Feb 4, 2020
James: Hey, audience and listeners, this is James Kandasamy from Achieve Wealth True Value-add Real Estate Investing podcast. Last week we had Kevin Bupp who's an awesome syndicator and a sponsor in the mobile home park space. And he gave a lot of insight on why did he choose mobile home park and what happened during 2008. And you know, how he rebounded in his real estate career and a lot of other things. So you guys want to check out that episode.
Today we have Todd Dexheimer. Hey Todd, welcome to the show.
Todd: How are you doing?
James: Good. Good. Very good. Very good. So Todd owns almost 550 units and he has been buying in Minnesota, Wisconsin, Kentucky, Ohio, Tennessee. Is that right, Todd? I mean, is this all that you're focusing, which is completely different from the usual guests that we get who buys in Florida and Texas, right? So I want to really dive into these States, which is not the usual focus or not the usual point of discussion that you know, a lot of multi-families syndicators and investors have. So let's talk, you know, Todd, why not you introduce yourself in case I missed out something?
Todd: Yeah, sure. I mean, you know, a little bit about my background. I started doing this business actually right when the crash happened. I started in 2008 so the timing was great. At the time people were telling me I was stupid and crazy because the sky was falling, you know, but luckily I didn't listen to them. I, you know, buck the Trendon instead of running away, I ran headfirst in. So started buying single families, did a lot of fix and flips, did a bunch of them, probably 150 or so, and was really, they'll want you to focus on rentals at the whole time. So while I didn't have any money as I flipped, I would just keep a little bit of that cash that I would get from the flip and buy some rentals. And that's how I was able to build up my rental portfolio.
Bought a lot of one to four families, some small apartments,
did that all locally in the twin cities. And I got up to maybe
close to a hundred units just under that at one point in time
before I kind of transitioned them. Yeah. Out of the flips, out of
that smaller one to four family stuff and into apartments, I've
since sold a few buildings in the twin cities, but I've been buying
in mostly out of state; in Cincinnati, Kentucky area Tennessee.
That's been my main focus now is just buying... I went from buying
kind of 20 to 30 unit type buildings to then now and buying larger
hundred-plus unit buildings. So that's my main focus now is looking
at a hundred plus unit buildings and doing value add
syndication.
James: Awesome. Awesome. I mean, looking at your bio, you also have done some office, some ski resorts, some mobile home park. And finally, I think now you're focusing a lot on, I mean, you have been focusing a lot on apartments, right? And why is that? I mean, didn't the other businesses make a lot more money than apartments?
Todd: Yeah, I mean, everything made plenty of money. They all make sense. And that's the beautiful thing about real estate and the confusing thing about real estate is it all make sense, right? I mean, you know, I can make a lot of money in office, I can make a lot of money in retail and warehouses and all kinds of stuff, and I can make money in development and owning land and mobile home parks. I mean, you talked about Kevin Bob, he's a fantastic guy. He's making a lot of money, I'm assuming, in mobile home parks. And so that's the beautiful thing about real estate, but you got to pick your focus, right? And so, yeah, I did some development, I did some land, like you said, I owned a ski resort, which is just super random.
James: Do you still own it?
Todd: I don't, I sold it. It was a distraction. It was a beautiful place. Look, it was like 190 acres or something like that. It was beautiful. A really nice river ran through one of the edges of the property. It was nice hills and it was an amazing property, but you know, it was a distraction and you've got to get focused. And I actually talked to my...
James: Can you hold on? Sorry, my dog is disturbing. Hey, Todd so it looks like you have done, you know, quite different types of business, right? Like an office, some ski resort and some mobile home park and you know, you started with smaller common, complex and all that. But finally you ended up focusing a lot on a common complexes. Right. And why is that?
Todd: Yeah. because apartments make you a lot of money. No, the answer is I needed to focus on one main thing. And I could've chosen office, I could've chosen retail and warehouse or buying, you know, distressed land, like the ski resort and I did all that. But there's just no focus when you're doing just random stuff like that. And I wanted to really focus and I wanted to build something big. And so ultimately, it was a choice of, okay, what do I really enjoy and what do I really want to focus on? You know, the beautiful thing about real estate, there's so many different options, every way makes money.
