Welcome to the FlipNerd.com Expert Interview Show Top 10 series, where we share our top 10 shows from 2017. If you’re looking for inspiration, you’ve found it in this FlipNerd.com 2017 Top 10 Award show. In this episode, I talk with my good friend Corey Peterson. Corey moved into real estate investing after being a used car salesman…and just closed on a multi family deal where he netted $4.7 million. Corey is also a single family wholesaler, but has seen the light on doing bigger deals that help him and his family build wealth, and generate generational cash flow. This powerful episode helps us remember the incredible opportunities we have as real estate investors. Let’s get started.
Mike: This is the FlipNerd.com Expert Real Estate Investing show, the show for real estate investors, whether you’re a veteran or brand new. I’m your host Mike Hambright, and each week I bring you a new expert guest that will share their knowledge and lessons with you. If you’re excited about real estate investing, believe in personal responsibility, and taking control of your life and financial destiny, you’re in the right place.
This is Episode #376, and my guest today is my good friend, Corey Peterson. Corey just sold a deal and netted $4.7 million, and today he shares with us how he got there, which honestly starts with him being a used car salesman. It’s a powerful story.
I’ve known Corey for years. He’s a guy you can’t help but like, positive every day, and his near rags-to-riches story is about to inspire you. I hope you’re ready to be inspired. Please help me welcome Corey Peterson to the show.
Corey, welcome to the show, my friend.
Corey: Hey, buddy. Welcome, man. I’m excited.
Mike: I’m excited, too. It’s funny because the way this has involved is this is show number 376. I’ve done a lot of shows. Through the show and through masterminds and different events and things like that, I’ve built some strong personal relationships with some people, and you’re at the top of the heap, my friend. You’re top of the pile.
Corey: Hey, man. I’m honored, brother.
Mike: I love hanging out with you. In fact, we’re going to be hanging out together next week, so looking forward to that.
Corey: Yeah, man.
Mike: Well, for those of you that haven’t met Corey, I’m going to have him introduce himself here in just a second. But Corey was on the show. I don’t even have the old show notes up, but it was a long time ago. It was probably at least two years ago, maybe longer than that.
And Corey is . . . A lot of folks in real estate investing tend to think about progression as an investor. A lot of people get started in single-family, and some people ultimately move into bigger deals, and that’s exactly what Corey did. He’s going to share his story with us today.
In fact, he’s got a new book that’s about to get published here in just a few days we’re going to talk about, too, to share his story and how you can do it, too. But Corey is pumped right now. He’s got me all jacked up because he just made almost $5 million on a deal, his first multi-family deal. And I know he’s doing a little dance over there, but it’s an exciting story. He’s going to share with us today how that happened.
And not that multi-family is for everybody or not that commercial stuff is for everybody, but he’s going to share his story and how you can do those things, too.
But, Corey, before I try to summarize this all in one minute, which I can’t do anyway, just start off by telling us about you and your background and kind of how you started.
Corey: I grew up just a small country farm boy in a small town in West Plains, Missouri, and I didn’t come from much. So I didn’t have the golden ticket, and I’ve had to hustle. I started off as a restaurant manager and selling cars, and I wanted something more.
I was able to go to Hawaii. My mom had married a gentleman named Bruce. I call him “Bruce Wayne.” He’s not Batman, but the guy was loaded. And so, we got to go to Hawaii, and he had a house right on the beach. And I remember going to this house. The first time my wife, who was my girlfriend at the time, we looked at that thing, we were on the beach watching the sun come up. And I remember looking at Bruce from afar and thinking, “Man, what do you do?” He had the perfect life of time and money, and he had no cares. And he told me, “Real estate.”
Mike: Oh, wow.
Corey: And that was the defining moment. I saw the immaculate perception of what that life would look like if done right, and then I read “Rich Dad, Poor Dad,” and it put me on the path.
Mike: So at that point, you’d never done deal. At that point, you were selling cars then? Is that what you were doing?
Corey: Yeah, I was a used car salesman.
Mike: Well, as you know, truthfully, everybody that’s successful in this business, for the most part, has a salesmanship background, right? It’s critical really in all small businesses, and I’m not trying to . . . If somebody just heard me say that and they’re like, “Well, I’m pretty successful, and I don’t have a sales background,” I’m not saying that, but it’s a good skill to have to be able to . . .
Corey: Just the communications, I think.
Mike: Yeah, communication is critical.
