WIN184. Distressed Multifamily Investing and Operational Turnarounds with Joe Rinderknecht

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AJ: All right. Well, today we've got Joe Rinderknecht with us. I believe he said he's out of Idaho, but I know that I saw that he, does some business in Texas. Joe, thank you so much for coming on the show with us. If you would maybe just tell us a little bit about yourself and kind of how you got here today.

Joe R: Yes, sir. Well, thanks, AJ. I sure appreciate it. And, yeah, so I live in Eastern Idaho. Most people may know like Idaho Falls, but I live in a little town called Rexburg.

And I guess to take it back, you know, from the very beginning, if you will, my last name Rinderknecht actually means keeper of the herd. So if anybody's watching this episode, I've got a cowboy hat on, which really, you know, created the foundation for who Joe is and where I am right now in life and in business. So I grew up on my grandpa's cattle ranch, in Northern Utah. So I went from cattle ranching to my dad did construction. So like all through like, middle school, high school, I was the oldest of five siblings.

So I was always going to job sites with him. I grew up, you know, understanding construction from pretty much, you know, putting a foundation in all the way to the finish work, you know, and manually did it myself. And then I would say, you know, my parents, growing up and I graduated high school in 2009. And that's right when kind of that that housing boom or the housing crash happened out the boom. For some, it was a boom for most it was a crash.

Yeah. And I was, I was naive, you know, at that time, I had no idea really what was going on. But as I've grown older, I realized that my parents, you know, they they kind of got hit pretty hard from that housing crash, because my dad was building a couple spec houses that he had to just like give back to the bank, right. And I didn't understand any of any of that I was pretty, I guess, sheltered from it, if you will. But after that happened, and as I was starting going to college, my parents wanted me to go be an x-ray tech.

Because it was a safe, secure job, you know, that you could pretty much always have a job and it would be in demand, Yeah, a little bit

AJ: of over compensation there a little bit.

Joe R: Yeah, yeah. I mean, they were just doing their best to protect me, do their best as parents to, keep me from, I guess, feeling what they were feeling at that time, which I don't blame them at all. But I'd always like my dad and a couple other mentors, like I read Rich Dad Poor Dad growing up and was a part of a couple other small businesses where I started realizing like I had a knack for business or just small business and entrepreneurship, and always wanted to do it. And so there was kind of a time in my life in 2013, I actually did start going to school to be an x-ray tech. But there was, you know, a life changing event that happened where I decided to just go all in on, you know, Joe's dreams instead of like what everybody else wanted me to do.

And that's when I really got into the world of business and finance and real estate. And, and I started going to school, USU in Logan, Utah got a bachelor's in finance, with a minor in entrepreneurship and real estate. And, and really, I bought my first multifamily deal, which was a duplex in 2016. And we house hacked that and, you know, bought a four plex in '17. And, you know, I I've pretty much been doing multifamily for about a decade now.

And, you know, for a handful of years there, I I went and worked for other people who were doing big commercial multifamily because I wanted to learn the business. Right? So I I have a pretty good background in multifamily and sorry, in in property management. Yeah.

AJ: So you went you went to work for a big property manager. Is that what you said?

Joe R: Yeah. Yeah. Out of Utah. Yep. Yeah.

When and I because, like, I wanted to learn the business. And so I got a job working at an 80 unit lie tech property. For any of you that don't know, it's low income housing, Section 42. I didn't know that there was like drugs, crime, cockroaches in Logan, Utah till I went to that property. It opened my eyes to what was really happening out there.

And I had zero prior background in property management, I just knew I wanted to do it. And the owner saw kind of my drive and interest in learning. And so he gave me the job. And the deal was like literally on fire operationally, Property manager hadn't been there for two weeks, super low vacancy or occupancy, really high delinquency. There was a lot of crime there, as I mentioned.

And if anybody's dealt in Section 42, you know, if there's some property managers listening, like you have to recertify tenants every year and any new tenants, you have to certify them. And that's a lot of paper work, right? You can't just do that on the computer. So I cut my teeth in property management and commercial, really, in twenty eighteen, nineteen doing that job. And we got the property restabilized in a matter of eight months and got rid of a lot of crime.

And the story I like to tell is that we partnered with the local strike force, which is kind of a secret branch of the police. Oh, okay. Yeah.

AJ: How'd how'd you find out about how'd you find out about them?

Joe R: I think my regional had dealt with them before.

AJ: Okay.

