Do you want to protect your assets from inflation? Inflation is a silent killer. It can slowly erode the value of your money, savings, and investments without you even realizing it’s happening. That’s why it’s so important to have a plan in place to protect yourself from inflation risk. Devin believes the inflation risk in the economy provides valuable benefits to asset owners. He and his team have purchased over 5,000 multifamily units over the years and he's seen it all. Listen and learn!

Table of Contents:

• Where To Listen To The Podcast
• The Metric We Look At in Multifamily
• How to Find Your Way Out of Inflation Risk
• Annualized Return Projections
• How Inflation Risk Affects Rates
• What Is a Bad Property?
• Types of Projects That Are Inflation Risk Resistant
• How to Reach Devin Elder

The Metric We Look At in Multifamily

Darin: Devin Elder was born and raised in San Antonio, Texas. He's a big believer in San Antonio, highlighting that it's the seventh-largest metro in the U.S. It has a great infrastructure, it's affordable, and it has a diverse job base. Devin is a complete entrepreneur at heart and he loves to help others in the business.

Just a little bit on how I know Devin. This is actually the first time that we're talking, but I know of Devin through social media. He runs in the multifamily space. He's been in the space for a long time, and I'm interested to know what he's done in the past and also his outlook for the future. With that, the first question I typically ask is how many properties and how many units you're invested in.

Devin: The metric we look at, and there are different ways to cut it up, but we look at multifamily units purchased. Today, that number's a little over 5,000 that we've acquired. Now, a lot of that has gone full cycle and we don't have in the portfolio anymore. We are currently managing about 3,000 doors in San Antonio, Texas, but there's always a little bit of a caveat with these. A couple of those are third-party clients that we manage for. We're vertically integrated. We own the management company, but then it gets more complicated. I'm also a key principal on those deals. I'm also an investor in those deals, so there are ways to look at it.

How Devin Started Playing in the San Antonio Market

Devin: If you just look at the properties that we currently manage, DJE, my company is the sole sponsor on. We're at a little over 2,000 doors right now, so there are different ways to answer that question. Then LP equity, I'm an LP investor.

Darin: You just watch the K1s come in at the end of the year.

Devin: Herding cats, yes.

Darin: You are in the San Antonio market so, share with the listeners a little bit about your background, and how you got into the space. You've been playing in San Antonio. I've seen people build out and then jump into other markets, but it sounds like you've really focused in on that one market, so talk about that.

Devin: I had what would be considered a college, I got a four-year degree, then I worked for a couple of large employers here in town. At some point, I just got a little bit disillusioned with my options. I have always been impatient. I'm also always experimenting with things and always trying to improve things. I just felt like my efforts at the companies that I was working at were not directly contributing to my success.

At the end of the day, I'm an entrepreneur at heart, and I needed to do that. That's what led me into multifamily. Real estate was finding or trying to find a vehicle, an investment vehicle that would allow me to get out of my W-2. I looked at a lot of different options and explored that for a while, while I was in my corporate career, and then eventually found real estate.

Passive Income Undaunted by Inflation Risk

Devin: I think if you search around long enough for passive income, retiring early, or building wealth, all roads lead back to real estate. You've seen it. It seems like folks have either built their wealth through real estate or built their wealth somewhere else and end up putting it in real estate. Whether you're a professional athlete, entrepreneur, or tech entrepreneur, it's like you end up with some sizeable allocation of your portfolio in real estate in one way, shape, or form, so I started doing that.

I was working for a medical device company here in San Antonio, a full-time job, married with kids. I started buying houses with hard money loans, renovating them, and refinancing out all my capital. That seemed to be a really cool model that I could repeat. First year, I did a house. Next year, I did 10 houses. Then my goal was to build enough cash flow from these rental houses to replace my income, at which point, I would allow myself to quit my day job.

It took me about two and a half years of really burning the candle at both ends, working the day job, having a young family, and building my real estate portfolio. In 2015, I was able to step out of the day job on the thesis that if I had all my time and energy to commit to my business, things could really take off, at least in theory, and that's absolutely what happened. Coinciding with me leaving my job was also moving from the single family realm into the multifamily realm. The first multifamily I bought was a six-unit with no partners.

From One to a Thousand Units

Devin: I ran that myself, literally signing leases on Sunday on the back of the car on the South Side of San Antonio. Then a 75-unit with some partners, and then a 130-unit, where I was the primary sponsor. It really just got fast from there, and I got the lay of the land. We're talking mid-2022. Right now, the last deal we closed was a 600-unit portfolio north of a $60 million purchase. That's how it started and how it's going.

Darin: You said a lot there. Impatient, you were disillusioned. You're an entrepreneur at heart. For the listeners' benefit, I think there are a lot of listeners that are in that same boat. They're in corporate America. They know they want to do something different, but they don't know how to get there. Sometimes, when they talk to people like you that have thousands of units, they can't really see the path, but you started with one house.

Every multifamily investor, every investor that owns thousands of units started with one unit, one property, one investment property. We all started at zero, and so you got to get out there and actually take a chance. Then when you first started doing the single family homes, you probably didn't see yourself, all of a sudden, "One day I'm going to buy a 600-unit portfolio."

