S3E2 – Jennings Smith – How to invest in real estate with $0

Key Timecodes

• (00:40) – Show intro and background history
• (03:59) – Deeper into his background history and business model
• (07:44) – Some numbers to understand better his business model
• (13:30) – Where does he find investors to fund the business?
• (17:38) – His business strategies
• (20:06) – What are his property earnings and payback time?
• (22:21) – What are the hot areas to get 100% occupancy
• (26:11) – What specific renovations and upgrades does he do to properties?
• (29:12) – How much these improvements allow him to increase the sale price of properties
• (31:54) – What is his biggest tip for anyone willing to run this type of business?
• (33:25) – The importance of promoting yourself as a business and building a brand
• (37:05) – How to communicate the right message to the audience
• (40:51) – What is the worst business or investment advice he ever received?
• (42:15) – What is the best advice he ever received?
• (43:39) – Guest contacts

Transcription

[00:00:04.090] – Sean

Hey, this is Sean Tepper, the host of Payback Time and Approachable and transparent podcast on business investing in finance. I’d like to bring on guests to hear authentic stories while giving you actionable takeaways you can use today. Let’s go. Do you want to generate passive income with real estate but don’t have any money to invest? Not to worry. My next guest uses a comment strategy of partnering with investors. In this episode, we talk about where to find investors, how to build an audience of investors, how to structure deals, and small improvements you can make to double the property value. Please welcome Jennings Smith. Jennings, welcome to the show.  

[00:00:41.820] – Jennings

What’s up, Sean? Thanks for having me. Sure.  

[00:00:44.140] – Sean

Glad to have you here. So why don’t you kick us off and tell us about your background?  

[00:00:48.250] – Jennings

Got you. Yes. So real estate investor, that’s my full time job. Also teach people how to buy their first apartment complex. There’s a big market of people that have got some rental homes, but they want to do something bigger. So we show people how to buy their first apartment. But I was a contractor, actually for 15 years and doing custom homes, bathrooms, kitchens, and started my own business right out of college doing that. And after a while, you just got really pretty sick of the ups and downs, like, cycles of construction and then also being beholden to clients. Right. You really have to keep that client happy, and you’re working for very few people at one time. And I just felt like they had a lot of power over my autonomy. And so even though I had my own business, I just kind of felt trapped by that business. And construction is a hard gig, especially in the, you know, 1 million to 3 million a year revenue. It’s, you know, very up and down. And so I recognized in the in the last recession, back in 2008, that I needed to make a change because, I mean, I went from making six figures plus right out of college to literally my company losing 50 grand a year.  

[00:02:02.870] – Jennings

I owe the IRS money. I’m working all day, going to Home Depot, buying those brass little peep sites and going door to door knocking, saying, hey, I can install this for $20 right now. And if I knocked enough doors, I could install four or five of those at the end of the day and make an extra $100, which I needed to. And so very humbling time, but it put metal in my backbone. It’s like, okay, no matter what, I’m going to make it. I’m going to figure out how to make money and get through this. But I don’t want to be here again if I don’t have to. And so as I dug my way out of that, I decided I’m going to do rentals. I saw my dad. He had a couple of rental homes, and he had done well with them. He said it’s a good way to save money every month, the tenants paying your rent and paying your mortgage down. And so I didn’t have much money, so I bought a $5,000 double wide trailer and that was my first deal. So bought that, it had no heat, no flooring. I fixed it up and I moved somebody in there, but I didn’t vet them.  

[00:03:05.290] – Jennings

I didn’t do any background check. I didn’t even check if they had a job. I don’t think. I was so excited that somebody was willing to rent my property. And of course, three months later, dogs have destroyed the property, he’s not paying. I finally got him out and I almost quit at that point. I was like, this real estate sucks, this is not for me. But I persevered and I fixed it up again, ended up just selling that one, breaking even. But I bought another trailer for $7,000 and rented it for $700 and pretty good multiple. Yeah, I made money with that one and a year later I bought a rental home, kept buying a few trailers here and there and eventually got two rental homes and four or five trailers and I had a vision. Now, okay, I can make money with this, but this is going to take forever because I wanted to have 1000 units and so I knew that I had to do something different, but that’s how I started.  

[00:03:59.180] – Sean

Right on. And I love your motivation there to transition from working for money and flipping the equation. So money is working for you. We’re all about that on this podcast. So I love your journey there. You said your first property was double wide or was that a single yeah.  

[00:04:16.260] – Jennings

It was a double wide trailer. Pretty run down.  

[00:04:20.180] – Sean

Yeah, no, it’s like okay, what I was thinking of is like Walter White’s type character. We’re going to be cooking masks. We’ve got no background checking this person. We don’t know what they’ve done, but they can fog a mirror. So we’re going to get you into this place.  

