BOO! Did we scare you?!
It’s that time of the year, ghosts and ghouls are out… and we’re bringing you the scariest stories ever told… in real estate!
This week Dan and Anthony are going to sit around the campfire and relay the most terrifying…bone chilling…blood curdling real estate investing tales!
What do you do if a resident doesn’t move out… or worse… they just leave all of their stuff in your unit!? What if a bank decides to change the terms of the deal… 2 weeks before closing?!
I’m getting chills just thinking about it! So… what are the horror stories of real estate investing?
All of this and more on this week’s episode of Multifamily Investing Made Simple.
Tweetable Quotes:
“Put the ball in their court and see if they can come up with a solution for us. And we did that, and it got them helping. Put us on the same team rather than being combative and against each other.” – Anthony Vicino
“Banks, at some point, have a lot of appetite for a certain asset class, and then as soon as they kind of get that bucket fill in their balance sheet, the faucet turns off. The faucet turns off and they go from trying to get your business to almost actively throwing it away.” – Dan Krueger
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*Transcript*
Horror Stories
[00:00:00] Anthony: Hello and welcome to Multifamily Investing Mades Simple, the podcast, it’s all about taking the complexity out of real estate and investing so that you can take action today. I’m your host, Anthony Vino of Invictus Capital, joined as always. By Daniel Dunning Kruger. Kruger
[00:00:50] Dan: Dunning. I’ll take that. . Um, I feel like it’s been a year since we’ve been in here.
We like skipped like, what was it, like three days? Yeah, like probably three, three [00:01:00] days. But it feels like it’s been like a
[00:01:01] Anthony: month. It’s probably been two weeks since we recorded last, and this is the first time that we’ve gone back and I did the old. Mainly because this morning I remembered like Dunny Kruger and I was like, I really want to use that as a nickname.
And I think we’ve done 250 episodes. I don’t think I ever used that one. I don’t think so. That was a new one that that was a pretty good one. But you, I’m pretty psyched. Do you have any left or should we go back to the No, no, no. Not as a one time blast from the past. It’s done. Nostalgia has been realized and now we just move on.
All right. Yeah, I’m good. Cool. Um, did you know that later this week. , The, the dead will rise. The, the seas will boil. The, the skies will open up and rain down frogs and terror. Hmm. And for one night sounds bad. Yeah. It’s horrifying. For one night, millions and millions of rabid children will be let loose upon their unsuspecting neighbors [00:02:00] in pursuit of candy are prepared.
[00:02:03] Dan: Sounds like a horrible, horrible idea. Who authorize? Oh, I
[00:02:06] Anthony: didn’t, I did not stamp this with my approval. Hm mm-hmm , I cower. I don’t know about you, but on Halloween I cower in my home, lights off and just pray. Nobody knocks and when they do, it’s just like, please go away. Please, please, please go away. This is not sound good.
I’m not prepared. You have a child at least so she could protect you from the other children, right? I mean, yeah, she’s
[00:02:28] Dan: gonna be Elmo
[00:02:29] Anthony: you. You use, you can use a little Elmo Coco as a human shield under
[00:02:33] Dan: the cookie Monster. and Liz I think is also gonna be Elmo. Wait, what? Yeah, I don’t know. She was supposed to be the cookie and then she just totally ditched me.
So now we got two Elmos makes in events. Liz, let’s tell we’ve just got a random cookie Monster and two Elmos. So that’s what’s happening. All right.
[00:02:49] Anthony: Well I’m not even, I don’t think I’m dressing up for anything, cuz again, I’m gonna cow her at home. There’s no reason to dress up. But Jamie is dressing up as Diddy Kong.
Mm. Yeah.
[00:02:59] Dan: You could be [00:03:00] Oscar. I am a
[00:03:01] Anthony: grouch. Yeah, that’d be fun. I am already in character. I just need to get, get a little green. You need to get in the trash can.
[00:03:08] Dan: Well, word on the street is, he’s in like a recycling mid now we have been watching this. Is that true? Yeah. I, I hope it’s not true. I’d be very sad.
I like, I
[00:03:17] Anthony: like Oscar in a trash can. Have you ever seen, This is a total tangent, Uh, tangent. Um, on YouTube there’s like this dark, dark Sesame Street series. And it follows Oscar the Grouch, unlike this homicidal rampage. Oh, God. Um, like, he just, like, he’s just trying to make his way in the world today. And like everybody just keeps like kicking him.
And K you know, you’ve seen the movie Joker, right? Yeah. Is this really old? It’s, it’s the Joker, but the Grouch. Huh? It’s, I haven’t seen the, And it was, it’s like this, it’s a very short take. It’s like a five minute trailer. Okay. And I was like, I want this to be a movie. Sesame Street is a horror movie.
Yeah.
[00:03:52] Dan: We’ve been watching. Old episodes of Sesame Street on YouTube, so I will make sure I keep an eye out for that. Mm-hmm. . And we do not put it on because that’s, You definitely should put it on, [00:04:00] probably scar
[00:04:00] Anthony: her, I mean, put her to bed first. Yeah. Well, how many people does he kill?
[00:04:05] Dan: I think he
[00:04:06] Anthony: more than five.
I’m saying. Well, I, I don’t remember the trailer all that well. It’s not like super brutal. But anyways, this has nothing to do with real estate except for Sesame Street is a street and Oscar lives in a garbage can. Yeah, because he doesn’t own any assets, so he’s pretty, That’s a horror story. Which actually segues nicely into what we’re gonna talk about today.
