Epic Real Estate Investing - Day Job to Full Time Real Estate Investor - Jeffrey Holst | 829

Episode Date: November 7, 2019

During his October travels, Matt made new friends and one of them is Jeffrey Holst, a real estate ace who made the transition from the day job to a full-time investor. Tune in and find out why Jeffrey decided to quit his 9 to 5 job and step into real estate, why multi-family was the key to his prosperity, how finding deals for multi-family differs from finding deals for single-family, how Jeffrey sees the future of the real estate, and many more! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Success in real estate has nothing to do with shiny objects. It has everything to do with mastering the basics. The three pillars of real estate investing. Attract, convert, exit. Matt Terrio has been helping real estate investors do just that for more than a decade now. If you want to make money in real estate, keep listening. If you want it faster, visit R-E-I-Aase.com.

Here's Matt. Hello, and welcome to the epic real estate investing show. I got a great show for you today, a great guest. As many of you know, I was on the road, almost the whole month of October. It was exhausting. I'm really happy to be home back in the office, back in the studio. But while I was on the road, I made a lot of good friends, I would say. I made some great contacts, had some great conversations, you know,

just had a whole lot of fun in between those times when I was working. I invited some of them to come on the show, and the first person to accept my invitation is with us today. He's got a great story. He's a successful real estate investor, and he's made this transition from day job to full-time real estate investor, which I found really inspiring as to how he did it and his story, and I think you will as well.

So please help me welcome to the show, Mr. Jeffrey Holtz. Jeffrey, welcome to Epic Real Estate Investing. Thanks, man. I appreciate you having me. Yeah, you bet. You know, we met just a few months ago, and we got to talking, and I think our ideas and seem like our views and our just, yeah, everything was just kind of

in alignment. Had a great time with you for a couple days. Probably consumed more alcohol than any two humans should in one sitting. I would say that's true, except for we did even better last weekend, actually. We were in New Orleans for Halloween weekend. Uh-huh. That was a lot of alcohol for my wife and I. I think I might have to take a break after that.

Okay, good. All right. So I'm not that guy. That's right. super uh where are you from jeffrey uh chattanooga tennessee i'm actually from michigan grand rapids michigan but i live in chattanooga now i've been here for uh about nine years now nine years now perfect so uh what inspired the move to chattanooga well i took a job um working for a trucking company um i started out so uh i'll take a step back if you don't mind so please i want to know how you

get into real estate anyway so yeah yeah so i mean yeah so i mean I was a bankruptcy attorney in Grand Rapids, so I did bankruptcy work. I did that for about five years. And in 2008, I was diagnosed with leukemia. And I ended up because I was running a small practice, and I'd only been practicing for a few years at that point, ended up personally going bankrupt in 2010. And at that point, I decided I needed to figure out a better plan. So one part of the strategy was to take a job. So that's when I started looking for as high a paying job as I could get because I needed predictable income. And then the second part was to create a plan that made it so that I would never have to go

that direction again. So I was in a situation where I didn't know if I was going to live or die and I wanted to make sure I had some money put aside for my wife. And the strategy was get a high paying job and then start buying real estate with the money. So that's what I did. That was your wife's suggestion? No, it was my idea. Oh, okay. She was just hoping I didn't die.

You know, she's a saint, though. She spent her time supporting me and whatever I wanted to do. When I just said I wanted to quit practicing law, that's a risky move, even though, you know, we had had some troubles. We were still making decent money before I got sick, and I knew once I recovered, I could do that again. But I also recognized, you know, you only have one life, right? So you want to do something you enjoy. And I always liked real estate. So I felt like it was the time to Do it. I mean, you're only to be this young once, so got to do it now. Yes, we'll only be this good looking once also. Well, I don't know. I keep getting better looking.

