People First! Advanced Multifamily Operations w/ Gino Barbaro | Sp.05 - The TCO Method

Episode Transcript
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(00:00):
Property management is a thankless job.

(00:02):
If you suck at it, you're going to get fired.
And if you're really good at it, you're going to get fired
because they're going to sell the property.
So it's a very difficult job to make money in.
So why don't you make your job a little bit easier?
And there's a couple of ways that you could do that.
[MUSIC PLAYING]

(00:41):
Welcome to the TCO method, the only show focused on helping
you massively increase your net operating income.
I am Andy McQuade, and thank you so much for tuning in
to this special interview episode where today I am joined
by Gino Barbaro, the man, the myth, the legend,
the king of multifamily real estate investing education.

(01:04):
As an entrepreneur, he grew his real estate portfolio
to over 2,000 doors and $250 million in assets
under management.
Prior to that, he owned an Italian restaurant for over 20 years
and was affectionately known as the pizza guy.
He met Jake in '09, and together they purchased their first deal
in 2013.
Gino left a restaurant in 2016 to go full time

(01:26):
in multifamily, Gino and his partner, Jake,
launched the Jake and Gino community in 2016,
which has become the premier multifamily real estate
education community, looking to help others invest
in multifamily real estate.
He has three best selling books that he has authored,
Wheelbarrow Profits, The Honey Bee,

(01:47):
and Family Food and Friars.
Currently he's living in St. Augustine, Florida
with his beautiful wife, Julia, and there's six adorable kids.
How old are they?
24 to nine.
God bless you.
I have one.
We were one and done.
So he's 10.
I'm good.
He's got my ADHD.

(02:07):
Thanks.
I want to correct a couple of things you said.
The first thing is I'm a legend in my own mind.
I'm a legend and no one else is mine,
especially my wife.
So let's get that straight.
All right.
The second thing is, yeah, and I always break my investment career.
Nevertheless, a couple of years I've really
thinking about this life before Jake and life after Jake.
So life before Jake was a little weird,

(02:28):
because I had the Shiny Object Syndrome.
My first deal back in 2002 was a triplex,
and it was beginner's luck.
It was awesome.
I found a good deal.
But then after that, mobile home park, strip center,
couple of duplexes, actually, ironically up in Rochester,
and then I met Jake.
And then I got clear the whole map, the process.
We figured out was by right, manage right, finance right,

(02:49):
which was our method.
But it's really one of those things where it's been a long journey.
And for me, you're talking about NOI,
and you're talking about, you know, in multi-family.
When you're an entrepreneur, I think people get into real estate.
They don't look at it as a business.
And I had that show, what shall we say?
That experience saying that restaurants and property management

(03:10):
are pretty similar.
It's customer service.
It comes down to taking care of the customer
and having empathy towards that customer
and really trying to deliver value.
And that's where I saw it.
That's why I got into multi-family,
because I like dealing with residents.
We don't call them tenants, they're residents.
We try to call them units, they're apartment homes.
I think that's some of the things
you need to start thinking about when you get

(03:30):
into this multi-family business.
At Jake and Gina, we like to say we create
multi-family entrepreneurs.
Because that's what you're doing.
You're building a business here.
You're not just becoming a landlord.
And always focus that that resident is the number one priority
for your business.
Put in a different way for anybody listening.
You know, Steven Covey says seek first to understand
then to be understood.

(03:51):
And I think as an apartment owner, as someone who has rentals,
it's got to be tough getting up at 8 o'clock in the morning
having your hot order, he did not working when you had to go
you had to go on a job interview.
And they call the landlord,
and a landlord doesn't respond.
There's something happens.
We all make mistakes.
I think what you're trying to do in business is you're trying
to really listen to that customer

(04:12):
and have the emotional intelligence.
Emotional intelligence is going by the wayside, as we speak.
But it's very difficult having property management
try to deal with that because these people are over-acting.
They're not yelling at you.
They're yelling at their situation.
So if you can understand that and try to listen to them
and try to be proactive with property management.
So when an issue does come up, you at least have the benefit

(04:34):
of doubt that you've helped them out.
And to think about it, I was equated to like the electric
companies.
You have your power on 29 out of 30 days.
You lose your power for that 30 minutes.
They're the devil.
But they've provided service for the last 29 and a half days.
And it's the same thing as property management.
So understand that sometimes it can be a thankfulest job.
But it can also be a rewarding job
because you are creating memories for people.

(04:55):
You are giving people a place to live.
And I think that can't be forgotten.
You can't lose yourself just in spreadsheets and just in numbers.
Absolutely.
And I think that speaking of spreadsheets and numbers,
that will reflect in your rank collection rate, your renewals,
all of the other things because like it or not,
tenants that stay will make you more money than tenants that

(05:18):
leave.
All the costs involved in the downtime
of lost rent of doing a turn or make ready,
that is opportunity cost that takes a year or two
to make back.
If they just stay there, then those bills are paid.
If you can get a ton of renewals, get the money in on the top line.
Like, yes, every dollar you save and cost,

(05:39):
we talk about all the time on the show.
Every dollar you save and cost is like $2 to your top line.
Great.
But you can only cut so far before you value engineer
all the value out of whatever you're doing.
There's a point where doing something to cut and save
has a negative impact on the overall well-being of the business.
And I think that that attitude in and of itself is a lost art.

(06:01):
You talk about the emotional intelligence.
There's people out there who just want the cheapest,
quickest, band-aid to put on whatever it is that they're doing.
And it eventually hurts their business.
Now, it's a different conversation if they're
going to buy a property and hold it for two or three years
and get rid of it.
But if you're in it for the long haul, you're in it for the quality.
You're going to buy and hold and run that asset and operate

(06:22):
that asset for five, 10, 15, 20 years.
The conversation is completely different than the guy
who's just looking to make a quick buck and get out.
And I think that, you know, I'm not calling anybody out
on the carpet because there is money to be made doing that.
And there is a value to it in the community.
And it generates jobs and income for businesses
and all the other stuff.
But it's a pretty brutal cycle, or at least it can be.

(06:47):
Even as you're doing that, though, Andy,
and your flipping properties, you can still
maintain a quality property management experience.
There's not to say that you don't.
And it's actually beneficial.
So then when you do sell it, you're actually selling a business
that's marketable.
You're selling a business with value.
So you're selling a business with systems and processes.
And as you're talking about this, what can the listener do

(07:08):
to actually create that experience?
I would say the first thing you can do,
if you haven't done it, is create some type of customer journey.
We had a gentleman named Joey Coleman on our show.
He wrote a book, Never lose a customer in 30 days.
And we had him on, I think three times.
And what I love about it, he actually wrote one for employees
as well.
Never lose an employee in 30 days.
What I love about his whole processes,

(07:31):
you have to understand there is a customer experience.
And every company has this.
From the very first touch point that you have an employee
to where they become, he has the eight phases.
It's the eight A's.
From assessing the very first touch point you have,
does that customer walk into your property management?
Office, do they pick up the phone?

