She Keeps It Real In Real Estate—What You Need To Know About JV Partners

Hey, it's Mark Podolski, the land geek with your favorite niche real estate website, www.thelandgeek.com. and I'm really excited for today's guest for a lot of different reasons. But before we talk to her, I'd be remiss if I didn't properly introduce my co host, Six Sigma. You know him, you love him. Scott Todd from scotttodd.net landmodo.com and most importantly, if not automating your Craigslist and your Facebook postings, posting Domination.com TheLandgeek Scott Todd, are you ready?

I am ready, Mark.

All right. For those of you that don't see Scott's video, he's taken to another level. It's quite upsetting to look at him now.

Is it the server? You mean to shut it off? I mean, like, I don't want to distract you from focusing.

The only way, the only way I can describe it is remember when the first HDTVs came out and, and you're like, this is so clear compared to like analog. That's how Scott looks right now. He's an hd and our guest and I look like we're in analog.

But you guys look fabulous, by the way.

So today's guest is Edna Keep. If you don't know Edna, she's the co founder of 3D Real Estate Profit in the Prairie Real Estate Investor Group and Multiple Ways of Wealth, a training, education and membership organization for real estate investors. Over the last nine years, Edna has built her own real estate portfolio to over 437 doors with a value of over $47 million. All except the first two properties were bought with the help of other people's money. Joint venture partners, her husband Warren and her own 14 doors personally and the rest of the joint venture partners. Most of these partners are passive investors looking for a great return without being actively involved in generating it. Plus, she trains other people how to be and a keep. Welcome to the podcast. How are you?

Oh, thank you so much, Mark. I'm wonderful. How are you?

I'm great. I'm great. By the way, I just want to let all the listeners know, today's podcast is sponsored by GeekPay IO, the only set it and forget it system to automate your no collection payments. So learn more. Get your first note free@thelandgeek.com Geek Pay. So Edna, let's rewind the tape. Okay. And how the heck did you wake up one day and like real estate passive income?

Well, you know, I was a financial advisor for years and I sold mutual funds and life insurance and I drank the Kool Aid. That's what I believed in. I believed in, you know, investing in the stock market and all that kind of stuff. And then after doing that for about 10 years, my, my husband and I just decided we wanted to try something different. Not because we wanted to get out of mutual funds, but because I was tired of my income being so tied to the stock market. So if the markets were up, I did extra good. If the markets were down, not so good. And I love the recurring income of it, which was like the trail, they call it trailer fee or service fee. I love that part of it. And I thought, okay, if we're looking at something else, I want something that will give us passive income. Let's look at some real estate. So we took a class with the rich dad group and we, it was an evening class, then we signed up for the three day weekend, you know how it goes. And you know, we thought, yeah, this is definitely something we can do. We thought we'd, you know, buy a few houses, it would supplement our income and then it wouldn't be all over the map. But you know, once I learned how real estate worked, which was within about, within the first year, like I really got to understand it. My favorite class was Creative Finance. Couldn't sell mutual funds anymore. I just couldn't. It just didn't make any sense to me. And so within two years from buying our very first property, I sold my financial planning practice and went into real estate full time.

Wow, Scott time. What are your thoughts?

Well, I would say that, Edna, like for a while, very short period of time, I did work for, I mean, many, many years ago, I worked for a financial services firm. I took the Series 7, all that stuff. And it was kind of hard for me because like I was young and I'm going there and I'm seeing people and I'm like, hey, you know, I'm just repeating the company Kool Aid as you said, right? Like, I'm just, I'm just rehashing whatever they said. And you know, the people I'm talking to had like more money than I did. I couldn't fathom like asking someone to like invest in a bond or a mutual fund. But I did it and you know, I never felt good about it. And then I would go and I talked to these guys and they're like, nah, I'm not going to buy your mutual fund. I only invest in real estate. And of course I'm feeding the company line back like, well, you know, real estate, you know, the stock market has gone up over every 10 year period, whatever it is. I forgot the line. And it, you know, we, I think we're so ingrained, like, we're so, you know, taught, like, this is the model. Just follow it. Shut up and follow it. That, to really stop and think for a second, like, man, there is something else out there. It really does transform your life. And like, from, from your perspective, those trailing fees, you know, Mark, you know, I don't know if you know, but like these guys that are selling you, these mutual funds, the class A mutual funds, et cetera, you know, every quarter, every month, whatever it is, like, you'll notice like some money hits your account, it's your commission for keeping them in that fund. The whole system is designed to keep you in that mutual fund.

