From Flipping to Multifamily: Achieving Financial Independence at a Young Age

0:00You did a lot of of flips how did you scale up that quickly like what did that look like and then I want to talk about your transition then from flipping to to rentals the answer is Partnerships okay and I I will I will preach this tried and true is like having great Partners is necessary to scale and grow in this in this space if you're trying to do it all by yourself you know you'll be able to get a couple deals done but you're going to be your own bottleneck so I linked up with a business partner early on he's still my business partner today that had some very good systems and processes around the marketing side and then I brought the sales aspect to it so he had the marketing I had the sales and we just we came into some new markets for wholesaling and flipping and then we were able to scale the business up we had 14 employees you know we were doing

0:48In 2018 2019 we were doing 150 deals a year so it takes a lot of coordination to do that many that many deals right all the title work everything so we had a a pretty solid or chart about 14 employees was kind of our average five of them are salespeople then we had some transactions some operations things like that so it was literally it was really Partnerships I was a oneman band for a a a long time I guess probably a little less than a year and I felt that like it was a struggle and I was I didn't have the blueprint and I was just trying to figure it out every single day and then I found someone that number one had a blueprint I joined a coaching group and a mastermind and in that coaching group and Mastermind I found a partner so there's two lessons there number one a mentor is an investment not an expense a

1:37coach is an investment not an expense and number two when you pay to get in those rooms that's where you start to link up with other people that share the same core values that are pushing in the same direction that you can then say Hey you have these complimentary strengths you know let's see if we can figure out a way to do this together yeah and you guys scaled that to a point where most people I mean I talked to a lot of people who want to build a a flipping company and you know most people would love to be in that position where they're getting you know doing 150 deals a year and have an operation that's all set up it sounds like you had a a good system in place why wind that down and and switch over to commercial rental properties that's a great question you know I'll answer it for me because my business partner

2:25His name is Bill Allen he still has that company rolling so I actually exited to go to commercial because if I'm speaking my truth single family was very very transactional like it was very much you know at the end of the year we do 150 deals we're all celebrating at the Christmas party giving high fives and everything and then the next year we all have we have to go do it again right there's no residual we just have to go out and do it again and there's no tax benefits so like we're literally paying out the wazu and taxes for all this active income we made and then we literally have to go back out and do it and it's it's just it was like a you know you know if you're building that business to sell or if you're building that business to then give it to like an a president or a chief operations officer to run it it can become a very well oiled machine that you do want to let run but I was you know a major Cog in the wheel

3:14Running the sales department and I just I I got a little burnt out to be honest with you you do 400 you do 400 transactions you know in three-year time period it's it's a lot so I would rather do you know less transactions that are bigger numbers yeah no can totally relate to that I I had a flipping company for five years very similarly from 2011 2016 and it was just a giant hamster wheel you know and and I that's when I transition to rentals as well and I didn't realize your your former partner is Bill Allen he was a guest on this show as well really sharp guy so great guy yeah well so so I guess can you share a little bit about the difference between what you do now and

4:02how do you spend your time in your from in your day-to-day I guess running a multif family business compared to the flipping business sure so we we we have 120 million right now in assets under management most of it's right here in Middle Tennessee I'm based out of Nashville and most of our stuff is within you know a few hour radius of us so you know my day-to-day is spent I would probably say 50% of the time I'm doing operations for our current portfolio just optimizing the net operating income on our assets keeping an eye on our expense line items keeping an eye on our controllables our leasing volume everything and then the other 50% of the time I'm I spend looking at new opportunities we are looking at a lot of deals right now in order to buy one

4:51there the market is kind of kind of crazy if you don't know what you're doing you got to be really careful right now there there are deals to be had hell we're closing on $43 million in the next three weeks so there's deals to be had but you have to be really careful you got to look at a lot of deals to know what what what a good one is to understand the basic and economics from them so I spend a a lot of my time behind spreadsheets the the less sexy part of this business that nobody really talks about right because everybody likes the property walks and to take the photos and the Selfies outside of the assets but really you got to fall in love with the spreadsheet not the property so I spend a lot of time looking at spreadsheets and underwriting deals and then the portion of my time is spent optimizing you know the current assets under management making sure that we're cash flowing well enough to distribute to our investors and and taking care

