Multi-Family Investing With Dan Handford
When you go and you change your focus you still have to make sure that you don't let the other ones go and so we had to put different systems and procedures and processes in, place so you found that the profits at one went down while the new one to around just fine correct, yeah. You. All this thing's whoo business, lunch, with. Roland Frasier. This. Is your seat at the table. Hey. Everybody this is Roland Frasier with business lunch my guest here today is Dan Hanford from passive investing, com thank you for being here today Dan thank your own we're having me where'd you come in from Columbia. South Carolina in, South Carolina and we are in beautiful Laguna Beach with the amazing view of the ocean, not. Able to be just behind those doors. Correct. So, did. We just kind of tell everybody. That's watching slash listening a little bit about you and kind, of what you're doing I know you've got a eight-figure business you've created and, we're. Gonna talk about kind of how that all evolved, but give them a brief synopsis of kind of where you're at now and then we'll dive, into the past sure sure so so, right now you know you mentioned in passive investing calm and that's our real estate investing, you know group that, we started it's. Actually our second year into that business okay and I see years old it's only two years old so but we. Wouldn't have been able to do as much as we have done with that business if it wasn't for the past so we're gonna dive into that I'm sure but okay you know with what we've done right now with past investing com we basically, acquire, large, apartment, complexes, 100, units or more minimum, ten million in acquisition, by, using. Private. Investor, funds so you, know normally you have like a REIT or a hedge fund that might go in and acquire these large complexes, right because an individual, a lot of times can't just write that check for that now there are some wealthy families that do it but a lot of times it's it so it's a REIT or a hedge fund that does it we've, built a company called, passive, investing com that does what's called a multifamily syndication. Okay where we actually pool, private. Investors funds usually there's a minimum investment in there like $50,000. And we'll have 35, investors, on the low end up worst about a hundred investors, in each one of our assets that we inquire and so. That's what we've been building over the last you know year and a half and the kind of growing that company but it all started, from the, begin to form from the beginning in from those, okay cool, let's talk about that thing because I love diving into the the, beginnings, and I think that, you said the beginnings, like your first entrepreneurial, thing was with the college textbook, well, it wasn't with the college textbook it was a college spine mom what was that now is that the first thing I would, say it was the first big, thing because, I'd had a couple other you know like growing, up in high school you know I'd do you know pressure cleaning and yard work and I know going door to door selling Cutco. Knives I've, always kind of had that entrepreneurial, itch okay but I never really, had a bitch Roux success or a business, until. That, business, okay and it was actually created out of a problem that I saw that was there and it, was the ultimate thing that's the frustrating thing though as people say when I was coming. Along and wanting to be entrepreneurial.
Everyone's, Like we'll find a need and fill it you know I. Don't. Need that exist that hadn't been filled but there are a ton of there's a lot of them and and so if you're looking for the need and frustrated, because you haven't found it it will appear, if you are, mindful. Of looking for it it's all it's all about being cognizant, of your surround right and hearing, and listening to people yeah, cuz that's how this one happens okay so tell us the story so, my. Background, is in chiropractic and, when I searched way into Chiropractic College one. Of the things that all these students needed, was a spine, model and what is that a spine model so you know you have your vertebrae, in your spine you, go to the chiropractor and they adjust you and they're moving those bones well they have to know where those bones are in your body to be able to adjust them and be able to move those so like the skeleton you see in a doctor's office only just that's just the spine it kind of exactly. They can put it on the table and position, it and various things like that okay cool so everybody has to have one everybody has to have one and, of course the bookstore is gonna sell them right because they sell everything and I'm very, nice it's just a just out there to give give give this bookstore there, for a profit for sure and with the, funny thing about bookstores. And universities, is that they. Usually sub, those out to a different company and so that the students can't complain, to the college okay and they just make a revenue, share off very funny okay so there's usually one company that ones like you know 15, or 20, different bookstores, in a particular region or you know that even one has like more than that but I digress, but, they're usually overpriced. As its there as a convenience, to the stew sure so, I remember, when our first you know quarter, of Chiropractic, College all, the students complaining about this spine model because we're poor broke college students right we, needed to buy a spine model and they were selling it for a hundred and ninety dollars and it really wasn't like the, highest quality like you can get a really good quality ones right now yeah but yeah just like PVC plastic, okay and so. I went, to the bookstore and, because, I heard their problem, right of you know the hundred, and ninety dollar spine model that nobody wanted to spend money on and so I went, to the bookstore and I was like I wonder if I can figure out who makes this thing and so. I ended up going online and, doing some, research and finding a distributor of, that spine model and they, were gonna that called him up and I said hey I want to go to sell 40, of these things you know how many, how much money would it cost me to buy these things they said well you, know including, the ship mean it would be sixty five dollars it's. Pretty big discount off 190, it's a phenomenal, disc right right and so, for $65, I told, him I said oh great great I'll, go ahead and get some orders in place but I didn't want to have any. Like. IOUs. Or like that cuz either college students yeah yeah so I was smart reasonable. Crowd, exactly. And so, I made sure that I had, them. Them pay upfront so I had like PayPal links, and so I fixed up credit cards and they give me a check or cash but there was no io u--'s okay so, I went in front of each one of the student body classes, or whatever and presented, this offered, offering, of the spine model and I was just thinking I'll make five bucks on it and of course I don't want to sell it for seven do stride knock to five cents off and it was 69.95. Right. 1695. And you're paying sixty-five. Sixty-five making. Five bucks and five bucks and I just I'm doing, this brokering, right okay and so, I went around the car last rooms the first week I sold eighty spines, with cash up front way more than you thought way more than I thought and of course I just at one college this is just one call Wow okay yeah and so, and thankful all the teachers were fine with me get in front of the classrooms, and talking pretty, cool and selling this actually probably happy because they wanted to help they, don't have an interest in the books I don't know just because some other know college isn't saying.
