The Fastest Way To Build A Six Or Even… Seven Figure Real Estate EMPIRE!
At this point, most real estate investors are familiar with value-add improvements. All the standard upgrades like countertops, flooring, and bathrooms. But what about the closets? Well, my guest today has found a niche that is creating an average increase of $45/unit with a 37% ROI with less than 3 hours of labor!
Jim Monk is the President of Clozzits.com. He’s been a serial entrepreneur for 17 years, he’s helped build three multi-million dollar companies and his newest venture has expanded into 18 markets in just two and a half years.
His company has developed a program to increase rents by 3% to 8% while improving the net operating income of your buildings and your asset value. And they’ve worked with huge companies like Katerra, Harbor Group, MMA, and Pinnacle and hundreds of thousands of units.
In this episode, Jim talks about how the idea of renovating closets got started, the incredible organic growth that they’ve had and shares how their simple process can add so much value to your properties. We also dig into his thoughts (and concerns) with cryptocurrencies and whether or not these hot markets in the US are sustainable. This is a jam-packed interview that I know you won’t want to miss.
Key Takeaways with Jim Monk
- How Clozzits help to make your units stand apart from your competitors.
- Jim’s concerns with the big players in the multifamily real estate space and how inflation costs could impact returns in the future.
- How his company can help investors to get a 37% ROI with an average increase of $45/unit.
- The beauty of the simplicity, the quality, the costs and the turnaround time for the completed work.
- Why newer entrepreneurs should seek advice from those who are at least two steps ahead of them. Meaning if you own 100 units, talk to somebody that owns a thousand units.
- Jim’s thoughts on cryptocurrency, both the positive aspects and the negative.
- Predictions on whether or not the hot markets continue to be hot in the next 3-5 years, especially in the Sunbelt markets.
- Why building processes and procedures are the most important key to success for scaling a business and managing people.
- Jim’s favorite hacks for scaling and growing companies, including listening to podcasts!
- Keep an open mind as you never know when or how things may change.
Jim Monk Tweetables
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Josh Cantwell: Hey, guys. Welcome back to Accelerated Real Estate Investor with Josh Cantwell. I’m your host, and today we’re going to have a lot of fun with this interview that I’m about to show you and share with you with Jim Monk. Jim is the President of Clozzits.com, spelled C-L-O-Z-Z-I-T-S dot com. Clozzits has developed a program to increase rents by 3% to 8% while improving the net operating income of your buildings and your asset value, all without having multifamily owners laying out much capital. His goal with his company is differentiating your units from the normal amenities and tap into new areas of construction, development, renovations, and property management. Jim has some massive clients that use his services, including one client, a REIT that owns over 290,000 doors. So, in this interview, Jim’s going to discuss what led him to building this company and his passion for supporting companies. And some of the companies that are his clients are companies like Katerra, Harbor Group, MMA, and Pinnacle. You’re talking about over 500,000 units and 500,000 doors.
In this interview, Jim and I are going to talk about his company, Clozzits.com, and how they can help you differentiate your units and also how to do it for about $1,000 a unit and how to get a 37% return on investment, meaning for every dollar you invest, you’re getting about $11 in return. And also, how they can install these in your units in less than two-and-a-half hours. So, on top of talking about this unique concept, this unique amenity for your units, Jim and I also discuss, number one, why process is the most important and process manages people. Number two, we’re going to talk about how Jim grew three companies from start-ups to multimillion-dollar exits. Number three, we’re going to talk about and discuss with Jim why you need to talk to other investors who are at least two steps ahead of you, meaning if you own 100 units, talk to somebody that owns a thousand. If you own 3,000 units, talk to somebody who owns 10,000 units. And we’re also going to talk about why arrogance and emotion is evil. You’re going to love this episode of Accelerated Real Estate Investor with me, Josh Cantwell, and my guest, Jim Monk.
Josh Cantwell: So, hey, Jim, listen, so excited to have you on Accelerated Real Estate Investor. I know, I apologize. I must start. I’ve rescheduled this about 27,000 times, so we’re super excited to finally have you on live. Thanks for being on, Jim. How are you?
Jim Monk: I’m great. I’m actually excited to be here too. It took us a little while to get here, but here we are.
Josh Cantwell: Yeah, fantastic stuff. So, Jim, obviously you’ve been an active operator, a passive investor. You have a fantastic business helping operators grow through the closet business. We’re going to talk about it, but I’d love to hear your take on what you’re up to today in your personal life, in business. What are you up to right now that gets you going? What are you excited about?
