Welcome to The Accelerated Investor Podcast with Josh Cantwell, if you love entrepreneurship and investing in real estate then you are in the right place. Josh is the CEO of Freeland Ventures Real Estate Private Equity and has personally invested in well over 500 properties all across the country. He’s also made hundreds of private lender loans and owns over 1,000 units of apartments. Josh is an expert at raising private money for deals and he prides himself on never having had a boss in his entire adult life. Josh and his team also mentor investors and entrepreneurs from all over the world. He doesn’t dream about doing deals, he actually does them and so do his listeners and students. Now sit back, listen, learn, and accelerate your business, your life, and your investing with The Accelerated Investor Podcast.

Josh: So, hey, guys, welcome back to Accelerated Investor. I’m so excited to bring you this interview where I share multi-family investing strategies with attorney Charles Dobens. He is a multicamera real estate investor, attorney, coach, mentor to real estate investors. And we just have a super fun conversation about multifamily investing. We’re going to talk about earnest money deposits. We’re going to talk about proof of funds, letters where they give you strategies for when a commercial broker asks you for a proof of funds letter and tells you, hey, I can’t give you this deal as you a proof of funds letter, how to overcome that. We’re going to talk a little bit more about how to recruit key players, KPs, key personnel for your multifamily deals.

Josh: So if you find a big deal and say five million, 10 million dollar asset, you want to buy but you don’t have the balance sheet, you don’t have the income, the liquidity to be able to take that deal down. And a key partner, key personnel to sponsor that loan for you. We also have multiple strategies. We talk about recruiting capital. Charles, I also talk about our three favorite things we like to do in our due diligence process. You’re going to hear more about that. And we also talk about some of the horror stories about Charles’s first deal, where he talks about how he assumed the loan, how he had phantom leases and how he had an exodus of tenants.

Josh: So you’re really going to enjoy this interview with Charles Dobens where we talk about the entire process of investing in large multi-family apartments. Take a listen. So, Charles, listen, I’m so excited to have you on the Accelerated Investor podcast. You and I have been trying to get this scheduled for months.

Charles: I cannot believe it’s you. Is that really you? I can’t believe it’s you.

Josh: So my audience understands. Charles and I have each probably canceled on each other four times, but for very legitimate reasons. He’s with the students. He’s doing deals. I’m with my students. We’re doing deals.

Charles: Neither one of us said, no, not that guy again.

Josh: Yeah. Last we were supposed to record, and I’m like, oh, my God, I’ve got to go see this hundred twelve unit building. I got to cancel again. So, Charles, I’m super excited to have you on today. So let’s jump in and tell me something to our audience, something that you are working on right now, something that’s get you juiced up. Some of that is giving you motivation and passion. You obviously have such so much weird stuff going on with coalbed and the election and riots and protests. But there’s so many awesome entrepreneurs that are making hay, that are having success regardless of what’s going on with the exterior. So tell me about you. What are you pretty excited for right now, Charles?

Charles: Well, you know, for the last 10 years or so, one of my major focuses has been on my legal and consulting practice, what I call multi-family investing academy and my own informed program. I’ve helped so many students buy apartments and doing it the right way. And, you know, I’ll tell you something. I am the best when it comes to transactional law, understanding multifamily transactions, getting people through the whole point. And that’s what I’ve been teaching over the last 10 years. And there’s always been one aspect of it that is just been kind of like on the sidelines and it just kind of missing. And that’s raising the private money. And obviously that is so crucial, you cannot have one without the other. You know, those students that go out looking for deals and thinking all the money is going to appear if I find a good deal. Now, you’re going to build the business the right way to build both sides.

Charles: And I finally got together with an old dear friend of mine, Jillian Sidoti, who I call the securities attorney to the stars. And she and I are now doing a multifamily war room. We did our first event a couple of weeks ago. It was phenomenal. And we’ve now created a system for investors, multi-family investors to do to come in and build the business holistically, both sides raising the money and finding the deals, putting it all together so they get across the finish line. And I got to tell you something, Josh, we already have a couple of students under contract already. And we just got going. It just gets me so fired up.

Josh: Cool, loving it. Fantastic. So you said a couple things I want to kind of peel back the onion on. You said investing in multifamily and doing it the right way. Yeah. So help me understand, Charles, what do you define as doing it the wrong way?

Charles: OK, well, first off, when you said you went out to see 112 unit, I immediately had a little bit of PTSD to a one hundred and sixteen unit that I once owned, which I got to tell you. It was one of the first deals ever did. We did everything wrong. We got everything wrong. And that’s why I learned so much in that experience that I make sure none of my students make those same mistakes again. And that’s what I say is like, listen, work with me. I’ve already made all the mistakes and you won’t. And I’ll tell you, it was an assumption. And if you don’t know the fine print on an assumption, you’re going to get yourself into trouble. There was phantom lease’s going on. There was fraud involved by the seller.

