Looking for some life advice? Trevor Thompson is a successful investor and businessman who has learned a lot of valuable life lessons in his years of experience. In this episode, he shares some of the most important ones with you. You’ll learn who to do business with, where to do business, and how you can add value to those around you. These are lessons that can be applied to your personal life as well as your professional one. Listen and learn!
Table of Contents:
- Where To Listen To The Podcast
- A Master in Networking
- Life Lessons From Doing Big Deals
- A Market Where Everybody’s Leaving
- Life Lessons From the Scariest Three Years of Trevor’s Life
- The Big AHA Moment
- Life Lessons From a Moral Compass Standpoint
- How to Reach K. Trevor Thompson
A Master in Networking
Darin: Trevor Thompson lives in the Austin, Texas area. He's worked for corporate America, has owned his own business, and has invested in 20-plus syndications. He's a master at networking and he loves to learn from others. He also loves sharing his knowledge with you.
Just a little bit about how we know each other. Trevor and I both are part of the same multifamily mentorship group, the Brad Sumrok group in Dallas. He’s a guy that supports everybody, so he's just gone full steam into the multifamily world. I'm interested to hear what he’s been up to and how he's helping others. The first question typically asked is how many properties and how many units you're invested in.
Trevor: I'm not actually a Sumrok student, I just show up at everything. I'm like a freeloader. A lot of my friends are, but I show up at a lot of events everywhere. As far as units, I'm about 1400 units, but not all my investments are in multifamily. I have my second GP deal closing in two weeks. That will put me at a total of 20 syndications, 18 of them is an LP, and two is a GP. Currently, five have gone full cycle and I'm in multifamilies, it’s where I'm mostly in.
But I have a retail center, a medical center, a condo-to-apartment or apartment-to-condo conversion, a single family home fund, and a new build storage. I'm a little bit diversified in the things I've invested in, but most of my energy and my personal learning are in multifamily.
Going Full Cycle
Darin: Let's start with the LP side and for the very starter people, LP, limited partner, GP, general partner. On the LP side, you said you're in 18 deals.
Trevor: Correct. Five of those have gone full cycle.
Darin: What does full cycle mean? What are the returns that you've gotten on these deals and why did you start investing in multifamily to start with?
Trevor: I first started in multifamily. So the five that have gone full cycle, what that means is they've gone from when you've invested, the property sold. They've paid out all the partners their portion of the income. How they did, I am at both ends of the spectrum.
In my first two passive investments, I actually made no money. I just got my capital back. There's a bit of a story behind that we can get into. Then, one of them, I was just what's called an 11% pref. There was no upside. I was only on a preferred payment. In theory, it's like a loan and that one did get paid out, even though there were 18 months when they stopped making payments during COVID. They caught back up and got us out. My final one was what I'm going to call my home run 20 months, 3X my money. I'm at the way both ends of the spectrum of way better returns than ever imagined to just getting my money back.
Darin: I counted four deals. Two deals, no money, just capital, 11% pref, and then at 20 months invest.
Trevor: There's another 16% pref, which was a land deal. Basically, it was more like a hard money loan for the entitlement of the land.
Life Lessons From Deals That Didn’t Do Well
Darin: I like the 3X in 20 months. That's pretty good. Talk to me about the ones that didn't do well. The two that you just got your capital back because I haven't heard too many of those.
Trevor: The first one was in Houston. What had happened was they bought the property. Even though it was part of my actual first mentorship program I was a member of, you think they would know better. They're the ones training me. They really messed up on taxes and insurance. Both things just about doubled on them and they weren't prepared for it. The property was just floating, going along. One month, it's making money. Next month, it's not making money. They got an unsolicited buyer that basically got everybody out with their money back. Everybody agreed, "Let's just get out and move on."
Darin: How long were you in that deal?
Trevor: Just a little more than a year, so it wasn't too bad. The second one was two years long and it was a combination of several issues. Number one, they weren't that honest about what level of property it was. I think it was a D+ property and they sold it as a C that they were going to bring it up to a C+. My fault for not seeing it, because it was only a few hours away, but I've learned a lot since my first few investments. It was a combination of them being in short-term debt that they could not get refinanced out of. So they couldn't get stabilized, couldn't refinance out of it.
The Properties That Suffered the Most During COVID
Trevor: Then, anybody who had a C-/D+ property during COVID, they were the ones that was hurt the most. This particular property really did get hurt. It was a long stretch in there where they really suffered and this is very unusual for an LP. I actually volunteered to help the asset management team. Because they were overstretched, they had few properties. They were really stretched and so, I volunteered to help. So, I went down. They had a paid asset manager that was managing seven properties. To be honest, what I found with my limited knowledge was he wasn't telling anybody what was really happening on-site.
Darin: The asset manager wasn't telling the owners of the institution group?
Trevor: And so, I finally called the lead GP and said, "Listen, I got to ask some serious questions here. Do you really want to know what's happening? I've been sitting on these calls here and we're at 92% occupancy. We're at 82 economic." They've got people that have been gone for three months that are still on the rent roll. They know they're gone and they've been told not to take them off the rent roll. It's just, "This is crazy. Is this what you want to be reported?" He said, "Absolutely not."
I said, "Well, I've got more. I just went through the manager's desk while she was off sick for the day and found all these unpaid invoices, but the work had been done." So I said, "Why aren't these invoices paid?" He said, "Well, we don't have any money in the budget, so we're not paying them." I said, "That's ridiculous. We've done the work. We need to sort out how to pay them."