Joe R: In in really any county or city, most police forces will have a strike force that will go and do drug raids and and whatnot. And so, like, we ended up doing a sting operation on my maintenance guy because he was dealing meth and doing meth in the maintenance room. Oh, boy. I and I built such a good agreement with these guys that, you know, like when you're in property management, or even when you're buying properties, apartments, like you have to train your tenants to how you want them to, you know, act with like, you know, how quickly you want them to pay rent and all that fun stuff and what they're what they are and are not allowed to do. And so there's a lot of drugs, right?

And so these guys would take their drug sniffing dogs, and they would like walk my property at all hours of the day and all hours of the night, just to taunt the tenants and let them know that we were not putting up with, you know, drugs.

AJ: Yeah. It's like setting that expectation early, right, of like, this is, what it's gonna be like. We're not gonna tolerate it. You know Yep. Probably send in a bunch of notices too, I'm assuming.

Joe R: Oh, yeah. There was a lot of direct work with the tenants and getting rid of a lot of very unhappy people. You know, you usually when you're trying to clean up a property like that, you usually see a pretty good dip in occupancy to to get rid of all the crap. But it's usually better for the community and creating a safe, you know, safe, stable community for all the tenants. And but, yeah, I I did that for a little bit.

AJ: I I was just gonna say I've definitely heard of some other guys paying paying, cops, off duty to, like, come sit at the entrance of, you know, the apartment complex

Joe R: Oh, yeah.

AJ: During their off hours or or even, like, I think

Joe R: I'm glad they I I heard I heard that

AJ: heard that one place, like, let the sheriff's office or whatnot, they needed an extra office. So they'd, like, gave them a room as an extra office at the place too.

Joe R: I know one of our properties in Texas, we have a few police officers that live there and there, we made sure to put them right next to kind of the main road.

AJ: Next to the front, where

Joe R: everybody sees it. Yep. Yep. Yep. Gotta love the men in blue men and women.

They're very helpful. So, but yeah, I mean, I from there, yeah, I went and worked for a handful of operators around the country for a couple years, just learning A to Z in the life cycle of a deal from acquisition to disposition. And, you know, right now, my partner and I, we've bought four properties in the last eighteen months, totaling a little over 400 units and 40,000,000 in value. And it's been a really, really fun ride like the light. It's crazy, because there's a lot of people that have not been transacting in the last twelve to twenty four months, and it's been our best years in the business.

AJ: Yeah. That's great. So how did you find your partner? How did you guys kind of link up? I mean, I heard you were working for another operator, but then kind of how how'd that formation form?

And then how do you guys complement each other?

Joe R: Yeah. Great question. So I originally met him in 2020. Both of us were just doing deals in our own backyard. So I was living in Utah.

He was actually living in Utah at that time too. So like we we built a lot of relationships, Montana, Idaho, Utah, but he he bought a 54, actually, it's a 52 unit in Ogden, Utah, that had, like, when he bought it, they the seller put in, 65,000 a unit in renovations. And the property management company managing it at that time was a company I worked for. And they always like maximize, you know, revenue and NOI. Right?

And so I was really interested in the deal. But I was like, hey, there's no way to, you know, maximize it anymore because these guys are running it. But and he's younger than I am, right? I I'm 34. I think he's 31 or 32.

And this was in 2020. So, you know, he was mid to late 20s when he bought it. And I'm just like, how the crap did you buy this? Like, I don't understand, you know, and he still owns it. And it's been like one of the best deals in his portfolio.

So, you know, I did like what anybody would do, right? And I dropped into his DMs and was like, how did you do this? You know, on Instagram. And, we just started talking from there. And, you know, in the last five years, six years now, we've underwritten a lot of deals together.

And we finally bought our first one together in September 2024. And we found out pretty quickly that we complemented each other really well. And so we created Cowboy Capital, which is our company because he also comes from a farm ranch background. And yeah, bought those four deals together and currently under contract to buy another one in Texas. But to answer your second question, like, how do we complement each other?

You know, it's taken like a decade or so to figure out like, I want to have in a partner, you know, somebody that you literally in a way get married to right, you know, from a business perspective. And I've been through a lot of partnerships and ones that haven't gone so great. And so what really what it came down to is, I love the asset management, the construction management, I love capital raising, but I'm very much like the details, like get into the weeds guy. And he's very much like the high level guy. Like he's built some amazing like broker relationships over the last ten years in our markets that we buy in.

And so like, that's where a lot of our deal flow has come from is from his broker relationships, right? And he's really good at the lending insurance. Like the dude watches the markets like a hawk, I'll get on the phone with him and I'll be like, five year in the seven year, they're going down. You know, it's like, we can get a refi really good. And I'm like, Okay, what's what five year are you talking about?

