Talking Real Estate With The Cashflow Cowboy! | Ep. 1

Hey everybody, this is Brandon Wells and you're listening to the Wells Way Podcast. I'm here for our first episode with Justin Orziniak, the Cashflow Cowboy himself. Let's get into it. All right, what's up Justin, man? Thanks for coming on the first episode of the Wells Way Podcast, dude.

I'm super excited to be here. I've been watching you put together this studio, it's freaking awesome. Thank you, thank you. And this podcast is going to be absolutely awesome as well, add some tremendous value because I don't know if everyone really knows your awesome story, but I'm glad you had me on. I'll share a little bit about mine, but dude, we connected what, 6 months ago? And it's like we're in Indianapolis, what was it, a meetup in town? For anyone who's not going to meetups, go to meetups. That's like the best way to get connected. But I don't know, I think we just kind of hit it off. Now we're in the MIH Mastermind together. I mean, Indianapolis, I mean, I've moved, so we don't get to see each other as much. Yeah, I'm in Michigan now, but it was just, you know, we really hit it off and You know, I'm glad you have me on here and I'm excited to like, you know, rip it up a little bit here and add some value to your listeners.

Let's go. Yeah, no, I'm gonna try to learn more about the Cashflow Cowboy himself, kind of, uh, more about your background, how you got started, um, kind of where you're at and what you're doing now.

Yeah, like why am I wearing this ridiculous cowboy hat around, um, and branding myself as the Cashflow Cowboy? So yeah, my— I actually had a pretty interesting I think I like to be like, what's a good— like, you ever see that Friends episode where it's like Ross and Chandler, they have the couch and they're like, pivot. Oh yeah, pivot, pivot. That is like exactly how I feel like I got into the real estate world because I started off, I mean, I was an engineer. That's what moved me to Indianapolis. I mean, if you want to take it one pivot back from there, I was, I was a crappy kid. So I actually got in some legal trouble, and I remember being there like overnight, having to do my time, if you want to say, overnight for being an idiot. And I remember being like, this isn't me, let's pivot. So I pivoted, I went and I got an engineering degree, graduated top of my class, took me to Indianapolis where we met. And I pivoted from there because I realized this wasn't what I wanted to do for the next 40 40, 50 years of my life, right? So I pivoted into being a realtor. And so I was like, I want to be an investor long term, but I don't know anything. I don't really have any income because I'm about to quit my job, right? So I was like, how can I do this? How can I, uh, bridge the gap? So I did one year as like a realtor working with other investors in town. And so I learned about investments while also making commission money. So I was good. I replaced the engineering income, which was wild as well because I tried so hard for that degree, and then flush it down the toilet and replace the income. Didn't need it, right?

Right.

Yeah. And then got, you know, self-educated. I think it was meeting the right people, right? The mastermind, uh, the meetups and stuff like that, where then I was like, all right, let's, let's do this. Like, let's take that next step, which was becoming a full-time investor, multifamily real estate investor. And it started off maybe a little slow, right? I mean, I, we had our first deal, 10-unit property under contract probably about 4 or 5 months after starting that transition. And then in the last 2 months, man, you've seen, you've seen it. It's been nuts. I mean, I'm down here looking at some deal after deal. I'm down here looking at some property right now that we walked it together. What was that, last Thursday? We're already under— yeah, St. Patrick's Day. We're walking properties while everyone's downtown hogging up the, you know, the streets down there. And, uh, we sent out an offer, we got that one accepted. So right now I have 4 deals all at once. We got one closing tomorrow and then probably another 3 with legitimate offers out there right now. And one I'm, I'm pretty confident we'll have an update here in the next week. And it, it went from one building to—

that's huge, man, because like everyone that I talked to, they're all complaining about deal flow, lack of, lack thereof. And here you are coming out the gate just this year alone with potentially 4 deals, 5 deals under contract in the first quarter alone. Um, what are you doing a little bit differently than everybody else to get all those, uh, deals kind of across your table?

