ITF 15 | Military And Investing

 

David Pere is an active-duty Marine who is the epitome of confidence. After he read “Rich Dad Poor Dad”, he loved the idea of financial independence and jumped right into building his wealth through real estate investing.

From house hacking his first property to a 10-unit to a 146- unit, his investing ventures are growing rapidly! Now, he is the CEO of From Military to Millionaire, host of the Military Millionaire podcast, and has been helping military and veteran investors to grow.

In this episode, David will dive into his deals throughout his career – the emotions, breakdown of his numbers, and his strategies. He will also share why he’s motivated to achieve financial independence quickly, why he likes diversifying, and why you got to be ready for losses, so this is a don’t-miss episode! Enjoy!

Listen to the podcast here


 

Military And Investing With David Pere

I’m here with my buddy, Nick Monge. How are you doing?

I’m doing great. How about you?

I’m doing great. Things are moving along. I have egress windows getting put into my properties. I am graduating from slumlord to landlord. I’m doing some improvements to the houses. I put an offer on a property and I’m under contract on another one in Fayetteville. Things are moving along on the real estate investing front.

Did you get the one in Fayetteville?

I got the one in Fayetteville. We’re going to close. It’s going to be a BRRRR. I’m buying it for $82,000. It needs $20,000 to 30,000 in rehab, and the area should be about $140,000 to $145,000. A little cash for me, $100 to $200 a month. At the end of the day, I shouldn’t have too much money in it but then it’s just rinse and repeat after that.

I passed my broker’s license finally after waiting with the delay of COVID-19. That was delayed twice. I finally took the test, passed it and I’m going through the State of Colorado to get the official license so I can start slinging in real estate.

We’re excited to have you on board. We need some help here to get people into some investment properties to help them achieve financial independence. That’s what it’s all about.

I’m ready to go.

To help further the education, we have a pretty sweet guest, David Pere. He is known as the military real estate guy. There might be a few out there but he’s the one that I at least know the best. He’s got a pretty crazy story. He jumps into things very quickly. He’s not afraid of anything. It seems you have to be pretty fearless if you’re in the military.

I met David over in Kailua. From the first time I met him, he had a good story. I went pretty deep into his deals and had some good information for us. He talks about how you can leverage a house hack into a 10-unit and 146-unit. He even briefly talks about building his Military to Millionaire platform and all of that. There’s a lot of good stuff in this episode. Read through the whole thing. Without any further more delay, let’s bring David on the show.

David, how is it going? Welcome to the show. How are you?

It’s going good. Thanks for having me on this show. This is fun.

We’re glad to have you. We’re talking here about financial independence. You’re a guy that I’ve known for a couple of years. You and Nick might have a longer history.

I remember meeting you over in the Kailua side on the BiggerPockets meetups.

Nick and I have a more sober relationship with fewer fun stories.

Which means it’s way less deep.

It evens out the sober versus duration.

When you get me, you, Alexander Felice and the guys over at Five Pillars all in the same place, it’s getting a little while. How did you stumble upon financial dependence? What’s motivating you to get there so quickly? Give us your story.

The first is The Purple Book and Robert Kiyosaki’s Rich Dad Poor Dad that everybody always brings up. In 2015, I was a recruiter. Someone handed me that book and was like, “You should read this.” I don’t like to read. The guy pulled a CD or the disc out of his pocket and was like, “Here you go. You drive a lot. You should listen to this.” I listened to it but less because I wanted to listen to the book but more because it was like, “You got me all right. Fine, I’ll read this stupid thing.” That changed my life. It was quick like holy smokes, turn around, buy a property, get back into buying properties. The long goal is financial independence equals time freedom.

It allows me to control my schedule and time. That’s what I’ve been wrestling with more and more in the military. I liked the Marine Corps but the more I sit in an office, the less I feel free. It’s just not ideal like it once was for where I am in my life. I’m looking to be able to control my schedule and travel if I want to travel, visit friends or see other countries. Unfortunately, it takes money or expenses to manage to be able to do that. The goal is to reach financial independence to be able to enjoy that stuff.

Rich Dad Poor Dad is the cornerstone to financial independence. I’ve given that book to a lot of people and some people aren’t impressed by it. Those tend to be the people that probably aren’t super motivated are very satisfied living the 40 to 50-year career, retiring at 65 or 70 and living out those ripe old years. I don’t think any of us are in that boat. Travel time equals freedom, I buy that. Is that why you got into real estate because that’s what Robert Kiyosaki recommended? Where did you go from there?

I had lost money in the stock market, and I wrongfully attributed that to the stock market as opposed to because I didn’t know what I was doing. My thrift savings plan or 401(k) hadn’t been that impressive in returns. At the time, I hadn’t acknowledged that because I had it sitting in the G-fund, which is our bonds, which isn’t going to grow and I hadn’t been putting as much money.

