The Land Geek Podcast #80

Welcome to the Land Geek Podcast, your resource for information and tips to making money by buying and selling money. Let the Land Geek show you how to make a passive income by working smart, not working hard. Learn strategies and tricks to make money buying and selling raw land today. And here is the man that's going to help you do that. The Land Geek.

Hey, it's Mark Podolski, the Land Geek from your favorite niche real estate website, www.thelanegeek.com. and today is really special because it's not often that I get a guy who has been investing in single family homes since 2009 while working full time at a New York City advertising agency. Then he made the switch to apartments when he realized he could achieve his financial goals a lot faster by buying lots of homes at once. And then he started Fearless Investing in February of 2013 and closed on 168 unit apartment community worth over $6.7 million in July of 2013 where he formed a syndicate and raised over $1.3 million. He is the host of the ever popular Best Real Estate Investing Advice Ever podcast. He is young and I'm jealous, but he's very impressive. Joe Fearless from Joe fearless dot com. How are you, buddy?

Oh, well, thank you so much for the introduction. I'm doing extremely well. I'm so happy to be on the show. I love the name the Land Geek. It's great branding from a former advertising guy myself. And thank you so much, Mark. And I'm excited to speak with you and share a conversation with all your listeners.

Yeah, that's great. And Joe, so just to be clear, like, you're not just a full time investor, you're also, you consult beginning investors. Correct. Who want to specialize in buying apartment communities and raising money from investors, Is that right?

That's right, Yeah. I work with people who want to learn how to raise money and buy multifamily communities.

Why, Joe? Why not Land? Why multifamily? Tell me, tell me your story. Like you're, you're this, you know, you're 32, right?

I am 32 years old.

Yeah, you're, you're way too young to be.

Age is really always relative though, right? If we were Talking to a 27 year old, he'd be like, Wow, 32, that's way old.

No, I know, I know, it's great. I mean, you're, you're my hero. So. Okay, so tell me. Like you're at this full, you're like a big hitter in this New York City advertising agency. What made you want to get into real estate. So just tell me a little bit about your background, your story, and then, honestly, I'm really going to try to put the jealousy aside. Okay. And just talk to you respectfully from now on.

All right.

But if I don't. But if I don't, just don't get mad at me. Okay?

Hey, if there's a hint of jealousy, I'm going to take that as a compliment. Right?

Yeah.

So I will just soak it in.

I like the reframing. Thank you.

Yeah, exactly. There you go. My story is really, really straightforward. I moved from Texas, where I'm from. I grew up in Fort Worth, Texas, went to school in Texas at Texas Tech, moved straight from Texas to New York City to work in advertising because I wanted to be where, in my mind, the best of the best were competing in advertising. Climbed the corporate ladder really quickly in advertising. I was the youngest vice president of a New York City ad agency before my 30th birthday. And then I realized along the way that I needed to learn how the heck to invest a dollar whenever I had a dollar to invest. For anybody who knows the advertising or marketing market, marketing industry, you know that you don't make any money when you get started. Like, literally, you probably make less than minimum wage whenever you factor in all the hours that you work. I didn't have any money initially. Literally, I had no money in my savings account initially. In fact, I think I had, like, $100, $200 in credit card debt from college that carried over. So investing wasn't a big thing for me because I didn't have any money to invest. Once I started climbing the ladder, I was like, okay, I have $1,000, and it was $1,000. And I didn't know what to do with it. So I went to my bank. I saw that they had a CD certificate of deposit, and I was like, well, what is this? I did a little bit of research on it based on the limited knowledge that I had at the time, and it was more money than I was making in my savings account. I put my money into it. They held it hostage for 12 very, very, very long months. I remember getting a check back for, like, $18 after a year, and I was like, oh, my gosh, there has got to be a better way. And then I got taxed on that $18. This isn't going to happen again. I need to figure it out quickly. I read the book Investing for Dummies. It's a great book. It lays out all the different. Well, the three different types of investing. Stocks, bonds, real estate, and LLCs.

Right.

I then gravitated towards real estate. Read a whole lot. I read at least a book a month, usually two or three.

What was it about real estate that, you know, attracted you versus stocks and bonds? I mean, you're in New York City, so you think, oh, you know.

Right. I mean, I literally live like what, a 10 minute walk from the stock exchange. It was probably rich dad, poor dad, to be honest.

Okay. Yeah, a lot. I mean, people love that book.

Yeah, yeah. It made it seem so attainable. And they focus a lot on psychology in the book, less specifics. But that's what I needed at the time to push me in one direction. And then I started getting more information from different books that had more substance on the specifics of how to make it happen. That combined with my family background. My sister is a real estate agent. My dad used to be a real estate agent. And it was just something that I was already familiar with.

