Ep #133 – Dale Hensel – Purchased 250 apartment units in 2.5 years. Dale invests in apartment complexes, mobile home parks, assisted living facilities, and NPNs.
- Purchasing 32 units in 6 months while working a full time job.
- Purchasing a 75 unit building for $5000 down.
- Purchasing and losing a 400 unit apartment building.
- Have a sincere belief that you can do anything.
- The power of a profound curiosity.
- The best negotiation technique?
- What are NPLs?
- What are NPNs?
- Assisted Living Facilities.
- Pairing “I can do anything” with “I’m only limited by what I decide not to do”.
- We are mortal. If I don’t do it, it’s never going to happen.
- When is the best time to start raising money?
- Suggestions on hard money lending.
- What is a viatical loan?
- To contact Dale Hensel visit www.originalcare.com
- Connect with me on Facebook at Rod Khleif.
- Text Rod to 41411 or visit RodKhleif.com for a FREE copy of my book, “How to Create Lifetime Cash Flow Through Multifamily Properties.”
Full Transcript Below:
Ep #133 – Dale Hensel – Purchased 250 apartment units in 2.5 years
Welcome. This is the Lifetime CashFlow 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: Guys, I have some exciting news, since launching our podcast, it hasn’t even been a year yet, we’ve had over a million downloads. I gotta tell you, I’m so grateful to you guys for your amazing support. During that time, I’ve spoken with, or met, or corresponded by email with literally almost a thousand of you. I can honestly say it’s been an incredible joy for me.
When I release my book, How to Create Lifetime Cash Flow Through Multi-Family Properties, more than 6,000 of you signed up to receive a copy. Well today, I’m excited to announce that within a few weeks, we’ll be launching what I can humbly say, is the best multi-family training and coaching program available anywhere.
We’ve carefully designed our program to include comprehensive online course, coaching, accountability, motivation, an online members area, tickets to a live event, we’ve packed it with a ton of other valuable tools and resources designed to help you quickly crush it in this business. To help you get to lifetime cash flows as quickly as possible.
Now if you’d like to receive some information on this when it becomes available, text the word CRUSH, C-R-U-S-H to 41411. Alright, let’s get to it.
Rod Khleif: Welcome to another edition of How to Build Lifetime Cash Flow. I’m Rod Khleif, and I’m thrilled you’re here. You guys are going to really get a kick out of my guest today. His name is Dale Hensel, and this guy has done it all, and is still doing it all.
He’s owned 250 plus apartment units. He’s been involved in buying non-performing loans. He’s raised over $90 million, and told me before we started recording here, that a lot of that was to buy those non-performing loans, which is a great business model.
He has owned online businesses. Sold a lot of money online, taking companies public. Been involved in some mobile home parks. Is pretty heavily involved in assisted living, which we’re gonna chat about briefly as well. Just an all-around entrepreneur after my own heart. Obviously, has the shiny penny syndrome like I do. Dale, welcome on the show, buddy.
Dale Hensel: Thank you so much. I appreciate it.
Rod Khleif: Yeah. Absolutely. You know what? You have such a colorful past. I don’t even wanna try to attempt to do more than that on your introduction. So please, tell me, in your own words, or tell my listeners in your own words, who you are and where you came from.
Dale Hensel: Well sure. I’m a serial entrepreneur but I have been a serial entrepreneur for well over 25 years. My very first business was picking up sea cucumbers off the bottom of the ocean up in Alaska.
Somebody suggested it would be a good business so I went out and learned how to dive, rented a boat, went down, and started picking sea cucumbers. It was kind of like picking up dollar bills, ‘cause every time I grabbed them, they were worth about 70-80 cents. So it was like dollar bills everywhere.
As a 21 year old kid, I was making a 1,000 bucks a day and…
Rod Khleif: Wow.
Dale Hensel: That was kinda cool.
Rod Khleif: That’s good money. [chuckles]
Dale Hensel: It was great money. And so I did that. I did commercial diving and commercial fishing for about five years in Alaska. I loved it but it’s definitely a young man’s game so I came back to Idaho. Started buying… I was a repo man for a very short period of time. I realized I learned how to ask for money when I was a repo man. It’s like, “Pay me or I’ll take your stuff.”
Rod Khleif: [chuckled]
Dale Hensel: Definitely, really good training to be a landlord later.
Dale Hensel: “Pay me or I’ll make you move.”
Rod Khleif: Right. Or I’ll break your kneecaps, right?
Dale Hensel: [laughs] Yeah, I wasn’t quite like that but yeah, you get the idea. What I did was, I bought an apartment complex. Then I started buying more. Then in two and a half years time, I’ve bought 250 apartments. I did it when I didn’t know it was suppose to be hard. I didn’t know it was suppose to be impossible. I didn’t have any money to start with. I didn’t have good credit… But none of that stopped me.
