Multi-Family With Eric Bowlin
Among the many ways to go about the business of real estate investment, putting your money into investing in multi-family properties may require a lot of thought, but the returns are often solid. That said, the part of that which really makes the process difficult is dealing with all sorts of tenants. Prolific multifamily investor Eric Bowlin speaks to Mitch Stephen about everything multifamily. When you’re buying properties – especially occupied properties – you’re usually also buying situations. Let Eric and Mitch take you through the best way to deal with these kinds of situations.
My guest is Eric Bowlin. He lives half the time in the US and half the time over Puerto Rico. He’s got some dramatic tax benefits for those kinds of people that are bold enough to do that. Eric, let’s jump right in. We’re going to be talking about 2 to 20-unit multifamily and the fact that you don’t need to let where you live dictate where you invest. Tell us a little bit about your background. How did you get this far?
I got started in 2009. I bought a triplex, my first home to live in. It’s funny how I got into it. I never intended to be in real estate. I wanted to buy a home, but I was a full-time student. I was working on my PhD at the time and I had part-time jobs. I was in the Army National Guard. I was a teaching assistant working part-time on everything. I couldn’t qualify for a home. I had a lot of debt and no stable income. I had discovered a little trick that you can add the income from the other units in the same building that you live in if it’s up to four units in order to help you qualify.
That was enough to get me over the edge to have the income that I needed to qualify for the loan. I bought a three-family and then I had plans on holding it for about three years. It’s 2009, you remember that the recession had begun. I thought in three years the economy is going to be great. I’ll sell it and I’ll be a teacher somewhere or professor, buy a single-family house and be a normal person. That was my plan and a few things threw that off. One, I got into real estate full-time. Two, the economy wasn’t great in three years. It’s worse in 2012 than 2009. That all changed because I got a knock on my door one night and I was watching TV. I remembered this night changed my life. I’m like, “Who’s that knocking on my door?”
I live in a pretty rough neighborhood because that’s all I could afford. People don’t walk around at night and knock on your door. I’m like, “Who is that?” It was one of my tenants who lived in the building, there to pay me the rent. I took the cash. I wrote a receipt. He paid cash because I think he’s a drug dealer. He always paid on time and in cash, it wasn’t a big deal. That was the easiest money I had ever earned up until that point. I was 24, working hard for my money. I was working a lot of hours as far as part-time work and I was in the Army. Everything I had earned had been hardly earned with a lot of effort. I’m like, “That was the easiest thing I’ve ever done.” I realized that night, “I’m going to do this forever. I want money to come to me and knock on my door.”
That was your light bulb moment where you go, “What am I doing?” I had the same thing. I sold my place and had more money in the bank than I made work in the whole year. If I put my whole year’s salary in the bank, I had more money in the bank. I thought, “What am I doing?”
I was like, “I don’t have to work for three weeks straight to get paid, but I got paid. I don’t have to do that?” I’m like, “This is what I’m doing forever.” I planned on getting real estate that night. Life took a little detour. I got deployed to Afghanistan in 2010 into 2011. When I came back, I immediately dropped out of my PhD program and I got into real estate full-time.
Did you scuttle the college endeavor altogether?
I had my undergrad and I was working on my PhD. I dropped out of that. I did get my MBA later, but that was only because the Army paid for it completely and I could do it online. I didn’t have to spend a lot of time and effort on it, but there was no reason other than I could get the GI Bill and get some of those other benefits while doing it. That was a few years later, but I’ve never used it. I didn’t need it. I dropped out completely to do real estate and everybody thought I was stupid. My professors were like, “You shouldn’t do this. You should get your PhD as a backup in case a real estate doesn’t work out for you.”
They’re still going to work every day and you live in two places now. You have two homes. One in Puerto Rico.
I remember I was traveling in Asia a few years ago. I was sitting at a cafe and I wonder what my old professor is doing. He had a high-level job working for the government and economics research. I’m like, “I’m going to look up a salary,” because he’s a public worker. It’s there. I’m like, “He’s earning good money.” He was $150,000 or something here. I’m like, “That’s nice.” That’s more than what I was earning at the time. I was on a two-month vacation in Asia traveling countries and I’m like, “It’s what I’d rather have.”
You accidentally did your first deal. Tell us about the first deal you did on purpose, if you can remember.
It was a house flip. Somehow over those two years, I wanted to earn passive income and I want money to come knocking on my door. Somehow over the next year and a half or so, that became, “I need to flip houses.” I’m not sure how that concept changed because one is very passive and one’s very active, but that’s what I thought I needed to do. I did it and it was terrible. I hated it. I made $1,000 in six months. I had contractors doing most of the work. I didn’t have to do a lot of the work, but I was still there every day, buying materials, looking up on a project, doing all that stuff. It’s very stressful. For my time, I probably made $0.10 an hour and I’m like, “There’s got to be a better way to doing this.” That led into my next multifamily deal. I did a four-family and I combined the two strategies where I buy and hold versus doing house flip. I bought an undervalued property and then I was able to add a lot of value to it. I changed out all the tenants, did a little bit of work on it and then it appraised out at more than double for what I bought it for. I was able to refinance it and keep it.