A Rough Property
Trevor: So, they managed to get some short-term funding we got caught up on, and then, of course, COVID hit and it just snowballed. We went down to more like 66% economic occupancy. Then, we clawed our way back and we got up to 87% economic occupancy. I was super proud of what we did. Then they said, "We're going to sell this property. What we need you to do is get it up to 92 and to do that, this is what you're going to do. You're going to drop income to two times and the only people you can refuse are violent offenders and sex offenders." I said, "Wait a minute, I just spent 10 months here.
So I told grandma that their granddaughter could move in, told the kids their mom could move in and that we've fixed this property." By the way, this was a rough property. I had armed security for three weeks as when they arrested the drug dealer that we turned in, he got released because of overcrowding and COVID in prison. He came back and threatened to kill us all and it was a wild ride. Again, I couldn't have learned any of this any other way. My learning cycle is fantastic.
Long story short, that was the end of me, being the volunteer asset manager. They did it. The sale fell through and then they got stuck with all these bad tenants. It took a while for the property to get going. They let the property run down. They were actually running the property with a temp agency. I'd missed one part of the story. They decided they would fire the property management company and I would self-manage. Here I was self-managing 176 deep value properties.
Life Lessons From Self-Managing
Darin: You, too, personally were self-managing?
Darin: Here you are, you raised your hand. Where were the GPs? Were they not in the state of?
Trevor: They were, but they were stretched with a lot of things. To be honest, I was having the time of my life because I was learning all kinds of stuff. I'm okay to be scrappy. I was having the time of my life. It was frustrating, but at the end of the day, I was making significant progress. I was learning so much. It was a big education. Then I thought, "We're finally here. We're so close to stabilization." Then when they said they wanted to just fill it, to sell it, I wouldn't do it.
I think it would have sold at proper and we could have slowly brought it up to be more stabilized then we would have been able to sell it at a much better price. It ended up taking a long time to close because it was a very unstabilized property and they let the property go down. They ended up with an $820,000 retrade at close, all condition based.
I feel lucky just to get my money back, to be honest, and I don't want to scare passive investors because this is not normal. So I just happened to have that happen. On another personal level, it actually was the same year I got let go with COVID. I worked for iFLY Indoor Skydiving for 20 years. So, I managed to switch my status to professional real estate. There was definitely significant tax savings for me being able to do that and so, there was a personal win that way.
Life Lessons From Doing Big Deals
Darin: So, you've gone through 20 syndications 18 as an LP. We'll get to the GP in a little while, but let's talk about those 18. You mentioned a few times about learning. What have you learned by doing so many big deals?
Trevor: Number one, who you invest with is critically important. The “who” makes all the difference in the world.
I didn't know the value of the who. Doing deals with people that you've come to know, you've come to like. Again, everybody looks good. Normally, nobody tells you about their deals that haven't gone well. My deal with that 3X was actually I've tracked these sponsors for a while. I know you're actually partners in one of their deals in Tucson.
Gary Lipsky and Kyle were partners on that first one. Since then, I've invested in Gary's fourth or fifth deal there. But what impressed me the most with them is I went to several of their events. I actually paid for their asset management training because I was so eager to learn and do different things and they talked about their mistakes.
A lot of people think, "Trevor, why are you telling people mistakes, or why are you doing these things?" Because I now look for people that are genuine and tell you, "We've had some struggles and this is how we've overcome them. This is what we did." At the end of the day, the story is still the investor capital was preserved. That is number one. Even though I made no money on those deals and I'm not going to reinvest with that group again.
The Simple Logistics of Passive Investing
Trevor: They still at least preserved my capital and they took that seriously, which was important. But who you invest with is super important. Secondly, I didn't understand some of the dynamics of, what I'm going to call the simple logistics of it, passively investing. The first time I went, they said, "We're going to increase the rents to this much."
If I'd actually just looked at the income and understood that you typically want to have two and a half to three times income in the area. The rents that they set in their proforma were unachievable at those multiples because the area income 1 mile from the property was too low. Now as I look, I start to look more for those things. Are their projections realistic?
Darin: Let's simplify that for the listeners. I think that's a great point. If somebody's income is the median household income in the surrounding area is $40,000, then what is the maximum rent that you can bump it to?
Trevor: Let me just think three times, are you trying to get me to do math now?
Darin: Yes. I'm trying to help the listeners understand that impact. He's plugging away on a calculator right now. That's what it sounds like.
Trevor: They can afford about $850 rent roughly.
Darin: That's a huge learning lesson. So, how he calculated, can you go walk through the math real quick on that? $40,000 divided by 12 for your monthly.
Trevor: Yes, that and then divided by three is, that's actually $1100. I did the math the wrong way.
How Deals Are Being Operated
Darin: That's how they can figure out as a limited partner. Once you transfer or wire your money into the deal and the deal is being operated by the general partner, the limited partners don't have control anymore. All the control is really on the front end asking questions. Doing your due diligence and possibly looking at what Trevor is talking about, "Do the rents make sense where they want to go?" Does the area support it? Another thing you could possibly do is just look on apartments.com and look at properties in the area and see what rents they're achieving. Do you think that this property after it's rehabbed can get there?
Darin: Are those the two main lessons that you learned or were there more?
