Ep #283 – John Bollinger – From House Hacking to a Growing Multifamily Portfolio
Here is some of what you will learn:
Understanding a 1031 Exchange
The importance of building a strong internal and external team
Why Multifamily is the most amount of money in the least amount of time
The importance of mentors
Understanding the due diligence process
The importance of project sequencing
The pitfalls of under insuring
Front loading your learning
Full Transcript Below:
John Bollinger – From House Hacking to a Growing Multifamily Portfolio (Ep283)
Rod: Welcome to another edition of “How to Build Lifetime Cash Flow through Real Estate Investing”. I’m Rod Khleif and I’m thrilled you’re here. I know you’re gonna enjoy the gentleman we’re interviewing today. His name is John Bollinger and he currently owns a hundred and seventy five units. He’s got huge goals for the future to own a bunch more and he’s the principal of Bollinger Properties. John, welcome to the show buddy!
John: Hi! how are you doing?
Rod: I’m fantastic
John: And actually a couple years ago we’ve switched all of our operations over to 3 cm multifamily
Rod: oh 3 cm okay I’m glad you mentioned that. So John you know I usually start by having people talk about their background a little bit and how they got started in this business and I know you’ve got kind of an interesting degree in quantitative business analysis which actually I actually enjoy myself but let’s talk about how you went from that to real estate my friend
John: Okay well I started off at a Wall Street company and that’s how I ended up in Texas back in 1989. I actually bought my first investment property in 1995. I bought a duplex and I moved into one side and started renting out the other and from there I was off to the races
Rod: House hack awesome
John: Yeah bought a lot of single-family homes, duplexes, fourplexes, lands, and did a whole mix this stuff up until the mid 2000s when I started getting into commercial property and at that time I started small apartments, RV resorts, small strip Center, stuff like that
Rod: oh so you did multi asset classes you did a strip center you did RV parks okay all right. So are your 175 units right now all multifamily or they a mix of something else?
John: No I’m strictly moving into multifamily. So all of my other items I’ve been selling off I’m pretty much out of the single-family home and don’t have any duplexes or four-plex left. So strictly focusing on syndicating apartments, managing apartments, and that’s where my only focus will be from here on out
Rod: Okay have you done a syndication yet or is this are you getting moving into your first one?
John: Actually completed one and I will be closing I’m just about completed a second one I’m closing on
Rod: Okay fantastic so let’s talk about the first large property that you did. What was the first larger ish that you did?
John: The first large apartment complex that I did is 110 units. I bought that as an independent. That was actually a third-generation 1031 exchange. I started with a four-plex exchanged that into a RV resort and then I got exchanged into this hundred ten
Rod: No kidding Wow fantastic. Do you still own it or you divested of it?
John: No actually we’re looking to put it on the market here very shortly and hoping to make the next top, the next one
Rod: Yeah I don’t think you have a problem selling it finding a replacement in this market maybe a bit of a challenge in the timelines that you’re gonna have that would be my only fear but you know those of you that are brand new to this game and don’t know what a 1031 is, it’s basically allows you to defer your tax and you know and ideally you never want to ultimately sell because then you never pay the tax if you can just hold on to the asset forever it just it really becomes a you know that escalation remains tax-free effectively but well good luck with that and where’s the asset located? what city is it in?
John: That one is in Victoria, Texas
Rod: Okay and that’s where primarily where you’re invested now is Texas?
John: Yes I’m South Central Texas. So San Antonio, Houston is in my area but it’s a very hot market hard to get into at a good price but you know anything in the area San Marcos down the Victoria going the other direction Kingsville, Corpus Christi’s a strong market even going south down into the valley so although basically all of South Central Texas is my territory.
Rod: Okay okay and tell us what you’re closing on here shortly you mentioned you’ve got a deal under contract and it’s in the homestretch. Talk about that deal a little bit
John: Well we actually already owned the property down the street and it was a tremendous success story and the owner of the property that we’re about to close on saw what we had done to that property and said well I’m getting ready to sell and that’s the kind of people that I want to own my property and so he walked into our office asking for who could buy his property and eventually he got word got up to us and we did it
Rod: Awesome fantastic and how many units is that?
John: It’s only a 40-unit. I wouldn’t mess with a forty unit normally but in this case we’re able to combine resources with the 64 we have on the streets. So actually we’re not gonna hire any new employees management all the way down through maintenance. I mean all we’re gonna do is split resources that we already have
Rod: Yeah fantastic that’s a perfect situation right there okay. So talk up a little bit about your team is it just you? is it you and a partner? how do you operate?
