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Things You Should Know Before Investing In Multifamily with Randy Lawrence

SHOW SUMMARY:

In this episode, Larry invited Randy Lawrence, a fellow mastermind member, to talk about multifamily. Randy has been doing real estate for 15 years and he first started doing small multifamilies. He also got into flipping.

Randy is an indomitable entrepreneur with over 24 years of experience and four successful real estate investment companies. He is also a pastor and the founder of multiple life-changing ministries that has impacted over 40,000 people in the last 15 years. He has been featured in the St. Petersburg Times and Tampa Tribune as well as on CBN, NBC, and CTN as the “Transformation Expert.”

In today’s show, they discussed having the right mindset, generating leads, and finding deals.

SHOW HIGHLIGHTS:

  • Randy's background
  • On being a real estate investor and pastor
  • On having the right mindset
  • Business transitions when the market changes
  • Generating leads for single family
  • Doing Bandit signs
  • What his team looks like
  • His multifamily business
  • How his team operates
  • Lenders they are working with
  • On having the right management company
  • Two components of multifamily:
  • - acquisition
  • - management of the ongoing operation
  • On having the right people in the team
  • Due diligence
  • Finding deals
  • How he structures his deals
  • His podcast

Quotes:

  • “You need to be comfortable being uncomfortable to advance forward.”
  • “Business just like life has seasons.”
  • “Anything successful that you do is going to require work.”

RESOURCES AND LINKS FROM THIS SHOW:

SHOW TRANSCRIPT:

Larry: Welcome to the Brain Pick-A-Pro show live from Lake Wylie, South Carolina, and all the way down South in Clearwater, Florida, is my good friend, fellow Mastermind member, we’ve known each other for a long, long time now, Mr. Randy Lawrence. What’s going on, buddy?

Randy: I’m fine, my brother. How you doing, man? Good to see you.

Larry: I’m doing excellent. It’s great to see you too. I’m really excited to have you on here. I know, man, you got a lot of stuff going on, and I’m excited to be able to hear about it and share it with our audience and find out exactly what you got going on, so why don’t you start out and tell our listeners a little bit about yourself.

Randy: Yeah, so I’ve been doing real estate now for fifteen years. We started off in 2003, started off – my original mentors were in multifamily. They had, you know, several thousand units here in Florida and so we started off doing small multifamilies and then kinda got the flipping bug, if you will, in probably 2004, ’05, just Florida was so crazy hot with, you know, the flipping going on and also the money was a lot faster in that arena so we really got focused on that and then, you know, flipped a ton of houses. Of course, the market crashed in 2008. We transitioned to a big short sale company, did hundreds of short sales and then started back really flipping again probably 2012, you know, and then from there, probably about ’15, started back, looking, hey, we really wanna get back to our roots of the multifamily and start focusing on larger complexes and so really started probably in the last year and a half, two years ago, going back and pursuing that direction and – so now we’re simultaneously, we’ve got the flipping company going where we’re flipping probably, you know, sixty, seventy-five houses a year and then the equity company where we’re buying larger apartment complexes like seventy-five- to four-hundred-unit apartment complexes and, again, not flipping those but rehabbing, doing the value-add improvement, improving the neighborhood for the tenants, improving and bringing rents up, and, you know, bringing a great return for us and our investors. It’s exciting, man.

Larry: That’s awesome. That is awesome, man. That’s awesome. And one important thing I think we ought to point out is you pastored a church for, what, about twenty years?

Randy: Yeah. Twenty years, yeah. So during that whole time, I did two things simultaneously. That and the real estate which we just talked about and then I also pastored a church. I was pastor for international ministry and singles ministry at a large, six-thousand-member megachurch here in this area and then back in ’06, we left out from there and went north to Tampa and launched a church called True Life Center and pastored that church for probably ten years and then about two years ago transitioned out from the lead role of that church and started the podcast and online focus called the Real Estate Preacher and so that church merged together with another church and another pastor took that over and so now we’re kind of casting a wider net through real estate, we’re helping people, you know, with kinda spiritual, mental, and strategic tools through the Real Estate Preacher Podcast.