You refinanced it and took some cash out.
In that particular deal, it was 2012. It was a four-family. I bought it. They wanted $150,000 for it at the time and I offered $65,000 and they countered at $75,000 and I bought it. It had bad tenants. It was an okay neighborhood. The mother who had owned it moved to Florida and left her son in charge. His son was a heroin addict. It’s unfortunate, but when you have that issue, he’s renting it out to all the worst people to get some drug money.
When we’re buying houses, we’re usually buying situations. That is yet another situation that you’re able to capitalize on or able to go in and solve a problem for someone or some situation. I was saying forever like, “I buy situational properties.” Either the property has a situation or the owner of the property has a situation but either way, something’s going to happen with or without me. I’ve got to come in here and see if I can make it happen with me, if I can make it easier or better for someone.
That’s exactly what it was. The house needed a little work. A little bit of paint and taking some carpets out. It was the tenants that were bad and that’s what needed to be changed.
I’ll give you a little nugget here. When we find ourselves dealing with drug addicts who have inherited their family’s houses, we always try to get them to take some amount down and then finance the rest, usually at a zero interest because we divide the balance by the number of months we want to pay. They’re not usually the sharpest tools in the box. We know because they’re addicts that they will need their next fix in another week and they’ll need another lump sum of cash. We can negotiate our notes away over a short period of time for a fraction of the cost. Some people look at that and go, “No, you’re taking advantage of these people.”
The other thing is, I could have given that man $100,000 upfront cash, he’d probably be dead right this minute. Our job is to delve it out as little as possible, but that’s one thing. We did that. The guy had a $80,000 note with us interest only for 120 months. Over the last four or five months, we ended up paying him out $50,000 and there’s no more debt, maybe $40,000. There’s $10,000 of it in limbo right now. Let’s talk about the idea that you need to invest right where you are and the limitation that, “I’m not the person,” or “I can’t go invest across the nation. I don’t know how to do that.” Let’s talk about investing out of your location. What are your views on that?
You should live where you want to live and invest where you want to invest. I’ve done it. I started in Massachusetts but I left Massachusetts for better weather and moved South. Now I’m between Texas and Puerto Rico. Not all the time because I tried to be in other markets, but I still buy the property back in Massachusetts to this day.
You know it and you know the streets, the culture and everything. I understand there are prices that aren’t good for some strategies. Maybe their foreclosure laws are not good or whatever, but there are still other strategies that work there. If you’re an expert or grew up in that part of town, I get it. You should never cross it off completely unless it’s a bad situation in that city or something. You said Texas. Do you invest in Texas?
I own a house there and I’ve partnered on some apartment complexes in Texas as well. My other place is in the Dallas market. I actively chose not to invest in the Dallas market even though it’s a great market for investing because I didn’t want to be too hands-on with what I was doing. I’m the kind of person that will show up at the property, look at it, fix things, and save money. I’m at a point in my life where I don’t need to do that, but I will because this is my personality. I am not investing anywhere that I can drive to.
You’re policing yourself. You’re putting up gates and barriers to defend yourself against yourself.
You’ve got to know yourself and your limitations and I’m way better using my brain to find good opportunities and build other streams of income. Not being hands on, but I’m a hands-on person.
I’m in San Antonio, Texas, which I do the seller finance strategy where I buy houses for $0.60 on the dollar or whatever. I owner finance them for 110%, because I am the bank and the underwriter and it doesn’t matter. I collect payments, but that doesn’t work everywhere. That doesn’t work in California. In Florida, it’s difficult because Florida has such horrible foreclosure laws. If you’re going to sell houses on payments, you’re going to have to go through some foreclosures. It’s part of the business. It’s like having a car and not thinking you’re ever going to have flat tires. Let’s talk a little bit because this is a topic that’s near and dear to my heart. I’m paying exorbitant taxes myself and I’m getting into conversations with people about Puerto Rico and different alternative places to live. Tell us a little bit about that decision to live half the year in Puerto Rico.
Puerto Rico is a tax haven. You can take advantage of some tax laws. There are some requirements and rules. It’s one of the best places. Living overseas anywhere gives you a lot of benefits. Puerto Rico specifically gives you even more benefits because it’s a territory. If you live in any country in the planet, you can earn an extra $100,000 roughly tax-free if you live there full-time. Puerto Rico isn’t subject to federal income taxes because it’s a territory. It’s the whole no taxation without representation type thing. Territories don’t get represented, so they don’t get taxed.
What you have to do is here in Puerto Rico, there was a lot of what they call brain drain where the educated, smart, and hardworking people get drawn into the US major cities and they leave the island and go there. The island was like, “How do we combat that?” They created a bunch of incentives to get entrepreneurs, doctors, etc. to work here with no taxes. They started that years ago and it’s starting to catch on that you’ve got a lot of stock traders, real estate investors, coaches, any service-based business where you can make your money on the mainland, but live here on the islands is where you’re going to go completely tax-free.
