Brandon: This is the BiggerPockets podcast show 298.
Michael: Well, multifamily you control your destiny because this is NOI divided by cap rate. If I’m in an environment like today, all the stuffs are five caps, so every dollar I drive to NOI is 22 value.
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Brandon: What’s going on everyone? This is Brandon Turner, today’s host of the BiggerPockets podcast here with the man David Greene. How you doing?
David: I’m good! What’s going on with you Brandon “who the dance” Turner?
Brandon: “Who the dance Turner?” You know, not much. I got some stuff going on. I got some cool real estate stuff going on right now. I’m working on possible another mobile home park. We’ll see. I’m really digging those right now. You know, just living the dream. How about you?
David: I’m doing great! The real estate business is going as good as it’s ever gone. I’m going to have my best month ever this month.
Brandon: Nice! The agent business?
David: Yes! Being a real estate agent. I’ve learned the investment side obviously, now I’m learning how to sell real estate. Luckily for me there are so many bad real estate agents out there that if you’re just halfway good you can dominate everybody. As I’m on my way to becoming excellent, I’m going to take over the world.
Brandon: There you go! That’s awesome. That’s awesome. All right. Well, today’s show, speaking of excellent, his excellence. Today we’re talking with a guy named Michael Becker. Michael is a fantastic real estate investor who has done, like seriously sold many properties over like I think he said it has over 6,000 units that he’s bought. They’ve raised over $150 million in private lending or private and syndication model.
He later on talks about during the “Famous Four” three things that will go wrong when you’re buying multifamily. I thought that was really insightful. Just make sure you guys listen for that. He talks about a recent deal, I mean this is incredible, they made like $10 million in profit using a combination of BRRR, syndicating and selling a property like $10million on this deal in profit. Wait to hear this story. I mean this guy is super aspirational because he’s done just massive big stuff, but his advice is like, right on for just like the everyday investor whether or not you’re looking for your first deal or your 100. Anyway, before we get Michael Becker though, let’s get to today’s “quick tip”
David: “Quick tip.” Today’s quick tip is, “If you don’t like your job, do not be discouraged because there are options out there for those who are willing to be flexible, adaptable and learn new things.” A lot of people know I’m transitioning from being a police officer into being a real estate agent. What I love about it is that though you’re still working, it’s still work. I can do it from anywhere. I can be in Hawaii talking with Brandon, while my team is working on deals and I’m making decisions and communicating that via text message or voice message right, without having to be clocked in to my nine-to-five.
A lot of people are here on BiggerPockets because they’re looking for financial freedom. It depends how you define that when you know that you’ve achieved it, but it’s definitely better than being in a cubicle your whole life right. You don’t have to wait until you hit financial freedom to leave the cubicle. There are many jobs out there where this kind of serve as a halfway point where you could be making a good living, learning new skills, developing your abilities as an entrepreneur as you work towards financial freedom where you don’t have to just stay stuck in a job you hate until you get there.
Being a real estate agent is a great opportunity, if that’s what you’re looking for and you’re already passionate about real estate. I’m actually going to be writing a book on how you can make six figures in your very first year as a real estate agent. Keep track of that. Then, if this is what you’re interested in, I highly recommend you get the book The Millionaire Real Estate Agent by Gary Keller. Read through it and see if you like it. If you think it sounds really cool, consider getting your license and working on the side. If it doesn’t sound really cool, then you can check that off the list to move on to whatever the next idea might be.
Brandon: Yes, that’s really, really good. You got your license and I’ve seen you just really flourish at that because you have a good personality for it. Yes, if you’re listening to the show and you’re like, “I’m looking for something different, but I want to be involved in real estate,” you consider that, being an agent. Yes, I’m looking forward to your book. You know It might be still another what, year–ish away who knows, but whenever it comes out. I’m looking forward to it. With that let’s get today’s show sponsor.
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Brandon: All right! Big thanks to our sponsor! As always and now it’s time to get to today’s show. I will say one thing before we jump into it, if you guys have not yet left us a rating a review for today’s show, I mean for this show the BiggerPockets podcast please do so, really helps us in the rankings on iTunes so more people will discover the show. Then do me a favor and let me know that you did. Shoot me a message over on Twitter @[email protected] or on Instagram @beardybrandon and let me know that you did. You can also let @davidgreene24 know and we just want to give you a virtual high five if you do. Thank you guys so much for supporting the show. With that let’s get to the interview with Michael Becker.
Brandon: All right, Michael welcome to the BiggerPockets podcast. How you doing?
Michael: Hey, thanks for having me. I’m doing well.
Brandon: Welcome to the show. We’re going to talk a lot about multifamily today, but I hear from reading some stuff that you actually started in singles. Maybe before we get into the big stuff, how did you get into real estate in general? Like why real estate? What sparked your interest and what came before that? Walk us through that.
Michael: Yes, so before I really got into real estate my entree was being a vendor in the business. I was a longtime commercial real estate lender, so I worked for some community banks in that year in 2008. My bank got purchased by Wells Fargo. I spent the last six or so years by professional career at a very large national bank.
My impression in life all I did all day was I was a commercial real estate lender, so I lent on all the major asset classes and income producing real estate. I have background loaning in office, industrial, retail. In the last about five years of my banking career all I did was value-add multifamily lending.
That’s really kind of how I got into it. I’ll just loaning money to other people. Kind of through that process I just realized I was on the wrong side of all these deals to be quite honest with you. It was just much better be the borrower than the lender so I decided to go out and do something about it. Really, when I first started it was in 2010, I believe I bought my first piece of real estate, invest in real estate.
That’s a great time a lot of good deals out there and I was just a little nervous going into a larger partnership because I work all day. I was kind of the grim reaper for about two years from 2009 – 2010, I did a lot of problem that didn’t work-out. A lot of the issues I found are really kind of surrounded around people who had partnerships that kind of went wrong, so I wanted to do something with my own money, with my own account and I couldn’t go out buy a large apartment building. I could put 15,000, 20,000 down to buy a little rent house.
That’s kind of what I did. I ended up doing about 16 of them. I buy out of foreclosure, renovate, get tenant, their refinance, get my money back, roll over the next one. I kind of did one after another, after another. Through that process I just realized it wasn’t very scalable. I mean you know I got 16 rent houses and I live in Dallas, Texas and all my properties we’re here and in Dallas like it’s hot in the summer if you could believe that.
That’s probably my third or fourth HVAC call or something that summer I kind of got frustrated. I took a step back and it’s kind of reflected was doing that work all day and I was a very successful commercial real estate lender. Just kind of looked at my clients and I was like, all these guys are out there they’re smart, but I’m a lot more smarter than all these guys. I know more about with this and a lot of people lending money to you. That day were after taking action I wasn’t, so I decided to go out and do something about it. About a little bit over five the last five years we bought what goes on our 30th a large apartment complex so take us over 6200 units.
Michael: We raise about 150 million in capital then about six, 700 million and transaction volume of buying and selling in the last five, five and a half years.
Brandon: Wow! All right! All right. We got a lot to unpack in there. I’ve been taking notes fiercely as you’ve been talking. First thing I noticed is, first I love that quote you said, “Much better to be the borrower than the lender.” I like that. You’re looking at all these people and you’re like, “I’m lending them money, but man they’re making a killing off these real-estate deals.” Also you mentioned that you noticed a lot of partnerships were kind of at the core of things going wrong that we’re borrowing from you. Can you talk about that? What do you mean by that? What went wrong on these partnerships and what have you seen actually work then?
Michael: Yes, if you go back 15 years ago when a lot of these deals that kind of went south in 2008-2009 and really they were being put together in 03, 04, 05 that’s when a lot of these deals were put together. You just have a lot of silliness out in the marketplace back then and get really unsound lending practices and these people that just couldn’t have any experience. A lot of times I would see I know Davis in California so a lot of people from his backyard. You’d have someone that had a little single-family house this happen to appreciate. They pull out a half a million dollars and buy an apartment complex in Texas. Go from one unit to 70 units or something’s crazy like that or there’ll be little partnership.
They weren’t very well thought out. I’m in a business partnership so my business partners based out of Austin. We have two clear roles that we play and we have different, but complementary skill sets to each other. Well, a lot of people were just kind of friends and they weren’t really intentionally putting their partnerships together.
They didn’t have the proper documentation within their company agreement or their operating agreement where they laid out. Those are in play for when there’s problems. If everything’s going well that doesn’t really matter what’s in there, it’s when you have problems. They just weren’t very well thought out. That was some of the reasons on top of all the other structural reasons taking on too much data or not being well capitalized, things like that.
David: One thing that you mentioned that I really, really liked about this was that you had no intention of owning properties at first. You were just working as a commercial lender. In your desire to be really good at that business, you got exposed to other businessmen and you thought, “Ooh, they’re doing something better than me.” You were in a position to recognize, “That’s my next step. I want to go there.”
One of the things that our listeners struggle with is they haven’t got started yet and they don’t know the path to get to where they want to go. You get into this analysis paralysis where you’re thinking, “Well, I’m not where I want to be, how do I get there?” You’re kind of showing like, “I didn’t know I was going to get there either. I was just doing good at where I was and doors open.”
Can you talk a little bit about how your investing career has progressed to get to this point? Like what were the individual steps that had to be taken as you look back and you realize, “Man, this was like a turning point for me because I did this it opened doors in this way.”
Michael: Yes, so what I had was I had a little bit of money. I was a
pretty well paid employee. I did well. I got commissions and I was pretty frugal. I saved my money you put it aside. I was a good boy in that respect and I don’t have any debt. Then I still had that, I had my professional experience, so what I had was out of ability to underwrite deal, after deal, after deal as a banker and put loans on apartment complexes, as well as I got to observe all my clients. Some did better, some did worse.
