Ep #313 – Chad Hudson – From Car Dealer to Multifamily Developer
Here is some of what you will learn:
Advantages of syndicating your deals
Understanding the value of sales training
Building your multifamily team
Advantages of passive investing
Accredited vs Non-Accredited investors
The value of a mentor
Building relationships with your banking partners
To learn more about our guests click here
Full Transcript Below:
Chad Hudson– From Car Dealer to Multifamily Developer (Ep313)
Intro: Hi! I’m Rod Khleif. Each and every week I record an interview with a thought leader that I know you’re gonna get a ton of value from. Now here on YouTube are the video versions of my podcast, Lifetime Cash Flow through Real Estate Investing. Now to make sure you get the latest information please subscribe and hit the notification bell. Let’s get started.
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 get value from the gentlemen we’re interviewing today. His name’s Chad Hudson and he has been buying and selling real estate since 2000. Started out in single-family like the rest of us and it’s just you know his own you know 30-plus properties and done over 100 transactions, done the whole flipping game and has now converted over to syndications and started actively investing in syndication. So we’re gonna dig into all that and go deep. Chad welcome to the show my friend
Chad: Hey Rod! I appreciate it thanks for having me
Rod: Yeah absolutely. So why don’t you tell my listeners a little bit about how you got rolling, where you came from, and how you got to where you are today. And then we’ll drill down on some of the stuff that you bring up
Chad: Sure absolutely. I grew up in a small East Texas town about 60 miles from Dallas, Texas and fortunately I could I could hit a baseball from the left side and got offered a scholarship to play baseball at Texas A&M University. I you know being from a town with 2,500 people getting to a daunting university like Texas A&M would scare most fellows but I tell you what, I knew when I walked on campus I had an opportunity and an opportunity most kids generally don’t get. So I wanted to take full advantage of my time there and the network there that Texas A&M provides is unvalued. So you know my time there I’m so appreciative but what I did was I knew you know I was gonna be entrepreneur after baseball but I had to make a decision a decision fairly quickly afterwards up. It was either pro ball or the next chapter and you know luckily I had met my wife which my girlfriend at the time she was basically got accepted to law school and I saw my first pro ball paycheck and I said gosh you know I’ve got to do something. So I was born an entrepreneur my dad was an entrepreneur and what I did I made a decision and walk away from baseball and we did a startup in 2000. It was a buy here pay here car dealership and we basically started lending our own money riding and I tell people all the time you got to have a vehicle type to actually you know you hear people want to just jump in. You got to have some money. You got to go and earn some money. So what I did was I was fairly conservative I built that company but any extra income I had I invested in real estate and you know we, back up a little bit to that company we bought vehicles but I was the lien holder and owner financed them and I lent the money to the demographic, couldn’t get financing. So I learned so much in that industry that it actually taught me how to talk to people what taught me how to taught me the lending side of it and it taught me how to invest and what you know fast forward I actually you know guy I needed a place to stay beforehand before I got married. So you know funny story kind of a light bulb moment for me was when I moved as soon as soon as I got done playing I needed a place to live and I bought you know I was already making money had a place and bought a place there locally the in Rockwell, Texas which is east of Dallas on Lake Ray Hubbard and my one of my best friends he needed a place to stay he was in Dallas and he was renting a place for I believe for a thousand bucks a month and my note was 716 all in and I charged in 700 bucks for a room and you know before my wife and I got married course he wasn’t gonna live there much longer after we got married but it was a learning experience for me that I just said good gosh this is a for savings account, someone is going to pay my rent my mortgage and I need more and that’s where the journey begins. So you know when you’re young and you your ego is so big you feel like hey I want a hundred of them and I want a hundred of them now and I’m gonna continue to run my business and that’s kind of how I was working and my hair on fire but you know and then and then you know different chapters and different equations come into place such as marriage and raising a family. But you know it was very fortunate on my behalf to have this company that I was running support my real estate habit I like to say. And I was able to do everything that you can generally do in real estate such as the development, such as fix and flips, and scale up on the bond holds to you know to build spec own custom homes and I knew my passion was in real estate. So I sold that buy here pay here dealership. I sold the real estate. I sold the accounts. I sold the notes and the paper and moving forward, my wife and I which I have to mention she’s been great deal of help you know she’s a real estate or I’m sorry she’s a contract attorney some real estate transactions but she’s in-house counsel for a company we just decided that you know we’re gonna make this real estate development company that we have our full-time gig or my full-time gig. And so we sold the company the original company that I started and here we are now I feel like you know I told you earlier I feel like not sounding arrogant but I’ve I’m seasoned by 40 and I thought I’ve got the answers to the test.
