January 26, 2022
Joe Fairless

JF2703: How This 20 Year Old Built a Multifamily Portfolio in One Year ft. Brad Simtob


 
 

Brad Simtob started investing in commercial real estate when he was just 19 years old. Now at 20, he has grown his portfolio to 350 units and has no plans of slowing down anytime soon. In this episode, Brad shares how he found his current deals and the goal-setting strategy that has helped him achieve his success.

Brad Simtob | Real Estate Background

  • Founder of Simtob Management & Investment LLC which purchases value-add multifamily in the Midwest. They are proprietary with their in house construction and property management team. They typically utilize a unit renovation value-add and are able to complete it for 30% less than the closest general contractor quote.
  • Portfolio: GP of 350 units in Michigan.
  • He’s only 20 years old.
  • Based in: Grand Rapids, MI
  • Say hi to him at: www.simtob.com | brad@simtob.com
  • Best Ever Book: Traction: Get a Grip on Your Business by Gino Wickman

 

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TRANSCRIPTION

Ash Patel: Hello Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m with today’s guest, Brad Simtob. Brad is joining us from Grand Rapids, Michigan. He is the founder of Simtob Management, which purchases value-add multifamily in the Midwest. Brad’s company is able to complete renovations for 30% less than the closest general contractor quote. He is a GP on 350 units, and he’s 20 years old. Brad, thank you so much for joining us. How are you today?

Brad Simtob: I’m great. Thanks for having me, Ash. I really appreciate it.

Ash Patel: I’m excited, man. Your resume alone – you’ve got me very intrigued. Brad, before we get started, can you give the Best Ever listeners a little bit more about your background and what you’re focused on now?

Brad Simtob: Yeah. I started when I was 19 years old, I bought my first building back in July of 2020, in the middle of COVID. That’s how I really got into this. It was a building in Lansing, Michigan. Now I’m here today, 20 years old, 345 units, our goal is 850 by the end of the year. We just want to keep growing.

Ash Patel: Alright. Slow down, man. 2020, your first property – what was it?

Brad Simtob: It was an 11-unit building. I actually found out in the middle of due diligence, it was a Section 8 building. That’s how I really got into all this. A lot of people told me to steer away and try to stay away from Section 8, but I decided to actually dive deeper, understand more, and understand how to do it better than other people who are doing that.

Ash Patel: Okay. Help me understand your mindset at the time. Because at 20 years old, that was the opposite of me. Have you been wanting to get into real estate for some time, and why?

Brad Simtob: I’ve always looked at real estate, I’ve seen a lot of people that could do really cool things. I’ve met a lot of people that are doing commercial real estate and multifamily, and I always saw these deals pop up online, but I never thought it could really be me. Because I’m 19 years old, how am I going to afford a $400,000 building? That wouldn’t make sense. Then I started to understand how other people do it, I started to meet people that actually raise money for their deals, and I was like, “That’s what I really want to do. That seems really cool.” I started just going from there and looking at deals.

Ash Patel: Will you walk me through acquiring that first property?

Brad Simtob: Yeah. I’ve found it in April of 2020. It was an on-market deal, and it was a family friend, he’s the broker for the company. I reached out to him and he sent me over the information. I ended up putting this lowball offer, and the broker said, ‘This is never going to be accepted. I don’t even want to show it to the seller.” I was like “Just show it to him. Tell him I’m a young kid that’s trying to get the deal done, and it’s a good deal at this price.” They ended up saying no. Then they came back to us and said “Actually, if you go a little bit higher”, I think it was 5% higher, “then we’ll get the deal done.” I said “Perfect.” I get it under contract, I’m so excited, I do all this due diligence, I start bringing it to investors, I raised $125,000, I got the loan, and then we closed.

Ash Patel: Okay. How did you pitch this deal to investors when you have no track record, and you’re 19 years old?

Brad Simtob: My dad definitely had to co-sign the loan. He’s been a huge mentor and advisor for me in this whole company the whole time. I sort of used his track record as a way to be able to get it into investors’ hands. I created this whole presentation, I laid out all the numbers, I’ve seen how other people laying out the numbers, I tried to do it very similarly; I explained the returns, and what I’m going to do. My goal was to build a portfolio at a time, which I have now done.

Ash Patel: What were the proforma returns that you pitched to investors?

Brad Simtob: I pitched an 18% IRR. What’s really cool about this deal is I ended up selling it a year and one day later. Investors ended up making over 80% in that one year  I owned it. That’s really where I took off.

Ash Patel: Over 80% on their initial investment, in one year. You killed it.

