Financial Freedom in 3 Years by Scaling with Small Multifamily


MANY people invest in real estate for financial freedom. Unfortunately, not all investors get there. The truth is that a little cash flow won’t allow you to quit your W2 job or support an early retirement. You need a LOT of cash flow, or you need a bigger portfolio!

Welcome back to the Real Estate Rookie podcast! With two college degrees and a successful career, Dan Marklin had what many people envy in life. But one day, after realizing that the top rung of the corporate ladder wasn’t as glamorous as it seemed, he began to dream of something more—a job that would afford him total financial freedom and allow him to spend more time with loved ones. It wasn’t long before Dan had dived headfirst into the world of real estate investing, buying his very first rental property.

In this episode, Dan will show you the method he used to scale his portfolio from zero units to over ninety doors in just THREE years! Along the way, you’ll learn the differences between cash flow, cash-on-cash return, and an even MORE important data point to consider when analyzing rental properties. But that’s not all. Dan spares no detail when recalling one of his real estate horror stories and shares how YOU can overcome the challenges of multifamily property investing!

Ashley :
This is Real Estate Rookie episode 405. Affording the financial freedom to leave your nine to five can happen sooner than you think with investing in real estate using the Stack method. My name is Ashley Care and I’m here with Tony j Robinson.

Tony :
And welcome to the Real Estate Rookie podcast where every week, three times a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. Now, today’s guest, Dan Marclin, is an investor who uses his W2 related skills to ultimately give him the time and financial freedom to hopefully potentially walk away from his job in 2024 through the power of real estate investing. Now we’re going to learn about starting small to go large in multifamily, why you should be investing in multifamily and what Dan would’ve done differently if he had to start all over again today. Dan, welcome to the podcast brother. Super excited to have you.

Daniel:
Thanks for having me, guys. Looking forward to it. Like a lot of people, I wouldn’t be here without BiggerPockets. So excited to be on it and ready to give back to everybody.

Ashley :
Dan, what was that moment in your life? What was going on where you decided you needed something else like real estate to really make the life that you actually wanted?

Daniel:
Yeah, so it really what started for me it was, I think there was an act one and act two that got me going and act one. So a lot of people, so hopefully this resonates. So I’m a kid from Missouri, went to school, got engineering economics degrees, started working for oil gas company, and I was doing that for a few years. And during one of the years, for five years I was going to West Texas in the desert every month and I was working our oil field facilities. And so I was listening to BiggerPockets podcasts, driving around in the field for four hours, literally in the desert and tumbleweeds and rattlesnakes. And the best part of my day was listening to BiggerPockets and listening to these guys Think Big, think about how big life you could have, what you could do. And the worst part of my day, I remember feeling just so sad, pulling up to wealth facilities and stepping out of the car when the podcast turned off and I was back to reality.

Daniel:
So that happened for years, but I never acted on it because I was always stymied by the work environment. Well, fast forward act two, covid hits we’re working from home. I got a promotion and I was working with a lot of senior executives and kind of like three things kind of all coalesced. One, I realized a lot of these senior executives, all that glitters isn’t gold. They’re not necessarily we want to be them, but they’re not really that more talented than a lot of friends and successful people I know outside of the corporate world. Two, I actually saw their salaries because I was doing benchmarking for our company and I realized they’re actually not making as much money as people think. They’re not making more money than people I know in real estate. And then three, the thing that tipped it, my dad actually got prostate cancer and he’s fine.

Daniel:
They did the surgery, they’re all good. They were monitoring it for a while, but that was in the fall of 2020. And I had a realization that you know what, he’s close to being 70, he’s 70 now and we love riding bikes together. We love spending time together, but I only see them maybe three times a year. They’re in St. Louis, I’m in Houston. And so that’s really what gets me going is realizing, you know what, I might only have maybe 10 really good years where we could still ride bikes together competitively, go out the back roads in Missouri, and that’s maybe 30 times I get to see my parents in the rest of my life. That’s really, really fruitful. And that was the tipping point where I had a look in the mirror moment and I literally told myself and my bathroom mirror right there. I said, all right, you’re doing two things. You’re either going to get into real estate or you’re going to stop talking about it. There’s no middle ground. You’re going to stop telling people you want to or you’re going to get in. And that was the spark that started everything. And then from then on I was committed. And here we are almost four years later,

