Sam Primm on Deals, Funding, and the Mistakes That Cost Millions

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0:00 Welcome back to Multif Family Strategy and the Owner Meeting podcast. I'm Christian, your channel host today, joined once again by Sam Prim. Good to
0:07 have you back on the podcast, man. Excited to be here, my man. Let's rock it. I am so excited to have you back. We've
0:14 had some changes to the economy since we last spoke. When we were last beginning, it was about a year ago. Multif family
0:20 was still slowing down a little bit. I think we're probably in for about another year to 18 months of pain before
0:26 it really starts turning around. But you are invested all over real estate. You're in the education space, the
0:31 single family space, the multif family space, the flipping space. You have so much business. I love your channel. I
0:38 love how much you share in the way that you teach. So, it's always a privilege to have you here. What is the business
0:43 that you have in all of your your niches of real estate? I'm curious for this. What has been the most consistent for
0:49 you in everything that you do? What is the most consistent real estate related business that you have? The most
0:56 consistent real estate related business we've had over the past five years, let's say, is probably our single family
1:01 rental space. Really, we have really good systems in place, processes, our our tenants say an average of four to five years. We have a
1:08 really good vetting process up front. Um, they don't cash flow a ton per door, right? But we have, you know, like 160
1:15 170 single family rentals. So, that seems to be the most consistent. You know, we bur them, so we buy them,
1:22 we fix them up. Maintenance is pretty low. We're probably starting to get into some more maintenance as the as the portfolio matures a little bit. But in
1:28 general, that's been the most consistent over the past five or six years. Recently, over the past 12 months, our
1:34 flipping and wholesaling business has probably been the most consistent. So, we we have multiple businesses, which is cool, but I think I need them. Maybe
1:41 it's because I suck as an operator. I need multiple businesses because they're not all going to hit, right? Education, like we talked a little bit earlier
1:47 before we went on camera, was really good for a while. That's slower. Flipping was a little bit harder. Now, it's been consistent. And then we have
1:53 the singles and the multis kind of in the background and a few other things going on. But yeah, I think right now
1:58 the one that's popping the most is our flipping and wholesaling company. It's been it's been kind of saving the bacon
2:04 for us while our other companies are kind of figuring some things out. That's awesome. Now, now single family buying that many single families, that's
2:10 a heck of a lot of transactions. One thing that I've managed to do in my business is I do about four transactions a year because I'm only multif family.
2:16 So you move forward, you know, 100 rentals or so a year. That's always been pretty good for me. How does one run the
2:22 business with that level of consistency? Because you said it was consistent single family. That's a lot of
2:28 individual pops. Do you does that work in tandem with your flipping and wholesaling business? You buy some, you
2:34 wholesale some, you flip some, or how does one do that amount of volume and have consistency?
2:40 Yeah, it's a great point. I think it's a couple things. One, we bought 42 um of
2:46 them at one time. We bought 28 of them at one time, so bigger chunks. And the other thing is, yes, that company does
2:52 we have we did 28 houses, 28 um contracts last month. We wholesale about 75% of them and then we uh you know uh
3:00 flip and buy buy and fix up about 25% of them. So the good ones we just pick off
3:06 as rentals for us. So it's kind of what you said, we just have this machine. We know how much money and spend. We have a
3:12 25 person team between marketing and contract to close and dispo and rehab
3:17 crew and operations and all of those things in that in that company. We call it our our diesel locomotive just kind
3:24 of cranks and keeps going. So we have that that is a profit center that is a good local brand and we're able to just
3:32 pick off the properties that make sense as rentals two or three a month. That's how be can be consistent because we're
3:38 buying 20 to 30 a month. We pick off those two to five a month. let's say that that makes sense and the numbers
3:43 meet our criteria and we have the crews and the funding to take them all down. So, it's kind of one of those things that's kind of in the background always
3:49 running and we're able to slowly but it adds up add to our cash flow and equity
3:55 through picking some of those off. What does it usually look like when you find an opportunity like you said 42 houses
4:00 in one shot and then you had like 20 some odd houses in one shot. That's very similar to picking up multif family,
4:06 right? You get one shot and you're like boom, tons of units. if we move forward in a huge step. How do those deals come
4:12 up versus other deals? Is it all the exact same funnel or how does one find 42 houses at the same time?
4:18 Yeah. So, I mean, we've been buying single family houses for 10 years now. So, we've only done a couple bigger
4:23 chunks. I think we did like an 11 uh 11 unit one is or 11 property one as well,
4:29 but the 42 one they usually come from like networking like you know, everybody lots of people can wholesale or flip or
4:36 do a single family rental. Not everybody can buy 42 houses, right? You need funding. You need operations. You need
4:43 rehab crews set in place. You need to be able to do that. So, there's very few people that can do that. So, the competition is less. And a hedge fund or
4:50 somebody big is not going to come in and buy 42 houses at one time. You know, they may come in, you know, buy, you
4:55 know, 100 200 unit apartment complex, but they're not going to be in the space. So, the competition is limited. So when these deals come across, people
5:02 usually end up finding us because of our brand and, you know, what we've done here locally and and we've seen some,
5:08 you know, shopped on the MLS through different people trying to sell them. But those this was offm market. This was a a guy who's been buying single family
5:16 rentals in one neighborhood for the past 30 years and he's decided to retire and
5:21 sell them all. and uh we got a wholesaler brought us the deal through him and we you know went ahead and and
5:27 did the underwriting and were able to take it down you know with the funding and and you know we rehabbed a majority
5:32 of them over a year year and a half and were able to kind of execute that whole thing. So it was just kind of a network
5:38 slashreutation slash just being able to actually do it that kind of made that one come to come to fruition.
