Multi-family Investing with Earnest Harbin
“Nobody’s perfect. Even stock traders make bad trades, real estate guys make bad, sometimes they don’t call it right. Sometimes, they miscalculate construction calls. Just because you did a bad deal because you did something wrong doesn’t mean that you don’t know what you’re doing.” – Earnest Harbin
Earnest Harbin, has spent his entire professional career focused on Real Estate which has shaped the company’s investment philosophy and attracted him to real estate investing as a viable investment partner that is trustworthy and dependable. A lifelong resident of Georgia, since he was 21-years-old he has been involved with construction and real estate investing. Initially he worked on framing crews, then owned and operated a successful painting company, then worked his way into small fix-and-flips, new home construction, and eventually multifamily investing.
Earnest launched his career in flipping single family homes and progressed into custom home building, with a combined total of roughly 100 homes, where he managed the renovation, ground-up construction, marketing, and sale of properties valued at $150K to $500K. He went on to build his first 75-unit multifamily apartment complex, owning and operating the business for two years prior to its eventual profitable disposition. Since that time, he has transacted property units totaling over 420 doors with value in excess of $20,000,000.
- Motorcross as a Profession
- Continuously Improve Your Circle
- Looking for Houses That Were Boarded Up
- Apartment Hack Very First Deal – Got Creative
- Stay In Your Lane (Market)
- Build New or Buy Existing?
- There is More Money out There Than There is Sense
- Where is the market going?
- What does working with you look like?
- Analyzing the Deal Based on The Merit Deal
- The 506c Rule
- Multifamily Insights Exposed Podcast
Links mentioned in this episode:
[00:00:16] You are a W2 capitalist.
[00:00:19] You are addressing the gap between your successful fulfilling W2 job and to building wealth for your family through real estate investing. You are ready to earn invest. Repeat. Welcome to the W2 Capitalist podcast. Now let’s get to work. Here is your host, Jay Helms.
[00:00:59] What’s up, everybody? My name is Jay Helms, I’m the founder of this movement and podcast known as the W2 Caplets. Today, I’m joined by märta family syndicator, Ernest Arben. I get that right. Earnings. You did that. EARNEST Let me give it a little brief bio of Ernest and then we’re going to dive into some questions and just chat a little bit. Ernest has spent his entire professional career focused on real estate, which has shaped the company’s investment philosophy. Scuse me. We’re just talking about how I don’t have enough coffee yet and attracted him to real estate.
[00:01:32] Investing is a viable investment partner that is trustworthy and dependable. Now, this is all coming from his Web site. Apartment buyers dot com, which I linked to in the show notes. EARNEST Now we’re just out. Ernest is a Earnest’s or you are a native of Georgia. Are you just spent most of your life in Atlanta?
[00:01:48] I am a native, born and raised, born and raised.
[00:01:51] And we were just talking about how you spent your entire career focused on entire lives, focused on investing in real estate, which is which is pretty cool. So you’ve actually never had a W-2 job, right?
[00:02:07] The only W-2 job I’ve ever literally had was just out of high school. So Subway sandwiches for about three months. Yeah. And I sold cars for about six months. And then I realized that he couldn’t be the man working for the man, so.
[00:02:23] Gotcha. Gotcha. So let’s get to let’s get the important stuff out of the way first. Georgia bought over our Georgia Tech.
[00:02:32] You know, I don’t even watch football.
[00:02:36] I’m a I’m a motocross guy. I you know, that was the day I noticed about you.
[00:02:41] So you’re a drill. And I saw you on your Facebook page just trying to stalk you a little bit on on social media. And you’ve got some some photos on there of you doing some pretty kickass stuff in my pen.
[00:02:56] Yeah, right. And those pictures are just within the last couple of years. And I’m 48 years old.
[00:03:01] Oh, wow. Okay. OK. Forty nine now. So are you just a natural adrenaline junkie or do you do you just enjoy something about motocross?
[00:03:10] Yeah, actually, I’m not really an adrenaline junkie. I actually just was really naturally gifted on a motorcycle and just was went really fast.
[00:03:19] I want to go fast, mama. Yeah. I like that. Ricky, Bobby, Ricky, Bobby. Man wants to go fast. How did you how did you discover you had a natural talent for being on a motorcycle?
[00:03:31] Well, when I was a little baby, my dad actually rode a little bit. You know, race is now. I picked up on it. And all the years I was younger and most kids actually wound up getting started at an early age and wound up getting started until I was fifteen years old. And I basically went from my first bike I ever had at 18 to turning pro in three years and rode pro for two years.
[00:04:02] That’s that’s a whole other story in of itself. Yeah. Cool, actually, but not real estate oriented and all. But it’s still a pretty cool story.
[00:04:09] It’s not. But I’m I’m really intrigued. So let’s dive into that for a minute. Do you still do you still race now professionally or no?
