Insider Secrets Podcast Episode #44

Featuring guest: Dan Handford

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Guest Bio:

Dan Handford - Insider Secrets Episode 44 guest

Dan and his wife, Dennae, along with their 4 children (3 girls and a boy) and standard poodle, reside and work in Columbia, SC. 

Dan Handford is one of the managing partners with PassiveInvesting.com which is a national apartment investing firm based on the Carolinas. He has led his apartment syndication company to acquire 2,680+ units with a portfolio valued over $357mil. 

He is also a passive apartment investor himself in 5,700+ units in 28 different syndication passive investments located across the Southeast USA and Texas. 

Prior to getting started investing in real estate, Dan had an extensive background in starting multiple seven-figure businesses from scratch including a large group of non-surgical orthopedic medical clinics located in South Carolina. 

Dan is also the founder of the Multifamily Investor Nation (#MFIN) where he provides free multifamily education to a nationwide group of over 31,000 members. The #MFIN has 50+ meetup groups across the US, Canada, and UK that meets on the first Monday of every month.  

He also hosts one of the most popular apartment investing podcasts on iTunes called “Multifamily Investor Nation” where he only interviews active multifamily investors that have closed a deal in the last 12 months. There is no fluff on this multifamily podcast and only getting down to the nuts and bolts of deal sources, financing, structuring, investor relations, closing, due diligence, etc. Go to www.MFINPodcast.com to subscribe.

Shownotes:

Standout Quotes:

“People ask me all the time, how come you like Real Estate so much? why are you so excited about it? That’s why, because there’s so much to learn” – [Mike]

“Our goal with our company is not just to do one or two deals and go away, our goal is to have you invest in multiple investments with us and over multiple decades so we can continue to grow your wealth alongside our wealth” – [Dan]

“The people who know how to pivot and move faster are the ones that actually survive, and the ones that curl up in a fetal position and do nothing are the ones that are actually going to get caught with their pants down later on” – [Dan]

“One thing I’ve always learned is that no matter where the Cap rates are, I’ve been able to make money…   if you know how to work the market…you’re going to make money” – [Mike]

“If you can’t measure something, then there’s no way you will be able to manage it” – [Dan]

 

Key Takeaways:

  • In one word, Dan describes himself personally and professionally as a Delegator.
  • The tax benefit was what brought Dan into Real Estate, realizing that investing cash flow into Real Estate creates an opportunity to keep more income and grow family wealth.
  • Dan shares that the goal of his company is to grow the wealth of investors over multiple decades alongside his wealth.
  • Dan’s process for making tough decisions: Assess the situation, figure out what the parameters are, and then have a discussion with the other partners in the group.
  • Major factors to consider in investment include the ‘Stabilization periods’ during renovations which now needs to be extended especially in this period of Covid19, and also ensuring that the property management company fits the asset.
  • Dan’s insider secret: What drives Cap rates higher or lower is the demand and the competition in that market; the lower the Cap rate, the higher the demand, and the higher the Cap rate, the lower the demand. It is critical to consider these parameters when buying and selling an asset.
  • Final advice from Dan: Learn and master the art of Delegation; you need to learn how to measure various KPIs to make sure that you can manage them.

 

Episode Timeline:

[02:42] Meet Dan Handford, today’s guest from Multifamily Investor Nation(MFIN), as he analyses the art of Delegation, as well as other key factors for business success.

05:19] Tell us in one word what best describes you personally and professionally.

[05:51] How things got started for Dan leading up to the Real Estate space.

[08:20] What about Real Estate inspires you?

[09:41] What are some of your buying criteria or standards that you look for in an investment?

[13:40] Understanding the difference between physical and economic occupancy.

15:28] When you’re faced with a tough decision, what’s the process that you go through as an entrepreneur to make the decision?

[17:04] Dan sheds light on his Meetup groups.

[18:56] What are the best types of technology that you use in your business today that are most effective for you?

[20:28] Tell us a couple of important lessons that you’ve learned over the years.

[23:20] What are some of the pitfalls that you’re seeing today in the market?

[27:25] Where do you see the market going over the next 12months?

[30:52] How do you build a strong brand?

[33:00] Dan’s Insider Secret

[36:51] What is the best book you have ever read?

The 10X Rule: The Only Difference Between Success and Failure by Grant Cardone

[38:40] How to contact Dan

Website – passiveinvesting.com

To learn more about multi-family investing

Join the free MFIN webinar – multifamilyinvestornation.com

[39:22]Any last piece of advice you’d give anybody today?

Transcript:

Mike: Hey, good afternoon, everybody. It’s Mike, your host of insider secrets, and that’s brought to you by my core intentions. Hey, today I am joined by Dan Hanford. Dan, can you tell our listeners a couple of things that we’re going to talk about today on today’s episode?

[00:00:15] Dan: Sure. I’ll give you three things that we are going to talk about today on the episode. And the first thing is we’re gonna talk about what the art of delegation and how that is very important in your business. And then we’re going to talk about something special that I shared with Mike which is one of my things that I’ve done in the last six months. That was really cool. So make sure you stay tuned to that one. And then the third thing is at the very end, I gave a kind of tip about what I was actually thinking that is very important for you to have success in your business. And so make sure you stay tuned for that one as well.

