Making Money in Multifamily Real Estate Show

176 | Closing Big Deals using 1031s and TICs with Patrick Grimes

April 13, 2022 Dave Morgia Season 1
Making Money in Multifamily Real Estate Show
176 | Closing Big Deals using 1031s and TICs with Patrick Grimes
Show Notes Transcript

Patrick's Background:

  • Patrick has fifteen years of experience in active real estate investment: purchasing distressed assets, renovating, and stabilizing for long term cashflow. His portfolio includes controlling ownership over 2729 units in the emerging markets across Texas and the South Eastern United States.
  • In addition to his real estate experience, Patrick holds a Bachelor of Science in Mechanical Engineering from University of the Pacific, and a Master of Business Administration and a Master of Science in Engineering from San Jose State University. He has spent 15 years in corporate America working for machine design firms to concept, design, and build one-of-a-kind custom manufacturing automation and robotic systems. In addition to working closely with the technical engineering teams, he travels globally working to negotiate contracts and secure multi-million dollar investment for automation programs. He has been able to leverage his corporate experience and real estate knowledge to help pave the way for future success.

In this episode we cover:

  • 02:19 Patrick's Background
  • 09:28 1031's and TIC (tenant in common) structures
  • 16:58 Older legal structures and syndications
  • 22:32 Closing timelines with a 1031
  • 30:05 Making sure you have the right terms (on the buy or sale)
  • 33:21 5 Key Questions

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Intro:

Welcome to the Making Money in Multifamily Show, where we discuss everything to do with multifamily real estate investing. We believe it's the best way to gain financial freedom and build lasting wealth. This is where you'll find it the best information and practices to help you succeed in your real estate business, whether you're already experienced or just starting out. Here's your host, Dave Morgia.

Dave Morgia:

listener and welcome to the show. I'm your host, Dave Morgia. And I'm excited to bring on today guest today I have Patrick Grimes on the show. Patrick is the founder and CEO at invest on Main Street. He has over 14 years of experience in the real estate business that includes over $146 million portfolio across over 1900 units in multifamily across the US primarily in Texas and in the southeast us. And he co sponsors syndications. He focuses on pretty much the whole plethora underwriting due diligence on the investor side of things, including pitch decks and raising equity. 20 million invested through his raising of funds. And just a quick mention here for Patrick, he is the inductee into the Forbes real estate Council. He has authored a couple actually probably several articles at this point, Patrick. But yeah, I would love to kind of pick it that maybe first get into your background and and kind of highlight that Forbes, recent article you mentioned right before we started recording.

Patrick Grimes:

Oh, great, Dave, I'm happy to be on this. I've we've obviously been in the same circles for some time. And I've spent most of my career multifamily, keeping my head pretty close to the grinding wheel and just knocking out deals and getting it done. And that's probably my engineering high tech background, right. And I have two master's degrees too. So I tend to just be a hard worker, but it's great to finally be getting out there and on podcast and sharing my story and what we're doing.

Dave Morgia:

Yeah, so like I mentioned this, the Forbes real estate Council just inducted. And you mentioned before we started hitting record here a couple articles that you've written, and one was actually I guess, relatively recently, maybe even this week. So you want to just kind of highlight what the focus has been in that space in Forbes, and what you've been kind of just focusing on when it when it comes to, you know, investing in syndications?

Patrick Grimes:

Sure. Well, first, let me say one thing, this little freebie to hang into the end, I do have an Amazon number one best selling book. At the end, I'll share with your listeners how they can potentially get a free signed copy of that shipped to him. hardcopy and but yeah, I can answer your question. So about I'd say like, eight or nine months ago, I was actually approached by a partner. And what is as a recruiter for the Forbes Business Council that I was invited into it. And I didn't know what it was at the time. And at the time, I was traveling, living in a wahoo back and forth between the southeast and Texas, constantly looking at properties and doing due diligence. And I just, I didn't have I don't say I don't have time to go be writing and getting my name out there. Let's just get the work done. And so I kind of, you know, shined it on and it wasn't until about third quarter last year that I started getting more and more feedback from people saying, Hey, you should be doing you know, one too many, you should be talking to more people, you're doing a lot of great things. We just had an exit, where we made $10 million in nine months in Jacksonville, Florida. And I just gotta get that story out. So I called it the fours. I was like, Hey, is that is that still a thing? They're like, absolutely. I you know, here's the application. And there's their selection committee. And then you you know, once you get invited, I guess that's step one. And then there's like step five, and then all of a sudden they called me in today. Yeah, you remember. So now I currently working with the forms thought leaders and various businesses that helped to answer the expert panel questions that are offered. I've been in a couple of expert panels. And I've been authoring different texts and essential articles. And essentially, they come to say, Hey, what are the biggest challenges in your space? What are the things that you know, people really want to know? And one of them that's very misunderstood in our space is doing a 1031 exchange and a multifamily syndications. And so a lot of kind of misinformation out there, whether it's possible, it's not possible how it works and and, and so I want to explain it to the editor. They did some really, there's nothing like that anywhere on any of their knowledge base or so they were very excited about it. So I wrote, you know, back and forth with them on that and had some peer reviews on it. And so we got published very excited about that. But I think the topic is a great one to maybe kick off with because I talked to a lot of investors that were like me, they bought a bunch of single family homes, maybe renovated and maybe refiled them and then kept circling Reese and I obviously I was I was doing machine design automation and robotics, but meanwhile is Moonlighting, the single family homes every time I did won, the management got to be more of a headache. And I can only do one probably one or two at a time before it was just too much for me to do my, my high tech job. And I love the high tech job is very cognitive rewarding, but it just didn't offer the future that I wanted. So, right. Oh,

Dave Morgia:

no, I was gonna say, yeah, it's it's funny, just the time intense crunch, it can be going small than just jumping right into the bigger stuff. It can be really ironic, you know, partnering with the, with a bigger team and dividing and conquering, obviously, the deals that you're looking at now. So just just funny commentary.

Patrick Grimes:

Yeah, I, I 100% agree, I had to do every single job myself, something I was really passionate about something I was really good at. And a lot is that I didn't want to do I wasn't passionate about I wasn't real good at and the one size fits all, you know, is a very uncomfortable shoe to wear. And so make getting a team together, where they've been doing it for decades. And they're passionate about this niche. And that mission, this mission and multifamily, they're profitable enough to allow for lots of very talented people to fit into a team. And that serves the investors better right when your investments somebody else's money. So yeah, and I think with the 1031 exchange, it was just a natural progression, because I'm doing that with my own single family portfolio. And I have investors calling me saying, Hey, can I bring? Can I sell off these? You know, I'm trying to retire. But I've got this portfolio that's demanding all my time. Can I trade it into a multifamily apartment into one of these multifamily passive syndications? And the answer is yes. And no. You know, once I explain, you can, but you can't join the syndication itself, we set up a little side entity, the property on the org charts here. And here's the syndication and it owns a percentage of the property than you would own, you know, on title, your own percentage of the property based on how much equity you put up, and we give you the return similar that you would in the syndication, but you can't be necessarily passive. Because in that case, you would potentially need it to one of the requirements that you have to be active, you have to be on title and an owner. So but we do all the heavy lifting, and there really isn't many jobs. I mean, with the portfolio we're doing right now 707 80 units, seven properties, we have three area managers, a regional manager, and we have profit on site property management, maintenance. And so what else I mean, all you really get is reports, right? Technically, you're active, but so we set you up, and we kind of put you in these little tenants in common structures, which is just a joint venture sort of setup that it's been around for as long as real estate's been around, I mean, people have been buying properties together forever. So it turns out to be a really simple way. And as long as they're investing enough, because it's it does a little more costly for us. I've multiple times now being able to bring in, you know, husband and wife says, hey, look, can we move this into there, which tired of it. And then not only do they get to move it in, that they get the better tax advantages, and they get the returns. And then and we find them deals, they don't have to we execute the business plan efficiently, which they don't have to worry about. But then we refinance the profits, usually in year three back to them, then they get to capital back and they're like, Well, I don't want to go find another deal again. So instead of trading off, hey, let's stop retirement or let's, you know, trade my have have a job. So I have to trade off less family time, less friend time with my friends and less time in my hobbies. Like just give it back to us, we'll keep the velocity of the capital high by reinvesting it into another deal that we found, which takes two to 300. underwritten before we find one. And so the velocity to their capital keeps going up. Meanwhile, they get to focus on their life. And so it's a big, I'm passionate about helping people like that, right. And even if say you don't have properties now, and you want to invest a large number, like a million dollars, and that you want to be able to 1031 at wherever you want forward, you can still do the tenants in common, right, we can set you up, you don't have to be in a syndication. But if you do join the syndication as a limited partner. We contend 31 you forward with us to our next deal. You have to come with us. If you're not in your own Tenants in Common if you're in our entity, you have to come with us or we'll pay well. Right? And that's that's where they kind of tarp is a lot of confusion, but it's actually fairly simple and great tools for people to build their wealth and take advantage of what's the most powerful investing tool available to Americans. And that's the 1031 exchange.

