Listen in to hear how Obin Olson and his brother took $30,000 and grew it into a $30 million real estate portfolio. Obin was in the media business where he and his brother produced films with global distribution in over 50 territories through companies such as Sony, Best Buy, Red Box and Walmart. Obin then focused on studying and learning how people become wealthy. He concluded that most wealthy people become wealthy through real estate.
Table of Contents:
- Taking Massive Action Resulting in a $30 Million Dollar Real Estate Portfolio
- How the Whole Real Estate Game Works
- A $30 Million Dollar Real Estate Portfolio Inspired by the Reinvesting Game
- A Tremendous Value Add Opportunity
- A Rehab Budget
- Recognizing Hustlers and Taking Actions
- An Actual Fear Awakening
- The Beauty of Having a $30 Million Dollar Real Estate Portfolio
- Rejiggering Our Whole Corporate Structure
- How to Reach Obin Olson
Taking Massive Action Resulting in a $30 Million Dollar Real Estate Portfolio
Darin: A little background on Obin Olson. Obin was in the media business, where he and his brother produced films with global distribution in over 50 territories through very well-known companies such as Sony, Best Buy, Red Box, and Walmart.
Obin then focused on studying and learning how people become wealthy. He concluded that most wealthy people become wealthy through real estate. Let's listen in on his journey of taking massive action to acquire real estate and grow his wealth. Now, onto the show.
Hey, everybody. We've got Obin Olson here with us today. Obin, I really appreciate you coming on the line. I just want to thank you for coming on the show.
Obin: Great to be here. Olson Capital Investments also is our company name.
Darin: Obin is an extremely experienced and multifamily investor. He's got a lot to share today. Can you just share a little bit about the first deal in Charlotte? I know you've got a large deal in Charlotte. You also have another in Dallas area. The Charlotte deal came first. Help us understand how you got that deal, some of the challenges, and how that deal is performing.
Obin: Do you want to start with that deal or do you want to start with my first real estate deal?
Darin: I'm good with going with the first real estate deal or we could just jump into Charlotte and go backward. It's totally up to you.
Obin: I'll give 30,000-foot historical on the real estate with us. As you may or may not know, we were in media before we're in real estate. I had a successful media company, a production company in North Carolina.
Income Behind the Scenes
Obin: We had a lot of clients up and down the East Coast. Won all the awards, and put together a good team, and we're really kicking ass. We were pretty far ahead of our time in that area. There's a lot of digital technology and a lot of the new stuff that was coming out around 2005, 2006, 2007, 2008.
Obin: As everybody knows, especially people our age, 2008 was very similar to the coronavirus in a way of just the bottom dropping out on everything. At the time, we were doing really well in the media space. Then the bottom literally dropped out because the first thing that happened was everything cut their advertising budgets.
Hospitals, tourist destinations, cities, all of our major clients, basically, put a complete freeze on everything they're doing. Just like they're doing now with coronavirus. I think I bought my second house at that point.
The first one I bought to live in, the second I bought to live in. But I bought the second one with the idea of taking the first one and leasing it out. And having its mortgage paid for because I figured out, "Hey, somebody else can actually pay down your debt." That's essentially the same as income behind the scenes. I was dabbling in that.
I bought a single-family house right before the crash. Really, within months of that disaster as a second house to live in and, eventually, I thought I want to do something with it. Possibly turning it into some type of investment, but to live in it.
What ended up happening is we paid way too much in hindsight for the second house.
How Local Lenders Support a Potential Million Dollar Real Estate Portfolio
Obin: And ended up living in it because there was no real option to do anything else with it. The first one was still renting out and covering its note and everything. I started figuring out going to local lenders and local banks and stuff. Figuring out how, what a refinance is, what a loan is, what a mortgage is. This is the stuff that I didn't really know about and just started delving into it because of the few things I've read.
Darin: Read where? What were you reading? Getting into the real estate?
Obin: At the time, we were struggling trying to figure out how the real games are played in the world. What is it about other people that look completely normal and the same intelligence, the same drive, the same everything that we had? What was it about them that got them millions of dollars ahead?
Once that became a critical focus just like any skillset, you start delving into that skillset and learning how it's done. I saw a pie chart one time and I was like, "Of all the millionaires in the world, 70% are doing it in real estate. The rest of them are all the other things that people do combined. All the businesses, all the sectors, all the facets, everything."
Darin: I see that same thing all the time, 70% to 90%. It's crazy how big real estate is in terms of the rest.
Obin: That really lit a fire under our butt to figure it out. At the time, spending countless hours and days just delving into the weeds of all up and down. We were building our own first digital cameras before people were.
How the Whole Real Estate Game Works
Obin: We're building drone helicopters before people were. We were so deep into media, and images, and image creation. We're creating our own hardware. We were working with HP, and Adobe, and NVIDIA, and stuff. We’re sponsored by them. We were as deep as you can get in this stuff, but the finances weren't equal to the knowledge base and the dedication.
Darin: So, now, you built your business in the media space. It goes into a quiet period during down economic time. You start educating yourself on the real estate space and decide to take action there. And you buy a second house and rent out your first house. You start to want to delve into that real estate world more.
Obin: What happens is our business is doing okay. We got our second house, and then the bottom falls out on everything. But by that time, I had been figuring out what was going on and how the whole game of real estate works. When the bottom fell out, it was just like this stuff is worth 150,000 a piece and I can buy it for 40, 50, and 60 right now.
Where do I grab the money? How do I make this work because this is a once in a lifetime opportunity? What essentially started happening was I figured out that up or down market, you got to have a good credit score. If you have a good credit score, you can get a loan. If you can get a loan, you can buy a property. If you can buy a property, you can fix the property up.
