Tim Vitale, a real estate investor and co-founder of Vive Equity, shares his journey from Wall Street accountant to real estate success. He emphasizes networking, education, and adding value to others as key to his transition from single-family to commercial real estate. Vitale's story highlights the importance of long-term strategy and strong relationships in the industry.
Key Takeaways:
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Strategic Networking and Education: Tim Vitale emphasizes the importance of building strong relationships and continuously learning in the real estate industry. His success is partly due to his commitment to networking, attending events, and being actively involved in the community.
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Transition from Single-Family to Commercial Real Estate: Vitale shares his journey of moving from single-family properties to managing a large portfolio of over 1200 apartment units and commercial properties, highlighting the significance of scaling up and diversification in real estate investments.
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Value of Long-Term Vision and Consistency: The discussion underlines the importance of having a long-term perspective and being consistent in efforts. Vitale's story shows that real success in real estate requires patience, consistent action, and a focus on building long-lasting relationships.
Tim Vitale | Real Estate Background
- Co-Founder of Vive Equity
- Portfolio:
- 1200+ apartment units, 3 NNN locations
- Based in: Wilmington, NC
- Say hi to him at:
- Best Ever Book: Never Split the Difference - Chris Voss
- Greatest Lesson: "Quitting my W2 job and burning the ships, no options but to succeed really changes the way you look."
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Transcript
Narrator:
Quick disclaimer, the views and opinions expressed in this podcast are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to bestevershow.com.
Tim Vitale:
Grow your network by providing values to others with no expectation of return. Zig Ziglar's quote, if you help others achieve whatever they're trying to achieve, you'll be able to far surpass your own goals.
Narrator:
Welcome to the best ever show, the world's longest running daily commercial real estate podcast. Our hosts interview commercial real estate experts every day to get you the best advice ever with none of the fluffy stuff.
Ash Patel:
Hello, best ever listeners. Welcome to the best real estate investing advice ever show. I'm Ash Patel and I'm with today's guest, Tim Vitale. Tim is joining us from Wilmington, North Carolina. He is the co-founder of Vive Equity. Tim's portfolio consists of over 1200 apartment units and three triple net locations. Tim, thank you for joining us. And how are you today?
Tim Vitale:
Ash, thanks for having me, man. Always a pleasure hanging out and talking with you.
Ash Patel:
Yeah. The pleasure is mine. Best ever listeners. Tim and I hung out at a conference maybe six months ago, Seth Teagle's conference up in Columbus. Yep. What a great guy. We had a fun evening. I've tried to get him on the podcast ever since I found out about what he does and when I met him that night. So thank you for coming on here, Tim.
If you would give the best ever listeners a little bit more about your background and what you're focused on now.
Tim Vitale:
I try to keep it as brief as possible. Originally from Bridgeport, Connecticut. I live in Wilmington, North Carolina now. I have an accounting and finance degree and in my W2 world. When I had that, I started as an entry level accountant on Wall Street in Manhattan and I worked my way up to an assistant VP level at 28 years old. And that's actually kind of the catalyst that pushed me into real estate because I had gotten a 3% raise when I got the AVP title and I was, wait a second, the Kool-Aid I'd been drinking this whole time said, this is when I make the life-changing money, 50%, 100% raises. And that never happened.
So I ended up going down the real estate path. That was early 2019, read Rich Dad Poor Dad, ended up buying my first condo in 2019, learned about the difference between income-based approach versus comp-based approached appraisal methods. I read that book right there, which is Multifamily Millions by David Lindell. And that opened my eyes to commercial real estate coming from a finance and accounting background. I understood revenue, expenses, and a wide debt, all that kind of stuff. So early 2020, I cut the cord with single family stuff. I never looked at, never underwrote, never touched another single family house.
And fast forward about 18 months later, August, 2021, I bought my first apartment complex was a 92 unit apartment complex. Then we did a series of deals after that. I quit my W2 job in September of 2021, sold my house and moved across the state. October 2021, went all in on the business. And then from that point till today, bought about 1200 units, some syndicated, some JVs, some I own 100% myself with no partners, own a couple of triple net locations in there as well, and roughly about $130 million portfolio, give or take.
