Expert Advice to Get You Started In Multifamily

Intro
Hi. My name is Rod Khleif, and I’m the host of “The Lifetime Cashflow Through Real Estate Investing” podcast. And every week, I interview Multifamily Rock Stars and we talk about how they build incredible wealth for themselves and their families through multifamily properties. So hit the “Like” and “Subscribe” buttons to get notified every Monday when a new episode comes out. Let’s get to it.

Rod
Welcome back to Multifamily Rock Stars. So as you guys know, this is where we interview people that are just flat-out crushing it in this business. And we show you the inside scoop on how multifamily investors are creating you know, incredible massive success in their businesses and in their lives. And I’ve got my co-host, Mark Nagy on the call. Mark, what’s up, brother?

Mark
Happy to be here for another one, Rod.

Rod
Yes, sir. Let’s make it happen. So we’ve got an awesome guy on the show today. His name is Derek Hogarty. And Derek’s got a very interesting background. And I don’t want to steal his thunder, but, you know, he’s done a lot of construction stuff. I actually want him to tell you because some of it’s cool. So welcome to the show, Derek. I’m glad you’re here, bud.

Derek
It’s a pleasure to be here. I’m honored to be here. That humbled all of the above. What you’ve created for everybody to learn from is really mind-boggling. I’ve been in the lifelong learning belief system for– I’ve been 25 years in business now as a general contractor, and I’ve tried to stay ahead of that curve. But yet what you’ve done in the multifamily market beats that. So I appreciate you having me.

Rod
Thank you, my friend. I appreciate you saying that. It’s kind of you to say that. So why don’t you take a couple of minutes and talk about, you know, your journey? Some of the things that you’ve done, just maybe the highlights of your bio here, which is very interesting, and particularly one of the things you worked on, which is kind of cool. So if you’d kind of tell us a little about who you are and how come you got into real estate and let’s start there.

Derek
No, great. Quick two minutes, not even. Went from framing homes, masonry within the engineering school. Went into engineering school, got out as an assistant superintendent in the Big Dig. Everybody’s heard about that craziness in Boston. In 2000– no, excuse me, I’m showing my age. In 1996, I went to my still mentor and he said, Derek, he said you don’t have any children. You’re not married. I need an addition on my house and you can get your job back tomorrow. So I went into business at 26 years of age. I was very lucky to win several awards early in life when my ego worried about that stuff. I think he’s the Massachusetts contractor of the year, blah, blah, blah. Fast forward, 2005, I sold the business and moved to Charleston, South Carolina. Had my only three-year stint in life in corporate America. As, you know, Vice President of Construction for a larger national firm, it just wasn’t my cup of tea. And had the pleasure, displeasure, honor, craziness to open up my business in 2008 here in Charleston. So I’ve been very lucky to act on referrals ever since that day. So it has been a little funny. I joke about you know, not my Yankee accent in the south, but yet acting on referrals. So it’s been good. You know, it’s really not a hard concept. Just do what you say and back up your words.

Rod
And I’ll tell you, in the contracting space, that’s not the norm. I’m just going to tell you. So, you know, it is really you know you’re being very humble. You’re a very humble guy. So why real estate, brother? Why? Tell me–

Derek
Yeah. In 2019, I learned very quickly that I was working in the job, not in the business. And I really thought that– I did go to another person’s weekend away in the Cleveland area, and I didn’t take any massive action. I then started following you on Instagram and all the social media, and I aligned with you due to the fact that your story aligned with some of my values we’ve seen in the construction industry. And then I give you big props all the time of you catapulting out of the valley and capturing everything you rightfully deserve again.

Rod
Thank you.

Derek
I truly became a Warrior because of that story. True story. The bonus plan is meeting Eric and all the other great people in the Warrior group. I mean, there are so many like-minded, cool, selfless you know, to help the group as a whole, people involved in that. And even to digress just one second on the processes, I didn’t know how much it was to invest and be a Warrior for call five because of how often they– how like-minded they wanted you to be and make sure you aligned with everybody else as a Warrior. I was like sold. I’m like, how much? Tell me. I want in.

Rod
Yeah. We do have a bit of an application process because we take it very seriously, you know. And I know that you were at our last Warrior event. Correct me if I’m wrong, you were at the previous one in Sarasota, correct?

Derek
Previous. Yes, I love it.

Rod
Yeah. You weren’t at the one we just had this weekend, I know, but, you know, you got to see just how incredible the ecosystem is. And now you’ve been in it for a while and you see it. We’ve been really blessed. The caliber of the people is just extraordinary. I’m sure you agree, yes?

