BiggerPockets Real Estate Podcast - 752: Why I Sold a Rental Property Portfolio That Took Me YEARS to Build w/Lee Yoder

Episode Date: April 13, 2023

Want to know how to invest in multifamily real estate WITHOUT being a multimillionaire? We aren’t talking about tackling a duplex or triplex; we’re talking about sixteen, eight, or ten-unit apartment buildings that could help you replace your W2 income. And while these deals may seem too big to take down for a rookie real estate investor, they’re much easier to get done IF you know what to do. But you’ll want to follow Lee Yoder's advice, who left his job and took a hefty pay cut to start investing in real estate. As a corporate physical therapist, Lee knew that time was passing him by. The one thing he could do to ensure a life of financial freedom and time with his growing family? Multifamily real estate investing! He made the risky decision to switch gears, leaving the corporate world and thirty percent of his income behind to make the jump. Thanks to smart saving and spending, Lee was in a position where he could dedicate large chunks of his time to flipping houses and later investing in passive-income-generating real estate. The best part about Lee’s story is that he did all of this on a middle-class income, without a ton of cash, using tools that almost every investor has available to them. If you want to know how he did it, what steps helped him skyrocket his portfolio, and how you can repeat his system, stick around!  In This Episode We Cover: When to go full-time into real estate and saying goodbye to a steady paycheck  House flipping and buying under-market homes at online auctions  The “passive income” fallacy and why real estate investing ISN’T what you think Living below your means and why spending less allows you to take bigger risks  Using real estate meetups to find partners, mentors, and deals in your area  The rental property “scrapyard” that most investors overlook when buying multifamily Buying in the multifamily “sweet spot” that new investors and big syndicators won’t venture into  And So Much More! Links from the Show Find an Investor-Friendly Real Estate Agent BiggerPockets Youtube Channel BiggerPockets Forums BiggerPockets Pro Membership BiggerPockets Bookstore BiggerPockets Bootcamps BiggerPockets Podcast BiggerPockets Merch BPCON2023 Listen to All Your Favorite BiggerPockets Podcasts in One Place Learn About Real Estate, The Housing Market, and Money Management with The BiggerPockets Podcasts Get More Deals Done with The BiggerPockets Investing Tools Find a BiggerPockets Real Estate Meetup in Your Area David's BiggerPockets Profile David's Instagram David’s YouTube Channel Work with David Work with Andrew Andrew's BiggerPockets Profile Try the BRRRR Calculator on Your Next Deal What is the BRRRR Method & How to Use it to Invest in Real Estate How to Properly Analyze a BRRRR Property Hear Andrew On Our Recent Episode About Asset Management Connect with Lee: Lee's BiggerPockets Profile Lee's LinkedIn Lee's Facebook Lee's Website Click here to listen to the full episode: https://www.biggerpockets.com/blog/real-estate-752 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [e-mail]. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show, 752. I'm Lee Yoder and I was able to become a real estate millionaire on a middle income salary and I believe you can too. What's going on, everyone? This is David Green, your host of the Bigger Pockets Real Estate podcast here today with my co-host, Andrew Cushman, who's also one of my very good friends and also my partner in multifamily investing. We brought him on because he's an expert in multifamily to help interview today's guest, Lee Yoder. Lee has a fantastic story and you guys are going to love today's episode. Lee talks about how he took a big pay cut to keep his job but got time back to start investing, how he got his wife on board to support him in his crazy real estate dreams, and how he's bought several apartment complexes and is ready to buy more,

all while making a middle income salary. Andrew, how are you today? Man, you know what? I'm talking real estate with you. Business is good. I'm healthy. and it is snowing like crazy in the mountains. I'm going to be skiing to August.

So I'm feeling better than the people you see in pharmaceutical commercials. That's awesome, man. This is Andrew's like checklist of everything you want in life. If there was good waves added somewhere to where you could be surfing, this would be your holy trifecta. You know, my goal sometime in the next month is to go surfing in the morning and snow skiing that same afternoon. I have no doubt you'll hit it.

As you seem to hit all of your goals, speaking of which, how's our apartment complex is doing? It's well ahead of pro forma. just sent all that information to the lender to let them know, hey, guys, we're doing great. You don't need to worry about us. All right. Like that. Yeah, I think I owe you a personal financial statement.

I got to get on that because I did see that email the other day. But enough about us. Let's talk about today's show. What was your favorite part of today's interview? Yeah, I want to highlight, there were a lot of favorite parts. Lee really dropped a lot of fantastic information, especially for those who are just kind of looking to get started or use this downturn as an opportunity to wedge in. It's been really tough to do.

But one of my favorite things is that Lee found his original mentor on Bigger Pockets. All right. So everybody listening, you're in the right place already. All you've got to do is just make use of it. It's great to listen to the podcast or watch the YouTube and suck up all the information. But to really get the benefit, go on the forums and interact with people. Go to BPCon and meet people in person. Go to the local BP meetups and get to know people.

that is how Lee got his first mentor that helped him through his first deal and that guy has continued to invest with him to this day as he's grown his business and that kind of leads me to the quick tip which is stick around to find out how Lee used networking relationships and then loop net to break into the business and find out you know you've heard loop net is where deals go to die but in actuality, you could use it as your secret weapon to get into multifamily. There you have it. If you are also on a middle income salary and want to figure out how you can get deeper into real estate investing, this is an episode you do not want to miss.

We just asked if you enjoy it. Would you please leave us a comment on YouTube and would you share it with somebody else? If you enjoy these shows, which I really hope you do, you could also leave us a five-star review wherever you listen to your podcast at. Those help us a ton. All right, let's get to Lee. You've upgraded how to buy properties, but did your insurance get the memo? When investors start scaling, insurance can't be an afterthought.

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investing at NRE.com slash BPPod. That's NREIG.com slash BP pod. We all joke that rentals are passive, but if you're spending nights matching receipts or guessing what a property earned last month, that's not passive at all. Base lane fixes that part of landlording, the financial chaos. Their banking and AI bookkeeping system automatically tags every transaction, updates cash flow insights in real time, and builds the reports you need for tax season. You can even automate transfers and move money around without paying wire fees. It's just cleaner. Sign up at baselane.com slash BP and get a $100 bonus. Base lane is a financial technology company and not a bank. Banking services provided by Threadbank, member FDIC. Today's guest is Lee Yoder. Lee is an Ohio farm boy turned physical

therapist that struggled like many of us do with finding a job that was good for him and worked for his growing family. He had a great opportunity to scale the corporate ladder, but took a step back, taking a 30% pay cut to do so. This allowed him to buy his time back and start his first flip, which was the catalyst to his investing journey. Lee believes anyone can follow his path for starting a real estate investing side hustle while working a full-time job and getting your spouse or partner on board. Growing his portfolio to 34 units and then actually completely sold off his portfolio to reset his priorities. Lee is now a general partner. on 283 units and has unlocked his true investor potential. Lee, welcome to the show.