And I've gotten friends that do note buying. I've got friends that,
you know, flip houses that wholesale, that do land development,
everything. And they all make a lot of money if they focus on it
and they do it well. So that's why; I just had to focus. I just had
to have one niche that I picked and ultimately I was most attracted
and most led to multifamily.
James: Awesome. Awesome. So looking at the States that you have invested right now, I'm not sure whether, you know, like the popular state, I would say like Texas, Florida, Las Vegas, Arizona, Phoenix and all that, right? I mean, how is the market different compared to this populous state? How's the market in Minnesota, Wisconsin, Kentucky, Ohio, Tennessee, different from the other markets that a lot of people know?
Todd: Yeah. So first of all, Minnesota is a totally different market than all of them. Minnesota is a extremely competitive market. You and I talked offline. I mean, it's a super competitive market. There's very little inventory, very competitive. Cap rates are extremely compressed. almost impossible to find deals. Not that you can't, but I mean, extremely hard. There's just not a lot of deals that sell, especially when you're talking a hundred-plus unit deals, just not a lot of deals itself.
James: The twin cities are there, right?
Todd: Yup. This is Minneapolis and St Paul, the twin cities. You know, if you go way out state, it's a different story, but you don't want to invest there cause nobody lives there. So if you're going to remain populous, which is Minneapolis, St Paul or the Rochester area, which is where the male clinic has...a lot of people know what the male clinic is. It's one of the best hospitals in the US, those are the two areas of most people are investing in and it's next to impossible to find a deal.
James: What is so special about these twin cities? I mean, now it's like what
Phoenix and Las Vegas, but past three, four years, I mean, I used to read Marcus and Millichap report and they always say the top city to invest in is twin cities. And I can never Google it. And now you're telling me that it is the twin city, right? What's the real definition of it, where it's located and what is so special? Why is it the top city?
Todd: Yeah, well, look, I mean I think we're the 16th largest Metro in the US, if I'm correct and I think we've got 3.8 million people in the whole Metro area, which we called the twin cities. We have a large portion of Fortune 500 companies are based here. It went down recently because there have been some mergers, but they're essentially still here. It's just a couple of companies that merged. So we've got a very large amount of Fortune 500 companies. It's just a stable, steady place, right? We're never going to have big population gains, but we don't have population loss and our rents never go skyrocket up. I mean, they've skyrocketed recently, but we call skyrocketing three and a half percent increase, you know, that's skyrocketing for the twin cities as far as rent goes.
But we're going to see, you know, that just stable, that
really stable, it's never that up and down. It's not like a
Phoenix, it's not like a Florida, it's not like that. Just that
roller coaster ride, we're just straight. And so people like that.
Our occupancy rate in the twin cities is, I mean, I think we've now
come down a little bit, but we're at about 97% occupancy up until
fairly recently.
James: On average. Wow, that's really good.
Todd: That's amazing. People couldn't find places to live. I mean,
if you were an okay landlord, you were full. The only people that
weren't full were just the slum Lords and even they were close to
being full.
James: And that probably could be the reason why, you know, you can't find inventory, right? Just there's no inventory. Right.
Todd: Yeah. Yeah, it's good. So the difference, that's one market. And then, the other markets that I'm really focused on are going to be like Cincinnati. Now as you start to really look, Cincinnati's in some of the lists now, market is to be looking at, and I just looked up the other day, like the cities with the best population growth, job growth, and Cincinnati was on there. So you're starting to see the markets that I'm invested in beyond those lists and they weren't on there before. So basically what it was is through my research, I wanted to find markets that hit all the criteria that I'm looking for. That's job growth. That's population growth, that's strong government and independent support for businesses, bringing in businesses. That's good rent affordability. That was huge on my list. I wanted cities that had good rent affordability, opportunity to purchase assets that were cash flowing with decent cap rates.
I wasn't necessarily looking for like a 10 cap, but I want
decent cap rates. I wanted a market that I didn't feel like
compressed to the point of where when we do see whatever recession
is coming next, that they're gonna go way back up. And so those
were the markets that I really tried to focus on. And that's what I
feel like I've found. Now, since I found them, they have definitely
compressed a lot more. You know, it's challenging, but when I first
started in those markets, there's a lot of opportunities and there
still is.
James: Got it. Got it. So how was your experience from going from buying and flipping houses into syndication, right? Why did you make that leap into syndication?
