Listen to hear Dustin Miles discuss how he continually invests in himself to help learn and grow. He values leveraging the experience of others that have gone before him. Dustin started with single family and scaled up into multifamily with 10 syndications for over 1,500 units. He loves to give back to charity, help others coming up behind him and he especially loves a challenge!

Table to Contents:

• Where To Listen To The Podcast
• The Candy Man
• Getting Into the Multifamily Empire
• Invest in Yourself by Putting It Out There
• Proverbs 27:17
• Talk About Fear
• Invest in Yourself and Pay It Forward
• Impact on Investor Deal
• The Next Big Stretch
• How to Reach Dustin Miles

The Candy Man

Darin: Dustin lives in Fort Worth, Texas. He went to school for engineering and started to invest first in single family, and then scaled up into multifamily. He's closed on 10 syndications with over 1500 units. He's always learning, always growing. And he has a passion for giving back to charity and others coming up behind him.

Dustin and I are both part of the same multifamily mentorship group. And when I got involved in real estate investing about three years ago, I joined the group, and I wasn't on social media at all. I wasn't on Facebook or on anything. The folks within the multifamily mentorship group told me I needed to get on Facebook and I needed to join this private Facebook group. And so I did. When I did that, I started to see a bunch of posts from people in the group. I was starting to look for, well, who in the group are doing deals, who are the syndicators versus the individuals that are investing in these deals.

And it was very evident that Dustin was involved in a lot of deals. I reached out to Dustin, and we had a great conversation early on. I'm just very thankful for that. And this is an industry where people give back, share, and help the next guy coming up. I think that you guys are all gonna really like this because Dustin has a ton of experience.

Dustin: I'm super excited to be here. I went to UT Austin for engineering school. And a little rewind a little bit more, I've always been pretty entrepreneurial. When I was a little kid, I had a candy business. My bus driver called me the candy man.

Invest in Yourself While You're Young

Darin: How did that work?

Dustin: I paid for my parents. I was eight. They'd go to Sam's and would buy Blow Pops, Jolly Ranchers, and Laffy Taffy. And then I'd just mark up the difference and profited probably 50 bucks a week. So, it was a nice deal.

Darin: As an eight-year-old, you think so? Yes. That's fantastic. You invest in yourself.

Dustin: So, my school told me that I had to stop selling candy or they were going to kick me out. I went ahead and stopped selling candy. And I think they were just mad, I was probably getting in on their territory. So but yes, bought and sold baseball cards, mowed lawns through a terrible carnival.

Then going into college, I went to, like I said, UT Austin and had an internet business. I'm 42, so that was pretty early. In as far as the internet is concerned, not everybody had a website. So, I initially started, I built a website. I had a friend of mine that helped me with that. Then I sold Pokemon cards. I didn't know anything about Pokemon cards, but my college apartment was half-filled with them. And I sold Pokemon cards on eBay and Yahoo auctions. I sold them all around the world, I think, 14 or 15 different countries.

Darin: That was after college?

Dustin: No, that was during college. So, when I was going to class, I had two backpacks. I had my engineering backpack. Then my other backpack was full of packages that I would send around the world full of Pokemon cards.

Darin: That's interesting. So, were your parents entrepreneurial or where do you think you got that bent from?

Dustin: Yes, my dad is pretty entrepreneurial.

Invest in Yourself and Explore Entrepreneurship

Dustin: He had comic book stores and a Halloween store. So he grew up, basically, buying and selling comic books. He had all the top Batman Number One, Superman Number One. They're worth a bajillion dollars right now. He doesn't have those now, but he was in the business. He could sell ice to an Eskimo. I don't think I'm that good of a salesperson, but I think I present myself well, and I'm determined and very persistent.

Darin: Absolutely. Now you get out of school, then why did you go to school for engineering when you have this entrepreneurial bent? I know a lot of engineers in the multifamily space, and engineers are extremely bright and a very difficult major. I was a business major, and I knew a lot of people that started in engineering and they ended up in the business school. But it doesn't seem like it fits with your background and being an entrepreneur.

Dustin: Yes. So, the option of going into business or engineering, and honestly, I like a challenge. So, that's why engineering. It was harder for me there. Some of my friends, I think, got through engineering school. Some of them didn't have to work nearly as hard, but I had to. It was a challenge for me. I had to work pretty hard. It was a mechanical engineering, top 10 school in the country and it was hard. It was hard and having normally at least a job or two during school, and then I had a business on top of that. So, it was busy.

Darin: Yes. That's a lot. So, now you graduate with an engineering degree and what kind of business did you go into?

Dustin: My first job was a fuel cell research job.

Make Money When You Invest in Yourself

Dustin: I think your son just went to A&M or just got out of A&M.

Darin: He’s a sophomore.

Dustin: I went from Austin to College Station. My first job. I was a poor college student and most of my shirts were UT this and UT that.

Darin: You could wear those around there.

