Making Money in Multifamily Real Estate Show

157 | The Last 5% Is The Most Important with Josh Cantwell

August 09, 2021 Dave Morgia Season 1
Making Money in Multifamily Real Estate Show
157 | The Last 5% Is The Most Important with Josh Cantwell
Show Notes Transcript Chapter Markers
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:

Hello, listener and welcome to the show. I'm your host, Dave Morgia. And with me today is Josh Cantwell. Josh, welcome to the show.

Josh Cantwell:

Hey, Dave, thanks so much for having me on, man. Appreciate it. Looking forward to this.

Dave Morgia:

Man. I'm really excited for this one, Josh. And just before we get going, here's a little bit more about you for the listener. Josh is the CEO of Freeland ventures and strategic real estate coach. He has completed over 3000 units in operation with over 40 million raised across those deals. And last but not least, Josh is the host of the accelerator real estate investors podcast. Josh, I'm gonna let you take it from there. Would you mind telling us a little bit more about who you are and what you focus on?

Josh Cantwell:

Sure. Yeah. Thanks a lot for having me on. Dave, really appreciate it. The quick bio is, we're focused on multifamily acquisitions and multifamily management, we own 3700 units now. We've raised and deployed about 80 million bucks, we've got about 40 million in play right now. Been in real estate since 2001, I bought my first property ever was a duplex which I still own. In fact, we just fixed it up again. And we're going to we're going to sell it because the market for small duplexes is really good. So I've been in this for 20 years, I was a financial advisor before that, so have a really good sense of the financial markets and what private investors are investing in and outside of real estate. And I'm a pancreatic cancer survivor in 2001, was diagnosed pancreatic cancer at 35 years old, which has just an 8% survival rate. So I'm one of the lucky 8%. And definitely a big part of my journey and stories. So that's where I've been, on a very high level. And, you know, I'm excited to contribute back to your group.

Dave Morgia:

Pancreatic cancer, 8%. I know offhand, but that's one of the, higher court cases as far as a lower percentage of survival. But 8%, I didn't realize it was that low. So props to you for really battled through that. It's probably a testament to your character, I'm sure.

Josh Cantwell:

yeah, appreciate that. And my surgeon who saved my life on the operating table, I didn't have a lot to do with that. I was just laying there. And he's a miracle worker. So yeah, definitely a lot of credit goes to him. Dr. Matthew Walsh, from the Cleveland Clinic is, just a wizard and saved my life. So yeah, big testament to him, really.

Dave Morgia:

No, that's amazing. We could probably do a show on that. We'll probably try to stick the multifamily today. You mentioned the duplex and I'm surprised you so you haven't sold it yet. Usually someone who's in as deep as you are in the business is probably sold that smaller portfolio stuff at this point. So you know, seeing that market, seeing kind of the commercial side of things. What is your kind of take on things and where are you guys really looking at as far as your business plans in the near future here?

Josh Cantwell:

Yeah, great question. So it's definitely evolved over the last five years or so. We got into multifamily and got into large apartments because we were actually a lender first. I have a private equity fund where we were doing a lot of private money lending and hard money lending starting back in 2015. We did a lot of single family residential about 700 deals before that. And we stumbled into apartments because we were lending on them on small balance under 10 million. apartment deals through our fund. And it's interesting, because we've now that we've wound that fund down, we've pivoted all the money into larger multifamily deals. I really feel like right now, literally today, as we're recording this, we're in a unique situation, because we're really in any year where there's two kind of Cornerstone years on either end of 2021. In 2020, it was obviously COVID. And a lot of people said it was pencils down in the multifamily market, especially large apartments, there was about an 81% reduction in the number of trades that happened last year. So a lot of pent up sellers that didn't sell last year are selling Now, the other thing that you're seeing in 2022, is the threat of the Biden administration tax increases the threat of getting rid of the 1031 exchange, the threat of getting rid of the step up in basis, the threat of higher capital gains taxes. And so sellers that would have sold 357 years from now are selling this year, to lock in their gains, especially guys that developed I'm seeing so many people that developed apartments 25/30/40/50 years ago, they have never sold more now selling this year, because they're afraid of the 1031 exchange and the step up in basis going away. So the next six months, basically until the end of this year, I feel, Dave, we're going to have a historic year in multifamily, historic meaning things are the cap rates are going to continue to compress down, prices are going to continue to go up, there's going to be a ton of sellers selling and there's going to be a ton of buyers buying. So I do think it's also ripe for people overpaying because there's going to be so much action happening and so many possible opportunities happening. The newer investor is probably in some cases going to overpay. So my advice to everybody is to make sure that you know exactly what you're underwriting will allow on your deals. What your model is, whatever that model is to know it inside and out. And to do not over buy to really stress your underwriting and still make your offers wherever you're comfortable. Because next year, there's going to still be a lot of deal flow. But a lot of people are going to buy properties this year. And if they buy wrong, they're gonna knock themselves out of the market. I'm in this for the long game Dave So I'm looking to buy as many properties as I can, but at the right price, I don't care if I buy zero properties this year, or I buy 3000 I want to buy them all at the right price. So that's my biggest advice, because I feel like the next six months is going to be an absolute frenzy, especially in the larger apartment deals, units and up 100 units to 700 units, it's going to be absolute bonkers.