David, thank you. Excited to be here. Yeah. And my co-host here, Andrew Cushman, it almost sounds like I was reading his origin story. He'll be chiming in later in the episode to talk about how he started with flips and realized that his heart was in multifamily investing. So that's interesting. Okay, 30% pay cut. Let's start with that. What did life look like for you at that time? How old were you? What kind of income was this job bringing in for you and why were you okay taking a 30% pay cut? Yeah, good, good question, David. Well, you know, because I saw, you know, a bigger, better path, I saw the dream of real estate in the life I thought maybe could provide us, but also, David, because we were living below our

means. So taking that, it was like 30, 30%, maybe 30,000 dollar pay cut. And we still could have the life. We could still pay for everything. We could still, you know, we really didn't have to change our life very much. So that's kind of an important step. If you can live below your means, maybe you can go do something different, make some decisions that you wouldn't be able to make if you're living paycheck to paycheck and you need that. But we just put ourselves in a position where, you know, we weren't spending all of my paycheck.

So we had the ability to do that. We didn't have to change our lifestyle because I took that pay cut. So that was kind of a first important move. You know, we were just smart financially, I think, you know, got a good payment, down payment on our house, didn't buy, you know, too much house for us. So we were just in a position where we were able to do that. So it wasn't like we had to change our lifestyle in order to do that. That is such an important point to note. You hear all the time when people ask, how were you able to quit your job or downsize?

How did you find the time to do it? Well, sell your BMW, get yourself a civic, right? Get out of that four-bedroom house with a $4,500 a month rent and go live with your in-laws. There's ways that you can do this if you're willing to make the sacrifice. It all just comes down to pleasure and pain and how bad you want it. I frequently use the example that wealth operates on a spectrum. On one end, you have comfort, or on the other end, you have profit. The closer you can get to profit, the better you'll do.

But it comes at the expense of comfort. You're going to give up comfort. And all the people I know that were blue-collar workers that made it, they all had that same pattern. So if you're asking yourself the question of how do I do what Lee did, just understand you've got to be tough. You've got to start off with understanding you're going to make sacrifice. And I love that you and your family just decided we're going to live beneath our means so we could do this. So thank you for setting a great example. Sure.

I'm interested to hear more about what your next steps were. So walk us through that first flip experience. What was it that? Was it what you thought it would be? And did you come away with any lessons on that? Yeah, it definitely wasn't what we thought would be. It definitely wasn't what I sold my wife on because, you know, I'm listening to podcasts learning about passive income and, you know, how you can get into real estate and, you know, let your money work for you and do those. So I'm selling my wife on the dream.

And no, when we got into the flip, that's, it's not what it was. And she reminded me of that. So we both learned her lesson and she helped me learn that lesson. It's hard to just jump right into multifamily, especially the bigger stuff. So flipping could be a great way to get started. So, yeah, I mean, so many stories there, David. And I'll let you guys lead it. But it was what a lot of people say.

It was just a different job. So, you know, just kind of high level, you know, I took that pay cut. And we made about that much back with the flip. And another reason I left, I didn't really set this up, but another reason I left that corporate space and was looking for something else was just because I was wanting to get more time back with my family, more flexibility, more freedom. And I got that when I left my corporate job because I didn't leave and go all into real estate. I left and went back to doing home health physical therapy, which I had done before, which is a job that offers a lot of flexibility, which offered me the ability to do real estate on the side and start this real estate side hustle. But I just didn't make near as much as I was making the corporate job. but now I had all this flexibility, but then I filled in all that time with this flip.

And it was very time intensive. I did a lot of the work myself because I was scared and we didn't have a lot of money. And I didn't know the contractors. So we just did a lot of it ourselves. And so it was just kind of interesting. I felt like God gave us this picture of like, hey, this is what flipping is like because I took this pay cut, bought up, you know, got a lot of my time back, but then filled it all with a flip and made that money back with the flip.

So it was like I gave up this really busy job for a not so busy job, but put a flip on top of it. And I was just as busy and made the same amount of money. So I want to say two things. Number one, to, you know, where, Lee, I don't know if you, you probably know this, but you're talking to, you know, David Green who has the Olympic gold for living below your means, right? I'm about a guy who was making six figures as a cop and sleeping in his car. That's right.

And then he graduated to renting a room from a dude. So for everybody listening, you know, listen to Lee's example. It doesn't have to be that extreme. If you can do it, great. But, you know, if you're like, well, I'm not going to live in my car and work 18 hours a day, I can't do that. Listen to what Lee just did. He cut back 30 percent, freed up a little bit of time and then went and did a flip to supplement that. So in terms of that, Lee, could you give us just real quick run through the numbers on that?

Maybe buy, rehab, sell. Like, what was your true net at the end of the day? Yeah, this was back toward the end of like fall of 2017. So just to set it, you know, it wasn't today. But I bought a house. And on hometown, I bought an online auction. Kind of site unseen. Now, I did go to the site and look around.

You're not really, you know, supposed to do that. Bought it for $80,000, put about $70,000 into it, so into it for $150, sold it for $190, you know, takeout agents, commission, stuff like that. We made about $30,000 on that. So that's where I said, like, we took, I took this $30,000 pay cut, then added the flip on top and made $30,000 with the flip. And so we made the same amount. So it wasn't any different.

But again, I'll just say, but it did get us into real estate. It did get us started. And so for everyone listening, what is your hometown? Levin and Ohio, just north of Cincinnati, Ohio. Okay, so what you're saying is you can successfully do flips and multifamily even in the Midwest. Oh, yeah. Yeah, believe it or not, especially now, as the economy might be turning, you might look at the Midwest. No, you're absolutely right. That's what I said, you know, a lot of times, especially when you're getting started, it's like, oh, my, you know, my markets, too. expensive if you live in San Francisco or I'm in the Midwest, nothing happens here. That's not always true. You just have to adapt your strategy. Lee, you've done a really good job of saying, you know what,

I like my hometown. I know my hometown, which gives you an advantage. Right. And then you've made both flipping and multifamily work there. So, so good job. Thank you. So Lee, how did you find this first flip? Yeah, just, you know, I mean, I was on bigger pockets at the time, a ton and listen to what other people were doing and just looking around online. Like I said, I found this one on an online auction. I think it was auction.com or X-O-O-O-M-Zo-com. One of those just found it online. I was just looking online for deals, looking on Zillow. Found this one, thought it was a pretty good deal compared to the other stuff I was seeing.

All right. And then did you negotiate it like through an online auction? Yeah, I mean, not much negotiating. I mean, just, you know, I ended up with the highest offer. You're just bidding. Right. And went a little bit higher. And I told my wife I'd go.