John: Well I would divide my team and I have an external team highly experienced real estate professionals when you’re talking about you know representation on the buying side, mortgage brokers, lawyers and transactional lawyers, syndication lawyers you know. So we’ve got a very strong team on that side and internally we also 3cm multifamily as building a strong team. I have an acquisition manager who assists me in finding product and evaluating it. He’s also basically our takeover manager so he does the project management so we don’t need a general contractor and so we just you know crank one through the other on that
Rod: Do you do your own internal property management or do you use third-party property managers?
John: No. We’re completely internal so every property that that we own we manage
Rod: You manage okay all right that’s unusual in my interviews with portfolios of your size. I see that a lot in the really large portfolios and I know your goal is to own a huge portfolio. I saw that on your on your bio but so this acquisitions person also helps you with that piece? or you have someone else that does that? or how do you handle the on-site management? of course you’ve got an on-site manager so you you’re basically doing the asset management at that point
John: Yes yeah my personal job is primarily asset portfolio type management. We do have individual managers on-site so my acquisition manager, he helps like I said more in acquisition and set up time but then we have a on-site community manager from day one when we acquire and so by the time we have everything set up and running the way we want it then you know they run with that ball
Rod: Okay so why did you not go more into retail for example? You owned a strip center or RV parks for example. Can you speak to why you honed in on apartments?
John: Well yeah absolutely um I kind of stuck my fingers and all of the different Peyser you could say in the real estate business and try to see what I liked and basically what I found was that I can make the most amount of money spending the least amount of time in apartment complexes and it seemed to be just made a lot more sense to focus on
Rod: So it was a lifestyle choice okay all right awesome. And I couldn’t agree with you more I just was curious to hear your perspective you know RV parks of course are very transient or can be and so there are a lot more labor-intensive and then retail of course you know is got the whole Amazon dynamic to deal with right now and you know you see a lot of you see a lot of shopping centers and strip centers that that have vacancy that never had vacancy before and that you know I know that that whole landscape in that asset class is changing. You’re seeing a lot of different uses come in to retail centers that you never saw before and was that your rationale there? or what were your ..
John: Yes actually that’s part of it as well I mean like you said in the retail industry you don’t necessarily have any well you sometimes don’t even have as much outside potential but you had a lot more exposure I mean you know Toys R Us just disappeared overnight you know things like that it’s pretty scary when you’re holding a large asset
Rod: Yeah absolutely. Okay so talk about you know let’s go back because you’ve done you started in duplexes you know which is a great place to start. You house hacked which is what I tell you know the young people that listen to me you know don’t buy a house buy a Plex live in one unit maybe live for free in one unit and start your process that way and then you got into larger properties. If you could go back and tell that person that first bought that duplex back in the 90s you know with today’s you with your today knowledge base what might you tell that younger version of yourself about this business?
John: Oh that’s a good question you know I studied a lot before getting started you know so education was you know very important part of what I do you know I think I really don’t know what I would do different other than I would probably seek out and would have had a lot more mentors earlier in in my growth cycle I would have grown and a lot more and not had to reinvent the wheel and do things the hard way which I did and in a single family world but in and I knew when I was moving into larger apartment complexes. I didn’t want to be in that and so I avoided that by having a very strong upfront team before getting involved
Rod: Hmm yeah yeah no question I’ve had mentors my entire life as well and now I’ve become one and love it you know I’ve got a coaching program and absolutely love it I never thought I would but I absolutely do. So if you are coaching someone that you cared about, about this business, besides mentoring them and telling them you know giving them your little nuances and wisdom, what would you tell them you know to focus on because there are a lot of people are listening that haven’t done anything in this space yet what would you tell those people?