Dustin: Yes. Everywhere I went, I was hissed at. So, that was interesting.

Darin: You still wore them. I was thinking you just kept them in the closet.

Dustin: No, I wore them. That's all I had. I was poor. UT was winning a lot then, so it worked well. But a few years later it wouldn't have worked as well.

Darin: That's back when the rivalry they still played against each other.

Dustin: Yes, I was at the game where Ricky Williams broke the record against A&M in '98 or '99.

Darin: So, say the title of the job again, like when you said it, I'm like, "All right, I'm going to have him define what that is." Because it sounds really important. And it sounds like you were making a lot of money right out of school, but I have no idea what that is.

Dustin: Yes. I was not making a whole lot of money. It's a fuel cell research engineer. That's basically what I did. But yes, fuel cells, it was an alternative to batteries. So, basically, you insert, it can be other fuels, it can be methanol, but you insert hydrogen and you get the byproducts are electricity and water. There was a promise for them to use them in cars and that felt like it faded, the projects I was working on, we were building the fuel cell part that was going to go into UAVs.

Getting Into the Multifamily Empire

Darin: They're very technical and complex in terms of types of projects engineers get involved in. Now you end up, do you stay in the engineering field? Then I remember when we got together for coffee one time, you told me that you started your real estate journey in single family. Maybe talk through how you ended up getting into that and how that progressed into multifamily and invest in yourself.

Dustin: I got into a single family after college, started doing single family rentals and flips. And I did about half a dozen of those. I always had the vision of going bigger. And I was trying to figure out whether that was buying a bunch of single family homes, or if that was jumping into multifamily. This was in the late nineties. Frankly, I didn't know a whole lot of people that were in multifamily. There weren't a ton of them. I had found one group, where I remember I met this guy. He was at a single family meetup and super, super nice guy and we're still friends today.

I remember I was amazed because I'd never met anyone that owned more than a duplex or a fourplex. He owned, I think it was 24 units in Lawton, Oklahoma. He lived in Dallas. I was just amazed. I was like, "Oh my gosh, how's this guy doing it." For some reason, I didn't have his contact information or I didn't get it. So, I called the person that ran the meetup, I was like, "Hey, I want to get in touch with this person. I'm going to go have lunch with him. I'm going to try and learn everything I can. And then, hopefully, do something similar."

Chase Your Goals and Invest in Yourself

Dustin: I ended up hunting him down. Hopefully, he didn't think I was stalking him too much. But yes, I ended up meeting him. Then it was interesting after that, I started meeting. It was like, I think whenever you go buy a car, you suddenly see, it feels like everybody else has that car. So, I met him, he had 24 units. I met a guy with 50, and then a hundred, and then a thousand.

Then I had lunch with the guy that had 10,000 plus. I was just like, "Whoa. Okay." And I was like, "Okay, these are normal people. I think I can do this." Then a friend of mine was putting his first deal together in 2012 and I was like, "Hey, I'd like to throw in some money." I was like, "Hey, I think it helps build my resume if I'm a key principle, a KP, on the deal."

He's like, "Okay, well, you can be a KP, but you need to throw in a little more money." I said, "Okay, let's do it." So, we still own that deal today. It's in your neck of the woods, it's over in Wylie. So, it's a B deal. It was crazy. So, 2012, I forgot the exact cap rate we bought it, is between a nine and a 10 cap.

This is a B deal. People thought we were crazy because we were spending $46,000 per door at the time for this B deal. We were paying top of the market. Everybody's like, "Oh my gosh. What are you doing basically?" So anyway, dove into that, did another passive deal. But around that time I was liquidating the single family I had.

Taking Initiatives

Dustin: I had some rehab projects that I was winding down. Basically, I'm prepping myself for going into multifamily. Then I hired a mentor in 2013. Got going from there, started making offers, and landed my first deal. A syndicated deal I put together in 2014.

Darin: Awesome. One thing you said, "I think I can do this." I think that's such a critical statement for people. I get people that reach out to me all the time on Instagram, and I'm sure you get a lot of new people looking to break into space. I think that that's so critical "I think I can do this." You surround yourself with other people that have already done it. Then, not to be judgmental, but you look at them and you say, "Look if they can do it, why can't I do it?"

If you don't go searching for those conversations and meet those people and realize, you also said, they're normal people. There's a lot of people in this world that will say, "I'd love to invest in those large apartment communities or large deals." But they don't take action to meet people, but they don't know anybody that does that and they don't take action to meet those people. So, that's key. Once you meet those people, it becomes less intimidating.

Dustin: Absolutely. And it's interesting. Back in the day when I first started, we didn't have, there wasn't Facebook. I mean, there's a plethora of resources for getting in touch with people. Honestly, back then it was tough to find those people. I'm a big believer in the Jim Rohn quote, "You're the average of the five people you hang around." So, it's like anything in life.