And we want it and jumped in. And then what did you do when it came to getting like contractor bids? how did you decide what the rehab was going to be? Yeah, again, just referrals. I mean, I think that the only way, especially when you're getting started, I mean, how do I know who's good? You got to go with referrals, so I start calling around. I actually, one of my first kind of mentors through Bigger Pockets,

just saw that he was in my town, Lebanon. He was here doing stuff, had rentals, you know, was talking on Bigger Pockets. So I said, hey, can I, you know, can I meet you sometime? And we met in McDonald's here. And, I mean, cool story, just fast forward. The guy has invested with me in a couple of, my syndications and he's a good friend of mine but he helped me get started and

introduce me some contractor so that's the way to do it is network with people in your area bigger boxes is the best place to start that's a great point and people always ask the key to networking and the answer is usually just well don't be a butthole you just be someone that people like and it's amazing how the difference between a contractor or a referral you'll get from someone that likes you versus the person who doesn't know you at all or sees you as competition or doesn't trust you like it doesn't work as well so just personal development is like the first place to start when it comes to getting good referral so let's let's hear about the next deal so you flip that house your wife is now not anti real estate because you made 30,000 dollars I'm sure that you're

holding your breath because if you lost money on the first one that's like a death sentence you can never get out of that might be done right so what was your next deal yeah um so the next so the next year we did a duplex we actually got this at the county auction um you know interesting enough i just brought or just brought that guy up i was bidding against him as a at the auction. And I beat him out. He quit bidding. And then, I mean, fast forward again, I end up selling the property to him once I was done with it. But bought this duplex in Lebanon for $90,000. It was rough. One side was vacant. The guy that lost it was moving into a nursing home. So he was going to vacate. But then his like niece and a couple other guys, they were

squatting in it. So very interesting takeover on that one. I've got a good story. But I bought that at the county auction for 90,000. This was now in the fall of 2018. Okay. And did you pay cash for that since it was at auction? Yeah, yeah. I did mention that on the flip. So we used the home equity line of credit. So our house had gained some equity. We'd been living in our house. By the time we did a flip, we'd been living in our house for five years, bought in 2012. So good time to buy, right? And so we had a good amount of equity. So we used to have a home equity line of credit on both

of these. And we got all that back after the flip plus 30,000. So we had more to put into the duplex. Okay. And did that flip go well as well? Yeah, that one went much better. So now I knew some contractors. I mean, this is a big part of anybody's story. You start building momentum. You know, each deal you do. That's why people say you've just got to get started because you can't start to build momentum unless you get started.

So I knew some contractors. I met some more. I kind of had a chance meeting of some contractors that are actually still working with us today. They came out to buy some kitchen cabinets that I was selling because they had a few in there and I didn't want to use them. So selling them, they came out in a rickety green van with a bunch of supplies in. And I was like, what do you guys do? You know, oh, we actually renovate units up in date. And I'm like, well, would you do this one?

And I end up doing great work for me. So just had more help. I did a lot less of the work. But we're just more sure of ourselves. We had more reserves. You know, we, that 30,000 we made. We didn't need to spend that. We're rolling that into the next deal.

So I had some more cushion. And so we felt more comfortable having other people do the work. So much better experience. David, you said, you know, if I lost money on that flip, my wife would have been out. And that's true. But I kept saying I had to prove two things to her. One, real estate can make money, and I did hit that one. But two, real estate is going to provide a better life for our family, and I missed pretty badly

on that one. So on the duplex, I felt like I hit both. On the duplex, we ended up making money, and it was, you know, more hands off. And we set a passive income. So once we did, we completely gutted both units and renovated them. But then we got a couple residents in there, and we were the, you know, we landlorded that when we managed that one ourselves. And we saw not much, obviously, just on one duplex, but we saw, wow, every month,

the income is more than our expenses. and we started to see, okay, this is more like that passive income, Lee, that you tell me about, you know, the dream that everybody on bigger boxes is talking about, okay, I can kind of see it. And so this one, you know, I end up convincing a little bit more about real estate with this deal. I'm going to take a little sidetrout. I want to go too far down this road. I just want to get your honest opinion about this. There's no judgment.

You mentioned the phrase, this passive income that everyone on Bigger Pockets talks about. I mean, I throw this to both of you guys. Have either of you experienced the income being as passive as it's talked about? about on bigger pockets, on whatever social media follower that you look at, or as your experience, Ben, that real estate isn't quite as passive as maybe the dream that you got sold. I'll start with you, Lee. Yeah, I'd love to hear what Andrew has to say on this one. But I would say as long as you're the one, I mean, it sounds simple to say, but as long as you're active, if you're the one going and getting the deal and signing on the loan and having anything to do with it, even if you buy a

turnkey property, but you're the one owning it, it's not going to be that passive. And there's different levels of being passive. So no, I have not, but I've chosen not to be passive. So, yeah, even when I talk about passive, I mean, you know, maybe a little bit less work, but we've always been the ones buying the property. And even if we, we've always used third party management after this duplex. But yeah, we're still actively asset managing. So I have not experienced it. But for our passive investors, I've seen them experience it. So you can get that. But not if you're the one buying the property and signing on the loan and being, you know, the asset manager. No, it's not going to be passive.

Andrew, what do you think? I would say, my answer is absolutely yes and heck no at the same time. It depends on what you've bought and who you have on your team running it. So, you know, early on when we were getting started in like 2013, we bought some rough sea properties and rough parts of Dallas. And I can guarantee you there was absolutely nothing passive about that. There wasn't a day that went by that that property was passive. On the other hand, we've got properties that we bought four or five years ago. We already did the value ad.

We've got a great team in place that's been there for a long time. And candidly, you know, at this point, we can manage that in a half an hour to an hour a week. And they, you know, and those properties spit off pretty incredible income for that amount of return. So I would say it's selective. And part of it is based on how you set your business model up and your relationships. and your team and what you buy, and then also how patient you are. Almost nothing that I have purchased has been passive from the get-go. I can't think of anything that has been.

But if you're looking out long-term and you get past those first few years, then it really actually can become passive. So for me, yes and no. Thank you for sharing that. And also thank you for putting all the work in that you do on these deals that we own together so that I don't have to do it. That's true. It's passive for you.

right? Yes. That just made me think of a book I should write. Scales of passivity. Yeah, I like it. No, that's a real topic. That really is. Yeah, and the reason I bring that up is I know a lot of our listeners as they're hearing

this conversation, they're beating themselves up. They're going through this internal turmoil of shame and guilt and feeling unworthy because either real estate was harder than they thought it would be or if it's working, it still requires so much of their time, attention, and energy. And they're like, well, I thought it was supposed to be. something that I just said it and forget it. I never have to do it again. The problem must be me. I like hearing from each of you and I'll throw, you know, my two cents in there. It's not passive. It's passiver. It's more passive than when I was getting shot at or, you know, chasing somebody or

writing a report for four hours in a room somewhere. But it is definitely not passive. And so don't think you're doing it wrong if you're not on the beach drinking my tides all day long and you catch yourself getting sucked into emails and phone calls and with your laptop open. in very little in life is completely passive. I think that's just in general it's an error a lot of us make. We think when I get married, I'm not going to have to worry about my relationship anymore. I'm done.

Both of you guys as married men are like, what? Doesn't work that way? Yeah, it's probably, I probably have the more passive love like than either of you do, not being married, right? So thank you for that. Lee is shifting back into where we were on your story here.

