Listen to hear Jake Stenziano from Jake & Gino discuss how he and his partner, Gino, started buying and creating a multifamily empire in 2013 and have grown their portfolio to 1,600+ units. In addition, these guys created a podcast, started a blog, started an annual conference, started mentoring other investors, wrote two books, started a property management and rehab company. These guys just go after it!
Table of Contents:
- The Humble Beginnings of a Multifamily Empire Owner
- Building a Multifamily Empire in Knoxville
- Having a Mentor to Create a Multifamily Empire
- The "I'm a" Mentality
- Jake and Gino's Decision Making Process
- Authenticity Goes a Long Way
- Multifamily Empire Is a Community
- Talk About Fear
- Projection of Multifamily Empire on Social Media
- The Multifamily Empire Amidst Pandemic
- Who Is Jake Stenziano Outside the Multifamily Empire?
- Wise Advice to Starters
- How to Reach Jake Stenziano
The Humble Beginnings of a Multifamily Empire Owner
Darin: Jake lives in Chattanooga, Tennessee with his wife and two young children. Jake and Gino closed on their first deal in 2013 and have been off to the races since. They own over 1500 units and the investors that they've helped mentor have collectively purchased over 9000 units. I heard from others before meeting Jake and it was very apparent, both on and off mic, that Jake is extremely transparent and just a good guy, a guy you can relate to.
Jake is the first person on the show that I have not met with personally. If you're in the multifamily world, you've heard of Jake and Gino. If you aren’t, you may not have heard, but they are very well known in the multifamily industry. We'll talk about a lot of different services that they provide, but they're just leaders in the space, so we're excited to have Jake today. To start out with, Jake, how many units do you have and you’re currently invested in?
Jake: The mark of the beast, 1666. It freaks me out a little bit. We're waiting to either buy or sell something to get off that.
Darin: It's a weird time right now. It's a good time to sell at times, but it's tough finding good deals. It's been a seller's market for a while now.
Jake: Interesting point because we've only closed on a hundred units this year, and it was two 50-unit deals, and it's just because it's the only thing that we've seen that makes sense. It's relatively close to other assets that we own. The one we just bought, we paid cash for it just to be more competitive and make it work, we'd pick it up for 40 a door.
Be Resourceful to Create a Multifamily Empire
Darin: I'm in the Dallas market. We're pushing 90-100 a door or even over a hundred a door on nicer deals. I don't know what your market typically is.
Jake: That's still cheap. We basically bought a shell, the mid-80s build and it was coming off of a USDA contract. It's those kinds we're going to clear the rest of it out, there's less than 50% occupancy right now, upgrade all the units and then we'll have a nice asset especially when you're talking about replacement cost. That's the stuff we're seeing right now. You're talking about football earlier, when we got on, you got to take what the defense gives you right now. We were still looking for value, but we don't want to get crazy with it.
Darin: It's a smart approach. We'll get into some more of the details on the multifamily side, but I do want to hit upon this, you guys offer a ton of different things to people that want to get in the space. I want to hit high-level on some of those areas, and then we could delve deeper into some pockets. One, you guys have written two books. One book was "Wheelbarrow Profits".
I just got involved in multifamily about three years ago, and your book was one of the books that I actually read to educate me. I appreciate you guys spending the time to put that out. I've talked to a lot of people that have done books and that first book I've heard can be a beast in terms of just time consuming and very difficult to get out. I could tell you from my personal perspective that I'm thankful that I had a resource like yours to turn to, so thank you.
From C-Student to Owning a Multifamily Empire
Jake: From being a C-student most my life, at least in high school before I got to college and despising academics and whatnot, it definitely was not the easiest thing or right in my wheelhouse of love, if you will, doing the things that you love to do, but we documented our journey and that's what made it easier. We're documenting our rehabs, how we're buying things, and it comes back to the three-legged framework, buy right, manage right, and finance right. I truly believe that that represents multifamily and successful multifamily deals to the fullest.
Sometimes folks over-complicate it, but once you buy it, you're stuck, that's fixed. Once you finance it, usually we're financing for a minimum of 10 years. The only thing after that is the management play and we dive into our different parameters. Clarity helps entrepreneurs so much, and for my time, being an entrepreneur, I know that clarity is so important, and just writing that book gave us more clarity on our process, if you will, some of it operations manual at times. It helped. It was not easy to your point, but I'm glad we did it.
Darin: Yes, you impacted so many other people. This is the first time we've ever talked, and three years ago, I read your book and I felt like I knew you guys a little bit, and it also provided me a ton of information breaking into space, so I appreciate that. You mention entrepreneurs, so what did you do before buying apartments?
The Moment of Epiphany
Jake: I grew up in a really small town in Western New York. It was about less than 2000 people, and there was a factory that made chairs. A lot of my family were cops, and there were the teachers, those essential schools. I just didn't have much exposure to business owners, entrepreneurs, so I had a lot of limiting beliefs around that growing up. Basically, my grandparents said, "why don't you try to become a state trooper?" Yes, I failed the psych exam, so that wasn't working. I played football most of my life, so I thought, "Hey, okay I'm going to become a gym teacher and coach football." Man, that was a mistake. I remember going to the city school.
Darin: Did you do that first?
Jake: I literally went to school to get a Physical Education degree, and I'm going out to the public schools in Rochester, New York, and I'm thinking to myself, "This is like a glorified babysitter." I'm sitting with these kids with those Little League time-to-play flag football, I have this vivid memory burned into my head. I'm trying to pull these kids off the bleachers to go outside and play flag football and they won't get changed, they don't want to do it, and I was just, "This sucks. What am I doing?"