Trevor: If you're going to invest in Texas, it's balanced out a little bit. But when I first started investing five years ago, the taxes were not near as significant as growth and insurance. Insurance in Texas has more than doubled and five years ago, they hadn't looked at it. Now, when you look at new deals now, I wouldn't say they're normalized out, but it's not as, not as. Those are two things that Texas is very aggressive on.
Darin: That happened to me on my first syndication deal. We budgeted for 80% of the purchase price for property taxes. Then you can look at the county property tax rates and you can see what they're going to charge the actual percentage. But you don't know what they're going to value your property at. I had a number of people telling me to use 80% and when it actually came in, they valued the property higher than our purchase price.
A Big Number to Swallow
Darin: This is unheard of. Typically, either the most they're going to go up to is your purchase price. We ended up having to hire a tax consultant that went and we ended up having to go through litigation to bring that down. But that's a scenario where property taxes is a huge percentage of your budget in a multifamily deal in Texas, at least. If you're off on that number significantly going from 80% to 100%, that was a big number that we had to swallow. Thankfully, we were getting higher rents than we had projected, so that offset it and we were able to absorb it. But if we weren't able to achieve those rents, we could have been in some trouble.
Trevor: And insurance, of course, has gone up quickly in Texas. A big part of it, of course, is Katrina and then snow-geddon. We all remember those two things. It's interesting. I just realized, I learned the other day that snow-geddon was actually a bigger insurance liability than Katrina was if you could imagine. You wouldn't think so. But the fact that it was so widespread across such a big area versus very localized and just in one community.
Darin: That makes sense when you think about it. One thing I would add to and I'm sure you look at this, so you have who do you invest with and the dynamics. I would tell passive investors the first thing I would consider that you do is pick the market you want to be in first. So, you want be in a landlord-friendly state. You want to be in a state that's growing, growing population, growing income, growing jobs.
Life Lessons on Building Relationships
Darin: Then the next step is I'm totally in agreement with Trevor is who you invest with. Once you determine, "I want to be in Texas, I want to be in Nashville," or "I want to be in Florida," in a growth market. Then pick syndicators who have an interest in those markets and try to get to know those people. If they're not interested in getting to know you, then pass. There are plenty of syndicators that want to get to know you and build a relationship.
Trevor: That's hugely important. The way I talk about it is, I'm the jockey first, which is the syndicator. The horse is the asset because I'm in a couple of other assets other than multifamily and then the track is the area. I'm 90% invested in Texas because I live here. I know the state. It's a great state. I've got one investment in Arizona, I've got one in North and one in South Carolina. All pro-business states. Areas of rapid, rapid growth. Lots of stability. Great markets to invest in.
Darin: Talk about the markets and why it’s important that it's a pro-business state or that it's growing.
Trevor: You want to be able to implement your business plan. If you look at some of the negative things that happened through COVID, Texas was still impacted. But not near as much as other places and they had programs to help with relief and do things. Just again, simple story, pro-business state, so Texas, we opened back up almost immediately. We were back in business. Restaurants were serving people.
Darin: It was like, "When are we going to open? Come on."
Negative Outside Forces and Their Life Lessons
Trevor: At that time, I just left for iFly and I started watching it. Places like California and Washington State were closed for 10 months. I'm originally from Canada. They were closed for 14 months. Then when restaurants opened, you actually had to show proof of vaccination to go eat.
You want to be in places that make it easy to do business because apartment complexes, even though it's very good business, it's still a business, it's still a challenge. You have outside forces that are negatively impacting you where you can't evict people, and you can't collect rent. They have long-term evictions. It could take you three to six months in some states to get rid of a tenant. Where in Texas, you could normally have 30 to 45 days, that's about as complicated as it gets.
Darin: That right there is a huge difference. I've heard stories of people who own property in New York or California and they had people in there that they couldn't get out. They were not paying their rent and they could not get out of their property for six months, or nine months and they were non-paying. In Texas, it's not like that. The growing aspect, I'll go back to COVID, also, because, across the country people, there were people on TV saying, "Don't pay your rent."
There were some people in some of my properties that ended up in the middle of the night, they just took off. But because we were in a growing market, because we had people that were moving in, there were people that were immediately ready to move in there.
A Market Where Everybody’s Leaving
Darin: There was a waiting list of people to get in. If you're in a growth market, that can happen. You can easily fill that vacancy. But if you're in a market where everybody's leaving, then it's much harder to find a replacement for that tenant when they leave.
Trevor: Yes, definitely. Also, just some of the lower class properties, like the one we were talking about earlier where I was an asset manager. People's mentalities are different, so rent, not rent relief. But just the relief checks came out from the government, so I literally thought, "Wow. The checks came. People are going to come in and pay the rent."
I literally went to the apartment complex that Monday and I noticed over 20 big screen boxes empty in the dumpster. And I went, "They're not paying the rent. They all bought big screen TVs." But I had an idea. I actually went and bought a big-screen TV and said, "Anybody who pays their rent on time will be put in a raffle to win a big-screen TV."
Darin: That's smart.
Trevor: It cost me $350 to get a big-screen TV. We've given them a couple of discounts trying to help them to catch up and stuff, so that was our first month going back to full rent payment. So, we said, "If you pay your rent, you'll get a raffle ticket to win the TV," which I try to at least be clever.
Darin: That's smart. As business owners and apartment owners are business owners, at times there are things that weren't in the budget and weren't planned. You have to come up with solutions.
