How George Pino Went From Selling T-Shirts To Building WEALTH

Hello and welcome back to the Owner Meeting Podcast. I'm Christian, your channel host, and really excited to be here with George today. George, welcome to the podcast.

Thanks for having me, Christian. I'm excited to be here.

Absolutely. George has done some incredible stuff in real estate and he's done a lot in real estate. Funny enough, he accidentally found his way into real estate. This was not originally intentional, but we're going to have a podcast today talking about actually building equity in your company, starting real estate, and how you can go from being an average guy like George or I to where we're at today. So I'm extremely excited to have you on. A huge privilege. George, for those who don't know you, give us a little bit of the backstory of where you started and how you accidentally fell into real estate.

Well, started off actually, I had my own— when in college, I started a company where I, of all things, was designing t-shirts and doing silk screening and selling them. Doing extremely well, especially back in the day for where we were. And I wanted to create that company and keep it going after college, but A lot of what we geared, um, was geared specifically on the retail side towards schools. And we had, I had a lot of time off in the summer months and a friend of mine that was working at a company needed some, said, you know, our company's looking for some help. If you want, you can come on in here part-time and help us answer some phones, do some real estate stuff and things like that. And, uh, you know, I've never been one to just sit around doing nothing. You can only be, stay so long at the beach or shop or watch TV. So I said, absolutely. You know, it's, I'll do it for a couple months. I started there. It was offered a full-time position in about 2 weeks. And then I thought about it and I said, you know what? This is pretty interesting. And I think I could probably do better at this than what I have already done. And so jumped right into it. And it was really interesting because we were doing of all things, real estate auctions. And these were not the online auctions because to be frank with you, I'm a little bit older than most people. If you can't see the white in my But I remember when someone actually told me, have you heard about this internet thing?

It's gonna be huge.

Oh yeah. But you know, I was a computer science major in college originally, and I remember programming in DOS. There was no Microsoft, there was no Windows, there wasn't anything like that. So, you know, we were doing things, open outcry, real estate auctions, kind of like what you see on TV where you're, you see an auction for cattle, but instead of cattle, we're doing real estate and we're auctioning off anywhere from 50 to 400 properties at one time.

That is, that is an incredible amount of volume. So you just all of a sudden are thrown into the real estate world doing ludicrously high volume. That had to be a lot of fun. How long did you do that?

You know, it was extremely fun. A lot of hard work. I mean, there were times where at that company I was literally working 7 days a week, sometimes 12, 14 hours a day because we were traveling all around the country. I was assigned Texas as my territory, which was their largest area. Area, and I was part of the closing department. So what I did was I wasn't on the sales side. I was after they sold the properties, I actually followed through to make sure they closed escrow. So I followed through with all the lenders, all the attorneys, all the title, and made sure that all these closed. And these were thousands of properties a year that I'm tracking and following. You know, one of the things I ended up doing was saying, we need software to do this. And I helped them custom design some software at that time, cuz there was nothing that we could do to track it. That was from my computer science background. But with that, you know, we had, it was, it was a lot of fun. It was very exciting. It was different. It was unique. Um, we, it was a time where, you know, it was as much work as we did, we played just as hard and including with our clients. I mean, I remember senior VPs at client, um, at, at some of the banks that we were working with to offload a lot of their REOs during the RTC days. You know, I'm some snot-nosed kid is probably how they saw me. That was like 22, 23 years old coming out of college. And even with a ponytail back then, and I'm dealing with the senior VP of a bank on their closings and I'm talking to them, they're like, so to get to know them, I did the only thing I knew how to do, which coming from college, you make friends by drinking. So we'd go out and we'd just go to bars and drink and make those connections. Luckily in Texas, that's a great way to start off getting to know someone. And I created, some amazing contacts, but I followed through with the business side. And, you know, we made sure we had a 98% closing ratio, which was huge, you know? So 98% of the deals that we actually sold, we actually closed those properties. So we had a really super high closing ratio, very little fallouts. And, you know, it was basically performing, but also having a good time doing that. And with that, I was able to grow within that company organically to the point where I was opening offices for them. I had opened up an office, closing department office in Houston, then one in Dallas. And then we ended up opening in Boston, New York, Chicago, and then Pleasanton in the Northeast Bay of Northern California, which is where I met my wife.

Wow. Speaking of, speaking of New York, so you opened in New York. Talk about an interesting real estate market. Now I, I moved from Seattle to Texas, so I very much relate to Texas real estate. I've bought hundreds and hundreds of rental units down here in Texas since I moved a couple years ago. New York, it's been a long time since I've looked at a market and actually wondered, is this completely uninvestable? With their politics. What are your thoughts on all the stuff that's going on in New York right now in the real estate space?

