Why I Sold a Rental Property Portfolio That Took Me YEARS to Build

David:
This is the Bigger Pockets podcast show 752.

Lee:
I’m Lee Yoder and I was able to become a real estate millionaire on a middle income salary and I believe you can too.

David:
What’s going on everyone? This is David Greene, your host of the Bigger Pockets Real Estate podcast. Here today with my co-host Andrew Cushman, who’s also one of my very good friends and also my partner in multifamily investing. We brought him on because he is an expert in multifamily to help interview today’s guest, Lee Yoder. Lee has a fantastic story and you guys are going to love today’s episode. Lee talks about how he took a big pay cut to keep his job, but got time back to start investing, how he got his wife on board to support him in his crazy real estate dreams. And how he’s bought several apartment complexes and is ready to buy more all while making a middle income salary. Andrew, how are you today?

Andrew:
Man, you know what? I am talking real estate with you. Business is good. I’m healthy, and it is snowing like crazy in the mountains. I’m going to be skiing till August, so I’m feeling better than the people you see in pharmaceutical commercials.

David:
That’s awesome, man. This is Andrew’s checklist of everything you want in life. If there was good waves added somewhere to where you could be surfing, this would be your holy trifecta.

Andrew:
You know what my goal sometime in the next month is to go surfing in the morning and snow skiing that same afternoon.

David:
I have no doubt you’ll hit it as you seem to hit all of your goals. Speaking of which house our apartment complexes doing?

Andrew:
It’s well ahead of pro forma. Just sent all that information to the lender to let them know, “Hey guys, we’re doing great. You don’t need to worry about us.”

David:
All right, like that, you actually got, I think I owe you a personal financial statement. I got to get on that because I did see that email the other day. But enough about us, let’s talk about today’s show. What was your favorite part of today’s interview?

Andrew:
Yeah, I want to highlight there was a lot of favorite parts. Lee really dropped a lot of fantastic information, especially for those who are just kind of looking to get started or used this downturn as an opportunity to wedge in. It’s been really tough to do, but one of my favorite things is that Lee found his original mentor on Bigger Pockets. All right, so everybody listening, you’re in the right place already. All you got to do is just make use of it. It’s great to listen to the podcast or watch the YouTube and suck up all the information, but to really get the benefit, go on the forums and interact with people.
Go to BPCON and meet people in person. Go to the local BP meetups and get to know people. That is how Lee got his first mentor that helped him through his first deal, and that guy has continued to invest with him to this day as he’s grown his business. And that kind of leads me to the quick tip which is, stick around to find out how Lee used networking relationships and then LoopNet to break into the business and find out. You’ve heard LoopNet is where deals go to die, but in actuality you could use it as your secret weapon to get into multifamily.

David:
There you have it if you are also on a middle income salary and want to figure out how you can get deeper into real estate investing, this is an episode you do not want to miss. We just asked if you enjoy it. Would you please leave us a comment on YouTube and would you share it with somebody else? If you enjoy these shows, which I really hope you do, you could also leave us a five star review wherever you listen to your podcast at, those help us a ton. All right, let’s get to Lee. Today’s guest is Lee Yoder. Lee is an Ohio Farm boy turned physical therapist that struggled like many of us do with finding a job that was good for him and worked for his growing family.
He had a great opportunity to scale the corporate ladder, but took a step back taking a 30{ecd1c82889c5dde6baa4cae2f6d3d4c330bac74c2b880dafaca78809ece33a56} pay cut to do so. The allowed him to buy his time back and start his first flip, which was the catalyst to his investing journey. Lee believes anyone could follow his path for starting a real estate investing side hustle while working a full-time job and getting your spouse or partner on board. Growing his portfolio to 34 units and then actually completely sold off his portfolio to reset his priorities, Lee is now a general partner on 283 units and has unlocked his true investor potential. Lee, welcome to the show,

Lee:
David. Thank you. Excited to be here.

David:
Yeah, and my co-host here, Andrew Cushman. It almost sounds like I was reading his origin story. He’ll be chiming in later in the episode to talk about how he started with flips and realized that his heart was in multifamily investing, so that’s interesting. Okay, 30{ecd1c82889c5dde6baa4cae2f6d3d4c330bac74c2b880dafaca78809ece33a56} pay cut. Let’s start with that. What did life look like for you at that time? How old were you? What kind of income was this job bringing in for you and why were you okay taking a 30{ecd1c82889c5dde6baa4cae2f6d3d4c330bac74c2b880dafaca78809ece33a56} pay cut?

Lee:
Yeah, good question, David. Well, because I saw a bigger, better path, I saw the dream of real estate in the life I thought maybe could bright us, but also David because we were living below our means. So taking that, it was like 30{ecd1c82889c5dde6baa4cae2f6d3d4c330bac74c2b880dafaca78809ece33a56}, maybe $30,000 pay cut, and we still could have the life. We could still pay for everything. We really didn’t have to change our life very much. So that’s kind of an important step. If you can live below your means, maybe you can go do something different, make some decisions that you wouldn’t be able to make if you’re living paycheck to paycheck and you need that.
But we just put ourselves in a position where we weren’t spending all of my paycheck, so we had the ability to do that. We didn’t have to change our lifestyle because I took that pay cut. So that was kind of a first important move. We were just smart financially, I think got a good down payment on our house, didn’t buy too much house for us, so we were just in a position where we were able to do that. So it wasn’t like we had to change our lifestyle in order to do that.

David:
That is such an important point to note. You hear all the time when people ask, “How were you able to quit your job or downsize? How did you find the time to do it?” Well, sell your BMW, get yourself a civic, right? Get out of that four bedroom house with a $4,500 a month rent and go live with your in-laws. There’s ways that you can do this if you’re willing to make the sacrifice. It all just comes down to pleasure and pain and how bad you want it. I frequently use the example that wealth operates on a spectrum. On one end you have comfort on the other end you have profit. The closer you can get to profit, the better you’ll do. But it comes at the expense of comfort. You’re going to give up comfort.
And all the people I know that were blue collar workers that made it, they all had that same pattern. So if you’re asking yourself the question of how do I do what Lee did just understand, you got to be tough. You got to start off with understanding you’re going to make sacrifices and I love that you and your family just decided we’re going to live beneath our means so we could do this. So thank you for setting a great example. I’m interested to hear more about what your next steps were. So walk us through that first flip experience. Was it what you thought it would be, and did you come away with any lessons on that?

