GI160: The Journey from Physical Therapist to Real Estate Investor with Lee Yoder

Lee Yoder was practicing physical therapist when he realized his true passion was building his own business and investing in real estate. He started with several small apartment buildings, repositioned them and sold them. Today, Lee is focused on syndicating larger apartment buildings.

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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:
Do you have money sitting in the stock market? And you’re worried about it or worse. You have money sitting at the bank, not keeping up with inflation. My name is Charles Carillo, founder and managing partner of Harborside Partners. And since 2006, I’ve been investing my money and my family’s money into income producing properties. These are real assets, real properties with real addresses that produce real cash flow. At Harborside Partners, we provide passive investors who love real estate with a turnkey investing solution. If you want to put your money to work in real estate, but can’t find deals, don’t have the time to get funding in. The last thing that productive people want to do is manage real estate. We find the deals. We fund the deals and we manage the tenants, the termites and the properties. Partner with us at investwithharborside.com. That’s investwithharborside.com. Go to investwithharborside.com. If you love real estate, you like the idea of passive income and believe that income producing properties will appreciate over time. Go to investwithharborside.com. That’s investwithharborside.com.

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Lee Yoder. Lee was practicing physical therapist when he realized his true passion was building his own business and investing in real estate. He started with several small apartment buildings, repositioned them and sold them. Today, Lee is focused on syndicating larger apartment buildings. So thank you so much for being on the show Lee.

Lee:
Yeah, Charles, thanks for having me. I’m excited to be on.

Charles:
Yeah. We’re interested to dig into your background and kind of see how you made the shift. And before we get into real estate investing, like, what was your background prior, both personally and professionally before you made the leap into being a real estate investor?

Lee:
Yeah, sure. I, I, I liked all my story Charles because you know, I didn’t do anything special and, and so I feel like, you know, people, can I identify with my story and, and maybe, you know, do something similar if they want to, but like you read there, I was a physical therapist at first I was doing outpatient, but then I got into doing home health, physical therapy. Mm-Hmm <affirmative>, which is where, you know, I would drive around to, to see people in their home mostly elderly people. So when I was doing that my wife and I were starting our family, we had, we had you know, our first baby and it was a great job for my family because I had a lot of flexibility, you know, my company would just send me my patients on my phone and I would call ’em and schedule ’em, you know, whatever made sense for, for me and them.

Lee:
So lots of flexibility. And honestly, I was probably almost never working more than 40 hours a week, probably, you know, sometimes significantly less. So just had plenty of time and, and then it wasn’t a hard job. I didn’t have to bring it home with me. So it was great for the family. The problem, you know, for me was it just was not fulfilling. I, I think, you know, God didn’t me for, for a job like that that, that doesn’t have any stress, you know, I think I was made more for something just, just a little more challenging and, and things like that. So the company I was with actually asked me to come in to the office part-time to be the clinical director was actually a staffing company that I was working for, but I was a, a contractor for them.

Lee:
And so I came in and started helping them build out this division, managing all the therapists that they had on staff. Meanwhile also kind of helping to do the staffing that they do for other companies, which is main part of their job. And, and pretty quickly I was doing no physical therapy at all. I was in the office full time, did that for a couple years and was growing, you know, with the company doing really well, climbing the corporate ladder, moving toward a director of operations role. And so now Charles, I was really enjoying my work, but now I was like, just the opposite. Like my work was very challenging and exciting and I was really enjoying it, but now I don’t have the flexibility. Now I am bringing work home with me a lot. And now we have two young kids and so it’s not so good for the family.

Lee:
So kind of saw both ends of the spectrum there and, and, you know, so that was wearing on, on my wife and on me. It just, it wasn’t, you know, after a while it was like, this doesn’t feel like the life we, we feel like God is calling us to, so was starting to wonder, you know, if, if there was a different path for us and then, you know, what some people experience with climbing the corporate ladder, like just, it wasn’t quite what I was promised. And, and then it was like, Hey, when you become the director of operations, you’re gonna need to be here even more like maybe another hour, hour and a half each day. And that was kind of a line in the sand for me. I was already away from home enough. I mean, I was doing work at home, which I was okay doing, but they’re like, Nope, you know, it doesn’t like you need to be in here even more so decided I, I, you know, kind of wanna leave.

Lee:
And then you know, if people were watching, you can see behind me, the, the rich dad, poor dad book, you know, someone handed me a different real estate book, but then I got my hands on that one and read that in, in, in kind of a light bulb moment for me. And I thought, okay, I think this is gonna be the answer because I think what I’m gonna do is I’m gonna leave the corporate world, go back to doing home health physical therapy, where I have a steady job, but one that’s not, you know real taxing. I have plenty of margin and I’ll do a real, I’ll do real estate on the side, I’ll start a real estate side hustle. So that was my, my plan. And toward the end of 2016, that’s what I did, Charles. I left the corporate world, went back to home health, physical therapy, but with a plan of starting a real estate side hustle. And about a year later, I, I got that, you know, got that going nice. And I’ve been doing it ever since. Yeah.