Brad Simtob: Absolutely killed it. It was the best thing I felt.

Ash Patel: So now the benchmark is really high. What’s next?

Brad Simtob: I’m really bullish in the city of Grand Rapids, and that’s why I moved here. I actually don’t own any real estate in Grand Rapids. I’m only in Lansing, Kalamazoo, and Michigan. I’m just trying to find deals, I’m doing my best to network with new people, going to dinners, get drinks with people, and really just having a good time trying to understand the market.

Ash Patel: Wait, are you 21?

Brad Simtob: Just getting dinner mostly…

Ash Patel: Yeah, drinks. [laughs] I like it. Okay, hold on. Did you literally move to Grand Rapids to pursue real estate?

Brad Simtob: Yes. I moved here by myself.

Ash Patel: Man, I love it. Where were you before?

Brad Simtob: I used to go to Michigan State before any of this happened. I was in East Lansing, Michigan. And then I bought my first property in Lansing. And when I bought my property in Kalamazoo, I said this is a great opportunity for me to live rent-free. So I moved to my building in Kalamazoo; I lived there for a few months, and then I moved to Grand Rapids.

Ash Patel: Alright. If you don’t mind, let’s keep going back. After the 11-unit that your investors made 80% returns on, what was the next deal?

Brad Simtob: So that was a 32-unit building I put under contract. I saw this deal before the 11-unit. I put a lowball offer, and the broker didn’t call me back. Then I just kept going up and up on this deal and eventually, they did call me back. They said 800,000, I said, “Okay, 800,000. I’ll write the purchase agreement.” I didn’t hear anything, then they called me back and they go “Actually, it has to be 900,000.” I go, “Okay. 900,000.” So I put it under contract at 900k, and I ended up renegotiating it down to 700k. There was a bunch of mold issues that we have to go in and we had to do a bunch of remediation. No one else is buying this property except for me at this time. So I ended up going in and we did all the renovations. Now it’s an absolute cash cow. We bought it for 700k, we ended up putting in about just over $200,000 into it now, so all-in for 900k. I had an offer a few months ago to sell it for 1.55.

Ash Patel: And?

Brad Simtob: I’m going to hold it. I’m not selling any of our properties unless I sell the whole city at once, unless I sell the whole portfolio.

Ash Patel: Got it. Brad, do you have investors on that deal?

Brad Simtob: Yup. I raised money on that deal too, we raised $350,000.

Ash Patel: Did you know you were going to have that kind of CapEx?

Brad Simtob: Yeah. Ahead of time, I knew I had that CapEx, [unintelligible [00:06:14].29]

Ash Patel: You raised money for that as well?

Brad Simtob: Yes. We got a 75% loan-to-cost loan on that building, which is great. It covered everything for the CapEx.

Ash Patel: What was the proforma return you pitched to your investors on that deal?

Brad Simtob: That one was roughly about 18% when I pitched it. When I underwrote it, I got about 28%. I never want to show an investor that hybrid return, because the expectation is too high.

Ash Patel: And wasn’t it tempting to take the cash, the $1.5 million offer?

Brad Simtob: It’s still very tempting to me today. I would make a few hundred thousand personally, which would be awesome for a 20-year-old, but it’s not right for investors. I know that the value is going to keep going up; I could still do better, I can still raise rents and decrease expenses, so the value is just going to keep going up.

Ash Patel: Would you do a cash-out refi?

Brad Simtob: I’m looking into options with that. I haven’t owned it for long enough, is the issue, to be able to do something like that. So I’m sort of waiting till I hit the two-year mark.

Break: [00:07:11][00:08:49]

Ash Patel: Out of curiosity, what if you sell it to another entity of yourself, so you could potentially pay back any investor who wants out, and you get an appraisal, you pay fair market value, and then would you be able to get a loan for the higher amount?

Brad Simtob: I think so. I never really looked into something like that. It makes sense on paper though.

Ash Patel: Yeah. I honestly don’t know.

Brad Simtob: That would be really cool.

Ash Patel: I’m just thinking out loud. Listen, man, you made a bold claim. You can do renovations for 30% less than the closest GC quote. How do you back that up?

Brad Simtob: I do all in-house construction. I hire employees for $20 an hour when the GCs are charging $50 to $60 an hour per person. So just on the labor alone, I’m saving $40 an hour. And then I have a great relationship with Home Depot and they’re able to deliver… What I do is I create these lists online on their Home Depot site, I basically just send it to the rep, and they get every single piece that [unintelligible [00:09:49].19] delivered to the unit in one week. They get everything delivered to the one unit, I put two to three guys in that one unit, it takes them one week to do the whole renovation…  And in Lansing, renovations are about $5,000, when the GCs we’re asking for about $8,000 to $9,000.