Lee:
Yeah, it definitely wasn’t what we thought it would be. It definitely wasn’t what I sold my wife on because I’m listening to podcast learning about passive income and how you can get into real estate and let your money work for you and do all that. So I’m selling my wife on the dream and no, when we got into the flip, that’s not what it was, and she reminded me of that. So we both learned her lesson and she helped me learn that lesson. It’s hard to just jump right into multifamily, especially the bigger stuff. So flipping could be a great way to get started. Yeah, so many stories there, David. I’ll let you guys lead it, but it was what a lot of people say, it was just a different job. So just kind of high level, I took that pay cut and we made about that much back with the flip.
And another reason I left, I didn’t really set this up, but another reason I left that corporate space and was looking for something else was just because I was wanting to get more time back with my family, more flexibility, more freedom. And I got that when I left my corporate job, because I didn’t leave and go all into real estate, I left and went back to doing home health physical therapy, which I had done before, which is a job that offers a lot of flexibility. Which offered me the ability to do real estate on the side and start this real estate side hustle. But I just didn’t make near as much as I was making the corporate job. But now I had all this flexibility, but then I filled in all that time with this flip and it was very time intensive.
I did a lot of the work myself because I was scared and we didn’t have a lot of money and I didn’t know the contractors, so we just did a lot of it ourselves. And so it was just kind of interesting, I felt like God gave us this picture of like, “Hey, this is what flipping’s like.” Because I took this pay cut, bought up, got a lot of my time back, but then filled it all with a flip and made that money back with the flip. So it was like I gave up this really busy job for a not so busy job, but put a flip on top of it and I was just as busy and made the same amount of money.

Andrew:
So I want to say two things. Number one to we’re, Lee, I don’t know if you probably know this, but you’re talking to David Greene who has the Olympic gold for living below your means. And that guy who was making six figures as a cop and sleeping in his car.

David:
That’s right.

Andrew:
And then he graduated to renting a room from a dude. So for everybody listening, listen to Lee’s example. It doesn’t have to be that extreme. If you can do it, great, but if you’re like, “Well, I’m not going to live in my car and work 18 hours a day, I can’t do that.” Listen to what Lee just did. He cut back 30{ecd1c82889c5dde6baa4cae2f6d3d4c330bac74c2b880dafaca78809ece33a56}, freed up a little bit of time and then went and did a flip to supplement that. So in terms of that flip, Lee, could you give us just real quick run through the numbers on that, maybe buy, rehab, sell, what was your true net at the end of the day?

Lee:
This was back at toward the end of fall 2017. So just to set, it wasn’t today, but I bought a house in our hometown. I bought an online auction kind of site unseen. Now I did go to the site and look around, you’re not really supposed to do that. Bought it for $80,000, put about 70,000 into it. So ends up at 150, sold it for 190, take out agents commission, stuff like that. We made about $30,000 on that. So that’s where I said I took this $30,000 pay cut, then added the flip on top and made 30,000 with the flip. And so we made the same amount. So it wasn’t any different. But again I’ll just say, but it did get us into real estate. It did get us started.

Andrew:
And so for everyone listening, what is your hometown?

Lee:
Lebanon, Ohio, just north of Cincinnati, Ohio.

Andrew:
Okay. So what you’re saying is you can successfully do flips and multifamily even in the Midwest.

Lee:
Oh, yeah. Yeah, believe it or not, especially now as the economy might be turning, you might look at the Midwest.

Andrew:
No, you’re absolutely right. And that’s when I said a lot of times, especially when you’re getting started, it’s like, “Oh, my market’s too expensive.” If you live in San Francisco or, “I’m in the Midwest, nothing happens here.” That’s not always true. You just have to adapt your strategy. Lee, you’ve done a really good job of saying, “You know what? I like my hometown. I know my hometown,” which gives you an advantage. And then you’ve made both flipping and multifamily work there. So good job.

Lee:
Thank you.

David:
So Lee, how did you find this first flip?

Lee:
Yeah, I was on Bigger Pockets at the time a ton, and listening to what other people were doing and just looking around online. Like I said, I found this one on online auction, I think it was auction.com or xoomzoom.com. One of those just found it online. I was just looking online for deals, looking on Zillow, found this one, thought it was a pretty good deal compared to the other stuff I was seeing.

David:
All right. And then did you negotiate it through an online auction?

Lee:
Yeah, not much negotiating. I ended up with the highest offer. You’re just bidding and went a little bit higher and I told my wife go and we won it and jumped in.

David:
And then what did you do when it came to getting contractor bids? How did you decide what the rehab was going to be?

Lee:
Yeah, again, just referrals. I think that the only way, especially when you’re getting started, I mean how do I know who’s good? You got to go with referrals. So I start calling around and I actually, one of my first kind of mentors through Bigger Pockets just saw that he was in my home town, Lebanon. He was here doing stuff, had rentals, was talking on Bigger Pockets. So I said, “Hey, can I meet you sometime?” And we met at McDonald’s here and I mean, cool story, just fast-forward. The guy has invested with me in a couple of my syndications and he’s a good friend of mine, but he helped me get started and introduced me to some contractors. So that’s the way to do it is network with people in your area and Bigger Pockets is the best place to start.

David:
That’s a great point. And people always ask the key to networking and the answers usually just, “Well, don’t be a butthole.” Just be someone that people like. And it’s amazing how the difference between a contractor or a referral you’ll get from someone that likes you versus the person who doesn’t know you at all or sees you as competition or doesn’t trust you, it doesn’t work as well. So just personal development is the first place to start when it comes to getting good referrals. So let’s hear about the next deal. So you flip that house, your wife is now not anti-real estate because you made $30,000. I’m sure that you’re holding your breath because if you lost money on the first one, that’s like a death sentence you can never get out of that.

Lee:
Might be done.

David:
So what was your next deal?

Lee:
Yeah, so the next deal we did at Duplex, we actually got this at the county auction. Interesting enough, I just brought that guy up. I was bidding against him at the auction and I beat him out. He quit bidding and then I mean fast-forward again, I ended up selling the property to him once I was done with it. But bought this duplex in Lebanon for $90,000. It was rough. One side was vacant. The guy that lost it was moving into a nursing home, so he was going to vacate, but then his niece and a couple other guys, they were squatting in it. So very interesting takeover on that one. I’ve got a good story, but I bought that at the county auction for $90,000. This was now in the fall of 2018.

David:
Okay. And did you pay cash for that since it was at auction?

Lee:
Yeah, I did mention that on the flip. So we used the home equity line of credit. So our house had gain some equity. By the time we did a flip. We’ve been living in our house for five years, bought in 2012, so good time to buy. And so we had had a good amount of equity. So we used a home equity amount of credit on both of these and we got all that back after the flip plus 30,000. So we had more to put into the duplex.

David:
Okay. And did that flip go well as well?

Lee:
Yeah, that one went much better. So now I knew some contractors, this is a big part of anybody’s story. You start building momentum each deal you do. That’s why people say you’ve just got to get started because you can’t start to build momentum unless you get started. So I knew some contractors, I met some more, I had a chance meeting of some contractors that are actually still working with us today. They came out to buy some kitchen cabinets that I was selling because they had a few in there and I didn’t want to use them. So selling them, they came out in a rickety green van-

David:
I love that.