Yeah, well, we are doing direct-to-seller. That's like kind of all these— I think all of them have been off-market in one way or another, whether it's directly the seller or like, uh, uh, the one we just submitted an offer on last night would have been a pocket listing from a broker. But still off-market, right?

Of course.

And you have— it almost feels like with our, our market being so hot, or at least it has been, um, where deals are harder to find on market, you kind of have to go down that route, that avenue of trying to get them before there's a ton of competition for them. Because there's a lot of people that will overpay for properties right now.

Yeah, at this point. So are you doing— you're doing direct-to-seller, which is awesome. Are you doing more mailers? Are you creating lists?

Oh my goodness, we have an awesome system. I wish I would— I will soon have it out for the public where I can legitimately like help people out who are trying to do direct-to-seller. Unfortunately, because I have all these deals, it's like, well, that's kind of the project that's been kind of pushed out of the way a little bit. But what we do is it's pretty much you get a good list of skip-traced properties, right? If you don't know what skip trace is, it's pretty much You find the, you get a property address and you find the owner's name, you find some owner's phone numbers. Not all of them are good, most of them are bad. And maybe some emails, maybe a mailing address or something like that. And so you can send mailers, we don't. What we actually do is I have a full-time acquisition specialist who takes that lead and he'll call every single number. And after he calls and leaves a voicemail, he'll leave a text message saying, "Hey, we just tried to reach you, we're interested." and well, there's two routes you can go. One, if you live within 30 minutes, say that you're interested in connecting with them and see if there's any synergies, right? Like you may be on single family. I don't know if you've ever done any single family stuff.

Flips, but not really from an investment side.

Yeah. Like you can just send them offers sometimes and they'll accept, right? There'll be so much distress. But if you're going after like a 20, 30, 40-unit apartment building, it's gonna be tough to just catch them without building a relationship. It's very important to build a relationship, 'cause they're a little bit more sophisticated. So what we like to do is if we're within, or we have someone on our team within like 30 minutes to an hour, maybe an hour of this property, we'll call them for the intention of not to buy their property, but to simply meet for coffee, meet for lunch, something, something to build a relationship. That will ultimately lead into, "Hey, we want to buy your property," right? And even if it means you just get, you know, you go to coffee and nothing comes of it, they decide they don't want to sell, and maybe you get like a good property manager recommendation like Brandon Wells or something like that, or you get a good vendor recommendation, or you learn a little bit more about the market that you're investing in, well, it's well worth it, right? So that's what we like to do. We found the most success calling and texting and trying to connect with them, meet them in person, something and then keep them in the CRM and follow up. That's important, right? A lot of people drop the ball on that.

I mean, I feel like follow-up is one of those things that just gets dropped in all facets of business.

Yep.

So like one thing that stands out for us as a property management company is if we do our cop shopping, like where we're pretending like we're looking for an apartment, we don't ever get follow-up. So we already know inherently that, hey, if we just call these people back we're already starting out on a much better footing than what all of our comp firms are.

So you're saying when you comp shop, like you secret shop another apartment building, right? To try to be like, hey, we're a tenant.

I'm a renter.

Yeah, I'm a renter looking for a room, and they're not following up with you to try to convert you to a waitlist or even to a renter? I mean, they're dropping the ball?

Most of the time we don't get a follow-up at all. And like here, like we have a full like system of you have to make so many contact points within so many hours, so many days.

So you're tracking that?

Yeah, yeah, we track all that 100% because it's one of the things that our competitors aren't doing that and we are. We're already 100%, not 100%, but 35 to 40% more likely to even get that lead just because we're the ones following up.

Yeah.

And what's cool is like we actually go through online process, but also we do the call-in process. We want to know what our competitors, or even what our potential acquisition, the current staff there, what their strengths are and what their weaknesses are.

No way. So what part, what, at what point in your business did you decide to put a little bit more effort on KPIs? Because that's probably what we're lacking big time on our direct-to-seller. Like our guys just churn, or my acquisition specialist just churning, burning. But at the end of the day, it's like, I know he's doing well because we're getting deals, but I don't really— I can't quantify how well he's doing, right?