Through that process it kind of got to get some best practices a lot of people did. Then as well as more than anything what I really had was I got to get networked being in a pretty major market like Dallas-Fort Worth. I mean there’s even in a major market it’s like this all over the country. There’s only a handful a broker’s probably six, seven shops to control 80, 85% of all the deal volume. They all knew who I was because I was an important vendor in the business. Like they would not get their commission until the deal closed. Deal wouldn’t close unless my loan went through so I was a pretty key talk to that.
That’s what I had. I mean I just wasn’t utilizing it to the fullest advantage. My biggest challenge was taking people’s impression of me as a vendor from the business into being a principal. I mean really all you have to do is close the deal or two and it’s like that. I mean you to kind of turn the light switch on. They take you pretty seriously in the marketplace because you know everything’s in theory until you actually go out and do it.
That’s really what I had. That’s easy for me to say because I had a lot of stuff that other people don’t have, but if you’re just a salesperson and they’re engineer and you’re trying to get into this business, everyone starts with where they start. One of the things I like to say it’s a completely unfair business is who you know, what you know, what chips you have and it’s also a team sport as well. You got to kind of put… you know if you don’t have something you got to find a partner, or a vendor, or someone that kind of bring something the table that you’re kind of lacking.
One of the things I kind of recommend people do, there’s plenty of educational platforms out there. BiggerPockets is obviously is one of the major one down there. There’s also like local mentoring clubs, Dallas-Fort Worth you have a few of them that are pretty reputable. Go to the meetups, go to these mentoring clubs, don’t get network with people that doing kind of what you’re doing.
If you have a little bit of money, but you don’t have an experience, maybe you can find a partner that’s done a deal or two, team up together. If you don’t have experience; find a good, competent, professional management company. Like come in and manage your deal for you if you need to get a loan, get a good confident mortgage broker. Then when you go in app to the real estate brokers that are selling these deals you can kind of reference like, “Hey, so and so is my management company. He’s the same guy that manages three dozen of these other similar assets on the market I’m looking to buy.”
That’s kind of like a check. It’s like a transfer credibility of the hem. If I talked to this very successful mortgage broker that finances all these deals, he’s reviewed my statement he kind of gives me a letter recommendation. That kind of solves that problem. The brokers really out there not only trying to get the highest price for their client, but they’re really trying to assess your credibility as a buyer. The more variables you take out by having these different reference points is you can kind of present to them, you’re going to increase your likelihood about you getting a deal what it’s exponentially.
Brandon: I love that. We could translate that really easily to like doing a single, “Yes, you want to buy your first single-family house or duplex or you want to buy 200 unit apartment building, is borrowing the credibility of somebody else.” I think that’s fantastic and I love that you brought that up. I mean, let’s say for example, you’re trying to work with a wholesaler right, so you meet some wholesaler at a local real estate group and you want him to bring you good deals, right? You can be like, “Hey, I want to buy a real estate deal and I was also going to go to somebody,” if they’re good they’re going to go to their existing client base, but if you’re like “Hey, yes, I’m working with this lender, I’m working with this thing. I got this property manager lined up.” They’re automatically going to be like, “Oh yeah, I know them. I worked over them before.”
I won’t call it fake, but like it’s not like that you’ve ever even worked with those people before. Just the fact that you use their name and that you’ve had conversations with them, some of them will going to take you much more seriously. I love that.
I guess do you have recommendations for like finding those people? I mean you mentioned a competent lender, a competent property manager; obviously it makes a big difference. How should somebody go about finding, and how do you go about finding the best competent people?
Michael: Yes, so property management company really when you’re willing to starting out just ask for referrals. If you have a good mortgage broker ask your mortgage broker for a property management referrals. Ask the brokers like, “Hey,” you know. What these brokers going to give you regardless is if it’s a list deal they’ll be an offering memorandum. The package on the deal and then there is going to be rent comps as well, so in this environment they’re going to kind of point out the comps are doing a little bit better than the property they’re selling. Go look at that property and say, “Oh! Who’s managing that property? That’s a similar property the broker says it’s performing better than the property I’m looking to buy, so let me talk to that management company.”
That be a good place to start. Within there you’ll find a couple management companies that manage the properties in and around that are like kind, similar been there, similar stock markets. That’s kind of really where I start. Then you know the broker can certainly give you a reference to a commercial mortgage broker. They certainly do that. Then there’s all these data services out there that certainly do it.
If you go to the networking events and the area you just talk to other people doing deals and say, “Hey, who gave you this loan?” It’s really just kind of get the boots on the ground, going out, getting networked and asking for referrals for these your two major vendors are really your banker and your management company. Then your lawyer is probably third. Those are really kind of as the three legs of the barstool that you really need you can get in place before you’re ready to be taken seriously in the marketplace.
Brandon: Yes. That makes sense. I want to go back a little bit. We kind of got an overview of your whole story. How many total units, you say 6500, is that right?
Michael: 6,200 for me.
Brandon: That’s just insane. I love that. Let’s go back to the first multifamily. You have bought 16, I think you said 16 houses…
Brandon: Then decided that this just wasn’t scalable, which I agree. I think it’s a great way to get started, but after that you’re like, “Okay, I want to scale this up.” What was the first multifamily you bought?
Michael: It’s about 120 unit apartment, a sub-market at Dallas Co. Garland Texas, this building kind of mid-70s, so I called like a C-asset in C–location, really.
Brandon: Okay and so you jumped into that one. Looking back now so your first multifamily, what did you do wrong on that one? Do you feel like everything went really well? What would you say, “Well, I learned a lot since then.”
Michael: Yes, so I think some of the capital improvements that you’ll need a little bit more money than we probably set aside on the front end, so we came in a little bit undercapitalized. We certainly could have set us out a little bit more money and maybe done a little bit more thorough is going stretching. That first couple deals we did we kind of made some mistakes along those lines where we didn’t ask… is go inspection. You walk all the vacant units, you walk the bulk of the occupied units, but you think, “Hey, these units are occupied!” Now they can’t be that bad if someone’s living in there.
That’s not always the case. I mean, some of these people are hoarders and God knows what some of the stories that we tell you about stuff we’ve seen in some of these units. Not have enough capital set aside, but fortunately we had enough to get it going. You know what, the entire time I’ve been doing this I’ve been in a phenomenal environment. I thought I called it like the Golden Age of apartment investing.
No, it can’t be better than it’s been the last five or six years cap rates have certainly compress and come down which we talked about that a little bit more and that really kind of helped support the values and the rental rates continue to grow just so much so much demand out there for rental units and the supply this isn’t keep it up. That’s really been you know is an absolute home run the first several deals we’ve done that would not be you know certainly example of that.
David: I want to jump in and ask you a controversial question that we don’t talk about very often. You’re exactly right about cap rates compressing and interest rates being really low and that makes it easier to raise money than it would be normally, right. Because you don’t have to offer much of a return and people are just desperate like, “Take my money, give me a return.” Do you feel this could be creating a bubble in the multifamily space?
Michael: You know that’s a difficult question to answer, but you know kind of my thoughts or that’s something we focused quite a bit on that there’s certainly some risk cap rates for everyone that don’t leave any investor behind. Really what a cap rate is, you buy a commercial real estate property, basically have the operating income which is like your rent and your other income like late fees, application fees, things like that. You struck that out of that all your operating expenses so like payroll to your staff, copy taxes insurance, make ready units. The difference between those two is net operating income or NOI.
Cap rates kind of how you can compare one property to another. For example, if we have a $100,000 of NOI in that operating income and we sell it on a ten cap. You basically take that NOI divided by the cap rate and would be a $1 million. If that same cap rate was five, that would be a $2 million that same NOI. What’s really been happening is the cap rate you know I’ll use my market as a good example. Now you go back say David five years ago in Dallas-Fort Worth you buy brand new Class A deal for a five cap. A B deal is about six and half cap and a C deal is somewhere between eight and eight and a half. You fast forward five years to today and A deal in Dallas-Fort Worth is about a four and a half cap. B deals about a five and the C deals about five and a half.
What used to be three, 350 basis points or 3 1/2% spread from the top to the bottom of the market is now a percentage point or hundred bits are lower and if it’s a value add some of these C deals are really even more compressed because there’s upside in the deal so people are paying even lower cap rates have that have the upside. That’s really where I’m kind of concerned a little bit that you know at the same time the cap rates would compress the interest rates up ticked up a little bit. They really haven’t run away, but they ticked up a little bit.
The arbitrage between your cap rate and your interest rate where you know first couple deals you bought on eight and a half cap or money at 5% so we had you know 3 1/2% spread and we’re levered five to one so at 80% loan. Now, all these deals are leveraged 70% because it is a debt services in there, you’re borrowing money at four and a half and you buying a deal at a five cap.
Think of these deals a little tighter the cash flows certainly a little tighter. I’m a little bit more fearful at the bottom of the market that I am the top of the market because it should be a bigger variance between the top of the market cap rate in the lower market cap rate. Right now there’s very little difference between, so I don’t think the market is properly adjusting or pricing in the risk that comes with these older buildings of all the bunch of obsolescence all the lower intent generally speaking a lower tenant profile from a credit standpoint and they just don’t have the money set aside.
That’s certainly a little bit of an issue that all the top in the market you certainly have a lot of supply and it’s all concentrated in the urban core and top-flight suburbs of all the major cities across the country so certainly some risk in there with the new supply.