Lee:
… with a bunch of supplies in. And I was like, “What do you guys do?” And, “Oh, we actually renovate units up in date.” And I’m like, “Well would you do this one?” And end up doing great work for me? So just had more help. I did a lot less of the work, but we’re just more sure of ourselves. We had more reserves that 30,000 we made, we didn’t need to spend that. We’re rolling that into the next deal. So I had some more cushion and so we felt more comfortable having other people do the work. So much better experience. David, you said if I lost money on that flip, my wife would’ve been out and that’s true. But I kept saying I had to prove two things to her. One real estate can make money and I did hit that one, but two real estate is going to provide a better life for our family and I missed pretty badly on that one.
So on the duplex I felt like I hit both. On the duplex we ended up making money and it was more hands off and we set a passive income. So once we did, we completely gutted both units and renovated them. But then we got a couple residents in there and we were landlord, that one we managed that one ourselves and we saw not much obviously just on one duplex, but we saw every month the income is more than our expenses. And we started to see, okay, this is more that passive income lee that you’re telling me about the dream that everybody on Bigger Pockets is talking about. “Okay, I can see it.” And so this one I end up convincing her a little bit more about real estate with this deal.

David:
I’m going to take a little side sidetrack. I don’t want to go too far down this road. I just want to get your honest opinion about this. There’s no judgment. You mentioned the phrase this passive income that everyone on Bigger Pockets talks about. I throw this to both of you guys. Have either of you experienced the income being as passive as it’s talked about on Bigger Pockets on whatever social media follower that you look at? Or as your experience been that real estate isn’t quite as passive as maybe the dream that you got sold? I’ll start with you Lee.

Lee:
Yeah, I’d love to hear what Andrew has to say on this one, but I would say as long as you’re the one… I mean it sounds stupid to say, but as long as you’re active, if you’re the one going and getting the deal and signing on the loan and having anything to do with it, even if you buy the turnkey property but you’re the one owning it, it’s not going to be that passive. And there’s different levels of being passive. So no, I have not, but I’ve chosen not to be passive. So even when I talk about passive, maybe a little bit less work, but we’ve always been the ones buying the property and we’ve always used third party management after this duplex, but we’re still actively asset managing. So I have not experienced it, but for our passive investors, I’ve seen them experience it. So you can get that, but not if you’re the one buying the property and signing on the loan and being the asset manager. No, it’s not going to be passive.

David:
Andrew, what do you think?

Andrew:
I would say my answer is absolutely yes and heck no at the same time. It depends on what you’ve bought and who you have on your team running it. So early on when we were getting started in like 2013, we bought some rough sea properties in rough parts of Dallas. And I can guarantee you there was absolutely nothing passive about that. There wasn’t a day that went by that that property was passive. On the other hand, we’ve got properties that we bought four or five years ago, we already did the value add. We’ve got a great team in place that’s been there for a long time.
And candidly at this point we can manage that in a half an hour or to an hour a week and those properties spit off pretty incredible income for that amount of return. So I would say it’s selective and part of it is based on how you set your business model up and your relationships and your team and what you buy and then also how patient you are. Almost nothing that I have purchased has been passive from the get go. I can’t think of anything that has been, but if you are looking out long term and you get past those first few years, then it really actually can become passive. So for me, yes and no.

David:
Thank you for sharing that. And also thank you for putting all the work in that you do on these deals that we own together so that I don’t have to do it.

Andrew:
That’s true. It’s passive for you, right?

David:
Yes. That just made me think of a book I should write, Scales of Passivity.

Andrew:
Yeah, I like it. Yeah. Well actually no, that’s a real topic that really is.

David:
And the reason I bring that up is I know a lot of our listeners is they’re hearing this conversation, they’re beating themselves up, they’re going through this internal turmoil of shame and guilt and feeling unworthy because either real estate was harder than they thought it would be or if it’s working, it still requires so much of their time, attention, and energy. And they’re like, “Well I thought it was supposed to be something that I just said it and forget it. I never have to do it again. The problem must be me.” I like hearing from each of you and I’ll throw my 2 cents in there.
It’s not passive, it’s passiver, it’s more passive than when I was getting shot at or chasing somebody or writing a report for four hours in a room somewhere. But it is definitely not passive and so don’t think you’re doing it wrong. If you’re not on the beach drinking Mai Tais all day long and you catch yourself getting sucked into emails and phone calls and with your laptop open, very little in life is completely passive. I think in general, it’s an error a lot of us make. We think when I get married I’m not going to have to worry about my relationship anymore, I’m done. Both of you guys as married, men are like-

Andrew:
What? Doesn’t work that way.

David:
Yeah, I probably have the more passive love life than either of you do not being married. So thank you for that. Lee, shifting back into where we were on your story here, what was your Mount Everest and who really helped you to get there?

Lee:
Yeah, I would say my Mount Everest, David, was the next deal. Jumping into real estate is usually a Mount Everest. It’s a big deal and it is hard to get started. So I’ll say that. But after the duplex we were ready to get into multifamily again. I’m listening to Bigger Pockets podcast and I remember Andrew being on very early listening to him back then. I’m like, “Man, these guys, that’s who I want to be like. I want to do what they’re doing eventually. So they keep telling me, go bigger, faster, you can do it.” And so that’s the way I was looking. So we ended up getting into a 16 unit and that seems not so big today, but back then that was absolutely Mount Everest. If you’ve just done a flip or duplex, a 16 unit is probably a Mount Everest to you, it was to me.
What got me over that hump, David, was again, more networking, getting involved, and I think I heard somebody on Bigger Pockets mention, “Get into your local RIA.” That’s a real estate investment association of your city. Every city has one. I looked up to one in Cincinnati. They actually were running an apartment focus group at the RIA, meeting at a La Rose’s Pizza, which is a Cincinnati pizza shop, one Monday a month. So I started going to that and the guy there was teaching us how to underwrite multifamily. And just using a very simple spreadsheet, but it was good for small multis and started teaching me and I felt more and more confident. So I’m just going on LoopNet, looking at properties that nobody wants, underwriting them, calling the broker and just going through the motions. And just felt a little more and more confident about them.
I’ll say this, even calling on a property and feeling like, “I think this is a good deal, I’m going to call this broker.” And calling them and the broker going, “Oh yeah, that’s already under contract. We had a lot of offers.” Even that was like, “Oh, man, that gives me more confidence.” Because I picked out a good property because I thought that was a good deal and it’s already taken like, “Man, okay, I’m getting this.” So just going through those reps and I’ve heard so many on Bigger Pockets talk about that, “Man, you need to underwrite a hundred properties to be good enough to find one.” And so that kind of stuff gave me confidence.