Right now, the nice part is everything's resilient. I mean, if you look at things at a very short window timeframe, it may not be the best time because, you know, there is that fog of war. No one knows what's going to happen. But at the same time, that breeds opportunity. That's the one thing I've learned throughout my career is that uncertainty actually breeds opportunity. You just have to be able to identify what is the most likely outcome. I think that this is a city that is one one of the greatest cities in the United States. It is a very resilient city. It's going to be very hard for it to come down. It'll always be in demand. So I think that there are going to be opportunities to invest. It's a matter of where, and especially if you play the longer-term and hold game, you know, that's one of the things that— one of the lessons I learned, you know, along that way, it's long-term plays tend to outperform the short-term. Buy and sell.

So you're thinking even with the politics as aggressive as they are, politics change, buy and hold, a good deal is still a good deal in New York. This might just open up buying opportunities.

Exactly.

People try to get out.

If anything, I think it will open up buying opportunities. People are going to run scared. They're going to end up selling. There's going to be a flood a little bit more on some of the market or the properties, but ultimately down the road, it's a city that everybody, that there is so much demand to be there that it's always going to continue growing in that aspect.

And I think historically that's extremely true. And you've seen that in most of the major cities regardless of what happens politically, especially your large coastal cities, you know, your, your Seattles, your California, basically the state of California.

Yeah.

You have all of these markets, they are really, really difficult to get lending on, to be a landlord in regulation-wise. And yet we see appreciation year over year over year over year over year. Outpacing any other market just because there is demand. And at the end of the day, real estate is supply and demand. It's housing for humans. When you get into multifamily, that's all it is. If more people are moving there, prices will push up.

For me, it depends on what you're looking for. 'Cause you know, are there better opportunities for cash flow outside of these markets? Absolutely.

100%.

But you're trading cash flow for appreciation. And you know, I have properties in upstate New York that cash flow like crazy. I mean, we're talking 15 to 18% cash on cash, doing really good cash flow. But I can tell you it hasn't appreciated at all or very little. And you know, that's fine because I'm looking at that more for my cash flow plays versus my appreciation plays. Meanwhile, you have properties that are in Los Angeles or some of these other markets like New York where because of the regulatory issues, the cost to manage and the cost to run these properties is so much higher. So you're trading that cash flow off, but because of the demand that people want to be there, the appreciation keeps going up and up and up. And you know, you offset your lack of cash flow with much higher appreciation. And if you play the debt game correctly, you can really compound that and do extremely well.

Now I've always geared my business based on cash flow because I found that I can live on cash flow. It's really hard to lose a building. That's cash flowing and you can wait for any market cycle to change as long as you're getting paid to wait. I've always geared heavily towards that. I've seen people with different strategies. At some point you do want a portfolio that appreciates. That is how you build long-term wealth. How do you personally strike the balance between these high cash flow, high upside, the risk reward ratio for your investment? How do you strike the balance between both cash flow and appreciation in your portfolio?

Great question. If I'm in certain submarkets that are more appreciation based, I actually don't take on as much debt. You know, so I'm still looking at that cash flow. I'm still making sure my debt service coverage ratios are enough so that if I do have vacancies, I'm going to still be able to maintain the property. Because I do agree with you, I am a cash flow buyer. And because of that, I may have missed out on some big opportunities where people have, you know, that you read about, like, oh, I invested in Apple when it was only 50 cents a share. You know, you may, but Honestly, that's so rare. And you hear that in real estate where you have all these opportunities where someone's invested into something and it's shot up and it's done extremely well. But the problem is that's extremely rare. And if you're chasing that and if you're looking at that and you're hoping for appreciation, really you're just, you're not an investor. What you are is, you know, if you don't have a fear, you're a speculator. You're hoping for that appreciation. You're hoping that the market's going to be timed right, that nothing's going to happen, that we're not going to have, and especially in certain submarkets, I mean, An earthquake tomorrow can drastically change the real estate landscape in California, just like a hurricane in parts of, you know, Texas through Houston and what, whatever. It's those things that are out of your control. But if you plan well, don't over-leverage and you still maintain cash flow, you're still gonna be okay. Now you may not have as much appreciation, but you're still gonna be able to play and get a lot more of that appreciation. The other way I do that, especially now, is I look for properties that I can that are cash flowing very well, yet I can add value to create that appreciation. So, you know, there's different ways that we do that. Like for instance, when we're in the multifamily game a little bit more so, you know, we bought a property that was 192 units in Texas and there were roughly 400 parking spaces, all of which were uncovered. Now, I don't know about yourself, but Dallas heat gets pretty damn hot in the summer months and people like to have parking and they had at least carports. So we looked at it and I quickly did a quick analysis and I realized I can put in 100 carports in, and these were all steel construction. It's not like we have to build them like for earthquake or to handle heavy snow and things like that. Like we do on the East Coast or up north. So we were able to build it with steel construction, with tin roofs, corrugated tin roofs and things like that. So it was relatively inexpensive. Actually, it came out to $700 a carport.

Oh, that's not bad at all. That's fantastic.

Not at all. $75,000 for 100 carports. Now we put those all in the prime locations, but then we sold the carports. If you wanted to park in a carport, it was $20 extra a month on your rent. That was $240 a year. On a cap rate basis alone, that raised the value of the property almost $2,000 per carport, and they rented out immediately. So I create that appreciation by figuring out ways that we can actually create value, do things like that. As opposed to hoping for appreciation in the market.