Really kind of the middle of the market is really kind of where we try to focus on. I call it the B day minus. In Texas where we buy that’s kind of about 1983 to 2008, at 25 year time horizon that’s the best part of the market. We’re targeting deals that are 10% or more below market rates. The upside of the deal is also my downside hedge. Then taking out longer-term fixed rate debt will kind of mitigate some of the risk in these deals as well. I went on a tangent. I don’t know if that answered your question, but that’s my rambling thought sir.
Brandon: That’s really good. In fact, I’m going to rewind that listen to that later because that was very smart and intelligent answer. I love that. Short answer is, yes you believe it is getting dangerously high. Do you believe, I mean obviously none of us have a crystal ball; is a crash coming, is a slowdown coming, is there’s a slight back retreat coming? If you had to guess, where would you put your money on?
Michael: Yes, so I would be skeptical if I was in a coastal market that has really rapid appreciation and they’re the rented values out of whack. I think those like LA, your San Francisco if they were people cost to Hawkins and I get rent control in California across all that. That would be an issue for me. I think here about New York slowing up quite a bit. I think the tax reform act that just got passed about a year or so ago, I think that’s really kind of separating the markets from the coastal markets are losing and the flyover markets like Dallas where I live they tend to be doing a little bit better because we don’t have a state income tax.
I think if you’re an area that’s got you know… I’ll answer the question this way, so the last time that we had a recession there’s really four things I’ve kind of noticed that cause people to have some problems. One, they bought in the hood, thing is buy in a high crime area, low socioeconomic area. Those areas tend to have the biggest problems when we have a recession.
Two, they came to these deals undercapitalized. They didn’t do a good physical inspection. They didn’t set aside enough money upfront to cure all the deferred maintenance on the deal and implement their business plan. One of the examples like to use in Texas it gets hot, so we had a AC go out and summer you don’t have the money to spend a $1,000 to fix it up so you take a vacant unit, that’s if you have a vacant unit, put it on an occupied unit, now you have a non-leasable unit. It kind of snowballs with snowballs, right.
The third reason really was people had improper management. They had you know UPS is a good example is you made a loan to a guy that was a literary UPS driver in California that try to owner-managed a deal in Dallas. That didn’t end well. I can tell you that at the end of the day.
Then finally you have a low maturity at that time. When the capital markets turn off, it’s like a light switches off, right. That kind of comes on a little slowly. If you happen to have a low maturity in 2009 and your cash flowing you keep your bills paid, but your values temporarily down and got a refinance or sell it at a bad time. That’s caused some problems.
I think if you kind of take out those four things, I think no matter what happens in a cycle you’ll do well. I think the areas that our landlord and business friendly areas of population and migration with job growth, those areas will do a little bit better. Just kind of stay away from where the new supply is. Kind of maybe go in the suburb in markets versus the urban core in the areas and in places like Phoenix, Atlanta, Dallas, Salt Lake City. Some of those types of markets I think going to do well no matter what happens. I’d be a little more nervous if I was in San Francisco or LA or New York.
Brandon: Yes, yes, that makes a lot of sense actually, but you’re still buying right now. You’re under contract on something or you’re still doing this even though the market is hot. I think that speaks to like a lot of investors tell me, “well I think I’m just going to wait until the market drops and then I’ll jump in.” What do you say to those people?
Michael: Yes, so if you’ve never done it then when the market drops are you really going to have the stones to go put your money on the table when everything’s tougher. Right now you could get capital, you can raise it you get the debt and those two things will become exceptionally more hard when there’s a recession. Because the world is full of capital and it’s got to find a home somewhere, somehow, somebody who goes in real estate stock mortgage bonds whatever. If your investor’s getting crushed in the stock market they’re not going to be likely to write you a check. To go into an asset class that just declined a bunch they’re going to be fearful they going to catch a falling knife.
If you don’t have a presence in the place, I don’t think you’re really going to be able to build as good of a presence at least in some sort of scale quickly in a recession. That be the first way I’d answer that.
The other thing is you know we’re just set your deals up. Like I mentioned those four main risk factors that I kind of see. You kind of take steps to mitigate that. That you should be able to survive any way, any form you know in our markets really the people that were well capitalized that good located yields their private managed properly, they survived it well and their values are materially higher today than they were at the peak of the bubble before. They were just able to have enough maturity and management in place and capital in place to kind of survive all that.
I think that’d be kind of how I’d answer it. Just take out you know if you have a business plan for three years, get a five-year loan, or seven-year loan, or ten-year loan. Have a little bit of runway on the back end so you’re not forced to make a capitalist decision at a bad time when the marketplaces is a mess kind of hunker down operate. A way to come off back into the deal. Also, take a little bit less leverage today. That would be the other thing I would say. The lenders are pretty prudent today so whatever the next event is that lenders aren’t giving out you know crazy loans anymore so these loans are closer to 70% where two three years ago you get 80% pretty much on everything.
Brandon: Yes, I think the lenders see the right in the wall that’s something eventually will… I mean rules did a cyclical guide, everybody knows that at least in a way. Fantastic! All right!
You mentioned how right now is a little bit… I don’t know if “easier” is a right word, but like whatever you said for raising money like today you can do that because people are feeling good and the economy is doing great. I want to actually spend a little bit of time there. Because you mentioned earlier you’ve raised that you said $150 million in capital.
Michael: Yes, a little bit over.
Brandon: Wow! That’s crazy, right. Like I’ve raised like 1% of that not even, right. How did you… the very first time you raise money, was it on that first deal?
Michael: Yes, it’s really hard, right? Starting out was really hard. I was fortunate on the first several deals we did. My now business partner was working for a broker out of Beverly Hills at the time and he had access to a couple high net worth guys. I took a very small remote or a very small cut of the deal on the first several deals we did.
I just had one equity check on the first several deals. It’s kind of set me up to get some credibility at the brokers and a track record. Then I went over into the syndicated route where now we raised a $100,000 at minimum and kind of go out raise you know last year we just raised $27 1/2 million and I hired 70 people. One webinar, one 90-minute webinar we’ll get all the money in the bank in less than 30 days.
Brandon: That’s awesome.
Michael: It start there that takes a lot of effort to get there, but that’s kind of how I did it.
Brandon: All right. I want to touch on this, you mentioned the first deals you didn’t take as much of a cut. Because you realized that you needed the experience, you need the knowledge; you needed that part of things more than you needed the capital. This is something I see newbies make the mistake all the time. They can do a real estate deal they want to do it and they’re like, “No, I want to do 100%. I’m not going to split this with anybody. I don’t want to lose any money.” Everyone gets a little bit greedy at the beginning. They don’t realize that that first deal will likely never make you rich anyway. Like the whole point of the first few deals right is to get the competence to be able to do the later deals.
Michael: That’s right.
Brandon: I love that you mentioned that, even like you’re talking on big deals. Now, you mentioned high net worth individuals, what percent I don’t know percent was, but like are most of your investors typically like just Uber wealthy people, are they more like the guys got the Roth IRA with a couple hundred grand sitting in it, what do you typically target for raising money?
Michael: Yes, so when we first started out we did a few more like what I call joint ventures. Like one rich guy and then us and so they would write you know 90, 95% the check and then I write a very small percentage of the check. We did, we probably did eight, ten deals like that. Then we kind of really transition over to do more the syndicated structure.
Just your normal rich guys, that you’re really rich guy so someone that has the ability to write a 100 or $200,000 check. I think for 2017, I did like 500K ones. I think 2018, I’m going to do almost eight, 900K ones. You know we have a pretty, pretty deep. I’m probably 600 unique investors at this point somewhere along those lines.
You got to get out there, you got to get some presents doing podcast. We host the little podcasts out there as well. I go to events. I partner with other people strategically that have big lists. They’ll come in with me and we’ll kind of split up “the promote” is what we call it or carried interest in the deal. We’ll kind of split it up. Where they take a portion, I take a portion then that I can expand my list and my reach to their reach. You don’t have to do everything on your own. You just need to kind of be realistic about what you have and then try to find a solution to solve the problem that you have.
We’ve done a couple of varieties of different ways and then nothing is better than returning capital to key investors, so you turn capital will tend to give it back to you and then tell all their friends about it so then you can kind of grow your list that way organically.
David: I wanted to ask you, how much of this is now just rich people telling other rich people, “Hey, I found a good way to make more money. You get you come over invest with this guy.”
Michael: There’s a good chunk of that for sure. Really one of the last we did we just I partnered with a firm at a San Diego that has tens and tens of thousands of clients. We just kind of hit their list then race capital from. Then I don’t have that list and they did. They don’t have the deal and they don’t have the relationships with the brokers and they used to run it, which I do and this is a really good marriage that we’re able to kind of partner up. They had what I needed and I had what they needed and we were able to strike a deal and do a deal. You don’t need to have everything you seem to have access to it.
David: Once again comes back to your point you made earlier about networking and meeting people and growing through the relationships at your building. Because rather than you saying, “Man, how do I look something up on Google like, where are rich people and how do I find them?” You’re just going to the resources you already have right and you’re working them. You didn’t need to understand every step along the way before you got started. You’re like, well, who do I know that can help me move in this direction and then it worked well then word spread and then it got easier. Tell us a little bit about that. I guess that’s kind of where I’m going is, what have you learned about relationship building as far as how it helps you in a business sense?
