BiggerPockets Real Estate Podcast - 791: 40 Rental Units and the “Desperate” Deals That Are Waiting for You w/Nate Shields and Troy Zimmerman

Episode Date: July 13, 2023

Nate Shields and Troy Zimmerman had a straightforward goal: get to one hundred rental units in ten years. Now, near the halfway mark, Nate and Troy have made almost unbelievable progress in a real estate market most investors perceive as radioactive. With overpriced properties everywhere you look, out-of-whack cash flow, and high mortgage rates, will good deals ever come back? Thankfully for Nate and Troy, finding a deal was never the assignment; making a deal was. After going through difficult partnerships in the past, Nate and Troy were hesitant to hop in the game together. But after years of getting to know each other’s strengths and weaknesses, it was only natural for them to tackle big deals together instead of small deals apart. Now, with forty rental units under their belt, they’re well on their way to hitting their hundred-unit goal. But this wouldn’t have worked out if they hadn’t made one special phone call. In this episode, Nate and Troy will review their most recent acquisition, a fourteen-unit apartment complex with tricky financing in northwest Alabama. They’ll also share how calling one desperate listing agent unlocked a deal flow that brought dozens of units directly to them. If you’re struggling to invest in today’s demanding market and don’t think there are any deals worth the effort, this episode could change everything for you. In This Episode We Cover: The “desperate” real estate deals that NOBODY is looking at (and where to find them) Real estate partnerships and why investing together beats going at it alone  Exit strategies and the BIG mistake most partnerships make when getting started  Why you might be just one phone call away from the best real estate deal of your life Seller financing and how to use it to lower your loan costs and get a tricky deal done Raising private capital and who you should (and shouldn’t) accept money from  And So Much More! Links from the Show Find an Agent Find a Lender 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 Rob's BiggerPockets Profile Rob's Instagram Rob's TikTok Rob's Twitter Rob's YouTube Are You an Agent? Work with Nate to Get More Leads! Partnerships: What to Do Before You Jump in With Another Investor Connect with Nate & Troy: Nate's BiggerPockets Profile Nate's Instagram Troy's BiggerPockets Profile Troy's Twitter Click here to listen to the full episode: https://www.biggerpockets.com/blog/real-estate-791 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 791. There was something about it that were giving him alarm bells. This had been on the market for quite some time. And the numbers just looked awful, like pitiful. And he's like, how could this be? How could this apartment building be bringing in this little money? After we found out what the property was actually bringing in, it was a slam dunk deal. Hey, hey, what's up everyone?

So glad you're here with us today. You made the right decision choosing to listen to this podcast because we are the biggest, the best, and the baddest real estate podcast in the entire world. I'm David Green, your host of the Bigger Pockets Real Estate podcast joined today with Rob Aub Solo, also known as Rob Built, if you're somewhere cool like YouTube or you like short tournamentals or you like being around cool people. You definitely know who Rob is. Today's show, we are interviewing Nate Shields and Troy Zimmerman. These are two folks who were struggling getting their real state business going until they found each other and had a partner made in paradise.

They ended up doing a home run burr and transitioned that into multifamily deals. And we get into how they found each other, how they knew the partnership would work, what they did wrong in previous partnerships and how they are looking for in analyzing deals today. Rob, what were some of your favorite parts at today's show? You know, I think it's really nice because we talk about partnerships and we talk about forming partnerships, but really being on the same page, not just in the actual day-to-day, logistics, but having a long-term vision for where you want your business or your real estate deal to go, that way there aren't any disputes or any fallouts later down the road. I think

this is something that's missed by so many real estate investors that just, you know, very nonchalantly partner up with people, but they don't ever discuss the exit plan, which can really, like, create problems if one partner is not in a position to sell and the other partner has to sell or wants to sell because, you know, life circumstances happen. So we kind of get that story. story we get the ins and outs of forming some of those JVs, how to work with some of those investors. And quick tip. Can I get to the quick tip? Sorry, I'm so excited. All right, today's quick, quick tip. Pick up the phone and make the dang call. Most of us are not closing deals or getting deals or scaling or getting to where we want to get into in the real estate

world because we don't pick up the phone and just pitch whatever we want to the real estate investor, to the property owner. I tell a story of how I call. the car wash operator today. And, you know, he gave me an offer on a, on a property that he previously told me no on. And we get into that a little bit more with Nate and Troy here because this deal that that they talk about all happened because he picked up the phone and he made a phone call and it turned into like a total grand slam of a deal. Dang it. That wasn't so quick, was it? Nope. But mine go long also. And I was just thinking maybe that's not a quick tip, but it's a quality tip. So that's today's quality tip for you. It's a quantity tip.

