Brian was seeing his clients make all this money with great tax benefits through real estate. He started taking action, eventually leaving his CPA job to be a full time investor. Now Brian has a portfolio of single family homes as well as small and large multi-family apartment communities. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Brian Adams Real Estate Background:
– Founding member of Adams Investor Group, LLC a company dedicated to creating wealth for others so that my clients make safe and consistent profits
– Practicing certified public accountant (CPA) specializing in real estate taxation and forensic accounting
– His team currently owns single family homes and small and large multi-family apartment complexes
– Began investing in real estate including focusing on asset management for investors 10 years ago
– Based in Glen Mills, Pennsylvania
– Say hi to him at: http://www.adamsinvestorgroup.com/
– Best Ever Book: E-Myth Revisited
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Joe Fairless: Best Ever listeners, how are you doing? 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 fluff.
With us today, Brian Adams. How are you doing, Brian?
Brian Adams: I’m wonderful, Joe. How are you doing, buddy/
Joe Fairless: I am wonderful as well, nice to have you on the show. We’ve talked a couple times – well, more than a couple times – over the phone, we’ve known each other for a while, and in fact, we spoke on the same stage probably three, four, maybe five years ago in New York, at a REIA event in New Jersey, I think… Do you remember that?
Brian Adams: I do remember that, Joe.
Joe Fairless: Yeah, that was a long time ago. I’m looking forward to catching up with you, learning about what you’re up to now. Brian is the founding member of Adams Investor Group, which is a company dedicated to creating wealth for others, and he is a practicing certified public accountant, specializing in real estate taxation and forensic accounting.
His team currently owns single-family homes and small and large multifamily apartment communities. He’s based in Glen Mills, Pennsylvania. With that being said, Brian, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Brian Adams: Yeah, sure, Joe. My real focus – I’ve actually liquidated all my single-family homes in small [unintelligible [00:03:17].17] I really target large multifamily deals, 200+ unit value-add deals. As you mentioned, my background is a CPA with real estate taxation, forensic accounting.
Many years ago, back to let’s say 2000, I was working at some really top-tier firms, and started advising my clients from a tax perspective of how to save money, mitigate tax, and all these other good things, and lo and behold, Joe, I got to see how these high net worth individuals were creating their wealth, and it was through real estate investing. So as the years progressed, I started deep-diving more into, from a tax planning perspective, realizing that they were creating their cashflows from large multifamily deals.
At the end of 2008 I kind of had the a-ha moment, like “Oh my goodness, if my clients are doing this, let me start putting together a plan to go after large deals.” So in ’08 I bought a duplex, had a vacancy, filled that vacancy, started generating really good cashflows, and then I really knew I could scale, so in 2009 I tried to buy a 132-unit deal; I know, a big jump from a duplex to a large multifamily, but I knew my clients were doing it, and looking back, I realize now that I was a little bit maybe too new to the game… And it’s always about adding value.
As I was licking my wounds a little bit, realizing that this large deal didn’t go through, I put together a strategic plan to work with others that were creating or going after large deals, and I partnered with them to acquire a 270+ unit deal. We bought that asset in 2010 for 4,5 million, and it appraised at 12 million on the day of purchase. I was kind of like “Oh my goodness, I can do this just as a–” at that time I was what would be deemed a passive investor, not an active investor… And at the end of 2011, Joe, I decided that I’d spent all this time as a CPA, working long hours, not seeing my wife and young girls at the time – I just realized that the juice of my passion had shifted from being a really good CPA, and I really wanted to focus more on the real estate investing, specifically multi-family… So at the end of 2011 I quit my job, I pushed all my chips in and quit my CPA job at a top 100 law firm to start my own business, Adams Investor Group.
Out of the gates it was very challenging, but now I’ve bought and sold over 2,300 units, and life has been good, it’s been great. I’m blessed that I work with some really good investors, and I’m very prudent, because as a CPA I wanna be conservative with my investment model and really target deals that make sense across the board.
Joe Fairless: Alright, some follow-up questions for you based on what you said… Let’s see, the first question is the 130-unit you looked at in 2009, you said you were licking your wounds and didn’t go through… What happened with that deal?