[00:04:19] No. I actually quit racing professionally in nineteen ninety one. And then over the years I just kept riding racing and you know, and actually transitioned into off road for a while and did. And God was really fast at that. I got to expert level. I never got to pro level but I did get to expert level and fame was going to do the bahat 1000 extra and got hurt really bad before that and never made it. So I just kept racing off road and motocross all through the years and the last year our race was till into 2017 and my bike actually got stolen and I just never went about another one. And so I haven’t written in about two year to two and a half years, but. But yeah, I just I you know, I guess it’s kind of like the story of being around the right people. You know, they always, you know, that whole regurgitated saying, you know, your network is your network. Right. You’re talking about people. Well, I actually wound up getting by sheer coincidence. Got to be really good friends with through the another friend. The factory guys that you know, the guys who were getting, you know, the number one guys like you see on TV, you know, they were getting paid. My dad and I at the time, having private motocross facilities was not very common. And my dad had a heavy equipment background. So he built me a racetrack. And we actually invited the teams to come right on it and they accepted. So I wanted to you know, we we literally had the fact retained coming to our house, riding on our track. I was damaged by me riding with them. I just got back really fast. I bet. Show me what I was doing wrong. You know, when you chase guys, you’re faster. You just get faster.
[00:06:08] So let’s switch to I want. Well, before we switch to real estate investment, how did you once the devs tween offroading and motorcross.
[00:06:18] Motocross is basically, you know, it’s a small closed circuit where you can, you know, where they jump the heels and. Yeah, and you can watch them. Yeah. So Supercross, this stadium and motocross is outdoor off road is primarily essentially just riding in the woods or the desert.
[00:06:35] Gotcha. Very cool. I don’t know.
[00:06:38] I don’t think anybody was expecting that they’re going to get a lesson in motocross, but it’s not normal there. He’s not.
[00:06:46] That’s why I’m so intrigued by, you know, having this podcast get introduced to so many different walks of life. And I’m always intrigued. You know, I grew up my dad raced motorcycles when he was younger before us and before my mom, I think, convinced him to not do it anymore. Right. Awesome. So he introduced us to the idea of riding and bought us a little Honda Excel. Seventy five, which I think he still has. But we didn’t take it much from there. Right. So and it was it was a 1970s model motorcycle, but it was. Yeah, I enjoyed it. But I wouldn’t get on one now because I’m a little too. Same reason why I don’t drive a fast car. I just as well have.
[00:07:31] Well, I’ve owned four Lamborghinis, but I’m not a speed junky, which is ironic.
[00:07:35] That is ironic. Yeah, that is ironic. But you might go back to work for Swiss real estate. That’s right. Main thing we want to sit here and talk about. So, you know, you bring up the comment of being around the right folks, regardless of your profession. Right. You get around those guys who are the experts of motorcross. You get around those guys who are the experts in real estate investing. And it’s just going to raise your level of competence. Right. So how do you go about when you first started investing real estate until now? Right. How do you go about continuing to improve your circle of influence so that you don’t get stagnant or, you know, what are some of the things that you’re doing now to kind of help continuously improve that cycle?
[00:08:26] Well, let me tell you, I. When I first get started, I’ll obviously this was quite a few years ago. You know, we did have social media, you know, self rhymes or, you know, I mean, it was back so far as, you know, flip phones. I mean, you know, you have the digital phones in any of that stuff. So, I mean, we take. You had to click the seven, you know, three times to get the you know, the wire. What it was yet.
[00:08:50] Yeah. Yeah.
[00:08:51] So it wasn’t like it is now so. And unfortunately, I never was really good at networking. And I was always a bit of a lone wolf, which is kind of how I. You know, I guess, you know, I was talking to somebody the other day on a little bit of a sort of a limiting belief concept in which I didn’t have you know, I was very motivated individual. And when I got started, it was kind of like, you know, I was just driving for dollars, but we didn’t call it driving for dollars. Back then, we just call it looking for houses that were boarded up. So we’re just you know, so I got in. I just started networking with the brokers. And, you know, in course, this we didn’t have Internet. You know, deals were more I say they were more prevalent because there wasn’t they weren’t so easy to get to. You know, you couldn’t go on a program and find you have 5000 foreclosures sent to your inbox. You know where you got ninety thousand investors looking for them. Right. I mean, in some ways, I think it was actually easier, but. But as I transition, you know, I moved forward and people are always asking me, well, God, how did you know 400 plus apartment complexes by yourself? I said, well, I know I was supposed to do it that way.
[00:10:08] Yeah, funds good and bad. Right. Yeah.
[00:10:12] And you know, and so after that I did it. And you know that thinking back on it now. I mean certainly. Yeah. I mean it was it was it was worth it wasn’t it was, you know, difficult times. And there were a lot of times where I really did wish that I had other people helping me, but I just did. No, no, no, not the syndication wasn’t.
