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December 8, 2020

PWC W2 Consultant to Rock Star Multifamily Investor [Ep. 026]

Listen to hear how Shane Thomas transitions from W2 consultant with PWC to full time multifamily real estate investor. He started investing in single family in 2010, then transitioned to multifamily in 2015. Shane and his business partner have successfully closed 4 syndication deals totaling 700+ units. He hosts a free multifamily meetup group in the Houston area and is a regular speaker at multifamily events.

Table of Contents:

Meet Shane, A Successful Multifamily Investor

shane the multifamily investor
Photographer: Hunters Race | Source: Unsplash

Darin: Shane Thomas lives in Houston with his wife and three children. He was a consultant with PWC for 10 plus years before going full-time in real estate investing. Also, he started with single-family investments in 2010 and transitioned to being a multifamily investor in 2015. Shane hosts a free multifamily meetup group in the Houston area and is a speaker at many, many multifamily conferences. He's a go-getter and has a complete growth mindset.

So the way I know Shane is, I mentioned back in episode six, I had Shane's partner Prashant Satoskar on the show. Prashant was one of the first people I met in the multifamily mentorship group that I had joined. And Shane is Prashant's partner. And so, Prashant introduced me to Shane and both of them were just so helpful when I was first getting started in multifamily. Just anything that they could do to help me they were open and willing.

In fact, in my first year when I was going after my first syndication deal, Prashant and Shane both agreed to partner with me on a deal that I was putting an offer in on. It was smaller than they wanted to even do. So they were just doing it more as a favor to me to have some experience guys on the GP side. We ended up coming up runner up on that deal. So we didn't win that deal and we haven't done another deal together, but I am invested in one of their deals and it's going fantastic. They've done a fantastic job. So these two are great guys to know, and I'm excited to hear his story. So, Shane, appreciate you coming on.

Discover How To Save Taxes and Build Wealth

Interest in the Backbone of the Business

Shane: No, thanks, Darin. I think it's amazing how these relationships evolve. I remember speaking with you when we first connected and we share a similar background in terms of education and whatnot. And it's amazing to see how far you've come and how far we've come together. I know we've got a long journey ahead.

Darin: Absolutely. It's going to be a lot of fun. So, before we dive into some of the deeper details, just for everyone’s perspective, how many properties do you guys currently own, and how many units?

Shane: We've done four deals total as lead GP’s over 700 units. Also, we've exited one deal and now we currently own and manage three deals close to 600 units in DFW.

Darin: That's awesome. So, you mentioned that we have a little bit similar, we both are PW alums. I was on the audit side coming out of school. I think you are more on the consulting side?

Shane: Yes, I started in audit but then transferred into consulting.

Darin: You're also from Canada, you live in Houston now, but give us a little background on where you went to school, where did you start your career path, and how you got involved in real estate investing?

Shane: Sure. So, I'm born and raised in Canada, the second generation of immigrant parents. I did what I was supposed to do. Went to school, got a good education. So, I did my bachelor's in mathematics and a master's in accounting at the University of Waterloo.

At the time, I decided that I wanted to become a chartered accountant, which is what they call it in Canada, equivalent to a CPA.

I enjoy numbers. And to me, understanding numbers was the backbone of business.

Multifamily Investor With Entrepreneurial Spirit

Shane: That was the path that I wanted to go down and I was successful in that route. Like you said, I got a job. Luckily, as an intern at PWC, PriceWaterHouse Coopers. Started in the audit practice and went full-time with them about 12, 13 years ago. Then as a young grad, new start, you're working a lot and I was learning a lot, but long-term I just didn't see myself doing auditing. I felt like I was a nuisance to our clients and stuff like that. And I'm sure you know how it was in those busy seasons.

I always want to solve problems. Relatively creative, I wanted to solve problems and work on teams. So, I created an opportunity to say I didn't want to leave PWC, but I wanted to explore other avenues and I wanted to move to the U.S. And so, long story short, I eventually got a job transfer from PWC Toronto to PWC Chicago in the middle of 2010, which as you know was the depths of the recession in the U.S.

So, that's what got me to the U.S. And honestly, I thought that was going to be a short stint. 10 years later, I'm married with three kids and we're living in Houston. I'm happy to share that journey, that 10-year journey as well.

5 Step Process Ad

Darin: That's fantastic. So, you come to Chicago in 2010, and then at some point, you start investing in single-family real estate. What prompted that?

Shane: Though I went to school, got an education and whatnot, I've always had an entrepreneurial spirit. Even though I don't think, inherently, I knew it. My brother and I and a couple of friends were always talking about ideas, developing business plans, and doing things that I do now.

Becoming a Multifamily Investor

Shane: But I think where we got stuck where a lot of people get stuck is just taking that action and executing. I still go back.

