BiggerPockets Podcast 135 with Transcript

Link to show: BP Podcast 135: Raising Money to Buy 1,000 Apartment Units with Brian Adams

Josh:This is the BiggerPockets podcast, show 135.

Brandon:Then in 2014 I bought a 209 unit deal for $6 million that appraised at $7.4 million on day of purchase and when we’re recording this in 2015, I’m actively looking for a 100 to 400 unit deals up to $15 million dollar purchase price.

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Josh:What's going on everybody? This is Josh Dorkin, host of the BiggerPockets podcast, here with my cohost, Mr. Brandon Turner. What’s going on sir?

Brandon:Guess where I’m going next week Josh?

Josh:I know where you’re going next week. I don’t have to guess.

Brandon:Oh well, everybody else guess where I’m going next week and I’ll.

Josh:We’re going to Disneyland.

Brandon:I’m going to Disneyland. Whoo.

Josh:Yes.

Brandon:Yes, I’m taking a four-day trip to Disneyland.

Josh:Four days to Disneyland.

Brandon:Four days to Disneyland.

Josh:That’s—that’s a bit much I think.

Brandon:Well, I only spend two days there and I’ll spend two days visiting some friends and such down in the southern California area so.

Josh:Excellent.

Brandon:I’ll be back before this show airs so don’t come to my house and break in because I’ll be here.

Josh:Nice.

Brandon:Naked.

Josh:That’s just disturbing. That’s disturbing my friend. Well, can we just move forward?

Brandon:Let’s go on. Let’s go on.

Josh:I’ve got.

Brandon:Today we have a great show.

Josh:Like a really bad, bad picture of mine here, but yes so we do have great show today and I’m super excited about it. We’ll get there in a second. Let me tease. This guy is amazing. This guy is doing some really cool deals and the cool part about it is you know he’s so open about how actually puts these deals together.

Brandon:Yes.

Josh:You definitely want to catch us. Again, whether you’re a novice or you’ve been in the game for ten-20 years, there’s great insight here so let’s get to today’s Quick Tip.

Brandon:Quick Tip.

Josh:Today’s Quick Tip is we are currently kind of facing kind of where some weird thing on iTunes so if you go into iTunes and you want to check out our shows, you could only see the last 20. We’ve been told this is a bug, but we do not know so it may happen forever and so if you want to see shows past the 20 current shows, go to BiggerPockets.com/Podcast. That’s BiggerPockets.com/Podcast and you can find all of our shows. You can see all of our show notes. You can listen. If you can’t see them on iTunes, that’s what you want to do. You could also actually listen on Sound Cloud or Stitcher so there’s alternatives as well. Definitely go ahead and do that. With that, why don’t we bring in today’s sponsor?

Brandon:B2R Finance is a new commercial lender offering loans specifically for rental investors. B2R Finance can help you unlock equity from existing properties so you can get cash out now. Cash out refinancing allows you to leverage your current investments to help you grow your existing portfolio. B2R is an asset based lender, which means your loan is based on your properties appraised value and cash flow not your personal debt to income and that is huge. It opens up a lot of opportunities previously not available to rental investors so you need a loan? Call B2R Finance at 855-910-0227 or visit B2RFinance.com today.

Alright, alright thank you to that sponsor for this week and let’s get on before we get to the interview with Brian. I want to read today’s one review from iTunes because I love this. This is from VictorianJunkie, which is an awesome name too. This podcast has been extremely influential in helping our business expand and learn about the pitfalls that can occur without the proper knowledge that BiggerPockets gives. I love that. That is from again, VictoriaJunkie 5 star review on iTunes so, anyway. Thank you very much for that review. You guys rock and anybody else who leaves one a rating review or subscribes to us on iTunes, it definitely helps us out so well thank you guys in advance for that.

Josh:Excellent, excellent, fabulous. Well let’s get to the show. Today we’ve got Brian Adams and no it is not the guy who’s going to serenade you. Not him, not him.

Alright we got Brian Adams, Brian Adams is a active real estate investor buying hundreds and hundreds of rental property units at a time with these large multifamilies and he’s going to talk to us today about how does it. How does he raise the money? How does he put the deals together? What does it look like?

Who can do this? Can you do it? You know, I’ve been investing for three years, five years, can I do deals like this? You’re going to learn all of that if you listen to show. Lots of tips and again there’s tips for everybody so pay attention, tune in, and get your pencils out because there’s definitely some notes to be taken. With that, let’s bring on Mr. Brian Adams. Alright Brian, welcome to the show man it’s good to have you here.

Brian: Thank you so much, really appreciate it.

Brandon:Awesome, awesome so you and I started talking back a few months ago because you emailed me to ask me kind of what my experience was. I was doing a webinar and so we started talking back and forth with that and I found out you’ve done a ton of stuff and so I like was you know, I had to get you on the show because yes I mean you’re crushing it with your investing business so we’re going to get into that today talk about that.

Josh:What does that mean?

Brandon:How you did that?

Josh:I’m not—you know you’re a little more prepared than I am man.

Brandon:Of course I am more prepared. You’re going to find out what it means. You’re just a listener, Josh.

Josh:Okay.

Brandon:I’m the host today.

Josh:You’re something.

Brandon:Oh I’m something. Alright so let’s start at the very beginning. How did you get started with real estate? Like when did that happen? What was your first deal?

Brian: Sure, well actually we started in a very young age. My grandfather had some rental properties and as a young boy I would you know, mow his grass. He’d give me a couple bucks and you know, pick up the trash and what was really cool for me to see in a very young age is he would take me along to go collect rent and back then my grandfather accepted all cash. I don’t do that from a policy perspective, but you know, he was accepting cash and then he would throw me two-three-four-five dollars so I got to this exchange of money happening through my rental perspective, but then let’s fast forward a little bit so when I was a junior in high school my football coach was also my accounting teacher and he pulled me aside and said Brian, you’re not the fastest guy on my team or the smartest kid in my classroom. I probably should have taken that as an insult at the time.

Josh:Yes, wow that’s.

Brian: He’s, yes.

Josh:That’s great. Thanks to you.

Brian: What he’s—yes, thanks teach, but he said you have this knack for accounting so my junior year in high school, I knew I wanted to be an accountant. You know my buddies are thinking they wanted to be doctors, attorneys, Hollywood stars, whatever, but I was very focused when I graduated high school and I want to go get my accounting degree in college and then once I was in college I wanted to get my CPA license. Out of college, I graduated and through this period of time when I was working with this high net worth groups, anywhere between you know, $5 million to a $100 million of people who were creating their wealth through real estate. It all kind of came back to me that well, I remember the times when my grandfather and I was working with all these clients from a real estate tax perspective to say how can I help them create more wealth and I just saw all the pieces kind of being put together for me so back in 2000 I kind of, you know, was doing the CPA stuff, but also I just bought a rental property.

You know, just one that I bought and started renting and then in 2008 I’ll never forget the time period. Again my background as a CPA, working crazy hours during tax season, working on those very successful clients and he was just crushing it. He was just making all this cash flow, all this passive income and I said, “What the heck is this guy doing right?” He’s living the lifestyle that I wanted to be living, traveling, golfing, whatever you know, it was just—I was intrigued so I started grabbing all of his tax returns and I realized that he had all these partnerships set up.

All these partnerships were single purpose business entities that were apartment buildings. Then he had a management company, a construction company, he had this whole business model and imagine the spotlight shining down above and an angel singing and like aha, you know like, I was like, oh my gosh. If this guy can do it, I know I can do it so I kind of giving you a long winded answer of how I got started, but in 2008 I said, “Okay, I got to get—I got to make some stuff happen.” I quickly went out, got some education, learned that the multifamily is where I wanted to go with my real estate investing career. Found a duplex. That duplex had a vacancy and filled that vacancy and I was like wow, this works on a very small scale. I can you know, create this passive income so then I went and I know—where we’re going to get head into and questions you’re going to ask me.

Josh:Right.

Brian: Then I went to really scale—scale the business and focusing on larger apartments.

Brandon:That’s awesome. Okay, yes, I want to step back, obviously, we’re going to—that’s the kind of focus of today’s show, but I want to touch on a couple things. First of all, I thought it was cool the way that you mentioned that you’re grandpa used to let you come and pick up rent with him, right so.

Brian: Yes.

Brandon:I mean I don’t have kids yet, but for the people out there listening that have kids and if you have rental property or two or three I think that’s awesome to like the more you can bring your kids into your business, to let them just see like the real life you know, fruits of your labor or whatever. You know, like how that actually works no matter what business I guess you’re in, but.

Josh:Oh yes.

Brandon:Specially real—I think that’s awesome. I think that’s just a great tip right there in general.

Brian: Yes.

Brandon:What happened between 2000 and 2008? Did you buy others like you bought a single family in 2000?

