September 18, 2024 • 45 mins
In this episode, Justin opens up about the challenges he faced in his early career, including his struggle to ask for help and the lessons learned from his father's ups and downs in the industry. Discover how he navigated the turbulent waters of the 2008 financial crisis and how he managed to avert disaster during the recent interest rate hikes.
We dive deep into Justin's strategies for scaling from small duplexes to managing over 557 units and $157 million in assets. Learn about the importance of doing the inner work, building relationship capital, and the practical steps needed to raise funds and close deals in today's unpredictable market.
Whether you're a seasoned investor or just starting, this episode is packed with invaluable insights and real-world advice that you won't want to miss. Tune in to get inspired and learn what it takes to succeed in the real estate game.
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Transcript
Episode Transcript
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(00:00):
Like, what was your mindset in your mid-twenties? Like, back then,
did you believe that you would become successful in real estate and be coaching
and doing all these things?
I had a problem asking people for help.
Simple things. And how do you reach out to people maybe you've built relationships
for that are doing things above you?
You felt like a burden to people. Correct. I had the same thing.
So syndicators, if they'd never done syndication before, are now apparently experts.
(00:24):
And so they went out there and they're chasing returns and they're buying these
deals. and I'll be first. We were one of them on one of our deals.
Thankfully, we are now in a position where we got out of that. But how?
Oh, we had a deal in Texas. We were about 60% done with the renovations. Things were going well.
Rates began to go up. Yeah. So now I'm watching our debt service go from 40,000
(00:47):
a month to over 93,000 a month.
Although we weren't moving fast enough on the renos and we weren't getting to
where we needed to be from an occupancy standpoint.
Knew we had to refi. I'm like, we have to refi by the middle of this year or we're F-U-C-K.
So I called I called my business partners and I said, guys, we business,
I said, what do we do? I said, here's the situation.
And they said, Justin, are you willing to move out there for a little bit?
(01:11):
Music.
All right, everybody, welcome back to another episode of On the Come Up Podcast.
I'm your host, Chris Luna. Today we got Justin Brennan in the studio.
It's actually his studio. Thanks for getting us in here today,
Justin. Yeah, I wasn't sure how we were gonna do this, but I appreciate.
Music.
(01:33):
And we literally just finished this studio, which is always a vision of mine.
It's a mini studio in San Diego to have more officially fish podcasts.
Well, I love that you're setting goals. You're attacking them.
You're getting after it. We're here.
You're creating an awesome reality for you, your kids, Kate.
(01:54):
We'll get into that later.
But yeah, the show's called On the Come Up. And I never really,
usually I just dive in when we start going into it.
But I want to kind of explain the show. The show's on the come up and a lot
of people see Chris Luna, you know, the, the finished product. I'm not finished.
I'm still going. They see you, right? They see this version of you,
but they didn't see the Justin from when he was in his mid twenties and you
(02:18):
know, when he was on the come up, when he was making it, you know,
creating a name for himself.
And so I really want to give the audience a vision of into like what you were
thinking in your 20s when you were trying to create wealth and basically you on the come up.
So we're going to go way, way back.
It's been a journey of as it always is.
(02:38):
I was actually before we even came on this podcast, I was watching Cody Sanchez
and she had a video little reel came out and she says, you know,
listen, man, I know I'm up here on stage talking about all these things.
And you're kind of seeing the finished product of all these years and I have
this portfolio of companies.
But if you don't think I'm getting
kicked in the nuts every day as an entrepreneur, you're out of your mind.
(03:02):
And if you think it's easy, whoever's told you that's full of shit.
And it's hard, but it's worth it. It's worth it.
And so, yeah, I mean, I get it. It's a grind and it's a battle every day.
And even when you've made it, you haven't made it because things are going to
happen because mo' money, mo' problems.
Mo' money, mo' problems. As they say. Spot on. But you have to enjoy the...
(03:26):
The process of it. Yeah. And understand that it is part of the process.
And as you gain wealth and maybe gain profile and gain notoriety and have all
these successes, with that is going to come sometimes some bigger problems.
But you have to realize you can solve them and you work through them step by step.
(03:47):
So I thought that was a great lead in because I kept thinking about that as
you were asking the question.
But yeah, I mean, I came up in real estate a little bit in San Diego,
go learning from I'm kind of a third generation real estate
person along with my brother and my sister before she
had passed but my brother were all in real estate
and we learned first from our grandmother wow who
(04:07):
was the original OG and she was you know hammering away till she was 91 years
old you know owning apartments and stuff in San Diego in San Diego do you know
how many units she didn't have a ton of units she was probably less than 50
that's but they were 100% owned yeah Yeah. Right. Free and clear. Free and clear.
Yeah. No debt. That's nice. Right. And she's driving around at 90 years old
(04:29):
in her little S10 Chevy truck.
Yeah. Collecting rent like a little Italian woman, you know,
and, but we learned a lot of that growth and wealth and stuff from her.
And she taught my dad and gave my dad the chance to then learn it and grow up through it.
And he was kind of the transitional character because while she did pretty well
for herself, my dad was It was like the guy that really made it.
(04:53):
But then he also lost it. Oh, wow. We're going to talk about that later.
All of the above. But I learned a lot from him. And I've seen poor.
We've been poor. We've been rich. I've seen them both. I've seen poor,
rich, poor. So we've seen it all, right? The top and the bottom.
And so you appreciate things. You understand the value of the grind.
(05:14):
I was never a trust fund silver spoon kid before.
So my dad was really good at teaching us the value of a dollar. I love that.
You know, they say that the first generation makes it. Maybe I think the second
generation keeps it and the third generation loses it.
It's something like that. I'm just happy that you haven't lost it.
Well, yeah, we haven't. I haven't gone bankrupt. I haven't lost it.
(05:37):
But at the same time, I think because you've seen some things,
I've seen money do good things. I've seen money do bad things.
You know i i i learned recently in
the last probably 12 months you
know some limiting beliefs that i had created yeah as a result of my upbringing
my surroundings my experiences with money good and bad and stuff it was creating
(06:01):
in my brain for myself so and then it can actually hold you back if you don't
realize what it's doing to you and i know we spoke when i was on
your podcast about some things you're doing to help with those limiting beliefs.
I think one of them was the hypnosis.
Yeah. The hypnotic reprogramming. I can tell that's some wild crap. Yeah.
Yeah. It's been good for you. It has been incredible for me.
(06:23):
You seem like a very clear-minded person. Would you describe yourself as that? Yeah.
I mean, I've always been driven and focused and able to take complex things
and simplify them and very task-oriented, it.
But I would say I can calm myself now because I think faith has helped with
(06:43):
that, getting closer to faith.
I think, I know the hypnotic reprogramming has done that.
It's kind of switched my mind from, you know, how can I, or can I,
I should say more like, can I do that to how can I do that? I love that.
Does that make sense? Yes. Simple little tweak of words. Yeah.
And then in changing framework of mine from, oh, I have to do that to,
(07:05):
I get to do that. That's good.
And removing limiting belief systems that I, that were there that I was completely
unaware of from things from how do you, I had a problem asking people for help, simple things.
And how do you reach out to people? Maybe you've built relationships for that
are doing things above you.
And you're like, listen, man, you know, can I get, do you know anybody that
(07:28):
can help me out with this.
I'd always had a problem with that simple thing. You felt like a burden to people.
Correct. I had the same thing because I hadn't built that relationship capital in my mind.
So having met Jeff Fenster and then going in and yeah, man, I got all tabbed
and everything by meeting him and experiencing kind of how that relationship
capital game works. Yep.
And then the hypnotic reprogramming from removing that stuff to saying,
(07:50):
no, you're worthy and it's okay to ask for help. Yeah.
You need to obviously build that relationship bank account.
You can't just be a taker, you gotta be a giver too. Gotta be a giver,
yeah. And then also removing the limiting belief I'd had around.
Thinking things were always going to be hard for me. And that we found out that
stemmed from early childhood and a learning disability.
(08:12):
Like when we got, when I did the hypnosis and we went in, like we tracked it
all the way back to when I was about six, seven years old.
And when we had found out I had a learning disability and then that triggered
a lot of things of, oh, learning's going to be hard. Money's going to be hard.
Life's going to be hard. You're always going to have to work harder.
You're always going to have to do this harder. You're always going to going
to have to give extra because it's never going to come easy.
(08:34):
And so it cemented this triggering belief system. So therefore everything's
going to be harder for you, Justin.
And then also like self-fulfilling prophecy, like your brain is probably looking
for things to prove yourself right.
Because since you think everything is going to be hard in life,
you want to prove to yourself, right? Well, yeah, you create it.
You don't even realize it and you'll put yourself in situations.
(08:55):
And then And because your mind's thinking a certain thing, you know,
as we all know, your mind will create that in reality because it's sending,
people don't, what I had to learn was the power frequency.
Meaning you want to be rich. Okay. I want to be a multimillionaire. Okay.
Great. Well, you can say it. I want to be a multimillionaire.
(09:17):
And by doing that, I'm sending a frequency for my energy, my body out to the
universe. And that's cool.
Like that's step one. It's cute. Yeah. But what people, what they miss is- Action.
Correct. And they miss alignment in opportunities that they don't recognize.
Because you'll send the frequency out. But let's say we leave here from this
podcast and I go down, and I want to be a multimillionaire in real estate.
(09:41):
But let's say I didn't know much about real estate at that point.
And now I go down to the Starbucks five minutes from now, and I'm sitting down having a cup of coffee.
And somebody walks in and sits down next to me, maybe like this,
but I'm paying attention.
I'm on my phone. I'm doing this stuff. And I hear him on the phone.
He's talking about some real estate deals that he's doing.
And he's looking for partners or he's looking for people to help him and all this stuff.
(10:02):
And do you see what's happening? I sent it out to the universe, the frequency aligned.
But now the universe is bringing me an opportunity that I'm not recognizing as an opportunity.
They're sitting right next to me at a coffee shop talking about real estate.
The guy's on the phone saying, I need people to partner with.
I need people to find deals.
I need people to do this. I need people to do that. He's talking about,
I'm trying to find this person. And I don't speak up.
(10:25):
A lost opportunity yeah you see like it's so simple
yeah but you didn't recognize it you asked
the universe for it the universe gave it to you in in the form of
a small frequency and you did not take action on it yeah that's the difference
between people and i i love that some people won't speak up because of the limiting
belief the fear of judgment right i used to have this problem what's the worst
(10:45):
thing they say fuck off yeah excuse my language but that's the worst that's
the worst thing that can happen.
