Ep #369 – Josh Eitingon – 2 person company with 350 doors
Here is some of what you will learn:
- Real Issues that you Minimize
- Non-Issues that you Maximize
- The value of a mentor
- Understanding Cardinal Construction
- Hot markets in the South East
- Criteria for selecting hot markets
- Developing broker relationships
- Pushing through fear
To find out more about our guest: click here
Full Transcript Below:
Ep 369- Josh Eitingon – 2 person company with 350 doors
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 great value from the gentlemen we’re interviewing today. He’s super nice guy. His is name is Josh Eitingon and Josh has been over 350 doors in multi-family, also does retail, has some retail properties. He’s a co-founder of DXE Properties from Long Island but they invest in the southeast now and we’re gonna dig into all of that. Josh, welcome to show brother.
Josh: Thank you, thank you. Good to be here.
Rod: Yeah. So let’s have some fun. So Josh, you know, maybe you can start by talking about how you got into real estate, I mean, we’ll do the kind of the history on you because I really didn’t dig into that at all. So talk about why real estate, may be where you came from and how you got to where you are.
Josh: Sure, sure. So I am, going back to college. I was always drawn to maybe it was the simplicity of real estate, I think I started like a lot of people did with a Rich Dad: Poor Dad, reading that book on the train on the way, leaving from work. My intention was to buy a two-family house and to live in half, rent the other half. It just seemed like it was a very logical first step for me, through all sorts of networking and just being out there different REIA events and a lot of different places. I was connected to someone that I really liked who became a mentor for me and he encouraged me right out of the gate to go a little bit bigger and ultimately that pushed me and my first deal to, he connected me to a property manager out in Cincinnati who showed me a bunch of deals. I felt a level of trust with him and leaped with my first deal being a 20-unit deal in Cincinnati while I was still working full time for a software company out of college, basically.
Rod: No kidding. Okay. So, you actually bought out of your market. You, so, and now you’re, you know, in excess of 350 deals. I know you’ve worked, you’ve founded your own company, then you found another company it looks like and you’ve progressed. I assume now you’re doing larger deals. Is that an accurate statement?
Josh: Yes, it is. And I’d say, that first deal was a great step in and I learned, for better or worse, a lot a long way on that. I did after a few years and after that first deal made the transition from my software role into a real estate acquisitions role or first an analyst and then an acquisitions person.
Rod: So you actually went to work for someone on their acquisitions site.
Josh: I did. Yes.
Rod: Okay. Fantastic, fantastic.
Josh: And then, I borrowed whatever I could and the relationships I made out of that particularly on the acquisition side to really get deals in front of me that I felt were compelling.
Josh: That was really our trigger in our leap for DXE. Just a handful of good solid deals to be our base that we’re now building off of.
Rod: Okay. So back to that 20-unit. Let’s go back there because I have a lot of listeners that haven’t bought a property yet. So why out-of-state? Number one. Number two, how did you select Cincinnati? And then, what prompted you to pull the trigger on that deal?
Josh: So in hindsight I don’t know that I do that deal again.
Josh: But it did get me in so, I couldn’t in without it. I was drawn to it. Look, I was fortunate, it was 2012, so most of what he bought in 2012 you couldn’t really mess up too much on. But just the mentor, he was doing a lot of flipping in Cincinnati. He owned a few multifamily deals out there and this property manager was somewhat that he worked with and, frankly, for no other reason, I was comfortable with that.
Josh: I do think Cincinnati has a decent story in terms of just diversified employers, is a good population base, solid demographics, it’s not growing like a Charlotte but, you know, there’s a good positive base of people there, but I’d be lying if I said it was anything beyond comfort on a relationship, but.
Rod: Got it, got it. Okay, alright. So that’s probably not the one we want to use as an example then. So, because you relied on your mentor but let’s say this; do you see the value in having a mentor in this business?
Rod: Totally. I absolutely. If, at a bare minimum just as a voice in the back of your head, identifying that, is this a real issue that I’m minimizing or is this not an issue that I’m maximizing. I think that little push in the right direction is extremely valuable.
Rod: Good, good. Okay. So, I know that it was that the only property you bought there in Cincinnati, everything else has been elsewhere.
Josh: No. Let’s see. The second deal was a 44-unit deal also in Cincinnati. A little later did a 62-unit deal in Northern Kentucky which is feds …
Rod: It is definitely in Cincinnati as well, right? Okay.
