GI308: Transforming Blighted Properties Into Thriving Assets with Gary Jonas

GI308: Transforming Blighted Properties Into Thriving Assets with Gary Jonas

Gary Jonas focuses on urban revitalization in Philadelphia by transforming blighted properties into thriving assets. He oversees a portfolio of 1,500 units, leads a team dedicated to maximizing investment value, and actively seeks partners for their new development projects.

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Transcript:

Charles:
Welcome to another episode of the Global Investors Podcast. I’M your host, Charles Carillo. Today, we have Gary Jonas. Gary focuses on urban revitalization in Philadelphia by transforming blighted properties into thriving assets. He oversees a portfolio of 1,500 units, leads a team dedicated to maximizing investment value, and actively seeks partners for their new development projects. Thank you so much for being on the show!

Gary:
My pleasure. Thanks for having me, Charles.

Charles:
So before we get into what you’ve, what you’ve got going on now with the how group, can you tell us a little bit about yourself, both personally and professionally that led you into what you’re doing now?

Gary:
Sure. personally, I born and raised in Philadelphia. Went to college 16 years of Catholic school. And when I graduated from school, I had no idea what I wanted to do, and I happened to get into the mortgage business, you know, by accident. And from there what I realized was that you either had to have a really high level of education in order to make real money or you had done real estate. And then that led me down the path to real estate. So that’s professionally kind of how that worked. And I can walk you through the timeline of kind of working for other people and start, and then going to running our own company, which we’ve done for about 30 years. And then personally I have one of three children. I have two sisters. I am right in the middle. I’ve been married for 26 years and have two girls that are 19 and 70.

Charles:
Oh, fantastic. Fantastic. So how did you know, it sometimes you have like ancillary real estate careers that people, maybe they’re brokers or they’re doing something that’s active, then they get into real estate investing. How did that experience from the mortgage business really carry over to becoming a real estate entrepreneur? And obviously it gave you the realization that you need to really own real estate. But can you give, walk us through a little bit about what changed and how you’ve utilized that experience into what you’re doing now?

Gary:
Sure. so the first thing that changed for me was I was in the mortgage business and I read Rich Dad Poor Dad. And when I read that, I came up with this brilliant plan, which was, I am gonna buy 10 houses. I’m gonna pay them off by the time I’m 45 and I’m gonna have cash flow coming in and I’m gonna retire. That was my, you know, plan. So I was working in the mortgage business, it was a good business. We were making some money. I was able to go out and buy 10 single family houses and I thought, man, this plan’s right on track. This is fabulous. And then I paid the first one off and I went into the house and I’m like, man, I gotta do 50 or $60,000 and worth of work to this house ’cause I’ve owned it for 10 years and it, you know, now needs some work and I’m gonna have to put all this money back into it and then I know me.

Gary:
I’m gonna wanna pay that off quick and I’m never gonna get to the spot where these single family properties are actually making me money. Yeah. So what I did was I said, all right, well we need a different plan for that now. Exactly. What happens at that time is we’re in the mortgage business, we’re doing great. We have we tried to create a call center, you know, ’cause we came from a call center environment. So me and three guys went out, we started our own company. We tried to create this call center. We had a hundred people working for us, and we realized we weren’t making any more money than we were when we had three people working in the basement together. We were just doing our own modes. So we decided that our business model was broken and we started trying to get loan officers into real estate offices.

Gary:
And when we did that, all of a sudden we started making money, getting a mortgage. So we’re making some money over there. I own these 10 properties and then financial crisis happens in 2008. We are lending our own money out and we get a call from a good friend and he is like, look, you better find a new platform because where you get your money from, they’ll lend out to people. They’re not gonna give it to you anymore. Just ’cause the industry is going insane. So in a week we were able to get a bank to allow us to operate off of their platform and I had nothing to do because they did all the work that I did. So my partners and I said, okay, well why don’t you go out and try my real estate? So luckily what happened is I owned these 10 properties, they had some equity in it, and at the time you could get lines of credit, second mortgage lines of credit against investment real estate. So we went out and got, I don’t know, a million dollars in lines of credit against that real estate and we started buying more real estate and that kind of set us on the path to, you know, a two unit building to a four unit building to a six unit building. And then all of a sudden you turn around and got 1500 units.