Great, great. Okay, so you've got some money, you're working full time then what, like, how did you carve out time to even start buying single family homes?

Well, I think we can carve out whatever time we want. It's based on how we, how we prioritize things. I'm a firm believer of that. It's just a matter of what we prioritize. I think it's what anytime someone says I didn't have time to do something, that is bs. They did have time to do something, they just didn't prioritize it above other things that they did do. And that's what I did. I prioritized investing as a top priority for me. And at the time it was right underneath my full time job. And then as I became less and less interested in doing working at an advertising agency, it started to creep up and gain traction on the number one priority slot in my life. And what I was doing is I was Investing in Dallas Fort Worth in 2009, I bought my first single family home.

And the market's just, you know, has been wrecked at this point. Correct. I mean, you're just buying things.

It was the, it was the perfect.

Time to buy, bargain, basically pricing.

And I would love to have, you know, claim that I had the foresight and to wait till the crash was over and then save up my money and buy. But quite frankly, I didn't have the money to buy a home until 2009. And it just coincidentally, I lucked out. And by the way, I happen to be from Dallas Fort Worth. A market, as I'm sure you would agree, is a very solid, fundamentally sound market.

Joe. I love Texas. Yeah, I love all those. I love every market in Texas. Texas is great. Yeah, people love Texas.

People love that. And hopefully people love Texans, too.

Well, you know, if they don't, they do now.

There you go.

You know, we'll just have you as a stereotypical Texan.

There you go. And not all people who live in New York are mean. In fact, most people aren't mean, by the way. It's just people are very straightforward. More straightforward in New York than other places.

You know what, it's funny you say that. Do you like that approach better in business than sort of the softer approach, maybe, you know, which is. Would be more charismatic way. Like the Texas way is, you know, kind of just more charismatic, kind of more fun, you know, versus.

Yeah, I think this is my.

This is my price, Joe. Take it or leave it.

Well, I think there are two. In my mind, there might be two different things. First is in. In the south, in particular Texas, there are certain social conventions that people adhere to. One of them is being polite for the sake of being polite. Whereas in New York City, that's not the case. I actually prefer the New York City approach because when somebody is having a good conversation with me and we're hitting it off, I know it's legit. I know that we're actually connecting on a human level versus the social conventions being in place in the south, and you're not quite sure if they're being polite for being polite sake or if it's real. Now, from the other angle that you mentioned, this is the price. Take it or leave it. I mean, that just. That could be really in any market. I think at the end of the day, how I always approach that is my favorite book is Crucial Conversations.

I just read that book. I love it.

Oh, my gosh. They talk about the mutual purpose, right?

Exactly.

And that's the. I've read that book like five times. I give it to my clients to read. It's like you, that it's the fundamentals of connecting with people. When the stakes are high and opinions vary, and they talk about how you identify. What's the mutual purpose? How can we both. What are we both trying to accomplish? And then building the conversation from that point forward.

Exactly, exactly. I love the fact that, you know, you realize going in that they have a story too, and you may not know it all. You know what I mean? Even though you're assuming something, you're Creating a story in your mind and they, they kind of say, you know, let's just keep to the facts. You know, this is the way I see it factually. How do you see it?

Exactly?

Yeah, I love that part.

Yep.

Yeah, it's a great book. Okay, I'm sorry to jump in on there. Okay, so, alright, so you're going into how you're buying houses 2009 and I assume you're, you're flipping and then when did the light bulb go off for you to say, well I could probably do a little bit better if I bought 168 unit apartment community.

Yeah, well, real quick on the homes I met. I was actually buying and holding.

You're okay, you're buying, holding. So.

Yeah, yeah. Because you know, I live in New York City and I'm buying in Texas. It would have been challenging. I actually tried initially to do some wholesaling and flipping and I failed miserably because I just didn't have the time that I chose to dedicate. I didn't prioritize it enough in my life to be successful at it. I wouldn't necessarily recommend anybody try to flip homes living a couple thousand miles away from the property unless they have a great system in place. And that is completely out of my area of expertise. I was buying and holding homes. The first one I bought was a 20% down payment. The second one I bought was a 10% down payment via Homepath loan program, which I heard is going away. The third is I paid all cash, but then I did a cash out refinance. I got all my money back in my pocket. And then the fourth, I bought it with a personal line of credit. So $00 out of pocket at the time. So as far as the light bulb going off, it was a combination, it was a cumulative effect really of me looking at my career in advertising, me listening to a lot of Tony Robbins and how he talks about the human needs and he talks about the six human needs. I won't go into them. But he says the final two lead to fulfillment and those two are contribution and growth or progress. And you're fulfilled if you are contributing to something greater than yourself and you are growing mentally, emotionally. I didn't feel like I was contributing anything larger than myself and I didn't care to grow mentally or emotionally within that industry anymore. So as a result of that I left the agency world. And then as a result of leaving the agency world, I don't have a W2, so I can't get approved to buy anything else. By myself.

