How To Build A $100 Million Real Estate Empire With J Massey

When I was a kid, all I thought I wanted to be when I grew up was a real estate investor. And I actually started my Internet businesses when I was 18 years old because I thought I was going to just fund real estate ventures. And I do have some real estate holdings, but they're pretty small, all things considered. And it wasn't until I heard Grant Cardone speak for the first time last year, actually, where I realized that I had been operating my real estate business in the slow lane. So some of you know that I had Grant, who claims to own about $350 million in real estate. I had him come speak at Freedom Fast Lane Live, and he didn't say much. I even tried to get him drunk on stage and he just wouldn't talk about real estate. Besides the fact that we had prepped for it beforehand, we had had several conversations about talking points. He got on stage and went on a big ego trip rather than actually talking about what I paid him to talk about. And I was very disappointed and it really hurt my opinion of him as a business person. So I was left with this, this gap, this void of what the heck do I do now? Because I've. I still want to know what the path is. I still want to know how I can accelerate my success in real estate from what I've got to where I ultimately want to go. Because I know that that can be a vehicle for true wealth. And I'm doing it. I have a real estate practice or business, but it's not my full time focus and I want to accelerate it without making it my full time focus. And Grant wasn't very helpful. So where do I go now? So I reached out to the person that I knew practices this day in and day out, and that's Jay Massey. Jay owns, I don't know how many units, but I know it's a lot. Real estate is his full time practice and he's not just one of those guys out there talking about it. He's one of the guys doing it. And he owns a large portfolio of multifamily real estate. And I wanted to hear about what his opinion was on where I could accelerate my results. So I brought Jay on and I'm like, Jay, you need to save the day here because I still want to know this info and I can't find what I want to know. So I need you to help me out. So this is a private phone chat that I had with Jay where I go into personally, what I'm doing now and how I can accelerate it. And Jay gives me his perspective on how he would scale the results. This is maybe the most value per minute I've ever received doing a podcast interview. And I think you are going to get just as much value out of hearing this chat with Jay Massey.

I have so been looking forward to this conversation. Jay Massey, my savior. Thank you for coming on to Freedom Fax Lane.

Thank you for having me. I don't know that I've ever been called a savior, but I'll take it.

Well, for those who aren't familiar, this is the context. In December of 2015, I paid tens of thousands of dollars to an individual by the name of Grant Cardone to come speak at Freedom Fasting Live. And everybody loved him. He was a big hit. But he said nothing about what we were supposed to talk about, regardless of the fact that we prepped before his talk behind stage on calls, before he went on there, I took wine up on stage to get him drunk so I could loosen him up and actually hear about his real estate empire. Wouldn't say a darn thing about the real estate empire. So Jay Massey is the guy that I know who probably has the most knowledge on this topic. And finally I was just like, I guess I'm not going to get the good stuff out of Grant. I've got to go to Jay and find out about real estate empire. So that's why you're the savior, because I've been promising this content. I paid for the supposed expert and you didn't say much. So thank you for being our expert, Jay.

I will do my best. I'm grateful to be here and I'm glad to serve and hopefully we'll set some mindsets free, give them some new ideas that they can go out there to use. Because again, apartment buildings is one of my favorites. I mean, I'm a cash flow guy at heart. So we've done all manners of real estate from commercial retail, apartment building, single family houses, as well as cell phone towers. So fire away, sir.

Very cool. All right, so here's what I really want to know. I have been studying real estate most of my life and I have realized lately that I've been operating in the slow lane.

Here's where I'm at right now, Jay. I pay cash for single families. I rent and probably get.

I guess, cash on cash. I'm probably getting a good 12% return or so per year, plus the appreciation.

Plus the write offs that come with that. But I'm realizing I've been operating this way for a few years now and I'm operating. That's kind of the slow way of doing things. And I hallucinate. I have the idea that the way that I'm really going to grow this as a practice, as its own business, and my primary business is Internet business. Obviously, I then invest into real estate.

But I'm realizing that the way I'm going to be able to scale that is a using leverage and other people's money and also going multifamily. And the reason for multifamily is just because, just speed, I can get 100 units in one fell swoop rather than doing 100 different transactions. So my first question is a, do you think that's the right strategy? Am I right in what I am and how I imagine is going to accelerate my success? And then I want to go into some problems I'm seeing and have you judo chop them out of my brain so that I can.

Your kung fu is weak. Yes, sir. No problem.

