October 22, 2018

JF1511: Lose It All But Bounce Back & Scale A Real Estate Business In Just 9 Months with Chad Wittfeldt

What a crazy story! Chad lost all of his money just 9 months ago!! Now he’s here on the show to share his story of going from that to partnering in over 100 units. If you’re feeling discouraged or just want to hear a great story, definitely hit play on this one! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

Best Ever Tweet:

Chad Wittfeldt Real Estate Background:

  • Started investing in the equities market at 17 years old, before moving to currency markets
  • Joined BlueSpruce to apply his online media skills while learning real estate
  • Lost everything, was a valet in downtown Denver, is now partnering to acquire 100 units, all in 8 months
  • Based in Denver, CO
  • Say hi to him at https://realbluespruce.com
  • Best Ever Book: How to Win Friends and Influence People

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Best Ever Listeners:

Do you need debt, equity, or a loan guarantor for your deals?

Eastern Union Funding and Arbor Realty Trust are the companies to talk to, specifically Marc Belsky.

I have used him for both agency debt, help with the equity raise, and my consulting clients have successfully closed deals with Marc’s help. See how Marc can help you by calling him at 212-897-9875 or emailing him mbelsky@easterneq.com


Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best ever 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, Chad Wittfeldt. How are you doing, Chad?

Chad Wittfeldt: Doing great, Joe. Thanks for having me.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Chad – he started investing in the equities market at 17 years old before moving to currency markets. He joined Blue Spruce to apply his online media skills while learning real estate. Blue Spruce is a real estate company. He lost everything though, and was a valet in downtown Denver, and now he has partnered up to be a partner on 100 units, all within about eight months. Based in Denver, Colorado. With that being said, Chad, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Chad Wittfeldt: Absolutely. For my background, I grew up in Michigan and I was in the process of moving out to Denver when I realized that I was flat broke… And the back-story behind that is I was pretty heavily focused in the foreign exchange market. I graduated college, I was moving out to Denver, and I arranged this partnership with a guy who I had trusted with my trading account. At the time, shame on me for putting everything in one account and giving someone access to it, but I was a hungry kid out of college and I wanted to “make it” as a professional trader, and it turned out the individual just didn’t have the financial responsibility; he was placing massive positions on my account, blew it up…

Then I got linked in here in Denver with my current partners now, but at the time I was in the process of moving here and didn’t really know how to pay for my rent and all those things, so I was a parking valet when I was closing my first apartment deal in Bridgeport, Connecticut… We closed that, and then we closed an 83-unit property in Branson, Missouri as well, so a lot has happened very quickly.

Joe Fairless: Wow, no kidding… That was all within the last eight months?

Chad Wittfeldt: Within eight months. I think I was in Iowa, driving from Michigan to Denver when I realized I had no money…

Joe Fairless: Dang…

Chad Wittfeldt: Yeah, so it happened really quickly.

Joe Fairless: How much did that person lose of your money that was in the account?

Chad Wittfeldt: At the time – like I said, I was fresh out of college, so I had about $26,000 saved, and that was from working from 15 till 22, 23…

Joe Fairless: Oh, that makes me sick…

Chad Wittfeldt: It was a lot of money for me. It was everything I had. I grew up in a pretty middle-class family, so I never went without, and I always worked in the summers, and this and that and the other thing, so for the first time in my life I had felt that true, real financial pain of “How am I gonna pay my bills?”

Joe Fairless: Wow… What did you say to the person who lost  the 26k?

Chad Wittfeldt: Man, it was tough… I didn’t even know what to think. When something like that happens, the first initial thing is you don’t believe it. You think “Okay, this was just a glitch on my broker. This can’t be real.” Then you kind of come to terms, and I don’t remember exactly what I said to him, but I have to imagine that I used some profanities, for sure. And the trouble is this is an individual that I met in the online community. I never met him in person, so it’s not like I could go and have a face-to-face conversation with them. It wound up with him just blocking me on every communication platform, and since we didn’t have any operating agreements or any contractual agreements in place, there was no recourse on my end. It was just a hard lesson, for sure.

Joe Fairless: Which leads us to the lessons that you learned… What are they from this?