[00:00:49] Mike: And I can tell you it’s very informative today, so you’re going to want to listen in at noon and I’ll look forward to seeing you inside.

[00:00:55] Kristen: Welcome to this week’s edition of insider secrets. The show that turns multifamily investing into reality. Each show we interview guests who are seasoned professionals, actively closing and managing real estate deals. Your host Mike Morawski has more than 30 years of multifamily real estate investing and property management experience.

[00:01:17] Mike is the founder of my core intentions. And he’s been involved in over $285 million of transactions. Focuses on helping you create short term cashflow and long-term wealth. Here’s your host, Mike.

[00:01:33]Mike: Hey everybody. Good afternoon. It’s Mike, your host of insider secrets, and that’s brought to you by my core intensions. Let me ask you, have you been thinking lately about what your intentions are and what you’re trying to accomplish and really what matters most in your life and in your business?

[00:01:48]At MCI, we invest in our client’s future through an educational platform, teaching you how to create short-term cashflow and long-term wealth. Whether that’s through passive investing or active investing. We empower you to execute sound real estate investing in property management principles while living a balanced lifestyle.

[00:02:08]I find so often our lives can get out of whack and we get so distracted that living a balanced quality lifestyle becomes difficult. So we try to help you develop strong foundation and practical principles. And a lot of what we do and we do here on insider secrets with our guests. Today, I’m excited to be joined by Dan Hanford.

[00:02:31] Dan’s with multifamily investor nation. Dan, would you say hi to our listeners real quick?

[00:02:36] Dan: I really appreciate you having me on Mike. Looking forward to sharing with your audience and glad to be here.

[00:02:41] Mike: I’m glad you’re here too. Thanks. So let me tell you a little bit about Dan. Dan is a real estate entrepreneur from the Carolinas, with a proven track record of success. He and his wife, Dena, along with four children, three girls and a boy and a standard poodle. And we can’t forget about the standard poodle, reside in and work in Columbia, South Carolina. Dan is the managing partner with passive investing.com, which is a national passive apartment investing firm based on the Carolinas.

[00:03:13]He led his apartment syndication company to acquire over 2,600 units with a portfolio valued at $357 million. He also a passive investor himself has investments in about 5,700 other units in 28 different syndication investments across the Southeast US and Texas. Prior to getting started in investing in real estate, dan has a very extensive background in starting multiple seven figure businesses from scratch, including a large group of non-surgical Orthopedics Medical Clinics located in South Carolina. Dan’s also the founder of investor nation, where he provides free multifamily education to nationwide groups of over 31,000 members.

[00:04:04] The multifamily investor nation has 50 meetup groups across the US and Canada, and the UK that meet on the first Monday of every month. He also hosts one of the most popular apartment investment podcasts on iTunes called multifamily investor nation, where he only interviews multi-family investors that have closed a deal in the last 12 months.

[00:04:27] There is no fluff on that show. The multifamily podcast has only gotten down to the nuts and bolts of deal sourcing, financing, structuring, and investor relations, getting down in the due diligence. And I always see that there’s something to learn from somebody who is that involved in the business dan. And what’s interesting is, people ask me all the time, Hey, how come you like real estate so much? Why are you so excited about it? And that’s why, because there’s so much to learn. We have so much we could just talk about from your bio. Here’s one thing I always ask people though dan is, tell us in one word, what best describes you personally and professionally?

[00:05:08]Dan: I would probably say the word delegator.

[00:05:10] Mike: Delegator. I guess you would have to be with all the businesses you have going on and all the activity you have going on. That’s good. I hope that we talk a lot about that today and how you are able to delegate. And, I know there’s some obstacles that come along with that from time to time, but be interested to drill down into that a little bit. Hey Dan, tell us a little bit about your backstory. We talked a lot in the bio about you and who you are and where you came from. But tell us really how things got started for you and how you wound up in the real estate space.

[00:05:41] Dan: Sure. One of the main reasons why I got into the real estate side of things is from the tax side of it, the tax benefits. Because as you read from my bio, I have an extensive background with multiple seven figure businesses.

[00:05:53] And one of them is an online company called shopping atomical.com. We sell all types of skeletons and skulls and brains and hearts and all kinds of plastic models doctor’s offices, colleges, universities, all across the country and around the world. And that business I’ve had for about 13, 14 years now.

[00:06:08] And it continues to do seven figures a year in revenue. And then my medical clinics of course do really well at the same time. And I actually was starting to make really good cash flows off of these businesses and writing really large six-figure cheques to the government. And, I was just tired of doing that.

[00:06:23] And so decided to start a private equity real estate firm called passive investing.com, to be able to have benefit myself as an active real estate investor, to be able to take advantage of the depreciation and offsetting all of my income with that. And so now we’ve been able to grow the clinics even when I’m not there.