Yeah, Cool so. 400. Bucks well sew it in it out that because, we had sold so I had sold 80 of them, I actually, went. Straight to the manufacturer, and I said hey I had this order, of 80 of these so you had that deal with the distributor, I was working with a distributor okay who now to this day is still our biggest competitor. Which is interesting but, so, we went to the retail selling that stuff we're still selling this oh cool it's actually our number one selling product we sell three or four hundred a month for how long ago did you do this huh that wasn't 12 years ago so 12 years ago you saw, the need and filled it and it's still working it's a seven-figure business that continues to run that's awesome and it's it's it's passive, and it's that's great you know it's, funny because I've considered selling, it yeah but I feel like there's a part of it that's like I'm gonna attach to it I don't, want to give it up but I also kind of think it's kind of a safety blanket because, if, for some reason something does happen to my other businesses I can always fall back on it and it continued to do like is it doing as well as it did when I was running, it from day to day no but, I don't have to do anything with what kind of profit if you can say does it make 20, percent about 25 or 20 percent okay so at the end of the day and I'm doing nothing I say nothing maybe I can hour a month alright he's sitting down with my corporate team or something like that but that's it nice so, it's not bad but, so I went to the manufacturer, not I've you know going back and, I actually they the lady told me she said well if you can sell 80 of those things how many times a year could you do that I said well there's an incoming body of students every three, months I was early. Yeah totally, and so I'm like four times a year and she's like oh well I'll set you up on our highest, tier discount, you can get 40% off the spine model and all. The rest of our products, and so. I said, well what does that gonna get me she's, like it's. $42.48. Nice nice, and I said well does that include the shipping and she says no but. I'm sure I can work that out so she actually got it actually worked it out so I got it for, $42.48. It included, this shipping for ninety million twenty bucks plus per unit exactly, exactly all in and so, I was getting really excited then you know sixteen, hundred dollars yeah and the funny thing is is that I didn't have I lived in a town, home at the time little two-story townhome about 1,200 square feet and, I, didn't have like, the place for a semi truck to come pull in and like turn around and, drop off a bunch of pallets it ended up being four pallets they had put they put twenty spines on each pallet yeah and they. Were they asked me you know where should we ship and I was like just. Ship it to the school. Because. I was I pay attention me yeah so I I had, them ship it to the school and then I called the shipping. You know dock or whatever they have there there's like a shipping direct materials. Director or whatever right and I, said just, so you know I have a have something being shipped there when it gets there just give me a call and and I'll pick telling. Nothing I, think it was so I get this phone call when, it go into their eyes and he's like um you. Have four pallets that's blocking our dock right now and I was like don't worry about it so I text messaged everybody said I'm on a group come, pick him up within an hour they were all gone that's always the funniest thing that's hilarious, um but I did get called in to the student director's office and was, told I couldn't do that right after, I had done it the second time so the first time I was fine the second time they're like you got a stack yeah because I actually two weeks later sold another forty spines did you really I did okay so I just continued to sell them and stuff like that and and, was that into, the same just, the one, college still yes that's always thrown call is amazing so but what I did was is prior to going into chiropractic I had a business where I was doing web design web hosting, networking, that kind of thing okay and in that kind of the technology, space and so, I took those skills and I said I'm gonna create a platform. For me to be able to sell all these products cuz it opened me up to their entire catalog, of over 2000 product right and so, I actually at that time started, an eBay store okay, and just started selling them on eBay and they started selling I was like whoa maybe I'll you know design, a website and have them sell on a website and this is like medically, modely cuz like, it's skeletons, brains, hearts, it's called shop anatomical.
So I still exist your shop is yes I'll shop anatomical, com so. Did. Was there any challenge, with with. Their other distributors. And sellers with. You going online and sewing at discounted. Prices on eBay there was but, I knew. What the problem was of what their presentation. And so, I I figured. Out what their problem was when they were selling so I took. A lot of the products that were online that because, with with with Anna day had a web store as well the major data they both did and actually some. Of these images got stolen from me because I paid, an actual, not, the product. Photographer, to take really, because with these Anatomy, models a lot of people will call you up and they'll say hey do you have the amygdala, in the brain and you're like well you, can't tell online as the pictures are terrible you know right so I took the extra, painstaking, step of making sure we had really high quality photos, and I would not put any product, on our side unless we had really high quality photos, okay like you could really zoom in paid a lot of money in bandwidth, and all this kind of stuff because it took so long to download some of these things but I knew it would be important, for these type of products, and so, that, was one thing that I did to kind of stand out was making, sure that people would actually see it how did you deal with the the people that were stealing your images, well. That was a lesson learned because the. Graphic, person, actually, owned the rights and, so I'm now moving forward, now know that before I hire somebody I want, to make sure I own the right that is so they, sold them with. Somebody else we had a, client, that when. I practiced law that. Was. A graphic design agency, and they designed all of the logos for a very famous well-known golf company and, but. They retained the rights and when the company sold to, a giant, firm for, a lot, of money I think was hundreds. Of millions of dollars. They. Said well you don't have the rights to that so you can't get that and when they were doing their due diligence they said well we. Are not buying the company if we don't buy the right so it was holding up a giant, deal and they came back and they ended up suing our client that was the graphic designer and. We. Were able to settle the case I think the day before customs, was going to destroy all of the incoming, golf clubs that they had with, my clients logo on them and they. Were like we, have to settle this so, it, would what it taught me was what you learned also and fortunately, I learned it on the profitable, side because I was the you know the bottom-dwelling. Attorney, that was making money off of it but, I, learned. That you've got to have those rights you can't and and those graphics graphic, designer deal set them up most of them that, they own the rights and they're only licensing, them to you and so you've paid the money and you get to use them all you want but, they, own the rights so that's a really well, and I like I want that to, sink into everybody it's watching slash listening right I'm eka that could save you, millions.