Jim Monk: So, very first thing, I’m an active dad, so I’ve got two amazing kids, one that’s looking at colleges right now so I’m in the midst of that and I’ve got a little bit of a younger son who’s 11, so he’s keeping me on my toes. So, outside of that, oddly enough, I think people are really surprised knowing my background as a serial entrepreneur. I’m actually really doing a deep dive into cryptocurrency right now and trying to understand that world. And I think a lot of us that know something at least about it, it’s a lot of questions and how it’s playing out in blockchain and everything. So, that’s one of the areas that personally I’m investing in and doing a lot of research into right now.
Josh Cantwell: Love it. So, tell me about crypto. Tell me one thing that convinces you that crypto is a good play and then tell me one thing about crypto that confuses the hell out of you and you’re still not sure about.
Jim Monk: So, I would say first thing that really sparked my interest was how it could be utilized as a way to offset inflation in some respects. So, that was a really very interesting part from my point of view, you know, as it relates to the values and so forth of it. Probably one of the things that scares the hell out of me, if I must say, is government intervention and what they’re going to do, how they’re going to roll, what they’re going to do because I can tell you that there’s a lot of concerns around it. And I think there’s been a lot of negativity around it but the premise of it works. I mean, you look at groups like JP Morgan and so forth, they’re looking at the blockchain technology. I think that that’s where it’s headed. I come out of financial services, so I understand that and where that’s going so I feel very comfortable but I’m very worried of what the governments are going to do of the world because it’s outside of the realm of what they can control.
Josh Cantwell: And they love to know what the hell we’re doing, right?
Jim Monk: Where we’re spending our money, how we’re spending our money. Yeah.
Josh Cantwell: One of the blessings and the curses of crypto is the open blockchain that everybody can kind of see and what you do with those dollars to buy things. Right now, a lot of people seem to be investing in crypto and holding it, not necessarily as a means of actually exchange like to buy cars, to buy houses, to buy clothes. They’re not doing that yet, although it’s happening. It’s just not on a big scale. But the governments wouldn’t they love to know in an open-source platform exactly where we spend every nickel? And wouldn’t marketers love to know where we spend our money so that they could direct their marketing to us in a way that we buy more stuff? So, the blessing and the curse of crypto, I love it. So, Jim, you’ve had a fantastic success story in real estate. You’ve been an owner-operator. You’re a passive investor. Quickly just tell our audience a little bit about where you’re at today in real estate. What are you doing as operations and passive investing? Kind of where do you stand today? And then we’ll jump into your business to help owner-operators.
Jim Monk: Absolutely. So, I came into it by accident is what I would say. It wasn’t deliberate. I had run a number of large-scale companies, had been very fortunate in life. And so, I started investing in multifamily probably about 17 years ago, and it was just a part of the portfolio. And I had the fortune of between myself and a couple of business partners building up to almost 3,000 doors without any debt. So, at that point in time, we had about 140 million or 150 million in asset value at that point in time. Fast forward, we turned over a number of things. So, today, we’re at about 1,500 units with our own outright bias between C and B class property sets, passive in the sense that I’m not involved in any of the day-to-day type of stuff but they’re a great asset from my point of view. They perform well. There are challenges when you’re dealing with lower-class sets such as more maintenance and some of these other things with our older property. But we are in a hold pattern at this stance waiting to see where the market’s heading. Every time I keep thinking that the market’s had it or kind of leveling out, you know, I’m in Dallas, Texas, it’s not.
Josh Cantwell: Not in Dallas, definitely not.
Jim Monk: Not in Dallas. And when we’ve sold some of these properties because the thing that I tell people all the time, Josh, is when you have someone come to you with a crazy number, go right and you say, “No. Thanks we’re passing,” and they come back to you for a second time and they throw even a crazier number out to you, you’re like, “Wow. I had to take a pause for that.” Then when they come back with a third number, you have to go, “Okay. That’s 10 years’ worth of returns that I can make right now. I probably need to take the money off the table.” And so, we’ve done that on several occasions and others we have not. And so, that’s where we’re at and we’re just kind of evaluating. There’s deals that kind of flow through personally through the family offices and so forth that we look at but as we’ve talked about you and I just briefly even is that the market is I know in Dallas and in other markets where we have clients where the other businesses I’m involved in, it’s red hot. It’s Phoenix. They’re red hot. And every time I keep thinking that we’ve hit the ceiling, I’m proven wrong.
Josh Cantwell: Yeah. There’s a lot of people in New York, New Jersey, and California who are looking for new places to live. They’re going now. They’re going to Texas and Florida.
Jim Monk: The whole Sunbelt area. Exactly right. And it’s red hot and you mentioned, like I said, some areas that you’re involved in and I’m going, “Yeah. You wouldn’t have thought about Alabama as an example,” but yeah. Now, you need to think about Alabama.
