Multi-Family Deal Lab Episode 004
Speaker 1: Welcome to the multifamily deal lab podcast, where we dissect a deal before your eyes and ears. So you can discover the strategies and tactics that got each deal to the finish line strategies and tactics that you can put in your own toolbox to get you to the closing table from sourcing the deal, raising due diligence to the property takeover, multifamily deal lab shows how you too can get the deal done. And now here’s your host, David Lindahl.
Speaker 2: Hey everybody. Welcome to multifamily deal lab. I’m your host, Dave Lindahl, and my guest is Brian Darcy. And we’re going to take you step by step through. But Brian did to get to where he’s, where he’s gotten. This is a special interview for me because Brian’s my surfing partner. And usually when I go to San Diego, he pulls up in the morning. You know, when we do, we used to do events out there. He pulled up in the morning with his van and a wet suit and a board. And we go off somewhere. Yeah. The whole crew sometimes bring different people. People that couldn’t get beyond the way it’s be on the whitewater. But so how’s things. Hi man. Haven’t seen you. Wow. Pretty good. I mean, this has been a weird time for sure, with all the stay at home stuff going on and the impact we’ve had to our current properties, some has been bad.
Speaker 2: Some it’s been good, you know, it’s kind of the way things are, right. So how many properties do you have right now Now six buildings and six multifamily and four commercial, right how about how you commercials doing commercials doing pretty good, actually, they’re kind of small. And so a lot of small businesses run out of them. At first it was a little rough and then everybody kind of came back quickly and this wasn’t, these are in South Carolina, so it was one of the early States that opened up. So we did. Okay. Where are they businesses that dealt with the general public or ha you know, summer like nail salons, kind of places. Those took a bigger hit, you know, it’s interesting in our big, one of our biggest tenants is Hertz at one of our buildings. Gosh, I don’t think we are one week into this whole thing. Hertz writes as a letter and said, we’re just to inform you. We’re not going to pay rent for the next six months.
Speaker 2: It’s the biggest company out there that we have. The rest is all these small time companies. Yeah. I just saw something on the news on her. It’s on, you know, how many offices, how many different locations they closed, which was quite a few. Yeah. They’re actually, you know, they’re back up and going. So it was only about a two month, but it was just interesting that they just pulled the plug on us. I’m like, they’re the big guys, what are these little, little operators So it was just an interesting thing. Multifamilies where you seeing your biggest difficulties in your, in your C properties or the C properties, that were kind of struggling in any way. So some of the tenant base there was already kind of struggling, you know, we had a little bit higher delinquency so that the two properties that I had that were a little bit higher delinquency, they got hit bad.
Speaker 2: You know, and even though the management was trying to walk people through getting unemployment and getting applying for the aid and all that, we were hoping that as they applied for that, they would, they would pay their rent. So, those are seeing a lot higher delinquency, but I have a one property. And I think, you know, about the one out in Texarkana with Rob and Eric that did exceptionally well. So it was just interesting. I was really down to what the management company was doing and the tenants that they had present. Cause we stayed at a, a solid 90 plus percent on two properties there. And it leaves a very strong management company and that it was almost a, you know, barely as female, like I said, and all of these are in Texas and C class. Why don’t you tell everybody how you get started to care about who you are and what you do
Speaker 2: Alright, well, I worked in software and systems. I was a corporate executive at a large medical device company here. And, I had a part of my division was in London. I had to go to England area quite, you know, about once a quarter. It’s not so bad. This is back in 2008, maybe. And I was about to jump on a plane and, and you know, this is before batteries lasted long and they’re actually plugins on airplanes, right So I’m like I got to get a book. And so I kind of went through my bookshelf and pulled off the shelf. rich dad, poor dad, somebody had given to me ages before. So by the time I landed, I had read the whole book and I had landed in London and I was like, Oh my gosh, I’m doing everything wrong. And up to that point, I thought I was doing everything right.
Speaker 2: You know, I was at my degree in engineering, I moved up in management and senior management and corporate executive. My parking spot was next to the CEO of the company, you know, my assigned parking spot. And so I really thought I was doing things right. And that just kind of opened up my eyes to there’s a better way than a W2 than active income and that’s passive. And so I went down that path and started flipping homes, not very many. And I’m down that path of going to flip homes. And in about that time, I went to a seminar in Florida. So in 2009 ish, I went to a seminar in Orlando and you were there and you were given, it was that there was the pitch fast, right So, but apartment, house riches or multifamily bootcamp or whatever it’s called now, was talked about, and it made 10 times more sense to me than flipping homes.