Brian: Yes.

Brandon:What else happened in that time?

Brian: Well really it was just you know buying a single here, you know, doing a rehab. There was no focus, there was no clarity, there was no, I knew I had a passion for real estate, but I was pretty dog gone good CPA as well and that’s what was bringing in the income. You know, I think we all, you know, operate from either a level of pain or pleasure and for me to kind of kick start my thing as I mentioned. I’ve got—I have two girls and during tax season, I was seeing them ten minutes in the morning, plus my wife and I was just operating from a level of pain and I needed to make massive action and you know, take control of where I wanted to go with my life and things.

Josh:Nice, nice. Alright so you’re determined, you say 2008. I’m going to change the way I’m doing things so you go you buy this duplex and then you know you talked about kind of scaling, well how did that go? You know, what?

Brian: Sure.

Josh:What came after the duplex? What was kind of the process? The thought process that you know, beyond like hey, I want to you know, I want to own a bunch properties. You had to have mapped out a plan.

Brian: Yes.

Josh:Let’s talk about the plan and then let’s talk about the implementation.

Brian: Sure thing so I’ll give you the high level and when I come back just some details as well so 2008, you know, I got this duplex. I was like okay, I know this can work. I did at a very small scale, 2009 I tried to buy 132-unit deal in Dallas, Texas.

Josh:That’s a little jump there.

Brian: Yes, just a little, but I knew, you know, I knew my clients could do it and reading in between the lines, I knew it was a lot of focus, massive action, right education and education’s great, the books are fine, but you got to get out there. You got to get swings in the cage and you got to you know, you got to take risk and so in 2009, the 132-unit deal did not work out. The seller and I could not agree on terms so we—you know, that deal unfortunately folded so and I was trying to do the deal myself. Trying to be the sponsor, trying to be the guy raising all of the money. I realized there’s multiple ways to get into real estate. There’s multiple ways to skin the cat so to speak so 2010 I partnered with a group. They found a 276-unit deal in Tennessee. It was a bank REO. We bought that asset for $4.5 million dollars and it appraised at $12 million dollars in the day of purchase.

Brandon:Whoa.

Brian: What I was able to do is add value. I was able to bring capital to the deal. It wasn’t my deal. They found it. They were the sponsor, but what that has helped me now looking back is you know, we were able to refinance that asset within a year’s period so I was able to get a nice return for myself, nice return for my investors. It’s a great story. It’s a good track record so and then from 2010 I made some decisions to you know, buy some bigger properties from there after.

Josh:Hey, Brian so let’s talk about that, 2010, you said you partnered with a group. You said it was 276 units.

Brian: Yes, that’s correct. Yes.

Josh:You guys paid $4.5 million and it appraised at.

Brian: Yes.

Josh:12.

Brian: Yes.

Josh:Alright so what is the process of partnering with a quote group to acquire a $4.5 million property when you’ve done a duplex and maybe a couple of singles and a couple of other little things before. How does guy, no offense, who doesn’t know squat, you know. All of a sudden, get together with this quote group to acquire $4.5 million dollar property. I know that lots of people are sitting here listening like oh my god, that’s crazy so please walk us through that process? You know, what exactly did you do in this deal, who were these people? How did you guys come together and how did the whole thing you know, flesh out.

Brian: Sure and it always comes back guys to relationships. It’s—everyone feels that you know, they’re just going to go out and buy a property or big property, but it always comes down to relationships and the people that you circle yourselves with so again, if those people are the negative ones, you’re going to unfortunately be that negative guy. I always realize that always going to be in the circles of those that are taking the necessary action steps. Those that are you know already burned the trail for me.

Let’s follow those that are smart. Let’s follow those that have done this before so to answer your question, I was just able to go through my network. Go through my database, make out reaches to those that were, you know, ten-15, steps ahead of me and say hey, this is what I can do for you. This is you know, I always want to add value to someone else’s life so if I can bring in my opportunity where my situation was able to bring capital. Some guys have some people in your audience might be awesome you know, deal finders. They’re—they or others might be good networkers or relationship or someone that’s a taskmaster. You know, all about the details so it’s really looking at your strengths and saying, “Okay, here’s my strengths. This is what I love to do. I like analyzing deals. I’m a CPA.” Other people might hate that process so if someone’s able to find the deal or the money well, bring that to someone that that skillset or their strength is there. You just, you know, play the strengths and weaknesses.

Josh:Okay so.

Brandon:Yes.

Josh:You said you brought capital. I’m assuming that means, you know, the—I’m assuming at this point and maybe I’m wrong that you didn’t have the money for the down payment yourself so bringing the capital means you went out and got the money, correct?

Brian: I got a portion of the—what we call private money or private equity for this opportunity. That is correct.

Josh:Okay so can you kind of dig into detail a little but more? I mean, I don’t need the ins and outs of your contract, but you know, what does that mean? I mean how does somebody go and do what you did because I fully—I don’t fully understand exactly what you’re saying that you did.

Brian: Sure, sure. No problem so the asset we bought for $4.5 million dollars, we got a bridge loan so there was a portion that debt was in place of $3.2 million so we had to raise capital of $1.3 million.

Josh:Okay.

Brian: I was out of that 1.3 I didn’t raise the whole amount at that time. I raised a portion of private capital. I took this investment offering and presented to a group of my investors that we all would partner and share in not only the cash flows, but share in the upside of the project as well.

Josh:Okay and did you bring any of your own money or was it—everybody—other people’s money only?

Brian: In this situation, yes, I brought my own capital as well because I wanted to show my investors that I had some skin in the game. Some of my deals though I have not needed to bring capital.

Josh:Yes.

Brian: Just because then you know, track record gets established and trust and level of credibility.

Brandon:Yes.

Josh:Okay so a deal like this, you put a little bit of money in, you bring—I’m assuming you raise you know, the majority of the money. Again, it’s an assumption, but what percentage of this whole deal do you end up getting?

Brian: See of the whole deal I think I was maybe like 5% to 10%. No, I was 5% owner so it wasn’t you know, a significant amount.

Josh:Yes.

Brian: It was enough when you think of you know cash flowing back and profit.

Josh:Yes. Yes.

Brian: Sometimes what’ll be really clear on this one is I realize you know, that my experience in 2009 where I tried to do it all myself and I struck out.

Josh:Yes.

Brian: Sometimes that first deal, you got to take a couple steps back realize okay this is the big plan. This is where I want to get to sometimes you may you know, take a lot less. You know something is better nothing so that’s what I looked at. I said, “Okay, I’ll just going to take a small piece of this and then let’s see where this goes thereafter.”

Brandon:Yes.

Josh:That’s great and you know you get a piece of this deal that you know, I think a lot of people here are like, oh well I got 50% of the deal and you should always go there and I don’t think I’ve heard on all of our shows and all of our interviews. I don’t think we’ve talked to a person who said that they’ve taken anything less. Now, grant it, they’re working on different proportions here. They’re working on you know, three units and two units and five units. You know, coming in and doing a $1.3 million raise, you know, for $4.5 million property, it’s a little bit different so you know at the end of the day, that 5% of you know, when you multiply it out of $12 million is project is—it’s a pretty good start.

Brian: Sure. You see.

Josh:It builds that track record like you said.

Brian: Yes.

Josh:Yes. Yes.

Brandon:That’s like that thing I always say—the quote I always say about it. You know, 50% of great deal is better than a 100% of no deal so saying way 5% of a great deal is still better than 100% of no deal.

Brian: Yes.

Brandon:I think that’s fantastic. Anybody who’s looking to get started and we just take that to heart right there. I mean just the idea of just work with somebody else who’s doing it. Who’s being successful even if—I mean, honestly, even if you work with somebody and made no money on the deal. At least your developing a track record.

Brian: Yes.

Brandon:I’m not saying you should necessarily work for free, but it’s better than nothing.

Brian: Yes.

Brandon:If you’re just struggling to get started so I think that’s fantastic. Can I ask you about like before we move on to what happened next in your business, looking back at the first ten years or eight years or whatever or it took ten years to get up to that kind of point. If you were to go back and do that again, you know, that whole decade again, what would you do differently in your life?

Brian: That’s an excellent question because I think you know, all the learning—in those ten years, you know, I got to learn more from my clients and those are some those ex-clients turned in to my investors. I think if I had to do it differently, I would have done multifamily sooner because I think from a scalability perspective, income perspective, you know, all those things, all the metrics. I think most people that I run in circles with, you know, are in that single family or wholesaling world. That’s a J-O-B. You know, you’re constantly looking for that next opportunity versus a multifamily, you’re creating that you know, existing income stream or passive income stream. To answer your question I guess would be, I wish I would have had that aha moment sooner and probably would have—my portfolio would have hopefully been a lot—be a lot bigger now. I’m unfortunate for all the experiences that I’ve—you know, the pathway that I’ve traveled. I think it’s helped me you know, to be better educated. Dot the i’s and cross the t’s and understand this business more so I think I’m fortunate for the past ten years to—from a learning perspective.

