On this episode of The Darin Batchelder Real Estate Investing Show, we have Joseph Bramante sharing his captivating journey in the world of multifamily properties. From dealing with inexperienced property managers to discovering unexpected hurdles during renovations, Joseph's story is full of twists and turns.
Joseph's optimism took a hit when he lost his job, putting a strain on the cash flow from his property. But he didn't let that setback stop him. Working two jobs and utilizing platforms like LoopNet, Joseph hustled to find a great deal on a small apartment complex in a prime location in Houston. And guess what? He snagged it for a steal at $25,000 per unit!
But the challenges didn't end there. Joseph's career aspirations took a positive turn after a life-changing encounter on a remote island in Papua New Guinea. Inspired by the advice he received, Joseph dove headfirst into real estate investing, devouring books like "Multifamily Millions" by David Lindahl. Armed with knowledge, Joseph purchased his first apartment complex while still living abroad.
Now, you won't believe this—Joseph closed the deal without even seeing the property in person! Talk about taking risks. With the guidance of his property management company, he invested more money from his 401K into the property and aimed to double the rents after renovation.
So grab your headphones and tune in to this episode of The Darin Batchelder Real Estate Investing Show to hear more about Joseph Bramante's remarkable journey and his valuable insights on the real estate market. It's definitely a podcast episode you won't want to miss!
- 00:01:19 Engineering background, interested in seeing results. Chose Exxon for higher salary.
- 00:04:33 Unaware of news while abroad, successful project.
- 00:08:12 Koolaid, Papua New Guinea trips, real estate investment.
- 00:10:56 Found broker, worked two jobs, bought property.
- 00:14:25 Unexpected challenges with property renovation and finances
- 00:20:25 Partner helped close property; big renovation planned.
- 00:22:21 Doubled rents, faced debt, but succeeded.
- 00:27:57 Struggled to get $3 million loan, found apartments instead.
- 00:32:01 Slowly bought one property per year, then two. Missed opportunity for more due to a stuck deal. Lesson: Start small and learn.
- 00:33:59 Opportunity for new investors in tough market.
- 00:37:39 New president, economy will improve, good time to buy.
- 00:41:55 Rougher multifamily properties with higher cap rates sought.
- 00:43:58 Insurance costs rose significantly the previous year. Many sponsor groups use unrealistic budgetary insurance numbers in their calculations. Passive investors should ensure that the insurance number is an actual quote from a broker for that specific property.
- 00:46:23 Transitioned to development, breaking ground on deals. Future is new development, steady cash flow. Old multifamily properties struggle with rent growth. Competing in the mid-tier market.
Episode Table of Contents
- A Critical Mistake in Managing Multifamily Properties
- Finding the Right Deal for Multifamily Properties
- The Appeal of Multifamily Properties
- Balancing Multifamily Properties and Other Ventures
- Transitioning to Full-Time Multifamily Properties Investing
- Transition to Development
A Critical Mistake in Managing Multifamily Properties
During the early stages of Joseph's real estate investment journey, he made a critical mistake by hiring an inexperienced property manager for his multifamily properties. This property manager, who primarily worked with single family homes, lacked the necessary knowledge and experience in dealing with multifamily properties. As a result, they made costly errors and unnecessary expenses. This experience taught Joseph the importance of finding a property manager who specializes in multifamily properties and understands the unique challenges and requirements of this asset class.
Unexpected Challenges During Renovation of Multifamily Properties
Joseph and his team encountered unexpected challenges during the property renovation process. One of the major setbacks they faced was the discovery of asbestos in the building. This required them to stop work immediately and engage in an extensive asbestos abatement process. Not only did this unexpected issue add additional expenses, but it also delayed the renovation timeline. This experience highlighted the importance of conducting thorough due diligence before embarking on a renovation project and being prepared for unforeseen challenges that may arise.