Ash Patel: How did you learn how to do that?

Brad Simtob: I ended up starting with GCs. They did some unit turns for me and renovations. Then I saw the breakdown, and I was charging you $60 per person, you pay them $20, like I’ve talked to them before. I could pay people $20 to do it, so I started with that.

Ash Patel: What is it about your mindset that allows you to achieve so much at a young age?

Brad Simtob: I’ve just always been a go-getter. I love to really have big ideas and big dreams, and I really want to accomplish those goals. Whenever I set a goal, I make sure that I do it. I write my goals down every year, and I make sure to accomplish as many as I can that year.

Ash Patel: Well, help some of us older folks out with that. You set your goals at the beginning of the year; I’m assuming they’re achievable goals. Are they a stretch?

Brad Simtob: Specifically this year, 850 units. We’re only at 350. When everyone looks at that, that’s definitely a stretch.

Ash Patel: And then you have a plan of action that you create at the same time?

Brad Simtob: I start with that at the beginning of the year, we’ll create that one-year plan. From there, we break it down into quarters. What do we have to do this order to achieve that by the end of the year.

Ash Patel: And you always hit them.

Brad Simtob: Yeah, it’s three years I’ve been doing it.

Ash Patel: Did you drop out of college to pursue real estate?

Brad Simtob: I did.

Ash Patel: What was that decision like with your family?

Brad Simtob: It’s really interesting. When I dropped out, when I first made the call, my mom was not having it at all. She said, “You have to get a college degree.” I was very fortunate my parents were paying for college. So it was a great deal for me, but I’m like, “I see all this opportunity. I know we’re in the middle of COVID and prices right now are so low. If I put all my focus and energy into this, I can only imagine how big we could grow it.” So I created a goal, by the end of 2021 I had to have 125 units that we raised money for, closed on, and owned. At the end of 2021, I ended up having a 345. So I definitely hit that goal.

Ash Patel: It’s funny. I picked up on what you said, “When I made that call to my mom.” It wasn’t a discussion, it was a call to inform her about your decision.

Brad Simtob: Yeah. I had already made the decision at that point. I only bring those ideas to my parents when I know for sure I’m all in with it.

Ash Patel: I love it. Do you have a team, or are you doing this by yourself?

Brad Simtob: I have just under 30 employees now. That includes all the construction, and we do in-house property management, and the people to manage those.

Ash Patel: What was your first hire?

Brad Simtob: My first hire was my best friend, Alec. He’s still with me, he’s the best.

Ash Patel: What’s his role?

Brad Simtob: We call him the COO, basically. He really mainly focuses on construction right now. I still manage all the property managers directly, but he does an absolute job, an absolute killer job with the construction.

Ash Patel: To hit your goal of 850 units, you’re going to have to raise a significant amount of capital. How are you going to go about doing that?

Brad Simtob: Right now, we have about 40 investors that we reach out to, to be able to raise money on every deal that we do now. We have an online portal that we basically send out. So far, we’ve been oversubscribed in our deals. It’s definitely going to get harder, as we’re raising more and more money and people only have a finite amount that can really give. So we’re going to have to reach out to new people, we’re going to have to start asking for the friends and family, which – they’ve been very generous enough of introducing us to other people already.

Ash Patel: Alright, I’m going to push you a little bit. Best Ever listeners, this entire interview, Brad’s had a smile from ear to ear on his face. Everything you say, you make sound easy. Give me stories of something that was grueling, something that set you back; a hard lesson that you learned.

Brad Simtob: Yeah. I have a great story. I bought a 29-unit vacant building in Lansing, Michigan, for just over 30 grand a unit, back in April 2021. It was supposed to be a 60 to 90-day renovation project; it was vacant. We were just going to go in we’re going to do our classic renovations where you get paint for a new cabinet, stuff like that, just new finishes, all the mechanicals were good. As we were getting close to the end – I was still in East Lansing at a time – I heard this tornado siren go off. There’s a big tornado going through, the winds were so high, the rain was terrible, and it ripped the roof off the building. I kid you not. There’s water going into the building and we basically had to completely restart, we had to remove all the drywall, and we’re still not even done with this project. We bought the building last year. It’s been terrible.

Ash Patel: Did the insurance cover the expenses?

Brad Simtob: It didn’t cover anything.

Ash Patel: Why not?