Todd: Yeah, flipping houses suck. It's a lot of work.
James: I mean, I've tried two times and I promised myself I'm not going to do it again.
Todd: Yes. It's just so much head damage in flipping houses. And can you make some good money? Yeah, I made some good money. I'm not gonna say I didn't, but there's just a lot of liability, a lot of head damage. You're dealing with a lot of contractors and you're in use always, and homeowners and emotions and it's just...you're always grinding. You're never...not that like I care about it, I enjoy grinding. I mean, I do it in multifamily right now, but I feel like I'm actually getting somewhere; where with the flips I felt like I was on that hamster wheel or I got to buy one and I got to immediately find another one and I'm always like running in a circle. And so that was kind of the reasoning that I wanted to get out of it.
Plus I'm paying, you know, short term capital gains or ordinary
income, I just didn't like that. Now multifamily syndication made a
lot of sense because I had a lot of investors. When I was doing
flips, I was bringing in private money to my flips. I wasn't using
hard money. I was using just private money. People I've met that
wanted to invest in my deals and that's how I got them involved.
And so when I wanted to transition into multifamily, it was pretty
easy to say, Hey, this is what I'm doing. If you want to come on
board or not. And all my investors said, yeah, let's do
it.
Ultimately that was what James I wanted to do from the very start.
When I first started this real estate journey back in 2007 when I
started reading books, before I ever bought anything, I read
several multifamily books, one by David Lindel called multifamily
millions and another one by Ken McElroy called ABC's of real estate
investing and I loved those books and that said, this is where I
want to go. And I had always been kind of obsessed with it, but I
had no clue how I was going to take down $1 million-plus building.
And so, I just kinda got scared and let it fall by the wayside.
James: So how did you take that leap? Who helped you and was it like a aha moment? One day you wake up and you bought it or?
Todd: I had a business partner and ultimately it was time for us to kind of separate and go our own ways. I wanted to do something different than the flips and wanted to take this multifamily leap. I started by buying some smaller, you know, as I said, 10 to 20 to 30 unit buildings and that was making a big step there. And then just started like listening to people on podcasts and going, no, why am I doing this? I hired a business coach too and I remember talking to him and going, I think he said, like, what? Why are you buying another 20 unit? And I said, well, you know, like I got to keep on buying these and then eventually I'll get up to, you know, hundred-plus unit buildings. Why not do it now? And I'm like, Oh yeah, why not do it now? So it's just like somebody just needed to tell me like, what are you doing? Let's just do it now. Like, and it wasn't like, Oh wow, that's a scary thing. When he said it, I was like, well, yeah, yeah, let's just do it now. You're right. Yeah. So I don't know, sometimes you just gotta be told like, what are you doing? Just go do it.
James: Just go do it. Yeah. You just need someone to, I mean...
Todd: Just a little kick in the pants sometimes.
James: A little kick or a knock on the head, hey, you can do it now. Right. Why not you do it? Right. So that's very interesting. So what are the things that you when you started syndication, right? I mean, when you look at a deal, when you get a deal, I mean, first of all, you're already finding it hard to find inventory, right? But whenever you find an inventory that comes to you, what kind of things do you look at?
Todd: I'm sure kind of the same as most people. I'm looking, you know, beyond the city and the neighborhood, which I already kind of mentioned. I'm looking for that population growth, that job growth, I'm really digging into the neighborhood too. And I want the neighborhood to have the same fundamentals that I'm looking for in the city. I want that specific neighborhood to have too and low crime and that growth is what I'm looking for. So beyond that though, as property-specific, I'm looking for an opportunity that has something wrong with it. And it might have really high expenses that I can take down. You know, utilities are a big one where people aren't, you know, we can put some like led stuff and we can put low flow toilets and we can do energy-efficient stuff that's really going to cut down on our bills and increase our ROI.
We can do RUBS which is ratio utility billing and where we're
charging back to the tenants, those people who don't know.
And then potentially, you know, depending on how the property is
being run, there might be some other potential small things that we
can do. And then of course on the income side, we're looking at can
we raise rents by doing improvements to the property? We don't like
to raise rents just to raise rents, I like to provide something
good for my tenant base. And then, you know, there might be other
things, like there might be a just occupancy issues that the other
management company or other owner just wasn't on top of things,
collection issues. Potentially. there are crime issues or there's
other just management issues at the property where they have the
wrong tenant basin and we can correct those problems that are
happening.
