Financial Freedom in 8 Years by Investing for Equity (NOT Cash Flow)

Summary

BiggerPockets Real Estate Podcast: Financial Freedom in 8 Years by Investing for Equity (NOT Cash Flow)

Host: Dave Meyer
Guest: Benjamin Acre, Emergency Room Physician and Real Estate Investor
Release Date: November 18, 2024

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1. Introduction

In this compelling episode of the BiggerPockets Real Estate Podcast, host Dave Meyer welcomes Benjamin Acre, an emergency room physician from Sioux Falls, South Dakota. Benjamin shares his inspiring journey from an accidental landlord to a successful real estate investor, emphasizing a strategy focused on building equity rather than chasing immediate cash flow.

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2. Beginnings: Accidental Landlord

Benjamin’s foray into real estate was unplanned. As an ER physician grappling with the high-stress environment of emergency medicine, he sought a safety net to mitigate the risk of burnout.

Benjamin Acre [00:54]: “I’m a physician, emergency medicine physician, and got started doing that not wanting to do any kind of real estate at all. Just never even thought of it...I was an accidental landlord.”

At 35, nine years ago, Benjamin and his wife purchased a house with the intention of living in it while building their primary residence. An unexpected twist led them to rent the property instead of selling it, sparking Benjamin’s interest in real estate.

Benjamin Acre [02:30]: “This was just a house that we bought, my wife and I, in order to live in while we were building our primary residence...”

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3. Strategic Shift: From Single-Family to Multifamily

Initially, Benjamin focused on single-family homes, acquiring three more properties without a clear long-term strategy. However, inspired by the podcast and the concept of building equity, he pivoted to multifamily investments to leverage economies of scale.

Benjamin Acre [04:57]: “From listening to the podcast, I learned that the economies of scale of multifamily were there. So I started looking for multifamily at that time.”

Benjamin devised a “50-year plan,” aiming to reach financial independence by age 50, allowing him the flexibility to either continue his medical career or retire comfortably.

Benjamin Acre [07:02]: “When I turned 50, I don’t want to have to work in the emergency department anymore.”

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4. Mastermind Groups and Community Support

A pivotal moment in Benjamin’s investment journey was joining a mastermind group facilitated by BiggerPockets. This community provided invaluable support, knowledge sharing, and accountability, significantly accelerating his growth in multifamily investing.

Benjamin Acre [18:06]: “Shout out to Pete and Rob... we're still meeting every Wednesday.”

Benjamin credits this collaborative environment for his successful transition to multifamily properties and his ability to navigate complex investment decisions.

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5. First Syndication and Lessons Learned

Benjamin ventured into syndication with a joint venture deal involving a 16-unit property owned by a nonprofit. While the initial acquisition was promising, unforeseen challenges with tenant qualifications led to a drastic drop in occupancy rates.

Benjamin Acre [23:21]: “I was just... you want to know the way you want to know before the end. Before the end, it did not go great. The end was good.”

Facing a 25% occupancy rate, Benjamin had to act swiftly to prevent financial strain on himself and his investors. Leveraging his emergency room skills, he personally repaired a critical sewer line to stabilize the property.

Benjamin Acre [27:12]: “I had to go in there and ran a jackhammer and jackhammer out the floor...”

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6. Recovery and Success

Through resilience and strategic decision-making, Benjamin managed to stabilize the property by securing new tenants and addressing critical maintenance issues. Eventually, he sold the property at an aggressive price, yielding an impressive 80% ROI for his investors within two years.

Benjamin Acre [29:09]: “We ended up selling two years. The ROI to the investors was 80% on that 40.”

This turnaround not only bolstered Benjamin’s credibility but also reinforced his commitment to equity-focused investing.

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7. Current Endeavors and Future Plans

Building on his initial success, Benjamin continues to engage in larger syndications, including a recent 226-unit property in Bismarck, North Dakota. He emphasizes the importance of finding complementary partners and thoroughly vetting potential collaborators.

Benjamin Acre [34:10]: “Just had that great experience and doing more. So a partner that I had found on Bigger Pockets...”

Benjamin advises aspiring investors to actively participate in communities like BiggerPockets, offering and seeking advice to build meaningful, trustworthy partnerships.

Benjamin Acre [35:13]: “Get yourself out there as just being helpful... It’s a great community for being able to do that and it’s free.”

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8. Conclusion

Benjamin Acre’s journey underscores the value of strategic planning, community support, and resilience in real estate investing. By prioritizing equity over immediate cash flow and leveraging mastermind groups for knowledge and support, Benjamin achieved financial freedom within eight years while maintaining his demanding medical career.

Dave Meyer [05:26]: “But it sounds like you've never just thought, hey, I'm going to buy deals opportunistically.”

This episode serves as an inspiring blueprint for professionals seeking to diversify their income streams and secure their financial futures through thoughtful real estate investment strategies.