Michael: Yes, so the first thing I like to say is no one’s ever going to come to my office or my home and give me money or a deal, right. You got to go out and get it. You got to get you need money; you need to go to places where rich guys are. Preferably, I think you guys host several events, you host meet-up, some of those would be a good example of a place to go. You go to a meet-up and these people are interested in real estate and there’ll be some people who have no money and will be used some handful people that room just trying to network and meet sponsors a deal so they can kind of co-invest with or be a private lender or you know whatever they’re looking to do.
Go to events. That’s a good way that real estate events, networking events, educational events those are good ways to go out and start networking people with people. If you become a thought leader in an area and you go out and when I attend to go to events I’ll tend to be a presenter or speaker in an event. Then I’m naturally a little bit shy so I don’t you know it’s not a natural thing for me to go on network, but if I find if I’m on the stage then when I get offstage I get to stand in the corner and people will come up to me. I don’t have to be the person initiating the conversation.
I’ve gotten myself out of my comfort zone to go presents or do a podcast like that and people will seek me out. You can be like a magnet, attract the money instead of pushing at it. Then on the deals, just go into the events where the brokers go. The brokers don’t go to those meet-up events. Brokers go in apartments to the national multi-housing council event every January. That’s where every major broker in town is going to be. I need to go to that event then get a network. They’ll go to that like for a good example Marcus and Millichap is a major broker shop all over the country. They have an annual multifamily event in Dallas-Fort Worth is coming up next month and do it all on the major cities, so you know who’s going to be there is all the brokers of Marcus and Millichap will going to be there that sell apartments.
I spend $300, I’ll buy a ticket. I go to the event and then I get to talk to everybody in there recap about their event. I can get in front of them and see them. Those are the things that I do. I just need to be intentional and specific about your actions and go to places where you’re likely to set yourself up for success. I’m trying to pitch all my loser friends from high school that they should give me money to invest. That’s not a good use of my time.
David: You’re so smart though. Your method is actually called “Brandoning,” where you just go to a room and you stand against the wall and it helps if you’re six foot five because everybody can’t help but notice you, right.
Brandon: Six foot five and a half, and a half don’t forget that half David Greene.
David: Even easier right. You just wait for someone to come talk to you because they see you standing over there. You don’t have to go hunt them down. You go to where the people are and then you wait for them to come to you. It’s very similar to fishing, right. Like fishing you don’t sit at home and wait for fish to come swim up to you and cross the landing up into you’re alive well. You go to where fish are and then you throw out a hook with bait that they want and you wait for them to bite it, right. I think it works for almost any business no matter who you are.
If you’re a plumber trying to grow your plumber business that will work is you go to where you’re likely to find people that own homes. Then you find something appealing about yourself so that they’re going to like you and then you become their plumber and they call you when they need something. That was fantastic advice for everybody who’s out there frustrated not knowing what to do.
Step one, find where the people are that you want to connect with. Step two, make yourself some form of bait or more attractive so that they’re going to want to talk to you when you’re there. If you can’t be six foot five and a half to just find something else about yourself… you’ll get noticed.
Michael: You know the other thing is it’s all relative too, right. If I’m in a room and I’ve done one real estate deal. I bought one rent house, I did one flip. I’m in a room when everyone else is done zero, I’m 100% more experienced than they are. It’s all relative. I mean that’s really it. You don’t need to be intimidated and you just got to put yourself out there. That’s really it.
Brandon: Yes, that’s true. Very good. All right, so for somebody who’s listening to this and saying, I really want to raise money for a deal. Whether it’s a large multifamily or maybe something smaller, but they don’t have those relationships necessarily yet with wealthy people. Like what is like the first step they should do? Would they go to a conference, would you recommend that? Let’s go to a meet-up, I don’t know. What is it?
Michael: Yes, so you need to have a base level education. You need to be able to speak the jargon. You need to speak somewhat intelligently about it. If you don’t have that, stop what you’re doing, get a base level education. Then once you have that, then like I said be intentional, go to events where you meet-ups and to where there people who are interested investing in real estate would be. Start building your list out. Start getting coffee meetings, calls, build out like you know, it’s easy for me now because we were raised capital mechanically.
When I first started doing it we just have a bunch of telephone calls. I’ll shoot you a package of email. I’d be on the phone and the first couple deals better raise a million eight for a deal, one of the first deals I did. I had to get you know $100,000 minimum so I had to get like 13, 14 people I think was what it took, but I had to do like 30 calls to get 14 people to give me their money they messed on the deal. That’s horribly inefficient.
Now what we’ll do is we’ll do a webinar on a Tuesday night in the evening and we will record it. That’s good to people get in 10 live. In 10 live there let people have a recording sufficient way to raise money. What it also does is now I have the deal package for the deal we put together the PPM and the business plan, as well as a webinar of recording me presenting the deal.
When I meet you knew David I can say, “Hey, David here’s a sample of a deal I did,” and then I say, “Hey, you know let’s have a 10-minute call. You watch this. If there’s any questions you have, you call me back later,” but the forms and the presentation will be very similar on every deal I do. That kind of shortcuts it. Then when I have a live deal it’s like, they’re already comfortable with me, they already come for my presentation. Now, do they want the deal, but I don’t want the deal that’s the best it really essentially it.
You need to do that on a smaller scale. Give them some information, send them an article something relevant about multifamily or self-storage or whatever you’re doing particularly. Then start just dripping on these people get a list and decide. Get in front of them and try to be somewhat of a thought leader and whatever subject matter that you’re trying to send like capital for.
David: You brought up a very interesting point we don’t hear about very often. Brandon I want to get your opinion on this too, because this is kind of like right up your alley.
You mentioned using a webinar for the purpose of pitching your thing which is easier to do one webinar to 50 people than it is to make 50 phone calls and say the same thing over and over. I’m just getting to this in my own business as a real estate agent where I’m getting the same phone calls about the same stuff and having the same conversation and starting to be like, “Man, I’m spending a lot of time talking to people about getting their license, or how to step up their game as a real estate agent whereas I could just make a recording of it and send it to them or do webinars.”
Can you tell me a little bit both of you about what you found makes a good webinar, what people need to know if you want to start doing this to be successful? What skills they should build up, what software to use stuff like that? We’ll start with you.
Michael: You know we used to use GoToWebinar when we pitch deals and that’s really it. Then like I said if you could get some content out there you go to webinar, start a podcast, start a blog something along those lines. Those are just kind of not in-your-face ways to present contact out there. Like you guys, I mean you’re at what… this is episode 298 I think is what you guys told me? They have 297 other examples they can listen to you guys talk. Over that time either people promote or expose yourself as a fraud or promote yourself as confidants, so that I can listen to 297 hours you guys talking neither I feel comfortable with you or I don’t.
You know it’s hard to fake it over that many hours. That’s kind of what I would do so GoToWebinar, podcast, blog. Start putting content down on a regular basis and be consistent and kind of drip on more than being in their face. That’s kind of the method I chose to do.
Brandon: Yes, I love that. Yes, I mean I have a studio that we do a webinar every week on BiggerPockets. We’re like teaching different real estate topics like how to buy your multi… like this week I’m doing on multifamily. Well, I guess it depends on what week this comes out this episode, but anyway I’m doing on multifamily, I’ve done single-family, right. I kind of look at like there’s like five or six things I love about webinars and this applies across the board.
I mean if you’re an insurance agent I think webinars can be powerful. If you’re a mortgage broker, if you’re a lender, if you’re raising money, if you’re a real estate agent, whatever I just love webinars because there’s like five or six things like…
First all they’re scalable like you just said right you can get multiple people you don’t have to give the same conversation over and over. There’s like the celebrity factor and this is like hard to quantify right, but if when you’re on a webinar teaching you instantly are seen as sort of a celebrity, even if you’re not at all. You’re the one teaching it, you’re like kind of like I don’t know, you go to a wedding right, like the bride and groom are like the celebrities at that event everyone wants go talk to them, right.
When you’re teaching a webinar you’re the celebrity in that space. Also it establishes credibility anytime you’re teaching people especially teaching in front of people establish that credibility. It also build relationships at scale. I thought about scalable in terms of like growing your thing, but it like people, how many people come up to like podcast hosts or webinar hosts and say, “I feel like I know you.” Like people listen to this show right now how many of you guys think that you feel like you know me or Michael or David now because you’ve heard us talking before, right. Like it builds relationships and that’s huge for being able to raise money. Then you’re also just giving good information.
Then lastly you’re collecting contact information, right. When you use like GoToWebinar you’re getting their email address and now you can email them again later in the future and on future deals. Yes, I’m a huge believer in webinars, like they’re one of the most powerful like marketing tactics in the entire world. Yes, people look into webinars they’re good stuff.
David: One thing I heard people say, real quick Brandon before you do this on is that, I don’t remember what the breakdown was, but it was something like you learn 40% of what you read, 50% of what you hear, 60% of what you see and 90% of what you teach. When you have to teach somebody, it exposes the gaps in your own knowledge very, very quickly, right. It’s also a very powerful motivator to learn more because you don’t want to look stupid and this leave people when you don’t know something.
Putting yourself out there and being like, I’m going to be the thought leader, like you said Michael, I’m going to be the meet-up organizer, I’m going to be the webinar presenter, forces you to step up your own game and your own knowledge and learn more and that will make you a higher producing person in general. I think I mean it’s a little bit risky because you’re putting yourself out there, but that’s how you grow so much faster. Okay, what were you going to say Brandon?
Brandon: Well, I was going to say the other cool thing about webinars is that you put your slide deck together first. Like you probably put together a pitch deck, right. Michael you’re like, right?
Brandon: People often think that when you’re speaking, you just like standing up to make it things off up top of your head. You’re like you have a slide and it’s in front of you and you’re just basically explaining what you already put together so you know it because you put it together, right.