Who did you study or whose advice did you take making that transition?
I read a lot of stuff online in general about it. I had been hearing people that I know who’ve been starting to travel here to see if they were going to move. One website that I follow, which is all about living and investing abroad and stuff, I think it’s called Sovereign Man. I signed up for their membership or whatever. You get an in-depth 50-page details on Puerto Rico, the laws and everything. That alone was worth the membership because I’m like, “I understand everything now. I don’t have to read the laws myself. I can do this. I can make this happen.” I traveled and then I tried a couple of different spots. I moved and I picked up a place on a long-term lease.
Are you married? Do you have a family? Were they all in? Were they up for the adventure?
Yes. I am not here all the time with them. They’re in Texas, but they’re okay.
Do you feel safe there?
In the part that I live in, it’s 100% safe.
You don’t have to renounce your citizenship or anything. You’re a dual citizen.
Since it’s a territory, it is technically American. You don’t even need a passport. You just need a driver’s license to come here.
I spent a month there one time in a previous life doing my jobs and it was quite a beautiful place. I was staying on Tortuga Beach and I enjoyed it a lot. Although it sounds Spanish there and I would use my Spanish over there, it doesn’t translate.
I don’t speak Spanish fluently or anything. I can get by with an Uber driver. I live in the Metro area. I live in San Juan and almost everybody speaks English to some degree here in the city. It’s very easy for English speakers to get by.
I’ve heard you mentioned a topic called Recycling Your Money. Talk to us about that.
While I was trying to explain the strategy that I’m using to invest for this one particular person, I couldn’t seem to get the concept across. That was what I discovered when I did my four-family, I realized that I could buy a property that had a situation or a problem. A lot of properties need to rehabs. A lot of times, it was tenant or problems with the seller or whatever it is. I could buy them under value. I could add value in a number of ways, either through tenant change, management change or rehabbing, etc. Put tenants in there, get up to fair market value or above market value on your rents and keep your costs low. Approach a local bank and I could put commercial financing on it even though they’re residential properties. I was able to not have to worry about your max number or whatever, ten houses on your credit that you can get.
I wasn’t doing any of that and I didn’t have to live in them. I was getting commercial loans. I was able to finance them, cash out and get my money back. Most of the time I got all my money back. Sometimes they’ll leave a little bit in, sometimes I get some extra out. Most of the time I was able to get my money. That’s the general strategy and it’s recycling. You get a paper cup, you throw it in a recycling bin and then they turn it into another paper cup or something like that. You’re taking your money, you put it in, you click the button, you get it back and you get your money, you buy another one. You’ve got a cashflowing asset on the side. It’s like recycling.
All the markets are hot right now. Do you have to wait for a down market to do this stuff and get in or are you moving all the time?
I don’t believe that you should necessarily wait. You need to find a good deal that meets your criteria and you can get close to all your money back out of it. It has a lot of value to add. You’ve got to find out and you’ve got to shop value. They’re harder and harder to find. I realized once I went back and every single year from when I started, 2009 until now, I thought about the number one reason why I should not invest there in that year. If you go every single year, there’s always a reason that you should not invest. In 2009, the economy’s collapsing. By 2012, the economy had already collapsed. The world was falling apart, whatever.
It’s supposed to collapse any day now because it’s been so good for so long. You can always come up with it.
That started in 2016. People were like, “Recession’s coming.” It’s been years since the recession was supposed to start. It will come eventually. It always does.
From the day one ends, there’s another one coming. It’s the nature of business cycles.
I don’t believe that you should wait for the recession. You’ve got to buy good cashflowing assets that will sustain yourself and sustain themselves through any recession.
Let’s talk about that. People go, “If it’s a hot market, why are there no deals out there?” which is completely wrong. That’s mindset BS. You’re screwed up because I don’t have to tell you, you could tell me. We live where there’s chaos. No matter how good the economy is, someone’s dying, someone’s getting sick, someone had a car accident and got paralyzed. All this stuff is happening out there. I don’t wish any of it on anybody. Some of them are sleeping good. Chaos is things that because change and change can be better. I’ve bought houses from people that won the lottery that didn’t give a damn anymore, “Take it. I don’t ever want to see it again. How fast can you close it? Just name a number.” I said, “How about this much?” “Okay. Let’s go to closing.”
Divorce and all kinds of reasons from fire to tornado to whatever. The bigger city you’re in, the more of that chaos is happening. Not every day, but every minute there are people finding themselves in a situation. By the minute they’re going, “No or I’m getting transferred. I quadrupled my pay with my company and I got a new region and I’m out of here. I’m making so much money now I don’t even care. I’ll leave some room for another guy.” Wealth comes from chaos. I didn’t invent that, but I like to use it a lot because that’s where we live. If you’re out there thinking that now’s a bad time to get in, it’s never a bad time to get in. If you can get the right price. You’re going to have to go look for where people are willing to sell things for that price.
It is true that there are a lot more people looking and so there’s more competition. What I usually tell people is you got to get down into a niche that other people aren’t looking. It’s like the supply and demand.
