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Real Estate Investing School Podcast
133. Become Financially Literate through Real Estate with Andrew Freed
00:54:15
Welcome back to the Real Estate Investing School Podcast. In this episode, Joe has an excellent conversation with one of Boston's top multifamily investors, Andrew Freed. Andrew started investing only 3 years ago after he took a look at himself...
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- [00:00]
A
Every dollar I get in real estate is a post tax dollar because I have all that depreciation sheltering all of my income. Right. So I can literally make like 250 a year, pay no taxes on that, and literally make the same as a doctor who makes $5,000 a year as a 45% tax rate.
- [00:20]
B
Welcome to the Real Estate Investment School podcast. I'm your host, Joe Jensen. Today we've got Andrew Fried on the call, and I'm excited to kind of break down and hear his story and go through everything. Andrew, why don't you tell us a little bit about what you're doing now and you know, a little bit about who you are and what you're doing.
- [00:41]
A
Totally. So what I'm doing now is I operate in the multifamily space. So as of now, I own about 127 units in Massachusetts and Lancaster, South Carolina. And I specifically focus on multifamily that are conditionally in good shape, but operationally are inefficient.
- [01:02]
B
I like that distinction.
- [01:04]
A
Yep. And that's the multi stimulus I've really played in. And that's. And I've only been in real estate for three years and that's how I've been able to scale so quickly as I take on these projects that you can stabilize in three to four months with good operations, not an influx of cash in the form of capex and things of that nature, forced appreciation. And I essentially stabilize the property quickly, then move on to the next one, stabilize the property quickly and move into the next one.
- [01:28]
B
Because you've done over like 20 deals just in the past, like three years?
- [01:34]
A
Yeah, yeah, I've done, yeah, I've done some. Somewhere around there, 20, 25 deals or so. That's exactly correct. I only started in real estate about three years ago. Yeah.
- [01:42]
B
That's crazy. That, that's awesome. I like that niche. So, so tell us a little bit about how you got into it. You know, so you're, how old are you right now?
- [01:51]
A
I am 34 years old.
- [01:53]
B
Okay, so you were in your 30s before you even really started diving into this. What turned you onto real estate and what triggered you to go so hard on it?
- [02:04]
A
So I found real estate during COVID when I read rich dad, poor dad, and when I ran across real estate, you know, I essentially prior to real estate, I was seeking the American dream, trying to get a good job at a good company, graduating, graduating from a good university, getting a six figure figure job, getting a swanky condo in a city. Like I did all that and then come around Covid, I realized like, is this the end? Because the path forward to me looked like 30 or 40 more years of working, which seemed agonizing to me. I've already been 10 years into the workforce and I really couldn't foresee myself doing that for 30 to 40 more years. And I really need to take a change. And with COVID you know, at a certain point, you can only procrastinate so much. You can only watch so many movies, you can only play so many video games where you really have to come face to face with yourself. And I did come face to face with myself. And I realized like the status quo of what my life is, is like this is not, not what I want my life to be. And then at that point I really took a holistic view of my net worth and I realized that 80% of my net worth was sitting in this one bedroom condo I bought five years ago. So I ended up taking out, I ended up taking a $200,000 line of credit on that one bedroom condo in Boston. And I used that money to house tax some properties, to buy investment property, joint venture on some properties. And then once I eventually ran out of my own cash, then I started raising money from investors and started syndicating deals. So I did that in a matter of three years. And I think in a matter of three years I I5X my net worth. So I'm very bullish on real estate. I think it's the easy way to financial dependence. And I think everybody has the tools available to do what I did in a short period.
- [03:46]
B
Yeah, man, that's so incredible. Like, so let's break that down a little bit. So obviously you know, you're kind of reevaluating things you into like, man, all the wealth I've built is in this little condo. I didn't even know I was buying to build wealth. Like it's. If I had done that 10 times, 20 times, like holy crap. So you di, you dive into it. Luckily you had some equity there. You do a heloc, a home equity line of credit, you use that money to go buy your next primary loan as a house hack.