And, and he's like, Yeah, you know, five year, the five year treasury. I'm like, Okay, cool. What's it at? He's like, Oh, it's like 3.6. I'm like, Okay, well, what does that mean for us?

He's just so dialed into debt and rates and the markets that we're in, which I really appreciate about him because you know, I don't want to deal with that stuff. I just want to really focus on operations of our existing portfolio, do new deals. And, you know, that's how we really complement each other. And I think the benefit that we both have to each other too, is that in a way we can both do each other's job if we needed to.

AJ: Yeah. Yeah. There's no backup plan. There's a lot of a lot of people wanna see multiple people in the GP just in case something happens.

Joe R: Yep. I mean, because it can. It absolutely can.

AJ: I mean, life happens. But having another person to pick up the slack if one person's you know, something's happening. So well, that's cool. That that sounds a lot like my brother and I. You know, I, I worked for a contracting company right out of college, just doing, like, heavy industrial contracting.

And, and he's, like, working with brokers, got his real estate license, and all that sort of stuff. So sounds like a very similar story, which is pretty cool. So yeah. I mean, the whole overall market was you know, transactions were down, like, 75% over the last couple years. So tell us a little bit, like, you know, it sounds like your partner is the one that like found the deals, but when you've got some background in property management and asset management, like, you guys doing heavy value ads?

What, what's what do you what do you do into those units that you bought?

Joe R: Yeah, yeah, I'd say we're doing I mean, really each property is a little bit different, right? We have two properties in Missoula 54 unit, we did, I think interior and exterior 15,000 a unit, which is still a fairly light rehab. Now we have another project in Missoula. It's a condo conversion, we're going to be doing like 45,000 a unit on that deal. And then like our deals in Texas are more like exterior and curb appeal heavy than interior unit heavy just because like, we're in San Marcos, which is between San Antonio and Austin, anybody that knows the Texas markets, like occupancy is like down or vacancy is like 15% across a lot of like Texas and worse.

So right now, we're just focused on making the curb appeal really nice, and making it a safe community for our tenants and, you know, chasing occupancies. We're not doing a lot of interior rentals. We're just turning units on those. But

AJ: Have you found anything that's worked for marketing? And, I guess maybe to kind of give some background too. Are you working with a property manager? Are you guys doing the management yourselves?

Joe R: Yeah. We're third party on all of our properties. So on all four of those fields, we have a separate third party. Yeah. And the other thing that's kind of tough too, is just like they all have different property management software, right?

So we use an yardie and AppFolio and Resmin and, you know, so that that is kind of the tough thing. When you're still a little bit smaller, you got to deal with these third parties and then the different reports. Our ultimate goal is to become vertically integrated. Yeah, we're just not there yet. We need more scale in each of these markets that we're in to be able to do it.

But all of our property managers have come highly recommended. And so right now, all of our property managers are doing really well. And, you know, doing their job, and we're doing a ton of like, you know, verifying that things are going as they should. So

AJ: Well, with vacancy at 15%, I mean, do is do you really consider property management doing their job at that point?

Joe R: I mean, I mean, if that's the way the market is, you know, we just gotta do our best to be sexier than the next guy. Right?

AJ: I mean, was there just an abundance of new product that came on the market or like how, I mean, historically, you know, everyone underwrites to 5% lenders put it 5% like, you know, having an extra 10% down there is good. That's that's pretty painful.

Joe R: It is painful. Yeah. And it you're, you're completely right. There was a lot of and that's why we're seeing that vacancy, right? There was a ton of supply.

And that's all coming online right now and being absorbed. Yeah. And so, right, it's taken, because like they're doing, like all your class A stuff is like doing, you know, concessions to the point where, like, these tenants can go live in a Class A deal with more that's highly amenitized, you know, pretty much for the same rate, you know, they could go to a Class C or a Class B property, you know, from like, on a on an annual, or like what they pay in a year. Yeah, right. And so that's where it's like a clot across the Class C and B class stuff.

We're starting to see kind of more vacancy. What we'd say though, is that, like in San Marcos specifically, we're probably like 60 to 70% absorbed. It was just under 2,000 units that delivered in the last two years. And there's only two projects totaling about four seventy units that's online that's being built right now.

AJ: And I think what you're describing there too is happening across the nation. It is. Like this is, something that's like well publicized and well reported on is that there's there was a big boom from '22 to, now essentially of, a bunch of units coming on in a lot of markets. And, you know, we're we're in Portland, Oregon, and so development here is a little bit harder to get done just because of the red tape with everything. So we actually didn't see as many units probably as some other markets.

