Ep #203 – Devin Elder has Acquired 350+ Multifamily Units worth $25MM+

Here’s some of what you will learn:

  • The importance of having mentors and other experienced people on your team.
  • The importance of educating yourself in the multifamily business to get started.
  • The benefits of developing long-term relationships for access to the best deals.
  • The importance of networking to become a problem solver and be a part of other deals.
  • The benefits of gaining experience in multiple areas of the business to be able to make better decisions.
  • The importance of responding to broker deals in the proper way to show knowledge in the business.
  • The importance of refurbishing units and how your cashflow can be affected.
  • The difference between Physical occupancy vs Economic occupancy.
  • The importance of reading and educating yourself on both the business and your mindset.
  • The importance of making the decision to commit and move forward in the business.
  • The reasons why real estate is one of the best investments possible.
  • The importance of choosing a proper mentor or bring people on your team to help with deficiencies.
  • The importance of getting uncomfortable and push through limiting beliefs.
  • The importance of making a decision to work hard on your goals and narrowing your focus for success.
  • Tips on how to take action and advice on where to start.
  • The importance of education before action, but avoid education without action.
  • The benefits of using resources like masterminds to shorten the learning curve in the business.

About our Guest:

Devin Elder can be reached at:

www.DJEtexas.com

Watch on YouTube!

Do you want to learn more about Multifamily Real Estate Investing? Work with Rod in the Lifetime CashFlow Academy's Multifamily Course & Coaching Program

Transcript in Full Below:

Ep #203 – Devin Elder has Acquired 350+ Multifamily Units worth $25MM+

Rod Khleif: Welcome to another edition of How to Build Lifetime Cash Flow Through Real Estate Investing. I’m Rod Khleif, and I am thrilled you’re here. I know you’re gonna get tremendous value from the gentleman we’re interviewing today. His name is Devin Elder.

He’s a investor in San Antonio, Texas. He’s got quite a few irons in the fire. Owns multifamily, is a partner in multifamily, is a passive investor in multifamily. He’s done syndications and had some projects in the works that we’re gonna dig into.

We’re glad to have you, buddy. Thanks for being on the show.

Devin Elder: Rod, thanks so much for having me. I appreciate it.

Rod Khleif: Absolutely. Let’s talk about…. Give us… I didn’t do your bio any justice. Give us a little history on you, and real estate, and why, and how you started, and where you’re at today, if you would.

Devin Elder: Yeah, sure, I’ll give you the high-level review. I’m a native San Antonian. I grew up here in San Antonio Texas, and graduate college here. Started in a corporate world here.

I thought as I grew up that that was gonna be my path. I’d gone into the corporate world, and after a couple of years of doing that, it really started to grind on me. I think a lot of folks can probably relate to that. After thirty years doing the corporate shuffle, I started looking for an alternative to basically replace my income. Build wealth that wasn’t 100% dependent on somebody else or a boss.

Had some missteps, and some learning experiences early on doing that but ultimately found real estate in 2012. I did a lot of single-family investing. I still have a company that does a lot of single-family investing but the goal for me was always to get into a multifamily investing.

I was fortunate enough, early in my investing career to meet some folks that were doing a lot of multifamily investing. Folks that own 500 or thousand doors of multifamily. To me, that was always the end game, because as you know, your economies of scale, financing is so attractive and there’s a lot of other reasons we all love multifamily.

It took me a few years to get there. I had to snowball some capital out of doing some single-family activities. Then started investing in multifamily. I was able to leave my corporate job a number of years ago, so I could full time as a syndicator and investor since then.

Rod Khleif: Okay, and then you mentioned before we started recording that you’ve had multiple mentors along the way. Originally, I think you said they were local. Now you’ve got some national players that you counsel with, which as you guys have heard me on this podcast a million times, this is a team sport. You absolutely want people in your camp that are experienced, that are empowering you, and coaching you and helping you prevent yourself from having any seminars.

Talk about the team that you put together to make this happen, how that evolved? I assume you started just making relationships with outside components, brokers, property managers, things of that nature. Can you speak to that a little bit?