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Key Takeaways

• Accidental Beginnings: Real estate investments can start unexpectedly but can become a vital financial strategy.
• Equity Over Cash Flow: Focusing on building equity can lead to substantial long-term wealth.
• Community and Support: Engaging with mastermind groups and communities like BiggerPockets accelerates learning and success.
• Resilience in Challenges: Facing and overcoming investment setbacks builds experience and credibility.
• Strategic Partnerships: Carefully vetting and collaborating with trustworthy partners is crucial for scaling investments.

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For more insights and detailed discussions on real estate investing strategies, subscribe to the BiggerPockets Real Estate Podcast on YouTube, Apple Podcasts, Spotify, or your preferred podcast platform.

Transcript

[Dave Meyer]

Maybe you're not getting into real estate because you want to quit your job today, but you want to quit in a year or in a decade. Today's guest is going to explain how he used real estate to create a safety net in case the stress of 24 hour emergency room shifts ever became too much to handle. Hey, everyone, it's Dave. And today we have an incredible investor story with Benjamin Acre, an emergency room physician in Sioux Falls, South Dakota. Benjamin became an accidental landlord, then realized that real estate could be the exact solution he was looking for and has since scaled up into some seriously impressive properties, even if he had to jackhammer at least one sewage line himself to get there. Let's bring on Benjamin. Benjamin, thanks for joining me today. It's good to have you.

[Benjamin Acre]

Yeah, thanks so much for having me. It's really exciting to be here today.

[Dave Meyer]

Yeah. Let's jump into this thing. Tell me a little bit about how you first got started investing and what else you were doing at that time.

[Benjamin Acre]

Sure. So I'm a physician, emergency medicine physician, and got started doing that not wanting to do any kind of real estate at all. Just never even thought of it. But I kind of realized early on that burnout was a thing, and it's very high in medicine and it's even higher in emergency medicine. And so I was wanting to do other things, but that was stock market, that was anything else other than real estate at the time. And I was an accidental landlord. That's how I really got into real estate investing.

[Dave Meyer]

And how old were you at the time?

[Benjamin Acre]

Let's see, it would have been nine years ago. So that would have put me at 35 years old.

[Dave Meyer]

Okay. And I would imagine that being an emergency room physician is extremely time intensive. So what was it like becoming an accidental landlord?

[Benjamin Acre]

Well, yeah, you're right. It is time intensive. The nice thing about emergency medicine is it's a shift work, so you can kind of schedule your day and pack it all in. And once you get that schedule out, then you have other time to be able to do other things. So I was able to make that work with that time constraint and real estate investing, at least for me, starting out was very much do the things and then hopefully let it run, be ready to answer the phone, you know, tenants, toilets and telephones, as everybody says. And that was my experience as well, starting out. The only problem was if I was on a shift in the emergency department, I wasn't able a lot of times to answer those telephone calls.

[Dave Meyer]

I'm interested, Benjamin, to learn more about your accidental Landlord experience. Because if you haven't heard this term, everyone, it's basically a lot of people get into real estate out of some, you know, unforeseen circumstances where you inherit a property or someone asks you to take over management of a property. And for some people that's a nightmare and they want to sell it and get rid of it. But it sounds like for you, Benjamin, there's something clicked about real estate that you liked. What was it?

[Benjamin Acre]

This thing was just a house that we bought, my wife and I, in order to live in while we were building our primary residence. I had promised her that I would build her a beautiful house once we paid off the one that we had. And we just, you know, you need a place to live while you're building. And that was my situation. So then our real estate agent said, you know, we were going to just sell it. It was kind of like a flip, but we didn't really know what a flip was at the time. And the real estate agent said, hey, I've got two people who want to buy a house. They're my clients, but they found lots of houses that they like. They just can't, they don't get. Their credit's not quite there and the bank has denied them. And he said, do you think you might want to rent to these guys and then you don't have to go through the whole thing about selling it. And I thought that sounds really nice not to have to go through that. And we didn't do any kind of background checks, nothing. Just relied on what he said and what the bank had. And so it could have been a bad experience, but it actually worked out really well.

[Dave Meyer]

You mentioned that you didn't have a specific goal when you first started out. And I think that is, it's a tough spot to be in with real estate because there's so many different ways that you can go. You could flip houses like you said, you could buy rental properties. So after that first one, where did you decide to go next with your investing career?

[Benjamin Acre]

What happened was then I heard about the Freedom number. I heard about, you know, you need to make a plan, you need to have a five year goal and a ten year goal. And so then I kind of started formulating something around that time. And it was all about wanting to be able to hedge for burnout. Way back in residency, which is what you do after medical school for a couple years, the burnout was kind of like, I'm feeling a little bit and I need to have something that at some point I can Leave. And luckily, throughout that time, I have not felt like I had to leave emergency medicine. I love taking care of patients so I can have continued to do that. And so I grew. But from listening to the podcast, I learned that, you know, the economies of scale of multifamily were there. So I started looking for multifamily at that time.