Or they say, oh, you already have that.
Meaning you're already fucked off because you have nothing. So you might as
well ask and talk and see if something happens and add value.
Question for you. In your multifamily education platform, because I know this
(11:08):
to be true for me, I was in Grant Cardone's real estate club.
And often, this is before I had a problem with public speaking.
I couldn't speak up. I would take in the info. I'd listen. I'd I laugh, I engage.
But when it came time for raise your hand and ask questions,
I wouldn't ask questions. At an event?
At an event, in person, and on Zoom calls. So my question for you is,
(11:28):
do you see that certain people on your calls that you run are scared to talk?
Because I know at my program, sometimes I see people don't want to talk.
Yeah, so the way around that is teeing up a prerequisite question where I say,
hey, I had another student ask this recently.
Boom, boom, boom, boom. And I'll actually ask, I'll prep the question.
(11:51):
Yeah. Next thing, oh, yeah, yeah, that's what I was thinking.
Yeah. Then they'll raise their hand. Got it. Or I'll tee up a problem that I
know everybody tends to deal with.
Okay. And then it kind of lowers their fear of, oh, I was the only one thinking this.
So, yeah, yeah, I think as a leader, and this is where people need to understand
this, as a leader, it is your job to get people to open up.
(12:13):
Open up. Because most people won't. Yeah. because of the fear of rejection.
Simply that. It's usually the fear of rejection or the fear of losing money.
Like when you ask a lot of people that are thinking about doing things, it's twofold.
It's the fear of rejection or loss and the fear of losing money, right?
So that's why they typically won't take action because they either don't believe
(12:35):
in themselves or they believe whatever they're about to do.
Is not going to get them to where they want to go, like give them the outcome.
So that's usually the two biggest fears people will have is,
oh, am I going to lose a bunch of money?
Or, hey, I totally believe in your program. It's everything I'm looking for.
But then I'm like, well, why don't, weren't you ready to go?
(12:56):
They don't believe in themselves enough to actually, am I going to step up? Yeah.
Like, am I going to do what I say I'm going to do? Meaning you guys are going
to do everything you're saying you're going to do.
But do I believe even myself, like I'm going to step up. Yeah.
I love that where the two real estate guys here in San Diego,
but we're actually peeling the layers back because before you become ultra successful
(13:18):
in real estate, I think you got to do the, not, I think you have to do the inner work.
It's very evident you've done the inner work. Okay. Let's bring it back though.
Okay. So Justin Brennan in his twenties on the come up, like,
did you ever back then, did you believe that you would become successful in
real estate and be coaching and doing all these things and have the capital company?
(13:40):
Like what was your mindset in your mid twenties? Did you think you'd make it?
Yeah. So let's step back in the mid twenties. So twenties, I just come out of
college. What college? Pepperdine university.
I was very blessed to go there. Originally I was going to go to U of A to play
baseball. Oh, nice. University of Arizona.
I spent some time out there. Yeah. And it was, I mean, I loved it.
I mean, party school USA, but that was part of the the problem.
(14:03):
So I went out there with my dad, we toured it and I was getting ready to sign
a letter to play baseball there.
Came home for the weekend. My dad said, Hey, I want you to think about it.
Come on for the weekend, make a decision on Monday.
And on Saturday, it actually received a letter in the mail to accepting at Pepperdine,
which wasn't my first choice. I wanted to go to USC.
I just got denied and went to Pepperdine and it was incredible.
(14:27):
Loved it. Came home from school.
But when I came home from school, I didn't want to be like, Hey dad, where's my job?
I could have done that, but I said, no, I want to go out and grind and figure
it out on my own, have some success so I know that I can execute.
So I actually worked in title insurance. Oh, wow. For about three years, from 2002 to 2005.
I learned a lot. Oh, a ton. I mean, people think title insurance,
(14:50):
they think it doesn't matter. Oh. And you're right. It doesn't matter until it matters.
It's like any insurance, in case shit happens. So you don't really need title
insurance, but you need it because then when you have problems, you really need it.
So yeah, I did that for three years during the boom time of real estate,
as we all know, in the early 2000s. And that was awesome.
(15:10):
Then came out of that, went back to grad school for a couple of years,
came out of that and went to, at that time, to work with my dad.
And that's where I learned the development space.
Grad school helped me out with that and learning the development and construction
of commercial real estate.
That's what your dad does or did. Yeah. He did subdivisions,
large Large subdivisions of 50 homes, 100 homes, then maybe 200 unit complexes, multifamily.
(15:33):
Started in San Diego, then different cycles took him into Idaho and then Las Vegas.
Wow. I mean, he was doing Las Vegas, built almost 2,000 units in Las Vegas.
So my history with Vegas is pretty good. I didn't realize. There's something
else out in Vegas that you like too.
So my history with Vegas is pretty... I didn't realize this,
(15:54):
but all the way from the late 90s and the early 2000s. Wow.
I mean, my dad was traveling every Monday morning. He'd get on a plane at 6 a.m.
38 minutes later, he's in Vegas. Yeah. And he'd work till Thursday night at
his office. Had a house out there near Summerlin.
Get on plane, fly back Thursday night.
Thursday, Friday, Saturday, Sunday, he's here. Get on a plane Monday morning, do it again.
(16:17):
And he did that for over a decade. It's like a bus ride. Pretty much.
It's a bus ride. It's a bunny hop. Yeah.
And did that. and then he did Sacramento, he did Southern Riverside,
and that's when the collapse happened.
That's Sacramento yeah you're Sactown Sactown all right well Elk
Grove but you know so he he had a condo conversion in Elk
Grove where at do you know I think it
was called Elk Grove Boulevard something like that
(16:38):
there's something like had oak Elk Grove something in
it but yeah it's a condo conversion yeah that we did up there like 248 units
wow and that was right in the collapse happened 2009-10 right
in there right in 2008-9 is when
that we were right in the middle of that conversion in the
banks everything collapsed and then he had roseville he
built built a bunch in roseville great market built two
(17:00):
different complexes in roseville a few hundred units and then
las vegas he had probably over a
thousand almost two thousand units in vegas built ground
up okay that's awesome so was he like
syndicating these where he'd go get i mean technically syndicating i
mean technically anytime you raise money it's syndicating yeah i mean people
but most people don't use that term unless they're putting the whole private
(17:24):
placement memorandum together securities attorneys blah blah blah but yeah he
was raising money he was doing it with his money in conjunction with investors
yeah and putting deals together and doing large.
Condo projects and apartment complexes that's amazing
there's a combo of both with some single family subdivisions
and then you do some luxury houses and stuff and that was all the way through
(17:45):
the financial crisis until it collapsed got it and so you obviously seen your
dad like have to go through 2009 has development ever scared you because you
you understand development well would you ever get into development because
i know you're more focused on like multi-family Yeah,
so that was one of the things. I'm not against development.
(18:05):
I'm against development in California and on sale product.
I will do development on rental product because I realized that everybody needs
food, water, and shelter. Yeah.
Food, water, and shelter. And more people rent than buy.
And when you're in market cycles, especially in California, where it takes you
(18:28):
14 years to develop anything, you can get caught because you buy something today
based on X numbers on selling it.
And that doesn't happen. You get caught in a market cycle and boom, party's over.
Got it. Whereas if you're doing it under rental product, you know,
for the most part, rents are stable and rising and supply is constrained strained
because of the development problems.
(18:49):
So your rents continue to stay stable and rise. And that's been pretty historical
in San Diego. There's only been a couple instances where rents have actually gone down.
So for the rent stuff, it's great. For the for sale product, I know.
Got it. Yeah. I'm with you on that. As you know, AD development for me leading into that.
But would I do development outside? But it's always going to be in the rental game.
(19:09):
Yeah. I don't see myself doing build and sell large development product.
We would do smaller, which we've done, like maybe five. A couple of condos at the beach.
But I'm not getting into a 50 to 100, 200 unit type development, build and sell product.
It's just you're asking for it. Got it. Got it.
Okay. You got to have super deep pockets. Yeah, super deep pockets. Yeah.
(19:34):
Not quite there yet. Someday.
Okay, cool. So...
You do multifamily deals outside of California.
Where are your current deals? And tell us a little bit about the company that
I guess you guys raise capital.
I know what you do, but the audience, they want to know what you do.
So you raise capital, you go and buy deals.
(19:54):
I see you on planes sometimes going there, coming back, just like your dad, like father, like son.
I love it. I mean, in a way, yeah, a decent amount of travel.
And that's mainly because California, you know, our money can only go so far.
I mean, we started here, but as time has gone on, the landlord-tenant laws,
business climate's been more challenging.
So you have to be tactful. I mean, you can still invest well,
(20:15):
I would say, in Southern California.
So call that Orange County South is good. Anywhere north of that,
things have gone a little cray-cray.
But, you know, it's harder in California. It's just in general.
So we had to take our money outside of California. So we started.
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(20:37):
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So click Click the link below and let's get back into the episode.
2018. Got it, okay. So we had started with one condo.
$100,000 in the financial crisis and then started buying duplexes and fourplexes.
Did most of that with our own money up until the mid-2000s. And then started
realizing, hey, for us to scale and grow, we got to start getting into bigger deals and syndicate.
(21:24):
And in order for our dollar to go farther, we had to go out of state and go
mainly into the Midwest.
Like the middle part of the United States, call it. Okay. So that's where,
you know, now investing in Nevada and Arizona and Texas and Oklahoma and Missouri,
and even into Tennessee,
which we're not there yet, but we're looking and others parts of the middle
part of the country is where you can go buy things for between 50,000 per unit. Wow.
(21:50):
To maybe 150,000 a unit. Yep.
Whereas here in San Diego, it's 300,000 a unit. Yeah.
That would be, a good deal at $300,000 a unit.
Yeah, so your dollar is going to go farther and if you run them well,
you can get good returns for you and for your investors.
So that's how we were able to scale from, call it 20 units, which we owned here
(22:11):
in San Diego, to now 557 units.
Wow. And trying to go towards 10,000. Let's go.
That's all happened. We went from 20 units to 557 all within the last 36 months.
Three years. Well, yeah, call it 2021 to 2024.
