#148: Moving Vans are Headed to Your Next Market

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 be with you today. I am interviewing a new friend of mine, his name is Chris Larsen. Chris has an amazing story of investing over the last 21 years about the portfolio he built in college and his first investment property, a duplex that he rented out. Almost like a six-unit duplex when he was just 21 years old. And now in this interview, we’ll talk about Chris’s just skyrocketing success. Now, Chris owns a portfolio of over two hundred and twenty-five million dollars. He’s raised tens of millions of dollars for his apartment holdings. Chris is going to tell you a little bit more about his book called Next Level Income.

Josh: And Chris and I have an amazing conversation about everything from him being a professional racer and him actually quitting a race in the middle of a race because he knew he no longer wanted to race. We’ll talk about his investing strategy of investing in light value-add apartments that are in the path of progress. Also in his book, Next Level Income, we’ll talk about how to create an opportunity fund. We’ll talk about it on this podcast. We also talk about over two dozen of Chris’s indicators or metrics that he likes to look at when he’s investing in big multi-family properties. Some of his favorites, which include net population growth and also drilling down into the diversity of the employment base in a market.

Josh: And he talks a little bit about more on how to analyze leases, specifically how to how to look for diversification of employment so that he knows that his employment base will support the leases going forward. He also gives an amazing tip on how to use the United Van Lines Web site for your due diligence. We also talk about one of his deals that he’s recently done that got an amazing evaluation on a small commercial property. And then the property got almost wiped out due to COVID. All of his tenants couldn’t pay their mortgage, couldn’t pay their rent, which put Chris in a spot where he couldn’t pay the mortgage. And now Chris was able to work with the tenants and work with the bank to create a win winwin strategy for everyone. You’re absolutely going to love this interview with Chris Larsen, whether you’re starting out with real estate, whether you already have a good-sized residential portfolio or whether you’re a huge multi-family operator. You’ll love some of the tips in this interview with Chris Larson from Next Level Income. Check it out.

Josh: So, Chris, welcome. Welcome to the Accelerated Investor podcast. I’m so excited to spend some time with you, get to know you a little bit better. Talk a lot about your money-making strategies and especially these big multi-family syndications. But, Chris, there’s a lot going on the world right now, obviously, coronavirus, COVID, election, you know kind of political and social unrest. There’s a lot of reasons for people to be negative or to be confused or to kind of have paralysis, because I’m not really sure what’s going on. But like good entrepreneurs, good entrepreneurs are always making hay, always making something happen. So I’d love to hear. Chris, what’s the thing you’re working on right now that you’re most excited about? What deals, what kind of books? What do you work on literally today, next week that you’re really excited about in your entrepreneurial journey?

Chris: Yeah. So I just finished recording the audio version of my book, and if anybody’s interested, they can get it on our Web site. NextLevelIncome.com. Just check out the book, link the books up there for free, doing the audio version up there just yet. But know excited to finish that. I would tell you it’s a lot harder to record a audio book than I thought. You just had to be so precise. So it was a fun experience, Josh. And we’re also for the first time this is since 2015, we are closing on two deals within each other about two weeks apart. So we’re buying a beautiful property in Fort Mill, South Carolina. Twenty eighteen build. That’s just under a hundred fifty units. And we’ve got another property under contract in Carey, North Carolina, another beautiful area outside of Raleigh in the Research Triangle there. I was just touring it with my family last week. So, yeah, I mean, it’s been we were talking before the show like home school makes my wife and I want to pull our hair out. But it’s fun to have some stuff that we’re working on sharing with investors and get excited about every day.

Josh: Nice. That’s fantastic stuff. So the book Next Little Income. Tell me about it. It’s probably got some stories about your journey, your entrepreneurial journey, raising money. But next level income. Like what? What’s the book title? Where did you come up with that? It’s obviously typically a book title has a lot of meanings. So tell us about the book.

Chris: Yes. I’m a I’m not a real creative guy. I’m an engineer by training Josh. So every everything’s next level income we’ve got next level income, dot com, the books, next level income story behind it. About two years ago, two and a half years ago now, my marketing strategist said, hey, you should like you should write a book. Because I was writing I was starting to build a cache of blog posts. So sit down a couple times a week and writing articles. And really the goal with next solid income, the first tenet is to educate investors. So I was trying to put articles up there because, you know, as you’re familiar with, Josh. People would call me and say, hey, can you tell me about this? And I would write him an email.

