EP #18 - Software Engineer Talks About "Nightmare" 1st Rental Property

In this episode, Jacob interviews Liam Delumpa, a Software Engineer turned real estate investor in the San Francisco Bay Area. Liam reflects on his rollercoaster journey in real estate, starting with the nightmare of his first rental property. Through perseverance and resilience, Liam overcame the initial hurdles, honing his skills and knowledge as an investor. His eventual shift to commercial real estate highlights the importance of strategic evolution in response to market conditions, emphasizing the need for continuous learning and adaptation for success in real estate.

Connect with Liam:
Email: liam@delumparealty.com
Instagram: https://www.instagram.com/illwillyd/

FREE Real Estate Investing Tools & Resources:
https://www.cashflowsaga.com/links

Join The Waitlist For "Rental Property Investing 101":
https://tinyurl.com/k4vpbd5u

Connect with Jacob:
Instagram: https://www.instagram.com/cashflowsaga/
Website: https://www.cashflowsaga.com/
YouTube: https://www.youtube.com/@cashflowsaga
Twitter: https://twitter.com/cashflowsaga

Connect with Mike:
Instagram: https://www.instagram.com/realtormichaelmagno/
Website: https://themagnogroup.com/
YouTube: https://www.youtube.com/@realtormichaelmagno

Transcript

Nancy: 0:00

This is the Financial Freedom Fighters Podcast

Jacob: 0:13

Welcome everybody to the financial freedom fighters podcast back with another episode and we have a very special guest today I knew the first time I talked to him that this dude was a mover and a shaker, and that he was going to accomplish a lot in the real estate space, he's one of those people that those meetups, he was talking to everyone, delivering massive value, great vibe, great energy. He's also engaged. So this man is winning at life. Liam, welcome to the financial freedom fighters podcast. Say what's up to the people.

Liam: 0:41

Wow, thanks. I was not expecting, uh, such a pump up there, but yeah, I'm fired up to be here. I've been, uh, keeping, yeah, staying tuned to your, your podcast and, and love the message you guys have been putting out. So yeah, excited to be on here.

Jacob: 0:53

absolutely. Absolutely. let's start with the, the, the X Men origin story of Liam what's your background. and what kind of led you to real estate in the first place?

Liam: 1:01

Yes. So I, uh, I have a tech background. I've been a sophomore engineer for about eight years. Um, and. You know, I'm born and raised in the Bay area down in Silicon Valley and in Cupertino. Um, and really just kind of saw the evolution of at least my hallmark, my backyard. Kind of where real estate went, where, uh, you know, just the whole neighborhood and the culture went, um, and, and how it progressed, you know, because of things like tech and, and how the economy progressed in that neighborhood and really blew it up. Um, and that really always interested me. Um, I was curious, you know, how people could afford houses, how people could afford buildings, you know, who were the owners of these stores that I go into every day. It was just something I was always curious about, but didn't really know how to get into. And then, so I went to a university of Oregon and, um, I studied computer science and, you know, really bought into that. Um, you know, anything I do, I, I go really deep into and, um, you know, I excelled at it. I enjoyed it enough to, you know, to name it, to make a career out of it for the past eight years, but really just kind of wanted. You know, something more, right? I don't hate my job, but I also wanted a little bit more security. I saw a lot of people getting laid off over the past few years. And, um, I thought it was time to maybe think and think about investing a bit more, I never really trusted the stock market too much, I think the volatility. is something that kind of irks me. So I, I've, you know, I've done all the right things like 401k, but it really wasn't moving the needle. And randomly, uh, my mother actually gave me a book in January of 2022. Um, so just about two years ago, it was the multifamily millionaire by Brandon Turner. And that completely just turned my world upside down. I realized like, wait a sec, this This is really doable. Uh, there's something that I could definitely accomplish if I just work hard enough at it. And so I got immediately hooked. Um, started just like talking about it everywhere. I went just consuming every podcast book I possibly could by October. I, uh, got a triplex in Cincinnati. Because that's, you know, where the barrier of entry could, uh, support, uh, what I was trying to do. Um, and then I really wanted to expand into larger stuff. So I partnered with a couple of folks and we just closed on an eight unit. Deal in Cincinnati as well and over the last six months. I've been really progressing into Uh kind of evolving into a commercial real estate, uh niche, so i'm really interested in retail And industrial and so have been primarily offering on those and trying to scale Out to those asset classes as of late. So that's kind of in a nutshell Kind of how I got here and, and where I, where I ended up now.

Jacob: 3:52

Yeah, absolutely. So that was an amazing intro. A lot to unpack there. and you know, obviously myself growing up in the San Francisco Bay area as well. And working in tech, we have very similar backgrounds. And so you kind of talked about, you know, an interest in real estate because of observing how real estate exploded in our local market of the Bay area, California, how did you kind of get to the point where, so I heard you read the, you read the book as well, but there's a massive chasm to understanding that real estate is a worthwhile investment, The concept of it and understanding that, Hey, you can make money doing it, but then actually. Going past that and then also like deciding to take action. how did you pass that barrier

Liam: 4:32

Yeah, this, there was a lot of moments of kind of self doubt there, imposter syndrome. I didn't, you know, it was kind of like an identity crisis, right? I was, had been trained to think one way to think that, you know, you move up the corporate ladder, you just work your tail off or whoever will hire you. And, you know, you can enjoy your work, but I hadn't really met too many people who love, like love their work. And when I met you, when I met, you know, my current partners at meetups. You're at these meetups and people love what they're doing. They're taking their time out on Saturdays and Sundays, going to network, going to help other people. And I just never seen something like that in tech. You know, there, there are definitely like gearheads and coders who are super into it. And you know, that's their passion, but not in a way that, you know, they share it with others and, and kind of treat it like a community. And I think that really is what kind of pushed me over the edge. To start doing it, um, was the networking piece. And it's especially important in a market like the Bay Area because we don't have the resources. I mean, a lot of people that I've met. From Cleveland, from Ohio, from Cincinnati, um, where we invest, you know, they had the resources, the low barrier entry, they could kind of just figure it out on their own and without, you know, relatively low risk in the Bay area, it is a conscious decision to take a massive risk. Because you're likely not able to invest in your backyard. You're going to have to do it out in another state. And so I think that's what really pushed me, you know, over the edge to take action was I would go to a meetup at least once or twice a month and just talk to people who had done it before. Um, even if they had just done a couple of deals, a duplex, a triplex, um, and then you'd meet people who are in commercial and in bigger stuff and realize that it's really doable. And so I think, you know, I really build off of, you know, energy from other people and meeting the right people. And enough of those people, got me to, to take action.