I’m putting 2 or 3 times as much money into it as I was. When I was looking at all these avenues, it was the perfect storm because I wasn’t into the whole stock market thing and Robert mentioned real estate. Around that time, the lease for my apartment complex was coming due. We can dig into all this more in detail but it came down to either renewing this lease or buying a house hack. I was like, “Let’s try the house hacking.”

I had thought about buying a house to live and flip. When I got out there, I didn’t know what I was doing. I had already been thinking about buying real estate and this was the catalyst to like, “This is what you should do.” That’s why I chose that. I’ve increased my 401(k) contributions. I do have some other securities investments but real estate is a great way to do it. You can reach it faster through real estate than you can through trying to save $1 million in a fund.

Why are you putting so much into your 401(k) if you want to invest in real estate?

You can reach financial independence faster through real estate than through saving a million dollars in a fund. Click To Tweet

One, diversification is a good thing. I won’t be able to put money into this later and compound interest is great, so this will be able to grow. There are tax advantages and all this other great stuff that is wonderful. I have viewed my TSP as my cash reserves and I have cash reserves, but I view my 401(k) as my emergency cash. If the world fell apart, I have a full year’s worth of expenses for all my properties in my first savings plan that I don’t plan on touching, I don’t want to touch and shouldn’t ever need to touch but it’s there.

I can put a roof on four of my properties without having to worry about it, which is not ideal but that’s a good spot to be in as opposed to I’m one of those people where if I have the cash sitting in an account rather than letting it continually accumulate, I’m going to be like, “That’s all I need. I’m going to go spend this on a new property.” I try to split the money I’m using for future investments and the money I’m putting in there so that I always have money in both. I figured if I work on the TSP then when I’m no longer eligible to contribute, I can ramp up the real estate side while that compounds over time.

That’s super smart because for me if I had all my money in one account, I would be so tempted to go buy more properties, splitting it up like that.

It’s putting barriers event. It’s taking me one extra step to be able to spend that money.

ITF 15 | Military And Investing
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It’s a lazy non-disciplined man savings account, but you do have to be disciplined to put the money in that account in the first place, make that decision to sign on the dotted line and say, “I’m going to put $20,000 a year or whatever the max is for the TSP.” I’m not sure how much that differs from the 401(k). Is the TSP the same thing? Is there a max that you can contribute per year and then if you were to take it out early, you’re penalized up to that 50%?

There are some variances but it’s limited. It’s more of a limit where you can put $19,500, as opposed to $6,000 or $7,000, and most people are limited to. If you go into a combat zone, it jumps to like $57,000 or something like that you can put into the traditional. You can get tax-exempt on both ends. There are a lot of cool ways that we can benefit from it. There’s a penalty if you pull it early but you can still roll it. I can roll it or self-direct it. I can borrow from it. I don’t plan on ever doing that, but I can borrow up to half of it or up to $50,000 from it and pay the bond rate back so I can essentially borrow $50,000 for myself and pay myself 2% interest, then I’m paying the interest back to myself. The only real loss is opportunity costs. There’s some cool stuff there. With everything that’s going on with the CARES Act, realistically I could pull the entire thing penalty-free and then tax only on the money I’ve earned due to all the crazy stimulus type stuff. I don’t have any desire to touch it.

Is the TSP the equivalent of like a Roth IRA? That’s after-tax?

You can do a traditional 401(k) or Roth IRA. We have both in there. It’s super low fees.

Usually, the military does get hooked up rightfully. Thank you for all that you do.

It’s a hookup that not enough people use.

I feel terrible about it. I took advantage of it initially, and then I don’t remember what happened. I got off it and never jumped back on. Stupid of me.

I messed it up the first few years but progress.

You read Rich Dad Poor Dad. You moved out to Hawaii. You decided you’re going to need to renew your lease or you’re going to house hack. I’m assuming what the house hacking route is. Did you hear that from BiggerPockets or was that something you knew before? What year is this house hack?

2015. It was before your book, but I’m pretty sure it was BiggerPockets where I first heard the term house hacking because I was researching stuff from Rich Dad Poor Dad and reading The Purple Library. I also read Brandon’s Rental Property and No (and Low) Money Down book right around that time. It was a 2.5, 3-month period of reading before I closed on this property.

The house hack idea made sense and it still makes sense. It’s a great way to get started in real estate because you learn how to be a landlord. It’s an incredible way to get started. The best thing about it all is the non-tangible. It’s less scary because you want to buy a house anyway. If you’re going to buy a house, why not buy one that might pay for part of itself? It takes that fear out for a lot of people. That was 2015, and then about seven months after I closed on that property, I landed in Hawaii and thus started more.

