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Ep #106 – Dylan Borland and David Toupin – began real estate investing at a very young age by fixing and flipping and have decided to use multifamily investing and ownership to “get out of the rat race before it even started!”

Here’s some of what you will learn:

  • Fixing and Flipping 100+ properties in a year
  • Structuring syndications
  • Why you should avoid 5 year balloon mortgages right now
  • The best strategy to use to raise rents
  • Every business in the world is 2 things
  • What to be careful about when working with mortgage brokers
  • Combatting analysis paralysis
  • Book recommendation: Never Split the Difference: Negotiating As If Your Life Depended On It by Chris Voss
  • Book recommendation: Trump Strategies for Real Estate by George H. Ross
  • Book recommendation: Rich Dad, Poor Dad by Robert Kiyosaki and Sharon Lechter
  • Book recommendation: Trump, Real Estate 101 by Gary Eldred

Our Guest

You can learn more about at: Dylan Borland and David Toupin at:
http://www.theborlandgroupllc.com/

Full Transcript Below:

Ep #106 – Dylan Borland and David Toupin

Welcome. This is the Lifetime Cash Flow Through Real Estate Investing Podcast. This is where you’ll learn strategies to help you achieve lifetime financial freedom through real estate investment. Your host, Rod Khleif, has owned over 2,000 homes and apartments. And he brings experts in all aspects of real estate investment and management on to the show. Now, here’s your host, Rod Khleif.

Rod Khleif: Welcome to Lifetime Cash Flow Through Real Estate Investing. I’m Rod Khleif and I am thrilled you’re here. I know you guys are really gonna enjoy the two gentleman we’re interviewing today.

I had done one of my free 30-minute phone calls with one of them, and was so impressed with their work ethic, and what they’ve done already at their young age. They’re both in their 20s, and they’re about to close on the first 24-unit deal.

You guys, you’ve heard me interview people with a few hundred units to a few thousand units to tens of thousands of units, but people like these two gentleman will relate to many of you much more because they’re just really getting going in the multi-family space. They’ve been bitten by the ‘multi-family bug’, and I’m really excited to have them tell you their story, ‘cause I was really impressed, I think you will be as well.

Their names are Dylan Borland and David Toupin. Guys, welcome to the show.

David Toupin: Thanks Rod.

Dylan Borland: Thanks for having us.

Rod Khleif: Absolutely. Dylan, let’s start with you. Tell us how you got started in business in general, and then in real estate. Make sure you tell people how you were when you got started, ‘cause that kinda blew me away as well.

Dylan Borland: Yeah, that’s a great question. I’ll try to keep it as short as possible. I started at a very young age in business. Just out of necessity. I realized that if I wanted to provide for myself… If I wanted to buy a car when I was 16, if I wanted to buy clothes, if I had to eat, quite frankly, I was the only person. It’s kind of a lone wolf.  I was the only person that was going to be able to do it for myself.

My parents were divorced growing up. My mom was working two jobs just to pay for the house.  It was up to me. I started at the age of 13, actually flipping cars. The reason why I got into that was because my neighbor was always working on cars in his garage. He’d fix one up, put it on his lawn, and sell it.

I got into it, not with the idea of wanting to flip cars, but I got into it because I knew, when I was 16, I didn’t have money to pay a mechanic to fix my car, when I eventually bought a car.

So anyways, I got the car-fixing bug. I started going out to the auctions, and we bought a car there together, fixed it, flipped it. From about the age of 13 to 17, I spent some time fixing and flipping cars. But for me, Rod, that wasn’t enough, ‘cause I had very specific income goals in mind, and I’d have to flip a lot of cars to get there.

I actually read a book on real estate investing when I was 17, and I said, “That’s it. That’s what I wanna do. That’s the business that’s gonna give me the income goals that I had in mind.”

Rod Khleif: Do you remember what book it was?

Dylan Borland: It was. It was actually Trump Real Estate 101.

Rod Khleif: [chuckles] Love it. I have all of Mr President Trump’s books. Yeah. Fantastic. Alright, continue. Sorry to interrupt.

Dylan Borland: Yeah. So I read that book and I was just really inspired. I said, “As far as I could tell, real estate was the only business where I could get to build the type of income that I had envisioned for myself, and the lifestyle that I wanted for myself.

I actually wound up buying my first property when I was 17. I couldn’t even legally buy it at the time. I had to have my girlfriend buy it ‘cause she was 18.

Rod Khleif: Love it.

Dylan Borland: It was behind the house where I grew up. This was in 2006, Rod. We renovated it, and flipped it. I did very, very well but then shortly after that the market crashed as we all know, and I think that the Detroit market, with the automotive industry, got it a little sooner than the rest of the nation.

I was quickly having to figure out then, “Now, what do I do?” That’s kind of a quick synopsis to where I was at…

Rod Khleif: Okay. But since then… Talk about what you’ve done since then, ‘cause that’s the most impressive…

Dylan Borland: Yeah. I’ve been investing now all in, full-time since 2006. I’ve been… That was at 11 years already. My business, Rod, has really been primarily focused on residential fix and flip. From about 2006 to 2010, the market was declining than recovering. I had bought… My focus was on buying income rental properties. I had accumulated actually 108 single-family rental properties, up until 2010.

After 2010, to make a long story short, I ended up going through a divorce, and I had to liquidate those properties. I took about a year off, from 2010 to 2011 to kinda I get my thoughts back together.

Jumped back into real estate full time, trying to recover from that personal hiccup. I went and focused on fixing and flipping single-families exclusively, so I could keep my capital moving. I could rotate it about three times a year at 20 to 30% returns.

I got to a point very quickly where I was doing over 100 fix and flip properties a year, from 2011, to just about November… Well, not just about, exactly, November 2016, where then we decided to move into the multi-family game; which is how we got introduced to you and your material as well.

Rod Khleif: Awesome. Awesome.

Dylan Borland: I’ve done a few things in between that time frame, a couple of lot opportunities, which I think you probably are aware of as well but that’s where we’re at now.

