Podcast: The Three Pillars of Real Estate Investing

Jake Stenziano and Gino Barbaro quickly built multifamily property portfolios worth millions, and their investments now generate tens of thousands in passive earnings per month. On this podcast, Jake and Gino discuss “The Three Pillars of Real Estate” and how they can help listeners achieve success and financial freedom via smart property investments. Plus, today’s guests explain why real estate is the best asset class to own, where to find great deals on property, and how to break out of the middle-class mindset.

Listen to today’s show and learn:

About Jake and Gino [4:09]
Jake and Gino’s first multifamily investment [6:31]
Breaking out of the middle-class mindset [9:37]
Investment strategies and recommendations for agents [12:14]
The three pillars of real estate [14:58]
How multifamily property values have increased [19:15]
Real estate assets compared to stocks [23:20]
Why millennials aren’t buying homes [24:34]
Where to invest in real estate [25:38]
A parable that will guide you on your investment journey [26:20]
Opportunities agents are missing out on [30:08]
How to find deals in today’s markets [32:54]
How to break through your goals.
Plus so much more.

Jake Stenziano and Gino Barbaro

What started out as a conversation between friends has exploded into a thriving real estate investment business that continues to grow in size and profitability.

Jake and Gino are both experts in multifamily real estate investing and have achieved, in just a few years, the sort of financial freedom they always wanted but weren’t sure was possible.

And while a certain amount of timing, coincidence, and luck brought them together, this website will be your partner, bringing that same luck, and years of experience, right to you every step of the way.

Well… if a pizza guy and drug rep can do it, we know you can too! Unlike many Investing Consultants and so-called Business Coaches, Jake and Gino have done the work with the assets to back their success strategies while consistently reaching their goals. They are passionate about sharing their journey with you.

Related Links and Resources:

Thanks for Rocking Out

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Read the Full Interview

Pat: Hi, real estate rockstars. I got a great couple of guests here today, Mr. Jake and Gino are on the line. We are going to talk about something fascinating and something you guys need to think about if you haven’t already thought about before.

You know I’m a big proponent of real estate investing, and these guys are real estate investing masters. We’re going to talk about why real estate agents don’t invest and why they should invest and what’s going on with the investment market in the future, as far as single-family homes, as far as multi-family, and as far as everything real estate wise. I’m excited to have them on. Jake and Gino, welcome to Real Estate Rockstars.

Gino: Pat, how are we doing?

Jake: Thanks for having us, Pat.

Pat: Hey, guys. Why don’t you just fill everybody in on who you are, so they get to know you better?

Jake: Well, I’m Jake and I got my friend Gino down there for the folks on YouTube and we are multi-family investors. Going back to the end of the great recession, I was a drug rep and Gino was a pizza guy and we were looking for more out of our lives. I was in a job that was doing layoffs just about every year and they would say, “Go home and sit by the phone and we’ll let you know if you have a job or not going to the next year.”

That wasn’t a way that I enjoyed living. I didn’t have control over my life, and it’s one of my sole purposes in life to provide for my family, and that’s extremely important to me. I was looking for more out of life, ended up moving to Tennessee. At the time, Gino was close and we started looking at deals in Knoxville. I don’t want to say the rest is history, but that’s what kicked off our real estate investing career. We started buying in some things that we call mom and pop investments. We were getting into lower price per door. Some of our early investments, we were buying stuff at 30,000 a unit and it worked really well.

Pat: Wait a minute, let me get this straight. You guys didn’t do what most people do and buy single-family homes first? You went from owning a pizza place and selling pharmaceutical drugs to buying an apartment building?

Gino: I didn’t want another job. I already had a job. I had a restaurant making W-2 salary. I had a decent living. I wanted multi-family and education [crosstalk].

Pat: What made you think that? Most people think, “Oh, yes. Just going to buy a house and rent it out. That’s what the landlord does.”

Gino: I like that. My mom had a fourplex and if she could do it, she’s an immigrant from Italy and she’s collecting the rents– I had a restaurant with three apartments upstairs. It snows, [crosstalk] and she’s getting the rent every month. So I said to myself, “I don’t want to buy one at a time.” Plus in New York to buy a house with 300 grand to make two grand a month, the numbers didn’t work. I said, “Let me buy multiple units. I can at least scale it.”

