February 23, 2018

JF1270: How To Succeed In Apartment Syndication After Being Rejected #FollowAlongFriday

Joe and Theo are back this week to discuss rejection. We’ll hear of three different investors who were all rejected on offers but kept going and ended up finding success. This episode was also filmed on Facebook live, some listener/viewer questions were answered live in real time. To watch the live filming on Thursday before we turn it into a podcast episode on Friday, visit bestevershowcommunity.com.

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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 of that fluffy stuff.

We’re doing a Follow Along Friday, we’ve got Theo Hicks as we usually do on Fridays… Theo, we’re gonna be talking about perseverance and accomplishing some pretty big stuff after you persevere, right?

Theo Hicks: Yup. Just for some context, we had the Best Ever conference and we had a panel where people were talking about kind of getting to the next level. It was interesting, because three of the people on that panel brought up the fact that whether it was their first deal, or just some apartment deal in their career where they were initially rejected, and then persevered and ended up either getting that deal or a different deal, or it somehow basically worked out for them in the end. Based off of those lessons that we learned from those speakers, we wanted to kind of touch on that and have a conversation around that on the show today. We have three specific examples that we want to go over.

Joe Fairless: The panel you’re talking about was titled Next Level. I think it was called Next Level.

Theo Hicks: I think it was called Next Level.

Joe Fairless: Yeah, Next Level, and it was a panel I moderated with four of my consulting clients who have recently gone from not as big of a deal to a large deal. I didn’t put this together until I started asking them on the panel about the deal; I didn’t connect the dots until they were all in the room together and we were talking about this, that three out of the four had the deal fall through or they didn’t get awarded the deal before they actually purchased a large deal.

So here’s some three specific examples. Jason – he initially found a deal for 3.1 million dollars, and it took him seven months to negotiate with the seller to get it down to a price point that was a good deal for Jason and his investors. He ended up buying it for 2.3 million. So seven months – that’s a long time. I want to think about how long seven months is and what can be accomplished and how different things are seven months from now or seven months ago. Do a daily journal and you’ll really realize that, and look back seven months. So it took him seven months to negotiate this deal.

The second example is [unintelligible [00:04:37].15]. Him and his business partner [unintelligible [00:04:40].12] they had a 78-unit that fell through. It didn’t work out. They had put a lot of time, a lot of effort in this deal, and it would have been their first syndication. It didn’t happen. Shortly thereafter they then found a 44-unit, and they closed on that deal. They raised about $800,000 and made it happen. So for them, they didn’t get the first deal, and then they ended up getting the second.

Then the third example is Andrew. He bought a 190+ unit apartment community, and he initially wasn’t awarded that 190+ unit apartment community. Another buyer was awarded it, but then that buyer didn’t pan out, for whatever reason. I believe it was a 1031 buyer that didn’t end up working out. Basically, he got second place initially, and then once the initial buyer didn’t work out, he was then awarded the deal. So perseverance, number one, but number two – it goes a little bit deeper than that, and that is thinking about the end and how we approach the end, how we treat others at the end of something… And instead of thinking about it as something is complete, think about it as something that I’m gonna build on to do bigger and better things. I think that’s the key, and it reminds me of a passage from a book. The book is by Robert Green, he’s one of my favorite authors (Theo, you know he’s one of my favorite authors; I talk about him all the time) and the book is 48 Laws of Power. Before I read that, what are your thoughts on what I’ve just said, Theo, while you’re gulping down some coffee right now?

Theo Hicks: I totally agree, because if you don’t keep where you wanna go in mind and what you’re trying to accomplish in mind… It actually kind of reminds me of two things that were actually said at the conference. One was when Terrell Fletcher was talking about how champions love the process as much as they love the outcome, and then two was when Scott Lewis said “Prepare to get punched in the face.”

Obviously, all three of these situations they probably went in with the expectations of it being not necessarily being completely smooth and easy, but they certainly didn’t expect to spend seven months probably negotiating that deal. But when they got punched in the face, he was able to maybe — because he loved the process or because he kept that end goal in mind, whatever reason that was, he was able to continue on.

When Scott said that – obviously, everyone knows that things usually don’t go according to plan, but how you react when things don’t go according to plan is kind of what separates the winners from the losers, so to speak… And it sounds like in all three of these situations when they got punched in the face, they took the correct steps to make sure that they’re either gonna get punched in the face again, or they fixed up their wounds and got back in the ring and kind of continued going until they won the fight. So I definitely agree with everything you’re saying, and I’m interested in hearing what quote you’ve got from the 48 Laws of Power, because the majority of that book can apply to so many different life situations, so I’m kind of looking forward to hearing what you’re gonna pull up.