Okay.

So I had to get creative and figure out, okay, what the heck, how do I do this? Well, I can leverage other people's full time jobs and come up with a valuable opportunity for them to invest in and then I can manage the process and oversee it and be investors with them. And that's the drive behind it. I had started studying multifamily about three months in October of the year that I quit and I quit in December. So October. So yeah, three months prior to leaving. And then I closed on the 168 units in July of the following year. So July, August. So about nine months from when I opened the first book, A Multi family to raising 1.3 and closing on 168 units.

Great, great. So give us some insight, like what did you learn from that transaction? What were some of the barriers? What was the hard part of it and where are you with it today?

The hard part was every part.

It was. That's quite a learning curve.

Yeah, it's quite the learning curve, my friend.

Yeah. But better to learn while doing than just, you know, because I see so many people just have paralysis by analysis and, you know, they're just running spreadsheet models all day. They never go out, make an offer.

Yeah, that's not me. Yeah, yeah. That's not my mentality at all, as evidenced by the approach. And yeah, I agree, it is better to learn by doing. The important part in that philosophy is to have people on your side who have been there, done that, and mitigate the risk for you and your investors as much as possible. As far as specifically some of the hard parts and how I overcame them, or one is I'd never raised a penny before. And so that's a learning curve in and of itself. I wasn't in sales and advertising. I was in strategy and account service. So I was working with current clients and helping grow the business. But I wasn't going in on the new business pitches. So it was a different skill set that I had to hone. One of the tactical ways for anybody looking to raise money for a land deal or for any deal that I use that could be helpful is I identified all the different networks that I'm a part of from I'm on the alumni advisory board at Texas Tech. So people I know there, I'm on a flag football team, people I know from my flag football team, people I know from high school, from college, and advertising, people who I know who live in Midland, Texas.

So you leveraged the one commodity that we all want to have with our community, which is trust.

Absolutely.

Even though you didn't have a track record. You had some track record.

Exactly. I had, I had some track record. And it would have been a lot easier to transition from a residential real estate agent into deal syndication for multifamily. And I didn't. I was in advertising. I was in advertising. And that's why, you know, some people. I have a call later today with someone who is interested in my program and he mentioned his first email. He's like, well, I've got, I don't have the experience, but I'm a residential real estate agent. And I'm thinking, wow, when we talk, I'm going to show you how much more experience you have than I had going into this. So yeah, I leveraged the trust and credibility factor and then combine that with the insane amount of knowledge I had about the deal and surrounding myself with team members who have a lot of experience. Because as you mentioned at the very beginning of our conversation, yeah, I'm relatively young. Obviously it's relative to whoever you're talking to, but especially in the industry too. It's not like I'm 32 and I've been in commercial real estate for 10 years after I graduated college or after I came out of high school. So I have to surround myself with people who have successfully done it at the time. And how I did that was I identified a property management company that had many units under management. I had a consultant who had closed on a lot of properties. And with the team in place, I put together a nice little bio sheet whenever we made offers. And collectively we're pretty darn strong.

Right, Right. So now did you have a blind fund on your, or did you just find this deal first, then go out.

And raise money, found the deal first and went out and raised money. But the caveat, I'll say two things. One is I started having initial conversations with investors about a hypothetical deal just to start transitioning their, the perception of, of me to them. Because at the time I was an advertising agency guy. So I had to shift that perception to a multi family person. That way once I had the deal, it would be a much shorter and easier segue. And then secondly, I would say never do, never find a deal without having money lined up verbally because it was a very stressful time. And you know, I, and putting stress aside, it's just from a business standpoint, it doesn't make sense because there's, there's ways to raise the money verbally prior to having the deal locked in Granted, it's a verbal commitment, so anything can happen, but at least starting the process and getting people saying yes, I'm interested. Once we, the syndicator identifies what their financial goals are, we say, if I find something that meets your financial goals, would you like me to share it with you? Boom. Of course they're going to say yes.

Right? Right.

And then you share it with them. And you always want to raise at least 20, 30% more than what you think you need verbally. And then when push comes to shove, when people are transferring money via a wire transfer to an escrow account, you'll have some people drop off just because of life circumstances, and you'll still come out ahead. I actually had someone, Two people drop out about two weeks prior to when we were supposed to close. And I had to close, make up a $250,000 gap.

