00:01

Welcome to Episode Eight of Season 15 of the Growing Empires Show. Today I’m here with my special guest, TJ Kosen. And he’s going to talk about how he got started in real estate right out of college, as well as how his first deal was over 100 units, where he found it from, and more importantly, what he’s doing today as far as wholesaling, and raising capital. So make sure you stay tuned.

00:27

Welcome to Growing Empires hosted by real estate entrepreneur and trusted Investment Advisor Jennifer de Jesus. Growing Empires provides insight to building wealth through passive income producing real estate investments for those who want to build and manage a more profitable real estate portfolio.

00:48

Right welcome, TJ to the growing empire show. I’m so glad that you’re here.

00:52

Well, thanks so much for having me. I really appreciate it.

00:54

Awesome. Let’s kick off this episode with you sharing a little bit about your background and the work that you’re doing now.

00:59

Yeah, absolutely. Um, kind of a long, long way to get there. I guess I started in real estate in 2006. My first deal was actually 112 apartment units in Memphis. So that was a lot of fun. The only problem 2006 with 2008 was right around the corner. So that was a it was a fun couple of years getting into real estate right at the exciting time. After that, about 10 or 11, something like that, and went back to San Diego, and spent a little bit of time kind of surfing recouping and flipping a couple houses. So that was a that was good. Probably should have bought a lot more. But we did pretty well buying stuff that was 75% off in California at the bottom of the market, and then got married 10 years. Oh, my God, I think, yeah, I think we’re coming up on our 10 year anniversary.

01:41

I hope your wife is not listening to this.

01:44

She’s not the office right now. No doubt in Dallas. And the mindset for moving out here, it was kind of a more volume based market and more affordable market. And just we thought it’d be fun to have a change. It’s fun, like as strange as that sounds coming from like California. And we love it. So that was again, we moved out here actually. Yeah, nine years ago about now been here ever since had some ups and downs and backs and fourths. But right now we have a pretty decent volume. I think we have about 3536 deals on the board. I’m not sure stuff comes on stuff comes off. So I don’t always know what exactly we have going on. But we definitely we have a lot of inventory strictly distressed residential. Now, once in a while we’ll pick up something commercial, but it’s generally by accident. And that’s kind of the business model, the history and a like I don’t know, condensed, condensed period.

02:30

All right, awesome. Well, today, we’re going to talk about your wholesaling journey, your real estate investing journey, and also about how you’ve acquired properties across multiple markets. So I’ve asked TJ to join me to share his wealth of knowledge he’s gained throughout the years on these subjects. So as we kicked us off, I just want to bring up something that you just mentioned initially, you said your first deal was 100. In how many units 12 112? How in the world does somebody is just started out investing in all of a sudden is accumulating 112 units, that is definitely not normal.

03:08

The market was a little different than 2006. I was 2425, I think something like that. So it’s a little while ago, and I was poking around online and saw a couple deals, I thought it’d be fun to get into the commercial side of it. Before it was all trendy. I don’t even know if there wasn’t bigger pockets at the time, I think there might have been and you know, thought what the hell, let’s go do a shot. We bought it for I don’t remember 800 grand, so whatever that is about 7000 units, something like that. capitalized about 12 to 13,000 unit and our targeted exit price at the time it was about 30k a unit somewhere in that respect. I don’t remember exactly. There was just that on that made sense. So it wasn’t that hard to raise a million bucks at 25. I guess, because our purchase price is only you know, the hundreds and the property now I’m not really sure what it’d be worth. It’s definitely an interesting market and a lot of changed both from the market like holistically in that particular sub market over the past 16 years.

04:04

Sure. And what market was that in that you bought that first deal Memphis, Memphis. Okay. And I heard you mentioned that you raise capital. So did you was all the money from raise capital? Did you do any bank financing at the time?

04:18

Yeah, we did. We did some fun stuff. We did the creative thing before it’s popular, I guess. I bought it where I basically assumed the existing hard money loan. That was from a local private investor. He’d actually had an ownership interest in the property like maybe 20 years before he was pretty familiar with it. It was pretty good terms. Actually, I think it was about two points above prime. So pretty good for hard money. So as rates were coming down in 2000, kind of ended 2006 2007 and march 2008. Rates are coming down, which actually helped our interest carry so that was cool. He had a relationship with a bank. So he effectively had a line of credit with a bank who secured securitized on the property. So he anyway he held the first negotiated a relatively good sized construction draw from him. I don’t know remember exactly what it was, again was a long time ago. And then the sellers, I had them hold a 20k second on the property. I think we came in with 15 or 20%. Down. So we raised the probably right around 170 to 200, grand, something like that. We ended up capitalizing a lot more than we expected. So we had to raise other money that way. But yeah, it was it was all kinds of creative before creative was popular. So it was it was fun. It was a good time. It was a good first deal.

05:28

Awesome. So yeah, obviously it partners in SE, right, or equity partners, I should say. So how did you did you? Was this a wholesale deal? Did you sell it right off? Was it?