Literally, Millions seriously. We actually have and. After that all happened we had an Anatomy illustrator, a medical, illustrator actually, design us a whole line of charts, mm-hmm, and that was one of the first things you. Want. To do it for us yes they were like well I want to retain the right so cool and I'm gonna pay you wanted the next person exactly so, we end up finding somebody to do I mean she's done a great job for us and we there's, a lot of profit in charts because you pay the graphic designer which is the up for an expense uh-huh but then the charts cost you like fifty cents right or sell them for like 20 right so there's a lot of profit in them but obviously when you're shipping a chart there's also chipping, and stuff like that right so, so. That's kind of cool so so what did you do with that you just basically said okay I got screwed on that or it. Wasn't anything I could do okay so so, they were they, licensing, them out to somebody else that after they had done them for you yes they, weren't to say license, I guess they were lying there was this you know pay us 500 bucks will give you accidentally but they still in the right so then, again. I. Mean it was one of those things there was a definite lesson learned but one, of the things that I knew that I was doing right was trying, to look to the customer, to see what were they wanting to be able to buy because, we started selling you know you know 20 30 $40,000. A month and, then when we really launched our webstore online, we just put a lot of money behind the Google pay-per-click ads, and that's what we do drive a lot of our traffic from is because Facebook. Retargeting and, Facebook Ads they just really don't work for this kind of business because they're like I want a skeleton, model like you can't like target biology, teachers because they're not like at that moment looking, sir astronomy, right exactly yeah search intent so we spend a lot of money on that so, now did it get how did you're in school, mm-hmm, doing this right how how big did it get while you were still in so how long has chiropractic, school four years four years so how so was this at first year because he was just the first day right so so, what, was happening, by year four and were, you thinking I'm not going to practice chiropractor. II it. Definitely, had across my mind but it did allow us to open up the chiropractic, business debt-free, yeah have any any debt when we opened it up or anything so it was all you worry about last year Lattin out last year of school yeah, we were over seven figures I'm it's amazing so you built a million-dollar business while in school out of just hey I maybe we shouldn't, it's. Funny because in. Between classes. I wouldn't, like, go in the hallways and talk you. Know I would, actually try to get there really early the more and parked my SUV, and, I bought a laptop stand, for my SUV, inside. In between class you sell them out of your SUV no of course absolutely but, I would I would drive the SUV as close to the building as possible, and then any matter if it was it was raining, snow whatever I would drive it I would get out of class go straight to my SUV crank.
The Car up and. Has, a laptop on there and I'd be responding, to customer calls and, like you know people would call up and they'd be like hey I wanted to see if I can get you know a discount, or I want to get this fee waived or whatever like let me put you on hold and talk to my manager, called. You know and and. And. Then of course you know when I was a year in a Chiropractic College I got married to my wife who's still my wife now and. We. Deny yeah yeah we have stories. All over the place of you know customers, calling in and complaining, and you know let me get my manager on the line and my wife a jump on the line and, that. Kind of stuff and then what had happened you know towards the end is that we had a manufacturer, that was from, Germany but they had a facility there in Georgia and where I was located in Atlanta Georgia days can mean it was very creamy so could you just pick up from there we could and so here is the difference is is that most of our products are dropship, hmm but if you drop shit from some companies they charge you a premium so instead of 40%, off you might get only 30%, off right so with this company I basically said well once, a week I'm gonna drive down there and beyond that first was like every other week every other week I'm gonna drive down there and. I'm gonna assume I'm gonna send you my orders I just want you to hold him for me just put him off to the side I'll come pick him up correct gave me an extra 10% nice, well then it bent then it went to like once a week and then it was twice, a week and then I'd have to like go down there rent a u-haul go, to the place load. All my stuff up and just drive it over to the FedEx place just to save that 10% yes, 10%, of thousands, and a lot of money yeah so to me it was it was totally worth it and and. So finally, after about a year and a half of doing that right before we left and we moved to Columbia South Carolina where I set up my practice I got. A call from the vice president, of that company. And he basically said all right let's. Talk here cuz I'm tired of you coming down to our offices, and, he. Said how about instead of to get charging you 10% I'll, just charge you four percent and I was like done you. Know four percents fine cost, on that, me too have the purse exactly, exactly no problem so you know we have a lot of those kind of stories then we had one story of a. Hospital. In Texas that actually ordered a I got ten times life-size, heart, mono, and. It was one of those models where my wife when I was designing the site she's like don't put that on there cuz no one's gonna ever buy that I'm long tan you never know, it's like a six thousand dollar model right and and. So sure sucks, coffee expresso, machine nobody. Buys it but when they do the profits it's just that ten percent that buyer that one percent that's okay that's right but we had they, were it, takes like eight weeks to order those larger models from Germany and if you are in transit it gets damaged, it's another eight weeks to get it in yeah they went in and, it's a six thousand dollar model and so, there was a heart, lab or a heart hospital, opening up in Texas and they wanted this for their Lobby and so, we didn't want to Freight, it from Georgia to there so we, just basically said alright they're gonna hop in the car in the SUV and we're gonna drive it over there oh wow summer wife and I just drove fifteen hours I think was actually Dallas, or Houston, or something like that we drove for fifteen hours dropped it off they put us up in a hotel and.