Andrew:
Lee, you brought up something that I think a lot of people looking to transition into multifamily question or struggle with. And that is, I’m just starting out, I don’t have a huge track record. I’m not going to lie to brokers or pretend that I’m something I’m not. Someone who’s just trying to make that transition that you made, what did those first broker conversations sound like? When you first introduced yourself and “Hey, I’m Lee. I’ve either done a duplex or just a 16 unit.” How did you get them to give you the time of day and show you the deals? Cause obviously you’ve gotten a lot further past that, but what did that very beginning piece look like?

Lee:
Yeah, I’ll say two things to that, Andrew. One, so the guy that was teaching me to underwrite Mark, I was using him. And he was fine with that, he was helping me underwrite. So I was saying, “Me and my partner, we own this many.” And Mark didn’t have much either. He had bought a 25 unit and a 40 unit I think at the time. So we owned 65 units. So if I’m looking at a 16 unit, if you bought a 40 and a 25, you and your partner and fast-forward, Mark did end up, I did give him a piece of my deal. So I wasn’t lying by any means, but he was the one helping me underwrite. So I was using that, so leveraging a partner or a mentor I think is a really good step.
But then two, I’ll just say that some people wouldn’t give this advice, but I heard back at the time, LoopNet is where deals go to die. And I remember thinking, “Well that’s probably where I should be looking then because the brokers aren’t going to take me serious, so I’m not going to get the best deals, so I’m going to have to… This is how I’m going to get in. I’m going to go get these deals that nobody else wants and I’m going to put in the time and that’s where I’m going to get started.” And so frankly, when I was calling some of the brokers, they were picking up my call because no one else was calling about the property. So they’re like, “Hey, I don’t care who you are it, you’re the only one looking at this, so we’ll give you a shot at it and if you seem serious then we’ll take you serious.” And so I had the partner and we went forward.

David:
Let’s dive in briefly about that and then I want to ask you about your wife and how you took steps to change that mindset there. When I hear about LoopNet, because I don’t spend as much time looking for multifamily deals as either of you two do. I get this picture of Ray from Star Wars going through a scrapyard of old spaceships that don’t fly anymore and trying to find parts that she can go sell for food? Is it that bad? What analogy would you guys use to describe what it’s like to find deals on LoopNet? And then what advice do you have for other newer investors, just like you said, Lee, where this is really their only option. How would you tell them to navigate that to look for opportunities?

Lee:
Yeah. Andrew, you want to take that one? What would you say about it, Andrew?

Andrew:
So I’d say a couple of things. One, it is basically Ray going through the scrapyard of Crash kits, but however, Lee had the exact right mentality. He’s like, well, everyone thinks LoopNet’s worthless, so I’m going to go do LoopNet because no one else is there and that that’s really how he got started. So I can, a real quick story. One of the best deals we’ve ever done, I bought off LoopNet because the markets that we invest in, I have alerts set up. Again just because I want to see what’s going on, I want to learn the market. Who’s listing what, what are the prices and all that.
Well, one day I got an alert and I looked at him like, “I’ve never seen that broker’s name before.” Called the guy, it wasn’t a broker, it was the owner. He put it on there himself. Okay, four days later had that under contract. I’m out there doing due diligence and local contractors saying, “How did you get this? Yeah, we’ve been trying to get this property for years.” So is it just like you find… Ray eventually found some stuff to get her food? You can still find stuff on LoopNet, but Lee’s strategy is exactly what I would tell anyone who’s beginning to do. Go to LoopNet, find the deals… You’re not looking for deals, you’re looking for people in relationships.
You’re looking for whose listing what you’re listening, you’re looking for the people who are going to take your calls. And if you’re still nervous, pick a market that you’re not going to invest in and practice over there. And then once you’re comfortable, go to your home market that you’re going to invest in and then start building those relationships. So LoopNet is a great source for relationships. You might get lucky and get a deal, but don’t approach it with, “Hey, I’m looking for a deal.” Approach it with, “I am looking for people, relationships and building my skills.” And then you will have success with LoopNet or [inaudible 00:26:05] or any of those other platforms.

David:
Lee, what about you? Anything specific? Is there a certain shine that you should look for in this scrapyard that would draw your attention? Or is it really just, “I’m trying to find a broker that will take my call and I’m calling about the one property nobody else is, so I’m more likely to get them on the phone. And then I’m trying to work that into a professional relationship.”

Lee:
The only thing I’d say is brokers will use LoopNet more for smaller properties. So they may have a pretty good 16 unit deal, pretty good 20 unit deal, 30 unit deal, but they might use LoopNet for it. They don’t have a big list. And I would say in Cincinnati we’ve got 3, 4, 5 kind of the top brokers and they don’t mess around with the smaller stuff too much. But there’s another level of brokers that are small guys, kind of independent shops. I could tell you the brokerage and you’d say, “I’ve never heard of that.” And they just deal with smaller deals. And a lot of times they just throw them up on LoopNet. They don’t have this giant list. So you can get some, I’d say there’s, at least in Cincinnati, you can get some decent deals, but they’re smaller. So again, if that’s where you’re starting, I do think you could actually find some stuff. And what I would say, just what shine you’re looking for, David, is just something that is close to you and something you think you can operate pretty well for whatever reason.

David:
So what about jagged edges, Lee? Is there anything that looks good on LoopNet and then you go to grab it and you get cut? Because I know that people throw stuff in there a lot of the time that just doesn’t really fit into any box or probably shouldn’t be in there. Do you have any advice for how people can avoid falling in any pitfalls?

Lee:
Yeah, I’ll just say from a high level, I’ve learned over the years, probably learned from guys like Kendra, but I’ll say I see properties where I want to own that property. I mean the age of the building, the location, things like that, that really matter. Where I’m like, “Man, I want to own that property.” But usually the numbers suck and the price suck. So I’m, “Okay, but I don’t like it for that price.” Where I would say there’s jagged edge of David on the other side of that coin where you say, “Man, I don’t really like that property. Don’t really like the location. It’s like an older property. I bet it leaks. I bet the roof isn’t good. I bet the residents are rough. It’s going to be hard to manage, but man, the numbers look good.” That’s where you got to be careful and it’s hard not to do.
And I would say that’s kind of how I got started. And sometimes I think Andrew got started a little bit in that way, maybe bought a property in Atlanta that was a little bit like that. And so maybe that’s kind of how you get started. But that’s where you got to be careful where the numbers look good and you think, “Man, I’m getting this for such a good deal.” Well, it’s not because no one else saw it. Other people have seen that and they’ve passed on it for some reason. It’s because there’s jagged edges, like you said, David, that’s because probably not in a great area, really rough tenant base. The building’s not good. You’re going to have cast iron plumbing, just much higher costing. You think those are the jagged edges you got to watch out for.