Dave Morgia:

Yeah, and I guess my first question before we dig into maybe the mechanics of the tenant in common structure, you kind of mentioned 1030 wanting the entire deal into the next one, even on the LP side, is that something you guys are doing is exiting as a as an entire property level entity 1030 Wanting to some more properties? Because you don't see that a ton of time in the syndication space, usually to a refinance or sell type of situation. So

Patrick Grimes:

yeah, and so just to be clear, the refinance will still do but that's not a 1031 Because that's not a taxable event, right. But on a sale relevant, you really got to talk to your sponsor, if that's something you want to do. A lot of the times sponsorship teams kind of you see in this guru space, they're just kind of patched together with some partners that are going to do this deal together. They may not do deals moving forward together, right. But if you find a firm that's Hey, we were doing deals were established. And this is part of our plan. Because I'm investing heavily I'm signed on the loans. I've got it require the sponsorship team to have 10 to 15% of the equity. We're, we're the second biggest investor, you've got the the lender, and you've got the sponsorship team typically. Or you have maybe one other private equity firm or something. But we're huge investors usually way, way deeper in the passes. But yeah, so we're we want to same tax advantages. And so if you find the right sponsor, because it's up to them, and therefore we're thinking and you ask them in advance, make sure that that's part of their plan, then yeah, so when we bought canopy Creek in Jacksonville, Florida, in March last year, and we got it under market on renovated units great basis, we held it for nine months before we were already getting our year five sales price offers unsolicited Wow. And we sold it we sold it for bought it for 27 million sold it for 37 million, I made a huge return back to our investors. But our investors i Hey, wait, can you just roll that forward? Right, only three of 40 investors are so actually wanted out, they and each of those did it begrudgingly. And one of them had a trust issue, they had to exit from another personal Yeah, had a liquidation event because they for something because they had to for another business they had that wasn't working. And they were all begrudgingly cashed out, which which triggers a taxable event. Within the rest of the 10 plus million actually, were all 1031 exchanging into a 340 unit in Houston and other emerging market we've bought under it was stabilized, you know, seven 8% occupancy when we bought it and in incredible after post not only in the lease up, but then post renovation, we got some incredible upside. And so we're looking at trade again, and we see bright future for trading and up again. So we're it's a definitely a strategy. Now, again, it's important to know that if you're invested as a limited partner, you're passive in the deal, you're also passive on the exit, and you don't get to choose where if you want to go somewhere else, you have to cash out. But if you come in as a tenancy in common, you're just partner on title, right? And so this syndication can go this way. And then you your tenants in common can go wherever you want. So if you bring in 1031 funds, or bring in a large lump sum, that's over, say, a million or so that the lenders like, okay, that makes sense why this guy would want to partner and not join the syndication, then you have the freedom to join with us? Or go your own way on exit. So those are the kind of the things that a lot of people don't know.

Dave Morgia:

Yeah, so I guess we'll we're kind of flirting with the mechanics of the text structure. Just for the listener, if you are listening only, and there's no video, essentially, what you're explaining, Patrick, as you have some type of partnership that's at the same level as the LP syndication level. So it wouldn't be under that umbrella, it would be basically tangential to it at that same kind of level of the hierarchy of of the company formation, which I think like you said, it's important, right? It, it makes it so you're a true partner versus envelopes into the deal at the lower level. So, so getting into I guess, you mentioned way earlier, you know, maybe a million dollar mark was where you start to get interested to do the paperwork and all the hassle to bring in someone that's doing a 1031 via a tick. So what is that number if you have a hard and fast rule? And why do you have a number in mind? Because of all of the headaches? You know, what does it really entail to make it worth your while to do