Charles: It went on too long. It had every aspect that you can imagine wrong. Right from the very beginning, even the quality of the asset. I’ll tell you, Josh, I could spend a whole entire podcast just talking about this one property and all the mistakes were made on this one property. We could be here all day. And let me tell you, you would love every story about it. I mean, even the time that the copper piping got stolen from my chiller boiler from the same property. It all happened on the same property.

Josh: Oh, geez. So helping these students do deals the right way, especially new students kind of getting into their first larger multi-family asset. Could be residential guys who are pivoting to commercial developments or guys just jumping in right away in commercial apartments. One of the things I wish I had done at a much younger age. I’m happy to be doing it now. We’ve got twenty-eight hundred doors. We love syndicating and co syndicating. It’s fun, but I wish I would have done it sooner. I know a big part of your training is helping people gain the confidence to really execute. So help me understand that part because really starts up here.

Charles: Yeah, no kidding. I mean, to hear some of these people who have had successes in other parts of their life come into the multi-family world, feel like, oh, I can’t talk to a broker, I don’t know what to say. He knows this is my first time on the job. He knows I don’t have any money. I said, listen, if what you’re lacking is confidence. Use me. I am your partner. Pick up the phone and we’ll call the broker. You listen to how I do it. I’ll walk you through it. You’ll hear me do it as I tell people, you will trip over your tongue. The first five times you speak to a broker. After that, you’re gonna be a silver-tongued fox. You’re going gonna be able to wow them because it’s all the same stuff. It’s just all the same stuff. And it’s just understanding and anticipating what type of questions they’re going to ask. And, you know, any step I. I say what my job is, is to remove the roadblocks that prevent people from buying multi-family.

Charles: And I know what the roadblocks are because I’ve done so many deals and the roadblocks are always the same. Yeah. Proof of funds letter, earnest money deposit. You know, having a KP to help you qualify, helping you find all the money that you need to get the deal done. Those are the roadblocks. Once you do that, I tell it this to my students all the time. Once I’ve helped you through two deals, you’re not going to need me anymore. We’re just friends and that’s it. And that’s how it works in this business. And this is, Josh, as you know, this is the greatest business in the world to be in. Yeah. And the best thing about it, and I already spoke to somebody about it earlier today, is that we’re all friends. I mean, I’m going to work with you. I might buy your deal later on. I might sell you a deal. It’s like we all are in this thing together. It’s like no other business I’ve ever been involved in is the way that multifamily investors work with other multifamily investors. It’s cool.

Josh: I love it. It’s definitely a team game. Right. So let’s peel back that onion a little bit on some of these roadblocks, because if some of our audience doesn’t know what these are. So obviously proof of funds letter. So I just talked yesterday with this hundred and twelve unit, made an offer on it, asking six point one, offered five point six. And they’re asking for proof of funds and asking for, you know, make your best offer with earnest money deposit. Can you qualify for a loan next? It’s the first time we’ve bought a deal where we got Charles. We got that. We got the questionnaire where they ask us like ten questions and we have to fill them out just to qualify under one hundred- and twelve-unit property. The guy’s being a little bit tight. I think it’s a little bit too much for a six, seven-million-dollar deal.

Charles: But, you know, the broker, it’s like the brokers first day on the job, like I’m going to be Mr. Giant Broker and they’re going to prove my worth.

Josh: And actually this is a deal. We bought multiple deals from the broker before. So I think it’s more the seller potentially. Sellers got 750 units and he’s letting go this first tranche of it. And so I think he’s thinking, look if I let go with this first tranche. This buyer might be a buyer for the rest of my stuff. So he’s thinking pretty long term, thinking. I was just trying to qualify us upfront. And we want to qualify upfront because I wanna have a shot at the other six hundred fifty units too. And so that’s a big part of it. Right. But the keys here is proof of funds, earnest money deposit, your KP. What is a KP. Tell us about that.

Charles: Let’s take it step by step. Let’s start with the beginning with it. With the proof of funds letter.  OK so the guy calls you up and you know he’s never worked before and he wants a proof of funds letter. I get this all the time from my students. Now early on in my career, I, I ran up against this. I realize this is a roadblock now. They’d never even ask me for proof of funds letter. And I think it has a lot to do with a level of confidence the broker has when he speaks to you, he knows that you know what you’re talking about. You’ve been through this before. He’s not going to insult you by asking you for proof of funds letter. If they ask you for proof of funds that are it’s typically the brokers attempt to prove his worth to the seller. He wants to say, listen, I’ve already qualified this person. I’ve got a proof of funds letter. A proof of funds letter is as useless as the paper it’s already been written on. It means absolutely nothing.

Charles: So there are two ways to handle is you can to push back on the broker by asking him some questions about the proof of funds. Like do you want a hard proof of funds or soft proof of funds? Do you know the difference, Josh?

Josh: Yeah, absolutely.

Charles: Well, let me just tell you, some most brokers don’t.

Josh: OK, so. Right. Right. Right. What do you mean? Like, I’m playing, like, the broker. What do you mean? Hard proof of funds or soft proof of funds.