Devin Elder: Sure. Fundamentally, the first layer I think of the team is the education piece. I did not grow up in this. My family didn’t do this.  If you have that background, that’s advantageous. That was not the case for me.

The first layer was the education layer. That came through some friends that I have, and have had for years. Lucky enough to be friends with folks, that owned, again, hundreds of units of multifamily. That really helped me. Actually, for a couple of years, I kinda shadowed them, watched them, asked them questions, etcetera. That was the base layer.

As I’ve grown into my own syndications, my own investment, it’s really the classic team. I’ve got a property management company. A relatively smaller company here in San Antonio I have great relationship with. I’ve been able to develop relationships with countless numbers of vendors. When there’s plumbers, electricians, roofers, etcetera because I came up in single-family world. I’ve been able to build those relationships.

The broker relationships are still extremely important. I have an acquisition team, and we reach out to multifamily owners. Frankly, that’s not really producing deal flow that we would see through brokers. Really, all the deals I’ve done, the multifamily deals I’ve done had been through brokers.

Now, most are off market but the brokers still, at least in my market, absolutely play a critical role, they have a thumb in the pulse, and they’ve got a lot of relationships with the owners. So, broker relationships should be critical.

There’s your lending relationships. We’re fortunate enough to get connected with a number of lenders. Really a big part of my team is other syndicators; both here in Central Texas and national. I’ve just spent time, and been diligent about developing relationships with other syndicators, and it’s been great.

Sometimes there’s nothing like being able to validate your numbers. Again, somebody else that’s maybe been doing it longer than you, bounce ideas around. And then sometimes, invest in those deals too. Or maybe somebody needs a little bit of help getting their balance sheet on the key principle side to where it needs to be. Or they need a little bit more liquidity or net worth, I’m able to come in and sign in on some non-recourse debt and help out. I’ve been able to help other syndicators and other syndicators have helped me. It’s 100% as a team sport. That piece of it is very enjoyable.

Rod Khleif: Yeah, I wanna mention on that, guys, you have an incredible resource with that closed Facebook Group I set up. I think we’re pushing 5,000 people. Actually, more than 5,000 now, pushing 6,000 people on there. There’s groups connecting all over the country. There’s strength in numbers like Devin just described.

There are syndicators you’ll meet, and maybe are a little short on the liquidity, or their net worth requirements that they need to take down a property. Or they need capital, and you can come in as a key principle to get that on your resume if you bring them some capital, or if you satisfy some of the other needs that they have. It really is a team sport, guys.   

Even in my coaching students, there’s people doing deals together already. That’s just how it works. So, get out there and make those relationships. If you are not on that Facebook group, it’s facebookcommunity.com. It’s a direct link there. You’re crazy not to take advantage of that resource, that free resource.

Let’s talk about… you talked about your team. How did you develop those broker relationships when you really didn’t have the experience? Speak to how you were able to be taken seriously. Did you springboard off of other people you’re associated with or did you just really push hard? What did you do to make that work?

Devin Elder: You know that’s a great point. My first multifamily project was a smaller project that I was not raising capital on. Just on my own capital. That was a foot on the door. It wasn’t an experience I’d go through again. I was signing leases, I was managing this property but it really gave me a feel for every aspect of the business. What that allows me to do now is, if I’m making hiring decisions or things like that, I really understand the roles I’m hiring for because I’ve done them personally even if it was for a relatively short time.

There was a small property I was able to leverage. The next property that I got into, I had a partner on. I was able to leverage a little bit of their experience; they’re a little further down the road with me. They’d done another similar size projects, 75 units. They wanted to partner on this deal for capital, and to help with the workload, and things like that.

I was able to jump into that. Obviously, contribute some capital, and have a large portion of the responsibilities. But it wasn’t necessarily just me going it alone. I highly recommend that.

There are so many opportunities to partner in the multifamily space whether it’s on capital, or whether it’s divvying up asset management duties. There are so many different ways to slice the pie that presents a lot of opportunity. Even for somebody that doesn’t have necessarily a 10-year track record or whatever.

After I’ve done those two properties, the small property by myself, and the 75-unit with a partner. That was in a relatively short time, that gives me enough credibility to have a resume to be able to go out, and start talking with brokers, and say, “I’m the owner in these projects and I wanna buy more.”