Devin: It was very sequential, it really was one foot in front of the other. Enough steps have stacked up and I feel like with every project, you learn a little bit. A lot of it, in the early years, is learning what I didn't want.

Midas Touch

Devin: I felt like everything I did was a mistake, and I almost feel like I made all the mistakes. All that's left is to do the right thing now. Today, it feels like the Midas touch. Everything turns to gold, but that's only because there was so much experimentation and failure starting out and really just taking it step-by-step.

Then a huge thing for me was just finding role models. I didn't grow up with any money or any role model around building this kind of portfolio or business. It was critical for me that I found those people. I got to be friends with people that had, let's say, a 1,000-unit portfolio, and even have guys like that give me some grief over dinner. Like, "What are you messing around with these houses for? You need to go buy a 100-unit apartment complex." When somebody I really looked up to and respected got after me like that, I just thought, "I have to do this." I just can't overestimate the importance of your peer group.

If I were to look at one factor over all these years being an entrepreneur that's helped, it's the peer group. I'm a part of several peer groups where there are guys and gals doing big things that push me.

There's that old saying, "You want to be the dumbest guy in the room." I think if you want to grow, you need to challenge yourself and be around people. Really, it's almost like osmosis. We just are social animals and we are just going to mimic our peer group. Whether it's the way we dress or the belief systems we have, we just mimic our peer group.

How to Find Your Way Out of Inflation Risk

Devin: Unfortunately, most people have a default peer group. They have their family, which they didn't pick, or they have their work environment. Maybe they don't really have control over that either, and that might be it.

You've really got to go out of your way, in my opinion, if you want to change things, to get around a peer group that is doing things that you aspire to do. That was instrumental for me and still is today.

Darin: How do you do that? You said you're involved with multiple peer groups. Are you in different mastermind groups, going to conferences, meetup groups? How are you surrounding yourself with these types of people?

Devin: It's evolved over the years. Early on, it was going to a lot of multifamily conferences and starting a podcast. Absolutely, paying to be a part of multifamily mastermind groups. That was really instrumental for me early on. These days, just to be frank, I don't really go to a lot of multifamily conferences or masterminds because my company's built, my team's running. Frankly, this is what we do every day, so for me to go spend a weekend at a conference and talk about it. I've had enough hours in the week talking about multifamily because we're over here running this portfolio. Now, that's different from when I started.

Today, my growth around multifamily comes from just running the company. I am a part of a couple of other CEO mentor groups, and entrepreneur mentor groups that maybe are not multifamily-specific, but where I can get around people that are doing big things and be inspired by them, and just to have that camaraderie.

What Entrepreneurs Need to Consider Aside From Inflation Risk

Devin: It's incredibly important, as an entrepreneur, that you not rely on your spouse to be your business confidant. Maybe your spouse is your business partner, in some cases. For me, that's not the case, so to not expect my spouse to understand everything about the business and be the sole person to rely on.

Then your employees and your investors can't be that either. You're sitting out there all alone with these massive decisions, and this massive burden on your shoulders. That's just no way to exist. Plugging in with other CEOs, other business leaders, I think, just from a social aspect is absolutely critical because you're wearing a different hat when you're around your team, or when you're at home being a dad or being a husband than you are running your company.

It's vital to just be networked with other people where you can be honest about your challenges in a way that you can't be in other CEO or entrepreneur. You got to put on a brave face for everybody, and that's fine. That's how it goes but I think that peer group of other people that are in your same situation in their respective companies is huge.

Darin: I go to a lot of multifamily conferences, but I also go to a lot of entrepreneurial-type conferences. Sometimes, when you're around the multifamily crowd, you're hearing a lot of the same kind of things over and over again. When you get around other people in different industries, you may hear something like, "I could apply that to my business." It's different than what you've heard. Or somebody is ahead of you and is challenging you to push yourself a little further.

How to Be Successful in Multifamily

Darin: That's very cool, and I like the progression. I’d say to listeners, that's probably a pretty natural progression. In the beginning, you want to soak up as much as you can in terms of how to get involved and how to be successful in the multifamily investing space if that's what you want. After that, exposing yourself to other people that have succeeded in a bigger way to challenge you is a great dynamic to have.

Devin: There's always another level, whether that's looking at philanthropy, whether that's looking at team-building, succession plans, or getting into multiple markets. There's no getting somewhere and then just stopping unless that's what you want. There is always another level to explore.

Darin: One thing you said before is, that you've gone through so many different things. I've heard this from other people. It's like, "It's another one of those." Once you've been doing it long enough, and I don't think you mentioned it, but I saw it on your website. You started investing back in 2012.

Devin: That was my first deal, first little house.

Darin: You've been doing this for 10 years. A lot of people have been getting into the space in the last year or two, three, four, or five years. I'm only in the space for four years. You've seen a lot and you could say, "It's another one of those. This is how we handle that situation."

Devin: The first time you see those, it takes a lot of mental bandwidth, resources, and maybe capital to deal with it. But after you've seen it a few times, these challenges start to look similar and you have almost a sixth sense about how to deal with them.

Is There an Inflation Risk in San Antonio?

Darin: Talk about Texas and then San Antonio markets.

