Small multifamily real estate does exist. You don’t have to have hundreds of units, syndicate, bring in investors, and make it complicated. So, how do you get started investing in small multifamily real estate and produce cash flow?
Today, Clint Coons of Anderson Business Advisors talks to Jen and Stacy Conkey, Founders of Warriors of Wealth and the Remote Multifamily Investing Academy™. They are two experts who know how to get into smaller deals that generate massive cash flow.
Jen and Stacy Conkey have more than 20 years of experience as entrepreneurs and real estate investors. Through their diverse real estate experiences, Jen and Stacy know what it takes to identify deals and make offers on properties that build long-lasting wealth. Also, Jen and Stacy share their knowledge and experience by teaching people what it takes to succeed in multifamily real estate investing with actionable strategies that make cash flow real estate fun and easy.
- Multifamily Impediments: Too big, too expensive, too much inventory, too competitive
- Where did Jen and Stacy start finding smaller deals? Education and just doing it
- Multifamily: More than big apartment buildings—anything more than a single unit/home
- Multifamily Categories: Get a good deal, and good cash flow to learn the process, then build-up
- Four Units & Under: Build relationships with realtors in local markets to find deals
- Path of Progress: As things build out, it drives the value of other homes via BRRRR
- BRRRR Strategy: Buy, renovate, rent, refinance value-add projects and maximize capital
- Stabilized vs. Value-add Strategy: When evaluating quad, is it a good investment?
- Why do Jen and Stacy never visit their properties but do everything online/on the phone
- Where do Jen and Stacy find contractors? Get them to go to a locked property and bid
- How do they find a property manager? Google and then find and call all of them
Facebook Group: https://www.facebook.com/groups/PassiveIncomeRealEstateInvesting
Full Episode Transcript:
Clint: Hey, what’s up, guys? It’s Clint Coons here. In this episode, what I wanted to do is talk about multifamily investing, but I want to do it in a sense that most of the time when I’m talking to people about multifamily, we’re talking about huge units—100, 200, 300. How many times you run into somebody that tells you, you can get involved in multifamily investing without having to go out there, syndicate, bring in all these investors, and make it so damn complicated, you’re like, I’m just going to leave this to other people?... Read Full Transcript
The two people I’m going to bring on today that we’re going to be talking to, Jen and Stacy Conkey, they’ve been doing this. I’ve known them for years. I’ve seen the success that they have generated through their investing. I thought you know what? Who better not to bring on than two experts that know how to get into these smaller deals that can help generate for you massive cash flow? With that, they’ve set up a company called Remote Multifamily Investing Academy. They are my guests today. Jen and Stacey, how are you doing?
Jen: Awesome. How are you, Clint? It’s nice to see you again.
Clint: I’m doing great. Nice to see you, guys. Wow. You’ve been doing this. I’ve been following you now for several years. We’ve known each other probably going back 10 years, and it’s been a progression for you. Before you got into multifamily, what were you guys doing?
Jen: Go ahead, you can go first.
Stacy: I started off in manufacturing, really. I climbed the corporate ladder only to find out it was on the wrong wall. In 2003 is when I started doing real estate investing. I did the DIY with my brother and my dad and then got it just went from there as a side hustle. But I spent 22 years in corporate America grinding and figuring that out while doing real estate on the side until I could finally leave that 9–5 and do it full-time in 2015.
Clint: That’s awesome. It just shows you that real estate can replace that 9–5 and give you the freedom and the flexibility to continue on it full-time.
Stacy: Absolutely. My background is a little bit different. Accounting was my background. I’m a CPA with your public accounting and started climbing the corporate ladder, and just realized that’s not what I was meant to do in the world.
I started investing the same. Actually, in 2003, Jen and I did not know each other then. Our paths were totally different. But my path took me immediately into remote investing because where I lived, the prices didn’t make sense for cash flow. It was very competitive and the prices were high, so high barrier of entry to get started. I learned about remote investing really early, and I’ve been doing it ever since.