Yeah, yeah. And you know, I built that up to. I was getting over 120,000 a year just in trailer fees alone. So it was powerful. I loved it. But, you know, I got a lot of slack when I decided to leave because people just thought I was absolute crazy. And, you know, nobody was selling their books when I did. So I got absolute top dollar board and never looked back. And I also made the deal with the fellow who bought my book that I paid monthly for four years. So that helped me over the hump, because in 18 months we bought 50 doors and that gave us a passive income of 5,000amonth. So I knew I needed at least another 5,000amonth. Well, you know, just, just to cover the day to day stuff while I was building this. So I negotiated that with the fellow who bought my book and then. Yeah, and then we've just taken it from there.

All right, so, Edna, let's get into the creative financing piece of this, your partners. Because to buy that many doors that fast, you got to have money. So walk us through your model, if you would.

Sure. So primarily now, at this point in our life, we buy multifamily only. And our sweet spot is between 12 and 36 stores. If we go higher, we have a lot of competition with REITs and stuff like that. But what we can do is we can buy the smaller units one at a time and then package them off, package them up and sell them to a REIT or something like that. So that's kind of our sweet spot and we haven't done that yet. We're still holding on to everything. Because I love real estate, I love owning it. I love having the passive income. I love having the, the tenants pay down our Mortgage, that's huge for us. But our business model is that we'll bring in investors. So say on a classic deal would be 50, 50. Sometimes it's 60 to us, sometimes it's 40 to us. It just depends. And what we do is they come in as full joint venture partners, and we work to get them paid off as quickly as possible. So we want to return their principal to them as fast as possible. So then we share in the cash flow from there. So one thing that I learned when I was selling mutual funds is I know the wealthy people kept saying to me, edna, if you could find me something that would pay 8% consistently, I'd give you the rest. They would say that to me all the time. And of course, it would never happen, right? Every time you think, oh, he had three good years in a row, well, then, boom, it would go away. And so I always kept that in my mind. So what we. And then, plus, we got our trailer fees regardless. And the mutual fund managers got their payment regardless. If the market turned, paid the investor 12%, well, it probably earned 14 or 15, and we got the rest. But if it was a negative 12%, it was actually negative 15% off your portfolio because we still got paid. And I seen a different business model. So what we do is we pair investors out first and before we share in the profit. So we can't win unless they win.

Scott.

Todd, I mean, you're right. Like, you know, the system is rigged. Those mutual funds are rigged real estate. And I think you gotta find good operators because there's a lot of people out there that just aren't operators. And, you know, so if you have a strategy, if you kind of have developed your sweet spot, I think that's a great, you know, a great resource.

But.

You know, like, are these people that you're finding, are these people that, like, they're doing these partnerships with you? Are these people in your network? Are these people that you had, you know, established relationships with while you. While you were their financial advisor, or these people that are kind of, I'm sure now it's grown beyond that. But are these people that you took with you?

You know, I had actually made arrangements with the guy who bought my book that there were a few clients I wanted to take with me. There were not a lot. I had about 20 clients that I wanted to take with me, and I couldn't do it all at once because I had to find the deals and stuff like that. And so he was confident enough in his skills that he would keep them And I was confident enough in my skills that I would take the ones I wanted. So I actually did an event before I left, and I invited those people out. And I said, out of the. At one point, I had 600 clients, but by the time I sold my practice, I downed that to about 300. And I said, out of my 300 clients that I deal with, you're the ones I want to take with me. And this is why, first of all, they listened to whatever I said. They took my advice, they were easygoing, they were not micromanaging me, all that kind of stuff. And it wasn't always the people that had all the money, because sometimes people with all the money, they just weren't your ideal client. They were hard on you. They were not ideal. So out of those 20, I think only about actually came with me. I think I did too good of a job selling them on mutual funds, because I think they're all still there, but, you know, just. Just talking to different people in my network to start with. And when they found out what I was doing, they went, yeah, like that's something that interests me. And I started getting more and more investors like that. So, yeah, it started with a few investors from my mutual fund days, but. But not the majority of them. They came after.

