June 3, 2022

JF2831: How a Former Teacher Scaled to $400M in AUM ft. Todd Dexheimer

When former high school teacher Todd Dexheimer decided he wanted to get into real estate 14 years ago, he scraped up every last dollar he and his wife had to buy their first single-family rental property. Today, as a GP of 4,000 units, Todd is focused on purchasing well-located commercial multifamily and senior housing assets. In this episode, he shares how he transitioned from flipping houses to buying commercial multifamily properties, how the current market is influencing his underwriting and perspective on debt, and why understanding the current state of the market is key to survival.


1. Making the Transition

From the beginning, creating cash flow and equity by scaling to commercial multifamily properties was Todd’s dream. When he realized he needed help achieving it, he hired Trevor McGregor as a mindset coach. “I had these limiting beliefs,” Todd says. “I knew I was in my way … so [I said to myself], I’m going to hire this guy to kick my butt.” He decided to tell his investors about his transition plan and ask if they wanted to join him. They all agreed, and soon after, Todd landed his first major deal: an 84-unit multifamily property. 


2. A Shifting Perspective on Debt and Underwriting

In today’s market, Todd says, debt is unstable, making it more difficult to get loans. He recommends assuming that you’re not going to get as high of a loan-to-value ratio (LTV), and underwriting accordingly — especially when it comes to bridge debt. “You have to assume that those interest rates are going to continue to rise,” he says.


3. The Key to Surviving in Any Market

Todd says it’s all about maintaining an acute awareness of what’s happening in the market right now. “There are several big things happening, and, by the way, most of them are completely out of our control,” he says. The two biggest factors of note at the moment, he says, are rising interest rates and more difficulty when it comes to raising money. He also stresses that real estate moves more slowly than the stock market — it can take three to six months for market changes to make a noticeable impact.


Todd Dexheimer | Real Estate Background

  • CEO and owner of Endurus Capital (multifamily) and VitaCare Living (assisted living). They purchase and syndicate 100+ unit value-add multifamily and senior housing, focusing on properties with economical deficiencies in grade B+ to A locations.
  • Portfolio:
    • GP of 4,000 units, totaling $400M in AUM
    • LP of $1.5M
  • Based in: St Paul, MN
  • Say hi to him at:
  • Best Ever Book: Building a StoryBrand by Donald Miller
  • Greatest lesson: Use highly qualified professionals in areas that aren't your focus. For example, use attorneys instead of trying to do it yourself.


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Slocomb Reed: Best Ever listeners, welcome to the Best Real Estate Investing Advice Ever Show. I'm Slocomb Reed and I'm here with Todd Dexheimer. Todd is joining us from St. Paul, Minnesota. He's the CEO and owner of Endurus Capital and VitaCare Living. They purchase and syndicate 100+ unit value-add multifamily and senior housing, focusing on properties with economical deficiencies in Grade B+ to A locations. They are GPs of 4,000 units totaling 400 million AUM. And as an LP, Todd has placed around 1.5 million. Todd, can you start us off with a little more about your background and what you're currently focused on?

Todd Dexheimer: Yeah. I mean, you nailed it, man. Appreciate it, by the way, just being back on the Best Ever, excited to talk with the Best Ever audience. We are very focused, like you said, on value-add multifamily and senior housing. With the senior housing, it's more of assisted living memory care, but very focused on purchasing extremely well-located assets. So that's our focus right now is we're... I don't know. We always say "long in the tooth". Who knows, the cycle could last another 10 years, it could be over tomorrow, so we don't know but...

Slocomb Reed: Would you like to make a prediction here?

Todd Dexheimer: No. No. No predictions from me. [laughs] Because I'll be wrong, I guarantee it. It doesn't matter...

Slocomb Reed: The only thing you do when you make a prediction is that you guarantee you're wrong.

Todd Dexheimer: You guarantee you're wrong, 100%. But either way, we really think it's important to be in very well-located assets at this time in the cycle. And honestly, we just like them a lot better. So that's our focus. Background - man, how far back do you want to go? I used to be a high school teacher. That's how I started my career and thought that was what I wanted to do the rest of my life, but it certainly wasn't. So through just discovery, real estate came about, and just reading books, honestly.

And then I started fixing and flipping houses through -- and that being... It was necessary. I wanted to buy rental properties. That's all I want to do, is buy a bunch of rental properties. I listened to David Lindell at one point in time, he was at some conference I was at. I was like, "This guy, that's what I want to do." I read a book by Ken McElroy, I'm like, "Yeah, that's what I want to do." And then I'm going, "I don't have any money. I can't do that." So I started...