Speaker 2: And so we signed up and from that point on, we, got into coaching and got into the El society and all of that, which we now call the masters program. And that that’s what kind of shifted for me. And we began buying multi-families and, but getting out of that engineering mindset was a hard, a hard thing. And it really took a lot of mindset set change. And I think, you know, because I was, I was so risk adverse. I actually ran the risk management board for this large medical device company. So I was super risk averse. And the way I kind of got out of that was kind of doing it myself and investing in my own were using my IRA to begin the self directed IRA, investing and begin that process. So I could like in a sense, prove to myself that I could do it and then began to begin to syndicate.
Speaker 3: Let’s dissect that first deal by the way. So I go out there surfing every morning, still
Speaker 2: I’ve been off for a couple of weeks. My neck is pretty messed up, but this year I have a bulging disc in my neck. So acts up flares up every once in a while. And, but this year, since the beaches opened up, so they’re close for a little bit. And then the beaches opened up. I surfed every day for a solid month, but I’ve been off for about two weeks and we just had a huge swell come through like eight feet and six to eight feet. And I didn’t go out any day. Any of those days, it was hard to not go.
Speaker 3: Have you, read that book mind over back pain.
Speaker 2: I have, I love that book, so yeah.
Speaker 3: Yeah. So what, you seem to be, have you read any, and so what we’re talking about is, I had severe back pain for two years and I had two bulging deaths or a scale due to building just three degenerated desks. And then the top of my head,
Speaker 2: It looks like, colorec
Speaker 3: Everywhere. And, you know, I was fricking like, my brain stopped talking to my calf and I was dragging my right leg around for about a year and a half and all that. Then I read that book mind over back pain. And, somebody handed it to me and said, Hey, you know, if you can, after I tried thousands of things and I was teaching, you know, a regular basis back then, and people could see I was in pain and they’d offer me all kinds of remedies. And I tried them all. So somebody handed me this book mind over back pain and said, Hey, if you, if you think this book was written for you, you know, as you’re reading through it, then, you know, read his other books and I’ve read through it. And I was like, Holy crap. I mean, he must’ve been, he could’ve been in my bed over looking over my shoulder when he wrote this book. But anyways, I have read his other books and then I wrote, have you read this book, unlearn your pain
Speaker 2: I think I need to go read it right now.
Speaker 3: Unlearn your pain is a really good book. And it, and this is where everybody out there is in any kind of pain, back pain, you have problems with the risk topple Conwell syndrome. You have fibromyalgia the stuff, you know, it’s called the MINDBODY syndrome. So when it is a unlearn, your pain is a book about, you know, how to unlearn your pain. And it’s got all kinds of exercises in it, which I followed. Cause I would, I would do anything to get out of that pain. It was so bad. I couldn’t sleep at night. You know So when you’re sleeping like three half hours each night, you know, you mentally get screwed up. The thing that saved me was I went onto this website, TMS Wiki, T M S, if you writing this down, T M Tom, Mary, Sam, wiki.com, and I’m on the left hand side, it’s called a structured learning.
