347: Using Multifamily Syndication to Reach 5,000 Units with Mark and Tamiel Kenney

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This is the BiggerPockets podcast show 347.

If we had to do it over again I would say I would have rather started larger but only if I had a partner that had done it before and been through it. That's the key. And made some mistakes. Frankly if everything's gone perfectly for somebody that might not be the person want to partner with, frankly. You're listening to Bigger Pockets Radio Simplifying real estate for investors large and small. If your here looking to learn about real estate investing without all the hype.

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From biggerpockets.com your home for real estate investing online.

What's going on everyone? This is Brandon Turner, host of the BiggerPockets podcast, here with my co host, the man who showed up to my town for a whole 24 hours last week, David Green.

What's up David Green I'm doing great man. I just got back from Hawaii. I got some sun, I got some exercise, I got a good conversation with you. I Think that we probably squeeze more into like a three hour meeting than most people do into like a two week.

Probably.

Yeah, yeah.

David, text me. He's like, hey, I'm in joining dinner tonight. I'm in your town. And I was like, wait, what? And anyway, you are doing a whirlwind trip around Hawaii and you got to do a couple of cool things. So that's.

It's important, you know, like you got to keep your relationships fresh. I don't want us to get into a ruthless. I had to surprise you.

There you go. They had to surprise me and show up and we got to go to Monkey Pod together, which is my favorite restaurant on the planet. I know you're, you know, a believer now too, right?

This is a running joke with Brandon and I where he loves Monkey Pod and I just feel like it's overrated. Maybe, maybe you guys need to comment on our Instagrams and tell us what you think of Monkey Pod. Is it worth it or not?

Have you been to Monkey Pod? Yeah, yeah, it's. It's the greatest restaurant on the planet. Their pie, everything. All right. So, yeah, Monkey Pod. Anyway, speaking of Monkey Pod, let's get today's quick tip tip. This has nothing to do with the Monkey Pod, but today's quick tip is simple. This simply this. The Biggerpockets conference is coming up here in about six weeks from when this episode airs. If you're watching this in the future, of course, that could be very different. But it comes out, it's happening October 6th through 8th, 2019, and we want you to be there. David and I are both going to be there hanging out the entire time. But here's the deal. The reason I'm saying this is a quick tip is because you have to act quick. This is going to sell out and it's going to sell out before the event. And so I believe tickets are still available as of right now, but you can check and make sure from the moment you're listening to this biggerpockets conference.com get tickets before they are sold out because we're going to come hang out with you in Nashville.

It's going to be a blast.

And now it's time to get on with today's show. So today's show is with Mark and Tamil Kenney. These are two individuals I met at the Pacific Northwest Conference out in Seattle, the one Tarl Yarber puts on every year. I met them a few months ago and we had like this like long, like three hour conversation with them. It was great. I just wanted to learn everything I could about them. And then, you know, actually, before I could actually invite them on the show, they did a charity auction. TARL hosted a charity auction, and we auctioned off one of the spots to come here on the podcast, and they actually ended up winning the auction anyway, which I would have invited them anyway. But it was great that some money went to charity for this. So everybody wins here, and I'm super pumped to have them on the show today. So they're gonna talk a lot about syndication, about going from doing a couple deals, 2, 3, 5, 10. I think they were up to, like, 15 deals, and then all of a sudden jumped to, like, having thousands of units. And we talked to that journey. So if you've been interested in getting to that level of your business, really going to the next level. Also, we talk a lot about investing with your spouse. Like, what does that look like? And how do you kind of navigate those things? How do you raise money, whether it's for your first deal, you're trying to buy a house to get a private lender. How do you do that without looking weird? At events, if you go to a local meetup, they give some just fantastic advice on how to do that. And then later, talk about. Basically, David gives this analogy of the Chicago Cubs and how, like, the exact same thing that finally made them win the World Series is the same thing you could do to really win in your life as well. It's actually one of my favorite analogies, David, you've ever given, so I know there's been a lot of them. So all that and more in today's episode of the podcast. So without further ado, let's get to today's interview with Mark and Tamile Kenney. All right, welcome to the BiggerPockets podcast, guys. Good to have you here.

Thanks for having us, Brandon. We're excited to be here.

Yeah. Great to be here.

Awesome. All right, so let's get into your story, you know, and kind of figure out, how did you get into real estate? Like, what was that very first deal? What'd you do before that? And how'd you kind of get into the world of real estate?

Sure. Well, Mark and I have been married 24 years, so he got his first deal just before we got married. So I will let Mark tell y' all how he got that first deal.

Yeah, first deal, I was 22, going to school for accounting. But my identical twin brother, we were both like, man, everyone needs a place to live, so let's buy real estate. We didn't have a mentor, we didn't have a parent teach us anything. And so we started looking when we were a senior in college and ended up getting a deal as a duplex. It was a big value add deal. And that's kind of how we ended up getting our first deal was we saved some money up, were able to pay for it and, you know, and get a loan for the rest, and that's the deal we did.

Okay, so you started on, like, a smaller deal. And how did you get from that to what I know you do today, a syndication? How did you go from. I did a duplex to now I syndicate real estate?

Yeah, we bought a few other properties in between there. Not a lot. But then we. I was doing IT consulting at the time at IT business and really wanted to replace our income because I was working so much. I'd sleep three hours a night, work 80 hours a week, like, literally.

And no time for family. And so Tammy didn't like it for some reason and said, you need to do something different. And I said, if we do something different, you're going to do it with me, so I'm going to drag you down with me. And so we said, there's no way I can replace my IT income with just buying, you know, two, three, four units every couple years. Can't do it. So let's syndicate, raise money from other people. And that's what we started back in 2013. But we started originally as a passive investor and quickly after that did our own deal.

So you mentioned that you started off passive. What do you mean by passive?

Well, a friend of ours was doing an apartment syndication, and he asked us to invest as a passive investor in his syndication deal, which just means he was doing all the work. He found the deal, and we were supposed to just sit back and collect the checks.

And that is what happened.

It did.

It actually went really, really well. So that was a good first experience, for sure.

That's cool. Yeah. We've had a few people on the show talk about how sometimes one of the best ways to get into the larger deals is to be a passive investor in somebody else's deal, which I did. I put, you know, I think I've done three syndications now where I put money into other people's deals, and I got to kind of see how they worked and what I liked and what I didn't like and look over their, you know, documents and their executive summary, ppms, all that. So I felt a lot more comfortable jumping into bigger stuff myself. Would you Guys agree. That's a, It's a great way.

It's a great way to start. I think there's kind of a misconception that you're going to learn so much by doing that. And syndicators tell investors, hey, invest with me and you're going to learn how to become a syndicator. That's, that's not true. Yeah, you're going to learn the way the process works and you'll learn a lot more than you knew before. But in my personal opinion, by being a passive investor, you are not ready to become a syndicator just by being a passive investor. Too many more things.

Yeah, yeah, 100%. So. All right, so let's go through that very first deal. Walk us through. Like, I mean, not. I mean, we're. Maybe we should go back real quick. Let's go back to the earlier deals real quick. The 13 to, you know, 17, whatever was in there. I'm wondering, like, first of all, where were those properties at? How are you managing those properties? Like, what did that look like? What was your business like during those years?

Yeah, so I was, we just got married basically. So I bought my first property and it was a duplex in Michigan. They're all in Michigan. That's where we both grew up.

Small town that he grew up in.

Okay.

Yeah. So kind of a big rehab deal and we're like, okay. I was traveling for work, you know, sometimes five days a week and coming back and shoveling snow in winter and evicting people and so hanging our own drywall, fixing toilet.

Yeah, we have an eight hour.

We have an eight hour toilet story that, you know.

We all got an eight hour toilet story. Yeah.

And it was like, you know what, this is really kind of sucky actually because we're spending so much time doing that. And it was all recourse loans, which means we had a personal liability. I was 23 years old at the time and wasn't making that much and so I had that kind of hanging over us. And we self managed. We didn't have any money to pay anyone to do anything else. So we did everything ourselves essentially.

Well. And we unfortunately. And I was only 20 and when Mark was out of town, I had to deal with the tenants, so. And the contractors. So we unfortunately believed a lot of the tenants stories when they told us they were going to pay us. And then we hear kind of from one of the other tenants that they didn't feel they really needed to pay us because they thought it was just extra money in our Pocket. Like we didn't have a mortgage on it or anything and we didn't need the money. We also learned not to allow family to come in before they've signed some kind of lease because then they have like this squatter's rights and getting them out is more challenging than getting a regular tenant out. So lots and lots of lessons learned. Yeah.

All right, so now that you've done that, and I'll let David jump in too. I'm just hogging the mic here, but now that you've done that, I'm wondering, do you think it's easier? And we can kind of try to quantify that word a little bit, but do you think it's easier to do what you were doing then, to do what you're doing now, and not just because you gained experience, but like, do you think it's more work to do what you were doing then or more work to do what you're doing now? Like, how would you, how would you look at that?

I mean, the way we did it was definitely more work then because we were self managing.

Yeah.