Ashley :
Dan, I really glad that your dad is doing better. And I have two similar situations to kind of relate to your stories on the viewpoint of being at work and seeing the people above you and what their job was. The day that I gave my two weeks notice to my accounting job, I said part of the reason I was quitting was I wasn’t making the money I wanted. And the partner at the firm looked at me and she said, well, do you think I’m making the money I wanted? No, I am not. And I was just like, exactly. And it was just, I always think about that moment as to like, yes, I did not want to be you. I didn’t want to end up like her. She was stressed and didn’t have time for her family and all these things, and she wasn’t even happy with the amount of money she was making.

Ashley :
And then as far as the family point, when I had young kids and I was really, really hustling getting into real estate, everyone always said, your kids, they’re only young ones. And almost made me feel guilty. But it also was like your dad, your dad’s only 70 once, he’s only 71, there’s still years ahead where if you grind and work so hard for a year, two years, three years, whatever it is, you can propel yourself to spend so much more time with your family than actually pacing out so that you’re only working 40 hours a week for the rest of your life or until you’re on age of retirement. I think that’s so important that it’s okay to give up a couple years with spending a ton of quality time with your family so that you can probably maybe get to the point where you’re seeing your family more than three times a year because you have a flexible real estate schedule, Dan. So I think it’s really amazing you having that visualization, you realizing that. So what was kind of that first step for you?

Daniel:
Yeah, so the big first step, well, I have one extra comment because the huge realization that it is so is that you realize two things. Where does your happiness and your validation come from? And when I was in that job, most people, it came from my job, but I realized that’s the wrong place for it to come from when your whole happiness is whether your boss is happy, whether you had a good interaction at work, whether your company is making money, that’s a bad spot to be in dependent on them. So that’s something that I think is for, people can’t see it right now, but when you get to the other side, you never go back.

Tony :
I got a comment on that really quickly. I think it’s such an important thing that you said about the validation piece that so many people are validated by the job titles that they hold. And I went through almost this identity crisis after I lost my job in 2020 where we started building this real estate business and I was still doing so well, but I still felt like I was maybe missing something or that I wasn’t really achieving because I wasn’t climbing a corporate ladder anymore. And I think for so many people, that’s how we value ourselves is like, Hey, how many promotions have I gotten? What does my last pay increase look like? But when you’re building a business for yourself, the scale or I guess the measurement of success is so different, but even now, multiple seven figure businesses that I’m managing. But even sometimes I still think like, man, am I doing something wrong? I’m not the VP of whatever company I was working for before. And I dunno, I just think it’s a super interesting topic about the validation piece. And I think there is a bit of a mindset shift you have to have when you’re stepping into the space of maybe undoing some of that indoctrination that we’ve had so far.

Ashley :
Dan, I want to continue into your first purchase, that first action you took, but first we’re going to take a short break here. Thank you so much. We really appreciate you taking the time to check out our show sponsors. We’ll be right back. Okay, we are back from our short break. Thank you guys so much for joining us again today We are here with Dan who told us about the pivotal moment in his life where he had decided enough was enough and he didn’t want work his W2 job to really decide if he was happy or not in his life. So Dan, what was the first action that first purchase you decided to take?

Daniel:
Yeah, so I think for everybody, the first thing as I read the Burr book and I read the book on property management from David Green and Brandon Turner, easy first step, do that. And then I talked to, I had a colleague at work that was investing and he gave me the realtor he used who’s also investor, and I just set up a call with them. It’s a simple step anybody can do. Just set up the phone call, let ’em know I’m looking to get investing, what can we do? And then it actually, I took about four months and got familiar with what do rental comps look like? What do neighborhoods look like in Houston? What does contracting look like? How am I going to evaluate properties? And then we started a search on the MLS for properties. We made a buy box, four units, four units, and under 400,000 here we go. And then it took about four months for us to finally get one under contract and get it closed. So even though I made the decision, I kind of want to let people know it’s okay. It’s not like the next week you got to be on the clock and buying a property.