[00:10:31] You know, I mean, this is just you know, I built I built my first set probably early two thousands. And then, you know, about about my first set that was pre built in 2010. And, you know, I just didn’t think nothing about it. I just did it, you know. And so I just worked my way through that. And then and then, as you know, circle back around, I’ve decided to take a bit of a different approach. You know, seeing how things have changed. You know, the syndication model is much more prevalent now with, you know, the new you know, the new exemption rulings and things of that sort. So it’s it’s changed things that change things a lot. So I just decided that, you know what, I’m older, more experienced, and I just don’t want to have to go through that much work again. Yeah. You know, I would I would much rather share the responsibility and work with other people because frankly, working by yourself all the time is very, very difficult.
[00:11:35] I agree. I agree.
[00:11:36] I mean, if it’s not and I tell people all the time. You know, it’s not that it’s like building a house. It’s not that I can’t go put the tile. I mean, I had to paint contracting company for almost nine years. I can go paint a house. I can put out, you know, if I’ve put roofs down, I can put Italian. But should I know it doesn’t make any sense, you know? So it’s kind of like when people are talking about doing deals. And the truth is, there’s some aspects that I’m not as good at. You know, I’m not a phenomenal number cruncher. So for me to sit in front of a computer and crunch numbers all day just ain’t my thing. I tend to be a little bit more of a, you know, three thousand foot view guy. You know, you have an idea guy. So that’s kind of where I’m at.
[00:12:18] Yeah. And you know, you make a good point there about making the best use of your time. I’ve got some guys in my mastermind group that they were giving me hack because the house we live in.
[00:12:31] My wife and I live on now. It’s somewhat of a fixer upper, right? It was built in 1979. 1980 hasn’t really been tight since. And while the work I do, myself and the Casimir mastermind were giving me panic about, is that really the best use of your time? You know, because I’m always giving it to them saying, hey, look, I used your time. You know, that kind of. And I’m not the best tradesman. But there’s something about just mind numbing work, you know, putting down baseboards, painting a wall that I enjoy every now and then. I don’t enjoy it all the time, but there’s every now and then. I’ve got to just do some manual labor just to reset, you know? Let’s talk about your very first deal. You know our channel a little bit before you, the record button about you house hack your very first apartment deal. Right. So let’s dive into that. Well, because I don’t know that I’ve heard that before.
[00:13:28] Well, actually, so what I did. You know, as you know, through the years when I got started, you know, buying properties, flipping houses. I graduated into building houses. And I built houses for a couple of year for about four or five years. And then and I always pretty much knew I was going to get into multi-family. I never it never was a oh, I woke up one day and said, let me just try my hand at, you know, apartment. I always knew I was going to now. I really got lucky with my first deal, in a sense that at the time I was looking for places to build some houses. And I just happened up on this. This was the subdivision that some elderly lady had owned. And it was like it was built like a T. And it was laid out and and it was laid out. You know, it t it was subdivided out into these lots. And when I got to looking at it and I to this day on how she wanted doing it, but it was zoned or three. Which is, you know, which is or March 13th thing I can’t read, that’s only now, but but it was multi-family Sony.
[00:14:34] So I was like, hey, you know what? So I just struck a deal where they’re asked what day, what? Let me just buy a couple of lights at a time. I’ll just build the multi-ballot just build up the apartments across them and then I’ll buy a few more lifestyle to take down the whole thing. And it wound up being that way and it had to about the whole thing. I didn’t have to develop the roads, but it had to put in the infrastructure. It was already there. So, you know, so I would have to say that’s kind of a, you know, certainly something you don’t come across very often. So I just built the units. And then after I got them about halfway built, my wife and my daughter at the time, we actually just planned at moving into one of the units, rented a three bedroom, two beds. And at the time, nobody even knew I was the owner. They just thought I was just working on the property building down there. Now, nobody ever did. No, I I’m I live there that I’m aware of.
[00:15:26] Well, you say you’re lucky, but you had to be looking for this. I mean, you had to be you know, I think, look, something you make on your own right now. I think you had to put in some hard work. Again, this was back, like you said before, really the Internet age. Right. You had to drive around, not. Oh, yes.
[00:15:44] Not driving for dollars. You’re driving for houses boarded up. You saw this. You got really creative. You found the owner, which I don’t even want to know what that process looked like before I got out. You could text her. I mean, I imagine you had to go to the courthouse and look at all these different records. Right. Or start knocking on doors and asking people who owns that piece of land.
[00:16:04] Well, that’s what’s funny is, is the price. She had actually built a duplex on the very first lot. The lady did so that originally I got the idea. Maybe I just built a duplex just like she did. And then it turns out that I wound up building eight places. And, you know, building the whole thing out with eight places, and that’s how we wound up with a total of 88 units. Well, she lived right behind the property. Her. Her her house backed up to the property. So I think I don’t remember exactly how I found out that she owned them. But I got, you know, a matter and talked to her about it. You know, because I wanted to maybe do the duplex thing and it just turned out to be better than I thought it was going to be. Really?
[00:16:48] Yeah. Yeah. No, only thing I would say is just start knocking on doors, you know? And if you run in that situation now, the result. This has nothing to do with real estate investing. But there was a huge there’s a huge sunflower field over and how IBAMA that we would drop by.