[00:04:36.150] – Jennings

The quality of this tenant was pretty, I would say less than Walter White, but yeah, it was not great. But that did get me started. And when I talk to people and they’re like, oh, I want to buy a 200 unit apartment complex, or I want to take down, I want to buy a $10 million business, I mean, that’s fine, that’s great. And if you can do that, awesome. But if you have opportunity in front of you that you can do, like if you haven’t done anything and you can take down a trailer or you can take down a single family home or you can buy the little gutter business and rehab it, turn around, do it. If you can start straightening stocks with 510 grand, do it, because that’s going to build momentum into bigger things. And if I hadn’t done the trailers, I wouldn’t have recognized that this isn’t where I want to be forever, right? Because Single Family, I’ll tell you, if you just want to own 510 rental properties, amass million, $2 million and a little bit of cash flow, maybe five to ten grand a month, you can do that with some rental homes.  

[00:05:39.920] – Jennings

But if you want to own 1000 units and you want to be getting six figures a month in cash flow, and you want to be building net worth in the tens of millions of dollars, like, Single Family, I don’t think is the best vehicle to do that. And that’s where I decided to start studying, okay, how do I do bigger deals? How do I do? Multifamily. So I bought an online course, like a little education course for $1,000, and studied that and finally found a twelve unit complex to buy and took that down. I asked the owner to sell or finance me, and he gave me 70% seller financing, but I still needed the $90,000 down payment. So I put together a little pitch deck, met with a couple of investors, finally got somebody to agree to the deal. They gave me the money, we closed the deal. And the cool thing about that was I realized, wow, I bought this with no credit. I bought this with none of my own money, and I owned 60% of this deal. I own 60% of this apartment complex. It’s cash flowing a couple of grand a quarter.  

[00:06:41.930] – Jennings

So I’m making now $1,500 a quarter. And 18 months later, we sold it for $410,000 because we did a value add. We raised the net operating income and I netted 90 grand. Investor made 60 grand. And I was like, holy cow, this works. And I can do this as many times as I want. There’s no limit with most things. Like, you have to have capital, right? You have to have capital to buy a business or to reinvest in your business or to invest in stocks or whatever. But with real estate, you can use other people’s money or you can use creative financing or seller financing, and you can get it started with no money. And there’s no limit to how big you can grow it. And we took it from zero units to 1000 apartment units and 500 self storage units in three and a half years. $60 million portfolio. There’s no way I could have done that. Saving up down payments and buying it like I was with the trailers and the single family home. And that’s why I get really excited about buying real estate, because there’s just no limit to what you can do with it.  

[00:07:40.950] – Jennings

It doesn’t take that long once you understand how to get it going.  

[00:07:44.720] – Sean

Let’s really dive into the nuts and bolts and some of the numbers here because our audience loves to walk away from this podcast with like, all right, I’m armed with the information. I can go do this today. They love that. So let’s break down. Did you say that was a twelve unit or a ten unit?  

[00:08:00.660] – Jennings

It was twelve units.  

[00:08:01.830] – Sean

Twelve units.  

[00:08:02.500] – Jennings

Okay.  

[00:08:02.860] – Sean

And it’s a seller finance. Is that so?  

[00:08:06.510] – Jennings

They had it listed on there are websites out there, so you can look on LoopNet or Crexy, C-R-E Xi that have these apartments listed. And I’ll be honest, a lot of the times those are not great deals that are publicly listed, but occasionally there are. And the reason why this wasn’t wasn’t selling was because it was in a small market out in the middle of nowhere in North Carolina, and it was losing money. It was being poorly managed, and the financials showed that, hey, it can’t even service the debt on it. So people weren’t chomping at the bit to buy this property, and they wanted $240,000. But when I went out and looked at it, it was in good shape. It’s clean, it’s tidy. It needed a new roof, but it wasn’t leaky, but it was old roof, and the tenant base was it full, and it was kind of older tenants and quiet place, nice place. And so I went to the seller and said, I love the property, the price is fine, but I can’t get a bank to loan on this because your financials are not good, and will you be willing to loan me the money?  

[00:09:06.910] – Jennings

And he was an older guy. He had a bunch of property and knew the game. And so he’s like, if you put down 30%, I’ll loan you the other 70% for five years, but you got to pay me off within five years. You got to refinance it or sell it again in five years. But I’ll give you a chance to get just the financial stabilized, and then I can refinance it and hold it, or I can sell it. And so once he agreed to that, now I don’t have to deal with a bank. I don’t have to deal with appraisers, I don’t have to deal with people digging through my financials. Can I get the loan? Will they like the building on and on, all that’s eliminated with seller financing, where the seller is essentially the bank. But you still have the problem of the 30% down, right? Exactly $90,000. And if I default, then the seller just keeps that money, and he’ll resell the building to somebody else so he doesn’t have a lot of risk. So I had to come up with that down payment. And that’s where I creatively said, okay, I’ve got people that have problems.  

[00:10:02.030] – Jennings

There’s people out there that have a lot of cash, and they don’t know what to do with it. There’s entrepreneurs, there’s business guys and girls that are just they’re really good at generating income, but they’re not good at preserving wealth, growing wealth, putting it in safe assets. And I think real estate is probably the one of the safest assets in the world to park your money. And so when you connect with people that are thinking like that, it’s really not that hard of a sell. You show them, hey, if we put this in here, you put your money in this deal, then you can pay them a preferred return. Like, you can say you get the first 89% of the profits out of the deal on your money and then we’ll split the rest. Or you can just do a straight up split, 50 50 70, however you want to structure it. In this deal, I structured 60 40, so I got 60%, the investor got 40%. And he did push back on that and said, well, why do you get more than me? I’m bringing the money.  