I remember, a few weeks past, I was driving home from my parents' house. I called my dad and I said, "Look, I don't know what to do." I had one of these epiphany moments, I said, "I can't do this anymore." At that time, I was doing a 100% commission sales job at Radio Shack, and my dad's in the medical industry said, "Hey, let me set you up with some of these pharmaceutical reps."
That Gut Feeling
Jake: This guy that I met with gave me the playbook of how to get into pharmaceutical sales and he said, "Here's a pitch book and you put this together, you document your sales success," he said, "I need you to finish your degree, go out and get one-year sales experience outside business-to-business sales."
I did everything the guy told me to do, created the pitch book, documented my sales success when I'll get a job selling business-to-business cellphones. Got three promotions within a year and then started applying and I landed a job with a top-three pharmaceutical manufacturer. It was funny too because at that time that I was getting hired I had a job offer from another company that was not as reputable. I did not have the offer from the company I went with on the table, and I rolled the dice and I told one company no. I held out for a better position which scared me at that time.
It worked out though. Sometimes you gotta roll the dice on these things and go with your gut. I did that, and then it was, "I hit the nail on the head." I thought I was in the best job ever, I was 25 years old, I had a company car making six figures, and I was doing something that I enjoyed with guys around me that were energetic and probably most of them were college athletes, so I was, "This makes sense." There was a lot of competition, I love the sales aspect of it, then healthcare reform hits and everything came crashing down. The industry completely flipped upside down, it was no longer fun. It was just a bureaucratic mess. They wanted you to read off a script, it just completely changed.
When One Door Closes Another One Opens
Jake: At the same time, what you saw were all these doctors losing their autonomy to medical groups. Not only were the pharmaceutical reps getting crushed, but the doctors were also all combining together into these medical groups basically going from entrepreneurs. They ran small practices, maybe 5-10 employees, becoming employees themselves. You see this massive shift in healthcare and I thought I stepped in. I was in a great spot too, "What am I going to do?" Now the company starts doing layoffs every year. I was with them for about 3-4 more years.
Darin: What timeframe was this?
Jake: The healthcare reform started in '08. I got into real estate in 2011 when I started first looking at deals, but we didn't close on anything until February 2013. But it was interesting because the one doctor in the community that retained his autonomy and his private practice, I became very close with. I was trying to understand why all, it literally, every doctor except for one in my entire area joined a medical group.
So I started asking questions because it just didn't make any sense. It turned out this guy owned real estate all up and down the East Coast and retained his autonomy because he wanted to, not because he was loving the money or it was so great or anything. But he was real estate first and he did his medical group. He volunteered with the firefighters, did all this great charitable work and that really left an impression on me.
I started to ask, "What do you think I should do?" I started to pick his brain a little bit because we got yet friendly and he said, "The best advice I can give you is to go buy a duplex and rent half of it right now."
The Best Advice He Never Took
Jake: He said, "That's what I did when I got out of college." The best advice I didn't take. I never took that advice, but it still left an impression on me. I'm in New York and I see one of my friends, Gino. I did all my catering through this place called Gino's Trattoria after the pharmaceutical company. I was very good friends with Gino's brother, Marco. Basically, I'm seeing these guys, I'm looking up to them, they have a business, I think it's really cool that they're entrepreneurs or whatever. Their taxes are like $30,000 on their house.
Taxes in New York shake you down. This is no joke. This was 2010, I got out in 2011. There's got to be something else out there. I hear there were places with no state income tax and better weather, lower property taxes, and people were like, "They're going to get you one way or another, there's no escaping it."
I literally started this spreadsheet, I went down and I found places like Florida, Texas, Tennessee. They had no state income tax, and then I started to rank them by property taxes. I noticed that Tennessee looks pretty good and there was a job opening with my company in East Tennessee. I was talking to my wife trying to figure things out and I said, "Let me just take this chance. There's a job opening in Knoxville, let me see what we can do." She is like, "No."
Finally, I worked her over for over a week. The hiring manager is from New Jersey, he's like, "i did the same thing 20 years ago." Fortunately, he put me through the wringer and the craziest job interview of my life, but long story short, I end up landing that.
Building a Multifamily Empire in Knoxville
Darin: You moved down to Knoxville. Did you bring your family with you right away?
Jake: I went down by myself for six months and became this closet weirdo hermit because I thought there was going to be some culture shock and everyone was like, "Oh you got to just make sure there's southern hospitality." It's like all my New York friends in Westchester tell me this. I thought I had to talk slower and I was always really minding my manners and I just was not connecting with anyone. It was because I was acting like a weirdo. Then, six months later my wife moves down, and she starts making all these friends like this and I'm like, "Oh, just be yourself." That took a little bit of a transition period.
Ultimately, I was looking for deals the minute I got down here, and I just didn't understand that I was the salesperson, not the broker. I was, "Okay, you're the sales guys, show me what you got, let me get some things going." But realistically, as a multifamily investor, you need to cater to your brokers not the other way around, because they're going to bring you deals that can change your life.
I remember so many times early on I was just hard-charging, too aggressive, and was not building enough rapport. I've been thrown out of a broker's office once, he's like, "You’re never going to do business down here,". We needed to course correct a little bit and finally built a relationship with a local broker and got a 25-unit deal done, but no one else wanted it. It was in a good area but it was rough, the late 60s build, septics, roofs shot, this thing was beat.
Best Practices in a Multifamily Empire
Darin: What about the occupancy? Was it low occupancy also?
Jake: No. It was a great occupancy with weekly renters. They were paying cash. I remember that first night so vividly, I went around collecting cash because I started managing myself. I had this wad of cash and I plunked it down on the dresser when I got home and it reeked of cigarettes. The sweetest smell of tobacco of my life I'm like, "Oh my god! I'm a business owner now." That was a very pivotal moment in my life. The problem was, after that the cash started drying up. Everyone's like, "Oh, new ownership," and they paid on that first week and then it got worse and worse.