What was your Mount Everest and who really helped you to get there? Yeah, I would say my Mount Everest, David, was the next deal. You know, jumping into real estate is usually a Mount Everest. It's a big deal and it is hard to get started. So I'll say that. But after the duplex, we were ready to get in a multifamily. Again, I'm listening to Bigger Pockets podcast.

And I remember Andrew being on very early, listening to MacDen. I'm like, man, these guys, like, that's what I want to be like. I want to do what they're doing eventually. So they keep telling me, go bigger, faster, like you can do it, go. And so that's the way I was looking. So we ended up getting into a 16 unit. And that seems not so big today. But back then, that was absolutely Mount Everest.

If, you know, if you've just done a flip or duplex, a 16 unit is probably a Mount Everest to you. It was to me. What got me over that hump, David, was, again, more networking, getting involved. And, you know, I think I heard somebody on Bigger Pockets mentioned, get into your local RIA. So I looked up our, you know, that's a real estate investment association of your city. Every city has one. I looked up to one in Cincinnati. They actually were running an apartment focus group at the Ria,

meeting at a La Rosa's Pizza, which is a Cincinnati pizza shop, every one Monday a month. So I started going to that, and the guy there was teaching us how to underwrite multifamily, and just using a very simple spreadsheet, but it was good for small multis, and started teaching me, and I felt more and more confident. So I'm just going on loop net, looking at properties that nobody wants, underwriting them, calling the broker, and, just kind of going through the motions and just felt a little more and more confident about it.

I mean, even, I'll say at least, even, you know, calling on a property and feeling like, I think this is a good deal. I'm going, I'm going to call this broker and calling them and the broker going, oh, yeah, you know, that's already under contract. We had a lot of offers. Even that was like, oh, man, that gives me more confidence because I picked out a good property because I thought that was a good deal and it's already taken like, man, okay, I'm getting this. So just going through those reps and, you know, I've heard so many on bigger pockets talk about that. Like, man, you need to underwrite 100 properties to be good enough to find one. And so that kind of stuff gave me confidence.

Lee, you brought up something that I think a lot of people looking to transition into multifamily question or struggle with. And that is, I'm just starting out. I don't have a huge track record. I'm not going to lie to brokers or pretend that I'm something I'm not. What, you know, someone who's just trying to make that transition that you made, what did those first broker conversations sound like? Like when you first introduced yourself and you're like, hey, I'm Lee, I've either done a duplex or just a 16 unit, like, how did you get them to give you the time of day and show you the deals?

Because obviously you've gotten a lot further past that, but what did that very beginning piece look like? Yeah, I'll say two things to that, Andrew. One, so the guy that was teaching me to underwrite, Mark, you know, I was using him and he was fine with that. was helping me underwrite. So I was saying, you know, me and my partner, we own this many. And Mark didn't have much either. He had bought a 25 unit and a 40 unit, I think, at the time. So we own 65 units. So if I'm looking at a 16 unit, okay, if you bought a 40 and a 25, you and your partner. And, you know, best for, Mark did end up, I did give him a piece of my deal. So, you know, I wasn't lying by any means. But he was the one helping me underwrite. So I was using that. So leveraging a partner or

mentor, I think is a really good step. But then, too, I'll just say that, you know, some people wouldn't give this advice, but I heard back at the time, LoopNet is where deals go to die. And I remember thinking, well, that's probably where I should be looking then, because the brokers aren't going to take me serious. So I'm not going to get the best deals. So I'm going to have to, this is how I'm going to get these deals that nobody else wants. And I'm going to put in the time. And that's where I'm going to get started. And so, you know, frankly, when I was calling some of the brokers, they were picking up my call because no one else was calling about the property. So they're like, hey, I don't care who you are. You know, you're the only one looking at this.

So we'll give you a shot at it. And if you seem serious, then we'll take you serious. And so I had the partner and we, you know, went forward. Let's dive in briefly about that. And then I want to ask you about your wife and how you took steps to change that mindset there. When I hear about LoopNet, because I don't spend as much time looking for multifamily deals as either of you two do, I get this picture of Ray from Star Wars going through a scrapyard of old spaceships that don't fly anymore and trying to find parts that she can go sell for food, right?

Is it that bad? what analogy would you guys use to describe what it's like to find deals on loop net and then what advice do you have for other newer investors just like you said lee where this is really like their only option how would you tell them to navigate that to look for for opportunities yeah Andrew you want to think that one what would you say about it Andrew so I'd say a couple of things one it is basically Ray going to the scrap yard of crash chips um but however kind of like kind of like Lee Lee had the exact rate mentality he's like well every Everyone thinks loop net's worthless, so I'm going to go do loop net because no one else is there. And that's really how we get started. So I can do a real quick story. One of the best deals we've ever done, I bought off LoopNet because the markets that we invest in, I have alerts set up. Again, just because I want to see what's going on.

I want to learn the market who's listing what are the prices and all that. Well, one day I got an alert and I looked at him like, I've never seen that broker's name before. Called the guy, it wasn't a broker. It was the owner. He put it on there himself. Okay, four days later, had that under contract. I'm out there doing due diligence and local contractors saying, how did you get this? Yeah, we've been trying to get this property for years, right?

So, you know, is it just like, you know, Ray eventually found some stuff, right, to get her food? You can still find stuff on LoopNet. But Lee's strategy is exactly what I would tell anyone who's beginning to do. Go to LoopNet, find the deals. You're not looking for deals. you're looking for people in relationships. You're looking for who's listing what. You're looking for the people who are going to take your calls.

And if you're still nervous, pick a market that you're not going to invest in in practice over there. And then once you're comfortable, go to your home market that you're going to invest in and then start building those relationships. So yeah, LoopNet is a great source for relationships. You might get lucky and get a deal. But don't approach it with, hey, I'm looking for a deal. Approach it with, I am looking for people, relationships. in building my skills and then you will have success with loop net or correct the or any of those other platforms. Lee, what about you? Anything specific? Like, is there a certain shine that you should look

for in this scrapyard that would draw your attention? Or is it really just I'm trying to find a broker that will take my call and I'm calling about the one property nobody else is? So I'm more likely to get them on the phone and then I'm trying to work that into a professional relationship. Yeah, the only thing I'd say is brokers will use LoopNet more for smaller problems. So they, you know, they may have a pretty good 16 unit deal, pretty good 20 unit deal, 30 unit deal, but they might just, they might use loop net for it. They don't have a big list. And I would say, you know, like in Cincinnati, we've got, you know, three, four, five kind of the top brokers. And they don't mess around with the smaller stuff too much. But then we, there's like another level of brokers that are small guys, kind of independent shops, you know, you would, I could tell you the brokerage and you'd say, I've never heard of that. And they just deal with smaller deals. And a lot of times they just throw them up on, loop net. They don't have this giant list. So you can get some, I'd say there's, at least in Cincinnati, you can get some decent deals, but they're smaller. So again, if that's where you're starting, I do think you could actually find some stuff. And what I would say just what shine you're looking

for, David, is just something that, you know, is close to you and something you think you can operate pretty well for whatever reason. So what about jagged edges, Lee? Is there anything that looks good on loop net and then you go to grab it and you get cut? Because I know that like people throw stuff in there a lot of the time that just doesn't really fit into any box or probably shouldn't be in there. Do you have any advice for how people can avoid falling in any pitfalls? Yeah, I'll just say from a high level. I've learned over the years, I've been learned from guys like Andrew, but I'll say there's, I'll see properties where I want to own that property.