I had a fourplex. I wanted the mobile home park. I didn’t like the mobile home park space, not because of the space because I wasn’t educated. I bought a strip mall, bought the strip mall wrong, wasn’t educated. I just saw multi-families. “Hey, I can buy four units here, six units there, and I can manage it while I have the restaurant and then when the day comes, when I make X amount, I can leave the restaurant.” That was my game plan.

Pat: Let’s talk about this. You still had the restaurant, you still were selling drugs, and you said, “We’re going to buy an apartment building.” Tell me about this first apartment building you bought.

Jake: There’s a little bit more of a backstory to that I think is really important because this is coming off the back of the recession. This is coming off the back of healthcare reform. I’m going around to all these doctor’s offices, where these guys used to have their autonomy and now they’re getting gobbled up by these medical groups. There’s one doctor left in Westchester County that I was very close with that retained his private practice and it’s because he didn’t need it.

I was getting very close with this gentleman. I tried to find out why I said, “Why are all these other folks getting gobbled up and you retain your autonomy and you still own your practice?” It was because he owned real estate. He started coaching me, and then Gino started coaching me. I learned that owning these real assets, saving up some money so you can repurpose it into assets that will pay you every month will put you in a position of control.

That’s what I saw, and that’s what I really desired, and I really strove to accomplish for myself, and that’s what we’ve done. You’re going back and say, “Well, you didn’t flip houses. You didn’t do that.” I think flipping houses early on is great for somebody. I think someone that’s a real estate agent that wants to go out there and sell homes and make money on it, but they need to repurpose it into assets that are going to pay them every month.

There was a very sound mental process behind what we were doing, and it came from Dr. Neshiwat, it came from Gino that I was leaning that to really try to understand how am I going to make life better for myself. That’s where this came from early on in the beginning. I never owned another business before this. The first thing I ever bought was a 25 unit apartment complex, and it was because we wanted something that was going to pay us.

Pat: That’s nice. Okay. You start out with a 25 unit right off the bat. At what point did you say, “Hey, you know what? I don’t need to make pizzas anymore. I don’t need to sell pharmaceuticals anymore.” How did you know? I think that’s what a lot of people are afraid of is dropping things to pick up new things.

Gino: That’s a great question. For me, I had six kids. We homeschool our kids. I wanted to get out of New York. Everyone needs to get clarity on what they want. I knew what I wanted, I just had to figure out how to do it. For me, multi-family was the way to do it. Our first asset was bought in February of 13. I probably started educating myself three years before that. It took me a good three years. It took Jake and I 18 months to get our first deal.

After that first deal, 18 months, we got our next deal three months after that. Then we got our third deal, six months after that. A year into this partnership, we have 200 units with cost segregation. Jake is able to leave his job because he’s got property management fees coming in also because we’re managing our own assets. If you play the long game, it’s like the farmer planting the seed. You need to water that seed. You’re not going to get paid day one. It’s a process.

For me, it took me three years to get out of the restaurant from the day I bought my first asset with Jake. It’s a five to six year plan. With all the kids that I had living in New York, that’s what it took me because I kept going on and the cost segregation helped me, and the ability to save money helped me, and the ability to have a healthy financial statement.

You can’t live above your means. You can’t have Parkinson’s law, where you make more money, and then you spend more just because you make more. We’re not entitled to that. We don’t deserve anything. What you deserve to do is to be financially smart and financially sound.

The money that you make, the money that you re-fi these deals, you put into the next deal. We’ve been able to re-fi over $9 million from our portfolio. I don’t have a Lamborghini in the driveway. I don’t go on extravagant vacations. I buy assets and now I don’t have to buy any more assets. That’s the idea of this and now you’re living off of that. Saving for college, saving for retirement is the middle-class mentality. Buying an asset that will allow you to pay for that event is what you want to do because when that event is over, you still have that asset that’s going to pay for the other event.

I have one property that’s going to pay for my six kids’ education, and I’m still going to have that property when they’re done with college. I’ve got the depreciation, I’ve got the principal paid down and I’ve got the asset appreciating. That’s the difference between having a wealthy mindset and a middle-class mindset. It takes a long time to develop it, but if you’re around the right people like Jake and my partner, Mike, and the Jake and Gino community, you can just pull yourself through and really live up to those ideals.