Larry: Man, I love that, love that. Great podcast, great concept. You know, anybody can go out there and learn the mechanics of real estate, right? But especially starting out, and even growing, you’ve got to have that support system, you’ve gotta have that, you know, be around like-minded people and also be able to keep your sanity and to grow and to try to do the right things and there comes a point when it’s not just about how many houses you can flip in a year or how many units you can buy, you want to be able to give back, right?

Randy: For sure, for sure, and, you know, I think that part of one of the keys for me has been that support, that spiritual base, really with God’s help enabling me to do both of those things, you know, even during like the market crash, I mean, going through that plus pastoring a church and then having the right mindset, you know what I mean, because it’s like not only when you’re facing those challenges but when you’re expanding, it’s like doubt, fear, uncertainty can kinda try to creep in and rob you of taking those steps and then even just being in like in the comfort zone, you know, everybody loves to be comfortable, and you have to become comfortable being uncomfortable to advance forward whether it’s somebody that’s listening and they’re starting off, like maybe they have a job and they’re gonna start flipping, well, that’s uncomfortable. You gotta pull the trigger and buy that first house for fifty or a hundred grand and take the risk and balls in and go in and do it, you know, and that’s like, wow, that’s uncomfortable, and so, you know, again, for me, it’s like that continuous development of the mindset, and even now, like in an honest way, I have to do that on a daily basis because like, even now, like this morning, I’m doing some reading, I’m looking out over the water as I’m drinking my coffee and getting ready to come into the office and as I’m reading, I’m reading in Numbers about the spies of Israel went in to spy out the land and it’s like this beautiful land but all of this fearful things and, for me, that just spoke to me, it’s like we’ve got two apartment complexes, one is 264 units, the other is 406 units that we’re working on, and that’s a bigger level purchase than some of the other ones we’ve worked with. At the same time, that’s where I’ve got to level up in my mind, it’s like, you know what, put the hammer down and go for it, right, and so I think that no matter what stage you’re at, if you’re just starting out or you’re growing or increasing, you gotta have that mindset focused on the right things.

Larry: You know, that is so, so important and, you know, business, just like life, has seasons, right?

Randy: Yeah.

Larry: And, you know, talk about seasons in the Bible, you know, and I remember Jim Rowland used to talk about that all the time. Life is like the seasons, right, and I’m reading a book right now called Necessary Endings, right, and whenever you – I mean, you mentioned a word a minute ago, transition, you had to transition. When the market fell out, you had to transition. You started a short sale business. So, talk a little bit about that, about seasons of business and having to make transitions when the market changes because you’re really, really good at that. I mean, you saw an opportunity – you didn’t look at – “Oh, the market’s tanked, I gotta get out of business.” No, you transitioned into another business and not only survived but took advantage of that situation, so speak a little bit to that, if you don’t mind.

Randy: Absolutely. Now, that’s a great point that, you know – things change in the business and the economy and so, often, people get so focused, and, again, I think it goes back to comfortable, it’s like, hey, I learned this, I’m doing this, stay focused and just doing this, and then, you know, when things change, that’s where it hits them and they’re not willing to make that change and so a lot of people, just like you said, they just, “I am not gonna make it, it’s not working,” and he’s left the business and came back in, you know, ’12 or ’13 when things were quote “better.” And so, you have to do is you have to look at and come to honest terms, it’s like you’re never one and done, meaning like, “I’ve got this figured out and that’s what I’m gonna keep doing ’til I retire at fifty-five or whatever.” It’s like you’ve always got to be making those adjustments and/or those transitions as the market’s changing and then even the better component of that is beginning to be more strategic, you know, so that I’m beginning to look ahead to see where the market’s going and getting prepared for that so as that happened in like 2008, the markets crashed and all these houses are going underwater where I’m out here in Florida, and it’s like I looked at that, it’s like, I don’t wanna – you know, we were still flipping but it was like catching a falling knife, you know, you go to sell the house at a hundred thousand, the neighborhood’s now ninety-five, you know, and it’s like I wanna go with the tide and so that was really – there is this tsunami of foreclosures coming, how can I ride that wave? I can help all these people to help them get out from underneath their mortgage and so that was kind of the focus that we did and so we really developed that as a full-scale business with, you know, short sale negotiators and, you know, managers and going through that process and then as that, you know, kinda crested out, we saw the market changing again and then so we started selectively rehabbing ’cause we had rehab crews and we stopped rehabbing everything in probably 2009, ‘10, because of the short sale focus and, again, as the market transitioned, we made that transition to start, you know, cherry picking, I guess, if you will, the ones that really needed to be rehabbed that made the most sense, and then so from ‘12 to ’14, again, selectively rehabbing and increasing that back into a rehab model, recognizing, you know what, hey, these short sales are dissipating and moving away and then so probably from 2013 to 2014, we bought a lot of foreclosures but, again, recognizing there’s people out there now that are scratching at the dirt trying to buy foreclosures off MLS and they’re gone.