Josh:Yes.

Brandon:Hey so really quickly I want to just jump back to that property and then we’ll kind of move forward. Now you’re not managing this property correct? I’m assuming the property is obviously, has in house management so I mean really at the end of the day, you’re just an investor in this deal. You put it together and now you’re kind of part of the portfolio—it’s part of the portfolio, right? You’re very passive.

Brian: Yes, in that particular 276-unit deal that is correct and all my assets Josh, to be clear, I put that with a third mark, the third party management company and in—and I just want to come back to one thing real quickly is you know, being a part of the deal doesn’t mean that you have to be a passive, you know. I brought you know, I brought value. I brought equity, but what did, I just asked a bunch of questions to those that were running the show like what about this? What about that? You know, I was just picking their brain.

Josh:Yes.

Brian: I think anyone that’s listening, that’s really important is even you know, don’t get a deal across the finish line, take that opportunity to ask as many questions as you can because it’s going to help you. It’s going to you know because each deal is unique. Each deal has challenge. Each deal is going to fall apart in some cases. You want, you know, you’ve got be prepared for you know, the worst situations.

Josh:Right on. Right on. Okay, 276 units, fantastic. Then what, you know, what do we jump into? 500? A thousand? Ten thou—come on, come on I mean you went from 2 to 276.

Brian: Yes.

Josh:You know if we’re using that math, you know, we’re going to a big one next.

Brian: Yes so what happened next and then this is where all the challenge comes right so at the end of you know, we bought that asset in 2010. We flipped it so coming now into the end of 2011, you know, I’m still working the CPA gig and realize again my passion, you know, back—going back to that junior year in high school, my passion’s been accounting. I’m a pretty good CPA, but my passion starts shifting. I got to see the real estate stuff start to happen. My clients were making it. I figure, what the heck.

I can start this so again, I mapped out a plan. This wasn’t something that overnight I said so I’m going to quit my CPA job, but I ended up quitting my CPA job at a top 100 law firm in the world and to pursue my own real estate business so December 5th—I’m sorry, December 15th 2011 I went to my boss and said I’m done and fortunately, my wife is very supportive and again, we mapped out a plan. 2012 was a very challenging year. I did not buy any multifamily. I had a 98-unit deal that that folded so I had some revelations about myself in 2012 and then 2013, I bought with partners a 144-unit deal for $10.3 million and then in 2014 I bought a 209-unit deal for $6 million that appraised at $7.4 million on the day of purchase and when we’re recording in 2015, I’m actively looking for a 100 to 400 unit deals up to a $15 million purchase price.

Brandon:Wow. That’s awesome. I love that that progression. I kind of want to touch on a couple of things there.

Brian: Sure thing.

Brandon:First of all.

Brian: Sure thing.

Brandon:You mentioned you had a—you and your wife developed a plan to quit a job.

Brian: Yes.

Brandon:Let’s talk about that. I mean what is that? A lot of people listen to our show, you know, I do a webinar every week on BiggerPockets, right and in that webinar when people sign up for it, they get a link to a survey.

Brian: Yes.

Brandon:Then the survey asks them just some more information about themselves, about like you know, what are you interested in, etcetera and one of the questions I asked is on a scale of one to five, one being not all and five being yes, do you want to quit your job? Our average rating is like a four, right on a four so 80% of our people generally or at least like majority of people are very interested in quitting their job and as a side note if people want to sign up for a webinar, BiggerPockets.com/Webinar.

Brian: Sure.

Brandon:How—I mean, how do they do that? How do they develop that plan that you did and get to that point?

Brian: Sure well, I want to point out, I’m not unique, I just—what I did was I figured out that instead of going after that shiny object syndrome, I think I do it still myself. You know, we’re all over the place. I really wanted to—I drilled down. You know I had an unbelievable amount of clarity and focus and it all comes back to my “why.”

Okay why do I want to go down this pathway? I could have stayed in my CPA gig. Still made the income that I was making. I was pretty good at—that I had, you know, clients that liked me all that good stuff, but the passion, the fire, the whatever else had shifted over to the real estate so then I mapped out. Okay, what—if I quit how much money do I need to make on a monthly basis? Okay, you know, that amount okay, how many units do I need to buy?

Where are those units located? What does that asset look like is it in my own backyard? Or is it in a different stage? How am I going to manage it? Where is the money going to come from so you know, it was a very methodical and that’s you know, I’m a CPA so I’m black and white.

You know, there’s not much, you know grey there so, you know there is a system or a process to checklist. I guess I put together. Okay so very methodical. Let’s go down this pathway and get it figured out and so your listeners that you know, this just wasn’t a one time thing. I’ve again had many swings in the cage. I’ve hit some singles, some homeruns, you know and struck out so you know, know that to move your business forward there’s got to—you got to take risks. We can all sit back and just you know, think about or do the education and all of that good stuff—we actually got to get out there and you know, take some action.

Josh:Yes.

Brandon:Yes, love it.

Josh:Hey Brian so you mentioned and I think I got the list written down as you were talking, but in 2012 you had the 98-unit that folded. What does that mean? How did that deal just not workout? Tell us about it.

Brian: Yes, sure thing. That was in North Carolina and that was a deal that I was going to sponsor myself and just so the listeners know what that means is a loan sponsor, the banks, basically require a couple different things one you have to have the experience to buy a multifamily deal. If you just bought a duplex, they’re not going to give you a loan on a 98-unit deal. You have to have some track record so I was able to again use the 2010 experience says hey this is what I’ve done.

Also as a loan sponsor, you need the net worth to cover the loan. All you also need is liquidity, most lenders, when you close will want some type of liquidity to use that’s 10% of the loan balance that you have to have liquidity. In my situation, while the 98-unit deal doesn’t fold or why it folded was I had some private capital that I had lined up. A big investor that was going to fund the whole asset and he pulled out.

You know, couple of weeks before I was—my money was going to go hard and that really means for due diligence purposes. You put up a deposit. You’ve got some—many of days—it could be 30 days, 45 days to do due diligence to you know, look at the numbers and do physical assessment and things of that nature. Then if you’re money goes past that date, it goes harder non-refundable so my money, I realize that my large investor was pulling out so I had to terminate the project. You know, I got my money back from the down the money, but I also lost money.

I lost money because I had to pay to get a third party appraisal. I had to pay money to get that physical inspection. I had an attorney cost so you know, suggestion to your listeners is before you, you know, get to that far of a process, you really want to make sure you got your house and where the nuts and bolts.

Josh:How do you avoid somebody pulling out?

Brandon:I was going to ask the same question.

Josh:Yes, I mean because that seems like, you know, I mean it seems like it could be pretty risky. You got guys who have cash or like yes, I got this. You know, I got your back and you know, you move forward on assumptions that they’re there. Then what so what do you need to do to protect yourself? What did you do?

Brian: Yes—sure thing. A couple of different angles, I like to address that in first, always make sure you have back up investors. That was a lesson learned. That—and plus he was the only investor so he was bringing the full chunk. That’s great if you’re, you know, maybe a seasoned guy, but you know, I was just kind of getting started so he was 100%, he had more control of the deal than I did. He was the one that’s—more or less calling the shots. You want to make sure you’ve got what I call my stable lay of investors, those that hire you know, have worked with me before or they’ve already funded money. It’s a different when someone gives you a commitment and actually fund the money at escrow so that money was not in escrow.

I never—you know, he never came forward so again, if investors already got their money in escrow and they want it back, that’s a different conversation. That’s probably maybe a legal question and I don’t want to go there right now, but let’s say you’ve got that investor who has not funded, but have said, hey I want to invest you know, x amount on your deal. Then all of the sudden they pull out. We want to make sure you’ve got you know, team A and team B so when team A player pulls out. You’ve’ got somebody right behind them so if you’re raising $500,000, a million or $2 million dollars. You always want to double that and that’s my opinion where you just double that amount of commitments so you’ve got people backstopping each other.

Josh:Yes.

Brandon:Yes, that’s a great idea.

Josh:That is great. How do we go find these people, obviously some of it comes with track record for you’re lucky you’ve you know, you’re—you’ve got the CPA business. You’re gone, but you know somebody who might have one or two deals, bought a 30-unit or something and now needs to kind of go ahead find some money partners. What would you suggest to them to do to go out and find the—and I’m not talking you know, the postman who has $10-$20 grand. Obviously, you’re talking about big money, accredited investors, stuff like that so how do people go about finding those people?

Brian: Sure and just to address, you don’t need to be a CPA to raise money, you know.

Josh:Right.