Pat: Yes, that’s awesome. Yes. Of course, that’s my belief too. That’s how I’ve quit working in multiple ways. Here’s the question. It’s 2020, you guys got started–

Jake: Sounds like he’s talking in the future, doesn’t it?

Pat: It does. Weird, isn’t it? 20 years ago was the year 2000.

Jake: I graduated high school that year.

Pat: Yes. Isn’t that crazy? Someone said to me the other day, if you’re born this year, you’ll be 80 in the year 3000. Now, that’s bizarre. Okay, so let’s talk about this. A lot’s changed. A lot has changed. Syndication novelty or syndication– Let’s call it–

Pat: Yeah. Being a respected asset class is at an all time high. Even real estate agents out there know of somebody or have heard of somebody who is putting together a deal for an apartment building where five years ago, certainly they weren’t. I wanted to talk to you about that in reality. This show is for real estate agents. A lot of agents are like, “I have an opportunity. I could just buy a single-family home and rent it out and be in control,” or, “I can get into one of these syndication deals that are coming across my desk.” What advice do you have for the listeners as to how to do this right?

Jake: Yes. I think there’s another path that we’re not talking about as well and that’s the path that we took is that you can do also partnerships on a smaller deal if you want, and then scale up as well. We use it all and we’re not– Well, we don’t– Excuse me, we don’t use it all because we’re not buying single-family units because we don’t think that makes sense because it’s hard to scale.

If a 50 unit or something like that comes across our desk, we’ll still look at that, but I think if someone’s out there and saying they’ve got a couple of hundred grand, or they can put a couple hundred grand together with themselves and a partner, I think that they should consider syndication if they don’t want to be that hands-on because it’s a great vehicle. They should also consider maybe I want to partner up with somebody and hire a management company and go look and see, is there a 30 unit? Is there a 40 unit deal out there that makes sense?

Pat: What numbers should they use?

Jake: In terms of what?

Pat: To decide whether that’s a good deal or not.

Jake: It’s getting tighter, if we’re going to be honest with ourselves. Back when we started, we were fortunate to buy some things at an 8% cap rate. I think that for a smaller size asset class, I think a seven cap would be good to target right now. I think [crosstalk]–

Pat: What he means by this guys, as he’s saying, if you buy something for cash, the cash that you’re going to get on it at the end of the year, this is not with the mortgage, is 7%. As far as the cash on cash, which is another term that you may have heard before, it’s what the return is on the cash that you invest with a mortgage, let’s say. What do you guys recommend for cash on cash? I think that’s easier for real estate agents out there listening to this to think about, “Okay, I got an extra 50 grand that I saved up from my commissions. I’m going to put it in, whether it’s a syndicated deal or a partnership with some other people.” What should they assume they get back every year on their cash?

Jake: I think that it it’s all dependent on the market, but anywhere from an 8% to 12% I think is a phenomenal cash on cash return. Keep in mind alongside this, if you’re a realtor and you’re participating in the management, this is something you want to talk to your CPA about. Not only are you getting that cash on cash, but you can do something called a cost segregation study, where you’re going to actually be able to accelerate the depreciation on that asset, which is going to help tremendously in terms of your taxable income. You’re going to be paying down the mortgage over time. There’s a tremendous amount of other benefits that are going to come out of this, besides just the cash on cash return that comes from the property which is still pretty damn good.

Gino: Pat, I want to mention, there’s something that we teach. We call it the Three Pillars of Real Estate. When either a single-family investor or multi-family investor’s looking at a deal, these are the three pillars you need to look at and see if it’s a good deal. The first one is the market cycle. What part of the market cycle are you in? Are you in a buyers’ market phase, or sellers’ market phase? There’s four different phases.

You can google market cycle. You have to learn the market cycles because you’re not buying certain assets and certain types. Learn where you are in the market cycle when you’re buying these assets. The second one is the debt. What kind of debt are you putting on this asset? Is it hard money? Is it private money or are you using agency debt? Are you using community bank financing. Kiyosaki says there’s two things in real estate, it’s debt and taxes.

If you can get great debt on this property and you have long-term fixed rate financing, you’re taking that risk off the table. The third one is the exit strategy. You talked about syndication. Sometimes syndication limits your ability to have that exit strategy where you need to sell. Jake and I don’t need to sell. Our exit strategy is if we want to sell and we’ve made a ton of money and our return on equity sucks, we can sell it at a big gain.