[00:10:56.900] – Sean

Yeah, I was going to ask that.  

[00:10:58.820] – Jennings

And that’s where I could have folded. I could have said, well, yeah, you’re right, we can do 60 40 your way. But I knew I had a great deal. I knew I had a diamond in the rough, and I knew that if I just tweaked a couple of things, I could make this property very profitable and it would be a home run deal. And I said, Listen, the problem in the market we have today is finding a good deal. It’s not money. Money is everywhere. If you don’t want to do this deal, that’s fine, I’ll find somebody that does. But I have a great deal here and so it’s worth it. Plus I’m going to do all the work. I’m signing on the loan, I’m getting the debt, I’m on the hook. And so kind of it is what it is. Take it or leave it if you want the deal or not. And he backed off. He’s like, okay, that’s fine, that’s fine. I think he was just sort of pushing me, test me. And I get that. I’m a negotiator too, of course, but he did agree to that. And then when we ended up selling it, he put in $90,000 and made $60,000.  

[00:11:53.250] – Jennings

So he made like a 30 something percent return over 18 months per year, 32% per year. So he made out great and he was very happy with the deal. But yeah, when you buy a property like that, there’s got to be a value add component. So I think it is the best way to go about it. So in this case, it was under market rent a little bit, and they weren’t charging the tenants for the utilities, so they were paying for the water and it was just costing them a fortune. Plus they were paying for a dumpster and they were paying the city for trash service, so they were double paying for their trash. And they didn’t realize this. Like, I uncovered this in the due diligence. And so I got rid of the dumpsters. I got everybody trash cans. I instituted a utility bill back system, and I think I raised rents like $20. And between all, just those three things I forced the value of the building up by $160,000.  

[00:12:48.120] – Sean

Wow.  

[00:12:48.540] – Jennings

And so that’s the cool thing about commercial real estate or apartments or self storage or whatever, versus single family is it’s a business like, how much money does this business make? And if you can make that business make more money, then it’s worth more. With a single family home, it’s like, well, what’s the neighbor’s house worth? What’s the neighborhood worth? What’s the area worth? Like, there’s only so much you can do. Whereas with commercial, it’s like, oh, well, we added a laundry room. We implemented a pet fee. It was under market rent by $100, and we raised rents, and now we increased the net operating income by 100 grand. Well, you just increased the value of that building by one to $2 million, depending on the cap rate of that market.  

[00:13:30.790] – Sean

Sure. There’s a few things I want to just dive into. One is, how does somebody find investors like that? Where did you go to find this individual to help you?  

[00:13:40.840] – Jennings

Awesome question. And I think that most people stop because they think, I’m not even going to look for a deal because even if I found a good deal, I don’t have the down payment. Right. $100,000 down payment is small for commercial. A lot of our down payments are in the millions, and it’s so daunting that they don’t try. And so in this instance, I would say you could go two ways. One, you could look for a partner who is willing to raise the money for your deal. Right. If you find a great deal, like I said, those are few and far between. And there’s going to be people that are willing to partner with you to bring capital, maybe their own capital, maybe they’ll raise the money for you. Or secondly, you can raise your own money. And I encourage people to start with, like just start with friends and family and go through your phone, go through your phone, go through your social media, go through your contacts, your email list, and just jot down, like, anyone you think would be remotely interested in real estate investing that might have, like, 50 to 100 grand of investment money.  

[00:14:44.430] – Jennings

Don’t ask your broke brother in law. That’s just scraping by. But, hey, this is my family doctor. This is the guy that owns the plumbing contractor in my town. And he always has a nice truck. He’s probably got some money laying around to invest and then broaching the subject with those people. I think a lot of times people are really nervous about doing that, and that’s where the rubber meets the road, where this is not something that you’re going to be able to do in the privacy of your bedroom with nobody knowing what you’re doing. So you have to put yourself out there. And that can be uncomfortable for people because it’s like, I don’t want to tell people, what if it doesn’t work out? What if I’m just trying this and I flake out and that’s fine? This business may not be for you, but if you can unlock how to raise capital, all of a sudden you can build as larger portfolio as you want in a very short period of time. And having those conversations is not as difficult as you might imagine if you approach it the right way. And I always just say, everyone you’re talking to, like, let’s say you’re at the cocktail party or whatever, at the Christmas party, somebody asks you, well, what do you do?  

[00:15:48.620] – Jennings

Well, instead of saying, Well, I work down at the bank, or whatever you do start talking about this. Well, yeah, I work at the bank, but I also I put together real estate deals. You know, we pull people together, we buy larger apartment deals. You know, we shoot for, like, ten to 15% returns or 15, 20% returns. And that’s kind of my ideal. And if they’re like, oh, cool. And they don’t engage and they’re just like, whatever, fine, that’s the end of it. But they say, oh, that’s interesting. Tell me more. And then you talk about it, and you talk about how I like to throw in there like a minimum. We take $50,000, $100,000 vessels, because you don’t want to be meeting with people that only have four or five grand to invest. It’s just not worth the time. But you would be surprised who has money, and you’d also be surprised who invest in one deal, will invest in two, three, 4510 deals in a row with you. Like, they have a lot of capital once they build up trust with you. And so if they express interest like that, you can say, well, I’m always looking for people to connect with.  