Larry: Right.

Randy: And they didn’t see that coming and so we’re, again, we looked at that transition back in probably ’14 and, again, I believe God’s help and having good people around us as well, being a part of a Mastermind with other collective people that are thinking high-level thoughts, you know, started focusing on the seller direct and going to a seller-direct model so that then, that way, by the time everything dried up in the foreclosure stuff, we’re already at scale in the seller-direct model, you know? So it really has been – the biggest part of that, I think, goes back to the comfort zone thing. Like in an honest way, I would have liked to have everything nailed down and not ever had to make a change.

Larry: Right.

Randy: But that’s not real life.

Larry: That’s true.

Randy: And so I think that, you know, the days where somebody could learn one thing and stick with it and ride that horse all the way to the end to retire with millions of dollars and ride off into the sunset, those days are gone. The economy changes too quickly, technology moves too quickly, seasons move too quickly, and, you know, what’s working today is not necessarily gonna be 100 percent of what’s working eighteen months from now.

Larry: You know, that’s so, so true. In fact, I’m really glad you brought that up about the transition and understanding where the market’s going. Like you mentioned the MLS stuff dried up.

Randy: Yeah.

Larry: Literally until about six or eight months ago, I was getting all my deals off of HUD and the MLS, right? I mean, you had to stop – you’re in Florida, right? You had to stop in, what, 2014?

Randy: Yeah, ’15 they started just disappearing, you know what I mean?

Larry: Right. Well, you know, I was getting all my deals until 2018 – now we’re still getting, you know, probably a few HUD deals a month and maybe one or two MLS, but we had to start doing direct mail, Facebook, you know, those type of things. Well, what are you doing now to generate your leads for your single-family?

Randy: Yeah, on the single-family side, we do direct mail and we’re probably at thirty thousand pieces a month and then we’ve got a pretty extensive network as well just because of our time frame here, so kind of the old school, you know, networking and reaching out to people and reaching out to other wholesalers as well. I mean, we wholesale properties but we buy from other wholesalers as well too, and then we’re beginning also to do outbound calling, you know, and so just really all the things – one of the things that we actually are gonna start doing back again is bandit signs. Bandit signs are effective, they’re just a little bit more labor intensive, you know? So – but that’s – and, again, you know, not being I guess lazy of just doing the one thing, you know what I mean? Like if it’s working, hey, let’s just stick with it kinda thing and it’s like, well, yes, but doing multiple things, you know, multiple streams.

Larry: And you have to. I’ve always said I’d rather have ten ways to find one house than one way to have to find ten.

Randy: Exactly, yeah, yeah, that’s for sure.

Larry: So, what does your team look like?

Randy: So we have a project manager that oversees all of the rehabs and we probably have anywhere from seven to eight construction teams going at any given time and then we have acquisitions guy, we have a closing manager, operations where she’s overseeing all the closings, then accounting manager where she’s overseeing, you know, all the bookkeeping and accounting and stuff like that. We’re bringing on, we’re right now in the interview process for another admin person and then we’re actively looking for a COO person as well because then again once that person’s hired, we’re gonna bring on additional acquisitions people as well so – but even too with us and then also having the apartment complex company as well, I manage each of those people and they oversee their area of responsibility but that’s where now bringing in that COO will help expand both businesses really because then they’re going to be dedicated solely to operations and management.

