Eric is a veteran who is now living the civilian life, and read Rich Dad Poor Dad years ago. Like many real estate investors, reading Rich Dad Poor Dad sparked a fire for real estate investing. He started with the seminars that other investors have paid for as well. Unlike many people, who complain about the price of the seminars and getting no value from them, Eric was able to leverage the relationships and network within the program to more than make his money back. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
“Learn, network, add value, and take action. If you do that everyday, success will find you” – Eric Upchurch
Eric Upchurch Real Estate Background:
- COO and Co-Founder of Active Duty Passive Income and is a Senior Managing Partner at ADPI Capital.
- Has been investing in real estate throughout the country for thirteen years
- Based in San Francisco, CA
- Say hi to him at https://www.activedutypassiveincome.com/
- Best Ever Book: Never Split the Difference by Chris Voss
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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, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Eric Upchurch. How are you doing, Eric?
Eric Upchurch: I’m doing really well, how are you doing?
Joe Fairless: I am doing well, and looking forward to our conversation. A little bit about Erich – he’s the COO and co-founder of Active Duty Passive Income, and is a senior managing partner at API Capital. He’s been investing in real estate throughout the country for 13 years. Based in Northern California. With that being said, Eric, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Eric Upchurch: Sure. I joined the military after college. I chose to be enlisted because I like to influence people and I like to do good things for junior enlisted soldiers. I got a lot out of that as well. I transitioned from the military in early 2011…
Joe Fairless: What branch?
Eric Upchurch: Army Special Operations.
Joe Fairless: Nice. Well, thank you sir for what you did.
Eric Upchurch: Absolutely, a pleasure. The Army used me, but I used the Army right back. I was able to have all my college debt paid for through the loan repayment program, and then they paid for all of my master’s degree as well while I was in, so… I definitely got my money’s worth there.
Joe Fairless: I’m going to my brother’s promotional ceremony later this month. He’s gonna be promoted to a colonel in the army.
Eric Upchurch: Wow, that’s pretty incredible.
Joe Fairless: He loves it.
Eric Upchurch: Congratulations, that’s really cool. Tell him I said hi.
Joe Fairless: I will.
Eric Upchurch: And thanks for his service. My wife and I moved back to the Bay Area where she is from. We met in college in Santa Barbara, and after I got out, we transitioned to Northern California, where we still reside. So we’ve been here about eight years, and I still have that W-2 that I care for as well, so… We could talk about that if you wanted to… And balancing both the real estate and W-2 job on the side as well.
I got started in real estate very similarly to many people in the military; we use the VA loan and get in on a property that we’re going to be living in. At the time, when I transitioned out of the service, I could not sell the property, so I moved back to the Bay Area and rented it out, and I eventually said “You know, I’m making money on that property…” Not much, because I didn’t buy it with the intention for it to be an investment property, so margins were slim, our profits were slim… But I thought maybe I could do a little bit better.
So I started learning and getting educated, I read Rich Dad, Poor Dad, which I guess is the accelerant… It just kind of poured fuel on the fire for me as well, and I said “Man, if he’s doing it and all these other people can do it, this seems like something that I can pursue.” Then I just started reading books, all the Rich Dad advisor books/courses out there, podcasts, I even did seminars, and anything I could do to learn about various aspects of real estate. So that’s kind of how I got into it.
Joe Fairless: What was the priciest thing you purchased to educate yourself?
Eric Upchurch: I paid 30k. I actually had no idea what the seminars were. You hear of the typical guru seminars, and I’ll just be out there and honest – I went to the free 90-minute thing and I got upsold to the three-day bootcamp for $997, and then I got upsold to the advanced training at the bootcamp, which ended up costing maybe roughly 30k all-in. And this is learning to flip houses in the San Francisco Bay Area in 2014, FYI.
So I’m a nobody, essentially, with basically no cash to my name, and I’m trying to inject myself into a market that people are paying $700,000 over the asking price for a burnt-out relic of a property in the Bay Area, right?
Joe Fairless: Yeah… Was that a Rich Dad, Poor Dad program?