My parents, they worked hard, W2 jobs. My dad still works for the same company for 30 years. They worked to provide us with a good future, but I just always knew that I wanted to get into some type of business. Actually, in 2009, I started investing in real estate in Toronto. So, not knowing anything, I just knew that I wanted to start buying some properties. It was a long-term thing for me. I never thought eventually it'd become a full-time thing, but then buy some condos and townhomes in the college town that I went to. And I saved some money. I worked through school and that's how I got my start.

For me, it was just like, I always heard stories from my grandfather saying that land is scarce, and buildable land is scarce. And so, for me, real estate was a more proven path as opposed to trying to become the next tech unicorn, if you will.

Darin: Yes, absolutely. So, your grandfather sounds like planted a little seed in your head. And I've interviewed a lot of other people that it hasn't happened with everybody. But many of them have had somebody that was in the generation before them that planted the seed that there are huge wealth-building opportunities in real estate and to sacrifice early. Put some money aside so that you can get into the real estate world. And it sounds like that had an impact on you as well.

Shane: Absolutely. I unfortunately never got to meet my grandfathers, but I just heard stories from them.

Courage From the Wife

Shane: My immediate family, as I said, I knew I wanted to do it, but I did not have the exposure growing up. I did have some extended family in business and then I met my girlfriend at the time, now wife. Her family comes from a business background. As our relationship grew, I think she honestly helped me think about things differently. And so, I think that also was a catalyst for us to move forward in this endeavor.

Darin: That's fantastic. So she was very supportive of you looking for another opportunity outside of your W2 income?

Shane: Yes. She's probably more courageous than me. And she saw it coming from her upbringing. She went to school, she's a nurse and she values education, but she just saw the potential. And so, that was just fuel, I guess, for me. It's been great. Yes, she's my number one supporter.

Darin: That's awesome. Hey, you mentioned something earlier about how you love to solve problems and you can do that in the business world as a consultant or as an employee in a W2 job. But take that idea, I read a lot of books and listen to a lot of podcasts and listen to wealthy people. A lot of them say if you're looking to get wealthy, help other people, bring value to other people, and then it will come. So, talk about that in terms of how you took those solving problems within the consulting world and then brought that over to the real estate side?

Shane: As an entrepreneur, you grow through these different kinds of inflection points. And in the beginning, it was like I maybe did not have the full abundance mindset because of coming from a W2 background.

Free Education for Aspiring Multifamily Investor

Shane: I think where I started to excel was when I realized that I can't do it myself. That I had to come, find partners and teams, and develop relationships. But I found that as I was going down this endeavor, commercial real estate, being a multifamily investor, there wasn't a lot of awareness. When I started, it was 2014/2015, the Facebook groups and the LinkedIn groups weren't as prevalent as they are now.

One of the things that I just tried to do, and I'm a firm believer I have this mentality now is you give without expecting anything in return. So the way that I try to do this is I host a couple of meetups here locally in SugarLand and just try to educate and bring people the awareness that there are other avenues out there to diversify and build streams of income – one is being a multifamily investor.

I think a lot of people just have that problem and they just don't know what the solution is. And so, I've just tried to have that mindset for everything that I try to do, whether it's in life or business.

Darin: That's fantastic. And that's something that got me charged up. That's part of the reason why I started this whole podcast was, I got excited when I got involved with this. It's a way to build wealth and it's also an amazing network of people that are all helping each other. It's not the same as finding the cure to cancer, but it feels like that in a way. Because it's like a hidden secret, this whole syndication model. Until you get into this world, a lot of people don't know about being a multifamily investor.

A Team Player

Darin: To bring awareness, and to let other people know, and to provide a forum for people to come to your meetup group and educate them, that's awesome. I applaud you for that. Talk about how you grew up a little bit more. You grew up in Canada, you have one brother, or do you have more brothers and sisters?

Shane: I've got one younger brother.

Darin: One younger brother, and W2 income, rich, poor, middle-class?

Shane: I would say, we had a middle-class upbringing. My parents worked hard, nine to five jobs. And my dad's an engineer by trade, transitioned to IT when we moved to Canada. My mom has done some admin office work. I mean, we had a great upbringing. I played all sports, growing up. I'm a very team-oriented person. So, I only started picking up individual sports later on in life when my body wasn't ready to handle playing hockey and soccer daily.

I've just always had a team mindset. I love to lead and inspire people and motivate. And so, yes, just a regular kid, middle-class. Education was very informed to our family upbringing. I got my education and then from there, I guess by most standards, I was "successful", moving up the corporate ladder, if you will. But inside, I knew that I eventually wanted to start something and then started down this path.

And what's amazing, Darin, is that as you start growing and you know this, as you start growing and your goals become bigger and bigger, I feel like I'm still in the batter's box. It's a thought analogy. And so, it's exciting to wake up every day. I probably work more than I used to work.

Determination and Perseverance Are Keys to Success

Photographer: NordWood Themes | Source: Unsplash

Shane: I was used to working a lot at PWC, but it doesn't feel like work. I'm pumped up. Like Monday mornings. I used to dread waking up at four o'clock to catch a flight, and now I'm waking up excited.

