Financial Freedom Fighters
Step into the world of real estate investing with your hosts, Jacob and Mike. Join Jacob, a W-2 tech employee trying to escape the rat race, and Mike Magno, a top 1% Cleveland realtor, as they share real stories and valuable insights from their journey towards financial freedom.
Financial Freedom Fighters
EP #22 - Accountant Explains: Buying Your First Apartment Building
In this episode of the Financial Freedom Fighters Podcast, host Jacob Sandoval and co-host Michael Magno interview Ian Cruz, a successful real estate investor from the Bay Area. Ian shares his journey from working as a CPA to becoming an expert in the Cincinnati real estate market. The discussion covers Ian's investment journey, including his first out-of-state multi-family investment and transitioning into larger commercial real estate deals, highlighting the importance of strong local partnerships and effective networking.
Connect with Ian Cruz:
Instagram: https://www.instagram.com/cincycashflow/
Website: https://www.elev8capital.co/
LinkedIn: https://www.linkedin.com/in/cbcruz/
FREE Real Estate Investing Tools & Resources:
https://www.cashflowsaga.com/links
Book a Free Strategy Call:
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
This is the Financial Freedom Fighters Podcast
jacob:Welcome everybody to the financial freedom fighters podcast. Back with another episode today. I'm your host, Jacob Sandoval, AKA cashflow saga. I have with me, my cohost Realtor, Michael Magno, and we have a very special guest today, somebody that I've become good friends with. He is based in the Bay area. He is one of the smartest real estate investors that I know. He is also. One of the most knowledgeable people about the Cincinnati market in terms of Cincinnati real estate that I know. Um, just an all around great guy. Very happy to have him on the podcast. We're welcoming Ian Cruz, AKA Cincy cashflow on Instagram. Ian say what's up to the people.
ian:Hey everyone, thanks for having me, Happy, happy to be here and share more about uh, real estate investing.
jacob:Yeah, man. Yeah. Very happy to have you. Um, and just really excited to dive into your story. I think there's so many interesting nuggets. Um, as you know, you know, a lot of our listeners are either based in Ohio, um, a lot of them, mostly in Cleveland. Um, so, but also based in the Bay area. So just really want to kind of like take a step back and unpack your story. So we always like to start with kind of the origin story. So Ian, you know, even before you got into real estate, why don't you give us a little bit of background and tell us how. That led into, you know, being a real estate investor.
ian:Yeah, um, so I think all of us are, you know, who get into real estate investing are, are trying to figure out how to deploy our capital to get The largest return on our money, um, to put us in the position down the road to be able to have more time freedom right, so Uh by day, I have my cpa license like you I worked at pwc for a little bit And eventually got over at an investment firm a venture capital firm as their manager of finance. So i've been And accounting numbers guy for the past 10 years. Um, and always looking at different ways of investing my money, whether it be in the stock market or in real estates or things like that. So, um, personally, my mom has done some real estate investments, um, dating back to 2008, there were things to learn. I always had all these questions. What, what happened with the housing market? We were kind of in college at, at that period of time. And, um, Mistakes were made and you just learn. And I just started reading all these books, trying to, trying to unpack what happened during that period of time. And, you know, tried to learn more about investing. Eventually I got to a stage in my career where I had a little bit more capital to deploy. And, uh, also helped my mom through a 1031 exchange and really just caught the bug, right? Wanted to learn the ins and outs of real estate investing. And like you, we joined a number of different, uh, investment groups and local meetups. And once you start talking to people, things really start to snowball, right? so that is, uh, Part of my journey into into real estate investing and then also house hacking was part of it, right? You're just trying to figure out how to get by in this expensive Bay area market, right? How do we make the numbers make more sense? and as we started to learn more and more eventually as I, uh, separately travel over to Cincinnati, Ohio, I'd be looking, okay, well, this is what a million buys me over here in the Bay area. What would a million bucks buy me over here in Cincinnati or in Ohio? What would the cash return be over there? And the numbers start to look from a cashflow perspective. They look a lot better. Right? So, um, over time got to network with, with many of you. And I think the. Data guy, the accounting, the finance guy, part of me, um, looked at, looked at real estate investing. Like it's a big math problem, right? You're, you look at an underwriting spreadsheet, you look at the interest rates, you look at the market rents and you're like, Oh, I can make this much money. And then as you know, uh, Jacob, over time, you realize it's not just a spreadsheet. It's a lot of action and it's, It's not just the spreadsheet is who you know, it's who can you call at this time? It's how do you handle this problem, right? If, if the spreadsheet looks good, but you're, you're a huge asshole and nobody likes you in town or you do bad business, like you're not going to be able to do any of that, right? So, um, relationships matter. Soft skills matter. I think that's been a part of my personal growth getting into real estate investing that I've really enjoyed as well
