Step By Step Building a Real Estate Empire from Scratch - with Sam Primm

Welcome back to Multifamily Strategy and the Owner Meeting Podcast. I'm Christian Osgood, your channel host today, joined once again by Sam Primp. Good to have you back on the podcast, man.

Excited to be here, my man. Let's rock it.

I am so excited to have you back. We've had some changes to the economy since we last spoke. When we were last speaking, it was about a year ago. Multifamily was still slowing down a little bit. I think we're probably in for about another year to 18 months of pain before it really starts turning around. But You are invested all over real estate. You're in the education space, the single-family space, the multifamily space, the flipping space. You have so much business. I love your channel. I love how much you share and the way that you teach. So it's always a privilege to have you here. What is the business that you have in all of your niches of real estate? I'm curious for this. What has been the most consistent for you in everything that you do? What is the most consistent real estate-related business that you have?

The most consistent real estate and related business we've had over the past 5 years, let's say, is probably our single-family rental space.

Really?

We have really good systems in place, processes. Our tenants stay an average of 4 to 5 years. We have a really good vetting process up front. They don't cash flow a ton per door, right? But we have, you know, like 160, 170 single-family rentals. So that seems to be the most consistent, you know, We BRRRR them, so we buy them, we fix them up. Maintenance is pretty low. We're probably starting to get into some more maintenance as the portfolio matures a little bit. But in general, that's been the most consistent over the past 5 or 6 years. Recently, over the past 12 months, our flipping and wholesaling business has probably been the most consistent. So we have multiple businesses, which is cool, but I think I need them. Maybe it's because I suck as an operator. I need multiple businesses because they're not all going to hit, right? Education, like we talked a little bit earlier before we went on camera, was really good for a while. That's slower. Flipping was a little bit harder. Now it's been consistent. And then we have the singles and the multis kind of in the background and a few other things going on. But yeah, I think right now the one that's popping the most is our flipping and wholesaling company. It's been, it's been kind of saving the bacon for us while our other companies are kind of figuring some things out.

That's awesome. Now, now single family, buying that many single families, that's a heck of a lot of transactions. One thing that I've managed to do in my business is I do about 4 transactions a year because I'm only multifamily. So you move forward, you know, 100 rentals or so a year. That's always been pretty good for me. How does one run the business with that level of consistency? Because you said it was consistent. Single family, that's a lot of individual pops. Do you, does that work in tandem with your flipping and wholesaling business? You buy some, you wholesale some, you flip some, or how does one do that amount of volume and have consistency?

Yeah, it's a great point. I think it's a couple things. One, we bought 42 of them at one time. We bought 28 of them at one time. So bigger chunks. And the other thing is yes, that company does. We have— we did 28 houses, 28 contracts last month. We wholesale about 75% of them, and then we, you know, flip and buy and fix up about 25% of them. So the good ones we just pick off as rentals for us. So it's kind of what you said, we just have this machine. We know how much money and spend. We have a 25-person team between marketing and contract to close and dispo and rehab crew and operations and all of those things in that company. We I call it our diesel locomotive, just kind of cranks and keeps going. So we have that, that is a profit center, that is a good local brand, and we're able to just pick off the properties that make sense as rentals, 2 or 3 a month. That's how it can be consistent because we're buying 20 to 30 a month. We pick off those 2 to 5 a month, let's say, that makes sense and the numbers meet our criteria and we have the crews and the funding to take 'em all down. So it's kind of one of those things that's kind of in the background always running and we're able to slowly, but it adds up, add to our cash flow and equity through picking some of those off.

What does it usually look like when you find an opportunity? Like you said, 42 houses in one shot, and then you did like 20-some-odd houses in one shot. That's very similar to picking up multifamily, right? You, you get one shot and you're like, boom, tons of units. We move forward in a huge step. How do those deals come up versus other deals? Is it all the exact same funnel or how does one find 42 houses at the same time?

Yeah, so I mean, we've been buying single-family houses for 10 years now, so we've only done a couple bigger chunks. I think we did like an 11-unit one, or 11-property one as well. But the 42 one, they usually come from like networking. Like, you know, everybody, lots of people can wholesale or flip or do a single-family rental. Not everybody can buy 42 houses, right? You need funding, you need operations, you need rehab crews set in place, you need to be able to do that. So there's very few people that can do that. So the competition is less, and a hedge fund or somebody big's not going to come in and buy 42 houses at one time. You know, they may come in and, you know, buy a, you know, 100, 200-unit apartment complex, but they're not going to be in this space. So the competition is limited. So when these deals come across, people usually end up finding us because of our brand and, you know, what we've done here locally. And we've seen some, you know, shopped on the MLS through different people trying to sell them. But this was off market. This was a guy who's been buying single-family rentals in one neighborhood for the past 30 years and he's decided to retire and sell them all. And we got a wholesaler, brought us the deal through him, and we, you know, went ahead and did the underwriting and were able to take it down, you know, with the funding. And, you know, we rehabbed a majority of them over a year, year and a half, and were able to kind of execute that whole thing. So it was just kind of a network/reputation/just being able to actually do it that kind of made that one come to fruition.