(07:51):
They see you online?
All the way up to the advocate, which they're raving fans.
How do you get them there?
And as you're saying this, Andy, the important thing to understand
is I read a stat.
I think it's about 70% of people who do not renew their leases.
It's not because of rent going up.
It's because of customer service defects.

(08:12):
And sometimes it's not even the property manager's fault.
There may be a leaky toilet that the resident never said anything
to the property manager, but it just was no on them
and bothering them and bothering them.
And when it came time to renew, they don't know why they didn't
renew, but they just didn't renew.
But if the property manager had a system in place
where every three months I'm going to go check up
and I'm going to walk in there and say, hey, how is everything?

(08:34):
What can we do for you?
Oh, by the way, I've got this toilet.
You're being proactive.
And what Joey Coleman does in the book is he really lays it out
of starting from that very first assess phase
all the way to the advocate.
And I am a true believer of this because I
had one restaurant for over 20 years.
And I didn't have any of these eight phases.
We won it.
We were a mom and pop.

(08:54):
We were winging it every day.
And it was just transactional.
And that's what a lot of mom and pop operators
in the multifamily space do.
They don't have it.
And they can't scale.
They can't figure out why.
And I wish I had an assess phase when somebody
walks into the restaurant.
How do you greet them when they call on the phone?
How do you greet them?
How do you deliver it?
How are you making those touch points?
Are you sending out emails?

(09:15):
Are you sending out gift cards?
Are you sending out happy birthdays?
What different touch points are you doing?
Are you using texts?
So you're using snail mail?
Are you using regular, whatever it is?
And he talks about it in the book.
And as you're talking about this, you're like, wow.
I can systematize this.
And I can try to eliminate a lot of the holes in my business

(09:35):
by doing this, by being proactive in the property management
space.
That's amazing.
And it ties in really well with the show.
So proactive decision making and looking at what the decision
today is going to cost you throughout the entire period
of time, you're going to own that is huge.
But we never touch on the customer side of it.
What you just said is huge because that's
nothing that we ever discussed because that's not my wheelhouse,

(09:58):
right?
That's not where my knowledge base comes from.
That's not my experience.
I'm very much a technical building materials guy.
That's what I do.
That's where I grew up.
I understand how they work.
I understand the headaches because they were all my headaches
for decades.
I don't miss it.
But that's awesome.
So you and your partner have done this for a decade.

(10:22):
You guys have proven that you have the fundamentals
in place to really do the business the right way, where
we see a lot right now of operators struggling, syndications
struggling because they operated without fundamentals
because it's 3%.
They didn't need them.
Fundamentals didn't matter.

(10:42):
You don't need to reserve.
We're just going to take a note for 3% and fix that problem.
Well, when the cost of capital is doubled or tripled,
that game is now completely different.
So why don't you take me through kind of your journey
when you're doing an acquisition and asset upgrade, let's
say, when you're coming in, whether you're

(11:03):
going to turn it immediately or whether you're going to just
manage it?
Where do you see those fundamental differences and how
is that impacting your business and your portfolio today
versus what some of these other companies are struggling with?
The answer to your expert, this is yours.
I'm not, like I said, once again, I'm not an expert.
And I'm constantly learning well.
But the answer to that question is it depends

(11:25):
about upgrades because right now it depends
upon the market cycle.
Five and six years ago, it was valuation with renovation.
That's what people were doing.
They were renovating because they were buying
at a certain price point.
Now it's valuation with operation.
But let's pull it back even further.
And the reason why Jake and I had an amazing 2023, we
close on over 300 units.

(11:46):
And it's just me, my partner, and we're not raising capital.
It was all internal.
It's because our framework, it's by right, finance right,
and manage right.
Oh, it's a three-legged framework.
It's a wheelbarrow.
And you look at the two back legs.
When you buy the asset, the asset's in place, right?
You bought that asset.

(12:07):
That's the price.
Once you've financed it with fixed rate, long-term financing.
Wow.
Who would thought buying stabilized assets on Bridgett
was a good idea?
Now looking back at it, it was insane.
Jake and I are like, going, how are these deals working?
Or they're not working?
But at the same point, once you do those two,
and Jake and I are using a type of bridge product,

(12:30):
I wouldn't call it bridge, but we're
using loan to cost with community banks or with credit unions.
And they're five-year products.
So we have five years to renovate these assets.
And within five years, we can refinance them out back
to a community, or traditionally we go to agency at that point.
But what we're talking about in this show
is the manage right, that wheel of the wheelbarrow,
which is in constant motion.
And you can take this framework.

(12:51):
You can apply it to single-family homes.
You can apply it to buying a business.
You can apply it to any kind of asset
where you're actually investing in it.
And when we talk about the manage right portion,
it depends on the asset right now.
We've gotten some negative publicity going into assets
that are so undervalued that you have to raise rents
and have to just, you know, evict people.

(13:11):
When you're buying an asset for a two-bedroom,
when rents for $700, and they should be $1,500,
it's very difficult to raise it.
So you have to do non-renewals.
So you have to be very specific and targeted
on each asset that you're buying.
So that's what's one thing.
And it depends on the asset class as well.
We're buying B-minus C-assets,
where we're not going to go in and put granted countertops

(13:32):
and spend a ton of money on the fixtures
because those renters don't really want that.
They want to save clean affordable place
with LVP flooring.
They'll get the resurfaced countertops.
We'll probably do kitchen cabinets,
you know, the for refacing a kitchen cabinets.
We may spend let's say six or seven grand
on an upgrade to upgrade a union if we have to go in,

(13:52):
but we'll probably get a two to $300 rent bump on average,
but it really depends upon what the resident needs.
And not what you're trying to accomplish.
And then obviously your business plan,
are you looking to hold these assets long term?
Or are you the flipper who in two years is going to flip out
and you have 100 units,
you may only do 30 or 40, test it, see if it works,

(14:13):
and then say there's meat on the bone,
I'm going to flip it to the next person.
We don't want to do that.
We want to buy really great assets in really great markets
with really good meeting incomes,
with really good unit mixes.
Buy them, fix them up with, you know,
properties that are built in the 90s and 2000s and 2010s
that are newer so that we can hold them for longer term.