Building a $30 Million Dollar Real Estate Portfolio Without Raising a Dollar From Anybody
Obin: If you can fix the property up and put a renter in it with a one-year contract, you can go back to another lender and reevaluate the property. Possibly or likely, if you did all those steps correctly, get your money back out of the deal and own the property with nothing in it. And still be cashflow positive from the rent if all your metrics and all your numbers line up.
Right after the crash happened, I was still in the middle of learning the whole ins and outs of the entire supply chain of how real estate works. How the banking system works, and it was just massive opportunity. I ended up in two years or less buying 10 single-family homes, recycling the same 30 grand that we'd saved up. So, I felt that that was it. I thought, "I'm done. I'm good." And I won't have to worry about where I am in 30 years anymore.
Obviously, getting a taste of, "Hey, you can buy a property. If you do it right and you buy it right and you buy it at a discount compared to market value if it's in good shape, you can essentially build a business without ever raising a dollar from anybody. And keep recycling and reinvesting."
I'll back up a little bit. As far as being a die-hard real deal investor, for whatever reason, I've pretty much been that way my entire life. Through necessity, not through study. When I left home at 18 and had $1,800 and a car that worked and drove across the country and pursues a dream in media, there were certain things you have to do.
The Only Gold Digging Climb up Is Reinvesting
Obin: To get a job, you have to show a resume. To get a gig, you have to show the work you've done. Then to do the work, you have to have skills and you have to have the equipment. To get the equipment and the skills, you have to have experience. So, there's always catch-22s.
I'm going, "Okay. I'm aggressive. I'm an ex-athlete. I'm aggressive at 19 years old, and I'm going to do this no matter what." So, I start by osmosis realizing the only gold digging climb up is reinvesting. I learned that really early on that, "Hey, you take a job, you take all the profit from the job. You put it back into equipment, you buy better equipment, you go do a bigger job, you have a bigger resume.
Now, you can get people to work with you and for you because you got an even bigger job. You can afford to pay them. Reinvest all that money back into them, and a bunch of more stuff. Before you know it, you have trucks, you have trailers, you have a studio. You have Daytime Emmy Awards and, literally, you've climbed all the way through whatever that sector or industry has to offer."
This could be landscaping. For me, it was media. It could be plumbing. I don't care what it is. But the concepts, the core concepts directly leading to massive success were being taught to me by myself. Through necessity to enable the next level up, the next challenge, and the next bigger project.
Darin: What I really applaud you on what you said was, okay, so now you're in the media, you get into real estate, the crash comes 2008.
A $30 Million Dollar Real Estate Portfolio Inspired by the Reinvesting Game
Darin: What you did was recognize a massive opportunity. You took some capital that you had, you educated yourself. There's always more to learn. After educating yourself to a point, you actually took action.
Massive action. You bought 10 single-family homes. A lot of people that get into real estate investing start with single-family. It's very common. After you invested and you saw the gains by investing in those deals, how did you get into multifamily?
Obin: Fast forward, past becoming an investor by osmosis through necessity, where I was going with was the reinvesting game. What do we do when we have 10? We have 10 and our values increased. Even in the down market, our values increased because we've put 20 grand, 15 grand, five grand, three grand, whatever they need. We put it into them, we've got them operational.
We've got money coming out of them. Now, their valuation is higher. I turned around and I started to learn the finance game. I started to figure out how does banking in general work. What is debt, what is equity?
What's the capital stack? How do all these puzzle pieces actually go together? Who benefits from what? How can I create things in the universe, in the known world that we live in that have value to all parties at the table?
That's really critical because if you don't have a value to all parties at the table, you're not going to have something that flows. If you're providing value to all parties at the table, then and only then can you be assured that you are also going to be rewarded for that.
The “What If” Question
It's up to you to put in the puzzles pieces together to figure out how to create value for all parties involved so that you can be automatically rewarded. It's what we call the automatic reward success formula. Fast forward, I've done the 10 single-families.
The market is starting to come back a little bit. We do a single spreadsheet. It asks the question, "What if?" The question what if is an extremely powerful thing to ask. If you present yourself with a question or your group, or whoever, it is a natural outcome to answer it. It gives you insight into the future.
You can do that through spreadsheets for real estate. In the movie industry, you do it through concepts and ideas. You go, "What if? What if we didn't have gravity? What if we could play with time?"
Darin: I'm guessing the what if was related to the real estate.
Obin: All those great inventions in any sector are almost always based on asking the question what if. That's why I always tell people to question everything. If you don't question everything, you're taking things in in a different way.
When you question things, you become creative. And when you become creative, you create and design things that either you don't know or other people haven't done. Or a combination of both. It gives you, the big O word, opportunity.
Fast forward, I've got the 10. We create the one and only spreadsheet that says, "What if we did X, Y, and Z? What if we took all these lines of credit that we have for our media business from all these different banks? And what if we took that money if we took all the money that we have individually together?
Creating Your Wealth on a Spreadsheet
Obin: What if we found a deal that was X, and we did Y to it? Then we assumed the rent was another variable? What would our financial picture look like in 12 months, in 24 months, in 36 months?"
When you answer that question and you go and build it out into a spreadsheet, you go, "Holy cow! If I can find X pricing on X amount of product, then in X amount of time, it's going to be worth approximately A to C," whatever that range is.
You start playing with the stuff and you say, "Holy cow!" There are formulas here to be made that you can create your own wealth in the future on a spreadsheet. Right now with some assumptions and variables.
We did an outline like that and said, "This is it. We can literally go from deal to deal and in less than 10 deals be multimillionaires. If we do it correctly per what we've been doing, what I've figured out, what I found."