[Dave Meyer]

I want to touch on something you just said before we talk about multifamily is just about liking your job and wanting to stay in it. Because I think for a lot of people, especially guests who come on the show, people, their whole goal is to quit their job or, you know, they want to go full time into real estate investing. But it sounds like for you, you want to hedge that, you know, which makes sense to me. But it sounds like you've never just thought, hey, I'm going to get into real estate so I can quit being a doctor. Right?

[Benjamin Acre]

Right. I was never at that point where I just have to get out of it. And I know some physicians and even other careers where people just, they, they're, they're just burnt out and they're done. They will need to get out. And, oh, man, I'd hate to be in that position. Some people are, and they have to deal with it. And you can get into real estate from that. But if you can keep your W2 for as long as you can, as many people have talked about on the show, that, you know, that gives you a great way to get the bank loans. There's just so many more doors are open for you if you can keep that. So that's what I did and have done. And, you know, that really has helped me with having that income to be able to go to the bank and get loan. So that's kind of my advantage that I have over a lot of people is that I have that big income that I still continue to be able to report to the bank.

[Dave Meyer]

Yeah, that is a huge advantage of maintaining your W2 is that you are more lendable. I don't know if that's actually a word, but we're going to make it one. But I think the other thing that's really interesting about and super relatable to people about staying in your W2 is that it allows you to be a little bit more patient, I find, and maybe take on a little bit less risk. Because if you just think about what you would need to do, do the type of deals, how intensive they would need to be to replace your income or to go full time in real estate in two or three Years. It's very different than if you're approaching it the way Benjamin might have been and saying, hey, you know, I'm going to buy deals opportunistically. That sort of puts you in a different mindset to the types of deals that you look for and ultimately end up buying.

[Benjamin Acre]

Totally agree. Yeah, for me it was a, I called it a 50 year plan, which is kind of a silly name. It was when I turned 50.

[Dave Meyer]

Oh, okay.

[Benjamin Acre]

Yes.

[Dave Meyer]

Yeah. 50 year old plan. Not 50 years from now, not when.

[Benjamin Acre]

I'm 100 years old. But yeah, when I turned 50, that was. And I wrote a thing down, I was just like, you know, when I turned 50, I, I don't want to have to work in the emergency department anymore. So, you know, people that listen to this have to take home that one thing if they can think about, you know, when in the future do you want to be able to leave what you're doing? Not necessarily that you're going to leave because hopefully you still like what you're doing, maybe you love what you're doing and you're just looking for something on the side to prepare for the future. And that is that to me, that's what real estate investing is all about. That's the goal, is setting that time and being prepared for it. And once you get to that, I'm there now. I mean, I'm not 50 yet. I'm 46 and you know, I'm there and it's such a great feeling. Thank you. Yeah, so now I can just do whatever I want and work when I want to. And I think a lot of people can have that as well if they set their goal right. You know, not that I want to be a millionaire and sit on the beach, you know, wouldn't that be great? But, you know, that wouldn't be fun for a lot of us, I think.

[Dave Meyer]

Yeah, I'm in the exact same boat and in a fortunate position where I sort of set a goal for myself to be what I would call work optional at 40. I'm there 37.

[Benjamin Acre]

Congratulations.

[Dave Meyer]

Yeah, I intend to keep working, you know, like my, I like working.

[Unknown Speaker]

I like.

[Dave Meyer]

I have a great job, as you can tell, so I get to do this every day. So now I've sort of readjusted and you know, I, you know, I was planning to sort of deleverage my portfolio and lower risk around 40 years old, but now I'm pushing that back out a little bit and I'm willing to take on some bigger projects because I want to keep working. But I think what you said a few minutes ago about time horizon is just spot on. And just, you know, 15 years, if you look at that time horizon, you can accomplish so much in real estate in 15 years. And I know if you hate your job, you know, that sounds like a really long time. But if you're someone who can manage it and can stick with it for a while, thinking on, I think that 15 years is like a totally realistic goal to be able to replace your income, really whatever income level you are. And so it sounds like it only took you what, seven or eight years though.

[Benjamin Acre]

Yeah. Right around there.

[Dave Meyer]

Do you attribute that to going into multifamily because of those economies of scale?

[Benjamin Acre]

Yes. I mean that and just real estate in general, because I think people can do it with single family if they wanted, you know, just a house, they can get a massive group of houses. But exactly like you said, the economy of scale. I learned from this show that and then I went ahead and bought a six unit in a small town outside of Sioux Falls, South Dakota. And you know, just kind of a small community, had eight people in there. And it, you know, it's just like you only have one bill for snow now. Maybe you don't have any bills with the single families, but you have. Or snow bells for single family. Maybe where you live, you don't. Lucky you. If you're.

[Dave Meyer]

Yeah, I was going to say I don't think everyone knows about snow bells. I have a, I have one where I have a short term rental at a ski town and it is pricey to have them come plow. It's insane. I should just drive a plow. It's a great business.