Managing properties can feel like a full-on circus. You're juggling vendors, tracking payments, chasing approvals across multiple properties, and maybe a few HOAs, all while trying to keep tenants happy and owners confident. One delay can throw everything off, and suddenly your day is all clean up, no progress. That's why hundreds of property managers rely on bill to streamline their finances. Bill for property management lets you add all your properties, assign permissions, pay bills, and receive payments quickly and efficiently, without the usual bottlenecks. It syncs with platforms like QuickBooks, Zero, NetSuite, and Sage intact, so your accounting

stays aligned. You can automate bulk payments across properties and HOAs. Choose flexible payment methods like same-day ACH, international wires, card or check, and set custom roles in approval policies. There's even a dedicated bill inbox for each property to keep everything organized. Ready to simplify your workflow, book your free demo at bill.com slash bigger pockets and get a $100 Amazon gift card. That's bill.com slash bigger pockets. Do you ever notice how every passive investment somehow turns into a very active lifestyle, active spreadsheets, active phone calls, active stress? Here's a better question. What if you could buy brand new construction homes, 10% below market value in the best markets across the country, without making real estate your second job?

That's exactly what rent to retirement does. They're a full-service, turnkey investment company, handling everything for you. In some cases, investors get 50 to 75% of our down payment back at closing, plus interest rates as low as 3.75%. They've partnered with BiggerPockets for over a decade, helping thousands invest smarter. If you want to do the same, visit BiggerPockets.com slash retirement to learn more.

Did you know your house gets bored when you leave? I can't actually prove that, but it probably misses out on the action, the footsteps, the late-night fridge raids. Yeah, when you're gone, your place is basically on unpaid leave. It's sitting there in the dark thinking, I could be contributing right now. Your side room wants a side hustle. Even your Wi-Fi is like, we could be networking. You're on vacation, spending money like it's a sport,

while your staircase at home is fully capable of sending your income upwards. Here's the twist. You can go on a trip and action. earn money. Airbnb makes that possible with the co-host network. If you're away for a while or have a secondary property, you can hire a vetted local co-host with real hosting experience to handle it all. A co-host can handle guest communications, it can manage reservations and keep things running smoothly so you don't have to check your phone between beach days. That means less stress and more time enjoying your trip. You can relax, knowing guests are taken care of and your place is in good hands.

You travel, your house works. Everyone wins. If you're ready to host but could use some help, find a co-host at Airbnb.com slash host. Let's bring in Nate and Troy. Nate Shields and Troy Zimmerman. Welcome to this side of the Bigger Pockets podcast. Now, as I understand, each of you work at Bigger Pockets, but you're not used to being on this side of the camera and the microphone.

So first question, scale of 1 to 10, how terrified are each of you? For clarification, I do not, but I live vicariously through Nate who does work for bigger pockets. So I hear all the stories. Thank you, Troy. I should have known. You just look exactly night like Nate. If you guys go on YouTube and watch this, you will see.

It's like we're talking to the same person in two different shirts. It's like one of those, what are those movies? Like Tom Hardy did one where he played two brothers. You know what I'm talking about Rob? Because you know every movie, right? I do. And then didn't like the parent trap. That's what this is.

I feel like we have the same person playing two roles on the podcast. But I promise they're different people. Because that is usually what people say whenever they meet us. They're like, they're always weirded out because they're like, who's, are you David or you Rob? It's like you guys look like brothers. Yeah, that's very note. Not well-known fact. That's why Rob grows his quaff.

It's just so we can be differentiated because we look like twins. It's helpful. Yeah, he's tired of getting confused with David Green. He's like way more handsome than that guy. Stop doing it. He looks like a combination of Shrek and Dana White. And I look like Antonio Banderas. Why are you guys mixing us up here?

All right. So in today's show, Nate and Troy are going to walk us through a deal that they're doing that includes a new joint venture as well as working directly with the seller. We're going to dive in more later, but first, tell us a few quick stats about this deal. Troy, I'm going to start with you. What kind of property is it? Yeah, it's a total of 14 units, two quads and two triplexes. Oh, are these all in the same lot? Essentially, there are two of them are on the same street. Two units are just one street over. Oh, but they're different parcels that are owned by the same person. Yeah. Okay. And then, Nate, what did you buy it for? We are buying this for 925,000. You see how I'm using

your names just so it makes it the audience think that we're talking to two different people and they don't realize it's actually the parent trap. And then, Troy, what's your plan for the property? We're going to hold this. We hold most of our property long term. All right. I'm excited to hear more. We'll get back to this deal. But first, how did you two get into business together? Did each of you have partners before you met each other? Did you look at each other and think, oh, my God, we were separated at birth, we are clearly identical twins. Like, what was the origin story of this relationship? Yeah, so Nate and I met after school, after college, through some mutual acquaintances and just had a lot of similar interests, like to play golf, like to play music, guitar. And actually, early on, I was

starting my financial planning career, and Nate was working for a security company. And we actually started a little side hustle together where we would go out and kind of procure these really great deals from local restaurants and realtors or retail shops. And then we'd package them up into these little coupon books. You've probably seen them. And we'd sell them to the community. And then unfortunately, Groupon happened. And, uh, wait. So did you actually, like, you were actually creating the literal coupon books? We were. Wow. Wow. Yeah. That must have been so much work, was it?

Yeah, I mean, it was a lot of work. It didn't last long. We should have seen the internet coming. Probably by that point, for sure. But I bought one or two of those in my lifetime. And, you know, I was just going every day. I was like, well, I need a cheap meal. I guess today I'm going to Applebee's for $10 off.