Charles:
So why did you choose, I mean, you read some books, you read rich dad, poor dad. Is that why you chose real estate as your investment vehicle? Or was there some other factor that kind of suggested this might be the great route?

Lee:
That’s a little bit what that’s a little, or by the main reason why I chose it, but also my dad’s in construction always has been, I did residential construction on my summers off when I was in college things like, so real estate just really spoke to me. So as soon as it was like, you know, real richly at port ADSS about being an entrepreneur, you know, more than anything and, and, and, you know, getting on the right side of, of the cashflow quadrant, you know, in his next book or whatever, but yeah, real estate just really spoke to me. I, I just knew like, yeah, I think I wanna be an entrepreneur, but I, I wanted to be in real estate cuz I, I think I’m gonna love real estate.

Charles:
Yeah. That’s awesome. That’s great. So let’s talk about your first real estate investments, how they turned out and like what you, how you got started.

Lee:
Yeah. I started like so many people you know, it was like the fall of 2017 that I bought a flip, you know, bought a house in our town. It was actually on online auction, but bought a house to flip. You know, I took a pretty good pay cut from my corporate job to go back to home health, physical therapy, you know, still making plenty, but I, I was making significantly more there and you know, so then we did a flip and I was just kind of doing it when I could, I did a lot of the work myself, but you know, we got toward like late winter of that next year of 2018. And, and it’s like, well, we gotta get this ready. You know, by April 1st, May 1st cuz that’s selling season. Right. We need to have this ready. So I kind of jump all in.

Lee:
And so I was spending a ton of time out there and we made pretty good money on it, but it was it was like being back in the corporate space. So it was just kind of this funny picture of like I left the corporate world to have a better, you know, work life balance. And I got that with my job, but then I added a flip on top of my job and now it’s like being back at the corporate world and I made good money on that flip, but it literally just replaced the pay cut that I took from the corporate job. Yeah. So it was just this perfect picture that, that flipping is just another job. Yeah. It’s just a different way to make money. It’s not investing. So I only did one Charles and then I’m like, and may my wife helped me with this because she’s like, this isn’t what you told me real estate investing was like, you know, we’re not getting passive income.

Lee:
We’re not getting residual income. This is just you being away from home, you know, another job. And I’m like, yep. You know, a hundred percent. And that’s, you know, I’m listening to podcasts, listening to books and I’m like, that’s what, that’s what the guys are saying. You know that flipping’s not investing, you know, you can do it, but it’s just another job. So we jumped into a duplex next. And we basically flipped out. We didn’t even own it for a year and we did, we did like a full rehab on it, but we had renters in it for a few months. And so we got to experience a few months of our, in our income from these renters is more than our expenses. So we’re making money every month. Nice. As long as we own the, this property, we’re gonna have that. So, and, and then, you know, because we had a little bit more cushion with the flip, like we hired out a lot more of the work, so that was a much better experience. And it felt like, okay, now we’re headed in the right direction.

Charles:
Yeah. Yeah. I just, I know those first couple like multifamily smaller ones I did. And they, the first one was just like, it was, it was just a nightmare. And then the second one, I was like, we positioned better. And I was like, oh, now I know what I’m doing. And you have a kind of like a flow of figuring out what works best for you. And it all depends on kind of your team and your time and everything that you’re talking about. And also your goals too. It’s funny you say about flipping and I don’t wanna beat up on flippers, but every time I talk to flippers for the most part and about passively investing into deals and you tell ’em the time horizon, they’re like, well, I get that back in like four or five months. I’m like, yeah, man. You’re like working 60 hours a week to do like, yeah.

Charles:
I mean, you’re waiting outside and your truck for people to finish work and then you’re doing this and you’re that, I mean it’s different and it’s just, they haven’t, they’ve still in that ordinary income kind of W2 kind of, even though they’re, self-employed, they’re like now just bought themself a job kind of, you know, and it’s you haven’t, they haven’t the mindset hasn’t changed yet. And that’s kind of what needs to happen when you start changing where your money’s coming from. So you started investing in that first deal. I guess it was an eight, a 10 unit, a 16 unit you got into tell me about those deals that you got into, I guess, after the duplex and you know, kind of how you were managing ’em property managing cause they’re smaller properties. So was I found smaller properties are the hardest properties to manage. If you don’t have a good foothold in that area or you’re new to it, you don’t have enough units.

Lee:
Yeah. Yeah. Lo everything was local. So that helped mm-hmm <affirmative> and, but yeah, the 16 unit was next and then, yeah, pretty much right after that, the eight and then the 10 we used the property management company. Those are all, you know, I live between Cincinnati and Dayton, Ohio, and all these properties were kind of like outside of Dayton. So we had, we had the same property manager on all of them. And they were a good property management company. It is hard to find good property management for smaller ties. Usually the bigger you go, the easier it’s to find good property management. Luckily, you know, through referrals we were able to, and it’s not like they were awesome. I, I don’t know. Maybe there’s no such thing as an awesome property management, cuz it’s just so hard. It’s a hard business.

