GI89: From A Duplex to Over 1,300 Apartments with Jason Pero

Jason Pero started his real estate investing career in 2001 with a duplex, left his full-time job in 2012, and currently owns around 1,300 apartments.

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Announcer:
Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host, Charles Carillo, combined decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now here’s your host, Charles Carillo.

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Jason Pero. Jason started his real estate investing career in 2001 with a duplex, left his full-time job in 2012 and currently owns around 1,300 apartments.. So thank you so much for being on Jason.

Jason:
Thanks for having me, Charles. I’m happy to be here. Good to see you.

Charles:
Yes. Good to see you too. We usually we’ve met a number of times in face-to-face at different conferences, which we haven’t been doing for the last a year or so, but

Jason:
I know soon enough, hopefully, hopefully soon enough. So,

Charles:
So what was your background prior to starting to invest in real estate?

Jason:
Well, prior to investing in real estate, I was just a few years out of college. So I graduated college in 1999. You know, met my wife, like very early part of 2000. Well, at the time we were just dating early part of 2000, but we’re just starting out, you know, didn’t have really anything and, and had this goal of, of, you know, getting rich, I guess at the time I was for lack of a better word, just, you know, I didn’t grow up around money. Didn’t have a lot of money, we weren’t poor, but just, I had no idea about about building wealth and and really, you know, real estate seem to you know, fill that need, you know you know, that time read rich dad, poor dad, like, you know, 90, 90% of other people in the business. But, you know, I said, wow, this, this is, this is the vehicle. This is the key. And at the time I just thought, Hey, if I buy a property or two a year for a number of years, I’ll, you know, be able to you know, be able to retire and do that and just that alone. But you know, of course our, our tastes and, and things evolve and, and, you know, wanted to do more and be more. But I worked in, I worked in sales, so I worked a few years, a few years in pharmaceutical sales and then did medical device sales for about 10 years. And that was a huge learning experience just having that corporate life, that pressure. But, but all the money we made, you know, so my wife worked in pharmaceutical sales as well. She was able to leave her day job in 2010, but those early years we just, man, we did it the old fashioned way. We just pummeled like one person’s salary into buying real estate, knew nothing about private money, knew nothing about syndicating, knew nothing about you know, larger properties, just, you know, just kind of grind it out for, for a bunch of years. And, and that’s just how we got our start. You know, we just sacrificed blood, you know, lived way below our means and just try to do everything we could to try and start building this little real estate business.

Charles:
So your first couple investments, your first one was a duplex. What, what, what happened? What went wrong? What went right? How’d you acquire it?

Jason:
Yeah, well, a lot when, right. I mean, it was I mean we bought this duplex for 32 grand and so I closed on it about a week before nine 11. It was like the first like 3,200 bucks. I, you know, it was like a 10% down payment. Just got like a regular bank loan on it. It wasn’t, you know, you can judge by the price. It wasn’t great. It wasn’t a decent area, but you know, it was older and the rents were really low. They were like three, 325 bucks a month. But when in, right away now this is 20 years ago, you know, but we went, went in right away, raise the rents and I think maybe raised them up to like four 75. And over time then, you know, until this past year they’re up at like five 50 and so a lot went, right. It was just a duplex, you know, we we’d have a long-term tenant, they pay their bills, things break, we fix them. But over the years, you know, we did minor upgrades, like replace the windows and replace the roof. And, and then unfortunately this past spring, like right around Memorial day time had a fire in the upstairs. So the upstairs was actually both units were vacant and they think maybe somebody broke in you know, and caused the fire. Wasn’t totally devastating, but I’m like, Oh my gosh, like, do we want to go in and like fix this up? And you know, it’s kind of at this crossroads, but I ended up selling that on land contract to to one of my old property managers. Who’s now a real estate investor. And so I’ll continue to make cashflow on that property for another 20, 15, 20 years. So that was like a great starting point, you know, that the property had, you know, kind of held a special place in our heart. And it was just eventually, you know, you kind of graduated into different properties, but that was the launching pad. Then, you know, we bought it from, you know, from the time we started to invest in real estate and it was looking for mentors, looking for people that, you know, we could buy property from. And this was a sort of a friend of the family. Guy was a retired IRS agent and he was partners with his brother-in-law, who was a school teacher. And they had maybe, you know, 35, 40 units at their peak. And so the next year, you know, they, they, you know, I said, Hey, I’m ready to buy more property. And they said, okay, well, we have a duplex in a four unit and I bought those. And then, then the next year I’m like, Hey, I’m ready to buy another property. And, you know, I bought a seven unit from them and ultimately bought, you know, bought a handful of property from them. But it was all a positive experience, you know, early on. I, you know, we didn’t know any better than just buying properties. And then as we started having children and, and the demands of our day jobs got to be more like allow, we, we’ve got to think about, you know, adding infrastructure and part of the growth pattern was like, you know, we have to grow or we’re just going to implode on ourselves. So I’m not handy. But I used to paint. I used to mow, you know, throw a lawnmower in the back of my car and do that type of thing. It’s a good learning. I mean, I, I, you know, you don’t have to do that. You always have a better, you know, higher and better use of your time, but taught me a lot, lots of ins and outs of like how to change locks on apartments out of do stupid little repairs, not really any good at it, but it was something I learned I didn’t want to do. I don’t want to be that landlord that I’m just tinkering around with my rental properties all day long. So, you know four years in the business, then I got my first real mentor in the, in the business and met this guy and he had a bunch of property that he was willing to sell. He said, Hey, if you come up with a down payment I’ll I’ll owner finance the rest. And from that point on that helped us leapfrog into bigger and better things.

