203: Finding Deals, Funding, Contractors, and Mentors with Matt and Liz Faircloth

This is the BiggerPockets podcast show.

Wait a second. Josh is actually gone today. I've been waiting 202 shows to say this. Ladies and gentlemen.

Sorry, Brandon, this one's mine. This is the BiggerPockets podcast show 203. Dang it.

You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com, your home for real estate investing online.

What's going on, everybody? My name is Mindy Jensen. I am filling in for Josh Dworkin today. I am the host of the BiggerPockets podcast. With you, as always, is Mr. Brandon Turner. What's going on, Brandon? How you doing?

I'm doing pretty good. You've heard the podcast a few times, haven't you, Mindy? You had that almost exactly in the Josh Dworkin inflections.

Not only am I a fan, I'm also just down the office from Josh, so I listen to him every single week.

Nice. Well, Josh is out of the office today. Josh is out for a little holiday break, and I think he's dealing with the moving offices, isn't he?

Yes. We're moving again.

Yeah, moving again. BiggerPockets is getting their final office for a while. Hopefully until they outgrow that one, too.

Well, you know, he keeps hiring people.

He's got to stop that. You know, I keep telling him we want to go smaller, shut down BP smaller and smaller. That's what I keep saying, but he doesn't listen.

Well, I'm glad he doesn't listen to you, because we do need some more people. It's just every time I turn around, there's another new employee. So welcome. Employee of the week.

That's awesome.

Latest employee.

Well, as Mindy said, this is the BiggerPockets podcast. This is Show 203 today, and we're talking with a couple who were on the show a while back. Back on show number 88. In the meantime, the last couple years since they were on, they've done some amazing things. So I'm excited to talk about that. Before we get into that, Mindy, what's going on? Mindy Jensen. Mindy Jensen here was actually a guest on the BiggerPockets podcast. What number were you?

I was on show 129 live in flips, frugality, and something else. Yeah, probably should have Looked that up before we talked. Let me go to biggerpockets.com show129.

All right, you go there and. Yeah, we had Mindy on the show, and Mindy talked about how she does a lot of live in flips. She's been a powerhouse of a real estate investor for the past, like, nine decades, and she's here with us today.

Wait, nine decades?

Something like that. So, yeah, Mindy is subbing in for Josh today, and I am super, super excited to have you, Though it is kind of sad not having Josh here. You know, I don't get any to make fun of for being short because you're not. You're taller than Josh, aren't you? You gotta be close. Oh, really? No, I mean, he's short. He's like 5:1.

I'm. Yeah, he's not 5:1, but I'm. He's taller than I am.

Okay, well, I'm not gonna make fun of you for being short, though, because that's normal for girls to be shorter.

That's normal for girls. Yes.

Yeah.

All right, before I get myself into some sexist trouble, let's move on to today. Yeah, we just did.

We just had harassment training.

Just had sexual harassment training. So watch out. All right.

You should have been there.

I should have been there.

It was great. Apparently, you cannot harass somebody for being a woman, but you can harass them for coming from Iowa.

Really? Okay, that's good to know.

Or any other state.

Not just Iowa or just Detroit, as usually we find out here on the platform.

Detroit?

Yes. When we make fun of Detroit, we're not breaking any laws.

You're not breaking any laws. And that's good to know. So let's make fun of Detroit. I got nothing.

That almost came up during the show today.

It did, actually. We did make fun of Detroit in the show today. All right, well, long enough intro, outro, or intro here. Let's get into today's quick.

Tip.

All right, Today's in sync.

You want to do today's quick tip, or you want me to take it Quick tip.

I would love to do today's quick tip. You get to do quick tips all the time.

I do. What do you got for quick tip.

To come back next week?

Yeah.

All right.

What's your quick tip?

The quick tip. The next six weeks are the best. Best time of the year to get some deals because everyone is so focused on the holidays, they're too busy to hustle. And those banks want the reos off their books by the end of the Year.

That is so true.

So you are thinking about buying a property? Start looking now.

Yeah, it's so true. I mean, in fact, almost every single year, I always buy at least one good deal during between Thanksgiving and Christmas. It just, there's so many good deals and banks are willing to take less on their reo. So get up there, hustle. Don't, you know, take Christmas off. It's okay. Be with your family, but go get some deals.

Yeah. And hey, the Internet's on 24 hours a day.

That's what I'm going to do. I'm going to ignore my family. I'm going to sit on no Internet. I but I am going to find some good deals and I'm going to buy something else by the end of the year. You heard it here first, folks.

Of course you are, Brandon.

All right.

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Now let's get into the show. Today's guests are Matt and Liz Faircloth. Like I said, they were on back on show number 88. You can get to it by going to biggerpockets.com, they are new Jersey real estate investors who do both flips and rentals. They also do property management. And we talk about all that stuff today. And we had a fascinating discussion you guys are about to hear on how they bought their 49 unit apartment building recently. Just kind of a cool story about how they got it. And the agent, the broker kind of laughed at them when they made the offer, but they still ended up getting it, which is pretty awesome. So I thought that was a fascinating story. Also, the way that they do make sure you guys listen for their tip on getting tenants to pay on time has to do with giving away a big screen tv. Love that tip. So with that brilliant tip, it was. It was brilliant tip. So listen for that a little bit later in the show. And the last thing I'll say before we bring them into the show is this. If you have not yet left a rating review for the Bigger Pockets podcast, please do so in itunes, stitcher or wherever you listen to the show. And make sure you hit that subscribe button and you know I'll give you a digital High five. Let's bring them in. All right, Matt and Liz, welcome Back to the BiggerPockets podcast. How you guys doing?

Great.

Great.

Thanks for having us.

Yeah, yeah. This should be fun today. So Matt and Liz were on the show back in episode. What was it, Mindy? Number 88.

Show 88. Show88.com Show 88.

There we go. So they were on the show 88, and we learned a ton from them. It was actually one of my favorite shows. I love that show. You guys talked a lot about investing with. It was actually called investing with your spouse, managing financials and growing your team. And that's really what we focused on, was how do you work with your spouse, how do you manage the book work and all that good stuff and kind of the scaling up of your business. Now, it's been a couple years, so if people want to go back and listen to that, please do. But it's been a couple years, and so that we thought it would be fun to bring you guys back, see what you've been up to. But before we get to the future, what you've been up to, let's give a recap for those people listening to the show that have not heard your story already. Why don't we go into a few minutes? Is, you know, who you are, what do you do? How'd you get into real estate?

Sure, I could take that. So we started investing about 11 years ago. Keeps increasing, and I keep keeping it the same amount of years. So I really love her. 12 years. But we actually met through some friends and were dating at the time and went. Started actually getting into real estate by really going to horses, reading rich dad, poor dad, playing the cash flow game. Very traditional way people get involved in real estate. But we both had these, you know, dreams of passive income, making things better. We really got intrigued with real estate for just the idea of making things better and. And also, you know, being able to live our dreams. So we started with a $30,000 loan from my father. It was a big deal. We bought a duplex outside of Philadelphia, little town called East Falls, Pennsylvania, and pretty much bought the property and with a loan, like I said, for my father. At that time, we were engaged, so he was trusting both me and Matt and this gentleman, Matt, who I didn't really know that well. We weren't even married yet. And we. We had some success with it. We got a robo woman. Actually. There was a bunch of things we learned from it. We actually had to evict someone, but we ended up making Money when we. We did a 1031 exchange and then got into some things in New Jersey where we settled and we bought our. We kind of built our portfolio slowly, you know, from there. And. And we're really at this point full time in this. Yeah, we have a team of about five people. We do fix and flips. I wouldn't say we have a hugely scalable fix and flip business, but we do a handful a year. And we also are more on the rental side, so we're more buy and hold investors. And we do a number of, you know, gut rehabs from mixed use, et cetera. Now mostly in the Mercer County, New Jersey area. Trenton mostly is where our focus is.

Yeah.

Okay. Okay. Very cool. So you guys involved here on the East Coast? Mostly out in New Jersey, you said. Right. And a little bit of flips, a little bit of rentals. So why don't we kind of start with, first of all, why do you do mostly rentals, some flips? I mean, like, what makes you decide what to do on a project, which avenue to go? Is it getting closer to financial freedom or how do you decide what you're.

Going to do next? Okay, well, yeah, that's. That's a great point. And what we do, we've coached some people in the past and Ria Club, talk to people about the business and stuff. You know, told people like, you got to have a really solid why. And the why you want to invest in real estate cannot be a, because I hate my job or B, because I want to make money. Right. If you hate your job, I get some advice. Quit your job and go get another job. Yeah, this business is work. It's not something you just go get to sip cocktails on the beach six months after you get into this business. Unless you get extremely lucky, this business takes a lot of work to make it work. So our why is about the ability to make a real impact in the world. And we're choosing to do that through real estate. So the mantra for our company is transforming lives through real estate. So we've got a pretty big why that we're doing this. Make money while we make a difference is another one that we throw out there. So that's why. Now you talked about rental versus flip. So for me, I guess I got this through Rich through the cash flow board game. There's a. There's a level 202 of the game. There's 101 that everybody plays. And then you can also play 202 and you draw these cards and you can either Draw capital gains cards or cash flow cards. And the capital gains is just something you put. You're just making a big chunk of cash in a cash flow card as you're buying rental property. And I choose to, I've chosen to look at our business that way and saying like, I want to do some capital gains deals and I get that they're not tax advantaged and things like that, but I want to make a big chunk of cash that I go put into something else. So be that sale, flip, whatever it is, or I want to go out and buy an apartment building as a cash flow play or something like that. And I find that a healthy real estate investor has a little bit of both in their business. Some capital gains and some cash flow deals. So we actively seek both of those.

