Starting Early with Drew Breneman

Welcome. This is the Insider's Edge to Real Estate Investing with James Nelson, the principal and head of Avis & Young's Tri State investment Sales Group. In this program you'll learn game changing strategies to outperform the market. James will teach you how to source, execute and capitalize on the best real estate opportunities in New York and around the world. Now here's your host.

Welcome to episode number 151 of the Insider's Edge to Real Estate Investing. This is your host, James Nelson. Thank you as always for joining. I'm going to do something special for you all today which is if you post a review and take a screenshot on Apple, Spotify, wherever you are listening to this right now and you email your review to any annamesnelson.com that's Ann with an e at the end, a n n eamesnelson.com we're going to send you a copy of the book. Just remember to send that screenshot and your address. Most importantly, so I know where to send this book. Ann is now doing an incredible job answering a lot of your requests, helping get the word out there. So go ahead and take advantage of that. Certainly if you haven't gotten the book yet, I'd be happy to send you that signed copy. Just if you email us with that information. Thank you. So for today's show, you're in for a real treat. You're going to be inspired by Drew Brennaman, founder of Brennaman Capital, who started very early on. A natural born entrepreneur, Drew started his business at 14. He then launched a highly successful Internet business while in high school. His ambition for finding the best investment vehicle for his earnings from his Internet business is exactly what led him to real estate, purchasing his first two rental properties at 19 years old. While in college, his drive attracted the attention of HGTV where Drew was featured as an up and coming real estate investor. He wanted to share what he had learned and aspired to provide direct real estate ownership opportunities to others. Drew earned his BBA in Real estate and Urban land Economics from University of Wisconsin Madison, My hometown and one of the top real estate programs in the nation. Upon graduation he worked for three national real estate development firms, each which focused on different product types types affording him a broad knowledge base for the office, retail market rate, multifamily and affordable multifamily sectors. In 2005 he founded Brennamon Capital, formerly Rise Invest and co founded the Blackhawk Investment Group in 2008 and 12, a Chicago focused real estate investment and property management firm. In 2019, he decided to buy these two multi family properties in Madison where he went to school. When I asked him if he had any hesitation, he said no. He told me that he had the money and the numbers made sense. Today, Brenman Capital specializes investing in multifamily in Phoenix, Dallas and Austin. They've acquired over $200 million investment properties, key sold GP and to date they've had over 25% average IRR on properties sold. Drew's criteria for acquisitions is 5,50 million 1980 or newer core plus in value add. So how many times have you overthought an investment or talked yourself out of it? Drew talks about having the confidence, but only after you've done your research. If you were inspired as I was by Drew, make sure and check out his podcast, the Brennaman Blueprint. You can find out more about Drew and his company@brennaman.com or link in with him and I will leave his contact information as the show notes which as always you can find@jamesnelson.com so we're going to have a brief word from our sponsor. We'll get right into that interview with Drew Brennan.

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Please Visit us at aytristateinvestmentsales.com and follow us on Twitter, LinkedIn and Instagram amesnelsonnyc to learn more. Now it's time for our investor spotlight and with us today we have Drew Brenneman. Drew is founder of Brennaman Capital. Brennaman Capital specializes investing in multifamily in Phoenix, Dallas and Austin. They've acquired over $200 million of investment property as key and sold GP. So really excited to get into it. Drew, thank you for joining.

Appreciate it. Thanks for having me on.

All right, awesome.

And you can still, you can still hear me obviously on this spaces.

Yeah, I can, I can see you on spaces. I can, I can hear you and it's, it's all good. So excited to use this new Medium and platform. And again the goal of this show, we're just trying to reach the largest audience possible. Get the word out there. Our job is to help our listeners gain the insiders edge to real estate investing. So Drew, we're going to talk today about how you, you did just that. So maybe take us back maybe a little bit about your story and how you got into the real estate business.

Yeah, happy to do it. So yeah, my, I just, I started a side hustle in high school selling items and video games. This is back in like 2002 to 2004 where I was playing this video game, Diablo 2 and EverQuest, world of Warcraft, some of these games people would pay real money for items in the games. So I just started flipping them. So buying and selling did thousands of transactions and didn't make a lot of money on any one, you know, like five or ten dollars per transaction. But I made between 80 and $100,000 as a high schooler and I kept all the money. So I started, you know, so both my parents.

I gotta, I gotta stop you here because I have. So I have three sons, 18, 16 and 12. And you know, I think if any high schoolers are listening out to this right now, they're gonna think okay, I'm dropping out of school, who needs college? I'm gonn. So was that, I'm sure part of that was your entrepreneurship at a young age. Certainly I would imagine your knowledge, your expertise. But did you also kind of come across this at a time before trading these digital assets was a little bit more mainstream? I guess a long way of asking the question if someone tried to do this today, do you think there's still opportunities like that or was that just a moment in time?