Do you have any tips for people who are trying to raise money Michael on maybe a webinar or maybe in just one-on-one with somebody? Anything that you found that works better or worse in those kind of conversations?
Michael: Yes, so some of the early mistakes that I did I could tend to get a little wordy or I’ll go down the rabbit hole of the deal and get into minutiae where honestly these people that invest with us a lot of people first and foremost so they don’t trust you and like you as a person. They’re not going to give you the money no matter what deal it is.
Brandon: Yes, yes.
Michael: Right? That’s first and foremost. Having certain level of trust and then get them to like you enough to get on the webinar and listen to you. It’s kind of first and foremost. Then once you get into the deal, they want to know you, okay, so how much is it going to take to get into this deal? When am I getting my money back and how much along the way? How much and when am I getting my money back?
You need to start with that. Then you can then get into, “how am I going to do all this?” I’m buying this deal on the rent comp support 10% or 20% higher rents down the street, but if you don’t hook them on the front of this deal with; this is how much I need, this is when it’s going to close, how much money getting it back to the timing of that money? You can go for an hour and then the people like, I don’t even understand the basics of the deal. That’s some of the mistakes I made on the front end that now in the first five minutes you know all that in my deal and then I get into the granular detail. Some people that’s all they need to know if they trust me they’re like, “All right, I’m going to sign off and I’m going to send my check in.” That’s really it.
Brandon: Yes, I’m a huge believer that like, when you talk about people raising money not necessarily lenders. Lenders go deep into stuff, but when you raising money from people I would guess, I don’t maybe you have a different number, but I would guess 90% of people don’t even look at the numbers that closely. They just trust you because they’ve had a friend that trusted you or whatever because…
I’ve said this before, at the end of the day they’re not calling up tenant in 905 A saying, “Hey, how much is your rent? I want to double-check that and make sure that Michael here has the rent number right here.” At the end of the day it all comes down do they trust you or not because you could just be making up all your numbers on the stuff as well. You could be doctoring PDFs of the tax returns. Like you could do anything you wanted in today’s world. Do they trust you or not and like you said, keep it simple upfront especially I love that advice. Like this is what the deal is, it’s what we’re hoping to get you.
Michael: Yes, yes, the other thing I would say too is this when you raising capital one of the questions I knew syndicator always asked me is like, “how do you structure your deal?” There’s a many ways to do it. You make it simple or complicated I would err on the side of simple. Just have like a basic maybe there’s a small upfront be like an acquisition fee or something along the line so keep that relatively small. Have any even easy split you know typically a deals we do is like an 80/20 split whereas sponsor gets 20, the investors get 80. Then there’s like an asset management fee kind of something on an ongoing basis so our revenue so we can kind of keep our life’s on paper overhead staff things like that.
Keep it simple that other people will pay like a pref with the waterfalls with us graduates up on IRR. I have to explain what the hell does that means anyone anyways. That I know what it means and it gets complicated, so simple is better. Especially if you’re raising capital from just individual high net with people if thousand, hundred thousand that time. You get down the weeds I mean that stuff that guys with MBAs that I certainly don’t have. That’s what they want to see. That’s not what you’re just your typical salesman, doctor, engineer, what want to see.
Brandon: Well, I remember a lot of syndicators I know I mean like, the guys they have the waterfall IRR with that all that fancy stuff and so I thought I need to do that. I was raising money for a mobile home park deal I was doing. I’m sitting there trying… I mean for days I was putting together these really fancy spreadsheets that were really like waterfall stuff and because that’s what I had seen done. Then I call it my buddy Andrew Cushman who’s been on the show a few times right.
Michael: I met Andrew alone, yes.
Brandon: Okay, yes. Andrew is fantastic. He’s like, “Brandon what are you doing? Just keep it simple.” He’s like just do like, yes I think we did ended up I was like a 70/30 like flat. I was like, “I can do that?” He’s like, “Yes.” He’s like, when you start confusing people like; I’m not raising money from a private equity firm here. They’re not going to look up my numbers that deeply. If I can use them they’re going to say, “No.” When I keep it simple people like, “Oh yes, that sounds good,” and that change my life, that conversation.
Michael: Confused mind doesn’t buy, right.
Brandon: There you go, yes.
Michael: You got people… go forward, yes.
David: Exactly. You’re exactly right about that. When people ask me, all the time like, “how do I recognize if this syndicator is good or not?” I get that question people call me all the time. I don’t mind that at all. The thing I tell them, the number-one thing that matters to me is more than like reading the PMM and the prospectus is that what’s their track record? How many times have they done this and how well have they done it before, right?
Like it’s very hard if you’ve done it if you’ve hit it out of the park 19 times or 20 and all of a sudden you’re going to make some huge mistake that you couldn’t have stopped me, but if it’s your first deal or your second deal there’s a very good chance that you don’t even know what you don’t know yet. You could have the best intentions and you just get sideswiped by something you didn’t see coming.
That just goes back to show that though I’m getting those deals under your belt if you have to give away a big part of it just to get it done, is valuable because it’s moving you along that path where your track record is the number one most important thing when it comes to raising money. More than some incredibly complicated waterfall that some MBA from Harvard wrote up for you that you spent $80,000 to get made and that’s like you don’t even understand it yourself so how are you going to explain it to your investors.
Michael: That’s right, yes.
Brandon: Definitely! All right, so we are about ready to shift over the next segment of our show where we want to learn about one of your deals in particular. This is “the deep dive.”
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Brandon: All right, let’s get to the deal “deep dive.” This is the part of the show where we dive deep into one particular deal of yours. We want to know a whole lot of stuff. What is the deal? What do you want to tell us about and then we’ll dive in deep on it.
Michael: Yes, so I’ll talk about the sixth property I purchase. We sold it about a couple of months back so that’s the recent transaction just went full cycle on. The deal with the time we purchased it was called Regional Place Apartments which is probably one of the worst names of an apartment complex I’ve ever heard in my entire life.
David: That is hilarious.
Michael: Yes, it was.
David: You said Reasonable Place Apartment?
Michael: No, no, Regional Place.
David: Regional Place.
Michael: That would have been worse.
David: Yes, do you have any Regional Place? Like, it does exist in a Region.
Michael: It’s a place and a region. That’s not when we bought it.
David: They agreed name department building, that’s what it is.
Michael: Yes, so it was a 218 unit apartment complex at suburban Dallas. Some what it called grapevine, it was built in the mid-70s. We purchased it for $10.9 million; it was about $50,000 a unit. We owned it for four years. About two years into it we were able to put a… we had a Fannie Mae loan on it. Fannie Mae loans allowed what’s called supplemental financing bases on the second link cash-out note.
They will return all our money. About we put 2.7 million down. About halfway through, we returned all the money plus a little bit about two years into it. Then when we sold it we sold it for $23.5 million a couple months ago. I put over $10 million on 1031 accommodator. We had all our money out. We still have 10 million bucks then. We bought a brand new deal with the were from 1976 to 2015 vintage that we just closed on 2 weeks after we sold it. That’s the best deal we did,
Brandon: Wow! Okay, I want to unpack that here, so I just make sure I got every number here right. First time you sold it was a 218 unit in Dallas, 1970s thing, How did you find it? How you found it, with just broker?
Michael: Yes. All these deals predominantly we’ve done one or two maybe where there’s no broker involved. This was an off-market deal so broker brought it to me. He was bidding on A he was competing with some other brokers to try to win the listing. He didn’t think he was going to win it so the broker’s playbook and one of the tips so I’ll give somebody if you’re talking to brokers are giving brokers opinions of value or BOVs. I mean if they’re not going to win it isn’t it doesn’t hurt for them to try to slam it off market offerings. We steal an L-O-I-N. The owner accepted it and you know we kind of went forward so we easily bought the deal off market.
Brandon: All right. You said 10.9 million is what you bought it for. Which was like 50K a unit?
Brandon: That’s awesome. Then negotiation wise, did you have any interesting negotiation things in that? Anything that went wrong or right?
Michael: Yes, so this is a deal at you know Texas we tend to get pretty large hail storm since this property had a large hail storm about a year or so before we agreed to buy it. That is like a $2 billion hailstorm. It was crazy. All the roofs and all the AC units were on the rue. I got all new roofs, all new AC units. They had only done about 80% of the work, so I had to finish that off. Then we got in this deal. This deal was a dump if I ever saw one. It was not in a really good area. Like the guy for example, was putting in used carpet when he was turning over unit. That’s about the grossest thing I’ve ever heard of in a multifamily space. It was a bunch of deferred maintenance.
We got into the deal. Back of those days you can potentially retrade the deal. You tend to get a price adjustment. We attempted to do it. We got some early dismissed by the seller. We ended up buying the deal at the price anyways even though we kind of misled us on a blind item or two. There’s some additional deferred maintenance we didn’t quite account for when we originally budgeting it, but it was such a deal we knew what was a deal was below market rents and there was how the easiest obvious management upside so we went forward with it anyways.
Brandon: That’s an interesting thing about all real estate. We don’t only talk about this strategy very much, but if you have a deal under contract no matter what it is big or small and you find stuff that you don’t like during the inspection period or during your due diligence, you can ask for a reduction right, but like the more they can say is no, right? Then you just go buy it anyway if you want to. There’s really no major downside right.
Michael: The downside risk if you’re just doing if you’re signing deal up and try to re-trade it what you’re going to risk is reputation especially in a market. You know if there’s something like legitimate and then they or they mislead you on something or there was you had no way of knowing that the roofs had hail on it because you don’t get a ladder in a three-story building or something.
