As a 20 year old college student, Chris did his first wholesale deal and made $7,000. For the rest of college, real estate was his hobby. After attending a Sean Terry conference, he was inspired to start taking real estate seriously and has already been successful. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Chris Salazar Real Estate Background:
-Founder of Arsenal Properties, a real estate investment firm
-Done over 50 single family deals and is now looking to transition into multifamily
-Has grown Arsenal to $4.7M in assets under management in under 6 months
-In the process of repositioning a 24-unit apartment building, and publishes content on real estate Graduated college last year
-Based in Chicago, Illinois
-Say hi to him at www.arsenalpropertiesllc.com
-Best Ever Book: Tools of Titans
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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.
With us today, Chris Salazar. How are you doing, Chris?
Chris Salazar: Doing well, Joe. Glad to be here.
Joe Fairless: Nice to have you on the show. A little bit about Chris, and he’ll get into it in more detail… He graduated college last year; he’s done over 50 single-family deals and is now looking to transition into multifamily. Is that true?
Chris Salazar: That’s true.
Joe Fairless: Wow, okay. I’ll keep with the bio. I just had to fact-check that… I had to make sure that’s correct. Okay – he’s grown his company, which is Arsenal Properties to 4.7 million dollars in assets under management, and under six months he’s in the process of repositioning a 24-unit apartment building and publishes content on real estate. My head is spinning… Holy cow, Chris. Tell us what is your focus right now, tell us a little bit about yourself.
Chris Salazar: Sure, so I just wanna correct one thing – we just have about 4 million, not 4.7. We have something under contract, we haven’t closed it yet, but I just wanted to be clear there.
My background – I graduated college May 2016, and when I was 20 I did my first wholesale deal. I found a duplex completely undervalued and I was able to sell it to a cash buyer within like two hours, and I made 7k in the wholesale fee. I was pretty pumped after that, and it kind of just got me going. I wholesaled houses through college, and then I got the opportunity to work with a local investor who does hundreds of deals a year in my market. My market is the quad cities, by the way.
Joe Fairless: What are the quad cities?
Chris Salazar: Davenport, Iowa and the surrounding area, Moline, Rock Island, Illinois, North Iowa… So that kind of area, that’s my main market right now.
From there, after I did my first wholesale deal, throughout college I was still wholesaling. I got to working with this investor, I learned some of the business, and I went out to a Sean Terry event in Phoenix at the end of October and I was like “You know what, I have enough knowledge, I know all the tools to do this on my own… Why not just do it right now?” So right after that I came back to the quad cities and spoke with the guy I was doing acquisitions for and I told him that it’s time for me to go out on my own.
I found a partner, and from there we’ve built it into a pretty sizeable portfolio so far… So I’m just really excited to grow it and have the opportunity to do that.
Joe Fairless: You said you started with a duplex… Is that right?
Chris Salazar: Yeah, a duplex was my first wholesale deal.
Joe Fairless: That was your first wholesale deal. How old are you now and how old were you then?
Chris Salazar: I’m 22 now, I was 20 when I did that. That was in October 2014, my first deal.
Joe Fairless: Okay, you were 20 years old, you were in college, right?
Chris Salazar: Yeah.
Joe Fairless: Where did you go to college?
Chris Salazar: Augustana College. It’s a small liberal arts school in the quad cities.
Joe Fairless: Okay. You’re in college, you were probably a junior in college, you did a wholesale deal, and then you took that money and did what exactly with it?
Chris Salazar: That money I just plumped into more marketing. I increased the marketing, but throughout college I also was playing football, I started a real estate investment club in my college, and I was just so involved that I kind of treated real estate as a hobby at a time. It was just more so a learning experience for me to soak up as much information as I could, so that when I really was going full-time, I’d really go after it [unintelligible [00:04:29].12] process there.
Joe Fairless: Okay, so you started a real estate investment club in college, you were making money on wholesale deals and you were pumping it back into marketing… At what point did you start putting that money in your pocket so you could then invest in deals?
Chris Salazar: I never really use any of my own cash in any real estate deal, so for that money I wasn’t doing a ton of deal; I probably did six or seven throughout college. Like I said, it was a hobby… I was doing those deals, and I had to pay a lot of my own bills, so all that money wasn’t really being saved as much as it should have been. I was kind of just living a college kid’s life.