Brad Simtob: They said the roof was not as good a condition. When I looked at the roof, it was at least five years left on this roof. It would not have fallen off if there wasn’t a tornado that came through. Then they said they looked at the storm radar and there’s no tornado. But I lived in East Lansing, I heard it.

Ash Patel: Oh my god, what a horrible experience.

Brad Simtob: Our plan with it is once we completely finished out the project, we’re going to go back to the insurance company. We’re going to have a total number of what they’ve cost us on our claim, we’re going to go back and either start a lawsuit, or something like that.

Ash Patel: And you have attorneys working with you.

Brad Simtob: Yeah.

Ash Patel: Good. Yeah, that’s a tough deal.

Brad Simtob: Yeah, it’s a tough one. But [unintelligible [15:00] money, which is good.

Ash Patel: What did that cost you, in redoing renovations? And a new roof, obviously.

Brad Simtob: Yeah. It’s hundreds of thousands at this point. I think it’s probably close to an extra 300,000 that we did not expect to incur.

Ash Patel: And where did that money come from?

Brad Simtob: Right now, our management company is lending money to this entity, until we get paid off. We’re still waiting for a final draft from the bank and we’ll be able to pay a large portion back.

Ash Patel: And Brad, you have investors on this deal as well?

Brad Simtob: I didn’t want to do a capital call, because it would ruin my reputation.

Ash Patel: And how do you share the story with investors? What’s their response?

Brad Simtob: There are three stories in this building. I rented out the top two floors, and all we’re waiting for is the final approval on the bottom floor. So I rented the top two floors, they’re above market rents of what I was expecting. I’ve lowered expenses as much as I can, I put so much of my own effort into that, just items like that, so I could show them the proof and that the project’s actually going to end up being worth more, but they’re not going to make the money as soon as they thought.

Ash Patel: And what advice do you have to other people on sharing bad news with investors?

Brad Simtob: It’s always good to end on a positive note and at least show what you’re doing to solve the issue. If there’s an issue, you can’t really tell people any issue and “I don’t know what to do. It’s out of my hands.” It’s never out of your hands. The roof flew off, that’s still 100% my responsibility. I should have known that the roof in this one part wasn’t as good, I should have done more research, so it’s 100% my fault on that.

Ash Patel: Way to take ownership of that. Good for you. What advice do you give people that are either your age or twice your age who want to get involved in real estate, but never took the leap?

Brad Simtob: That’s really interesting, because I know there are so many opportunities in real estate. It’s a huge world, there are so many different things you could do. You could be a broker, you can do Airbnb, or these different things. I always tell people to sort of look in all directions and see what really fits them best. I think the reason I really love what I do and I’m so happy with what I do – I used to be the property manager and everything for the Section 8 tenants. So when I’m moving people in and they’re telling me stories of how they’ve never had a bed, they’ve never had their own place, they would cry on my shoulder, and I would be crying, too. I think it’s terrible that people would have to live that way. So I really found my passion in that area, so I tell people to try and find the same passion. Work for other people and see what you can do.

Break: [00:17:19][00:20:15]

Ash Patel: Have you considered doing other asset classes – industrial, retail, office?

Brad Simtob: I have. But I think it’s really important just to stay focused on what we do. I only buy in three cities in Michigan, so I know exactly what I’m looking for. It really keeps me honed in and focused on our future growth and everything like that.

Ash Patel: What if you run out of deals in those three cities?

Brad Simtob: I guess we’re just not going to have a deal from there for a while. Maybe we can look into development or something like that, but I just love the areas that we’re doing.

Ash Patel: And your ultimate goal is to sell to some hedge fund, or a big REIT, or something, so you’re going to accumulate as many assets as you can and sell off the entire portfolio?

Brad Simtob: One goal I wrote down… So we use the EOS system, and it’s called a BHAG. Big hairy audacious goal. The BHAG that I wrote down is I want to sell a billion-dollar portfolio. So I need to create a portfolio worth a billion dollars and I want to end up selling it to someone at that point.

Ash Patel: You’re so focused on work; do you have time for your personal life?

Brad Simtob: Yeah. One of the goals I wrote down for this year is I actually want to go on 15 vacations. If it’s a weekend trip, if it’s going here, going there, wherever it is; going up North… Tomorrow, I’m going up north with my friends and I’m having the best time. So I still have time to do stuff like that. I’ve really focused on creating leaders in our company, so when small issues come up, they can figure it out themselves. If it’s a bigger issue, of course, I want to be involved. We’ll talk through it and figure out a situation together. But a lot of the things are figured out with them.

