Financial Freedom through Out-of-State Rentals - with Garrison Haddon 

Hello and welcome back to the Owner Meeting Podcast by Multifamily Strategy. I am so excited to have Garrison on today. Garrison, one, welcome to my house. Second, welcome to the pod.

Absolutely. Appreciate it. Thanks for having me.

Absolutely. Garrison, he lives in San Diego, California. However, he invests in Lexington, Kentucky. Lexington, Kentucky. So out-of-state strategy. He's actually joined Multifamily Strategy and gone through the mentorship program where he's gone from buying single-family and small multi to larger multifamilies. We're going to talk about those transactions, how to scale from small rentals into larger rentals, very much like I started. I started with duplexes, but same thing. And where his portfolio's at today and what's next for him. So love sharing with owners who have done the thing that you want to do. I think Garrison's in a perfect place where this is attainable for anyone if you focus up and get the right set of strategies. So Garrison, tell us a little bit about your background here. Why Lexington, Kentucky?

Yeah, it's a, it's a long story and I'm going to keep it short so this doesn't turn into a 45-minute podcast here. But I knew San Diego wasn't the place for me. California's not very landlord-friendly to say the least.

That is true.

So started looking out of state in 2021, I believe it was. And looked at a bunch of different markets and with my limited knowledge at the time, really just listening to podcasts and mainly BiggerPockets, I decided Somewhere in the Midwest or the South was somewhere I'd start looking and started doing market research. And long story short, decided I wanted to invest somewhere I had some sort of boots on the ground, somebody I trusted. So I had a friend named Darren Huber who's a Michigan City in—

yep.

So I actually bought my first deal with Darren. He's a realtor up there, had a portfolio of his own, bought a duplex up in Michigan City, bought it for, I think, $90,000. It brought in about $1,500 a month after some Property management nightmares I won't go into and some headaches. Oh yeah. We learned a few things.

For a small property, that's pretty decent cash flow.

It was great. It was great. Older home needed some work, but it was a good start. Yeah. After we had the place for a little while, I started learning a little bit more about the fundamentals of real estate and it's more than the cash flow, more on the appreciation side. And we weren't going to see that in my opinion in that market. And the market was quite limited in size and scope. And for what I wanted long-term with growth into multifamily, I saw that as as a limiting factor.

Well, and that's something a lot of people bring up is, is do you actually have to choose between cash flow and appreciation, or can you stack the deck so that you can choose both instead of one or the other?

Yeah, I, I, and I think that's part of why I chose Lexington. I think it's a good mixture of both. It is not a rapidly growing market, you know, it is not like some of the areas you're investing here in Texas where the population growth is just immense. It's insane. Lexington is like slow and steady. Which for me was really what I was looking for. I have a W-2 that is my, what I call my down payment generator.

Yep.

That I plan on keeping for quite some time as I build the portfolio. And I wanted more of a slow and steady growth. Something I could depend on that's not going to have the ebbs and flows that some of the growth markets might have.

Yeah.

So anyways, pivoted out of Michigan City, sold the duplex and moved towards Lexington and started buying properties there.

How'd you do on the sale of duplex, by the way?

Really well, actually. We got an incredible deal on it. We bought it in, I think, January. In January in Northern Indiana, it's cold and snowy. So I imagine we didn't have as much competition as we probably would have in the springtime. I think we, yeah, we paid about $90,000 for it and I think we sold it for $170,000 or $180,000.

Ooh, that's a good sale.

We nearly doubled our money and we owned it for about 3 years. Great deal. Would do it again. But just in a different market. Yeah, we decided Lexington was our place. We didn't want to be split amongst multiple markets and which I think is extremely smart in that direction.

So, so you enter Lexington. What is the first deal in Lexington?

First deal is a 4-unit. I call it a 4-unit. It's legally 2 duplexes that are matching side by side. Perfect. Great deal. I don't know if I'll ever sell it. The places were built in like 2015. We've had so few problems with them. Got a great deal on them. So it was a good base hit to get started. And then after that, we, let's see, I, we bought the 4-unit. I started running outta money and decided I need another way to make more money. So I tried flipping houses, doing it from across the country was an interesting process.

That would be hard. I've done some large renovation projects and then lease-ups been hard.

Yeah.

Managing contractors, it, the fix and either fix and hold or fix and flip, either of those models. Where you're doing heavy value add, I found are a lot easier when you're actually in market.