05:41

No, we closed on it. We owned it from 2006 to 2000? Either 10 or 11? I don’t remember exactly. And it was when we bought it, it was about 10 to 12%. Occupied. So not very occupied. When we were at the peak of the market and got up to about 95%, I think economic occupancy of available units somewhere in that in that area. I don’t remember exactly. And the market shifted. So we actually ended up losing money on it, which is never fun to do. But it was a it was a big Yeah, just a big capital value added kind of project moved out there. Manage everything ended up hiring a bunch of the subs had a crew at the age of 25 ish. I don’t know, we probably have 50 people working for us at one point between subs and direct employees. It was a lot of stories. Everyone says, you know, you should write a book about it. But I don’t know.

06:29

I’m sure your time is valuable. And you’re moving on to other things. So you said you self managed you moved out there and you self manage? What did you learn from that first experience?

06:43

Again, it’s such a different market, the management is absolutely key. And that’s I mean, I think that’s important with anything we that definitely applies to any business, like going forward, right. So even with our we have sales guys, acquisitions, guys, this book, guys, we still have pretty good contractor crew, I think our payroll last week was like 65k, or something and contractor payroll. So having a good management team in place that can manage that just kind of operational stress is is hugely important. We tried hiring a management company out there that thought they were good at what they were doing. I actually ended up suing them put them out of business because they weren’t very good. So that was I mean, that was fun. I guess it’s kind of I moved back, it’s like, wow, these guys are really screwing up, I probably better go back there and take charge. So I did. And that was that was just the most important. Probably the most important lessons we I like, I like keeping stuff in house as well as we can. Not so much. Obviously, we don’t hire like the direct labor ourselves so much. But control of the process was was really important. Control of the project was really important in all of our deals, we’ve done probably several 100 flips, just residential flips. And the control of the process has always been important. You know, stuff always pops up. So you’re always bumping into something you didn’t expect, maybe, you know, and that happens. But when that happens, it’s important to realize not the contractors fault. It’s, you know, whoever bought the property, whoever owns the job, it’s their responsibility to take care of it. So between control and responsibility, those are the two biggest things I think we’ve probably learned from the experience was, you know, stuff goes right stuff goes wrong. when stuff goes right, it’s generally because the team, the put together is good. So I suppose you can take some credit for that, when stuff goes wrong, it’s because you personally should have done better to not miss something. It doesn’t mean that you know, you don’t get surprised once in a while. But definitely, we see it so often with investors, right where they want to blame the contractor for screwing on the one to blame the seller for not telling them the truth they want to okay, but if you’re the professional in the real estate environment, you’re buying any kind of volume of deals, your first deal, your 50th deal doesn’t really matter. If you’re the one representing yourself as the professional, then taking ownership of the project and being responsible, as much as you can for the outcome is what’s going to push you through the good times and the bad times.

08:54

Yeah, I agree. Totally agree. So we’re what’s your background? Where did you before you even got into real estate in 2006? What were you doing? I

09:02

graduated college in 2004. So when I was I got out of college, right? I don’t know what I think it’s kind of popular to not think that you should go to college now. I had a great time. I loved it. I got good grades. I got four degrees, two bachelors, one in history, and one in Business Administration. And then I got to I guess our associates, your minors, really one in math and one of the theology. And I got that because I thought it’d be fun. So I really enjoyed it. I think there’s a lot of value to that. It’s definitely not in the product that you learned or in the actual day. I mean, yeah, I guess you learned counting one or something. And maybe that’s useful if you want to look at a balance sheet. But that’s a lot more about the experience a lot more about the relationships. I’m still friends, a lot of those folks, and a lot more. I mean, it does prove that you can stick through something in my case, I think it was five years, but you get the extra degrees. You got to take some extra time. But you can stick through something and see it to the end and that’s applied really well in business where you Yeah, the responsibility of, again, what the outcome is. And that takes a lot of kind of fortitude. And I’m not saying college is for everyone. I’m not saying it’s necessary. It’s definitely not, especially for financial success. But I think there’s a lot of value the transit overlooked in the modern kind of entrepreneurial culture.

10:13

So you went to college, you got these degrees. Why didn’t you do anything with those degrees? Specific in those industries?