Rod Khleif: And this was in Idaho?
Dale Hensel: It started in Idaho, but I ended up owning apartments in Idaho, Utah, and eventually, Texas. Yeah, yeah, it started in Idaho and yeah; I just bought up apartment complexes, and was a landlord.
Ran around and did everything for the first couple of years. Painting, collections, electrical, plumbing, I had a crash course in all that ‘cause I didn’t know anything. But it was a lot of fun.
Rod Khleif: So you learned through the school of hard knocks. You didn’t go buy books, or do courses or any of that business. You just did it.
Dale Hensel: You wanna know something funny is somebody asked me if I was doing what Carleton Sheets was saying.
Rod Khleif: [chuckles]
Dale Hensel: And I said, “You got to understand, I’ve been traveling and up in Alaska for years, so I haven’t had a TV. I didn’t watch TV at all. I didn’t see Late Night.” I was like, “Who’s Carleton Sheets?”
And this guy came and brought me this whole course of Carleton Sheets, and he dropped it on my desk. And it was still wrapped in plastic.
Rod Khleif: Oh, yeah. As most of those are when people buy those courses.
Dale Hensel: Holy crap.
Rod Khleif: Yeah.
Dale Hensel: And he said, “This is Carleton Sheets.”
Rod Khleif: That’s hilarious. I haven’t heard that name in a long time. But yeah, that’s the sad reality, and people buy these courses… And by the way guys, and I will announce it here for the first time. I actually am creating a course. It’s almost done. A 12-module course on multi-family investing, and I can humbly say I think it’s one of the best in the business. But don’t buy it if you’re not gonna unwrap it. Like you just talked about, Dale. I mean that’s crazy.
Dale Hensel: I know.
Rod Khleif: So you just learn through hard knocks. What prompted you to buy your first property? Can we talk about that process, and where it was? What it was? And why you bought it?
Dale Hensel: Sure. I think I was about 24-25 when I… I was 23 when I bought my first house. But I was living Alaska the house is in Idaho. So I think it was about 25 years old, I move back to Idaho, moved into the house, and I rented out all the rooms to various people. So I had roommates.
The first time it’s ever happened to me is at the end of the month, I’d collected all the rent and I paid all the bills and I still had like a couple of hundred dollars left. And I was like, “Oh! This is cool.”
Rod Khleif: [chuckles] Right.
Dale Hensel: Great, so right then and there, I think I set the goal. I wanted 10 houses in 10 years so I can make like $100 per month per house and make $1,000 a month that would be awesome, wouldn’t it.
Rod Khleif: Yeah, I love it. I love those initial goals. That’s awesome.
Dale Hensel: Yeah. So at $1,000 a month, I thought I would be able to like go to part-time or something. It’s just…
Rod Khleif: That’s so awesome. It’s so funny ‘cause I can just remember those early goals myself when I started buying houses. Anyway, please, continue.
Dale Hensel: Well, yeah. About six months after I just made that goal, I met a landlord who had a whole bunch of apartments. He was really burned out on one. He goes… I told him about my goal. I said, “I’m gonna buy 10 houses in 10 years, and I want to be a landlord…” He goes, “You wanna be a landlord?” I say, “Yeah!” “Get in the car, come here.”
Rod Khleif: [laughs]
Dale Hensel: And he drove me over to the crappiest property he has. He says, “I hate this. My wife hates this. My wife hates that I have this. I’m gonna sell it to you.” I was like, “Alright.” We did a no-money down deal.
Rod Khleif: Wow.
Dale Hensel: We drew on Escrow Company, he signed it over to me, I’m supposed to pay extra dollars a month. I was collecting like $4,000 a month in rent, and paid like $2,300 and all the bills, mortgage, and everything in. I was like, “Wow! This is awesome! This is my $1,000 a month. This is awesome.”
I jumped in, fixed stuff up, evicted people, painted everything and I fixed it up. Suddenly I realized, after about six months it was doing really well. It was kind of on autopilot.
Rod Khleif: Right.
Dale Hensel: I was getting rent every month. “This is great!” I don’t have to spend any time there. And then I found another guy who had another 16 units and I said can I buy it? He says, “Well, do you have any money?” And I go, “Well, no”, ‘cause I put it all on the other apartments.
I went back to the guy who I originally bought the apartments from and said, “Do you know anybody who could give me 15 grand?” This is what this guy wants. He goes, “Yeah, hold on. Here’s a phone number.” I called this phone number up and this little weak voice on the other side said, “Can I help you?” It turned out to be like a 92-93 year old guy who’d been loaning money all his life.