Exactly. For someone who is trying to figure out, should they partner, should they not partner, who's the right partner? Before we get into the deal, I'd like to get some of your guys's perspective on, what did you do with people that looking back you can clearly see that were those were mistakes that's why it didn't work and what did you see in each other that made you realize this is a partner that actually could work out in the long term we could start with you Nate yeah I think um you know Troy and I had developed this relationship in our 20s um you know we were we were playing golf together

we would have poker nights uh play video games I mean we were just kind of hanging out becoming buddies basically first and then we had had that, you know, that coupon business that kind of fizzled rather quickly. But we're both kind of in that visionary mindset. We like, you know, talking about ideas, new things, new businesses, all that kind of stuff. And so what kind of happened, you know, over time, I ended up leaving my marketing job that I had. And I did not like that job at all. So I was looking for an out. I became a real estate agent. And within eight months, I was able to quit my job. and went full-time in the real estate.

And at that point, I didn't know what investing was still. I spent a couple of years just doing retail, buy, and sell. And then a property manager friend of mine shared the latest Bigger Pockets episode with me. And this was back in 2015, I think, is around episode 105. So I think we've had a few episodes since then. And it just kind of floored me to hear about real estate. I listened to all the podcasts. I started reading books.

And that's when Troy and I talked about a partnership together because we were both interested in real estate. Troy had actually already had some experience buying rental properties. And so we decided, you know, how are we going to build a business together? Does it make sense to work together? How can we do that? And really it was because that relationship that we had had for years at that point that we felt comfortable going into business together, especially because I felt like he had more of a financial

mind being a financial planner. I was in the trenches selling real estate every day. So I had my pulse on the market. But then he had also had experience on both the commercial side, managing some commercial properties and buying rental properties. So for us, it was just, you know, let's do this. Where do we start first? So you knew each other for a while. You got to know each other's character, personalities and styles, and you believed this is a person that I could trust. And then you made another good point there. You had opposing skill sets. Doesn't do any good to have two point guards on the same team. You want somebody who is covering a different base than you. Troy, anything you'd add to that? No, I think that's true to a certain extent. And yet,

as I look at our real estate business, you know, real estate is not that hard. So I've watched our business change and our roles in the business change as needs have arrived. Like Nate said, for a while, he was an agent. And it was because of his, just his ability to access auctions in the MLS at that point, he was kind of the deal sourceer. He would find the deals. And through that, we found our first Burr property, went to auction, bought it for 60 grand, rehabbed it, rented it, repeated. refied, repeated. It worked perfectly. It was a perfect burr, and then we never did it again. But it was because of Nate's role at that time that he was finding the deals. That's shifted somewhat,

and we've been able to kind of offload some of the responsibilities, depending on who's curing what at any given time. So, Nate, you started off finding deals, Troy. You were sort of handling the back end of it, making sure everything got done. It's funny that you said, you did a burr and then you stopped. I think so many people that were buying properties from 2014 to 2020 or so had that same experience. Like, we were so spoiled that you could do a burr, get 100% of your money out, be left with a cash-flowing rental that had been fully rehabbed and was going to have no cap-x for the near

future and just think that's normal. And it should happen all the time. And there's so many of them that we don't even need to go do this again, right? And now we're in this market where we're like, I'd get it. give my left arm to have anything that cash flowed a little bit. And if I leave 10% of the money in the deal, I'd be thrilled with it. We can't find those anywhere. And we're all looking back kicking ourselves saying, why didn't I buy more real estate when I could? What was your mindset at the time when you guys did that deal that prevented you from going after more? Yeah, well, I think, you know,

the most important investment that anyone makes is their first deal because it kind of gets them over that hump of I can do this. And you learn a lot in that process. And so for me, there are two things. that kind of held me back from investing in real estate. One was just like, how does real estate, like how does a real estate transaction get put together? And luckily, I had at that point about two years, maybe about, you know, I think I had about 60 deals to my name just in the trading of real estate for clients. And so I felt like I had a comfort level with how a transaction goes. I had contacts, like I had attorneys. I had, you know, a bunch of different vendor partners. And then the second part of it that I really learned a lesson on was, you know, how to find and manage a

contractor. And I made some pretty big mistakes there. Trusted a referral. And usually that's a great place to start, but you still have to do another layer of vetting. And I did not vet this contractor hard enough. And he just took way too long, went way over budget. It was poor quality work on top of all of that. And then it delayed our process to be able to complete, you you know, kind of the burr strategy, and it led us into basically the fall, which is not a great time to try to rent a property in the upper Midwest. And so luckily, we did find really fantastic tenants, but it did delay our timeline by several months. And so I learned some lessons on how to find contractors, and that led to some better experiences down the road where I was actually

able to partner with some contractors that knew how to work with investors. I knew how to better manage them, and I knew what to look out for as well. Contractors are such a tricky referral. Because when I get a good contractor, it's like, I don't want you to know who that contractor is. I don't want to give you my guy, right? I'm going to give you someone else's guy that I heard they use. And maybe I have their contact info. Is it the same with you, Rob?

