On my first podcast of the new year, Devin Elder is my guest. Devin has done a lot in real estate and is expanding his business more every year. He started out as a rental property owner, moved into flipping houses and wholesaling some deals, and now he is focusing on investing in multifamily properties. Devin has recently bought a 75- and 192-unit apartment building and is looking to buy more. You can hear him discuss his real estate career on this podcast.
Click on the green button below to listen to the podcast
How did Devin get started in real estate?
Devin started working in the corporate world but knew he wanted to be financially free without having to depend on a job. He worked on many different projects to create passive income on the internet. He never saw much success in the internet world and decided to switch to real estate. Devin bought his first rental in San Antonio using a hard-money loan, which he then refinanced into a 30-year fixed loan. Using this process, he had very little of his own money tied up in the deal but was making positive cash flow. Devin was looking for at least $20,000 in equity and $350 per month in cash flow from every rental he purchased. Within a few years, he was able to replace the income from his corporate job.
How did Devin get started flipping houses?
After Devin had purchased 10 to 12 rentals, he started to flip houses. He was mostly finding his deals from wholesalers but used a variety of sources. He also would drive for dollars and got many leads from his website. Devin has had up to 8 rehab projects going at once, and his biggest problem has always been finding great contractors to fix up the properties. I know how that goes! Devin was still in the corporate world while he was doing all of these deals and building his real estate empire. He also started to wholesale a few deals that he was able to get from his marketing that he did not want to flip or hold as rentals.
Why does Devin want to focus on multifamily investing?
After flipping houses and buying many rentals, Devin has started to buy multifamily apartments. He has purchased a 75-unit and 192-unit apartment building. He loves multifamily investing because of the ability to scale up. Devin likes the 100- to 200-unit properties because the institutional investors are not looking at properties with fewer than 200 units. He also loves the fact that he can have onsite management to handle most of the work involved with the properties. Devin is looking to buy more and more large apartment complexes, and you can hear all about it on the podcast.
How can you get in touch with Devin?
Devin is always looking for more investors for his large multifamily deals. Devin also primarily uses private money to fund his flips. You can find him on http://www.djetexas.com/ if you want to talk about investing in his projects.
It is a new year; have you made your goals?
If you missed it, I published my annual goal article this week. You can find it here: My goals for 2018 and a recap of 2017. I talk about everything I want to accomplish in this year and what I did and did not accomplish last year.
[0:00:13.9] MF: Welcome to the Invest Four More Real Estate Podcast. My name is Mark Ferguson and I am your host. I am a house flipper. I flip 10 to 15 houses a year, I own 13 rental properties, with a goal to buy 100 by 2023. I’m also a real estate agent. I’ve been licensed since ’01, I run a team of nine and we sell close to 200 houses a year.
So on this show, we like to interview house flippers, landlords and the best real estate agents in the business. So stay tuned for some great shows, if you want more information on my rentals, on the numbers, how I buy properties, check out investfourmore.com.
[0:00:58.1] MF: Hey everyone. It’s Mark Ferguson with Invest Four More. Welcome to another episode of the Invest Four More Real Estate Podcast. I have a great guest on for today’s show; Devin Elder, who is a very, very busy real estate investor. He’s focused on single family. For much of his career doing 50 deals a year as a wholesaler, flipper. He also has ventured into multi-family business doing some rather large deals. I’m really excited to talk to Devin, hear how he got into real estate, hear how he’s become so successful and what his plans are for the future.
Devin, thank you so much for joining us. How are you?
[0:01:34.7] DE: I’m doing well, Mark. Thanks for having me. I appreciate it.
[0:01:37.2] MF: Yeah. No, no. I loved to have you on the show and love to hear your story. I always start with everybody, what first drew you into real estate? How did you get started?
[0:01:46.7] DE: Well, for me it was really – real estate just happens to be the vehicle. I had gotten this idea that I wanted to be financially independent at a young age. In my 20s I spent a few years building some affiliate website and things like that to try and generate some passive income. This was [0:02:06.7] poor dad. I’m sure a lot of the listeners and a four-hour work week had a big impact on me when that came out.
I was already made up in my mind that I was going to create some passive income and find a way to build wealth. I thought it was going to be through websites. I did that for a few years and I wasn’t able to generate the kind of income that I wanted.