James: Got it, got it. I mean, out of these five cities, five
states that you invest in, is there any difference in landlord
friendliness within this city?
Todd: You know, they're actually all fairly similar as far as this
landlord friendliness. They all have different quirks to them. You
know, some of them might have to give a like a five-day notice to
the tenant before you can evict them. Some of them, you can't set
their stuff out on the curb right away, you have to give them, you
know, like in Minneapolis, if you evict a tenant and they leave
stuff at the property, you have to hold onto that stuff for 28
days. That doesn't have to stay in the property. You can put it in
storage or whatever. They have time, it used to be 60 days but they
have time to be able to get their belongings. So they're all a
little bit different. But I would say, all in all, they're kind of
probably less right in the middle.
You know, I hear some other States are being better. For instance,
Texas I hear is really good. But yeah, you just kind of raised your
eyebrows and rolls your eyes a little bit and I've heard that too
by other people. And I think what happens is, you know, and not
saying every state is the same cause there are some states that I'm
sure are really hard on landlords, but I think if you know and
understand the laws and understand what you can and can't do to get
your tenants out and that type of stuff, most States are just fine.
Like it's not that difficult to move tenants. So, for instance,
Minnesota, a lot of people have that kind of misunderstanding. I
don't know where it comes from that you can't kick a tenant out in
the winter and that's not true.
My company just evicted one of our tenants and there's date to be
sat out is, I think December 12th. You know, so you can, you know,
it's winter here. I mean, December 12th is...next week is going to
be zero degrees out. So, you know, you just have to understand it
and if you understand the landlord laws, the tenant laws, you're
going to be just fine. So get the right people around you, surround
yourself with the right people.
James: Got it. Got it. And also, I see in your bio that you have a
passion to teach undeserved youth and adults on how to create
financial independence. So can you explain about that?
Todd: Yeah. You know, so I've volunteered for a nonprofit called
Junior Achievement, a lot of people know that and my passion and I
don't know exactly where I'll take it, but my passion is just to
continue to do that and raise awareness, raise money and for people
who don't have the opportunity to have what we have and do what we
do. A lot of people don't even know a business or being a business
owner, being an entrepreneur is even like a possibility for them.
And it's possible for everybody. Cause there's a lot of people that
come from nothing especially, you know, I see people from different
countries come here that have nothing or start with nothing and
they do amazing things. And there are people living in this country
that just don't even think it's possible. Like they don't know that
it's there. So I want to just really educate people.
The other thing is I love to figure out somehow how to get
financial education into the schools. And that's a tall task, I
know, and it may never happen, but that's one of the things I
really want to do. I used to be a high school teacher. I really
think it's important to teach our youth about how to be responsible
financially and just about the amazing opportunities that there are
out there.
James: Yeah, absolutely. Especially in the US right. Where it's a
capitalist country, right? Anybody can, you know, make a lot of
money, as long as they're willing to work hard, you find the right
people to be coached on, right. You're on the right path, you work
hard, you should be able to make a lot of money. I mean, it's
completely different from a lot of other countries out there. I
mean, people may not appreciate how much freedom to create wealth
in the US unless you have travel outside and you have lived in
other countries, right? So a lot of people did not know that, so
that's really good. Yeah. I mean, a lot of people take it for
granted and a lot of people do think that somebody else owes them
something.
Todd: Yeah. It's a hard mindset to change. I mean one of my very
first tenants, and this is partly where it came from, one of my
very first tenants in a single-family house, she moved in. She had
section eight and she said, "You know, I'm not going to have this
section eight for very long so could you take me when I drop out of
section eight?"
I said, "Oh, absolutely, yeah, as long as your income and you meet the requirements, no problem."
"Okay, I'm going to do that. I'm getting my real estate license. I'm going to get out of this. My mom had section eight, my grandma had section eight and I don't want to be part of this circle."
She never got out of section eight. I had to actually evict her because she wasn't even paying her portion of the rent and I don't know where she is at today. I'm hoping she's out of section eight but my guess, my gut is she's probably still in section eight and never learned really what to do and how to get out of it. And I'd like to be able to help end that cycle.