10:20

Oh, history? Well, history. You know, it’s funny, my wife got a history degree, same college four years younger than me. So we didn’t know each other. Then we met afterwards, she was going back for a master’s in something that she doesn’t do anymore, either. Because she works, you know, we worked together, she thought it’d be fun to be a museum curator. So she got a degree in history, and some other stuff, a degree in Italian and theology and some of the things that I remember exactly, she’s got five fingers, she got me beat by one. And then she got a job at the San Diego Automotive Museum. As a curator, I don’t really know what a curator is. But she found out really quickly, Wow, that really doesn’t pay well. And yeah, I can get a master’s degree in history. And then I can wait for the head, museum person to die, who also doesn’t make any money. And then maybe I can get advancement. And she’s only 60. And these people lasts until they’re 85, or 90, because they fundamentally have to love what they do. If someone is not really good idea, so she got a master’s degree, and then also didn’t make a whole lot of money. So then I decided, you know, maybe we should do this real estate thing kind of together. And it turns out that that’s actually financially a good way to go. I never wanted to work in corporate America, I never wanted to be an historian, I literally took the classes because I thought they were fun and interesting. I studied abroad in Oxford first semester, I was gonna get a history minor. So I did that. Like I studied abroad in Oxford first semester, I knocked out all the classes for the minor in like, one semester, that really kind of too, I guess. And then I came back, and it’s like, well, that was easy. Well, if I take six more, I get it a full on degree. So let’s just take six more over the next like year and a half and just enjoyed it. It was fun. I think it gives an interesting perspective on a lot of different things. Okay,

11:53

so what made you decide real estate? Ultimately? What was it about real estate that was intriguing? made you think I’m gonna I’m gonna do this?

12:01

I think it doesn’t everyone say financial freedom. I don’t really know what that means. I think the I think that was probably the original objective was, you might notice I’m not retired because the office and we’re still working. So obviously, that’s not what the actual objective is. I think your objectives can change over time, I think my initial one was definitely financial ability to go and kind of do whatever I want to provide for family, like that kind of stuff. And then at some point, either that, in our case, losing money in the first deal was not fun. So then you reevaluate, well, what do I gain from it, and what you gain is a life skills of how to do kind of the thing, that is a good thing to know how to do. And then when he kind of to have that mindset shift, then for me, or this point, it’s not about financial freedom, that’s actually relatively easy. I think. It’s about climbing the next hill. Because every time you climb a hill and get to somewhere, you kind of look around. And it’s never as big a hill as you thought it was gonna be once you’re on top now, and when you’re in the middle of it, it looks like the most massive Hill you’ve ever been on. But I think every small business owner kind of going on to the entrepreneurial side, probably has something similar, where they start out with some goals, and then maybe get to different goals. And for us, every time we we level up, it’s like, well, wow, that was really hard. And then we do, it’s like, Well, that wasn’t as hard as we thought. And I was like, Okay, who can we hire and help us do that better. So we hired them. And then we look around going like, well, now we’re kind of bored again. Now we got to do like more of the thing. So we increase our volume, increase our marketing, increase our kind of velocity, and build our team. So now what’s more fulfilling than the money is really seeing the team members be successful and be able to provide for their families, and do well because of the environment that we create and provide for them.

13:42

That’s awesome. So where did you find that first deal? Was it? Was it a like off market deal? Was it on market at the time? What was it?

13:50

This was embarrassing? I found on Craigslist. Hey, listen,

13:53

I You should not be embarrassed if by all means necessary, right? When you’re investing in real estate, I don’t think there’s ever a one trick pony. I just

14:01

illustrate dating. I guess Craigslist wasn’t that bad back in the day. But yeah,

14:05

that’s true. That’s true, especially if you’ve found 100 And whatever unit deal. That’s awesome. Yeah, the

14:10

owner put on a couple I was. So I was doing loans at the time in 2005. Right 2005 And six kind of saw loans in california because I’m from San Diego. And being in San Diego neural was kind of aware that real estate is cyclical and up and downs because California should definitely has bigger swings than a lot of the rest of the country, including pretty much everywhere and 2008 is a like realistically hopefully a once in a lifetime thing. Like we haven’t had a crash like that. In real estate promises. The savings alone crashed in like the late 80s or mid 80s. So it’s not really but your California has like ups and downs more frequently than the rest of the country historically. So I thought well received all these loans. Like obviously the problem in the market at the time was the residential loan product and the types of borrowers that were able to qualify for these not very good loans. So the the mindset was, well, let’s get into investing. But let’s not do it in California because it’s overpriced. And because we’re gonna have a correction and because of this loan product that was in the system at that time. So let’s look at other markets that are making more cash flow oriented, a little bit more stable from a peaking value, value perspective, and that are more affordable and more manageable. So nail that down to a couple. Ironically, we thought Dallas would be good without Houston would be good. Memphis look good from a cash flow idea. I think Katrina was still kind of like the aftermath of Katrina was still kind of happened to Orleans. So we kind of looked at that, but that now that sounds like a lot of like falling bureaucracy bureaucracy that we’d have to deal with, with like new codes after the hurricane. So like, I don’t know, Memphis sounds a good combination of kind of equity, appreciation and cash flow. And then kind of started looking more than found the deal. Yeah, that’s a long way of saying it. I just, I guess I want to get to loans. I didn’t like loans. I didn’t like them. I didn’t like the product. We didn’t do particularly bad loans in our company, for the most part. But we definitely saw what was available in the marketplace. And just like how that wasn’t sustainable from a lending perspective, very different than loans in the marketplace now very different borrower qualifications, very different, like just all around so we’re not fixing to bump into 2008 Round two, this one’s gonna be a lot different. And it is a lot different.