So yeah that's great so what's that
assets under management over 157 million
(22:32):
157 million right which on
the syndicating apartment game is nothing right when you go
talk to some of these other people that are in much higher space you know they
have 500 million or a billion yeah right like the you want to do you want to
get to a billion hundred hundred percent yeah because i mean i take there's
some people i look at call it i think it's ashcroft you know with joe farrell
(22:55):
and those guys in his company,
they have like 13,000 units and about 2.8 billion.
And then, of course, you got Grant Cardone. He's at about 5 billion and I think
he has the same number of units, but he does A-class type stuff. Yeah.
But yeah, getting to a billion, you know, Elevate Capital, those guys, I know them well.
They're about 5,000 units and probably five to 700 million in assets.
(23:19):
So yeah, it can absolutely be done. So as far as your team goes,
because maybe there's some investors out there who want to get into syndication,
what was needed on the team?
Like there's you, there's your partner, maybe there's an analyst.
What's the team look like to actually build this syndication company?
Yeah. So in the beginning, you have to go lean and mean. So it was me and Chris.
(23:39):
And then I started hiring outsource people that weren't under the payroll,
but we were still paying on a per, like a monthly retainer.
So I had an analyst guy that would analyze, you know, you need to see a lot
of deals then to like filter them down into one that you would actually do.
So I hired an analyst guy who would analyze everything from a high level.
And I would just start shooting him deals.
(24:00):
And he'd throw them into the simple spreadsheet, see if it even meets our basic metrics.
Back of the napkin. Back of the napkin. then if it meets the back of the napkin,
then I'll start looking at them further and funnel them down.
So that's how that started with the analyzation part.
And then boots on the ground. I mean, as long as you have in the States,
so usually what we would do is before we go investing into any market,
(24:22):
I would spend a couple months up front.
Traveling out there once or twice, touring properties, touring markets,
touring areas, meeting the brokers, meeting the property management crews,
setting up the construction crews.
Got it. And that's in each market we're in. And I would do that a month or two in advance.
So that way all the backend stuff is locked and loaded. So once we start to
(24:42):
see deal flow and we actually start moving on deals, we're not catching our tail. Got it.
And so in the background, so that's front of the house.
I love that you're out there, you're doing it, you're hustling,
and you're grinding on the back of the house.
Like, are you guys raising money actively hopping on calls? Where are you finding those investors?
Is it 401k money set by IRA? Where does the bulk of your guys' capital come
(25:04):
from? Yeah. So we started deal by deal, right?
And so I always, people are like, I want to start a fund. I'm like,
well, you can, you have to understand when you do a fund, your investors are
people that are going to invest with you. They're investing on your strategy.
So if you haven't had a track record of a strategy, it's very hard for somebody
to to invest with you or give you anything more than a soft commitment. Got it.
(25:25):
Right. Because imagine this for a minute. If I was just getting started and
I came to you, Chris, and I said, Hey, I have a fund, a $10 million fund,
and we're investing in real estate. You'd say, great.
What are you investing in? Oh, we're doing multifamily, this, this, and this.
And you're like, awesome. Well, do you have like a specific deal that I can
look at? Because I don't know you that well yet.
I don't, you know, track record of doing this. So I can't like buy into your strategy yet.
(25:46):
Got it. Cause you haven't had a, you know, a beginning and an end where I can
actually see a track record.
Easier to do on a deal-by-deal basis because then I can come to you and I say,
hey, I have this 50-unit deal in San Diego and minimum investment's $25,000 or $50,000.
Projected returns are 18% to 20% a year on your money. Who do you know that may have some interest?
(26:07):
And then they're going to say, well, I may. Do you have something you can send
me? Great. I'll send you the pitch deck on the deal.
And here's this 20 or 50 unit deal. It's going to break it down for you.
It's going to show you the actual property, how much money we're raising,
where's your money coming into that, what's your projections,
when are you getting your money out, how long is it in, et cetera, et cetera.
It's going to answer all, 95% of the questions that you may have about that
(26:29):
specific deal. And it's deal-based.
So that way it can attract the actual money.
Because otherwise you're just going to get soft commitments from people,
where they'll say, yeah, I'll invest with you when you have a deal.
You'll hear that a million times. Yeah, that's so good because we've been looking
at multifamily syndications out of state. Nevada being one of them.
Cincinnati, obviously spent some time out there. Texas. Cincinnati's good.
(26:52):
Ohio's a good market. Yeah, we like it out there. Like I know the little pockets
because I used to walk those streets.
So we've been eyeing that. We actually were going after a deal out there.
But where I was going with that is we did realize it was harder to raise funds for that.
Now, I love what you just said. That was the golden nugget for me personally
is if I lean into my track record of ADU development, a fund for ADU development
(27:15):
in San Diego, which is probably one of the best places to build ADUs in the US,
I'd probably have more success on a fund on that.
And then I'm not competing with, say, multifamily. No, why were you trying to
raise money before you had a deal in Cincinnati?
No, this was, yeah, we didn't have it in a contract, but the gun to the head
type thing kind of scares us a little bit. Like, got to close in 60 days.
(27:36):
That's what frightens us.
Well, okay. So let's walk through that for a minute. Okay. Because I understand
that's the contract time and then you have extensions you can build into that.
Yeah. But let's call it 90 days.
Okay. Because you typically get 60 plus a 30-day extension. Yeah. Yeah.
And depending on the size of the deal, so this is where a lot of the mentee
students come in and they get caught. Everybody gets freaked out.
(27:57):
They're like, yeah, I can find deals. We can show you how to do that.
I can analyze deals. I can show you how to do that. And then they get to the money part.
They're like, I don't know how to finance. I don't know how to get the loan.
I don't know how to raise the equity. I get bottlenecked and they stop.
And I try and tell them, I said, well, it starts with the deal first.
Because if you have a deal that makes financial sense.
Raising the money is not that hard. But if you don't have a deal that doesn't
(28:19):
make financial sense, raising the money is very difficult.
Because if I came to any investor and I said, hey, I can produce 14% to 20%
projected returns for you on your money annually, and here it is,
it's a minimum $25,000 investment,
raising that money is not that
hard if the deal makes sense and they trust you that you're not a fraud.
And you also don't want your raise to be too big for your first one if you don't have a track record.
(28:44):
So that's another thing people get at because they're getting taught by these
gurus out there to go after 50 plus unit deals on their first ones.
And I'm like, yo, you have a better chance of breaking into the White House.
Than you do of getting that deal and executing it and raising the capital and
actually making it happen on your first one.
So you need to stick 10 to 30 units for your first syndication apartment deal,
(29:05):
10 to 30 units because you're dealing with mom and pop brokers,
mom and pop sellers, lenders who will call you back.
The capital size is small enough. You're raising maybe three to 600,000. Okay.
You're bringing in 10% of that. Call it 60 grand. You're raising.
Personal funds. Yeah. You're bringing in 10% of the capital stack.
So if it's 600 grand, you're raising total down payment. You're bringing in 60K. Okay.
(29:29):
And then you're raising, call it 540K. So raising 540K from 25,
50, and $150,000 investors, you will get that with five to seven people on a
deal of that size. I like that.
Basically, I always thought of it this way. On a syndication deal,
as a syndicator, you can tie up the property with an earnest money deposit and that's your money.
(29:52):
And then your job is to go- And it's refundable, at least in this market right now.
It's refundable. like the days of the non-refundable earnest money are gone
because the market's a challenge now.
So earnest money is fully refundable during the due diligence period.
Got it. So usually that's 30 days and then maybe you get an extension on that
or something. There's always workarounds. Okay.
Let's talk about today's market since you just brought up.
(30:16):
So what are you seeing in today's market? I know I'm starting to see more deals.
Obviously, we're talking about interest rates coming down.
What are you seeing out there? Okay. So in the commercial multifamily space, it's a shit show.
Okay. Right. Because the capital markets are a disaster right now.
They're getting better for financing, but you have to understand all of the
(30:36):
headwinds that have been created because of all the deals that were done from
about 2021, 2020, 2021 into 2022.
So that two-year window, you had an enormous amount of deals done yeah 90 of
them are done on variable rate financing yeah right the value add.
(30:58):
There's some people losing a lot of money yeah so syndicators if
you've never done syndication before are now apparently experts and so they
went out there and they they're chasing returns and they're buying these deals
and i'll be first we were one of them on one of our deals thankfully we are
now in a position where we got out of that but how well let me explain it okay yeah there was I mean,
(31:19):
you want to talk about threading a needle.
Yeah. We threaded a needle. Thank goodness it was only one.
Okay. Because there's some syndicators out there that have lost gobs of money.
Tides. For themselves and for their investors. Tides equities being one of them.
Yeah. Tides is one of them. There's a handful of other ones.
But they're still around. Tithe is still around, but they've had to give properties
back. All these things have happened and there's many others.
(31:41):
So you had a lot of deals done where they would buy the property.
They would bank on, they'd buy it in negative leverage, meaning it doesn't cash flow today.
But they're going to go in, renovate, and then make the property better with better rents later.
So it's going to cash flow later, presuming you hit that.
The problem is, everything that was done in 2021 and 2022,
(32:03):
2022 well interest rates went up in 2022 as we all know and
they went for us we had a loan at four and
a quarter percent that went to nine and a half percent double and
we weren't the only ones we were one of thousands of syndicators that's the
floating rate debt yeah so you can imagine and the reason why you do floating
rate debt is because the fixed rate debt would not provide you renovation dollars
(32:24):
for your deal got it right so you would have to then raise that through more equity.
Which lowers returns. Correct. Yeah. So everybody was in there saying,
okay, well, things are good now. We'll go ahead. We'll take the variable rate.
We're going to renovate this thing in 18 to 24 months, and then we'll refinance
it into fixed rate money then. Once the NOI had increased.
(32:45):
And that's cute and a great idea. And it worked very well for several years
until the interest rates go up.
Which no one could have predicted. well we i
mean so we projected they would go up there wasn't
we weren't morons nobody in their right mind would ever expect them to go up
nine times i think it was maybe 11 times in nine months yeah so that was the
(33:07):
crux is we knew they would go up so i projected in our numbers oh they're going
to go up a couple percent yeah let's bank that in we'll be fine blah blah blah but not.
Double in nine months. So it makes your deals go upside down.
And so what's happened now today here in 2024 is all these guys who've been
kicking the can down the road, they can't get out of their deals and they can't,
(33:30):
they can't feed the debt.
And so they're either handing the keys back or they're selling them at massive
discounts or they're trying to do some workouts.
You're seeing some workouts. So if you're big enough, maybe you get some modifications
done, but it is a massive disaster.