Rod: So you’re like the Space Shuttle with the on the launch pad with the steam coming out of the bottom
Chad: Yes sir absolutely. I’m pretty sure you’ll agree with this if you’re gonna take some risk my gosh when you’re 20
Rod: Yeah yeah it’s much scarier when you’re when you’re when your tooth like me of course I’ve got socks that have a decade on you but you know it’s still I hear you now I want to circle back to a couple things you said
Chad: Yes sir
Rod: because I’d like to actually clarify them. You said you got to have money to do this business and I’m gonna tell you that you don’t need a lot of money to do this business as you’re gonna discover you know we’re gonna talk about syndication here in a minute but if you’re the one bringing the money to a deal which is I think the direction you want to go you know it really it’s a team sport and you can find the money to do your deals, you can find the money for your at-risk capital, you can find the money to for the equity, you can find the money for pretty much every piece of this. Now doesn’t you know you I tell my students my coaching students to use their money for operational purposes even the millionaires on that are in my coaching program that have you know ten billions of dollars. I tell them don’t use your own money. There’s so much money out there looking for deals right now. Use your money for the earnest money, for the for the due diligence cost, to do the building inspection, for the finance cost, to put the financing in place. All of which you get back from the deal but so I just wanted to you know really say that your way of doing it where you raise them you made the money you sold everything because you want to manage anymore I remember you telling me that before we record it to get into this business is a common way that it’s done. But I mean I’ve got students that have done it with very little of their own money. So I just want to flag that
Chad: Yes sir absolutely and I’ll clarify at 23, what I said money it wasn’t much but you know what you said startup money or our living expenses. So you can’t roll into a project with a rainy day without a rainy day fund
Rod: Yeah I agree agreed unless you’ve got, unless you’ve got a partner that’s got it you know I like in my case when I was in my twenties I bought tens of millions of dollars worth of property and none of my own money fifty-fifty on JV partnerships you know I just talked a good game did you know was able to influence people because I was so passionate about it. But now I want to circle back to something else you said which is really powerful and those of you guys listening. Sales is such a critical component of this business and the fact that you had a car dealership I mean doesn’t get any better than that for sales training I mean you know that’s the ultimate in sales training. You’ve got a few minutes to make it to build rapport and then convince someone to buy an asset and so you know those of you listening be sure that you spend some time learning how to sell. You may think that that’s not important but it absolutely is important. In fact, back to my students for a minute, I give them lots of gifts and one of them is a sales book because it’s you know they’re like well why am I getting a sales book because you gotta sell yourself you know like, Chad, you’re gonna be out there raising money you know for other people’s deals you know it’s all about building relationships but I love your story about renting a room to pay your mortgage brother and you know I hope you guys are listening I mean that’s just so awesome or buy a Plex and rent half of it. I mean what an awesome way to get rolling. So talk about what you’ve done since you sold out. I don’t want to steal your ponder. Let’s talk about what you’re doing syndication wise and what you’ve done so far
Chad: Sure you know after selling the company and moving forward, I have a development company that I still build, that’s my passion as far as building and I’ve built some smaller multi-families but
Rod: Yeah you said you built some five plexes I think is that what you said?