Rod Khleif: Now, that’s awesome, and it’s so funny, I can totally relate to starting to do business when you’re 14. I lied about my age and got a job at Burger King, so I could buy my first car; my 70 Road Runner.

Dylan Borland: Nice.

Rod Khleif: I’d this cool 70 Road Runner with this pistol grip shifter, and it had a hood scoop, which is called and air grab. You click a switch and a hood scoop comes out of the hood, electronically. Yeah, that was so…

Dylan Borland: Ah, that’s nice.

Rod Khleif: Yeah that was awesome. But I had to go and work at Burger King, and flip burgers for a couple of years…

Dylan Borland: So you were not flipping cars, you were flipping burgers.

David Toupin: Flipping burgers.

Rod Khleif: No. Exactly. No.

[chuckles]

Rod Khleif: See, you were a lot smarter than I was. Okay, David, you’re up. Tell us about your background and how you got started.

David Toupin: Yeah, absolutely. I guess I kinda have a similar story. Starting at a young age. 13 years old, my parents told me… I’ve always been a huge car guy, kinda like Dylan. I never gotten to flipping but I knew when I turned 16, I wanted to buy a car. And my parents said, “You bring us X amount of money, and we’ll match it up to like three or 4,000 bucks, and you can buy a car on your16th birthday.”

So I started a landscaping business. I don’t wanna do what everyone else was doing. Everyone else was kinda doing, going working at the fast-food places, or working for a minimum wage. I wanted to…

Rod Khleif: Oh, sure you had to throw that in there after my story, didn’t you?

David Toupin: Yeah, I threw that in there.

[chuckles]

Rod Khleif: Nice. [chuckles]

Dylan Borland: That’s brutal David.

David Toupin: No, but I really saw myself doing something else. I didn’t really like working for other people, necessarily. I like working for myself.

I started a landscaping business, and throughout high school, by the time I was 17 or 18, I had accumulated probably about $10,000 worth of equipment, 50 plus clients. I was mowing lawns and doing landscaping every week, and I accumulated quite a bit of money doing that. I sold that off when I went to college.

Rod Khleif: Okay.

David Toupin: Yeah. Since then, I… My first three years in college, I actually went to… Initially, go into the dental program. My dad’s a dentist, so I thought I always wanted to be a dentist, at that point.

I quickly changed my mind, and decided business was for me. My junior year, I had done it internship in auditing, and I then did one in investment banking and consulting.

In the meantime, while I was doing those, I had read a book. You know it. I’m sure the almost all of you read this, Rich Dad Poor Dad.

Rod Khleif: Of course.

David Toupin: It’s cliché but that book blew my mind, completely got me hooked on real estate. Funny story, you had, I believe Erik Stark last week.

Rod Khleif: Mm-hmm.

David Toupin: It’s what you aired.

Rod Khleif: Right.

David Toupin: His partner Steve Mills, I had heard on Bigger Pockets, quite a while ago, about a year ago. Steve Mills had mentioned he’s from Royal Oak, Michigan, right close to where we are. And he had said, “Go read Rich Dad Poor Dad on the podcast.” That’s what got me into it. Steve Mills was actually the catalyst.

Rod Khleif: No kidding.

David Toupin: Yeah.

Rod Khleif: I’ll be darned.

David Toupin: That’s funny that you had his partner on your show.

Rod Khleif: That’s funny.

David Toupin: Steve actually then became my first mentor.

Rod Khleif: Awesome.

David Toupin: For a few months, he really mentored me, and got me into real estate. Those guys are great. Steve and Erik, they do a great job.

Rod Khleif: Yes.

David Toupin: Yeah. From there, I actually got out of my last internship, and decided that working in the corporate world was not for me. I’d some big job offers, and literally, the day I got out of my last internship, I turned them all down and …

Rod Khleif: Yeah, I think you wrote down, you were offered like 80 grand, which is pretty significant starting salary and you turned it down.

David Toupin: Yeah… Especially for Michigan.

Rod Khleif: Right.

David Toupin: For Michigan… And I turned it down the day after I got out ‘cause I knew I’d… Like Dylan, I had very specific income goals. I knew I wasn’t going to hit it by working for someone else. I knew that it was only gonna come by I working for myself.

Rod Khleif: Good for you. I’m sure that was a challenging decision…

David Toupin: Very challenging.

Rod Khleif: Because if you’re facing that kind of salary in one hand, the bird in the hand versus a dream and a goal…

David Toupin: Exactly.

Rod Khleif: That says a lot about you. Your goal setting and the power of you setting your own goals, and realizing what you really wanted.

David Toupin: Yeah… A lot of people are in the same scenario, and I say for me it was easy because I didn’t really have much to lose. I don’t have a ton of costs and expenses to live.

[00:10:00]

David Toupin: I don’t have a family to support. I know it’s a different decision when you’re at that point but for me, it was kind of a no-brainer type. If I take that leap now, I’m really not missing out on too much. I could always go back, and maybe try for the job again.

Rod Khleif: So that’s how you justified it ‘cause you’re like, “You know what…” [chuckles]

David Toupin: But it was never… I had nothing to lose at the point but in my head, I was never going back. I never wanted to take that second option. My first and only option was to make it in real estate, was the thing.

Rod Khleif: Awesome. I read here that you did your first wholesale deal, and made 12 grand. For those of you who don’t know what wholesaling means, it’s basically finding a deal, and getting it under contract, and then flipping the contract. He made 12 grand, which is a pretty respectable wholesale deal. Good for you.

David Toupin: Yeah. That was about within the first month of me declining those job offers, and going out on my own in real estate. And within that time, I had met Dylan, a few weeks in, through a mutual friend. I heard about him and a lot of the cool things he’s been doing throughout the community.

He’s kind of a rock star as far as fix and flip goes to single-family community. I had a meeting with him, latched on him pretty quick, got him… He took me under his wing, in a kinda mentor relationship…

Dylan Borland: I forced him.