Clint: See, that’s just it. So many people, they live on the coasts. They want to do some multifamily, but as we talked about in the opening, I said, hey, the impediments are too big. The second impediment is too expensive. You’ve heard it. There’s more cash floating around than there are deals, so you’ve carved out this little niche for you. How did that start, where you started finding these deals?
Stacy: For me, the very first multifamily I got, I didn’t know what I was doing for starters. I paid for an education, it was complete garbage. I had a lot of figure it out as you go, but I ended up finding a couple of light fixer-upper duplexes in Illinois. I just started doing it and then it moved from market to market.
At this point, we’ve done 17 different markets throughout the US over the course of time. That’s just how it started and a lot was take one step, stub your toe in a few things, adjust, and eventually, we just created systems that we could just do one thing after another. Every single deal we do is A, B, C, D, E, F, G, exactly the same every time so that we cross every T and dot every I. It really just started with a couple of duplexes and then over time built into apartments.
Jen: For me, my first one was a duplex. I used my 401(k) to get it. I used my 401(k) improperly to get it, so that was fun. I learned a lot since we’ve actually been with Anderson Advisors for several years now. I learned my lessons on that, but that’s how I started out with just a duplex.
Before that, it was wholesaling and flipping for profits. The grind, I felt like I was creating a new job to leave my old job. Buy and hold was better for me, personally. I haven’t looked back.
Clint: Now people who are listening in, they’re thinking, wait a minute, Clint, I thought this is about multifamily. They just said duplex. That’s a multifamily, right?
Stacy: One of the things I’ve always been very pep is because the education I got when I was new was so awful, when I was still trying to figure it out, I said, you know what? If I can ever figure this out, I’m going to go back and I’m going to teach others because this is not right.
Real estate truly can create freedom. It can create financial freedom, time freedom, and location freedom, but I was struggling. I was on the struggle bus big time. I was very passionate then like, if I figure this out, I’m going to go back and teach it. After a handful of years, I did start doing that.
I’ve worked with people over a lot of years now. For over 15 years, I’ve been working with new people. The one thing I’ve come to realize is people hear multifamily and they think apartment buildings.
Jen: Big apartment buildings.
Stacy: Yeah. Multifamily includes apartment buildings, but multifamily is anything that’s more than a single unit, a single-family home. There’s this entire niche, area, that is so much easier for people to get started, especially if they’re nervous or overly analytical like I was, and that is two to four units, and it’s residential. It’s very similar to buying a single-family home, except you get the benefits of some economies of scale, and the inventory is significantly higher.
Although we do both and we teach both, I always want people to know that multifamily isn’t only for people who have $500,000 in the bank sitting to put down on something. You can get started with a duplex. That is better than sitting, watching, and doing nothing.
Jen: I was very much into, how can I get as big as I can? How can I get into big properties, learning about syndication, and then realizing when it came time to implement, that was really hard. I had to go figure out a PPM, and I had to figure it out an SEC attorney, and I had to go figure out all these other things and come up with quite a bit of capital before even getting into that. That’s why I was banging my head on the wall after my trainings, and Stacy is the same thing.
We didn’t do it that way, though. We ended up doing joint ventures and getting into smaller deals to build up our name. Once you show that you can close on a property in your pro forma, then you no longer need that sponsor that I was in desperate search of back in, oh, God, I just want to take down a 100-unit building or a 400-unit building. That was very difficult. It was very daunting and there’s a lot of fear there. I felt like our way is a lot smoother and able to get into it.
Clint: If somebody wants to make that leap into multifamily, it sounds like you don’t need to be a single-family investor first or develop that type of experience. Because if you’re going four units or less, Stacy, what I heard you say, then you’re going to be looking at a qualified mortgage.
You can use some of those senior debt that they have out there. There are senior lenders that you can work with and fall in under the Freddie-Fannie program. Is that how you break it down? You guys break it down into different categories of multifamily?