Devin: I was born and raised in San Antonio. It's always been a little bit of a sleepier town next to the bigger Texas markets like Dallas, and Houston. Then Austin has just been a unique market, been really on fire the last few years. I started investing in 2015 in San Antonio multifamily, when you were trying to buy stuff for 60K a door, 70K a door. I bought a deal for 46K a door. What I've always liked about San Antonio is, it’s Texas. It's a business-friendly state. San Antonio's big. It's like the seventh, largest metro in the country, which a lot of people probably don't realize.

It has a great infrastructure system, so traffic is fantastic for a city this size. Then you got a diverse job base, so we're not reliant wholly on energy. We've got a little burgeoning tech center. Medical is a big employer here. We've got military, Military City USA is a moniker for San Antonio, and it's affordable. Even though we've seen a run-up in prices in everything, globally since 2020, San Antonio is still affordable. So, you've got a lot of migration, a lot of folks moving here. Especially since 2020, that really changed things.

Then you've got a Downtown that's really being revitalized. Frost Bank built a new tower Downtown a couple of years ago. It was the first addition to the San Antonio skyline. There are another 350 units of multifamily that are going up right now in Downtown San Antonio. Some new hotels are going up.

A Gift to the City

Devin: An area just north of Downtown called The Pearl was a billionaire developer's what we call a gift to the city. He really went first and spent a tremendous amount of money doing this incredible development that has just absolutely skyrocketed real estate values around the area.

Then now that, of course, if smaller developers can get the comps on the hotel rates, on the rental rates, then that's going to spur a lot of development. It spurred a ton of economic activity in Downtown San Antonio. We actually have our corporate office in Downtown San Antonio. I'm really excited to be in the middle of that, even though we don't really invest in projects Downtown, necessarily. That's the high level in San Antonio. It's a great place to have a family. Your average age is a little older than, say, college town or party town like Austin, but that's fine. Your median income's going to be lower than it is in Dallas or in Austin. For our purposes, renting 1980s apartment communities at $1.25 a square foot, that's perfect.

Darin: Let me ask you this because you've been doing this for a long time. When I got involved four years ago, I ran into people that said what you said. They were buying at 40, 50 a door and they were like, "I'm out." This was back in 2018. They're like, "I'm out of the market." I think I bought at 80 a door, and now things are 150 a door in the Dallas market. One, why did you stay through as prices kept going up? Two, what's your take now at these levels? Are you still buying?

Inflation Risk on US Dollars

Devin: The problem is, we're denominating in U.S. dollars, which everybody wants to be fixed, and it's absolutely not fixed. The value of the dollar's eroding like crazy. We all denominate everything in dollars and we don't even think twice about it because it's the global reserve currency. It's King Kong, but when we denominate in dollars and you say, "It used to be 40K a door. Now it's 100K a door. That's crazy." The purchasing power of that dollar has eroded massively in that time.

If we had a denominator that was constant, it would be easy to compare prices across time. We do not have a denominator that's constant. You can't compare apples to apples and say 40K a door versus 100K a door because look at the cost of gas, look at the cost of college, the cost of going to Disney World, the cost of rents, the cost of everything has gone up because the purchasing power of the dollar's eroded.

So, that's how I address that, just a dollar-per-door conversation. All we're looking for is an investor IRR. That's all I care about. At the end of the day, my company that's got 70 employees and tens of millions of dollars of investor capital deployed is looking for one metric. It's beautifully simple. We're looking to beat our average annualized return projection, and we're looking for some cash flow along the way.

But at the end of the day, if we can do that because rents are higher because we've got a debt structure that works because we've got a value-add plan to spend some money and make some improvements, that is all in service.

Annualized Return Projections

Devin: All my whole portfolio companies are in service of exceeding our investor average annualized return projections. If the apartment was one million dollars per door and we could get it to underwrite and feel comfortable that we could get a 15 to 20% annualized return for investors, we'd buy at a million dollars a door, and so that's always going to be the case.

The thesis on multifamily has always been, for us and many others, that this is a fundamental need, that we're massively undersupplied on housing, and that the meaty part of the bell curve of the population that needs an affordable, clean place to live that's not crime-infested, dirt cheap, but it's also not $3,000 a month, you're just going to have that contingent of the population forever, as long as you're in an area that's seeing population growth.

The dollars are going to be what it's going to be. We're going to plug it into our underwriting and make some assumptions on what we think we can do with the property, and it doesn't matter. Again, because we're denominating in dollars, the purchasing power of the dollar is not a constant. It's very easy to get wrapped up and say, "I can't pay 125 a door because I used to pay 80 a door, and I'm just not going to do it."

Well, those days are gone forever. We live in a new reality where the dollar means something different, and at the end of the day, we're looking for investor return. Also, talking about inflation, we want to lock in the debt in today's dollars because inflation benefits asset owners.

With the Inflation Risk, The Rich Get Richer and the Poor Get Poorer

Devin: It's really sad for the whole world that the rich get richer and the poor get poorer, but the reason the rich get richer is because they own assets. What we saw with 2020 and this avalanche of trillions of dollars coming into the system here is that asset prices absolutely went crazy.

People who own assets saw their balance sheets explode. This is the rich getting richer. They're doing that because they're using leverage, they're getting loans on the property, and they're seeing asset prices appreciate. I don't like that that's the game, but I didn't make the game. And I set out to win the game for my family and win the game for our investors, and so that's the game we're playing.