Lee:
I, I joke, but I’m like semi not joking that, you know, we pay an 8% fee and then first month’s rent. If I, if it had to be 20%, I’d probably still pay it because I just don’t want to do what the property manager does. So yeah, that, that was, that was a big part of it, Charles, you know, I, I, I, I love to tell people because it was, it was a, felt like a monstrous undertaking to buy a 16 unit. I mean, my wife and I knew nobody that bought apartment buildings. I wasn’t in a coaching program. I had a good mentor that really helped. That’s one thing I would really advise. People have some kind of mentor he really helped, but it just felt like crazy. Well again, the mentor really helped. And then to me, the property management company really helps because, you know, we were like, I remember my wife and I talking and she’s like, I mean, what, what are you gonna do when you actually close on this property?

Lee:
Like, what do we do? How do we, how do we take it over? And the answer is we do nothing. The property management company does it, you know, they go out to the property, they introduce themselves to the residents. They put, they try to meet ’em off. They can’t, they put a, you know, hang something on their door, shoves under, under the door, send ’em an email call ’em and they set everything up and, and they run the property for you. Now you’ve gotta be ready to manage them. But you know, the nice thing Charles is like for me, you know, the biggest thing I’d ever owned was a duplex and I’d only owned one. So buying a 16 unit, just again, felt like a crazy undertaking. My property management company was managing a thousand units in Dayton. So for them picking up a 16 unit, okay. No big deal, you know, so I’m talking to them about it and like, it just brought my anxiety level. So, so far down because the people that are actually gonna be doing most of the work, it’s not daunting to them. This is easy. This is a walk in the park. So that’s key. I, I, I wouldn’t do it any other way then, then bring on, then have a mentor to help you get into it and then have a property management company manage it for you.

Charles:
Yeah, no, it’s, it’s, it’s very difficult to find the good management on those. And I, the people that I’ve found that are most successful in the smaller properties have somewhat, first of all, they’re somewhat close to each other and I’m not saying like next door to each other, but they’re within a mile or what are the radiuss that they’re comfortable. They’re not 45 minutes away from each other. And then secondly, they have their own team and that’s how you’re able to do it because imagine you have a job, AKA property manager, and all you get is bad calls all day long. No one’s calling you being like, Hey, Hey, you know, all this, you know, Hey we’re paying you over for the month and I just sent you off the check and no, Hey,

Lee:
You guys are so fast to get the maintenance request answered. I love you guys.

Charles:
Yeah. Thank you so much. And I’d love to have you guys over for dinner. No, it’s, it’s more like it it’s, it’s more like, Hey, there’s a leak here, a leak there. They never fixed a leak. This last guy told me to fixed the leak and he’s not here. And where’s

Lee:
My neighbor’s too loud.

Charles:
Yeah, yeah. Yeah. It’s just so it’s just like, it’s an O if you, you know, it takes a certain person to get calls that are negative all day long from people that are just mad and because especially when a new management switched over, cause you’re like, listen, I don’t know what they told you before. This is what we do and blah, blah, blah. So yeah, it’s it’s a thankless job, so you need to have thick skin for that. But finding them, I found the best ones through referrals. Yes. And that’s how I’ve done it. And that’s how we do it going forward. And definitely finding other people that have like size properties in the similar area that you know, similar class properties and similar size. And then that, that you can utilize what they’re using for management. I’ve usually found that to be the best, you know what I mean? And but let’s talk about what you got going on now. You’ve, you’ve scaled up. What’s your firm’s current investment strategy and criteria.

Lee:
Yeah, I would say right now, Charles we, we’re still mostly sticking to the date and area and, and I was just gonna say on your point, I totally agree. I’ve I’ve told brokers, like we we’re ready to buy in Cincinnati. We would probably buy in some of the surrounding cities like Indianapolis Louisville, Lexington, but I would not buy anything smaller than a hundred unit in those other ones, because like you said, yeah, it’s really hard to have the small, but in Dayton where we already have 188 units where we have a good property management company, I would buy a 40 unit because we can put that into the group. Right. And I’m right here. So I totally agree with you. And that’s kind of our strategy is there you go. Probably we’re mostly gonna stick to Dayton in the surrounding area and in the 40 to 100 units.

Lee:
I think that’s a nice sweet spot. Most people, I would say like 90% of real estate investors, maybe it’s maybe it’s higher, they’re not doing 40 units. They’re doing, they’re doing less than 40 units. Yeah. They’re probably, you know, most people are in residential and you might do have some people that are small multifamily. So there’s a lot of competition on those, you know, maybe even 20 units and up, there’s just not as much competition, but what, I’m, what I’m finding out, you know, we just closed on a 96 unit and I love the property and I’d love to buy 150 unit or 250 unit. But what I’m realizing is I’m looking at those properties. Not that there’s so much competition, there might be only, you know, 10 guys off. I mean, I they’ve been on some there’s five guys, but those five guys, Charles, as I’m sure, you know, that’s big money and they don’t need the same return that I’m not gonna speak for you, but that I, I want that my investors want it’s, it’s a different kind of money.

