AIPIS 32 – Successful Real Estate Investing and Franchising with Anthony Lolli

Welcome to the AIPIS show for accredited income property investment specialists and those who aspire to be. If you're a real estate, mortgage or financial professional, this is the place for you. We'll explore innovative investment analysis, sales, marketing and income generating strategies for the most historically proven wealth creator income property. Learn from the experts as they show you how to build a better business and a better life.

Welcome to the AIPIS show for accredited income property investment specialist and those who desire to be. This is your host Jason Hartman where we talk about increasing your income, your productivity and just generally having a better life while serving your clients better with America's most historically proven asset class income property. We have great interview for you today and we will be back with that in less than 60 seconds.

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My pleasure to welcome Anthony Lawley to the show. He is quite a success in the greater New York City area and he is the founder of Rapid Realty and they do leasing and investment sales in the greater New York City area and has a whole bunch of franchises, about 800 agents. Just quite a great, interesting success story. I think you'll learn a lot about business and investing on this episode. Anthony, welcome. How are you?

Thank you very well. Thanks for having me.

Well, good. Thanks for joining us. So tell us a little bit about your background. I mean, you've been in real estate for 15 years, I think.

15 years, yeah, I, it's a funny story. I actually started in real estate when I was 19 years old. I was motivated and encouraged by my friend's father. He was kind of like a stay at home dad and, and had been out of the workforce for many years. And he took a real estate class and jumped into real estate and started making money right away. So I said, where'd you go to school? He told me where. And it was happened to be in Bay Ridge, Brooklyn. So I, I attended the classes and I remember, you know, when I was in the classroom, the instructor was raving about how you can make so much money in real estate, you can become an investor, you can become a developer, you can become a top real estate salesperson and, and on and on and on. So I, I raised my hand and I said, well, excuse me, sir, if that's the case then then why aren't you doing it? What's the story? So he said, I'm going to talk to you after class. I said, okay. No.

Came and he spoke with me and he said, you know, Anthony, I actually own this real estate school. The class was packed. I mean, There was over 50, 60 students and the tuition was about $150 or $175 at the time. It was a one week course. He had courses going on in the daytime. At night it was about $1.3 million a year in real estate education he was making. And after I did the math, I said, sir, I'm going to pay attention, I'm going to pass this class. And then I formulated a couple goals and one of which was obviously to pass the state exam and get my license. And then I chose, at the time it was Brooklyn's largest real estate firm to work for. And I wanted to become a student of the game. I wanted to learn all the ins and outs of sales and I started rubbing elbows with developers and investors and multi unit property owners and I started asking questions. And then I basically lived in Barnes and Nobles and self taught myself, took every real estate course under the sun. Any anything that you could was out there, I took it, I wanted to learn it. And little by little I started becoming a really good salesperson. Started selling stuff, people were calling me up, getting lots of referrals and I said, there's no way I'm going to become a top salesperson and not own. With all this knowledge and all these relationships with mortgage brokers, mortgage bankers and developers, I have to own real estate. So I took advantage of some lending opportunities back then and, and it went from buying one property to two to three. And then that led me into starting my own construction company because I started buying some distressed property and I needed to learn about construction. So I started a little crew and they're still with me till today. And it went from there to swelled to 15 properties. And then of course when you own real estate, you have to learn about renting it out if you're going to keep it. So I started renting property and my own stuff and, and then I kind of got a little taste for what the rental atmosphere was like and I said, you know, I want to really try my hat in the rental ring. And then I started Rapid Realty and I grew it from scratch.

Wow, so you grew it from scratch just starting one office and recruiting your first agent, I suppose, and then building it up, recruiting more and then franchising after that, huh?

