July 7, 2020

JF2135: Architects Point Of View In Investing With Joe Villeneuve


Joe is an Architect and real estate investor for over 40+ years. He has some unique perspectives on how you should go about planning your real estate goals, how to raise capital and a couple of thoughts on what you shouldn’t do with your seed money. 

Joe Villeneuve Real Estate Background:

  • Started investing in 1980
  • He is also a professional Architect owning his own firm for 40+ years
  • Currently, his portfolio consists of 10 properties
  • Based in Plymouth, Michigan 
  • Say hi to him at joe@3venterprises.ws 

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Best Ever Tweet:

“Don’t spend your seed money” – Joe Villeneuve


Theo Hicks: Hello, Best Ever listeners and welcome to the best real estate investing advice ever show. My name is Theo Hicks, today’s host, and today we’ll be speaking with Joe Villeneuve. Joe, how are you doing today?

Joe Villeneuve: Not bad, not bad.

Theo Hicks: Good. Thanks for joining us; looking forward to our conversation. Before we get into that, a little bit about Joe – he started investing in 1980, he is also a professional architect owning his own firm for over 40 years. Currently, his portfolio consists of 10 properties, based in Plymouth, Michigan, you can say hi to him at joe@3venterprises.ws. Joe, do you mind telling us a little bit more about your background and what you’re focused on today?

Joe Villeneuve: Sure. I’ve done a variety of different things; you’ve seen some of them. I consider myself a serial entrepreneur; and I spell cereal with a ‘C’ as a breakfast. Every day, I wake up that way and that’s when I focus. My background, because of that, is a variety of different things. But as far as real estate is concerned, I have taught at many real estate investment clubs as a featured speaker, one that I accidentally became an organizer in. That became exhausting because we did four meetings a month. It was all themed; our last meeting was on a particular topic and it was an all day. So the last Saturday of the month, in the morning, we talked about the topic; in the afternoon, I’d put together what I refer to as interactives, where students actually had to act out and perform what they learned during the morning. Our philosophy was always – we’re going to show you how to do it, we’re going to teach you how to do it, we’re going to grab you by the collar and drag you through it to make sure that you do it.

I think the biggest frustration I’ve always had whenever I’ve been to a lot of them is that they teach you how to do it, but then they leave you hanging in the dark and I didn’t want to do that. So that’s where the interactives came in. I want them to actually feel like they were doing it when– they had the experts there, the people that taught it, and their partners, potential partners and other students that are making the same mistakes and asking the same questions and finding out that they can do it, and do it the right way. So there’s a lot of other things, but that’s some of the biggest things– I enjoyed doing that. Burnt me out, but I enjoyed doing it.

Theo Hicks: So you said your portfolio consists of ten properties. What are those ten properties? Are they single-family homes, multifamily?

Joe Villeneuve: Yes. I don’t do multifamily; I hate multifamily. That to me, that’s a whole 30 minutes segment. I really hate multifamily.

Theo Hicks: Let’s condense your hate for multifamily down to maybe five minutes. So give me a rant. Why don’t you like multifamily?

Joe Villeneuve: Inconsistent. You have high cap rates, low cap rates. Usually what you find are the ones that have come up for sale with high cap rates because they just got to spending the year before all their money in the capital expenses. So now they can show the past cap rate for the past years being high because they don’t have any cap rate. Then in about five years, ten years, all of a sudden, a person who buys it and gets nailed with it. The misconception that you have, say, a 20-unit building and if one of the units goes vacant, you’ve got 19 other buildings to pay for it. What if you got 20 single-family houses with the same situation? The difference is if you got a 20-unit complex– so let’s say that there’s two 10-unit buildings. If a roof comes up on a single house, you got one roof to replace. You gotta replace ten roofs in a multi. You don’t patch driveways, you have to replace parking lots, commercial expenses, everything that’s associated with it. When you’re dealing with residential, you don’t deal with the landscape, snow removal; the tenant does. You do with the commercial side, the multifamily. So I don’t like it. So I learned real fast I don’t want to invest in it. I want to invest something I got more control in.

Theo Hicks: Is this from firsthand experience in multifamily or have you never done a multifamily deal?

Joe Villeneuve: Both. When I say both, I’ve done a multifamily, been associated with a multifamily, I watched it happen from an architect’s standpoint. I sat back, I watched it and I said, “No, this is not what it’s built out to be. There are better ways to doing it.” It’s just better ways of doing it.