Yeah. Yeah. If I was in market, it would've been a very different scenario. I have quite a bit of construction experience and could have stepped in a lot of times to fix the problems before they became real big ones. But difficult to say the least.

Okay. And how many, how many of those did you try?

We did two. Got it. They were both nightmares in different ways.

Okay. I'm, I'm going to ask more about this later, so, so stay tuned. I'm going to imagine this might fall into our category of our last question here. We'll see. So what did work when you're building your business in Lexington? So you started with 4 units, 2 side-by-side duplexes. What did expansion look like from there? And at what point did you join Multifamily Strategy? And then what did it look like afterwards?

Yeah, our expansion I would consider slow. We did our 4-unit that one year and then kind of dabbled in flipping and had a lot of headaches with that that slowed me down and prevented me from wanting to buy more properties. I had a lot of capital tied up in the flips and it stopped me from buying more. More deals. He, in the process, bought another duplex, probably about a year after the 4-unit. We bought another single family. One of the flips we decided to keep because I actually fell in love with it.

Oh, there you go.

Even though it was a nightmare, but loved the neighborhood, loved the house. Oh. By the time it was done. And really just kind of became frustrated with the lack of growth and started looking for opportunities and ways to find someone to kind of help me level up. And that's when I stumbled across Multifamily Strategy. Probably on Instagram, I imagine.

Most likely.

Most likely.

But that or YouTube or BiggerPockets, or depending on the place that we were showing up at the time.

Yeah. And it, what you had done and what you were promoting kind of resonated with me and where I wanted to go. And that's how many rentals did you have at that time?

Did you just have the 5?

We had, let's see, I think we had 7 at the time.

Okay.

Yeah.

And then you joined not too far after you actually did buy a commercial multifamily property.

Yeah. So I joined. Early 2025. Yes. I'd say maybe February or so.

Yeah. About, about a year ago from when we're filming this. Yeah.

About a year ago. And spent my, like, I took my time. Slow and steady wins the race kind of guy. Mm-hmm.

But this is where it would be.

Yeah. Made, made a bunch of connections and, and met a lot of new multifamily owners in the area and, and ended up transacting with one of them. We bought a 9-unit in August of last year. Right near a college campus. Great brick building. Really happy with it.

I'm a sucker for brick buildings.

Yeah. And since then, I've been banging my head against the wall a little bit looking for more deals. A lot of owners in the market that I have networked with and met, I've shared a lot of deals. I have a lot of great connections there, but the pricing just usually doesn't make sense.

Until recently. Until recently. You have a deal. This is actually a fun story and this is, I love this. We talked about this last night over dinner, but this is what a little bit of persistence and a few connections gets you. So talk about this 26-unit that you are now under contract for.

Yeah. So in, let's call it November of last year, my realtor Scott Peace, who is absolutely great, good friend of mine now and has done great for me, brought me a 26-unit in Lexington that was off market. Supposed to be a well-performing asset in good condition. And we started going back and forth with the owner who was a bit difficult to deal with at times. It probably took us, I would say, on the order of a month to get like a crystal clear picture of how the property was actually performing. Should not have been a month, but some owners are difficult. So persistence and persistence. And we finally got to terms that we all agreed on, which was really exciting. And on a Saturday we had a meeting with Scott Frederick, who's the other realtor involved and the owner, and came to terms on a deal, purchase price, the partial owner financing, everything that was going to put the deal together. And Scott went to work and wrote up the deal.

There we go. And I love these blended debt products. You have partial seller financing. What does the debt stack look like on this?

Yeah, so we've got about 15% seller financing on this, and then I'm probably going to do about 15-20% down depending on how the bank underwrites it here in these next couple weeks.

Oh, that's exciting. So mostly bank finance, 15% seller. What interest rate are you getting with the seller?

Seller's 1% over prime. And this is the only way he was willing to sell it. He is set on the amount of owner financing he wanted. It's a 3-year term with the option to extend 5. We are buying—

so midterm debt.

It's midterm debt, but we're buying the property at about $600,000 under what it's valued at.

Oh, so you're going to have no problem refinancing that?

Yeah, no problem refinancing. I'll probably do that. Probably push it to year 2.5 or 3, just to give myself a little more time to get the property value up even a little more. So when you refi out, it'll be that much sweeter.