Chris: And after about, you know, seventy-five emails, I thought, why don’t I just write this and put it somewhere so people can read it? And my marketing strategist said, hey, you could you could actually write a book out of these blog posts. And I was like, what would that look like? We started talking about it and I thought, well, if I’m going to write a book, why don’t I do an outline? So I was in Toastmasters, you know, talking about giving speeches and how to kind of build an audience and tell a story. So I wrote an outline and I thought, OK, I’m going to sit down every morning at five a.m., five thirty eight and just write for an hour. You know, each of these subjects, I would I would literally lay everything out. And it took me two weeks in two weeks. I had the book written. We did an e-book. Finished that two years ago. But a lot’s changed in the past two, three years. So we updated the book. We put some new stuff in and I put a new chapter in I would call Your Opportunity Fund. And, you know, the book tells a little bit about my story, Josh, starting at age 21 as an investor. It talks about losing my father at age four, losing my best friend when he was 18. I was 19 at the time. My journey to become a professional cyclist and why put that put that to the side to ultimately chase financial freedom and now try to help other people achieve the same thing.

Josh: That’s phenomenal. So in the book, I’m curious, most people that I know that are successful entrepreneurs have some event that usually happens in their life. Good, good, bad. You know, somebody a lot of times, honestly, bad situations. I’m a pancreatic cancer survivor. That was the kind of catalyst for a lot of things in my life. I’m curious if your entrepreneurial journey has one of those moments, one of those stumbling blocks. If you discuss it in the book. Tell us about that.

Chris: Yes. So, you know, people that know me, they hear, oh losing your father at age five. That must have been terrible. Truth is, I was so young. It really had a limited impact. And I was raised in a Christian. How old? And I told my mom was like, it’s OK because he’s with God now. So to me, the normal was having my stepfather. Great man, help, help raise. That was normal. The moment for me was when my friend passed away. We were at a bike race. He had a brain hemorrhage and I actually went to the hospital. I was the one that identified him in the hospital. And it was it was a shock. I put my head down for a year and all I want to do then, Josh, was raced my bike and be a professional cyclist. So I’m at Virginia Tech. I’m an engineering student. I tell people I knew two weeks into a program I didn’t want to be an engineer, but it was OK because I was gonna go race by bike and I thought, I’ll come back, you know, and maybe go to grad school and figure out what I want to do.

Chris: And I actually started I was always kind of entrepreneur. I had these side businesses that I would have because racing a bike, you don’t make a lot of money. You sure still want to have some financial means. When Chris died, I, I told myself a couple of things. One, I said I’d never let an opportunity pass me by. I said, hey, Chris, we should go do this. I’d say that be great. That’s part of the reason I quit racing my bike is it’s so it’s so restrictive. You’re so disciplined in your training. I wouldn’t I wouldn’t drink any alcohol as a college student. I wouldn’t even take an Advil. I wouldn’t stay up late. That hampers your social you know, your social life and those sorts of things. I’ll never forget. I had a girlfriend bring me a hotdog from a cookout that was on campus. And I said, I can’t eat that. She’s like, what? I said, I don’t eat hot dogs. Like this athlete can’t eat hot dogs, you know.

Chris: Even silly, you know, silly stuff like that. But really, a year after Chris died and I talk about this in my book, I won for the second year in a row his memorial race and for something that was so meaningful to me, raced bikes and then memorial racing for my friend who passed away just over a year before that, I felt nothing. And I won it, like in dominant fashion. Yeah. So it should have been like the peak of my athletic career and I felt hollow. And a week later, out of the championships, I pull from the side of the road. And the feed zone, if you know anything about cycling, there’s zones where you can get a water bottle or some food. My mother was there, watching on a hill and I pulled over and I just sat down and she’s like, What are you doing? I said, I’m done. And she didn’t know I was. I literally like in my mind, I quit cycling. And she looked me. She goes, But you’ve never quit a race before. But I quit that day because I knew my life had more meaning than just riding my bike around in circles. And I wanted to honor my friend’s life. I want to honor my life. And I knew that there was things that I could achieve that were much better and that it still plays a big part in my life. A lot of great relationships. But it was at that point that my life and focus really changed.

Josh: Yeah, no doubt. Now, today. Your life, your focus is on your multi-family portfolio. Portfolio consists of No. Eight to 10 large acquisitions in the last several years. Over two hundred twenty-five million dollars of property owned. You’ve raised tens of millions of dollars for your deals. And you sort of kind of did all this very recently in the last several years, kind of building off, be very strategic about where you invest. You told me kind of getting ready. First, you have three specific markets. So just tell us a little bit more about your moneymaking strategy. Why did you pick apartments? Why do you pick large apartments? And, you know, a lot of people kind of get into apartments as an evolution where they start with small deals, they start with wholesaling or rehabbing. And you have a kind of a different story than a lot of people where you kind of specifically took a career path that would help you meet accredited investors to invest in your big syndications. So tell us a bit more about your deal flow right now, maybe some deals that you’re buying. Describe these couple deals that you’re about to purchase and help us identify what does that look like? And, you know, help it help our audience understand how can they participate in that type of stuff? What kind of systems they have to have to do what you’re doing?