16:18

Sure. So out of all the states in the US that you could have gone to why Texas? Why down south

16:26

Texas, the best country in the world. The best and Dallas is the best city in the best country in the world. It’s beautiful scenery, you know, it’s a it’s flat. Okay, now we, my wife and I want to change we got married and we thought it’d be fun to move somewhere else. So we looked at different spots that had a kind of robust real estate market. We looked at areas that we’re on all kinds of tabloid journalist things like Business Insider about like best places for younger like whatever people to live and let Yeah, it was whatever like 10 years ago now is I guess that’s a lot younger. And you know, different different places popped up. Dallas popped up Plano popped up in generally Plano so like north north of DFW popped up is like a great area to live for, as a family have kids great like quality of life. We looked at like Raleigh, because she was working for a big broker dealer at the time, and regulatory compliance, and they had an office out there, thought Boston be fun, but it’s cold. And we don’t like cold that much. And I thought about Atlanta, too, because it was kind of on the upswing, but not Dallas, just kind of kind of pique the interest. I had some friends out here and visited a couple times I was loved the town. And we kind of thought you know, if it sucks, we’ll just leave. And so far, it hasn’t stopped.

17:41

Okay, so that first deal he did 2006. What was the next deal? Was it after that one was sold, or was it simultaneous deal?

17:50

Well, the next deal was actually December of 2006, it was 98 units from the same seller, I ran into a similar circumstance with the financing. So he bought the seller bought a pool of four properties, or maybe five, I think, from one, I don’t want to judge the guy, but consider the occupancy and the quality of the properties. He was a bit of a slumlord. So, so the seller that I bought him from bought four properties out of foreclosure, I have no idea what he got him for, like less than I did so good for him. And I think he financed them all with the same lender. So he sold off, he had sold off two before this. Now he hadn’t actually, he still had, I think he actually I think he had all four of them, I got the best two of the deal. So the one was a big value, add the 112 payments was the big value add property. The second one was an idea units did the same thing where the seller carried a second, smaller second, I think it was only 50 or 60k because it was more stabilized property. He wasn’t really an operator, so he didn’t want to do the rehab. He bought it really cheap. And he was able to kind of stabilize and kind of clean up a little bit but he didn’t want to like operate the properties. It’s fine. So we came in and the hard money lender did the financing on the first and then ended up refinancing the properties. I’m not sure exactly maybe a year after we own that one I think got takeout financing that was relatively relatively good financing I guess. Actually that bank ironically ended up going defunct in the financial crash so that says something about the product that they were in in terms of like their risk appetite maybe I don’t know. And that was it. My first flip wasn’t until about a house the next year 2007 I bought one house not make life easy. It was a house without the top half because it had been hit by lightning. Oh my gosh. So we obviously bought as a flip bird that one that was cool bird that with a loan from Bank of America. And like 2% We got a line of credit on it. So that was that was great. So that cash flow like a mofo for a couple years. I remember when I sold that 2011 or 12 I remember. And then again lost money on the first flipping The first big property that I didn’t tell you this last Monday that, so I went back to California and just bought as much cheap stuff as I could in the Inland Empire, a couple flips in San Diego, but didn’t really have like a volume based mindset living out there. People were doing volume, I suppose I didn’t know who they were. And the business model wasn’t so obvious about how to like really scale and expand. So I think, I think that’s kind of why I moved to Dallas, I thought I could do more volume out here turns out a good and plenty of volume in San Diego too, but I just didn’t really literally put two and two together at the time. Sure.

20:31

The episode will continue in just a moment.

20:34

As an investor, we know it’s important to stay on top of market trends and real estate opportunities that add value to your portfolio. We also know that having a trusted source of reliable information to help you stay a step ahead of other investors is critical to your success. If you’re interested in having these types of resources, as well as access to me and my team, I invite you to join the Empire Investment Club, a free service that gives you an easier way to make sense of today’s and tomorrow’s real estate opportunities. As a member of the Empire Investment Club, you’ll get access to relevant resources and investment focused experiences, such as live interactive webinars, market trend presentations, and investor socials designed to equip you with what you need to succeed. So whether you’re an active investor, passive investor, a combination of both, or just starting out, the club is where you’ll get what you need to build a portfolio you love to join, just head over to Jennifer to haces.com, sign up, and we’ll see you in the club, where everyone’s on a journey to becoming a better investor. Did you use for mentors during all this, were you just doing your own research and due diligence?