Now this is something I hear often. So if you've ever talked to banks and they, a lot of banks won't allow the seller second. That's a sticking point for a lot of people. How did you find the right lender who will allow you to have second position debt?

Yeah.

Where you can do this blended debt product.

And this is the value of a good realtor or broker. Once again, Scott, who, there we go, was the one that brought me the deal, recommended a local credit union for the 9-unit I previously bought. So I used them on the 9-unit, created a relationship with them, and had already had those conversations to see if that was something they were willing to do on future deals. So I brought this to them, kind of explained how we were structuring the deal, and they were totally comfortable with it.

See, this is really, I think this is really important. First of all, credit unions typically are going to be better to work with than banks more often than not. That's like the first thing you look at, local or regional credit unions. Do they service this area or even better if they just service the city?

Yeah.

For Stephenville, Texas, I have a credit union that does only Stephenville, Texas and Houston, Texas, which are nowhere near each other. So it's kind of weird, but they just have two branches. There's two branches in their charter. They have to deploy capital into multifamily in those markets. So we bring all of these lenders all the way to their maximum amount. In this particular case, lender per client will lend up to $3 million. So I was able to knock out 2 and then it looks like I'll be able to refinance 1. We'll have 3 deals with them for a total balance. They were able to push it a little bit to about $3.2 million. I'll be just over their cap. But again, you're allowed to work with these and get a little bit more creative with the credit union than you could. You couldn't go to Chase Bank and be like, hey guys, fund this.

Yeah.

But if you're like, hey, where do I, where do I go? Look up in your area, the word credit union, and then when you find them, check how many branches they have. If they have 1 or 2 branches, they're a smaller credit union, highest odds you have a success. And then next go to regional banks, same thing. Small banks is usually in their charter.

Yeah, absolutely. And to unpack the deal a little bit more, uh, it probably sounded simple as we spoke through it just a few minutes ago. We didn't get it that Sunday when the owner was supposed to sign.

Oh yeah. Yeah.

Yeah. It fell apart. So that, so Christian and I talked about this deal back in December and obviously wanted his input on it and he, he gave me the thumbs up and Ready to go.

It's actually a great deal. It's just like, it's a great deal.

Yeah. So Saturday night I had a drink and was super excited. You know, I'm going into contract and wait for the signature. And turns out the owner went out to dinner with someone else that day, that Saturday night, who got the deal instead.

That would tick me off so much. I would be done working with them forever. But obviously that's not what you did.

That's not what I did. I had a little insider information through Scott once again. Lexington's not that big of a city, so everybody knows everybody. And actually found out who got the deal. He's another realtor in town who I had networked with. I've networked with, you know, a bunch of people in town trying to search for off markets. And the guy that went into contract on it, I shot him a text when I found out that he was potentially the one that bought it and said, hey, any chance you're buying a 26-unit in Lexington? And his response was something along the lines of, Why you ask it? So instantly knew like, yeah, he's buying it and he's, he's just like, how, you know, how, how did you know what's going on here?

Yeah.

So that, that kind of opened the conversation and he gave me a little information on the deal and long story short, he, he was unable to get the money together for the down payment. He had gone into it assuming he could do, I think around 10% down. And the bank said no to it. He was unable to get the rest of the funds together, fell out of contract. And we were able to swoop back in, make the same exact deal with the owner just 2 months later. And here we are about a week into contract now.

God, that's so exciting. And this would, this would a little bit more than double your portfolio, right? You have a little less than 20.

A little more. Yeah. I have, as of today, 16. As of 4 days from now, I'm buying a single family, which is technically for my 10-month-old daughter.

Oh, I want to talk about this too. I call it, that's so cool.

They'll make us 17, but it's, her money to keep. And then the 26 will, yeah, more than double us. Absolutely.

This is such a cool, especially as a multifamily owner, this is the type of stuff that makes single family make sense to me. Yeah. You are buying a house specifically for your 10-month-old? 10-month-old.

Yeah.

Daughter. So she's going to be a landlord before most of your kids. Well done. If the goal is generational wealth, what a great way to start out. Like, hey, you got your first rental. You're not passing a ton of money over. You're not like, hey, here's your inheritance early. You set aside a property. Tell us about this house and how you found this deal.

Yeah. So I found this deal once again through networking, which is where almost all of my good deals have come from. Yep. Thanks to Christian to push me to go do that. Cause I'm not, I don't look forward to owner calls, but I do it anyways. Owner in Richmond, Kentucky, which is a suburb of Lexington, owns in the ballpark of 800 units. I made great friends with him. Every time I'm in town, he invites me over to his house, which is, you know, mansion on a hill, very successful.

