Phil Toth’s Multifamily Journey: From Renovations to Scalable Success

All right, Phil, you are up [applause] >> now. >> Here we go. >> There he is. >> There he is. All right, you guys all know Phil. Phil's been uh Phil's been a blast at this event. Phil, I I appreciate you being here so much. I've said this like four or five times. Phil is more or less what should happen when you make minimal mistakes. Not that he didn't make any mistakes. You're going to talk about some of them, I'm sure, but Phil made very few mistakes just kind of doing the thing, going through. Phil, I just wanted to talk and I want to hear you talk about your journey since you joined Multif Family Strategy, not as an ad for us. I just want >> as your experience from you had a goal. What was that goal? What did you do? And ultimately what I would really like to know is what why did it work for you? There are things and you had mentioned a couple in the pub last night. Hey, there's a there's a change from when I was stuck to when I was unstuck. Um, this needs to go way up. So, I'll >> I'll help you there. >> Ladies and gentlemen, the billion Oh jeez. No pressure. Um yeah, so basically my sort of journey started. I uh I yeah joined the mentorship. Problem was I I sort of sat on the fence for six months and was was just waiting waiting wasn't sure and then I finally realized like the education you're going to get is going to move you forward so much faster. And like once you make that leap to all right, I want to do the thing. um like just getting into you're going to you have to help me keep on track. I I'm going to get all sideways talking through this, but um yeah, it just it moved forward so fast that Christian Yeah, the um Yeah, hold on a minute. I gota collect my thoughts. I'm >> No, that's okay. I you here, too. >> Yeah, that this will this will help because I'm Yeah. All right. What what's a specific question you're I can answer? >> Okay. So, you joined the mentorship. >> Yeah. >> You had mentioned last night in the pub that there was a difference between when you joined there was a while where you weren't participating as much as you would have liked to. Yes. And there was a jumping off point for you. You're like, "Hey, what what was the actual change between I was at the mentorship and I was in the mentorship?" >> Yeah. Definitely the participation thing like I sat like I said I sat for six months sort of himming and hawing finally jumped in and sitting in the background sort of listening to everybody not really participating I just because I wasn't confident on the terms I didn't really understand okay we're talking about cap rates what's a cap rate type that in once I sort of got enough repetitions in um to where I started to understand the language then I felt confident presenting and then I was Oh, okay. I can do a lot better if I just get the reps in. If I get do this over and over and over. So, every week present one or two deals. And in between those sessions, I was doing on my own doing the math like four, five, six, seven deals every day just to get the reps in. And then once I sort of started to get that critical pattern recognition of like what my buy box was, um, not like, oh, this is a good deal, that might be a good deal. Like I didn't get too spread out. I was just looking at between eight and 15 units and I would look at everything in my market. Absolutely everything. Um, I think Cody, you were saying like you've looked at everything in Washington. That's what you need to do. need to be able to see what is a good deal when it comes up. Like, okay, everything is at this level, this level. Oh, this one's down here. Bam, jump on that one. And yeah, that was what really flicked the switch as far as like just the confidence to then go and make an offer. Like, oh, I've seen this before. This is a good deal. I know it's a good deal. You double checked me and yep, sure enough, off to the races. >> His first deal, I was worried that it was too good. I was like, we're missing something. And then it turns out we weren't. It was just a really good deal. And then he did it again and then he's doing it third time. >> Yeah. It keeps working. >> You told that was the deal. You said, "Don't worry about that one. I'll I'll take this one first." [laughter] >> Yeah. Don't worry. Just just put that in my funnel. [laughter] No, the uh Phil with the first deal. I know we discussed it. You know, there there's coaching around it. But >> yeah, >> for you personally, there there is a jumping off point for I believe this is a good deal and I actually go under contract for the deal. How did you at what point did you know this is the deal that I'm ready to offer on? This is the one that we're going to do. >> Oh, at before I before I ever even presented it on the Tuesday call, I was scrolling through LoopNet, [snorts] saw the property, saw the price, and was like, "That's mine. I'm gonna I'll have that." And if as I did the under well it's just I love this >> pattern recognition like yep this looks like the kind of thing that I've been looking at it's the price that is significantly below market