GI141: Transitioning from Home Flipper to Multifamily Investor with Jimmy Edwards

Jimmy Edwards is a multifamily investor who currently controls 570 units. He became interested in real estate investing when one of his professors got him to read “Rich Dad, Poor Dad” and that it “pretty much exploded his brain.”
After college graduation in 2013, he started with single-family investing and became a house flipper. It wasn’t until 2016 when he decided to scale the business and that is when he stumbled across multi-family investing, scalability and forced appreciation.
When he started with single family investing in 2013, it was about finding distressed properties, rehabbing, and flipping them. He had a few partners but he then met his current partner Katherine, who was married to a friend of his. She had a background in construction and she managed the rehab process after he found the deal. One time Jimmy remembered that he had a single-family house that sat on the market for months and the interest ate up their profits. He realized that with multifamily properties; you are still receiving cashflow; even when selling a property. In 2017, he started to focus entirely on multifamily investing.
Jimmy recommends that investors know their strengths and find other partners who excel where they fall short. You can learn more about Jimmy and his team here: highfivemultifamily.com.

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Transcript:

Announcer:
Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host, Charles Carillo, combined decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now here’s your host, Charles Carillo.

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Jimmy Edwards. Jimmy has been buying distressed assets in Dallas Fort Worth Since 2011. He has purchased, rehabbed, and successfully sold over 100 Single family properties and is currently invested in 570 units. So thank you so much for being on the show, Jimmy.

Jimmy:
Yeah, thanks for having me. It’s a pleasure.

Charles:
So you started from single family, you went into multifamily. Can you give us a little background on yourself professionally and personally, prior to getting involved with your, your current real estate investment firm?

Jimmy:
Yeah, absolutely. I I I’ve pretty much been in real estate my whole career. I got a degree in finance real estate from Texas tech university and my last semester I opted to take some, some real estate classes instead of, you know, corporate finance three and accounting three. And one of my professors had us read rich dad, poor dad, and it pretty much, you know, exploded my brain. So I got my real estate license. I was, you know, a real estate agent and then I was a mortgage broker in the recession, which was pretty lucrative. And then in 2012 they closed down my branch and 2013 just went into flipping houses full time. By 2016 we did about 60 houses a year in 2016. And then kind of in 2017 was a, a pivotal moment where you know, how do I scale this business? You know, do I do more houses, less houses, bigger volume bigger margins, you know, new construction. And then I stumbled across multiple and it kind of hit all the points I was looking for you know, scalability forced appreciation and really just, you know, going, going bigger, utilizing, you know, teams to help it scale. So that’s kind of been my, you know, that’s my quick elevator pitch.

Charles:
Nice. so know, before you’re getting into multifamily kinda wanna talk about your single family because it’s you know, multi-family obviously people get into it usually for a lot scale and we’ll get into kind of like why you moved over. It’s easier to get economy to a scale. Let’s talk about for your single family. I mean, you’re doing all these homes you’re, you’re not just wholesaling them. You’re actually finding them they’re distressed. Right. You’re purchasing their rehabbing them. You’re, you’re flipping ’em, you’re selling them. So what kind of system did you have in place or what kind of team did you have in place when you were doing that?

Jimmy:
Yeah, so we, it, you know, I started out and I had a couple different various partners along the way, just here and there. And I, I teamed up with my current partner, Catherine. And it was really for a little while. It was just me. And then when I teamed up with her, we really gained some velocity. Her background is in construction and you, you know, I’ve always been kind of a deal finder. I’m, I’m a deal junkie. And I really like sourcing deals. And so, you know, when I was by myself, I was sourcing deals, managing contractors, listing the houses. I mean, I was a one man show. And when we teamed up, we formed a little bit more of a, a conveyor belt, right. I’d find the deal, pass it to her, she would manage the rehab process. And so that really created a lot of velocity. And we used contractors you know, obviously that we were aligned with and that understood our vision and our scope. So, you know, we’d have a four or five page scope of work and you know, they’d execute it. And eventually, you know, we got in the rhythm with several teams and we were just able to go, you know, really, really, you know, fast.