Stacy: At a macro level, yes. I’d say there are 2–4 family. We call that small multi and then we have apartments. We teach it separately because it is very, very different. It is night and day difference. The valuation, the lending, everything is different within 2–4.
When I’m talking to someone who’s a beginner, sometimes beginners are like, that’s great, but I don’t want to bother with that. I want to start with 10 or 20 units. Cool, then we’ll teach them apartments. But what I found over the years is that more people are like, you know what? Let me just get something that is a good deal, good cash flow, so I can understand the process, and then I’ll build up.
Depending on who you’re talking to, there are two really big strategies out there even for the smaller multis. It’s the same with apartments. It’s either stabilized, meaning it’s pretty much cash flowing from day one or it’s a value-add. In the 2–4 world, that’s the BRRRR strategy, where you’re going to buy it, renovate it, rent it out, and then refinance it. In the apartment world, we would do a value-add project.
Getting back to that, Clint, when you’re asking, would you go conventional financing, if somebody is lendable in that way because not everybody is, but if somebody is a regular W-2, good credit score, lendable, they can definitely go conventional financing on the stabilized.
For people who are like, you know what? I want to do a value-add, I want to try to maximize my capital, and they do want to do the BRRRR strategy and do the rehab, there are special lenders that are specifically for that. They’re called hard money lenders and they’re expensive, but they’re expensive just for the period of time that you’re holding it. They’re also great for people who don’t have the job, the high credit score, and things like that. Their qualifications are a little bit easier and allows people to get in the game.
Even hard money lenders nowadays are doing the long-term 30-year fixed mortgages, probably because they see the economy change. Flipping is going to be working itself out of the limelight. Interest rate is going up and it’s going to have some downward pressure on prices eventually. Those lenders don’t want to go out of business. And so they need to offer a better product.
We thought this was going to happen three years ago. We’ve been literally waiting for this correction to come or for things to slow down. Part of what gave me the clue that that was coming is I started noticing the hard money lenders offering long-term rental loans.
To your question, yes, Fannie-Freddie, conventional, sure. But for people who don’t fit into that perfect mold, you can also get a mortgage from a hard money lender, and they’re not like 12%. It’s not like a rehab loan rate. They’re a little bit higher than conventional, but not ridiculously higher.
These days, knowledge is power. When people have the knowledge of how to protect their assets, like everything that you guys do, the strategy, the asset protection, they are empowered to make the decisions.
The same thing with lending if they have knowledge about what’s possible. Somebody who said I can’t do this because I can’t get a regular loan because I don’t have a W-2 or I don’t have a 700 credit score, that wouldn’t keep you from investing if you have knowledge. There are actually different lending options for you. That’s a very long answer.
Clint: No, that’s good. A lot of people don’t understand that aspect of it. They think, well I don’t qualify because I don’t have that credit score. There are a lot of non-QM (qualified mortgages) lenders out there that are available to you that will help put these deals together.
Let’s just stick with the four units and under. What do you look for to find these deals? What rocks should I be lifting up behind trees? Where are those things located?
Stacy: That’s a great question. We get that a lot. If you just listen, then there are no good deals out there, like there are just no good deals. But the reality is, we run an academy and our students deal, after deal, after deal, after deal, after deal they’re getting. Clearly, they’re getting them from somewhere.
I will tell you and for your audience, there is a single place that we tell our students to go. We give them 10 different options, but we’re like, look, 95% of your results are going to come from one place. That is building relationships with realtors in the local market that they’re going to be investing, which is mostly not where they live because we teach remote investing.
We don’t teach people, yeah, go find properties where you live. There’s nothing wrong with that. It’s just that a lot of our students and a lot of people that follow us don’t live in investing-friendly places, they live in expensive places. What we tell them is pick your market or pick a few markets and start reaching out to realtors. Yes, you’re going to find that they have MLS-listed properties, which everyone has access to. That is true, but they also have off-market properties.
The other thing is I don’t want people to dismiss that just because something is listed on the MLS means that it can’t be a good deal. All day, every day, we have our students who are out there finding deals. The numbers don’t make sense as listed, but they’ll make the offer that does work for them. It’s a lot of no, no, no, no, yes.