[00:17:05] My wife’s like, oh, I love that. I want to take some pictures in that field or whatever. So I just start going knocking on doors. Who owns that piece of land? And after two knocks, I get the owner. They tell us. Yeah, you guys can go out there, whatever. And I imagine it was the same thing. Right. Is is you’re just knocking on doors and got extremely creative with that lady to to work that out. So that’s incredible. I quit. Do you invest in Atlanta only or disasters where you’re based?
[00:17:34] No, that’s just where I’m based in most all I mean, all the investing that I’ve pretty much done up until now, it’s been in Georgia. But I am now I am now looking to try to you know, I’m expanding into I’m looking at Alabama, Tennessee and South Carolina and, you know, some parts of North Carolina. And, you know, maybe maybe a few raised in Florida like Jacksonville or something. You know, or or anywhere that might work out like that said somewhere in the southeast. Right. So for us, it’s like pretty much the southeast, you know, because that’s what I know. I know. I know that the best people talk about all the time. And that’s one of the things that I talk about with other people is, you know, it’s sort of a little bit of a stay in your lane concept. It’s like, you know, I talk to people all the time. They say a lot just by deal anywhere. That’s a good deal. You know what? Well, there’s areas where I live that I don’t even know, you know. I mean, a close by me. And it’s very close. You know, the construction similar. You know, a lot of the laws are similar. You know, so, you know, the southeast stamp’s tends to be the same. But just because there’s deals to be made in Ohio and Oklahoma City and Phoenix and Dallas. I don’t know anything about those markets. Yeah. I mean, you know, if I’m a big player, you know, maybe that’s different. But for people to just be carting all over the place, you know, you buy a 60 unit somewhere where you got to get on a plane to go look at it. I mean, they don’t they don’t produce that kind of money to to to have that much headache to go all over the place. That’s just my opinion. Lots of people do it, but it just doesn’t make it doesn’t make practical sense to me.
[00:19:08] Yeah. I run into a lot of people do that, too. And I’m glad they do. And not. I’m glad it’s not a requirement of an investor. You know what I’m saying? Yeah. I was just curious because, you know, Atlanta is such a huge market. We have to drive through there to go see your in-laws. And I don’t know how you guys do it. I just don’t like the traffic. You know, the piece of the Peach Pass is one of the best things I’ve ever purchased.
[00:19:34] Well, my book, My Houseboat Is is up eighty five on Lake Lanier. And you have it fast. Get up there. So that’s you’re right. I mean on eighty five, that’s that’s the golden ticket, right. There it is. That’s right. I mean certain times of the day going through Atlanta can be pretty bad. I mean depending on what time of the day I get it, I need to go to like to north Atlanta. I can get there an hour or I get there an hour and forty five minutes. Depends on when what time I leave.
[00:20:01] Yeah. Yeah. Right. That bad you. So you first started out doing all those yourself and building units and now you’re doing syndications. But would you rather build something new now or would you rather buy existing. What’s what’s your preference today. Doesn’t really matter.
[00:20:19] That’s funny. My my girlfriend actually has been, you know, at me about really building something. The only hesitation is, you know, building something that the few drawbacks to that. Well, the pros and cons to building is new construction. Sometimes can be a little more difficult to raise capital for. And and then and also new construction takes a long time. Yes. But on the flip side of that, when you get done, you have a new property. And now so that the key to buying something that’s pre existing is that you can buy it. The big the largest selling factor or, you know, a key factor that a broker uses is that you can buy it or significantly under replacement cost. Yeah. So if you can do that, then you can buy a much larger property for a much lower price. You know, ideally and then, you know, that’s where you that’s where you make your money. So if you’re if you’re gonna you’re going to build something. But now. But prices are so high now. I mean, C-Class. Properties here are going for seventy five thousand dollars a door. That’s crazy. You can. You can build it for a house. You could build a, you know, a relatively similar property, not, you know, a C-Class or a garden style type property market rate, garden type, as opposed to building some highfalutin, you know, a class, you know, really, really hungry. Yeah. I mean, yeah, yeah, that’s different.
[00:21:47] So it’s you making that clarification because when when you said that, that’s where my mind went, because that’s where we typically look at. We stay away from the classes.
[00:21:57] Somewhat for the most part because we’re interested in the cash flow. Right. And not not so much the appreciation. So I’m glad you make that clarification, because a lot of people in appaling, I think that. Right. Oh. You know, best neighborhood for this or or whatnot.
[00:22:13] That’s that’s good idea. It is a very it is a very it’s a very distinct or a distinction that needs to be made.
[00:22:21] And people need to try to understand that at least a little bit when you’re talking about classes. You know, you also have different types of construction. You know, you have when you have class a high rise. I mean, you’re getting into a whole ‘nother different type of construction, you know, inner city type stuff, or you build garden style apartments, garden style apartments. You’re built more like a house. Yeah. Whereas other, you know, other types of properties are there, you know, they’re metal, stud concrete and, you know, higher off the ground and they’re just built totally different. So. So the cost of construction is much different, but. But when you’ve got something you’re paying, you know, something that’s built in the 70s.