Darin: By asking that question, what if, you guys came to the realization that you had a bunch of untapped places to grab equity from lines of credit. If you could take that unused line of credit in various different places, then leverage that into new real estate deals that would produce a ton of cashflow. And eventually more net worth.
Obin: More importantly, a ton of equity. I don't really care about the cashflow, I care about the equity. And I care about the value that we create. The value that we create on an exit into another value creation vehicle. The next deal multiplies so fast if you do it right.
A Tremendous Value Add Opportunity
Darin: You make that decision. Now, you have to go take action. What did you buy first in the multifamily world?
Obin: We outlined what's possible. Then we said, "Okay. This needs to happen." Market conditions are dictating we're in an upmarket. This is the time to do it." Basically, we pulled together everything that we had.
All the capital and cash that we had, family and friends. Then, we used all the unused lines of credit that certainly weren't earmarked for that type of usage. But what does the bank know if I can get it in and out quickly?
Darin: When you say we, it's you and your brother are partners on this, correct?
Obin: At the time, my dad was an active partner as well. We take the credit we have available, and we take the equity and the cash we have available. We go buy 10, 2001 built townhomes from a bank. Remember, this was after the crash. So, there were still 50 cents on the dollar product out there.
We found half of the townhome community that was bank-owned, and they took 57 cents on the dollar for 10 units. They're basically class A, class B, nice, maintained. The rent was terrible. $700, $600 rent, and at least at the time 995 rent easy as what it should have been. The management, the company that was running for the bank.
They don't care as long as it's full and not upside down on the bank's note. We saw a tremendous value add opportunity. Just basically turning the place around, getting out the lower end people that were there. And putting in class B, low-class A that it deserved.
Transforming Mismanaged Businesses Into a $30 Million Dollar Real Estate Portfolio
Obin: That was basically the play on that deal. It was what we call a management renovation play, which is the best thing in the world if you can find it. That's where you go in and start spending the energy and money with hammers and bulldozers. And really physically fixing asset. You go in and find something that's being mismanaged, you can do that in businesses.
You can do it in real estate, you can do that in a variety of ways. The beauty of it is the multiplier on that. It is what it is. You could double or triple the value of the asset pretty easily by doubling the operating income. Or whatever it comes out to be that you need to do to it. We did that. I think a year later, we refinanced it.
Got an extra 600,000-700,000 out of that deal that we didn't have to start with. We get our down payment back out, closed an extra 600,000-700,000. Plus, we still have our bank lines of credit and everything for our business to slow down. We said, "Okay. We've done the spreadsheet, we know what we have to do. We got to double up every time."
So, we went from 10 townhomes to our next deal was 96 single-family, very low income, very bad, poor condition portfolio. This time, we owned 10% downtown of that town where we were. It was a pretty big move, it got press and everything.
I try to tell people. I started with $30,000 and now, we're sitting on 30 million of real estate almost. We haven't had a single investor along the way. And we haven't done anything to go raise capital.
How to Make Our Deals Make More Deals
Obin: I'm now trying to figure that game out $30 million in because it looks it is something that we probably should have learned in the beginning. But we didn't need to because we figured how to do it without that. We had figured out how to make our deals make more deals.
That's different than most people. It's a much harder road to hoe because every deal has to practically double up over and over or it doesn't work. I have to work a whole lot harder in real estate than let's say a syndicator would. At the same time, I own 100% of it.
It's a real different animal. So, we took the 96 on. It was absolutely horrendous managing and trying to maintain them. I went through manager after manager after manager just to drive all the homes and you can look at them. It will take three days, it was hell. So, we just said, "Nope. I don't even care. Breakeven, whatever. This is a bad move." Never get into these again, especially not in bulk.
A couple of years later, we sold them. In the meantime, we sold them and once we're free and clear of them, we made a little bit, not a lot. I mean, compared to the size, I think we're up maybe 500K or something, which is a lot of money.
But not compared to the size of the deal. They just resold again and somebody made five million, but that's just how that goes. I didn't want to deal with it. I knew the value was there.
Our First Hairy Monster
Obin: I knew if I went in there and spent two to three years and renovated every single house, we could easily get the $5-$6 million value pop. But that was too slow. I didn't want to do it. So, we just ended up selling those. Then our first real big multifamily commercial deal was Charlotte. This is I guess, 2016. By that time, the market was really starting to dry up.
Before buying Charlotte, I remember driving around Atlanta just looking at 10s and 20s of huge apartment communities. Just sitting there for 30,000 a door, 40,000 a door, 25,000 a door.
Darin: How big was the Charlotte deal? And how many units?
Obin: By the time we got to the 125-unit size, the market was almost dry, almost nonexistent. It was literally one of the very few remaining in a great area bad assets in the country. By this time, we were looking nationwide. It had been on the market a lot, but it was in such bad condition, it scared everybody off.
Darin: What do you mean by bad condition?
Obin: Just falling apart exterior and very low income, unruly tenants. Just a very much of a D class situation. Owners were terrified of their own asset. Their dad built it. They didn't know how to run it.
Darin: What was the occupancy?
Obin: Low 80%. Rents were crazy low, $600 rent in Charlotte market, which is $1,100-$1,200 rent market. So, we took on our first hairy monster. I literally went up there and lived on top of it, figured out how to run property management software.
A Rehab Budget
Figured out what a manager's job is, hired a manager, and then just started going crazy and running crew to rehab and renovate it. By this time with my 10 singles, I had the experience, know how to do that.
Darin: Obin, can I jump in here for a second. So, we met through Instagram. We got together for dinner in Dallas when you were here looking at a deal. I remember from that conversation talking to you and your brother was the challenge that you went through on this Charlotte deal.