Chad Wittfeldt: Honestly, due diligence on people. Don’t ever follow somebody just blindly. It doesn’t matter their status or whatever the case is, who’s in their network or what name is behind them. Just don’t follow someone blindly. Then number two – just diversification. Always, always. Never put so much risk on one entity like that.

Joe Fairless: Due diligence on people, but even after the due diligence, having written agreements in place, right?

Chad Wittfeldt: Oh yeah, absolutely.

Joe Fairless: Okay, so when did this happen? How many months ago from our conversation right now?

Chad Wittfeldt: Right now — this happened, I would say, nine months ago. Exactly.

Joe Fairless: Okay, nine months ago you lost everything that you had saved since a teenager, through what we just talked about. And then what happened after that, once you came down to earth and you had some sanity and clarity? What did you do next?

Chad Wittfeldt: Sure. Well, I was fresh in Denver at the time, and I knew nobody here. I just was going through a lot of self-reflecting and thinking. So I did graduate college, I didn’t mention that… I did go to school, I did get a degree… So going and getting a corporate job was always an option. It was certainly always an option that would have settled that pain. But I knew myself well enough that I wanted to make it as kind of in an entrepreneurial phase, and then I didn’t wanna live a life of asking permission 24/7. I don’t wanna ask permission to go ride my bike in the mountains. I don’t wanna ask permission to go fly wherever. I like to create my own path. So I was focused on making that happen, so the first thing I did was just figure out how I can make some money to live, so I started just parking valet, because that gave me some flexibility. I was at least able to go park cars at night, instead of working during the day.

Joe Fairless: How much can you make on that?

Chad Wittfeldt: I was probably making about $25-$30/hour, something like that. Downtown Denver, just trying to find the high-end locations, and shake hands and smile. [laughs]

Joe Fairless: Okay.

Chad Wittfeldt: So that was the first focus, paying my bills. The second focus was starting to build my network in Denver, so I started attending meetup groups and networking events like it was my full-time job. I was going to them every single day. I actually got linked into my business partners now. My first point of contact was my business partner Brad, who I met at the bike park. We’re both pretty active mountain bikers, and… I lived here in Denver for two days, and I just didn’t know anybody. I wanted to meet some friends, so I just said “Hey man, it’s a sweet bike.” We just kind of started going back and forth, and he says “Hey, I’m in real estate.” I’m like “Great, I’ve been interested in getting into real estate.” I go to our business partner Adam Adams – his meetup group; I meet Adam, grab his attention a little bit, and long story short, we just set an appointment and now I’m business partners with him.

But after my head kind of calmed down, I was just focused on action. I was focused on making steps forward to kind of remediating that loss and remediating that pain. I think in situations like that it’s really easy to get focused on the bad instead of focusing on the solutions. I think that mindset shift for me is what really helped a lot.

Joe Fairless: How many units are you in?

Chad Wittfeldt: Just 100 units right now.

Joe Fairless: You say “just”… That’s a lot of units. I think I heard you say an 83-unit…?

Chad Wittfeldt: Yeah, 83. That’s in Branson, Missouri.

Joe Fairless: Branson, Missouri… And then, I guess I can do math – 17 units in Bridgeport?

Chad Wittfeldt: Yeah, Connecticut.

Joe Fairless: Okay, got it. $25/hour, times (let’s say) 40 hours, times four weeks – that’s about $4,000/month, $48,000/year, plus or minus. So I imagine your role in these apartment communities isn’t just investing your own money, since you started from zero nine months ago, and you’ve got a $25/hour job… So what is your role in these communities?

Chad Wittfeldt: I actually invested no money into these deals. I invested my time, and my expertise and my knowledge. And as far as the math on the valet – I wasn’t working 40 hours a week, that’s the thing. My focus was getting away from that  as much as possible. So my full-time job at that point was building my real estate journey.

To answer your question, my role in these apartment communities is — I guess I’d like to say I wear quite a few hats. I help on the lead gen side of deal flow and investors; primarily though, the back-story behind that is when I first joined the team, I wasn’t partnered with them. I was just their acquisitions guy. So all I was doing was cold-calling brokers and wholesalers and saying “This is who I am, this is who I’m working with, these are the assets we’re buying. What’s your e-mail? I’m gonna send you over my buying criteria.”