Yeah, no, I'd always heard, you know, I've been in the multifamily industry for, gosh, for about 13 years now. For the first, first 8, I was on site and I heard KPIs. We didn't really track them. We were just so in the weeds, you know, filling up units, getting renovations done. But when I got promoted to be a regional manager at a pretty prestigious company here in town, um, and I had 6 assets under that I was overseeing, 6 different staffs. I kind of knew at that point I needed to have a tracking system in place to be able to keep everything in track. And since then, it just kind of carried over into the Brandon Wells way kind of model. We track everything.

Yeah, I think we've talked about like what your company provides, and I'm always like Is this like a normal amount of expertise? You're like, definitely not. Like, no, no, we're gonna make sure you're taken care of. And honestly, I think the tracking is huge where I kind of alluded to it earlier, right? The new software and stuff that I'm trying to make for the public to be able to do direct-to-selling and stuff like that. A huge component of that is analytics, right? KPIs. Because I know right now in my business, I'm lacking in You know, if someone else wants to pick up a new direct seller, I mean, they're going to have the same problems I am. So might as well try to solve that for them up front.

Well, it sounds like you've solved another problem is like people who invest in multifamily specifically, they're not a success by themselves. So you have that person who loves underwriting, who loves all that data analysis. Maybe they don't love going out, meeting investors and raising money. So you found people that can do that kind of stuff on the back in while you're out, you know, wrangling in.

Yeah, exactly, checking on the cattle. Yeah, yeah, that's so funny you mentioned that. I really wanted to talk to you about this because I wanted your thoughts on it. So, um, right now I feel like it's, it's absolute momentum building right now with the business, and, you know, things are going really well. The last year though was kind of building that foundation, and a lot of the foundation was team members, the right team members, that are helping you, the right partners. And one of the big things that I learned from joining these mastermind events, and even going to meetups and stuff, is that if you try to do this real estate business alone, it's gonna take you a lot longer and it's gonna be a lot harder. And instead, like, I just was like, what am I good at, right? Finding deals. That's what I'm good at. Like, I'm a young guy. I was 26 when I got started, right? So I was like, I'm a young guy, I don't have any money, right? But I got hustle. And I have the ability to communicate with potentially owners and stuff and see, and other investors, see if they wanna sell their property. So that was like what I identified as my superpower. But then along the way I picked up, what are the other superpowers out there? One of the big ones for me that I don't love doing, but I've started doing a little more is underwriting, right? Usually if you can, if you're an analytical person, you can, you're a freak in the Excel sheets, right? You can do underwriting.

Yeah.

And do really well. And that's the value you can add without any capital. The third one would be capital, whether it's someone that you just have deep pockets that you can fund these deals, or you have the ability to raise capital if it's like a syndication or something. That's a huge value. And then what I was just— what I was actually gonna ask you if you feel the same way here, because we walked those 8 units last week, right? I remember walking through them as the deal finder and going to you, it's like, so what do you think, how much do we need renovation, right? It's like, what do we— what do you think rent comps are and stuff like that? And I realized I don't necessarily know that because I don't have that experience. And I feel like someone with construction background or property management background that can walk a unit or walk a property and go, "Yeah, that'll be $5,000 there. We can do about $20,000 for a new roof or paint it, it'll be $6,000 or so." Whatever it may be, just dive it in and know those top of your head. That's invaluable and something that you can bring to any partnership and make sure that people are buying good assets in their renovation budget. That's correct. Because you probably see it all the time. I do, yeah.

It's one of those things to where it definitely comes with the experience. You know, we've probably— I've probably been a part of over 250 unit renovations in my career. Um, yeah, I mean, in the last 90 days alone, my company has overseen 68.

And then just unit turns? Yeah, no, full unit, full renovations. Oh my goodness.

And we'll have those done and all rented within that same time frame. So I mean, we've done it. Yeah, but I wouldn't say that's necessarily a superpower. It's, it's just something that I've gained with experience. And like, we're actually looking to bring on like a capital project manager, um, who, who that could be their superpower. So for us, you know, it's about having people on the right seat of the bus, and I want to make sure that I have the best people in every city. And although we can walk those units and we can tell you this car is probably going to be $5,000 for that. I want someone to be able to create that spreadsheet and create a budget that you can then give to your bank and be held to. Yeah, right. So when we're walking them now, it's like, hey, based off my experience, that's going to be $5,000. But then do— when we go through due diligence, we'll confirm and tighten all that up. I want to be able to have that person from, from the jump.