jacob:absolutely. Absolutely. So thanks for giving us that background. I, I always find it interesting. I'm just hearing how different investors kind of found their way to real estate. You know, for me personally, it was a complete accident. You know, I bought a primary residence that I ended up having to turn into an investment property. Mike, you actually got started on just the realtor side of things before you kind of figured out, Hey, this is actually, or no, you actually turn your primary into an investment property. And then you also go on to the sales side of the business. Um, and then Ian, it sounds like. It was kind of a combination of different things. You helped your mom with the 10 31 exchange, which I think is a lot of great experience kind of upfront. Um, you got started in house hacking, which is almost a necessity in the Bay area if you want to buy. And I'd love to talk a little bit about that because I think a lot of people feel it's actually impossible to do in the Bay area, but you kind of prove that that's incorrect. And then also you just. Figured out with your investor cap, how can I deploy my capital effectively in order to generate a return? And I think that this is, you know, at the end of the day, real estate is a great vehicle. We have all become very passionate about real estate as an investment vehicle, but that's what it is at the end of the day, right? If you are investing in the stock market, you know, maybe you're 401k, you're not, maybe. Consider yourself to be an amazing stock market investor, but that's what you're doing. You're deploying your capital into an investment vehicle and you should think about real estate as an alternative investment vehicle. To diversify your wealth. So Ian, I, I just love those aspects of your story. Like there's a lot of different factors that led you to become a real estate investor. Um, and then also your special connection to the city of Cincinnati that allowed you to focus on that as kind of the market that you wanted to invest in. But let's take the story a little bit further, right? So you have all these ideas, you want to deploy your capital, you help your mom with the 10 31 exchange, but then what brings you to the point where you're like, okay, now I'm going to. I'm going to make my own kind of out of state investment and like, talk us through like that evolution
ian:Yeah, um, so when I did a 1031 for my mom It was from single family into a five unit turned six unit. We did uh, what's known as a bill to suit exchange So with that it's like a hybrid. It's Partially somewhat like a reverse exchange where you identify replacement property, but the 1031 exchange agent withholds some of the money so that the exchange isn't complete. The 1031 exchange company actually takes title to your replacement property and allows you to be the manager. And then you use some of the excess funds from the, from the relinquished property to improve upon that property. So we use those. excess funds to build an ADU, which is a little stressful. It has to be within 180 days. So yeah, we got to go prefab on that. Um, but it went from five to six units and, um, that was a pretty complicated transaction to, to jump into. And then it's also commercial financing and commercial multifamily rights. So you're diving into just straight into apartment
jacob:straight into the, straight into the deep end right there.
ian:Yeah, yeah, and I, I went straight into that and joined, you know, as Tony, Tony Lynn walked, uh, that property with us. He's, uh, one of the mentors that, that I've had and, um, that's really opened my eyes. Um, but at this stage in life, I'm not buying like a 3 million, six units or in the Bay Area, right? You know, I looked at, at Cincinnati because it's, it's going to yield a little bit of cash flow and the barrier to entry is lower, right? so my, my first deal was also a six unit over in Cincinnati, but that property was 375k, right? So it's much, much different. because I was actually doing both of these transactions in parallel. I learned a ton, right? Um, and there's a lot of stuff that crosses over. Then there's a lot of stuff that doesn't because obviously it's a very small balance commercial loan. Which I found out as an out of state investor with no experience. It was nearly impossible to get the financing for. Um, so I dealt with a lot of headaches in that way. And something that I've also learned or is something that I've also thought is that, um, You know, not to give out of state investors a bad name, but it's almost like to some people it is some of the stuff starts to look like play money. Cause it's like, Oh, you know, six unit, it's only that much, but it's still, you know, you're still a housing provider for people, right? Like the same level of care that, that we have to put into our six unit in the Bay area, we're still impacting six, six families, um, over there. So there are all of these situations and things that you have to handle sensitively, like there's, there's transition when you. When you buy a building, right? So, huge learning experience. Right. And, uh, it's, you know, that's, that was my first deal out of state, actually. It just jumped straight for my mom, the six unit and for myself also jumped straight to a six unit as well.
jacob:Yeah. Real quick, Ian, just to, to kind of like ask a couple of questions to clarify here. So you're doing the six unit 10 31 exchange for your mom. Incredibly, incredibly complex transaction there. And just for the listener, a 10 31 is effectively like you are selling a real estate property. And instead of paying. What would be capital gains taxes on whatever capital gains you have from that sale, you can defer the capital gains and actually. If you're investing that into an additional real estate investment property, then you can roll those proceeds into another investment property. And there are different variations of the 10 31 exchange. We don't have to go super in depth here, but Ian did an even more complex version of the 10 31 exchange, and he did that helping his mom. So that's a six unit in the Bay area. Um, a very big purchase price, obviously, because that is a lot of doors to have in the Bay area. But simultaneously. You were buying a six unit for yourself in Cincinnati. So one, how did you find the deal? And then two, if you would elaborate a little bit more on why we make the statement that like doing a commercial multifamily deal for your first deal off the bat is jumping into the deep end. Like for the listener who maybe hasn't even bought a single family or maybe hasn't even bought a duplex. Why would we say that jumping into a commercial transaction right away is like jumping into the deep end? Yeah,
ian:Yeah. Um, So, uh, the first question was how I found the six unit or can you repeat the
jacob:yeah, yeah, yeah. yeah. First, first question is how'd you find the six unit? Like, did you get a, did you get a realtor in Cincinnati? Like, did you find this off market? Like, how did you find this six unit in Cincinnati?
