Epic Real Estate Investing - Joe Fairless - Best Real Estate Investing Advice Ever | 451

Episode Date: August 23, 2018

It's all about Joe Fairless on today's episode of Thought Leader Thursday! Today, Matt interviews the real estate entrepreneur who controls more than $301 million dollars of real estate and hosts a daily podcast, The Best Real Estate Investing Advice Ever Show. Learn his 3 tips for investors who want to start doing bigger deals, what he wishes he knew when he got started in real estate investing, and the 3 immutable laws of real estate. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. I hope people are talking more or more about cash flow. That would be a good thing because that would help avoid some big time mistakes that people made in 2008 when they were buying for appreciation. Hello, I'm Matt Terrio of the epic real estate investing show and welcome to another episode of Thought Leader Thursday. Today I'm joined by a real estate entrepreneur who controls more than $301 million worth of real estate. He's written two books, Best Real Estate Investing, by, ever, volume one and two, which include advice from some of the smartest people in real estate. He also hosts a daily podcast, the best real estate investing advice ever show. It includes

interviews with successful, with successful real estate professionals who provide valuable insight and advice. So please help me welcome back to the show, Mr. Joe Fairless. Joe, welcome back. Hey, thanks a lot, my friend. Grateful to be back. Yeah, glad to have you. So we've talked a lot. We talked about your past. We don't need to talk about that again. But this number here, $301 million worth of real estate. I don't know how long ago you wrote that on your blog post. What does that look like today? It's funny why we got the one in there.

Don't forget that one. One million is a lot of money. That's a key number. That's a key number. Let's see. Well, we sold two properties last month and we're buying, we're closing on, well, we closed on one this past Friday and we're closing on one in a week and a half. And I was actually right before we jumped on this call, I was putting the finishing touches on an investment package for investors to announce a deal that we're sending out.

So I don't exactly know. I haven't done the calculation with all the closings and stuff where we're at, but it's still around $300 million. You did that overnight, right? Overnight. I woke up and then bam, it was done, just like those late night infomercials tell you. Got it. So, and the reason I kind of said that is because you have a unique approach. I don't know if it's unique, but it's probably different than what most people on my show are used to hearing about.

And that's like you kind of focus on, if I remember correcting, and you can correct me if I'm wrong. Like one kind of big deal a year. Is that still kind of what you're doing? We focus on big deals. Yeah, we focus on 150 plus unit apartment buildings. Those are the type of properties we buy. on average we buy between six to eight of those a year. Okay.

However, we don't look, yeah, we don't look for a quota. We simply buy whatever makes sense. And, you know, the equity will be there for whatever property we want, assuming that, you know, the underwriting looks good. It wasn't always that way. You know, before we were limited by equity. but at this point with the track record and, you know, with my network, we're able to buy what we want. I mean, barring, you know, if we had a $100 million equity raise on a deal, I wouldn't be able to pull that off.

But up to $25 million on a deal equity, I can pull that off. So, you know, within that range, we can make it happen. Sweet. Yeah, I've got, I don't know, nowhere in your league when it comes to multifamily. but we've got about, I don't know, 50 units or so, 54, if I was going to get specific. And, you know, we teach primarily single family real estate investing here on our show. And, but I found those properties by just marketing for single families. And those opportunities came across my desk through our direct mail and our internet efforts.

If someone wanted to be really intentional about finding those types of deals, because it's, it's beginning to be kind of the, the flavor of the day. I hear a lot of people, even on the wholesaling shows, they're going towards multifamily. How do you go about that? How is that different from marketing or finding those deals than what you know about single families? There's two different paths and it's similar to single families and small multis. It's on market and off market deals. So on market deals, it's, it's, well, brokers. And some, the challenging part of doing what I do is having the credibility to do it and brokers and property managers to believe that you will, you will close on the deals. So starting out, that's a big problem. It's a challenge because they want you to have

the background and the track record, but you can't have the background and track record until you actually do the deal. So some specific tips for everyone listening who wants to get into something larger, but they don't have the track record yet. The most important thing that the brokers want is to close a deal in the shortest amount of time as possible with a qualified buyer. And so if you're offering to pay them a consulting fee of a couple hundred bucks an hour, then you immediately separate yourself from the pack, even if you don't have any experience relative to what you're looking to purchase that size. The second thing you could do is when you ask for their advice on who you should reach out to for team members, actually reach out