Do you actively seek a certain amount of flips or are you trying to get. Do you have certain amount of flips going at a certain. At one particular time? Like you have. You always want to have three flips going. So as soon as you sell when you have another one, or is there like a certain number?

Well, we were, we were scaling up our flip business and had a bunch of employees that were running around doing our labor on our flips and things like that. But we ended up pulling back because that ended up not working. And so we were, we probably had two to three deals in the pipeline at a given time. We ended up, since the last podcast, we ended up just dissolving that arm of our company because it wasn't sustainable, wasn't predictable, wasn't something that we could continually go into each deal and know exactly what costs are going to be. There were major cost overruns and just labor was just getting way out of hand. So we thought it was a good idea because we could buy labor at wholesale and just pay people directly for their time versus paying a lot of markup. Seemed like a brilliant idea, but you got to also manage that time. And it's very easy for it to take a week to hang cabinets. And paying somebody hourly to do that can really kill your job. So we scaled back up to where we're looking to do somewhere between three to four fix and flips in the pipeline at a given time. And pipeline could be purchasing construction or waiting to get sold. And anywhere in that process, we're looking for three to four at any given time.

Okay. You know, there's something that I deal with all the time in that I'm always trying to figure out, is it better for me just to hire employees to handle my Rehabs, or is it better to hire a crew? Because, you know, like, I get a bid on something and the guy's like, I can do it for $25,000. And I'm like, that's like a month of work for, like, one guy, maybe two. Right. So I'll just hire two guys. So, like, lately I've been actually just hiring people. But then, I mean, just before the show, like, not even an hour ago, I was doing, like, bookkeeping for one of the rehabs we have going on. I was adding up everything I've spent, and I'm like, I'm so far over budget from what I. Not necessarily, like, I am over budget, but, like, I'm so much just more on labor than I ever thought I'd be. Maybe a little cheaper on the. On the material, but everything just takes so long. And it's largely because these guys that I'm hiring are getting paid by the hour. And so, like, are they working as fast as they could? Are they being efficient? I don't know. They didn't bid the material either. So are they using the cheapest material or the best material for the job or the. Are they just buying whatever they can? Are they looking for sales? You don't know. Because they have no incentive for anything. They just. They show up to work. So it's a tough.

Yeah, we had one job where there was three job sites, and there was a foreman that was. That was over a couple of job sites, and we started looking at his timesheet, and the guy had gone. He regularly would go to Home Depot four to five times a day. A day. Like, you couldn't just go once and just. You know, there's a certain amount of efficiencies that need to get implemented in having your own labor force like that, or it'll drown you. And also being able to predict that it should take this many man hours to rehab a bathroom or to do a kitchen or to sign a house or to do whatever it is you have them doing, and then really hold them extremely accountable to that amount of time to do the work, or you're going to get sunk because it just adds up so quick.

Yeah, makes sense.

Yeah.

That's one thing I've discovered is paying somebody by the hour, all of a sudden, it takes twice as long. You could have done that.

If you were billing me by the job, it would be, oh, wow, I can get it done as fast as possible. But when you're billing by the hour. I made that mistake once, and now I do everything Myself, with my husband, it just, you know, it takes forever, but I know it's done right.

Yeah.

We've found that there's two strategies we've been working with, our fix and flips. Obviously hiring GCs, because that's one major strategy. And we have a couple that we trust. And then we're also starting to partner with people, people that have flipped homes very well, and we're figuring out what that looks like. Like a, you know, we have, you know, good friends of ours in Philadelphia who are flipping homes and we're partnered with them on a project. So we're just looking at strategic partnerships and, you know, strategic GC relationships right now. It doesn't mean you can't do well with hiring a team again. But, you know, it's the wrong people in the wrong spot and it's going to cost too much.

We should mention that here because we are able to align with that partnership because of Biggerpockets. And they found the deal that we align with them on because of bigger pockets as well. So you would have a landlord that had a tenant move out of a property that was active on BP didn't want to do the flip. It was in a really, really changing and value going up part of Philadelphia. So they reached out on BP and found a flipper and became friends with them and, you know, and over time began to trust them. And so when that tenant moved out, they sold the property to this flipper. The flipper had become friends with us because of some stuff that we had done and everything like that. So it was a very friendly relationship. But because of bp, we developed trust and also just honestly just got to know each other and introduce each other because of bp and. And we structured a joint venture with them because of some lessons we learned through the forums on Biggerpockets. So we literally found the deal and structured it through things we learned on bp.

So let's talk about that for a minute, because there's a lot. I mean, obviously BiggerPockets is a big site. There are hundreds and hundreds of thousands of people. Now, Mindy, who is our community manager, is in the forums all the time, so she knows that there's a lot of personalities, a lot of people in there. One of the reasons people interact on BiggerPockets so much is because of the networking you can do. Like, I have private lenders that I found on Biggerpockets. I've worked with people, I get advice from people. I've gone out to coffee. I'm like, lots of different relationships from bp. So talking to the people that are listening to the show right now, if you guys can talk to them, how. What advice can you give people in terms of how to work with people from the site? Like, how do you know you can trust somebody? How do you know that they're legit not gonna steal from you? How do you. Yeah, how do you even have an idea about that?

Yeah, go ahead.

Can I take this?

Working with your spouse, round two.

Other topic, right?

Yeah. Two extroverts in the same room, huh?

Go ahead.

I become an intro.

Introvert with you. You do realize this, right?

So, you know, I really, I've studied a lot. Not that I could be. I try to share as much as I can on biggerpockets, but I studied a lot of people's behaviors on bigger pockets in these forums. And what ends up happening is there's things that people should do and there's things that people that they shouldn't do. And what ends up happening is people go on there and they say, you know, I need them, I need money, and I need relationships. Can you help me? And you want to help them because you kind of feel. But on the other hand, people don't get that they need to add value and they need to be a resource themselves. And everyone on your site can be a resource. You don't have to have 10 years experience in real estate or have a million dollars to be a resource. So I come from the perspective of you have to be a resource and be someone who wants to help others as a prerequisite if you're going to get involved in online firms. And the second thing is to start building relationships. You can message someone saying, hey, I'd love to get to know you. Have a coffee meeting, see how you can help them.

Yes.

You know, people just want to take. And they just want to, like, fast forward the process. How did you buy that apartment building? And like, tell me in 20 minutes so I can do the same thing next week, you know, and it's not that we don't want to help. I mean, I love helping people. I really do. It's a value of mine. But, you know, you have to add value too. And I think that's the key. And the relationship Matt was talking about, we started just helping each other. We had coffee. We just, hey, how can I help you? How can you help me? And we started helping each other, and then we were a resource to each other. And that was two years ago, and now we're doing a deal together. So I think it Just people want to fast forward things, and you have to work it and actually share and get involved. So I think that's huge. And people just want to fast forward stuff. They shouldn't get involved, first of all.

Sing it, sister. Absolutely. You have to put in the time. I see Josh's. Josh really likes to say there's no such thing as a stupid question. And that's true to a point. But I really don't like to see the forum questions that say, hey, how do I get started? I need a little bit from you. What is it that you want to do? What do you want to get started with? And everybody can help with something. Just because you don't know anything about real estate doesn't mean that you're not some marketing genius or a sales aficionado. You can do something to help somebody else, and I mean, even just sweep a floor. I know a guy, he found a mentor because he just went over to their house one day and said, I'd like to sweep. I'd like to do something. Anything I can do to help you. You know, I don't have any knowledge. I want to learn, so what can I do to help you out?

Yeah, Another. Another tangible thing that people can do if they're just getting started is, you know, answer phones for somebody. Somebody find somebody who is successful, that is maybe doing directional marketing. Nobody likes answering phones. Right. But you don't have to have a lot of talent to answer a phone. An hour of training, you can at least know kind of what to say on the phone, at least to field the calls, know what's going on. It's a very, very simple thing, but it can really be helpful for somebody who's maybe doing a lot more direct mail or signs or whatever, marketing in their business. And that way you get to learn kind of how they're doing it as well. And you're providing value where all you have to know is how to talk, and that's about it.

And we get the question a lot with local reas or just meeting people through bp. You know, how do you find a mentor and how do you do that? And everyone wants a mentor, and everyone should have a ment. But you can't just take from people. You have to give. And I think there's this level of give and take. And all the years that we've been involved in, bigger pockets, people. I could tell you on my hand how many people have said, hey, can I help? How can I help you? Yeah, like, not many, you know, which is interesting, right?

We've had a few people come to us and the biggest to add on to this is the, is the thing that I've offered for people to do for me to help me out us out is to help us find deals. Just simply, just. It could be farming through realtors, it could be talking to your local wholesalers. But you know, we've recently, not recently, but we've experienced expanded our reach into buying apartment buildings and also bought larger apartment buildings in geography. And so we're trying to expand into new markets because we don't want to just be in central New Jersey. We're in central Jersey, we're in Philly now, and we're also in central Pennsylvania. I'd like to keep that reach expanding further out. So these are markets that I'm looking for people that know that I don't know as well as they do. So maybe they're a little more networked and things like that. So I'm working with a few folks on a mentorship basis and I'm glad to help, but if they turn over something and I'll work with them on the deal as well. So it's a win. Win in that sense, you know?