They take that yes deal, then they go do due diligence, and they find out what are the real numbers. How much rehab does it really need, or how much rent is it really getting? If they need to go back and renegotiate it because there’s more wrong with the property than they thought, then they do that. That is how our students are getting deals. It’s not a matter of waiting for the perfect deal. It’s get out there and make stuff happen, make offers.
Jen: Another thing that I’d like to add to that is, and Stacy doesn’t like when I do this because she’s the one who will teach people how to fish and I’m the one handing out fish sandwiches, but go to cnbc.com, look at the top 10 business states. In those top 10 business states, look for the two MSAs that are up to 120 miles away from each other.
Where’s that path of progress? Because as things are building out, it’s going to drive the value of other homes. You can come in there and look for a path that’s going through gentrification. You can get in there at a low rate, add some value to it. This is if you’re going to do a BRRRR strategy, of course.
If you’re a beginner, I actually prefer that you get into a stabilized one first so it cash flows at day one, if you can. She differs, we differ. But everybody out there is going to have a different opinion.
When you get in there and you’re looking at, okay, where is this that I can find these low deals that I can pick up? Realtors or brokers that you’re calling can get that list to you and you can start evaluating it. But cnbc.com, it lists out the top 10 business states. You want to look for things like job growth, population growth. Are those things on the up and up? Is Amazon coming into town?
If they are, how long will it be before they’re completely in there? Is it one year? It’s usually about three years. But there are so many different, I call them key performance indicators or KPIs that tell you what the markets doing and how you want to get in there when most people are going to think you’re crazy.
We entered into Indianapolis in 2017 and everyone was like, what are you talking about? But yet we picked up duplexes for $29,000, and now they’re what? $175,000 because the gentrification took place. That’s also another really cool way to pick up a good market and figure out how to get in there low, and then sell high, and swap till you drop on a 1031 exchange if you have to.
Clint: When you’re evaluating a quad or lower, what are some of the things I should be looking at to evaluate whether or not this is a good investment?
Stacy: It depends on whether your strategy is going to be stabilized or going for a value-add. We’re speaking to your listeners or your watchers right now. If you’re the type of person that you really don’t have a lot of time, you do have some capital, and you really just want to get something that cash flows right away, you’re going for stabilized. If you’re going for stabilized, you want to look at things like, how many of the units are occupied? Ideally, all of them if it stabilized. What is the current rent?
The other thing you want to look at is, what is the market rent, and how far away are those? Because if the market rent is a little bit higher than your current rent, you actually have not only stabilized, but you have some upside as well, which is really nice, so that’s a big one.
Ultimately, you’re gonna be looking at things like property taxes or insurance. You’re doing a basic financial analysis to make sure that that property is going to cash flow. Before interest rates started going up, we would tell our students between 200 and 250 a door, that’s what we’d like to see you doing. Many of our students will do higher than that if they find a really good deal, but that’s a good place to land.
With interest rates going up, it’s unlikely that we’re going to be able to meet that level of cash flow on every unit because it’s just the reality, the cost of money is higher. But if you can get between 150 and 200 a door, then you’re sitting in a good place so that if an unexpected thing comes up, you’re not necessarily going to be out of pocket about it. If someone moves out, you’re not like, oh, God, what am I going to do to cover the mortgage? Because you have other tenants in there.
Looking at the income of the property and the basic expenses is going to allow someone to look at how much would this cash flow based on whatever the interest rate is at that time, which as we know, is a shifting monster right now.
If someone is looking to do a value-add, meaning they’re willing to spend a little bit more time dealing with it because you got to deal with the contractor. They’re willing to deal with more frustration because there absolutely is. When you’re dealing with a rehab, there are delays, there’s frustration, you’re dealing with a contractor. Sometimes they don’t answer their phone right away. You might want to pull your hair out a little bit. Why would you even do that? Those are my favorite ones, except when I’m in it.
