Multifamily vs. Single Family

Full Transcript Below

Intro
Hi, my name is Rod Khleif, and I’m the host of “The Lifetime Cash Flow Through Real Estate Investing” podcast. And every week, I interview Multifamily Rock Stars. We talk about how they built 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 Star. So as you guys know, this is where we interview people that are crushing it in this business and in their lives. And we show you the inside scoop as to how they’re creating that massive success. And as always, I’ve got my co-host, who is the director of our massive action team for our warrior group, Mark Nagy on the call. Mark, what’s up, brother?

Mark
Hey, not too much, Rod. It’s awesome. We’ve been doing this long enough now, I don’t know. We’ve been doing these episodes maybe about eight, ten months, something like that. And every week I’m starting to keep seeing these familiar faces pop up since I’ve joined the team with you. And no different here today. A year and a half ago, met this guy and excited to hear about what he’s been up to.

Rod
Yeah, well, he’s been doing a lot, so it’s Tim Fergestad, and we’re lucky to have him here. And he’s an LP and GP and over 1000 doors. And he’s got an interesting background. In fact, you know what? I’m not going to steal his thunder. I want him to say it. So welcome to the show buddy.

Tim
Hello. Thank you for having me. You guys are awesome. I’m a big fan of podcasts and this is one of my favorites, so it’s a treat for me to be on here. Appreciate it.

Rod
Oh, thank you. Yeah. So why don’t you just give us a little background, because it is not your normal background. So, yeah.

Tim
Okay. Well, yeah, I started as a scientist. I have a Ph.D. in neuroscience, and my wife is a physician. She’s an M. D. And so we have a lot of schooling, I had a lot of income, a lot of taxes and no financial training and no free time. And so, in 2006, my wife finished her residency and became the breadwinner, and she got pregnant with our first kid. And so if you remember those years, those were interesting times economically. They were hiring freezes and universities funding was terrible and stuff. And so we decided– she’s a breadwinner, I’ll be Mr. Mom for a while and raise our kids ourselves. And long story short, when she’s doing a 24 hours OB shift or something, I’d be the fill gap. Right? I’d be doing everything else. And I decided to pivot into real estate because I always liked real estate and it’s something that I can do on a more flexible schedule. So I got my license here in Arizona and wanted to–

Rod
You got your real estate license?

Tim
Yes.

Rod
Okay.

Tim
And I wanted to fix and hold some plexus here in Arizona. But I soon learned I didn’t really like the market here at the time. There’s the 1% rule when you’re looking kind of at the residential models and stuff. And it was more like the half a percent rule. Still kind of is here in Arizona.

Rod
You know what’s interesting is it was 2% when I first got started.

Tim
Right.

Rod
I was able to buy houses, you know, for 20 grand and rent them for $400 a month, you know. That’s 2%. And that’s how come I was able to explode with my single-family portfolio. But, you know, what made you think about getting into multifamily? I think you joined the Warrior program about a year and a half ago, is that right?

Tim
Yes. A year and a half ago. I got some single-family rentals in other markets where the numbers made a little more sense. I started a land wholesaling company. I tried some other aspects of real estate. I became a passive investor in someday I knew here locally syndication, apartment syndication and that was in Las Vegas. But I tried doing some plexus remotely actively myself in different markets like Columbus, and I had a good contractor and agent. I thought I did, and I tried to put in– as soon as I find something about ready to go, they’d go dark and I’d have to set it all up again. I got frustrating. I missed your summer event. Some friends that I knew here were going– is that in L.A.? Maybe?

Rod
Could be. Yeah, I’ve done a couple in L.A. I lose track. You know, they run together for me.

Tim
Well, I couldn’t make it, but then I got on your mailing list and got a notification for a virtual one, and so I managed to make that.

Rod
Wonderful.

Tim
And that was awesome.

Rod
Awesome.

Tim
Thank you very much. It was–I think you recruit or attract a– people with a growth mindset, right? An abundance mindset and they want to develop– I really liked your– your mindset stuff is very powerful, and that’s– I really a–that appealed to me. And so I was attracted to that.

Rod
No, I appreciate it. Yeah. I mean, that’s really what the brand is known for is, you know, people actually taking action with what they learn. You know, it’s not just the technical side of things.

Tim
Right. To answer your question, though, the why multifamily is– the single-family did okay, but they were kind of a hassle, and my multifamily outperformed it by a lot and was much less of a headache. So it was clearly an easy transition to realize the scalability and all that. I’ve had some weird tenants and other stuff I’ve had to deal with, and so that was healing.