Dave Morgia:

And I think I agree with you pretty much the whole way. And I think the interesting catch 22 in this and no pun intended 22 being next year, there's going to be so much of a push like you're saying into 2021 where all these deals moved up, you could say, and that's going to deplete what already is going to be expected for 2022. And with a cap rate compression, I think there's gonna be people are going to think that the deals are going to get I go away towards the end of 2021. And 2022 can be even more competitive, because maybe the cap rates are still compressed. And now you have some deal flow that normally wouldn't have been there because they sold the year before. So I think it's gonna be a crazy 18 months, whatever you want to call it, kind of like you said, so yeah, buying opportunities as there always will be. But typically, in a market like this, you have to definitely make sure you're not paying more per door that you're going to be able to kind cash flow on. So

Josh Cantwell:

Yeah, no doubt. I also think the other thing that everyone needs to recognize that really happened over 10 years ago, which is contributing to the competition today is the JOBS Act, which was signed into law by Barack Obama. Whether you like him or hate him doesn't matter what side of the aisle you're on. The JOBS Act is one of the greatest pieces of financial legislation ever. Because it's allowed for funds. It's allowed for Reg A plus 506 C, all these different funding opportunities and you're seeing more and more money flow into multifamily mobile home parks syndications funds than ever before. Those are dollars that would have gone into the public markets that would have gone into stocks, bonds and mutual funds that are now flowing into private deals through PPMs So those to me are the three historic things that are happening. Last year's COVID next year's tax increases and the JOBS Act which happened to be 10 years ago. Those three things combined, it's making it absolutely amazing now, I do think people need to build in for increased rent rates as well. naturally going to be rent rates go up, especially if you're doing a real value add play, and you're turning units. And you're bringing a remodeled unit to the market, I do think that rent rates are going to go up a lot. And so you've got to build into your marketing might be able to pay more, because the rent rates are going to go up. I do think on most of the deals that I penciled out two, three years ago, where we have rent increases of 100 $150, we're starting to see rental increases of $300 $350, when your rents that we never thought we would get, we're getting. And I do think that's going to happen next year to where remodeled units, upgraded units, especially in the Midwest and the southeast, where there's older apartment stock, the older stuff, if you can buy, you have to pencil in for a little bit larger rent bump than you did a year ago, because of inflation. And because there's lack of supply. So people have more money, they want to spend more money, and they're willing to pay more for rent.

Dave Morgia:

Yeah, and you bring up a good point, too. So earlier on, you mentioned, the new investor may get burned, because they may pay too much. But in the same vein, like you said, if you are intimate with the market you're at and you know that delta rent increases is growing. That is one of the ways where the conservative underwriting that everyone preaches has to go away a little bit to actually win a deal. So while you do have to be careful, you also have to be aggressive in some of these channels. So you mentioned the rent increases, is there any other channels that you guys are trying to stay competitive with in this time to make sure you actually can win something?