Larry: Right. That’s great. That is good. So it sounds like you got – you’re running pretty lean based on how much you’re doing.

Randy: Yeah, it is. I mean I’ve probably been historically more like the Sam Walton kind of deal of, you know – they still have the old office building in Bentonville, Arkansas, you know, even though they’re this giant global company and so I had been historically more of a lean, kind of push it to the limits and so these additional hires we’re doing kind of will expand the bandwidth and I think that you probably, you know, I could have probably run faster, further if I’d not been as lean, you know what I mean? It’s like – but that’s just kind of where I’d been in my mindset, you know?

Larry: Well, that’s not a bad thing to do is to stay lean.

Randy: No. For sure, yeah. I mean, there’s not a lot of fat on the bone in the operations here, for sure.

Larry: That’s really good. So, you mentioned multifamily a minute ago. Tell us about that business. Tell us about your multifamily business, ’cause you really started it before the fix and flip, didn’t you?

Randy: Yeah, we did. You know, we had been in those smaller multifamilies, you know, seven, ten units, that kind of thing. Those were more easily acquirable at the time, you know, again, where we were at, and then – but as we transitioned back to focusing on that, really, the decision was, you know, we don’t wanna go back in the smaller multifamily, we wanna move to the larger multifamily, like the mentors I had and then another neighbor and friend of mine on the beach has done a ton in that arena as well and so, we really said, you know what, the economies of scale for that threshold is about seventy-five units up to, you know, four, five hundred units and so that’s really been our focus and so we closed eighty-four unit at the end of ’17, we’ve been working on a bunch of deals this year, it’s a very tight and competitive space right now because just everybody and their brother is pushing after multifamily and so that’s driven prices up and, you know, makes it, you know, all the more important to make sure they underwrite us correctly, so we’ve got probably three deals that we’re working on right now, two of them that are the larger complexes and then kind of the bread and butter is the 75 to 130 units, that’s really kind of our sweet spot, if you will.

Larry: Right. Seventy-five to a hundred and thirty units?

Randy: Yeah, yeah.

Larry: That’s good. Yeah. And tell us a little bit on what your team looks like on that side ’cause you gotta have somebody out there pounding the pavement all the time to find those deals ’cause, like you said, everybody wants to be a multifamily investor right now.

Randy: For sure. Yeah, that’s like – that’s the thing, you know, everybody wants the cash flow from it, so – but it really is a team sport, if you will, a team business, so we’ve got our management company that we work with, they’ve been of course thirty years in the business, very seasoned, really super dialed in, and they’re invaluable to have because of, one, you gotta know how to operate a complex once you get it, and also being able to underwrite the numbers ’cause a lot of times you’ll look at numbers and the numbers that are given to you are kind of crap, you know what I mean? Like they’re not real, you know? It’s like I’ve seen stuff like even in your neck of the woods there in South Carolina where, you know, they’re saying, okay, on a 150-unit complex, the salaries to run it is $60,000. It’s like, good Lord, that’s half of what it’s gonna take to really run it, you know, correctly, and so – but with that management company, we’ve got the boots-on-the-ground, you know, manager that oversees things. We’re able to have them go look at a complex for us when we, you know, get one that comes in. We’re able to work the numbers. It looks like it’s gonna be reasonable. They’ll do a first tour of the property, check out the neighborhood, that kind of thing, so it’s important to have that type of operation. Also, the due diligence company that we work with, you know, we have that in place so that, again, once we get it under contract, you’ve gotta walk, you know, every unit, check every, you know, up, down, all around for the building, all the roofs, all the ACs, all the interiors of every unit, you know, somebody asked me that, “You walk every unit?” Absolutely, we walk every unit.

Larry: Right.

