In this episode of the Distressed Real Estate and Note Investing podcast, host Brecht Palombo talks with Gino Barbaro, co-founder of JakeandGino.com and Rand Partners, about getting started in the real estate investing business and what it takes to set yourself up for success.
Check out JakeandGino.com to learn more about how to invest in apartments and other multifamily properties by using the three-step “Buy Right, Finance Right, Manage Right” framework.
Hey, I’m Brecht Palombo and this is Gino Barbaro. You’re listening to the Distressed Pro Professional Podcast Series, where we talk to real people who are out there in the field doing deals and making it happen.
Today, I’m very happy to have Gino Barbaro on here. He’s got jakeandgino.com, and what is the name of your investment company? I know you’ve got another.
Gino: We are Rand Partners.
Brecht: Rand Partners. And you’ve been investing in multifamilies for the most part, for it sounds like the last nine or ten years. And over $100 million in that time in assets under management. If I got the 25-word elevator right.
Gino: You’re missing the most important part of my life, which is that I have six children.
Gino: We homeschool. My daughter just graduated college. She’s a 21-year-old. She’s doing missionary work for this year. So. I did good. She’s okay. My son is 18. He’s going to be a sophomore and then all the way down to seven years old. And I think that for me, that’s probably the coolest thing about my life. I have an amazing, amazing wife.
But for Jake and I, we met back in 2009. I had a restaurant, and I was what we would call an entrepreneur that created a job. I had one restaurant for over 20 years, and I loved it. I worked with my dad since I was eight years old; man, I’d go to the restaurant every day.
I thought everyone went to work with their dad. It was just the coolest thing in the world. And I actually opened up the restaurant with him after I graduated college. He passed away in 2007, and that was my turning point. Then the great recession comes in 2008, and I’m just working my butt off, and I’m like, something doesn’t feel good.
You know, I, I check my values. I’m like, is this my dream, or is it his dream? And I met Jake in 2009. He’s a pharmaceutical rep. He’s doing catering orders out of the restaurant for the doctors. And he moves down to Knoxville in 2011. You know, I get to stay in touch with him. I love his work ethic.
I love who he is. He’s a really hard worker, really dedicated. He moves down to Knoxville in 2011, and we start looking at deals. It takes us 18 months to find that first deal in 2013. Fast-forward to today, you know, that 1,500 units+ is – we’re not syndicated. We have two syndicated deals for Jake and I; we own the majority of our assets.
We’ve been able to refinance and roll our proceeds to the next deal. So a thousand of those units is just me, Jake, and another partner. Syndication has been a great tool for us to utilize as far as trying to scale up. It’s just that multi-family is an amazing business because there’s so many different ways to get into it.
The big catchphrase today, Brecht, is “syndication, syndication.” But for those little mom and pop operators out there like Jake and I, when we started it, it was great buying a 30-unit, 50-unit, 70-unit. You can scale up; you can buy for yourself. You can JV, you can syndicate. There’s so many different ways to get into multi-family.
Brecht: So when you first started with that – a lot of the folks that I talked to, about two-thirds or more of the folks who are our listeners have some kind of a business or career or profession, and they are looking to move on from that. Talk a little bit about how you go from A to B like that. Did you liquidate the restaurant? Or let us in on how that all went.
Gino: That’s a tough one right there because you don’t go from A to B; you go from A to A1 to A3 to A5. I wish it was linear. It’s just not for me.
The first thing I needed to do was answer, “What is my why?” I don’t want to call it a midlife crisis, but I’m in my mid-30s, I’m doing something that I don’t really like too much.
I’m coming home. I’m working hard. My kids are seeing me that I’m just tired and grumpy, and I don’t want them to equate hard work with not liking their job. And it feels as if I’m not being the role model, and I’m like, I have to find something else. I am trading time for dollars.
That’s when you get into your 30s, you’re like, uh-oh. People tell me this, that the difference between rich people and poor people is rich people value their time a lot more than poor people do.