David Toupin: He forced me.

[laughter]

Rod Khleif: Right. Right. Right. Good. Well, good. I know you did some flips after that, together with Dylan and got acclimated.

David Toupin: Rod, yes. We… Yes, and he brought me under his wing, and a few weeks into coaching, Dylan actually kinda said, “Hey, you’re not… “ [chuckles] You can tell it best. You say it best.

Dylan Borland: Well yeah. David originally sought me out to coach him because I do some coaching as well. I have a small amount of coaching clients that I work with. I knew very quickly, David was the exception for a lot of the rules. I could tell that he was somebody who I needed to pull out of coaching pretty quickly, and get him on board with me.

Rod Khleif: Oh, wow.

Dylan Borland: When I did that…

Rod Khleif: That’s nice to hear that. Right, David?

[chuckles]

Rod Khleif: Awesome.

Dylan Borland: Once I did that, he absolutely killed it. He closed his first deal the first week, and did a deal a week, after. Then he said, “I was done with the residential game. It’s too small for me.” [chuckles]

David Toupin: Yeah, I [overlap talk]

Dylan Borland: He’s actually the reason I had done two multi-family deals prior to meeting David. But I got very complacent in the residential business, which would… [overlap talk]

Rod Khleif: Sure. I can totally relate, you get comfortable because it’s so easy.

Dylan Borland: Yeah.

Rod Khleif: When you become good at it, it’s so easy.

Dylan Borland: Right.

Rod Khleif: For me, buying a house is like buying a pair of socks, because it’s so simple.

Dylan Borland: Yeah.

Rod Khleif: And you’re right, complacent is a great word. That’s the reason I got my butt kicked because I didn’t get out of single-family as I was told to, and get in the multi-family in a bigger way. Good.

Dylan Borland: Right. David was really the catalyst for that. He helped me just…

Rod Khleif: Alright. Good.

Dylan Borland: I mean, focus on multi-family 100%. That was back in November of 2016.

Rod Khleif: Awesome. Awesome. Well, so let’s talk about this first… Well not first, but the deal that you’ve got on the table right now. If I understand it correctly, it’s two 12 units?

David Toupin: Correct.

Dylan Borland: Yup.

Rod Khleif: Tell us how you sourced it, and tell us about it.

Dylan Borland: Go ahead Dave.

David Toupin: Yes, so we found, actually both of them, through local multi family brokers, and they are actually our competitors; the two brokers. One had enlisted, I think Dylan found it online, and the other one, I kinda have a relationship before hand and he sent it to me.

They’re actually two blocks from each other on the same street…

Rod Khleif: Perfect.

David Toupin: Yeah. They’re great. One is a 12-unit, all one-bedroom units, and the other one is all two-bedroom units. The great thing was we got them very similarly priced, for the one with the two-bedroom units had the same rents as the one-bedroom units.

Rod Khleif: Nice.

David Toupin: We knew instantly that buying that at the same price, we can increase the two-bedroom unit rents, at least 100 a month each.

Dylan Borland: Yep.

Rod Khleif: Right.

David Toupin: It was kinda poorly managed…

Dylan Borland: Both definitely, like UT, both from value-add opportunities. One of the units in particular, they’re both on a street called Pardo, like Dave have mentioned, they’re two blocks down from each other.

One of the units, the guy’s owned it for like 48 years, and he hasn’t raised… The rents are like a 100, 150 below, where they should be.

Rod Khleif: [chuckles] Right.

Dylan Borland: He hasn’t raised the rent on anybody. Some people, 18 years.

Rod Khleif: Wow.

Dylan Borland: But he’s taken…

David Toupin: Immaculate. It’s immaculate…

Dylan Borland: Immaculate care of the property.

Rod Khleif: That’s great.

Dylan Borland: Anytime, there was even a little crack in the sidewalk, he’d be out there with a little caulk gun, and seal the crack in.

Rod Khleif: No kidding. Nice.

Dylan Borland: Both of them, very good opportunities.

Rod Khleif: What caliber of an area– B area, C area, a D area?

David Toupin: I’ll say, C, C plus.

Rod Khleif: Okay.

David Toupin: C plus area, yeah, B minus.

Dylan Borland: It’s just in Metro Detroit area, and it’s a nice little kind of a … What would you say,  a blue-collar kind of working area.

David Toupin: Yeah.

Rod Khleif: Okay.

Dylan Borland: Well populated, just outside of… This area is little down town… [overlap talk]

Rod Khleif: It’s not the hood.

Dylan Borland: No. No… [overlap talk]

Rod Khleif: I mean, you hear stories about Detroit that, you know, a little hair raising… Okay. Alright. The numbers, what are you paying and what do you anticipate as far as returns, if that’s something you can come off your cuff with.

David Toupin: Yes, I think what we shoot for any time, from here on out, when we’re putting a deal, together is, we mostly aim for what our investors is gonna get, and then we look at our piece of the cut.

One of these, we syndicated and the other one we bought for ourselves.

Rod Khleif: Okay.

David Toupin: So the one we syndicated, we do kind of an 8% preferred return and then a split on the backend of that… I think, what was that, 80-20?

Dylan Borland: Yep.

David Toupin: 80-20 and we aimed to get our investors at least 10 to 12%. It’s what we shoot for, from here going forward…

Dylan Borland: Right.

Rod Khleif: Right.

David Toupin: And on these properties as well.

Dylan Borland: Yeah. So like David had mentioned, now both of these properties; one of them, we bought for 567,000, one was 565,000. When we purchased the properties, what we looked for is an overall 15% cash on cash return.

Rod Khleif: First year.

Dylan Borland: Yeah. Obviously, it’s leverage so we’ll usually ___ [00:16:12] at a 70% or 75% LTV because we don’t have very good… My business is always cash based for the last 10 years. We didn’t have very good banking relationship so I think we got hit harder than we should have on the banking terms. But they’re amortized over 20 years, and we had to fight for that. Some bank wanted 15 year amortization and at 5% interest. What that means is when we modeled the pro forma out on the back end, like Dave was mentioning, one I bought for myself, the other one we syndicated.