Look at the situation logically to make the right decision. Click To Tweet

Is this house type located in Missouri?

It is. I don’t own anything in Hawaii or San Diego. I found some other ways. I house hacked a rental property, which is cool.

You’re in Missouri in 2015. You get your first house hack. The house hack stipulations are that you are supposed to live there for one year. I suspect the military has some say of like if you’re getting called on to get deployed, that you can get out of that. With that being said, let’s get into the real deal. David, this is the part of the show where we dive into the first deal that made you the for-real investor, AKA the for-real deal.

We alluded to that first deal and it is the Missouri house hack, which you got before you deployed in the military in 2015. Why don’t you tell us a little bit about that deal? How did you find it? How much do you pay for it? What do the numbers look like, the emotions you went through on it, and all that kind of stuff?

I was in an apartment and looking at renewing the lease. It was a 2-bed, 1-bath and $550 a month. This is Missouri prices. I get a housing allowance. It’s like $800, $850 or something like that a month. I was already doing all right. I was already saving a couple of hundred bucks off living in the apartment, no big deal. It was close to work but I had already looked at buying a property. I finally was like, “We’re going to look.” I looked at 5 or 6 duplexes. Missouri prices at the time were pretty decent. I was able to find a property that was on the MLS. It was with a real estate agent that seemed to make sense. It wasn’t a home run. It was a base hit but it’s still cashflows. While it was listed for $85,000, I got it for $81,000. No closing costs, the back and forth negotiation.

I’ve never paid closing costs because I always offer low. When they come back, I’m like, “Okay, but you pay closing costs.” I’d rather pay $2,000 towards the equity than $2,000 down towards closing costs for $3,000, $4,000 or whatever. When I bought this thing, I did the math on how much everything was going to cost, and the full pity payment, principal, interest, taxes, insurance was going to be $615.

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It’s dropped since then. It’s down to $570, but at the time, it was $615. I’m paying $550 and I jumped to $615, $65 difference to live in a 2-bedroom, 1-bath apartment or to own a duplex with 2-bedroom, 1-bath units that are mine. The principal pay-out on this thing alone is more than that $65. Even if nobody lives on the other side, I’m paying the same amount every month than I own this thing but it already had a tenant and they were paying $425 or $475. I was an out-of-pocket less than $200 a month to live in this thing.

The only renovations I did is I painted a deck. I did some manual labor stuff around and then I replaced the flooring for $1,200 in the unit I was living in. The other unit was more updated. It seemed like a win. The emotions were I was nervous but when I looked at it logically, I knew it was the right decision. My girlfriend at the time, now wife, liked the idea. She thought it was a decent idea. I realized that I had a bunch of crazy ideas before but people weren’t trying to talk me out of real estate. It seemed logical. At this level, I was like, “I can’t lose. My housing allowance still covers the pity and everything else on this property. Let’s freaking do it.”

It worked. Ever since I moved out of that house, it’s paid me over $300 a month in cashflow on average. I used an FHA loan. I should have used the VA loan, but my supposed VA expert lender guy talked me out of it because he told me you can only use it once and I shouldn’t waste it. That shows how much he knew about the VA loan because you can use it more than once. I use the FHA loan and even with the FHA loan, my entire down payment was under $4,000. It was everything that I put into this house, and then it’s made me $3,600. It’s almost 100% return every year since. That was my first deal in a nutshell. Not a home run but it’s been great.

If you still own it, it sounds pretty solid. We talked a lot of investors and 85% of them started with the house hack. The only one that I know that hasn’t started with one is Jay Scott. He got right into flipping because he’s an animal. It sounds great. The things are giving you 100% return every year and that’s driven by the low down payment of the FHA loan you used. Then what?

I get moved to Hawaii, which I am not complaining about. I enjoyed living out there. While out there, I bought a few other units, some other deals and did participate in stuff. I hosted a meetup out there in Kailua for about a year. There was a BiggerPockets meet-up once or twice then I started hosting one out there. My wife had a property and we refiled that. We used the HELOC and rolled that into a ten-unit property. I’ve bought another duplex. Personally, we’re at fifteen units in Springfield.

You moved to Hawaii and then you started investing out of state. You did not house hack in Hawaii.

I made 5 or 6 offers but I was on the wrong side of the island. I lived in Kailua, which is fancy-schmancy, expensive, not going to work house hack numbers side. With the VA loan and the cap at the time, which has gone, I couldn’t come to market price. I was going to have to drive 40 minutes to the other side of the island to make it work. My wife was pregnant. It was not ideal.