Darin: Part of that is the journey. The journey to get to the next goal is, I think, where my juices are flowing the most, that's where I'm charged up the most. When I hit the goal it's nice, you're just typically a financial carrot there but then it's onto the next. And that's where that challenge, that stretching of yourself, that unknown, can I accomplish this?

That's part of what drives us as humans. So, talk about, when you were a kid, it sounds like you were always motivated. You were motivated to do well in school, you wanted to do well and make your parents proud. What did success look like back then? And then after you started shifting your mindset, how did that definition or that vision of success change?

Shane: For me growing up, success was working hard and eventually getting a job that I'd be able to afford a good lifestyle, raise a family, and move up the corporate ladder. I mean, if you asked me when I was 20, probably the definition of success is becoming a PWC partner. And having a good family, working for years, making a good income, and living a good life.

As you said, I've always been motivated. I work hard. Determination and perseverance, I've always had. I think my friends and people that know me would say that as well, but I've realized over time that there's only so much that willpower can do for you.

Work Smarter

Shane: I think we all have the same amount of time on this earth and every single day. And so, I've realized that instead of working harder all the time, I'm shifting my mind to working smarter. That's how I got into multifamily and transitioned from single-family to being a multifamily investor. I had limiting beliefs.

I was going to go buy a 15-20 unit in Chicago by myself. Because I said, "okay, I want to be a multifamily investor.” I've had this much capital that I want to deploy. I'm going to do it myself. Then I realized, after stumbling a little bit in the beginning, ran into cross syndication, and now we're doing deals that five years ago I would never have imagined.

I think success now to me is being able to do what I want when I want with who I want. I would say I'm not a hundred percent there yet, but we're getting there and I enjoy every single minute of what I do. It's really freedom. I've got three little kids right now and three years ago when my wife was first pregnant, I was still on the road every single week.

And I was just like, "Wow. I don't know if I could do this for the next 20, 30 years of my life." And now we're at home with COVID, but even regardless of that, I'm at home. I get to see my kids every day, drop them off at school and it's great.

Darin: Yes. It is amazing when you surround yourself with other people. That was the big thing for me when I joined that multifamily mentorship group.

Shane & Prashant

Darin: And meeting people like you and Prashant and all these other syndicators that are saying, "Look, you don't have to do the duplex, four-plex, eight-plex thing, you can go bigger. You can't do it on your own, you've got to partner with some other people, but that allows you to scale faster. So how did you end up connecting with Prashant? How did you guys end up becoming partners?

Shane: Yes. So, just like you said, we were part of the same multifamily mentorship group. I think I had joined first and I just met Prashant at one of the events, weekend events. And just like a lot of people that you meet, you connect, start developing relationships. You have a phone call or whatnot afterward. And me and Prashant, even though we were in the same mentorship group, we just started having more regular touchpoints.

He would call me just to get my opinion on things related to the group and deals and stuff because I was in the group a little bit longer than him. Then we just started having more, what I would call, a peer buddy system, if you will. Like gym buddy. We just went from once a month calls to weekly calls and it helped us become accountable.

There was no intent to partner in the beginning, to be honest with you. It was just like, "Hey, how many brokers did you call? What deals are you looking at?" I was living in Chicago at the time. Then I moved to Houston in 2016 and I was looking at a deal in Houston and Prashant was like, "Hey, why don't I just come down and tour the deal with you? I mean, I think Houston is a good market," et cetera.

Markets for a Multifamily Investor

Shane: Then we started realizing, "Hey, this has been six, maybe nine months, a year that we've got complimentary. We have the same vision, ethics, morals, which I think is by far non-negotiable when it comes to partnerships. And so, he had his own business for many years and had that operational background. I come from a finance, accounting, consulting background. And honestly, we've got a pretty big age difference too. And I think that helps us because we're pushing each other outside of our comfort zone. He's got a lot more experience to lean on.

Darin: He's got a little bit more experience. I mean, he's the older one. That's great. So, what markets are you guys focused on?

Shane: Primarily in Texas, major markets in Texas. The Texas triangle, including Austin, that's primarily what we're looking at. And we do like some secondary markets. We've got our eye on a few markets in the state. But we're firm believers in just digging in, in your backyard in the sense that if you want to become an expert there.

And then we're working with some other folks in terms of joint venturing and whatnot. People that have boots on the ground in some of these other markets. We'd love to leverage our experience and resume in other markets. But right now we like Texas, we think that long term, Texas is going to be a great place to be.

Darin: I agree. I just want to clarify one thing. When you talked about investing in your backyard, I would say that I would put a qualifier on that. To say that if your backyard is a strong market and so what we consider a strong market, landlord-friendly, population growth, income growth.

The First Deal Is Like Driving a Manual Car

Darin: So, if you're in a market that doesn't meet those criteria, then there are options to partner with people that are outside of your market and you bring other things to the table. Would you agree with that, Shane?