On the syndication model, the investors were given 8% preferred and then they’re gonna fall somewhere between 10-12% obviously, if everything goes right and we’re very conservative on the pro forma. Both buildings are currently 100% occupied but when we modeled it out, we sold the one out of the syndication model; we modeled that out at 92% occupancy, and sold that to investors.

Then of course, we get, I think your listeners are probably familiar with the portion of that backend, and our cut is a 20% split in addition to property management fees. And then we also charge 1%…

Rod Khleif: Acquisition fee? Did you do an acquisition fee as well?

Dylan Borland: Acquisition fee is 3%. [overlap talk]

David Toupin: [Overlap talk] 3% in acquisition fee and a 1% asset.

Dylan Borland: 1% asset management fee, yearly, on gross income. I think we did 4%?

David Toupin: Three, 4% management fee.

Dylan Borland: Management fee and then one property management fee. We do have our own brokerage as well. Then 20% equity.

Rod Khleif: Equity, that’s great. And there’s lots of ways, guys, that you could structure these syndications. The way they did it was really more fee-driven.

In mine, I actually carved the equity 50/50, and just hardly take any fees. There’s lots of ways. The fee income is fantastic. When you’re out there doing the due diligence, and paying for third party reports, and spending your own money to evaluate these properties those fees can really make a big difference, and three to 5% is the norm for acquisition fee. So, you have no problem charging those. That can be a significant chunk to help you find the next deal. That’s a great model. Fantastic.

David Toupin: You always talked about, and I know we might get into this later where you say, “Tell me about a deal where you got your butt kicked on.” Initially, we went into this planning… We thought we were gonna get an 80% LTV from the bank, and a 30 year am. We went in, way not nearly conservatively enough.

Dylan Borland: Yeah.

Rod Khleif: Let me ask you this, do you have a balloon?

David Toupin: Five year.

Dylan Borland: Ah, it’s a five-year term.

Rod Khleif: Okay.

David Toupin: Because our business was cash base for years past, we didn’t have those banking relationships that we went in expecting to get much better terms. And that’s why we ended with just equity on the backend.

Rod Khleif:   Well it’s a little late for this conversation but I do wanna tell you, guys, I would avoid five-year balloons right now, okay?

Dylan Borland: Yeah.

Rod Khleif: And because when the contraction happens and it’s gonna happen. If you’re at the trough when it happens, and your values have gone down, and even if your cash flowing, you can’t refinance. That is no fun.

Dylan Borland: Right.

Rod Khleif: So keep that in mind on future deals. I would push them out at least seven years right now.

David Toupin: At least seven years. Yup. We agree. We thought with these properties, there’s enough value to add that… [overlap talk]

Rod Khleif: Well, I think, you’re probably right. You may not wanna wait…

David Toupin: But not extremely.

Rod Khleif: You may not wanna wait to…

Dylan Borland: To do a refi.

Rod Khleif: Maybe in a year you refi. Just get yourself terms that are a little more palatable because I would be a little bit nervou… Not that… I’m not trying to scare you.

Dylan Borland: No, we understand completely.

Rod Khleif: Yeah, okay. Those rents sound fantastic. Let me ask you this, are you gonna start pushing the rents? Are you gonna start bringing them up?

Dylan Borland: Yeah.

David Toupin: Right away. That’s our goal.

Rod Khleif: Okay. What are you gonna do to minimize vacancy? What is your plan? Do you have a plan for raising the rents?

Dylan Borland: Yes.

Rod Khleif: I mean, you’re not just gonna go, and raise the rent 100 bucks and not do anything, I hope.

[00:20:02]

Dylan Borland: Correct.

David Toupin: No. I think, majority of tenants on both these properties are month to month. I think, it’ll be pretty easy right away to going in. I think our goal is to incrementally raise them. We’re not gonna raise them 100, 150 bucks if we can retain some tenants. Maybe do it over a year or two, incrementally raise them. That would be the best solution instead of…

Dylan Borland: Right.   

Rod Khleif: Well, that’s one strategy, and other strategy is to go in and make some improvements.

David Toupin: Right.

Rod Khleif: Then go to just under market rent. You wanna be careful that you don’t end up with a ton of vacancies.

Dylan Borland: Yeah.

Rod Khleif: That’s always a give and take in this situation.

David Toupin: Our plan on the syndication, we raised an additional 25,000, I believe. Right away, we’re gonna put that back into improving the building.

Dylan Borland: Improving the building, yeah.

David Toupin: It’s 12 units, it’s not a huge building, 25,000 will do quite a bit of damage on the common areas, upgrade one or two units… [overlap talk]

Dylan Borland: Exterior landscaping, balcony, immediate refinish

[overlap talk]

David Toupin: Yeah.

Rod Khleif: Perfect. If they see you making repairs, that makes it a whole lot easier to stomach. Particularly visible stuff: paint, landscaping, things of that nature. Where they really see that you want to improve the property. It makes the rent raises much more palatable. Good.

Dylan Borland: On the other side, we look for a value-add on the other 12-unit. It’s got this beautiful common space and it segues into the basement. One of the things that we are looking for, to add value to that. The bottom line, we’re gonna add lockers. Considering adding storage space ‘cause there’s no storage space.

Rod Khleif: So, you’ve got some extra room where you could put in cages or whatever?

Dylan Borland: Yeah.

Rod Khleif: Okay. Perfect.

Dylan Borland: We’re gonna put in 12 cages, and we were looking at the cost of that. I think, it was $300 for a 5x5 cage but we could boost the rent to 40 to $50 per month extra.

Rod Khleif: Wow!

Dylan Borland: You can do the math, it pays for itself in a year.

Rod Khleif: Wow! Yeah, that’s fantastic.