Brian Adams: I was trying to be the lead dog, and what I mean by that is trying to be the guy to put the deal together, try to be a lone sponsor and raise all the money and do all the things that I do now, actually… But at that time I was just too new to the game, I didn’t know how all the puzzle pieces worked.
So as I was trying to put this deal together, it didn’t come together. There was a period of time when your money becomes non-refundable, and I realized that I just wasn’t able to pull the trigger and get the deal done, so… Fortunately, I was able to get my earnest money back, but I licked my wounds because I did spend money for an attorney and putting together a PPM (private placement memorandum) and inspections, and… There was a lot of sunk costs, so that’s what I meant by licking my wounds, like “Oh my god, I’ve lost money here”, but to kind of fail in this game a little bit, and you’ve gotta pick yourself up and realize “Okay, what did I do right here, and how can I get better at learning the ropes a little bit better?”
Joe Fairless: How much money would you say you put into that deal that didn’t close?
Brian Adams: It was 30k, it’s not chump change.
Joe Fairless: No, it’s not, but it’s a good lesson… And just for Best Ever listeners who want to be educated on the money required to close these types of deals, can you break out that 30k that you put into that deal that you didn’t get back? Where that money went from and just the major chunks.
Brian Adams: Sure. Generally speaking, your attorney has to draft a PSA (purchase and sales agreement). That could range $2,500 to $3,500; it really depends on how much time is involved. The PPM (private placement memorandum), the operating agreement and the subscription booklet could range $7,500 to $15,000. Then you’ve got costs for an appraisal, and the inspection, and environmental, and surveys… So there’s all these other reports. I’m not exactly sure, Joe, what that break out was for a third-party, but I’m sure your listeners can kind of figure that out, whatever is left over.
Joe Fairless: Yeah. Okay, the bulk of it, it sounds like was the legal costs for the drafting of the PPM and the PSA (purchase and sales agreement).
Brian Adams: Yeah, and I’ve always been of one — being a CPA and in that professional environment, I never wanted to kind of put it together myself or try to put it together myself, because I’m not an attorney, and I would also suggest and advise your listeners not to kind of [unintelligible [00:08:23].05] You do need to seek respective legal counsel, good legal counsel to help navigate the contract and other things, especially raising capital; you’re playing in the Securities and Exchange Commission, so you’ve gotta make sure you’re doing this the right way. So I didn’t wanna short-change, and — maybe I spent a little bit more money on the legal side, but I wanna make sure I was protected… And I’m glad I did; it was a cost well spent, as I got to learn… A bit of an expensive lesson; I wouldn’t suggest anyone to go out and spend that type of cash. It was a hard lesson.
Joe Fairless: Well, that’s why we’re doing this interview, so that the Best Ever listeners can avoid something like that, because we’re learning through other people’s experiences. The second question I have is on the 270-unit that you said you partnered with others… I wanna clarify something for my own purposes. I believe you said you bought it for 4,5 and it appraised for 12 million at purchase – is that when someone else bought it from you?
Brian Adams: No, it was a bank REO, so at the time that it went under contract it was at 4,5 million, but then, because as you know with values of multifamilies based on your net operating income and cap rate, and… Things had changed 6-8 months after the property actually went under contract, so there were some delays with closing that when the appraisal came back, it appraised at 12 million.
Joe Fairless: Wow. You had it under contract for 4,5 million and then 6-8 months later it appraised for 12 million dollars?
Brian Adams: Yeah, that’s correct. Some of these banks at the time — this was 2010, so a different environment than when we’re recording this show, of course. Some banks just had some bad assets on the books and they wanted some quiet transactions that they kind of wanted to happen, so some of them at the time were wanting to liquidate properties… And to be really clear, Joe, as a disclaimer, I did not find this deal; I wasn’t the operator, I wasn’t the person putting the deal together. What I was able to do was go through my rolodex after the 132-unit deal collapsed on me, and say “I wanna get in this game. I know I can make this thing happen. Who is in my rolodex that I can add value to them?” and my value was to raise capital; I was able to bring some dollars into their deal and be involved, and be kind of that person in the backseat, as a passive investor… Asking questions, understanding the game; how did they do what they were doing and all that other good stuff?