Charles: Listen, if you don’t know what kind you need, I mean, that would have been a real problem for me to have to go back to my bank and get a proof of funds letter thatdoesn’t meet what you’re looking for. I want to know exactly what it is that you’re looking for in the proof of funds letter before I go out and get it. So what exactly are you looking for. When you push it back on the broker? I’ll tell you, Josh, I had this blog post that I fell off my thing. It was the funniest blog post. But it had to do with proof of funds letters and it had to do with Monty Python’s Chasm of Death. You know, where they come up. You have to ask three questions like, what is your name? Sir Lancelot of Camelot. What is your favorite color? Blue note. Red. Oh, the guy gets you throws into the chasm of death. That’s what it’s like with a with. When the broker asks you for proof of funds. Just push it back on him and say, well. Because the gatekeeper of the chasm of death, they asked him, well, what do you mean? What’s the wing speed of a North American swallow.

Charles: Well, is it a pregnant one or not? I don’t know. And he goes to fly in the chasm of death. That’s what you gonna do with the brokers, push back on him and say, well, you know what exactly are you looking for? Why do you need this? Because remember what you’re actually doing by giving the broker a proof of funds letter is you are allowing the broker to have a tool to discriminate against you. Yeah, no doubt. All a way to put it. I’ve never heard it put that way. But that’s really powerful. That’s what he’s doing. And so you can either allow him to do that or you can make him justify why he has to do that and just always think about it that way. Please remember what you’re doing by a proof of funds letter is you’re showing the enemy or you’re giving the enemy bullets for his gun. Yeah, you don’t do it. Just don’t do it.

Charles: I push back on approval of funds and I had this one student of mine. Dear lady. Every single deal that she made an offer on, they wanted to see proof of funds. Yeah. You knowwhat was going on? They were not they were listening to her talk and they weren’t confident. I said, let me get on the phone. I want to talk to the broker. And watch how I do the deal and submit the offer. And she got on the phone with me. She listened. The way I talk. And sure enough, broker didn’t even dare ask me for proof of funds. Right. And we’re right on past it. And she’s like, oh, man. And it all had to do with that. She just totally lacked confidence in herself. Yeah. My job is to get her over that roadblock.

Josh: That’s fantastic, so KPs. Right, so KPs are important. A lot of guys raise money. A lot of guys can find deals. Some guys don’t have the balance sheet to be a kepi. What is a kepi and how do you help locate one if you’re maybe good at raising money or good at finding deals, but don’t necessarily have the balance sheet to qualify for a big, you know, Fannie Mae, Freddie Mac sort of loan for a deal. Yeah. Help us understand that from your perspective.

Charles: So back before 2008, if you could fog a mirror, you could get a multi-family mortgage. I mean, everybody was selling them after 2008 when the market crashed. They started getting tougher on the underwriting and they got tougher on this requirement of a KP a key principal. And the key principal is someone that meets certain financial requirements and experience requirements that Fannie and Freddie or any other big GSEs want to see in order for them for you to qualify for the loan. So if you’ve never done a multi-family deal before and you’re looking to do a five million dollar Fannie Mae loan. Guess what? I’ll tell you right now, you’re not going to get approved.

Charles: OK, but don’t worry about it. What we would do for you was we put the whole package together so that you do get qualified. I have over 200 clients, many of whom qualify as a KP, and they will partner with you on the deal. And just so we can give you a definition of a kepi, a kepi is someone that meets a balance sheet requirement, a liquidity requirement and an experience requirement.

Charles: And I just say those three things without putting any numbers on them, because the numbers vary based upon the size of the deal. What this KP is going to do. And when my clients when I connect my students with someone, my KP clients, I tell my students, I said, listen, you can, I’m going to introduce you to this person is as a KP. But your deal must be a non-recoursedeal.  They won’t do a personal recourse. No KPs will do a personal recourse. It has to be a non-recourse deal. So if you’re dealing with a local lender, it’s not going to work. You’re gonna have to qualify on your own. But the key piece that that I present are all they always do, non-recourse loans. And just so everybody understands, non-recourse means that in the event that the deal caves and they take the property back and listen, not so proud. I owned property back in 2008, 2009.

Charles: This has happened to me when they take it back. They don’t come after you for any deficiency. Unless you have breached what we call the bad boy provisions. And those bad boy provisions like fraud, waste, abuse, all those types of things are typically about six. I think they’re up to about six bad boy provisions now. If you breach any of those, you have also signed a personal guarantee that only gets triggered in the event that they come after you for those breaches. So it’s not really an moderate course. It’s a partial non-recourse. So that’s what that’s. So we get you covered with the with the KP as well to get you across the finish line. And that’s the whole thing is all you’re doing is putting the deal together and bringing in the partners.