Josh Cantwell: Yeah, no doubt. No doubt. So, what is your take on the market? Do you think you’re seeing this in real-time, people making you offers that you never thought you’d be getting and you think it’s topping out? Real estate is obviously very, very local, right? So, what’s happening in the Sunbelt is not happening in Ohio. It’s not happening in California. So, I asked this question, I guess, with tongue in cheek a little bit and with a grain of salt, what is your thought on the market and specifically the markets that you’re in? You probably can’t comment on the market as a whole everywhere because markets are very geographical but you mentioned things keep going up. Do you think that’s going to continue in the markets that you’re investing in?
Jim Monk: So, one of the things that I’ve had the perspective of is working within Clozzits and we work with a lot of really large-scale REITs. And we’ll talk about some of that and mid-tier groups, groups that have between 3,000 to 10,000-unit or doors. You know, my biggest client has 290,000 doors right now. That’s a massive amount of doors. Yeah.
Josh Cantwell: What?
Jim Monk: 290,000.
Josh Cantwell: That’s got to be a property manager, right? Like, property manager that manages.
Jim Monk: No. It’s a REIT. MAA out of Germantown, Tennessee, publicly-traded, 290,000.
Josh Cantwell: Wow. 290? I got to start thinking bigger, man. I thought 3,000 units was a big deal. That’s what? 100X. That’s 100 times what we’ve done. I’m a small fish, man.
Jim Monk: You should go look at some of these UDRs. Another great example, one, Greystar. Our first client we ever had was a privately-held REIT that had 3 billion in asset value. That was our very first client. But where I’m going with that is, when we sit down, we listen to what they’re doing and then I go to what I call the mid-market of syndicators and everyone else that’s out there playing because, again, that’s a lot of institutional money. The concern that I have is that so much money has to be deployed. I mean, I’ve got one client right now that’s sitting on $7 billion that is going all back into multifamily. And when they’re sitting there and they’re complaining that we can’t find deals or deals where I can get the yield out of it, the thing I have to remind them of is, yeah, but you’re also the cause of this because when you’re a big, large scale REIT, you’re not looking for 15% or 16% rate return. You’re looking for 3% to 7%, 8%. You’re okay with that. I can’t be. I’m not okay with that.
Josh Cantwell: Which is just forcing everything to go up. So, they are causing their own problems.
Jim Monk: Correct. And so, my biggest concern I see right now is the deployment of cash. There’s a lot of it still out there. And as long as it’s out there and there are people out there willing to sell for single-digit returns, I see the demand just continuing to stay very hot for at least the next three to five years. My biggest concern that I have outside of that is inflationary cost. When I look at that, I look at the labor shortage, or I look at material cost and so forth, it goes in either renovations, buildout, any of this. I get concerned about where the consumer is headed and whether or not they can afford these prices and if we’re pricing ourselves out of certain markets as relates to rents. Right now, we have the benefit of being in a market that’s growing because we have so many people coming in here. We’re absorbing all that in Dallas here, in other markets. But wherever there’s a migration, there’s a void that’s left, right? I mean, you’re talking about like Ohio and these other places. There are voids that are left. What’s going to happen in those markets? Now, there’s a great opportunity to snap them up maybe but there’s also, again, those inflationary costs that are impacting the daily consumer.
Josh Cantwell: You’re so right. So, the void, we haven’t really talked about it much but the population loss in places like Chicago, New York, New Jersey, California is leaving a void. And we talk about, man, you can never get yield in California. And with all the population migration out of California, out of New York, New Jersey, out of Chicago, people ask me all the time, “Should I invest in Chicago? I see deals everywhere.” And I say, “Well, that’s the problem. If you see deals everywhere, there’s nobody buying them, that is the problem. Don’t go there.” Right? You want to see moderate. I like things when they’re normal today, Jim, as I’m sure you would agree, things are not normal. And one of the challenges as an operator is projecting out. So, if you buy a building today and you’re projecting out three years or five years and maybe your goal is to refi three to five years from now, the number one metric that we look at is future rent. What’s the future rent times the 50% expense ratio divided by your cap rate? You have a new value. That number is so important. It’s so hard right now to think about where you’re going to be down the road.
In Cleveland, where I operate primarily in Ohio where a big part of our portfolio is, it’s a little bit easier to predict because we’re forcing appreciation through significant value-add because the buildings here are old 1960s, 1970s. It’s not like Dallas or Houston or Arizona or Florida, where everything seems to be built in the last 5 or 15 years. So, it’s a totally different mindset. So, tough to go. Any advice for operators you think or things that you’re looking at when you’re evaluating deals to try to peg that number, to try to peg the rent number in the next three to five years? Is there anything metrics that you look at or different reports that you look at to try to give you a gauge on where the markets are going?