Life Lessons From the LP Side
Darin: That worked for some people doing that raffle. Getting people to pay to be included in that raffle. It may not have worked and if it didn't work, then you'd have to come up with something different. Keep trying to figure out what's going to work and what's not.
Again, going, staying on the LP side, my experience is I get a lot of deals in my email box now. Almost every deal looks the same in terms of return profile. It used to be 8 to 10% cash on cash. Now, maybe, it's anywhere from 6 to 9% and a total return of 80% to 120% over five years. All these deals look pretty similar to each other. If you're completely new, you could chase. Well, this one says 120% and that one says 80%, but what happens is you get to know the people.
You know, "All right, this guy always comes out with a lower number, but he always kills it." Sets expectations low and then just blows through the number. Then other people might set it a little higher and they don't get there or they barely get there. What's your experience and how do you determine which deals to invest in because they all look the same?
Trevor: Yes, so I start with the who, always. And again, I've got a couple of deals with some of the same sponsors. Then I'm going to call it waiting for the stars to align. For example, I picked a who. She's actually mostly a capital raiser, but she's always a GP on her deals. We were connected for more than a year together, and we talked.
First Storage Investment
Trevor: I actually tried to get her to join one deal I was in, but she couldn't. That deal turned out not to work anyways. So, the who sent me a deal? I looked at the main GPs and I knew them. I'd also tracked them and spent some time listening to them. Then, the horse, the asset class. I wanted to do my first storage investment. Then there was just outside of Charlotte, North Carolina and that was a market I wanted to invest in. It's on fire as much or more than even Texas. The way I looked at it, "I got the trifecta."
I've been paying attention to the who, so I sit and look in my email box and I delete all the people I'm not tracking. Then when I start tracking you, I go to your webinars. For example, you just sent a deal out on glamping. You probably don't even know this. I reached out and connected to your partner and said, "You're doing a deal with Darin and I like Darin. So, I want to know you." Then we had a nice call with a little mix-up, but we're going to connect again.
That's me connecting the dots of the who’s, and so, I do a lot of the who's. I pick somebody I like, I watch, and then, it's the what. At this time, I didn't have disposable income, but it was another asset class. I was seriously thinking, "My diversification is just a few asset classes out of multifamily, just to balance myself out and learn about other markets." The way it came across, I got a deal from somebody I've been tracking for more than a year.
Life Lessons From the Aligning of the Trifecta
Trevor: I knew her partners, the main GPs and I knew I was interested in doing my first storage investment and I knew I wanted something in the Carolinas. All the trifecta aligned. I went to the webinar and then I invested. But it took me a year to get to the who's and then all of a sudden the asset class and the where. If their head deal had been in Alabama, it would have been a no, because I don't know anything about Alabama. So, it had to be Florida, Carolinas, Arizona, or Texas.
Darin: That's an example of, all right, you think about, "You're being a limited partner. You're putting in capital." Some people may look at that, as, "Why do I have to get educated?" You don't have to, but don't complain if all of a sudden you get into a bad deal. I'm completely in agreement that the people are the most important things because look, in all these deals, the returns are phenomenal.
There's been a lot of deals over the last number of years that have been double your money in 2, 3, or 4 years and you said you had a 3X deal. But a lot of these deals don't always go in a straight line. They all of a sudden have some hiccups and they're challenged for a three-month period or a six-month period. Then they get it and come out the other side and the backend sales price is great. But it's knowing that the people that are running the ship, that you have confidence in them.
Darin: If you are not going to spend time to get to know the people and ask other people and learn, then shame on you. What should you expect? Trevor has invested in 18 deals. Even as an LP, he spent the time to get to know people and that doesn't mean just one conversation. He said he's been following somebody for over a year before he invested with them, so that's huge.
Trevor: At the end of the day, I'm hoping to do multiple deals with the same people, so I want to pick and then build my relationship. Then, I'm switching over to get to the active side. I also look for people, there's a possibility that we have some things in common, some things where I could bring value. Because I'm switching to there, I'm still going to be passive no matter what. I'm just a little out of balance. I want to get a few more active deals but I always want to be passive. I'll mostly be passive in other asset classes just because I don't understand them as much and I want to learn.
I don't understand glamping. I've never been. I don't have anything. But it looks cool and it looks like the future. It looks like Harley Davidsons. Rich people buy motorcycles, this is rich people buying motor homes. It's a good market with disposable income.
Darin: It very well could be, but time will tell. Nobody has a crystal ball. But hey, let's talk about your background. You mentioned that you worked with iFly. What does iFly do and what role and capacity did you work with them? You probably worked in other places before that. So, what is your background before dealing with multifamily?
Trevor: I have the strangest background. In fact, I just did a video of, "Am I the World's Most Unusual Man?" Because someone introduced me as that. So, I actually started working for Ripley's Believe It or Not, at age 13. I worked for them all through high school till age 18 then I went to the Guinness World of Records.
Darin: What did you do for them?
Trevor: I started out handing brochures on the street corner. Eventually, in five years, worked my way up to a supervisory position.
Darin: Then at 18, you went to the Guinness Book of World Records?
Trevor: Yes, and they opened up a museum just down the street in Niagara Falls. Actually, my old boss went down there and opened it up. I went down there and started as a shift supervisor. Shortly, became assistant manager, then manager, then they gave me the title of Vice-President. It was just a nicer way to say, "We like you and we're going to pay a little more money." I actually got hired by Guinness to manage the rights. They didn't own them and they bought them out for North America. So I went and ran a company-owned location in the Empire State Building in New York City.