James: Yeah, that's a very good thing that you're doing because I
think sometimes they need someone in the business circle to go back
and, you know, just tell the possibilities out there in the
business world. So, yeah, that's very important. So, Todd, when you
look at the multifamily apartment, I'm presuming you're doing a lot
of value add deals, right? Is there anything that you find in terms
of what the most valuable value add when you're doing all this
turnaround?
Todd: I mean, it's different for every project, but one of the
things I like the most is trying to find expense, just expenses
that we can cut but efficiently cut. Like I don't want to just cut
repairs and maintenance because those are going to come back. And
they're going to probably come back and bite me because I tried to
cut those and be cheap. But now if we can do things, we can cut
down by buying in bulk, by buying the right materials, by being
efficient at our scheduled repairs versus just randomly doing it
when it finally breaks. If we get into a more of a rhythm and a
schedule, we can actually cut expenses, which a lot of people don't
understand. Like how is that possible? Cause we're always on the
property and always scheduling things.
But preventative maintenance is actually going to save you money
versus having something that breaks, I mean, think about a furnace,
right? If you go and you change the furnace filters, every month,
you're going to extend the life of your furnace by potentially 10
or more years just by doing something like that. So that's one big
thing. The other big thing with expenses and this is my favorite
one, and I already mentioned this, is the utilities and cutting
back on a lot of the utility costs by doing, there's a lot of
different things we can do. We can replace the toilets with the low
flows, we can put on a water reading system where it can tell and
it can send us a rating if we have a water leak. You know,
just silly things like that that seem like they shouldn't, you
know, save you that much money, end up saving you a ton of
money.
And the reason why this stuff is my favorite, the expense reduction
is my favorite is because this is a recession-proof system, right?
If we cut our expenses and a recession whacks us, guess what? Our
expenses are gonna go way up. But if we jack our rents up today and
a recession happens, what happens with our rents? They go back
down. Right? And they do, and I don't care what people tell you
that multifamily rents don't go down, they do. And so, so raising
rents while I like that, and I'm not going to tell you we don't
raise rents, but we know that by cutting expenses down, as long as
we do it the right way and not just cut to cut because we want to
be cheap, but if we do it the right way, that's recession-proof and
that's going to continue to keep our NOI high during the
recession.
James: That's a very interesting perspective because yeah, you're
right. I mean, rents can go up and down, right? But once you
optimize your expenses, you're probably going to be, you know,
sticking to it, right? So you could invest on your expenses. That's
a very interesting perspective. That's good. So Todd, let's go to a
bit more personal side of it. So do you have any secret sauce to
success? I mean on your personal side?
Todd: You know, I mean, there's no secret sauce, right? It's all
out there. It's all about yeah, several different...if you can do
the few things, focus, following one course until success...keeping
yourself completely focused that's extremely difficult, right? But
because we got so many distractions out there, but limiting those
as much as we can. You know, never giving up, always pushing on,
always continuing to persevere, being consistent and persistent.
Those are all really big. I mean, it's very easy in this industry
and in any industry to get kind of discouraged. You know, you get
beat out on 10, 20, 30, 40 properties and you don't get one and you
get discouraged. Look, I haven't bought a property since May. Do
you think I'm excited that I haven't bought a property since
May? No. I would love to have a property right now under
contract, but I don't.
But I'm not discouraged. I'm going to keep on going and keep
on pushing on and keep on putting on offers until I get one. So I
think those are just really important things to focus on. I think
obviously you need to be clear, you need to have goals, you need to
understand where you're trying to go with this business. Those are
all so important. So there's no secret. I wish there was and I
found it, but you know, it's hard work. Being an entrepreneur can
be lonely. That's out there all alone. You're getting your butt
kicked in but it's a fun business at the same time, there's a lot
of reward in the end when you're building something bigger than
yourself.
James: Yeah. It's interesting. And even on the previous podcast, we
were talking about how the world has changed compared to like past
five to six years to now. Because now with social media you feel a
lot of FOMO, right? Because you start seeing people are closing
deals and doing deals and you are like, Oh, I didn't buy since
March. You know, so you have to really, really control your fear of
missing out. Especially when you can see everybody, what's
happening.