Niche it down. I’ve bought a house every 4 to 5 days in or about my hometown. It averages about 100 houses a year for 22 years straight, good times, bad times. In tougher times, I was able to buy 150, which skewed the years that I only bought 60 or 70 because things were so hot. The point is it has everything to do with your ability to find these things. In my niche, I try to go with marketing strategies. They’re harder to get to the people that I’m trying to get to. You have to go further up the mountain to fish in this pond with the bigger or the better fish. The further I go up the mountain, the less people that are at the pond. I get up towards the top where the air is thin and it’s cold and the wind is brutal. There’s no one there but me, and I write my ticket. I have no competition. I picked things that had more obstacles in the way to get to this target-rich little market. How do you go about finding these apartment complexes? Do you have it narrowed down to a region or certain cities? Are you casting that all over and seeing what shows up?
What I like to do, especially on a smaller 2 to 20 type stuff, my niche is structural issues. That was something that I picked up over time that I got good at. I’m able to get structural problems fixed very cheap because they’re high markup items. An example that I give is everybody’s trying to buy a three-bed, two-bath house that needs cosmetic work. Everybody’s looking for that. Let’s say you see that property, there are 30 people bidding on it. If you find a property that needs some foundation work, and out of those 30 people who were originally interested in it, maybe five of them are interested in doing foundation work. You eliminated most of your competition. What happens when there are fewer bids on a property? Lower prices.
If you can get that work done inexpensively, you can arbitrage and take that profit. That’s what I do on small stuff generally. That’s one of my big niches. The other one, especially in Massachusetts, is tenant problems. The laws of Massachusetts are very strict on dealing with tenants and it’s tenant-friendly. A lot of people don’t have a good process or system good attorneys and everything to make sure everything’s by the book. If you go in and bring everything by the book, it’s easy to evict. What happens is they mess up and they use the wrong font type, which is in the law. You’ve got to use a certain type of font size like in certain documents. If it says 12-point and you’re in 11-point, that’s it. Your case gets tossed.
We call them sidewalk lawyers. They’re experts in tenant law because they know every time they catch the landlord, they get free months or years in the thing.
For a lot of people that are in California to New York and anywhere on the West Coast or East Coast, that’s tenant-friendly. If you become an expert at the tenant laws and you put the documents and systems in place, that’s a great way to get in because anybody’s got problem tenants. I’ve had it before. I’m like, “I want to sell this property because I hate this person so much.” If somebody had marketed to me at that moment, I probably wouldn’t have sold. If I was a regular person with one property, I would’ve been like, “Get this thing out of my hands.” That’s the person that you’d go after. That’s another great niche that I like to go after as well.
Let’s go back to that refinancing, the recycling your money. You put your money up and you got it and you buy it when it’s all fallen down and leaning to the left. You take your money and you’ve got the white picket fence around it and it’s all straightened out. When the sun hits it right, it has that sparkle on the corner. You then borrow. Let’s talk about overleveraging or not. How much will you borrow on a house?
That depends. I don’t always max out my leverage. It depends on how comfortable I am for its cashflow. I did a property. I bought it for $100,000. It’s a five-family. It’s vacant for seven years. I put about $100,000 with rehab and carrying costs. It was appraised at $400,000 but I only got a loan on it for about $225,000. Even though I could have probably got a $300,000 loan, give or take 75%, I didn’t fully leverage it because I wasn’t comfortable with its cashflow after the max leverage.
You’re smart, but there are still ways to look at it that I discovered. I noticed that a lot of the people, even a lot of the gurus have filed bankruptcy once or twice. They’re all in all the time the big checks and all that stuff. They’re constantly rolling to double. My book, Failing Forward to Financial Freedom, I didn’t know it at the time, but I was trying to explain to people how I had figured out how to fail but not go under. There was a limit. Part of it was policing myself on several different fronts. I too have had the opportunity to leverage and I always thought I want to be careful not to over-leverage. There was a second hybrid way to look at it, which was you could over-leverage, you could have went and got that $300,000.
You’re not going to pay tax on it because it’s borrowed money. You’re going to net the $300,000 if that’s what they give you at the closing. What those other guys were doing is they were getting the $300,000 and they were buying boats, airplanes and all this crap. If you took all that money though and bought another hard up, straight, good asset with it, then maybe leveraging to the max on that one property wasn’t so bad because in your whole when you looked at your books, you had to look at these two properties as together. This one’s over-leveraged because this one doesn’t hardly have any leverage because I took all the money and put it into that one. If you leverage up, you better make sure you’re buying assets and you’re not buying toys with that money.
Part of the thought process is also the amount of properties that I’m buying at any given point in time. It’s also the market cycle. As I get higher up in the market cycle, I am getting a little bit more conservative in what I’m doing. I’m not deploying capital as readily as I was a few years ago when it was a little bit colder or not as hot. I still buy but I’m not on a buying frenzy all the time. I’m picking and searching for the best deals. When I’m finding something, I’m going back and refinancing other assets and leveraging them up and then buying it. I’m okay with that but I didn’t have something in specific to go after, so I went a little bit lower because I wanted the cashflow. I was focused on that at that moment.