[Benjamin Acre]

You should.

[Dave Meyer]

It's time for a break, but we'll be back with more of this week's investor story in a few moments. Tired of the headaches that come with hunting down sufficient rental property insurance? Well, say goodbye to the endless calls and all the stress with National Real Estate Insurance Group, or as they call it, nreg. With nreg, you can customize your coverage easily, manage it online and keep every property you own, regardless of occupancy status, protected on one monthly schedule and bill. There's no fuss, just flexible, reliable coverage that adapts to your portfolio. Visit biggerpockets.com insurance to learn how effective insurance can be with National Real Estate insurance group. That's biggerpockets.com insurance. Go visit it to request a proposal today.

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[Dave Meyer]

This show is sponsored by Airbnb. Fall is here and I've got a trip coming up soon. And while I'm enjoying the autumn vibes, my home will be earning me extra cash as an Airbnb. And the best part? Everything's managed right from my phone so it doesn't mess with my vacation plans or my pumpkin spice lattes. Airbnb makes hosting easy and practical. Whether you're gone for a weekend or a month, it fits right into your lifestyle. Your home might be worth more than you think. Find out how [e-mail] host Black Friday is coming, which means people lining up outside of glass doors waiting to burst in and get their hands on some great deals. But there are some doors you don't want anyone smashing through and snatching stuff, and those are the doors to your home. You need the best home security system available. That's why I am personally recommending Simplisafe. It's the system I use to keep my home and family safe. Their active guard outdoor protection changes the game by preventing crime before it even happens. If someone's lurking around, Simplisafe's agents see them in real time and can even talk to them. Set off your spotlights and call the police before they've had a chance to break in. Plus, there are no long term contracts, no cancellation fees, and it's around a dollar a day for all of this protection. And right now, SimpliSafe is giving exclusive early access to its Black Friday sale to our listeners this week only. You can take 60% off any system with a select professional monitoring plan. This is their best offer of the year, so don't wait. Head to simplisafe.com pockets to claim your discount. Don't wait. This offer won't last long. Keep your home, your family, and your peace of mind protected with Simplisafe. There's no safe like Simplisafe. Welcome Back to the BiggerPockets Real Estate Podcast with our guest, Benjamin Aker. So that six unit, was that your first one after the accidental landlord, or did you do something in between?

[Benjamin Acre]

So I started in that thinking, well, single families is the way to go. So I ended up buying three. Well, it'd be, well, four total. So three more after that first one because that's all I knew. You know, buy a single family and rent it out and go on to the next one. It wasn't, it wasn't the brrrr method, you know, just. I didn't, I never thought about refinancing, but I had them all set up so that they would be about cash flow neutral. And that's for me. That was another thing that I learned from this is this podcast is just like to set up how you want those mortgages to be. A lot of people are going for cash flow and when they're starting out, especially if they are quitting their job, they got to have cash flow to stay, you know, eating.

[Dave Meyer]

That's right.

[Benjamin Acre]

And so I totally get that. And I'm not discounting cash flow as being important, but for me, and for, I think a lot of people that maybe don't realize it, equity is the way to go. And you, you want that. So I've got income right now from my W2 job. I pay ordinary income tax on that. And when I do real estate investing, unfortunately it does not help me offset that. And if I'm taking income from that, it's going to be just more income that I'm paying that tax on. It's not capital gains tax. It's ordinary income tax I have to pay. And I'm at a high tax bracket and every. And it doesn't even matter if you're at a high tax bracket, whatever tax bracket you are, if you increase that income, then you're going to go potentially to a higher one. You're paying more money on that than otherwise. So I'd rather have that money coming into me when I don't have the W2 income. So I want to be building that equity right now. So I set all of those loans up to be about cash flow neutral, knowing that I could float something loan to the project if the AC unit went out or whatever, I could do that. Another benefit that I had with my.

[Dave Meyer]

W2 job, well, it's it's exactly what you said benefit of having a W2 job. But you were able to craft this strategy because you had that time horizon. Right. Like you knew this plan to be retired by 50. The 50 year plan allows you to make those decisions. Right. You could say, hey, you know, when you were just started, sounds like you're in your late 30s, you were saying, hey, I don't need the cash flow right now. And so the deals that I select and the deals that I design, like you didn't just select these deals, you created the mortgage in a very specific way to support that long term goal rather than just doing what, you know, a lot of people on social media or in the forums or on this podcast of saying that you should pursue cash flow. And like Benjamin said, there's nothing wrong with cash flow, but it's ideal for people who have a short time horizon. And time horizon is just how long till you want to live off your investments. So if you have a short time horizon of two or three years, yeah, go for cash flow. That's super important. But if you're like Benjamin and you've thought far enough ahead to know that I'm not going to need this cash flow for 10 years or 15 years, you can make totally different decisions. And I think I'm sort of on the same page as you, Benjamin, that when you have that longer time horizon, pursuing equity is a more efficient way to build overall wealth if you have your expenses covered from your normal income.