But it also taught you guys a ton about how to manage it every deal going forward. That was you've mentioned that you hired a general contractor to do the rehab. And then you ended up changing up.
So, help the listeners understand what went wrong. Why did you have to make a change? I love the idea on how you guys look at actually developing what things should cost before you actually go out to bid.
Obin: We got the deal at Charlotte. We're all excited, and we put together a rehab budget. We thought, "Okay. We're going to stroke a check on this. We're going to be able to hire a general contractor, and this is going to be great."
It's their little project, they're going to get it done. We're going to watch over it. The work happens, they get paid. And then we're finished. We thought it was going to go basically like that.
It turns out that general contractors in general, are a group of people who don't have anybody's best interest at heart. Except for theirs in every single step of the process.
A Team Who Works Together in Creating a $30 Million Dollar Real Estate Portfolio
Obin: So, it went from a dream of doing that to I remember one time I drove to the property. I was walking around looking at siding and stuff that was going on.
And I just looked at it and I said, "There are seven guys out here and one is doing work." I started asking the guys, "What's going on?" They're like, "Oh, that guy hired me." The next guy was like, "Oh, that guy hired me." The next guy was like, "That guy hired me."
There are seven layers of people pimping people doing work on the property. I walked over to a piece of siding and just checking the work. And I literally lifted it up with my pinky finger all the way to horizontal. This is a Hardiplank siding. I mean, this stuff is tough.
It essentially fell off of my hand. I took a photo of that. I remember lifting it up horizontally, putting my head underneath it, taking a photo of the siding. Sticking out over my head like a roof horizontally, and sent it back to the general contractor.
I said, "You're fired, and I don't want to see any of your people out here anymore. I will run the show to the finish line. Thank you very much."
Darin: That's got to be scary. You're not a general contractor, right?
Obin: Absolutely not, but I know how to run a show because remember, we did production with media. By this time, we had already produced five feature films and has a studio in Atlanta. So, we transitioned everything to Atlanta by that time. I know how to run a show.
Darin: So, you knew how to build a team.
Divide and Conquer
Obin: I'm like, "You're fired. You're out of here. Guys, who out here is good? Who out here can work with three people or two or three people's helpers and that's it? And who out here can I give you 70 square feet of work. And you can handle that mentally and physically and get it done.
Then I can give you 70 more square feet. Because nobody out here seems to have any idea how to take this whole thing of nine buildings. And figure out how to even divide it up and conquer it."
Obviously, there's going to need to be a team leader. There's going to need to be somebody that figures all this out. Basically doles out little pieces of work one at a time to very small teams.
Lots of little small teams everywhere, and that's how this is going to work. Because that's what they can comprehend and handle. So, I've got to figure out how to run that show.
It ended up being that. By the time it was over, eight, nine months later, I've been there on the ground the whole time, eight or nine months. I identified people who were capable. By the end of it, I'm running these people's businesses for them.
I'm going, "Okay. So, you think you can get it done this amount of time. This is what your materials are going to be. This is what your labor is." I do the math on their labor and how many helpers they're going to have.
A Win-Win Scenario
Obin: I go, "Dude, you're going to be upside down $10,000 at the end of this job with that price. Do you realize that?" "Oh. No, man." I'm like, "We're going to make it work. Dude, you just gave me the time and materials and how many people. I know how much you have to pay your guys. You're going to be upside down."
So, I ended up running these guys' businesses for them, so that they won't literally go upside down and can finish. It's like, "Okay. All right."
Darin: Well, that's big for you. If you just let them go down that path and then go upside down, then to your point. They're most likely not going to be able to finish the job. And you're going to have to go out and find other workers. So, you got a win-win scenario.
Obin: I know. Splitting it up, I probably had, I don't know, five to 10 teams out there at any given time. Rotating the men out, and just ran it like a general contractor should with my best interest at heart instead of theirs. So, it got done on time and on budget.
We brought it in. I don't remember what the numbers were, but I know it was a good probably quarter to half a million dollars. Below what it would have cost to have a GC do it.
So, I turned it from an absolute shit show to success through my knowledge of being able to run a team. And my persistence and not giving up.
Darin: You took action early in the process. Somebody else that was running the deal may have let that general contractor go. For another three months, four months before they made that change.
Recognizing Hustlers and Taking Actions
Obin: They would have put $50,000 more in the hole and gotten no work that was even acceptable and with no permit. This guy was used to that. He's used to people rolling over and him being able to take advantage of them. That's what a lot of these guys love. They're hustlers. It was an excuse.
Darin: You recognized it early and took action. That's awesome. Now, when you guys talked about the Dallas deal, you married up your experience there with buying a large deal in Dallas.
Then you guys basically said, "Hey, we can figure out what everything should cost based on when we talked to the general contractor. We asked how many people it's going to take to do the job, what type of people are going to be there.”
Then you actually go and do the research and you know what the hourly rate is for those people. You get back into what he should be charging plus whatever his margin is. You have a good idea where I think a lot of people when they're getting into the large multifamily space, they don't really have that knowledge. It's all guesswork.
Obin: They get eaten alive all the time. I see it constantly. Let's back up a little bit because I want to finish out the Charlotte. Then that's going to segue straight into Dallas.
So, nine months in, we paid, I can't remember, 6.2 or something for Charlotte. Rents were under market dramatically. While we're working on it, I get to find a great manager. He's literally doing a renovation to the tenant base on the inside of these units just like I'm doing the renovation on the outside.
A Valuation of $12.5 Million Dollar Real Estate Portfolio
Obin: By the time we're both done in about the nine-month mark, it took him probably another six months. But he was getting close, we had a turnaround success on our hands. What does that look like financially? We're hoping for an $8 million valuation. That would be awesome.