Yeah. So it's funny you mentioned that. So I was visiting San Francisco— what was that? A week ago, 2 weeks ago at this point, and it was with, uh, one of the investors in our mastermind group puts these on, these events where he kind of pools all his investors together. And this time it was out the West Coast, they had done the East Coast last year. And so one of the guys that's, that runs SharpLine Equity, one of the hosts of this, what his name's Chris Jackson, right? And I remember talking to him about like this teamwork and having the right people on the team. And he's been in it for 10 years, right? He, he knows exactly what he needs to do to close deals, and they closed a ton of deals last year. It was like 7, and I think Marco raised like $30 million or something crazy like that, right? Attracted $30 million, excuse me. But one of the cool things about it is someone that they've added to their team was actually another investor in their market who does, he does development, right? So he understands what it costs to develop. So he also understands when things were built correctly and when things were built not correctly. And so they'll have properties under contract and they'll fly this guy out to the properties and he'll walk it and he'll be like, "No, we don't wanna buy this." Right? And they'll lose, you know, $20 grand earnest money or $30 grand earnest money. And, you know, the guy feels bad 'cause he's like, "Oh, did I just kill the deal for you?" He's like, Chris is like, "No, you saved us. You saved us so much money." This is the cost of doing business, right? Especially on these bigger deals. But it's really nice to have someone in there up front that can go, No, this is not— we're not doing this. This was poorly done. Move on to the next one. So I think having someone that can eyeball that just up front, maybe the numbers aren't perfect, but someone like that on a team is invaluable. I mean, it's great, especially— you probably see it, like, I want to hear your take on this. Do you ever get investors that come to you with like, here's our business plan, I need you to renovate, you know, I need you to do a new kitchen and stuff, but we got $2,000 budgeted for for the whole kitchen per unit, make it happen.

Yeah, no, that happens more times than I'd like to admit. But it's one of those things where I feel like in the last 3, 4 years, investing in multifamily has become this popular thing to do. So people who were just doing flips or had a duplex or triplex are now starting to come buy these 10s, 15s, 50-unit plus, and they're bringing over this single-family mentality over to the multifamily. Not realizing they're two completely separate avenues of investing in real estate. So I feel like in the last year we've spent more time mentoring than managing their assets because we kind of have to protect them from themselves almost, where they'll be like, hey, we want to do this because we heard it on a podcast or some guru said, yeah, we should do this. And we're like, oh no, no, like, if you want to do this here's what's going to happen. And we've been in the game for so long that we can, we can project, hey, if you want to do this, A, B, and C is going to happen and you don't want this. Yeah. So an alternative would be this is what we would recommend. And I think a lot of our clients would honestly say that we are a take charge type operator versus we're more proactive than reactive. And what I mean by that is when you have a property management company and a client brings you their pro forma and you confirm all the numbers and then you close, the easiest thing for a property manager to do is manage that pro forma. Like, that's the easiest thing they can do. Not us. Not us. We'll have a client bring us a pro forma where their rents are underwritten at $615. Let's try to get 875.

So you're actually pushing?

Oh yeah, yeah. So you could talk to several of our clients and they would say, hey, yeah, we underwrote 875, he's getting 1050. And I kind of have to explain that thought process to them because it's— they're so— a lot of clients are so interested on physical occupancy. How many bodies do I have indoors, right? And that drives me nuts because I would rather get an extra $200 a month in rent it, have that unit be— even make it an extra 7, 8 days, but still get that higher— and make more overall because that vacancy loss gets usually absorbed in a higher rent in the first month. And then it's straight positive cash flow every single month. And so sometimes we have to have pretty stern conversations because they're like, you know, our occupancy, we want to get people in the door. And we're like, hey, trust us, Give us a week.