The reason you would do that is because you’re raising the value of the property through doing rehab. If that is your strategy, if you maybe don’t have as much money just to sink into a property, and you are willing to spend more time and deal with more frustration to make more money, when you’re doing the BRRRR strategy, you want to look at the after rehab value on top of the other things I already mentioned.
There actually won’t be any current rent because there are not usually tenants in there. They’re usually vacant. You’re looking at market rent. You run what I call a pro forma financial. It’s not a mock financial. It’s a financial statement as if the new tenants are in there. What is the market rent for your newly renovated unit? And then what are the property taxes, insurance, property management, maintenance, et cetera?
The other thing you want to make sure is after we have value, is it high enough? So that when you’re completely done with this rehab and let’s say we’re six months down the line and you’re going to refinance, you could refinance at 70% or 75% of that new ARV, and that you’d be able to at least get some of your capital back out. Probably not realistic to get all of it out. Some of our students have, but I feel like that’s a hard thing to do these days.
Back when I was new in investing, it was easy because they would lend up to 90%, but not so much anymore. Those are some of the things that you really want to pay attention to depending on what your strategy is.
Clint: When you mentioned 150 per door, hopefully, everyone realizes, we’re talking about a leveraged asset. We’re not talking about paying cash here. […], of course, it’s going to be much more.
Stacy: Correct. When we’re always dealing for ourselves, we are still in growth mode. We are not in just sit and wait around mode. Everybody we worked with is also in growth mode. I forget sometimes that people sometimes will just pay cash for things. But for us, instead of paying all cash, we’d rather break that money up into four or five pieces and go get 4–5 number of the property.
Jen: I don’t know that we’ll ever not be in growth mode.
Stacy: Yeah, I have a difficult time envisioning that.
Clint: Jen, are you going out and looking at the properties at all, or are you doing everything over the Internet?
Jen: No. This is such a great question, Clint, because we have never stepped foot in our properties. We just went last week. We got invited to go to the pole race in Indy. We have a small portfolio there. Right when we landed, she looked at me and said, do you want to go and look at all the properties? And I was like, yeah, as long as you don’t step foot in them.
It was the first time I’ve ever been in the vicinity of one of our properties. But to answer your question, no, we do everything online. We do everything over the phone. All we need is cell phone, Wi-Fi, laptop. We’ll travel and we can invest anywhere and not need to be there.
Clint: I get it if you’re going to buy a stabilized property that you could evaluate it. But the challenge is if I want to get into a property, then I’m going to have to add value, so the value-adds, the idea of finding a contractor, how do you know? Where do you go to find a decent contractor so you don’t get screwed?
Jen: Like everybody else that does it physically, they just walk and open their front door and say, I need a contractor, really loud. I need a contractor. Except no, that’s what nobody does. We literally will get a property that we get locked up. We will have three contractors go out and bid on it.
You can find them in Thumbtack. You don’t have to scream out the front door. We have a very specific process for vetting them on top of inspectors, and how to vet that property managers, and how to go through that entire process. It’s just not necessary to be there.
Stacy: It’s a really big mindset shift because that is the biggest question we get asked, Clint. It’s always contractors. What about contractors? Even though you need a whole team, contractors is the big one. Just like you’re not going to go outside your front door and start yelling, how do you find a contractor for the house you live in? You go online, you go to Thumbtack, HomeAdvisor, Angie’s List.
There are tons of websites. That’s just a way to start making some phone calls. Like Jen said, we a long questionnaire, we vet them, we have the bid the project, and you have three different sets of eyes. We only use licensed and experienced general contractors.
Clint: So that’s an app?
Jen: Yeah, it’s our favorite app.
Stacy: It’s our favorite app because you can communicate back and forth with them. They can give you visuals, they can walk around real-time. It’s almost like FaceTime, except FaceTime is not recorded. It’s just live, but Marco Polo, it’s a document. Yeah, it is. Everything is documented.