I can totally help you here. You're tossing me softballs right now. So this is good. What it comes down to is, yes, your thought process is correct. Your asset class might not be, but your thought process is correct. So there is a couple of things. I typically don't recommend someone do what you're doing until they're done. Meaning I'm not ready to grow a portfolio. Paying all cash is not the way to grow a portfolio.

Especially.

I should also state that I am not.

Trying to have a political conversation, but politics and economic policy, monetary policy definitely play a role in a lot of these decisions that we should be making, especially as real estate entrepreneurs. Chief among them is you've got to keep an eye on inflation. Specifically, you've got to have your own version of what you think inflation is. I mean, you can't go with the reported numbers, unfortunately, in this particular case. So all of that said, typically, until someone is ready to go into the phase of.

Receiving income from their portfolio, which I don't think you're there yet, you're much like myself, where, shoot, I'm still young. I've got stuff to do. I want to make stuff happen. When you're still in that growth phase, that's the high time, especially in an inflationary economy, you need to be acquiring as much debt and leverage on the property as humanly possible, or at least as much as you can stomach so that you can go through the process of being able to leverage the amount of cash you have. For example, I'll use a very easy example. My brother has.

An inexpensive condo, but he paid $40,000 for it. All cash. Similar to what you just said. I was like, dude, why did you do it that way? Call me.

After done talking to him. I was letting him know, like, look, here's what you could have done. And you could have ended up with four, if not five of them and been at twice the cash flow by the time it was done with properly leveraged, especially with the low interest rate that we have today. Or more importantly. And you hit the nail on the head, my friend, with raising capital. Raising capital is where it's at. Part of the reason people have trouble getting into real estate or finding the money is because they don't have the skill sets to raise capital capital. And once you have that skill set, you no longer are beholden to bank terms. And in my opinion, I would rather pay a person interest than a bank anyway. At least that's how we've operated so far. In the tens of millions of transactions, or tens of millions of dollars worth of transactions that we've done. I've still not used a bank yet.

Okay, so I want to comment, make sure I understand. A. You're saying that could happen a lot.

Yeah.

Well, you're essentially saying that where some would argue that we're in an inflationary period right now and that there may be an inflationary period coming, that's up for speculation. But you're operating under that context. And at the same time where I'm at with my goals, to accumulate $100 million in real estate, because that will make for a nice down payment on the Cleveland Indians. In order to do that, I need to be in aggressive accumulation mode, which means that I need to leverage the cash flow I have and the equity I have. To use that to go into.

Hyper acquisition mode is essentially what you're saying. My portfolio right now does profit. It profits a decent percentage of what I have invested. But you're saying, cool story, bro. Go use that as your leverage for acquiring a lot more. And don't worry about what you're taking home, which I'm totally fine with. I'm totally cool to not pull any money from that.

That's exactly what you're saying, right? That's exactly what I'm saying. Especially right now when you don't need because you don't need the income. And that's the new thing that actually your world of Internet marketing is what I've been learning for the past couple of years. And I'm just like, oh, wow, these go really great together.

So it's been exciting for me from that standpoint. And I also find it interesting. An interesting side note is I'm after the San Antonio spurs and you're after the Cleveland.

That's really, really interesting in and of itself because I find this to be common, which would be another reason, in my opinion, for you to begin raising capital. Because most of those team transactions are not done by sole owners, not today anyway. It's usually a bunch of owners, a bunch of people together in some form of a syndication, which is again, a very commonly practiced strategy amongst real estate, especially the higher dollar transactions. You go. So to begin to build that network and have that experience and have done a number of syndications before you get to that point again, it just would be the perfect stepping stone. The other thing to consider is your current strategy. However, if you believe deflation is on the rise, it's perfect.

If you believe that, if you do great, don't change. Or if you're listening and you're like, man, I just want to live on what I got. I don't want to take any more risk, then what you're currently doing is also perfect. But when you're in growth, you use debt or leverage to control the asset because the asset is only going to be available one time.

I have some clients that work in the student housing arena. When they get a chance at an asset, because of their limited geography, they have to try and buy it regardless of their cash position. They have to try and buy it right now because it may not come back on the market for 10, 20, 30, 40 years. They may never get another shot at that property. You use leverage to execute quickly. It's all about speed of execution because you can refinance and rework the financing over and over and over over the lifetime that you own the property to get it to the profitability status that you want or whatever sort of value. The other thing that I would.

Want you to think about strongly is it's one thing to say, yay, I got a $100 million portfolio. That's wonderful, dude, but I would rather you be saying, I have $100 million of annual cash flow. That's way more powerful than the value of the portfolio. Just ask people back in 060-708-09 the value of the portfolio.