Good. How long ago was that decision then? So 2010 is when we moved to Tennessee and we started buying real estate in early 2011. 2011. Okay, so here we are eight years later. What is your real estate investing, I don't know, portfolio or business? What does that look like today? Well, I'm full-time real estate now. So I quit working two years ago. So it took about seven years to get to where I could just support myself off of my real estate investing. I started with single families. I mean, 2011 stuff was super cheap. So we were just buying stuff for cash, $10, $20, $30,000 houses.

And then we started doing some private money stuff where we were, you know, using investor funds to buy single family houses. And then eventually we just started flipping those to bigger and bigger deals. And our strategy back then was we'll buy one or two houses. fix them up, rent them out, and then sell them for a little bit of a profit. And if we did that enough times, we'd have enough to keep one for ourselves and still have operating capital. So we just kept doing that. And we got to have a partner that I met in law school that's up in Michigan. And we got to a portfolio of about 50 or 60 single family houses that were free and clear, a couple of duplexes. And then we started looking at, you know, multi-family at that point.

So we ended up having about 100 units of single family and small multis before we transitioned a few years ago into the larger multis. Got it. Cool. Sounds very smooth and efficient, but we all know that that's probably not how it went. It wasn't nearly as strategic as it sounds. Yeah. Again, in hindsight, the retelling of the story always sounds much better than what the actual

actually played out. So it took you seven years to make this transition from having a job and working real estate on the side to be able to go full time. Looking back, what would you have done differently to get out of your job quicker? Well, I would have gotten into multifamily sooner because the multi-families, and I, by the way, I quit working before we started buying, you know, larger multis. And we started with the first larger one was 12 units. So it was larger than duplexes and quads, but it wasn't enormous.

But the opportunity in those is so great that I think we could have accelerated our growth a lot faster because we've gone from, you know, that 12 unit we bought just over two years ago now to where we bought a 19 unit, a 32 unit, a 41 unit. We've got a 16 and a 22 under contract right now. And then we have 40 that we're very close to I under contract with, which we'll see. You never know any of those deals could fall through until you actually close them. For sure. So they're all local to where you live? So some of them are in Michigan and some of them are down here in Chattanooga. So I have one partner up in Michigan who runs a property management company. And so we do continue to, you know,

buy deals with him. And he's my primary partner. And then I have another partner in Chattanooga who also runs a property management company. It's kind of a strategy of mine because I wanted to tap into those local networks. So I made friends with property managers. Sure. No, that's a highly recommended strategy here on the epic real estate investing show. They're the center of all, everything real estate investing, right? They are the hub. Yeah, I mean, they have a lot of opportunities, right? They can, they get first crack at deals. And also, you know, if they're partnering with you, you know, they're going to be watching your investment very carefully. Right. So to go back, if you were to do it all over again, you'd got into multifamily sooner because of the opportunity.

Explain to me, what do you mean by that with the difference in opportunity between the single family and the multifamily and how would that have gotten you out of your job faster? Yeah, so what we're focused on value add multifamily. So we're buying stabilized properties that we can see some area where we can increase the net operating income. By doing that, we create a lot of additional equity. You know, I'm not sure if all of your listeners will really understand how multifamilies value differently than single families. But once you get above five units, it's really based on the income is what determines the value of it. And so you can really force appreciation. I mean, that 19 unit was the second deal we bought and we bought it in 2000 well it's two years ago almost exactly

we're looking at refinancing that now and taking out more than we put in originally so we can just go repeat it like that that's an enormous gain for a couple year period and supported by a couple hundred dollars per unit and additional rent and then you of course also have the advantage of once you get to big enough multifamily is the non-recourse financing which takes a lot of personal a liability out of the deal for you. So you can really, you can kind of pour gasoline on your returns when you start getting into those deals. Got it. So the return would have gotten you out of your job sooner. That's right. And on the ability to scale faster, it's, you can only have so many single families. It becomes sort of a management nightmare. And you can do it, but it's a lot more

work. And one 19 unit is a lot easier to close and a lot easier to manage than 19 single families would be. Hmm. Interesting. Because, you know, when we hit about 50 units and our 50 single families, and then we went in and bought ourselves an 18 unit. And boy, that was such a pain in the butt for us. And I was thinking, wow, it's just like 18 houses under one roof. How difficult could it be? There's a learning curve, right?