So, I mean, our vacancy's still running pretty similar, but we're there's, our it's called BDS, building development services. They have, like, nothing in the pipeline. And similar to what you're saying, like, there's one or two projects that are coming online and then, you know, towards the latter half of the year, like there's nothing. And so once all that gets absorbed, I mean, presumably, I mean, I don't know about you guys, but we saw rents actually go down from 24 to 25 and then from 25 to now, they've kind of stayed flat. But, yeah, which I mean, also it hurts the pro form a, but then, you know, there's the opportunity when hopefully all this new product gets absorbed that stuff's gonna shoot up.

Is that kind of like your guys' sentiment?

Joe R: Yeah, yep, I do agree, especially in like the Texas, Idaho, like Utah, like Salt Lake is absolutely getting slammed right now. Yeah, right. And like the vacancy is worse. And the concessions are you know, there's a big 300 unit that was offering three months free rent and a $3,000, you know, gift card. Right?

That's Do you do you guys go seek do you

AJ: guys go secret shop those those places just to understand what what they're doing?

Joe R: Yeah. I mean, we do more from, like, a buying perspective, you know, because a lot of those deals that are given concessions like that, they've been trying to sell, you know, the loan amount or, you know, they're just trying to get occupancy. Right? So there's there's been some, like, class a 2020 vintage newer deals that, you know, we've been looking at that are short sales. Yeah.

Right? And so, yeah, we we

AJ: They they have they have their construction loan, and they can't get the perm loan until they get that occupancy up. Right? And so they're sitting there with a huge financing bill and no income coming in. Like, they're just there was the guys on the tail end of that development, cycle are losing their shorts.

Joe R: Yeah. Yeah. You know, what I, one thing I will say, AJ too, it's like with your market Portland, like, there's probably some fairly decent like buying opportunities and more kind of blue states. Like I know, like Missoula has become pretty liberal.

AJ: Oh, yeah.

Joe R: And their vacancy is 3%. Yeah, 2%. Right? And the rents have like, so we bought this deal in '24. We bought it for 6.8.

We've got a bov from Northmark right now at 12,000,000 in eighteen months, you know, we jump rents almost double. But the benefit that we have is because it's liberal, the amount of supply is extremely low. Like, they they don't let people build. It takes like eighteen to twenty months to even get anything through the city. Yep.

Right? And so that's why we're like, man, if we could buy even more even at a higher price per unit, it's like we know there's no new supply and tenants are capped at, you know, what they're offered.

AJ: Yeah. And if and if there's nothing in the planning, you know, position and there's nothing coming online, like, you know, you've got a two year runway of before something even, like, gets up out of the ground.

Joe R: Yeah. So if you could go in and buy some good deals in some of those blue states, like, yeah, you gotta deal with a landlord tenant laws, but Yeah. You're you're not dealing with the vacancy and delinquency like like we are in Texas, most likely.

AJ: So I heard you mention a couple, you know, deals smaller than, like, 60 units. And kind of an interesting question that, you know, we grapple with is we we buy a lot of stuff that's, like, under 50 units. We typically don't put any on-site managers on those properties. We we manage them from our office. Hopefully, they're close to our office, and we're vertically integrated, so we we do the management ourselves.

But for the third party managers that you guys are using, do you do you I mean, does it make sense to put an on-site manager on on those? Like, how do you how do you like determine that and how do you go about it?

Joe R: Yeah. So like in in Missoula, we have a 54 and a 25. And so, yeah, it does not make sense to have, like, on-site staff, and we don't have an office at either of those locations either. But luckily, luckily with like all of our property managers, like they have a central hub where they're like our property managers, like they have their office in their central hub. Right?

And so they'll work, they have like a small portfolio of properties, right? So we're not working with like the roundhouses and the gray stars of the world, right? We're working with more kind of location specific property managers that have a good little portfolio. So like Missoula, we work with Missoula Property Management, and they run like, I think they run the most multifamily in that market. It's a couple thousand units.

So they have kind of the market share there. But yeah, it's really cool what they have. They kind of call it their beehive because a lot of their properties that they manage are smaller. And so all of the regionals and property managers work out of the office, and they even have a big, like maintenance shop, right, where all their maintenance guys work out of and so they just drive to the properties as needed. And so that's what's really been working for us.