Yep.

And then when we do it and they're like, wow, okay, that's so funny.

We see this all the time. Pretty much every single direct-to-seller property that we have under contract right now has been historically 100% occupied for the last 10 years of ownership. And you look at that and you go, so you just had under-market rents for the last 10 years of ownership. Did you enjoy that?

Yeah, no, that's one of those things is like there's property management and there's good property management. Yeah. And a good property management or a good operator, in my opinion, isn't okay with just the status quo of like, if we're running your asset, the likelihood of you ever hitting 100% occupied is not very high. Okay. And if we do, it's gonna be for a short amount of time because we're gonna bump those rents.

Yeah, everyone's getting bumped.

We're gonna bump up those rents. Well, that's why our year-over-year income growth on a lot of our assets is insane. That's why a lot of assets are 3, 5-year plans on refi or sell. It's happening year, year and a half for our clients.

I feel like occupancy rate or vacancy rate, whatever you call it, is like, is in itself a very telling KPI. It's like if you're 100% occupied, it means there's something wrong because you, you're not trying to push the envelope. And once you push the envelope, you realize that, oh, we could have got an extra— even if it's an extra $50 across 10 units or something, that's, that's a ton of money.

That's it. If you do that, what, $50 a unit times 10 units off of a 6% cap rate?

Exactly. So the cap rate in there, crazy amount of value that you just added.

And that's how One thing, we— I had lunch with a client the other day and he said, what we like about you is you look at it like we do. Um, like you look at it from every decision that you guys make on the asset, it's from the investor point of view. So you can, you can tell us how much money, how much value you created off of the decision that you make because that's how you look at it.

Yeah, and that's because you know how to invest in real estate. And which is so funny because you know You'll see this a lot with like the, maybe in the smaller stuff, you'll see it with the brokers, right? You start talking to them, you're like, "Hey, I wanna buy this smaller investment property," whatever. And they've never done investments. They've never owned an investment property before and stuff. But they're pitching it like they, all these numbers and stuff like that. You're like, "How can I lean on you if you don't have my perspective?" Right? Then at that point, it's like your perspective is probably just to get get the commission check.

Yeah.

Which is fine. I mean, you gotta make sure you take care of your people that are helping you find deals with those commission checks. But it's nice to have a prop— even a property manager, a property manager or a broker, or just other people on your team that have other investments themselves. So you can say, oh, they've been through it. They know what's going on here. I can trust that a little bit more.

No, that's a really good point. And it's one of those things to where you wanna take care of the people that take care of you. But you also want to trust the source of the information. Like, we all, we all know how accurate seller pro formas are. Yeah, yeah, right.

20% expense ratio, right?

And so there are some in our market that do a really good job, and it's their job to paint the asset in the best, best light for their clients. And I get that. But you have to understand the full operational cycle of an asset when you invest in that. And if you don't and you just go off of some fancy colored offering memorandum and you make your decision based off that, you're in for a world of hurt.

Yeah, actually there's someone in, uh, in a different group or whatever that I was a part of that she literally was reaching out to me, was like, hey, I, I just sold my asset 1031 into this new one. And she had no business doing this because she didn't— she took all the pro formas that were given And the, the between— she, she leaned on the lender and the broker to have her best interest. Like, she was like, oh, they won't steer me wrong, which in a sense is true, but also it's like they're, they're just trying to close a loan, they're trying to close a deal, right, and get paid. So there is a level of you need to be educated enough to like understand how the whole process works, right? And you can, you know, you can protect yourself and then, you know, find realtors and brokers and stuff like that that'll that'll help you out, property managers that'll help you out, right? You mentioned it, the business plan, right? If I give you a pro forma and it's, hey, I want rents to go up to $850 and all your other assets in that area are at $875 or $900, I want you to push them to $875 or $900 without me having to ask. And it sounds like that's something you guys do.

So with that being said, as you're like looking at these deals and you're evaluating your teams, How much thought process do you have before you start, go out and pull these deals? Like, how much, how much time did you spend building your investment criteria before you paid someone to do your skip tracing? You brought someone on to call all these owners to really build your deal flow?