Patrick Grimes:

all of this? Yeah. So first of all, I'd like to encourage your listeners if you're interested to go to invest on Main street.com. And when we have learn, click on 1031 Exchange because we have an input not only if you Google, Patrick Grimes Forbes 1031 Exchange, you'll see this article I wrote for Forbes, but I have a much more comprehensive, our white paper on the topic with graphs and pictures, and it's an infographic kind of setup that makes it very simple. Also, you can set up a strategy meeting with me, I'd be happy to have that conversation with you. But the coming into a tick structure is more costly, right? Because if you just join the syndication Well, we already paid the money to write the private placement memorandum to get the securities offering filed and we got to and so it's essentially that, that next $100,000 investment that's free, there's no additional cost for that, right. But if you want to come in and you want to partner with a syndicator Well, that's a new legal entity and then the because you're not passively, lender wants to know who you are. So they're gonna want to underwrite you again, A personal financial statement schedule of real estate owned complex, I'm going to do it because I've, I'm signing on probably half the deals I've done. I've been I've been very key principles loan guarantor, their non recourse loans. But as part of what I offer, you know, the partner, co sponsor in the syndication deals, but I do it all the time. And once you do it once, it's just it's just small tweaks each time. But yeah, I think you do have to do some of that. And then once the there's costs associated with the lender, there's costs associated with the attorney to put the agreements together, there's time to get through the agreements. And, and then there's ongoing accounting. And so oftentimes, syndicators, I had, it's just a headache. Also, since you're not passive. And we can't sign an agreement saying you don't make any decisions, or else it might disqualify your 1031 Exchange, we're taking a little bit of a risk bringing you in, we have a we have one big investor, which is a syndication, they're going to insist on doing everything according to the plan that's in the offering memorandum. We can't deviate from that. Even if you wanted to vote you couldn't the Securities and Exchange Commission's requiring us we track along that path. So we've got to find the right personality truly is, hey, I'll jump on the year bandwagon, I'll let you, you know, guide the bus down the road. So when all those pieces fall, persons, the lenders willing to let them in because they don't have a bankruptcy and and then we they got all the can put the documents together only takes a couple hours. And we do all the agreements. And yeah, we're kind of in I've seen some deals, where it doesn't make sense if they're coming in under a million, right? Because we're raising $32 million, and you can't have 32 part owners that are all active in decision, even though we're saying hey, you know, you're Pat, you're you're not you're not passive legally, but you're not going to make the decisions or do all the heavy lifting. The lender looks at and goes, Hey, that doesn't make any sense. I'd love

Dave Morgia:

to see 32 Different groups be active on a deal. Yeah. And

Patrick Grimes:

I talked to an older investor, actually, that had, I was just eating lunch with him out in California. And he told me that that's used to be how things work. He said he did attendance in common because he's talking about 1030 Wanting into one of my deals, and a hotel, actually. And he said he actually did a deal where they had, you know, tenants in common 1234. And the each of the individual LLCs were anonymous, so they didn't know all the investors that were in all the tenants and comments, but there was like, you know, over 30 That's why I brought that up, because it turns out, that used to be the way but now lenders is nobody wants that syndications are the way to do it, that a couple active and the rest are passive, right? So the the lender only cares about the people making decisions really, right? It's better for them. So gotta you know, four to eight partners is kind of a in the high end of the range, right? So that's kind of that's, that's really where you got to worry a little bit there, from what the lender might observe. So can you get into his deal with it? The equity is small enough, maybe and you've already got a 1031 put together, maybe you can do 500,000 Most indicators are just saying a million is the minimum. If you go less, though, some people will say, well, the costs are so high that it will eat into the other investors profits. And if I can raise it in the syndication and why would I take your funds, right? Because it just hurts people. So some syndicators are saying, hey, let's I'll charge you two or four, I've even seen somebody charge 20,000 to an investor wanted to bring like 350,000 That's so it's not a loss for the rest of the passive investors, they have a waitlist for the deal. But their heart goes out to these 1031 guys, right? Because they're saying, Hey, you're gonna vet that only because you did three refinances in your last property. All of that might disappear, in taxes, all of it. Right. And so you actually don't get anything and sell. And I've heard that story from my investor that had a property for 20 years, kept refi refiners, every single penny was gonna go away that sale and and so he was like, hey, I'll just put up the cash, it's a lot cheaper for me to make it not a loss for you or your investors to help cover your costs. So there's some things that we've kind of negotiate it's a win win, it's but it's really about who, right and the relationship with that investor and, and they're each specific situation. That's why since that's why I have strategy calls right on my website to get the 30 minute call and we get to know each other and talk about your situation. And then we actually have a contractor and invest on Main Street I've specifically brought on who has a side business or as a as a primary business as a temporary one an intermediary, but because I bring him on to facilitate not sometimes he's the intermediary sometimes he's not. I bring him on to facilitate this because he The intermediaries really don't care so much and only make like $100 $1,000 is a huge hassle. So it's kind of a dying business. And there's really not any money in it so and they don't have experience in multifamily syndications. That's the problem, right and how all that works out. And I've had one one of my partners said that a 1031 Intermediate didn't didn't wire funds, like two hours before the end of the day at the day of closing.