Josh: We closed the deal last August. My friend Jack and I. And I was, you know, co-syndicating, cosponsoring the deal and it was Jack’s first big deal. So 10 million dollars, nine point two million dollar purchase. Six million of soft costs and renovations and capex. All in for nine point eight million. And right before the deal closed, the bank told Jack because he didn’t have experience with that kind of deals looking to bring in. We’re going to Kepi. So another front of ours, things Augustino just steps in and says, I’ll be your KP. Give Augustino one percent of the deal. Didn’t require a lot of nonrecourse. Boom. Right. So you have different people playing different roles. You have a team. You know Jack and I have partnered on a lot of other stuff. I told Jack, like I don’t want to be a KP for this deal. I’ve got other roles and responsibilities in this deal. I’m already kind of got my sort of agreed upon equity, our joint venture.

Josh: It’s not really worth it to me to necessarily step in as a KP, bring in someone else. Because I wanted Jack to kind of feel like, hey, I’ve got to be the quarterback and bring in the right players, put them in the right seat, put in the right position. He did that. Now that deal is going to refinance probably in December of this year, 18 months later, value’s going to come in at about fourteen, fourteen point two million, with the cap ex and the value add that we’ve gone jacked up the rents and we’re gonna cash out re-fi everybody and pull about 800 grand out of that deal. Now that deal fails unless Jack sources the KP. Right. To do the purchase.

Charles: Yes. Exactly. And, you know, you tell Jack, you know, I say to my students, listen, you’re gonna give away a piece of the deal to get the KP in to get the deal done. You’re gonna do that for maybe two, maybe three deals. And then guess what? I’m tapping you on the shoulder to be someone else’s KP. Because now you qualify. So, you know, it’s just everybody. That’s a beautiful thing about this business. We all work together to make it happen.

Josh: Pull everybody up. The other piece that you mentioned was the private money side. And this is I love the fact that you said at the beginning you can’t just find a great deal on the money will follow because it takes time to build relationships with the money to get somebody interested in investing. Because you’ll look, when I interviewed Kevin O’Leary for this podcast, that’s when I talked to Kevin Harrington for this podcast. Guys from Shark Tank. Barbara Corcoran for this podcast. They all said the same thing, which was, look, when we invest in somebody and they have to have a great idea, but we’re really investing on Shark Tank, we’re really investing in them as the entrepreneur. So the question becomes, is not just the deal. It’s not like Shark Tank you have a great business. You have a great new idea. Great invention. You also have to invest in the jockey, the guy that’s driving the deal. And so talk to me a little bit more about that. Charles, what’s your perspective on what mistakes are people making when they’re doing it wrong? What are they doing right when they get it right, when it comes to the private capital building, the relationships? To put that piece of the puzzle together, OK?

Charles: Biggest mistake they make is they don’t realize that this is a business. They are in a business. The property is nothing more than a factory that produces a product. And the product, our leases, the leases are what we get paid on. So you have to look at this thing from not from the whole picture. You have to know how to read a financial statement. You have to know how to manage cash flow and what have you. This is a business. It’s not like a single family fix and flip. Now you’re in a business. And so that’s the biggest mistake I see people making. And all businesses require two things, systems that generate profit and cash. When a business is out of cash, it’s out of business. I got a phone call from one of my students the other day and he says,  I got a situation.

Charles: I want to know if you can help me out with it. I said is about two years ago, I sold one of my properties, made a lot of money. I needed to do a 1031 exchange. I was looking around for a deal. I find this guy who’s doing a multi-family transaction. He’s willing to change some of the ownership structure to make it a tick. And I can move my money in. It was great. I dumped it in and I just got a phone call from them and in four days are going to foreclose on the property. Oh, I know, I know. Josh, dagger in the heart. Right. But when you hear that in today’s marketplace, what’s your first thought?

Josh: My first thought is how did you not know much sooner?

Charles: OK. First off that was I turned ok. That wasn’t what I was looking for. But let’s talk about that for a second because I said to this guy, I said he didn’t just find out four days ago that he’s getting foreclosed on. Right. He’s known for months.

Josh: Oh, maybe a year. Maybe longer. Right. Before the actual bank knew that he was going to start missing payments, that something was going on with the leases. There was probably some cap ex that wasn’t done that pissed off the tenants who didn’t pay the rent.

Charles: OK. In a normal world, everything you said would be right. But we’re in a COVID world right now, so. OK, sure. Yeah. And let me explain that in just a moment. But, you know, you think to yourself, we’re in a pretty frothy multifamily market right now, and this is the first time I’ve heard anybody getting their deal foreclosed on. I mean, back in 2008, you go to any of the special services websites and they got pages and pages of multi-family deals being foreclosed on. How, what did this guy do wrong? Right. What did he do wrong? That he’s losing his property? And I if I listen to his tale of woe and I said, here’s what you did wrong, you went into this deal. It was a value-add proposition. It was a you know, you’re going to do a rehab and you can start to drive the rents. But you didn’t raise the money ahead of time. You were going to do the rehab on current cash flow. Meaning I made two thousand dollars this month. I’m going to go plow it back into my property. Rehab deals do not work that way. The power of the cap rate, the velocity of money is it’s so much easier to raise all the money you need upfront. Fix all the units, build up some rent and get the hell out of it. And he didn’t do that. He goes, you know, you’re absolutely right. You’re absolutely right. I said, so. So what happened? How did this happen so fast? Listen to this, Josh. And this is you know how it’s how it’s happening now.