Joe Fairless: Yeah, I’ll read the passage here in a second. It’s almost — when we get punched in the face, it’s almost saying, “Thank you, sir. May I have another?” Because it’s the mindset that what is taking place right now is not the end, and I want to make sure that I’m connecting. And obviously, if someone keeps punching your face, you punch them back or you figure out another solution or approach, so perhaps that analogy is not the most appropriate… But it’s important to build relationships with people even after you get disappointed by them. And perhaps it’s not friendly “Let’s go have drinks” relationship, but just leaving it so that you are on higher ground, or you are on high ground. That way you can continue to build and build on your experiences… Because ultimately, we’re all gonna come across challenges, we’re all gonna come across things that we don’t like, we’re all gonna get screwed over by someone at some point in time or multiple times… So really, it’s about how do we approach that, and are we continuing to take the high ground and creating empowering meanings from that?

When Andrew initially didn’t get his 190+ unit deal, well, he could have thrown a fit with the broker; “Oh, man, that sucks!” and “We didn’t want this deal anyway.” He didn’t. Instead, he continued to build the relationship with the broker, and they ended up getting awarded a deal… And oh, by the way, after they closed on that deal, the seller enjoyed his experience with them so much they now have a 200+ unit deal under contract. Boom, there you go! But if he would have ended on a sour note after he wasn’t initially awarded something, then he’d be without 400 units right now. How powerful is that?

So here’s the passage:

“For most of us, the conclusion of anything – a project, a campaign, an attempt at persuasion – represents a kind of wall. Our work is done, and it is time to tally our gains and losses and move on. Understand this – in any venture, your tendency to think in terms of winning or losing, success or failure, is dangerous. Your mind comes to a stop, instead of looking ahead. Emotions dominate the moment: a smug elation in winning, dejection and bitterness in losing. What you need is a more fluid and strategic outlook on life. Nothing ever really ends. How you finish something will influence and even determine what you do next. Some victories are negative, they lead nowhere, and some defeats are positive, working as a wake-up call or lesson. This kind of fluid thinking will force you to put more strategic emphasis on the quality and mood of the ending. It will make you look at your opponents and decide whether you might do better to be generous to them at the end, taking a step back and transforming them into allies. Playing on the emotions of the moment, keeping your eyes on the aftermath of any encounter, you will think more of the feeling you leave people with, a feeling that might translate into a desire to see more of you. By understanding that any victory or defeat is temporary, and that what matters is what you do with them, you will find it easier to keep yourself balanced during the thousands of battles that life entails. The only real ending is death, everything else is a transition.”

Theo Hicks: [unintelligible [00:11:26].28]

Joe Fairless: This guy is money. Robert Green, 48 Laws of Power – it’s a must read. 33 Strategies of War – I’m reading that right now. But everything’s a transition, except death, which depending on what your belief system is, certainly that could be a transition, too. But we’ll just talk about as our time on earth, how about that? Anything as we’re on earth is a transition, and it’s important to approach it accordingly. Nothing’s an end, so [unintelligible [00:11:55].28]

Theo Hicks: That really reminds me of — and I’ve talked about it before on the podcast, but again, it’s such a great point that I had to be bringing it up… It’s Scott Adams, the Dilbert cartoonist, brings up the difference between goal thinking versus systems thinking. Obviously, he’s not saying “Don’t set goals, just live in the moment, do whatever.” He’s saying that when you are trying to accomplish a task, your goal should be to have systems that you can use indefinitely throughout your life, as opposed to doing whatever you need to do to accomplish some goal, and then having the skills to be able to accomplish that.

An example – we talked a couple weeks ago about hiring a mentor. If you’re going to hire a mentor that is gonna do everything for you, and your goal is to make a million dollars in real estate, maybe him doing everything for you will have you reach that goal of a million dollars, but once you reach that million dollars, you’re not gonna have the skillset required to replicate that or to maintain that, or do it again if it happens to go away… Whereas if you do it yourself – and it may take a little bit longer, it may be a little bit harder, you may have a lot more setbacks along the way, but once you actually get to the million dollars, you have the skills, the knowledge, the expertise to be a millionaire, and you’ll have a better chance of maintaining it and replicating it.

A cliché is that the first million dollars is the hardest, but once you get to a million dollars, you either lose all of it, and you know what to do again, unless you set a goal and you did whatever you needed to do to get to it, and didn’t actually learn the things yourself… So that’s kind of how I think of the goals versus system thinking in my head. Obviously, you need to set goals, obviously you need to strive towards something, but the success of that goal cannot be based solely on the outcome, because probably that’s not going to be the best for you in the long term. So even if you don’t reach that million dollar goal in the timeframe that you want to, but you’ve learned the skillsets to make $500,000, you’re way better off than you would be if you had someone basically drag you along the way to that million dollar goal.