Think about those three, everybody, your market cycle, your debt and your exit strategy. Write those down. Every time you analyze the deal, make sure what you’re going to do with that deal down the road when you’re exiting, because you’re going to buy, make sure you can sell it to somebody if you’re going to sell it and if not, make sure you can be able to hold it and cash roll that baby.

Jake: Make sure anybody that’s out there that’s a realtor or whatever that thinks they may qualify for this, the real estate professional designation, talk to your CPA about that because it can be a tremendous wealth builder for you.

Pat: Basically, this is a show for real estate agents. Probably 80% of the audience here is real estate agents, so you guys qualify. That’s a no-brainer if you’re not doing that, you’re a clown because it’s a no-brainer.

All right. All right, so let’s talk about this. The last decade has been amazing for multiple different investment strategies, multiple asset classes. Do you know how much–? I’m going to go with multi-family because that’s your guys’ game. Do you know how much the multi-family asset class has increased in the last 10 years?

Gino: What would you say, Jake?

Jake: What would you say by increased? Were you saying the values?

Pat: Yes. Let’s say you had 100 grand and you– Yeah, the values. Let’s just say the values. Let me answer that question. Jake?

Jake: Some of our properties, it’s what we know and it’s more than doubled because we’ve taken– Keep in mind, guys, this is based on your net operating income. These are cash flowing assets so it’s going to be looked at and viewed as the income approach. I’ll go back to our third deal. It was doing $450 a month when we took over.

Gino: In rents.

Jake: In rents per unit. It’s 136 units. Now, these things are up over $800 in many of the units. You’re seeing a tremendous–

Pat: Your cash flow has doubled.

Jake: Yes. You’re seeing [crosstalk]–

Pat: Which means the value has certainly more than doubled.

Jake: What you’re doing is– Then we have tremendous cash flow on these and we’re able to refinance them, we still hold them and they still continue to cash flow. You refinance some of your equity out of it as its run up, that’s tax-free for the time being, and you’re able to continue to cash flow management. It’s been a fantastic overall run for us [crosstalk]–

Pat: What would you say to somebody listening this that’s like, “Well, you know what? That’s all well and good, but I had a 100 grand in 2010 and I put it in the stock market. Now it’s worth $450,000 because the stock market has increased four and a half times since then.” What do you have to say to that?

Jake: That’s kind of easy because I was a W-2 person at the time. I had money in the stock market and I saw in 2010 that I lost it all, and then it came back up. I have no interest in owning paper because inflation is the silent killer. If you’re out there and you feel good about having assets that don’t pay you every month, that make you look rich on paper and they’re actually devaluing because you’re not keeping up with inflation. Our rents go up with inflation. That’s the beautiful thing about this.

I went from being maybe having a net worth of $150,000 back when I was W-2, like the person you are referring to that got rich on paper up over $300,000 to having a net worth of over $10 million since I got into the multi-family real estate space. It’s just a mindset shift that you want hard assets that are going to pay you every month, that are going to allow you to then go out and buy more assets. You’re playing a different game. I think that while my multi-family has gone up a lot, I think it’s more outpaced the amount of net worth than anything that I would have been able to do on the W-2 side. It’s been tremendous from that perspective.

Gino: I want everyone out there to google a fractional banking system to see what kind of banking system we have. Banks lend on a reserve. If they have a dollar in reserves, they lend out 10, 12, 14. What does that do? It causes massive inflation. 1971, we got off the gold standard by Nixon. We are in a debt revolution. FED is printing money. Printing, printing, money.

Jake: We have to use it.

Gino: The value of your money is going down. You have a hard asset. That’s what’s happened over the last five or six years between 10/31, between negative interest rates, between money coming in from China, between the affordable housing crisis. All of these factors have elevated multi-family and this replaces. Jake, what are the three fundamental human needs? Food, clothing and–?

Jake: I think it’s apartments now. I think we’re [crosstalk]–

[laughter]

Pat: Multi-family assets. I think what people don’t realize is that what you guys are doing and what all real estate investors do is they borrow money against them. When you’re comparing the stock market, a $100,000 now is worth $450,000, or $1 million is now worth $4.5 million, where your $450,000 is worth $10 million, it’s because it’s leveraged.