Charles: They get through, you know, Fannie or Freddie through the dust lenders, they get that 90-day forbearance from the government for COVID. They get an opportunity for another 90 days after the first round. But it’s not guaranteed. And what happened in this case was this guy’s deal had been on the blocks for a while. The bank was not liking what they were seeing for a while. And when he applied for that second round of 90 days, the bank looked at him and said, you know what? We’re just not going to do it. We’re just going to take the property back because, you know, you just can’t even keep the thing going right now. And that’s how it happened.

Josh: Yeah. Wow. Yeah, I totally agree, Charles. We definitely every deal we do, we recruit all the capital upfront, down payment, all that lender fees, all the stuff costs, all the cash box sits in the account. Might have to pay interest on that. Fine. Who cares? Down to the limited partners for that. But you’ve got to be able to as soon as there’s a unit that becomes available, term that unit common spaces execute your business plan, whether it’s the insides, the outsides, the roofs, the windows, whatever it is, and heart in the asset as soon as possible, fast as possible and say within the first six months to 18 months, 24 months. So that you really never have to touch this thing again for five to 10 years. Other than unit turns. Yeah. That’s where it comes to raising money. Where you talk about doing it the wrong way. The right way to do it is to build relationships, you know, show people deal flow, even if it’s a deal that you’re not going to do, even if it’s to be made an offer that you didn’t get. Show that to potential private investors and say, look, if I got this deal, this is what we would have done. This is the offer, the potential offer that we would have made. This is what the returns could have been if I find another deal like this. Is this something that you might be interested in the future? And if it’s not them, do you know anybody else?

Charles: Oh, my gosh. Josh, you sound like you’re one of my students. I’ve trained you well. This is exactly how you do it. This is exactly how you do it.

Josh: So I come from the financial planning world. Right. And when I’m used to meet with people as a financial adviser, when I was in my early 20s, I was twenty-five years old.

Charles: Who’d you work for?

Josh: Northwestern Mutual and Robert Beard Securities. And then I was with a private, small, private firm and we kind of sold for a lot of different companies, both in the stock markets and the insurance markets and stuff like that. I did fee based financial planning for a long time, charging clients for plans and asset-based funding. And this is a judge New York life right out of college. So you got to say yes. So, you know, we’d say, like, you don’t. I’m not assuming that you’re interested in any of these products, but assuming that you’re interested in investing back then in stock markets. But I want to get together with you and tell you more about what I do, because now I teach my people and what I do is like everybody is a potential. Again, multifamily is a team sport. Right? So everybody’s a potential client because if they have no money, again, I don’t assume anybody has the money, but they always, if they like the strategy. They’re going to refer you to people. They’re going to introduce you to people, somebody that you might buy a building from.

Josh: I used to do this with residential buying property from, selling property to, cheerlead for you, invest with you, just, you know, be a center of influence. So that’s really what it comes down to when it comes to private money. And once somebody becomes an actual investor, they’re gonna tell their friends. Now, with all the money that we manage, we manage over 40 million dollars of private money, you know, twenty-eight hundred units, we don’t really go out and actively recruit capital because we’re getting referrals from people all the time. Yeah, it takes a minute to get there. But you start with a hypothetical deal. You start with the deal that maybe is a deal that you might have done. Maybe it’s a 20 unit and say here’s a 20 unit. If I find a two hundred units going to look just like this, just add a zero to all the numbers.

Charles: Right. And there’s everything you said is absolutely spot on. Let me just add a little bit to it. I think a lot of it has to do with our background on how we both came into this and how to speak to people. I say to people that, listen, this is what what I do. Do you know anyone that might be interested in hearing more about this type story? So in other words, I’m not putting it on you. I’m not asking you to say yes or no. I’m asking you to help me, help me find more people. And then they come back and say, well, I might be interested. What about me? Yeah, what about me? Exactly. Now, the other thing is, is through out that process, like you’re talking about a hypothetical that’s great. That’s going to get the person into your system, into your funnel for deals, but then your funnel is always keeping the people abreast of what you’re doing. Hey, we looked we made an offer on this particular property. I remember that offer. It fell through. And here’s why. And I’m glad it did. Next timeI will let you know what you keep. So when we were doing it that way, the very first deal we did this is how we kept track of all our friends and family who were interested in the type of deal we were doing when we when we finally got past the due diligence phase, and we were going out to market to raise money. They were on board. They knew anything about it. Like, we’ve been waiting for you to do this. And it took us nine days to close on that deal, for all the money that we needed to raise, it was easy.

Josh: That’s phenomenal. Yeah. I have these hundred and twelve units. We made this offer. And we actually wrote the offer without a financing contingency. Ballsy. Right. Ballsy.