After that is – I was called a failure of trying to find passive income through that. I found real estate and a light bulb went off and I said, “This is it.” It’s not because I loved real estate. I just saw that it could be a path for me to create wealth and passive income. It made sense as a vehicle and I had already made up my mind and tried and failed on the website stuff and start to put all my energy into real estate at that point.
[0:02:58.1] MF: Cool. The website stuff can be very difficult and confusing knowing – even I’ve been involved with for a number of years and it still is baffling sometimes why some stuff happens and other doesn’t. When you got into real estate, did you go fulltime like wholesaling? How did you jump into it?
[0:03:18.4] DE: Yeah. I checked a strategy, where I started with single family rentals. That strategy is still near and dear to my heart. I think it’s maybe less – a less sexy approach in like a wholesaling a deal and making a quick 20 grand. I came into wholesaling later. I started out buying us a little rental, bought it from a wholesaler. It was needed – actually gosh, it seemed like a lot of work at the time.
I think the rehab budget like 10 grand, which is like nothing now. But at the time, it seemed like a big rehab budget. But went in, hard money, bought it, renovated it, refinanced out into a 30-year fixed debt. Put a tenant in and started cash flowing and a had decent little equity capture. Once I’ve gone through that and seeing that that was a viable model, I just started buying like crazy and just renting and repeating.
I didn’t really have a lot of capital tied up in, because I would refinance out. Sometimes I would refinance out all my money. Sometimes, I would refinance out most of it and leave 5 or 10k in a deal. That was the foundation for me to start creating some cash flow and some equity. That’s what kicked everything off.
[0:04:35.1] MF: Very cool. You’re in Texas. Were you doing all these in Texas?
[0:04:38.7] DE: Yeah. In fact, I’m in San Antonio. Hundreds of units later, they’ve all been in San Antonio. One of my mentors early on told me not to buy anything more than 30-minute drive from my house. I’ve mapped that and I looked at it and that was the whole city. I was like, “Okay. I can buy anything in the city if the numbers work.” That’s the only stuff I’ve ever bought is all in my backyard.
[0:05:04.4] MF: Very cool. Yeah. No, I’ve done the same thing with my rentals. I love single family rentals too. I think they’re just a phenomenal investment. There’s so many people that put them down, but they’ve been great for me and I’ve done the same thing. All of them, except for one turnkey I bought in Cleveland, which is an experiment.
My blog almost are within 7 miles of where I live. They’re already there. When we’re doing our flips, they’re all 30 miles away pretty much. It’s been the same philosophy. When you’re buying all these single family rentals, there are certain things you’re looking for, locations, cash flow, ages, or was it just whatever the numbers worked on?
[0:05:46.1] DE: It’s really whatever the numbers worked on. Ideally, it’s built after 1980, the 322. The market’s picked up here in San Antonio and I’m sure other places too. It’s not like you just get to go pick it off a tree. If I would’ve had my way with those rentals, it would be that criteria. I didn’t care. It could be anywhere in the city, as long as the numbers worked. I would not get emotional about what it looked like or where it was. If the values were there, the rents and the after-fair values were there and it could hit my criteria, then that would be good.
When I was doing the rentals getting started, I just flipped for – like to pick up at least 20,000 in equity and have at least – I think my criteria was like 350 in cash flow a month. The biggest thing for me was low cash out of pocket. If it was under 10,000 cash out of pocket, I would try to buy it. I didn’t have a lot of capital starting out, so that was real important to keep those numbers in check.
[0:06:50.8] MF: Those are great numbers if you’re taking your cash out and still getting that cash flow, especially because I know Texas has a little higher property taxes, so you’ve probably got to account for that as well when you’re buying.
[0:07:03.5] DE: Yeah, exactly. That’s right.
[0:07:05.7] MF: Cool. With the single family rentals, I’m guessing that really built a solid foundation below you knowing you had that money coming in and that passive income. How did you expand from those into the other areas of real estate?
[0:07:20.2] DE: Well, the passive income really – you’re right, a 100% right. That was the foundation, or what I would call my base salary. I had a pretty good corporate job during this time. My goal was to replace that corporate job income with passive income. I was able to do that after a period of years doing – I mean, really you’re talking about side hustle. I don’t know if that’s a term when I was doing it, but man, was I side excellent.
