Subscribe to Real Estate Investing Unscripted on Apple Podcasts, Google Podcasts, Stitcher, or Spotify.
This episode we speak with Joe Fairless, real estate investor and managing partner of Ashcroft Capital. Joe controls more than $460,000,000 worth of real estate, is the author of several books, and hosts the longest-running daily real estate podcast, Best Real Estate Investing Advice Ever Show. Joe shares best ever advice on how to become successful in real estate investing, and more importantly, successful in life. He shares why he left a lucrative job as the youngest VP of an advertising agency on Wall Street to pursue a life of financial freedom in real estate, plus tips for scaling to where he is today.
Join us at the Best Ever Conference in Denver at the end of February to hear Joe Fairless speak live! Get 10% off your registration using code speaker2019.
"There are certain aspects that lead to success, not only in real estate but also in business in general. One of them is ongoing commitment to personal development."
Matt Rodak:
Welcome, everyone, to this episode of Real Estate Investing Unscripted. I'm your host, Matt Rodak, founder and CEO of Fund That Flip. Today we have a very special guest. He is -- I would go as far to say -- somewhat of a celebrity in the real estate investing world. He hosts the world's longest running daily real estate podcast, where he's interviewed guests like Barbara Corcoran and Tony Hawk. He has authored several books. He runs a really awesome conference out in Denver, which we'll talk about towards the end of the show. He owns more than $400 million dollars’ worth of real estate and overall is a really great guy. I am honored to call him a friend. So, with that, Mr. Joe Fairless, welcome to the show!
Joe Fairless:
Thank you so much, Matt. I'm looking forward to our conversation.
Matt Rodak:
I should add to that list, a new father. Congratulations on the birth of your daughter.
Joe Fairless:
Yes, two and a half months now we've had a daughter. Life has changed, that's for sure.
Matt Rodak:
I can only imagine. We have to put that a the top of the list of your credentials.
Joe Fairless:
There you go. That's right.
Matt Rodak:
You do a lot of different things, as I mentioned in your introduction. Tell us about your real estate business, what you guys do, what you're focused on, how you operate, and give everybody here that's listening a sense of what that looks like.
Joe Fairless:
It's interesting. There are a lot of different platforms and activities I participate in, but it's all focused on one thing: apartment investing. So everything that you mentioned at the beginning of the show when introducing me, and everything that I do on an ongoing basis, is focused on apartment investing. My business that I co-founded with Frank Roessler, who's my business partner, is Ashcroft Capital. That's our company. As you mentioned, we have $470 million dollars’ worth of apartment communities. We partner with high net-worth individuals, and we buy apartment communities that are stabilized so that they are cash flowing on day one, but there are value-add components to them. The other things you mentioned -- the books, I have a podcast, and the conference -- those are all different things I do to help grow the apartment investing business. The conference that I host in Denver with a co-host of mine, the books that I write, and the podcast I do help the apartment investing business. That's the approach that I've taken with our company; there are certain aspects that lead to success, not only in real estate but also in business in general. One of them is ongoing commitment to personal development. With the podcast, I've interviewed over 1,600 people! We were talking about this before we started recording. I've got 1,600 episodes of my podcast.
Matt Rodak:
That's crazy!
Joe Fairless:
Yeah, it is crazy. What that means is -- I was thinking about this the other day -- I've probably interviewed more real estate investors than anyone else in the entire world. I don't know of anyone else who has interviewed more real estate investors than I have in the entire world. So, I've learned some stuff along the way. I interview not just apartment investors; I interview fix-and-flippers, I interview founders of successful companies like yourself, I interview people who do wholesaling, storage, commercial or retail, etc. I have a commitment to learning on an ongoing basis and that has certainly helped me and the company Ashcroft Capitol to grow. Also, through the conference, the relationships that are established and also the learning is helpful. With the books, I have the ability to reinforce those lessons by putting them on paper. Then, when I share it with other people, that helps people learn more about my thought process, which in turn -- if they like the thought process -- they reach out to me. If they're an accredited investor and they're looking to passively invest, that helps grow our network of investors. It's an intentional approach to personal development and business growth that I take with all those things, but everything ladders up to apartment investing.
Matt Rodak:
If you have any doubts that what Joe is talking about works, we can talk next about how you got started and how long you've been at this. What's interesting is that we connected at about the same time we were starting our collective businesses. It's just been incredible to see how much you've done in such a short amount of time. It's probably four or five years now we're going on, but still! $470 million dollars’ worth of real estate, 1,600 episodes recorded, two books published, a conference that is going on the third or fourth year. All of that's happened in a rather short amount of time. That is some people’s lifelong achievements that you packed into four years. Talk to us about what you were doing before this, how you got interested in real estate, how you got started and how that's led to where you're at today.