There were so many learning lessons from that first deal. One, don't take cash, but that's what the prior owners were doing. Don't do weekly renters. They weren't screening anyone. We just, literally, started building our management company from the ground up on that first deal and learned everything not to do except for one thing. The best thing we learned on that deal was that mom-and-pop ownership groups charge something called a move-in fee.
A lot of people do security deposits, this that and the other thing, but we adopted that from day one and it has been a tremendous revenue generator for our apartments. We do a $450 move-in fee, and we don't do security deposit. It takes that tension out of the relationship from the beginning because everyone's always wondering, "Am I going to get the security deposit back?"
Coverage of a Multifamily Empire
Jake: We're expanding our offices onto one of our campuses right now. We have a rental for our back office and we're closing that down. We just did this nice build-out for our back office and we're closing down the current back office, which we rent, and I'm saying, "I know they had a dartboard up. They stain the carpet over there. We gotta get it and clean it up." But this is that kind of that rub that goes on between renters and owners every day where the move-in fee takes that out of the mix.
In addition, we do a sure bond so we have additional coverage. You can buy it for $87.50. There are different kinds where you have a pool, some have no pool. They buy a bond so if they mess the place up there's coverage there, and then they're connected with the collections agency as well. It's like a system, it simplifies the process and gives additional coverage for the landlord in case one messed stuff up.
Darin: We do something similar, we don't call it a move-in fee but we have an admin fee rather than the security deposits. We don't do the sure bond, so if somebody messes up the unit, it's on us to clean it up and rehab it.
You talked about a few things that I want to hit on. One was, early on, you mentioned limiting beliefs. There are some people that are listening, they're searching and they're reading and they're listening to podcasts, they've heard that term over and over again and they understand it, limiting beliefs. But then there are other people that are like, "What does he mean by that?" Help us understand what that means? Limiting beliefs? How'd you change yours?
Having a Mentor to Create a Multifamily Empire
Jake: Fortunately, I have a partner/mentor. My partner, Gino, was the guy that pushed me over the limiting belief hurdle. I didn't even hear the term, but when I started to work with Gino, he made me aware of it. He's a Tony Robbins' disciple and that's where a lot of the limiting beliefs come from. But for Gino, he was a chef and he always had this limiting belief, "I'm a chef, investors won't take me seriously, I'm not a multifamily investor, and I'm a chef." He always had that. It was almost stigma around him, so that's where he struggled and he talked about it with me openly. I was, "Wow, it's pretty cool." Because I wasn't always the most open or would share feelings or discuss things like that.
As time went on, I remember having different conversations with Gino and him struggling with this. I started thinking to myself, and this was because we worked for 18 months together before we got our first deal. I just couldn't see myself or believe that I could be a business owner. The first job that I've ever had, I worked on a Christmas tree farm and it was $3.25 an hour, but they gave you soup and sandwiches for lunch. Growing up in western New York, it's very depressed. I've worked for UPS, I worked for United Truck rentals. If you want to talk about the job, you get to start moving people's houses, everyone hates moving. Hats off to those guys.
I remember summers just looking at the back of these trucks thinking you're getting close to the end, and then there's that little hump that goes over the cab and you got another 6 feet to go.
Knowing Your Limiting Belief Is the Kickstart to Your Career
Jake: You talk about finding out what you don't like to do, worked at the lumberyard, various jobs where you find out, "I don't like to do this," but at the same time I had no idea how people created wealth, no idea how people became millionaires. I just didn't think that it was for me or an option or even being a business owner. I didn't know a single business owner except for Gino and his brother, Mark, I didn't have exposure. It's your surroundings, where you grow up and whatnot.
My limiting belief was literally, "I can't own a business. Can I? How would I even do it?" Having that mentorship from my partner, Gino was the game-changer. I've always had a high motor, have a ton of energy, and kick a door to make it happen, but sometimes we struggle mentally, and so many times I think real estate is 90% mental. If we're going, to be honest, this is not rocket science. It's not. That's why I go back to clarity, the buy right, manage right, and finance right. If you set your parameters up, and you follow the yellow brick road, "No, this is what I will buy, this is what I will not. Here are my management parameters, I want long-term debt. I want non-recourse financing."
You can do that but you have to believe you can do it, and that's why so many people once they get into even maybe a 10-plex or a 20-unit complex. They start to scale up quickly and get a lot of deals under their belt because they realize, "This is not rocket science." They're held down thinking, "Oh! It's a pie-in-the-sky or it's not for me," and I think many of us struggle with it.
Start With Something and Grow From There
Darin: Absolutely. Even yourself, you and your partner, you were counseled by your partner, but you ended up buying a 25-unit deal. Now, what's your largest deal that you've done?
Jake: We did a 281-unit.
Darin: Before you did the 25-unit deal, there's no way you could have thought to yourself, "I could do a 250-281 unit deal," right?
Jake: We didn't even syndicate it. It's owned by me and two of my partners. We split it up in thirds.
Darin: That's awesome. It's like you want it in pieces but you bought a 25-unit and that gave you the confidence to go, and you saw the process, you built a process around it, and then you started to scale up, then you started to teach other people how to do it. I'm sure you get approached all the time. I get people coming to me on Instagram and I hear it in their voice when we have sidebar phone calls. They feel like they have to start with a duplex or a four-plex.
Jake: Or there's the other side that says, "I got to get 150 units, that's all I can do" because they see the Instagram, and they will sacrifice not doing the smaller deal. There are two sides of that spectrum which is crazy that people are being shamed on. I'm here to tell you, do a 10-unit, do a 300, wherever you're at, and then grow from there, because I do. I see people that are like, "Why did you just do a 50-unit deal?" I'm like, "Because it makes me money." I just bought it.