(14:36):
And that's what our strategy is.
That's why we're really focused on the East part of Tennessee
and we're looking for these assets
and we're fortunate in 2023,
'cause in 2022 they weren't around.
They were getting bought up by these huge groups,
which now all of a sudden are having problems
with bridge financing and their terms are coming due
and their rate caps are so expensive.
So understand the framework of buying these assets,

(14:57):
being able to finance them,
but then the really important part is how to manage
these assets.
- Absolutely and I think the management is a two tiered question
because there's asset management
and there's property management and they need to cooperate
and you can't force a property manager,
if it's a third party property manager,
they're incentivized to not change their ways,

(15:19):
they're incentivized by how they get paid
to continue doing what they're doing the way they're doing it
because if they do things the way an asset manager would want
if they do things to be more efficient,
if they do things to require less repairs
and less maintenance and less calls
and less all of this other stuff, they get paid less, right?
They're gonna make that flat fee regardless

(15:40):
but then how do they charge an owner for a hot water tank
or a toilet or a whatever if those things don't break
while they're managing the unit, right?
And they're not gonna make a ton of money off it
but it's cash flow for them
and most of these property managers
when you get right down to brass tax,
they're not a profitable business entity,
they're a cash flow based business entity

(16:00):
that is just robbing Peter to pay Paul
every single day of the week.
Given that 95% of them are mom and pop operations
that are just in the business every day
and not on the business looking to scale,
looking to grow, they're just putting out fires
and running around like chickens with their head cut off.
So the asset management piece
and the property management piece
if you can self manage that

(16:21):
if you can bring in an internal team,
everybody I've ever worked with
has had better results doing that
than trying to change what their property manager is doing
because there's no good way to force that change
and I see the finger getting pointed
in these indications now,
oh the property manager screwed this up for us
or oh the GC that was doing our renovation
screwed this up for us.
I don't think that that's true.
I think you just didn't have the control in place

(16:43):
that you needed to make that asset work
the way it needed to in your pro forma.
That's what I think happened.
Let's talk about a couple of ways to do that
but the first thing, once again,
seek first to understand then to be understood.
Property management is a thankless job.
If you suck at it, you're gonna get fired
and if you're really good at it,
you're gonna get fired
'cause they're gonna sell the property.

(17:04):
So it's a very difficult job to make money in.
So why don't you make your job a little bit easier
and there's a couple of ways that you could do that.
Be really proactive with them.
We have what we call weekly pulses.
We're vertically integrated
so we manage our own properties.
That's why we only, quote unquote,
have 1800 units currently
'cause we don't wanna outgrow infrastructure.

(17:24):
These syndicators are third party.
They were just outgrowing their infrastructure
and we look at it as a business.
If you look at 10 years, it's a hundred average
of 180 to 200 units a year.
It doesn't seem like it's daunting but it adds up.
And when you're doing what we call weekly pulses,
every week we have our property managers
send out a weekly report of each property that we own.

(17:45):
It's probably 25 or 30 going out every single week
of every single property,
the KPIs in the property, the key performance indicators.
If you can't measure it, then you can't manage it.
I don't wanna know what the linkuencies are,
April 1st for March.
That makes no sense to me.
I can't be proactive on that way.
So for them, it's a benefit to property management
if they collected the linkuencies.

(18:06):
I wanna know how many people came into the office
as we call guest cards and how many people applied.
What does that look like?
Do we need to help you guys take care of that?
What are evictions looking like?
You track evictions?
What are vacant unrented?
That's a number we're looking at.
What are collections?
If you do this weekly pulse every week
and get on the call them for 10 or 15 minutes,

(18:27):
and I know most you're gonna say,
"Well, my property management company doesn't do that."
Most of them don't.
The ones that are good will.
And if you have your asset management,
you made an excellent point.
asset management and property management
are pretty confrontational
because the property manager wants to spend 200 bucks
in a ceiling fan.
When the asset manager is like, "Bro,
I could get a ceiling for 89 bucks.
I've got a budget here

(18:47):
that I'm a fiduciary to my investors."
The property managers of fiduciary
are really to the residents and to the owner.
But what you're talking about,
there's that confrontation.
So they need to be working on the same page.
The asset manager needs to create a budget.
The property manager needs to sort of work in tandem
with the asset manager.
And there's one of the documents that we use
that really helps our whole portfolio.

(19:08):
We call it a property log.
Every single property has its own log.
So we know on 123 Main Street,
we striped and sealed it two years ago.
The roof was done five years ago.
Who is the electric company on that property?
When did we clean out the gutters?
When is the less power washing done?
It has its own specific log to that property.

(19:29):
So when you do have another property management company
come in, it's right there, all the notes
and everything's right there.
The asset manager can take a look at that
and say, "Hey, we need the budget
for power washing this year," or striping seal,
or crap, there's 30 air conditioning units.
We need to change 10 this year.
That's how you have that discussion
between both of those entities.

(19:49):
And for syndicators to say that property management companies
dropped the ball, well, when you overpay on your property
and you need to put money aside
and you can't fix certain things,
there's an issue with that.
And I think that's just really lazy
for them to be saying, to be blaming property management
companies for that.
- I don't disagree with that at all.
I think that a lot of people are just looking

(20:10):
for scapegoats because they told people one thing,
sold them a bill of goods, told them it was low risk
because it was real estate.
Forget the fact that you buy this thing leveraged,
you got 80% on a note with a bank
and then property value declines suddenly
because cap rates skyrocket, you're upside down 30%.
Your investors that just cashed all your LPs

(20:32):
that went in and they're like,
"We'll just sell the property, I'll take my money back."
Yeah, well, the properties were 30% less now.
So you actually have no equity.
So you're actually in the hole,
the bank actually could collect from us on this
in a lawsuit if they chose to.
There's a lot of moving parts there
that people are not aware of
and there's people out there now educating people
on how to do LP investments and how to be a good GP

(20:52):
and other stuff, but it's kind of too little too late.
And when I see all these GPs last week,
literally flipping out because rate cuts were announced
for next year, like this is gonna solve all their problems,
you're talking about maybe three quarters of a point
if they do three reductions.
That's not gonna help you.
Your lack of business fundamentals
and understanding the business is the root of the problem.

(21:13):
The macro, if your business plan relies on macro changes
that you can't control, you don't have a plan.
Your business is not functional.
Like, I love guys like you and your partner
who understand this, you know.
This is real estate is not a 10X game.