And then you have a lot of these banks holding onto this bad debt that are not
reporting it and not talking about it.
(33:50):
And it's not being reported on CNBC, but all you need to do is go on cred.IQ
and they'll show you all the bad debt loans out there in the multifamily space.
Wow. Cred.IQ. It's cred.IQ.com. So they track all the debt. Oh, wow.
Yeah. And they'll show you all the bad debt, both in the office space,
(34:10):
which we know is isn't bad.
Yeah. And then multifamily, which the delinquency rates are going up pretty drastically right now.
So what that means is there's blood in the street, blood in the street,
but that also means there's opportunity. Yeah.
I love that. Okay. So how did you guys get out of the situation you're in?
So we got out by the skinny skin of our lucky skin skin.
(34:35):
So we had a deal in Texas. this, we were about 60% done with the renovations.
Okay. Things were going well.
Rates began to go up. Yeah. So now I'm watching our debt service go from $40,000
a month to over $93,000 a month.
And it's eating through the interest reserve. So when you do these deals,
you bank in with the interest reserve to pay the bank while you renovate so
(34:59):
then you can refinance it later.
So that's all banked into the total cost as an interest reserve to pay the loan each month.
Well, Well, when your interest reserve, when your cost per month double,
you're going to eat through that interest reserve a lot faster,
which means you need to move faster.
Got it. Otherwise, you're going belly up. Yeah.
So I saw that coming and I saw that we weren't moving fast enough on the renos
(35:22):
and we weren't getting to where we needed to be from an occupancy standpoint.
That's why I saw you on Southwest flights just flying out there all the time.
So I ended up making a call in January of last year, in 2023. Okay.
As I saw it coming, I knew we had to refi. I'm like, we have to refi by the
middle of this year or we're F-U-C-K'd.
So I called my business partners and I said, guys, we business, I said, what do we do?
(35:46):
I said, here's the situation, you know, what do we do? And they said, Justin,
are you willing to move out there for a little bit? I didn't know that,
but I love it. That's what it takes.
And I said, fuck.
I said, how do I do this? I said, my family, kids, relationships, what am I going to do?
(36:10):
And I had to make the call. So I ended up moving out starting in January for
a month to the property on site, lived in our model unit. We had a model unit on site.
That's and was bird-dogging that deal every day with the staff.
And they didn't move fast enough, so I fired half of them. And I brought it in.
Well, they didn't like it. They didn't like that I was micromanaging.
(36:32):
I said, well, it's not your money, it's ours. So I said, you're going to do it my way or peace out.
And I said, if you don't do this, I'll step in and run it myself.
And then you'll see the greatest well-oiled machine you've ever seen in your
life. And we got it done. And within six months, we had the reno done.
I had occupancy up to 98%, delinquency down to 2%. Renewal's all done.
Everything locked and loaded. We got the refi done seven days before the 10-year
(36:55):
treasury went through the roof.
And we slid that thing right across the finish line. And our loan guys with
Walker Dunlap, we got it done.
And they called me the next week. They said, Justin, that was the greatest show
we've ever seen in our entire lives.
They said it was so good that every single one of our operators that are running
into problems getting refinances done right now because they're not willing to step up.
(37:18):
We're using you as our example. That's good.
And we've talked to a couple people who are so, like they're blown away that
an owner would move out to his own property. That is insane. Live on site.
And I said, well, you have to understand from my perspective where my mind was
going. We had $7 million in the deal with our investors. Yep.
(37:41):
And these were family friend investors on top of people we knew and didn't know.
These people, first time investors with us. So I'm looking at it like this has
to go because if it doesn't, the rippling effects long-term for us with future
growth and future investments, we're screwed.
And then I had things going on in my mind with my dad thinking,
(38:02):
well, my dad went through this in 2008.
Yeah. And I'm going, no mother effing way.
Yeah. So I said, what do I, WIF or whatever it takes. Whatever it takes.
W-I-T. Yeah. Whatever it takes. I got that freaking hat.
You know, I have never heard you talk about this story. And I'm so happy you
did. WIT. Because whatever it takes.
(38:25):
There's a book by the writer of Blackstone. I forget his name.
One of Grant Cardone's mentors.
And that's what his book's called, Whatever It Takes. And you did that.
You literally moved out there. That is amazing. I love that.
And I will do whatever it takes. Because most people, and this is what's frustrating.
And I can't expect the property managers to run at my pace. It's not their money.
It's not their property.
(38:46):
They're going to do their job. But I did ask them. I said, I at least expect good.
I'm not asking you to be me. Which is great. Right.
But I'm like, I can't expect that, but I should expect good.
Yeah. And I said, if you guys aren't willing, I'm showing you what to do.
(39:06):
I'm telling you what to do. All you need to do is actually do it.
Like, you don't have to think.
Like, I'm captain driving the ship. You just need to row the boat.
And you can't even row the boat.
So I said, next. And I said, let's bring in. So I went through two property
management companies to get to the third one.
And I'm just, you know, it's frustrating sometimes. And we're still battling
(39:27):
with that property, mainly because of market dynamics now. Hurricanes or something?
No, just what's happening. Generally speaking, people have to understand what's
going on because of inflation, because of cost of housing, because of cost of
expenses, because of cost of everything.
Everybody's paying up the yin-yang on all their expenses.
And so they don't have a lot of dry powder sitting there
(39:47):
so every month people i mean you know we're
maybe the fortunate ones but you know there's 60 70
percent of this country that and i don't understand but i get it they're they're
borderline paycheck to paycheck and so when you have a hiccup any hiccup you
can't pay your rent so now you're seeing across the board not just our across
(40:09):
the board in certain markets, delinquency is up,
evictions are up, rents are flatlined.
So when you have revenue on these properties, flattening and decreasing,
and then you have expenses increasing, that margin is now squeezing.
And so now properties are getting cash strapped. They can't pay their bills.
You're seeing massive problems happen with the debt service can't,
which is why you're seeing delinquencies rise.
(40:29):
So you're having major problems across the United States. And I would say mainly
in the Sunbelt States, but probably others.
And so you're seeing cash-strapped properties in the short term so you gotta
hold on to these things if you can. As long as you have good debt and you can just,
break even at the moment, hopefully make a profit, but break even to get to
(40:50):
2026 because 2026 game's going to get better. Yeah. Big time.
So buy, buy, buy, buy, buy right now is 2026.
That's kind of my buy box and strategy here in San Diego is if I can break even
on the existing rents to service the debt and in the background for the first
six to 12 months, I'm working on the plans and permits to build these ADUs,
(41:10):
then I'm sitting pretty.
So that's what you're doing now is you'll break even. Okay. If I'm breaking
even, I'm good. If I cash flow a couple hundred bucks, a thousand bucks, great.
If I'm losing a thousand, I can live with that. But if I'm taking a 5,000 hit
per month, I'm like, okay, next.
Won't even look at it. So you'll float those until you get the permits and the
ADUs and everything done.
Then we'll go ground up, we'll build them, and then just hope and pray that
(41:31):
rates are down and we can cash out refinance.
If we can't cash out refinance, at least not have to cash in refinance.
Right, and you can service the debt still for a period of time? Yeah. Okay. Yeah.
And their lenders will extend and work with you, I'm presuming if things get,
they don't want to, I mean, as long as the property's operating,
I guess, and at least paying itself, hopefully.
Yeah, I took a page out of your book and actually moved into one of my properties
(41:53):
two weeks ago. There you go. But it was in Pacific Beach, so I wasn't complaining.
It's not too shitty. Yeah.
Is that where you're at now? That's where I'm at now. Okay. And are you going
to stay there? Like, what's the plan with that? What's the plan of attack?
Yeah, so we're cash flowing on that deal or breaking even right now.
I'm paying rent at my own property. I have a partner on it. We're 50-50.
And we're building six ADUs.
(42:15):
There's a house in the front, duplex in the back and an open space in the middle.
So you're helping pay in the front and keep some cash flow moving while you build.
Yeah, we're remodeling one of the units.
And so, yeah, we'll break even, build six ADUs, take the three unit to nine
unit, smoke and deal. Create three million of equity.
It's amazing. Holy crap. Yeah. And then you're going to do, I mean,
(42:36):
rates should be in a better position when you're done to refi.
Yeah, when I'm all done, I'll refi. I plan to keep it. So we're not going to
be super leveraged on it.
We will probably want to keep as much cash flow as possible and just pull out
our original equity and maybe a little extra.
Yeah. Wow. That's the model.
Yeah. So I want people to do multifamily. I want the ADU game is great.
(42:58):
But yeah, those are the kind of challenges going on in the market right now. Okay. Yeah.
You know, people that are worried about the election stuff, I tell them,
guys, there isn't a single president
that's going to, that should be dictating how you do in your life.
And if you think that's the case, then you're creating that.
I mean, I can go back and I thought about this. I'm like, let's think about
(43:20):
all the presidents, whether, you know, one side or the other,
have they actually truly affected my ability to do what I need to do?
Because even with taxes, is this that different policies
blah blah blah there's always workarounds yeah if you
notice it like all of the politicians build they'll
set a policy taxes are going up but then they build in the loophole this is
(43:40):
happening build build a loophole yeah everything has loopholes and they do it
because they can that way they can take advantage of the loopholes they all
do it yeah it's the biggest f show you've ever seen in your life and i laugh
at it because i'm like guys Guys, I got news for you.
Whether it's Republican or Democrat, they're not doing any of us any good.
Yeah. So just keep your blinders on, stay focused, you know,
(44:03):
treat people well, work hard. Yeah.
There's the election coming up in San Diego and this guy just popped up on my
Instagram page. I think his name, last name is Turner.
He's an independent guy running, ex-policeman.
But it was interesting to me. He's not a Democrat. He's not a Republic.
And I was looking at his Instagram page. I'm like, this guy might win,
which I think is cool. Cool. I DM'd him. I'm trying to get him on the podcast. Yeah.
(44:26):
So local politics can have an effect.
Yeah. So maybe that's the caveat I should have mentioned. Local politics,
you can actually move things that will affect people.
The national level, I just don't think as much. Yeah. And I just don't. Yeah.
Nice. All right, everybody, that wraps up this podcast.
(44:46):
Unfortunately, the cameras cut off right when I was asking Justin about his love life.
So you guys will have to ask him about that or find him in future podcasts.
You can find Justin on Instagram through official Justin Brennan.