I think, one of the keys to speaking with brokers is just know what you’re talking about. Make sure you understand the nomenclature. Make sure you’ve immersed yourself in the stuff that you got educated because anybody that’s been doing this for a length of time: a broker, a lender, an investor, they’re gonna know immediately if you don’t know what you’re talking about.

Rod Khleif: Right.

Devin Elder: Education is the basic… the first block.

Rod Khleif: No question. No question. You’re right. You’ve got to know the, you called it nomenclature. That’s a great way to put it. Really, you need to know the terminology. If a broker sends you a deal you have to respond in an intelligent way.

“This deal doesn’t work because I did this analysis. This is the cash on cash. This is the cap rate we came up to once we normalize the expenses. This is why doesn’t work.” If you respond in an educated way that they know you know what you’re doing, you’ll be taken seriously. If you don’t or you’re not responsive, obviously you won’t be.

Alright, awesome.

[00:10:00]

Rod Khleif: You told me that you’ve had some major rehabs. I’d love to hear about that. What was the size of the project, and what sorts of things that you have to do?

Devin Elder: Yes, so I’ll go back to the 75-unit that bought last year. It was 32,000 a door in San Antonio, Texas, in 2017.

Rod Khleif: Wow! That’s a great price.

Devin Elder: That gives you an indication of… you can imagine what kind of shape this property was in, right?

Rod Khleif: Right.

Devin Elder: We’re spending just shy of 15k a door on renovation. That’s interior and exterior. You can imagine, we’re literally touching everything.

We haven’t changed out windows in the property. It’s a 70s building property. We’ve got solar screens on the outside. We’ve got two-inch faux blinds on the inside. We didn’t feel it was necessary to completely replace the windows, but I’ll tell you what, everything else got touched. Paint, new parking lot, I mean, this thing was like driving through a monster truck, you know.

Rod Khleif: [laughter]

Devin Elder: Yeah, we took it over. I literally never park on the property for a few months until we got the parking lot completely done ‘cause it was like crazy potholes, the level of… I would just say, criminal element there, and gang activities, and stuff like that was extremely high. To the point that we built the business plan to basically run this occupancy down to zero, and completely start over.

We’ve gone through, turned every single unit, and touched everything inside, down to the sheet rock; New baseboards, new doors, new tiles around, new sinks, appliances, plumbing. Everything’s been touched.

Rod Khleif: Wow.

Devin Elder: The units are beautiful. That was an extreme rehab. Spent a bunch of money on HVACs. Spent a bunch of money on… There was actually a pool there in the 70s. We budgeted a pool upfront. Instead of replacing it and putting a new pool, like we thought it was actually little cheaper to go in, and dig up the existing pool. The crew is like digging up digs, we’re gonna resurface it.

Everything got touched. You can imagine 15k a door on 75 units. You’re just completely changing it.

Rod Khleif: That’s massive. You’re talking new kitchens, new baths, new appliance packages, new flooring. What’d you do? Like plank flooring? Did you re-carpet? What did you do flooring-wise?

Devin Elder: Vinyl plank, not a shred of carpet on the whole floor.

Rod Khleif: Yeah, that’s the way to do it, guys. That’s the way to do it. That massively cuts down your turnover expenses. You know, 15k door is a massive turnover. Let me ask you this. What was the overall period of time it took you to do 75 doors?

Devin Elder: Well, it took about six months to get all the rehab done, interior and exterior.

Rod Khleif: You did that in six months? That’s very impressive, 75 units in six months. That’s like 10 or 11 a month, ore than that actually. Wow!

Devin Elder: Yeah, we really went in and not with a piece… Normally, you would go in if the property is 90% occupied.

Rod Khleif: Right.

Devin Elder: Kinda do turns as lease renewals come up and you wanna maintain that revenue. Well, the goal of this project was not to maintain any revenue because physical occupancy was sub-50, economic occupancy was less than that. Frankly, the tenant base there, it just didn’t make sense to keep any… [overlap talk]

Rod Khleif: It was wipe it all out.