Charles:
Yeah. That project management, that was something I, I flipped houses before. And it was something that finding the deals wasn’t really an issue and finding money. It wasn’t really an issue. It was, it was the con it was the getting the rehab done. Yeah. And getting it done to the specifications and what you needed the quality to be, and the condition to be when you’re leaving when you, when you wanna sell it, you know, to meet with the the market. And that was the biggest thing. So you, that was a great way of doing it instead of you like becoming a licensed general contractor and going that whole route, you brought on someone with experience and project management, because it really takes, there’s so many moving pieces. And so that’s awesome because, you know, you have certain contractors. Yeah. Of course, someone putting, you know, the roof game done and the hot water heater can go at the same time, but it’s different when you have someone painting and putting down flooring and everything like that. So that’s great that you were able to find how did you, how did you meet your partner?

Jimmy:
So we actually Catherine married a good friend of mine from college actually. So we met in college and we we’d, they’d, we’d invested in some deals before. You know, we’d been good friends for, for a long time now, and we’d, we’d done some investing together and then really found some synergies and just decided to, you know, kind of, kind of go all in. And it was really a, you know, a blessing in disguise. I’ve had, you know, along the way, a lot of people say, Hey, I wanna, I wanna work with you. And, you know, they, they don’t really commit. And you know, she, you know, they, we just talked it out and, and made it happen. So it was, it’s been really, really good.

Charles:
Yeah. It’s great. When you find a partner that is, wants it as much as you do. And cuz you, you will find a lot of people that want a partner wanna do something, but they really don’t want to what you gotta find out afterwards talk is cheap. Right, right. So let’s talk about the switch a few years ago, you made the switch over to multifamily. You, did you do any flips during that time or now you’re 100% in multifamily or a little bit of both.

Jimmy:
A little bit of both. I mean, we’re, I’m pretty much a hundred percent multi family. I mean, I think we did, you know, one deal in 2020 and maybe one or two in, in 2019 and maybe, you know, two or three in 2018, but really the transition to multifamily full time. I mean, we turned off the faucet, you know, as far as marketing and 2017 really just focus on multifamily. But I mean, we still have deals that kind of fall in our lap and you know, we, you know, the, the margins are right and the opportunity’s there. So, you know, we’ll, we’ll take ’em and it’s, you know, at this point, you know, flipping a house is, you know, we could probably do it in our sleep. I mean, the systems are, are there. So but yeah, we we had a deal in 2017 where and this was kind of like the pivot point where, you know, it, it, it was a good deal.

Jimmy:
The margins were right. And we went to list it and like five other flips came on the market and like the same week. And so the, you know, the market just got saturated. And so everyone sit on, sit on the market for a couple months and it just, the interest ate up all of our profit. And so that was really about the same time we were looking into multifamily. And so it was kind of interesting that it happened that way, but you know, with multifamily projects, I mean, you’re flipping a building, but you know, you’re holding costs are covered. And so it was just like the light bulb moment went off. Like, you know, we need to make this transition full speed ahead.

Charles:
Yeah. That makes perfect sense because when you’re flipping even you know, the cost of money is very expensive with single family flips with the hard money. And even if you’re going to a private lender, you still have to pay that most likely paying that every month interest only, plus you’re paying this exorbitant amount of insurance because it’s a vacant property. Plus you’re paying, you got the tax bill coming get tax ban after you. Yeah. So it’s like you know, you have this window of, you know, you talk to like some flippers, like, oh yeah, it’s a hundred days. We want to give it through it. And then this other one, like when you start getting over like 180 days on the flip, I mean you’re every day, there’s no more, there’s no more value you can add into the property it’s done.