21:38

Really bad, that’s, you know what that’s probably one of my biggest failings is I’ve always had, I wouldn’t say a mentor about here’s how you do everything. I’ve always had people that would be able to give advice or an outlook on a piece of a thing. But like maybe maybe hiring people or employing people, there’s been a good friend of mine who was our HR contractor in Memphis, he had a big team and a big company, there was a good dude. And it became a bit of a mentor from like a hiring perspective. But never like a business coach, holistic mentor, never really had one of those probably would have gone farther than I had. Maybe if I’d done that earlier. We’re doing masterminds and on the education thing more recently, and it’s definitely elevated business to a certain level, I think there’s a lot of if you get into a trap of taking advice from people that maybe aren’t in the position that you actually want to be in. And it’s generally it can be well intentioned, but it’s not necessarily applicable to where you’re wanting to go in life. So I think it’s really, really difficult to know who you want to take advice from. Even from a mentorship perspective, I knew about like the rich dad education programs. Trump University was big. I remember going into like, one of his two day things is like, I’m looking around going like, I don’t want to be like any of these people. Because they’re talking about doing one flip at a time and they’re talking about investing in something passively. I’m not really interested in that I want to do something bigger. So yeah, kind of went all out, I guess. Okay.

23:06

When did you get into wholesaling?

23:09

Not until Texas, actually, I think it was after, I don’t even think our first wholesale deal was until I moved to Texas. I remember the first wholesale deal, and I haven’t thought about it. There’s a lot of benefits to it. So we moved out here, like nine years ago, did a couple flips. It had some side tracks that ended up breaking my back and having a bad accident where I had to learn how to walk again. Kind of set things back a little bit. Sure. I don’t know if that was on my little bio or whatever. But so that kind of set things back for a while. Get back into real estate flipping ended up building a construction company. And then because my mind is out just wasn’t into real estate for a while it’s kind of burned out. Seven years ago, probably something like that. We’ve never been starting out with just my wife and I in Dallas we never were wanting to do just wholesaling because I think wholesaling is such a such a niche, such a niche market, that it’s easy to scale in a good market. If you have a good team that you can negotiate that can negotiate well with deals. It’s a relatively low margin in terms of like exit strategy and very confining in terms of that. So we’d like to say in our current business, we again, we do a pretty good volume. We try to we try to manage the exit strategy with the entrance strategy when we’re negotiating with sellers. And wholesaling is definitely a huge part of that, because it’s a great opportunity that you can offer sellers. And from a business standpoint, obviously, the velocity of being able to turn over a deal relatively quickly, is huge for cash flow. So it’s it’s really good. It’s a good additive for the business, where people tend to get into trouble is where they try to scale it up without trying to do other stuff at the same time. Because as you build a team and as you increase marketing expense, and as you increase team members, then obviously your overhead and your operational expense goes up quite a bit. So you have to basically if you’re just wholesaling. And if you’re just going on kind of national numbers, you have to triple or quadruple your volume versus if you’re doing it all by yourself. So the way we the way we do it is we negotiate better, we sell better by having wholesaling as one of our exit strategies. And we we keep a small team that’s relatively more robust than a lot of our competitors in terms of being able to negotiate with sellers and understands the different sub markets. Because if all you’re doing is selling on, as a wholesaler selling on whatever it is 80% minus repairs minus whatever you buy it for the wholesale fee, then that’s great. But you’re you’re ignoring all the other opportunities for that property. We bought a property with way less equity than that as a sub two rental. Let us cashflow 500 bucks a month. We did that a month and a half ago. And we’re into the thing like 12 grand, which is insane. We contract property over the weekend, that I don’t even think about it. But we’ll probably make about 80 to 90 on just wholesaling. So it’s really it’s really a good like you’re missing out on, I would say probably half the business and a ton of the upside if it’s just the wholesaling model. The good thing about Wholesaling is very scalable. The odd thing about Wholesaling is it’s rather difficult to scale at a highly profitable level.

26:15

Okay, so how did you scale it? Because you’re currently doing it? So how did you scale it? How many people do you have on your team? Where did you find them from? What do they do?