What did the funding look like to knock that out? I imagine that was a lot of— I imagine it's a lot of due diligence, a lot of paperwork. For all those individual houses, but going through the whole process, what does funding look like to close on 42 houses at the same time?

Yeah, so it was quite the undertaking. We're kind of crazy how we're able to get this deal done. It's kind of a wild story. So the guy who we bought it from, Terry, he was, you know, he owned 42 houses in this neighborhood of about 100. We own 5 or 6 in the neighborhood already. So we're like, yes, we love this area. It's a little bit of a not lower class, but it's like the lower end of like a nice area, a nice town. It was in Wentzville, Missouri, really nice booming town in the suburbs of St. Louis. And this is like the lower class area, but lower class there is still like mid-class and, you know, some rougher areas. So it wasn't bad. And we knew we would like to take it down. He brought us the deal. We talked to him. He wanted $3.5 million for the 42 houses in 2020. And we tried to get it under contract. We couldn't get the funding lined up to do it at the time. And then COVID hit. And then like a year later, he came back to us asking us if we wanted to do, if we could have the funding lined up. And he wanted the same price, but the houses have went up about 20% in value during that time, right? Because that was after the COVID boom. So we're like $3.5 million for 42 houses. Like we need to, you know, $83,000 a house. They're worth $150,000, probably $140,000, $150,000 as is. Like we need to figure this out. So at that time, we had the business that matured a little bit. We had built some more funding relationships. So what we did to fund it was we got a, uh, we got a 20% down payment from a private money lender, one lender. The bank did the other 80%, and then we went to that private lender for the rehab funds. So that's how we took it all down. It was, uh, we, we budgeted $500 grand for the rehabs and spent about $1.5 million. So we're about a million bucks off on our rehab budget, which just Couldn't, we couldn't get in and get a scope of work on every project before we bought it. We were in and out very quickly, taking pictures. So we really couldn't get, figure out how much they needed. And it really didn't matter because they needed way more work than we thought. But also they appraised for like $187,500 a piece after we rehabbed. So there was a few million in equity, but it was a little bit more work than we thought to get there. Obviously a deal that size, first time doing something that big of that magnitude wasn't going to go smoothly and it didn't. But we ended up kind of taking a little bit of a risk, not knowing exactly how much they all needed, but we knew there's a ton of equity to be had there. It just took us a while and another million bucks to get to that equity, but we finally got them.

And that's the great thing about doing great deals, is when you can go through the project, you're like, oh, there's a million dollars of fluff in here, uh, and still come out profitably. You did a darn good deal. That's making the money on the buy.

Yeah, exactly. So we— it's just one of those things where it was the only way to get the deal done. That's why most people wouldn't buy it, because they couldn't get in everything and do a scope of work before. And we were willing to take that risk just because we had the systems in and we've been, you know, I think we've done about 2,000 wholesales and flips now in the past 10, 11 years. And we, you know, at that point we had enough experience, we could, felt like we could take it down.

Well, this is something I found consistently when you're doing vertical integration. So you have wholesaling, flipping, single family, multifamily, you have branding, you have education, you have all these companies that all help feed into each other. If I was a new investor and I'm trying to start this, you have a lot of data, you have a lot of experience now in a decade of operations. To know, hey, I know I can take this deal down. I know what the pieces are going to be. I know that we have to buy it so we can figure it out. If I'm trying to start at the beginning of this, I've found one of the biggest messes people do is they try to copy everything you do all at once. So someone can listen to this and be like, I want to do what Sam does. I want to have a wholesaling, flipping. I want to get my broker's license. I'm going to get my, I'm going to hire VAs. I'm going to hire my team. I'm going to get my callers, my underwriter, and you won't do anything. There's way too much to do. Unraveling the thread here, if you were starting over, which piece of all of these businesses would build first and what sequence would you try to put this company together if you were trying to rebuild it from scratch? What would the starting point be?

So I would do similar what we did, but I'd reverse the order. Originally, 2014, '15, I started investing in real estate with a full-time job trying to replace my income with rentals. And that's really tough to do with the BRRRs when you're cash flowing $300 a door and it's not even responsible to try to live off that revenue. So I'm not very smart. So I did that for about 2 years, just bought as many rentals as I could with a full-time job was up to $20,000 or $25,000. I'm like, there's— I'm cash flowing, you know, $4,000 a month, $6,000 this month, $3,000 this— oh crap, last month we did $2,000 because we had to replace a roof. Like, that's not a responsible way to even— even if there was more to live off of rental income. So I wanted to quit my job and go all in on real estate because I believed in it. So that's when I started wholesaling and flipping. I was hardheaded, like, I'm going to replace my income with rentals when in reality you need to replace your income with active income, which is flipping and wholesaling. So what I would tell most people to do is figure out your, your, your cash position, where you're looking and what your goals are. And figuring out how to source deals is the number one strategy that can separate you. You can keep 'em as rentals, you can wholesale 'em without closing, you can close on 'em and wholesale 'em and whole tail 'em, or you can flip 'em. So I would have focused on replacing my W-2 income quicker because when I went full-time in '18, we acquired 95% of our portfolio since then. So if I could have gone full-time in '16, how much further would I have been? But I should have got into the active income game first, not even necessarily to quit my job, but just to have that active income. So that's something I would have done a little bit differently. And then I would have focused more on— there's two things you need to make this work. You need deals, you need funding. You don't need to be an expert at understanding cap rates or understanding where, you know, storage facilities versus Airbnbs versus boutique hotels. You can figure out the lanes, but you need to find deals and you need to find funding. So I would have focused first on deal finding, active income, and then focused on getting as many funding sources as I could. And that's what I tell my community. I mean, that, that's what I would tell anybody out here wanting to start from scratch is understand the art of finding the deal and gain the skillset, the connections to raise the funds to be able to not have funding be a reason why you can't close on a good deal.