We’re gonna talk about some horror stories of real estate investing. You can’t just throw
[00:04:27] Dan: a word in and say it’s a segue,
[00:04:29] Anthony: you. Doesn’t make it a good one. Horror story, , segue . Okay, let’s go with it. What, Well, what’s, what’s the prerequisite for a segue then? What do I
[00:04:38] Dan: have to get, What do I have to do? It’s, it’s gotta be smoother.
That felt a bit abrupt. Like, and we’re talking about horror
[00:04:44] Anthony: stories. It’s like the, when the, when you cut across three lanes of traffic because you realize your exit’s right there. Yes. And you’re no longer, you know, like the. You know what I’m talking about? Like Yeah. You’re through the wedge. You’re through the wedge.
I do that.
[00:04:56] Dan: Yep. I don’t feel good when I do it. But you do it. I want, [00:05:00] if I am late and I need to get somewhere.
[00:05:02] Anthony: Mm. I just chalk it up and I go, Well, I’m on this path now, . I’m no longer going where I was. Yeah.
[00:05:07] Dan: It really depends on where I’m going and how bad I wanna be on time.
[00:05:09] Anthony: That’s fair. That’s fair. Uh, before we do, Okay, here’s a.
Before we go to the horror stories, let’s go a different direction. Let’s cut a, let’s cut. This is, we’ve cut across three lanes of traffic into the merge and then we realized, oh no, we were actually, it’s a left, it’s a left exit, so we gotta cut back across. What’s your bad investing advice besides, don’t cut across six lanes of
[00:05:34] Dan: traffic.
I mean that’s, that’s solid advice for just life. Don’t be that guy. I mean, we all are sometimes, but try not to be that guy cuz everyone hates that guy. My bad investing tip of the week this week is, it should be easy. Find something to invest in that you understand and it feels easy executing a transaction or, or getting into a deal.
Now that sounds like it should be good advice, like most of my horrible advice [00:06:00] does at first glance. But this one is bad advice simply because I feel like this concept of, of thinking that something should be easy because it looks easy when other people do it. When experts. is what gets people stuck in analysis paralysis because the first deal you do, the first investment you make, whatever it is, the first time you do it, you’re probably gonna suck at it.
It’s probably gonna be nerve-wracking. You’re probably gonna feel nervous and start to have second thoughts and think about, you know, maybe this, maybe this isn’t the right move. And anyone who’s bought a house or, or you know, gone out and signed the lease for their very first, a department kind of knows this feeling when you’re about to actually put in to paper and put some money on the line and do something that’s a little bit bigger or different than you’re used to.
You start to second guess yourself. And that’s a dangerous thing to caught up in because a lot of people, specifically in real estate get stuck in what’s called analysis paralysis, and they never feel a hundred percent confident. So they never actually pull the trigger and they never actually do anything.
But I gotta tell you, no matter what you’re doing, whether it’s public markets, private markets, it’s gonna feel [00:07:00] weird for. I don’t know how long it takes to get a handful of transactions under your belt, A handful of deals, but I feel like you’ve gotta get at least a few deals under your belt before it starts to feel like you’ve got, you know, kind of an easy flow going.
[00:07:12] Anthony: Yeah. That’s like the whole psychology of investing in in recessions, which we find ourselves in right now. It in, we always hear like great wealth is made in recessions and that when the markets dip like this, this is, these are great buying opportunities cuz things are a big discount and. You, you think, Oh man, I’m gonna be ready for that.
When the, when the buying opportunities arise, I’m gonna be ready. And yet, when the buying opportunities arise, they’re buying opportunities because others are not willing to buy at that number for whatever reason. And, and so there’s this going against the grain that feels very, very wrong, even though, you know, what you’re supposed to do is buy and like maybe dollar cost average or whatever.
But like in the moment of doing, it’s like, uh, I don’t wanna catch the falling knife. Maybe it has further to go still, and. I, I find the psychology of investing during like down times where we [00:08:00] know what we’re supposed to do. Really, really fascinating cuz it’s really hard to
[00:08:03] Dan: actually execute. It’s really easy to say, Here’s what you should do.
And in retrospect it’s really easy to look back and say, Oh, that would’ve been the perfect time to do X, Y, and z. And then if you’re actually standing there in the moment, it feels entirely different.
[00:08:15] Anthony: Yeah. Like for instance, like right now, crypto and stocks are really, really down. I was talking to somebody the other day who’s like, you know, I’m gonna, I think there’s gonna be incredible buying opportunities in the next six to 12 months.
I don’t think we right now. Yeah. And I was like, Well what about right at this instant? Like we know that these things have taken a big hit. They’re lower than they were. And so yeah, they could probably go lower, but um, and they probably will, maybe, who knows? But the thing is like when you always say, I’m going to get in, in like three months or in six months, like, That, that horizon always gets pushed off.
It just keeps getting pushed. And at a some certain point, you just have to get in, start doing the thing. It’s about not timing the market. It’s about time in the market. And so get in. But another thing I I want to ask about here is how do you know when it’s hard [00:09:00] Because you suck and when it’s hard because it’s just hard.
[00:09:06] Dan: Uh, well, that’s an interesting question. It’s hard because you suck versus hard because it’s just hard. Um, I don’t know. I mean, I guess you’d have to assume early on until you’ve got a good number of, of reps under your belt that part of the difficulty is just you sucking. And, but that could also be at a time when it’s just difficult in general for everybody to execute well, no matter how experienced they are.
Mm-hmm. . So we could have a little bit of both, uh, but I’d have to just kind of defer to data and say, Okay, unless you have x. , uh, executions, X amount of of of practice shots, X amount of deals done, whatever that a good chunk of you struggling is probably just lack of experience. Is
[00:09:48] Anthony: that fair? Yeah, I think so.