Yeah, I mean, it's really easy to waste money in this industry, right? I can be throwing money at marketing of assets that we won't even we don't even wanna buy, right? So we actually, it's so funny you mention that. Previously, we had a market in Indiana that we were really going after aggressively. And the source of where we got our list was, I can't remember, it was either one of the online sources or maybe the county or something like that. But it had a ton, it was like 50% or more of like conversion houses, right? 'Cause we didn't have good data, we didn't know the unit count on these. So it was outside of our criteria, right? We're usually like 10 to 100 units, you know, BC class type stuff. And we're sitting here and my guy is wasting his time calling these conversion houses where you look at the address and we're just like, no, this is crud, like moving on, moving on. And so it's funny because we threw— we wasted so much money off.

Like time.

Yeah, time as well wasted, right? And then, and then so we were like, oh, should we wholesale these and stuff like that? And then it's It's more of like staying in lane, right? Now we're getting outside of our lane and we do the bigger stuff. We don't do the smaller stuff. So I'm just like, okay, moving on. Let's just cut our losses. Let's reset. Let's get a fresh list. And that is important. What you wanna make sure is that what you're targeting is what you want. And if you don't know what you want, this is very important too when you talk to brokers or other investors and stuff like that. Know your investment criteria, right? Once we get the, know what unit count you're looking for, know what type of real estate you want, commercial, multifamily, industrial, office, single family, whatever it may be. For us, we like the BC class just 'cause we like to be able to force some appreciation, add some value with renovations maybe. I mean, a lot of what we're getting is actually, you meant operational, right?

Yeah.

We take a self-managing property manager or a cruddy one and we put in someone that's good that we trust third party and next thing you know the income shoots up. Significantly, and we have a great asset. And then lastly, we kind of just don't like war zones. Some people— I know you've done some war zone conversions, you've made your investors millions— but, uh, we personally, uh, stay away from being the slumlord in the D-class assets just because it's, it's a lot of headaches, and I don't think I'm prepared for that level of headache.

Yeah, so you could definitely invest in those areas as long as you understand what your strategy is to kind of be that, the start of that change in that area. So like, if you are looking at a C-minus asset— uh, you know, can you change a tenant profile? Can you create a gated community? Can you do exterior lighting? Can you do events with your residents or like build a small community? And if you don't have the experience with that Definitely stay away from those C-minus assets. Because there's— it's more than just putting bodies in the unit and then collecting rent. There's a whole organic plan that goes into those. And you're right, we have made our clients a lot of money in the last year and a half by taking over C-minus assets and then doing major renovations. But those renovations aren't just the units. It's to the exterior security lighting. Is taking a property that's not gated, creating it gated, and then going to your local hospital and say, "Hey, look, you're right down the road. We just did all these renovations. Let's partner up on a referral program." So now their employees live 10 minutes away from work and they're paying half of what they would if they were living straight downtown.

So that's how you go in and change the entire— whole strategy.

Yeah, it's a whole strategy that you— if you don't have the experience, stay away from that. Run away from C-minus assets.

Got it, got it. I have a question for you, Mr. Pro— I know your company does a lot more than property management. Well, I actually want to ask you a little bit more than that, but since you do have such great experience, one, like, where do you see rents and stuff going right now with everything going on? We're a hot market. It seems like coming out of COVID rents were skyrocketing. Month over month. Do you foresee that continuing? Should we be underwriting for 3, 4, 5% growth? Or should we kind of be looking at a slowdown period?

No, so, you know, I just got back from the Best Ever Conference out in Colorado, which was phenomenal, by the way. And I hadn't expected to go into that and hearing people be a little bit more like, cocoshes. But some of the best economic minds of our industry were like, you know, buy, buy, buy, rinse, rinse, rinse. And that contradicted with my natural— I'm naturally more conservative. Once you have demand that is far outreaching the supply, then you can charge more. I see that happening for another 2, 3 years.

Wow.