Oh, yeah. Oh, yeah. I ruined my contractor in California for myself. He was the best contractor in the city. I'm not even going to say the city because I've already ruined that city too. but everyone goes to him now. He's built dozens of homes for people that I referred out. And now I can't even get a quote for like three months and like he's expensive now.

And it's a whole thing. And I'm like, well, I'm happy you're winning, but I'm not losing because I helped you win. So you have this budding relationship. You guys have sort of figured out we want to be in business together. How did you align on where you wanted to go? You did mention you pivoted after the first burst. Obviously, there must have been a heart to heart that sort of guided your strategy after that. So Nate, can you give us your thoughts? And then I'll go over to you, Troy. Yeah, when we,

when we first talked about this idea to, you know, own rental properties, our pie in the sky goal was 100 units in 10 years. And that, we just pulled that out of thin air. It just sounded cool. But it kind of at least gave us a starting point because you got to start with one. And so we, we talked, we set up our LLC. We, Troy brought the bank. relationship with a commercial lender, which was, we're still working with that, that person to this day. And so that's kind of, you know, where that all began. And then I think the next thing that kind of changed some things to, in addition to maybe kind of stopping the burger strategy, Troy moved out of States. We were in the Chicago area at the time. He moved South Carolina.

And so that kind of changed our strategy a little bit, too, because he was kind of looking at some properties there. We had one property in particular that was kind of a disaster. We bought a duplex that we made a huge due diligence mistake on. We thought it was zoned multifamily, and it was not. And we did not find this out until the appraisal was done. We already done quite a bit of work to it. We were not going to be able to pull out our money unless it was a property that adhered to the zoning. And since it was being used as a two unit, we either could kept our cash in that deal or we had to revert it back to a single family to pull our cash out. So we had to make the hard decision to pull our cash out of there. We had to revert it to a

single family, which cost us like another $10,000. And then when Troy had moved to South Carolina, we sourced a property there. And that kind of took us more to and more of an out-of-state investing mindset. That's where we do most of our deals now. I want to talk about a little bit of the ins and outs of the partnership in the structure that you have in place. I wanted to just start with this question. Is it hard to actually set up a partnership? No, I mean, for us, we probably did the worst thing possible, but we just jumped on legal Zoom and set it up that way.

And it's been fine. I guess we haven't made any changes, so it was pretty easy. All right, getting back into this deal that we are talking about here, your 14 unit, I believe we're with you, Nate. So tell us, how did you find this deal? So I'll back up for just a second, and I'll tell you how we found the market. Five years ago, we were looking for a bigger multifamily deal. And we were pretty agnostic as to what market we were in.

We would obviously do our due diligence if we found a deal. But we're looking at major markets all across the U.S. And actually, Troy found this 20-unit deal in northwest Alabama, about an hour outside of Huntsville. And there was something about it that were giving him alarm bells. This has been on the market for quite some time. And the numbers just looked awful, like pitiful. And he's like, how could this be? How could this apartment building be bringing in this little money?

It just didn't make any sense to him. And so this is why he's such a great partner. But he dug into it. He found the property manager. And Troy, maybe you want to continue this because you were the direct contact with the property manager at that time. Yeah, I found out on LoopNet, who was like Nate said, at 20-20-plex that just looked, the NOI was ridiculously low. And instead of just passing it over, I thought I'd call the property manager and called

them up and kind of said, I asked him, why are these numbers? Why is the rent so low on this property? And he kind of laughed. And he said, you know, the only thing I can think of is that I switched property management software halfway through the year. And they only took one of the 1099s enlisted it as the income for the entire property. So he ran through the numbers with me. And after we found out what the property was actually bringing in, it was a slam dunk deal.

I mean, best deal we've ever done by far. And, you know, I think that was a lesson for me. Just pick up the phone, you know? I mean, the best deal of your life can be one phone call away. So, you know, with that being said, that is how we actually met Robbie. He was the property manager who picked up the phone when I called. And we love the guy. And he has been so instrumental in our business. So not only does he manage that 20 unit for us. He brought us a fourplex in 2020, early 2020. And then he just brought us this

14 unit deal completely off market. So, you know, for us, our property manager has really been the greatest source of deal finding. So let me get a, let me get clarification here. If I'm hearing this correctly, you found a deal on loop net that didn't necessarily work out. It was like, eh, it's not that great of a deal. And then you were like, but I'm going to call anyway. You call and then due to a technicality or a flub or a glitch, they're like, oh, yeah, sorry, let me crunch the numbers, crunch. And then all of a sudden they're like, oh, yeah, we were way off.

It actually makes this much money. And then no one had made an offer on the property because the numbers looked bad at face value. Yeah. I mean, it's shocking right that no one had followed up on this. The numbers were so bad that I didn't think it was possible. And that's what prompted me to make that call. And yeah, it's been a great deal for us. Yeah.