Well, we go back and get a new appraisal with our rent now where it is, with the place looking good. And the comps that they pulled, and they send us back. I think it was a $12.5 million appraisal.
I'm like, "I just made almost $5 million in nine months with no MBA, with no real knowledge. Just getting out there and slinging it and forcing it to be a success. Where in the world else can you do that that quickly?"
Darin: That's a deal that was fully marketed, that was sitting on the market for a long time. Nobody wanted to touch it because it was scary. How did you get past the fear of getting into a deal like that?
Obin: Because it was that or we're finished. It was that or we're financially done. I don't know what else to do. This is it, this has to work. So, we just pour all 100% resources into making it, forcing it to be a total success.
Darin: Obin, I love that statement, "This has to work." I think that that's a key component when you're looking at successful people. I remember somebody asking me maybe two or three career paths ago. Somebody said, "Darin, what are you going to do if this doesn't work?"
Darin: I was like, "Well, I'm just not thinking that way. I'm thinking about what do I have to do to make it work?" There's going to be stumbling blocks that come along the way. You just have to adjust. So, that's huge.
Obin: We call that incoming missiles. They never stop. See, a lot of this comes from me being able to go take on something that big like that. That much risk and knowing 50,000 a month in debt or whatever it was. I don't think there's a lot of people out there that could do it just cold hard like that all of a sudden.
The reason that we're able to do it, the reason my brother and I are capable of that is because we went through the hell that is making movies at the $5-$6 million level.
Where you have an actor for $300,000 for one day, and then it rains. You're out in the middle of the boonies, and you have an action sequence. And you have to shoot, and you have to figure out how to get it done.
Failure is 100% not an option military style. You get trained to be an absolute monster. If I hadn't had that, this thing would have scared me to death. Just like it scared the current owners who owned it.
They were so afraid of it, they would sneak around and show us the property and whisper. The management that was controlling them, the tenants were controlling them. They were so happy, so thankful that somebody got it out of their lives. That's the other side of the coin. What's the path forward to becoming that kind of person?
The Navy Seal Attitude
Obin: It's A, doing real estate like we were doing. And slowly building one deal after another over more period of years. A slower build or it's B. It's who you are. You know how to develop teams, you know how to run giant projects.
And you know how to withstand and sleep at night with massive amounts of debt over your head. That you may or may not be able to pay and be okay with it and be a Navy Seal. That's where we had gotten to as human beings at that point. That is why we're able to do this project, and just jump.
The down payment for that property was 12 bank line of credit. I was using borrowed money that has a 12-month expiration date. If you don't pay it back, they're coming after you. Completely the wrong thing to do, but the only thing that would grab the property.
So, not only were we on a renovation loan that would work. I think it had 24 months maturity or they come bankrupt and take the property back from us. But we're also using the down payment with the same deal.
It has to be a success. When you're in the position of, I don't care if it's a movie or running a corporation or real estate or whatever it is. An athletic event, when it has to be a success, your mindset is different. "Yeah, man. I want to do this. I'm thinking about getting into that." It's what I call the Navy Seal attitude.
Darin: I would agree. Earlier when I asked you about how you overcome the fear, people have asked me that before, and you answered it.
An Actual Fear Awakening
Darin: You answered it by saying, "Look, in our prior career, we had to do it, right? Now, we're in a different industry. But we had the confidence that we could do it," because of your prior experience.
Sometimes you run across something that you haven't done before. You're scared. But if you can think back in your own mind about another time you were scared and you took the chance, and it worked out. That can sometimes propel you forward.
Obin: I actually had an actual fear awakening. I'll never forget it. It happened during production on one of the bigger movies, it got so bad. We don't know if we can finish this, we don't know if we can keep it going. The money is running out. Is it going over budget?
It got to a point where I had to make a physical choice, a conscious physical choice. That choice was this. Either A, we keep going and we do this and we win. Or B, we get so afraid of fear, we get petrified into a corner, and it will self-destruct.
I had to look at fear consciously in a very conscious manner and say, "This thing is like a disease." It is killing my ability to perform. And it needs to be consciously focused on and eradicated because it is no longer needed. We're not in the woods with caves and sticks, and the wolf is chasing us and fear is saving us. It's a completely different game we play now.
We have not dropped fear. Fear is directly linked to cavemen living. We have progressed so quickly past the need for any kind of fear in our modern society's fabric.
Get Rid of the Fear Stopping You From Generating a Multi Million Dollar Real Estate Portfolio
Obin: We're still holding onto it as a throwback, and it's stopping everybody. Once I had that realization, as we all do when you see something you can turn over in your mind.
And figure out why it's pointless, how you can get rid of it, and how you can focus on elimination of the problem. It starts with the realization and the understanding awareness that it is a disease, A. B, it is no longer needed, and C, it is my duty to control it and eradicate it.
Once that happened, I became totally different. When you get past fear, you become 10 times stronger. Because the fear, even though it may still be there, it certainly is still there. It still crops its ugly head up and then gets a hammer to it, you know it's there. You know what it's doing, you know how it's hampering you, then and only then you can start to control it.
When I became totally okay with failure. Going back to the point was I had to become 100% okay with total failure and what that meant. I started adding it up. What does total failure actually mean?
Does it mean your mother doesn't love you anymore? No. Does it mean your wife doesn't love you anymore? Well, if the answer is yes, then she wasn't really a wife anyway. So, no.
Does it mean you're going to be hungry? No. Does it mean you're not going to be able to transport your body from place to place to start over. Or do whatever it is you need to do to grind back up? No.
Adding Up What Total Failure Really Means
Obin: Does it mean you don't have a roof over your head? No. Because somebody you know is going to throw you a roof, is going to throw you a lifeline.