Josh: Exactly. And then we went on, really all the acquisitions after that have been Southeast focused.
Josh: So parts of Florida, Atlanta, Carolinas.
Rod: Okay, okay. So, you use, obviously, use third-party property managers.
Josh: Right, right.
Rod: Okay. And so, what caused you to make the shift from Cincinnati? Was it a partner? And how did you select? What was the first other state that you bought in?
Josh: It was Florida.
Rod: Okay. We’re in Florida. I mean, obviously, that’s my backyard.
Josh: Panama City.
Rod: I love Panama City. I love it. Yeah, yeah, yeah. I’ve been there in a long time beautiful beaches. So what you buy there?
Josh: 70-unit Cardinal deal.
Rod: Awesome, awesome. What do you mean by Cardinal deal?
Josh: Sorry. It’s the type of construction is cardinal style. So, single story, it almost has a manufactured housing type of look to it. A lot of them we’re built in the 70s and 80s. They were almost built as the affordable renter unit. They all have these PTAC units that do heating and cooling through the wall and they’re all very-very small efficient units. They were meant, again, as renter, for renters, for the owners where you’re you could almost buy parts and everything out of a catalog at least that was the thought process back then.
Rod: Interesting, interesting. And why, so, how did you find that? How did you select Panama City? Were you being a generalist or just looking for a deal wherever you could find it? Or did you target Panama City?
Josh: So at that time I was more story and deal driven whereas I would look at a deal and then back into the market. Versus these days were more so the opposite where we’re really only looking at maybe eight or nine cities total and not looking elsewhere.
Josh: But in that case, that was through a broker that I worked with on the acquisition side when I was working for the larger investment company and he knew that I was interested and did smaller deals and he put it in front of me because there was a good motivation. A group that just bought it a year before in a big portfolio that had all different types of asset classes and this just wasn’t in there, they were more so in the industrial space and office space and they were actually to peel this off. They bought it, it’s some of the distress and let us do the heavy lifting so to speak.
Rod: Nice. Now you like value-add deals, yes?
Rod: Okay. So, now you’re, tell me the markets that you love and your most heavily vested in now.
Josh: Sure. So right now we have re-deals in Charleston, South Carolina. Doing a project in Charlotte North Carolina. You know, we know Greenville, South Carolina very well. Even in Raleigh, Raleigh-Durham area, we also know very well. Open to Atlanta, admittedly not competing, especially Rone Atlanta and same with Jacksonville and lastly, actually not far from you, we do, we’ve been spending some time in Tampa but I’m also having a tough time competing in this…
Rod: Yeah. Tampa, Atlanta are tough, I mean, they’re, I mean, don’t get me wrong, we just, we’re always looking, we haven’t even taken anything down in Tampa ourselves. We’re closing on something in Sarasota, here, shortly but, you know, this is tough but, listen, I love every market that you’ve identified. So tell me, you know, tell my listeners what you look for in a market now? The sorts of demographics you look for and then maybe we’ll drill down on really what you’re looking for in an asset.
Josh: Sure, sure. So from a strictly form of population perspective, we won’t look at any MSA that’s less than, I’ll say, 500,000 but we’re really looking to be closer to a million.
Josh: We are definitely looking for diversified employers. Like, nothing against these markets of people are listening like a Fayetteville, we’re not going to look at just because it’s primarily driven by military and, you know, we’re just not comfortable with that necessarily.
Josh: You know, we’re looking for positive, population growth positive, job growth, any job announcements and again, diversity of employers so, you know, I mentioned Charleston, it’s a port city, big tourism base, big manufacturing presence and, obviously, I’m picking a lot of markets that are, you know, there may be sexier but there and they’re very competitive for that so that’s the tradeoff.
Rod: Sure, sure. And guys, jobs are the number one thing to look at when you’re buying multifamily and, you know, we don’t want any one-horse town and in one horse and, a horse can be a military base, because if the horse dies or runs off, you’re in big trouble and so we wanna see not just employer diversity, we wanna see a different industry diversity as well and that’s when you have a secure safe bet and so, you know, that’s one of the big things that you wanna look for. So, population growth, job growth. Alright, fantastic. So, what sorts of assets now do you target? What size range and, you know, what are some of the returns that you, you know, cash on cash and IRR numbers that you like to see or feel like are realistic when you’re looking at a deal?