We made 4 or 5 offers. We got outbid in cash and everything. We finally decided to live on base. It wasn’t great. While I was there, I was able to participate in a flip with a buddy of mine named Corey. I did a little bird-dogging. I was able to do some local deals but nothing crazy. I wish I’d been able to live like that by there. I love Hawaii. I would love to go back. I didn’t buy anything while I was there.

At what point did you buy the second property then?

I moved out there in 2016. We bought February of 2017. 7 months later, we bought the 10-unit.

Fourteen months after your first property, you bought your second one. You went from a house hacked with ten-unit.

I was sending out letters to house that duplex. A guy called me and was like, “I have a duplex. I don’t want to sell it but I have a ten-unit if you’re interested.” That was a little bit nerve-wracking but it has worked out well.

Tell us how that went about.

I was sending out letters, which I still do sometimes. Although, half of the time they come back return to sender. I was sending out letters to people who owned duplexes, triplexes and fourplexes that absentees. They didn’t live in them. The guy called me and said, “I don’t want to sell that but I have this other property.” I’m like, “Let’s look.” I was home for Christmas at this time. I got to walk through one of the units. I had to knock on a door and ask one of the tenants if I could walk into their house. They were cool with it so I had to walk around a filthy version of a unit. That was the only one I saw. I saw the exterior and then I was back in Hawaii. We were negotiating back and forth.

Ask tenants to participate in some of their utility bills. Click To Tweet

He wanted $240,000. I said $225,000. After inspections, we got down to $212,500 and then it appraised for $250,000. It’s closer to $300,000 probably, if not more. Those numbers are making fun of me over there. It’s $200,000 for what? That’s not even a house. It’s a C class. It’s not anything incredible. I pay utilities. It’s not like the ideal thing but I bought it with 85% bank financing, 10% seller financing and 4.9% out-of-pocket. Almost nothing out of pocket. Eighteen months later, I had refinanced. I had $70,000 in equity and paid off the seller financing. I dropped my payment. At this point, it cashflows over $1,000 but usually over $1,500 a month. I don’t have any money in it.

With a ten-unit, that doesn’t get valued the same way as a single-family or a typical house hack. You’re adding value by either increasing the income or reducing the expenses. How did you go about getting that $70,000 of equity? Is it because you bought it so undervalued or did you do something?

We did spruce the thing up a little bit, painted the exterior and did some exterior work landscape or replace some furnaces. We did some stuff like that. We also increased rents. It was renting for $4,200 to $4,400 a month when I got it. Then it’s up in the $5,000 range, right around 48 to 52, usually. There was a washer dryer. I put a second one. It didn’t need a second one but the first one was on a lease. I didn’t like that. As that one fades out, we’re getting rid of the lease and going to keep the one that’s not on a lease so I can get a little bit more. The laundry comes only $50 to $100 a month. We did a little bit of RUBS. I get another $100 or $150 back through utilities.

Explain it. What is RUBS?

Ratio Utility Billing Systems. It’s me asking tenants to participate in some of their utility bills. There are a lot of ways to do that. We have started saying, “$25 a month goes towards utilities,” which honestly is never going to cover what that place because it’s an older building, eats, and utilities. Once we get all 10 leases up to $25 a month, that’s a quarter of my utilities covered. That’s ultimately $250 a month that will translate to a pretty decent amount and valuation and then we’ll slowly go more from there.

It’s double-edged like $25 a month for utilities plus increased rent of $50. It’s been a slow climb. I did some crazy stuff with putting in different filters into the water faucet so that they run lower gallons per minute. I put light switches that are motion sensors in the bathrooms so people can’t just leave their bathroom light on all night. They will shut off after a little while because people always leave bathroom lights on.

We’ve seen probably about another $100 cut-off expenses that way. It changed all the trash cans to a dumpster and that cut another $100 a month. We’ve done various little things like that. The valuation came back about $30,000 or $40,000 higher than the original appraiser, which is nowhere near what it should appraise for. From what I understand, that’s normal when it’s not for a sale. It’s for a refi but I was able to pull enough money out to cover all the seller financing, pay all my original down payment back and then drop the payment of $200 a month.

That’s a combination of BRRRR syndication. It sounds crazy because it’s only a $250,000 property or whatever it was, but that’s ultimately what you did. You did mini syndication where you pieced together some financing, added value, refinance them out and then you can use that money. Did you pull money out or did you get a HELOC on it?

I use the HELOC from a property my wife had owned for several years to buy the ten-unit, and then I paid the money back into the HELOC.

ITF 15 | Military And Investing
Military And Investing: It’s better to pay $2,000 towards the equity than $2,000 down towards closing costs.

 

How are those tenants? Was it fully occupied? Were they paying on time? Were they trouble at all?