26:25

All the above? All the above? I think the mindset for scaling originally was I really don’t like talking to sellers. So my wife and I move out here we’re doing all the different pieces, we’re doing our flips, we’re doing a couple wholesales, I’m dropping off paint and trying to answer the phone. And everyone thinks that, oh, if I hire someone, they’re gonna work at whatever the number is 75% of my ability or some, you know, some made up number, they just think sounds fancy for the statistics. They’re only going to work at 80% and 70%, whatever my best day, well, and that may or may not be true. And actually, I think it’s not true. But realistically, you don’t work 100% of your capacity all the time with all the different pieces if you have to do all the different things, because you just don’t want to. And because it’s very difficult. So if you have to answer the phone to take an inbound lead, that you can make 30 grand on, but you have to drop off paint buckets, so you don’t call him back until the next day. Well, now you lost the deal that you don’t even know that you had versus plus, if you don’t like talking to sellers, you’re not as inclined to want to talk to them. It’s not that sellers are bad people, but their houses tend to always have bad stories, I want to listen your story, I’ve heard your story 20 times, the house smells kind of funny. And I got to burn my jeans after I get out of the house. For me, it was more like scaling from like lack of desire to do that piece of the business. So hire an acquisitions guy. It’s like, okay, well, now I have an acquisitions guy or two, now I have to have enough leads to make sure they. So that’s the responsibility aspect. And then well, now I’m making less money because they’re taking a piece. So now I gotta get more leads to give them more money to get make me more money. And then at some point, you say, You know what, we just need to build the whole team, because it’s the best way to do business. And it’s a lot more fulfilling to really invest in the team members. So we have three people on acquisitions, we have two on dispo, I guess, with my wife kind of friend as well. I have a business partner that leads up the acquisition side, he loves the negotiation side, he loves the creative negotiation structure. So he runs, he runs the acquisition side, I’ve barely in any good training people. I do the construction, I do the marketing. And I do the kind of business I like to say that I I’m like the janitor, I make sure everything’s cleaned up, I’m probably the lowest margin product that we have. Because if we’re doing a flip, we’re gonna be in a flip, you know, four months or five months, if we’re doing a wholesale, we’re gonna be in the field, you know, three or four weeks. So inherently, I’m already low margin. So I’m expendable in that respect. But that’s my job to make sure that kind of everything else keeps rolling. And all the kids play nice together in the sandbox. And it works well, because we have a good team of people to complement our kind of issues. And, like, I think all of us know how to do all the different pieces, but there’s pieces that we don’t like doing so we rely on other people to do those pieces. I think it’s nine out of nine plus MBAs in the office. But the seven, I gotta count, I don’t remember.

29:08

Okay. And then all your work that you’re doing on the construction side, is it all subbed out work or do you actually have employees now in the construction company?

29:15

No. We have all subbed out right now. I think we’ve had project managers to kind of look and waste a lot of money. And it’s not, it’s not that big a deal. In our flips, we have a pretty, pretty cookie cutter approach to how we how we do the flips. We’ll do higher end ones with the lower end ones. The cheapest ones are the you know, 150 to 200 range. Our most expensive one right now is a million bucks pre sold, actually sold it before we had drywall even up on the walls. So we definitely run the we’ve definitely run the range, but we put in a very similar product. Do a very similar look. And we’ve used the crews that we’ve used, we’ve used them for years. So my main GC have actually known since we moved out to Dallas, so I’ve known him actually over nine years, I think, and we use him a lot. And he’s just a good dude. We bring in other subs for obviously, the skilled trades. And he’s able to do a lot of the kind of what would be like project management stuff already. And when I just, we know, we like we know we do, I’ll sometimes I’ll text him a scope, and just tell him to get going and kind of go from there. Okay.

30:22

So what happened with the investors on that first deal that where you lost money? What happened after that? Well, unfortunately,

30:29

still related to your store.

30:33

So they couldn’t disown you. Right? They couldn’t they couldn’t be unrelated to you

30:37

might have been better if it could have just cut ties to people, they’ve, they’ve been admitted back there. Okay. They keep investing in the person not so much the product at this point? I think. So. I think they’re doing okay.

30:47

That’s awesome. I asked that because I feel like you know, you know, real estate is full of ups and downs. And you know, you’re bound to if you’re in the business for a long period of time, you’re bound to have something that doesn’t go according to plan. And I feel like that sometimes is the thing that derails people, they just give up, they’re just like, ah, it didn’t work. I’m done. I’m not gonna do this again. But you jump back on the horse, and you’re like, No, I’m gonna do it again. And I’m gonna do it. I’m gonna keep doing it. So, you know, what, what did that that loss teach you? What was the most valuable lesson you took from that actual first experience?

31:24

Well, time to market better was the biggest one. Because, again, 2008, I don’t think anyone was seeing it being quite as kind of catastrophic as it was, it definitely gave me a different perspective on commercial properties. Just obviously, the way cap rates work. If you got 100 units, and you raise rents, say 100 bucks a unit, by keep your expenses the same, then you make a million bucks, actually about 1,000,002. or something, if it’s a 10%. Cap. The problem with that is in a down market, if you miss, or if the market actually shifts and rents go down, you can lose a million bucks just as quick by having to drop rents to stay occupied. So it’s like leverage is definitely a two way sword, because it made me a lot more kind of conservative, probably to my detriment, because the best thing I should have done, probably biggest missed opportunity was, I probably should have broken my back. And that was kind of that kind of sucked. Because that made me just not interested in real estate for about a year and a half. But that would have been the perfect time. And I knew all the like knowledge base to get back into commercial real estate hard before the most recent run up in all that stuff. Because I saw it we moved here to Dallas, kind of to do that. Or at least look at the opportunities. We knew it was an uphill battle, because we didn’t know anyone in town in that field. But you know, the that’s probably the biggest missed opportunity. I think when stuff started peeking out about two or three years ago, we started seeing just stuff that didn’t make sense. People saying things like oh, cap rates don’t matter. On properties, all that matters is raising money and the ROI that the investor gets based on the interest rate differential that they’re paying. And were able to enforce like, you know, that only works. If you have long term fixed interest rates, it only works if rates don’t go up. And the likelihood of rates not going up from a two year two years ago, basis, I thought was zero. And I just wasn’t sure that I was smart enough, or really desire to try to compete on that level with those folks, and make a good deal when I knew how to do a high volume of residential stuff that week turnover, quickly, predictably. And we can build a team around doing that and doing it well. So that’s always a given take, I guess. There’s there’s benefits and there’s disadvantages.

