Lee is a full-time physical therapist and a part-time real estate investor. He had a great full-time therapist job working with corporate clients making great money and eventually decided to give that up to work in home health to have a more flexible schedule so he could help his wife with the kids and after taking this pay cut he started to look for additional ways to increase revenue and so he started by investing into real estate. You will see how even if you are working full-time you can still invest in properties with families and friends.
Lee Yoder Real Estate Background:
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“You have to think a little bigger, 10x your dreams” – Lee Yoder
Theo Hicks: Hello, best ever listeners. Welcome to the Best Real Estate Investing Advice Ever Show. I’m Theo Hicks and today we’ll be speaking with Lee Yoder.
Lee, how are you doing today?
Lee Yoder: I’m doing great. Thanks so much for having me on, Theo. It’s a real honor to be on you guys’ podcast.
Theo Hicks: Absolutely. Thanks for joining us. A little bit about Lee. He’s a full-time physical therapist and part-time real estate investor. He’s been investing for about two and a half years and his portfolio consists of 34 units, between a 16-unit, a 10-unit and an eight-unit. He’s based in Lebanon, Ohio, and you can say hi to him at his website threefoldrei.com.
So, Lee, do you mind telling us more about your background and what you’re focused on today?
Lee Yoder: Yeah. So I started out in physical therapy… Man, how time flies… I guess it’s been like eight years ago. I got out of doing that, got into home health physical therapy, and it was great schedule-wise. My wife really enjoyed me having such a flexible schedule and being home. We had young kids… But it was extremely boring and unfulfilling for me. So actually, through physical therapy I got into the corporate side and was a clinical director for a company and started building a division for that company based on the home health physical therapy. So I was managing all the therapists between Cincinnati, Columbus and Dayton. So at that point, I’m really enjoying my work, but now I have no flexibility and my wife’s really struggling raising the young kids by herself most of the time. So that didn’t really work either.
So I kind of stumbled upon real estate through a friend, read the Rich Dad, Poor Dad like a lot of people do, and thought, “Okay, well maybe I can go back to doing home health physical therapy, so I have more flexibility, more time at home, but so I don’t get bored, so I’m not unfulfilled, I can get into real estate.” So that’s what I did about three years ago. Well, I left about four years ago, but I didn’t really get started in real estate until three years ago.
So left and I took a big pay cut. I was like I said, a clinical director, kind of moving toward a Director of Operations, role making north of six figures, and left and was not making that in home health physical therapy, but I had a lot of freedom, a lot of flexibility. Still had the stability of a full-time job, but was able to really jump into real estate.
So like I said, did that about three years ago, kind of started like a lot of people, I did a flip, flipped a duplex, had some lenders on that for a little bit, but didn’t hang on that very long… And then about a year and a half ago, well come up on two years ago, I joined the Cincinnati RIA; the Cincinnati RIA has an apartment syndication focus group led by Mark Hutton, who does an awesome job. I think you guys just recently had him on your show. But he kind of became a mentor to me. Meanwhile, I’m always reading and listening to podcasts and everything, so learning and just knowing that I really want to get into multifamily space.
So Mark helped me a lot and just started underwriting deals. And yeah, well, not even about a year ago, I put in an offer and then started moving forward and was able to purchase that 16, 8 and 10-unit kind of in rapid succession, all last fall. So did all that, and basically I spent the last year really bringing those around; two of the three were significant value-add properties, so just kind of been working on those.
And really the past several months, really most of this year, since I’m just really trying to get the apartment syndication business, more formalized and really try to build out a business, to go after a little bit bigger properties and bring on more investors, kind of follow Joe Fairless’ blueprint. I was kind of going through his book and trying to follow that blueprint and take a step up a little bit. So that’s what I’m trying to do now.
Theo Hicks: Thanks for sharing that. Was that the order that they were purchased, 16, 10, 8, or is it—?
Lee Yoder: 16, 8, 10. Yep.
Theo Hicks: And you bought all those really quickly?
Lee Yoder: Yeah.
Theo Hicks: Did you syndicate those or was that your own money?
Lee Yoder: No, it wasn’t my own money. But we just kind of did a joint venture simple LLC with close friends and family. So just a couple people in each one; they’re smaller properties, pretty low purchase price. So just two or three people on each deal.
Theo Hicks: Which of those was the hardest deal?