5:39of our our tenants which take care of our properties which take care of us so got it that's my day to day yeah break that down a lot further but no that makes sense and and so can you kind of share the difference between the their first multif family deal and and this one because I imagine you didn't start with the 43 million deal a lot of people hear that and they're like wow I could never get into multif family because I can't put together $43 million deal but I imagine you probably started with smaller deals and have worked your way up yeah my my first deal was a little 14 unit it was $750,000 you know me and two of my buddies each put up 33% of the capital to close it and we all guarant toward the loan you know I think we put up like 170 Grand or something like that so we all split it and guarant toward to loan that was my

6:27First property and then my next one that I did Bill Bill Allen and I went 5050 it was a little 21 unit property we paid 950 for it and then I I did a was 21 then I did a 27 unit was $1.2 Million was a little 27 unit and then I did a after the 27 unit we started to realize that we we needed some more Capital to buy these things without having to slow down our buying velocity so that's when we did a 506b syndication to buy our for first 49 unit and then we raised like $800,000 it was a $2.5 million purchase and then we did a after that was a 65 unit and then we did a 93 unit and then we've been buying everything in between you know 50 and 150 units ever since so yeah I I definitely understand you know now looking back

7:16You know six seven years you know it's it's it's a journey that has got us to this point where we're now closing on a $32 million deal but I'll tell you that I've done a $320,000 deal I've done a $3.2 million deal and I've done a $32 million deal and the only difference is a zero right it it's definitely bigger but the you kind of you're dealing with the same thing just at a bigger scale so don't get too don't get too hung up on the the size and if you understand the operations of it and how it makes money believe it or not raising capital for a $32 million deal is actually a lot easier than raising capital for a $3.2 million deal and that may sound crazy but it's actually it's easier because you're in a you're talking to a different person you're you're a different ballpark with a different investor right we have one investor writing a 10 and a half million dollar

8:04Check and that's a lot easier than rounding up you know a bunch of people to write $50,000 checks so yeah I will tell you that you know just don't get caught up I'm I'm a trial by error person I have to learn so I did the whole thing where I scaled up I did a 14 then a 21 27 49 65 because I had to make sure I I could do this then I can do a bigger one now I can do a bigger one and that was just that was my journey that's how I chose to do it and if if how you see fit you can do it that way too but don't shy away from doing a 100 unit deal because you haven't done a 10un deal because that 100 unit deal may be really good yeah absolutely what's what would you say is the biggest lesson that you've learned from scaling up like is there anything that stands out that you're like well I wouldn't do you know that type of deal again or usually it comes from something that

8:52Was painful a painful lesson learn but doesn't have to be yeah I've done I've done 24 commercial properties right now and there's probably there's probably two of them that I I probably wouldn't do again okay maybe maybe the maybe three two or three but that's not bad I mean bat 90% is not it's not bad like you're not gonna pick all winners and if you're trying to like you're probably never going to do a deal because you're gonna be so gunshy31 and I've never had to do a capital call you know I've never been fortunate enough to never be in that position because we do underwrite very conservatively but I've had some red flags go off and chose to ignore them and they end up being true

9:41Right so if your guts telling you something's off make sure you dig in and make sure you ask and just don't confuse your gut of being nervous with something being wrong right so that's where it kind of helps out when you when you have a mentor or a coach by your side because I I actually canceled the first three multif Family Properties I had under contract I canceled those due to my coach's advice and I didn't know what I didn't know I I could have been way behind the eightball stepping in potholes but my coach my mentor at the time was was able to tell me hey you missed this you know hey you didn't account for this and so I was able to you know avoid doing a bad deal because right now like sometimes the best deal you ever did is the one you didn't do and people need to be careful right now buying value ad deals on bridge debt people need to be really careful with the type of of of

10:29loans that they're getting on properties and the exit strategy I think people really don't think too much about the exit and I always have this I have this saying that takeoffs are optional but Landings are mandatory and you need to really think about when you're going to exit the property who you're going to exit it to how much you're going to exit for and is that a realistic time frame and expectation because we get into this wealth conversation and everybody's like you know I'm going to buy and hold commercial real estate forever I'm going to give it to my grandkids and that's all good and well but like if you have investors you're you can't just tell your investors hey I'm G to give this property my grandkids one day they're gonna screw that I want my money back so you know we build businesses to sell and we build businesses to sell and they have a five to 10 year time frame U to exit and then we take those profits and we then roll them into you know properties that we you know hold for ourselves but

11:19You know for the most part if you're buying with other people's money like you have to have an exit plan in place so I I would always just you know trust the spreadsheets and Trust the numbers because don't lie and that's that's my biggest piece of advice is God just live and die by the numbers because they they do not lie to you and if you get your emotions involved with the property like that's where you end up losing money