[00:06:39] So I have a good team. It’s about 50 employees there, and I’m a good CEO that manages that team. And so I don’t go in and doing a lot of the day-to-day operations at all. Matter of fact, in the last three years, I haven’t really stepped foot in the clinics at all. During business hours. I’ve been on a few times, I’ve gone there to pick something up or whatever, but never during business hours I’ve actually been in the clinics.

[00:06:59] And just because I have a good team that runs those clinics. And I still have a corporate monthly meeting with those team members to monitor the KPIs and the financials and make sure that my vision of the clinics are still moving forward. But I’m not going in and doing the day to day because I’m solely focused on the multifamily real estate side of things and with our group. And the main reason why I got into it was from the tax benefits of it. And being able to learn that if I can invest my cashflow inside of real estate, then I can actually keep more of what I make and grow my family’s nest egg all at the same time. As well as our investors that invest alongside of us and grow their nest egg at the same time.

[00:07:38] Mike: Yeah. It’s interesting you talk about that, I can hear the passion in your voice and I have to imagine it’s more than just growing the nest egg that it’s about the business itself. There has to be something within the business that just really inspires you and gives you a passion about it, and what is that?

[00:07:57]Dan: The very beginning when I got started, it was the true reason why I started was because of my own benefits. But when you have a business like this, we now have, almost a thousand investors that are actively inside of our assets.

[00:08:09] And each one of those investors that are in there, has a family, right? And we’re also growing other people’s wealth alongside our. So we’re not just benefiting ourselves or wanting to grow with our investors. And I tell my investors all the time when I get on phone calls with them, that our goal with our company is not just to do one or two deals and then go away.

[00:08:28]Our goal is to have you invest in and multiple investments with us. And over multiple decades, so we can continue to grow your wealth alongside our wealth.  We invest inside of each one of our assets alongside of our investors and not just the minimum investment. We’re actually putting in usually between five to 10% of the equity required in each one of our assets. And we’re growing our wealth alongside of our investors.

[00:08:52] Mike: Yeah. Interesting. Hey, what are you looking for today in an investment? So when you’re going out to look for a new syndication or a new apartment deal, what are some of your buying criteria or standards that you look for?

[00:09:04] Dan: Sure. And are you talking more from the active side or the passive side?

[00:09:08]Mike: If I’m a passive investor and I want to get involved in one of your deals, what are you going to talk to me about? Deal structure and things that you look for. You’re obviously on the active side at that point when you’re syndicating that deal.

[00:09:19]Dan: Yeah. So that’s even a third level of it because..

[00:09:22] Mike: Yeah, right.

[00:09:22] Dan: If it’s a Passive investor looking at one of our deals, then it’s a little bit different answer to the question. If it’s me as a passive investor, looking to invest in somebody else’s deals, or if it’s me as an active looking for the next deal, multiple things. But I’ll tell you what we actually go after right now, as far as our investments.

[00:09:38] So we’re typically going after a little bit of a higher quality asset that you might see some other syndicators go after. So we’re usually gonna be in the B plus with value add space or the A-class which is what we call a core plus property. And we’re not talking about kind of downtown urban infill class stays where the rents might be, four or five, six, seven, $8,000 a month.

[00:09:58] We’re talking about a suburban class say, so the rents are usually going to be anywhere between about 13 to about 17, $1,800 a month. And we’re looking for assets and primarily right now, the Carolinas we’ve started to branch outside of that a little bit. But there’s only four primary markets in the Carolinas that we’re going after assets, and this is the Charlotte, North Carolina MSA and the Raleigh Durham chapel Hill, that whole triangle area there in North Carolina, Charleston, South Carolina and Greenville, South Carolina. And then outside of that, we’ve started to look to a branch out and looking inside of Atlanta, Georgia, Jacksonville, Florida, and then also Tampa, Florida at the same time.

[00:10:35] Mike: So you have stayed pretty concentrated with your investments where you really have stayed in that region and not gone too far outside of it. Have you seen consistent good level returns in those markets or have they fluctuated a lot?

[00:10:50] Dan: It’s been fairly consistent. There’s been a few, there’s been one property and the Greenville, South Carolina market that hasn’t performed as well as we would have liked it to perform, but it is still performing decent enough that we’re going to hit the return levels that we projected for investors when we exit that property.

[00:11:06] But all the other assets have been doing fairly well, especially given the environment we’re in right now with COVID-19.

[00:11:12] Mike: Yeah. So what are some of the things you look at? You’re saying that property didn’t perform as well as you thought it would. What were some of the predictors you looked at and then that didn’t happen?

[00:11:24] Dan: Sure. The biggest thing we look at is obviously collections, right? So a lot of times we always talk about physical occupancy, but you always have to look at that economic occupancy at the same time. And so with COVID 19 and there was the eviction moratoriums earlier on, but then the CDC health on evictions as well has caused us to have some collection issues on that particular property.

[00:11:44] We just recently had to stop distributions. I don’t want to say stop them, we’ve went from monthly distribution schedule to a quarterly distribution schedule. And it’s primarily based off of that occupancy level and the ability and the bad debt that’s been building up on the property because of some of the residents that we just can’t get out.