But once you learn it, I think that first 12 unit was the hardest and the 19 unit, the second hardest. And then once we got through those, you know, buying a 32 or a 40 unit, which would have seemed unimaginable two years ago. Both of those are operating very smoothly now because of that. Yeah, it's like anything else. I imagine the repetitions that makes you better at what you do. The question was, this isn't really an asset-specific show, right?

Sure. We do talk a lot about single-family because that's just kind of what I do, and those are most of my reference points, at least most of my successful reference points. And what I really try to focus on here is regardless of what asset class you choose, whether it's multifamily or single-family. family or storage facilities or, you know, what do they call those things, mobile home lots or whatever, you have to be good at finding deals. So I really stress on being acquisition experts. So now that you have so much experience in buying all those single families and now you're

bought a lot and they're investing a lot in the multifamilies, how does the finding of those deals differentiate? So the single family stuff, you know, a lot of it was just relationships. with other investors, tax sales, stuff like that. The multifamily, there's a lot, you really have to develop strong broker relationships because it's difficult, I think, to find them on your own. Now we're toying with some other marketing to try to get direct to sellers, but most of the multifamily sellers are much more sophisticated, so you can't do the traditional, like, direct mail wholesaling route.

It can be done, but I think it's more difficult. You have to have a much cleaner pitch than what you have to do on those. So it is a little trickier. And, of course, you know, when you build a broker relationship, that's all about credibility. They got to believe that you're going to close the deal because especially in this market with multifamilies, if the deal makes sense, someone's going to buy it and the broker knows that. So once they have it, they're kind of in the driver's seat. So you really got to build good relationships. Perfect.

All right. So I couldn't agree with you more. To this day, most of our deals will come from our relationships. and thank God we were nice to people on our way up so that they're still nice to us today. But give me an idea of what that looks like because a lot of people will come on and say, hey, you just got to network. You got to build relationships. Starting from scratch, if there was someone that you wanted to get to know, a high-powered broker,

that was a good flow of those types of deals, how would you approach that? What would it be the way that you'd make friends into getting their good graces? Yeah, so I'd probably do it a little bit differently now than we did when we first started. When we first started, we just were like going on like loop net and like, you know, looking for brokers that had things that made sense to us and then reaching out to them directly and saying, hey, we're interested in buying this. In fact, first we were trying to, one of my partners is a broker up in Michigan and we were trying to, you know, split commissions with them. And one of the things we learned very quickly in multifamily at least is the brokers

don't need to split with you. So they're not going to. They don't have to. So they don't. So, you know, that's the first thing is, you know, find brokers in, in, how to talk to them and then convince them that you know what you're going to do we had one broker that said to us I don't want to talk to you because you're not ready to buy maybe they were right maybe they weren't right I don't know but once we started buying it did become a lot easier to get brokers to take your call right so it's sort of a catch 22 you just kind of have to do it and you have to have a clean pitch so when you get a broker on the phone you don't want to say hey I'm thinking about getting into multifamily someday maybe you have to say look I'm looking for you know 10 to 20

unit, multi-families with individual entrances, and I don't want flat roofs because it's Michigan, and I prefer brick, and I want it to be like in 1970s or newer built. You know, whatever your criteria is, you have to be very precise about what you want and what market you're buying in. And then for us, we focused on just a couple of markets in north of Detroit, Metro, Detroit area, but like a specific area there. And then we found the brokers that were doing transactions in those areas and told them that's what we wanted to buy.