The other thing is yes, we use technology, which that has shifted over time because that technology didn’t exist when I was new. A lot of things that we use now didn’t exist then. It’s a lot easier now. But the other thing that we do that a lot of people, once they start getting their mind around, oh yeah, I guess the way I find a contractor at home is I pull up the Internet, I go to a website, and they start making calls, and then I get bids. It’s the same thing you do anywhere.
First of all, we also get a home inspection with no exceptions. We get a building inspection, depends on the size of the building. But once we’re in the rehab and the contractor says, okay, I’m done with these four things, I’m ready for a draw, we don’t just say, oh, okay, here’s your money. We always have an independent third-party inspector, ideally, the original home inspector, go to the property and review those items.
Are they done and are they done correctly? They almost never are 100% actually done. The home inspector might go and say, okay, well, these two things are completely done, this third thing is 80% done, and this thing’s like 50% done. Well, cool. I’m glad I didn’t just pay him for all four things, because they’re not actually done.
That has been something we’ve learned the hard way over time. To add that layer is what allows us to not be there. Frankly, even if we were, I don’t know what I’m looking at.
Jen: I don’t know what to look at either.
Stacy: Oh, the shower pins on, right? Okay.
Clint: Yeah. […], but they happen to be pony walls.
Stacy: Yeah, so that’s the whole thing. One of the nice things about that is sometimes people get nervous about doing rehab-type of projects because they’re not knowledgeable about rehab. They’re not overly knowledgeable about rehab. I’m not one to pick up a hammer. If I have to, I’m sure I’ll do more damage than good. But it doesn’t matter because I use professionals that are vetted. And I have a third party who’s very experienced, go and look at that project before I ever release funds.
I don’t have to be very overly knowledgeable about rehab, specifically. What I have to be is really good at project management and understanding how to lead a team. These days, I feel like remote is becoming pretty common.
Our team for our academy is mostly all over the US. We have three people that are in different parts of the world, all three different. They are an everyday part of our life just like everyone else, and none of our team lives where we live. I think one person lives in the state, but not even close.
The whole idea of remote is becoming more common for people. Especially if people are already working remotely at work or they did in the time of Covid, you start realizing you don’t have to physically be there if you can put controls in place to make sure that things are being done correctly and that you’re using professionals. We’re not trying to get our brother to go do something for us. We’re actually hiring licensed experienced professionals.
Clint: What happens when you go beyond, let’s say we’re looking between 5 and 20. Does that change at all in the analysis or how you approach those types of deals?
Stacy: The analysis definitely. When it comes to apartment buildings—for everyone, I will call apartment buildings as anything five or more units—the valuation is different. Two to four units are valued based on comparable sales only. That’s pretty much it. If you get into apartments, the valuation is based on the net operating income. That’s the revenue that comes in minus the operating expenses.
There’s something called a market cap rate. Those two items, net operating income, and market cap rate, that drives the value of the property. Banks will also look at comparable sales, but the bigger driver is an operating income.
I am far more interested when it comes to apartment buildings, at diving into see where can I increase that net operating income. Can I increase the revenue? Can I decrease expenses? Can I implement a rub (ratio utility billing) system where I can then offset my utility costs so I can lower my expenses, I can increase my value?
From the evaluation standpoint, we are looking at really maximizing the cash flow or the net operating income. When it comes to doing due diligence, it’s not really different, there’s just more. We are looking at leases. We are looking at if there are any contracts that the building already has in place. We are looking at those.
With the contractors, unless it’s an actual true rehab project, a lot of times, there’s unit turnover needed or upgrade. We’ll have people that don’t necessarily have to be licensed general contractors, as long as our property manager who is there in town is okay with going in and being a part of that. Because oftentimes, it’s our property managers that have in-house rehab teams that will go in and do the turnover on that. We still have the building inspection done and we inspect every single unit. We never skip a single unit, because the one you skip, that’s the one that will get you.