The "I'm a" Mentality
Jake: So many people get caught up in this Instagram entrepreneurism, go big or go home. And I'm like, "This is here to create a great life for my family and myself and the people that are on our team. That's what this is about, not me sitting on the top of the Lambo and saying, what up dog?"
Darin: I completely agree with you. You need to, at some point, pull the trigger and take action. If you could only get your mind around doing something smaller then do that. On the flip side, I would say, so I bought a duplex for my first investment, it was three years ago. After I bought it, it was a new construction duplex, so I had a year to build. But after I signed the contract I was, "I'm also a business owner," and I started running numbers and I'm like, "This is just going to take forever, right? To build any real wealth."
My next deal was a 76-unit syndicated deal, and people are like, "What do you like better?" I'm like, "The 76-unit all day long." I'm not bummed out that I did the duplex because it got me in the game. I may never have been able to pull the trigger on that 76-unit had I not done the first one.
Jake: You could see the process and you realize it's just, you're adding zeros at a certain point. But it gets easier though because you bring a team with you and people have a division of labor and those roles and responsibilities. So you don't have what I call the "I'm a" mentality, "I'm a do this, I'm a do that, I'm a do everything."
Being Open to New Learnings
Jake: That first deal, I messed everything up. I'm cutting the grass on this because I had this blue-collar mentality from Rochester thinking, and I saw my parents and grandparents built their own house. I'm like, "Guess, that's what you do. You just do everything yourself." Jim Clayton sold his mobile home company to Warren Buffet, actually financed my fifth deal.
Darin: He was your only investor?
Jake: No, he had a bank. He sold the mobile home manufacturing to Buffet, then he rolled that money into Clayton Bank. I spent a day with him, he went out, we drove the deal. I said to him, "Whatever happens here, I don't care if the leasing agent doesn't show up or the maintenance man is, I will show up and do the work. You've nothing to worry about like I'm your safety blanket on this." He's like, "I love your energy," and we have 2500 units at that time, he's like, "I like your portfolio," he said, "But that's not how you scale."
There literally were 3 years, 500-units into it or something after our first deal and I didn't even think of scale. I'm like, "What is he talking about?" Then I became just this huge student on EOS, the traction system, and then scaling up the Rockefeller habits. The Michael Gerber stuff there. I just started digesting all this stuff and we've spent over six figures on scale coaches for our employees, but that was one of these inflection points where Jim started coaching me on that stuff, and then I took it further because I realized how important our growth was going to be and the scale was going to be at that point versus just acquiring more assets and trying to bootstrap.
Jake and Gino's Decision Making Process
Darin: Where along the way did you and Gino decide, because you had a choice at some point you guys were like, "All right, we can continue to scale and just have it go from 500 to a thousand, to 2000, and just have it be our own deal. We're just huge property owners. Or, we could also do that but also create all these other programs where we help other people do it." At some point, you guys had to make that decision. Help me understand how that came about.
Jake: Yes. It was funny because my cousin is a marketing executive down at Madison Ave in the city. We talk about this stuff quite frequently because he's very methodical. He's starting a podcast, he has 20 episodes recorded already, and Gino and I just commit and figure it out at the end of the day. That's God's honest truth. I remember we started writing the book, I said, "Listen, every morning, let's get up an hour early each, let's write and you do this chapter, I do that, and let's compare notes." I think it took us 7, 8 months doing that and we're just relentlessly disciplined.
I said, "Hey, man! Let's start a podcast." He's like, "I don't even know what the hell a podcast is." Go back to JakeandGino.com and listen to our old podcast, they're terrible. They're absolutely terrible. If you go on, we're usually the number one multifamily podcast on iTunes. If you go back, it's like we were terrible. We were actually terrible, we just committed, we shared, we had authenticity, we shared what we're doing and we are very transparent with folks.
The Multifamily Empire Podcast
Jake: It wasn't ever, "Hey, were going to start this huge mentorship program, and own all these units." It was just, "Hey, let's get a little bit better every day, and hey, this looks like a good idea. Let's take a look. We've taken the long view and everything that we've done. We know that we believe in multifamily as the vehicle and that we know that there are these little verticals off of it that we want to control the process more."
From the beginning, I wanted to control management. I just have a little bit of this New Yorker thing where I think everyone's going to rip me off or whatever. I don't know if it's a Myers-Briggs or whatever, but I came up with a hard D on that, and it's like there's skepticism at times. We started managing and then from there, we started documenting our journey and sharing it with folks, we wrote the book, we started the podcast, and we just got a little bit better every day.
And we did a live event. I don't know, it was maybe 175 people, I don't know, four years ago or something. Never did a live event before and he was, "Oh! How do we do this?" I'm like, "I don't know." I called up the Hilton in Knoxville, I spoke to the lady, we put the thing together. We had literally no support. We did an event a couple of years ago, we had 20 people helping out. You learn, you pivot, you grow, you get better. I think that's entrepreneurship. You test, measure, and then you apply the new changes.
Focusing on Fulfillment to Create a Multifamily Empire
Darin: Were you also getting feedback from your podcast listeners and people that you are coming in contact with? "We want you to do more. Will you guys do a live event? Will you write another book?" Did that help prompt some of that stuff as well?
Jake: Not really. He was, "Let's do this now." It really is just both of us love the vertical integration and control. If you look, we've scaled out our mentorship program. I'm proud of it because we focused on fulfillment. We're not snazzy marketers or we're not great marketers or anything but we have great fulfillment and great success. The Jake and Gino members have closed over 9000 units, and that's because we have very qualified coaches and we focused on our fulfillment.