Eric Upchurch: No, it was a different company, but the same thing. HGTV type of stuff. And I don’t wanna dog that either, because what I got out of that, even though I couldn’t apply all of the principles, I got a great education out of it, a good foundation, but I also got an amazing network of people that eventually – and actually within two years – made much more than my money back on the money I spent at that seminar.
Joe Fairless: And how did you do that with a network of people that you met over [unintelligible [00:05:14].28]
Eric Upchurch: Yeah, great question. One of the guys that I’ve met there, who I’m still friends with today – he’s a custom home builder/contractor in the Bay Area. He was just there to reinvent himself. He was in his fifties at the time, and he was just there to see what’s new and what’s going on and how he could scale up his business. He and I started talking, and we saw a lot of synergy between ourselves, and we just said “Let’s try and figure out a way to do this together.”
Long story short, I was living-and-flipping – which we can talk about separately – in the Bay Area, which was very lucrative, and he ended up helping me force appreciation on one of my properties near the ocean that I was living in at the time. So we ended up putting a chunk of money in, but he didn’t charge me what normally would have been a $180,000 renovation. I ended up putting about 50k into it, and it increased the value by a quarter million in nine months. Through that relationship that I built I definitely got my money back.
Joe Fairless: Yes, you did. That $180,000 retail renovation cost – what was done?
Eric Upchurch: We went into that property with the idea obviously to live in it. It was in a great location, and I had two little kids as well, so we thought “Well, two blocks from the beach… This is pretty neat.” But we were looking at the area and just going “Well, all our neighbors seem to be retirees, kind of”, and there weren’t new, young families moving into this area. So we started thinking about exit strategies.
We looked at this property, it was a four-bedroom/two-bath, oddly positioned fourth bedroom in the middle of the house; tiny bathroom, tiny living area. So we said “Why don’t we just knock out that fourth bedroom?” Normally, you wouldn’t do this, right? Take a four-bedroom and convert it to a three. We just had our eyes wide open and said “Let’s add six feet to the master bathroom, add four feet to the living space and the kitchen, and open it all up by collapsing that bedroom.” And if the people who are moving in here are retirees, they don’t need four bedrooms. They need maybe three. So we were able to capitalize on just kind of going in with eyes wide open.
It was a pretty major renovation. It took about eight weeks altogether. The guys who were working on it were actually living in the property as they were working, because we knew them, obviously… So that was kind of cool.
Joe Fairless: What research did you do besides the first-hand experience that you had with seeing who was living there, and where the neighborhood was going? What research did you do prior to having someone swing a hammer at the wall?
Eric Upchurch: I didn’t do a lot. I had neighbors that I was talking to… Our neighbor had just bought the property across the street, and they were a 60-year-old couple who moved down from Grass Valley, from Northern California… They finally could afford the beach life that they always wanted to retire to, so I said “Well, how many other people in this neighborhood are like that?” It was either people who had lived there for years/decades, or people who were just coming in as retirees.
Then I talked to the agent – it was actually the seller’s agent, who became a good contact of mine – and he just said “Yeah, that’s a pretty common trend. So my wife and I just said “Alright, let’s check this out. Let’s figure it out.”
Joe Fairless: Were your neighbors, the older people who were moving in, buying four-bedroom places?
Eric Upchurch: They were actually renovating the property as well, and I think ultimately they ended up selling it to somebody else… But we had this conversation with them, and they said “All we need is for our grandkids and our kids to come through, and we just need one extra bedroom for somebody to crash in.”
Joe Fairless: Huh. Alright, so let’s talk about the deals that you’ve done. You’ve done a live-and-flip, we’ve talked about that… But what are some other deals that you’ve done?
Eric Upchurch: I’m gonna say, first of all, the power of the VA loan, which is the only reason I was able to buy up property at all in San Francisco Bay Area. Coming out of the military, I was an E6 at my ETS, and I was making 40k, or something like that. I’d gone through the Dave Ramsey “Get out of debt” type of stuff, but I didn’t have cash to put down. Thankfully, I had the VA loan, so I ended up doing three live-in flips. And the only way were able to do that – the first time especially – was no money down. I could afford the payment because I had a good W-2 job, but I could barely afford that payment. Then the equity over two years was crazy, value going up, so I was able to do that.