I mean, the age of the building, the location, things like that, that really matter where I'm like, man, I want to own that property. But usually the numbers suck and the price sucks. Okay, but I don't like it for that price. where I would say there's jagged edge of David on the other side of that coin where you say man I don't really like that property don't really like the location

it's like an older property I bet it leaks I bet the roof isn't good I bet the residents are rough it's going to be hard to manage but man the numbers look good that's where you got to be careful and it's hard not to do and I don't say that's kind of how I got started and sometimes you know I think Andrew got started a little bit now

maybe bought a property in Atlanta that was a little bit like that and so maybe that's kind of how you get started but that's where you've got to be careful, where the numbers look good and you think, man, like, I'm getting this for such a good deal. Well, it's not because no one else saw it, right? Other people have seen that and they've passed on it for some reason. It's because there's jagged edges, like you said, David, and that's because probably not in a great area, really rough tenant base.

You know, the building's not good. You're going to have cast iron plumbing that, you know, just much higher costing you think. Those are the jagged edges you've got to watch out for. Yeah, it's called those spreadsheet goggles, right? And that's generally the case with C and even down to deep, properties. They look great on a spreadsheet. Oh my gosh, the cash flow is wonderful. But what I say about it, and I need to get a t-shirt made with this is the grass is always greener over the septic tank. Right. And that's, that's, I've had, I, that is, you know, almost all of us, myself included, when we go into multifamily, we go for those properties because they look great on a spreadsheet. No one else wants them. The broker will talk to us. Don't do it. That, don't do it. It's funny how when I talk to Andrew and we're getting into apartments that we're looking at or that he's analyzing, the questions that he asked or the goggles he has are radically different than mine. Like, I've never asked the question, what type of material is the plumbing made out of in residential real estate?

It has never popped into my head. I might not even know what it is. And like, that's one of the first things that will come up at a certain part in his, in the analysis of it. And you hear Lisa the same thing. This is a very different beast than just buying a duplex, even though we call both of them multifamily. All right. Moving back into your story here, Lee, tell me a little bit about, like, how did your wife change your mind about the steps that you were going to take? Yeah, one thing it was really neat for us, David, and you might find this in a partner.

Hopefully you find this in your spouse, but God just created Han and I very differently. I'm a risk taker. I, you know, and when I jump in, I'm ready to go. I'm to build the parachute on the way down, that type of person. and she's not. So there was a lot of, you know, struggle early on because once I found real estate, and especially once I got in and tasted it, I mean, I was all in. I was ready to go. So even with that first flip, yeah, okay, I agree with you. It took way too much time. But man, like we made money. This was fun. Like the next one was going to be better. I was ready

to flip more properties. For her, it was like, no, we got into this because you said this was going to be better for our family. We had two young kids at the time, David. And they, I mean, not, you know, we're in agreement there. Like my wife and I are in agreement, what kind of life we want. I'll just kind of push past and say, well, we'll get there, but we got to do this first. And my wife was like, you know, a little bit more, she's just wiser than I am and more practical. And hey, no, you know, our kids are young. This is an important time. We're not going to just sacrifice this time. This is important. Let's take a step back. Well, taking that step back causes us to not do another flip. So instead of doing another flip, she said, now, again,

like, you talked about residual income from people renting. And yeah, we got this chunk of money, but now we have nothing because we sold that property. So I thought we were doing multifamily. So yeah, you're right. Let's get into a duplex. So, and then kind of the same thing. We sold up with a duplex. And she's like, okay, but, you know, multifamily and hey, maybe are you sure you want to do another duplex?

So she just really calls me to slow down and really think about it and be intentional about our next step. So it was really cool. I don't know a whole lot of people that did one, one unit, one two unit, and then one 16 unit. You know, we only took three steps. We did three properties, but the third one was a 16 unit. But I've got to credit my wife on that because, again, I would have just done a bunch of flips. I would have been like, you know, Andrew, I know others. I think, you know, I can think of others that are scaled really high in the multifamily,

but they did like a couple dozen flips first. I would have been that guy. But my wife, you know, kind of, nope, put the brakes on. Let's think about this. Let's be intentional. You said multifamily. You said rentals, you know, all that. That's not what flipping is.

So that's, you know, how we kind of work together. But then also, she would have never got started without me. So I would kind of push and she would stop and say, let's think about this. Then I would push and sit up and let's think about this. You know, I'm always, what's next? I mean, you know, each time she'd say, I just got comfortable with a duplex. And now we've got to do a 16 unit. You know, it's such a, yeah, that's Mount Everest.

It's like, what are you doing? We don't know anybody that does this. And I said, well, I know a couple of people on bigger pockets, or at least I've heard them talk about it on bigger pockets. So we'll do it. So, yeah, that's kind of how it worked out between. us, David, and now we, you know, kind of compromise together along the, along the way. All right. So it seems partly by persuasion and partly by momentum, you end up getting bigger.

What or who did you need to have the confidence to go after this next deal? The 16 unit or the one after that? The one after the 16 unit. Yeah, the one after that, that just really built. You know, some people will talk about the law of the first deal, maybe specifically when you're getting into multifamily. And I really believe in that. So I needed that kind of first mentor that I had, Mark that was leading the apartment focus group at the Cincinnati Ria. I really needed him to get into the 16 unit. But he kept telling me all along the way,

Lee, once you do this one, you know, you won't need me on the next one. And I, maybe I could have, but I found that to be true. So on the next one, it was an eight unit. So it was actually kind of a step down. And the funny thing is, you know, speaking of that law of the first deal, the day we were closing on the 16 unit, I got the eight unit under contract.

So, I mean, talk about, you know, you get some momentum to close your first, you know, multifamily. And right away, you get another one. And it was only like a month later that we got a 10 unit under contract. So, I mean, I just did those, you know, more by myself. I still had my mentor's ear, you know, asking him some questions. But I actually gave him a piece of that 16 unit because he helped me so much on it. But then getting into the next eight unit and the 10 unit, which were right after that, I was able to jump in those kind of more on my own.