Joe Fairless:
The way I scaled so quickly is I found the right team members to help me because I had taken an honest assessment of my skill sets -- what I'm good at, what I'm average at, and what I'm not good at -- and then simply bringing on team members to help me or partner with me on things I'm average at or I'm not good at it. Everyone knows that if you're good at something, then check that box. If you're average at it, you're going to fail in this day and age, in business. If you're not good at it, you are certainly going to fail.
What I was doing before: I graduated from college from Texas Tech University and I moved straight from Lubbock, Texas, to New York City. I was a junior project manager at an advertising agency making $30,000 a year. That doesn't go too far in New York City. I was living in East Flatbush, Brooklyn, which at the time was statistically the busiest police precinct in all five boroughs of New York City based on how many crimes are taking place per precinct. I moved from there to East Village and lived there for nine years. I was in New York City for ten years and during that time I climbed the corporate ladder in my advertising career. I went from a junior project manager making $30,000 to the youngest VP of an advertising agency on Wall Street or near Wall Street. I was making around $150,000 there. I had a goal of making $100,000 salary by the time I was 30 years old. I had accomplished that by my 28th or 29th birthday. I realized as I accomplished it, that wasn't really what I was after. I accomplished a monetary goal, but I wasn't fulfilled by what I was doing. I changed from one agency to another. The reason why was because I was going to work on more nonprofit stuff, but that still didn't scratch the itch.
So, I sampled life experiences while I had my full-time job in advertising, and I learned stand-up comedy, which I'm terrible at. I just took a class, but I ended up performing at Gotham Comedy Club, I think it's called. I performed in front of a very friendly audience of coworkers so that made it less nerve wrecking. But I did that. I also was writing the book on how to have a remarkable career. Not my career, but other people’s. So, I was interviewing other people that have remarkable careers. I interviewed the soldier of the year. I interviewed a very high-level executive at Southwest Airlines, and some other people. I was writing a book. I was, learning stand-up comedy. I was also teaching a class on how to buy single family homes in cash flowing markets. I lived in New York City at the time and I was not able to afford anything in New York City, so I bought in Texas where I was from. My friends we're wondering how was I doing that. I was making a couple hundred bucks a month on each of the homes at the time. I started telling them, and then I taught a class on it eventually. What I realized by sampling life experiences is, I realized what I really want to do more of.
I think that was really helpful for me, to test things out while I still had a full time job and sample certain things. As a result, I left my advertising profession and ended up doing real estate full time. When I left I realized -- well, prior to that I thought through this -- I wouldn't be able to pay for or get approved for a mortgage for a single family home. I could, however, partner up with people who want to partner with me on larger deals. When I taught some people in the class what I was doing, I heard, "Hey, this looks good, but if you ever do something larger, let me know. I'd like to partner up." I heard that a couple of times and I realized that I had customers before I had a product. Anytime as a business owner you have customers before you have a product, keep on going. Do that thing assuming that you care about that thing because you're onto something, my friend. So, I had customers before I had a product, and then I simply started looking at deals, and off I went.
Matt Rodak:
One thing led to the next and before you know it, you have a couple hundred million dollars of real estate.
Joe Fairless:
It happened overnight, just like that. No challenges in between whatsoever, haha.
Matt Rodak:
My father-in-law often says "Look at you, Matt. You're a five-year overnight success." That's kind of true. I think you hit on something. Any aspiring entrepreneurs out there, whether you're in real estate or not, I think Joe hit on a good point. A lot of people think about, if I could just build this app or if I could just create this legal structure. Then, you invest all this time, energy, effort, and money into coming up with a product, but without first figuring out if you have customers for that product. Fortunately for you, you had it the other way. You had a product, but it was actually the wrong product. You listened to your customers and said, "Oh, this is what they want. Let's go create that product instead." Really interesting.
Another thing you hit on that I'd like to have you talk about is that you mentioned you've been fortunate to have folks around you to really help you build a business. You've done that intentionally too, it sounds like, by first starting with a personal assessment. Give some pointers on what that look likes. Is that just a reflection? Is it looking at your experience? How did you determine, "Okay, I'm good at these things and I'm going to need help with these other things," and then building the team around those things that someone else can do better than you can.