You Know that kind of stuff and delivered it and we, have a lot of cool stories about that business that's probably again one of the reasons why we haven't gotten rid of it yet it's too much fun it is well and you know with online companies, you're not gonna get that premium you're gonna want for it right it's the multiples, aren't just aren't there on those online business right so I will give you a hundred dollars cash for it right now I have a hundred dollars I bet you would. Cool. Okay so now. You are, doing seven figures you move and open your chiropractic, practice was, there a decision do I want to do the chiropractic, thing or just do this there. Was there was but all along the way the doors that continue to open up for me to stay in the chiropractic, space we decided that that's what I wanted to do okay as we also looked at it and said yes. I was working full time in the, shop anatomical, business but I could. Also hire, somebody to do that because, it was to a point now where it was really just handling, the customer services, customer. Service calls and you know where's my tracking number, you know what about this billing issue so, it wasn't really anything that was like really, high level that I had to do and, those small, tasks, I could just do in between seeing patients okay and so, we actually hired somebody to actually run that and so. They're they've been running it and managed and you know I don't have to mess with it and so I started the chiropractic, business bill well going, into the chiropractic, business, you know there's this thing that is, you, know you think that you're running your own business but really, in chiropractic you're trading time for dollars only, so many people you can adjust a day same thing with a law firm I had the same, thing you know it's, it's always like those cool professions, but then when you start to get into your like weight and pretty limiting its limiting, like there's you can only add other people, like you that work under you and then you just have a scale you know that's, why I ended up doing about two or three years into it I hired on my first associate, doctor to come work for us right and he. Worked in the business and then I got to look on you know on the business and sort of in it as much yeah and eventually. We decided to integrate into the medical space we had what's called an MD, DC, clinic okay and from, there I got a no because I'm, an initial guy what, does it stand for indeed. Order. And then the DC is the Doctor of Chiropractic okay, so kind of easy seen clinic of MD, DC okay so you've had another medical doctor that you brought, in as a partner or no it was just as an employee okay so I still I still own of all of a hundred percent so I've done that strategic, you're like the graphics company. I. Tell you so I have some some I have two. People, well actually really only have one person that has phantom, equity okay and that's it all right um it's a very small amount but. Its amount that allows me to do, what I want to do with you since. You mentioned that will you give a brief just tell people what phantom equity means sure, so instead. Of giving up your ownership of your company and control of your company for variety, of reasons not just you, know control, but also tax, reasons and, things like that for the person has the equity and.
And You also protect yourself from downside. Of that person leaving and still owning your business you, basically give them you. Know fake or phantom equity into your business and, they, basically are sharing, and all the profits, and it's like they owned it but they don't actually own right and, if it sells I'm assuming they get some, sort of ride-along right so that Corey owns like three percent they get three percent correct yeah and and a lot of times companies will do that in the beginning stages and then when they actually exit, it that's when they get their nice windfalls, is when, they do that so and. And it's funny is is that this person and I have no agreement written down anywhere for it yeah but he knows me and I know and we've done really well and you know it's it's, just worked out that way so when I came into. Idea. Incubator was the company that owned digital marketer and all that in, 2013. We we did our deal and, my. Partner's Ryan Dyson Perry Belcher told. Me after after, the deal they forgot, that. Richard, Lindner had, phantom. Equity that. I didn't know that so I oh sorry, but you know I know you just did, this and this was a seven-figure ish you know deal it was seven-figure, plus right deal so so. Then they had to say you know well there's this there's a piece. Of the company you know apparently, significant, piece of the company that that, we have this other owner on we you know that dilutes, all of us and there. Was nothing in writing about it and they'd had it since the beginning so I. Think that was maybe. Four years in that they'd had it and so, I. Think. Two, years later we finally got around to getting it documented, but, same thing but, Richard knew you. Know we're all good guys and we're gonna make it happen I wouldn't ever recommend, that ending them with that but. And, if you do do that be the person that's granting, the phantom equity not person that's not but, but, it is a really great way to do things so yeah it's and that's to me that's really cool because I think agreements, you know as a recovering attorney. Agreements. Are only as good as the people that make them so it's really cool that once. You get sued a few times you realize how well these agreements are not written no no way you can find every little hole yeah because if, you have a good attorney they're gonna or on the opposing, side they're gonna find a hole somewhere exactly, okay, well back to the thing so you have the, business is growing got the phantom equity person you had hired, on people so that business is growing and the other business which is. Just. Anatomical, is that wood shop, and it's all shop anatomic, shop anatomical, is growing so how do you go forward from here so, when, we started. To hire on the medical side I realized, very quickly that I really. Wanted to had the passion of being able to kind of scale and grow because I'm very, vision. Istic or visionary, type person and I like to you, know I like growth, and I like scaling and when I don't see that I get bored frustrated yeah I get frustrated yeah and so. What, I had decided to do was is I want I set a goal to in, 24, months I wanted to scale from one clinic to. Five clinics and so. I told my I brought all my team together it was like 12 at the time and, we had a 5,000, square-foot office that we were you know running the practice out we had the medical medical team there we had the chiropractic, team actually had some physical therapy going on and, we. Decided to scale, and of course a lot of them I could tell we're kind of rolling their eyes like, yeah right we're not gonna be able to scale that quickly you know and grow, that fast and, and. I knew that we. Needed to make some changes but I didn't know what those were gonna be and so we scaled, to the next clinic okay and it were you renting space in the building all of ours are rented okay cool okay so and I did it on purpose because I, didn't know how well these were gonna run yeah well plus you've got it's pretty expensive to throw, all that stuff together it does okay cool and so we probably I think each clinic we were able to open for about probably a hundred and twenty five thousand apiece so it wasn't like an extreme, expense but there was definitely some money that had to be out laid to be able to put in the x-rays, and the fluoro machines, and outfitting, of the office and stuff like that but.