Joe Fairless: Okay, so you did 6 or 7 deal, you graduated college, then you started working with someone who was doing it at a high-level, closing on a ton of properties, and you were doing the acquisition for him. Then you went to a Sean Terry event in Phoenix less than a year ago, and after that event you came back to your area and you said “I’m gonna venture out on my own”, right?
Chris Salazar: Exactly.
Joe Fairless: Okay. What a story so far… We haven’t even gotten to the meat of it. So when you got back from the event almost a year ago, how much money did you have in the bank?
Chris Salazar: When I got back from the event – not too much; I can’t even really remember…
Joe Fairless: About 2k, 10k, 30k, 100k?
Chris Salazar: Probably 10k or so…
Joe Fairless: Okay, 10k. And did you have any properties that you owned?
Chris Salazar: No.
Joe Fairless: Okay, so you’ve got $10,000 in the bank, you don’t own any properties, you went to an event… What was it about that event — how much did that event cost and what was it about that event that you’ve decided “Hey, I want to spend my time and my money to travel to Phoenix to attend”?
Chris Salazar: I’d just been following Sean Terry, that’s how I kind of learned about wholesaling in the first place. I was listening to all his podcasts – he put out a bunch of great free information – and learning from him I just felt like I should really pay to go down there and meet him, and kind of network with all the other people that are doing big things in real estate. So that was my thought process there.
Joe Fairless: How much did it cost?
Chris Salazar: It was $500, I believe.
Joe Fairless: Okay. Not including travel.
Chris Salazar: Not including travel.
Joe Fairless: So all in you probably spent about $1,000?
Chris Salazar: Yeah. And then from there, as I said, a lot of what they key speakers were saying really resonated with me, and I went back and I found a partner and I picked up things from there. So it gave me the courage to go out on my own, finally.
Joe Fairless: Did you know your partner prior to attending the event?
Chris Salazar: I did.
Joe Fairless: How did you meet the partner and how did you pick that partner versus other partners?
Chris Salazar: This partner, I’m actually friends with his daughter; I knew him from a few years before, and I was just talking about what I was doing and he was interested in investing. He’s an investor in a lot of different things in different businesses, and he just kind of gave me the opportunity to do what I’m doing now.
Joe Fairless: What do you bring and what does he bring to the partnership?
Chris Salazar: I bring all the experience, he’s solely just a cash investor. He just provides the funds for all the deals, and I do all the groundwork.
Joe Fairless: So what was the first deal you two did together?
Chris Salazar: The first deal we did was a single-family, three-bedroom; it cost about 45k, we put in about 20k, and it’s worth 105k. From there — we were doing all cash deals at the time, and we were just refi-ing everything out.
Joe Fairless: Oh, okay. So you buy it for cash, you fix it up, and then you do a cash-out refinance, you get your money back and you hold on to it?
Chris Salazar: Exactly.
Joe Fairless: And what type of ownership do you have on that deal?
Chris Salazar: On the company as a whole I’m a 50% owner.
Joe Fairless: Okay, so everything is 50/50. Cool. With the $20,000 that you put into it, did you swing the hammer?
Chris Salazar: No, I contracted everything out. That was the first deal we closed on; I think that month we closed on several others, something like five more probably… So I kind of went and took action; I didn’t really have all the necessary tools at the time to go do it. I kind of just learned as I went, and thankfully, I bought correctly, because I was doing acquisitions prior, so I kind of knew how to buy correctly, and I didn’t get hurt on that end.
But at one point I was managing like 10 rehabs. I was the general contractor on all of them, jumping around, losing a ton of sleep but learning a ton in the process.
Joe Fairless: And you were doing acquisitions for 12 months, 24 months before you created this company?
Chris Salazar: Yes, I was the acquisitions manager for the guy in the quad cities for four months.
Joe Fairless: Four months, okay. Because you said you were doing acquisitions so you knew how to do it correctly, and then I was like “Wait, he wasn’t doing it for very long…” [laughs] But four months, okay. This is good, because it will inspire Best Ever listeners who are thinking maybe they don’t have the amount of years under their belt to get done what they wanna do, but here we go, we’re talking to you and you are going lightning fast through things.
Let’s talk about the largest deal in terms of price point that you’ve bought with Arsenal Properties.