Charles:
Nice. Yeah. That’s awesome. That’s a great, that’s a great place. Yeah. I did the same thing on my self managed for years doing all that you know, rebuilding the toilet kits and changing locks. And I had I’d have bags of different locks from different apartments that I was switching between it and keys going everywhere. It’s funny. Cause my dad did a lot of property. You know, he managed his own properties, but he had a team doing it. I never saw my dad changing locks and he had a system and I was like, but years into it, then I was like, Oh, you know, I can just hire someone to do this landscaping and this kind of stuff. And that made it so much easier. So yeah. But you don’t know that right from the beginning where you’re trying to well, you’re learning the businesses of grit, like you said, but you also don’t know that you’re able to easily just how easy it is to outsource stuff. You know what I mean?

Jason:
Nobody teaches you this stuff like, you know, growing up, but that’s okay. You have to learn it. And the faster you can learn how to get things in a system and, you know, hire people and outsource stuff. You know, if growth is your, is your goal, then, then you can grow, grow easier,

Charles:
Several hundred units now yourself and now you syndicates. So what is your current acquisition criteria?

Jason:
Yeah, I mean, I mean the simplest thing is the deal has to make sense. You know, if I’m going to syndicate, you know, I’m looking for the ability to pay out my investors at, at, at what they would expect or think is a good deal. So maybe 8% cash on cash 15 to 20% IRR. What I look for is that worst case scenario that Hey, day one, the deal can make, it can make money. You know, I don’t want to, I wouldn’t want to be the guy or gal, you know, stuck mid value add when the COVID crisis hits and you’re trying to push rents by three, 400 bucks a month. I love the value add play. I mean, there’s a ton of wealth can be created that way, but I look for a deal that can hold its own day one, but then it has enough upside to, you know to make sense. Um you know, I, I really like, I mean, most of my property honestly, is, is in my backyard, Erie, PA, Northwestern, Pennsylvania. You know, we’re in Cleveland, Ohio now getting ready to close the deal in Texas, have something going on in Florida. But at the end of the day, I like these secondary and tertiary markets because as we’ve all seen recently with COVID, but back when Oh eight great recession happened and even around nine 11, you know, when the, when the economy takes a hit the secondary and tertiary markets aren’t as impacted, you know, they, they may, you know, rents may take a little bit longer to, to increase, but, you know, we’re not seeing like, you know, right now I’d hate to be a landlord in San Francisco or really anywhere in California or somewhere where rent prices are really high. So I just like to look for areas that that will withstand a, an economic downturn. So Cleveland, Ohio where we’re investing as well, you know I love that city, but you know, when there’s a big, you know, the great recession hits, you know, they might be affected, but people still need a place to rent and, and, you know, the rent values aren’t so high that, that people aren’t gonna, aren’t gonna pay those. So I think, you know, your, your multifamily investment should be able to weather any, any kind of storm that comes, that comes to it.

Charles:
Yeah. For sure. Has your criteria or strategy changed during COVID at all? Or are you just more conservative?

Jason:
I would say I was generally like I’m aggressively conservative and I don’t know if that makes any sense, but I mean, I, I try to, like when we underwrite a deal, you know, I want to really look, I’m looking at two sort of models, right? I want to look at a pie in the sky if everything hits and this is true for our syndicated deals and just what we on ourselves. But if everything hits this, thing’s just the grand slam all the way around. But look, conservatively behalf rent, rent increases. Don’t, you know, don’t meet our expectations or, you know, cap ex is higher than we want. Can this deal still makes sense? So we always try to stress test and that’s something I I’ve, I’ve done for a very long time. So the criteria hasn’t changed much, but what has changed is though, you know, for going with agency debt you know, by and large, we’re stuck with these, we have these crazy COVID reserves and what do we do with those, right. Does that become something that we, when those are released back to us, can we implement a nice cap ex plan to, you know, start, you know, maybe increase the value and get some better runs. So, so that has changed a little bit because we know we’re going to have to, you know, have to, the lender is going to hold, you know, several hundred thousand dollars a month in the cases of our money. So what do we do with that, right? Or do we give that back to investors when the funds are released? So, so I guess from the way we analyze it, maybe create a business plan, but at the end of the day, I think for me, the fundamentals have to be the same. I want something that you know, that over, say a eight, 10, 12 year period, we can deliver, you know, 8% plus cash on cash returns, plus, you know you know, really have that 15, 20% IRR,