(21:34):
Like, no offense to the guy who uses that phrase all the time,
there's smoking mirrors there
that are now coming to light
and you need to respect other people's skin in this.
If they don't understand it and you take their money
and lose it, you're going to own that forever.
Like, people are not gonna forget this particular phase

(21:57):
of the economy regardless of what the next 12 months
bring for rate cuts and all the other stuff.
A lot of people are not gonna make it through this
on the skates, right?
So my biggest thing right now is I look at this is,
if I was gonna invest with somebody,
if I was gonna give somebody money,
I would give somebody with a track record
and a business plan who understands reserves

(22:19):
and understands that deferred maintenance costs more
if you defer it.
Like, there's a ton of things that don't respect
the time value of money or market fundamentals
that have been done because they worked, right?
The rising tide lifts all ships.
Well, the tide is going out
and now there's a lot of beach ships on the shoreline
with a lot of people left high and dry

(22:40):
because they don't have a way out
because their business was floated by free money.
Like stupid ideas and bad business models
like the electric scooters, like we work,
spending too much money, no plan to ever make a profit.
Like, there is a cost to everything you do.
You need to have a way to pay for the things

(23:00):
that you're buying in a business.
You can't just continue to leverage public capital
or private capital to pay the bills
and just rob here to pay Paul.
There is a certain point where cash flow drives up
because there's no profit
and people will stop giving you money.
And I think that's where a lot of these people are.
So when you're looking at a property,
when you're going in on the operations side,

(23:21):
you said you're vertically integrated.
So this is really your wheelhouse, so to speak.
And you're, I don't know if you target distressed properties
or if you just look for solid fundamental properties,
just walk me through what that process looks like
when you're evaluating anything from a 40 door

(23:42):
to a 300 door property.
What does that process look like for you guys?
Andy, you should know that distressed properties
are really value ads.
Okay, value ad was the marketing term a couple years ago.
Now it's going back to the distressed.
When I started in 2011, there was a lot of distress brother
and it's coming back.

(24:02):
And to answer that question, once again,
it depends really on the market cycle,
but we're doing right now for us creating that by right criteria
on the front end and understanding that when we buy this asset,
we need to manage it.
I am really not that much smarter than anybody listening
on this.
I've just got more experience.
I went through the last cycle.
I saw what happened.
I saw the problems.

(24:23):
You can always buy real estate.
You can't always sell it.
And a lot of us learned in '08, '09, 2010
that debt was coming to, but asset prices were lower.
Oh wow, that sounds like what's going on right now.
So I went through that pain.
I had a property through that process.
I couldn't get it refinanced.
I had to work with the bank.
I got a modification.

(24:43):
But right now when we're looking at an asset,
we have what we call our by-rate criteria.
We want a certain median income, at least $50,000 in Tennessee.
That denotes a certain type of renter.
If you're going to be able to charge three times rent,
don't let the broker tell you you can raise rents.
If you don't have the median income at $25,000.
So we'd like at least a $50,000 median income.

(25:05):
And we've learned from experience.
We bought a property with $34,000, $35,000
in the income a couple years ago in Kentucky.
It was a difficult property.
It checked a lot of the by-rate boxes.
Now right now we're buying assets that are a little bit newer,
80s and newer, just because of the price points.
Why buy something built in the '60s with cast iron plumbing
and with aluminum wiring, when I can buy something

(25:26):
that's a little bit newer and that's going to last a little bit more?
We like unit mixes that are two beds.
We love two beds.
And we love town homes as well.
If they've got garages even better,
hopefully they've got covered decks.
I hate decks because decks are just a nightmare to take care of.
And breezeways.
So breezeways right now we're covering a lot of our breezeways
with vinyl because those are another night maintenance nightmare.

(25:47):
You don't look at it for the short term,
but when you're managing these assets,
these are things you're looking for.
We like properties that have washer, dryer,
hookups, believe it or not.
That's a great amenity for a lot of the residents that we have.
If there's pools on the property depends on the property itself.
With our 132 units we bought back in January.
There's a 2005 build didn't have it.

(26:08):
We don't need it.
The one we bought in July 105 units.
It was an 80s build.
Beautiful asset.
I mean, it's got a, we're going to put a nice dog park there.
We're going to put a pickable court there.
It's got a really nice clubhouse, fitness center, great pool.
What else are we looking for in assets?
Just trying to get really crystal clear on that.
If there are one beds,
it's not that we don't like one beds.
You just got to be careful.

(26:28):
One beds can be a little bit more transient.
There goes a little bit more turnover depending on where the market cycle you are.
Three beds in our market, crush.
We love three bedrooms.
There's not that many in our market.
The most recent deal we bought, 2001 vintage, 96 units.
We paid 72,000, 75,000 unit because it was coming off a light tech contract.

(26:50):
But it's if phenomenal deal is, but you know,
there's, it's going to be some work on that because it's coming.
Come here, come here, baby.
Come here, baby.
Come here, baby.
Yeah, but this thing was built so well.
I mean, like, you mean all the breezeways you're done.
It's great.
All right.
The walkways are beautiful.
I don't even, all you got to do is stripe and seal in the parking lot.
It's got a nice pool.

(27:12):
It's got a nice office.
It's got all concrete.
I'm sorry.
I mean, it's got all metal stairways, stairwells and all.
It's a really nice asset.
So when we're looking at it, we're looking at to see what the components cost to rehab
this thing and what is the capital expenditure?
What capex?
We need to put it into this property.
And I think for anybody listening to this, figure out what your criteria is, what that

(27:32):
buy-right criteria looks like to you because every market is different.
Some markets would have $50,000 a meeting income.
You'd be like, that's jet's poverty level.
And some markets like, that's really good.
Eastern Tennessee bridge, if we get an animal.
Yes.
Yeah, it is.
And for us, Brick, we love Brick.
We like pitch roofs.
It's not to say that if we get a 1960s flat roof, you know, with one bed, we're not going

(27:56):
to look at it.
But we know the operational difficulties that we will have with that asset.
And depending on our strategy for looking to hold that long term, something built in the
'60s, if we don't completely gut rehab or rehab it, you know, in 10 years from now, that
asset's going to be like 70 or 80 years old.
So we just have to be careful with, you know, that's our strategy.
So if anybody looking to buy their asset right now, think about what your criteria is

(28:18):
and always think about what your exit strategy is.
Most investors don't think about the exit.
They only think about, hey, I'm buying this thing.
I'm just going to figure it out as I go along.
Think about what you're going to do because you don't have to, you know, as they say in
aeronautics when you're flying an airplane, takes off, take off, they say are optional.
Landings are mandatory.
You're going to land that deal whether it's a refi or a cell, figure out what that looks

(28:42):
like for you.
Absolutely.
That's huge.
And we have something in my program that we do that's very similar where we encourage
people when they're doing the getting ready to do the rehab where they look at how long
they're going to hold it.
So what's the disposition plan?
Any going to hold it for two years, five years, 10 years, or you don't know indefinite, but
look to make those decisions on what you're going to use and what you're going to put

(29:04):
there based on who the tenant's going to be.
Right?
Always build it around the worst case scenario, lowest common denominator tenant that's going
to move into that unit and have pets or have lots of kids or have whatever and put things
in place that minimized the amount of maintenance that's going to require when those tenants
move out, whatever it is, whether it's LVT, LVP, whether it's a better quality paint, whether

(29:28):
it's minimizing the maintenance and walk around, just dumb, check the box, things like smoked
detector batteries, thermostat batteries, toilet flappers, just things that you can avoid
thanks to technology that you might pay 15 or 20 bucks more for, but that will pay for
themselves because of the lack of having a call based on that or the lack of having to

(29:52):
replace it every turn as opposed to every two or three turns.
So having a centralized, not centralized, but having a centralized set of standards, right?
A product specification list that says, you need to be using these vendors because they
give us benefits and perks, right?
We spend this much money with them.