Devin Elder: Wipe it out.

Rod Khleif: Yeah, by the way guys, physical occupancy is what shows up on your rent roll or people that are actually living in the property. Economic occupancy is the people that are actually paying. S Sometimes there’s a big difference. So, very important for you to know that.

Okay, so you just did a complete go in, and get everybody out, turn it over. That makes it more, easier to do.

When you’re doing a large turnover like that, you’ve got to calculate your carrying cost because you’re literally gonna have little or no income certainly on any units that you’re renovating. That’s one of the things we just went through.

At my life event in Tampa, just recently, that was one of the big things we harped on is whenever you’re doing repositioning and you’re refurbing units, your gonna have… you’re cash flow’s gonna go down before it goes up. You have to account for that because otherwise one of the biggest mistakes people make is they run out of money in these situations. Then it’s just a lot of pain and brain damage.

Okay, fantastic. So, you found most of your deals with brokers. All of them, I guess but they’ve been off market deals of brokers through relationships. If you were gonna give some high school graduate some tips or books that would help them if they were interested in real estate, do you have any suggested reading for them that would, not even necessarily real estate related but any of the books on your library that you would suggest to them?

Devin Elder: Sure, Think and Grow Rich is one that’s everybody’s heard. There’s nothing new. I did read that in high school. At that time, I thought it was interesting but all these years later I’ve realized it had a massive impact to me in planting these seeds. I didn’t realize it until later in life.

If somebody’s in high school, I do recommend reading that even though there’s been a million books written since then that have spawned off those concept. For me personally, it was very powerful to have ingested those ideas even though I didn’t realize it. Gary Keller…

Rod Khleif: Oh, The One Thing, yes.

Devin Elder: The Millionaire Real Estate Investor, was another big one. And then recently, in the multifamily space, it’s a book called The Perfect Investment that I enjoyed very much. That is very multifamily specific.

Those are the kinds of three books, at three different times in my life that were very influential.

Rod Khleif: Yeah, I’m trying to think of the author of “The Perfect Investment.” I’m pretty sure I’ve interviewed him on the show.

Devin Elder: Yeah, I believe it.

Rod Khleif: Yeah, okay.

Devin Elder: I have it here at the desk but…

Rod Khleif: Well, anyway, it’s funny you said, “Think and Grow Rich” ‘cause I actually gave away 220 copies of that book at my life event just last… the Tampa event I just did.

Devin Elder: Perfect.

Rod Khleif: We went thru it because it was so powerful. I ask how many people had read it, then I ask how many times they’d read it because it’s just one of those books you don’t just read once. It’s really, it’s foundational. Awesome.

So, is there a dark time in this journey of yours that you’d be willing to share with my listeners? Everybody thinks this journey to success is easy but there are always speed bumps, and bloody noses. Any seminars? We don’t call them failures on my show, we call them seminars. Any seminars that you can share with us and any learning experiences?

Devin Elder: Yeah, absolutely. There have been a ton of learning experiences. Really I just decided early on that I was gonna be an entrepreneur. It was very important for me to make that decision. If you look at the, I think, it’s the Latin root of the word ‘cide’…

Rod Khleif: Yes.

Devin Elder: It means to cut off, right? So, I think that’s really important. I know lots and lots of people that are capable of doing this that have not and will not leave their comfortable corporate jobs because they won’t make that decision.

I think that’s been key for me as early on in making the decision that this is what I was gonna do. That made it a lot easier when challenges will come up and say, “Well, this is what I do, so I just gotta deal with it.” I think that’s extremely important for people to make that decision. Draw the line on the sand and then commit to getting to the other side of any challenge.

Rod Khleif: And it’s not a 99% decision, my friends. It is a 100%. Like Devin said, the Latin root means to cut off. If you’re taking the island in by in battle, you burn the ship. So, you have to take their ships to get home. It is total 100% commitment. When you make a decision, you shape your destiny. That’s a great tip.

Now, let me ask you this, what advice would you give your 20-year-old self knowing what you know now? What would you do differently in this multifamily space? I’m just curious.