Jim Monk: So, a couple for us is one of the things that we started looking at was, obviously, you’re going to be looking at what your retention rates are, you know, what the occupancy rates are within certain markets. One thing that I started looking at is like economic development, how many people are coming into a market, how many doors are being built. So, you made a very good point here in Dallas. We have so many doors coming on, over 40,000 doors over the next year and a half to two years. And you’re sitting here going, “That’s kind of a freaky number,” and it sets out there. I saw a real page report just recently, Josh, that we’re way beyond what most would be, but it’s because of all the people flooding in that we can absorb that. Otherwise, we would be flooded and the market would be just in a real bad place. So, what I’m looking at is what’s coming into that market? Are there economic development opportunities where there’s big employers coming in, things of that nature where there’s nuggets that a prospective company can come in? I’ve had friends of mine and other syndicators that I know that will know that there’s a good example like Tesla.
Tesla came into outside of Austin in a small little town. Some people knew that it was coming in through economic development and so forth, snapped up some land nearby, and now they’re developing that in an area that’s just pasture land. Now, I’m not saying the development’s the way to go, but redevelopment is another big play and I think you’re going to be seeing more and more of that with the stimulus and with a number of the things. But the biggest thing that I look at is those rents and so forth. But the other thing I was going to on this, Josh, was when you’re competing against these new doors being developed, it makes it much more difficult in that aging property. You have to keep up with it because guess what, for $75 more a month or $100 more a month, then be able to get into a B or A class property set over here that’s got an infinity pool that our property doesn’t have. So, it requires us to mostly be on the look at that and knowing what that is. And that’s one of the bigger challenges I would say with working in big, hot metroplexes just like we are in today in Phoenix or Vegas is picking back up and so forth. You’re competing against the existing and the new stuff coming on the market.
Josh Cantwell: Yeah. We don’t have any of that mostly so I’m good when it comes to that stuff. Cleveland, Columbus, Cincinnati, three of the 50th largest cities all within for me, about a three-and-a-half-hour drive. So, we’re focused on that Midwestern stuff and places where we can get big yields like you’re talking about. You know that 15% to 17%, even 20% annual rent growth, especially in the first year or the second year because of the value-add improvements, not really through population migration or job growth or economic growth but it’s purely through a heavy lift of the actual building. So, it’s fun to hear different people’s perspectives on what’s going on. Jim, you’ve had a ton of success. I would love to hear your take on this. You’ve built three companies from zero dollars to multi-million dollar companies. Your latest business is called Clozzits. It’s spelled C-L-O-Z-Z-I-T-S. Clozzits.com. And this is a business that helps apartment owners. These are the clients of yours are the apartment owners, the syndicators, the operators helping them put in new amenities, including special closets for their residents to stand out to be different. Tell us about this newest venture. How’s it going? And how does the owner-operator benefit from working with you?
Jim Monk: Great question. Actually, it came out of necessity, almost. You know, like I talked about it before, we were in competing with – I was like, say, we had new neighbors coming around us all the time, developing up new properties, and we were struggling. We didn’t have the capital. We’d already done a lot of the things I think most of us do in this role of value-add. We did the hard surfaces. We did the paint color changes. We added new countertops, the flooring. And I was sitting down with a friend of mine and basically said, “Hey, you’re in the renovation side of multifamily. What are you seeing that the big guys are doing that I can do?” And he said, “Not much. All of you were kind of swimming in the same bucket there.” And I said, “Okay. Well, what area of the apartment hasn’t been touched?” He goes, “The closet.” And I said, “Why?” He goes, “It’s utilitarian.” And so, we started experimenting with our own portfolio. And what we found was we were able to support rent increases and differentiate ourselves in the marketplace compared to our competition, and creating more storage.
And so, the market, we’ve been doing this for about two-and-a-half, almost three years now, Josh. And so, when we started the company, the very first thing we said is, “Well, we need to be a manufacturer. We’re going to vertically integrate. We’re going to cut out all the middle people because I need to get as much money squeezed out of this to get an ROI within the next two-and-a-half to three years like most of us and I needed to do X for me.” And so, what happened was a company came in one day walking our property looking and said, “Where did you guys get those?” And we said, “Well, we did that,” and they said, “You know, we have about 50 complexes and we’d love to talk about. This is amazing. You’re actually getting a $45 rent increase off of these?” And we said, “Yeah. Every unit.” So, today, to kind of give you a snapshot, we’re in about 18 markets in less than two-and-a-half years.
Josh Cantwell: Wow.
Jim Monk: Yeah. We’re growing very fast. We’re a full turnkey solution. So, for our clients, we go in and we do it on the terms. We can do renovations. Renovations, that’s an easy one for us. We do it on the terms. And the reason why we do that is because we saw the need to get rent increases because we’ve already done everything or a lot of our clients would say, “Hey, I don’t have the capital means to go and spend thousands of dollars. I have X. What can I do?” And so, most of our clients have come about because what they’ve done is they have walked their property, they’ve bought a property, they’ve heard about us through word of mouth and they’ll say, “Hey, we want these in our units.” Once I see them performing, they want to go do it in all their other units. And so, that’s what’s happened for us. It’s been a very organic, very fast-growing thing. It will be an additional 10 markets probably within the next, well, we’re in December almost here. Next year will be another additional 10 markets.