Andrew:
Yeah, it’s called those spreadsheet goggles. And that’s generally the case with C and even down to D properties, they look great on a spreadsheet. Oh my gosh, the cash flow is wonderful. But what I say about, and I need to get a t-shirt made with this, the grass is always greener over the septic tank. And almost all of us, myself included, when we go into multifamily, we go for those properties because they look great on a spreadsheet. No one else wants, the broker will talk to us, don’t do it. Don’t do it.

Lee:
That’s good advice.

David:
It’s funny how when I talk to Andrew and we’re getting into apartments that we’re looking at or that he’s analyzing, the questions that he asked or the goggles he has are radically different than mine. I’ve never asked the question, “What type of material is the plumbing made out of in residential real estate?” It just has never popped into my head. I might not even know what it is. And that’s one of the first things that will come up at a certain part in the analysis of it. And you hear Lee the same thing and is it’s a very different beast than just buying a duplex, even though we call both of them multifamily. All right. Moving back into your story here, Lee, tell me a little bit about how did your wife change your mind about the steps that you were going to take?

Lee:
Yeah, one thing that was really neat for us, David, and you might find this important, hopefully you find this in your spouse, but God just created Hannah and I very differently. I’m a risk-taker and when I jump in, I’m ready to go. I’m the build the parachute on the way down, that type of person. And she’s not. So there was a lot of struggle early on because once I found real estate, and especially once I got in and tasted it, I was in. I was ready to go. So even with that first flip, “Yeah, okay, I agree with you. It took way too much time. But man, we made money. This was fun and the next one’s going to be better.” I was ready to flip more properties. For her it was like, “No, we got into this because you said this was going to be better for our family.”
We have two young kids at the time, David, and I mean we’re in agreement there. My wife and I are in agreement what kind of life we want. I’ll just kind of push past and say, “Well, we’ll get there, but we got to do this first.” And my wife was like a little bit more, she’s just wiser than I am and more practical going, “Hey, no, our kids are young. This is an important time. We’re not going to just sacrifice this time. This is important. Let’s take a step back.” Well, taking that step back caused us to not do another flip. So instead of doing another flip, she said, “Now again, like you talked about residual income from people renting and we got this chunk of money, but now we have nothing because we sold that property. So I thought we were doing multifamily.”
So, “Yeah, you’re right, let’s get into a duplex.” And then kind of the same thing. We saw that with a duplex and she’s like, “Okay, but multifamily, and are you sure you want to do another duplex?” So she just really calls me to slow down and really think about it and be intentional about our next step. So it was really cool. I don’t know a whole lot of people that did one one unit, one two unit and then one 16 unit. We only took three steps. We did three properties, but the third one was a 16 unit. But I’ve got to credit my wife on that because again, I would’ve just done a bunch of flips. I would’ve been like Andrew, I know others, I can think of others that are scaled really high in the multifamily, but they did a couple dozen flips first. I would’ve been that guy, but my wife kind of, “Nope, put the brakes on. Let’s think about this. Let’s be intentional. You said multifamily, you said rentals, all that. That’s not what flipping is.”
So that’s how we kind of work together. But then also she would’ve never got started without me. So I would kind of push and she would stop and say, “Let’s think about this.” And I would push and say, “Stop and let’s think about this.” I’m always, “What’s next?” Each time she’d say, “I just got comfortable with the duplex and now we got to do a 16 unit. It’s Mount Everest to us.” It’s like, “What are you doing? We don’t know anybody that does this.” And I said, “Well, I know a couple of people on Bigger Pockets, or at least I’ve heard them talk about it on bigger pockets, so we’ll do it.” So that’s kind of how it worked out between us, David, and how we compromised together along the way.

David:
All right. So it seems partly by persuasion and partly by momentum you end up getting bigger. What or who did you need to have the confidence to go after this next deal?

Lee:
The 16 unit or the one after that?

David:
The one after the 16 unit.

Lee:
Yeah, the one after that just really… Some people will talk about the law of the first deal, maybe specifically when you’re getting into multifamily. And I really believe in that. So I needed that kind of first mentor that I had. Mark that was leading the apartment focus group at the Cincinnati RIA, I really needed him to get into the 16 unit. But he kept telling me all along the way, “Lee wants you to do this one, you won’t need me on the next one.” And maybe I could have, but I found that to be true. So on the next one, it was an eight unit, so it was actually kind of a step-down. And the funny thing is, speaking of that law of the first deal, the day we were closing on the 16 unit, I got the eight unit under contract.
So I mean, talk about, you get some momentum to close your first and right away you get another one. That was only a month later that we got a 10 unit under contract. And I just did those more by myself. I still had my mentor’s ear asking him some questions, but I actually gave him a piece of that 16 unit because he helped me so much on it. But then getting into the next eight unit and the 10 unit, which were right after that, I was able to jump in those kind of more on my own.

Andrew:
Can we dive in for a quick second? And I know you’ve touched on it a little bit, but for those, again looking to get their first eight, 10, or 16 unit, how were you funding these early deals? You made some money on flips, you had a partner, was it solely from that or were you starting to bring in investors in the beginnings of syndication at that point? How were you doing these first deals that started to build your platform?

Lee:
Yeah, great question. I think these small multis are such a good way to get started. And you can make it pretty simple. I just did a joint venture deal with a family member or a close friend, and we just went 50/50 on it.

Andrew:
Which deal was that?

Lee:
That’s all three of those.

Andrew:
Oh, okay.

Lee:
In the 16 unit, eight unit and the 10 unit different people. But each one I either had one or two partners and I would keep half of it and I would give them half. They were kind of more the money partners. Now be careful on a joint bench where everybody has to be active and they were. But if you really look back at it, I was probably doing 90, 95{ecd1c82889c5dde6baa4cae2f6d3d4c330bac74c2b880dafaca78809ece33a56} of the work and that’s why I got my 50{ecd1c82889c5dde6baa4cae2f6d3d4c330bac74c2b880dafaca78809ece33a56} and they really got their 50{ecd1c82889c5dde6baa4cae2f6d3d4c330bac74c2b880dafaca78809ece33a56}. Because they brought all the capital that we needed for the deal.

Andrew:
So it was passive for them?

Lee:
Yeah. Pretty close to being passive for them, yes. But technically no because it was a joint venture. So they had to be active.

Andrew:
Right. For legal purposes, it was not passive.

Lee:
Correct, yeah. Let that be on the record.