You know, I really, really do. And, you know, I think Depending on who you talk to, I'm of the mindset that I do think we were at the top of the cycle pre-COVID, and I'm of the mindset that COVID kind of reset that cycle a little bit. So, you know, I, I think that we have another 2 to 3 years of aggressive rent growth, but we have another 4 to 5 of income growth that we can kind of count on. Now, do you talk to your people, understand what you're getting into? But as the operator that I am, that's what we're seeing. I mean, we're—

that's promising. I'm glad you see it.

It is. And we're seeing it across all our asset classes, our C-minus asset classes.

Yeah.

But also our A asset classes where, you know, we're seeing some renewal rates are 50%.

Wow.

No, we, we've raised in the last 90 days our average renewal rates on our $75. That's Our highest is $425.

Wow. So you said something, well, a couple things. One that I really want to highlight, and you said you went to a conference, you talked with people that have high-level apartment— they probably have tons of apartment units, they, they probably have an incredible pulse on the economy at a high level, right? And you listen to their opinions on where they think the, the economy going, rent growth, like that. That's exactly That's exactly how you need to be, right? You gotta leverage people in your network that have that experience and you take their opinions, right? I'm not gonna go ask my next-door neighbor that hasn't done an investment property before and ask him, "Hey, what do you think about the market? You think it's hot? You think it's cold? Where do you think it's going?" And they're gonna say, "Oh, it's gonna collapse in a year," or whatever. What are they basing off? I don't trust what they're basing off. So it's important to have those people in your network.

It is. And that approach is so sound because what my advice is, and when I speak, I speak to multifamily assets specifically. So if you're in the industrial, retail, office, medical, even single family, you know, talk to someone who specializes in that field. But from a multifamily perspective, I mean, there's a reason why people are being extremely bullish in the market right now.

Yeah, yeah, we, we've done that. That's why you've seen us submitting offers left and right, is because we're, we're not necessarily being overly aggressive, right? We're seeing, we're getting to market. Yeah, we're getting the market. A lot of the assets that we're taking over right now have been the, the longtime owner that has, that just wants high occupancy. They don't want to deal with the tenant base. And we're seeing in the last year that you can push rents so much higher. There's so much, you know, a couple hundred sometimes below market without even touching the interior of it, just literally paint.

Yeah.

And you can get it up $200, $300. That's unbelievable.

And it's been interesting, the underwriting has changed that I've seen in the last 2 years. And some of my, some of my top-tier clients, uh, when they underwrite their deals for further investors, they underwrite the deal that, that's going to get them, you know, They're 8-9% cash on cash, 50% IRR is kind of what everybody's going after right now. But what they're not doing, and I'm trying to get them to be a little bit more aggressive, is it's okay to show a 5.5% income growth versus a 3.5% if you think you can hit 5.5%. I think investors are, and as they should, they're very, very cautious and they want to be good stewards of their— investors money. But if you underwrite and you know you can get net $900,000, but $700,000 gets you your return numbers, don't underwrite at $700,000. Yeah. Right? And it's like one of those things where like they want to look, they want to overpromise.

Yep. Or underpromise, overdeliver.

Underpromise, overdeliver. But it makes them look like, oh, we got a 35% IRR. And like when I see that, I'm like, great. You underwrote, like, your underwriting was off.

Yeah, you did that.

So it's one of those things, like, when you're looking at deals and you're looking at raising money and syndicating deals, um, how do you underwrite those? Are you underwriting what you truly think you can get, or do you underwrite to kind of what you need to, to hit the numbers, knowing there's a lot more meat on the bone?

Yeah, yeah, I'll be, uh, I will be Probably in the middle of conservative and aggressive, right? I'm not like all-in aggressive where, you know, if we don't get a refi in 6 months, like this thing's collapsing type stuff. No, it's like this is like legitimate business plan that we can execute here. And then like if I go and I get a ballpark rental amount, let's say it's like, oh, you could probably get $750 to $850 or something. We'll usually go kind of towards the lower end just to be sure.

Of course.