We do the same thing with the private money. I’m using private money to buy my houses and the money’s wrappable. I buy a house for $50,000. I owner-finance it for $100,000 with $10,000 down. I got a $90,000 note coming in, but I got a $50,000 payment going out. I’m keeping the spread without being a landlord. This takes longer-term money. What I’m doing is I’m pledging my notes as collateral to the community banks. I’m cashing out my underlying and freeing them up so I can run again with my private money. I’m recycling money in a different way than you’re doing. It doesn’t matter how you recycle it, as long as you can get that wheel rolling because if you’re rolling that wheel, you’re doing something good.
There are a lot of different ways to do it and not just real estate. There are businesses that you can do it with as well. The concept of lending your money and then not having any money left in it because you’ve increased the value in some way or you’ve created that spread in some ways in years with notes minus the asset itself, but it’s the same concept.
What’s more important: cashflow or appreciation? You’re a landlord, so appreciation has got to be a big part of what you do.
My philosophy on that, it depends on your goals. If you’re trying to quit your job, if you’re trying to live a life that’s free to go and do whatever you want, you need cashflow. If you’re the person who loves your job and you’re never going to leave it because you have a passion for whatever you’re doing, then you might not need as much cashflow. You might be more focused on long-term wealth. I’m focused on cashflow primarily, getting more money every single month to pay for my lifestyle and improving lifestyle. I don’t particularly care. If my properties lost half their value tomorrow, as long as I still have the cashflow coming in, it doesn’t matter.
How do you find rents? You haven’t been through a downtime with your rents. How do you think the rent’s going to work in a downtime? Is it going to be tougher to collect rent in a downtime? Are you going to be able to collect higher rents in a downtime?
I was investing down at the deepest part of the recession and being a landlord was hard back then. Finding qualified tenants was nearly impossible and getting those tenants pay you was nearly impossible because everybody’s losing their jobs or were out of work on unemployment. It was challenging. The interesting thing is that rents kept going up during that time because there was more and more demand for rentals because people were losing their houses. Even though the banks were kicking people out, they weren’t putting those properties on the market because they didn’t want to flood the market. There’s less inventory. Nobody was building and there were fewer houses available for rent.
Even if they were, the banks weren’t loaning any money. If most people can’t borrow money to buy a house, then they got to rent a house. In the recession, and I found this to be true, my owner-financed houses are based on the rent. I back into the rents to find my owner-finance sales price so that I can offer a PITI payment equal to the rent. It makes no sense to rent if you have a down payment, which is the separator because most people don’t have good credit and can’t go to the bank. I found that it was a lot easier to sell my houses because I was offering financing because there were many more renters out there. Everybody was a renter for a little while because they didn’t have a choice. I’m backing into your situation trying to think, as a landlord, that would be good for the landlord too because no one can buy a home. The banks have tightened up, they’re not giving out any money. There’s a lot of pressure put on rents. A lot of people are looking into rent. When that happens, the rents go up.
That’s exactly what happened during the recession. Rents went up. It was harder to collect your rents, but the actual rental rates were going up the entire time during the recession.
In lean times, there are a lot more people out there in dire straits. You have to up your game and who am I letting in? It’s better to leave that front door locked, than give the key to the wrong person because you’re going to pay. You might think, “I need to get someone in there because I’m not getting any money.” You need to get the right person in there or stand down, in my opinion. How do you feel about that?
I say the exact same thing. I would rather leave it vacant for a month and lose $1,000 rent than get a bad tenant. You spent 2, 3 months in eviction. You’re going to lose that $3,000 on rent. You’re going to have to repair all their damages and lose another $3,000 to $5,000 and all that. By the time you’re done dealing with a bad tenant, you’re out $6,000, $7,000, which is part of the game. It happens but if I can stop that upfront by waiting another 30 days to fill it with a good person, that’s what I’m doing.
There are lots of good people. Even in bad parts of town, you can find the better person to go into the unit if you wait. Part of getting off on the right foot from the very beginning is you’ve got to buy it and you’ve got to pick the right person to make the transaction with. How are you vetting these people and to what level? How stringent are you? What are you doing?
I’m very strict. I have a 2 or 3-page application that they have to fill out. I started looking immediately on any discrepancies on that. If they can’t fill out references, even though I’m not going to call their personal references, but if they can’t fill them out or it’s their mom or dad. It’s the little signs and signals saying that there’s nobody who can vouch for them. I’m a landlord. I don’t want their prior landlord. I want their second prior landlord referral. Whoever their current landlord will probably say anything to get rid of them. I know I’ve done that. They’re like, “That’s a great tenant. Get rid of them.” If it’s two prior, then I’m going to get something honest. We’re looking for that. I cross-reference all the addresses to make sure they exist. Sometimes people will make up addresses. I’ll go into the registry of deeds and see who owns that property. Is that person owner line up with the contact that you gave me? If not, is the contact that you gave me a property manager? Are they a legitimate property manager? I’m checking those things to make sure I’m not getting a friend as the reference. I’ve had people give me fake addresses and properties that don’t exist.