Corey: Being able to communicate with people. And so, then I went on a journey, and I started off as a wholesaler. Then I did a pretty good job. I started building a track record, and then I wanted to do the bigger deals. I’m like, “Man, if I could just raise private money.” And I learned how to raise OPM, other people’s money, and I got masterfully good at it.
I started raising millions and millions of dollars, and I was doing fix and flips. And there came a point in time where I started to kind of . . . if I looked at that perfect vision, I wasn’t living it anymore. I had money. At least I thought I did because all I was, was a check cutter. I’d buy properties and cut checks.
And I was becoming a professional parts runner, too. I’d go to Lowe’s, I’d go to a job site, like, “Oh, gosh, we were missing this and this.” So I’d run to Lowe’s and come back. I did that for all my properties, it felt like. And I was just chasing my butt, dude.
And it was at that point I actually . . . In the world, I would look super successful, Mike, but I felt like an absolute failure because I was working so hard and so much. And I remember driving by an apartment complex, an apartment complex I’ve driven by many times, and I would say, “I wish I could own an apartment complex.” That’s all it ever was, just a wish.
But on one of my low days where I actually missed my kid’s soccer game on a Saturday . . . His game was at 3:00 p.m. I woke up that morning thinking, “I’ve got to go look at these five homes, and I’ll be in time to get back to the game.” And I missed his game because I’m hustling real estate, and I felt like such a failure, honestly. I’m driving by, and I see that apartment complex. And that day, I said, “How can I own an apartment complex?”
Man, that changed everything for me. It got me super focused on, “Well, I don’t know. How do I figure it out?” So I went and found a really good mentor that taught me the business. And right then, it was very crystal for me. I remembered looking back at Bruce in Hawaii, like the perfect life of time and money, and thinking, “Robert always talked about cash flow. He never talked about fix and flip and wholesale and stuff like that.”
I felt like I’d become a trader with a D, but it felt like a T. But I was a trader to the craft in a way that I really wanted to be a real estate investor. And once I got into the apartment life, I knew that that was exactly the route for me and that it would . . . If I’d focus on cash flow, my life could get really good.
Mike: That’s awesome. I coach and mentor folks, and that’s one of the things that we talk about all the time is it’s . . . Early on, it’s hard to not be doing everything yourself because you can’t afford to have other people. You can’t afford to have a lot of overhead yet. But the truth is, probably most real estate investors, unfortunately, never get beyond that. They end up basically not really being entrepreneurs or business owners. They’re self-employed, right?
Mike: And some of those people might do really well. They might make a lot of money. But like you said, you’re kind of a slave to the clock, you’re doing everything yourself, and you just can’t get away from it.
Corey: I didn’t have enough systems, and I didn’t know how to build systems. I build systems now, but I’m a lot older and wiser. I didn’t do that when I first started out, and I just was frustrated.
And also, in my market, it was getting harder and harder to find deals. See, I’d raised all this private money that was wanting to give me their money, and I would run into the problem of it was hard to find new deals. I was only doing REOs and short sales at the time, and when those started to run out, I didn’t know how to market to find deals, like you probably teach and like I do now today.
Mike: It’s funny with raising . . . I know you’re going to agree with us. Once you kind of learn how to raise money or once you have a track record, you could easily raise, generally, more money than you need.
I was at an event last week and somebody said, “Look, I’ve got a half million dollars I’d like to lend to you.” And I don’t need the money. I was like, “I know this sounds really weird, but I don’t need the money.” That’s not necessarily like . . . It’s not my money that I’m borrowing. I’m borrowing it, right?
Sometimes what happens is . . . It’s really easy to raise too much money, especially if you’re doing single-family houses. You might find somebody that’s like, “Hey, I got a million dollars to lend out.” Well, the thing is, those folks want to apply it right away. So you can’t say, “A million dollars, that sounds great. Well, I only need $60,000 right now, so can you set all the rest of it in a savings account, just sitting there for me in case I need it?”
When you find people that want to lend you money, you’ve got to find a way to apply it. Otherwise, you’re less interesting to them if it’s just sitting in a side box.
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Corey: You’ve got to put the money to work. And so, that’s what I was having with all this capital available and not enough deals, and I knew that that capital was my ticket. By having to that kind of money and that type of capital, you can put yourself in lots of deals. I always call this “The Godfather,” the Corleone method.