Chris: Yeah. Josh, I appreciate that. So I started at 21, bought my first investment property. And I talk about in my book, I was day trading the stock market and just the volatility, the stress, I thought. I don’t know if I want to be doing this from 40 years old. So now, 20 plus years later, I appreciate the decision my younger self made. But my strategy was really simple start. Now, Josh, I thought, OK, if I can buy enough properties that ten thousand dollar of net rent coming in before debt service, I was like, OK. Net expenses. Ten thousand dollars a month after tax. That’s pretty good like that. That can provide a lot of freedom. So I bought enough properties that I had over 10 grand a month coming in. And the second piece of the problem, after I figure out what the strategy was, I needed a job to produce the capital to do it.

Chris:So I’ll never forget going and sitting, and it wasn’t Barnes Noble. It was Borders outside Christiansburg, Virginia, just outside of Blacksburg. And I got this book. It was like 100 hundred careers. We can make over a hundred thousand dollars. So I had this, you know, I. Okay, I got it. I need to make a lot of money so that I can have money to invest that. That was the thought process in my head at age 20. And through a series of events, I ended up meeting a gentleman that was a friend of the State Farm Age and I worked for and he sold orthopedic implants. Now, I was in biomedical engineering and here two years earlier. We’re going through like finite element analysis and how to design these implants. And I’m thinking to myself, I’m not smart enough to design these things. And here I can I can take a career where I can understand the overall aspect and then work with surgeons to provide better patient care. And for somebody that had an interest in being a doctor. This was very appealing to me. Made good money. As you as you mentioned, you have a mental accredited, you know, wealthy, affluent investors along the way. That wasn’t necessarily why I did it, but it certainly provided kind of this confluence of events.

Chris: After over 10 years of owning and managing these single-family properties, I realized as a, itjust took me way too long. If you ask me, somebody’s that’s got an MBA in finance. But I realized my return on equity was so low from where it could be. And then on top of that is somebody that was making who was accredited, making hundreds of thousands of dollars a year. I was paying a lot of tax. I was like, there’s got to be a better way. So I became a passive investor in these multi-family deals. So why did I do it? I’m very analytical. And people a lot of people don’t believe me when I tell them this, but my wife and I moved to Asheville, North Carolina, and before we did, I had a stack rank spreadsheet where Asheville was on there. So when it came up with a friend that was looking for somebody to move North Carolina and work for him, I told him, I said, if you have something in Asheville, you let me know. And he’s like, have you even been there? I said, no, but it makes sense on paper. You know, as the engineer.

Chris: This is the guy that doesn’t test drive cars. I just figure out which is the best rated and how I get the best price. So that’s how I looked at it. Same thing with the metric ice industry. I knew that there were these demographic trends that were fueling the medical device industry. So when I started to look at other options and real estate multifamily was presented to me in a meeting with like kind of in a conversation. And when I drilled into it, I found that millennials were fueling this renter trend. And I thought, these are the same reasons that I decided to get in the medical device field. So it was a no brainer for me. Josh ’cause philosophically, it made sense. It took me two years to sell all of my single-family rentals and transition everything into commercial real estate. So that was in 2013.

Chris: I decided to make my first investment in the multi-family space, so I made a big jump, you know, from like these little, you know, single family rentals to boom, you know, buying into one hundred,hundred- and fifty-unit property. And then our first syndication was a few years later in 2016 and that was one hundred unique property. And now we’re about to close on a two hundred- and eighty-eight-unit property coming up here. So we, we liked the multi-family is for the demographics. I talked all about that in my book. We like the larger properties for the efficiencies that we can achieve. But really we apply over two dozen data points to decide what markets to be. And then we let you know, once we let the data and the numbers speak for themselves, we go into those markets and really work on the relationships and sourcing. High quality deals like the one that we’re getting right now is an off market deal.

Josh:Fantastic, you mentioned the two dozen data points. I’m sure you cover that in your book. Tell me about some of your favorites. What are some things that stick out to dozens? Great. But there’s usually maybe three to five that I look at. You probably have three to five as well. Could be income growth, population movement, things like that. Because to acquire an asset where you know that that area is going to grow. You can have the opportunity, have very organic growth, kind of a light rehab, light value-add and just kind of buy and wait as the path of progress comes through. But many people want to start investing in their own backyard. So as you talk about your kind of favorite demographics and what helps you identify markets also. Tell me a little bit more about how you got comfortable. Now, I know you live there now, live in that market. Those markets that you want. But you had to get comfortable thinking you were going to move to an area that you didn’t know. You weren’t going to invest necessarily in your backyard to start because the demographics told you where to invest. So help me understand the answers to those two questions.