Darin: That makes perfect sense. Some people, me including, before I got involved in the space, may think, "I bought at 40 a door, and now it's 80 or 150 a door." But in that time period, rents have gone up, incomes have gone up. The people that owned the properties in the past put money into the property to improve it, whether that be painting the exterior or renovating the interiors, so the property has improved over time. All those are factors and you’re frankly the first person that talked about the purchasing power of the dollar going down over time, which is a critical component as well.

Devin: I don't know if you've seen the memes out there that say, "These new $1 bills are awesome," and it's a $10 bill. There's no question that the purchasing power's being eroded, and that's not new. It's been being eroded for decades.

The Situation Most People Are in Because of Inflation Risk

Darin: To your point on assets, my kids are college-age kids, and my wife, they'll say, "I can't believe these gas prices." I don't like paying the gas prices either, but I tell them, "I'm glad we own ExxonMobil." That's an asset that's appreciating at the same time I'm paying higher prices at the pump, but then there are other people that are just paying higher prices.

Devin: You've got to own something. If you don't own something, you're not seeing any appreciation. You're only seeing higher prices, and that's the situation most people are in, and it's tough. Same thing with taxes.

The middle class is paying all the taxes. The people on the low side are not paying taxes. Rich people are not paying taxes because they figured out ways not to do it. So, you've got your hard-working, six-figure middle management guy paying all the taxes in America. I don't necessarily like that system but that's the system that we're set up in. At some point, you got to make a decision to play the game to win if that's your aim.

Darin: I think that's a great point. I don't know if you saw the news or not, but the Fed increased rates by 75 basis points. I was at an event last night, and I'm around a lot of different syndicators. There's a lot of grumbling going on about interest rates going up, debt prices going up, people getting floating rate loans, costs for the caps are getting crazy, and loan proceeds are down. Talk about how that's impacting your business.

Always Looking For Deals with No Inflation Risk

Devin: Right now, the deals we've been offering on, we don't sit on the sidelines really much. We're always looking for deals. We're professional investors, so if you sit on the sidelines, you might be on the sidelines for two, or three years, so we're always looking for opportunities. Loan proceeds are down. We have one metric we're looking for and that's the average annualized return to investors.

Loan proceeds are down, interest rates are up. That's hurting cash flow. Those are all definitely headwinds. We've lost deals recently that we just got to as high a number as we're comfortable on. That was well below the asking price several months ago, and so pricing expectations have come down a lot. We closed a big portfolio in Q1 of 2022 before the Fed really started all these hikes. The debt market's completely changed, so you're looking at lower leverage and as a function of that, you're looking at lower offers. Deals that might have had 12 offers over ask now have two offers, 10% below ask. That's just the reality.

I say all the time, there's always headwinds, always tailwinds. We've got a headwind of debt right now. Absolutely, debt is the biggest lever, in a traditional syndication model. We're buying a $20 million apartment building, getting a bank loan and investor equity is the rest. With that model, you've got to hit certain investor returns, so it's just flat out lowering offering prices because the debt has changed, so lots of deals getting re-traded, which is unheard of.

How Debt Terms Can Blow Up Deals

Devin: In a normal kind of market condition, you do not want to be an operator that re-trades a deal you have under contract. That's a big no-no, but if your debt numbers absolutely change overnight, and they have, then you've got to. Deals are falling out of contract. Deals are blowing up because debt terms are changing. We've got to underwrite more cautious debt terms on the deals we're looking for, but the Fed had to do something. You got an eight and a half percent CPI print, inflation's visibly out of control. Been at zero for a long time.

If we zoom out a little bit, the sooner the Fed can raise rates and go through this market pain. I haven't checked the Dow since this morning and don't know what it's doing, but the stock market's down. There's going to be a pain. The Fed said as much. I think the sooner we get into that, the sooner they're able to cut rates again. They can't cut rates from zero, so they've got to get off of zero. It's helpful to zoom out multiple decades and look at what the Fed's done. Recessions are short-lived and are measured in months, not in years most of the time.

If we're in 2022 and we're headed into a recession and we can't have a soft landing like the Fed was talking about, that's part of the monetary system that we're in where the Federal Reserve can print any amount of money. Again, I don't like that system but I didn't make that system. So, that creates a boom and bust cycle, that's what we're living in.

How Inflation Risk Affects Rates

Devin: The sooner we can get these rate hikes out of the way, the sooner the Fed can cut rates again. Historically, that's what they've done. I just don't know, globally, that we can sustain high rates for any multiple, multi-year period of time. Could be wrong. That's all forward-looking stuff, but the Fed had to do something with the CPI print. We're going to be in this interest rate environment for a relatively short period of time until they're able to cut rates again.

In the meantime, if we're pursuing deals, you've got to factor in the cost of your rate cap. You got to factor in your leverage. You got to factor in your rate. The only other lever you have is price, which is to lower your offer price. At some point, sellers in this market are just going to have to accept that. If they're in a position where they have to sell, they're just going to have to accept that, and we see that happening.

Darin: That's interesting. This is a prediction from me. I don't know if you think the same, but the syndication market has grown a lot in the last several years in terms of a lot of new syndicators out there. I think that with a troubling situation where you have debt becoming more difficult, it could weed out some of the new syndicators. They're just not able to get it to work, or they got a deal done a year or two ago and they did three-year bridge money. Now, they're coming up on having to either refi and they're having trouble making it work. What's your take on that?