I know you're asking and it's funny, it's probably the same way where you made all the money in New York real estate back in the Rockefellers were buying it. Right. Like it's. You still make money in any, in any market is my point where. Yeah, in those video games no one's playing those I don't think anymore. But the modern day version of that would be, what's it called, drop shipping, arbitrage and stuff on Amazon. So the modern version of that would be you can go buy like Windex at Target or Costco for like $2 a thing on Amazon it sells for like 6 bucks. Because I don't think Amazon figured out how to way to make money on selling it or something. But individuals are. So there's still ways to make money In a similar thing today, definitely that was like a moment in time and took advantage of that for sure. But no, I think, I think there's still opportunities like that. But yeah, really, I didn't mess around with it. I just. During high school, I pretty much all I did was go to school, come home, make those deliveries. I played basketball and baseball and then did my homework. So I play the sports when they were in season. And that's all I did pretty much. I had a. A girlfriend some of the times, but I didn't. I just worked and went to school and kept the money. I liked making the money. It was exciting. And the other thing too is you can't really drop out if you're making. What would that be, 20 or $1,000 a year? Like, that wasn't too exciting. But what was nice is I, I had no bills. So as a high schooler, that, that's great. But as, as a, as an adult, you would, you'd be in the poor house making 20 grand a year. But as a, as a high schooler, you keep it all. You set yourself up, you know, in a good spot. So that's what I did.

Amazing. And what were your parents thinking about all this? And were they. Were they in the real estate business or.

No, they're both teachers, so they. My dad was a shop teacher, my mom was a speech pathologist. They're. They're retired now, but no, they were, they were supportive where they weren't. I mean, some of these parents, I see them, they, they say like, don't do this. Focus on school. You should be a doctor or whatever, you know, and they, they be telling me don't do it. They thought it was cool I was making this money, but also weren't like, you know, they wouldn't have wanted me to drop out or anything, but at the same time, for doing the business or any other businesses, I tried because also before that I did, I did all sorts of stuff. I made a vending machine route. I. To play paintball and afford money. I bought paintballs and resold them. And I, it was a magician. I did all sorts of stuff. But this was the one that, that stuck. And they sort of. Yeah, so they were supportive that whole time. They didn't have, they weren't telling me, don't do it. But at the same time, it wasn't like, they were like, hey, let me throw money in on the deal, or, you know, like, like, or giving me a, a leg up other than being supportive, you know. And so they, they were they were great in that regard because, yeah, I see a lot of. You hear a lot of stories where it's like, no, my parents wanted me to be a doctor. So then I, you know, I did this and this and this. And I hate being a doctor, you know, So I didn't. I didn't have to go through any of that. But, yeah, so started. Kept the money, started reading about investing, really liked real estate, and bought my first four deals when I was in college. I bought $2 million of property, and I went to UW Madison for college. They also have a. A real estate program there. So switched my major to real estate and been just all real estate ever since. I picked up my first.

So, Drew, I'm sorry, but I gotta stop you again. So you just kind of breeze through. I bought $2 million of properties in college. So now you got the college students thinking, like, oh, my gosh, how. You know, most college students, sure, they're trying to keep up with their studies. You know, they're out at the bars, they're having a good time.

Yeah.

How are you acquiring $2 million in real estate while you're in college? And at this point, I mean, I guess you'd saved up a little bit of money from your trading.

But where.

Tell us bought. And how did you raise the money for them?

Yeah, well, it was all my own money, and it was. So the first deal was a $220,000 duplex. I put 35,000 down on that. If I remember right, if that's 15%, that's what I had done, put 15% down on it. At the time, I didn't know any of these terms, but ended up being just kind of a value add deal where the rents were below market. I bought it at a really attractive gross rent multiplier and was able to. I wasn't planning on buying and selling anything at the time, like, re. Like flipping. My strategy was, you know, you. You are just so new. There's a lot you don't know. Like, just find something that's cash flow positive day one, and just focus on understanding gross rent multiplier and understanding how to calculate the cash flow. So dialing in the rents and expenses, that's all I did. It was cash flow positive. 200 bucks a month with me living in it, I believe, or. Or I guess I don't remember if that was with me in or out, but it was. I moved into it, and it was cash flow positive, and I just kept it super simple. Second deal was similar. You know, another duplex same thing. I use the. You know, it's 2005 when I'm buying these. So it's pretty, you know, it's not. It's not hard to get a loan. And I had documented income from my business on my tax return. And so I go and I get another. I buy the next duplex. And I think what I did was I already raised the rents and income on the other one. So I was able to, I think, put a second mortgage on the first to get the equity for the second, then sold that first one, had all that money from that one, and bought a $650,000 three unit. You know, just. Then the next one, same thing. I hadn't sold either of those and I bought a third one with pretty close to no money, down another three unit. Those last two were right around $700,000. So then that got me to the 2 million. So.

And you were obviously able to get the banks to lend you no problem. That, hey, this is, you know, someone in college.

And well, what's interesting. And someone asked me too once. We're like, how did you convince the realtor to like work with you? And it's funny because none of this ever crossed my mind, James, where I just thought, I have the money. I'm. I want to buy rental property. I have income from my business. Like, why wouldn't they give me the loan? So I just sort of never. I never thought. I never thought it was a hurdle and it wasn't.

Love it. So at uw, did you end up taking some real estate classes? You said are you, you.

Yeah, yeah, yeah. They have a real estate program there. So, you know, my.

That was one of the best in the country.

