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, we have Danny Randazzo. Danny is the author of the “Wealth Lessons for Kids” book series, an entrepreneur, host of a real estate mastermind, investor, national speaker, and volunteer.  He is also a Managing Partner at Passiveinvesting.com.  His first investment purchase was a $1,000,000 commercial building and he was able to become financially free at 30 years old.  Today, Danny controls over $225M in real estate.

Welcome to the show, Danny, how are you doing?

Danny: [00:00:34] Doing very good. Thank you so much for having me on. Grateful to be here and talk about all the things that I love, which is, real estate and financial freedom, helping people and giving back to the community.

Aileen: [00:00:48] So before we get started, can you give the listeners a little bit more about your background and how you got started in real estate?

Danny: [00:00:54] I was, brought up to go to school, get good grades, get a good job and work for a corporate company that was not in the auto industry.

So I grew up just outside of Detroit. And the auto industry was something that employed a lot of people and, being diversified away from that was important to, generations before me, because they knew if the auto company slowed down or shut down for any period of time, that would be a difficult situation.

So that corporate mentality of, the safe route was, very much a major theme in our household. And,  I never believed in it, but, I certainly went to college. Got good grades, got a good job out of school. And, that job. Really benefited me extremely well. It had so many complimentary skill sets to put me in a position to be successful as an entrepreneur and really good at evaluating real estate deals and managing those assets.

 I got started. I worked for corporate America doing financial consulting work, and that was a very busy job. I was exchanging my time for a paycheck and on the road constantly, away from home and learning a ton. Very good experience, both professionally and personally, but I hit the, look to the future button.

And I could see the partners, executives within the firm that I worked for and they were traveling even more than, yeah, I wasn’t, I was, I, that was like the aha moment. This is not sustainable for life. And if you want to have a family and, be around a significant other. And yeah. That’s when I got the real estate book a little bit more.

I read all the books in high school and knew a lot about investors early on, but that was the major shift for me of like, why do I need to get started? And then it just became a matter of taking action to get there.  Fast forward throughout the journey, my wife and I made a very quick and easy decision and I emphasize quick and easy because it was imperative for our life to move from San Francisco. So we sold everything we had in San Francisco moved to the opposite side of the country and Charleston, South Carolina, And started building a real estate portfolio. And I think, one important piece to highlight with the listeners of that quick, an easy decision.

So we built up this idea in our head of life and depth. So if we stayed, we were going to die and suffer this miserable life of working for corporate America and never controlling our time. And so that was the focus that was like, we knew exactly what would happen if we stayed. And yeah. The decision was quick and easy, we got to give up everything we have here.

We lived by great, phenomenal people. I loved the Bay area, really enjoyed living there, but we knew for our future and getting to that financial freedom level, that it was not going to be accomplished. By being there. And so it was time to go and to answer the first question you all had, that is really what got us started in real estate was making that decision, moving, buying that million dollar office building and generating,  solid cash flow to start building towards our financial freedom number.

 Aileen: [00:04:18] How did you find that first, commercial building that you invested in and what gave you the confidence to do that? What kind of steps did you take before that?

Danny: [00:04:26] I typically do things, by working backwards. And so my goal, I wrote it down on a piece of paper. I wanted the first investment property to generate $5,000 of cash flow per month.

And so by having that goal, I said, if I’m going to look at single family houses, I need to buy probably 10 or 15 of them, and that’s going to take. A couple of years, and I don’t have a couple of years to do that. So I need to be looking for one property that can generate that kind of cash flow.

And so I either need to look for a commercial asset or a multifamily asset.   And so that’s what I was looking for. And by honing in on my personal goal and criteria, I was able to filter out all the noise of. Look at my shiny deal or, go meet with some flipper. Who’s got some story about flipping a house and making a hundred thousand dollars or something like that.

I said, none of that.  don’t even talk to me, I’m going to stay laser focused on this goal. And so that’s how I found it. There’s not a grand story of getting a call from a broker. It was just honing in on my criteria and then looking at what’s available on the market and finding. What asset fit my personal need.