I used to think that the money was in real estate, and it kind of is, but I truly believe that the money, the real money, is in the money. The money is always patient. It always gets the last look. It never makes rash decisions. The money negotiates out of strength, and because you have . . . It doesn’t have to be your money. You just have to have access to it or to be able to place the money.
And that’s really how I got my first deal. I went to a group where there was a bunch of multi-family guys. And I stood up in the back of the room, and I said, “Hey, listen, I got a crap ton of money. Are there any deals?” Thankfully, I did it on a Wednesday. It was a Wednesday morning or Wednesday afternoon. So for the rest of the week, I didn’t pay for lunch or dinner.
Mike: So let’s tell the story a little bit. I know, like we said, you just made $4.7 million on a deal, which is awesome, but you kind of transitioned from single-family. So you mentally made the decision, “I need to own an apartment building.” So tell us what happened next. Where did you go from there?
Corey: Well, I had to go find the education on how to do it, so I went and sought out really good mentorship or education, and my mentor is David Lindahl.
Mike: He’s been on the show before.
Corey: Dave actually wrote the foreword to my book, so really cool. I flew all the way to Boston and met David, and I went through this coaching program, and I just became one of his best students. I truly took what he said, I did what he did, and I didn’t do what he didn’t do.
You know this, Mike, as well as a lot of people out there. You don’t have to reinvent the wheel here, not in real estate. It’s already been done. All you’ve got to be able to do is be a master copier and put your own little flavor to it. That’s all you’ve got to do.
Corey: And so, that’s all I did. Once I learned from him the whole concept of how to underwrite and make sure that we had good deals, and that financially they would work, then I needed to go find one.
But I still had all this money, and I just found out . . . I went to one of David’s events, and I really . . . Like I said, all I do was I stood in the back of the room and say, “Hey, I’ve got a bunch of money. Are there any deals?” I’m ready to buy a deal right now, and I just wanted to see if I could.
And it surprised me because I saw every deal in the room that week, and I was able to actually find a great deal from two guys that really . . . They had $100,000 hard in this deal, and they were going to lose it because they didn’t have the rest of the money to close and they needed to close in 30 days. I had the capital.
Mike: And that was this deal that you just made a bunch of money on?
Corey: Yeah. I bought it in 2011 for $3.2 million, and I raised $1.6 million of private money. I negotiated a 75% ownership of that deal from these two gentlemen, so they immediately gave me 75% of the ownership of a deal that . . . Now, I had to go . . . We wrote the contracts, but I had to go vet the property.
Mike: Sure, of course.
Corey: Now, I spent a lot of time vetting the property, and, dude . . . What I found out is the property had a bad reputation. There was a drug problem. There was a management problem because it was in receivership. It was an REO, bank-owned property, and the management didn’t give a rip. They didn’t care.
There was deferred maintenance, so all the units inside, like the interiors, just needed refreshing. But the golden thing about it was that it was three miles from all the big box retail, the Lowe’s, the Targets. All the nice stuff was three miles away.
Mike: Was this in your market or no?
Corey: No. I live in Phoenix, but this property is in South Carolina, like a million miles away. So, I had to find really good management company, and I had to understand my demographics and what I was doing. I knew I had the money to do the deal, and so I validated the deal. I knew the deal was great, and so I took on the risk.
Now, the only thing I didn’t do, if I could get a little carve-out, is I didn’t underwrite my partners like I should have. That’s a whole other episode. We can do “Know Thy Partner” and “Know the Operating Agreement.” I ended up buying both of those guys out, and I owned the property 100%.
Mike: So they got 25% of the deal, or who knows what your . . . You know what your buyout was. But they got 25% of the deal for finding it and because they were about to lose it, so they were willing to give up the majority stake of it because they couldn’t fund it.
Corey: Yeah, just so they could close, so they could still have something and really not lose their $100,000.
Mike: And the money you had access to was debt financing, right?
Corey: No, it was equity. So we got a combination of debt and equity. We bought it for $3.2 million, I raised $1.6 million, but that was enough to do all the rehab, do all the things that needed to be done for the whole property. Plus, they paid us an acquisition fee and some other things, all the closing costs.
So all in, we’re at $3.6 million or something. I can’t remember exactly what we were in for the deal, but $3.2-ish. So we get the deal, and then . . . Do you want to talk about maybe the structure of what happened there?
Mike: For sure. Absolutely.