I think you said something very profound here that I really want everyone to hear. You need to find the deals and find the funding. The deal comes first. I've always looked at this like trying to sell a car or if you want to keep it even simpler, like trying to make a deal on buying a watch or something nominal. If you have no product, you have nothing to pitch. This is something where people always come to me, and I imagine this is what most people come to Sam too. I don't have the money to go full-time. You need the deal first. You have to have something to pitch, something to present. If you come in with a business idea, if Sam came in with, hey, I have no houses, I have no money, I'm a W-2, I have my income, and that's, that's where I'm at. Or I've done my first 25 houses. I'm going to have this awesome deal come up. I want you to invest in it. What's the cash flow? I don't know yet, but a lot of deals kind of look like this. How much do I need to put down? We'll find out when I find the deal. Really hard to pitch. If I was trying to buy a car, how many miles does it have on it? I don't know yet. What does it cost? It'll be a good deal, right? It's impossible. You find the deal, then the next thing you do is you're like, okay, now we have a deal. We have something to present. I have a certain amount of cash flow, a certain amount of upside. Those are two things that I can offer anyone. To invest in this deal if I don't have the money myself. You do need both pieces. If you're looking for one, start with the deal. Now you can start building your business out of the deal flow. Find a way to find money. What I found for me, I'm curious if this is the same for you, when you are finding the money for the deals, oftentimes it's the same people I'm networking with for deals are the ones who have the money. The tasks overlap a ton, especially on the off-market stuff. People with real estate know people with real estate. That's been my experience. How are you primarily sourcing deals and capital?

Yeah, for sure. I'll piggyback off what you said, then get to that. Yeah. If you have a good deal, the money will come because you'll be able to show the true numbers. And if you have a good deal, for whatever reason the money doesn't come, there's still a monetizable aspect to that to wholesale it and get rid of it and still make a little bit of money. So getting that deal first is a huge part of it because if it's a good enough deal, you'll be able to find the money. And then as far as how we're sourcing, so depending on the asset class, you know, single families, we're sourcing through networking and through, you know, paid advertising, direct mail, mail, some TV, a lot of omnichannel stuff, Facebook ads, those kind of things. Just general marketing and just networking with agents and other wholesalers that deal source those. For our multifamilies, which it sounds like you've been doing good, you've been buying a few recently, we have not been buying. It's been probably a year and a half or 2 years since we bought one. But our multifamily, we've done that through relationships. Uh, we sent out mail one time and got a decent amount of leads. That was several years ago before we really knew what we were doing. But the multifamilies we bought have come through relationships and through, you know, multifamily brokers that are, you know, bringing us their deal because they know it's in the area before they shop into their list. So just relationship has, has been the biggest way you've been able to get the multis across the table.

And the multifamily is interesting. That's the lane that I've, I've stuck in primarily. Every time I've deviated from that, it's always bit me in the butt. I have a cool hospitality project that's doing pretty well, but it's a huge distraction from the rest of my business. It doesn't— I thought it integrated better than it does. Turns out hospitality is a business that involves real estate. It's not real estate that involves a bit. It was a, that was a learning lesson for Christian. When you're building these though, I think there's going to be a lot of multifamily and I'm just starting to see it like this is the last 3 months has really been the time I'm starting to see it. Multifamily's had a slowdown. I don't know if you're seeing this, but projects are taking longer. Rents aren't increasing as fast as a lot of people thought they did, especially the syndicators and quadruply so for the syndicators who use variable rate debt. We're just hitting the point right now where the banks are not extending, they're out of capital. There are some deals that are starting to hit the market and I'm just starting to buy these now where there's been enough pain for enough time and the interest rates aren't backing off. I think some of our multifamily opportunities we're going to start seeing are going to stem out of this slowdown and restart of multifamily. Have you been seeing that in your portfolio too for multi versus single family? Have you felt the drag in multifamily that I've been feeling the last 18 or so months?