Once you start adding up what total failure actually means, you're like, "Dude, this is fine. I can always go to fucking Walmart and greet or McDonald's and flip." That's a total failure.
Darin: Not everybody looks at it that way. So, that allows you to take risks, take managed risks.
Obin: That was the awakening. I was like, "If total failure is not really that bad, then why not bleep? Am I letting this fear control my success? It's insanity, it's crazy."
After that point, I became free of the devil. I became free of fear, and at least consciously able to control it, manipulate it, put it back in the box. Tell it to go F itself, and step past it. When that happens, when you have that awakening, you become a monster.
When you don't have that fear, you can make logical choices to take gigantic risks that are calculated. You don't just gamble, but you can make that logical choice to take gigantic risks. And build anything you want. Elon Musk is a perfect example of that, among many other people who are monsters.
It's all methodology in your mind and you have to unlock a bunch of key elements to be able to do it. After that, it became easier to do bigger things, and here we are today.
We had success on Charlotte. It's now humming along, it’s got a new loan on it. I've got all my money back out of it, plus $2 million.
The Mentality of Doubling Down
Obin: Now, our liquidity is three or four or whatever. Remember, never put a single dollar outside the first 30 grand into it. Now, we're onto the next deal.
Darin: Now, you had the mentality of doubling down every time. Do you still have that mentality or as you get larger, do you do more sizable chunks. Or do you keep doubling down?
Obin: As you grow and as markets change, you can't keep that exponential going. It's just the way it is. You can't find big enough deals fast enough. Everybody else is sucking them up and the market is going up.
The dynamics change, the dynamics of the markets change all the time. What ended up happening is we couldn't find anything on the market for two years. I was flying all over the place looking for stuff.
Darin: Help our listeners understand what is the type of deal that you guys look for. I talk to a lot of syndicators that are there in the value add space, 95% occupied. They're just going to rehab the interior units or the exterior and the interior, raise rents, but it's agency finance. Longterm agency financing.
Your deals, the occupancy is much lower. The deferred maintenance is much higher, so the rehab is much higher. And because it's not 90% plus occupied, I'm assuming you're taking on personal guarantee loans. I don't know if that's the case, but most likely bank personal guarantee loans.
Talk about how you source deals, and when you tell somebody, "This is the type of deal we're looking for." Because I think it's different than a lot of the syndicators I talked to.
Obin: Totally different. I'm looking for garbage. I buy trash.
The Beauty of Having a $30 Million Dollar Real Estate Portfolio
Darin: When you see the single-family signs, you say, "We buy ugly houses."
Obin: We buy ugly apartments.
Darin: Large communities that need a lot of work.
Obin: As many doors that are rotting and falling in as I can find. There's a perception thing to all this. A guy who has somebody else's money, who's going shopping to buy a deal and make somebody else in return. Get 20% for himself has a completely different outlook on what he needs and what he wants than what Olson Capital needs and wants.
That guy needs something that's safe. He needs something that's predictable, he needs something that he's not going to get his hands dirty in. And he needs something that he can get regular high-quality, low-cost debt on it. There are no questions on what's going on. That's his business model.
The beauty of real estate is there are tons of business models on top of the same asset. It's what you want out of the deal and what you're trying to achieve that dictates what you're looking for. In my case, while the syndicator is going out trying to find a five cap, stabilized, he can bump the rents $30 in year two. Spend a little bit of CAPEX, and increase the value over the next 10 years.
That's a success to him. But that's a total failure to me, and here's the reason why. If I do that route, I do one deal, and I'm dead. I have no more capital, no more money, and I have no more movement, no more growth. Why? Because I'm going to sink my money into that deal. And I'm not going to be able to get it back out. Okay?
A Quick Success With a Whole Lot of Risk
Since I'm using my own money, I have to buy disasters. Here's what happens. The syndicator is terrified of what I buy and he should be. It's going to take a lot of work, it's going to take a lot of risky money, it looks scary.
To me, I see gold, I see discounts, I see 50 cents on the dollar, I see a major discount. And I see a whole lot of work ahead of me. I see a double up in 12 to 24 or 36 months.
What happens is they don't want to touch anything I look at, and I don't want to touch anything they look at. There's definitely guys like me out there, and they buy, and they're competitive, but sometimes they miss them.
So, a deal like Charlotte or Dallas, both on the market, both just hanging out. Nobody wants to touch them. They go over there, they get scared to death. The place is caving in. It's got roaches. The plumbing is all fucked up and sewage just coming out everywhere. The ACs don't work and the windows are half-broken.
The tenants are dealing drugs, the roofs are caving in, the tornado took down one building. It's a real disaster zone, but the thing is I see a quick success with a whole lot of risk. They see total failure because they won't be able to execute.
Darin: You mentioned it earlier. You've proven yourselves with two large multifamily deals that you've been able to go into the scarier deals. Renovate it, and increased their value dramatically.
I would suspect that there are a lot of passive investors that would be interested in that type of deal.
Turning a Real Disaster Zone Into a $30 Million Dollar Real Estate Portfolio
But because it's a hairier deal, they would expect a high return. Then dealing with some of the other offers they're getting from other syndicators that are more predictable.
Obin: One last note on my train of thought there, so which deal is a more dangerous deal? I'm going to give you a scenario. A, a deal that's barely cash flowing, it's a 5.5 cap, you're going to get agency debt on it. If the rent drop 1%, it would be breakeven, 3%, it would be underwater. It's beautiful. It has no issues, it’s highly occupied, it’s highly stabilized.
It is a retail market-rate deal. It’s beautiful versus a piece of crap that's 70% occupied. That's caving in, rotting, and has who knows what, back taxes. This is just a total disaster from every angle. It comes down to the price you pay.