Derek
Very much so. And I don’t want to leave anybody out, but I mean, there are at least a dozen people, 20 people that I could refer to you right now that I could call and they take my call. I even live in the same town as Jonathan and Sam Wells. And we get lunch sometimes and Ian Schmidt. And I’ve got another fellow Warrior coming down from Jersey to look at an asset. So he wants to believe in what he’s going to capital raise for. So it’s really been a great– you know, wrapping yourself with the like-minded and– it doesn’t matter what profession you’re in. We just want for the good of the team.

Rod
That’s it. Yeah, that’s it. And now you joined really in June of last year, so not even quite a year yet.

Derek
Yes, sir.

Rod
And you’re already in, what is it? 132 under contract and you’re in how many?

Mark
105.

Rod
Yeah. 105 already. And I know we had expressed potential interest in that 88 unit you bought, which I know is a screaming deal. You’re killing it. And I’m actually kicking myself a little bit for not being more influential on my team. But my team is a democracy, so I kind of go with what they all agree on.

Derek
I understand.

Rod
But I will make sure to rub it in their nose the next time we have a meeting about how well you’re doing with that asset.

Mark
I’d love to hear about this deal because you’ve mentioned it a couple of times like how did you find it? Why is it such a good deal? Tell us about this first deal.

Rod
Agreed. Let’s do that.

Derek
True. Okay. Early in September, I did land 16 that I closed on, which got my feet wet. And then I quickly learned that you put the same effort into closing 88 as it takes to do the 16. I’ve been planting seeds since 2020 with brokers, and a broker brought us this fractured– you’re not going to like this, Rod, fractured HOA condo deal.

Rod
No, I remember it, buddy. I mean, I remember it well.

Derek
What made it a unicorn is that the owner of all 88 units– well, actually 87, we bought one more to become 51% of this HOA put everyone in a month-to-month agreement so he didn’t gain any big balance due to Covid rules. That allowed us to introduce our– the one-third of our business model unilaterally on the first month of purchasing this product. This person did not have any debt service, so he was well below market. We bought an average door price of about $715 a door for a two-bedroom, one-bath product.

Rod
The rent.

Derek
Yeah. The rent was $715 a door. Yeah.

Rod
Right.

Derek
We are now getting $1150 and with multiple backups per door at each turn with a 435 plus or minus on average spread and then times 88 times 12 is a nice appreciation in one calendar year.

Rod
Fantastic. What is that in millions?

Derek
3.8 sir.

Mark
Wow.

Rod
3.8 million increase in value. Good for you, brother.

Derek
We paid 4.635 when we added all the ADA.

Rod
Good for you, man. I think it was the fractured condo that scared my team, you know. And then I saw recently you closed on that final unit because, guys, you know, when you own 51% of a condo complex, you own the whole HOA. So you dictate what happens, what gets spent, what doesn’t get spent, how things are handled, which is what’s critical. And with a condo like that, you’re handling all the exterior maintenance. And so, you know, it’s not like a situation like you might buy a duplex in the middle of a bunch of duplexes. That can be a bad situation because if the other owners aren’t taking care of their units, it’s going to reflect badly on yours. But in your situation, because you control the HOA, you control the exterior appearance of that asset, and [inaudible] either wiser. So it’s really a great situation. So kudos to you, brother. Congratulations. You freaking deserve it. I know you worked your ass off for that deal. I saw you post pictures of you with your truck filled with parts and materials for it you know, in the Warrior group, which is awesome.

Derek
That is true.

Rod
Yeah, good for you.

Derek
I’m the excuse remover is what I call myself.

Rod
Oh, I like that. Oh, I like that a lot. I know that you partnered with your coach Eric on that deal, and he’s a partner in that, KP in that, and you used the guy we love for financing Tyler for the financing. What’s next, buddy? What are you looking at?

Derek
You’ll be slapping my wrist right now by how much cash we have released due to some delays and closings. But we have another 64-unit within 10 minutes of Columbia that this is almost– very lucky that not only has the rent gone up almost 50% since we’ve had this under contract, but yet they are implementing our proforma with $17 more per door than we had in that proforma. Had a significant setback, a 75-day delay in regard to banking. And then all of a sudden, if you can believe it, it was a California bank. So they literally withdrew last week. We then, with the excuse of not– that wasn’t in their region, I’m like, who put the address on the term sheet?

Rod
Yeah. Right.