We Scaled it the second clinic and the. Second clinic was, the, the was, the one we learned the most lessons on okay because, in, that second, clinic so it's the one that just took off and did perfectly, so there was no in, the beginning his second one dead yeah so the problem really wasn't the second clinic okay it was the fact that we took our core team from the first clinic to open the second to open up the second huh because, we were like well we don't want to have to like you know lay out too much more money and I'm gonna hire how many hired too many people, whole team and so we split the team yeah and so, the second, clinic was, profitable, in the second month I mean it was doing phenomenal, and then. At the time our. Management. Style was looking at the finances, quarterly yeah obviously we're looking for bank accounts and stuff like that but like the trailing indicator trailing, stuff was not until like the quarterly right and so. We things can go wrong for three months but it, did man we opened up at the end of the first quarter of that year and then by the second, by the end of the second quarter we look to pull the reports and were like oh my, goodness we got to do something right and so. That taught me a lesson that when, you go and you change your focus you still have to make sure that you don't let the other ones go and so we had to put different systems and procedures and processes in place so you found that the profits at one went down while the new one to around just fine correct, yeah and you. Know we didn't actually I wouldn't say we well, I guess it depends on how you look how so we can lose money but technically, you did money okay but yeah you left it on the table yeah and so, we had to instead of doing looking at him quarterly we started looking at a monthly well now because we have five clients were looking at him every week yeah which is which ultimately I think makes the most sense yes yes, so every week I get financial reports even to this day on Monday mornings that I call my my my phone my Monday morning financial reports usually takes me about 30 minutes to review them and then I have a corporate meeting team with my team out once and dashboards. As well anything, like that that you look at daily um no, we don't have any of those obviously. We're looking at various KPIs, on those, financial reports and stuff like that we don't have like a soft word and I think I just have a staff account and that sends me know since be numbers and then I have a marketing, department that sends me numbers on how many new patients we had in how many calls we had how do you book those or weekly just those are weekly okay cool so, that's. A really good really, good thing for us to talk about for a minute is the scaling so you went you had one thing that was working profitable, and you said I should, probably have let's just do before more right yeah and and. You did that and one lesson that you took away was the. The. Core. Team. Don't. Take that to the new one but then you, still have to find those people and you only have the core team that you've got so, how did you solve that as you went into three, four and five I had those core team members hire, the next core team members you did okay so they're interviewing, and hiring they're, interviewing and hiring how did that work it, worked out very well I mean obviously we went through a couple of them here and there and stuff like that but for the most part it worked out really well smart I like that but when we went from that when we did that second clinic I never really had a hierarchy.
Of Chain, or a chain of command and, just like I am it and so you guys got a problem come to me but, once we started to scale that just was not gonna work because, I didn't have time to go to answer everybody's problems, or issues or questions and so I started, to actually you, know put a system in place work all right I'm the I'm the CEO I'm gonna have my CEO. Oh and, I have my you, know my person who's over our, director. Of billing. Or whatever and our, compliance. Officer, and then everybody else reported to them instead, we had office managers now each one of the locations and so all these staff that work in the office report to the office managers the office managers now report so there was this nice chain of command in place and it, was a hard transit, transition, at first I remember the meeting to this day, of me basically saying don't call me anymore right and it wasn't like trying to be mean it was just like if, we're gonna scale I can't. Call I can't, yeah and people would still call me and I told him I said if you call me I'll know your answer to your question but I'm gonna tell you did you ask this person yet did you ask that person but and if you have and they need to go talk to them and if you have talked to them and they haven't gotten to the answer yet then I'll go talk to them right right and figure, it out and so it was definitely a transition from how long did it take a year a year yeah that's about right yeah we and that's how long it took us to open up the third clinic no it is okay well months okay but in that in the next, six months we, opened up the last three okay, so I should open the bottle see if six months six total no. There should only five so five okay so last two yeah okay well we only had the two clinics, oh okay. The third that's the last room after that first year okay I see okay got it so but, that. Was the reason why I took us a year is because of all those lessons that we had to learn about the core team yeah management, and the hierarchy, and and even you know kind of honing, in some on the marketing now you had two clinics and then. We also put together a centralized. Call. Center before all of our you, know administrative. Staff setting, appointments and all the appointments, medical, records billing authorizations. Build enough all, in the same building so what we decided is is actually opened up the second clinic I realized really quickly that I could not scale it with all of it combined the higher practic, the physical therapy and the medical it just was not gonna be possible, yeah without maybe, bringing it out bringing, in some outside equity, sure I didn't want to do that right and so what I looked at was I said what what what in the business, has, the highest. Profit and what. Could be scale mm-hmm and that was the medical side okay and so we actually decided. Medical, as opposed to the chiropractic right okay so, we. Actually decided to completely cut out the chiropractic, at all completely so, we removed the chiropractic, we removed the physical therapy and a lot of people were asking me know well why would you do that aren't you a chiropractor, and I'm like yes but. Chiropractors. In order for me to scale my business I needed to team up with them because. Chiropractors. Don't refer to other chiropractors hmm. They only refer to outside. Chiropractors, make sounds they're afraid of losing business yeah they're afraid to lose a business that's totally different in medicine medicine, they'll refer to a cardiologist. Or a specialty is based on specialty. Chiropractic its differ is that because chiropractors, can cure, everything that's right yes okay, basically. The god doctor that's right that's right. But, with with the chiropractors, we actually now build a referral network with them so that because, the type of medicine that we per we practice is what's called non-surgical.
Orthopedics, And sports medicine we do a lot of regenerative medicine Prolotherapy. PRP, stem-cell and, so the best type of patient that we can help as someone who's already failed, at chiropractic more. Physical therapy and so now we're creating these two-way, referral. Networks were being at once and, we can bring it back and forth it actually worked out really well it was scary but I was like I knew I knew, the moment I thought I was like that's what we have to do okay and we cut it out and so, we really were able to reduce your foot at a chiropractic, ompletely we. Were so, the second clinic was about 4,000, square feet little over 4,000, square ok the. Rest of the clinics or 2,500, square well okay so it's pretty significant, drop and what kind of medical stuff so. With the point that with the Stars they're the the treatments yeah we do a lot of niat knee treatments, we do a lot of back treatment, spinal treatments, we, have we have, a physician that we have is a physical, medicine and rehabilitation physician. So he's a so it wasn't like internal. Medicine and cart no transplants. And stuff not do that 2500 ideally. But, just, so people know it's it was directly related to the, chiropractic, correct just on the May is would, you say it's like an elevation. Like a step up from. The. Things that would be treated from, through chiropractic, absolutely, so it's it's something that if for some reason know I was all non sono answers yeah, so we did most, of what we do is in his injection based, okay but it's it's been stead of trying to always just inject a steroid, or some form of chemical where, a lot of times taking the bot the patient zones bodily. Fluids like their blood or thier stem cells and re injecting them back into the body the tissue that needs to be healed and repaired nice okay and so a lot of our services are cached, based so there was a whole system in place there for the whole sales process which, could be a whole other podcast okay, so you scaled, and it probably should be so you scaled up the medical side of things you got rid of the chiropractic in that allowed, you to have, many, many more referrals, right correct and and. So how did that go and we scaled faster, so instead of taking you and. Just so I understand to in one of the bit of the five Clint, you have a call center that's handling all the administrative. Stuff like that okay cool so because we had the five thousand square foot office it's from the main office and we were taking, out the chiropractic it's perfectly repiy we used all that space for, administrative. Staff okay and so we have call, center with cubicles, and they're answering, phone calls all day long and you know we do a lot of you know radio and newspaper and TV advertising and, online so we got a lot of leads coming into the into that training. Center in that Center I called my training center because I do a lot of phone training with them and to make sure that they're answering the calls properly, and handling them properly and things like that nice you can definitely see the numbers drop when they start to get away from the residual training right so, there's, a whole lot of lessons from that piece too but yeah it, still gonna be we were able to scale to the next, three clinics within six months three and six months instead of one in one year okay and it's because of all the lessons that we learn and the things we put into place so, how many do you have no five okay fine and, why so wide not expand, more than five oh. I. Get asked that question quite, often I would say I. Have. A mind, block on, distance. Okay, because our, main office is in Columbia South Carolina and, then within each one of the clinics is it within an hour to an hour and a half drive okay, well, the other two locations within, South Carolina, that would want to scale to our Myrtle.