Speaker 3: So don’t on the left hand column. There’s a bunch of things. And then one of them is called therapy. Don’t click on the therapy, click on the structured learning. And it’s a 40 day writing program. And it tells you, you know, what to write about. And it has all these different things in there. And by the time you get to the 40 days, you should be out of pain. Some people are, are a pain right after they’ve read the book. Some people aren’t going to pain. you know, one weekend, two weeks in, I actually was a hard healer. Like, you know, they phrase me as a hard healer. It took me 60 days to be finally out of pain. But the whole thing is, you know, big psychological thing. But anyways,
Speaker 2: That book again, Dave, what his name of it again,
Speaker 3: one of them was relearn your pain. I mean, unlearn your pain, unlearn, unlearn your pain. And then the other one was a TMS Wiki website, structured learning. And if you just follow that every day and you write takes about half an hour, a day to write it, but you follow it every day, you get so much crap out of the subconscious of your mind. You know, it’s just a great cleaning process anyways, as we digress. But I know everybody, you know, a lot of people have chronic pain, you know, so this, it certainly helped me and it’s helped a lot of people that I’ve turned this book onto and that website, so, you know, could possibly help you as well and could keep you out there surfing exactly your first deal, going into your first deal. So what was your very first deal coming out of, the learning process of multifamily
Speaker 2: You know, we started down the path and sometime in 2009, the argument or seminars and everything, and kind of going down that path. And it wasn’t until actually 2011, that things kind of heated up. And we bought, we had 120 unit that we were putting under contract and moving forward. And then the same seller also had a 90 unit and it was in Midland, Midland, Texas. And so we ended up buying that portfolio from that seller. And the first deal we had found originally we had bid on the deal probably eight or nine months earlier through a broker. We went all the way down through vest and final, and we literally lost out on the deal for under $50,000. And so we thought for sure, that would have happened. So that would have been the beginning of 2011, but it turns out it came back around, of course, a lot of these deals do, we got contacted and then we bid again and we got the deal at a cheaper price because now that seller had held onto a lot longer. So it was around, gosh, it was so cheap that back then I was, you know, 24 at Dover kind of thing.
Speaker 3: Oh, that was great. Just, just like this next opportunity is going to be great.
Speaker 2: Yeah. 11 and a half nap, 11 and a half cap, you know, just crazy, crazy acquisition. And that was really the gold standard deal. That, that was a, you know, we spent 3 million for that 125 or 120 unit. And then another, I want to say 1.2 million for the 90 unit that came along with it, the 98 and was a little bit older, but it was, they were still both full already. So we, we, took those on and, within three years, really two and a half years, we sold the 90 for about two and a half million dollar profit. And, we ended up selling the 120 after we refinanced it. So we financed it and for a $2 million reef, we pulled out 2 million on the refi, paid everybody back that invested in the deal. And then we held it for a little bit longer and then sold it for a couple million more.
Speaker 2: That was like the best deal ever as well. So, we, at one time we were cranking out cashflow of over 18% to the investors. So that was a, that was a really good deal. We raised the rants $450 in the first two years. Wow. And that was because oil was booming in that region. And, you know, interesting when we did refi that deal, we went over the cliff on a sellers market to when oil market dropped out and we were able to sustain, we went into cash management for a little bit with the lenders. So there was about a year of no cashflow and then it kind of just slowly started moving it back up and started cash flowing again. And then we, in a turnaround and selling that for a couple million more. So that was a overall good. But during that, if you were asking me in that middle of when we actually went over the sellers market too, and that was a, that was a rough year.
Speaker 3: That was a, you know, when the oil market crashes, it’s not something that you can come right out and predict, you know,
Speaker 2: Yeah. 2015, the end of 2015, right in that range is where it really got bad. And we saw it coming, but we had already done the refi. We saw it coming in that, in that region, they do all those. They pull all the oil permits, you know, and that sells it’s a healthy oil market. And the number of permits weekly permits was declining rapidly. So it was around 300 and it was going down to under a hundred and I’m not a real good gentleman on our team. He was just a great statistician. And so he was watching these data, but we had already done the refi. So we were pretty much, we needed to go for the ride, but it was a good ride overall. Cause we came back
Speaker 3: The good thing about real estate, you buy a good property in a good area. And, you know, it tends to come back over time, time heals, most of the wins in real estate. So how did you raise the funds for that first deal Did you, so that was a BR. So it was a broker contact that got you into the best and final.
Speaker 2: Yeah. And then as the same broker came back six or eight months later and that’s when we put it under contract and I had, I’d been actually communicating a lot with that seller and met him once in Texas. So cause he had another property that we’re also potentially interested in and then we put in a contract and then raising the money. We had several people
Speaker 3: Back to the broker. you didn’t get this deal with a broker and then you kept, did you keep following up with the broker Did you continue the relationship with the broker or did he just,
Speaker 2: We had a continued relationship with him and we had the backup, you know, the backup offer in. Right. And we continued the relationship with him, but when they fell out of contract, he didn’t call us if somebody, one of the people on our team at actually was talking to him about another deal and he’s like, Oh yeah, you guys were bidding on that Midland prop or that those Milan properties are you guys interested in them again And so that’s kind of how it came back. So it was, we kind of, a little bit gave up, you know, so we probably followed up with him for the first three months and then nothing happened. And then in a, just a sidebar conversation with him, he brought it back up and then we ended up capturing that deal. Interesting. You know, it’s important to keep up those contacts that’s for sure.