Opened up a franchise location on Hollywood Boulevard in Los Angeles, and had the world's tallest woman who actually worked for me. She was 7"7-1/4' and we traveled for TV shows. Probably, the coolest thing that I did was we gave Michael Jackson a Lifetime Achievement Award. I went to lunch and I was three places away from Michael Jackson. That was right when he signed the biggest record contract ever with Sony Records before the rest of his world started to unravel.
Life Lessons From the Scariest Three Years of Trevor’s Life
Trevor: It was fascinating to meet him. Then I wanted to open a Guinness and I wanted to do it in Orlando. I wanted to come to America. Orlando was where attractions were done. So, I raised the money, found a location, and then Ripley's bought the rights out and wouldn't give it to me. Strangely enough, I'd also committed to open a year-round haunted house in Orlando, of all things. So I moved to Orlando and opened a year-round haunted house. It was not very successful and it was the scariest three years of my life.
I would get paid on Thursday. Because we weren't successful, I had to put my money in the bank so my employees could get paid, and hope I made enough money on the weekend to get paid money. It was that crazy. Then I got recruited by iFly, so iFly is indoor skydiving. I got recruited by the original owner in Orlando, Florida. When I started with his business, he was losing $50,000 a month. He just didn't understand how to operate it.
Oddly enough, too, at the very first team meeting, he gave everybody a copy of Rich Dad, Poor Dad. I read it. Blew my mind and I put it on the shelf and just kept doing my job, which was the biggest mistake in my life. I should have started investing and creating passive income back then. Took me a long time to figure out that that was a big mistake that I made. Obviously, we became very successful. We started growing the business, took on another partner, and got a big infusion, $50 million to really build the company big.
An Amazing Journey
Trevor: In my role, I'd opened and operated 11 locations in the US. Then they decided they were going to really blow the company up to make it appealing to private equity. So, they split my role. I went to new tunnel openings and I actually opened 46 of 80 worldwide locations. So, all over the United States, Queenstown, New Zealand, Brisbane, Australia, Melbourne, Perth, San Paulo, Brazil, Brazilia, Calgary, Canada.
Darin: It’s not just the US, you were flying all over the world.
Trevor: First one on a cruise ship. I actually went on a Royal Caribbean cruise and spent a week with their sports department. I learned how we could incorporate a wind tunnel into their business and help them launch the first one. It was an amazing journey. Also, during that time took over three franchise locations that were struggling. It's the one that it's most comparable to what you do with apartment syndications.
So, we went in. There was a struggling business that needed somebody to come in and take better care of it. We came in, had some CapEx budget to renovate it, and better management systems. They were doing it themselves, sort of ma and pa operators. In our business, it was called increasing the EBITDA, which is very much the same as NOI. In all three businesses I took over within a year, we increased it by 30%.
That's one of the things that gave me the skill set. We sold it to a private equity company and that was the first time that I got what I'm going to call a significant payday. Now, I no longer had an excuse not to invest in real estate.
When Things Align Together
Trevor: I decided, "Okay, I can't do anything active. Let me look into it." To be honest, I started looking at retail and office. Then one day, I stumbled across multifamily and I went, "That's amazing." All of these things aligned together that I had no idea. I just thought of toilets, tennis, and trash as everyone else does.
I went to this weekend's seminar and went, "Hold on a minute. This is exactly what I'm doing in my life right now. Taking businesses, growing them, getting them better, improving the bottom line. That's all I've done my whole life. I had no idea that it was a business. Then, I started to learn what non-recourse debt and you've got all this leverage power. Wait. Bonus depreciation. I started adding all these things together and it was like, "I had no idea." Of course, that's why I jumped in and I've been in so many deals. It's just mind-boggling. I had no idea it was a business.
Darin: I wish, I've been in it now for four years and I wish I had started a long time ago. Look for you, young listeners, you get started with real estate early. Have somebody else pay your mortgage and then you reap the benefits of being an owner. So, I went back to my hometown last week and I can't tell you how many people. We haven't even talked about mindset, but it really comes down to mindset. I was scared to invest in real estate and it sounds like it's really complicated. It's a big dollar amount in the beginning. I was shocked by how many people are still, 20, 30 years later still living paycheck to paycheck.
Life Lessons in Waiting
Trevor: It's just staggering. I always say, "Don't wait to buy real estate. Buy real estate and wait."I always like to make this thing. Now again, let's say you worked really hard and you got $100,000 and you invest it. The rule of thumb is it doubles every five years. So, five years, it's $200,000, another five years, it's 400,000, another five years, it's $800,000, another five years, it's $1.6 million, another five years, it's $3.2 million. It's staggering. I started in my 50s, so I don't have that effect. I got to work a little harder to get there.
Darin: Let's go back to that first one. $100,000, it's going to be $200,000 after the first five years. If you put $100,000 into a stock ETF, what's the S&P average return is what, 7 to 9%? Let's even give it 9%, 9% x 5 is 45%. So, at the end of the year, end of the five years, you're $145,000 versus $200,000. Then, you look at the next five years, you're $400,000 versus, what, 10 years at $190,000. Over time, it can be such a huge difference. In addition to that, there are massive tax savings that can be had by being in real estate, which is completely another topic.