And then when they brought us stuff, we responded quickly, right? So if they brought us something and didn't meet our criteria, we said, no, you know, here's why we don't like this deal. And, you know, we didn't have to, they didn't have to reach back out and see if we were still thinking about it or whatever, right? They knew right away if we were interested or not. And then you just got to close the deals that you tell them they're going to close, right? Obviously, sometimes you're going to discover things in due diligence or whatever that doesn't

make, it makes it so it doesn't make sense. And if that's the case, then you just have to be forthcoming about that and tell them, hey, this is just, you know, I can't do it under these terms. But you just got to make sure that that's, you have a legitimate reason why you're reevaluating it. Mm-hmm. Got it. All right. So knowing how to talk to them, demonstrate you're serious by knowing exactly what you're looking for.

I think that's really key. That was a real estate agent for four years before I became an investor. And every time I held an open house, someone would, walk in. Yeah, I'm an investor and just looking for something makes sense. You got anything? Right. Right. I was just like, get the hell out of here. Damn it. Yeah, we're all looking for that, right? Something that makes sense. And I'm guilty of saying that sometimes a broker will say to me, well, what are you looking for? And I'll say, I don't know, something that makes money, you know, like cash flow. I mean, for us, that's really what it's about. Like, I actually don't care

if it's a multifamily, single family, whatever. I'm more of a cash flow investor. I want to support my lifestyle and have a safety margin so that if, you know, rents decline or I have vacancy, then I'm still going to be fine. That's been my goal from the beginning. So, perfect. And then once you get a broker that actually starts responding to you and sending you opportunities, you want to respond quickly with the details as to why or why not it doesn't work for them, right? That's right. Right. It doesn't work for you. Got it. And then when you do decide on one, you got to follow through. You got to close the deal, right? Yeah. It's kind of just referring back to the whole everyone's favorite radio station.

What's in it from me? And if you understand brokers and agents, they want commissions. They want big commissions and they want them often and they want them easily. Yeah, the easy part, I think is the most important part of that, actually. Is it? Yeah, I think so. I mean, they want to know that you're not going to be a pain in their rear end the whole time that you're dealing with you. And then the other thing is I think you really need to recognize that sometimes you can find the best broker and you can say to them,

look, I want you to represent me and, you know, you get whatever you got from a seller, but I'm going to give you, you know, two points on top of that. And almost, almost bribe them to bring it to you first. You know, I don't know how many people do that, but sometimes I'm just not afraid to pay more commissions. If the deal makes sense, whatever, if I have to pay 9%, 10%, it really doesn't matter. If it makes sense to me after everything. Yeah. This is one of some of the things that we were talking about, I think, when we met just, you know,

I don't really care how much someone else puts in their pocket as long as I get what I'm supposed to get. Yeah. Well, I mean, we look at deals sometimes and everyone's small, I hear somebody say, oh, that guy who just bought that for a million dollars a year ago. Why should you pay him two million? Because it's worth two and a half. That's why I should pay him too. Like, if you sell it to me for two, I'm happy, right? I don't care what he got it for.

Good for him. Right. Right. If people get stopped by, well, I'm not going to give him two more points. He's already getting three points from the seller and blah, blah, blah, blah. And so, hey, do you want the deal or not? You know, it's just the concept of supply and demand. and if that isn't in your favor,

then you've got to play the game, right? That's right. Perfect. All right. So speaking of points and costs and work, you know, once you've acquired the property, are you doing your own property management

or have you hired that out? Well, so on the apartments, most of them are with my partner in Michigan and he has a property management company. So he's actually doing it through his property management company. And we're paying him the same fees that he gets for other management projects that it gets. The stuff that I have down in Chattanooga, I do a sort of hybrid self-manage.

There was a, when I bought it, because I just have 12 units of multifamily down here. When I bought it, there was a guy who was managing it for the previous owner. And it was right before the holidays a couple of years ago. It was like this time. And I just said, you know, oh, we'll just let you run it for the rest of the year. And let's see what happens because I didn't really want to deal with it. And, you know, he took direction really well. And so I just kept him on.