Variable to Operating a Property Well

Devin: The operations, these deals are not easy to run. I think we've seen for a long time that that was okay because your valuations were just running away. We don't buy deals in Austin, but I was having lunch with a broker friend of mine. This was a few months ago. He's like, "Five years ago, you could have just bought anything in Austin." You could have had negative NOI growth, doesn't matter. Just acquire it. Forget about everything else, and you would have looked like a rockstar five years later, an absolute rockstar with zero operational ability just purely on the appreciation. Look, we've seen a lot of that.

The truth is, these deals are hard to operate. You're operating on a handful of acres where hundreds of families live, and older buildings sometimes. There are just a lot of variables to operating a property well. I think operators that have a handle on it now are going to have an opportunity to shine. It's harder to get into deals right now today with the debt situations that we're in, so you're just going to have to find a way to make it pencil or not participate. I also would say, I've never felt like we bought an easy deal, never.

Darin: Every deal, at the moment, seems like you're stretching.

Devin: Overpaying. "Are we buying too high? Are CapEx budgets too high?" Every single one of them. Taxes are too high. That's just how every single deal has ever felt. None of these are a layup, at least in my opinion.

The Differentiator Between Successful and Unsuccessful People

Darin: What a lot of people have told me is, that they were scared on their first deal. They were scared about their latest deal, but even though they were scared, they still are able to pull the trigger. I think that's the differentiator between people that find a way to be successful and people that get caught up in that analysis paralysis and just can't pull the trigger.

Devin: You should be scared buying these deals if you're taking on investor equity. You should absolutely be scared. That's a very sacred duty, and so it's a fine line that we walk between actually getting a deal done. To be honest, you could put together a good-looking deck and go raise money on anything. You could absolutely do that, but you don't want to be in a situation where you can't perform to your projections.

You're not going to be in business long, so the onus is on the operator, really almost exclusively, to find and pick good deals to put in front of investors. As I said, you've never seen a bad offering memorandum. They all look amazing. You're never going to see an operator say, "We may do okay on this deal, but it's a little shaky." Nobody's ever going to say that. Every deck looks amazing.

Darin: The deck looks amazing. So many of the return profiles look very similar to one another. Invest in, one markets that you believe in and two, with people that you know, like and trust, for sure. You mentioned it earlier that you guys are vertically integrated, so that can mean a lot of different things. How would you define the way your company is vertically integrated?

A Who Not How Situation

Devin: We used to not be. We used to basically be a private equity firm that raised capital, bought apartment deals, and brought on third-party management companies to run the day-to-day operations. Then I had a really negative experience with two assets with a third-party management company. I felt that I had no choice but to start my own management company, so I did that a number of years back and it's been great.

It's definitely a who not how situation. I found the right who to run the management company. Started with him as the first employee, and he's grown that company to 65 people, at this point, that run our entire operation, from leasing consultants and maintenance folks to accounting, and HR, and all that stuff is now housed. Everybody that works on one of our assets is employed by a DJE company, and so that just lets us execute faster. It lets us have better control. We're not just another client to a larger management company, and everybody's rowing in the same direction in terms of outcomes.

Darin: How long have you had that internal property management company?

Devin: Started it in March of 2020. Perfect time to start a business. It's been a little over two years now and it's just grown incredibly. It has grown because we're already poised as buyers and operators, and so we've got to have somebody manage the property. It's been our company and we already had the acquisition side and the capital side really humming along, so it was pretty easy to just plug-in projects that we were buying into our own team. That's helped a lot, everything from underwriting deals to executing our capital improvement plans.

Inflation Risk in Property Management

Devin: We have a couple of clients that are friends of ours, but that's it. We're not trying to go out there and do marketing and get clients. Frankly, there's not a ton of margin in property management and it's a lot of work. It's all in service of investor returns. The property management company actually is profitable and makes a good margin, but if it just broke even and it made our returns work, that would be enough for me.

Darin: Have that control.

Devin: It was very much started, operation-focused.

Darin: In March 2020, when you had to make that decision, you're probably like, "I don't know if I want to bring this in-house. This is a hassle, and it's going to be painful." It's a learning lesson, and now you look at that as a blessing. That's a lot of things in life. The troubled times that you had, nobody wishes that they went through it, but when they look back, they're like, "That formed my character."

Devin: It's such a cliché, and I wish there was a shortcut but there isn't. All the pain has led to something. It's almost like Groundhog Day where Bill Murray spends the whole movie getting his butt kicked. Then at the end of it, he's got this great day because he built all these skills along the way. It feels the same way where it's just like getting started in this business.

The first couple of years are getting my butt kicked in every imaginable way, but that's what makes you strong. That's what makes you capable, and sharpens your decision-making ability, and that's the differentiator. There are easier ways to live life than being an entrepreneur and pursuing these things.

Free Yourself Up to Bigger Things

Darin: But you wouldn't change it.

Devin: I certainly wouldn't have it any other way, no.

Darin: For the listeners' benefit, you mentioned Who Not How, and there's a book. I'm not sure if you're referring to the book or not, by Dan Sullivan. Listeners, if you want to get a better understanding of what he means by that, Who Not How is a really short book, but it's great, by Dan Sullivan on finding people, whether it's hiring employees or outsourcing different tasks so that you can free yourself up to do bigger and better things.