Yeah, yeah, yeah. Wharton in Pennsylvania and U W Madison are always the top two just kind of go back and forth, flipping, flip flopping, number one and number two. So yeah, definitely that was fortunate because I was going to Madison no matter what. Being from Wisconsin, you know, that's in state, tuition is super, is affordable, and it was a really good school. So I just pretty much only. I only applied to Madison and got in and went there. So. Yeah. And then if. I mean, I think that pretty much sums it up for those back in the. The college days. And so I had invested all of my money in those four deals and I was graduating in December 2007. So then, you know, I'm looking at the market going, you know, I don't. I never had heard about raising money equity. And so it never crossed my mind really or I had heard about it, but that was not for 22 year olds. That was, you know, for older people, let's say. And, and so I didn't. I. I was like, I should get a job and learn from some of these bigger groups. So I interned at an office developer and then later got a full time job at a multifamily developer up in Minnesota. And then that's where I met my first investor. So was an intern where I worked his dad. We went and talked to him about what? You know, potentially buying deals together. And so he saw me, you know, I probably was like 23 years old at the time. 22, you know, so I was super young. But what's interesting is I. There was like a lot of activity happening. I've already bought four deals. I work full time at this place. And they. He liked one of the deals that I brought to the meeting and we ended up buying it. And that was sort of the first.

Let me get this straight. So you're an intern at the company and you just show up and bring a deal and you say, let's do this together. Is that. That's how that happened?

No, no, no. Let me, I'll. I'll explain it. It's sort of the son. I was working full time at an apartment company and one of the interns there, he heard. He heard this story and then was like, we should go talk to my dad about buying deals where. And the dad didn't work at the company. His dad owned a construction company elsewhere. So. But point being, like, it was, it wasn't like. Because I'm trying to. As similar to the question you asked. How could somebody do this today? It wasn't like that was my best friend from grade school and I just like, was Lucky, who I sat next to in kindergarten. This was someone he. He also majored in real estate, the Sun. He met hundreds of people at Madison. And then a lot of other people worked at this company. But, you know, I was the only one who was actually doing deals. So I was the only one. You know, if you wanted to partner with somebody, that was the only person. Because if you want to like, hitch your wagon to somebody, it was me, you know, I'm doing deals. And I listened to what the dad was saying he might be interested in and said, here's a deal that fits that profile. Let's check it out. And we ended up buying one of the deals I printed off and brought to that meeting.

So, Drew, I. I know I can already tell your story. This is going to inspire so many of our listeners here because you know, I believe one of the things that holds people back from investing in real estate, the number one thing is that fear, right? That lack of capital. You know, how do you get started? Right? And the fact that you, you started with a duplex and you grew it, but it was really about what you just said, which is finding the opportunity, right? And there's plenty of people who are really smart when it comes to analyz real estate and you know, figuring out how to structure it. But at the end of the day, your ability to source incredible opportunities, that is the most important thing that you can bring to the transaction. So why don't you tell our audience a little bit about how you find these opportunities. You know, were these on market? You said you know, some of the, the two families earlier deals you bought with brokers. So how did you start? And by the way, that investment that you did with your friend's father, are we now graduating? Was this like a 10 unit, a 20 unit?

It was a shop.

Talk about.

Yeah, there's a shopping center, Minnesota two tenant retail deal we bought for 2.62 million 625, 000 1-20-2009. You know, these memories are, you know, burned in my head here. But yeah, that's a, yeah, that, that was a nice, a nice deal that was on the market with a broker. But it was 2009 so there was, you know, end of 2008, so there was nobody bidding on it. So we just wrote our own ticket on it. We had fresh capital to put in to deals and banks and brokers and sellers like that. But to back up on sourcing deals. Yeah, the first one was on the MLS like a broker, like a marketed deal. It just. And then the next ones were all off market like one, the next one was in the newspaper, you know, if you remember those days. So I was in the, in the newspaper, I saw it called her as a for sale by owner.

For sale by owner.

Yeah. So in the newspaper the next one was also for sale by owner. I was walking to class and I saw for sale sign in the yard and called the guy and you know, he wanted like I don't know, 800 grand. And I was like, I think it's worth like you know, 650. And ended up, you know, getting it where I thought it was worth and bought it for 650. And then he had another one he wanted, you know, another big number for relatively speaking and got it a lot cheaper as well. But that was direct as well. Same guy I bought the third one from, I bought the fourth. So in terms of advice for people, which I think what you're getting at, yeah, you need to be able to like, find these opportunities, but it's really hard to put it all together. So I really would recommend to people like, don't. Let's say if. Whether you were my age, when you're in your early 20s or whatever, like a big advantage I had then was I kept my. My costs were super low. I didn't have any overhead spending. So when I made money, I saved it all. And then I'm just investing. So that was one. And then the other thing is that, you know, I was. I worked those jobs. So I had a job, I had my own properties and then I had this, you know, side business I was building. So I basically had three jobs, which sounds crazy. And it was. I basically only worked for. For a very long time just on that. But what it allowed me to do, and I've heard other people do the same thing is there was never like a gun to my head, so to speak of, like, you need to do this deal so you'd see an opportunity. It wasn't like, I need to put this together or I have to stop and go get a job. It's like, I already have a job and I already, already have my own portfolio. I'm just trying to build this nest egg bigger. So that would be a tip I have because I think people who, let's say maybe they're a broker and their thought is like, I want to do deals as a principal, I'm going to find one, then I'm going to quit brokerage, let's say don't do that. Like, stay a broker. Like, and then until. Until you had so many deals on your own, where brokerage or whatever your day job was, because it turns into a waste of time. And in your eyes, like, that's when you jump. Like, I quit my job when it was. I had. By the time I quit my job in 2011, I. We had bought $25 million of property together, me and that family. And I still had three deals or two deals on my own. Like, so that's the time to make the. Make the jump.