I would meet the – the title company would send somebody out to me at Starbucks across the street from my work and we’d back out a closing. I look at properties in the morning and after work and on the weekends. I was building all that and I eventually got to the point where I was – had enough cash flow that it – basically the cash flow is exceeding my corporate income.
Around that time, I also started getting to flipping houses. I started out with this really conservative rental approach, where I wasn’t seeing these giant chunks of capital come in, but I was seeing that cash flow build up, which was my goal. Then after I’ve done 10 or 12 of these rentals, I started flipping and that’s when I started to see $20, $30, $40,000 chunks of capital coming in.
When I had the base of income off my rentals and then I started seeing that I could make this money flipping, then it started to make my job look almost more like, it was costing me money. Because having to go to work and spend all day in a cubicle, even though it was a big job, it was actually costing me money because the opportunity cost for not being able to go flip a house for $20,000, $30,000 or whatever. At that point, it was a long-term plan. It took me a couple years, but I was able to just pull the cord on the job and then just goes fulltime into managing my rentals and flipping.
[0:09:17.4] MF: No, that makes perfect sense. I’ve talked to a lot of people, and so my coaching programs or just on the website who are in that same position you’re in, where they have a corporate job and they make really good money. It’s like sucking them into it. They don’t want to leave it for making out this money, but then they have rentals they’re flipping and I tell them, “Imagine how much you could do with real estate if you had a fulltime career in it and you didn’t have to worry about that job? You would do so much better.”
Plus, with a lot of the rentals and things, the taxes are so much better as well in real estate. With the new tax laws, it will be even better for a lot of people. It’s tough to cut that tie. But man, isn’t it beneficial if you can do it.
[0:10:00.3] DE: Yeah, that’s right. I always say, I’m glad I didn’t get one more promotion. Because I think I was at that threshold for me financially where yeah, I was making good money, but I wasn’t making crazy corporate money. Yeah, it’s different for everybody. But for me and my level at the time, it was just enough to be good money, but not enough to be like – you get too comfortable. Most people I see – I have a lot of friends in the corporate world that are like, “Man, I want to be doing what you’re doing.”
I say, “Well, you got to jump.” Most people are not going to jump, but you got to do it at some point. I’m very thankful that I never had a better job. In fact, my last couple years in the corporate world, my boss would ask me, “Okay, what’s your career path and what’s your next move?” I would just like, cheap easily be like, “Oh, yeah. I like where I’m at.” While I’m secretly building this real estate empire and issuing any kind of opportunity for promotion.
It made me an odd duck in the corporate. Like this guy doesn’t want to get ahead, or move up. He’s content to just tag along. In the background, I’m working like a madman building this real estate empire. It’s a good point. You got to jump at some point.
[0:11:19.3] MF: It makes perfect sense. I had other guest who actually got fired from the corporate world, because they’re doing so much real estate stuff they didn’t care about their job anymore. It was like, “Wow, that was so nice I got fired.”
[0:11:33.3] DE: Yeah, that was probably a big service for that person, because it’s scary pulling the plug. I mean, it is scary. If somebody does it for you, that’s probably works out better.
[0:11:43.5] MF: Yeah. Cool. How did you start getting into the flipping? Was it just you saw the opportunity there, or you wanted to increase the capital for buying rentals?
[0:11:53.1] DE: Well, it was both. I think I’m very, I guess very conservative in the way I approach things. I want to take things in chunks and try things and chunks and absorb new information. I didn’t want to go out and start flipping houses and get burned. I did a bunch of rentals first, because I frankly think it’s a lot easier to refinance a renovated house than it is to actually sell it. There is just way fewer steps and it’s easier in my mind.
Once I’ve done a bunch of those, I started looking at the numbers and saying, “You know, look. There is margin here. I’m going to this whole process. We might as well just start lifting. Somebody is just selling them, instead of refinancing.” It was a natural progression. I built a revenue model to how much money I wanted to make and how many deals I needed to do. Flipping was a big part of that component. It just was a natural progression into that.
[0:12:55.8] MF: Cool. When you’re doing the flippings, I’ve been flipping for a number of years and I think we did 26 this year. One of my biggest problems has always been finding the contractors, keeping them working hard. Is that the same for you?
[0:13:12.8] DE: That was absolutely the hardest part and I fixed that this year. You and I are talking at the very tail-end of 2017 and I can fix that this year as a result of kind of two things happened. Earlier this year, I bought a 75-unit apartment complex. Really, really heavy-value add turnaround project. It was taking a lot of my time rightfully so. The flipping business was still going and still rocking and rolling, and I was just spread too thin.
