No Broke Months For Salespeople - The Process of Buying Your First Multi-Family

Episode Date: May 9, 2024

Jake Stenziano and Gino Barbaro are co-founders of Jake & Gino; they founded it in 2016 to educate others about multi-family real estate investing. A premier multi-family real estate education community focused on values. Jake is known for his role as a pharmaceutical sales representative with a Fortune 100 company before transitioning to multi-family investing in 2013. He is a best-selling author and a leading expert in multi-family investing, currently managing over $250,000,000 in assets. Gino Barbaro is an entrepreneur and investor with a portfolio of over 2,000 multi-family units and $250,000,000 in assets under management. He previously owned an Italian restaurant for over 20 years before transitioning to multi-family investing in 2016. He is a best-selling author of three books: Wheelbarrow Profits, The Honeybee and Family, and Food and the Friars. In this week's Mastermind, Jake & Gino will discuss the Process of Buying Your First Multi-Family. To find out more about Dan Rochon and the CPI Community, you can check these links:Website: No Broke MonthsPodcast: No Broke Months for Salespeople PodcastInstagram: @donrochonxFacebook: Dan RochonLinkedIn: Dan Rochon

There's two things I think you need to do with any real estate business, whether you're doing multifamily or you're doing self-storage or you're doing single-family homes, you need to source deals and you need to source capital. So if you're really good at sourcing capital, find the person who has deals. And if you're really good at sourcing deals, find the people who source capital. So always keep that in the back of your mind as well. Welcome to the No Broke Months for Real Estate Agents podcast. Working as a real estate agent can be incredibly rewarding and fulfilling, but it can also be frustrating if you aren't making the money you deserve. So if you're ready to end the stressful cycle of working hard for no results, then get started with a proven step-by-step system so that every month is no broke months.

Jake Stenziano and Gino Barbaro are co-founders of Jake Gino, a premier multifamily real estate education community focused on values. They founded it in 2016 to educate others about multifamily real estate investing. In this week's Mastermind, Jake Gino will discuss the buying your first multifamily process. My name is Dan Roshan. I'm the host of the No Broke Months podcast, which is a show for real estate agents to help you have no broke months. Thanks for joining me. Enjoy the show. So I always thought of multifamily in the beginning as that side hustle. We planted

our flag in multifamily and in 2011, Jake moved down to Knoxville, Tennessee. And to me, I guess the rest is history, but it took 18 months when he moved down there to find the first deal. It didn't happen overnight because we didn't have the process. We didn't have buy right, manage right, finance right. And after 18 months finding that very first deal, three months later, we got our second deal. And part of it is because we didn't know how to speak to y'all. We didn't know how to speak to brokers. We didn't know how to create that relationship with brokers. And that's part of the buy right that we can talk about today. But for me, when I met Jake, everything changed because I understood all of a sudden multifamily has to be front and center. I can't focus on buy rate that we can talk about today. But for me, when I met Jake, everything changed because

I understood all of a sudden multifamily has to be front and center. I can't focus on anything else because I had a restaurant. I couldn't fix and flip. I couldn't do single families because I already had a job. So I'm like, what's the best vehicle that I can find with all these, I guess, units in one location that I can still do my main restaurant job and have my side hustle. So I always thought of multifamily in the beginning as that side hustle. And our very first deal, I think we're going to show a little bit, but it was a 25 unit property. And it's all 25 units in one location. Jake is driving around, doing his sales calls, driving out after work, picking up rents, trading units. And we're still doing that part-time while

he's got his full-time gig. And I did the same thing, units. And we're still doing that part-time while he's got his full-time gig. And I did the same thing, but I know we're going to jump into the buy-right, manage-right, finance-right. I don't know if you want to add anything to that. Yeah, I have a lot to add. So this is a group primarily based of realtors. And I think there's a few reasons why our presentation today is going to be interesting to you. The first reason is that investing obviously is great. And we do something for our team members. We have over 75 team members on our property management team that actually invest dollar for dollar into our deals.

We don't do 401ks. We simply have an investment program where folks can invest back into the business. Now, as agents, you're seeing deals all the time. I'm sure you're seeing small to mid-sized multifamily deals trade. So hopefully we can shine a light on the value and the long-term wealth potential today that this may supplement what you're currently doing because you're already in the space. It's a great bolt on for you to, you know, in your day to day while you could be selling houses and then selling different real estate to also be investing. So I think that's one reason why you should definitely listen up because it may benefit you there. The other thing is, look, there's people doing deals of all sizes from two units to four units to, you know, 300 units,

whatever the case may be. And there's a great opportunity in the small to mid-sized space for everybody that's selling real estate to have a potential to do that. But you need to speak the lingo. You got to understand the underwriting, et cetera. And we can help with all that. So I think there's definitely a few great opportunities this afternoon. You mind if I piggyback off of that real quick? Just don't hurt me, man. I try not to. I won't say it for you. One thing that everybody can do as a realtor, if you're selling properties, you have an amazing list of clients. They just sold a house. They've come into a lot of money.

I think what you can do, start doing right now today, is start creating a list of potential people that you know that you can, quote unquote, start raising capital from. Now, I don't want you raising capital if you don't know how to invest in multifamily, but people always say, well, where do I get the money? I mean, syndication is a strategy in multifamily where you go around and you raise money for other individuals. You're already buying and selling homes for people, and that's where people accumulate a lot of money. So start thinking of yourself as a capital raiser. Hey, I've got 50 people that I'm serving. Well, speak to those 50 people as you

get into the lingo. Say, I'm looking into investing in multifamily. What are you doing with your funds currently? Are you investing in IRAs? Do you have your money in savings? I've got this great vehicle. You'd be surprised at how many people would say, yeah, that sounds like a great idea. So start thinking of yourself as that person who has the capital. And I think the second component is if you do find deals in multifamily and you quote unquote can't take them down yourself, find people who are doing the business and bring it over to them as an opportunity and possibly ask them instead of maybe getting a commission,