Well, and that's what I love about the commercial. I always tell everyone to do their best to get out of single family and then resident, like the small residential stuff as fast as possible. So if I tracked what you were saying correctly, you have 100 carports, cost you $75,000 to make them. You pretty much immediately lease them. You said it was $20 a month per carport. So you created $24,000 a year of new NOI. That's, you know, there's not a new— I imagine there's not really much of an upkeep cost on a metal carport. So you had no new expenses.

No new expenses. We put solar lights on them that were— I mean, we had no expenses.

So you added straight profits. You said that was Dallas?

Yes.

Okay. So let's go conservative. Dallas is better than a 6 cap market at that time, but let's just say it's on a 6 cap valuation. You spent $75,000 to add $400,000 of value instantly to your property.

Yep. Bingo.

I mean, that's, that's an amazing return. That's a ridiculous return on investment. And it's done like that.

Absolutely.

Oh, that's amazing.

So, you know, there's things like that on this, on the pure commercial side, like on retail and stuff, we look to, you know, we, I'm very much location-driven as I say to anybody, any agent that is trying to sell me a property, they ask me what I'm looking for. And even what I'm looking for when I'm representing a client, I let them know that, you know, typically speaking, my investment strategy is that I'm geographically agnostic, but I'm extremely location-driven. And so I look for the prime locations that I know I can retenant. I mean, the win-win for me is I buy a commercial property that's cash flowing very well. The worst case, the best case scenario is for the tenant to go out of business so I can kick them out and bring in a better tenant at a higher rental rate. That's what I look for. And so, you know, and I have a couple of those right now that we're waiting for either for the tenant to, for the lease to expire or for the, or for hopefully the tenant to go out of business. Yeah. You know, I'm not afraid of that then because I go into it eyes wide open with the understanding that here's my plan of action in case this happens. And if it does happen, that's actually a good thing for me.

When you are building your portfolio and you've, you know, you've diversified across different asset classes, you have multifamily, you have retail, what goes into the decision-making of what you want to hold and in what quantities in your portfolio when you're balancing a portfolio? Like myself, I'm a multifamily guy, so I'm like my business is all based around multifamily and property management. I'm vertically integrated in multifamily. That's my target. For you, where you are buying, you're buying large deals, you're buying different asset classes. What is the makeup of your portfolio and how do you intentionally manage that?

Well, right now we've actually repositioned out of multifamily. We got kind of tired of the management and the headaches and the regulatory issues. We sold everything that we had in California, ended up selling everything we had in Texas.

Wow.

And ended up, uh, start transferring everything into single tenant net lease assets, which is my specialty on the brokerage side.

And as passive as you get in real estate.

As passive as you can get. And people always, it's, it's, and I love it because most people look at it and say, well, it's a declining value asset. You know, every year it goes down in value and stuff. That's because they don't know what they're doing. I love, and that allows me opportunity. If I have a whole bunch of competitors that don't know what they're doing, they're not gonna, they're not gonna necessarily offer the right pricing or look at the right properties in the right way to be able to create that value. So I look at that and as far as properties I hold or sell, it's as simple as this. It's not my personal residence. I'll sell any property tomorrow as long as I can replace it with a better investment. So depending on where it is and what my offering—

great.

There are properties I know I can't sell right now because of the current market conditions and things I'm waiting to reposition leases and whatnot. Um, but at the same time, if somebody came in and offered me a great price and I can replicate the, I can replace the rental rate at a higher rental rate and cash flow, I'll probably take that offer.

Yep. At the end of the day, real estate, and you, you've kind of summarized this to put it simply, it's sticks, bricks, and money. It's, there's nothing emotional about a piece of real estate.

No. And I think that's the biggest fault that a lot of investors make, especially the mom and pops, is they don't look at it. They don't reanalyze it. They don't take a look at it, you know, because I'm looking at everything when it comes to our investments, everything from the cash flow to the depreciation. If I depreciate, why would I hold on to an asset for 30 years and have zero depreciation when I can exchange it, increase the basis? And then even if I have the same cash flow, I am— by increasing the basis, I am getting a much better tax break and benefit. So I'm keeping more money in my pocket. That's the whole reason you bought real estate in the first place and not stocks. Is to take advantage of the tax advantages that are offered. So if you're not going to do that, then you're not really investing. What, you know, none of this is emotional to me. It's, I mean, obviously personal residences, a little different. My wife got upset with me on our first home where someone came in and, you know, they said, oh, I have a buyer. And I said, oh, well, you know what, I'm not going to list it, but if you bring somebody at this price, I'll sell it. Yeah, she did. I was a little upset because I'm a person where, you know, I'm, I'm very old school. Father was in the military. You know, he was a military family. It was World War II, Korean, Vietnam War veteran, all in service. But we grew up essentially growing up in the military is like growing up in a small town and your handshake is your word. So when she came with that offer, I was like, damn, I guess we're selling our house, hon.