Ash Patel:
Tim, when did you get promoted to AVP?
Tim Vitale:
It was December 2018.
Ash Patel:
Okay. I'm writing down some dates for this timeline. For three years, you were doing real estate as a side hustle. And by the way, even though you got a 3% raise, did you get those fat bonuses?
Tim Vitale:
I was already getting hefty bonuses. The only benefit that I got was the title. And I then became an officer of the company. So my life insurance policy tripled and I was like, great. I asked my boss about it. She was like, oh, well, your life insurance policy tripled. And I was like, wonderful. That only helps my wife Danielle when I'm dead. Don't help me today. But other than that, it was just a 3% raise and normal bonuses.
Ash Patel:
All right. So for a few years, you're doing smaller deals. August of 21, bought your 92 unit property.
Tim Vitale:
That was the first one. Yes. Yeah.
Ash Patel:
But how did you go from doing one-offs to 92 units?
Tim Vitale:
I did the single condo. It was a $76,000 condo in November 2019.
And then I did no real estate transactions all the rest of 2019, 2020, and the beginning of 2021, there was nothing in between. Then the next transaction was that 92 unit. It was all education and networking and building up the relationships to get access to the opportunity to be part of a general partnership team. It took years to build up the skillset and the knowledge and the relationships and the trust from investors and the trust from other partners in order to get that invite.
And that's the whole crux with getting into commercial real estate is getting an opportunity to get into real estate. And real estate at its core is not that difficult of an industry if you have money. But if you don't have money, like most people that are trying to create equity and create wealth, syndication is a great tool. How do you get into a syndication deal? You got to find the people that have the things that you need, that can raise money, that can sign on the debt, that have the opportunity to access to the deals.
Once you build those relationships with people, then your whole kingdom opens up and you can do whatever, but it's getting to that point. That's the most difficult that takes years and years and years of consistent action of providing values to other with no expectation of return, the law of reciprocity in order to get that invite. And most people quit within six months or a year because they're, I've been doing this for free, working around the clock, doing all these things, and I'm not getting anything out of it. But what you don't see is the intangibles that you're building that will one day your whole foundation of everything that your industry has built on is relationships. And it just takes that long to build those.
Ash Patel:
I feel like we can do a case study on you from 2019 to 2021. Can you deep dive into that, Tim? All you owned was one condo. That was the extent of your real estate investment portfolio. How do you spend two years building this network when you have no track record?
Tim Vitale:
So it was during COVID, right? So it was a blessing and a curse. I attended every single Zoom call that I could. I listened to all the podcasts, all the bigger pocket stuff. I found all the commercial real estate podcasts and I was just consuming a ton of information. I'd wake up at five o'clock in the morning, I'd read my books, I'd educate myself, I'd underwrite deals, I'd do all of the things. Then I'd go do my day job from eight to six or eight to seven and then I would go do networking events in the evening time that were commercial real estate focused.
That's oversimplified, but literally that was the core of what I did was being involved in the community and being involved in the network and finding a way to provide value to people that were doing what I wanted to be doing. And then not expecting anything in return, just doing it out of the goodness of my heart, because I wanted to be involved and I wholeheartedly just enjoyed doing the things that I was doing. And you do that for a consistent period of time and people take notice.
Ash Patel:
Can you share a few examples of things that you did to provide value with no return?
Tim Vitale:
So I was involved in the Zoom calls. I was posting comments. I was liking all the things. I would attend all of the stuff. I just provided value through engagement. Engagement is what they were looking for in order to build their Facebook group. Well, I did that for a long period of time. And then we became friends and we started texting and talking and whatnot. And then they started their coaching group and they were like, we know you do underwriting. We know you're in the finance world. This is kind of what your specialty is. Take a look at this underwriting file and tell me what you think. And Ash, I tell you, this was the worst underwriting file I've ever seen in my entire life.
I literally talked to them on the phone and I told them flat out point blank, this is terrible, you cannot sell this. None of these calculations work properly. I don't even know how you've bought anything with this calculator. So I took it upon myself with no instruction from them at all. I completely rebuilt their entire underwriting file from scratch. I took all the things that they were doing and I implemented it into it.