Chris: Yeah, absolutely. So, again, you know, this is you’re talking to a guy who won’t test drive a car. I just trust the numbers. So, you know, I don’t know. Now, I trust my intuition more and more. So the big thing is net population growth. So if if you’re looking at these things, you’re just thinking in general or let’s say you’re young and you’re looking at where should I move to have the best opportunities in life? You want to move to an area where people are moving. And in my book I call it the rising tide. So population growth in an area is literally the lifeblood of all markets. So if people are moving there, it’s going to make whatever you’re doing easier unless you’re trying to buy up a bunch of vacant land for you. That would probably be the only thing I could think of that would make things easier if people are leaving. You want you want to live and you want to operate where people are moving. One of my favorite things. Like you don’t want to dive into all the data and the numbers, go on United Van Lines Web site. And every year they put out a report and you can see the states where people are moving from and where they’re moving to. I love it. It’s by one of my favorite things to check out every year.

Josh: First time I ever heard that little tip. I love it.

Chris: Oh, yeah. It’s and it’s again, like you have to dove deeper than that when you get into the markets. But it’s really it makes sense. Like people are moving from the east. They’re moving out of where the weather’s not great and the taxes are high and they’re moved areas like the southeast where the weather’s better and the taxes and cost of living’s lower. Better quality, lower cost of living. Itmakes sense. Right? Then you want to drill down. You go even further. So then you say, OK, we want diversity of employment. So I’ll give you a counter example. So Houston, 10 years ago was dominated by the oil industry. Now great industry. Right? Well, when oil prices dropped and the oil industry suffered, the multi-family units or multi-family suffered there in Houston. Today, over a decade later, you have a much more diverse employee base. So that’s another data point we like to see.

Chris:What are the top 10 employers? You are they stable? Do you have government? Do you have universities? Do you have private industry? Or is it a one factory town? If it’s a one factory town that you have, you know, some big concerns about what may happen. So let’s say you found a region that you like, a state that you like, a city that you like. The employment diversity is is good. Now you go into a property. So let’s say we’re looking at a property and this is super important in March when we were doing due diligence on a property during COVID. We go and we do an employment analysis within the property. So if we have 200 units to look at what each of those 200 residents. What they do. And then we’re going to determine what the risk is in each of those. What we’re looking for back in March was do we have a high percent of service industry workers or do we have more white-collar workers? And what we determined well, had about a two percent high-risk resident base there. And do you know what our collections were two months later? It was 98 percent.

Josh: Pretty close. Pretty dang near 100 percent.

Chris: Yeah. So, you know, a lot of times if you know the numbers to look at, you can kind of predict the way things are going to occur. Now, I’m not I don’t like to bet. Like I don’t like to gamble. I don’t like to bet. I like the if I do bet, I like to bet on tidal shifts. So I bet on big long term trends of people. Talk to me. If you look at my book, I try to pick things. I know we’re going to one for like 10 years because if you bet on a rising tide, you might face some short term challenges. So people, you know, some of our is really concerned about with what’s been going on this year with COVID. Hey, Chris, collections are down. You know, maybe vacancies or economic vacancy is up. Well, we’re not selling the property this year. So if you look at it over a five year period, the big trends aren’t going to change the demographic change. Yeah, the fundamentals aren’t going to change. So it provides a lot of comfort if you know that you’re going the same way as the tide. It’s a lot easier. You know, you’d much rather paddle downstream than upstream, right?

Josh: Love it. So your strategy we talked a little bit about this get ready is, you know, buy in the path of progress where there’s net population migration, where there’s stable jobs, diverse economic and you purchase. And the strategy for your passive investors, for your limited partners is kind of buy and hold three, five, seven years and eventually liquidate and sell. So help me understand a little bit and help our audience understand a little bit more about when you started doing. I know you invested passively. Everybody’s always interested in learning. How can they be better at raising money? What can I do to kind of get my first big apartment building done? Maybe I first heard 50, 200-unit deal. What are some of the things that you remember about your first big raise? How it went? How did you get the money in the door?

Josh: How you built those relationships ahead of time to kind of have them kind of warmed up and ready to invest in your first indication that first one is always a little bit of a little bit of a grinder. Not quite sure. You’re like, oh, boy. I think I can do this. I think I. I have it under contract. I, I can get non-recourse funding, but what about the three million dollars I’ve got to raise and then all of a sudden you’re done? Kind of what? The sweat off your brow. And you’re like. We did it tell. Tell me about that for your first deal.

