Aileen: [00:00:00] Thank you everyone for joining another episode of the How Did They Do It? Real Estate podcast. We are your hosts, Seyla and Aileen and today’s guest, we have Justin Grimes. Justin has been investing in multifamily real estate since 2016 as a passive investor. He is fascinated by the concept of creating passive income to achieve financial independence and helping others to do the same.

Justin is the founder of Timbermoss Capital overseeing capital raising, acquisitions, and investor relations.  He is also the host of the popular webinar series, Engineering Wealth.

Grateful to have you on for today, Justin. How are you doing?

Justin: [00:00:36] Yeah. Good. Appreciate you guys having me on and a nice job on the bio. I can appreciate that.

Aileen: [00:00:41] Thank you. To kick off, can you please tell our listeners a little bit more about your background and just a little bit about how you got started with real estate investing?

Justin: [00:00:48] Sure. I still have a W-2job. I work down in the Houston area, oil and gas, which currently is an interesting space to be in.

But, anyway, I’m in charge of compliance and things there. And how I got started in real estate, is it in, 2016? In an unfortunate way, perhaps. So my dad was killed in an auto accident. And from that, I needed to try and help figure my mom try and help figure out how to supplement her retirement income since they just lost one.

We, took a look around and explored different ways. My goal was to explore ways that the wealthy behaved and the wealthy created their wealth and protected it. Listened to a lot of podcasts, read network, all kinds of stuff to find people that I thought it would be a good fit for our goals.

And we landed on commercial real estate and in particular, multifamily real estate. we began planting seeds of capital in different groups, and we’ve built a nice portfolio of operators and assets that we’ve got good relationships with and, so far so good.

Seyla: [00:01:51] So what are the main benefits of investing in real estate for retirement comparing to the traditional 401K?

Justin: [00:01:58] for me, it’s about having more control over the investments. I like things that are tangible that you can touch, not pieces of paper that, all markets are impacted by things that are typically out of their control, perhaps, economic policies, global.

Issues like this pandemic, is a variety of things that could impact markets, real estate or stocks, but at the same time, I also don’t particularly care for a traditional retirement. vehicles, where you’re penalized, if you access your capital. So it bothers me.

And, if, you do have some sort of savings vehicle like that, then a self directed IRA, which I’m not an expert on, but I am, we do have quite a few investors that invest in that vehicle. It gives them the freedom and flexibility to, put that capital to work, through a custodian and manage it way where they have a lot more involvement in the day to day operations of it.

The real estate we’re talking about in particular is, passive investing, typically, through syndication. One of the benefits is it’s not completely hands off, but, it has the potential to become mailbox money. Once you have established the right relationships and you’re comfortable with the operators and their processes and their level of communication.

it can really become a very powerful tool that allows you to do very different things in your life than you may have imagined in your forties or fifties or even thirties in some people’s cases.

Seyla: [00:03:23] Thank you for sharing that.  Most people don’t know a lot about multifamily investing or real estate investing in general. And, one of the things is that it’s possibly difficult to get your significant other to invest.  How did you get your significant other to be on board to invest in the real estate?

Justin: [00:03:44] Very fortunate and my wife makes it super simple.

She didn’t make it hard on me. I’m very grateful for that, she’s very supportive in me, learning new things and trying to grow, whether that’s, personally, spiritually. Business, whatever. Usually I’ll take a deep dive into something such as real estate in this case, and I’ll be so passionate about it.

I can’t help but talk about it. And so I’m always talking about it with her. And I’d explain what I’ve learned, the potential, powerful nature of how that tool could be applied and how it could change our life long-term for our kids, family, all that,  you know, and then, so at the beginning, the supplemental income for my mom’s retirement was a thing.

And then for my wife and I starting a family, we sat down and our goal is to create generational wealth and not just wealth as a means of money, millions of dollars or something, but wealth and freedom of time to be able to do what you want to take the kids out, to have fun trips, make good memories, that’s, one of the more powerful.

aspects of who’s truly right. Wealthy. You gotta have a lot, you can have a lot of money and be very poor. Yeah. As far as, the things that are in your life. anyway, that’s how we approach any of these deals. that we look at. So that’s our beacon. if we’re going to make a decision, if that’s the underlying goal that we’re trying to shoot at.

So I usually look at the deals when they come in. and if it meets those goals, then I’ll pitch it to her. And that gives her the participation and ask some questions and keep me on my toes, make sure I’m thinking of the right things and keeps me honest with that. It gives me the confidence that I’m making the right decision.