Devin: There are a million hooks that are going to get attached to you as you're running through this entrepreneurial journey.

I think it's our job to constantly remove those hooks that are holding us back, and that might be a task or whatever. Growing my company has been a process of firing myself from different roles. I've worn all the hats, I've done it all for short periods, long periods of time. My goal for the last few years has really been for my companies to run completely without my involvement. That's just a goal, that's just a direction.

The reality's not there and I don't know that'll it ever be there, but it certainly helped clarify my thinking around what the team looks like and how I cannot be a bottleneck on processes, which in turn helps the entire organization by having that framework.

Darin: Talk about maybe one multifamily deal and a big lesson that you may have learned.

Devin: We did this one deal, it was my first larger deal. It was 75 units, a total war zone. I had two other partners on it.

What Is a Bad Property?

Darin: War zone in what way?

Devin: We had a drive-by shooting there.

Darin: Like a real war zone?

Devin: We had homeless people sleeping in units. We had, people who would show up to the office completely naked in the middle of the day, strung out on drugs, and we had drug dealers in there. You name it. I did not find a dead body, but pretty much anything outside of that happened on that property.

It’s a real war zone. That was one lesson, just because it's a bad property doesn't mean the returns are going to be there. All I care about is an average annualized return net to investors. If I can get that on 1985, 300-unit B-plus asset, I want that.

Darin: It's a lot easier.

Devin: All I care about is the return, so if I can get that on a bigger, cleaner asset, I want to do it, so there was that. Also, my partners had this very DIY mentality. It was a husband and wife team, and they were there. The husband on the team, anyway, would be there 10, 12 hours a day. He would be mowing the grass. He would be in the units fixing stuff. I got to see firsthand like, "I just don't think this is very leveraged. I don't think we, as the owners, should be doing this stuff." I’ve got to see firsthand like, "This is not how I want to do it and I definitely want to bring people in. Rely on other people." It took me a couple of years to fine-tune my team.

Lesson Learned From Inflation Risk and Bad Properties

Devin: I don't think you can just hand stuff off and expect it to go perfect. It really took a few years of fine-tuning that. On that property, that was the lesson learned for me was it's, I don't want to spend all day at the apartment complex doing the stuff. I'm supposed to be finding deals and growing this company.

Darin: I was going to ask why because some people listening may think, "They're saving money by doing that," so why do you not want to be caught in the weeds and doing those tasks?

Devin: This is not to bash my old partners or whatever, but I think that was the last deal they did, and that was years ago. I've gone on to do thousands of units since then, so say what you will about either of our approaches. Let's just look at the results of the approaches.

Darin: I don't know if it's the right answer, but let's just say mowing the lawn, so you're mowing the lawn every week. If you take your time to drive there to mow the lawn and drive back, and you spent those three hours or whatever. It’s actually thinking about another way to drive the business, that one idea that you come up with could potentially save or make the property that much more profitable. If you're always in the weeds, you don't have time to do that thinking.

Devin: There's a real opportunity cost to that. There's an exercise I did a number of years ago that really helped clarify my thinking. It was, let's determine an annual salary. Let's determine hours per week to work.

The Target

Devin: Let's just say it's a million bucks a year, and you want to work 20 hours a week, just as a thought exercise. 20 hours a week times 50 weeks, that is 1,000 hours. A million bucks divided by 1,000 hours is 1,000 bucks an hour. I wrote that on my whiteboard and said, "Let's just have this as a target."

That really helped me do, "I want to work 20 hours a week, make a million bucks a year," was really helpful in eliminating things. Every time I'd sit down, I'd go, "Is this $1,000 an hour activity?" Negotiating a multifamily deal, that might be tens of thousands of dollars an hour. Talking to an investor that's going to write a million-dollar check into a project, that might be tens of thousands of dollars an hour.

Those things are clear, and then I discovered playing golf with investors was potentially a $1,000 an hour activity, which felt wrong. I enjoy playing golf, but when I look at it through the lens of a dollar per hour, it checks the box. There was 95% of the business activity that was not at $1,000 an hour, and that really helped me start to divide the workload. I’ve struggled a lot too with just accepting that that was okay. I didn't grow up with money.

It was Andrew Carnegie who said, "The one that does the work doesn't get wealthy." I've seen that be the case that the person that architects it, puts it all together, and is an owner reaps the rewards. They obviously take the risk too, but try to architect from that dollar per hour and say, constantly checking yourself, "Is doing X, Y, Z activity $1,000 an hour?"

An Awesome Exercise to Beat the Inflation Risk

Darin: Everybody has their own dollar amount, but I think that's an awesome exercise. To your point about the worker versus the owner, I don't know if you've read this book or not about Nike. I forget what it was called, but in that book, they state that they hired a designer to do the logo for Nike, that swoosh, which is probably, what? The most recognized logo symbol out there. They paid somewhere between 2 and $400 for that person to design it. That designer got paid one time. Let's just say it was 400 bucks, $400, and Nike has that swoosh symbol all over the world, recognized to their company. If that doesn't tell you the difference between the worker and the owner, nothing will.