I told him what I wanted the money for, and I hear this feeble little voice in the other side go, “Sounds good to me!” And he had me come over to his house to pick up a $15,000 check, and take it over the Escrow Company, and drop it off, so I could buy this apartment complex.
I called the guy with the apartment complex and says, “I got 15 grand like you asked. If you come over and sign here, you can have it. He’s like, “I’ll be right over.” ‘Cause he’d told me what he wanted and I had to go find 15 grand. He was surprised I found that 15 grand.
Suddenly, I was at like 31 apartments, and nice fixing those up. Then I quit my job as a repo guy, and my boss actually kind of fired me. He said, “You got too much stuff going on, you can’t be collecting my money, if you’re worried about your money. So you got to get out of here.”
And which was a good thing. But I don’t like to quit, so he had to fire me. So after that, I took about a week, and said, “When putting all these money into these apartments, and I don’t really have time, or I don’t have enough money to put them in there and eat. I need to go buy more apartments. And so what I did was…
Rod Khleif: Oh, interesting rationale. [chuckles]
Dale Hensel: Right. This is a little different than the average, and I was like so it’s, I either decided had to get another job or buy more apartments. So I decided to go but more apartments.
Dale Hensel: Then I went out, and I called somebody up, “Do you know anybody who’s selling any apartments?” He said, “I got this guy who’s got 44 units, and his wife hates that he owns them. He hates that he owns them but you’re young and stupid, why don’t you buy it?”
Rod Khleif: These were all in Idaho?
Dale Hensel: These were all in Idaho.
Rod Khleif: No kidding. Wow.
Dale Hensel: Hence, I ran over to this guy and he had a 44-unit apartment complex. He says, “I’ll sell it to you.” And he sold it to me. We worked out some sort of deal. I don’t even remember. It was really a complex deal including the tax write-off over here, and so… I don’t even remember, it’s years ago.
It was a complex deal but it meant that I came up with no money down.
Rod Khleif: No kidding. Wow.
Dale Hensel: Yeah.
Rod Khleif: Fantastic. Okay.
Dale Hensel: All was great. So basically, I took over his apartment. Started cleaning them up and now, I didn’t have to worry for a little bit, in a way, about eating. ‘Cause I was making enough money to eat, so I didn’t have to get a job.
But about six months later, I kicked out a whole bunch of meth heads, and I was cleaning the place up, and since I wasn’t collecting rent, and I was putting money back in the building, my mom who would come to work for me as a painter said, “Dale, we don’t have any money in the bank account. How are we gonna eat?”
And I’m like, “Damn.” And I thought, I have a Jeep, that’s paid off. Hold on. So I drove over to this guy, who I knew loaned money on cars, and he said, “There’s another guy who’s selling an apartment complex.” I’d heard about it but I didn’t know about it. So I called him up and I said, “What do you want for your apartment complex?”
He says, “Well, I got an apartment complex and a triplex. I’ll give them both to you ‘cause I’m moving to the next town because they just promoted me in Albertson’s. I’m gonna be a store manager. I don’t wanna mess with this anymore. I only owned these a couple of months. Here’s what I’m gonna do, I need five grand. If you give me five grand today, I’m gonna move to the next town and you can have these.”
So I went and got five grand…
Rod Khleif: So you mean five grand to take over his debt?
Dale Hensel: Take over his debt, yeah.
Rod Khleif: Right. Got it.
Dale Hensel: Yeah, $750,000 in debt, five grand down.
Rod Khleif: Holy cow! You have fallen into some phenomenal deals, Dale. Holy cow.
Dale Hensel: I know, right.
Rod Khleif: I was just gonna say, obviously this was years ago.
Dale Hensel: Yeah. This is in 96-97.
Rod Khleif: Now, you’re a very dynamic guy. I mean, incredible energy. You probably have more friends than most. Would you attribute, up to this point, would you attribute your success to your relationships and your ability to network?
I’m sorry to interrupt your… ‘Cause I want you to continue your story, I just…
Dale Hensel: No, let me answer that. Let me answer that. So some of my success is, one, I have a sincere belief that I can do anything. I don’t know where I got that but I’m glad I have it.
Rod Khleif: Love it.
Dale Hensel: Two, I’m really, really curious. I don’t come to the table going, “I know everything.” I go, “How does it work? How does it work over there? What are you doing? How’d you decide to do that? How did you decide to do this? Why are you doing these things? Does that work? How did you, what did you learn?” I ask these questions ‘cause I’m really curious.
People fascinate me and so I’m curious about them. How they work in their world. By doing that, I found that most people will open up and tell me everything. Eventually, I go, “Well, if that’s the case, why don’t we just do this, and I’ll solve your problem, if you solve my problem.”
Rod Khleif: Love it. Love it.
Dale Hensel: By accident, I stumbled into or backed into one of the best negotiating techniques ever, which is just ask a lot of questions.