Dave Morgia:

Man, those are some minute phone calls.

Patrick Grimes:

Yeah, so there's some vetting, we have to do there, right. And I have another investor who's worth like $500 million. And he is an intermediary is a guy who went to high school with and doesn't have an email or doesn't check his email and doesn't have a mobile phone. And he goes, Oh, that's alright, I just pick them up. And we just go to golf, and I take him to the bank. And, you know, we wire the funds. Sounds like a freaking nightmare. He goes, it sounds like a nightmare. But I've done this with hundreds of millions of dollars. And I'm like, okay, by the sea, it's just a wide range of of things that happen out there. So we do have the right people on on staff, right, that are paid by our right to make sure that you get the right education that you get the right answers to the questions that you have. Yeah,

Dave Morgia:

I agree 1,000%, it has to be not just a 1031 expert, it also has to be someone who has the familiarity with syndications, which, in this space from from my experiences is not a high tally of, of 1031 stewards, right. Like there's, like you say, probably plenty that know how to go trade one for one property for property, but to get into, you know, the niche of investing in a tick. Not necessarily everybody knows how to get that game done. Because like, like you say, a lot of 1031 owners are probably, you know, just local owners trying to invest into the next property in their area, that type of thing and, and they just have the local guy pretty much like the guy who said that he's going out to golf with so it's much different than investing long distance nationally or even in these these texts and syndications. So, very, very insightful. Getting into, I guess, more on the investor side of things, because Because from your perspective, as a sponsor, you're really kind of massaging taking care of two lanes of investors, from the tics side of things as the 31 owner, you're only seeing the the conversation with yourself and what needs to get done to make sure that I'm allowed to participate in the deal as a 1031. Owner. So what is it after, say, your discovery call that I need to prepare for, to make sure that this goes smoothly for you so that we can do it again the next time?

Patrick Grimes:

Yeah, well, from you know, from the syndication side, and then I'll kind of show how they overlap. When it's when, you know, we put with my partners we put like two to 300 offers out before we get a deal, but that means we've probably flown to a dozen properties and done due diligence and then come back and try to negotiate with they didn't tell us was there and and so by the time we actually get an LOI due diligence, purchased themselves due diligence done final negotiations and hard earnest money is up. And we're on a race to close. Typically, you have like 3045, maybe 60 days at max right at that point. And, and then by the time we actually do a webinar, and then put this pretty deck together and present it, oftentimes you only have 30 days, right to actually get your funds in the door to close? Well, if you're trying to sell a property, it takes you 30 to 60 days, right, depending upon the kind of asset to get it on the market and get it sold. And they don't have time. So it's a little bit of a chicken before the egg thing. And some things we can predict, like, we knew we were selling this asset in Jacksonville, and we needed to place it and my partners, we underwent a big effort to find the next asset in place. So we told but hey, guys, anybody wants to 1031 Exchange, we've got 10 million coming in here, we can tack on some more, right, move it in. But a lot of the times, you just gotta get on the call with a sponsor. And you're gonna have to have this conversation and I have it, hey, these are kind of the deals that I have going on in the future. And this is kind of the general return profile of online deals and how things work. And you're going to need to know in advance that it'll be somewhat like this. It may be in two or three markets, but that might be all you get before you're like, Okay, that's good enough for me to go ahead and put my property for sale. Or, or you get to call, Hey, I just sold funds or with the intermediary, I got to place it immediately because at that time, they have 45 days to identify, right? And then it's like, Well, okay, what do I have under contract? That I can get them into a tick because in a tech structure, you have to submit your paperwork to the lender. Well, that goes with a loan application, which is 30 to 45 days to close. So if you're coming to me If you have to identify within 45 days, you're trying to see if I have this narrow window, I've got a deal, right? That I haven't included, I haven't already filled it full of text or I haven't included that I've submitted a loan app core that I may have submitted revision to, which may delay the closing, right can be expensive, or you lose the deal over delay them, at least give me the green light to close the lender, or I've got to get you in the first time. Which means now you gotta rush real quick to get all your statements together. And so and that's why, you know, inside the PDF that we have that invests on main street.com/ 1031, we have the guide, the ultimate guide, the 1031 exchange, and multifamily syndication. So there's no surprises, right, we even have case studies in there, of how all that timing works out. And it's just a matter of giving us a call and we'll get you going is it really isn't as complicated, it's just, you have to be prepared in advance for it.