Yeah, I love that. I love that.

Yeah.

If you can, if you can find a deal. I mean, I said that before. Somebody came to me and was like, hey, Brandon, I got this amazing deal. Here it is. Can you work with me on this to help me figure out, you know, we'll work it together. Why would I turn that down? Right? I mean, I'm probably just opening myself up for a million people to say they have a deal. But you know what I mean, like if it's in my area and it is something that I like to buy. So I mean, I like small, multifamily. Somebody comes with a fourplex in my area for 100 grand, of course I'm going to talk and be like, yeah, let me, let me work. Let's work this together. I'll show you everything that I'm going to do in this property because it only benefits me. I mean, it benefits both of us, but it's so good for me.

I think I hear your cell phone ringing back there.

I know exactly. I got one in my area. In my area, I've got a deal for you.

The 4 plex for 100,000. I think Liz and Matt live in a neighborhood more like mine than yours. Probably you can't even find a single family or like a condo for 100,000 in my area and in the Denver area. And it's just ridiculous.

Yeah, yeah, that's what I'm saying. A fourplex in my area would be a good deal. I mean, a fourplex in your area would be a good deal too, but that ain't happening. But you know, just any what, what makes a good deal in your area, what do you want? And then go out there and find it or ask for help on how to find that. I mean, somebody could come to you guys and be like, hey, what do you want? How do I go get it? Give me the. I'll be your. I'll be your hands and feet.

Sure. And you can, and there's education in that too, because you can help them define the parameters that are, that are a good deal by our standards. We've been around the block a few times. We know what works and what doesn't. So I can define those parameters pretty easily as long as once I understand, you know, arv, sell prices and rents, I can back in. And you know what things like real estate taxes that are the standards across the board are, if I can get to know some of those parameters, we can pretty easily through a mentorship, back into what a good deal should look like.

Right.

So you can give them the parameters, go out there and find it and say, okay, it should be around this much money per unit on a mid sized multi or around this on a fix and flip in dollars per square foot. And you can give them the marching orders to go out, to go forth and find it. And they can bring back, you know, potentially good opportunities.

Yeah. And what's cool about that too is that you're not wasting a ton of time dealing with somebody who's not gonna hustle. Like if they, if they produce, if they hustle, then you guys are gonna both make good money. And if you don't, and maybe that person will find out, you know what? This isn't for me. And then it's again, you're not wasting a dozen hours and lots and lots of coffee conversations with somebody who's not gonna do it.

Exactly.

That's awesome. Well, cool. Let's go back and talk again about, like you mentioned, I know we kind of moved past this, but the dissolving of that part of the business, I thought that was interesting. Cause we don't hear a lot of people on the podcast say they, they scaled back something, they tried something, didn't like it scaled back. So how did you know that that was just. So you were saying you dissolved the construction arm, right? Basically doing, hiring your own employees and all that. What does that look like, from a, like, I don't know, administrative standpoint maybe, did you have to fire employees? I mean, how did that all. How did that come about? And tell us about that. Sure.

We had a bunch of W2 employees that we. That we had that worked, you know, for the company. And we ended up letting a few of them go. As we saw that we're going to start winding it down. So we let a few of them go early. And then at the end of the year, we decided, okay, this is, you know, we had kind of gotten towards the end of some of the projects. We had a few. There was all. When you get into this business, there's always something in pipeline, right? So there's projects that are done, there's projects that are halfway finished. There's projects we haven't started yet. So there wasn't like this break point that it's like, okay, all the work is now done, the paint's now dry, you can now go home, and you're now laid off. Right? So we had to just pull the plug at a certain point and go to everybody say, listen, this isn't going to work out. I mean, it was tough, man. I mean, you got to think about, these are people's livelihoods and things like that. So, you know, it was a. It was a not an easy moment for me to go and face these people and say, hey, listen, just, this is going to work and we're going to be letting you guys go today. But, you know, I did it. And they've all gone forth and found other sources of employment because we're w2ing them. They. They got to fall back on unemployment and everything like that for a bit. Some of them went back and found work immediately otherwise. Others took a while. But they've all. They're all into the workforce now, and I know that because they're not collecting unemployment anymore, because I see that. So. Yeah, but the reason why we did it was we just. Liz and I had done a lot of watching the profitability of our construction jobs. And I say construction, I'm not talking about people hiring us to do construction for them. This is strictly a team that renovated our vacant apartments and handled our fix and flips. That was it. That's all they did. And they also did the. We were doing some bur stuff, and they were implementing that as well. Right. So just we started looking at the numbers and everything was going over budget. Everything was coming in higher than it should have. And there's also a former business partner of ours was running that division of the company. So he was parted with as well. That's why we had to do it, because we couldn't predict where that business was going to go. Sometimes we made money and a lot of times we didn't. And a lot of times we didn't. Were becoming more and more. So we and this guy owned real estate together. So we ended up having to sell some of that real estate to pay some back debts that the company. Because then the company was also getting itself further and further into debt. So we had to sell some of the real estate to part of the business. Right, that part of it. Everything else was healthy. The rental side of our business was very healthy. So we had to sell off properties that I owned with this partner that Liz and I own with his partner to pay the, you know, home depot bills and credit card bills and, you know, just to pay off and resolve things.

So, yeah, I'm just gonna add to that. But no one's wrong in these situations. I mean, it was a tough situation, but, you know, you have to take a step back and go, okay, what am I really good at? And Matt has a lot of strengths and he's got a few weaknesses.

None.

None. Me too, Matt. None.

So sayeth my wife.

But, you know, and so he was a little more active with the team and he had to look at in the mirror. And he can't just blame one person or the team. He had to look in the mirror and say, what could I have done differently? And I think that's a big lesson in this business because everyone makes mistakes. Everyone does things that don't. Sometimes doesn't work. And you have to continually say, okay, we want this to be successful. What could we have done differently? You start blaming everyone is when you're not gonna be successful in this business because it's the accountability, right? You gotta own what doesn't work and what does work. So, you know, we started talking about it. We said, you know, we need to see consistent profitability, right? You can't. It was like you almost felt like you were thrown the dice. We could have just gone to Lennox City, right? I mean, and I don't want to make anyone wrong. I think it was the partnership and the team. Everything about it didn't work. One person wasn't one thing. It was it. It didn't work. So we really careful not to blame and make people wrong because it's really easy to do.

We learned a lot about ourselves through that journey and. And we could have through loyalty and because we Liked these people. We could have ridden it all. We could have ridden this thing all the way to the bottom, you know, and allowed it to take everything we had. But we decided, you know what, as much as we like these people and as much as we want this to be successful, because we see the possibilities, we had to draw the line and cut it and do what we did. It was a very, very difficult point, but it was also a very courageous point for Liz and I to acknowledge it's not working. It was a pivot to acknowledge it wasn't working. And then. So since then, we rebounded and hired all GCs, turned around all those projects, and everything we've touched in 2016 has been profitable with flips and that side of reselling all the properties that we had with that partner has all been very, very profitable. And that paid back those debts and then some with extra cash and everything. So it's been a really good journey this year in and in self reflection too, and in figuring out really who we were through that process.

Yeah, Well, I think that. I think that is amazing that you guys looked at your business and had that conversation of, this isn't working. Well, let's cut it rather than trying to fix it. You know, I think a lot of times everybody. I mean, I do it all the time in my own life. It's like, I just keep doing it because I've always done it, and I'm just gonna keep doing it because I've always done it. Right? Like, I mean, I was just thinking the other day about buying, like, cheap houses. I still buy, like, you know, cheap little, you know, rundown houses and fix them up. And when I look at them, like, I'm making like a hundred bucks a month at the end of the day on some of these. Why am I doing it? Just because that's what I've always done. And so, yeah, somebody, I mean, just. I mean, just like, what, yesterday, two days ago, somebody offered me a $15,000 house. And I'm like, sure, I'll take it. And so now we're working on closing on that thing. And I'm like, what am I, what am I doing? Like, it just doesn't make a lot of sense. And so again, and I love the fact also, you know, the four hour workweek. Most people have read that book. You guys probably familiar with it, right? So in there, Tim Ferriss talks a lot about stop trying to always work on fixing your. The stuff that's not. You're not good at. Right? So I'm not Very good at this. I'm gonna keep working on that to try to fix that. Instead, he says, focus on your strengths. Right. What are you actually good at? And in your case, you guys looked at it and said, you know what? Our strength is not in managing a contracting team and managing a team of people, because, I mean, some contractors, they are really good at it. They can get their people working fast and quick. Yeah. That's just not your business. That's not my business. So why are we dabbling in it? I think it's a. I think it's a good question to ask. Just because you hear other people doing it and it works for them, maybe it doesn't work for you.

And it's really important to ask that before it goes down a road that's too far to come back and make. Right. Right. So it's like the continual meetings that we. We joke. We have meetings all the time together. People are like, what are you meeting your husband about? Don't you. Don't you live together?

Like.

Yep.

We don't talk about work all the time.

With a son, you gotta be husband and wife, too.

Yeah.

