Today we have Jeff Johnson on the show! Are you looking for ways to reduce the risk in your investments? Jeff Johnson is a GP and passive investor with extensive experience managing real estate investments. He’s realized great success through his disciplined approach to risk management, leveraging mentorships, and building strong relationships with other investors. He can teach you how he's achieved success by helping you minimize the risks from your own investments.

In this episode you will learn:

• how to limit investment risk by establishing buying criteria
• who are the players on your team
• how to leverage your background in real estate investing

Table of Contents:

• Where To Listen To The Podcast
• Insights from an Experienced Investor on How Can You Minimize Risk for Your Investments
• How Can You Minimize Risk for Your Investments Through Collaboration
• Strategic Partnerships and Preparedness: Ways on How You Can Minimize Risk for Your Investments
• Effective Strategies on How Can You Minimize Risk for Your Investments Through Underwriting
• How Knowledge in Conversation Can Help You Minimize Risk for Your Investments
• How Can You Minimize Risk for Your Investments by Building a Cohesive Team
• The Importance of Quality Relationships on How You Can Minimize Risk for Your Investments
• How To Reach Jeff Johnson

Insights from an Experienced Investor on How Can You Minimize Risk for Your Investments

Darin: Jeff Johnson lives in the DFW area. He and his wife work closely together in building their real estate portfolio. Jeff's a big believer in leveraging the experience of coaches and mentors. He's also a big believer in building the right team.

We are both part of the same multifamily mentorship group, the Brad Sumrok group here in Dallas. And Jeff has jumped into the multifamily world and I'm interested to hear what he is been up to and how he can help new people jump into this world as well. With that, can you share with the listeners how many properties and how many units you're invested in?

Jeff: Absolutely. We have about a dozen single family properties still. We got involved in it in about 2007. And then, when looking to scale, we got into apartments and we're general partners in two, actually lead sponsors with my wife and I. Then passive in five deals for about 500 units.

Darin: Can you share with the listeners what your background is? So, people come to the real estate world from all different backgrounds.

Jeff: Absolutely.

Darin: So, what is your background?

Jeff: I'll take you all the way back really far. So, grew up economically challenged and started working at a really young age, primarily as a laborer. One of my best friends, his dad was a general contractor, built houses amongst other things. And the first job that we had, Darin, was actually spreading straw on a two-acre lot that they had recently seeded. And so, spreading straw, but then one thing led to another then we got into framing houses and painting.

How Can You Minimize Risk for Your Investments Using Your Unconventional Journeys

Darin: How old were you and where were you living?

Jeff: Fourteen, in Middletown, Ohio. So, we got into one thing into the next, and then as years went on, we were installing hardwood floors, framing houses, doing roofs, and found myself actually doing a lot of carpentry work. Fast forward to the on and off through college and then got a management degree, and went to work for a finance company.

And that's where I met my wonderful wife, Carrie. We started off as underwriters and then loan processors. We became mortgage originators, and then we did all of them at the same time. So, we literally would start at the beginning by talking to someone about a purchase or refinance.

We would put together the documentation, the disclosures, the finances, the appraisal, and title work, then all the docs, close it, and then even collect it. So, we got to see the whole process from soup to nuts, start to finish, A to Z. We had the privilege of trying to resolve some of those that got behind or delinquent as well. So, it was a great foundation for what we're into now.

Darin: It's funny how each of us has a different pathway to get here. And sometimes you think that the experiences you have as you're growing up and as you're going through work and life may not be that applicable. But you can leverage off of that experience and you typically have a unique experience from the next guy that doesn't have that experience. So, that's fantastic. I'm sure at the time you didn't realize that one, working with the GC, you were going to be able to see it years and years later, right?

How Can You Minimize Risk For Your Path to Investments Ownership

Jeff: No, honestly, I distinctly remember one winter break we were building a house. It was probably 25 degrees outside. And it was just freezing and I couldn't work with the gloves on, so I had to hold the metal nails with my bare fingers. They were all frozen. And just the pain in my fingers, trying to drive a nail. One time I missed the nail and hit my thumb. And I just remember, "All right, I'm going back to college because I cannot do this for a long period of time, for sure."

Darin: That's funny. So, you thought, "I got to go to college," I don't know if you're in the same boat as me but I try to tell young people, "Look, get a job to learn. But look for an opportunity to become an owner, an owner of something." An owner of cash-flowing assets is what we're talking about here with multifamily. There's other opportunities to be an owner too, to be a business owner or whatever. But the general contractor that you were working for was probably making a whole heck of more money than you and your other friends that were working for him.