I made it this nice sleek design. I made it on Google Sheets because that's what they wanted. I structured it how they were looking for it. And just one day I showed up and I was like, I made this for you. And they're just floored, absolutely floored. And they're like, how much can we pay you for it? I was like, Oh, I don't want your money. I just did this because I felt bad for you that you were going to sell this and it would make you look terrible. And they're like, dude, you are seriously the salt of the earth. Thank you for helping us because most other people would try to use that as leverage or do this or do that. I just did it because I wanted to, and they recognize that.
And then we continued to grow as friends and that really increased our level of communication. And then one thing before you know it, they reached out and they're like, hey, we got a deal that was that 92 unit. They found it, they funded it, they raised the money, they got the debt signed on it. They did literally everything. Two weeks before closing, they called me and they're like, we want to surround ourselves with people like you, people that just give and give and give. And his exact words were, every time we ask anything of anybody, you're the first person to raise your hand and say, I'll do it. And they were like, that's the type of person that we like in our circle that we want in our circle.
So they invited me into the deal. They gave me a piece of equity, which 8% of the total deal, which is a big slice compared to people that are walking away with 1% or less in a lot of syndications. So I had 8% ownership in this deal and was involved in the asset management, started doing the property management calls. I do the site visits. Then I was off to the races, right? I was part of a team. I was part of a team of a bigger deal.
I had the experience now, I brought a lot more value to the table. Then I started building other relationships with other people and those relationships began to cultivate and there now you have experience and you can raise money and you can do this. And every deal I got more valuable and more valuable and more valuable, raising more money, then I can sign on the debt myself, and then I could raise all of the money by myself. And then fast forward today, me and my partner, Tim Vest, who I think was on this show a couple of years ago.
We run Vibe Equity now and we do it all. We have in-house accounting, in-house management, in-house construction. So we do everything. So we keep it soup to nuts now. And it's amazing how fast you can grow in just basically two years.
Ash Patel:
What was the key to your growth success?
Tim Vitale:
My network and always leading with value with no expectation of return. You will get burned by people. That is going to happen. You are going to provide value to somebody. They're going to make a lot of money or they're going to benefit in some way off of what you do for them. And that's fine. Because the more people you do that for eventually, either the universe is going to come back and pay you or one of those individuals is going to come and lend you a hand when you need it, building that relationship capital to be able to rely on when you need that help is so confident, inspiring, and what does confidence do for you as an aspiring real estate investor or somebody that's maybe not aspiring, but you're doing it already.
The difference between having a conversation with somebody like me and somebody that's just getting started is I have confidence behind the words in my voice that says, I can make an offer on this deal. I know I have people that will sign the debt for me. I know that I have people that will raise the money for me or I can raise it myself. I know I have the team in place that I can manage these deals. Those statements are much stronger than I think or I might be able to, or I could potentially.
Words inspire doubt and I don't have any doubt in my words because I know I have the network and the relationship to fall back on to do anything that I want to. That's possible because I can call somebody that I need help with, with their expertise on. If it was triple net related, I'd call you or text you and be like, Hey, what do you think about this? And you'd probably answer, but that gives me the confidence to say, okay, well I looked at this deal. I talked to somebody that I trust. They said, yeah, it looks okay. Go for it. I'm going to go for it. I'm going to figure it out. Right.
And that's the difference between somebody that has those relationships and somebody that doesn't have those relationships. It's all the confidence that comes behind the words when you're talking to sellers, brokers, and investors.
Ash Patel:
Yeah, I love your story. I'm just leading with value. A couple of quick examples. I was up on a ladder doing something at one of my office buildings. I got a call from somebody that I didn't recognize the number, took the call. It was during the week. This guy was at the best ever conference. And he said, Joe, Phyllis just did this presentation, talked about you a little bit and I'm in Northern Kentucky, figured out to reach out, talk to him for an hour, just random dude. And I ended up helping him a lot with commercial real estate, but all of the things that came out of that conversation, all the opportunities that he's presented me with over the years have been priceless.