Charles:
Right. Yeah, for sure. So, but we, we spoke prior about you know, about your, your management company and your 600 plus units that you have yourself. So you self manage that. And are you able to give us an overview of the property management arm of your business, how you run?

Jason:
Sure. And we do sell, we vertically integrated on the syndication stuff as well. So we manage all those units that are in Northwestern, Pennsylvania, and Northeast Ohio. So Cleveland area everything’s in house. Yeah, I mean, I’ll tell you it’s a lot easier to acquire properties than it is to S to find employees or that, that, that was the truth for a lot of years. So I think what really helped us was when we learned how to, to actually build a system and, and, and create, you know, try to really create a company culture that, you know, we’re attracting top talent on all ends, you know, whether it’s office staff or, you know, maintenance staff that’s out in the field. And you know, we, we have a system in terms of how we, how we list the units and how we rent the units and leasing and, and, you know, lease renewals and how we handle maintenance calls. But a lot of it’s been trial and error. A lot of it’s been, you know, figured out through best practices and masterminds and, and seeing what works and what doesn’t work. You know, at the end of the day, I mean, the good and the bad with that is that you know, if you, if you have a property management company and you’re actively involved, somehow some way tenants may be able to find you, you know, unless you just have, I mean, I have a few dozen employees at this point, but inevitably I’m always able to be found somehow. And, and that’s, that’s Okay though. I mean, when, when, when my wife and I started Our business, you know, we wanted you know, we took a lot of pride in it and we still take a lot of pride in the business. So you know, the highest and best use of my time is not talking with tenants about, you know, maintenance issue or a lease renewal concern. But you know, what, if that’s what it takes to, to get the job done, then, you know, you have to make yourself involved. And so that can be, that can be a burden that can be, you know, it’s not necessarily a waste of time, but it’s, it’s, it can be a time drainer. So that’s the downside of it, but I I’ve, you know, and it’s, it’s really trite. I mean, people say it all all the time, but, you know, if you can find people that are better at certain things than you are, you know, find people that are better at saying no to that applicant that shows up with all the money in hand, they’re ready to move in today. We all know that that’s, you know, that that’s probably the wrong person to take that you need to follow your criteria on who rents your apartments, but, you know, when you’re the one handling it and it’s your baby, you know, that apartment complex is your, your baby. You know, you might be more inclined to, to let that person in and, and, and listen to their sob story rather than look at the cold, hard facts and say, why would I want this person? But they don’t, you know, they don’t meet the income requirements. They, you know, they’ve had recent evictions or whatever the case is. So, you know, you want people that can say, no, you want people that can follow your criteria for what you want in terms of you know, tenant base, you know, how you want to respond to maintenance calls, that, that type of thing. So and honestly, like there’s people that are built for that type of thing. And we have, you know, we have an employee who used to be a caseworker. She loves like dealing with drama and setting people straight. Like, she’s like, Oh, you’re not going to pay your rent because of an eviction moratorium, let me teach you why you are going to pay your rent. But that’s like, she loves that. And I don’t, I don’t like those conversations, not in the least. So I think that, you know, there’s a lot of different personality types that are built for different parts of this business. So, and I’m still learning this, but the quicker you can recognize that, Hey, you know what, there’s going to be people better than you at a lot of these things, get out of the way and let them do their job, you know, kind of check your, you know, and it’s all your own ego, you know, it’s all what you have in your head get out of your own way. And boy, you can really go far with, with getting the right people on board.

Charles:
Yeah. And make sure those right. People are proactive so that you’re you’re not having any issues of bottleneck. Right. And turn into something that they shouldn’t have turned into. But so what is your current role in the, in your business and what is your average day look like for you since you’re kind of more sounds like on the acquisition and I guess present side of the property management company. Yeah.