We have a property management group with over 50 employees. What do we focus on there? Customer service. We look for high-end hospitality like service in the C&B apartment space. We have a mortgage arm. Part of the core values there is literally a blue-collar work ethic. It's about service and being treated how we want to be treated. I think that when it comes down, and I think you're alluding to the path, and so we did our first thousand units before we took anyone's money before we syndicated the deal.
We bought extremely undervalued, mismanaged mom-and-pop apartments, refinanced the proceeds and rolled them in the next deal. We've only syndicated three deals in total. That's the one time where we had a lot of people knocking on our door saying, " Hey, we'd love to invest with you." like friends and family members. The first syndicated deal we did, It was 132 units. I think we raised the money in 24, 48 hours, or something.
Authenticity Goes a Long Way
Darin: I've talked to a lot of different syndicators and also people that are looking to break into the space. One of the advice I give people is, if you can afford to join a multifamily mentorship group, you should look to do that because you use the leverage of the experience of other people that have already done it and created systems and pathways and your group is always in the mix on that discussion. You mentioned being authentic and that's what I've heard over and over again from people, they're just like, "The guys over at Jake and Gino, they're just real people."
Jake: We don't do the sugarcoat. That's what I say about the Lambo stuff. I live a great life. And I have a beautiful home here on the lake. I don't care about like a Lambo, it's just not who we are, so we try to stay true to ourselves and we work. We are in it every day managing these apartments and trying to get better and put better systems in place. Even on our boot camps, I was down in Dallas and might say, "Can we get on one of your properties, we've got some students coming from the day." It's awesome because I may learn something from your management, we'll take it back and share with our folks, so we're constantly learning too. We don't know everything.
The beautiful thing about the program is that we're constantly learning to evolve and adding to it, and therefore it's making us better. In a selfish way, it's forced networking and learning by having to show up and do it every week. We teach a one-hour class every Monday at noon, so you got to be prepared for it.
Fulfillment Events in a Multifamily Empire
Darin: That live conference that you started several years ago, started with 175 people. I was debating going to your conference, it was in Orlando, I think. Last October-ish or sometime in the fall. For some reason, I had a conflict and I couldn't go.
Jake: You missed out on that one.
Darin: Yes. I heard that you guys have been putting on a really good event and really good people. That's one of the attractions of these events is networking with great people. How large has it grown to now?
Jake: I think the last event we did was a little over 500 people. We had one of your guys down there. I don't know if you know Rick Sapio coming out to Dallas. He's tremendous. Eric Thomas, Cole Hatter, and some of these other guys. We had, not to mention our team, it was a great time.
Darin: That's awesome. I'm sure you're closed right now, right? For events? Or you're doing it online? What are you doing?
Jake: We've just been doing our private fulfillment events. When people sign up for the mentorship. We have a buy right boot camp, we have a manage right boot camp, we have a finance right boot camp, and we cycle those throughout the year. We've just been doing hundred person events just for fulfillment with the Jake and Gino members. Because the larger like the 500-person event, the multifamily master that we do, we open that up to the public and we'd bring in a lot of different speakers as well. But these intimate 100-person events that we do are just fulfillment with our coaches, our staff, our property management group, and whatnot.
Darin: Hopefully, in 2021.
The Honey Bee
Darin: We have a public event again and I would love to make it down there for it. Tell me about the new book.
Jake: The Honey Bee. Gino and myself, we're big fans of the parable, the Richest Man in Babylon. We just love the multiple streams of income. We talked about, we got the mortgage brokerage, the syndication company, and we have a book that follows a sales rep which is similar to my journey and just dives into going through some smaller deals, the growth, the pain, he veers off and doesn't stay in his lane at times. It's a cool story that shows people what the actual growth in story format, so it's fun, digestible, and enjoyable, of multifamily, the journey of a multifamily investor looks like in story format.
You can see the different inflection points, the different pain points that Noah goes through, and there's a mentor along the way who is the Bee man. I'm not going to give away too much. We reached over a hundred five star reviews on Amazon, so I'll leave it there.
Darin: That's awesome. It's a fictional story but based on your experiences in multifamily.
Jake: Loosely, yes. But with those different inflection points that we've experienced, so people can say, "What's coming next? If you're at 50-units right now, what does 100 to 200 look like and what can I do?"
Darin: I have not read it yet but I have to get it and read it. One book that comes to mind is The Alchemist. Great book, but that's a fictional storybook, but woven in that are a bunch of life lessons.
Jake: Not as skilled as him, but I think we did a very good job with the book.
Multifamily Empire Is a Community
Darin: You mentioned that you have this Mastermind group and a hundred people at any given point in time. How does that work? Do you invest alongside all of your students? Do you teach them how to do it? What's involved with that class?
Jake: It's more of a community. There's a private Facebook group where we're interacting every day. We got the weekly class and private events. It's an opportunity for people to actually build great networks. We've seen so many people link up and do deals together. I think that's one of the most impactful things is that people are leveraging each other in the community for knowledge, someone maybe a deal finder, someone may bring money to the table, somebody may have management experience.
We, from the Jake and Gino standpoint, have done deals within the community. Say someone brought us a deal earlier this year, it was a 50-unit deal in Knoxville and they said, "We'd love to do it. It's weird-sized for management, would you guys want to participate?" We went in, we bought it with a group of guys, putting money in, didn't take any fees or anything, but we managed it because our comfort level is there with the group that we've built out. I don't think we'll do third-party locally, so yes, we do a little bit of everything really.
Darin: What markets are you focused on?
Jake: Anything within a 3-hour radius of Knoxville right now. We invest in a couple of other cities in Kentucky and in Tennessee. Would love to break into Chattanooga. We thought we just had a deal there. Tough one to break into. It seems like a few groups just pass the deals to others at times.