Lee:
So I feel like that, you know, 20 to a hundred, maybe, maybe even if you want, like maybe even 20 to 150 is kind of this, this niche where there’s not as many people playing in it as the smaller stuff, but you still don’t have the big money because a 96 unit that we just closed on in Dayton, big money and is not going after that. They want a 200 unit in Cincinnati. So that’s kind of the strategy is to keep doing more of that in our local area. And, and, you know, we’d love to do some bigger stuff in, in different areas, but for right now, man, when I look at that stuff, I just laugh at what people are paying. And again, it makes sense for them. It’s not that they’re being stupid. They have a different cost of money than I do.

Charles:
Yeah. Yeah. They have different people. It’s, it’s a much different you’re dealing with the family office. It’s one 8% return. And they, you know, that’s it. And, but they also are placing five, seven, 10 million. You’re placing a portion of that. So it’s it’s, it’s a different ball game. The other thing too, though, is that with the competition, with hitting with these bigger players that have bigger checks that they can write and don’t require as big of a return their debt’s also gonna be less too. So that’s something too that that you have the compete against, but when you’re get into smaller units, there’s two things. And I love this because you’re thinking outside the box and we hear from, I hear from all these different gurus, all over the place that are telling you a hundred plus units, and I talked to new investors, never bought anything and not even a duplex and they’re, oh, I’m gonna buy a hundred units or I’m gonna do, I, I think I per this, the, Hey, listen, it’s the easiest way.

Charles:
Yes. Buy, you know what? You buy a hundred, you might as well buy a thousand units. You know what I mean? If it’s that easy, you might as well just do it. And it is, yes, it’s much easier to close on a hundred units. It is on 10. But the thing though is that if I’m able to find a less sophisticated buyer in most situations with smaller properties, I’m able to find a more, a less sophisticated buyer compared to some guy in that hundred unit. That’s going through a large brokerage firm that has all his BPOs, all his stuff, his broker broker, price, opinions, all this kind of stuff. He knows exactly what it is compared to someone that inherited it or someone that’s been sitting on this property without debt for 25 years. And that things just like paying all of his bills.

Charles:
He has no idea that his rent are 40% under. He doesn’t even care. You know what I mean? Never even checked what market rents are. Cause he just raises the rents 1% or something a year, whatever it is. Yeah. I mean, that’s a much different buyer. There’s a lot more, you know, meat on the bone there. So tell me what you think in that situation. Because one last thing before I give it to you is we’ve done smaller deals before we’ve done deals where we put properties next to each other, into a syndication. We did a 68 and a 22. Okay. 90 unit. We did a 27 and a 32 to make a 59 unit when we did syndications early on years back to be more competitive in hot markets like Tampa. And so tell me about what you think guys, I’ll give it to you and finally, and let me know what you think about smaller units and why people don’t like those or that. Why they’re kind of shunned inside this multifamily arena.

Lee:
Yeah. I, I think, you know, for us, Charles after last year we bought a 45 unit, a 47 and a 96 and the 96 is my favorite. And it’s the easiest for our property manager to manage because there’s more units in one spot that can dedicate one person. So the economies of scale are real, but everybody knows that. I just, you know, just like people. And this is me, you on my soapbox about the Midwest and, and you know, Hey, I’m gonna, I’m gonna back up, you know, where I live, but like, everyone’s like, oh, the Southeast to Southeast, look, I, I’m not gonna argue with you. The Southeast is awesome. I would love to invest in Southeast, but everybody knows that the, the, the cap rates reflect that. So sure you can go invest there, but just know like you’re gonna pay a different price then in the Midwest, the sure.

Lee:
It’s not as good of an area to invest. Totally. But the, the cap rates reflect that. And I think it’s just the same thing. I like my 100 unit better than my 45 unit, but the cap rates reflect that. So yeah, in this, and, and I’m just Charles, I don’t know about you, but like, we’ve been at the top of this market for a long time. I’m at the point where I’m like, look, we’re gonna keep buying because I think multifamily is the best place to have your money. If we do have a downturn. So I still feel confident raising money from investors. Cause I’m like, look, if you take it outta the stock market and you put it in with us and we have a correction, you’re losing 50% of whatever’s in the stock market. We’re not gonna lose anything. We’re, we’re not gonna hit the projections we, we had.

Lee:
And, and we might have to hold for longer, but we’re gonna be fine. So we’re still buying, but I I’m get, I’m a little nervous with, with some of the cap rates, some of the, the way people are reaching and things like that. And, and it’s just even more competitive. So I agree with you. I would rather, you know, we would love to add a couple hundred units this year. I would like to do it with one property. That’d be a lot easier, but so would everybody else? Yeah. So would the family offices, so yeah, it’s just one of those things, like sometimes doing the harder thing you, well, usually it’s, that’s where the money’s at. So if you wanna make a good return, I think you’re hitting on Charles. You’re gonna have to go the harder route. It would, it’s much harder to buy five 40 unit properties this year than to go out and buy one, 200 unit property. But

Charles:
Yeah, but it’s yeah, the

Lee:
Return is gonna be way, way greater. I agree with you there. I think you’re gonna make a much better return on five 40 unit properties.