Dave Morgia:

Yeah, it's more like prepare, prepare, prepare, and then execute, you know, you got to be ready for this 45 day window before you you want to actually execute in the window. Because like you say, it's very like chicken or egg catch 22. So you got to know well ahead of time, like what you're gonna do when that clock starts, because otherwise, your clock and their clock is never gonna line up, and it just won't work out. So very, very

Patrick Grimes:

tricky. You know, and we'll help you too. There's a funny trick that we actually got played on us, which we learned a little bit the hard way. But we're closing this month on foreign earned 42 units, and I'm registered as a 506 Reg D, 506, D, sorry, Reg D 506. C, which means I can talk about my investments, right, a lot of the other sponsors have five or six B's, which means we have to kind of be behind closed doors, and we have to have a you know, relationship and where we I can be forward thinking I mean, forward facing, I can talk about it, which is what I prefer. Right. So that's maybe just to preface that. But yeah, so we're did this 440 units in Northern Carolina to property portfolio, amazing deal. Owner, it was off market owner was just as a retail holder, and they kind of bought that as diversification. But their retail focus developers, so they really had no idea really wasn't their thing. And they didn't really focus on which is perfect for us, you know, unrenovated units, that were not meeting even the unrated unrenovated market rents, so we bought it below market, we can bring it up unrenovated to market and then we can renovate the units for even more upside. It's perfect, right? They were, they weren't slumlord. So they kept up the big ticket items, it's just a matter of us doing a rinse and repeat strategy, right? Great property. Got it at a discount. And, you know, did all the due diligence got ready to close right before the end of the year. And when you know it, the guy pulls out a trick that he had in the purchase and sale agreement and says, Hey, I have something right here that says I can delay closing, if the property identified to 1031 into has it has a hiccup. And he did. And so our investors and be like, oh, shoot, we, we we saw that. But you know, it just it's not that often that people actually pull that but it's still it's still an amazing deal, great buy, and we still want to hang on to it, we're still closing on it, but we're actually closing on it on the seventh. And and so it's actually two months. I mean, quite a bit of time delayed on it. But it's still an amazing deal. We did move capital to other deals that were closing, so they could take advantage of the cap to the tax advantages. But so I mean, something to keep in mind though, is you know, if you plan right and you have the right people on your team rootin for you, then we can help you put things like that it's right now, you know, it's a it's a seller's market, right and a lot of places so if you put little little clauses in there, like have the right to delay this and then you won't come to me like oh, shoot, I don't have any recourse. I'm closing on this date. And Baba will love you plan ahead and we have a conversation, you know, maybe you'll have a little more flexibility to make sure it all pans out.

Dave Morgia:

Well and you kind of went to where I was gonna go next is you have to understand when you're 1030 wanting, it may be a seller's market or a buyers market, but it really kind of doesn't matter because you're doing both sides of the coin, one of each. So in this instance, in today's market, you would call it more of a seller's market and you know, lower supply higher demand. But that means on your sale you can be the strict one you can be the one with the terms kind of like you got stuck with on that deal. I'm glad it's working out obviously. But that was the the seller understanding that he can be a little bit firmer on the negotiations on his sale because he needs certain amount of things to go the right way for him to be able to perform. So just keep that in mind. It's not like it's a wrong time in the market to 1031 Because you're literally doing both sides of the coin. So if it's kind of sucks on one side, you can, you can make it a little more in your favor on the other.

Patrick Grimes:

Exactly. And I would say, don't be scared to put those kinds of clauses in the agreements. And, you know, brokers and, and realtors, they'll scare you because they want it to close. They want to get paid. That's what they care about fee bait. At the end of the day, if you're trying to defer 300 or 500,000 in capital gains, then put a clause in there so you can get out. Right? Do it for yourself. Right. If don't do don't close for a favor, do your broker and then lose potential risk losing, you know, a significant amount in taxes. Yeah,

Dave Morgia:

Patrick, I think I think we've covered a good gamut. I would say probably the you know, the top couple things to consider are, you know, prepare, prepare, prepare, and then just make sure you have a good intermediary that understands what you're trying to do in the space understands, you know, what the tick structure is, and has done it before and, and has systems on like, you know, people that might be on the more local level, just kind of doing 1030 ones in their local area, not really focusing on anything outside of that. Is there anything else that you would kind of stress in this timeline? If you're kind of, you know, researching this, you're discovering it for the first time?