And he's still there now. And he does some maintenance and he does some management, but, you know, it's really, I mean, it's a sort of a combination of like a half manager almost. Right, right. That's the thing about real estate, there's just so many variables at play and so many different ways you can go and so many exceptions to the rules. And then there are the hard and fast rules and the rules of thumb. And it's just like, do it.

Yeah. You just got to do what makes sense to you. I mean, at the end of the day, you know, I have some duplexes in Chattanooga that I manage myself. I like managing them because they're easy and I don't have to pay someone to do it. And it's just not that much work. So I don't mind doing it. I mean, that's the flexibility you have when you're full time in real estate is that you don't have to,

you know, worry so much about it. And then actually the guy who runs the 12 unit, if I'm going to be out of town, I just text my couple of tenants and say, hey, if you have any issues, call him and, you know, then I don't worry about them. So it's just kind of nice. Like I said, he kind of does what I need them to do and it's worked well for both of us. That's awesome. Yeah, Jeff, this is why I had you on the show, bud, because it's been, what, three weeks, four weeks since we've seen each other and met.

And we're in a different environment and there's no outside influences of the alcoholic nature. And you're still the same old cool guy. And I really appreciate your graciousness and giving. What's the future for you in real estate? Do you have a stopping point or is this just going to go on forever? Well, you know, I actually planned on quitting two years ago and I got bored in about five days. So I was just going to, I thought I just go. Yeah.

Yeah, I mean, it was a little bit longer than five, but I went on a cruise and I came back from the cruise and I thought, you know, I should start buying apartments. That sounds fun. And so that's what we did. And I don't really have a plan to quit because I like the growth thing. I'm doing some other stuff that keeps me away from real estate. You know, I've been working on, you know, some personal branding stuff. And I also have a real estate show.

I think I told you about that before. It's a YouTube show. right? Yeah, YouTube only. Yeah, we get drunk and talk about real estate. So it's a lot of fun. It's the old-fashioned real estate show. Old-fashioned. Like the drink. Yeah, like the drink. It's named after the drink. So what we do is we drink an old-fashioned while we're talking about real estate. And it's myself and my partner, Brian Leverage. That's his actual name, by the way. He had to be a real estate investor. Yeah, that's right. He didn't have a choice. But he's another transplant to Chattanooga. He started out investing Southern

California and quickly decided the numbers were better here. And so he's been here almost as long as I have. And we've built a pretty good relationship and we've bought some buildings together. We've even bought a strip mall and an office building together recently. So that's kind of a new thing for us too. That's awesome. That's awesome. Well, super.

If someone wanted to get in touch with you, the best way for them to do that, would be to reach out through the YouTube channel or is there another way? Yeah, I mean, oldfashn real estate.com is probably the easiest way, right? Is it old or old? old old old old d oh and then fashion ed so like that and then real estate yeah got it um so just like the drink actually um that's the easiest way to get a hold of me but i also have my personal website it's geoffrey holst.com so if you're um putting my name in the show notes or something then they'll be able to figure that one out too it's not like i'm hiding you can also just google me or find me on

facebook you know when we met i realized we were already facebook friends and i never even met you I know. I've probably got a lot of those. I don't know. Yeah, me too. I'm actually about out of Facebook friends, though. You know, they have that limit on there. Yeah, I'm reaching the peak as well. But very good. Well, awesome. Jeffrey, it's been a pleasure. Let's stay in touch. Let's check back in and see where we are. I don't know, maybe first quarter of new year. Yeah, I'm up for it anytime. It's great talking to, Matt. Likewise, Jeff. Take care. Thanks. Bye. Yeah, yeah, we got the cash flow You didn't know, home boy, we got the cash flow This podcast is a part of the C-suite Radio Network For more top business podcasts, visit c-sweetradio.com