So, Drew, this is such incredible advice. Really appreciate your sharing this because you're right. So many people look at investing in real estate is okay, when I'm going to do this, then I need to leave my day job and go all in. And no, I mean the fact that. And look, if you are working for A real estate company. If you're a broker listening, there are ways to do this where you don't want to create a conflict. Right. So if you are investing in the side and you happen to be working for a big real estate company, first of all, tell them what you're doing. It's okay to have that conversation and make sure that it's something that's not competitive. So I would imagine whatever big real estate company you're working for at the time, we're probably not interested in smaller multifamily or shopping center deals.

So, yeah, you're right.

Just important. On that note, if you are going to start this as a side business, so to speak.

Yeah, you're right. And so those early deals, I was working at an apartment developer and we were buying commercial deals. We were looking at apartment ones, but there wouldn't have been no conflict. We're looking at deals that were 2 to 8 million. And the stuff we were buying as we were, we were buying at work was like 50 million. So our building. So yeah, spot on.

So take me to 2011 when you did go all in. So you said at this point you had, what'd you say you had a dozen properties, $25 million portfolio value. How many units, how many square feet.

Would that consist of? Yeah, I don't, I never have been big on unit count or square feet. I just think of the dollar zone because it's been a bunch of different product types. But yeah, at that point I had 25 million that I owned a share. You know, I got a share of the profits on with that family. And then, and then I owned two deals, I think at that point on my own still all the original four. So. And then what I wanted. And so, you know, what I was making off those would it be eight deals was at that point it had eclipsed my day job by a lot. So it was, was time to go and then push, push, try to maximize the sort of, let's call it, dollars I could with this family. So because we, we ended up in total buying $100 million of property. But it wasn't like they threw 40 million in and we just, you know, put 40% down. It was kind of deal by deal. I think at most they maybe put in 8 million at the peak. But it was really more like the. After doing the commercial deals in Minnesota, I moved to Chicago and we started doing multifamily and I bought, it's like we put 3 million of equity in, bought 10 million property, then we raised the rents, we Refinance on all the equity, did it again, bought another 10 million, rinse and repeat where we did that and bought I think 30 million of property with that group of money and pull all the equity out. So we did.

So Drew, I'm looking at your website, Brenneman.com and I'm looking at your portfolio and you've got some really historic looking properties and obviously there's some shopping centers in there. I see Panera Bread, I see sleep numbers. So, you know, on the retail side you have credit. But a lot of this multifamily product looks like pre war conversion. So was there kind of like a certain look and feel or profile for a deal on the multifamily side that appealed to you? And it looks like it was certainly a value add strategy. So maybe talk about.

Yep.

You know, your business plan and how you were able to figure out how to convert and renovate these properties.

Yeah, we, I've only done two Renault in Chicago. I've only done, I guess some needed rent. Like they all needed different amounts of renovation. But in terms of like really renovating the property, there's only one actually what we were buying usually was like if you're on the website, the one that's I think Evergreen Wicker park is the name or the 1449 Wicker park one. Those are 2730 Ashland. Those are all deals where they were built as condo deals around let's say the 2005, 2008 era. They ended up going back to the lender. Somebody got them from the lender super cheap. They had really low rents in it that the receiver threw in or the person who bought the note when they got to control the property. And then so we'd buy it on that depressed rent roll at the time at like a six cap. And then we like the, the Evergreen deal, we raised the rents from $2,200 on average. With the three beds we're going to today, those go for 3,600. Like we. And at the time it was 3,000 where we were doing value add deals. But it was really more operational and leasing value add. So we didn't need to take on a lot of construction risk which I really, as the market got better, those deals dried up and you know, all the defunct condo rental deals got. Got bought up. And then we had to go to deals where more it was like a lighter lift. And all the ones that you're looking at that look like maybe they're 100 years old, those are all inside fully renovated. So someone else did the renovations on all but one of those. And then, and then they just didn't, they didn't, they didn't sell them. Right. Or they, they rented them all out in the, in the winter, you know, rents were depressed and we bought it because of that. So at a fair cap rate for the, on the depressed rent roll. So awesome.

And you have a tab on your site where you say why multifamily investing? And multifamily is definitely an asset class where we encourage a lot of people looking to get into the business to start off. So why, why do you like it as an asset class?