If you had enough smaller properties, you had a third party management company. I don't think it makes much difference, frankly. The difference is when you get into syndication, you're going to raise capital. That's a whole, whole new game. I mean, you're going through it right now, you said several times. And that's when it's like, okay, there is more work involved in there. And when we buy 100 unit property, there are more things from a contractual standpoint in contracts you have to assume. And insurance is more complicated but wise. There's no question. We did a lot more work back then than we do now on properties.

Well, and the work is different based on what involvement you want. So in that those early days when we were doing everything right, we were the handyman, we were hanging drywall after the contractors did a crappy job and we knew nothing and we did a better job. Right. So. So how much involvement in that kind of stuff do you like or can do to save money there versus how much do you want to hire out? And if you have to hire it out, whether it's small properties or a large property, hiring everything out to third parties, it's cost effectiveness, I guess. The more units you have, it logically makes sense that you can hire it out so that you can work on the business and not so much in the business.

Yeah. This is a really good topic to discuss because I know that there's dissenting point of views there's some people who think, don't start small, start big. If you want to be in multifamily, jump into multifamily, hire everything out, leverage it all. Just focus on kind of where you guys are now, which is where you got to over a period of time. And there's others who would say, divided into small steps, take baby steps. Start with single family. Do it all slowly. Leverage out the stuff you don't like or you're not good at. Learn yourself as a business person, where you want to be. What advice do you have for people who are not yet started but are trying to figure out where they want to start?

Yeah, to me, my personal opinion is just by doing something, you're further ahead than 99.9% of people in the world. So just taking some sort of action, which is great. If we had to do it over again, I would say I would have rather started larger, but only if I had a partner that had done it before and been through it. That's the key. And made some mistakes, frankly. If everything's gone perfectly for somebody, that might not be the person I want to partner with, frankly.

Yeah, that. That's typically when people. When people say, you know, should I start small or start big? I mean, I feel like you have to get those bruises from the smaller deals. If you're going to get in the bigger ones. I mean, you're going to make mistakes on your first deal. So if you make a mistake on a $5 million deal versus a $50,000 deal, it's a whole lot less on the smaller deal. But like you said, if you have a partner who's made those, had those bruises, that's the secret to sidestepping that. If you really want to sidestep that, you find somebody else who's had those bruises, got bumped around a little bit, and somehow, you know, connect with them, work with them, get those, get that done degree and we.

Absolutely. And we did that. We ended up partnering with somebody, had more experience than us when we did our first larger property. And it was. It's very valuable, for sure.

Yeah. Cool. All right, so let's go. Let's go to the end of your story. So people have an idea of totally where you're at today, and then we can kind of get into how you got there from that first deal. So I guess, what do you have right now? What kind of real estate do you own? How many units do you have? Give us an overview of your current business.

So we bought over 5,000 units. We have about a little over 4,300 left. We sold probably a thousand units last year, five states, so mostly Texas and southeast U.S. and that's kind of where we're at right now. We've been changing our, you know, we still buy some pretty big, big value add deals, but reality is Those, you know, mid-80s construction, five to six thousand dollar rehab are much easier to deal with. They just are. So we kind of change our model a little bit, but we still won't turn down deals. If it makes sense, frankly that are those big value add deals.

Okay, yeah, so that's, that's pretty substantial going from I own, you know, 13, 14, 15, 16, 17 units to I own 5,000 or now 4,300.

Right.

Let's kind of walk through, I guess how you got from, from there to there. So what was the very first you first you started passive, you said what was the first multifamily. Then you did like as you guys like as an active or part of the GP.

Yeah, the 64 unit deal in Mesquite, Texas. Two actual physical buildings that were separate across a street essentially by side Street. So 32 and 32. I was, that was kind of the first deal we did. It was a mid-80s construction property.

The owner was originally only selling one of the buildings and then as we were talking with them, we realized that they owned the other building as well. And we convinced them to sell both to us at the same time.

Oh, that's cool. And how much total was that in the beginning? How much were you paying for that?

3.9 million.

Okay, so 3.9 million. What, how did you finance that then?

So we got Freddie Mac loan on that one actually.

Okay.

Small balance loan. No, it's non recourse, so no personal liability unless you do something bad. The difference though with, with Fannie versus Freddie, this Freddie loan, you don't get any rehab dollars. So if you have rehab to do a small balance, Freddie won't give you rehab dollars in a loan where Fannie will.

Interesting.

We didn't need a bunch of rehab. We bought $2,500 per unit or rehab. You know, one of the 32 units is built as condos, so very nice construction. The other one pretty, you know, nice construction as well. But the financing we got, I think a 10 year term on it. At that time the rate was probably 4.9 ish percent. And we actually ended up doing a refi on that here recently.

Oh, very cool.

You mentioned that you bought the second building from the same people. How did that come up in conversation. Did you guys bring that up? Did your, did you have your agent broach it? Can you kind of like build a bridge for how you thought, oh, we should do this to how it actually came about?

Yeah, the broker brought it up and my guess it was probably orchestrated a little bit, frankly, that they were, you know, I mean, we saw, we had similar situations. We had a portfolio and it's kind of like you talk to the potential buyer about one property. Oh, by the way, there's another property, but the broker brought it up and the one property was actually that they were selling was running a little bit better than the other one. So maybe, I'm not sure why they wanted, you know, maybe they're trying to try to add some value to the other property. But it was the broker we would. Had no idea necessarily that they were selling. They had to have the property.

Wow. Okay, so what can you give advice, I guess, for people who are listening right now, who are at this point where you were. They have a few properties that are on, they've got 14, 15, 16 units, you know, some small multifamily, They've been doing all their own work. What's the like. Let's walk through. What would you tell those people if you were just coaching them like step one through step ten here, you know, in a, in an abbreviated time, how do they get there? How do they get to that first syndication deal?

Yeah. I mean, the biggest problem everyone has starting out is they don't have the credibility.

Yeah.

So if they go talk to a broker and say, I'm looking for 100 unit property and what have you done, Brandon? Well, I haven't done any yet. Okay, well, they're not going to give you the attention because think about it. I mean, I wouldn't sell to somebody first time buyer.

Yeah.

And the brokers don't make any money unless you sell a property and sellers don't make any money. So number one is if you're going to try to buy, you know, you want to consider larger, whatever number you want to pick 100 units, you need somebody. We talked before about partnering with them, get them on your side, leverage their track record. And there's other things that are fairly. Some things are fairly simple. I mean, you're going to struggle with certain aspects of it. Like, okay, maybe I don't know how to underwrite a deal.

Yeah.

But that can be learned. I don't know how to raise money. If you want to raise money, those are the two biggest things people struggle with. If you're looking at it from a new person perspective, it's hard because everyone wants to get that quick, quick deal.

Right?

Well, you know, it took us a year to get our first deal. That's not quick, you know, yeah, sure. And doing things like, hey, I'm going to work with a broker, I'm always going to do what I say I'm going to do. I'm not going to retrade unless absolutely possible retrain, meaning I go under contract and I go back to the, to the seller and say I want, I want to credit now for something.

And then, you know, I always tell people too, you know, don't be a jerk. Might sound like, okay, of course, don't be a jerk. There are people that, you know, I say if you don't know if you are, maybe ask your spouse to probably tell you whether you are a jerk or not. But, but reality is that people want to do business, people they know like and trust. I mean, everyone says that it's not always about the person that can close the deal. You want to be able to have a relationship with somebody that's easy to work with. We always tell brokers we want this to be the easiest transaction you've done for both yourself and the seller. And we keep getting more deals because of that. So, you know, having that long term mindset, which is hard when you're starting out, not getting a position where you think you're, you know, going, trying to beg for money, you don't want to be in that position. One of the easiest ways is to come, you know, if you can do it legally. Right. But coming in somebody else's deal, become part of the general partnership, help them raise money. Yeah, but it's all about it. Someone has done it before. Leverage their track record. And there are a lot of things that you can do as a brand new person in the business even if you have no money to add value. So you need to add value. You can't just, hey, Brandon, I'm partnering with you. And you're like, what do you, I'm like, well, I have time. Well, that's useless. Now you have to train me. Right. So make, make an effort on your own to start learning different aspects of the business and don't become a, don't try to be an expert in every single aspect of it. Try to pick one or maybe two areas probably that you're already good at naturally and become really good at those.

And I would say don't be so desperate to get into a deal quick that you're willing to partner with somebody just because they have a lot of experience. You really do need to make sure that your values align, that you've done your research, that they do have a track record of being somebody who maybe we'll even communicate to other people the way that you do. We've had experience with a partner who was good at what he did, and. But he wasn't tactful of how he disagreed with brokers or with people or laughed at people in their face. And that. That's taken offensively.

Right.

So you really do need to kind of date before you marry a partner, because it's a lot harder to get out of a partnership than it is a marriage nowadays.