Theo Hicks: I’m assuming the better way is investing in single-family homes, or it could something else… So if you could mention what this better way is [unintelligible [00:07:13].06]

Joe Villeneuve: Almost anything else. But just over the years, I’ve gravitated towards certain things. I’ve gravitated towards single-family, but not as a collection of a lot of them. It’s just simply a means to an end. The end really is triple net. I guess I’m physically lazy and mentally aggressive; I got this best way of describing it. I want my money working for me, I don’t want to be working for it, and it makes no sense that way, because you can always get your money back, but you can never get your time back. So I want my time to be an exponential return on it, and for me, that’s what the triple net does as much as anything else. The returns are not as high, but it’s a part of a system as you work your way from beginning to end; you can start with a single-family, work your way through to the end game being your cash flow game, being the triple net. You can truly retire off with something like that. Whereas it’s hard to retire off a single-family because in order to do that, you have to sell it, and then you get all kinds of issues – capital gains issues, surprises, there’s all kinds of problems. So I don’t look at any particular, other than triple nets maybe, any particular investment vehicle as a single or multiple ones, different ones that I look at as being the best ones to invest in. I look at them as a sequence of options, one leading into the next which leads into the next, and it’s more a matter of order of appearance than the fact that I just seem to look at each one of them as an end; they’re all a means to an end.

Theo Hicks: Interesting. So the single families, they’re a stepping stone to triple net leases.

Joe Villeneuve: Yeah, plan is everything. Most real estate investors don’t understand what a plan is, unfortunately. When I used to teach this, first thing I would ask is, “What’s your plan?” and they would tell me it was flip three houses a year and hold one house per year, and I said, “Well, that’s not a plan,” and then I would describe what a plan is, starting with your end game which is your ultimate financial goals and work your way backwards; reverse engineer it to where you’re at right now. Look at it the same way as getting a college degree – prerequisites working way all the way through, each one’s a stepping stone that leads to the next. There is no – I got this property. Now, what do I do? Where’s my next one? Every decision you make should be made on the entrance to a decision into entering a deal should be predicated on how the exit from that deal leads to the next entrance. So you already know where you’re going every time you make a decision, and that’s where the planning comes in. It’s laid out ahead of time. You just turn around and follow the breadcrumbs once you get back to the beginning.

Theo Hicks: I’m confused, because mentioned that you don’t want to sell the SFRs. So do you find it just taking the cash flow from those and putting that into a triple net lease?

Joe Villeneuve: No, no. I never said I don’t want to sell it. I said it’s a means to an end.

Theo Hicks: Okay.

Joe Villeneuve: Selling it as apartments. Let me give you one of my basic philosophies. One of my basic philosophies for single-family is I don’t want to hold a single family for more than five years, and the reason for that is I don’t look at the property as my asset. My asset is my cash and the property is nothing more than a temporary resting place for it until it moves on to the next vehicle. Whether or not I have $100,000 in one property or I have $100,000 in the bank, it’s still $100,000, but $100,000 in the bank, I can parlay a 20% deposit into $500,000. If I got the same 100 grand sitting in a property, it’s worth 100 grand; that’s it. It will never be worth any more sitting there. It’s dying. So once I can get that equity that I bought, let’s say 20% worth that I bought, up to 40% gifted to me, based on the tenant gifting it to me when they’re making the rent payments for me and making my principal payments out of that, plus depreciation, once I get to the point where it is now 40%, I get it out of dodge, and now that 40% becomes $200,000 instead of $100,000, and it just keeps moving up to $400,000. So the $200,000, it keeps going on and on and on; it just keeps moving. I look at my cash as a verb not a noun. When it becomes a noun, I lose.

Theo Hicks: Perfect. So what type of property are you going to do for the triple net lease?

Joe Villeneuve: It does vary over the decades. Right now, my favorites are dollar stores and anything to do with medical. They’re the most stable at this point. Medical will always be the most stable.

Theo Hicks: Do you own these currently or this plan further on down the line once you’ve turned, using your example, $100,000 to $200,000 to $400,000 to–

Joe Villeneuve: Right, right, right. I don’t own anything. I control, but I don’t own. My businesses own it. if somebody were to ask me where the properties were, I would tell them– well, I wouldn’t tell him anything. Part of the reason is because there’s nothing that’s owned with a single entity in other words. It’s all a matter of partnerships of some sort, and out of respect for my partners, nobody knows where anything is. So don’t ask that question because I won’t tell you.