Jeff: Oh yes, for sure. And I remember one job we had, he bought an old fourplex. And again, we had the sexy job. So we got to go into the basement of this fourplex where the prior owner/tenants just used it as a dumpster in the basement. They had literally stacked up trash and garbage probably five feet high. So, it was so high we had to crawl. We couldn't stand up, we had to crawl on top of all the trash and then literally throw them out the window or take them up the stairs.

Unlocking the Path to Financial Freedom With Lessons Learned From a Free Asset Mindset

Jeff: And slowly, the more and more we worked, it lowered and then we could begin to walk, hunched over. Then finally stand up straight and then ultimately walk on the floors. But what was really cool about that though is at lunch breaks and different things, we talked with the owner and just, "Hey, how does this work? Why did you buy it, it's a piece of junk, "All these things.

He's like "No, I'm renting out the top two units and that'll make the mortgage payment. We're going to move our mother-in-law into the downstairs unit, and then the other one will actually put money in our pockets every single month. Pay off the mortgage in 15 years and we'll have a free asset essentially that will pay us then with four different rents." And I just thought that was the coolest thing ever.

Darin: A free asset. That's awesome. And so, at a young age, you were exposed to that. Did it take a while for that to sink in like later on in life, you remembered back to that time?

Jeff: Yes, well, I knew that day that I was going to do real estate somehow, but had no idea being economically challenged. We had a hard time getting through the week as opposed to talking about buying an investment property or something. And went to college with lots and lots and lots of student loans and then of course got out of college. And it literally took us years and years and years to pay back our student loans. So, to come to your point, would certainly, knowing what I know now.

How Can You Minimize Risk for Your Investments Through Collaboration

Jeff: I would probably take a different route as that pertains and probably wouldn't have taken on all that college debt because that took a really long time to get going for sure.

Darin: And I think today with COVID, there's more and more students that are looking at like, "Look. If I could do this online and that much cheaper and get my degree and not come out of school with this heavy debt load, I'll be that much better for it. "And I applaud them for that. I think you lose a little bit of the, I don't know, the college growing-up experience by doing that. You mentioned a number of times that you were economically challenged. If you're going to come out with student loans, that online process might be a way to do it.

Jeff: Oh, 100%. I agree.

Darin: You're in two GP deals now. What role are you playing in those deals?

Jeff: I was one of the lead sponsors.

Darin: Are you the lead GP?

Jeff: Co. Primarily, again, underwriting, finding the deal, putting the numbers together, the power is in the teamwork. And so, working with a team of folks that can manage the assets, take care of the CapEx, do those types of things. I'm really fortunate to be able to have a wonderful spouse, Carrie, that is the asset manager on both of them. So, she fills me in on a lot of the different things. We work together on a lot of it, but she really does the heavy lifting on both of those properties.

How Can You Use Synergy to Minimize Risk for Your Investments

Darin: That's awesome. I recently had a husband-wife, couple on and they said that they have done a number of these syndication deals. And when they divided up responsibilities. It made their life a lot better where one person was handling these roles and responsibilities and the other person was handling these because they have different ways of doing it.

Jeff: Yes, totally.

Darin: So, it's nice having your wife that can handle the asset management piece.

Jeff: Absolutely. She did underwriting as well, and then I actually worked for a state farm for a while and was an underwriter for property and casualty also. So, she's really good with the numbers. She did collections, and again, she's managed our single family portfolio pretty much primarily for the last decade or so. So, it's like from a skillset perspective right down our lane.

Darin: So, you did a single family from 2007. When did you get into multifamily?

Jeff: We started looking into multifamily in 2018. And then I think we joined Brad's program in 2019 just in time for COVID to hit and the whole world turned upside down there. Perfect timing, right? And then, we were able to get into a contract on their first deal in 2021. So, we get picked up on in 2021 and then another one in 2022.

Darin: Awesome. In COVID, I was in a number of deals both as a GP and as an LP, and it was a scary time to own assets. But then, it's funny because now when I talk to syndicators, everyone's like, "Yes, I wish I bought more back then."

Minimizing Risks and Maximizing Returns in Syndication Deals

Darin: There were properties that would come up and people were scared to do it, and the ones that had the courage to move forward were well rewarded for that. So, talking about that, were you nervous at all about your first syndication deal?

Jeff: Yes and no. Based on the fact of what we've done previously, we were really confident that we were able to put it together. Actually, there's a bunch of newbies that put it together primarily, but we had the skillset and the experience that was applicable that's needed for these things. Obviously, there's going to be unexpected challenges that always come up, but it was, I'd say more excitement than nervousness.