Well, I think one thing that's really good to point out is that your relationship with your broker or your agent is actually a partnership. I hear he gets spoken of all the time, like, well, I hired him. It's his job. Find me a deal. That's your job. But who. Who takes a job they're not going to get paid for? That's not a job. That is a partnership. He only wins or she only wins if you get a house and you only win if you get a property. So you need to approach it from that perspective. Do I partner well with this person? Do our personalities match? Are the expectations we have the same? That's the number one thing. When I hear people complain in the forum, or people come to me and say, hey, David, I know you're an agent. My agent's not doing this thing. How do I. How do I get them to understand what I need? They never, ever, ever had a conversation in the beginning where they spelled out, this is what I would like from you. Just this morning on my Instagram, I heard someone say, hey, my agent does all these things great, but they don't look for houses for me, I'm looking on my own on Zillow. Is that normal? And I just thought, like, why didn't you tell them in the beginning? I'm expecting you to bring me properties, or I don't need you to bring me properties. But I want this. And it never comes up. And I understand a lot of other relationships that we think are the same as this, that you don't have to do that like you're a waiter. You don't have a conversation when you first meet him, saying, okay, how often are you going to fill up my water can? I expect you to offer me drink recommendations. So this is different. And I think if people understand it is a partnership, they will treat it the same way that they would. As if someone came to you guys and said, hey, I want to get in on your deal as a general partner. That would open a very long conversation. What are you going to do? What am I going to do? What are you good at? Where can you help me? When people don't have that with their broker, they almost always end up having a bad experience.

I love that because, you know, we know countless examples of people that don't have that conversation. Even people that are going to be part of the general partnership. Which sounds bizarre, but we've seen it time and time again. Even recently, a couple people that we know, they're saying, I'm partnered with so and so I'm a partner with Brandon. What's Brandon going to do? Well, nothing. I'm at Real Shirt. You know what I'm like, are you serious?

I mean, surfing part of the general partnership is that Exactly.

Or they'll say, we're partnering with so and so for a certain type of deal to development deals. Example. And I'll ask a question. Have they done development before?

Are you serious? You're going to be giving away equity, spending your time money, losing money potentially. And you're not even doing the simple things. And so people enter into partnerships on a whim.

Yeah.

And you better, you know, the second kind of conversation is you better have everything in writing up front to your point, David, is who's doing what and if you're not doing it, what are the consequences?

Yeah, really good.

Well, I was just, I was just in Hawaii the other day and Brandon and I were meeting and talking about business stuff like we tend to do. And that was what most of our conversations are about is who should I partner with, how should the partnership look, what am I going to do? What are they going to do? And I made a video while I was there that basically I just talked about. When you're choosing an agent, you should ask your agent, what are you good at and what are you not good at? You people can ask me that. I will not be offended. I can absolutely tell you I'm going to struggle with empathizing with your emotions and holding your hand as much as somebody else might. There's some agents that just love that, but they're. They're dumb as a box of rocks when it comes to running numbers or something. Right. Like, that's just isn't what their skill set is. So if you're great at numbers, but you know that you need a lot of reassurance, you don't Need David, you need somebody else. If it's the other way around, then it's different. And that conversation almost never comes up. I have to initiate that with the client every time. And they. They don't even realize that was a thing. And now I do that with everyone. When people say, you know, what should you. What should you ask your property manager? And I'm like, but they already own eight properties. Like, how. How have you done it already? You just jumped into it and hoped that that partnership worked out. So I think that's really big. What you're talking about is being easy to work with, being likable, having the expectations very clearly set, knowing this person has a skill set that will help me accomplish my goal, and I have something that will help them with theirs as well. You also said something I thought was really important earlier, when you mentioned that the first year, you didn't really make any progress before you bought your first big deal. Tell me what you learned in that year that made it so you were able to pull the trigger. And then I'm sure that your. Your success kind of snowballed from there.

Yeah, very nervous about it. I think we didn't make enough offers, frankly. I mean, I was finance background, so underwriting deals really wasn't a major issue for me to do that quickly. But can also be. You can sometimes be too conservative in general early on.

And that's it.

That's partly from, like, now you can look at a deal sometimes, and without even thinking about it, you can kind of be like, start poking holes all over the place. Right. And it just kind of just comes to you early on. You will analyze every single little aspect of it and get so nervous about it and go, what if this goes wrong once it goes wrong? So for us, we didn't make enough offers initially. And two, we had a very poor, poorly defined criteria. Eight units. Okay. 800 units.

Okay.

Well, we couldn't do it 800 units, and we didn't want to do it in eight units. So why are we actually spending time wasting our time on it? So we looked at everything. So having a clearly defined criteria, plus it makes you a lot better with brokers, if you can rattle off. This is my criteria. So they're not wasting their time either.

Oh, I love that you said that. Because this is something that newbies, whether you want to get in your first deal, your 100th deal, I mean, you know, 100 unit or a single family, they make the same mistake. It's like, what do you want? I want to buy Real estate.

Estate.

Well, great. Well, what kind? Well, like the real estate kind. You know, it's like, okay, get specific. I mean, it's. It's one thing this goes back to. And I've said this on the show before, but I'll say it again. Now, if somebody would come to you and say, hey, you know, hey, Mark, I'm looking for a job, you'd be like, good for you. But if somebody came to you and they're like, hey, I'm looking for a job in the IT field somewhere in like the Michigan area, you know, preferably at like a fortune, you know, thousand company or. Or, you know, larger. Do you have any ideas? All of a sudden your mind starts working like, oh, how can I help this person? Do I know anybody that fits that criteria? So when you give people general things, they're going to give general answers. But when you get people specific, you give your agent, I'm looking for duplexes in this state at this price range. Well, now all of a sudden you're, you're. One, you're seen as more serious because you actually know what you're talking about, using the right language. But two, then they actually. Their mind starts working. How do I get you that thing that you want? So, yeah, I think.

Right.

I think newbies have a fear of missing out, that they don't want to be more specific because they're like, but what if a screaming deal comes along? And it wasn't a duplex, it was a triplex. So the agent didn't think of me. And so they start with. Because I get that a lot, too. I just want to find a great deal. It can be anywhere. It could be anything. I don't know how I'm going to buy it. I don't have my money lined up. Just tell me when you get it. My brain knows that the amount of work it would take to try to remember that is too much. I'll never do it. But Brandon, like, to your point, this is specifically what I want. You said it earlier, Mark, like mid-80s construction, value add, opportunity, this many units. Now that broker has like a little Rolodex card. I get. Do we even use Rolodexes anymore? An outdated concept, right. But they have a little note they can make in their mind that when they see this, they think of you. And that's what you're trying to do. You're trying to get everyone you come across to think of you when they come across the piece you need. So Brandon and I were just talking in Hawaii he's telling me about his business. I now know the things that he needs for it. If I meet a person who I think would be great for what he specifically described, boom, I'm going to send him right to Brandon. If he was like, oh, I just need, you know, somebody really smart that knows real estate, there's no way I would ever think of him. You know, with the number of people we come across.

Yeah. Plus with investors, I mean, with your investor pool knowing what they want, some people, you almost have to work backwards and say, well, if I find a property like this, will my investors be interested in it? Yes or no? Maybe, maybe not. There are a lot of things that some investors don't like, and other investors like different aspects of it. They want that big, huge value add. Other people get freaked out by bridge loans. Other people love them. So understanding your investor pool is critical.

Yeah.

So how did. How did you balance? I don't want to be reckless and just write offers that I shouldn't be writing with. I'm afraid I don't want to write offers. Did you. Was it just tightening your criteria that allowed you to be confident? Yeah.

And. And end of the day, you know, this was, you know, several years ago, so there was a little bit more room in the market, so we couldn't go. We could negotiate more back then. Now it's getting tough. We could come in and say, well, you want 4.3. We're at 3.9. Maybe we end up at 4. And it still works for us. So we had some flexibility.

Another reason why that criteria thing is so important. I was just thinking, I'm reading this book right now called Built to Sell by. I think it's John Wardlow, maybe. I don't know. It's called Built to Sell. It's really good. But anyway, in this book, it's about building a business that you can later on sell, but if you want to. So kind of an E my style business, I guess you could say something systematized. Anyway, but in there he makes the point that most businesses are so general. They do so many things. And he uses the analogy of like a graphic design company and, you know, they do logos and they do websites and they do SEO work and they do blah, blah, blah, and they do everything right. So they have a bunch of people who can do a lot of general stuff and they're generally good at a lot of things, but they're not great at anything. So he makes his point in the book to. If you were just focusing only on what you do best, he said, they define. It was logos, okay, if all you did was logos, not only do you have a clear criteria that makes everyone happy, like we're talking about here today, is other people can help you, but you also get better at that thing. And so when it comes to deal underwriting, if you're trying to underwrite everything or if you're trying to look at everything, you're a general at everything, or you're just a generalist at everything. But all of a sudden, if you're like, no, I am buying apartment complexes between 100 and 150 units in the Dallas market, all of a sudden now, like, your ability to analyze those deals is similar, so much greater because you've done a hundred of them that are all the same thing. You know exactly what the water bill is going to look like in that area, or you know exactly what the, you know, whatever. So that's another, I guess, benefit of that, of that focus.

It's so true.