On the same token, I've had other people that wanted to get in front of me and they're just like, I'll do whatever it takes. I just want 15 minutes of your time blah, blah, blah. I had one guy just recently on Facebook. He reached out, he's like, this is a mixed use building. I know it's a good deal, but I don't know how to underwrite it. He's like, I'll give you the deal. You can have it. Just teach me how you would underwrite this one deal. And I'm like, wow. No, man, I'll teach you how to do it, but you keep the deal.
Leading with value, so many good examples. So I love that you're sharing that and thank you for that. Tim, what do you do now? You're a master at underwriting. Are you still focused on underwriting or have you added acquisitions or investor relations?
Tim Vitale:
No, we do that all ourselves still. We are in the process of hiring an asset manager to help with maintaining the business plans and updating the financials and sending the banks all the information that needs to be done and keeping all the files organized. There's a lot of stuff that happens behind the scenes, but ultimately the major touch points me and Tim Vest like to stay in charge of, which would be underwriting anything debt related, anything investor related, and anything broker related.
So that's what Tim and I do. That's what brings in business. That's what builds our brand, our reputation. That's what people know us by. And then we're looking at hiring people to help us kind of service those positions. But we still want to be those major touch points in order to continue to grow and build the brand.
Ash Patel:
You use third party managers, I'm assuming, to manage your assets?
Tim Vitale:
We used a lot of third party managers. But we started in-house management on July 1st, 2023. So we started the company in May, but we took over July 1st and we're in the process of transitioning properties to that management company after stabilizing the first couple that we just took over for the last 90, 120 days or so. So now that we've got those in a good spot and we feel comfortable with it, we've worked out a lot of the kinks, we're looking at bringing on more of our units away from third party management. And then anything that we're buying or acquiring today has to have on-site management like an onsite leasing office so that our management company can come in and do management from day one.
Ash Patel:
What is your bottleneck today? Is it investors? Is it deal flow?
Tim Vitale:
It's time, really. Our biggest bottleneck now is time and the security to grow is being able to service the deals that we currently have. A lot of people that you will hear recently and over next year that find themselves in operations and asset management. And if you don't have a good track record of asset management, you will fail in your business plan. So it's a balance between continually growing and continually maintaining and executing on the business plan.
Our bottleneck now is me and Tim are doing everything. We have a regional manager and we have people within the property management company, but for terms of asset management, we're doing a hundred percent of it. So we really need to hire somebody that's going to end up working full time hours to just get more time in the day. There's only so much time in the day and the only way that we can get access to more time is by leveraging it with money, by paying somebody to do the work for us. So that's kind of where we're at right now is that we need to get that person in place, get that person up to speed.
And now we have an additional person that we can delegate more task oriented things that don't grow the business to. But doing all of those types of things that we can outsource to them so that we can continue to go back to focusing on debt investors and deals.
Ash Patel:
How did you and Tim come together?
Tim Vitale:
Funny story. It was middle of COVID. And he was actually part of Mike Ely and Nate Berger's mastermind. I lived in Charlotte at the time and I saw Tim was part of Mike's group. And I was like, I think I'm gonna join a mastermind. And I saw his social media stuff. And I was like, oh, Mike seems like a good dude and blah, whatever. And I reached out to Tim Vest cause I was like, your name's Tim V too and you live in Charlotte. Let's meet up for coffee one day. Well, it was middle of COVID.
We met for coffee. We ended up sitting there talking for four hours. We just hit it off. A lot of the things that we did aligned, personalities aligned, our business mindsets aligned, what he liked to do was what I hated and vice versa. And we became friends and we kept up. And then a couple of months later, maybe a couple of weeks later, something like that. He texts me, I'm going to go check out a deal in Anderson, South Carolina. And I called him and I was like, cool, pick me up. And he goes, what? I'm coming with you. Come pick me up. And he was like uh, okay, right.
Okay, kind of caught him off guard. So we ended up going down and looking at that deal in Anderson and it wasn't any deal that we ended up doing, but we looked at it and we kind of talked in the car for another five, six hours. We were in the car for a long time. Then there was another deal. We went and looked at it together at that time and it just continued to grow and grow and grow. And we ended up being friends and talking about real estate stuff for the better part of a year before we even did one deal together.