Other than that, at the same time I was learning [unintelligible [00:09:10].28] I was learning about tax liens, and invested in it through my self-directed IRA, I did some private money lending, some flipping out of state, buy and hold portfolio out of state, a limited partnership deal, which was great… I’m still in that one on a 439-unit mobile home park portfolio, and then now multifamily properties syndication.
Joe Fairless: You don’t need any money down for a VA loan?
Eric Upchurch: Oh man, I’m glad you brought that up. No, and that is part of the incredible thing about the VA loan. If you qualify for the VA loan, which is anyone who has served 90 days active during wartime, or 181 days active during peacetime, and actually six years cumulatively of reserves and guard also qualify, and there are some other things as well, other people who qualify, like widows as well… Anyway, the huge value is you can buy up to a fourplex as owner-occupy. So you have to live in it for a year and a day.
Say you buy a fourplex, zero down, zero PMI, great rates, and you can roll in your VA loan funding fee, you can roll in the closing costs, and you can do a VA rehab loan as well, which I’m not an expert on that one; I haven’t done that myself.
So you can literally go into a fourplex, threeplex, duplex or single, and house-hack, which is why I wrote the book “Military House-hacking”, kind of talking about this strategy. So it’s an amazing asset to anyone who served in our military. I have a meetup here in Northern California, and a lot of guys who served in the ’80s have still never used their VA loan. Now, maybe they don’t need to. At some point maybe you don’t need that benefit. But for the young soldiers and airmen and sailors out there that are just getting started… I wish I had this information 20 years ago, but there’s nobody out there teaching it. So that’s what active duty passive income is doing.
Now we’re able to use our community as outreach to military installations and colonels, and people in the military who have broader influence over battalions of soldiers. Otherwise, the financial education – and no fault to the militaries – there’s a mission. You have to focus on what’s important, and the task at hand is protecting our country, and protecting our interest, and mission-first, mission-focused. So that financial education is limited by how much time – and we say this kind of tongue-in-cheek… But you line up everybody on a Friday or on a Thursday before a four-day weekend, all your soldiers, and you give a safety brief. “Don’t do drugs. Don’t go to jail. Don’t hurt anybody. Don’t have a DUI.” And then at the back end of that they’ll say “Oh, and by the way, invest your extra cash into your thrift savings plan”, which is the military’s equivalent to a retirement plan. That’s pretty much it. I mean, there’s a little bit more to it than that, but barely. And that’s for good reason, so I’m not dogging the military for that, but it’s time for that to change.
So we’re able to go out there, and now we have a podcast obviously, and a lot of people come into this idea, this mindset that you can be financially free and do some really cool things with what you’ve got going on while you serve, and after.
Joe Fairless: As you mentioned, San Francisco is pretty pricey… How high of a loan amount can you get with a VA loan?
Eric Upchurch: It just went up… It was $769,000, give or take. And some change. The typical loan right now I believe is 484k for the rest of the country, but there’s like 60-something counties across the country that have a higher cost of living, so they allow what they call a Jumbo VA loan. So you can qualify for up to like $769,000; I think that’s what it was last year. And then anything above that — even in the Bay Area, you can’t buy something for $769,000, so anything above that… Say you buy a house for a million dollars, which – anyone who’s listening to this, don’t worry about the numbers; they’re just extra zeroes. People in the Bay Area are doing what they can, and… [laughter] So anyway, you just have to pay 25% of the difference between the maximum loan amount and the purchase price. And you also have to qualify, your debt-to-income has to be correct, and all that stuff, too.
Joe Fairless: Yeah.
Eric Upchurch: So that’s kind of nice… You can get into a property even for lower money down with the VA loan as well.