Yeah, so multifamily. So originally we wanted to buy multifamily, but there wasn't really any distressed multifamily deals in Minnesota to buy in 2009 through 11. So we were buying those commercial deals because that's what was available to buy, that was attractive because those were trading at discounts. And we were buying, you know, full commercial buildings 100% occupied at like 9 caps when you could borrow at 5 or 6%. So we like that at the time. But then once those deals went from 9 caps down to 6 caps, I like then if you're going to buy something at that kind of cap rate, I like multifamily a lot more. And I mean the reasons are, it's, you know, you have a, you have a really, they'll say resilient and diversified rentals income stream. You know, on these commercial properties that I have, it's two to six tenants. So you lose one of your two tenants, you're now you're losing money. You know, from a cash flow standpoint you need, you're, you're carrying the building and also need to add money to then re rent the space and pay, you know, leasing fees and tenant allowances and all that. So I liked how diversified it was where you know, you buy a 20 unit, you lose one tenant, it's, you know, you're still cash flow positive and it's easy to rent an apartment. It's very, very little rental costs. And then I like the one year lease term. You know, some of these commercial deals you get locked into a law a long term rent and then it's inflation starts running hot, you can't reset your rents. So I like the one year lease term. I like how you have so many different renters in it and probably most importantly, you have the best debt terms. So you, all those Chicago deals I'm talking about where we bought it, we raised the rent, so we refied out all the money. Each one of those cash out refis were Freddie SBL loans. So fully non recourse loan that's only available to multifamily. And you know if we were doing shopping centers maybe we exclusively maybe we wouldn't have done those cash out refis because those loans, you know you and the size we were playing in, they're the recourse loans with banks. So then do you want to really lever up again on a fully recourse loan and you know again you lose a tenant, now you're cash flow negative. We're on an apartment deal with a lot more confidence pulling out the money. It's non recourse, it's fixed rate, long term, five, seven, ten year money. And then you have so many different renters, you know, not relying on the same business too. You know they work at different places, their, their income is diversified within the building. And then you also you have all these tailwinds. You know current renters are renting longer. Gen Z is just entering the rental pool and like that's the biggest grouping age group I believe the 1998-2012 or whatever it is. I mean I think that's like a third of the population and they're just getting into the rental pool. And I know this is a long answer now and last thing ncreif this is, I always thought this was the case but ncreif this real estate trade group, they have an index for private real estate and they break it out by product type. Multifamily, industrial, office retail. And from 1990 to 2020 we got the data on the appreciation and return numbers by year and for all hold periods. We calculated 3, 5, 7, 10 year holds. Multifamily had the highest returns at every, in every time period for all hold periods and it had the lowest risk for so lowest standard deviation in returns for all whole periods except for one. So it has the highest returns and the lowest risk. Best that all the trends are in your favor. Like why not, why would you not be in multifamily?

Yeah I saw that and that blew my mind because certainly and a lot of the points you make about why multifamily and the safety and if you lose a tenant and you know, the financing but generally as a result if you do multi family it's going to generate a high, a lower return rather than because that whole risk reward retail theoretically should deliver a much higher return. But when you look at your annualized returns or at least when Naycreif did this, very interesting to see that multifamily.

Ended up on top there, and that's nationwide. So too in the New York area, it may be totally different where I know there's a lot of headwinds in multifamily with all the rain control and all these different things where, you know, it depends on the market too, I'd say, you know, so then that you gotta, you gotta put some thought into what markets you're investing in as well. And it may not be the case everywhere. Yeah, maybe, you know, and for the longest time, I mean, probably midtown, you know, office in New York was the best product type. You know, that's what everybody wanted. So.

Good. So talk about now how you expanded your investor base. So you had, you know, your original partnership, you all were using your own money. At what point did you take on third party investors? And then how did you grow that?

Yeah, really, that was, that happened very recently. So in 2020, I'm. Yeah, I'm sort of, you know, during COVID sort of thing rethinking, like what, what should you do after when this is sort of done? Not in terms of like with your career or anything, but just sort of what. What do you want to focus on? Because one thing that had happened in Chicago is our rents barely grew from 2015 to 2020. So the deals went well because I was picking ones where the rents were below market, but the market wasn't doing me any favors. Meanwhile, you go online and LinkedIn or wherever, and everybody who bought a deal in the Sun Belt was crushing it. And so I looked at that and said, you know what I need to do? I need to make a pivot to the Sun Belt. And I need to open this up to these people that have talked to me. And it wasn't a lot of people, but just over the years someone would say, I have like 50 grand or 100 grand, I want to invest. Could you, could you do it? And I actually would tell them no, because we like, we're just really set up. We had that one family in Minnesota. Then later on I met. In around 2019, I started working with another one in Chicago. Same setup, a father in law and a son in law. Both scenario, both scenarios. Their daughters ended up doing or do our accounting, still pay the bills and do the bookkeeping. They thought they like that as a role more than their prior job. So then they all gravitated towards that. But. So we weren't set up to like take on passive investors because we didn't have great reporting because it was more like you already Know what's happening since you're really more of a partner versus let's say a passive investor. And plus your daughter's paying the bills, your son's in this. I mean like you already know just from kind of talking to us like you know, whatever at dinner time to your son, what, what's going on. But so to, to really sort of take on those passive investors we had, I had to make some at the time would seem like really big investments where I needed to hire more people. Because at the time, like I, from when I first started until 2021, I sourced every deal that we bought and I, I was pretty much on all of them. I was pushing the business plan post acquisition as well, but I didn't have to spend really any time raising money because that was already there thanks to my partners. And then, and then, you know, I raised the debt. But that's pretty fast endeavor there. But so had to hire up. So I hired two acquisitions people and then one more asset management type guy and then got Juniper Square, which is what we use for our investor portal. Juniper Square and any of these platforms. I think I, I think Juniper Square is, is great, but I don't. It's. Any of them would work. They work this pretty much the same way where they calculate. You know, let's say you want to pay out a $10,000 distribution. You entered in what your business deal was, what your waterfall is into the software and it would calculate what the distribution is for you. We do this obviously in Excel to double check. We're not just relying on it, but you could, it hasn't been wrong yet on how it calculates it. And then it generates a file that you can then upload to your bank to then send out an ach. Then you can also distribute all your investor communication with it. So they get an email saying you've just been paid X dollars that syncs up with the ACH file they gave us. We distribute K1s through it, we launch our deals, new new equity, new equity raised opportunities through there. So it's, it's useful as you scale. But I think we, you know, we've hit probably the point where we, where we do need that, but kind of that was a big investment. I think people should, just because I'm doing it, I think you really gotta kind of should wait to spend that kind of money till you, you know, you really need it. So.