Out of necessity, I brought on a partner who – a young guy, construction background, his father is a GC who’s done some fantastic work for us. That’s your point of the difficulty of finding crews. I said, “You know, what? This flip business is great, but it’s holding me back from buying more apartments, which is where my future is. I’m just going to partner with this guy. We’re going to continue to buy all these houses. I’m going to give up some profit obviously, but I’m going to let him manage the construction aspect of it.” He’s just done a phenomenal job.
I basically took the biggest pain of the flipping business and then gave it to somebody else who’s good at it. Not to say he doesn’t have challenges with it. I mean, we’re constantly hiring and firing subs and trying to keep them busy and move it around. But my partners were managing a lot of that, which has just been fantastic.
We’re able to do a lot more volume, because we’ve got some division of labor, and he’s able to run the construction aspect of it. Frankly, he’s got a couple guys on the acquisition side too. That business is really taking off, because I’ve added more people. While of course, I’m sharing in the profits now, the pie has gotten a lot bigger too. Most importantly, I’m able to step out of it and go focus more on multi-family.
That was my fix. You always need money, a deal and a team. You’re right, the team is a tough part a lot of the time, especially the contractor. Yeah, we feel that pain too and the way I fix that was just to bring all the partner with the construction guy and let him run that. That’s been going extremely well. I’m very happy with that decision.
[0:15:24.2] MF: Very nice. Yeah, the same thing with my business, I hired a – I didn’t partner with somebody. I hired a project manager. It’s actually someone who had worked with me for a number of years doing other real estate stuff. Once I found the right person for that job, things went so much smoother and so much easier.
Then we also hired some employees this year too, where fulltime handymen contractors who only work for me, which is really amazing. I don’t have to worry about, we’re through at their bids, if they’re working hard. That’s been a big breakthrough for us too.
[0:15:56.2] DE: That’s outstanding. I’ve toyed with that model for a long time. Do I hire more people? Do I bring people on fulltime? Because right now, we don’t have anybody on salary except one kind of office manager that handles a lot of the scheduling and a lot of the paperwork and stuff like that.
We’ve got one person on salary right now, but everybody else is contract labor. That’s great to hear that you’re able to do that. I think there is different models. For me, it was again out of necessity. I was so busy with the apartment complex and I really didn’t want to manage employees.
Part of this whole thing for me is I don’t want to build a giant organization where I’ve got HR and a bunch of that stuff. I just said, “You know what? I’m going to partner with this guy. He’s done great work. We’ve partnered on a few deals before, and I don’t want to manage him. He’s an equity partner and he wants to get this stuff done as much as I do and we’re going to each work on our pieces of business and just move on.”
I guess, my key criteria in doing that is that I need to be able to step out of a business more, so I can go do more multi-family. Yeah, I think it’s also going to a point where you can plug some people in and that’s great to hear that some fulltime people are working out. Yeah, that’s some tricky part I think is finding the right crews and the right contractors.
[0:17:17.4] MF: Yeah. It definitely is a tricky part. Yeah, we still struggle with it too. You think you got it figured out, and then yeah, something always happens. When you’re doing these flips, how are you financing them? Are you using local banks? Hard money, your own money? How does that work?
[0:17:33.3] DE: I started out using hard money. Then moved into private money, which was a revelation for me just to be able to work with an individual and bam, 10% or 12%. That’s what we do now, so I’ve got a really pretty big databases of lenders that want to fund these projects. It’s pretty straightforward. It’s the first lean loan docs we set up and they fund the purchase price in the rehab up to 75% of LTV. I won’t go higher than that. Then we just pay in monthly interest payment and crank up the project. When we sell or refinance, we get my money back and then we just rent some repeat.
Another thing that that’s done for me looking at a high-level overview of my business, because now I’m shifted to these multi-family projects where I’m always proud of myself that I built a – through one-on-one relationships and referrals, built a big network of lenders who would lend on the flip project. I’ve got a lot of folks who they’re lending on that and it’s great, because we don’t ever have to say no to a deal. If a deal makes sense, we will buy it. That’s great to just have an unlimited source of capital for that.