Jason:
Well, I think it’s really, you know like acting as a CEO or president of a company, right. And that, that oftentimes is the vision set or the, you know, the, the, you know, setting the pace, setting the setting, the tone for the company. So so constantly working on the business rather than in the business. And for years there was this transition of like, yeah, I’m doing both, but so, you know, stepping out of the way to let people do their jobs, but I’m measuring metrics, I’m analyzing data and I’m making big decisions and letting everybody else make the little decisions, right. Like it telling the, telling our employees, Hey, this is what we want. This is our agenda. Now you can make those decisions. You can make things happen so we can meet our, meet our goals as a company. So it’s really trying to, trying to set that pace and set that course. So and a lot of that is, is, you know, how, you know, being, being the vision of what, what do we want our company to look like? What do we want our employees and tenants experiences to look like, and then hiring people to make sure that those goals are being met and making sure that everybody’s in alignment with those that’s really hard, right. You know, to have everybody’s swimming in the right, you know, in the same direction, but you know, really am involved in the acquisition side. I mean, I I like that, that’s what we do. You know, but even on that side, having people that maybe are really good at, you know, you know, crossing T’s and dotting I’s and making sure that every, every element of the deal is underwritten properly. So again, like, you know, I I’m really good at with our relationships with our brokers and off market ways of coming across deals are really good at uncovering opportunities, but having people that in place that can that can really scrub that and make sure it’s the right, you know the right fit. But, you know, as we buy, we also were selling. So you know, kind of churning the bottom part of the portfolio, maybe things we’ve owned for 15, 20 years and have a bunch of equity in as time to time to kind of let those properties go, you know, go on to something else. And so we’ve owned our finance a lot. We’ve sold things and just taking the equity and trying to move it in different directions. So actively involved in that, that part of it too, to just kind of get the business to the next step.

Charles:
What is your role in the acquisition? Are you more, do you focus more on say we’re doing syndication syndication deals is your are you sourcing deals? Is that like your thing, are you underwriting deals? Are you raising money? Are you doing a little bit of each or you kind of even more higher level than that? And you might have a couple people that are doing that for you and you’re coming in and you know, yes or no on a deal.

Jason:
Well, so yeah, I mean, the truth is I’m still doing a little bit of everything like that. So even with our syndication business am at the high level of it. And, and I, I sponsor the deal. You know, we, we pledge our balance sheet, you know, and they I, you know, sponsor my own deals and sponsored other other people’s deals as well. But as an example, I mean, a deal comes along. It makes sense. Maybe I want to send a Cate. It I’ll make a phone call or two to, you know, say, Hey, you know, I’d like, you know, this partner or that partner on a deal, let’s, let’s put a team together and, and make the deal, make the deal happen. So I have a good friend of mine in the business. He’s, he’s popped, popped on a couple of our deals. And there was an opportunity that had arisen from a seller that we’ve bought in multiple properties from. And I said to him, I said, look, we’re going to have this opportunity. I’d like to do it 50 50 with you. So let’s just, you know, we, we kind of said, we know we can both do it. I’d say it’s smaller, smaller as relative as if it’s a $4 million deal. It was about a $1.3 million raise. So we both said, you know, Hey, we, we know we can do these alone. Let’s just make sure we have a room for each other in the deal. So we both raised money. We both but honestly it wasn’t that, you know, it wasn’t that big of a lift for us. And we kind of just made a few phone calls each and then had the money committed because it was a smaller nature of it. And just didn’t require a lot of work. I mean, you know, the one thing I think a lot of people forget whether they’re self managing cell phoning, a small portfolio or syndicating is, you know, I didn’t get into this to create an 80 hour a week job for myself. So sometimes it is like that and I’m like, all right, I got it. You know, you gotta pump the brakes a little bit. And and I know you put in the work so you can have the rewards later on, but, you know, I, that, doesn’t it, you know, I didn’t get away from corporate life to keep working 78, 70, 80 hours a week. Sometimes you need to, and you have to do whatever it takes. But as I’ve, as we’ve started to grow in the syndication thing is it’s taken off, you know, I’ve identified things that, you know, I, I can do all of that. I mean, you know, I’ve built my own portfolio by doing all of, all of those things. You mentioned raising capital underwriting deals, obtaining financing, you know, sourcing the deals. But a lot of that takes a lot of work, so happy to give some pieces of that of those duties. Hey, there’s some people that can do that better, more efficiently, or that really enjoy joy, that aspect of it. So for me, it’s been, you know, just, Hey, I can step back a little bit and really, you know, work on more of the higher level stuff, which I’m I still struggle with because I do, like, I do like raising money. I do like sourcing deals. I do like doing all of the, kind of the nitty gritty, but as, as we keep growing, you know, I keep trying, you know, finding ways to give up some of those things that, that that I enjoy doing.