Jacob: 6:31

Yeah, for sure. Um, so kind of like a golden nugget from Liam there. I I've said this on past podcasts before, but the meetups are. Incredibly, incredibly helpful, especially for you, the hopeful investor. You know, I, I didn't go, I didn't start going to meetups until I had done a couple of deals, but before I started doing that, it felt very lonely. You know, uh, I, I made a, I made a lot of mistakes. I didn't know what the hell I was doing. I was listening to podcasts in the forum, the BiggerPockets forums and things like that, but it was super lonely. I, I talked to my now wife about it, and she's like, I don't care about this. Like, stop talking to me so much about this.

Liam: 7:06

You know, what's funny is that, and I've told people who are getting started, like to go to meetups and their responses. Oh, I have nothing to provide. Like, I don't know what I talk about, but it's crazy how a progression can You know, the first year of going to meetups, I was asking questions the whole time and just picking people's brain and yeah, kind of feeling sometimes like maybe I'm like not bringing a whole lot of value. I'm kind of taking advantage of people, but slowly, slowly it just so happens. Now I find myself, I'm just going there and answering questions for people the whole time. And I don't even, I never really thought of myself as a subject matter expert or super experienced, but just being at meetups, you realize like, Oh, there's a lot of people under you. Like I've come a lot of a long way. And it really did all start from going to those meetups when I was in their position.

Jacob: 7:51

Yeah, absolutely. Absolutely. I feel the same way. And honestly, like the most fruitful conversations I have now at meetups or even when I was starting out before are not with like the most experienced investors necessarily, but it's the people that are either just ahead of you. Or just behind you in terms of their journey, right? And so you find a lot of that. The vast majority of people are right where you are, right? So don't be intimidated by the meetup. And legit, the first meetup I went to, I sat in the parking lot for like 25 minutes before I went in.

Liam: 8:19

I used to be so nervous.

Jacob: 8:21

Me too! I was just like, I just, I didn't want to do it. but just get over it. You know what I mean? Like have a beer or have a drink or whatever, you know, drink of choice for you and just get in. There's so many nice people. And I agree with you, Liam. I think that it's, it's such a welcoming and sharing community. And that's what I've really enjoyed about the real estate investing space. So everyone take Liam's advice, go to a meetup. It's going to help you take action. So you're going to meetups. And you're determined to take action, Liam, how did you happen upon, you, you mentioned Cincinnati, you mentioned Ohio, you mentioned the buried entry, but there's a lot of places in the Midwest, right? There's a lot of places where the, the purchase price is going to be lower, So how did you like specifically happen upon deciding on Cincinnati as your market and talk about your process for getting to that point?

Liam: 9:04

Yeah. Yeah. Right. So in a tech background, I, Wanted to find another market that was poised for development into tech space, mainly because that's all I knew. All I had seen growing up firsthand. Um, a lot of my family's in Portland and Seattle. We've seen what tech has done to those markets. Um, my brother had recently moved to Austin at the time. You know, Austin blew up pretty much anywhere tech touches down, blows up the whole market in a good way. And so I started looking at emerging. I just did a Google search, uh, emerging tech markets, um, Tampa, Atlanta, um, you know, Boston parts of the Northeast kept popping up. There wasn't too much in, um, the Midwest. I saw Indianapolis and then I kept coming across, uh, just Ohio in general, they'd kind of bunch up Columbus, Cincinnati, and Cleveland as, Oh, these are like kind of tech hubs, they feed off each other. And it got to the point where I saw Indianapolis and. Ohio is in between those three markets, um, looking up things like from there, narrowed it down to population growth, GDP growth, crime rates, uh, looking at school systems. Looking at the competition too, it's something as simple as on Redfin, you can go in and there's like a little heat map of a bar of how competitive the market is. Indianapolis was really competitive. That was my number one market. And then because it's like a bigger, a million person Midwest markets, like unheard of. And so like it was growing so fast, but it got to the point where I was splitting hairs. I'm like, okay, whatever. Cincinnati has a three and a half percent vacancy rate for this, for the average neighborhood, Cleveland has four, it just had to take action. And I think, the thing about Cincinnati was I had reached out to agents in Indianapolis, Cincinnati, and Cleveland, probably three or four each. And I just got the most feedback and. You know, the most attention as a new investor from, um, some agents in Cincinnati, one of which I'm actually still good friends with. And so it, it, it really, there isn't a science to it, but there's also an art to it, right? Get your data, get data that makes you feel comfortable. But at some point you're just going to have to choose. You can make money in any market and you can make a footprint in any market. So that, that's kind of how I ended up with Cincinnati.