Shane: Absolutely. I know I should have started with that. I started becoming a multifamily investor when I lived in Chicago. And I was investing in deals in Texas. So, honestly personal reasons are why we're here. But yes, I think leverage other people, especially if you're not in markets that may not be the most suited for what we do.

Darin: Absolutely. You have four deals as a GP. One deal went full cycle. Talk about that deal. That was the first deal that you guys did. Talk a little bit about that deal. How you got the deal, any challenges along the way and how long you had it, and what the returns were when you sold it?

Shane: I think there's the law of the first deal as they call it. I mean, the first deal is the most challenging. I compare it to driving a manual car. You must get neutral. And getting into first gear is the toughest. Most people stall out a lot and give up. And once you get into first, getting into second and whatnot gets a lot easier.

The first deal, it was an off-market deal that we spent about 9, 10 months looking for our first deal. We defined our criteria here in Dallas. This is an off-market deal, 125 units just south of Houston. And so, we found this deal, it had a little bit of hair on it but had a great story.

Understanding the Business as a Multifamily Investor

Darin: What do you mean by a little bit of hair on it?

Shane: Lower occupancy and it had an income restriction which, I think, is just something that you just have to understand. And once we understood it, it did not impact our business plan at all. That's why it was just not your standard deal if you will. So, for that deal, once we found the deal and we're getting close to putting an offer, similar to the experience that we had with you in your first deal, we brought it to a friend of ours who had done 15 deals prior. That friend was based in Houston and just knew the broker and it helped us.

Prashant and I hadn't done a deal as lead syndicators before, so leveraging our third partner helped us win the deal and give the broker and seller confidence that we could do the deal. That deal we bought in 2017. We had to take a bank loan on that. As I said, it was a pretty big value-add. We turned it around, lowered the occupancy, et cetera. But ended up stabilizing the deal low to mid-nineties. And in less than two years, I mean, I'm fast-tracking here. There was a lot of learning in a great way.

We went through a couple of management companies and all stuff that I think sharpened our skillset and our tool belt for the future. But yes, we ended up selling that deal in less than two years for a 25% IRR, 50% total returns over two years.

Darin: Awesome. So, what was the occupancy when you took it over?

Shane: 81-82%.

Darin: So you brought it from 81% to mid-nineties?

Shane: Yes. We took it down to the high sixties then to the mid-nineties.

Multiple Streams of Income

Darin: I'm not privy to this deal, but I'm assuming that the reason why it went from the eighties down to the sixties was a couple of things. One, some of the tenants were like, "Oh, no. New ownership. They're going to be doing improvements and they're going to be raising rents. I'm going to take off and go down the street to another property that's cheaper and not as well-maintained." And secondly, there are probably some people that weren't paying as consistently and you guys were new ownership and coming down on them.

Shane: Yes. That's accurate. I think it comes down to whether their leasing criteria wasn't the best. There is stuff and people and, as you said, a new sheriff in town with new rules. Whether it's 80%, 70%, 90%, there's generally some kind of shake up on any deal. This deal just had to have a little bit more than others.

Darin: I had you guys and other people telling me, "Hey, Darin, on your first deal, when it closes, you're going to have a drop in occupancy." I was like, "Ah, I don't think that's going to happen with mine." And sure enough, it did. It did. So, talk about, a lot of books on growing wealth talk about multiple streams of income. So talk about, why is that important, and how does multifamily play into that?

Shane: I think a lot of us are told to get a good job and you'll be set. But at the end of the day, if you have that mindset, once something happens in the economy, whether it's the great recession or COVID and businesses have to make decisions, if you've only got one source of income, that could be cut off overnight.

Risk Mitigation Strategy for a Multifamily Investor

Shane: Having multiple sources of income, if you look at people that have generated significant wealth, right? They're just basically reducing their downside risks. And so, for me, being a multifamily investor, from an asset class perspective resonated the most with me. I think it has the best risk-adjusted returns that I could think of in any type of business or investment.

Then as a syndicator, there are multiple ways that we can generate income for our investors and for the syndicator and the company itself. Whether it be through the ongoing work of asset management, the acquisition, part of the promote, the promote meaning your interest in the deal, for finding the deal, taking the risk to put up the hard money and putting the deal together, raise the money, et cetera.

And you've got multiple, different assets, hopefully in different markets which is another risk mitigation strategy. And so, for me right now I've been focused on being a multifamily investor. I like to go deep and become a master of something before starting something else. But passively, even myself I'm looking at other asset classes in the commercial real estate space to put some money into, like industrial and storage and stuff like that. Again, for multiple streams of income.

Darin: Multiple streams of income can mean a lot of different things. It could be your W2 income plus being a multifamily investor. Or it could be being a multifamily syndicator and having multiple deals so you're getting streams of income from multiple projects. It could be going into different asset classes as well. But one thing that's key in going the large scale multifamily route is to say you were in Chicago and you ended up purchasing that 16 or 20 unit deal on your own.