Joe Fairless: Yeah, that’s something I hadn’t heard of. I’ve obviously heard of the VA loan, but that part of it, the 25% of whatever the difference is between the max and your subject property… The meetup that you’ve got in California – when did you start it and what’s the format?
Eric Upchurch: That is something that we probably don’t even need to discuss, because I just moved up to this new location, and it’s really just a few people. I just called it like a military real estate social networking thing, and it’s just getting off the ground…
Joe Fairless: When did you start it?
Eric Upchurch: October, but it’s once a month, and I don’t put any advertising into it, or anything.
Joe Fairless: October, you do it once a month… And it’s just meet at a bar, or what?
Eric Upchurch: Yeah, right now it’s just at a restaurant.
Joe Fairless: At a restaurant. And do you have a speaker?
Eric Upchurch: No, not yet. I’ve got so many other things going on, and it’s not a focus of mine.
Joe Fairless: But you have done it once a month since you’ve been at the location that you’re at…
Eric Upchurch: I’ve had to cancel a couple, just because I’m traveling a lot now, and stuff…
Joe Fairless: Okay. I mention it because it’s not about the actual meetup itself, it’s about the mindset that you have for creating it. That is something that I did when I moved to Cincinnati. I started a meetup immediately, and been doing it once a month. I missed maybe two months or so, for four years… And it’s grown and it’s grown, and it’s been very beneficial for myself, and also those who have attended, I believe.
Eric Upchurch: I wanna give a shout-out to Adam “Triple A” Adams, actually. He’s becoming a very good friend of mine now, and he’s obviously very good with the whole meetup community, and that all works; a great resource for anybody who wants to start a meetup.
Joe Fairless: Yes, absolutely. I think I interviewed him on — I know I interviewed him, but I think I interviewed him regarding meetups.
Eric Upchurch: Yeah, I’m sure. He’s pretty much the man with starting meetups, if somebody wants to learn how to do it.
Joe Fairless: So let’s talk about another specific deal that you’ve done. What’s the most recent deal that you’ve closed on?
Eric Upchurch: I got my first GP spot in a 212-unit syndication, which was neat… And that really was not my deal as far as sourcing goes. I got brought in to raise capital, which was all new to me, but I’m plugged in with some really great people, who are supportive, and I’ve networked enough now to build a team around me of people who are smarter and better than me… But I’m constantly present, I’m constantly active – I’m taking action, I recognize that – so I got provided the opportunity to raise capital for this deal. I didn’t know how I was gonna do that exactly, I didn’t know that I could talk intelligently about the asset, about the investment… I also had experience as a limited partner passively.
For the last couple of years I’ve been talking to a good friend of mine that I invested with, and his company has syndicated almost a billion and a half dollars of real estate. So I invested with him the first time, and he agreed to just kind of walk me through the numbers, and what it looks like… So I knew the process, and I got this opportunity, and I said yes immediately. I don’t know how I’m gonna do it, but I just crunched and made it happen.
So that’s the first one, really. I’m really just at my infancy of multifamily real estate investing. Now we’re looking at a 71-pad mobile home park…
Joe Fairless: Before we get into what you’re looking at, how much money did you bring to that deal?
Eric Upchurch: I brought 425k on that deal.
Joe Fairless: $425,000.
Eric Upchurch: Yeah. Which I feel like in the grand scheme of things–
Joe Fairless: It’s a lot of money.
Eric Upchurch: Well, it is. It is. And I feel like that was a small amount of money on the grand scale, a smaller amount of money for probably what people are raising out there… But it was enough to get me in.
Joe Fairless: For your first raise, it’s a lot of money. The person who brought the most – how much was that?
Eric Upchurch: The person who brought the most – it was a six million dollar raise total…
Joe Fairless: No, on your 425k.
Eric Upchurch: Oh, on the 425k the person who brought the most was 100k.
Joe Fairless: 100k. And how did you meet that person?
Eric Upchurch: That was actually a family member.
Joe Fairless: Okay. What about the next person, the next highest?
Eric Upchurch: The next person was a person that I knew through the military.
Joe Fairless: Okay.