Can we dive in for a quick second? How are you? And I know you've touched on a little bit, but could you, for those, those, again, looking to get their first 8, 10, or 16 units, how are you funding these early deals? Were you using, like, you know, you made some money in flips, you had a partner, was it, you know, solely from that, or were you starting to bring in investors in kind of the beginnings of syndication at that point? Like, how are you doing these first deals that started to build your, your platform? Yeah, great question. I think these small multis are such a good way to get started, and you can make it pretty. simple. I just did a joint venture deal

with a family member or a close friend and we just went 50-50 on it. Which deal was that? That's all three of those. So 16 unit, yeah, 16 unit, 8 unit and the 10 unit. You know, different people, but each one I either had one or two partners and I would keep half

of it and I would give them half. They were kind of more the money partners. Now, be careful on a joint venture, everybody has to be active and they were but I mean, if you really look back at, I was probably doing 90, 95% of the work and that's why I got my 50% and they really got their 50% because they brought all the capital that we needed for the deal. So it was passive for them?

Yeah, yeah, pretty close to being passive for them, yes. Okay. But technically no, because it was a joint venture, so they had to be active. Right, right. For anyone, for legal purposes, it was not passive. Correct. Yeah, let's let that be on the record. There are two kinds of real estate investors, those who have reviewed their insurance,

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Banking services provided by Threadbank. member FDIC. All right. So let's recap where we're at here. So you take a pay cut at your job. You move from corporate physical therapy to at home physical therapy. So there's a little bit of a disruption in kind of the pattern maybe that your life had looked like. But that got you some more time and flexibility, which you threw into doing your first flip. This is how you got your feet wet with real estate investing. You learn how to run numbers. You learn how to network. Sounds like that was a pretty important part of your whole story here. And it seemed like that was a step back, but it actually propelled you into the flip that got you started with real estate,

then a duplex and then bigger multifamily. So you're picking up momentum here, but as you do this, you're also carrying more weight. You're managing more properties. You have more time going into this. At a certain point, you start to realize either this one isn't worth my time or I know more than I knew before.

I wouldn't have bought this one with what I know now, even though it made sense at the time to get me to where I am now. When did you decide to liquidate that? Yeah, good question. Part of it was, you know, the market driven, David. So we got all. all of those, those three multis in the fall of 2019. So coming into 2020, you know, COVID hits.

And, you know, crazy enough at the time, I thought it might be bad for real estate. And it was amazing for real estate because of how the government and the Fed handled it. But so, you know, as 2020 went along, those were all pretty big value add properties, those multifamily. So I use third party management. That's another thing. We, you know, we get into that a little bit.

But I'm a big advocate of that, especially when you're getting started. if you want to scale pretty quickly. I guess if you just want to own a couple duplexes and scale small and your own hometown, sure, manage them yourself. But using third-party management really helped me to scale because they were managing the day-to-day and they were a great partner to me. And you want to talk about just going back real quick, how did I get over that Mount Everest of the 16 unit? Knowing that a property management company was managing it was a huge part of that. We've actually recently discussed the property management issue in a previous episode,

But how did you find your third-party management company? Because that size property, 8, 10, 16 units, that is especially hard to find good property management for. So how did you do it? Yeah, again, I'll just have to go back to referrals. And that's why you've got to network. That's why you got to be part of a community. You know, on bigger pockets is a great place to get started.

But then I would use that to find your local community. The RIA is really good. When you go to a RIA, when you go to a meetup, you're going to talk to people that own small multifamily. You're going to talk to people that own single family rentals, duplexes, stuff like that. So you're absolutely right, Andrew. I would never want to have to manage a bunch of those myself.

So you've got to talk to people. The one thing I would say is talk to people that have used that property management company for over a year because I've found people, and I've had it myself where they do well at first and then not so much. So if somebody's been working with a property management company for over a year and they've had a good experience and you trust them, then I would go ahead and go with that property management company. I really like your tip about get referrals from somebody who's used the company for at least a year.

Because those relationships are like dating, right? Everyone's excited on their best behavior the first six months or whatever. But by the time you get past a year, some of the real colors have started to come out. And that's when you really know who you're working with. So that's a great tip, Lee. Only get referrals from someone who's used the company for a year or more. I like that. So at what point did you decide it was the right time to sell these properties?

As 2020 went along and we started bringing them around, I mean, it was twofold for me, David. I saw an opportunity because of the market, but two, I was just so ready to go all in on real estate. And you start thinking about what's the opportunity cost of me not being able to work on this full time? Because while I didn't have a busy job, I did still have a full-time job. And so I was just feeling such a pool to real estate. So I wanted to get in. And I'll just share some quick numbers just so people know, you know, with those 34 units, we were owning half of them. you know, we're in a good cash flow market. I was probably making like $30,000 a year off of those.

Now, I was never quite making that because we started selling them before they were all stabilized, but I just haven't done the numbers myself. If we'd had all those stabilized, we're probably making 30 a year. If we could have doubled that, that probably would have been enough for me to say, okay, this is probably the bare minimum of what we need to pay our expenses. This was back before all the inflation that we've had. Maybe it's definitely more than that now. But at the time, I was like, okay, I got to double this. Well, you know, David, I didn't. I didn't, just didn't want to wait that long. I didn't want to take another year to find all these and properties were already hard to find. So because the market went up so much, I saw an opportunity to sell.

Now, there's taxes involved and all those things, but I said 30,000 years, I really had about the opportunity to make 10 times that if I sold all three of these. That's just how ridiculous the market got. So I said, man, I could pull forward 10 years of cash flow on these. And what that allowed me to do, David, was give me this runway. So that was like, if I was, if I was, If I need $60 grand a year, that's going to give me five years worth. Okay, and let's say taxes take that way. Okay, four years worth. So it was like, I've got four years of a runway to jump all into this, go all in.

If I can't do anything with it, I mean, sometimes I think people overdo the worst-case scenario. My worst-case scenario was that come back to being a physical therapist where I was before. And I can still do real estate. I just can't do it full-time. So the market, you know, was a big part of that decision. I just wanted to get in so bad. And I just had an opportunity with these properties to say, why don't I just take all

this cash flow now. Yep, I'll have to pay taxes. But I give myself this big cushion, this runway, to jump all in and see what I can do. Worst case scenario, I got to go back to my job that I'm doing right now. So for newer investors that are looking at multifamily, what are some things that they should consider, especially considering the fact that we don't know for sure, but statistically speaking, the next three years are probably being a lot different than what the last three years were like. Yeah, what I would say to that, David, is just consider it. It just takes time. I mean, I think real estate takes longer than people think, especially coming off the past three years, because I would definitely agree with you that these next three years are not going to look

like the last three years. So I would just say, man, get ready. I think there's going to be some really good deals over the next three years. So I think you're going to have a chance to pick up properties. But if you think you're going to buy something the next six months and it's going to double, you know, or whatever in the next couple years, it's, I don't think it is. But that's okay. You know, just give it some time. It's eventually going to double. Yeah, I would just focus on that. Focus on getting your deals, focus on building your business, you know, building up your portfolio, but just know you got to know it's going to take time. It takes time to build wealth and real estate. Andrew, what are your thoughts on the next three years versus the