Tony :
Dan, I want to hear a little bit more about your buy box because it sounds like you had some criteria you’re working with, but I think for a lot of new investors they kind of struggle to come up with what that buy box should actually be. So how do you as a brand new Ricky real estate investor decide on your specific buy box?

Daniel:
Yeah, I think so there’s two things. It’s what can you afford and what’s your strategy? And so I think first and foremost, I recommend for all rookie investors, two to four units. Why is that? Four units and under, you can get conventional financing from the government, so you get Fannie Mae, Freddie Mac, 30 year low interest rate, fixed loans, you get a lot of favorability set up for you. So that was simple. It’s two to four units, something that’s multifamily. And then also though, I was looking at what am I willing to put in and I had, I said a hundred thousand, which that might not be okay for most people, but based off of that, we said based off of that and a typical rehab, here’s where we’re looking, we’re looking for $400,000 properties, two to four units because we had a pre-approval letter from a lender and that’s where deals were available and we could probably make it work.

Ashley :
Dan, let me ask, where did that a hundred thousand come from? Was that pulling money out of a savings account? Was that taking a HELOC and maybe give us an idea of what percentage was that of your wealth at that time? Was that a big deal to be taking that 100,000 or was this a little bit of money you were able to risk at the time? Kind of give us a little insight up to how comfortable you were with this decision.

Daniel:
Yeah, so that was probably two thirds of liquidity I had, so not things in 401k or brokerage accounts, but of just cash I had available, but at that time I was still maxing out my 401k and I was still contributing into my stock account every year. And so it was probably maybe 15% of my net worth if you will, but I didn’t, now looking at it, I’m much more confident what I did at the time, it was kind of like I just need to do something different. I have a 401k, I have stock accounts, I have whatever money markets. I at least this is diversification in line with my portfolio.

Ashley :
And I think that is a great point to make is that you don’t have to scrape together everything that you have and risk it all to get started In real estate, you can take a portion of it and there’s so many different markets out there with different price points that no matter what your liquidity is or worth, there can be a market and there can be a way to find a deal without pulling all of your money out of your retirements, draining your savings and things like that. And I’m assuming that you probably felt more comfortable taking that step knowing that you weren’t risking everything for you and your family?

Daniel:
Yeah, definitely. That was a big bonus is to have a cushion on top of that in case things went wrong. So we were doing $140,000 rehab on the property and maybe I’m getting too far ahead, but so saying, okay, what’s a 20% cushion on that? And having what I call the safety valves. If you really need to, you could sell some stocks or you could even loan out of your 401k. That’s why I wouldn’t recommend using those upfront if you don’t have to, but you always have those to fall back on if you need

Ashley :
Them. I think this episode is already a great disclaimer of if you’re going to do a no money down deal, you’re not using any of your money to get into a deal. We’re not saying don’t do that, that’s great. You can do that. What we’re saying is make sure you have reserves or you have that safety net in case something does go wrong where you need to have money for something. So Dan, tell us about you put together your buy box now. What was that first property? How did you find it? Things like that.

Daniel:
Yeah, so it was an MLS property. So we had a search set up and I reviewed I think 40 different properties and we put in offer, not firm offers, but at least talked to agents on five of them. And then this property, I had it tagged and I said, it’s overpriced by 30 grand. And then it came back on the market. Well, it was on the market. They dropped the price on Wednesday night, we got the notification Thursday morning, we submitted an offer at 8:00 AM and they already had another offer and they accepted it that day. And that’s how we got it under contract. So it was an MLS property. We just looked at ones where there was deferred maintenance and in the part of town that we liked and then just act quick. So I did enough, I looked at enough of other ones to know what I was looking for. And then when this one came up, act quick on it.

Tony :
Dan, you bring up a really good point. I just want to make sure that we highlight this for the rookies, but you said you analyzed 40 different properties and I think that’s where a lot of Ricky investors maybe get caught up is they say, man, there’s no good deals out there. And then you’ll ask, well, how many deals have you actually analyzed? Not just looked at the Zillow listing, but how many have you actually run the numbers on? And they’re like four. Okay, well there’s the challenge. You haven’t looked at enough deals yet. So I think the fact that you analyze 40 is super important. Now, just quick side note on that, what tools or resources were you using to go through that analysis process?