And then it's like, well, if we hit our metrics at this point, then that's when it's like, we'll do like a deep dive once it's under contract. So my preliminary underwriting is a little conservative, but you know, probably in the middle, a little aggressive too. And that's why I'm able to submit so many offers because a lot of people are like, oh, I need to know every detail. It's like, no, you need to get it under contract so that you can get the information from the— so that the owner knows you're legit enough to give you that information that you need to round out your underwriting. And usually at the end of the day, the worst thing that can happen is you paid for an inspection and the inspection came back and you're like, whoa, this is a bad asset, right? I need to get out. So you lost your inspection money. That's fine. It's kind of the cost of doing business, right? The upside is—

Cost of tuition.

Yeah, the cost of tuition, exactly, Leonard, yeah. The upside is you now have an opportunity where no other buyers are trying to outbid you for an asset 'cause you have it under contract., which then you can end up buying. So the upside is you buy an asset. The downside is you lost inspection money. That seems like a pretty good risk-reward situation. And a lot of times the information you find out during the due diligence, and like, I'm not suggesting go retrade every deal, but if something comes up that is that significant that it crushes your numbers and your returns and you're like, I can't meet these numbers for my investors, tell the seller. And most times they're gonna be like, Oh, I didn't even know that was at my— like, I didn't even realize my property was that bad, or XYZ. And you get a discount, now it makes sense, right? Or the flip side is, you know, the inspection looks great and you just went conservative on your numbers, and now you're like, oh, this is gravy. Now we have even better metrics that we can go to our investor pool and say, hey, this is what we got. You know, we will, you know, it's still probably a good idea to do the overperform, underdeliver type stuff or whatever.

Opposite.

Yeah, we can't keep it. Yeah, trust me, I am overperforming, I promise. Um, but yeah, so that's, that's kind of, uh, the way that we go. But, um, you mentioned one thing that we gotta touch on before we get out of here, because you're Wells Way Management, right? But you have these top-tier clients and stuff that you're doing much more than just management for. Like, what else are you doing? Like, you full circle now? Are you like, yeah, you come to me, you want to invest, I'll take care of you?

So yeah, so Wells Way Management is one arm of Wells Way. Wells Way is really a multifamily investment firm, and within that we do offer a third-party management service. The Wells Way Management is more known because that, that's my primary background, is the property management piece where we're actually looking to transition away of being property manager focused and investor focused where we go after our own deals. But also invest with awesome investors like yourself to where now we can run the deals in-house and be more vertically integrated.

That's awesome because now it's like literally I just bring you guys on the team as almost like a pseudo management plus asset management. And I know you have the experience to be like, you're not going to steer me into a bad deal or something like that. So really, I only need to focus on either finding a deal or just bringing cap, you know, hey, I want to invest. And you, you probably even have your sources of finding deals within your markets too. That— so it's really, it is kind of full circle, and it's almost like a partnership at that point.

It is, yeah. And we have found that better aligns our interests with that of our clients, to where if we're in those deals with them, or we bring deals that we want to go after and they invest in, then we have management in-house. There's a lot more control, and I'm not having to kind of manage the smaller 10-unit third-party assets because I want to get back to a lot of the bigger stuff, as so do you.

Yeah, I want to get those big ones. Yeah, yeah, you guys are full circle. That's awesome. So it's really just, you know, you guys will have, you know, skin in the game speaks louder than, than everything, right? It's a lot easier to get partners that way. That's super cool.

Awesome. Well, thanks, Justin. Had an amazing time doing our first podcast. I would love to have you back, you know, episode 15, 20-ish, to see how much we've grown. Oh yeah. But this is huge. I mean, thank you. Um, my listeners are going to find a lot of value with what you've got to say.

Dude, Brandon, you're the man. I appreciate it. I'm glad we've got connected at just a random happenstance meetup back in the day, and it's turned into a great friendship. So appreciate you, love your knowledge, and you're going to add so much value to your listeners.

Thank you. Thank you for joining us for the first episode of the Will's Way Podcast with the Cash Flow Cowboy himself, Justin Orziniak. If you want to follow him on social media, you can check out his Instagram @cashflowcowboy. This is Brandon Wells with the Wells Way Podcast. Thank you for tuning in. Stay tuned for more episodes.