Aileen: [00:00:00] thank you everyone for joining today’s episode of the, How Did They Do It? Real estate podcast. We are your hosts, Seyla and Aileen, and today’s guest is the one and only Joe Fairless. Most of you already heard about Joe, but Joe controls over $900 million of real estate with a specific focus on value-add multifamily acquisitions.

He is the co founder of Ashcroft capital and has personally raised over a hundred million dollars from private investors for real estate investments. Prior to that, he was the youngest vice president at an award winning advertising agency in New York city. Joe is also the host of the popular podcast: Best Real Estate Investing Advice Ever show, which is the world’s longest running daily real estate podcast. Past interview guests include Barbara Corcoran and Robert Kiyosaki.

Joe is also the author of 3 popular real estate books, including Best Real Estate Investing Advice Ever Volumes I and II, and BEST EVER Apartment Syndication Book.  Today, we will learn about how Joe first got started in real estate and how he built his massive real estate empire, please. Welcome Joe Fairless. How are you doing today, Joe?

Joe: [00:01:05] Oh, I’m wonderful. And what a thorough background. Thank you. Thank you for sharing that and looking forward to our conversation.

Aileen: [00:01:13] Thank you. Thank you for joining us as our guest today. Could you walk us through a little bit more about your background and how did you first get started with real estate investing?

Joe: [00:01:22] I first got started by purchasing a single family home in Duncanville, which is South of Dallas. And I was in New York city at the time.

I’m from, from Fort worth Texas, but I moved from Texas to New York city after I graduated college and I didn’t have any money. I actually had, I had less than money. I had negative money because I had student loans. I had about 20,000 thousand or so dollars worth of student loans after graduating college.

And I made a salary of $30,000 whenever I graduated in New York city, which doesn’t, it doesn’t go very far for sure. Living expenses and also paying down student loan debt. But I. Worked hard and climb the corporate ladder relatively quickly, being a youngest vice president of a New York city advertising agency.

And along the way about, Oh, was it five, about four years after I graduated college, I, they ended up buying a single family, only home in Texas, even though I was living in New York city. And it was for $76,000. I bought it because. I had put money into a CD, put a thousand dollars into a CD previously, and they held it hostage for 12 long months.

And then I got about, I think like $19 or $12 and profit after 12 months of them holding my thousand dollars hostage. And then I got taxed on that money, those profits. And I was like, there’s. Gotta be a better way. I started looking at other investing and I read investing for dummies and I attended conferences or seminars, I should say, rich dad, poor dad seminars.

And I learned, and I decided to go with real estate. So my first house was, I bought it where I never visited the home. I had, some, my real estate agent do a video of the house and I just went ahead and did it, and I actually sold that house.   Oh, this past October, for a while I made like $120,000 on it.

I forget what the final sales price was, but you know, it, I held it from 2009 to, October of 2019.  So 10 years, wow. 10 years I held it and, and making, about $120-125,000 on it.

Seyla: [00:04:09] Thank you for sharing that information. When did you discover multi family investing?

Joe: [00:04:15] The reason why I sold the house is because on paper, I made money because all the, all the expenses were less than the income coming in every month. However, when someone would move out, they would be moving, make ready costs of, you know, $5,000 or so on average.

And that’s just a sneaky expense. A lot of people don’t factor in is the make ready costs to get the home ready to have another tenant. Yeah. And if you factor that in, or when I factored it in for my properties, they were basically breaking even, it wasn’t making much money, if any.

So I realized that there had to be a better way. There had to be a way to scale my investing so that I could have many people under one roof. And if I did have a vacancy and it did cost $5,000 or $3,000, or even a thousand dollars that would not kill the financial model for my investments. So that’s what I did.

I, I looked at apartments because of that reason. And as a result of looking at apartments, you know, if you have a 10 unit property and you have one person move out, you’re still at 90% occupancy and if two people move out, you better start pacing, paying really close attention to that property.  Cause you’re at 80%.  But still you, you should be all right. Yeah. 80% generally speaking with a 10 unit property, not with larger unit.  But when you have a single family home, someone moves out, you know, 0% occupancy and that’s Armageddon.

 Seyla: [00:06:13] when you were a VP of a marketing company, did you start investing in multifamily altogether while doing the W2 job?

Joe: [00:06:23] I did not. I was focusing on single family homes. When I had my w2 job. I was also teaching a class in New York city about how to invest out of state where the numbers made sense.

And I was, I was teaching my system for how to do it, do that. And then, I realized when it was coming to, it was, um,  October of 2012. When I think hurricane Sandy, Sandy hit New York city, it required us to all work from home or in my case, a shoe box apartment in East village. And I realized at that time I didn’t want to go back.