Fast-forward a little bit, I just recently closed a 556-unit deal and I raised 10 million in 45 days – that just didn’t happen overnight. This was a lot of hard work, and a lot of dedication, if you will… Or, determination is probably the better way to say it. You’re gonna run into bumps and bruises along this journey, and you need to kind of have some focus and some clarity on what your desired outcome is. For me, I knew that working 70, 90, 100 hours a week during tax season just wasn’t the game that I wanted to follow. I wanted to create my own wealth, because I knew my clients were doing it, and I already had the blueprint already in front of me; I just knew I had to take that massive action to get it done.
Joe Fairless: What did that 270-unit sell for when you exited?
Brian Adams: Well, that’s an interesting story, because what had happened – and all of us knew this that were going into the deal – is that we bought it for 4,5, it appraised at 12 within what’s called a seasoning period, so within a 12-month period the asset was seasoned, and then the operator refinanced the deal and cashed myself and my investors out of the equation. They held the deal going forward, so basically refinanced back at that same appraised value. That was pretty cool, because I was able to get a nice, juicy return, as well as my investors, and it helped a create a track record, a story, and I was able then to basically slingshot that into my own… This is what I was able to accomplish. It doesn’t mean I had to do it all myself, I think again this is all about leverage and using collectively – how do we create a win/win strategy? And I was able to help them, they were able to help me, and everything’s been pretty good thereafter.
Joe Fairless: In the projections that were sent out to investors on that 270-unit, was it a “12-month we’re gonna cash you out” projection, or was it more of a “5-7 years”, and they happened to come across this so they exited out early than anticipated.
Brian Adams: Yeah, it was an early exit; it had a shorter window on it… I think it was a 24-month window, and it just happened that we were able to exit sooner rather than later, and all parties were certainly happy about that.
Joe Fairless: So now let’s go to 2011, and then I wanna ask about this 500+ unit, 10 million in 45 days. But before I do that, in 2011 you quit your CPA job, and you said there were some challenging times. What specifically was challenging?
Brian Adams: Yeah, so if you think about my background, my story of being a CPA, and very conservative, and kind of having that W-2 income coming in… So I just knew I wasn’t where I wanted to be, and I pushed all those chips in. So when I wake up, for the first part of 2012, I’m either self-employed or unemployed, depending how you look at it. I had to pull myself by the bootstraps and get out there and get after it.
In 2012 admittedly, Joe, the deals just didn’t rain down on me, the private investment capital didn’t rain down on me; I had to get out there and really work my strategy and my plan. My plan did change. Instead of trying to buy large apartment deals, I had to change the strategy a little bit to get cashflow, so I started flipping houses. We were doing about 1-2 houses a month, and that really helped – looking back, as I reflect – because I was able to do a flip, tell the investor “Okay, here’s what we’re gonna do… We’re gonna buy it, we’re gonna fix it, we’re gonna sell it, you’re gonna get your money back, get a return.” And they were like, “Oh wow, you actually did what you said you were gonna do.”
Then I’m all about communication, so I was bringing them along this journey with me, and then one guy would tell their friend, and then their friend would tell another person… “Hey, I talked to Brian about his program.” Then that just seemed to snowball into some really cool stuff.
Again, looking back, it was really hard, dark days, if you will, but you just have to kind of persevere, and once you know where you wanna go, it’s just kind of mapping out that plan to try to get there, and there’s multiple ways to get to California from where I am in Pennsylvania; you’ve just gotta try to figure out a way to get there.
Joe Fairless: Tell us about the time that was one of the most challenging moments in that period.