So we have a lot of meetings working on the business. That's where kind of sometimes where I add value to my. You know, trying to add the strategic value and tell my husband what to do. No, I'm joking.

But just to kind of weigh in, saying, hey, I can look at things a little differently in our business because I'm not as day to day as Matt is. I mean, I have parts of our business that I run and help with, but I'm not as day to day to him. And I don't run the day to day. And I've been very careful to not do that. It doesn't work for our personalities, but I do work in strategic ways in our business. And I'm able to say, hey, you know, this. This part I'm looking at totally objectively. It's not working. And then he's open and we talk about it. And you do. Sometimes I say things quicker than he's. He says them because he's in it so much more than I am. So it helps.

It's good to have it as a perspective.

I was just gonna say it's a lot easier to see it when you're not in the thick of it.

Oh, man.

So now that you don't manage your own contracting company or your own contractors, how do you find good quality contractors that you go back to again and again?

We ended up. We have one GC that we work with, that, believe it or not, of all things, was running a clean out company when I first met him, like just, you know, you have an estate, no problem, I'll clean it out. I'll dispose of what you don't want. I'll take what you do want and put it over here. He was that guy and he was cleaning out apartments for us. And I went to him and I saw, you know, he had a lot of integrity, had a really good crew. And I asked him, do you have a general contractor's license, which in New Jersey you have to have? And he said, no, but I can go get it. I said, let's just do me a favor and go get it. And so he did. And so from my prior business and owning, you know, running the construction company, we had a whole list of subcontractors. And I had plumbers, electricians, H vac guys, you know, concrete stonemasons, everything. And so I went to this guy and I slowly trained him how to be a gc. I just took him under my wing and I made. And I started him off just doing apartments, you know. Yeah, just doing little turnovers for a thousand bucks to 3,000 bucks. And as he grew, he's on two flips for me right now. Two flips from paying him, you know, 30, $40,000. And I gave him some of my resources. My plumber, my siding guy, my roofer, and he's my appliance, where I go for appliances. He didn't know where to go to buy kitchen cabinets. And so I gave him like, listen, don't go to Home Depot, go to this wholesale guy right here. Here's his phone number. So I trained him how to be a gc and so now he's under my wing on that. Now I've also, through my network with other real estate investors because we know a bunch of other real estate investors, we've started to tap into their network with their GCs and that. So that's how we built our network. And we tend to use the same GCs over and over again. So I find that if you've got a good horse, just keep running with it. And that's. We tend to not beat these guys up too hard or take them, you know, and squeeze them and take them out to bid every time that there's a job and everything like that. If I think it's a fair price, I'll give it to them. And that my favorite thing about using a GC is that it's predictability. I know how much it's going to cost. The one thing you have to manage then is time. But I know what the money is going to be. I know exactly what the money's going to be. But then I got to start pushing them to get the job done, because then that's the factor of the. It's a bit of a variable, but the quality and money, I can. I can control them.

Do you tell them how much you have to spend on a particular flip, or do you ask them for a bid and have them tell you how much they're going to charge you?

Now, I can talk to them about that, like, but that this is like their, you know, eighth or ninth job for me, you know, but. And then they still come in high sometimes where I'll say, like, listen, you know, one of the guys bid redoing a unit, and my budget was to 2,500, and he came in at like 30 something, you know, 32 or $3,300. And so I just said, listen, Pat, this is what I have. And he said, okay, I'll do it. I'll do it for that, you know, no problem. I can, you know, so I will. I will disclose budget to them now in the game, now that I have that level of trust and now that I'm a large portion of their business. But coming out of the gate, first time meeting a gc, they always ask you what you have in your budget, and I rarely tell them. How do you answer?

How do you answer that? How do you answer that question? When somebody. Well, they ask that all the time.

If you want to play the game. If you want to play the game with them, I'll knock 10% off and tell them, yeah, I'll knock them at 15%. Yeah. Well, this. If they really push you for. Just to make sure that they're going to even be even near your ballpark, because that's fair. They want to make sure that it's going to be somewhere in the wheelhouse. You want to be in that. But sometimes I'll just say I'll be straight with them at times and say, listen, I really like for you to, you know, give me what you think it's gonna cost, and then we'll talk about my budget, you know, because most of the time it comes out if you're far off from each other and what you think it should be and what they're at. I mean, but I tend to. I try not to go first unless I. Unless I have to.

Yeah, I had a repair, a rehab that I needed to Do. I was installing all new windows and like giant sliding glass doors. It wasn't something that we could do ourselves. And I got a bunch of different quotes and one guy even said straight out, this is gonna be $60,000. If that's not in your budget, I'm not even going to come out to look at it. That's not my budget. So great.

It saved you so much time there. Right? I mean he's showing his hand and saying this is what it's going to be. I'm working on getting enough data so I can use J. Scott's method through the book that he wrote through BP about being able to estimate by dollars per square foot. When I look at a house and just measuring the whole house out and say this is a 1700 square foot house. If I'm going to do this work, it should cost me around this in square foot. Just using a lot more data to measure that. I'm not. I don't have enough data to input yet. But I'm looking to get there too. So I can just estimate, you know, by square footage.

I would also love to do that. I don't do that either yet, but I would love to because. Yeah, they just would be so much more easy to. Yeah. I mean, but every house is so different, you know, I mean like especially with. With the ages. I don't know what you guys are on the east coast. You probably have a lot of old house houses too, you know. We do, yeah. Some of our 1900 and some are 2000. And you know, the difference between that can be pretty dramatic when you're property. But makes sense.

Yeah.

Going back to that book. Are you talking about the book on flipping houses by Jay Scott published by Biggerpockets Publishing?

I actually. It's funny you bring that up. Yes, I was so. Yeah. But I couldn't remember the title. So thank you.

And it also comes with the companion copy of the book on estimating rehab costs, also by J. Scott.

Wow. Where do you get that at, Mindy?

You could go to biggerpockets.com flippingbook that's it. That's it.

And you have to raise your voice inflection as you're typing that into biggerpockets.com flippingbook okay.

And that's how you get right to it.

Awesome. Awesome. All right, so what about like bad contractors? Do you guys deal with bad contractors ever? Like, do you ever have bad situations? Have you had any bad stories with them?

And that doesn't happen, Brandon.

And how do you deal with it when you do?

Not in New Jersey.

But believe it. Well, we've been in business for 11 years. And so we started out working with contractors and the whole concept, like, you know what? I'm gonna go start my own construction company because I'm doing it myself. That was because we were dealing with a bunch of bad contractors, right? And so we got in bed with a few really bad contractors toward the end there when we were just like, you know what? We're just not doing this anymore. We're gonna start. We're gonna scrap and start our own. But straight up stole from you. And you would. You would give them an advance on the money, and then they would disappear, and it was impossible to get them to come in and finish. And just bad contractors are not good with their numbers. And you can tell with their financials, and you can tell that they're robbing Peter to pay Paul, meaning that they're taking the advance check that you give them to start your job, to finish the job that they were supposed to do for the guy behind you.

Right?

And it may seem like a lot of contractors do that, but there are good contractors that actually hold the money in escrow and pay their guys out of it and, you know, spend their materials and stuff like that. And that last check that you're giving them is really their profit. That's. That's their gravy. It's not money that they need to finish off some other project elsewhere. So I find that to be the most common contractor error. And that. So the one guy that we had, that's the former cleanout guy, he underbid a job for us, and I was a little concerned, but I let him jump into it because I think that he only underbid it by about 5% of what I think that it really should have cost. And he called himself out about halfway through the job and said, listen, I am having a problem on finishing this project. Here's what I did. He sent me a long email, itemized exactly what he did wrong. It was great, and just kind of turned himself in. And he didn't ask me for more money, but he asked me to adjust the payment schedule to say, okay, I see you're retaining 30% of the job until the end. I'm not going to have enough money to finish this job unless you drop that down to 15%. And he just explained exactly what he's gonna do with the money and everything like that. And so I agreed to it, but it was only because he was honest and turned himself in. I find that if you find contractors kind of pretty much telling you white lies to cover for themselves and where things are and stuff like that. That's another sign of a bad contractor, even if they're just trying to sweep things under the rug or keep you in the dark and stuff like that. So I find that's another side of a bad contractor, too, so.

Yeah.

So true.

Yeah, I had a guy steal five grand from me, gave him a down payment on windows, use that money to pay off the last job, didn't have any money to buy the new windows and end up just disappearing. Yep, gone. And it's just like. Well, there was a lesson learned there, I guess.

Like, I wish all that I had lost through contractors was five grand.

Would that be nice?

Yeah.

So, Brandon, where did you find that contractor that. That stole your money?

I found him through Craigslist, actually, which I found a great contractor at the same time. I actually put the ad up there. I said, looking for a contractor, and two guys responded. One was fantastic. He did a whole rehab for me. And the other stole five grand and left. But then the second guy ended up fixing the problem for way cheaper than my budget, so actually ended up not as bad.

But you win, right?

Yeah, they kind of washed out in the end. So anyway, yeah, it means. Again, finding. Finding guys, I think key. A couple of key things you guys said. First of all, you know, once you get good ones, keep them, pay them well. Don't tick them off. Don't. Yeah. Don't try to nickel and dime them over everything. And even in a case where maybe they do underbid it and if they come to you. Yeah. Work with them like you did. I think that's fantastic. Just.