to those people, which most people do, but then follow up with the broker afterwards, telling him or her the result of your conversation. A third thing, and it's just simple follow-up stuff. The third thing is when you, prior to reaching out to a broker, if you look at the sales that they've recently done over the last month or two. And then you go drive those properties. And then prior to reaching out to him or her, you give them feedback or you have talking points for them

at the initial conversation. Hey, I saw you closed on these properties. First off, congrats. Secondly, just so you know context for what I'm looking for, here's the ones I would have been interested in, and here's the ones I wouldn't. And that way they know you've done your, your homework and your research.

So those are three things that could separate yourself from the pack, even if you don't have credibility, because brokers are going to be the path of least resistance to find deals. But the challenge is they've got a lot of people vying for their time. Right, right. You know, if I reverse engineer one of, I sold a 44-unit building middle of last year, something I bought five years previous. And I found myself for the very first time being in the shoes of a just,

distressed seller. And I was like, I'm motivated. I want to get rid of this. So I did something very simple. What I knew to do was just put it on the loop net. And boy, if you want your phone to ring, that's a great place to make a ring. But every call that came in, I really had the impression that someone just walked out of a seminar or just read a book or something like that. And the person who I ended up going with was, I think kind of fits the category that you just said. I was looking for certainty of clothes. So I wanted someone that sounded very confident and they were able to exhibit some sort of credibility. And the second thing was I was looking for someone that knew the property or had local knowledge, right?

And so right on the point, right, I should have just reverse engineer that myself because that's what I was looking for. And that's what made me comfortable. And that's ultimately who I sold the property to. So fantastic. Cool. So we were talking about, I think I mentioned a little bit, maybe it was before recording right now, but we were talked to a little bit about, you know, multifamily kind of. it seems to be the flavor of the day, like on the fix and flip shows or the wholesaling workshops. People are starting to talk more and more about cash flow, talking about more and more

about multifamily. How do you see that going as far as the trend of multifamily moving forward? Well, I hope people are talking more about cash flow. That would be a good thing because that would help avoid some big time mistakes that people made in 2008 when they were buying for appreciation. So what I see it going is, I mean, number one, we're a nation of renters. And we are more and more people are renting. And I don't think that's going away anytime soon. Where I see multifamily going, I mean, interest rates are going to continue to rise. That's going to probably keep people in their apartments longer.

But on the flip side, it's a negative for apartment investors because when you go to sell, the buyers don't have as much buying power. So, you know, it's a blessing and a curse. for interest rates, but whatever. I mean, that's just part of the business, right? We just got a roll with whatever the economy presents us with. I mean, ultimately, there are three immutable laws of real estate investing that if we adhere to those laws, then we're going to be fine when the correction takes place.

One, is we buy for cash flow, not appreciation. People in 2008 who bought for appreciation, they got burned. two is we have long-term debt on our properties. So Fannie Mae, Freddie Mac debt on our properties, if you're in multifamily, you know, seven, 10, 12, 15-year debt. If it is five years, because I do put some bridge loans on our properties, but they're five-year bridge loans, and we expect to exit out of them after two years. And so if we do not exit, out of them after two years, then we have three additional years to decide what the heck to do with the property. And, you know, if the markets in two years not so hot, then we make an educated guess

on is that a chronic issue? Or do we see some light at end of the tunnel within about two years? That way, we still have a year buffer. So the second thing is put long-term debt on properties because in 2008 people got hurt. It's one of the reasons is because they had a property that, where the note became due at a very inopportune time. And they had to do something with it, but no one was getting financing. Or if they were getting financing, it was interest rates that were really high relative what they used to be. And then the third is have cash reserves, have adequate cash reserves for an oh shoot scenario.