I’ve had some trouble. Most of the trouble I’ve had with that property though has been unusual, not necessarily tenant-driven issues. I had somebody who was moving out and he took out part of the roof with his U-Haul. He didn’t mean to but I don’t know if he even noticed honestly. I’m sure he did but he didn’t even stop and someone saw him. We filed a claim through U-Haul which took months but we got it paid by U-Haul so it wasn’t like we had to deal with the tenant. I had a tenant die, which that’s the tenant’s fault.

What do you do with that scenario?

There are two ways you can go about it. I’ll tell you the first way and then my way. The first way is that you get environmental like industrial cleaners in. They call them industrial hygienists who come in and they rip the flooring out depending on how bad it is. They rip the cabinets and paint out. Either way you go, you’ve got to take all the flooring out of the room. You’ve got to treat the air and do all this crazy stuff, spray the whole thing with all these chemicals. It’s like fumigating and do all this crazy stuff. This guy died and it was three weeks before anyone found it because he didn’t have any family members, which is sad. No one knew about this guy. He’s a loner.

Did he get killed or did he just die?

He just died. He was old. Nobody knew until a week after rent because he always paid on time and my landlord was like, “This doesn’t feel right.” They sent the maintenance guy out to do a checkup and he was laying there. I don’t know that his air conditioner was on. All I know is he was composting. It was not pretty.

We had to bring all these people in and you’ve got to deal with all this stuff. It is a major headache, redo the flooring and walls. That’s huge stress or you do what I did, which is you have a good property manager, get a ten-minute phone call and you say, “Let’s do that,” then you never hear from it again until you get a text that says, “Everything’s good and it’s rented.” It costs the exact same amount either way but that’s why I advocate for property managers.I asked about the process afterward. I didn’t have to do or deal with anything, which was awesome.

How much does that end up costing you?

House flipping from halfway across the country is doable. Click To Tweet

It was $4,500. They recommended the cabinets and everything. What I could have done is I could have pushed it up to the $5,000 mark, done my insurance deductible and gotten the entire unit renovated but I didn’t want to mess with that so I paid the $4,500 and called it a day. Essentially, he took all almost all of this year’s income out with him when he died. That’s probably my worst tenant issue but it wasn’t a tenant issue.

The tenant clientele wasn’t all that bad. We had some turnover and vacancies, but it’s like a class C property but it hasn’t been too bad. We have no vacancies even through all of COVID. If you watch my TikTok, you’ll see me talking about this, but my one tenant that we were in the process of evicting pre-Coronavirus, we couldn’t evict because of Coronavirus. I don’t want to kick someone out when I don’t have to, but he wasn’t paying rent before all this started.

I was like, “Why can I not kick this guy out? It’s not because of COVID.” It turns out he gets all this unemployment and stuff during Coronavirus. He was able to pay his last three and a half months back and he’s up to track. Instead of losing a tenant, I got three months late. That month was my best cashflow month ever.

You’re doing the Airbnb out there.

After the ten-unit, the next thing I bought, which I can’t go into a ton of detail on because you know I’m still in this lawsuit, but I bought a 40-unit. I partnered with someone who was my first partner deal. I had done a little bit of helping with some house flips in Hawaii. The next thing I personally bought was a 40 unit mixed-use. It was 25 residential units and 15 commercial units down in Branson, Missouri, which I joke that it’s old people Vegas, but it’s like a town full of shows and musicals. It’s a cool place.

I bought this big building on a lease option. It was a crazy deal with 4% financing interest only for the first year. It was a great term. It was great in everything except that it ended up being like a lease option scam where they scare you off and try to keep your money because after the closing, a light switched and the people involved. It became totally different. There’s a lot of contractual breaches and crazy stuff.

Four months into that, I pulled the plug and I’ve been in court for months. I was supposed to go to court but it got pushed from COVID. I can’t talk too much about that but suffice it to say that sometimes in this game, if you go big, there are people out there who don’t always do what they’re supposed to do. Sometimes you can fix it and sometimes you can help it. Sometimes you’ve got to find a solution and pivot.

Jumping into a palm that’s too big or whatever it is can pay off, but there are a lot of risks especially when you don’t know what you’re doing. You went from a house hack to ten units. It was different than a 10-unit to a 40-unit.

It’s a smaller jump if you look at percentages.

It’s funny that you mentioned Branson, Missouri. Our guest, Kendra, invests in Branson, Missouri as well. I had never heard of that sound before her. That’s the place to be. You’ve got your 40-unit and you can’t talk too much about it because things are still in progress, and there are probably some confidentiality there but we’ll chalk that up as an L for now, and then we’ll have to revisit that in maybe a year or so after this COVID thing settles. Hopefully, they can erase the L and make it a W.