Rod Khleif: Ask questions. Absolutely it’s like How to Win Friends and Influence People. Let them talk, by you asking them questions. That’s brilliant.
Those of you listening that have kids, if there is one trait that I try to endear into my children and I hope you do the same is a profound curiosity. I don’t think there’s anything that’s more important for anyone’s success is to be curious and to gather knowledge. Curiosity… Yeah, that answers that question, so please continue.
So you got this 75 units for 5,000 bucks, holy cow.
Dale Hensel: I had this Jeep, and I got five grand on it. I didn’t tell the guy what I was borrowing money for. He just loans money on cars. Drove over, gave the guy five grand, and he gave me the apartment complex and the triples. He said, “Yeah, hey, I’m out of here. Thanks a lot.” And I drove back over to my office, and told my mom, “Hey, I borrowed $5,000 on my Jeep.” She says, “Oh, you didn’t have to do that. We’re gonna eat. And then how are you gonna pay your Jeep off?”
I says, “No, no, no, no, you don’t understand.”
Rod Khleif: [laughs]
Dale Hensel: “I bought an apartment complex ‘cause we were too broke to eat. So that we can eat, because I went and collected $3,500 in payments today, so I got money. She’s like, “You did what?”
Rod Khleif: You can’t make this stuff up. You can’t. You guys listening, you can’t make this stuff up. This has got to be real. [chuckles]
Dale Hensel: My mom’s only response was, “I have more apartments to paint?”
Rod Khleif: Oh, that is so awesome and so funny.
Dale Hensel: Yeah.
Rod Khleif: Please continue. Remind me to tell you my story about my Rolls Royce, but I… Please continue.
Dale Hensel: I’d love to hear that one… After that, I picked up some other houses, and duplexes and triplexes. But then, an opportunity came up to buy a 400-unit apartment complex down in Dallas. A friend of mine called me up, says, “Hey, there’s a deal down here. Get to drive down here today. Do it.” And I did. I bought a 400-unit apartment complex, with partners down there in Dallas.
I had that, and I ended up getting sued by the City of Dallas. Got in a pissing contest with the City Council of Dallas. I lost the apartment complex, and they got bulldozed.
Rod Khleif: Wow.
Dale Hensel: Yeah, I lost half a million dollars, and I learned a hard lesson. But at the same time, I learned about foreclosure, and all of these other stuff. That’s when I started buying non-performing mortgages. I was like, “Wow! That’s awesome stuff.”
It ended up working out for the best. But it just made me a better landlord, and it just made me a better investor overall, so it wasn’t wasted on me. It wasn’t a wasted lesson at all.
Rod Khleif: I would like to dig in to that story a little bit.
Dale Hensel: Sure.
Rod Khleif: On the 400-unit, but just real quick on the Rolls Royce story. So I thought, I always wanted a Rolls Royce. I actually had one imported from England, right-hand drive. It was hilarious. It had little TV trays in the back. But I had to sell that thing to make payroll, one week, ‘cause I couldn’t make payroll.
You’re talking about you’re hawking your Jeep, I had to sell this Rolls Royce, and practically had to give it away. Same… Now a Rolls-Royce, you have this picture of this $100,000 vehicle, I paid 15 grand for this Rolls-Royce, so don’t, those of you who are listening, don’t think it was a big deal. I actually sold it for eight grand, okay. But it was an older one. It was cool. My mom thought it was cool but I had to sell to make payroll.
Dale Hensel: Yup.
Rod Khleif: You have to do that when you’re an entrepreneur. You have to do what you have to do. You had to do it to eat, I had to do it to make payroll. That’s just how the world works when you’re on your own and making it happen.
Dale Hensel: Yeah.
Rod Khleif: But you learn and you move on… I wanna talk about that 400-unit because you glossed over that, and that is kind of a very unusual story.
Dale Hensel: Yeah.
Rod Khleif: You bought this 400-unit, you had partners, and looking at your bio, I read that it was in a really tough part of town. Please tell us what happened.
Dale Hensel: Well, it was in South Dallas, which is a really rough part of town, and I purchased it. It needed to be rehabbed but the city code violation guys are coming down, and fining us sometimes up to a million dollars a day. Every freaking violation they could.
Well it turns out, like eight years later, the FBI busted up two-thirds of the City Council for, and they went to jail and whatnot, for attacking and bulldozing apartment complexes, and then reselling them to developer on the back end.
Rod Khleif: Holy cow. Wow.
Dale Hensel: Yeah, so we figured that out, and I went to a couple of attorneys, and they said, “Alright, well you have a great cases, you could sue the City for millions. Write us a $250,000 check, we’ll start the lawsuit process on it.”