It sounded like the same thing as if you did invest in the stock market, but you took out margin calls on all the stocks that you bought which allowed you to double and triple and– You know what I mean, quadruple.

Jake: You’re playing a different tax game too though. I think that’s key.

Pat: That too, right? Yes.

Jake: Yes.

Gino: The other thing I think we should all mention– Jake and I both read this book called Big Shifts Ahead by Chris Porter. I think everyone in the single-family home space has to read the book. It can be a painful book. It’s all about demographics. There’s 72 million Baby Boomers and 72 million Millennials. What do you think they’re doing? They are renting, they’re not buying. This multi-family, I think in the long term, is going to stay where it is because people don’t want to buy. They’re going to continue to rent.

Pat: It’s funny. I love that. I’m going to read that, but it’s like the older generation lives in these older type houses and the younger generation would never buy that, they don’t want to buy– They want all this new shit. They want this beautiful stuff. The sellers are not attracting the buyers.

Gino: The other problem with that is the Millennials have all this debt. They want to be transient. They want to be able to move from Phoenix to Knoxville to Jacksonville and pick up and leave. Why buy a house? Why have a mortgage? Why put 3% to 4% of your principle payments away for CapEx every year? It’s not like it was 10, 15 years ago where you could build equity and have that American Dream. Right now if you’re buying a house, you’re buying it at the top in a lot of these markets. They don’t view it as an asset like our generation did. They know that it’s work. They know that it’s, I think, “a luxury” to them. To them, rent and then just have that lifestyle and not worry about the hot water heater or fixing [crosstalk]–

Jake: I think the maintenance too. I think a lot of them struggle with a maintenance component. They have to sub a lot of it out. It’s different than when your dad probably went out and mowed the lawn and fixed the shit himself.

Gino: Take a look at the demographic book because it’ll talk to you about what’s going on. You have a lot of immigrants coming in, they rent. You have women single-family households, they can’t afford to buy homes. What happens when the recession hits and you can’t qualify for a mortgage? Where are these people going? The bottom line is, you need to be in a good market.

You need to be in the Southeast, you need to be in the Midwest where people and jobs are still migrating even when there’s a recession. It’s more affordable to live in Knoxville or to live in Jacksonville than it is to live in New York City or California. Choose a good market to invest in. Choose a market that has a plethora of jobs and choose a market where population is growing.

Jake: It doesn’t have to be where you live either.

Gino: Yes, exactly.

Pat: All right, cool. Tell me about The Honey Bee.

Jake: The Honey Bee. I got her right here. We’ve got The Bee. It’s a parable. It loosely follows our journey from the early gut punches, because there’s a lot of stings early on. When you’re an entrepreneur– We started off, it was myself and Gino and with a 25 unit. We were trying to hire maintenance men and figure out our management company. There’s a lot of learning lessons that take place. We documented that. We put it into a parable form. We showed the journey of a gentleman that–

He met a mentor and he went on his journeys from buying a smaller asset and scaling up and having various streams of income as we do. I think one of the keys to our success is the vertical integration. We control every piece of the process and that’s what we teach in the Honey Bee. We manage ourselves. We do our own in-house asset management. We do the syndication. We have a finance company. That level of control has really propelled. It’s really cut costs for us as we’ve grown. We know that what we’re getting into, we have someone on the team with experience, so we’re not getting the wool pulled over our eyes. That’s really been our approach to the business.

Gino: Jakes, it’s really been a process though. We just started off-

Jake: For sure.

Gino: – fumbling and mumbling. It doesn’t happen overnight. We’re doing all the work. It’s not how can we do it, it’s who can we do it? We hired the property management company. We hired property managers instead of Jake doing it. There’s a lot of that process. The honey bee is like emblematic of what’s going on. The honey bee is the worker. All it is, is the honey bees going out and making the honey. The person who owns the hive, Noah and Tom who own the honey bee hive are the ones who make the money. Now, it takes a long time to make honey. You have to pay those honey bees to do it. If you can make that and point that connection in your brain, you can become really super wealthy doing that.

Pat: You’re saying Jake and Gino are hive owners?

Jake: We’re hive owners.

Gino: That’s right, and Pat and everyone else out there who’s an entrepreneur. We want to own the hive. Sometimes, we may pay our honey bees more than what we’re making. Ultimately, the value is in the equity, and the value is in the creation of that business because you can always sell that hive off to somebody else and start another hive.