Self-funding the Rehab with Limited Knowledge
Another significant mistake Joseph made was self-funding the property renovation with their own cash, without exploring alternative financing options like bridge loans. This decision put a strain on their finances and limited their ability to respond effectively to unexpected expenses that arose during the renovation process. Joseph learned the importance of exploring different financing options and leveraging other people's money to mitigate risks and ensure sufficient funds are available to handle unexpected circumstances.
Despite these obstacles and mistakes, Joseph maintained an optimistic and determined attitude throughout his real estate investment journey. He viewed these challenges as opportunities to learn and grow, ultimately leading to his success in the real estate industry.
Finding the Right Deal for Multifamily Properties
During his search for investment opportunities, Joseph utilized platforms like LoopNet and established connections with brokers to find potential deals. Through these channels, he came across a small apartment complex in a prime location in Houston. What caught Joseph's attention was the attractive price of $25,000 per unit, which was considered a bargain at the time. By leveraging his network and resources, Joseph was able to secure the property and take the first step in his real estate journey.
The Power of Multifamily Real Estate Investing: "Multifamily is really where you can grow your wealth."— Joseph Bramante
A Paradigm Shift
Joseph had always been on a career-oriented path, aiming for a long-term commitment to a corporate job with ExxonMobil. However, during a trip to a remote island in Papua New Guinea, one of his managers shared a valuable piece of advice that would change his perspective. The manager emphasized that a job is essentially a means to collect a paycheck and urged Joseph to start prioritizing his own financial well-being.
This realization led Joseph to explore the world of real estate investing and embark on a path that would ultimately challenge and redefine his future. Inspired by the potential for financial freedom and wealth creation in the real estate industry, Joseph began delving into books, attending courses, and acquiring the necessary knowledge to make strategic investment decisions. This paradigm shift enabled him to forge a new path that would lead him to success in the multifamily space.
Motivated by Encounter
Joseph Bramante's introduction to real estate investing came during his time working for ExxonMobil overseas. A manager he worked with had several rental multifamily properties and was making monthly rental income. Intrigued by this model, Joseph started exploring real estate investing and educating himself about the industry. He found inspiration in books that emphasized the benefits of multifamily properties, such as "Multifamily Millions" by David Lindahl. These resources provided Joseph with mathematical formulas and strategies that gave him confidence in the potential profitability of investing in multifamily properties.
The Appeal of Multifamily Properties
As Joseph delved deeper into real estate education, he recognized the advantages of multifamily properties compared to single-family homes. The ability to exert more control over property value was particularly appealing to him. While the value of single-family homes is heavily influenced by market trends, multifamily properties provide greater control over the property's value through renovations and management. This realization solidified Joseph's decision to focus on multifamily investments, setting him on the path to becoming a successful real estate investor.
Taking the Plunge
Armed with newfound knowledge and determination, Joseph took a leap of faith and purchased his first apartment complex while living in Papua New Guinea. This decision was made even more challenging by the fact that Joseph and his partner had never seen the property in person. Despite the inherent risks, their property management company assured them of the property's potential for impressive returns. Joseph's commitment to the investment was evident when he tapped into his 401K to allocate additional funds to the project. This bold move demonstrated Joseph's unwavering dedication to making the venture a success.
Balancing Multifamily Properties and Other Ventures
During his real estate pursuits, Joseph found himself fully engrossed in the industry. However, he also had other ventures and experiences that were taking up his time and attention. One notable experience was his time spent in Australia. While in Australia, Joseph was largely disconnected from what was happening with his real estate investments back home. This allowed him to focus on his work in a $22 billion LNG facility project in Papua New Guinea. Although he was making significant amounts of money, the rotational work schedule limited his opportunities to spend it.