Darin: Well, good for you. A lot of people I think get hung up on, there's a lot to it buying a large apartment building for the first time. Whether it's good advice or bad advice, I tell people just focus on the next one or two, or three steps. Otherwise, you're going to get so overwhelmed by all the different things you have to do. And then, once you do that, that step one, it's in the rearview mirror and now it's not scary anymore. But in the beginning, doing anything is scary.

Jeff: Yes. No, absolutely for sure.

Darin: Did you have that?

Jeff: Yes, a couple of things we want to do is really limit our risk. Brad does a great job teaching in his program. If you start off with a good asset, you can avoid an awful lot of problems just by avoiding them from the get-go.

How Can You Minimize Risk for Your Investments Using Thoughtful Property Selection

Jeff: And so, for that, we wanted to buy a newer property, newer to us was mid-eighties in really good condition. We found that it'd been owned by the same owner for 35 years. So, we would call that number one pride of ownership, no large deferred maintenance things. We knew that a big ticket item might be the boiler so we just put that into our budget. Said, "Okay, let's just plan on replacing it." Because we know that that could go out.

We planned on replacing a certain percentage of the AC units, planned on replacing some of the washers and dryers. We took over some preventative maintenance things that they did around the plumbing and then put in a significant cushion for other things that might go wrong or placeholder, so to speak, with their CapEx budget on additional upgrades and repairs. The other part is it's in a very good area, so we've got a good asset in a good area that's already run well and has been cared for really well also.

It's easier to run a really good company that's already running well than it is to take over one, especially on your first one, and try to, "Hey. I'm going to go in and redo every single unit and fix the roof and fix all problems." That's the way that we were trying to manage our risk on it. And really the learning curve is just taking over the process, which we had plenty of learnings for sure on our first one. But we had a great team of people that was able to help mitigate some of those challenges.

Strategic Partnerships and Preparedness: Ways on How You Can Minimize Risk for Your Investments

Jeff: I'd say the other part is to make sure you have great people that you're working with. So, we had some excellent long-term successful business owners as our partners. That's going to make things a lot easier for you as well if you've got the right people that are professional and experienced and are really good at being able to make business decisions. Can help to make other types of good decisions also.

Darin: Those are great points. One, the type of property that you were looking for. You guys were very focused on buying a property that didn't have a lot of deferred maintenance so it was going to be easier to run and manage. Secondly, you were very focused on partnering with good business people.

The ideal is to invest with some partner, with somebody that has experience already doing this. Sometimes that happens and sometimes you partner with two or three other folks that have success in other areas of life. And as Jeff mentioned, they're good and experienced as business people and then they can apply that to running an apartment community.

You brought up learning lessons. Can you share some of the learning lessons that once you closed on the deal and you were managing the deal, what were some of the things that came up that you had to work through?

Jeff: Well, the boiler, we knew it was going to go out and it certainly did in a perfect time of the year, which was some of the coldest days of January. I was glad that we had money allocated for that.

How You Can Minimize Risk for Your Investments by Having Contingency Plans

Jeff: And honestly, my wife Carrie had done a great job of proactively going out and getting bids from different companies. And just getting to know them before we actually had to make the decision to do it. Because the worst time to make a really big decision like that is when you're trying to fix a big problem, with the boiler already going out. So, she already had great relationships with bids and I talked to the owners of the companies several different times.

So, it was really just flipping the switch and saying, "Okay, let's do it right now," as opposed to anything else. But that was a big learning. And then, the second thing I'd say, is we went with a property management company that ultimately ended up going out of business. One of the big learnings would be, "Hey if you've got to change property management companies, who's your number two go-to, and do you already have those relationships built? Do you know who you would go to?

Like what that ramp-up looks like ahead of time, and be ready proactively in case something does have to happen that you got to change property management companies? And fortunately with this one, similarly, we had some red flags. We had some issues. We escalated to senior management in the company and they weren't getting resolved. So, we started quickly talking to other property management companies, found a great one with TAM, and started the transition sooner than when they actually went out of business.

How You Can Minimize Risk In Your Investments With the Right Team and Proactive Decisions

Jeff: So, I'm really glad that we saw the red flags and that we took action early on. And again, when we talk about that, it was Lisa Landry who actually had the relationship with TAM and said, "Hey, we need to talk to them. They're an outstanding company and let's talk to them about taking over."

Darin: Yes. The property management company is a big piece of the puzzle and they're managing the day-to-day. I remember my first syndication property. We saw those red flags also, and I was on a mastermind and actually asked some other syndicators, "Hey, how hard is it to switch out property management companies?" Because they were having a conversation about that.