[00:23:00] You’re paying seventy five thousand a door for I mean, I got it. I almost don’t even just don’t make any sense anymore.
[00:23:07] You know what? What does the cap rates you’re running into right now on some day?
[00:23:12] Now it late, you know, right here, at least in Georgia, Alabama and Tennessee. Well, I guess even Carolinas really. I mean, it’s very it’s very common at this point to be paying six or six and a half cap for us for a safety class property. Yeah, it’s me.
[00:23:30] That’s just it’s just really expensive.
[00:23:34] But I will I will tell you, one of the biggest problems that we run into and I was even wanting to write out, you know, a blog or some sort of an article or something about it was basically, you know, the pixie dust and the OEMs in India. And the brokers are RAMSI’s basically, if you could buy a property at a six and a half cap on its current operations that needed bull interior renovations use as an example. And then you could raise the rents. One hundred fifty bucks a month over the course of the next year to 18 months or 24 months or whatever. Then you can get you know, you could get it up to let’s just just just theoretically say get it up to ten or eleven cap. You get a four or five basis point spread by doing that. Then that makes sense then that you then you’re stabilizing it, you’re getting it fully fixed up and you’re getting it to that point where somebody might should pay a six and a half cap, pay a six and a half cap on the numbers. What is going to add to the fact that I’m finding consistently, consistently, consistently that people are doing and that just tells me that that there’s still more money out there than there is sense right now?
[00:24:47] No, you’re right.
[00:24:48] We can we can we can we can talk about all these nuances that people talk about. You know, the sky is falling. We’re gonna get a recession. You know, when’s it come in? Nobody has a crystal ball. But the truth of the matter is, when you see when people are just consistently overpaying and you know, they’re overpaying because they they get money. Syndicators want to raise money. So while they can get it, they want to keep raising it. They want to keep buying. Yeah. I’ll point out the old adage, say the piper, it’s got to be paid.
[00:25:16] And, you know, I agree with. It is been frustrating for me to kind of sit back and say, OK, I’m out of time, but my brakes a little bit. I’m not going to try to do anything. And then I kind of took an approach where you like. You did. I didn’t apartement hack a first deal, but I did syndicate it with a couple of guys. And now I’m to the point where I’ve invested in two different other apartment complexes where we’re I’m just a limited partner. Right. So I’m enjoying this side because there is not I mean, you know, I crack on the phrase passive investing all the time because I don’t. Yeah. As passive or it’s not truly passive, but it’s more passive than syndicating do.
[00:26:04] We’re trying to run a flip or something like that. But I got to tell you, I’m I’m enjoying the heck out of the limited partner side. And I get from those guys who, you know, the folks that I’m dealing with only to clarify, they’re they’ve got a really good track record. You know, I spent a year watching them and I know those guys.
[00:26:24] Well, I know that.
[00:26:26] And in understanding who they are as a person, not just the deals that are put together. So I’ve started started that way, you know. But we’re talking about just the overall market. Right. What do you think it’s headed? You know, if you had a wister crystal ball telling you.
[00:26:45] Well, this is what I tell everybody when, when, when, when, when everybody starts talking about the market, the recession, what’s going to happen? You know, I’m not an economist. I’m a data scientist. You know, I’m just I really.
[00:27:00] My whole career, everything that I do in life, I just work off with frickin good old fashioned common sense. And what I see going on around me and, you know, and I and I sort of relate what’s going on. You know, when we got hit, two thousand eight, you know, the government and lenders had been you know, they went through the 80s, the half-white 80s, the 90s were great. And then everything kind of, you know, leveled out, I think. What was it not? Well, it was it late? Was it late 90s? We had that one crash like ninety seven or ninety eight or so. Not two thousand.
[00:27:35] You know, I was still in high school so we would I don’t know, we had we kind of had that crash, you know, a bit of a recession.
[00:27:45] And then we had you know, and then everything went back up again and then two thousand eight. You know, at that time, we had have, you know, the whole 100 percent financing and get it. They were putting people houses left and right. I mean, they could get people in houses fast enough. And it was inevitable that a bus was coming. When it hit and a lot of people don’t understand, too, this gets really off track of the topic of this. But they really had more to do with Wall Street underwriting credit, paper and things of that sort. So when when when it really hit me, it was like flush in a toilet. I mean, everybody took a bath. And when it did, I mean, it was like, you know, everything imploded. So when you know, when the economy took a 20 or 30 percent haircut, you know. So then. So so everything had to get washed out, so to speak. So now since 2008, now a decade has passed a little over decades past. Then we’ve had the highest, the fastest and highest growth rate that we’ve ever had in history. You know, a hundred years or I don’t know the exact statistics on that.