That's fun. That's fun.

Very intelligent. Been a great mentor of mine. And he has a, group of about 10 people that he informs when he wants to sell properties. So somehow I have weaseled my way into that list. He believes in me and likes me enough to think that I'm worthy. So call it 2 months back, he sent out a text to those 10 or so of us of the properties he's selling. The properties are like handwritten on a piece of paper. This guy's very old school, you know, literally handwritten, takes a picture of a handwritten piece of paper. Address, number of units, how much rent it's bringing in per month, and the price. He prices everything at like the 1% rule. 1% rule doesn't really work in today's interest rate.

Yeah. That, that usually puts you somewhere right around breakeven.

Yeah.

Maybe, maybe like 1 to 2% cash flow.

Right.

On a decent deal.

Yeah. And I, I don't want to buy a 1% deal if there's no upside.

And for those who are unaware, the, the, the 1% rule is simply, it's a, like not even back of the napkin math, it's like before the napkin math. It's like back of your hand math. Yeah. Of if the rent is like the monthly rent is 1% of the purchase price. It used to be, it's likely a good deal. That's when interest rates were 4% though. Now that your expenses are higher, the 1% is only a measure of income, not expenses. So that does, that's why that rule has changed where what used to be your cash flow benchmark is now your breakeven benchmark.

Exactly. Continue on. So anyways, he's good at managing his properties. So his deals at 1%, there's very little upside. Yeah. Got a lot of units and knows what he's doing, right? So anyways, he priced them all at 1% rule. Well, he happened to have a little single-family home in Richmond that is cute as heck. Mm-hmm. Uh, 2-bed, 1-bath, original wood floors, built in the '40s.

Oh, I love that. I love that.

Uh, he bought it in a portfolio from another investor of I think a, a large number of homes and, and multifamily.

Oh, and he's, he's keeping the bigger properties and selling the little ones.

He's keeping the big ones and selling the little ones.

That's a, that's a great way to get a great price on, on deals. You buy the portfolio.

Absolutely.

Sell off pieces you don't want. Yeah.

And he never raised the rent. He's had it for, I think, 4 or 5 years and decided he doesn't need the complication anymore. So, so he hasn't raised the rent on the family that lives there. So the rent's $900 a month. It should be probably $1,400, $1,500. So he sold it to the 1% rule, $90,000. The property just appraised for $180,000.

Oh, that's fantastic. That's fantastic.

Day 1 is plus $90,000 on, on my daughter's net worth, which is super exciting for me to be able to kick her off like this.

On average, real estate doubles about every 15 years in value. Now granted, on our last market run-up, we saw that accelerate. Sometimes it takes longer, but on average, so by the time she's like 18 and half, you know, when she's an adult, she's going to have probably a couple hundred thousand in equity in that property, in a single house that's also bringing in rent. I mean, that's an amazing, what a fun starting point. What did the financing look like on that? Just conventional financing?

Yeah, we used the same credit union that we're using on the 26-unit. 20% down. So 20% of $90,000, $18,000 plus closing costs. So pretty simple.

So basically an investment of like around $25K.

Yeah. And that was my plan. I am technically like gifting her the $25,000 to go buy this property. And then obviously I will manage it because 10-month-old can't help manage it much yet. But I want to, raise her being part of that process. Yeah. Whether it's as simple as picking paint colors when she's a little kid or driving by and then kind of, you know, having her grow into that and hopefully fall in love with the real estate thing.

She might be one of the first investors who do not have to say, hey, I wish I bought real estate earlier.

Yeah, absolutely. She might just say, I wish my dad bought me more. Yep.

Which I'm guessing is what she's going to say. Like, wow, dad, why didn't you buy more of these houses? You can buy these low to no down. This is pretty incredible.

And that is part of the That's the plan. As I slowly put it into motion, I would like to continue to leverage that property as it grows and buy her more properties with that same seed of $25,000 I put it on day one. Yeah.

Are you guys planning on having more kids?

More kids.

So is that the goal? Each kid gets their starter house?

Absolutely. That's the plan.

Oh, that's so cool. That's so cool.

Yeah.

Is anyone going to get upset that their starter house does better than the other one?

Yeah, I imagine that could probably happen. There's potential for that.