Josh Cantwell:

Yeah, I think the biggest place for us look in the capex it's in the actual unit turns and the ability to get labor and material at the best price right now. I think everybody knows that some of the supply chains are backed up, that's obvious. Everybody knows that labor, there's labor shortages, that's also obvious. So the operator that can win that game of sourcing supplies, getting them deliver getting them on time, on budget, sourcing labor, bringing in good guys to do your unit turns is a huge deal. Because a lot of guys are going to buy. And then they're going to be like oh crap, I can't get my supplies, I can't find labor, and they're getting their capex team is getting kicked in the teeth. We're seeing that now from a number of our competitors, we've definitely had our challenges, but we're big enough to work our way through that and have enough experience to work through it. So I do think that the way you win a deal is and this is why we're focused on the industrial Midwest and the South and the southeast, is there's less deals that trade and there's older apartment stock in some of those markets, we look at the Sunbelt, a deal might trade every three years. In the Midwest, the deal is gonna trade every 27 years. So finding those deals in Indianapolis, Pittsburgh, Kentucky, Ohio. To me, those are the true value add deals. It's funny, as you see some deals, Dave and south and they're like, it's a value add deal I'm like, dude, you're bumping rents at 75 to 100 bucks. And the thing is, like brand new, when I look at the pictures, what are you really doing, to me value out as a $10,000 hard unit turn right? That's value add, or adding dog park sealing and striping driveways, new roofs, that's a value add, just you know, slapping on changing something that's already really nice. And it's something that's a little bit nicer. And bumping rents 50 to 75 bucks is not true value it to me, that's just operations. So where we're winning deals is we're really focused in our backyard, we've got deals in outside of Atlanta, we've got about 2000 units, we've got a couple 100 units in Mobile, Alabama, a couple 100 units in Oklahoma, we've got about 700 units in Houston. But we're really focused in our own backyard right now, frankly, in Cleveland, Ohio, Columbus, Ohio, because we feel like those are the deals with significantly older apartment stock, where the way you win that game is by being really good at your unit turns and your capital improvements, because then we're able to bump rents dramatically two to $300. Easy in this a lot of those markets. So we're willing to buy stuff that can be penciling out now at five cap, because the rent bumps are there when you completely remodel the complex. So that's our model right now, again, that might change as things change. But we've been really focused on that for the last two years.

Dave Morgia:

Yeah. And so you enjoy the big Delta on rent increases, putting some money, some smart money into these units. I guess the last kind of the flip question, but what Won't you buy in those Ohio markets right now that kind of scares you away? That pretty much is a hard No. Or if there's one, what is it?

Josh Cantwell:

Yeah, the hard nosed something that you're seeing a lot of this right now is the guys that bought three, four years ago or two years ago that did some sort of value add component. And now they're selling at full retail price, right? They're trying to exit and take advantage of the market. And, it's essentially like buying a house that was just flipped. if you just saw somebody that flipped a single family home, and they're asking top of the market, and you're an investor, would you go buy that single family home and try to flip it again? No, you wouldn't. So it's the Same thing on an apartment complex could be a 200 or 400 unit deal, we're definitely seeing that. We're seeing guys, try to exit when they look at their, look at their purchase, it was just two to four years ago, they did do a significant value add, they definitely did do rent bumps, and now they're trying to exit at a five and a half or a six gap, I get it, that's what I would have done two to four years ago. But I'm not going to pay full retail for that. So you know, even if it's a cash flow play, I think one of the things we're definitely looking at more nowadays is some deals where we can get money in play from our investors, and we can just buy them and hold them without a significant amount of capex or significant capex it needs done on day one, it's something that we may be able to defer and do the cap back six months to 18 months from now. So we're looking at more of that, but we're still not going to be retail.

Dave Morgia:

Yeah, and you mentioned there's a kind of not change in your thesis, but maybe a second channel there, with your investors maybe having an appetite for those types of deals that just cash flow, they want and maybe not as much upside. So where do those conversations originate? And what are really the metrics that really start to make conversation on that avenue?

Josh Cantwell:

Yeah, great question. And I think the change in the idea that changing the thesis comes from refi risk, okay. refi risk, to me is the biggest risk, because we don't know what interest rates and cap rates are going to look like in two to three years from now. And so that becomes a pretty significant unknown. I think everybody would agree that the capital markets, the lending markets, are very favorable still, and they can't stay that way forever. So to me, the challenge how do you take on a certain amount of capital improvements without really stretching your team super thin. And then you have to balance these two trains going down to separate tracks at two different speeds. One is, I've got investors that want to invest, trust us, we've got hundreds of them 10s of millions of dollars. But our capital improvement team can only handle so much. So the origination of the conversation looking for more of a deal, that's more of a cash flow play comes from, hey, we've got investors that want to get money in play, we can buy more deals, but our cap x team can't handle another 200 units or 500 units hard turn, can't do it. So then we got to have the conversation with the investors to say, look, you've got to have to expect that if there's not as significant of a rent bump, and there's not as significant of a capital improvement, there's not as significant of a rate of return. So you've got to be more comfortable buying a deal with maybe a smaller pref maybe instead of a 10% pref it's a six or 7% pref instead of a refinance in three years, we're going to hold on to it a little bit longer and possibly sell it. Because we don't have enough room to refi and return all the equity, we've got to sell to return the equity. So it's a little bit different conversation. And the investors need to know, look, if you can trust me, and you want to get your money in play and get a good return doesn't have to be, a total Grand Slam, you're we're all going to have to adjust together, we're all gonna have to adjust together, you can't expect the same returns that I gave you two, three years ago, because back then we were buying it maybe 40 a door. And now those same deals are trading at 65 or 70. A door, I can't expect to get the same return we got into early before, now we're getting more at the top and when the markets matured. So we got to have a different conversation with the investors, if they're not willing to be realistic, that I'm just not gonna put their money in play.