And then once we did that one deal together, we pretty much did all of our deals together. There was kind of one-offs here and there, and he had done some stuff with other partners and stuff like that. And then here we are two years later and every single deal that I do is with Tim. If you ask me to do something with you, that means you're getting Tim Vest too. It's the two of us that come in that ask. And we do all of our stuff together and we didn't create a company together until we had already done around 900 doors or a thousand doors, something like that.
We had a $90 to $100 million portfolio before we even had the thought process of let's partner up and really make this something special. And a lot of that reasoning was we had outside pressure from private equity funds and some other debt solutions that they were like, we love working with Tim and Tim, but you guys need to create a company, be vertically integrated, have in-house management, have those economies to scale. And he was like, from a private equity fund basis, that's going to attract a whole different crowd of people to invest in your deals.
And once you get there, you're gonna be able to buy whatever you want. And they were like, if you could never have to worry about money again, how many deals would you buy? All of them. So they're like, okay, we'll do these things. And then now you look more attractive to us and then more attractive to our investors. And now we can do more deals together. And we're like, you know what? Tim and I had seen each other through some hard times and some really good times. And you handled every single one of those situations exactly the same way that I would.
That's how I knew that we were good partners, that I could trust him and that we were going to be able to accomplish together whatever we wanted to accomplish.
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Ash Patel:
I think that's important to test drive the partnership first versus a lot of people. They'll form a company and then they learn about their partners and it might not work out. So test driving that partnership is like dating before a marriage. So good for you. Tim, tell me what you have in the pipeline. What have you closed on lately? Yeah. What's going on?
Tim Vitale:
We've done a lot less deals this year because of the vertical integration. A lot of our time and energy and focus was there. We've done less deals this year, but we've bought more units, which is the trajectory that you want to be on. So the time of recording this is the day before Thanksgiving. We're closing a 356 unit portfolio next week. And then we're also selling some stuff that we've owned for a little while. We're doing some other transactions in between, but going through some refinances. So there's quite a few deals that we're moving and shaking on. And those business plans have come to fruition and now looking at refinancing.
So, there's a lot of portfolio stabilization, as well as acquiring larger deals now at this point.
Ash Patel:
How are you buying over 300 units when there's no good deals out there?
Tim Vitale:
Relationships, again, we make good people. We do what we say we're going to do. We say we're going to close on a deal and we never give up on it, no matter what happens. Equity partners back out or debt partners back out, insurance comes in sideways or rehab budgets go up. No matter what, we figure out a way to make the deal work and we close on it. And that level of confidence and security from a seller's perspective is, I'm gonna go with those guys every single time because they close on it no matter what. And I want that security of closing.
And for what it's worth, toot my own horn here, but there's so many people that will just try to leverage people and take as much advantage as possible because they look at it as like a zero sum game. I need to make as much money as possible on this one single deal. Otherwise I'm not doing it. And Tim and I look at it a little bit differently. It's more along the lines of, okay, well, this isn't the best deal, but it's an okay deal. What are the next 10 deals look like? And because we've had that mindset, it is literally we close on this deal and then we get the next one under contract and we close on that deal and we get the next one under contract. And we close on that deal and we get the next one under contract.
And we don't really underwrite a whole lot of deals now because we have a handful of brokers that bring us deals. They know exactly what we're going to buy. They know what our appetite looks like. They know what we're going to make an offer on. They can go to the seller and say, these guys take this offer and they will close on it no matter what, and that level of reputation that we've built with brokers and a couple of sellers just makes it so we don't really have to look for deals anymore. And then the other side of the equation is you've got a private equity fund that's backing you.
So now we have, not really looking for money anymore, not really looking for deals anymore. Now we're just looking for those operational efficiencies in order to capitalize and move quicker and do more bigger deals. If you're doing more bigger deals, you call it whatever you want.
Ash Patel:
Yeah, right. Tim, this is not a great time to sell. Why are you guys selling?
Tim Vitale:
A lot of people will say that. And my thought process is if you bought the property right and you've executed your business plan and you've increased the value and you can sell that property for profit and make returns that are probably better than what you underwrote, you do it. One thing that I like to say and make a comparison to is nobody faults you for taking profits in the stock market.