5:43 What did the funding look like to knock that out? I imagine that was a lot of I imagine there a lot of due diligence, a lot of paperwork for all those
5:49 individual houses, but going through the whole process. What what does funding look like to close on 42 houses at the
5:55 same time? Yeah. So, it it was quite the undertaking. We're kind of crazy how we're able to get this deal done. It's
6:01 kind of a wild story. So, the the guy who we bought it from, Terry, he was, you know, he owned 42 houses in this
6:07 neighborhood of about a hundred. We owned five or six neighborhood already. So, we're like, "Yes, we love this area.
6:13 It's a little bit of a not lower class, but it's like the lower end of like a
6:18 nice area, a nice town. It was in Wville, Missouri. Really nice booming town in the suburbs of St. Louis. And
6:24 this is like the lower class area, but lower class there is still like midclass and, you know, some rougher areas. So,
6:29 it was it wasn't bad. And we knew we would like to take it down. He he brought us the deal. We talked to him.
6:35 He wanted three and a half million bucks for the 42 houses in 2020. and we tried
6:43 to get it under contract. we couldn't get the funding lined up uh to do it at the time and then COVID hit and then
6:50 like a year later he came back to us asking us if we wanted to do if we could have the funding lined up and he wanted
6:55 the same price but the houses have went up about 20% in value during that time right because that was the after the
7:01 COVID boom so we're like three and a half million for 42 houses like we need to you know 83 grand a house they're
7:08 worth 150 probably 140 150 as is like we need to figure this out so at that time
7:14 we had the business had matured a little bit. We had built some more funding relationships. So what we did to fund it was we got a uh we got a 20% down
7:22 payment from a private money lender, one lender. The bank did the other 80% and then we went to that private lender for
7:27 the rehab fund. So that's how we took it all down. It was uh we we we budgeted 500 grand for the rehabs and spent about
7:34 a million five. So, we were about a million bucks off on our rehab budget, which just couldn't we couldn't get in
7:41 and get a scope of work on every project before we bought it. We were in and out very quickly, take a picture. So, we we
7:47 really couldn't get figure out how much they needed. And it really didn't matter because um they needed way more work
7:52 than we thought, but also they appraised for like 1875 a piece after after we rehab. So, there was a few million in
7:59 equity, but it was a little bit more work than we thought to get there. Obviously, a deal of that size, first time doing something that big of that
8:05 magnitude, wasn't going to go smoothly, and it didn't. But we ended up kind of taking a little bit of a risk, not
8:10 knowing exactly how much they all needed, but we knew there's a ton of equity to be had there. It just took us a while and another million bucks to get
8:17 to that equity, but we finally got them. And that's the great thing about doing great deals is when you can go through
8:23 the project, you're like, "Oh, there's a million dollars of fluff in here and still come out profitably. You did a
8:28 darn good deal." That's making the money on the buy. Yeah. Exactly. So we it just one of those things where it was the only way
8:34 to get the deal done. That's why most people wouldn't buy it because they couldn't get in everything and do a scope of work before and we were willing
8:40 to take that risk just because we had the systems in place and we've been you know I think we've done about 2,000
8:46 wholesales and flips now in the past uh 10 11 years and we you know at that point we had enough experience we could felt like we could take it down. This is
8:53 something I found consistently when you're doing vertical integration. So you have wholesaling flipping single family multif family you have branding
8:59 you have education. You have all these companies that all help feed into each other. If I was a new investor and I'm
9:04 trying to start this, you have a lot of data. You have a lot of experience now in a decade of operations to know, hey,
9:11 I know I can take this deal down. I know what the pieces are going to be. I know that we have to buy it so we can figure it out. If I'm trying to start at the
9:18 beginning of this, I found one of the biggest messes people do is they try to copy everything you do all at once. So
9:24 someone someone can listen to this and be like, I want to do what Sam does. I want to have a wholesaling flipping. I
9:29 want to get my broker's license. I'm gonna get my uh I'm gonna hire VAS. I'm gonna hire my team. I'm gonna get my
9:34 callers, my underwriter. And you won't do anything. There's way too much to do. Unraveling the thread here. If you were
9:39 starting over, which piece of all these businesses would you build first? At what sequence would you try to put this
9:45 company together? If you were trying to rebuild it from scratch, what would the starting point be?
9:50 So, I would do similar what we did, but I I'd reverse the order. Originally
9:55 2014-15 I started investing real estate with a full-time job trying to replace my
10:01 income with rentals and that's really tough to do with the burrs when you're cash flowing 300 bucks a door and it's
10:06 not even responsible to try to live off that revenue. So I'm not very smart. So I did that for about two years just
10:12 bought as many rentals as I could with a full-time job was up to 20 or 25. I'm like there's I'm cash flowing you know
10:18 four grand a month, six grand this month, three grand this oh crap last month we did two grand because we had to replace a roof. like that's not a a
10:25 responsible way to even even if it was more to live off of rental income. So,
10:30 I wanted to quit my job and go all in on real estate because I believed in it. So, that's when I started wholesaling and flipping. I I was hard-headed like
10:37 I'm going to replace my income with rentals when in reality you need to replace your income with active income,
10:42 which is flipping and wholesaling. So, what I would tell most people to do is figure out your your your cash position,
10:48 where you're looking, and what your goals are. And figuring out how to source deals is the number one strategy
10:54 that can separate you. You can keep them as rentals. You can wholesale them without closing. You can close on them and wholesale them and wholesale them or
11:00 you can flip them. So, I would have focused on replacing my W2 income quicker because when I went full-time in
11:06 18, we required 95% of our portfolio since then. So, if I could have gone full-time in 16, how much further would
11:13 I have been, but I I should have got into the active income game first. Not even necessarily to quit my job, but
11:19 just to have that active income. So, that's something I would have done a little bit differently. Um, and then I would have I would have focused more on
11:26 there's two things you need to make this work. You need deals, you need funding. You don't need to be an expert at understanding cap rates or understanding
11:32 what you know storage facilities versus Airbnbs versus boutique hotels. You can figure out the lanes, but you need to
11:38 find deals and you need to find funding. So, I would have focused first on deal finding active income and then focused
11:45 on getting as many funding sources as I could. And that that's what I tell my community and that that's what I would tell anybody out here wanting to start
11:51 from scratch is understand the art of finding the deal and gain the skill set,
11:56 the connections to raise the funds to be able to not have funding be a reason why you can't close on a good deal.