Invest in Yourself by Putting It Out There

Dustin: I just hired a track coach pretty recently. This guy has run the sub-four-minute mile before. It's funny. He trains, it's a bunch of high school kids trying to get scholarships. And then there's the 40-year-old me out there.

Darin: Let's clarify for the listeners because I see your social media and you're always out on the track running. So, he hired the track coach not to help him with multifamily, but for your track skills, correct?

Dustin: That's right. Well, track skills are lofty, I don't know if there are big quotes around that.

Darin: Right, relative.

Dustin: Yes, I mean, he's been there, done that and he's coached people. I'm not trying to run a sub-four-minute mile. I'm trying to run at a sub-five-minute mile. But he's already been there. He's done that, coached people on how to do that. It's just like in multifamily, when you want to learn how to do it, got around those people. Then, you either partner up with people or hire a coach. I hired a coach and then I also partnered up with people. I did both.

On my first deal I syndicated, I partnered up with the guy that I was KP on his first deal. And then another deal, I partnered up with him, and then I also partnered up with my mentor on a deal or my apartment coach. So, it's not rocket science.

It's finding anything you want to do in life. You just find people who are available as a coach, or you can partner with, and go take action, go put yourself out there.

Darin: I completely agree with that. But I think that you have to add to that mindset, right?

The Arnold Schwarzenegger Story

Darin: You grew up with an entrepreneurial mindset and you took chances and risks. Starting little business ventures and doing different things. You did single family, always wanted to go bigger and got into the multifamily. I'm sure you run across these types of people. I talked to people that some people think in their mind that they're not worthy, that they're not capable of doing it, that why would somebody want to partner with them and they'd have no experience? It's trying to let them know, "Look, everybody started somewhere." Everybody started with no investment properties.

A lot of people start in a single family and then they grow into a multifamily. Some people go directly into multifamily. But everybody started with no experience, but they were able to have the mindset that they could do it. Invest in yourself.

I think you have to make a personal decision that I'm going to do it and I can do it. Then seek out those people that can teach you how to get there.

Dustin: Absolutely. You can make excuses or you can go out there and get it done. I was listening to an audiobook while I was running earlier this week. The guy was talking about Arnold Schwarzenegger's journey – this guy in Austria. I don't think he spoke English or, if he did, it was very butchered, but this is right after World War II. He wanted to be a movie star so he moved to America. He's worked hard. And, oh my gosh, it's just this random guy from Austria that ended up becoming the governor of the largest state in the country.

Darin: Crazy story. He doesn't fit the model-actor type, but he had the determination to make it happen.

Dustin: He's the Terminator.

To Join a Mastermind Is to Invest in Yourself

Darin: So you talked about hiring a mentor, you talked about hiring a track coach. I know that when we met you, you talked very highly about being involved in mastermind groups. Before this recording, you were just getting off a mastermind. How many units and how many deals are you in?

Dustin: I don't know, passively. I'm probably half a dozen passively. But I've been either, co-captain or co-captain on 10 deals or so, sponsored or cosponsored 10 deals. I think it's about 1500 units. It's eight of them in Texas, two in Oklahoma.

Darin: Awesome. You've got the experience now. You're a guy that's done 10 deals, 10 syndication deals, 1500 units. Why invest in mastermind groups?

Dustin: I invested more in myself last year than I have previously before. I'm in Strategic Coach, which is one kind of mastermind I'm in. Another mastermind I'm in is called ISI. It's called Iron Sharpens Iron. It's led by Aaron Walker. I've been in there for about two and a half years. Great, great group of guys. The reason why I joined that group was, I was interested in having an online presence. I knew that he's been on John Lee Dumas's podcast, as much as anyone else. I think five times. And I knew him and some other people within his group were good at building an online presence. And so, I wanted to go learn from them.

What I didn't realize is they're very good about not only helping to shape your business life and helping to prompt that up, but their focus is on your entire life, not just business. So, that was a very pleasant surprise. There's a mastermind that it's not paid or anything that I'm starting.

Proverbs 27:17

Dustin: It's just a few guys, but they're very high-level guys and we're all building an audience and or trying to, at least. It's just a bunch of great guys. You get around really good people. It's not one plus one equals two. In those instances, one plus one could be three, or it could be 10. So, I’m really interested to focus on deeper relationships and just with good people, good things happen.

Darin: That's awesome. So, a few things there. One, Napoleon Hill's book, right? Think and Grow Rich. Listeners, if you have not read that book, you have to read that book. But he talks a lot about the mastermind. It is so true that you get around a group of people and one plus one equals more than two, it equals three or greater.

I think it's important for listeners to understand that even as you become successful, you're still trying to better yourself personally and professionally and invest in yourself. It's not just for personal gain. I know you. We've talked at length at coffee and we'll talk about it some more here. You have a lot of goals that are to help others and are charitable related. But investing in yourself helps so that you can impact more people. So, I think that's huge.

The other thing was just the name of that mastermind, Iron Sharpens Iron, which leads me to believe that there's some type of Christian focus to it. I mean, it may not be, but that is talked a lot about in a Christian context.