[Benjamin Acre]

I totally agree with that. Yep. The equity for many of us is the way to go. And long term, that's really what I want and what I think a lot of people should be wanting and going after as well, for sure.

[Dave Meyer]

And I just, I should also just mention that that could change over time. Like my first deal, I was waiting tables and I really wanted the 300 bucks a month of cash flow. You know, that was, that made a meaningful difference to me in my life at that point. You know, fast forward, I got a higher paying job and I didn't need the income anymore. And so then I could start pursuing equity more in my deals. And so I just encourage people to sort of think about where you are in your life and your own personal needs and not just, you know, listen to whoever saying, oh, you need cash flow or it's just about equity. There's no right or wrong answer. It is about your own individual preferences and your own financial circumstances. So this is super cool. So you, you went from accidental landlord, three more single families, then you went to a six unit.

[Benjamin Acre]

Eight unit.

[Dave Meyer]

Eight unit.

[Benjamin Acre]

Eight unit dot I think I said.

[Dave Meyer]

Excuse me. Yes, eight plex. Okay. And then where did you go from there?

[Benjamin Acre]

So after the eight unit. I don't know if it was after or before but I got into my mastermind group.

[Dave Meyer]

Okay.

[Benjamin Acre]

I got to say that's another huge benefit from bp. Thank you to everyone at BP who came up with this idea with, with Brandon Turner's 90 Day Intention Journal. That was in 2019 when that first came out and I bought that and it's a great journal. I went through it. But what BP did at the time was they would hook you up with four other investors that were kind of in a like minded area and got with a group and three of us are still around. We're still meeting every Wednesday.

[Dave Meyer]

Really?

[Benjamin Acre]

That's so cool. I know. So shout out to Pete and Rob. I mean these guys are great and you know, they were kind of, they're in single family, multifamily kind of starting and we just able to bounce things off of each other. And I remember talking about multifamily with them and you know, I don't know if it was, you know, whose idea I mean that's part of the mastermind is just this one group mind thinking together is so cool and you know, and that. So we've just really, and all three of us have just really taken off with what we're doing. And for me it was multifamily and that's, that's. I credit them a lot and BP for getting us hooked up. We're still doing it after all these years.

[Dave Meyer]

I got to say, I remember before, I guess before 2020, I never really made content for biggerpockets. I've been working there for nights since 2016. But I was like more in the operations part of the business and I was involved in creating those mastermind groups. I love hearing that this was impactful for you. It makes my day. I, if anyone else listening to that is still doing their mastermind, please shoot me a note on bigger pockets. I would love to know that. That's super cool information and I'm so glad to hear that other people are your guys are still meeting because just getting around like minded people, it really makes just a huge difference in, in your investing career. It sort of just like normalizes some tough decisions. Like I can imagine if you, you know, you're working full time, you bought one single family, a couple single families. Like without encouragement from other people, it might be really daunting to go into multifamily.

[Benjamin Acre]

Yeah, totally. And these guys have, you know, their own perspective and all their knowledge that they've built up. And, you know, you say, hey, I mean, I want to do this. And they say, well, have you thought about this? Have you? You know what? And it's just so many times they have helped me in coming up with new ideas or new strategies and might say about the bad week that you had when the tenant needed a new toilet or something like that, they said, oh, sorry, you really should get someone to do that for you. Oh, yeah, I didn't think about that. You know, get a property manager, you know, any kind of these ideas. It's just been wonderful.

[Dave Meyer]

No, that's great. And so that was 2019, when we started the Mastermind, you know, during the Pandemic era. Were you buying multifamily?

[Benjamin Acre]

Yes, I was in multifamily and started selling off the single family just because it's hard to do two different things at once. And, you know, even though they were profitable, there was the profitability of the multifamily. So much more after that 8 Plex, then it just really took off, then ended up buying a 16 plex. And I did that as a syndication, and that went really well. And so then I just have continued doing that since then.

[Dave Meyer]

And for anyone listening who doesn't know, syndication is just an industry term for raising money from a bunch of investors, pooling your money together to buy larger assets like multifamily. And it can be super beneficial because, as I'm sure you can imagine, if you want to buy a 50 unit, that's a lot of money and usually individuals don't have it. And so you have different classes of investors. You have what's known as a gp, a general partner or a sponsor who organizes the deal and sort of takes the lead on decision making, finding deals, doing all the operations. And then you have people called LPs or limited partners who mostly just invest passively by contributing capital money to the deal. And so, Benjamin, had you ever been a part of a syndication like Passively, or did you just go straight for being a general partner and running deals for yourself?