33:26

Understood. So are you buying and holding properties today?

33:31

We do we do have a decent number of rentals. Yeah, our peak was definitely the 202 110 plus another 10. So 20 and 20 ish or something back in the day, that was fun. You may have a handful, we’re very selective, because unless you buy really well, with the rising interest rate environment, it’s a little difficult to borrow. So we’ll do something creative. We’ll do you know, we’ll do a sub two on something. But we definitely keep that in a pretty small like Nicky box. We’re not crazy. I’m using that as a like a main acquisition strategy. We’re doing a lot of notes. So we’re doing a lot of where we become the bank. And we sell a property with us offering financing to the end buyer. Yeah, that’s a good so you don’t get the upside. You don’t get the depreciation, you don’t get the debris depreciation on the from a tax standpoint. But you get a lot of cash flow, and you get a lot of no headaches. And if you originate the note well, and if you have a quality borrower, then it’s a very low default rate. So I mean, no one wants to talk about turnover on rentals. But you know, turnover sucks. We’ve had properties this year, that we’ve had to rent twice, just because the first time and we’re pretty good operators, but just because the first tenant had something come up and they want to move out like well, what are you supposed to do? Obviously consuming, you can do all that. But realistically, the only thing you can do is put it back on the market and rent it again. The note the notes don’t tend to default and they cashflow really well. So we we warehouse some of those we sell some of those to other investors that just want to cash flow. And our next step is we’re going to be raising a debt fund for basically warehousing the notes at a at a bigger level. So on the kind of beginning stages of paying attorneys a lot of money for putting all that together for us.

35:05

Sure. And you’re still wholesaling and flipping, as well as holding properties and doing the notes. Now,

35:11

all the above, we have six, six flips going, I don’t know how many wholesalers, we have gone, because like I said, Come on they we have. So last week, for example, is a great week, we had five sales of some kind or another one was land. I guess the rest of two of them are, like regular wholesales. I think one was a seller finance deal. And I missed them on I don’t know what the other one was. And we signed six contracts, no seven contracts from Monday to Saturday last week. And those contracts, to be honest, we skipped our Monday meeting because the acquisition team had appointments. And so I’m not even sure what those contracts are, except I have a pretty good idea that they’re pretty good deals because they’re trained well. One key to scaling no one talks about is you got to drop the ball, because everyone wants to control every piece, and everyone wants to replace themselves. But you can’t do both at the same time. So if you rely on the training, often, I find the team members on the team have more faith in our ability to do the business than we do ourselves at a skill level. Because they see every piece of the transactional, they see the marketing, and they are taking the leads and kind of doing the thing. Whereas you’re questioning like, man, we’re gonna try this new marketing thing, we’re gonna spend 20 $30,000 on shit, I hope it pays off. But as long as we have, you know, something that’s already working, then the team kind of already has faith that it’s gonna work. It’s our job to make sure it works. So sometimes easy to kind of lose faith in yourself, especially when trying new stuff.

36:36

So what’s what’s on the horizon next besides the wholesaling in the fund? What is next for you?

36:43

Well, if we raise a bunch of money to fund we’re gonna do more deals. So we probably got to double our volume again, and go from 32 to 35 to maybe 50 deals at a time. That sounds like a lot of work. Yeah, sounds like a lot of work. I think we probably got to get into some kind of ground up development. I think the numbers on that still make a lot of sense. We’re doing some land mostly on smaller lots, and make some decent money. I think there’s there’s definitely a lot of transactional revenue for like, like splitting up land. And that’s kind of that’s kind of where we’re going. I’m not a big believer and retiring. I don’t think like, I don’t know, anyone that I don’t know, anyone that retires it’s really all that happy. I don’t really, I don’t know, like, I like building the thing. Like I said, you get to the top of the mountain, you look around, if there’s not a taller mountain, then you know, maybe at the end of the road, maybe you need to try something else. So as long as we keep seeing higher mountains, we keep climbing.

37:37

So are you in any other states now other than Texas, California, Tennessee, the ones that you were already working in?

37:43

We’re predominantly in North Texas. We’ve done some stuff in South Carolina. We played with some stuff in Florida, a year and a half ago. So it was pretty good. We got to go back down there again, because that’s a good market. We’re doing a lot of marketing, definitely heavy in Dallas Houston. Not really in Austin, and a little bit in Oklahoma. And I think I want to test out some in. People think I’m nuts. I kind of like test out some stuff in Arkansas. I’m hoping not saying that might be a dumb idea. I don’t know.