Daniel:
Yeah, a hundred percent. And I would say analyze ’em and know you’re going to analyze ’em wrong and be okay with that because you’re just going to get better I think. So the biggest tools, what I would say, number one, know your neighborhood. So go to, we have an M-L-S-H-A-R, Houston Association Realtors here. Find your local MLS Zillow or something. Just find a list of properties, write ’em down, make a Google map, and go drive those properties. Go Wednesday, Thursday, 10:00 AM to noon and go drive the properties around your neighborhood because guess what, you’re going to find out what’s a good neighborhood and what’s not a good neighborhood. Why did I say that? Because if people are out walking around, they don’t have jobs, they’re not at school, things are going on, you’re going to find out very quickly. And so you get, okay, now I know my neighborhood.

Daniel:
Then I went to go to Rentometer or the BiggerPockets calculators and or just apartments.com and Zillow and make a list. Go find 40 apartments, two bedroom, one bedroom, three, two, whatever, and just write down the rents because now all of a sudden, okay, what are rentals in the area? And then finally from there I talked to contractors, a general contractor, and I said, kind of just help me with the ballparks. And so we ballpark, what is a bathroom remodel? What’s a kitchen remodel? What’s the whatever? Knowing it’s going to be way different, but now you just kind of know, okay, the difference between a 20 grand remodel and a 40 grand remodel. So when I did that, I built my own calculator, but I base it off the BiggerPockets calculator and I use that to do the inputs. And so the goals I tell for people is my goal was six to 8% cash on cash return and 16% year, one return on investment, everything included. And so if it hit that, go with it. That’s a good solid swing on a first property.

Tony :
Quite a few things to unpack there, Dan, and I appreciate you walking us through that detailed process. But the last thing is where I want to focus first is you said, Hey, my target is, I think you said 8%, right? That’s what the target was for you,

Daniel:
Six to eight, cash on cash,

Tony :
Six to eight cash on cash. So that is your, that’s part of your buy box is, Hey, I’ve got to make sure that I get this number. And we get the question all the time of like, Hey, what’s a good cash on cash return? And the truth, the honest answer is that it depends on the person because someone who’s investing for tax benefits is maybe going to have a different perspective than someone who’s investing for cashflow, which would be different than someone who’s investing for long-term appreciation. So you’ve got to know what your motivations are to help you identify your specific kind of benchmark for cash on cash return.

Daniel:
I agree. And actually what I use, I would actually not go with cash on cash. I go by your total return on investment. I actually use IRR, which it’s not that complicated, but it’s just what’s your annual rate of return? Because I look at it this way, what’s your opportunity cost? You could be in the stock market, make seven to 8%. If I’m going into real estate, I want to at least double that to make up for my time and effort. And quite honestly, we should try to be tripling that. So what does that mean? That’s why my minimum is a 16% annual return when you consider everything principal pay down appreciation. But I shoot for over 20% because, and again, we might get into this, but that’s what I can get in syndications and that’s what I can give to passive investors. So if I’m going to do it on my own, I better be beaten. Quite honestly, 20% is what I look for.

Tony :
Dude, I love that breakdown. And just I want to go back to one thing, Dan, because you talked over this pretty quickly, but you said, Hey, I also communicated with different contractors, and I know for a lot of rookies who are getting started, maybe especially those who have never done a rehab before, estimating those rehab costs or even just finding the contractors can be a little bit difficult. So where did you find and source these contractors? Did you go to Yelp? Did you go to Angie’s List, Thumbtack? Where did you go to find these folks and then how detailed of a number were they actually giving you?