Cause I’m not doing it on my own, so it’s a, it’s not a business partnership, but we treat it certainly, as a combined team decision.

Aileen: [00:05:28] That’s great. So would you say that passive investing has helped you, at least get started and on your path to financial freedom and getting your freedom of time?

Justin: [00:05:38] Yeah, absolutely. I’ve seen, the nature of the passive income, that’s coming in now in checks. I haven’t replaced my W-2 income and don’t necessarily plan to retire, but, um, you know, it’s nice to have that, as a tool in your pocket, in case, situation like we’re in now with oil and gas, a lot of people who may have never considered that, you know, my goodness, I just worked for that company for 20 years and now I’m out of a job, So to be able to have that peace of mind, for your family, grow older, and you down your career path is very powerful.

 Seyla: [00:06:12] you mentioned that you invest in real estate in multifamilies, passively. So how can someone participate in this type of investment?

Justin: [00:06:22] So what we’re talking about, typically is a syndication. So primarily what a syndication is a real estate, basically a pooling of funds by multiple people to purchase, an asset. By doing that, we’re able to increase our purchasing power, and buy the asset that otherwise would be unaffordable for us.

So for example, if I had a hundred thousand dollars to invest, I could not go out and buy a $10 million apartment, at most banks. But if I have that money and I have 30 co-investors friends, family, or, likeminded individuals that have the same goals and things like that. Then together, with everybody chipping in that same or comparable amount of money, we have that purchasing power to go take down an asset like that.

Seyla: [00:07:05] So if someone who wanted to chime in, to the first real estate syndication, do you recommend them to just jump in or what do you recommend that they should do before they actually do it?

Justin: [00:07:17] Yeah. I appreciate the question. I think that is something a lot of people will struggle with because it’s very overwhelming to go out there. There’s a lot of, there’s a lot of resources available to you, but, at some point, it becomes a, who do you trust and where do you go and who do you listen to and all that kind of stuff.

it starts with an interest in trying to become educated, to help build your confidence. one of the things that helped me see the opportunities in a different way and change my mindset from. just being a w two employee to, maybe shifting to see the power of investing and owning a business is rich dad, poor dad, which is a very popular book.

And, certainly not the first one to mention that one, but, it did give me a different perspective on money and taxes in particular and all these good things. So number one is get educated. You have books, podcasts, getting involved on networking sites, things like that, just, and that leads to the next point, which is  to ask questions.

So as you’re on those networking sites or at events, don’t be, shy about being new to it and learning and things, no ones, most people, at least aren’t going to say, Hey, you’re new. Write me a $50,000 check and I’ll show you how this works.  So you want to ask questions.

How many deals have you done or how, who do you invest with, or how, how did you get started in this?   you want to pull different stories from different people in different experiences so that you can get those data points together to make your own informed decision if this is the right fit for you.

The next thing, repetitive on that, but networking, which has changed a little bit these days. but, yeah know, there’s still online, networks, there’s virtual events, and a lot of people in this space, I think, I’m not sure. Sure compared to, single families and things like that flipping community and all that, but a lot of people in the multifamily space or commercial real estate, very interested in.

Just helping people get started, or, learn. Like I said before, I think just going to those events or putting yourself out there a little bit, you’ll be surprised how welcoming that community could be to help you along your way. once you’ve done those three things, then the fourth is to review previous deals.

Yeah. For example, if I’ve gone to a conference, I’ve met some people, and we keep the communication going and say, you know how this deal go for you with this particular operator or, if you’re an operator yourself, you may have, your, pitch deck and your. A financial performance for one of your assets or something like that.

So you’ll want to review, their, performance or, history, in this space. and then, the last thing to do before you get started is to make sure that you’re very clear on what your goals are and don’t. Feel like you’re obligated to rush. So if you’ve been doing research and all this stuff for a year, and you’re still not quite there, I’m not of the opinion that, there’s a timeline on this thing, you need to be able to sleep at night, be comfortable and confident that.

The decision that you made is the right one for your family. I don’t think it take most people a year once they kinda hear the stories and see the different options and  value that’s created through this vehicle. But, at the end of the day, just take your time and it’s no rush.

Seyla: [00:10:30] I agree before jumping into the first Real Estate Syndication, as you mentioned, first we have to make sure that we educate ourselves and network and also vet the sponsors. And now, taking onto the next step now that you like your sponsor, who you would like to work with, and you trust and now the opportunity actually arrived and they presented you with an investment opportunity.  What are the must have key qualities that you’re looking for?