Didn'T matter, if it didn't cash flow.

I am so excited I could cry right now because I already can tell that this conversation is going exactly where I've always been. Want a conversation like this to go. So first of all, thank you. Here is a question that comes up for me based on what you are saying, you are talking about raising capital and that you have never used a bank.

I have the ability right now to leverage the equity of the holdings that I have in order to go buy some mid tier multifamily properties. And rates are so low right now, why wouldn't I use a bank?

Oh, okay, that's. Wow. All right. So first of all, you've got to understand the deal you're making with the bank.

If it's okay. There's an episode on one of my podcasts, episode number 56. We go into what is all of this in detail. But one of the things that you're typically going to have to give up is what is known as a personal guarantee. When you really understand what that means, especially you, Ryan, and you're not going to want to do it. I'm not saying you can't get a better interest rate, but it's more than just about the interest rate. It's about having your other assets at risk, all the other things that you've built, possible future income, I.e. royalties, even at risk should something go wrong. And I wouldn't want to put myself in that position, and I wouldn't want you to put yourself in that position if for no other reason. That is one of the things. Now, that doesn't mean there aren't times where it makes sense to do a PG from time to time, but I'm saying in general, that's number one. Number two is I don't care how big the bank is, they're eventually going to cut you off. And if you want to keep growing to the side that you're talking about, they're going to cut you off. You're going to need a resource of investors to pull from.

I want to push back on that, at least for argument sake.

So right now, if I'm looking at a building that costs a few million bucks, we'll say just 3 million bucks. That amount of money doesn't scare me to personally guarantee.

Because with other assets that between you and me and the approximately tens of thousands of people who are going to be listening to this as a podcast.

I have it. So I'm not afraid of that at all, of making a personal guarantee. And it feels to me like.

I'm.

Going to pay less to the bank than I am to a partner, to a lending partner. Unless that was just a straight loan basis, unless it was just somebody who wanted 10% return on their money, then that might be a different story. But I've learned in business to be very protective of equity and to work on a cash flow basis if possible. So why would it be any different with a bank?

Yeah. Okay, so what you're talking about is what we call a quadrant three deal. So bank deals and what I call quadrant three, the amortization quadrant. And that makes perfect sense. And so first, let me first say this. There's a few trillion dollars in retirement plans right now. Many of the individuals who are listening right now are getting less than 1%, 0%, maybe 2% over the last 12 trailing months. If they look at their last 12 trailing months return, that's probably where they are. And I am telling you Ryan, they would rather get 4% than the 2% that they're currently getting. 4% secured by a piece of real estate. Trillions of dollars, okay? Terms are easier with no personal guarantee. Alright, so that I get the pushback, but I can go to retirement plans and access trillions with easier terms, better interest rates, more flexibility, total negotiation and still have. And if you still want to protect equity, great, no big deal. Now yes, the interest rate is lower, but you're not thinking about the full business cycle. Because in order to even get to the point to where you have money, you have to do some marketing or the have that deal, you have to do some marketing to bring those things to you, right? Well, that's not free. But here's what I do know and have proven many times in many different countries now with all of our students is simply this. If I help you or your parents with their hundred thousand, two hundred thousand, half million, whatever, do you know what they're going to be talking about at the next barbecue? Do you know what they're going to be talking about the next time the HR department brings up the 401ks? Do you know what's going to happen? All of those people that they have already, they're having the same problem, right? They go to work and they say, man, guess what I did with my 401k this weekend. They're on the golf course, hey, guess what I'm doing with my retirement plan? Oh dude, I want to do that. How do you do that? Well, you got to call my guy.

Who's my guy?

Well, you got to call Jay.

What are the deals that you have structured? What do they look like? Are you just doing like a fixed, fixed returns secured by real estate and you have an automated process for paying them that return?

Yeah, that is one deal. We I train four different deal structures is what I call what you're just called that. What you just described is what I call a standard debt deal. Yes. So we do those two. We do standard debt, standard equity, which is what most people know about, and then we do a modified debt. Modified equity into. Well, to break that down, we would need another two hours.

Got it. Okay. Now the thing that I've run into myself is just the overall deal flow as of right now. It feels like since interest rates are low, asset prices are way up, and it feels like all the good deals are gone or at the very least are off market. And it's not my full time business to go solicit off market deals. And that is a full time thing in and of itself to go and find people who own multifamily. So what are you looking at when you're going into a deal? As far as number of units, the size of the deal, how much is enough to get your attention? And then how are you.