Charles:
<Laugh>. Yeah, that was, that was quite an exciting time. I started investing in multifamily in oh six and bought first property end of oh six, bought second property end of oh eight. Completely different times. Bought another one in end of oh nine and all three very different vibes of what was going on there. So just getting lending even in a, you know, on any type of property, I, I had issues with it, you know what I mean? It was a very difficult time I was due to the business, but I had a commercial property. I was trying to get financing for one of those throughout that, that little time span there. And it was it was a no go. I mean it was, and you had private lenders that were like, oh yeah, like 50% will own you on like the appraised value or whatever. And listen, no one knew what was gonna happen, you know what I mean, in hindsight. So it was great that you’re able to pull that much money off your properties.

Gary:
Yeah, we got really lucky. And then we also got really lucky ’cause you know, in the beginning you’re doing everything yourself. So we had an apartment building that was a three unit apartment building and one of the units, it would constantly have a leak in it. And so the tenant called me one day and I go down there and I have no idea what I’m doing, but I just start cutting holes in the ceiling, like trying to identify where this water is coming from. And after a half hour cutting holes all through the ceiling, I found the leak, which was exciting. But more importantly, she said to me like, Hey, you, you should meet my boyfriend. Like he, he’s in commercial real estate and he took us from, hey, you know how like all we knew was the residential market. We knew how to finance stuff residentially, we didn’t know anything about commercial financing, which quite honestly is way easier and way more flexible if you know what you’re doing in that space.

Charles:
Scalable too. Yeah.

Gary:
Correct. So as soon as we met him and realized, Hey man, if we do a really good job, we’re gonna be able to get our cash back outta this deal quickly. Where, you know, in a residential deal, it doesn’t matter. You do a really good job, you gotta wait a year before you can get it reappraised and they’ll give you another value of this. As soon as it was done, they looked at the income and they said, okay, if the building makes this much money, we’ll give you this much. And it really changed the way we were able to operate the

Charles:
Business. Yeah, that’s great. That’s one of those things I found is specifically with like local banks and credit unions, if they, you find one that has the appetite for commercial apartment buildings they’ll loan a lot on it and they’ll bend it over backwards trying to get those, those loans. You know what I mean? You don’t know because if you don’t follow up with someone, they’ll be following up with you and following up with you. ’cause They want that they want to, you know, they want your property and their portfolio of loans. So that’s great. That’s awesome to hear. So how, how do they kind of grow? What, what does, can you give us like an overview really of your current investment strategy now at the how group, what you guys are doing and kind of how that’s involved from buying three family properties, which is how I started too. Yeah,

Gary:
So I, I mean I always tell everybody when you go from one step in the process to the next step in the process, just partner with somebody on the first deal that’s already done it. Mm-Hmm <affirmative>. Especially if you’re bringing value, you found a deal, you think it works. So our big leap was we went from duplexes to a six unit building and we’re like, wow, you know, this financing is different, everything is different. And when that project worked out, we started looking for sites that were a little bigger and we found this warehouse, but it was gonna be, it was going from six units to 34 units. And we were like, man, we’ve never done that before. So we started, you know, asking around and we found the guy that was a well-seasoned guy that was looking for a project and he partnered with us and took us through the process and we’re like, okay, great.

Gary:
So we got through the 34 unit building with him and then we felt confident that we could kind of build in that 30 to 50 unit space. At the time our business model was buy on the edge of where the development currently is build. So don’t buy an existing asset, build something new, build really, really nice apartments that are maybe a little bigger that are very well thought out with no amenities and charge a little below the market rent and see if that works. And that works great for us. And that was our model until about three years ago. And so we just started there and, and I don’t think we’ve ever done anything. So we went from 30 units to a bunch of 50 unit buildings and we kind of stayed in that space for a while and then eventually we, we did a hundred years of building and 150 years of building, but we haven’t done anything outside of that size like it.