Theo Hicks: So by partnerships, do you mean that they’re raising capital for these deals?

Joe Villeneuve: Yeah, usually partners are cash partners or money partners, one form or another.

Theo Hicks: Do you any money raising tips that you found to be very useful?

Joe Villeneuve: Yeah, I’ll tell you one huge one. I follow the principal formula of the number sequence of 1073741824. That’s the most important number. In fact, I’ve got it almost written on the wall in one form or another. It means everything to real estate investors. The basic premise for that number is more than most important philosophies. For real estate investors, it should be the most important philosophy they should follow. My first of two golden rules that I found. Under no circumstances, ever, no matter what wives tale, rumor, group setting, multiple people telling you to do otherwise, ever spend your seed money. Use it to infinity, but never spend it. You can spend your profits, not your seed money. Your profits is somebody else’s money that they’re giving to you. Your seed money is the most valuable thing in the world to you; never spend. Use it to infinity, but never spend it. Spend it means you get one use out of it. Using it means no matter how many times you try to spend it, every vehicle you put it in, it keeps coming back with friends; friends being profit and cash flow. So it’s the money’s friends that are importat; and every time those friends come back with it and into the next vehicle, and it keeps coming back with more friends and more friends every time I do it. That’s the goal. Once you spend your money, you start all over again from scratch; and once you spend your seed money. If you keep using it, it keeps coming back and you have an exponential return on it, and it doesn’t cost you anything anymore.

See, I can buy my seed money, as long as the cost of the seed money is self-sustaining. In other words, when I get that loan or I get the cost, the money itself that I get has a means of paying off anything associated with it, but not using all of it to do that. So if I only use half of it and I essentially control the cost of it completely, that means the other half is free money. That’s a cash like substance as far as I’m concerned, and I could use that forever. In a situation like that, no matter what the initial cost, it’s immaterial, because it’s self-sustaining. So it doesn’t matter what the cost is, I got free money. I focus on the free money, I use it over and over and over again, and I can go forever with that principle without having to get another loan. Let me just keep using the same money. It’s just a matter of how you use the money and how money works, and that’s one of the problems I see. Real Estate investors don’t know how money works. They don’t understand strategies, they don’t understand some of the keywords such as what risk is, they don’t understand what profit is, what actual cost is. They deal with percentages as answers, and percentages will lie to you every time. I never use a percentage in an answer when I compare one thing to another.

A great example isthe  stock market. I got into a discussion with somebody once on the stock market and returns, they said they had 15% return on the stock market and you could only get a 5% return on real estate, and I said, “Well, even if that were true, I could blow you away with that, but it’s not true.” He says, “First of all, you’re cheating. You’re getting the best that you can get and you’re saying you’re gonna get it all the time and you’re forcing me to get the average. I’ll tell you right now, I don’t buy average, but I’ll take the average,” and I showed him how it was in day one. He could take the same dollar amount, I could take the same dollar amount; he could put it in the stock market at 15%, I could put it in real estate at 5% and I’m ahead of him from day one, and I leave him in trail. Percentages lie; they focus on the interest rates. As long as the interest rate is reflected, the impact of the interest rate is reflected in the payment and the payment is covering it, if you have positive cash flow, the interest rate doesn’t matter. You’re not trading off interest rates.

When you look at the interest rates of a loan and the loan’s being paid off and you have cash flow, you’re not the one paying the loan off of it if it’s a cash flow property; the tenant is. Your only cost is the down payment; that’s it. As long as you have positive cash flow, down payment is your only cost. At 20%, you’re buying a $100,000 property with 20%. So it costs you 20 grand. So if you start at $100,000, you’re buying $500,000 worth of property. So if you have 5% return, that’s a $25,000 return in the first time, and the person in the stock market gets 15%; they get $115,000. They get 15% return and this spreads away from there. Not counting the cash flow– if it is a $4,000 return in cash flow, within five years, I get all my money back and I’m now living on free money on that investment. Stock market can’t say that. They got $100,000 still in it. So I was laughing so much. I was like, “Alright, this is a great time to invest in the stock market.” It’s never a great time. I must saying I’m not in the stock market, I am. But it’s never a great time compared to real estate. They’ll never be a better time to invest in the stock market than real estate, simply because you can’t compare the two together. They’re completely different. Somebody said, “Well, it’s like comparing apples and oranges.” No, it’s not. It’s like comparing apples and spaghetti. They’re both food, but that’s as close as they can be compared.