And I think that’s another thing to highlight with the listeners. There’s so many people I hear out there who want to buy a 10 unit multifamily or a hundred unit or a 500 unit multifamily property. But just buying that asset may not meet what your personal goal is. And so making sure that the asset fits your goal is really important, so it can, really achieve and help you grow towards your, progress.

Aileen: [00:06:15] So did you do that first deal on just you and your wife, or did you have partners with that deal?

 Danny: [00:06:21] Yeah, it was just her and I. So we really went into things, with that proof of concept of kind of put your money where your mouth is and become real estate investors. Prior to doing that, everybody knew me as the financial consultant.

And so I had to change that behavior and become Danny the real estate investor and being able to, show that first property of, Hey, I put all of my own money into this deal. I have no partners. I’m doing this. I am a real estate investor, and that is going to give you the confidence and the track record to do your second deal.

And then once you get there, you do your third deal. And so it was really important, for us to be able to do that and have that, resume builder, if you will.

 Aileen: [00:07:08] So fast forward to today, in your opinion, is it a good time to invest in multifamily right now?

Danny: [00:07:14] It is, I think, from a multifamily perspective, there are there’s good deals and there’s bad deals all the time, regardless of exterior economic situations, if you will.

And so from a multifamily perspective, not all markets are created equal. Not all properties are created equal. Our business high level philosophy @passinvesting.com and the apartments that we look to invest in, we look for markets that have job growth, that have population growth, that are in the best parts of the most desirable cities in the Southeast us to live.

And when you have that mix of economic indicators, it gives me a great level of confidence and, security or conservativeness in the investment to know that there’s, there is more demand to rent a high quality apartment in a desirable location than there is supply. And those are the markets that we invest in.

And if there is an economic downturn, like ‘08 and that happens again, the multifamily industry proved that it can at least maintain it’s occupancy while property values may not appreciate.  We’re in the game for cashflow and so the debt market is very advantageous right now.

We’re seeing some of the lowest debt.  Interest rates that we’ve ever had. And so I think this is still a good time to buy, but you need to be buying the right deals. Not all deals are great. Not all deals are terrible. You gotta look for the right deals, be conservative in your business plan and, go out and get some opportunities.

Aileen: [00:09:06] That makes sense. Since COVID hit, how has your investing strategy changed?

Danny: [00:09:11] We have changed, several items when we are looking at new opportunities. So one, one thing that comes to mind, if we’re looking to acquire a new asset and let’s say historically for the last 10 years, the property has maintained 95% occupancy on average.

We may underwrite the deal and say, okay, COVID may impact our occupancy, creating a higher vacancy rate at the property. And so maybe we will underwrite instead of having a 5% vacancy factor, we may double it and say, okay, we’re going to have a 10% vacancy factor for the next 12 to 24 months and that’s going to give us a lot of cushion in our business plan and in our budget where we’re not expecting 95% of people to be living in paying, but we’re expecting 90% to be living in paying at the asset. And being conservative in your vacancy projection is, one of the things that we changed, another area that we’ve changed is, increasing our stabilization period.

So if you typically try to stabilize a deal from an operations perspective, so honing yeah. And the income and expenses, and if you’re renovating units, maybe you’re trying to do that all in the first 12 months, while depending on the size of the asset, we may stretch that stabilization period out to 12, 24, 36 months, to make sure that we have enough variability and allowance in our business plan to still achieve the goal. Because what we learned with COVID is when that broke and in our are desirable high quality markets, people did not move around as much. We still had the leasing activity every single week, but it did slow down a little bit.

And when that occurs, you can’t stabilize as quickly as you had planned previously. So stretching that stabilization period out, adding, six, 12, 24 months to what you would normally plan for is a great way to be conservative. And the last thing that I would say too, to changes we’ve made from COVID,  just have an allowance for,  additional, capital reserves.