Corey: So Year 1, we buy this property, and it’s got problems. We’ve got to fix the problems, and the first thing to fix is the management team. So we go through, interview them, and we know that they’re just not the right people. We bring in our new trained staff from our management company. That’s Step 1.
Then Step 2 is we hire Mauldin police. We actually had two police officers that we gave free units to, to live on our property, so they would have a police presence. And then every night they would go walk the buildings. It really helped with all the loitering and all the things that were not good going on, on the property.
Well, then we came up with a wonderful . . . I don’t know how this idea came in my brain, but I had said, “Hey, don’t you guys have drug dogs?” And they’re like, “Yeah, we’ve got drug dogs.” And I go, “Could we use them at my property? Can we have them come test the area?” “Sure.” So we put a notice on all the neighbors’ doors that we were going to bring the Mauldin police dogs, drug dogs. We had two move-outs in the middle of the night.
Mike: Coincidentally, right?
Corey: There was a drug problem, and they were now removed. Of course, once we did that, all the neighbors, they all know who it is, but they’re not going to tell, right? But they were coming up and saying, “Thanks. Thank you.”
And really, we just started . . . That Year 1 was just a whole transformation of getting rid of all the unwanted types of tenants that were not really wanting to be great tenants and then a combination . . . And we started doing a building at a time fixing up.
Mike: Let me ask you this, Corey. Before you started making those improvements and stuff, was the property already cash flow positive or no?
Corey: No. Our first NOI, like our second month of business, we collected $50,000 in rents, as opposed to the month that we sold it, we collected $112,000. So five years later, we collected $112,000 off the same building.
Now, for the first maybe six months, it was negative. After the sixth month, we got it to where it would be stabilized at 85%. We bought it and it was maybe 70% occupancy. We got it to 85% by the first year, and by the second year . . .
So Year 1 is really just taking it building by building, fixing it up, and fixing all the problems. By Year 2, now we’re done with the interiors. Now we’re working on exterior stuff, so we’re doing all the trees, all the bushes, putting a slurry and stripe on the parking lot. We actually put new roofs on all the buildings.
So now we started with the exterior looking really pretty. We redid our laundry room. And one of the things that we did on the first year . . . and I always forget to talk about this, but lighting. Lighting is so key. It makes the biggest bang for the buck. If you change the incandescent lights to those really bright LED lights, that makes a world of difference because immediately . . .
We function in workforce housing. Most of our tenants have jobs, and they come home late at night. And if you’re a woman and you’re coming home at night and you’ve got these yellow, ugly, scary lights on, it’s scary. If you’ve got these bright LEDs that put off all this light, it’s a lot better place. And immediately, our tenant base is talking like, “Wow, this is new management, new company is, ‘We’re here to fix things.'”
Mike: Yeah, that’s awesome.
Corey: That’s really the trend. And so, we just went that . . . Year 2 we fixed the exterior, and then Years 3 through 5, all we’re really doing is optimizing rent growth. We’re raising the credit criteria, too, where we get the best tenants.
We implemented what we call an ACH program, so now if you get on any of our properties, you have to . . . We have iPads on the property where you have to put in your information and you have to have a checking account.
Well, in workforce housing, to have a checking account is kind of a big deal because there’s a lot of people that like to pay by money order. For us, you’ve got to have a checking account. That’s one of our filters. But it also allows us to ACH the first of the month and collect about 90%, 95% of our rents.
Mike: That’s awesome.
Corey: So now I have my manager not sitting there with her head down doing . . .
Mike: Chasing checks and . . .
Corey: Yeah, doing stuff like . . . Now that her head’s up, she’s looking at the property, she’s looking at the people that come on, she’s managing our property correctly. We optimized that.
And then when we get ready to sell like we did with this property, we sell for a premium. We take a number that we think in our head is right, and then we add some more money on top of that. And the reason for that is we want to market to a certain type of either a Wall Street grade type of a buyer or, honestly, someone that has a 1031 broken exchange, and that’s exactly what we found.
Mike: They’ve got to move fast and find a deal and not be so picky.
Corey: Yeah. And the reason is because we have five years of perfect books, perfect financials, and we have a rising income story. That rising income story, don’t undervalue that story.
Corey: Wall Street will pay big money for consistency. And we know this, so we market to those types of people, and we found someone just like that. They needed to close pretty quickly, they had a 1031 exchange, and they bought the property. So we bought it for $3.2 million, and we sold it for $8.8 million.