So I, I made a commitment to not go back much longer. And I ended up actually getting fired or let go, is how they put it in December of 2012, because we lost a major client Proctor and Gamble and about a third of the advertising agency I was working at was let go.  But about two weeks prior to me getting, let go, I sent out an email to all my family and said, I’m putting in my two weeks notice after the holidays because I’m, I’m done with the industry I’m moving on and it actually worked out really well getting, let go, because I got a severance package when I definitely would not have got a severance package if I had given my two weeks notice.  And then, and only then did I start, was my, did I focus full time on apartment investing.

However, while I had my full time job, I was studying. To be an apartment investor. I was reading all the books I could get my hands on. It is likely that any books, any apartment investing books that were published 2012 and earlier I’ve read, or at least I’ve read parts of them and I currently own, because I was just a voracious reader on apartment buildings.

I still read a decent amount, but it’s just not on apartment buildings exclusively like it was then. So I was studying and I would reach out to the office authors of the, of the books and I would it wasn’t a good approach by any means. Now I would take a different approach where I would attempt to add more value to the authors.

Whereas before I was just a dumb kid saying, Hey, I read your book, would love to speak to you some time. That’s not good. And we get very, very many responses because the office is very busy and it wasn’t, you know, wasn’t thinking about their needs. I was just thinking about my own. but I really started being a student full time on apartment investing and doing that after I left the W2 job.

Seyla: [00:09:16] Got it. So how did you get that courage to actually put that two weeks notice? And how did you get the confidence that these apartments, multifamily investment would be working out for you?

Joe: [00:09:28] I, and just to clarify, I never did put in my two weeks notice, I just said I was going to, I have an email to my family. I printed out on my wall in my room. I, before I got a chance to put in my two weeks notice, they did a pretty sizable layoff at my company, but it’s, but either way, what was like, how did I get to the point where I said this is enough.  Time to time to make a change.  It’s pretty simple.  I recognize that life is, very short, relatively speaking, and I actually have now a death clock in my office. Which sounds incredibly morbid because it is incredibly morbid. According to my wife, it’s a countdown clock to my 90th birthday.

It has days, hours, minutes, and seconds.  It’s a reminder to live every moment and if I’m not settled, if I’m not happy with what I’m doing, then I’ve got to make a change. Cause this is the time to do it. I most likely will not have a lot of regrets whenever I’m about to die.

So live, I live accordingly.  Steve jobs talks about when he looked in the mirror and said, if I am unhappy a lot of days in a row with something then I make a change. And people who don’t live that way have a misconception of life and death. They think they’re going to live forever, so they don’t make the changes that they need to, and the most uncomfortable changes are usually the ones that need to be made and are the critical, the lead dominoes.

So I realized that when I was receiving work to do at my full time job as a W-2 employee, I realized the emotion I had was being annoyed.  I was incredibly annoyed because how dare they send me work.  Even though I was a W-2 employee, because I was working on apartment, investing in studying that, and it’s not fair to them.

And it wasn’t fair to me. So I knew I needed to make a change. And in fact, I can read you the email. It’s very short and sweet. I wrote on November 20th, 2012 to my family, it says, hi everyone. I’ve made a decision to leave the advertising agency world. I came, I conquered now. I don’t care at all about it. The only way I won’t quit is if my cash out refinance, doesn’t go through as planned in a couple of weeks.  It’s scary. I’m going to a very good salary to basically nothing, but I’ll be fine. Would appreciate the moral supportive to make this big change.  Can’t talk tonight, but I’m free this week. If you want to talk.  I was at a bar when I wrote it, so I couldn’t talk there. I was, yeah, I was doing it and you know, we all have to make those decisions. And unfortunately, a lot of people wait way too long to make that decision and they’ve wasted a good part of their life. Just, you know, teetering back and forth when. They know in their heart, they should have just proceeded on.

 Aileen: [00:12:40] Yeah. And what the, uh, death clock in your room, that’s always a constant reminder that we really do only have a short amount of time on this earth, so we try to make the best set of out of it, every day. So it’s morbid, but I guess it works.

Joe: [00:12:54] Yup. Yeah. I I’ve been told by my wife that I have to rename it to my 90th birthday clock. So I’m good with that too, but I really know what it’s mean. I really know the intention behind why I had it, but I, we can sugar coat it that way.

 Seyla: [00:13:09] So let’s, go back to, the first time when you started apartment multifamily investing. How did you select your market and would you be able to walk us through of how you found your first deal?