roll your commission over into the deal. I mean, we've had people that have done that and that's a great way to get equity in a deal. And Jake and I are always looking for deal flow. There's two things I think you need to do with any real estate business, whether you're sending, whether you're doing multifamily or you're doing self storage or you're doing single family homes,

you need to source deals and you need to source capital. So if you're really good at sourcing capital, find the person who has deals. And if you're really good at sourcing deals, find the people who source capital. So always keep that in the back of your mind as well. Yeah. And we call it multiple streams of revenue. As a realtor, obviously, you could be selling real estate. You could be investing in real estate. We property manage in-house. We have an education company. We're more involved in laundry than

ever. We look at laundry as a business without a business, actually buying our own machines now and managing that end of it. There's cable contracts, and the list goes on and on in the multifamily space. There's so many different revenue streams. And every time we do another deal, that's another stream of revenue that stays with us year after year. Our current portfolio, 1,800 units. We've actually purchased over 2,100 units. We sold out of Louisville, Kentucky a couple of years back, but we intend to hold everything else. Currently

have 260 million in assets under management and over 75 full-time team members on the property management side. So that's a little bit about our portfolio right now. And this is what gets me excited. I think, Jake, the next slide is about our students. Our students to date have closed over 70,000 units. They've done over $4 billion in student volume. And over 111 students have left their W-2 jobs and gone into multifamily full-time. This is since 2016. We wrote the book, We Have Our Profits. And since then, we really started the education back in 2019. So the last four years, it's been really an amazing journey to see the students learn how to use the buy right, the manage right, and the finance right. And the community has allowed students to raise money from

within. It's allowed them to learn the business from within. And it's just another great place to start networking and to start learning what other people are doing in the business from within. And it's just another great place to start networking and to start learning what other people are doing in the business. And selfishly for me, it's been a great networking opportunity. I've learned so much and there's been so many great vendors that have come into our lives and the podcasts have allowed me to learn so much. So it's a selfishly an internal mastermind as well.

So again, it's a great kind of thanks. You say on the bottom, there's that QR code. I think that QR code is our link tree. It has all our social media. We again, it's a great kind of thing. You say on the bottom, there's that QR code. I think that QR code is our link tree has all our social media. We do, we do podcasts weekly. So if you guys want to check us out at Jake and Gino.com, you can click on there and see all the different podcasts that we have.

And like Jake said, selfishly, we've, we've, I mean, had what over 500 interviews just on the Jake and Gino show. I mean, people like Ken McElroy, I've had TR Ecker on there. We've had Robert Kiyosaki on there. We've had some really amazing guests on there. And if you're thinking about starting a show, you're thinking about me. I may be able to make some money or monetize on it.

It is the best thing weekly where Jake and I have a mastermind call. We had a call with a guy named Anthony Truxie the other day. He's a former NFL player, played in the NFL for three years. Now he's a motivational speaker. To really get on the call with him for an hour, I mean, every week, it's life-changing. Just seeing what everyone else is doing in other businesses and other areas and to really level up your skill, it's just an amazing platform. So if you are doing podcasts,

you want to consider starting one. They are a lot of fun, a lot of work, but you can get so much value from it. All right, and this is our three-step framework. This is what Gino was discussing. We kicked this off about 2014 is when it really started to come together because we started self-managing after our first deal. We were managing that first one, that 25 unit ourselves, and we were always documenting and working on what we call the machine. That is our management operations

and how we can systematize this to grow the business. And what we realized, I would say within the first couple of years is that there's a duplicatable framework and this is what all of our students have used. We call it buy right, manage right and finance right. Essentially, we looked at multifamily as this three-legged stool,

but two of the legs were fixed and one of them was constantly in motion. And what do I mean by that? When you buy the deal, there has to be a certain buying criteria. And this is where so many people get confused because they're looking at all these different things. We call it the shiny object syndrome. You really need to drill down a specific criteria that you're looking for because then it's

going to be easier to sift for what the good deals are. But a lot of people don't know what that is. Just to get very basic on our buying criteria, we have a certain area that we're looking in. There's a certain unit mix that we're looking for, a certain vintage and age, a certain style of unit that we prefer. There's a certain cash on cash return we're looking for. We value that over an IRR, if you will, and don't need to get too much in the weeds with this. But we know exactly what we're looking for. So when we see it, it's very easy to move. But once you buy it, that leg is fixed. And again, we touched on it a little bit early on, the finance rate. We're looking for

long-term fixed rate financing because the folks that are getting in trouble in this market are the ones that bought bridge debt, overpaid, and now they're stuck. So think of that wheelbarrow or that three-legged stool. When one of those legs gets wobbly, it challenges your investment. And the epiphany really was, and this is why we use the wheelbarrow as the metaphor, was the management. This is a business. The wheel is constantly in motion. It holds your assets in the wheelbarrow. You buy it, it's fixed. You finance it, it's fixed. But that wheel needs to move and it's in constant motion. And so many people look at multifamily, oh, it's just an investment. It's an investment, yes, but it's also a business that needs to be managed. And that's where so many people miss the boat. They buy it, they think they can forget it. No, you need to

tend to it just like you're raising a child. And that's where we come in to help with the management support. Jake, I think any real investment in real estate should follow this framework. Because if you're buying a single family home, you can still follow this framework. You need to buy it at a certain price point. You need to know what kind of homes you like, three bed, two bath. What's the median income? Where are you buying it? What's the median income? Where are you buying it, right? What's the school system? So you need to figure out what your criteria is to buy that asset. And financing is the same thing.

What kind of financing are you going to be using to buy this single family home? Is it, you know, Fannie and Freddie conventional 30 year? Are you using private money, hard money? Are you going out and using a community bank, credit union? So understand the finance right portion. And then who's going to manage the property? Are you going to have third-party property management or are you going to manage it yourself? So every time you're looking at an investment, and I would even say a business as well, if you're buying a business, look at it from these three lenses.