Lee Yoder: Probably the hardest was the first.
Theo Hicks: Okay, so first deal was the hardest. Let’s start from beginning. So did you pursue certain size deals based off of how much money you knew you could partner with, or did you find the deal first and then find the money?
Lee Yoder: Kind of find the deal first. I really went after everything. I mean, I was working up to 100 units, even though it would have been a real struggle to raise the money for something like that back then. But then looking all the way down to six or eight; I really did want to be commercial, I really wanted to go after a commercial property, so I wasn’t looking at anything too small. I kind of thought between the 10 and 20-unit range was where I wanted to be. I was looking at stuff bigger, but I kind of figured “I’ll just find the deal and then I’ll go take the rest on from there, one step at a time.”
Theo Hicks: Perfect. So you identified the size of deals you wanted to look into. How are you generating leads?
Lee Yoder: You know, I really wasn’t, Theo. I was just doing it the lazy way, just looking online. So all three of my deals were listed. Two of them I found on LoopNet and then one was really listed by more of a residential realtor and that one was just on the MLS, and a buddy of mine actually found that. I’d been telling him about investing for a while and he wanted to get into it with me, so he sent that to me that day it was listed, because there was a friend of his that listed it… And he’s like, “Hey, what about this one?’ And it was a great deal. So yep, I found them all online.
Theo Hicks: So you would just go to LoopNet every day just to see what the new deals were? What was your original process for initially screening the deals? Because I’m imagining when you first go on LoopNet, there’s 100 deals outside of the unit size. What were some of the other things you were doing to quickly eliminate some deals and then figure out which ones to focus more on? And then once you did that, what did you do to focus more on those?
Lee Yoder: I didn’t have a good screening process at the time. Through the apartment syndication focus group here in Cincinnati, Mark shared with us an underwriting tool, and it’s a pretty quick underwriting tool. I use Joe’s as well, and Joe’s is much more in-depth. So the one that Mark shared with us, you can fill out pretty easily. And a big part of what I was trying to do was practice underwriting.
I was really using the underwriting tool on a lot of deals and just run them through there, and it’s just a quick, “Here’s what the income is” and figure out — expenses being about 50%, what kind of loan do you think you’re going to get? Here’s your NOI, here’s your cash flow after you pay the mortgage… It gives you like a break-even number. So here’s basically how poorly you can do on the property and still break-even.
So just kind of a really quick underwriting tool. But I was doing that on most of them. And the more you do that, Theo, I would start to be able to look at deals, and just really quick in my head, you can do a quick income times 95% because you want to figure 5% vacancy, divide that in half and then divide by a cap rate that you’re looking for. So just even doing that real quick with deals.
I mean, I would love to own in Cincinnati, but so many deals I would look at in Cincinnati is like, “Wow, this is a six cap, that’s not good enough for me.” I don’t have the money already. I’m trying to create wealth, not just put my wealth into a property, like the guys who are buying a four or five cap or whatever; they’re just looking for a place to put money sometimes. But I was looking for a better deal than that. So I could just do a quick underwriting and just like, “Is that going to be a good enough return for me?” And I was able to cross off most deals like that.
Theo Hicks: And once you found this 16 unit deal and it passed that initial screening and you knew that this is the one, then what happened? Did you negotiate the price and then pursue money and then start finding the team that’s going to manage it? Walk us through that point, up until the close.
Lee Yoder: I was doing some networking, but really it was, I guess I’m kind of a jump-and-build-a-parachute-on-the-way-down type of guy. So I talked with Mark about it, Mark helped me a lot. I actually brought him in on that first deal with me. He didn’t put any money into the deal, but he had done so much to help me, so I gave him a piece of the deal to continue helping me out with it. But I made an offer and they were asking for $440,000 for that. And Mark kind of taught me, and others as well, if it doesn’t make sense at that number, what number does it make sense at? So I made an offer at 350k, we kind of went back and forth a little bit, but we just stuck to that number. And it had been online for a year and a half, it had under contract a couple of times, fell out both times. So you can imagine the sellers were just really ready to sell. So we just held to our guns there at 350k and they came down to our price. And so at that point, it got real and then I started getting really serious about what property management company would manage it for me, because I knew I didn’t want to manage my own properties… And just started getting quotes on stuff really quick. And as we got the inspector out there, he had a lot of connections…
So I would just encourage people, as you’re going down that path, if you kind of force yourself into it, you’re going to come up with a lot of the team members that you need as you get into it. Suddenly, the broker that I’m buying from — I wasn’t working with a broker, but the broker that I’m buying from, he’s giving me referrals, “Well, hey, use this property management company.” And then Mark as well, he was kind of a mentor of mine, so he was giving me a lot of referrals, but really kind of did that as we went along through the inspection period.