Dustin: There is part of that. Yes.

Darin: Okay. And then when we'd sign off, I'm going to have to ask you about this last mastermind, that's just getting going.

Invest in Yourself and Find Your Momentum

Darin: Because I may try to take advantage of that. So, thanks for bringing all that up. That's huge, we're all trying to learn from each other and help the next guy. And we all learn from each other from that.

I'm part of a Monday morning men's Bible study. We used to meet at somebody's house every morning, Monday at 6:00 AM. But because of COVID, we started doing Zoom calls. We've been doing it for, I don't know, two or three years now and I'm so thankful. All the guys in the group that had been there for a while, that so many prayers praised that at the end, just saying we're thankful to have each other.

Because look, life goes in ebbs and flows. Sometimes there's a guy in the group that's going through a challenge and everybody else comes along and helps coach them along the way. Then all of a sudden, six months later, you find yourself in a challenge and they help you. So, that same type of thing can happen in a business mastermind group as well. You learn from each other. That's awesome.

One of the things I've seen you do, it sounds like it's coming out of this mastermind, is I've seen you start to have more of a website presence and putting out webinars and educational content. Talk about what you're doing there.

Dustin: Yes, it's called Momentum Multifamily. My partner is Hayden Harrington. Just a great guy. We're very similar, but we have complementary skill sets. He's great with a lot of things but great with marketing and all that. But as far as the webinars and all that, we had in-person events, as I think you know.

Going Online

Dustin: Originally, I think last April or May of 2019, when we kicked off that meetup and we started at 25-30 people or so, and outgrew the space we were in and had to end up moving to the West end. It ended up averaging around a hundred people or so.

When COVID hit we ended up, obviously going to the webinar. We thought every bit, well, I don't know how everybody thought, but I thought the whole COVID thing was going to last for a month or six weeks. We were doing two or three webinars a week. Because I was like, "Let's pump out a lot of content. Let's do this, while everything's slow." Anyways, obviously, this may end up going on for a while or, I think we may just end up adapting and all that.

We've settled on doing webinars every other week. We have articles we're putting out there as well. And we have a multifamily 101 ebook. We have just lots of different resources for people out there and different series. Also, we have the heavy hitters series, which is people that have been around the block. Some have a thousand plus units. And then we have a panel series where we've had a women's panel, doctors panel, military panel. Then we have what we call multifamily 101 series, where it's more of a learning process. We talk about PPMs and all that. And we had Kristy come on, talking about taxes, and how taxes can benefit folks. So it's been a great learning experience.

I did want to mention that as far as the kind of giving back. So, within Momentum, we did a charity event last year. And man, that was really a lot of work.

Invest in Yourself to Help Others

Dustin: I've never put anything like that together. We ended up, I don't remember the exact number, I think after all the bills were paid, we ended up raising over seven grand for Cancer Care Services.

I'm on their board. It’s a great, great, great charity. It was a lot of work with that charity event. We had Michael Becker, who was nice enough to come to speak. And we gave away, we had raffles for lunch, raffles for plane tickets. We had an auctioneer there. It was interesting. It was a lot of work.

Darin: That's awesome. Can you repeat the website address? Because you talked about a lot of different free content that you've got on there. And so, some people may want to check that out. What's that website name?

Dustin: It's momentummultifamily.com.

Darin: Okay, great. And talk to me a little bit about fear. So, you started entrepreneurial endeavors, very, very young. You are somebody that can push past the fear. But there are different times when you're trying something new that you have fear and that you have to, even though you're uncomfortable, push forward. Talk about a time when you may have felt that way. How did you proceed forward even though you were uncomfortable?

Dustin: I think it happens every week or daily. I don't know, I mean, for being honest here. So, I did a Facebook charity event for Cancer Care last May for my birthday. Frankly, I was nervous about that. I've never done anything like that before. We ended up raising 5,600 bucks off of Facebook charity event. I was nervous especially that it's for a charity. I feel it's an added pressure because I want to do good things for them.

Talk About Fear

Dustin: There was pressure definitely, I was very nervous about it. I'll go into a little quick story on that. So, we went to go talk to Cancer Care Services. So, this was September, October, and we're like, "Hey, we'd like to throw a charity event for you." They're like, "Were you thinking summer 2020 or fall 2020?" No, we're like, "In a month or two." And they were like, "Yes, what are you doing?" then I was like, "Okay, well, we are building an audience. We think we can have some people."

I was like, "And we have vendors and sponsors that can help out." So, I'm like, "I think we got that covered, and we have the venue." And, okay, well, they're like, "It's going to be hard to pull off and a lot of work." We're like, "No big deal. We got it." And it was a lot of work.

Darin: That's great. So, they knew what was in store. You guys didn't know it. So, you just went plowing ahead.