John: Well you have to learn, you want to try to figure out as much about the details as possible I mean that’s where the it’s not a complicated business but it’s especially when you get into apartments there’s a lot of moving parts and you just got a you know you’ve got a make sure that you have a really good checklist to cover everything through due diligence through operations and making sure that you know cause it’s a little things that you know they can end up wiping you if you just let too many of them go
Rod: Couldn’t agree more
John: Yeah I would say that
Rod: Yeah no question you know and guys you know like for example we’ve got about a forty page due diligence checklist that we use and provide in my program and you know really every business is nothing including multifamily is really nothing but people and systems and those systems require checklists and so that every rock gets look under you know and every question gets asked and every potential issue gets addressed and nothing gets missed you know it’s critical and really from the start to the finish I mean even pre closing you’ve got all of course all your due diligence stuff and your financial due diligence, your property due diligence, but then you know even there little nuances of the closing and making sure every piece there’s been checked off and then once you’re in your reposition you know making sure that everything sequenced properly and you’re not you’re not painting after the carpet goes in or the you know the flooring goes in or the go in and things of that nature and all of that should be check listed. So let me ask you this you know you’re obviously already very successful in this business and you know and that people think that that road to success is all positive. Talk about a time you got your nose bloodied in this business talk about a setback a time that you know you really you know got knocked down for example and the lesson in it if you could
John: Yeah I would say probably the biggest knock down I that I have experienced was when we had the RV Resort on Father’s Day somebody was driving up the interstate highway with a lit grill, fire grill by on their back of their truck you know we’re lighting out fires were probably 10 miles long along I-10 and one of the plate it happened to be a day where there was just tremendous winds going in every which direction so he dropped the coal down the hill from us and it before we know it burned 120 acres across the highway from us and it took out a bunch of our facilities and you know dealing with insurance is bad enough. But we ended up you know recovering on, we actually put a lot of blood sweat and tears into it and took that insurance money and came out with a lot better product than we had before that happened
Rod: But it’s not fun when you’re in the middle of it
John: Yeah no fun when you’re in the middle of it and where the really nasty part was we were short on business income insurance and so
Rod: Right so that’s a loss of business income yeah the exact same thing happened to me you know when Hurricane Charlie hit Charlotte County here in Florida you know I had 360 damaged houses many of them uninhabitable. It was the biggest logistical nightmare I’ve ever dealt with in my life you know I have. You know it took eight weeks just to evaluate the damage forget about fixing anything but you know and the insurance and suing the insurance company and the loss of business revenue and all of that stuff and but then again of course every house new roof and got fixed up and you know the assets were in better shape, the apartment buildings that I had were in better shape, but no not a fun time. So tell me you know in your business, in this evolution you know towards success, what did you have to give up to get where you are today?
John: I would say you know it takes a lot of time and energy to get things set up and to get the ball rolling and you know and to learn but if your front end you’re learning and your hard work then it’s a lot and systematize and make your checklist and everything else like you were talking about earlier. You put it in a box is what I call it so that you’re just cookie stamping it over and over again then the people that you mentored and brought up and then are in a company and then replicate what you are doing and
Rod: Yeah you set it up like that you know what, you’re focused on Texas I assume you’re looking for B and C assets that you can reposition that you can add value to is that your MO like most of my syndicators on the show
John: Yes yeah I like strong neighborhoods and strong product in those neighborhoods so I look at C plus I mostly prefer low B product to even high B product that I can take into the low ways or you know or an A that’s you know got a lot of value left on it you know there’s sometimes it’s tough to find those but
Rod: Yeah you know we’re doing we’re actually closing on one tomorrow that’s a low A that we’re gonna bring back to it you know a top notch A property and you know they’re harder to find. How many deals would you say you’re looking at in this day and age to find a deal? what’s your experience of that? or you’re acquisition’s guy, tons I’m sure right?
John: Yeah tons yeah I always say it’s like panning for gold so you keep panning and panning and panning and then you find a nugget and you look at it and say well that’s not big enough throw it over your shoulder and you keep it and some more
Rod: I like that analogy I haven’t heard that one I like that one that’s absolutely apt as well so let me ask you guys can you share a quote that you love something that’s driven you in your success? do you have any quotes that you enjoy? I’m hitting you with questions I haven’t prepared you for so I apologize I’m being a little hard on you here and not intentionally
John: No I can’t think of anything
Rod: That’s okay
John: I could have probably think of
Rod: I’m sure it’s all it’s all good. I have a bunch of them on my desk and on my wall so I cheat for that question. What’s the biggest risk do you think you’ve ever taken in this business? if you were to go back and look when you really stepped out of comfort and pushed yourself, when was that and what was that?
John: Well yeah stepping out a hunker you know just something you have to do
John: All the time you know in order to grow I mean otherwise you’re never going to move forward you know buy that 110 the first time you know I had never run anything more than a 25 so you know that was a nice leap you know so you have to get outside your comfort zone make it anywhere
Rod: Sure sure sure. Well listen I really appreciate you being on the show today John. You added value and you know it’s a fun business. We all love it and I would you know those of you listening you know if you don’t love it, go do something else. Would you agree with me John?
John: Oh absolutely
Rod: Yeah you gotta love what it is you do so work is play. Well thanks for being on the show my friend I really appreciate it
John: All right no problem thanks for having me.
Rod: All right take care
Thank you for listening to the Lifetime Cash Flow Through Real Estate Investing Podcast.
If you’ve enjoyed the show, please take a minute to visit iTunes and leave your comments. For more resources or to connect with us further, please visit our website at rodkhleif.com. Tune in next week for our next show.