[00:16:49.030] – Jennings

Do you know of anybody that would be interested in something like that? And that’s a cool way to phrase it, because you’re not asking them directly. Like, are you interested? Do you want to give me money? Do you want to invest? You’re asking, hey, can you help me out? Do you know anybody that’s interested in this kind of thing? I’m always looking to deepen my investor base, and they’re either going to say, no, I don’t know anybody, or they’re going to say, well, I know my brother in law, he loves real estate. Or they’re going to say, Well, I might be interested. And if they’re interested, that’s where you got to have self control and don’t rev up the chainsaw and corner them in the party and talk to them. Real estate all night. You say, okay, cool, let me get your number and we’ll set up something and we’ll talk, right? You got to be cool.  

[00:17:28.350] – Sean

I can tell you’re a Southern boy. I love that. Rev up the chainsaw.  

[00:17:33.470] – Jennings

Well, let me tell you about Volta failure.  

[00:17:36.930] – Sean

Here we go, baby. I love that. That’s a good strategy to talk to your network and maybe just the people just outside your network and have those casual conversations. And just to reiterate here, you actually didn’t put any money down. It was almost like you structured the deal as I need the money from an investor. But you’re the project manager. You do all the heavy lifting and the coordinating and the phone calling and all that. That’s where your value comes in, correct?  

[00:18:03.660] – Jennings

That’s right. We’re not necessarily property managing it. I have hired a property manager on all my deals, but we’re the asset manager. So yes, we’re doing the due diligence, we’re getting the loans or negotiating the seller financing and we’re running the deal. So if they’re putting the money and they are truly a passive investor, they’re not having to do anything.  

[00:18:26.370] – Sean

Yes.  

[00:18:27.140] – Jennings

And so once you have the meeting set, then you can go and meet with them and just talk to how you structure deals. And even then, I wouldn’t be putting a deal in front of them. You’re just planning to see it like, this is potentially how it would look. And having that conversation around, what are they looking for? Like, do they even like real estate? Are they looking for safety? Are they looking for cash flow? Are they looking for tax incentives? Like, what’s their motivation? And then you can craft your pitch around what they’re looking for. And then still, I don’t have anything right now, but I’ll put you on the list. And when we do, I’ll put it in front of you and if you like it is this something that if you like the deal you’d want to do and that you can do, you have 50 grand, 100 grand to put? If they say yeah, it depends on the details of the deal, but, yeah, I want to do it, I’m interested. Now you have a soft commitment, and then when you have a deal come up, you’ve got a million dollars worth of soft commitments.  

[00:19:19.790] – Jennings

You maybe get about half of those that actually commit. That’s a great way to start. And eventually, though, the most powerful thing is social media telling people what you do online. It’s crazy. I mean, I’ve bought $60 million of real estate with none of my own money, and 75% of the down payments have come from Facebook and Instagram.  

[00:19:38.830] – Sean

No kidding. Wow.  

[00:19:40.320] – Jennings

And I thought that that’s completely impossible. Who’s going to give me 100 grand? I’ve literally had individuals giving me one and a half to $3 million who have never met me in person. They’ve only known me through Facebook. So the social media is super powerful. I wouldn’t focus on that at first so much as just building your tracker with people that know you trust you, but then start telling people online because you don’t know who you know. That’s going to resonate with your message.  

[00:20:06.710] – Sean

Right on. I want to talk about building your brand a little bit in a moment, but I want to revisit the numbers here, just so I’m clear. So this property, I still like this twelve unit example, you bought it for $240,000, correct?  

[00:20:20.550] – Jennings

Yes.  

[00:20:21.320] – Sean

You made some small little improvements to the structure, and then I love the idea of cutting the fat. There’s a double pay situation with the garbage. And you uncovered that issue, raised the value to if I’m correct, did you say $160,000? So that brings up the total value to a $400,000 property, is that correct?  

[00:20:42.190] – Jennings

Well, we sold it for 410, and there were some closing costs and stuff, so, yeah, we netted about 160.  

[00:20:48.220] – Sean

So this investor, he gets 90K back as an initial investment, plus it’s 40% of the profit, is that correct?  

[00:20:57.800] – Jennings

Correct.  

[00:20:58.930] – Sean

Got it. So looking in that case, he’s making $48,000. Yeah. So, well over one hundred and forty K on a ninety thousand dollars.  

[00:21:11.270] – Jennings

Plus he got his share, he got 40% of the cash flow for 18 months as well.  

[00:21:15.830] – Sean

Ah, yes. There’s, there’s that that’s great. How long was that? Was that like a two year between the time you bought it and sold it?  

[00:21:22.700] – Jennings

Yeah, it was 18 months.  

[00:21:23.960] – Sean

18 months, okay.  