Daniel:
Yeah, great question. That was the biggest concern for me too. Who knows what things are going to cost. There was two ways. One, referrals. Referrals. And through my agent who’s also investor, he had a guy or two guys he used. So I went to one of the properties they were doing and I just asked the contract, I walked it with him, I said, what does this bathroom cost? What does this kitchen cost? He’s like, okay, kitchen’s five grand. The bathroom, what we’re doing is three grand, the new floors is four grand, whatever. So I was like, okay. The other way though, what is really good is going to meetups, start going to real estate meetups, go there, you’ll start getting on people’s distribution list even though you don’t want to. Somehow you’re going to get emails and then they’re going to tell you about new meetups and go to those meetups. And at those meetups, a lot of times contractors are there as sponsors. And I’ve found a lot of times if they’re paying the money and they’re there as a sponsor, they’re usually a decent contractor. Now that’s not a guarantee, but it’s usually better than just some guy off Craigslist that you found or some guy you Googled. It’s somebody that’s involved in the investor network in your area. So that’s worked out really well for me, for being able to find contractors.

Ashley :
So Dan, when you did this deal, what did your offer kind of look like on this property? Were you putting in an inspection period then so you could get contractors in to help you with that estimate?

Daniel:
Yeah, so we treat it like a single family property. So four units and down, you still treat it like that. So it was a standard 40 day close. We had a 10 day option slash inspection period, and then we had financing contingencies for 21 days and then we had closing. So as soon as we got it under contract, the biggest things you got to do, go get an inspection and had a regular home inspector go out and do the inspection. And I have contractors, I had three contractors come out. So what I like to do is have your inspector go in the morning and then I have the contractors meet at like noon or one, so the inspector finishes, my three contractors are there, the inspector gives us the down low, here’s what I found. And then we walk it with the contractors. So you got one day of disruption for tenants, but you got your three contractors you go through, get your bids, and then before your option period’s done if your numbers are going to work or not.

Daniel:
And one final comment on the four unit, the financing, I had multiple different options, hard money, conventional. I was trying to make it work. Conventional wouldn’t do it. There was too much deferral, hard money was going to cost too much. So literally our option period ended on Friday and at 4:00 PM on Friday, I just kept calling around, got referrals, kept calling who might finance this, and I found the lender I used on 4:00 PM on Friday when our option period was ending. So I wanted to put that in there. I was staring down the barrel not even knowing we’re going to keep going forward, I don’t even know who I’m going to use to finance this. And it came out and worked through. So I want to say that for folks, keep hustling and it’ll work out. Okay.

Tony :
Dan, dude, I’m super happy that you shared that because Ash and I are both pretty big proponents of the small local banks like that. So two questions. One, what were you saying as you were calling around and then two, what were the actual terms of the debt that you got?

Daniel:
Yeah, so when I was calling, it was fairly typical for lenders. Once I figured out there was potentially issue with conventional lenders saying there might be too much deferred maintenance, this is what we can lend on. We had a lot of rehab to do that it pretty much came clear that, okay, that’s not going to work. What’s alternative lenders going to do? And I talked to hard money lenders, they all are willing, but the terms are tough. And one of ’em said, Hey, call Tammy up. And she was a local bank and the terms that she gave me is that their local bank, they did a construction loan for a year and they held it on their books. It was a 4% one year construction loan. And the only caveat was that it takes 40 days, like the usual closing, it’s not hard money. So you got to go through the whole process and then you refinance with them on the backend. So I got essentially a hard money loan, so a construction loan for four and a half percent interest rates, no extra points. And all I had to do was just do a regular closing timeframe and then refi with them on the backend. That was it.

Tony :
Dan, that was so very similar to my first real estate deal that I ever did. There was a local credit union in the city I was investing in, and it was a one year construction loan interest only. And I think at that time I was paying about 6%, which is still pretty good to fund the whole rehab. And I brought $0 out of pocket for that first deal. They funded everything. They funded the purchase and the rehab and the same, I just had to refinance with them on the backend. And that’s the beauty of going to some of these smaller local regional banks is that you get the same, almost better than what you get with the hard money lender for a cheaper cost.

Daniel:
Yeah, exactly. The funny part, they’re called Citibank, but CITY. So they’re just like the big bank Citibank. It’s just not the, I mean it couldn’t be written any better.

Ashley :
So we’re going to take a short break right now, but when we come back with the Dan, we’re going to touch on the other properties he has purchased and go through the lessons that he has learned. And we’re also going to find out what the stack method is and how that can build you financial freedom. We’ll be right back. Okay, we are back from our short break. We are here with Dan, and we just talked about his four unit property that he purchased, how he did the acquisition due diligence and funded the deal. And now we’re going to move on to Dan’s next deal. So Dan, what happened after the four unit? What was your next purchase?