So it's also a matter of focusing. Like Mark mentioned, your passive investors knowing exactly what they want, what they. What they've bought before or invested in before. One time several years ago, we were partnering with somebody trying to bring a development deal in Houston to our investors, and they were a bunch of triplexes. They were all going to be built together. But it was a new market and it was, yeah, for us and our investors, it was a new market and it was a new thing. It was a development, and it was triplexes versus 100 units or more, which is typically. Show them. So all those things being new to our investors, most of them were like, you know, hey, I don't know if I'm interested because I'm confused. I don't know about this. There's a saying out there that says the confused mind refuses to act. So if your investors are not clear what the offer is, what's in it for them, that that investment opportunity is just as solid as your other investment opportunity. Because we didn't have a track record ourselves in the development or in triplexes. They're not going to move forward with that. So you cannot count on. I have a thousand investors and they've invested with me before, so they're going to invest in anything I throw at them. That's not true.

Yeah, that's a really good point.

It's reeducating them slowly and then maybe even taking questionnaire from your investors to find out what they would be interested in, what type of interest or returns are they looking for? Because based on their age based on how close they are to retirement, that will kind of indicate how risk adverse they are.

Yeah, that's a really good point.

I know you guys have done quite a few deals. Owning 5,000 units is a lot. And I know that you work with other people that are starting to get into this, people that are experienced. You've kind of seen the whole spectrum of how this works in your experience. What have you found are like the few skills that really make a difference in someone being successful, getting into multifamily syndication. And what are some things that people think that they need to know or be good at and they really don't?

Okay. So I think that if you or your partner is really good at deal analysis and you understand the rules of thumb and the different things to look out for. Just for example, if there is one lump sum payment in that trailing 12 that you aren't going to be able to count on as being in your other income, your person who's in control of the deal analysis part needs to understand all those roles. So somebody on the team needs to be really good at that. And then somebody on the team needs to be really good at relationships. Relationships with investors, relationships with brokers. Otherwise those brokers are not going to be calling you when they have deals. Right. They need to be trustworthy to be able to follow up with brokers, have regular calls with them or lunches with them. How are you going to stick out to that broker from all the other investors out there who are also looking for that same asset type?

That's such a good point.

So for me, those are the two top skills to have.

And what's interesting, it's like left brain, right brain too. It's like you're an analytical guy and you're the relationship guy. I love that you said that.

Yeah. And the other one is, end of the day is access to money. Whether you have money or you can get it, but it doesn't matter whether it's real estate, any other business, if someone says, I can go raise money, I can raise, you know, millions and millions of dollars. You are valuable to any industry in the world. So you need to be able to get money some way.

Yes.

And we, we've had people who thought they could raise money because they're great networkers and they have a lot of relationship, a lot of people who have money. And it comes down to those people weren't ready to act when the offer. So you raise zero and you don't really know what you can raise until you've done it. And you started building a track record. Just a little story. When I was in junior high and gym class and we are having to climb this rope, I was very athletic. I thought for sure I was going to be able to get up, get up that rope really quick. And I go and try it. And it was a rope without knots. I couldn't do it at all. It's one of those things in life you just don't know until you try.

That's such a great point. Well, let's talk about raising money for a little bit because this is something that stops a lot of people, whether they're trying to look for just their first private lender to help them on their first deal, or they're trying to raise, you know, $20 million in a, in a fund or something. How did you guys start raising money in the beginning before you had a track record? Then how do you do it today? What are some of the tactics that you use today to attract people to your company to invest into? Invest with you? Yeah, sure.

I mean, early on, you know IT business. So I had a lot of IT professionals that I had done business with. So generally speaking, lots of times both spouses are working, they're making pretty decent money. So that was access to some people there. And then we started going to events, right? We started going to meetups and other events, which, you know, but it's the follow through that everyone lacks is that they go spend, you know, whatever, a thousand dollars to go to event, an entire weekend there. They get 20 business cards and they never follow up with people. So if you can even do that one thing and be the person that follows up with someone after the event.

Then you're much further ahead than everyone else.

And I would say don't be that one person at the event who is going around and just handing out their business cards to everybody and trying to walk out of that event with a stack of business cards because they don't care about you. They're only interested, they're only interested in getting your money, getting you into their deal at all costs. They're not into relationship building.

There's a dude, right? I mean, there's a dude that was at the event. There's weeks ago.

We have multiple stories and he had.

Something, a shirt that had his name on it, like a, like a sticker, but it was actually engraved in there, whatever. And the back, I said, you need my business card. It's like, dude.

That'S one where you go like, next.

Yeah.

You know, when I first became an agent that was what we got told is go hand out your business card, get other people's business cards. And so you do it because you're supposed to. I don't ever call anyone who gives me their card. I don't remember them. When I'm done, I've never gotten a call from someone I gave my card to. That's like, hey, I just found a way to help you. Even though we barely know each other, I've been thinking about. Right. So instead what I do is if I have a good conversation, I think this will help a lot of people at these events is I don't even ask for their card. I say, what's your Instagram handle? Or what's your Facebook profile? Then I add them as a friend right there. From that point, I can look at their page and see are they legit or not? Right. Is it just like you could. They're obviously just trying to raise money and they don't know much about the business. Or is this someone I can connect with, click with? And it makes it a hundred times easier to stay in touch because I get reminded that they exist when their stuff shows up in my feed. And I'm like, who's that? Oh, I met that guy at that thing. We talked about this. I can send him a message. I can comment on their stuff. That follow up is so important, like you said. And because everybody's eyeballs are on social media, bring social media into your follow up and just make it a thousand times easier on yourself.

Sure. Yeah. We actually attended a meetup recently and there was a girl, and I'll just say she's a millennial and she says LinkedIn is back. So Millen are all hanging out on LinkedIn. So that's how she connected with me right then and there. She connected with me on LinkedIn and was sending me messages of different things we had talked about during our conversation so that we could continue our relationship at that point.

Now I feel bad. I deleted my LinkedIn.

Well, I think too, just to kind of follow up on your original question too, how do you. How do you continue to do it? You know, LinkedIn and other, you know, platforms if you don't have someone's email address. We know a guy. This is a true story. He had over a million people following him on YouTube. Not real estate guy, another guy. And he got cut off permanently. 100 from YouTube. They asked him.

Wow.

So he has no access to any of those people now. So when you're on social media, end of the day, you want to be able to get, you know, people's email addresses, you need to give them something of value. You can't be like, give me your email. You have to have something of value. Maybe you, Brandon puts together 10 step checklist and it gives you the first three and says you want to see the other seven and then they end up giving your email and, and then you can communicate with them at least.

Yeah, that's such a good point. I think. Yeah. A lot of people out there, especially like Instagram influencers or, or, you know, Facebook people or whatever.

Yeah.

At the end of the day, you don't own those relationships. The companies, Instagram, Facebook, YouTube, they own those relationships and they will shut you off if they want to at any anytime. Yeah, Very important to get that email address, like a phone number, build your database on your own. So that way no matter what happens, you've got something to fall back on.

Right, right.

So when you're raising money from somebody and you're talking with them and they say, yeah, you know, like, yeah, I've got, I've got some, you know, I like passive investing or I'm a passive investor. I like, I like doing that. How do you, I mean, is there any tricks or tactics? Tricks, but in a good way that you use to get that person like into your. I don't funnel or whatever. Like, I mean, how do you, how do you get them from. Yeah, I like doing this to they like you enough to give you a check for, you know, or wire 100 grand to your next syndication. I mean, how do you walk them through that journey? The relationship wise?

Yeah, I mean, typically it's going to be more than one conversation. So if I met someone at an event, they're like, hey, I'm a past investor. Again, it's that follow through. Hey, do you mind if I, you know, send them an email? Hey, can we jump on a call together sometimes? And we have a guy literally that just invested, after three years, he just invested our current deal right now. Three years. Every deal. I'm going to invest, I'm going to invest and just never has, you know, so sometimes it's being persistent and not pushy. You can be pushy if you want to and it might work for some people, we're not like that. But then understanding too, if someone says, hey, I have, you know, $100,000, I want to invest, I might say, well, maybe you should split that across a couple deals. So rather than doing one deal and it's that credibility and not that you're just after the money, in some cases, people are in a position to invest. So trying to see their perspective and not just getting the money. And then we mentioned before, people want to do business. People they like too. Having some common themes, like when we talked. Right. Or we had several things in common, which is great. And it doesn't have to be yourself. Could be, hey, my kid, my kids in dance too, and your kids in dance. And having that relatability with somebody, not just business people. It's all things being equal. If they like you, they're going to do business with you or someone that they just met.

Yeah, that's so true. The likability factor, I think, is often.

I don't know, misunderstood or not rated as high as it really should be in almost every aspect of business. Like, they did this study a while ago. I read this in a book recently where they looked at people who got raises at work. Like all the different factors that go into why they got a raise at work. And it was like everything from job performance to length of time, the company, and like the only thing that mattered. Does your boss like you? That's what the scientific study came out. The end. Like, if your boss likes you, you will get a raise and promoted. If they don't, you won't. And has nothing, almost nothing to do with performance.