It's hard to be mad about a free house though. That's amazing. What a great story and what a great idea on how to start them young. Like, hey, there's going to be a point when they're, I'm guessing, end to early teens where you're like, hey, this is your property and here's the fundamentals of how it works. They're going to understand, hey, there's a tenant problem. How are you going to solve this? Hey, guess what? We got a call. There's a pipe leak in your property.

Right. Let's call the plumber.

It's a masterclass on how to run piece of real estate on a really small attainable scale.

Yeah.

Sub $100,000 acquisition, but worth almost $200K. I mean, that's, yeah, that's great. That's super fun. What a great application of skills.

Yeah. And it, it's fun for me. It, it's a feel-good thing. It's something I had started thinking about when my wife was pregnant and I've been shopping for the right property for a while. And I told myself before she turns 1 and she's 10 months now. So like I'm always already like, oof, kind of sweating it. I'm running outta time here. And it's a personal deadline. But I'm hard on myself, so I actually get out there and do the work. And finally this one came up and I was like, absolutely, it's perfect. Absolutely.

Oh, that's so cool. That's so cool. Well, congratulations there. That one closes this week, right?

Yeah, it closes Friday. This is the first time I'll actually close on a property in person, which is kind of exciting because I'm closing with the largest owner I know in the area and we're going to—

Oh, that's great.

Go out to breakfast before and it'd be good to see him anyways. He's He's a great guy.

So the takeaway here is the takeaway of almost every podcast. You met with people who've done the thing that you want to do, and then you did the thing that they did.

Yeah, absolutely. And they are there for me to lean on. I mean, I could call some of these owners at any time and ask a question and they're more than happy to share. I am the same way. If someone were to call me right now and say, hey, I want to buy my first rental, can I have some advice? Yeah, absolutely. Yeah. More than happy. Yeah.

Oh, and that's the fun thing. Most of the owners, they like, we like talking about real estate.

Yeah.

I love it. And most of our family doesn't care about real estate for the most part. Like I don't get to share real estate with my friends and family. That's not something— it consumes most of my life and I don't get to talk about that with most people. So when there's someone who's getting into the game, they want to learn more.

Yeah.

I mean, of course I want to go out and have coffee and talk about real estate. Yeah. It's a no-brainer.

Yeah.

And those end up being the people that I transact with.

Yeah.

When I sold my RV park, because I don't sell a lot of real estate, I almost never sell. It was sold at a significant discount to someone who I liked because I knew him. We worked together. He's been out to my Robinhood events. Like we built a personal relationship first. I bought it for $300,000, put $300,000 into it, sold it for $1.5 million. So I made $500,000 in a year. I'm a happy camper. And then that allowed me to move to Texas. That was the liquidity I used for the house. Well, then he is getting an appraisal that we're expecting to come in around $1.6 million here somewhere end of this month, early, early next month. He should make the same $500,000 that I made on the same deal. I just didn't want to run a remote RV park once I moved out of the state. That was the thing for me is my, my partner on that deal lives an hour and a half away and he's a top-tier broker. He is so busy. Yeah. And I live 2,000 miles away.

Yeah.

So I'm like, this no longer makes sense to me. Those pieces happen only if you have relationships. Like no one else got a shot at that deal.

Right. That's great.

He would, he came over to my house, we talked about it. He is like, that sounds like exactly what I want to do. And he's knocking it outta the park. Yeah.

That's awesome. Yeah. That's one of the things I've really enjoyed about Multifamily Strategy is having that group of people that are like-minded and doing the same thing. 'Cause I've also struggled with the same thing. I don't, have a lot of friends that are in the real estate space that I can, you know, share some of my big wins with and talk about a lot of the details. Yeah, we've got a group chat with, with some of the multifamily folks here and it's great. We're always bouncing around ideas and yep, and talking about stuff that, you know, a lot of people wouldn't understand if they didn't own large multifamily and real estate.

Exactly.

And it's having that community of people and seeing other people win is, is also a big push for me to realize like, holy cow, Phil just bought 14 more units. I need to get it into gear. Well, you know, that kind of stuff.

One of the fun things about being in community is like it's easy to get in your own head when you get resistance. Like you mentioned that 26-unit, it could be really demoralizing when you're like, hey, if I was going to contract for this, you've been hunting and hunting and hunting, right? You find the deal, you get a verbal agreement, and then it doesn't come together. It's really easy to go like, ah, maybe, maybe I have tapped out this market or like, I don't I don't know if this is coming together. Then you see other people doing the same steps succeeding, and then you get to ask yourself like, well, if they're succeeding, then it's doable.