(30:13):
They give us rebates.
They give us discounts to give us special pricing.
They make sure that they hit our service requirements as far as when I'm doing a rehab, they
drop a pallet at the door, it has everything I need to turn that entire unit on that pallet.
The guys can do the demo, take the junk out, bring the pallet inside, do the work, they
don't have to run to the store.
Winshield time is expensive, right?
Having all that stuff pre-settled gives you some level of control, but it also keeps

(30:39):
the stupid tax to a minimum because you're going to make sure everything matches throughout
the entire property because everything has been specified ahead of time.
You have your vendors lined up because you're buying from a vendor that isn't treating
this property as a property.
They're treating your company as a portfolio and you're buying across your entire portfolio
of LLCs as the parent to make sure that you're getting a package price that looks at your

(31:05):
buying power.
All of these things take place before the unit is even acquired.
These are standards and processes that are set up to help you scale because when you're
ready to buy and close on a property, you just pick up the phone and say, "Hey, I need
you to come and do a due diligence walk with me and we're going to make a list and you're

(31:27):
going to get these units, but I need you here for a week."
Your sales guy shows up and he walks those properties and he takes those lists, builds those
things, and you don't worry about it again until the day construction starts.
That's the system that you really need to have in place if you want to be able to just
move and move and move.

(31:48):
That was something that I was taught by a family office that went from, I think there were
three or four thousand doors when I started working with them and in three years, they were
at 12,000 doors and I was on a plane for them every three weeks.
I was flying to South Carolina, North Carolina, Virginia, Michigan, Pennsylvania, wherever

(32:09):
they needed me to go, I would go.
They taught me the system and what worked and how it, what their priorities were and how
to make it go.
My whole system is built off just stealing good ideas from people.
I didn't invent any of this stuff.
I just, I have, I had this crazy level of access to all these sea level operators and I like
making my job easy.

(32:30):
I'll take good ideas and use them to get in the door with other guys.
Why would I not?
It's not me, so how is it?
It's not my company.
How do you get them to work?
And I agree, everything you've said there is the benefits to investing in multifamily.
That is it in a nutshell.
Being able to systematize it, go into the 25 year property where they're basic boxes, they're

(32:50):
all the same thing.
Instead of having 25 single family homes, you've got a 25 unit that has basic fixtures,
but how do you get property management to get on board with something like that?
Because that's a no brainer because property management, when you take a property over, we
have our property, actually, we decided on the deal last week on Monday.
I flew up on Monday last Monday.

(33:10):
Our team was there.
We took over Monday our property management run site, closing windows, making sure thermosets
were, we're set, getting all the keys, but how do you get property management to work,
walk, and lock step?
It's always trying to make them think that it's in their best interests.
We're trying to make your job a lot easier and you're trying to do, you're trying to convince
property management that, hey, we've got this system here, let's utilize it together.

(33:34):
How do you get them on board?
A lot of it comes to removing their headaches, right?
You make their job easier by taking stuff out of their hands.
You have a schedule, whoever's going to run that turn.
I've worked with companies who have the actual property manager on site, the leasing manager,
the actual property manager, runs the job as a GC.
I've had other ones where they hire third parties and I actually had a client that hired me

(33:57):
to come in and do it and do all their purchasing and procurement for nine months to do this
rehab on a 328 door apartment complex right here in Webster.
It's an interesting beast and it comes down a lot of times to how are you paying the guys
and incentivizing them in some cases.

(34:19):
If it's internal, you can just say, we'll just do this and it is what it is, but you're hiring
people sometimes from the existing property management company that's familiar with the
property, you're bringing people in from outside, you're expanding your workforce, you
have to train them into the company culture, but at the same time you have to do like a change
management process where you're dealing with them on a level that you need to take baby

(34:41):
steps and bring them into this and teach them how to do it.
A lot of it comes down to, we have one maintenance guy per hundred doors.
We want that maintenance guy to not be behind a windshield.
We want you to be working and being efficient.
So here's the benefits to you and it could be anything.
What's the motivator for them?
Do they have kids?
Do they have a family?

(35:02):
Do they have hobbies that they like to do?
Do they want to be on call 60 hours a week?
Probably not.
Do they want to work 55 hours and then be on call through the weekend?
Probably not.
Are they living on a property?
Yes, no, maybe it doesn't matter, right?
In some cases.
But you want to make sure that you're appealing to their sense of self and self worth and

(35:23):
what they enjoy to keep them as part of the team, but you also want to make sure that
you're paying them in a way that encourages good behavior.
So you put checks and balances in place to make sure that the asset manager, property manager
conversation, right?
You need to be on budget.
Okay, well, my budget is stupid because we've got all these old things in the basement of
this unit that where our storage is, and they're all covered in six inches of dust.

(35:44):
We're not going to use those.
Okay, well, let's look at it and we'll figure out a way to do it.
So you incentivize them to stay, you know, maybe not the property manager, but the maintenance
manager, keep these particular pieces and parts at this level.
Don't cost us too much money.
Don't tie up too much cash by filling this with hundreds of things that are going to take
four years to use.
Don't do that.

(36:04):
Maybe we'll bring in a system like Apfolio has built in where you have a maintenance recording
table for all the stuff you stock and inventory.
And then as it gets used orders are automatically generated or maybe we have a sales rep from
somebody come in and walk this and take a tally and tell you what to order.
You start by building those processes in that backbone and you don't let them.

(36:27):
If it already exists, it's easy to plug and play.
If you're trying to build it from scratch, every company is different.
Every culture is different.
You don't know.
And there's always going to be turnover and churn anytime you change anything because people
do things the way they do, like trying to change a maintenance guy from another company who's
been at a property for 10 years and telling them, hey, listen, I know you're used to doing

(36:47):
this, but we need to do this instead because all these copper pipes on this property are
hitting 50, 60 years old and they're starting to pinhole.
So we're going to start running instead of more copper, we're going to specks everything.
When you go into a unit and you have a call, you just replace it all with pecks.
I don't care what it is.
You're doing a faucet swap, you're doing a changeover, pecks it, be done with it.
We're not going to play that game.