ian:Yeah. Um, so I was, I think like many of you, I have the, the Zillow kind of addiction where you're refreshing and I'm refreshing across two markets and I have filters for things that are listed within 24 hours. So things are always popping up and I was finding the replacement property for my mom. Um, but I was having filters on both markets and I actually considered helping, you know, having my mom. This is way too small for her, obviously. But even having her get multiple transactions, possibly, uh, technically, rather than doing the built to suit, we could've bought the five unit. in the Bay Area and then also bought the six unit in Cincinnati. So I was exploring that, but the more I thought about it, I didn't want to play on my mom's dollar with stuff out of state. Um, instead I played on a complicated improvement exchange on her side. And then for myself, I took the six unit, um, with a partner that, that, that, you know, Daniel over, um, over in the Bay Area. So the way that the, the six unit in Cincinnati came about is, um, I, I have just been refreshing Zillow for quite a bit and this deal, the numbers all penciled out, it went under contract just immediately, just, just like many things in the market do, but the buyer actually never wired in their EMT. So I kind of slipped in afterwards and submit an offer a little bit below ask and was able to get it under contract, which is really good because I had another friend and I didn't know he was offering on it. He's actually. He trains at the same boxing gym as me, but he was willing to offer above ask on that property. And he thought he missed it the first time it went under contract. Then that slipped through. We offered below, below ask. It was, it was listed at 400. Um, I, I knew someone who was going to offer 425. I, I got it at 375. Um, And yeah, I mean a lot of times, actually multiple times, me getting under contract is being a backup or waiting for things to fall through. So just following up on properties even after they go under contract is, is definitely a good thing. My realtor, uh, was, uh, Uh, Joe Cornwell, who is now one of the hosts of the best ever real estate investing podcast. Um, he's pretty well known in the area. He's, he's a great guy. Um, but I had seen him on BiggerPockets answer some questions and I liked his thought process. And, uh, a trip earlier when I went over to Cincinnati, I met him up and he's a guy who does everything. He's got his own construction company. Um, he, he, You know, his company is called Realty One Stop. So it's really because he does a number of different things. So I met him while he was doing his own burr over in Norwood on a triplex. So I met him and, uh, reached out to him when I, I saw this deal and really the stars aligned and the numbers made a ton of sense. So I didn't have any hesitation in putting in an offer. I wasn't like nervous or anything like that to get to your, uh, question about it. this Diving like jumping into the deep end. It is Different it's obviously more doors. There's more tenants. Um, there is economies of scale, right rather than six single family homes You have a six unit building. So that's like one roof, you know, um, there there are efficiencies there, but on the flip side um You do have six tenants. Maybe one, one is causing more issues. Maybe, uh, a lot of, it's unfortunate, but a lot of landlords there, there will be more deferred maintenance on the multifamily building than, um, than a single family home. And in terms of the financing, it's not, uh, based on your own DTI. So it's a whole different process. It goes through a commercial loan where, uh, it's based on the strength of the property. So one of the things that, um, We went through as we requested one unit to remain vacant, but when that's one out of six units, it hurts your DSCR a little bit. Uh, so we actually didn't meet the DSCR that we needed for a loan. And, um, we're out of state investors. So that already narrowed down our pool. Uh, it took, it took us bank out of, out of the equation. Um, so that, that made things difficult and we had to pay, uh, a pretty decent fee for a mortgage broker because mortgage brokers have, uh, loan minimums, right? So, uh, it was, it was pretty stressful to find the financing for that property, but, uh, to share what DSCR stands for, I know that's going to be the, the next topic in question. So DSCR stands for debt service coverage ratio. So basically you want to make sure that the rents cover the The debt on the property and on commercial loans. I mean you can take out dscr loans I mean people do that for like airbnbs and stuff, which will have their own requirements, but for commercial loans Lenders will want to see that the dscr is above 1. 25 x so 1. 25 times the the debt service and that'll be over usually a 25 year amortization Not a 30 year amortization. So many residential loans are amortized over 30 years, but many commercial loans issued by small, small banks and credit unions, which is what you may need to go through if you're, you're investing, um, in Ohio, those will be over a 25 year amortization in the current market.
jacob:yep. Yep. So just to kind of emphasize a point here for the listener, you might be thinking about buying a single family house. You might be thinking about buying a duplex, but there is another kind of level to the game I'll call it in terms of like jumping straight into commercial. Real estate, and that is defined as five units or more. And at that point, as Ian described, it is a lot less about you as an individual, right? Like you are not qualifying for the loan necessarily. It's not about your W2, so to speak, and how much money you make and your credit score. I think they still check those things, but it's a lot more about the numbers. It's a lot more about the property as a business, how much revenue is going to be generating. What's the NOI. and what the DSCR is. And so the financing is a lot different, you know, you're not going to get 30 year fixed rate, like Ian said. And so as you think about what is the right first move for you, Maybe that is jumping into commercial, you know, with a little bit of education, like Ian did, Ian was managing a complex transaction in the 1031 exchange. He felt like he liked the idea of going for a six unit. but just know that there's different considerations there to make. Um, and so I guess, Ian, would you say, knowing what you know now, would you have done anything differently? Would you have started residential first before jumping into commercial? Or did you like that? You kind of jumped into the deep end right away.