So that's what brought us into that particular market. And then over the last few years, we just remind Robbie, our property manager, hey, we're buyers. So if anything comes across your desk, we'd love to take a look at it. And after BPCon last October, we were pretty fired up like everyone was. and we reminded our property manager again, hey, we're looking for deals, especially if there's any kind of creative finance element to it. We are buyers right now. Yeah, that's huge. I don't want everyone at home to just listen to this. I was thinking about this earlier on my walk this morning on my walkabout, if you will. And one thing that I realize is I think that the reason most people

don't scale or don't have success past like their first deal or even getting their first deal is because they just don't ever make a physical phone call. Like the moment you have to make a call, you just kind of get, I don't know, that's too much work. I'm too nervous about it. But it's just like calling people can lead to so many opportunities. I saw this car wash and, you know, I'll say this. Like I, there's a phone number on the door of this car wash. And I was like, hey, maybe they'll sell it to me. And I called them six months ago. And he was like, no, no, no, I'm not going to sell it. But thank you. Thank you for reaching God. I appreciate it. But no, no, thank you. And I was like, all right, great. Walked by today, called him again. And he answered the phone. I was like,

hey, it's me. I called you six months ago, just following up. And he was like, well, I'd sell it for four million if you're for real. He said you called me six months ago. And I was like, all right, it was not a great price. It's actually a very bad price. But I made progress in six months because I decided to call. And I almost did it. And I think that if I call them again in six months, maybe it'll go down to 2.9. I don't know. But the point is calling over and over again, warms people up, it builds rapport. And even if you fail at making those phone calls, it at least thickens your skin a little bit so that you can just do it. Because it is scary to make phone calls, I think. Cudos to you on doing that. Yeah. And I think especially in today's market, right,

everyone, the hardest part is finding a good deal. And yet so few people are willing to just take the extra step to make a deal happen. Well, this is what stood out to me about this. You see a deal on the MLS, the numbers are terrible. We've all seen that. All my. guy that house is priced so high. Why do they think they're going to get that? Those cap rates don't make any sense. I hear these statements constantly. We view it like that's the price. It doesn't make sense moving on to the next one. When I see that, I'm not looking at it from my perspective of I want an easy deal. I just want to find something that makes a bunch of money. I can write one offer on, put it in contract, and be done. I'm thinking how that listing agent must feel. This thing's been

sitting on the market for six months, for nine months with numbers that clearly don't make sense. They probably feel pretty bad about themselves. These listing photos are terrible. They don't even have an interior shot. Nobody's going to be asking about this. They're probably desperate for a phone call. This person probably really wants to talk to somebody about real estate. That listing might be expiring soon and they've got nothing to take to the seller. They're going to lose the listing completely. That's the house you want to call on. You don't want to call on the one. that looks gorgeous and is priced really low. It has been on the market four days because it's priced low on purpose.

It's going to sell for $100,000 or $200,000 more than that. And that listing agent isn't even going to answer the phone. They're going to give you some automated response and say, submit your offers through this portal on this website. You'll never get to talk to me. They're running an auction and your client's going to be frustrated. You call those ones that are obviously messed up and you find what you found, Troy. Oh, the rents are much higher.

They're idiots. They don't know what they have, right? These pictures are terrible. The property looks way better than I thought. What were they thinking when they did this? And they want an offer. They want something. They want to start negotiations.

They just want to feel wanted. They haven't gotten attention in six months, right? All their friends are getting dates and they're sitting there posting on their Instagram and they're getting zero likes. And then you happen to leave that one person to comment and they're like, oh my gosh, I got attention from a buyer. This feels great. They want to talk to you all the time.

Those are the deals that you should be looking for when you're investor. But for some reason, we pass them all. up and we chase after the same homes that everyone else is. All right. So let's see, where are we? Troy, how did you negotiate this deal? So one thing when we're trying to vet markets in general, and I think it organically started just because it was where we lived, but we were about an hour outside of Chicago. And so we're our, hour outside of a metro area, decent demographics. When Troy moved South Carolina, he sourced a duplex there. That was about 30 minutes outside of Charleston. And then when we were looking for,

For a larger deal in a different market, this just happened to be about an hour outside of Huntsville, which is a very, very strong market and has been for years now. It's really been on fire. So what we do, you know, for some people who might think that it's hard to find a deal in your own town, that that can be the case. And depending on what your goals are and what you're looking for, there are plenty of markets out there that might just be on the fringe of a really hot market that doesn't have the attention yet. And so if you just go and do your due diligence and see what's going on there, sometimes there are markets. And we found this to be true in several markets where not just one metro area, but there can be two or three, like in a triangle. And that can be really, really good. Like down in Alabama, there's, there's Huntsville.

And then there's like there's a bunch of manufacturing in Tupelo, Mississippi. and then you've got, you know, up until like Memphis and Nashville. So some of these markets feed off of each other because a lot of their distributors come from these larger markets and then infill into the smaller markets. So there's still a lot of good things to be looking out for in these tertiary markets. So that's the 20 unit. You also mentioned this 14 unit on this deal. Troy, is that the same market?