Leveraging Yourself and Others

Darin: All your capital is tied up in that one deal. And because it's a smaller property, you may be doing a lot of the work associated with that deal and it doesn't allow, so you have your W2 income. Then you have that property. You may not have the bandwidth to go look for the next deal and you don't have the capital because your capital is tied up in that deal. Where one of the big advantages of going into large-scale multifamily is being able to scale and leverage.

So, you're leveraging the experience of your partners. You're leveraging the money that other passive investors are bringing in. And importantly, you're leveraging possibly a third-party property management company. If you get large enough, a lot of syndicators, once they get to a certain size, then they consider bringing that property management company in house. But what that allows you to do is purchase an asset and then have a third-party property management company actually on the property, leasing up the units, rehabbing the units, taking care of the day-to-day, and then it frees you up to go do more business.

Shane: I think one of the biggest blessings in disguise for me personally was that 20 unit in Chicago that didn't work out. I spent eight, nine months hitting the pavement, doing a lot of the stuff that I'm doing now. But with that kind of fixed mindset, "I'm going to buy this." And to your point, the capital was going to be tied up for four or five years. And yes, I think even when I talk to new passive investors, I encourage them to spread. If they've got money to invest in 10 deals rather than putting it into one deal.

Diversifying Yourself as a Multifamily Investor

diversify to be a multifamily investor
Photographer: Razvan Chisu | Source: Unsplash

Shane: That way you are diversifying yourself and you're learning what deals you like, what type of operators you like, et cetera. And to your point, Darin, I think multifamily is one of the only businesses that I know where you could truly scale. If you think about it, we third party manage our deals as I know you do. There's just a plethora of companies out there that do this day in and day out. Whereas if you're going to go by, for example, a gym or something like that, you're sure you could find somebody that manages for you. But it's not as proven as scalable as something like multifamily with third-party management companies.

Darin: Right. I've likened it to when people look at franchises. If they go and buy, from my experience, talking to people and reading financial books, the people that go and buy one location franchise, they buy a job. But the other people that look at buying maybe a territory and building 15, 20 locations and hiring competent management to manage those deals and they're just the ownership group, those are the people that develop wealth. And I think it's the same thing on the multifamily side. It just allows you to continue to grow.

Shane: Yes. I think you hit something on the head. I mean, it comes down to being able to build a team. Whether it's your own company or you're leveraging other people's joint ventures, I think the team is critical and everything.

But the true people that I've seen grow tremendous amounts of wealth can inspire people, motivate them, let them do what they do best other people and grow from that and it's amazing to see.

How Third-Party Property Management Helps a Multifamily Investor

Shane: Because you're right, a lot of people go from the employee to, as an accountant, I've seen a lot of peers self-employed. They're working for themselves, but they don't have the freedom, they don't have the scalability, et cetera.

Darin: Yes. Absolutely. So, I'll just talk to the listeners about a couple of instances that having third-party property management helped me. One was the leasing manager that was on the property we kept and she was really good. But she was used to working at larger properties and she got hired away at, just offered a better income that we couldn't match. And when she left, if I was managing that property, all of a sudden I would have been having to scramble to interview people and where do I find people?

Well, I didn't have to deal with any of that. The property management company took care of that. And the next day had the regional manager at the property and then they were on looking for the replacement. So, I didn't have to worry about that. That is a huge savings. Secondly, when I did have the drop in occupancy when we first took it over, all of a sudden we found ourselves with more units available than I thought.

Well, we had one maintenance guy full time. There was no way he was going to be able to rehab all these units. So, I talked to the regional and they just brought some other maintenance guys from other properties over for a week or two, banged out those units. And then those guys go back to the other properties. So, it's huge to be able to leverage that experience.

An Introvert That Likes to Educate

Darin: Shane, you've grown. You started, didn't know what you were doing and then all of a sudden, you and Prashant have a great reputation. Now I've seen you've been asked to be a speaker at different conferences. So, talk about that. What a great ride, and why even spend the time to go speak at conferences?

Shane: It has been a great ride and I guess naturally I would consider myself an introvert. My childhood friends would probably agree.

Darin: It's funny because you're so friendly and outgoing at all the events that I see you at.

Shane: Yes. Obviously, over time things change. But inherently, I think I've been an introvert. Although I've always liked to present and talk to people and connect people. One of the things that I learned in my consulting days is having the ability to simplify complex things and articulate it in a way where most people can understand.

I learned that and I started to apply that to our business. And like I said, I always wanted to raise awareness because I think there's a lot of value in what we do. It can help a lot of people that are on the grind. And so, that's one of the reasons why I do like to present and get out there and be on panels.

The other thing is, honestly, when you're out there and you're presenting or whatnot, you learn so much more. I think teachers would agree. Once you start teaching something, you learn. And so for me, it's about keeping my tools sharp. We used to do a lot of pitches and stuff in my consulting days. You're running your own business.