Beach And Hilton Head which are more, than an hour and a half is like two, and a half to three hours so it's not an easy like just you know trip during the day gonna come back and so. 10 are you are you driving to these, fairly. Often that. Back then yes like right now I'm not I haven't I'm, in, a position now which that's another ending to the store I guess is as where, I am now with these but I. Would. Say the biggest thing for me as is the regulation around the medical spa he's met at medical industry. Okay fair enough but also the, risk involved, because you, know we're sitting here paying providers you, know hundreds, of thousands of dollars a year to do treatments, well guess who has the highest risk I do yeah, and so there's certain things that we have to do documentation. Wise and if the insurance companies come back and say oh you didn't do something right guess who has to pay that back not, the provider I got, a right to check for it and so the highest risk is mine and so there's a balance of risk versus, reward versus. You, know where. Do I want to really be as far as the distance Darla have to fly somewhere to manage them and what, about a bringing. In an operator as, a as a CEO Oh a chief operating officer, and then, either licensing, or franchising, and have it be that you've got a proven business model and so, the liability would sit with whoever, the owner of the franchise who would be a doctor was, and then you scale out using other people's money and then they're basically, paying you, X percent you're managing everything your call center is still handling all that stuff would would that be something that might work did you want to buy one. I'd. Like to be part of the process of central. Company selling them yeah, I mean I mean we definitely have considered that I've had some physicians reach out to us about that but, we haven't it seems like you have a great system, and it, just depends on what you want for your life and how it fits right but but, since. It uses you said you've gotten to the point now where you don't have to go right and I, want to hear if there's a process of that or any good takeaways, but, but. Unless. You just hate money and. Uh it. Seems like it would be something that might might, be worth completely. Considered that conversation, yeah okay, all right go ahead how do we get to you not having to go at all yeah so about. I guess, it was probably about the first part of last year's in 2018.
First Part of 2018. I was. Listening to somebody speak and they. Were talking about how, to become the. General in your business and I. Was while he was talking I was like well yeah I am the general in my business remember no it was it, was Tai Lopez aye Lopez okay cool so and, I had ever heard of uh-huh like everybody, was like oh yeah as YouTube video and the girl amber. Union in the garage and I. Actually. Run a business I don't play on the I don't play online right right well, that's actually good because there's, good to be learned from everybody rather what you think that's right and of, course and I went into a blind because I don't I don't know who he is I'm just listening to how many sounded, really, good and solid and sure you know it's you. Know so anyway so he, was talking about becoming the general in your business yeah and I remember sitting back and thinking that. I was the general and they started to talk further and I realized that I wasn't I was just going into the office putting out fires and I needed. To figure out a way to become the general in my business you know the Warren Buffett model right and so. I said, that night it was a Friday night at a conference so that Friday night I sat. In the hotel room for until like 2 or 3 o'clock in the morning I had a friend of mine with me we were talking to tour til 2 or 3 o'clock in the morning and it. Just hit me I was like why. Don't I just promote the, guy who's been helping me build this thing he. He he, bring me take him from the co-op position, and put him into the CEO position I can, step out I can still own it 100% I can still be, the president, you still have my vision but then I can not, have to be out worried about it anymore so everything's the same except. I don't have to work in the business that's what that was the aha, moment, you nice that's great well that was a huge takeaway I mean you should see us box. Of candy or something inside been, to his house yeah okay nice, but anyway, so that. Monday morning after, that event I sat down with my CEO and told him that hey I want, to leave and first. Thing I always asks is are, you sick you know are. You dying like why am dying everybody's dying, that's. What they I'm, not you know going in for surgery all, right I've cancer, I know what I mean eventually I'm going on eventually yeah so. He goes well I'm pretty much doing everything as it is anyway so it's fine with me I'm, like okay, so, I turned over the few things that I was doing and basically, the. Next day on Tuesday, that next up that Tuesday I made, an announcement to my team via a work, place live video as the software you used to be able to announce it and so he just made the announcement and, I have, maybe been into the clinic maybe, six times since.