Josh: Right. We’re, so, we do have a bit of a large range. We’re in the five to twenty-million-dollar deal size. We just think that the flexibility, especially now, is something that maybe we could offer that other groups don’t offer so maybe a little bit of a competitive advantage and the deal size that will chase. Return wise, we’re looking at deals on a lot of five to ten year time horizon and then we need to be in the fourteen to sixteen IRR range which is more moderated than we were a year ago, if you asked me that question, but I think realistic to have a little bit more moderated expectations these days.
Rod: Yeah, yeah. So, do you work strictly with broker relationships? Do you do any direct to seller marketing of any kind? How do you find your deals?
Josh: I tried the direct to seller side. Did some direct mail. I haven’t had a huge amount of success with it. I do think it works, but maybe I didn’t commit to it long enough or I think that’s what people say, it’s typically the consistency on that side, but I will say two of the better deals that we’ve done have come directly from property managers and not through brokers.
Josh: Which I, you know, I think they’re rare but I think they can definitely happen and in both of those cases we paid very healthy wholesale fees to the property manager that got us this deals.
Rod: Sure. Worth every penny, and, you know, I I’ve got someone in my mastermind that got, I don’t know, I think a couple thousand doors from his property management company so, I mean, they can be very lucrative relationships. So tell me, talk about how you develop your broker relationships and are you involved in that process?
Josh: They’re fine.
Rod: Okay. So talk about how you find the brokers and how you, you know, stay in communication. Some of the strategies used to make sure your top of mind.
Josh: Sure. I really-really tried to just have, it’s all about consistency in my mind. I think not to insult brokers but it’s easy to have like a short term thought process with brokers that they’ll maybe have an interesting deal and if they talked to you yesterday you’ll get it before the other guy that’s just as qualified as you are. So on an ongoing basis, we have our short list of brokers that we’ve either worked with before or I have a really good rapport relationship with, we’ll just touch base with. It could be every two or three weeks. We took a trip, probably now, it’s probably about a month ago, month and a half ago, where we were in Tampa, Charlotte, Greenville, Charleston. All in a week and we weren’t even going there necessarily with the intention of looking at deals, it was really just to be a face in front of a broker, grab a coffee, grab a beer and, you know, try to smile and just look and see deals. We’re absolutely offering on marketed deals. I think our expectation is, we’re probably not gonna win those offers, but I do think it helps continue to build that relationship and be able to hang around the hoop if something yells out.
Rod: Can’t stress that enough guys. You know, when you select a market, you know, you did, of course, you start those relationships over the phone, you get, you know, you ask them to send you deals, you’d be very responsive, but you’ve got to go break bread with them. They’ve got to see that you’re real and not just one time, I mean, you start yes, you got to go meet them and then they see your real, they see your passion, your integrity, they, then really the clouds part and you start getting more activity from them but then, you know, even well into it, like you are Josh, you go back down and the sole purpose of reigniting those relationships, keeping them warm and, you know, keeping yourself top of mind. Wouldn’t you agree?
Rod: Yeah, okay. And so, talk about now what, you know, what, how you develop your, you know, how do you select your third-party property managers? Let’s go there for a minute. So, you know, you’re obviously, you know, you’re, how do you find the best people in this business? Let me ask that question.
Josh: Well I would say this. It’s been referral driven.
Rod: Yes. That’s what I was looking for. I mean, that’s the answer I was looking for. I just wanted to hear someone besides me, okay? So, you asked for referrals and that’s the answer. So, you know, but do you work with some of the larger players and the property management space? Do you like the smaller companies? What do you look for?
Josh: So, we’re doing both. That the Panama City deal was actually managed by a really large manager. I think that managed 40,000 units across Arta and a handful of the Gulf Coast states and it worked and they took on a 70-unit deal and did a really-really good job and then at the same time, like in Charleston, we work with a smaller manager that manages about a thousand units only Carlson. I think there’s a case to make in both directions.
Josh: There’s definitely pros and cons I could say.
Rod: Well, let’s speak to that cuz I don’t think I ever have on this show and, I mean, I could speak to him. Let, you speak to the pros of a larger company. Let’s start there.
Josh: Pros of a larger company, I think, the scale behind it. So you lose an employee, you lose a maintenance person or salaried staff, they’re able to tap into …
Rod: Slogan play.
Josh: There, and to me, that’s the biggest, the most important piece of every deal, are the people.