Yeah. So work on what. What are some things? Like, this is a weird question, but like, yeah, I initially, when we started talking, I liked you guys. You were great people. What are, what are things that people can do to get that likability? I mean, like, this is like Dale Carnegie, you know, how to win friends and influence stuff. But, like, what are things that you find have worked well for building those relationships?

People like Tammy better than me.

The fun one.

For me, it's eye contact is important so that when you're actually talking with somebody, you actually act like you care what they're saying and not just looking around the room to see who else might be there paying attention or what other important conversations you can get in. If you're really being an active listener, you're going to be able to ask that person questions based on what they said. So if you're going into a conversation with that intention, that will teach you to be a better communicator. The best conversationalist is the one who can ask questions, sit back and just listen. That way that person thinks that was the best conversation they ever had because they're confident about what they know. And if you're asking them about things they know, which is Usually themselves and things they're passionate about and their kids and their dogs, then they feel good. And if they feel good about the relationship, they're going to be ready to take that relationship to maybe the next investing level.

Yeah, I think paying attention to what they're saying is kind of. To piggyback on that is important. I've. I've been guilty before. Someone says, I'm in a conversation, they talk about their kid, and then I'm like, do you have kids? It's like, well, they just told me.

Yeah.

You know, so really being conscious of what they're telling you. I mean, I do it now sometimes. Oh, yeah, Your. Your. Your daughter is 14 years old. She didn't dance. And sometimes, or I remember, even see someone six months or a year later, I'm like, yeah, you had like, wow, how do you remember that? You know, and you can't remember every single aspect that someone tells you, but a few key points will really set you apart.

When, if you're going to an event and you haven't met a hundred people and forgot everybody already by the time you walk out the door, just try to remember two or three people. Try to remember the details about them so that when you go home or you go to your hotel room or wherever you are, write it down so that when you connect with them on social media, you'll have an instant point of contact, because we all know that we'll walk out and we'll be overwhelmed. Our brain is like, yeah, I've said my name. They said their name. I met that person. I'm moving on. You completely forget any of the conversation, and relationships are going back to square one at that point.

Yeah. Josh Dworkin, who founded BiggerPockets, you know, back 18 years ago or whatever it was, now he has this thing whenever he goes to conferences. And I always admired him for this is every time he has a conversation with somebody, he gets a business card. He immediately in the conversation, he'd be like, oh, hold on. You know, like, grab out a pen and like, write down on the back of their business card who they are. And then as soon as they walk away, he'll go in detail, like, this is the person who had the three kids that did this thing. Right. And then he'll keep that business card. He's so good at that because then he's got, like, later on he'll go and enter that into like, a. Some kind of, you know, CRM or whatever database or whatever, so he can keep track of that stuff. And then later it's like, oh, I'm gonna have a call with Jeremiah. Who was that? Oh, yeah, he was the one with the daughter who had the 14 year old, you know, dance daughter.

Great.

And like, he's like, josh is one of the best relationship people I know because he just knows things about people. So. Yeah.

Yeah.

That's awesome.

Yeah. Very cool. All right, what about. Let's go to your guys's individual business. How what each of you do in the business, like, you know, Mark, what do you do? And to me, what do you do? And then what fires you up in addition to what you actually do? But what do you love doing? What just fires you up in that role?

So my role in general is more of like our. The meetups that we do and the branding, the marketing, trying to keep in touch with people on social media. Just community building in general, because I like being around people. And if some of the people we invest with or partner with live locally, then if Mark and I are having a date night, we might call them up and say, hey, Mark and I are heading here. Do y' all want to join us? Because community is so important to us. So that's kind of my role, I guess what I'm good at.

Yeah. So I do the rest, basically. So I'll end up doing more around broker relationships, deal analysis, the loan kind of aspect of it, some asset management. So kind of more of the transactional and operational side is really as far as fired up for me. You know, we'd like to help some of the people here and there. And actually seeing someone get their first deal. Yeah, people like, well, yeah, I still get excited when we do deals. I mean, it's not like to downplay it or anything like that, but nothing like seeing someone brand new get a 100 unit deal. Their first deal. And that's incredible to me because now their lights are on, man, I can change my life forever.

Or watching how excited they are when they're able to scale quickly with that second deal. Right. That first deal is definitely the hardest. But as soon as you get that, you've got your feet wet, you've learned some stuff, and then you know how to go on and systematize.

I love the deal piece of it. Trying to get deals is my favorite part of the whole aspect.

Yeah, that is. That is fun. It's like, I don't know, it's like hunting for like. Yeah, it's like, I'm gonna go get that dough. It's out there somewhere. And I'm in the middle of the woods, like looking for it. Yeah. What, what does the rest of your business look like in terms of like, I mean specifically. We'll go, we'll go mark here because you're the one, you said you're doing the deal analysis, some asset management. Do you have employees under you that also help with all those things or are you just like, you're just everything when it comes to that stuff or what's your actual structure look like in the business? Business?

Yeah, we have kind of more of a group, if you want to say, people in the group that will fulfill different roles. So there are, you know, half a dozen ways people can get involved in the syndication. And some people want to just raise money, some people want to just put money into deals and other people want to just analyze deals. So we definitely have help without a doubt. There's, we couldn't be where we're at right now without help at all.

But I also have an assistant that helps me and then we have a tech guy who handles some of our web stuff and then we have a tech Internet who's a nephew, 15, really smart. But we're getting him involved in the business as well. So we do have a team, whether it's our own team or our partnership team or whatever.

15 year old, they had like 14 people working for him.

Wow.

Yeah, he's crazy smart.

Yeah, that's impressive. And then what is the typical syndicate? I'm kind of just firing a lot of these like syndication questions that have been on my mind for a while. So what does the typical split look like? Lp gp. And by the way, for those aren't familiar, GP is general partnership. They're the ones doing the deal like the putting it all together. Right. And limited partners are the investors. So we use these phrases a lot. But sometimes I realize people are listening who might not know, you know. Yeah, this is the first time hearing them.

So.

But what does that typically look like? What are you splitting? And I know it's high deal specific, but what's, what's average or normal for you?

Yeah, normal for us. We do a one time 2% acquisition fee.

Okay.

So I send the purchase price and then we'll do usually a 70. 30 split. 70 to the investor, 30 to the general partnership with an 8% preferred return. So a lot of people don't understand that term either. But basically they get, they, the investor gets the first 8% before we as sponsors get anything. And it's not capped at eight, but they get it before we get that. And we don't we haven't really taken disposition fees or refi fees although the more we do it I can see what people do and I think there's value, you know, it makes sense to maybe do that.

Yeah.

And then a 1 and a half to 2% acquisition or sorry asset management fee which is based on the revenue collected for the month.

Okay. So that basically covers your overhead, the ability to keep working, doing deals. Then the 70% like goes to investors. Do you guys include waterfalls in your, in your write down at all, anything like that?

We haven't. So waterfalls people maybe not know is it. We maybe get 70, 30 and they go 60, 40 and 5050 depending on some sort of hurdle that we hit. We haven't really, we haven't really seen a need for it. I can see doing it. I think probably a better way of doing it frankly for us would be to give a different class. So someone that invests let's say 250 or 300,000 in deal would get a higher preferred return than someone that invests less than that. That structure probably would make more sense for us in our business and our investor pool.

Cool.

Yeah. And for those waterfalls, the reason we don't do it, it goes back to the confused mind refuses or the confused mind basically doesn't act on anything. But if an investor has to read the investor documents multiple times to figure out exactly what you're going to get versus what they get, they're not going to act and they're not going to invest in your deal. So you've got to keep it simple for most investors, depending who your investor is. Right.

I mean we've gone to the big guys before equity guys and you better be doing waterfall. You better know what equity multiples are. You better know all these terms prep equity. If you don't and they're not going to business with you. So it really understanding your investor pool.

Yeah, it's great, great advice. Yeah, the, the simplicity thing I think is so key. I'm working on like my executive summary right now for the, the fun that I'm doing and like I'm just like how can I make this so simple and clear that people are like oh yeah, that makes perfect sense. And so like I'm even like the same way at bigger pockets. You know I'm always put like Burr and house hacking because people need these like, like the ways we are. We are drawn to the simplicity of something that just makes it, it's like a three step process or a whatever. So if you can put that into your Deal. I oftentimes, I do these webinars for biggerpockets every week. And I, I tell people like, you might have the greatest deal in the world, but like, if you can't present your deal clearly in a concise way, that's maybe colorful, like lenders and partners, your spouse, like, people don't want to. If you like, I always like, joke, like, never show your spouse a spreadsheet. One of the fastest ways to get your spouse turned off from a deal, like, hey, look at this spreadsheet with 900, you know, pizza pieces of information. Because then like, they get confused and the confused mind doesn't want to act. They don't want to do anything. So like, like, it sounds stupid, but like, add a chart, add some color, add a graph, and like, people like, oh, yeah, that looks really good. And it's, it's not even about the thing. And David, I know you do the same thing with your real estate agent clients. Like, you go in there and give them a 500, you know, point PowerPoint. But I've seen you, like, you're just like super simple, like, this is what I do for you. This is how we get it done. And they just, just moves that way.