Okay, I either put my money on to an attorney, and spend seven to eight years dealing with this very negative thing, or I go build another company and start over and everything else. I just don’t believe in lottery tickets so I didn’t want to sue for seven or eight years, and realize I…
Rod Khleif: Wow. That’s quite a story. I wanna interject something, and those you listening, that are buying properties. Don’t discount the power of these regulatory agencies that come out. These code enforcement people, make them your friends. If you get a code violation notice, call that person immediately. Do not ignore it, and say, “How can I make this right? Can I have a little time to make this right?” Kiss their butts…
Dale Hensel: A little bit, yup.
Rod Khleif: Because they have very little going on in their lives except the power to make your life miserable.
Dale Hensel: That’s right.
Rod Khleif: So make sure that you treat them very, very well. Many of them are very significance driven, and you just know how to deal with people like that. You just praise them, and tell him how amazing they are, and you’ll get what you want. Right, Dale?
Dale Hensel: Well, most of the time.
Rod Khleif: [chuckles] Most of the time, yeah.
Dale Hensel: I mean, we actually showed up at the Code Enforcement Office, all of us did. We were saying this is what we’re doing. They grilled us. They took pictures of our driver’s license. They put a camera on us. I mean, they were really unfriendly to begin with. We were really trying to be as nice as possible…
Rod Khleif: That’s very unusual though, Dale.
Dale Hensel: It was. But what it was is, it was endemic. It was because of the situation, somebody behind the scene was getting paid.
Rod Khleif: Right.
Dale Hensel: And that’s really what it came down to.
Rod Khleif: Right.
Dale Hensel: I don’t care how nice we were, somebody was getting paid and there was a different deal, ad we were just, you know…
Rod Khleif: No. No, that’s very, very unusual, and then now it makes sense. When you determined later what was going on. But for the most time, you just treat then right, and let them know you’re making progress. They’ll usually leave you alone but they can really make your life hell. I just wanted to interject that for my listeners that are getting started.
Dale Hensel: Yeah, no, that’s absolutely correct, so go ahead.
Rod Khleif: Yeah. No, I’m really glad you brought it up ‘cause it’s never come up before. The importance of dealing with public officials and, or regulatory agencies.
Dale Hensel: I really call them, just so you know. I get a code violation; I rarely call anyone, I go right down to their office and sit down, and talk to them face to face. And that will solve 95-98% of the problems, usually, that day. I’m like, “Oh”.
Rod Khleif: I agree completely. I agree completely… Yeah, absolutely, I agree completely. That’s the best way to do it. So I know that you’ve got a lot of experience raising money. Let’s touch on that a little bit. Although you raise money to buy non-performing notes and we’ve talked about syndications on the show here. For specific property deals, I’m assuming that’s what you did with that 400-unit. Was that a syndication?
Dale Hensel: That was actually me, and a couple friends throwing in. So no, it was something else.
Rod Khleif: Oh, okay. No kidding. Okay. Alright. Well let’s talk about syndicating, what advice could you give my listeners that wanna do larger deals, that wanna syndicate? What would you tell them on how to make that happen?
Dale Hensel: There’s a couple of key parts to this. I dig my well, way, way, way before I’m thirsty. So if I’m gonna raise money for a project… It’s what, March, so if I wanna raise money for a project in October, later this year, I’ll start yesterday. I already started last month. I’d start looking for, I’d start prepping, I start looking for the pitch.
I’m also introducing myself to investors all the time, saying, “Here’s what I do. Here’s my background. Here’s why I’m a good choice. Here’s why I’m low risk.” I basically just tell them, and they’re like, “Well, do you have a deal right now?” “No, but deals show up relatively quickly and the best ones are short fused. So I’m telling you now, so that if I come to you… It is a short fuse. You’ll understand all of the stuff you need to, before I ever ask you for money,”
Rod Khleif: Oh, I love that. That is…
Dale Hensel: [bad audio] … Months, and months, and months before. I’m always planting seeds. The cool part is, the office that I’m in right now, is a 16,000 square foot building, we bought in 2014- 2015. We bought it out of bankruptcy, 16,000 square foot, Class A building. It came with $150,000 worth of furniture, and office equipment, and server room and tech, and $200,000 worth of restaurant equipment.
We bought the entire building for $850,000. Because it was like super short window, right out of bankruptcy and I called five or six friends, put all the money together and got that done.
But I’ve been prepping them for a while. It appraised for four million, two months later.
Rod Khleif: Wow.
Dale Hensel: We bought a beautiful Class A building, which we now occupy, for 21 cents to the dollar. Because I’ve been prepping people that. And the funny part was is, I heard about it right around Thanksgiving, and I had to close right after Christmas.
So the two biggest holidays, everybody’s gone, nobody wants to talk about money, nobody wants to do business, and I still managed to get all of the money put together quickly, easily. It took a couple of days to make some phone calls and get it done and coordinated. We closed this December 31st of 2014.