and yep did a quick little underwrite with the rent you all I had was the rent roll and and a sort of loosey goosey T12 and I was like close enough close enough it okay we'll work out the details in due diligence but I'll go under contract based on this information then later on worked out all the details and whatnot, but like just scrolling through saw one that just hit that pattern >> and because I'd done enough reps through the mentorship and through on my own just saw that was the deal that one. >> Can you can you tell us a little bit about your first deal? Like I know some people know because they were there talking. >> Yeah. Yeah. How did you where did the money come from for the first deal and how was how did like >> how did the transaction go? Give us the give us. >> Yeah. Okay. So I started out in LA. Um I was you know just a poor broke bum sailor. Uh you know the old joke is what do you call a pro sailor without a girlfriend? Homeless. So, [laughter] the the opportunity to buy my parents house, my childhood home, um I bought that house, renovated it, sold it at exactly the right time during COVID. Um rolled all that. We my wife and I then moved to Pittsburgh in Pittsburgh, bought a house that was a third the cost. Um and then so I had some capital left over. That capital we then bought a single family. I renovated that. Now I had renovated three homes. I was really confident with contractors and, you know, electrical and mechanical stuff. Um, and then started I took about a year off because I was burned out on renovating and I started to look around at I had a a guy that I was racing with um he's got 8.2 billion in multif family and and um big big big guy out in the West Coast. And I was sitting around on a boat with no wind and I was like, "All right, I've got this guy that's an incredible business mind. Let me figure out what he's done because he's clearly got something. He's doing something right. So, let me pick his brain." And his advice was, "Yep, buy one house one year, two houses the next year, three houses the next year." And that was when I sort of started hearing your stuff. And you're like, it just multif family just extrapolates. just expands and grows and or it's scalable is the word I'm looking for. Um, and I did the math on the single family route of what he had advised. I was like, "Yeah, it looks great in 20 years, but I want to retire my wife now." Like, I I don't want to wait 20 years. I don't have 10. I don't have five. I want to do it as soon as possible. Um, so that was when the multif family side of things like, "Okay, it's just the same thing of what I've been dealing with. it's just longer roofs and more doors, not a problem. Um, and that was sort of when I got into started looking at the multif family stuff and started that journey towards multif family strategy. >> Now, the first this this first deal you did, what surprises did you get along the way doing the deal because the deal went exactly the way you thought it was with absolutely no hiccups, right? >> Uh, yeah, of course. It always goes exactly the plan, exactly on budget. Um, no. I mean, just from day one, there were issues. The the sellers were slummy, you know, just slimeballs. They were trying to sc They didn't show up to closing. Not for any reason, just cuz he wanted the the seller wanted to make me squirm. I was I was the new guy and he just wanted to stick it to me a little bit. And so that going through that developed a relationship with the broker. He came more on my side. Anyway, it that ended up feeding a lot more properties down the road just because I was the standup good guy and he wanted to work with me rather than the seller. So, that's led to the next two properties. Um, just being in and around the multif family space, other people move into your sphere and you never know who's going to come into your network. Um, but yeah, the deal went, of course, it never goes according to plan, but one of the big lessons I learned not to do wrong was just fund. Bring more money than you think you need. Don't try and pay for things out of cash flow. You know, I I brought to closing the the closing costs plus the down payment plus another 150 grand to renovate everything. I did a budget, talked to um uh construction, the whole construction industry walked through with me and gave me prices and put a budget together. Um and yeah, we we started doing the build like we went a little over. We ended up being able to add a 10th unit which really increased NOI and then on the refi took it from purchase price of 430 and and we refied for 1.3. So, pulled out 550 grand cash and that's now funding the next deal. I was able to pay off my partner on the second deal. So, I own that just myself and then I still have enough cash left over that I can buy the third deal by myself. Um, yeah. So, that that's like it just it's true what you say though. It's the more p the more pieces you have on the board, the more you stuff you can move around and it just snowballs. On the second deal, are you going to refinance that one as well and pull out more capital or is that one you love