[Benjamin Acre]

I was involved in a. It was more of a joint venture JV deal that one of the guys was the leader of it. So kind of now, looking back, feels like a GPLP thing, even though I'm considered a general partner in that. But that wasn't a syndication. So to answer your question, no. But I did have that experience where this one guy put together the deal and found the investors and brought everybody on and just seemed like such a great thing, thing, you know, for me being able to just invest passively on that. So I thought, well, wouldn't it be great to be able to bring people together? Because you do get to a point if you keep on getting bigger and bigger, where you just don't have that money, Especially if you're not looking for cash flow. You know what to start out with, you don't have a huge pile of cash to get the down payment. So you need to put other people together. So I did have a little bit of experience, but this was the first one and it was a. Definitely a learning curve.

[Dave Meyer]

Yeah. How'd it go?

[Benjamin Acre]

You want to know the way you want to know before the end. Before the end, it did not go great. The end was good. I'd love to tell you about that. But it was a. There's a 16 unit and it was owned by a non profit organization that helps people who are kind of like a halfway house kind of a thing. So people who are down on their luck had some trouble and they can't get, maybe either the money or they don't qualify to rent in other places. So they would help those people out, they would get grants. And then they owned this place themselves and they subsidized it. So I think at some point they kind of thought, you know what, we're kind of taking from one hand and paying the other hand. Maybe that's not our mission. I don't know that for a fact. But then they wanted to sell, so. And it was a great deal, great price, and went in there and bought that from them. And my big mistake there was thinking that they would just continue to have all the tenants in place. So look, great, the whole place is full and they're paying the monthly rent for them. So I just get this big check at the start of the month. It's great. Kind of like what you've talked about in podcast section 8. This is not section 8, but it's a similar sort of a deal.

[Dave Meyer]

Is it state funded or something?

[Benjamin Acre]

Well, a lot of their. I looked up their funding afterward and 70% of it was federal grants that they were getting.

[Dave Meyer]

Okay.

[Benjamin Acre]

But it is a local organization. And so after I bought it, just out of the, out of the blue, they started finding reasons that their attendance didn't qualify. You know, so kind of like one of them was, oh, you're making too much money now, so we're gonna drop you off the plan. And so the people who were making some money, they had a certain percentage that they needed to pay and the group was paying. And so that group amount was gone. And then they just didn't have enough money for the rent. And so then I started to try to find other sources to help them, you know, assistance sources. And in some cases I could, but some cases I couldn't. And so they ended up many of those people leaving. But. But after that, we were down to 25% occupancy.

[Dave Meyer]

Oh, my God. Whoa. And what were you when you bought?

[Benjamin Acre]

We were at nearly 100%. I think it was 100%, but it was, oh my gosh, you know, right where you would expect it to be, you know, when you're buying. So nothing alarms off. But I didn't think about. I don't even know if this is a thing, but it would have been nice to have some sort of a guarantee in the contract that said, hey, you're going to keep on paying this for the next year as we stabilize or whatever. Just didn't even.

[Dave Meyer]

That's a unique circumstance. Circumstance, yeah.

[Benjamin Acre]

Huge mistake.

[Dave Meyer]

Yeah. Interesting. So how did you rectify this?

[Benjamin Acre]

Well, luckily I had saved up an extra $40,000 to do a rehab of a garage. So there's a. There was a big garage that they had on this property. I was going to divide it into little garages and then rent those out. It's a great idea, right? Well, I guess in the end it was the best idea that I had. It didn't turn into a garage. It just sat there as a big nothing. But that money was paying the mortgage. So I notified the investors right away of the situation, which you have to do. Communication so important investors, by the way, that I do. They're. They're people I know. They're co workers, they're friends. I don't advertise to do these deals because I want people that I know.

[Dave Meyer]

Can I ask how many people. How many limited partners you had?

[Benjamin Acre]

Yeah. Well, in. In this deal, there were five LPs.

[Dave Meyer]

Okay. So people you probably knew decently well, I would imagine.

[Benjamin Acre]

I know them well and because of that, I think I'm much more concerned about their money then I have bought my own.

[Dave Meyer]

Yeah.

[Benjamin Acre]

So they will not be losing money on this deal if I have anything to say about it. And I'm in control, so I better not lose their money. And that, that boy that kept me up at night, I remember waking up at 3am with this 25% occupancy. What's we going to have to do when we run out of that Money, Yeah. And I would be subsidizing myself and capital call, those kind of things, you just never want to have that. I luckily didn't. So I ended up finding a contractor who was looking, just calling around, looking for short term rental for his workers as they come in to build some these big barns for hogs in South Dakota here. So he'd bring them in, they'd stay there for a few months and then they would go. And he wanted 10 units. And I thought, oh, this is going to save me, you know. But the one thing that stopped me, and I'm glad I did it was I thought, what is going to happen in, you know, six months when he moves out those 10 units right back here?

[Dave Meyer]

Yep.