So if there’s any sort of additional, cleaning or staffing need, having adequate reserves is always important whenever you’re looking at a deal, maybe baking in another, 10,000, hundred thousand 500,000, depending on the size of the asset and the location of the asset, just building in some additional buffer of reserves.

Always a good idea.

Seyla: [00:12:04] That makes sense. And a lot of good strategy. Thank you for sharing that with our listener. Do you face any challenges, with the lenders, property managers or investors, during the COVID time?

Danny: [00:12:16] I’ll kind, kinda take those in order from a lender perspective. No, they were, they were available and willing to work with people.

We didn’t utilize any of the forbearance, our properties, perform quite well. Collection rates were very good. that wasn’t even a thought to our business model. We had, plenty of money to pay our debt service pay all of our property expenses and send out monthly, distributions as we’ve planned to do for all of our assets.

So that was a very good thing.  From a property manager perspective, no, not any major challenge. I think we really worked together from an ownership perspective and a management perspective to, take the challenges as they come. A couple of the shelter and place orders, forced us to close down amenities spaces, whether it was the clubhouse, the fitness center or the pool area.

And then we work together to figure out when do we reopen? When do we provide some of these amenities back to the residents while of course maintaining the health and safety standards set forth by the state and a great resource that we utilize was a national apartment association.

They really provided a lot of good information and guidelines and recommendations for sure. Property owners and managers to follow when reopening or making some of the decisions to close things down. lenders, property managers, from a broker perspective, I think things really slowed down in the middle of April, May and June from a seller and buyer perspective.

I think the brokers hibernated for a little bit, just because from a seller perspective, no one was really bringing deals to market because they didn’t know what was going to happen. Buyers were expecting some phenomenal discounts. That wasn’t really warranted. because in the space that we look at our specific multifamily and markets, the performance was adequate. It was acceptable performance. So nothing was really underperforming and position of needing to be sold quickly. So we saw a stalemate of sellers and buyers being a little bit far off in their expectations, and that has slowly tightened. and we’ve seen a lot of good deal flow, both from a buyer and seller perspective over the last, I would say 30 days.

Seyla: [00:14:42] We appreciate the insights. One of the things, I want to bring up is that you also wrote a book called Wealth Lessons for Kids.  Could you tell our listeners a little bit about the book and why is it important to teach the kids from a young age about wealth ?

Danny: [00:14:58] The reason I really wrote the book is because of the real life lessons and experiences that I had that shaped my belief around money and finance and a personal responsibility to financial freedom.

I would share some of those stories and I heard it from several people close to me that were like, Oh man, I wish I had learned that same lesson like you did. And I just said, okay, great. I’ll write a book about it and you can share it with your, nieces, nephews, kids, relatives.  And I honestly think the book, while parents or, adults read it to younger generations or young people. I think the real lessons still go to the adults have, some of the mindset changes they may need to make around money. It’s one of those taboo topics that’s not talking about enough at the dinner table.

And I think, people get a little squirrely or squirmish when you know, the money conversation comes up or, how much. How much are your expenses in a given month? Did you make enough money to cover all of those expenses, and it’s conversations that we need to have. I think the more comfortable you can be around the subject, the more you can go out and conquer it.

Money should not be a resource that controls you. You should control it and utilize it to your benefit. And so I think that’s some of the main themes of what I wrote the book and then sharing the real life lessons that I experienced. it’s just a great way to help young people. And again, I think the earlier you can talk about it, the more comfortable everyone can be around the subject as it’s, a pretty vital component to life.

It’s not the end all be all. I just want everyone to be able to control their own financial destiny. And, as a result, hopefully have more of an abundant lifestyle, where they’re not burdened by thinking about paying their bills every day. And am I going to have enough at the end of the month?

Aileen: [00:17:03] Yeah, it’s never too late or never too early to start.

Danny: [00:17:06] Absolutely well said.