Clint: How do you find a property manager? That’s just another aspect of all of this. Like what you just brought up, they have their in-house teams versus those that contracted out, which all my stuff, 95% of it is all remote. I’ve been through those issues before with property managers finding good ones that have it in-house rather than they beat the hell out of me on my CAPEX when there’s someone out there to replace a mailbox.
Stacy: For property managers, our primary way of finding property managers is just googling and then just finding and calling all of them, because what we’ll find in any given market is that there are some property managers that focus only in the northwest quadrant of the city, or the property managers only focus on single families, or only 2–4, or only apartments and only apartments that are over 60 units, or only apartments that are 24 units. They’re all different.
Really, when someone’s getting started in a market, you almost have to call all the different property managers, and then you end up with your shorter list of the ones that make sense for what asset you’re looking to buy, and then you’re asking those questions.
You know what, Clint, not every one of our property management companies has in-house. They don’t. And if that’s the case, I’m always talking to whoever the contractor is and say, look, we don’t come into a market to buy one property, we never do.
There is a long-term opportunity for you to be our go-to person. But what we need from you is work to be done timely, for your reporting to be honest, and that your pricing to be fair. If we can do all those things, you’re going to be our go-to guy for everything that we do. It’s just a matter of trying to appeal to their logical side and seeing a future of working with us. That’s been mutually beneficial.
Clint: Going back to what we talked about being oversold or tapped out, are you still seeing growth in that, especially with interest rate changes that’s going on now?
Stacy: Apartments compared to 2–4 family, there’s just a smaller inventory anyway. Multifamily apartments has been the darling for many, many years, and there are lots of cash. It is very competitive, and yet our students are still getting multifamily deals.
For our students, we really specialize in people who are just getting started or they’re in their first couple of buildings. The sweet spot that we’re seeing is between 6 and 20 units. We have a few of our students who have closed more like 30-unit buildings, a couple of them, but most people are closing between 5 and 20 units.
They’re doing the same thing. They’re reaching out to a lot of different brokers in the markets we’ve identified that they’re interested in, and just their follow-up game is strong, any deal they get in, especially with a new relationship, they’ll evaluate and then they’ll call them back.
This is one of the keys. For people who are watching your podcast, you don’t want to be the type of person that asks someone to send you a bunch of stuff and then they never hear from you again. Maybe you didn’t call back because you’re like, well, that deal is terrible. I can’t do that deal. But when you call that broker back and say, I really appreciate that you sent me that 14-unit deal, here’s what I liked about it.
Unfortunately, what the seller’s asking is far more than it makes sense to pay based on my criteria. Just that alone will tell the broker that you actually did look at it, which is a respect of their time, and that you’re serious, and that you know how to evaluate a deal because they know it’s crap too. Sorry. They know it’s garbage.
Jen: Another thing that we noticed, especially last year in 2021, is in response to Covid, what we saw is a lot of opportunity with motels or short-term rentals that declined because of Covid. And then you have owners who had some dire situations and needed to off the property. We’ve seen some of that, where you can use it as a mixed-use. We chose to dive into that last year and just look into a different type of business model because of it.
We ended up closing on a motel in January that is mixed-use to look at it. But the way that we evaluated it is a 44-key because in motel world, there are keys. It’s a 44-key building with two different buildings on the property. We wanted to make sure that we had a long-term approach and a short-term rental approach.
We took ten, and we’re using them as a long-term rental approach. That covers the nut of the entire building. The short-term rental approach, we have it in an amazing area. It’s in Wallace, Idaho, which is the stardust at Wallace. It’s in a really cool community because not all of these hotels were in a bad area that wasn’t seeing a lot of traffic. They were thriving before, and then traffic dipped, and they found themselves in some circumstances.
It’s still a very good area in terms of jobs, growth, and it’s in the panhandle. As people are traveling and want to go there, it’s still a really good opportunity for us. We started looking at those types. We don’t have all the answers on this one. We’re literally rehabing it.
Stacy: And learning as we go.