Theo Hicks: Alright, Joe. Besides all of the great advice you’ve given so far, what is your best real estate investing advice ever?

Joe Villeneuve: Don’t spend your seed money; that’s it. Don’t spend your seed money.

Theo Hicks: Alright, are you ready for the Best Ever lightning round?

Joe Villeneuve: You got it.

Break [00:17:54]:03] to [00:18:48]:07]

Theo Hicks: Okay, Joe, what is the best ever book you’ve recently read?

Joe Villeneuve: I got it right here. Excel 2016 Formulas.

Theo Hicks: There you go. Excel is super powerful. I think people don’t utilize it enough.

Joe Villeneuve: I tell people all the time, if I wasn’t married, I’d marry it.

Theo Hicks: Excel? [laughs] Yeah, that’s awesome. Alright, if your business were to collapse today, what would you do next?

Joe Villeneuve: Start a new one.

Theo Hicks: What would that new business be?

Joe Villeneuve: Don’t know. Never hit that spot yet. Remember, I’m a serial entrepreneur. I invest in real estate based upon the market and the timing with decisions, and same thing would be true with the business. When one business fails, a whole other industry opens up. It’s just you have to be able to see it and take advantage of it.

Theo Hicks: What is the best ever way you like to give back?

Joe Villeneuve: I’m doing right now. You and I. You can’t take it with you, so I figured I might just give it back before I leave. Otherwise, it goes useless.

Theo Hicks: Then lastly, what is the best ever place to reach you?

Joe Villeneuve: Email.

Theo Hicks: Again, that’s joe [at] 3venterprises.ws.

Joe Villeneuve: Correct.

Theo Hicks: All right, Joe. I really enjoyed this conversation. I’m looking forward to listening to it again because you’re spitting out advice so fast, I could barely keep up with my typing. So I’m sure I missed some while I was typing, but these are a few things that stood out to me was why you don’t like multifamily; I thought that was interesting. I’ve never heard it from that perspective before. So you said that it was inconsistent and you gave an example of cap rates where  someone will spend a bunch of money in one year, and then sell the property to someone else. Then five years later, that person gets nailed because the numbers were just based off of the previous owner investing a ton of money into the deal that year before. We talked about single-family homes – you can replace one roof as opposed to having a place or very, very large roofs inside of ten roofs on a multifamily; patching a driveway as opposed to replacing the entire parking lot, and you mentioned landscaping and removal.

I really liked your idea about looking at things in a sequence and you mentioned that a lot of real estate investors don’t understand how plans work and the whole entire idea is to have an end goal in mind, and then reverse engineer it and then follow the breadcrumbs. So when you’re entering a deal, you should be thinking about the exits. Does it allow you to enter into another deal at that point? So thinking more longer-term as opposed to a deal by deal basis.

You talked about one of your basic single-family philosophies being not wanting to hold on to a deal for more than five years and how the asset isn’t the property, but it’s your cash; the single-family home is just a resting place for that cash. So you can invest $100,000 into a single-family home with a 20% down, a 500k property, because the principal pay down and the residents paying the rent, you can turn that $100,000 into 200 grand and then you can push that into another deal and repeat the process.

You mentioned that your favorite triple net leases right now are dollar stores and medical because they’re the most stable, and then your best ever advice and your money-raising tip was – never spend your seed money, use it to infinity. By spend, you mean getting only one use out of it. So the goal is that you use your seed money over and over and over and over again.

I liked that you put it– you said that you’ll invest in a new property, and then you’ll get the seed money back with some friends, and then you put the seed money and the friends into a new deal and they make even more friends and so on and so on until you can get to your next step in the sequence, and that was just maybe 5% of what you talked about. So Best Ever listeners. definitely give this one a second listen through. I know, I sure will. Again, Joe, really appreciate you coming on the show. Best Ever listeners, as always, thank you for listening. Have a best ever day and we will talk to you tomorrow.

Joe Villeneuve: Great.

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