How are you finding those deals now? I'll tell you, I asked Grant Cardone this question. He was like, man, well I spent a lot of time on LoopNet and I was like, BS.

You need more wine. So Jay, Matthew, where are you finding your deals and.

How big do they need to be in order for you to get your attention?

Got it. At this moment, the things that I am interested in are 70 units and above residential, but residential apartments in only certain states, definitely not California. And commercial, retail, pretty much any size, 20,000 square feet and larger, preferably single tenant, triple net, some sort of national credit type available. Or I'm still looking for more cell phone towers because those are hyper profitable in and of themselves. So that's kind of my world. And I have flirted with the idea because I like going to the movies of I flirted with the idea of buying a movie theater locally because I thought that would just be cool to go to the movies and be the one that owned the building. So those are the types of things that I look at in general to get my attention. I actually start with the rent to price ratio. What does that mean? Say the building. I'm looking at a 1.5% rent to price ratio. Or for you accounting types, it's an 18% hurdle rate is what I'm trying to clear. Meaning if the building is a million dollars, I want 1.5% times 1 million to be able to come in per month, or in this case $15,000. If that building can generate $15,000 in its current condition as it is per month, then okay, you got my attention. That's going to begin to get my attention. And if it can't do that, you're just not going to get my attention. The second thing that I'm always trying to do is just to make sure that I can have a debt service coverage ratio of that's the goal. I know it's hyper conservative, but it has proven to be better than not. What I mean by that is with a debt service coverage ratio of 2, what it simply means is that I could be 50% vacant on a building, pay all the expenses and the net service. I won't make any money, but I won't go backwards either if I'm 50% vacant. So, for example, I have 182 unit building right now. And at 56% occupancy, we break even across all expenses. Everybody gets paid, blah, blah, blah, blah. So everything above that is profit, which is kind of cool. And you want to keep doing that. But that's me. That's a very personal thing.

So let me the way that I'll calculate what I'm willing to pay for a building, even though I haven't acquired a large building yet, When I'm looking at the numbers, I'll take total reported revenue and then divide it by two and then divide it by the cap rate that I want to get. So the reason I divide it by two is because I figure the expenses are going to be 50% or.

I want them to be covered at 50% occupancy and then I'm calculating cap rate out of that. It sounds like you do something similar. You might get to the number a little bit differently, but that it's a similar approach.

Yeah.

The thing I was happiest about is that you were starting with the rent or the income that the building could generate. So long as you're starting there as the proper limiter on your pay, then you're great. I'm very happy with that. You didn't say the word comp. I can't stand.

Okay, cool. So it's good to know that I'm calculating, at least for the most part, correctly. Now, when you're sourcing your deals, where are you finding the good ones?

Got it. Now, the first part of my answer is going to sound a lot like what Grant Cardone said, But listen to the second part. So I'm going to give you a couple of strategies. My number one strategy. I'll give you a second and then I'm going to tell you why. LoopNet, or how to actually use LoopNet to find the right Deal.

If you are going to LoopNet, that's great, that's a great place to start. But here's the truth of the matter. The reason anything is on LoopNet or the MLS for that matter, is because people like me have already said no. The realtor doesn't have someone else to give it to. So hey, I'll put it on LoopNet.

If you talk to any realtor doing deals, they're like, yep, that's exactly what's happening. Because they have their short list of people who they're like, oh, I know the exact guy who buys this type of thing. Let me give them an email, let me give them a call, let me give them a text message. It happens to me almost two, three times a week, if not more, depending on the marketplace. Right. So just know people like me have said no. I said, I don't want that. Let the other people, meaning most people listening, they can have that one. Alright? So just understand that that is why it's on LoopNet. With that understanding, however, it doesn't mean LoopNet has no value. All right, here's how you can get value out of LoopNet specifically for multifamily when you're looking at a particular marketplace. So you said Cleveland, right? Yeah, I go to LoopNet, I'm gonna do a general search for Cleveland. Amongst the parameters that I care about, like 70 units or more. Family in general. Family in general. I want to know who's the marketing genius that's out there because he or she is likely to be the one who has the listings. Anyway. Then I want to get them on the phone. Now here comes the number one strategy. I want to get them on the phone and I'm going to ask them one question. Do you have anything that could be seller financed? That is the question you should be asking anyone and everyone who is actively listing property. I promise you, you ask that question even if they say no. Then you follow up with, well, who else in your office might have something that could be seller financed? Your worst case scenario is a referral to another agent. Your best case situation is, oh yeah, I got three of these things. Because specifically in the multifamily and definitely in commercial, you're going to find those types of deals because they have problems and challenges. They can't get financing. That's why they're there. Real estate entrepreneurs specifically, and I hope I drive this point so home. We don't get paid afford just taking over things that are already fixed. We get paid for resolving problems like any other entrepreneur. You're having trouble finding deals, it's because you're looking for the shiny stuff that's easy that everybody wants. Go find a real problem, build the team to solve it and that's how you're going to get your deal.