Eric Upchurch: Actually, that sourced several contacts. Previously I had all those relationships, and I knew that obviously for a project like this I need to have pre-existing relationships, so I just kind of dug through my brain. I didn’t have a Rolodex at this time; I wasn’t even thinking about how I’m gonna raise money for a multifamily deal. I just said “Who do I know?” So my Rolodex I guess was my phone and my thought process of who might have money stashed away somewhere.
Joe Fairless: And did those military friends know you as a real estate investor already?
Eric Upchurch: Yeah, absolutely. I am very intentional with telling everyone that I know, including people — literally, I’ll find a way to tell somebody in an elevator, if they’re in there for two floors. At the gym, wherever it is. I love talking about it, and I try and figure out a way to work it in a conversation.
Joe Fairless: Based on your experience, what’s your best real estate investing advice ever?
Eric Upchurch: Best advice ever – two things. One is use the VA loan. If you have access to the VA loan – and we just interviewed Grant Cardone on our podcast recently… And I didn’t wanna bring this up, because I think he probably would have said “No, man! Don’t go with a four-unit. You need to go 40-unit!”, whatever.
Joe Fairless: Yeah.
Eric Upchurch: So I didn’t wanna bring this up with him, but I love the idea of zero money out of pocket on something that can cashflow, like a fourplex. You live in one unit for a year and a day at least. You’re living for free(ish) and/or making cashflow from the other units that you’re renting out. So in my opinion, that’s the best advice ever. Otherwise, if you don’t mind, I have what I feel like is the real formula to success, which I love saying, and people who know me know that I say this often in our community, which is “Learn, network, add value, take action. If you do those things over and over again, success will haunt you down.” I really believe that. That’s what I try to do every day, and every conversation I have, and that’s worked for me so far.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Eric Upchurch: I think so. Let’s do it!
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Break: [00:19:13].09] to [00:19:52].12]
Joe Fairless: Best ever book you’ve recently read?
Eric Upchurch: Best ever book I have recently read – Never Split the Difference, by Chris Voss. And Can’t Hurt Me, David Goggins.
Joe Fairless: And we interviewed Chris Voss. You can google “Chris Voss Joe Fairless” and you can listen to that interview. What’s a mistake you’ve made on a transaction?
Eric Upchurch: Getting into one that I shouldn’t have, which is tax liens. I hate them.
Joe Fairless: Why?
Eric Upchurch: Too boring. I know the strategy. It’s just too long and slow and boring, and to me not active enough.
Joe Fairless: What’s something you’ve lost money on?
Eric Upchurch: I lost money on a first trust deed through my self-directed IRA. The builder who I lent money to – or my IRA lent money to – actually passed away. That was unfortunate, obviously, and something that none of us could control, but… I lost some money there.
Joe Fairless: What’s the best ever deal you’ve done?
Eric Upchurch: Best ever deal I’ve done were the three live-in flips in the Bay Area. Living and flipping is awesome, especially with the VA loan. And then I’ve also done a few BRRRR deals as well.
Joe Fairless: Best ever way you like to give back to the community?
Eric Upchurch: This is an important one, and I’m very intentional in putting this out there… It’s brand new to active duty passive income – it’s called ADPI Helps, and we are now partnering with several people to give back to the PTSD and addiction issues that we have in the military. I’ve lost several friends to suicide, and obviously some other serious issues in the military as well. So folks with PTSD and addiction – we are now just starting to reach out, and we’re gonna create a support group, and who know where that’s gonna go, but we’re really excited about it.
Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?
Eric Upchurch: Please contact us. You can contact me directly at email@example.com. Our website is activedutypassiveincome.com. I am also @realericupchurch on Instagram.
Joe Fairless: Eric, thanks for being on the show, talking about the VA loan. Certainly relevant to anyone in the military, or who would qualify for the VA loan… And also talking about your role in the 212-unit and how you make sure that you’re intentional about what you talk about when you’re speaking to people. And then your formula for success, “Learn, network, add value, and take action.”
Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.
Eric Upchurch: You’re the man. Thanks, Joe.