Focused Market of a Multifamily Empire
Jake: We're looking at the Carolinas as well. We're real close to the Carolinas as well. It's because of the vertical integration that we have. If something happens, we have a renovations team of about eight or nine guys, at any given point. If we need to go and do some heavy lifts on one of the properties, it's a nice cost-savings measure for us.
Darin: That's awesome. Your students also focused on those markets? Are they all over the place?
Jake: All over. We've got a ton of members in California, a ton of members in New York, and they're investing all over the place.
Darin: You mentioned that they've done 9000 units and you guys are at like 1500, so obviously, they're coming into the community, a lot of them are pairing up and finding partners and then they're going out and doing deals off on their own but leveraging the experience within the community.
Jake: The framework. It comes down to the buy right, manage right and finance right and putting those parameters in place and creating those networks.
Darin: Talk to me about fear. How does somebody looking to get into real estate, how do they jump off and get their first deal? That fear prevents a lot of people from moving forward.
Jake: It's so real. I remember, even for the first four deals, I vividly remember just staying up at night running through the numbers and getting out of bed, going open up the laptop and looking at the underwriting 15 more times, because it's a big deal. I blew up my 401k, put a HELOC on my house, blew up my Roth IRA, I borrowed money from my grandparents.
Talk About Fear
Jake: I emptied out my savings account. My wife had bonds that we traded in, everything possible. I'm an equity hound, really. That's from not really being huge into syndication, in the beginning, I did everything that I could to get into these deals. I think that, for me, my back was against the wall. Personally, I can only speak from experience, really. I can't say what other people are going through, but with the layoffs that were coming every year, I needed to do something else, and I saw this as an opportunity. I felt good because, again, my partner had the experience. He had gone through your different real estate coaching at that time, so I felt like this is an opportunity. Gino had done some units, and we're just looking to get a little bit bigger.
From myself, it was literally just, "Okay, what's the worst thing that can happen here?" We started with a 25-unit. We went to a 36-unit. Then, we went to 136-units. The first two, okay, maybe we can recover from these, then you start getting into 136 units, 300 units, it starts to get a little more real in terms of, "Wow! This could really blow you up." So it was being really hands-on with the management and just not overpaying. That's where that buy right comes in.
Fortunately, we've stayed in the same market, so we knew, or at least we thought we knew, how the deals were going to perform, what our expenses were. The more data we are able to collect just internally, and we weren't going super wide in terms of different markets at that point, we felt we could do pretty well. This was 2013, our first deal was 25 a door or something.
Do Not Overanalyze to Paralyze
Jake: The 136 units, the third deal we did, we bought it for 29 a door, and the rents are, on average, around 800 now, and they're in the four’s. We've refi’d, I don't know, 2 to 3 million bucks out of that thing already. It cash flows well, very well in a multifamily empire.
Darin: One of the things you said was, what's the worst thing that can happen? I've had a number of different investors say that, because every investor I've talked to has said that they're nervous, they're scared before buying almost any deal, whether it be, and especially the first deal, but almost any deal they're still nervous like, "Okay, am I underwriting this correctly? Do I have it all?" Nobody has 100% of the data and you are never going to have it perfect. Yes, get educated, read books, listen to podcasts, get a mentor, talk to other investors, but at some point, you have to pull the trigger.
Jake: Let's talk about that for a second though, because one of the things I feel about people, they get stuck on the sidelines a lot analyzing deals, being paralyzed, not pulling the trigger. What I've found over time is that equity is what really makes you rich. It's not the transactions. Different things come up over time, whether it's cost segregation, whether it's the different streams of revenue, whether it's RUBS, whether it's a move-in fee. "Oh, I didn't realize I was going to be, I'll refi out and then go start using agency debt. All these things that happen from actually being an equity owner, "Oh, hey! 36 months into it now, we're doing really well. In the first year, the cash flow wasn't there, now, it's maybe doubled."
Equity Is Powerful
Jake: These are all things that I've gone through and I just realized that the equity is so powerful. Even if you look at what happened here with the coronavirus. Things came available. There was a PPP, so for the payroll. You had these refundable loans that we're giving out. Then there are different things that you could do with the SBA. Equity is such a huge component for me, and that's what I really strive to grow personally because I've seen it. I think that's where it's at.
Darin: It's a key component for sure. But there are two sides to that. There are people who say, you make your money on the buy, so don't overpay. But if you don't own anything, you can't take advantage of any of these things that equity owners have the ability to take advantage of.
Jake: That's why it's being selective. It's being disciplined and working hard to find it. I told you about people snubbing that 50-unit deal that we bought. We caught wind of it through. The lead came through our Jake and Gino website. A broker said, "I might have something for here." I was up there the next day looking at it. This was, we have 1600 units, and this is a 50-unit deal that comes in. I saw the potential right away from the numbers. I got up there the next day, met with the broker, we paid cash, and got the thing done. You gotta act and a lot of people probably wouldn't have been that aggressive on a 50-unit deal.
Darin: People are scaling and a lot of people are just going to have a number that they're not going to look at any deal underneath that.
Projection of Multifamily Empire on Social Media
Darin: Talk about social media. You talked a little bit about it in a negative sense of people taking pictures next to Lambo's and look at me.
Jake: No, it works. They do a lot better.
Darin: Talk about social media and pros, cons, what's your thought?
Jake: I may have been hated a little bit there. It's just that's not our persona if you will. I don't have that in me to do. While we probably could have a larger presence if we did more of that glam type stuff, I don’t want to do it, really. It's just not in my heart and soul, but I think it's great. You get yourself out there. I think one of our best marketing campaigns, I guess, if you will, we've done as a podcast. We got out there early with it, we just let it rip, didn't really know what we're doing, and I think it paid off great. It enables us to do live events and these different things. We do social media, we have somebody that handles it for us, and we try to just do what we're told. I'm like the biggest employee.