Like Jake said, once you've done the buy right fine, and once you've done the finance right fine, those are the, we call it wheelbar profits because we just thought that three-legged stool, those two backs of the legs are fixed. That manage right is the wheel. That's in constant motion. That's what we related to me to be focusing on as well. And I think the difference between when you're doing this, when you're buying an asset as an investor, I think you all should really focus on what your exit strategy is. Because we've all been brainwashed in real estate to say, hey, you make money in real estate when you buy. I tend to disagree with that because for me, you make money in real estate when you sell or when you refi the deal, when you crystallize.

Because you're going to make a little bit of cash flow every month, that's fine. But at the end of two years, when the property appreciated from 100 to 200, let's say, or 150 to 200, that excess equity is there. You're either going to refi that money out, refinance it 200, let's say, or 150 to 200, that excess equity is there. You're either going to refi that money out, refinance it out, pull it out, or you're going to sell it and move on to a bigger property, let's say. So when you're following this framework, the whole idea is to get these deals, get them going, put them on what we call an imaginary conveyor belt. You have a conveyor belt in front of you. It's five years long as conveyor belt, let's say. You want to start stacking these assets. So as these assets move along and you're holding them, that equity starts

growing and you're able to pull that equity out and get it into the next deal. That's why over a three or four or five year period, if you become really focused on it, you can achieve amazing results. It's just, Jake and I were dumb enough not to quit after 18 months. I had enough paid at the restaurant that I'm like, bro, I don't care if your wife, fiance at the time wants to buy a house. We're not quitting. You buy the house, put the money into the down payment, and we're going to continue along. When we bought that first deal, for me, the heavens opened up because that broker loved us. He's like, I like you guys. Let's continue along. Three months later, we got our second deal. So it took us 18 months to get that first deal.

But within almost two years, we had two really good deals going on. And that's why thinking about real estate from buying it, you need to buy it. But you always think of needing that exit strategy. And how are you going to pull that equity out of the deal to be able to get that equity into the next deal? Let me give you a real life example of how having good buying criteria works. I was on a call with our chief operating officer this morning. And before she started exclusively just investing in our deals, she was buying single family homes. And she called me and I'm like, hey, you look a little run down. What's going on?

She said, oh, one of the single family homes that I still own has cast iron pipe. It's collapsed in concrete and it's going to cost me an arm and a leg. So, you know, as we talked about knowing the vintage, knowing the different physical attributes to avoid, that would have been outside of our buying criteria. That's not something that we would have bought. Therefore, we're not going to deal with that pain down the road. There's certain things that, you know, you can frame up and just say, hey, this is outside my comfort zone. We're not going to invest in a flood zone. One of the folks that we work with quite frequently has this deal. It's in a flood zone. It's going to make a lot of money until if that doomsday flood comes, it's going to be a big pain in the ass and I don't want to deal with that. So it's creating these structures to avoid the stuff that's inevitable because you may get the shiny

object syndrome or you may get really excited about something because you don't have anything on your plate right now. But I'm telling you, it's better to defer and wait for your pitch than to force something that's outside of your criteria. So let's talk about that buying criteria a little bit more. There's a similarity in all of our deals, and that is they all exceed the 1% rule. Is everybody somewhat familiar with this? We'll see many faces on right now. Essentially, 1% rule, if you don't know, let's say you paid $100,000 for an apartment home, an individual unit. You want to make sure that the rents are exceeding $1,000 a month, just plain and simple. So you buy it for $100,000, the rents are over $1,000.

And now what may be the case is, and we're going to really get into this, because this is probably some of the most valuable information we can give you all today because inflation has hit multifamily on the expense side. And I don't know if a lot of folks are talking about that or they're just beginning to. You can go in and buy a deal that right now is not exceeding the 1% rule if you know your market and your comps well enough. So what do I mean by that? If the rental comps for a very similar unit, let's say a 1300, but you're paying nine, but the rents are currently at 900 and they want a hundred thousand for the deal. There's an opportunity there, but you really need to be sure

of those rental comps. And what we're seeing right now is there's the mom and pops, the people that might own a couple multifamilies, but it's a family or it's a lawyer and a doctor that just said, I think it's really cool to own some apartments because they want tax advantages or whatever. These are the people that we buy from. And the reason is, is because they get left behind. Inflation has hit multifamily in a big way over the last three years. What that has caused is the expense side to creep up, but also the income side. And what we've seen with these mom and pops is they've been reluctant to raise rents because they're going to get kicked back, pushed back from the residents. Oh, you're a bad person, this, that, and the other thing.

But the truth of the matter is we're looking at our budgets. We have been this week and we have deals where if we would not have kept up with inflation and raised our rents, what would have been profitable two years ago is now breaking even or underwater. So knowing the market rate and being flexible to move that up is crucial for long-term success in this business. And what you'll also see is that you will blow the 1% rule out over time because of inflation. We have deals that we bought 10 years ago that rents for $350 a door. They're now over a thousand. This is the shift that you've seen in the value of money, in an inflation. So what we're looking for right now,

and one of the main things that we see is these mom and pops, it may be 100 units, it might be 20 units, whatever the case may be. They kept their rents suppressed over the last three years as inflation has taken control. Rents maybe were, at the time, reasonably 900. They moved up to 1,200. They have not kept up with these. So if you can get that unit at, say, 80,000, 90,000 a door, and then with your renovations, get it past that 1%, well, we're seeing that work really well right now. So that's a component of our buying

criteria. The other things that we look at, we go back to the physical attributes. We like pitch roofs. We love two bedroom units. They do really well at our market. We like 1980s vintage or better because less plumbing issues, et cetera. Breezeways are a big thing in multifamily. We don't like sheetrock in the breezeways. If we see it, we're going to put vinyl over it because it's impossible to keep clean. It always ends up getting damaged and beat up from couches and residents and things. So it's these long-term attributes.

We don't love flat roofs. We haven't had great success with flat roofs, so we try to avoid those. Cast iron pipes is a no-go, okay? Flood zones is a no-go. So you see the list goes on and on, creating this criteria. So when you see the deal finally come across your desk, you can act on it and act appropriately with the broker and transact quickly. Thank you so much for listening. You are freaking amazing.