[00:28:52] We’ve had the highest growth rate. That’s why people in the last five to six or seven years have not every deal they’ve done out of the park because like all you had to do was buy something. Yeah. And so essentially, they just. You know, they they were buying things, so. But now but the lenders have tightened things up. They’ve done things where it’s, you know, the people have more more cred. You know what we call it credit in the deals. Right. They have more of their money in the deal. So so the parameters are much different now. So. Long story short, we’ll get a a sort of a pullback like you do in the stock market. When something goes up, you get a pullback and you get stabilization and then, you know, and it kind of bubbles along. I think I think we’re kind of at that bubbling along stage where everybody’s still buying. They’re not really going to pay more because the prices have kind of stabilized out a little bit. I mean, it’s you know, in the last several months, C-Class and B-class properties are all kind of getting bought in those same price ranges. And that’s kind of where they’re at.
[00:30:01] So at this point, it’s just going to get through. It’s going to be whenever people are stopped seeing those those, you know, 20 plus percent IRR returns. You know, I thought an investor the other day and she actually said that, you know, she paid her or her initial investors back in the last couple years, paid them back so much that the returns were so high that she had actually, you know, inadvertently condition her investors to receive those exorbitant returns. Then they actually some of them didn’t even reach and reinvest back with her in other deals because she said, hey, I can’t promise that stuff.
[00:30:38] You know, I don’t know if I’m going to triple your money, you know, because those values are not they’re not like they’re anymore. And there’s a lot of nuances of that. You know, there’s only so many properties that were built in the 70s and 80s. There’s only so many properties built in the 80s and 90s and so forth. So you take all those individual properties, you know, 50, 60, 70, you know, 80 percent of those properties have been bought up, renovated, resold, or are now at the point of, you know, they’re five to six year hold through syndicators and now they’re trying to sell those properties.
[00:31:11] So the amount of properties that are out there, you know, to buy and flip and get that exorbitant forced return is just not as many of them available. So, you know, so there’s there’s a lot of factors at play there. So I guess. Let’s ask you a question. You know, I don’t think we’re going to see I wouldn’t know. But everybody says I’m going to wait to invest until we get another recession. But I always tell everybody, hey, you know what?
[00:31:36] The only time the best time to invest is any time when you buy something. If it makes sense, you just it makes sense. And whatever, you know, whatever makes sense to you. But it has to make sense for cash flow and income perspective.
[00:31:49] But yeah, yeah, I’m with you and kudos to your friend for not putting herself or her investors in a peculiar situation. Right. If they’re used to getting news checks and she’s and she’s like, wait a minute, we really hit the ball out of the park on this one.
[00:32:08] It’s not going to be that great going forward. Right. She could have really did herself a disfavor by promising on that. So that’s incredible. Absolutely. You know, there’s a lot of people out there who just take the money and run sort of street. But what? So one other thing. So now you’re moved on to syndications and we’ll make sure we cover this part because we’re showing up on time. But right now, you’re looking for people to partner with.
[00:32:32] For syndications, you’re you’re looking for opportunities in those funds. What does it look like to do a deal with with Ernest Harvin and apartement Bosco? What does that look like?
[00:32:44] What I what I try to do if I don’t find as many deals. I see a lot of syndicators that have kind of adopted a model where, you know, I always preface this. There’s nothing wrong with it. It’s just it’s not why I’m choosing to go at the moment. But there’s so much money out there, you know, and and there’s there’s fewer deals. So to get a deal done, you’re going to have to buy a deal where there’s just not as much upside. So you can you can buy a deal, raise capital and just get a deal done so that you’re doing something so you can buy a deal. You can create a yield play for your investors and, you know, using the property as the vehicle. And then the more deals you raise capital for than you can you can operate as an assets under management type concept instead of. So what? Well, I always refer to that as they’re making money off the deal as opposed to own the deal, which is why a lot of syndicators are going to these, you know, 80, 20. I mean, I saw one the other day. It was eighty five fifteen split. And I’m thinking I’m an operator. I’m a fine. I’m you know, I’m I’m a look for the deal. Acquire the deal, renovate the deal. And you know, I’m and I’m thinking to myself, well, I’m not 15 for even if I was the only GP, I’m not taking 15 percent. Yeah. So. Right. Yeah. I mean they should there’s nothing there. So when I see a deal like that and I actually told some m.p.’s the other. On another call that said, you know, I see you as an LP, I said it’s nothing wrong with it. It’s just be aware because they always say watch out for invest in deals that are conservative. Well, if you’re invested in a deal that that AGP is willing to take that low of a split. To me, that’s a concern. No, I wasn’t so conservative. So I agree.
[00:34:32] Point line. You know, one of the things you gotta want to do is if you have a general partner, you want him to stay motivated, him or her to stay motivated in the deal. Right. And if that property’s not producing and even if it is producing and they’re only getting 50 percent of the cut. How motivated are they going to keep going after, you know? I don’t know. That’s a very excellent point. I’ve never even thought about due diligence in a deal where you look at the split. Right. Because I’ve seen them all over the board, 60 down to what you just said. Eighty five. Fifteen. I have not run into one 90. Tanya, I’ve analyzed some deals where it only made sense for the investors if there was a 90, 10 and I was like, okay, it’s not a deal for me.
