Today’s syndication school is a little bit different than normal. Theo is discussing Joe’s response to a Facebook post about a lemonade stand and how the same advice can benefit apartment syndication investors. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Theo Hicks will go through a particular aspect of apartment syndication on today’s episode, and get into the details of how to do that particular thing. Enjoy this episode, and for more on apartment syndication and how to do things, go to apartmentsyndication.com, or to learn more about the Apartment Syndication School, go to syndicationschool.com, so you can listen to all the previous episodes.
Theo Hicks: Hi, Best Ever listeners, and welcome to another episode of the Syndication School series, a free resource focused on the how-to’s of apartment syndication. As always, I’m your host, Theo Hicks.
Each week we air two podcast episodes that are typically part of a larger podcast series. We release those on the Best Real Estate Investing Advice Ever Podcast on iTunes every Wednesday and Thursday, as well as in video form on YouTube a little bit later in the week.
Each of these series or standalone episodes focus on a specific aspect of the apartment syndication investment strategy. For the majority of these series we offer some sort of document, whether it be Excel spreadsheet calculator, a PowerPoint presentation template or a how-to PDF guide for you to download for free, that accompanies that episode or series. All of these free documents, as well as the past Syndication School series can be found at SyndicationSchool.com
This episode is going to be a little bit unique, because it is entitled, as you can see, “How creating a lemonade stand can help you become a better apartment syndicator.” So this is based off of a Follow Along Friday I did with Joe a while back. Basically, we came across a Facebook post – and I’m gonna read the Facebook post really quickly, to give you some context.
“Our five-year-old wants to do a lemonade and popcorn stand during our community yard sale this weekend. As her business consultants, we need to provide her with some market research to help maximize profits, so we need your help. One, how much would you pay for a glass of fresh lemonade? Two, what size cup of lemonade would you like for that price? Three, would you prefer fresh lemonade from actual lemon juice, or the fake Country Time kind? Any and all advice is also welcome.”
So Joe read the replies, and most of the replies were directly answering the questions. “Hey, this is how much money I would pay for a glass of fresh lemonade. This is the size cup I would prefer based on that price, and I would like lemon juice/Country Time/some other type of lemonade brand.”
Obviously, all those are relevant, and they answered this individual’s questions directly… But from Joe’s perspective, he realized that there were at least two keys that were missing in order to create a very profitable stand. And when Joe went over this, we kind of talked about it and related it to investing, so that’s what I wanted to talk about today. So we’re gonna go over the keys that Joe mentioned in his post, and then we’re going to talk about high-level, as well as some specifics as to how these keys can be applied to your syndication business to make you a better apartment syndicator.
The first key was if you are a commodity business, then get out as quick as you can. According to the Merriam-Webster Dictionary, the definition of a commodity is a mass-produced, unspecialized product. Mass-produced, unspecialized – basically, something that’s pretty generic. Most lemonade stands are gonna be pretty generic. One, people already know how much money they wanna pay for a glass of lemonade. They can go to the store, they can see how much lemons cost, they can see how much the Country Time and some other powders cost, they can know how much cups cost, maybe they add in some labor cost as well on the part of the kid, and they can pretty much say “Okay, if you’re just selling me lemonade, here’s how much I could spend.” Or “Hey, I could just go buy lemonade at the store, so why would I buy lemonade from you?”
So that is what a commodity is. But to make it not a commodity, Joe recommended that the person add some sort of bonus gift to each paying customer. Once she adds that bonus gift, she’s no longer selling just a commodity, and as a result, she’ll be able to charge more for her lemonade. The specific suggestion that Joe gave in his Facebook comment was that the bonus gift could be a drawing by this five-year-old.
So before she starts her lemonade stand, she can spend maybe the night before, or the morning of, creating 20, 30, 40 different drawings (each drawing will be different), and then whenever she is selling it, she could basically market and say “Lemonade plus free custom drawing.” If me or Joe were to be selling lemonade and do a drawing, people probably wouldn’t buy it, but since the kid has that cuteness factor going on for them, people are more likely to buy a lemonade from this child if on top of it she’s giving away their custom drawings. Even if they’re not gonna keep that custom drawing, it’s still making it not a commodity, and it gives her really limited upside for the price. So if the drawing is very good, she could sell a cup of lemonade for $10. Or it could be something like “Pay what you want for this lemonade.”
So the whole point is don’t just do something that really everyone else is doing. When you are an apartment syndicator, you have to figure out how you’re going to stand out and not just be another commodity. When we did the episode talking about why people invest with you – they’re not gonna invest with you because of the returns you’re offering; they can go anywhere and get returns. So what makes you different than other syndicators?
Whenever you’re starting your business, whenever you’re starting even your educational process, you wanna think about how are you going to be different than the other syndicators out there who are offering just a return on the investment? Obviously important, but again, if I’m a passive investor, why am I investing with you and getting your 8% preferred return, as opposed to this guy over here, and getting his 8% preferred return? What’s the difference?
A few examples – and again, these are a few specific examples that Joe does. Number one, they send out monthly Best Ever reports. They’ll interview one of the investors, and they will feature them in their report, as well as having a few other items in their report as well, and then they will send that hard copy, nicely-designed report out to their investors.
Whenever we wrote the Best Ever Apartment Syndication Book, which in itself is something that’s unique – it’s a book that is teaching people how to become apartment syndicators, plus we’re also in the process of writing another book, that is The Best Ever Passive Investor Handbook – we give those out to our investors for free; one for them, and then one for them to give to someone that they think would be interested in learning about the material in the book. Joe hosted in-person happy hours across the country this year.