Slocomb Reed: I know exactly those feelings. Swap out high school teacher for youth minister and you're telling both of our stories so far. Go ahead.

Todd Dexheimer: Yeah, so I mean, what do you do? You start buying single-family houses. We scraped up every last dollar - bless my wife's heart, she allowed me to use every last penny of ours - and buy our first rental property. Just a single-family home. We bought it for $65,000, put some money into it, and rented it.

Slocomb Reed: When was this?

Todd Dexheimer: $1,500 a month. That was back in 2008, so the market had just imploded. It's a scary time. Now looking back, you go, "Yeah, genius. It was super-smart, you bought in 2008." But it was just timing. It was just the time of my life where I was ready to take that step and take the action, and it happened to be a great time. Although most people were running the opposite way. I was told by a lot of people that I'm stupid, "This is the dumbest thing you could ever do." And I'm just like, "I don't know. $65,000 and I can rent it for $1,500 a month. That doesn't sound that stupid to me, so I'm just going to go ahead and give it a shot." So I did, and it worked.

Slocomb Reed: Nice. And fast-forward to now... Well, let's not fast-forward to now. You buy your first single-family rental in 2008, scrounging together the down payment. What happened next?

Todd Dexheimer: Yes, literally scrounged up the down payment. Actually, at that same time, I partnered with somebody who brought the money in for another deal we flipped. It was a flop, we didn't make much money, just spent a ton of time on it and made $1,000. We bought a single-family home that my wife and I lived in and flipping while we were living in it. But this rental was what pushed me forward.

So I bought this rental, $65,000, we put some money into it and I went to this meetup. And these guys and gals were putting it on, and one of the guys up in the room was a mortgage broker, and he's talking about refinancing properties. And I thought there was no way this was possible, because everything was imploded. People say you can't get a loan on properties and then refinance. So I went and talked to this guy. Anyways, long story short, we got this refinanced, we pulled money out, and then I was able to continue to repeat that. And I ended up buying a bunch of rental properties, as many as we could. So we'd pull our money out, we'd buy another one. We'd pull our money out, we'd buy another one. So we did the BRRRR method, now known as, and just continued to do that.

Eventually, we ran out of ability to do it; with the small amount of income that we made, we just couldn't do it in our own personal name. So I started flipping houses and tried to like, "How can I buy more rental properties? What can I do?" Because I can't buy any more in my personal name. I partner with a couple of people, we did some deals, there's got to be a better way...

So I started calling these local banks. Actually, I started calling big banks. I started calling US Bank, and Wells Fargo, and they're like, "No, you can't do that." The guy I sat down with at US Bank, he goes, "Look, stop talking to our bank and banks like us." He said, "You need to call some small, local banks. I came from these small local banks. You're hungry, they will do business with you." So I'm like, "Oh, really? I didn't know that." So I started calling these one, two-branch banks, and lo and behold, after calling about 100 banks (literally, 100, 150 banks), I got a handful of banks that wanted to do business with me at the rates and terms I wanted. So I started buying more rental properties.

Slocomb Reed: How big did your portfolio get before you scaled into commercial size multifamily?

Todd Dexheimer: About 100 units. I don't know the exact number. Right around 100 units.

Slocomb Reed: Gotcha. And then when and why did you make the decision to scale from there?

Todd Dexheimer: I was so sick of flipping houses. I flipped 150 houses from 2009 to 2014, maybe into 2015. I think my last couple just ended...

Slocomb Reed: So 2014, 2015 is when you're getting into commercial?

Todd Dexheimer: So 2014, 2015, I'm like, "I've got to make this change." So I had a business partner, we split, went our separate ways. Long story. But anyways, my dream was to buy multifamily, and I'm buying one to four-family houses. This is not my dream.

Slocomb Reed: Why is that a dream?

Todd Dexheimer: Why was it? I don't know. Well, first of all, it made a lot of sense of scale. I want to get a lot of units, I want to create cash flow, I want to create equity. Certainly, you can do that in one to four-family, but it's not that efficient, honestly. It looks great on paper, but in reality, you get that roof that you have to replace, that knocks your cash flow down for five years. You get an eviction and the tenant destroys the place, that knocks your cash flow for seven years type of thing. So I was cash-flowing, but it just didn't... To me, it just didn't actually feel great. Didn't feel like I was accomplishing what I wanted to accomplish. So I started buying bigger buildings, and I thought I needed to just slowly, gradually step up my game...