ian:Um, for me, and my goal is knowing that I always wanted to get into apartment investing and get into multifamily. I, I, I wouldn't change it. There were definitely some mistakes made along the way. Like, for example, paying that 12K mortgage broker fee on a 375K deal. That's not small, but, um, I, I wouldn't change it. Uh, definitely some learning lessons. Yeah, I mean, if, if you know that that's your niche, I would just say, just go for it. There's no need, um, there's no need to go for, you know, For the small, like for single family, single family has its own place in investing, right? But, um, I, you know, I like that I went with essentially the smallest commercial multifamily deal that I could find, um, to get that experience and get that under my, get that on my resume. Um, that being said, You know, the loan terms are actually better when you use an agency debt or, um, if you do a commercial loan that's above a million dollars, right? So I didn't, that was something that I really wasn't aware of. The fact that the small balanced commercial loan is probably the most difficult to finance and it's going to have the worst debt terms.
jacob:Yeah, for sure. For sure. For sure. So. Let's keep talking about another, another factor that's important about commercial real estate versus residential real estate. Residential real estate is valued based off sales comps, right? So what are similar properties with similar attributes and similar locations valued at So it's always, it's based on the cops. Commercial real estate is based on income, the incomes that it's generating. So Ian, I know that you and your partner, you executed, a great business plan for this particular six unit and you able to achieve some great value ads. So why don't you talk. Uh, for the listener a little bit on what you did with the six unit and how you were able to increase the value so much.
ian:Yeah, um, So just to reiterate what you said, these properties are not based on comps, right? So you're not just finding, uh, another six unit down the street and seeing what that is worth. And that's not the value of your property. It's based on how your property is performing, which is also how you get, you're able to qualify for the loan. It is pretty simple. It is trying to improve the overall performance of the building. Um, the prior owner and, and this is something that is pretty common. There are a lot of out of state landlords in Ohio or in the Midwest, um, and, um, Oftentimes you'll be buying from a burnt out landlord, so the prior owner of this building was a, she was either a doctor or a dentist out of, uh, Las Vegas, right? So she probably thought that this investment was going to be a little bit more passive, um, and a lot of people struggle managing properties out of state, and they struggle building the right relationship with their property manager to be able to address issues. Immediately, they may be getting the short end of the stick if a PM has a number of local clients and then they have all these kind of coastal investors that they're trying to, you know, Get a weekly sync with it. It can be very difficult to to build that relationship with your PM, right? So prior owner had had some trouble with this building It was a six unit five of them or two bedrooms. There's one one bedroom and it was getting like 3, 700 a month in rent With one vacancy, but everyone was well below market rent Since then, obviously when there's turnover in a building, naturally tenants, turnover and ownership in the building, tenants will leave. Um, so some of that happened naturally. We didn't raise rents for, I think it was at least six months, probably a year even. We, we took our time with it. Um, we wanted the building to stabilize. We knew we were going to deal with some vacancy. Um, and eventually we raised the rents, uh, and we did it in a. Kind of staggered away where it's still below the market rent, but above what they were paying because some of them were in two bedrooms paying like 600 bucks a month. Now you can get 1, 100 or 1, 200. Our highest is 1, 200 for a two bedroom. So our rents have gone up from 3, 700 up to 6, 225 per month. 6, 225 per month. There's still some lost lease on that, so there is a two bedroom tenant that's paying 950. I'm not trying to just squeeze, squeeze up to 1, 200 just, just because I can, but every time a tenant leaves, we can go ahead and renovate the unit, um, and bring it up to market. So over time, we've renovated four out of the six units, um, and now it's six, over 6, 200 a month on the property that we paid. 375k for and this is during a time when interest rates were rising and we were all scared like oh my god, but we I mean our interest rate is five and a half percent right which seems Seems good today, but it was in that very quick time time frame when it was raising from like three to to six percent so, um overall the numbers work, uh, even if we dealt with a lot of struggles to start we dealt with a vacancy we dealt with Putting money in between five and 10 K per units. Um, and we, we don't, we don't, uh, RPM distributes money to us, but we don't, we don't distribute for ourselves. We just kind of let the money stay in there and grow. Um, but it, it definitely took some time. If, if I was expecting like to be making a bunch of money in year one, I might've been disappointed and said, Hey, I'm going to sell this building, um, because it's been a headache, but don't wait to buy real estate, buy real estate and wait, right? So after a few years, I'm pretty happy with where it is.
jacob:So let's talk about, let's talk about the valuation. If, if you don't mind, Ian, cause you did a ton of work, you and your partner did a ton of work. You brought the rents up, you brought the profitability of the building up. And the whole point with commercial real estate is when you increase the net operating income, the NOI, you are increasing the value of the building. So in terms of actual numbers, Ian, like what was the equity creation? For the six unit, after you kind of got to stabilization and got closer to kind of market rents on all the units.