Josh Cantwell: Got it. So, the recommendation is, okay, let’s say I buy a new building like I have 500 units under contract, three separate buildings I’m buying between now and the end of January, 170-unit, a 220-unit, and a 77-unit. And I’m going to go in and I’m going to do my heavy renovation. I’ve got a $1 million budget. Let’s say it’s 5,000 to 8,000 a unit and I’m going to upgrade these Midwestern Rust Belt apartment complexes that we’re buying. We’re going to raise the rents by $200, $250, and we’re putting an all-new LVP, white sugar cabinets, granite countertops or butcher block countertops, new tub surrounds, we’re glazing the tubs, new vanity, new toilet. We do all that. So, the option is hire your company, have you guys also do the closets, right? Meaning instead of just like one shelf and a bar, which is what most closets have, or not even the shelf, just the bar going for a lot of units. One option is to have you guys come in during that value-add, heavy construction, heavy renovation phase. Do it then. Or do that first lease-up, charge X amount.
Let’s say the rent goes from $750 to $900 or from $900 to $1,100, then have you guys come back in possibly at the turn. Could be two years later. That unit becomes vacant. That person moves out. Maybe we’re just cleaning it and repainting it. And during that week, that property’s offline or that two weeks that properties offline, you guys come in, slam out these new closets, and then we see you’ve already got the big rent bump on the first renovation. Now, we see maybe a $40 to $50 additional bump because we’ve added this additional storage using the existing space we have, right?
Jim Monk: Correct. So, for us, our average closet typically takes about two-and-a-half hours for our team to install. So, we’re in and out very quickly for that reason, and our average client today sees about in all the markets we’re in about a $45 rent increase. ROI about 37% is what they’re actually seeing right now. So, for every dollar they’re spending with us, they’re seeing about an 11X return for every dollar with our amenity set. And the reason why they’re coming in and doing this is, frankly, for one, they’re supporting it and they’re getting it but the other reasons are Gen-Xers and your boomers. The boomers like my mother have a lifetime supply of stuff and they’re trying to store everything.
Josh Cantwell: That grandma’s always got a bunch of stuff.
Jim Monk: Gosh, does she ever? And so, then you have the other set which are going, “Hey, I’m working from home now more often after COVID. I want a place where it’s a resort-type amenities, and I don’t mind paying a little extra for it, especially on the female side of things.” And so, what happens is when you look at we’ve had clients come about because we’ll be installing in one side of the street with one company. People are walking through. They’re doing the tours and so forth, and they’ll come back and we’ll get a call from across the street where a company says, “Hey, we want to put them in because the ones across the street we hear are getting this kind of rent bump.” And so, that’s how a lot of our stuff has grown organically is because it’s a very big differentiator in the marketplace. And when you’re talking sub, typically below $1,200 of a product amenity, that’s a relatively small number when you’re considering what it supports and how quickly it supports that. I’ll tell you one of the other things that we did, listening to the market, which caused us to grow quite aggressively, is we came in with a lease-to-own program because we had a number of clients, Josh, that said, “Hey, we don’t have the CapEx for this. We’ve blown through our budget but we’re seeing it work in your one property set over here, but we really want it over here.”
And we became the bank. I’m such a believer, myself and my business partner. We do a lease-to-own program over five years and basically, it’s a no recourse setting. So, because we don’t want to mess up the first position of a mortgagee or whoever is holding the note. So, we’re that much of a believer in what we’re doing and supporting. And so, we went and partnered with our clients on this, and that’s caused us to grow too in that respect for those who don’t have the budgetary means to do it.
Josh Cantwell: Got it. So, peel back that partnership a little bit more. So, I have a 220-unit. We just bought it in April and we paid 11.65 for it. It’s about 53 a door. It was greatly mismanaged for 10 years. Okay. So, I had one owner, didn’t really do a whole lot, another owner for two or three years, didn’t do a whole lot. We took it over. The property is in a great location, very B-Class. This is actually in the area where I went to high school and I love the area, super B class. But because this building was mismanaged, rents are low and the tenant base is not that great, right? So, we bought it. Since April, we’ve already turned, hard turns, full turns, 61 units. Just totally slamming it out, 10 units a month. And that’s done. So, if I wanted to say, “Okay. Let’s add this amenity to these units.” These are, let’s say a two-bed, one-bath, or 787 square feet. And so, living room in the front, kitchen off to the right, you go down the hallway, you have closets down the left, you have bedrooms to the right, bathroom in the back. So, bedroom has its own closet and then you have sort of a main closet in the hallway for linens. Some of the linen closet/whatever closet.