And because you're amazing, I'm going to ask for a quick favor. It'll just take you 30 seconds for you to leave a favorable five-star rating or review on your favorite platform. Then what I'll do is I'll enter you into a raffle where we can meet 45 minutes for a free coaching session. And I'll also give you a copy of the book, Real Estate Evolution, which is the 10-step guide to CPI consistent and predictable income. Oh, by the way, I'm the author of that book. So if you'd like for me to coach you,

give you some nuggets and help you in your business, go ahead and leave a review and you can enter into the monthly raffle to win. Yeah, Jake, I think one thing we should really pull back on is if you're going to figure out your buyer criteria, the first thing, if you're getting into real estate or multifamily or any kind of investing is you need to select one market. I think that's the thing. If you're just getting into it, you want to become an expert in that one market, that one area, because all of a sudden you'll understand values. It's very similar to residential. You'll know the neighborhoods, you'll know the values, you'll know the rental rates, you'll know what median income is in that area. And then obviously the biggest way to get deal flow in multifamily is to go through the multifamily brokers.

And you already have an advantage because you already are a broker. You already sort of speak their lingo. So that's your advantage. But if you're out there and you want to start investing, and it doesn't have to be in your backyard, it could be anywhere that you can get accessibility to. When Jake moved to Knoxville in 2011, I was living in New York at the time still. He was in Knoxville. So I had my partner in Knoxville, but I was investing from New York and I knew how to analyze the market. There's a lot of ways, a lot of tools, a lot of different websites that you can use to analyze the market. But the idea is to understand that market, really get a good idea of it, and then start opting at the broker's list.

Start going on websites and saying, well, multifamily brokers, Knoxville. You'll see about 15 or 20 pop up. You start opting into their lists. And then all of a sudden, these brokers will start sending you deals. They may not be great deals at first. They'll send you offering memorandums. But then you can start analyzing these deals and then start trying to create a relationship with that broker. And don't call it you should know. Don't call a broker up and let's go for a cup of coffee. No, call these brokers up and say, hey, I want to do a property tour. You've got 123 Main Street. Listen, let's do a property tour. That's how you start creating the rapport with the broker. And then all of a sudden, refining your buy buy-write criteria because every market's going to have a

different buy-write criteria. If you think you're going to get the 1% rule in New York, I don't see it happening. I just don't. But there's more capital appreciation in New York than there is in cash flow. There's a lot of markets in the Southeast where you can get the 1% rule. So understanding the market is really, really important. And I think the second part, Jake was talking about flat roofs and he was talking about cast iron plumbing. All of that buy right criteria for us is a function of price. When we were buying these properties years ago, the prices were a lot lower so we could buy these properties with these deficiencies and we had enough money set aside where we could fix these properties. Now the prices have been elevated the last couple of

years that if there's any room for error and if there's any problems, it's going to come out of profit unless you can get the seller to actually say, hey, timeout, this property is not worth this because you have all of these repairs. And the problem was two or three years ago, there was so much demand that the seller would say, see, I'm going to go to the next buyer. But now it's really good because now the brokers are calling us back. There's more opportunity. There's less people buying these properties because the properties that are on the market right now that are currently functioning, they're having a problem. There's a lot, what we call capital calls, a lot of deals that aren't performing. So the people that own these deals, their investors are not going to invest in another

deal. They're worried about this deal. So there's less money to go into this asset class right now. So that's what's causing that demand for the asset to drop. And anytime a demand for anything drop, for an asset drops, the price is going to drop. And we've seen prices drop. And I think this is just the tip of the iceberg because you're seeing interest rates actually holding still. The 10-year treasury is dropping like a rock right now. So to me, it's over 50 basis points down this week, guys. That's a really

good sign for rates. Freddie Mac SBL just dropped rates 15 basis points and the 10-year is down over 50. And so how the loans work for Fannie and Freddie and multifamily is it's a spread over the 10-year, typically 150 to 200 basis points. So a 50-point drop is a half point rate reduction if you were to do a loan this week versus last week. That's tremendous. That's huge. So that just signals to us that there's not as much demand as there was. There's not many mortgages being done. There's not a lot of assets that have been traded. So they're trying to spur this sector right now.

And that for us is good. If you're into it right now and you've got relationships with brokers, I think the next 12 to 24 months are going to be a great opportunity to start buying these assets. Has anyone compared 2002 to 2008 in terms of investor returns and such and what kind of has happened in that recession versus now? Have you looked at any of that? 2022 versus, excuse me, 2022 versus 08? I personally have not. I'm sure that Dan has. So I got a few things here just to share with everybody because I think when you're talking about peaks and troughs in real estate, it matters in terms of where pricing will be and where activity will be, right? So, one of the biggest things that you saw in 2008 were the banks collapsing.

You had more banks collapse in 2022 than you did in 2008. So, let that sink in for a minute. The big differentiating factor here is the inflation. This is gauged by CPI. I'm sure you guys are familiar with that. 08, it was basically flat. It was down 0.02%, right? 2022, it was up 8.3%. So that's a big factor in this because you have money that's worth less and there's more of it out there. So it's going to impact the way things go down differently. The stock market in 08 was down 37%. The stock market in 22 was down 19%. We have all this inflated money out there that was pumped into the system. Still really bad.