So, Edna, from a structural standpoint, and you're working with outside investors, why did you choose the joint venture route over the fund route?

Oh, you know what, we actually set a fund up early in my career. As a matter of fact, that was one of the deciding decisions for me to leave being a financial advisor, because I was wanting to carry my trailer fees on, of course, as long as possible while I was building the real estate side. But I. I just got to the point where I couldn't do it. But we. Okay, now I kind of lost my train of thought. Tell me your question again. I was going to.

Okay, so like a joint venture.

Joint venture goes to.

I've got 12 apartment complex.

Yeah.

In Tampa. It's going to cost 3 million. Yeah, right. You're going to put in the 3 million, I'm going to do the work. We're going to split the profits 50, 50 or whatever it is, or, you know, you're gonna put in 600,000, whatever it is. Right. As opposed to saying, hey, look, here's a fund. We're gonna raise $20 million and we're gonna buy these assets, we're gonna take a management fee. And, you know, if you're an accredited investor, you can do this or however you're gonna structure it. So why did you go the JV route over the fundraise?

Okay, so I now have to just back up here a little bit. So that. That was actually the reason I decided to leave. Being a financial advisor, I was approached by a guy who wanted to set up a fund of real estate. And I was going to be one of the leaders in that. And so that's when I gave up my mutual fund license because I couldn't do both. And I did end up getting my exempt market license at the time because it helped me with, of course, a bigger network again. But, you know, the fees and everything else involved in that fund just didn't make it worthwhile. Within three years of us starting that fund, we sold everything that was in there because we couldn't get the financing we needed that we could get personally. We could get, you know, 80 to 85% financing. If we bought personally and through the fund, we could only get 65% and our interest rate was higher. It was like four and a half percent. And we were routinely getting two, two and a half. So it just didn't work. We had to have other people involved. Like in Canada was called Olympia Trust. We had to pay them like 8,600 dol year. We had to get audited financials and everything. There was just so many costs. And then also you had to answer to the securities Commission. You had to write up an offering memorandum, you had to follow your offering memorandum and all of that. And in the meantime, we were still, you know, buying a house here and a house there and doing joint ventures on the houses and doing really great. So it wasn't the market, it was the model. So, yeah, we got out of that within three years, we were able to get everybody their money back and a return of about 9%, not near what we should have been able to get them if we would have done it just in a joint venture model. So then from there, that's all we do going forward, just joint venture models, because you can get really, really good financing. So like I said, with the lender, we can go up to 85% financing. If we get vendor take back, we can go up to 90% financing.

Let's define vendor take back.

Okay? Vendor take back is seller financing. So a lot of. Just about every deal that we do will ask for vendor finance in order for the seller to leave some money in the deal. And we get a lot of them because we know how to ask and give them the benefits. Not everybody goes for it, but lots and lots of apartment building owners do because they drink the Kool aid. They love real estate. Most of the time they're getting out of it because they're retiring or moving on to different types of deals or wanting to be more of a passive investor anyway. So why not leave your money in the solid real estate you already know and understand?

Awesome, Scott. Todd, you're smiling. In hd.

In hd. Look, I mean, like, Mark, I mean, I would love it if, if our sellers would owner finance. And in fact, there are some that do. Like, I've bought land that I've turned around and resold and it's on owner financing. I bought it on owner financing. Right. Like, it's just the way that it is, you know, and it really works magical because, you know, like on the deal, like one of the deals that I've done. So, you know, essentially I'm paying, I think 250amonth, but I sold that land for 295amonth. Yeah, 295amonth. So right now I've got a $45 positive cash flow on that one deal. Whoop dee doo. I know $45 is not that much money. You know, it's not necessarily gonna, you know, I don't know, it's. It's like lunch. Right.

However.

Right. But I don't go to Panera too often, so I know you think I do, but I don't. Anyway, it's Panera that said that thing is going to be paid off in three years. Well, it was three years total. So it's like a year into this thing now. More than that. So it's going to be paid off. My buyer is going to basically pay me an extra three years on this thing. So my positive cash flow goes from, you know, $45 to $295 the minute it's paid off. Right. So, you know, it's cool because I'm able to control a 40 acre piece of property literally for $500 down. And I sold that thing for $1,000 down. So right there I doubled my money.