 Joe: [00:13:23] I selected my market in a way that is not,  methodical,  because  I was focused on Tulsa, Oklahoma. Which I came to that conclusion, very methodically. I was looking at population growth. I was looking at, diversification. I was looking at some connections that I had. I was looking at a lot of, a lot of things that you should look at when you’re looking at markets, but  I wasn’t getting any traction.  And there is one aspect to a market that. You’ll want to pay attention to, and that is the amount of inventory there is available to purchase, because if it’s a wonderful market, but there’s not a lot of inventory, then you’re going to have a hard time getting a deal, especially if it’s your first large deal.

And I had a, I had an idea in my head that because I owned at the time four single family homes, I would be given a lot of respect by other apartment owners because I was, I was a real estate investor and then I had four single family homes. And of course, you know, of course I was going to be able to pull off a transaction which is really ignorant of me.

It’s completely different. It’s a different world. And I was not getting the traction in Tulsa, Oklahoma. And then I was introduced to a broker who was based in Cincinnati, Ohio, and that broker had a deal and that deal was, could have creative financing, specifically a master lease.  So I thought, I never considered Cincinnati, Ohio, but let me take a look.

So then I looked at Cincinnati and looked at it through the same filters that I did at Tulsa and I was basically came to the conclusion that slow and steady wins the race in Cincinnati. It’s not a dynamic market. It’s certainly not going to get the rent bumps that Dallas Fort Worth, Orlando, Tampa, those markets are Denver are getting, but it’s also a market that people really don’t leave for the most part.

It’s basically just a flat line population. So I decided to, pursue that deal. And that’s the first deal I ended up closing.

Seyla: [00:16:03] Awesome.  Would you be able to tell us the specifics of the first deal?

Joe: [00:16:08] Sure.  The first deal was the worst deal I’ve ever done.  So that will be interesting to, to certainly learn from. It lost money.

I actually lost. So it, we bought it. We. Yes, technically I didn’t buy it. I gained control over it because it was a master lease with option to purchase.  So with a master lease, with option to purchase, that means, you are controlling all the operations, you get all the income, but you also have to pay all the expenses, including debt service.

 And in exchange you give the group that currently owns it, a down payment of some sort, which is, you know, negotiated. And then you agree upon a price at a later date in which you’re going to buy it. I, in the whole concept for, how the master lease would, would work is that you buy a property that is distressed,  or you just buy a property and, you cashflow and then you sell, you exercise that option to purchase has a later date when it’s worth much more than what it is currently, because if you say, put it under contract under national lease for a million dollars and you say, okay, I’m going to buy this for a million dollars in three years, I just got to do some work to it. And then in three years that’s worth $3 million while you, you’re buying it for one, but it’s worth three. So hallelujah. You came out 2 million ahead. So it’s a great for distress properties. The problem that. the mistake I made, one of the many mistakes I made on that deal. I didn’t recognize that it was a distressed property. The owner mentioned that it was in 95, 90, 98, forget what he said, almost a hundred percent occupied.

So I thought, Oh, this is great. But that’s when I learned the hard lesson of the difference between physical and economic occupancy.  Physical occupancy people living there. Economic people paying to live there. And unless if you have a really good a team that is auditing the financial, it can be challenging depending on what the seller does with their numbers to make that distinction.

I now know how to do that. But on that first deal, I didn’t, and it was actually a more of a distressed property. I think in the first couple months we were collecting around 70% of what we’re supposed to collect.  There’s a pandemic right now going on and we’re collecting more than that on every one of the deals that I’m in.

So it was, it was clearly a distressed property at the time. So we put it under contract for a day, I think is six, 6.3 million. I want to say.  Numbers are a little, oh, fuzzy. I know I ended up losing about a million and I paid back my investors, plus 14% annualized return out of my own pocket over the course of about a little under two years.

So I traded investors for life as a result of that.  Got a thank you note handwritten two pages from one investor, got Ruth Chris gift cards from another investor.  You know, it’s also interesting that I’ve interviewed people who have had a deal like that completely go south and they lost investor money and they, they don’t pay it back and it was just one deal. And I just don’t understand that concept or that philosophy.  It just doesn’t compute for me.  So anyway, yeah, that that the couple lessons that I learned, one was the physical versus economic occupancy. Another is when you do a master lease with option to purchase. We definitely want to make sure that the lender has approved in writing of that agreement.

Fortunately, I waited to close on the master lease, until the lender approved it and writing, but it was very awkward going to the closing table with these older individuals, much more seasoned individuals. And I, it was just me and I had my attorney from Texas on the phone. And I was going into the closing room telling them that we weren’t going to be able to close because we didn’t get the approval.  It was a tough spot because they’re all expecting close. And I just learned that, Hey, we should probably get this information so you can avoid some awkward moments if you, uh, know that in advance.