It’s their friend answering the phone.
We do that. I do an eviction record check. I’ll take somebody who has an eviction ten years ago under a different lifetime or whatever, only if they’re upfront about it. I asked them, “Have you ever been evicted? Has a summary process ever been initiated on you? Have you ever received the notice to quit?” If they answer no, but I find it in their record, I auto-reject it because you lied to me. I have a lot of great tenants who were evicted a few years ago and they’re like, “Recession, bad times. That’s the way it was.” I’m like, “What is your credit? What’s everything like now?”
“What changed and how are we now?” Make sure it isn’t happening again.
If it’s two years ago, no. If it’s ten years ago, I’ll look at it if you’re honest. I call their employer, but we don’t call the number they give me. I find the company online. I find their HR department or their manager or whatever, depending on the company. I call them through the number I found online. If I can stalk them on social media, I will, if they have public accounts. I’m looking to see if they have pictures in their apartment. What condition did they keep their property? Things like that.
This is important for people out there. You can take all the applications you want. Your application can be as in-depth as you want. If you don’t follow up on this stuff, it’s a waste of time. Just because there’s something in the blank doesn’t mean it’s right. You can eliminate more people by verifying these blanks are gypped up, trying to see if I miss anything or don’t follow up.
These people are bad liars. They’re not good at it. There’s always a discrepancy to find.
Have you taken a body language class or you learned it on the street?
I have not taken any classes on it, but you can usually tell. I don’t show the properties myself anymore because I live across the country. You can tell based on how they are looking at the windows. You always know when someone’s shady when the first thing they do is go to the street side and look out the blinds.
They want to know if they can see who’s coming.
They’re either a cop or a military person in which I’ll know based on any application, or they’re into some crime because that’s not normal behavior. Most people are like, “Interesting, nice kitchen.” If a person’s going, “Nice kitchen,” then they go looking out the blinds. I’m like, “What’s this guy’s past?”
Why does he have to be so concerned about what’s out there? I never thought about that. You have a free eBook out. Tell us about what the eBook is about.
The eBook that you can download talks about the five sub-strategy that I briefly mentioned here. It also talks about five major roadblocks or mental mindset stuff like, “Is the market too hot? Are there no good deals?” I talk about those as well and how to overcome those.
I want you to go to REInvestorSummit.com/smallmultifamily!. You have a bootcamp coming up in March 2020. I think it was the 14th and 15th. Tell us about that bootcamp. Tell us what you’re going to be teaching there.
That is a hands-on, down in the weeds, getting into information on three main topics. It’s finding deals and we talked about three unique strategies to find these small multifamily deals in a hot market. We talk about what I like to call Capital Attraction, which is how you get the money in order to close on these deals. You don’t need a ton of your own money to be buying these both through debt and through equity. We’re talking about management systems so that you’re not getting sucked into you buy a couple of properties and now you spend all your time managing them rather than finding more properties to buy. Those are the big three that we talked about, but we also run through the numbers and operating costs. We get down into the weeds on the numbers as well.
What’s the bootcamp going to run?
The pricing is $200 for early bird pricing. As we get closer to that, it will go up to about $400.
Where is it going to be held?
That’s outside of Boston, Massachusetts.
Do you speak regularly? Are you out and about or is there something you do now and then?
I speak at events. It’s not a ton. I don’t have a crazy busy speaking schedule, but I also run a meetup in the Boston area that I speak out about once a year. That’s the biggest meetup in New England for real estate investing. I do speak at other people’s events and meetups that I know and relationships that I have around the country.
What’s the name of the eBook?
I call it The Five Secrets.
It’s like anything else that was in there, Eric. You’ve got to figure out what your niche is and then you’ve got to drill really deep and get down to the most minute details.
In real estate, there are people successful in hundreds of different niches. You can be successful in any of them, but you can’t be successful in all of them. You’ve got to pick one.
I have a saying, “The hardest thing an entrepreneur will do is have one great idea and finish strong.” We have our chinks in our armor and one of them is we see the value of a lot of ideas. We can see the big potential of them all. Almost every endeavor takes everything you have to make it run the way it’s supposed to and generate the money that you dream of. You have to get down to it. Stay focused. I had another question that I almost forgot to ask you. About how many units does it take to start to where you can back off and let it run? Is it from day one or do you have to get it? Did you find a magic number that once I cross this amount of doors, I was able to let go?
The number for me with the properties I was buying in areas I was buying, once I started to hit around the 20-unit mark, which is in the small multifamily, it’s only 4 or 5 properties if you think about buying 3 or 4-families mostly. It’s when it started to self-sustain and self-grow. That was when you get to the point where a vacancy isn’t detrimental because you always have a vacancy. You have the law of large numbers saying if it’s a 5% vacancy rate, you’re always going to have one unit vacant if you’ve got twenty units. You start hitting your averages and it’s self-sustaining. You can budget things easier.