12:02 I think you said something very profound here that I really want everyone to hear. You need to find the deals and find the funding. The deal comes first.
12:10 I've I've always looked at this like trying to sell a car or if you want to keep it even simpler, like trying to
12:15 make a deal on buying a watch or something nominal. If you have no product, you have nothing to pitch. This
12:21 is something where people always come to me and I imagine this is what most people come to Sam to. I don't have the
12:26 money to go full-time. You need the deal first. You have to have something to pitch, something to present. If you come
12:32 in with a business idea, if Sam came in with, "Hey, I have no houses. I have no money. I'm a W2. I have my income and
12:38 that's that's where I'm at." Or, "I've done my first 25 houses. I'm going to have this awesome deal come up. I want
12:45 you to invest in it. What's the cash flow?" I don't know yet, but a lot of deals kind of look like this. How much
12:50 do I need to put down? We'll find out when I find the deal. Really hard to pitch. If I was trying to buy a car, how many miles does it have on it? I don't
12:56 know yet. What does it cost? It'll be a good deal, right? It's impossible. You find the deal. Then the next thing you
13:02 do is you're like, "Okay, now we have a deal. We have something to present. I have certain amount of cash flow, a
13:08 certain amount of upside. Those are two things that I can offer anyone to invest in this deal if I don't have the money
13:13 myself." You do need both pieces. If you're looking for one, start with the
13:18 deal. Now, you can start building your business out of the deal flow. Find a way to find money. What I found for me,
13:24 I'm curious if this is the same for you. When you are finding the money for the deals, often times it's the same people
13:29 I'm networking with for deals are the ones who have the money. The tasks overlap a ton, especially on the
13:35 offmarket stuff. People with real estate, know people with real estate. That's been my experience. How are you primarily sourcing deals and capital?
13:42 Yeah, for sure. I'll I'll piggyback off what you said then get to that. Yeah, if you have a good deal,
13:47 the money will come because you'll be able to show the true numbers. And if you have a good deal and for whatever reason the money doesn't come, there's
13:54 still a monetizable aspect to that to wholesale it um and and get rid of it and still make a little bit of money. So
14:00 getting that deal first is a huge part of it because if it's a good enough deal, you'll be able to find the money.
14:05 And then as far as how we're sourcing, so depending on the asset class, you know, single families, we're sourcing through networking and through, you
14:11 know, paid advertising, direct mail, some TV, a lot of omni channel stuff, Facebook ads, those kind of things. just
14:17 general marketing and just networking with agents and other wholesalers that deal source those for our multifamilies
14:23 which I sounds like you've been doing good. You've been buying a few recently. We have not been buying. It's been probably a year and a half or two years
14:28 since we bought one. But our multif family, we've done that through relationships. Uh we we sent out mail
14:34 one time and got a decent amount of leads. That was several years ago before we really knew what we were doing. But the multifamilies we bought have come
14:39 through relationships and through, you know, multif family brokers that are, you know, bringing us their deal because they know it's in the area before they
14:46 shop to their list. So just relationship has has been the biggest way you've been able to get the multis across the table.
14:52 The multif family is interesting. That's the lane that I've I've stuck in primarily. Every time I've deviated from that, it's always bit me in the butt. Um
14:58 I have a cool hospitality project that's doing pretty well, but it's a huge distraction from the rest of my business. It doesn't I thought it
15:04 integrated better than it does. Turns out hospitality is a business that involves real estate. It's not real
15:10 estate that involves a that was a learning lesson for Christian. When you're building these though, I think
15:15 there's gonna be a lot of multif family and I'm just starting to see it. Like this is the last three months has really been the time I'm starting to see it.
15:21 Multif family's had a slowdown. I don't know if you're seeing this, but projects are taking longer. Rents aren't increasing as fast as a lot of people
15:28 thought they did. Especially the syndicators and quadruply so for the syndicators who use variable rate debt.