Dylan Borland: It increases NOI by five or six. I mean, these are smaller units but it increases that NOI by five to 6,000 a year, which now that goes to… We bought it for 565, we sell it at an eight cap here in Michigan market. In five years, it’s gonna be 750 to 800,000 property. Just by that small change alone.

Rod Khleif: Absolutely. That’s fantastic.

Dylan Borland: Yeah.

Rod Khleif: That’s a great idea. What’s next for you, guys?

Dylan Borland: That’s a good question.

Rod Khleif: Before we start recording you mentioned you’ve got some stuff in the hopper.

Dylan & David Toupin: Yeah. [laughter]

Rod Khleif: What sorts of things are you looking at?

David Toupin: For us, the biggest thing on getting this two 12 units down is, we’re systematize… We like systems in this business. We’re really big system guys, so…

Rod Khleif: Those of you listening, every business in the world is two things: people and systems.

Dylan Borland: Yeah.

Rod Khleif: If you wanna have any scale, if you wanna make things happen like these guys are making them happen, you’ve got to establish systems. Fantastic.

David Toupin: Yes. What was huge for us is really getting that syndication model down. The system for due diligence. The system for financing. We wanted to start small and then scale.

Dylan Borland: We have a goal. Just more specifically, over the next five years to acquire 100 million in multi-family assets over the next five years. We broke it down to 20 million a year. Now, we’re not in a rush to get there ‘cause we don’t wanna make bad investment decisions, right?

Rod Khleif: Right.

Dylan Borland: But I think, it’s important to set that goal.

Rod Khleif: Sure.

Dylan Borland: Right now, going forward, like David had mentioned, these 12 units were more so, training wheels for us to get those systems established. The syndication process, the raising the capital process, the management process. We found out very quickly there’s a lot of things we did wrong, such as the five-year term and mortgage.

Rod Khleif: Right.

Dylan Borland: Going forward though, we also realized that same amount of time and energy could be spent on bigger units with bigger profits, bigger returns. We made a goal now to look at anything 80 units or above.

Rod Khleif: I see.

Dylan Borland: So, a lot of our properties…

Rod Khleif: How are you gonna take that down? Are you gonna bring in a sponsor, or you’re gonna be able to do it yourselves?

Dylan Borland: That’s a good question, Rod. Just from being in the fix and flip business, I have a good amount of… I guess, what would you call it?… Finance ability.

Rod Khleif: Myself, so I think anything up to… Like we’re looking at a 96-unit now in Michigan, which is about $4 million acquisition price. That’s something that I could take on myself.

Going forward, couple of the other properties we have are much bigger than that. We’re looking at a 20 million acquisition, a $50 million acquisition. Those are some of the properties we have in the hopper. Yes, we have sponsors lined up.

Rod Khleif: Good.

Dylan Borland: And equity people as well. What we’ve also been doing during this process is, David’s kinda been working on the due diligence but I’ve been working on aggressively lining up and having conversations, and building relationships, with not only sponsors, but also equity participants. It’s what I’ll do.

Rod Khleif: Sure. Investors, sure.

Dylan Borland: Yeah, so that they’re ready to go when those opportunities come up.

Rod Khleif: Are you going to do individual syndications for each property, or are you gonna do a fund? What’s your plan for raising equity?

Dylan Borland: Yeah, good question. We’re gonna do it on a per property basis.

Rod Khleif: Okay.

Dylan Borland: I did, and I started in 2016. I think you probably had this in your notes, Rod. I raised a fund in 2016. It’s a $28 million fund. I raised it in 90 days. I actually gave all the money back because we realized that that model was not what we wanted to do. In an essence, I would become an employee in that scenario. Our goal with these investments is long term ownership.

Rod Khleif: Sure.

Dylan Borland: We have plans in place to cash out the equity investors, and keep them for ourselves indefinitely.

Rod Khleif: Oh, so you’re structuring these so you actually cash out your equity? They don’t stay in with an equity piece?

Dylan Borland: Correct. Yeah.

Rod Khleif: Oh, interesting.

Dylan Borland: David and I wanna own these assets for ourselves 100% at the end of the year, or at the end of the term.

Rod Khleif: Wow.

Dylan Borland: Which typically is a five-year term. Yeah.

Rod Khleif: Wow.

David Toupin: That’s really only achievable if you have a really good value add deal. As you know on a scenario where we buy or pull them out or… [overlap talk]

Rod Khleif: Sure. They’ve got to have the returns for that to make sense.

David Toupin: Absolutely.

Rod Khleif: Where they’re really acting more as lenders, really they’re acting more as debt.

David Toupin: Yeah. Simply put, yeah, it is.

Rod Khleif: In a way… Certainly… Because their return will fluctuate, they’re investors.

Mine’s a little different, my fund. I’m doing it as a fund. It’s primarily for mobile home parks, and smaller apartment buildings right now.

Dylan Borland: Yes.

Rod Khleif: My game plan is to refinance and get the investors, their capital back. But just they stay in the deal.

David Toupin: Yeah. They stay in the deal, yeah. We’re looking at…[overlap talk]

Rod Khleif: Right. Listen, I love your MO. That’s a great way to do it. If you can find people to do that, that’s a great way to do it.

Dylan Borland: Yeah.

David Toupin: Yep.

Rod Khleif: Good for you. Let’s talk about management for a second. Now, I’m a big proponent in self-management. I would say, there are arguments both ways. If you’re locked in to the management, a lot of times that can take away from your acquisition energy.

Dylan Borland: Sure.

Rod Khleif: Are you guys planning on… You said you’re gonna charge 4% management fees. I’m assuming you are managing?

Dylan Borland: Correct. Yup. We’re gonna be managing everything here in-house.

Rod Khleif: Okay. And you’ll be managing the managers basically.

Dylan Borland: Managing the managers, absolutely.

Rod Khleif: So, on that 24-unit, maybe you take one of the units and somebody gets half off their rent, and they’re responsible to check on both buildings every day, setup some systems there to make sure that somebody is picking up the trash, and taking care of…

Dylan Borland: Correct… Keep the common areas clean.