Aileen: [00:21:09] it seemed like that first deal you learned a ton of things and those like, a hard hit in the face by losing money, but you are able to preserve capital, which is the most important thing when we’re working with the, with the investors.

As you were going through the growing pains of that first deal, how did you get that motivation to continue to move forward? Like instead of, instead of saying, Oh, I lost all this money. I’m not going to be making anything and getting into that like depressed mindset. How did you continue moving forward and building up to where you are today.

 Joe: [00:21:43] Personal development. Focused on, listening to YouTube videos on personal development, affirmations, reading a lot of books.  Tony Robbins talks about how life happens for us, not to us and having that approach, you know, what’s happening right now is happening for my growth.

And I’m going to focus harder on myself, working harder on myself than I do any deal or any job. And I know when you do that through my studying that I’ve done on personal development, things are going to work out in the long run. And yeah, I thought what would a billionaire do? How would a billionaire approach this?  Would a billionaire cut any corners or, you know, not pay vendors or something like that, or would a billionaire who is morally sound, take care of everyone and then know that by taking care of everyone, you’re going to be taken care of as well. And I think that’s the key. I don’t think I, I think 99% of the people who had a first deal of large deal, like I had would not be.

In the position I’m in and it’s because 99% of the people don’t focus on personal development as much as I do.

Seyla: [00:23:01] That’s great.  For that first deal, did you do everything by yourself for that first deal?

Joe: [00:23:08] Yep. I was the only general partner.

Seyla: [00:23:12] Wow. That was impressive. When did you realize that you actually, need a partners?

  Joe: [00:23:18] When I realized whenever things weren’t working out and I realized that I was swimming with sharks and I was a good swimmer, but I needed, I needed someone else to swim with me, who had some experience that, you know, I didn’t have.  You know, there’s there’s components to the business that we have to be really, really good at in order to Excel at a high level.

And I knew that I had some of the skill sets required, but not all of them. So I either needed to hire, which I didn’t have any money to hire or partner, which, and doing.  And that’s, it’s worked out very well, through the partnership. And I certainly would not be where I’m personally at today and our investors wouldn’t be where they’re at if I didn’t partner.  And the beauty of partnerships and the key to partnerships is focusing on your strengths because when you focus on your strengths and everyone does what they’re really good at, then things, things work out.

Seyla: [00:24:23] That’s great. what is your next focus?

 Joe: [00:24:26] The focus is on performing on our current portfolio.

That’s the primary focus always has been, always will be.

Seyla: [00:24:35] so if someone wanted to get started in real estate in today’s environment, do you think it’s a good time? And what advice would you give to them?

Joe: [00:24:43]  Any time’s a good time to buy cash flowing properties that you can renovate, increase the rent, increase the value and decide what you want to do with it.

Refinance or sell.  So yes, as far as what to do read a bunch of books, listen to podcasts like this.

Seyla: [00:25:00]  What is one thing that sets those successful people apart in the real estate business?

Joe: [00:25:06] Consistent action and executing on that consistent action on a daily basis, I’ve done a podcast over 2000 days in a row.

I personally don’t do an interview 2000, uh, you know, every day I batch them and now I don’t do as many. I have a cohost who does some, Theo Hicks, but, I did the first, like 1500 or something.  So you know, most people wouldn’t do consistent action on a daily basis like that, but those who do, and there have been others who have, they get the results.

Seyla: [00:25:38] What has been the highlight of your real estate career? 

Joe: [00:25:42] Coming back from the first deal and, and coming back really strong, even stronger.

Seyla: [00:25:48] What tools or techniques have you used to improve the efficiency of your business or personal life?

 Joe: [00:25:54] Appointlet to schedule calls and my, assistant executive assistant Kaitlin.

She’s a wonderful and, helps make my life a lot easier.

Aileen: [00:26:06] Awesome. Thank you so much.  And so if the listeners wanted to learn more about you and your story, where can they go to find out more?

 Joe: [00:26:14] You go to Joefairless.com.

Aileen: [00:26:16] Thank you so much for being our guest on the show today, Joe, we appreciate your time.

Joe: [00:26:22] Yeah, my pleasure. And you can actually even email info info@joefairless.com. And we’ll get you a document on evaluating markets. That will be very beneficial to you. So just mention you heard me on this show and you liked the evaluating markets document. We’ll make sure we get it for you.

Aileen: [00:26:43] Awesome. We’ll also include that in our show notes too, so everybody can easily access it

Joe: [00:26:48] sounds good.

All right. Thank you so much, Joe.

All right. Thanks. Bye.