And it was great to hear from other syndicators that said, "You know what, Darin, it's not as difficult as you think. If you know in your gut you got to do it, you just got to do it." I applaud you and your team for being able to see that as well.

Jeff: Yes, thank you.

Darin: When you think back to before you did your first multifamily deal and then after doing them. What were some of the thoughts versus reality, like some of the fears versus, "You know what, I shouldn't even have been worried about that?" Did any of those come to light?

Jeff: I'll say there's always a lot of uncertainty when you're first putting it together and especially when you have to put a lot of hard money down. That can certainly be fearful. But again, if you've got the right team in place ahead of time and you need to have some folks that are experienced with going through the process. Or at least knowledgeable about going through the process.

Harnessing the Power of Mentors and Networks

Jeff: We're really fortunate to be in Brad's program. Nick Espanet is a coach now, a great friend that helped us with walking through the steps. And so, I say again, from managing the risk. That's one of the things that we wanted to make sure that we did was guardrails and professional, competent, experienced syndicators that we could go to.

And any of the coaches on Brad's team would help out quite a bit. And of course, we also used a broker, a buyer broker. Tom Lafferty because you don't know what you don't know. And you don't want to have life teach you a really big lesson when you're talking about the size and scope of purchasing an apartment. So, Tom and Nick, Brad's team all just really super beneficial.

Darin: Yes. That's awesome. I've talked to some people from social media, and whatnot that they're leery of conferences and multifamily mentors and all that. It's an investment in yourself but it's also an investment in the network of people that have already done what you want to do. And you talk about guardrails, being able to, "Hey, have you seen this before? What'd you do?" And that gives a lot of comfort.

I partnered with a guy, Raj Gupta of Chicago who I met through the group and he had done this many times before. When I came across something, I would share it with him and then he would say, "Don't worry, this all works out and this is how we handle it." And that gives a lot of comfort. If you're doing it by yourself, that would be a lot more scary.

Effective Strategies on How Can You Minimize Risk for Your Investments Through Underwriting

Jeff: Another thing that I think that we learned, especially in the negotiation or trying to win the bid process is to be, I'd say cautiously aggressive. When you're underwriting it, the numbers are the numbers and you want to make sure that you've got third-party factual data that back up everything in your underwriting. And you want to also leave some extra credit there for yourself and be able to take any variable expense and fix it, so to speak if you're able to. This year there's been an awful lot of talk around rates.

Darin: What do you mean by that? Take a variable expense and fix it if you can.

Jeff: Yes, so think of interest rates. So, interest rates, if you've got a floating rate, you're really at the mercy of whatever that's linked to, whether it's SOFR or formerly LIBOR or whatever it might be, ten year treasury, or something. So, it can go up and down. And again, there's caps in different ways to be able to manage that risk. But just making sure that you know what the risk is and if you're going to have a variable rate loan you need to make sure you've got caps in place. And be able to underwrite the property that's going to perform to go up to that cap. But then also that you've got money to buy the next cap also.

And so, for us, we've gone with fixed rates loans and we sleep really well at night regardless of whatever the fed's doing with raising or lowering rates. Because we know our business model that's baked into the plan and that's not going to change. And that's like your number one expense.

Calculating Potential: Proactive Underwriting

Jeff: The other thing I would say, there's some different things with water as well as with electricity when you're looking into it from the front end to say, "Okay. is there an opportunity to do some water conservation plans that we know is going to lower it," not exactly how much is unknown. But by being able to lower it, you know that's not going to be any higher than what it is today. So, those are a couple of little examples.

And then, with being cautiously aggressive, you always want to leave a few things. What we like to do is make sure that we're leaving a little bit of extra-economic vacancy plugged in. So, again, we've been really fortunate with being able to run it close to being fully occupied, but our underwriting's still such that we use around 10% economic vacancy. Which gives us a big cushion there.

And the other part I would say is if you've got a couple of pieces of other income, maybe you're able to add washers and dryers. Perhaps covered parking or tech package or something like that. Don't include all of it because as life often happens, something will come up and you want to be able to use that. Or have a little cushion or fallback or be able to overperform in some areas that you're not expecting to and that'll help you be able to hit your numbers.

Darin: Those are all great points. And another thing that I thought about when you said cautiously aggressive was underwriting for people that haven't done this before. Underwriting is just basically having a spreadsheet and putting different assumptions into the model.

Decoding Underwriting: Unveiling the Key to How You Can Minimize Risk for Your Investments

Darin: And I don't know about you, but when I first started underwriting these multifamily deals, none of them worked.