There are massive tax implications and leverage that you cannot get. I guess you can get it in the stock market if you're doing it on margin but just massive leverage and tax implications. This is outside of the real estate, but your experience, the haunted house deal. Three years, and it was not successful. Would you have changed that and still do it today looking back? What did you learn from that timeframe?
The Haunted House Business
Trevor: First of all, I learned. Even though I understood the entertainment business, I didn't understand the haunted house business. I definitely overestimated the interest in a year-round haunted house. We did really well during the holiday season and obviously, during the month of October. But I just learned so much that it was just so challenging to make money, so challenging to make money.
Darin: You would hear in the real estate world over and over again, "Find people that have done what you want to do and mimic what they do." Had you found somebody that owned haunted houses, would that have been beneficial to you?
Trevor: Way beneficial. Just to give you an idea of how bad it was. We opened on Friday the 13th at 1300 hours. Within 20 minutes, we realized that we had built something that didn't work and had to close on our opening party. You talk about driving home thinking, "What in the world? I just moved to the States and spent this friend of mine's money. We went double the budget. It was supposed to cost under a million and we were almost at $2 million." Interesting story. He ended up holding the real estate and ended up making a pile of money on the real estate, so way more than covered his losses. But interesting story.
He was a real estate guy that did a lot of real estate deals. His claim to fame when Orlando was, he would buy hotels and then scrape off the frontage. Then he would build gift shops and retail stores. Sell the hotel back basically for what he paid for it and get the front land for free.
Wheeling the Deal
Trevor: He was really good at that wheeling dealing and did a lot of things. But I learned a lot about real estate from him as well. The reason I stayed there three years was literally from a conversation he said, "I'm going to put all my money in. You're going to get bored and leave." I said, "I guarantee I'll stay for three years."
Darin: You were a man to your word.
Trevor: Literally about two months before that, a headhunter recruited me for iFly, like at the end of three years. Then I actually negotiated with iFly that I would help him for another year in the transition to new people running it for him. It's very interesting how the timing just worked out really well for me.
Darin: The Man upstairs looking out after you. It's mainly a real estate show. But no matter what you're going to do in life, if you're going to take a chance, go and find somebody that's done it. People always have this dream of starting a restaurant and they don't go out and do the research. They don't talk to other restaurant owners to find out what's the good, the bad, and the ugly. Go out and talk to people that have done it, so that's what you're in for before you spend all that capital on it.
Trevor: That's the power of that in that market of franchises. Someone who's proven a concept and then is selling you more than just the restaurant. They're selling you the how-to.
Darin: Now, you have all that experience, how does that help you now? You're making the transition from LP to GP. How does all that experience help you going into the GP world?
The Big AHA Moment
Trevor: Something I didn't till the big aha moment was that this is a business. I've spent my entire life running and opening businesses and we didn't even talk. I owned several different businesses and had a consulting company. I've done lots of entrepreneurial-type stuff all through my career. That's all real estate on the active side really is. It's taking a business, running it better than the next guy before you ran it, and giving returns to your profits or to your partners into things.
My entire life was dedicated to improving the bottom line. Whether that was through increasing revenue, decreasing expenses, or efficiencies, my entire life has been that. So, the transition ended up being an asset manager and being in the apartment business. It's a simple transition because, In theory, I've been doing it my whole life. It's just in a different class now, in a different space.
There are nuances, which is why, again, I've associated. That's why I show up at all the events and why everybody thinks I'm a part of their program, by the way. I meet Jake and Gino people. They say, "How long have you been with the program?" I said, "No, I'm just a show-up guy." But just because I'm a big networker. It's hugely important to me.
Darin: This guy is a huge networker. I don't know if I've been to an event that he's not at. What value do you get out of that?
Trevor: I'm meeting people like you, the relationships. You just start to connect with people. I like to build the pieces. Just like I said, I got a deal sent by you.
Life Lessons From Networking
Trevor: I hadn't heard of your partner and I thought, "Well, I don't know this guy. So, I reach out and say, "I see you're in a deal. Our common connector is Darin. Could I talk to you?" I just keep building all the dots and that's how I'm building. To me, my network is my net worth. I just keep trying to add value to people and keep connecting with people and just have a plan.
At the beginning of this year, like the last end of last year, I watched Grant Cardone talk about omnipresence. He said, "If people don't know who you are, it's your fault." In today's world, they can get to know you. Of course, that guy is omnipresent like crazy. I'm nowhere near Grant Cardone's. Then I just started and set a goal to be on so many podcasts. I set a goal to go to so many events. Now, next year, I'm changing my plan. I'm going to spend a little more energy on learning more capital raising and connecting the dots. But it's an evolution. It's not like a shift.
Darin: Now, you're LP and you're moving into the GP space. How did you let people know that you were looking for a different role? That you wanted to be part of the GP team and how did you find partners?
Trevor: I just started connecting with people. Someone would say, "We're looking at deals in Texas." I would just see that on a meetup, connect with them, and find out nobody's in Texas. So, I would say, "Listen, I got an idea for you. You need somebody to go visit a property.
The Law of Averages
Trevor: I will go visit the property for you and I guarantee I won't steal it from you. I'll take photos, do broker tours, visit comps, and help you. In exchange, I'd like to get on your deal if the deal happens." The law of averages of how many happen. It was a little bit surprising to me, the fact that I did about 30 tours, and I got on as we came second on one. Then I got on another one. Unfortunately, so my first two GP deals didn't happen. In my very first GP deal, I ended up losing some significant money just because we couldn't get it done.