The Since I left since 2018. Since we gained of last year okay that's pretty great so it's, been cool. But. For a week and a half after. I left I sat back and I was just like doing nothing like I basically, said, did. You find there was like a void, it was so boring yeah I was so I mean I feel like we're born were born and and were created as producers. And I wasn't producing but you still have your shop, and a time I still have that okay and are you not doing anything with that at this point so you have another operator, that's there yeah okay everything, right now so inserting, business exactly. So of. Course my wife is like you got to get out of the house you know you gotta go do something you're driving me nuts and so this. Is drives you crazy when you're a productive, person you can't not produce the you note so that but it's really cool so you end up with two businesses now under your belt that you don't have to do anything with and time. To do number three so what was it and they were a couple other businesses, at the same - but we won't get into those but anyway so what. I told my wife is I said what I'm gonna do in order to figure out what. I want to do cuz I'd already accomplished, a lot up to this point I said I don't want to do anything small I want, to go big like I had like I had listed out like 20 different opportunities, that I could do and it's like none of them or big enough I wanted, it to be something, big, what did big mean to you I didn't, know okay I didn't know what it was I just knew I just knew, I just knew when I found it I would know what it was but I didn't know what it was and so I told my wife I said so. I'm out of the house I'm just gonna call. Up anybody, and everybody that I know and just say hey, I want to go to lunch I don't know go have a cup of coffee I want to go pick your brain and figure out how I could add value to you pretty smart and that will get my creative juices flowing and I, actually went to lunch. With a banker, in Greenville, who had had our accounts, you know they're actually about an hour and a half from our main from our where I live but, they've treated us very well so we stay with them and should be went to lunch with her and she was like well, I thought. You know you'd always had this interest in real estate I said, that's. It mm-hmm and so. I went on a path after that lunch and the, next weekend, I was at a conference and. Had. Already been researching the multifamily, you know the apartment syndication, business, for probably, a year and a half prior to that but it never I never had that time because I was always in the business I never had the time to focus on it so, I'd done a lot of research already and that was the aha moment, for me there was is that's, what I needed to do interesting and so I started to go into that path and a lot of people in the beginning will teach you to you, know start small go, get a little v unit, or ten unit and then I'm like no I want a job and, that wouldn't be big enough for me right and so, I went, on a path trying to figure out who could I hire as a mentor, to, be able to help me who has already where I want to be yeah it, was really good formula for success yeah so I did and, I said I don't care how much it cost me because I know it's gonna pay me back in dividends who define it, was a gentleman by the name of Joe Fairless okay and he's, got he at the time he had just under, half a billion in his portfolio okay, and yeah. Like he's he a teacher like a coarse kind of guy or just a guy you found so he's very exclusive so he's the type of person so he actually has the longest, running daily, real estate podcast, okay call pizza it's called the best ever. Real estate investing advice ever Wow okay the best real estate investing advice ever podcast, okay and it's been going daily, for five five years so that's like ridiculous.
Kind. Of like Johnny Lee Dumas did it for how many years yeah yeah, and so. Anyway, so he's got a lot of success from that but he only accepts, two clients a month and you, had to apply and you have to have had some form of success in your background because, he didn't want to just waste his time with the people that didn't that weren't serious right and I didn't want to pay the money and whatever and how much does he charge he, at that time he was charging eighteen thousand okay of course to me I was like that's, actually pretty cheap because I already priced out a couple other mentors, they were like twice that right well I I told him I said I try I have Drive wrote the check and and. They been, paid him I said you need, to probably double your fee right, nothing he's charging max forty. Thousand okay so it. Sounds like it is it's totally worth it and he has helped me get to where I am right now we did a little over 130, million in acquisitions, last year and we're gonna do another 100 125, million this year but. I wouldn't have been able to get to that level of scale without, the prior background they put in the prior businesses, and the reason why I really thought that the real, estate was gonna be a big thing for me was, from the tax side of things because, we were already making a lot of money off in the business often the practices, not the other businesses, and I was writing large checks to the government, and I was tired of doing it and of, course you hear you know people like Trump paying zero taxes, and he's a billionaire, and almost kind of stuff and I'm like well what is he doing and of course real estate is really where that a lot of the did advantages, are as anta's of all the depreciation sure, so, we're investing money into these properties, and we're taking depreciation. And it's, allowing us to offset, our other income, and it's. All legal which is the crazy thing right so you'll have close to a quarter of a billion dollars of real.
Estate Under management how, does that work give us the the crash course the Joe fearless in five seconds kind of over five minutes course sure sure so the, way what the way we structure it is is you know somebody who say they have you, know some money stay on the side a lot of times we're working with a lot of professionals, like doctors, lawyers. Dentists. We're looking with a lot of actually. Have a few chiropractors, not very many but you have a few chiropractors, in there and and. Also, entrepreneurs. And people. Who have money and but, they're tied, to their business or or they're tied to their job or and, they might like that like they don't really care to quit that they want to stay that but they don't, want to they have this fear of missing out right and they want to invest but they don't want to go and do flipping of houses or single-family and things like that and so, they want to have more safety and security and multi-family Oh multifamily, the reason why it's such a great asset class, is because if you look back in the crash in 2008, most, asset, classes around the average default, rate was about 4%, well, multifamily, had one of the lowest at point four percent and, it's, because in a down economy people. Can't buy houses, so what do they do and they rent right and so, and the other thing that I really, really like about multi-family. And this is what I tell people when they are, investors, that call and they'll say well why should I you know invest my money with you, you know I've I've spent. Some time building up my smight at my IRA, or my 401k, and I'm not gonna self-directed, to go to invest in your property why. Do i why should i invest with you I said, I always tell them I say well what, for one you you have to have somebody on the team from. With these properties that knows how to run a business right because when you're talking about buying apartment, complex you're, not just buying real estate yeah it's buying, a business unless. You think of it that way it's not gonna work out right like the nice thing about buying those businesses, that you have the depreciated benefit so you're you're spending, money or investing, money but then you're also getting this depreciation and, that, depreciation comes, in the form of doing, cost segregation on, stuff on the properties, and things like that allows you to accelerate, the depreciation and, of course you know Trump stacked with the triumphs new tax law and he changed some things that allowed, us to get to a hundred percent depreciate. An expense. All the renovations, on most of the items the first year yeah and so, that's all that stuff is as major benefits, and depending on your tax, classification. And things like that it can offset other types of income that you have sure so it reduces your taxable liability, okay so, we're, able to provide returns for investors and we between fifteen, to eighteen percent on a internal. Rate, of return you know type basis, but more, of what, most people probably are familiar there's an annualized, return or your ROI so. Normally, anywhere between about a you know eighteen to twenty two to twenty three percent annualized. Return and that's for your investors, correct how about for you so. We typically structure, our deals with it's called a 70/30.