Four boilers go out. That's a problem. Do you have adequate cash reserves? So if we adhere to these three immutable laws of real estate investing, one, buy for cash, flow, two, long-term debt, three, have cash reserves, then I think we're going to be pretty good over the long haul. It will get rocky. We won't cash flow as much when the economy takes a turn, which I think it will. I don't know when, but the fundamentals of real estate will stay strong. Right. Good. Couldn't agree more. I think particularly the third one when you said,

the cash reserves. I think that's underrated. Yeah, agreed. I think it's important. So now, Joe, with, you know, you've got several years now since you've left your previous profession, now you've got several years in real estate, you've got multiple deals under your belt. You're managing hundreds of millions of dollars of real estate. Looking back, what's one thing you wish you knew right when you got started? When I interviewed Robert Keseaki on my podcast, He said, the richest people build networks, everyone else looks for work. And if I had learned that at the very beginning, then I would be even in a better spot than I'm in now. The key is building a network.

The key is, you know, build a relationship with you, right? You're a very influential real estate investor. You've got a network. and it's important to continue to build a strong relationship with you. It's important to build a strong relationship with other people who can either be business partners or just are good people you want to stay in touch with and it could be relevant along down the road.

I wasn't as intentional about building a network whenever I first got started. It's important to have a big email list. It's important so that I'm about to click send. Once the seller signs the purchase, and sale agreement, which likely will be any time now, I'm about to cook send, and I'm going to send it to a lot of accredited investors of mine, and I will likely fund $13 million in five days or less. The last two deals in total was a $23 million equity raise. We funded in seven days.

So that is the power of a network. There's a lot of sub-how that's accomplished. track record, performance, being true to, you know, good character, all that stuff. But one of the components is having a network. So being intentional about better than network. Yeah. It's something of commonly say here on the show that, you know, you can go fast through a marketing budget and generating leads and generating that attention. Or you can go far by earning that attention through relationships. Yeah.

I recommend everybody to do it both. but you'll get to a point where you no longer need an actual marketing budget if you're intentional about creating those relationships. You mentioned my previous career. I was in advertising. And one takeaway I got from that experience is that the number one influencer of purchase intent is word of mouth referrals. Word of mouth being the number one indicator of what people are going to purchase.

And if you're going to run a Facebook ad, would you say it should be more brand-centric or unless, you know, direct response, right? Yeah, perhaps. I won't claim to be the best at deciding what to do on the Facebook ads because I don't know. But I do know that content is way more important than calls action. When you focus on good content, then you're going to generate, you're going to create a community. And, you know, the word of mouth referrals, me,

telling you about someone who I had a good experience with and I recommend, holy cow, that's so much more valuable than you coming across 12 different Facebook ads promoting the same thing over one month. Congrats on your success. It's the only daily real estate show and you've done very well. So good job. With that, the name of your show, the best real estate investing advice ever. So you've heard a lot of advice.

You've had people on your show that have shared tons of advice. and I know you've got your ear to the street, you've got your own convention, and what's one piece of bad advice that you hear out there frequently that just really gets under your skin? Bad advice that gets under my skin. I'd say when, well, I think the secret's a bunch of BS. You know, you think something, you think something, you think something, and it's going to happen. that's not the case at all. And what's about actually executing the vision?

That's a big problem. I do have a vision board, and it's huge. It's a gigantic poster on my wall, but I do it as a reminder for the action that I take. And one of that is a daily podcast over 1,400 days in a row now. So that's the type of massive action it takes, but people who say, hey, you got a vision, then things will transpire for you.

Not so much. You've got to have effective execution. Right. Amen to that. So what's in the future right now, Joe, that you're really excited about? It might be exactly what you're working on just before we started recording, but anything bigger than that? The biggest is my wife's pregnant with our first kid, a girl, and she's due in about

eight or, I know, it's like six, not eight months, like six months or so. So that's pretty big. That's pretty big. It doesn't get much bigger than that. So congrats to that. So today we're talking to Joe Fairless, the host of the best real estate investing investing advice ever podcast. You can find him there. If people wanted to get in touch with you through another channel, what would be the best way for them to do that, Joe?

You can email info at joefarerless.com. If you want a free apartment resources guide, we'll get that to you. So info at joefarerless.com. Info at joefarerless. Super. Well, dude, it's been a pleasure. Let's not wait so long to do it again. Great catching up with you. Yeah. All right. Likewise. Likewise. Talk to you soon. Take care. All righty. So thanks for tuning in to Epic Real Estate and Investing. And I will see you next Thursday on another episode of Thought Leader Thursday. Take care.

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