Getting Past It

Shane: At the end of the day, you're selling your company and you're trying to win deals and work with brokers and stuff like that. But I just enjoy being able to learn and be able to help others. I'm always trying to get outside of my comfort zone. So, speaking on panels and stuff was just one of those things. A couple of years ago, I got invited to a couple of panels and I was scared, to be honest with you. I went in and at the end of the day, we're all just people.

There's a lot of limiting beliefs and I think Darin, we share the same story. I was never on Facebook before, maybe four or five years ago now, after I joined this group. And now with COVID and stuff, I've got more active on LinkedIn. I've put out videos there, put out my first blog six months ago. And I kid you not, I was having trouble hitting the post. I think my wife had to come to nudge me and say, "Here you go."

Darin: Isn't that funny? I remember that on Instagram, I mean, having to push send, what goes on in your head like, "Oh, what are people going to think?" All this fear and people are going to judge me and all that stuff and then you just got to get past it.

Shane: Yes. I think once you get past it, just so many things open up. I think one of the sayings that I have up on my wall is,

A lot of people think of what they have to give up, but don't think about what they have to gain.

Being a Multifamily Investor Is About Paying It Forward

Shane: If you're doing this podcast is helping, if it helps one or two people or both, we feel like we've added value. We know it's going to help at least that. And so, that's the way I look at things now.

Darin: I think that's great. What I found is that when I started putting content out there, I'm sure some people go, "Oh, Darin's another post." There's somebody that's saying that. But when I get calls from new people that just didn't know me before, and then I spend an hour on the phone with them and they're like, "Thank you so much for sharing this information." I'm like, "That's what it's all about. It's helping the next guy."

I've told my wife, some of those people are like, "Hey Darin, I want to invest in your next deal." And some of them I'm like, "That person's never going to invest, but that person's a go-getter and I think will go out and get a deal. And I'm happy to be a part of that." So, I love that you have that mentality of helping others. And some of that may come back to benefit you and some of it may not, but it's still an inherent thing in people that is just a joy in helping other people achieve their goals.

You mentioned something about one door closing and another door opens. And I'm a believer in that. Sometimes I'm wanting something really bad and it doesn't happen and I look up to the big man upstairs and I'm like, "Why didn't that happen?" I was hoping for that and praying for that. And so many times though, when a door closes, it's forcing you to look for that other door.

When One Door Closes, Another One Opens

Darin: Some people may lose a job and it feels like the end of the world. Like your whole identity is tied up in that. And then, when you have time to think and talk to other people, you may all of a sudden decide to go out on your own. You're like, "Wow! Had I not lost my job, I never would have done that." And with investing and being a multifamily investor, I always thought the only opportunity was to invest in the stock market. Then I finally found a way to get involved in real estate investing. And now it's our opportunity. I think it's pretty much an obligation to let other people know that they have that opportunity as well.

Shane: Yes! I think you hit something that I have a story on because I believe in what you said. We're so fixated on the now and we're going after a goal and sometimes we end up with some disappointment. I'm a firm believer everything happens for a reason. Like when I was in PWC Toronto, I was getting promoted to a manager right at that time. I took a "demotion", if you will, to go into consulting. Because I had no consulting experience. They were taking a chance on me. I was starting with fresh grads, honestly, coming out of school to start work.

I think a lot of people at that time thought I was crazy. Why would I do that when I was only five years away from making a partner? But had I not done that and taken that one step back, I wouldn't have got three steps forward. I wouldn't have gotten into multifamily syndication and be a multifamily investor.

Making the Best Out of Your Journey as a Multifamily Investor

Shane: I think that the key is you got to take action, and you learn from every step in the journey. And I think a lot of people sometimes get fixated on the destination. But when you get to the destination, there's not this amazing aha moment. It's the steps that get you there and then you figure out what your next destination is going to be. And so, that's really where I agree there are so many times. Every day it feels like one door gets shut, and then the next day another door opens.

Darin: Absolutely. And people will also ask me, "What was the hardest part of that first deal?" And my answer is every part was hard the first time you did it. But then I look back on some of the steps and I'm like, "Man, I don't have any fear of that step anymore." But the first time doing it, it's scary. And so, the first deal you did, you guys learned a ton. In the second deal, you probably had some different challenges than the first one, but there were some learnings that you learned in the first that could carry over.

So, the deal that I invested in with you and Prashant, one of the reasons why I invested was you guys are great guys and I trust you. But also, when I went and looked at the property, it was ugly. It was not an attractive property. When people talk about foundation issues in single-family, people typically just run. And when I saw this property, a lot of the buildings had cracks up the side of the building through the brick. And I was like, "this thing is going to take a lot to turn around."

Be a Proactive Multifamily Investor

Darin: And so, I want to learn from watching you guys. That was part of the reason why I invested. And you guys did an amazing job turning that property around for sure.