That's fine. I've seen some of that in my life as well. I'm less, I think it's because the amount of transactions we've done. Just even the house. I love the house. I loved my old house when it was, it made business sense to buy a bigger house and just to cash out the equity of my other house. I had a loan secured by the house that I used on a real estate transaction. Being able to wipe both of those by just offing the asset.

Absolutely.

It made my capital stack better on both business and personal. It gave me a better house and more cash when I wanted more cash. It was a, it was the right transaction and that was the same conversation. It's like, well, unfortunately we love this house. We're moving to Texas and we're selling our Seattle house. We have the right price, right time. Adios. I tend to be a little bit more like you and I'm a little bit more pragmatic with housing. Yeah. But everything with real estate, I really like the model there. And one thing that I hear this again and again and again for people getting stuck trying to scale, they worry, okay, what happens if a project goes wrong? And if you do enough projects, not every single project goes right. And I think you actually phrased this perfectly. There's some properties that you can't sell right now because you're repositioning. Sometimes there's a project that doesn't go exactly to plan. It doesn't even mean that it's going to lose money or it's a bad deal, but sometimes you're halfway through a project and your entire plan changes. Are there any examples of deals where like, wow, this got really hard and then we made it through by either repositioning or giving it more time? I think it's just encouraging for people to get to hear like, hey, It, real estate is not going to go exactly as you write it out on a piece of paper, but you can still make it. It's not going to ruin you on one deal unless you really screw up.

Agreed. And you know, I think the biggest mistake people make is over-leveraging. They just keep taking money out, money out, money out, and they over-leverage and they forget that real estate is cyclical. So, you know, there are going to be ups, there are going to be downs. If you try and unfortunately there's no way to necessarily, it's not like it's a, firm cycle, like, oh, we're going to have 3 years of up and then it's going to be flat for 2 years and then it's going to fall for 2 years and then we're going to have 3 more years of up. No, there's no way to predict that. It is a little bit off. I mean, you, there are certain market indicators that you can take a look at and follow that help you see a little bit more and what may or may not be happening in the marketplace, but it's hard to predict what you're going to do. So, you know, what we, we went in, we did some syndications, uh, in 2004, 2005 with the expectations of selling around 2008 and '09.

Oh, good luck. Right.

So, but by just extending a couple years, going back out to the investors, because what we did was we bought for— we always make sure the properties can cash flow. So even in a down market, I'm still making— even if the value— I haven't lost anything until I've sold the property. So if I don't sell the property, I haven't lost my equity. So we ended up, you know, as long as we're cash flowing, I'm not worried about it. So we were still cash flowing. We're still bringing in a decent cash flow return. And we went back out to the investors and said, you know what, we can sell right now, but ultimately we're going to take a hit on our equity. However, if we wait a few years, I think we're going to have a big bump and push up. Now, I mean, I wish I could have waited an extra year and a half, but we waited a couple years. We ended up selling at a profit and doing very well on our returns, our yields in Los Los Angeles at that time were around 15 to 18%, depending on the building. So we did very well overall. I mean, I think if we had held, that's when, and then in 2011, '12 is when the market really shot up. And if we had been able to hold for a couple extra years, unfortunately some of our investors needed to get out and we ended up getting out for that reason. But if we had been able to hold for those extra couple years, our yields would've been into the mid-20s.

How does communication work with the investors when you have a major plan change like that? We want to exit our original game plan. We're exiting around 2008. This is the worst time to sell. Obviously we can't do that right now. Everything's on fire. No, there's no buyers at the moment for this and the pricing's terrible. How do you have the communication with them to where they have the comfort and confidence to allow you to do a change of game plan and to ride out and sell at a later date? How does that communication happen and how do you keep that communication going prior to having a problem?

Okay. Well, with our investors, we've always communicated and done good communications. Like we gave them quarterly updates that were not just your typical quarterly updates of, well, here's what we're doing financially. We told 'em what's going on with the building. We told 'em what we are doing, what, how we were working it and what we did with that. So when it came time, you know, a lot of that, we had already built a good cash flow stream. We were already doing well. They understood what the market, that the market changed, that the market crashed because of the stocks going down and everything else. And debt was disappeared. And with debt disappearing, there were no buyers, of course, because most buyers are not going to pay all cash for a property, especially in Los Angeles. And with lenders tightening up and no debt out there, they understood that. And most of these were also, they had other real estate investments. They realized what was happening. All of the investors that we used, because we were a syndication, they were qualified investors, meaning that they were a little bit more astute than somebody who's doing a crowdfunding platform. Platform and putting $50 or $1,000, you know, hey, here's my life savings of $10,000. But we wouldn't take that money. You know, our investors had to have a certain net worth. They had to have a certain amount of income that they were generating to be a qualified investor under the government rules and regulations. And as such, they were a little bit more astute and they understood. So when we went out and said, you know, here's what we see and here's how we see it, we can continue We're still cash flow positive. We're still doing well. There's still going to be demand for the rentals. So we're not going to get hurt in cash flow. Our loans aren't coming due. We are ready to, you know, we can continue like this if need be forever and still get a decent cash flow return. However, if we sell right now, we're looking at potentially cutting into our profits heavily because of the loss that we're going to take on the equity. And then we projected, well, based upon past market trends, and the nice part is if you choose the right market, such as we talked about Los Angeles, we talked about New York, and especially in the right neighborhoods, these markets are typically the last to fall in downturns and the first to come up. So, you know, cuz they're in the high-demand areas. And so looking at that, we thought, okay, here's our projections. Here's looking at past history and track records of different market downturns. Here's what we expect. We'd like to hold for about 2 extra years. Preferably 3. Everyone agreed to at least 2. And that's what we ended up doing. We were able to manage and weather through it and maintain and actually increase our equity overall on the properties and sell for profits.