Yeah, I think the drag has been, we talked about a little bit, our occupancy hasn't quite been where we want it to be, which is operational and maybe somewhat environmental. And then The interest or the rental rates haven't gone quite where we want just because affordability, nobody could predict all this inflation, all this insurance going up, all this taxes going up and the squeeze on the tenants as well as the operator. So the rental rate has not gone up as much as we thought. And then the ancillary expenses, property tax, insurance have gone up. So it's just squeezing us on the back end and we're able to make it work. Again, you know, rather than a 3-year refinance, we're going to have to do a 5, maybe 6-year refinance. So we're able to make it work because it's real estate and it's flexible and it's adaptable, which is one of the benefits of it. But I think you hit a great point was all these syndicators came in, they were getting paid to put the deal together. They had money behind them through funds, connections, family offices. It was a hot market. So they were overspending, overbuying to get that fees, to get their $200 grand for putting the deal together. And in reality, some of this money didn't do the proper underwriting or trust the syndicate too much. And a lot of those are in big trouble right now. A lot of those people that bought those, those syndicators that bought those deals, whether it was an LP or just a syndicator, brought it together. And I think a lot of those are going to start to start to trickle out there and be deals for, for people like me and you that are ready to bounce on them.

Yeah, I just got a— we just got an offer accepted yesterday for the largest deal I've ever done or will have ever done. We still have to, of course, close it, which is a whole nother process. But 144-unit building, we're picking it up for about $1.5 million less than the syndicator bought it for 4 years ago.

Good for you. And then yes, that's my point. They're all, they're getting squeezed because part of it was greed and part of it was, I don't think anybody saw some of these external factors I talked about, but a lot of it was just people being greedy.

Yeah. Buying today, having both of us have gone through this, hey, we were playing when real estate was just red hot. Awesome for extended period of time. We've also played the game through a significant slowdown, a major rate increase. What guardrails are you putting on the way that you're buying deals to weather slowdowns like this? Is it just longer-term debt? What is the, what are the parameters that one would look like knowing what market cycles can feel like? How do you protect against that in your portfolio?

So there's a couple different things. Number one, we're extremely selective in what we buy. We've been, I've seen more properties that are close to penciling out in the past 6 months than I've seen in the past 2 years probably. So we've been very close on a couple properties. We're just not budging. And it's probably a little bit gun-shy from the few that we bought that aren't quite penciling out and are getting extended. So if I'm buying, it's a deal right now. So I know what a deal looks like now. I know that maybe let's not run this thing at 95% occupancy. Let's underwrite this thing at 92% because maybe that's more realistic and maybe, you know, that if we get this, that hasn't been sold a while, the property taxes are going to go up. So those types of things we're being extremely conservative with. But on the other side of the thing, of the coin that's really kind of helped us is in '21, right before rates went up, we did a major refinance of a majority of my portfolio. Singles and multis were able to get at 30 years under 4% at 10-year fixed. So we got fixed for a while. So we're able just to really take advantage of some of that, that cheap big debt that was able to allow us to be able to, you know, cash flow more and be able to, you know, be able to not have as much of a payment. And then also we got a decent amount of equity. We got a few houses last year that we refinanced and pulled out some money, and we're doing another refinance now. We're paying off some houses to try to increase cash flow. So when you get to a certain point, as you're looking at like, how can you take advantage of your equity? You got $20, $30 million in equity. It can sit there, that's great. But if you're able to tap into it to pay off other assets, to pull line of credits on, to just— they're just— it's a kind of a little bit different of a ball game. I feel like it's when you're growing, you're like playing checkers, and when you get a certain amount, you're playing chess. And now we're like— and it's good and bad— we're like trying to play 3D chess. Like, got all these different pieces. Look at return on equity. I never, never thought that that was the metric. It is. You have your equity, how much are you getting return on it? So those types of things that we're looking at as we're trying to grow and actual professionals and have big boy businesses.

I love it. I love it. You mentioned something earlier that I just kind of put a pin in. You had mentioned like, hey, some of the projects took longer than we wanted to. We talked off screen a little bit. A lot of the way that you're buying this is, you know, you'll have a specific lender and you'll refinance and essentially the big boy version of the BRRRR method where you're going to be investor capital, bring it in, send it back with a return. You had mentioned real estate can be flexible and terms can be flexible. That's really interesting because I think a lot of what we see on real estate is people are like, hey, it's illiquid, it's slow, it's rigid. You had mentioned there's a certain level of flexibility with the way that you're able to play with the deals, the contracts. When you have a market shift like this, what sort of flexibility do you have in real estate after you purchase a property? How do you get flexible and how do you get creative?