15:34 We're just hitting the point right now where the banks are not extending. They're out of capital. There are some
15:40 deals that are starting to hit the market. just starting to buy these now where there's been enough pain for
15:45 enough time and the interest rates aren't backing off. I think some of our multif family opportunities we're going
15:51 to start seeing are going to stem out of this slowdown and restart of multif family. Have you been seeing that in
15:56 your portfolio too for multi verse single family? Have you felt the the drag in multif family that I've been
16:02 feeling the last 18 or so months? Yeah, I think the drag has been we talked about a little bit. Our occupancy hasn't quite been where we want it to
16:08 be, which is operational and maybe somewhat environmental. And then the the
16:13 interest or the rental rates haven't gone quite where we want just because affordability. Nobody could predict all this inflation, all this insurance going
16:20 up, all this taxes going up and the squeeze on on the tenants as well as the operators. So the the rental rate has
16:27 gone up has not gone up as much as we thought and then the ancillary expenses,
16:33 property tax, insurance have gone up. So it it just it's just squeezing us on the back end. And and we're able to make it
16:39 work. It's just again, you know, rather than a three-year refinance, we're going to have to do a five, maybe six year
16:44 refinance. So, we're able to make it work because it's real estate and it's flexible and it's it's it's adaptable,
16:49 which is one of the benefits of it. But, I think you hit a great point was all these syndicators came in, they were
16:56 getting paid to put the deal together, they had money behind them through funds, connections, family offices. It
17:03 was a hot market. So, they were overspending, over buying to get that fees to get their 200 grand for putting
17:08 the deal together. And in reality, some of this money didn't do the proper underwriting or trust the syndicator too
17:14 much. And a lot of those are in big trouble right now. A lot of those people that bought those those syndicators that
17:19 bought those deals, whether it was an LP or just a syndicator brought it together. And I think a lot of those are
17:25 going to start to start to trickle out there and be deals for for people like me and you that are ready to bounce on
17:30 them. Yeah, I just got a um we just got an offer accepted yesterday for largest deal I've ever done or will have ever
17:36 done. We still have to of course close it, which is a whole another process, but 144 unit building. We're picking it
17:42 up for about a million and a half less than the syndicator bought it for four years ago.
17:47 Good for you. And then yes, that that's my point. They're all they're getting they're getting squeezed because part of it was greed and part of it was I don't
17:53 think anybody saw some of these external factors I talked about, but a lot of it was just people being greedy. Yeah. buying today ha having both of us
18:00 have gone through this hey we we were playing when real estate was just redhot
18:05 awesome for extended period of time we've also played the game through a significant slowdown a major rate
18:11 increase what guard rails are you putting on the way that you're buying deals to weather slowdowns like this is
18:18 it just longerterm debt what what is the what are the parameters that one would look like knowing what market cycles can
18:24 feel like how do you protect against that in your portfolio So, there's a couple different things. Number one,
18:29 we're extremely selective in what we buy. We've been I've seen more properties that are close to penciling
18:35 out in the past six months than I've seen in the past two years probably. So, we've been very close on a couple properties. We're just we're just not
18:42 budging. And it's probably a little bit gunshy from the few that we bought that aren't quite penciling out and are
18:47 getting extended. So, I'm if I'm buying is a deal right now. So, I know what a deal looks like now. I know that maybe
18:54 let's not run this thing at 95% occupancy. let's underwrite this thing at 92 cuz maybe that's more realistic and maybe you know uh the if we get this
19:01 that hasn't been sold in a while the property taxes are going to go up. So those types of things we're being extremely conservative with. But on the
19:07 other side of the thing of the the coin that's really kind of helped us is in 21 right before rates went up. We we did a
19:14 major uh refinance of a majority of my portfolio singles and multis were able
19:19 to get at 30 years under four at at 10ear fixed. So we got fixed for a
19:25 while. So, we're able just to really take advantage of some of that that cheap debt that was able to allow us to
19:30 to be able to, you know, cash flow more and be able to, you know, be able not have as much of a payment. And then
19:36 also, we got a decent amount of equity. We we got a few houses last year that we refinanced and pulled out some money and
19:42 we're doing another refinance. Now, we're paying off some houses to try to increase cash flow. So, when you get to
19:48 a certain point as you're looking at like how can you take advantage of your equity? You got 20 $30 million in equity. It can sit there. that's great.
19:55 But if you're able to tap into it to pay off other assets to whole line of credits on to just they're just there
20:00 it's a kind of a little bit different of a ball game. I feel like it's when you're growing you're like playing
20:06 checkers and when you get a certain amount you're playing chess and now we're like and it's good and bad. We're like trying to play 3D chess like got
20:11 all these different pieces. Look at return on equity. I never they never thought that that was the metric. It is. You have your equity. How much are you
20:17 getting return on it? So, those types of things that we're looking at as we're trying to grow and be actual professionals and and have big boy
20:23 businesses. I love it. I love it. You mentioned something earlier that I I just kind of put a pin in. You had mentioned like,
20:29 hey, uh, some of the projects took longer than we wanted to. We talked off screen a little bit. A lot of the way that you're buying this is you you'll
20:34 have a specific lender and you'll refinance and essentially uh the big boy version of the burr method where you're
20:40 going to be invest your capital, bring it in, send it back with a return. You had mentioned real estate can be
20:47 flexible and terms can be flexible. That's really interesting because I a lot of what we see on real estate is people are like, "Hey, it's liquid, it's
20:54 slow, it's rigid." You had mentioned there's a certain level of flexibility with the way that you're able to play with the deals, the contracts. When you
21:01 have a market shift like this, what sort of flexibility do you have in real estate after you purchase a property?