Chris Salazar: Sure. The largest deal I’ve done is a package of 27 homes. That deal – we paid about 1.37 for the package, and I think the after repair value on it is about 2.15. The properties didn’t need too much repair, but they were all under-rented for the most part, and none of them really had leases. I think a couple of them were locked into a lease. So we raised the rents, we had some repairs done to the properties, and we kind of stabilized those houses.
Joe Fairless: Was that an all-cash transaction?
Chris Salazar: Yes.
Joe Fairless: And where are you at in the business plan of that deal?
Chris Salazar: We have all the rents up to market; I think all but one of those properties is currently rented right now, just because the tenant just recently moved out, so we’re turning over that unit… But that’s all been fully stabilized.
Joe Fairless: I think the story here is – now that we’ve gotten a little bit into it – not as much about your deals, but more about how you were able to convey the confidence and expertise to a high net worth individual who’s got the checkbook to pay 1.37 million dollars for a package of 27 homes where you’re gonna be a 50/50 owner. What do you think about that statement?
Chris Salazar: I would agree. It’s definitely about mindset, at least for me… The only experience I had was doing acquisitions for that guy, and then just doing several wholesale deals, but throughout that process I learned how to do a rehab for the most part, but the biggest learning curve was when I just started buying these houses and I was thrown into all the rehabs, really managing contractors and having our property management team oversee everything. It was just completely different than what I was expecting. It was really tough and I was working 16 hour days most days. It was definitely worth it. I definitely failed, but the faster you fail, I guess the faster that you learn and can grow.
Joe Fairless: The gentleman who you’re partnering with – you said you’re friends with his daughter. How long were you friends with her? Basically, how long did you know him prior to you two partnering up?
Chris Salazar: Four years or so.
Joe Fairless: So college, basically?
Chris Salazar: Yeah, late high school.
Joe Fairless: And what was the first conversation that you had with him about business?
Chris Salazar: He always knew I was interested in real estate. He thought it was interesting that I was doing wholesale deals in college, and he thought that was pretty ambitious for being a student still… And I know he really trusts me, which is great to kind of have that relationship, and I think that’s one of the most important things, especially when you’re using other people’s money, to be a trustworthy person and be willing to do the right thing.
Our first conversation was just really explaining what I did, what I can do and what I needed. Initially in our conversation I was just hoping to maybe convince him to give me money to do one deal… But he had a bigger vision, and I’m so glad he did, because it turned into something great and we built a solid portfolio in a short period of time so far.
Joe Fairless: There had to have been some bad news along the way you’ve had to give him… So what was that bad news and how did that go?
Chris Salazar: My biggest challenge was dealing with the contractors and really putting my trust in some untrustworthy people. He is from Chicago, he wasn’t involved in any of the deals, like I said, so I was doing all the ground work… And the biggest news was that we lost money from a contractor [unintelligible [00:12:49].05] or me not vetting the contractors properly in the first place. That was the biggest–
Joe Fairless: On that one example – or multiple examples – where you lost money, how much money was lost and what would you do differently if presented the same scenario?
Chris Salazar: We probably lost 3k or 4k on that, so it wasn’t a big mistake, but I just learned from that experience to just vet everybody the same way, put them through the same interview process, and really go with my gut feeling on these guys.
I was doing so many projects and I was overwhelmed, so I was just putting guys in jobs and really wasn’t doing all my due diligence on them as I should have.
Joe Fairless: The package of homes that you mentioned – 27 homes – the ARV is a little over 2 million; you’ve got about 4 million, so what makes up the second-largest chunk of that total assets under management?
Chris Salazar: I think we have two duplexes… The others are single-families. I think we bought 50, sold off 3 of them, so we’ve got 47 properties, actually.
Joe Fairless: What’s the macro-level plan for it? Is it just continue to buy with cash, fix it up, then refinance out the cash and hold on to them?
Chris Salazar: Yeah, some of these deals we’re doing now that are off-market we’re leveraging upfront, instead of paying cash, but the deals that I’m pulling off the MLS – we’re buying those cash.
Joe Fairless: What would you tell to a Best Ever listener who wants to find a partner like the type of partner that you found and have a similar structure?
Chris Salazar: I would say networking is very important. Tell people what you do and how you can help them. Always offer something valuable, but really more importantly, just tell people what you do and really be excited about it, have the prior knowledge and have the confidence. I think confidence is very key when it comes to talking to high net worth individuals like this.