Chris: At some I was like, hey, you know, you guys raised four million dollars for this deal. And I said it was four and a half. And believe me, when you’re so darn proud of it and how well, when you’re sweating that last 500 k like it’s a big deal. So. Right. When you raise four and a half million dollars during our first raise and what I tell people is, I mean, you can have somebody promise their first child, you know, hand over their heart, you know, swear to God that they’re going to invest one hundred thousand your deal. And that’s worth about 50 percent. Again, a guarantee is about worth 50 percent. And no offense to investors. Things happen. And as you know, Josh, when you have a financial relationship with investors. You learn a lot of interesting things. You know, I’ve heard personal stories, you know, ranging from divorce and sickness to things like, you know, having to having to rebuild a boat dock or something like that. That was unexpected. So, you know, things come up. So if you’re array’s and you need to raise three million dollars, you want commitments of about six million.

Chris: So that’s rule number one, you know. Over raise when it comes to, you know, the commitments that you have in hand if you back up a little bit. You need people to know, like and trust you. So I was fortunate to have kind of built a network over my career and have people that knew what I did, both personally and professionally. And Joe Fairlie’s, who’s big in the family space, says you need business success and real estate success, ideally to be successful in the space. I think, you know, people that understand what we do in the multi-family space. So it’s never too soon to become building that network. We now have a platform. So I think if you’re going through this long term, having some sort of platform and again, I stumbled into this, we started Next Level Income to provide an educational service for people. You know, the opportunities is secondary. You know, this was really you know, we’re just doing it for free as part of the mission that we have.

Chris: But it’s definitely helped to provide a platform for investors. So those are those are a few things. And then when it comes to actually raising the money and get it, you know, bringing investors into a deal. I mean, communication is tantamount to high level. You have to have just a very transparent communication strategy. You have to always be honest and you always, as we say, at Next Level Income, put investors first. So, you know, it’s the Southwestern Airline CEO. You know, it’s like do we know, he has his formula, which is, you know, is it going to be cheaper? Is it going to be more profitable or is it going to be better for the passengers? And if it’s not more profitable, it’s not better for passengers. It doesn’t fit one of those than it’s out. So we say, is this better for investors? Is this better for investors? Not, oh, can we make more money on this? Like, if I was an investor, would this be better for me? Always run our decisions through that filter. And people may argue as some of our decisions. And that’s fine. But that is the filter that we’ve put it. It’s worked for us. And I would suggest that if you were going to take an investor’s money, always make sure you look in the mirror and say, is this really better for George, yes or no?

Josh: Yeah, no doubt. When I had Kevin O’Leary on the podcast, Kevin was talking about. Look, when you start to build a business, you can kind of muscle it up to about five million dollars. That after five million to 10 million, which is where a lot of entrepreneurs fail. He talked about the ability for that entrepreneur to go from just muscling at working extra hours to their capacity to delegate. And then typically after five or 10 million and they have some capacity to delegate, bring on a team. Now it becomes about bringing in industrial money to really scale. And when you take on that investor money, just to kind of mirror what you just said, you now have like almost like a new boss, which is those investors are now your new boss. And it becomes, hey, what can we do to communicate better, provide better returns, more significant returns, but also more secured, more regular, consistent returns, and to be able to communicate that on a regular basis and do it in a way that you can kind of communicate with everybody.

Josh: So the fact that you said you have a platform, typically when you say a platform in this space, it means if some sort of Web site, membership site, some sort of back office with deal flow and education, for those people to be able to read articles, see updates on their deals and be able to do it in a way where you can kind of communicate in that one, the one to many strategy where you can put in the information one time and communicate with all your investors at once. So because they don’t really want to lot of people call us, I’m sure they call you too for updates. But if they can get a solid update by just logging into some sort of platform or membership area or industrial update, they would rather do that. And then as a deal gets closer, refinancing or selling, then expect to hear you’ll have your phone ringing off the hook all the time. So really, really cool stuff. So, Chris, let’s back up for a second. I know you sort of just told your story again. You talk about this in your book, Next Level Income.

Josh: But let’s back up to when you first got started with your very first deal period, your first ever resi deal. Everybody remembers their first resi deal and when you talk about that, also tell me a little bit about one of the deals that you did that had a lot of hair on it. I love to talk about real investing, and not every deal is all roses and rainbows. You know, I had a deal that I bought. It was a short sale. And I found out there was a double homicide in the property seven years after I bought it. And the son was, you know, had like a second personality, had like a little bit of schizophrenia, ended up murdering his parents. So I had some deals that has a lot of hair on them. Right. So those are always the fun stories to tell. But tell us about your first deal. Tell us about some hairy deals so our audience can understand. Look, this is a real business. It’s not always roses and rainbows.