Brian Adams: Sure, I had an investor that had invested a million dollars with me over a couple different deals, and he ended up unfortunately passing away. We had all the paperwork etc, but his family wanted his money back. They were aware of him investing with me, but at the time they didn’t understand real estate as well as this particular investor did, so I had to figure out a way to get him paid back over a period of time, which sounds a little bit challenging… You have someone lined up, and then could you have taken an approach that we were gonna keep his money? Yeah, you could have, certainly; there were documents that would have proved all that out, but at the end of the day what I’ve realized is I wanna work with people who wanna work with me and vice-versa, so it just wasn’t a fit… And sometimes we’ve just gotta go in separate directions, so that was challenging back then.
Joe Fairless: Was the million dollars invested in current deals at the time, that were being flipped?
Brian Adams: Yes, it wasn’t liquid… So talking with the attorney, they had to basically replace that investor with someone else; it was all transparent, everyone knew what happened, there wasn’t any shadiness happening. Everyone was aware of the situation, and I wanted to make sure everything was disclosed.
Joe Fairless: Did you have a million in the queue to just replace, or what was that like?
Brian Adams: No, that’s a luxury I have now, but back then no. It was creating relationships and making sure that people — networking and doing all the things that you’re supposed to be doing… Just dotting the i’s and crossing the t’s, communicating with people, telling them what you do and how you do it, and “educate first” is what I’m a strong believer in. Before you try to take someone’s money, you wanna make sure that it’s a fit. Some people who have come to me and said “Hey, I wanna invest with you”, maybe they don’t understand that real estate is illiquid, and it could be a 5-7 year deal and you just can’t, like the stock market, call up your broker tomorrow and say “Hey, I want all my money back.” It doesn’t work that way. So that’s kind of that education process that we go through.
Joe Fairless: As far as creating relationships and networking, what are some tactical things that you do to cultivate your investor group?
Brian Adams: First it comes down to what I call the circle of influence – who’s your friends, your family, and maybe some business associates that you know better than others… And the reason I say it that way is because generally speaking, your friends and family want you to succeed, so the question when I first started was “Hey, do you know anyone who I can help with real estate investing?” and it goes further than that of course, but they would maybe say “Here’s one or two folks that you can reach or out-reach to”, so then that creates your database and you just start creating content and educating them…
And then to take that a little bit further, what I also was doing back then is instead of going to, let’s say, your local real estate investment group, there’s a lot of people in the room maybe that are seeking money – they have the deals, but they don’t have the money… Well, I kind of flipped it around and said “Where are people that have the money? Where do they hang out?” Maybe it’s at a charitable event, maybe it’s at a wine and dine event, maybe it’s at an art show… It’s kind of flipping the equation around a little bit – okay, I’m gonna go to a place where probably there’s not gonna be other real estate investors; I can then share my experience with them, and they’re probably gonna be someone that might have some capital they wanna deploy, and let’s see how we can create win/win. That’s been successful for me as well, just to kind of swim up the stream a little bit, go where other people aren’t, and go to a different fishing hole.
Joe Fairless: As far as the different fishing holes, what’s one specific example – and then I have a couple follow-up questions – of a place that you went to? You mentioned art shows, charitable events, but can you give us one specific thing?
Brian Adams: Back then it was a shotgun approach – hit as many networking functions as I could, creating the database and follow-up. I think that’s the key – someone that you meet… I don’t really wanna meet 100 people. I actually would rather prefer to meet 5-10 people and have an engaging conversation, have a connection. Then on top of that, when I get a business card or something, I put them into my database and send them a thank you note – “Hey, I enjoyed our conversation”, or an e-mail… And then periodically – maybe it’s 30 days – just give them a call and say “Hey, John, great to meet you at XYZ event. Just wanted to see how you’re doing?” It’s nothing kind of sleazy or anything, it’s just wanting to create a connection and see how we could possibly work together. My background, again, of being a CPA and helping very high network individuals, I’ve had that experience.
I should disclaim right now, Joe, that anyone can raise capital. You don’t have to be a CPA to raise money. Anyone can do this, but you just need to have a plan to get where you wanna go. I’m all about systems and processes and checklists, so I kind of put together a strategic plan of “Okay, I wanna get from here to there. How am I gonna do that?” and I kind of try to figure it out on my own there.