Devin: The challenge is that we need to live. We need a paycheck to pay our bills and it's hard. Two and a half years working my corporate job to get in a situation was incredibly hard. The hardest thing I've done as an adult was to work my way out of my corporate job. Making that transition and being in a position where you can take risks and be the owner, it's no joke. It's a different approach.

Darin: Talk about that because somebody knows you now, they're like, "Devin's an overnight success," but it's not. You had to sacrifice to get there.

Devin: There's no question. Somebody gave me a book early on. I think it was by Darren Hardy, called The Entrepreneurial Roller Coaster. It was an older guy, and I was telling him my plans to build this company. He's like, "Read this book."

Entrepreneurs Have to Deal With Inflation Risk

Devin: The first thing it said was a quote from Elon Musk. He said, "Being an entrepreneur is like staring into the abyss and eating glass." Eating glass and staring into the abyss is not the rosiest picture. I think, in the beginning, it can absolutely be that.

A lot of entrepreneurs don't make it. There's a risk here. It's just a different mentality, but the rewards are crazy for those that make it through the gauntlet. I think a lot of it is life just testing you. If you can get through that and pass the test, then the rewards on the other side are there to be had. We see countless entrepreneurs that are a testament to that.

It definitely took a lot of perseverance, a lot of getting kicked in the teeth repeatedly, and keep showing up. It took everything I had in terms of getting around the right people, every dollar of capital I ever made, putting it into this business, and risking all of that. All for this dream of being an entrepreneur and having this freedom, and several years of what I would say high fuel consumption.

It takes the rocket a tremendous amount of fuel to get out of the atmosphere. Once it gets out of the atmosphere, it doesn't take much fuel once you're out of the atmosphere, but getting out of the orbit, getting out of the Earth's gravity is incredibly resource-intensive, and that was the case for me, I think, like a lot of entrepreneurs.

Starting Your Own Business Is an All-Out War

Darin: I would agree wholeheartedly with what you said. I'm still a huge believer that if you have a pit in your stomach that you want to try something, whether it be real estate, or starting your own business, you're not going to be satisfied until you take that chance, but on the same token, as Devin said, you got to feed your family. You have to plan to be able to do that.

You’d have to either be doing stuff at night or on the weekends, you have to sacrifice. Sacrifice watching Netflix, sacrifice some of your weekend time to go after your goals because, look, a year goes by, three years go by, five, 10, and all of a sudden you're like, "Why didn't I try?"

Devin: I think in the beginning especially, it's an all-out war. Not forever, but you've got to plan for an all-out war for a couple of years. We’ve got to practice that with Dave Ramsey. We paid off all our debt right after we got married in 2008.

Then, we went all-out war. I mean, literally eating beans and rice, sold my car, sold everything. We went to war and paid off, it's funny, it was 110,000 of debt, which sounds hilarious now, but at the time, that was tremendous. I saw the power of going all in, 100%, take no prisoners on a concept. In this case, paying off credit card debt, student loan debt, car debt, stuff like that, and it worked. In two years, we saw this progress.

Getting Everyone Onboard

Devin: It really set the tone for me to go, okay, if I can get my family onboard and we can go to war, all-out war, be willing to sell the shirt off your back if it meant advancing the cause, you make a lot of progress in a short period of time. That's what I did with my business. It was an all-out war. Sold everything, and put every resource I could possibly imagine into it. Countless sleepless nights, and that's what it took. That compressed a lot of activity and a lot of things into a relatively short period of time. Now we're on the other side of that, it's like I live a life that I would absolutely never have dreamed of as a kid.

Darin: Good for you, and you're making a lot of people wealthy. As a syndicator, I go to church. I think that that's a way of serving. Look, you're helping grow the wealth of all your investors.

Devin: There's a guy I used to work for that's a billionaire. He said, "The best thing you can do for people is giving them a job," and so we're employing a lot of people, good jobs, good company. We're giving a lot of people, investors, an awesome avenue that they might not have had otherwise or been aware of. I love that aspect of it.

Darin: So, what's the next big stretch goal? What do you have for the future?

Devin: We want 1,000 doors on the acquisition side in 2022. We're at 600 right now, so we've got 400 doors to buy this year. Debt markets are a curveball that we're working with, so there's that.

Types of Projects That Are Inflation Risk Resistant

Devin: We want to do $50 million of capital raised for the company this year. We're at 35 million. We do some other stuff. We do some land stuff and some other types of projects that we put some investor capital into, so we've got some other avenues besides multifamily.

Those are the targets for the year that are tracking pretty well. We'll see what they're going to be next year. I think right now, we're in a season, we've switched to marathon mode instead of sprint mode. We've got the property management company up and running. I promoted the guy that started that management company with me. He's now COO of our company. It's an incredible opportunity for him and he's done a great job.

We're in the process as a company, of saying, "We want to raise X amount of capital and we want to do 1,000 doors on the acquisition side this year. How can we continue to pursue those goals, but let people mature and grow in their roles and get ready for their next advancements?" That is one of my favorite things, seeing people get promoted up through the ranks of the company, and that stuff takes time. They've got to marinate in their roles. So, we're definitely more in marathon mode where, let's keep the company, the culture great. Let's continue to promote from within and continue to foster that because all that leads to good outcomes for us.