Gary:
And it just kind of naturally went there. But what’s happened is if you were buying three years ago or four years ago, you didn’t know you were buying into the top of the market again. You didn’t know that you were buying into interest rates, doubling supply chain issues, con construction costs being more than it was in the past. Right? So that was a recipe for some really tough stuff. And most people were seeing a lot of opportunity right now ’cause the banks are finally starting to say, Hey, we can’t hold onto these assets and give people time. Hope rates are gonna go down and now assets that that weren’t leveraged properties are properly are gonna start hitting the market. But you know, we were not immune to that. One of the things that we did, Charles, that was kind of part of our model was we never took interest rate risk.

Gary:
So while when those rates went up and doubled, we were protected against that the whole time. Because we knew, like our theory basically was take as many of the variables that can cause trouble for you out of the equation. So one’s interest rate, one’s construction cost, and the third is what, what can I rent these units for when they’re done? Right? We took interest rate out of the process. We started building for ourselves, like over time my partner got really good at doing the construction piece of it. So we started running a construction company. So we had, we felt like those two variables we could take out. And then that left us with just, hey, did we underwrite the market rents properly? And if we did we would be okay. And that’s what we did. That said, we even own in our own construction company, supply chain issues and cost of materials going up really made us still lose money in our operating companies over the last three years.

Gary:
But because for 15 years we always put a bunch of money in reserves, put a bunch of money in reserves, put a bunch of money in reserves knowing that there is gonna be a day. You never know when you’re buying into the bad part of the market until it’s too late. Right. And if you’re a growing company, and of course we’re doing the most amount of business we ever did, as we buy into that market, we lost 70% of the reserves that we built up in three years. But we never went back to an investor and asked for money. We never gave a set of keys back to the bank. So I say to all my investors, Hey look, my job is to outperform the sector we’re in. So the sector we’re in did very poorly the last three years. In fact, a lot of people lost all their money.

Gary:
If they put it in there, you were expecting to make 10, 12% cash on cash on your money and you make it six, well that’s a pretty good outcome in relation to the way the rest of the market went and those people are receiving that message and still investing with us. So you know, nobody’s immune to buying into a bad market. And so I feel really bad for the people that started in the last three or four years ’cause they didn’t get a chance to build up the reserves or do any of that. And they kind of done just as good a job as I I did. And they’re out of business. And I would just say to those people, don’t be discouraged like it happened. You’ve learned from it. You back out there and and and go again because you know, the more you learn the better off you’ll be.

Charles:
Yeah, definitely. For sure. One thing I wanted to just go back to you you talked about and you kinda glossed over a little bit, but I’m very interested in digging in just a bit. When you went to, I think it was a 34 unit from a six unit and you partnered with someone with more experience, which is, which is great advice, especially if you’re doing going into a heavy renovation. I think you never have done like a really heavy value add deal, like bring someone on that’s done it so you can kind of like see what they’re doing, number one, but maybe also utilize their team. Can you explain what you brought to the deal, you and your like direct partners and then what this other more seasoned individual brought to the deal so that it wasn’t just like, oh I found this deal and now like you do it. It’s like, what did you bring? Because I feel when people hear that, they’re like, oh, I’ll just find a deal and just find people that, you know will put up all the money and do all the work. But what did, how did you kind of form that whole and structure of that deal?