[00:21:24.890] – Jennings

My plan was to refinance it and hold it, but by the time 18 months rolled around, we had bought so much stuff at that point and larger deals, it just didn’t really fit our portfolio anymore.  

[00:21:35.930] – Sean

Sure. Got you. Let’s take a quick commercial break. Have you ever lost money in the stock market? Maybe you heard or saw a comment on YouTube, TikTok Reddit, or another social platform, or maybe you just received bad advice from a friend. Yeah, I think we’ve all been there. Most people lose money in the stock market because they make decisions based on emotions. What if you could remove emotions from investing? What if you could make consistent returns in the stock market based solely on logic? And what if there’s a software that could handle that logic for you? Introducing Tykr, a platform that helps you manage your investments with confidence. Get started today with a free trial. Visit Tykr.com. That’s tykr.com again, Tykr.com. All right, back to the show. One big question a lot of investors have is if I’m buying a multi family, and I really like that. You stated this was fully occupied. So 0% Vacancy, which I’ve talked to people on this podcast before, they’ll be dealing with 100 units and they’ll be like, well, I try to have like a 10% or less vacancy. That’s good. In this case, you had zero. How do you know what’s a good area to purchase?  

[00:22:47.260] – Sean

Like, geographically? Are you kind of buying, like, in the outskirts of a city or suburb or maybe near a school system? What do you look for?  

[00:22:54.390] – Jennings

Yeah, so 100% occupancy is very nice, and the higher the occupancy when you buy, the less the risk is on the deal, for sure, because the more cash flow you have coming in. However, keeping your properties 100% occupied is a mom and pop mistake because you’re not pushing the market rents. You really don’t know what the rents are. If you’re 100% full, you’re too cheap. And so you’re not maximizing what the market will bear, which this guy was definitely doing, and he didn’t care. He had a large portfolio. The property management company was charging him like 22% in management fees when you added it all up together and it’s like, no wonder he was losing money on this deal. But I have also bought properties that I bought a property in Tulsa, Oklahoma, 208 units, and it was 50% vacant. So we’re talking mega high risk deal. But we bought it for 5.5 million. So think about 208 units for 5.5 million and it’s collecting $55,000 a month. When we bought it and we took it to now we’re collecting $130,000 a month. Okay, we’re 100% full. Okay, we’re 98% full. We put two and a half million into the renovation, or 2 million in the renovation and about a half a million in carrying costs.  

[00:24:11.990] – Jennings

So all in was about 8.1 million. And it appraised. We just refinanced it appraised for 14 million. We pulled out 9 million in a new loan. So we paid off our old loan. We paid the investors back all their money and pulled out. There were some escrows and closing costs, but we pulled out like 5000, $600,000 too, on top of that in cash. And it prints $30,000 a month in cash flow every month. Plus it’s paying the mortgage down, it’s going up in value. And so sometimes those heavy lifts that are distressed, you can make a lot of money with them, but you better know what you’re doing because they can eat you alive as well. Right? When we bought that, $55,000 a month was not enough to cover the cost of that property. It was distressed. But going back to your question of where do you buy, I mean, growing population is the best and most important metric, right? If there’s people moving there that overcomes a lot. I’m not super picky. Like I only will buy in the Southeast or whatever, but if it’s a growing area, then I’m liking that. Even if it’s flat and it’s near other areas that are growing, I’m still okay with that.  

[00:25:22.170] – Jennings

If it’s a declining population, pretty much that’s going to kill the deal for me. Even if the numbers look great because rents drive everything. And if you can’t fill it up and you can’t keep it full and it’s just a struggle, it’s going to make everything else harder. So that’s the first thing I’m looking at is like, what’s the population? 20, 30,000 or above? I mean, when you get into small markets, like 5000, 6000 people, I’ll still do those deals if they’re really small, like 20 units, 15 units. But I don’t want to buy 100 unit in a town of 5000 people. But the 208 unit we own. Is in Tulsa, Oklahoma. There’s a million people in Tulsa, and Tulsa’s population is pretty flat. It’s not a super growing market, but we’ve done really well because we offer a great product that’s better than our competitors at a good price, at a competitive price.  

[00:26:11.540] – Sean

Nice. You over doubled the value of this particular property, and you said you made some renovations. Can you dive into that? Like, what did you specifically do? Because I know there’s a lot of listeners, if they own properties or looking to buy, they can take immediate action and make some of these upgrades.  

[00:26:31.570] – Jennings

Yeah. So when you’re doing this, you got to remember what drives the bottom line with these renovation dollars. This is not your home. This is not a pet project. This is not something that you’re going to hold forever and give to your grandkids. And you just want it to be like this crown jewel. I mean, that’s fine, but remember, this is a business and you’re trying to only invest a dollar if it can get you back, too. And so I’m looking at here’s how you take on a renovation. You look at it and you think, okay, well, the exteriors are kind of crappy, the parking lots are messed up, the roofs are iffy could clean up the landscaping interiors, blah, blah. And you want to fix up the outside first because you think, oh, they want to roll up and it looks beautiful. That’s a rookie mistake, and I made that mistake. So don’t do that. People don’t care. Renters don’t. Unless you’re in like the really nice Class A stuff, they’re not going to care. So go in there and fix the interiors. So you want to take it and make, like, a diagram, like a grid of all the units that you have and do the lowest hanging fruit first, like repaint it and refloor it and paint the cabinets and move somebody in there and get that income up, because the faster you can get your income up, the safer the deal is.  