When it comes to marketing, I try to stay true to myself, and just listen to what our CMO tells us to do at the end of the day. We meet with him every Wednesday, he's like, "This is what's coming down the line. Yes sir, I'll try to execute," and get my things in when he asks for them.
Darin: I'll share a story that, and this is somebody that reached out to me on Instagram. We had a sidebar conversation.
Jake: I just got on Facebook two years ago, by the way.
Social Media Can Reach the Right People
Darin: Three years ago for me, Facebook. Instagram has been a year, a year and a half. He tells me he's looking at different groups and he said that he talked to, I want to say what may have been Josh Roosen in the group, but in any event, he talked to somebody within your group and they shared a story about Gino that he was posting on Facebook. First, he was getting a bunch of likes, and then he just kept posting. But he wasn't getting as much engagement, and it was a year and a half later, this guy called him up and said, "I've been watching the success and how you guys have grown and I want to invest with you."
That guy had not corresponded with him or done anything with him for over a year and then reached out and then ended up connecting and investing in one of your deals. It sounded like it was a big investor. Sometimes there are people that are just trying to learn from watching you on social media. Like us, we haven't met before, but I read your book when I first started. I've seen all the things you guys are doing. The conference, I was going to go to your conference last year. You put yourself out there and you put yourself out there so that you can help more people, and so that's awesome.
Jake: Plus, there's a lot of opportunities, whether you want to do a loan with us through our mortgage brokerage Rand Capital, invest in a deal, get mentored. There's a lot of opportunities for us to work together, so you have to do it. Sometimes, marketing is not my favorite component of it, but you got to be out there.
The Multifamily Empire Amidst Pandemic
Darin: What makes it worth it for me is when I get a call from somebody from Las Vegas or Chicago or even overseas, and we have a sidebar conversation, and they're like, "Thank you so much for sharing this information because I'm looking to break in the space," it's a way to give back and serve others and help the next guy coming up. I like that aspect of it.
And I don't want to get too deep on COVID, but how things changed for you guys based on COVID? I know you've had to shut down your live events. You're probably doing some more stuff online. What about just managing your assets?
Jake: We shut down our multifamily mastery for 2020. That's the larger, open to everyone. One of the things that we found with our boot camps that we continue to do with the Jake and Gino community, fortunately for us, our HQ is in Knoxville. We've done some events in Knoxville. It's not really been shut down. People, they've had some restrictions here and there like everywhere, but we've had some good events and we've had people come from California or the Northeast. It was this overwhelmingly positive feedback of, "Wow! This feels normal," when they've been coming from these places that have been completely shut down, to go into a room learning, educating, going out for drinks, whatever, after the fact, it was like, "Thank God, there are some places in the world that are still operating."
That was one of the most interesting things that I felt people almost craving for some sense of normalcy and fortunately for us, it hasn't really, again, it's impacted everywhere.
Everything Is Possible With Teamwork
Jake: We had Tim Lyons and had a great conversation with him. We're just swapping stories. He told me about the craziness of people shooting fireworks and I was, "We're just hanging out here just doing our thing." It's like you see a broad-spectrum, but I think everyone appreciated how there was a sense of normalcy at our events, and I think that was well- received.
From the property management end, the team was freaked out in the beginning. We have some millennials on our team, some younger folks as well. There was a huge craving for the utmost transparency. Meeting after meeting, we need to know what's going on. I'm like, "This is what we're doing, let's go and get it done." I had to get out of my comfort zone in a big way. We started doing end of day huddles and had more meetings than normal because people needed those touch points to feel good about things. For me, that was very stressful, but the team did a fantastic job.
We really got into the virtual leasing heavy. We stayed open. Maybe it was by appointment or virtually, whatever the case may be, but we're willing to really push through to the point where last month we actually returned to growth. We dipped and so that's been phenomenal. It was just, February was the last time where it was like, "Great month, everyone's kicking ass." Then March hit and then last month was the first month that we actually returned to growth, which was just fantastic. I was super pumped with the team for pulling that through. It's been rough. Working a lot more hours trying to regroup, figure out new systems, how to serve people properly, how to make people feel okay about coming to work.
Caring for Everyone at a Multifamily Empire
Jake: I know a lot of the folks in the maintenance team just didn't feel good about what was going on, they're like, "Am I going into a unit and die?" I wanted to get out there and I started just blowing off properties, picking grounds with everybody and said, "Guys, we're here, we're going to do it, we're going to do this as safely as possible." It's little things like that that we get our hands dirty when it comes down to it. We have, between the different entities, 60-some folks that we got to take care of.
When the whole thing hit, Gino and I did a state of the Rand fam. We said, "The number one thing that we're committed to right now is not laying anyone off." I said, "That's number one. We all have jobs. We're going to work through this together as a family and make sure that we see this to the end."
That probably was the best thing that came out of it because it gave us an opportunity to show what kind of leaders we were, and I think that helped our culture internally to this day.
Darin: I got to imagine that when you look five years from now and you see the loyalty that those employees still have with you, it's going to be looked back upon as being a very, very smart decision.
Jake: We've been hiring. I know we got lean. We cut our pest control back. We were making sure that we weren't overspending and looking at different areas where we weren't just maybe doing more upgrades than normal because you don't know. You need to be in a strong cash position. Fortunately, it's coming back around.
The Multifamily Empire Is Resilient
Darin: It's interesting because, as I said, I've only gotten involved three years ago, and there was all the talk about, even before COVID hit, that we're at the tail end of the real estate cycle, and multifamily is really resilient in an economic down cycle, and so I bought into all that, but I was, "Well, this is gonna be my first downturn."