And at that point, that’s when I realized that, and the other one is, was my money working hard for me, and was I working hard for my money?
That one really stung me also. And for everybody listening to this, I was there, and it was a reality check. I read the book by T Harv Eker called Secrets of the Millionaire Mind. And I took that personally. And that’s what happens when you’re in that, in that rut. You take everything personally but step back.
“People see the world as they are, not as it is” – Mr. Steven Covey, genius. And when I realized that, I’m like, it’s not T Harv’s words that are hitting me, it’s me, my responsibility, all of my actions that I led me up to my 38 years of my life are mine. What do I need to do? So I started to get educated.
I got into mentorships. I started listening to all of the experts out there: Zig Ziglar, Napoleon Hill, Tony Robbins, Norman Vincent Peale, Jim Rome. I was just inundated with that, and I needed that at that point in my life; I got into coaching, and then I started buying the assets, and I started the coaching.
The coaching and mentorship really, really helped me out because I didn’t know what I didn’t know. I wanted to be an investor, but how do you become an investor when all you know how to do is make pizza, and you’re in that realm. I needed to actually level up my peer group, which is what I did with the mentorship and with joining other groups and then eventually creating Jake and Gino.
That’s what it is. It’s a peer group where people are out there. They’re not judging you. They want to be like you. They want to be surrounded by other people who are making it happen. And for me, going from the restaurant, it was always, okay, multi-family is great, Brecht. I can buy a 10-unit property, do one closing, have a little bit of economies of scale, and I can still do my job full time.
And we did that for a couple of years. And then it came to the point of when do I burn the ships. And with me, it was year three that I was with Jake in 2016 in March. I remember. And this is a tip for everybody. It’s October 2015, and I’m like, I’m almost there. I almost have enough money. I’ve got six kids. I live in New York. I’ve got a big nut there. I need X amount of money per month, and I’m almost there.
And I go to my brother, and I say, Mark, I’m going to quit the restaurant Monday through Friday, I’m working real estate full-time Monday through Friday, Friday, Saturday, Sunday. I’ll work at the restaurant. Wife’s not too happy, and kids aren’t too happy.
I did it for six months because I really needed to have that proof of concept. I wanted to know that I could do this real estate full-time. In March of 2016, I said, you know what? I’ve got around enough of what I need, maybe a little bit less. And I took the plunge, and for everybody out there, just do the Ben Franklin model.
What are the pros, and what are the cons? The pros are, man. I can live a life of abundance. I can create an amazing life. I can have a lifestyle that’s created by my business instead of the other way around.
The real one con was, if I fail, what happens? It’s not the end of the world; I can just go back and open up another restaurant, or my brother will take me back, but we don’t think that way because the fear overtakes us.
And I think fear is a powerful emotion. When you have fear, it causes inaction. What I ended up doing was I went from the fear state to the anger stage back in ‘08, ‘09. And when I got really angry – the solutions aren’t there when you’re angry because you want to raise your level of energy even more.
Now I’m trained as a life coach. When you’re in that anger stage, as we seem to be in the United States, there’s no solutions coming out. Anger will let you take some type of action, but then you have to start becoming logical, and it removes some of those emotions and starts raising your level of energy.
That’s what I did with Jake, getting a partner, having that accountability. It gave me the ability to start thinking clearly and being able to go to somebody else. And when we got on those calls early on, even today, I mean, I’ve been on the phone with Jake 3 times. It’s energizing. We’ve had a tough week – I told you, we’ve lost a couple of deals.
And he’s like, and I said to him today, I said, Jake, I feel off this week. And he’s like, dude, I feel the same way. I know how you feel. So it’s like having that support group, and with him doing the podcasts every week, getting on these calls every week, it’s really helped me leave the restaurant and actually go into real estate full-time.
Does that make sense?
Brecht: Yeah, it does. It’s interesting to me that you go right to that. And I find often when I talk to folks who’ve done something big like you have that they’ve had the same experience where they first had to get their heads right.