After that, I flipped a house that was an example of poor contractor management but it survived. It was not a profitable endeavor, but I survived it and realized that house flipping from halfway across the country is doable. I totally could do it but I didn’t do a good job of having my property manager stop in and manage the project to make sure like, “Everything has been done. Here’s your check. I was sending checks.” Everything worked out but it was a bunch. It wasn’t anything impressive. I took some money from that and rolled it into another duplex. Between those two, in March 2021, I was a general partner on 146-unit syndication.

ITF 15 | Military And Investing
Military And Investing: You need to have good property managers so you wouldn’t have to deal with maintenance.

 

Listening to all these podcasts, it’s like, “That’s a good idea.” You can’t get the catch that syndrome.

I figured out how to be talking to people about different strategies then it’s way better if I’ve tried that strategy. That’s been my justifying force. Ultimately, my overarching theme will always just buy and hold. I don’t care if that’s 1 unit or 200 units. With a buy and hold property, there are differences but for the most part, buy and hold is buy and hold. I’ve tried a little bit of everything to get there.

You did that flip. You maybe made a small amount of money from it. Probably more headache in time. You didn’t make anything?

No.

You lost a lot of money, a little bit of money, probably lost some hair and maybe has some gray ones or probably decent stress. Let me talk about that failure a little bit. We talk about these two failures because that’s part of real estate as well. The grit and endurance you had to keep going, what’s gotten you through all that?

If you play the real estate game, you’re going to take losses. Everybody does. Not just in the real estate game. Look at everybody who put their life savings in the bank, stock market, went to retire and then it dropped but it’s back. No matter what you do, you’re going to lose at some point in some way. You need to be ready for that. I took two pretty substantial Ls. One that will turn into a W, both with great learning experiences, both not something that I couldn’t survive because my personal finances were in check. I didn’t take risks that would ruin me. I lost some money but I gained its tuition.

Even if I had lost $80,000 between the two of them, that’s cheaper than most college degrees. I probably learned something that’s more valuable than some of them, not all. It depends on what you’ve got to do your degree in. Arguably, my $80,000 that I could potentially get back from whatever is worth way more money in what I learned than it is if I had gone and got an English degree and then not used it. It’s all perspective. I lost money. It is what it is but I kept moving because my finances were in check. There were a lots of learning. The important piece is going back and learning that stuff. I look at it this way. I got two big Ls out of the way. I’m due for some good stuff for the next few years and so far, it’s been working out that way.

I’ve heard a quote one time and Brendan Turner said it, “You either win or learn.” The L is learn. There’s no such thing as losing. You learn your biggest lessons from the mistakes you make because when you win, you think you’re right and everything’s all good to go. It’s necessary evil. Everyone goes through it. Thanks for sharing that.

We’re at this big 146-unit syndication and you’re a general partner. For those who aren’t familiar what the difference look with the general partner versus limited partner, a general partner is someone who leads the syndication and does a lot of the work to put syndication together, whereas a limited partner would be like they put in the money and do nothing. I enjoy the limited partner status. David, tell us a little bit about your experience as the general partner.

This isn’t something I was sure I was going to step up to the plate for yet but through networking, I’ve got a few cool opportunities and some people tried to get me involved in their team. I got to this thinking out of the left field. It was in Columbia, South Carolina. I looked through the numbers. The numbers looked great. It was with people that I knew and liked.

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They asked me to help them out with stuff. I did some of the due diligence with them. I wasn’t able to fly out to the property because I’m active duty military and it was a short fuse but I was able to be on video call for everything. I helped with the underwriting. I got to run through all that. I helped with designing the presentation, designing the webinar, helped with some of raising capital, which was a first for me.

I’ve got a ton of experience and behind-the-scenes information on how syndication goes and what it takes to put on something like that. It was a great learning process and a great deal. I don’t have a huge ownership stake in it. No one has a huge ownership stake in syndications. It’s piecemealed but the ability to tackle, we bought a $9.1 million deal that has potential for a ton of awesome returns. The amount of money that was required to invest in that was minuscule comparatively. It was pretty cool.

That’s the ultimate leverage point. If you can invest $50,000, $100,000 or something into the syndication, you can do exactly what you did to your ten-unit. It’s your 10-unit times 14.6. You do that. You increase rents, reduce the expenses, increase the cap rate or that’s how multifamily units are valued off of then you refinance it, pay your syndicators off and you got yourself 146-unit.

Everyone was worried about COVID. The nice thing is this property was 40% Section 8. We went into it, knowing that we were going to turn those people over. When all this happened, we said, “We’ll turn those units over in 1 month or 2.” Section 8, they come through. They always pay. We might have taken a 5% hit as far as vacancy or not paying rent.