And how do you expand your investor network? I see you're, you're active on social, you've got your own Podcast. How are you finding new investors?

Yeah, it's interesting. So I'm doing all that stuff that you mentioned, but really the most, I'd say about a year ago on. On Twitter, I had a couple, you know, replies or tweets of my own that got a lot of traction in the real estate Twitter world, relatively speaking. It did. And I had, you know, maybe 10 or 15 LP sign up on our list from that. But that was really the only time I've had like a big pop on people sign up. Otherwise it's been. They're more organic. Like, the podcast has been nice to, you know, to learn from others and to share information, but I haven't had a lot of investors sign up from that. It's. It's really more Ben, like your first lp, let's say now you can take on smaller ones. So then you ask, what friends do you have? Then he, you know, the first, like passive investor I had, he invested like whatever a normal passive investor would put in. 50 grand, 100 grand. But then I went and said, like, what do you have any co workers or people we should talk to that, you know, and he did. And then they put in a similar amount of money and then they know people. So really, I wish I had a more elaborate system. I could tell you that others could like, duplicate, but it's more what. What I would say is you need to have deals and then you need to go for referrals to actually. So to give you the short answer at the very end there, no, that's.

Great advice and it makes a ton of sense. And look, I think social and putting out great content is way to stay top of mind, but there's no substitute for having that relationship or referral. Referrals are always best. And I certainly see that on the brokerage side. Such a big difference. When a happy client refers me to one of their friends, then you don't have to go through that kind of.

Exactly. Yeah.

Initial, you know, qualification phase. So drew this story from, you know, building this from the ground up. I mean, I've got to imagine along the way there was some pitfalls. So is there anything along the way that, you know, sometimes you get the question, what would you have done differently? Or what would you say to that?

Yeah, I mean, I've. So I've really spent a lot of time trying to, you know, I guess minimize moving pieces and some of the risks involved. So there's deals I could have done and like, probably what would have felt like overextended ourselves in terms of expertise and money wise and you know everything went up from 200, you know, 10 to 2022 and that you know so I could I in 2015 I thought the market was you know, peing and you know I. So if I guess it could have been more like more gas pedal at times knowing I guess now knowing in retrospect the market was going to go up for 12 years, you know that, that you know if you had a crystal ball I should have done that. But really more that's something that's actionable. I think would. Would be really any of my regret around any decision. It's. It's selling like I. We are long term holders and like that first deal, that shopping center we bought, we sell that it's. We, we bought that 14 years ago and we're not selling anytime soon. And because you think about it, what.

Kind of cash flow does that. So that was the one you bought for, I think you said 2.6 million. I don't know how much you put into it.

But what kind of.

I mean do you think of that as like what's my cash on cash return with that today or how do you even y.

A couple. A couple ways. That one we did a significant cash out refi on so then that we. We sort of for lack of a better term messed up what our cash on cash would be by pulling out a lot of money. But what I look at on that one is we've.

Which is a good thing.

Yeah, we have, we have four timed our money on that deal without selling it. So we still own it but we four timed our money and then to.

Get to where we should just stop the podcast here.

There we go. The thing is that's. Yeah, that's what happens if you bought in 2009. You know that and.

Right.

So who will today be similar? We'll find out. But I think you know, right now it's hard to make sense of where you know prices are and with interest rates being so high. But I think what will happen is when people look back buying today it will be as simple as while prices went down 10 to 30 depending on where you are, you bought. And then that was a really low point in the market. It was a great buying opportunity. And then in five years you look like a genius. But right now it's like hard to make sense of it. Like apartment buildings, I look at, they're five and a half caps and the interest rates, five and a half, you're getting no positive leverage. You know, you got it so Everything's pretty thin return wise. But probably what'll happen even though you can't underwrite like this is interest rates will drop. You'll do a big refi, you know, in year three or four, or sell it at a low cap rate. Because when you lower cap rate, when interest rates drop again, no, that's like red flag number one in underwriting. Don't assume a lower cap rate on sale. So we don't do that. But like that's probably what's going to happen because that's what that's happened to me. Into all the deals I bought in 2009, 10, 11, they were commercial deals at 9 caps. Even, you know, 12 months ago, those were all high five cap deals, you know. Now I don't know where they're at this moment, but.

So talk about going into new markets. So you've expanded into Phoenix, Dallas, Austin. I can guess what those three markets have in common. But talk about being the outsider. So you're based in Chicago. How do you learn a market? When did you feel like you're ready to actually dive in and invest? And if you're kind of the outsider, how do you compete with the local players?