More banks collapsed in 2022 than in 08. Stock market was worse in 08 than 2022. But again, there's that inflation component. Bonds were worse in 2022 than in 08. The real estate indexes were worse in 08 than 2022. So I don't know. It's kind of interesting. I just think that we're actually leveling in to the bottom in 2023, like we were in 09, and it's going to be stagnant for a minute. The key to this though, is from an investor standpoint, it creates tremendous opportunities because when Gino and I started investing, it was right at the

back end of the Great Recession. That's when we picked up things at a very good price. And real estate has gone up a lot. So the comparison that we make in our market, when we started, we were buying deals for $35,000 a door. Now, things have gone up a lot. The really good product in our market goes for $150,000 to $200,000 a door. But we're still finding assets for 75, 80,000 a unit. But if you think about what's happened with inflation over that time, there's probably not much difference in what we're actually paying in real money at 75 a door when we were paying 35 a door, if that makes sense. So you got to keep that in mind for the folks that

have been in this for a little bit. So if you can find that type of value, you have to adjust historical figures and realize where you're at in today's society. So if you can find that type of value, you have to adjust historical figures and realize where you're at in today's society. So I think we're finding some actual tremendous value out there. And we're going to get to this here in a second, which is the financing component. Touchdown management, we'll go back to that. The financing is very interesting right now because we're getting 6.5 to 6.7 with credit unions right now for our deals. And then when an if, and they will cash flow the deals that we're buying at those levels. But the key here is that if we're able to get five, four and a half percent rates with agency, Fannie and Freddie, say in three or four years

from now, it's going to be huge because we'll be able to refi, push our rate down in at a great basis, in at like 75 a door. These deals will be monsters in terms of the cashflow they throw off. So again, thinking long-term, this is how we are approaching multifamily right now. So it's all perspective. And here's the other thing. When everybody's pulling out, we're going in. And it's easier said than done. But from 2021 to 2022, they were our lowest years in deals acquired. We're already at over 300 units for this year in three deals. And that could seem like a little, that could seem like a lot. Our actual acquisitions have increased quite a bit because we're seeing the price points that we want. Yes, the rates are higher. We're fixing them for five years and looking to exit to a refi

when we see that 4.5%, 5% debt again. Jake, in 2008, you forgot to mention real estate was down over 40%. And I think 2022 is down 20%. But the Great Recession really caused some structural issues, problems with the economy, because for the next four or five years afterwards, there was no building. Building completely stopped. And that's why people are seeing now that the supply and demand, the supply side is finally starting to catch up.

But now builders have stopped again because rates have gotten higher. So that's where the thing is where Jake says that, is it ultimately going to go drop long term. I don't think there is because I don't think there's enough supply of owners on the market and absolutely not enough supply of renters on the market. We always say that multifamily is a basic human need. It's food, clothing, and apartments. I mean, it is a basic human need. And that's what I love about it.

I think the demographics are changing from people owning to people renting. I mean, if people are returned to work and they're going to be able to stay at home, they don't have to live in a certain state. They can live anywhere they want. They can start commuting. They can start saying, I'm going to live in Knoxville for a year, then I'm going to go to Nashville for a year. So the lifestyle is over the long term is absolutely shifted over to the renter side. And I think that home ownership, it used to be that American dream. I really don't think it is. I personally think long-term owning a home makes much more sense than renting a home. If you know you're going to be in the market for years, if you want to put down roots, it makes total sense because you're building equity,

you're saving money. But at the same time, for a lot of people, they don't know how to get into it. They don't know these 2% deals, these FHA loans. They just don't know they can do it. And they're just more comfortable renting. But for me, that's- Terrible, Gina. You're speaking to a group of realtors here, man. Yeah. Well, I'm saying that buying is so much, makes so much more sense for a lot of people. You're just seeing demographic shifts to rents. I get it. Yeah, absolutely.

I mean, you're seeing a lot of babies. 10,000 people are turning 65 every day. And those people have a tremendous amount of wealth. They're selling their homes or downsizing. You saw the whole RV market thing go crazy during COVID. That's pulling back. I just think that they're moving down south. The southeast has got the demographics. It's got the weather, it's got the still the cost of living.

I think a lot of people are moving down here and they're renting instead of buying. Diana, do you want to open up for any questions? I mean, I'm sure we threw a lot at people right now. I just would love to know any questions, what they think about real estate, market, multifamily, and any questions on getting into their first deal. We'd love to hear any questions. Yes, absolutely. So, I mean, so that's great. Does anyone have any questions specifically for Gina or Jake

in regards to everything, regarding everything that was already covered? All right. So my question to you is, are you seeing more today? I'm sorry if you covered this, I didn't catch it,, are you seeing more today? I'm sorry if you covered this, I didn't catch it. But are you seeing more today long-term renters or more short-term renters? Meaning like you made the point earlier before where people are working remote right now

and they're able to live where they want to live. They don't have to live up in the Northeast where, you know, you make more money, right? And you can live down South where it's nicer. The weather is a little bit better and still make the Northeast money. Are you seeing those people that are coming down, renting short-term while they're looking for a long-term home? Are you seeing those people just coming down and running long-term? When I say long-term, I mean more than two years. Yeah, it's a great question, and there's a lot to unpack there because depending on the market, and you really need to look at this

because there's this perception that you'll make more in the Northeast or you'll make more here. There's actually, you know, median income statistics that are out there that show some of the markets in the Southeast are actually paying more now than the Northeast. And the cost of living is a lot cheaper. So that's why you're seeing this demographic shift of people leaving because there's such a spread where, let me give you an example. And this is the reason I actually left New York for Tennessee. There's no state income tax. Okay. And this is not to sound braggadocious, but I have a very large house on the lake here and my property taxes are

$6,000. That's it. Okay. It's nuts. And no state income tax. And it's, I don't know, 65 and sunny out right now. So there's a lot of meat there, if you will, from a quality of living, cost of living, whatever perspective. And yes, we're seeing a mix of people coming down because they don't want to commit necessarily to an area until they get a little better feel for it. But they understand the rest of that. So, and this is key to what I was saying. We love owning townhomes. We love owning apartments with washer-dryer hookups.

We love owning apartments that have garages because you get people to stay longer. So if the person wants a six-month lease, we can offer that to them. But it may take longer than that to find their home. Or they may say, wow, the market's more competitive. I want to wait or I want to wait till rates come down. So we may carry that person that initially came in on a six-month lease for three years, depending until they really get settled in. So there is that.