[00:27:43.460] – Jennings

Then as you’ve moved your rent roll from 50 grand a month to 80 grand a month. Now you can tackle some of those really hard down units that were like the floors are broken up and the cabinets are ripped out and they need all new appliances, and you got to spend ten or 15 grand just to get that unit back online. You do those last because now you have more cash coming in. And another mistake people make is they always think, well, I can just bankroll renovations like you can’t. If you have renovations to do, you need to have that in your budget, and you need to have borrowed that or raised that or have that in your capex, your capital expenditure budget. Don’t try to do that out of cash flow unless it’s just like a very light thing. And you have two or three years to get twelve units done because it takes forever to bankroll renovations. And then when you’re done with all that, now turn to the parking lots. Now turn to the roofs. Now turn to the exterior painting. Because people spend 90% of their time in their apartment, in their unit, and if the unit looks really nice inside, for the most part, that’s what they care about.  

[00:28:41.400] – Jennings

So that’s what I found with the renovations, is you should be able to get a really nice product for $5,000 on an interior and then another, depending on how bad, but another 3000, $5,000 per unit for exterior. That’ll get you a good product. So for our units, we budgeted about 10,000 a unit for all 200 units for the rehab. But it was already half full. We didn’t have to renovate every single year. So some of that money went towards exteriors.  

[00:29:11.880] – Sean

Yes. That’s smart. I’m looking at your strategy very much like building a big business. In the case of a SaaS business, especially B to B, is you look at unit economics. How much value can you provide to your consumers to justify increasing the price per customer, whether it’s more add ons or more features or whatever? You see a little bit of that in B to C, but it’s not as common. It is that B to B, but in your world, same thing. Like increase the value of each unit, and therefore you can increase the price, and you create a multiple effect. If you’ve got 100 or 200 or 300 units, it’s a big deal.  

[00:29:54.820] – Jennings

Right? If you walk in and the living room is LVP plank flooring, and they have granite countertops and freshly painted white cabinets and stainless steel appliances or black appliances, you’re going to command a premium on that unit. Maybe $150, $150 a month times twelve months to the NOI. Bottom line, divided by 5% or whatever the cap rate is, you could be talking serious money. So you think about, let’s just say for easy math, $1,000 a year to the bottom line on that unit, divided by get my phone out here. Sure. I don’t want to make a mistake. I know you guys are math guys here. 1000 divided by five cap is $20,000. Okay? So you’ve just increased the value of that unit by $20,000. So if you can spend ten grand to get that $100, if it costs you even ten grand to get the new floors and countertops, but you can get that $100 rent increase, then it’s worth it to spend that money. And you got to look at everything that way versus a new parking lot is going to be 80 grand. Are people willing to pay $100 a month more because they have a new parking lot?  

[00:31:04.950] – Jennings

I mean, no, they want that granite, they want that stainless steel. And the carpet in the bedrooms, like, if it’s luxury vinyl plank or if it’s carpet, do they care? Not really, because that’s the bedroom. So just do the bedroom and carpet, but do the living room in LVP because it’s got more traffic. It’s easier to clean. They’ve got guests. It looks nicer. So these are just things I’ve learned. I used to put granite in everything and some of the stuff, it didn’t matter. Right. I could get the same rent for mica countertops as I could with granite, so I stopped putting the granite in. But you add like a washer dryer connection. Man, that’s huge. Imagine now you don’t have to go to a laundromat. You can do laundry. A lot of apartment dwellers, they can’t do laundry in their house. As a homeowner, you don’t think about that problem. But that is a major problem.  

[00:31:51.970] – Sean

I love it. Great tips here. Before we jump to the Rapid Fire Round, I do want to kind of sometimes they do this, they don’t always do this, but is there like one other hot takeaway or one other fun tip or maybe a big lesson learned? You can give the audience.  

[00:32:09.210] – Jennings

If you’re interested in multifamily or doing bigger things in real estate, I think that the biggest tip is to get around the people that can help you get there. And that’s where I screwed up because as a contractor and as a single family home guy with rentals and stuff, you don’t really need a team. It’s like, I can do this, I can pull myself up by the bootstraps. You cannot close significant multifamily deals by yourself. Maybe you can close an eight unit, ten unit, but you’re not going to be closing a 200 unit by yourself. And so the faster you can plug into other people that are going, the direction you’re going, learning from their ideas, synergizing partnerships, help them, helping you get loans, helping you raise more capital, the faster you’re going to get where you want to go. And that’s what I did. I started to go to conferences and join Masterminds and pay for some education stuff and get connected with these people. And it just blew it up. I mean, it blew up my efforts and where I was going. It took me five years to get four trailers and two rental homes and took me three years to get 1000 apartment units.  