I had it myself on the back for building that database. But then you go to the multi-family world and you’re like, “Okay, this one deal with a 4 million dollar capital rate.” You’re going, “Well, it’s time to grow that lender, or investor network because 4 million bucks would get you a lot of houses to flip. That could be one multi-family project.”
What I’ve done with my lender database is just continue to build those relationships with folks where okay, you went to our project last year. There’s a 100,000 and we return the capital and make 12%, you’re happy. Maybe we did two last year. Well, now I’ve got this multi-family project and we’re projecting whatever, 10% cash in cash returns and we want to double your money in five years.
That same lender will say, “Okay, well we worked a deal on a house stuff, so now we’ll work with you on the apartment stuff too.” That’s been nice to make that transition in terms of capital is to take those lending partners that I’ve built relationships with over the years and say, “Well, look there is the bigger opportunities for little longer term holds that are going to produce cash flow, but they’re also going to have an equity component for you.”
Unlike the house flipping stuff, which is just straight debt. It’s been interesting making that transition and try to grow that database to be able to pull off those 2, 3, 4 million dollar capital rate if the apartment’s on.
[0:20:15.7] MF: Right. That makes perfect sense. I’ve done the same thing. I still use some local banks, because I can get really cheap money from them, but I use a lot of private money. I’ve actually used hard money for the first time lately, because rates have dropped down so much.
[0:20:28.7] DE: Really? Wow.
[0:20:30.1] MF: I mean, I’ve done a couple deals under 9% with hard money lately. They still have some of the fees and stuff they get in there that you don’t have in private money. That’s been interesting. Yeah, the private money lenders of course are just so easy to work with. It’s like you [0:20:45.6] tax and say, “Hey, you want to do this deal?” It’s like, “Yes.” “Okay, great.”
[0:20:49.3] DE: Yeah. There’s something to be said for that. It’s all about relationship. You’ve got a good relationship with somebody, you like working with them, you like making money for them, it’s just – you can’t be [inaudible 0:21:00.4].
[0:21:01.8] MF: Yup. It’s funny you say that too, because I have one private money lender who’s partnering with me on a multi-million commercial property that we’re working on buying here. The same thing where they transitioned into the flips into something else. Yeah, it’s all about relationships.
[0:21:18.8] DE: Yeah, that’s right. As investors, we always think of these different classes of flipping, or commercial, or – A lot of times when investor, they may not – not that they don’t care, but they’re looking at the return and the fact that their investment is collateralized and obviously they’re looking at the operator, not necessarily what after classes.
[0:21:45.5] MF: Yup, exactly.
[0:21:47.3] DE: Create a great return that’s collaterized with somebody that you like and trust. That’s great. That’s my goal is to be that guy in a few years where, “Yeah, I’ve got some stuff.” I’m letting the guy that’s hungry and is building his empire go out there and do with my money.” I think I’ve got a few years of build – continue to build my empire and then I’m going to start to transition to be the money guy. On a natural progression.
[0:22:15.0] MF: I talk to my main private money guy and he’s always like, “You know, I should be doing more –” because he used to do the same thing. He’d be the active flipper, buying rentals all the time. He’s like, “I just wish I was doing more deals and doing more stuff myself.” At the same time I’m like, “I’m not really doing any work at all and making money, so I’m okay with that.”
[0:22:33.0] DE: Yeah, exactly. You get used to that real quick, I’m sure. That’s great.
[0:22:37.5] MF: Cool. I also want to talk about the multi-family, but one last question on the flips before we get into that. How are you sourcing your deals? Is it direct marketing? What’s that part of the business look like?
[0:22:48.5] DE: Yeah, great question. That’s a challenge too I think in this market. When I started, I started investing in 2012. In hindsight, it was a bonanza. There was deals everywhere. I didn’t know that at the time, because I was just starting. Deals have definitely gotten tighter. When I was the solo operator for a number of years, I got most of my deals from one wholesale; a guy that I could trust and then wholesale has had a bad name a lot of times and for good reason.
There is a couple of companies here in my market where they just basically prey on the new investor that’s went to a seminar and he’s fired up and they’re going to burn him on one deal and never have that relationship again, and they can just cycle through people like that. It’s pretty brutal.
Anyway, I’ve built relationship with one wholesaler that I liked a lot. He would get me deals very consistently that made sense for me and I just made it my goal to be his best easiest buyer. We did a ton of deals like that. That went on for years, then I started working with my partner this year and there’s two acquisition guys that we have and they’re doing all kind of stuff.