Charles:
Right. I mean, you just need to unload it. And the same thing, I, I, same thing. It was also very transactional, which I hated. I mean, obviously you have more of a system in place, but that’s one thing is I didn’t mind doing the legwork with multifamily because I was like, okay, I’ve got this asset for years. So I don’t care if it stinks for a month for me doing this, getting this all put together and doing this or a few months, whatever it is to get the thing up and running initially. But it just, yeah, I mean, if you’re not, you don’t have any income coming in, you’re now covering all those expenses throughout the whole process. And then just hoping that you can sell it for what you planned on from earlier,

Jimmy:
Right? Yeah. 100%. And you know, and, and, and there’s been some times where the market has decreased and that, you know, didn’t work out as good as we’d hoped. And then, you know, in the past couple years it’s been, you know, the market can, can help you if you make some mistakes. But you know, that’s, that’s one of the things I really liked about multifamily is it’s not based on comp so much as it is, you know, driving INI. Right. I mean, if, you know, if you’re pushing rent while it’s sitting there, then you know, you’re adding, adding value.

Charles:
Yeah. So we went over all the, these great points about why multifamily is great and why we don’t like single family. But tell us about how you got involved in multifamily. Like, what was your first deal? Did you come in as an active, did you come in as a passive investor? Like a lot of people do.

Jimmy:
Sure. So we, you know, just like every other you know, flipper, we we kind of set our goals, you know, we thought we were gonna do a 20 unit deal ourself. And I, throughout that process realized that all of my real estate experience was still not enough for the lenders. You know, I, I, we went to the bank and said, Hey, we got this good deal. And they said, you know, what, what experience do you have? And I said, you know, I flipped a hundred houses, I’m a real estate broker. And they said, well, you know, what’s your multifamily experience? And I said, well, none. And so it was kind of a pivotal moment there where, you know, we realized the power of, you know, teams. We didn’t get that deal, but through the process were, you know, engaging with people in our, you know, database and talking to folks.

Jimmy:
And we actually were running comps and saw a deal, you know, in the neighborhood looked up the tax records and Catherine actually knew the owner. So she called him and started up a conversation and, you know, told him we were looking to get into the multifamily space. And then a couple months later, you know, we got a phone call from him and he said, Hey, I’ve, I’ve got this 16 unit deal. It’s a super heavy lift. I know y’all have experience, you’re looking to get into the game. It’s a lot more work than, you know, I want to commit to, but it could be a great deal if we all team up. So we ended up doing this 16 unit together. It was a, a townhouse reposition I mean, it was pretty much an F and, and we took it to a C plus, you know, rinse from five 50 up, you know, 1150 when we were done.

Jimmy:
And it was a great start of a relationship. We ended up doing another a hundred unit deal after that 116 unit deal. And then I actually 10 31 that 16 unit deal into 120 unit deal. So, I mean you know, it was, it was a really good experience, but in that process before we got involved in that deal I did make, you know, some passive investments to learn, you know to kind of see from the other side. Right. And I think that that was really helpful, you know, now being on the, you know, GP side, you know, I know, you know, how to treat, you know, my investors, because my expectations as a passive you know, kind, it came from that. So,

Charles:
Yeah, that’s a super heavy lift. And obviously with hundreds of single family homes, rehabs under your belt it’s not something that you really have to kind of worry about right on your end, but I imagine you wouldn’t suggest someone starting out to do something like that in their first rehab, if, I mean, without this type of experience that you have.

Jimmy:
Yeah. I mean, I would say the, the team is crucial. You know, luckily we had a team that was experienced in, in, in those types of deals and, you know, that was actually a good stepping stone into our first indication. We found a hundred unit deal that was 50% occupied. And there wasn’t a ton of competition going after that deal because most people don’t have the time or expertise. And so for us, we had a little bit of a competitive advantage because our team was, you know, ready, willing and able to, to undertake that type of asset

Charles:
When you were putting together your numbers on that deal, did it did you come in pretty close to what your renovation budget was or did you guys underestimate it or overestimate it?