That's perfect. So it's the little changes and it's the great communication that keeps investors from getting too spooked or too, you know, yeah.

And during that time we still kept up with different communications. Like here's where we are, here's where our estimate of value is, here's what's happening in the marketplace. Here's what we think we should do. And we just kept going.

Yeah, I absolutely love that. And it's the simple communication throughout, and it's not just when you have a problem, it's just consistent communication and then full transparency. If they know, it's really hard for someone to be upset about a problem that they've been a part of and see the actual development of like, hey, we're foreseeing this, this may be a problem. Here's our plan for this. By the time they get there, you're not blindsiding anyone, which is where I see the largest mistake from newer investors is something goes wrong and they try to solve it without bringing awareness to the rest of the team. Yeah. You just let everyone know what's going on. And of course on larger deals, I'm assuming these are mostly done either as a fund or just a 506(c). If you're doing the syndication, you're working with accredited investors. You're not working with, you know, mom and pop investors. They're not brand new to this. These are higher net worth individuals who have likely also invested in other deals and they've seen the same market trends that you're dealing with.

Absolutely. And almost all of them were real estate professionals, so they had other investments in real estate. They understood what was going on. They had done this before. They just liked our investment strategy and model, so they invested alongside us.

I absolutely love it. What a, what a great structure. How do you attract that right investor for your deal? People who like your model, awareness is obviously a huge piece. Like they, they have to know that you exist and know your model to actually invest with you. How do you attract the right people to the right deals?

Awareness, talking about it, getting out there. I mean, we have a lot of people that come to us now and, you know, cuz just because They understand our investment strategy, what we look at, how we go about it. So, you know, in, in this area itself, you know, yeah, when we first started off, there was the dog and pony show. You know, we had personal contacts. We'd run out and say, here's what we're gonna do. Here's our past track record on our personal investments. Here's what the plan is. And here's our, you know, here's the upside, here's the downside and where we're at. We actually, for at that time, we had an investment model that was pretty unique. It was a socially responsible real estate investment model that most people had never even heard that term before. And because of that, we were actually invited to speak at different conferences, talk about the model. We were written up in the Wall Street Journal, LA Business Journal, New York Times, Dallas Business Journal, wherever we went to do this model. We got written up with because it was such a unique investment strategy and model that we did. And that allowed for people to come in.

What made it so unique?