It’s just a hard one. This is a hard one. I don’t know if there’s an objective answer, honestly, because it’s one of those questions I get sometimes about. How do I know when I need to stick with it [00:10:00] or when I need to pivot? Mm. You know, it’s, it’s really that concept. It’s like, I don’t know. I don’t really have any idea how to answer that question if
[00:10:06] Dan: you don’t see any marginal improvement.
Yeah. That would be what I say, like if you’re able to somehow quantify your performance in some way that’s not tied to how much money you’re making, but is more so tied to are you following your parameters and your process, and if you’re nailing that, then you should be.
[00:10:26] Anthony: So you’re saying maybe change the metrics by which you’re measuring success right away from the money?
Yeah. Don’t look at
[00:10:31] Dan: your p and l. Yeah. Look at, okay, here are the, here’s my parameters for investing. Here’s my process. I’m gonna follow you, come up with this Well, before you go and try to transact anything so that there’s no emotion. And then you wanna be able to, you know, track down whether it’s a real estate deal, like just have a checklist of things, of boxes that need to be checked for you to execute on a deal.
And if you check eight outta 10 or more, then you do the. And then you just look back at your checklist as you’re going through deals and like are you trying to talk yourself [00:11:00] into something where there’s only five boxes checked or is there a nine check box page in front of you that you didn’t next, that didn’t move forward on?
Mm-hmm. . Right. You gotta be able to look at that process and see, am I following my rules or not? And if you are, that’s great, but it’s hard to follow your rules.
[00:11:17] Anthony: I break my rules all the time. I saw that. Yeah. Cause nobody’s there to stop me. It’s just me. And
[00:11:23] Dan: I can’t hold. . Yeah, it’s tricky. I think the key is just figure out what it is that you’re gonna do, uh, before you’re in the moment and you have emotions to deal with.
And then write it down. Read it, actually do it. Check ’em off. Like in real life, don’t just have a mental checklist, even if it’s four things. Mm-hmm. ,
[00:11:39] Anthony: you can always lie to yourself. Exactly. Yeah. This is where like having a decision journal I find very, very, very valuable. Mm-hmm. . So, All right. Time for another segue is that, Hey, this is a horror show of an episode.
This is like on brand for the episode. I get it. Yeah, it’s horror shows. Okay, so [00:12:00] we’re gonna talk about the horror stories of real estate investing. I, you got a bunch written down there. I got a, I got a few here. I don’t know how many we’ll get through. So I’ll see, This isn’t gonna be, one of those episodes are like six horror stories.
It’s just gonna be some horror stories. It’s gonna
[00:12:11] Dan: be, there’s no shortage in real estate, so we could go all day, just see what happens.
[00:12:15] Anthony: Yeah, I wanna share the stor, my first story. Is, um, I’ve shared the Bounty Hunter story in the book and this podcast a ton, so I’m not gonna share that one. I’m gonna share those same residents on that building.
Um, I’m gonna share the next thing that happened with them, which was equally horrible. Um, for those don’t know, like a month after I bought, uh, like this house hack triplex, I got a call from Bounty Hunters and the dead of night, it was like January 15th, super, super cold and had to drive across town in a, in a b.
And it sucked. Anyways, these residents were great. They were fantastic. Uh, a week after this, the, the, the lady that was living there, she, um, her baby got sick or had been sick because they [00:13:00] were smokers, and they lived in a very unclean environment. And she started saying like, Oh, we have black mold in the, in the bathroom, and that’s why the baby’s getting sick.
And so suddenly they’re looking at like a lawsuit and it’s like, wait. So we had to go in there. We ripped out all the floorboards and the walls and the bathroom. There was no mold. So we did all this for nothing, just to kind of like cover our bases and prove like, Hey, no, we’re totally cool here. Anyways, two weeks later, her lease runs up and it’s like, Okay, you gotta be outta here.
We got these great new residents ready to move in. Um, I did not leave enough window of time here, so they were supposed to move out on like the 31st of January. And then like the next tenants were moving in on like the second of of February. So left like a one day turn. And leading up into the, that last week, I just had so much anxiety of like, what if they don’t leave?
Like, what if they just decide they’re not gonna leave? Like, what am I gonna do? Like the Minnesota is very hard to kick people out in the dead of winter, like for, you know, reasons. Makes sense. And so I was like, I might be stuck with these guys [00:14:00] until spring. Like genuinely might not be able to get rid of them.
And so, I was trying to be very, very accommodating with them in the weeks leading up to them leaving to the point of like, Hey, how you’re gonna be out at this time? Uh, what can I do to help? Is there anything that you guys need? All of this stuff? Well, the day that they’re supposed to move out, none of their stuff is moved.
They haven’t even started. And I go to ’em and I’m like, Are you guys gonna be out by 6:00 PM Cuz it was. 10:00 AM in the morning and I was like, I don’t think you guys are gonna be able to pack all this fast enough. She goes, Well, my dad, who was also one of the living in the unit, he was supposed to be here with the truck, but he got arrested last night for grant theft auto and he’s in prison or in jail with the car keys, so we can’t get into our car.
And I was like, Oh my, Are you kidding me? Are you kidding me? Am I, I gonna be stuck with you guys because of Grand Theft Auto and like, you have no key. And I was like, I will rent you a. So we rented him a truck and like brought it back, gonna steal that too. And, and then I was [00:15:00] like, Okay, well you guys gotta be outta here by six so get all of your, as much of your stuff out as you can.
And they, they weren’t, so they come to me at 6:00 PM and I was like, Okay, here’s the deal. I need you guys out by 8:00 AM tomorrow morning. Cuz that’s when the, the crew’s coming and they do all the turns. And so they’re like, Okay, we’ll work through the night to get everything out. I wake up in the morning, they’re gone.