 Justin: [00:10:59] We’ll go through a couple of things. let’s see here, I heard somewhere along the way. I think when I was first getting started and it didn’t make a whole lot of sense to me at first, but now that I’ve gone through a few deals, it certainly does.

And that’s that a good operator can make a bad deal go good. So they can turn a tough situation into a, a favorable and then save a deal potentially, and bad operators can take a really good deal on paper and make it go bad. by mismanagement, by, variety of things, so it all starts with the operator, like you mentioned.

So am I confident in their ability to execute a business plan? And preserve, as well as grow my capital. So those are our goals, preserve and grow the capital. So I don’t want to, what should it call me and say you lost my 50 grand, but, and I don’t want you to necessarily to say, Hey, I only, was able to get whatever percentage on your money, but I’d rather have that a second phone call than the first phone call saying he lost my money. when I talk to any operator, I think it’s important that they get to know me and ask me what my goals are. so that they’re clear and not every investor is a good fit for every operator.

For example, there are, maybe jump ahead here, but, if my goal for my mom is she needs residual income, for her retirement will cashflow and something that’s going to provide that, fairly quickly from the time of purchase, through the life cycle of the Business plan, that’s important to our investments for her. Whereas for me, I may be able to put some money into something and wait two or three years before I see that as long as it meets other criteria. specifically, when I’m in passively investing in a deal, I’m looking at time, risk and cashflow.

So time, how long is my money going to be tied up potentially with the, underlying caveat, always that. things happen in the market. If you were in the fifth year of a deal right now, and your goal was to sell it in the fifth year, you odds are, you may not, this may not be the year.

It happens may happen in year six and seven. You have to wait for that cycle. And that could happen at any time on any of your investments. you got to understand that aspect. So how long is your money going to be tied up? as well as if you’re going to be actively involved at some level, then how much time are you going to need to allocate to weekly, monthly, whatever that may be.

So it does, I get things risk. different markets, different types of asset classes. For example, if you’ve got a, a rundown property, that’s in a good market, but it’s going to be a heavy lift on the rehab. you may not want. I personally would be I’d want somebody who’s been there and done that and tried and true on a smaller scale before they go take 180 unit, class D property and try and reposition it to a C or something like that.

Through a budget of $30,000 a door. That’s big, there’s a lot of work they’re going to be doing. And that’s a lot of units that they’re going to need to be managing. If that makes sense. Yep. and then, last thing, like I mentioned was cashflow. any time, we’re looking even on the deals where I’m willing to wait a little bit, it’s a component of the decision that we make because it gives you an idea when you see the money coming in and you see the financial statements and things like that, on the shorter side of an investment or the sooner, rather than get five years down the road before you collect your first check or something, that’s something that’s, it’s not for us, so time risk cashflow. Those are my kind of criteria.

Aileen: [00:14:18] Do you also take a look at markets or does it primarily depend on the sponsor and the time risk and cashflow?

Justin: [00:14:25] The risk, I would throw markets in there. So if you’ve got major markets, you’re going to need to look at the, population growth, the jobs, stability, the diversification of employment, so a lot of things like that will be thrown in that risk bucket that, not just are you going to give me my money back, but is that a, an area or a market, that I have confidence in growing or being able to stabilize the, Tane during the, like a downturn like this, some markets that maybe, for example, aren’t investor friendly States and things like that.

They’re really having a tough time collecting rent and that’s a. Going to impact cash flow. No doubt.

Seyla: [00:15:00] So now that we, looking at our, opportunities and as a passive investor, are we allowed to invest in any type of multifamily syndication deals or is there any limitation, upon the passive investors?

Justin: [00:15:15] Yeah. So the SEC has defined, I don’t know a better term, but buckets of people. So you have accredited and non-accredited.  An accredited person, has a net worth that exceeds a million dollars or an income that exceeds 200,000 as an individual or 300,000 is a couple filing jointly in each of the last two years.

So if you have a, that there’s some underlying components to that for the million dollar net worth, that cannot include your primary residence. There’s things like that. If you are a, an entity such as a, a trust or something like that, then all of the investors need to meet that criteria as well. Not just necessarily one more. Better topic for a lawyer probably than me, but, that’s kinda the high level, strokes of that. For non-accredited investors, most of these things, people that the accredited investor has access to everything, the non-accredited investor has access to a little less, but there are still ways to get involved.