Yeah, so a couple things. One is we, when we bought those multifamilies, I think we talked last time, we bought, you know, 3 multifamilies in like a 12, 15-month period. Nothing crazy, a 32-unit, a 29-unit, 27-unit, good, good high-quality B+, A- asset class. So some good, some good assets, but we had those with a 1-year, 2-year, 3-year, 4-year, 5-year, and 6-year buyout to, we're able to get to just, it's a mathematical equation. We just have to get the equity to a certain point where we can pull it out and, and give it back to the, the private lenders that gave us the money for the, for the down payment. So there's some flexibility built there. We were like, all right, this is going to be 2, maybe 3 years, but we built in some flexibility with it being— we're on year 4 now. It's probably going to be year 5 or 6 before we're able to get it. So build in some flexibility on your terms with who you're doing business with, but then some flexibility in that, all right, we want to— maybe we paid off a private lender that was on one of our apartment or one of our self-storage facilities. We refinanced some houses from this asset class, pulled out some cash, did a couple of things with it, and then were able to pay off the private lender the $200 grand that they gave us for the self-storage facility. And now they're done with that. They're off of it. We're not having to pay them, you know, whatever it was, 8, 9% prep interest on it. We're able to cash flow more by utilizing other asset classes. So that's where you can be flexible is when there's equity there. And then also I think you can set yourself up with some flexibility on the front end with the terms that you go into contract with whoever you're doing business with.

And I think a lot of investors, if you're big into intermediate, you've probably heard of pref equity, especially if you're using partnerships at any point. This comes into play for preferred returns. On preferred interest, what does that look like with a private lender?

So how we've done our deals, and they've all been different, and probably none of them have been perfect, but what we've done is depending on if the deal is heavy cash flow right now, heavy cash flow later, we're like, we're going to get you to that 12 to 13% return on your money, there's a couple of different ways we can do it. We can give you 5% interest now on your money. So you're going to annualize 5% return on your money. And then you want to get that 12%. When we pull out, when we refinance and we pull out some equity, we'll give you your money back plus a 7% kicker annualized. There's a math formula, but it gives you that 12% annualized return. That's how we look at it. And one deal we did at 8%,, you know, their interest they're getting and then just a 3 or 4% kicker on the back end. So depending on the deal, we're able to kind of be flexible with those terms. And they're private lenders that we've done, you know, single-family flips with. We've done, we've done other deals with that. They're just wanting to put some of their money into long-term play and get, you know, a quarterly check. We pay 'em quarterly as opposed to, you know, in and out on flips. So that's just how we do it. You're, you're the multifamily expert, not me. So the terms and the terminology, but that's just how we approached it, the hybrid model to make it work on our end and not have to give up a ton of or any equity or give up any ownership. It all goes through us. They're just getting, getting the return. And at the end of the day, in 2, 3, 4, 5, 6, 7 years, whatever it is, they're going to get their annualized overall 12% return.

It's very, very similar actually to how I built my multifamily portfolio. The only difference is the same. It's the same. Ultimately, it's pretty much the same. It's a different way of writing it instead of debt. We brought on equity partners with a buyout option, but it looks functionally the same. They have a certain return called a preferred return that they get at the cash flow distributions of the property, and there's a kicker that they get on the buyout. And a higher cash flow deal, they can get higher cash flow. On a higher upside deal, they can get a bigger kicker, but same, same. They exit the deal at the end. It's basically equity structured like debt. The same, it's functionally the same structure.

That makes sense. Yeah.

Yep. It does. They accomplish the same things. The only differences that I can think of is in debt, it's an obligation versus an option, which in mine is an option with a penalty not to. So there's maybe a little bit more flexibility with equity. On the other hand, Sam gets 100% of all the benefits of being the owner, which means if you're running a cost segregation study, if you're getting all of this other stuff, Sam has some extra benefits and that extra debt can have its own write-offs depending on your CPA. Won't give you guys all the tax advice there, but Sam has some benefits for being 100% owner and has an obligation to pay because it's a note. I have an option to pay, but I don't have all the same benefits of being 100% owner through the life of the deal. Both of us are doing a cash-out refi at the end to hit our kicker. It functionally is a very, very, very similar model to what we're doing. And the nice thing is you can do either option. So when you're building these, this is the type, these are the tidbits I love on a podcast, by the way. If you guys are like, hey, Christian's doing the owner meeting for me. That's why we do this. This is, these are two different, very similar paths, but there is a right or better model for what you want to do. Making the little decision of, do I want to structure this as debt or equity? If I can functionally make the payments the same, how do I want to do it on my projects? And what are the advantages of both? Sam, that's awesome. Actually, that's, that was one of my personal favorite takeaways from this podcast. I'm going to go back and think on every deal I've done and kind of which ones would've been better. In Sam's structure of the same payments than mine? I think there's a few.

Yeah, I think it just depends on the situation and how big, like you hit on it perfectly. So obviously you're an expert in the spaces. Some of my other businesses are pretty, pretty profit-driven and pretty, so we're able to not pay any money in taxes the last 3 years because of things like being able to do a cost seg on an apartment complex. So having a little bit more risk, like you said, being, you know, it's a not, we have to pay it. But I trust myself and trust the business and trust everything that I'm able to. I'd like to not give money to an inefficient government as much as possible.