I mean, they’re doing driving for dollars and we’ve got some [inaudible 0:24:10.8] software, avenues and things like that, where we can find people. They’re doing a lot of cold calling. We are doing some mail. I wouldn’t say that’s my favorite avenue, because obviously delivered some deals for us, but it doesn’t feel like the biggest winner for me. I think it’s just these one-off deals that we’re finding the guys who are driving for dollars and finding those and able to track people down.
A lot of times, these would be deals that wouldn’t necessarily hit the list, hit the criteria if you were to pull on a list of mail that might not be on there for whatever reason. I would say that’s probably one of the better avenues. We still buy from wholesalers, we still wholesale. We have a marketing website up and we put signs up in every house that we do.
We’ve probably got eight rehab projects going right now, so that’s eight signs out there around the city with our website and our phone number on there. There is a lot of folks in the water. I would say there is not one avenue unfortunately that it’s like a slam dunk deal producer, because the stuff at the wholesale isn’t pushing out now. In general, it’s just total garbage at this point. There’s no way to make money on it. We’re sourcing a lot of our own deals through cold calling, thriving for dollars, that kind of thing.
[0:25:30.7] MF: Cool. That makes perfect sense. Yeah, I agree about the wholesalers. I think, you go through about nine of them before you find a decent one.
[0:25:37.6] DE: Yeah, absolutely.
[0:25:39.3] MF: Yeah, you get these new base and say, “The cost is $200,000. There is $20,000 of work and it’s worth 260. I’m going to make $40,000.” It’s like, well. You got another 20,000 in cost, your repairs are probably 40,000 and it’s maybe worth 250, so you got to verify everything.
[0:25:55.0] DE: Yeah. I mean, I ended up building an Excel model that I use for the flips, where there is a 3% to 5% price reduction taped in, there is 1% to 2% concessions, there is 1% to 2% repair amendment, there is a 10% to 20% contingency on the rehab budget, and there is 60 to 90 days on market.
If all those things in there, it’s still nets me at least 10% of the sales price then I’ll buy it. It’s got to have all that stuff in there. You plug one of these wholesale deals in there and you profit like $900 right. There’s no way, man. There’s no way to worth it.
[0:26:30.9] MF: Exactly. No, great information. As far as sourcing deals, we’re doing the same thing driving for dollars. We do a lot of direct marketing, which has been great. I still get a lot of deals from the MLS. I’m an agent and that’s been my bread and butter.
[0:26:45.7] DE: That’s great.
[0:26:46.2] MF: Retailers, Craigslist. I bought a house off Facebook the other day. That was cool.
[0:26:50.8] DE: Cool. Yeah. Very cool.
[0:26:53.3] MF: All right. You’ve done the rentals, the flips, and now you’re getting into the multi-family. What drew you into that side of the business?
[0:27:00.4] DE: Well, I’d always wanted to end up there, for the reason of really for sale ability, because my goal for years and years has been to own a 1,000 units, a multi-family. That was just a number to shoot for in my mind. The reason is because if you look at – if I look at a flip business that’s an X amount of revenue per year, and if I were to try to grow that 10 times, I just – it hurts my brain. I would have to be in multiple markets, I would have to hire all these staff and there’s just so much minutia and everything involved that it doesn’t scale.
My goal with the multi-family is just to be to be able to have a business that scales in with a larger property and third party management. We can definitely scale multi-family business up. That’s been my goal for year and years. I think initially it was capital, confidence and experience were not there. It’s been a very organic process for me to grow into that.
It’s been years of studying multi-family and hanging around with other multi-family owners, building up my war chest through flipping. I started out with a small multi-family that I bought on my own without any partners. I really wanted to prove it that I could make money in multi-family without raising capital.
I’ve started there, and then from that small project, ended up selling that and jumping into a 75-unit. Then from there, jumped into a 192-unit. It scaled quickly, but the beauty of the multi-family side is that you’ve got teams in place for all the stuff to handle property management and things like that, and you have more budget to work with.
It’s obviously a very different animal than the single family started. One of the things I like is the ability to have an impact on it, that offering income. It’s not necessarily all about comps anymore. Although that’s a factor. It’s really about what can you get that net operating income to by improving the community? I like it, because it just scales better and it’s just playing a bigger game of it’s a lot of fun.