Daniel:
So I did the four unit and moved the tenants out. We bought it for 2 65, $140,000 rehab, so big rehab on it. While the rehab was going on, there was a point where I was like, I don’t think I’m going to keep going. I think this is just it, right? It’s going to be too much. I don’t really know what broke me out of that. I think I just held on and saw the light at the end of the tunnel. So kept looking and found a six unit that was on the MLS on the market, and we put an offer on it. The guys were ready to sell. It was kind of from a hack job investor, and so we got it. And so then from there we went forward with it. But the big difference, so if you get for the rookies five units above, you’re in a new ball game, so you’re no longer conventional or residential, it’s commercial residential, which means you can’t get the same financing, you got to go with better loans, you got to do a whole different due diligence process. So it’s a different ball game that we stepped into.

Ashley :
Can you define hack investor, because I think that’s the first time we’ve heard this term, and I’m not sure it’s in our glossary yet, but this someone who has all these cool TikTok videos and they’re talking about these life hacks of how to be a great investor the easy way

Daniel:
Or Yeah, a hack investor. That’s probably just being the PC term for something you can’t say on podcast people. The guys before me bought it from a wholesaler. They did cosmetic stuff on four of the units, and two of the units are a duplex in the front and they had it completely to the studs. They tried to do it with the wrong contractor, they got the wrong permits, they tried to get around the city and they had five literal red tag violations next to each other on the windows that shut them down, and they essentially needed out. So they actually brought $3,000 to closing in order to give us the deal. So they were underwater on the property.

Tony :
So Dan, let me ask one question, right? Because I think if another investor were to see that man, these people are selling at a loss to give me this property, something like this must be the worst deal ever. So I guess, what did you see in that six unit despite those warning signs to say, this is actually a good next acquisition for us?

Daniel:
So I’ll go back to what we saw earlier, neighborhood. So it was a really good location that’s really up and coming, a lot of growth. And then also the potential that for the units were already rented. So my realtor was giving me this, Hey, you could get some income while you finished the two. And actually the fact that the price was so low, it was six units and we got it for $320,000 near the heart of Houston. And so even with a full rehab, I actually like doing the rehabs because if you do a lot of the work, you get a lot of new things, you have less maintenance issues on the backend usually. And I found that from the four unit I did. So I really wasn’t scared of it. And actually project management, budget management is something I’ve done with multimillion dollars. Looking at this project, I just thought we have a lot of leeway to play with here. And so it was still worth going forward. It did not end up as easy as it sounds, but we still made it work.

Tony :
Well, I guess let’s get into that. What were some of the challenges? I’m assuming you went through the same process, you had contractors give you bids and you had a good idea with the inspector. What was so different about this project that created maybe some of those unexpected consequences?

Daniel:
Yeah, first and foremost, we thought residential 45 days, no problem. Okay, well, you go five units and above, typically you need 60 days to close. You do 30 days of due diligence, 30 days of financing and closing. So that was a big learning. We had to get a bank, a lender that would do it, they would do the loan on their balance sheet. So when you do that, you get worse terms, 20 year amortization, higher interest rate, but you actually have to have approval from the bank. So you’re actually making a proposal, making a slide deck. They got to get approval from their board of director, not of the whole bank, but of their loan process. So it’s not as simple as, yeah, you meet the criteria, no problem. You actually got to go through it like it’s a business loan. So then after we figured that out, got the acquisition done in the property, we had termites, we had foundation repair, we replaced a full roof, the red tags, they ended up putting more red tags, putting a violation on my name, and I had to go to court for it. My contractor bankrupt during the middle of the process. My permit handler was a conman and delayed us 200 days. And then we also had a habitability inspection that’s supposed to happen once every four years and happened to happen while we were doing it and had to fix a bunch of issues. So that’s a short list of things that went on that we had to get through to figure out this project.