38:13

Okay. All right. So what would you say that is your best kept secret?

38:23

Best Kept Secret. I’ve kind of put stuff out there. Like it’s always funny when someone thinks they can have it all says I’m like, Dude, I know about your past. You lost money on somebody else on point like, Well, yeah, that’s I tell people about like, it’s not that hard, right? That’s kept secret. You know, I don’t miss living in California. But I do miss scuba diving and surfing. That was fun. I used to do that about a couple times a week, probably. So I don’t know if that’s a secret. I know, here’s something very odd man we met in real estate. I really enjoyed gardening with my daughter. She’s four. And we build a garden in the backyard. It’s 10 feet by 20 feet, I think brought in like it’s above ground, not above ground, but like, kind of raised ish or whatever. So I brought in a bunch of mulch and dirt and stuff. And we planted a lot of different stuff. And it turns out that like the idea that she’s four, right, the idea as well, she sees the vegetables grow, she’s gonna want to eat more vegetables. That’s actually not the way it works. She likes seeing them grow. And she wants to eat the strawberries and the blackberries and the rest of that stuff like kale and lettuce and beets and radishes and carrots. Not really all that interesting to her. So I mean, how often I have to eat more vegetables, I guess.

39:33

That’s awesome. It’s great that real estate provides you the time to do those types of things to

39:38

make time for the important stuff for sure. I think the change in perspective from being able to invest in people and in the guys out there being able to make them successful. Yeah, that’s a different level of stress. But that’s really the step about being able to actually kind of buy back some of your time. It was again giving giving up a lot of the control where it’s okay if you don’t know every lead that comes in because you Know the following up with them as well as they possibly can.

40:03

If you had to give my listeners a, make sure you do this and make sure you don’t do this to get started or to scale their investing career, what would those two things be what to do and what not to do from your past experiences.

40:17

So what to do is definitely a little mindset he is think about the outcome that you’re trying to get to when you’re going a certain direction, because a lot of people think they want to increase their volume, oh, I have to do 15 deals at a time Well, that’s, that’s going to decrease your margin it has to, that’s just the way it goes. So look at you know, look at a look at where you want to go. And see if once you’re there, you actually want to be there because some of the biggest mistakes I’ve had not not Memphis, that’s not really a mistake, actually, the construction and everything else is relatively successful. But in terms of like missed opportunities, in terms of fear of taking the next step was something where it’s pretty obvious that I should be going a certain way, is in not really understanding you know, getting a thing. And then who actually wants the thing once I have it. So make sure you want the thing once you have it, I have to get a flip, I have to get a flip, listen, easy perspective, right? You know, that desperation, thinking that you have to place money or have to get a flip or have to do the next deal is where you end up missing an opportunity is right in front of you, or we end up getting into something that you probably shouldn’t be in. So I think that’s, that’s what you do do what you what you don’t do is don’t be scared of failure. And definitely don’t be scared of failure. Because if you’ve never lost money on a deal, you haven’t done enough deals. Or you’ve been in the best market in the history of mankind for the past decade. And you don’t know that there’s other market cycles and other things that happen on the market. So don’t be scared of failure. Because all the things that have formed our ability to do what we do have been from some really annoying struggle. So taking over managing stuff at 25 or 26, in Memphis, when I probably wasn’t, like, probably really qualified for it, to be honest with you. I mean, I was good at it. But only because I was determined and tenacious. breaking my back learning how to walk again, I wouldn’t wish it on my worst enemy. But it’s definitely formed our mindset and ability. My wife and I both because she was there every night in the hospital with me and working through the process, it formed our ability and our mindset to go push for building the thing. So the failures, they suck, they’re horrible. They’re not good. But even if they’re not your fault, because you don’t see them, the outcome is your responsibility. So push through them, because they definitely give you the ability to go to the next thing. And also, you don’t always know what the next thing is. So you don’t know what God or fate or the universe is preparing for you until you take the step to go move that direction.

42:50

That’s awesome. Well, TJ, you are a great motivational person. Definitely. You just have a lot of insight and a lot of great direction and your ability to just go after this real estate thing with no fear. It’s just incredible. It’s really, really incredible. Like I said, you don’t know too many people that are in the 100 Plus units on their first deal to begin with. So the fact that you did that I think is really commendable. I really appreciate your time today. Thank you for your knowledge, and your insight, and we wish you all the success in the world in the future.

43:25

Absolutely. Thank you so much for having me. I appreciate it.

43:28

Thank you for listening to this episode with my special guests, TJ Cozen. I hope you enjoy everything that TJ had to offer as far as mentorship, and how to get started and what to do if you’re entering into the world of wholesaling. I think his creative ideas on how to acquire deals and how to build a team were extremely helpful, and I hope you can take something that will be beneficial in your investing career. Until next time, take care.

43:54

For more information about how Jennifer can help you plan, develop and manage a strong real estate investment portfolio, visit growing empires.com