Chris: Absolutely. So the first deal I did was 21. So we are looking at 21 years ago here in December, which is coming up real soon. It was right, I think was right after the first day of winter. So I was living in a room, a rented room and a townhouse in Blacksburg. I was a junior in college and I was having issues with like that wasn’t working. And there’s issues. I hadn’t signed the renewal. So we’re talking about, you know, going into probably like October and school started and they’re like one or two months and I’m paying the rent, but I hadn’t signed a lease. So I see this townhouse up the road. It’s just one row townhouse come up for sale. And I was like this could be an opportunity. So I looked at it. We’re talking about like ninety thousand dollars, back in the late 90s and was able to get a FHA loan, pay less, put less than three thousand dollars down, had my mom cosign on it and basically a house back. So I thought, hey, if I can buy this and run out two of the three rooms, I can live here basically for free, which is what I did.

Chris: And that place next door basically had my own little mini six unit the family deal. Yes, you kind of mash them up together like a duplex, sounds run out of the six rooms, and I was self-managing it. So that was the first deal that I did. I think it’s a great way to get started. I tell people, if you’re listen, you’re like, hey, how do I do my first deal? You could do a house hack. You could buy like a fixer upper, like a fix and flip. You actually live in why you do it. And to be able to live in a property, create value and then sell it on the backside tax free, which you can do if it’s your personal residence not to get. I’m not your accountant, but look into that. Yeah, that’s powerful.

Josh: I did very similar, Chris. I mean, I bought my first investment property. I was staying with my buddy after college. Living at his place, like this is cool. But I kind of see my friend Kevin is renting out two of the other rooms, wasn’t charging us much, but I’m thinking like he’s offsetting a lot of his mortgage right now by running, you know, the other two rooms out to me and my buddy Tim. So I quickly went and bought my own duplex. I lived in the first lower unit and it was a three bedroom. I rented out one of those to my buddy Josh. His name was also Josh that I rent it out the upstairs to a young couple with a small newborn. And I basically live there for about 100 hundred bucks a month. After all my expenses were paid and even the utilities and things cost me about 100 bucks. My mom thought. You know, I was so young, I was 23, 24 years old, you know, not only are you buying your first house, but you’re gonna be a landlord. Like, what are you doing?

Josh: You know, I don’t do that. What makes you think you’re going to be a good landlord? You’re gonna lose your ass. They’re going to, you know, break everything there, steal everything. I paid full price for it. I got an FHA loan exactly like you talked about. But today, I own that property. It’s nearly paid off. It’s going to pay for if I refinance it. It’ll pay for most of one of my kids college for at least two or three years tax free. And I paid full price. So I think the lesson there is, is just to get in. Right. Get into something that’s manageable. So then that’s cash flowing, maybe a light rehab. And it’s interesting to hear you talk about now your value at apartment strategy. That’s, you know, 100 units, over 50 units or more is still that kind of light rehab strategy. I like that as well. That’s pretty cool. So. So, Chris, tell me you’ve probably had a hairy deal or two. You probably had a deal that went a little bit sideways. Tell us about that.

Chris: I don’t know if I have any, you know, kind of took some of the wind out of my sails with your double homicide story. But I think this is pretty cool because it kind of kind of concessions between the two. So I sold that townhouse back in 2015. And while I was in the process of closing on it during that period, I had I was looking for an office in downtown Asheville for my wife to rent. So we’re down here looking at some spaces. We were actually with our attorney at the time and he said we just bought this place next door from the bank and we’re finishing it. We’re going to some offices. And we went looked at one of them and I was like, it’s pretty cool. And he goes, Well, Chris, you do real estate. He goes, they have another you know, another one of the seven unit for sale right down the road. So I went he goes, I’ll show it to you. So this is our attorney’s showing me this, you know, for the. And I looked at it and it was on the market for about 700 grand and maybe more than that. So they had they just lowered the price. It was like seven twenty-five. At first it lowered it was on market for about seven hundred grand. Took a look at it and I talked to a friend who’s a commercial broker.