last three years? Yeah, I think I think Lee's right on. You know, a lot of the deals and opportunities we saw in the last five or six years were all two and three year holds. That business model is gone. Like I would be scared of anything that requires a two, an exit and two or three years. However, if you look longer term, five, six, ten years out, all the fundamentals that favor multifamily investing are very much in place, especially if you're buying in the right markets. And so later this year, and I think all of 2024 and probably into 2025, are going to offer everybody opportunities that haven't been available for the last five or six years. It's been so competitive and so high priced. So, you know, for those, those have been trying to get into the market

and I haven't been able to, guess what, the brokers are going to start returning your calls now, right? Because a lot of the buyers have gone away. And this is the opportunity to get in at the bottom of a new cycle. And I'm not saying, I'm not saying that the bottom is a specific time or day or month or priced. Just big picture, the bottom is going to be sometime in the next 12, 18, and 24 months and then any well-located properties that you buy in finance properly during that time frame, five, six, 10 years down the road, you are going to look like a genius. So, yeah, I think Lee's right. There's me a lot of opportunity. You know, still need to be very cautious and strategic about it. The business models and plans and strategies that worked for the last five years,

those need to be put on the shelf. They'll come back, but those aren't the strategies for right now. but that doesn't mean you just sit and wait, right? There's no such thing as a bad market, just bad strategy. So we just need to adapt our strategies for the current market. What's your thoughts, both of you, on balloon payments coming due in the next 18 to 24 months with rates significantly higher than when people got in? Do you think that rents have gone up enough that they can still cover the debt service on the refinance, but maybe the cash flow goes down for the one holding it?

Or do you think that we're actually going to see some fire sales? Angie, you probably have more insight than I do to that. I'll just around here what we're seeing and hearing. I think probably if you bought in 2021, I would be surprised if you didn't get enough rent growth to be okay, as long as you didn't take too much leverage. I mean, I've heard of people taking, you know, they got 90% loan of value, then got 100% of their rehab in their loan. So that's a lot to overcome because when you refinance, they might only give you 75.

So even if you got a bunch of rent growth, you might be in trouble. But my guess from what I've heard some people that bought, maybe end of 2021 and 2022, depending on how short that balloon payment is, might be in some more trouble. Yeah. What the, the situations Lee mentioned is going to be, in my opinion, is going to be the driver between increased transaction volume by the end of this year as well as increased opportunity.

There are a lot of fantastic properties that are operating really well. But no, nobody, nobody saw that, I don't, well, I shouldn't say to me. I don't know of anybody, whether it's big banks, any kind of podcaster. Nobody forecasted two years ago that rates would be, you know, the federal funds rate would be bumping up against 5%. Right? The forward curve said, oh, hey, we might be up a half a point by the time we get to 2022. And that's what everybody planned on.

So this came as a shock to the entire system. And like Lee mentioned, there's a whole lot of deals that were done in 2020, 21, and even into 22 that were very high leverage. And yeah, there's still been some rent growth, but not enough rent growth to overcome a 100 or 150 basis point cap rate expansion, which means, you know, when you cap rate, NOI, that gives you your valuation. So there are a ton of great properties out there that have a balloon payment due, meaning the loan matures and it is due in full in the next, you know, six, 12, 18 months. They cannot refinance, right? We talk about, uh, you know, uh, David, you're always talking about, hey, if you do a burr and you leave 10% in, that's still a win, right? Cash out. We're talking big cash in refinances are going to happen where a sponsor or their investors are going to have to come up with $5 million just to refinance the loan and put that money back in. A lot of people can't or won't do that. Those properties are either going to be sold or are going to go back to the bank as foreclosure. And I personally know of quite a few properties that are in that situation. They are kicking the can down their.

road for now, but they are probably going to get sold. One caveat, a couple of quick caveats to that is lenders that have kind of learned their lesson from 2008. They don't want to take back a ton of stuff. So the ones that can be flexible are being flexible. And there's a ton of money on the sidelines just waiting to dive in at the moment that these distress deals start showing up. So I think that's going to help kind of put a floor in things. But the opportunities are going to be there. And candidly, you know, we're looking forward to the chance to get in at the beginning of a new cycle. And, you know, again, especially for anyone looking to get started, now is your time. The competition is down.

People are going to pay attention to you. And there's going to be deals coming. That's awesome. Okay. So let's work with that. Lee, do you feel like there's a sweet spot in terms of size or units that newer multifamily investors should look into? Yeah, I think, you know, if you're just getting started, yeah, any multifamily, I think, is a great place to get started. Once you start building your portfolio, you get comfortable with maybe a duplex and a quad.

I would just kind of stair step up. I would jump into a 10, you know, a 12 unit, something like that. It's just, you know, you need to raise less money for it. You mess up. It's a smaller mess up. But once you get going and, you know, like I did, got that portfolio, I have found, you know, just over the past couple years doing this, we've syndicated some deals. We've done some bigger stuff.

I think there's a nice pocket between 20 and 100 units. That's a nice niche because you don't have to get bullied by guys like Andrew Cushman, but also, you know, staying above 20 units, you know, I'd say 90% of real estate investors, you know, anything above 20 units is like Mount Everest, like it was to me. And so you have a lot less people competing, but also you're staying away from the really big money competition. who would never look at anything under 100 units, sometimes not even under 150 units. So I try to get as close to 100 units as I can

because there's some economies of scale there, and it's just much easier to manage. Andrew mentioned, and I agree that the smaller multis are harder to manage, so it's very helpful if you can get a few in the same area, which makes it easier. But I just think your competition, you are limiting your competition between 20 and 100 units. I think that's a nice place to be.

Nice. Yeah, so you're too small for the big guys, but too big for your competition. I always look for that same thing. That's a wise take on that. I've often looked at like with residential real estate, there's often a way that you can find the median income for an area, find out what most people are going to be pre-approved for based on that medium income, go a little bit more expensive to where most buyers are not going to be able to qualify or uncomfortable qualifying, and then look for that area where the

deal's been sitting on the market the longest. And then you go write an offer that is less than what they're, you're going to be were asking for, which would actually put it in the price range of where people could have afforded it. So now if you need to exit, you're selling and you can still make money. But that way of looking at real estate makes a lot more sense than just plug it in a spreadsheet and see what the spreadsheet says. What about the concept about good deals and money following a good deal? Okay.

Is that a fallacy or have you found that to be the case? No, I would say that's a fallacy. I think, you know, were people with money be interested in a good deal, sure. But where I think that that becomes a fallacy is when you think, hey, I'll worry about raising money once I get a good deal. And then people are just going to flock to me. I think that's absolutely a fallacy because people don't just invest in a good deal with somebody they don't know. I mean, yeah, they would do it if it was their own deal because they would trust themselves. That's a good point.

You want to buy some really good cocaine? I promise that it's never been stepped on. Yeah, yeah, yeah, similar. So, yeah, they're not going to trust you with that really good deal. if they don't already trust you. So you have to develop the relationship first. You have to explain to them your track record, get them comfortable. I always say we want people to be comfortable and confident investing in multifamily real estate.