Jeff: None.

Darin: And I would look at these other people that were winning these deals and I'm like, "How are they doing that?" And so, I would then log on to their webinar and I see who won the deal and it wasn't me. And I'd log on and say, "How'd they do it? What did their underwriting look like?" And what I realized was there's a lot of components within the underwriting that you have to make a decision on. Let's use interest rates, say interest rates are 6% and you're like, "Oh, I'm just going to be conservative. I'll put in 6.5."

And then, economic vacancy, you're going to, "Oh, well you know what, it's been running at 5%, but I'm just going to put it in 10%." And then, maintenance expenses, you put in higher amounts in all the different areas to be ultra-conservative. Well, then all of a sudden you look at the end result and you're like, "There's a negative return here. This deal doesn't make sense." And then, you see other people actually bid up the deal and win the deal.

And then, two years later, they've increased NOI and was a great property. And you're like, "How did they do it?" After a while, you have to be confident that you can actually execute the business plan. If you're conservative in every single area of the underwriting, it's just not going to pencil. So, you have to understand what's realistic or else you won't win a deal.

Learning from the Winners: How You Can Leverage Insights to Minimize Risk in Investments

Jeff: Spot on. That's why I say it's cautiously aggressive. You want to be able to see what the numbers are but know what the numbers are. And you don't go any higher than what the numbers tell you. And if the property goes up to a higher bidder, then it goes to a higher bidder. But you can't compromise your own numbers and your own business plan.

Darin: But I would add to that though, if you're new to the industry, try to get on the email list as many syndicators as possible. And if you end up getting an opportunity to sign up for the webinar for the person that won the deal. You may learn something that they did differently and that you might be able to apply to your next deal. So, it's not a wasted effort because you've learned something.

If you look at it and you're like, "Whoa, they got really aggressive," well, then Yes, you back off and you don't do it. But sometimes I would look at this and I'm like, "I didn't even think of doing that."

Jeff: Totally. No, you're absolutely right, Darin. That's great. And one particular property we looked at, that exact same thing happened, we watched the webinar of the folks that won the deal. It was the tech package. And I was like, "Holy smokes, they're going to earn this amount per unit times 150 that really makes a big difference in a tight race that can be the extra." So, you're absolutely right about that.

How Knowledge in Conversation Can Help You Minimize Risk for Your Investments

Darin: Right, exactly. Now you have something in your back pocket that you may include in your next underwriting. You may not, but you know that you could potentially implement that or you didn't know that before. I think it's important to learn from other people that are doing it because they've already implemented a lot of these business practices and you can learn from them. And that's another thing I think is valuable from the mentorship program, is not just the mentor and the coaches and the guardrails, which are amazingly important. But also it's the other people in that network that you can learn from.

You can learn from them by watching their webinars and competing against them. But you can also learn from them at networking functions. So, at networking functions, there's two things you could be doing. One is you could be meeting partners and investors. And the other is you're trying to learn from other people. What are you doing in your properties now that's adding value?

This is just a conversation and they share something. You're like, "Holy cow. Oh man, I could do that in my properties and it can improve the NOI dramatically. That's just smart. That's smart."

Jeff: Yes, no, absolutely. You hit the nail on the head, Darin, and you learn so much from all the networking events that you go to and talk with other folks. You can learn from LPs there and GPs and everybody from just different challenges that they've gone to or what it is that they're looking at today. Different people's experiences, areas, all different things. Even in DFW, the different little submarkets. There's different growth as you will know, different amounts of growth in different parts of the metroplex.

How You Can Use Inspiration and Collaboration to Minimize Risk for Your Investments

Jeff: And depending on what type of properties that you're going after and the size and the scope, all those, just, "Hey, what's property management cost?" Well, it depends. It depends on the property, the size of it, the number of units, the age of it, and all those types of things. So, no, I think that's perfect and you just learn.

And then, the really cool part about it is you make some friends. You make some people that are really cool to hang around that you like and that inspire you. I get inspired every time I go to one or have a conversation with a like-minded person. I get inspired and excited to do more and try out whatever it is that I learned.

Darin: Yes, you said a lot there. Like you can go to a networking function and, look, there's a lot of business things that are going on with the economy at that particular time. So, you talked about the property management company. Well, when you saw the writing on the wall. Well, you go to a networking function and you're friends with a lot of these people and you just ask them, "Hey, who have you had positive experiences with in property management for these types of properties?" And then, all of a sudden it gets bubbled down to two or three.