If you look at that scenario, help me understand how we would engage with your company. And also, this rent-to-own partnership thing, tell me how it goes.
Jim Monk: It’s good. So, the very first thing that we’re going to want to know is what kind of dimensions we’re dealing with. So, the easy way to do it is have someone within your team, your management company, even just the management person going out and giving some basic floor plans. We don’t need all and we just need some so you can get ideal pricing. And the pricing is really driven by how much square footage we’re dealing with. And what we come in and we say, “Look, here’s what we’re doing. Here’s the installation cost for us to do this.” And you know, I would say in the market today, we’re under $1,200. Some markets were a little heavier just because like Phoenix, there’s a low supply of labor. It’s not the material cost. It’s the labor of installation and so forth that plays into that. But for most were sub $1,200 in most markets. And so, what that would allow us to do is go into a closet and typically we’re going into the primary closet first because that’s where we see the greatest rent increase. We actually saw that on the secondaries. We do have clients that’ll do the secondary and even a third bedroom. They’ll get usually between a $10 to $15 rent lift, but it’s not nearly as significant as the other or your linen closet and so forth of that nature too. You get actually a better rent increase off of that than you do in some of the second and thirds.
But the point being is we’ll come in, after we get the measures, we’ll do the design, full turnkey, no cost. And then what we’re saying is here’s the cost associated with that. Once we have that, we know those floor plans, immediately, what’s happening is we’re getting into your schedule. So, once we’ve been given a green light, we’re getting into your schedule. We’re coordinating with your general contractor, your maintenance team, your property manager, and we’re starting to coordinate those turns or those renovations on a monthly basis. And we’re going in, we’re doing the installations, we’re in and out, and then you guys are doing what you do best, which is exposing the residents to that or the new residents to that and seeing the rent increases of that. That’s that piece. And that’s where a lot of our clients go.
The other aspect of it is around the lease-to-own program. The lease-to-own program is someone somewhere with a couple of different exceptions. One is we’re in need of some due diligence on our part. So, it’s all about what the rent rolls look like, what are you trying to achieve? We want to make sure that we’re investing in a company that’s going to have a good game plan down.
So, we do a little of that due diligence over about a 24-hour, 48-hour period. We didn’t say how much of the complex are you looking to do this on? Most of our clients are doing between 70% and 80%. They’re not doing 100% because, Josh, they want to leave meat on the bone for the next ownership group, typically. And so, what’s happening is we’ll go in and we’ll start scheduling out in that manner and say, “Okay. We’re going to 10 a month. We’re doing 70%, 80%. So, here’s what we’re looking at over another 18 to 24-month period.” And that’s typically how we work today with our clients and as they get scheduled and as they get installed, when you’re starting to collect rents, that’s when we start billing. So, we’re staggering that so that it’s not a massive cost outlay for you, the owner, and you’re able to see those things and continue on the process.
Josh Cantwell: Got it.
Jim Monk: At any point in time, our clients can pause. We’ve only had a couple where they’ve paused and typically one was a hurricane came through, so they had to put a pause because they had all kinds of damage afterwards in Louisiana, and the other one was a fire and we got it. We just said, “Hey, you have some bigger issues to worry about. Get those taken care of.” And then the fire went and get it resolved. We’re back on board now with them, but they had to focus all their resources to fixing the building.
Josh Cantwell: Got it. Got it. Love it. Love it. So, some of the things I heard, just going to spin this back to our audience, some $1,200 cost per unit. I did the math real quick, 220 units on this building, figured $1,000 so $220,000 investment. Two-and-a-half hours to install. And like you said, typically installing in 70% to 80% of the building to leave some meat on the bone for the next guy. We have that conversation all the time with our lenders, one with our brokers who list and sell our buildings and brokers that we buy with who are saying, “Look, you actually sell the building more often. We’ll get more offers and often get a higher price per unit.” If you leave some meat on the bone because the next buyer feels like there’s some equity in it for them, right? When you get maxed out, there’s nothing for them to like there’s no lift for them. There’s no increase for them. It makes it actually less attractive. I agree with that comment wholeheartedly, for sure.
Now, Jim, I have to ask you, you’ve built three multimillion-dollar businesses, this being the latest one. I’m curious to know what kind of growth hacks. What kind of strategies have you used to not only be a successful multifamily investor, operator, and passive investor, but to build these other companies? You know you scaled them to 18 states, 18 markets. Some people look at that and say, “Damn, that’s a lot.” They got these big clients 290,000 units, some of your clients. How the hell do you do that? So, just what are some thoughts, some hacks, some different strategies for building companies?