I was getting pretty frustrated, because I was making 40-50 phone calls a day, following up with more e-mails than I can even count, and my inputs were not matching my outputs in the sense of these brokers were sending me single-family deals and new developments and empty pieces of land. Just very awful stuff that’s not even close to my buying criteria… So I went back to my business partners and I said “Hey guys, this might be what you’ve been taught by whoever, but I don’t really think this is working very well. What if I can position you, this company and ourselves so that deals and all the moving pieces of closing a deal comes to us, instead of going out and actively seeking it?” They said, “Okay, show me what you’ve got.”

So I just started showing them a lot of intent-based marketing strategies that were actually going to convert and actually bring us leads in different facets of real estate. Just to kind of give you a quick example, we had a 160-unit property under contract last month, and that deal came to us because I had my partner record me a video explaining what IRR is, and debt service coverage ratio, and what it means in the apartment syndication community… And I make sure that the algorithms of social media are right, and I post it, and I make sure that the engagement gets right and it gets out to the right people… And that brought us a deal that we actually put under contract.

So just a lot of digital development, online development, and making sure that our message is positioned properly and it gets in front of the right people. So that’s my primary focus in the company.

I also pre-underwrite deals and help raise money with my personal network of investors… So definitely a couple different hats, but it’s been awesome. It’s been a lot of fun.

Joe Fairless: It’s a lot of fun to hear your story and how you’ve created the value and made room for yourself and put yourself at the table with the team. As far as the 160-unit deal, you said you had it under contract last month. Did it close?

Chad Wittfeldt: No, we let the contract dissolve on that.

Joe Fairless: What happened?

Chad Wittfeldt: It was a pretty medium rehab, so it needed roofs and all kinds of different things… In our initial due diligence phase, just based off of our communications with the seller and the broker, we anticipated about 1,6 million of cap-ex, and at the time we hadn’t visited the property in person. We sent one of our partners down to the asset and he walked the property, and we just found a lot of things that hadn’t gotten disclosed by the sellers and the broker…

Joe Fairless: Like what?

Chad Wittfeldt: The exterior stairwells all needed to be replaced. Actually, the day after my partner left, someone actually stepped through and it broke on them.

Joe Fairless: Oh, man…

Chad Wittfeldt: Yeah, so it just didn’t pass through our due diligence. We’re very strict with what we’re gonna close on. We still pursued the deal, but we had a contractor come out and bid out the entire rehab, line by line, and it came out to be a little bit more than we originally anticipated… So we went back to the seller for a renegotiation and they just were not interested, so we said “Okay, we’ll work on our other deals, and thanks for your time.” That’s just how that worked out.

Joe Fairless: What are some other examples of intent-based marketing strategies that you do now that have generated leads?

Chad Wittfeldt: A lot of it comes through content production and social media. Specifically, our last property that we actually closed – it came to us in a Facebook group. Somebody had asked a question, and I believe my partner went in and gave them a very educated, very well thought out, very genuine answer. When other people see you doing this, it shows that you’re credible, it shows that you know what you’re talking about, it shows that you come from a place of value… And the same thing – that person reached out to us, said “It looks like you’re doing awesome things in multifamily. I’d love to bring you deals.” So they wound up bringing us the 83-unit property and we closed on it.

But yeah, if anybody sees — I’m not talking about specifically my business partner… If any of the big names – Grant Cardone, and Gary V., and Tai Lopez and Tony Robbins… You see their content and you see the videos that they’re producing – you have to understand that these things are very well engineered to appeal to a certain person and make them feel a certain type of way, and then respond accordingly. We do the same thing, it’s very strategic.

A lot of our content that we produce – we have a podcast as well, that brings us deals, that brings us investors, people who wanna work with us… And we just kind of replicate that process through different mediums: Facebook, Instagram, YouTube… Honestly, it’s really just about positioning the message, showing who we are, what we’re doing, that we’re credible, that we can close, and providing value along the way. A lot of it comes through an educational standpoint, teaching people how to position themselves properly online, teaching people how to pre-underwrite a property without spending three hours just going through a basic T-12 before going through full-on. Just teaching people these little ins and outs and trying to provide as much value to our marketplace as possible. It typically comes back in the form of deals and investors.