So you're basically saying that the best deals are a going to come from referral from somebody who is on the ground floor. So that frees me up to be not a full time deal sourcer. And as you say that it's interesting because.

With the single families I buy, I do have one primary contact that I buy most of them from and he just sent me a portfolio of single families and basically I had first dibs before it went on the market which was kind of a cool like oh, I hear what you are saying through the context of what happened yesterday afternoon. And the other thing you are saying is that seller financing is a a nice filter to get to the guy who's got the most deal flow. And also that those types of deals often expose the opportunities that might have the problems that we can solve as investors and then have the highest roi. My understanding correct so far?

Yeah. Not only they're just also the most likely. We all have to realize that the real estate industry is designed to be retail and 95% of the transactions probably should go retail through the traditional realtor bank channel. Fine. We the real estate entrepreneur play in the 5% that they can't handle. But that 5% is still billions of trillions of dollars. It's fine and there's a lot of it there if you go look.

But if you try to play, you.

Can'T beat them at their retail game because that's not what we're looking for. So don't play their retail game. You've got to play at the wholesale or below or before level in order to make it work.

So let me ask you this. I've run into the issue where I'll go onto a site like LoopNet.com and I'll just look at a deal that passes my SNF test and then I'll call up the agent just to get in the good graces of an agent that I think can go to work for me. So for example, I started to look in other places in Ohio and I call them up and say I'm a Cleveland, I invest in Cleveland, which is my hometown and I know that market well. But I'm noticing the numbers are different in this area, in this area and this area. What do you have? And they get all excited because.

Those types of Investors tend to be good clients, but then they just go to their computers and they print out a listing of the MLS according to my criteria. And I'm like, dude, I could have punched this into City feature LoopNet. Why are you wasting my time? And I find that to be kind of a recurring issue of not finding the agent who's really on the ground floor. Or maybe it's building up enough trust with agents in order to get first dibs on some of those deals. So is your method of asking for which ones of seller financing kind of a way around the gatekeeper to get to the guy who is making the deals? Or is there another way that I could accelerate that process?

The answer is both. It is a way to get to the man or woman in that particular marketplace, because if he. And you know this from business, the ones that are willing to invest in the marketing are probably the ones that are also making money, period. You know, and if they're not willing to invest in their marketing on LoopNet and various other places, then they're probably also not making any money. Now, they know the person who is. In fact, they probably are jealous or hate the person who is.

But, you know, it is. It is what it is. So. Okay, so, but what you, what I hear you asking is, Jay, can you give me another super secret way that all to make this happen? Okay, sure. You pulled my leg. Here you go. Here's what you're gonna do, all right? You're gonna go to the national association of Residential Property Managers. Now, I know it sounds counterintuitive. That's fine. Just roll with me for a second. It's narpm.orgnarpem.org and what you're going to do is you're going to go. So in Cleveland, I'd put in a Cleveland zip code or, you know, 10 miles within whatever zip code or just Cleveland, whatever, whatever area you're looking for, go to narpam, right? That's where you're going to start. And you're going to pull up a list of property managers. And those property managers, here's the great thing about them, they know who's who in their marketplace. So a frequent question that I will have my students ask them is, hey, who is it that you like to do business with when you know, when you see a house coming from this particular realtor, do you get afraid? Are you scared? Are you nervous? Are you excited because you know everything's been handled properly, etc. You ask the property manager because the property manager know, oh, God, don't deal with him or. Yeah, that guy's great. They know already, period. And they are one of the best sources of team building and referrals that I have ever found. In fact, most of the time when I am working in foreign marketplace, and when I say foreign, I don't necessarily mean outside the U.S. i just mean outside my home market where I live. They are the first person I am looking for. And I build.

Everything around and through the property manager. So they are the ones who know the super secret ways to do it. Now, there is a third way, Ryan, but I don't know if everybody wants to hear that one yet.

Yeah, nothing like raising a little bit of curiosity.

Nothing like it.

I think we all want to hear it, Jay.

No doubt, no doubt. This one is totally.