21:07 How do you get flexible and how do you get creative? Yeah, so a couple things. One is we when we bought those multifamilies I think we
21:14 talked last time we bought you know three multifamilies in like a 12 15month period you nothing crazy 32 unit a 29
21:21 unit 27 unit good good high quality B+ a minus asset class so some good some good
21:27 assets but we have those with a oneear twoyear threeear four year 5 year and
21:32 sixyear buyout to were able to get just it's a mathematical equation we just have to get the equity to a certain
21:38 point where we can pull it out and give it back to the the private lenders that gave us the money for the for the down
21:43 payment. So, there's some flexibility built there. We were like, "All right, this is going to be two, maybe three years, but we built in some flexibility
21:50 with it being we're on year four now. It's probably going to be year five or six before we're able to get it." So, build in some flexibility on your terms
21:57 with with who you're you're doing business with, but then some flexibility in that. All right, we want to maybe we
22:04 paid off a private lender that was on one of our apartment or one of our self-s storage facilities. We refinanced
22:09 some houses from this asset class, pulled out some cash, did a couple things with it, and then were able to
22:15 pay off the private lender the uh 200 grand that they gave us for the self-s storage facility. And now they're done
22:21 with that. They're off of it. We're not having to pay them, you know, uh uh whatever it was, 8 n% uh prep interest
22:27 on it. We're able to cash flow more by utilizing other asset classes. So that's where you can be flexible is when
22:33 there's equity there. And then also I think you can set yourself up with some flexibility on the front end with the
22:39 terms that you go go into contract with whoever you're doing business with. Mhm. And I think a lot of investors if
22:44 you if you're beginning to intermediate you've probably heard of prep equity uh especially if you're using partnerships at any point this this comes into play
22:51 from preferred returns on preferred interest. What does that look like with a private lender? So how so how we how
22:58 we've done our deals and they've all been different and probably not all none of them have been perfect but what we've
23:03 done is depending on if the deal is heavy cash flow right now heavy cash flow later we're like we're going to get
23:09 you to that 12 to 13% return on your money there's a couple different ways we can do it we can give you 5% interest
23:17 now on your on your money. So, you're going to annualize 5% return on your money. And then you want to get that 12%
23:23 when we when we pull out when we refinance and and we pull out some equity, we'll give you your money back
23:29 plus a 7% kicker annualized. It is a math formula, but it gives you that 12% annualized return.
23:34 Um, that that's that's how we look at it. And and one deal we did at 8%, you know, their interest they're getting and
23:41 then just a three or 4% kicker on the back end. So, depending on the deal, we're able to kind of be flexible with those terms. and they're private lenders
23:47 that we've done, you know, single family flips with. We've done we've done other deals with that they're just wanting to
23:53 put some of their money into long-term play and get, you know, a quarterly check. We pay them quarterly as opposed
23:58 to, you know, in and out on flips. So, that's just how we do it. You're you're the multif family expert, not me. So,
24:04 the terms and the terminology, but that's just how we approached it, the hybrid model to make it work on our end
24:09 and not have to give up a ton of or any equity or give up any ownership. It all goes through us. they're just getting
24:15 getting the return and at the end of the day in two three four five six seven years whatever it is they're going to get their annualized overall 12% return
24:23 it's very very similar actually to how I built my multif family portfolio the the only difference and it's the same it's
24:29 the same ultimately it's pretty much the same it's a different way of writing it instead of debt we brought on equity
24:35 partners with a buyout option but it looks functionally the same they have a
24:40 certain return called a preferred return that they get at the cash flow distributions of the property and there's a kicker that they get on the
24:47 buyout and a higher cash flow deal they can get higher cash flow on a higher upside deal they can get a bigger kicker
24:52 but same same they exit the deal at the end it's basically equity structured like debt the same it's functionally the
24:59 same structure that makes sense y it does they accomplish the same things the only differences that I can think of
25:04 is in debt it's an obligation verse an option which in mine it's an option with a penalty not to so maybe a little bit
25:10 more flexibility with equity on the other hand Sam gets 100% of all the benefits of being the owner, which means
25:17 if you're running a cost aggregation study, if you're getting all of this other stuff, Sam has some extra benefits
25:22 and that extra debt can have its own write-offs depending on your CPA. Won't give you guys all the tax advice there,
25:27 but Sam has some benefits for being 100% owner and has an obligation to pay
25:33 because it's a note. I have an option to pay, but I don't have all the same benefits of being 100% owner through the
25:38 life of the deal. Both of us are doing a cash out refi at the end to hit our kicker. it it functionally is a very
25:44 very very similar model to what we're doing. And the nice thing is you can do either option. So when you're building
25:51 these, this is the type these are the tidbits I love on a podcast. By the way, if you guys are like, "Hey, Christian's doing the owner meeting for me." That's
25:57 why we do this. This is these are two different very similar paths. But there is a right or better model for what you
26:03 want to do. Making the little decision of do I want to structure this as debt or equity? If I can functionally make the payments the same, how do I want to
26:11 do it on my projects and what are the advantages of both? Sam, that's awesome. Actually, that's that was one of my personal favorite takeaways from this
26:17 podcast. I'm going to go back and think on every deal I've done and kind which ones would have been better in Sam's
26:23 structure of the same payments than mine. I think there's a few. Yeah, I think it just depends on the situation. A big like you hit on it
26:29 perfectly, so obviously you're an expert in the spaces. Some of my other businesses are pretty pretty profit
26:34 driven and pretty so we're able to not pay any money in taxes. Um the last three years because of things like being
26:41 able to do a cost seg on on an apartment complex. So um having a little bit more risk like you said being you know it's
26:47 it's not we have to pay it but um I trust myself and trust the the business and and trust everything that able to I'
26:54 I'd like to not give money to an inefficient government as much as possible. So, I feel the exact same. And I've found
27:00 every time I save a couple hundred thousand on taxes, that's a couple hundred thousand that I can do buying a deal without using any partners or debt.
27:06 When I come in and and have my own money, I invest it. And when I'm out of money, we continue to invest.
27:12 Bring more people along for the ride. That is uh my favorite way to play the game.