Darin: One of the things you said though was that you focused on adding value to others. I think that that's what you have to do if you want to move into that role. You have to tell people what you're looking for. People are not going to come knocking at your door and say, "Do you want to switch from being an LP to a GP?" That's not going to happen.
You have to tell people that you're looking to become a general partner in deals and then, you have to provide something different to that team. Add value in some way that your being part of that team is better than those other guys being on their own. If you can't communicate that then it's going to be very difficult for you to find people that want to be on board. I've had plenty of people say to me that were limited partners, "I want to learn the business."
Darin: "Can you just take me to all the meetings and take me to when you meet onsite with your onsite leasing manager?" This and that and the other thing. As a general partner, your number one goal is to maximize the returns for all of the investors. It's very difficult to do that and also bring all these people and be a teacher and all that because I was that guy. When I was an LP, I was trying to say the same thing to people. I was like, "There is going to be a ton of rehab on this. Can I look at how you do the bids?" "No problem, Darin." Sure enough, I get in the deal, and then I don't get called, but so be it. But I love that you looked for teams.
Your niche, at least the one that you said was, you looked for teams that weren't in Texas but were looking to buy in Texas. Then you said, "I could be boots on the ground." That's a great way of providing value. Somebody could be in the Carolinas. There are people in Texas that are looking to diversify and get out of Texas. Get into the Carolinas where you could be boots on the ground, that's a great idea.
Trevor: Then even if you go back, someone would say, "Well, why would you volunteer to be asset manager as an LP?" Well, I needed the experience. At the end of the day, even though I learned a ton doing it, I could say to people, "I've got some experience and I've toured a lot of properties." But I also want to go back and clarify that I do put a lot of that message out there.
Life Lessons From Choosing Who to Invest With
Trevor: But on the other side, I'm just like I'm selective of who I invest with. I'm more selective about who I partner with. I turned down 100 people to the 10 maybe that I would go look at a deal for them. "I don't know you. You're out of the blue. You're in the middle of a raise, you're in trouble. I'm not interested. Thank you very much." Next time, if you're forming the deal, contact me. In fact, if we got a good synergy, I'll let you get over your problem, and let's connect after you close the deal and get to know each other better."
It's even more important to have the right partners because now, I'm not only selecting the person who's responsible for my money. I'm selecting the partners that are responsible for my investor's money. A huge step up in responsibility. I've taken somebody's life savings and they've trusted me with it. It takes up people a long time to earn $50,000 sitting in a bank account, it just doesn't happen overnight.
On the partnership side, I'm super, super cautious as well. And that's part of the reason why I go to these networking events. I see how they interact with people that come up and talk with them. Are they open and approachable and are they helpful or are they arrogant because they're big shots and blow them off? Because there are a lot of arrogant big shots that are doing well. There are people that don't return my calls. And so, you just have no time for them.
People Who Invest With You Are Important
Darin: No. And look, the people that are going to invest with you, that's important. I have limited partners and they're like, "Look, Darin, I've got a busy life. I've got a job. I think that what you guys are doing in the multifamily world is great and the returns are much better than I can get in the stock market, but I'm not going to spend the time getting to know all these people."
The value of me working with you is that you vetted those partners. You’re saying that even though the limited partner doesn't know them, you know them. You trust them and that means a big deal.
Trevor: That's the power, too, of joining a mentor program. Obviously, you're in the Sumrok program. You can separate the wheat from the chaff pretty easily by the people that show up. I got to say most of my best friends are in the Sumrok program just because it's so Texas-powerful. There's a huge value in that because who's doing good deals and who's good partners in those environments? There are very few people that get on the second deal that weren't really good partners on the first deal.
Darin: I've interviewed a lot of people on the podcast. When it comes to partners, what I've been told is, that I've had good partners. I haven't had the bad one yet, but I've been told where it's fallen out and it's only been a few people, but they've shared. Where it fell out was really not so much on their ability as a business person. But more, "They weren't completely aligned from a moral compass standpoint."
Life Lessons From a Moral Compass Standpoint
Darin: When a certain decision had to be made, they were making decisions that maybe, for sure, they didn't agree with, from a moral compass standpoint. Whether it was legal or not, I assume it was legal, but they just would have handled it differently. Those were partners that they were not happy with. They chose, "I'm not going to partner with those types of people again." I agree partnerships are very important. Look, as an LP, you're spending a year getting to know people. As a GP and who you're going to work with, sometimes, it's multiple years.
I've had people contact me off Instagram like, "I got this deal in Ohio and you want to be a GP on it?" I'm like, "I don't even know you. I haven't met you once and you're calling me and you want me to be a partner on that?" I'm like, "Next time you're in Dallas, let's sit down and have coffee." It's the guys that I'm partnering with. I've known for a year, two years, three years, four years, like it just makes sense. You want to know who you're doing business with.
What else can people learn from a guy who's invested in 20? I have to say, most people have invested in maybe three deals, four deals, or five deals. You're fortunate that you have the capital to invest in.
Trevor: Again, part of it, too, is understanding a little bit of how the game works. I’m fortunate enough to be an accredited investor and I know a lot of people. There are sometimes that I've gone in for less than the minimum because I don't mess up their unaccredited investor number.