Well, we've always believed in giving back to the community. The way we look at it is if we can increase and better the community, then it's a win-win for everybody. Because, you know, if I'm investing in real estate in a community and I'm making the community better, guess what? There's going to be more demand and therefore I'm going to get better rents or therefore I'm going to get higher appreciation. So, works for me as an investor. At the same time, it works for the people that live in the community as opposed to the take, take, take mentality. I'm going to invest, I'm going to not invest, reinvest into the community, and I'm going to take away. So what we did was my business partner at the time, and still is my business partner, but he comes from a very small town in Nebraska. And when I say town, it's actually, I think it was legally classified as a village, 281 people. And going to school, as you can tell, is probably different and unique than most other people in the United States, their experience. And what, whenever he had a problem or an issue with schoolwork, specifically math, he would literally after school, just go over to his teacher's house, knock on the door and say, hey, you know what? I didn't get this. Can you help me out? And he thought, you know what? Can we replicate this? And we thought, I looked at it and I said, I was looking at our properties that we owned. And at the time, Most of the properties weren't quite large enough to replicate that model. So we started selling that and looking to buy larger properties. We figured out, uh, I ran business models and ran numbers on it to figure out there's a certain density we needed. And what we did was we took a unit off the market, we converted it. It was typically a studio or a one-bedroom and, you know, a smaller unit. But what we did was we converted it into what we call resource center. And these were all low-income neighborhoods, very low-income neighborhoods in some cases. And we would put in, and especially at that time, there wasn't as much of an internet, uh, like, and especially in these low-income neighborhoods, people couldn't afford having home internet and computers. So we would put internet, computers, mini library with books and games, but then we'd also discount the rent of a percentage of the units. We'd bring in accredited school teachers in exchange for the discount in rent. They would tutor the children that, and the teachers actually typically lived in the area. So it was a win-win for them because a lot of them were taking jobs just to survive. Especially in the LA submarket, they take after-work jobs, drive an hour into a better neighborhood that could afford tutoring, and then drive back home. And so instead they would just come here and then they would tutor or mentor the kids 4 days a week for 2.5 hours a day. What we did initially, we did this just to try and give back to the community. We didn't think that there was going to be a financial benefit for us. What we didn't realize was typically speaking, low-income— well, we did know this part, but low-income neighborhoods have a very high turnover rate. You know, people tend to move in. In fact, the elementary school in the area had a 60% attrition rate. So 60% of the students that started the year didn't end the year. That meant that, you know, if it was high school, yeah, there's dropouts, but elementary, there's not really dropouts. What that meant was the people, the, the, the families were moving out of the neighborhood.. So that neighborhood was having over a 60% attrition rate. Once we started this program, what we didn't realize was it would stabilize that community. People now saw value that we actually cared about them, that even though it was a low-income neighborhood and a rough neighborhood, this was something that their kids could go to. We actually even created, uh, ended up creating a foundation that we funded to give scholarships out to the kids too. Cause you know, one of the biggest complaints that we got initially was, well, you know what, why should I study after school? I'm never going to college. My parents can't afford it. We said, We'll figure out a way. If we need to give you that scholarship, we'll, we'll work on that. We'll figure out different scholarships that are out there. We brought in people that could help them with grants and everything else and, and writers that would get them going. And so we created this whole foundation of that as well to support. What was the most interesting part is our make-ready costs dropped by 50% because nobody moved out. On top of that, our maintenance costs, when I, when I realized that we were actually making a difference in the community was The second building we purchased, I walked in and I was walking in and I never hide who I am, meaning I don't sit there like, oh, I'm a maintenance guy that's on the property management. If they want to know, I'm the owner and I'll talk to anybody there. And as I walk in, I had one of the tenants come up to me and she starts in a very angry tone, I need to talk to you. And I was like, oh gosh, what's going on? And head down. I'm like, okay, what can I do to help you? And she goes, you need to talk to your gardener. I'm like, what's the gardener doing? She goes, well, he's not doing a good enough job weeding and doing this and that and whatever else. Right. And I'm like, oh, this is just a lady that's just complaining for the sake of complaining. Cause I'm looking at it and it's like, not bad. It's not necessarily great, but not bad at all. And then I turned the corner and she was outside because she had organized a group of other women. To go out and these were all women, older women that were on Section 8 subsistence housing that deserved to be on it because they were either handicapped or they were retired and they were just didn't have the income. They pulled their money together, what little money they had, and went to Home Depot and bought flowers and they were planting them themselves and putting it in the common areas. And this was an area that was when we bought the building was full of weeds and we cleaned it up and everything, but it wasn't the greatest obviously, but it was still nicer and nice. And we looked at this and thought, here's a group of tenants that is surviving month by month, paycheck by paycheck. They took their time and their money to improve the common area of an apartment building. And I immediately said, you know what? I'll talk to the gardener. I'll make sure that he does it. And I'll see about getting you some fertilizer and everything else, whatever you need. And that's when we realized that we were making a difference, that that was actually, and that's it. Worked out, you know, we, our buildings became in demand. We were never without a vacancy. And to the point where it actually ended up hurting us in the program because we ran out of kids. Nobody moved. As the kids matriculated out and they graduated, we had no more kids to tutor. Yeah.

So that's when I found that that's some of the best stuff that you can possibly do in a building. We have, I, so I do a lot of Section 8 as well. And, uh, I purchased some, some of them are on still in the LIHTC program. You just have to buy them at a phenomenal price where they cash flow heavily. Yeah. But it's adding the services. If you're under 100% occupancy on those, which you shouldn't be because they're very affordable, it's adding the services like, hey, we do movies on the lawn, we have childcare services available, we have bookable space, we'll occasionally just host an event or an ice cream social. We network with local churches who want to do Bible studies there. So you have all of these different services and community activities But it costs next to nothing. It really does to coordinate a movie night in the summer on the lawn with a big blowup screen. You're talking hundreds, not thousands of dollars. You have popcorn for everyone, drinks, sub-thousand-dollar investment. Yeah. And you offer an amenity that no one else is doing. You just become that you're, you're already affordable. People love living there. And what you start finding is that your people who love living there, they start actually helping out. Places that have trash everywhere, tenants start picking up their trash.

They care about the place they live. And I agree with you 100%. You know, it, uh, and it's just bringing that human element back to the investing side. It's not all about the money. Um, you know, we had, uh, we had one situation where a tenant, her son passed away, unfortunately, and it was due to gang violence. And she was worried about getting evicted because she couldn't afford the rent because she had to pay for the funeral. And our manager told us this. And I said, tell her not to worry about rent, not to pay rent for as long as she needs. She didn't pay rent for 4 months. We didn't give her a notice. We didn't talk to her. And I said, you know, just don't worry about it. You know, we'll work it out. We'll figure it out. That lady came back to us and it took her 2 years, but she paid all the back rent back. But we bought such goodwill within that community and understanding that, you know, it was more of a payoff, but we didn't look at it that way. We were just trying to do the right thing. I mean, I'm putting myself in her shoes. If I was in her shoes and my child got passed away, the last thing I'm thinking about is how I'm going to, you know, okay, I got to pay rent. You know, I don't want that extra burden on me. So, you know, we're like, take it off.