Jim Monk: So, one of the very first things I would say is process. So, you know this as much as I do. I learned this a long time ago. You can make all this look really good but it’s all about when from a scalability stance, you have to have processes, as you’ve got to build to have a process that manages people. And so, one of the very first things we came in and did was how do we go from installing one unit? How do we install 200 units in a day? I mean, that’s the kind of way we approached it. Your quality control, how you get material over there? So, we start asking these basic questions. And so, process is one of the very first things I would say in every company I’ve had, day one. It may be a simple process. It may be just saying, “Hey, there’s two of us in this company. Here’s what we’re going to do. Here’s how we’re going to do this.” So, one of the best things I always tell people to do is resources-wise, I read a lot. So, E-Myth Revisited is probably one of the best ones, and another book is called Traction. Traction is by far one of the best out there from a process stance.
Josh Cantwell: He actually got on the podcast last week.
Jim Monk: Oh, really?
Josh Cantwell: Yeah.
Jim Monk: Wow. So, small world, because that is an amazing book around the EOS system and what works. And I drank the Kool-Aid many, many decades ago. And you know, to your point, you were saying multi-million. Just not to toot my own horn but to get from a financial services company where I was working on my house to $400 million, which is where we related 8,000 employees and executing on that over a five-year period, mind-blowing processes. And so, some of those life hacks, I would say, also are podcasts. Things like this are really important. My car is a university on wheels. Every time I’m in the car, I listen to podcasts. It might be Reid Hoffman who’s one of the co-founders of LinkedIn with Masters of Scale. It might be My First Millions. It might be your show. It’s whatever is going to give me the information I need to be best equipped as a leader and owner of properties and so forth. And so, those are some of the best life hacks. I’m amazed so many people barely pick up a book. They’ll listen to a podcast.
Josh Cantwell: No doubt. Jim, you’ve had a ton of success. Last question, just what kind of advice would you give your younger former self? So, you just gave some different hacks and strategies for growing companies, but more on a personal level, you’ve had a lot of success. You’ve probably had some stumbling blocks and challenges along the way like most great entrepreneurs have. If you look back and were able to look yourself in the mirror and see yourself 20 years ago or whatever the number was, what would you tell that person? Like on a personal scale, on a business scale, what would you tell them? Like, what would you do differently? And what did you do to do well? What were some things that you thought, “Hey, man, make sure you do this because this freaking worked?” What are those things?
Jim Monk: So, one of the first things I’m a first-generation high school graduate and college graduate. I graduated high school very early in life, so I was very fortunate to get some sort of intellect about me but the one thing I kept remembering was go talk to successful people. If you’re looking to be a 2,000-door person or a 3,000-door person, your portfolio size, go talk to the one that has 5,000 to 10,000 units. Go look up. Don’t settle. I mean, that’s one of the things. When I first said that, I said I want a mentor, and he was a vice president. I was able to talk to him, Gordon Gibbons, who came in and I was a VP at IBM at the time he was, and I said, “What made you a success?” He said, “Education, I did this. I read a lot.” And so, if you’re a person who’s just getting started in multifamily real estate even, they should be talking to you. How did you get to this? And surround yourself with those types of folks. I don’t think we do that. You got to set aside the ego, the fear, and all that. That’s one of the other things you need to do. So, I would say one of the things I did right was being able to go find those individuals, seek them out, and say, “Look, humbly, I don’t have a lot of that knowledge. Can you help me?”
And I may sound like these are some stupid questions to you, but to me, that’s the starting point. And then as I got more experienced, I mean older, more experience, I was able to ask more complicated questions because what? I had those situations now and I had that experience built on. So, that’s one of the things. And so, I would say that. I’d say I would have told my younger self, “Quit being so arrogant. Set the arrogance and the ego aside.” I found that those that didn’t really cashed checks always so well, if anything, they spend money. And so, set some of those things aside and really be humble in what you’re trying to achieve and who you’re with. I would definitely say some of those lessons I learned, one of the very first lessons I learned was a property that we bought. Very first property we bought we didn’t do proper due diligence and I know you’ve been through this experience yourself and you find out really quickly, “Oh, we need to spend a million dollars on roofing. Oh boy, I didn’t see that coming,” or, “Oh, we didn’t do proper…” Just within a very short period of time, we realized with that one first property that we were going to be in the hole for four or five years and you’re just struggling. Financially, we had the money to take care of it but that was not the plan.
And so, what I learned from that is surround yourself with really great people, everything from real estate attorneys to those who can do appraisals, to those who had dealed. We’ve never done a deal and we didn’t take any advice. That’s part of that arrogance part. So, that would be another thing that I would recommend. And then I think one of the other things is keep an open mind. I know there’s a lot of change happening in the world today. And what I mean by that from a business philosophy and what’s working, there are things where I would say to the younger self, “Keep an open mind because what’s working today may not work in the future or may change.” And some of those things are everything from the technology that we work with today to make our lives a lot easier to how I do due diligence or how I pull information today that there’s so much information that’s readily available that wasn’t 20 years ago. You know this, Josh, and it’s amazing but at the same point in time, I still have to have the skills to sit down there and work through the formulas and figure out, okay, is this a good deal? And I have to take, for myself, I have to set my emotions aside a lot and be very logical in that because emotions are like, “Really, I just want the deal. No, I just want it.” I just want it or I’ve got pressures that I need to deal with and then you find out that you made a bad deal. You knew the red flags. You just didn’t pay attention to them.