Josh: To be able to insert and replace that easily until they find the right formula. I think it’s incredibly valuable.
Rod: The right person. Really, for that role and sometimes you go through two or three to find that person for that asset. Okay. That’s a great plus. What else?
Josh: I think on the plus side, they’re typically very good, you know, removing the noise in terms of contractors, you know, they’re gonna have contractors, they’re gonna set their standards from an insurance, from different deals they worked with where it’s going to be a shorter list. They’re not necessarily gonna be the most cost efficient list but, I think, they inherently are gonna bring a greater quality product at the end line.
Rod: No question. No question. I’ll add a couple of things. One, they’ll typically have a great training program for their people as well. These people that they’re putting on your assets so they’re very well trained, there’s typically a training department, there’s consistent training which is so critical. Additionally, they typically have a great marketing of training program as well and they’ll have, you know, maybe a whole marketing department that will help you market your asset, you know, very-very effectively so, you know, there’s just a lot of component pieces in a large management company that can be very a large management company that can really help. So now let’s talk about the advantages of a smaller management company.
Josh: So I think you could get more interest and care or as a maybe to rephrase, the smaller management company, the owner of the management company, is still our direct point of contact and she’s someone that has 20 plus years of experience in that business. So you’re getting a senior level person. That’s in the weeds with you, in a way that you’re not gonna get that same person as your day-to-day contact.
Josh: You know, I think they often will know the one of maintenance guy that might be able to come over and fix something for a couple hundred dollars and do it a little bit leaner. But I think the risk is that it could be challenging to you, for them on the staffing side, to be able to retain and be as attractive to the better base of employees, offer the same employment packages, cost all of those things.
Rod: Yep, yep, yep. Couldn’t agree more. Okay, okay. So, what’s, you said five to twenty million, well let’s back off for a minute here. Let’s talk about you for a second. So, you know, one question I love to ask is, if you could go back in time, I know you’re in the early 30s, you go back to you early 20s, is there anything you might do differently with what you know now? Something that might inspire or put a bug in somebody’s ear that’s at that place in their life that’s listening.
Josh: So, that’s a good question. I, you know, I think my answer would be just the education side and absorbing that much more, I would have out of college, worked for a real estate investment company that much sooner, and like, you know, I try to fight get a job at a gray star or a gray stone or from either perspective and just see how the best people are doing it and investing and learn from that level and at the same time I would still complement and take that leap on the entrepreneurial side and jump in young. I think, you know, you’ll force yourself to make it work. I think you need some base to work around to be able to take that leap, but ultimately the leap needs to happen to be able to put together a portfolio.
Rod: Well, I know, at least I’m guessing that you’re super analytical and so, I’m sure that that first deal maybe even the first larger deal was probably a real push, yes? I mean, there’s a real stretch for you to push through that fear muscle and all that, yes?
Josh: How could he sense that was more analytical.
Rod: I can just sense. You talk to as many people as I do, you feel it, and you said, that you, you know, and it was obvious by your role with, you know, on the acquisitions team and the deal analysis team and so I can tell. So, how did you push through that fear, brother? I mean, what did you do to, so for the people that are listening, that are in that place, there may be more a little more introverted, you know, not as comfortable starting new relationships, how did you push yourself out of your comfort zone?
Josh: You know, I think it’s a, what I, well, so I’ll say this, even my first deal that I did, we still raised or I raised a little bit of money for that deal which, again, I would never suggest that anyone to do. Maybe I was young enough and dumb enough at the time. Say, okay, let’s do this. What I did in that case, I also invested and I put my money before everyone else’s.
Rod: But back to my question. How’d you push through the fear? Was there fear?
Josh: No, there was definitely very much so fear. I think I assess individual risks and attempt to verify with whatever supporting case I can to push to that fear.
Rod: So you did it analytically. I mean, you literally just, you did a Ben Franklin clothes. You looked at the negatives, the positives and the positives outweighed the negatives. So you did it there. So it wasn’t as much of an emotional decision as it was a tactical one.
Josh: I try to always make it tactical. I think, from a personal improvement perspective, I think I have some, there’s some I’m improving I could do on, on the other side but, yeah, I’ve got spreadsheets all over the place.