David:
All right, so let’s recap where we’re at here. So you take a pay cut at your job, you move from corporate physical therapy to at home physical therapy. So there’s a little bit of a disruption in kind of the pattern maybe that your life had looked like. But that got you some more time and flexibility, which you threw into doing your first flip. This is how you got your feet wet with real estate investing, you learned how to run numbers, you learn how to network. Sounds like that was a pretty important part of your whole story here.
And it seemed like that was a step back, but it actually propelled you into the flip that got you started with real estate, then a duplex and then bigger multifamily. So you’re picking up momentum here, but as you do this, you’re also carrying more weight, you’re managing more properties, you have more time going into this. At a certain point you start to realize either this one isn’t worth my time, or I know more than I knew before. I wouldn’t have bought this one with what I know now, even though it made sense at the time to get me to where I am now. When did you decide to liquidate that?

Lee:
Yeah, good question. Part of it was market driven David. So we got all of those three malts in the fall of 2019. So coming into 2020, COVID hits, and crazy enough at the time thought it might be bad for real estate and it was amazing for real estate because of how the government and the Fed handled it. So as 2020 went along, those were all pretty big value add properties, those multifamily. So I use third party management. That’s another thing. We get into that a little bit, but I’m a big advocate of that, especially when you’re getting started. If you want to scale pretty quickly, I guess if you just want to own a couple duplexes and scale small and in your own hometown, sure, manage them yourself. But using third party management really helped me to scale because they were managing the day-to-day and they were a great partner to me. And you want to talk about, just going back real quick, how did I get over that Mount Everest of the 16 unit, knowing that a property management company was managing it was a huge part of that.

Andrew:
We’ve actually recently discussed the property management issue in a previous episode, but how did you find your third party management company? Because that size property, 8, 10, 16 units, that is especially hard to find good property management for. So how did you do it?

Lee:
Yeah, again, I’ll just have to go back to referrals, and that’s why you’ve got to network. That’s why you got to be part of a community. On Bigger Pockets, it’s a great place to get started. But then I would use that to find your local community. The RIA is really good. When you go to a RIA, when you go to a meetup, you’re going to talk to people that own small multifamily, you’re going to talk to people that own single family rentals, duplexes, stuff like that. So you’re absolutely right Andrew, I would never want to have to manage a bunch of those myself. So you got to talk to people. The one thing I would say is talk to people that have used that property management company for over a year because I’ve found people and I’ve had it myself where they do well at first and then not so much. So if somebody’s been working with a property management company for over a year and they’ve had a good experience and you trust them, then I would go ahead and go with that property management company.

Andrew:
I really like your tip about get referrals from somebody who’s used the company for at least a year because those relationships are dating, right? Everyone’s excited and on their best behavior the first six months or whatever. But by the time you get past a year, some of the real colors have started to come out and that’s when you really know who you’re working with. So that’s a great tip, Lee, is only get referrals from someone who’s used the company for a year or more. I like that.

David:
So at what point did you decide it was the right time to sell these properties?

Lee:
As 2020 went along and when we started bringing them around, it was twofold for me, David. I saw an opportunity because of the market, but two, I was just so ready to go all in on real estate and you start thinking about what’s the opportunity cost of me not being able to work on this full-time? Because while I didn’t have a busy job, I did still have a full-time job and so I was just feeling such a pull to real estate. So I wanted to get in and I’ll just share some quick numbers just so people know. With those 34 units we were owning, half of them, we’re in a good cash flow market. I was probably making like $30,000 a year off of those. Now I was never quite making that because we started selling them before they were all stabilized, but just having done the numbers myself.
If we’d have had annual stabilized, we’re probably making 30 a year. If we could have doubled that, that probably would’ve been enough for me to say, “Okay, this is probably the bare minimum of what we need to pay our expenses. This was back before all the inflation that we’ve had. So maybe it’s definitely more than that now.” But at the time I was like, “Okay, I got to double this.” Well David, I just didn’t want to wait that long. I didn’t want to take another year to final these, and properties were already hard to find. So because the market went up so much, I saw an opportunity to sell. Now there’s taxes and vans and all those things, but I said, “30,000 a year, I really had the opportunity to make 10 times that if I sold all three of these.” That’s just how ridiculous the market got. So I said, “Man, I could pull forward 10 years of cash flow on these.”
And what that allowed me to do, David, was give me this runway. So that was like, “If I need 60 grand a year, that’s going to give me five years worth.” And let’s say taxes take that way. Okay, four years worth. So it’s like, “I’ve got four years of a runway to jump all into this, go all in.” If I can’t do anything with it… I mean sometimes I think people overdo the worst case scenario. My worst case scenario was I come back to being a physical therapist where I was before and I can still do real estate. I just can’t do it full time. So the market was a big part of that decision. I just wanted to get in so bad and I just had an opportunity with these properties to say, “Why don’t I just take all this cash flow now? Yep, I’ll have to pay taxes. But I get myself this big cushion, this runway, to jump all in and see what I can do. Worst case scenario, I got to go back to my job that I’m doing right now.”

David:
So for newer investors that are looking at multifamily, what are some things that they should consider, especially considering the fact that we don’t know for sure, but statistically speaking, the next three years will probably be a lot different than what the last three years were like.

Lee:
Yeah, what I would say to that, David is just consider, it just takes time. I think real estate takes longer than people think, especially coming off the past three years because I would definitely agree with you that these next three years are not going to look like the last three years. So I would just say, “Man, get ready. I think there’s going to be some really good deals over the next three years. So I think you’re going to have a chance to pick up properties. But if you think you’re going to buy something in the next six months and it’s going to double or whatever in the next couple years, I don’t think it is. But that’s okay. Just give it some time. It’s eventually going to double.” Yeah, I would just focus on that, focus on getting your deals, focus on building your business, building up your portfolio, but just know you got to know it’s going to take time. It takes time to build wealth in real estate.

David:
Andrew, what are thoughts on the next three years versus the last three years?

Andrew:
Yeah, I think Lee’s right on. A lot of the deals and the opportunities we saw in the last five or six years were all two and three year holds. That business model is gone. I would be scared of anything that requires an exit in two or three years. However, if you look longer term, 5, 6, 10 years out, all the fundamentals that favor multifamily investing are very much in place, especially if you’re buying in the right markets. And so later this year, and I think all of 2024 and probably into 2025, are going to offer everybody opportunities that haven’t been available for the last five or six years. It’s been so competitive and so high-priced. So for those who have been trying to get into the market, and I haven’t been able to, guess what the brokers are going to start returning your calls now.
Because a lot of the buyers have gone away. And this is the opportunity to get in at the bottom of a new cycle. And I’m not saying that the bottom is a specific time or day or month or price. Just big picture, the bottom is going to be sometime in the next 12, 18, 24 months. And then any well located properties that you buy and finance properly during that timeframe, 5, 6, 10 years down the road, you are going to look like a genius. So I think Lee’s right, there’s going to be a lot of opportunity. You still need to be very cautious and strategic about it. The business models and plans and strategies that worked for the last five years, those need to be put on the shelf. They’ll come back. But those aren’t the strategies for right now. But that doesn’t mean you just sit and wait. There’s no such thing as a bad market, just bad strategies. So we just need to adapt our strategies for the current market.