Joe Fairless: The 83-unit in Branson – what more can you tell us about that in terms of purchase price and business plan?

Chad Wittfeldt: That was acquired for 3,1 million, and that property had about 1,2 million of cap-ex in renovations before we acquired it, so it doesn’t need really any value-add. What we really like about that property is our property manager is one lady, and she’s been managing that asset for several years; she knows all her tenants by name, she hosts weekend barbecues in the courtyard… Right now it has a lot of older residents, so we have discussed positioning it, and — I don’t wanna say converting, but kind of just moving it over to kind of like a light assisted living center. That’s something that we wouldn’t really execute on for a couple years, but right now it’s a pretty straightforward asset. It doesn’t need really any updating, it doesn’t really need much repositioning, so… Just making sure that it cash-flows properly, keeping occupancy up, rinse and repeat, really.

Joe Fairless: Was does a “light” assisted living facility look like?

Chad Wittfeldt: This isn’t something that I’ve really heard of as a strategy before, but assisted living centers – you have a caregiver there the whole time, right? So a light model of that would just be somebody to help the older residents get their groceries, help them cook once in a while… They’re not there primarily the whole time, but really just kind of creating the community and creating the environment around the older demographic, to attract more into that property.

Joe Fairless: How do you model that in your underwriting when you’re acquiring the property?

Chad Wittfeldt: We underwrite very conservatively. We underwrite from the standpoint of where the property is standing today, but basically we had anticipated that if we do decide to execute the strategy, we’d be able to charge higher rents due to the extra amenities, and obviously just offset the expenses from there as well.

Joe Fairless: From the 83-unit, before we move on to the 17… From the 83-unit, for the Best Ever who are listening and are like “Wow, I wanna get in on an 83-unit, too…”, how much money have you made from this to date, if anything so far?

Chad Wittfeldt: Our company takes an acquisition fee straight from the close, and then monthly distributions off the cashflows. The way ours is structured is our partners are on the general partnership side, and then we have a sponsor on our general partnership side as well. Then on the limited partnership side, we just have our equity investors.

What’s nice about this property – it’s been cash-flowing since day one, so we’ve already received some quarterly distributions off of it.

Joe Fairless: Oh, that’s great. So what was the acquisition fee?

Chad Wittfeldt: I believe in our original underwriting it was 3%, and then we brought it down to 2%. I’m not very good at math. I wanna say it was like 60k-70k.

Joe Fairless: Cool. And how much were you able to take away from that?

Chad Wittfeldt: Well, since we had to split some of it with our sponsors, and then we split it up between our partners on the general partnership side, I wanna say it came out to like 9k-10k/person off of it.

Joe Fairless: That is 400 hours work of valet, so that’s darn good, right? [laughter]

Chad Wittfeldt: The way I look at it, too – you put in the work for something that’s gonna pay you off for the next 7, 8, 9 years. So it’s just a long-term play, really.

Joe Fairless: You all are in Missouri, and now let’s go way up to the East Coast to Bridgeport, Connecticut, a 17-unit… How did you come across that deal?

Chad Wittfeldt: That property came off to us on Facebook. It’s crazy. People look at social media as just a place to post pictures of your dogs and your kids, but business actually goes down on Facebook and Instagram… So it’s pretty cool to see acquisitions and see a forward ROI from those efforts.

Joe Fairless: Specifically from Facebook, was it an ad, or was it just a post that you did on your group page, or what was it exactly?

Chad Wittfeldt: Basically, this property was already under a contract and moving through due diligence before I came onto the team, but I believe this property came to Adam Adams just through networking in a Facebook group. Not his own group, but somebody else’s.

Joe Fairless: So a 17-unit — was it represented by a broker?

Chad Wittfeldt: Yes.

Joe Fairless: And what are the numbers on this one?

Chad Wittfeldt: I believe–

Joe Fairless: You weren’t as close to this one as the other one…

Chad Wittfeldt: No, I really wasn’t.