That is the right, that is the right way to do it. And in business, I've found this is doing this over the years. You definitely will get taken advantage of if you're too nice and your tenants will start to do that. So we've come up with a policy of Always be kind, never be nice. Nice is bad. Nice is where you're like, no matter what they ask, yeah, of course we'll do that. We're not trying to just be accommodating. We're trying to be kind and do the right thing. And that is a perfect example.

Yeah, no, absolutely. I mean, it's funny, that same building, I had a tenant come up to me one time and yell at me about how my manager wouldn't replace her carpet. And I said, why does your carpet need to be replaced? She goes, I got a big hole in my carpet. You have a hole in your carpet. We should replace that. She goes, that's what I've been telling her. Okay. Let me see that hole. Let me take a look at it. I walk in, I look, and I'm like, first thing I say is, you know, you're right. There's a big hole in the carpet. And I said, we'll get it replaced tomorrow. This room. And she looks smugly at the manager like, ah, ha, ha, ha, ha. And then I said, I do have a couple questions for you though. She goes, what's that? I go, well, that hole is remarkably shaped like an iron. How'd it get there? She goes, well, I left my iron on there and it burned through. I go, great. Okay. Well, we're still going to replace that carpet, but I'm going to tell you what, you're going to pay an extra $25 a month until it's paid off. And so it was being kind, but firm and fair. So, you know, and she did, but you know, it's, you can't get taken advantage of because they will take advantage. You're absolutely 100% right on that.

But when you can manage kindly, correctly. Yes, you do build community, you have better tenants, they take better care of your property. Ultimately, you get to feel better about your investment just as an investor. You're bettering a community. I have found that spending the little bit of extra time and money on that actually does make more money. You actually end up with higher returns. You end up with a better money model when you do the right thing. Which is what I just think is a beautiful thing. So the fact that you were doing this, I agree early on because for us, that's the only way that some of these properties, this is the only way that you could actually make the deal. Like this is why the deal works is because it's managed at a really high level. I can see why people wanted to invest in that, especially when that was less popular to be socially aware as a landlord.

You know, what I think was interesting though is what you said is it has to do with coming in with that mentality though too. It's not just offering the services. The residents that are living there has to, they have to understand that you actually mean to do good, that you're doing it for them as well. And what I mean by that is part of our model was that We were very interactive from our property management to our, you know, all of our maintenance guys would get to know the tenants by name and say hello to them every time they saw them. That was part of the rules that we had with them. It was building that whole community and that trust network. And it was interesting in that when we were taking off and we got written up in the Dallas Business Journal, a very large investment company came and they said, oh, we'd like to invest with you. And we showed up at their offices to talk about the investment. And it was interesting in that. You know, within about 5, 10 minutes, we realized they weren't going to invest with us. They were here to pick our brains. And because they had their marketing team there, they had their property management team. They had, they had every, I mean, they had about 10 people inside with my business partner and I sitting there going, okay. And we told them exactly what to do and how to do it. We didn't care because the way we looked at it, if we all do this, it's going to better the whole community, not just our building. We're like, we told them everything, but we also told them that the key component component was the human aspect of it. Making sure that your managers are in tune with the residents, making sure that you're in tune with the residents, making sure that you're just not putting it out there. The next thing you know, about 2 months later, we get some calls from other investors and friends of ours in the Dallas market and they're like, hey, did you see so-and-so's doing your kind of concept and replicating it? Like more power to 'em. I hope they do it right.

Yep. No, that's exactly right.

And 9 months later, they all closed down and got foreclosed on. No, no, no, they didn't do it right. They just put, they just built a center thinking that, you know, field of dreams, I'm going to build it. People are going to come in and we're going to get that value. That's not how it works. You got to put the investment of the time and energy into it yourself with whatever investment that you're doing with whatever aspect of it. If you think you're just going to do it and hope for the benefit, that's never going to work. And it doesn't matter whether it's a socially responsible aspect of it or whether it's just a regular investment side. You can't just make that investment. You have to be proactive and be involved throughout the whole thing.

I absolutely agree. Final question. We ask this every podcast. We call it the stupid tax because the earlier you are in your investing, it's the dumbest you're ever going to be. And so all of us have made some decisions that cost a lot of money. It could be time, money, friendships, but we've made decisions that we would go back in time and have made differently. Is there something that stands out throughout your real estate career where you're like, man, this was a really high stupid tax to pay? I did because of what I didn't know. I didn't know. I made a set of decisions that cost X or Y. Is there any stories that immediately come to mind?