Joe Fairless:
It's a three step process. First, you've got to know what the successful people in your industry -- or -- you've got to know what is required in order to be successful in your industry. You have to know the skill sets that are required. You have to know the different departments for best-in-class companies that you're going to be competing against. What departments do they have in their company? One, be educated on what are the best-in-class people that I'm competing against doing, what are they really good at, and what are their skill sets, because we've got to have some sort of roadmap to follow. 99% of the stuff any entrepreneur does, has been done in some form or fashion by someone else. Most people aren't sending a rocket to Mars or doing Elon Musk type of stuff. Most people are taking aspects of businesses that have been there and done that before, but putting a unique spin on them based on unique skill sets or differentiating features, for the most part. So, first is to identify what other people are doing that are successful in what you want to do, and list those things out. The second is to see how many of those things do you enjoy doing. For example, for my business there are basically three components to be successful. One is you have to have money to do deals. Two is you have to have the deal, and three is you have to execute successfully on the deal. You do those three things -- you got the money, you got the deal, and you successfully execute -- you're going to grow your business.
When I look at what I enjoy the most, what I thrive in, and what is fun to me is the money part. Having relationships with investors and helping identify the right opportunities, but primarily having those relationships with investors. The way that I've structured the company that I co-founded with my business partner is that he primarily focuses on the execution, and then we have a team that focuses on the acquisition. He oversees the acquisition, and I'm involved in some capacity, but we all focus on what we uniquely enjoy about the business. When we do that, then we're setting everyone up for success. Think about LeBron James. If he were at a position like Center, that's not freeing him up to do what he really needs to do. I am not comparing myself to LeBron James! I'm simply saying, with that example, you want to set up your players and your team in the best way for them to thrive based on their unique skill sets. When you're creating a company, same thing; you want to set up your company so that you can thrive based on your unique skill set. Most likely, your unique skill set ties back to what puts a smile on your face, what you enjoy doing. When you enjoy doing it, you're going to do better and you're going to do it longer. The key here is consistency over a period of time.
So, the first step is to identify what successful companies in your space do. Second is to identify which ones of those characteristics you will focus on. The third and final step is simply bring on team members to focus on the other areas. That's it. That's the one, two, three step process for scaling a company in a relatively short period of time, and doing it in a way that sets everyone up for success, not only in the short term but also the long term. Everyone's doing stuff that they really enjoy doing. Therefore they thrive.
Matt Rodak:
Couldn't agree more, very well said. It sounds super easy when you say it. One of the challenges, perhaps, for people to be aware of is the second bullet point that you have. This was hard for me, letting go. If you're going to bring other people on to do some of this stuff, you also have to empower them to do it, and to do it maybe a different way than you would do it because you hired them for the reason that is exactly that: they should be better than you at doing that thing. Part of it is a little bit of humility and willingness to let go. Otherwise you get stuck. There's no way to go up.
Joe Fairless:
It's strange, I don't have a problem letting go. That's never been an issue for me. I know what I enjoy and what I don't enjoy. The areas that I don't enjoy, I have no problem bringing on someone to focus on that area that they enjoy, that I don't enjoy. I have zero problem with that. Now, I have to have a level of competency in that area in order to do some checks and balances with them to make sure that it's being done effectively, but they are going to be much better at it than I am. I just don't have that chip in me, for better or worse. That's just not something in my personality where I have a problem. Consequently, I have no tips for anyone who does have a problem letting go because it's just not my nature.
Matt Rodak:
I have a little bit of a letting go problem, and the tip that I can share is do it once, actually fully let go, and feel how good it feels. You'll want to keep doing it. It frees you up so much to actually work on the things you like to work on, and ultimately you end up getting a better result because of it. Thank you for sharing that and some really cool stuff on how you've grown your business. It's been a pleasure on this end watching it grow. Another thing that I'd love to have you talk about -- and pull us back into more specifically real estate -- you mentioned that even when you were getting started buying single family houses there is this idea of buying for cash flow. I know it's something that you really preach and believe in, in terms of your personal investments, but also a lot of the messaging and coaching that you provide out into the real estate investing universe. Talk to us about why cash flow has been the big thing that you guys have focused on, and why you think it's the right thing to focus on as opposed to cap rate or any other kind of valuation metric that someone could try to prescribe towards a new acquisition.