Dustin: Exactly. I was nervous about putting out that I was going to run. I did a Facebook video about a year ago, where I said, I'm going to run a sub-five-minute mile. And I had been training on my own. It's been okay. But I'm like, "I want to do this now." So I'm like, "Okay, I'm going to hire a coach." I found this guy that he used to run for TCU. I think the name of his website is Train Like a Kenyan. He's Kenyan and a super nice guy. I was nervous about that. And I was part of a book that came out this week.

Scary But Do It Anyway

Dustin: I was frankly, nervous about that too. Because I was a lot more, not that I show my personality and all that, but there are a lot more details about my life that I put out there. It was definitely past my comfort zone.

Darin: Got you. What's the name of the book and where can people get it?

Dustin: It's on Amazon. It just came out on Tuesday. And let me look up the exact title. I'll find it for you. I'll get a link for you.

Darin: We'll come back to it. It sounds like each stage you go through it and you're able to push past it anyway. But setting up the meetup group, are people going to show up?

Dustin: Yes.

Darin: I would think it would have been fear and I'll share some of mine. I said that I didn't get on social media until three years ago when I got involved. And then I was going to all these entrepreneurial conferences and people kept talking about Instagram, and you need to get on Instagram. If you don't get on Instagram, you're just dumb. That's what I just kept hearing over and over again. I'm like, "It's a kid app. Why? It's for my kids." I remember I hired a guy to help me. And I was afraid to push the button to send my first post like, "What are people going to think? I have no followers." It was scary. That sounds so silly. It was scary.

And talking about your five-minute mile posting, you held yourself accountable by doing that. When I started the podcast, I set a goal to have a hundred, five-star reviews on Apple Podcasts.

Push Past Fear and Continue to Invest in Yourself

Darin: When I sent that post, literally my finger was hovering over the send button for a while because I'm like, "What if I only get five? I'm going to look dumb." I'm like, "Oh, you got to just push past it." So, I did it.

Fear can come into our mind in so many different ways, in so many different times, but we have to push past. One of the ways to push past is instead of thinking about the negative of, "Okay, well, what happens if nobody shows up to the meetup or nobody gives you a five-star review?" But what happens if the opposite happens? What happens if a lot of people show up to the meetup and you educate people and you help them? Or and the same goes for the podcast and different things.

What drives us to push past that fear is, in some instances, it's a financial gain for you as a GP and for your passive investors on a deal that you think is very promising. Other times it's just giving back and educating other people and hoping that you're having an impact.

Dustin: Absolutely. I did find the book name, it is Success Habits of Super Achievers. It's on Amazon right now. And to your point, two things I'd like to mention. I think that's the reason why some people they're afraid of what other people are going to think of them and how they're going to look. A lot of that's ego-driven. So, if you push that ego aside and it's like, everybody, they're just trying to get ahead, trying to be a better person, et cetera.

Kindness Pays Off

Dustin: There's a quote by Theodore Roosevelt, that's something I enjoy. So, I'm paraphrasing this, but there's the best thing you can do is have the right answer. The next best thing you can do is have the wrong answer. And then the third best thing you could do is do nothing.

So, it's just whether you take action and succeed or not. At least you're out there, you're getting something done. And hey, if you don't succeed, then you learn from it and then you go back and do better next time. Most of the time, it's not the end of the world.

If you look at it like, "Okay, what's the worst thing that can happen?" If I don't run this five-minute mile, what's the worst thing that can happen? When I ran a 5:20, 5:50, that's pretty good. I'm not in high school.

Darin: You're right. What I found was that, and maybe I'm wrong, but I still think that there are going to be people that are going to judge you. But what I realized is that, okay, all of a sudden, somebody from Chicago or Las Vegas, or someplace else in the country contacts me through Instagram and I have an hour's conversation with them. All of a sudden I'm like, I never would have met that person, had I not done this.

So, I'm not doing it for the people that are trying to judge, but I'm doing it to try to impact other people and help other people. You went before me. When I joined three years ago, you were kind enough to take my call. Then about a year ago, when I asked you to get together for coffee, you were kind enough to go with me.

Invest in Yourself and Pay It Forward

Darin: Today you're kind enough to come on the podcast and share with others. So I want to give back too. I think that that's just something that we just get a lot of joy as a human, to help other people and coach other people.

Dustin: Yes. Hundred percent. There's, and again, I'll paraphrase his quote. I like quotes.

Darin: You must be a big reader too.

Dustin: I try. It's probably been more audiobooks lately because that goes well with running. But there's a quote by Audrey Hepburn. And I heard this first from Rod Khleif, it was at one of his conferences. But it's "You have two hands, one to help yourself, pull yourself forward and the other one to help someone else" or something like that. But yes, I'm a big fan of that.

Darin: I'm sure, you said you had a bunch of people help you. I had a bunch of people to help me, and why not help the next person. Talk to me about your exit strategies on these multifamily deals. What are the exit strategies that you consider when you're going into a deal? And how do you see those play out as the deal progresses?