Darin: It's the price you pay and its execution.
Obin: It's the price you pay and its execution. Financially, I see a five cap and I go, "Hold on a second. If the market has coronavirus for five minutes, this deal is bankrupt. But my piece of shit over here that I'm paying 50 cents on the dollar. I could withstand a 60% occupancy for a year before I was going into bankruptcy.
But I have to do a whole lot of work and a whole lot of execution to get it from A. To where it is to B, where it needs to be. That's the part that most people can't stomach, don't want to do, and for good reason, it's absolute hell.
Therefore, they think that safer deal is the clean, pretty, shiny penny. You know what? Most of the time, it is until something happens, and then it isn't.
A Ton of Opportunities
Darin: I completely hear you. That's why I say that I believe that there are investors out there that would look at those opportunistic deals. But they would expect a higher return of that.
Darin: You mentioned COVID-19. And you have some pretty bold statements in terms of getting back to work and the economy getting back going. How do you see this crisis playing out with regard to real estate? Is this like a replay of what happened for you back in 2008?
Darin: There's going to be a ton of opportunities that come our way or do you not see that?Obin: It's a 50/50 coin toss right now for me. The reason that is is because it all depends on what the population wants to do. If the population says, "Screw this. Let's get going. Let's get back to the good life," and they really push hard, then it may be an artificial dip. With some stimulus and we keep going.
Darin: Massive stimulus. That's a big question mark.
Obin: If people decide collectively to throw in the towel, then this shit is going to hit the fan like nobody's ever seen. So, I don't know yet where we are. Nobody does. The market represents exactly that, up and down every day, and not going anywhere. If it goes negative, which I think there's more than a 50/50 chance.
I think it's 60%-70% chance it's going to go pretty hard negative. If that happens, it's cleaning the clock time. It really is. Retail centers and stuff everywhere are going to go bankrupt. A lot of office space has the potential to do so because of people also realizing they can work at home. The whole thing becoming streamline, technology everywhere.
Sticking It out in the Multifamily World
Obin: Filling in the gaps of people needing to move from point A to point B everyday 9:00 to 5:00 is completely changing the world. There are sectors that will potentially get destroyed in a really big way, but it may not happen.
It's looking less and less like it's really not going to. We're going to feel some. Real estate is 60 to 120 days behind anything disastrous happening.
It's a very slow-moving beast. The more we are paid, four times or three times more. More than they were in 2008. It's a tsunami shit storm headed in that may or may not land.
Darin: Let's go fast forward six or 12, even 18 months. Let's assume that there is a big downside. It negatively impacts those sectors that you just mentioned, retail, office, hospitality. Does your strategy change and you start going after those opportunistic deals? Do you stay in the multifamily world?
Obin: Hotels are done, period. They're over. They were inflated. I was trying to buy hotels before all this, and they're way overpriced. There’s way too many of them, way too competitive. I would say they‘re absolutely slaughtered. If anything was for a sure bet right now, it's hotels.
Darin: Would you invest in those during the correction or would you stay away?
Obin: They're 40 cents on the dollar. People still exist. It's not like we killed a bunch of people. Eventually, they're going to be crawling around using hotels again. I think it's going to be a smart play. Will I do it or not? I don't know yet.
We'll just have to see. When a massive enough correction all of a sudden you’re buying 10, 12, 13, 14, 15 cap hotel.
How Do You Look for Opportunity
Obin: you're like, "Okay. You know what? There's so much money to be made here," then it becomes worth the risk. I remember apartments were 10 caps.
Darin: Not in this day and age, but who knows? So far so good on the multifamily route in terms of collections across the board, nationally. But we're still a couple of months in on this COVID thing, and we have 30 million-plus that are unemployed. There's massive stimulus out there, we just don't know how long it's going to last.
Obin: Stimulus is a terrible Bandaid. It's good and bad. If you put stimulus on something and then everybody says, "Okay. All right. Fuck it. Back to normal, and everybody goes back to work, stimulus was a total success and amazing.
But stimulus as a Bandaid to then just prolong the pain is a terrible idea. The jury is still out on whether or not it will really do anything. The bottom line is opportunistic. It's what it is. If it's a carwash, a hotel, multifamily, a high-rise, a condo conversion, a business, a biotech startup.
It doesn't matter to me if the opportunity is there. How do you look for opportunities? It really comes down at looking for the downside. The way we look at what we do feels somewhat unique.
We try to kill deals. First and foremost, we're deal killers. That's what we do. Here's the reason why we do that. We have a huge checklist, we try to kill a deal. Every time a deal comes across, it looks like a good deal. We try as hard as we possibly can to kill it.
The Next Big Goal After a $30 Million Dollar Real Estate Portfolio Under Management
If you've tried for two months to kill a deal and you can't kill it, then there's a good 85% chance that that's a really good deal. If you just can't kill it no matter what.
Whereas the average investor looks at stuff as an opportunity and looks at the upside, "Well, we could do this. We could make this, and we could do that."
I look at it and go, "I could lose this. I could fail here, I could crumble there. The market could kill it here. Competition could destroy it over there." When I get up to checkboxes and I look at it and I can't check any of the negatives. The only thing left is positive, then I start getting interested.
Darin: That makes a whole lot of sense.
Obin: That saved our ass I don't know how many times.
Darin: You guys are, you've mentioned 30 million in assets under management. What's next for Obin? What is your big stretch goal?
Obin: To be honest, because of the market conditions and the way they are. The uncertainty, and just the sheer grind required to do our model, we're going to change completely what we do sometime in the future.
I want to be in the position of, and to go back to the article that shows 70% of all millionaires are made of real estate or whatever. There's another article out there that's not as well known or statistic. That is the richest people in the world, most of them are in Wall Street.