Theo Hicks: So the management company and the inspector, all the people came through your connection with Mark?
Lee Yoder: Yeah, Mark had a connection with the property management company, but the selling broker recommended the same one… But yeah, Mark referred me to the inspector.
Theo Hicks: What was the original list price?
Lee Yoder: 440,000.
Theo Hicks: 440,000. I heard 140 and I was like, “Wait, 140k for a 16-unit?” So it was originally for 440k and then you settled 350k. Okay, I’m sorry.
Lee Yoder: Yep. No problem.
Theo Hicks: What about the money for the deal?
Lee Yoder: Actually, just one money partner and it was a close family member. My in-laws actually brought the money down for that deal. So it was just me, close family and Mark on that deal.
Theo Hicks: How did that come to be? Did they know about this beforehand? Did you just call them up and say, “Hey, I need $100,000? What do you say?” And how did that conversation work? Were they the only people you talked to or did you talk to other people? Maybe walk us through the money raising process from your perspective.
Lee Yoder: Sure. I’d been talking to a lot of people about real estate. So this was about two years into my real estate investing career. So I flipped a single-family home and flipped a duplex. So my in-laws were actually involved quite a bit on the single-family, and had loaned us some money on that just because the HELOC we were using didn’t come through, an issue with the bank. But anyway, they kind of accidentally got into that with us, we paid them a little bit of a return, so they kind of saw, like, wow — you know, they’ve never done anything like this. So then I was like, okay, kind of get this real estate thing—my father-in-law is very handy, he likes doing stuff like that… So they kind of saw the power, but we didn’t use them on the duplex, and they were kind of like, “Why don’t you use us on this? We thought we’d invest with you again.” My wife said, “Well, you know, we got the HELOC now. So don’t need it.” So they were kind of getting some interest.
And so again, I didn’t have the money raised upfront. So I got it under contract, talking to people about it, talking to my in-laws about it and they just said, “Well, you know, why don’t you just let us bring the money for the deal?” So they had just kind of gotten interested in real estate, kind of saw the power of it and they had done a really good job saving their money, and decided they wanted to invest with us. So that was pretty organic.
Theo Hicks: Perfect. So you said that this was the hardest deal. Was is hard because you kind of had to do everything on the fly or was there something else that happened that made it a difficult deal?
Lee Yoder: Well, half of it was hard because it was my first one and I didn’t have all the connections. So as soon as I got done with the first one, I felt very comfortable offering on another one. I felt like, man, I got the property management lined up, I got my inspector lined up, I got the lending lined up… Just so many different things, and I just felt more confident about, “Okay, if the numbers look good to me, then it’s good. I know it’s going to work out.” And it’s just not such an intimidating process once you’ve done it once. So that was part of it, why the first one was harder.
And they needed a whole new roof. It’s an old school building, so it’s kind of a weird building; it’s a huge building for a 16-unit, and it needed a lot of work. So there were a lot of common areas, big hallways, a lobby and they needed it totally gutted and redone. There were three vacant units when we got it. A couple people moved out pretty quickly after we got it, because we increased rent by $25, just to ask for a utility bill-back, because we actually pay all utilities, including cable. We pay everything. But we also cracked down on smoking the building. So we lost a couple tenants pretty quickly.
So the first few months were okay, and after that more people moved out and we really lost a lot. So we weren’t planning on making much money in the first year, but I think we basically made zero in our first year, so yeah, it was kind of a long process to turn it around.
Theo Hicks: Did you fund the renovation costs? Was that included in the loan or was that extra money you got?
Lee Yoder: Yeah, it was included in the money that my family brought to the deal.
Theo Hicks: Okay, so they covered the down payment for the loan and then all the renovations.
Lee Yoder: Correct.
Theo Hicks: Okay. So you bought this deal, was it two years ago?
Lee Yoder: No, almost a year ago.
Theo Hicks: Okay, so where’s the deal at now?