the debt product? Well, what's the strategy now that you are or you're finishing? >> I don't have to. That's the great thing. It's like I don't I'm not in a position where I have to pull out the capital to return anything to anybody. >> Yeah. >> I've already done that with the first one. So, yeah. I mean, I'm at max leverage on the first one, but it's making my life a lot easier on the next two. I can just hold on to it until I need a big influx of capital. So, if I find like this 38 unit that I'm working on Yeah. Okay, I'll leverage the second property and the third property to get to that bigger unit. >> What is your net cash flow from the first two deals? >> First two, 14 grand. >> Yeah. >> So stupid cash flow. 14 grand cash flow. >> It's so much per unit. >> Yeah. Out of 24 units. 23 units. >> Yeah. [laughter] >> It's just Yeah. >> No, this is monthly monthly cash flow. It's just such a I >> I I often think about how much debt and how much work I put in to put together about Yeah. about $50,000 a month of cash flow. >> If you extrapolate what Phil's done, it's like, oh, you're there at like a hundred doors. >> Yeah. But I mean, but it was it was 60 80 hour weeks and, you know, lots of literally digging ditches and, you know, foundations. It was a lot of work up front. Nothing's free. Um, but it's just what it what business do you want to build that suits where you are? Like my I wanted to build as big and as fast as possible. So, I'm taking a lot on my shoulders. Whereas Garrison has a hell of a lot more doors than I do. Um, but he's doing using property management. He's growing a lot faster. But that's what suits his business model. It's just build the thing that fits your where you are. You don't have to do what I'm doing because I live in the place where my units are, where I'm building my portfolio, so I can manage it. So, if I can manage it, well, self-management makes an awful lot of sense. If you can't buy in your backyard because you live in a blue state >> and you're out, you're you're relying on property management. Like, Garrison's doing it really well. He's found a good property manager and he's building around them because that's the limiting factor. Matt, >> a lot of folks here don't know the details of your first deal. Walk through the condition of the building at the start. >> Yeah. >> And then how you >> Yeah, absolutely. >> Yeah. So, my the first deal, you know, uh fortunately be the property had all like there was nine units um and we had nine leases. So when I went to the bank, it's fully occupied, but in reality, while I was under contract, two tenants, one tenant moved out organically. Another one had a heart attack and he went to hospital for multiple months. So I had two vacancies right there. And then while we were in due diligence before we closed, another two more I found, we found out that one hadn't paid for four months. So that was an eviction. And then there was another lady that was certifiably insane. and she legitimately went to mental hospital for multiple months, was a part of a program that was funding her to live out of the hospital. Like it was just a giant disaster. She called the cops on me multiple times. Um just a a whole headache. Anyway, yeah, so there was four really out of nine units, there was four vacancies, four real vacancies. Um, so we instantly went in, renovated all those four units, brought those up to uh up to fair market rent, and then I didn't raise rent on everybody else. I just waited for them to their leases to expire and said did the binder method. Um, and then because in the meantime, they had seen all the hallways improve. They'd seen the building improve, new roofs, new gutters, all the big ice dams and ice problems in the winter time were being taken care of. somebody was shoveling the the sidewalk for them, the salulting, and just things were happening. When they would call on maintenance calls, somebody would show up. Um, so they're seeing a value before you go and say, "Hey, pay me more money." Uh, hey, you now have the option to go to this brand new unit over here. It's this price or you tell me what you want to pay to stay in your unit. And invariably, they go about 75 to 100 bucks under what fair market rent is. like sweet, I don't have to spend 15 grand on your unit to renovate it. You're going to pay me 90% of fair market rent. So, did that through the whole building, spent about 250 grand um renovating a $400,000 place. All the rents went up and I noticed my clientele changed. My clientele went from we had a sex offender. He was like on Megan's list, rapist, like really bad dude. He was living there. We have a couple of drug enthusiasts that were living there. Um, when we did the 10th unit, the guy that was delivering the appliances, he was like, "Hey, 3 years ago, I got stabbed on your front doorstep." He goes, "You've done a great job with this place. It's nice. It's clean. It's neat." Like legitimately, the kid grew up down the street and got stabbed in front of my building. Um, so yeah, we're raising the neighborhood. And because of that, the neighbor across the street, he's