Those are legitimate reasons, but if you still go the parking lots messed-up. Well, you got a eye, you know the parking lots messed up. Just that the biggest risk is reputation. We don’t tend to try to do that, but this deal we have some legitimate reasons and he just denied us anyways and we decided to buy it.
Brandon: Yes. Well, I think that’s cool. I mean, I don’t play that game either where we try to get under contract and then try to bully them later, but like a lot of times stuff does come up in due diligence so you shouldn’t be a necessary afraid to ask for those things. For example I actually I should have done it here. I bought this property here in Hawaii, right. Like and I got an inspection, but I decide not to get to a pool inspection. Then I got here and I found out the entire… all the pool stuff was bad. I mean I had I got the inspection then I would have come back to them and then, “Hey, you know we inspected all the pool,” you know, whatever. I don’t know, I’m probably like 10 grand to fixing the pool now. I could have negotiated that earlier had I done the inspection. Anyway.
All right, so you negotiate it. How did you… actually before I go there, what were rents like when you bought it and then when you sold it again? I’m curious like what did you guys be able to push what did you push rents to?
Michael: I try to remember exactly, but I think on average we were somewhere around $650 in rents give or take across the board. Then when we sold it I think we’re north of $1,000 in rents. That’s you know we like literally doubled our net operating income when we owned it. Like, literally doubled. This deal had an apartment, especially older apartment so utilities are a big deal. This particular deal we had upside in the rental race there where I think at the time we figured they’re about 20 or 25% below the market comps.
In addition to that their property all these older properties are master meter typically for water and sewer and gases that boilers. In apartments you implement what’s called “rubs” or R-U-B-S; ratio, utility, billing, system. Basically some fancy jargon for where you take the water bill and then you allocate it and then you build a percentage of it back to each of the residents on the property.
We had both upside and increase to the rents, as well as upside in increasing the bill box, plus adding admin fees and some other stuff they as customarily weren’t charging for that that we thought we all the competitive properties are doing that we could charge for. Those are the two ways. On top of that they had some high expenses like their the gas bill was out of control because I had a really old boiler so we budget to replace the boiler, did a water conservation program so we lower the water bill on the way and a couple other expense savings so we can go ahead.
Brandon: That’s awesome. Is there RUBS for a second on that? The idea of shifting over the responsibility of the water to the tenant is one of my favorite things in the world on it when I buy a property. Like if I can do that in like it takes a lot of the variables out of the equation, right. Because the water bill like could be 800 one month and 200 the next month because you know somebody left their shower running for a month because tenants will do that sometimes.
I mean I’ve literally gone into units before and their bathtub faucet whatever was broken and it was running at full strength completely. I’d ask them like, “How long has it been doing this?” They’re like, “Since we moved in,” or so you know something like that. I’m like, well clearly hadn’t been since they moved in, but like at some point the faucet broke and it just runs and they didn’t want anybody in their units they didn’t say anything. I don’t know how much how many gallons they wasted, but anyway.
When you shift that over the 10 and now they’re going to be like, “Well, I don’t want to pay for that water bill, so I’m going to get that fixed right away,” but how do you know whether or not you can implement that? Like you always do it?
Michael: Yes, I should do that their competitor properties that I’m cuff in mind to, “did they do it?” If it’s acceptable in the marketplace and you should be able to implement it. Like kind properties as similar areas do it, you could do it. There’s not raucous. It’s a good thing about multifamily you might sound intimidating, but it’s a really dumb simple business you know. Just kind of follow the leader, very simple principles. It’s not always easy to do it, but it’s really, really simple at the end of the day.
David: You said something else I really like too. You said we replaced the boilers because they were inefficient and the gas bill is high. I think it’s important to notice that you can get an ROI on your money in more ways than just acquiring a new property, right. Like you spent some money up front to fix something that someone who’s cheaper might have thought, “I’m not fixing that thing it still runs,” right.
I bet if you looked at it within a certain period of time you would have recovered all that money and then you were making pure profit after that point. A lot of times when you dump money into your properties you get a return in the form of lower water bill, lower gas bill, better rent and you make the property worth more so that you’re benefiting on the back end when you go to sell it.
Michael: The thing that is most critical in it was like a light bulb went off. When I what I kind of like always understood this, but when I always do this, but when I understood it there’s like a light bulb that went off. The difference between single-family and multifamily is you know single-family your property’s worth what the neighboring properties are worth. The CMA- comparative market analysis. You got to buy it cheap enough, have enough money to renovate it so it’s then worth what the neighboring property is worth.
While multifamily you control your destiny because this is NOI divided by cap rate. If I can increase you know, if I’m in an environment like today all this stuff’s a five cap. Every dollar I drive to NOI is 22 value. I may repeat that, every dollar to NOI is 22 value, so if they cost me $5 to get 20 in value it’s a freaking no-brainer right. The moment you realize and understand that, it’s like, “why would I ever do a single-family house again?” Honestly.
Brandon: Let’s talk about funding. How did you fund this thing you said and be run investors in a Fannie Mae something, let’s walk through that.
Michael: Yes, so we had I think three or four investors. We had a couple of high net worth guys put a little larger checks in the deal. Then we put some money in the deal. I think we put about ten or 12% of capital in and we had three or four guys kind of further for the rest of it. A little larger checks on this deal. We needed about $2.7 million. We paid I think 10.968 to be exact for the deal. Ran about a $1 million renovation budget because there’s a bunch of work that needs to be done there.
All in all about 12 million or so went into the deal at about $2.7 billion loan so that Delta was dying and some change I think in a loan, so we got a ten year fixed rate loan through Fannie Mae. Fannie Mae and Freddie Mac are not the only two largest lenders on the single–family space, they are also two largest lenders on the multifamily space.
The other thing is really kind of life changing when I want to kind of realize that is these Fannie Mae loans if you get a floating or variable rates and fixed rates they’re typically say ten year term with a 30-year amortization so you have a longer amortization. Nowadays you get multiple years of… on the front end. Three, four, five years of… today. Back at the time we got one, but the markets a little bit better today from the on that standpoint.
Then they’re all non-recourse. What that means is we have to sign what’s commonly referred to as “bad boy” carve out. What that means is you sign a thing that you’re not going to commit a “bad boy” out. It’s basically fraud or misrepresentation. The example I like to use, in Texas we get hail so if I have it like an insurance on hailstorm, I get an insurance check and I don’t tell a lender about it.
That’s a “bad boy” acts. Like a bring in a guarantee. If I just ruin the property and I’m just incompetent, I just can’t make the deal work and the deal fails or Dallas turns into Detroit and everyone moves out of the city. I can’t rent my units, you can just give the keys back and there’s no personal recourse to you as a borrower. That’s powerful and in that respect that it’s reduces the risk.
What’s even more powerful and is that it doesn’t kind of cloud your balance sheet with contingent liabilities. What I mean by that is you know we have a certain amount of net worth and my partner’s do as well. If I have all these you know why I don’t know what I have three, 400 million in debt or something like that right now out there. If I had 300 million in contingent liabilities, a banker is going to look at my net worth wise you know it’s grown quite a bit. It’s nothing compared to that kind of debt so they might don’t be as apt to give me more loans, but all these loans in our recourse I could do more and more and more deals.
Basically I’m just limited to amount of money I can raise my deals I can find. That’s really my only limitation out there now. In a moment you kind of get to that realization that’s the other real power that you have in multifamily space over the single-family space.
Brandon: That makes sense. All right. Next question. What did you do with it? You said something about refinancing it or pulling out capital and what is that?
Michael: Yes, so our basic business plan was we went through we’ve cured all the deferred maintenance and then we set aside some money for some upgrades. We had upgraded the pool area, we added a playground, we upgraded the office signage package things like that. Then we went to the unit’s boiling appliances, light fixtures, plumbing fixtures, painted it, resurfaced the countertops kind of your basic Hartman turnover upgrade.
Through those efforts to curing the deferred maintenance, through improving the management style and then adding some amenities a better product, we’re able to get those higher rents from the tenants, by extension we increase the value. Along the way about two years into it we went to a lender and said, “Hey, we took the value from 11 million dollars as our 16 or 17,” or whatever was that time and they gave us almost a $3 million loan in the interim which is a supplemental loans.
That’s another unique advantage of a Fannie Mae and Freddie Mac loans, they’re assumable as well. If I own a mortgage and your older property have a mortgage, I can sell it to you Brandon and you can come take over my mortgage, assume my mortgage and buy the property. It’s kind of put the difference down. It’s assumable, as well as it allow supplemental financing. It allow you to re-leverage a loan to 70 or 75% if I come in and increase they’re not offering… and by extension of value.
It’s a really flexible product. There’s a lot of good things. We put a supplemental loan on it, we owned it for a little bit longer and then a couple years ago or a couple months ago earlier this year a gentleman, a broker who sold us a deal and a guy we sold three or four deals to they came to us and started giving us unsolicited offers to buy the property from us because if we’ve already transacted on a few other deals and then asks when can I have brought a few other people and ran like a little mini kind of marketing process, got a number that works. It was too much money to say no to so we took it and moved on to bigger and better pastures out there.
David: All right. What lessons did you learn from this specific transaction?
Michael: You know making sure that you have your capital set aside up front. I think this deal we got a little scary on the front end of the deal where we the 10th profile that was in place that would accept a unit that had used carpet for example and all this deferred maintenance you know it was a little deeper dive. I kind of describe these value-adding multifamily deals kind of like a checkmark, you kind of go down and then you go up.