Lee Yoder: We’re renovating one unit right now, we’re almost done with it. We just let a tenant go. So we have 15 of the 16 full. The 16th is almost fully rehabbed. And in fact, I think they put the flooring in yesterday, probably they did between yesterday and today. So we’ll be trying to get that one rented out and we’ll be full. We’ve raised rents for everybody, like I said, did a $25 bill back… But we’ve actually turned over seven of the units. And on those units, we’re getting anywhere from a $70 to a $90 rent premium when we remodeled the unit and put new tenants in them. So on seven of the units we got that kind of a rent premium. There’s a cafeteria in it. Like I said, it’s an old school and there’s a cafeteria, and we have a church renting out that space, so they’re paying 60 bucks a week for that space.
Theo Hicks: Nice.
Lee Yoder: Yeah, we’ve turned a couple offices and different things into storage… So we’ve really brought the value of it up and we actually have it listed for sale right now.
Theo Hicks: Awesome. Well, congrats.
Lee Yoder: Yeah. Thank you.
Theo Hicks: Thanks for walking us through all the details. Every time I do that is because it is your first deal and I like going through the first deal with people, so that people listening who haven’t done a deal for realize that when most people do their first deals, they don’t really know what they’re doing.
Lee Yoder: Yeah, correct. 100%.
Theo Hicks: And it ends up working out if you continuously grind, if you have the right team, if you have the right people around you and you have the right mindset… So thank you for sharing that.
So, Lee, what is your best real estate investing advice ever?
Lee Yoder: With all the books that I’ve read, everything I’ve learned, I like to say that I think you have to have a mix between The 10X Rule, which is Grant Cardone’s thing, and then Darren Hardy’s, The Compound Effect. He wrote that book because Grant Cardone just talks about like 10X-ing your dreams. I actually never read the book, I understand the concept; and that part’s pretty easy for me. I don’t have trouble dreaming big and thinking like, “Okay, maybe I could own 100 properties.” But a lot of people I think struggle with that part. If you struggle with that part, I think you got to get your mind wrapped around – there’s a lot more possible than what you may think. So you’ve got to think a little bigger, 10X your dreams. If you think the most you could ever do is own one house, well, 10X that and at least think that maybe you could own 10 properties.
And I think after that, though, Theo, The Compound Effect talks about just taking consistent action. And it’s like the small things that you have to do over a long period of time to build up the momentum to eventually see this exponential growth and really take off. I don’t know your story as well, Theo. Joe, to me, is like an incredible example of that. So many guys that get into the apartment syndication space or just the multifamily space in general, it takes a long time to get that first deal. But that whole time, you’re building connections, you’re improving your underwriting process and your ability to underwrite deals, you’re talking to people, you’re slowly raising money, and then suddenly, you finally get that deal, you’re ready for it, you take on that first deal…
Michael Blank talks about “The law of the First Deal,” that was certainly true for me. You get that first deal and suddenly, the second one kind of comes to you in rapid succession, and then you’re off to the races, because you’ve done these consistent things, processes, procedures, all these things you’ve done over the past, sometimes a year, a year and a half for some guys, to get to that… But then you can really take off. And that’s really hard. That’s hard for me, because I just want to look for properties and go after a property, but there’s a lot of things you’ve got to do to prepare yourself to be able to take on it, especially a bigger property. So I’m kind of working through that now.
Theo Hicks: Awesome. Are you ready for the best ever lightning round?
Lee Yoder: Yeah, absolutely.
Theo Hicks: Okay.
Theo Hicks: Okay, besides The 10X Rule book and The Compound Effect book, which you’ve already mentioned, what is the best ever book you’ve recently read?
Lee Yoder: I’ve got to say recently, Theo, it really is the Best Ever Apartment Syndication book. Got it here… That Joe wrote. When I decided I really wanted to move forward with the apartment syndication route and go after some bigger properties, I got that book, and to me, it’s a textbook. I actually partnered up with but the guy I used to work with on the corporate side, and he’s partnering with me on apartment syndication stuff, and I told him to read that. I said, “Man, just go through this. It’s a textbook, you’re going to learn so much.”
So if anybody’s serious about getting into the apartment syndication, I would highly recommend that book. It shouldn’t be like your first book, if you’re looking to get into real estate, because it’s next level stuff, I think. Some of it’s a little bit beyond me still. But if you understand real estate and you want to do apartment syndication, that’s a great, great book.