Rod Khleif: Right.

Dylan Borland: Pick up the trash. Yeah, absolutely, correct.

Rod Khleif: Okay, fantastic. Fantastic. I think one could do both buildings. You gotta make sure though, just from experience, that the other building doesn’t become a stepchild.

Dylan & David: [laughter]

Rod Khleif: Because take it from my experience, sometimes it does.

How did you get the financing for those two deals? Did you just go to a local regional bank?

Dylan Borland: That was a good question. We started off with a referral from the seller’s agent. I said, “Okay, well, let’s try that first.” But we made a mistake because we didn’t have a backup plan. We didn’t approach other lenders.

The first 30 days in our financing contingency went by, and the lender kept telling us, “Yup, they’re gonna get us good terms; 80-20 terms, you name it.” At the end of the day, when 30 days passed, and I got back from approval, the terms were horrendous. They were 70% LTV, 15-year amortization. It just killed our cash on cash return.

That was the first mistake we made. Now, we know we gotta start developing relationships but also be working multiple lenders on each deal.

Rod Khleif: And I will caution you on that. You wanna be careful, particularly if you’re working with brokers. If you work with a broker that goes to multiple lending facilities, you can get a bad reputation if you’ve got multiple brokers working at the same time. You gotta be very, very careful with that.

Dylan Borland: Exactly, yeah.

David Toupin: Yeah. So, we go direct to bank.

Rod Khleif: Yeah, but if you’re direct to bank then you’re fine.

Dylan Borland: Yeah. We thought direct to bank, and we’ve also been.. I don’t know if it’s good or bad. But we’ve been fully transparent with the banks as well. Told them, “Hey, we made a mistake but now, just so you know, getting involved working with us, we’re working with two other people that are working on the same project as well too.” [chuckles]

At least on this deal, because we had to catch up ground. We were 30 days behind… We dropped the ball.

Rod Khleif: Oh, sure. Now, okay, you did that on those deals. I understand that. I will tell you, if you go into a deal, saying that you’re not gonna be on the top of the stack.

Dylan & David: Yeah. [chuckles]

Rod Khleif: I would not recommend that to any of you listening. They have to be responsive, and there’s a list of questions you need to ask when you get started. Make sure that you’re responsive as well. That they get their loan package timely. Okay.

Dylan Borland: Yeah. Now we’ve developed relationships with local banks here in particular.

Rod Khleif: Good

Dylan Borland: Dave here’s a native of Michigan. We’ve got some pretty good relationships established including… [overlap talk]

Rod Khleif: Great. You take them to lunch, you go have coffee, you do all that.

David Toupin: Absolutely.

Rod Khleif: Don’t underestimate the human component here because, really, they’re people. You don’t think of them as institutions. You develop relationships. They see what you’re made of. They see what kind of integrity you have.

[00:30:00]

Dylan Borland: Exactly.

Rod Khleif: Those relationships can make you a lot of money. So, good for you.

Let me ask you a question. Speak to the people that are listening, that thinking about getting into this business, that have not taken action, what would you tell them? Dylan, you wanna go first?

Dylan Borland: I’ve got a very simple solution for that. The best way to take that… I get asked this question a lot of time because I coach people as well too. They’re very hesitant, especially people who may be considering leaving their job, and they’ve got families, and they’ve got health insurance, and they’ve got benefits.

Most of the time, if I were to talk to somebody, I would say, “Hey, if you’re in a position where you’ve got six months saved up, just do it.”  It’s the only way to jump in… I jumped… I’m a little [overlap talk]

Rod Khleif: By the way, those of you listening, we are actually on video ‘cause I’m putting these on YouTube now, and he saw me flinch when he said that, so he got responsive.

Dylan Borland: [chuckles] But, I’m unique. I’m the kind of guy that I just… I jump in and I take the boat out to the deep water. And I jump in and I figure it out. So there’s no hesitation.

Rod Khleif: Okay. I’m gonna come right back and say, “Don’t  do that”. Okay?

Dylan Borland: [laughter]

Rod Khleif: Alright, in fact, today I’ve got a… Anybody that’s got my book, is gonna get an email, and the title of the email is How To Buy Multi-family When You Have A Full Time Job. The premise of it is to keep the full time job at least until you’ve got some income coming in.

Listen, I wanna come back to you with another question; both of you actually, with another question. But before I do, David, what would you tell them?    

David Toupin: You know, like anything, you have to take that first step. Most people, the biggest thing is taking that first step. They’re scared to get into their first. Whether if you’re going into residential. You’re first wholesale deal, your first…

Rod Khleif: Right.

David Toupin: Single-family rental, your first fix and flip. Even your first multi-family. I would say, you’ll learn so much just by doing it. You’re really holding yourself back by… I think, you should educate yourself beforehand, but some people take it a little too far. They take a year, two, three. They take too long.

You have to jump into it. You call them seminars. We just had our own seminar. We’ve been investing for 10 years, we just had our own seminar. Just doing these 24 units. It’s an awesome learning experience. You have to just jump into it, and your mind will be blown…

Rod Khleif: And just do it. Like Nike says, “Just do it.” Okay.

David Toupin: Yeah.

Dylan Borland: Some people get what we call analysis paralysis.

Rod Khleif: Absolutely.

Dylan Borland: They wanna figure everything out ahead of time. That’s all I’m saying is, at some point you just have to jump in and you’ll figure it out as you go.

David Toupin: Yeah.

Rod Khleif: I couldn’t agree more. Take a look at what I sent out on being able to do this while you have a full time job because I really believe in… In full respect, what you did takes stones, and I’m impressed. And there are people listening that will do that. I will tell you, it’s the scary way to do it but if your self-motivated, you can make it happen, then fine, go make it happen. But I will also tell you that it’s easier to get financing if you’ve got W2 income.

Dylan Borland: Sure.

Rod Khleif: You can save more money if you’ve got W2 income. Frankly, you’re typically working 40 hours a week, and there’s a whole lot more than 40 hours in every week.