Derek
An intern, maybe? Lo and behold, that same fellow professional took us under his wing and we’ll be closing that forest and rectifying, turning the negative into a positive. And then we have another 48 units that has always been under his care in Florence. And then I just submitted a letter of intent for 10 units, five duplexes in North Charleston, not too far next to the first 20 that I had under agreement, put closed on in September.

Rod
Bam. Man, you’re not letting any dust settle, brother. Very impressive.

Mark
You’re charging ahead.

Derek
Well, I knew truth be told, I am a new empty nester, so I have time on my hands, unlike a lot of other people in the Warriors. So they give credit where credit’s due, you know, I’m very lucky to have my children be thriving in other professions. They didn’t want to go down this contracting route, which I don’t blame them. But yet, being an empty nester and thoroughly enjoying what I do, I’m actually in the midst of trying to find a general manager for the construction leg so I can dive 100% into the multifamily.

Rod
Yeah. That’s really smart. I’d encourage you to give them a little piece of the action so they have ownership, you know, and they’re incentivized to treat it like– I’m sure you’re already going to do that. Treat it like it’s theirs, but good for you.

Derek
Thank you, sir.

Mark
So how are you feeling about– obviously, so many people are hesitant, fearful about the market, the way things are going, obviously, one of the big banks in California just closed down, and that’s going to hurt inflation. The Fed’s trying to help inflation, all kinds of crazy stuff in the world. And the market, the real estate market right now, are you excited about where the multifamily market is going? A little nervous, both. What’s your feeling on things in the next year or two?

Derek
Well, just like anybody in business and maybe being above the 50-year mark, you know what you know, and then you admit what you don’t know. And so when you come to the conclusion of admitting what you don’t know, you try to surround yourself with the person that people that do. With that said, you know, very, very lucky to have aligned with Eric, any Warrior. I mean, even Canadian friends in the Warrior group are assisting me with some input like that, Ravi, and stuff like that, Rasool. I mean, there are so many references that I can call. You know, even Damion is up in Jersey. I mean, it can go on and on. Then the California friends, then they’re in the trenches of it. So I’ve been very lucky to do my underwriting. I am a numbers person. I do enjoy that aspect. So I will bring it all the way through a letter of intent, all the way just to form a GP split. And Eric, I’ll never forget it. In the heat of the closing of the ’88, he made me watch the 90-minute video to do my own GP split versus he teaches me how to fish. He doesn’t give me the fish.

Rod
He’s an excellent coach and a great guy. He was able to make this last Warrior event as well. And we’ve got a lot of excellent coaches. And that’s the thing. We don’t have professional coaches. We have operators that decide they want to help other people, and they take you know a handful of clients a piece and coach them.

Derek
And give back.

Rod
And that’s my coaching program. That’s my Warrior program. Exactly. They give back. But, you know, they typically have at least a 1,000 units themselves. And you got a good one. No question.

Mark
And by the way, he was on the podcast, should be two weeks ago now. And so listeners, if you want to listen to Eric and get some other feedback on the other side of what Derek is talking about, go listen to that two weeks ago.

Derek
Yes, you’re right. I was at my retreat and listening to it. So here I was at another retreat, and Eric syndicated entrepreneurial retreat, listening to my coach and you guys. So it was great.

Rod
Nice.

Derek
And, you know, my goal is 500 this year to be 100% transparent. And that’s in my daily mantras.

Rod
Fantastic.

Derek
But I don’t grow too big, too quick. You know, that’s one thing I would promise my team that if it has to be 300, okay, you know. If it’s 400, okay. But I will always done the preface of under promise, over deliver versus the opposite.

Rod
Yeah. No, that’s smart. That’s smart. So let me ask you this. You know that we get a lot of aspiring real estate investors on this show like you were before we met. And some of them know they need to make a move. They haven’t making a move yet. They need to learn something. And maybe if it’s not even this business, it’s something because I really think an incredible opportunity is coming in our space and really economically all over in all spaces, buying businesses, buying other asset classes, even single-family, although I don’t push that. But, you know, for someone that hasn’t taken action yet, you know, speak to them for a moment.

Derek
And I didn’t either for almost two years, at least from 2019 to 2021. I made excuses. Oh, I’m a single dad. Oh, I got a busier general contracting firm. I’m doing fine, etc. It’s excuses. I would tell somebody to pick a date, an important date. I was at an event where someone chose their anniversary as they’re going to quit their W-2 job so they could celebrate their quitting their W-2 job and their anniversary simultaneously that night. And then you got to read it– I have a daily mantra that I put on a piece of paper, and they need to visit that. I have a morning regiment. If I didn’t have my morning regiment, I would be [inaudible]

Rod
I’m not going to let that go by. Give us your morning regiment, brother.