Ashley :
Dan, I feel like you are on the wrong show. You need to come on the segment. We do. That is a horror story episode. Happy, because that’s what I just heard from your list of things. So maybe go through a couple of those and what are some things you did to overcome all of that, and how did you have the endurance to keep going? Because a list like that, oh my God, that’s got to weigh heavy on you emotionally and just be mentally draining. So

Daniel:
The first three termites, foundation roof, I knew before going in, so I put it in the budget. So I had a plan upfront, and it was as simple as that. You hear termites and you think, oh my God. But then you find out, okay, there’s three types of termites, there’s dry wood, foremost, and subterranean. What do you got? What do you got to do? Okay, and what’s it going to cost? Like two grand? Oh, that’s not that bad. So we kind of did that for a lot of the issues and okay, fix those upfront. But then while we got into it, there was a lot of mistakes on the permitting side that really hurt us and we put too much trust in my general contractor and in the permit handler. And he said he was figuring everything out the city, but he just wasn’t getting anything done.

Daniel:
So at the end of the day, what I just had to do, sometimes you just got to step in, you got to ask the right questions, you got to push the issues, and sometimes you need to step in and coordinate and do the work. So after my contractor went bankrupt, I had to step in with the subs, with the electrician, the hvac, the plumber, the handyman, and get the work done. And when the permit handler went MIA literally to Mexico for 45 days and couldn’t reach him, I went down to the city and I said, look, I don’t know where this guy is, the permit’s under his name, what can we do? And we got it done, we figured it out. So it’s not like a simple tactical answer besides just be ready for it and be willing to just do whatever you need to do to step in and make it work.

Ashley :
Out of curiosity, was that a simple process to just transfer it in the permit into your name or another contractor?

Daniel:
No, and they actually didn’t let me do that, but because I was the owner, I could submit things and I could request inspections. So that was good enough. But this might go down a rabbit hole, but the big problem was that he had said, yeah, we’re good. Do the work, we’ll get the final approvals. Well, that wasn’t the case. And so when we went to get the final approvals, we hadn’t done any of the prior inspections, so they theoretically could have made us redo a lot of work, open up walls, redo a lot of things. So there was a lot of tact working with the inspectors, trying to be as nice as you can, as tactical as you can to just get it approved and get everything out the door so they don’t start asking more questions, make you do more work.

Ashley :
We had this situation with a code enforcement officer and we invest in a lot of small towns, and so some of them are even just part-time, not even a full-time gig. And we had one officer come out and say, you know what? You don’t even need a permit. You’re not changing the walls or whatever. But we were doing some electric work, some other things. I was just like, I just don’t feel like this is right compared to other towns. I said, we need to get this in writing. And that is our rule. Anytime we were dealing with anybody who tells us information that somebody else in that same department or that same person could tell us different later on, we always get it in writing. And it has literally helped us out with so many things, even down to countertops getting installed. We send an email saying, no, we don’t want the little backsplash piece.

Ashley :
What do they do? They deliver it. They’re trying to charge us for it. And I pull up that email from six weeks ago, like Here, no, we sent an email. And they’re like, oh yeah, sorry. That’s a fault on our side. But when you are encountering these certain circumstances, especially with the government or some kind of authority figure that maybe works in a department where there’s other people, always try and get it in writing what they are saying as to, look, I have the email, this person told me this. Okay, so Dan, you’ve overcome some of these obstacles. What was kind of the timeline of this whole project?

Daniel:
So this project, it took, we went under contract in February in 2022. So the four units that we were working on that were occupied, we had to do work there and we got all of that done, and that was rented out in September of that year. But the duplex that had all of the permit issues, we didn’t get it fully finished and signed off until about 18 months later, finished, rented out, et cetera. So it took over a year longer than it should have. And I actually at one point was almost having to file legal action against the permit handler. So I wrote up how many days he delayed us. He delayed us 200 days from, I would say at best, his incompetence at worst, his gross negligence. So one of the real estate horror stories they talk about. So this is what I call the four hardest working days of my life.