For example, there’s a 506B raise.   They can have up to 35 non-accredited investors for that. They’re unable to market, so no general solicitation. So you’re not going to see a Facebook ad or something like that.

And the there’s some criteria around, those 35 investors, what kind of information that they get on a regular basis and making sure that they understand the risks involved in that investment.  how do you get access to that is like we said before networking. So it takes developing those relationships with operators who structure 506B offerings and then, going from there.

That’s one way. There are other ways for non-accredited investors to get involved in real estate, but syndication specifically, those are the types of deals that you’d want to be looking at operators to do five or six B. Thank

Seyla: [00:17:04] so you mentioned that you have been passively investing in multiples syndication deals so far. So what is your next focus from here?

Justin: [00:17:12] So I’ve got a couple of groups, operator groups that have built some rules with. And so I’ve joined them, and certain aspects of the asset management side of things.

so we’ll meet, weekly on certain topics. We’ll have management, asset management calls with the, property managers, a monthly, help them raise capital, help them, keep the investors in the loop. So that’s kind of one, one avenue of what I’m doing into the commercial side. And then the next thing I’m doing is, we’re going to develop a RV, parks and resorts here in Texas with a couple of partners.

 Seyla: [00:17:48] what is one thing that set a successful people apart in the real estate business or investing?

Justin: [00:17:54] it’s having the ability to get up when things knock you down.

 Successful people see failure as part of the journey to becoming successful. They don’t see it as just the brick wall. They couldn’t get through or knock them down and they couldn’t get past it. So most successful people that I’ve met, they have had some major challenges that they overcome, whether that’s, divorce or, business, bankruptcy.

I mean, things that, nobody’s really happy they had to experience or go through, but, after failing, they’ve learned from it and they’ve modified their behavior and, they’re very focused on not repeating that same mistake and as part of the growth, I think that a lot of people, don’t give themselves a chance to fail.

So they don’t, they never experienced that.

Seyla: [00:18:40] What has been the highlight of your real estate career so far? 

Justin: [00:18:44] We’re focused on hitting singles, a baseball analogy, so now I don’t have any home runs where I flip the house for a hundred grand or, made some quick money on any great deal, but, we’re real happy with the performance of the things that we’re doing. I wouldn’t mind hitting a double or a home run every now and then, but, we’re perfectly happy, just consistent cashflow, protect the capital and keep meeting good people and, have fun while we’re doing it.

Seyla: [00:19:10] What tool or techniques have you used to improve the efficiency of your business or personal life?

Justin: [00:19:15] we talked before, when our second kid came on, on board, I ran out of time, so I work in, come home and, my wife’s been dealing with toddlers all day and they want to play and so it’s just, it’s amazing.

It’s very exhausting. And I couldn’t figure out how to get through my day. I came up with something super simple, but it’s a weekly calendar. And on the left hand side, it’s got the times, broken down into 30 minutes, just a single page. And, it’s every Friday I’ll fill it out for the next week with what I know is coming up, whether that’s doctor’s appointments or, meetings, the office or any of that stuff. And then I’ve got, things that I’ve timestamped basically that, I right down in red. So these are the things that I’ve put a due date on and I’ve, I’m determined to meet that goal. I’ll put those things in red on there and no more than, as far as those critical things, two or three things a day on that side.

So what I used to do was I just have a long list and I, it just never ended. Yeah. Just try and take little bites now. And I still, there’s still things I may not can get through, but I feel like I can accomplish a lot more that way. I do that on Friday, Sunday evening. I review it. Make sure I’m still on track there for the week.

And then, every morning before I leave a reminders got to get this done today,

Aileen: [00:20:33] Yep. That’s a great tip. Whatever gets scheduled actually gets done.

Justin: [00:20:37] There you go. Good way.

Aileen: [00:20:39] So if our listeners wanted to find out a little bit more about you,  where can they go to do that?

Justin: Yeah. So website is www.timbermosscapital.com.

And then, on there, I’ve got an ebook and some weekly content that I put out. People can sign up for any of that stuff there. if anyone has any questions or something that I can help them with, then, just it, my email is jgrimes@timbermosscapital.com . Happy to help.

Aileen: Awesome. Thank you so much. And we’re also looking forward to watching your webinars too.

Justin: [00:21:13] Absolutely. Yeah, I appreciate that.