Derek
Oh, boy. So it started off based on the 5:00 AM club move, plan, grow, get up, and exercise. Then you plan your day. I do a power list since I did 75 hard three times, four times now. And so I created the top eight priorities of items that I need to achieve that day selfishly for the good of the firm or the good of Derek Hogarty. And it gives you a good visual to refer to once your world tries to knock you off you know, balance again. It also gives you a little dopamine hit when you’re checking off the little list like, oh, little wins each day. And then the grow is either meditation, reading. You know, I read a bunch about energy and frequency and, you know, stuff like that. And the “Power of Intention” is– I’m reading it a second time now by Dr. Dyer.

Rod
I literally just talked about that this morning. It’s so crazy. I just recorded an Own Your Power clip on Connection. And I talked about vibrating at different frequencies, literally.

Derek
Absolutely.

Rod
It’s crazy that you said that because you know I really believe we vibrated different energies. And as you self actualize and you look in the mirror and you become a better person, your energy levels increase and people fall away and new people come into your life because I think people that vibrate the same energies attract. And I know some of you are like, oh, good God. Some of you are like, get out of the foo-foo land. Get back to real estate. Well, you know, there’s a reason that people that are successful talk about this stuff, so don’t discount it. Trust me.

Derek
Absolutely. Yeah. Absolutely.

Rod
I was just going to say the power list is something I’ve done, which is– you know, for people listening, “The Power List” is by Andy Frisella. It’s a list of actual action items that you want to do for that day. It’s not a list of goals per se. It’s things you can physically go and do, which is why it’s so powerful. There he goes. He’s showing them on video right now.

Rod
Those are your daily power list?

Derek
Those are completed power lists.

Rod
Oh, that’s freaking awesome.

Mark
And the check marks.

Derek
And then what did I do– did I win the day? Yes or no? And what helped me win the day?

Rod
Oh, I love that. So that’s Frisella. Yeah. You know, I used to do a little note card with six things on it that I would check off, but I like that better. Just the visual aspect of checking them off and the fact that you’ve got this stack that’s almost 10 inches thick of these daily hours so you can look and you can celebrate on an ongoing basis what you’re getting done. That’s brilliant. I have to give Andy kudos for that.

Mark
Yeah. So you mentioned– you know, we were educating from 2019 to 2021. You know, my curiosity, what changed? What made you decide to actually jump in, take the action? What was the spark for you?

Derek
So an absolute positively, Rod’s story. Being at this top, losing it, and coming back, I’ve hit several valleys in life. I’ve had some people tell me to go out of business. My consultant tells me to go out of business. I’m like, you’re gone. No such word as can’t or quit, you know. I even coached my baseball teams. I’m sure my son would roll his eyes if he heard that again right now. I taught all the youth that. So long story short is there are other people in this market, but they have not lived and succeeded, lost it, and got it back like Rod has. I totally aligned with your story. I knew that I wanted to align with the Warriors due to that story. And then the last piece of the puzzle was really getting the coach and Eric. And then him, we’re wired alike. I may not have been military. I tried because I had asthma. They didn’t let me in when I was young, whatever. But because we were wired so alike, he did push. And even the gentleman that’s coming down from New Jersey to look at this asset to help capital raise, his Warrior coach said, S. H. I. T. or get off the pot. Go.

Rod
Love it. That’s the bottom line, guys. And that’s what our coaches push. Massive action. By the way, you know, if you have an interest in the Warrior program, text the word “crush” to “72345”, and we’ll help you crush it in this business like we’ve helped Derek and lots and lots of other people. And that’s how you apply. And there’s an application process. I think I mentioned that previously, but that’s okay. You know, if you want something, if we can tell you want it, you’re very likely going to be able to join us. So again, text “crush” to “72345”, and you can look us over. We’ll look you over and we’ll go from there. So let me ask you this. In this journey so far, it hasn’t been that long, but just in– and maybe you could talk to something previous to joining us as well. But talk about a setback. You know, I call them seminars but talk about a setback. We have lots of them but maybe pick one. And if you feel like it’ll serve the audience and add some value if something comes to mind.