Chad: I’ve sold my smaller units and I kept one five flex that I still have to this day but you know it was another learning experiences especially listening to guys like you and your show and the fantastic learning experience that you can come and get from that you know I was to the point where I wanted to scale up I knew that I couldn’t scale up alone. So I reached out to several different indicators and started learning the industry and I knew that I wanted to be a part of that so I’ve invested in, my wife and I’ve you know I said we had sold just about all of our portfolio and wanted to go that direction. So you know I love that you know
Rod: So you invested passively in some operators? you checked them out. You invested in their deals. So guys I wanna kind of drill into that a little bit with you since you brought it up here Chad I think it’s a fantastic way to get into this business is to start passively. I mean like right now are you still in the Dallas metro? still in that general area?
Chad: Yes sir I’m a suburb of the Metroplex
Rod: Right we’ve got an asset right now under contract we’re raising money for and you know with so if you’re accredited for God’s sakes reach out to us but the point here is what’s great about that as a way to start is not only do you learn a little bit about what’s going on with the business but in my case specifically I mean I make it a real effort to teach my investors what we’re doing. So we do webinars I record them and we talk about these you know the different stages of this from you know putting it under contract, arranging the financing, to the reposition, the work we do, the capex we do on the property to you know ultimately it’ll you know we’ll be talking about the exit strategy, and the disposition but you know what’s great about starting passively is not only do you get to learn like I just described but you also, it goes on your resume okay. So you know when you talk to potential brokers and potential investors you can tell them you’re in a few hundred deals or a few thousand deals whatever the case may be yeah cuz you are. I mean, I’m sorry not deals a few thousand doors. I’m sorry you can tell them you’re in a few hundred doors or a few thousand doors and certainly then you’ve got instant credibility number one but you know because it’s on your resume and also when Fannie and Freddie agency debt looks at you they look at that as experience. You’re gonna get a better interest rate and so it’s just a great way to get started. So you know and it’s not uncommon you know this that you’ve taken from single family to now you’ve actually done some development and bought some plexes – now passively investing and I know that the next step for you is active either raising I think you saw you want you’re gonna raise money for other operators is that the smart are you thinking
Chad: You’re correct I mean I felt like I needed in order to what we talked about earlier has skins on the wall. I feel like my resumes great as far as from from the experience side but you know I’m a player on that deal. I wouldn’t I didn’t talk to you about that earlier but I went and drove by that product it’s in my backyard there
Rod: Oh the one that we have right now? Awesome
Chad: You know again when I drive up to something like that from an investor side, I know what to look for, I know what type of demographic areas to talk to, ask questions about. I know all the questions asked so yeah no doubt. I mean it from being a student from having skins wall I you know I’ve prepared myself for this particular moment and you know not that I was afraid or not I’m not that I’m afraid to go in alone, my egos not big enough. This is a team sport that thanks back to for me playing for you know basically it is a early team sport and I felt like I was a one-man band with the thirty units and I knew if I wanted three thousand units that I need to hitch my wagon to some good teammates and that’s kind of where I’m in
Rod: I love it you know honestly life is a team sport my friend you know it’s not just but definitely multifamily real estate is and like I said your progression is very very common and you know sometimes you know people stay in the passive side long term or forever but many of them have aspirations to go active and that’s why you know I decided as part my program you know I want to incorporate the educational component because just because I freaking love it that’s the bottom line. But guys if you’re interested in talking to us and looking over our shoulder just text “partner” to 41411 and we’ll get you on Robert or my calendar to chat but you got to be accredited. Now you know certainly there are ways to do syndications where you don’t have to deal with accredited but in that case you have to have existing relationships what’s so great about the new laws as you can advertise like I can mention this on the show. In the past you could never do that as long as you know as long as I’m going to accredited investors but there’s also a new syndication out there called Reggae Plus where it takes a little longer to get it done but you have to have the books audited but when you do that you can actually advertise and take sophisticated investors which is kind of cool it’s something we’re looking into on one of our deals but so let’s back up and I want you to give some advice to people like where you were before you got started. And there’s a lot of those people listening to this show Chad and I know you can add value to them for sure. So first of all you know when you were starting out did you have any aha moments? I mean any anything come to mind you talked about one of them where you where you rented out that room and it was like holy shit I got my mortgage paid for. Anything else come to mind when I ask that question
Chad: Yeah real quick I’m still friends with that he’s great friend of mine and my wife and I just sold that unit we bought for 80 grand we sold it for 260 and he was like you son of a. I said hey you paid the mortgage for the first six years buddy.