Shane: I appreciate it. Yes, I know that's another example of one door closing and another one opens. I still remember we lost a deal the week before getting that deal. We were disappointed and then made a few phone calls and this one was an off-market deal. And we saw the opportunity there, as in a fantastic location, to your point. I mean, it was very beat up. But we had the capital plan to improve it. And right now, I mean, it's our best performing asset.

As you know, we're looking into refinancing that property. I'm just shocked at the valuations that we're getting. It just continues to perform. It's right across the street from the school. And it's a little bit of an older asset, but we feel strongly about the bones of that. It's one of those deals that sometimes you get a little bit of luck in life too.

Darin: Yes, absolutely. But here's another thing, you're out looking for deals, right? If you're not out looking for an opportunity, you're going to miss it. That means, if you want to get into passive investing, then you gotta get out there and meet. Find out what market you want to go after, and then go out and meet the syndicators and start looking at deals.

If you want to become active, you have to take some action to move down that path. It's not just going to fall in your lap. It is not.

Fears of a Multifamily Investor

fears of a multifamily investor
Photographer: Joshua Ness | Source: Unsplash

Darin: It's like when you get a new car and you drive by and all of a sudden now you start seeing that same car all the time. The same thing happens with opportunities. And there are very wealthy people that I've read books on that do the same thing with businesses. They're looking for huge businesses to buy and a big opportunity, but they're searching for it so they see it in people. And the other thing is you have to tell people what you're trying to achieve because then other people can help you.

Talk about fear. Fear is something that we all have at different stages. How do you take action when you're still afraid?

Shane: I think with my background being an accountant, you would consider me a pretty risk averse.

Darin: And Prashant is like, "Hey, let's go for it."

Shane: I think you got to get past the fears. I don't know, there's not a magic formula per se, but I always incrementally try to do something that's outside of my comfort zone. Surround yourself with people that can help you take that push. I'm not saying that we take uncalculated risks but I try to surround myself with people that have done things that I want to do. And emulate and follow the breadcrumbs that they put, whether it's multifamily mentoring or as a multifamily investor, now I'm more focused on business mentoring and scaling and whatnot.

I'm probably a little bit more analytical because of looking at stuff, and yet they just need someone to say, "Hey, we've come up with this criteria and whatnot." And it hits all the boxes. What's the worst that could happen? I think that's the last question that I always say.

What's the Best Thing That Can Happen?

Shane: I left my job when we had two kids under the age of two and she was pregnant with number three. Probably, for most people, not the ideal time to leave your job, but I knew we had momentum with this business. I truly loved it and she supported me. And did we have some fear? Yes. But we were in a good position. We took that chance and looking back, it was a great decision.

I just look at, what's the worst thing that could happen if I make this Facebook post or I post an article and I get one comment. Or if I'm able to add value to one person, that's better than nothing. So yes, that's the question I ask.

Darin: What I would add to that is, so I've had a lot of guests that have said the same thing. What's the worst thing that can happen? But then adding on to that, well, what's the best thing that can happen from this? And the best thing typically is significantly better than the worst thing that could happen. The other thing I would tell you about the post thing, this has happened to me, and I've also talked to other people where the same thing happened to, sometimes you put out a post and you don't get the traditional likes and comments and the stuff that you know that people have interacted with.

But then all of a sudden I'm on the golf course and I see somebody I haven't seen in maybe two or three years and a guy stops me and is like, "Hey Darin, man, I didn't know you were into this real estate thing. I've been watching for the last few years.

Sacrifices That Makes a Multifamily Investor

Darin: I'd like to get involved in your next opportunity." Never liked or commented or gave me a call or sent me a text, but when I ran into him, he brought it up. And so, I think that some people watch social media and they just don't interact with it as much but they are there to learn and to see who are doing things that I would want to do? And so, you may be having more of an impact than you even think is my point to that.

Talk about sacrifice. What kind of sacrifice did you have to make in your life to go this route?

Shane: I think in anything that most people do, there's always sacrifice. In 2015 when I started this endeavor, my wife was pregnant with our first daughter and we moved to Houston with our number two on the way. I moved to Houston and I've got friends here and family here, but I knew that we needed to transition to a more multifamily and do it actively.

As you know, Darin, a lot of the events and networking happens on evenings and weekends. I mean, pre-COVID, I was traveling up to Dallas or other cities for events on a pretty regular basis. And my wife would have to go to parties and stuff alone and, "Hey, where's Shane?"

I think there are sacrifices that we've had to make to do what we're doing now. And for me, my kids are now getting older and starting to these are the times that they're going to start remembering. I'm glad that I made the sacrifices when I did because I feel like I'm getting into a better and better position.

Create a Vision for Your Future

Shane: I'm not going to have to be on the road as much as I did when I was working in consulting and whatnot. And so, I think personally, I've sacrificed a lot of hobbies and things like that in the last couple of years. But for me, I knew that it would enable me where I am now to live the life that I want with my family and my kids.