Josh Cantwell: Great stuff, Jim. I just wrote down on my notes here I’m taking arrogance is evil and emotion is evil. Because you’re so right, though. Like, when we’re not asking questions, it’s either because we have an arrogance that we think we know it all or we have a fear that we’re afraid to ask. So, that is an evil like just saying, “I don’t know everything. It’s okay. I just have the guts to go ask somebody who’s two or three steps ahead of me the questions I need to know.” Versus saying like, “I’ll just figure it out as I go,” which is that could be a million-dollar mistake like you just described on the roofs, right? And then emotion is evil where you get it and especially this case, especially in the south, where you have a deal, there’s a call for offers and there are 37 offers on the one building. Everybody’s into it. You got to have your ceiling like where are you going to tap out at?
Jim Monk: That’s exactly right.
Josh Cantwell: Tap out. Don’t just keep going. I don’t want to go up another half a million because I really want it. Look, if a deal doesn’t pencil, it doesn’t pencil. And that’s where it comes back to the conversation Jim and I were talking about knowing what that number is, that future rent that you think you can charge by 50% time, divided it by your cap rate to hit that number and stop, right? Don’t let emotion get involved. There’s going to be another deal. There’s going to be another opportunity. My brother, Mark, once said years ago, “If you can’t find deals, you’re getting boxed out on deals, expand your market or expand your marketing.” And I still think that was genius because if they’re not happening in your market, expand your market or if you are hell-bent on staying in your market then expand your marketing to go find more deals and build better relationships. I thought that was genius. I think that applies here as well. So, Jim, listen, fantastic interview today. I absolutely loved it. I want to make sure our audience again, we’ll put it in the show notes, Clozzits.com. Jim and I, you and I need to talk after this is over about some of my own complexes. And if people just want to reach out to you, Jim, give some business advice, engage with your company outside of Clozzits.com, where can they find you?
Jim Monk: They can find me at email@example.com. That’s the easiest way or LinkedIn. I’m on LinkedIn religiously. They can reach out to me that way. I’m not much of a social butterfly so I don’t get out there on TikTok or Twitter or any of those things. That’s not me, but LinkedIn…
Josh Cantwell: It’s a good place for the professionals.
Jim Monk: Yes, exactly right. And so, what I would say is I’m there. I would welcome it. I’m a huge supporter of entrepreneurship. So, if someone I believe it’s a right that we all have and it can pull us out of a lot of stuff. You know, I come from a very poor family in Louisiana, and it can pull you out socially, economically. They can pull you out. And so, I’ve just been happy to take the time and share it with you today.
Josh Cantwell: Absolutely, Jim. Thanks a lot for jumping on. I know we’ve had to reschedule this a few times. I’m so glad we finally squeezed it in. Thanks for being on Accelerated Real Estate Investor.
Jim Monk: Awesome. Thanks, Josh.
Josh Cantwell: Well, there you have it, guys. I had a great time interviewing Jim for today’s podcast. Thank you so much for listening all the way to the end. If there’s anything that we can do to help you with your real estate investing business, your multifamily business, just let us know. If you’re interested in coaching, go visit and apply at JoshCantwellCoaching.com. Don’t forget to visit Jim’s website, Clozzits.com. And also, listen, if you’re a passive investor, don’t forget to visit FreelandVentures.com/Passive. I do want to thank everybody. This podcast is just such an awesome opportunity for me to share, to just kind of let loose, let my emotion go free. You can tell I have a ton of energy when I do this. And also, this in a real way has helped us build an enormous real estate investing business. Frankly, just last week, we did a raise for one of our buildings 170-unit that we’re buying and in one day we had over $7.5 million in commitments for a building where we only needed to raise $2.5 million. So, we over-raised by $5 million, which completely populated our second deal. So, now I don’t even have to raise for that second deal because we’ve got enough money now to fund them both.
And this podcast, this platform has really been instrumental in meeting new people, in creating relationships with new people, telling our story, building our brand. So, I just want to thank you for that opportunity to share on this platform, to have you listen, to help that, help you and help us build our business at the same time. It’s been an amazing win-win for us and for our audience. So, again, just want to tell you how grateful I am for you. How much gratitude I have for being able to host and run this podcast. Thank you so much for being here today, and we’ll see you next time. Take care.