[00:35:20] Yeah, it does. It’s not even a good deal for the you know, and always and I always ask a lot of package where, you know, they always say this is a conservative underwritten deal. But, you know, I’ve looked at webinars where they quite literally are almost looking at ancillary income as their basis to increase revenue. You can’t you can’t depend on other ancillary income. You can’t spend on late fees, pet feed, laundry, feed it to me. I mean, you can put a little bit in there because there’s some of that stuff that you can kind of depend on. You know, if you’ve got three years records, you know, say, and you had five thousand dollars a year in hand, salary, income. OK, you can plug that in, but don’t count. That is, you know, where you’re going to raise revenue. Don’t say I’m gonna do better or you know. And I guys a of time, they say, well, we’re just going to manage it better or we’re going to manage it because we have other properties. You know, there’s some there’s some there’s some basis to that. But, you know, I just think every property should stand on its own. Yeah. And, you know, and and again, you know, I look at the deal for the deal because I’m looking at the deals as if. Well, you know, traditionally all the deals that I did up until now, it was just my money. Right. I didn’t I didn’t. So it wasn’t like I’m going to put this money here. I’m going to collect some fees because guess what? There was no face to clay. It was say that the deal made sense or it didn’t.
[00:36:52] Yeah. You know, and I had Joe Fairless on. Pretty sure you know who that guy is. But yeah, he he you know, we’re talking about a similar question. Right. And he said, look, you invest on the merits of the deal. Of the merits of the deal. Pass. Then you should pursue it. Right. So very similar to what you’re saying there’s that’s what I mean.
[00:37:16] It just doesn’t make sense to do the deal when it just doesn’t make sense. I mean it. You know, and they indeed this is a we could talk about this all day long after that. But that’s really how I feel about it. And people always say, you know, you owe. You know, you owe to your. If you’re gonna take somebodys money, then you owe it to them to be good stewards of their money. You know, preservation of their capital. Number one, profit second. And, you know, and your reputation, you know, if you care about your reputation, then, you know, all you need is one bad deal to go south because you’re an idiot. And, you know, it’s you’re done. Well, I mean, some people can recover, but it’s is harder.
[00:37:57] Some of the things that I’m saying, this is hard to recover. Right. And reputation in this industry, I think, because it’s huge. So it’s a small world.
[00:38:06] I can tell you that we just got that from Baltimore at Rod Place Event, which was a phenomenal event. And I have to tell you, you know, you just can’t imagine how small the world is. I mean, I’ve got guys in California that I’m friends with. And they’re sending me deals going half got this broker sent me a deal. And, you know, in Alabama, Georgia, where what? He asked yesterday, they sent it to me, too. And you get thinking it’s like when you get a deal package from a broker. Well, you ain’t the only one they send it to, regardless of what they tell you. Yeah. You know, you’re not you’re not their best friend.
[00:38:46] So somebody who wants to invest with your partner, with you. Do they have to be a millionaire? They have to.
[00:38:54] I mean, what’s what’s the. I’m going to let me preface that by saying we’re not your legal counsel or we’re not, you know, CPA or attorneys or anything like that. But if somebody wants to invest in one of your syndications, what does what does that look like? What kind of requirements do?
[00:39:09] What I have to check off to to partner with you on everything that I’m working on right now is primarily going to be done under 50 states. See? So the five or six day ruling is essentially the rolling the where you can basically advertise anywhere you want. You can openly solicit money. I can take out a billboard on ask seventy five if I want to. But the caveat to that is they do absolutely has to be an accredited investor, which, you know, if, you know, life is dictated, not accredited.
[00:39:40] Right. And you have to you have to prove that accreditation is not just based off of your your word, your word. Thank you.
[00:39:49] Yeah, yeah, yeah. I mean, ideally. Yeah, I think I think initially they weren’t going about it from the perspective of, you know, being able to sort of self-certified. But now because you know, as things if were grass and these tighten up a little bit. You know, most indicators or most even attorneys are recommending that, you know, that you basically third party certified at this point. So, you know, to to see why. So it’s. So, yeah, I mean at this point we’re that’s what a working under right now is Father Cixi. So they would they would have to meet accredited status.
[00:40:28] Very cool. Very cool. So as we wrap up, Ernest, I’ve enjoyed our time. Hopefully this is not the only time we do this, but I want to make sure we know how to get in touch with you.
[00:40:39] I’ve got a link to a FarmBis dot com. You have a boat cast coming out soon? Yeah, we were joking around about that. You got her recording podcasts, recording studio on your boat, which I’m a little bit jealous.
[00:40:54] But I can shamelessly plug the name. It’ll be multi-family. Insight’s exposed and uncensored.
[00:41:01] No, it’s kind of like it’s like me talking about that the ins and outs and nitty gritty of what it takes to be in that apartment complex, apartment business and a famous saying, if it’s not all cupcakes and rainbows and it’s not right.