Joe Fairless:
The number one question I get right now is, "What are you doing to prepare for the market correction?". The number one answer I give is, "We buy cash flowing properties from day one." They're all value-add properties, so when the correction takes place -- which I believe it will, I just don't know when -- we'll simply hold on to that property and we'll cash flow. We won't cash flow as much as we'd like to cash flow because we're going to scale back or even discontinue the renovations on the property. We'll stop or slow down the value-add process, but we bought a cash flowing property from day one. In my opinion it's a more conservative approach than buying a property that's completely distressed and it doesn't cash flow. You turn it around and you make a good chunk of money, but you could also lose a good chunk of money because what if the market turns? I recognize who I'm speaking to right now, and I recognize the fix and flip model so I'm treading lightly here, Matt. But just in general, I believe buying cash flowing properties is a safer investment than buying a property that is distressed and not cash flowing or making any money at all. I've interviewed approximately 1,600 investors and people got burned in 2008. One of the things that happened was, they didn't have a cash flowing property and that's a problem whenever you lose your job in the market crash. Now, you don't have income to pay that property or follow through on the renovations.
Matt Rodak:
Got it, so for you it's a risk return equation that you've measured and said, "Maybe we're not on an IRR basis going to capture the types of returns as someone that's investing more speculatively or taking bigger swings. A lot of baseball games have been won on singles and doubles.” Is that the approach?
Joe Fairless:
Right, yep.
Matt Rodak:
Gotcha. So, is there a threshold in terms of occupancy or amount of free cash flow that you guys are trying to target on the way in? Is it like, "We just need to be cash flowing enough to cover our expenses and maybe modeled out for a higher vacancy rate or a reduction in rents"? Or, are you really looking for, "If we did nothing to this thing, it's going to be okay. We see some opportunity on the edges to get a couple percentage points here and there on rents." Where on that spectrum are you?
Joe Fairless:
It's simply got to be cash flow positive when we buy it. Normally if we're buying it at a five cap, not factoring in debt, there's your return. As long as it's a cash flowing property on day one and there's value add components to it. Obviously we have other variables that we consider, but from a cash flow standpoint, that's what we look at.
Matt Rodak:
Got it, keeping it simple. I like to say that real estate investing really isn't rocket science. The only thing it really requires is discipline. You got to have a thesis, whatever that thesis is. It could be fixing and flipping, it could be cash flow, apartment investing. You have to have a thesis, and you have to stick to it. Assuming you don't get additional data not to believe in that thesis.
Joe Fairless:
Yes, agreed.
Matt Rodak:
Let's wrap it up here with the theme of the show, which is Real Estate Investing Unscripted. As you know -- and you're a planner -- things happen no matter how well you model things out or how well you think you're buying it. Almost inevitably, something is going to come up at some point if you're in the game long enough that is going to be like, "Whoa! That was a gotcha." Can you share with us one of those experiences that you've had, or maybe one of your students or something else that you've seen that the listeners can learn from?
Joe Fairless:
Yeah, the property in Houston. I owned it for 12 months and in those 12 months we had two hurricanes and one fire! Everyone was safe, fortunately, with all of the above and the fire. I mean, it's so cliché, but a resident left a candle burning and it burned the building down.
Matt Rodak:
It burned the whole building down?
Joe Fairless:
I wish it was a better story. The whole building, yeah, eight units. The property was 155 units and one building had eight units. Gone. During that same 12 month period we had two hurricanes. We did not prepare for those three things to take place within 12 months of ownership. The insurance covered the fire, so pretty much a neutral event from a cash flow and monetary standpoint. The hurricanes, we were fortunate that we did not get the brunt of the hurricanes. I forget the first one. The second one was hurricane Harvey, and the water came up to the doorsteps but did not really get into it. We didn't even need to file an insurance claim, but Houston was wrecked. Getting workers to work on our property while we were in the renovation process - it was just not happening.
Joe Fairless:
One thing I learned from that, I call it an S.O.S. Process for when unexpected things take place. The first "S" is Safety. Letting investors know, and people on the ground, that everyone is safe, and then also their money. "Okay, a hurricane has taken place. As a reminder, we have insurance to cover this." Or, "A fire just happened. As a reminder, we have insurance to cover this." So, safety for people and then safety for their money. The second one is keeping them up to date. So the "O" in S.O.S. is Ongoing Communication. Being proactive about it. I only had one or two investors email me about it because I was emailing them and I was being proactive and on top of it. The third "S" is a Summary. So, summarizing once everything's done. Summarizing what took place, and what the end result was for both safety of people and also safety of their investment. That was something I created as a result of going through this, and that was certainly something that was unexpected.