ian:Yeah, I'll give you, um, to refer to What book was it? Um Apartments It's one of those apartment investing books, the one minute rule, right? So let's say, I mean, let's make it even more simple in terms of math. Um, let's say it's getting 6, 000 a month in rent. Uh, that would be 72K a year in gross rent. And let's use the 50 percent expense ratio, right? So 36K a year in NOI. So, Uh, commercial properties are valued by cap rates. Um, so, uh, the, the, the mathematical equation is purchase price equals NOI divided by, um, divided by cap rate, right? So a cap rate in general, when I think about it conceptually, it's your unlevered rate of return on your property. So if you didn't have debt, what is your return on the property? If you spent a hundred K on the property cash and it's giving you six K and a Y, that's a 6 percent cap rate. Right? but when you flip and try to, uh, when you flip the equation, you're trying to figure out what your property is worth. You take what the market cap rate is, um, and you're going to use that to determine the value of your building. So in this simple, uh, example, it's, let's say the property is getting 36k a year in NOI. Let's go ahead and I'm just going to open up Excel right, right here. Um, 36k divided 6 percent cap rate might be the market. That is a 600, 000 valuation. Um, if it was a 7 percent market cap rate, that's a 515k valuation, right? So, uh, depends on what the market is. but you can back into it based on the performance.
jacob:huge. And so thank you for walking us through that Ian. And at the end of the day, folks, this is kind of the power of commercial real estate, because it is fully within your control as an operator to change how much that building is worth. So Ian bought this property for, 375, 000, which I think it was slightly under market value, but again, it's valued based on the amount of income it was generating. And at the time it was under market rents, it was mismanaged. Um, and it wasn't generating the amount of revenue and income that it potentially could have. Ian went in there, he slowly renovated the units. He slowly, you know, kind of raised the rents and he got that NOI. Up above six, um, or he got the income for that property above 6, 000, increasing the NOI. And he got that valuation closer to 600, 000 or over 600, 000. And so through executing the business plan, Ian is adding a ton of equity to the property. Now, if Ian wanted to today. Sell that property, he would cash in on the equity. That isn't exactly how it works on the residential side, right? I have a single family, a duplex, a triplex, um, and there's appreciation in those, but it's more so a factor of, you know, what are the single families duplex and triplex is selling for in Cleveland. And I will benefit from that appreciation, but not necessarily because I'm increasing the rents and executing a business plan. So that's an important distinction to make. And that is why. Commercial is very attractive as an investment vehicle. And that is why a lot of investors eventually kind of graduate. And, you know, even Mike and I have talked about eventually wanting to get into the commercial space because that's, you're playing the game at a higher level at that point, and you have more levers to kind of increase and force. Equity, you'll hear that a lot kind of in the real estate space is like forcing equity and forcing appreciation. And you could do that through kind of controlling the income. Now, Mike, I'm going to go to you because you're uncharacteristically quiet here. And I have a hunch and I have a hunch it's because this is the second Cincinnati investor that I've brought to the podcast. and as a Cleveland man, yourself. I, I sent some, some resentment. So we're going to try something here. I don't know if this is good. I don't know if it's going to work. I'm going to give you guys both the mic. We're going to do like five minutes and we don't have to call it a debate. We don't have to call it a debate, but, but we can call it advocating for your market, right? So Mike is a big Cleveland investor. Obviously he is. He is the hometown hero in Cleveland. I am a big Cleveland investor myself. Obviously, Ian, I've invested in Ian's deal as well. Right. And we'll talk about that, but I've invested in, uh, eight unit in Cincinnati. We JV together. Ian is the market expert in Cincinnati. They're both in Ohio, right? We love Ohio. So we can all agree on that, but there is a little bit of a rivalry that happened. The listener, you didn't, you didn't hear this, but there's a little bit of a rivalry. Happening here between Cincinnati and between Cleveland. And that was happening a little bit before we went on the air. So I'm going to give you the mic first, Mike, and you can take it whatever way you want. You can just defend Cleveland. You could bash Cincinnati. You can do whatever you want, but I'm going to give you the mic. So take it, take it away, Mike.
mike:All right. So Cincinnati, what do we say about Cincinnati? Well, we should just give you to Kentucky. That's the first thing we always say about about Cincinnati, right? Like we should just cut you off and you know, you guys can just become part of Kentucky. But now on a serious note. I know people being successful in Cincinnati. Um, and, and I'm, and I'm glad that you came on and, you know, you're sharing your story with us and, and we can hear about that. Um, you know, when we were off air, I was telling you guys that I, I, I have my reasons why people, you know, like why I tilt people to, to invest in Cleveland. it's, it's more about the demographics of everything is the way I break it down for people. Ohio has various distinct markets and Cleveland, uh, is part of a, just a much greater market because it's just not Cleveland, right? So it's, it's all of Northeast Ohio and Northeast Ohio encompasses almost 50 percent of Ohio's population. So that's one of the, one of the reasons that. When people ask me, because I get these questions often from people is why Cleveland? Why Columbus? Why Cincinnati? Why Toledo? And I go back to looking at the, you know, basically the metropolitan area of Cleveland is just it's a much greater opportunity because of the population distribution, you know, whereas when you look at Cincinnati, you look at Columbus, you look at Dayton, for example, that that triangle here in southwest Ohio. All those markets are kind of independent of each other. You get a little bit of crossover from Dayton into Cincinnati and Cincinnati into Dayton a little bit. You don't get any crossover into Columbus cause it's 80, 90 miles away. So, um, and then Toledo is its own thing. Um, so when you look at Cleveland, you know, in this example, you know, I always tell people you've got six of Ohio's top 10, uh, cities and population all in Northeast Ohio. So that, that's my biggest thing that I tell people. But. Once again, we all know, uh, real estate's hyper local, right? And you can be successful anywhere.