Brian: Anyone can do this. It’s—okay looking at your circle influence and it might be focus on you know, BiggerPockets and you know, we want to be careful there and advertising and things of that nature, but it’s all about the relationships. What value you can add to others and go through your—what I call the circle of influence. It could be your, you know, your family, your friends, your CPA, your business associate, your doctor, attorney. We’re not asking those individuals specifically for money. We’re just saying, hey who do you know, this is my business. This is what I’m trying to accomplish and those in your, you know, your true circle of influence. Those are going to be the ones that really want to try to help you out and you say, hey, Josh, Brandon. I need—I’m looking for this—I’ve got a deal I need to raise money. Who do you know that could be interested in this type of thing? You know, specific—I’m not asking you guys for money. I’m just saying, hey who do you know?

Brandon:Yes.

Brian: Who’s in your database that might be a good fit and it always happens is that you know you start talking to your family and friends, you’re telling them about what you’re doing all the great things that you can accomplish and all of the sudden, you’re like dude, why didn’t you ask me about this, you know?

Brandon:Yes.

Brian: You know, this sounds awesome. Let me participate. Let me get in this thing so then you—it again, it’s all about using your network, your relationships and you know, trying to get your business moving forward.

Brandon:Yes, I love that. I love that and just to go back and harp on one point you just said there, about you know, maybe it’s on BiggerPockets and you have to be careful about advertising. That’s you know, completely right and the idea that like, okay so BiggerPockets obviously has a lot of newbies on there right, people that are just learning and so you know, they go onto the forums and they ask a question like how do I buy a rental property and then everyone, you know, kind of helps them out so there’s obviously a lot of answers for new people. A lot of the experienced guys look at that and they say well, I don’t know what value. I mean like I don’t know, I don’t have any reason to participate on BP and the forums or by building relationships. You know, I’m not in that. I don’t need those answers, but I think what a lot of people don’t realize is it’s that like. Just—answering those questions, you know, you might help one person or 50 people that are going to read it, but you’re in front of thousands of people who potentially have money who see you as an influential person.

Brian: Yes.

Brandon:The people that are most active on BiggerPockets and that are out there helping and being productive and I’ll put that not just on BP, but just in general in the world, right. You know, specifically for BP, they’re the ones that everybody seen as a person that hey, maybe I could invest with them someday.

Brian: Yes.

Brandon:There’s a lot of people in America who have a lot of money and don’t know what to do with it.

Brian: Yes.

Brandon:You got to just be the guy that people want to go to because they see as a mover and shaker so anyway, that’s just my encouragement to people that are listening to this show right now that maybe have you know, not sure why they should jump on BP because they’re already experienced. Well, that right there is pretty good reason so.

Josh:Yes. That’s great. Cool.

Brian: Yes.

Josh:Hey Brian and I don’t think there was a question in there for him. Was it? Was there?

Brandon:No not really just.

Josh:Okay.

Brandon:Harping on that.

Josh:No I love the plug. That’s a great plug. Alright so you know, let’s kind of circle back a tiny bit and hammer down a little bit more on the deals, you know, you’ve got a $10.3 million deal. You’ve got the $6 million, you’re looking for these others. You know, what kind of person, you know, I just want to dig a little deeper into the investors. You know I don’t think the question I want to ask is what kind of person gives you money, but you know, what kind of money are you raising. Are you raising $25,000 at a time, $50 at a time, $100,000, quarter million, half million, what are you raising? What kind of chunks are you—are typically getting for you know, these raises that you’re doing.

Brian: Yes sure so now that I have a track record. My minimal is $100,000.

Josh:Okay.

Brian: That could be a million, a quarter million, up to a million dollars of the investors that I’m able to tap into. Did that happen back in 2010 or even 2009? No so I think the audience needs to realize that as your business starts to take you know, or move forward or to get traction, you know, you can increase minimum investment, but maybe start now. I would suggest only start at $50,000 because you know, to raise a $2 million for a capital raise, $25,000 is a lot of people that you need to you know, look through your circle of influence so kind of have in that minimum of $50 and you really need a couple big guys, you know to help that average out. Again, we want to make sure that we’re dotting the i’s and crossing t’s if you’re pulling money together.

I know there’s not an SCC call, but you know we want to be careful. We want do the things the right way and make sure you get counsel and putting the private placement number in, the PPNs and all that good stuff. Make sure you get all that taken care of when you’re raising money.

Brandon:Yes.

Josh:Nice.

Brandon:I love that. Love it. Alright so let’s move on. I want to talk a little bit about you know, how you’re—I mean we kind of know how your businesses developed. Now you’re looking for the larger apartment buildings. How many have you done total in like units have you bought and sold or invested in?

Brian: Yes, bought and sold almost a thousand apartment units, valued over $30 million. I currently control the 144-unit deal in South Carolina, 209-unit deal in Texas, and there’s reasons why if you want to go, you know, if you want me to go there. I live in Pennsylvania, why I’m you know investing in other states or?

Brandon:I would love that.

Brian: Okay yes.

Josh:Yes.

Brian: I’m in the northeast and the opportunity cost to you know, deploy capital for properties around this area are pretty expensive. Where I can go to other markets and buy properties that are a lot cheaper and also my business is built on job growth and economic growth so where are those markets across the country that those markets are performing very well. Very simplistic view here though is someone’s got a job they can pay your rent. Texas in my opinion are—is a state that’s producing a significant amount of jobs regardless if it’s a blue collar or white collar type of job.

It’s a great to business friendly state. It doesn’t have an income tax. It’s a very landlord friendly state. It’s the central of the country so it’s great for distribution of product for big employers so how I also look at the—at the model is okay what are the trends in the marketplace? Looking at Census Bureau data, job growth, economic growth. You know other, you know, you can for example set up a Google alerts. You know, I do that for all the markets that I target and daily, weekly, you can get news just coming in to your email about what’s happening in your market place.

Josh:Yes.

Brian: I’m in again, I’m in Pennsylvania, I’m buying deals outside my market place so we want to be an expert and that’s what one question the investors are going to ask. Well, you live in Pennsylvania, what the heck are you investing in a different state? Well, what I just told you is what I do and everyone’s investment model is going to be different, but you know I target markets that have some type of upswing and I believe the markets you know, other markets across are you know everything cyclical so.

Josh:Yes hey so you know, we talked to a lot of people and especially, you know for new investors. We always try to tell them you know, try to invest local. Try and stay where you can kind of find opportunities so you can kind of go buy, reach out and do it. I’d like to think that it’s a little bit different when we’re talking hundred, 200 plus units.

I mean it is, but it isn’t right? I mean you still want to be able to go and see that you know things are being run and managed appropriately, but at the same time you know, you may not be able to as easily find those opportunities. They’re a lot easier to find a duplex within 200 miles than a 200 unit within 200 miles that meets the criteria you’re looking for. You know, I love the kind of becoming an expert outside the market place.

You said, job growth. You said, stable economy. What are the things do people want to look for? Do you have any data sources that you would recommend people use to help better evaluate the market that they’re looking at.

Brian: Sure. Again, I’m a frugal CPA so I love free stuff. Marcus and Millichap, which is a broker has a lot of great free information on what we call MSAs so the market’s like Dallas or LA, New York, Denver, you know, the big markets. Marcus and Millichap does a great job of analyzing this stuff for us where construction permits, absorption rates, all of those good stuff. It’s kind of all put together for us. There’s another report I use it’s called View Point.

It’s IRR.com, I believe. I don’t know exactly off the top of my head that link, but I’m sure you guys can you know, figure that one out. There’s you know, Costar, there’s LoopNet, even though that’s a free resource as well and I’ve never bought an asset off of LoopNet, but there’s data and I’m a data junkie and I think as you’re beginning to go down this pathway of putting a larger multifamily, you got to be the expert because not only are your investors going to ask you, you know, your loan broker, your management company, everyone’s going to be pointing to you say okay how are you going to run the show? They’re going to be looking to you or like the quarterback of the team, you know, to navigate and leverage other people skillsets to you know, get your property across the finish line. Either that’s, you know, the purchase rehab, get you know, flipped whatever the exit strategy is.

Josh:Okay that’s great.

Brandon:Yes.

Josh:Alright so let’s talk about that exit strategy, you know the first one it sounds like that 90—not the 98, but the what was that? The 276-unit, you said you flipped that so how quickly were you out of that deal?

Brian: Well again, I wasn’t the operator.

Josh:Right.

Brian: The operator are the ones and I knew this kind of going in that it was going to be a fast paced deal because there are so much equity in the opportunities so I knew.

Brandon:Yes.

Brian: My investors knew. I’m all transparency and you know, we got to be because we’re—we have other people’s money at risk.

Josh:Yes.

Brian: What we don’t want to do is lead them and things don’t happ—you know, any deal can sideways, but so the operators of that deal you know, put together a refinance strategy. There was you know, value that could be extracted by putting deed on and myself and my investors that I brought to the deal, we were all refinance so we got our principle back plus a healthy return of that particular deal.