Randy: I mean, we don’t just look at the three that we’ve seen on the tour. Once we got it under contract, we’re gonna walk every single unit to see what the condition is because we need to evaluate what’s our real cost gonna be to rehab this thing and bring it up to, you know, best standards, so that due diligence team is in place and then the lender that you work with is key too and so we’ve got a couple of really great spot-on lenders because, you know, there’s a number of different ways to approach it whether it’s a bridge loan on a deal that’s not at the occupancy you need to get a Fannie or Freddie loan, and then the other part of it is, you know, with the Fannie/Freddie, we have now that Fannie/Freddie card because of having done deals, but if you’ve never done a deal and you’ve never gotten a loan from Fannie or Freddie, you need to have that relationship with somebody who can come on and sponsor with you, and so of course we’ve developed that relationship with numerous other people in the beginning as well.

Larry: Right. So basically what you’re talking about on the lending side, if you haven’t done a multifamily, you need a key principal to go in and sponsor your deal so they’re basically signing on the dotted line.

Randy: For sure, yeah, it is. So, the loans with them of course are, in most instances, they’re non-recourse loans but you do have to give a personal guarantee for that on a bad boy carve-out so, again, it’s still non-recourse but if you were just trying to defraud them then that comes back against the guarantor, and the other part of that is you really also have to have the net worth, so if you’re borrowing three million dollars on an apartment complex, you’ve gotta have a net worth of three million dollars or your key principals have to have a net worth of three million dollars because they wanna see, hey, we’re gonna loan you the three million, let it stand against this complex, it’s non-recourse but we wanna see that you’ve got at least a three-million-dollar net worth and some liquidity. They wanna see that you’ve got like a year’s interest as well so that’s where, you know, we had that but we didn’t have the Fannie/Freddie card, so to speak, and so – but again, having to connect with the right people to develop those relationships, that’s why it’s a team sport because even now, once we go to buy a place, whether it’s a three-million-dollar, five-million-dollar, or fifteen-million-dollar purchase, it still requires other people to be involved different from the houses.

Larry: Right. That’s exactly right. That’s exactly right. Tell us a little bit about the management company. You mentioned your management company, they have thirty years experience and they’ll go out and do the first site visit for you. Man, that management company is really a very key role in a successful multifamily project, right?

Randy: Absolutely. It’s super huge. I mean, if you don’t have the right management and operations, it’s gonna be a mess, you know, and that’s where, you know, there’s two components I would say to that multifamily is one is the acquisition part, you’ve gotta buy it right, make sure the numbers are correct, have the rehab accurate for what you’re gonna do, that’s the first part, but then the second part and it is equally as critical is the management and the ongoing operations. I mean, you really have to be able to have professional operations so that you can minimize cost, maximize the rents, and also maximize the efficiency, and so when we targeted particular areas throughout the Southeast that we were focusing it on, we developed relationships with different people that were experienced and then connected with other owners and then found out from them, hey, who are, you know, three managers that you can recommend to us, and then so we went through a vetting process by speaking to other owners on, you know, hey, who do you recommend, and they’re like, yeah, I worked with this person and it was total crap, I worked with this company and it’s been fantastic and so through that, we kinda, you know, whittled out the bad and went straight to the good, you know, versus somebody just kinda looking on Google, management company, and picked this guy and then you get, you know, ends up costing you fifty grand in heartache and headaches.

Larry: That’s so true, that’s so true, and I’m glad you shared that about how you found them. Actually that was my next question, how did you find your management company but you wanna be able to ask owners, you know, to recommend some and then you put them through a vetting process as well, right?

Randy: Absolutely. Yeah. And, you know, the reality is on that first go round when we were moving into an area that we had not been before, it required a lot of work. I mean, you know, anything successful that you do is gonna require work.

Larry: Right.

Randy: And the culture that we live in today, people don’t want that, right? They want easy. Microwave success, right? Bing, ten seconds, wooh, yeah. It’s like –

Larry: Wow. I like that term. It’s so true. It’s so true.

Randy: That’s what it is. You know, I remember specifically sitting at this very desk, talking to people on the phone and thinking to myself, man, this is a buttload of work but it’s worth it, right? As I’m digging through and peeling back layers to find the gold and to find the right people that are gonna ultimately be part of my team.

Larry: Right.