27:18 You are an educator and I I love your content. For those who haven't followed him yet, do that immediately. Sam Faster
27:24 Freedom on Instagram. I love well structured content. You've done a great job of what I call edutainment. It is uh
27:31 it is entertaining. It is catchy. It is easy to resor absorb. My favorite thing about your content is it's easy to
27:37 remember. The way that you drop tidbits sticks in your head. So, you know, a week later, you're like, "God, I
27:42 remember that video. That's something I want to apply to my business." As an educator, I always ask this question to
27:48 everyone who educates. Is there one piece of advice, one mentor, one moment in your career that was defining? And
27:56 I'll buy you a second to think of it if you if you don't have one at the top of your head. I had one with a man named Zach Lazo. Uh he's in Seattle. He's
28:02 involved in Compass Real Estate. They they acquired his company right after I met him here. I was a broker and we sat
28:09 down and I was like, "Hey, I'm trying to figure out this active income that Sam talked about in real estate. I'm like, I'm I'm making some money buying
28:14 rentals, but I want to go full-time and I need to figure out the income piece." I sat down with him. I'm like, "What?
28:20 How do you feel about me coming to work for your brokerage?" And he's like, "It seems like you figured out deals. I don't think you should become a broker.
28:25 I think you should figure out how to monetize and build your business around the things that you are doing." And he
28:32 taught me just a couple tidbits in a 30-minute coffee meeting on don't go get
28:37 another job. There's a way to do this working for yourself. And it could be wholesaling, it could be flipping, it
28:43 could be doing deals that are so good that you can do an assignment fee or an acquisition fee buying it in your own
28:49 LLC. There's so many ways to monetize buying. But that moment where he said,
28:54 you can't you do enough volume and you have enough access to deals. You don't need to work for anyone. Figure out how
28:59 to build an active job in your passive business. That changed my life. That was a piece of advice I got early that I
29:07 wish I got eight years before when I was trying to save up for real estate. Sam, was there was there a pivotal moment, a
29:12 meeting over coffee, a phone call with a mentor? Was there was there one thing that was like, "Wow, this happened and
29:18 it changed the whole trajectory of my business." Yeah, great question. And there was a um
29:23 a moment, it's it's a different angle, but it was a it was a pivotal moment for sure. Uh everything I do is with a
29:30 business partner, his name is Lucas. We own everything 50/50. No outside partners, none of that. Just it's just
29:35 me and him. All of our businesses, he operates a few, I operate a few, we divide and conquer. I haven't been to a
29:40 flipping meeting in two years. He hasn't been to an education meeting in two years. So, we're able to each grow our
29:45 own businesses, have our own identity, our own many cultures within the within the the the bigger culture that we've
29:50 been able to build. But right as we got the ball rolling. So we started in 145 15 time frame. You know by by end of 16
29:59 we had probably 35 40 rentals maybe. Started looking at flipping and
30:04 wholesaling. Um we're we're doing some pretty cool things especially never thinking I would do this. I always thought I'd be a W2 employee my whole
30:11 life like you know a lot of people are taught. So there was a point where Luke and I like I think we want to do something really cool with this. Do we
30:18 do this on our own? build it on our own and start to to look for people or do we
30:24 go with our network? Do we hire and and bring on team members that are our friends, our family? Everybody says
30:31 don't mix friends and family with business. Should we do that or should we bring up the people we love the most
30:37 because we think we're going someplace cool? And we decided to do the latter. We decided to bring our our friends and
30:42 our family with us and it was a huge moment for us because we just tapped on our network. Now, it's created a few
30:49 interesting situations, but overall, our culture is so amazing because 22 of our
30:55 55 employees, people I went to high school with, kindergarten with, guys, I got in bar fights with in college, like
31:01 the the the the loyalty is is there and it's palpable and everybody coming in
31:07 through our hiring process, we don't know, is able to be indoctrinated pretty quick with it cuz yeah, my friend
31:13 Andrew's kind of an idiot, but guess what? He would run through a wall with me because I've known since we were six. So that was a very pivotable moment for
31:18 us, not really knowing. We're like, "Yeah, let's do with our friends and family. We thought about a little bit, but not knowing the potential repercussions of that." And we've had
31:25 really good friends that just had it worked out and we've done it the right way and and you know, either moved positions in the company or just, you
31:32 know, helped them find a new job and not fired them around the spot because they weren't performing. So, it's created a
31:37 couple different obstacles, but overall, I feel like we're 10 times further further along than we would be trying to
31:43 grow 50 employees that we didn't know from Adam before we hired. Oh, that is that is a good piece of
31:49 advice. It's fun how these things start to scale. Like you get this lesson, you learn the skill, it's like, wow, look at
31:54 what my company became today because of that. Mhm. On the flip side, found it's always
32:00 easier to save people money by making mistakes for them as opposed to uh as opposed to all the cool things that we
32:05 do, right? Which you should absolutely replicate. What are the things that went wrong? Is there a decision you made in
32:11 the last 10 years that you can share? I have like 10 that I can share and one that I legally can't share. But the is
32:17 there a decision that you made that was really costly? It could be emotional. It
32:23 could be a loss of time. It could be just a straight up this decision cost me $2 million. Was there a decision that
32:29 you would make in your b that you made in your business that you could go back in time that you would definitely make differently and what was that uh what
32:34 was that decision? Yeah, there's two that come to mind that were like bigger decisions. So, one of them was our education company to not
32:42 give too much details that people may or may not care about. We were doing really well there for a couple years. We had an outsourced sales company that was um
32:49 selling the coaching program. We were selling 50 to 100 a month and and the price was uh at the time was 5 to seven
32:56 grand. So you can do the math. It was a very very profitable business. Very lucrative. We we were we were doing really good.