Todd: Stop comparing yourself to others. For one, you don't know
what others are doing. You don't know what type of ownership
structures they have or anything like that. And when I look at my
properties and I really probably dive into them, I have a really
good ownership structure on my properties and some people that have
three times the amount of units, four times the amount of units
than I do, they probably have less ownership, less overall,
whatever you want to call it, equity than I potentially have. And
so if you want to compare yourself to others, you're always going
to be disappointed. You just have to look at yourself and go, I'm
happy where I'm at today. You know, where are the goals that I have
for myself in the future and where am I today and what do I need to
do to keep on pushing on? That's how you gotta look at it. If I
look at what you're doing and what everybody else is doing, what
Kevin Bop is doing, I'm going to be disappointed in myself. I'm
going to want to buy these properties and I'm going to end up doing
stupid stuff.
James: Correct. Yeah. I mean sometimes it's surprising. Sometimes
people can claim they own a half a billion dollars in assets, but
he may be poorer than the guy who owns a hundred units on his own.
Cause they had half a billion, they probably own like a what,
10-20% out of it and out of the 20% they probably own like...
Todd: Or half a percent.
James: 30% out of it. And out of that 30% they probably gave so
much money for all the capital raises that they are hiring.
And they probably wouldn't do the 0.001 of that billion. Right. So
you know, I mean just audience, I mean, you guys really want to
make sure that you don't get caught in all this marketing hype that
you're seeing in Facebook or LinkedIn. So the real guys are really
working. So you'll be able to identify the real guys just by
talking to them in terms of what are they doing and how are they
portraying themselves? And, you know, talking to their passive
investors.
Todd: Yeah, yeah. I mean, there's a lot of noise, like you
said.
James: It's a lot of noise and sometimes the rise of social media,
I mean, you have a Facebook group. I have a Facebook group.
Sometimes they know the amount of I mean just in general, Facebook
itself, there's so much of noise out there that it creates a lot of
FOMO in a lot of people, so you have to be really watching out for
that. Yeah. Was there any proud moment in real estate that you
think I'm really, really proud of that moment? I'm really proud
that I did something that's gonna stay with you for a long
time?
Todd: Boy. you know, I guess just getting started from the
beginning is probably what I'm most proud of is that well, like I
said at the beginning, everybody goes 2008 that was an amazing
time. you're a lucky guy. But at the same time ask yourself this,
did you invest in 2008? You know, most everybody listening has to
say no because they were either, well, maybe too young or they're
running the other way. And I was young in 2008 but I just took that
risk, I believed in it and I saw what was possible. And so that's
probably what I'm most proud of when everybody else was running the
other way, I ran right to the fire hydrant.
James: Yeah, yeah, that's true. I mean, even now it's hard to find
deals. I mean, it was the same thing in 2008, it's hard to find
deals. Even in 2010, it's hard to find deals, all the time. It's
always hard to find deals.
Todd: Well that's the thing is, and you said it, that's perfect
right there. And I'm glad you said that because it's always hard to
find deals. It's always easy to say there was a lot of deals back
then. We might be saying in 2025 that every deal in 2019 and 2020,
we should have bought. We don't know right now, but in 2011, 2008,
you know, all those years while it was happening, there was not a
lot of great deals to buy because the market was totally different
than it is today. And you didn't know where it was going to go. You
just didn't know. You have to buy on today's fundamentals. You
can't buy on to tomorrow's fundamentals because we don't know where
that's going.
James: Yes, absolutely. Absolutely. Hey Todd, why don't you tell
our audience how to get hold of you?
Todd: Yeah, so I've got several things. If they want to listen to
my podcasts, they can definitely listen to that. It's Pillars of
Wealth Creation. They can reach out to me if they want to learn
more about my company and invest in that kind of stuff. They can
reach out to me at my websites venturedproperties.com or they can
email me, todd@venturedproperties.com. And then I do coaching as
well, run some mastermind groups and coaching. And if they want to
learn more about that, they can either email me at the email
address or they can go to my website, which is coachwithdex.com as
well.
James: Awesome. Todd, thanks for coming on the show, you added tons
of value. Give us a lot of perspective of different markets that
I'm not familiar with and I'm sure a lot of listeners are not
familiar with and how did you, you know, came up in life and you
know, you have been giving back as well. So really happy for that.
Thank you.
Todd: Yeah, definitely. Lots of fun. Appreciate you having me on.