Joe Fairless: Fair enough. We won’t get into any details on this one. I’m really grateful that you talked to us about that 83-unit. That was really helpful for just understanding the mechanics behind it and how you all found it.

What was your major in college?

Chad Wittfeldt: Entrepreneurship.

Joe Fairless: Oh, cool. Where did you go?

Chad Wittfeldt: I went to Northern Michigan University up in Marquette.

Joe Fairless: Alright. What is your best real estate investing advice ever?

Chad Wittfeldt: I would just say honestly for me it all starts with the mindset. It’s so easy to talk about it, it’s so easy to go post a status on Facebook about surrounding yourself with the right people, or staying positive, or this and that… But to actually execute upon it when things are not looking good – that’s what’s hard. When you’re in the trenches and you don’t know how you’re gonna pay your bills, it’s hard to stay positive then… So I’d really just say focus on building that foundation of your mindset and build out from there, because you can really build an empire on a weak foundation.

Joe Fairless: What’s one thing you do regularly that works on your mindset?

Chad Wittfeldt: Gratitude. Constant, constant gratitude. I’m in a position right now in my life where I’m young and I’m in this game of real estate, and I’m surrounded by people who have already found their success, who have already done it… So instead of looking at them out of jealousy or greed or any of this, I look at them out of gratitude that I even know them, I look at them out of appreciation.

This past weekend – I’m a huge dirt biker and I went up in the mountains with 12 guys that I was riding with, and pretty much all of them are very successful real estate entrepreneurs. They’ve got their Toy Haulers and their brand new Diesel trucks and brand new dirt bikes, and I’m righting with them on my 1998 KTM dirt bike… But you know what, the entire time I had so much gratitude and so much appreciation that I was even able to get out there in the first place. So it’s coming from that place of constant gratitude.

Joe Fairless: Beautiful. I love that. We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Chad Wittfeldt: Let’s do it.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:23:00].19] to [00:23:46].28]

Joe Fairless: Best ever book you’ve recently read?

Chad Wittfeldt: How to win friends and influence people, Dale Carnegie.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Chad Wittfeldt: Real estate specifically?

Joe Fairless: Well, yeah… We already talked about that other one. [laughs]

Chad Wittfeldt: [laughs] I guess you could say this 160-unit deal had a mistake in it in the sense of we didn’t dig as deep as we needed to in the very beginning, but at the same token, I believe there’s a process to things. We kind of have this rule in our company that we’re not gonna go visit a property until it’s under contract… And that was brought to us through previous experiences that didn’t transact either… So just keep your ducks in a line, and it’s not closed until it’s closed.

Joe Fairless: Best ever way you like to give back?

Chad Wittfeldt: Helping others. I’m not where I intend to be yet, but I’ve been through a lot over the last eight months, between losing it all and then making some  real momentum in my life… So I started to help other young entrepreneurs in my space, and I do more calls than I can count just to help them get their businesses going.

Joe Fairless: Best way the Best Ever listeners can learn more about what you’ve got going on and get in touch with you?

Chad Wittfeldt: Find me on Instagram. It’s @cw_invests. You can find me on Facebook – just my name, Chad Wittfeldt. I post a lot of content, a lot of stories, and the best place to reach me is probably in those DMs right there.

Joe Fairless: Inspiring conversation. I love hearing how you overcame a pretty challenging financial situation, and… Here’s a question – are you happy that it happened?

Chad Wittfeldt: Very. I’m very, very happy.

Joe Fairless: Ain’t it crazy how that works?

Chad Wittfeldt: It really is. Those pain points, they’re the greatest motivators and the greatest educators.

Joe Fairless: Yeah. Thank you for getting specific with us about what you did next, how you added value, how you focused on networking and going to meetups as a full-time job, making some money on the side just to pay rent and food and gas for your dirt bike, and then now what you’ve done, and what — we haven’t even scratched the surface. Really inspiring to hear this.

Thanks so much for being on the show. I hope you have a Best Ever day, and we’ll talk to you soon.

Chad Wittfeldt: Thanks, Joe.

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