Dustin: We're going into it with the thought that we're going to hold it long term. So a lot of times, we place longer-term debt on stuff you're normally centered at 12 years. I try to get some steps down if possible. You take a hit on the interest rate and all that. But I like to have a step down just in case. No one knew, a year or two ago, everybody thought interest rates were going to start growing up and now they're super low. So, we'll see.

Yield Maintenance and Step Down

Dustin: Everybody thinks interest rates are going to be low for the foreseeable future, but again, we'll see. But I like the option of having those step-downs as opposed to defeasance or yield maintenance, which yield a much higher cost on the back end if you exit those earlier.

Darin: Maybe just talk quickly about, some people get what you're saying, and some people that have no idea what the difference is between yield maintenance and step down. So, maybe just talk high level in terms of that optionality.

Dustin: Yes. So, with step down, typically it depends on there being lots of different step-downs. But there's a five, four, three, two, one. So, that's the prepayment penalty that you pay. It's a percentage of your loan amount. And that's typically a much cheaper option to go if you potentially exit that loan earlier. So, we exited a loan early not to sell recently, but to refi, because interest rates had dropped, our NOI had gone up a lot and we're like, "Hey, let's go ahead and reset this guy." And so, we ended up refi-ing and pulling quite a bit of cash out for investors.

On yield maintenance and defeasance just, I guess, high level, those are just more expensive options. If your loans are a few million bucks, you're probably, I mean, and this is all over the board. But I've seen some, there was a deal that I assume the loan on. It was a CMBS loan. I'm giving an example now. The CMBS loan was about three million bucks. And the interest rate I think was like five and a half, or maybe it was low fives. But the defeasance was $750,000.

Darin: That's a big number to have to absorb.

Exit Strategy

Dustin: Yes. So, we ended up assuming that loan, instead of them eating it on the front end. We held the deal for about two, two and a half years and weren't planning to exit early. It's just we bought it at nine caps and sold it at six and a half. So, you make some money to win.

Darin: A few things on that. I come from the loan trading world, and so some people may be thinking, "Why do they have these large prepayment penalties on these deals, anyway?" Fannie and Freddie are the kind of ones that will play in that long term fixed rate space, 10 to 12 year fixed rate loans where most banks want to do five years or less. Predominantly these loans are going to go into securities.

Then the pension funds or insurance companies are going to buy those securities. They want to have that interest coupon for 10 years. They want to be able to count on that. So, the reason why they have these prepayment penalties is to make up for the fact that they could prepay earlier. Yes, they make money off of it, but a big reason why is because they go into securities that are sold elsewhere.

So, one of the things I wanted to talk to you about though on this exit strategy topic is that I met a lot of syndicators. I would say that the high majority of the syndicators' exit strategy is a sale within. It's a five-year business plan, but it's a sale within. If it's a great market, two and a half, three years. If it's there are some hiccups along the way, maybe it extends to four or five, six, seven years. But that's their exit strategy.

Deal Wisely

Darin: But I've seen you on some of the deals that have refi’d, pulled out investor money, provided that back. And then, if you can return all of it, you could have infinite returns from that perspective, because you have no more money in the deal and you're still getting cash flow. But you're one of the few that I've seen that looks at the refi, pulls out cash, gives a bit to the investors and holds the property as a strategic option. So, talk to us about that and how you invest in yourself and in that deal.

Dustin: Yes. I think it all depends on how you feel about the area and the asset in general. The deal that I mentioned, where I was a KP on that we've held the deal for eight years. It's a B deal. It's in Wylie. So, if anybody knows anything about Wylie, they had a massive hailstorm two years ago or so, I don't remember, but somewhat recently. So, the entire exterior of that deal is brand new. It's been great, on that deal is a great cash-flowing asset. It's just printed out money.

So, it's a B deal. It's right across the street from an elementary school. Wylie has some supply, they don't, they may now, but at the time they didn't have. There's only one other competitor in the B space in Wylie there. They may have some new products coming online. But there's not a ton of supply and Wylie is next to Plano. It helps when your neighbor is Plano. So, when you have those, good things happen, that was easy, as far as trying to figure out whether to sell that or not.

Impact on Investor Deal

Dustin: Then there's a deal over in HEB, that we recently refi’d. Similarly, it's next to elementary school. It's a nice cash-flowing asset, very stable, and very dependable. We feel it is an older asset, but we know the bones and we feel good about everything there.

If you're in an area where you don't feel as good about the long term of the outlook, then maybe that's something where you go ahead and try to exit. But if you like the area and you like the asset, and you feel good about your roof and your exterior and all your expensive items, then yes. I don't know. If you can just print money, why not?

Darin: Right. How does that impact the investors in the deal? Everybody has different uses for the money. Does everybody on board with that strategy?

Dustin: Yes. It's interesting. I've polled investors in the not so recent past or in the recent past. So some investors want to be in and out within three years or so, three to five, as you mentioned. There are some guys that have been in a bunch of deals and they're fine with just being in that deal forever because, for them, it's a pain to recycle capital.