Have you ever heard of anybody shaming somebody for selling stock before? Never. Why would somebody shame me for selling an asset? If I'm realizing unrealized gains, capitalizing on those gains, and I'm providing a level of returns to my investors that's far above what I had projected, why wouldn't you do that?
So, for example, I'll ask you this question. Would you rather have a 100% return in five years or a 70% return in two?
Ash Patel:
I'll take the two years and I agree with you. You don't go broke making a profit.
Tim Vitale:
You don't go, yeah, I love that saying too. You don't go broke realizing profits or realizing gains. If I can sell it and there's meat on the bone for the next guy to come in and make money, and I can provide a 50 to 70% return in two years instead of a hundred percent in five. We're talking about a 35% return per year versus a 20% return per year. It's funny how so many people are like, no, I'll take 105. I'm like, but you realize what you just said. So I was curious to see how you're going to respond, but yeah, you're like, if you have an opportunity to sell a property, make a 50, 60, 70% return in 18 months to two years, why are you going to hold it?
Ash Patel:
I'm with you. I'm more extreme that way where we have a property now, my partners decided we should sell this flex building fully leased now. They wanted to list it at a seven cap. And I'm like, you guys are delusional. No one's paying a seven cap for this. We speak with the broker and he recommended advertising it at a nine cap. I'm like, yeah, let's do it. It's still make a lot of money on it. And my partners said, no, we'll hold it. We don't have to sell. We want to extract as much capital as possible where I'm the opposite. Look, a profit's a profit. Who cares? Take the money. You're leaving money on the table.
Tim Vitale:
I love this conversation because I ask that same person. If you were then the buyer in that situation, how easy is it for you to sell a deal that there's no real upside potential on the easiest way to get in and out of deals fast is to buy them right and to sell them with meat on the bone to the next guy. You can't be greedy and try to take 100% of all the profit out of every single deal, or you're going to be stuck holding the bag, holding that deal forever until the market around your property changes and somebody else can come in and recapitalize the debt on that property and make a profit on it.
Ash Patel:
I'm with you 100%. Add 80% of the value? Yeah.
Tim Vitale:
My other part of that is, in this example, let's just use arbitrary numbers. In this example, if you're going to list it at a seven cap, maybe you're going to net a million dollars at a nine cap versus $1.2 million at a seven cap. So you're literally talking about the difference of $200,000 there. Well, let me ask you this. Do you think that your return on equity is going to be able to go up by a hundred percent in this deal, or do you think it's better to move this million dollars and put it into an opportunity that you can take a million dollars and turn it into two, maybe even three million, or hold this deal to make $200,000?
Ash Patel:
I'm with you 100%. All day.
Tim Vitale:
Velocity of money wins every single time. If you have opportunity and you have money, and then you can keep moving the money to the next deal and the velocity of capital keeps growing, then you don't need to 10X your money every time. All you need to do is double it. Double it, double it, double it. So if I can double my money in a year or two, I'm out. Done. Yeah.
Ash Patel:
Give you the extreme of this example. It was a $2.3 million purchase one year ago and it's being listed for 4.1 million. We just filled the 40% of vacancy that we had with one tenant. So it's okay. We're going to make $1.8 million. Who cares if we make 1.2, 1.3. Right. I'm with you on that.
Tim Vitale:
My thing is if you make that money, the 1.8 million is not going to turn into $4 million of equity. If you don't move the money into the next opportunity, it's not going to continue to grow at the rate that I want to grow. I want to do this. And there's a lot of people that argue that you're going to be able to go like this and then hold it and you're going to plateau and yeah, it's going to go up over time. And I guarantee you, you will make money and you will become wealthy over the long run. But I want to be wealthy like now I'm young, I'm 33, dude, I got a ton of energy and I want to make something of myself now.
I don't want to wait until I'm 70 years old to be rich and wealthy. I want it now. And the way to do that is continually moving your money into opportunity where you can add value to the assets or to the people or to the business or whatever it's going to do. So you can add value, capitalize on those gains and move it to the next deal. Cause if you just let it sit there, for my corporate career, our corporate entities were always valued on return on equity.