Rod
Right. No, it’s nice when, you know, you can have, you know, third-party property management handle that stuff for you. So you’re not dealing with toilets and tenants. And that’s one of the beautiful things about multifamily.

Tim
And one vacancy doesn’t kill you.

Rod
Right. Exactly. One vacancy in a house and you’re 100% freaking vacant. Right? And it’s not a big deal otherwise. But, yeah. So, in your GP role, what role did you play? I don’t want to assume. You know in this business it’s a team sport and people wear different hats. Did you wear all the hats or did you help in one particular area?

Tim
Right. Not in that deal. That was my first deal. The GP was last year, and I got that through networking, through the Warrior group. Really. And that was with Sam, and they wanted some help with the at-risk capital and some of the capital raising. So the two things I was able to participate in, and I’ve been able to learn the asset management and stuff through the process as well, which has been great.

Rod
Fantastic, fantastic. So how old are your kids?

Tim
15 and 12 now.

Rod
Okay.

Tim
They still take a lot of time.

Rod
Yeah, sure. So how do you manage that, you know, with the kids and still, you know, work this business and talk about that for a minute?

Tim
Well, in the past year or so, largely thanks to your generous books that you send as well as the training stuff. I’ve sort of managed to block my time a little better. Right? I’m more efficient with it. I also get up earlier and am more productive in the morning before they even get up. And I get a lot done. And then, I think I’m more efficient again in the windows when they’re at school. I get a lot done. When they’re home, it gets tough.

Rod
Right. No, I get it. Teenagers. Good Lord. But, you know, one of the things, guys, if you’re listening, that I spend a lot of time on because one of my biggest regrets in life was coming home to my kids and being distracted, not being with them, not being present. So, you know, I teach a planning process that includes blocking time, which is what Tim’s referencing, which is very, very powerful. It’s how I managed a couple of large companies at the same time. Yeah.

Mark
I know you mentioned mindset there, Tim. You know, you went from single-family, passive investor, multifamily, now active multifamily. What are some of those big mental hurdles that you’ve had to overcome, you know, along that journey there?

Tim
Well, one of the biggest ones was I didn’t realize these sorts of private investments were available. I really didn’t. I thought I just had to invest in the stock market and do what my financial advisors have told me. And I didn’t even realize that. I thought that was only for the rich or the real estate insiders. Right? And so, that’s one of the things I want to share with a lot of people, a lot of my colleagues, and other stuff. I want to let them know that these are options because most people or a lot of people don’t know about it.

Rod
Well, you know what’s crazy is–

Mark
When you say passive investments, you mean just multifamily–

Tim
Multifamily investments.

Mark
Right. In general, right? Just to let the people listening know.

Rod
It should be about passive investing in multifamily. I mean, you’re in the catbird seat, being in the medical community, for sure. I mean, it’s a ton of money there. I know some–you know there are some doctors in my mastermind that kill it because they’re able to speak your language and, you know, show people the benefits of multifamily investing, passively or actively, for that matter?

Tim
Absolutely.

Rod
I mean, you’re in a great position to capitalize on that for sure. So we talked about sacrificing, you know, what’s next for you? Let me say it that way. Are you guys actively looking? Are you on a team? You’re doing it on your own now? Are you still working with some other warriors on this? Tell me a little about that.

Tim
Right. So I’m in Phoenix, and Phoenix is a great strong market for a lot of reasons, but it’s also very competitive. And so although I’ve been focusing here, the deals I’ve been on or part of have come from other people in other spots through networking, right? And a lot of it through the warrior program originally and then sort of secondary through there, maybe. But that’s been a big part of it. I’ve met people here in Phoenix who invest in Dallas, and I met people in Dallas who are investing in Phoenix. And I eventually realized that it’s competitive everywhere, and I’m boots on the ground here. So that’s kind of where I’m focusing. But I’ve been– I’ve not teamed up per se yet. I’m still promiscuous, I guess.

Rod
Right. That’s funny. That’s very funny. I’m going to use that. That is very funny. And guys, this is what I teach as well, is that when you meet somebody and you do a deal together, you don’t get marry, you date. Okay?

Tim
Right.

Rod
And promiscuous. I love it. And, you know, you make sure that you work well together before you move on and get married and do all sorts of deals together. You can do one deal together and then see how that works, see if everybody’s work ethic is there, see how you get along and yeah, I love it, Tim. It’s a great, great, great analogy.