Joe Fairless: So an action step would be when we create goals, to list out next to them the skills we’ll acquire along the way, regardless of if we achieve that goal. That way, we are building on something and we’re treating things as transitions, not start and stop.

Theo Hicks: And you need to do that before you set the goal, but you can also do it after you’ve reached it or failed to reach that. Look back and see “Hey, what skillsets–” As you said, some defeats are obviously legitimate defeats that you need to be like “Alright, I messed up”, but some of them are gonna be positive because you’re gonna have a lesson from them. And I will say that most of them (if not all of them) you can pull some sort of lesson from.

Joe Fairless: Absolutely.

Theo Hicks: But after you’re defeated, look back and be like “Alright, I got beat up. What did I do wrong? And also, what did I do right, that I can extract and apply moving forward? And what do I need to get rid of?” So instead of just thinking about what you need to get rid of or just discarding the entire plan, extract the gems and then get rid of all the turds.

Joe Fairless: Yup, I like it.

Theo Hicks: I need to read 48 Laws of Power again. I forgot how powerful that book is.

Joe Fairless: Oh, man… It’s awesome. Let’s see. We’ve got two listener questions, and  by the way, Best Ever listeners who are listening to this via the podcast on Friday, we do this live earlier in the week, and you can just go to BestEverCommunity.com, and you’ll see the feed earlier in the week. So these are questions that are coming in right now while on the call. One is from Braden, and he asks “How do you tie up investor capital on deals that take several months to acquire?”

Well, the process for raising money is once you have it under contract, then you start the money raise. If that’s what you’re referring to, the several months between contract and closing, you can either have them fund 30 prior to closing, so that’s only in your escrow account for 30 days, or you can have them fund earlier, and that’s just part of being an investor in the deals.

Another idea that I’ve seen done is paying a very small interest on the funds once they are submitted up to closing… So like 3% of whatever interest, whatever they might be making in a CD or something like that – pay that, so that they are getting a tiny bit, but they are getting some sort of interest on their funds. We don’t do that; it would be just a logistical nightmare to do that. We’re not set up that way, and it’s not a whole lot of money really at all. But that is an option that I’ve seen other people do. With us, we just try to fund about 30 days prior to actually closing, even though we’re having investor conversations prior to that, and as early as once we have it under contract.

And then Paul asks “Suggestions on top three ways to find multifamily deals?” Well, don’t we have a document on my website…? JoeFairless.com, the little carrot that we have for people to opt in is like 27 Ways to Find Off-Market Deals.

Theo Hicks: Yes, if you go to JoeFairless.com, the first thing you’ll see is enter your e-mail address to get access to 24 proven ways to find off-market deals. If you go to the Resources tab for our blog, we have a category for finding deals. I think we call it Lead Generation, and we’ve got 30 articles in there about how to find deals in general. I’d probably say at least half of those are specific to finding multifamily deals.

Joe Fairless: Cool, so go to those resources, and Paul, if you still have questions about that after you check out all that stuff, then let us know and we’ll be happy to address some specific questions after that.

And then the last one, “How long is your typical escrow period?” Right now it’s typically 60 days from when we sign the contract to when we close. Ideally we do 90, but it’s just a really competitive market. Once we have an agreed upon LOI, it’s typically about 10 business days from that point to having a signed purchase and sale agreement (PSA). So we’ve got 10 days on the front-end from the LOI to the PSA agreement, and then we’ve got usually 60 days – sometimes 90, but usually 60 – from contract to close, and that’s because it’s a competitive market and we need to be able to close quicker. What else have we got, Theo?

Theo Hicks: Moving on, daily updates, observations from the past couple of weeks?

Joe Fairless: Nope, I’ve talked about that stuff already, I’m good. What about you?

Theo Hicks: I’ve had a busy two weeks. [unintelligible [00:18:35].03] but three things, actually. I have my quarterly – or I think it’s maybe bi-annually inspection at my units, which again, was technically done when we bought the property by an inspector, but the property management company that I hired will go in there and review each of the units to check out some deferred maintenance. It looks like I actually addressed most of the deferred maintenance during the first couple of months that I had the property; it was a lot of deferred maintenance, but I’m glad it’s out of the way.

A couple of minor things that we had to change – I can’t remember if I talked about this the last time or not, but one of the buildings, the building with the most deferred maintenance, let’s just say that… There was a unit in particular that was the biggest problem, and we were comfortable giving the current resident a 30-day notice, just because —

Joe Fairless: They wanted to move out though, right?