[Benjamin Acre]

Desperation leads you to do some dumb things. But luckily I didn't do 10. I did. I said, we're going to do four units. So you know, that four units would bring us up to 50%. That was enough to keep us just in, you know, above water. And so we got them in there. And I remember this, the last real big thing was that the sewer had backed up in one of those four units that I wanted to get these guys in. And he needed to moved in on Monday because they were going to start working. And this was Friday, sewers backing up. And I could not get a plumber out there. They just. Not the weekend. There's nobody. And this, this was a pandemic was kind of in around. I can't remember exactly the dates, but it was just hard to get contractors. And so I had to go in there in that basement unit and ran a jackhammer and jackhammer out the floor.

[Dave Meyer]

Oh my God.

[Benjamin Acre]

To the sewer line. And I was digging around in the sand that's underneath the cement with my screwdriver, just kind of trying to see. And I hit that pipe and this hole just filled up with black ooze from that. And I thought it's going to go everywhere. So I started bailing this out into the bathtub was right there. So bailing it out of the bathtub. And finally it stopped. And then I got some Fernco fittings, which are these rubber fittings that you connect pipes together. And I replaced that pipe. This was Saturday.

[Dave Meyer]

Oh, my gosh.

[Benjamin Acre]

And then I poured cement that evening. The next day I put sticky tile floor on and reinstalled all of the fixtures and had them in there on Monday when I had to go back to work. Oh, God.

[Dave Meyer]

So that was a. You triage the situation and that was an emergency.

[Benjamin Acre]

Yes, it was. It was an emergency.

[Dave Meyer]

So. But it sounds like eventually you. You made this all work. You made everyone whole. Do you still own that property?

[Benjamin Acre]

No, we sold it. So I wasn't even. So the. When you do a syndication, you oftentimes will have a horizon, which is telling the investors, hey, we're going to sell it. They want their money back. At some point, money goes in there, becomes very illiquid, and then you want to tell them, you know, hey, I'm the one who's making the ultimate decision. When I think the time is right, I'm going to sell it or refinance it or do whatever. Some people refinance and keep it forever. But this was. We're going to sell it. And the horizon on this was five years. However, as the, you know, the GP of the deal, the operator of it, if you will, I can choose, or it was set up so I could choose when. And there was a group out of Nebraska, I think, that was looking to do a 1031. And another broker in town called me up and said, you're interested in selling? And I said, no, we're not interested in selling. It's only been two years, but if you really want to buy it, here's a price. And I kind of slipped on that price. And he went to his guy and they said, yep, we like that price.

[Dave Meyer]

I love it.

[Benjamin Acre]

We want to buy it. So we went under contract.

[Dave Meyer]

Excellent. So you're very aggressive with the price, I assume.

[Benjamin Acre]

I was. Yep. Yep. And because I, you know, I. I had. I held all the cards at that point, or all the chips, you know, I could do anything I wanted because I don't really want to sell, so. And then, you know, when you have a 1031, those are great. But they encourage you strongly to do things that you might not other do otherwise. Do like buy something.

[Dave Meyer]

Yeah, you can buy a thinner deal for sure. Oftentimes it's still pencils for the. For the 1031 to buy a bit of a thinner deal.

[Benjamin Acre]

So I'm hopeful it's worked for him.

[Dave Meyer]

Yeah.

[Benjamin Acre]

So we ended up selling two years. The ROI to the investors was 80% on that 40. 40% every year, if you can look at it.

[Dave Meyer]

That man.

[Benjamin Acre]

So just huge. I was just.

[Dave Meyer]

Good for you.

[Benjamin Acre]

Please. Thank you.

[Dave Meyer]

You know, go from 25% occupancy to an 80% return in two years is. That's a. That's a great turnaround. Congrats. We have to take a final break, but stick around to hear more of Benjamin's journey all the way from Single family deals to syndication Sponsor Worried about your investment properties? Weathering a storm? Experience peace of mind with coverage from National Real Estate Insurance Group, or NREC as they call it. They've built the largest investment insurance program in the country. They focus solely on residential, tenant occupied, vacant and renovation properties, all customizable to your specific needs with just a couple of clicks. So while the rain pours outside, rest assured your properties are covered with comprehensive insurance from NREC. Visit biggerpockets.com insurance to learn how effective insurance can actually be with National Real Estate Insurance Group. That's biggerpockets.com insurance go visit today to request a proposal.

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Constant contact.com let's jump back into this week's investor story. So what's happening with you now Benjamin? Obviously the investing climate is changed. What are you doing with your portfolio these days?

[Benjamin Acre]

Still doing the syndications. Just had that great experience and doing more. So we a partner that I had found on Bigger Pockets and met by the way, vet your partners. He's a local partner and we met a bunch of times, kind of talking it over, wanted to work together. So he's kind of the operations side of things and so he found a couple other deals actually. So a 30 unit and then a 56 unit local.

[Dave Meyer]

Wow.

[Benjamin Acre]

And so we've done those now.

[Dave Meyer]

So can I ask you how you met on BiggerPockets?