Chad: You know I get asked this question and there as far as real estate advice it’s simple. You find a mentor and it’s that simple and you know that’s what I was talking about earlier about being in a large institution like A-M. It taught me how to interact and taught me how to ask questions. A lot of kids this days, you cannot be afraid and I tell people all the time find a mentor, do not be cheap, go buy dinner, lunch, buy them coffee and then invest in a deal. Maybe bring a deal to him you know the old adage of 50% of something’s better than 50% of nothing
Rod: Yes sir
Chad: You know I tell him Rod you know this, the generation above me, my father or that particular generation and they’re badasses in my opinion. They’re tough, they blaze the past for us and they will bleed to tell you information. They will tell you their story. They will tell you their success story and they’ll tell you what not to do and to me I don’t give a shit about a college education or boots on the ground or sweat equity. That is invaluable when you can hit your wagon to somebody that has been there and give you life lessons and tell you what not to do. And so I made it a point when I was 20 years old to hang around older friends and I still have every one of those today. They have all been a very important piece of my success and I mean quite frankly my success is because of them. I’m yeah
Rod: That’s beautiful man that’s beautiful
Chad: And hear them tell you, you didn’t want to spend your 40s paying for your 20s and 30s and that was my goal was you know what I’m tired of hearing that so I’m gonna make it a point to not do that. So I want to set myself up for success in my 40s and not pay for mistakes. So
Chad: By any means I’ve made a lot of them but I feel like I minimize those from having mentors.
Rod: Yeah no I appreciate you mentioning that and I’ve had scores of mentors over the years and have mentors now. And now I went ahead and created my master mind and gosh were up to four billion in assets in that thing. We’re meeting in San Diego in March and this four billion in the group in assets represented and you know just and we meet for one purpose and that’s just to help each other. But guys those of you there out there what Chad said is brilliant and most people even you know you mentioned that generation certainly that generation wants to help but people in general are happy to help you know if you come at them from a place of wanting to learn and if you especially if you can figure out a way to add value to them, you pay for lunch, you pay for dinner, whatever you know most people are happy to help and talk to you and tell you about their mistakes in their journey. And if you take a genuine interest in them like you know Dale Carnegie’s book, “How to win friends and influence people” and you allow them to talk and you ask questions my God, they’ll think it’s the greatest conversation they ever had because they’re the ones doing all the talking. So let me ask you this any seminars you know I’m sure you know what that term means if you listen, you said you listened to my podcast, any seminars that you want to mention in this journey of yours so far?
Chad: Yes sir I’m actually I’m going next weekend Rod which I believe is the twenty, I think that’d be the 28th multifamily convention in Houston, Texas
Rod: Oh I’m actually speaking at that one
Chad: You’re the speaker yes sir
Rod: I’m opening the ceremonies yet guys in fact let me mention that. I’ll make sure we put a link well gosh I should I’ll make sure we put a link in the show notes but I’ll also have it on my personal Facebook page and on the in the big multifamily group but that’s in Houston. It’s a one-day event. Nothing’s being sold. It’s my friends Faris Musa and Kenny Wolf putting it on and so you’re gonna be there awesome. We’ll get to meet
Chad: Yeah both great guys and I’ve talked to Faris and Kenny, had lunch with Kenny, and again you know fantastic guys. And one thing I’ve learned in this industry is you know the there is some very very very bright people and I love that that was something another gold mine was to never be the smartest person in the room and you always continue to build your you know build, create, and build your game there. But uh yeah both Faris and Kenny are gonna be there and I know you’re speaking there. So I’m super pumped you know
Rod: Yeah I know that’s
Chad: I sucked at networking but that my 2019 New Year’s resolution was to get out there and and go meet people
Rod: Love it love it yeah both Kenny and Faris are in my mastermind by the way and actually I spoke to Kenny this morning we’re doing a deal together right now but great great guys and that should be a lot of fun. And I’m bringing the boss with me so we’ll hang out in Houston a little bit before and after but so we’re looking forward to that little trip but so you didn’t answer my question though. I asked you if you had any setbacks or seminars as I like to call them as anything come to mind where you got your butt kicked that you billing to, if there was a lesson involved that you’d be willing to share
Chad: I bought a boat does that count?