How'd you do it?

I. I cried a little bit first.

You went into fetal position.

I would like to say that I'm just being facetious, but no, I think there was some literal tears happening at the time. And what I did is I knew it was going to happen. I just kept pushing. I reached out to my existing investors and I reached out to other people. I was scrambling what I had under my assets and trying to figure out, getting, like, personal loans and liens on my homes and all sorts of stuff. What ended up happening is an existing investor took the remaining $250,000.

Right. You know, it's funny because I'm always telling my coaching students the hard part of real estate is getting the deal. You get a deal.

Yes.

You'll find the money. The money is usually not as difficult as what we all make it out to be. It's getting the deal.

100% agree.

Yeah. Yeah. And so being relatively new to all this, and let's face it, forming a syndication is not something that is for the faint of heart. I mean, you've got to get, you know, a real estate attorney to draw up docs. Right. And, you know, there's laws in place about how you do this in a circular. Did you do a reg. D? But you were over 1.1 million. So how did that work?

We did an operating agreement. And I did not do ppm. I should have, but I didn't. And so in the future, I will. And I might actually go back and do PPM with the existing investors, even though things are going well, just to put it on the books.

Sure.

But that's something that I found out now. I found some resources now where you can actually get them for about $5,000. Oh, wow. Yeah. Crazy. Crazy inexpensive. Through some resources. So there's ways to do it. Typically, you hear people say ppms cost 15, 20k.

15, 20k all day long. Yeah.

I didn't have that money at the time to do it, so I put personal risk on the line because if something were to go wrong and an investor were to come back and say, hey, I wasn't properly disclosed, then it's on me, and that's personal liability on my side. So that's why never do what I did on my first deal. From a PPM standpoint, always get the PPM and work with an attorney and make sure it's buttoned up.

Sure, sure. Okay. So the whole thing was just hard and arduous. So from starting from finding the deal, getting the money, how long did it take to close that deal?

One month longer than it was supposed to. Because what happened? We got it with a master lease with option to purchase. Then that's a whole other story, and we probably don't have time to get into it. But essentially we financed it creatively because there's a large prepayment penalty on the property. Therefore, in order to not trigger their prepayment penalty, we implemented the strategy of doing a master lease. So we had one month delayed closing because I saw in the lender documents that our seller had with their lender that there was not a master lease allowed to be on a property on the property without written approval. So we waited a month to wait for the lender to give my group written approval that we could do the master lease because I was not about to raise $1.3 million. And a lender to say, not only is this due on sale right now, because it's. Technically, you just sold the property without receiving payment, but this is an invalid agreement in the first place, so you're going to have to try and get your $1.3 million back from the seller because we're totally out of this. To answer your question directly, it took about from June to August. Actually, June to July, two months under contract, because we'd been working on the property for a couple months prior to putting it under contract because it was through a relationship.

I see. Okay. All right. Great, Great. And then, was it hard sourcing that deal? Did you get it from a broker? You were out just making offers. Was it, you know, a bank?

I actually got it through a consultant that I was working with, and he was helping teach me the business, and he was connected to a lot of people. And he came across this opportunity and the unique nature of it. This property that I have, it was on LoopNet, believe it or not. But because of the large, they call it the feasance penalty. Prepayment penalty. Same thing. Because the prepayment penalty, nobody was touching it because it didn't make sense to put new financing on it even with the attractive debt options that are available. So we came in from an angle that nobody else is coming in from from and made it work for everybody involved.

Very creative, Joe, Very creative.

Well, thank you, Mark.

So I know we don't have much time, but how important is the marketing background that you have? Because we were talking about it and we were joking about it before the podcast. Your podcast is called Best Real Estate Investing Advice ever. Mine's a land geek. I mean, you know, it just goes to show you like marketing is so important in every aspect. Right. So can you just, you know, talk a little bit about how that's transitioned in to your real estate?

It's throughout everything that I do, my marketing background, my advertising experience, it is the foundational elements that's driven me to the point where I'm at right now, it's allowed me to get press prior to ever closing on a multi family property. But being written about in Yahoo Finance about a deal that I was working on, I was quoted by a reporter and in fact one of my investors got an email from Yahoo in his inbox whenever we were looking at, whenever I was looking at the deal, I didn't even talk to investors yet. He's like, oh my gosh, I got this email, tell me about this deal. Well, he ended up investing with me, right?

Yeah, there you go.