And you know what? You could have spent six months trying to figure out who those two or three were if you were just yourself and trying to Google. And now, people have all these multifamily properties and maybe they have floating rate debt and they're trying to figure out solutions.

Leveraging Networking to Minimize Investment Risks

Darin: So, they're asking other people, and it's not just how do we solve it. But collectively they can leverage off the experience of a lot of other folks in the group as well and, "Hey, here's how we're doing it." And that's huge.

Jeff: No, absolutely. Networking is always great to do, whether it's in person or online, lots of opportunities and things to learn. And one of the things I've learned is, just all the changes that we've had since 2019. You think about the debt and you think about our economy and all the things that we went through.

So, 2019 comes along, hey, business is great, all businesses are doing fantastic. The stock market's insane. Then all of a sudden, something happens called COVID and the whole world shuts down. Then it opens back up a little bit. And lenders quit lending completely and sellers almost stopped selling.

As you said previously, whoever it was that bought a property at the beginning of 2020 most likely is very thankful. Because they've probably already hit their business plan and maybe even exited just because like what happened after the fact. So, what I'll say, is it's always a great time to buy a property where the business plan and the numbers work regardless of anything else that's going on.

And then, the second part is we're always learning and things are always evolving. No one ever knows everything about everything and people and companies are just figuring things out as we went through COVID. And then, even as it opened up, all the lenders are lending like crazy.

How Can You Minimize Risk for Your Investments During Turbulent Times Through Resilience and Adaptability

Jeff: Now everybody's selling their properties. So, that's a whole other problem yet again. And then, as quickly as it all started, it seemed like it stopped with the fed saying, "Okay, inflation's out of control."

You think? Put the brakes on, raise the rates, and stop all the insanity. So, that creates yet another entirely different challenge. So, just the complexity with all of that over the last 24, 36 months is probably more than combined going back to 2010, that's wild. That's wild. So, it's great to have a network.

Darin: The other thing is that you have a business plan, but you can't forecast everything. At the time, my discussions were about what happens when we hit a recession and then COVID hit. And people were on TV saying, "Don't pay your rent." Nobody had ever seen that before and you can't put that into a business plan.

I guess I was scared being an owner of a multifamily at that time when it first came out. But now as time went on, what I learned was, you know what, people still paid their rent. I was like, "We were still cash flow positive every month." Our delinquency went up. There were people that either legitimately lost their jobs and didn't have the income anymore, or they just decided they weren't going to pay. But the minute they moved out, there was a line of people waiting to move in and they were willing to pay the rent. So, it showed me the resiliency of this asset class.

How Can You Minimize Risk for Your Investments by Building a Cohesive Team

Jeff: Very true. That's certainly been amazing for sure. And there's always going to be different types of solutions. One, we probably just talk about the country and the world, and there's different types of problems that present themselves. People are going to come up with different solutions to the problems that we have. And those solutions oftentimes don't exist the day that the problem arises, so to speak.

So, again, managing for cash flow, being conservative, and making sure that you always got a little bit of planning on the uncertainty and having a rainy day fund. So to speak, in civil terms, certainly bodes well when some of those challenging days arise for sure.

Darin: Yes. Having capital available to solve a problem is a good thing for sure. Hey, so in multifamily, people talk about it being a team sport. Over and over and over again, you'll hear people say multifamily is a team sport. Talk about some of the players on that team.

Jeff: Okay. Yes, absolutely. One, my wonderful wife, I could talk about her all day. She does a great job. She's been involved in, well, we've said a little bit with those different experiences of managing single family properties, underwriting, and so on and so forth. We've also got Lisa Landry, and Lisa's been her own design firm. She was the number one franchise in the country for a number of years before starting her own, going out, and starting her own company.

Landry Designs just does a phenomenal job, super hard worker, always on it, and has a wonderful eye for design, which I do not. So, whenever it comes to anything picking out any colors, Darin, I just listen.

Darin: Leave it to her.

Everybody’s Got to Know Their Own Lanes

Jeff: Absolutely leave it to her. She's great at that. So, everybody's got to know their own lanes. You know what I mean?

Darin: What about the partners, what type of partners do you partner up with? Not business partners but vendors. Any partners that you need to get involved with?

Jeff: So, off the top of my head, obviously, a great property management company. The great thing about a great property management company is they should have the preferred vendors that they already work with. And that makes things exponentially easier. And it's important for you or someone on the team to be able to get to know those folks as well. I would say and be able to continue networking, growing your sphere, and learning about other vendors.