Randy: And so now, like the result of that on probably two of the last complexes and then this four-hundred-unit deal that we’ve looked at in most recent terms, it’s been a matter of making a call, talking to the owner of our management team, and then speaking with him, one of the team members goes out, looks at it, I mean, that’s worth every bit of blood, sweat, and tears that I’ve put into it because having the right people on your team makes all the difference in the world.

Larry: That’s so true. I even know some multifamily owners that will give their management company a small piece of the deal just to keep invested.

Randy: Yeah, for sure, and that is part of the model with some of those folks, you know, and we have not done that but I’m not gonna say that that doesn’t have its place and/or couldn’t be a good option. I know guys that have done it and it’s been very successful and, you know, we’re looking at that because the other thing too is not every company necessarily covers every area and has expertise in that area, you know, so again for us we’ve expanded our geographic focus and footprint just because, you know, that’s part of the nature of what’s going on in the marketplace and so, with that, we’ve also expanded where we’ve got, you know, probably two or three go-to management companies that are exactly like I described. They are on point, they’ve got their systems dialed in, they’re at the top of their game, and they’re on board with us, and so, you know, because they recognized, look, we’re not kind of screwing around with it, we’re in it for the long term and as soon as we get something in their area, we’re focusing on expanding that area, and so, again, that’s how they make their money as managing more and more doors for a longer period of time.

Larry: Right, right. That’s so important, that’s so important. You mentioned a minute ago also you have a due diligence company. Tell us a little bit about that and what all do they do for you when you get a property, you know, under contract.

Randy: Yeah. So, it’s good to have that so ’cause a lot of times, your management company has the ability to do the due diligence with you and they’ll do that as taking over the project, you know, ’cause again, you’re coming in, oftentimes you’re gonna replace that current management with your management. You may keep the person that’s the boots-on-the-ground manager of the complex if they’re good. If they’re not good, you know, you keep them on during the transition and maybe second month in, you replace them, but so there’s – sometimes we’ve gone into projects that we’ve looked at and then the management company’s doing a good job, they’re just constrained by the owner not wanting to spend any money. The owner’s just milking it for, you know, the cash flow.

Larry: Especially the last three months that it’s on the market.

Randy: Yeah, yeah, for sure. Well, and again like so we looked at – we’re looking at one in Texas that, again, they bought it as a cheap cash flow place so they bought it and they haven’t put any money in it, they’ve got a great management company but also explicit instructions don’t spend any money, you know, so you can’t make the improvements so in a situation like that, we don’t wanna use that management company to do the due diligence because there’s a heavy conflict of interest.

Larry: Sure.

Randy: And so that’s where we bring in our due diligence company to actually do the lease on it, to make sure that the leases are true and accurate against the rent roll, do the actual facilities walk where we look at all the roofs and, you know, foundations and all the units and then put together a detailed report on it, you know, so that kind of project probably can cost anywhere from, you know, twenty-five hundred to five grand to do that because, you know, you’re bringing in one or two people, they’re spending two or three days there depending on the size of the complex, you know, it’s a lot of work, but it’s worth it because then now you’ve got, alright, hey, there’s this, the electric’s bad, this is bad, the sewer lines are bad, you’ve got all this information that you can now go back to the seller and say, look, hey, you know, there is at least another fifty grand worth of work here that’s gotta be done that was not, one, disclosed to us, maybe you didn’t know about it, but, two, it wasn’t visible, now we know about it, let’s talk about it, you know, so even though you might spend five grand, maybe you uncover a fifty-thousand-dollar problem and then that becomes off of the price so you spend five to make fifty, that’s pretty smart.

Larry: Sounds like five thousand is very inexpensive to go do that much due diligence.

Randy: For sure, yeah. It’s a good deal, it’s worth it, you know, and so I think what happens is when people are moving into multifamily, you’ve just gotta recognize that you’re dealing with bigger numbers, you know what I mean, like so, again, people will go do a house inspection and pay two hundred dollars, well, it’s like that’s not gonna be what you’re gonna get in that multifamily space but at the same time you’re also spending five million, not fifty thousand, on buying the place.

Larry: Exactly. Exactly. Now, let’s talk a little bit about finding deals. Because everybody is chasing multifamily right now, right? I shouldn’t say everybody but – that sounds like something my four-year-old would say, but there’s a lot of people –

Randy: It seems like everybody.