Gary:
Yeah, so we bought a warehouse that we, we essentially knocked down the warehouse bill that’s 34 unit building. What we brought to the table is we had, we had the asset under contract, we put half the capital and we signed on the debt with the partner. Now admittedly, we probably don’t get that loan without the partner. So we both signed on a debt. He was really the controlling member though. So at the end of the day we couldn’t do anything without his. Okay. Even though we found the deal and we put up half the capital, he at the end of the day put the other half of the capital in and you know, we, our construction group ran it with his oversight, right? So he would say, Hey, I’m looking at what you’re doing. Why are you doing this? You should do this. Hey, did you think about why you’re putting your elevator here?

Gary:
This doesn’t really make a lot of sense. And he used all his years of experience to guide us or we didn’t just give it to him and be like, Hey, you do it and let us kind of sit beside you and work. We said No, we want to try and do it and we want you to tell us what we’re doing wrong and save us from all the mistakes. So, you know, we used a hydraulic elevator versus is a different type of elevator. ’cause He told us that that was less expensive. It had better, you know, usability over the years. We used certain types of materials because he said to use them, he brought certain groups of his subs down because he said, Hey, these guys you know, are a little more experienced. Your guys done six units buildings, they never did a 30 unit building before. You know, so that kind of stuff. It was very collaborative through the process, but we knew at the end of the day he was in charge.

Charles:
No, that’s great. I just, I think sometimes people would hear that and they would think initially of that it was just, you’re just handing it off. But the amount of work that you did, you put up a bunch of money, you signed on debt alongside them and he pretty much just almost acted as an advisor or mentor and by also signing on the debt. So he has great upside there. And then getting just the subs and the other contractors that he had, I mean it’s just that alone is worth bringing on a a partner like that, you know what I mean? Because that minimizes a lot of the issues you have if you have people that are actually, they’ve worked with one of your partners for many years and the type of property you’re trying to build. That’s

Gary:
Right. And every step up the ladder like, oh I can do that, but you don’t reali you don’t know what you don’t know. Mm-Hmm <affirmative> and you never wanna make a mistake on the biggest building you’re doing. So my suggestion is always a part in our way. You know, we did a bunch of 50 unit building where we went to do our first 150 unit building. You know, there’s little nuances that are different, which is you have people on site versus not having people on site. How do you plan for them? Where do you stage them? You know, just questions that we wouldn’t even know to ask because we just, we’ve never done it before. So when we did that, we partnered again with somebody that owned a bunch of 150 unit apartment buildings and they walked us through our first one and then we’ve done two or three more since then.

Gary:
But what we’ve created Charles and I think is really important and everybody, like I tell everybody this is my sheet. I made it up. I made it up because I didn’t wanna negotiate with each person individually and forget what I offered one person versus a different person. So I just created a sheet that lays out the development process and assigns a percentage to each of those things. So for example, if you sign on debt to me that’s worth 25% of the overall deal. If you bring the equity or capital that’s worth 25% of the overall deal if you pay for the entitlements and identify the property that’s worth 25% of the deal. So we just kind of have a sheet that goes together like that. Yeah. And if somebody were to call me in the same situation I was in before and say, Hey, I have this deal, I want to do it with you.

Gary:
I send them the sheet and I say, okay, well tell me what you want to do and tell me what you want me to do for you. And then we fill out the sheet and I say, okay, well does this look fair to you? Here’s what you’re gonna get. Here’s what I’m gonna get. There are a couple caveats that are important. If I’m gonna sign on the debt you signing on the debt doesn’t really help me If you are at the low level, so we’re not taking the 25% and split it in half. Like if you wanna sign on a debt to show a level of commitment and you take 5% of the 25%, that’s fine. But if I got a sign on a debt and they’re looking at my balance sheet, I can’t split that with you equally. Right? And like that doesn’t really make sense.