Slocomb Reed: Duplex to fourplex, to 10-unit, to 16, to 24.

Todd Dexheimer: Yeah. So that's what I did. I bought a 10-unit and I was buying them out of town. I was buying them in Cincinnati, I was buying 10-unit, 20-unit, 22-unit, that type of stuff. I was going to take that slow road up until actually, I hired - and you guys have had him on the show, I heard Trevor McGregor - as a mindset coach because I knew I was in my way.

I had these limiting beliefs, I knew I was in my way. I wanted to go bigger, but I just was not doing it. And I'm like, "I've got to get out of my own way, so I'm going to hire this guy to kick my butt." And that's exactly what he did. I was telling him what my plan was, and I said, "Eventually, I want to buy a 100-unit." He goes, "Why? Why don't you do it right now?" I'm like, "What do you mean?"

Slocomb Reed: When was this?

Todd Dexheimer: This was in 2017.

Slocomb Reed: Okay.

Todd Dexheimer: And he actually says he knows Joe, and he says, "You know, Joe went from buying a couple of single-family homes to 100 and --whatever it was-- 162 units, or whatever it was.

Slocomb Reed: Also in Cincinnati.

Todd Dexheimer: Yeah, also in Cincinnati. And I'm like, "Yeah, I know Joe." And he's like, "Yeah. You have more experience than he did when he started. Why can't you do it?" I'm like, "Oh. Hey, you're right. Let's do it."

Slocomb Reed: So what did that transition look like for you?

Todd Dexheimer: So just this paradigm shift. What did the transition look like?

Slocomb Reed: Was your first deal, all your own capital, or you sold some of your smaller stuff to build the capital, or did you do your first deal raising capital from other people? What did that first one look like?

Todd Dexheimer: So through the years, when I was doing these fix and flips, I would take a lot of private money. I didn't use hard money and a lot of bank money, I would just use private money. They would fund my flip, so...

Slocomb Reed: As debt or as equity?

Todd Dexheimer: As both. I did some equity and I did some debt. Things changed and evolved through the years.

Slocomb Reed: That leads to a natural segue to bring in limited partners on multifamily deals, doesn't it?

Todd Dexheimer: It does. So I had that conversation with my investors. And I sat down with a bunch of them. I said, "Here's what I'm doing. I'm making this transition. Would you be along for the ride?" And all of them are like, "Yeah, this sounds great. We want to do it." So I went out and found my first bigger property; it ended up being an 84-unit, and then within a few months, a 120-unit, so I bought...

Slocomb Reed: That was in 2017.

Todd Dexheimer: Yeah, 2017. Bought 204 units within a couple of months of each other, and raised $3 million between the two buildings.

Break: [00:11:37] - [00:13:24]

Slocomb Reed: Todd, I'm going to make an assumption here. And my assumption is that the Best Ever listeners who are involved in apartment investing, the vast majority of them have heard of you, for some reason or another, through conferences, through your involvement in podcasts, the BiggerPockets blogs, and they know of your success. And they know about some of the things that you're doing, at least with multifamily. You're talking about a 80-something unit in 2017, and now you're up 400 million assets under management as a GP. So there's definitely a progression there.

What I want to talk about right now - we're recording in mid-May 2022, and a lot of people I know inside of real estate and outside of real estate are hyper-focused on what's going to happen in the next few months, and they think that there is some sort of recession looming. Now, Todd, we've already said in this episode that making predictions only guarantees that you're wrong... I'm not asking you about predictions or anything like that, but I want to know how it is that you are changing or updating your underwriting, and how it is that you're changing your thoughts about the debt for your current acquisitions in 2022. Is your underwriting changing? Is your perspective on debt or your objective for the debt for your deals in 2022 shifting based on all the things happening in the world and in the economy, that all of our sophisticated Best Ever listeners are aware of?

Todd Dexheimer: Great question, and obviously on everybody's mind, but one thing I'll start this with is... We have short-term memories, but think back over the last five years, how many times this question has came up. Now, where we're at today, what has happened? This question comes up a lot. This isn't the first time I've been asked this question, and it's not going to be the last time. This question has been asked to me in 2017, 2018, 2019, 2020. Certainly 2020. 2021, now 2022. So let me just start with that.