All their stuff is still. Perfect. Haah, Haah for me and Jamie. So we then take the next four hours moving all of their stuff from their unit. Cuz you can’t just throw it out. It’s a lot of, to the base, to the basement. And then we are required for like three months to hold onto this, this property until maybe these people come back.
Right? So for three months his base’s just packed full of their crap and it’s a lot of crap. And then finally they at that time runs up. We can get rid of all their stuff then a month. She comes back, she’s like, I want my stuff. I was like, What are you, what are you talking about? Your stuff’s gone now. So all that has to say is like, we eventually got ’em [00:16:00] out, did get the unit turn done in time, did get the new residents in.
It was a win all around. But if you’re not prepared, if you’re not prepared for a, a story like that, when you’re getting into your first property, you’re not ready for your first property .
[00:16:14] Dan: So real estate’s passive. Super passive.
[00:16:17] Anthony: Totally. Yeah. , super passive. I, that’s a lot of money. If I didn’t already at that point in my life, like have a lot of control over my schedule due to like, escape, um, I, I wouldn’t have been able to just like, I think you
[00:16:30] Dan: were too nice, man.
I think you’re too nice to him. They’re like this guy.
[00:16:34] Anthony: Oh, I was just wait too, could work this guy. Yeah. And they worked
[00:16:36] Dan: me for sure. And that’s what happens when you’re new. You wanna be accommodating. , uh, when, like profession, I call ’em professional residents. Yeah. And those people who make, uh, a living off of trying to eek out as much time in a unit before they get evicted as possible.
Try to get as much without pain as possible. When those types of people find a, a brand new, fresh, uh, mom and pop landlord [00:17:00] who has no experience. So like, Ooh, I’m gonna be this guy’s best friend. You’re like, Oh, this person’s great.
[00:17:05] Anthony: Come on in. Nope. I never thought they were great from day one. Nope. That was never a problem.
But I was really nice because they had a baby and they were like on hard times. After the kid looks, it’s like, Oh, not great. They had another kid, They had like three kids. It was just a nightmare. That was a horror story. Yeah. Because I think what made it hardest is not like the, the inconvenience on us of like moving stuff and all that.
That’s not really the, the hard part. And this goes back to Ben Horowitz, the hard thing about hard things in his book. The hard thing is like firing people. The hard thing is like looking at another human being and being like, Sorry, I, I know your life sucks and I, I know you don’t have any like thing figured out.
I, I can’t help. I’m sorry. Yeah. It’s not your fault, like,
[00:17:46] Dan: It’s hard. Maybe just don’t steal cars. That’s, that’s a great start. Don’t steal cars. Don’t do that. Start, and that probably eliminates pretty much all the problems of that day.
[00:17:55] Anthony: Oh, don’t steal cars is like, I don’t know why we didn’t lead with this
[00:18:00] This should be at the start of every podcast episode. Just don’t steal cars.
[00:18:03] Dan: All right. Uh, next horror. This one’s a little different. This one’s kind of, this one’s kind of a, a joke slash kind of a horror story, but, um, my very first deal I got, which I’ve talked about upping million times, I’m not gonna go into detail, was a six unit building in St.
Paul, Minnesota. I was so excited to get this deal into contract. Close it and I show up to the closing. Uh, for this first deal, I’m all kind of nervous. I’m like, Okay, what do I wear? Do I dress up for something like this or do I just ? I totally overthink it. I didn’t dress up, I didn’t wear tux. These
are
[00:18:35] Anthony: the questions that people wonder about though.
Yeah. Like what is the, what is the No,
[00:18:40] Dan: don’t dress up. Trust. Yeah. Don’t dress up . But, uh, so I’m all nervous. I’m getting all my stuff together and, uh, I got my money on my paperwork, all that stuff, and I. And, uh, typically when you go to a closing, when you acquire a property, you get some stuff at the closing table or maybe right afterwards or something like that.
It’s usually gonna be keys, files, miscellaneous stuff you’ll [00:19:00] need to, to operate the building that you don’t get until. Deal’s closed. Um, one of those most common things is keys. That’s no joke. And I remember on this first deal, um, the broker who sold it to me, um, shout out to Kirk. Great. Um, plops down this enormous pile of literally, it had to be 150 keys or more for a six unit apartment building with one washer, one dryer, front door, back door, a couple storage lockers.
Hundred plus keys on one big pile, No labels, no nothing. All just random. This is
[00:19:35] Anthony: unlabeled keys. This is like the owner’s like dicking with you. Like he just went to the hardware store and bought like a hundred. He’s like, I’m gonna show this new guy.
[00:19:42] Dan: Maybe. I don’t know, man. I never actually met the seller.
She was a weird one. Um, but, uh, you know, I say this one as kind of a joke, but also as it just kind of like, Kind of set the tone for like, Oh, this is what this is gonna be like. It’s gonna be like a constant, uh, barrage of just [00:20:00] inconvenient, like what the fuck moments for like the next five years. So that’s not really a horror story, but I was like, I looked at that and I was like, What?
I mean, that’s my whole day trying to figure that out.
[00:20:11] Anthony: That, that’s a good analogy for real estate investing is like real estate investing is every single day somebody just plops down a queueing of 150 keys in front of you and you gotta figure with no context and you deal. Gotta figure out it, deal, figure out what it is, every day.
It’s a new set of keys. Pretty much. Pretty
[00:20:27] Dan: much. So that was a quickie. That’s a good one. It
was
[00:20:29] Anthony: kind of fun. That’s funny. Um, that’s like, uh, um, the, what’s the, um, the director, the house and the cabin in the woods where it’s kind of a comedy. Right. I don’t think I’ve seen that. Josh Whedon. Josh Whedon. Yeah.