[00:41:18] One thing that I try to make sure everybody knows is that we don’t. We have good things and bad things. I have somebody call me out because I posted something. We actually had our very first loss when we sold the property, basically the property, it was a buying home. But the property I held for three years and when I sold it, do all the math. Right. Ended up costing me like twelve grand. Hold onto this property.
[00:41:51] But you know, what he didn’t see is that, you know, we just sold another one a couple of months before where it was a four hundred twenty eight percent return. And I was if I’m ever gonna take a hit this tax year of the year, though, and take a hit. Right. And it was an area that I don’t want to be in anymore. There’s a property that I just didn’t pay attention because I didn’t give the respect that it needed. And so I just kind of let it go. So anyway, I don’t know.
[00:42:20] You know what? Let me throw something in there just quick. I got to go then.
[00:42:24] You know, the sun’s up. So the sun’s up now. So now now it’s time to go to work.
[00:42:30] See, people always talk about, you know, what’s your worst deal? What’s your best deal? You know, the the funny truth is I’ve never really had a bad deal on the most.
[00:42:41] Almost all the deals I’ve ever done, I’ve knocked them out of the park. Now, some single family houses, you know, held some and didn’t make much money. I think I actually had one property that I held for about three or four years.
[00:42:53] I think, yeah, about three or four years that actually I wound up writing a check. When I went to closing. But what I want to emphasize about that is. You know, nobody’s perfect, even stock traders make bad trades. You know, real estate guys make bad. You know, they sometimes they don’t call it right. Sometimes they miscalculate construction costs, whatever. You know that just because you did a bad deal, just because you did something wrong doesn’t mean that you don’t know what you’re doing. If you take if you do 10 deals and eight of them make a lot of money and two of them didn’t. So, you know. So just simple accounting.
[00:43:32] You did take the last match up against your profits on the other eight. We still made a lot of money. So. So are you. Are you still a winner or you’re a loser because you didn’t do. They don’t do deals.
[00:43:41] Yeah, I’m a lot better off personally. You know, and one of the things in this is where I struggle with you, always trying to take the lessons learned. Right. So the wall. Yes.
[00:43:51] Well, I’ll tell you, you don’t get young. Learn the lessons and the bad times.
[00:43:54] Not in the good times, which is I don’t know. I want to change that about myself. I can. But, you know, it’s always easier to reflect on what went wrong than to reflect on what went right. Let me repeat. You know what went right. But you’re absolutely right. So but, you know, I look at that deal where we lost money in my aunt. What did I learn that I learned? There’s an asset class I don’t want to be in. There’s a neighborhood that I don’t want to be on. We had to replace some septic tanks and do a lot of stuff that that was not planned for. Right. But it wasn’t worth that $12000 fee. I don’t know.
[00:44:36] I don’t that’s where that’s where I struggle. But you’re not looking at it. You’re not looking at. Don’t look at just a race that whole fall. Look at it. This is how I always look at anything that I had to spend money on. Didn’t they all say, you got into a deal, get it, put a $50000 earnest money. Hey, you don’t want to lose earnest money because you know, it sucks. But you what you have to look at it or you really have to really get it to is cost of doing business. You know, you have cost of doing business. If you said, hey, I had to spend $50000 to find out if that was a good deal. It was. I didn’t lose my earnest money. I just spent $50000 to not get into a really crappy deal. I was gonna lose a lot more in future.
[00:45:16] Very true.
[00:45:18] Warren is living with that man. Best best way to get in touch with you.
[00:45:24] The best way to reach me is either through my Web site apartment, Bascombe or just Earnest’s at apartment bios dot com.
[00:45:32] Very cool. Very cool. Thanks for. Thanks for time this morning. I will definitely you can link up with you again pretty soon.
[00:45:40] Well, I’d like to say again soon when you got a new I wanted to pick your brain on new construction.
[00:45:47] I don’t know why it’s one of those. It is one of those itches I think I might have to scratch eventually.
[00:45:52] No time soon.
[00:45:54] But there’s the one that eventually has this little did had this little little townhome development. We’ve been I and maybe doing something right up in north part of Atlanta.
[00:46:06] You know, if you want to scratch it, I don’t know if it’s that big of an itch, but there is something there that, you know, I went through this process where I thought I wanted to own a car wash and I even, you know, got real close on and went under contract.
[00:46:20] And everybody I talked to like, don’t do it, don’t do it, don’t get any taste, don’t make car washes.
[00:46:28] I actually looked into that a while back, even went to a car wash, you and all that stuff. You know, it’s like any other business. You know, you can get it right and you get your your operations down. It’s a it’s a cash cow. It’s you know, it’s a business. It’s not a real estate venture. It’s a you know, it’s a business that is designed to look at it from a from a cash flow perspective. Yeah. It’s to get that in self-storage. But I think those two are not better now.
[00:46:53] Now I’ve looked at them. I’ve got my own one of those, too. But there wasn’t too much money for it right now. So you know. I know. I know. Yeah. In this market. Right. Ernest, thanks again, buddy. I will talk to you soon.
[00:47:07] Absolutely. Appreciate it. See you, buddy. Thanks.