It's insane. So it's positioning yourself so that first and foremost you know who you are and what you represent. And once you know who you are and what you represent, then it's a matter of finding the most effective outlets of doing that. And from a marketing standpoint, I mean if you're an investor and I'm speaking to you, then it's extremely relevant that I was in advertising and I know marketing because ultimately we're buying a business and the income for the business is rent. And you get rent from having the place full, right? You get, you have the place full by having people stay there. So you have resident retention programs and you advertise it effectively within the community because most of your renters are going to be within a 1 to 3 mile radius of the actual apartment community. They're going to be that it's a very close area for where you're going to be renting people from or where people are going to be renting from. One thing specifically that I've done with resident retention for the 168 unit that is a bit unique. I actually haven't mentioned this on another show before, so exclusive stuff for you and your awesome listeners.

Great.

We give the residents for everybody who has paid on time for that month and has a zero dollar balance, we mail them a thank you letter. You know what are stamps now? I don't even know. There.

It's under 50 cents, 44 cents.

Yeah, under, under 50 cents. Plus we buy them a dollar scratch off ticket.

Wow, I love that idea.

The perception of, of a dollar scratch off is much greater than a dollar.

Yeah, absolutely.

And they are just blown away by it every month. And I'm in an area, this apartment community is in an area. It's working class, hard working people. So the opportunity to make money every month by simply paying their rent on time just is an incredible incentive. And they're incredibly grateful. And we have really good retention just from that one program that costs $1.50. Plus a little bit of time to have a template to create at the beginning where you just write the letter and that's it. You mail it out. It's an amazing program. And that's the type of stuff with my projects. And I tell my investors, I bring to the table, yes, the fundamentals are obviously going to be there, but then there's a little bit something extra and that's what differentiates me.

I love it. I love it. All right, Joe. Well, this is the time in the Lane Geek podcast. I get to put you on the spot and ask for your tip of the week. It can be a quote, a book, a resource. We talked about crucial conversations, but whatever you want. What's your tip of the week?

Model after those who have successfully done what what you want to do.

Model after those who have successfully done what you want to do. So basically, find yourself a good mentor.

Find yourself a good mentor. And not only that, but identify and be a student of the competition and their business model. Once you understand the competition's business model and you get as much material from them as you can from marketing terms, secondary and primary research. Secondary research where you scrape the Internet and primary research where you try and identify things that you can actually do, whether you speak to current customers of theirs or whatever. I am a huge student of identifying a business that I want to be in, in this case, multifamily and seeing what the best of the best are doing. Getting on their webinars, getting on their email list, requesting information, speaking to the people there and understanding their business. That way I can take bits and pieces of their business and apply it to mine and add my special sauce.

I love it. I love it. Well, Joe, I really appreciate you taking your valuable time to be on the podcast today. And my tip of the week is to learn more about the incredibly dynamic and successful Joe Fairless, go to JoeFairless.com I have a link to it in the. In the show notes, but it's Joe J O E Fair, as in I'm being fair to you less l e s s.com so do that. I also have another tip because Joe's. I guess we can all agree Joe's kind of a marketing genius. It's called pageyourself.com. joe, have you heard about this site pageyourself?

I haven't, but I need to hear about it if you're recommending it. What is it?

Well, you know, it's for those people that aren't very techy. And can we all agree that Facebook might be a good place to market?

Oh, yeah.

Yeah. So it basically allows you to create your own Facebook page without having to know design or anything like that and help you run promotions and quizzes and fan gates and all types of cool stuff for your business. So check it out. You can start for free. And then I think that, you know, it's like the freemium model, but it's pagerourself.com and, you know, as Joe would agree, you always have to be trying new marketing techniques and seeing what works for you. So, Joe Fairless, are we good?

I'm good. Thank you so much, Mark.

Thanks, Joe. Are you going to come back and do this again?

Hey, if you invite me back, I'd be more than happy to come back and have another conversation.

I love it. I love it. Well, thanks so much. I want to thank everyone for listening. And if you would take two minutes out and just rate the podcast, go on itunes, let us know how we're doing. And, you know, we really, really appreciate it. We need the feedback, and that's going to help us so much, and I'd really appreciate it. And look, if you're looking for some wholesale land, go to frontierpropertiesusa.com. invest there. If you want to learn more about how you can make an incredible income actively and passively buying and selling raw land, go to www.thelandgeek.com and download for free the Passive Income Blueprint. Get the ebook how to Avoid the Three Fatal Land Buying Mistakes. And of course, get this always informative and engaging podcast delivered each week to your email inbox. This is Mark Podolski, the Land Geek. Joe Fearless. Thanks so much and we'll see everybody next week.

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