Speaker 3: Yeah. That was a, that was the point I wasn’t going to get to. And also, you had met with the buyer. How did that happen I mean the seller,
Speaker 2: The seller, I got on the phone with him one time and he was a great guy, reminded me of my, I have family in Texas. And so the way that we say my name, Brian, you know, so he was a great, I just really liked him. So we kind of hit it off on the phone. And then I think we went out to El Paso, me and one of my partners went to El Paso and we met him at his property there. We didn’t do that deal, but it was just kind of cool to meet the seller.
Speaker 3: Yeah. I mean, I mean any opportunity you have to be a seller, you know, it’s a great opportunity because you meet them face to face and damn they remember you. That’s fantastic. Do you know, they, they push things your way
Speaker 2: Pressingly. It’s a small world. we do know a few other sellers, especially in San Antonio area. We were attempting to buy a property with a seller one time and, it didn’t go through and then we ended up buying one of his other properties later, you know, a couple, probably about two years later. So it’s interesting how we get deals, not just through brokers, but if you can make a contact with somebody that’s an active owner, sometimes they’ll, they’ll call you back when it comes down to Oh, that we want to sell this. Oh, those guys were very interested or I liked them or we hit it off with them in some way, shape or form.
Speaker 3: That’s it Personality, personality, commonality. All right. Let’s talk about the money. Right.
Speaker 2: So the money rate released to raise 1.2 on the larger property and 800,000 on those lawn was local because there was no Fannie Mae there. so we, we were getting a local lender or basically a conduit there and those, loan-to-value didn’t work out so great. So we had to raise 1.2 on the first deal. And then we had to raise 875 on the, our 800 on the second deal. And that was, that also included about 400,000 of capital repairs reserve that we wanted to do some facelift on both of those properties. And so we ended up finding a single investor for the 90 unit and they brought all the funds.
Speaker 2: It was through raising the money for the other, you know, we had a big chunk, 2 million to raise and as we were creating relationships and that, we found somebody that had just made a huge sale of an assisted living property and they wanted all of it. So basically they took a little bit larger percentage obviously, but it was still a good deal for them and for us. And then on the res side, there were, six partners in this. And so on the res we all, okay, we’re all gonna raise money. And it all worked out, you know, where we, we thought we were each going to raise an equal amount and that, that didn’t work out that way. It doesn’t usually work out that way, just FYI. So it ended up, I pretty much ended up raising about a million of that 1.2, I think it was 900 of the 1.2 and it was
Speaker 4: Going so the first
Speaker 2: Month of the contract was like, hell, because I’m like, Oh my God, we’ve got to raise this money. It’s just, it was a mountain. It was Mount Everest, you know, and I remember this is way back in 2011. And I think you were out here for some sort of a leadership, like an El society thing. And it was that lawyer. And I remember going there just like head down because I couldn’t raise any money. And we were about a month away from closing. We hadn’t raised a dime and I don’t know it was just in that conference or whatever. I mean, I walked out of there, you know, why not me And something might’ve been said, there was like, well, I have a great deal. And this is a great investment. And we were giving a great return. Why would somebody not invest with me
Speaker 2: And I think up to that point, I still had my engineering mind that analytic mindset that’s was saying, why would somebody invest with me I know nothing about real estate. You know, I’m that mind chatter is what I was living to. And I just read a quote this morning, actually, Ford said it. He said, if you believe, or if you don’t believe either one’s going to come true, believe in yourself, it’s going to come true. So up to that point, I didn’t believe in myself. And there was some shift in that time and I just started going, okay, why not us We could do this. And all of a sudden things just started opening up and think around that same time. Another interesting thing you said, Hey, let’s serve some more. I got this commercial multifamily going on and why don’t you we’ll surf this morning. You can come to the commercial multi-faith or the commercial Academy with me. And I’m like, okay. So I went there, remember when you had your Rose raspberry on your forehead
Speaker 3: So everybody knows when we surfing to a new, I was like, Brian, take me to a new place surfing. He’s like, okay. So, we got, I don’t forget where it was, but, I used to get off the board. I just did dive, you know, when it’s time to, you know, the, the ride was over. I just dive in. Well, I didn’t know. There was sandbars out there and I do right into a sandbar at the teach all day one coming down. Cause it was like, it was a raspberry, you know, it wasn’t just a deep cut. It was like kind of a low in my face.