And let them win a few times. Let him win a few times. Like, if your budget is a little higher than what his number. Than what his number is, maybe tip him off to say, listen, maybe you might want to, you know, just. I'll give you a little more even. I've done that to my guys. Or even just withholding it and throw them a bonus at the end.

Yes.

You know, there's nothing like throwing just a straight cash bonus, just $300. Great job. You know, it doesn't have to be a huge amount of money, but if they come in under the budget, and the budget that I need to make the job successful is X, and they made me some money by coming in under that, and then I'm happy with them and I want to reward them with a little pat on the back. There's so much loyalty. You get from that and they're willing to look the other way if they end up under bidding a bit and don't try and get it out from, you know, get it out of you in one way or another.

That's a fantastic.

And knowing that there's another job coming, you know, knowing that you're gonna do this over and over again. I have, I met a woman through bigger pockets locally and she has a, she does a fix and flip business as well. And she had, her electrician came up to her and said, I wanna be your electrician. How do I do that? What can I do to be your electrician? And she said, well, I do a lot of these, so they're all in the same neighborhood. He said, I'll make your job a priority. I will do your job first. I will. You know, she knows he's going to show up when he says he shows up. She knows he's going to do what he says he's going to do. So she. And he knows she's going to continue to give him more and more projects. So it's a really great situation. But yeah, she found him, you know, just the luck of the draw.

Yeah.

And on that note, you know, a lot of times when my good contractors, the people that I want to keep working for me and prioritize, you know, what are they most interested in? Usually it's getting paid quickly. Like they got a lot of bills, they're usually not that good with their finances and there's always, you know, Friday nights coming, you know, so even if it's not in my system, you know, I might pay bills once a month and I know I have 30 days to pay that bill, but I will meet them in town on a Friday night at 9:00 o', clock, you know, p.m. to give them a check if I like them. Because I, if that's what it would help them out. I mean, last week I did, I met a guy after work, like after he got done with the job, came up and we met because I want him to be happy. I want him to think next time, oh yeah, if I go do that job for Brandon, I'll get paid that same day, I'll get paid the next day, I'll get paid quick, I don't have to wait.

Like that means a lot. That means a lot to some of these guys to be able to have it right there because they need it, honestly. So I'd ask you, Brandon, do you use some sort of a contract with your guys? I mean, how are, how are you regulating terms with them and payment schedules and stuff like that. So we use a boilerplate contract. And I'm curious what you use for your guys and Mindy too.

Yeah, I mean it's a good question. So I have a document I don't even, I wouldn't call it like a legal, even a, a boilerplate, like a legal document. But I just wrote this document. I actually put it in the file place if people want to check it out. Biggerpockets.com files and I'll link to it in the show notes@biggerpockets.com show what are we, 20303? Yeah, biggerpockets.com Anyway, it's just a one page form. All it says is like, here's a description. Like, you know, this is my company name, here's a date, here's the project address, here's a description of everything that will be done here is, you know, payment schedule, payment, you know, date, payment date, payment date. And then it just says this will be whatever. Anyway, and then we both just sign it. And it just. When I switched that a few months back, I don't know, three months ago, it's been so helpful because like they have their form and I don't care if they want to put it on their own bid form. I don't care. We take it, we put on my bid form, we both sign my bid form. Now when I have a job, I've got eight bid forms for the eight different aspects of the job. And everyone shows what they're doing. Exactly. And when they're getting paid for it and everybody's on the same page, you give them a copy, me a copy and all happy. It's been really nice having that. So I thought that's what I've been doing.

Cool.

Yeah. That's not my experience.

It never was my experience. I just got so fed up with it, I decided to get, I decided to get organized.

But yeah, I have, we have resorted to just basically doing everything. But like if we're adding a second story, we'll hire the, the addition of the actual structure. But then we do everything else ourselves because that's not been our experience.

And you know, you know, I like about that just Mindy, you doing that, you know, a lot of people on the show say, you know, you shouldn't do your own work. And we have a lot of people who are building systems like, you know, I don't do my own work. And you guys, you know, Matt and Liz don't really do their own work, but I Love the fact that it works for what you and your husband want to do. Like you guys are building a real estate, you know, empire as well, just in a different way than I'm doing it. And I love the way that you're doing it. It just, it works for you and where you're at right now. And I mean, you guys are super, super successful at what you're doing and it's just, it's different. And I love that.

It's got to work for your personality. Yeah, yeah.

Real estate is all what you make it for yourself. And I don't want to have 14 flips going on at once because the thought of hiring 14 contractors really gives me the heebie jeebies.

Yeah, I think that's cool.

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Well, cool. So a minute ago you guys mentioned, more than a minute ago, you mentioned that you're getting into apartment buildings now. So in the last. Since we talked, now you guys, I'm assuming, bought something big. Can we talk about what you've been up to since then in terms of larger purchases?

Sure. So about. Probably about a year ago, right? Just about a year. Literally a year ago. We Both read the 10 times factor. I think it's called a 10 times factor by Grant Cardone.

The 10x. The 10x 10x rule. The 10x rule. Yeah. Biggerpockets.com show 108, I think is Grant Cardone.

Yeah, yeah, yeah. I didn't mention, but I am. We're expecting in March. So my pregnancy brain is literally like. I don't know if I have brain.

I remember those days all the time.

But anyway, yeah. And so about August of last year, we're on vacation and we're at that point we had. The largest building we had purchased was an 18 unit, and before that was a 10 unit. So we've kind of grown incrementally. You know, we didn't go from a duplex to 100 unit. That wasn't our strategy. And there's a lot of strategies out there we kind of built very systemically, so to speak, and very. I want to say slowly, but we methodically. Methodically, yeah. I'd say methodically. So at that point I said, you know, it's time for us to. We know the recipe. You know, we know we manage these, we manage these properties. We're almost underselling ourselves where we could be, we could be really raising our game. And at that point we made a goal. We wanted to buy 100 unit, you know, apartment building. And we made it. A goal is August of last year and in what August of this year we closed on a 49 unit. So we didn't get to that 100, but. But it was 49. So, you know, and I think the key there is we went from an 18 unit to a 49 unit, but we were also managing over 100 units, units of various size. And we were able to really assess what's the recipe.

Right.

So if you can handle a 20 unit or an 18 unit, you probably can handle a 50 unit and 100. I mean there are different issues that come up, but we kind of felt comfortable and ready and built an investor base and build trust with these folks. So, you know, we're ready for it. And yeah, I'll tell you. And how we found it.

And yeah, I'll get briefly into the story of it came up through. I don't find that many deals like this on like a wholesale market or anything like that. I mean single family homes and small, small rentals. A lot of them are on wholesale or Banco Reos or whatever. And I know that there's outlets, I know there's auctions and stuff like that for larger properties like this. But I have found the most success for these kinds of properties through just brokers and that. So a broker we had actually done a few other transactions with brought us this deal and it's out in central Pennsylvania out. And it's actually out in Amish country out in Lancaster County, Pennsylvania. And a beaut. And it's this converted factory, it was a shoe factory in the early 1900s, became abandoned and was converted into an apartment building in the 90s. And the guy that converted it owned it for 20 years and was looking to sell. So we went out and looked at it. I thought it was overpriced. And so they were asking 3.9 million. And we underwrote it and crunched the numbers and put in what I thought the factor should be on the property. And we came back and I told the broker, like, listen, it's got to be anywhere between 3.2 and 3.4. That's what we think the property's worth. And they scoff oh, no pro. You know, this is a hot market. This is seller's market right now. And you know, and. And just the guy literally just kind of shooed me, shooed me off. The broker did. And so they went and took a contract at 3.8. And that buyer started getting cold feet. And it was a stretch for them to get into that kind of market. And they'd never bought an apartment building before, so they just tried, started finding things wrong with the building and asking the owner to do something called a retrade, meaning saying, hey, we discovered some things during our due diligence phase and we wanted to drop the price to 3:7 because we found that your roof's not very good or because we don't like the way these units are laid out or something like that. So just finding something wrong with the property, asking to drop the price. So you gotta be careful when you do that because you can offend people. So you can make it look like you're trying to, you know, pull a fast one on them, right? So, so they ended up. That deal ended up falling apart. The owner of the building didn't disclose to the broker. I'm laughing because it's just funny what people don't tell their agents. But he didn't tell his broker that this property had something called a balloon payment due in a certain period of time on his mortgage. A balloon payment means that, okay, you've got a nice five year fixed mortgage, but after five years is up, the entire amount of the loan loan is now due, meaning the rate doesn't reset. It's not a 30 year fixed mortgage. It's typically a five year loan that you get on these types of things. And there's a bunch of money left at the end of that five years. And so that bunch of money is called a balloon. And so this guy disclosed to his broker that he had a balloon payment. It was due right when that deal was supposed to close. And so he came to the broker and said, hey, listen, because that deal fell through, my loan is about to go into default. And so he went to the broker, says, is there anybody else interested, you think can put a deal together? And the broker said, yeah, well, pretty sure Matt Liz could buy this building. But they offered me 3.2 to 4. And the owner shocked the broker by saying, get him out here. And so we went out and met with the, met with the owner. And this property has a gazebo on it. And I sat with the owner and the gazebo on the property and we put a deal together at 3.35. And so it was a great. And so I'll shut up now that you guys ask questions. But it was. There's more to it than that. But yeah, I'll let you guys ask.