So as an investor, what do you do? Because this question always comes up. You've just got to be aware of what's happening in the market. There's several big things happening, and by the way, most of them are completely out of our control. But how are we doing things differently? We're looking at our underwriting and we're looking at our debt. That's the biggest thing right now that's happening in today's market, is that the debt market is unstable. So it's a little more difficult to get loans, the LTV is a little more challenging, you're not going to get as high of an LTV. So conservatively underwrite, assuming you're going to get less LTV, especially if you're doing bridge debt, you've got to assume that. Again, with your interest rates, especially if you're doing bridge debt, you have to assume that those interest rates are going to continue to rise, and your bridge debt is short term.

Slocomb Reed: Are you doing bridge debt right now, Todd?

Todd Dexheimer: We will, depending on the project, but again, we're going to really conservatively underwrite. We definitely like permanent debt. Permanent debt is a little more predictable, we can figure out where it's at. But with permanent debt, we oftentimes can't lock that rate until our third parties are completed, so that might be a month or more after signing the purchase and sale agreement that we can't lock. So we have to assume those interest rates are going to go up.

We just had that happened to us. We had a deal and happily -- how we underwrote it, it worked, but interest rates from the day we signed the PSA to the day we locked in went up by over a half a point. So things change. We went from, I think it was 3.8% to 4.5%, so a big change. But again, our underwriting was conservative enough to where that was okay. Now, would I have been happier at 3.8%? Absolutely, but the deal still worked.

And so I think that's the biggest thing, is just be understanding what's happening with the market. That's happening. The other thing that's happening right now in today's markets - it's harder to raise money. I've noticed a big difference between just even a month ago to today, people are pulling back a little bit, and...

Slocomb Reed: That's mid-April to mid-May. Chances are this airs early to mid-June, and so it'll be interesting for our Best Ever listeners to think about the difference between what we're saying now and three weeks from now. It feels like we're in a moment where weeks and months matter.

Todd Dexheimer: They do. Days are mattering right now. So maybe by the time this airs, Slocomb, the market just evens out and people are going to go, "Alright, we're ready to reinvest." But maybe it's going down on a cliff like it's going right now, and people are like, "Whoa, we're out for now." So we'll see what happens.

But I got asked this question earlier today. They said, "Well, stocks are going down, crypto's getting crushed, but real estate's doing really well." It's one of those stable, especially multifamily stable, it holds up well in recession, for the most part, of course. "Wouldn't people want to be flocking to it?" And I said, "No. Fear is fear, and people are always going to be fearful and they're going to walk away no matter what."

Slocomb Reed: Yeah. From one real estate guy to another, and with a real estate audience listening, I have to play devil's advocate. We haven't experienced these current political and economic trends for long enough to really understand the impact on property values, because you're not day trading houses. The purchase cycle just takes a lot longer.

Here's some numbers for you. The person who started a refinance or started a purchase process in November or December closed in February, and made their first mortgage payment in April, meaning that they got their property under contract or they started their refi before Putin invaded the Ukraine. So just now, those people are starting to make mortgage payments on those 3.8% interest rates that you're talking about. We haven't been in this moment long enough to know what would happen to real estate, whether on the single-family space or in the commercial space, because our transaction time is so much longer than crypto. Nobody's pulling up the Kraken app on their phone and taking down a 100-unit apartment building.

Todd Dexheimer: Yeah, and that's a super-important point to understand, is that real estate moves so slow compared to all these other markets. So what real estate ends up doing? We won't know, we won't actually see the results for probably three to six months, maybe longer. And who knows what's coming in three to six months, and how that's going to continue to affect...

So yeah, you're 100% right. Real estate's very slow-moving, so you just have to be aware of what's going on in the market. I have no problem with people saying, "Well, I'm just going to pull back a little bit." That's okay if you want to do that. We are continuing to push forward, trying to continue to buy real estate, just trying to be extremely sound with how we're buying, and be cautious.

Look, if you stick to the same fundamentals, the fundamentals of real estate, I think you'll be fine. And if you have a sound business, with sound operations, again, you're probably going to be fine. Now, people have gotten so used to making huge cash flows and raising rents by 15%. Those days might be over; and even if they aren't, inflation is making your expenses a lot more expensive, too.

Slocomb Reed: A lot of people have been looking at the last seven years, instead of the last 70 years, for sure.