Dave Morgia:

And I think that's something that I feel at least the investors that I talked to were the investors that I hear about secondhand, and I guess slower to react and maybe you see in kind of other markets. you look there was tons of money injected in the US and in return globally through this pandemic, the market is a lot of people fear getting towards the top again, we had that K-shape, V-shape, whatever you may call it. But if you're looking at a macro level, you can't just then ignore that when you look back into real estate, you have to assume that maybe it's a time where you park safer dollars, and then you have that more secure play. Yeah, there's going to be deals where you can inject some capital and get crazy upside. But those are, like you say, talking about the deals that are going to transact this year, those are going to get eaten up here shortly. Not all of them. There's always going to be deals on a grand scale, it's going to shift towards more of that kind of casual a core place. So it's always interesting to hear how people are handling those conversations as this whole year your pluses progressed, I like to hear the takes from everybody's little investor pool. So

Josh Cantwell:

Yeah, for sure. I think that's what it's all about is listening to those investors. What do they want? What do they risk, what are they comfortable doing? To me that last five or 10% of the capital stack is the most meaningful money. It's the most meaningful conversations. And those are the people that need to be coddled groomed talk to communicated with move the most often. Because it's usually you know, you might have your big debt first, you might have a large investor second or a pref equity investor. Second, those guys and then it's still the smaller guys, the mom and pop guys usually fund your last, they might be very accredited. In some cases we do 506 b non accredited, but those are the people that really make the deal go to me without them, the deal doesn't happen. And so it's about talking with them and keeping them up to date. And a lot of those guys like, Look, Josh trusts you so much. He just do whatever you want with my money. They say that, they really want to know what's going on. At the end of the day, the communication has to be a super high level with them. But I think that's where you win is getting their money in play once. For sure everybody tests me out, they give me 50 100,000 200,000 start, guys that could easily invest a million or more. And if you do it the right way, they're going to come back and refer their friends and see just the communication has to be a super high level right now.

Dave Morgia:

Yeah, and I alluded before the show we're teetering into this territory, this kind of investor relations. You mentioned, basically, the soft commitments, right? Where you have this Yes, but it doesn't actually turn out to be maybe they got a look at the deal further. So just, putting a dollar amount on your own time, and these certain investors may be a mom and pop who write smaller checks. Where do you like to be as far as of covering the different types of investors in your pool? And where do you like to ultimately focus? At least 80% of your time?

Josh Cantwell:

Yeah. I think at the end of the day, look, a couple things, our minimum investment is $100,000. in most of our deals, bought our average accredited investor invest $242,000 with us, our average non accredited investor, that's a 506 b type of play, invest about $76,000. With us, I don't have a preference, because I've got a lot of non accredited investors that over time have invested a half a million to $600,000 with us. And so at the end of the day, to me, every investor is important because I've been saying for years, I've been coaching investors for years, I've invested for years, I've always said Look, when we're recruiting capital, we're not just recruiting capital, we're looking for people that and this is what I used to do residential I used to tell people look, I'm looking for somebody that I could buy a property from, that I could sell a property to, that could invest with us or that could cheerlead for us. Now with multifamily and large apartments, I might not be as much working or looking for people who could sell me a building or I could sell a building to because those trades don't happen as often. But I'm definitely looking for people to invest with us or cheerlead. For us cheerlead is an important category. We've got a lot of people that refer a lot of friends who don't have a lot of money of their own, or I've got very accredited investors very big friend of mine who's got massive best selling books. He's only got a couple $100,000 with us, but he's already sent me 100 potential investors this year. So cheerleading is a big deal like relationships and networking is a big deal. So I think at the end of the day 80/20, you've got to really keep your eye on who are the 20% of your investors that can really invest the most in cheerlead the most. And you've got to nurture those relationships, buy them some schwag, send them some gifts, send them gift cards, pick up the phone, invite them to special webinars, if they're in town, take them to dinner, nurture those relationships and goes super deep. It does not take 100 or 1000 relationships be successful here. you could have 20 or 30 really solid relationships that go super deep and refer a lot. And those can make you a lot of money. So to me, it's about listening. It's about listening to what people are really saying. And then always knowing that whatever they said, there's always another level. There's always something else they probably could do if you just ask,