Charles:
The other thing too, is that you see, I always like look at what large investment firms are doing. And you are, you have a lot of these investment firms that obviously large private equity firms with billions of dollars could go and buy lots of apartment buildings. Why are they buying hundreds of single family houses, which must be a nightmare to manage. Yeah. Right. Because they’re looking, they need to, they need returns. And they’re going to where the returns are not as sexy as buying. Hey, we just bought 5,000 multi-family units in Orlando. You know what I mean? Or whatever it is. Yep. Not as sexy as, Hey, we bought a hundred houses in a section of St. Petersburg or whatever it is, you know what I mean? Or Cincinnati or wherever you’re, they’re buying in. You know what I mean? But the thing though, is that that’s where for their plan, for their proforma of where they think those are gonna go, they’re gonna be able to generate higher returns.

Charles:
Everybody’s gonna make more money there than buying it a 3.9 cap somewhere on 200 units. And it’d be a lot easier. They could stroke a pen and send that, you know what I mean and do it. And it’s just, there’s a reason why you have firms that are getting into more unique investments within real estate, doing things, doing conversions from one class to another, because they’re trying to find returns and and they have to go the extra more legwork to do it. And, you know, and I don’t think that’s something when you have, when you have these coaches that are only saying, this is the only way to do it. Well, the big guys don’t do that. The big guys are changing with what happens in the market and how they can generate returns consistently and conservatively, let’s be honest as possible for their investors. Just like, just like you’re doing Lee.

Lee:
Yeah. Good point. And I know a couple, there’s a, I signed, I did a mastermind last year with a, with a syndicator that I really respect. And you know, he’s one of these guys, Hey, 200 plus, that’s all we do. And then this past year, Charles, he’s like, we’re, we’re gonna start buying 20 to 50 unit stuff. Yeah. And, and they buy in Florida and he bought a 25 unit and, and he loves it and he sees it, man. Yeah. It’s a good point. I think you’re making a good point.

Charles:
Yeah. Yeah. And your, and your investors don’t care what it’s in. I mean, my investors don’t care if it’s 59 units or 195 for the most part. Nope. I mean, they see there’s some scale there, but if I have other units in the area, it gives you scale. They’re looking for, oh, so the guy down there for 200 units is paying 75, a unit and you’re paying 55, but you know what I mean? So like, okay.

Lee:
Graph is 6% and yours is eight.

Charles:
Yeah. Right. You know, but you’re, they don’t care how much work have to, you have to do, Hey, go do, go do work. I’ve gotta go back to work too. And we’ll talk, you know what I mean? Yep. But yeah, it’s just, I just like that idea, like you have of just wherever the returns are and wherever you can conservatively get, ’em not just like, you know, rents are gonna keep up going up 15% a year while they’re not, you know what I mean? No. Right. So let’s talk about raising money for funds, how you started raising funds for your first real estate deals and kind of like how that’s morphed over the years to what you’re doing now, larger deals and more often

Lee:
Yeah. It starts like, like, you know, most people say, I mean, it starts with, with friends and family. So and then it just kind of snowballs from there. I mean, that’s one way, I guess we’ve, we’ve kind of grown it in two ways. Charles one is, is just that organic growth. So the friends and family that invested with us, you know, starting a couple years ago on the 16, eight, you know, I just brought in one or two investors on each of those just did simple joint venture deals, but now we syndicate. But some of the people that have invested with us or people that have seen us, you know, along this path, now they’re investing. And then now they’re telling other people who are coming to us in one investor, we’ve seen kind of some organic investor based growth. And then, you know, I started a podcast almost two years ago.

Lee:
I’ve been posting, you know, on social media for a couple years now of what we’re doing. And, and so people will, will see that. And a lot of people wanna watch you for, for, you know, a couple years or something and wanna see see how that goes. And, and then they see you having some success and they see your investors experiencing those returns and they decide I wanna get in on that. So after a couple years of putting out, you know, some, some content and just kind of putting out what we’re doing, we’ve gotten some interest from people. And, and so we’ve actually brought in some people that you know, I didn’t know before, and I, I didn’t know anybody that knows that person, but they, they saw a post and they say, Hey, you know, you guys are, are buying in our area.