Fun to do and I think at the end of the day, very few people are unfortunately going to do it, but it will yield the fastest results. The fastest results. One of the things that I do and I've consistently done is so every city, town, whatever, they have a mayor, right? So the mayor is usually a very public individual. They have luncheons or some sort of come meet the mayor thing. Well, interestingly enough, real estate and politics are intimately connected. If you want to find all the who's who, the right people inside the real estate world, the next time the mayor holds a luncheon, go, period. Because they're going to be there. All the disreputable contractors won't because they don't like to be around police. Right. So all the people that you're looking for to build your real estate team are often there. Especially if you're going to be playing the multifamily game. The multifamily game is also known to a mayor as voters. And we influence a lot of voters because we can control a zip code and how that zip code goes.

Hmm.

You have my attention, Jay Massey.

Awesome. I have succeeded then.

Let me ask you this.

You're putting yourself in the strategic position to where deal flow can naturally flow your way.

My guess is that you probably have more than most and you're filtering through a lot of deals and the numbers that you shared earlier are kind of your filter for getting out the good ones. What's your process then for weeding out the rest of them and being left.

With.

The deals that you're actually going to execute on.

I don't think I understand your question. What do you mean?

Yeah, so you've got your numbers that filter through kind of your SNF test, then. I'm sure. There's another layer of due diligence. So you cast all the ones that don't meet your numbers. Then what's the process for making sure that something is a good deal?

Got it? Yes. Well, the interesting thing about that is that we've got like a four page Excel sheet due diligence checklist that we go through every time. I mean, we could. If you want to talk due diligence again, that's going to be another two hours. But we do here. I'll give you some of the unique things that we do that most people may not have considered because this one can knock a property off really, really fast, is to call the police department or the local 911 or to get how many calls have been made to that particular address, because that will tell you the activity at that particular address. Especially when you're working in a multifamily environment, you want to know what call volume to 911 call volume kind of looks like. Because that will tell you. Do you have a whole bunch of. Do you have dv domestic violence going on? Do you have. I mean, you've got. Remember the news that you see at 6 o' clock is probably somebody's tenant, so it might be yours. And you want to find out if this is the building that you've got. You want to know that now. And it's. One of the fastest ways to knock a building off is to actually get that report.

Are you evaluating any other metrics in the area like.

Distance from Starbucks or.

Annual income or anything like that?

Yeah, because in general, the first question. Okay, I guess we should have started here. The first question you should ask before undertaking any of these things is who do you want to serve? Period. Real estate isn't as much about the property as it is about the people. And you serving that particular person. Here's what I mean. We're intimately familiar with. I'm going to use three retail store chains that you might be familiar with. Nordstrom, Target and Walmart. All three of those, they sell similar products. In this case, let's say shirts. Now, I'm not telling you where to go get your shirts. I don't really care about that. The point is they all sell shirts. Yet when you go to Walmart, you have an expectation. When you go to Target, you have a different expectation. When you go to Nordstrom, you have a completely different expectation than the other two. Yet all three earn money because they serve their customer and meet that customer's expectation. So if I'm doing, for example, and the Same is true when it comes to real estate. There are Walmart neighborhoods, Target neighborhoods, and Nordstrom neighborhoods that are usually behind gates and all these other things, which is great. And I'm not passing any judgment. I don't really care. I just want you to understand that when you go in, you're owning a business and you're serving people. And you've got to be equipped and have systems that know how to serve those people. What I mean by that is when they have an emergency, you need to be able to treat what they consider an emergency, an emergency. And if you can't do that, then you're underserving them poorly, and that's the problem. So to give everybody a quick example, if you were a Nordstrom style investor, here's a Nordstrom style problem. Your tenant will call you and say something to the effect of, I tried to press the garage door opener and it didn't open. So here's what I need you to do. I need you to come over here right now and fix this or I'm not going to pay rent. Now, you and I both know that likely the problem is that ain't the battery in the garage door opener. However, that is beneath what they're like, hey, I am paying. You are going to come over here. You've got to treat this like an emergency. If you can respond to that person that way and meet their expectation, you are probably a Nordstrom investor. However, in Walmart land, this is what it would sound like. It would be more like, you see, what happened was I woke up and the garage door was gone. I'm like, ah, okay, great, no problem.