And then we want people to be comfortable and confident investing with threefold. And then we'll show them the deal. And if it's a good deal, yeah, the money will follow. But only because we already got them comfortable and confident in multifamily and with us specifically. But you cannot find the deal and then go find people and think they're going to invest. with you. And I think what that gets to the heart of that is when you're investing as an LP, you are really betting on that sponsor and the operator more than the deal. A really good sponsor can take a bad deal and turn it around or save it. But a not so good operator or sponsor can

take the best real estate deal and run it into the ground. So yeah, Lee, you're absolutely right. So when it comes to this, do you need a mentor and money to get access to money? Like what else do you think that you need if you're trying to raise money to become a syndicator? Yeah, I think the key there, David, if you're not going to get a mentor, you know, I think you can start out small. So for me, you know, my wife and I, we did the flip on our own. Then we did the duplex on our own. So by the time we got to the 16 unit, we did have a little bit of a track record. So even if we didn't have the mentor, I think maybe we could have broken it. And let's say we went to an eight unit first. There might have been somebody that was willing to trust us. Now, it's the people that are closest to you,

the people they're going to believe in you, even if you don't have a real long track record. And they might see your track record in other place in life. Like if you have a great corporate career, a lot of times I'll see people within somebody's colleagues that they've worked with, they say, well, I don't know that you're going to be good at real estate, but I know how you work, and I know how dedicated you are and I know your integrity. So I'll invest with you. So the people that are closest to you are going to be the ones that invest with you first. So if you scale slowly, you can, and maybe start out by yourself, I think you can get

people to bet on you without having a mentor that you can lean on, you know, and lean on their track record. But if you want to jump more quickly, certainly if, you know, some people out there saying, well, I don't want to mess around with small stuff. I want to jump right into a 40 unit. Yeah, I think you're going to be surprised to find enough people to invest with you to buy that 40 unit unless you got out the money yourself. But because there's just not going to be enough people that believe in your track record to jump right into a 40 unit. So I think if you want to go quickly, you're going to have more need for a mentor, somebody to lean on and somebody to help bring in the capital and the experience that you need. If you want to go real slow and build up your track record slowly and build up your experience slowly, build up your capital based slowly, I think you can do that more on your own.

Again, for, you know, Lee, you dropped a nugget of wisdom there in that track record doesn't have to mean look at all the big deals I did. track record can be your work ethic at your job. You're the amount of consistent maybe volunteering you've done at, you know, at church or local charity or something. Something that lets people know who you are at your core, that counts for track record, even if it's not real estate. Yes, real estate is a great piece to add on to that. But if you're sitting here going, I don't have any kind of real estate track record. Well, you can partner to get the real estate piece and then add that on to the track record of who you are. And now you've got the whole package.

Very nicely done. All right. Last question, Lee, what is the biggest lesson in multifamily that you've learned? Yeah, I'll see the thing I've stubbed my toe on the most that I'd like to pass on to other people trying to get into it is just the need to bring in more reserves than you think you need. It's a lot different. That's where I think the numbers are better. you know, you're just always going to be surprised. I've been surprised so many times on the deferred maintenance that we find.

You know, going all the way back to that 16 unit, David, I just, I was so shocked at the way people would, you know, live that they would settle for. So, you know, you think if when we went into that deal, we knew, okay, there's three units vacant. We think some other people are going to move out. So I really had a good number in mine. And I got pretty close to it on the amount of money we're going to spend to renovate units. And the people that were going to leave, we even anticipate. anticipated that pretty closely. What I did not anticipate is the people that stayed, we had to put

thousands of dollars into their units because I was not comfortable with them living the way they had been living for years. You know, we went into some ladies, uh, um, apartment just to change out her toilet because we wouldn't have more efficient toilets. And she said, oh, why you're in there? The water, my water doesn't work in my bathroom. Her bathroom sink hadn't worked. And I said, okay, how long has that been a problem? Oh, about four years. I said, you've been living without a sink in your bathroom for four years? Oh, yeah. Well, it was stuff like that and like somebody's water heater out. I mean, that's where we're spending. I'm like, we're not okay with that. We're, you know, yes, we're going to get that fixed. But I didn't know we're going to spend so much

money on the people that stayed. We got hit with a pretty big tax issue this past year on some of the properties we syndicated. Just kind of came out of nowhere. It was a unique thing. There was a new law passed in Ohio that played into it. You just never know. And it really messes things up. When you suddenly don't have enough reserves, you suddenly don't have the capital. CapEx budget you thought you had so you can't turn units as fast as you wanted to. It just messes everything up. So one big lesson, just whatever you get a good idea of what you think you're going to use on CapEx and then how much you need in reserves and then probably add 20% to that and you're

probably closer to the amount you need. Awesome, man. We may need to have you back to get into syndication 101, but thank you very much for the job you did today. I think you painted a very good picture of how to get off the runway and get your plane up into the air when it comes to multifamily investing as well as how to find you spare parts for that plane in a scrapyard somewhere on loop net yeah it was an absolute honor to be on guys i've been listening for years and it's just an absolute honor beyond i'd love to come back andrew any last

words no i just say you know for those lists again you know sometimes you know people come on like i've done 5 000 units and you know and i live in atlanta i'm investing in dallas and you know it seems kind of far away you know lee has done to me you know lee has done to me you know you know Lee really laid out the framework for getting started, right? He didn't just say, I'm going to quit my job. I've got three weeks of reserves and I'm going to go into multifamily. He transitioned into a flip and then transitioned into multifamily, gave himself cushion all on the way, did it right in his own market, you know, had his wife on board, had a mentor. And none of the stuff Lee talked about was this crazy miraculous event. where he just got lucky. Lee is just a person of high character who put the time and effort into relationships and trying to do things the right way. And not overnight, over time, that has built him into a successful real estate entrepreneur.

Nice, man. From physical therapist to fantastic multifamily investor. This is Lee Yoder. Thank you very much, Lee, for people that want to find out more about you. Where can they go? Yeah, jump on our website, three-fold REI, as in real estate, investing.com. That's threefold spelled out, rei.com. And then I'm pretty active on

LinkedIn and Facebook. She can find me by my name and I'm on bigger pockets as well. And Andrew, for people that wanted to follow up with you, where's the best place for them to find out more about you? Yeah, if you just Google Andrew Cushman, usually the first page or so of results, but just go to Vantage Point Acquisitions, our website, vpacq.com. There's a couple of tabs there. You can connect with us.

and I will see you at BPCon in October. Awesome, man. And you can find me at Davidgreen24.com. Please go there because you can follow me on social media at David Green 24. But you will get fake accounts that will follow you back as soon as you do. People get tricked by this all the time. Make sure the spelling of the name is correct if you're going to follow me on social media, which I hope you do. And you can go to my website, which is not being faked, Davidgreen24.com.

Well, thanks a lot, Lee. We will have you back again. I'm going to let you guys get out of here. This is David Green for Andrew Jedi Cushman. signing off. 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.w.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.