Devin Elder: Well, if I had the ability to go back, would be to buy everything at whatever year it was when I was 20. I’m 39, so if I could’ve started buying all the stuff 20 years ago, that would be the first thing. Absolutely.

I will go back in time and tell myself that real estate is a phenomenal vehicle for building wealth, for so many different reasons; the leverage, the appreciation, and depreciation, taxes, cash flow, all of these things. I almost call it cheating in business.

If you look at opening a subway franchise, you look at having a dry cleaning business or you look at all, like Karate schools, whatever all these business avenues, that you have as entrepreneur, I feel like real estate, when I tell people that I really don’t pay much in taxes relative to my income, and it’s completely legal, people scratch their head. There’s just so many reasons.

So, I would tell my younger self that real estate is the vehicle, and to go start get educated. Again, I think one of the key things is just to understand that underwriting model inside and out. I’m a spreadsheet guy, I have natural proclivity to excel at those kind of things, but you have to understand your underwriting model, in your sleep, inside and out. I think it starts there with that piece of the education.

I would tell my younger self to just get started and get networked. I think a key take away for somebody that hasn’t started in this is to understand that there are, whatever you’re lacking, you can partner with somebody to fill the gap. If you’re lacking education, go hire a mentor.

First of all, you can go read every book that you want under the sun for next to free. That’s a great start but you need to meet some flesh and blood people, and befriend some people.

A shortcut to that is hiring a mentor. Somebody and the standard for a mentor is it they have to have done this successfully. Not somebody that, you’re gonna be a buddy and you’re gonna go in with no clue. I see that a lot. You wanna buddy up with somebody that’s just as clueless as you are.

[00:20:01]

Devin Elder: I think that’s a terrible idea.

So, you can shortcut by hiring a mentor, and the entire thing is relationship base. If you’re raising capital, that’s extremely important relationship. If you’re working with broker, that’s an important relationship. If you’ve got a mentor, that’s an extremely important relationship.

Just understand that if you’re starting out, whatever deficiencies you have, there are people that you can bring on your team to fill that out. Maybe it’s hiring an analyst at first. Somebody that’s analyzed a thousand of these things to help you get good at that or maybe it’s bringing on a mortgage broker to help you understand all the nuances of the lending.

You said it, it’s multifamily or real estate investing is a team sport. It’s easy to get overwhelmed in the beginning but you can plug in your deficiencies with partners and team members to get it done.

Rod Khleif: Yeah. It’s almost like we planned this interview because my listeners have heard this multiple times. I said this from the front of the room just last, at this event.  That is whatever your deficiency, you can supplement with other people– either employees or partners. Play to your strengths.

You’re a spreadsheet guy, you’re also very outgoing but sometimes a lot of spreadsheet guys aren’t outgoing. So, they pair up with someone that is, for the relationship side of the thing.

If you’re like me, a ‘fire-ready aim’ guy that can’t spell the word spreadsheet, you have a Robert, like I have a Robert. He’s a CPA, he’s done a $100 million worth of multifamily deals. He’s my CFO. You align with someone, like you said an analyst or someone to help you get to push through it. But you have to get uncomfortable, my friends.

Your magnificent life is on the other side of comfort. You gotta push yourself. It’ll only be uncomfortable for a while. Once you’ve done it a few times, even if you’re introverted, go out there and make relationships. Once you’ve done it a few times, it’s no big deal.

I used to be embarrassed to walk into a classroom late ‘cause everybody would look at me. You just push through those limiting beliefs and those fears and you go make it happen.

Have you had given anything up to get where you are today? Any sacrifices to get where you are today?

Devin Elder: Sure. I wouldn’t call them sacrifice but I’ve absolutely, intentionally given a lot of things up. I made this decision many years ago when I decided to be an entrepreneur. I have worked for a number of years in the corporate world.

I’ll just highlight something really quickly. I think, everybody that’s successful that I’ve met has some kinda pain point event in their life. For me, it was getting fired from a job that I was really busting my tail at. That was a pain event. It was a turning point in my life and it’s cliché but I count that as one of the bigger blessings in my career. Was to have enough pain in that corporate job to decide that I wasn’t gonna do that.