jacob:I, I, I didn't expect, I didn't expect it to be as respectful. I'm just kidding. I'm just kidding. That was, that was, that was great. That was great. All right, Ian, I'll pass the mic to you. Um, take it however you want, but let's talk, let's talk about Cincinnati. Why you love Cincinnati so much.
ian:Yeah, so I could put on my real estate investing hat, I could put on my sports fan hat, right? There will be a lot more trash talk when I put on the sports fan hat. Uh, the sports phrase is, if it's brown, flush it down. Between Bengal fans. Uh, but, For
mike:think Joe Burrow's our bitch though, right? I mean, come on now.
ian:you guys, you guys have been, I that's been painful to watch.
mike:We've owned his, we've owned his ass since he came into the league, so.
ian:yeah, it's, it's crazy. It actually is crazy. Um, been waiting for that to change. The Browns have always given us trouble. The AFC North is a beast in general. Uh, not to get too off topic, but all four of those teams had winning records last year, so it's, it's been crazy. It's going to be an interesting year. Um, but as it relates to real estate investing, I can say, Michael, you're in the market that's, that's right for you because like you said, it's localized. Right? So you can, you can make money. Uh, you can be successful anywhere in the best market is the market that you know the best. And for me personally, that is at its core. Why invest in Cincinnati? Because I go there quite a bit and I have the best boots on the ground, uh, for my deals. So you've partnered with me before, but a lot of times that I, you know, Share the deals and opportunities that I have. I don't just sit around and talk about myself or talk about the deal itself. I talk about who I've partnered with, and I've been fortunate enough to partner with Slocum Reed of the Best Ever Network and with Venture Real Estate Company over at just larger apartment complexes. And those teams are rock stars. And you know that you're getting with A capable operator. So for me, it really starts with the people that I have in place, um, that make these investments work again. It's not just a spreadsheet. It's not just data. It is people, right? Um, as it relates to Cincinnati itself. Um, I like it. Uh, personally, I'm bullish on the whole Midwest in the coming years. If we're headed into a recession, I think all of it's going to do well. Um, not out even outside of Ohio. Uh, when you think about Columbus, Cleveland and Cincinnati, Columbus is historically your appreciation market and people like it because of intel and all that kind of stuff, but it's priced accordingly, right? And Columbus has the highest, uh, population growth. Cincinnati is below that. It's kind of slow, slower, but steady. And then Cleveland is, is below that historically. But like I said, I'm not, I won't be surprised if any of those trends change. So I think that within all of those you're, you're going to get a lot of cash flow in, in Cleveland and also in Cincinnati. So I really like those markets. And when I think about Cincinnati's economy, it's well positioned in In any economy, uh, good times or bad times. In general, there's a number of Fortune 500 companies, more Fortune 500 companies per capita than Chicago, New York, LA, right? It packs a punch for its population size. You've got Kroger, you've got Procter Gamble, um, you've got Fifth Third National Bank. Thank you. I just don't see it going anywhere. And, and, um, it has a lot less, if you're looking at the larger multifamily space, it has a lot less new construction than other areas. Um, all of these markets that have a lot going for them. Don't, don't get me wrong. But when you think about Vegas and Dallas, and they're, they're getting 20 K deliveries a year versus Cincinnati, which may be 20, 4500. Um, it's going to affect that supply to supply and demand equation differently, right? I think Columbus is going to have 12, 000 deliveries. You got places that are getting way, way more deliveries. So, um, the overall trends in those markets when, when it comes to apartment investing is that there will be. Slow to no or possibly more rent concessions, um, because there's so many new deliveries coming online. Um, but then in 2026 and 2027, those trends are going to reverse because all the permitting, all the construction, they've, they've kind of slowed down a great amount. And, um, there's going to be another rent Growth cycle, uh, in those markets. So people are trying to figure out when to invest back into like Dallas and stuff like that. Whereas Cincinnati right now in 2023, uh, the highest, uh, largest year over year rent growth. And every, every few months, the trailing 12 period changes. So the one month it's number one, another month it's somewhere in the top five, but it's consistently near the top in terms of both, uh, rent growth and home sales. price, uh, growth. In general, in Ohio, the lending environment is a lot more conservative. That's an Ohio thing. That's not a Cincinnati thing. So, you know, as it comes to all these stories that you hear about apartment investing and distressed properties and bridge debt, there was a lot less bridge debt that was taken out on these properties, right? So, I wish that there were more opportunities popping from, uh, coming, coming our way from an investor's standpoint, but I'm just, I'm not seeing it. And unfortunately, some of the things that people are buying still don't, they don't pencil out and make sense. But in terms of things staying stable, there's, there are a lot of reasons why Ohio in general will stay stable and why I'm, I'm very bullish on Cincinnati.