Patrick Grimes:

Well, you know, so I know some there are some people out there that say, well, I could never get to know I have like, 10 single families, and I've got to sell them all market rates. And that means I have to exit out of that I have to get them vacant, I have to fix them up, stage them and sell them was like okay, but if you do one at a time, that's not gonna be enough to trade up. Right? But like, well, I got, I gotta get my highest price for it. Well, you're also getting your worst possible scenario, tax burden, right. And if you sell them as a portfolio occupied to another investor, maybe you'll lose 5%. Right, but you'll gain 30% in tax advantages, right? And, and you'll get more flexibility, because you'll work with a more sophisticated buyer that allow you to put the necessary terms in there so that you're safe. And you won't have to worry about the timeline, because they'll still be income producing. So if you need another 30 days, or you know, whatever to close, it's not that you're paying out of pocket because you didn't vacate the property. Right. So that's probably another piece. The other piece is some people have a hard time making that that the million mark or whatever I've had other investors come along, and like I said, either put up some cash to help with expenses or supplement that right, supplement that with cash or retirement account funds or whatever else, so that you're still it's in the mind of the you're still solving a problem. So maybe they're in the syndication for a piece, and they're in a 1031 for a piece and the total amount is enough for me to be like, Okay, I don't have any hair left to pull out. And while if you can't see and so, but my thanks to my wife's COVID cuts, she decided to just get it all off winner, but only here. But since you're solving a problem for me of this piece, this chunk, then yeah, sure, we'll do it. Let's, let's make it. So just talk to your sponsor, we'll be flexible. It's probably the only other piece. But again, it's a lot of information. If you set up a call, we'll look at your specific situation. We'll get the right people on the phone and see if we can help.

Dave Morgia:

Yeah, absolutely. And Patrick, I think I'd like to dig into these five key questions while we still have a little bit of time. So the first one here, if you could only pick one trait that explains your success, what is that trait? And why?

Patrick Grimes:

Hmm, well, I would say probably persistence, I've been told my whole life that I'm very persistent guy and probably I two master's degrees, while working full time with a background in machine design automation and robotics. I took a big hit in the first downturn and still came out fighting in both my in real estate, I took a hit and I came up fighting and kept after it, I'd say the persistence in the space to just even though you know, hit hard, wanted to keep going I had to make it work and pivot and all that stuff. That's probably what I'd say.

Dave Morgia:

Yeah, that's, that's my most popular favorite answer. Getting back up is the thing, you know, long term, long term approach to it, and you'll make it out eventually, so I couldn't agree more. And then what is the most uncharacteristic thing you have done in your business? And why did you do it?

Patrick Grimes:

Well, let's see. So I would probably I'd probably go maybe two different ways with that. Karen uncharacteristic for me would be actually being on this podcast right now. Right? Because I'm a high tech guy. I mean, I've got a lot of high tech friends and I've I've built a higher large reputation and so I have significant investors coming from the high tech space that it used to that are investing in an automation projects. And I've started developing at passive investor videos that my my wife has produced until nine so here I I'm now uncharacteristically getting myself out there getting out of my habit Hall leading up from my grinding wheel and, and meeting people. I'd say that's probably for me, uncharacteristic, but here I am doing it. And we have the number one Amazon number one best seller book out now and I'm a co author on here along with the league and terrorists at Def Leppard. Radio guys, Russell Gray, NFL, NBC players and coaches, actors, entrepreneurs is really cool book lot of great stories, persistence pivots, and game changers. And I'll ship you a signed copy of this, if you go to our website, as instead of an introductory meeting, and as a free welcome gift. We'll ship this to you. And it tells kind of that story.

Dave Morgia:

Awesome. And then can you name a time, Patrick, where you felt like you weren't going to end up successful? And how did you overcome that fear?

Patrick Grimes:

Okay, well, both in the high tech space in real estate, I've kind of had you know, but the biggest one for me was when I was starting out my engineering career, I saved up every penny I had, I go into the detail on my book and I wanted to get into real estate I was in my the owner of the company I was working for as like, engineering is going to be cognitively rewarding, and you're going to have a great time. But it's not going to give you the future that you want or you want for your kids and your family. invest as much as you can as soon as you can in real estate. So I bought some land and a pre development out of state which was perfect track record by the developer and you know, the the market was never gonna go down. And this was 2007 actually invested in 2006. And in 2000 789 10, just crashed and I was able to avoid bankruptcy. But I paid for wild negotiated debt forgiveness, which only meant I had to pay income taxes on that debt forgiveness on the other side alone had been sold like three or four times at that point. And so I hit it hard, I lost a lot. And it took me a while to crawl out of that double down into my high tech, high tech career and then came back out a completely different perspective for lower risk, you know, the tortoise will outpace the hare, high risk adjusted returns and resilient markets that that withstand recessions, low leveraged and long term, low interest rate deals that don't have balloons. And so and that's what I've been doing right and it's been working great.