On the Sophisticated Side
Trevor: I've also said, "I really want to get in your deal, but this is all I got left in my IRA. I understand if you got to kick me out if someone comes along with a bigger number." But it doesn't normally happen on the accredited side. It can happen on the sophisticated side because it's capped at 35 people. I've been fortunate where there are a couple of deals where I've got in for less than the minimum, so it sounds like I'm in.
Darin: Let me share that with the listeners because that I think is key. There are some listeners that are looking to get in their first deal. Maybe 50 grand, 75 grand, or 100 grand is a lot for them to bite off. Just know that you can go to the syndicator and say, "Can I get in for whatever your number is, $35,000, $25,000? They may say no but they may say yes to get you in. If you have a good experience then you may invest more the next time. Or when that deal goes 2X, now, you've got $50 grand and you may roll that into the next deal, so that's important.
Trevor: Sometimes there's been conditions like, that was we have a larger person that we need to bring in. On the sophisticated, they can only bring, so many people into a deal. If I'm number 34 and I'm only in it 50 on 100 and someone comes in at 100, I'm going to lose my spot. As a passive, you need to understand that you may need to do that, but it's not happened to me.
Trevor: It's allowed me, "I want to get in your deal, but this is all I have left." Especially, some certain things I like to invest with my IRA money, just because it's better used for it. Because you can't get a lot of the benefits of accelerated depreciation and some of the other things, I would prefer to use it there.
Darin: What is your next big stretch goal? Where do you go from here?
Trevor: My big stretch goal is 5000 doors in five years.
Darin: You're at 2000?
Trevor: Well, 1250, but yes.
Darin: Five years from now, you want to be at 5000 doors?
Trevor: That's just the number I put out there.
Darin: What about the split between LP and GP?
Darin: Next year, how many GP deals?
Trevor: I want to do three. I think these people that do too many in a row stretch themselves too thin and put people at risk. Three is going to be within my comfort level. I can still give them a good amount of my attention. You see some of these people, "I get a deal a month." I'm like, "How are they keeping up?" I know some people are building massive teams. There are some companies that are just building massive teams. But I like the GPs to be people that are in the deal, aware of the deal. Not run by people that work for them.
Darin: When you did your first LP deal, did you think that you were going to end up having a goal of 5000 doors?
Life Lessons From Taking Action
Darin: That's what I want listeners to understand, like, "You have to take some action and get into your first deal." Whether it's being a limited partner or buying a duplex or four-plex or 12-plex or getting in a GP deal, you have to do something. Then your mind expands to the next thing. Then to the next thing and to the next thing because you have the knowledge base and the comfort of knowing. But you didn't know that before.
Trevor: We talk about doors, so my goal is to get to five, but then I actually want to reduce the number of doors and increase the quality of the assets. My goal is eventually to have three major deals. I call them apartments that I would live in one of the states that I like to do business or live in. It's a strange goal, but on my vision board, I have something in the desert, in Arizona. I have something in Texas and I have something in Florida and one has palm trees, and one has mountains and sunsets for Arizona.
Even though that would be fewer doors, my goal is would be a bigger portion of the GP team, the lead, and their higher-quality assets. That will be easier for me to get out of in a 1031 if I could have that plan. Right now, it's hard to get to where that plan works unless you're a bigger part of a deal.
Darin: You also mentioned a vision board. Listeners, if you haven't heard of a vision board, Google it. Make yourself one. I have one. You have to look at something and have a vision for where you're going, you can't just let life push you around.
Trevor: For me, the vision board, I didn't show the complex. I showed what I'm looking at sitting on my balcony. In Florida, I'm looking at palm trees and some sort, and in Arizona, I'm looking at a sunset with a mountain behind me. That's my view. I want to be sitting on that patio going, "Wow, I'm here."
Darin: Invite me when you get there. I want to come. If people want to reach out to you, what's the best way for them to reach out to you?
Darin: So, why Niagara Investments?
Trevor: I'm from Niagara Falls, Canada.
Darin: I've been meaning to ask you this. If you guys don't know Trevor Thompson, he always spells his name K. Trevor Thompson. So, I want to know what the K stands for.
Trevor: It's Keith, that's my legal name. When I turned 16, I went to buy a car. My parents, of course, were frugal, so they told me I had to have savings bonds. So, I had some savings bonds that said Keith, some that said Trevor, and some that said Keith Trevor. At that time I worked for a guy that used his first initial and I thought that was cool. So, at age 16, I became K. Trevor Thompson. Until it even mattered, my driver's license and credit cards all said K. Trevor Thompson. Now, it matters with 9/11 and all the other things. Passport and credit cards are now Keith and hotel stays are Keith.
Darin: Cool story.
Continue Learning Life Lessons
Trevor: I got one more thing, too, for the listeners. You got to continue to learn all the time. One of the things I want to do is talk about your book here for a little bit. Not only was it an awesome book, but I also bought four books that you recommended and I'm going to have them read over the little while.
You got to continue to learn all the time.
Darin: We all do. I bought a duplex and never thought I would have a podcast or write a book or be in a ton of deals. But that's what happens if you take action. It snowballs and then you start helping other people. That's what it's all about. It's helping other people get further along in their life and create their vision. I really appreciate you coming on.
Listeners, this guy has done much in business and real estate. Five years from now, I wouldn't be surprised if he's way surpassed that 5000 number because this guy's a go-getter. He's a networker, and a good guy to be on your team. Other GPs reach out to Trevor and he will be selective, but he may be a great partner to have. Until next week, signing off.