But in the investment world, everyone looks on return on investment, return on investment or cash on cash return, as people like to say, is great. Don't get me wrong, but I was literally at dinner with this guy. He said he got about $200,000 into this portfolio and he's making $36,000 a year. I'm like, cool. That's a pretty decent return. Nobody's going to fault you for that. Turns out he's got a million and a half in equity. And I'm like, dude, your return on equity is 2.4%. I said, you could sell that $1.5 million of equity, put it into a high yield savings account at five and a half percent and triple your income with no risk.
And he was like, dude, I've never even thought about analyzing my return on equity instead of my return on investment. Because all I cared about was the money I had into the deal. I was like, no, man, you got to look at growing your total balance sheet. Your return on equity is by far your most important driver.
Ash Patel:
Tim, do you cringe when you hear stories of people paying off their assets early?
Tim Vitale:
No, I don't actually. Because everyone's risk tolerance is going to be a little different. And I got a kid on the way and my wife's due in about four weeks, New Year's Eve, she's due. And I looked at life insurance policies and the stipulation of the life insurance policy is to pay off the debt on one of the assets. And the thought process there is because it will take care of my family forever. So I'm not against paying off assets, but it depends on where you are in life and what your goals are.
Somebody that's my age, I'm going to tell you liquidate payoff assets, in liquidate and leverage, liquidate and leverage, because you want to grow that money as fast as possible, as much as possible, because the other side of the coin is a lot of people's metric is I want to make a hundred thousand dollars a month passive, right? To do that, you need $12 million invested at 10% to make $1.2 million per year, or a hundred K a month.
Conversely, if I have $24 million, I only need to invest it at a 5% return in order to make that same metric. When you invest into deals that are only providing a 5% return, they're much nicer, much safer, much more long-term assets. It's a lot easier to meet your income goals when you have more money to invest at a lower return. So, typically, those lower returns are also equated with safer assets.
My mindset is for me to be completely retired and be done forever, I want to be able to invest my money at 5% and not have to think about it versus having it invested into something that's making 10% that's super risky that takes up a lot of my time and energy. And head space.
Ash Patel:
And head space, yes. Yes. Okay, do you cringe when you meet people and they say, I'm a buy and hold investor?
Tim Vitale:
Yes, because that same guy, I use that as an example. He was a buy and hold investor. I'm like, cool, dude, that's great. But your return on equity is not helping you. And I explained it to him in this way of I syndicate a lot of deals. So my minimum level of investment is gonna be a 7% preferred return on the LP side of my deal. So if I look at my return on equity, and my return on equity is getting close to that 7% or is below that 7%, for easy purposes, let's just say my return on equity is 7%. I wanna liquidate that money, invest it into my new 7% opportunity because now my cashflow hasn't changed. No harm, no foul, nobody's upset, your quality of life hasn't changed at all.
When you invest into a new opportunity that makes that 7% return, you're able to have upside potential where that money could turn from a million dollars into $2 million. But in your original example, that your 7% return is making you 7%, but your million dollar opportunity might go up to $1.2 million versus $2 million because there's not as much equity upside. Because you're gonna make money over the long run.
But the way to accelerate that is you have to move your equity into your minimum investment opportunity that has upside potential so that you can continue to grow your balance sheet.
Ash Patel:
That's a great point. And for the best ever listeners out there, especially the ones that are value add investors, buy and hold doesn't make sense. It's almost contradictory to being a value add investor. And what I tell people is just do the numbers, do the math on if you buy and hold your properties versus continuously turning and burning, deploying your capital into value add deals over five years, the numbers don't lie.
So everyone starts out a buy and hold investor because that's what we think is the right way to do it, right? Buy a bunch of real estate, pay down the mortgages, and eventually you own a bunch of assets. But really the number you should be focused on is your net worth more than passive income. Your net worth number doesn't lie.
Tim Vitale:
Your net worth number is going to drive your passive income. It's going to drive it.