Rod Khleif: That is awesome, and I wanna just hammer that point home because that hasn’t come up before, why it’s so important to develop relationships with investors. But the way you described it is just fantastic, in that, you know, “Why are you telling me all that stuff now, even though you don’t have deal?” Because of that short window.
That, guys, I hope you’re taking notes on that because that is brilliant. To prep them for the fact that you know you may find a screaming deal, and you may need to know within 48 hours whether or not to pull the trigger on it.
Dale Hensel: Right.
Rod Khleif: So Mr, Mrs Investor, learn everything you can about me right now so that when I find that deal, I can come to you and we could get it done. We both benefit, because those are the best deals; the ones that have to close quickly. Love it. Thank you for that. That was definite value.
Hard money lending, I know that you’ve loaned money, you’ve used hard money, what would you suggest to my listeners that are getting into multi-family properties? That’s something they should ever consider utilizing.
Dale Hensel: Absolutely, and the reason is it’s another tool in the toolbox. I have seven or eight tools in there. I’ll try conventional financing, HUD financing, CMBS Pipeline Conduit Loans, private investors, hard money, long-term private money. We even bought apartment complexes with using viaticals back in the 90s.
Rod Khleif: I don’t even know what that is. What is that?
Dale Hensel: So this is a very advanced technique. A viatical is a life insurance policy that you purchase on somebody else. So let’s say, back in the 90s, AIDS was a big thing, and people would have these life insurance policies, of say half a million dollars. But they want it cashed now for their life insurance policy because they would never be able to utilize it. They have expenses, and the disease was still relatively new. They would sell their policies for about 25 cents to the dollar, so 120-$150,000 for a $500,000 policy.
What we would do is we would go to… There was a whole market place where you could buy these viaticals…
Rod Khleif: Secondary marketplace, yeah. I do remember this.
Dale Hensel: It’s very different nowadays, but we used to be able to go to the secondary market, and we would go and find somebody with the property that we wanted, whether it was land, or apartment complex, or commercial, and we would say… And this was really good with apartment complexes because of the cash flow.
We would go to them and say, “Here’s the thing, we will buy… “ Imagine being able to buy a million dollar property for roughly $250,000 worth of viaticals. We would go and say, “We will pay you a 110 or 115 cents on the dollar of your property.
They’re like, “I get $1.1 million in…”
Rod Khleif: But you have to wait. [chuckles]
Dale Hensel: Right. And so here’s what we would do, we would buy these insurance policies for like 250-$300,000. We give it to them, and then we would buy back in insurance that would simply say, if these policies don’t payoff within two years, then Lloyd’s of London will come in and buy them from him for a different kind of…[bad audio]
Rod Khleif: Oh, wow. That is very complex. Holy cow. That’s… Wow.
Dale Hensel: Right. It’s called bookending. We bookended it so on the far end, the maximum they would have to wait is, they could wait very little time, they could wait up to two years. But if after two years they didn’t get their money Lloyd’s of London would take him out and they would be at their 1.1.
Rod Khleif: Wow. Wow. That’s quite a strategy, a little morbid but quite a strategy. [chuckles]
Dale Hensel: It is a little ghoulish, I know.
Rod Khleif: Yeah. Yeah.
Dale Hensel: But like I said, that’s just another tool… [bad audio]
Rod Khleif: Yeah, sure, another tool. No, that’s awesome. So hard money and any tips about being careful there? It’s all really empirical, right? It’s all cash flow driven.
Dale Hensel: Here’s the thing, I’ve borrowed money from a lot of hard moneylenders over the years. Sometimes, things just don’t work out timing wise, when you expect them to. So the biggest, best thing you need to do is pick up the phone and say, “Mea culpa, it’s not going to plan. Give me another couple of days. I’m gonna stroke you another small check. But I’m working on it.”
As long as they’re getting communication, and getting some movement, and getting a few bucks from you, they would probably be more willing… Depends on the hard money lender, it will be more willing to work with you and say, “Alright, well hurry up and get it done.” And by doing just that sort of thing you find that a lot of hard money lenders can be, “Alright, I know it’s not perfect but I’m gonna get paid for my time, and energy, and money. I don’t have to foreclose so that’s good and you paid me off and that’s great.”
Rod Khleif: Now you’re talking about if you get into trouble, if your like window, if your short fuse on how long the debt is for runs out. And you need more time.
Yeah, it’s funny you were talking about that 94 year old man. I had a 80 some year old lady that I borrowed a couple of million dollars from as a hard equity lender in Denver, and then in Florida. I used to pay her 12% interest, painful. Finally, we negotiated down to eight, after a decade, but she made me a ton of money.