They talk about the “why,” and when you talk to somebody when they’re kind of way at the beginning, they want to know the how and the mechanics of it. And it’s like, to get that, you haven’t. You’re not even there yet. Think about that after you get enough gumption and need to move on.
I was about the same thing. It was about three years – same thing, I had to burn the boats and all of that. And it’s striking how often I hear that same kind of sentiment from folks who have actually done it.
And I’d encourage anyone that if you’re thinking oh no, it’s really, you know, it’s really the nuts and bolts that you got to get down first, that comes with doing deals, doesn’t it?
Gino: Yes, and it’s always about asking yourself the right questions. You know, when people get into the community, into the academy, everyone in multi-family, their first thing is “I need to find deals.”
You don’t need to find deals. You need to pull back and learn the business. We teach Buy Right, Manage Right, and Finance Right for a reason. Because it’s not just about finding deals. You can be a great deal-finder, but how are you going to finance that deal? How are you going to manage that deal? And have you selected a market? Do you know how to underwrite the deals?
I mean, there’s so many other components to it. We get overwhelmed that we have that get-there-itis, and that’s the problem. People don’t plan things out. They’ve lived a crappy life for 50 years, and then all of a sudden, they want to completely change. And you can’t do that.
You have to really map yourself out and, you know, have that “vivid vision moment,” as Cameron Herald says. What’s it going to look like in the next five years? And like you said, it doesn’t take a long time. It’s 3-5 years. Think about that time period in your life. It goes like that, but you need to be intentional.
You need to sort of shut off social media. You need to really focus on what you’re doing. And a lot of people have done that through COVID. I’m sure a lot of people have just gotten fed up with what’s going on, and they’ve focused on their business, and I’m sure there’s a bunch of millionaires that have been created over the last year, just because of what we’re talking about now.
Brecht: Oh, sure. So talk a little bit about when you finally decided, all right, that’s it. I’m gonna go for it. What did that first getting-going look like for you? How did you decide on that market down there? And, just kind of flesh that out a little bit for us.
Gino: First thing I would tell everybody. You need to convince if you’re married, your significant other. I had a convincing play with that. I told my wife I want to be financially free. And for her, August 30th, 1998, that was her financial freedom. She married me. She never worried another day about the bills, but I said, think bigger.
I said it’s not just about money. Wouldn’t it be great to get your mom on a plane and to fly down and pay for a vacation? Wouldn’t it be great to donate to the friars in Harlem? So I had to paint that picture for her. So once she figured that out, she’s like, oh, okay. And then she saw the pain of me going to the restaurant.
Those two things really solidified her being part of my team. Not that she cares about real estate. She could care less about a cap rate, but at least having her in my corner made me feel great. She supported me cause there’s a lot of nights that you’re working late. There’s a lot of weekends that you’re going to events.
There’s a lot of investor calls you’re doing. There’s a lot of podcasts you need to do, and you can’t get that stink-eye. You know, every now and again, you get the stink-eye, but she’s gotta know why you’re doing this. She has to understand it. So for me, that’s important as far as getting going, it was exciting.
I mean, when you hear people telling you, you know, life isn’t all about work. Cause I would go to the restaurant – I’d homeschool in the morning. I’d go to work at 10, and I’d work until 2:00. At lunchtime, I’d take my lunch break, sit down, and do work.
And I’d have people walking by me and going, do you never stop working? And I’m like, this is not work. This is fun. So when you hear people saying that to you, you know, you’re on the right path.
I would go home late at night, and then we would be doing calls or whatever that would look like. And I did that for a good solid two or three years.
Trying to start the podcast, we wrote a book in the meanwhile, calling investors. It was very hard. And you know, we have this instant gratification. People are texting you, and you’re working on the kitchen line. You can’t get to the phone, and they want that. That’s very, very hard. So getting home and responding to people right away was one of my things.
Like Robert Cialdini says, being committed and consistent. Once you commit to something, you need to be consistent. And that’s one of my values, and when I don’t do that, I feel really bad, but in the beginning, it was really, in that 18 months, finding that first deal, it was hard for us. It wasn’t an easy thing because we had no credibility. We didn’t know anybody in the market.