So I feel the exact same. And I've found every time I save a couple hundred thousand dollars on taxes, that's a couple hundred thousand that I can do buying a deal without using any partners or debt. When I come in and have my own money, I invest it. And when I'm out of money, we continue to invest, bring more people along for the ride. That is my favorite way to play the game. You are an educator and I love your content. For those who haven't followed him yet, do that immediately. Sam Faster Freedom on Instagram. I love well-structured content. You've done a great job of what I call edutainment. It is entertaining, it is catchy, it is easy to absorb. My favorite thing about your content is it's easy to remember. The way that you drop tidbits sticks in your head. So, you know, a week later you're like, God, I remember that video. That's something I want to apply to my business. As an educator, I always ask this question to everyone who educates. Is there one piece of advice, one mentor, one moment in your career that was defining? And I'll buy you a second to think of it if you, if you don't have one to the top of your head. I had one with a man named Zach Lazo. He's in Seattle. He's involved in Compass Real Estate. They acquired his company right after I met him here. I was a broker. And we sat down and I was like, hey, I'm trying to figure out this active income that Sam talked about in real estate. I'm like, I'm making some money buying rentals, but I want to go full-time and I need to figure out the income piece. I sat down with him. I'm like, how do you feel about me coming to work for your brokerage? And he is like, it seems like you figured out deals. I don't think you should become a broker. I think you should figure out how to monetize and build your business around the things that you are doing. And he taught me just a couple tidbits in a 30-minute coffee meeting on Don't go get another job. There's a way to do this working for yourself. And it could be wholesaling, it could be flipping, it could be doing deals that are so good that you can do an assignment fee or an acquisition fee, buying it in your own LLC. There's so many ways to monetize buying. But that moment where he said, you can't, you do enough volume and you have enough access to deals, you don't need to work for anyone. Figure out how to build an active job in your passive business. That changed my life. That was a piece of advice I got early that I wish I got 8 years before when I was trying to save up for real estate. Sam, was there a pivotal moment, a meeting over coffee, a phone call with a mentor? Was there one thing that was like, wow, this happened and it changed the whole trajectory of my business?

Yeah, great question. And there was a moment. It's a different angle, but it was a pivotal moment for sure. Everything I do is with a business partner. His name is Lucas. We own everything 50/50, no outside partners, none of that. It's just me and him. All of our businesses, he operates a few, I operate a few. We divide and conquer. I haven't been to a flipping meeting in 2 years. He hasn't been to an education meeting in 2 years. So we're able to each grow our own businesses, have our own identity, our own mini cultures within the, within the, the bigger culture that we've been able to build. But right as we got the ball rolling, so we started in '14, '15 timeframe. Time, you know, by end of '16, we had probably 35, 40 rentals, maybe started looking at flipping and wholesaling. We're doing some pretty cool things, especially never thinking I would do this. I always thought I'd be a W-2 employee my whole life, like, you know, a lot of people are taught. So there was a point where Luke and I were like, I think we want to do something really cool with this. Do we do this on our own, build it on our own, and start to look for people? Or do we, Do we go with our network? Do we hire and bring on team members that are our friends, our family? Everybody says don't mix friends and family with business. Should we do that, or should we bring up the people we love the most because we think we're going someplace cool? And we decided to do the latter. We decided to bring our friends and our family with us. And it was a huge moment for us because we just tapped on our network. Now, it's created a few interesting situations, but overall, our culture is so amazing because 22 of our 55 employees boys, people I went to high school with, kindergarten with, guys I got in bar fights with in college. Like the loyalty is there and it's palpable. And everybody coming in through our hiring process we don't know is able to be indoctrinated pretty quick with it. 'Cause yeah, my friend Andrew's kind of an idiot, but guess what? He would run through a wall with me 'cause I've known him since we were 6. So that was a very pivotal moment for us not really knowing. We're like, yeah, let's do it with our friends and family. We thought about it a little bit, but not knowing the potential repercussions of that. And we've had really good friends that just had it worked out and we've done it the right way and, and, you know, either moved positions in the company or just, you know, helped them find a new job and not fired them around the spot because they weren't performing. So it's created a couple different obstacles, but overall I feel like we're 10 times further, further along than we would be trying to grow 50 employees that we didn't know from Adam before we hired him.

Oh, that is, that is a good piece of advice. It, it's fun. How these things start to scale. Like you, you get this lesson, you learn the skill and it's like, wow, look at what my company became today because of that. Mm-hmm. On the flip side, found it's always easier to save people money by making mistakes for them as opposed to, uh, as opposed to all the cool things that we do right, which you should absolutely replicate. What are the things that went wrong? Is there a decision you made in the last 10 years that you can share? I have like 10 that I can share and one that I legally can't share, but the, is there a decision decision that you made that was really costly? It could be emotional, it could be a loss of time, it could be just a straight up, this decision cost me $2 million. Was there a decision that you would make in your bi— that you made in your business that you could go back in time that you would definitely make differently? And what was that, what was that decision?