now sticking another 300 grand into his place. So he's seeing what I'm doing. And then the neighbor next door, he's building big warehouses and improving his facilities. And they they own the entire street. So they're starting to build the infrastructure around us as well. So the whole area is going from like when I bought it, it was really slummy, really crappy. Um, and it was a Dclass property, D-class tenants. And I it's in a C area. And so I brought it up to sort of B minus. Now I've got my tenant pool is people that are young professionals. It's their, you know, they've been working for four or five years. They're making, you know, 80 80 grand to 100 grand, some somewhere in the six figure range. Young professionals that want a nice, neat, clean place to live and um that they can be proud to call home. So I now I don't have delinquencies. I don't have vacancies. I don't have calls in the middle of night. the first three months while we were I was getting calls six, seven, eight a week. I've had two calls in the last four or five months because we fixed all the problems. There aren't any problems. And our tenants are good people. They're not sitting at home sticking their, you know, fist through the wall. They're not just they have lives. They have jobs. They're they're busy. They they don't just sit at home and wreck the place. Um, so yeah, you you you just move up in the world and your a lot of your problems just go away. >> So your become easier. >> So So your first deal was a home run. Your second deal is a home run. You were saying earlier your third deal that you just went to contract looks better than the first two deals. >> Yeah. Well, it's the it's the exact same deal. It's just half price. [laughter] >> Again, it's that pattern recognition. You know, for the last I hadn't last property I bought was in November. Um, I've been I've been analyzing deals all the last what seven, eight months. I've offered I've made 14 or 15 offers in that time. Everything's been at like 900 to a million for the same my little buy box. This one was 425 asking price. I called my my agent. He brought it to me. It's offmarket. And I said, "Well, offer them 400." He goes, "Why? Just give them their asking. Like you why? You know that this is a deal. Just get it done. Okay. I always got to ask. [laughter] >> This came to you this came to you through what? >> So, yes. Okay. So, my because so it came through the first property. My agent there was the seller's agent. Um and he so he double represented. He got annoyed and pissed off with the with the um >> the seller because they're just unscrupulous. So that then led to the second property. Um he the the broker now has an office in my part of town. One of his agents is living in this apartment building and that agent said, "Oh yeah, I'm a do I'm a agent. Do you have anything for sale?" And the guy the seller said, "Yeah, I'm thinking about selling this." Well, actually our client is that guy over there. He owns this, this, and this. Would you be interested? Yes. Made the connection that way. like it's never going to hit the market. It's just I'm the only one that's ever going to look at it and sign the sign the deal. Let's do it. So, it's just you, you know, same thing with it's it's amazing who you make connections with just randomly. I was looking at buying um some washing machines for one of my units because I don't have washer and dryers in units. I have a a basement that I renovated and put a whole bunch of washers and dryers in. And I went on Facebook Marketplace and um found a couple of wash commercial washers and dryers. Turns out the guy that was selling them was just closing down his laundromat and he owns 900 units in my town. We became friends. So now like, okay, I'm Yeah, I'm getting sued by a slip and fall. Yeah, whatever. Okay. Hey, I called the best lawyer in town. No, we're not taking on any new clients. Crap. Uh, okay. Called my guy with 900 units. Who do you use for a lawyer? The guy that I just called that told me no, we're not taking on new clients. Hey, Phil's a good dude. Hook him up. Sure. What can we do for you? Like, just open that door. Like, you get access to things that nobody else you wouldn't otherwise normally. It's just you got to get once you get moving and you get pieces on the board, people start coming into your world. Why would that guy take $425,000? >> Because his rents are really low. [laughter] I'm I'm charging 1150 to 1350. His are 500. >> These people just don't know what they don't have. >> Well, they just they haven't done the they haven't done anything to improve the building. It's you know, it's probably hasn't been touched in 40 years. Um the everything's sort of run down and dilapidated. like I'm probably going to have to put 200 grand into it. Um, they're but their rents are commensurate with the quality of the building, I'm assuming. Or they're just they're just people that don't, oh no, this so and so's been in this unit for 15 years and never raised the rent on them. Their rent's been the same for the last 10 years. And well, okay, your your property is only so