Dave Morgia:

man, you couldn't have answered that more perfectly. I was hoping to get something close to that and you exceeded my expectations. I think putting or I guess, shoehorning you know a certain metric onto your investors in where we should spend time XYZ and really get too fixated on that type of thing, when really you should be just finding those regular relationships and latching on to those ones like you said, the ones where you're building a relationship, not just a transactional kind of relationship. that's where the real money is made. You can work with those people like you said for decades and just homeruns that's all

Josh Cantwell:

I got a story I got to tell you. It took me 30 seconds when I was a financial advisor in my early 20s I had a fancy car and fancy suit, fancy watch. I got an appointment with a couple I pulled up to their house. It looked like it was an old farmhouse that was about to fall down. There was a barn with a half that you know half the wood was ripped off. The grass looked like it didn't cut in 10 years. There were animals literally running everywhere gravel driveway, I pulled up and I'm like I am wasting my freaking time. care, I walked in and realize the guy had been with GM for 38 years had a huge pension. 401k The wife was a teacher for 35 years, had a huge pension and a 203B they had a hundreds of 1000s of dollars saved. They were very accredited. They owned hundreds of acres of farmland. They were back then I thought, God, these people are loaded. I walked into their house not knowing this, I sat on this old rickety chair that was going to fall down under the weight of my body. the kitchen sink was full of pots and pans and dishes that were dirty that it looked like they've been sitting there for days, if not weeks. And I totally judged these people by their cover. And I made the hugest mistake ever. Thank God. Once I started interviewing them, I course corrected and said Holy shit, these people a a lot of money. Wow, did I make a huge mistake, and they were total sweethearts. They became clients of mine. For a couple years. While I was still financial planning. I carry that lesson with me today over 20 years later. So knowing that man, some of the richest people I've ever met are super not assuming they're super quiet. They don't like to be well known. And then some of the people that look like they're rich, that are loud and obnoxious and flashy. They're not they're just they're wearing every nickel they have is on their body. And so you just got to learn to be comfortable getting to know people and asking questions. So I learned at a young age just to nurture every relationship, see where it goes, don't judge a book by its cover. And then even when you think you have a relationship, there's always another level.

Dave Morgia:

So is that something in your career you've learned to just change your behavior on after that experience? Or is that something you had to put into a system to make sure you really take care of these people and not assume How did it kind of change? You? Obviously it has so I guess yeah, explain a bit more.

Josh Cantwell:

I think that changed me from the very beginning, I got into real estate where I look like look to me, I just wanted relationships, I wanted relationships, more relationships. So and again, it went back to somebody that could buy a house for me and somebody I could sell a house to somebody that can invest cheerlead those four categories. Now, over time, I've definitely had to put that into a system because we have hundreds of investors millions of dollars in play here. So we have a director of operations, who is also responsible for our funding and cap-raise. Her name is Jen. She's also some of my sort of my personal assistant, although that's a very small amount of her workload. And Jen and I sort of tag team, our investor pool, and she's constantly reaching out to them. What we do to systemize it though, Dave, is we put out amazing quarterly updates on all of our investments, whether it's our fund, whether it's our apartments, whether it's a one off deal, even a single family, like we used to do a single family, residential private lender loan, we would give people amazing quarterly updates. And so they would ask us questions throughout the quarter. And we got used to telling people look, I promise you, you're gonna get an amazing update at the end of the quarter, in the middle of the quarter, there's not much that's changed since the last time I gave you an update. So if you could be patient, wait till the end of the quarter, then we took, big pride in making sure that we Wilder people on a quarterly basis with amazing transparency, pictures, video updates, this is what happened good, bad or ugly. This is where what happened. And people got used to saying, Okay, I can wait till the end of the quarter, I'm not going to ask a lot of questions. So that allowed me to scale because I didn't have to take a bunch of questions in the middle of a quarter. But secondly, these people felt like, Wow I'm getting the full story, Josh isn't holding anything back. Everything's transparent. And so between bringing on an assistant to manage our investor portal, sending out quarterly gifts, sending out amazing quarterly updates, setting up times with me on my calendar, like my investors know, I take appointments on Monday and Friday, only I don't meet with people during the week. These are some of the guardrails that we've put into our business that really works for us. And it conditions the investors to know, this is how Josh is going to communicate with me, and they get comfortable with it, and then they get used to it, then they expect it. So that really has helped a lot.