If I had known better, I probably wouldn't have sold as many properties early on.

Okay. Are any particular properties coming to mind that you should have?

Oh, absolutely. I mean, because one When we first got started, right, you know, we had a very interesting investment start. I mean, and the nice part is we've done well because the only amount of capital I've ever put into investments is $25,000 total. And we reinvested everything back into it. My business partner and I, we started off with $25,000 each on the investment. We've just— what we did was reinvest everything. At the time, we're very young. We didn't have any money. We didn't come from money. We came and realize, you know, we were buying properties and we were flipping homes. You know, we were buying a lot of REO properties, sometimes in bulk, and ending up buying them, flipping them, thinking we're doing well. We saw all the people that we were selling properties to at auctions kind of doing similar things, but we didn't have the capital to hold. Now, if I had taken a little bit more risk on and realized that I could, you know, maybe we should have, instead of buying it to flip, buy it to rent and hold, and then refinance out and take that capital out that way. A little bit more risky, not as fast potentially on growth, but the equity growth that we would've seen, like for instance, you know, I bought a house in Silver Lake that was on the hill, Silver Lake in California, in Los Angeles, which is a very hot market. We bought that house for $60,000. It was an old Victorian, 2-bedroom, 1-bath house, but it was on a like 12,000-square-foot lot, which you don't find in California very often. We ended up putting in about $40,000 into the repairs because we had to redo the foundation and some other stuff, some cosmetic stuff, and update a couple, the wiring and things like that. We put about $40,000 in repairs and we turned around, we flipped it for $170,000. Decent return, all within 6 months. Now, if I had held onto it for 2 years longer, I would've sold it for $500,000. If I had held onto it for 5 years, it would've been about 5, 6 years, about $1 million. If I had it right now, it's over $3 million.

Oh yeah.

Oh yeah. You know, it, it's so holding onto that, that equity play, we weren't looking at it. Part of it was necessity, but also, you know, patience, I think. And, you know, patience is something that when you're younger, you don't learn how important it can be. And you know, I think that's the lesson that that taught a little bit, that you don't have to rush into doing something so quickly. And also sometimes the best deal that you have are the ones that you pass up.

Oh my gosh. Yes, that is, I, that was, I've shared this so many times on the podcast, I won't go into it, but the biggest stupid tax that I paid was that we were buying so much multifamily. And when I start, I start with no money in my 20s. It was all creative finance. So like the first 17 deals were multifamily seller finance, low down, small capital raises. I mean, that's, that's how we got started. There's a resort that came up, $4.5 million. I had no idea how to underwrite it. We just thought, me and my business partner at the time, all of the deals worked. I had 17 deals. A couple of them are home runs. A few of them just worked, but like I did 17 successful multifamily transactions that were all cash flowing, all making money. And we went, we're good at creative finance real estate, which has nothing to do with running a resort that is way too broad. I made decisions where I had to spend the next 3 years earning my way through paying it down to— you mentioned this at the very beginning, you do not want to over-lever, and if you do, you have to delever it. That is the way to solve too much leverage. Have less debt. I spent 3 years taking all of my proceeds, rolling down that debt to get our DSCR into a place where the— I basically paid until it was a good investment again. That was the way out on overpaying for a deal. One deal after 2 years of success, one deal cost me 3 years of of successful business decisions just to pay for the one bad decision. Yeah. One out of 18 deals cost that happened to be the biggest deal I'd ever done. So many reasons not to do that. Don't change business model. Don't, when you do it, don't do it for $4.5 million. Yep. When you're in your 20s, just not a good idea. That biggest stupid tax, but ties right into that. It's the deals you don't do that saves so much money. And then when you buy and they make money, the longer you hold them, the better they will do. Like if you have something that is making money, unless again, as you said earlier, unless you have something to trade it to right now that makes more money, don't get rid of it. You do not need to cash out. You get paid to hold. You don't need the sports car. You don't need the superhouse. Exactly. You hold this, you just need time. Give it time.

You'll never regret it. Absolutely.

Awesome, dude. I loved having you on the pod. If people have more questions for you, if people want to follow more of the awesome adventure that you've been on, where do people find you online?

Online? I do. I have a fairly decent LinkedIn profile that they can reach out to, or they can always reach out. Just, I mean, I get a lot of direct reachouts. I'm happy to talk to anybody, just give advice and help out because I think you have to give back from, you know, I was the one thing I didn't have was a good, oh, actually one thing I did have early on in the business side was good mentors, but not necessarily in the investment side. So I don't mind giving advice out to people. And so they can always reach out directly to me on email, gpino@cbicommercial.com.

There we go. Well, thank you so much for joining. There'll be a link to that below in the show notes. Everyone, thanks for watching. And again, this is the owner meeting. If you don't have time to go and go meet all the owners, we do it here for you. Absolutely. Follow the podcast. We're gonna have a whole bunch of more awesome guests on, but this has been an absolutely amazing experience. Thank you so much for your time. Everyone else, we'll see you on the next episode.