Brandon:Okay.

Josh:Right on.

Brandon:Okay cool.

Josh:What about the other ones the 144, 209-unit?

Brian: Yes so the 144 I still have that deal and that was a HUD deal and it’s a disclaimer, well I don’t know if I want to say this in a recording, but I’ll say it what I was going to say anyways is HUD is very challenging to work with. I’ll say the good first and I’ll come back to the bad.

Josh:I don’t think they’re going to come hunt you down man. I think it’s a government entity.

Brian: Yes.

Josh:That is kind of a given.

Brian: Yes so we got awesome financing of that $10.3 million dollar purchase price, we got 90% financing. With that came a 40-year mortgage.

Josh:Wow.

Brian: It’s amortized over 40 years, an interest rate of 4.15%.

Josh:Wow.

Brian: It’s assumable to the next guy. The downside.

Josh:Oh my god.

Brian: Right, yes, the downside is it’s compliance driven. You know seems like every other day we’ve got people coming in to look at our asset. We can only—on this particular loan structure, we can only distribute out cash flow twice a year. With that, there is a formula that we need to follow and if we don’t hit certain bench marks.

We can’t distribute out cash flow. Secondly, we have to have a significant portion of capital, you know, set aside. It’s called cap x reserve. We have to have a significant portion you know for roofs this has to has built in 2004. It’s a class A deal. They want us to have roofs, you know, 20 years, 25 years down the road. We have to have money for that. I’m like are you kidding me so again what I was going to say is would I do another HUD deal? Probably not because of just the red tape you have to get through. You know, from one side, it’s attractive terms, but there’s the you know, the other side, the other world.

Brandon:Interesting. I’d never heard that.

Josh:Yes. That’s crazy. What kind of cash flow is that property doing? What kind of returns are you getting?

Brian: Well, we project it out a pref return that means the investors get a certain yield on their investment first and then after that, you know, the management where I’m at, we get paid so we projected out an 8% to 10% cash and cash return, but I shared because we didn’t meet the formulas we haven’t distribute out cash flow for this particular year just because we didn’t meet those thresholds.

Josh:Okay.

Brian: You know, each deal is unique. Each deal has it’s own you know, exit strategy. That’s a long-term hold because I believe and I think there’s a lot of chatter right now when this being recorded is interest rates are going to go up. This rate we’re locked in for 4.15%. There’s probably you know, this is an institutional type of asset for someone else so we’re going to hold this deal for another six-seven years. Interest rates, mostly like they’re going to be higher that they are now and hopefully, you know, extract additional value out of this property when we sell it down the road.

Josh:Fair enough.

Brandon:Awesome.

Josh:Fair enough.

Brandon:Yes.

Josh:Hey let me—so you had talked about and sorry Brandon I got a lot of questions. Got a lot of questions.

Brandon:Go ahead.

Josh:You had talked about management getting paid after the investors. I had written down earlier, how are you actually getting paid so I understood on that first property that you guys had refied and you were able to kind of get money out there, but these properties that you’re holding onto long term, are you taking cash each month. Obviously, on the HUD you can only distribute cash twice a year so that’s probably not a monthly cash flow and because you quit your job so you know the real question is how are you living? How does somebody quit their job buy multifamily properties by raising money and then actually make a living? That’s I mean I think that’s probably a question that’s on a lot of people’s minds.

Brian: Sure thing and just to clarify that just a little bit so our management company is obviously in the operating expenses when I meant by managing, I’m the managing member.

Josh:Right.

Brian: Just want to make sure that you know people didn’t think we were paying our investors and then the management company gets paid. They get paid before our investors do, but so how I get paid is when I put these you know, these deals are long and can be challenging and takes a lot of time so I put together an acquisition fee structure so I get paid three points of the actual purchase price of putting these large opportunities together so you know $10.3 million, that was $300 plus acquisition fee paid at closing. I had a partners who we split that and so in that particular deal in that was kind of an upfront fee and then I share in you know, the cash flow, the tax depreciation, the backend profit. There’s some opportunities and just to touch on this some people put what we call asset management fee so usually it’s one points that as the quarterback of the team or the managing member, you know you can take one percentage of you know, gross collected rents and get paid one a monthly basis or annual basis.

For the deals that I’ve done so far, I haven’t baked in that in if you will into my opportunities because if we get to my 290—209-unit deal, I’m actually taking 50% of that deal and I’m not greedy by any means, but this again is a lot of work so I didn’t feel, you know, putting in or including an asset management fee on that particular deal. It didn’t make sense because I still want to make sure my investors get paid and I wanted to make sure the numbers worked.

Brandon:Sure.

Josh:That’s great.

Brandon:Just for people that are listening to this that aren’t sure, everything you’re talking about is very very normal with syndication and with putting together big deals so like nothing you’re doing is like, you know, weird, I mean you now because like when I think about it—if I were to do a partnership on a duplex, I wouldn’t typically get an acquisition fee at the beginning, you know, that’s just—that’s just weird right for the duplex, but with larger multifamilies, it’s very very common and that’s just the way it’s done so and one of the reasons I want to get to where you are.

Brian: Yes.

Brandon:I mean it’s one of the reasons I wanted to do show today right because I want to be you so.

Brian: Yes, well thank you Brandon for that compliment, but yes, you’re exactly right and this is like common practice in this particular segment of multifamily and most important it’s all about disclosures so you know I’m not doing anything that my investors aren’t aware of not included in the private place of memorandum and you know, we just need to disclose these things and disclose the investor and those investors are supposedly informed investors and they’re making the investment—the decision to invest with you so as long as everyone’s on the same page. You know, we’re not doing anything that’s you know, secretive for the investor.

Josh:That’s great.

Brandon:Great, great.

Josh:How big’s your team? Is it just you? I mean are you alone?

Brian: Yes, you’re looking at him right now and then for disclaimer, I’ve got you know a virtual assistant, that helps me with the administrative and marketing and again coming back to that 2010, you know, strategic, it’s how can add value? You know, I do have other people that I work on, you know, work with, but you know, I’ve kind of, I’ve been doing all on my own and to scale this business, I do need to you know, bring on more people to handle the acquisitions, the due diligence, the raising money because right now I’m doing a lot of that myself and I’m realizing as I move forward that I need to rely on other really smart people and I’ve had a fortunate experience on BiggerPockets actually. I—you know, I made a thread, I put a post up there and you know, I’ve been fortunate that people have outreached to and say, “Hey, how can I help? You know, sounds like this is a pretty cool thing. How can I participate?” You know, I’m vetting some people right now to see you know, the—and I only work with action takers, you know, those are that like myself, you know, I had to quit my job and I had a goal. I’m not wanting to work with those that they’re just kicking the tires. I want somebody that’s, you know, passionate and loves this stuff just like I do so.

Josh:Yes.

Brandon:Yes.

Josh:What kind of marketing are you doing? I mean you said you got a VA who’s doing marketing, you know, why do you need to market if you’re just going to buy big multifamily properties.

Brian: Yes so you guys probably know in sales it’s what ABC, Always Be Closing.

Brandon:Always Be Closing.

Brian: Yes so in my world, I’m ABM, Always Be Marketing because you always need to be marketing for really and I’ll break this down pretty simple for you or my world is in real estate it’s deal and dollars. It you know, people get so concerned and confused that they got to do all these other things, but you need to have the right deals coming in for your investors and you need the investors, you know, to close the deal so if you can play matchmaker, you understand from a marketing perspective or you know, what your investors are looking for and you market to that category of investors. They’re looking for you know a property built x and you know, looks like this in cash flow and returns. Well market to that subset of people. Then take that group of people and go market to the brokers, other investors, do direct mail, do those things and then your business, you know, it just happens faster because you’re not trying to swim upstream on both accounts. It just—it just makes a lot easier. It took awhile for me to figure that out, but now with my marketing, my VA is you know, I’ve got a website, I’ve got you know, I do direct mail. That’s how I found and bought my 209-unit deal on a direct mail piece.

Brandon:Really?

Brian: Yes, yes so it’s you know and marketing is just not one funnel. It’s multiple funnels, these conversations we’re having, it’s other investors, going to a local REA, it’s just not one-size fits all. It’s multiple funnels that are open and you never know when that either deal or investors going to come from and you just you know, you need to be proactive.

Brandon:Yes.

Josh:Excellent.

Brandon:I love it and I’m encouraged that you talk about direct mail worked for that apartment complex because.

Brian: Yes.

Brandon:I don’t—not a lot of guys and I don’t even like talking about that on the podcast because like that’s what I want to do, right?

Brian: Yes.

Brandon:I don’t want everybody and their brother direct mailing apartment owners, right?