[00:12:00]So as it’s not necessarily, exactly our fault because it’s hard to get people in a unit when you can’t get that person out. And that bad debt is just continuing to build up. And so that’s been one of the biggest things that has hurt us on that particular property. And at the end of the day, it’s going to be fine.

[00:12:14] There’s going to be the property has done really well, even up until this point. And we’ve even had some people that have looked at it in our print have been a potentially buy that particular property, which will allow us to surpass our original projections on it as well.

[00:12:26]Mike: It’s interesting. You bring up a really good point. And I know a lot of our listeners probably went, what? But could you explain what you talked about between the physical and the economic vacancy piece? Because I think a lot of times people just think vacancy rate, but they don’t look at the physical versus the economic. Can you talk about that for a minute?

[00:12:44] Dan: Sure. Yeah. Physical occupancy is how many people you actually have living inside of the unit. So let’s say you have a hundred unit property and you have 90 people living in the property and 10 of them are vacant. You have a 90% physical occupancy on that property. But if you have a 90% physical occupancy but only let’s just say 90% of the people are paying their rent. Now you actually have a lot lower, not a lot, but you have a lower economic vacancy, which means how many people are actually paying their units, paying their rent based on what they were supposed to pay.

[00:13:20]So whether you’re looking at that from a GPR perspective, that gross potential rent, or what their gross effective rent is or what their actual rent is. That’s how you figure out what that economic occupancy is seeing. Okay. Yes, physical occupancy might be high, but if people don’t start paying their rent or don’t continue to pay their rent, then that economic occupancy, how much are you actually collecting on what you’re expecting every single month can also be down as well?

[00:13:42] Mike: Yeah. I bring that up because a lot of times I’ve worked with investors where they go, geez. The vacancy was this, but my collections are this and they don’t understand the difference, upfront. So I’m glad we talked about that.

[00:13:54] Hey, a couple of questions for you. I want to circle back and you’ve got a lot of businesses. You have a lot of things going on. I’m sure that there’s times that come up, that you’re faced with decisions. And some of those decisions might be really tough to make. And some of those decisions might be a lot easier to make. When you’re faced with a tough decision. What’s the process that you go through as an entrepreneur to make the decision?

[00:14:18]Dan: And a lot of it just depends on the tough decision, right? So there’s been a lot of tough decisions that have had to been made with the COVID 19, that pandemic that has come about.

[00:14:28]But I’m the type of person that when there’s a decision that has to be made, I’m not going to sit there and Ponder on it and spend multiple days talking to lots of different people and how to figure out that decision. Usually I’m going to assess the situation, figure out what all of the different parameters are.

[00:14:42] And then we’re going to have a discussion with our other two managing partners that we have in our group. And then we’re gonna make a decision. Because to me, time is of the essence, especially when it comes to making decisions. Especially when it comes to these types of decisions, when you have a pandemic or a recession or things like that.

[00:14:56] A lot of times the people who know how to pivot and move faster are the ones that actually survive. And the ones that crawl up in the fetal position and, do nothing, the ones that are actually going to get caught with their pants down later on when their property gets taken back from them.

[00:15:09] Mike: Yeah. Isn’t that interesting. I think if you read a lot of bios and Colin Powell talks about this in a bio that somebody wrote on him and I can’t remember the author right now, but he says that you have to make a decision and go with it. You can’t like second guess yourself, you’ve got to make that decision and go with it.

[00:15:26] I think a lot of times entrepreneurs get stuck because they get stuck in their decision process. So I think when you have a process in your own mind, it’s helpful in growing your business and you’ve obviously grown some successful businesses as a result of that.  I want to talk about meetup, you have a lot of meetup groups and are they all productive or are they all pretty successful?

[00:15:48] What are you talking about in your meetup groups and are they all on the same topic every week? How do you operate all those groups?

[00:15:56] Dan: Yeah. So this was a top decision, I guess we had to make at the beginning about how we were going to run them. Because ideally I’d like to be the one that is teaching the content every single month when they have these monthly meetups across the country and even into Canada and in the UK that we have.

[00:16:11]But from a technology perspective, we just couldn’t figure it out. Because in order for that to work, you’d have to basically make sure that each meetup group organized, had their own projector and screen and ability to set all that up and the technology and speakers and all that kind of stuff.

[00:16:25] And so what we decided to do instead is one week before each one of our co-organizers, gets together and actually meets on that first Monday of every month, they will jump on a zoom meeting with me and I will teach them on a particular topic that they’re going to be talking about at their meeting.

[00:16:43] And I’ll give them an outline. Or we call it our one sheet outline. It’ll give them kind of announcements to make, and then it’ll give them the bullet points of what they’re going to cover during their content session and give them a guideline of how that particular meetup group is going to run.

[00:16:57] And it allows me to be able to teach them one-on-one. I say one-on-one, but in a group setting, you obviously are going to have 50 plus meetup groups. So there’s 50 people that are there that were teaching and educating on this particular topic. And they’re going to take that content and that information and present it to their immediate group on the first Monday of every single month.