Charles: How long was your inspection period?

Josh: The LOI, they haven’t accepted it yet. We’re still negotiating. So. But we wrote it. We know we’re in competition with the big boys out of New Jersey for this deal. And we know that the big boys in New Jersey have bought properties from the seller before. So we knew we had to make a competitive offer. So bigger earnest money deposit. But also we weren’t a two and a half million dollars down like I know I can go get that next week. Like, I had a fundraising webinar yesterday on a small multi family.

Charles: I got your e-mail for it.

Josh: Yes. Six hundred thousand dollars that we need to raise. We raised three million bucks yesterday. And that was part of that was just to seed this next deal. Hopefully we got it because we know that the commercial loan, we know we’re gonna get that. We know we’re going to qualify. Non-recourse, the whole thing. So just to make our offer really strong, like you talked about, we’ve got to have these relationships built, like you’re talking about. Relationships built in advance. So now we can go after a deal that maybe we would get boxed out of because this other company is much bigger than us that already has a relationship with the seller. So we had to kind of, you know, we had to lay all our cards on the table including moving financing contingencies. So we’re excited about that.

Charles: OK, so hang on a second now and now I’m interviewing you because I just want. Yeah. So how long was the inspection period? And also, like, did you do anything special with the with the earnest money deposit?

Josh: So right now we’re not yet with the earnest money deposits. Hundred thousand dollars basically go fully hard as soon as the due diligence period is over. But we told them we only need seven days due diligence after we get the stuff from the seller. So we’re really good at knocking out due diligence when it comes to the financial stuff, reviewing leases, reviewing the profit loss, the ledgers, all of that stuff. We’re really quick about that. But getting into thebuildings and running through the units, we also told them, look, we only need to see seventy five percent of the units, but we want you to sign an affidavit. This is when push back on the sellers want you sign an affidavit that the other twenty five percent of units are in the same condition as the other seventy-five. And we’ll knock out the seventy-five doors in less than three hours. Because I’ve got four guys. Me and my two partners and my rehab project manager, we each jump into a separate unit. We walk it. We’re primarily looking for three things when we do our due diligence.

Charles: Hold on, hold on, hold on. Let me write down, what will be my three things and see if we match. Let’s see, and then. OK. I want my third one’s going to be a tricky one. I know you’re not going to get this one. OK, go ahead.

Josh: All right. The first things we look for is leaks.

Charles: Water. Number one.

Josh: There you go, sir.

Charles: Let me tell you something. Number one leaks, because you have to learn what mold smells like. Yeah, that’s absolutely right.

Josh: Number two, we look for the tenant being clean or dirty. Because we’re looking specifically at the tenant base because we’re going to try to bump the rents. We want to look at the tenants and say we’re going to keep this tenant or not, because it doesn’t matter how much money you have. Doesn’t matter if you’ve got a lot of money? Not a lot of money. High income. Low income. You can have a clean unit. You can keep your unit clean. And so we look for clean or dirty.

Charles: OK, hold on. Number two for me was where? Was if this thing if I had bought this property today and I had to turn this unit tomorrow, how much. What condition did this person leave it in? So I’m going to say that you and I are two for two right now. OK, now here comes a tricky one. Number three, let’s see if you get it right.

Josh: So number three was we’re talking more about compact’s, which is full turn, half turn or no turn, OK? So it kind of goes into your socket one a little bit. Yeah. Yeah, I think so too. We walk in when we do because we already walked. We did a site visit on the do we want to spot for units or in your initial site visit. So we know what the each, each unit mix looks like. Andnow we’ve got a budget. We know what the square footage is, the LVP flooring, the paint, how big, the hardware, all that stuff. And we’re looking for is it full turn, half turn or no turn. So can we get away with bumping the rents with no turn? Can we get away with bumping the rents? Down Dominic just got home from school.You gotta go, buddy. You wanna say hi real quick?

Charles: Hey, buddy, where are you? Where are you guys?

Josh: We’re based out of Cleveland, Cleveland, Ohio suburbs.

Charles: Oh, son of a gun.

Josh: Yeah. I’ll be down in a minute. So that’s the third one. So clean or dirty, leaks, full turn, half turn, or no turn.

Charles: OK, so let me ask you before I tell you what my third one is, how long does it take you to go through a unit now? Just like you’re standing at the door.

Josh:  It’s like literally knock on the door. If we’re doing full inspection, maintenance, coming in, inspection, walk in. I’m looking at clean or dirty. Go right to the bathrooms. And the kitchens. Looking for leaks up in the corners, for any yellow spots. Look at looking up into corners. I’m also looking again, that clean or dirty. We’re also looking for smoker. Nonsmoker. Yeah, because a smoker can destroy a unit real fast. I was in a building actually building that were buying. But this one. Oh my God. Charles this one tenant. Been there like 27 years. Never moved out. Was a smoker. Like there’s the black, yellow tar. Coming down like it’s like, oh dude. So we’re gonna have some.