Dave Morgia:

And if it's the same Jen that worked with us to get you on the show, she's amazing. She did a great job. It really mirrors you know, that pretty much Investor Relations, nurturing a new lead type of thing. So you can really tell that whole, finished polished system is there. So really

Josh Cantwell:

awesome. I'll pass it along to her. She'll be happy to hear that.

Dave Morgia:

Absolutely. Yeah, I would love to get into because we're flirting with the kind of mental fortitude and all those kind of, the soft skills that you need to really succeed in business. So if you want to Josh let's get into the five key questions here.

Josh Cantwell:

Sure. You bet.

Dave Morgia:

If you could only pick one trait that explains your success. What is that trait and why?

Josh Cantwell:

I think look, it's I've always operated in the clouds. And what I mean by that is that I was conditioned at a very early age to hire an assistant when I was 22 years old, I hired my first assistant. Her name is Liz, Enslie, I still remember her name. And I was conditioned by my former kind of mentor, that if I was in the financial planning world, if I wasn't in front of a client, or fighting to get in front of a client, I was unemployed. So everything else, all the other muck had to be done by somebody else. And so I still subscribe to that today, if I'm not raising capital, or funding to get in front of a possible investor, or if I'm not looking at a multifamily apartment building, or making an offer on a building, I'm unemployed. And so I've got to operate in the cloud to doing that, and that only, and so we're fanatical about bringing in amazing staff to do everything else. So I can think I can raise money, and I can make offers, that's all I want to do.

Dave Morgia:

highest and best, use your time. I love that.

Josh Cantwell:

Absolutely. That's that has to be at right highest the best use, there's a million things you could do with your time. But what's the highest and best use for me, it's raising money, finding buildings, and then basically operating in the clouds, or putting together the systems or putting together the executive plans, and then disseminating them down to the team that executes. And now I've got to have a lot of mutual respect, Dave, this is big deal, I've got to have a lot of mutual respect for the people that are in the dirt, the people that are doing the stuff, and know that it's usually going to take twice as much money, we this is one of the things we subscribe to, it's gonna think twice as much money and twice as long as we planned for. So every time we make a plan, I'm like, Oh, God, we could turn that building in nine months. And it's only gonna cost us a half a million bucks. That's my initial knee jerk. if I see a building like Then I'm like, don't, it's gonna take us two years and a million dollars, that's what it's actually going to take. So twice as long, right? And twice as much money. If you subscribe to that and underwrite for that it's gonna, it's gonna help you win the long game, right? It also allows me to have a lot of mutual respect for the people doing the stuff in the dirt because buying a building, frankly, is the easy part. It's managing the building, managing the capex, managing leasing, all that stuff. It takes a long time, and you got to have the people that will do that and execute that for you in order for me to operate in the cloud.

Dave Morgia:

Absolutely. teamsport. You can't do it alone. So I haven't heard a single person yet. So maybe I'm wrong, but I doubt it. Yeah, absolutely. And then Josh, what is the most uncharacteristic thing you have done in your business? And why did you do it?

Josh Cantwell:

Oh, probably the most uncharacteristic or unpopular thing that I did was when I was diagnosed with pancreatic cancer. I let my team all go virtual back in 2011. This is way before going virtual was ever popular way before people thought people could work from home. I frankly had to do it out of necessity. I knew that I was going to be out of work between all my testing, preparing. My wife was also eight months pregnant when I was diagnosed, so my son being born, and then all the recovery, I knew I was going to be away from the Office for probably six to nine months. So I just got rid of the office, I let everybody work from home. And we what I found was while I was recovering from surgery at this massive incision in my stomach, I lost 50 pounds. within three weeks, I was able to run my business from my laptop, my computer from my basically master bedroom while I was still recovering still had Staples and stitches in my stomach. And my team started to tell me, you know what, Josh, like we're more effective, we will work longer and harder for you. Because we're working from home. The time that we would spend at the office would be let's say 830 to 530. And then they'd go home and they forget about work. They would say hey, working from home, we would do things at 8/9/10 at night, we would check email at six in the morning, because it's right there when we're working from home. So we created a bunch of systems and guardrails around working from home way before it was ever invoked. And we did it when a lot of people said no way nobody will work from home all your employees will goof around. They're all gonna goof off with your time. They're all going to be milking it. They'll be milking the clock. None of them did. They loved it. And it was very unpopular back then. And it worked out amazing for us.