Yeah, there's two that come to mind that were like bigger decisions. So one of 'em was our education company, to not give too much details that people may or may not care about. We were doing really well there for a couple years. We had an outsourced sales company that was selling the coaching coaching program. We were selling 50 to 100 a month, and the price was, at the time, was $5,000 to $7,000. So you can do the math. It was a very, very profitable business. Very lucrative. We were doing really good. The sales team was selling a lot, and we were, you know, starting to see some cracks of, hey, they're overpromising. They're not, you know, part of our culture. They're outsourced. They're doing anything they can to get a sale. So we, to protect the brand, we let them go. And try to start an in-house sales team. And that cost a little over a million bucks because we went from netting a few hundred grand a month to having expenses, having marketing, we still having to pay the sales team on their things that they, you know, just so we fired them, we had to pay them for the, the money that they're bringing in to losing a few hundred grand a month for a few months in a row and not even including the upside. So it costs us between $1 and $1.5 million. A snap decision, not either talking to them to say quit it out or stop it, or hiring a team on the side and slowly feeding them leads and then doing the, doing the firing. So that was definitely something that kind of derailed the education business. And we're doing better now, but honestly, it, the market's down a little bit, but we haven't fully recovered from that. And the other decision that I made that probably wouldn't have made was, um, this was back in '21, '22, '23, I'm sure it was similar to you when it was red hot. I felt like everything seemed like everything I did was like working out and I was like, man, I'm a hell of an entrepreneur, right? I buy this, it goes up in value. I buy this 12-unit apartment for $680 grand, get a private lender down payment. 2.5 years later, it's worth $1.2 million and it doubled in value and I'm so good and it appraised for that and I paid them back and thus the multifamilies were rolling in. So we got sent a, a boutique hotel, like a 20-unit hotel down in Branson, Missouri, which is like a little resort town in the Midwest. It's actually not that little. It's pretty good size and it's about 4 or 5 hours from our office. Everything we own is within an hour of our office. But we're like, hey, we're invincible, right? Everything we do works. So let's go ahead and buy this. We can buy for $850 grand. It appraised for as-is for $1.9 million. So let's go do this thing. There's so much in this deal. We want our team to look at it with us. Let's just take a private jet down there because it'll save us time. Fly down there on the jet, fly back on the jet back in a day. So we did that, went and looked at it, got pitched from the contractors because it needed work, got pitched from property management companies. We met with 2 or 3 contractors, 2 or 3 property management companies. We went down there like, all right, let's do this deal. We did it, raised the funds, bought the property. I mean, in general, Airbnbs, you know, we run an Airbnb, the boutique hotel is just, you know, nightly or, you know, a couple days or a week. It's in a really good spot, really good location right down south of Silver Dollar City. But that thing has yet to perform. We were banking on 80% occupancy in the summer. We're getting 50%. And that thing in the winter when it's not rents bleeds about $20,000 a month. In the summer when it is renting, we're making a little bit of money. But overall, I would guess we're cash flow negative, like maybe $250,000, $300,000 in the past, probably 18, 24 months on that thing. We got a new company taking over, trying to kind of cobble it together and just exit. And I'll exit losing $200,000, $300,000 just to get out of the damn thing so I don't lose $20,000 a month on it. So that was just something to where it's like you talked a little bit, it's a hospitality business. We're not hospitality experts. We're incredible at single families. We're okay at multifamilies. Self-storage decent, but this Airbnb hospitality thing we suck at and it's 4 hours away. So I think it was just some ego built into it, some timing built into it, and then just honestly not the best property managers to try to get that thing filled. So it was, it looked like it was going to net us $50 grand a month and we're losing, you know, $20 grand a month on it. So that's inaccurate underwriting if I've ever seen one.

If it makes you feel any better, I did the same thing, but I spent $4.5 million on mine.

I feel great now. I better make you feel better. I don't want you to screw up too.

If you make it now, I like you. I believe that it is fixable. The mistake that we made, and this is actually, I want to build on this lesson. This is not Christian's podcast. This is Sam's podcast for today, but this story is so valuable. This, I have 3 property neighbors who have similar resorts that are doing quite well. There is a way to do this thing excellently. I built With a completely multifamily team because same exact reason. We're good at multifamily. We did good in our property management company. Everything is good. We're good at real estate. It's not real estate. It's not multifamily. It is a business with employees and overhead. What happened? I had 4 partners. 3 of them ditched me. One of them asked to be bought out, which we said no, because it's not performing. You can sign over your equity. Which in retrospect, I should've just let him keep it. I had one partner who was going to live on site who decided not to live on site shortly after we closed. And it ended up, mine was an hour and a half from my house. Then I moved to Dallas, Texas. Now it's, I don't know how many miles that is, like 1,500 miles. That's the best guess. It's a long commute to get there. I hired a manager who owned a bunch of boutique hotels that run really well in Dallas. They lost us Airbnb Superhost almost instantly. They screwed up our booking site and somehow, I don't know how they did this, they got our phone number deactivated and we lost our phone number. So I had to like, we get calls, whoever bought that phone number texts us sometimes. Like we're still getting calls for people who wanna book, lost the whole lead. It was a disaster. I finally, 3 years later, built the team and the employees and the staff where it's finally ripping money.

There you go.

Well, that's good. I probably threw $1.5 million into it. To get it to finally start working. That is expensive. If you buy for $4.5 million to toss an extra $1.5 million, we call that the super stupid tax. It works now. The cost to get it to work was so much time, money, stress. I could have just bought another 500 multifamily units in the same time that I just took all that time and energy into a business that wasn't mine. That is, it feels good to have one other person who's felt the same pain.