Is this one? Is it a different market? Yeah, it is the same market. And in fact, I think I also mentioned the four unit complex that we're. we bought. It's literally on the same street. These 14 units are on the same street that we already own a 4plex. So really familiar with the area, feel good about the property management that's in place. Yeah. And so I imagine you get to use a lot of the same vendors. And so it's a pretty seamless machine once it's up and running, right? We love it. I mean, having solid boots on the

ground makes you want to continue to purchase and continue to buy in that area. Yeah, 100% agree. And Nate, you know, kind of got your take here on like the tertiary markets, all that stuff. But can you just take us through your actual buy box? And how has that buy box evolved over time? Yeah, I think when we started out, you know, we just bought, we bought a single family. We did the Burr Strategy. Then we looked into some duplexes and some larger units. And when we wanted to go for the 20 unit, I mean, it didn't have to be a 20 unit.

it just ended up being the best deal for us. And as we've continued to kind of build our portfolio, we like to stay in that kind of mid, mid-sized multifamily range because it's, first of all, it's a commercial property. We prefer to play in that space, if possible. But as we move forward, I think that we're not, I mean, if it was a good deal and it's in a market we like, well, we'd probably still buy a duplex. We like multifamily quite a bit.

But, you know, Troy, maybe you could kind of chime in on on what you're thinking our best buyboxes. Because I think what we're looking is for a deal in a market that we like and have boots on the crown. That's kind of our criteria. Yeah, that's good. Yeah. And I also think I think our buybox has changed a little bit given the current market environment. I think we are less focused on cash flow right now and more focused on just solid properties. that hopefully break even.

Hopefully we get a little bit of cash flow. But solid markets where we feel rents will appreciate long term, kind of taking care of the cash flow problem on its own. But then looking for markets where we feel long term appreciation will naturally occur as well. So yes, I'm working on a book right now that I'm hoping bigger pockets will publish that details the 10 different ways that you make money in real estate.

And you just mentioned two of those ways. market appreciation cash flow and market appreciation equity, trying to bring some clarity to all the different angles that people take when they're making place because there's so much controversy between should you be an equity investor? Should you be a cash flow investor? Does location matter? Should you be adding value? And really the answer is yes, you should be doing all of it, but you typically have to give up something to get others. So I like that you guys are sharing. This is the strategy that we are using and this is why. So therefore, these are the properties that we're looking for. remind me, what did you pay for this deal?

$925,000. That's right, $925,000. You said that earlier. And then, Troy, how did you negotiate that? Really did not negotiate as far as price goes because it was an off-market deal. And the seller was adamant on his price. And he said, if someone can pay me $9.25, I am willing to sell. If not, I'm willing to hold.

He built these 14 units. He was the builder back in the late 90s. And so he has a lot of pride of ownership. Oh, yeah. I can see this one already. Yeah. So we didn't negotiate on the price, but there were some really interesting pieces that kind of happened along the way. I've been negotiating with this seller since November of last year.

And initially, he thought he wanted to seller finance. You know, he didn't want the big tax hits. kind of worked that back and forth and eventually he just kind of, I don't know, just kind of walked away. I think he was second guessing whether or not he wanted to sell to sell the property. You know, his heart and soul was in these things. Kind of let it be for a few months. And in January just thought, you know what, I'm going to reach back out. Again, another phone call, right? I'm going to reach back out to the seller. And I'm just going to say, forget the seller financing. Let's let's let you.

work on a traditional financing deal. We'll work with our bank, and we'd still love to buy these units. And at that point, I think he knew he needed to sell. He was in retirement, and he agreed to that. So I guess we negotiated in the fact that we got him to accept the deal. So, Troy, was that at all heartbreaking that you had a seller finance deal option, or was it like not a huge deal to switch to conventional lending? It wasn't a huge deal. Obviously, the seller financing piece was attractive in the fact that we thought we could get a lower rate. But it's not like he was pushing the amortization schedule out to 40 years or anything crazy like that. We also have such a good banking relationship that, believe it or not, I mean, even, I mean, we're getting under six

with our bank. So we weren't too worried about that. But, But we ended up, this deal actually ended up a portion of it is being seller financed anyway. And that was due to an appraisal issue. Got it. So Nate, tell us, how did you fund the deal? So we funded it with our lending partner, who we've been working with a very long time. And then the other component was the seller finance. And then our down payment into the deal is obviously between our business.

And then we brought on two partners, which we have never done. before. So we're doing a JV deal with another group of guys that we like and trust. Okay. So how much money did you have to put in? Because I imagine if you're bringing other investors in, do they want skin in the game? Yeah, we ended up putting in altogether right around 30% of the deal. Part of that was due to the fact that the appraisal came in low. And that's a whole different story. So we brought a little more cash to the deal. And yeah, because we've got a few more guys in this deal who wanted to bring capital and wanted to be involved, we did a little bit, a little bit greater down payment. Okay. All right. And, you know, you said that you JVed on this.

Were there any specific JV thing that you had to do? Or was it still just going on to legal Zoom or whatever website and forming your partnership there? No, we used an attorney this time. This one, you know, because there were more parties involved. We felt that was probably the better, wiser decision. But really good guys and just guys that we've gotten to know and talk real estate with and feel comfortable kind of pursuing deals together down the road. People love to call real estate passive income, which is interesting because most of the investors I know are very busy. Busy finding deals, busy managing teams, busy worrying they pick the wrong market. Rent to retirement flips that model. They help investors buy turnkey new construction homes, often 10% below market value in top rental markets across the country. Their local teams handle the build, the property management, and the details, so you don't have to.