Daniel:
So we talked about permits and on the duplex we had to get the final structural sign off. Everything was done. I mean, we were there, we had utility hookup, we had electrical, we had plumbing, we had everything. We just needed the structural. So the structural contractor inspector came and said, everything looks good except the firewall. You have a duplex, you need a firewall in the middle that goes up to the attic and it goes beneath the house in the crawlspace, which sounds crazy and it is crazy, but you need an actual drywall wall beneath the house in the crawlspace to the floor. So I spent four days myself because all the contractors were done, nobody wanted to come. I spent two days in the attic in Houston in July. It was 102 degrees, the AC wasn’t on yet, and I was fire caulking every seam of drywall that there was on that firewall in eaves where six foot 3, 210 pound men should not fit. So I did that for two days, and then the next two days I spent army crawling. So just hoping to God there was no snake, no critters under there and dragging drywall behind me just so I could push it up in the middle and screw it in place to make a firewall underneath the property. And thank God he came out the next day. And of course all he did was he took two seconds, looked up, looked down, and said, yeah, you’re good to go. And that was it,

Ashley :
Dan. I got a headache listening to that of go through those couple days of just having to overcome this situation. And I have a comment of the inserting yourself into something. Sometimes it does seem to make sense to get it done faster, you just do it yourself or taking that extra action to make sure it’s done correctly rather than taking the time to hire it out. And I’ve actually found in my circumstance, but also I don’t have a lot of contracting or job skills as far as that, is that I will try to insert myself into doing something that’s supposed to be done by somebody else, and it actually delays the process even longer because I am not the person that’s supposed to do that. I’m not following the processes and procedures we have in place. I’m just thinking like, oh, I have the time. I’m just going to go and do it and get it done. And it ends up actually working out worse for me. So I’m glad that it worked out for you that you were able to grind those couple days and to overcome that situation.

Tony :
So Dan, you went from a four unit to a six unit. You started investing passively in other investors’, syndications. I guess what did maybe getting a glimpse of that larger commercial multifamily experience do for your personal real estate portfolio?

Daniel:
Yeah, so I think it’s been huge. So when I saw those four deals and then I saw the different investors and I did a lot of learning. The biggest thing, I joined a real estate group here in Houston that you’d have to pay to join, but it has mentorship and it has a lot of the network to figure out how to get started if you want to get started, and you could see how it goes. And I realized that in one deal there, I could essentially double my portfolio with what I have by myself even more. Actually, I’m buying an 80 unit deal with investors, raised $2 million with them, and this one deal will make it so that we hit our goal for financial freedom. And it’s not outlandish. My goal is to buy two more this year. And with that, we’re already then hitting our goals for even beyond just freedom, being able to thrive, if you will. So I think that was the big change. Definitely you got to have the capability and the heart to be able to do it. It’s not for everybody, but I think at least everybody could try this. At the very minimum, being passive investors is just an awesome way for people to get started as well. I think everybody should be doing that.

Tony :
Well, Dan, congratulations brother, to go from two, I’m sorry, from four to six to 80. That’s more than a 10 x jump, an answer race, $2 million in your first attempt at doing this. It’s definitely a big accomplishment. And I know we’re nearing the end of today’s episode, but it sounds like, Dan, I’m going to have to bring you back to maybe talk specifically about that first 80 unit and how you took that deal down, because I’m sure you got a lot of our rookies minds and gears kind of turning over how you made that leap.

Ashley :
Well, Dan, thank you so much for taking the time to come on the show today and to share your real estate journey, your lessons learned, and to give such great advice throughout the show. I think it was really amazing the buy box of how you put that together as a new investor and then learning about the stack method and if you’re interested in growing and scaling, how you were able to use syndications to do that, and kind of the path you took to get to being able to take down an 80 unit. And we’re really excited to have you on again some time to really deep dive into getting a 80 unit deal. If you want to learn more about Dan, we’ve linked his information into the show notes or the description if you’re watching on YouTube. Thank you guys so much for taking the time to check out our show sponsors. They make the show happen just like the rookie community does. If you’re not already part of the real estate rookie Facebook group, make sure you join so you can answer questions and you can ask questions. I’m Ashley. And he’s Tony. If you want to join us on the Real Estate Rookie podcast, you can go to biggerpockets.com/guest. Thank you for joining us, and we’ll see you guys next time.

 

https://www.youtube.com/watch?v=nhuzVQ7BpMo123??????????????????????????????????????????????????????????????????????????????????????????????????????????????

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