Dale Hensel: I know.
Rod Khleif: She made me a ton of money. So, okay.
Dale Hensel: I have never had a problem borrowing eight and 12% money.
Rod Khleif: Right.
Dale Hensel: As long as I know I’m making more on the back end. So absolutely. Absolutely.
Rod Khleif: Right. Okay. Well, alright. That’s good. And you guys have heard me talk about how I’ve used credit card, sometimes, to buy properties. I mean, you do what you have to do if the deal is right. You make it happen.
Dale Hensel: Right.
Rod Khleif: Good. I know that you and I had talked previously about something that I was very interested in, which was assisted living. I actually had mentioned to you, I used to own the domain name AffordableSeniorHousing.com and never ended up doing anything with it. But I do believe in it. I do believe this country is headed for a crisis and it’s in that whole arena with all the baby boomers retiring and there just aren’t enough beds and resources.
You told me about a concept that you’re involved in, and this really doesn’t tie in, this is just kinda a little bonus for you guys listening. This is very, very interesting. I was gonna do this myself. I have friends making a lot of money doing this. I’m gonna have him talk about it for a minute because it is very intriguing.
If you own large houses, or you wanna think about a different business model, listen what Dale’s got to say here.
Dale Hensel: Having bought a lot of apartment complexes and having enjoyed that cash flow, over and over, month after month. In fact, I bought my first one in 96, and I sold all of them in 2007. So I got to enjoy a lot of cash flow from those. And what I was looking for when I kind of started again about a little year and half ago, saying, “Alright, it’s time to build up another portfolio of properties. Let’s try it.“ But I want cash flow, and I want something more passive. I’m little older. I just want passive income. I wanna make sure I can do stuff. Go somewhere else and play, and money keeps coming in.
I looked at the multi-family market now and I was like, “Awesome.” But there’s a lot of money out there, chasing a lot of deals and so it compresses cap rates just a little. And so I thought…
Rod Khleif: Right, particularly on the larger stuff that we were used to doing. Right.
Dale Hensel: Right. Like you go buy a 250 or 500-unit apartment complex, and I’m competing with three pension funds and a hedge fund who have way more money.
Rod Khleif: Right.
Dale Hensel: They’re just trying to deploy it to get a return, and I’m trying to actually make money.
Rod Khleif: Right.
Dale Hensel: Our differences in what I consider making money and theirs is just different, so they would often times beat me out.
Dale Hensel: What I started to do is like I say, “Alright, where can I get 10, or 15, or $20,000 per month, from a single property, and then just stack up to several of those properties.
Somebody pointed these assisted living group homes out, residential care homes, they call them in some states. And I said, “I don’t know anything about it.” I looked at it, got into it. We can… I’ll give you high-level numbers here, but we were buying…
Rod Khleif: Well, hold on. Hold on. Let me just… So people listening who don’t understand. Basically, what he’s talking about, guys, is a big house. You take a big house, five-six bedrooms, and it becomes an assisted living facility.
Dale Hensel: Right.
Rod Khleif: And each bedroom can hold or has one or two people, and the numbers are staggering. Now, of course, it’s a business and you’ve got to have caregivers, and all kinds of… They’re very regulated. But please, continue.
Dale Hensel: Yeah, it is a highly regulated business but, here’s what I started finding out. First of all, there was some very experienced people in the market who have managed and run assisted living homes. They were looking for a job so I could find them, you could find good people.
Two, a lot of our caregivers, we can train and everything else. It is 24-hour care so you have to build that into your model. We found that we would take a single-family home between 300 to $600,000 and depending on…
Rod Khleif: Purchase price of the home.
Dale Hensel: Purchase price.
Rod Khleif: Okay.
Dale Hensel: We’d probably put a 25-$30,000 sprinkler system in and fire alarm system, et cetera. A few other, small minor things like some ADA stuff. As long as it’s compliant with the state, we could then start renting these rooms out, individual beds, by the bed, by the month. To give you an idea, assisted living usually charges between 3500 and $4500 a month. Our average is about 4000.
Well, if you have 10 people in the house, 24-hours a day, at $4000 a month, that’s $40,000 a month in gross rents. From a single-family home, that could be around half a million dollars. The net on that typically is anywhere from, depending on how you run it, 25 to 45%. We usually come in around 40%. That margin…
Rod Khleif: 40% net margin. On a $40,000 a month, you’re at 15-16000 a month net revenue.
Dale Hensel: Net revenue.
Rod Khleif: That’s better than a sharp stick in the eye.
Dale Hensel: It was, and we like that.
Rod Khleif: Yeah! [chuckles]
Dale Hensel: We bought up five in Albuquerque really fast, and five in [bad audio].
Rod Khleif: Wow.