Rod: Okay. Alright, alright. That’s interesting and that’s fascinating actually cuz I, you know, me I’m all about the mindset piece of this. It’s all about, you know, how do you get uncomfortable push through limiting beliefs, you know, fears and take action and you did it very-very systematically so that’s very cool and you added value. I promise you added value to some of the people listening and so, you know, if it checks off all the boxes or most of the boxes, then you have no excuse other than to pull the trigger, yes?
Josh: Look, I’ll say last sentiment on this topic that you throw in there. With every deal I’ve done, there’s always going to be you’re, like detracting bangs.
Rod: There’ll be some hair.
Josh: There’s something that swirls that makes you think, am I sure I want a job?
Josh: And ultimately, no matter how much you try to mitigate that risk, you do have to be willing to just leap and believe in the overall coming together.
Rod: And I’m sure the mentor, I’m sure the mentor helped a lot with that, of course, to give you comfort. Yeah. So tell me about a time you made a mistake. A real doozy.
Josh: Well I would say the biggest mistake that we’ve dealt with has been that first year, just the expectation that you said on the first year. You know, I think that no matter …
Rod: With your numbers, maybe you underestimated the vacancy or in the capex or how long, how quickly you could execute.
Josh: Turnover, bad debt. You know, assuming it, you step into more of a stabilized product than you are because there’s only so much, you could be as diligent as you want, verifying the deal upfront, but there’s still gonna be some unknowns that float out there.
Rod: Yeah. So, you know, I would say just the expectation that I may have set with investors for the first year being potentially more of a stable year than it ended up being and that’s becoming more of a re-stabilizing year. I would say that would be the one, you know, a mistake that I regret in something I could have very easily gotten ahead of and not turned off anyone from the deal.
Rod: Okay. Yeah, that’s great lesson learned. Let me ask you this; what kind of person do you think is best suited for multifamily? Active investing.
Josh: I would, I’d say a business owner. I think someone that really understands the people side of the business, that could read individual as well, and, you know, having a construction background certainly cannot hurt, but, you know, with each deal it’s almost like its own little mini business that you’re running.
Rod: So it is. You create a business plan on, I mean, it’s really, your plan for the property is a business plan, so you’re absolutely right, it is a little mini business. What’s the most challenging part of the job that you do now? I mean, what do you think is the most challenging, Josh?
Josh: So, you know, I could, I always bucket it in two different buckets. You cross at least every day. We have …
Rod: I’m sorry, I didn’t hear you. What did you say? I’m sorry.
Josh: All the work that we do day-to-day falls into buckets.
Josh: Inside their heels bucket or the money bucket. Rd: Right.
Josh: So we’re either chasing opportunities or building up an investor pipeline or cultivating that pipeline.
Josh: You know, I guess the challenging part is that when we do have a deal, the rest of the world slows down for us, you know. We’re a company of two people and a little bit of part-time help and we completely stop and make sure that deal, you know, is vetted and tested in everything so …
Rod: You have families and everything else that, you know, obviously, right?
Josh: So the balance and then once we close and start implementing business plan and then we want to reset maybe on the acquisition side and other things so, really putting it into a consistent flow of business creation. I guess maybe a challenge that I would call out.
Rod: Yeah, yeah, yeah. That’s good and that’s helpful. So, you know, I’ve got a lot of aspiring investors that are listening right now, what would you tell someone that hasn’t pulled the trigger yet about this business? What where the wisdom.
Josh: My, maybe it’s dumb advice but it’s my go-to, it’s on very-very-very location-location-location oriented. I think that can secure most mistakes. I started in a rough, in a rougher area, rough submarkets, difficult tenant-based. I’d much rather say, spend a little more to win that deal that’s, you know, walking distance to whatever it might be.
Rod: Starbucks? Whatever, right?
Josh: Then try to jump in on your first deal that you’re gonna be active about in, you know, next to a pawn shop.
Rod: Right. Now, that’s a sound advice, brother. That’s a sound advice. Well listen Josh, you added a ton of value. I really appreciate you coming on the show and, you know, it’s DXE properties guys, and I really, it’s a pleasure to meet you and excited to see where this goes for you my friend.
Josh: Well, likewise. I appreciate the invite, thank you. No, my pleasure buddy. Well you take care and I’m sure we’ll cross paths again soon. Hey thanks for watching. Please subscribe to my channel and if you listen to podcast join me on iTunes, Stitcher, or wherever you listen to those podcasts just search for a Lifetime Cashflow to Real Estate Investing.