Darin: Reinvest it somewhere else.

Dustin: They got put in. They don't know anything about that. They don't have any history on that deal. How's it going to perform? But at least with this other deal that it's been cash flowing and all that, you can feel good about it. Once everybody has a good chunk of their cash out and they're able to go deploy it somewhere else, pretty much everybody is okay, as long as the asset's cash flows. Everybody likes receiving checks.

What's the Take for Value Add?

Darin: Good point. What's your take on, value add. BC value add has been such a hot area over the last few years. But now, that we're in COVID, we're in a little bit of a time where it's more unpredictable in terms of what's going to happen going forward and there may be more volatility. What's your take on new construction versus the value add BC space?

Dustin: Well, I'm a big believer in watching what people do. So, I'm offering on A deals now. I think that speaks for itself. But no, we're still looking at BC stuff. There hasn't been much giving on pricing at all, especially within DFW, everybody's collections are awesome, and at least for the most part.

Unless, if they were struggling before COVID, then they're probably struggling now too. But no, if all the cap rates are on top of each other, then some of A starts to make sense. So, when you see Bs, see anywhere between 100 and 160 a door. You can buy an A for 150, 160 a door, and it's 20, 30 years newer, it starts to make a lot of sense for sure. I know we've offered on a few different A deals, probably within Texas in the 120 door range.

Darin: Yes. The BC value add space makes a lot of sense in terms of being able to find other properties that already have made the upgrades and you find the property that the market rents are below and you already see the path. But now that we're in this time, and I really wasn't I didn't have my mind on new construction for that reason. And I think there's risk in terms of the initial lease-up phase and also absorption in turn.

Cap Rate Differences

Darin: There's how many other deals are being built around your area. But one of the things that I think that's interesting to think about at this time is that on a new build, it may take a year or longer to build it.

I think there's going to be a lot of unpredictability and volatility with the election happening. Eventually, the government is not going to be able to continue to send out trillions of dollars. So, I believe you're going to have more businesses that will go under. And you'll have some challenges along the way that will come up. And if you're using that time to build, versus having to execute a value add plan, I don't know. I'm not involved in one right now, but it's just a thought that has come up in my mind that it may be not a bad time to look at that.

Dustin: Yes. I mean, that's the ultimate value add, right? You go from dirt to a building. No, I've not built and I'm not involved in a building and developing, but we're looking at that for sure. One thing that's pretty interesting that I would, as far as A versus B and C is the cap rate gap over the past 10 years is a lot tighter for As versus Bs and Cs. If you look at the history of Cs within DFW, I don't remember, I'm pulling these out of the air a little bit, but they're between a six and a nine or so or maybe even a little bit wider. Whereas within the A space, you're looking at between a four and a half and a five and a half. So, it's just a lot.

Webinars for Conferences

Dustin: From an exit cap perspective, there are some additional assurances within that A space. But like you said it depends on where you are and where you buy and where you build and all that. You could have someone building their competitor right next door to you. The stuff that we've looked at in the A space where we're trying to find spots because there are some blood bath concessions even within DFW. And so, trying to find those spots where there's not a whole lot of concessions, and where you don't have a ton of other competition, I think would be key.

Darin: That's huge. So before, when we were talking about your website and everything and putting out content, I noticed that you're doing a lot of online webinars. How does that work and what benefit is there to you guys for putting the content together and the individual that signs up for the content?

Dustin: We have a lot of just different content up there in general.

Darin: So, you have stuff on the website, but you also have like, okay, and maybe I'm wrong. Next Thursday, we're going to have this event going on and sign up for the webinar. That has become more prevalent, not only in the multifamily industry but just in general, because conferences have gone away. So, a lot more people are trying to vie for people's attention and are doing these online webinars. Just speak to the ones that you have an actual time horizon on it.

Dustin: Yes. So, for our webinars, our goal is to just bring education in general, add value. We've had some really good guests that have helped out a lot with that.

Dustin Outside Real Estate

Dustin: We had Dan Hanford on pretty recently. We had a military panel. So, I think anytime the audience can relate to whoever's up there. And that's what we're trying to do, whether it's a doctor panel, we're just trying to get them to relate to folks.

Darin: That's very interesting. I like that panel approach. So, let's say you're doing a doctor panel approach, how do you market to try to attract doctors?

Dustin: We don't do anything special. You've probably seen it, we put it on Facebook and we put it on LinkedIn. Then we'll post about it some. But yes, we don't do any advertising right now. It's really just, we are building our email list so that it does help with that, but there's no ad spend behind that right now.

Darin: Got you. Because I've read books and I've seen things where people have been able to within Facebook target very specific niches. When you're doing these panels, you could really get specific on who you want to target. That's interesting. So, Dustin, what do you do for fun outside of real estate?

Dustin: I love to be outside despite my lack of tan. But I enjoy hiking a lot.