First of all, they do teach scoffing at low ball offers in real estate school. So he obviously passed because he was.

Able to teach you. Yeah, he must have taken that class.

And second, you must have a really big bank account for. You just have 3.5 million sitting around or did you?

We do. We just didn't have anything else to do with it.

Different currencies and stuff. Yeah, yeah.

Just laying around the house.

That's right.

Yeah. Yeah. Well, we've just gotten into the space of just constantly talking to people that are looking for alternative places to invest their money and so we can do private loans with these folks. We've done a few turnkey deals. Not a big focus for us. We have done a few turnkeys, but we also can offer equity positions for investors that are qualified. So we had a list of people that were interested in our equity stuff and people that invested with us through this because this is our seventh of, they call it syndication that we've done of people pulling money coming along with us and buying midsize, multi or buying some sort of property with us. So we had people that have done deal one through six with us and so we just went to them and said, hey, we've got another thing, are you interested? And so in about 45 days or so we were able to assemble the deposit money that we needed to buy the building.

And then did you get a commercial loan for the rest of it?

We did. We got a commercial loan that was a non recourse loan, meaning that we didn't have to personal guarantee anything. Although they still vetted out our financials to make sure we were financially responsible. So we had to have good credit. You have to, you know, have your financial house in order as well just so they can make sure that you have that. But they were more concerned with our resume and more concerned with. With the fact that that Liz and I and the team that we built know how to run a building like that. So that was more of the conversation. Show us your other assets, show us that you bought real estate before. Show us your profit and loss statements for your other real estate. I had to go through a lot of that. They vetted out a lot of our other real estate, so. And they wanted. Who's going to manage it? They wanted to know. And so we Hired a third. We hired a third party management company for the first time. We've managed all of our own real estate with our own team up until now. But we hired a third party manager because this property is two hours away for us.

That was going to be my next question. How did you. How are you managing it? Because I'm not that familiar with east coast real estate but I know that Pennsylvania is not right next door to New Jersey like your properties.

By doing it ourselves, the management ourselves for so long we developed what we thought we think to be parameters on what we think works as a manager and what doesn't. We've actually Liz and I've written some articles for BP on this and I shoot a lot of videos for BP and that. So there's a lot of that out there just through what we learned through this process and some things that we call being a good manager versus being a great property manager. So, so we vetted them out basis what we think a great management company does and you know, some through our network because we have a network in Lancaster county but we just had. Didn't own any real estate at the time and through BP put out a behavior looking for property management company in Lancaster.

That's how we found. That's how we found Slate House.

Yeah, yeah. That's the organization that manages it for us. That's. We found them on BP and that. So yeah. And the biggest thing that I'll say that this is just like a tip for your listeners is for an asset like this, I didn't want the property manager's only source of revenue, their source of profit to be their management fee and their markup on labor and their fees with us. We wanted to bring them on a ride along into the profitability of the building. Because it's what I'm used to. I'm just. For me we're used to being concerned with the bottom line because we own just about everything that we manage now. Right. So I find this a different management strategy we have. When you have an ownership stake, that's just what I've seen for myself anyway. So we required that anybody that managed the building buy a share of the equity of the building. So this property management company owns a share of that building and it's a very, very small stake. It's nothing. You know, there's people that own quite a bit more than they do but we still require that they take some sort of an ownership in the building so that they look at it like an owner as well versus just a management Company looking to collect a fee.

That's one recipe I'd also add to the one other thing that's really worked with this particular property is that we've always. Some people invest out of state, some people have, again, very different strategies in real estate and everything works for people and, you know, different circumstances. We've always invested locally, we've always invested. We've always had a rule. We don't buy anything more than 30 minutes away. It's just been our thing, it's been what we've wanted.

So we kind of broke that.

That.

And as we grow, we're like, okay, we don't have to do it that way like that. Brandon, you were saying about doing things because you've always done them. But it was really important for us to have someone that we trusted local to that property. And, you know, a family member of ours happens to be a real estate investor. When we get together for vacations, he always chats about his properties and his duplexes. We chat and, you know, we always get into good conversation. We'd never done anything with him before, so we actually brought him in as a, as part of the general partnership, you know, outside. And he's been such an amazing asset, him and his wife and they're 10 minutes from the property, so that's huge. That's like our eyes on the property, so to speak. Matt goes up there and I've been up there with him, but he's not getting up there as much as obviously you need someone. And I, and I also mentioned people want to get into multi families right now. They want to buy these apartment buildings. And I got to tell you, it's the buying is the one side and I feel like that's the easier side in some ways. It's the managing side, especially as you transition because you're taking on an asset that people have been used to a certain way. And the way this property was managed was a little bit more mom and pop and it wasn't being managed as well, as much as we like to see in terms of like a business. So we've had a transition period, right. So you're not just collecting, you know, huge rent checks or you have to get. It's a six month process of really transitioning and turning around units. We have, we have more vacancies we want to see right now, but we're managing it and we're gonna get those filled and we're managing the manager and Matt's going up there and we had.

A bunch of tenants move out Right after closing.

Just because they don't like what you know, they want to see something different. So I just want to make mention.

They were scared there was a new sheriff in town and mom and pop at last.

You're gonna expect that. We've seen that in every larger. Anything above like, like seven units. We've seen that happen.

Yep.

Where it's been like, you know, you're gonna deal with at least of three to six month transition time like we call it and you're going to deal with some of that. So don't be scared of it, but know it's coming and know that you know you're just not going to sit back and collect your rent checks. It's going to be something you have to manage.

So there's, there's bad apples and we're getting tangent.

This is a good one.

There's bad apples on multifamily and there's also people that are like the stewards of the property. And the stewards of the property can actually be a bit annoying at times because they will call you if there's anything going on. The snowplow company doesn't show up by 9am when they're supposed to. They will call you. I've had the guy that's the steward of our 10 unit building and every building has one of these people that's just they watch out. We had one tenant in a complex we sold. She was planting gardens, she was watching the whole place. She would walk around the streets with a trash bag and pick for recycling. But she would also call you with anything. And so you have to let go that these are annoying people. They treat it like it's their home. They're the stewards. And so you got to find them and make them your advocates and you know, make sure that they're happy because they will look out for the place for you and then find out the bad apples. The people that are, you know, sneaking at a bunch of relatives and having parties and paying the rent when they want to pay, when they feel like paying it and stuff. So we're in the middle of find. I think we found most of them. We found our Stewarts and our bad apples on this building and we're, you know, just looking to peel off the bad apples right now.

That's fantastic.

Do you give your stewards any sort of discount or any sort of incentive for them to continue this?

They don't really need that. I find that they don't need that. I think what they want is attention. They want to Be heard. And I think that they're not necessarily looking for, like, a pat on the head or anything like that, but I think they want. They just want you to care about the property as much as they do, because they're just treating it like it's their home. I mean, we got one building where somebody's been living there for 25 years, right? So she's never moving out. It's her home. Unless we force her out of there, she's never going to leave. And as long as I treat it like it's her home, like she does, then she'll be very, very happy. You know, we do incentivize tenants, but, like, we give away a flat screen TV every year to our tenant, to one tenant out of our tenant base. They have to pay their rent on time all year, and then they get their name into a drawing, and all the people that pay their rent on time get into a drawing and we draw out one, and I give away a flat screen tv. This is for the stuff that we manage in Central Jersey and Pennsylvania.

Yeah, you wrote an article about that for the. For the blog. I remember that. I thought that was a great idea.

Flat screen TV to my tenants. I'm nuts. Well, we also broadcast that we had done it to our tenants and for our new tenants, we tell them that we're gonna do it. Just so you know, you could win a flat screen from us. So it gets us impressed with tenants, and it also just is a nice way to give back and say thanks.

So I love that. I love that. I remember reading that article, too, and I remember just being like, why am I not doing that? I should totally be doing that. I have not yet integrated it yet, but it's. It's in the works, so. Very cool. No, that's awesome, guys. All right, so we could talk forever. Obviously, we got to start moving on here because this show will be four hours long. So I want to move us over to a section of the show that we lovingly call our fire round.

It's time for the fire round.

All right. These questions come direct from the Bigger Pockets forums, which, of course are the listeners can access anytime, day or night for free@biggerpockets.com forums. Go in there and ask some questions. All right, the firearm questions. Let's get to it. Number one, I'm looking to invest in a 10 to 50 unit multifamily building. Is my first larger multifamily property. Should I look local or is it okay to look out of state?

Well, it depends. It Depends on your goals. It depends on what you want to do. It depends on if you're doing this thing full time right now, if you're looking to invest passively in a deal like this. So I would say if you're investing full time in this business, I would say I would keep it more local, especially if it's your first midsize multi like that, because then you can kind of learn the game of management and be able to reach out and touch it. If you're going to raise investors, that will go very far with them. Unless you've already got this whole management team and conglomerate lined up in the state that you're looking to buy in and that all that groundwork in place, I would say you want to keep it local on your first deal for investor comfort and for your own education. Would you agree with us?

I have to agree with you.

Writing. Wow.

Okay.

Question number two. I had a tenant move their boyfriend in without asking. They claim that the boyfriend is not living there, but his car has been there for months. What should I do?

File eviction immediately? No, I'm just kidding.

Okay.