Yeah.

And it makes it so much easier to stay engaged and stay plugged in.

Yeah. There can be success in any market if you work hard enough. Yes. I am not boots on the ground. I'm in Lexington at best a few times a year. Yeah. I absolutely could scale faster if I lived there. But I'm very happy where I live and my family's there and I've made the decision that it, might be a bit slower for me to scale, and that's okay with me. That's my style is different than others. Yeah.

Rocking forward 26 units at a time though is not, uh, that's great.

Yeah.

You need to transact what, like twice a year and you can, you know, conservatively you season those.

Yeah.

You're adding like, doing pretty good. You know, 2 deals of that size doing well on stabilization, you're probably cash flowing another $10,000 a month. Like I think fully stabilized, I'm guessing probably $5,000 a month of cash flow, like fully stabilized.

Yeah. Day 1, it's like 10% cash on cash return where I'm buying it today.

Oh, that's a good starting point.

Yeah.

Double digits is always fantastic.

Yeah. We actually got updated financials this morning. And they're better than I expected by a little bit, which is like super exciting and rare.

Usually they're a little worse than expected.

Got a couple more questions, so yeah, we'll hold for a second, but so far it's a little better than I thought. So yeah, 10% cash on cash and it cash flows about $3,000 a month on day one. There's a little bit of upside in it. It's a bit more of a turnkey property than I would normally shop for.

Yeah.

But the numbers work on day one.

And well, and it doesn't take a lot of rent increases to find another $1,000 cash flow. Yeah. So you, you get that thing fully, fully stabilized. So maybe that adds $4,000, right? And that's, that's, you do one other deal like that, you know, $8,000 a month. That makes it, yeah, that makes it, if it's $83,000 is your benchmark to make six figures a year in rental. I mean, you're right there.

Yeah, exactly.

So that's fantastic.

It's got great potential. All the units have been remodeled in the last five years. All the plumbing's been redone. All the electrical's been redone. Like, The only question mark is the roof, but other than that, pretty happy so far. Obviously we get to go inspect it here in a couple days.

Yeah. Well, the nice thing too is even if there is a problem with the roof, you replace that thing once, they last a long time. Traditionally they last longer in Texas. I know they last a little bit shorter than other places.

Yeah.

You don't, like in Washington State, you do a 50-year roof. That's like a normal thing to do.

Right.

You would never do that in Texas because on a 50-year roof, you're going to have some windstorm that damages it. We're going to replace it before 30 years anyway.

Yeah. So it's not going to last. Yeah.

So you do 15-year roofs here knowing that you're going to replace them within 15 years, no matter what you buy. Oh, I love that strategy. Okay, let's get into the stupid tax. So when you're new, it's the dumbest you'll ever be, right? You're never going to be dumber than when you haven't done it before.

Absolutely.

And this is regardless, you can have the best mentor in the world, which he happens to have, but you can have the best mentorship group, you can have the best community, you can have all the pieces. The most mistakes you're ever going to make is when you are new because you know the least that you will know. That's just factually true. What is the highest stupid tax that you have paid so far on the real estate journey?

I would say in simple terms, my stupid tax was do not flip houses from long distance.

Okay. I feel like there's a story here.

I mean, there's many stories we could go on.

Why would you not flip a house?

So we, from distance, our very first flip house, I was probably a little overexcited by, you know, listening to too many podcasts and seeing other people be successful at it and not having a mentor that did it. I didn't have someone to help me walk through the process. If I had a mentor, they probably would've told me, no, stupid, don't buy that house. So anyways, I bought a house that needed a lot more work than we thought. Oh, I sent a contractor out that was a recommendation of another contractor who I trusted.

Yeah.

And still the contractor that recommended him, still great guy, still love the dude. But he recommended one of his subs that kind of did sideboard work and he thought would be a good fit to help us keep the budget under control. Yeah. It's kind of the exact opposite of what happened. So we ended up hiring this guy and he went out there, looked at the property. I made the mistake. I made a bunch of mistakes on this one. It's kind of embarrassing to share, but I didn't pay for a home inspection. Okay.

Yep.

Because that was another $500 off the top that I figured I trust this contractor. He's supposed to be good.