Gary:
So there’s little kind of nuances within the sheet, but at the end of the day it’s worked very well for us over the years. And I encourage anybody that’s doing something and saying, Hey, I wanna partner with somebody else to really identify the components of the deal and assign value to them and then say if I were on the other side of this deal, what I think was fair if I got that for the other pieces. Because what you’ll find is people fill out the sheet and they’re like, oh, I’m gonna do all this stuff. Or they waited to just the stuff that they’re doing and they don’t really look at the other people’s perspective and then they’re shocked when they can’t find a partner that wants to do the deal with them. Yeah,

Charles:
No, it’s a lot of great information. I’ve also found from one of my mentors was telling me years back is that you know, bringing on partners that know what their role’s gonna be and know how to execute it, not that they’re bringing on and like training them and you’re like, oh that makes perfect sense. But years back I made a mistake with that of bringing someone on and I was like actually training. And you’re like, okay, this is just a one and done type deal and everything worked out well. But you understand later the amount of time you spend doing that could have been spent you know, other parts of the project. So a lot of great information. I like that. And also weeds out people pretty quickly when they’re like, ah, I can’t provide this, I can’t provide this, I can’t provide that. Okay, maybe, maybe this isn’t working with Carrie is is not what’s all gonna work out for us. Exactly.

Gary:
In which case you just identified a deal and it’s like, hey, I, you know, I’m basically getting the real estate commission for identifying a deal. Now I can negotiate it to be a little higher ’cause I’m not regulated by that industry. But essentially that’s what you’ve done, right? You found a deal and that’s worth something.

Charles:
So Gary, how does being focused on one market kinda give you and your firm a competitive edge maybe over other guys out there trying to do similar to what you’re up to? So

Gary:
It’s an interesting question because one of the things Charles, that we’ve done is we’ve said, Hey, we don’t wanna be concentrated. Philadelphia’s a big market, right? So we were like, Hey, we don’t wanna be concentrated in one sub-market. So we would do like one or two deals in a neighborhood and then we would do one or two deals in another neighborhood. And my initial theory was, Hey look, I don’t want to be over concentrated in one neighborhood and that neighborhood goes south and now I got prop. In hindsight, if I were doing it over again, I probably would’ve done that because the more intimate, like even just neighborhood by neighborhood, the more you understand it you know, it snowballs much quicker. So the guys that I’ve seen that dominate a submarket I think are doing a little better than we’re doing by having a couple deals in all the different submarkets.

Gary:
So while Philadelphia is a market we know I I would suggest to people that concentrating in the market is better than not concentrating in the market because real estate is so hyperlocal that not understanding the market and thinking you have it and missing one little thing can really crave problems. And, and specifically in real estate, you do a bad deal in real estate. That’s, that could be a 10 year effort to work on that thing. When you made a mistake where you know you’re in another business, you make a mistake, you go, okay, we’ll put that to the side. You can’t put that piece of real estate to the side. You gotta keep it and manage it and do everything you can until you fix the problem. So I, I would really say be as hope or hyper local as you can and focus there and you’ll know the most about the neighborhood and you’ll probably do really well.

Charles:
A couple things I’ve found about being more focused in a, in a local area is number one is that you know the rent really well that you can get, which is super important because how many times do you get performance from people and you’re like, there’s, there’s no way this person’s gonna get this or this is like pie in the sky. Maybe it’s possible, but like I gonna put my money into that. I don’t think so the other thing too is that you explained earlier in our conversation was that you’re pretty much on that line I of gentrification, right? As you’re trying to find right and get right up onto it and then kind of build properties that you can offer for the same or a little lesson rent. So obviously in that situation you have to really know exactly where that line is and like how it’s moving and which way it’s moving and how fast it’s moving. I mean, that’s like a very important part of your, your business strategy.

Gary:
Totally agree. You hit it 100%. Right on. Hey, now what’s interesting now is we’re changing, like we think the fundamentals are such that building new construction doesn’t make any sense anymore. Mm. So we’ve shifted our model to trying to find buildings where we can add value to the building, but not in your prototypical like, Hey, I’m gonna go in and put a new kitchen in and I’m gonna raise the rents 200 bucks, right? Like, ’cause everybody’s competing in that market. So where is there some, you know, sub juice that maybe you miss? So I’ll give an example of something we did on a real estate deal recently that made a tremendous impact. And when you hear it, you’ll be like, oh yeah, that’s totally simple, but everybody missed it. I missed it. Somebody on the team saw it and was like, Hey, what, what we do this.