Jacob: 11:28

Yeah, a hundred percent. So. So to kind of like pull out a couple of like really important nuggets that Liam was saying, he started with the Google search, right? A lot of people are like, there has to be this perfect process. I have to have all the data points. I have to, you know, make this massive spreadsheet and have this like perfectly scientific approach to picking the market. But at the end of the day, like you don't have to make it that complicated. And like Liam said, there are, there's data points that you should kind of monitor, but to a certain extent. You just have to kind of make the decision, You have to just come up with a thesis. So Liam's thesis has said, Hey, I want to come and invest in a market where there is going to be some tech influence, That's it. That's his whole thesis. And he looks for that in emerging markets in the Midwest. And then he. continue to research, continue to pull the data. But he also had conversations with real people in those markets. I think a lot of people are in for are afraid and they do all this research at their computer, you know, before they just pick up the phone and have a conversation, you know, I didn't even know that much about Cleveland, to be honest, aside from a couple of trips that I went to actually see the city, uh, because my wife's sister was doing residency in Cleveland. So I saw the city. I was like, Hey, this is a lot nicer than I thought. I looked at Redfin. I was like, well, these house prices are a lot cheaper. I looked at the rent. I said, Oh, that rents a price ratio is pretty good. And then what did I do? I went on bigger pockets, the agent agent finder there. The first conversation I had was with Mike and then I was off to the races. I did minimal, minimal research, and that was probably to my benefit because I think you can get caught in analysis paralysis, like Liam is saying. And so. I'm not saying don't do your research, have, have a thesis, do enough research, but time box that, and then actually have conversations like Liam did three to four agents per market. And then you're going to get a good sense of, is this doable? Do I like the vibe, but you can make and lose money in any market. And so at a certain point, you just have to pull the trigger, but so many new investors get stuck right there. So you, you decide upon Cincinnati at that point, right? You've done your market research phase, you decide upon Cincinnati, but you're not, you're not kind of done there, right? So you have the agent picked Cincinnati's like, there's a lot of sub markets within Cincinnati. There's a lot of neighborhoods. There's a lot, you know, a class B class C class neighborhoods, like. What is the right strategy to implement single family multifamily? Are you doing value add? Are you doing turnkey? Like there's still a lot of decisions to be made even after you pick the market. So walk us through how you kind of kept moving the ball forward. Even after you pick the Cincinnati market.

Liam: 13:58

Yeah, well, one of the things from, that Brandon Turner book is that you have to have your crystal clear criteria. So before, you know, going any deeper, know exactly what you want. And that doesn't need to be perfect either. Like what you said about the data, not being perfect. Time box it right. Come up with a strategy that works for you at that time. I can tell you a year and a half ago, my buy box is completely different. Come like 100 percent to three 60 degree turns different than what I was. So don't get set on that. But at the time I wanted a two to four. Unit multifamily building because I didn't want the risk of a single tenant. I wanted value at potential. I saw this as something that I would be willing to invest a ton of time into and learn in the trenches and do the hard work. I wanted things as specific as you know garden style. I didn't end up getting that but have have your as specific as possible criteria as you can So when you're going to these agents, you're not just saying oh, I want to invest you're saying I want to invest And this is the criteria don't give me anything that And from there, you know, I think a lot of people on social media say that you can just, invest remotely, which you can. I am a huge proponent of going to the market because like you said, some data. Isn't even that accurate. We, I had this market, that I thought was going to be my target sub market. It was a neighborhood where the rent to income ratio was favorable for the landlord. It seemed safe. There was very low crime rates. The schools were good and it looked like rents were increasing in that neighborhood in a really positive trend. I go to Cincinnati. And was terrified. I drove in and drove right back out and decided I'm never going to invest in that neighborhood. And it just goes to show data can only tell you so much. You have to go to the market and really understand. So I spent about. Within one weekend, about 12 to 15 hours, I'd say driving around Cincinnati with a voice recorder app on my phone, just saying everything that I observed.

Jacob: 16:04

Wow.

Liam: 16:05

when I wasn't doing that, I was meeting with agents. I was taking agents, property managers out to beers, to lunch, getting to know people, uh, DMing random investors on bigger pockets on Facebook groups. And just by the, I left that. With valuable friends. I love that trip with valuable friends that I still keep in contact to this day. And we connect when I'm around there. And so, part of it is choosing the market, but I think getting your boots on the ground, shaking someone's hand, looking people in the eye and really getting to know them in person. Is, is totally invaluable and they'll just open up to you and tell you all the secrets that you need to know about the market. So, you know, it's, it's not what a lot of people want to hear. I think a lot of people think they can just find a market, look at data, find an agent and do it all remotely. But there is something really intangible that you get from just being there. My comfort level with the market, with different neighborhoods, uh, it just increased so much just from going. Mm hmm.

Jacob: 17:04

Yeah. Yeah. No. And that is, um, that is a unique take. I would say that is a unique take in the real estate investing space for sure. the two properties that I do have in Cleveland, the duplex and the triplex. I have never seen them. Um, and so I have been to Cleveland though. I have been to Cleveland, but at the same time too, you know, it really does depend on how much you kind of trust your boots on the ground team there. Now I, definitely am not going to debate Liam. There is something very intangible about being in the neighborhood, seeing the property itself. And actually being able to understand, you know, what is this street like? Cause it always looks different. It always looks different. I just closed on a, uh, Airbnb in Michigan. And obviously like I'm pumped about it, but I, I'd never been there. I'd never seen it. And I'm going to see it for the first time this weekend. Um, I'm going to hop on a flight actually after this podcast. And I know it's going to be mass and I know it's going to be massively, massively different when I go and see it. So I, I, I agree 100 percent Liam. think that if you can make the trip out there, you're going to get a lot of value from making that trip. Now, some people might not have the time and I, and I think that that's okay. And I think that's when you have to really rely on your boots on the ground team, but a hundred percent, a hundred percent, I think like making a trip out to the market. Um, if you can, it's going to be more beneficial than not for sure.

Liam: 18:20

Yeah. And I think it's through the lens of just being able to pull the trigger right now that I have a bit more experience, I could probably invest in them. Actually, I would definitely invest in the market without visiting it. But you know, as you're getting started, you know, through the lens of someone trying to, you know, really get into real estate, that was what really did it for me is like, I've done my due diligence. I've gone there. I've been there. I feel like I know as much as I'm ever going to know. So just do it.