Darin: That huge. People have talked about all kinds of different sacrifices, and for listeners that want to make a change, you create that vision for what you're trying to achieve in the future. And then, as Shane said, there are sacrifices that you have to do now in the early stages so that you can have that vision later. And some of those sacrifices is time, Shane was traveling to conferences on nights and weekends.

As a multifamily investor, it's not easy to build up a new multifamily meetup group that you've done and going to conferences and speaking, and now setting up stuff on LinkedIn to help educate people. Other investors have said that when they were starting, they had to live below their means so that they could sock away some money so that they could have some seed money to put into their first investment. Whether that means just living in a lower house or apartment or in with the parents or whatever the case may be, but they're so thankful that they did that because it gave them the opportunity to take action and then grow from there. So Shane, what do you like to do outside of work?

Shane: Growing up, I was huge into sports. I'm the type of guy that I honestly struggle watching sports, but I love playing.

Shane Outside Real Estate

Photographer: Ryoji Iwata | Source: Unsplash

Darin: Do you struggle watching sports now?

Shane: Now it's a little different, but even growing up, I would rather play than watch.

Darin: We're recording this on Masters Thursday. It's in November. It should be April that is playing, but I hope that you like to watch the Masters.

Shane: I'd rather play. The Masters is awesome.

Shane: I'm a fanatic for getting out there and staying active. And so, that's what I try to do. I don't play sports as much as I used to. Though I do run a lot and that's where a lot of thoughts and stuff and just get away and have some peace and quiet. I like to read, spend time with my family. And I was a pretty big car guy, so used to do some autocross and a little bit of racing and stuff like that.

Darin: What ages?

Shane: From when I was 25.

Darin: So like street racing, illegal racing? Legal.

Shane: Legal, actually. It's organized. You go into a parking lot and you're just doing track in a parking lot. So it's not like, I've done big tracks as well too. But this is more of the handling. I get an adrenaline rush from that. So I want to pick that back up soon.

Darin: Yes, that's awesome. I don't know anybody else that does that. That's fantastic. If somebody is listening right now and they want to, they're like, "You know what? I've heard about these multiple streams of income. I'd like to get involved in real estate investing. I don't know-how. I like the idea of passive income investing." What advice would you give somebody that's in the situation that's just looking to do it for their first time?

How to Get Into Investing

Shane: I think we've all been there. And I think right now, the number one thing is to get educated. The second question is how. And there are so many groups and things online now. If you took a little bit of action, you could find Facebook groups online or LinkedIn, Google, but I think the key is finding people that you have alignment with.

So, we joined a mentoring group. There are different clubs out there, whether they're paid or unpaid. I think you're surrounding yourself with people that are doing it. And then getting references, et cetera. But the number one thing, and I'm sure it's been said before is getting the education. Because no one's going to show you a bad deal.

You got to be able to see through the deal and develop your criteria. And that all just comes with education. The beauty of being a multifamily investor and a passive investor is that a lot of the hard work and heavy lifting is done by the team leading the deal. There's a lot out there right now, especially compared to when I started with. Guys, 10 years, 15 years in the business, there was no awareness. It was the country club type of thing. Handshakes and super-wealthy people doing these deals. And now it's available to the majority of people. They just need to connect themselves with the right people and get the right education.

Darin: Yes. I think that's great. Great advice. So, I would start with, pick the market you want to be in. So, if you want to be in Texas, then focus on Texas then find syndicators that you like in that market and educate yourself on how these deals are put together.

A Multifamily Investor Has to Take Actions

Darin: Talk about track records of different people. And then finally at some point, just like Shane has to pull the trigger on that next acquisition, at some point, even as a passive investor, as a multifamily investor you have to take action. There's not going to be a hundred percent certainty on any investment, whether acquiring or becoming a passive investor. So, at some point, you got to take some action.

Shane, I appreciate you taking the time, my friend. I wish that we were still meeting face-to-face. Zoom calls and phone calls are starting to wear on everybody, I think. But I appreciate you getting together. I appreciate the relationship with you and Prashant and that you're managing my money and other people's money very well. And if somebody wants to reach out to you, what's the best way for them to reach you?

Shane: Sure. My email, I'm pretty responsive there. So, shane@catequity.com. I'm also pretty active on LinkedIn. And so, I think, like what we mentioned, I've written some blogs on there and we do some LinkedIn Lives with some guest speakers that are experienced professionals in the space. Connect with me on LinkedIn or you can visit our website. We've got some informational materials, especially if you're new, wanting to learn about what we do and how we do it catequity.com.

Darin: Very good. I was just going to spell it for them but you did it. So, hey Shane, once again, thank you very much. Until next week, signing off.

How to Reach Shane Thomas

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Darin Batchelder

Wealth creation through real estate provided me with a new passion to get the word out and let others know that they have an alternative to investing in the stock market.

If I can inspire and educate just one person to take action that results in life changing wealth creation then the work to launch and grow this podcast is well worth the effort.

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