Todd Dexheimer: Yeah, that's just it. Look at history and what happens. You can't expect what's happened in the last seven years to continue to happen just over and over and over again. It's just never going to be like that. If you're underwriting like it's going to continue forever, you're going to be wrong. Like we said, about predicting the market, we're always going to be wrong, so underwrite smart, underwrite what historically has happened and you should be at least okay.

Slocomb Reed: For an audience like our Best Ever listeners, I have a relatively small portfolio. And I'm an owner-operator here in Cincinnati, but I am grateful, heading into whatever we're heading into, that I have great long-term fixed-rate debt, and I already have the door count that I need to sustain my lifestyle.

Todd Dexheimer: Yeah.

Slocomb Reed: For sure.

Todd Dexheimer: And that right there is really valuable for people to understand. You want to try to put yourself in the position - and for people that are beginning, it might be a little harder, but you want to try to put yourself in a position where you don't have to be doing transactions in order to sustain your lifestyle. So figure out how to have a different lifestyle if you're doing that right now. How do you get by with not needing? And we're in a great position. We don't need to ever buy another building again if we don't want to. We want to, but we don't have to.

Slocomb Reed: Of course. Yup. Todd, are you ready for the Best Ever lightning round?

Todd Dexheimer: Let's do it.

Slocomb Reed: What is the Best Ever book you have recently read?

Todd Dexheimer: I think Building a StoryBrand by Donald Miller was an excellent one that I read pretty recently.

Slocomb Reed: What is your Best Ever way to give back?

Todd Dexheimer: A couple things that I give a lot to, or we give, my wife and I give a lot to - our church and try to be involved in that community as well. I'm on the church board. And when the church has things going on, we try to be involved as much as we can. And Junior Achievement too, we give to that. We really like that organization and what it's doing. So those two things, and I guess many other minor things, too.

Slocomb Reed: In your commercial investing career thus far, Todd, what is the biggest mistake you've made and what's the Best Ever lesson you've learned from it?

Todd Dexheimer: Well, you phrased it "commercial." I had something else in mind, but since you said "commercial," I'm going to change it.

Slocomb Reed: Let's focus on the big stuff.

Todd Dexheimer: Yeah, that's one. So the biggest mistake I made was actually on the very first transaction I did. And it was just -- honestly, it's a long story so I'll make it as quick as I can here. But it was not good due diligence, I would say. I counted on the property management company that I was hiring, which was actually the property management company at the time of that property, which was a mistake in itself... I counted on them to do too much of my due diligence, without hiring professionals or doing it myself.

I'm a licensed GC, so I know a lot of the construction aspects. But either way, I relied on somebody I probably shouldn't have, and we didn't dig deep enough, and mistakes were made on the property that I probably could have avoided, specifically with the plumbing that was going on the building. And maybe that's another mistake. I bought a building with old, galvanized plumbing, and didn't assume that it all needed to be replaced.

Slocomb Reed: I get that. For sure. And what is your Best Ever advice?

Todd Dexheimer: I would say... Look, people are listening to this podcast, the Best Ever podcast is a fantastic podcast. I listen to it and a lot of people listen to it, and it's great, and there's great advice, but take the advice and take action. If you're not willing to put in the reps, you're never going to have the success that you're hearing other people that are on the show having. And it's so easy to listen and understand, but you have to take action, and it can be incremental. We always hear people say, "Take massive action, big results."

Slocomb Reed: 10X it. Yeah, right?

Todd Dexheimer: 10X it. That's great. But you know what? It starts with little steps, little action, and that ends up snowballing into massive results. You've never built a snowman by just grabbing that snow and poof - all of a sudden, it's a snowman. You've got to roll the ball, you've got to stack them up. You've got to do all those steps before that snowman actually looks good, and that's what you have to do with real estate and your business. You've got to be taking incremental action every single day and make sure you're getting results. You can be the smartest person in the world and not have any success.

Slocomb Reed: Todd, where can people get in touch with you?

Todd Dexheimer: Enduruscapital.com, if they want to learn more about our company. They can email me todd@enduruscapital.com. Those are two great places; of course, I'm on LinkedIn and Facebook, not really much other than that, so they can connect with me there as well. And I do have a podcast, Pillars of Wealth Creation. Of course, listen to Best Ever first.

Slocomb Reed: Awesome. Those links for Todd are in the show notes as well. Todd, thank you. Best Ever listeners, thank you as well for tuning in. If you have gained value from this conversation with Todd, please do subscribe to our show. Leave us a five-star review and share this with a friend who you know we can add value to with this episode as well. Thank you and have a Best Ever day.

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