Joe Fairless: Now do you go to, say, an art show or a charity event or something like that?
Brian Adams: No, I don’t. Now I’ve got a group of investors that I work with and I communicate often and regular with them. I’m blessed and grateful that they’re sharing my name with others, and now I just have that opportunity to share my investment strategy with them, and if it’s a fit from an educational perspective, then it all works out.
Joe Fairless: Okay. But previously, did you go to a charity event or an art show or something like that?
Brian Adams: Back in the day, yes. When I was starting out, that is correct.
Joe Fairless: Okay, alright. So my question is pretend we’re in that scenario, you’re at the art show, we just meet – what’s the conversation like?
Brian Adams: It’s “How are you doing?”, kind of getting to know you, kind of come with what we call an elevator pitch, if you will… Like, “Hey, this is what I do, this is how I do it. Have you ever owned any rental real estate before?” and if they nibble a little bit and then they ask a follow-up question… And then you’re trying to have that conversation. Again, it’s creating a connection, and sometimes it’s really not ever about real estate, it’s about “Hey, tell me about your family, your kids. Where did you go to college?” You wanna create that rapport, because no one’s gonna give you — my minimum investment is $100,000. No one’s gonna give you $100,000 the first time you meet someone. You’ve gotta develop that trust and that credibility, and that takes time. It’s not gonna be an overnight success thing.
And Joe, again, I wanna disclaim this – this didn’t happen overnight; it’s been a lot of hard work to get to where I’m at now.
Joe Fairless: Now let’s talk about where you’re at now… Recently you purchased a 500-and how many units?
Brian Adams: 556-unit deal.
Joe Fairless: A 556-unit deal. You said you raised ten million in 45 days… Of that ten million — well, first, roughly (if you don’t know the exact number) how many investors were in that deal?
Brian Adams: There were about 20. Two very large investors who we’ve done deal before, and then the others are a mixed bag, 18 or so of other relationships that have been created over time.
Joe Fairless: Okay, and of the ten million, the two very large, are they around seven million a piece, or something…? Roughly how much did they invest?
Brian Adams: Their chunk was 7,5 million.
Joe Fairless: Each?
Brian Adams: No, the total raise was ten million, so…
Joe Fairless: Oh, right, right. Yeah…
Brian Adams: No worries.
Joe Fairless: Got it, got it. I was scaling it up to 20.
Brian Adams: Soon enough, soon enough. What I’ve found is that most of my deals – I get about a 50%-60% repeat rate of one investor has done this one, and they wanna kind of get in the next one. So again, I’m blessing and grateful that I have the investors that I can just say “Hey, I’ve got this opportunity, we’ve done a deal before, here’s another one – do you wanna participate?” and I’ve been grateful that that’s been able to come together easy.
Joe Fairless: The two investors – the very large investors – obviously not looking for personal, identifiable information, but I’m curious (and I’m sure the Best Ever listeners are curious, too) how you met them initially.
Brian Adams: Again, networking. I don’t know specifically where we would have met, because it’s been years and years of just — but they didn’t invest when I first started. They wanted to see what Brian Adams was gonna do and how he was gonna do it, and a lot of people when I first was starting, they knew me as a good CPA, but they didn’t know me as a guy buying 500-unit deals and all this other good stuff… That took time.
Joe Fairless: Those two, your two largest ones, you don’t remember exactly how you met them?
Brian Adams: We’ve known each other for years, so I don’t know exactly what network event we would have met at… But yeah, we’re good friends, so I don’t know exactly.
Joe Fairless: Alright, that surprises me, but nonetheless, so it was a networking event, some of the things that you described earlier… And then you’ve got 18 investors, average of 166k or so per investor, in total the ten million… Anything else as it relates to raising money that we haven’t talked about that you wanted to mention before we ask for your best advice ever?