With all the stuff that was turned off, as far as outside utilities like things that weren’t running, community centers or whatever due to everything, we brought in an extra $20,000 to $25,000 net because of all the expenses that we weren’t. It was crazy. It was a huge drop in expenses for the month of April and May 2021. As far as everything with the Coronavirus goes, so far so good there too. We had some vacancies and stuff but it did not outweigh the expenses. In fact, we netted more than probably the last years. It was probably their best month.

I’m surprised. I thought people would maybe be home more so they’d be using more utilities.

Those utilities go through the individual but things like community centers, heating hot tub and a pool boy or random things like that, lawn care, they’re able to let it go a little bit, like little tiny things that add up. There was some other stuff in there too, but I don’t necessarily remember what that was off the top of my head. I know my HOA. The jerks won’t turn the stupid hot tub back on. I know they’re saving money on that heat like, “I’m paying for this.”

Where was that property located?

I don’t know either.

How did you find that one?

ITF 15 | Military And Investing
Military And Investing: No one has a huge ownership stake in syndications.

 

I found it via content marketing by me putting myself out there enough that people decided that it was worth talking to.

We were talking about how the whole COVID-19 thing was affecting everything. You had mentioned that in the past Airbnb. I’m curious how that business has changed, if at all.

I moved here to San Diego and my wife is going to be here some of the year and she’s going to be in Missouri some of the years. She took a job there as we planned to go back there. I wanted to live in an RV, downsize and live it up. I knew when they come to visit, that would be super inconvenient. Instead, we got a place like a 4-bed, 3-bath. It’s a nice place in a nice neighborhood that they would like to come and visit that I got. At least, I looked around for a whole bunch of people. This happened to be the house that it worked in, where I signed a lease that allows me to sub-let for short-term rentals. I can’t do long-term stuff per se but it says sublets.

I posted on Facebook, and this is a Brandon Turner idea. We were having dinner and I was talking about my struggle for everything to do out here. He’s like, “Why don’t you just sublet?” I was like, “I hadn’t even thought about that.” I was on Facebook, messaging every rental I saw that looked like it might work like, “I’m interested in your place. Can I rent bedrooms out while my family is out of town?” Finally, someone said yes. I didn’t mention they were going to be out of town most of the year. I got it in the lease.

What I did is this four-bedroom. I am in the office. My master is next door to the office. Down the hall, further down on the other side of the house is a bedroom with a bathroom, then downstairs is a bedroom with a bathroom. I rent those out. I had been renting it as one Airbnb but I separated it. Craig, I called you one day when I was getting into this deal with the second where you helped me out with some of this. It was when I was deciding to split it into two Airbnbs.

I was renting them both out on Airbnb. My rent is $3,000 and then I pay for utilities, for high-speed internet and everything. It’s probably out like $3,300 to $3,400. My best month with the Airbnbs is 26. For San Diego, $800 out of pocket, when I’m getting $3,105 from the military is pretty sweet. I can’t complain. I’m hovering right at $1,900 because essentially, you asked about how Airbnb is doing. They shut it down in Oceanside and said, “Unless you’re renting to medical professionals,” but that meant that the people who were staying here couldn’t go anywhere. Nobody knows that I have anyone living in my house. I’ve got a tenant up here in cash, and a buddy who got out of the Marine Corps downstairs in cash. They’re saving money, I’m saving money and no vacancy.

That’s great that you were able to adjust so quickly. A big fear that a lot of investors and newbie investors have is, “What if this or that happens?” No one ever thinks about, “We’re humans. When things go bad, when something starts to hurt, you adjust and it would make you feel better.” Anyone can do that at any time. That’s why it’s so important that when you do go into buying a property, you have multiple plans and strategies so that if a worldwide pandemic hits and Airbnb goes to shit, you got some buddies that you can move in or you can rent by the room because people still need a place to live. People are dying but not that quickly.

I was looking to pivot to the furnish finder to renting to nurses. Maybe not a better solution but a more convenient solution. My wife is probably happier with a friend of mine and an older couple living in the place than she would be with two nurses.

That pretty much sums up your story. Is there anything we left out?

Nothing that matters as the real estate. Years ago, I started documenting everything through a blog, and then that grew but that’s me talking about my story saying, “I am here.” As far as real estate, that’s about everything.

For those who don’t know, David is a semi-celebrity, at least among the military niche there because he’s a military and a millionaire. He’s got a great podcast and blog that I highly recommend you check out, especially if you’re in the military because there are a lot of things real estate-related that the government allows only military people to have. I’m sure David can talk about this for years. What’s your next plan with real estate investing, podcast, blog and all that kind of stuff?

I got ordered to pay off debt before I buy another property. I’m working my way. I’ll pay my credit card off with this final little amount that finishes the transaction. I have no credit card debt, which I had the money to pay that off. I just hadn’t paid it off because I was thinking, “If this gets as bad as people are saying, banks can cut credit lines but they can’t cut my savings accounts.” I had kept the money in a savings account and left the credit card alone. I’m just debating. I don’t think car loans are so minuscule. I don’t worry about paying them off but it sounds like my wife might appreciate that.