Rod: Well I was hoping it would be real estate-related
Chad: I’m kidding I do not have a boat but yes sir you know I’ve got a great story that it’s real estate-related but it’s more you know paying attention to the signs around us. And it’s more and as far as my real estate development company either I was doing. I was building some spec houses but it’s a good story that I learned from I carved my way out of it and instead of this day my line of credit is still there but I had bought six lots, built six packs and saved the best lot for last and you know it was one of those things where I wanted build the nicest house on the street. It was the best lot and I got caught. I got caught in 2008-2009 just like everyone else but you know the rainy day fund was there. I went ahead and bought the house I couldn’t sell it I kept it for five years and leased it out. And I went against the grain on a lot of my you know my rules of thumb but so here I am a landlord about 70 miles from my house and I’d really didn’t want it. It wasn’t meant to be a a rental but what happened was I lost about 25 grand and I went into the local bank that I dealt with and I was a young kid at the time and they gave me a fifty thousand dollar line on credit. And you know back you know back to the mentor thing you know I developed the relationship with a partner and that was the bank and they gave me a 50 grand LLC and I still eighteen years later have this relationship with that same Bank and that line of credit Rod is a million bucks
Rod: Yeah I love it it’s a great story it’s a great story
Chad: All that is from is from doing the right thing paying it back and doing what I said I was going to do. And so they’ve extended that and they’re a partner if I, if or when I do other deals and they’re they have my back but you know I lost money in that deal but I learned so dang much and as far as the bond hold those you know you can get beat up on them but it’s kind of hard to if you’re if you buy it right which is one thing but you can you can sit on it and let you know let you know let the appreciation sit in and bail out at a later moment but that was my biggest setback and I learned a great amount from it and you know my biggest you know probably my biggest take out of that is really really see the signs. It’ve been easier settling that lot and wait for the markets come back but you know I got I got overexcited so
Rod: Yeah well well we won’t compare memos on 2008 you know. So knowing what you know now I know you’re 40 or above 40, what would you tell your 20 year old self about this business? What might you do differently?
Chad: Did I mention I’d buy a boat?
Rod: Yeah I just sold mine thank God. Actually I got my money back out of it I couldn’t believe it. I didn’t lose a dime which is very unusual
Chad: You know I mentioned mentor which is key and really surround yourself around the right people. I you know I try to tell youngsters if they ask me questions I will tell them to go put a deal together take action and be smart about it though they you know I mentioned earlier take your risk, take your moments when you’re in your 20s and when you got time when you don’t have a much responsibility, when you don’t maybe you hadn’t started a family yet, maybe you’re not married, maybe you can take more risk. But you know it’s one of those things where I ask questions and in building rapport you know it’s the mentor way. Go find a mentor
Rod: Love it love it love it. Listen brother thanks so much for being on the show I really appreciate it. I’m really looking forward to shaking your hand this next weekend and you know that’ll be fun and I’m gonna do my best to bring my A-game and add value there and it should be a lot of fun to see Kenny and Faris and all the other people that are showing up. I’ve got some of my students showing up there as well so that’ll be a blast. Anyway thanks for being on the show buddy and you definitely added value and I look forward to getting to know you better. And I’m sure that we’ll stay in touch and even after next week you know
Chad: Well I’ll see you next weekend and hey listen I appreciate really really appreciate what you do and having me on your show is fantastic. I’ve listened to every one of them and I’ll get on that treadmill and kill it and listen to you and man I love it. And I appreciate what you do I really mean that
Rod: Thank you. Thank you brother that’s very kind of you to say that. All right my friend take care
Chad: All right take care of it
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