Josh:Too late.

Brandon:Like.

Brian: Yes.

Brandon:I’m encourage the fact that that worked for you and that does work.

Brian: Yes.

Brandon:Very very cool.

Brian: Yes.

Brandon:Alright good deal well let’s move over to the Fire Round.

Announcer: It’s time for the Fire Round.

Brandon:Alright, these questions come direct out of the BiggerPockets forums, which people can get to at BiggerPockets.com/Forums. This is that same thing I mentioned earlier about people jumping in, just being active in that part of the site is a good way to build your reputation and I know you actually did that. I read through your thread. You have a thread about your kind of your story and it was fascinating and you just kind of start building your brand on BP so anyway, I’m going to throw some questions at you here, Josh or two,

Brian: Sure thing.

Josh:I’m might throw a few or so.

Brandon:You might throw a few yes, you know.

Brian: As well.

Brandon:Yes so I guess how would you answer these if you saw these in the forums. Number one, somebody said, “What are some examples of good deals on four unit or six unit apartments? Something just came on the market for $130,000. It’s not the best area, but I think they’re in pretty good condition.” How would you respond to that person?

Brian: Well, I guess first disclaimer is that—that’s too small for me.

Brandon:Sure.

Brian: Move on because from a scalability you know, I guess it’s all—it always comes back to the numbers and making sure that the numbers, you know, kind of match up and that you know, of there’s enough cash flow because you know, I just want to come back to something real quickly is if someone’s focused on a four to six unit and maybe again they live in Pennsylvania and they’re looking at another state, North Carolina and it’s producing $600 or eight hundred dollars a month. Each month, they have to go travel down there or you know, there’s travel expenses and at the end of the day, this is a lot of work so I want to make sure everyone knows that this is you know, this is not one morning I just hit the easy button and all of these you know, cash flow and acquisition fees came flying out. There’s a lot of work so I think getting very clear again on your “why” it does—does a six or eight unit, you know that get you started and I’m not—I’m encouraging anyone that you got to take action to get started, but does that fit the model of where that investor is heading in the direction. I hope I’m answering your question for you.

Brandon:Yes, yes, I actually like that a lot because I just get a lot of people. I love you answer there about the numbers. I get a lot of people who email and say Brandon, I found a fourplex for 150,000 should I buy it? First of all, like I don’t even time to answer to a lot of those emails, but I mean.

Josh:Whoa. Whoa. Are you bu—wow?

Brandon:No, I try to answer every email I get.

Josh:I’m Ben and I’m too busy to answer your email.

Brandon:I’m just saying.

Josh:That’s why I pay you buddy boy.

Brandon:Yes yes yes.

Josh:No, I’m just kidding.

Brandon:No, but I—so I mean here’s the problem right like that tells me nothing.

Josh:Yes.

Brandon:Does a $150,000 for a fourplex—does that tell me anything at all?

Josh:You need more information.

Brandon:Yes.

Josh:I think that’s one the big problems.

Brandon:Yes.

Josh:That a lot of new people have is and I was going to go there.

Brandon:Yes.

Josh:Is when you post, guys post some details because that doesn’t tell us anything.

Brandon:Yes.

Josh:What, you know, what are the rents? What are the expenses? You need to you know, if you want help in getting answers on if something is a decent deal or if other people think something is a decent deal, you need to give some details and if you’re not thinking about those details, then you’re not ready to buy that or any other deal.

Brandon:Yes.

Brian: If I can go there real quickly is you know, I’m a big fan of Stephen Covey, you know, have the end in mind so if someone’s asking you those questions, it’s okay. Turn it around and say, “Well, why is that a good deal for you?” You know, does that fit what you’re looking for?

Brandon:Yes.

Brian: A lot of people struggle they want somebody else to answer to that question. Why is it a good deal for you? Why is it a good deal for the investors and if you don’t have you know, answers to those two questions, you shouldn’t be in real estate or you shouldn’t be doing that deal.

Josh:Yes.

Brian: Or you need to learn a little bit more.

Brandon:Yes.

Josh:Yes.

Brandon:It’s like that—the Alice in Wonderland, the cat in the whatever—the cat—the Cheshire cat right and Alice has like you know, “Which way do I go?” He says, “Well, where do you want to go?” She like, “Well, I don’t really care?” He says, “Well, it doesn’t matter then.”

Or like if you don’t have that predefined like does it fit your goal? Does it fit your plan? I have no idea if a fourplex is good for you and so one thing I will say too, just to encourage people if you’re like somebody who wants to go and email somebody and ask them about a deal, whether it’s me, Josh, you know, Brian here or anybody in the world.

Josh:Don’t email me.

Brandon:Yes, well I was going to say, put it in the forums instead. I mean because.

Josh:Yes.

Brandon:We get certain things, but when you put it in the forums with thousands of people that could see it, you’re going to get advice from a lot of different perspectives and get advice from a lot of people that can then jump in and help you in a way that any of us three or anybody that you talk on one on one won’t be able to do so that’s my encouragement, yes.

Brian: Sure, good point.

Josh:That’s great.

Brandon:People jump in there and post your stuff if you have questions.

Josh:I always tell people to do that by the way.

Brandon:Yes.

Josh:Again, they’ll hit me up. Hey, I’ve got a question, I want to know this, right. I would love to help you.

Brandon:Yes.

Josh:Post it on the forums A so you know, you’ll get other answers.

Brandon:Yes.

Josh:Because mine may not necessarily be the right answer.

Brandon:Yes.

Josh:B so that you can get multiple feedback.

Brandon:Yes.

Josh:Multiple opinions.

Brandon:Having other people it’s interesting.

Josh:Other people can read it and learn as well so yes.

Brandon:Yes.

Josh:Alright cool, this Fire Round is really going quite slow.

Brandon:It’s a slow burn, Josh.

Josh:Yes, it is.

Brian: Slow burn.

Josh:It is a slow burn. No there you go. Alright second question is apartment demand and development is surging in some market including Texas. What would be your criteria for developing multifamily?

Brian: Well, again, I hate to take the sideway here. I don’t do development.

Josh:Yes.

Brian: I target those assets that are already built. My model is built on value add, those properties that where we can come in and force valuation by either you know, decreasing expenses, increasing rents, doing some type of rehab so my track record I don’t know how to answer that one from a development perspective like building the asset out of ground.

Brandon:I think your answer.

Josh:There you go.

Brandon:Is actually really good in that like—that’s not your niche, you’re not distracted by the shiny object of development just because it might be hot in one market. You know, your good at multifamily, value add of our apartment investing.

Brian: Right.

Brandon:I love that.

Josh:You’re very wise Brandon.

Brandon:Thank you. I’m a wise guy. That’s what they keep saying. Alright number three, what would be a good job like career to try and work for to learn about buying and selling city apartments. Like basically like how do I get a job in the industry to learn more?

Brian: I think you know, being an acquisition manager is a good start if that is your skillset of course so that if you know you understand the numbers or you know, being out—being a networker, being a marketer because it all comes down to you know, really finding the deals and finding that investor and if you can add the most value by bringing someone a kick, you know kick butt deal or your able to find money and bring that to someone’s deal. You’re going to be well sought out. You know so someone came to me and said, “Hey, I’ve got—I got this deal or I’ve got this money.” I’m well, why wouldn’t I want to partner with that someone you know, someone so I think the best job would be to again, either being an acquisition person to understand the numbers and how to put the deal together or being like a master networker.

Josh:That’s great.

Brandon:Yes. I love that.

Josh:Right on.

Brandon:Just to add on to that because you know, this is a slow Fire Round today so I’m listening to on Audible, I’m listening to the book 80/20 Sales and Marketing by a guy named Perry Marshall. In that book there’s a—this long discussion on the idea that most of what a person does doesn’t produce results, right 80/20, which says 20% of what you do produces 80% of your income so in this.

Josh:Pareto Principle isn’t it.

Brandon:Yes, yes, yes. It’s the Pareto somewhere, yes that whole like thing. It was in the Four Hour Work Week. It’s in Pareto, yes all that good stuff so the idea that so when he was talking about in there is his argument in the book, which I agree with is whatever you’re doing in life, look at what 20% that makes you the most money and then hire someone to do the other 80%. I’m going to twist that around to that job question or whatever and say if you can find somebody like Brian or like the thousands of other guys that are out there doing what you want to do. Do their 80% that they don’t want to do that’s not making them money. Let them do their 20% and you will make them way more money because you’re taking that load off of them.

Brian: Yes.

Brandon:If you can find a guy like Brian and do that 80%, like the marketing like you said.

Brian: Yes, that—Brandon, that’s gold right there what you just said.

Josh:That was gold.

Brian: It was awesome. That’s it.

Brandon:Thanks.

Josh:Yes.

Brandon:I’m a wise guy.