Mike: That’s awesome, man. Congratulations.
Corey: I netted $4.8 million.
Mike: Digital fist bump.
Mike: What’s incredible, when you start to think about different buyers . . . And we think about this in the single-family space, but in your space, it’s even more so. There’s a ton of people out there . . . Guys like you and me are value buyers. We want to buy something that we can add value and increase it and make money that way. There’s a ton of people, especially the more professional investors, they just want to buy cash flow. They want something that’s stable, reliable, and they don’t want to have to try to improve it. They just want it to stay stable where it is.
Corey: Absolutely. They’ll pay big money for it. They’ll pay a premium for it because they’re not looking for the big bump, just a stable rising income stream. Once you figure that out, once we understand that model . . .
That’s why we hold our deals for five years, because, really, Year 1 and Year 2 are the fix all the broken stuff. And those last three years are really where we focus on that nice operation story that we can say without a doubt, “Hey, there’s no deferred maintenance. There’s nothing that you’ve got to do to this property. Just keep operating the way we are, and you should have a really good, successful time and make the money.”
Mike: What some folks that are listening right now, if they don’t know you, may not know is you’ve done several more deals since then, and while you’ve got a nice payday right now, you’re not taking your money off the table. You’re parlaying that into the next deal, right? Share more about that.
Corey: So, the reason we sold this deal was not just so we could go make a big gush of money, because that’s not even important to me. What’s more sexy to me than making big money is making huge cash flow checks. And so, we are going to do a 1031 exchange in that deal, and actually we just locked up our new property that’s in Indiana. It’s a student housing project we’re buying for $12.7 million, but it will spit out around $560,000 a year of cash flow.
Corey: That’s something to get excited about. I still have the equity. It’s there. But now my money is working very smart and very hard, and it will work for me for the rest of my life. So one deal, Mike, one deal, I created legacy wealth.
Now, I’ve done this with . . . I’ve been a fix-and-flipper and a wholesaler since 2005. I’ve made a very good living doing it, but I’ve never become wealthy until I did one apartment deal.
Mike: That’s awesome. I had a live event this past week for three days, and I talked a lot about that. We make a lot of money wholesaling and rehab, and we’ve done very well, but my wealth is in my rentals.
I think you need to look at it both ways. And even if you’re doing multi-family and you’re just starting off . . . As you know, if you were only doing multi-family and you just had one deal, it probably wasn’t also throwing off enough cash flow for you to live on, too. You’ve got to have your income, and then you’ve got to have your wealth-building side.
Corey: You have it both, yes. And I still have a wholesale business, so I totally subscribe to the method of you should . . . The great thing about wholesaling and even fix and flip is you can make some paychecks, but don’t lose sight of what Robert Kiyosaki used to talk about, which is cash flow. Pay attention to that game.
Do your rentals. It could be single-family rentals, which is great, or you could step up to the multi-family game. Either way, it doesn’t really matter, but it’s that cash flow that represents true wealth. The cup gets refilled each and every month.
Mike: Absolutely. And truthfully, we all . . . I think I can speak for the industry when I say this, for the most part. Most of us get into this business to achieve financial freedom. Again, while wholesaling and rehabbing, all those things, have been very good to me over the years, the moment I stop doing those things, the money stops. That’s not how you define freedom.
It’s enabled me to do a lot of other things, but what you want is the type of cash flow that you’re talking about to where you could, at some point, just stop working completely and the cash flow will continue for as long as you let it.
Corey: It’s becoming the big kahuna, Bruce Wayne. It’s really looking at . . . I’ll never forget it. He gave me the perfect vision of what time and money really look like, and I think every investor truly inspires for the both.
We’ve been settling for one a lot. I feel like that’s my mission now, to get out there and educate people and let them know that, “Guys, fix and flip and wholesale have been great, but don’t forget on passive income.”
Corey: You have to start stocking up for that kind of stuff because that’s the generational wealth. It’s the one that lets you quit and live a life that no other can live.
Mike: Normally I wait until the end for people to kind of plug something, but share your book. Your book’s coming out here in just a few days. Pop that book up. So it’s called “Why the Rich Get Richer,” and if you go to WhyTheRichGetRicher.net, Corey will give you a free copy. You’ve got to pay for shipping. But tell us about that.
Corey: “Why the Rich Get Richer,” I wrote that book because I really just wanted to talk about all the ins and outs of how I see investors really monopolize on their monies. And I think people that are smart are looking for alternative ways to invest, and as investors ourselves, there’s got to be a way . . .