We've had that happen a few times on us that our lease says that any adult that's in the property for more than 10 days straight is considered an additional tenant and they have to sign paperwork and you have the right to screen them and things like that. So I would go case by case. If the boyfriend is causing problems, then you really want to address it. But I think either way, you want to get some paperwork on the boyfriend, you know who he is. The proper way to do it is to make the boyfriend and apply, fill out an application, pay an application fee, and run a background and everything like that. Obviously, the tenant you have, the girlfriend is probably able to afford to rent on her own or you wouldn't have let her in the building to begin with. She probably already approved her. But I would get something on the boyfriend just so you know who you have in there. So we've had a situation where the contacts. Yeah, yeah. Emergency contacts and stuff like that. We've heard we had a circumstance where the girlfriend moved out that was on a lease and the boyfriend stayed. And he's pretty much a squatter at that point. Right. And everything. So we had to deal with him now and I didn't have any information on him. So don't do what we did many, many years ago. Get info on these people so that you can deal with them and know who it is that's living in your space.

We had, when we first bought our apartment complex. We had four guys that were living there when we moved in that were apparently undocumented workers, quote unquote. Because then they all got deported and so the unit was vacant. But then four more guys just showed up one day and took their place. Like we didn't know who they were anyway. And so that was an interesting situation to deal with. And it happens. And we just, I don't know. You just deal with those things when they come up. Yeah, good answers.

Yeah, yeah.

All right, next question. Do property management companies typically. It said, Toby, total newbie question at the top of this forum post, but it says do property management companies typically keep the books on a property for their clients and like deliver a balance sheet income statement at the end of the year or month? Or do they just handle the day to day property management like collecting rents and leave the accounting and all bookkeeping to the owner?

Yeah, I could take that. The, you know, it depends on the property management company, the one we're using because again, this is our first experience in the 10 years that we've been doing this. 11 years, whatever. They, they do the bookkeeping, they collect the rent, they manage the property, they do the turnaround, you know, turnaround apartments, what have you. So they're the front of the, you know, managing the property when it comes to paying the bills, so to speak, the mortgage, you know, insurance, all the different things that we have to pay. Our, our bookkeeper, our office, you know, bookkeeper, slash office manager takes care of that. So we get actually a. Not an acquisition fee, a asset management fee. My brain. Seriously. Asset management fee that basically the Derosa Group, our company is that manager of the manager, so to speak. We get a fee to then take care of paying the bill. A lot of property management companies can do either. They just charge more, you know, on a monthly basis. But we, we wanted to kind of keep some control because kind of we're used to controlling it all.

Yeah.

So we really wanted to keep some control.

Giving you something though. Property management companies should give you some sort of a statement at the end of the month on activity. On activity. They might not be paying the bills, balance sheets, everything like that, but you want to get some sort of some statement from that. It should be better than like a Microsoft Excel sell. I would make sure property managers using some kind of a software like, you know, Appfolio, Rent Manager, Buildium, something like that.

Better yet, it's nice when you use the same software. When we were interviewing property management companies, we asked them what they were using. And they had said, you know, a lot of them are using appfolio, the three that we interviewed. And at that point, we were using another one, Rent Manager, which was great, but we were just ready to move on a little bit from that. And now we're using appfolio, so we're sharing the same system, same software. So it's kind of nice because they can give us. We are familiar with the reports they give us.

Makes sense. Cool.

I think we're supposed to answer the questions faster on the platform, so.

No, it's. All right.

Lightning fast. Lightning fast. Right.

Okay.

I have around $500,000 in liquid cash to invest, but I'm still confused where to start. Everything I've been reading has been about eventually raising capital, but how do you start when you already have the capital? I'm looking for maximum. Maximum cash flow and appreciation later down the road.

Maximum cash flow and appreciation later down the road, huh? Okay, I would say that again. It depends on what your goals are. Right. So if you want to do it yourself and you want to make maximum cash flow, I would look to do the investment yourself and everything like that, But I would not go taking all that 500k and slinging it into a deal. If you've never invested in real estate before, I think that you should start really small and go buy some sfrs and figure them out and try them out and everything like that. If you want to be.

SFR stands for.

Oh, sorry, Single family Residential.

Just in case somebody's new.

Yeah, yeah. I'm speaking in tongues over here.

Right.

So I would. I would. That's where I would start and then build it up from there. Now, if you're looking to just make a really great return on the money, there's all kinds of other vehicles you can get yourself into. You can do some private loans. You can invest passively in projects and not have to do this business full time. And you can make, you know, probably somewhere in the low teens on projects pretty easily if you're looking to put that 500k to work. But if you're looking to put some sweat equity in there, too, you can get a lot more than the low teens on the. On the money, but you got to put some time into to make that, too. So, again, all goes back to the why?

I love it. I love it. All right, cool.

Let's transition this thing to the last segment of the show, which we lovingly call our famous four.

All right.

These questions are the same four questions we ask every guest every week. And Being that you guys were on the show, back on Show 88, we asked you before, but I'm gonna ask you again in case things change and if they're the exact same, you can, you know, alter it if you want. Number one, what is your favorite, currently your favorite real estate related book? And you can each answer this if you'd like.

I'll go first for me, because we've gotten heavy into just raising money from people that want to make alternative returns on their money outside of Wall Street. I've been studying a lot on this. And so Rich dad has a book called opm Just Other People's Money. And it's been a great resource and it was written a while ago, but a lot of it still holds true, even with the changes that are coming down with SEC regulations and stuff like that. So I find that to be a great resource book with ideas on how to raise private capital and how to structure deals. So Rich Dad's OPM is pretty. My favorite real estate book right now.

Yeah, I would say. I've been recommending down to Earth Landlording by Don Beck. He's actually someone local to Philadelphia, but we used that 10 years ago. And what's nice about that book or any of these types of landlording books is it comes with forms so you don't have to recreate the wheel. And we've been able to build our systems based on forms and checklists, and a lot of that came from that book. So I recommend that. It's pretty basic, but it's very good and thoroughly very cool.

Very cool.

I haven't heard of that book.

I have not either.

I'm excited to check it out.

There you go. All right, number. Number two. Mindy, take us away.

Number two, what is your favorite business? Non real estate book.

So for me, after we unplugged our business partnership with the construction stuff, we stabilized everything got into the, you know, ramped up into apartments. And now where Liz and I are is we want to really scale up. We're now looking at 150200 unit apartment complexes. We want to double our fix and flip business again. There's a book called Scaling up that's through the Gazelle's organization that I'm in the middle of right now, which I find to be great for businesses that are established but want to scale up to whatever the next level is. I'm in the middle of scaling up right now and it's really, really inspiring.

Yeah, I have to answer something a little more spiritual but business oriented. It's called As a Man Thinketh. It's serious. Like five. I love that book.

That's a great book.

Of course.

You carried around. Anyway.

I like to read it every year. I like to read it every year and. But seriously, as you think is what you are. And if you start thinking, inevitably you become what you think. And that's not something that I sang that no one else knows. But if you don't watch yourself, you get into that. And it's a great little book. And literally it has some spiritual elements, but it's very humbling to think through. Like, how do I get this head in this mind thinking the way I want to see my results and my output? So I read it literally every year around December and I carry it around in my purse.

Okay. My husband needs that. What's it called again?

As a Man Thinketh by James out.

As a Man Thinks.

It's literally like the easiest read.

But it was written in the 1920s.

It's my book. You don't get a chance to talk.

Thank you.

You're welcome. Nice.

I'll check that one out. I have not read it, so. All right, number three.

Okay, so, Matt and Liz, outside of real estate, what are your hobbies? What do you like to do when you're not flipping houses and landlording?

Well, okay, I got a few. We both keep pretty fit in the, you know, in the gym and stuff like that. But I also make my own wine with some friends.

I drink wine, just FYI, Liz used.

To and then she got pregnant and the doc said no, so. Right.

I'm not pregnant. Yeah, just throwing that out there.

Just throwing that out there. That's been one of a hobby I've gotten into over the years, is making.

My own wine between, you know, working, balancing, you know, our three year old. I love to just get some time and watch some of my favorite Netflix shows. To be honest. That's what I do.

Tell them, what's your favorite show?

Yeah, I'm very excited that the Gilmore Girls revival is coming out. I cannot say enough how excited I am.

My wife has been marathoning that show. Well, like, I mean, every day she's watching episodes of it because while she's like, she's breastfeeding, right? So like our baby, she just had to sit there on the couch and really like sit there. So. Yeah, I mean, she's on like season seven now. I think that's the last one before the new one last month. She's trying to get it done before.

I cannot tell you how excited I am. I keep watching the trailer and I'm just so excited.

I'm a good husband. Watch it with her. And I think that's just.

I don't get a lot of TV time.

But you're a very good husband if you watch that with her.

Yeah, I don't.

I have my laptop up. Just so you know, guys out there. I'm busy with other things, but I'm sitting next to her, so. That's funny.

That's funny. Well, cool. Yeah. All right, Number four of the famous four, what do you guys believe sets apart all the successful investors out there from all the others who give up, fail, or just never seem to get started?