(37:09):
And you get pushed back in some people's leaf and it's part of doing business, but it comes
down to incentivizing them to fit in your company culture and reward them for good behavior.
So I've got a client I've been working with. He's got 140 doors that he manages.
They're scattered site, singles, multis, doubles.
He doesn't have any big multi family.
The biggest I think he's got is like 10 and he's trying to figure out a scale and part of

(37:33):
it is building systems so that his guys know where they need to be when they need to be there.
So he's using app folio.
He bought the iPads.
He's got the phone tie and he's got everything automated through the portals on the website.
Now he's doing all this crazy stuff, but he's incentivizing the guys to do the maintenance
call once and do it right.
And he bonuses them when there's no call back for 30 days.

(37:58):
So if they go to fix a toilet, they do it the correctly.
No call back for 30 days.
They get a kicker in their paycheck at the end of the next month.
And it's different for everybody.
Every company has different cash flow if they need to watch and different budgets if they
need to afford for employee benefits and incentives and all the other stuff.
So it's got to be a team effort.
This whole thing has to start at the top.
It's a strategy from the sea level that has to be rolled out, but you have to get buy-in

(38:20):
from the field.
And that's where the company culture and being consistent as an organization matters, which
is where the standards come in and establishing vendor relationships and vendor scorecards.
And you build these things and these systems in the operation.
And you don't need to think about it.
It's all there.
So the decision making time goes to zero.

(38:42):
Oh, this happened.
Well, we have a process for that.
Oh, this happened.
We have a process for that.
And there's a lot to it.
And it's different for everybody.
I've never walked into two operations and seen the same issues.
But the issues in property management are pretty universal.
So there's only so many ways you can put a puzzle together and have it look like the picture
you're trying to build.

(39:04):
How do you, when you're, I guess, bringing people in and you're onboarding, right?
You're absorbing people from other properties.
You acquired what three properties in the last 12 months, basically.
How does that look?
Are you bringing experienced people in from your other properties to say, hey, this is
how Jake and Gino do this?
This is our method.

(39:25):
This is our process.
We're going to onboard you.
Here's the time frames.
Do you have somebody from another property come and train them up and actually help them
run the property for a while or what does that look like?
Yeah.
I mean, it depends as you grow when you first start.
And I don't want anyone getting into this business being completely overwhelmed.
You know, when Jake and I started the 25 unit, 36 unit, the second deal, 136 unit, the

(39:46):
third deal, we just learned.
And it was very different.
The I'm a mentality was there.
I'm going to do this.
I'm going to do that.
But as you start growing, we have regionals now.
We have a COO right now and we actually have Chelsea.
She's a rock star, what she does.
She was on the property on Monday last week.
She was actually on there.
She's going to onboard the property manager.

(40:06):
Unfortunately, the person that we had, usually you take over property, the culture is not
there.
There's a reason why you're buying a property for 72,000 unit when rents for 700 bucks and
they should be 14 hundred bucks because they're reading Danielle Steele's Smuddy books.
They're not doing their job.
That's the reality.
The reality is they're just at the steering wheel.
But it's not only their fault, it's, you know, the ownership is fault.

(40:27):
So we want to blame the property managers once again.
They're just, that's their expectations.
They're being led by somebody who shouldn't own this property and the property was owned
by a trust.
But once again, it was a huge, huge pain point.
They wanted to get rid of it.
But what we've done is Chelsea will come in and we'll hire, trying to hire for culture and
it's interesting because you can hire property managers from other property management companies.

(40:51):
That sometimes work.
If they're willing to, even if they can have 10 years of experience, 30 years of experience,
they can be the ones that, if they have the emotional intelligence, they're like, well,
this is a great organization.
They've got 80 people as employees.
Let me see how they do it.
Or you have the ones that are like, I'm in new in this forever.
No, everything.
That's how I do it.
And it's like, you know what?
It's, it's not going to work.
I would tell everybody, go to these high end restaurants, go to the roots, Chris, the world,

(41:16):
go to the steakhouses of the world.
You may find amazing people working there and we have.
We've got a couple on our staff that are really trained up in customer service and really
trained up in how to deal and have that emotional and really deliver that superior experience
to the resident.
And you can teach them.
If you've got a system in place, they can learn your system.

(41:37):
That may be one way to quote, unquote, hack the system wherever you're out there.
You're trying to hire property managers and you're finding that you're having problems
because every time they come on, it's like, well, I don't use that folio.
I use building them and I don't like this system.
And we do a seven day turn.
You're just going to have to set the expectation on the front end is this is how we do our
systems.
Are you willing to work within these parameters?
And if not, you could just go out of the process and go look for people who you think

(42:00):
are good fits for property management.
Absolutely.
I think the systems are all essentially the same.
And when you get pushed back on something, it's a coachability thing.
Whoever's in charge of them for their first 60 to 90 days will make or break their career.
Like if you've got a shrub who doesn't walk the walk, but talks, then they're going to

(42:22):
fail.
Their employees are going to fail.
So it's the leadership in a lot of cases.
It's the is this somebody who's going to show up at 5 30 in the morning at the office
and start their day or is this somebody who's going to expect other people to show up at
5 30 in the morning and walk in at 9.
And that's going to set the tone for the office because what's good for you is good for

(42:43):
me.
Regardless of what you say, I understand you're my boss, but I'm going to emulate you because
I'm learning.
And if this is the environment, I'm in this is what I'm going to do.
Like you have to show up.
And it's how you show up that matters maybe even more than what you're teaching these people.
When you're done, right?
You stabilized everything is there.

(43:06):
How are you incentivizing your employees to want to do more?
Like you said, you have regionals now.
Are they coming from internal?
Are you developing people up and into those roles when they're a good fit?
What does that look like for you guys?
Well, we do have bonuses.

(43:26):
So bonuses do go out of the hit certain metrics with NOI.
But more importantly, I think the best thing that we've done in the last couple of years,
what we do is we allow our employees to invest in our deals.
That's perfect.
We call it the Golden Ticket Club and it's dollar for dollar.
No fees, no nothing.
So an employee has been with us for two years.
They can invest in a deal with us.

(43:48):
And we've had the last five deals.
We've had employees invest in our deals.
And the amazing thing is you see property managers invest $10,000 all of a sudden, 80 months
later.
We have a lot of money back for $14,000 because they deal refinance.
They get all their money back and they're still cash flowing every month.
That will change the mindset of most people on this planet because all of a sudden you're

(44:12):
not saying to yourself, "Hash, we raise rents.
Now you own it.
Now you're an owner."
And it's like, "Wow, we need to raise rents.
Why aren't we doing these maintenance calls?
What's going on?
It's just astounding.
Going from socialism to capitalism when people have skin in the game is truly...
I love seeing that.
I love seeing people make that switch to having that victim mindset that all of a sudden

(44:35):
having the ownership and the responsibility mindset to having a piece of something and saying,
"Wow, I can make a difference.
And not only can I make a difference, I can make money doing it."
And that's what I'm there for.
If you can get to that level where you can have employees start investing in your deals,
what we have to do is we create obviously create a syndication because it is a security
because they are typically not working full time on that deal.