Well, yeah.

Well, I'm 2 years in. I have one for you.

Yeah. Mine's not turned around yet. So you're ahead of me.

Well, I paid a hefty fee to be ahead. Good news with hospitality. This is the only thing that I like about hospitality. With the right marketing plan, you can outperform. In multifamily and in single family, it is ridiculously hard to outperform your stupidity if you buy buy something with the wrong structure, there's only so much you can do to beat your competition. You really do have a price constraint with what the market does. In hospitality, you can at least make a marketing plan to where you can outperform the other guy.

Yep.

That's a good point. So there is hope, at least you're in a business that has hope. If the same thing happened on a multifamily deal, you're much more cooked.

Yes, that's for sure.

And luckily we have these other businesses to rely on as we're bleeding cash out So is the moral of the story here, I don't think it's don't do boutique hotels, 'cause a lot of people make a ton of money in boutique hotels. I think the moral of the story is realize what your company is and stay in your lane. Every other business you have and every other business I have, they all build directly on each other. The wholesaling doesn't help the resort other than you make money and it can be tossed at the resort. The multifamily doesn't help a resort. You're operating teams and your property management there. If we both didn't buy boutique hotel when we are single and multifamily operators, flippers, wholesalers, don't buy a piece that doesn't fit into your business because it's cool. 'Cause boutique hotels are sexy and it's exciting and you're like, hey, we get a jet to see it's even cooler.

Taking a 5-hour drive into a 30-minute flight's even cooler. But yeah, it wasn't good.

I have a major question on this and I, if everyone else listening thought the same thing, what does it cost to take a private jet from where you're at to the property and back? What was the, what was the PJ? It was about—

Wow.

That's actually not as bad as I thought it could be.

No, I mean, it's a, it's a, so it was a 30-minute flight each way. We had, we had 7 team members with us, our contractors, people that needed to look at it, the, we brought a roofer with us who was gonna do it. And we're like, all 8 of us, the revenue we can create, high-level people in our companies, we drive down there and we're gonna be, have to get a hotel, be away from our family, be outta the office 2 days as opposed to just there and back in 1 day. Like, well, that's how we likes how we looked, I was like, you know, financially, honestly, could make some sense. So, and it wasn't, you know, it wasn't, we were spending $50 grand. It was, it was, it was a quick there and back. So that's, that, that's part of the reason why we did it. It wasn't obnoxiously expensive.

Kind of fun though.

It was, it was pretty cool. I've been on private jet of my, back in the corporate job, I flew on quite a few, done a couple of them. They're, they're pretty fun. Uh, there's a whole nother world of, of wealth when you can just take private jets everywhere and the flexibility and the independence and the time savings of that is, is wild. So that's the goal is to be able to just take a private jet a few times a month going somewhere.

It'd be pretty cool. That's one of the things where you know that you're talking to someone who's legitimate in the business though, when the private jet is not the punchline, that is just the vehicle of, hey, we got the jet, we went down. Yeah. That's really cool. That's really cool. It's fun to have a business that's in a place where like this actually makes financial sense to do that. I feel like that's when you, it's a good benchmark for when you're like, hey, my company is doing well. Where the time savings are financially a smart idea to take a jet with my team down to the, that's really fun. That's a fun goal for, I think a lot of people to aspire to is that let's get to that level where it is financially the most responsible decision.

Yep. It's like seeing the faces of the team who had never been on one, which again, I've been on a few, but yeah, it was pretty fun.

No, that's awesome. That's awesome. Well, Sam, I appreciate your time immensely. Sam is a fantastic investor from everything I can see, a fantastic educator. He no longer has an outsourced sales team. He does this in-house at apparently massive 7-figure cost to himself to improve the quality of the product. So if you're listening to this right now, right now, and you're thinking about checking it out, all we know is that he's, he's made a decision that lost $1 million to improve the quality of his company. I'm going to say it's probably pretty darn good. And if all the cool things he teaches online are similar to what you learn there, I think it's worth checking out. Sam, where do people find your education company so we can get your $1 million back? Get everyone over here. Where do they find you?

Yeah, I appreciate it. Yes, fasterfreedom.com. And the best place to go is just to shoot me a message on Instagram. Some days are super active in the DMs, some aren't. I'm in the DMs, as you know, and I have a team that helps me out sometimes in there, but they'll never pretend to be me. I'm very active in the DMs. So shoot me a message on Instagram is the best way to get ahold of me and go to fasterfreedom.com just to learn a little bit more. Awesome. Perfect.

We will link those both below. Sam, thank you for joining the channel. Everyone else, this is the Owner Meeting. We're bringing the owners to you. You're busy on your 9 to 5, you're driving the car. I built my entire business, as almost everyone does, by meeting the people who have done the thing that you want to do. You don't have the time to do it? Check it out here at the Owner Meeting Podcast by Multifamily Strategy. We'll see you on the next episode.