33:02 The sales team was selling a lot and we were you know starting to see some
33:08 cracks of hey they're overpromising. They're not you know part of our culture. They're outsourced. They're doing everything they can to get a sale.
33:14 So we to protect the brand we let them go and try to start an in-house sales team. And that cost a little over a
33:21 million bucks because we went from netting a few hundred grand a month to
33:27 having expenses, having marketing, we still having to pay the sales team on their things that they, you know, just
33:33 we fired them. We had to pay them for the uh the the money that they're bringing in to losing a few hundred grand a month for a few months in a row
33:40 and not even including the upside. So it cost us between one and one and a half million bucks a snap decision, not
33:46 either talking to them to say quit it out or stop it or hiring a team on the side and slowly feeding them leads and
33:53 then doing the doing the firing. So that was definitely something that kind of derailed the education business. And
33:58 we're doing better now, but honestly it it the market's down a little bit, but we haven't fully recovered from that.
34:04 And the other decision that I made that probably wouldn't have made was um this was back in 21 22 23 like I'm sure it
34:12 was similar to you when it was redot. I feel like everything seemed like everything I did was like working out and I was like man I'm a hell of an
34:18 entrepreneur right I buy amazing everything works I buy this it goes up in value I buy this 12-unit apartment for 680 grand get
34:25 a down lend private lender down payment two and a half years later it's worth 1.2 2 million and it had doubled in
34:31 value and I I'm so good and it appraised for that and I paid them back and the the multifamilies were rolling in. So we
34:38 got sent a uh a boutique hotel like a 20 unit hotel down in Branson, Missouri,
34:44 which is like a little resort town in the Midwest. It's actually not that little. It's pretty good size. And it's
34:49 about four four or five hours from our office. Everything we own is within an hour of our office. But we're like,
34:54 "Hey, we're invincible, right? Everything we do works. Let's go ahead and buy this.
35:00 We can buy it for 850 grand. It appraised for ASIS for 1.9. So, let's go do this thing. There's so much in this
35:07 deal. We want our team to look at it with us. Let's just take a private jet down there because it'll save us time.
35:13 Fly down there on the jet. Fly back on the jet back in the day. So, we did that. Went and looked at it. Got pitched
35:18 from the contractors because it needed to work. Um got uh pitched from property management companies. We met with two or
35:24 three contractors, two or three property management companies. We went down there like, "All right, let's do this deal." We did it, raised the funds, bought the
35:30 property. I mean, in general, Airbnbs, um, you know, we run an Airbnb, the boutique
35:36 hotel is just, you know, nightly or or, you know, a couple days or or a week. Um, it's in a really good spot, really
35:41 good location, right south of Silver Dollar City, but that thing has yet to perform. We were banking on 80%
35:47 occupancy. In the summer, we're getting 50. And and that thing in the winter when it's not rents bleeds about 20
35:52 grand a month. In the summer when it is renting, we're making a little bit of money. But overall, I would guess we're
35:58 cash flow negative like maybe 250 300 grand in the past probably 18 24 months
36:03 on that thing. We got a new company taking over trying to kind of um cobble it together and just exit and I'll exit
36:10 losing two 300 grand just to get out of the damn thing so I don't lose 20 grand a month on it. So that was just something to where it's like you talked
36:16 a little bit, it's a hospitality business. We're not hospitality experts. We're incredible at single families.
36:22 We're okay at multifamilies. self storage decent, but uh this Airbnb hospitality thing we suck at and it's
36:28 four hours away. So, I think it was just some ego built into it, some timing built into it and then just honestly not
36:34 the best property managers to try to get that thing filled. So, it was it looked like it was going to net us 50 grand a month and we're losing, you know, 20
36:40 grand a month on it. So, that's an inaccurate underwriting if I've ever seen one. If it makes you feel any
36:46 better, I did the same thing, but I spent $4.5 million on mine. I feel great now. I better make you feel
36:52 better. I don't want you to screw up too if you make it. Now I like you. I I
36:57 believe that it is fixable. It the mistake that we made and this is this is actually I want to build on this lesson.
37:02 This is not Christian's podcast. This is Sam's podcast for today. But this story is so valuable. This I have three
37:09 property neighbors who have similar resorts that are doing quite well. There is a way to do this thing excellently. I
37:15 built it with a completely multif family team because same exact reason. We're
37:21 good at multif family. We did good in our property management company. Everything is good. We're good at real estate. It's not real estate. It's not
37:28 multif family. It is a business with employees and overhead. What happened? I had four partners. Three of them ditched
37:35 me. One of them asked to be bought out, which we said no because it's not performing. You can sign over your
37:42 equity, which in retrospect, I should just let him keep it. Uh, I had one partner who was going to live on site
37:48 who decided not to live on site shortly after we closed and it ended up uh, mine was an hour and a half from my house.
37:54 Then I moved to Dallas, Texas. Now it's uh, I don't know how many miles that is, like 1,500 miles. That's the best guess.