Joe Fairless: What is your best real estate investing advice ever, based on your experience so far?
Chris Salazar: Set goals and take action. If you set your goals ridiculously high and it’s a failure, you’ll fail above everyone else’s successes. That’s a huge quote I like to go back at. I’ve been writing my goals down for a couple of years… It was cool to go back in my journal and actually look at what I wanted to accomplish and what specifically I wrote down. A lot of the things I wrote down are coming true.
It’s really setting in my mind what I want to accomplish and just taking action on this. I mean, so many people listen to these podcasts or any real estate information out there, they consume everything, but then they just never go out and do it… So I would just say “Do something.”
Then another piece of advice is always be willing to give back. What I like to do also is just talk to other people that are my age – really anybody that wants to get involved in real estate deals. I like to just walk them through what I did and how they can apply the same principles and do the same thing.
Joe Fairless: Are you ready for the Best Ever Lightning Round?
Chris Salazar: Let’s do it.
Joe Fairless: Alright. First, a quick word from our Best Ever partners.
Joe Fairless: Best ever book you’ve read?
Chris Salazar: Tools of Titans, by Tim Ferriss.
Joe Fairless: Oh, I love that book. Best ever deal you’ve done?
Chris Salazar: The best ever deal would be the package of 27 properties. It was great.
Joe Fairless: What’s a mistake you’ve made that you haven’t talked about, that you’ve learned from?
Chris Salazar: I would say not doing my due diligence, whether it be on people or on a specific property. Really know your numbers, know what you’re getting into and definitely go with your gut when you’re dealing with people and putting your trust in them.
Joe Fairless: What specific aspect of knowing your numbers did you mess up on in the example you’re thinking of?
Chris Salazar: The repair costs. I got into a deal where we didn’t lose money, but we could have made a lot bigger profit on the deal, on the flip. It was just me being too novice on everything, and just not knowing my numbers in terms of repair costs.
Joe Fairless: What part of the repair costs was not accurately assessed?
Chris Salazar: There was a foundation issue. That was an additional $9,500, I believe. There was a sewage issue that was a similar cost… Those [unintelligible [00:18:02].04] right away, and I could have just come around that by just getting an inspection done on the property, instead of being lazy.
Joe Fairless: What’s the best ever way you like to give back?
Chris Salazar: Like I mentioned before, I like to help people realize what I do and how they can create the same life by investing in real estate, whether it be a few properties replacing their monthly income, or if they wanna create something a lot bigger, it’s really possible.
Joe Fairless: What’s something that you would tell a Best Ever listener “Hey, this does sound good, but man, you’ve gotta watch out for XYZ”?
Chris Salazar: I guess getting into something where you don’t fully know what can go wrong. I knew what I was doing in the sense that I knew how to buy a property correctly, I knew how to mostly evaluate repair costs other than the unknowns that come up, but if you’re gonna get into something, know all the risks and kind of know exactly the efforts that you’re gonna have to put into it – or at least for the most part – before you actually get into it.
Joe Fairless: And how can the Best Ever listeners get in touch with you?
Chris Salazar: I have a website, it’s ChrisJSalazar.com. My cell phone number is on there as well, and my e-mail is email@example.com.
Joe Fairless: Do you currently have a meetup locally? I know you said you started an investment club while in college…
Chris Salazar: Yeah, that was just specific to my college. I still speak at that every year. But locally, there are a couple. I speak at them sometimes… But I live in Chicago now.
Joe Fairless: Well, Chris, incredibly impressive… Bravo! I’m clapping. Congratulations on what you’ve done in an incredibly short amount of time. Your story is an inspiration. This truly is a story of your determination, how you got out of the gate really quickly while working and doing wholesaling in college, you started a real estate investment club in college, and the relationships that you’ve built in a short amount of time have resulted in some lasting benefits.
When we talked about how you had a conversation with the gentleman who’s daughter you know – you knew her for four years, so indirectly you probably knew him for about four years or so, and some of the things you think that really solidified the partnership was him being interested in how active you were in college doing wholesale deals, you also started an investment club, and then the trust factor, too. You mentioned how you like to give back and talk to others, as well as having that confidence based on the stuff that you’ve been doing along the way.
Really just a fascinating story. Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.
Chris Salazar: Thanks a lot, Joe. Thanks for having me.