If you can respond to that and you know how to respond to that with the correct system, then great. Because remember, Walmart, Target and Nordstrom all make money. So once it gets past the SNF test, I'm really thinking about who am I serving, what services, what needs, what things do they need in order to have a complete living experience? What does that, that could mean in a Nordstrom property, we're going to modify the leases or programs and packages to include accent walls. Because, hey, if I can have an accent wa, they might like that. Nordstrom is where tennis courts, pools are mandatory, whereas in Walmart it just needs to be functional. And this begins to inform the quality of rehab. What we need to inspect, why we need to inspect, it informs, who needs to be on the team. I mean, this is why I'm like, if you want to start talking due diligence, we could be here a while.

What about when you look at a number or you look at a property and you decide that it's a go, you decide that all systems go. And.

The one thing that you know is staring at you is that the reason it's a go is because there is some big repair.

The entire complex needs a new roof and windows.

How are you evaluating that or accomplishing that? Are you letting a property management team handle those? Are you involved at all.

In the single family world? My property management team just handles everything. He needs a new roof. All right, go put whoever you want in there and get a new roof. But what about when it's in a 70 unit apartment?

Yeah, no, this is a completely different animal at this point. To run things properly, you need four teams. You need a, obviously you need a transaction team to help you purchase. You need a construction team or rehab rehabilitation team to help you put the thing back together. You also need a management team, that's obvious for ongoing operations. And then you need an emergency team. All four of those are separate. And the only one that you have described right now is the management team. And that's great. But you need the other three because an apartment building really runs more like a business than it does real estate. And that's what you've got to understand. You've got like departments that you've got to run and who have an objective and goal. So we tend to build. So for example, I have an internal operations person on my side of the table who we compensate directly, who then oversees or works with the CFO together to hire a construction manager. And that construction manager then hires GCS and subs to oversee the project. Because depending on, you know, if we're redoing 182 kitchens or 70 bathrooms or whatever, this is no small undertaking by any stretch of the imagination. I mean, even something as simple as, you know, little water filters that you put, you know, under the faucets for making sure that we have low fold, low flow toilets and all of these little things. Those little numbers begin to add up really, really quickly because we want to use certain epoxy for our floors so that we can have lower turnover. All of those little things add up really fast when you start multiplying by hundreds of units at a time. And more importantly, because here's the thing most people overlook is that when you are doing that rehab, you need to keep your eye on the operational costs, because your operational cost, their operational expense ratio going to be what you're going to pay every year. You pay that capital expenditure once, but you're going to pay that operating expense time and time and time again. So it is often worth going a little more durable in that particular case and making sure that the rehab was done right from the beginning. Instead of trying to, well, let's just get it fixed and out there because otherwise you're going to end up have to rehab it two or three times and you're going to hate that experience at the end of the day. To do that, you need the people who have the inside track on what are the best hammer, nails and screws and epoxy to use. And that's usually not your property manager. That's not their function. That's like putting a customer service person in charge of sales. That's just not going to work.

Got it. So final question, and this is a very open ended question, but based on your analysis of what we talked about in terms of. I know what I have, I know what I have, this portfolio of single families, what would you say is the next logical step to building up the empire? And specifically, would you go for the gusto and go get a big old building with some private money? Would you take more of an interim step and acquire a 50 unit or even smaller? If Jay Maxey was in that position, how would he take the next step to building the empire?

Got it. Well, here's the thing that's not fair to you about that question is that I have a different level of experience and understanding.

Because that changes the role that I play. Remember, I'm playing a very active role. Your primary income is elsewhere and you need someone to play that active role. So that, that really, really impacts this decision. However, in general. Okay, good, good, good. However, in general, you're going to go play Monopoly, right? You remember that game, right?

Four.

Four greenhouses, one red hotel.

That's where you are. It's time to trade in the greenhouses and go buy a red hotel or two. That's really where you are. If that's what you're currently doing, that's great. What you've done is great. And if you want to get to where you're trying to go, I would be focused on, like I said, 100 units and higher. Definitely, then definitely commercial. I don't know about Cleveland commercial retail. I haven't done any study there, but maybe industrial could work out and I would be looking in those two areas if I were you. Definitely the triple net land for sure. Maybe even gas stations, depending on your risk tolerance. So that's kind of what comes to my head at the beginning and Again, this is all predicated on the fact of what role are you going to play, how active are you going to be? And if you're not going to be that active, then you need to participate in somebody else's syndication who is that active and go that route.

Do you have any markets that you like better than others right now or how do you. Because you're not buying in California, I think that's where you're based.

Yeah, I do. I live in California. But not residential in California.

Okay, so how are you evaluating the markets that you go into?

I start with rent to price ratio.

As I said before.