Then all of a sudden, when COVID happened I'm like, "This is completely different than anything you could have ever planned for where the government actually tells you you can't evict anybody for non-payment." It wasn't even in anybody's mindset that that could be an option. With that, a lot of properties have done pretty darn good through this process still. There's been a ton of stimulus. We'll see what happens after the election.
Jake: It will come down to the market. I just read there are 15,000 vacant apartments in New York City. That's the thing that I say to folks right now. The people that are going to succeed post-pandemic are the folks that are in growth markets. They're in places where people want to be, where jobs are flowing to. You're in Dallas, I think you're going to continue to crush it. In New York City right now, maybe there are buying opportunities, but I think it's going to take a minute to hit. I've seen different economists say it's going to take 10 years for the thing to rebound.
Darin: Dallas has been booming. I'm an East Coast guy, I'm originally from Connecticut but I've been here 10 years and I don't see it slowing down here.
Who Is Jake Stenziano Outside the Multifamily Empire?
Darin: What do you do for fun outside of work?
Jake: Dude, I love to do, this is going to sound crazy, I love to landscape seriously. I have a little over 3 acres here on the lake. I've totally transformed, I got a mid-90s house. I've totally transformed the landscape, I've cut down a ton of trees, done a lot of landscaping, and it's because during the week it's just constant zoom. It literally is my therapy. A lot of times I'll either get the chainsaw out or something on a Saturday morning, go just put my head down for 4 to 6 hours and come in dripping with sweat and it's like, dude, I feel better. That's sometimes what it takes for me to reset. Personal weirdo, but I love working out.
Darin: It's good for you, it's not my thing. I can appreciate it when I come by drive-by. I'm like, "Hey man, that looks really good."
Jake: It's a feeling of accomplishment.
Darin: You've got kids too, right? How old are your kids?
Jake: Yes, that's what I was going to say. My wife's pregnant. We got a 2-year-old and a 5-year-old. Like on Labor Day, for example, I did a podcast with Gino and then we went out and they got these electric cars and they're just literally ramming them into each other. Just stuff like that, just like hanging out with the family, having campfires, keeping it simple, working out, nothing too crazy over here.
Wise Advice to Starters
Darin: If you are going to describe, you said you've done most of the deals you guys have done with your own capital, but recently you've syndicated two or three deals. If there's somebody listening that they've never participated in multifamily syndication, how would you describe that person, maybe they've only invested in the stock market, whatever, how do they get involved as a passive investor? What's the best way for them?
Jake: I think the best way for them to get involved as a passive investor is to vet the group that they're going to be working with.
Darin: How do they even meet people?
Jake: You look at the different groups that are out there. I think one of the best ways to do it would be to say, "Hey, there are 10 groups that I'm looking at right now, for whatever the case may be," just like you're shopping. This is like anything. If I were to go out and invest passively, I was looking at different groups to vet, I would schedule calls with the different groups, start to look for alignment, because they may not be a good fit for them, it may not be a good fit for you or maybe.
Then I would ask him, I would say, "Hey, I want to speak to some people. I want to see the results, but I also want to speak to people that have invested with you and I want to hear stories, and I want to hear how it went for them." I think that would be the best way to do it because it's just like shopping. This is something that you're buying.
Choosing Your Multifamily Empire Is Like Shopping
Jake: If you're going to go out and you're going to look to buy a new truck, you're going to go out, you're going to drive a Dodge, a Ford and a Chevy or something. You're going to ask people, "Hey, what is your experience?" You got to read reviews. I think it's the same thing going out there and trying to align yourself with the group that has a similar vision and goals that you would as an investor. If a group goes out there, they buy apartments, flip them in three years, and you get paid off quickly, and that's what you want, look at the track record and say, "Hey, that's the deal. I want to be in more of those." Sign up for that.
Or, if the group holds longer and that's where your passion and desires and you see a track record, sign up for that. I think that's the key because if your goals are not in alignment with the group that you're going with, you don't look at the track record or what they're doing, then it's probably not going to end well. The other thing is to know where the market is right now. If they've traditionally done something but you think it's harder, maybe that's the reason not to invest with them.
Darin: I think that's very good advice. It's different than in investing in the stock market where you just go online and pick a stock symbol or a mutual fund symbol and buy the stock. In this world of syndications, you have the opportunity to actually get on a call, and depending on where you live, potentially meet face-to-face with the person putting the deals together.
Get the Audio Book
Darin: Reach out to those people and get to know them and make sure that the deals that they put together are in alignment with what you're trying to achieve. I think that's great advice. How do people get a hold of you, Jake?
Jake: Yes. I think the best way for us is that you can get some Honeybee resources. We got the Honeybee that just came out. You can go to JakeandGino.com/honeybee, and there we have a free download of our credibility book. I was talking about a pitch book earlier in the show when I was in my pharmaceutical time. We actually have a credibility book that helps investors network with brokers, network with bankers, network with investors. You can get a free download of the credibility book at JakeandGino.com/honeybee. There you can get different resources, download our podcasts, and also apply to work with our team.
Darin: Fantastic. I look forward to reading your book.
Jake: Get audible. Gino read it and he crushed it.
Darin: Did he really?
Jake: Yes, the audible is fantastic. He's got this late-night DJ voice, and man, he really did a good job on it.
Darin: Fantastic. Maybe I'll have to do that. I appreciate you coming on. Listeners, I hope you enjoyed that one. You guys will be hearing about Jake and Gino for years to come. These guys are leaders in the space and really appreciate that they put out more and more content to help the next guy. Jake, appreciate it, have a great weekend.