Yeah. That’s a, that’s a great, It’s a, it’s a, it’s a funny horror movie.
[00:20:47] Dan: Okay. But it’s also horror. I’ll check it out. I might actually be able to get Liz to watch that. She’s not. It’s good.
[00:20:52] Anthony: It’s funny. Big scary movie person. Yeah. She’ll, it’ll crack her up. Um, okay, so my second, another horror story is, and this was a true, [00:21:00] this was a horror story in, in the sense of like, Oh, you got
[00:21:02] Dan: the actual scary ones, babe.
Well, the, well, this one
[00:21:04] Anthony: was scary. Well, it wasn’t scary, but it was like, it’s okay to
[00:21:08] Dan: be scared. Okay, well you,
[00:21:10] Anthony: you live through this one too. This is, So we had a deal last year in May or so that we were gonna be closing in June. June 1st was the closing date. So we thought, so we thought, dun, dun, dun. We had this thing buttoned up.
We had all the capital raised. Seller was dope. Like we’re buying the rest of the, We’re work, we’re still working with the seller. We’re buying a bunch of stuff from him. Like he’s great. Everything. This was like the easy, smooth transaction and. Meant what? Like two weeks before closing, the bank comes back and they just completely about face on their terms and they just drop a pile of keys in our face.
It was a drop. It was take these keys. It was, it was effectively like, Hey, that 75% loan to value, we were gonna give you, Yeah, we’re gonna give you 60. And it was like, Okay, well that. Breaks the deal. What?
[00:21:57] Dan: And we were like, Why? And they’re like, Just cause [00:22:00] there are reason, well do not really quote unquote air quote reason.
[00:22:03] Anthony: Yeah. Not good reasons. It was very confusing cuz we had done deals with this bank before we had a great relationship or so we thought, and you know, so this just really came out of the outta left field and we hadn’t really heard too many stories of this happening. Um, where banks just kind of like changed the term.
I mean, they do, but we
[00:22:19] Dan: did after, after it happened.
[00:22:21] Anthony: After it happened. We’ve heard stories, but before nobody told us. Yeah. And this was common actually in 2020, in the middle of the, you know, um, covid quarantine. Like that’s a horror story for people that were living it, where they had, like, it’s happening right now to people too, where they had like agency debt and then agency came back and said, Hey, instead of six months of reserves, you guys, you gotta have a year.
Yeah. You know, that really changes the numbers on your, on a. Yeah, it’s
[00:22:41] Dan: happening now. Whereas rates are rising, people have to keep going. Uh, a lot of buyers have to keep going back to the seller and saying, Hey, you know, I gotta keep my debt service coverage ratio rates just one up, another 75 points. I can only offer you like 5% less, so we gotta re renegotiate this again and again.
It’s unfortunate, but yeah,
[00:22:58] Anthony: continue. No. [00:23:00] Yeah. And so, , that was a horror story in, in that for us, like two weeks before closing, it was suddenly this big question mark of what was gonna happen with this deal, where we were gonna get the next financing, how the seller was gonna react when he heard the news.
Because at that point, we didn’t have the great relationship that we have with him now. Um, a lot of the relationship that we have with him now is due to how we acted during that period of time. And, and the tone that we set for the relationship. Um, but it really led to like a scramble over the next month and a half.
And the horror story, this is, this was one that was like a one two punch that just kept giving. The next bank, who the seller connected us with was a small local community bank. And we sat down with them and they got on board and they loved the. And we thought it was a done deal again, leading up to about two weeks, maybe a week before the next closing, which had been pushed back to July.
And then the bank came back, did not somehow realize earlier on in the transaction, And this is [00:24:00] amazing to me, um, that we were syndicating the deal and they weren’t really familiar with that model. Suddenly they got cold feet in the 11th hour and it was very, very confus. For us again. Yeah. So another pivot had to occur.
Luckily we went to our, another bank, which we had plan, we had intended just to go to this bank. Initially we went with the smaller community bank cuz the seller kind of like vouched for ’em. They were, they had great terms it seemed like. And we ended up getting the deal done. I think only having to push that second closing back like a week.
So like second, maybe second week of Jan of July. Yeah. I think we were like
[00:24:34] Dan: six weeks after when we were planning on mm-hmm. closing initially. Like it wasn’t a full two months. Um, I was just looking back at closing dates recently for updating something I wanna say. It was like, yeah, Dead center, July somewhere.
Mm-hmm. . So, um, but yeah, that one was, that one was tricky because, uh, if you’re not already aware, banks at some points have a lot of appetite for a certain asset class, and then as soon as they kind of get that bucket fill in their balance sheet, they [00:25:00] get their multi-family or whatever the asset class is up to their preferred allocation.
Uh, Uh, the faucet turns off. The faucet turns off and they go from trying to get your business to almost actively throwing, kind of pushing it away in the sense that they’re like, Yeah, we’ll give you a loan on this, but like Anthony said, we’ll give you like 60% cuz we don’t really need this in our portfolio right now.
And that just kind of happens every so often, especially with those local regional banks. Um, agency, it’s a little bit. , um, I think transparent. Mm-hmm. because it’s, it’s, it’s public knowledge of how much money there is to be lent for certain types of products when you’re looking at Fannie or Fred. But for these local regional banks, you just kind of, you gotta go by how the tone of the conversation to get a, a glimpse into what’s going on and be on the curtain there.
So, but we may have it. I think that, like Andy said, the reason that that all went well with the sellers, because when the, we first had this issue pop up, we went straight to him and communicated it. Mm-hmm. . And we were transparent and we were just like, Hey, we don’t have a solution for this yet, but here’s what’s going on.[00:26:00]
And he helped us
[00:26:01] Anthony: solve it. Yeah. And we doubled down this. So two things here is, one, we doubled down. , I think we put more in his money up, or at least we offered. And he like, you know, that means a lot. Let’s put a pin in that and we might come back to it. We didn’t end up having to do it, but we led with that number.