(44:57):
They're investing passively.
So just go through the legal hoops that you have to through an attorney, let them talk
about it.
It's been really pretty cool to see as far as the deals go.
So we don't raise any outside capital.
The deals that mean, "Jag, do, we just internal."
It's from our employees and we typically bring about 85 to 90% of the capital, about 10 to

(45:19):
15% is from the employees.
That is beautiful.
That's awesome.
Congratulations.
That's huge.
My wife, her company just sold that they were in ESOP for about 10 or 11 years, which is
an employee owned.
Having skin in the game is a very big deal for everybody.
And I think that's awesome.
I think that's a great idea.

(45:39):
I'm actually surprised.
It's honestly the first time I've heard anybody say that.
And it's genius.
Like, yeah.
I wish I could take credit for it.
I just think Jake at one point said, "I think this is a great way to retain talent."
Because I vehemently hate the 401K.
I think it's the biggest scam on the planet.

(46:00):
Why would I want to give the government my money?
Have it locked up for 30 years?
Probably make on average 3 to 4% a year once you take away fees and all this crap.
And when I retire, if I got 3 million bucks in there, I basically have a million and a half,
because half it's going to go back to taxes and to enter the rest of that crap.
So for us, part of our core values in our culture is we want, if we so believe in

(46:21):
this vehicle, we want to be able to offer it to our employees.
I think Jake, when he had that epiphany, was like, "I think it'd be great to have a maintenance
tech go on a property, fix an apartment, and he has a piece of ownership."
I think he's going to have to take a little more pride in it.
I think he's going to be, he's going to have a different mindset going to that unit and
saying, "I need to fix that.
I need to fix that."
Because at the end of the month, there's cash flow coming in.
And if it's not done or it's vacant, I'm going to have less money coming in.

(46:45):
That's huge.
That is amazing.
And I'm going to steal that just so you know, this conversation has just made me
not--
Rip off and duplicate my friend.
I'm kidding.
That's awesome.
Wow.
That opens up a whole lot more doors.
Andy, I have to be honest, it is a very lucrative deal for employees.
I don't know if they understand the amazing benefits.

(47:07):
And I'm not just saying this to my horn, but if you really think about it, they're investing
dollar for dollar.
There's no acquisition fees, there's no asset management fees.
They are partners in this deal.
But they've been working with us for two years.
And the only caveat that I have that I learned from a billionaire in Hawaii, I went to an event
and I was sitting next to him.

(47:27):
He's a billionaire, a private equity guy.
I don't even know him.
His name is Stephen Metter.
Very, very low key.
And he had the same type of system that-- and I was talking to him about it.
He says, "The only mistake I made was that I'd have employees come.
I'd give them equity stake in it.
They would leave and go compete against me."
The only caveat was if you start and you leave the company, great.

(47:49):
If you leave and go compete against me, I'm just going to buy you back out.
So if you want to start something like that and say, "Hey, I'm giving this money to a property
manager.
She's getting equity or he's getting equity in this deal."
If they go and start their own property management company or go work for a competitor,
I have the ability to buy that property manager out of his or her share because the benefit
is so huge.
I mean, if you're working for an entity and you're a property manager and you can buy a deal

(48:14):
or be part of a deal for the next five years, at the end of year five, that deal
and you're one and you're two may have already refinanced or you may have already sold and
got and got crystallization of equity and you're probably going to make more money from that
than your paycheck.
Then you have ownership.
So it's such massive benefits.
Then you're obviously, you are, I don't want to say, dragging on the owner's co-tails,

(48:38):
but the owner's got all the infrastructure in place.
The owner has all those economies of scale and your 30 unit is getting massive benefits
from the other 1700 units.
So there's so many benefits to it.
So I think you really need to lay it out to the employees to say, hey, if you got and you
go and put your money into a syndication, they're going to feed a death.
You're not even going to know if the business plan is accurate.
You know what you got here.

(48:58):
So just understanding, letting them understand the value that that offer you, giving them
is truly a really cool deal for them.
That is huge and it's way better than the 401K all day long.
The 401K, I see it as, okay, you're going to put it in there, your employer is going to
give you a match, roll it over to every year.
Once the match hits and it's finalized and you can, right, without penalty, roll it over

(49:19):
into an IRA.
If you've got the ability, roll it into a Roth, pay the income tax.
Don't do it in New York State.
Pay the income tax, put it in a Roth and then tax the seed and not the crop and just do
it every year, right?
You need to just avoid those 10% penalties and all the other crap.
Don't do it if you're in New York, California, right?
Where there's a crazy income tax, wait until you're in a free state where you can roll

(49:43):
that over and not pay the state just to show up and make the money, right?
You're doing this for a reason.
You want to build wealth, you want to build generational wealth, you want to do the right thing
for your family, you want to leave something behind that's tangible that can maybe make
your kids' lives easier.

(50:03):
Maybe they don't want to be property managers.
Maybe they don't want to be real estate investors.
Maybe that's not their thing.
Great.
Cash is king, right?
Don't leave them a house in New York State that they have to sell and defy the profits or
have people argue about who's going to move in and who's not.
These are all stupid things that don't help build a family relationship.

(50:25):
Having all the stuff, all your legacy set in place, running your legacy like a business
and making those decisions upfront, knowing what human nature is and knowing how things
happen when money is involved.
I love the fact that Jake and Gino are still Jake and Gino after 10 years and doing business
together and still friends.

(50:45):
That's a big deal that you don't see a lot.
A lot of people get into business with partners and before long, they're not friends anymore.
They don't want to hang out.
They don't want their families hanging out.
They don't want anything to do with each other and they can't wait for one guy to be
like, "I'm out.
Buy me out," or dissolve the company and liquidate the assets between two different companies
or whatever.

(51:07):
There's nightmare stories everywhere of partnerships that have gone sideways.
You're work ethic and how you do things and how you think about the business is inspiring
quite frankly because it doesn't happen enough.
There's so many horror stories of people who are like, "Oh, this guy is a great guy.
I want to be a business partner with him."
They get into business together and a year down the road, the entire thing is disintegrating

(51:27):
and they hate each other.
Anybody listening, it's values-based decision making.
What are your values?
What's your psychology of money?
What is your relationship with money?
What is your partner's relationship?
Understand all of those because those all fall into play and I think that I've gotten
pretty clear on it and Jake's gotten pretty clear on it and we just want to build in a business
that we're growing 20% a year.

(51:48):
We don't have to do any stupid deals.
We've been thinking about a couple hundred really good units, continue to manage them and
continue to run what he calls a well oil machine.
That's what our goals are.
Figure out where your goals are for 2024.
That's beautiful.
I love it.
The last thing since we're coming up on an hour, the last thing I want to pick your brain
and I appreciate your time.