Charles:
Yeah. That’s a great I did that. We started doing that probably 12, 18 months ago, and just start focusing on certain parts of the acquisition syndication. And we’re like, Hey, we’re really, we like, you know, the co asset management, we like raising money. We like doing these things and left it to a couple of our partners for sourcing deals and underwriting it. And they love that analytical part of it. They love making the relationship with the brokers, which is a full-time job as it is to do it correctly. Right. Especially in the market we’re in now. Right. But speaking of that, so we’re in a very competitive market. How has your company changed or implemented any new deal sourcing techniques for finding deals? Like for example, one of my partners they brought on a broker pretty much in-house into their company and to source deals. So it’s like, I’m like, that’s outside of the box. I love that type of stuff. Have you guys done anything like that or changing anything around to offer your personal portfolio on smaller properties or on syndication? Don’t anything like that?

Jason:
Well, so, so for our personal portfolio and what we own w what, what is local to us? Haven’t had to change much, you know, after 20 years, like, I think when you’re starting out in the business, you’ve got to, you’ve got to do a lot of things to set yourself apart when you build a reputation you know, with, with various brokers and in a certain market, you’re going to be on the shortlist of people that get called when an opportunity arises, you might not get called on everything. But even sellers that say, Hey, you know what I’m going to sell. Then, you know, your name can come up. That’s just been years and years of networking and getting to know, you know, most owners in the, in the market. And then, you know, we’ll still cold call, but I mean, we’re, we’re running out of opportunity in our backyard. There’s just not a lot left that that is larger that we would want to acquire. So so as we go into new markets to me, it’s really about having that, that broker relationship and, or being able to source off market deals. The thing with I’ve got a strong relationship with, with a broker T brokerage team that you know, they, they find, I mean, not a lot makes it to market, you know, they, they work with these off-market sellers and, you know, they know what neighborhoods we’re looking at. And they’re like, all right, here’s the opportunity, thumbs up, thumbs down, let us know what you want to do. And, and it’s just become, so I’d say they almost worked for us, or we worked for them. I mean same thing, but they say, and same thing with our lender. I mean, I underwrite a deal, shoot it over to the lender and they have their analyst. I can’t stress enough how important it is to have a good, a good lender. That’s going to almost be a de facto co maybe, you know, you don’t want to maybe replace your CFO on your current team, but, you know, my lender, my broker acts as a, my loan broker acts as a CFO. And so, I mean, he’s, we talk multiple times a week about deals and he’s, he’s kinda the, you know you know, he, he’s always going to ask the tough questions. It might sometimes tell you what you don’t want to hear. But being part of being a sponsor on some folks, other deals I’ve seen, what, what the industry has a as a normal loan broker and a lot of a lot of syndicators and non syndicators, you know, they’re just always going to go for the best rate, you know, and always just gonna just shop it around. And, and it’s very, just transactional, but, you know, I’ve found with, with my guys, I said, you know, they’re getting me the best possible deal there. They’re giving me various options on every opportunity we’re doing. And they ask all the tough questions. And if I’m thinking about the deal in one way, and they’re thinking about the same way I trust, I trust that opinion. Right. And so to me, that’s, that’s just, you know, not ha you know, it’s not to knock having like 50 broker relationships, but it’s better to have like one or two, like really good friends, best friends in the industry that, Hey, this broker is going to call me on every deal. And, you know, if, you know, if he puts something to market it’s because you passed on it already. And so, so to me, it’s just really been trying to become even closer and better friends with those guys that we’ve, that we’ve done multiple deals with you know, private sellers or, or the, or the broker side. And those conversations are just, you know, it’s multiple times a week that we’re talking and trying to best, you know, best strategize on what, what, what the next, what the next deals look like, the best opportunities to, to deploy our money.

Charles:
Yeah. And that’s your competitive advantage. You have access to capital and you have the relationships which, you know, puts you above you know, 90, 95% of other investors in the market, you know, in the markets that you’re looking at. So that’s great. That’s awesome. The other thing too, is having the having a good broker that is underwriting your deals pretty much on another level, which is awesome. Cause you send to them, they’re like, listen, this isn’t even gonna, this isn’t going to pencil. You know what I mean? Or this has to be looked at, and that’s a, that’s awesome. I was told once by a broker that or lender that you know, you, you think of lenders like restaurants where you have, you’re paying for different kinds of services, kind of a thing. And even if they’re not getting the best one or if you’re paying a little higher on that broker’s fee it’s usually really well worth it in the long run because they might be giving you additional service and you’re compensating for their additional experience in their field.