Darin: You do have the Irish complexion, but I see you on social media all the time that you're hiking up this mountain. You're wearing the Denver, Colorado shirt right now.

Dustin: Yes. I just love to be outside. I've played soccer since I was four years old. And I've played my whole life. I'm not playing right now during COVID because I play indoor. I just like to be active, run, normal stuff, go try new restaurants.

The Next Big Stretch

Dustin: I like the Mediterranean quite a bit and Indian food. So, I like to try different things. I love to travel. Right when COVID hit, I was supposed to fly out to Europe. A friend of mine was turning 40. I was coordinating with his wife. He didn't know I was coming. I was going to show up for his 40th birthday. And I was going to Facebook live it too.

But anyway, it didn't work out. I told him, "You got to be on the lookout. I might just show up at any time." So, as soon as the COVID thing chills out I may buy a ticket and head out there. But yes, I like the normal stuff, like to travel and hike and be outside and be active.

Darin: Awesome. What's the next stretch goal for Dustin?

Dustin: I'm really focused on the sub-five-minute mile. Then the other goal, which is going to be easier for me is running a quarter-mile in under 60 seconds. I'm more of a sprinter, so that's easier for me. So, those are my two main goals, where much like yourself, I'm sure we're going after deals right now. We've plenty of LOIs out and all that. But really, those two running goals are the biggest goals I have. So, and then once I hit those and then I'm like, "Oh, okay, cool. I did this. Then I'm going to push him further."

Darin: Exactly. That was great. Whenever I talk to successful people, they're always going after something. And then once they get there, they're pushing onto something else, which is amazing. That's what keeps everybody charged up.

Only Do Business With People You Trust

Darin: If there's a passive listener on, what advice would you give them? They've never done a syndicated deal as a passive, how do they go about getting involved?

Dustin: I would reach out to different syndicators and I would get to know them. You're investing with people. It's not a marriage, but you're potentially in this business relationship with people for potentially up to 10 years, right? If we're doing a 10-year loan. So, but certainly, I would think of, it's going to be in that five to seven-year range.

Find some people that you mesh with and that you believe in them, you like their business plan. I mean, people do business with people that they know, like and trust. So, I would get to know people. And don't be afraid to ask, before you invest. I've never had anyone ask me this, "Can I see your criminal record? Can I see your credit score?" I mean, I think, stuff like that it's important.

Then I would, once you get to know whoever the people are that you're wanting to invest with. I would really focus on location. There's a lot of things that you can change about a property, but you can't change the location. If you're buying in a C minus area and you pour a lot of money into it, that makes it look like a B. Well, it's still a C minus area and those B residents aren't going to necessarily head into that area because of schools or because of ego or whatever.

So, we're really focused on the deals we're looking at. We're really focused on location. And I invest passively too, so that's something I look for as well. And then yes, I think that's pretty much it.

Invest in Yourself and Pick the Market You Like to Invest In

Dustin: I look at year one cash flow. And I look at the debt service coverage ratio as well. But year one, what I do is I look at the prior T3 or trailing three income, and then I swap that in for whoever's proforma that is. Then if I'm happy, what that means is, the worst-case scenario. If I assume that the new buyer can't do any better than the seller on income, am I okay with that cash flow, whatever that looks like. If that cash flow feels good to me, then I move forward. So, that's one thing a quick test, I look for.

Darin: That's a good point. I think that's great advice. I would say that maybe pick the market that you want to invest in first and then look for syndicators in that market. Where do you find syndicators? Well, you can find syndicators through social media. There's a ton of Facebook groups that are focused on multifamily. If you know somebody that has invested in syndication, you could ask them for referrals. You can go to free meetup groups when they start having actual live meetup groups. You can get involved with online webinars and online meetups, like what Dustin has available.

There's one thing that's very unique about making an investment in these private placement deals, which yes, they are long term. And that's very important that you have to focus on, do I want to do business with this person for a long term period?

Don't Be Afraid to Ask Questions

Darin: But you have the ability before you invest to call that person or possibly even meet with that person for coffee, where you don't have that ability when you're buying stocks. You're not going to call it the CEO of IBM and he's going to call you back. So, it really is a more relationship-driven business proposition. So, make sure you get out there and don't be shy about asking questions like Dustin brought up. Dustin, if people want to get a hold of you, what's the best way for them to reach you.

Dustin: My email is probably the best way. It's dustin@momentummultifamily.com. And as Darin said, I'm all over Facebook and I'm trying to follow Darin's lead on Instagram.

Darin: That's funny. Dustin, I really appreciate you coming on, man. You're a leader in the space. I've noticed that you did a lot within the multifamily mentorship group, but then you didn't let it stop you from there. You've gone out and you've built relationships with syndicators and passive investors all over the place, and you continue to try to learn. That's just something for all of us to learn from too. And we're all trying to grow. So, I appreciate you coming on. Listeners, I hope you enjoyed that one. Until next week, signing off.

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