Pat: It’s pretty much Capitalism 101. It’s like Kiyosaki says, “The A students work for the C students.”

Gino: I love that.

Pat: Yes, it’s like no matter what, you’re going to have– You need a lot of honey bees if you want to be successful. You got to get away from the honey bees. I think that’s a big challenge, especially for real estate agents because they’re honey bees. They work really hard and they’re very much in control of things. If you want to scale your properties, which is the reason why you guys want multi-family instead of buying single families here and there, you got to let go of the honey bee and become a hive.

Gino: I think Jake mentioned it. He mentioned the people, the systems and the culture, those three. I think when we started to scale, we really wanted to figure out what our culture and our core values were. You have to figure out what your core values and what your mission statement are for you to grow and it’s okay. If you’re doing $20 an hour work, you have to sub that work out.

It was hard for us to do it. I love bookkeeping. I had to sub that work out because I can get somebody to do that for $35 an hour and I can go close a deal. I think the real estate agents have to figure out where their value is and be able to share the pie. We don’t own 100% of all these pies. If you own 10% of one pie, 20% of another pie, 30% of another pie– I have over 23 streams of revenue. If six of them aren’t doing well, I’ve got 17 other streams. Think of it that way. Think of growing it and being able to share. Once you can share and grow your network and grow your team, it all starts with the people. It really does. I wish I’d known this 10 years ago, but–

Jake: I want to touch on something he just said though too, because there’s been so many times where a realtor, a broker has brought me a deal. I’m thinking to myself, “Why the hell is this guy not buying it himself?” There’s so many times there’s value in it, that’s an off market transaction or something, I’m thinking, “There’s so much value in this, I cannot believe this guy is not trying to just [crosstalk] himself.”

Pat: What do you think the answer to that is, because this is such a great question for people listening?

Jake: One is I think they get stuck in the mentality that, “This is my job and I need to make a rip off this. I can’t jeopardize me being a broker that they think I’m going to go and try to buy directly from him.” The other thing is they’re not even thinking about that. They’re just thinking, “I want the quick fix so I can go pay the bills and keep the cycle going.” I’ve just been like, “Oh, my God. How is this guy actually bringing this to me and it’s been something that set me free for the rest of my life?”

Gino: It’s a hormone, this dopamine hit. It’s an instant gratification. It’s like, to tell your children to put off and delay that gratification, save that money so down the road you have something to invest with. For them, they get caught in the hamster race where transactions are great. They’re making great money every year but that transaction– If you can put that off, transactions pay the bills, equity makes you rich. It’s really hard because I know that you’re stuck in the grind and you can’t see above that but maybe, if you’re a realtor, you tell the seller, “Can I get some equity in this if I can roll some of my transactions, some of my broker fees in there?” That’s one way of doing it, man.

Pat: That’s what you should always do. We’ve had guys on the show like that, that that’s how they make– That’s what you should always do. Take a piece of it. Don’t take a commission. Take a piece of it because you don’t have to pay taxes on it at that level too.

Jake: Pat, we did an owner-financed 281-unit deal back in 2015. We actually got money back at the closing table and the thing paid us $60K last month and we paid the owner off about two years ago.

Pat: Wow.

Jake: Think about that. The realtor brought us this deal. We put nothing down. There’s almost 300 damn units and the thing paid us $60K last month. What the hell?

Pat: Right.

Jake: That’s the kind of thing where I’m like I just don’t get it. Hey, he made a nice fee on it but the thing pays us every month.

Pat: Yes, think of the logic. In their mind, too, in 2015, they might have thought 2016 was going to crap out. They had maxed out. There was no value to add, which I think is a concern now. Talk to me about that. How do you know when there’s no more value to add in certain areas that it seems like these apartment buildings or even single-family homes have been sold three or four times in the last decade. How do you know?

Jake: It doesn’t always have to come down to a value-add played on it. I think that’s a trap that a lot of guys get caught up in. We did a deal — when was it — towards the end of last summer. It’s 143 units and it was a 6.8 cap. There’s not a tremendous value add on the thing, but the cash flows nicely. It’s an asset that I’ve very much liked owning. It just makes sense. It just made sense. It was cash flow from day one, and they’re not easy to find.