And, you know, Jake was a salesperson who viewed brokers as, oh, they’ve got to bring me the deals, you know, he’s Mr. Bull in the China Shop, which was not a good way to deal with brokers, but he finally realized, Hey, well, hold on, they are the gatekeepers.
We have to treat them. And we got fortunate. We found a great broker early on. He trusted us. He confided in us. He found us a couple of deals. And from there, you find your first deal. And then, all of a sudden, things start changing. You start getting the credibility, and you start building that team. You start meeting other investors in the market.
You start meeting other brokers, and then deals just start coming to you naturally. It’s one of those things where you put in the work, and you say, I got lucky. It fell in my lap. Nothing falls in your lap. And nothing is lucky. It’s intentional. It’s a lot of the hard work that you put into it that ends up being called luck.
Brecht: For sure. You know, I think it’s, you talked about the working all the time and the kids – we also homeschooled for, uh, we’re not right now, but we did for a number of years, and that’s got its own challenges and rewards as you know, better than me.
But it is interesting, you know, now, the kids see that I’ve got a lot of time. That I can choose to do whatever I want with, and we’re not suffering through a lot of things. But there was a time when it’s just like you’re talking about, I mean, driving around and doing auctions, I’d do a thousand miles a week, you know, I’d be out there – 7:00 AM to 7:00 PM, come home, eat something quick, work till 3:00 AM, get up and do it again and then work all weekend long.
And I wonder how you keep your – this is totally off the real estate track, but if you have kids, if anybody else has kids, maybe they’d be interested to hear about it – but one of the things that I find more challenging as successes come is how do you keep it real for the children?
You know what I mean? Make sure that they still have some responsibility and some idea of a work ethic and that Dad actually did work 90 hours a week so that we can have this now.
And that you’re going to have to go bust your ass to get established as well. I don’t know if you know; this is a tangent. Talk a little bit about that.
Gino: What you’re trying to say is you don’t want your kids to be soft. And it’s a difficult thing because at one point – my son is 18 years old.
I have a 2014 Porsche Cayenne, and he’s driving that. Tomorrow he could drive a Toyota cause he doesn’t care. So we’re not really into the material things. We’re practicing Catholics. So for me, money is not the end-all, be-all. It’s great. It’s comfortable. You know, we always talk about giving back.
We’re very fortunate to be able to donate, but for him and for me, he’s working with the company. He’s worked with me since he was eight or nine years old. They all have at the restaurant. And now they’re working for Jake and Gino. So, they’re inundated in the culture. And I want them to be a part of the culture; my wife and I do a podcast. So we work together as well.
My kids, we have a boot camp this weekend for the students. They’re all gonna be there. They’re gonna be selling swag. I want them to see that. And for me, I want my kids to do what they love to do. I don’t want to force them into any endeavor. I don’t want them to go into real estate if they don’t want to.
My son, like I said, I want him to learn financial statements. I want him to learn budgeting. I want him to invest in real estate. He’s seen the power. He’s invested in a couple of our deals. So he’s like, we refi-ed this. I’ve got how much in the bank now? So I’m training his mind, and that’s the most important thing to be able to train their mind and really to see opportunity.
And I don’t want him to be trading time for dollars. I want them to really be doing stuff that’s impactful. Like I said, my daughter. She’s a missionary. She’s going to be working at camp for this next year, for the next 12 months. After that, I want her to get a job, but that’s what she’s been called to. I’m hoping one day she gets married. She has a bunch of kids too, but that those are their decisions.
And it’s really hard to say. I’ve got all this money, and life can be great, but at the same time, I want them to know the value of the dollar. I want them to know that hard work ethic, and you know, there’s a book out there that I think everyone should read.
It’s called Mindset by Carol Dweck. And I challenge all the parents. Don’t have your kids have that fixed mindset. Your kids may be really smart, really intelligent, really good at something. Don’t only say that about them, because then what happens is when they come upfront a challenge and they have a fixed mindset, like John McEnroe, all of a sudden, it’s not my fault. And they quit.