You can start getting more people that are a little more permanent because there’s always a place to rent. You’d have someone that’s more full-time or full-time. I’m at a volume now where every day they wake up. There’s something to do. They make ready, they need to oversee, they need to go show it and then they need to sign. I’ve been contemplating the Puerto Rico taxation choice. I was even talking to John Hyre a little bit. He’s down there. Do you ever talk to him?
No, I’m not familiar.
I think he’s in San Juan as well. I may be down there seeing you soon. Can I knock on your door? I won’t be giving money in the middle of the night, but I’ll knock on your door.
That’s fine. The money’s optional.
Tell us how you’re finding these properties.
When I want a deal, I start on the MLS and I look at every deal that’s available. If there’s nothing available, then I stack on more complicated methods. The next thing I do is direct mail marketing to the types of properties. The important thing with direct mail is knowing exactly what you’re looking for so you’re not wasting money mailing to places that aren’t what you want. The right number of units, the right mix of units, the right zip codes, neighborhoods and streets, that’s what it is. I also do have a lead generating website. I get a couple of deals a month through that, nothing crazy. I also have that and that runs all the time.
How many doors are you up to?
I’ve got 480 units total between Texas and Massachusetts. Apartment complexes in Texas and then a small multifamily in Massachusetts.
You only lease on your own or do you have partners on some of them?
My multifamily in Massachusetts, it’s my own. The apartment complex, I have partners because they are too big for me to take that on my own.
I was curious. I hope you don’t mind me asking.
I’m pretty open about all of it. There are a lot of different ways to invest and it’s important to be open about those.
The reason why I was asking is the readers learned that it’s not like you’re on fourplex number two. You’ve been doing this for a little bit. You’ve been having success. You’ve done it enough to know that there are issues out there and then you start to figure out how to deal with the issue. I want the readers to know who we were dealing with.
I’ve run into about everything. I’ve lost a lot of money and mistakes over the years.
That’s why you need a mentor or a bootcamp or something because if you think you’re going to go out there and save the money from a mentor, you’re sadly mistaken. You’re going to pay the street or you’re going to pay the mentor. The street is ruthless.
I’ve hired a lot of coaches over the years in real estate and in other businesses. It’s something I believe in a lot. I go to a lot of conferences and seminars. If I spend $500 and I go learn honestly one thing that I will take with me and I’m going to keep it as part of what I do, that is worth the $500. You can convert $500 into thousands, tens of thousands, just one nugget.
I’ve walked out of seminars on the first half a day because I heard such a great idea that I didn’t want to be messed up with anything else. I got this idea, it’s clear in my head right now. I know exactly what I’m going to do. I don’t want to get confused with anything else. I’ve walked right out. I got in, got my nugget and left. The other thing you find is the harder to find a nugget, the better you get at your niche, especially within your niche. If you can even get one nugget sometimes, it’s a good weekend or good seminar because when you first show up, there’s a nugget a minute. You’re writing everything down. As the time goes on, it gets harder. It also might mean that you need to get into rooms where there are more complicated people.
There are rooms where everyone can come in for $10 and then there are rooms that costs $25,000 to get in. You don’t start off in the $25,000 room because you probably couldn’t use a lot of what they’re telling you because you’re not at that level yet. You don’t have the budget yet. You don’t have the mentality or the sheer nerve to do what they do. They’ve proven sales for so long that they’re not opposed to it. They have the $50,000 for the budget. If they lose it, it’s not going to kill them. They already tried it on the $10,000, $30,000 and $20,000. They already know what the results are going to be. They’re trying to ramp up the results at this point and they have their confidence that’s how it’s going to work. Try to get in a room that pushes you a little bit. It’s not too comfortable, but it’s one that you’re ready for.
I think that’s one of the things about paying for anything is that when you have a free meetup, for example, you do get some good quality people there, but you get a lot of people who are kicking the tires, trying to learn a little bit about it. You put a little bit of money into it and you’ll weed out a lot of serious people and you’re surrounded by serious people. The more money you pay to go to whatever event it is, the more serious that group of people becomes. You get more value out of it.
It’s a natural law. If a room costs $30,000, $50,000 to get into, there’s a different person in that room.
They’re serious about what they’re doing if they’re paying that money. If you’re at a point in your business that you can afford that and you want to be around those people, it’s worth paying for.
We’re always trying to get to another level. Are you with a mentor or a mastermind group right now?
I’m in a mastermind that I go to that’s run by a man named Kyle Wilson, who is the business partner to Jim Rohn back in the day when Jim Rohn was walking the Earth. I’m in his mastermind. That’s cool. I have a mentor as well for the events that I’m running. I was thinking about running events for two years and I never squeezed the trigger and I never started it. I started it because I said, “I need to get somebody to kick my ass.” I hired somebody, I spent a lot of money and I ran an event.
One of the reasons why you don’t pull the trigger is you’re not sure yourself. You get with someone who’s done it a million times and then you ask all your questions. They go, “No, you do it like this,” or “Don’t worry about that, hedge your bet by doing that.” Pretty soon I was like, “I should have done this a long time ago.”