Dave Morgia:

Yeah, again, find the right team and you're golden, right? That's where you can really leverage everything. So that's awesome. And then Josh, can you name a time where you did not feel like you were going to be successful? And how did you overcome that fear?

Josh Cantwell:

Yeah, it was probably still when I was diagnosed with pancreatic cancer because at that time, frankly, Dave, I was a residential investor, doing a lot of fix and flips a lot of wholesale a lot of transactional business and we were doing millions of dollars a year but was still very transactional. At the same year, same time I had just divided me and my old business partner divided decided to divide up the businesses and buy each other up. So we did that. I'm now the CEO of just my business, no partner. And now I'm ripped away from that business because of cancer, going through all these tests, my son being born the diagnosis, recovery and surgery for me. And we were bleeding cash in a hurry, with no way to make money, because I was literally sitting in my bedroom recovering. And so I remember a couple months before that surgery before being diagnosed, talking to my buddy in the gym, and not really bragging but making some snide remarks about how much money we had in the bank. And then all of a sudden, I remember a year later that we were just hemorrhaging like spending money. It was bleeding, it was going down fast. And so the way that I, think we recovered was this look, when I was in surgery, I realized that it made a big mistake. Number one, I had not a lot of funding, I wasn't really focused on funding, I was focused on transactional work, it was basically a job. And number two, we were doing far too many things. And so when I looked back, I said, look, if we can control the funding, specifically, like I mentioned at the beginning of the show, the final five to 10% of the capital stack, we can control everything. People will give us deals because we can close people will bring us more investors because we can deploy their capital, we'll get better relationships, because we can do bigger deals, we can, we can work with commercial contractors, because we're doing larger deals will be associated with bigger, better people. Everything will up level. Because so we got focused on one thing, I got focused on building an amazing team of a players I got focused on just being fanatical about recruiting capital. 10 years later, I'm actually going to celebrate my 10 year anniversary of my surgery this coming November. So I'm super excited about that. Just fanatical about one thing. And for me, the one thing was I knew funding equal freedom. If I could get the funding all kinds of funding, I can pick and choose the deals I wanted to work on, that everybody else that was focused on this transactional work of finding deals, flipping properties, flipping buildings, apartments, being a realtor being a mortgage broker, they're very transactional, they were always going to be subject to what the market would bring them, and how much how hard they could work. And so that was the one thing was just get super fanatical about funding equals freedom to me, I still subscribe to that. And because we controlled the funding, we were able to rebuild the fund, build these apartments and go from there. And that's what I think everybody should do. If you're a real estate investor. Finding deals is definitely one thing. But finding the final five to 10% of the capital stack is the most important thing to me.

Dave Morgia:

Yeah, that's where a lot of the money can be made. And where a lot of people will bring have to bring out a JV to give up a lot of the deal. And not that there's anything wrong with joint venturing on a deal. But when you have to bring someone in because you can't close your own equity. That's it can be costly. So yeah, I couldn't agree more to be able to do that on your own. It will open up so so many more doors. Yeah, no, no. And then pretty much opposite to that question, can you name a time in your business where something went perfectly? And what did you do to make that a reality?

Josh Cantwell:

The short answer is no.

Dave Morgia:

That's my most popular answer.