If you have the growth mindset and you teach your kids, you know what, with hard work, with effort, things will come. And if you don’t win on the first try, you just keep working at it. And we’re all here to learn and to get better. That growth mindset is just a game-changer for me because if it wasn’t for that growth mindset, I probably, after 18 months, I probably would have quit after four or five brokers slamming the phone.
So for all the parents out there trying to teach your kids, if your child came in fourth place, it’s okay. The person who won first place deserved it. They worked hard. If you want your child to win first place, tell them you did great. I’m not saying to criticize them.
You did great, but somebody is better than you. They worked really hard at it. They didn’t get lucky. They’re not smarter. We’re not endowed with these gifts. It really comes down to having and putting in the time to get to that level. Does that make sense?
Brecht: Yeah. Great advice. Hopefully, people take that and carry through to adulthood – hard work is not just for kids.
Gino: That’s right.
Brecht: So, talk – it sounds like you’ve got a couple of different podcasts and a lot of different things going on. I’ve visited your site, and you and I have chatted a little bit here about buying right, financing right, managing right.
That sounds like a framework to me or a system that you have. And you’ve mentioned – I don’t know too much about your offerings, but you’ve mentioned something about a course or academy. What’s that all look like, and what are people learning or doing in there? Tell us about that.
Gino: So I started Jake and Gino back in 2015 with Jake when I was about to leave the restaurant. I was fortunate, like I said, that I had enough capital to retire, and I thought I’m coming down to Florida. I’m going to retire with a cash flow. I get down here. I’m like, what am I going to do? I’m so bored.
After like a week, I was like, let’s start the podcast, Jake. So we started the podcast, and we started, we started the Jake and Gino community, and I just started micro-courses, started selling. And then, in 2018, we got a salesperson on the team. His name is Josh, and that revolutionized everything.
All of a sudden, we had offerings, we had real products, and for us, I just wanted to create a community open-source, students come in, they learn our framework, which we call the Buy Right, Manage Right, and Finance Right. It just puts students together. And once you’re at these boot camps and you’re at these trainings, it’s so much fun to see people change our lives.
We’ve had over 50 students quit their W2s. We’ve had students that close over 18,000 units – over a billion dollars in deals since we started doing this, and it’s just a snowball effect because now, once students have been in two or three years, they see their own framework.
And it really, I want to teach to people – my biggest thing with multi-families is to teach people not to do bad deals. My motto is “no deal is better than a bad deal.” So even if you don’t ever buy multi-family, I don’t want you to buy the wrong one because I bought the wrong one back in ‘06.
Ten years. It was painful for ten years. Every time that property manager called, I saw the phone and the time-suck and the money suck. I want people to avoid that.
So that’s what we teach. We teach principles such as the three pillars of real estate and the market cycle, the debt, the exit strategy, when to buy these deals, what type of deals to buy.
Look withing. What is your investing criteria? Most people are investing in stuff. They don’t even ask themselves what are their goals? So all of this stuff. We work on your personal development, work on what you’re looking for.
If you’re, let’s say, a full-time dentist and you want to get into multi-family, well, should you be doing it by yourself? Or maybe, should you be general partnering with somebody or even investing passively?
All of these questions need to be answered, but we try to teach the business. And then, from there, it really comes down to what are your goals? What are you looking to do in multifamily?
Brecht: Yeah. How did you finance your first deal?
Gino: Great question. $600,000, 25 units. We had an 80% bank loan, 10% owner financing, and we put 10% down. Like I said, we found an amazing broker – and back then, seller financing was prevalent, and we were just talking about this before the recording.
I think the debt markets are going to slow things down. I think if they don’t – I’m surprised they haven’t already because, you know, Freddie and Fannie had all those reserves.
I thought that would have slowed it down a little. So one of our coaches wrote a book called Creative Cash on seller financing. Jake, myself, and our coach Bill, we’ve done over $20 million in seller finance deals.