Split Okay, so we'll find the deal but we'll vet the deal and you know we'll put it all together and we get 30% from our fur our sweat equity 30%, of the profits, 30% of the ownership. It's, basically 30%, of the borrower entity so give, me an example so let's say that you. Find a million-dollar building and. You. Want to well it's actually that's a ten million dollar building so that we get into your surplus, or into your range right ten million dollar building and you. Put together how. Much money do you put together ten million dollars or enough to finance it or how do you do that so we do use debt okay and so we debt we do put we do what's called permanent. Agency, debt using Fannie Mae and Freddie Mac okay what's really cool about these properties, is that they actually allow you to have non-recourse. Debt on it and very, few assets are like that but because of how stable it is we, do be the the, Fannie Mae and Freddie Mac do not require, any type of recourse, okay meaning, that you still have to have somebody on the team that has the net worth and liquidity so, there's there's three things you have to have when you're requiring these properties these types of large loans you have to have net worth of the loan balance you. Have to have liquidity which, is 10% of the loan balance then, you also have to have experience, managing these managing, these types of assets interesting okay so ten million dollar building what, amount do you have to put down so just keep the math simple let's, just say we had to put four thousand down okay because it's usually about seventy, about, 74. 72 75 percent loan to value okay, and so when you add on closing costs and things like that it's gonna be let's just say four four million dollars okay so forty percent down roughly you have to come out so now you need to raise four million correct, okay so what happens next so we have our database, of investors, so people who go to our website and they register and say hey I want to be one of your investors, no go jump on a phone call with me I'll vet them make sure they're the right fit because there are some investors that we don't want to work with right and. So we don't accept, everybody, but you know that we wanted to work with them and they seem like a good fit then we'll put them on our investor database who do you not want well. I would say it's somebody who doesn't. Trust us okay well how do you find out it's. Do you know like a trust fall you know fall backwards and we'll catch. It's. Somebody, in it I would probably say most of the investors, well there's two ways so these. Types of these, are where they're called security so we were Reggie we have to register every one of these assets with the SC's, is that a like a formed e-filing or all right okay yep and each. One of these assets, are. There. To actually. Ask. Your question one more time so. I'm. Looking at howdy well the question there was how do you decide who you don't want to work how you tell you okay so there's two types of investors that we don't want okay so number one you have to realize it because these are these are securities. They are actually non-marketable. Securities so. You can't just go to the stock market anyway anyway oh you would normally go in just buy and sell shares it's, like you put in fifty thousand you put in a hundred thousand, it's locked up for five yes. Illiquid, you cannot touch it so, you're still getting return off of that and we're only buying stabilized. Cash flowing assets, but, the second type of investor, is so many who maybe gets, onto our database and they, go very, start to review our deals and then, they start to piecemeal everything, apart and they try to like find as many holes as possible, and everything that we're doing and there's a just, like we talked about earlier about contracts, you know you you know who I'm talking about yeah and you. Look you just have to sit there and say maintenance I don't they're high maintenance and, I don't not not that that any of that's bad, it's just I don't, need it like I don't. Need it and it takes you time so and if it creates, in efficiencies, in how you operate plus it's just not pleasant right and I had an investor, just recently that did that to know nitpickers, right, and I basically told him I said I I don't think that you're a good fit for us because, you, have great questions but the way your questions, are leading it shows, me that you don't trust us right if you don't trust us then you, need to sit on the sidelines for this one yeah and he, finally came and just said no I still want to invest you know and did you say no we'd actually let him in okay so we'll see how this one goes okay but, he it.
Was But sometimes you. Know and yes, we're selling investments if you will but when, you're selling a lot of times that pushback approach makes people want to get in more yeah for sure so, but he knows up front that I'm like listen these, are great questions but, you. Know you're respectful, to him you're just like I just Dina this isn't it is not affiliate we're looking more and I know I think that this guy will probably invest, more and more with us sure because I know what we do I know how we're set up and I know that work trust work you do what you say do we say come. Back right he was trying to find things in the contract, that wasn't, there, trying to say well if that's what you're gonna do why isn't on the contract like well because we can't think of everything in the contract, you know so. Those are the kind of people that's one class the nitpicker what's the other class well the other class is the one that that can't put, their money in and. Not. Expect, to get it out when they didn't want to get it out okay, so somebody who doesn't want to invest it's not a fit it's just not a fit yeah so those are really kind of the only two I mean I always like to educate our investors as much as possible so on our website we try to put a lot of you know educational, stuff out there and I even have an educational. Arm to our business called multifamily, investor, nation at over 9,000. Members of that and we're. Educating doing, weekly webinars around the whole topic and various things like that too so you you. Vet these people out that are not good investors, and now you've got four million dollars you need to raise to buy this ten million dollar property. That's. Done through syndication. Is it accredited. And non-accredited investors, so. It depends on the project so some projects, it's gonna be actually. A. Registration. See a 506 C and so we can only accept accredited, investors in those but, most, of ours at price - 80 % of them are gonna be I still under Regulation, D but. It's gonna be a 506, B. As in Bravo and, so those ones they can actually we can accept accredited, and non-accredited. Okay, great so now and then you've got how do you find these investors doing. Podcasts, like this or a lot of times where we find our investors, and I had one just recently that was, on a podcast and, he's actually lives ten minutes from my house and said I heard you on a podcast and I want to come in and be a part of this, you know he's invest in two of our projects, now at two - a to the tune of about a half a million dollars with just that one investor, is it mostly organic like that or do you use paid media as well it's, all been organic all organic I think, so do you know Rama grant did I do okay he was he always used to say just flap
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