[00:17:15] Mike: Interesting. Yeah, you’re like the coach of coaches then aren’t you?

[00:17:18] Dan: Correct.

[00:17:18] Mike: By doing that, good for you. That’s a great process to have in place. And so when we talk about technology and resources and things like that, What are the two or three best types of technology that you use in your business today that are most effective for you?

[00:17:34] Dan: Oh, there’s a couple of them on the multi-family or the real estate side of things. Number one is our investor portal. We actually use RealPage IMS, or RealPage AIM is what they call it now. It used to be called IMS before they were bought out by real page. And the other piece of software would be a software what we call air table.

[00:17:51] So airtable.com, and it is a spreadsheet platform that we use it to keep track of our deal flow. It’s a spreadsheet platform, but you can also inside of this store PDFs and Excel spreadsheets and documents, and we can access it through an app on our phone. So we can be in the field, taking pictures of the property and uploading it directly to there.

[00:18:09] And all of our key people that need to have that information has access to it right away. And we also keep track of our not necessarily all of our investors, but the status of our investors more when we’re raising capital for a deal. We’ll keep track of them on who’s funded, who hasn’t funded, whether we received their accreditation letters or not, or sign the PPMS or making sure we have all their ACH information in place.

[00:18:31] And so it’s another way for us to have a checks and balances before it actually goes into our actual investor portal.

[00:18:37] Mike: Interesting. So you haven’t had to go and build anything yourself for your operation. It’s all been out of the box stuff that you’ve been able to work with.

[00:18:45] Dan: Correct?

[00:18:46] Mike: Yeah. Good for you. So tell us a couple of important lessons that you’ve learned over the years. Things that maybe you stubbed your toe on a little bit, what worked through.

[00:18:58] Dan: Sure I’ll tell you earlier on in my business career, even when I was first doing this, starting the medical clinics, one of the things that I can point to that gave me the hockey stick growth in my business is the ability to delegate.

[00:19:11] And I’m a typical entrepreneur where I have this flaw that is inside of me. And I don’t think I will ever get rid of it, but I have to change my mindset. But I have the flaw in my mind that I can do everything better than everybody else. And I know a lot of people have that problem and they struggle with that.

[00:19:30] And I did as well, but I had to tell myself that if I could find somebody and hire them to do some of the tasks that I was doing, and they could do it 80 to 85% as well as I could do it, then I could turn that over to them and they could do it. And most of the time, I’m surprised and they do it a lot better than I could have ever done.

[00:19:49]But it allows that mindset shift for me, what allowed me to learn to hire the people that are basically gifted in those particular areas that I can go and do what I’m gifted in, which is the vision and the growth and the scaling of the businesses.

[00:20:01]Mike: What’s interesting is I’m not laughing at you. I’m laughing with you because I can relate a hundred percent to what you’re saying. And your bar is still higher than mine. Cause I’ll say, if they can get it about 70 or 75%, I’ll be happy. But yeah, it’s funny because a lot of times you feel like, I have to get this done.

[00:20:19] And it’s something I do all the time, but if I could just teach it to her or him and let them do it. You know what, it’ll take me 15 minutes to teach it, but it’ll take me five minutes to do it. I’m just going to do it.

[00:20:33] Dan: Yeah. Absolutely. And right now, when I do that kind of training, I get it on recording. So I’ll do a zoom meeting and I’ll record it. And then we’ll have this video library of recordings of different trainings and that way, if for some reason we hire somebody else and they need to learn how to do that task or whatever. I already have it already done. I don’t have to spend another 15 minutes teaching them how to do it. It’s already right there in that video library.

[00:20:53] Mike: Yeah. Do you have a tendency to write things out? So like you have a task that you do and if you write all the points out, sometimes for me it makes it easier to teach. Teaching hasn’t always been my great strong suit.

[00:21:04] And it’s funny that today now I’m in the coaching and training business, and that’s all I do. And now it’s become a lot easier and I just enjoy it. Cause I enjoy giving information away helping people and watching people grow. I think it’s an old mentality of being a carpenter and standing back and saying, Oh, look, I built that wall.

[00:21:22] And when you see somebody else grow and you help them grow, you go, wow, look at what we did. So it’s interesting. Hey, what are some of the pitfalls that you’re seeing today in the market? You’ve mentioned COVID the pandemic a couple of times. What do you see pitfall wise that we should be watching for as we’re doing deals today?

[00:21:43] Dan: As a passive investor or as an active investor?

[00:21:46] Mike: God, you got to keep bringing that up. Don’t ya? No, just as an active investor. Somebody who’s out going to do a deal themselves, not even from the passive side.

[00:21:54] Dan: Sure. I would say that obviously even before COVID, you have to not always look at the pro forma that the brokers give you and think that’s the end all be all.

[00:22:04] You gotta do your own due diligence. You’ve got to come up with your own pro formas, work very closely with your property management companies and make sure that happens. But one of the things that I’ve been seeing that I think is very important to bring up is about the stabilization periods during renovations. Because, before COVID, it might’ve taken you 12 to maybe 14, 16 months to fully renovate a property based on the lease renewals and things like that.