Theo Hicks: They wanted to move out. So they’re moving out, and then the first above them is also moving out, which is also an issue resident, so we’re very excited about that, because we can go in there… The upstairs unit is actually completely fine, because the guy was barely ever there, so that one we’ll turn over pretty quickly. And the other one we’re gonna turn over and increase the rents by almost $100, so we’re excited about that. Once we actually implement that rent raise on those units, as well as on the other ones, I will definitely let all of the Best Ever listeners know how that went… Because, as we just talked about earlier, not everything goes according to plan, so I’m sure something will come up, but we’ll figure it out.

Secondly, we are sending out a direct mailer to all of the 4 to 19-unit buildings in three specific Cincinnati neighborhoods…

Joe Fairless: Okay!

Theo Hicks: The letters are ready and we’re sending them out probably this week, early next week, so obviously I’ll let everyone know how the results are… But just to let everyone know what I actually did, I partnered with an agent who did it for me – technically for free, but obviously she’ll get a commission if we end up getting a deal… And the mailer, I can’t remember exactly what it said, but I mentioned that I was an active investor, that I already owned properties in that area and I was looking to acquire more, and if they were interested, let me know; if not, is it okay if I reach out again in – I think I said three months or six months…

I kind of just wanted to get a mailing campaign out there so I can see what the response was, so I could make some changes and kind A/B test and see what works and what doesn’t work. What I’m very curious about is see how it’s gonna work coming from a real estate agent, just because she’s using her branding on there. I’m curious to see how that works… Again, if it doesn’t work, I’ll just do it myself, my own branding. I might put a picture of myself on there and a picture of my wife on there too, so maybe that’ll attract some people… So we’ll see what happens.

Joe Fairless: You and Marcella are pictured on the direct mail piece, but it’s coming from an agent?

Theo Hicks: It’s on behalf of the agent. So she’s not saying that she’s buying it… She’s like “These are the investors I’m representing” and at the bottom it’s our picture.

Joe Fairless: Okay, alright. A colored picture?

Theo Hicks: A colored picture.

Joe Fairless: Wow. Did you sign it?

Theo Hicks: We did not sign it, no.

Joe Fairless: Okay, cool. I’m interested to hear how this goes. When do they get sent out?

Theo Hicks: I’ll have to reach out to the agent. I know last time I checked in with her she sent me a picture of just all the letters printed out, all the little printed stickers for the addresses…

Joe Fairless: How many are being sent?

Theo Hicks: 400-something.

Joe Fairless: How did she get the addresses and the contact information?

Theo Hicks: I did that. I just sent her a spreadsheet. This is very Cincinnati-specific; I’m not sure it is how it works everywhere, but if you call in to the county auditor, he’ll give you like a three-week [unintelligible [00:21:57].09] back-end of their system, and you can download all the tax information on all the properties, or all the sales information, [unintelligible [00:22:05].02]

So I just downloaded that and then did some Excel magic to sort it and get the correct properties. I wish I could figure out how to just pull out the 4-units and the 5-units, but the category is 4 to 19, and technically I could sort based off of a value or sales price, but I’ll just mail to all of them. If it’s too high of a cost, I’ll solve it with someone else, maybe raise money for it… I don’t know, we’ll see. I’m pretty jacked up from the conference, so I feel like I can do anything right now.

Joe Fairless: [laughs] That’s right. Well, you can… You certainly can, because others before you have done it. That’s sweet, I’m looking forward to hearing more about that. I’m sure everyone else is, too.

Theo Hicks: And then thirdly, the last Follow Along Friday we talked about me starting a mastermind group, so I took action on that… I’ve got my first mastermind group in Tampa scheduled for Wednesday, 7th March. I had a really insightful conversation with someone at the conference who is — I guess we’ll call him a master meetup creator. He hosts one of the biggest meetups in Denver. He gave me some tips, and one tip in particular that he gave me was doing it weekly when you first start out. I’m not sure if I’ll do it weekly or monthly yet, I haven’t exactly decided. I’m gonna have a conversation with people that attend the first meetup, but I was thinking about either doing it weekly at this exact same location, or since Tampa (and I guess any city) is so big, I could do some sort of like traveling meetup, where I do one meetup in my location, and then one meetup in like St. Petersburg, and then one maybe in Clearwater and then one closer to downtown Tampa. That way I could do once a week, but it’ll be at different locations… Kind of following the approach that — maybe it was Taylor; I think he does his every day of the week. He’s a rockstar.