David:
What’s your thoughts, both of you, on balloon payments coming due in the next 18 to 24 months with rates significantly higher than when people got in? Do you think that rents have gone up enough that they can still cover the debt service on the refinance, but maybe a cash flow goes down for the one holding it? Or do you think that we’re actually going to see some fire sales?

Lee:
Andrew, you probably have more in insight than I do to that. Around here what we’re seeing and hearing, I think probably if you bought in 2021, I would be surprised if you didn’t get enough rent growth to be okay as long as you didn’t take too much leverage. I’ve heard of people, they got 90{ecd1c82889c5dde6baa4cae2f6d3d4c330bac74c2b880dafaca78809ece33a56} loan value and then got a hundred percent of their rehab in their loan. So that’s a lot to overcome because when you refinance, they might only give you 75. So even if you got a bunch of rent growth, you might be in trouble. But my guess, from what I’ve heard, some people that bought maybe end of 2021 and 2022, depending on how short that balloon payment is, might be in some more trouble.

Andrew:
The situations Lee mentioned is going to be, in my opinion, is going to be the driver between increased transaction volume by the end of this year, as well as increased opportunity. There are a lot of fantastic properties that are operating really well, but nobody saw the… Well, I shouldn’t say… I don’t know of anybody, whether it’s big banks, any kind of podcaster, nobody forecasted two years ago that the federal funds rate would be bumping up against 5{ecd1c82889c5dde6baa4cae2f6d3d4c330bac74c2b880dafaca78809ece33a56}, right? The forward curve said, “Oh hey, we might be up by half a point by the time we get to 2022.” And that’s what everybody planned on. So this came as a shock to the entire system. And like Lee mentioned, there’s a whole lot of deals that were done in 2020, ’21 and even into ’22 that were very high leverage. And there’s still been some rent growth, but not enough rent growth to overcome a hundred or 150 basis point cap rate expansion, which means when you cap rate NOI, that gives you your valuation.
So there are a ton of great properties out there that have a balloon payment due, meaning the loan matures and it is due in full, in the next 6, 12, 18 months. They cannot refinance. David, you’re always talking about, “Hey, if you do a bur and you leave 10{ecd1c82889c5dde6baa4cae2f6d3d4c330bac74c2b880dafaca78809ece33a56} in, that’s still a win, cash out.” We’re talking big cash in refinances are going to happen where a sponsor or their investors are going to have to come up with $5 million just to refinance the loan and put that money back in. A lot of people can’t or won’t do that. Those properties are either going to be sold or they’re going to go back to the bank as foreclosure. And I personally know of quite a few properties that are in that situation they’re kicking the can down the road for now, but they are probably going to get sold.
One caveat, couple caveat, quick caveats to that is lenders, I’ve kind of learned their lesson from 2008. They don’t want to take back a ton of stuff. So the ones that can be flexible are being flexible. And there is a ton of money on the sidelines just waiting to dive in at the moment that these distressed deals start showing up. So I think that’s going to help kind of put a floor on things, but the opportunities are going to be there. And candidly, we’re looking forward to the chance to get in at the beginning of a new cycle. And again, especially for anyone looking to get started, now is your time. The competition is down, people are going to pay attention to you and there’s going to be deals coming.

David:
That’s awesome. Okay, so let’s work with that. Lee, do you feel like there’s a sweet spot in terms of size or units that newer multifamily investors should look into?

Lee:
Yeah, I think if you’re just getting started, any multifamily I think is a great place to get started. Once you start building your portfolio, you get comfortable with maybe a duplex and a quad, I would just kind of stair step up. I would jump into a 10, a 12 unit, something like that. You need to raise less money for it, you mess up it’s a smaller mess up. But once you get going, and like I did got that portfolio, I have found just over the past couple years doing this, we’ve syndicated some deals, we’ve done some bigger stuff. I think there’s a nice pocket between 20 and a hundred units. That’s a nice niche because you don’t have to get bullied by guys like Andrew Cushman. But also staying above 20 units, I’d say 90{ecd1c82889c5dde6baa4cae2f6d3d4c330bac74c2b880dafaca78809ece33a56} of real estate investors, anything above 20 units is like Mount Everest like it was to me.
And so you have a lot less people competing, but also you’re staying away from the really big money competition who would never look at anything under a hundred units, sometimes not even under 150 units. So I try to get as close to a hundred units as I can because there’s some economies of scale there and it’s just much easier to manage. Andrew mentioned, and I agree, that the smaller multis are harder to manage, so it’s very helpful if you can get a few in the same area, which makes it easier. But I just think your competition, you are limiting your competition between 20 and a hundred units. I think that’s a nice place to be.

David:
Nice. Yeah, so you’re too small for the big guys, but too big for your competition. I always look for that same thing. That’s a wise take on that. I’ve often looked at with residential real estate. There’s often a way that you could find the median income for an area, find out what most people are going to be pre-approved for based on that medium income go a little bit more expensive to where most buyers are not going to be able to qualify or uncomfortable qualifying. And then look for that area where the deal’s been sitting on the market the longest.
And then you go write an offer that is less than what they were asking for which would actually put it in the price range of where people could have afforded it. So now if you need to exit your selling and you can still make money, but that way of looking at real estate makes a lot more sense than just plugging in a spreadsheet and see what the spreadsheet says. What about the concept about good deals and money following a good deal? Okay, is that a fallacy or have you found that to be the case?

Lee:
No, I would say that’s a fallacy I think where people with money be interested in a good deal, sure. But where I think that that becomes a fallacy is when you think, “Hey, I’ll worry about raising money once I get a good deal and then people are just going to flock to me.” I think that’s absolutely a fallacy because people don’t just invest in a good deal with somebody they don’t know. Yeah, they would do it if it was their own deal because they would trust themselves. But-

David:
That’s a good point. You want to buy some really good cocaine, I promise that it’s never been stepped on.

Lee:
Yeah, yeah, yeah. Similar. So they’re not going to trust you with that really good deal if they don’t already trust you. So you have to develop the relationship first. You have to explain to them your track record, get them comfortable. I always say we want people to be comfortable and confident investing in multifamily real estate. And then we want people to be comfortable and confident investing with threefold, and then we’ll show them the deal. And if it’s a good deal, the money will follow but only because we already got them comfortable and confident in multifamily and with us specifically. But you cannot find the deal and then go find people and think they’re going to invest with you.

Andrew:
And I think what that gets to, the heart of that, is when you’re investing as an LP, you are really betting on that sponsor and the operator more than the deal. A really good sponsor can take a bad deal and turn it around or save it, but not so good operator or sponsor can take the best real estate deal and run it into the ground. So, Lee, you’re absolutely right.