And because it doesn't start making sense to, like, bring payroll onto a property at like 1,000 to 1,200 a unit a year, until like you're 8,100 plus units. Yeah, right. And so that's where it's like, it makes more sense not to go with like, because a roundhouse if we like a roundhouse or like a gray star, know, they'd be three or 4% plus 1,200 plus per unit per year. And I mean, that kills your NOI. So all these other companies we're working with right now are just a flat rate, 7%, 8% rate.

Right? They're still kinda residential with, with a touch of, you know, commercial in there.

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AJ: And sounds like you've got experience in the, like, commercial, you know, that 80 plus unit working for that property management company. Your experience, what do you see as the differences of working with those two different types of property management companies?

Joe R: Yeah, I mean, I think when you go more commercial guys where, like, it's like I was an on-site guy, right? 80 units. I think you have a more intimate, I guess, relationship with the tenants and understand their situations and can I mean, that can be good and bad? Yeah, for sure. Guys too much, then you're not going to be given that rent increase like you should.

And, you know, Sally's kind of been a financial burden and you're not gonna, you know, but but the other thing too is like, it gives you like, for me, the benefit was I see what's happening at the property every single day and I can control what's going on. I can go and knock doors every single day, deliver non sufficient funds or three day payer vacates. And so but I think the main difference that I've seen in the larger commercial property managers versus the residential is the larger commercial guys, they know how to really maximize income, and especially your ancillary income items that your residential guys just don't typically do because it's not their MO. And so it's been a learning curve for a lot of our property managers that are more residential, because both my partner Levi and I come from more of a commercial background with multifamily. And so when we're like, hey, you guys can get to $2,800 or $3,000 a unit a year in other income, And they're like, try 1,200 to $1,500 They're like, How do you even do that?

Most people don't understand this, but there's a dozen to two dozen different ancillary income items that you can push to a tenant. And I think if I'm hearing what people are thinking right now as they listen to this, they're thinking, well, aren't you just nickel and diming tenants at that point? Right? Which is a valid concern. Probably the first thought that I had when they're like, you want me to push, you know, 3,000 a unit a year on top of their already $1,200 rent, Right?

But the way that it was taught to me is like, if you're not a slumlord, right, that's got to be priority number one. If you care about your community, and you are providing services, like, we're not going to charge a fee where we're not providing a service if it doesn't make sense. But the way it was taught to me is when a guy goes and buys a new car, call it a 50,060 thousand dollars car, they're very focused on that car. They don't really think about, okay, well, how much is you know, actually, I'm gonna give a better scenario to my own situation. They go buy a brand new f three fifty diesel.

Right? Yeah. Right? Like that like, I wanna go buy that. It's gonna be a $60,000 truck.

Right? But am I thinking about the diesel cost? You know, that's $150 every single time you fill up that tank. Right? The diesel costs, the insurance, the the repairs on a diesel is double that of a gas truck.

Right? But guess what? What's the value that that truck brings me? I can haul my horses, I can go to rodeos with my kids, I can go hunting. It serves my needs.

Right? And so therefore, I'm willing to pay the diesel and the repairs. Same thing with an apartment complex. If you can provide a safe, clean community where tenants can call it home, and they enjoy being there, they're going to be okay with a mandatory media package, or you're rubbing back 100% of utilities, or some of these other VIP concierge services to just make things more convenient, your valet trash and parking, right? All of those things.

So I hope that helps people that were originally had that thought as they listened to this.

AJ: Yeah, I was I mean, like, I know that

Joe R: That makes a of sense.

AJ: Yeah. Mean, then you've probably got laundry facilities unless laundry is not in there.

Joe R: Yeah. Yeah. Right. So There's one that people like we do what's called a real estate allocation, where we we charge back a small percentage of the property taxes to the tenants. Really?

Yep. Yeah. So the the company that I work for Cornerstone Residential out of Draper on all their properties, real estate allocation, it was a property tax chargeback.

AJ: That's kind of like a triple net lease then.

Joe R: Yeah. A way.

AJ: Taking that same concept and applying it to a residential aspect.

Joe R: And then you have like cam feet too. Right?

AJ: So, you know, the, my understanding and kind of like the reason behind this too, is that way, you know, when it comes to marketing your property, you can offer essentially a lower rent. And then and then with these additional fees.

Joe R: Yep. That is true. You don't have to, like, lead the market. And most of the time we don't lead the market. We're pretty, you know, 5,100 below.

Exactly.

AJ: So how I mean, I'm super familiar with property management and I know some property managers charge those fees, but then keep those fees themselves instead of putting it on the P and L. Is that something you've gotta really watch and negotiate with them? Yeah.

Joe R: Most of that when you're dealing with third party, it's in the fine print.

AJ: Right.