Tim
Yeah, that’s it. I see the value of it, though. I mean, I don’t want to be too promiscuous. I want–the people I’ve seen excel really do find somebody who complements their strengths. Right. At the University, I wear a lot of hats, and I’m trying to wear a lot of hats now. The first six months after joining your program, I absorbed a lot of material, and it just took me a while to set up my systems and get comfortable and get going. And it’s too much. It really is a team sport. You can’t do it all yourself. And eventually, I have to sort of find a situation that will allow me to go further, faster.

Rod
Yeah, but you’re not doing so bad.

Mark
Maybe working you’re still working on that, then, you know. That’s what I was going to ask. Maybe you’re still working on that, figuring that out. I don’t know if that’s the answer, but how have you taken that background, you know, in neuroscience and applied that to figuring out your, “superpower” in multifamily, or are you still working on that?

Tim
I’m still working on that. As I said, I’m used to wearing a lot of hats. I’m trying to do everything myself. I mean, I’m a geek. I like numbers. I can do this with the underwriting, but I also– I am somewhat gregarious. I like talking to people. And the capital raising, I think is good and fun and networking. I’m enjoying that. So it’s a balance. And I have some funds I can help, you know, bring to the table and make KP and deals.

Rod
Sure. That’s very valuable. You know, what advice do you have for people that are thinking about this business, that, you know, maybe haven’t gotten started yet or any suggestions you may have for those people?

Tim
Well, the main one is don’t do it yourself. It’s really complicated. It’s not that–there’s a lot. And it really helps to have people helping you out, not just inner circle team members, but property managers, loan brokers, all sorts of assets out there that are happy to help you and work with you. I would say, join a group. The way your program is great, not only for the networking and the mindset stuff, which Rod is great with but the information, and he set for these great action plans. Those helped me a lot, Rod. I appreciate that.

Rod
That’s good to know. Thank you for that. That’s awesome. By the way, guys, if you’re listening and you want to apply to our warrior group, just text the word “CRUSH” to “72345”. And you can also go to “RodKhleif.com” is a place you can do it there too. But yes, you know, and you check us out, we check you out. That’s how it works. So again, that’s “CRUSH” to “72345”. And thank you for that. So I have a question. What’s your driver, brother? What’s your why? What’s making all this happen?

Tim
I’m a hard worker. I don’t sit still very well as part of it. And I enjoyed the LP stuff, but I want to be more active in the GP stuff. Just when we go to the beach with my wife, she wants to sit down and relax. And I’ll sit there for like five minutes and I got to go play in the water and start making this sandcastle or something because I can’t take it. So I got to go do something. But my main why is my family and getting time. My wife has been the breadwinner for a while now, and I want her to have the free time to practice medicine the way she wants and not be so stressed out and the financial burdens of being, you know, the primary provider and stuff. So my main one is to help her. But just the older I get, the realize I want to make an impact on everybody. I want to help–I like being able to help the tenants in the community and like helping my partner and stuff. And my family is primary.

Rod
Nice.

Mark
I’d actually like to touch on that really quickly because I talk actually with a lot of people that say, you know, similar to you to where you’re the only one doing real estate. Right? Because your wife is not actively involved in real estate. It’s just you. Correct?

Tim
Correct.

Mark
And so a lot of people think, oh, it’s just me, you know. It’s just me going out and building a business. But I want them to hear it from you. How important is it that you and your wife are on the same page before you just go jump into building a business?

Rod
Not only how important is it, but how did you communicate that? And was there any need to influence her into this mindset? If you can go back and think about that because that could be really, really helpful. Yeah.

Tim
Yes, I know she’s been pretty supportive of most of my endeavors. And real estate is something tangible that I think she appreciates and understands.

Rod
Okay.

Tim
I talked to her about it too much. So she starts to tune me out because I can’t find other people to talk to.

Rod
Got you. Then you overcommunicate. Okay.

Tim
Yeah.

Rod
You know, we get that a lot, you know. What happens if my wife doesn’t support me or my husband doesn’t support me? And so, you know, we like to get into that conversation a little bit just to give some feedback. And it’s usually communication. I mean, if you communicate, and, you know, just explain the benefits and mitigate the fear through that communication. And that’s why I asked the question. So let me ask you this. You know, knowing what you know now, if you went back, you know, a couple of years or even further back, is there anything you might do differently with the knowledge that you have now?