profitable. There go the price. Yeah. I mean, yeah, he probably could have asked 600 and I would have paid it. Wait, this isn't being recorded, is it? [laughter] >> Send it to him immediately. >> Yeah. So, the the I guess the the end of it all is like I my business model is like you like what you were saying earlier is I started out thinking backwards. Who do I want to rent to? I don't want to rent to the pain in the neck tenants that don't have any money. So, how are they going to pay you if they don't have any money? They're just going to cause you headaches and you're going to be chasing them for collections. I don't want to deal with those sort of people. Who do I want to deal with? Young professionals that are just starting out in life, good people with a, you know, providing good housing for good people. So, I identified who I wanted to rent to. And then I thought, all right, well, what are they going to want? and I built that product for them. Instead of trying to buy a product and then find somebody to sell it to, find the person you're you want as a as a client and build something for them. So, that's just sort of been my business model the whole way through. >> If you build it, they will >> they will come. >> Yeah. >> Yeah. >> And the current owner just doesn't >> he's he's a lawyer. He So, his daughter owns there's three buildings all back toback. They own the um lawyer office on the corner and then there's an apartment building attached to it and he's like, "I'm retiring. I don't want to deal with this anymore. I'm 80 and I don't want to work anymore. I want to sell this. I want to get rid of it." And he they just told me like, "Oh yeah, there's we own a whole bunch of apartments." All right. Well, guess what? Let's get a little further into this and make sure it's what I want. Like it's a it's a doable deal. Hey, would you be interested in making a deal for the whole thing? I'll take all of it off your hands. You know, once you have that relationship said it's not, this program is not get rich quick. Uh Phil, >> it's not passive. It's not passive. You're frontload. We were talking about this at lunch. Like you're frontloading all the work up front. >> Yes. Um, you know, coming from the career I had previously, like at the end of my career, like all my friends look at me and they go, I race sailboats for a living. Oh, you're in Croatia. You're in, you know, next week you're in St. Barts racing on big mega yachts. Like, oh man, you're so lucky. Lucky like hell. You didn't see the sacrifice and the hard work it takes to get to a position where like if it was easy, everybody would be doing it. But you the hard work you have to get take to get there. the sweat, the blood, the tears, the sacrifice, like not starting a family for 20 years, not having a retirement account, not having money or being able to do anything ever because you just you're always worried about the next little bit of income. Like, you're sacrificing all that stuff to get to this thing at the end. Real estate's the same way. You're gonna sacrifice and work really hard in the beginning and then everybody's going to see you at the end at retirement going, "Wow, you get to live on an island or you can be anywhere you want and you have an unlimited disposable income." Like, it's just it's delayed gratification. You going to do the hard work now or you going to stretch it out over 20 years and never eventually get there? >> That's awesome. Well, ladies and gentlemen, this is Phil. Phil's going to be back up for our Q&A. We're going to take our final break and then Phil Phil will be up for Q&A. Every all the speakers from today will be up for Q&A and then we will wrap. I will ask for just a few of you guys if you are cool with it. I would love to do an event like this again. To do so, I have to get Dylan and team actual clips of people talking about how cool the event was. If you guys are willing to give me a few testimonials like, "Hey, how did you like the event? What were your takeaways?" I'd appreciate getting a few of those with you guys if I can grab a few of you guys after the event. But right now, >> let's go to the last. Yes. question. [laughter] >> Awesome. I've learned so much and thank you for that and I would love to six months from you. So that would be super helpful. >> Before we break, can I point this out? Dylan's superpower, which is really good. If there's one thing that I got from Dylan's presentation amazingly, it wasn't even the presentation. It's the fact that Dylan, how many people did Dylan name? He came in late yesterday afternoon. Dylan's superpower, he's he's my marketing guy. He's the best sales guy I know. He remembers everyone's name. He remembers everyone's story. And he's able to put together a speech. Oh yeah, this person did this and this person did this. This person did. If you want to raise unlimited capital, that's the actual skill that you need to have. If you can do that, that is such a cool thing. So Dylan, thank you for displaying that on stage. That was very cool. Thank you for that. >> Or find a Dylan. >> Or find a Dylan. >> All right, let's break.