I may spend some 1 month or 2 to pay off all my car loans to be done with it. I’m back on the horse. I’m still sending out letters, still negotiating on deals through whether that be through private financing. My goal is in about a year and a half to be entering the reserves out of the military active duty and a full-time on my business on both my online platform and real estate. I hope that works. I think that I’m in a position whereby that time, I don’t necessarily know about being completely financially independent because I like to increase my expenses every now and then. I’m sure I’m going to throw some vacations in there. I might force myself to not be completely financially independent to keep working. My passive income, if I live frugally, it’s enough to retire on. It’s almost my goal. I think I’ll reach that. I’ll be good.

Once you hit that minimum financial independence goal, which is like, “I don’t need a job any longer to get by,” you can start taking pretty big risks and make multiples of what you would make otherwise. It’s the whole you’re playing to win in rather than playing not to lose. Most people are playing not to lose but you’ll be in a place where you can play to win, which is awesome. Are you looking for more syndication stuff or single-family?

I’m going to do more syndication stuff but as far as my personal stuff yet, smaller rental stuff here and there, I’m totally cool with that. I’m totally cool with anything from 1 unit to 1 bazillion, as long as it’s with the right team. I’m probably going to go back and flip another house once I lived there to be like, “I beat you.” To get my money back and say, “Haha.”

If there’s nothing else, we can move into the last part of the show, the final four. Nick, the first question is on you.

What book are you reading?

Wild At Heart, which is more about men needing adventure, a book on triathlons, which doesn’t help anything in this business. I did finish Jab, Jab, Jab, Right Hook by Gary Vaynerchuk. That’s probably the last business one about content marketing. I’m reading more about personal development in general.

What is the best piece of advice anyone has ever given you?

Take action. Go for it. You’re going to be scared, be nervous, be this and that, but you always will be. You’re going to lose some stuff but make sure you don’t take risks that won’t ruin you and then go for it. If you know the worst thing is survivable, then the best thing is great.

At the beginning, we discussed the importance of financial independence to you, but if you don’t mind touching it one more time, could you tell us what is your why and why it’s so important for you to be financially independent?

It’s two-fold. One, it allows me the time freedom to spend time with my family and travel. The other is that it affords me the ability to dedicate time to my purpose, which is helping service members and veterans learn how to build wealth through real estate, personal finance or entrepreneurship.

The last question is if animals could talk, which one do you think would be the rudest?

Hippos.

Why? Elaborate, please.

A hippo is one of those animals that everybody thinks is like this docile, chunky monkey thing in the jungle, but hippos are pretty high on the count of humans that get murdered. People don’t hear about hippos killing people but they kill people a lot. I feel like if I was the fat dude who’s thought of like a pansy, I would be an asshole. That’s why I figure they’ve got to have a chip on their block because all they do is kill people and sit in their little bathtubs.

Where can people find out more about you?

FromMilitaryToMillionaire.com, on Instagram or anywhere else.

David, thank you so much for coming to the show. It was great chatting with you. I’m excited to throw of you back in the next FinCon whenever that will be.

Whenever we’re allowed to do that again, I’m down. Those were good times.

I appreciate you coming on. It was great talking with you. I wish you the best. Talk to you soon.

That was a great episode with David. What do you think, Nick?

He had some solid information and dove deep into his different projects. We briefly discussed the shiny object syndrome. It was an awesome episode and I had a great time chatting with him.

He’s a good dude. Nick and I both know him personally. He’s a fun guy to talk to on and offline. He’s one of those guys that jumps right in. Going from a house hack, which was a $91,000 house hack, “I’m going to buy a ten-unit, which was only $200,000.” What about 146-unit, which is close to $10 million? He’s almost like 10X saying every single step of the way. It’s crazy how you build that confidence after you get that first deal because you realize it’s the same idea and math, just bigger numbers, more things involved, more people, but that’s how you get experienced by doing it. He’s the epitome of that.

That is the most common phrase from our guests so far. Everybody says you’ve got to jump in. That’s the best way to learn. He discussed that. It’s a great show.

I hope you all enjoyed it. If you can, please leave us a five-star review and comment. We greatly appreciate it. We will read each one, take your feedback and try to improve the show that way. Without further ado, I’m going to get back to my day.

It’s great talking to you. I’ll talk to you later.

 

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About David Pere

ITF 15 | Military And InvestingDavid is an active-duty Marine who devotes his free time helping service members, and veterans, learn how to build wealth through real estate investing, entrepreneurship, and personal finance!

 

 

 

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