I think our dip was a little deeper David than what I really thought it would be. Now we were kind of thinking we can hold about 90% occupancy and we get down to low 80s. That kind of stressed cash flow until we were able to kind of turn over all these units, but it takes about a year, year-and-a-half kind to go unit by unit, month by month… these units over. Then once we kind of got through it, it was a little bit better. The deeper, the crappier of the property, the deeper that’s going to be. Our subsequent deals we’ve been kind of underwritten a little deeper dip when we see a little bit more distress within the property.
David: You know that’s the first time we’ve actually heard anyone or at least I’ve heard anyone describe the process as like that checkmark, but that’s exactly what you see. I even see it in as much smaller degree in the single-family space where I tell people; in my first year of owning a property I don’t expect it to cash flow at all. Because there’s always things I did not get fixed during the initial rehab that pop-up during that first year that kill your cash flow. It doesn’t mean you did something wrong, it means your expectations were wrong.
Like I just tell myself the first year it’s not going to make me any money. I’m going to be dumping money into this leak, or that thing that broke, or this dryer rat I didn’t catch. Then when you get it all fixed rent starts to go up and it turns around. I think with single-family it’s almost though like you can change direction very quick because you’re out there with like a jet ski, right. Like, I don’t like the direction it’s going, “Boom!” I could turn it around fast.
With multifamily you’re out there Michael trying to turn around an aircraft carrier. Like it just going to take a year and a half to get you to get that whole thing spun around, but it’s immensely powerful once it is. The wealth you created in this one deal to me it’s just amazing.
Michael: Yes. It is life-changing is only what it was. You know one of the things I like to say about apartments it’s kind of like adult daycare in a lot of ways which you don’t have that with single-family. If all these residents that close proximity to each other and then if you have a drug dealer in unit 202 is going to affect all the units in and around that deal. Those are some of the things that you have on the multifamily side, you have the city as well, you don’t have as much of that on a single-family side. They don’t really come mess with you on the single-family side too much.
On the apartment side I’ll do like an annual inspection and give you you correction notices and all these things you have to manage the city on top of all the tenants and all those things. You own real estate, but really you also own an operating business it’s kind of wrapped in real estate.
Brandon: There you go. I love it! All right! Well, that is the end of the deal deep dive. Now we’re going to shift gears here and head over to the world-famous “Fire Round.”
It’s time for the “Fire Round!”
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Brandon: All right! Let’s get to the “Fire Round.” These questions come direct out of the BiggerPockets forums. We’re going to fire them right at you Michael. First one, “We’re in the process of purchasing our first multi-family. It’s four buildings a 24 unit, a 16 to 5 unit and 8 unit. Wondering what detail of inspection is common for this? I mean costs add up really quickly. Like do I have to check the gas line, like the sewer line? Should I have an inspector walk through every unit?” What would you suggest?
Michael: There’s two components when you’re doing a multi-family site inspection. There’s a physical inspection when there was a financial audit as well. On the physical side, yes we tend to have our management company and/or there’s a vendor locally that kind of the engineer that do these reports for you, but yes I would walk literally every unit if you can because you like I said even the occupied units you’d be shocked with some of the conditions that some people are willing to accepted that units.
Michael: If you don’t properly budget for it, but yes get a vendor out check the roof, parking lot, AC- kind of do a basic AC survey, get a plumber out maybe put a camera down the sewer lines. Check out all the major components because if you miss something make you talk $20,000 on a smaller deal that can swing quite a bit on a bigger deal with surrounding here, but with smaller deals that can certainly add up. Certainly do that, as well as you need to make sure you do good lease fall audit, so you’re making your offer based off the financial information that the seller provides you.
He or she gives you a rent roll, so you need to go check lease by lease, the tenant name, start date, end date, lease amount, security deposits. Make sure they match the files that are on hand, as well as we always try to get copies of bank statements and utility bills so we can at least match the numbers that get me on the water sewer bill, match what the water sewer bills actually are and their deposits somewhat are in line with the revenue they produce.
I don’t care as much about what their insurance is or what that payroll number is because I’m going to operate it the way I’m operates my budget. That doesn’t impact me as much, but the water bills are kind of consistent from ownership to ownership.
David: What do you say to people who worry like this? I don’t want to spend money inspecting a property. Do I really have to? How do you correct that mindset?
Michael: You should stop buying real estate really. That’s such a short-sighted thought to have. You know were talking… what… I don’t know how many numbers you just rattled off. You talking 40-ish you now are spinning a couple million dollars most likely unless it’s in the hood and Detroit or something like that. It’s a couple million dollar transaction so you’re not going to spend $5,000 in pursuit cost. That’s foolish. You’re stepping over dollars to get dimes.
Brandon: All right.
David: That’s a great way… Okay.
David: Next question. This is a good one. “How do I do my first multifamily syndication with no money down? Should I even try?”
Michael: This is not in my experience to do this right. This is not a no-money–down business. I mean not in scale. You’re not going to get someone to give you 100 unit deal to do it. Maybe you could have someone sell you a six, seven, eight unit kind of a mom-and-pop. That might work there, but you need to get as high paying job as you can, sacrifice some lifestyle, save some money, maybe do start in a single-family space wholesale, flip, accumulate some capital and then once you get 50,000, 100,000 then you can start putting that together.
That’s one of the things that I’ve kind of really been the most interesting things is you know one… two things really. One, how do you scale it, how do you manage 800K ones I have to do? You know I’m a dumb banker I didn’t know how to have employees and do all that kind of stuff is systematize your business. Then the other thing is as you go up in this business when you put a house in a contract maybe you put 2,000, 3,000, 5,000 earnest money when you buy a $30 million apartment complex. We’ve had a million dollars hard on a deal out of the gate, right.
How do you scale your pursuit cost? You don’t jump into that out of the gate. You got to have some confidence though you got to know what you’re doing before you want to put your cojones out there like that to make sure you’re going to get the deal done. You know having to think through as you go from ten unit to 50 unit to 100 unit. The price of poker goes up on the pursuit cost, on the earnest money, on the lender fees, on your lawyer fees, all those things that if the deal blows up that’s on you as a sponsor.
Making sure you have a plan and you think that through as you scale your business stuff. You don’t have it, find a partner that does.
David: I like that. It’s kind of like saying, “How do I play poker without having to pay the blinds, right?”
David: Like I want to be in the game, but I don’t want to have to risk any money or spend anything that you might due diligence. It’s just you shouldn’t be doing it at all. Like Brandon and I talk all the time because everybody has that questions, “How do I invest in real estate with no money?” You can be in deals. I do it all the time with none of my own money ends up in the deal, or sometimes I pull out more than what I even put in when I use the “BRRR” method, but I took money to get into the position where I could get the money back out, right. You have to have some form of money.
I love, love, love, your answer. I mean that should be like the thing that we take from this episode and put on Instagram, “Of the path to success is get a good job, make good money, get good at what you’re doing, save your money. Now that money has some value to you because it’s tied to hours and sacrifice you made, so you don’t want to go out there and blow it. Invest it, learn what you’re doing to get it back and then bring other people in once you’ve got kind of understand the system, figured out.” That was an amazing answer.
Michael: Well, thank you.
Brandon: All right. Now, Celyn, I’m going to be looking to purchase three multifamily properties from a seller liquidating their portfolio. One’s a 75 unit, one’s a 50 unit, one’s a 50 unit, so it’s a total 175. I’ll be purchasing through an LLC. I’m going to get bank financing, so should I try to get one loan, one commercial loan in all three or should I get three separate loans?
Michael: Yes, so I would first want to know how close in proximity the deals are to each other, so if their contiguous you know, if they’re contiguous to each other you can legitimately run them as one apartment building. It might make sense to get one loan. I don’t like the idea of getting one loan if you do get one loan make sure they have what’s called a partial release provision within there their loan documents. That if you want to go sell the one of the 50 unit deals off you don’t want to pay your entire mortgage off. You have the ability to partially pay down that note.
I think it makes more sense to get three separate mortgages that way. If they’re close to proximity, but not contiguous you can potentially share some of the staff, or maybe have one of the places have an office and they leased the other two buildings out of a larger building or someone along those lines, but I like the idea having three separate loans or lease having partial lease provisions within the mortgage.
Brandon: All right. I like it. Last question of the day. Well, of the “Fire Round” anyway.
David: All right. Last question. “Should I start with multifamily or should I start with single femme?”
Michael: You know I don’t think there’s a right or wrong answer. It just kind of depends on the amount of resources you have. I had enough money. I had a background. With the benefit of hindsight, I didn’t necessarily need the single-family space. I could have jumped into the multifamily space. With the single-family space really got me to do is it really got me in the position where I learned how to do a deal, go full cycle, give me some level of confidence that I could project manage on a very small scale. Then I was able to kind of implement some systems and build and repeat.
I almost personally like single-family house more than if you’re buying like a triplex or fourplex. I think that’s a little bit better in my personal opinion than buying a really small multifamily. If you can’t buy a 20, 30 unit deal I might suggest you go under the single-family.
Now, one of the things one of my mentors told me a long time ago and this is extremely true; and a smaller the property, the more true this statement is. Is when you own multifamily deals you kind of own them in dog years. You know so every year of ownership feels like you’ve owned it for seven. The smaller that property is the more true that statement is. In a multifamily the real power of it is just a scale… economies of scale. If you can’t have a large enough property that produces enough revenue that you can afford to have a full time on-site, maintenance staff, a full time on-site management staff, you got to manage it off-site it becomes really challenging.