38:00 It's a long commute to get there. I hired a manager who owned a bunch of
38:06 boutique hotels that run really well in Dallas. They lost us Airbnb Superhost almost instantly. They screwed up our
38:11 booking site and somehow I don't know how they did this. They got our phone number deactivated and we lost our phone
38:17 number. So I had to like we get calls whoever bought that phone number text us sometimes like we're still getting calls
38:23 for people who want to book. Lost the whole lead. It was a disaster. I finally three years later built the team and the
38:30 employees and the staff where it's finally ripping money. There you go. Well, that's good. I probably threw a million five into it
38:36 to get it to finally start working. That is expensive. If you buy for $4.5 million to toss an extra million5, we
38:44 call that the super stupid tax. It works now. The cost to get it to work was so much time, money, stress. I could have
38:52 just bought another 500 multif family units in the same time that I took all that time and energy into a business
38:58 that wasn't mine. That is uh it feels good to have one other person who's felt the same pain. Oh, yeah. Well, I'm two years ago. I I
39:06 have one for you. Yeah. Mine's not turned around yet. So you're you're you're ahead of me. Well, I I I I I paid a hefty fee to to
39:13 be ahead. Uh good news. Um with hospitality, that's the only thing that I like about hospitality. With the right
39:20 marketing plan, you can outperform. Uh in multif family and in single family,
39:25 it is ridiculously hard to outperform your stupidity. If you buy something with the wrong structure,
39:31 there's only so much you can do to beat your competition. You you really do have a price constraint with what the market
39:37 does. in hospitality, you can at least make a marketing plan to where you can outperform the other guy.
39:43 Yep, that's a good point. There is hope. At least you're in a business that has hope. If the same thing happened on a multif family deal,
39:49 you're much more cooked. Yes, that's for sure. And luckily, we have these other businesses to rely on
39:54 as we're as we're bleeding cash out of one. So, is the is the moral of the story here I don't think it's don't do
40:01 boutique hotels because a lot of people make a ton of money in boutique hotels. I I think the moral of the story is realize what your company is and stay in
40:07 your lane. Every other business you have and every other business I have, they all build directly on each other.
40:14 The wholesaling doesn't help the resort other than you make money and it can be tossed at the resort. The multif family
40:20 doesn't help a resort. Your operating teams and your property management there. If we both didn't buy boutique hotel when we are single and multif
40:26 family operators, flippers, wholesalers, don't buy a piece that doesn't fit into
40:31 your business because it's cool. Because boutique hotels are sexy and it's exciting and you're like, "Hey,
40:36 taking a jet to see it's even cooler. Take taking a five hour drive into a 30-minute flight. It's even cooler." But
40:42 yeah, it wasn't good. I have a major question on this and I if everyone else listening thought the same thing. What does it cost to take a
40:49 private jet from where you're at to the property and back? What What was the What was the PJ?
40:56 Wow. That's actually not as bad as I thought it could be. No, I mean it's a it's a so it was a 30-minute flight each
41:02 way. We had we had seven team members with us, our contractors, people they needed to look at the we brought a
41:07 roofer with us was going to do it and we're like all eight of us the revenue we can create highle people in our
41:13 companies. We drive down there and we're going to be have to get a hotel be away from our family be out of the office two
41:18 days as opposed to just there and back in one day like that's how we how we looked at was like you know financially
41:25 honestly could make some sense. So, and it wasn't, you know, it wasn't we were spending 50 grand. It was it was it was a quick there and back. So, that's
41:30 that's that that's partly reason why we did it. It wasn't obnoxiously expensive. Kind of fun, though. It was It was pretty cool. I've been on
41:36 private jet of my back in the corporate job. I flew in quite a few, done a couple of them. They're they're pretty fun. Uh there's a whole another world of
41:43 of wealth when you can just take private jets everywhere. And the flexibility and the independence and the time savings of
41:49 that is is wild. So, that that's the goal is to be able to just take a private jet a few times a month going
41:55 somewhere. It' be pretty cool. That's one of the things where you know that you're talking to someone who's legitimate in the uh in the business
42:00 though when the uh when the private jet is not the punchline. That is just the uh that is just the vehicle of hey we got the jet we went down.
42:07 Yeah. That's really cool. That's really cool. It's fun to have a business that's in a place where like this actually makes financial sense to do that that I feel
42:13 like that's when you it's a good benchmark for you're like hey my company is doing well where the time savings are financially a
42:20 smart idea to take a jet with my team down to the that's really fun. That's a that's a fun goal for I think a lot of
42:26 people to aspire to is let's get to that level where it is financially the most responsible decision.
42:32 Yep. Seeing the faces of the team who had never been on one, which again I've been on a few, but yeah, it was pretty fun. No, that's awesome. That's awesome.
42:39 Well, Sam, I appreciate your time immensely. Sam is a fantastic investor from everything I can see, a fantastic
42:46 educator. He no longer has an outsourced sales team. He does this in house at
42:52 apparently massive seven figure uh cost to himself to improve the quality of the product. So if you're listening this to
42:58 right right now and you're thinking about checking it out, all we know is that he's he's made a decision that lost
43:04 a million dollars to improve the quality of his company. I'm going to say it's probably pretty darn good. And if all
43:09 the cool things he teaches online are similar to what you learn there, I think it's worth checking out. And Sam, where
43:15 do people find your education company so we can get your million dollars back? Let's get everyone over here. Where do they find you?
43:20 Yeah, I appreciate. Yes, fasterfreedom.com. And and the best place to go is just to shoot me a message on Instagram. Some days are
43:27 super active in the DM, some aren't. I'm I'm in the DMs, um, as you know, and I have I have a team that helps me out
43:32 sometimes in there, but they'll never pretend to be me. I'm very active in the DM. So, shoot me a message on Instagram is the best way to get a hold of me and
43:38 go to fasterfree.com just to learn a little bit more. Awesome. Perfect. We will link those both below. Sam, thank you for joining
43:43 the channel. Everyone else, this is the owner meeting. We're bringing the owners to you. You're busy on your 9 to5. You're driving the car. I built my
43:50 entire business as almost everyone does by meeting the people who have done the thing that you want to do. If you don't
43:55 have the time to do it, check it out here at the owner meeting podcast by multif family strategy. We'll see you on the next episode.