So, you start saying, "What's that all about? How's that work?"
A Team Managing Millions or Billions of Dollars
Obin: You start to realize, "If you can manage other people's money and make them a decent return, they‘ll line up out the street around the block for you to do so." There's a lot less grind, a lot less rednecks. A lot less physical risk in managing capital than there is in managing assets like this.
From my perspective and life goals, I don't want to be looking at 500 income and expenses on rental properties. I want to be looking at a team managing millions or billions of dollars. What‘s the most efficient way to generate capital?
What our knowledge is of banking and finance, debt, and capital structures? How can we turn this new knowledge we have through the necessity of we have to learn it, to do real estate?
How can you get as close to pure as you can? Everything that people do is a black box. A McDonald's is a black box. An apartment community is a black box. A car factory is a black box. All these things do when they're set upright as a system is they generate value. They do something society needs, but they are translators.
A lot of them are really poor translators. If you look around a society, you see all the black boxes that people are rendering inside of. Most of them are really poor capital translators. They don't do it well, they have a lot of friction, they have a ton of risk. And they have a ton of management nightmares. They're great.
But if you're really trying to get pure with capital in a purest point of view, which is where I'm at now, I want the absolute least risk friction that we can have.
Rejiggering Our Whole Corporate Structure
Obin: I want a team of 10 guys managing three billion dollars on assets, all financially, all on computers, and none of the other real-world stuff. That's ultimately where we're headed.
Darin: That's awesome. Right now, you're at 30 million and you want to grow to be three billion in assets.
Obin: Yeah. I don't want them necessarily to be physical assets. At the end of the day, physical assets are really safe. You can start really generating big returns in the market, with a fund or whatever that you're still going to want to. What we would end up doing is probably rejiggering our whole corporate structure.
Streamlining all of it, and making it so that it's way, less intensive compared to the way it is now. We'd be able to place the capital that we're playing within the markets or whatever into these, then the asset.
Right now, the assets are basically these massive growth machines. Eventually, the assets are going to become basically safe bank accounts because you can't keep them. You can't keep cash, you can't keep money in the bank. So, an apartment community is an amazing bank account. It grows X amount for a year.
It throws off cashflow. It's 15%-20% return on your equity, internal, external and it's stable. It's real and tangible. Can't just go up and fiat money overnight and disappear because it's paper, it's a number and doesn't exist anyway.
We will always be attached to physical assets, but my new challenge is fintech. I want to climb that ladder, I want to go back to being creative. And I want to go back to working on the computer and having teams of people that are intelligent.
Building the Survival Pyramid the Right Way
Obin: That works on computers with me as creators because that’s a really fun team to run. Running guys with hammers that can barely even get to work every day, it's not very rewarding. Being a creative person in the film industry, in commercials and stuff. Being in that realm and going away from it by a necessity to build the pyramid the right way.
The survival pyramid the right way, the physical assets, to use it to lever up has been absolutely incredible. We’ll definitely surpass that and move on, and that's the next step.
Darin: Timing-wise, we're mid-2020. If I talk to you a year from now, do you foresee having that company established and having a team in place?
Obin: Yeah. We've already been doing marketing testing. We have already been putting together a pipeline. Figuring out the modules, the people and stuff and what we need to what we're going to build. We're still not decided on where we're going to do it.
I'm looking at tokenizing real estates, super interesting. Quant trading on the market is super interesting. My brother is really heavy into that right now, building that out. We've got great tests going.
Anything that's digital, that's turning a physical asset into … There's a huge problem in real estate right now and it's liquidity. It's liquidity prices with the assets because just to refinance one of our deals it takes $300,000 in fees to get new money.
It's absolutely antiquated and insane how retarded real estate transactions are when we have bitcoin. We have online, everything in our phone, we have Robin Hood in our pocket. I would love to be involved in some stuff that turns all my assets into a liquid device.
An App Designed for Quick Buy and Sell in Real Estate
Obin: Maybe we create an app. Or maybe we tokenize all the real estate. Sell off the debt and the equity in an app where you can just buy and sell it quickly with a push of a button. It shows all the pertinent data right there so you can make a decision if you like it or not.
You can get in and out quickly. Something like that is super interesting to me. Then just being in the capital markets. And possibly putting out together something like Ray Dalio is doing would be really interesting to me.
Darin: He's definitely a thought leader in the space, for sure. So, Obin, how could people reach out to you if they want to get in touch with you? What's the best way for them to reach out to you?
Darin: Well, Obin, I really appreciate you coming on the show. It's an amazing story of how you took 30K and turned it into 30 million in assets. Now, you're 30 million in assets, and now you're pushing a goal of three billion in assets at some point later in life. That's amazing. I appreciate you sharing with our listeners. Next time you're in Dallas, I would love to get together again.
The Key Defining Things That Exist
Obin: I think in closing, it's hard to share what's the most valuable thing you can share with somebody. But I think one of the key defining things that exist that people just need to really take a heart. Understand in their soul and their bones how you create value for somebody else. Because what happens is if you can crack that nut, then you're automatically rewarded.
If I can make somebody else more money than they have right now through a service or a product or something that I'm doing, either A, make them happier or B, make them more money. I'm focused on making more money because I know as soon as I figure that out, they will literally line up around the block. Of course, I'll be rewarded.
So, if I'm one person and I'm able to do that, and there are six billion people on the planet. I can reach all of them with the internet, it's a simple job of cracking the code, of how can I create value for somebody. That's all it is.
Darin: It's a great point. Great point. Once again, Obin, really appreciate you coming on the show. I think that you've taught everybody a lot of life lessons. Not just real estate, but just life lessons and how to attack a business.