Aileen: [00:17:08] Yep so now you controlling $225 million of real estate, and you wrote a wonderful book to children. what is your next focus from here?

Danny: [00:17:19] We are going to continue to acquire. So since I sent you the bio for this show, we closed another $50 million apartment purchase.

So we’re up to 275 million, and we are working on acquiring a couple more assets. So as we’re in the early fall, 2020, we’re going to finish out the year, very strong. Hopefully we can buy, like I said, a couple more deals this year and we will continue to grow our business. And it’s been, a joy so far.

We’ve got a great team of people @passinvesting.com. We just work with some phenomenal, team members and I’m just grateful to have everyone on our team and the partners that I work with. So we’re going to stay focused on what we do. We’re going to buy some more apartment communities. We are going to improve our operations at the other assets and continue to provide, a few thousand people, great places to live, where they love to live and want to stay.

Seyla: [00:18:23] Congratulation on closing another asset.

Danny: [00:18:26] Thank you.

Seyla: [00:18:27] What has been the highlight of your real estate journey so far?

Danny: [00:18:30] Tough question. I think there’s highlights and victories along the way that you can, celebrate, reflect on and be grateful for, a couple that stand out to me, number one, Really jumping into real estate while working a full time job and doing real estate full time on the side.

 the big victory was of course, retiring from corporate America, quitting from corporate America and becoming a full time entrepreneur and investor. so that was a major highlight of course, buying our first large deal. I’m buying every deal after that has been quite the journey to get to 275 million in multifamily assets.

So those are great, victories along the way, seeing our team grow @passinvesting.com. like I said, we work with great people. And that’s been a real highlight to, to work with high quality individuals and a team that really supports each other. So those are the major highlights and, I look forward to, continuing to celebrate victories along the way.

I think that’s important. But it’s also important to, stay focused and stay on track with, your business planning and growth as we continue to grow our business,

Seyla: [00:19:48] what tools or techniques have you used to improve the efficiency of your business or personal life?

Danny: [00:19:53] a tool from a business perspective, we utilize Asana.

It is a web based also app based, kind of tracking software. It’s not quite like Slack, where you get constant updates and messages in there, but it is a place where we can track.  and we’ve broken it out to buy property of, key items that we’re working with management on. let’s say a storm came through and knocked the tree down.

We may say, when is the tree going to be repaired and we’ll keep that note in there so we can log in anywhere around the world at any time and see what’s going on with the property. And I can make notes. Our director of asset management can make notes. My other partners can make notes. We can all see what’s going on.

So that’s been a very beneficial tool from a business perspective, from a personal perspective, I would say, a tool that has allowed me to be efficient is, is really minimizing the use of other tools. So what I mean by that is, not getting bogged down in all these social media things. There’s Twitter, there’s Instagram, there’s LinkedIn, there’s Facebook. I really kinda just limit myself to producing content and sharing it through the platforms that I’m on and I don’t learn any new social media platforms. It’s probably not a good thing, but, I stay much more productive that way.

And I also don’t go in and consume a scroll feed of stuff. I just really send out my content and that’s about it. So I think for people who are trying to get started, don’t do anything, on social media and only produce content or take action that is going to get you closer to that goal. So going on and commenting on great job and so that’s not helping you. It’s nice and it probably makes you feel good for a moment to say congratulations to someone else, but you need to be focused on your priorities and going through that scroll feed is not helping you or even the other person.

Aileen: [00:22:14] And if our listeners to find out more, where can they go to find out more about you and where can they go to find your book?

Danny: [00:22:20] Yeah, so to find more about me personally, find my book, just go to Dannyrandazzo.com. And then if you’re interested in learning about our multifamily investing, just go to passiveinvesting.com.

Seyla: [00:22:33] Thank you so much, Danny, for coming on to the show today, we appreciate it. And as a parent I can say, thank you so much for writing the book to educate the children.

I’m pretty sure it’s benefiting everyone involved. So thank you.

Danny: [00:22:49] Thank you very much. I really appreciate it.