David:
So when it comes to this, do you need a mentor and money to get access to money? What else do you think that you need if you’re trying to raise money to become a syndicator?

Lee:
Yeah, I think the key there, David, if you’re not going to get a mentor, I think you can start out small. So for me, my wife and I, we did the flip on our own, then we did the duplex on our own. So by the time we got to the 16 unit, we did have a little bit of a track record. So even if we didn’t have the mentor, I think maybe we could have broken it and let’s say we went to an eight unit first, there might have been somebody that was willing to trust us. Now it’s the people that are closest to you, the people that are going to believe in you, even if you don’t have a real long track record and they might see your track record in other place in life.
Like if you have a great corporate career, a lot of times I’ll see people somebody’s colleagues that they’ve worked with, they say, “Well, I don’t know that you’re going to be good at real estate, but I know how you work and I know how dedicated you are and I know your integrity, so I’ll invest with you.” So the people that are closest to you are going to be the ones to invest with you first. So if you scale slowly and maybe start out by yourself, I think you can get people to bet on you without having a mentor that you can lean on and lean on their track record. But if you want to jump more quickly, some people out there saying, “Well, I don’t want to mess around with small stuff, I want to jump right into a 40 unit.”
Yeah, I think you’re going to be surprised to find enough people to invest with you to buy that 40 unit unless you got the money yourself. But because there’s just not going to be enough people that believe in your track record to jump right into a 40 unit. So I think if you want to go quickly, you’re going to have more need for a mentor, somebody to lean on and somebody to help bring in the capital and the experience that you need. If you want to go real slow and build up your track record slowly and build up your experience slowly, build up your capital base slowly, I think you can do that more on your own.

Andrew:
Again, for Lee, you dropped a nugget of wisdom there in that track record doesn’t have to mean look at all the big deals I did. Track record can be your work ethic at your job, the amount of consistent, maybe volunteering you’ve done at church or local charity or something. Something that lets people know who you are at your core. That counts for track record, even if it’s not real estate. Yes, real estate is a great piece to add onto that, but if you’re sitting here going, “I don’t have any kind of real estate track record,” well you can partner with someone to get the real estate piece and then add that onto the track record of who you are and now you’ve got the whole package.

David:
Very nicely done. All right, last question Lee, what is the biggest lesson in multifamily that you’ve learned?

Lee:
Yeah, I’ll say the thing I’ve stubbed my toe on the most that I’d like to pass on to other people trying to get into it is just the need to bring in more reserves than you think you need. It’s a lot different. That’s where I think the numbers are bigger. You’re just always going to be surprised. I’ve been surprised so many times on the deferred maintenance that we find. Going all the way back to that 16 unit, David, I was so shocked at the way people would live, that they would settle for. When we went into that deal we knew, “Okay, there’s three units vacant. We think some other people are going to move out.” So I really had a good number in mind and I got pretty close to it on the amount of money we’re going to spend to renovate units and the people that were going to leave, we even anticipated that pretty closely. What I did not anticipate is the people that stayed, we had to put thousands of dollars into their units because I was not comfortable with them living the way they had been living for years.
We went into some ladies’ apartment just to change out our toilet because we wanted to have more efficient toilets. And she said, “Oh, while you’re in there, my water doesn’t work in my bathroom.” Her bathroom sink hadn’t worked. And I said, “Okay, how long has that been a problem?” “Oh, about four years.” I said, “You’ve been living without a sink in your bathroom for four years?” “Oh yeah.” It was stuff like that and somebody’s water heater out. I mean, that’s what we’re spending. I’m like, “We’re not okay with that. Yes, we’re going to get that fixed.” But I didn’t know we were going to spend so much money on the people that stayed.
We got hit with a pretty big tax issue this past year on some of the properties we syndicated, just kind of came out of nowhere. It was a unique thing. There was a new law passed in Ohio that played into it. You just never know and it really messes things up when you suddenly don’t have enough reserves, you suddenly don’t have the CapEx budget you thought you had, so you can’t turn units as fast as you wanted to. It messes everything up. So one big lesson, just get a good idea of what you think you’re going to use on CapEx and then how much you need in reserves. And then probably add 20{ecd1c82889c5dde6baa4cae2f6d3d4c330bac74c2b880dafaca78809ece33a56} to that and you’re probably closer to the amount you need.

David:
Awesome, man. We may need to have you back to get into syndication 101, but thank you very much for the job you did today. I think you painted a very good picture of how to get off the runway and get your plane up into the air when it comes to multifamily investing as well as how to find spare parts for that plane in a scrapyard somewhere on LoopNet.

Lee:
Yeah, it was an absolute honor to be on, guys. I’ve been listening for years and it’s just an absolute honor beyond, I’d love to come back.

David:
Andrew, any last words?

Andrew:
No, I’d just say for those again, sometimes people come on, it’s like, “I’ve done 5,000 units and I live in Atlanta, I’m investing in Dallas.” And it seems kind of far away. Lee has done to me, Lee, really laid out the framework for getting started. He didn’t just say, “I’m going to quit my job, I’ve got three weeks of reserves and I’m going to go into multifamily.” He transitioned into a flip and then transitioned into multifamily, gave himself cushion all on the way, did it right in his own market. Had his wife on board, had a mentor, and none of the stuff Lee talked about was this crazy miraculous event where he just got lucky. Lee is just a person of high character who put the time and effort into relationships and trying to do things the right way, not overnight, over time, that has built him into a successful real estate entrepreneur.

David:
Nice man. From physical therapist to fantastic multifamily investor, this is Lee Yoder. Thank you very much, Lee. For people that want to find out more about you, where can they go?

Lee:
Yeah. Jump on our website threefoldrei, as in real estate investing, .com. That’s threefold spelled out, rei.com. And then I’m pretty active on LinkedIn and Facebook, so you can find me by my name and I’m on Bigger Pockets as well.

David:
And Andrew, for people that wanted to follow up with you, where’s the best place for them to find out more about you?

Andrew:
Yeah, if you just google Andrew Cushman, usually the first page or so of results. But just go to Vantage Point Acquisitions, our website, vpacq.com. There’s a couple of tabs there you can connect with us and I will see you at BPCON in October.

David:
Awesome man. And you can find me at davidgreene24.com. Please go there because you can follow me on social media @davidgreene24, but you will get fake accounts that will follow you back as soon as you do. People get tricked by this all the time. Make sure the spelling of the name is correct. If you’re going to follow me on social media, which I hope you do, and you could go to my website, which is not being faked, davidgreene24.com. And well, thanks a lot Lee, we will have you back again. I’m going to let you guys get out of here. This is David Greene for Andrew Jedi Cushman signing off.