Chris: And I thought, you know, I don’t really need this, but we could buy it. And it was a mess like it. When you walked into it. Josh, it looked terrible. It was built in 2007. So it wasn’t even 10 years old, but it looked like somebody moved out in the middle of the night. There’s wires and out of the wall, you know, paint was all, you know, marks all over the walls. There were ceiling tiles missing. Just it just looked like crap for somebody that I grew up with, my stepfather was a contractor. I looked around, thought, this is there’s not a lot wrong with this. It just looks like crap. Half vacant, half of the seven units were vacant and the other ones were at 50 percent market rents. So I did a little back of a napkin. I was like, you know, you don’t need it. But if I could do it 1031 exchange into this property, I’d save a lot in taxes. And there’s some upside. So I made an offer to the bank four hundred thousand dollars. The bank came back at like five forty-five and we bought it for five twenty-five. So we put it about twenty five grand into it. 1031 exchange. Put another about twenty-five grand into it to fix it up.

Chris: Essentially doubled rents which were still I rented below, got it leased up as quickly as possible and two years later I was able to refinance at the property’s worth about nine thousand today. Now the flip side is that’s a commercial property. I had half my tenants here this past year shut down by the health department. So you have this, like, kind of home run of a deal that you came in to and needed a bunch of work? You know, from my perspective, it was easy work, but a bunch of work, you know, got it up to speed within about a year and then if everything’s going great. And then one of my tenants she had to shut her business down. That was only profitable after two years. So I worked with her to transition out of that lease because she has two units rented. So I didn’t want to kick her out of, you know, kick both her businesses out. I wanted to help her main business survive. And then so help helped her work through that. The other challenge was, you know, these tenants really, they couldn’t pay rent and stay solvent. So I worked with the bank.

Chris: I was able to do some deferred payments and was able to pass on those deferred payments onto them. So they were able to survive for the two or three months that they were shut down. And, you know, it’s obviously it’s not great when you don’t have any rent coming in. But having the bank be able to work with you and pass it on to your tenants who you have a relationship with. It was it was a learning experience for me. But it was also it also made me feel good that, you know, these individuals that I have a personal and professional relationship. You know, I could do something for them, even though it wasn’t it wasn’t optimal. So, you know, it’s neat because they pulled me aside afterwards and said, you know, it’s really cool. We were all in this together. And I feel like those relationships, you know, they’re gonna be they’re gonna be with me as long as they want to be there.

Josh: Yeah. That’s fantastic. So I love the challenge that it presented. Great deal. Challenge presented out of nowhere due to COVID and then, you know, being resourceful, which I think most really successful entrepreneurs have that trait of being extremely resourceful, flexible. Find a way. Find a solution. That’s part of what kind of scares me about this upcoming election with a lot of the socialism talk is you remove a lot of that creativity, you remove a lot of the entrepreneurship when you have more of a socialist society and everybody gets paid for regardless of what they contribute. You contributed in a big way in that deal and were able to help people stay solvent because you had some skin in the game. You wanted to protect that. And so we’ll see, you know, we’ll see what happens with the election. And I don’t want go down the bunny trail. But congrats on being very, very resourceful there. So, Chris, last and final question. I’m sure you talk about this in the book, guys. Make sure you pick it up Next Level Income by Chris Larsen.

Josh: Chris, you probably talk about in the book some of the lessons that you’ve learned along the way. Things that you would maybe tell our audience, things you’d pass along, pay it forward, pass back to your younger former self after all of your successes, two hundred twenty-five-million-dollar portfolio, you know, big syndication deals, you got two more deals closing coming up two weeks apart, which is amazing. I know what that kind of raise can look like. We’ve done deals like that, too. You’ve probably learned some amazing things along the way about yourself, about your relationships, about your entrepreneurship, about how to manage money. What are some things that you think are maybe some top lessons that you’d like to pass along?

Chris:So number one, Josh, all down to the people. And like you said, I talk about in my book, I say real estate is a team sport. And I make an analogy to cycling. So people may look and say, oh, you know, Lance Armstrong, and some people may not like the guy, but, you know, pick out, you know, cyclist that is won like the Tour de France. People glorify that individual. There’s a whole team behind him, you know, a whole team not just on the road, but people that are, you know, preparing the food, the bottles like that about, you know, the feed zone earlier, you know, giving massages, you know, driving the vehicles, the team mechanics like you have this individual. And anytime you see, you know, some, you know, magnate or, you know, person like Elon Musk in the business world, there’s a whole team and those people. So number one, you know, begin early building your network. And remember that those interactions that you have, you know, whether it’s with your boss or a coworker or it might be.