Speaker 2: Yeah. Just standing up there, the raspberry or any forehead, you need an explanation for that. So I came up and gave the explanation. And in that conference I met a bunch of people and one of the people, they were real timid. And they asked me if I, if I would meet with them afterwards. And, and I was like, man, I gotta get home. You know And I was like, okay, I’ll do it. And so I hung out and met with them afterwards and they end up investing half of that investment. Wow. We came in with a big chunk and that was just an opening. And then there was a couple of hundred thousand. That was our minimum. So then a couple investors I brought in from work and some other people that I knew from my career at the time, and that was kind of how it opened, but truly it only opened because I believe that it could happen. And I think that is such a big part of it. And it is probably the biggest thing and probably the most important thing to be a multifamily investor is raising money is not about broker. It is about broker contacts and it is about finding deals. And you know, it is really about making those connections to raise money. So
Speaker 3: Well, it’s about, it’s also about positioning too, because you know, you, you had the mindset shift, but you also you’re out there. You know, you came to that event, you didn’t have to go to that event. You came to that event, you know, you talked to those people, you know, I’d rather be driving home. He came to the El society meeting that we had. So it was getting yourself out there and just, you know, being in the right place, you know, a lot of times it’s just, it’s like Woody Allen says is timing. It was being in the right place, right time. And in things happen, it’s funny, you said the, the why not me, because that was a big part in my life too. My family, we grew up a middle class and my father was very frugal. My mother was always in the mindset that other people have the good stuff and you know, and we, you know, we, we, we get by, cause she always got by in her life and that’s just the way it was, you know
Speaker 3: And, and you dreamed about what other people had or you dreamed about these things. And I just remember, like, in my, before about a year before I started real estate investing and I was like, well, why not me now Why does everybody else get all these things Why can’t I have it And that’s when I started reading all those books, you know, the magic of thinking big, raise the bar, the giant within, instead of why not man, it’s like, it’s gonna be me. You know So I had decided that it was going to happen. And that’s what I find that all successful people, they just make that decision that it’s going to happen, regardless of how many times you get knocked down, beat up how many obstacles coming your way. Okay. It’s gone.
Speaker 2: I think that that persistence, you know, in belief is there because you could go back and forth on that. But I still think if you’re still like failing forward, you know, that that saying, but you just keep going. If you just keep going, then all of a sudden seeing things start to open up and I’ll have to say, and you, you had mentioned showing up, you know, my wife and I were showing up to every event that we could shoot. We were flying places to go to events, but there were a lot more events in Southern Cal. So we would go to every Southern Cal event just to make contacts. I was also connected to my local Rhea again, just to make contacts. And the more, it’s not like, especially out of the Rhea, I don’t know if I ever pulled an industry out of the Rhea, but it was more about me being able to communicate and tell my own story.
Speaker 2: And it was like a constant practice. So I became used to. Yeah. And then people aligned with you, not necessarily, you know, the deal is one thing, but a friend of mine, George Anton said, the currency in our business is not money it’s trust. And so when people see you and they trust you, then you open up the door for them to align with you, invest with you. Yeah. George’s a great guy. Yeah. One of my favorite people out there, of course surfing with him. Dave, you share for them is that we said, Oh, I said, I never been surfing with him. I can imagine George surfing. So it would meet up now, you know,
Speaker 3: The coronavirus crisis, but you can still do. There’s a lot of different meetup groups going on virtually. but still with me, that groups, you get to practice on a regular basis, which is good. You know, you don’t have to wait till the monthly meetings of certain things. There’s so many different meetups that you can just go. It doesn’t have to be real estate or investment related. It just has to be people, people there that are going to ask you
Speaker 2: One simple question, what do you do It’s like favorite question.
Speaker 3: And it’s funny you say, you know, we tended to have a lot of events and Southern California while at one point, you know, I’d been teaching since 2002 and buying all those units all around the country. And by 2011, 2012, I was burnt out of traveling. Like I didn’t want to go anywhere. So I told the staff that we’re going to have events in Boston and San Diego, because those are the only two places I want to be sometimes in live. We can’t get the hotels with San Diego, but that’s it. I just want to be in those two places. And that’s why we have Southern California all the time. That’s how I get to learn how to serve from you and spend all the time.