But there is also understanding the needs of the true apartment home where people will then stay with you longer. Oh, making it rain will stay longer because you have what they need from a home perspective. Dog parks, washer jar hookups, fitness centers, up, down living, people love unless they're the elderly, right? They like the town home feel, garages. So this is what we focus on. And we're actually, we have a 290 unit development right now where we're doing a build to rent model. And these are 1600 square foot individual homes with amenity packages throughout the community. So there's a variety of ways to be involved. And if you can manage some of the properties and become a real estate professional, your tax advantages are virtually limitless. That's something we didn't really touch on.

If you want to look up cost segregation and real estate professional, it's a pretty big deal. Aaron, that's a great question. And what I realized over the last couple of years, people from California are moving to Tennessee in droves. It's insane. People from California are moving to Florida. That never happened. I mean, I'm telling you in history. And I think they just realized that when you're paying 13% state income tax in Florida and you make a million dollars, that's 130 grand. You bring that million dollars to Tennessee, you're saving a lot of money. And the cities that are close have benefited. They're Nashville and they have Knoxville, you have Chattanooga. So you're seeing this demographic shift. Now, COVID accelerated that.

Is it going to slow down? It's absolutely going to slow down. But I still see a lot of people moving, especially if they're not having to return. And what the great thing about the Southeast is, where it wasn't 20 years ago, the Southeast's labor force has gotten really more educated, where you see Wally, you see Miami, you see Austin. They've become tech centers. Those are the really, really,

and it's an educated- Bunsville, big time. Huntsville. So years ago, you would say jobs are not going to the Southeast because they're not going to leave New York. They're not leaving San Francisco and Silicon Valley,

but they are right now because they're migrating and they're having all these different areas. Raleigh's a booming city right now because- Bezos just moved to Miami. You go to Tampa, that's where 10 years ago, people would have said, oh, I think there's boom and bust.

But there's certain markets that you really need to be aware of. And I mean, I don't know why anyone would want to live in Phoenix, Arizona. I mean, I'm in Florida. I can deal with heat. But when it's 120 degrees for three months straight, I mean, that's just, it's no humidity. It's dry. It's still 120 degrees, but people are moving there because they're leaving California and they're just, and they're using it as a second home. So understanding the markets and the demographics and what's pushing all of it. And it's unfortunate

because when I was living in New York, I was living in a bubble up there. I didn't even know when Jake moved to Knoxville in 2011, I'm like, bro, where are you going? Where? I had no idea what Knoxville, Tennessee was, but when I opened up the laptop and I saw the numbers, the values, like what his rents were compared to what he was paying, I couldn't even come close to that in New York.

And then you take the insurance is less, the taxes are less, the labor is less. It just makes a lot more sense to be investing in these markets that are, I don't want to call them secondary, but they're not your New York, California, Miami markets. There's so many other markets in this country that you could be looking at to be investing. You already know 87% of all real estate agents fail in this business. And you also know it doesn't have to be that way. If you're a real estate agent and you're looking for consistent and predictable income,

I invite for you to get your free copy of Real Estate Evolution, The 10-Step Guide to CPI, Consistent and Predict real estate agents. And you can do so when you visit www.therealestateevolution.com. I'll share with you your book that I authored to show you the way. Thanks. How, what, where are the different locations where you do, where you invest, where you own properties? Is it the Knoxville, Tennessee area? Is it the Raleigh area? Are you kind of spread out? Do you focus on a certain area? We do. Yeah, that's a good question. Since we manage in-house and we have our own team,

we tend to do about a three-hour radius uh of the east tennessee which you know we look at like johnson city you know going towards nashville we have some stuff in lexington kentucky uh looking at chattanooga that that whole kind of geographical footprint that way uh and we had louisville it was just a little bit of a jump i think we had like 400 units there at one point um but it was just a little bit harder um to make that leap four hours than the three-hour radius. So it's very doable. It just depends on your goals and aspirations. And we don't raise money. All the money that we invest is our own capital. So folks that, you know, there's so many different ways to get into this business. The folks that primarily do syndications have a little

bit bigger footprint because they use third party. you can you can grow slower with your own equity and keep it more localized or you can grow broader if you want to raise money and use third party those are what we typically see and our students right now i mean they're all over they're all they're all they're other than all 50 states but a lot of them are in the triad north carolina that's a big area greensboro dallas too yeah that don't know like the apartment all over the world and so that's yeah i'm trying to think uh i believe around ohio the columbus market is doing is doing real awesome people since it's a city right kansas city the midwest florida so you're looking at markets that have airports kansas city's got the world cup coming next year so they redid their

entire airport and when you're seeing that happen, you look at markets like Charlotte. Why would Charlotte, North Carolina? Their airport's a hub. Nashville, fixed air airport, same thing. Atlanta, Georgia, that's a massive airport. Dallas, massive airport. Well, they seem to love Omaha for whatever reason. We get a lot of folks that there's good cash flow in Omaha, Nebraska. No one would even think of that. Well, you know why? That's why it's good because there's not much institutional money and it's not sexing. You say, yeah, I'm investing in Omaha. People are like, where's that?

But if they're saying, I'm going to Miami, well, yeah, let me invest in Miami. But the numbers will tell you that Omaha is at a phenomenal market. The population growth is steady. The jobs are great. It's eight airport expansion, cashflow. It's an average $800 to rent a two bedroom unit in Omaha

and median income is $70,000. It's insane. So that tells me that people can afford to live there and then I can continue to raise rents, which is phenomenal. Whereas you may look at a market like, I don't know, we'll pick something like Miami. Rents are probably two grand

and median income is probably around $70,000. like Miami. Rents are probably two grand. Immediate income is probably around $70,000. You're probably not getting much for two grand in Miami right now. And if you do not think you probably want a $2,000 apartment in Miami. I may be wrong, but yes. But you see, that's why when you're looking at markets, you just have to look at the data and see what the data is. And one last thing about the Southeast, always look at the affordability of a market.