(52:08):
It's awesome.
This has been a great conversation and I think it's going to be hugely enlightening.
When we're looking at value-ad, outside of just right, I'm a big proponent of doing the
right thing when you're managing an asset.
Instead of just adding to the rent, if it's a distressed, non-performing, underperforming
property that needs work, you're going to raise the rent.

(52:31):
That's an NLI increase, right?
Running things efficiently, that's kind of like 201, right?
You pay less for your products, you leverage your buying power, you do all this stuff.
So 101 is raise the rent.
201 is fix what you're buying and how you're buying it.
301 adding amenities, right?
So in-unit washers and dryers, parking passes, maybe some covered parking, maybe some amenities

(52:57):
on the property that allow you to get gym memberships and that kind of stuff.
What's value-ad 401 for Jake and Gino?
What does that look like for you guys?
It's interesting.
You've broken it down and let me give people a framework that we have and we teach our students
and it's really fee-based.
I think the fees for us, the average, between 10 and 15%, of gross revenues because we

(53:23):
use non-refundable moving fees.
Those are huge for us.
We love them.
They're like, "Shirty bonds are not insurance."
But it's a great process for us down south here because you can get a four or five hundred
dollar non-refundable moving fee, which hits the income statement day one.
You keep that.
It goes into a pool.
But the great thing about this is there's no security deposits.
We don't want to have that confrontation.

(53:43):
We don't want to be able to deal with security deposits.
So that's something that we've been using.
Focus on, I guess, that looking at it and seeing what the current owner has.
Three types of fees.
We break them up into one is upfront.
Front fees.
At fees.
Pet fees.
Security.
Non-refundable move-ins.
What does that upfront fee look like for your property?

(54:05):
That's important.
The second one is recurring.
What are the recurring fees on the property?
Do you even have recurring fees?
We're talking about rubs.
Ratio utility billing system.
We're talking about pets.
We're talking about short term leases.
We take over properties that are doing month to month.
Well, there's a fee to going month to month and make sure that you're charging that.
Rentus insurance.
Do you have a rentus insurance where you can actually make money on rentus insurance?

(54:26):
The third one is occasional.
Those occasional fees where if there's trash left outside, you're penalizing them.
There's late fees going on.
There's breaking the pet, addendum fee.
There's a break lease fee.
Those are the occasional fees.
Take a look at how your fee game is compared to what you're buying.
If you're buying a property that has high rents, maybe they don't have the fees broken

(54:47):
out.
They're just throwing it into the rents itself.
But understanding that there's a huge value-ed component to that.
I think the 4.0, Jake wants to become the Chick-fil-A of apartments.
That's his goal.
His goal is to have that customer service.
If you can do that in the sea space, I'm not saying we're anywhere near that, but if you
can at least try to aspire to that and try to deliver some type of quality customer service

(55:10):
and quality experience for your residents, like you said, on average, residents, every 50%
of your portfolio turns over every year, 40%, 50%.
You can drop that down to 25% or 30% and have the majority of them stay.
Not only does it create culture within your company, it creates culture within your property,
then all of a sudden people want to live there and you can get a premium from that as

(55:33):
well, Andy.
I think taking care of your space, taking care of your property well, showing it respect,
in probably 90% of cases, your tenants will do the same, right?
They have something that's nicer than maybe where they've been before.
They don't want to screw it up.
Especially if it's like, I don't know if you guys do an ELHTC or Section 8 stuff, but if

(55:55):
they're on one of those programs, a lot of what used to be 20 years ago, Section 8 was
a sure thing.
10 years ago, Section 8 was a nowadays.
It's like, Ah, Section 8 doesn't really mean much because they don't really care if they
lose because there's other things that they're just going to go and get instead.
That level of respect, that level of consistency, that level of, I'm going to take care of this

(56:16):
apartment. That's not the way it was, like people are still big and the, Oh, Section 8's a
sure thing.
Yeah, not really.
No, it's not.
Not anymore.
Not with the environment we've been in since, really, since 2019, 2020 is when that, that
I think that other shoe dropped.
So what do you guys do?
Section 8, you get really great rents as opposed to market, right?

(56:37):
Section 8 used to get really great rents as opposed to market.
Now, there's a case to say market rents are probably very similar to Section 8 is.
So if you like to have that bureaucratic process where you got to deal with the government and
you have property managers that are aligned with that and that's what your system is like,
great, you can go to that.
We just don't, we don't really like dealing with that space.
So I'm a big free market guy myself.

(56:59):
So like everything I do is based off of the risk rewards, you know, do this now.
It pays for itself later.
There's not a lot of that that's put up with in the Section 8 government world.
You look at the LHTC programs and they literally just put these things together and then
suck all the life out of them over however long it's in the program.
10 years, 15 years, 20 years, and by the time it's done, like there's one here that the

(57:23):
guy's been trying to sell since 2018.
I've gotten brokers who've called me to try and find a buyer for like six different times.
And it was built in I think 97 or 98.
Completed still has original kitchens, original fixtures, original lighting, like it's brutal.
They've deferred maintenance on roof repairs and just the walkways, broken concrete, drive

(57:48):
ways all need to be resealed.
There's weeds growing up out of them.
It's a frequent call spot now for the police department.
They're there every day.
Like that's a property.
The guy wants 31 million bucks.
He wants one point.
He wants 122 a unit for it.
That's like guy.
It's worth.
Yeah, this is a way.
It's worth 50 a unit maybe because it needs so much.

(58:09):
Every unit needs 15 to 20,000 in rehab.
There's no way he's ever going to get that.
So he's just going to keep sitting on it.
He's never going to sell that thing.
It's in a great location.
It could be turned around to become a nice B minus property, but it's in New York and the
guy's out of his mind.
It's a 20 million dollar property.
He's trying to get 31, 33 million for.
It's not it's not going to happen.
So anyway, more power to them.

(58:30):
You know, I appreciate you coming on.
Everybody listening.
Geno Barbara.
Geno tell everybody where they can find you, where they can find your course, what your
website is, where they can find your podcast, lay it all out for us.
Jake and Geno.com is the hub.
Just go to the website.
You'll see the podcast where the Jake and Geno show.

(58:50):
I do a podcast with my wife on family and communications.
I love that show and Movers and Shakers podcast where we interview our students.
Just go to the website.
You'll find everything there.
Andy.
Perfect.
Thank you so much for coming on.
I appreciate you.
I hope everybody out in whatever format you're digesting this in has.
Please enjoy this show.
So if you're watching on YouTube, please hit that bell and subscribe.

(59:13):
If you want, leave us a comment on the episode.
We'll make sure that we get some answers for you if you have questions.
If you are listening on Apple Spotify, I hurt radio wherever it is, please make sure to
subscribe.
Leave us a review.
And as always, go do real estate.
Thank you so much.
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(59:34):
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