Dylan and David: Yeah.

Rod Khleif: I’ve interviewed people that have made mega million fortunes on the side doing this business.

David Toupin: Just on the side, yeah… You’ve got your 9:00 to 5:00 and then your 5:00 to 9:00. That’s… [overlap talk]

[chuckles]

Rod Khleif: That’s right, and your weekends.

David Toupin: And your weekends.

Rod Khleif: That’s right. I wanna ask you guys both a question because you guys really, you remind me a lot of myself in getting started early. I know what motivated me when I was young. It wasn’t just the car. It’s deeper than that.

So, Dylan I want you to start. What do you think is your driver? what made you start when you were 13 years old, 14 years old, 15 years old and really make things happen? What do you think it was?

Dylan Borland: You know, that’s a good question. Because when I first started, and it has transformed dramatically since, but growing up, I was never a materialistic person. Though I had a very specific income goal in mind, I didn’t have it in mind with material things. I’m actually a very frugal person. I didn’t want the fancy cars, and the watches, and the jewelry and the houses. I wanted to make enough income so that if I wanted to go… I like to travel the world when I was really young.

Rod Khleif: Okay.

Dylan Borland: If I wanted to travel, I could just travel, and not have to worry about anything. Up until about 25, so I’m 13 to 25, that was my motivation, to hit that specific income goal so that I have the freedom to travel, so that I have the freedom to not have to worry about bills.

Also, I didn’t like debt. I wanted to have a debt-free lifestyle. That’s why I wanted to hit that income goal. It’s to have that flexibility to travel the world, experience the world at a young age before I had a family. And then also, to be able to live a debt-free lifestyle. That’s what was important to me. At 25 though, my life changed… Just turned 30.

Rod Khleif: Oh, you’re 30. Okay, I thought you’re still in your 20s. I misstated, okay.

Dylan Borland: Yeah. I’m 30.

Rod Khleif: Well, congratulations. Sorry.

Dylan Borland: I had my first child two years ago.

Rod Khleif: Oh, nice.

Dylan Borland: He just turned two in February. That’s my my biggest why, now.

Rod Khleif: Sure.

Dylan Borland: You think you know love, until you have a child.

Rod Khleif: Oh, right.

Dylan Borland: It’s unbelievable. Just anytime I think about him, I’m just, I’d do anything for him. One of the apartment buildings that I’m actually buying, I’m naming it after him.

Rod Khleif: [chuckles]

Dylan Borland: A kind of… It’s something that I’ve always wanted to do.

Rod Khleif: Awesome.

Dylan Borland: But he’s my big why now because I want him to grow up, and see that anything is possible.

Rod Khleif: Mm-hmm.

Dylan Borland: If you put your mind to it, you can achieve it. The best role model for him is to be myself, leading by example. I would say that that’s my biggest motivator right now.

Rod Khleif: Okay. How about you, David?

David Toupin: Yeah. I mentioned this actually the first time I met Dylan. We talked about our goals a lot. I write my goals down every day.

Rod Khleif: Good for you.

David Toupin: One thing I always write, and always been a big part of my life is philanthropy. I know that’s huge for you, Rod. We’ve talked about it a little bit on your call. You help out with the Tiny Hands Foundation, I think it’s called.

Rod Khleif: Mm-hmm.

David Toupin: I don’t know if you have your… Is that your philanthropy? Philosophic organization?

Rod Khleif: Yes. Yeah, no, that’s my foundation.

David Toupin: Okay. That’s awesome.

Rod Khleif: Thank you.

David Toupin: That’s a huge motivator for me. I always write down, “I wanna run one of the top three biggest philanthropic organizations in the world.” That’s my goal. I wanna be up there with the Bill and Melinda Gates Foundation, and the Ford Foundation.

Rod Khleif: Love it.

David Toupin: That’s really what drives me everyday. Along with…

Rod Khleif: Are you giving back now?

David Toupin: I do a little bit, yeah. My family and I, we work with organizations around Detroit. I do give little bit, what I can. I give as much as I can here and there.

Rod Khleif: That’s fantastic. That ties in… Tony Robbins says, “People will achieve to be happy. Why not just happily achieve.”

David Toupin: Yeah.

Dylan Borland: Right.

Rod Khleif: The same thing applies to philanthropy. There’s no reason you can’t be giving back right now.

David Toupin: You can’t do it the whole way.

Rod Khleif: It’s a journey. It’s not a destination. So I just wanted to give… Well, that’s awesome guys. Those are both great.

For me, honestly, it was material things.

[chuckles]

Rod Khleif: I wanted the Lamborghini, I wanted the Ferrari, the Corvette, and all these things. I think it was… I immigrated when I was six, and got picked on at school. I think it was part of that psychological, showing people I’m good enough. That was a mental thing I was going through.

It’s funny people have different drivers. I always like to ask what the deep driver is. Certainly when you have children, that changes everything.

You said you got a seminar on this deal. What was it, the financing? Is that what’s the seminar or was there anything else?

David Toupin: Oh, boy.

Dylan Borland: How much time do you have?

[laughter]

Rod Khleif: Look, let’s hear it, because it’ll probably add value to the listeners. So, they don’t make the same mistakes.

Dylan & David: Yeah.

Rod Khleif: So, what happened?

David Toupin: Yeah, a little bit of everything. We went in with our deal modeled out, investors splits, the syndication modeled in a certain way; based on the financing terms being, at a specific rates, specific amortization, specific loan to value. When we didn’t hit that, it changed a lot of things. We had to adjust the equity split…

Dylan Borland: We had to re-approach the investors and let them know.

David Toupin: We had to re-approach the investors.

There’s a lot of things that come into play there, so…

Rod Khleif: How much did you raise on that syndication for that deal?

Dylan Borland: 183,000 for that deal.

Rod Khleif: Okay, not bad. How many investors?

Dylan Borland: Seven, including myself. I’ve a small piece of it.