Gary:
So in Philadelphia, one of the things that is in the zoning code is your number of units are, are really limited by how much parking you have. So Philadelphia wanted to create more density. So they’re like, Hey, we want at least one parking spot for every three units, or most places are one parking spot for every one unit. So what happened was, you know, even when I do that, a lot of times I’ll build more parking than the zoning requires because even though it’s that way, like people still gotta live in the building and people wanna park their cars on site. So sometimes you’ll have more parking than is required by the zoning code. So we made an offer to buy a building and that building had that situation where it had more parking than was required for the number of units. And they designed the building in a way where they put all their amenities, their gym, their, you know lounge and all this stuff, the best real estate in the building on like the top floor.

Gary:
And they had at the same time a vacant commercial space that they couldn’t rent because where you entered the building, it just wasn’t very conducive to commercial space. And so the person that worked for us said, well, what if we move the gym in the lounge down into the commercial space and call it like a WeWork slash Hey you can get a membership to do this gym. And we put five apartments in this space upstairs and and now we can rent them very easy. And just that change did two things, right? One, it activated the space that was univ for way more rent. But the second thing it did is, and and I know you know this sort of, how many people know this, that people value residential real estate way more than they value commercial real estate, specifically small mob and pop things. So we, so now I’m getting more rent, but the value of that rent is worth way more to the building value than the commercial space is. So those two little things in one building, we didn’t touch one other unit. That’s all we did. And we probably added $2 million in value to the building like that. Wow. So those are the kinds of things that we’re looking for in today’s market to say, Hey, they, these buildings are out there, they’re not everywhere, but they exist. We gotta find these buildings. Yeah, very unique

Charles:
Value

Charles:
Add type situations and opportunities. So that’s

Charles:
Great. So Being in this business for so many decades,

Charles:
I mean, what have you learned from your worst real estate deals?

Gary:
What I learned from my worst real estate deals was I probably knew going in that I was stretching.

Charles:
Yeah,

Gary:
Right? But what happens is you become a deal junkie and you want to do deals. And specifically for us, like we have an engine we need to feed, we have a bunch of people to work for, so we wanna keep them busy. And so what happens is sometimes you get, you’ll stretched to do a deal and as soon as you stretch to do a deal, you gotta fight for 10 years. That’s why I say that. ’cause Like it eventually that deal will come back and will make money. ’cause Over every 10 year given period of time, real estate is always going up in value. So even if you got it a little wrong, it’ll work itself out. You just gotta do a lot of work and make no money for a period of time. Meaning any dollar that comes in, you are not taking any of it.

Gary:
You’re giving it to your investors ’cause that’s the right thing to do. ’cause You brought ’em into a deal, you stretched a little bit and now you gotta pay for that. And the way you pay for that is working for free. What, what I see happen when people get in trouble is they can’t afford to work for free on a deal and then the deal goes sideways. So if you know you’re stretching on a deal, you can do that, but only do it if you’re willing. If, you know, I can with, I can withstand working on this one deal as part of our overall portfolio for a long period of time without making revenue and I’m gonna treat it just as nice as I treat the building than I am making revenue on because that’s what I owe to my investors.