Tim
Absolutely. One of the main things is I would work more on myself earlier on. There’s that story I like with the guys in the parking lot going to work, and the boss drives up in his Lamborghini. He’s like, wow, how do you get a car like that? The boss says, well–

Rod
Work really hard.

Tim
Every day, you work really hard, for all year. And next year I’ll be able to buy another one. It’s true. And I realize working for myself and on myself is something that I didn’t often do. I always sort of went in and just went through the motions.

Rod
But if you’re not the lead dog, the view never changes. Right.?

Tim
That’s right.

Rod
But you know, the thing you said about working on yourself, I’m really glad you said that because guys, you know, “a life unexamined is a life not worth living”. That was Socrates a few thousand years ago. You need to be looking in the mirror every year to be a better, you know, husband, wife, father, mother, you know, business person, human being, frankly. And, you know, that’s just so critical. And, you know, you build your emotional IQ, you build your gratitude, you build all these things that really propel you to true success, which is happiness. And, you know, we think it’s all the money. But, you know, if you drill down and ask the question, why, enough times, why somebody wants something, it’s always happiness and love. I mean, that’s what everybody wants. And so, you know, I’m really glad you asked that question, because that self-improvement. It’s a critical component. I meet people sometimes on the podcast that are gazillionaires, okay. And I can tell if they haven’t evolved into happiness and really self-actualized and I feel sorry for them, frankly, because they’re truly not successful. They may be successful from an outward, but they’re not happy, and that’s true success. So I’m sure you agree.

Tim
Yes, absolutely.

Mark
I know we’ve talked about you’ve given a lot of good advice, right? If you could go back and start over, what is some bad advice you’ve maybe received along the way? It could be about multifamily, business building, family, whatever. Right. That you think maybe new people shouldn’t have that.

Rod
Or an experience or an experience that you learn from, either one?

Tim
Sure. I got one that is an experience and bad advice. It’s not bad advice. It’s tricky advice. One thing was, you know, if you find the deal, the money will come. And that’s true if–

Rod
If you’re working on the money in advance of the deal. Otherwise–

Tim
Well, here’s what happened. Some people out in my network called me up and wanted some help on a deal. And they had a capital, not a dealer broker, but a capital partner on Wall Street who raises big money for deals and just tells them, we don’t write checks for a few million dollars, you know. Go find me something else. I got 100 million to deploy this quarter. You know, go find something bigger. And so they did, and they found one, and it was a C-class and a cash flow. It looked good. The numbers look good. Had a good plan. This was a few months ago. And what happened was we had some hiccups along the way, quite a few. That’s a whole another interview in itself, maybe. But basically, the capital guy couldn’t perform. And that was a fear of mine I had from the get-go. But he works with like a broker at Northmark who said, yeah, I worked with him repeatedly, who vouched for him, said he brings like $80 million to deals. Right. So bringing ten is not a big deal for him. But he bought at it after he sat in with my partners before I was in the deal and convinced everybody, oh, yeah, we can do this. We can close by this date, not a problem. But then when it came time to perform, he’s like get an extension for four months. You know, I’ll send out some flyers or something. That doesn’t work. And so, yeah, we got in trouble with that. So that hurt because we ended up losing some earnest money and stuff.

Rod
Oh, you did? Wow. You actually–wow.

Tim
And, I guess, I learned a lot of things with that one, was also that we tried to hurry up and raise it ourselves, but we need some help. So we need some institutional money or some preferred equity or something. And once you say 60s vintage in El Paso, they say, let me stop you right there. Not interested.

Rod
No kidding.

Tim
So that was interesting, too. And I’ve learned kind of how those old deals play out. Right. Because they make money. The numbers work. It would. But you’re getting to the point where you can build for the same price.

Rod
Yeah. Well, that’s the problem.

Tim
Yeah. So what happens with those, right? Usually, I didn’t network enough to find the guy who wants to put his money into that deal.

Rod
Yeah, I didn’t know about that. That was a seminar. That was absolutely a seminar.

Tim
That was.

Rod
What are some important questions that you think someone that’s thinking about getting into this business might want to ask themselves?

Tim
I guess I’d want them to make sure they want it, know their why. Because I see a lot of people get into it and not execute, right? They don’t follow through, they like it, they learn a little about it and they dabble or something, but they don’t actually take action or as you say, massive action. And I love it.

Rod
Right.

Tim
That’s what it takes.

Rod
That’s massive freaking action. Okay. Don’t forget the freaking, okay?