Josh Cantwell:

Yeah, nothing ever goes perfect we've definitely had times, look, I think what I've made the best decisions and things felt like they were going right was when I was in lockstep with my wife, and my business partner, when we were in lockstep, because in most of my businesses, I've had a partner, usually a junior partner, I'm usually the CEO, majority owner. But look, I think the biggest risk for any entrepreneur is divorce, it's spouse risk, it's relationship risk. So the only thing that can really knock a CEO or a leader or a founder completely knocked them out of the game, is relationship risk. And so when things just feel like they're going better, I don't think things never go perfect. But when things feel like they're going perfect. is Usually when the communication with my wife is at 100, very good, solid place, we know where we're going. And that's been the tough part, right? Because I was an entrepreneur way before I got married. And so for me to then bring on a quote unquote, business partner in a spouse. It's been probably the hardest thing in my life, because I'm used to operating as the guy that had no one to answer to I could make every decision on my own because I've been an entrepreneur all my life. I've never had a boss, David since I was 20 years old. I've only ate what I caught, I've only ate what I killed. And so that was the toughest thing. So as I get more mature, happily married now for 15 years got three kids like I've still screw up all the time with that and do include my wife. For those conversations, when I do take the extra time to tell her, Hey, this is where I think we should go, what do you think? And then she gives me her feedback and she buys in, then the decisions becomes so much easier. So I think that's a big part of it. I know a lot of guys get into business with their spouses and things go, it's been an up and down roller coaster for me, I will tell you, I've screwed that up 1000 times. But when I do communicate well with my wife, and then you know, any business partner that I have, and the three of us or the four of us are in lockstep, it's easier at home, which makes it easier in business.

Dave Morgia:

No, that's an amazing answer. And it might lead into this last one. But what is something you've been focused on lately to improve yourself your business and sounds like that work life balance is key to you.

Josh Cantwell:

It's huge. I like to coach too. I coach club volleyball, I coach sports, football and basketball, my kids are at that age, where I can still coach them when they get into high school, they're not going to want me around anymore, right? There's those coaches that get paid to coach, I get paid to coach some now, I do it because I love it. So what am I doing right now to improve, I would say, using technology as a weapon. Okay. There's a lot of technology out there. We know, there's all kinds of different software platforms for investors for property management for all different kinds of everything, every kind of plugin for WordPress, you can imagine, but most people have no clue how to really use the software, how to really optimize their business using software. So we tell our team, if it's not in the software, it didn't happen. Okay, because a lot of software's people buy it, we think the software is going to be the magical weapon that fixes every problem, but nobody on their team actually adopts and uses the software. So we have a leadership meeting every month, once a month. And the majority of that meeting, sometimes it can go four to eight hours, is adoption of software, we're training our team, from the partners, to the CFO, to the operations managers, the VPS, all the way down to the people that are in the dirt, of how to continue to upgrade and use the software. Because if it it's the software, I can scale, I can have a better viewpoint of what's going on in the company. And look, we got a $300 million portfolio 3700 units, it's difficult to see all the stuff to see around every corner to see every blind spot if it's not in the software. So I would encourage your audience think onboarding technology is one thing, but adopting it and using it is another if you use technology as a weapon, you can scale. You got to demand that your team uses it that they're in it that they got their nose in it every day. And if you demand it require it your business will flourish.

Dave Morgia:

Yeah, it's if you can't swing a hammer, you can't be a carpenter. So you got to be able to use the tools that are in front of you to do the business you want to do yeah, I couldn't agree more there. And I know you are trying to get out of here because you have some family duties that talking about volleyball. Yeah, I love it. So do you want to let our listeners know how they can reach you today, Josh?

Josh Cantwell:

Yeah, absolutely. Just go to our main website, FreelandVentures.com, they'll find everything there from our books to our Facebook group, YouTube, a bunch of our deals, they can go to FreelandVentures.com/passive there, they can register and see some of our deal flow and how we underwrite deals and some of our free videos. So just check out our main website.

Dave Morgia:

Really appreciate the time today.

Josh Cantwell:

Hey, Dave, thanks for having me on. This is fun.

Dave Morgia:

Thank you for listening. This has been the Making Money in Multifamily Podcast. If you have any questions, comments, or would just like to connect, please feel free to check out the show notes for how you can connect or visit longviewacquisitions.com

Josh's history impression of today's market
Expectation of deal flow in 2021/22 and the JOBS act
Underwriting competitvely
Shying away from your target market
Evolution of investor expectations
Josh's story of judging a book by it's cover
5KQ1 - If you could only pick one trait that explains your success, what is that trait and why?
5KQ2 - What is the most uncharacteristic thing you've done in your business and why did you do it?
5KQ3 - Can you name any time where you felt like you were not going to end up successful? How did you overcome that fear?
5KQ4 - Can you name a time where something in your business went perfectly and what did you do to make that a reality?
5KQ5 - What have you been focusing on lately to improve yourself or your business?