Yeah, well, what happened was I started Rapid Realty and it was myself and I recruited a couple friends, some family. Then when I ran out of friends and family, I said, you know what, it'd be pretty nifty to start a real estate school. And I think that $1.3 million wouldn't be too bad either. So I actually started a real estate school because my dad was a retired school teacher, my mom was a housewife. So I said, I'm going to start a school, I'll give it to you guys, you guys own it, you guys run it. And I started referring people to their school that would want to come work for me. And I grew the company from just myself and a handful of agents and it grew to 15 to 20, to 30 to 80. They eventually almost 150 agents and actually started Rapid Realty in the first property that I bought at 21. And it went from the first floor to the second floor to the third floor because it was a three family, mixed use, commercial property. So I was able to grow within the building. And then eventually the natural thing was to open up corporate stores. And coincidentally, that week that I was making that decision, I had found several locations. I was actually going to open up seven stores all in one shot. I had the capital, and at the time, I had some good players. I had been grooming what I had called at the time, my Michael Jordans to actually manage these stores. And the coincidence came in because that week I had been closing a couple deals with a good friend of mine. He's an entrepreneur, restaurateur, owns a lot of properties and we do a lot of rentals for the guy. And I respect him and I always admired him. So he just came back from Chicago, he franchised his rubbish removal company. He was raving about it. He said, you can really grow your company. You can really take on some people. I said, look, I don't need partners, I don't need capital. I have my managers. I'm going to go to the corporate store route. I know about franchising. McDonald's, Burger King. Yeah, yeah, yeah, I'm not interested. He said, well, you should really consider it. So I've kind of brushed it to the side. Lo and behold, a couple days later, my seven Michael Jordans that were going to be store managers, right when I was about to sign the leases, they all left me, not even together as a group. They left me independently to start their own firms and direct competition with me. And then of course, I said, you know, I cannot continue to grow a company and breed my own competition. I have to look into this franchising thing because, you know, if you're grooming a player, a salesperson, and they're helping you grow the brand, if you don't provide that outlet, they're eventually going to leave and do their own thing. So I flew my whole executive team out to Chicago. We learned all the ins and outs of franchising. And at that point I recognized that we already had inherent similarities to franchising. Because in the franchising world, you have your franchisor and your franchisee and they profit share and they call it royalties. In the real estate world, you have your broker and your salesperson and they profit share and they call it commission splitting. And it's the same theme, you know, you set the person up, they work under your umbrella. You give them the tools, you give them the network, you give them, you know, in some cases, the infants, the inventory and the infrastructure. So that's what we were doing already. And there was some slight modifications we needed to make to our pro forma to be able to basically grow. And there were some people we needed to take on. But when I came back from Chicago, I said, you know, I know I have a good concept and I know I can run a great.

Anthony, what was in Chicago? Why Chicago?

Well, Chicago is like the mecca for franchising. It's where, you know, most of the majors franchise consulting firms operate out of. They have their facilities there, their training. And a lot of successful franchises were birthed in Chicago.

So who did you go to see in Chicago when you were there?

I went to a couple franchise places. Francorp, iFranchise, couple different brands. So coming back from there, it was like, okay, I know I can do my own brokerage business. Well, I know I can. At one point I had it doing over 250 transactions a month. And I said, but can someone else do this? Is this a real business model? Is this a concept? Or is it something that a veteran person can do? So I said, I'm gonna open up a test pilot store. Before I ask a stranger to commit their own money in their own time, I'll open up a test pilot store, but this time I'll treat it like a franchise. I'll put a manager in there I could trust that I know won't fly away, and I'll put it through all sorts of exercises. And that's exactly what I did. I opened up my first test pilot location in Crown heights, Brooklyn. I gave it all sorts of obstacles. I put it on the ground floor of a brownstone with really no retail presence. It was around the corner from an actual homeless shelter. And let me tell you, six months. I mean, the first month it started booming, and six months later, the manager said, you know, I don't want to manage. I want to be the very first rapid realty franchisee. I'm ready. So that was about 28 months ago. And we opened up our first location in Bay Ridge, Brooklyn, and it just exploded ever since into a 53 location franchise. And I'm excited because in the franchising world, it usually takes a couple years before you get people that become multi unit franchisees that they're comfortable with the concept and they want to buy more and more locations. But within six months to a year, I have like a handful of multi unit franchisees that own two, three, four locations. So I'm very, very proud of that. And now we're, of course, we're in other states, which is really what a Franchisor's dream is now.

Talk to us about real estate investing. You many years ago spotted the opportunity that real est investing or I should say better term for it, income. Property investing is the path to wealth. And you know I have found throughout the years and it's funny, I also got my real estate license when I was 19 just like you. I was in, I was in college and I started selling real estate part time many years ago and started buying investment properties through the years and they just served me so well. I just, I just think there is no better path to wealth and success than income property. What they've done for me, Anthony, and I bet you're going to say the same thing. Even though I don't not know, but they've really sustained my business for me in hard times. I've been able to call on those properties to provide me with extra cash I needed to grow my business to sustain my business. And it's just such a great complimentary thing. And your clients want to see that you're investing in the product you sell.

I agree. I got to tell you, those properties were my angel investors. You know, you hit the nail.

Right. That's a great way to put it. Your angel investors. And for those of you who don't know, an angel investor is usually the first investor in a company where they, they invest the first money after maybe the friends, family and fool. Okay. And then the next step in financing a company is venture capital and you know, other for bank financings available potentially. But angel investors, that's a great way to put it. Your income properties become your angel investors. Tell us about that.