Larry: I know, right? So, give us some tips and strategies on finding multifamily.

Randy: Yeah. Well, I think that one of the surest way is to begin developing your network and, again, that’s part of that team like what we talked about of who’s on my team. The other integral part of that team is brokers in the specific area of where you’re gonna focus on. I mean like I would say the best thing to do is focus on a particular geographic area that you wanna be in, understand that area, and then begin to network and connect with legitimate brokers because probably the majority of the complexes are owned by more sophisticated individuals or companies like us or, you know, even guys I connected together with in that beginning, you know, they owned fifteen, twenty, twenty-five, thirty complexes, these guys are professionals and so most of those people recognize in this marketplace, they’re gonna sell to maximize their value through a broker and not just kinda, you know, sell it to anybody off of the street and so by developing those relationships with the brokers that, hey, that you are a multifamily purchaser, you’ve got the means and the wherewithal, you begin to develop that relationship, they now begin to include you in that process of like, “Hey, I’ve got a deal that I want you to take a look at.” I mean, prime example of that, we had a deal in Georgia that the people offered on it, they were kind of a high-flyer, no-money group. It fell apart. The guy talked to some of his, you know, team, “Hey, who is somebody that is situated for this type of property?” and then, boom, our company, Prosperity Capital, came up. He reached out to me, hey, I talked with so and so, they said that you buy in this kind of thing and, boom, brought it to us as an off-market deal. We were gonna buy it but we got snaked out in the very end by another group which that kinda sucked, but, you know, that’s part of that development of those relationships and then, especially once you close on properties, then people recognize you are a performer and then it starts to compound even more. I mean, like right now, we’re hiring another admin person because our internal CPA lady, she’s gonna also be moved into deal analysis because we’ve got so many deals that are coming to us, we need more help underwriting them, you know, to vet through the properties, and so it is absolutely a great strategy to work that. The other element that we’re gonna do is specific targeting to send out particular mailings to owners that we wanna target for a particular area. I know guys that are doing that, it’s been less fruitful than what you’d have in like kind of the single-family space because, again, it’s a more sophisticated seller. In an honest way, when we would go to sell our place, I’m not gonna sell our complexes to somebody off a letter because by going to a broader market, I’ll bring in more money.

Larry: Right.

Randy: But, again, it doesn’t mean that those opportunities aren’t there, it’s just a little bit I’d say of a longer run because you gotta target those people that maybe have owned them for ten plus years that they are ready to sell based on age, there’s a little bit more work I think you have to put into it in doing the research before you just, boom, buy a list from, you know, Realist and, boom, mail it, you know?

Larry: Right, right. So what you’re saying is probably the biggest bang for your buck is to build relationships with brokers and be their go-to person before the property goes on LoopNet which is, you know, where they go when they don’t sell.

Randy: For sure, yeah, exactly right, you know, ’cause – that’s exactly – if you want to develop those relationships, you’ll be a part of the group that they reach out to. Now, again, there may be thirty, forty, fifty people that are in that marketplace that they say, hey, we’ve got this property, we wanna reach out to you, and in some instances when you develop those relationships further, maybe that number whittles down to three to five, you know what I mean? Like they’re gonna get their three to five best people, say here’s this deal because, again, at the same time, there’s a number, like this deal we’re looking at in Georgia, the guy wants six million, the broker’s like, “Dude, you’re not gonna get six million, it’s more like 5.5 to 5.8.” The guy’s like, okay, I could live with that, and so, you know, they’re reaching out to us and probably, you know, a handful of other people to say, hey, here’s where it is, here’s the number, and then if they can’t get the number that they want, then they’ll put it out into a broader sphere like that.

Larry: Right. That’s good. That is good. Now, you do some – I think a lot of your deals are probably around four- to seven-year plays where you’re gonna go in and either rehab the property to a certain extent or you’re going to improve the management, reduce expenses, increase the rents, you know, that sort of thing, and so tell us a little bit about how you structure your deals ’cause you bring in some investors from time to time, right?

