Live owner meeting with LA MEGA Real Estate Investor - Brenton Hanes

Hey YouTube, this is Cody and I'm here today with a friend who I met for the very first time, Brenton Haynes, based out of Colorado. Welcome to the channel. Could you share a little bit about who you are and what you've done?

Sure. As Cody said, I'm Brenton Haynes. I'm out here in, in the Front Range of Colorado, Denver area. I actually grew up in Los Angeles and grew up with a very strong investment background in real estate and a family that has grown a substantial portfolio in the Los Angeles area. Currently we own and operate about 900 multifamily units.

That, that's phenomenal. And so that's been through 2 generations now. How long have you guys been investing for?

So my family's been investing in commercial real estate for, I want to say, 60, 65 years now. Okay. Yeah.

And what's your general approach on scaling? Did you start with Did you do the Dave Ramsey model and pay cash? And how'd that go?

Yeah, so we structured a lot with debt. And back when we started, I mean, gosh, I mean, you could get into multifamily almost no money down, 10% down. You know, this is back before I was born. You know, I was born in '73. And, you know, my dad started the business and ran a large commercial brokerage and slowly scaled over time as he learned the business. And then now we focus primarily on like Class C value-add 100+ units. Yeah, in the LA market.

And you're a real estate agent. How important has that been for growing your portfolio?

Well, I think it's really important because you're on the front grounds every day, right? So as I'm looking for client, you know, property for clients, I don't compete with my clients. A lot of times I'm just in a different area or a different avenue and looking for different returns.

Yeah.

Um, But yeah, I think it's really helped relationship-wise, finding deals, understanding deals. I analyze deals almost daily. So yeah, it helps immensely and just, it adds a different layer to just investing overall, I think.

If someone's trying to get started today, you know, LA is pretty expensive.

It is expensive.

I mean, the returns you're getting are phenomenal as far as cash flow, but You know, you got so much equity over there. Would it make sense for someone to start buying there, or should they look elsewhere?

You know, I, I'm a fan of buying in the markets that you know. Yeah, it doesn't matter where you're at. People are making money in almost every market, but it's, it's, it really depends on your goals, what you want the property to do, and what the end game is. Now, if I don't have anything out of state per se, because I was born and raised in California, it was more of a recent transplant to Colorado, So I don't have any assets here. I'm not against it, but the machine that we have is in California, and that's the market we know, family's in it, and we probably won't leave that market either.

So you mentioned endgame. I'm sure that's changed over time. What was the original goal?

The original goal, right, is to build passive monthly income. And then as you build the monthly income up, you realize that you're actually building generational wealth. And then so that kind of changes in. So just now is positioning into second generation, but we're already planning for the third generation and putting guidelines and structure in place of how much we're going to leverage the portfolio, what the expectations are, and try and look and forecast for that as, as we look at the third generation taking over, which would be my son.

Yeah, so some people hate on second and third generation without realizing how hard it is to actually pass that on. What do you recommend for folks that are building it? Because a lot of people are building it for the first time, but they may know how to build it, but they don't know how to pass it on.

Right, so, you know, as the generations go on, the wealth begins to accumulate like a snowball. Cash flows increase dramatically. Some of the properties we've owned for 50 years. And I think the oldest property that we have that's still in the portfolio, about 1970, right? And they cash flow like crazy, become banks. We were able to leverage them to other assets, and some of them are just flat out paid off and paid off by tenants. So it is tricky, right? So second generation is known for screwing things up. And third generation's even known for screwing that up even more if it even gets there without getting too screwed up. So it's really having a level head as you build the wealth, realizing like, look, wealth doesn't make you a better person, but it creates the opportunity. It's having the eye for the opportunity. Doors will open more for me because of the portfolio and the opportunities and the people I'm around than it ever would have in the beginning. So it's recognizing those opportunities and using those to springboard into other opportunities to get you where you want to go financially and in the investment world and building your portfolio. So remember, you're never a better person because of money. Money just gives you opportunity.

Yeah. And then our last question, you mentioned earlier that you don't like to go over 50%. That's your hard cutoff for loan-to-value, right?

Exactly right. Not leveraging more than 50%.

Well, what are your thoughts on my strategy for someone— they could be in their 30s, 40s, 50s even, but they're trying to get their portfolio started. What are your thoughts on the the high leverage seller finance.

Right. So you're in a totally different spot, right? You're young, you have time to recover if you make those more catastrophic mistakes and learn from that, right? So a lot of this business is learning from your mistakes. That's our education as we go along. And so you're— you are paying for education in those mistakes, right? And sometimes you pay dearly and sometimes you don't. You know, for me in that portfolio, we have such a machine going on, we want to preserve it more. So we take a more conservative approach, and the cash flow is already there, so we don't need to get super aggressive. We're not looking for quick growth, we're looking for the right growth, and it could take us 5 years to find a deal.

Yeah, but if you were your age and you didn't have the portfolio, because I mean, you've been building this for a long time, right? If you were in your 40s, 50s, and you were starting out, would you look at the leverage piece a little different?