You've got to have some great make ready teams. Got to have some great, say, general contractors or folks that can do a multitude of exterior things, whether it's roofing, siding, painting, concrete, the big jobs, et cetera. If you have a boiler, you obviously want to have some plumbing companies that are proficient with boilers and are able to fix those. And the same thing for a chiller. HVAC, obviously.

What else? Any type of water conservation. To go back to plumbers, plumbers can be very, very important, electricians, and having a great maintenance person. So, a good lead maintenance person is going to take care of a lot of the smaller issues there. But I'd say for us, we used a lighting company and again, Carrie did an amazing job finding a fantastic lighting company to replace and update all the lighting on our first property. And it really looks like daytime now at night. So, they took care of all of it.

Investing in Excellence How Can You Minimize Risk for Your Investments by Partnering With Refutable Companies

Jeff: And I'd say probably the biggest thing without naming all the companies is while your very best companies aren't going to be the cheapest. Just like Apple computers are not the cheapest. They're expensive and it's usually worth paying the extra money to work with a great company that's going to do great jobs. Take care of you and take care of any issues should they have to come back and do something.

You want to be able to work with a company, Darin, that just says, "Yes, I agree with you, this needs to be corrected. We'll come back and take care of it." And they do this without giving you any pushback or charging you additional money or those types of things.

Darin: Let me jump in here. I would say that leverage is key here also is that when you're in a multifamily mentorship group, say property management company, they want to do a good job for Jeff Johnson and his team. But if they're also doing work for 20, 30, 40, and 50 other groups within that multifamily mentorship group then they understand the value of word of mouth. And if they mess up managing Jeff's deal, it's not only going to be Jeff's deal. He's got friends with other people within the group, and the property management company's reputation is on the line.

So having that leverage. Then the property management company as you mentioned already has longstanding developments and that property management company may manage a lot of different properties in that market.

Know How Fair Dealings Can Help You Minimize Risk for Your Investments

Darin: And so, say, they're a landscaper or a plumber or whatever, they want to do a good job for that property. Because they want a recommendation from the property management company on the next five properties that they end up managing. So, you want to have that leverage, somebody that has more skin in the game than just your property.

Jeff: Very true, very true. And I say also it's important the way that you treat these clients as well or companies. Once you've got a chance to work with a good, strong, reputable company, don't beat them up on the bids. Don't put them up against three or four other folks and nickel-and-dime them down to anything. Because the best companies will quit returning your phone calls if they come out numerous times and they're giving you bids and you don't ever use them. You're just trying to use them to put up against each other. So, that's one of the things that we do.

We know that we found some really fair contractors. They do really good work. Their prices are competitive and everybody should make money when they're at work. We know they're really reliable and we'll come back and do anything additionally that we need, but we treat them fairly and they in turn treat us fairly.

Darin: That's a great point. Look, everybody's got to make money. So, if you find somebody that provides great value and they stand behind their work, that's a huge plus. You mentioned maintenance. That's a big factor that people I don't think realize until they own a property. You have a leasing manager and you want the leasing manager to rent these units and keep the property full.

The Importance of Quality Relationships on How You Can Minimize Risk for Your Investments

Darin: But the maintenance person working on the work orders. Their AC is down, or they have an issue or a leak or something's going on in their unit. If they're paying rent there, they want to know that the property is taking good care of them.

And that's going to translate into potentially them renewing and also them telling their friends and family that they should come to live here. So the maintenance person has a really big role in this.

Jeff: You're absolutely right. They certainly do. Vitally important to the property.

Darin: So, some of the other partners, lawyers, somebody who understands these large syndications and the legal work associated with it. You mentioned GCs. GCs can come from your property management company or could come from other referrals. Lenders, you're going to get a loan on the property for 70% or more of the property value. You want to have somebody that can provide a good lender to you. And that's part of the value of these multifamily mentorship groups and networking also because you get referrals to these quality vendors.

Jeff: Very true. No, honestly, as you're talking about that, the ones that we've used, they were exactly that. They were referrals from other folks that we know, like, and trust and highly recommended. So, we give them a call and they were right. They were spot-on with everything.

Darin: Absolutely. And for them, the value is, I mean, look, somebody, if they came in cold just from a, say, Google, it may have taken six months or a year to build that relationship. But then all of a sudden, they're referred by somebody that's used them on four or five properties.

Minimizing Investment Risks and Finding Fulfillment Beyond Work

Darin: You're like 80% there in the buying decision already. You've narrowed it down to two or three parties and you're ready to pull the trigger. So, it's huge from their standpoint because their buying process for a new client goes down dramatically. So, what do you like to do for fun outside of work?