[00:33:19.770] – Jennings

So it’s just night and day with the commercial real estate, but also plugging into the team.  

[00:33:25.120] – Sean

Sure. One other thing I was going to ask before going to the Rapid Fire Round is you’re big with promoting yourself as a business. And I’m just going to list a few things and then you can expand upon it. But you’ve got a podcast, you’re big on Facebook. What are you doing to really build an audience? And that’s great. You’re building an audience because then you have quick connections to people who can help raise. They can bring capital, they can be your investors for projects. How are you building your brand?  

[00:33:55.890] – Jennings

So building my brand and building a brand is the most important thing that we can be doing, I think, right now. Because if you have an audience, more people know you. And when you have something that can help people, you have a platform to get the word out. And we’re seeing that with these celebrities who are now overnight monetizing their brands. And they have a billion dollar Tequila brand, clooney, and the Kardashians with the makeup and Kanye West with Yeezys and all the stuff that he’s doing. And it’s like these brands are incredibly valuable. And so no matter what you do, whether it be real estate stocks, buying businesses, building software companies, a large personal brand, it’s only going to pour jet fuel on that. And you’re also going to be able to help other people, right? So you can bring serious value to others. We always talk about, how can I.  

[00:34:54.700] – Sean

Add value to you?  

[00:34:55.330] – Jennings

How can I help you? Well, if you have a million followers on social media, I promise you can pretty much help anybody to help get their messaging out on what they want to do. And so I see that as super valuable. And at the time, I started my Facebook group just to sort of build my credibility. Yeah, attract investors, maybe attract deal flow. But we took it seriously. Like, we did a show, two shows every week. We kept all the spammers out. We kept it very carefully, moderated, and it grew from a few hundred people to 25,000 people in two years. And that allowed me to launch the Deal Room, which is the mentoring program for people that want to buy their first apartment complex. It also has helped me. I mean, I bought a pet business that we closed on last week, and I was able to raise the whole purchase price for these guys. And so they gave me a significant portion of their company just for providing their down payment capital. I never would have done that without a social media brand. And so the brand, as far as how to do it, the first thing is you just got to start doing it.  

[00:35:56.710] – Jennings

You still start putting your voice out there and focus on your customer, focus on the consumer. I see a lot of people out there on social media that are just all about them. Like, look at what I got, look at what I’m doing. I’m so cool. I’m making so much money, blah, blah, blah, blah. And I get it. I think you do need to flash some of the success. People need to know that they’re listening to a credible source and that you know what you’re talking about. But it’s got to be about them. That’s what people care about. And it shows through if it’s not about them. And so a lot of these efforts can fall flat. So I try to center my messaging around where was I three years ago? What was I thinking about? What was I struggling with? How can I help that person and help them make a good decision so that they can unlock their life, get out of a dead end job they hate, or w two, that they don’t want to do anymore and start doing something that’s more meaningful, passion, work that’s exciting and fulfilling to them.  

[00:36:51.300] – Jennings

But for the average person out there, the best thing to do is just start posting and start creating content. Just start documenting what you’re doing on a regular basis, day in, day out, and then you’ll get better from there. You can’t get better if you don’t do it badly at first.  

[00:37:05.910] – Sean

I love how you really hammered on, especially in today’s society, so many people are really prideful and bragging about themselves, and I like your approach it’s very much what tips, what value. You’re probably giving examples of lessons learned and things you made mistakes on and how other people can avoid that. And those types of themes are what correct me if I’m wrong here. That’s what people gravitate towards as opposed to, hey, I’m Jennings. I’m the best real estate investor in this set of South Carolina. Carolina.  

[00:37:39.010] – Jennings

Sean, your mess is your message. We all know we’re all human beings. We all screw up. And when you see somebody who will never admit anything or be real with you, it’s hard to take that person seriously. Like, I just released an episode today. It was a $6.1 million apartment deal gone wrong. Like, we didn’t do well. We didn’t make 40% returns for the investors. We barely got out with the investors money. And I document the whole story because I think the people that are listening to me and following me and following my advice, they deserve to hear where I screw up and the things that I did that weren’t the best way to go about it so that they can be like, not, oh, yeah, Jenny’s is an idiot. I’m not listening to him anymore. But you know what? He’s trying to help me. He’s trying to show me. And his ego isn’t so big that he’s not willing to say where he made a mistake.  

[00:38:29.830] – Sean

Yeah, great advice. All right. Long awaited here.  

[00:38:34.000] – Jennings

Let’s translate. Now I’m nervous. I’m nervous about the lightning round.  

[00:38:37.610] – Sean

You’re a podcast host. You’re going to nail this if you can try to answer each question in 15 seconds or less. You ready?  

[00:38:45.160] – Jennings

I’m ready.  

[00:38:45.930] – Sean

All right. What is your favorite podcast?  

[00:38:47.990] – Jennings

My favorite podcast? Besides unlock your life. My own, of course. I like Mark Evans the Making of a DM. I don’t know if you’ve heard of that, but The Making of a DM, he’s my personal mentor, and it’s real gritty, it’s real raw. But that’s the first pockets I listen to. Very straight through, and I highly recommend it.  