Charles:
Yeah. Yeah. And that’s, that’s a lot of good information there. One thing you see, if you see properties that are hugely under poor management or they’re not making any money, they will go into disrepair quickly. Right? And it’s, that’s where, that’s where the slippery slope slope starts. Because you’re not gonna get rent increases, you’re not gonna get people staying there. We’re gonna get a lot of turnover. And I mean that just starts, that starts it. And you gotta have someone comes in that’s really well capitalized to fix that. Whether that’s being, you sell it to someone and they do it, or you have to fund another investor that comes in to assist you with it. But either way, when you know you’re not taking care of the building, that is when all the issues. Yeah. I think that’s just where it really starts and the property starts slipping and that’s where you really get into real trouble. But 10 years of a lot of time, especially if you have investors, I mean that’s a lot of time, a lot of calls, a lot of monthly updates that aren’t, you know, what you said before, what you’re hoping when you purchase the

Gary:
Property. That’s right. And generally it doesn’t take 10 years, but it, it feels like 10 years. It might take five years, it feels like 10 years. The other thing I find is with our investors, if, if we have bad news and everybody’s gonna have bad news at times, it’s to be honest about the bad news. Don’t run from it and explain your thought process on what you’re trying to do. Because if people hear what you’ve done, like whenever, whenever I ever, I’ve had somebody complain, I, I get on the phone, I go, okay, well here’s what we’re doing. You know, so I’ll give you an example. We built a building at the university that I went to. Okay. So we built a 200 unit or 200 bed building there and we built it there. Freshmen lived on campus, sophomores, juniors, seniors were now to live off campus while their enrollment went down, then they made sophomores live on campus, then they made juniors live on campus.

Gary:
And now I got this 200 bed building and all I have is seniors. Well I can’t fill the building, so what am I gonna do? So I went out and started going to section eight and saying, Hey, ’cause there’s no other real market around there and renting the units that way. And when I went to my investors, I’m like, well we went to these fairs and we did this and here’s our timeline to invest it and we lent the building a hundred thousand dollars so we would make sure that we covered the shortfall. We’re not gonna make any money for two years, but we’ll get the building to this value and then we’ll sell it. ’cause We don’t wanna be in this business, but here’s a plan. If you have ideas or something you think is a better plan, I’m all ears, otherwise this is what I’m gonna do. And everybody’s like, yeah, that’s a great plan. I appreciate the hard work. I know this sucks, sucks for us, sucks for you, but you’re being a good steward of my money. And that’s all they can ask for.

Charles:
Yeah. The preservation of of capital is number one, right? That’s how it always works in these businesses for people that have been around for many decades that right. So as we were before we wrap up and people, before people learn more about your business, Gary what would advice would you have for any aspiring real estate investors out there? Maybe they’re, they’re in a W2, they’re in another job, maybe like when you were in mortgages and they’ve got bit by the bug one way or another in real estate investing. What would you say?

Gary:
I would say the number one thing is to take action. The number two thing is to understand, I used to teach a class to people at the real estate offices and when I would teach ’em the class, they would be like, I would always start with this idea like, hey, there’s no good real estate deals out there and Gary only gets ’em ’cause he’s in the business and he’s getting access to deals that we don’t have access to. And then I would pull up a sheet and show them I would go buy and single family stuff at time and I go, well I bought 56% of my deals from real estate agents so I didn’t find them off the market. They were stuff that was on the market that somebody brought to me and I just knew quickly it was a good deal and made an offer.

Gary:
The so, so the first thing is, it’s not that these deals only go to Charles and Gary ’cause they’re networked and nobody else is. I mean certainly that happens on occasion, but for the most part, if you’re out there hustling, you are going to find you. Right? That’s number one. Number two, you gotta set your expectation, right? Like if your expectation is, if I find one good deal in a year when I’m getting started, that’s a great outcome. And then now you gotta go backwards. Well, what do I gotta do to find one good deal? Well, I probably gotta look at a hundred different places and probably gotta make offers on 15 and probably get to the final round of five. And I probably get one. Like, that’s what the math probably looks like when you’re first starting and people look for a month, they go, man, I looked at everything.