We did something
[00:26:15] Dan: though, didn’t, we didn’t, We did a little extra. We did. I feel
[00:26:17] Anthony: like we did a little, I don’t remember if we actually ever put it in escrow or anything, or if it was just all verbal, but, um, we did, but uh, but something happened there. But we led with that and saying like, Hey, we’re, we believe in this, Believe in us, put this money in, like trust.
Um, the, the number two thing, and this is maybe the best piece of. Um, that I can give in that type of a situation is the seller had a ton of experience. He’s been in the game way, way longer than we have 30 years at this point. And so when we were in that position, Dan and I were looking at each other like, What do we do?
And I was like, I don’t know. Let’s just call Joe the seller and, and see what advice he has, like, put the ball in his court and see if he can come up with a solution for us. And we did that and it, [00:27:00] it got him bought in then to helping. Put us on the same team rather than being combative and against each other.
Yeah. He’s
[00:27:06] Dan: got 30 years of experience, so, you know, we’re, we’re like five years in so you gotta imagine anything we’re experiencing for the first time, he’s probably had experienced a handful of times. Mm-hmm. and already knows what to do. So, um, next up, I got a few to choose from here. I’m not sure what to go with.
I got another one that’s kind of fun. Uh, and I got a few that are just legit horror stories. So, um, what’s the crowd one read Anthony. Fun. Okay. Keep it lighthearted. Yeah. Um, I’m gonna actually cross this out, so don’t accidentally say the name.
[00:27:38] Anthony: Good. Good. Yeah. We don’t wanna expose the innocent or the not
[00:27:42] Dan: innocent.
Um, for those of you who haven’t listened to our episode titled, uh, what was it? How we got into a Fist Fight with a Seller? Yeah, something like, We should link to it below. But I would say that that was not a horror story in the sense that it was like a super negative experience for us. But I think a horror story, [00:28:00] because it was just so cringy for the other party involved, it was just like all the things to not do in business and how to not conduct yourself.
And in that sense, you mean get super
[00:28:11] Anthony: emotional. yell at people.
[00:28:13] Dan: Yeah. You know, puff up your chest, have the biggest ego in the world. And to try to kind of, um, summarize the story so we don’t completely, uh, uh, retell it. I’d say go listen to the episode. It was pretty entertaining. But what we got set up with the seller who had a, a, a small portfolio of buildings that he was gonna sell, he did a lot of work to, it made him really nice and, and he had a particular price point he was trying to.
Uh, and then we underwrote it and said, Okay, well here’s the price where it would work for us, because we need to make X amount of dollars for it to be worth our while. And so we said, Okay. There’s a big difference here. You know, here’s the price that works for us.
[00:28:49] Anthony: And, and for you glossed over that. It was a really big difference.
[00:28:52] Dan: It was, it like, I wanna say 1 75 to like one 20. Yeah. He
[00:28:55] Anthony: wanted one 70 ish a door. And I think we were, we could maybe [00:29:00] go up to one 20 a door. So there was, there was for
[00:29:02] Dan: us, which is fine, but he somehow decided to take that as we think you’re. We’re smarter. Your price is wrong. Ours is the only price that matters.
That’s what he heard. Yeah. And he was like, That’s a direct attack on me. And just proceeded to bombard us with, He just yelled at us
[00:29:19] Anthony: effectively. Like 20 minutes. Yeah. Effectively what it is, is he’s like, You’re telling me my assets are only worth this much? And he had tied up like his personal. Self worth into the buildings.
And so when we were saying, your buildings aren’t worth that much, he was saying, Hey, you’re, you’re not worth that much. Yeah. And it was really fascinating, like psychological breakdown in real time.
[00:29:38] Dan: I wish he had his camera on this was a Zoom call and unfortunately he did not have his camera on. Um, but I, I feel like there’s a lot of just overcompensation for a lot of things going on there.
Yeah. There’s, there’s some stuff that needs to be unpacked, but um, again, that was kind of a, a funny horror story. I got a couple other actual. Really shitty situations I
[00:29:57] Anthony: could talk about too. Yeah. I don’t have any [00:30:00] funny horror stories. Oh, my. I’ll do the fine ones. You do mine. Just mine. Just suck my, my These are depressing to
[00:30:04] Dan: make people want not wanna be in real estate.
Yeah.
[00:30:06] Anthony: I’m trying to, I’m trying to scare people away. Got here so there’s more deals for us. Um, the very first deal I tried to do actively was actually a partnership with my friend. Um, and I’ve shared this story before too. At this point we’ve shared all our stories. We don’t have any more original material here.
People, um, him and I got together. We had worked on another business together in the past. We were really good friends. Um, we went into that first deal. We had a quad under contract up in Payne, failing neighborhood, um, which is, Not the best neighborhood in St. Paul, first of all. And it was an a dubious area that I, I thought you could make a compelling case that in the next five to 10 years, that street in particular, was gonna get really nice.
I had, um, a pretty strong belief in this, but not so strong that I was like, uh, willing to jump hard into this deal. [00:31:00] And the numbers made sense. They were okay, but there were so many unknown variables. One, the building was completely vacant. It was a quad completely. So all the rents and everything that we thought we could get, like there was just no p and l to really point to.