He will also be all over my feed in the coming week where we'll be posting shorts and reels.
(45:08):
But anyways, I hope you enjoyed this episode and we'll see you in the next one. Peace.
You.
Like, what was your mindset in your mid-twenties? Like, back then,
did you believe that you would become successful in real estate and be coaching
and doing all these things?
I had a problem asking people for help.
Simple things. And how do you reach out to people maybe you've built relationships
for that are doing things above you?
You felt like a burden to people. Correct. I had the same thing.
So syndicators, if they'd never done syndication before, are now apparently experts.
(00:24):
And so they went out there and they're chasing returns and they're buying these
deals. and I'll be first. We were one of them on one of our deals.
Thankfully, we are now in a position where we got out of that. But how?
Oh, we had a deal in Texas. We were about 60% done with the renovations. Things were going well.
Rates began to go up. Yeah. So now I'm watching our debt service go from 40,000
(00:47):
a month to over 93,000 a month.
Although we weren't moving fast enough on the renos and we weren't getting to
where we needed to be from an occupancy standpoint.
Knew we had to refi. I'm like, we have to refi by the middle of this year or we're F-U-C-K.
So I called I called my business partners and I said, guys, we business,
I said, what do we do? I said, here's the situation.
And they said, Justin, are you willing to move out there for a little bit?
(01:11):
Music.
All right, everybody, welcome back to another episode of On the Come Up Podcast.
I'm your host, Chris Luna. Today we got Justin Brennan in the studio.
It's actually his studio. Thanks for getting us in here today,
Justin. Yeah, I wasn't sure how we were gonna do this, but I appreciate.
Music.
(01:33):
And we literally just finished this studio, which is always a vision of mine.
It's a mini studio in San Diego to have more officially fish podcasts.
Well, I love that you're setting goals. You're attacking them.
You're getting after it. We're here.
You're creating an awesome reality for you, your kids, Kate.
(01:54):
We'll get into that later.
But yeah, the show's called On the Come Up. And I never really,
usually I just dive in when we start going into it.
But I want to kind of explain the show. The show's on the come up and a lot
of people see Chris Luna, you know, the, the finished product. I'm not finished.
I'm still going. They see you, right? They see this version of you,
but they didn't see the Justin from when he was in his mid twenties and you
(02:18):
know, when he was on the come up, when he was making it, you know,
creating a name for himself.
And so I really want to give the audience a vision of into like what you were
thinking in your 20s when you were trying to create wealth and basically you on the come up.
So we're going to go way, way back.
It's been a journey of as it always is.
(02:38):
I was actually before we even came on this podcast, I was watching Cody Sanchez
and she had a video little reel came out and she says, you know,
listen, man, I know I'm up here on stage talking about all these things.
And you're kind of seeing the finished product of all these years and I have
this portfolio of companies.
But if you don't think I'm getting
kicked in the nuts every day as an entrepreneur, you're out of your mind.
(03:02):
And if you think it's easy, whoever's told you that's full of shit.
And it's hard, but it's worth it. It's worth it.
And so, yeah, I mean, I get it. It's a grind and it's a battle every day.
And even when you've made it, you haven't made it because things are going to
happen because mo' money, mo' problems.
Mo' money, mo' problems. As they say. Spot on. But you have to enjoy the...
(03:26):
The process of it. Yeah. And understand that it is part of the process.
And as you gain wealth and maybe gain profile and gain notoriety and have all
these successes, with that is going to come sometimes some bigger problems.
But you have to realize you can solve them and you work through them step by step.
(03:47):
So I thought that was a great lead in because I kept thinking about that as
you were asking the question.
But yeah, I mean, I came up in real estate a little bit in San Diego,
go learning from I'm kind of a third generation real estate
person along with my brother and my sister before she
had passed but my brother were all in real estate
and we learned first from our grandmother wow who
(04:07):
was the original OG and she was you know hammering away till she was 91 years
old you know owning apartments and stuff in San Diego in San Diego do you know
how many units she didn't have a ton of units she was probably less than 50
that's but they were 100% owned yeah Yeah. Right. Free and clear. Free and clear.
Yeah. No debt. That's nice. Right. And she's driving around at 90 years old
(04:29):
in her little S10 Chevy truck.
Yeah. Collecting rent like a little Italian woman, you know,
and, but we learned a lot of that growth and wealth and stuff from her.
And she taught my dad and gave my dad the chance to then learn it and grow up through it.
And he was kind of the transitional character because while she did pretty well
for herself, my dad was It was like the guy that really made it.
(04:53):
But then he also lost it. Oh, wow. We're going to talk about that later.
All of the above. But I learned a lot from him. And I've seen poor.
We've been poor. We've been rich. I've seen them both. I've seen poor,
rich, poor. So we've seen it all, right? The top and the bottom.
And so you appreciate things. You understand the value of the grind.
(05:14):
I was never a trust fund silver spoon kid before.
So my dad was really good at teaching us the value of a dollar. I love that.
You know, they say that the first generation makes it. Maybe I think the second
generation keeps it and the third generation loses it.
It's something like that. I'm just happy that you haven't lost it.
Well, yeah, we haven't. I haven't gone bankrupt. I haven't lost it.
(05:37):
But at the same time, I think because you've seen some things,
I've seen money do good things. I've seen money do bad things.
You know i i i learned recently in
the last probably 12 months you
know some limiting beliefs that i had created yeah as a result of my upbringing
my surroundings my experiences with money good and bad and stuff it was creating
(06:01):
in my brain for myself so and then it can actually hold you back if you don't
realize what it's doing to you and i know we spoke when i was on
your podcast about some things you're doing to help with those limiting beliefs.
I think one of them was the hypnosis.
Yeah. The hypnotic reprogramming. I can tell that's some wild crap. Yeah.
Yeah. It's been good for you. It has been incredible for me.
(06:23):
You seem like a very clear-minded person. Would you describe yourself as that? Yeah.
I mean, I've always been driven and focused and able to take complex things
and simplify them and very task-oriented, it.
But I would say I can calm myself now because I think faith has helped with
(06:43):
that, getting closer to faith.
I think, I know the hypnotic reprogramming has done that.
It's kind of switched my mind from, you know, how can I, or can I,
I should say more like, can I do that to how can I do that? I love that.
Does that make sense? Yes. Simple little tweak of words. Yeah.
And then in changing framework of mine from, oh, I have to do that to,
(07:05):
I get to do that. That's good.
And removing limiting belief systems that I, that were there that I was completely
unaware of from things from how do you, I had a problem asking people for help, simple things.
And how do you reach out to people? Maybe you've built relationships for that
are doing things above you.
And you're like, listen, man, you know, can I get, do you know anybody that
(07:28):
can help me out with this.
I'd always had a problem with that simple thing. You felt like a burden to people.
Correct. I had the same thing because I hadn't built that relationship capital in my mind.
So having met Jeff Fenster and then going in and yeah, man, I got all tabbed
and everything by meeting him and experiencing kind of how that relationship
capital game works. Yep.
And then the hypnotic reprogramming from removing that stuff to saying,
(07:50):
no, you're worthy and it's okay to ask for help. Yeah.
You need to obviously build that relationship bank account.
You can't just be a taker, you gotta be a giver too. Gotta be a giver,
yeah. And then also removing the limiting belief I'd had around.
Thinking things were always going to be hard for me. And that we found out that
stemmed from early childhood and a learning disability.
(08:12):
Like when we got, when I did the hypnosis and we went in, like we tracked it
all the way back to when I was about six, seven years old.
And when we had found out I had a learning disability and then that triggered
a lot of things of, oh, learning's going to be hard. Money's going to be hard.
Life's going to be hard. You're always going to have to work harder.
You're always going to have to do this harder. You're always going to going
to have to give extra because it's never going to come easy.
(08:34):
And so it cemented this triggering belief system. So therefore everything's
going to be harder for you, Justin.
And then also like self-fulfilling prophecy, like your brain is probably looking
for things to prove yourself right.
Because since you think everything is going to be hard in life,
you want to prove to yourself, right? Well, yeah, you create it.
You don't even realize it and you'll put yourself in situations.
(08:55):
And then And because your mind's thinking a certain thing, you know,
as we all know, your mind will create that in reality because it's sending,
people don't, what I had to learn was the power frequency.
Meaning you want to be rich. Okay. I want to be a multimillionaire. Okay.
Great. Well, you can say it. I want to be a multimillionaire.
(09:17):
And by doing that, I'm sending a frequency for my energy, my body out to the
universe. And that's cool.
Like that's step one. It's cute. Yeah. But what people, what they miss is- Action.
Correct. And they miss alignment in opportunities that they don't recognize.
Because you'll send the frequency out. But let's say we leave here from this
podcast and I go down, and I want to be a multimillionaire in real estate.
(09:41):
But let's say I didn't know much about real estate at that point.
And now I go down to the Starbucks five minutes from now, and I'm sitting down having a cup of coffee.
And somebody walks in and sits down next to me, maybe like this,
but I'm paying attention.
I'm on my phone. I'm doing this stuff. And I hear him on the phone.
He's talking about some real estate deals that he's doing.
And he's looking for partners or he's looking for people to help him and all this stuff.
(10:02):
And do you see what's happening? I sent it out to the universe, the frequency aligned.
But now the universe is bringing me an opportunity that I'm not recognizing as an opportunity.
They're sitting right next to me at a coffee shop talking about real estate.
The guy's on the phone saying, I need people to partner with.
I need people to find deals.
I need people to do this. I need people to do that. He's talking about,
I'm trying to find this person. And I don't speak up.
(10:25):
A lost opportunity yeah you see like it's so simple
yeah but you didn't recognize it you asked
the universe for it the universe gave it to you in in the form of
a small frequency and you did not take action on it yeah that's the difference
between people and i i love that some people won't speak up because of the limiting
belief the fear of judgment right i used to have this problem what's the worst
(10:45):
thing they say fuck off yeah excuse my language but that's the worst that's
the worst thing that can happen.
Or they say, oh, you already have that.
Meaning you're already fucked off because you have nothing. So you might as
well ask and talk and see if something happens and add value.
Question for you. In your multifamily education platform, because I know this
(11:08):
to be true for me, I was in Grant Cardone's real estate club.
And often, this is before I had a problem with public speaking.
I couldn't speak up. I would take in the info. I'd listen. I'd I laugh, I engage.
But when it came time for raise your hand and ask questions,
I wouldn't ask questions. At an event?