Joe R: It's so annoying. Like, on a deal in one of our deals in Missoula, like, we signed it, closed it, and I'm like, where's our late fees? Now, like, we we keep those because we are the ones that are doing the work to collect those. I'm like, what the freak? But they're our best option.

AJ: I underwrote for those to be in our p and l.

Joe R: Yeah. Yeah. And we did the same thing like a Boise deal. We bought bought 48, and in their pro form a, it had late fees, but then they started keeping them and like in the contract, it said, you know, that they kept late fees is in the fine print, but then we're like, but why was it in the pro form a? So ultimately, like, if you have a good property manager that's willing to negotiate work with you, like, gave us the late fees because they're like, you're right.

It was a part of our original pro form a to you, what you could expect. So we will we will do that for you. Yeah. I guess your property managers that's, like, willing to negotiate and work with you on pricing and whatnot, I'll just I'm fine shouting them out, like up in Boise Commercial Northwest, they've been absolutely amazing. Our other management company that I won't mention in Missoula, they always feel like they try some of their statements, we do our best to be good stewards for our owners, but they're just not used to active operators like Levi and I, like we're in the middle of it all like they have more, you know, smaller properties where their owners are fairly passive, and we're extremely active.

And so like when we ask for certain reports, or ask them to do one thing, know, that's not how we do things, you're just gonna have to deal with it this way.

AJ: Do they do they not do they not just give you a user in the software?

Joe R: Oh, they do. They do. But, like, when we've asked for certain things for them to be flexible on certain things, it's always it's been No. But we've we've had to go and it's kind of funny because, like, we went up and we actually one of our last trips, we went and took the entire office cookies. Nice.

And our our property manager has been a 100 times more willing to do things out of the box for us since

AJ: we did that. Send them send them some whiskey for Christmas.

Joe R: I should.

AJ: So I I we we manage ourselves, so I don't have a of experience in doing out of market stuff. But what's you know, you said that you're more active in the, like, management and, talking with the management company. What what sort of, like, cadence do you kind of meet with them? And, like, what what what do you how do you think that you're maybe more demanding than, you know, a passive investor?

Joe R: Yeah. So we on properties that were stabilizing, it's every single week. Yeah. And if it's, you know, if we're doing a heavier rental, it's twice a week, right? Because like, you got to stay dialed in on operations, making sure that things are getting done, especially when you get into much bigger complexes.

And like these smaller deals, 50 units, like if you said a number right now for you know, Montana or Boise, like I probably have a pretty good idea of who that tenant is and where they're at rent wise, you know, but like when you get into these two three hundred plus units, like, you gotta you you really have to, lean on your your systems and your reports and whatnot to know where things are at.

AJ: So are you just meeting with the property manager of that works for the management company? And then are you and then like, what are you going over? Are you going assuming you're going over vacancy, you're going over delinquency, you're going over, probably potential new tenants that are coming in. Like, tell me, I mean, I know I'm listening some stuff, maybe taking your answer away from you, but, I'm just I'm curious.

Joe R: Yeah. So and it really depends on the deal. Like Boise, we had our call today. We still do a weekly call, but we're a 100% occupied. Nice.

We're we're strategizing and we've renovated 11 units since we bought it in June. Done a bunch of exterior stuff. We're 100% occupied. And like today, we're strategizing and our calls are much quicker than thirty minutes instead of an hour, hour and a half. Yeah, right.

Because we're going over occupancy, we're going over leads, we're going over, okay, where are we at with rent? What have we collected so far? You know, it's a fourth. So all the rents not in yet. And then we're doing a lot of strategizing for the leasing season, you know, because we have in April, we have six units in renewal.

So it's like, hey, where should we push those to see if we can retain them? You know, and we're getting aggressive with our renewal rates, because we're like, hey, it's fine if they move, because we know we can get $100 premium if we renovate. Yeah, so you can

AJ: rent it out and get, know, an extra $100 $200 So you're like, and and or if you give them a high rate and they just take it, you're like, sweet, that helps the NOI.

Joe R: Of the higher occupancy, you know, we're almost right now like a 6% cash on cash return to our investors, you know, since June, which is, it's pretty tough to do that in these markets. But then you go to Texas, And our entire conversation is occupancy. It's it's on marketing. How do we drive more traffic? How are our leads?

You know, why is our conversion ratio from tours to applications lower than it should be? Right? It's really digging into the marketing and the strategies and, and delinquency and because we bought it from an owner, who he bought it for 25,000,000 in '20. Let's see, '23? 25,000,000 October 2023, and we bought it for 21.5 in September.