You know, I learned that when the, when the Chicago Cubs finally won their world series since 1907 or whatever it was. I was listening to the manager and they had asked him, what did you guys do different that you hadn't done before? And he said, I came in here and all I did was drill fundamentals. Now these are like big league players, the best of the best. They're supposed to have been playing baseball since they were six years old. And he said, we went back to the very basics. How to bunt, how to run the bases, how to hit your cutoff man. Just stuff that you learn in Little League because we get away from that. There's this tendency to over complicate things because it makes you feel smarter, but it isolates you from everybody else and it's oftentimes not effective. That's why I asked you guys a question. What are the things you've learned that from doing this that make people successful? And you didn't tell me you have to go get an MBA and you have to be an Excel God and be able to craft a waterfall spreadsheet. It was very. Relationships stand out, follow up, right? Like, know your criteria, not really complicated things. But if you do, though, that's why they're the fundamentals. Because if you do them well, you'll be successful. And people that have done things for long periods of time have recognized this is the most important part of football. This is the most important part of basketball. If you do these, you'll be good. And Brandon quoted Mark Cuban. Brandon loves to quote other people, but he gave Mark Cuban credit this time when he did it. A quote that's. It's been in my head the whole time I was in Hawaii. And that business is a sport, which is why business is fun to me because, you know, you start off and you suck. And you guys, you spent a year before you got a deal and it was miserable. Then you finally figured out these are the fundamentals we needed to learn. Your conditioning kicked in, boom, you're having success. And just for those people that are listening to this, it. Don't let yourself get intimidated by anything because it's almost always the simple things that are going to make you successful.

Yeah, I love that.

Cool. All right, well, let's. I got a couple more questions before we move on to like the deal. Deep dive. But first, how do you define success? I mean, like, and I don't mean that just in a deal like I'm not wanting just number wise, but being a successful person or couple family, what does success look like for you?

Well, for me it's, you know, the American dream is to make a lot of money and to be able to have a nice house and travel when you want. And that's great. But for me, the more you make, the more you can give. And if you're not giving when you have a little, you're certainly not going to be giving when you have a lot. Money only makes bigger what's already in you. If you're greedy and selfish, you're going to be even greedier and more selfish and paranoid the more money you have. So I encourage you, regardless of where you are in your finances, to be free with giving. Our church recently said it's one of the very few messages I actually remembered because they kept it simple.

Yeah.

See a need, meet a need. It is that simple. Whether it's somebody you're, you're in a conversation with, has something that you know, somebody who might be able to help them with that, that meet that need, then connect them. Don't hold your relationship so close because you want them to benefit you someday. Meet that need because it will eventually come back to you. So for me, that's more important is learning how to be a giver.

That's cool.

Yeah.

And for me, it'd probably be, I mean, that's, that's awesome, for sure. More around having the complete balance, which I would say in reality is extremely challenging to do. But if you can balance your. Your marriage, your, you know, being a parent, being a business person, fitness, how. I mean, all those aspects of spiritual. If you can balance everything or work to balance everything, then you're going to be a lot better in everything you do. With that said, don't beat yourself up when some area isn't going exactly the way you want to. Because sometimes the season and. But I think that's one thing early on that I did not do. I had no balance. I worked my butt off. I was really good at what I did. Any deadline I would make, no matter what, even if it was unrealistic, but I had no balance. So for me to be able to sit here and say, well, now fitness is huge for me. I'm being the best dad I can, the best husband. Those are all things that I didn't do before, and now to be able to do them, to me is success.

So that's cool. Yeah. In the book, the one thing Gary Keller and Jay Papistan talk about, there is no balance. It's balancing. Right. And I really, like, that's one of the simple things. Again, simple things that stood out to me is that it's okay, like, to go a little far one way and a little far the other way. Sometimes, like, it's. It's about the balancing act that we do. And some people are just never balancing. They don't even think about it. That's right. And so, yeah, there. There is a. There you may. You will never get perfect balance, I mean, like, no matter what. And people get frustrated because of that. And that's okay. I mean, like, I've given up on the idea that I'm ever gonna have perfect balance all the time.

That's right.

We're just balancing those things.

Yeah.

Yeah. Cool.

True.

My. I got one more for you before we jump to the DLD5. I know David has something too, but what's been your biggest challenge so far in the world of syndications and growing this massive portfolio you have today?

Well, since Mark and I kind of do this together, my biggest challenge is learning how to balance our relationship outside of the business. Because we're both passionate about the business, we tend to talk about the business all the time, which is okay because we're both passionate about it, but we're finding it difficult to really turn that off so that we can reconnect as a couple and individuals that we're not Just these business machines always on to us or to me. That's one of the biggest challenges is finding that balancing act to just be. Be us.

Yeah, that's such a good point. I mean, what have you found that has helped with that? I mean, because my, I struggle with that too. Like, my wife and I go to dinner and all we talk about is whatever real estate deals we're doing, like half or that now. Now it's Rosie. You know, we talk about Rosie as well. But like we talk so much about business and we struggle with that. Is it. So anything that you found works well for, for being just focused on each other?

Well, we just hired a business coach who's also going to be working on that with us.

Nice.

So, yes. So we are big on getting coaching in different areas of your life just to take you to that next level or something you're missing. So we're hoping he will help with that. We also have other friends in the business who we can kind of talk with who are also married doing it together. So it's really nice being able to bounce ideas off of them to see how they're handling their partnership in it as well.

Yeah, that makes sense.

Wow.

All right, so let's go from there. This has been, this has been awesome. And there's probably 10,000 more questions on syndication I want to get to, but we'll see what comes up later in the fire round. But first, let's go to the deal.

Deep, deep dive.

All right, this is the part of the show where we dive deep into one particular deal that you've done recently. Do you guys have a deal in mind that we can pick apart and go into the numbers?

Yeah.

Okay, so the first question, what kind of deal is this? I guess give us an idea of what kind of deal it is and also where it was located. What kind of property is it and where was it located?

It's a multi family deal built. It's in North Dallas and it's 255 units.

All right, 255 in North Dallas.

And how did you find this deal?

It was listed with a broker that we had a relationship with, but we had not done a deal with him before, but we had a relationship with them.

Do you do most of your deals with brokers? I should have asked you that earlier, but we'll throw it here.

We do now. A lot of the deals we get are off market now, but we definitely work through brokers and rarely, we don't really work directly with sellers.

Okay, so you're not out there like, you know, sending. We buy apartment. Okay. And when you say off market. Q. I know we're going deeper than the deal, deep dive, but we say off market. What's the difference in your. In your terminology between. Because I've heard some different definitions of this. Off market pocket listing, you know, broker, you know, has a relationship but hasn't listed it yet. I mean, like, how do you define what is off market and where you. What do you mean by that?

Yeah, I probably two categories. One, it's. It's listed. There's an offering memorandum which is kind of their marketing. And they blasted it out this on their website. They blasted out to their email list. That's a listed property in my mind. All the other ones just are just a variation of that.

Okay.

If you not listed not on the website, maybe they went to three people and that they want to maybe potentially buy it.

Yeah. Okay. That's how I define it too. So. Yeah. Okay, cool. Next one. How much was it?

15.4 million.

400.

And how did you negotiate that price?

Frankly, it was a very fair price, which was a little surprising for the Dallas market. But we came down. We got a small credit on it, not a big credit. We got maybe 150,000 off, I think, but that was it. We didn't have to do. We didn't do a ton of negotiation because it was already. We knew it was gonna be competitive. We knew it was a fair price and we didn't want to be in the deal. We ended up getting a little bit less than we could, you know, than we. Than we did because we actually put a huge amount down as earnest money.

You know, I'm glad that you mentioned that this comes up a lot in just the world of. Of agents and buying properties and investors who buy a lot understand it. There's this belief that it's your agent's job to get the price as low as possible. And that's not necessarily the case because you could have went in there and said, well, your agent could have fought for you to get it for 10 million and someone else offers 15, and all you got was nothing. Right. It's. It's to get you the property for the best price possible. So in this case, you could get 150,000 off. Sometimes you have to pay 150,000 more.

Right.

To get the deal. Do the numbers make sense? Is the best question to ask, as opposed to just like, how cheap could I get it? That's right.

Right. And in one point that you made about the Brokers or the agents working for you to get the price down. For commercial real estate, like we're buying, typically there is a selling broker. That broker works for the person who's selling the property. Their job is to get the top dollar they can for that seller. In our world, we don't typically work with buying brokers. You can if you're working, if you're trying to find something out of state, you know nothing about that market, you don't have any boots on the ground, and you just need a foot in the door to get you started in that market, then it might make sense. But again, typically you're working with that selling broker and it's their job to work for the seller, not you.

Yeah. So we need, we negotiate with them essentially.

Yeah.

All right, there you go.

Cool.

Okay, next question. How did you fund this deal?