Lee:
I’ve been interested in getting real estate. I’d like to get to know you and, and maybe we’ll just invest with you. Cuz we’ve been seeing what you’re doing and, and like, you know, one great example, our biggest investor in our last deal never met the guy before, but he’s into real estate and he’s wanting to get in, but he can’t find any deals right now. Right. That’s, it’s so hard. He found one 12 unit, but he can’t find anything else. And he’s got this money he wants to put to work. And the, the mortgage broker that he worked with commented on one of my posts on LinkedIn. And so he called this mortgage broker and said, Hey, who’s this guy, you know, you must know him. And he is like, oh yeah, you know, we, we know Lee and yeah. I mean, I’ll, I’ll reach out to Lee and see if everyone talk to you. So I get lunch with this guy and he’s like, man, I like what you have to say, Lee, I wanna invest with you. And he became our biggest investor on our last deal. Wow. you know, so, but that just started happening, Charles, that that’s something that we’ve, you know, been working at for a long time and we’re just now starting to get some traction. So kind of two fronts, the, the organic growth and then putting out, you know, stuff into the interwebs that are, they’re finally bringing some, bringing some people in. Yeah,

Charles:
Yeah, yeah. After a few years you’re in overnight success, but exactly. It’s that, it’s that momentum. Because if you do something and with everything has to be on social, all kinda stuff. And I, I find that I put up a deal that we closed on or that’s just even under contract and that we’re raising money, say it’s through a 5 0 60 or something like this. So we can advertise you. And it’s like just momentum of deals coming in. People want to be part of what you’re doing. They want to, they wanna ride on momentum. They want, they thrive on that. They wanna be with you, same thing you’re gonna want, you know, you’re gonna wanna partner with people that are doing deals that have, that are in the flow and making stuff happen. But so which is, which is really cool and that how you’re leveraging the internet and all these different platforms to get your message out there and to build your investor base. So we talked a little earlier about becoming a full-time real estate investor from being a professional. What would you suggest to someone in that position where you were, and you were going back and forth before you got into multi-family where they wanna make the leap, but they haven’t done it yet. And they have this job and they’re in some position before thinking about leaving to go full time.

Lee:
Yeah. I, I, I think you got a couple different paths you can take Charles. I mean, for me, I was able to get a job and, and, and more people than ever can get in a situation where you can be in a job that has a lot of flexibility. And I say that because so many people are working from home. So if you’re working from home and you can, you know, now you’re doing your job in less time and you kinda have some flexibility. Maybe you could jump on a call cuz you know, you’re not at, at an office where someone’s like, Hey, why are you talking about real estate? You know, you can do that at home. So if you can kind of start it as a side hustle I think that’s one way to get in. And so you could, you know, start trying to, to build a little portfolio and then maybe that portfolio ends up producing enough monthly income to, to get to the point.

Lee:
Maybe it replaces your, your expenses and, and maybe you can step away. That’s one way, if you’ve got a good job, that’s, that’s earning a good income, then I would go invest with somebody like you, Charles. I would keep that going and, and you know, it, it’s gonna take some time. Both, both routes are gonna take some time. That’s, that’s something to remember. I kind of got lucky the time to market, right? To be, to be honest with you is why I was able to quit as, as soon as I will. And I’ll explain that a minute, but if you start building a portfolio on your own, it’s gonna take some time. I mean, I would say plan on it taking five years and then if somebody can get some money in with you, Charles, somebody like you, 50 grand a year for five years or something, that’s, it’s gonna take five years, but, but again, that’s gonna end up building up and maybe you guys go full cycle on a couple and get that back and you’ve doubled my money.

Lee:
And then put, maybe you can build up enough to, to again, replace your income. So those two routes go passive or go active that could allow you to, to quit or go part-time at least. And then you can get into it more and more and go quicker. The other, you know, the way I did it was I, I built a portfolio, but then I sold it all. And so I had this cushion, so I used real estate to create kind of this three to four year runway where it’s like, I don’t have the cause I sold everything. And then we started building Mac up this year, but I had this really long cushion. So I did that through real estate. If you could do that through your job, if you’re making a really good income and you just, you know, do the the fire method or something where like you just get your expenses down and you build up this runway so that you can quit and go into it full time. That’s another way. But I think probably what works for most people is, is try to keep your expenses low, try to make really good income, but have some flexibility to either jump in actively or passively and build that up until you’re able to go full time if that’s what you want to do.

Charles:
Yeah, yeah, no, definitely. And that’s the other thing too, if they want to, because I think a lot of people get sold on this, this mythical thing called passive income when you’re being an active real estate investor, which isn’t really a thing. Yeah. Maybe get semi passive. If you have a team in place and all this stuff that you’ve worked and you have a system, you can get it very passive, but you’re not gonna get it fully passive. The only passive way of doing it to invest with you or me or something like this with deals that are working like that or anybody else that has passive deals. But the thing too is I always see is that people that just want the passive income don’t really care about real estate. That’s where I always earn, like, you know, you you’re, you, you, you might as well work harder at your job or whatever you’re doing your profession.

Charles:
And then for five years put away this additional money you’re making from hustling at your job into a passive deal with whatever operator. It doesn’t matter that you know, that you’ve a seasoned experienced operator and let that, you know, let that go and invest in different projects and see how it goes. And you’re gonna get closer to your passive investing goal, your passive income goal much faster than you starting a brand new thing on the side and do this and do that because you’ve already got something already built with what you’re doing. And it’s easier just to take that up 25% or 30% versus from zero, you know, zero to, you know, 50,000 or a hundred thousand a year is very difficult than a new business. And for sure, yeah. Especially in real estate where real, estate’s a great long term investment. It’s not something, you know, great. I made two 50 this month on this one, you know? Well, that’s great now I just need like a hundred of these things. Right. Knows. So, but

Lee:
It really takes time.