I think the goal that I would try to put out there. You know you want to get in the business and get to a point, you can buy large enough properties just for full-time staff on the actual asset till you get there everything else is real efficient. You know people get in this business they either love it or they hate it. One of the two things going to happen, you buy a 50 unit deal, “Man, I love this. I can’t wait to sell it, scale up.” Like some buyer or, “Man, I hate this thing. This sucks. We sell it and never do it again.”
You know, do you own these things in dog years they’ve kind of use that little saying, you kind of the smaller that the property is more true that statement is. You’re going to get in it, want to scale up, or you going to want to get out; one of the two.
David: What do you recommend is a good like breakeven number for how big of units people should be looking for so that it’s worth their time and that…
Michael: It’s really depending on how much revenue produces and every area has difference. I think in the state of California if you have 16 units or more you have to have on-site residents. I think if you need to California there’s certainly not X’s, but generally speaking in our markets if we win the right about area one full-time office personal, one full-time maintenance person for about every 100 units we have. You know I think about 60, 65 units in our mortgage should justify a full-time manager, maintenance. It won’t be as efficient as you have 35 less units and kind of well the optimal size would be, so the closer you can get to that 100 unit the better.
With that said I mean you know people make money on these small deals. People start with what they have. When you get in this business you start now just got to be realistic. They can account of what you have. What things you could bring to the table? How do you find other people to kind of fill in the gaps that you have? There’s nothing wrong with a single-family house or an eighthplex. Whatever you can make work, but if you want it to be in this business you want to be a professional, you want to scale, you need to do these larger deals or you just can’t scale your business.
Brandon: Well said, well said. All right! Well, let’s head over to the last segment of the show which we lovingly call our…
Brandon: Let’s get to the “Famous Four.” Number one, these are the same four questions we ask every guest, every week and now we’re going to throw you Michael. Number one, what’s your favorite real estate-related book?
Michael: I like the two Ken McElroy books. The ABC’s of Real Estate Investing and the Advanced Real Estate Investing Guide. Ken’s my buddy. I’m not the biggest reader, but I actually read those books after I did a few deals, so I was very heartened when I saw Ken’s business models very similar the way we operate.
Brandon: Cool. Yes, those are fantastic books. All right.
David: All right. What is your favorite business book?
Michael: One of the books I read… one of the guys I kind of look up to is Sam Zell. Sam Zell came out with a book about a year ago, Am I Being Too Subtle. I really like that book. He’s a master of scale, so I’ve really got a few nuggets out of that on how to kind of grow your business to scale it up.
Brandon: Cool, I not heard of that one.
David: Wow! Congrats on finding a book that Brandon hasn’t already read.
Brandon: What is it worth like?
Michael: $7 billion, so you might want to check that one.
Brandon: I’ll check that one out.
David: All right. What about hobbies? What are your hobbies?
Michael: I like to travel, so I’m going to go to Ireland from my turn 40 in a few days. On my 40th birthday will go over to Ireland. I’m looking forward to that.
Brandon: I said I did Ireland a couple years ago. Make sure you do they, if you can do the Aran Islands it’s the worst sea ride over there. Like the boat is the worst thing ever, but it’s one of the coolest things I’ve ever seen in my entire life is over on the Aran Islands, so I recommend it.
David: My comment was much less practical. I was going to say, if we have you on again you need to do the whole thing in Irish accent. While you’re over there.
Michael: I’ll work on it.
Brandon: Yes. All right. Final question from me. What do you believe sets apart successful real estate investors from those who give up, fail, or never get started?
Michael: I think it’s there’s a lot of determination and perseverance you need to have in this business. Like I said what I like about real estate, what I like about single-family, what I like about multifamily it’s a really dumb business. Is really, really simple. It’s not always easy, so you’re going to have some challenges. You’re going to have to deal with some adversity the city, the tenant issue. You know one of the things I’ve learned through this business, you own enough large apartment buildings. You know three things are going to happen. There’s going to be a fire, your tenants are going to sue you. People will die on your properties, right. If I don’t want to deal with stuff like that you know then I should go back to be a banker again. Then I don’t have to deal with my 401 (k) and not having the lifestyle I want to have and being able to go to Ireland for ten days on my own whenever the hell I want to.
There’s always a trade-off with everything in life, but having some perseverance, being able to deal with some challenges as you come and then you find out once you kind of overcome it you know it’s kind of like being, I’ll prepare myself to like a professional basketball player or a football player. When you first get out of college and go into the pros everything seems really, really fast because you go on from the college level to the pro level.
It’s kind of similar in real estate. Now, that’s saying I’m constantly surprised by things I see all the time, but you know more and more I’ve either seen this exact scenario or something similar to it. I don’t need it. I don’t have to reinvent the wheel every time something comes at me. I’ve already kind of seen it I know what the right answer is and I just do it.
David: I think that is such a profound analogy that you used. Thank you for using analogy on the show.
Michael: Not to my house, not my wife. “I hope you speak great about me there.”
David: The problem is newbies like everyone is new at something. Most of the time if you’re listening to a podcast you’re in the educational like phase of the cycle and you’re new, right. Like people that are really good at this aren’t usually seeking education, so people that are likely to listen to a podcast like this are in that, “Man, I just got into the pros and this is fast. Like these guys are strong. That game moves so quickly. I miss half a step and “boom!” I’m beat, right. Like these are guys that are really good at what they do,” and they start to feel like, “It will always be this way and I’m never going to catch up and this just sucks, right.”
You’re saying, “Hey, no. You will adapt to it. You will adjust. There’s only so many things that could go wrong and it’s not rocket science. It’s not easy, but it’s very simple. If you stick with it you’ll start to figure it out and everything in life kind of works that way. That’s why you know we always say like persistence is so important because if you just stay playing the game long enough your brain will adapt, your body will adapt, you’ll improve in the areas where you were weak and it will get easier. Then it’s fun. Then you can go to Ireland for 10 days.
When I first became a real that agent, “Oh my God, It was so frustrating.” Everything was new. I didn’t know anything like talking to people, calming people that down that were upset. It was all a different skill set that I didn’t have yet. Then I just got back from hoping in Hawaii with Brandon for like 12 days and it was as smooth as things could ever be. I came back with three listing appointments set-up and we closed on about four houses while I was there. My team had things running and it wasn’t hard at all, but man if you’d have told me that two years ago I wouldn’t have believed you because this thing is too hard.
Michael: Yes. The other thing too that all kind of leave you guys on as one of the things that I think is a great advantage about what I do is completely unfair business, right. It’s who you know, what you know, what chips you could trade, what relationships, what deals you’ve done. When you’re starting out that really sucks because you’re on the wrong side of that more than you’re on the right side of that.
Once you get into this, you know a good example is, two years ago one of the top brokers in town, his family and my family went on a Disney Cruise, right. My 40th birthday parties in two weeks and you know seven or eight of the top apartment brokers in Dallas-Fort Worth are going to be in my birthday party, right. It’s a completely unfair business you know. We’re all buddies and we’re friends. Then when they get that deal they’re not going to call you. That’s never done. They’re going to call me and if I pass and it’ll start going down the line.
You just got to get yourself in a position. You got to be a person of integrity. Do what you say you’re going to do. Follow through, close these deals in a track record and you’ll get yourself on the right side of that unfairness.
Brandon: Drops the mic. I love it.
David: That’s “boom!”
Brandon: “Boom!” All right dude, this is fantastic. I won’t rob your last question David you want to ask it?
David: Yes, like it wouldn’t bother me if you did, but thank you Brandon for passing that.
Brandon: I’m a nice guy.
David: Michael, where can people find out more about you?
Michael: Brilliant! There’s two ways you can find information about me. We have a podcast I host of, one of my partners my background is banking so it’s called The Old Capital Real Estate Investing Podcast as, Old Capital Real Estate Investing Podcasts or OldCapitalPodcast.com. You can find it anywhere you hearing me today you can likely find in iTunes, Stitchers, or the other ways simply the way we do business is through my company spiadvisory. You just go to our company’s website which is www.spiadvisory.com. There’s a contact us form. I’m always happy to have a 10 or 15-minute telephone call people I meet off of a podcast.
Brandon: All right. Very cool. All right. Well, thank you Michael this has been fantastic. I’ve learned a ton and my mind is racing right now, so this is really good for me and hopefully our audience as well, so thank you. We’ll see you around.
Michael: Thank you guys for having me. Appreciate it.
Brandon: All right! That was our show with Michael Becker. Fantastic! That guy is just like on-fire with his multifamily. That’s amazing.
David: Yes, he’s so good that he just describes it in a way that makes it so simple. That you realize like, “Man, I could be doing this too,” and that’s what I love. Like you know someone’s good at what they do when they describe it in a way that makes it sound simple as opposed to complicated.
Brandon: Yes, that’s true. I love the idea too. I’m glad he’s covered the webinar thing because nobody really talks about that on the show of like using webinars to raise money or you know like why those are so powerful. Yes, super cool! All right! Well, guys I hope you enjoyed this interview as well. Make sure you guys stick around for next week. We got a really fun interview next week with a TV celebrity. You’ll find out more next week on the podcast, but stay tuned for that.
The one after that actually, Mr. Josh Dorkin may be coming back and kicking David Green out the show for episode number 300. You didn’t hear that here. I don’t know. I don’t know what you’re talking about. What? What?
David: I sit on the throne of the King and he is welcome to come take back the Iron Throne anytime he likes.
Brandon: All right. Well, guys thank you so much. David, thank you. Rosie, thank you for being so happy and cheerful. Rosie’s in the background hanging out with me on the lanai here. With that guys, let’s get out of here.
For BiggerPockets.com I’m Brandon and Dave you want to take us out?
David: See you guys later!
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