Dave Morgia:

And then the next one can you name a time where something in your business went perfectly and what did you do to make that a reality?

Patrick Grimes:

Well, I so nothing ever goes perfect Lee. But I tend to resonate I think a little bit with Napoleon when he said you never want to wear that never want to wear that went to plan but never never want to wear you didn't plan thoroughly, I'd say. I'd say that, you know, when I made the transition to multifamily. It was it was rocky took about two and a half years but my wife was there for my very last single family closing and I was no longer going to trade off her my time with her my time with my friends and my time with my hobbies outside of my engineering career. For my investment portfolio, it's time to trade up and work with partners and scale. And after my you know, kind of a lot of deals going wrong, right. A lot of underwriting a lot of traveling a lot of offers a lot of you know, a lot of investor calls. Finally when I got my first deal going it was a little chaotic, right. I was working with partners that have been doing it for 20 years. Still a little chaotic, a lot of moving cards. And then the second deal was on the heels of the first and we I was flying around and you know, chasing that it was on the third deal. I felt like we really got in the groove, it became much more of a rinse and repeat. And things went much more smoothly, right. And I had time not only to get things done to make the deal happen, but try some other things. I even created like a little short movie trailer for that investment. It was kind of a cool, kind of a cool time because I finally felt like, hey, look, we found something that works. Let's just do this. Again and again and again. Right. And that was when I think that that that particular time when things just felt like they went right. And it was that was the path.

Dave Morgia:

Yeah, it goes back to that planning, quote, you said, you can definitely have a plan, but there's going to be hurdles. That doesn't mean you should not try to make as much of the process repeatable as possible. So like you say, the third deal, the processes, were kind of getting a little flushed out better, you can start focusing on other channels of the business because you kind of have the systems to do more of the bulk of the work. So and the last one here, what have you been focusing on lately to improve yourself or your business?

Patrick Grimes:

Yeah, I think a lot of my energy's been kind of one on one. And with both say brokers and with investors, and you know, partners, right. And I think that this year is really that year where I'm building more of a thought leadership platform. I'm, I've just did some public speaking talks, I'm doing some podcasts gonna start my own podcast, I did the Amazon number one best selling book, which I really poured out a lot of my story. I'm getting great feedback. And with the Forbes stuff, and I'm sort of giving back to the space and getting my name out there. And that's sort of what's new for us, we got the right machine. Let's just tell people about it. And they'll be drawn in. And they are.

Dave Morgia:

Yeah, and you're already you know, I'm on the right path with the book and the Forbes articles and being on the Forbes list. So yeah, I'm sure it's 2022 with the focus will yield great results in that regard. And I think you said what this is the third of I'm sure many, many podcasts interviews you'll be doing over the next year. So yeah, looking forward to seeing all that, Patrick, but just wanted to thank you for coming on 1031 Six is not something that everyone's super keyed in on or even aware of, whether you're someone who owns real estate to be able to actually 1031 yourself, or if you're a sponsor, or trying to figure out other ways to get some sophisticated funds into your deal. So just wanted to thank you for that. And before we do sign off, do you want to just maybe give the listener one last way they can reach out to you I know you mentioned the book, but is there any other way they'd be able to contact you today?

Patrick Grimes:

Yeah, so you can give me a call at 209-403-6096? If, if I don't answer my investor relations guy will. My email address is Patrick at invest on Main street.com invest on Main Street all spelled out that calm. And then check us out at invest on Main street.com. Like I said, there's a 1031 guide there. There isn't a passive investor guide and we have our our current deal offerings, we have actually 111 deal currently open for subscriptions.

Dave Morgia:

Awesome. Patrick, thanks so much for the time today.

Patrick Grimes:

Absolutely. Appreciate it. Thanks, Dave.

Thank you for listening to the show. I don't take your time and attention for granted and appreciate that you would spend it with me. If you enjoyed this show or any of my previous shows, it would be a huge help if you would rate and review the show on Apple Podcasts or your favorite podcasting service, or even just share the episode with a friend. And if you'd like help from me or would like to talk about real estate investing further, feel free to visit the show notes for more information, or you can visit davidtravis.com.