Jason:
Right? Yeah. I mean, it’s, there’s a deal I’m working on, right. I’m not going to say where it’s at, just because I don’t want to, I don’t want to them, I don’t want to out the loan that the loan team, but it’s, it’s painful. And, and had this group use my guy and there’s a reason why they went with, with with this particular loan broker. They already knew the property in the market and everything, but the man it’s, it’s, it’s like you know, it’s, it’s just kinda like minor league compared to, you know and my loan broker, just nice guys, they, but they’re, they’re really just trying to do the best job possible for you as the borrower. And they, they’re, they’re really thinking about these, you know, the things that you’re, you may not be thinking about and making sure that you’re doing a good deal. You know, we, you know, when you’re buying you just, sometimes you tell yourself these lies that you think a deal is going to be fantastic and you try to outsmart what the real data, you know, what, what the metrics are going to be. And, you know, you never want to the truth will always come out, right? So, and sometimes you think you can out smarter outwork the current management or the current business model, but you know what maybe there’s a reason why a property works a certain way, and it’s just good to have those kinds of those conversations where, where there’s a reality check and, and these guys are really stress testing the deal with you and make sure you’re doing the best thing for you and your investors.

Charles:
Yeah. So what do you see for the next 12 to 24 months in multi-family? I guess, I mean, with the economy, with everything that’s happening, we’re already in COVID for 12 months as we’re speaking.

Jason:
Yeah. I mean, you know, I, I’m not, I don’t have a crystal ball. I mean, I, I think that, you know, multi-family, by and large, it’s still going to be a very strong investment and I’ve, I’ve kind of heard both sides of this argument. I’ve heard some people say, Hey, look, there’s going to be a crash. Like all these people have been over, you know, people have been overpaying for multifamily for, for awhile now that that there’s going to be a day of reckoning. But the counter to that point is that look, interest rates are still really low. You know, there’s investors that are chasing yield. That’s, that’s not that great. So there’s some investors that they’re happy with four or 5% cash on cash. And if that’s the case that continue to continue to drive prices in certain markets. But I think that there will be, I mean, you know, whenever there’s an economic pullback, I don’t know if that’s a year from now five years from now you know, that could affect how far you can push rents. Right. It may, may soften it. I mean, people still need places to live, but it’s really like, you know, how does that affect your business plan? Right? So maybe you had a straight value add strategy and you were in the middle of a bridge loan or a hard money loan. And if you haven’t been able to execute your business plan, that might, you know, that that may affect your ability to then get the valuation you were looking for, and you might have some disappointed investors or, you know, or, or you may lose the deal completely. I think by and large, the fundamentals are still very strong. But you know, no, one’s no one really saw COVID coming. And, and then when they came, everybody was panicking thinking that, you know, nobody was going to pay rent and, you know, it’s, I think there’s certain markets that that’s true, but I don’t know. It seems like that seems like multifamily is still, you know, it keeps going up and up. I mean, it’s, it’s trading like crazy. So I just, I honestly don’t know what I do know is I’m just going to continue to adapt to whatever’s out there in the market. I’ll just adapt my strategy to, to meet with what the market has at the time.

Charles:
Yeah. I agree with you. It’s like, I think the value add it’s a great strategy and I think it’s pushed by a lot of gurus as, but it’s something that I believe is not something that can, you can utilize in every part of the market cycle. I mean, you’re not rate people are telling me they’re doing value adds in 2020, and like, I’m not kicking out anyone that’s paying me. Right. Right. I mean like, and you would be very foolish to do that, have a call with your, you know, with your investor base and tell them, but it’s like, I’m not going to kick someone out, try to raise re put $5,000 or 2,500 into a unit and try to get out another 125 bucks. That’s when you push it back and you’re taking care of a lot of your you know, take care of your roof, take care of some mechanicals, take care of stuff like that. But you know, stuff we’re doing now, we’re not penciling and rent increases for, for a year, you know, maybe even more. And it’s like, you know, we’re cleaning, painting and renting.

Jason:
Well, that’s a, that’s a great point. I think, I guess one of the things, the way we underwrite our deals is we’ll usually take two to three years to see if we are anticipating rent increases. Yeah. We’ll, we’ll make sure we’re taking through two to three years to, to realize that, and you know, this portfolio I’m buying right now, it’s, it’s, it’s smaller, it’s a 35 townhomes, but the average rents are around 1200 and they can be pushed easily to 1400. Current owner is, is, you know, came to me, you know, we did our inspections about a week and a half ago. And she said, Hey, you know, I’ve got a couple leases renewing, but I wasn’t going to push the rents too much. You know, it’s up to you, you know, do you want to push the rents? But I’m thinking, okay, you’ve got these $1,200 a month rents and, and you know, what does the market look like right? It may take a little longer the find that right tenant, it’s better to, I mean, you lose one month of one month of rent, you know, there, there goes your increase for the next year. So I think it’s better to play the long game and be smart about keeping a good paying tenant. And you know, rent increases are not always linear. You know, I mean, you could go five years, not increase the rent at one property. And then all of a sudden, you know, you’re going 50 bucks, 50 bucks a month, you know what, when the time’s right. So that’s the only downside sometimes with with these deal. Analyzers is I mean maybe I just, for me, in my own little small sample size in my own little world, it’s never just been, Hey, it’s 5% a year and just goes up and up. I mean, there might be years where you’re like, all right, we’re at the top of the market and we’re, we’re plateauing for fi you know, for another five years. And then all of a sudden you jumped back up you know, and over a 10, 20 year period, you’ve, you’ve gotten the average as you’ve wanted, but it just, you know, kind of comes and goes. Yep,