Josh:Wow man what did you eat your spinach this morning? What’s going on here buddy?

Brandon:Yes, yes, yes.

Josh:Alright, what do your minimum cash flow requirements for buying multifamily and why? Do you have minimum cash flow requirements?

Brian: I do so minimum for me is at least $5K a month and not including the acquisition fee.

Josh:Okay.

Brian: I want to make sure my investors—well, investors need to get paid first. We have a fiduciary responsibility, but you know, from where I see my business going I want to scale when the next you know, ten years to control $250 million and I want to $100K of passive income coming on a monthly basis and it’s a very strategic. You know, I could go out and tomorrow probably buy a deal, but it’s—it doesn’t fit, you know, these deals—the deals right now is very competitive. There’s a lot of you know, there’s a lot of assets that are trading at ridiculous pricing so we really need to be careful, understand our numbers, but so yes, I mean, you know, $5K a month on a deal is where I need to be on a minimum basis.

Josh:Got you and by the way, you helping tens of thousands of investors get better at this is not going to help this competitiveness so you know. Just so you know.

Brian: Yes. Never stop while I’m ahead, but.

Josh:Yes. Oh sorry I’m not going to answer that question, Brandon.

Brandon:Yes, yes, yes. Alright next question, we’ll see—I think we kind of covered that one, but we’ll say it anyway when looking for a multifamily property, what do you look for?

Brian: It comes back to, you know, once I understand I’ve got a pool of investors are looking for the deal and then I go out shopping basically for them so again I’m a value add guy so I got to be buying a property and I’ll use my 209-unit deal as an example. I bought through a direct mail and direct mail didn’t happen just on one letter campaign. I think that’s where people get a little bit frustrated. They do one result. They get a zero response rate and they say, “This stinks. I’m done.” It’s a—in my model, it’s a very consistent approach, three, five, seven step letters to that you know, owner, I’m very targeted on what type of property I’m going after so for me I’m looking for something where I can fix up, increase the rents, decrease the expenses, I bought that 209-unit deal for $6 million on a day of purchase it appraised at $7.4 million and I’ve been able since ownership, I bought that a year ago so I’ve been able to increase rents on $100 per unit.

I’ve spent my cap x budget is $750,000. I’ve spent $500 grand so far for door and exterior, slab, you know painting, interior upgrade such as you know, switching out the lighting and the carpet. Just adding more of that little curb appeal to force value because we haven’t really covered how multifamily is valued, but it’s all in the net operating income or the NOI so we want to be you know, drastically pushing that NOI so that’s going help our valuation when we either sell or refinance.

Josh:Since you opened the door, you know, let’s keep the slow burn going really quickly what is NOI, how does somebody figure that out?

Brian: Yes so NOI is basically taking bigger gross collected rents and subtract out all of your operating expenses. What’s not included in NOI is your debt service what you have to pay the you know, your bank, your mortgage, the interest so that get’s you down to NOI and multifamily properties are based from a value basis. It’s not based on sales comps. It’s based on cap rates and those cap rates are at the local level so a cap rate here in Pennsylvania where I’m at for a C class building, a C class area might be, you know, a five-six-six and a half cap. I go to Texas and that same asset might be an eight cap or you know in a different market. Texas is pretty competitive actually, but so each you know, market is driven by that local level of cap rate, and that’s what determines valuation.

Josh:Right on, right on. Alright so my last question I’m not going to read because I know you’re not actually going answer, not because you’re bad guy, but because I know how you answered the questions you want to answer and I don’t answer.

Brandon:It has nothing—yes, you haven’t done it so.

Josh:Yes, yes.

Brandon:Don’t do it.

Josh:Alright so so I’ll just ask you a quick question. Hypothetically, should I be looking for deals that are on market or off market? Has not been asked or I’m sure it’s been asked a 100 times in the forums, but you know, that’s the final Fire Round question.

Brian: Yes so is any market really off market? You know, a broker may tell you that it’s off market, I can tell you for me, my deal in Dallas was off market because I sent the letter directly to the seller. It’s a lot of work to actually get letters to the seller, but that’s a different, you know, that’s a different topic right now, but so I bought deals that are on market and off market. I think it all comes down to what do you want to pay for it because a broker, a seller is going to tell you, hey my deal’s worth $10 million and the numbers only check out at $8 million.

That’s your offer or that you know, your strike price should actually be $7 million and then you work up to that $8 million so I think it really comes back to taking motion out of this and if a deal is one market or off market, as long as it fits the investment parameters that you and your investors need to hit and you can make the thing work and you’re—you have a strategy of once you buy the property and how are you going to execute the game plan and then how are you going to execute, you know getting paid at the end of the day because that’s what you and your investors are all striving for. Either that sale or refinance and you know, cash flows along the way, so you know, I’m open to any deals as long as it fits in my investment criteria.

Josh:That’s great.

Brandon:Great. Perfect.

Josh:Fantastic.

Brandon:Alright, moving on to the world famous.

Announcer: Famous Four.

Brandon:We ask these questions to every guest and so we’re going to throw them at you right now.

Brian: Sure thing.

Brandon:Number one, what is your favorite real estate related book?

Brian: Ooh, can I name more than one or is it a limited one?

Josh:Go for it.

Brandon:I’ll allow it this time.

Brian: Okay so—I think one I you know, again focus on markets across the country and Dave Lindahl has book called Emerging Real Estate Markets and since I also raise money through a syndication. There’s a guy name Gene Trowbridge that has a book, It’s a Whole New Business and how I raise some of my money about 30% of my money comes through self directed IRAs. There’s a guy, he’s not as well known as some of these other ones. Joe Luby has a book. It’s Keep It Advanced Tax Strategies for IRAs so you know investors that want to use IRAs to invest in real estate. You know, how you can participate in these types of deals.

Josh:Fantastic.

Brandon:Yes.

Josh:Alright, cool. Favorite business book or books?

Brandon:All of them.

Brian: Yes I got—okay I got a couple of those as well. You know as someone that you know is just starting your own business, there’s a lot of moving targets and for me I need to really focus and Getting Things Done by David Allen.

Brandon:Yes.

Brian: Was a benefit for myself. The E-Myth Revisited by Michael Gerber. Think and Grow Rich I think any entrepreneur, business owner should consider reading Napoleon Hill’s book. I’m a big die hard Tony Robins guy so when I put this plan back together, you know I flew to Fiji I was at Tony Robins at his Business mastery Course and Tony’s got a great program throughout, you know, if it’s just not business, got some other programs so he’s got a business mastery course. I’m a big marketing guy so Dan Kennedy’s got a book because I’m targeting that affluent, you know investors that can invest $100K. He’s got a book called No B.S. Marketing to the Affluent and I’m still bad at this, but there’s a lady Julia Morgenstern. She’s got a book Never Check Email in the Morning because you know, when you wake up in the morning there’s things that you should be doing, getting those top three priority things done and email can distract you so.

Brandon:Love it. I love it. I actually added five books to my list on Amazon.

Josh:There you go. There you go.

Brian: That’s great.

Brandon:Alright cool. Alright Josh.

Josh:What about hobbies? What do you do for fun? Do you got two little girls?

Brian: I do.

Josh:What you know.

Brian: Yes.

Josh:What do you guys like to do?

Brian: Yes, we like to travel actually next week we’re heading to Arizona.

Brandon:Nice.

Brian: Do some family time at the end of August. We’re heading to the Outer Banks. We enjoy our time traveling and the type of business I’m in, my—I basically—because my properties are across the country, I you know can work basically remotely or virtually. I like to golf even though I’m not as good as I’d like to be, but I do enjoy getting out, swinging and you know, working out and you know, just enjoying this business.

To me I think when I was a CPA and that grind. That was work to me. Now I’m in my passion state so this is fun. I love putting deals together, talking with people, these conversations we’re having, I get you know that thrill so that’s kind of my, I guess kind of hobby because I love—I love the business.

Josh:Outstanding.

Brandon:Yes, I love that. Cool, alright, my final question of the day. What do you believe sets apart successful real estate investors from those who give up, fail, or never get started?

Brian: I think it’s simple answer is the “why”. You know, understanding what you want in your life. What you want to happen. How much money you need to make and taking action towards those and those actions, you know, if like I said early—I need a minimal of $5K a month.

Some people are like wow, that’s a lot or maybe that’s not enough, but anyway what would be three action steps, you know, to get towards that goal and they maybe they’re the baby steps. I mean think of are social security number. It’s three parts. Think of our name, first, middle, last name. That’s three parts.

Chunk this thing down into small parts and then each day, each week, each month, take actionable steps to that big goal and then you know, at the end of the day, we can all read as many books as we want, but as I said before. You got in the cage. You got to take swings. You got to take risks. Surround yourself with the people that you want to be that’s doing those things that you’re doing. Just you know, surround yourself and get in that same circle of influence as them.