Jimmy:
We, it came in right at where our numbers came in. I mean, I, you know, we, we had patted the budget with some contingencies and also with operating income because it was, you know, we bought it and it was not cash flowing. It was actually in the red. So we had extra rehab and, you know, it was a funny story. We went into the deal and you know, we, we, our, it met our expectations as far as rehab, but we knew from flipping houses that there were gonna be skeletons in the closet. Yeah. That’s we had extra rehab for unknowns. And that’s really what, you know, I don’t know if I wanna say saved us, but that allowed us to come in budget. Cuz we did find things that we couldn’t see and due diligence and you know, we came in at budget and, and it, and it worked out really well. So yeah, I think that, that, you know, part of that experience was, you know, knowing there’s gonna be things you can’t see.

Charles:
Yeah. And even finding places that are advertised or you feel are like a turnkey or already renovated type property. I mean, there’s someone that’s done that and to make it profitable, they’ve probably have not renovated and fixed at everything. And there’s probably some things that are gonna have to be done. So even if you’re walking into something, oh, it’s all done. Even though it’s rented, you still have to put together some sort of reserve and renovation type budget, even if it’s minimal. Because I bought properties like that before and it’s like you know small things compared to the overall property, but it still costs money. And it’s not something that you wanna rely on your cashflow from, especially if you have investors that you’re telling, Hey, in the first you know, 90 days or 180 days, you will get your first your first distribution. And you’re not able to do that if you have to is part of it are all of it for these renovations. So, but so let’s talk about now what’s your current criteria and strategy when you’re investing?

Jimmy:
So we, I mean, I’m, you know my box is, you know, we’re looking for a hundred to 200 unit deals. You know I, I mean, I probably, you know, 70 to a hundred percent occupied, right. I mean, I think there’s opportunities in all of those deals. You know, I’m, I’m always open to distressed assets. I think you get you know, a little bit of, you know, a competitive advantage there. You know, we’ve bought some, some stabilized deals you know, where the seller maybe did the reposition, they took it from 50% to 90% and then, you know, there’s opportunity for us to take it even further. And then I really, really like the deals, you know, which you, and I both know are harder to find that are, you know, a hundred percent occupied because you know, that, you know, RINs are too low.

Jimmy:
Right? Yeah. So I, we, you know, we really like all of them. I think that, you know, as we move forward you know, cap rates are compressing between, you know, a and C assets. And I think there’s a lot of opportunity. And B you, you know, something that still has, you know is outdated, but you know, a little bit nicer asset than, than, you know, some of the older ones. And you know, I, we have several strategies. We, we have, you know, kind of two boxes, right? So I’m looking for deals that you know, we can raise capital on that indicate we bring on all our LPs and, you know, make them money. And then we’re also looking for deals that maybe have a little bit smaller raise and we can kind of move this 10 31 machine down the road. So we’ve kind of got two lanes moving all the time. And I think it allows us to, you know, kind of keep our peripherals open a little bit wider instead of being super, super specific.

Charles:
Yeah, no, I definitely, I definitely agree with that. That’s something that we do. We have a syndication route, and then we also have the JV joint venture route where we are which we’ve been a little bit more active on lately with smaller deals because you know, everybody’s looking for what every syndicated wants, which right. Hundred plus units B minus area C plus, you know, all this kind of stuff that for sure. So, I mean, it’s, you have to get creative with it, which definitely is like you are, because I think a lot of people shy away from the heavy lift, which doesn’t scare me if the operator like yourself that you’re partnering with or that you’re with in the deal has the infrastructure and the team in place for renovation, which is, I mean, which is all, which is super important to be able to do the project management on it and have experience doing it, learning it on the fly with with this deal you’re doing, you know? Right. So let’s talk about that. What does your team look like now and what is your role on it, Jimmy?