If we do two of these things a year, it’s fantastic for us, but we have to look at a ton of deals. We’re doing a deal right now. It’s a smaller one. It’s 52 units. Rents on the market right now should be about $900. I think the average is $650, so mom-and-pop owner. We’ll go in. We’ll probably put 150 grand into it, turning it, but it’s going to be a nice place. It should be about 50% cash on cash when it’s all done. I think you have to be patient and wait for your pitch because you’re not going to a lot of them in this environment right now. If we do two a year, we’re in a pretty good spot.

Gino: Jake, it’s the race to 80. We need to really look at 80 deals to underwrite to find that one deal on this market. I’m not saying you have to drive up to 80. You have to underwrite, look at those, quick, back of the napkin, and they’ll filter themselves down. If you’re looking at four deals a week, it’s going to take you 20 weeks to find a deal.

Pat: What areas of the country do you guys like and what areas do you not like?

Jake: Today 2020?

Gino: Yes, we’re within three hours of Knoxville so we like the Southeast, right to workplaces. Some of the states have no income tax. A lot of job drivers, big, big companies coming down to these areas. We do not like the blue states. What Trump [crosstalk]–

Pat: Say it again. You don’t like what?

Gino: We don’t like the blue states. What Trump did with the tax law, with the property taxes in New York, they’re going out in droves because the first 10 grand– You can’t write off anything above 10 grand with property taxes. The affordable housing, see what’s going on with the affordable housing laws in New York and California. It’s killing them. Now, California wants to do the Prop 13 where they want to raise property taxes. People are going to flee.

You have to watch where those migratory patterns are going. You can look at Phoenix, you can look Boise, you can look at Nevada, you can look at Salt Lake City, you can look at Denver. These are all places that people are leaving California and middle class well-paid people. It doesn’t matter if California is supplanting them with other people. They’re supplanting with immigrants, people who make less money, you have less skills. You are losing that skilled labor.

Why did Toyota leave California and go to Texas? Not only because of the tax benefits but because employees can make 80 grand a year and can afford to live in Dallas. They moved their whole operations from Toyota in California to Texas, so Texas is going to continue to thrive. I think Florida is a little bit expensive right now but going forward– Look, the weather is great down here. The tax environment is great down here. People want to move down here. There’s so many jobs down here.

Jake: The population growth is there too.

Gino: The population growth is there. The Southeast, Jake calls it the Southeast Conference, the SEC. We like this area. We like North and South Carolina. Just be wary of when you go into the market. Find out those sub-markets. You really have to deep dive into those sub-markets. We can go talk about this for hours, but just focus on those areas where people are moving, where there’s job opportunities.

Pat: That’s awesome. Well, great, succinct advice. I appreciate that. Guys, where can we get The Honey Bee?

Jake: You get it on Amazon. You go to jakeandgino.com and get yourself a copy. The audible is coming out shortly depending on when this thing comes out. It might be already out. You got the G daddy reading that sucker. Man, he has a sweet, sexy voice, boy.

Pat: Oh, my God. That’s ah..

Jake: Tell you what, they were in there like, “Man, you should do this full-time,” and he was thinking about leaving his multi-family for this.

Pat: [laughs]

Gino: Not a chance, bro.

Jake: We’re going to try to keep him on board.

Pat: I read my book and then I got so many bad reviews on Amazon for that I said um and paused too much. I had to literally do it again and actually concentrate while doing it.

Gino: Dude, it’s painful, isn’t it?

Pat: [laughs]

Gino: You’ve got to sit in an office, you’re there for six hours, stopping and reading the same thing over three times. [crosstalk]

Pat: Yes, it’s something you wrote, right?

Gino: Yes.

Pat: [laughs] Awesome, dudes. Well, listen. Guys, I’m going to put all their information, put their website. I’m going to put all their contact information, social media links, everything. I’m going to put a link to the book and both of those things that they talked about. It will all be there. Just go to hibandigital.com/jakeandgino, hibandigital.com/jake A-N-D, gino, G-I-N-O. Of course, it will all be there. Guys, this has been awesome. Thanks so much for contributing today and I wish you the best of luck. Hopefully, we’ll get together and break some bread in the near future.

Gino: Sounds great, Pat. Thanks.

Jake: Thanks, guys.