[0:29:16.4] MF: I’ve talked to a lot of multi-family investors and I’ve even talked to some hedge funds at conferences and different things. A lot of them were saying it’s really hard to buy a multi-family right now, because prices are high and there’s a lot of competition. Are you finding that as well, or are you looking for the off-market deals that aren’t exactly advertised out there?
[0:29:35.7] DE: A 100%. I mean, in my mind, in my experience the last couple years, the same thing happened in a single family. People will always lament a lack of deals, and it’s true. We’re just working really hard on the single family side and fighting from the deals.
The multi-family side is the same. I mean, there is nothing marketed that makes a lot of sense. There is a lot of money chasing yield, so that’s totally true. It’s definitely about off-market, the ability to source off-market deals and the ability to find mismanaged deals. It gets a little tricky. I’m looking for a 100-unit plus stuff. If you start to get over 200 units, you’re playing more where there is institutional players and you may not see stuff that’s mismanaged or has it as a value add opportunity.
There definitely is stuff with people, maybe they’re self-managing, or out of state owners where they just mismanaged it. Maybe they didn’t budget enough for repairs, or for tapex, or they just are out of state, out of thought, out of mind. That’s the opportunity that I see. It’s a lot off-market stuff, so it’s contacting owners, it’s building network of brokers and it’s really working that off-market side on the multi-family. It’s really most the same of the single family stuff. It’s definitely tight, definitely hard to find deals, but I don’t think that means that you got to just sit on your hands. It just means you’re going to have to do more work for it as well.
[0:31:02.9] MF: Great. That makes sense. Yeah, same thing with single family. A lot of people say you can’t get deals now, that the investing side is over. But it is for people who don’t want to work hard and just want to find those foreclosures they can make money on with paint and carpet. Yeah, there will always be deals there if you know how to find them.
[0:31:20.9] DE: Yeah, I totally agree. I think it’s good that it’s hard, and I think it’s good that maybe people want to go put money in Bitcoin, because it takes those people that aren’t really committed and it puts their attention elsewhere. I’m glad that it’s almost as far as it is, because the only people out there competing are the other diehard, serious hard workers.
That’s what I am. I am a 100% committed to this and I’m not a casually interested. I think a lot of people are casually interested and want somebody to put a deal on their lap. I think it just doesn’t work right now. If you’re a 100% committed to it, you’ll absolutely find a deal.
[0:32:03.6] MF: I completely agree with you. With the multi-family, are you doing like a syndication deal with your investors, or are they partners? How does that work out?
[0:32:13.8] DE: Yeah, for sure. It is a syndication model. If I was at a point to put 3 million dollars cash in my own deal and just get a bank loan on it, I may go that route. But the syndication model is good for a couple of reasons; one, is you can flip together larger amounts of capital. Two, one of the things I found over doing this business for a lot of years, the one thing that’s on I really enjoy is the finance piece of it.
I view my company these days as a finance company that happens to be in real estate, because it’s really all about finding something that I can model good returns for investors. That’s it. It starts and ends there. If I can model good returns for investors, then I can make it work. But one of the other things too that I find really fulfilling and rewarding is being able to take people along this journey too and give them great returns, because I found there’s just this great – it’s almost sad, but everybody hates their job.
There is this angst of so many people, smart, talented people that go to work every day in a job they hate. It’s pretty cool to be able to give those people an insight into the real estate world, not only inside, but profit out of it in a passage form where they can participate without having to know and do all the stuff that I go out and do.
I enjoy very much bringing on partners for the fact that I can do bigger deals and the fact that I can have them participate in the return. A typical deal would be – I looked a 100-unit property yesterday. It’s looking like at first pass, the capital rates will probably be 1.8 million bucks. I’ll put in a 100, or 200k of my own money, I’ll participate right alongside the rest of investors, and then I’ll go out and find if it’s 1.7, or 1.6 capital rates I’ll go out and find 15 investors at a 100k each or something like that. That will just be out of my network of folks that I’ve been working with for a number of years.
We’ll go out and raise that capital and then go put banks in on the rest. It gets stabilized and we could put on recourse set on it, that’s great. If it’s not stabilized, maybe we’d get something from a local lender that has an appetite for those projects, then we can either refinance once it’s stabilized or sell or whatever the case may be. It’s bank debt for 75% of it, and then it’s a syndication for the rest of it. Then of course, your tapex budget and whatever else – whatever the capital you need to raise.