We had to and he was just he his ship was sinking because he's gone to prison for securities fraud. We won't go into that, but unless you want to. But his ship was sinking, right? Like, they were putting people in just to get occupancy and not, you know, like their, their, rent to income was like 40 plus percent. Right?

It's crazy. And so we had to we've been spending the last six months getting out non payers and getting a lot of it's been a huge cleanup game, right?

AJ: They a given higher a space to anyone with a pulse.

Joe R: Yep. Yeah. Yep. So that's a lot of our weekly conversations with them is just how do we retain who we have that are actually good tenants. So we're doing a lot of like, renewal conversations.

And how do we bring in new blood, you know, to these and all of our renovations, we've almost put in a million dollars into the exterior renovations, since we bought it in September, you know, doing the parking lot, residing half the buildings repainting, doing we turn to pickleball or two tennis courts into pickleball courts and a playground and a dog park, increasing the amenities, and really just cleaning the place up. Right? So kind of like I said before, we're doing that to show tenants that we care about them. And a new strategy, I don't know if you've ever taken on a deal where you kind of get it from a poor previous owner, but we're doing like a debt forgiveness program right now. So it's like any tenants who have like delinquency from prior ownership still that we haven't collected on, as long as they can, like, bring us, like, next month's rent, and give us a five star view, we're gonna forgive all of the debt that they brought into with from the last seller from the last owner, you know, and that really gives people breathing room, right?

Like, we want to also like in our investing, do what I like to call, you know, concept of impact investing. It's like, how are you impacting everybody around you with how you invest, Right? Our tenants are our clients. And so it's like, how can we best serve them? And if you can imagine, like, I've been there myself, just like drowning in debt, you know, and it's like, you just feel like you can never catch up.

Like if you can do some kind of debt forgiveness for these tenants, and because it's like, who knows if we'd ever collect on that debt anyway? Yeah. Right? And and we get to retain a tenant that's actually likes being there and is referring people and is now on time. 100% worth it.

Yeah. You know?

AJ: And working with the management companies, kind of like back to that, you know, I I hear, you know, you you get a project and it usually takes about eighteen months to get it stabilized. Like, during that eighteen months that you're really, you know, getting these bad tenants out or you're doing a bunch of renovations, like, do you do any sort of, like, incentive programs for the third party manager or, like, the specific person that's, like, you're working with?

Joe R: Yeah, sometimes we will do. It's interesting. Some property managers we worked for before don't like, haven't allowed us to. We wanted to do it directly because they're like, we have our own bonus structure in house, like, because they manage a portfolio versus just one property, like on our smaller stuff. But, my partner Levi, he's done this a lot more where if a, we'll do bonuses at the end of the year for these specific regionals or the property managers, if we can hit like a certain income and occupancy, like our focus is more on the NOI.

Right. And so like, we usually do, like, additional bonuses to the the managers if we can hit an NOI, a certain NOI. So, yeah, we love paying our property managers more money Yeah. Especially if if they can get, you know, operations where they need to be. So, yeah, we love we love paying out of our own pockets to to help other people.

AJ: Awesome. Well, we're getting towards the end of our time now, so I'm gonna jump to our last four questions. You ready to move on? Or you got anything else that Let's go. You wanna All right.

First one is what's one piece of advice you would give to your 25 year old self?

Joe R: Yeah, see 25, I'm almost 35. I started doing multifamily when I was 25. So, I mean, if I could give myself any advice at 25, it would be, you know, to because I I've always been, you know, I I call myself a man of vision. Like, I feel like that's what's kept me going through all of the hard times, because it's been, you know, eight, nine years of just a lot of, you know, shit thrown at me to, you know, now eighteen months of like, this is the best my business has ever operated, right? What I would tell my twenty five year old self is to, and anybody else, you know, that's young is to like, build that vision, and go after it unapologetically and and treat the failures as learnings, not as failures.

Right? Because if you treat it as a failure, then you you you're just giving up. But if you treat it as a learning, then you can grow from that and become a better version of yourself.

AJ: Yeah, one, the more mistakes you make when you're younger, cheaper they are typically. And

Joe R: you can be more risky. You can take more risk Yeah. At a younger age too. So that's the other thing. I wish I'd have taken more risk, I think.

AJ: Cool. I like it. Next question is what was your first entrepreneurial endeavor?

Joe R: I built picnic tables. So as I mentioned, my dad was a contractor. He worked at Home Depot and was a general contractor and he found, they created these like picnic table plans. And so he and I, and this was, I was probably a freshman in high school plans and he and I engineered what I feel to be still the best picnic table to date, because you could put 300 men or women on one side of the table and it won't tip over on you.