Tactical Muti-Year Goals

Devin: We'll probably try to buy 1,000 doors next year, too. That might mean getting into some other markets. I'm not a huge fan of setting very tactical multi-year goals because I think things change. You got to react to the marketplace and be nimble, so I tend to set one-year targets around capital raising and units acquired. Mid-year, probably Q3, late Q3, we'll start trying to put our goals together for 2023.

Personally, I really achieved an incredible amount of dreams and financial freedom. Now, it's more about coaching other operators to come up and do that, getting our employees promoted and them coming up. Continue to deploy investor capital. I feel I've achieved my dreams and I want to just continue to enjoy running and growing these companies at a responsible rate.

It's not an all-out war for me anymore. It was, in the beginning, to get this stuff off the ground, but now we're a bigger, established company. I just want to keep it growing and keep a good company culture. That's where my head is at these days.

Darin: That's awesome to have achieved that. I tell people, even people that are beginning, they can't see it, but you're a testament to it. It's a ripple effect. You were out to create something for your family, and now you're talking about adding 1,000 doors when you don't necessarily even need to, but you're pouring into your employees and helping them grow. You're continuing to provide great returns to your investors. I don't think people can see it at the beginning.

The Ripple Effect of Buying Things With Inflation Risk

Devin: When you were buying your first house, you probably couldn't see it. But now, all of a sudden, you're just like, "Oh, 1,000 doors this year. 1,000 doors next year." The ripple effect that that has, hiring employees, building people's potential within the company, returns that you provide all your investors, and what they do with that money, is huge.

Devin: You can't do it at this level without a big team and a lot of investors. They're all in it because there's something good in it for them. I actually had to get to the point with myself, like, "Why am I growing this company?" It's not just to hand it off to my kids, let them have a big inheritance. That's the last goal in my mind. It's definitely bigger than me. Everybody involved wants to do more deals. That means promotions. Investors want to be in more deals, so it's not just about me anymore. When I look around, everyone's winning. Why wouldn't we want to do more?

Then we could look at these assets like we're pouring millions of dollars in these assets. They look a lot better than they did six months ago before we bought them. That's a win. So, if we're setting it up where everybody involved wins, why wouldn't you want to do more of that?

Darin: What do you like to do for fun outside of work? You mentioned golf, but you mentioned it in the context of business, so I don't know if it's a hobby of yours.

The Power of Unplugging

Devin: Hugely influenced by Dan Sullivan. We talked about him earlier. He's got this concept of free days within Strategic Coach. I started taking Fridays completely off about a year ago, which was an adjustment, but I'm able to do that, so completely unplugged on Fridays. That lets me do a couple of things I'm super passionate about. We love going out on the ranch with the family. I've got two boys and a girl, my wife and I do. We get out on the ranch and rough it a little bit, and we love that. I love going hunting with my boys.

I fly a helicopter, so we'll fly, I and the boys will fly out to the ranch or down to the beach house and do that kind of stuff. Just feel really blessed to be able to spend time with my family. My kids are seven, 10, and 13, so have this finite period where, before they go off to college or whatever they do when they leave the house, we're in that sweet spot right there. I just don't want to have any regrets about how I spend these years right now, so I spend as much time with my family as they are comfortable with.

It's like, at some point, everybody needs to go do their own activities, and sports, and stuff, but a lot of time there. I'm a constant learner too. Aviation has given me a lot to chew on the last couple of years. I'm working on getting a plane and getting all my ratings for that. That's like, it's pretty dense stuff to get through, as it should be. That's my current challenge, and I think that's how my brain operates. I've got to have a challenge.

An Awesome Way to Unplug

Devin: I've realized in the last year that my business can't be my hobby all the time. I have people running the company and doing their roles. It's not my job anymore to jump in and meddle with it. It's their job to run that and figure that out. I've got to put my overactive brain on other things. Aviation's been a really good one. Golf continues to be a challenge for me. Then the ranch stuff, going out and getting animals and stuff that we raise, and that's an awesome way to unplug.

I had somebody comment on one of my Facebook posts. He said, "Do you have all the hobbies?" I think I had a picture of me flying a helicopter. It's like, we're all going to die. We know that, and I feel like I just try to operate as if I died and then I got to come back. How would I look at things if I was already dead, but then I got to come back and have all this stuff I have. Let's go for it and go for the most we can. I definitely have a lot of hobbies. Being intentional about stepping away from the business has let leaders and people step up. That has only helped the company get stronger, letting people mature in their roles.

A Helicopter Ride

Darin: If listeners want to reach out to you, what's the best way for them to do that?

Devin: djetexas.com. That's our company, We've got podcasts there. We have a team on the website and the different things we've done. You can definitely connect with us there. That'd be the best spot.

Darin: Well, Devin, I really appreciate you coming on. If you're ever in the Dallas market and you want to play a round of golf, let me know. I am not much of a hunter, but I'll go for a ride in the helicopter.

Devin: I was up there for a conference a few months ago. We took the helicopter up there. It was fun, so there'll be more, for sure.

Darin: I look forward to it. Listeners, I hope you enjoyed that one. Definitely reach out to Devin, and get to know him, and his team. He's got a big company and has been doing it for a long time. Look forward to connecting more with him. Until next week, signing off.

How to Reach Devin Elder

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