So those are just three specific things that Joe does, that’s on top of just offering a return. A few other things that aren’t very specific, but also kind of unique, is his communication style, responding to investor’s questions very quickly, hosting conference calls instead of generating interest on an individual basis… Hosting the conference, having a podcast, a blog… All those things are taking Joe’s business from being just a return standpoint, to having unique added value to the investor. So that’s point number one – basically, figure out how you can stand apart from just offering returns to your investors.
Now, going back to the lemonade stand, the key too to the success of a lemonade stand is going to be location. Location matters. You can do the right thing, at the right time… So you can sell the best lemonade, at the hours where people are the most thirsty – maybe after lunch, or something – but if you’re in the wrong spot, then it’s not going to work.
Another example – this is a little bit different from the five-year-old… Joe was going on a jog, and he came across a lemonade stand. The kids that were hosting the lemonade stand had strategically placed their stand at the beginning of a dead-end road. So it’s right next to a “No Outlet” sign. Also, in the intersection was a well-traveled road, and the road had a Stop sign. So not only was it at a dead-end road for safety purposes, but it was on a well-traveled road, so lots of traffic, and it was at a Stop sign. So the fact that it was at a Stop sign basically forced the people at the Stop sign to make a contact with the kids, who also had a massive sign promoting their lemonade.
And then on top of all that, they were also providing a drive-through type service. So if you didn’t wanna get out of your car, the kids would come up to you, offer you the lemonade, you’d hand them the money, they’d hand you the lemonade.
So the advice that Joe took from this, that he gave to this five-year-old from the Facebook post is that they should find an intersection where there are Stop signs, and that there’s a safe way for people to pull to the side to buy a cup of lemonade. Obviously, safety is being the priority, because if hospital visits are part of the business plan, it’s not gonna be the best, most successful lemonade stand, because all of your profits are gonna go towards paying for hospital bills… But aside from that, clearly you wanna be on a street that has low speed limits, and a sidewalk for the safety concern, but also you want to ask yourself “Where do people usually stop?” You don’t wanna do it on a 55 mph road, where people are driving by and have to pull to the side; there’s obviously the safety concern, but also people are less likely to pull aside if you’re hosting your lemonade stand on the highway. So you wanna host it on a well-traveled road, ideally by a stop sign, where it’s safe – sidewalks, and people having the ability to pull over.
Obviously, applying this to apartment syndication – where you buy your deal matters. That’s the first point. We’ve done Syndication School episodes on maybe a two or four-party, or maybe even a six-part series on guiding you how to specifically go from narrowing down 19,000 cities in the country down to a handful of cities, how to evaluate those cities to determine which ones to select, and then once you select those cities, how to learn which submarkets within those cities, which neighborhoods, which streets are the best plays to invest in deals.
But secondarily – or I guess in addition to where you’re investing, you also wanna keep in mind what you are doing to find investors. So where are you going to find investors? Are you going to the places that have a high concentration of high net worth individuals?
Here’s an example – I was interviewing someone on Joe’s podcast the other day. The episode is not gonna come out until February… The guest was Ryan Gibson, who works for a company that raises capital to buy and develop self-storage facilities… And the example that he gave is that he joined an athletic club that is known to have a lot of high net worth individuals go there. And through this club not only is he meeting these high net worth individuals while he’s working out, or at different community events, but he’s also been able to find other community events through this athletic club. So we’ve got high net worth individuals that are there, and the example that he gave was he found an organization to volunteer with that also has high net worth individuals.
So are you going to a regular, smaller gym, that has non-high net worth individuals, or are you combining your fitness regime with going to an athletic center that has high net worth customers that work out there, that go there for different community events? That’s just one example.
Basically, ask yourself “Are you going to the right places in order to maximize your chances for meeting high net worth individuals, creating relationships with them, cultivating that relationship and ultimately transitioning into talking about investing in real estate?”
Again, those are two keys – number one is “Don’t be a commodity, be unique.” Number two is that location matters.
We actually have a blog post that we wrote on this. I went into a lot more in this episode than I did in the blog post. The blog post is “The two secrets to a successful lemonade stand”, which you can find on Joe’s website, in the search function. And if you wanna go there to take a look at some of the images we uploaded, we’ve got a picture of the lemonade stand that Joe came across on his walk, as well as the lemonade stand from one of Joe’s — so one of Joe’s investors heard Joe talk about it on the podcast, and actually had his son follow Joe’s advice, did a lemonade stand and handed out custom drawings… So there’s pictures of that, as well as the email that Joe’s investor sent him, that explains the success of the lemonade stand.
Again, first make sure you’re offering services that are not commodities, and I gave plenty of specific examples of how to do that for apartment syndication… But again, be creative, be unique, and base it off of your own personal strengths, personal skills and personal experience. And then secondarily, make sure that you’re investing in the best locations, and that you are putting yourself in situations, you’re going to the places that will maximize your chances of finding high net worth individuals to invest in your deals. You can apply this to finding team members as well, finding business partners, education (are you going to the right conferences?), things like that.
That concludes this episode of “How creating a lemonade stand can help you become a better apartment syndicator.” To listen to other Syndication School series about the how-to’s of apartment syndications and to download all the free documents we have available, visit SyndicationSchool.com.
Thank you for listening, and I will talk to you tomorrow.