Hiring my coaches, I made back 4X my payment in the first three months. Financially, it’s worth it. I felt happy that I did something that I’ve been thinking about for years. Doing that was this personal accomplishment.
Why do you do it?
I wanted to be a teacher. I was supposed to be a professor. I enjoy watching people learn, develop and grow. That’s something I like. I also love real estate. That’s why I got out of teaching and being a professor and doing it.
You have the best of both worlds.
Now I’m doing both. When I see somebody and people say, “You changed my life.” I spoke at an event a few years ago. Somebody was cyberstalking me essentially. She got my home address and then sent me a Christmas card. It said, “I want you to know you change me and my husband’s life. Thank you.” I’m like, “That was one hour of talking and I changed your entire life. That’s powerful.” You get satisfaction out of it.
For me, that’s where I’m at too now. The money’s fine. You have to charge some money or decent amount of money to get the student that’s going to get you the emotional award that you’re looking for, which they’re going to apply themselves 100%. You’re going to get to watch them employ your theories and change the landscape of their whole life. I had a person drive five hours one way to knock on my door and not even know if I was there. He shakes my hand and we had a good emotional talk. He got in his car and drove off. It was very powerful. He said, “I quit my job and my wife said, ‘What are you going to do on your first day off?’ I said, ‘I’ve got one thing I’ve got to do right now. I’ll see you in ten hours.’” He drove to my house. He said, “I fired my boss yesterday.” He gave me all the credit, which is not the case. It takes a good coach and it takes a good player.
It takes the right person to take action on. You can give them all the information, but if they don’t take action on it, it’s never going to happen. That comes from within.
Do you do one-on-ones?
That is something I do, but I’m very selective with the people I take on because I don’t need the money and I charge money because I want the right people. I should be paid for my time as well. I’m not working with anybody who’s going to be a headache. I say no to a lot of people.
You’re looking for the same thing as me. You’re trying to find the right fit. This guy’s right there. With a little tweaking, with the little things I know that he doesn’t know, he’s going to get past this thing where he’s at. He’s going to go on to do whatever. It could be bigger than me by 100 times. Right now, I can get him over this one pass. That’s what I look forward to. We have a pretty long intensive consult before and I don’t push it myself. I don’t push anyone to make a decision on that consult. I say, “You go home and pray about it, think about it, talk to your wife, whatever. If you think I’m the right guy, you can call me here in the next day or so.” I’ll tell them whether I think they’re the right guy or not or if they need to move down to a weekly call instead and improve the business out a little bit more before they spend that money.
You’ve got to have the right niche that they’re in. They’ve got to be in the right personal circumstances and you’ve got to get along. You’ve got to want to be on a phone call with either the student or the student wants to be on a phone call with a mentor. If you don’t get along, you’re going to be like, “I’ve got to talk to this person again?” It’s not fun for anybody.
People who are financially independent like you and I, we don’t want to do things we don’t want to do for very long. To get the free eBook or to learn more about Eric Bowlin, go to REInvestorSummit.com/smallmultifamily!. Learn about his bootcamp and all the different things he offers. Before we wrap it up, what do you have to say to a person who’s contemplating investing someplace where they do not live?
The first thing is to make sure that you understand the market. That’s the most important thing. It doesn’t matter what market it is that much, as long as it’s a growing market, but that you understand it and you build a team there specifically. Whenever you’ve got to build that team because you’re going to be relying on other people if you’re not local. Even if you are a local, you’re relying on other people. It’s important to understand the ins and outs of your market and have a solid team on the ground there who is supporting you.
Have you traveled to all the markets temporarily to see the lay of the land and help build your team hands-on at first? Have you been able to build markets, invest and never stepped foot in the city?
I like to travel to where I’m going to be investing. I might not travel upfront, but when I get really serious about a property and I’m about to invest, I’m going to travel there. I’ve traveled to a lot of cities and a lot of cities that I never bought anything in. You get in there and learn. You don’t have to. I know people who aren’t doing it, but I believe that, if you’re going to spend hundreds of thousands of dollars, I’m not so wealthy that I’m willing to spend that money without looking at the asset.
Sometimes things can look great on paper and the picture can look wonderful. You get out there and you’re walking around and you go, “I don’t want anything to do with this. This is BS.” There’s something they’re not telling you. How come you didn’t take pictures of the five cracked houses across the street?
It’s not about the asset itself. It’s about the area, the neighborhood, the market, overall, access to highways, was it convenient. You don’t feel that until you’re on the ground looking at the different neighborhoods. It’s important and it’s face-to-face with your property management and real estate agents or brokers. You’re like, “I’m a real human being here. I’m not somebody that’s on the phone across the planet. I’m a human here. Treat me like a person.” I feel that has a big impact on relationship.
I want to thank the readers out there for stopping by to get you some Eric Bowlin. If you’re interested in a multifamily, creating cashflow this way, please go to REInvestorSummit.com/smallmultifamily!. That will get you there. Thank you so much for taking the time, Eric.
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