In some cases, investors even receive 50 to 75% of their down payment back at closing, and there are interest rates as low as 3.75%. They've been trusted partners with bigger pockets for over. a decade. And if you want to learn more, visit biggerpockets.com slash retirement. Did you know your house gets bored when you leave? I can't actually prove that, but it probably misses out on the action, the footsteps, the late night fridge raids. Yeah, when you're gone, your place is basically on unpaid leave. It's sitting there in the dark thinking, I could be contributing right now. Your side room wants a side hustle. Even your Wi-Fi is like, we could be networking. You're on vacation.

Spending money like it's a sport while your staircase at home is fully capable of sending your income upwards. Here's the twist. You can go on a trip and actually earn money. Airbnb makes that possible with the co-host network. If you're away for a while or have a secondary property, you can hire a vetted local co-host with real hosting experience to handle it all. A co-host can handle guest communications, it can manage reservations, and keep things running smoothly so you don't have to check your phone between

beach days. That means less stress and more time enjoying your trip. You can relax, knowing guests are taking care of and your place is in good hands. You travel, your house works. Everyone wins. If you're ready to host but could use some help, find a co-host at Airbnb.com slash host. Real estate investors, the April 15th tax deadline is coming fast. If you own rental property and haven't done a cost segregation study yet, you could be handing thousands of dollars to the IRS that you don't have to. These studies let you write off. as much as 25% of your building and generate huge tax deductions. Costsegregation.com is an online self-guided software that makes cost segregation fast and affordable.

So it finally makes sense for smaller rental properties purchased for as low as $100,000. With pricing under $500 and an average savings of over $25,000, it's just a no-brainer. What's more, audit support is included by the number one cost segregation company in the U.S., but you must complete it before the tax deadline. Go to costsegregation.com and use code tax deadline to get 10% off your first report. Don't overpay the IRS. Head to costsegregation.com before April 15th. All right, rental property investors, listen up.

Our friends at Dominion Financial already have some of the best DSCR rates in the industry. Now they're the fastest, too. They just launched 10-day DSCR closing. That's right, 10 days. And they're still the only lender with the DSCR. our price beat guarantee. That means faster closing. The best terms. Zero guesswork. That's Dominion financial. Check them out at biggerpockets.com slash dominion. Again, that's biggerpockets.com slash dominion. Now, was there anything that you had to do to vet the partners that you brought in?

Was there any learnings that you had from your previous, I guess, partnerships and everything? Because obviously, if you're bringing in two new people, that's two different mindsets and two different philosophies that are coming into your investment. Nate, I don't know if you're the person who walked through those logistics or if it was you, Troy. Yeah, it was probably more my relationships on this deal. These guys, these guys were neighbors, guys I went to church with. So I just kind of knew them organically through everyday life. So they both had real estate experience. And, you know, we decided once we realized we had the similar passion. We just started having breakfast once a month talking about real estate. They knew I was

working on this deal. And for whatever reason, during one of these breakfasts, I just was kind of feeling a nudge to throw the deal out there. And I did. And I said, guys, what do you think about partnering on this? And Nate and I didn't need to, but I think it was a chance for us to grow and and learn just how to partner and build a deal with more people involved. And these two guys jumped at the chance. And it's been great. It's been a lot of fun. What advice do you have for people who are, you know, they have a decent friend group,

but they're not sure who's interested in real estate, who could be a potential partner. They don't even know how to bring this topic up without feeling awkward. Yeah. I mean, I would say, I mean, like when I was a real estate agent, I was always told, don't be a secret agent, right? Tell everyone that you are in the real estate business. You need to tell people what you're up to, what you're interested in, what you're learning. And naturally, these conversations will come up.

I was getting a haircut the other day and real estate came up. And so it's like people are interested in real estate. Everyone knows something about real estate, right? They either know that their rent has gone up, has skyrocketed the last couple of years, and they'll vent on that. Or they know that their neighbors, got into a bidding war over a property and had to pay 50,000 over asking, whatever it is, you know, everyone knows kind of how real estate works. So, you know, a couple things is just don't,

don't keep it a secret. Share it no matter where you're at in your journey. Maybe you just read your first book or listen to your first podcast. Go tell people if it's exciting for you that will rub off on other people. They might have a connection or maybe they'll end up being your your private money lender or whatever it might be. Then the second thing is go hang out with people who are like-minded. So go find those meetups. You know, you can just go to meetup.com or go to bigger pockets and go to the network tab and find those local meetups. They're happening all the time, all over the place. And if they're not happening, go start your own. That's what I did. There was one that was like an hour for me. I didn't want to drive an hour, so I started my own.

Troy, anything you add to that? No, just to kind of piggyback on what Nate said, I was kind of that secret real estate investor, to be honest. Just because of the profession that I was in. I just didn't talk about it a lot. And it's funny to watch now that Chris and Paul are actually involved, they are talking about it more than I am. And it's amazing how many people that we know who have now come up and say, I heard you guys are doing this, you got to let me know next time you buy a piece of property.