And right now it's still a lot cheaper, especially now to rent than it is to buy. So that's another reason why I think that, you know, we still have the ability to raise rents a little bit because especially with interest rates, you know, first it was prices just doubled in the last three years, but now you throw on the interest rates where there's six, 6.5% to buy a home, renting is still a much more affordable option. So when you mention A, your students or investors, are they purchasing within local, within vicinities local to them? Are they merging out into these markets and these regions that you're describing? Because I believe like close to us, we don't have very many multifamily units available for sale.

I know that I've had people who, investors who have come to us looking, but just haven't been able to identify those. So what would you recommend that we kind of expand our scope to those regions and geographical areas in which you're describing to be able to meet their needs? That's a great question. Can I adjust her second point, Gino? Let me go first because there may be a... Often. Yeah. So one thing that may be

off your radar, the multifamily space operates differently than residential. So when a broker gets a listing, they only send it out to their email list typically. Okay. And they don't partner with another participating broker. So if you go to sell a deal, you're going to go to a broker like a Cushman or something like this. They will then blast that out to their email list. So if you don't know who the brokers are, there may be a strong possibility that you're just not seeing these because they never hit the MLS ever. So that could be point one. And then I'll let Gino handle point two about the vicinity question. Well, the vicinity question, that's a great question, Dan, because what I would say is start going to different events

and you're going to meet other people who are investing in different areas. I mean, selfishly, Jake and Gino, that's why we created the community. We've got over a thousand students who are either doing deals themselves, they're partnering with others. There's a lot of people in the New York area who are partnering up with people who live in Georgia and who live in North Carolina and they're partnering up. People in those markets tend to have more capital. People in markets like North Carolina need capital. So, hey, I've got a deal. You've got money. Let's get together. That's a great way to do it. I would also say, like I said, you have to go to these events. I would also join meetup groups. If there's any kind of meetup groups that you're wanting to see if there's any events going on in North Carolina, going around in any market that you're focusing on, that's another way.

I'll go back to that point about picking a market and then trying to meet the brokers in that market and Googling them and getting on their list. Like Jake said, it's really important that you do that because it's not open source. It's a very close community and you can go direct the seller on a lot of these smaller deals. But as you get into the 20, 30, 40 units, they tend to be a little bit more sophisticated and they do use brokers. It's you want that person in between you representing you. And that's why brokers are so important. Yeah. Especially when you get to a hundred units or more, you're not going to see that those deals, unless you know who's listing them or who's, who's, who has the actual contract to sell. I forgot to mention also, if you're, I don't know where

you guys are located, but I know there's parts of philadelphia i mean i'm sorry pennsylvania if you're going into you know the mountains you guys are virginia right northern virginia dc metro area so uh and then we have some that are a little bit further out erin you're in pennsylvania correct yeah i'm in the greater philadelphia area so we're like maryland so so pennsylvania maryland dc virginia so if you go west if you go into like greater Philadelphia area. So we're like Maryland. So Pennsylvania, Maryland, DC, Virginia. So if you go West, if you go into like the Poconos around there, there's some multifamily around there. I know Richmond's a good market. I know Roanoke is a really good market as well. So I would look at those markets as well in Virginia. Now, I don't know landlord laws as far as if they're challenging, not challenging. That's why the Southeast, once again,

it's more business friendly. Omaha, same thing. We tend to look at as that. I don't want to call it one of our pillars, but one of the reasons why we like investing in those Southern markets, because they are more, I don't want to say landlord friendly, but if you don't pay a rent, we can evict you. I don't know if that's landlord friendly or not. I just think that's common sense. So that's what we tend to do down South because what we're doing is we're selling time. If you're in an apartment and I can't get you out, I'm not collecting rent and I can't collect rent from the next person coming in. So for us, making sure that you understand the landlord laws and tenant laws in your market is really important. I'm sure there's a ton of multifamily South of DC too in the suburbs. There's got to be. I could be wrong.

Like you said, they may just not be listed on the MLS. But even driving around, I mean, I'm sure you see apartment communities though. Oh, absolutely. Yeah, then you're just not seeing them. Okay. You're not seeing them because it's a closed group essentially.

You got to know who the brokers are. Your Cushmans, your Marcus and Millet Shaps, they have brokers that just do multifamily. And that's how these are being traded. So one thing you could do right away is just go onto a site like LoopNet and type in multifamily for your market. And then you'll see the brokers pop up. And then those deals on LoopNet for now, when Jake and I started back in 2011, that's where the deals were because they just couldn't sell, so they throw them out. Now you get picked out if you look at LoopNet, right?

Now, but now it's coming back because now there's more deals, which is actually exciting, but you're not looking for the deals. You're just looking for whatever brokers are listing those deals. You can go to auction.com. You can go to Crexie.

You can go to all these different brokerage sites. I like Bercadia. I like Cushman and Wakefield. I like Collier's. I like Marcus and Millichap. All those sites have Sperry Van Ness, NAI. There's a lot of different brokerages. You just want to get onto as many of their lists as possible.

And then when they do have a deal, they'll circulate it out and they'll put it out there. Perfect. Thank you. Anything else? This has been a wealth of information and beyond. So this is great. Absolutely great. Significantly more than what I even expected.

So I'm certainly appreciative to you both. Yeah. And it's just, I love being a multifamily owner. I mean, you get paid every month because you own it, right? That,

that check's going to be there kind of thing. So it's, there's a lot of sense of security in that if you're managing well. So it's, you know, it's, it's, you know,

less, less high peaks and troughs, if you will, of where your finances are going to be. Diana, do you mind if I just, I wanted to recommend one more book before we sign off. No, please do. Absolutely. I think it's important. Yes. And this is not about real estate or anything.

I've been reading, doing research on psychology and how we handle our money. The book is called The Psychology of Money by Morgan Housel. And for me, it was so important when I read it because our relationship with our money tends to hold us back from investing. And how we have that relationship, if we get a dollar into our life, well, what do we do with it? Do we spend it all? I mean, for us to become wealthy, we need to put some of that aside. And I know that might be difficult for some of us, but listen, I have six children. I was living in New York. I know how expensive it is up there. So we can either be wealthy or we can make excuses.