Basically, just kind of traveling around… From my perspective, I don’t know if people would wanna come every single week, maybe just once a month. So that way, it’ll technically be once a month in the different locations, but for me it’ll be once a week.

Joe Fairless: One thing you’ll want super clear in your own head is why you’re doing this, because when you start increasing the frequency to that degree, you can get burnt out quickly, unless you have a very clear reason why you’re doing and the business benefits for doing so.

Theo Hicks: Yeah, right now my business benefit/outcome is to 1) make friends, 2) learn the Tampa Bay market, and 3) form relationships with people in the Tampa Bay market so that I could invest in deals in Tampa eventually.

Joe Fairless: Cool.

Theo Hicks: Those are the outcomes. That’s what I’ve got going on in my business right now. I’m super excited to be taking all this action and have all these things on the horizon, and I can’t wait to update everyone on how it goes.

Joe Fairless: And the mystery gentleman who you were referencing in Denver – is that Adam Adams?

Theo Hicks: Adam Adams, the man with two first names.

Joe Fairless: Yeah, we wanna give him a shout-out, give him props, because he’s given you some good tips. Great stuff, and I’m interested to hear how all that goes.

Theo Hicks: Awesome. So just to wrap up here, make sure you guys join the Best Ever Show Community. That’s BestEverShow.com, or bestevershowcommunity.com. If you join, you can answer the question of the week and have an opportunity to be featured on the Best Ever Blog. Each week we ask a question…

Joe Fairless: You said BestEverShow.com, but that doesn’t go to the Facebook group…

Theo Hicks: Sorry, BestEverCommunity.com.

Joe Fairless: Got it.

Theo Hicks: Or BestEverShowCommunity.com.

Joe Fairless: There you go. Okay.

Theo Hicks: Again, we post questions on there once a week, and if you answer that question, we’ll feature you, or you’ll have the opportunity to be featured in a weekly blog. This week’s question is a fun one – “Tell us about your best and/or worst real estate story.” I can’t wait to go on there and talk about my favorite flooding story – or my favorite waterfall story – of my first duplex. I love telling that story.

Joe Fairless: If you wanna see some horses in a basement, then you can go check out that post and you’ll see an incredible sight. Someone was literally keeping horses in the basement.

Theo Hicks: Jesus!
Joe Fairless: Yeah. Let’s see… We’ve got a book coming out, my friend. What did we call it…? Best Apartment Syndication Book Ever… I forget the title we ended up with, but basically it’s a book on how to do apartment syndication from start to finish. It is the most comprehensive, detailed and action-oriented book on apartment syndication out there. It is being created because there is a need for it, that’s for sure. I wish this was out whenever I was getting going. Here, if you’re watching the video – boom! Look at this, that’s the book right there. We’re reviewing it, and if you want to be the first to know when it is published and how to get access to it, then… What is that website?

Theo Hicks: BestEverNewsletter.com.

Joe Fairless: BestEverNewsletter.com Make sure you put in your e-mail there and you will be on the weekly newsletter that we sent out, and that will also notify you when the book comes out. I’m very excited about that, and that’s gonna be a game-changer for a lot of people in a very large way. I’m looking forward to you and I adding a lot of value to people’s lives through the book.

Theo Hicks: Me too. And our final call to action is make sure you subscribe on iTunes and leave  a review to the podcast for your opportunity to be the review of the week. This week’s review – which is my favorite review, and you’ll see why in a second – is by WilliamColeman202. He titled the review “It’s such a great resource”, and he says:

“This podcast is great for real-life examples of how to be successful in this industry. Joe covers so many different aspects that you can nearly search any topic on real estate and find a great interview with an experienced professional. This podcast links you with so many great resources, such as Joe’s book, his conferences, and best of all, the people he interviews. I greatly enjoy the Follow Along Friday…”

Joe Fairless: I knew it, I knew they were gonna mention you! I was waiting for that.

Theo Hicks: “…where you get to know Joe and Theo, and learn a bit about how they think and run their business. A must listen.”

Joe Fairless: [laughs] I saw that coming from a mile away, I didn’t wanna interrupt you though. As soon you said “My favorite”, I was like “He’s gotta mention Theo. I’m sure he mentions Theo. Where is it? When’s it coming?” Well, thank you… You said Will?

Theo Hicks: Will, yeah.

Joe Fairless: Will, thanks so much for leaving a review. That helps us get high-quality guests to elevate everyone who is a part of our community, so please continue, everyone, to leave reviews; we will continue to highlight it, give you two thumbs up, and we’ll continue to put our best foot forward to give you good info that’s actionable.

Thanks everyone for hanging out with us. I hope you have a best ever weekend, and we’ll talk to you soon.

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