Randy: Yeah, correct. So, we do, depending on how much the equity piece is, we’ll have other investors participate with us in the complex and in the purchase and then it really usually exists on that time frame of between four to six years because. in that first year, we’re going in right out of the gate and, you know, doing the exterior rehab, getting rid of some of the lesser quality tenants, you know, probably by month six to eight, we’ve made those changes, we’re renovating units, it probably takes a solid eighteen to twenty-four months to go through and do the renovations on the turn ’cause we’re not just putting everybody out, we’re, you know, selectively getting rid of the worst tenants, the slow paying tenants, the problem tenants and keeping the good people, and then improving the tenant profile so by year – twenty-four months, year two, we’ve got – all the renovations are done, the tenant base has been improved, now you’re, you know, significantly improving operations as well through that time period so that come year four or five, you’ve really got a great complex that’s been totally transformed, better quality tenants, better quality of life, higher income, higher value, and now the ability to sell that. So – and that’s where, again, that way the investors that participate with us, you know, they’re getting paid on a quarterly basis through the cash flow and then there’s additional monies of profit coming to them when we sell in year four, five, or six. Now, there’s occasional deals like the one that we’re working right now in Texas that’s kind of actively going back and forth where – it is one where we’ll do a bridge loan because of the renovations that we’re doing and some of the other vacancies with the property, that kind of thing, and deferred maintenance, where on that kind of deal, investors would come in with us but we’ll actually have that project done within about twenty-four months, be able to refinance out the project, pay them off, so they’re getting paid off in a more twenty-four to, you know, two-and-a-half-year time frame there so that also happens just depending on the nature of the acquisition and what it looks like.

Larry: Right, right. That’s really good, man. That’s really good. This has been some awesome information.

Randy: Awesome to connect together with you, brother, and, you know, looking forward too to having you on the Real Estate Preacher as well, man.

Larry: Awesome. That’s good. Tell us a little bit about that podcast.

Randy: Yeah. So, we have really started focusing on that. I mean, again, it delivers a spiritual component, a mindset component, and then a mechanics component, you know, from doing mailings to marketing to how to answer seller calls to, you know, we’re actually gonna start a series now on the apartment complexes. We really haven’t talked about that as much as it’s been single family and so we’re starting to focus on that about like, you know, how we build out our multifamily business, how we, you know, work with other investors, raise money, all that stuff, so, and then, you know, we are getting more diligent about doing the regular episodes, you know? We’ve been like on the top page of, you know, iTunes or whatever with it but some of the other focuses have kind of pulled my focus away and it’s like God’s kinda saying, hey, we get people to reach out, man, thank you so much, I appreciate the help and, you know, they learn from it so it’s been a little bit neglected on my part and so we’re honestly putting more focus back on it because it’s really delivering value to help somebody. I had a guy that they probably flip a hundred houses a year, he reached out to me and he’s like, “Man, dude, I love the podcast, the stuff that you shared has just really helped change my mindset and helped take me to another level and, you know, man, keep doing the show,” and, you know, so that kind of thing is really cool to hear that response and, you know, that’s an opportunity to get back and help other people too.

Larry: That is great, man, that’s great. So, Randy, if somebody wanted to reach out to you, how can we help you? How can they help you and how would they reach you?

Randy: Yeah, so you can reach out to us through our website, prosperitycapitalpartners.net. You can go to prosperitycapitalpartners.net and then it talks about our company, it’s got a Contact Us form, you can find out about how if you wanna invest with us and apartment complex deals, you can reach out through that mechanism and I’d love to be able to talk with you and be a value to help you.

Larry: I’m going to the site now, right now.

Randy: Awesome. Yeah.

Larry: Yeah, that’s awesome. That’s good. Man, I really, really appreciate you being on today. It’s been a lot of fun. Really, really informative, and, man, just keep doing what you’re doing. I appreciate it.

Randy: Absolutely, brother. Appreciate you, and you keep rocking it out there and helping all the folks that you’re helping too, brother.

Larry: Thanks a lot, man. I appreciate it. You take care.

Randy: Alright, man. Take care, brother. Have a great day.