Opportunity in a Challenging Market: "If you can find a way to get a deal done in this market, it'll be a great experience for you to learn a lot. It'll be a nice little notch to put on your belt for your future resume."— Joseph Bramante
A Career in Engineering
Joseph's career path in real estate was not his initial plan. Coming from an engineering family, Joseph pursued civil engineering at Louisiana Tech University. He had the chance to work in New Orleans for a consulting company called WS Nelson during his summers, gaining insights into the traditional engineering route. However, he grew bored of the repetitive nature of the work, largely involving AutoCAD and Excel. When Exxon came to his career day, he saw an opportunity for a higher-paying job and decided to join them. This decision led to an exciting journey in the oil and gas industry, including overseas work in Australia and Papua New Guinea.
Overcoming Challenges and Setbacks with Multifamily Properties
Joseph faced various challenges and setbacks during his journey in real estate. One of these challenges came when he bought his first apartment complex while still living in Papua New Guinea. The weeks following the property purchase saw a 15% vacancy rate, which was a blow to their plans. Another setback was discovering that the insurance they had purchased for the property was fraudulent. Additionally, a mistake made during the renovation process led to asbestos being found, causing a halt in the work. These obstacles, coupled with Joseph losing his job at Exxon, tested his determination and resilience. However, Joseph and his team decided to go all-in and proceeded with a massive renovation that ultimately paid off, resulting in an impressive return on their investment. These challenges and setbacks played a significant role in shaping Joseph's mindset and approach to real estate.
Transitioning to Full-Time Multifamily Properties Investing
Joseph Bramante made the bold decision to pursue real estate investing full-time after his experience with Exxon. Recognizing the potential and wealth-building opportunities in real estate, he joined a real estate group by investing $10,000. This group provided him with valuable guidance and advice, including the recommendation to sell a negative cash-flowing property. Despite feeling sick and scared as he wired the money for the sale, Joseph knew that taking this step was necessary to progress in his real estate journey.
Economic Outlook and Market Opportunities
According to Joseph, there will be significant changes in how the economy operates with the introduction of a new president and some economic uncertainty on the horizon. He expects campaign promises regarding interest rates and anticipates efforts to lower them. While property taxes in Texas pose a challenge due to inaccurate assessments of property values, Joseph remains optimistic about the current market. He believes that it is a great time to buy real estate and does not foresee any significant long-term downsides.
The Future of the Economy: "I'm optimistic that post January you're going to see a big difference in how the economy itself is running."— Joseph Bramante
Transition to Development
Joseph Bramante's real estate investment company has made the strategic decision to transition to development. They have already broken ground on their first new project and have plans for 30% to 40% of their portfolio to consist of new developments. By focusing on building new multifamily properties, they can achieve Class A quality at Class B prices. This is because the cost basis of constructing new assets is lower than the cost of acquiring older multifamily properties. This provides them with a competitive advantage and the potential for higher returns.
Benefits of New Multifamily Properties
Targeting newer multifamily properties also comes with several advantages. One major benefit is the steady cash flow that can be generated from these assets. New properties typically require less maintenance and repair, reducing the expenses associated with upkeep. This allows investors to earn more stable and predictable income from their investments. Additionally, new properties are more appealing to renters, especially in markets with high rates of new construction. This increased competition for older properties means that owners of older assets may struggle to maintain rent growth, as renters have more options to choose from.
The Future of Real Estate Development: "We want 30% to 40% of our portfolio to be new development. It's the equivalent of buying at Class B prices but getting Class A product because your cost basis is so low."— Joseph Bramante
Setting Their Position in the Market
Joseph Bramante recognizes the importance of positioning his company in the market. While they are not striving to be the top-end Class A multifamily properties, they aim to be in the upper middle tier. This strategic positioning allows them to benefit from the demand for quality multifamily properties without being subject to the intense competition at the top end of the market. They aim to provide solid, well-performing properties that offer a balance between affordability and quality.
In conclusion, Joseph Bramante's real estate journey serves as a valuable learning experience for aspiring real estate investors. His challenges and successes highlight the importance of diligence, education, and a commitment to ongoing improvement in the industry. By adapting to market conditions, embracing new opportunities like development, and strategically positioning their investments, investors can thrive and achieve long-term success in the real estate space.