There wasn’t much data to say like, Okay, what can we really do with this thing? So there was just a big unknown there in our unknown of our ability to actually execute the deal. And on top of all this, my partner and I, like, we just were, we were struggling to communicate and, and get the work done that needed to get done because we both were trying to pick up the same balls and we were dropping the same balls and just creating all this.
and leading up until the day of closing for like the, the month that we were under contract, like money’s hard, things just kept getting harder and harder. Like the conversations were, like both of us were just leaving more and more irritated with the other person and it was like, what is happening here?
And so, In the 11th hour, literally the day before closing, I had to, I just pulled the [00:32:00] plug. I was like, I’m not gonna do this. We’re, we’re just gonna walk away. I’ll pay up the earnest moneys, whatever. Um, and it put a, it, it definitely put a wedge in the relationship with me and my friend, and it’s something that I don’t know if we fully ever will reconcile and come back to, but it was one of those things that I recognized if we jumped into that real, into that deal in particular.
Um, but also our relationship in the way it was strained, that it was only going to get worse, right? And so it was just recognizing, um, you might be in a horror story, but you, there are things that you can do to not make the horror story worse, right? Like, don’t go outside, keep the doors locked. Stay inside.
Yes, there’s a yes, there’s a serial killer outside, but don’t make it worse. Just stay inside. You have to go check though. You don’t have to check. Also, don’t split up the group. Stay. Create like a, like put your backs to each other. Find a room where nobody else can come in, except for through one door.
Everybody’s got a club and hatch it. Like, stay together. Like don’t make it worse on yourselves.
[00:32:59] Dan: [00:33:00] Okay. Sometimes that’s, that’s the key. You need to fall when you’re running too. Right? You can’t like, not fall. Well, that’s
[00:33:07] Anthony: if you were running away from somebody. Don’t keep looking. , Don’t look back. Don’t look back because, Huh?
This is all backwards. Look, if they’re gonna get you, they’re gonna get you looking. Back’s not gonna change that fact. . Right? So focus on what you’re doing. Don’t get shiny objects here in the room. Shiny object being the cleaver in the murderer’s hand. Oh, okay. Right. Keep your eyes forward. Interesting. And, And run.
Run. Maybe this should have been the bad
[00:33:30] Dan: investing tip of the week. Just run. Yeah. How to survive a horror movie. Um, for clarity, I think it’s
[00:33:36] Anthony: a good one for clarity. . I think I would survive a horror movie. You think so?
[00:33:41] Dan: Yeah. Because you just don’t ever leave
[00:33:43] Anthony: your house. I would. That’s fair. . That is very there no risks.
I would peace out too. There’s no hero in me . So there’s no going back for the, the children and the women. There’s just Anthony running down the street, . Oh. And Jason with his cleaver looking at [00:34:00] me being like, Damn, that man runs fast when he doesn’t look back.
[00:34:06] Dan: I wouldn’t make a very good
[00:34:07] Anthony: movie though. . It would be Force Gump in a horror movie. . Just ask me . Oh, that’s hilarious.
[00:34:13] Dan: It’d be very shortlived. Um, alright, um, horror stories. How many are you going for here? I’m about to do my 30.
[00:34:22] Anthony: Let’s do, this is just you do one more then we’ll wrap it. One more. Okay.
[00:34:25] Dan: So I got a few to pick from here.
[00:34:27] Anthony: Make it a good.
[00:34:30] Dan: Okay. Um, I got a good one. Um, it’s a good one because, um, this is around when you and I teamed up as well and it’s not gonna be the same, uh, focus as that I’ve taken when I’ve, I’ve told this horror story before, but it’s just the fact that, uh, we did our first deal together. , um, in January.
We closed on the deal in January of 2020, and this was a heavy lift value add deal that we were doing. Um, [00:35:00] fun fact, we are actually refinancing this deal now this week, but you’re listening to this in the future, so we just refinanced this. Last
[00:35:08] Anthony: week to you. Okay, Dan, we gotta talk about how to tell a horror story,
Okay. First of all, you don’t start the horror mo horror movie being like, Here’s the horrible thing that happened, and then fast forward to like, I’m so excited. Then fast forward to the family, like 20 years in the future, living happily ever after. And then go back to the horror story.
[00:35:26] Dan: I just, I just thought I’d throw
[00:35:27] Anthony: it in there.
He just had so much anxiety. He’s like, I gotta tell you, it’s all gonna be okay. You could tell a horror movie and like in the first two minutes you’re like, Don’t worry, it’s gonna be, it’s all gonna be okay. . It all works out in the end, .
[00:35:38] Dan: So yeah, you’re right. This isn’t gonna be scary at all. Now. Um, That’s why you’re the cookie
[00:35:43] Anthony: monster.
Yeah, . Great.
[00:35:45] Dan: All right. So we, we, before Covid we did some pretty heavy lift, value add deals that were just, you know, tenant base was suspect. Uh, the, there was a lot of CapEx needed for deals, and those deals are great. You can make a lot of money, but if there’s any unknown things [00:36:00] that pop up, like. 2020, then that could throw wrench at things and, and make it a very stressful experience.
And so we closed on one of these deals, the biggest deal to date in January of 2020. And for those of you who forgot, uh, some weird stuff happened in the coming months. And this building in particular had a very rough tenant base. They did not do background checks on people when they got ’em in here. And we found out within the first 30 days, okay, pretty much everybody’s gotta go and they’re all month to month leases.
So we’re like, okay, let’s just start issuing the non-renewals and go through the process. Um, March hits and we’ve cleared out the better part of half the building, and all of a sudden, uh, the world shuts down. Uh, you can’t evict people. No one’s going outside. Nobody can work and everything just stops. And this is our first indication, first big deal.
Um, and we’re just sitting here thinking like, what is this just gonna go on for a year? Is this two years? Like, what do we do? Um, luckily, uh, you know, things, actually, all things consider. Turned on pretty quickly as with respect to the [00:37:00] real estate market contractors, Those guys were starting to be able to start to get back to work pretty quick and we could start leasing units and, and our industry actually did fairly well.