We can't do both. So we have to figure it out how to start first saving our money. And that's important. And then let's learn the vehicles. Let's learn how to start investing. But I think if we can't at least put some of our money aside and let our money start working hard for us, it's going to be very challenging to get out of that, we say that rat race. Because when I was at the restaurant every week, I was just thinking about getting through the week. The week is over.

I've got my money. I got to start it all over again. And again, my only benefit or difference was that I was able to- Still transactional. Yeah. And I was able to meet Jake and we were able to start it all over again. And again, my only benefit or difference was I was able to see- So transactional. Yeah. And I was able to meet Jake and we were able to start buying, investing our money. That's the only difference. Just understand what the relationship that you have with money is. And once you understand that, in that book, he goes over some simple things. He mentioned that after the age of 80, Warren Buffett accumulated $61.5 billion out of his $65 billion net worth.

So he accumulated from zero to age 83 billion. From 80 to 15 or 20 years, he accumulated the vast majority of it. So it doesn't happen overnight. Give yourself some time. Jake and I bought our first deal 10 years ago. We've been able to accumulate it. If you can see yourself doing one deal a year, the next five years, you'll have five deals. And it's just, so when you start chunking it down, we overestimate what we can do in a year and

underestimate what we can do in five. Just take that five-year window and say, hey, in the next five years, I want two or three deals. That's life-changing. It's life-changing to you. Yeah. For instance, Erin, are you a real estate agent? Yeah, I am. How many deals are you closing every month, would you say? Probably not many right now. Two, three, something like that? Something like that, yeah.

So just think of the transactional nature of it. And I'm not, I'm not hating. I want to talk more about like the multiple streams of income. Like the minute it's done, it's like, okay, got to get back on the horse and sell the next one. Got to sell the next one. Right. And to Gino's point, we do two or three really damn good deals a year. We wait for that one and it's two or three transactions throughout the entire year. And if you do that over a period of time, again, I mean, it's probably pushing actually closer to $275 million right now, our total portfolio. And the cash flow from that snowballs. And the thing is, too, the longer you own it for, the more efficient and better you

can get it to cash flow. Because you'll see things like inflation and different things take place. And you've already fixed it up and those efficiencies take hold. So it's just, I think it's probably less work. You're not chasing the next transaction as much and thinking, where's that next one going to come from all the time?

So let me ask you how, you said something about five years earlier. How long do you hold on to these multifamily properties? We've only sold out of Kentucky. We sold out of Kentucky and we'll, you know, we, I'll give you an example. We, and that was more during COVID, they put these, these laws in place that demanded everyone to take section eight. And it was, it was super weird. We're like, we just don't feel comfortable with this. And it's, it's, it is what it is. I'm not going to get into the politics of it, but we just didn't really like that. We didn't think it was, it was going to be good

for the investments. So we sold those, did really well on them. But, but ultimately the only time we've sold is when, when something from the government happened that we didn't agree with, or we buy these portfolios, right. It's two or three deals in a package. And there's like a duplex or an eight plex in there, which is a little bit smaller than really makes efficient, efficient sense for us at this point.

Like we just, we just sold a four plex a little while ago. Cause it came as part of a package. Did great on it, renovated it, sold it basically for twice. We bought four. But that's, that's really it. The rest of the stuff we've held on to. And that's, in my mind, I want to hold these in the 10-year blocks and reevaluate every 10 years because that's what

our financing is for. We get it on a community bank or credit union deal. Then we roll it out to agency, which is a 10-year term on a 30 amortization. And so we look at these, each of these deals really in, in, in 10 year chunks. And I think the, the only way that it really makes sense for me to sell one of these and that, and that's where the conversation is, is if we bought, we're so cheap because we bought some deals for like 2525,000 a door and they may be worth $125,000 a door now, right? And if it's going to take me 50 or 60 years to make the amount of money that I would make off the sale after the 10-year period and it's below 100 units because anything over 100 units creates this hub and you can bolt down smaller properties to it for management and the

economies of scale are really good, I think those are the only ways that I ever really truly look at selling something. If it's going to be well past my foreseeable life that I'll ever make the money back on the cash flow, I think there's a reasonable conversation to be had at that point. I think all for a sale. Depends upon your goals too. If you buy in a market and all of a sudden, that market or that asset got old and all of a sudden they have in air,

air conditioning. Absolutely. Yeah. Infrastructure type stuff. And you say, okay, I can sell this. I'll sell this. But if you're buying an asset, that's a nice asset and a good market, it's in great, good or great condition.

I mean, like, why would you want to kill the golden goose? I mean, you buy- I like that monthly payment. Yeah. Yes. And then you have the tax benefits as well. I think that's the way we've been evaluating it. When we first started, we would buy anything. We just got, I don't want to say lucky, but we bought these properties when no one else was buying them. We bought them in a great market, like a really good area. And we've just been able to hold on to them and take care of them, continue to take care of them. I think the exit strategy, though, is very important when you're looking at a deal for anybody on here.

Even when you're buying single family, you always have to think of what that strategy is. Are you going to hold it longer term? Because then that's going to affect the financing. Or are you going to buy it and flip it really quick? Maybe I'll just use private money. So every time you're analyzing an investment, please always think of your exit strategy. It's a really good question.

Listen, if anybody wants any information, just go to jakeandgino.com. Thank you both very much, Jake and Gino. Yeah, our pleasure. All the information. Thanks, everybody. I'll see you guys later. Have a great weekend.

See you. Thanks so much for listening to the No Broke Months podcast today. Until the next show, I invite for you to be grateful, make good choices, help someone, have the best day of your life, and go find a listing. Hey, I just had the best 45 minutes interviewing Dan Rochon. He's from Virginia, right outside the DC area. He's been in a stable market for a long time. Within 18 months, he created so much success where he was actually able to buy the brokerage as a real estate agent. Dan is a leader of vision, focus, and passion. His enthusiasm is truly infectious. He just came out with a book for real estate agents

to kind of help people pivot. We went through and talked about how to succeed in adversity, some of his big traits out there.