[Benjamin Acre]

So he found me just on the forums so I Am active on the forums. I like answering questions. I think even starting out, just if that's something that you want to do, just get in there and ask a question or maybe you have an answer to a question, just get yourself out there as just being helpful. I think that's all you got to do. Don't say, I want to do a syndication. You know, I mean, I guess you can say that, but, you know, people don't normally have a lot of advice for that, but they do have advice. If you have that issue and you know some problem and solve it, and it's just a great community for being able to do that and it's free.

[Dave Meyer]

Just go do it. Yeah, yeah. If you're waiting for to find a partner to answer a question, just go do that for free. So, okay. I'm curious though, because, you know, I talk to a lot of people and I hear about really interesting deals and partnership opportunities. How did you vet this person who approached you to partner with.

[Benjamin Acre]

Yeah, that's a really good question because you have got to do that because you're, you're making million dollar decisions, multi million dollar decisions, and you don't want to have the wrong person. So looked at his track record and so, you know, both of us have a little bit of it had a little bit of a track record at the time. And, you know, I said, you got open the books and show me, and I did the same for him. So look at the books now. There's, I, I don't know that there's anything that you can do to be 100% certain. But one of the biggest ways to do it is just meeting multiple times and looking at the numbers. And, you know, if the person that you're meeting with can explain those numbers, you have questions about, well, where did this money go here, whatever, then that's a good thing. That doesn't mean they're great. It just means that they're not terrible because of that. But if they can explain that or there's some other issue that you have that just, you know, they don't give you a satisfactory answer, then that's, you know, you've got to be, what do they say? Slow to hire, quick to fire.

[Dave Meyer]

Exactly. Yeah.

[Benjamin Acre]

Kind of the same way with a partnership.

[Dave Meyer]

Be patient. Yeah, for sure. I love that advice about opening the books. I think that's super important to just dig in. How profitable are you? How have you operated your business? You know, especially with these large syndication deals where, you know, these are more complex deals, the operations are more complex. The financing is more complex, the lack of liquidity, the additional investors like you got to see if the people can do it at that point. I think if, you know, if you're partnering with someone on your first single family, it's a little bit different. But I think that's, that's excellent advice there. So what are the syndications? Are you in South Dakota still? And how are deals looking there? Because multifamily is all over the place these days.

[Benjamin Acre]

Yeah, totally. So everything's in South Dakota except we just closed on one in North Dakota up in Bismarck. But yeah, it's slowed down because, well, I mean deals are in any market so you can find it whether the interest rates are up or interest rates are down. But when the interest rates go up at the start of that curve, I think it becomes harder. And we notice that because sellers have this vision of what it was like a year ago or two years ago, how great it was. And you know, people are paying all these top dollar and they want that top dollar and so they're going to go on the market for that. And they just haven't realized that those aren't selling. So, you know, it takes a while for that mentality to kind of change. And I think it has to a large degree now. But so we had a dry couple of years where we didn't do anything. But I, you know, that's another thing about a syndicator is that you really don't want ones that are just all the time going. All the time going. You want to know ones that are really taking the time to find the right one and sometimes it's going to be a dry time. And so now I think that it's starting to come back. We bought this last one was Bismarck was 226 units now. So we really went big.

[Dave Meyer]

You went big. Okay.

[Benjamin Acre]

Closed in August and we're stabilizing it right now.

[Dave Meyer]

Awesome. Good for you. So tell me, was this deal on the market a long time or how'd you find it?

[Benjamin Acre]

It was an off market deal, another one found by my partner Austin and his group. So he's just great at find. I'm not so good about finding deals. I'm much better with the investor side of things. So that's another great synergy. Don't find somebody that does the exact same that you do. Totally. You know, why would you need anybody to help with that? But so he found this. So he was just looking up in the area, knew some property management companies that were in the area, knew some brokers and just talking to people, just networking and just. He's fantastic with that.

[Dave Meyer]

No, that's awesome. Good for you. All right, well, Benjamin, thank you so much for sharing your story with us. This was a lot of fun and congratulations on all your success. If anyone wants to connect with Benjamin, we'll put his contact information below. But it sounds like we can find you on the BiggerPockets forums at the very least.

[Benjamin Acre]

Sure can. Yeah. Thank you for inviting me onto the show. It's been an absolute pleasure and a dream of mine for many years, so.

[Dave Meyer]

Oh, that's great. Well, thanks again, Benjamin. This was a great, fun conversation and thank you all so much for listening. We'll see you soon for another episode of the Bigger Pockets Real Estate Podcast. Thank you all for listening to the Biggerpockets Real Estate Podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K. Copywriting is by Calico, content and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit ww biggerpockets.com the content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk, so use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose, and remember, past performance is not indicative of future results. BiggerPockets LLC disclaims all liability for direct, indirect, consequential or other damages arising from a reliance on information presented in this podcast.