Chris: I have a terrific story about the person that worked in a cafeteria when I was really early on in my career. And like, the cafeteria was closed and the surgeon that I was working with couldn’t get anything to eat. And I ran into this guy and we just, you know, it’s been nice to him. And he goes, hey, let me go grab you a sandwich. And he went in the back and grabbed his surgeons some sandwiches. Here’s a surgeon making a half million dollars and a guy making a tenth. And he’s like, how does you do that? And I was just nice. Yeah, I’d say hi to the guy. So just remember that those interactions that may seem innocuous are a reflection of your character. And they compound over your life. And ultimately, those will be determinant not only of success financially, but also the fulfillment that you have personally. And I think that, you know, that is the biggest thing is build that network. Remember that it’s all about the relationships. And, you know, you don’t have to be cutthroat and put a gun to a person’s head for every negotiation to be successful.

Josh: I love it. There you have it. Chris Larsen, listen. Thank you so much for joining us today on Accelerated Investor. I had a blast.

Chris: So, Josh, thanks so much. It’s been fun.

Josh: So, guys, there you have it. I hope you enjoyed that interview for Accelerate Investor with Chris Larsen from next level income. Check out the show notes for links to his book and his Web site. And guys, listen. We’re all in the middle of change. I want to thank you for being here with me today. All of us are in the middle of change due to COVID, due to the election, due to changes in the economy. I’m sitting in a very bare office recording this in my home because we recently bought an 80 unit apartment building and decided to move some of our corporate office in to the leasing office and get rid of our corporate office. So the painters just left. I’ve got a brand-new home office where I am hanging out in today, but it’s not decorated at all. So if you’re catching this on YouTube, I’ve got this boring gray wall behind me. I promise you, next time it’ll all be decorated. We’ll be excited and ready to go. So we’re going through some changes while I’m excited. Upcoming. I’ve got a closing on a 16-unit apartment building. I’ve got a closing on one hundred- and twelve-unit apartment building. We just closed on this 80-unit apartment building.

Josh: There’s a lot of amazing, we just looked at a 52-unit apartment building. We just listed one of our latest rehabs for sale. We’re also winding down our private equity fund and pivoting those dollars in the multi-family and apartment buildings. We just bought a five unit. We just bought another duplex. There’s been amazing things going on. So there are real estate deals happening. There are real estate entrepreneurs making money, and Accelerated Investor. This podcast is the absolute best place to find that information and hear from those experts and hear solo casts and strategies and techniques from me. If you’ve enjoyed it, please leave us a rating in review in YouTube or in i-Tunes. And again, I want to thank you so much for participating with me, sharing with me, giving me the opportunity to come into your life every single week, a couple times a week with the Accelerated Investor podcasts. Thank you so much for being here. Have a fantastic rest of your day. We’ll talk to you soon. Take care. 

Hey, Josh here. And do you want to win a free Accelerated Investor T-shirt? All you have to do is give Accelerated Investor our podcasta rating and a review on iTunes. OK. Do that now then send us a screenshot on Facebook, Instagram or Twitter. What we’re going to do then is every week we’re gonna pick our favorite rating in review and we’re going to send that person a free T-shirt and maybe again, some other cool fun stuff as well from Accelerated Investor. So, again, don’t forget to take a screenshot, leave a rating review, take a screenshot, send it to us so we know exactly who you are. And then once a week, every week on the podcast, we will announce a new winner. Don’t forget to take a screenshot and send it to us so we know exactly who you are. We’ll announce a new winner every week.

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As an engineer by training, Chris Larsen is all about the data behind a potential deal. With a $225 million dollar real estate portfolio, he’s worked hard to remove the emotion from decisions by relying on dozens of metric points that help him analyze a new market or property. Chris’s new book Next Level Income educates investors on how to leverage real estate to build their dream life.

One of the metrics that Chris looks for is simply: Where is everybody moving to? And once he establishes that, he drills down with more questions:

  • What are the top ten employers in the area?
  • Does the area have government, university or factory employers?
  • What is the cost of living?
  • What are the taxes like?

Once he gets that information, Chris digs even deeper into the properties he finds. He wants to know what kind of employment the tenants in those buildings have. If he’s buying in Houston and every tenant is in the oil business, then a bust in oil is going to mean a lot of missed rent checks to him. He suggests you use his metrics to buy in the path of progress where there’s net population migration and stable jobs.

Some of Chris’s tenants in his commercial properties have had a rough year with the shutdowns. Opening up the lines of communication with them has helped him create some win-win-win situations, or in some cases, just help his tenants save their business. When you make good business decisions based on data, you can afford to put some heart back into your business when you need to.

What’s Inside:

  • How Chris uses United Van Lines to figure out the next hot market.
  • Why it’s important to diversify your tenant base’s employment.
  • Some of the key indicators Chris uses for finding a new market to invest in.
  • Chris’s advice for raising capital: always over raise.

Mentioned in this episode​

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