Jen: Learning as we go. But that was also something to look at because as the economy is changing and as Covid had impacts, there are different opportunities. Some people will look at that and say, oh, God, I got a contract. I got to get back in, and I don’t want to risk anything. But then there are people like us who are like, oh, let me expand, let me open up, and let me look at different ways to skin this cat. And let’s try it.
We took a very calculated risk and did it that way, too. There are just some opportunities out there and there might be some mind blocks where people think there are no deals. But there are a lot of deals.
Clint: How did you find that deal in Wallace, Idaho?
Jen: It fell on our lap because we have relationships. That’s almost not fair to say, but when you start reaching out to realtors and brokers and building those relationships on a long enough timeline, pretty soon they know you close, they know you’re a performer. Some of our students even get cold calls from Marcus & Millichap because they know you perform. Now, they’re reaching out to you.
We’re the same. It happens to us because we’ve treated it for almost two decades as a relationship business versus this automated services. Let me go out and pound the pavement. We’re like a deal magnet now. Not now, but we have been.
We attract them because of the relationship piece, and it fell in our lap. Our business partner evaluated it. We all talked about it. We really dug into it. Stacy evaluated the crap out of it. When you have Stacy evaluate a deal, you know you’re all right.
Stacy: People cry sometimes.
Jen: She makes people cry, including me. Just because we treat it from a relationship perspective, we get deals that fall on our lap. Our pipeline is just full, because they know we’re going to close if it’s a good deal, so they’ll bring them to us.
Clint: I remember. I used to follow Stacy. We would teach an educational course together. She was supposed to give them 2 hours, and she’d always run 40 minutes over into my time because she just kept going, and going, and going, and telling everybody. And then I would get up there and their hands are cramping because they can’t write anymore.
Clint: I know you guys teach something on Wednesdays, don’t you? Every Wednesday?
Stacy: We do.
Jen: We have a weekly training on a variety of multifamily topics. We do it every Wednesday at 12:00 PM Pacific, 3:00 PM Eastern.
Clint: If somebody wanted to attend that, is there a cost?
Stacy: No, we do it for free every week. It’s our way of being able to be available to new investors or just the community of investors to ask any questions. You’ll learn a little bit and then come in with questions. But no, it’s free. They can register at www.wowaua.com. That stands for warriors of wealth, because in our academy, our people who are in it, we call them our warriors of wealth, and then it’s asked us anything.
Once you go in there, you can register for the next one. If for some reason, someone can’t make that time, because I understand that’s the case sometimes with work and schedules, once you register, the next page, it’ll be last week’s recording and we leave it up for a week. That way, you can still benefit.
Even if you can’t attend live, you can still learn what we’re there to teach, but then you can also watch the Q&A of other new investors and what questions they’re asking. Sometimes it’s great when you’re new because you don’t even know what to ask. Sometimes, just coming and listening to other people’s questions and answers gives you a nice foundation that allows you to feel a bit more confident so that you can step forward and start making some progress.
Clint: Nice. I’m going to put that link in the show notes so that if you guys didn’t catch it, just go down there in the notes and you’re going to find that. I’m also going to put that Marco Polo app. You guys send me the link on that. I’ll make sure we get that in there as well. We appreciate the time. Is there anything else you’d like to tell everyone that’s watching right now or listening in about the small investing space in multifamily?
Stacy: I have one thing to say, and that is everything that’s going on in the economy, inflation, gas, everything it is, hedge the inflation by getting the money into a hard asset. Don’t be afraid. Don’t contract, expand. Sometimes the media can set fear and then you don’t ever achieve your goals, so don’t let that happen to you.
Clint: It’s so true because you’ve been through it like I have, where you saw it go back down, and that’s where the opportunities were. When everyone else starts pulling out, that’s when you step in, and that can really be your launchpad. I hope people to go take advantage of it, join you on Wednesday. Again, thank you for coming on and sharing all this wisdom with me today. I truly we appreciate it.
Stacy: Thank you for having us, Clint.
Jen: Thank you, Clint.
Clint: All right.
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