Jacob: 19:03

Yeah, a hundred percent, a hundred percent. No. And I resonate with that too, because I think that my first property that I ever bought was supposed to be my primary residence and it was in Portland, Oregon. And me and my wife, we went there multiple times because we were going to live there. kind of in that way, I did what you did, Liam, it wasn't really intended to be an investment. It ended up being an investment because we didn't end up moving there. We had to turn it to an investment, but the process of going there, seeing the different neighborhoods, shaking the hands of the realtors, that is what I did for my primary. And then maybe it was because of that process, doing that process and then understanding how it went down that I felt comfortable for my next ones after that feeling like I didn't actually need to go to Cleveland and to, to meet Mike and things like that. Cause I'd seen it play out at least once. We'll kind of move on Liam. So at that point, you have your crystal clear criteria. You've made your trips to the market itself. You know, you made relationships with agents, property managers, get a feel for the actual neighborhoods and things like that. Tell us the story of the triplex. Like, how did that kind of come about on how did you land that deal? And, you know, just give us the kind of deal deep dive on that one.

Liam: 20:03

Yeah. So I, connected with a agent who I decided, you know, he was a really good guy. He drove me around a couple of times when I had visited and he set me up with a drip campaign on the MLS and I was just looking at deals every single day and I, found this deal. It was completely vacant. I got it for 235 K for a triplex. So it was just way cheaper than anything I could ever dream of affording here. There was a lot of work to do, right? I wanted something that wasn't a full gut job, but something that I could, you know, really bite my teeth into and get experience, uh, you know, turning, I had originally planned on doing a BRRR deal and. You know, pulling out all the equity, but at that time, uh, it was right before the Ukraine invasion, the first interest rates hikes. So it was right at the beginning of the storm. And I got a little nervous about interest rates because the whole premise of a BRRRR is that you project what your interest rate will be when you refinance. And you can project your cashflow after,

Jacob: 21:17

Liam real quick. If, if somebody's listening to this and they don't know what a BRRRR is, could you, could you break that down for the listener?

Liam: 21:23

oh yeah, of course. So it's by rehab, refinance and repeat, I think is the last one. Right. So rent, rent, rent. I, uh, forgot the actual acronym, but yeah, essentially, uh, instead of flipping it, instead of flipping it, you refinance and pull out equity and you have a cash flowing property. So I was intending to buy it vacant. Rent it up, rehab it, and then rather than sell it, refinance out. So I have all my equity and I'm able to purchase another deal. Now, where that went south is because of the interest rates. I wasn't confident where they'd be. So I got locked in at a 5. 1 percent interest rate, and I'm glad I just did a conventional loan because it, by the time I was done with my rehab, it was in the sevens. And, um, so, so to back up a little bit in terms, you know, before we get even the, uh, the debt piece. I had been offering on a lot of deals and, uh, I found this one, uh, I submitted an offer and we got accepted. And that's when it, you know, it really got scary. We put an inspection report, we got an inspection report. I got a couple of quotes saying it would be like a hundred grand to rehab, which I didn't have. I got a couple of quotes that said it would be anywhere from 30 to 40. And I landed with a contractor who said it would be about 40 K. So I decided to pull the trigger and, and go with this deal. And knowing that my equity would probably be locked up for a little bit because of the interest rate environment, but I'm now kind of sitting with a lot of equity in this deal that I can pull out eventually if I want to sell or refinance, but that's kind of. The high level of kind of my decision around this property. I thought it would hit all of the BRRRR metrics, which technically, uh, for a BRRRR, you want your total project costs. So your purchase price down payment plus rehab costs to be 70 percent less. Uh, or 70 percent of the after repair value, meaning that you'll have enough equity to pull out the whole loan to value, which would be 70 percent and pretty much make all your money back. So I'm still sitting on that equity and waiting for the right time to pull it out. But yeah, successfully kind of rehabbed it. It's all done. Renting at actually above market rates, which is great. And, um, yeah, it was kind of writing out the

Jacob: 23:57

Yeah. Let's, let's talk a little bit, um, about the kind of numbers of the deal, if you don't mind sharing. So I think you mentioned the purchase price was two 35 K, um, how much actually ended up going into the rehab. And then. Were these three, I believe part of your business plan you like, you added bedrooms and things like that. So like, let's talk about like the actual business plan and execution, because I think it's a really good, outcome that you achieved here, but it was a journey to kind of get there. Right. So like, let's talk a little bit more about, about the actual renovation and, and things like that. And cause I, I think it's a, it's a, it's a great story.

Liam: 24:26

Yeah, this was a nightmare of a first deal, which, which many first deals tend to be. Uh, I inherited a tenant who there was one tenant. I say zero because. I wasn't making any money, but one tenant who wasn't paying rent, who had extension cords going from the second floor up to the third stealing power. Just, it was a headache. and I really learned the hard way on this one. I had gotten quotes for, for different contractors and it went a little bit over budget. We ended up going about 50 K for the total. Project costs plus holding costs of a mortgage, um, was about 1, 200 a month for that,

Jacob: 25:19

How, how long was the, how long was the total rehab? Like the time.

Liam: 25:23

ended up being close to a year, actually. Um, yeah, and so I can get into kind of how it all went wrong. I had to fire three property managers before I found the right one. And yeah, I get, you know, Cincinnati is a great market. It's not known to have the most robust property management services, uh, which I knew going into it. So we close 235 purchase price. It's about 68, 000 down. We have holding costs all reserved and yeah, spend about 50K on the rehab. But Through a span of three months, I had gone through three property managers. I had done my due diligence on them. I had interviewed them. I had a whole grading template of different questions and categories where they excel. I got all these from references, but that's one of the risks. Of investing out of state is that you just really don't know until they start working with you. And but I was prepared for that, right? I I was prepared to fail in those areas and had reserves And so we bought it for 235. We fixed it up the the after repair value we're thinking is anywhere from like 325 to 350 and the reason that I boosted the value so much is because On the closing statement, I bought three two bedrooms And in the inspection report, it says three, two bedrooms and I, when I finally go or have my property manager go to the building, there are. One of the living rooms had been closed off into a bedroom. So there was a third bedroom and it was the same layout for another one. So I put out an extra bedroom. So now I have two, three bedrooms and one, one bedroom or two bedroom rather. So I was projecting three, two bedrooms for 1, 100 per month rent each. I have one rented out the three bedroom at 1, 500. Another two bedroom rented out at 1, 350. And then the other two bedroom at 1295. So call it dumb luck. Maybe it was retribution for all the headaches I went through, but it. all worked out.