Mark
Yeah. And by the way, you know, when people text in to work with me and my team and Tim, you went through this as well, you know, whether you even work with us or not, that’s one of the things that we do with everybody is we have you sit down, we ask questions about your why and writing out your goals. Because even if you don’t work with us, what Tim just said, knowing your why, that’s going to be the thing that’s going to get you there. You know, gaining the knowledge, all that stuff of what Tim and all these interviews is important. But that why is the key to getting into success because, you know, if you went through that challenge that you just told us about, lost some money, if you didn’t have a strong why, what do you think the odds are that you just quit and walk away from multifamily and say, you know what, this isn’t for me.

Rod
Right. Exactly. Yeah, no question. And, you know, I’ll tell you, you know, if you don’t have that burning desire really is what it is. Like Napoleon Hill talks about his book “Think and Grow Rich”, you got to want it. Which is why in our boot camps, the first thing we do is goal setting. Goal setting on steroids for the first hour and a half. Because how are you going to get anything if you don’t know what the heck it is. Right?

Tim
Absolutely.

Rod
And so, you know, that’s just a critical piece. You know, that’s how you push through those limiting beliefs and fears and stumbling blocks and setbacks, which are inevitable. Everybody is going to have them. I’ve got bigger ones than most, you know, those setbacks, seminars. So, you know, that’s what pushes you through. You know, we fail our way to success. And that’s the truth of it. So, you know, were there any defining moments or aha moments for you, Tim? Any moments where you’re like, okay, now I get it. You know specifically about the business, if possible. But if not, maybe in life, in general, is fine too. But does anything come to mind if I ask that question? If not, no big deal.

Tim
No, nothing leaves to mind right now.

Rod
Okay.

Tim
You often say when you get the first deal done, you realize how easy it is, and then you want to hurry up and do some more. I mean, that one was nice. Our first deal last fall, a lot of it was the market. By the time we closed, we had a hiccup with that one where less than a week before we closed, the lender bailed on us.

Rod
Oh, wow.

Tim
And so thankfully, we had an extension, and then we were able to get it done. But basically, when we finally did close it appraised at our exit value for the project already.

Rod
Nice.

Tim
That was like, wow.

Rod
Nice.

Tim
We had to stabilize it and right clean it up because the seller had put in a bunch of poor tenants and we had to deal with that [inaudible]

Rod
Sure. That’s not uncommon. You clean up the demographic.

Tim
But the appraisal already basically was good. So it was–

Rod
Nice.

Tim
That was kind of an aha moment.

Rod
Sure. Well, you know, you get the little ones all the way through. You’re like, okay, I see. I should have done this this way instead of that way. They may have been life changing, but they certainly help.

Tim
Sure.

Rod
All right, well, listen, I really appreciate you coming on the show today, buddy. And I know this is the first time you’ve ever done one of these, so you killed it. You did great.

Tim
Thank you for having me. This has been great.

Rod
Yeah, my pleasure. Yeah, so, really, it was great to see you and I don’t know if you’re going to make it to the Denver Boot Camp. If you are, make sure you come up and say hello. There’ll be about 1000 people there, it will going to be a little crazy.

Tim
I certainly will.

Rod
Fantastic. Yeah, there’ll be a bunch of warriors there, too. All right. Well, it’s great to see you, my friend. I appreciate you coming on.

Tim
All right. Thank you. Thanks, Rod.

Rod
Thanks.

Outro
Rod, I know a lot of our listeners are wanting to take their multifamily investing business to the next level. Now, I know you’ve been hard at work helping our Warrior students do just that, using our “ACT” methodology, which is Awareness, Close, and Transform. Can you explain to the listeners how they can get our help?

Rod
You bet. Guys, we’ve been going nonstop for three years, building an amazing community of like-minded people. And our coaching students which we call our warriors, have had extraordinary results. They’ve purchased thousands and thousands of units, and last year, we did over 1000 units with our students. And we’re looking to grow this group and take it to the next level. We’re looking for people who want to follow a proven framework that’s really step by step and then leverage our systems and network to raise equity, to find and close deals, and to build partnerships nationwide. Now, our Warrior community is finding success in any market cycle. So if you’re interested in finding out more about how you can become more of our incredible network and take advantage of the incredible opportunities that are coming very soon, apply to work with us at “MentorWithRod.com” or text “CRUSH” to “72345”, and we’ll set up a call so you can check us out and we can check you out. That’s “MentorWithRod.com” or text “CRUSH” to “72345”.