jacob:Absolutely. Absolutely. Well, we will conclude that debate battle, whatever you call it. I think I'm a little underwhelmed because I think you guys were both a lot more respectful than I thought you'd be, but that's okay. we, we, we all love the Midwest here, um, from a real estate investing standpoint, but in general, for you, the listener, right, I think we're going to Um, our investment thesis is very much the same, you know, whatever market you pick in the Midwest. Um, we're just very bullish on the Midwest in general, especially coming into this market cycle for all the reasons that both Mike and Ian touched upon here. Um, so we, we will stay long the Midwest in general on this podcast. And so we'll kind of transition here, Ian, because I do want to dig into your story and I want to be respectful of your time, but so you went from. Okay. 1031 exchange, um, help your mom kind of do that for the Bay area property. You, you took down your own six unit kind of added the value there. And then you kind of continue to evolve, continue to, to elevate, you know, no pun intended elevate in terms of what, what you want it to do. Right. So you had aspirations to go bigger and you started actually raising capital and bringing other investors into deals. I myself invested and partnered with you on eight units in Cincinnati, and we could talk about that, but tell us a little bit more about the evolution of saying, okay, cool. You know, I had one partner, we bought one, six unit. Okay. And then, you know, you, you always had the aspirations to kind of do bigger multifamily deals. So tell us a little bit more about how this kind of continued for you.
ian:Yeah, I think real estate is a team sport. I'll start there. And I think that building your connections and figuring out how you can find value to other investors is going to pay itself back. Right? So I met you at a meetup and we, we, we don't need it. I don't need to say, Hey, invest in my deal in Cincinnati. I, you know, we, we talked about your story, right? Accidental landlord, uh, story over moving and, and. And over here, I mean, we just talked, right? And, um, I never saw myself as a capital raiser or anything like that. I was just always trying to find deals and find the best solution and find the best partnership group to make these things work. Outside of real estate and outside of my career, I think, uh, uh, Jacob, you know, I, I volunteer as a, at a nonprofit boxing organization as a coach. And I think it's in me to try to share knowledge and help other people. so just similar to the way that you educate people on how to invest, I like doing that stuff. And I think that two heads is better than one and both are. You know people will always see that stuff that you don't see so when I'm looking at deals rather than feeling like hey I have to hide this deal for from the world. This is only for me I always brought people along to underwrite the deals and pick at it anytime. I had an opportunity I said find what's wrong with it. I mean I've sent emails like that. You've been CC'd like tell me what's wrong with this deal To make sure that I'm not jumping into something bad. And I, I utilize the platform fractional, the, the deal that, that we were partnered on together, um, as an active JV, um, to buy eight units over in Cincinnati. And over time, we just looked at a number of deals. I got to meet and network with a number of investors and see who would be a mutual fit to be able to partner together on properties, right? So, like our first fractional deal was actually an Airbnb that we all partnered in together where everyone had these complimentary skill sets for running an Airbnb, which is really nice because there are a number of hats that you want to wear. I was the underwriting guy but I was definitely not the property manager or the person coming up with the logo or the welcome guide or anything like that. Right. So, um, I think being able to meet like minded people and help each other out and, uh, you know, meeting you and learning from you just, just the same way that you, you've learned along in my journey. We've been able to find ways that we align and, uh, Partner together on on properties. Um, over time. I just get really passionate about sharing what I know about the city with other people So I I last year I hosted a field trip to cincinnati of about 20 people and we're going for round two In august this year. There's going to be 40 people. Um At that field trip over in cincinnati and i've lined up I mean last year was a lot of fun. We had a lot of guest speakers, but This this time around, we've got some sponsors and we've got some really, really great people that are going to be showing us around and, and fun events and things like that. And, um, what has ultimately happened is I have brought investors into the city that either want to be very active and let's say, buy their own duplex or their, their own midterm rental. And I, I helped them without asking for anything in return. Um, but then I've also found people that want to deploy their capital passively and to. syndications and things like that. So you find, you find what people's buy boxes are and see how you can help them. Um, and then separately from like an operational standpoint, I always say that, uh, there's strength in numbers. So me bringing together this investment base gives us a much different profile when we work, for example, with a property manager, right? I'm not just Joe Schmo with my duplex, trying to. you know, calling my PM 50 times a day, um, when they're, they have to deal with. higher and more large profile clients, right? So I think a lot of out of state investors have a hard time managing that relationship. And now that we have a group that kind of works together or sometimes are in the same partnerships, it makes building those relationships better. And there's a little bit more accountability working with me from, from the other side of things, because there's more reputational risk working with, A base, right? A whole base of investors. Like if you did something, everyone would find out, right? So, um, some of the, the, the out of state horror stories, it's because there is no reputational risk in working, you know, with, uh, on both sides of the equation, right? So, um, I, I found that fostering and building a community has helped. I mean, it helps everyone, honestly.