Jacob: 27:26

We'll take it. a couple of follow up questions here, uh, cause I just think this is a great story. The first kind of nugget I want to pull out here is that one, the deal you like, you kind of self proclaimed a nightmare deal. Right. I think for the listener, this is like what you kind of have to internalize because That is more often than not the, the scenario that most new investors face. Like, and I'm not saying it has to be a nightmare deal, right? I'm not saying that has to be the worst deal in the world, but the chances are is that that first deal is just not going to be. Amazing. You know, it's not going to be this whole, you shouldn't have the expectation that it's going to be this home run deal. You shouldn't have the expectation that it's going to go perfectly. It's it's not, it's not, let's

Liam: 28:06

It's not, but you need to be prepared with the reserves,

Jacob: 28:10

yes, exactly. So Liam was repaired. He had the reserves, but that's just the first thing I want to pull out. It was a nightmare deal. And I think his, maybe it was a special case. So the other follow up question, Liam is it's pretty bold. I would say, to want such a heavy value add project for your first one. knowing what you know now, and maybe as you talk to newer investors and, you know, people listening to this pod, would you advise that, would you advise people to take a, such a big, I know you learned a lot, you learned a ton and you're like a much better investor now that you went through that, but would you advise somebody who's doing this for the first time to take such a heavy value add project on, uh, for their first one?

Liam: 28:45

you know, I love that you bring it up. And this is kind of one of the more hot takes I've come to develop over the past few months, but my mindset is so much different. To where I don't think you do need to take on something that heavy. And I think if you're getting started. I've been telling people at meetups, you know, don't sleep on, you know, the possibility of being a completely passive investor or doing something that's, that's much easier of a deal. The, you know, a lot of social media influencers, they make it seem like you need to be in the trenches. You need to struggle. You need to grind for so long, but you know, really it's just, It is a long game and it's about, you know, getting, getting your money to work for you for as long as possible. And what I'm seeing now is, you know, I did this deal, so many sleepless nights, headaches. All in all, I was in the red for about a year. The cash on cash is great now, I mean, with the, the rents I got, the cash on cash return, I'm getting about 12 to 13% annually. And I think I've doubled my equity in, in about two years of owning it. And, um, or just about a year and a half. So still doubling of equity and under two years, but I mean, the, the offering. That we're giving our investors for the eight unit, we're giving them 8 percent cash on cash with a two X equity multiple over three years, the returns aren't that much different, and if you're investing any syndicator worth their skin will be passing down the depreciation, the tax benefits, all that principle pay down that people want to get into and think they need to do themselves, you know, a lot of that can be achieved through passive investing or through investing in kind of easier deals. So I would say. I wouldn't regret what I'm doing, but it's for a special, not special, a particular mindset in that you want to do this not for financial freedom, because you love this and that you want to be an entrepreneur in this space and build a business around this because you can be passive and have financial freedom without doing all this stuff. It might take a little bit longer, but only commit to doing this and building out a bit, a real estate business. If you're going to treat it as such. and I hear a lot of people saying, Oh, I want to buy a property for passive income, but you guys know it's not passive at all.

Jacob: 31:10

Yeah. Liam. I love this, this hot take and it's kind of one that Mike and I definitely share. Right. So I think that what's interesting about Liam's story is that he had this deal and it was a nightmare deal. And he persevered and it ended, he ended up getting on the other end of that deal in a very good situation. And now when Liam holds that property for five plus years, and when he refinances all of his capital out of it, and he's still cash flowing, That first nightmare year is going to be like, you know, a distant memory, right? It's going to be a distant memory, but it's because he held onto that property. He's just, it's because he persevered. the problem that I see is that if you're an investor that didn't have, you know, that understanding or that expectation or that perseverance that Liam had, how many people would have quit? In year one, Liam of just being like, this is not what I signed up for. This is not what I expected. And they quit it. And they just didn't invest in real estate ever after that. So they just like swore off real estate. So that, that is what I think is the danger of taking on too big of a project in your first deal. It's you, you can either persevere like Liam did. But the vast, vast majority I would venture would not have the perseverance that Liam does and would actually just quit. And then when you quit and you stop real estate investing forever, you shut yourself off to the, what we know to be the long term benefits of real estate investing in general, like the real money is made in the buy and the hold. You have to hold it, you have to hold it and you have to hold it for a very long time. And so that's why when I talk to people, I'm like, look, don't buy a turnkey property from a turnkey provider because those companies are garbage, but there are going to be properties like good agents like Mike can find you like, Hey, this is pretty rent ready. You'll probably have to put a, you know, a couple thousand into making it rent ready, sprucing the units up, but it's going to, it's going to be rent ready. You're not going to have like amazing out of the park returns. In general, but you're going to get in the game and you're going to get in the game and you're going to see the process play out and you're going to have minimal headaches. And I think that just seeing the first deal play out and seeing that it's going to be okay, is the most valuable thing that you can accomplish with your first deal. Because I can tell you now, you're not going to achieve financial freedom quickly. You're just not, I mean, like if you're, it doesn't, it doesn't happen that way. You're going to have to pick the strategy and maybe that is passive investing. And we can get into a whole topic of. Being a passive investor, investing in syndications, or doing this yourself, you will not achieve financial freedom. If you do not have a sustainable strategy and if you do not stay in it, you know, I want to say a minimum, a minimum of probably 10 years, right? Like minimum of 10 years before you even think about achieving financial freedom. So you have to do what is sustainable for 10 years. And after that 10 year point, you're, you're going to be money. You will, if you stayed in it that long, but the danger is actually like that first, second, third deal any of those deals can take you out. Any of them can take you out. And that's where the real risk is. So you don't want to be, you don't want to be buying deals that could take you out. we'll kind of keep the ball rolling on this story, Liam. So. you kind of like wade through the difficulties of this triplex, you renovate it, you kind of get this leased up, you're getting above market average rents. You survived that kind of first deal at that point. what is the headspace? What is the mindset? what are the moves that you made after that? And where were you in terms of after that deal and what you wanted to do in real estate at that point?