I worked for several years building real estate, ending my corporate career ‘til I was able to leave. When I decided I was gonna be real estate entrepreneur, I made it a very clear decision. This has actually been a point of conflict with some friends and family members. That I don’t give any of my attention to anything outside of my immediate influence. My family and my friends get my attention, and my business gets my attention.

That means I don’t watch the news, I don’t care about the presidential election. Obviously, maybe there are some tax impacts on me, or whatever but I don’t spend any mental energy on it. I don’t spend any mental energy or time on things that are not improving my business, or improving my relationships.

It was a very, very narrow focus that I’ve had for over five years now. I’m just very conscious when I wake up in the morning that I’ve got a full battery at 100%. When I go to bed at night that battery is gonna be empty.

I am extremely, extremely selective about what ‘mental apps’ I have open. I don’t have the news on, I don’t care what’s going on in other parts of the world. Some people have take exception to that about all that stuff. I’m ruthlessly selective about what I let have my intention. I think that’s been one of the keys for me.

Rod Khleif: No question, you know. Again, it’s just funny. It’s like deja vu on some of the things that I talked about at my event because I told people, “Bring in the good stuff, bring in the motivational stuff.” I do Driving Force Tips on this podcast but there’s so much quality material out there.

If you need to stay motivated, there’s lots of stuff you can find but stand guard at the door to your mind with the negative crap, like the news and this political stuff that’s going on. It’s just negative and it’s just toxic. You need to stand guard of the door to your mind. Love it. Great advice.

If you could give one piece of advice to an aspiring real estate investor… A lot of people that listen to my show haven’t taken action yet. They’re thinking about it. They wanna do it. What would that one piece of advice be?

Devin Elder: Well, I would say that whatever it is you wanna do, real estate or anything in life, you got some goal that’s beyond your current capabilities. I think the best way to accomplish that is to find someone who’s actually done and accomplish the thing you want.

Maybe your 50 pounds overweight. That means getting a trainer that is actually in shape. Hiring them, give them your money to get you to where they are. I think that’s the number one thing because there is such an abundance of phenomenal material out there that you could consume. You have podcast, you have books. All these stuff is really important.

You’re not gonna truly learn, I think about it like a coin. One side of the coin is education; the other side of the coin is actually signing contracts, taking action. If you don’t have both, it’s not gonna happen. A lot of people are too biased towards one or the other. Taking action without education, which is disastrous or just educating and never taking action.

I found the best way and the best way I’ve seen for people to succeed is go out and get a mentor. That mentors, they have to have done it successfully. Give them money to shortcut. I mean you might [bad audio] process.

Rod Khleif: No question.

Devin Elder: That’s my number one thing. You have to know somebody, flesh and blood, whether it’s a friend or mentor, whatever but that has done this successfully. That is gonna cut years potentially off of your trajectory.

Rod Khleif: No question. Absolutely, no question, and to circle back to something you just said– Education without implementation is just entertainment. I mean, it’s all it is. I said that at my event as well.

You have to implement. We’ve got a kickass-coaching program but I don’t care if you use me or not. Get help. I mean, why go through the school of hard knocks when someone can massively shorten your learning curve and help you prevent mistakes, and keep you safe, and everything else and ramp. You know, get you further faster.

I’ve had coaches for years. I’ve got coaches now. I’m in masterminds now. It’s crazy to make the mistakes that are unnecessary when there are so many incredible resources out there. Alright, fantastic.

Devin, you’ve added a ton of value. If you guys wanna reach Devin, his website is D as in David, J as in John, E as in Edward, Texas.com. Is that correct, djetexas.com?

Devin Elder: That’s it.

Rod Khleif: Alright, awesome. Devin, you’ve added a tremendous amount of value. It was a real pleasure. I gotta tell you, some of the stuff coming outta your mouth sounds like it’s coming out of my mouth. We’re definitely aligned in our belief systems, and our methodologies, and strategies around what it really takes to make this business happen. So, this been a real pleasure for me. Thank you, brother.

Devin Elder: Thank you, Rod. Really appreciate it.

Rod Khleif: Yeah, absolutely. Take care. We’ll stay in touch, man.

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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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