jacob:Yeah. Yeah, no, Ian, I, I really want to commend you because I think that one. For, for you, the kind of new investor who is, you know, afraid to go out there and network, and maybe they think that they don't, they can't add a lot of value, you have to kind of look at stories, you know, like Ian's, um, and, and like mine and, you know, like Mike's where. You can't do this alone. You can't do this alone at all. And you can go so much further in the real estate space. If you put yourself out there and you make these connections, there are tons of people out there. You know, I was just talking to a friend last night. Uh, she's too afraid to invest on her own and I was like, you need to find a partner. You know, you need to find a like minded partner, somebody that you can do these deals with somebody that has the same kind of like views and the same kind of risk appetite as you, and you need to just partner. And that's one of the things that's so unique about the real estate space is that. So many people are willing to partner. So many people are willing to share knowledge. And if you are kind of on the sidelines right now, you need to find the Ian's. You need to find the Mike's. You need to find the me's, you know, the people that are going to like help you think through this, um, just because we like to share that knowledge, right. And you're going to go so much further. If you find that group of people or that person that you really align with, and that's really going to help like shepherd you into the future. the next phases of your real estate investing journey. And Ian, also, I want to commend you because I was just like really impressed when we first met and, you know, I hopped on one of your live underwriting calls, you know, for, for the, for the listeners, Ian does a lot of live underwriting calls where he'll take a big apartment building, maybe one that. They're not, he's not even offering on or anything like that, but he'll do an underwriting call and he'll go through how he, he looks at it, how he would analyze that deal and how he'd break it down and point out all the things that he does and doesn't like about the deal. And he has a lot of attendance on these calls because there's a lot of people that don't have the skill of underwriting, especially a large apartment building. And. But you also accomplish twofold things where you're, you're actually building that trust. You're actually showing the rigor that you put in underwriting these deals. So when you actually do bring a deal to these folks. It's like, wow, Ian, Ian knows what he's doing, you know? And so, and you do know what you're doing. And so that's why you build trust, even for people like me to kind of invest in your deals. And so I want to commend you on one, you know, in a very short amount of time building a track record, a reputation, and just like a pretty impressive network of people that are very passionate about Cincinnati, people that trust you. Um, so just kind of want to commend you on that. You know, it's been very impressive just to watch your journey so far. and I want to kind of, I know I gotta get you outta here, but I do want to end with kind of a question that we ask everybody, which is Ian. If you're talking to a newbie and you're saying they're, they're scared to do their first deal. They know real estate's a good idea, but they're not really quite ready to jump in. what would you tell that person?
ian:Yeah, I normally answer this kind of just, uh, say yes to everything and, and try to network, find an accountability group and things kind of snowball from there. Um, but just to piggyback off what you just said, because you got me thinking, right? Um, it is good to know what unique. view you bring to the table, right? What, how you can help somebody else and, and they're going to help you back. Right? So for me, like knowing Cincinnati being like, if we go to a market and people are talking about their markets, like me knowing Cincinnati, even if I don't know real estate helps a lot, right? Me knowing numbers, even though I don't know. particularly real estate investing numbers, me hosting those calls to either educate or be educated, knowing that it's not a one sided thing that helped a lot, right? Um, all of those calls, I, I can, I should try to count how many of those calls I had because I had so, so many. And, uh, thinking back, even that, um, the deal that we partnered with Slocum on over in Northside, We had an underwriting call on that like six months before we got it under contract. So by the time we got it under contract, it was like everyone knew it. Everyone was like, Oh my God, now you got it at that price that you underwrote it that six months ago, um, that, that, uh, you know, the buyer wasn't willing to sell it that easy. Right. And we raised all the money in a day. So, I think Staying in, you know, if, if I'm to summarize that knowing your unique, what makes you unique and how you can add value. Like for me, that was knowing some bit of numbers without assuming I'm the expert and know everything, but knowing at least basic underwriting and knowing Cincinnati as a market. So that kind of differentiated myself and then, um, just really staying in front of people and, and keeping, um, Constant communication with people. I mean, you and I have, you know, we check in pretty frequently, right? So, um, being able to see what people are up to and, and touch base and, and figure out how you can help people that, that'll all come back around, right? Sharing, sharing as well as sharing before you try to receive, right. And, and, you know, everything will snowball from there.
jacob:Absolutely, man. I think that's amazing advice. Thank you for sharing that with the listeners. Um, and thank you for sharing your story today. Um, very inspiring. And I think it just goes to show that. You might get into this ladies and gentlemen, uh, to, to invest in real estate, but, you know, Ian's Mike's and my stories are all evidence of the fact that it becomes about more than just the real estate investing, right. It becomes more about like acquiring the deals, building the portfolio. At this point, you know, we we've all started to build careers in real estate, not just, you know, being investors ourselves, but living and breathing and spending all of our time doing this as a, as a profession. And so, I mean, I think that's just a Testament. You know, if you do catch the real estate bug, be very, very prepared for your life to change, because it's not going to kind of just stop at that one deal. So Ian, I would love to, you know, give you the mic, please. You know, if, if people want to get more involved with you or connect with you, um, how can they do that? And you know, what should people be on the lookout for? Talk about since he cashflow, talk about elevate capital. It's how can they get in touch with you?
ian:Yeah, I got to give better intros. I didn't share my, my company that we've, uh, we've built. So, um, I'm a partner at Elevate Capital and our website is elevates with an eight capital. co. I'm sure, uh, Jacob will link that in the show notes. My Instagram is cincycashflow. Cincy with a Y, not, not with an I. So cincycashflow. And you can find me on LinkedIn just using my name, Ian Cruz, uh, CPA. Yeah, those are the best ways to reach out. I am also on Facebook, um, so feel free to reach out, uh, however.
jacob:Awesome. Awesome. So folks get in contact with Ian. He is one of the best real estate investors. I know a wealth of knowledge, not just in Cincinnati, but in all real estate investing in general. So hit him up at since he cashflow elevate capital. co. Um, I am Jacob Sandoval, your host at Cashflow Saga. He is our lovely co host at Realtor, Michael Magno. We are the Financial Freedom Fighters. We will see you in the next episode. Peace.
mike:See ya.
ian:See ya.
Nancy:Goodbye