Theo Hicks: I love it when that’s the best ever book. Thank you. So if your business were to collapse today, what would you do next?
Lee Yoder: If I can stay in real estate, like if I suddenly couldn’t try to syndicate any more or couldn’t go after multifamily properties, I would probably go back to flipping. My wife and I, we actually just finished up a flip a few months ago. We really enjoy doing it together. We really enjoy having the kids join in. They’re still a little bit young, they’re six and four, but they’re getting closer to the level where we kind of do it as a family. So I would probably go back to flipping houses with my family.
Theo Hicks: Out of all the deals you’ve done, what’s been the best ever deal?
Lee Yoder: So the best ever deal would have been the 16-unit that we talked about, because I was able to purchase that for 350,000 and we were able to negotiate. I didn’t talk about this. We bought it for 350k, but we actually negotiated; the seller is bringing $100,000 cashback at closing, because it needed a new roof and a ton of other stuff. They were able to see the building was kind of falling apart, they were going to have to help us; we put some back into it to bring it around. So we got that. I did put a little bit more into it, we used some of the cash… So we probably put 45k into it. But at any rate, we’re into it for under 400k, and we’ve got it for sale for 700k right now.
Theo Hicks: Wow. What is the best ever way you like to give back?
Lee Yoder: Recently, my wife and I really enjoyed involving our kids and getting giving to our residents. So having kids often makes you—well, I think it makes you want to kind of be the best version of yourself because you want your kids to become the best version of themselves. So it’s really inspired us to show them how we can share Jesus’s love and the blessing that we’ve been given to bless our residents with those. So for Christmas, we handed out like a little Christmas gift to all of our residents; just because of COVID, we handed out a gift card to all of our residents and our kids are the ones that will put those on their doorstep and stuff. So being able to do that for our residents, it’s fun. We like it, but it’s fun to involve our kids in that, and for them to see that as well.
Theo Hicks: And then lastly, what’s the best ever place to reach you?
Lee Yoder: So you mentioned my website already, and I appreciate that. https://threefoldrei.com/ and we’ve got some free resources there, like a sample deal package. And I tell people about, on the website, how I paid zero percent taxes on the 16-unit I’m going to sell, and how I’m making that work out. But you can email us at firstname.lastname@example.org. And then you can call us at 937-400-3044.
And then actually, Theo, I have a podcast that I just started, focusing mostly on multifamily, but also a faith and family aspect. And my podcast is called Three Fold Real Estate Investing.
Theo Hicks: Perfect. If you’re watching this on YouTube, you can see his logo behind him right now. All right, Lee, well, I appreciate it. I enjoyed our conversation. Besides the takeaway I mentioned right after we talked about your first deal, which is that a lot of times people don’t really know what they’re doing on their first deal – I was like that, and most people I’ve spoken to are like that. And so if you haven’t done a deal before, don’t allow the thought that you don’t know enough or analysis by paralysis stop you from doing a deal. As long as you, again, have the right mindset and the right team, you’ll be able to figure it out along the way.
The other interesting thing you said was about your job right in the beginning, where you said that you were making more money at your previous job. And obviously, you could have kept doing that, could have kept making more money growing that part of your career. But you realized that you weren’t able to spend too much time doing what else you wanted to do with your life, and so you took a step back, took a pay cut, came back to the more flexible, you called it the “boring” job, and then were able to use your extra time to spend with your family as well as your real estate.
So I think the lesson there is that if you want to get into real estate—actually, I just talked to someone who kind of did the opposite of what you did. He had his full-time job, he started doing real estate on the side and then ended up getting fired, because he wasn’t getting enough time. But I think the better solution is to find out a way to either get a new job or just do something that you’re going to be able to do while you’re building up your real estate career. Obviously, people have been fired or quit and had it work out, but I think your strategy is a little bit safer and I’d probably recommend that strategy.
And then thirdly, your best ever advice, which is to find the balance between the 10X rule and then the kind of slow compound effect. You don’t have to just do one or the other. You can keep both in mind and realize that you set these big goals, but you also need to realize that if you continuously grind over time, you’re going to see that compound effect, the exponential growth.
Lee Yoder: Yep.
Theo Hicks: So thank you, Lee, for joining us. I appreciate it again. Best Ever listeners, as always, thank you for listening. Have a best ever day and we’ll talk to you tomorrow.
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