At an event, in person, and on Zoom calls. So my question for you is,
(11:28):
do you see that certain people on your calls that you run are scared to talk?
Because I know at my program, sometimes I see people don't want to talk.
Yeah, so the way around that is teeing up a prerequisite question where I say,
hey, I had another student ask this recently.
Boom, boom, boom, boom. And I'll actually ask, I'll prep the question.
(11:51):
Yeah. Next thing, oh, yeah, yeah, that's what I was thinking.
Yeah. Then they'll raise their hand. Got it. Or I'll tee up a problem that I
know everybody tends to deal with.
Okay. And then it kind of lowers their fear of, oh, I was the only one thinking this.
So, yeah, yeah, I think as a leader, and this is where people need to understand
this, as a leader, it is your job to get people to open up.
(12:13):
Open up. Because most people won't. Yeah. because of the fear of rejection.
Simply that. It's usually the fear of rejection or the fear of losing money.
Like when you ask a lot of people that are thinking about doing things, it's twofold.
It's the fear of rejection or loss and the fear of losing money, right?
So that's why they typically won't take action because they either don't believe
(12:35):
in themselves or they believe whatever they're about to do.
Is not going to get them to where they want to go, like give them the outcome.
So that's usually the two biggest fears people will have is,
oh, am I going to lose a bunch of money?
Or, hey, I totally believe in your program. It's everything I'm looking for.
But then I'm like, well, why don't, weren't you ready to go?
(12:56):
They don't believe in themselves enough to actually, am I going to step up? Yeah.
Like, am I going to do what I say I'm going to do? Meaning you guys are going
to do everything you're saying you're going to do.
But do I believe even myself, like I'm going to step up. Yeah.
I love that where the two real estate guys here in San Diego,
but we're actually peeling the layers back because before you become ultra successful
(13:18):
in real estate, I think you got to do the, not, I think you have to do the inner work.
It's very evident you've done the inner work. Okay. Let's bring it back though.
Okay. So Justin Brennan in his twenties on the come up, like,
did you ever back then, did you believe that you would become successful in
real estate and be coaching and doing all these things and have the capital company?
(13:40):
Like what was your mindset in your mid twenties? Did you think you'd make it?
Yeah. So let's step back in the mid twenties. So twenties, I just come out of
college. What college? Pepperdine university.
I was very blessed to go there. Originally I was going to go to U of A to play
baseball. Oh, nice. University of Arizona.
I spent some time out there. Yeah. And it was, I mean, I loved it.
I mean, party school USA, but that was part of the the problem.
(14:03):
So I went out there with my dad, we toured it and I was getting ready to sign
a letter to play baseball there.
Came home for the weekend. My dad said, Hey, I want you to think about it.
Come on for the weekend, make a decision on Monday.
And on Saturday, it actually received a letter in the mail to accepting at Pepperdine,
which wasn't my first choice. I wanted to go to USC.
I just got denied and went to Pepperdine and it was incredible.
(14:27):
Loved it. Came home from school.
But when I came home from school, I didn't want to be like, Hey dad, where's my job?
I could have done that, but I said, no, I want to go out and grind and figure
it out on my own, have some success so I know that I can execute.
So I actually worked in title insurance. Oh, wow. For about three years, from 2002 to 2005.
I learned a lot. Oh, a ton. I mean, people think title insurance,
(14:50):
they think it doesn't matter. Oh. And you're right. It doesn't matter until it matters.
It's like any insurance, in case shit happens. So you don't really need title
insurance, but you need it because then when you have problems, you really need it.
So yeah, I did that for three years during the boom time of real estate,
as we all know, in the early 2000s. And that was awesome.
(15:10):
Then came out of that, went back to grad school for a couple of years,
came out of that and went to, at that time, to work with my dad.
And that's where I learned the development space.
Grad school helped me out with that and learning the development and construction
of commercial real estate.
That's what your dad does or did. Yeah. He did subdivisions,
large Large subdivisions of 50 homes, 100 homes, then maybe 200 unit complexes, multifamily.
(15:33):
Started in San Diego, then different cycles took him into Idaho and then Las Vegas.
Wow. I mean, he was doing Las Vegas, built almost 2,000 units in Las Vegas.
So my history with Vegas is pretty good. I didn't realize. There's something
else out in Vegas that you like too.
So my history with Vegas is pretty... I didn't realize this,
(15:54):
but all the way from the late 90s and the early 2000s. Wow.
I mean, my dad was traveling every Monday morning. He'd get on a plane at 6 a.m.
38 minutes later, he's in Vegas. Yeah. And he'd work till Thursday night at
his office. Had a house out there near Summerlin.
Get on plane, fly back Thursday night.
Thursday, Friday, Saturday, Sunday, he's here. Get on a plane Monday morning, do it again.
(16:17):
And he did that for over a decade. It's like a bus ride. Pretty much.
It's a bus ride. It's a bunny hop. Yeah.
And did that. and then he did Sacramento, he did Southern Riverside,
and that's when the collapse happened.
That's Sacramento yeah you're Sactown Sactown all right well Elk
Grove but you know so he he had a condo conversion in Elk
Grove where at do you know I think it
was called Elk Grove Boulevard something like that
(16:38):
there's something like had oak Elk Grove something in
it but yeah it's a condo conversion yeah that we did up there like 248 units
wow and that was right in the collapse happened 2009-10 right
in there right in 2008-9 is when
that we were right in the middle of that conversion in the
banks everything collapsed and then he had roseville he
built built a bunch in roseville great market built two
(17:00):
different complexes in roseville a few hundred units and then
las vegas he had probably over a
thousand almost two thousand units in vegas built ground
up okay that's awesome so was he like
syndicating these where he'd go get i mean technically syndicating i
mean technically anytime you raise money it's syndicating yeah i mean people
but most people don't use that term unless they're putting the whole private
(17:24):
placement memorandum together securities attorneys blah blah blah but yeah he
was raising money he was doing it with his money in conjunction with investors
yeah and putting deals together and doing large.
Condo projects and apartment complexes that's amazing
there's a combo of both with some single family subdivisions
and then you do some luxury houses and stuff and that was all the way through
(17:45):
the financial crisis until it collapsed got it and so you obviously seen your
dad like have to go through 2009 has development ever scared you because you
you understand development well would you ever get into development because
i know you're more focused on like multi-family Yeah,
so that was one of the things. I'm not against development.
(18:05):
I'm against development in California and on sale product.
I will do development on rental product because I realized that everybody needs
food, water, and shelter. Yeah.
Food, water, and shelter. And more people rent than buy.
And when you're in market cycles, especially in California, where it takes you
(18:28):
14 years to develop anything, you can get caught because you buy something today
based on X numbers on selling it.
And that doesn't happen. You get caught in a market cycle and boom, party's over.
Got it. Whereas if you're doing it under rental product, you know,
for the most part, rents are stable and rising and supply is constrained strained
because of the development problems.
(18:49):
So your rents continue to stay stable and rise. And that's been pretty historical
in San Diego. There's only been a couple instances where rents have actually gone down.
So for the rent stuff, it's great. For the for sale product, I know.
Got it. Yeah. I'm with you on that. As you know, AD development for me leading into that.
But would I do development outside? But it's always going to be in the rental game.
(19:09):
Yeah. I don't see myself doing build and sell large development product.
We would do smaller, which we've done, like maybe five. A couple of condos at the beach.
But I'm not getting into a 50 to 100, 200 unit type development, build and sell product.
It's just you're asking for it. Got it. Got it.
Okay. You got to have super deep pockets. Yeah, super deep pockets. Yeah.
(19:34):
Not quite there yet. Someday.
Okay, cool. So...
You do multifamily deals outside of California.
Where are your current deals? And tell us a little bit about the company that
I guess you guys raise capital.
I know what you do, but the audience, they want to know what you do.
So you raise capital, you go and buy deals.
(19:54):
I see you on planes sometimes going there, coming back, just like your dad, like father, like son.
I love it. I mean, in a way, yeah, a decent amount of travel.
And that's mainly because California, you know, our money can only go so far.
I mean, we started here, but as time has gone on, the landlord-tenant laws,
business climate's been more challenging.
So you have to be tactful. I mean, you can still invest well,
(20:15):
I would say, in Southern California.
So call that Orange County South is good. Anywhere north of that,
things have gone a little cray-cray.
But, you know, it's harder in California. It's just in general.
So we had to take our money outside of California. So we started.
All right, everybody. This episode is brought to you by BackyardCommunity.com.
(20:37):
At BackyardCommunity.com, we teach you deal, debt, equity, where you can find
deals just like this one that I just bought, where I'm going to add six ADUs
and increase the value by over $3 million.
The community is growing daily. We'd love for you to be there.
It includes two Zoom calls per week, video courses, step-by-step tutorials.
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And everything you need to get your first multifamily development deal done.
(21:00):
So click Click the link below and let's get back into the episode.
2018. Got it, okay. So we had started with one condo.
$100,000 in the financial crisis and then started buying duplexes and fourplexes.
Did most of that with our own money up until the mid-2000s. And then started
realizing, hey, for us to scale and grow, we got to start getting into bigger deals and syndicate.
(21:24):
And in order for our dollar to go farther, we had to go out of state and go
mainly into the Midwest.
Like the middle part of the United States, call it. Okay. So that's where,
you know, now investing in Nevada and Arizona and Texas and Oklahoma and Missouri,
and even into Tennessee,
which we're not there yet, but we're looking and others parts of the middle
part of the country is where you can go buy things for between 50,000 per unit. Wow.
(21:50):
To maybe 150,000 a unit. Yep.
Whereas here in San Diego, it's 300,000 a unit. Yeah.
That would be, a good deal at $300,000 a unit.
Yeah, so your dollar is going to go farther and if you run them well,
you can get good returns for you and for your investors.
So that's how we were able to scale from, call it 20 units, which we owned here
(22:11):
in San Diego, to now 557 units.
Wow. And trying to go towards 10,000. Let's go.
That's all happened. We went from 20 units to 557 all within the last 36 months.
Three years. Well, yeah, call it 2021 to 2024.
So yeah that's great so what's that
assets under management over 157 million
(22:32):
157 million right which on
the syndicating apartment game is nothing right when you go
talk to some of these other people that are in much higher space you know they
have 500 million or a billion yeah right like the you want to do you want to
get to a billion hundred hundred percent yeah because i mean i take there's
some people i look at call it i think it's ashcroft you know with joe farrell
(22:55):
and those guys in his company,
they have like 13,000 units and about 2.8 billion.