[00:39:10.560] – Sean

Nice. All right, what’s the recent book you read and would recommend?  

[00:39:15.330] – Jennings

I really like the slight edge. The Slight Edge is all about adopting habits that are going to change because the motivation, the RA RA, I’m going to do it. It doesn’t work. All we are is a product of our habits. And if we do the same things over and over and improve 1% or whatever a day, the compound effect, it takes a long time. It may take a few years just to go from here to here. And then it’s just like, whoa, straight up. And I’ve seen that in other aspects of my life health, fitness, money, real estate, et cetera. And so I’m constantly focusing on what habits do I need to be sharpening up? That’s what I preach, is you want to close multifamily deals, you got to change your habits. The habits that you have got you where you are. If you want new results, you got to do different habits.  

[00:40:04.760] – Sean

Yes. Great advice. All right, movie question. What is your favorite movie?  

[00:40:10.110] – Jennings

So I just flew back from Italy. I just turned 40, and me and my wife and I went to Italy for my birthday. And so on the way home, I watched probably like, four or five movies in a row in this ten hour flight. And I’m not really a superhero movie guy, but I did watch Aquaman, and it was it was pretty interesting. So I know that’s probably a pretty cheesy one, but Aquaman was probably the best one of the three or four that I watched on the flight back as far as, like, a movie, probably where the Red Fern grows. Classic.  

[00:40:40.530] – Sean

Sure. Yeah. Good one. Yeah, I’m a big superhero. Sci-fi is really I gravitate towards I kind of put the superhero movies in that DC. Aquaman is definitely a fun movie. All right, business questions here. What is the worst business or investing advice you ever received?  

[00:41:02.930] – Jennings

I think a lot of it’s going around right now is with the rates and the fear in the market, and there’s this advice that’s kind of circling, like, I’m going to keep my powder dry, I’m going to sit on the sidelines. I’m going to wait. There’s going to be a blood bath, and I’m going to be ready. And it plays right into our fears, right into our insecurities and this thought that we’re smarter than everybody else, so we don’t have to really take action yet. And I think it’s some of the dumbest advice that’s out there right now. So while you’re sitting on the sidelines, I’m going to be out there trying to close deals, good deals that fit my metrics, and I’m going to be rich. You’re going to look smart, but I’m going to be rich. So I think that’s some bad advice that’s circulating right now. Is this, like waiting, waiting and waiting for the right timing, trying to time the markets. With real estate, you should constantly be finding below retail, good value ad deals and taking them down as consistently and often as you can.  

[00:41:59.640] – Sean

Yes. It’s the same thing in the stock world. There are gurus all over the media telling you to hold weight, hold and wait. No, we want to be buying right now.  

[00:42:10.120] – Jennings

Yeah, I don’t know that world, but I totally agree when it comes to real estate.  

[00:42:15.770] – Sean

All right, I’ve got time for one more question here. Top of the hour. I got to jump. But what is the best advice you ever received?  

[00:42:24.530] – Jennings

Think outside the box is a quote we hear a lot of times, and yet you can’t think outside of the box because the box is your brain. And if you could think outside of the box, then the box would just be a little bit bigger. But we only can think to the level of our limiting belief, right? And so the best advice has been when I’ve gotten around different thinkers where I can think outside of my box and into their box, and I can borrow the belief, and I can see, well, that guy can do it. Why can’t I do it? He’s no smarter than I am. He works no harder than I do. He works hard. So do why, and he’s got guts and metal, but I do, too. And just this different thinking of working harder and more grinding is really not the answer. It’s expanding your mind and seeing these opportunities by getting around higher level people. And that’s probably been the best advice I’ve given, is getting around these higher level, bigger thinkers. How do you do that? It may be through conferences, networking. You may have to pay to play.  

[00:43:26.610] – Jennings

You may have to do partnerships. You may have to give them something. But getting into those circles has really expanded on my business and my mindset, so that’d probably be my pick.  

[00:43:38.580] – Sean

Nice. Great advice. All right. And where can the audience reach you?  

[00:43:43.100] – Jennings

Best place to hit me up is just right on my website. Jenningsmithjr. So, Jenningsmithjr.com, my link to my Facebook group is there. It’s free to join my podcast. Is there there’s a contact form if you want to reach out to me, hit me up on my socials? Of course. And I tried to message and reply to everybody that contacts me. So happy to connect there.  

[00:44:07.790] – Sean

Awesome. Well, thank you so much for your time, Jennings.  

[00:44:10.150] – Jennings

Yeah, Sean was a lot of fun. Great show. Thank you.  

[00:44:12.620] – Sean

All right, we’ll see you. Hey, I’d like to say thank you for checking out this podcast. I know there’s a lot of other podcasts you could be listening to, so thanks for spending some time with me. Also, if you have a moment, could you please head over to Apple podcast and leave a review? The more reviews we get, the more Apple will share this podcast with the world. So thanks for doing that. And last thing, if you do do hear any stocks mentioned on this podcast, please keep in mind this podcast is for entertainment purposes only. Please do not make a buy or sell decision based solely on what you hear. All right. Thanks for your time. Talk to you later. See you.