Speaker 2: Cool.
Speaker 3: Let’s talk about, surprises, surprises during due diligence process. There’s always surprises during the deal prior to owning a deal. Cause there’s always surprises after owning the deal as well. So what was some of the surprise you diligence
Speaker 2: Surgeons surprises usually come up, depends on who you have doing due diligence. I feel like sometimes people look at a property and they get excited about what they got. And then when you’re excited, you tend to overlook the issues and, you know, significant surprises come in by way of, having to spend a bunch of money on new boilers or new money on these are expensive, big ticket items, right Boilers, roof leaking, didn’t get on that roof. And then that turns out the one that needed to be replaced for, you know, a hundred thousand dollars. And if you don’t know those things, it’s really hard to manage through after the fact. So if you’ve already raised your money and closed your deal and you find out you need a hundred thousand dollars to replace a roof because you’ve already fixed it eight times for several thousand each time, you know, it’s really hard and it’s hard message to your message to say, Hey, you know what
Speaker 2: We’ve got, I’ll withhold the cashflow so that we can build up enough capital so we can replace this roof. It’s not a good message. So during due diligence, you know, I would say, be a hair splitter and really get to know, go there yourself. That’s one thing that’s been one of my mistakes is, you know, one of my biggest problem deals. I didn’t go there. I had a local team, you know, a trustworthy local team, but I felt like it’s important for me to I’m the money raiser and eventually the asset manager type person. Then I really want to know what’s going on with that property. Cause I don’t want to find out later, Oh, we have eight ACS to buy at 3000 or two 2,500 a piece. And you know, it was just, it just kills us. And also every surprise, because remember I said, money is not our currency, but trust is our currency.
Speaker 2: Every surprise you have, you’re actually taking a withdrawal out of your trust bank account. And if I have to, you know, Oh, we got a surprise. We have this issue that we didn’t catch during due diligence. That’s a little bit of a two your investor. That’s a little bit of a downer. Like why didn’t you guys catch this first You know, there’s that little question. And that is a little bit in a erosion in the trust account, if you will. So I think it’s really important that you get there, you get your hands dirty, you get sweaty and dirty. If it’s Texas, it’s, you know, doing due diligence, it’s hot there in this, especially in the summer and you’re exhausted and you drink a gallon of water I’ll, you know, and it’s just, you’re sweating to death as you’re going through every single unit.
Speaker 3: you know, it was a larger complex, there’s always one unit, that’s the hoarder and that’s all we needed. That’s the cat person
Speaker 2: You can’t get in there or the, you know, and never listened to what the maintenance guys tell you, they’ll say, Oh no, I was just in that unit just yesterday. So I said, well, Oh, go ahead and open it up. Anyway, it’s vacant. It’s about ready to be rented. And I’m like, well go ahead and open it up. Anyway, we walk in the lights, didn’t work. And I’m like, well, it smells, smells damp in here. And I turned on my light and I look at it. And that’s about when we started walking through the, you know, three quarters of an inch of water on the carpet, you know, in there. And you’re like, and he’s like, no, seriously, I was just in here yesterday. He’s probably getting there two weeks ago. You don’t want to listen to what the maintenance guys, you just got to go verify. You don’t want every room, not just to, if there’s 12 roofs get on all 12.
Speaker 3: Yeah. And I think it’s important to understand people’s motivations, you know, at different times of the deal and during the due diligence process, you’ve got a property management company that wants to get that deal. So if they’re doing part of the due diligence, they may oversee some stuff to get that deal done. Or, you know, it may not focus on certain things to get that deal done. you also can look at your team members too. So if you’re going into a partnership, with people that you know, or don’t know, especially the ones that you don’t really know, you kinda know you don’t, you get a good feel for them. So that’s why the partners in the deal, but there’s that motivation to close the deal for the acquisition fee and people will rationalize why, you know, this deal can be done because they’re already spending that acquisition fee. So they want this deal done. Now, not even thinking about the consequences of the things that get overlooked or the things that are wrong with the property going into the close.