Jimmy:
So I’m, I’m, it it’s really pretty similar. We have I I’m acquisitions, you know, again, I’m, I’m a deal junkie you know day to day minutia kind of bores me. So I really try to focus on what I’m good at and that’s, you know, chasing deals, building relationships you know, Catherine again is really managing the CapX. And then we, you know, we co-sponsor with people you know, that are really, really good at, you know, kind of back office stuff and, and operations and asset management. I mean, we’re heavily involved in that too, but you know, it’s really good to have, you know, people on your team that are more you know, a little bit focused on, you know, com you know, computer type stuff. You know, when we’re out looking at deals, you know, it’s nice having someone, you know, that likes to be in the office. So and then, you know, partnering with, you know JV and, or partnering with that, you know, maybe, maybe have, you know, more, you know, capital to bring to the deal. You know, cuz that’s a, that’s a time consuming process raising capital, right? So, you know, if we have you know deal finder CapEx manager operations, and then capital, you know, those are the four component we really need to have velocity. And so that’s really kind of how we’ve tried to, you know, build our team.

Charles:
Yeah. And you really need one person, at least for each of those roles, if you really want to have deal flow and you really want to be able to do asset management on a deal. I mean, and and everything raise money and have all the other pieces covered. So what what software does your team use daily?

Jimmy:
We really, our, our biggest is, is investor management tool. We use syndication pro and that has been really significant, you know, I mean, again, going back to paperwork and computers and you know, just investment go and K one S and distributions. I mean, having, you know, when I started in 2017, like, you know, there was maybe one company that did it and it wasn’t, you know, very popular at the time. And so really just streamlining investor relations has taken a lot of, you know, back office stuff off the table.

Charles:
Yeah, for sure. No, it’s it’s definitely a game changer and it cuts down on your administration and headaches and also your your limited partner, your passive investor management, which cause a lot of the questions are answered right there, so right. Definitely.

Jimmy:
And they love having everything in one place. Right. Just going in and being able to log in and not, you know, having to, to, you know, reach out to another human to find it.

Charles:
Exactly. Yeah. So what are common mistakes that you see other real estate investors make being in here for so long?

Jimmy:
Analysis paralysis is a big one. I think that, you know, people talk themselves outta deals a lot, which is, you know, a good quality to have. But you know, I think that, you know, when we see a deal and I know it’s a deal, you know, we just, we, we go after it. And sometimes you uncover things, but you know, you, you, you have to participate, right. I mean, you’re not going win any deals if, if you’re not participating. And then the other one is, is I think a lot of people underestimate the value of a location. And what I say by that is there’s a lot of deals that underwrite really well on paper, but they maybe don’t have the experience or they’re underestimating a bad location. Right. Mm. And so I see people, you know, underwriting deals and going after them. And I’m just thinking to myself, man, that is, you know, you’re not accounting for X, Y, and Z because that location is, you know, not premier. So those would be my

Charles:
You’re looking at comps and someone’s using a comp from two miles away, which it could be in a whole, it’s pretty much in another country.

Jimmy:
Try the tracks.

Charles:
Yeah. I mean, because it’s funny that like you said, that it’s exactly true is that you can be looking at something and they can literally, I mean, everybody’s done it, they drive down the street one side, Street’s nice. One side, Street’s not, you cross over the, this the tracks, right. Quote unquote, which is true. And you go from and like, oh my God, it’s night and day, or it’s just a block or two, you’re like, oh my God, what just happened between this? And it’s because, oh, wow, it’s a very busy road over here. And it’s very quiet over here cuz I have a property like that between two of those. And I was like, if it’s one block this way, it’d be worth a lot more it’s right here. It’s perfectly fine. But you know, it’s just amazing that if this was literally eight houses down this way, you know, and so it’s very, that’s when I think I talk to people, I’m like, Hey, if you’re picking out your neighborhood, like really know the neighborhood, not just the city, not just the area of the city, like get it down in the neighborhood.