Yeah. Yeah. Then that's the power of leverage and dealing, you know, dealing with other people's money, too. You've got us as the entrepreneurs who do all the work. We have an infinite return because we didn't put any money in the deal. I'll give you an example of one that we're working on right now. We actually bought a vacant apartment building. The last owner had rented it to the same group. It was like a group of disabled adults through a company, but he'd rented it for 20 years to this group. So when they moved out, they built their own building, they just wanted to sell it vacant. They didn't want to do all the work. So we bought this Property, we paid 855,000, we got a $600,000 vendor take back because of course you can't go to a traditional lender and financing. And the guy understands that. He's been an investor, he owns tons of property in our city. And so we got 600,000 from him, 400,000 from an investor. We're going to refinance it out at 1.2, $1.3 million. So we'll make a couple hundred thousand dollars profit in a six month period and all financed by somebody else.

Amazing. Amazing. So Edna, what's some of the worst advice you see or hear given in your area of expertise?

You know, some of the biggest mistakes I see people making is, you know, they'll buy their first two, three, four houses and they'll decide to property manage it themselves. So deal with tenants and toilets is what I call it, because they want to save themselves that couple hundred bucks a month. And that is one of the biggest mistakes they can make. Because first of all, you'll get so frustrated dealing with tenants and toilets that you'll quit and it wastes all your time and you have no time to grow, so you have no time to go on and get the next deal and the next deal and the next deal because you're too busy saving that 200 bucks a month. So that's one of the biggest mistakes I see people do all the time.

Yeah, Scott, how many times do we say like a week can always make more money, can't get more time.

Get more time. Exactly. Right?

Yeah, you can't, man. Like, and you know, like when you start embracing that and like making decisions based on that, I think that your life all of a sudden becomes much more enjoyable because the little thing, the little things that you kind of take for granted sometimes you're like, it's just money, right? Like literally, like I'm not saying be out there wasting it, but you know, like the memories you can create with your family and loved ones and you know, experiences, if you just follow that model, greatly enhances your life.

You know that game Cash flow? Cash Flow 101 by Robert Kiyosaki. Okay, so we played that with our kids and my students for years because I love. Totally makes sense. Once you can get your passive income to cover your day to day expenses, you're financially free and you know, I mean, you can earn more and more money. Once you get to that point, your lifestyle can change. But that's why it's so interesting to see who gets out of the rat race first. The janitor, the secretary, not the doctor, not the lawyer. Their lifestyle is too high. So, you know, I tell people, follow that model till you get your day to day expenses covered. Then you can do whatever you want. And that's where you can start making the big money because you can actually concentrate on it and you don't have to keep thinking about putting food on the table.

Yeah, no, it's an interesting point that a lot of times we don't even discuss is the lifestyle inflation and how it can really sort of be this obstacle in to grow real wealth and cash flow. And I always often ask people, is there one luxury that you have that you can't live without? Like you just wouldn't be able to live without. So I'm going to ask you, Ed, is there one luxury that you own that you just wouldn't be able to live without?

Well, I don't own it, but it's my housekeeper. I hate cleaning house. I always have. And I've had a housekeeper since 1992. And I even tell my husband, I give up my truck and I drive a brand new Escalade. I give up my truck before I give up my housekeeper. I love, love having a housekeeper.

Yeah, no, that's a really good answer. And yeah, it's interesting. But is there any one thing that you actually own, like asset?

Well, you know what, my apartment buildings, because my tenants are paying them off. They're assets that keep up with inflation. If somebody would have told me when I was young, because you heard my story, I was a single mom at age 17, 16, lived in subsidized housing. My daughter went to subsidized daycare. I made all of 1200 bucks a month at that time. And if somebody would have told me that at some point in my life, I'd have over, well, it's between 25 and 30,000amonth going in mortgage pay down alone. So basically somebody else putting money away for my retirement of 25 to 30,000amonth, I wouldn't have believed. I wouldn't even have been able to understand how that could happen. And that's the lifestyle we're living right now today. And yeah, I want to keep those apartment buildings forever.