Brian Adams: I think the best suggestion to your audience would be when an investor invests in a deal, and you have a fancy proforma or a spreadsheet of the investment offering, investors expect that the deal is gonna perform the way that it’s outlined. When the deal doesn’t perform the way that it’s supposed to, you’ve gotta be able to communicate the bad and the ugly. What I mean by that is a quick example – I had a 144-unit deal that had a fire; that’s a material thing that needs to get disclosed immediately to your investor. That has an impact on your financials and your projections, so you wanna make sure that your investors are in the loop. If something is not trending and tracking the right way in a deal, you’ve gotta communicate; you’ve gotta make sure that the investor are not gonna get their cashflow check, or distribution quarterlies or whatever the setup of the deal is, they’re not gonna that – you’ve gotta make sure that you’re telling that person sooner rather than later. There’s no surprises… You wanna communicate and communicate often.
Joe Fairless: What is your best real estate investing advice ever?
Brian Adams: I think to know what your Why is, what you’re trying to accomplish. I was gonna do flips, I was gonna do a wholesale, I was gonna do multifamily, I was gonna raise capital – I was all over the place before I had a specific “This is what I’m gonna do and this is how I’m gonna do it.” So know what you’re trying to go after and really know your why. What I mean by that is wrap emotion in really a thought process that you’re setting out for. You can spin yourself in a circle and it can be very frustrating… I know that, I did that several years; I just didn’t have the direction and focus.
Sometimes we get ourselves focused — for me there was a place of pleasure and pain; I was good at what my job was, I was doing really well. I was not with my family, my girls, and not doing the things that I wanted to be doing, so that pain led me to a place of taking massive action to get things done.
Joe Fairless: Are you ready for the Best Ever Lightning Round?
Brian Adams: Sure, give it to me!
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Joe Fairless: Best ever book you’ve read?
Brian Adams: The best ever book… I’m a big fan of the Michael Gerber, E-Myth Revisited book, and I’m also a fan of Think and Grow Rich and Tony Robbins. I guess I’m not saying just one… It’s just creating a mindset of success.
Joe Fairless: Best ever deal you’ve done?
Brian Adams: Best ever deal was in 2014 I bought a 209-unit deal on a direct mail campaign. I bought it for six million, and at the day of purchase it appraised at 7,4 million. 15 months later I sold that deal for 10,2 million so that was a really nice opportunity. And direct mail does work; it takes some time, but I found that on letter campaigns. That was a really good deal.
Joe Fairless: What’s a tip you have on direct mail to apartment owners?
Brian Adams: Just don’t do one campaign, don’t do one letter. It’s a sequence or a series of letters that need to get sent out. If you send one random letter to a person, most likely they’re not gonna outreach to you… So you have to maybe send a letter every 7-10 days, and then continue to follow up maybe 30 days thereafter with “Hey, just wanna see if you’re still interested”, because life events happen; I’ve actually had a couple people call me… They’ve had my letter for years; they just put it in a file and then something popped up and said “Hey Brian, are you still doing what you’re doing?” So just be consistent with your direct mail campaigns.
Joe Fairless: What’s a mistake you’ve made on a transaction?
Brian Adams: I think just an overall mistake, Joe, is that when I first was out of the gates and I wanted to get into this business, I got into maybe a transaction, I didn’t vet my partner as well as I should have, or as I would now. So we’re all coming together to get the deal done, and this person claims they can do this and that and the other, and at the end of the day they just couldn’t do it.
The advice would be don’t rush into getting into the deal just to get a deal. Take your time, make sure it feels right, and vet whoever you’re gonna be working with.
Joe Fairless: Best ever way the Best Ever listeners can get in touch with you?
Brian Adams: Sure, my e-mail is email@example.com. I always have a free gift, if I could… I have a report on why apartments are the ideal investment. If they wanna text “ideal1” to 44222, I’ll send them a free report, and it’s all education.
Joe Fairless: Outstanding. Well, Brian, thank you for being on the show. Thanks for talking about your career path and how you went from a duplex in 2008 to raising ten million bucks in 45 days on a 500-unit most recently… The approach you take, getting to know investors, at least initially, going where the people who have money are versus going to local real estate investment groups, and the focus on the individual, not necessarily the masses… So meeting 5-10 people versus 100.
Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.
Brian Adams: Thanks, Joe. I appreciate it, buddy.