I think apartments, for me, are a lot easier than doing single-family homes. Only because maybe I’ve gotten really good at raising private money, but . . . I can buy 100 units at one deal.
Mike: I’m jealous.
Corey: I only have to go through one deal.
Mike: I talk about this all the time. I’ve got a portfolio of rentals, but I’m like, “I could do a deal with Corey and 4x my rental portfolio in one deal,” or whatever.
Corey: We’re going to do that, by the way. I promise you.
Corey: But it really does. To me, that’s one deal, so in my mind, if I could do maybe four to five deals a year, my life is cherry.
And the best part about that is because they’re such larger units, I’m paying for management. I bring in a management company to do all the work. In fact, my management company finds all my deals for me now. I don’t even go find the deals. They come to me.
And so all I really do, the only job I really have, is to cultivate and talk with my capital. And that’s the fun job. It’s like, “Hey, let’s go watch a game. Let’s go watch a hockey game. Let’s go out to dinner. Bring two of your friends. And let’s just talk and have fun.” Meanwhile, I just shut up, I pay for everything, they do all the talking, and then I get two referrals.
Mike: That’s awesome.
Corey: So that’s the money game, and it’s a lot easier and it allows me to live what I call that big kahuna lifestyle. I’ve become a cash flow creator.
Mike: That’s awesome, man. So let’s talk really fast about lessons learned. If people are listening to this and they’re like, “How do I do that? What do I need to do?” I’m sure you would probably agree people don’t have to start in single-family. I know some people that do a lot of . . . I think even Dave Lindahl says that. He didn’t do any single-family, just went right to multi-family or . . . I can’t remember. Maybe somebody else.
But there are some people that think you step up. There are some people that just go right into multi-family. But if folks wanted to just ease their way in . . . Sometimes people are overwhelmed by the whole raising money idea, which I know you can appreciate for some folks out there. But just talk about how people could start, besides, obviously, reading your book.
Hey, bring me a copy next week. I’m going to see you in, literally, eight days, so bring me a copy, my friend.
Corey: Yeah, I will.
Mike: Not that I’m too cheap to go buy it. An autographed copy is what I want.
Corey: I’ll put all the magic words in there for you.
The answer to that question is it starts with the concept, the belief first. I think people have got to believe it with their mind. “Hey, I could maybe, possibly do this.” And then, really, the whole raising private money, I know it sounds very scary, it really does, but it’s really a lot simpler than most people think about it.
Here’s the deal. You never ask . . . This is something that I teach. You never ask people for their money. You only ask who they know.
So when I’m making a presentation to somebody about, “Hey, let me show you . . .” I’m like, “Hey, listen. Mike, I think you’re the kind of guy that you have lots of influence on people. That’s what I want to use. So if I could have you look at my stuff, I want you to critically look at what I’m doing as I present to you. Let me know if you make any changes because I want to make sure that you feel comfortable referring your friends to me. Is that all right?”
Then we go through a small presentation, and you talk about what I’m doing in multi-family, like, “Here’s what I’m going to do. I’m going to buy properties for this. I’m going to have this management company.” Meanwhile, Mike is sitting there critically looking at my stuff because I’ve just asked him to be my buddy and look at it hard. And so, you’re really paying attention.
At the end, and I believe this, the right people will always self-select. They’ll say maybe, “Hey, Corey, aren’t you going to ask me?”
Mike: Right. “I think I’m interested.”
Corey: Yeah. “Well, since you put it that way . . .” But truly, that’s the way. That’s the secret to raising private money.
“How do I start?” I started with asking my friends and family. People are like, “Oh, gosh.” Yes, your friends and family. “I don’t have any friends or family. I don’t have any money.” That’s what a lot of people are going to say. Well, join the club because neither did I. But I still used my friends and family because guess what? They were great people to practice on. They really were.
Mike: And they know people, too. I don’t know how yours ended up, but sometimes, it’s like, “I know or happen to know this person.” Sometimes people know people. They might be broke, but they know somebody because of where they work or friend of a friend type of thing.
Corey: That’s exactly what happened.
Mike: It’s like, “This guy was just saying he needed to invest his money somewhere.”
Corey: You just start going up on the money platform. That’s what always happens. So someone knows someone that’s wealthier than they are, and everybody wants to look like they have the inside track.