And then, of course, you got Grant Cardone. He's at about 5 billion and I think
he has the same number of units, but he does A-class type stuff. Yeah.
But yeah, getting to a billion, you know, Elevate Capital, those guys, I know them well.
They're about 5,000 units and probably five to 700 million in assets.
(23:19):
So yeah, it can absolutely be done. So as far as your team goes,
because maybe there's some investors out there who want to get into syndication,
what was needed on the team?
Like there's you, there's your partner, maybe there's an analyst.
What's the team look like to actually build this syndication company?
Yeah. So in the beginning, you have to go lean and mean. So it was me and Chris.
(23:39):
And then I started hiring outsource people that weren't under the payroll,
but we were still paying on a per, like a monthly retainer.
So I had an analyst guy that would analyze, you know, you need to see a lot
of deals then to like filter them down into one that you would actually do.
So I hired an analyst guy who would analyze everything from a high level.
And I would just start shooting him deals.
(24:00):
And he'd throw them into the simple spreadsheet, see if it even meets our basic metrics.
Back of the napkin. Back of the napkin. then if it meets the back of the napkin,
then I'll start looking at them further and funnel them down.
So that's how that started with the analyzation part.
And then boots on the ground. I mean, as long as you have in the States,
so usually what we would do is before we go investing into any market,
(24:22):
I would spend a couple months up front.
Traveling out there once or twice, touring properties, touring markets,
touring areas, meeting the brokers, meeting the property management crews,
setting up the construction crews.
Got it. And that's in each market we're in. And I would do that a month or two in advance.
So that way all the backend stuff is locked and loaded. So once we start to
(24:42):
see deal flow and we actually start moving on deals, we're not catching our tail. Got it.
And so in the background, so that's front of the house.
I love that you're out there, you're doing it, you're hustling,
and you're grinding on the back of the house.
Like, are you guys raising money actively hopping on calls? Where are you finding those investors?
Is it 401k money set by IRA? Where does the bulk of your guys' capital come
(25:04):
from? Yeah. So we started deal by deal, right?
And so I always, people are like, I want to start a fund. I'm like,
well, you can, you have to understand when you do a fund, your investors are
people that are going to invest with you. They're investing on your strategy.
So if you haven't had a track record of a strategy, it's very hard for somebody
to to invest with you or give you anything more than a soft commitment. Got it.
(25:25):
Right. Because imagine this for a minute. If I was just getting started and
I came to you, Chris, and I said, Hey, I have a fund, a $10 million fund,
and we're investing in real estate. You'd say, great.
What are you investing in? Oh, we're doing multifamily, this, this, and this.
And you're like, awesome. Well, do you have like a specific deal that I can
look at? Because I don't know you that well yet.
I don't, you know, track record of doing this. So I can't like buy into your strategy yet.
(25:46):
Got it. Cause you haven't had a, you know, a beginning and an end where I can
actually see a track record.
Easier to do on a deal-by-deal basis because then I can come to you and I say,
hey, I have this 50-unit deal in San Diego and minimum investment's $25,000 or $50,000.
Projected returns are 18% to 20% a year on your money. Who do you know that may have some interest?
(26:07):
And then they're going to say, well, I may. Do you have something you can send
me? Great. I'll send you the pitch deck on the deal.
And here's this 20 or 50 unit deal. It's going to break it down for you.
It's going to show you the actual property, how much money we're raising,
where's your money coming into that, what's your projections,
when are you getting your money out, how long is it in, et cetera, et cetera.
It's going to answer all, 95% of the questions that you may have about that
(26:29):
specific deal. And it's deal-based.
So that way it can attract the actual money.
Because otherwise you're just going to get soft commitments from people,
where they'll say, yeah, I'll invest with you when you have a deal.
You'll hear that a million times. Yeah, that's so good because we've been looking
at multifamily syndications out of state. Nevada being one of them.
Cincinnati, obviously spent some time out there. Texas. Cincinnati's good.
(26:52):
Ohio's a good market. Yeah, we like it out there. Like I know the little pockets
because I used to walk those streets.
So we've been eyeing that. We actually were going after a deal out there.
But where I was going with that is we did realize it was harder to raise funds for that.
Now, I love what you just said. That was the golden nugget for me personally
is if I lean into my track record of ADU development, a fund for ADU development
(27:15):
in San Diego, which is probably one of the best places to build ADUs in the US,
I'd probably have more success on a fund on that.
And then I'm not competing with, say, multifamily. No, why were you trying to
raise money before you had a deal in Cincinnati?
No, this was, yeah, we didn't have it in a contract, but the gun to the head
type thing kind of scares us a little bit. Like, got to close in 60 days.
(27:36):
That's what frightens us.
Well, okay. So let's walk through that for a minute. Okay. Because I understand
that's the contract time and then you have extensions you can build into that.
Yeah. But let's call it 90 days.
Okay. Because you typically get 60 plus a 30-day extension. Yeah. Yeah.
And depending on the size of the deal, so this is where a lot of the mentee
students come in and they get caught. Everybody gets freaked out.
(27:57):
They're like, yeah, I can find deals. We can show you how to do that.
I can analyze deals. I can show you how to do that. And then they get to the money part.
They're like, I don't know how to finance. I don't know how to get the loan.
I don't know how to raise the equity. I get bottlenecked and they stop.
And I try and tell them, I said, well, it starts with the deal first.
Because if you have a deal that makes financial sense.
Raising the money is not that hard. But if you don't have a deal that doesn't
(28:19):
make financial sense, raising the money is very difficult.
Because if I came to any investor and I said, hey, I can produce 14% to 20%
projected returns for you on your money annually, and here it is,
it's a minimum $25,000 investment,
raising that money is not that
hard if the deal makes sense and they trust you that you're not a fraud.
And you also don't want your raise to be too big for your first one if you don't have a track record.
(28:44):
So that's another thing people get at because they're getting taught by these
gurus out there to go after 50 plus unit deals on their first ones.
And I'm like, yo, you have a better chance of breaking into the White House.
Than you do of getting that deal and executing it and raising the capital and
actually making it happen on your first one.
So you need to stick 10 to 30 units for your first syndication apartment deal,
(29:05):
10 to 30 units because you're dealing with mom and pop brokers,
mom and pop sellers, lenders who will call you back.
The capital size is small enough. You're raising maybe three to 600,000. Okay.
You're bringing in 10% of that. Call it 60 grand. You're raising.
Personal funds. Yeah. You're bringing in 10% of the capital stack.
So if it's 600 grand, you're raising total down payment. You're bringing in 60K. Okay.
(29:29):
And then you're raising, call it 540K. So raising 540K from 25,
50, and $150,000 investors, you will get that with five to seven people on a
deal of that size. I like that.
Basically, I always thought of it this way. On a syndication deal,
as a syndicator, you can tie up the property with an earnest money deposit and that's your money.
(29:52):
And then your job is to go- And it's refundable, at least in this market right now.
It's refundable. like the days of the non-refundable earnest money are gone
because the market's a challenge now.
So earnest money is fully refundable during the due diligence period.
Got it. So usually that's 30 days and then maybe you get an extension on that
or something. There's always workarounds. Okay.
Let's talk about today's market since you just brought up.
(30:16):
So what are you seeing in today's market? I know I'm starting to see more deals.
Obviously, we're talking about interest rates coming down.
What are you seeing out there? Okay. So in the commercial multifamily space, it's a shit show.
Okay. Right. Because the capital markets are a disaster right now.
They're getting better for financing, but you have to understand all of the
(30:36):
headwinds that have been created because of all the deals that were done from
about 2021, 2020, 2021 into 2022.
So that two-year window, you had an enormous amount of deals done yeah 90 of
them are done on variable rate financing yeah right the value add.
(30:58):
There's some people losing a lot of money yeah so syndicators if
you've never done syndication before are now apparently experts and so they
went out there and they they're chasing returns and they're buying these deals
and i'll be first we were one of them on one of our deals thankfully we are
now in a position where we got out of that but how well let me explain it okay yeah there was I mean,
(31:19):
you want to talk about threading a needle.
Yeah. We threaded a needle. Thank goodness it was only one.
Okay. Because there's some syndicators out there that have lost gobs of money.
Tides. For themselves and for their investors. Tides equities being one of them.
Yeah. Tides is one of them. There's a handful of other ones.
But they're still around. Tithe is still around, but they've had to give properties
back. All these things have happened and there's many others.
(31:41):
So you had a lot of deals done where they would buy the property.
They would bank on, they'd buy it in negative leverage, meaning it doesn't cash flow today.
But they're going to go in, renovate, and then make the property better with better rents later.
So it's going to cash flow later, presuming you hit that.
The problem is, everything that was done in 2021 and 2022,
(32:03):
2022 well interest rates went up in 2022 as we all know and
they went for us we had a loan at four and
a quarter percent that went to nine and a half percent double and
we weren't the only ones we were one of thousands of syndicators that's the
floating rate debt yeah so you can imagine and the reason why you do floating
rate debt is because the fixed rate debt would not provide you renovation dollars
(32:24):
for your deal got it right so you would have to then raise that through more equity.
Which lowers returns. Correct. Yeah. So everybody was in there saying,
okay, well, things are good now. We'll go ahead. We'll take the variable rate.
We're going to renovate this thing in 18 to 24 months, and then we'll refinance
it into fixed rate money then. Once the NOI had increased.
(32:45):
And that's cute and a great idea. And it worked very well for several years
until the interest rates go up.
Which no one could have predicted. well we i
mean so we projected they would go up there wasn't
we weren't morons nobody in their right mind would ever expect them to go up
nine times i think it was maybe 11 times in nine months yeah so that was the
(33:07):
crux is we knew they would go up so i projected in our numbers oh they're going
to go up a couple percent yeah let's bank that in we'll be fine blah blah blah but not.
Double in nine months. So it makes your deals go upside down.
And so what's happened now today here in 2024 is all these guys who've been
kicking the can down the road, they can't get out of their deals and they can't,
(33:30):
they can't feed the debt.
And so they're either handing the keys back or they're selling them at massive
discounts or they're trying to do some workouts.
You're seeing some workouts. So if you're big enough, maybe you get some modifications
done, but it is a massive disaster.
And then you have a lot of these banks holding onto this bad debt that are not
reporting it and not talking about it.