Liam: 34:25

from that deal, I really learned my strengths, my weaknesses, my interests and what I disliked. It was eyeopening to me. I just, because of what I had consumed via content, I thought I was just going to burr 50 deals in the next five years. And I realized that, you know, small multifamily is not for me. Being an actual operator, uh, you know, the integrator managing the manager is, is not necessarily for me either. I found I was really good at sourcing deals. I'm really good at building relationships with the right people to, to build a deal pipeline. Uh, I kind of found out how to kind of raise capital, gain some credibility and really weighed into that. And so I knew that I wanted to go bigger and, and really buy into this less is more. And that's what I've been continuing to, uh, kind of evolve from there. It started with larger multifamily. So I thought let's double the portfolio, you know, even if I don't own it, my whole, my Myself, let's find some partners and let's, you know, get to, I was looking for anywhere from eight to 30 units, um, and starting to offer on those. Joined I joined a multifamily mastermind, um, uh, a bootcamp and really just kind of tried to educate myself on commercial financing, commercial debt. And what it would take to manage. And so I started to really educate myself on that front. I knew that I wasn't going to offer on anything and, and kind of going back to one of my original points is that at this moment, my buy box had completely changed. I'd spent 12 months. You know, going after one thing I had gotten it and realized I don't want to do that anymore. And so then I jump into multifamily and, uh, just close on an eight unit. We, I have a partner here, local in the Bay Area who helped with the capital raise and really similar to me. He's on the acquisition side. He is much more, into the actual management of it. But, you know, I bought into what my, my strengths were and my strengths aren't managing. So we actually gave an equity carve out to a really well known operator in Cincinnati. And this is much more passive than the last deal for me. Yes, I'm, we're losing out on a good chunk of equity, but it's more fulfilling for me because I get to spend time doing what I like and looking at kind of more deals and sourcing more deals and raising more money for, for other people. And for this deal, you know, the market had dried up in Cincinnati. It was really discouraging for the first three quarters and, you know, to close out the year, a deal had fallen out of contract a couple of times and we decided to pull the trigger on, on this eight unit. And, you know, I can go go into more detail there, but essentially, yeah, I just wanted to graduate up from residential multifamily to commercial multifamily, knowing that the end goal would be kind of nonresidential commercial. So this was kind of that stepping stone I was really looking for.

Jacob: 37:19

Yeah, for sure. And. I love that kind of self reflection on your own part. And I think this is really, really important, right? I feel as if a lot of people get into the real estate investing space, feeling like they have to do it all feeling like they have to be good at all of it. the underwriting, the acquisition, the deal sourcing, the management, It is a lot of work to be doing all of it. And let's be honest, you're not going to be good at all of it, right? You're going to have certain aspects of who you are inherently, you know, some of the skills from your day to day corporate job that are going to lend itself well to the real estate space. Like you're going to be elite, probably at one, maybe two aspects of it, but you're not going to be elite at all of it. And so the self realization that Liam had to say, Hey, I actually don't like. The management piece at all is a massive, realization for himself and he can go and put his efforts towards what he is elite at, right? Which is the capital raising, which is the deal sourcing. So for you, the listener have those moments of self reflection, you know, obviously do that first deal because you're not going to know, you're not going to know if you don't do that first deal. If you don't do that second deal, you might actually really like the underwriting. You might actually really like the acquisition or you might actually really like the management, but you're not going to know once you do that first deal. So Liam, He did that and he figured that out about himself and then he went and said, you know, I don't want to do anything under four units. So Liam, if the listeners unaware, what is the real kind of distinction between residential multifamily and commercial multifamily and why would one. You know, like yourself say, I only want to do commercial at this point. Like, what are the decision points and what are the factors that lead you to that decision?

Liam: 38:50

Um, the real reason you do that as economies of scale, We have six of the eight units being rented. They're all rented for about 80 percent of what they could be rented. And so just with some simple renovations, filling the two vacancies and getting the existing tenants up, we've, we've done our value add. And that leads me to my last and final point of commercial is that it's less emotional with the, even with a triplex and. Quad it's emotional in the sense that a lot of these people are living in one unit You know, there's a lot more neighborhood feel and it's based off sales comps. You're saying okay Within a half a mile radius, these are the kind of triplexes, same build age condition that were sold, but with commercial landing, the value of the property is based off of the income that you're taking in. So for this deal, this eight unit, the apartments are in great shape. I mean, we're going to have to maybe do a couple of grand to each, put some new paint on it, but it was poorly mismanaged. So the income was so low that we got it at a price at 560 K. It appraised for 670 without the rental bumps. And by the time we get our proforma rents, we're hoping to sell this at close to, you know, eight 30 to eight 50 in the next three years. And that's just from raising the income. And it has nothing to do with what other people bought down the street. It has to do with what we control. And how we manage the property. And that's what really I like about commercial. You know, everyone says that they want to get their own place. They don't want to invest past because they want control. Well, that's the ultimate control is when you have a commercial building and it, the value is based off of what you bring, of how much you push the rents, how much you push the income, how much you succeed as an operator. And that's, that's the ultimate control in a real piece of real estate.