Ash Patel:
Yes, a hundred percent. But it also, I've met people that I want to quit my job, but I can't because I need X number of dollars in passive income every month, and then they share the amount of equity they have in their real estate, they share the millions of dollars they have sitting in the bank. And I'm like, wait a minute, you've got 10 years of passive income sitting in the bank, just spend what you have. It's equity instead of passive income, but you've got it already. It's just mindset that people need to overcome.
Tim Vitale:
You know, it's funny that you said that because one of the things I said in my intro was that we sold our house. My wife is the one that told me to quit my job and sell the house because we had about 150 K in equity in it. And the thought process behind that was if I sell the house and I have the equity, then I can live off of that equity for at least two years. And I said, if I go full time in my business and I'm using the best time of my day, which is eight to five, building this business and I can't put any money into the bank account in two years, it was never meant to be.
We sold our house November 10th, two years ago. So we are 12 days past my two year metric here of saying that if I couldn't put money into the bank, it wasn't possible. And because I took a risk on myself, because I bet on myself, because I took calculated risk in investing and building partnerships and all of those things that go into building a successful real estate business. I promise you I'm making more money than I was at my W2 job.
Ash Patel:
Yeah, I'm glad this worked out. Otherwise you'll be back to making 3% raises every year.
Tim Vitale:
Yeah. What's the worst that can happen? I go back to work. Big deal. I can always get an accounting job.
Ash Patel:
Tim, we're heading into the tail end of our discussion here. Can I have you rebook for a part two? Because we haven't gotten into a lot of what I wanted to. We haven't hit the triple net, but let's end with our best ever lightning round. Tim, what is your best real estate investing advice ever?
Tim Vitale:
Grow your network by providing values to others with no expectation of return. Zig Ziglar's quote if you help others achieve whatever they're trying to achieve you'll be able to far surpass your own goals.
Ash Patel:
Tim what is the best ever book you recently read?
Tim Vitale:
I'm reading The Wealthy Gardener right now, and it is really modern-day rich dad poor dad, and I'm really enjoying it.
Ash Patel:
Tim What's the best ever way you like to give back?
Tim Vitale:
I love to give back we do a weekly Tuesday call we call it Tim and Tim Tuesdays at 10 where we talk about real life problems in our real estate business. We provide transparency and honesty, and there's no fluff. It's not scripted. We don't think about what we're gonna talk. We literally think about it five minutes before the show. We're like, what are we gonna talk about today? And nine times out of 10, it just turns into a business meeting between Tim Vest and I, and we just broadcast it. And it just really shows people a day in the life of a real estate investor, syndicator. I buy my own deal, do it all. So I don't like to label myself as like a syndicator, but I do a lot of different types of deals.
We just talk about real problems. And I don't know where you are in your life and in your journey, but sometimes other people need to hear that you've gone through or are going through those same problems in order to provide some level of inspiration and, or hope to people that they can continue to go through whatever difficulties they're currently.
Ash Patel:
Tim, I've watched that. You guys do it live.
Tim Vitale:
We do live. Yeah. No scripts, no editing, nothing recorded. Nope.
Ash Patel:
Tim, how could the best ever listeners reach out to you?
Tim Vitale:
Join my Facebook group, making moves in multifamily, reach out on Facebook or LinkedIn, Tim Vitale on LinkedIn.
Ash Patel:
Hey, best ever listeners, we will do a part two with Tim, but thank you, Tim, for your time today, joining us. Sorry that I couldn't condense this down to one episode. I'm actually not sorry cause I do want to continue this conversation. I'm not sorry. I love talking with you, man. We always have a good time. Best ever listeners. Thank you as well for joining us. If you enjoy this episode, please leave us a five-star review, share this podcast with someone you think can benefit from it. Also follow, subscribe, and have a best ever day.
Narrator:
Hi, best ever listeners, Joe Farrell is here again. And one last thing before you go, would you like to receive a short weekly email with proven tips from experienced investors, free tools and resources, and a roundup of the week's most relevant news and best ever content? Well, if so, join the community of nearly 15,000 commercial real estate passive and active investors who receive the best ever newsletter. Just go to bestevercre.com forward slash access, and you'll get the very next one. I hope you enjoyed this episode, and as always, thank you for listening, and have a best ever day.