I'll take that one. Or I'll go first. I say to myself, literally on a daily basis, there is always a way. So whenever we're, you know, dealing with something, which you're always dealing with something, and I don't care if people, you know. No. Where you are in your business and where. What level you are in your business, you're always dealing with something to move through. And I always come back to that. You know, we're dealing with a situation right now with a foreclosure. And, you know, we had a call today that was. It was okay. So we're like. I keep saying to myself, there's always a way. There's always a way, there's always a way. So that keeps me kind of moving towards solution, which doesn't get me negative. And then I read my as man thinketh book and I feel bad, but you can't give up. I mean, this business is going to throw you a lot of curve balls. No matter how long and how many deals you've done, you gotta just. There's always a way. And there is, if you believe that there is. So, yeah, yeah, yeah.

I've been doing this since 19.

And.

Let'S say I'm a couple of years older than Brandon and I. Yeah, just a couple. But I thought it was really a couple of minutes ago, Matt, you said that, you know, oh, we lost money, now we're making money. And it's not nice to know that you lose money, too. But it is, is. It's nice to know that I'm not alone. I'm not the only one who's making these mistakes. And I could have given up a long time ago and then I wouldn't be here today.

So I think it's interesting, and I was going to say I had another point on, I think, the keys to success, this business. But you're leading me into another point which I think is a really good one, and that's just shaking off the losses we lost again. Yet another article in Biggerpockets that I wrote about this, how we lost $35,000 on our very first fix and flip. Right. So that's enough to shake most people out of this business.

But that's a lot of money.

Yeah, that's. I mean, it's a crazy amount of money, believe me. I mean, it was, it was a tough loss. And shaking that off was, I think, one of the factors that brings us to where we are today because we still learned a lot from that deal and applied it to success elsewhere. And shaking off dissolving our construction company and not walking because there's been, over the 11 years we've been in business, there's been many, many opportunities that we could have walked and said, you know what, forget this, let's just go, I'm going to go back to my day job and I'm going to go do something else. And in not doing that, because I find that typically when this business has a dip, there's like a trampoline in there somewhere and you hit that and you go back up. Right. And I find that we typically rebound much higher than we were. So it's not a straight line increase in growth. There's dips. But shaking off those depths and, you know, dusting it off and trying again I think has been the, the reason of. For our success.

Yeah, I love that. That. Well, very cool, guys.

So true.

All right, well, that's the end of the famous four, which means we're pretty much at the end of the show. We got one final question that we ask every guest every week. And Mindy, I'll let you take it.

Where can people find more about you besides BiggerPockets?

Well, we. Our website, derosagroup.come r o s a group dot com. We put a lot of stuff out on YouTube. So we have a YouTube channel called the Landlord Chronicles and it's also, you can find it by searching Durosa Group on YouTube. A lot of our videos that we shoot on YouTube end up on BP as well.

So we have a, we have a series on there called Mentorship Mondays. So we like to get questions from people just to share and we answer the question and it's a good give.

Back thing to do.

Yeah, yeah, we answer the question. We're not leading them to anything to answer their question and we just help them out.

We just. So your question on the air so.

That'S kind of neat. And we really enjoy that giving, kind of giving back and just helping people and growing a community.

It's been a lot of fun.

Well, you guys do fantastic videos. I love your videos, by the way. You guys have put on videos. Thank you. So, yeah, make sure you guys check it out. Everyone listening, check out their videos. Check out the show notes page of the show. Of course. Biggerpockets.com show 203. Well, 203. Don't go to 203. And, yeah, we'll put links to some of your articles in there as well and some of your videos and stuff. So. Awesome.

Well, guys, thank you for having us back.

Yeah, thank you so much. This was. This was fantastic. Tons and tons of great, like, tidbits, tips. Just got a lot of good mindset stuff, too. I love it. So, guys, thank you very much.

Welcome. Thanks for having us. Yeah, it's a pleasure and an honor.

Thank you. Have a good day.

All right, bye.

All right, that was our show with Matt and Liz Faircloth. Fantastic discussion with them. I. I love talking with people like Matt and Liz who are, first of all, just super, super passionate about real estate, but also they can explain, like, the entire, like, what they're going through so well. Like, I just. I come up with a conversation like that, and I have, like, a hundred things I want to change in my business or do a little bit differently. I don't know. Do you do that when you listen to a show? You're just like, oh, these are all the things I'm gonna do differently now in my life.

Oh, yeah. I listen to the podcast on the way into work, and I'm like, I gotta take a note, but I'm driving.

Yeah, I do that, too. Whenever I'm listening to podcast, I'm like, dang it. Like, I have been guilty of, like, pulling over to the side of the road just to take some notes. Because, you know, when I hear stuff really good, both audiobooks and podcasts. Yeah, I try not to text and drive too much, but, you know, yeah.

I use the microphone setting on my phone, and I'll be like, oh, take this note. And I hope it works as I'm driving the speed limit. Of course.

Of course. You only go the speed limit. Well, good job. All right, well, that again, that was a great show. If you guys want to learn more about math, Matt and Liz, make sure you guys check them out on the show notes@biggerpockets.com show203 leave them a comment there and let them Know, if you have any questions or comments, just want to give them, you know, shout out first. You know, coming on the show, it's not. It's not always easy for guests to come on the show and just talk for like an hour about themselves. But, you know, they do an awesome job. We love having them here as part of the BP community. So last thing I'll say, we should encourage people to give Josh a hard time for not showing up today and thinking that family and other things are more important than me. So.

I know, right?

Yeah. So hit him up on Twitter, rdorkin, and just let him know that you missed him on the podcast. Or let him know that he looks a lot like Adam Levine. Cause doesn't he look a lot like Adam Levine?

You know, Brandon, you're stealing my thunder. I was going to say thank you, Josh. I want to just say thank you to Josh for letting me take over and sit in his chair and letting my not quite so Adam Levine look alight self take over and sit in his chair. But you, like, totally stole everything, so.

You might not look like Adam Levine.

Give him a hard time.

Yeah, we definitely will. You might not look like Adam Levine, but you. You look pretty much just like Christina Aguilera. So it's kind of the same.

Oh, yeah, we're twins.

Yeah, pretty much twins.

We're twins.

That's good.

That's a good thing. Who do I look like? Do I look like anybody? The only people.

People say you and I both look equally like Christina Aguilera.

Okay, that's good to know. People say I look like Shaggy. Do you know Shaggy from Scooby Doo?

I don't know.

Maybe.

Yeah, I don't know. It's not really a compliment, though. How does Josh get to look like Adam Levine and I get to look like Shaggy? I don't know. I don't like it. Whatever.

I gotta say, I can't watch those Adam Levine videos where he's danced around in, like, no shirt. Like, oh, that's too much like my boss.

Yeah. Yeah, that would be a little bit awkward.

Oh, can I say that we just had harassment. Yeah, we just had harassment class. I'm not sure if I can say that anymore.

I'm not sure either.

All right, so let's get out of here. Last question. Mindy, what have you been watching on Netflix or TV or movies lately? What's been your thing?

So I really like those crime serials like Criminal Minds and ncis. So I had to stop watching Criminal Minds because I was getting nightmares because it's always about really awful things that happen to women mostly, and sometimes men, and every once in a while a kid. Although the kids don't normally get it in the end. But NCIS is just like, it's a Navy guy that died. And not that I enjoyed it, having our Navy guys die, but it's a lot easier to take. No more nightmares. How about you? Are you. Are you watching anything on Netflix?

I don't know.

Gilmore Girls.

Yeah, my wife was watching a lot of Gilmore Girls. That's. That's about it. And I've been watching a little bit of Westworld. You know, the new HBO show Westworld, which I don't. Yeah, it's just kind of like. It's like their Game of Thrones replacement. While Game of Thrones is off the air, it's.

Oh, okay.

It's about robots, basically. So it's. Robots are awesome robots in a Disney World type setting. Anyway, decent show.

Pretty good, but.

All right, well, people don't care.

Check that out.

Okay, good, we're getting out of here. So lastly, again, thank you guys for listening to the Bigger Pockets podcast. You can hear this weekly, so make sure you check back next week. We got another awesome show and Josh will be back next week and I'm sure there'll be a lot more jokes making fun of me. There was a lack of making fun of me today, which was kind of a change of pace. So thank you, Mindy, for being next. Nice to me.

You're welcome. I like you, Brandon.

Well, thank you. I like you, too.

When I come back and co host with Josh, I will absolutely rib him.

Okay.

You better. I hope so.

I will.

Just for you.

Good. All right, well, guys, thank you so much for being here. Mindy, thank you for being an awesome co host today. Or co host. I'm still the co host. You're the host.

Yes, I'm the host.

Yeah. Thank you. Put me in my place.

Thank you for.

Thank you for being awesome, Brandon.

Thank you.

All right, guys, we'll see you around the site.

Bye.

Bye. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing without all the hype, you're in the right place. Be sure to join the millions of others who have benefited from BiggerPockets.com, your home for real estate investing online.

Famous, Famous for.

Come on, Mindy, you gotta do that.

Supposed to sing with me.

Famous.

It's a song Famous for.

Yeah, it is kind of not bad. It's a jingle.

Yeah, I'm almost professional every week.

Almost Almost.

Thank you all for listening to the Biggerpockets Real Estate Podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K. Copywriting is by Calico, content and editing is by Exodus. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.biggerpockets.com. the content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk, so use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose, and remember, past performance is not indicative of future results. Biggerpockets LLC disclaims all liability for direct, indirect, consequential or other damages arising from a reliance on information presented in this podcast.