Josh:Outstanding.

Brandon:Brian, you and I should go golfing some day. I need to surround myself with you.

Josh:I want to bring a video camera to that.

Brandon:I’m such a terrible golfer, you know.

Josh:Aw, I can’t to wait to see. I can’t wait to see. Alright, Brian, before we let you go, is there—where can people find you? Obviously you’re on BiggerPockets. You have a website is you know.

Brian: Yes.

Josh:No, share away.

Brian: Sure thing so my website is AdamsInvestorGroup.com and you know—I—this community that you guys have formed, you know, I put this thread out and there’s some really good nuggets in my opinion. You know, in the thread about me quitting my CPA. I forget how it’s worded, but go to the multifamily forum and I tried to address as many questions if not all the questions that people have—you know, asked so I want to you know, give back as much as I can because this pathway was not easy, but through this I’ve learned so much and If I can help some others. You know, get that massive action, get those goals, financial goals. You know, go away. You want me to give my personal email or phone number or.

Josh:That would be a bad idea.

Brian: Okay, alright then I’ll.

Brandon:Only cause you’ll get inundated.

Brian: Okay, thank you for that then I will hold it right there.

Josh:Yes.

Brandon:Cool, cool and I’ll also link to in the show notes. We’ll link to that thread of yours in the forums.

Brian: Yes.

Brandon:People can check that out at BiggerPockets.com/Show135.

Brian: Wonderful.

Josh:Brian, thanks so much for coming on man, we really appreciate it and thanks for being a part of our world.

Brian: Thank you. Thank you so much. I appreciate the opportunity.

Brandon:Alright, thank you Brian.

Josh:You got it. Alright guys, that was Brian Adams, big big thanks to Brian for sharing just everything. Yes that was outstanding man.

Brandon:Yes.

Josh:I mean I think newbies and you know others who’ve been in the game a little bit are going to just be blown away that they can probably do this stuff too.

Brandon:Yes. I love his technique of this idea of you know having a plan. Basically lining up the dominoes as the one thing he talks about and just knocking that out like because it’s his plan.

Josh:Yes.

Brandon:You know like he didn’t get distracted by this stuff.

Josh:Yes.

Brandon:He’s very single minded and straight forward in what he’s doing and I just love that so.

Josh:Yes, I mean in the Fire Round we were asking him questions from people and he couldn’t answer them not because he didn’t want to, but because you know, he doesn’t get distracted.

Brandon:Yes.

Josh:He does what he does. He’s focused and he’s on it and I think that’s a great way to go ahead. You know, the one thing, right?

Brandon:Yes.

Josh:To go ahead and build out your business so that’s awesome. That’s awesome. Well great, fantastic show, yes. That was a lot of fun and I’m excited to go buy a few you know, multi hundred unit buildings.

Brandon:Yes, me too. Me too.

Josh:That’s true.

Brandon:Hey you know what we’ve never really done before on this show and we should.

Josh:What’s that?

Brandon:I’m going to ask you, well I’ll first tell you this, if you guys are listening for the interview. You can go at this point. You’re you know, we’re done with this show, but I want to ask you a question Josh.

Josh:Oh.

Brandon:I heard this on another podcast recently, what movies have you been watching lately? We’re just going to take this away from real estate, gets fun here for a minute. What movies have you been enjoying lately?

Josh:What have I been enjoying lately? Wow!

Brandon:And or TV shows.

Josh:Ah yes, that TV shows probably a better idea.

Brandon:Okay.

Josh:You know and there is nothing on TV during the summer. Absolutely nothing.

Brandon:That’s a lie.

Josh:We just caught Worky Blue yesterday, which is pretty you know, it’s one of these shows that we’ve liked for a long time. I—this summer have loved Silicon Valley.

Brandon:I haven’t watched it yet.

Josh:Tobby Washington. Oh you got to see it, man.

Brandon:I know.

Josh:Because it’s awes—it is literally this show about these just nerdy guys who have built this outstanding company, but it’s—you know what I think this summer all the shows have this kind of painful attribute. It’s like they have these lead characters that you really like and you really want to see succeed yet they have these weird quirks and they keep screwing things up and so it’s kind of painful and you’re cheering. It’s like The Last Man on Earth, which was another show that we watched. You know, end of the fall, end of the spring. I don’t know, that’s kind of what I’ve been watching. What about you?

Brandon:Nice. I just—I have like 30 minutes left of Daredevil on Netflix.

Josh:Is that with a—that’s not Ben Affleck.

Brandon:It’s not the Ben Affleck, no this is TV show Daredevil that Netflix released.

Josh:Oh.

Brandon:It was rated the highest show on all of Netflix. It was like.

Josh:Really.

Brandon:It beat out House of Cards in ratings like.

Josh:Was it good?

Brandon:I expected it to blow my mind. No, I don’t think it was very good at all. I mean.

Josh:That’s terrible.

Brandon:It’s fine. Like it’s fine, right it’s an okay show.

Josh:There goes Netflix as a sponsor.

Brandon:I know, no I mean it—I think it’s fine. I think anybody who says it’s better than House of Cards is insane.

Josh:That’s hard to beat.

Brandon:It’s hard—I mean like it’s a fine show. It reminds me of something that you’d maybe see on like ABC Family like it’s a.

Josh:Is it a drama or is it like a, you know.

Brandon:It’s like an action.

Josh:It’s like cartoony.

Brandon:It’s very cartoony, action hero, you know it’s a comic show.

Josh:Okay.

Brandon:Like and they do a good job. For a TV show it’s great. It reminds me of a movie, but like I don’t it just—there’s so many like cheesy things. Maybe I just kind of not into the comic book thing. I don’t know, but it’s fine. It’s a good show, but I just personally. I’m like this is nowhere near what I expected it to be so.

Josh:Yes. Yes well, you know.

Brandon:You know you can win them all. Whatever.

Josh:No, no, yes, but otherwise I don’t know. I’m not, you know, we’re not doing too much of that at night. We’re—we’ve been playing some backgammon, you know, getting a little gaming.

Brandon:Let’s see.

Josh:Which is fun do you play backgammon.

Brandon:I don’t even know what backgammon is. Isn’t it you get the board when you get like a chess set. Usually they flip it over and like, it’s a backgammon board.

Josh:Yes.

Brandon:When I was a kid I got that.

Josh:Yes. That’s what it is. It’s one of those prizes that every kid doesn’t want to get.

Brandon:Yes, I guess, yes. I don’t—I never played it.

Josh:It’s fun. It’s a gambling game actually, there’s like a dice that.

Brandon:Teaching kids to gamble. Good job.

Josh:There you go, there you go. Come on, what kids did not gamble with their grandparents growing up? You played cards, you played war for a quarter, you—you know. That’s a terrible game by the way.

Brandon:War.

Josh:The never ending, worst game ever,

Brandon:Just flipping cards like yes we played a lot of that and then I shifted to a Egyptian Rat Race. Ever played that game?

Josh:I’ve not heard of that one.

Brandon:Best game of all time. You and I like the BP group should play it some time when I’m in Denver next. Like it’s really—it’s absurdly fun.

Josh:Nice.

Brandon:Anyway, yes.

Josh:Outstanding. Awesome man well cool. I’m excited for you to leave.

Brandon:Thanks.

Josh:I mean—you know, I wish you luck when you go on your journey to where are you going? Disneyland?

Brandon:Disneyland.

Josh:You’re going to the Florida one? The California one?

Brandon:California one, yes and I’m hoping to have dinner at the Pirate of the Caribbean ride. That is my ultimate goal for this trip. That’s the only thing I really care about this trip is dinner at Pirates of the Caribbean.

Josh:Nice. I will tell you that when we have gone over the past couple of years, my girls are a little afraid of the—there’s a big drop. I’m going to blow it for everybody who’s never been on that ride, but there’s a big drop in that ride and my little kids did not like the big drop. Let’s just put it that way.

Brandon:I’m sorry. I’m sorry. You know.

Josh:Yes, I have lots of Disney stories, but I can’t share them with the world. They are some fascinating Dorkin adventure Disney stories.

Brandon:I’m looking forward to hearing them off air.

Josh:That’s all. Yes, yes. Alright guys.

Brandon:Alright let’s get out of here.

Josh:Well thanks for listening, show 135 of the BiggerPockets podcast check it out. Well you’ve already checked it out if you’re in this now so get out of here. Follow us on Facebook, jump on BiggerPockets, you experienced guys jump and help the newbies and everybody get in there and make it happen and then get out there and actually make it happen in the real world so thanks for listening. I’m Josh Dorkin, signing off.

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Josh:Have I told you that I.

Brandon:Is that a song?

Josh:Brian Adams?

Brandon:Yes.

Josh:Yes. Yes.

Brandon:Okay.

Josh:Alright.