Rod Khleif: Did you do a 506B then? The non-accredited?

Dylan Borland: 506C.

Rod Khleif: C, so accredited. They’re accredited. Okay, good.

Dylan Borland: Yeah.

Rod Khleif: Okay. How did you find the investors?

Dylan Borland: That’s a good question. I launched 2016 looking to raise a hedge fund. I thought that’s the direction I wanted to go with.

Rod Khleif: Okay.

Dylan Borland: I actually self-taught myself. I didn’t know anything about raising capital. I had a fight. I didn’t have every dollar I’ve made, I’ve made it for myself. I mean, I did it the hard way.

Rod Khleif: Sure.

Dylan Borland: It was almost embarrassing for me to go, and start looking to raise capital. I had to get over that ego. Really, it was what it was, right?

So, I self-taught myself. I bought the top five books on raising capital. I attended one seminar. The State of Michigan was holding a Securities and Exchange Seminar, an in-depth seminar, which I attended. Got to meet some of the top attorneys in the State. I started learning how to raise capital. I did it through a what we call, you’re probably familiar with it, multi-family, single-family offices, institutional investors and high-networking…[overlap talk]

Rod Khleif: You’re talking about family offices?

Dylan Borland: Family offices. Yep. Yep.

Rod Khleif: So, you raise it from family offices?

Dylan Borland: From family offices, and high network induviduals.

Rod Khleif: That’s a small raise from a family office.  For those of you that don’t know what a family office is, they’re typically hundreds of millions of dollars under management for a particular family. A celebrity or a great business person…

[00:40:00]

Rod Khleif: Sometimes even billions of dollars.

Dylan Borland: Yeah. I raised the hedge fund from family offices in particular.

Rod Khleif: Oh, got it. Okay. Okay.

Dylan Borland: That’s how I got started with developing those relationships. And then…

Rod Khleif: I thought we were talking about the 180 grand. That seem way too small for family offices.

Dylan; Yeah, so when I went to the 180, some of those people in that raise were high net worth individuals. Most of the doctors and attorneys, things like that.

Rod Khleif: Sure.

Dylan Borland: When I decided to not do that and give that money back, we transitioned a lot of those people into, “Hey, this is what were gonna do going forward, to do a per property syndication model and who’s still interested in it?” And so I reached out to a lot of them… [overlap talk]

Rod Khleif: Okay, great. You’d already done a lot of the work, okay. Got it. Okay.

Dylan Borland: We reached out to a lot of those same people. Now, a good amount of them dropped off and said, “Nah”, or family offices are to small. Those guys are saying, “Im not gonna look at anything three million of less.”

Rod Khleif: Right. Right.

Dylan Borland: The 183,000 was raised, I had a $50,000 chunk in myself. The remainder was raised through doctors, attorneys, other real estate investors in particular.

Rod Khleif: Okay. Good. Good.

Dylan Borland: Local.

Rod Khleif: Any books that you’re reading right now that you love? Business-related, real estate-related?

David Toupin: I am reading “Never Split the Difference”. It’s by an FBI… [overlap talk]… it’s awesome.

Rod Khleif: Oh, that’s a great negotiation book, yeah.

Dylan & David: [chuckles]

David Toupin: Awesome book. Sweet book.

Rod Khleif: Love it, good.

David Toupin: Love this book. I just read, I believe it’s called Trump’s Strategies for Real Estate, by George Ross; Trump’s attorney. He was the executive vice president of the Trump organization. Awesome book… It’s mainly taking what he did for his bigger deals, and applying them to smaller ones, but there’s a lot of good tidbits in there.

Rod Khleif: Awesome.

David Toupin: Bits of information.

Rod Khleif: Awesome.

Dylan Borland: Yeah. I’m a big book reader myself. Right now, though I’m focused 100%, I just started a course from Darren Hardy. I don’t know if you’re a reader… [overlap talk]

Rod Khleif: Sure. Success Magazine, sure.

Dylan Borland: He has a course, which is called “Insane Productivity.” It’s a 12-week course just on how to really just bunker down and be insanely productive. Right now, I’m fully immersed in that and a lot of tips, and tricks, and things to do to eliminate distractions, and just maximize productivity in a daily basis, yeah.

Rod Khleif: Fantastic. Fantastic.

David Toupin: And you’re book as well.

[overlap talk]

Rod Khleif: Oh, thank you. Thank you. Thank you.

Dylan Borland: And of course. [chuckles] Rod, remember we showed you. We got it here in the table.

[overlap talk]

[chuckles]

Rod Khleif: Yeah, that’s awesome. It’d be great if I could get off my butt, and get it printed.

Dylan Borland: [chuckles] No, we did it for you.

Rod Khleif: Yeah. Actually, I’ve been waiting for some testimonials, and they just came in, so it’s about to go on Amazon. That’s exciting. I’m actually doing coaching as well. I’m excited about that. I got certified as a high-performance coach. That, coupled with all the time with Tony Robbins, I think I can add value there. And of course, do real estate coaching as well.

Guys, hey listen. I really appreciate you being on the show. It’s been a lot of fun.

David Toupin: Absolutely.

Rod Khleif: You definitely added value, and hopefully inspire some of the people that haven’t taken action yet to what’s possible. We are definitely gonna stay in touch, and follow each other’s careers.

David Toupin: Well thank you, Rod.

Dylan Borlan: Absolutely, and more importantly we appreciate everything you do for the community, so thank you.

David Toupin: Yeah, thank you. Rod.

Rod Khleif: Absolutely my pleasure, guys. Thanks for being on the show.

Dylan Borland: Thank you.

David Toupin: Thanks, Rod.

[music]

Thank you for listening to the Lifetime Cash Flow Through Real Estate Investing Podcast. If you’ve enjoyed the show, please subscribe, and then take a moment to visit iTunes and leave a five star rating and review. For more resources to connect with us further, please visit our website at lifetimecashflowpodcast.com. Tune in next week for our next show.

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