So, you know, I think I think everyone talks about how important your network is. And shame on me for not realizing that earlier, but it's true. I mean, it's true. The more people you know and real estate is one of those things. Everyone's attracted to it. So the more people you know and the more people you can share the story with, you know, I think it's going to speed your journey along. Okay.

And one question here says, I mean, I'm kind of always interested to see how these types of things, are formatted and everything like that. But with more parties involved on this particular deal, what can you share about communication and partnerships? Obviously, there's the legal side of it. And that's the ultimate form because it's all documented. But what about the actual day-to-day back and forth with investors, Troy? Is that something that you've had to sort of change your theories or your philosophies on? Yeah. Yeah. I mean, not so much my philosophies, but definitely, definitely the practicality of picking up the phone and keeping everyone in the loop. It's been more than what I'm used to. You know, thus far, though, it's actually been an encouraging experience. You know,

when you're kind of, man, this deal has had a lot of hair on it that we're trying to close. And when you're talking to these guys, I mean, the encouragement that I get from some of these other guys, hey, you're doing a great job. Keep going. We're going to get through this. I don't know. it's kind of fun to have more energy going towards a deal that we wouldn't have otherwise. But yes, definitely, definitely more communication now that we have other investors. Yeah, it's a beautiful thing when everyone's excited about the deal, right? Yeah. Yeah, let's keep it that way.

Yeah, you punch holes along the way and you try to make the deal not work, but just barely survive, and then it survives, then it's like, we did it. If we could survive our own hole punching, then this is going to be a great deal. So tell me, Nate, what does it stand now? Like, I know you guys haven't closed yet. Are you guys approaching the finish line? How close are you to kind of rounding this one out? Yeah, less than a week, we are set to close.

So we're very excited about that. I guess just to kind of paint a picture, you know, like Troy said, this deal was initially brought to us in November and the time of this podcast that we're recording today. It's middle of May. So that's a while, right, to work on a deal. but that's what's really important about making a deal happen is just be persistent. You know, good things take time and good deals are going to take a little extra work sometimes,

but they're totally worth it, totally worth it. Could not agree more. The best deals rarely work at face value. You know, you kind of have to make the deal work. That's something that I always heard as a bigger pockets listener, but something that we all believe here at bigger pockets is, you know, like deals don't just come. out of thin air, you have to make the good deals, right? So I heard David Green say that a time or two. So what's next for you to? I think for us, we like Troy said, we're going to continue

buying. There's a lot of fear in the market, and that's usually the signal for me to pounce. I think there's going to be a lot of great deals like Troy said in the next 12 to 18 months. We kind of sat on the sidelines the last couple years, just kind of managing our portfolio as the market was just kind of overheated. Not that we weren't willing to look at deals and stuff, but it just so happened that as interest rates went up and there's more fear in the market and talks of recession and all this stuff, it opens up a window of opportunity for those who are, you know, willing to go after these deals. All right. Well, thank you guys very much. For people that want to find out more about you, Troy, where can they go? Twitter and Instagram, Troy G. Zimmerman. For me, you can find me on Instagram,

Nate underscore Shields, but definitely hit me up on bigger pockets. If you are an investor-friendly agent and you'd like to connect with more investors from the Bigger Pockets community, I'd love to have a discovery call with you and see if we can help you build your business through Bigger Pockets. Rob, what about you? You can find me over on YouTube at Rob Built, on Instagram at Rob Built. Occasionally I post weird, funny videos. And on the Apple review platform where you can leave us a five-star review after you do that because

you love the show. want us to get served up to other people and you want other people to achieve financial freedom through real estate. What about you, David? You can find me at David Green24. Or go follow me on Instagram or YouTube at David Green 24. You know, Rob, I had a thought. You need one of those little cartoon heads that is like a caricature quaff, right, needs to be very significant. And you need to put it on T-shirts like what you're wearing right now because these are what you wear all the time and sell them for $400. Oh, wow. I'm flattered. Do you think I could? I know you could. Silhouette of my quaff and my glasses, like on my pocket.

Yeah, like, if people pay that much for Dolce and Gabana, they would easily pay that much for a Rob-built special. Well, I'm going to send you the first edition, all right? I want you to wear it every episode. If I wore that same shirt as you, people wouldn't be able to tell us apart. They'd be very confused. That's right. So we probably should not do that just for the sake at BPCon.

Like, we don't want people going up to you and be like, Rob? It's like, no, I can see why you think so. Yep, that's it. Nate, Troy, thanks for joining us today. guys, go give them a follow and keep up to date with what they got going on in the investing world. This is David Green for Rob Dona Karen, New York, Abasolo. Sounding out. Do you ever notice how every passive investment somehow turns into a very active lifestyle,

active spreadsheets, active phone calls, active stress? Here's a better question. What if you could buy brand new construction homes, 10% below market value, in the best markets across the country, without making real estate your second job? That's exactly what rent to retirement does. a full-service turnkey investment company handling everything for you. In some cases, investors get 50 to 75% of our down payment back at closing, plus interest rates as low as 3.75%. They've partnered

with BiggerPockets for over a decade, helping thousands invest smarter. If you want to do the same, visit BiggerPockets.com slash retirement to learn more.