And I thought the strategy would be more prevalent during the pandemic. Everyone said that no one was gonna stop paying rent, but it didn’t happen. So for us, our first deal was seller financing, and those small mom-and-pops, it’s an amazing strategy. I think everyone should take a look at master lease options and seller financing.
One of the big challenges and objections that people have, when they get into multifamilies, is where do I find the money on that first deal? I mean, $83,000 was the down payment on a $600,000 asset. Totally changed our lives. Amazing with closing costs and everything. So you can get into this, but you need to learn all of the tips and all the strategies.
Cause it’ll open you up to more deals. The more ways to get into a deal, the more deals you can underwrite, the more possibility or probability that you’ll close in.
Brecht: Yeah. So, what’s your ultimate goal with this? Are you just going to continue to amass units, or have you got an exit strategy out there?
Gino: That’s a great question. I don’t have an exit strategy. We’re just considering what our net worth has gone to. We’re trying to plan for our states for how we pass these assets over to our kids. Cause I don’t wanna have a fire sale. I don’t want to be not here one day when my kids go, I don’t want this multifamily thing.
So we’re already putting things in trusts, and we’re thinking about it. We’ve created a company it’s called The 100 Year Mindset, The 100 Year Real Estate Investor, where we’re selling whole life insurance. And what I love about whole life is basically state tax – you have the death benefit on there, you have the living benefit.
We call it the dual asset strategy; investing in whole-life, you’re creating one asset. You’re borrowing out of that asset to buy the multifamily. When the multi-family pays off, you pay the loan back, and all of a sudden, you have these two assets, and it’s the living benefit and the death benefit.
Now the drawback, like everything else in life, you need to have a long time horizon, but if you don’t, you’re not going to be successful. If you have the shiny object syndrome where one day you’re chasing crypto, the next day, you’re chasing single-family. The next day, you’re chasing REOs. That’s where I see people that are truly successful. They really learned something.
Like you’ve had your business since 2009, you’ve grown that. You’ve learned that business. You’ve understood that industry. Now it may be time to do something else, but you didn’t go chase something else after you started something and did it. And that’s the problem with, I think, with a lot of entrepreneurs, we’re ADD. We figure something out. Then we get bored right away, and we move on to the next thing.
I challenge everybody – learn something really well, master it, get really good at it, and the passion will come from that. I love multi-family because I can understand that now. It makes sense to me; there may not be as many deals.
Jake always says he wanted to be a fitness instructor when he got out of college; he loved fitness. Well, how did that work out? He freaking hated it after six months because nobody wanted to go work out. He was telling people, he was like, these people are going to tell them?!
So don’t fall in love with a thing that you think you’re passionate about. I loved food, but after a while, it drove me nuts. I didn’t like it. But with this whole business building, this whole entrepreneurial venture, that whole idea that you can help others, that’s turned into a passion. So for me, the long game is just to continue to do it as long as I can.
Brecht: Wow, that’s a good game. And you don’t hear that very often. You know, a lot of times there’s something, some other side, you know, the things that folks are looking to get to.
I guess what I do want to touch on, cause we’re already running a little bit longer than I planned, but I just want to touch on it a little bit.
You talked about deals being hard right now. And you know, when I’m looking in at our data, I’m seeing that a lot of the lenders are selling loans. There’s definitely multifamilies, at least distress, like defaulted loans and multifamilies up 50% over 18 months ago. So there’s definitely some, we’ve had all this, the eviction moratorium, you know, we’ve had a lot of folks out of work, especially renters.
So what’s happening now, and what do you see over the next 12 to 24? I’m not asking for a crystal ball.
Gino: Well, I mean, if we had this conversation 18 months ago, I would’ve said to you that that market is going to seize up a little bit. Rates are going to go a little higher, but did anyone foresee $4 trillion of printing?
It really depends upon the external forces of what happens outside. The thing with the multi-family where you’re seeing a lot of these defaults is in these areas like California and New York, where they’re under-performing, there’s a lot of delinquency.