A lot of people that actually come into my deals usually start with giving me the minimum investment. Sometimes, I’ll even cut them down. They will say, “I’m thinking about putting in $400,000, $500,000.” I’ll be like, “Just give me $100,000, because you don’t know me, and I don’t know you. I want you to understand what I . . . I’ll have other deals coming down.”
I want them to truly get into the deal and start seeing how it works and our process, and then they become advocates. Really, it’s a way of just communicating, and it’s not sales-y. The one thing about money is when you need money, you never get money. So you’ve got to act as if you do not need anybody’s money, because we’re not selling.
I believe this in my heart. When I’m selling a multi-family deal, I’m making an offering. “I’ve got a really good opportunity that I would love for you to take advantage of, but if you don’t like it, I don’t even care. It’s all good because I’ve got 10 other people that want to talk to me today.” Even if they didn’t, that’s what you still say. You’ve got to make the illusion that you don’t need anybody, and honestly, that becomes a reality.
In the beginning, you may be saying the words, but truthfully, once you get rolling, that’s the reality. People are knocking down the phone. Mike, no one trusts the stock market anymore. Who believes in that anymore? Not very many people. They really want alternative ways to invest.
Mike: Yeah, something physical that they can . . . Even if it’s not in their hometown, at least they know if they wanted to jump on a plane or drive there, they could see it and feel it and it’s tangible.
Corey: And that’s exactly what we sell. This is a real deal. We talk about risk. What’s going to happen? Could everybody move out? That’s probably highly unlikely. Could people move out? Yeah. Do we care? Not really, because that’s just what happens. People move in and out of apartment complexes.
Now, if it started trending, we’re going to pay attention, but generally, it’s just a little bit of a cycle. And that’s okay. We don’t freak out when there’s 90% occupancy and 10% vacancy. No one cares. Trust me, I still care.
Mike: Yeah, you care, but . . .
Corey: We want 95%, 97%.
Mike: You care, but it’s . . . Unlike single-family, if you have one unit and one person moves out, you have 100% vacancy. There’s some comfort in a partnered community.
Corey: Yeah, it’s 0% to 100%.
Mike: I’m probably going to screw this up. Somebody that used to be kind of a mentor to me said, “Everybody ain’t going to do anything.” It was basically just saying not everybody’s going to do the same thing at the same time.
Corey: Yeah. And really, the only risk with single-families, if you only have one or two, is if one moves out, you’re like, “Oh, gosh. All the income is gone for that property.” If you had 100 homes, it’s a little different. Now you can pull off vacancy. That’s not a big deal. So, there is some comfort.
Finding money seems scary, but honestly, it’s like anything else. When you start something new, when you say, “Hey, I’m going to try to buy a home,” well, that was scary when you first started, for most people, until they started to get into the process. Then they understood it. So I always find the more you can educate people on how to do it, your mind starts to understand and starts to tell itself, “Yes, I can.”
And then the other part is finding deals. Finding deals, just like anything else, is a little bit harder these days, even for multi-family, but it’s very easy to get deal flow.
It’s different in a single-family. In single-families, we do a lot of direct mail marketing. We try to find motivated sellers. In multi-families, I basically market to brokers in the markets that I follow.
So we’re on every broker’s list, and they send us their deals. Most of the deals that we buy are 100 units plus, and they’re sold by what I call guys like me. I’m not going to put it on MLS, or I’m not going to . . . I’m going to use a broker from a brokerage firm to sell my property. I have to leave enough money on the table for another investor to come buy it. That’s why the multi-family . . . They understand that. If I can’t make income, I can’t buy it.
Now, what we get good at and how we find deals is by operations, and operations is really what makes or breaks you in this business. How do you find good operations? Well, you’ve got to make a lot of phone calls to management companies, and you ask them very detailed . . .
What you’re buying in a management company is their systems. How do they train their staff? How do they go from a lead to a prospect to a tenant? What’s the process that they have? What kind of marketing do they do? Do they do street-level marketing? Do their managers get out of the desk and go knock on all the businesses right around the street? Where are those businesses around the street? How come they’re not living at your property?
Those are the things that we do at our properties that ensure that . . . Portfolio-wide, we probably have a 95% occupancy.
Mike: That’s awesome.
Corey: And so, we keep it very high because we believe in 100% occupancy. And we actually obtain it quite more often than not. It’s hard to hold it there, but we actually get there more often than not three or four times a year.