Speaker 2: Yeah. That’s a, that’s a huge one because we’re talking about just acquisition. You gotta understand acquisition is, you know, three to four months, but you’re going to hold up property three to five years and you’ve got to be able to continue to manage that asset, not manage the property, but manage the asset to a profitable place. And if you go into it with that mentality, I’m just getting that acquisition fee, you know, a high percent of the time you’re going to, it’s going to be a rough three to five year hold until you could resell it. It’s like a boat owner the best day is when you buy it. And the, and when you sell the best two days when you buy it and sell it, and that’s not what you buy a property for, you buy a property for passive income. I mean, really That’s what it comes down.
Speaker 3: Yeah, absolutely. I view, I was about to say something, but you, triggered something in my mind about the boat. I bought a, I went out fishing a few years ago with some friends. We did all day friends from high school. I hadn’t seen in a long time. We had such a great time. The next week I buy a fishing boat thinking I’m going to go out with friends every weekend. You know, the first day I bought it and I took it off the dock and I went to pick it up the engine stall and like the guy that sold it to me, he already left and I’m halfway at the Harbor. And I find the little period I hook up to him and I call him and I was like, Hey, I can’t get this boat going. I should’ve known then to give it back.
Speaker 3: He’s like, I understand. And you know, pass the engineering report. I don’t know what’s wrong with it. You know, do this, do that. And you know, I eventually got it going again. And then I took it a couple of miles down and in docket to where my slip was, but I had problems with that boat the entire time that I owned it. I owned it for one year and in violence, it was like I’m selling this fricking thing because every time I took it out, that engine, that engine would stall. If you’re a boat owner and had a slip, that engine would stall just as I entered the slip or was about to get close to entering the slip. And that’s where, you know, you get that wind can be against you. You have the car coming against you and you need that little bit of,
Speaker 2: Yeah, you need reverse.
Speaker 3: I didn’t even get the joy of owning it the first day. You know, because I had problems. It was a telltale sign instead of giving it back.
Speaker 2: But that’s not what we buy properties for. I mean, yeah, we make a good money, you know, three to 5%. I used to try to do 4% on the acquisition fee. And if the deal works, you know, I try to keep it at four, but you make a lot of money at the beginning. And because the market is so good, you make a lot of money at the end, but if you’re not making money during the whole man, it’s a stressful time. And I know this because I’ve had a property exactly like this, it was great at the buy. And we sold it for a great price. We made a ton of money, but we made nothing from the buy to the sell throughout the whole whole period. It was just nothing but a bunch of problems that deal with stress. Yeah. A ton of stress
Speaker 3: I’ve had. I’ve had my fair share of those as well. Anybody that’s been investing for any period of time, even if even, you know, being educated, there’s still miscellaneous things that happen. You get surprised. Nothing is exact true investors understand that investing brings risk. But those that are just starting to be a passive investor in multifamily, when things go wrong, they’re like, but you’re supposed to know everything. It’s like, it’s an, that’s why the private placement memorandum says real estate investing is risky. You could lose all some or all of your money, which very rarely happens. But the stressful times happen often. If you’re not, if you’re not buying right and you don’t get into a rhythm, it always happens at the beginning too. It’s not like, you know, you start, you started doing your deals and you started understanding the rhythm of deals and how deals should go. But it’s the beginning when you don’t know what you don’t know.
Speaker 2: Oh, peeling back. The onion is crazy. Right When you peel back the onion, you know what I mean You start to reveal things like, Oh, no way. Oh, Oh, there’s tenant base. Now we’ve got to do a tenant reposition. That was the bad one. That’s the worst thing in the world. Yeah.
Speaker 3: Well, I want to thank you for coming on to this call. I’m going to on Thursday, I’m going to be driving back up from the Cape. We’re going to give you a buzz. We can catch up. I haven’t talked to him yet.
Speaker 2: Yeah. I need to catch up with you. I wanted to talk to you about one deal that I said, I’m having a little bit of issue and I was wanting to see what your thoughts were.
Speaker 3: All right. Sounds good. So, everybody else that’s out there, you know, you always have two homeworks that is go out there and get two offers in there. Don’t have to be deals at work. Just, you know, just go through the process, go on LoopNet, going Kresge, go on those websites. And you know, talk to the brokers. That’s all you’re looking to do is establish a broker relationship and then get yourself into networking situations. These days it’s virtual meetups. And you can certainly raise funds doing virtual meetups as well. there’s a little technique to it, but you can do it. And then there’s small social situations that you can get involved in as well. So that’s it. Thanks everybody for joining us and we’ll see you next time. Next week, I already,
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