Charles: Have you seen any hoarders yet?

Josh: Oh no. No, no, not really.

Charles: I had two hoarders live in the same building, you know. Right. They didn’t even know each other. But it was the most disgusting thing I’ve ever seen. My gosh, I tell yousomething, Josh. but okay. So here’s my third one. And this is the other thing is the lease. You know what I mean by that is I go around with the rent roll and I make sure that that all people over 18 are recorded on the lease, and then if there’s any pets in the unit that we’re collecting pet deposits and pet fees on the lease, I want to make what I like. Yeah. So that’s another one that I do when I go around and see them. But man, I tell you, there was one time, I got a million stories. So I’ve been through over three thousand apartment units. There was a time that I was walking through and the guy was walking down the street and the manager said, hey, we couldn’t get into your unit. We’re gonna need to get in to see it just to take a look at it. Young guy, twenty-six, 27, office worker, well-dressed, very well-kept. And he goes, Oh, I had a party in my unit, but football game is Saturday. It’s really not a good time. We just need to get in. It’ll take us two seconds. We just need to get in. We went in this guy’s unit. It was the most disgusting unit I’ve ever seen. He had about a foot of crap all throughout the whole place. And this was like this was a normal looking guy. And you think he lives in this type of squalor and you just can’t imagine how some of these people do it.

Josh: So, Charles, give me look, let me ask you one more question, and then I want to give my people an opportunity to, you know, find your stuff and jump into some of these trainings that you’re doing. Look, look, look at the wife. They’re like, we can’t try that again. Cool. Is that. Likewise. That’s what. Love. Yeah. Lisa, what are you doing? So Charles. So help me understand. When do you start presenting a deal or you start to talk about private money? How quick. On average. Again, this is a very general question, but how quick on average do you think somebody typically investing to deal with you or one of your students from the time you kind of meet them, start warming them up to the time they actually jump in? If you had people like jumping like day one and then other people take like five years.

Charles: Because some people are, they take a little bit more time. And obviously, if they’re already real estate investors, no time at all. No time at all that deal. Let me take a look at the private placement memorandum and. Yeah, I’ll be in. Tell me what I’m getting. Tell me how you guys structured the deal. They’re in.It’s the people that don’t understand multi-family as an investment that take more time, frankly. And the problem that new investors make is they go in there like, you know, full of piss and vinegar, think like, hey, get my deal. It’s gonna be so fantastic. But you’ve never laid the ground work for why multifamily. And it was like, you know, when we were out there selling insurance and stuff. You’re not gonna sit there down there and just throw the products at them. They need to understand why. How exactly is work and why do I need it?Right. Same thing is true. And that’s why you’ve got to start the day you start looking for deals, the day you start thinking about multi-family is the day you start building your investor database and cultivating those people and really working with them to make sure that they buy it. When the time comes to pull the trigger, they’re ready to go there.

Josh: Yeah, absolutely. And, well, it works well for us is when we have way more investors and we get oversubscribed. Yes. Then you kind of build this reputation of, oh, my gosh, I’ve got to get on Joshes webinar regularly. I’ve got to make sure he sends out a deal. I raise my hand in reserve a unit early. You know, I had multiple text messages last night from guys who said, hey, I got your invite. I didn’t have a chance. Get on the webinar. Can you send me the link? Replay is unless you’re already oversold because they know that that’s common. And I’m able to tell people because we are oversubscribed. We raised three million dollars. We only need six hundred grand. Guys are like, oh, wow. What else do you have coming? Yes. So now instead of me in any sort of at all, I’m not an all like asking them for money, begging them for money. They’re like, Josh, when are you going to have your next deal? Josh, when are you going to have your next deal. That’s a great position to be in. You want to get there as fast as possible. And really it’s about scarcity. So it’s about kind of building up more relationships than you need, having more private capital than you need. And it also allows you to kind of adjust the terms down a little, ratchet the terms down in your favor a little way as much. Yep. Yeah, I always much it’s phenomenal stuff.

Charles: But I’ll tell you, some of my most successful clients, you know, one client has over six thousand units himself and he does not even raise any private money. What will end up happening, Josh, is you’ll just get a stable of consistent investors and that’s all you need. Yeah. And once you sell a deal, those people want to come right back into the next deal. That’s right. It becomes a lot easier. This business is hard at the beginning. The barrier to entry, you know, most of its psychological is huge in the early, early stages afterwards. This is the greatest business in the world to be in. Yeah, I agree.

Josh: I agree. Charles, listen, this has been an absolute blast. I want to ask you one final question, which is really, if you if you had the opportunity to talk to your younger former self, your less experienced self, or one of our listeners who doesn’t have your kind of experience or my experience, what would be the main maybe one or two pieces of advice you would give them to give them some more confidence, give them a little bit more clarity, a little bit more of that kind of a personal self-esteem to be able to jumping into a big multi-family deal.