Yeah, well, we, I guess first on how we pick the markets. Like, we spent a lot of time on market selection and Phoenix has been growing for a long time. Like it got a lot of attention the last couple years. But going back a lot further. So let's say from 2000, the year 2000 to 2019, apartments there have appreciated 7.4% a year. So it's been having a high appreciation for a long time. And rent growth, our data started in 2005. So 2005 to 2019, so before any of the COVID 19, you know, explosion in rents and everything, it was, it grew on average 4% a year. So it's already a high growth market. I just got into super growth mode with COVID you know, because you got all these people from California and Chicago, all the places moving, moving out of there, down to the South. And then also it has the best property tax laws in the country. It has a thing there called rule A. And there is a 5% increase cap per year on your assessed value. So California's got probably the second best system. But when you sell, they move you up to your sale price for your assessed value in Phoenix, in Arizona they don't. So you have really, really good tax certainty for property taxes. Insurance is super low because there's no, it's just hot. There's no tornadoes. There's no hurricanes, there's no floods. Like, so your insurance is low, your taxes are low and your rents are growing fast. So it's a good, It's a good market. Dallas and Austin also is where we're. We're working to get into as the next markets. And Dallas is very stable. It's been growing. It's a Sunbelt market, but it performs like a core market of sorts. You know, a lot of these big institutional buyers, you know, it's like the next. You know, in the old days it was like everyone wanted New York and LA and San Francisco and now a lot of it is like the number one Sunbelt city they want is Dallas, where that's like that in Miami are like the two most core markets in the Sun Belt. So we like the stability. It's growing fast. 4th biggest MSA in the country last 15 years. Way above national average for appreciation. And like that's. We like that a lot. And then Austin is the. We went back, calculated the data. What drives appreciation and multifamily the most in its population growth and job growth. It's kind of obvious, but it's. Those are the top two. Supply was not correlated with prices actually. And so. Or had a very low correlation, I should say. And Austin is number one for the last five years in population and job growth. So like, that is all you need to know.

So awesome. So. And what about the competition? What about the outsider coming in? How do you feel like again, I would imagine a lot of the local buyers there have their broker relationships already. How do you work your way in and try to get that insider's edge?

Yeah, you're right. And so the, in order to. So initially to get your. My. My edge initially. And. And I love the name of the podcast too, because in. In Chicago, everybody is. It seems like it's like a former trader and they all ask, what's your edge? Like, that's their question, the way they talk about trading. But so you, you need to be known as a closer. And I did that in Minnesota and I did that in Chicago. Like, I'm not retrading people over little ticky tax stuff. The same Marcus and Milchap broker in Chicago, He's. I think I bought 10 deals from him, for example. Like, and so one of the deals in Phoenix being marketed by a Marcus Milchap broker. So I had that guy, the Chicago broker. I said, do you know this guy in Phoenix who works at Marcus? He said, yeah, we've gone on this awards trip like every year together. So Cool. Give him a call, please. You know, if you would reach out to him, just, you know, let him know what I'm like. Because, you know, I'm like a new just person ringing them up and making an offer here. And he told him that Drew is the realest buyer ever. And like that's the testimonial you want to get from the people you work with. Where for 10 deals in a row, I wasn't retrading over lil stuff. I closed every deal I put under contract with that broker. I did what I said I would do. I don't let people walk all over me. But also I. I'm experienced enough now to go to a, as you called it, a pre war building and see like that has all furnaces in it and the windows need to be replaced. Well, I'm going to assume that in my numbers when I go, I'm not going to get in a contract and then go and be like, wow, I need to put 100 grand of windows in this thing or 200 grand and then ask the seller for that. Like, I already know it needs it and I don't, I don't work like that. So then everyone likes selling deals to us. We're not overpaying like crazy numbers. But we get something under contract, we close it. So we got the reputation in a couple markets and you know, we. I sort of rely on the last one to get the to the next place. So you had to establish it somewhere, but that's was by being a closer in Minnesota to start. So don't retrain people over ticky tech stuff and try invest your time and get a reputation as a closer. Not trying to retrade people over little stuff.

Incredible advice. So, Drew, you've only been doing this, I guess if you say you started in 2009. Right.

So let's bought that first place, 2005. I'm coming in on 20 years. It's weird.

All right, 20 years. But your trajectory, I mean, this is really inspiring. What would you say your keys to success have been?

Yeah, that's a good question. Because I think really like it's the stuff we haven't talked about. It's been my mindset where when people ask what was your mindset for this? It's like, I don't, I don't over complicate things. Like my first deal, if I were to tell you someone, what did I do? I had the money to buy the deal. I wanted to buy it, so I bought it. That's it. I didn't Overthink it. I just figured out, keep it simple, find some cash flow positive. Figure out how they value it so you don't overpay. That's it. Then I bought. Then you learn more as you go. Right? Like when you're. If you know a lot more now about investing, I'm sure, James, than when you first started in brokerage and everything, like, you just, you need to just get going, you know, as a new broker, you need to just start making calls, bring a senior person to the meeting. It's not that complicated.