Um, all things considered. There was a bunch of assistance dumped out there for people, so it ended up going well. But I gotta tell you, those, those first couple of months there where there were so many unknowns, had to be some of the most stressful months in my life just because. . This was the first full launch syndication, probably 12 to 15 people in that deal.
And it was a completely different environment than we’d ever experienced before. Mm-hmm. so incredibly stressful. I already gave away the ending. We navigated well, it’s turned into a home run deal, but, um, at the moment, in the moment is very
[00:37:45] Anthony: stressful. Yeah. The hardest part, the scariest part in any horror movie is before you see the, the monster.
It’s like all in the buildup and the, in the unexpected, uh, unexpected nature of like, what are you gonna see? What’s actually gonna look like? And your imagination runs [00:38:00] rampant and then you see it and you’re like, Oh, it’s horrible. And then like the second time you see it, you’re like, uh, and the third time you see it like, you know, whatever.
It’s Billy Crystal and monster’s income, basically. Exactly. You just become like de uh, desensitized to it. And so, Like, that’s a good example where it’s like, I don’t know what this monster looks like, Like this monster could look like anything. And when we finally saw it was like, Ah, monster’s not so bad.
Now who knows? Like, I think that Monster has maybe just been lying and, and wait for the last couple of years. And like, maybe now we’re just starting to see him like creep his head out from the door. We’ll see what the next year and a half brings. Um, maybe, maybe we revisit this story in a year, maybe two years.
And we’re like, Oh God, we thought we killed the monster. But it turns out that monster, uh, we didn’t put enough bullets in. O. Yeah. Cause that’s what happens in these movies, right? Like the bad guy never dies the first time. Okay. Yeah. Is
[00:38:46] Dan: that how you, I mean, what if it’s a zombie? I don’t think you can shoot a zombie in the head and kill it, right?
Yeah. Is that how you do it? That’s how you, that’s
[00:38:53] Anthony: the only way to do it. That’s one of the ways we do it. Pole acts to the brain. That’ll do it. Okay. Um, paras, zombies, gardening shears to the, the ice socket that’ll do it. [00:39:00] Ice pick to the, the brain stem. That could also do it if you have like, um,
[00:39:03] Dan: because, and I am human, he had to get some sort of like
[00:39:07] Anthony: thing that’s different.
Those weren’t really zombies. Those are. , um, mutant. That’s I am legend, right? You’re legend. Okay. They’re like mutants, vampire half breed. That’s, that’s something different. That’s not pure zombies. Anyways, zombies never really scared me personally, I never got of those again. Forres Gump, I’m just running . I got no baggage, nothing holding me back.
Sorry Jamie. Love you dearly. Um, I mean,
[00:39:33] Dan: I guess, I guess that’s what we got for, for horror stories, right? That’s everything. I mean, I got more.
[00:39:39] Anthony: Yeah. Nah, I think that’s good. That’s all the time we got. Let’s wrap there. Um, I do want to leave you guys with a book recommendation because we haven’t been doing our book Deep Dives recently because we’re, we’re, we ran outta books.
Um, but one that I’m reading and I’m, I’m surprised that I haven’t read it sooner because I’ve read a lot of other things from this author. Um, it’s from the author Robert Chaldini. He wrote, um, [00:40:00] Persuasion and Persuasion, or, No, Not Persuasion. He wrote Influence and also a book called Persuasion, which are all about influence and like how to be persuasive.
He wrote this book in conjunction with a couple other authors. It’s called, Yes, 50 Scientifically Proven Ways to Be Persuasive. I found it really, it’s really interesting. It’s really fun actually. There’s a lot of, It’s every chapter, it’s 50 chapters of like a different research article about like a study that they did of like how they were, how to increase influence and persuasion and things of like as simple as like the words that the A hotel uses on those little cards in the bathroom to get.
To reuse your towels rather than to just, you know, go through five towels in one stay. What are the
[00:40:41] Dan: words? Say you, I don’t even
[00:40:42] Anthony: read those things. So usually it says stuff like, Hey, please, you know, only use one towel. It helps save the environment. Um, a portion. If you do that, then we’ll donate a portion to this cause or whatever.
Like, it’s usually like trying to, um, prey on [00:41:00] people’s, you know, desire to do good for the nature and the environment. Um, and so they found ways, some really interesting ways. Usually there’s like 20% compliance on those types of things, and they found ways to increase that up to like 60, 70% with just a few, just the words that they’re using.
So this is like copywriting really. Like how do you write persuasively to influence people or how do you speak to people in the words that you choose to use and how you frame things just to be more persuasive. I, I’ve, I find it really interesting, even if you’re not in sales or marketing or business or whatever, um, everything’s a con, everything.
An opportunity to persuade an influence. You know, whether that’s talking to your loved one and trying to decide what you want for dinner, or which movie you guys want to go to, or like where you guys want to vacation for the summer. Like it’s all a negotiation. And anything that you can do to level up your persuasion skill, I think is, is well worth the time.
So check out that book. It’s called, Yes, 50 Scientifically Proven Ways to Be More Persuasive by Robert Cini and two other authors. I can’t remember the. I love it. Yeah. So that will do it [00:42:00] for us. That’s all we got. We look, guys, look, we, we made it to the end of this horror show. Uh, nobody got hurt too badly.
Um, the paper cut, the paper cuts will heal the emotional damage. Might not never, um, but we’ll, we’ll, you know, take it day by day and do the best that we can. So, uh, appreciate you guys being here and for running screaming Naked through the field with us, and we’ll see guys in the next.