We syndicated the deal with a group of investors that we had. We had done a few deals before that and we knew this would be something they're interested in, but it was our biggest phrase at the time. So our investor pool, it was only. We did 506B just means that we could only go to people we already had a relationship with. And we went to our investor pool.

506B, meaning we were working with accredited and non accredited investors.

Yeah, that makes sense. Yeah. I just did a 506C recently and the difference being with the 506C, you can advertise and market, but you can't take non accredited. And so I made that choice. Like I had, like, I didn't know which one to. To do, but I thought because of the power of my Instagram, because I have so many followers, I thought I better go with the C take. And I feel bad that I can't take a lot. Like most of my followers I couldn't even work with because they're not accredited. But I, I thought it would be too hard with the podcast and all that to. To do if I was with me. But I do both. Yeah. You done both?

Yeah.

What have you found? I mean, have you found a difference? Like do you like one more than the other?

Typically the C I like as far as building in that your list because after you condition them and they're in there for a while, then you can start offering to get legal, legal advice to do on that. But you can also offering them 5, 6B's at some point in time.

Yeah.

So it's a good way to build your list.

Yeah, that's a great point. Great point.

Yeah.

What did you then Actually, let's go back to some more specifics on this. So it's 15.4 million was the purchase price. Did you get a. You got a bank loan, I'm assuming on a good portion of it. And then you raise the down payment or did you raise the entire 15 from investors?

So we, our equity raise is 4.8 million.

Okay.

And we did a loan assumption, which just means that the seller already had a loan and we assumed it from them. So, Matt, to complicate things, we assumed it and then we also got what's called a supplemental loan. So the proceeds that we got were 75% of the loan to cost, which included some rehab dollars, which is a little unusual. So we assumed in from them. Didn't put us at maybe like 60. I remember it was leverage. And we got an additional loan from the same lender through a supplemental that gave us additional money.

Okay, very cool. It's kind of like. Is that kind of like a second mortgage if we were dealing with like, you know, like a smaller deals. Okay, okay, it is very cool. And then what did you do with this property? Like what was the kind of the story then?

So this one had a lot of things that, you know, you might have 10 things that you think are going to work out on a property and maybe only six or seven work out, whatever it might be. But this one, it was a big management play because they, even though the occupancy was high, they weren't collecting rents. They treated their tenants, I mean, horribly. I mean, example after example, we saw 50 ourselves how bad they were treating people. And then they weren't actually charging anything extra for rehab units. So they had 113 that they did not rehab, but all the other ones they had rehabbed. And the rent roll, which shows all the rents, they weren't even charging a penny more for units that were rehabbed. So we're like, man, we know we can charge more for those. We can renovate the rest of the units. We can do better and manager perspective and better rent collections and things like that. So. So that was kind of the business plan. It didn't require a ton of rehab. It was actually a pretty decent looking property. But we did rehab some exterior, kind of spruced it up, spent some money on landscaping and then did the remainder of the interiors.

Okay, so what ended up being the outcome?

Are we still on the property? Actually, I was just on the phone today with about a refi for the property, which we can get closer with. This guy's saying is going to be Quite amazing. So we'll see.

Yeah. Do you have an estimate? Like, what do you think it's worth today? If you had to guess, you bought it for the 15.

Mid, mid-20s.

Wow, that's awesome. That's awesome. All right. So what lessons did you learn from this deal?

This one. So loan assumptions, depending on the timing of them, can be tricky. So we wanted to do what's called a supplemental loan initially. And then I started then do a, like a second supplemental loan. So not to confuse things, but end of the day, we said, two years later, we'll do another supplemental. Well, what happens is you're going to the same lender. They're not as aggressive because you have to go to the same lender for supplementals. So they were like, well, you know, five years left on the loan and you're doing a second supplemental. So the proceeds weren't going to be very good. So that would kind of scratch that. So we ended up looking at the refinance instead.

You know, on this one, frankly, we've had other ones. Not everyone goes perfectly right. But this one lesson learned were, you know, we raised enough money, which in past, before, sometimes we didn't, but they actually gave us like $371,000 more when we closed a deal, too. The lender did, which may be even better if they didn't, maybe would have needed that. But we probably underestimated the amount of time it takes the lender to reimburse us. So we have to pay for things up front in some cases, you know, several hundred thousand dollars, and we're waiting for the lender to reimburse us, and it's a fight, and now we're stuck. We can't necessarily pay distributions, so over raising is key within reason. And then realizing that, hey, you know, you have to condition your investors that, hey, we have $350,000 out. We can't pay distribution right now. It will work out. But reality is. And then we have some other things like that we didn't even know about. Like the property company put some seasonal workers in there. We didn't even know that. They didn't ask us. And we're like, you know, 17 people move out in a day. We're like, what's going on? They're like, oh, the seasonal workers. Like, what do you mean, seasonal workers? Right. We're in North Dallas. So I guess really understanding, even though you have rules in place, sometimes propaganda companies can still do things that they shouldn't. But really kind of understanding upfront what your rules of Engagement are kind of back to David's point, whether you expect from your management company, hey, we don't do. We don't do 24 month leases. We do 12 month leases or six month leases. Hey, we don't do leases for seasonal workers. So really kind of getting more concrete on that we could have done a better job on.

All right, well, that's a good answer. That's a, that's a very good deal too. That sounds awesome. So very cool. Well, let's head over to the next segment of the show called the fire round.

It's time for the fire round.

All right. It's time for the world famous fire round. These questions come direct out of the BiggerPockets forums. That we're gonna fire them right at you right now. See what you guys gotta say. So here we go. Number one, I'm an army helicopter pilot, currently deployed. My wife and I just made 170k on the sale of our first rental property. I want to invest the money, most of it back into real estate. So what has worked for you? If you could start out with a hundred, we'll call it 150k. What would you do with 150k if you were trying to start a real estate investing business?

Yeah, I would split it into three, probably, frankly. Okay, so $50,000 increments. Now, if it's. If they only have 150, I'd keep 50 back. Okay. Emergencies for their families have 100 to work with. Split it across two deals. And if they want to be active, I would say, you know, they don't need to start passive. Find a partner and go do. If they want to be passive. I would go slowly, but you have to understand the basics of a deal before you invest. Just because you have $100,000 doesn't mean you should go spend it. You need to understand the basics of any deal before you put the money in. And most people don't. So become educated before you do it.

All right, very good. Next question. This is a very, very popular thread on the forums. Getting discouraged. Everything is going wrong at once. So Ryan says I have 13 doors, but everything seems to be going wrong at once. Insurance is requiring me to get the roofs done, the siding changed out, and some steps repaired. I've already spent all my reserves and maxed out a couple credit cards. It's been a terrible four months. Does anyone have any advice for getting through this?

I would say I don't know where he is on the positioning, maybe doing, looking at a refinance or bringing Somebody in. I mean, if he's, you know, credit cards are horrible. I mean, just end of the day, right? So he'd be much better off bringing some, another equity guy in, get 50,000, whatever he needs and give up part of the ownership of the deal. Still stay in a position where he makes all the management decisions, but give a part of the equity of the deal and get out of credit card.

And even, even hard money loans require less interest from you than credit cards.

So that's, that's a very good point. And hard money loans are a lot easier to get right now than I think a lot of people realize.

Yes.

Yeah, very true. All right, number three, from Mike in Colorado, how do I vet a syndicator? Like, how do I know I can trust this person with my money?

Yeah. So we have a number of questions. Like we have 22 questions on our website you can go download too, that you ask a syndicator before. It's a small world. So ask other people at events. Bigger pockets, right? Hey, have you ever heard this guy? Whatever you want to do, right? But it's a small world to understand that. End of the day, it's unfortunate, but you might trust somebody and they might still end up doing something they shouldn't do. It's just reality. Take it slowly. Ask good questions and ask around and ask their experience or track record. If they have partners, ask to talk to their old partners. We have old partners, but I think they would all have good things to say about us. I really do. So there's nothing wrong with asking. And don't be scared to ask a question. People say, oh, should I ask this question, man? Someone wants 50 or $100,000 in money, you ask whatever questions you need to. Right. To feel comfortable. Hmm.

You know, I had a conversation a couple weeks ago with a gentleman who's a consultant for like, helps place high end like clients with like Microsoft and Google and stuff like that. Anyway, so he does a lot of hiring and things and he gave me this piece of advice when hiring. I thought it was fantastic. And I think it applies to this as well, where he said, if you think back to a bad employee, you've had in the past, like an employee a bad one, and someone were to call you and ask you and say, hey, you know, I'm thinking about how hiring this person for a really vital role in my company. What do you think of them? Like, you'd be very guarded. You'd be very careful in what you said. I mean, like at the same time, you don't want to like, throw them under the bus, but you'd be like, like, you know, like, they worked for me. They did, they did a, a job and. But like, if they were one of your best employees that left on great terms and you had a great relationship with them, you would go to bat for them and you would sell like that person. You'd be like, oh my gosh, they're the best. You've got to hire them. They're awesome. So he said the number one thing he looks for when hiring somebody and I would say this is similar. If Veggie, you're a syndicator. Is our previous client, previous people going to bat or are they being safe on how they respond to the story about them? I just, I thought that just blew my mind thinking that way. It's like, yeah, that's exactly how I would do it. If it was somebody that I didn't absolutely love, I wouldn't go to bat for them, but I would, I'd be very careful and very legal about it.