Charles:
Yeah. Yeah. Yeah. So what are common mistakes that you see real estate investors make?

Lee:
I, I think you just hit on one there, Charles. It it’s, it’s not a get rich quick scheme. It’s, it’s I think rod CLE he’s down on floor with you. He says it’s a get very wealthy over a long period of time. Yeah. Like for sure. So you’ll get wealthy it’ll happen, but it it’s just gonna take a long time. And so if you don’t go at it with that perspective, I think that’s when you make mistakes. And I’m just thinking, you know, when you’re talking, people are like, well, I’m gonna, I’m gonna jump in this. Usually I it’s like I’m gonna get into real estate and I’m gonna make more money and I’m gonna go flip. And it’s like, what you were just saying, no, just, just make more money at your job. Just do like flipping. Why would you just do a different job that you’ve never done before?

Lee:
Yeah. Just do your job. You can make money at your job. Flipping’s just making different money. So I think that’s it when you know, getting into I’ll just share from my experience and I think probably other people make this a mistake. I think it’s easy, especially in, in today’s market where you do have to really sharpen your pencil to get any deal. I mean, it’s, it’s very competitive. And I think one mistake I’ve made Charles is coming in under capitalized. And, and trying to say, you know, maybe we can use cash flow to turn some of these units, right? Like it just, it gets tight. And man, you’re really setting yourself up. And, and not that we’ve had like these big disasters, but you just get to a point where you don’t wanna get to a point and we’ve been there where you say, okay, somebody just moved out.

Lee:
We really don’t have the money to do a really good turn and get the top of the market rent. Maybe that’s a strategy, but it’s not our strategy. And so, you know, we we’ve been in a position and there’s ways to get around it. You know, for example, you know, you can raise more money in, in your deal. We’re doing that for one of ours, cuz it’s not closed yet. And so we have that ability and we, we set it up that way. But I’ve done that a couple times where deferred maintenance just caught me by surprise you. I wouldn’t think that people would live in the, the situation that they live in. So, you know, you buy an apartment building and you think, Hey, 25% of the people are gonna move out this year and we’ll have those units. And then you think the other 75% of people that stay there, their unit must be decent.

Lee:
Right. Cause they’re living in it. Well, that may not be the case. We’ve gone into units where people don’t have running water in their bathroom, like their bathroom vanity. And you wouldn’t think somebody would live like that or people don’t have hot water, but they will. I mean, in certain situations, you know, if you’re, you know, lower C class especially, and so we’ve ended up spending thousands of dollars on residents that stayed in place. And, and on my first couple, I didn’t expect that. I didn’t expect to have that much deferred maintenance. So deferred maintenance can really get you where your risk, you had more capital. And then if you’ve got a, a heavy you wanna do a lot of unit renovations and you wanna take your property from C class to B class man raise more and we’ve been caught a little bit, you know, we certainly didn’t anticipate the inflation that we’ve seen.

Lee:
So I don’t necessarily think, you know, I don’t go back and beat myself up about that. I don’t know that we, we should have been able to see that, but you know, we could have been even better capitalized and just going forward, you know, we’re taking even bigger rehab loans with our lenders and things like that. And just, you’d almost rather have more money than you need. And then you can really yeah. Improve that property because that’s where, that’s where the value add. That’s where the money’s made. Right. That’s, that’s where you can increase revenue and, and things like that. So I think a lot of people like me have come in and under capitalized.

Charles:
Yeah. no investor’s gonna be mad when you send more money out to them. That’s been sitting in a savings account, so right. Yeah. <Laugh> happened to me once in a limited partner deal. And I was like, really? Oh, wow. Look at this. That’s awesome. But the thing though, is that exactly what you said? And that’s the number one thing of what you’ve just said is that never do CapEx from cash flow. Okay. Yeah. I mean, because you’re anything the value on, I always like worried when people are getting into deals and they’re just like skimping on it to try to get it on like, listen, you need to have a sizable reserve and you’re gonna take this property. That’s working okay. Probably 90%, 92% or something occupied and paying stuff like this, you’re gonna drop it to the mid eighties. So you can do all this work.

Charles:
So you think you’re gonna have the same returns. You’re not gonna have anything you’re you have to make sure everybody’s on board with that, depending on how aggressive that you, your GCs, your team can do this renovation process and make sure that you’ve raised all the money for these deals. And obviously like small repairs and maintenance. You’re gonna take that out of some of the cash flows are going, but like, you’re not gonna take out a roof. You know what I mean? I highly suggest you don’t take a roof and all these other larger CapEx items out of cash flow. And it’s very important that you have all that money set aside. First of all, know, what’s wrong with the property of what you think from the beginning. And then there’ll be more, that’s wrong with it, set that aside and then put some more aside and go into it. And then that way it’s gonna be a little harder. You gotta raise more money. It’s gonna push down your returns a little bit, but it’s gonna be much safer. Yeah. And not having to go back out to your, your, your investors for money in a capital goal. Yeah. So, yeah. So as we’re finishing up here, what do you think are the main factors that have contributed to your success over your professional life prior and during real estate?