So I, I love that answer. And sometimes we have so much tendency to overthink. And look, don't mistake this for not being prepared and not doing your research. I mean, it seems like you really studied, you understood what the market was, you wanted to be smart about it, but once you had the knowledge and the capital, you didn't hesitate. Right? And no deal is going to be perfect. I think back to one of the podcast interviews that I did with Jordan Vogel, and we took a line from Nike. We called it Just do it, because that was his advice. So many people just, they're waiting and maybe you're listening to this right now and you've seen you've underwritten dozens of deals and every single one, you're just coming up with a reason why. At the end of the day, it doesn't make sense. And Jordan was also the same person, by the way, who said every single day, the day after he bought it, he had buyer's remorse where he thought he overpaid. So, you know, but I think as long as you have the long term approach, which clearly you do, Drew, you can certainly outperform the market. So, Drew, with that, only a couple minutes left, what advice would you give to the aspiring investor? And we got some people on the line, too. We're doing this on Twitter, Spaces, trying something new. So maybe someone in the audience has a question, but what advice would you give to someone who's looking to get into this? Maybe where to start off? Because you already said don't overcomplicate, do it. But kind of like career trajectory, working for a big shop on your own. Talk a little bit more about that.

Yeah, I guess depends where you want to take it. But let's say with career wise, let's say you want to be, you want to do what I did in terms of like, do your own deals and be out on your own, I would say you're going to need to get some money together yourself. So whether you can start, you know, a Side hustle, reselling things on Amazon or doing something, save your money and then start out by doing a fha three and a half percent down into a one to four unit. Hopefully that works in your market and get into a deal with little money down and get, get going. And so I think along the way you're the best way to learn is asking questions. The other things that came to my head when I was like about just getting started, it's, you don't, you don't need to have an ego about things. You're new even now I, I own $200 million of property and I, you know, a couple weeks ago I'm on the phone with someone who's my age, but he owns $2 billion of property. Asking him like, what about things that are issues in my business and that I want to improve on. So I don't be curious, ask questions, learn by doing. But you got it. You got to get started.

So Drew, love that. So tell our audience how they find out about you. I already mentioned before, Your website is brennaman.com B R. How else can they follow you and learn more about what you're doing?

Yeah, I also have the Brennanman Blueprint podcast. It's a real estate investing podcast. So we get into stuff about like how to do your first deal and then bring on folks that are doing bigger deals and talk about what our lenders, what's going on in the debt markets. So that's a good resource. As well as on our website, you can sign up to be a passive investor in our deals. Just hit the invest now button, sign up on the list and then we as we have deals that we are taking investors on, we send them out then last thing is the passive investing guidebook we have on our website. If you want to learn more about passive investing and how these real estate deals work, you can go to the download section. So brennaman.com downloads and it's, it's there so and obviously on Twitter, you know, follow us on Twitter. I'm at. And then James, what's yours?

It's a, it's James Nelson, nyc. Yeah, I've been doing, I've been spending most of my time on Instagram and LinkedIn, which are two very powerful platforms. But I think I've been missing the party on Twitter. So, you know, we'll certainly build on this. That was pretty encouraging. That was a pretty positive endorsement when you said you picked up 15 investors from, you know, some of your early tweets. So we'll see. Matthew I think we might have someone. I'm not sure. If you have a question. I see you on the, on the speaker panel. If so, feel free to speak up. And if not, we'll, we'll organize this better a little bit next time. So if you all have questions, we can, we can certainly ask for them. But Matthew, if you're on, do you want, do you have any questions for Drew?

Well, not. How's it going, guys? Not so much a question, but more just a comment to, to, you know, review what we were already saying. Drew, you know, you mentioned people would ask you how you managed, managed to convince the lenders on your first few deals, being that you were so young and in college and you said none of that ever crossed your mind really back then. And then you said, and it ended up not being a problem anyway. So, you know, that really speaks to me because there's so many what ifs that hold us back from acting out on our business plan. So I think, you know, such a big factor in starting your real estate investing businesses. For lack of a better term, taking a leap of faith. That's not to say, you know, doing your due diligence and whatnot, but, you know, take a leap of faith to an extent and, you know, just learn as you go because if you fill up your head with too many what ifs and whatnot, you'll find you never end up going for it in the first place.

So, yeah, that's awesome, Matt. We really appreciate the feedback and great to get the live feedback. That's one of the benefits of doing this on Twitter Spaces. So I want to thank all of you who are tuning in. As always, thank you so much for spreading the world word. Our goal here is to educate, to help you gain the inside edge to real estate investing, to outper in the market. We want to make you as successful as possible. I really hope you take these words to heart. Put them. He wrote a book called Knowing Isn't Doing so. Sure, yes. I hope you took a lot of notes but put them into action. So if you have not already, you know, connect with me. James Nelson nyc We love your reviews. We love your feedback. If you haven't gotten the book yet, we're getting just such positive response out there. So really appreciate you spreading the word as well. So until next week, this is your host, James Nelson.

Thank you for listening to the Insider's edge to real estate investing. We appreciate your subscribing and sharing with your friends. If you haven't already, please connect with James at James Nelson NYC on LinkedIn, Instagram and Twitter. Please also visit James Nelson.com where you can find the show notes and other episodes along with an exclusive video series and other helpful resources so you can gain the insider's edge to real estate investing. Until next week.