Well, you know, I saw it. You know I saw, I saw the strategy. I knew about equity appreciation and really I did it because I was picking the brains of people that were becoming wealthy from their rental property and I heard the numbers that they bought them for and I knew what the increased value was and I saw them leveraging their properties and taking home equity loans and home equity lines of credit and refinancing. And I saw them basically making 10 years worth of rent roll inc. In one day, parlaying that money into investing into another property and all cash refinancing that and keeping the thing going. And you know, there's many ways to skin a cat and there's many ways to look at a property. You know, you can look at it for the cash flow. You can look at it for its equity appreciation and refinance value. You can look at it for its resale value. And once you have the eye for that, it becomes like the Matrix, like the movie the Matrix where you can look at a property and you can automatically assume what you would do with it once you purchased it and kind of visualize. So you, you kind of have to know a little bit about construction, you have to know a little bit about finance, but once you get past all those things, you just don't want to stop. And, and you have to know about rentals too. You know, if you're going to rent out your property and keep it and even if you're just going to flip it, most stuff is sold on its, on its rental revenue value.

So.

Yeah.

So what type of properties did you start buying in the beginning of your investment career?

Well, you know, I had a couple choices. In New York it's a little different because you know, you have rent stabilization guidelines. So anything that's above six families, you're under rent stabilization guidelines. So I stay, I stood away. Although I own a couple of them, I deregulated them because they, the rents, you know, I was able to increase the rents to the deregulated point.

But. And rent stabilization, is that just another fancy word for rent control?

Well, there's a difference. Rent control, it's a fixed rent. Rent stabilize is that there's rules as to how much percent you can raise it. For example, one year it could be a 5% increase only for a one year lease. 7% increase if you're giving a 10 and a two year lease. But the real kicker in rent stabilization, and there's a lot of controversy going around it right now, especially in the media, is that you have to renew a rent stabilized tenants lease. You can't kick them out, you can't raise the rent. And more than whatever the laws are, and they're constantly changing every couple years. And there's always arguments, there's landlords and tenants always arguing their points. So when you own a rent stabilized building, then you're only selling it or trading it under the multiple, you know, and that's that versus owning three and you know, up to four or five family homes you're open, you can raise the rent to whatever the market value is. You're not restricted to having to renew the tenant's lease. And then of course, if you want to sell it in New York, what's really cool is that you'll find an end user, a person that might want to occupy the ground floor and the basement and the garden as their personal unit and they're able to collect cash flow, you know, rental revenue from the units above, which of course allows them to buy the property for a higher amount of money because the financing is available to them because the bank counts the rental revenue as income.

Yeah, great, great opportunity. So what would you say to practitioners listening who are in the real estate business? They may be in the sales side of the business or even the rental side of the business. What would you say to them that it takes to be successful?

Well, it's determination. You have to surround yourself around successful people. If you're the smartest person in your circle, change your circle. If someone's listening to your show, they're doing the right thing. You have to be a connoisseur of real estate. All things real estate from blogs. I mean, I tell you, I subscribe to at least 50 to 60 different Twitters and my phone does not stop texting whenever there's a new real estate related article. I like to stay. I like to keep my fingers on the pulse of the real estate market, the industry in general. And now of course not, I'm in franchise. I'm following that. But more importantly for someone looking to get in or someone looking to rejuvenate their real estate investment career, they should understand this is a perfect time right now because it's a do over, the rules completely changed. So even if you're a 20 year real estate veteran expert, you have to go back to school. And in this case we have all the tools available to us online. Google, YouTube, everyone's posting things under the sun so you can self educate yourself more than ever and learn all the new financing rules. I have a personal videographer and photographer who works for me and he's starting to become a real estate investor because he's inspired by all the things that I'm doing. And the guy just started working for me a couple years ago, really never did anything in real estate other than do all of my videos and pictures. And now he's becoming an investor and he quickly, in a couple days, got himself up to speed, you know, utilize some contacts and connections I have. So it's not that difficult if you want in, especially with FHA and a bunch of other lending instruments that are available today.

No question about it. There are great opportunities out there and this is the time folks to be accumulating these properties. So good stuff. Well, in terms of property investment, you're a buy and hold investor, right?

Yes.

Yeah. And I couldn't agree with you more. You know, I have, I have flipped properties, but I'm mostly a buy and hold guy and I find that over my years in the business, which are more than I care to say now, but I find that the people that flip properties have spending money. The people who buy and hold properties have real wealth. And that is a big, big difference, folks.