AJ: Nice.

Joe R: And it's built out of, you know, cedar or redwood. It's the sturdiest picnic table. Like I built a I think like two dozen picnic tables for a campground when I was a sophomore in high school, and I graduated in o nine. So I was like, what, twenty years ago? And those picnic tables still stand today.

AJ: Nice. That's pretty cool. How did you, how did you find your clients then?

Joe R: My investors?

AJ: Well, I mean, no, like the people that were buying the picnic tables.

Joe R: Oh, just a ranch, a ranch that was local. Just I served a lot of local people that we knew from our local community.

AJ: That sounds like a great experience for sure.

Joe R: Just got out there and started talking to people at a young age.

AJ: Nice. Alright. Next question. How has your formal and informal training shaped your journey?

Joe R: I I would say let's see. Formal and informal. You know, most people that get to, I think, the level I'm at usually go through more of a corporate setting, you know, work for the big shops that buy multifamily or, like, I've never had a corporate job outside of like doing the property management gig. And so I, I was a blue collar worker all the way up to 2018. You know, I drove semi from 2015 to 2018.

And to learn property or learned real estate while I was driving. And so I think that my formal informal training is that I've always done my best to be my authentic self and be raw in all my communication and even show like the bad times and not just the glamour of the good times. Right? And so I think that's really who, like how I've become that person to who I am today is just by being authentic. Know, I've never had a sales job, never had a corporate job.

I've just always gone after that vision of who I wanted to become and what goals that I wanted to accomplish. Kind of like you said, about 25 yourself, I went after it unapologetically and figured it out by doing it.

AJ: Yeah. Yeah. That is a that is a good way good way to go about it. And you just kinda keep making a step forward if you can be it small or big, but as long as you keep stepping forward. Yeah.

Definitely get that.

Joe R: And I mentioned one last thing to that just The popped other thing that I did too is I found the people who were doing what I wanted to do and I added value to them and I got to learn by doing. So it's like property management, I got paid like $24 a year at that property. But it's it's totally made me who I am today. And, you know, my love for asset management, construction management, and those operators around the country I worked for for two years. I mean, I probably made less than 50 ks a year, you know, 2019, 2020 and '21, you know, just learning the business.

Yeah, you know, so yeah, I mean,

AJ: You know, some people go to college and you have to pay for the college education or or you can get paid a lower wage at some other place and learn the business that way too. Right? Like, it's it's it, you know, everyone looks at it as like, well, I wasn't getting paid enough. Well, what what did you learn though? That's probably worth a lot more than that 24 ks.

I'm assuming now.

Joe R: Oh, totally.

AJ: Yeah. All right. Last question. What was your biggest mistake and what did you

Joe R: learn? Oh, my biggest mistake. I would say my biggest mistake is the deals that didn't always go the best. I've never lost money. But I would say it was because the there wasn't synergy in the partnership.

And what I would have done differently is like better vetted these specific individuals that I was partnering with. Even though we're already friends, we already knew each other. From a friend perspective, not from a business perspective, I would have vetted them more on a business perspective and made my decision more on a business level than a personal friendship level. Because a person that you do business with is a 100% different person than somebody that could be a friend. Right?

Because you have money on the line, and you have responsibilities, and you have to hold each other to those responsibilities. Right? And if you're worried about hurting each other's feelings, it will ruin, you know, like, one or two people in particular, like, I don't really have a working or friendship relationship with them anymore, you know, because of things that happened. Yeah, you know, so I would bet your friends if you're gonna partner together, like, and they you let them do it to you have been talking to people business with before. And if it's your first time doing business, I guess, you know, you just gotta go learn by doing.

Right? That

AJ: is that is true. Well, that is good advice. Well, Joe, thank you so much for coming on the show. You know, great talks about asset management and property management and kind of like what you guys are doing. Our listeners want to get ahold of you or learn more about you.

Is there a preferred method that you'd like to have them get in contact with you?

Joe R: Yeah, sure. You can hit me up. My email is joe@cowboycapital.us. Also on Instagram, excuse me, and LinkedIn.

AJ: Awesome. Well, thank you again for coming on the show. Had a great time. Appreciate it.

Joe R: Yeah. Thank you, AJ. Appreciate it.

AJ: Thank you for listening to this episode of the Real Estate Professionals Investing Podcast on WIN, your community of investing knowledge for growth. We hope that this episode has increased your knowledge and added value to your path to freedom. If you would, please take a second to rate

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