(33:50):
And it's not being reported on CNBC, but all you need to do is go on cred.IQ
and they'll show you all the bad debt loans out there in the multifamily space.
Wow. Cred.IQ. It's cred.IQ.com. So they track all the debt. Oh, wow.
Yeah. And they'll show you all the bad debt, both in the office space,
(34:10):
which we know is isn't bad.
Yeah. And then multifamily, which the delinquency rates are going up pretty drastically right now.
So what that means is there's blood in the street, blood in the street,
but that also means there's opportunity. Yeah.
I love that. Okay. So how did you guys get out of the situation you're in?
So we got out by the skinny skin of our lucky skin skin.
(34:35):
So we had a deal in Texas. this, we were about 60% done with the renovations.
Okay. Things were going well.
Rates began to go up. Yeah. So now I'm watching our debt service go from $40,000
a month to over $93,000 a month.
And it's eating through the interest reserve. So when you do these deals,
you bank in with the interest reserve to pay the bank while you renovate so
(34:59):
then you can refinance it later.
So that's all banked into the total cost as an interest reserve to pay the loan each month.
Well, Well, when your interest reserve, when your cost per month double,
you're going to eat through that interest reserve a lot faster,
which means you need to move faster.
Got it. Otherwise, you're going belly up. Yeah.
So I saw that coming and I saw that we weren't moving fast enough on the renos
(35:22):
and we weren't getting to where we needed to be from an occupancy standpoint.
That's why I saw you on Southwest flights just flying out there all the time.
So I ended up making a call in January of last year, in 2023. Okay.
As I saw it coming, I knew we had to refi. I'm like, we have to refi by the
middle of this year or we're F-U-C-K'd.
So I called my business partners and I said, guys, we business, I said, what do we do?
(35:46):
I said, here's the situation, you know, what do we do? And they said, Justin,
are you willing to move out there for a little bit? I didn't know that,
but I love it. That's what it takes.
And I said, fuck.
I said, how do I do this? I said, my family, kids, relationships, what am I going to do?
(36:10):
And I had to make the call. So I ended up moving out starting in January for
a month to the property on site, lived in our model unit. We had a model unit on site.
That's and was bird-dogging that deal every day with the staff.
And they didn't move fast enough, so I fired half of them. And I brought it in.
Well, they didn't like it. They didn't like that I was micromanaging.
(36:32):
I said, well, it's not your money, it's ours. So I said, you're going to do it my way or peace out.
And I said, if you don't do this, I'll step in and run it myself.
And then you'll see the greatest well-oiled machine you've ever seen in your
life. And we got it done. And within six months, we had the reno done.
I had occupancy up to 98%, delinquency down to 2%. Renewal's all done.
Everything locked and loaded. We got the refi done seven days before the 10-year
(36:55):
treasury went through the roof.
And we slid that thing right across the finish line. And our loan guys with
Walker Dunlap, we got it done.
And they called me the next week. They said, Justin, that was the greatest show
we've ever seen in our entire lives.
They said it was so good that every single one of our operators that are running
into problems getting refinances done right now because they're not willing to step up.
(37:18):
We're using you as our example. That's good.
And we've talked to a couple people who are so, like they're blown away that
an owner would move out to his own property. That is insane. Live on site.
And I said, well, you have to understand from my perspective where my mind was
going. We had $7 million in the deal with our investors. Yep.
(37:41):
And these were family friend investors on top of people we knew and didn't know.
These people, first time investors with us. So I'm looking at it like this has
to go because if it doesn't, the rippling effects long-term for us with future
growth and future investments, we're screwed.
And then I had things going on in my mind with my dad thinking,
(38:02):
well, my dad went through this in 2008.
Yeah. And I'm going, no mother effing way.
Yeah. So I said, what do I, WIF or whatever it takes. Whatever it takes.
W-I-T. Yeah. Whatever it takes. I got that freaking hat.
You know, I have never heard you talk about this story. And I'm so happy you
did. WIT. Because whatever it takes.
(38:25):
There's a book by the writer of Blackstone. I forget his name.
One of Grant Cardone's mentors.
And that's what his book's called, Whatever It Takes. And you did that.
You literally moved out there. That is amazing. I love that.
And I will do whatever it takes. Because most people, and this is what's frustrating.
And I can't expect the property managers to run at my pace. It's not their money.
It's not their property.
(38:46):
They're going to do their job. But I did ask them. I said, I at least expect good.
I'm not asking you to be me. Which is great. Right.
But I'm like, I can't expect that, but I should expect good.
Yeah. And I said, if you guys aren't willing, I'm showing you what to do.
(39:06):
I'm telling you what to do. All you need to do is actually do it.
Like, you don't have to think.
Like, I'm captain driving the ship. You just need to row the boat.
And you can't even row the boat.
So I said, next. And I said, let's bring in. So I went through two property
management companies to get to the third one.
And I'm just, you know, it's frustrating sometimes. And we're still battling
(39:27):
with that property, mainly because of market dynamics now. Hurricanes or something?
No, just what's happening. Generally speaking, people have to understand what's
going on because of inflation, because of cost of housing, because of cost of
expenses, because of cost of everything.
Everybody's paying up the yin-yang on all their expenses.
And so they don't have a lot of dry powder sitting there
(39:47):
so every month people i mean you know we're
maybe the fortunate ones but you know there's 60 70
percent of this country that and i don't understand but i get it they're they're
borderline paycheck to paycheck and so when you have a hiccup any hiccup you
can't pay your rent so now you're seeing across the board not just our across
(40:09):
the board in certain markets, delinquency is up,
evictions are up, rents are flatlined.
So when you have revenue on these properties, flattening and decreasing,
and then you have expenses increasing, that margin is now squeezing.
And so now properties are getting cash strapped. They can't pay their bills.
You're seeing massive problems happen with the debt service can't,
which is why you're seeing delinquencies rise.
(40:29):
So you're having major problems across the United States. And I would say mainly
in the Sunbelt States, but probably others.
And so you're seeing cash-strapped properties in the short term so you gotta
hold on to these things if you can. As long as you have good debt and you can just,
break even at the moment, hopefully make a profit, but break even to get to
(40:50):
2026 because 2026 game's going to get better. Yeah. Big time.
So buy, buy, buy, buy, buy right now is 2026.
That's kind of my buy box and strategy here in San Diego is if I can break even
on the existing rents to service the debt and in the background for the first
six to 12 months, I'm working on the plans and permits to build these ADUs,
(41:10):
then I'm sitting pretty.
So that's what you're doing now is you'll break even. Okay. If I'm breaking
even, I'm good. If I cash flow a couple hundred bucks, a thousand bucks, great.
If I'm losing a thousand, I can live with that. But if I'm taking a 5,000 hit
per month, I'm like, okay, next.
Won't even look at it. So you'll float those until you get the permits and the
ADUs and everything done.
Then we'll go ground up, we'll build them, and then just hope and pray that
(41:31):
rates are down and we can cash out refinance.
If we can't cash out refinance, at least not have to cash in refinance.
Right, and you can service the debt still for a period of time? Yeah. Okay. Yeah.
And their lenders will extend and work with you, I'm presuming if things get,
they don't want to, I mean, as long as the property's operating,
I guess, and at least paying itself, hopefully.
Yeah, I took a page out of your book and actually moved into one of my properties
(41:53):
two weeks ago. There you go. But it was in Pacific Beach, so I wasn't complaining.
It's not too shitty. Yeah.
Is that where you're at now? That's where I'm at now. Okay. And are you going
to stay there? Like, what's the plan with that? What's the plan of attack?
Yeah, so we're cash flowing on that deal or breaking even right now.
I'm paying rent at my own property. I have a partner on it. We're 50-50.
And we're building six ADUs.
(42:15):
There's a house in the front, duplex in the back and an open space in the middle.
So you're helping pay in the front and keep some cash flow moving while you build.
Yeah, we're remodeling one of the units.
And so, yeah, we'll break even, build six ADUs, take the three unit to nine
unit, smoke and deal. Create three million of equity.
It's amazing. Holy crap. Yeah. And then you're going to do, I mean,
(42:36):
rates should be in a better position when you're done to refi.
Yeah, when I'm all done, I'll refi. I plan to keep it. So we're not going to
be super leveraged on it.
We will probably want to keep as much cash flow as possible and just pull out
our original equity and maybe a little extra.
Yeah. Wow. That's the model.
Yeah. So I want people to do multifamily. I want the ADU game is great.
(42:58):
But yeah, those are the kind of challenges going on in the market right now. Okay. Yeah.
You know, people that are worried about the election stuff, I tell them,
guys, there isn't a single president
that's going to, that should be dictating how you do in your life.
And if you think that's the case, then you're creating that.
I mean, I can go back and I thought about this. I'm like, let's think about
(43:20):
all the presidents, whether, you know, one side or the other,
have they actually truly affected my ability to do what I need to do?
Because even with taxes, is this that different policies
blah blah blah there's always workarounds yeah if you
notice it like all of the politicians build they'll
set a policy taxes are going up but then they build in the loophole this is
(43:40):
happening build build a loophole yeah everything has loopholes and they do it
because they can that way they can take advantage of the loopholes they all
do it yeah it's the biggest f show you've ever seen in your life and i laugh
at it because i'm like guys Guys, I got news for you.
Whether it's Republican or Democrat, they're not doing any of us any good.
Yeah. So just keep your blinders on, stay focused, you know,
(44:03):
treat people well, work hard. Yeah.
There's the election coming up in San Diego and this guy just popped up on my
Instagram page. I think his name, last name is Turner.
He's an independent guy running, ex-policeman.
But it was interesting to me. He's not a Democrat. He's not a Republic.
And I was looking at his Instagram page. I'm like, this guy might win,
which I think is cool. Cool. I DM'd him. I'm trying to get him on the podcast. Yeah.
(44:26):
So local politics can have an effect.
Yeah. So maybe that's the caveat I should have mentioned. Local politics,
you can actually move things that will affect people.
The national level, I just don't think as much. Yeah. And I just don't. Yeah.
Nice. All right, everybody, that wraps up this podcast.
(44:46):
Unfortunately, the cameras cut off right when I was asking Justin about his love life.
So you guys will have to ask him about that or find him in future podcasts.
You can find Justin on Instagram through official Justin Brennan.
He will also be all over my feed in the coming week where we'll be posting shorts and reels.
(45:08):
But anyways, I hope you enjoyed this episode and we'll see you in the next one. Peace.
You.
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