Dale Hensel: We’re expanding, but yeah, it was really interesting to see this market. I was just like, “Wow, this is so…”
Rod Khleif: So guys, that’s something I actually have a great, great friend in Sacramento that has made a ton of money doing this exact same thing. I know Dale is in acquisition mode for this. I’ll have Dale’s contact information in the show notes if you have any interest in discussing that with him.
I’ve always been interested in it because old people are dear to my heart. I really feel like this country is headed for a crisis. There are 80 million people getting older, and there just aren’t enough beds. Back in the day, I was gonna start converting hotels into assisted living facilities. That just turned out to be a nightmare to try to accomplish because of the ADA, the American with Disability Act. Always had to be a certain length, width and stuff.
I know, guys that this isn’t what we typically talk about on the show. I thought you might be interested. It is kind of a unique way to make money and we should always be looking for ways to get high cash flow.
Dale Hensel: Yeah. That’s what I was trying to do. I was trying to get the cash flows that I used to get from apartments back in the 90s and early 2000s but I couldn’t seem to find, currently. I was like, “Well how do I do this? I found my best bang for the buck, ended up becoming like these mini multi-families. These little teeny multi-families, you know, assisted living facilities, because the numbers were staggering to me. They were every bit as good as some of the apartment complexes that I used to buy.
I’m a big fan of apartment complexes because they’re consistent, they grow over time, they go up in value, and everything. There’s a lot of buyers for them. If you wanna sell, it’s awesome.
Rod Khleif: Sure.
Dale Hensel: I’m a big fan of them but right now, when I was looking for deals, there’s a lot of people chasing deals with not quite enough you know…
Rod Khleif: Sure. Sure. Unless you’ve got brokers that know that you’ve bought recently and you can prove that you can close. Because the market is so hot, unless you’ve got those relationships, you’re never gonna get those pocket listings, the phenomenal deals. The deals are out there but if you’ve been out of the market, like you were out of the market for a long time. It makes it very, very difficult to prove that you can take them down and find those deals that have those returns. That’s a very unique strategy, and I wanna learn more about it.
Dale Hensel: Happy to talk to you about it.
Rod Khleif: Yeah. Well listen, Dale, it’s been a real treat to have you on the show. I’m very, very grateful. Let me ask you a question that I sometimes ask guests, that really applies in your case. I do these little clips, every week called, Your Driving Force Success Tips. They’re really about the psychology of success, 80% of your success in anything is your psychology. And you have a fantastic psychology.
I’m just curious. What makes you jump out of the bed in the morning? What makes you as driven as you are?
Dale Hensel: First of all, I believe I can do anything.
Rod Khleif: Right.
Dale Hensel: That’s one.
Rod Khleif: That’s awesome.
Dale Hensel: Second one, if you pair ‘I can do anything’ with ‘I’m only limited by what I decide not to do’. My third thing that drives me really is funny, it’s a couple of experiences I’ve had in Alaska, where I very nearly died when I was out in the boats. I realized, “Man, we are mortal. We are simply flat mortal.”
Rod Khleif: Right.
Dale Hensel: When you’re in your early 20s, you think you’re immortal, your invincible… [bad audio]
Rod Khleif: Sure.
Dale Hensel: You get a little older you start to realize that. But very young, I realized, I had this near-death experience, I go, “Alright, if I don’t get up and do it, it’s never gonna happen. It’s never gonna come to me. It’s never gonna magically appear. But if I want it, I can go get it ‘cause I don’t have any limitations… Why not?”
So in the form of like not being limited, and very, very curious, and then driven by death, in a sense. I know I’m gonna die and by embracing that, I’m like, “Well, I better get done what I wanna get done.” So I get out there.
Rod Khleif: I love it. Love it. Love it. Love it.
Dale Hensel: It makes me jump up in the morning. I literally go, “ Raahhhhh! I’m not dead yet. Let’s go.”
Rod Khleif: Love it.
Dale Hensel: Yeah.
Rod Khleif: That’s awesome. That’s awesome, buddy. That is awesome.
Dale Hensel: One last thing is, when people tell me, “Why aren’t you afraid of failing?” I’m going, “I have failed a lot of times and nothing’s killed me yet. I’m not dead yet. And I keep doing the deals, so I’ve learned something new.” As long as the deal isn’t totally fatal, “Ahaha! I’m still alive!”
Rod Khleif: Oh, I love it. I call them seminars. They’re all seminars. I’ve had some big ones like you, and they’re learning experiences, and they make you stronger. Well, listen my friend, this has been a real hoot and I’m really anxious to see how it goes with those single-family ALFs. That’s, like I said, something that I’m interested in.
Thanks for being on the show, my friend.
Dale Hensel: Absolutely. Thank you.
Rod Khleif: Really appreciate it. Alright. Take care. See you.
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