Jeff: Spend time with my amazing wife and family. We've got three active kiddos that are involved in band and soccer and boy and girl scouts. So, they certainly keep us busy. We have a lot of fun with them. And just trying to enjoy every season of life that we can. Try to make it to the gym, not quite as often as I like to but I really enjoy going to the gym. And then, we do dog rescue as well. So, we've fostered over 45 dogs. One at a time usually. Sometimes two at a time.

Darin: I'm going to jump in on that one because I haven't heard that before. So, how long do you keep a dog?

Jeff: However long it's necessary.

Darin: Well, give me a range. A week, a month?

Jeff: Probably one to three months. It just depends. Carrie has a vast network of different rescue groups. She works with just some really outstanding volunteers. So, generally speaking, we'll get a dog from the shelter that's on the euthanized list and when nobody else will step forward, and it's in its final hour. We'll work with different rescues to sponsor the dog. And we'll get the dog and have it transported here. And then, we'll work with the dogs in the rescue to make sure that it's been vetted.

Rescue, Rehabilitate, and Invest: Minimizing Risks in Both Lives

Jeff: Usually what we do first is give it a bath, help it to integrate, or decompress because they're usually pretty stressed out after being in the shelter. One we had was in the shelter, I think nine months and was ironically fine, just totally 100% fine. They'd said in the shelter that it had a lot of energy and had cage rage. Well, it just hadn't gotten out and exercised in nine months. Cesar Millan always says that the three keys for dogs are energy, exercise, and affection, sorry, energy, discipline, and affection.

We give them a bath. They usually sleep for about three days. They almost sleep for several days and they get up. And we take them to the vet, make sure they're up-to-date on all their shots, see if they're chipped, and if they need neutered or spayed, take care of that as well. Once they get through that, we work with them. Socializing the dogs with our dogs, make sure they're friendly. Usually teach them basic commands. So they're housebroken, friendly with kids, people, dogs, learn how to walk on a leash, those types of things.

And then, Carrie works with Petfinder and a number of different rescue groups to find the perfect dog. And this is what's really cool, Darin, is I never even knew this was a thing until actually, we started doing it. But the really cool part is that when somebody adopts a dog from us, they get a tryout period. It's like anything else. We get an application.

From Foster to Forever

Jeff: We're going to make sure it's going to a good home and ask a lot of questions. We go into a home lookup or an inspection of the home. We do a meet and greet. If there's other dogs there that you might have, we make sure that your dogs get along with our foster dog and that it's going to be a nice fit. I'm going to give you a trial period. So, once we say it's a good idea, go ahead and take the dog for a couple of three days, make sure it integrates well with your family. Whether it's kids, other dogs, pets, or cats. Most recently, folks had a parrot. So, making sure they get along really well together with them.

And then, it's like, "Hey, if it's a great fit, then we'll go ahead and sign the adoption papers. And if it's not, then you can return the dog and we'll keep looking for the perfect family for them." So, it really is just an amazing, amazing way.

Darin: That's amazing.

Jeff: Yes. I'll tell you about just a couple of them. Recently we had a family. And they said, "We're really active in the pool, like to hang around the pool, go swimming. And if we had a dog that just loved water, that would be just perfect." And I said, "Okay." We had a dog for him and it wasn't the right dog. But two or three dogs later, we had a dog that wouldn't stay out of our pool. And so, we're like, "All right, we know the perfect family to go talk to."

Nurturing Returns

Darin: I know the perfect family.

Jeff: I know the perfect family. And so, we called him up and they're like, "Oh my gosh, I can't believe that." So, it was just amazing.

Darin: Jeff, that just says so much about you and Carrie and your family that you guys spend the time to do that, that you are animal lovers. Look, we're all busy and the fact that you guys have a heart for that just says a lot about your whole family. So, I applaud you for doing that.

Jeff: Well, thank you so much.

Darin: You're the first person that I've talked to that focuses on that area. There's so many animal lovers out there. That's another beautiful part about this business is like, look, if you're an animal lover and you want to get into multifamily, here's a syndicator for you. You get to choose who you want to invest with if you're a passive investor. So, that's awesome. So, hey Jeff, if people want to reach out to you, what is the best way for them to reach out to you?

Jeff: Yes, absolutely. For me, it's admin@growpropertygroup.com. And if you want to reach out to my wife Carrie, just send her an email at carrie@growpropertygroup.com. It'll be a pleasure to get back to you.

Darin: Fantastic. I really appreciate you coming on the show. Listeners, I hope that you enjoyed that one. Until next week. Signing off.

How To Reach Jeff Johnson

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