Amazing, Amazing. All right, and then we're at that point now in the podcast where we're going to put you on the spot.

Sure.

Ask you for your tip of the week. A website, a resource, a book, something actual where the art of passive income listeners can go improve their businesses, improve their lives. I think the mentorship has been great, but I'm going to ask you for one more tip. What do you got?

Sure, you know, so, so one tip I would take when it comes to earning passive income is hire a coach. Somebody who has done what you want to do, not somebody who's just teaching it, but somebody who's done what you want to do. That's my number one tip.

That's a great tip. And oftentimes real estate information has like the sleaziest reputation because you see so many of these people that, you know, basically they made a lot of money in 2006 and then they make all their money in teaching, they're not doing deals anymore. And people are like, wait a second, you're teaching me a strategy that no longer works, you know, and it sort of hurts the people that are like legitimate.

It does.

But I think that, I do think that even having somebody, even a bad somebody is better than having nobody.

You know, even if they, they may not know everything, if they're not buying today, they may not know all the new rules and stuff because rules do change all the time. You know, I even have, you know, students that come to me with new stuff that, that's come out maybe through a lender or through, through a networking event they went to that they're teaching me. So I'm continuously learning and you can't, you can't close yourself off and think you know everything because there's always more. So, yeah, working with somebody who knows, even if they've done it in the past, like, like I say, don't take your advice from the father in law that's never bought a property in his life other than his own home. At least talk to the neighbor who owns a, who owns a rental property, you know, even if it's only one.

Absolutely, absolutely. Scott Todd, what's your tip of the week?

So many, so many tips. Like, so many opportunities for tips. And yet how do you choose? So Mark, I would say that a book that I've really started reading, like I went back and reread it again and I think it's still really relevant, is the Art of Social Media Power Tips for Power Users. And in this book, let me get this book right. Yes, Guy Kawasaki. And if you don't know about Guy, like this is a guy who worked for Apple. He was their chief evangelist Officer at Apple. He's gone on to, I mean, you know, some of his other companies, like Canva, you know, Canva, the place, the website you can go to. So he's like. He's, like, promoting them. This guy has social media down. Like, he is a big sharer of information. He's just a wealth of knowledge. And just to be able to take his strategy and look at it and put it into practice, really, really cool.

So this art of social media, is that right?

The book is called the Art of Social Media Power Tips for Power Users.

All right, now, should I get the audio or the book?

I think the audio is fine.

The audio's okay.

Yeah, audio is good.

All right. Done and done.

I'm gonna get it, too. I have not read that. That sounds very interesting.

I'm getting it. All right, awesome. Well, my tip of the week is probably the best tip of the week. Not just because it's mine, but because it's. Learn more about multifamily and how to start building your passive income in this incredible niche and have other people use other people's money is ednakeep.com we will have a link to her site, ednakeep.com and please go there and learn more. Edna, are we good?

Yes. And, you know, if you want a free resource over and above the website, I do do a free training by video. It's just training.ednakeep.com so if people are thinking they might be interested but just don't know enough about it to find out, that's also a good place to start. So, yeah, your guests can. And guests and audience can go through that as well.

Great Scott. Todd, what are you going to say? Nothing. All right, well, I want to just thank all the listeners and remind them, look, it ain't easy getting guests. It's even harder getting really good guests. And the only way. The only way we're going to get the quality of guests like an Edna Keep from Edna cape.com is if you do us three little favors. It really helps. You got to subscribe. Make sure you subscribe, subscribe, rate, and review the podcast. Send us a screenshot of that review. To support the Landgeek Calm, we're gonna send you for free the $97 passive income launch kit. So please do that. And Scott, are you ready for this?

I think we're ready. Let's go, Mark.

All right. In HD. 1, 1, 2, 3. Let freedom ring. See.

Hey, that was pretty good.

No, it's horrible because the lag with your fancy video.

I thought we were good.

Edna Lag or good?

I think you should do it again.

See?

Oh, no, we're out.

We're done.

Well, thanks again. And thanks, everybody. And we'll see everybody next time.

Okay, thanks, guys.

Thanks.