Gary:
There’s nothing out there. This is no good. And then they quit. And it’s like, well yeah, you, you just, your expectation from day one was Roth. And if you had really set an expectation and put an idea of what a funnel looks like together to bring a deal in, then you would, you would feel better about, hey, I’m doing the work that is getting me closer to a deal. So I’ve looked at 50 deals. Yeah, I haven’t gotten one yet, but I know that I probably gotta look in a hundred. So I’m halfway to the goal of getting to the one that I’m gonna end up with. Like, that is what I would tell people. That’s where I see people peter out and lose focus. Secondarily, guys like you and I, we’d love to talk real estate. We’d love to help people like look at people you think are doing a good job and reach out to them and say, Hey, can I shadow you for a day? You know, what could I do to add value for you? You know, is there something I could do? Can I look for deals for you? Can I work with your underwriting team and you know, can I run around and take pictures? Is there anything I can do for you that would make it easier for you and allow me to learn? And if you’re doing one of those two things, you’re probably gonna be okay.

Charles:
Yeah, I like the reverse engineering of the goals and the properties to look at. I had a, a lacrosse coach in high school and he would say, if you’re down by two, you need three goals. We need like 30, 35 shots on goal, right? So you, you break that down to how much time’s left and how you know, and gives you an idea. And you can utilize that in anything what you’re doing with your goals that you know, you know exactly how many attempts you need and then you can figure out exactly all the effort that’s gonna be needed. Most time people are like, wow, that’s a lot more than I was expecting, which is, you know, which is how the world works. You know what I mean? So, but dear

Gary:
Yeah. Well I apologize Jordan. I’d love to put one last little caveat on that though, right? So let’s say you do that deal and you spend that time and that deal makes you 75 grand. Well, was the work, you know, like that’s probably five hours a week worth of work, right? I tell people, if you’re really committing five hours a week to doing this work, you will unearth the deal and you will make money. So now you gotta just do that math, right? Same thing we did before. Okay, well it’s five hours a week of my time worth 75,000 hours or 50,000 or whatever you think you’re gonna make. And if the answer to that question is yes, now again you can, you can feel good about the five hours you’re spending ’cause you have a a pretty good sense of what the end of the road looks like. Yeah.

Charles:
Yeah. I think it’s a little bit more difficult for people that might be in a W2 mindset where they’ve been trading time for money and to get outta that is a very difficult thing to break. And I think when people break it and then, you know, they get that first check, I think it really plants you know, this can work and they go a little bit more full throttle into it. So Gary, how can our listeners learn more about you and your business?

Gary:
Great question. They could just go to our website, which is the how group.com and you know, just kind of look at what we’re doing. We do development, we do construction and we do property management. We try control all three phases ’cause it makes it, you know, easier for us. And that, I always tell everybody by doing that, if you invest the money with me and you have a question, like I can’t go, oh, well my property manager stinks or I can’t go, oh, the construction guy stinks. Like you’re, I’m your point person, so there’s an issue. You can call me, you know, I’m gonna be able to give you an answer. And so yeah, everybody has direct contact to me. You can see what we’re doing on that website. We’re starting to expand right now. Our property management is one of the things that we think is underutilized. People don’t do a great job of managing below the institutional level of the big 150, 200 unit buildings. So we’re focusing on growing that business right now and adding existing assets to our platform. That’s, that’s kind of what we’re doing

Charles:
Right now. Fantastic. Well thank you so much for coming on today. I’ll put the link to your show to your company in our show notes and looking forward to connecting with you here in the near future. Awesome.

Gary:
Thank you so much for having me. Appreciate it.

Charles:
Thank you.

Links and Contact Information Mentioned In The Episode:

About Gary Jonas

Gary is a seasoned real estate entrepreneur with a proven track record of delivering exceptional returns. With a deep understanding of the Philadelphia market and a keen eye for undervalued opportunities, he has successfully transformed blighted properties into thriving assets. As President of The HOWGroup, Gary oversees a portfolio of 1,500 units and leads a team dedicated to maximizing investment value. His strategic approach, coupled with a strong financial acumen, has resulted in consistent growth and profitability.
Gary is actively seeking partners for new development projects that offer significant upside potential. His expertise in urban revitalization and strong industry relationships create a compelling opportunity for investors.

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