Lee:
Yeah. I’ll tell you you know, one thing that I didn’t, didn’t foresee coming and God just kind of set it up this way. My wife is very risk adverse. So early on, that was really frustrating for me because mm-hmm, <affirmative>, she wouldn’t let me jump in as quickly as I wanted to. And she wouldn’t let me run as fast as I, I wanted to, but where that really you know, felt like it was a, the right design by, by God to put us together. Was that in slowing me down when she did that, we ended up moving quicker. Because again, we only flipped one house and she’s a big part of the reason we only flipped one house because she’s the one going, this isn’t what you told me. It was like this isn’t inve this doesn’t seem like passive income, you know, and it, and, and I’m, I’m ready to jump into another, we made good money.

Lee:
I had fun. I let’s jump another one. She’s no, we’re, we need to chill out for a little bit. Well, in that chill out, period, I, you know, continue listening. I’m like, yeah, this isn’t what I wanna do. This isn’t investing. And so we only did one. So we jumped into a duplex, you know, and, and kind of same thing there, you know, taking our time. And so in the first year we only did one flip and the second year we only did one duplex. But then in the third year we bought a 16 unit and eight unit and a 10 unit. And so looking by the time we had those 34 units looking back, I’m like, I I’ve been blown away by, by what we’ve done in, in, you know, a short amount of time, but it felt like the whole time we were moving way too slow.

Lee:
And so having my wife as a partner really helped. And so I think often it’s, if you wanna partner up with somebody, go find that partner, find one partner that pushes really hard and has this big vision and another partner that that’s that’s the implementer or something, you know, that that’s like more like, let’s just focus on what we have today and my wife and I balance each other out that way. And, and so that that’s been really helpful and, and contribute to our success. Having a mentor was huge for me getting into the commercial multifamily. I kind of mentioned that our, it was through our R here in Cincinnati, but I the guy that was leading the apartment focus group ended up kind of being a mentor for me. I ended up giving him 10% of that 16 unit.

Lee:
And that’s the perfect kind of coach, cuz he ended up making $20,000 off the deal, but it wasn’t until we went full cycle on it and sold it. So that’s the kind of coach you wanna get that’ll that’ll help you. And then you, you pay him on the back end once you make money instead of the other way around. Not always, not always. I’m not against coaching. Cause I think he, I think you need something, but I was really blessed to have him. He helped me get in that first one. And, and just networking in general, Charles, I, I think that, that, that’s what just levels up your mindset. You know, I remember when we were doing the 16 unit, it might have already said this, but just how my wife and I were like, we don’t know anybody that, that owns an apartment building. This seems so crazy. But if you network with people, you’ll, you’ll find out, there’s actually a lot of people out there that buy apartment buildings, you just don’t know any of them. And the more you know of and the more you feel like, okay, if they can do it, I can do it. So networking and, and getting a mentor is mentor or coach I think is, is huge. It’s helping me.

Charles:
Yeah. It’s great that you’re able to find a mentor locally and pay them like that. That’s a great conversation. Most coaches won’t do that, but that’s awesome that you were able to find one and someone really, really invested in your success. Talk about alignment of interest. Yeah, I think we have a lot less coaches out there telling us to buy real estate and programs and all that stuff. If if they got paid on the back end of your product, if

Lee:
They only, yeah. If they only got paid, if the investment was a success.

Charles:
But that’s awesome. So Lee, how can our listeners learn more about you and your business?

Lee:
Yeah, Charles, probably the easiest way to jump on our website, threefold, R E I, as in real estate, investing.com everything’s ever got a free ebook there. Five steps to passive income for the full-time dad. You can, you know, can sign up for our monthly newsletter, get ahold of us there. I’m also pretty active on Facebook and LinkedIn. Just look for my name, Lee Yoder. You’ll find me there. Okay,

Charles:
Awesome. I will put those links into the show notes. Thank you so much for coming on today and looking forward to connecting with you in the near future.

Lee:
Yeah. Thanks for having me on Charles. A lot of fun

Charles:
Talk too soon.

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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About Lee Yoder

Lee was a practicing physical therapist when he realized his true passion was building his own business and investing in real estate. He took this passion and considerable action to quickly build a portfolio with several small apartment buildings. He was able to quickly reposition this portfolio, bring it full cycle, and provide an incredible return for his investors. Today, Lee is focused on syndicating larger apartment buildings. He is the founder and visionary behind Threefold Real Estate Investing, and he’s committed to forging a path that will generate incredible wealth and opportunity for all involved. His focus is driving the business forward by forging new relationships with top-notch professionals in the real estate world and bringing on more partners to invest alongside Threefold. Lee also hosts a podcast, Threefold Real Estate Investing, which discusses multifamily real estate investing, while also focusing on pursing better relationships with family and a better walk with Christ.

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