Right, exactly.

Yeah. So that's good. Yeah, I thought that was really good. So anyway, yeah, I would call up a, a previous person who's worked with them and just say, what do you think of them? And if they're, if they're selling you on it, then the good chance that they were actually really good to them. So anyway, cool.

All right, great advice, Brandon. All right, last question.

I'd like to claim ownership, but I did not come up with that idea. I don't claim ownership for things.

You're becoming so much better not taking credit for other people's credit party quote.

Oh, my God.

All right, from Pete Harper in Streetman, Texas, this. The seller for a 12 unit complex I'm looking at has been refusing to provide detailed financials. They sent a flyer with high level figures, but the numbers don't look right to me. I've requested three year actual financials, but the seller's refusing. I've never run into this before. Is this a red flag?

Yes. Oh, my gosh. Yes.

Yeah, we run it.

We run into it many times.

We do.

Even on the larger properties. And end of the day, you have to position it, you know, if the seller has a reason to give it to you. If they do like, hey, my lender won't give me a loan unless you're going to do that. You're going to give me the financials. So having a reason. But end of the day, you have to really, really careful about something like that. Because if they're not Going to give you even the basic financials for the last three years. You have nothing to go off of. I mean, you have to assume the worst. Hey, it's vacant. Who knows? We've been in properties literally before where we. This is recent. Hey, it's, you know, 65% occupied. Very low. Go there. It's 15% occupied. No joke.

So you just have to do a lot more due diligence of your own to know what that business should be running at. I mean, it's a commercial property, 12 units. It is a business. So the financials and everything that the seller would normally provide, you would give you a good base to work from. But when you don't even have that, that there's so much more work involved in trying to figure out if this business will work for you or not.

You can still do your due diligence. You can walk the property, see who's vacant, occupied. You could ask. They may not give you, hey, I want to see a deposit in the check. I'm going to pick tenants randomly. You're going to show me that it actually deposited in the checking account. You could actually pull the tenants and ask them. But end of the day, if you're not comfortable and your gut's telling you, hey, there's something wrong with this, I would suggest not moving forward with the deal.

Yeah, I like that. Because there's two reasons. It could be that's motivating the seller. It could be that they're lazy, they just didn't keep good books and they don't want to have to do the work, which would be better. Or it could be like, actually bad. They. They don't. They're not getting money. They're misrepresenting the property. It's not being rented out. And so what I like to do, because this comes up a lot when I'm representing clients in deals where the seller says, I'm just not going to give you that. And they just. And my client's like, what do we do? I. I don't know what I'm supposed to think. And I like to try to create a situation that puts the owner bonus back on the other side, the responsibility on them. So I would probably draft something that says, okay, well, if you don't give me any information, I gotta assume the worst. Here's the price I can pay you if I have to assume I'm buying 12 evictions. Yep.

Right.

Here's the price I can pay you if the financials look this way. Which one would you rather have and, and if they say, well I want the higher price, say great, then you need to give me the financials and you can have it. If not, here's my offer and it looks terrible. And now I've created incentive in the seller to like earn himself more money by giving me the financials. If they still refuse to do that, then I would just assume, well that's because you are misrepresenting this property and you're. I'm having to buy evictions basically at that point walk away.

Yeah, for sure.

It's great.

Yeah, good point. All right, well that is the end of the fire round. Now before we get out of here, let's head the one last segment called the world famous famous for. All right, these are the same four questions we ask every guest every week here on the podcast. But before we get to it, let's hear what's going on this week over on the Biggerpockets Business podcast. Hey there Brandon and Biggerpockets real estate podcast listeners. This week on the BiggerPockets business podcast we talk to James Anderson who co founded an axe throwing business that brings in nearly a million dollars per year. He's going to tell us all about starting a brick and mortar experience business and he's going to tell you how you can get your entrepreneurial business off the ground today. So make sure you subscribe to the Biggerpockets Business podcast. We'll see you on Tuesday. Now back to your famous four. All right, with that, let's get to it. Number one and you guys can answer this individually or together if you'd like. What is your favorite or current favorite real estate related book?

The only real estate related books I've read was when we first started and that was by Ken McElroy. The ABCs of real estate Investing, the advanced guide. And then if you're wanting to self manage, he's got the management book as well. It's just very simple. It tells his story of how he started and why he transitioned from single family to apartments and why they rock.

Cool.

Yeah.

Anything different for you, Mark? No, stick with that one. Perfect.

All right, how about, how about your favorite business book?

Yeah, business book. I mean I don't know if you want to consider, I mean it's kind of the default. But Kiyosaki's book, I'm really Rich dad, Poor dad, I mean consideration, it was the biggest influence on me personally as far as mindset perspective, without a doubt.

Cool.

What about some of your guys hobbies?

Working out in general, I guess. Mark's very, very diligent, and I'm trying to be diligent, but I'm more dedicated on the job right now, so I'm a little less diligent. But we both really enjoy that.

Fitness ufc.

We'll watch mma.

That's really the only sport we follow right now, as people bashing each other's faces in. Way cool.

And cars.

Oh, cool. Yeah. All right, well, final question. What do you believe sets apart successful real estate investors from those who give up, fail, or never get started?

I think it's mindset. It's not how many times you fall or try to avoid falling. It's how many times you're willing to get back up, whether it's business or relationships. Right. Like, Mark and I have been married 24 years, and it's tricky. Business is tricky. Life is tricky. But you've got to learn how to work around those obstacles. Like we talked earlier, it's a balancing act, and it's being confident that you will be successful and just getting back up and trying again. Don't give up.

I know there's a study done somewhat recently, and the word really was grit, you know?

Yeah.

End of the day, that's what it comes down to. When everything looks bad or anything. Nothing's going the way you want to, but just sticking through it, it's really. It's grid. It's what's going to get you through it. Mindset. Obviously, you have to have a mindset. You're going to do it, but a lot of people have mindset. Frankly, it doesn't mean they're successful. They have to do the action. The action is what's going to make it successful.

Yeah, that's a great answer. Great answer.

All right, last question for me. Tell us people. Where can people find out more about you?

People can find out more about us by checking out our website@thinkmultifamily.com that's T H I N K multifamily.com. they can also reach out to me personally at Tammy t a m I thinkmultifamily.com or mark m a r k@thinkmultifamily.com Perfect.

Perfect. All right, well, thanks, guys. This has been a lot of fun. And now. Yeah, yeah, yeah. This has been cool. I'm excited to kind of like, you know, get more into your world and. And learn how you guys do this stuff. So thank you for joining us today.

Thanks for having us.

Appreciate it, guys.

Yeah, thank you. All right, and that was our episode with Mark And Tamil. Kenny. Yeah, good people. Good people. Very, very smart. And, yeah, I learned a ton. I love that.

Yeah, they've got a really good system down. I like how they explain how each of them, like, how they kind of divide up the business and then how they work their own personal relationship into the business. That's not something I have to work on, but I know a lot of investors do. Like Brandon, we talk about is how you balance those two things. And your point about you're never in balance, but you're always balancing was very insightful as well.

Thanks. I made that point up by myself. I didn't read that in a book, like, the one thing at all. I completely made that up. I'm gonna put on my Instagram later as a quote, and I will put Brandon Turner under it.

You're growing so much in this, giving away credit. Josh Dworkin will be so proud of you.

I know I gave Josh a good shout out today on the podcast as well. No, yeah, really good stuff. And yeah, like, like I really, like I didn't say this in the interview. I could have probably, you know, get commended them even more. Just like, how smart that is about the two sides, the left brain and right brain. You really need both sides to put together a real estate deal. And if you don't have that personality side of things and all you are is the analysis side or vice versa, like, that's the hole you need to fill in your business. And so go out and find somebody who's like that.

Amen. That's great.

Cool. Well, with that, I guess it's time to get out of here. David Green, anything you want to. To say before we get out of here? Anything that's going on in your life or interesting or anything you want, need in your life?

Yeah. I'm hiring real estate agents for my team. If anybody here is a talented person who wants to kind of step up their game as far as making more money or even step up their investing, and they want to work with me on that, please reach out. Especially if you live in the Northern California Bay area, and I do these meetups, you know, pretty much every month, where people can come and teach them for free all that I can. Because we're all about giving value away as much as we can here. So take advantage of that because you don't know. I might get hit by a bus tomorrow and you'll be like, oh, I wish I'd gone to one of those meetups. I think, I think in general, the couple today showed us the power of going to meetups and meeting people and letting people get to know you, not just an email and an inbox, but as a real human being makes a big difference in your business. So you should absolutely be taking advantage of that.

That it does.

Thank you.

Cool.

That being said, this is David Green for Brandon finally giving away quote credit Turner signing off.

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