Charles:
No for sure. And the other thing too, is that when you’re renting now you have someone that’s already paying. Right. But when you’re renting, now you can do all the checks on them. You don’t know that they’re going to be paying month to month, five months, 13. You know what I mean? So what happens if they stop paying after month five? And now you’ve got someone sitting in there for God knows how long now. So that’s another roll, the dice, which I would not want to be doing with my money, or definitely not with investor’s money on the line. But so what do you think are the main factors that To your success, Jason?

Jason:
Well, you know, I think having a having a great partner, you know, my wife and I built a business together. I mean there’s been a few deals where we’ve looked at that, you know, they can bury you, right. They become, whether it’s a money pit or just a, and, you know, I was really excited looking at a deal and we look at each other and she’s like, we’re not buying this. Like, and, and I joke around, you know, that, Hey, she would’ve left me if we did the deal. Now that that’s not true, but it’s, it’s she, she hates when I say that, but it’s like having somebody that can tell you, Hey, you know what this, this may be is, is wrong. You know, not, you know, it doesn’t fit our criteria or it’s going to be, you know it’s just not going to know why are we really want to do this deal? So so that’s been, you know, just having a great wife, who’s also my business partner that that’s been, you know, great for the success. But I think that just always having this, this desire to continue to learn and grow. So we’ve grown from like a, like say a unit count in an income standpoint, but also growing just from like, Hey, how do I keep honing our process? How do we get better? And, and I think that desire to try to always be better than we were the day before. That’s really the biggest, the biggest thing, because you know, this business will knock you down at times. I mean, whether it’s, whether it’s COVID and you got the whole distributions, whether it’s you know, a bunch of tenants trash you’re building and you have to, there goes your cashflow for a year, whatever the case is, there’s going to be a lot of things that can derail you that can, that can kind of kick you in the teeth a little bit. But so I think it’s just keeping up, honestly, it’s as simple as keeping a positive attitude you know, and, and wanting to continue to learn and surrounding yourself with good people, you know, joining masterminds, you know, reading everything you can now you can overdo that because you still have to live your life and still have to, you know, get out there and make things happen. But I just think that, you know, just kind of keeping that positive attitude and taking a long view of things like, Hey, maybe you have a challenge with a property today that that’s not, or even employees that shouldn’t be that shouldn’t define you for the life of your, your investment career. It can be a short-term challenge. I just think really taking that long view of things is, is is crucial because, you know, any business is going to have setbacks and challenges. So it’s how you deal with them, how you respond, that that’s going to make all the difference.

Charles:
Yeah, for sure. So you’re a coach and a speaker, what are common mistakes you see investors make, and then we’ll, we’ll close it up here.

Jason:
I think one of the biggest things, you know, is people sometimes focus on the wrong thing. You know, I see it a lot with, with syndication and multifamily that, you know, you buy the latest coaching package from whatever guru selling them. And then there’s a ton of great content out there. No doubt, but it’s, Hey, I want to buy a thousand units this year. And not that that’s a bad goal. You know, like that, that’s a fine goal, but it’s, it’s like, what do you really want? You know, and I think so I think the biggest mistake is not having clearly defined goals. If you want to be able to say, Hey, I have a thousand units, so I can get onstage and Bragg at, at a, at a live event. That’s great. But if you’re only like a half a percent owner of those thousand units, you know, your cashflow is going to be less than a guy or gal that has just a handful of duplexes. So, so really, I think it’s, you know, if you want freedom cashflow and really define those goals and not really make it about the unit count, I mean, the unit account is a useful metric because if you have a dollar amount tied to each door but I think people can sometimes lose sight of the fact that what they really want in this business. And they might just, you know, they might just mastermind themselves to death. I mean, they could be on calls every day, every week, building connections and networking, but, you know, is that the highest and best use of your time? Is that, is that really what you’re aiming for? And for some people it is it’s, I mean, there’s nothing wrong with it. It’s just what I see. A lot of people kind of go down a different path than what they, then what they really want, you know, which might be freedom. You know, it might be the cashflow and they, and what’s important to you and me from a dollar standpoint is totally different from somebody else. Somebody might say, Hey, I just need a few thousand dollars a month to cashflow. I can live on, you know, I can live very cheaply and somebody might say, Hey, I need tens of thousands, hundreds, whatever it is, every it’s all your income, it’s all relative to what you want and how you’re going to spend it. So,