Jacob: 40:38

Yeah, no, that, that was an amazing explanation, Liam. And so to kind of just like reemphasize what Liam is saying. at the end of the day, all real estate, when you purchase a piece of real estate, it's all a business, right? Even a single family house is, is a business, right? You have rental income, you have expenses, you have to manage it in such a way that you profit from that. So, you know, you can think of all real estate as these mini businesses. Now for commercial specifically, that is much, much more so the case because of the fact that the valuation of that building, like Liam was saying, is valued based on the income that it is generating. And whereas the value of a residential property, anything four units or less is much more valued on what that other single family house or what that other duplex down the street is valued at. And so you do not have control over the value of a residential property in the way that you have control over commercial property. There's a lot more leverage in that. And so that is just something for you to know, right? Because I think a lot of people, there'll be a couple of different paths, I think there's going to be people that the small and mighty investor, they kind of pick up the single family, then the duplex, and maybe they stay in that four unit and below and build, you know, a portfolio of 20, 30 doors. And that could be a good path. You know, that could be a fine path for you. And, and maybe that's actually like what you want to do. And, but you should know that that's, that's kind of your path. And then there's going to be people like Liam who immediately have that recognition that, Hey, I did a residential property or two, maybe. And then I do want to scale up. I do want to focus on commercial and I want to kind of get Liam into the transition that you have from commercial multifamily to different types of commercial, like retail, but you're also going to have that path where you're like, Oh, maybe commercial is the play. And then you're going to have a path like myself. I went the small multifamily route. I had very similar interests to kind of scale into larger commercial multifamily as well. And I still do. But then there's like this whole Airbnb space that opened up to me. And so that's kind of the path that I'm going down right now for my own personal portfolio. But all this to say, there's a lot of ways to skin the cat in real estate and to bring it all the way back to Liam's point in the beginning, you know, this Airbnb that we bought it appraised for, 987 and the first, and the first, the first property I bought in Cleveland was, you know, a 210, 000 duplex. And to bring it back to Liam's point, the buy boxes change. The strategies change. All of these things change. But the most important thing is, is that we all stayed in the game, you know, we didn't tap out after those hard moments, you know, and I had a lot of hard moments with, you know, the single family, the duplex, the triplex that I had. And there's a lot of moments like, why the fuck am I doing this? Because it's just like, and, and having, having conversations with my wife, she's saying like, uh, something went wrong again. Something went wrong again. Like, are you sure you know what you're doing? And like, there's, there's that imposter syndrome, right? There's that imposter syndrome where you're like, man, Mike always says this. And I really like the phrase is that like, good things happen when you're just making moves, right. And good things happen when you're staying in the game. And so I'm kind of getting on a long tangent here, but all this to say is that you have to be mindful of the strategies you're taking. What I really like about Liam's story is he's very like introspective and reflective of the moves he's making. And I see a lot of people even with more doors than us that are just kind of acquiring and buying just to buy, but you don't see clarity of thought. You don't see clarity of strategy. You don't see the, the, the real thesis behind what they're doing. And so that's what I want to apply to you. Liam on is like at every single point in your journey, from the story that you shared with us today, you've thought really hard about this is why I'm doing the value add, right? This is why I don't actually like want to be. You know, managing the property anymore. This is why I'm going into commercial. And so tell us now why you're thinking about actually doing not even residential, right? Not even doing, uh, but, but going into the retail space. Um, so tell us about that evolution, um, for, for yourself.

Liam: 44:36

Yeah. Yeah. So again, it was all about just being introspective. Um, I'm, I'm pretty nerdy. I take out, you know, a lot of, uh, a lot of processes from, from like my tech world as software engineer. We have this concept of, of a retrospective of meeting, you know, after projects, after, you know, every couple weeks of work. And so I do a retro on all my projects on everything I do on each quarter, you know, where I can't, you know, how far I've come, what I accomplished, you know, where are the gaps here. And I just felt like I was working way too hard. I mean, they're the multifamily space got flooded with, you know, just from people who are consuming the same content I am going up to the same buildings I am and feel comfortable in the same space that I am that five to 30 unit. And it used to be the sweet spot where institutional didn't play there and residential investors didn't, you know, go up to there, but it's kind of like the new hot thing everyone's doing mid to small, you know, commercial multifamily. And it was hard to find margins that worked. And I went to the best ever conference, which was kind of, And just met a lot of people who are investing in things outside of multifamily and realizing the margins are way bigger and you do way less work. And so it's going back to this thing. Like, I don't like managing. I am intrinsically, I work really hard, but I'm trying to work hard so I can be lazy and not actually have to, you know, do a lot at work. And so it really resonated with me working with businesses. Who care about your property a little bit more than a tenant would in the leases that I'm underwriting in the offers that I'm underwriting The uh, a lot of the the lease structure is different There's a concept of called triple net where they pay for everything taxes insurance maintenance utilities the tenant pays for everything And at the worst case scenario, I haven't offered on anything. That's less than a modified gross A modified gross lease is essentially they pay for everything besides the taxes and insurance. So you're never really walking into these deals and the commercial side where you are on the hook for construction, maintenance, taxes, and insurance for all your expenses. So it's a way to really, you know, put a lot of the onus on, on your tenant. And so that really resonated with me and just do it going bigger for less, right? So rather than say, I'm going to buy a. 2 million deal that has 50. I offered on one that has three doors. It's, you know, it's 2. 5 million, but it had three multi tenant industrial tenants who were triple net who paid for everything. And so why would I not? Do that and, and kind of take back some of my time. And the main reason is there's just not a lot of content out there. You know, you had to join, I joined a mastermind and, you know, really engulf myself in that space and, and really invest my time. And it was another learning moment, right? A lot of people say, don't get shiny object, object syndrome. Don't, you know, keep moving around, stick with one niche. You know, my whole thing is. Spend a year on something, have data, track your metrics. And after a year, when you've collected your data and you have a thesis and you have an idea to pivot for a specific reason, like multifamily market margins are shrinking, like the competition is too high and just realize that you have a reason to be going a different direction and take that step. And for me, it wasn't a complete, you know, different, I mean, it was, uh, just an evolution, right? From small triplex to commercial multifamily, just to regular non residential commercial. Um, and everyone's path leads them differently, but mine kind of got me to where I can make the most of my equity of my money, but mostly what's my return on my time. And I think that's why I'm into the commercial space.

