I wish I could say that I woke up one morning and God had bestowed upon me 674 units. Unfortunately, life doesn’t work that way. The farmer can’t expect a crop in the summer if he doesn’t plant seed in the spring. The builder can’t complete a house unless he starts off with a set of plans and follows his plans to fruition. This article will outline the steps I took to grow my portfolio and achieve a level of satisfaction that was missing in my life.
Where is the first place that I started? Let me give a brief outline of my journey and then dive deeper into the “trek”.
- Seeking growth/contribution
- Financially frustrated
- Began investing on my own
- Sought out a mentor
- Pursued another coach/more education
- Continued frustration
- Jumped into Tennessee market
- Focused on Tennessee and multifamily properties
- Bought first deal
- Continued to buy
- Refinanced big property and used capital to continue buying.
- Wrote “Wheelbarrow Profits” based on evolving investment strategy “mom and pop apartments”
- Launched Jake & Gino
- Continued buying more deals
- Focused on system building and growing portfolio
The first step of my journey was dissatisfaction. My business was okay, but I had just lost my father to cancer and I was growing bored with working in the kitchen. I had been working with dad since I was eight years old. I guess when my dad passed away, my love for the restaurant business passed away with him.
I also had a feeling of being “stuck”. The only way I can describe it is going in to work and feeling as if I had nothing to contribute. I was looking to make an impact, a difference in people’s lives. How could I do that being stuck in the kitchen making chicken parm? Tony Robbins opened my eyes and heart to why I was exhibiting these feelings. His explanation of the six human needs hit home with me. I was not fulfilling the last two needs, growth and contribution.
On top of feeling stuck, I was feeling financially frustrated. How was it possible that I was earning less money and working longer hours? I attributed it to the Great Recession, but I now know better. I was to blame, no one else. But, what could I do to improve my situation?
My answer was to begin investing in real estate. I bought my first investment down in Florida with a friend and my brother. Huge mistake. I was taking action, but I was taking uneducated action. I placed too much trust in my friend, and this first deal blew up.
Fortunately, I did not give up after this colossal mistake. I was too frustrated with my present situation that I craved a change in my life. If I did not possess this desire, then I may have just packed it in. My mantra is: Thought-Desire-Action-Result. What does this mean?
My thought of financial freedom led to a burning desire, which coupled with massive action, would lead to a result. If my thought wasn’t a burning desire, then the thought would just dissipate. I had the good fortune of having a strong desire.
Unfortunately, I took the wrong massive action (I was an uneducated investor, aka I was the man who had the money and I met the man with the experience and the man who had the experience ended up getting the money and I ended up getting the experience), which led to my result, a terrible investment.
After this total loss, I decided to seek out a mentor. I signed up with a real estate coaching program, and I quickly realized why my first investment was a total failure. This was a turning point in my life. I was learning how to invest in real estate from someone who had success, and I began to invest outside my market.
Although I had taken a huge step, I felt that I needed more education. I signed up with another coaching program, and my focus now was on learning everything I could about multifamily investing. This is when I met my partner Jake. Ironically, he was experiencing the same frustration in life that I had, and he was relocating to Knoxville, TN, to escape the high costs of New York and focus on quality of life. Before he left, we spoke briefly about possibly partnering and investing in real estate down in Tennessee. I told him to contact me when he was settled in.
I received a call two months later, and we began to analyze his market. His market was far superior to our market in New York, and we began our hunt for the first deal. During the process, Jake became increasingly frustrated and decided to “blow” his capital for a down payment for his house. Sometimes, the wife wins over our desires.
That did not deter us. We continued to scour the market, engaging brokers and receiving rejection after rejection. One broker even lamented, “You all will never do business down here!” We began to think he was right.
But, low and behold, after two years of constant rejection, we stumbled across a listing on Loop Net called “The Shamrock”. This property had been on the market for over two years, and was listed for $750,000. The property was twenty- five units that comprised multiple cottages, duplexes and a six-plex building. It was not your typical apartment complex, but I saw the potential in fixing up the property and raising the revenue.
We offered $600,000, with 10% down, 10% owner financing, and the remainder bank financing. The sellers accepted our offer, and we finally landed our first deal. Our total closing costs for the deal was $84,000. Doubt quickly set in. Did we overpay, is the property going to cash flow, can we perform all the repairs? We were experiencing buyers remorse.
This remorse quickly vanished once Jake went to collect the first month’s rent. I will never forget the phone call. He sounded like a kid in the candy store. He was amazed at how much cash he collected, and he had it all stacked up on his dresser. Jake was hooked!
It took us a few months to perform basic repairs to the property and turn over the tenant base. It was overwhelming at first, but our desire to succeed just pushed us forward. I called it on the job training, and we were learning something new every day.
Four months after our first acquisition, we spotted a thirty-six-unit property on Loop Net. It was love at first sight. This deal was very similar to our first purchase, and we had to find a way to come up with the down payment. I showed this deal to a friend in New York, and he decided to partner with us in acquiring the property.
Six months after our second purchase, we located another big deal that we fell in love with. After three months of grueling negotiations, we closed on the deal and we were proud owners of a 136-unit apartment complex. I was flabbergasted. One year ago, we were struggling to find a deal. Now, we were the proud owners of 197 units.
Jake and I noticed a common theme throughout our portfolio. We were attracted to “mom and pop” owners, a term that Jake came up with to describe our properties. These properties all exhibited deferred maintenance, motivated sellers and the ability to add value. We continued to look for these mom and pops.
Our attention turned to managing these properties and focusing on the abysmal operations. On our 136 unit deal, the former owners were collecting around $53,000 per month in revenue. Within a year of purchase, the revenue exploded to around $85,000 per month. Our goal now was to refinance the property and extract the capital for our future purchases. It took us almost one year to refinance the property, but persistence pays off. We pulled out $1.6 million dollars from this one deal. During the next twelve months, we refinanced our first two deals, and began to finally comprehend the power of multifamily investing.
At this point, Jake came up with the idea of writing a book detailing our investment success. He wanted to share his story with countless W2 earners, and show them a way to quit their job and achieve financial freedom. I thought he was crazy, but decided to give it a shot. This is where our investing framework was born: “Buy Right, Manage Right and Finance Right”.
Writing the book forced me to educate myself even more, and I began to learn new techniques and strategies. During the writing of the book, we purchased a 281-unit deal with no money down. Was it luck or just a coincidence? I’ll never know, but the education and experience were critical to landing this deal.
After the book was complete, we launched Jake & Gino, a real estate education company focused on multifamily investing. We created a podcast “Wheelbarrow Profits” and began writing blogs and creating content.
For two guys who regularly have a hard time turning on a computer, we persevered and learned how to spread our message. Our goal was two-fold: grow the portfolio and teach students how to excel in the multifamily space.
Fast-forward to the present.
Jake and I have both “retired” from our previous occupations and are focused solely on investing and the education company. To think it all began with purchasing a run down 25 unit apartment complex. I guess the moral of the story is to choose a goal, commit, get educated and then take massive action. Jake likes to say,
“Education X Action=Results”
I am in total agreement.
Written by: Gino Barbaro