Mike: That’s great, man. And there are some people that just in their mind, they’re like, “Well, if I can operate at 90%, I’ll be happy.” So they are always going to have more vacancy than they want because their mindset is, “Well, 90% is pretty good.” I know you’re different in that regard. You’re shooting for 100%.
Corey: Absolutely. Man, that is like . . .
Mike: I know that sounds crazy what I just said, but am I right with you there? A lot of multi-family people, they just say, “Well, the average is 85%. I’ll be happy if we hit 90%.” But nobody’s saying, “I’m going to have 100% or I’m not happy.”
Corey: Yeah. That’s the shift. So how do you consistently stay at 95%? You’ve got to put 100% as the benchmark.
Mike: And that last little bit there, that sounds like a little bit . . . There’s a ton of profit in that. It’s all profit.
Corey: It’s all profit. It’s funny because in our system, you’re either red or green for certain things. I’m going to give you a little insight into how we operate because it’s a funny story. Every property that we have, they have a blow-up mattress, a whole thing of bedding, sheets, pillows. And so, you’re either red or green in our system for certain KPIs, key performance indicators.
And if you’re red for a certain amount of time, a managing mentor will show up at your property. These guys are within our management system, and they just go travel to wherever we’re operationally challenged. And they sleep in the office. They get the bedding out, and that’s where they’re sleeping. It’s crazy, dude.
Corey: They’ll stay there for a month or two months, Mike, however long it takes to fix the problem. And they’re there to really fix the problem and help my manager, not to sit there and say, “How come you’re not doing this?” They’re like, “Here, I’m here to help. You use me.”
But the great thing about these guys is they’re seasoned. They’re the best of our management that have been there, done that, seen it, seen everything.
On this particular deal, they didn’t make a site visit, but it kept on . . . Every month, there were only two vacants. It’s a 100-unit property, but there are always two vacants. The guy is like, “Darn it. What is it going to take to get you out of your chair and get those two units filled? Why is it always two units? Go fill them. Go get off your butt, and go fill those two units.”
That’s the mentality. It’s done out of love, and the guy hit it. The guy actually did it. He got out of his seat, and he’s like, “I’m going to make it . . .” He made a commitment to get the two filled up, and he got to 100%.
Mike: That’s awesome.
Corey: And then, when he gets to 100%, it’s like a big party. I’m calling him. My management company is calling him. He gets a big bonus for it because we want to reward that very heavily and say, “You did it, brother.”
Mike: That’s awesome. Well, Corey, we’re running a little long on time here. Tell us one more time . . . I’m going to add a link down below for WhyTheRichGetRicher.net, where you can get a copy of Corey’s book. If folks want to learn anything else about you, is there anywhere else for them to go, or is that the place they should go?
Corey: Go there, but you can go to KahunaWealthBuilders.com. And the book thing I’m giving away, the WhyTheRichGetRicher.net, I’m also giving away my video series on how to find money, how to find deals. I’ve got extra bonus videos and stuff that I have just added in there because I wanted to over-deliver.
Corey: It’s a really cool little . . . I’m giving you a bunch of stuff, man. And I just want to . . . It’s my first book, dude. It’s my first one. I’m really excited about it, proud of it.
Mike: You should be. That’s awesome.
Corey: I just want to give back because life is . . . This real estate business has been so good to me, and I just want to share.
Mike: Awesome, man. Hey, great to see you. I always appreciate your time.
Corey: Mike, I appreciate it. I’ll see you next week, brother.
Mike: Absolutely. Everybody, this was Episode #376 with Corey Peterson. I’m going to add some links down below in the show notes here. If you’re listening on iTunes or somewhere else, make sure you go over to the site and look under the shows for this most recent show, 376, and you’ll get access to these links.
I really appreciate you. Man, I love talking to people like Corey. He inspires me to just keep going, even if I’m not doing exactly what he’s doing, which I want to be doing exactly what he’s doing. It inspires me, so hopefully, you got something out of today’s show.
I’m starting to get a little more consistent in asking this, but if you love this show, if you like what we’ve been doing, 376 episodes deep into this show, please go out to iTunes, Stitcher Radio, Google Play, wherever you watch this podcast at, and give us a positive rating if you love the show. We’d appreciate it. It’s the fuel that keeps us going.
We’ll see you guys on another upcoming episode. Hope you have a great day. Take care now. Bye.
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