[00:22:27]You’re going to probably have to make sure that’s extended out. You’re going to need to make sure that’s probably closer to 20 to 24 months, or maybe even longer, depending on the market that you’re actually investing in or looking at an asset in. So that’s one of the biggest things.

[00:22:37]But making sure that when you’re selecting the property management company that you select one that actually fits the asset. Because, we are now in these higher quality assets, which there are other property management companies that I’ve got 10, 20, 30,000.

[00:22:50] And you notice that they’re managing, but they manage lower end C class or lower and B class properties, and you can’t manage a C class resident the same way you manage an A-class resident. It’s two different resident demographics. And you have to make sure that you match that property management company with the property as well.

[00:23:05] Mike: Yeah. Interesting. So you don’t manage your own properties Dan, you always use third party?

[00:23:10] Dan: We always use third party.

[00:23:11] Mike: Yeah. What was your decision around? Obviously you made a decision way back when that this is how we’re going to handle it. Why did you not go build your own property management division?

[00:23:21] Dan: Sure. One of the main reasons why you build your own property management company is to have more control of your asset, right? Because it’s not really to make a lot more money because all the research that I’ve done, you’re not really doing it to make more money because you got to hire people to build and manage those assets.

[00:23:35] Anyway, at the end of the day, you might make a little bit, but it’s not really about making more money with having your own property management company. It’s really about being able to have more control over your assets. And as long as you have a good system in place to able to manage your managers or manager, property management companies, then for us, we wanted to make sure we could grow, we could scale. And we knew we couldn’t grow in scale as fast, if we had to be worried about really starting two different companies. Because a property management arm is really its own separate company, has its own set of regulations and nuances. And now you’re having to hire people and fire people.

[00:24:08] There’s a lot of decisions that have to be made in that kind of a setup. Whereas it’s a lot easier when you’re getting started, at least to be able to just say, Hey. Let’s just go ahead and use third-party property management. And I even know a lot of other people that have billions in assets under management, and they still use third-party management.

[00:24:22]I do feel like eventually we will probably get to the point of bringing in-house our own property management. But I’m not really sure how close that’s going to be, or even if we’re going to be able to, or about be able to, if we’re going to actually make that decision to do it. There’s a lot of moving parts to it and I’ve actually interviewed some really high level, even institutional level people about starting your own property management company and saying, Hey, how many units do you really need to have in a particular market for it to even make sense for you to have your own property management company?

[00:24:49] Because, I’m not in this to have a job, I don’t want to have another job where I have to be a regional manager or be a property manager myself. I want to make sure I have key people in place. And in order to do that, you have to have a certain number of units in place. And if you want to do it properly.

[00:25:03] And usually that number is between about two to 3000 units in a particular region or a particular market to really make sense of starting your own property management company. And that’s how we came to the conclusion that we are going to hold off doing that until we got a few more units under our belt.

[00:25:15] Mike: Yeah, that makes a lot of sense. That’s for sure. Where do you see the market going over the next 12 months dan? And everybody’s got a different opinion of this right now, right? Because of where we’re at and everybody’s still wearing masks. It used to be that when you wore a mask and walked into a bank that they got nervous and thought you were going to Rob the bank, now it’s a natural thing.

[00:25:36]So where do you see though, from a business standpoint? Across the board, not just real estate, all businesses. Where do you see us going as a country, as entrepreneurs moving forward over the next 12 months?

[00:25:50] Dan: Sure. I think that one of the things that’s going to happen, especially with the actual vaccine, that’s just been released that you’re going to see a lot more people taking advantage of the vaccine and being able to be more comfortable about getting out into the public.

[00:26:04] And we’re a resilient country. We’re all Americans and we love this country. And to me it’s still the greatest country in the entire world. And these types of things we always come out of and we always had to lead the world and being able to get out of these types of issues.

[00:26:18] And so across the board, I think we’re going to continue to do well. We’re going to continue to grow. I think we’re not going to really see as much of an impact of this as we’re probably have been predicting in the past. I think we’re going to continue to see that there’s going to be certain sectors and certain industries that are going to struggle over the next probably, six, nine, 12 months.

[00:26:36] But as these various restrictions start to be lifted. Travel’s going to be starting to increase. You’re gonna start to see even the hospitality industry starting to pick up. And you’re gonna start to see people traveling more because I even have people in my own family that really haven’t left their house other than to go to the grocery store and that’s it. Some of them might be in a high risk category or some of them just really concerned about getting it or maybe getting it and then they’d be giving it to somebody else.

[00:26:59] And so there’s a lot of still people out there, even though you go on the streets right now, I’m living in here in Columbia, South Carolina. I went to the mall on Saturday and it looks like just like a regular christmas season out there, right? Everybody’s wearing masks and things like that and I want to say they’re socially distancing, but they’re really not right?

[00:27:13] Now, they’re basically just putting their masks on. But I think that as we move into 2021, things are going to continue to improve. And the unemployment is going to start to continue to go down, especially as this vaccine is starting to roll out across the country. And more and more people are feeling more comfortable about getting out there into the public.