Jacob: 48:28

Liam, I love that. I love that kind of like evolution because so I was having a conversation. This is maybe like last year with the old commercial broker. Right. And I was talking about, Oh, at that time I was like, I think I want to go into kind of commercial multifamily. And he was more on the, like you, like retail triple net leases and things like that. And he said, he was talking to me and he's like, you know, save my card. You know, save my card because about in about like 10, 10 years or so, you're going to sell all of your multifamily, you're going to sell all your multifamily. And then you're going to want a 10 31 into some triple net leases. He said, all of his clients are all people that, you know, went down the kind of real estate, the residential real estate route, and maybe they did scale into multifamily. But at a certain point, especially as we get older, And we want the income that we rely upon as we get older to be more and more passive. Right? Like that, that's, that's ultimately the goal, right? That's ultimately the goal. You know, it takes a really long time to make, you know, enough money where if you're like an index fund investor, for example, right, the 4 percent rule, you can withdraw 4 percent of your portfolio and never run out of money. That's great. But 4 percent is not a lot. And you need to have a really, really big index fund portfolio to be able to do that. But if you did have that great, because that's super passive, All this to say is that we're investors These are investment Vehicles, you know, we're, we're not necessarily tied to Airbnb as a strategy or, you know, commercial multifamily as a strategy or retail as a strategy, right? We were, we are investors and we are trying to generate a return for ourselves or for our investors. And we are picking the vehicle that matches up both with our skillset, but where the return exists, where the return exists. Liam did his homework. He was for a whole year trying to get into the commercial multi family space in Cincinnati. The deals were not there, you know, the cap rates and the interest rates, they just, they, they, they just weren't making sense, right? Because, you know, the sellers weren't, they just didn't come down enough, Given the current interest rate environment. So he pivoted, he pivoted, right? He pivoted and said, look, I am not just going to sit here and accept that this strategy doesn't work. And then I just have to keep like banging my head against the wall. And he pivoted and he pivoted to a strategy where you can work. So I guess on my tangent, what I'm trying to say is real estate works, but you have to understand the current environment that you're in and figure out the most optimal strategy that matches your skillset and matches the current environment. Right now, Liam is saying, Hey, I think there's a lot more meat on the bone in commercial retail, commercial industrial, and that's where he's going down. And so, I know I got to get you out of here. This has been an amazing, amazing conversation. I personally have learned a lot and I'm sure the listeners to have learned a lot from your evolution in just, you know, a little over two years of doing this, you know, how many, how much you've learned and how much you've grown as an investor is truly, truly inspiring for me to kind of witness that. And I'm sure inspiring for the investors as well. We'd like to wrap up with one question. If you could give. You know, your best advice to the person that is sitting on the sidelines, thinking about doing their first deal. And I'm sure you've had a lot of conversations like that. Like what would you tell that person that's sitting on the sidelines right now?

Liam: 51:41

Yeah. I'm glad you asked that because that this is one of the biggest realizations aha moments that I've had in my investing career is that your goal should never be an outcome goal when you're getting started. It should never be. I want to buy a property by the end of the year. I want to own specific amount of real estate by the end of the year because there's just too many unknowns. You don't know what you don't know when you're getting started. You don't have the systems and the data to. Accurate in your projections of what you can accomplish. And you're going to set yourself up for disappointment if you just like have this arbitrary goal of I want this triplex by this amount of time. And I don't want to be having this much equity in it. For me, and I still live true to this, most of my goals are process goals. And when you're getting started, every single one of your goals should be a process goal. Have an idea of what you want in the end. But you can't control things that you're just not prepared for. What you can control is how many agents you're going to contact this week. How many deals you're going to underwrite. How many books you're going to read. How many investors you're going to connect with and, and chat with and, and, and learn from, and the outcome, the buying that first deal, the getting into real estate, it's just a symptom of those process decisions you made, um, today. And so I would say if you're thinking about it, you're not sure about it, just, you know, Get some KPIs together of what you want to hit of, you know, say I want to watch 10 YouTube videos a week, just do something where you can track progress and eventually you'll get there. I, I wouldn't get too caught up on a specific, you know, outcome goal when you're getting started. There's just so much out there that you don't know. And you might have this outcome goal. And then two years later realized like me, that's not my goal at all, actually.

Jacob: 53:26

Yeah, absolutely. Absolutely. No, I think that's fire advice. I think that's fire advice and that applies to more than just real estate. Right. I think in, in, in all things in life, you cannot, you cannot actually control the outcome, but you can control the inputs, right? The inputs to the process. And so ladies and gentlemen, This has been an amazing episode. Liam, if people want to get in touch with you, what is the best way for them to do that?

Liam: 53:48

Yeah. So, um, well, first of all, I really want to thank you for having me on. Uh, I feel like, you know, we met a couple of years ago and just kind of grown. A lot together, seeing you kind of in a really similar place, uh, you know, in your investment journey and your, you know, W2 world. yeah, really flattered to be brought on, but if you want to get ahold of me, my email is liamatdelumparealty. com. Uh, email is probably the best way I have, uh, my Instagram is illwillyd. Uh, and, and, uh, I actually just got, uh, on, uh, I'm a co host of a, uh, podcast targeted towards tech professionals. It's called pixels and properties. Um, so I've done one episode there, but hoping to start doing a few more here and there. So

Jacob: 54:37

Yeah.

Liam: 54:38

on here on one of these.

Jacob: 54:40

Yeah, absolutely. So Liam, I'll follow up with all that info so we can make sure to put that in the show notes. Um, everybody, if you want to connect with Liam, uh, he's an amazing investor, just amazing source of wealth and knowledge, especially for you. First time investors. So I'll make sure to put that in the show notes so they can reach out to you. I am Jacob Sandoval at cashflow saga on all socials. We are the financial freedom fighters. We will see you in the next episode. Peace.

Liam: 55:02

See ya.

Nancy: 55:02

Goodbye