Charles: OK? Well, this is not just a multifamily advice. This is life advice. Just be confident yourself you can do this. I mean, the people who do this aren’t rocket scientists. There’s nothing special about them. They just decided they wanted to do it. And you can do the exact same thing. Anybody can do this. But I you know, I say that. But there are some people that will never be able to do this business. They just can’t get their own way. This is really what you want to do. You can do this. This is, I mean, I knew early on, very early on, I love multifamily. I wanted to be this multi-family investor, but, you know, early on, I can’t do this for that reason. I can’t do that. You can do anything in this business, right? Yeah.

Josh: Charles, one of the things that gives me confidence that I try to kind of project out is, you know, if you have a really good commercial mortgage broker, the guy that we use is phenomenal. He does a lot of the comps and we obviously verify all that stuff and review it. But when you look at the current leases and the current situation, the current cap rate, you look at where it should be operating today if there is no loss, lost to lease situation and it’s operating at its full capacity. And then with Cap ex looking at what the future rates could look like and what that future must look like, numbers really never lie in this business. It’s really easy to get comps with multi-family. It’s really easy to get rents, rent comps and multi-family. It’s easy to see pictures on apartments, dot com or costar. These other tools and resources in multi-family. And for me, if I don’t have a lot of personal confidence in this business, you can get it through the numbers that are numbers, the numbers. So you can just. Absolutely, it like I can do this. This is not that difficult thing. If you go buy a duplex, you can buy a 20 unit just adding more units. It’s no different, really. The only regret I have is I didn’t do the you know, the big 200 units and the 400 units and 700 that we’ve done. I didn’t do those 10 years ago. It’s my only regret.

Charles: Oh, I know. Ten years ago would’ve been the right time, 12 years ago was not a good time. Not a good time. That’s how fast it turned. But let me, one of the things I teach people is how to understand a multi-family financial statement better than your accountant. Yeah. And a lot of people look at it like, oh, I didn’t know it was gonna be about numbers. Oh, I’m not good at numbers. I’ve never been good. No, no, no. The way I teach it, you will understand it. And I put up I put up a trailing 12 financial statement. And I look at it and I say, how many people look at this? And their eyes glaze over. I mean, the same type of person that doesn’t even doesn’t even balance their checkbook. I said, OK, now watch what I do and I cover up all the numbers. I said, don’t worry about the numbers. All I want you to understand is what’s the time element involved on this on this statement? What not what period of time is this representing? Look at the categories that we put the numbers in, because that category, those categories tell the story. Yeah, I can tell you exactly what a day in the life is of that little old lady who’s been running that property for the last 20 years and whether she’s going to keep her job when I take over the property or whether I’m going to canned her the next day just by looking at the trends in those categories. And once you learn those trends, you get this business. This business is so damn logical. It’s beautiful.

Josh: Yeah, it’s a great way to say that. I love it. I think that would be the title of this podcast. This business is so damn logical. That what it is. Charles, listen, if my audience wants to learn more about you, learn more about your multifamily investing academy, your coaching programs, your forum, where can they get more information about your programs?

Charles: Okay. My coaching programs are only found now with my partner, Jillian Sidoti at the Multifamily War Room dot com. We’re doing another virtual event in March. We only open it up. We only open it up twice a year. You know, if you’re if you’re interested, you come on to our executive council. But if you’re looking to work with us directly, we only open up that that avenue every March and October. That’s the Multifamilywarroom.com. And that’s the best way to track us down.

Josh: Fantastic. Charles, listen, this has been an absolute blast. I knew it was going to I on you to share your stories.

Charles: We’re gonna do this again. And I knew this was going to be fun. Josh, I’m so glad we did this.

Josh: Absolutely. Thank you so much for joining me today on Accelerated Investor. Thanks. I’ll talk to you soon. So there you have it, guys. I had a blast interviewing Charles Dobens for the Accelerated Investor podcast. Man, he’s a lot of fun. He’s got tons of energy and loves just sort of talking shop like the boys, right? Not really a super formal interview.

Josh: Just really having fun talking about real deals, real strategies, things like the earnest money deposit approval funds letter, bringing on a key partner and recruiting private capital.I hope you enjoyed some of the case studies that we talked about. Some of my recent cap ex’s that we’ve done. I also hope you enjoyed our discussion around confidence. Right. You can manufacture confidence or you can let the numbers do the talking for you when it comes to multi-family assets. Listen, if you joined this interview, please share it on social media. Share with your friendship and family. Shared on Facebook, Instagram, LinkedIn, leave us a rating. Leave us reviews. Let us know how we did. Of course, I would love it if you give me a five-star rating and a personal review on YouTube or on i-tunes. That means so much to me to be able to share this and serve you another impact on your investing.

Josh: If you have any questions at all or you want to get coached on how to build your portfolio, visit JoshCantwellcoaching.com and I would love to spend some time with you there helping you build your portfolio, building passive income in perpetuity for you and your family for years to come. Hope you enjoyed this interview. We’ll see you next time. Take care.

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