[0:34:56.0] MF: Awesome. Sounds really similar to a lot of other deals I’ve heard with the really value add multi-family. It’s actually similar to some of the bigger commercial deals I’m trying to do now. It’s just a really cool business to be and with real estate, all the different things you can.
Well, I think those are all the questions I had for you. Now I know if people want to contact you, get in touch with you, what’s the best way for them to do that?
[0:35:22.7] DE: Probably the easiest single point is my company website and that’s djetexas.com. That would be Dylan, Jacob, Emily Texas.com. That’s got contact for me, it’s got links to social media stuff, links to all of our projects and see pictures of before and after and all that good stuff. That’s kind of a catch-all.
[0:35:46.6] MF: Very cool. Very cool. What’s your goal with that website, if you don’t mind me asking? Are you looking for more investors? Or what’s the purpose?
[0:35:55.6] DE: Yeah, that’s really it. I mean, to grow my relationships with investors, because as I’ve grown these projects, these multi-family projects now just require bigger capital rate. Always looking to meet new investors.
It’s a showcase to what we’ve done in our portfolio, to bring in new investors, and then just also have information. There’s an education component too. I’ve got a YouTube channel where I talk about multi-family. It’s basically like a multi-family syndication education platform. If somebody is new to it, they can go and consume some of that content and get up to speed on how the whole thing works.
[0:36:31.6] MF: Cool. Very cool. Well, like I said that’s about all I had for you. I do have one last question I was trying to ask. If someone’s looking to get into real estate, what’s some advice for them? I know you’re doing a lot of different things. I do a lot of different things. I always like to tell people to focus. Don’t try and do too much at once. What’s something else you can add for people looking to get into the business?
[0:36:57.6] DE: Yeah, Mark. I really like your focus point and I agree. I’m going to divide this into an A and B answer. The A answer would be for somebody that has money. They’ve gone their career, they got capital they’re looking to invest. For that person, I would say go invest in somebody’s syndication. Find a good operator that you like and trust. Put money in the deal and look over the shoulder, right shotgun. You’re going see the financials, you’re going to be a partner in the deal, you’re going to be an equity owner, you’re going to get to see all that stuff.
You can go walk on the property if you want, but you don’t actually have to do any of it. I think that’s a wonderful introduction to multi-family investing. If you’re younger, or maybe you’re not in a good capital position and you’re really just starting from nothing, which I can relate because that’s how I started, if you’re in that category, I would recommend you partner with somebody that has successful done what you want to do. That might just be running errands for him, or ear-dogging deals, find some way to add value, but don’t do it alone.
I see people creating partnerships with two people are new. That’s ridiculous. Just because you have your buddy, now you’re just going to both lose money together. You need to partner with somebody that’s actually experienced. If you’re getting started, I would recommend that, because that insight from somebody with experience is – you cannot put a dollar amount on. It’s priceless.
[0:38:24.7] MF: Great advice. The partner thing hits right at home. I hear people all the time like, “I’m partnering with my buddy.” I’m like, “Why are you partnering with him?” Like, “Well, I don’t really know what I’m doing, so I want someone else to help me out.” I’m like, “Do they know what they’re doing?” “No.” Well –
[0:38:39.7] DE: Yeah. I see it too, and it’s like – so you can cling to each other while the ship sinks. I mean, it’s not a good strategy and I would definitely don’t endorse that at all.
[0:38:48.6] MF: I know. Partnerships can be very tricky. There needs to be one person who can add value and another person who can value in a different way, or it doesn’t work.
[0:38:56.2] DE: Perfect. That’s right. That’s it. Yup.
[0:38:59.1] MF: Awesome. Well Devin, I think that’s all I’ve got for the show. Thank you so much for being on. A lot of great information. I loved hearing about your story and how you’ve become successful in this business. Hopefully we can stay in touch and yeah, I wish you great success on your flipping, the rentals, your multi-family, everything else.
[0:39:16.4] DE: Excellent, Mark. Thanks so much for having me on. I really appreciate it.
[0:39:19.7] MF: No problem. Yeah. Yeah, thank you again.
[0:39:23.5] DE: All right. Take care.