I definitely would look at the leverage piece a lot. Even advise my clients differently, right? Everyone's risk tolerance is different in this business. So it's understanding risk and mitigating risk. And so every deal has its different risk. If two 10-unit buildings could have two different risks involved depending on location, condition, and acquisition costs. Yeah. So you really have to understand your risk even in a low-leverage portfolio because It's got a cash flow. Yeah, it's got to make— you're in this business to make money. If it doesn't make— we're not running a charity, we don't provide free housing. That's not what our business model is. There's nothing against that, it's just that's not what we're structured to do, right? We're not a nonprofit, so it has to make money and the deal has to make sense. Everyone's risk tolerance is different. I advise my clients that are my age that are looking into it You have to put in the energy and the effort and time, and it's going to take a lot more energy in the beginning, and you're going to take a lot more risk.

Well, that brings up one more question, actually, that I didn't think about. There's a lot of people trying to buy in the Midwest just for cash flow, and I mean, you've amassed not only a bunch of units but a large dollar figure behind your portfolio, right? There's a lot of people that just want to buy for cash flow. Why is that right or wrong? Or, I mean, sure, I think that holds you back.

What people don't really talk about is the 4 returns of real estate. Right? There's 4 returns. Cash flow is one of them, uh, appreciation is one of them, equity buildup— so that's your tenants paying your loan down. They're nice people, right? And they're really good people. And in tax shelter, right? So it's, it's really trying to find that balance of all 4. If you're fixated on cash flow, you're going to make the money, but if you hold that property, like let's say in the Midwest, you buy it for $100 grand and 10 years sell for $110, you're missing out on a tremendous wealth-building opportunity, which is appreciation. And that's one thing that's always great about the LA market is the appreciation's always been there. Colorado is great with appreciation. There's, there's other markets with that. There's— we just don't dive into all the different markets because we're laser-focused. I think this— what people get lost in is the laser focus. You need to know, eat, breathe, sleep your market. I don't know the Houston market because I'm not in it. Owning one property isn't going to make me understand that market. I need to be in it. I need to drive it. I want stuff in my own backyard. I go to LA all the time, right? And I have family that drives it. We know all the properties there. We know all the owners. It's relationship business. We know when to strike and get that deal.

That's awesome.

So that to me, I think, is what's missing in a lot of these segments of what people are talking about. They chase the cash. Yeah, cash is great, but here at the end of the day, if you give most people $1 million, they're going to blow it. So if you get $1 million in cash flow, you're— nobody's going to know what to do with it. Yeah, right. And but if you had $1 million in appreciation that you could 1031, it's a little bit more disciplined, right? Yeah.

Well, do you have anything else you want to share with the YouTube and the Facebook?

I would say keep plugging away, keep at it. This is, this is not an easy business. But it's not a hard business either. You just gotta understand it, understand the language that's used, and just remember the arithmetic is third grade. Don't get lost in the fancy analysis of property. At the end of the day, it's simple arithmetic. We are cost-per-unit buyers 'cause we know what a cost per unit will go with a certain unit mix and we know what rents we can obtain, period. We don't care cap rate, we don't care DRM, We don't care about a lot of that stuff. We look at it, but we weigh more on cost per unit, which is against the norm of most investors.

I got a lot of hate on BiggerPockets from saying I don't really care about the cap rate.

So yeah, everyone's focused on cap rates, and that's the big thing out there, and they think that they're savvy when they talk about cap rates. And it is an important indicator, don't get me wrong, but it's not the only indicator, and it may not be the heaviest weighted indicator for us because we just know that market.. But if you're dancing around other markets, you're going to rely more on cap rates because you don't understand the market. It's a good indicator. It's not the only one.

Well, I appreciate you hopping on the channel today.

I appreciate you coming out all the way out to Colorado to quote unquote have some coffee.

By the way, guys and gals, this was originally supposed to be a coffee meeting and he had a party, so he said you're not flying all the way for coffee. Come to the party.

Come to the party. So I live on 42 acres in Colorado. Big ranch party. I don't know, we had about 100 people here. And we do redneck style, hang out in the garage and get some tacos and just hang out. Yeah.

And what I share with everyone here is that it takes one phone call to build these relationships. We met online on Facebook a couple years ago when I had 24 apartments, stayed in touch, and here we are meeting and I get to go learn from him. Yep. And so it is that simple.

And we had like 750 units and we added like another 120.

Yeah, it's phenomenal.

Which, which we got essentially for free. Yeah, all our money back. We didn't— we had no money out. I'll say we had no money out of pocket on that deal.

BRRRR deals are a lot easier on bigger deals. Everyone wants to start with BRRRR. It's like, go get some big stuff first.

Well, yeah, I mean, there's so many different ways to skin a cat, and, and you can't look at every deal with the same business model too. You gotta, you gotta be able to identify that value add to help increase that rent. Yeah, that's really where it's at. Have it be adding storage, parking, turning over units, something in the common— I mean, there's, there's so many ways to add value to a building.

Yeah, we're doing our first storage deal right now. We're adding storage on the back of multifamily. But, um, yeah, that, that is it for today's YouTube video. So we'll probably do more with Brenton, but, uh, stay tuned and we'll see you guys next time.

Have a good one, guys.

Cool.

Awesome.

That was a good video.