[00:27:31] Mike: Yeah. It’s funny you talked about going to the mall. On Saturday I took my kids into the city. We went to look at Christmas decorations and I was surprised at how empty everything was and it felt like a weak Christmas season. It was like, man this isn’t how it’s been in years past. But it was interesting, an eerie feeling almost.

[00:27:53]Dan: I will tell you traveling in the airports right now, it definitely feels that way.

[00:27:56] Mike: Yeah.

[00:27:56] Dan: Because I’ve done a few flights since COVID and it’s always been like an empty airport and I’m just like, this is just really weird.

[00:28:02]Mike:  Yeah. Hey, you have done a really great job building brands. Your companies, everything from your ophthalmology companies and your real estate companies.

[00:28:11]How do you build a strong brand? What are some of the techniques that you use that help you develop a strong brand?

[00:28:20]Dan: One of the things that I’ve always looked at and focused on is not necessarily the brand building as much as it is about trying to really market your services or what you actually do.

[00:28:30] And then the brand building is actually secondary. So a lot of people think, Oh, I want to be like a Nike or a Starbucks and whenever people see my logo, they think of me. The problem with that is that we don’t have the marketing budgets that these large corporations have to do brand building the way that brand building usually needs to be done, where you have a guy running on a soccer field or running on around a track.

[00:28:51] And all of a sudden you see a Nike swoosh logo, right? Now that’s not how we work. I’ve actually been a big student and follower of Dan Kennedy for many years. And his whole philosophy is about direct marketing, right? About getting a direct response from your advertising. So anytime I do any type of ads for my orthopedic clinics or whatever it may be, I always have a tracking phone number on it.

[00:29:14] We know how many leads came from that. We know what worked, what didn’t work, and we can tweak it. And it allows us to really see what kind of response we’re getting. Because if we’re not getting a response then we need to pull that advertisement back because when we have a certain number of limited dollars that we can use in that marketing budget. And we need to make sure that we’re using those marketing dollars wisely instead of just putting a logo on it and not really knowing.

[00:29:36] Hey, am I going to get a benefit from this or not? And so to me, brand building is secondary to the whole purpose of trying to get a direct response. If I spend a thousand dollars on an ad, I want to see an X return on that investment. And I don’t see that extra turn on an investment. Then I need to maybe move those dollars to something else and maybe figure out where that needs to go.

[00:29:55] Mike: Yeah, that’s interesting. There’s a lot there and I’m a huge fan of Dan Kennedy. I have been for years and he’s always taught some really great techniques around the direct marketing like that. So this show’s called insider secrets. What secrets or advice would you give to a new investor doing active investing today in the marketplace?

[00:30:18]Dan: I think one of the things that has allowed us to be able to find really good quality assets and provide some really good solid returns for our investors is that we’re not chasing low cap or not chasing high cap rate assets. And it’s one of those things where I see a lot of gurus and mentors in the space that teach that you should go after a seven and eight and 9% cap rate market.

[00:30:39]And to me, it was not a very big appeal to me because when I started running the numbers, I actually could get a better return on my investment by investing in a lower cap rate market. And that’s because if I spend the same amount of time, energy, and effort in a 8% cap rate market, and a 5% cap rate market that 8% cap rate market if I increase that net operating income by a hundred thousand dollars, I’ve only increased my value of that property by 1.25 million. And I say only in the 1.25 million is nothing to Bobcat. That’s really good. But if you do the same amount of time, energy and effort in a 5% cap rate market, I’ve increased the value of that property by $2 million.

[00:31:18] So it’s about the time and energy and effort complex or kind of dynamic is there. And I also look at a lower cap rate market and go, I have more stability in that market. Because what drives those cap rates higher or lower is the demand and the competition in that market. The lower the cap rate, the higher the demand. The higher the cap rate, the lower the demand. And so if I’m looking at an asset, I’m going to hold onto it for five to seven years. I want to make sure that when I buy that property, there’s high demand. Because I want to make sure that there’s also high demand when I go to sell that asset at the same time.

[00:31:53] So I’m going to have that exponential benefit. And it tells me that there’s people that are in that market that are wanting to buy that asset. And it allows me to know that there’s also some stability that’s within that market as well.

[00:32:04]Mike: And you said a whole lot of great things right there, and I’m going to advise our listeners to go back and listen to that a couple of times how you said that. One thing I’ve always learned is that no matter where the cap rates at I’ve been able to make money, High, low, if you know how to work the market, if you know how to work the cap rate, if you know how to work the sub market, you’re going to make money.

[00:32:26] It’s the same thing, whether a Democrats in office or Republicans in office, I’ve made money on both sides of the aisle, right? So you just have to know what to do. And I think that comes with experience. And I appreciate your years of experience and knowledge that you’ve been able to share.

[00:32:44] Hey, on a little lighter note, let’s talk about a couple of things. I know you’re in Columbia. And talk about what’s your favorite tourist attraction there?

[00:32:53] Dan: In Columbia?