Matt Rodak:
It's definitely a great example of something you could never really plan for. It's interesting, you mentioned how hard it is to get workers onsite -- and I don't know if any of the people you've interviewed have come up with this idea -- but I used to work in the insurance business and we were very big on loss prevention. One of the things that we encourage our larger commercial insurance to do was to pre-negotiate contracts with contractors in the event of a natural disaster so that you could actually put... Especially the emergency crews. If you have a tree down, the guy is going to come out and do your tree before the next guy, because you've paid him some premium or some advanced down payment to make sure that they're on retainer. Now, a contract that is only as good as their delivery on it, but something that's maybe worth looking at.
Joe Fairless:
Yeah, that's interesting.
Matt Rodak:
It's likely that one of these things comes through again in the next 10 years.
Joe Fairless:
Yeah, we have one Houston property. We probably will be selling that in the next couple of years, but if I buy another Houston property that's something to consider for sure.
Matt Rodak:
I appreciate you sharing that. Last thing, let's talk a little bit about your conference. It's coming up here at the end of February. What is it? Who shows up to it? What can people expect to learn there if they want to check it out? Give us a little rundown on the Best Ever Conference.
Joe Fairless:
BestEverConference.com is where you can learn more about it. It's heavily focused on commercial real estate and gaining private investors. If you are focused on investing in deals passively and learning more about different asset classes, this is for you. If you're focused on bringing more investor capital into your deals, this is for you. If you're an operator of any type of commercial property or want to be, this is for you. We don't focus as much on the residential, but we do have investors who do residential and are looking to scale their residential business. So, if you've done multiple deals, then this is for you as well. For example, when I was at the conference last year presenting, I asked everyone before I started talking, "Who's done at least two deals?" and 99% of the people had done at least two deals. Everyone there is looking to scale and we don't have any beginning investors who attend. If you're looking to scale your flipping business, then this is a good conference because there's lots of ways to do that, or we touch on that. But, if you're looking to get started in real estate then this wouldn't be the best conference for you because this is taking your business to the next level focused.
Matt Rodak:
It's a master’s class, if you want to think about it. I believe it's February 22nd and 23rd out in Denver. We will be there, Fund That Flip. We went last year and I can say it was probably one of, if not the best conferences that we attended last year. And we attend a lot of conferences, so I mean that! Check it out if you are investing in real estate and focused more on commercial. We've got a lot of folks out there that are listening that are also accredited investors that participate on the platform. So, if you're looking for other sponsors like Joe to potentially allocate some capital to, there will be a large room full of high quality folks out there. Check it out, BestEverConference.com. I'm looking forward to it. It's always a fun time.
Joe Fairless:
Yeah, we'll be hanging out shortly. Yeah, looking forward to it as well.
Matt Rodak:
Cool. Let's get you out of here. Really appreciate your time, Joe. A couple of other plugs: you run a podcast that is called the... you do it because I'm going to screw it up.
Joe Fairless:
It's a mouthful. "Best Real Estate Investing Advice Ever". If you want to learn apartment syndication, I've got a book on Amazon. You just search "Joe Fairless" and it's called “Best Ever Apartment Syndication Book”. There's no ambiguity on what the book is focused on!
Matt Rodak:
I like that. I mean, we do the same thing with our name!
Joe Fairless:
Right. “Fund That Flip”.
Matt Rodak:
If you can't remember that, JoeFairless.com works too. You've got links out there on that, so check out JoeFairless.com. I really appreciate your time, Joe. I think the three or four things that I pulled out of here -- if I could summarize before we cut you loose -- it all starts with a commitment to learning. I think you've taken that to the extreme, and it's paid off for you. There's definitely an ROI out there around continuing to improve yourself. I really liked your idea of sampling different life experiences. I'm involved with a group here called The Founder Institute that allows folks to -- and I went through it actually to... that's actually how we met. We were introduced through someone that I met at Founders Institute. I think a lot of people get it wrong when they want to start a business and they just quit their day job without first experiencing what it's like to either run a business or do something different. So, use your time that you have out there to watch less Netflix and experiment with stand-up comedy if that's something you're interested in. The last one that I really liked is, to scale it really starts with a personal assessment. I think of it as a needs assessment. What do we actually need to be successful, and what do I like doing? Focus on those, and then bring other people in that like doing all of the other stuff to help grow your business. So those were my three takeaways from the chat. I think this was really good and anything that you'd like to pile on there?
Joe Fairless:
All good!
Matt Rodak:
Well, thanks again, Joe. I really, appreciate you joining us and thank you all out there listening to this episode of Real Estate Investing Unscripted. Be sure to check out our blog at FundThatFlip.com. If you have any funding needs, check us out there as well. Otherwise, I look forward to next time. Your host, Matt Rodak, signing off.