Ash Patel: How do you cultivate leaders in your company?

Brad Simtob: I have a leadership coach, and I give a lot of credit to her for helping me figure out how to go through conversations, how to treat people, how to create processes, and write them down. I really do pride myself as well in automation. I’m so young that I understand this computer so well, that our property management system is basically completely automated; texting tenants, emailing them, correspondence, things like that.

Ash Patel: What do you use for a PM system?

Brad Simtob: We use Rep Manager. I love it.

Ash Patel: And why did you get a coach? Was there an issue that started?

Brad Simtob: There wasn’t an issue, it was just that I started to get a little nervous and I started lacking confidence in myself, and I started to notice it. It was at a time when I think we only had 10 employees at the time; I was still 19 years old. I was like “Am I fit to be doing this?” I’m not sure, I wasn’t too sure myself anymore. It was actually my dad’s idea to bring in this leadership coach. She’s really helped me, she brought the confidence back. I know for sure I could do it now; I know I’m capable, and now I just need to figure out the steps of how to get there.

Ash Patel: Brad, a lot of people have an evolution where they take on everything themselves. It’s when they’re on the brink of a nervous breakdown is when they start hiring people. Did you hire people preemptively, or were you doing it all yourself?

Brad Simtob: I truthfully think I hired preemptively, sometimes even too much. I want to word it a little bit better, but I think that I’m out of the day-to-day now; things that I still have time that I could be doing, and I don’t need to be spending too much money on it. For example, we just hired an admin that’s going to be doing all our purchasing for all of our properties. We’re turning units, we’re turning about five or six units a week now, of renovations, so there’s a lot of ordering that goes on. But me and Alec definitely could be handling it ourselves, but this is pre-emptive, because we know we want to grow, and we have to do this if we want to reach our goal.

Ash Patel: And who are your mentors? Who do you look up to?

Brad Simtob: I look up to my dad a lot, and there’s a lot of people that are involved with the Detroit real estate and everything with that in that area that I really look up to. I talk to them a lot and they teach me a lot.

Ash Patel: At 20 years old, if I had a ridiculous amount of money, I don’t know what I would spend it on. What do you spend your money on?

Brad Simtob: That’s a really good question. Whenever I do a new deal, whatever’s in my personal bank account, I really just put it into that deal; [unintelligible [00:23:56].10] scrape up. I try to be an investor on every deal, and I have been so far. Sometimes it’s a little tough for me, because I have a limited amount of money, but that’s really what it goes into. One thing I do pride myself on is we’re really big into AMEX cards, so all of our purchases are on the AMEX card. It gives me a lot of travel points, which will help me be able to do the 15t vacations essentially for free.

Ash Patel: Brad, what’s been the challenge with having your best friend as your right-hand man?

Brad Simtob: I haven’t had any challenges yet. I’m hoping I never have a challenge. But so far, it’s been perfect and we’re really good at splitting up the work side of life and the personal side of life, which is awesome.

Ash Patel: Good. Brad, what is your best real estate investing advice ever?

Brad Simtob: You’re never too young to start, and anything is possible as long as you set your mind to it.

Ash Patel: Brad, are you ready for the Best Ever lightning round?

Brad Simtob: Let’s do it.

Ash Patel: Alright. Brad, what’s the Best Ever book you’ve recently read?

Brad Simtob: Traction. It’s a great book.

Ash Patel: And what was your big takeaway from that?

Brad Simtob: It’s really teaching me about the EOS system, which I think is really important. I think it’s too big to talk about in this podcast. It’s great.

Ash Patel: Brad, what’s the Best Ever way you like to give back?

Brad Simtob: I love talking to young people like me that are really interested to get into real estate or they’re already in real estate doing some side things. I love talking to them and sort of motivating them, showing them that it’s possible.

Ash Patel: Brad, how can the Best Ever listeners reach out to you?

Brad Simtob: My email is the best way. It’s brad@simtob.com.

Ash Patel: Brad, it’s been an honor having you on this podcast. This is Brad’s first podcast that he’s ever done. You absolutely killed it. Thank you for sharing your story with us. You’ve accomplished more than people two to three times your age, so my hat’s off to you, man. Thank you for sharing your positive outlook and how you built this business.

Brad Simtob: Yeah. Thanks for having me. I really appreciate it, Ash.

Ash Patel: Best Ever listeners, thank you so much for joining us. If you enjoyed this episode, please leave us a five-star review and share this podcast with anyone you think can benefit from it. Also, don’t forget to like and subscribe. Have a Best Ever day.

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