Where we are – in Tennessee, I live in Florida, and I mean, the building here is just out of control. Everyone’s moving here. There’s so much capital flowing to these markets. There’s jobs that are still being created. Rents have been rising cause there’s so much demand. I’ve never had a time in my history – I don’t know about you, where you look around, you have high inflation, you have 0% interest rates. You’re coming out of a recession. There’s so much demand, but there’s no supply.
So everything is like so inverted. I don’t know what happens when the demand and the supply converge. We may go into a serious recession. Cause then you may have oversupply because people have just gone out with the demand.
It really depends on what the government does with printing. I just think over the long term, multifamily is a basic human need; it’s food, clothing, and apartments. That’s number one. Number two, it’s a hard asset. So we have inflation. It’s going to continue to rise. It’s just going to – where’s the point where investors’ returns and this makes sense, is multifamily not going to be an asset where you cashflow anymore? Where you just have capital appreciation or investors are going to be willing to do that because that’s not investing to me. That’s more speculating. I’m buying something at a buck and hope I can sell it a buck 50, and I’m not making any kind of a yield.
That’s not an investment to me. I’m sorry. That, to me, is a speculative play. And is that where multifamily is heading to? I don’t know. I don’t think so. I hope not. The other caveat with multifamily – are the tax benefits going to continue? Tax benefits are tremendous in this space, and that’s what’s actually elevated it.
And I guess, Brecht, the other thing is where’s money going to flow to if all of a sudden something else comes on the horizon where whether it’s a commodity or people are going to go crazy with gold or really crypto all of a sudden, that may take some of the flow out of multifamily, but I don’t think so because it’s a hard asset. There’s a lot of tax benefits. It’s a basic human need. There’s so many benefits and positives.
That’s why cap rates have been compressing for the last several years. I still think it’s going to happen. Deals will be harder to come by. I think, Brecht, the answer, ultimately, to the question is these smaller units, these smaller deals, 20, 30, 40, 50 units, the ones where
these private equity companies, they don’t want to deal with the management on these smaller ones. They want these 200-300-unit properties with their scalability. If they can figure out the remote leasing, if they could figure out the technology where they can take and do remote all this type of remote property management, then that may make sense to them.
But right now, I don’t think it makes sense to them to get into that part of the space.
Brecht: Even as they’re buying up thousands or tens of thousands of single-family and stuff.
Gino: Yes. And that’s funny, that’s a hard business model, but what they’re doing is they’ve got cheap money. They don’t have to cash flow on those.
What they’re doing is that they’re buying it; they’ll hold on to it for three years, and they’ve got a yield, and they’ll have the property management companies out there. They’re very hard to manage. I don’t know how they make – they don’t make money on the management because by the time you have the thousand dollar rent and that renter gets out, you’ve got to put two grand back in CapEx, and the hot water heater’s located somewhere else. Those are very hard.
But when you have scale, and your cost of capital is so cheap to buy these properties, you buy them at a decent number, and three years from now, they’re up 30%, and you can liquidate them. That’s where their play is. And they have to, they have to place the capital.
That’s what they have to do. So that’s what they do.
Brecht: One and one and a half percent interest is my understanding of like BlackRock and what they’re paying. So it’s very inexpensive. Hard to compete with that.
Gino: Very difficult. I agree.
Brecht: Yeah. Gino, it’s been awesome having you on here. I love your energy and the story, and if you’re thinking about multifamily or even just thinking about real estate, it sounds like you should go over to JakeAndGino.com and listen to the podcast, subscribe over there. It sounds like you could really get your head right listening to Gino here, and it’s just been fantastic having you on here. Really appreciate it.
Gino: Thanks for having me on. I appreciate it. And I’m glad you had a nice vacation. I hope I made the ending of the vacation, at least a little palatable, as I like to say.
Brecht: Coming off of that much time off, it was refreshing to be able to talk to you here. I really appreciate it.
Gino: Thanks again.
Brecht: All right. Thanks, Gino.