Charles:
So when you see deals come in, you’re like, know what neighborhoods are in. And then you can kind of price accordingly when you’re doing your, because that makes such a big difference. Just like you said what would be some suggestions you would make to new invest that are getting started

Jimmy:
Participating really? I mean, just participating and whether that’s, you know, investing as a, a limited partner, you know, being a passive and, and kind of, I mean, that was what I did, you know, I thought I knew everything and I decided to invest passively to try to learned the business and, you know, I probably underwrote five or six deals that were being offered before I made my first one, cuz I still didn’t understand you know, what I was doing. And so if, you know, as a, as a passive, I would say just, you know, participate underwrite offerings. And then, you know, if you’re, if you’re looking to be a lead, you know, GP again, just participate, right? Like, you know there’s a lot of deals out there. You know, and we’re not gonna win ’em all, but you know, when you’re making offers, you’re engaging with the broker and you’re building a relationship and maybe that deal doesn’t work out, but I can say, Hey, you know, when you do find something that fits my box and maybe you need someone to move quick, you know, call me and that’s really worked, you know, extremely well.

Jimmy:
So just participating, you know, I mean it can be scary. And like I said, a lot of people get, you know, analysis paralysis, but I mean, you’re gonna learn as you go. So just, just start going.

Charles:
Yeah. That’s a great idea. Start underwriting potential passive investments. Yep. And do your own due diligence on ’em between where they’re located and rents and everything like that. And that’s great. I mean, it really gets, you started with something that you’ve were told that pencils out fine. That’s a great opportu. Now you can do your own research on it and you should be doing that with any deal that you’re investing, whether active or passive and the group you’re working with should give, you know, without any type of issue your underwriting that you can review. So that’s awesome. That’s a great, great advice. What do you think are the main factors that have contributed to your success? Jimmy

Jimmy:
Being openminded and, and really, you know, learning that I can’t do it all myself. You know I, I was never really ego driven, but you know, I always had this want to figure things out and to, you know, conquer certain things. And, and as I grew, I realized, you know, I’m really, really good when I focus on one or two things. And when I focus on my superpower, it helps the rest of the team. And just because I hate doing paperwork doesn’t mean that there’s not someone out there that loves doing paperwork and hates chasing deals. And so, you know, and, and I think that comes from you know, I read a book called the who who not, how I think it’s Dan Sullivan. But really, you know, finding the who’s on your team you know, that have their unique ability. And, and I, I think, you know, we all grow together and we can do more together.

Charles:
Yeah. So how important is partnership and getting into commercial real estate? Obviously it was required for how much scale and how big your business was in single family as we touched upon earlier. But how important is in commercial, if someone’s going from maybe a couple single families into commercial multifamily?

Jimmy:
I mean, I, I, I think it’s huge, right. Because I think that, you know there’s gonna, you we’re all helping each other, right? Like I, I think that know through the space, right. There’s people that have been at some point they did their first deal. And then over the years they’ve done a lot of deals and maybe they’re not wanting to, you know, put in as much sweat equity. Right. you know, maybe they’re a little bit further along in the game. But they understand, Hey, you know, if I can partner with someone that’s hungry I can lend my balance sheet. I can lend my resume. And, and I can trust in this person to do a lot more of the heavy lifting, right. And then someone that’s getting into the game is really hungry. Hey, you know, I’m, I’m willing to do whatever it takes, but I don’t have the resume. I don’t have the experience and I can use, you know, some, some guidance. And so really just those partnerships to me are extremely valuable and everyone just kind of helps each other, you know, no matter where you are in the game.

Charles:
Yeah. No. Fantastic. Well, how can our listener story more about you and your business, Jimmy?

Jimmy:
Yeah. Just go to our website. It’s high five multifamily. H I G H F I V E multifamily.com. You know, there’s a lot of info about us and then there’s, you know, you click a little form and reach out and we’ll jump on the phone.

Charles:
Yeah. Awesome. Yeah. There’s a lot of information on there and it lists all the assets that you guys have purchased and also sold and currently owned. So I wanna appreciate you for coming on today. Thank you so much. And looking forward to meeting up and connecting with you again, future cause I think it’s been a couple years. Yeah. Pre COVID was the last time we saw each other face to face.

Jimmy:
Yeah, brother. Likewise. Thanks for having me.

Charles:
I’ll talk to you soon. Have a great rest of your day.

Jimmy:
All right. Thanks. You too.

Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.

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