Yes. I always say being rich is having money, being wealth is having time. And there's nothing better than a big chunk of rent roll revenue coming in every month. Now, I'm a buy and hold type of guy, but right now I'm in the middle of two unique transactions. And this does happen in other areas besides New York. I'm in the middle of an air rights deal on one of my first properties that I bought, where I founded Rapid Realty. And there was a zoning change and that increased the value of my property. A bunch of development was going on around me. Someone bought the vacant lot next door that had been on a standstill because they bought it from the last purchaser who was going to turn it into condos. But he stopped when the recession hit, and he just bought it. And he approached me, and I approached. Actually, I approached him about buying my air rights. So now we're closing a $600,000 air rights deal. So talk about money out of thin air. It's, you know, literally. And then, of course, there's another building that. My second property, where I actually had a fire many, many years ago, a candle fire. I'm in the middle of that deal there because it was. There was actually a McDonald's traditionally owns the land that they leased to their franchisee.

Sure. They're the biggest real estate company in the world.

Possibly this happened to not fall into that category. So the owner approached me about a couple months ago. He said, look, I'm not renewing McDonald's lease. The neighborhood has changed, the zoning has changed. I'm going to. I'm in the parking lot business. He owns a bunch of parking lots in the city. And he says, I'm thinking about selling my property to a developer. And I had some relationships with some hotel developers, and I said, well, why don't we unite our properties and see what we can do together? So right now we're in the bidding process. A couple people are bidding for our properties, and then I'm talking to some of my neighbors. They're also going to tack on their air rights as well to do this. So, you know, there's time that you got to know when to hold them and you got to know when to fold them. But I really sapped, you know, what I could out of that property. I've Owned it at this point at least 12 years. And I did the math on the strategy on rent roll, you know, buy versus hold versus sell. So I think I really want to do something major like this. It's a big development. It's probably going to be about 300,000 buildable square feet. And I'm interested in getting on to the next level of real estate.

Yeah, that's great. Tell us a little bit more about that air rights deal. Because we had a client who was, they were able to sell mineral rights in their property. They had no idea. And you know, I had a deal on a large apartment complex that I own and there was an unclaimed insurance claim that I just, I just profited like net, net over $100,000 on total surprise. I mean some of these surprises are just beautiful surprises, you know, not all surprises are bad surprises. A lot of them are really wonderful.

Absolutely.

But how did that air rights deal go down? Just tell us a little bit about that. That's so.

Well, you know, there was zoning changes and the zoning changes, if you don't pay attention, they'll happen right under your feet. And you kind of have to keep up with things and go to you know, the, the board and the commission meetings and find out what's happening, who's poking around, who's asking about making changes. It could be a big developer. You know, follow that developers trends, see what they like to develop. And then it, you know, it does take money to make money. Sometimes you have to invest on a good zoning analysis attorney to kind of let you know what your property is worth. Given multiple different scenarios, if something is zoned a certain way, whether they built this type of property or that type of property, or if they allowed it a certain amount of square footage for a non for profit, that could change the thing. So there's multiple different ways you can, you can your property. A zoning change can affect your property. And of course if you want to hang on to the property and if it's worth, if it's worth more just to keep it, if you're getting high rents, then you can sell your air rights. So after getting educated about the air rights, I made a decision. I says I don't plan on building on this property ever. I don't plan on knocking it down. And I know what the maximum amount of an investor would pay me if they wanted to buy the whole thing outright. And it isn't that wide of a property, so I might as well sell the air rights. And then of course, because I'm a real estate broker, you know, whatever he's building next door, we have an exclusive right on it. So that, you know, you also factor that in the math.

Fantastic. Well, good stuff. Well, Anthony Lawley, give out your website and tell people where they can learn more.

Well, they can go to my personal website, which is anthonylolly.com and the way you spell lolli is like lollipop. That's lol I so it's just my first and last name dot com. And then of course, if anyone's interested in real estate rentals or anything real estate related, they can go to my franchise company's website, which is rapidnyc.com so either one of the two is fine.

Good stuff. Thanks so much for joining us today, Anthony.

Thank you.

What's great about the shows you'll find on jasonhartman.com is that if you want to learn how to finance your next big real estate deal, there's a show for that. If you want to learn more about food storage and the best way to keep those onions from smelling up everything else, there's a show for that. If you honestly want to know more about business ethics, there's a show for that. And if you just want to get away from it all and need to know something about world travel, there's even a show for that. Yep, there's a show for just about anything. Only from jasonhartman.com or type in Jason Hartman in the iTunes store.

This show is produced by the Hartman Media company. All rights reserved. For distribution or publication rights and media interviews. Please visit www.hartmanmedia.com or email mediaartmanmedia.com Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network, Inc. Exclusively.