Derek
Don’t always take no as the final answer. And I was proud– it was weird. When Eric posted that you know, perseverance, he called Derek Cody perseverance. Now, that’s a mixture of hard-headed, no such word as can’t or quit. But there’s been many setbacks. I have been told to close the business. I have been told– and you just keep on fighting and you negotiated and I negotiated with my subcontractors. At one point, I lost four million dollars worth of signed contracts in Massachusetts and– that had signed. And I had 28 people, six trucks, office manager at 33 years of age, 33. And I had a two-year-old and a one-year-old at home, a two-year-old and a newborn, and about seven figures a month of AP and AR rolling at that time. So I visualize that. I got it. I loved it. I was rolling. Think you’re a baller.

Rod
Right.

Derek
And then something comes out that you can’t control. A lot of my clients were living on their margin. And then you probably remember that sir, back in 2003 or ’04 when the margin calls get called, I lost all those signed contracts.

Rod
Wow.

Derek
I couldn’t went bankrupt. I sat down with all my subs and said, listen, I owe you X. I’m going to convert the structure to cost plus. They’ll pay you direct and I’ll pay you 10% more. And it took me 10 months to pay that old AP and AR off to get into the black. It was not easy. It wasn’t fun. It was probably the catalyst of the divorce, I’m sorry to say, and not to go too deep. But yet in hindsight and learning, always learning.

Rod
That pain and upset can cause pain and upset in your personal life, too. I get it.

Derek
And not to– Derek and Kim were doing well. Derek and my ex-wife, we did well and we were fiscally savvy and we didn’t spend. And to have your client tell cause your fiscal demise, I had to take the high majority of our worth and put it into the business. Now, always trying to take the spin and turn a positive into a negative, I was very lucky to have six figures available to me. We put it in the business and fused it. And then as my ex-brother-in-law used to tell me, I put lipstick on a pig and sold it in 2005 to move the Chelsea, South Carolina.

Rod
Did you? You were able to sell it?

Derek
Yes, sir.

Rod
Wow. Good for you. Good for you. You know, you just didn’t give up. The moral of the story there is you didn’t give up. I mean, I remember when Covid hit, I had 800 people scheduled to be in Orlando. I’m like, what the hell are we going to do? And you could still see me on my video recording the video saying, we’re going to have it in this studio right here, which I created overnight. You know, sometimes you have to pivot. You have to innovate.

Derek
Absolutely.

Rod
And it was coming economically. You know, you may be listening and you may have it happen in your life. It could be a layoff, it could be a job, you know, some a business issue. And, you know, that’s when you roll up your sleeves and you just freaking make it happen no matter what. And I’ll tell you, Frisella and my [inaudible] are great at that conversation right there. I know. That’s how they roll. But, well, listen, I really appreciate you coming on the show, buddy. Unfortunately, I’m a little out of time here, but thank you. And I’m glad we are with you on.

Derek
It’s a pleasure.

Rod
No, and you absolutely added tremendous value. And it’s, of course, great to see you as well.

Derek
It’s a compliment. And thank you, sir.

Mark
Thanks, Derek.

Rod
We’ll talk soon, my friend. Take care.

Outro
So one other quick thing. We encounter so many people that are frankly frustrated. They’re looking in the mirror and they’re frustrated that they haven’t been able to escape the rat race. They haven’t been able to build cash flow to the point where they’re able to have financial and time freedom with their families. And maybe they see other people buying real estate and creating incredible cash flow and they think well, it’s just scary. You know, buying apartments is intimidating. And I get it. See, that’s why we created our Warrior Mentorship Program. They’re our coaching students, and they’ve had extraordinary results. My students, I’ve been teaching about five years, and they own upwards of 140,000 units now that we know of, right? And we feel like it’s just getting going. Now, we’re looking to grow this group and really take it to the next level and honestly believe that the greatest transfer of wealth could be upon us right now with this current economic environment. Everything’s going on sale. So we’re looking for people who want to follow a proven framework, really like a blueprint or a map, literally step by step. And then they’re able to leverage our systems and our incredible network to raise money and equity, to find deals and close those deals and build partnerships, really nationwide. So if you’re interested in finding out more about how you can become more in our incredible network and take advantage of the unbelievable opportunities that are upon us, you can apply to my Warrior Mentorship Program by texting the word “CRUSH” to “72345”, or you can go to “MentorWithRod.com” and what we’ll do is we’ll set up a call so you can check us out and we can check you out and see if it’s a fit. Now, again, you can go to “MentorWithRod.com” or text the word “CRUSH” to “72345” to apply, and we will speak soon.