Oh yes, yes, yes.

I'll have the contractor go crawl around and look at it and he's a professional.

Yeah.

He should know what it needs. So contractor went out, I did not fly out to Lexington because that's cost me $1,500 at the least to fly San Diego to Lexington and stay there for a few days.

This is why single family is so hard. You have to buy something that is worth making a trip out to San Diego at least once.

So I started adding up all these things and I was like, well, I could cut the trip out and I cannot do the home. That's another couple grand, $2,500, maybe, maybe even more.

On a small property, that's a little bit.

That's a small property.

That's, that makes a difference.

That's a good portion of the margin. Yep. So anyways, I trusted this guy. He went out and inspected it and told me, hey, here's, He gave me a reasonable list, what was reasonably put together of about a $30,000 renovation budget. Seemed reasonable based on the pictures I had seen and what I'd been told of the property and thought, yeah, let's buy it. Let's do it. So we paid, and it's, the numbers are a bit fuzzy. We paid about $90,000 for it. That $30,000 turned into $60,000, $70,000, Mm-hmm. We'll know the tally soon because we're doing taxes right about now. And obviously we got to tally that up to show how much money we lost. I lost, net loss on that property and it was an absolute nightmare.

Oh, so you lost time and you lost money.

Oh my gosh.

How much did you end up losing on the property?

Probably $10,000, $15,000.

But paying $10,000 or $15,000 to, oh my gosh, to go through the stress.

Yes.

And the time. Yeah, it was, uh, that's, I mean, that's just absolutely nothing feels worse than like spending time and effort and then not only not making money.

Yeah.

You paid for the experience.

I paid for the best lessons I will ever learn, I think.

You know what?

So that, that's how, for 10 to 15, it could be a lot worse. Yeah. That's really not that bad to learn that I am not good at flipping houses at a distance. And it's not, the business I want to run.

Oh, and that's really helpful. That's what I learned in hospitality. Yeah. Where my mistake was closer to 7 figures than, you know, 5. But when you do these deals, it's like, yeah, you know what your business is and know what you're doing.

Yeah. It has really helped me kind of redirect and focus because my plan at the time, if I would've explained to someone 2 years ago what I was doing was, you know, I've got my W-2 that pays quite well. I'm an engineer. So I take my extra from my W-2 and then I'm going to flip houses and make more. I'm gonna dump all that money in for down payments and we're gonna buy duplexes and 3 and 4 units and some single families here and there. And I'm just gonna keep growing until I'm happy. Yeah. I've realized that that's not the business I want to run. Yep. I, I do not flip houses. I will not touch a flip house. I don't care how big the numbers are, how much money I think I could. No. Yep. Do it.

I'm the, I'm the same way now. Even with converting hotels, which I've done successfully before, I'm like, man, it is so much work. The juice is almost never worth the squeeze. And even if it is on paper, I'm like, you know what? I could just do the things that I already know I'm good at.

Yeah. And that, I feel like that for me, it's just like made me realize like I need to focus my business on my true business case. Yeah. And not get distracted by all these little side projects.

Because there's lots of ways to make money in real estate. There's a lot of ways.

There's a million ways to make money in real estate. Everybody has their own best way. Whether it's multifamily or flipping or single family or section 8, there's a lot of stuff that works, all these different flavors. And there are a lot of extremely wealthy people that have made money in all these different avenues. So it's very easy to, you know, go scroll Instagram or Facebook or TikTok or whatever. I found the next thing and find the next, next great thing.

Yep.

And get distracted by it. And all of a sudden you're doing 4 different things.

Yeah. Right now what's really hot is boutique hotels. People are just all nuts about boutique hotels because all the Airbnb people, their Airbnb stopped working.

Yeah. So they're pivoting.

Massive declines. And they're like, what's the next closest thing? We love boutique hotels. They're amazing.

Perfect.

Guarantee what's going to happen. Boutique hotels are going to run up. They're going to, Inventory is going to reduce and now you're not going to be able to do those because you're competing with the people who've already rushed to the space. So that's why these single strategy things don't work. Multifamily strategy is actually based on learning multiple strategies to take out deals within your buy box. Like you put together your parameters, but it's choosing the right debt products and the right equity partnerships to knock out the deal. And that's your whole anatomy of the deal. Deal, debt, equity. But yeah, no, that's, I talk to a lot of flippers. A lot of people invest in my deals, they're house flippers who are tired of losing money. That is very common. They're like, I would rather just dive in on a cashflow multifamily deal than try to go for the highest margin flip. And the risk reward is just not there.