But the other thing that matters is the political makeup of the marketplace. Some marketplaces are just anti. I don't want to be anywhere near there, depending on where they are. California has proven time and again that they don't want my money as a business owner. So it doesn't help here. That's just really what it comes down to, to be very direct. So places that have proven that they want to create jobs and they want entrepreneurs to do this are North Carolina, Tennessee, Georgia. They've got some very, very interesting pro employment laws. And at the end of the day, as a buy and hold cash flow real estate investor, you're a job chaser. That's really what it comes down to. You want to know where to put your investment dollars. Where are the jobs, how durable are those jobs? Are those jobs going to be in India tomorrow or Shanghai or somewhere else? Do they have a high propensity of being able to stay in the United States? If they do, great, go for it. If they don't find somewhere else like, you know, Silicon Valley, I mean, rent and price per square foot is through the roof. It's absolutely stupid. And all of those jobs could be in China tomorrow. I'm just like, oh, but you know, hey, sunshine has its appeal, I guess. So there's nothing I can do about that.

Are you visiting each of the properties that.

Come your way that you're thinking about or do you rely on the numbers more than you actually going and seeing them? Assuming they're out of state, I mean, yeah, they're all.

They're, yeah, out of state for sure. And I'm, I grew up in this business or in business as a financial planner first. So I was always looking at the numbers first. I mean, real estate is just a stream of income like any other business. And you analyze those numbers first before I'm ever going to get on a plane. I don't get on a plane much, unfortunately. Because a lot of stuff gets kicked out. But that's okay. It is what it is. That's just part of it. Even then, when we are going to move forward, a lot of times I can send someone on our staff to go do some of the preliminary setup appointments so that when I do get to town we can be hyper efficient with time as opposed to a whole bunch of wasting time type of conversations.

Well Jay, I got to say in terms of value per minute, this might top the list. As far as Freedom Fast Lane podcast.

Thank you so much for this. I've been looking for this exact information for a long time. Paid a guy a lot of money to get it and he said not much. Thank you for this. I know you set up a page for our listeners to get some more free stuff as if you didn't deliver enough already. So would you talk about that?

Yeah. Basically what I did is the top 11 ideas of how to earn and increase value when it comes to multifamily and apartment buildings. I put my top 11 ideas especially one of them will surprise you simply because nobody looks at it. And it is, believe it or not, using these 11 ideas you can actually take stuff off LoopNet and find a way to turn it into something that is valuable. So even if you don't have those inside relationships yet, these 11 strategies will take a non performing building and make it perform because it gives you different ways to look at increasing the expenses, lowering, sorry, decreasing the expenses and increasing the income, thereby increasing the net operating income and cap rate or the value of the building and cash flow. So that's really what it comes down to. If they want to pick that up, they can just go to cashflowdiary.com Ryan again cashflowdiary.com Ryan R Y A N Completely yours for free because I like helping.

And your podcast is also excellent. And that's at Cash Flow Diary and people can find that on itunes or cashflowdiary.com Jay Absolutely. Thank you so much for hanging out with us. I really appreciate you. Thanks for hanging out with us on Freedom Fast Night.

You're welcome. Thanks for having me.

Man.

Every minute of that chat with Jay I thought was packed with value. And I just want to publicly thank Jay for hanging out with us on Freedom Fastlane and for sharing the type of information that Jay shares. It definitely had an impact on where I'm going next and I hope that it inspired and educated and empowered you to move forward towards your goals as well. Hey, if you liked this episode, there's a few more that you should check out. There's an episode with real estate millionaire Josh Cantwell where he talks about leveraging other people's capital. You should also check out some of our investing podcasts where we talk about how to make and keep a million dollars or investing for cash and long term wealth. Those episodes are filled with my strategies for both automating this process and the other things that I invest in for long term cash flow and long term wealth. We also have a free video series over@freedomfastlane.com if you head over there and type in your best email addresses, we have some strategies that we share on boosting business revenue, investing for cash flow, investing for wealth, and setting yourself up for long term success. It's a very, very valuable video series that you can check out over@freedomfastlane.com just look for the cash Flow video series and you'll get that for free over@freedomfastlane.com hey, if you're not a subscriber to the show, let's quit kidding around and make this official hit. Subscribe on your podcasting app or on itunes. It helps us spread our message of freedom. We believe that free, empowered entrepreneurs are how we solve all of the world's major problems and we need as many of them as we can get. So subscribe to the show. If you know someone who is looking to invest in real estate or be an entrepreneur and you know they would find value in this episode, please share it with them. Thanks for listening to Freedom Fast Lane. See you on the next show.