[00:32:54] Mike: Yeah. Somewhere in your area there.

[00:32:56] Dan: Yeah. I would probably say we have a really good zoo here. It’s called the riverbanks zoo and it’s a really big, popular destination for people all over the Carolinas to come and visit. It’s one of the top rated zoos in this region.

[00:33:08] Mike: Wow. Interesting. I would have never picked that market for heaven of zoos. That’s good. How about a favorite restaurant?

[00:33:16]Dan: Actually there’s a restaurant up in Charlotte that I would say is my second favorite restaurant.

[00:33:21] And I’m a big steak fan. So all my top restaurants are steak restaurants.

[00:33:25] Mike: Okay.

[00:33:25]Dan: My number two best steak restaurant is actually Del Frisco’s out of Charlotte, North Carolina. They have a couple of different branches. I’ve been to the ones across the country, and pretty much anywhere I’ve gone. Del Frisco’s has had a really good experience as well as the food is just phenomenal.

[00:33:41] Mike: Isn’t there one in Dallas?

[00:33:43] Dan: There is.

[00:33:43] Mike: Yeah, I’ve been to it. Yeah. A very good restaurant. Yep. Best book you’ve ever read?

[00:33:50] Dan: The Bible. So I would definitely say if we were talking about any book, it’d be the Bible. You’re talking about business-related books, I’d probably say the 10X Rule by grant Cardone is a good book that has really changed my mindset and really been able to think bigger than I’ve ever been thinking before.

[00:34:04] And I’ve read that probably about six or seven years ago. And it was definitely a good book for me.

[00:34:09]Mike: Good. Somebody else just mentioned that I’m going to have to read that’s one that I haven’t read.

[00:34:12] Dan: The best way to read that book is via audible.

[00:34:15] Mike: Really?

[00:34:15] Dan: Cause he actually, Grant Cardone reads that book himself and it is just hilarious. He’ll sit there and laugh because of some of his ad libbing that he does in the audible version.

[00:34:24] Mike: Oh yeah, that’s great. I’m going to do that so. Most memorable moment you’ve had in the last six months?

[00:34:33]Dan: In my airplane. So I just bought an airplane back in August. So taking delivery of that airplane was pretty exciting.

[00:34:39] Mike: Wow. What kind of planes you buy?

[00:34:41] Dan: Say 2017, Cirrus Sr 22 G6. So it’s one of the most advanced single engine airplanes. That’s on the market and has full glass cockpit and GPS and weather and all kinds of stuff on board, which is really cool.

[00:34:54] Mike: Wow. Good for you. You’ve been flying a long time?

[00:34:57] Dan: I started flying about 10 years ago and then stopped for about 10 years. Trying to get back into it, hopefully taking my check ride to get my private pilot’s license in the first part of next year.

[00:35:06] Mike: Oh interesting. Good for you. So they let you go buy an airplane without a license?

[00:35:10] Dan: They do. Yeah, you can buy the airplane. You just can’t fly it. So I have a couple of pilots that fly me right now, whenever I need to be flown, but I’m also in the process of getting some training too.

[00:35:21] Mike: It’s a little different than buying a Harley because I won’t bought a Harley without a license, but they let me drive that. Hey Dan, if people want to get ahold of you or talk to you about any deals you might have going on, how do they do that?

[00:35:32] Dan: Sure, the best way to do that is just go to our website, passive investing.com.

[00:35:36] And if you’re interested in joining us on one of our future properties, you can click that button on the top right-hand corner that says join the passive investor club. And one of our team members will jump on a phone call with you, discuss your investment goals and make sure that our group is the right fit for you.

[00:35:51] And if you’re interested in just learning more about some multi-family investing, we have our free MFIN webinars that we do every single week. You can add your email to our email list by just going to multifamilyinvestornation.com. And we’d love to be a resource for you there as well.

[00:36:04] Mike: Yeah. And we’ll have all your information in the show notes too. So any last piece of advice you’d give anybody today?

[00:36:11]Dan: Two last pieces I would give you. So first off we talked about delegation and don’t forget that you need to learn and master the art of delegation. And the second thing is you need to learn how to measure various KPIs to make sure that you can manage it. Because if you can’t measure something and you don’t, there’s no way for you to be able to manage it. So make sure you set those KPIs so that you can actually manage your investments.

[00:36:33] Mike: Interesting. Thanks for your time today. I appreciate your insight, everything you’ve had to offer and say it’s been a pleasure to get to know you too. Look forward to talking again.

[00:36:42]And everybody thanks for being here. We’re here every Tuesday at 12 o’clock. So if you would go to Apple and like insider secrets and follow us on YouTube and follow us and subscribe and love us and do all that crazy stuff, we’d appreciate the reviews. So thank you. Look forward to talking to you next week.

[00:37:01]Kristen:  Thank you, Mike, and thank you for joining us for another great episode of insider secrets. As always insider secrets is brought to you by my core intentions. Join us on social media and visit mycoreintentions.com where you can get expert coaching on all things, multifamily investing and property management.

[00:37:19] We’re looking forward to having you back again next week for more insider secrets.

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