It is the most headache-inducing thing I have probably ever done. Oh my gosh.

Yeah.

The amount of times I wanted to curl up in a ball and make it stop.

The only reason, the only reason you would do it is if you loved the renovation process, you were involved, and the project itself is what you want to do for a living.

Right.

And if that's, if you love that, that's the appropriate time to flip houses.

Absolutely. And doing it from a distance, it's just, oh, so hard. Not the way to do it. So hard.

Well guys, this was Garrison. Garrison is doing great things. I'm really excited to see where he ends out the year because you're going to be cruising towards 50 units.

Yeah. My goal is to buy 40 this year. So we've got the 26 in contract and then my daughter's one. So that puts us at 27. I have my eyes on a 13-unit. I'm actually meeting the owner.

Oh, that'll put you right there.

Thursday morning. I think that's probably why my phone went off halfway through this.

Oh, there we go.

Asked him, what time are we meeting for breakfast so we can go walk through it?

So, oh, there we go.

That could put me at my 40 if I can work a deal on that.

Yeah.

We're trying to get creative on the financing. He's got a number in mind that is a little too much, but he's willing to do deferred payments for probably 5 years. Okay.

There we go. So it comes down to the debt structure.

It's a debt structure thing. The property's got a lot of potential. The rents are low. So it's just how can I buy it to make it cashflow day one? And then I think I have a good understanding of where it can go, but walking through it this week will—

Oh, that's fun. I'm so happy that you're, I'm so happy that you're successfully buying commercial multifamily, that, that jump from the side-by-side duplexes into a 9-unit, a 26-unit, a 13-unit. Absolutely. You have to succeed, I don't know what the correct English phrase is. I was going to say so much less frequently. That's, that's not English. You don't have to succeed as often. Like one or two deals moves you forward $5,000 to $10,000 a month in permanent recurring income.

Right. The amount of work to buy a single family versus like using this 26-unit as an example, pretty similar. Yeah.

I mean, if you tried to buy 26 houses, it would've been like way, way, way, way, way, way, way harder.

Done like 26 trips to Lexington.

That would've been terrible. And then, then your travel costs would've eaten up all your margin.

And I could not. Yeah. I would not. So the scalability is just, it's incredible and it's what I'm looking for. I'm looking for, you know, I'm more of a passive investment, obviously, with the way I'm running my business. And yeah, buying 26 single families is far from passive. And then they're all different. Yeah. That's the thing.

Well, yeah, you have different problems, different plumbing, different electric.

Yeah. You don't know. Yeah. Because like the 2016, for example, they're all the same.

Yep.

So they're all going to have the same water heater and the same sink and the same dishwasher and commonality. Right.

And you're able to run your business with replaceable parts.

Yes.

Every unit looks roughly the same. I use the same paint, like same paint SKUs for interiors of every property that I own. Yep. Often same or similar cabinetry, countertops, flooring.

Yep.

You get standards, whereas in different houses you're going to have different design. You're going to, it's a lot more work. Yeah.

And it's a big question mark every time you send a contractor out there. They got to walk in and figure out, well, what's the paint color on the walls? Do we have any idea what kind of flooring this is? We need one plank.

Yeah.

Or can we not? Is it discontinued? Do we like, we have no idea.

Yeah.

If it's a big multifamily complex, yeah, you've probably got leftover from your last unit turn. Yep.

Most of my properties have a whole bunch of extra flooring stored in the shed. Yeah. We have all of our paints there. SKUs are saved. It's Sherwin-Williams. So I know like, hey, we can actually, if we forget to save the paint can, we can drive back there. They know what the property is. It's in their system. We have our, so much easier to scale.

Yeah.

Well guys, this is the Owner Meeting Podcast. We meet with owners here. Specifically so that you can get all the benefits of meeting owners without having to do the interview yourself. So if you're busy on the 9 to 5, you're listening to this podcast driving into work, that is exactly what this is for. Garrison succeeded the same way everyone on this podcast succeeded. He met with people who he wanted to emulate their business and then he copied their business and saved a whole bunch of time. I mean, that is the master strategy. So we do that here for you. So like, subscribe, leave a comment, do all the things that help boost this channel, bring this out to more people. We appreciate you and we'll see you on the next episode.