Charles:
Yeah, the doors is, is is not a it’s, it’s not an accurate way of, I think assessing your success in the business. I think it’s more of figuring out kind of appeal I taught, I taught to be honest, like, you know, set up your 15 year, 10 year, five year goals, and then what do you, and then work that into weekly goals and figure out what you have to do every week. And that’s it. I mean, people are closing deals all around you just like you and you, you, you feel bad about it. If you start at the same place and you feel that you’re behind them, but I mean, you have criteria and you have a strategy. And you know, I always kind of laugh a little bit to myself. If it’s someone that’s a little newer, especially where we are in the market cycle and you and I have gone through 08 and stuff like that. And I was renting apartments and people were negotiating with me and you’re keeping people in them and because you didn’t know what was going to happen. Right. And and it’s something that I mean, we had no problems. I didn’t lose any prop properties, no rentals, no commercial properties during that time. And I don’t know. It’s just it’s, you know, so do people, they don’t know that they don’t have, they’re not seasoned like that. So it’s something to the, have to keep your mind to that. Listen, this is the plan. This is what works. We’ll stay on it. And at some point.

Jason:
Thing I’d add to that. I mean, I is, is just the big mean, I guess a big mistake kind of popped in my mind is just stop comparing yourself to others. Right. So, so everybody starts and they’re like, and they think what they see on Facebook is reality. Oh my gosh, I just, you know, this guy and I started at the same time and he’s got a thousand doors and, and they may not be telling the whole story and they might start, you know, there’s this like jealousy factor or, Hey, I’m not doing enough. And it’s, you know, I mean, sweet, maybe all of us, hopefully, you know, a lot of us know now, I mean, what you see on social media is not always reality. And a lot of times people have something to sell or there’s another agenda and that’s okay. But I think like, you know, comparing yourself to others and where you’re at is going to steal any joy that you have. You know, they say comparison is the thief of joy. And so, so I mean, just be comfortable and happy with where you’re at in your own journey and, and you know, and don’t compare it to the next guys because there’s always going to be somebody, you know, more handsome, fitter, you know, wealthier or whatever it is, you know, nicer car, bigger house, it doesn’t matter. Right. Like it’s about you and your own journey. So that’s just, I guess that’s the biggest thing is just being centered and being comfortable with where you’re at and what’s important to you and your family. Don’t, don’t let it, I mean, maybe use that other stuff as, as motivation if that’s what you want, but don’t use it as comparison. Yeah,

Charles:
Yeah. Progress. I’ve only the happiest I’ve been is when I have progress. So I think it’s Tony Robbins progress equals happiness, and it’s a great thing to live by. And you see where you were a year ago, a month ago, six months ago. And you know, if it’s financial or if it’s something else, I mean, you’ve made progress in, that’s something that you can celebrate, but how can our listeners learn more about you and your businesses?

Jason:
Sure. they can connect with me on Facebook, LinkedIn connect on my website, peril real estate.com. You know, and I’ve got a whole bunch of info in there. But yeah, they can, you can put my email in the show notes too, if you want.

Charles:
Okay. Yeah. I’ve got all your links. I’ll put them in Podcasts and YouTube notes. So thank you so much for being on Jason and looking forward to meeting up with you again, face to face when we can do that.

Jason:
Same, same. I can’t wait to see you again. My friend,

Charles:
Talk to you soon.

Jason:
You too.

Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.

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About Jason Pero

Jason Pero was born and raised in Erie, PA and attended college at nearby Westminster. After college Jason began a sales career in pharmaceutical and medical device sales. He started his real estate investing career in 2001 when he and his wife purchased their first duplex. He built a portfolio of real estate rental properties while working a career as a medical sales representative. He was able to leave his job in 2012 as the portfolio grew to nearly 300 units. Jason balanced the demands of a high-pressure sales environment, a young family, and growing a real estate portfolio. Upon leaving his day job Jason continued to build his real estate holdings and currently owns around 1,300 rental apartments. He is the President of his local landlord Apartment Association and a frequent guest on podcasts and occasional speaker at real estate investing conferences. Jason enjoys coaching and mentoring both seasoned and beginner real estate investors. He continues to grow his real estate business but enjoys spending his free time working out, traveling, relaxing with family and friends, attending sporting events and concerts.

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