- [04:16]
A
Yeah, that's exactly correct. So when I decided to get into real estate, I think I'm a big advocate of bigger pockets. And I listened to Brandon Turner and Brandon Turner gave a great recommendation. He's like, you know, the easiest way to house, the easy way to reach financial independence is the House Act. 10 multis in 10 years and you have 30 units like that's all you need to really live right. And that seems super feasible to me to save three and a half, five percent every year for my W2 and just keep moving into a new multifamily after multifamily. So that's the strategy I decided on. And I was living in Boston at the time. So after losing out on 20, 30 offers in Boston because it's a very competitive market, there's not a lot of supply of multifamily, I really decided to take a turn and I really looked at the markets in Massachusetts that had the highest concentration of multifamily. And There were only two markets. There was Brockton, Mass. Which is about 20 minutes south of Boston. And then there was Worcester, which is the second largest city in Mass, about 45 minutes from Boston. And that's where I really decided to plant my flag. And from there, I house act a property in Worcester. I bought one from my neighbor across the road. I partnered on a five plex, a couple six plex, is a three plex, and as of today, I own about 30 units in that market.
- [05:27]
B
I love that. One thing I really like that you did is you let your goals dictate the details of your strategy. Meaning, like, you, like, you're looking in Boston because that's where you live, that's your backyard. That's easy. But you weren't going to achieve your goals that way. You weren't getting the deals under contract, and you were starting in a very competitive period where it's like everybody's waving earnest money and waving inspections and just doing whatever they can to buy. And you're like, I can't get anything under contract. But I like that. So it drove you into another city. And sometimes that's what happened. That's what got me out of Utah, is I couldn't hit my numbers buying in Utah, so I started investing out of state. You moved you out of Boston and. And you're like, okay, well, I'll figure that out, because that's what's going to actually work with my strategy, Even though that wasn't the original plan. And I like that it drove you out of the town a little bit to the place where it worked the way you needed it to work.
- [06:22]
A
Yeah. And I mean, I think that's. That was a real big key to my success, was focusing on a market that had a large supply of my asset class. Right. One of the biggest mistakes I see in real estate is people niche, but to the point that there's no supply. Like, I want mobile home parks in these three zip codes, like there's three mobile home parks, like you call the owners there, you're done. Right. Like, so I think it's really important if you're going to choose an asset class to at least ensure there's a decent supply of it. So you're not, you know, fighting with 10 investors for the same asset.
- [06:52]
B
Oh, I love, I think that's, that's really good advice. I don't hear a lot of people speaking on that point because, yeah, we get like, oh, get clear. Get your buy box. No, it's super, super clear. Like I said, it might get too clear that there's no way to do it. So you find a market that has a lot of what you're looking for. So then you can actually get some stuff under contract, get some good deals, have some competition or a competitive edge. Talk to me about your partnership. So that's something I think a lot of people are interested. We have a lot of listeners that have done one or two deals. Maybe they're running out of money, maybe they're four or five, 10 deals, but they're kind of out of their own money. And they're like, well, how did you structure partnerships? What did your first partnership look like? And, and what did you adjust as you did, like your second, third, fourth, fifth?
- [07:40]
A
So when it comes to partnerships, I think people really have to keep in mind that partnerships, the best partnerships happen organically over time for relationships that you know people from 6, 12, 18 months already. And when you're setting up a partnership, it's really imperative not to choose somebody based off whether you like them or not. It's really choosing them based off whether their skill sets offset your skill sets. Right. Like, for example, I'm really good at back office, I'm really good at administration, I'm a certified project manager. But to that end, when it comes to maintenance requests or dealing with tenants, things of that nature, I that stuff that I can do it, but it doesn't come easy to me. Right. So I specifically found partners that specialize in dealing with tenants, dealing with tenant communications, dealing with capex. And I focus on the other side of real estate and our partnerships really blossom where we were able to really scale our portfolio very quickly. Going back to your question about how I found my partners, most of my partners were found at meetups and I actually started the largest real estate meetup in Worcester about three years ago and just starting that really blossom my network and really allowed me to develop tons of partnerships in the local market.
- [08:51]
B
I love that I think that's, that's super cool that you, you, you. One thing I really liked you mentioned is the way you structure the partnerships. You say, hey, where do they bring value that I struggle with? And where do I bring value that they struggle with? Because I think you hit the nail on the head. A lot of people find someone, hey, I click with you. Me and Andrew like each other. We're cool. We play the same games, we do the same hobbies. Let's go into business together, and then we both have the same amount of money, the same amount of credit, and it's like we're both 50, 50 on the deal. It's like no one's adding any extra value that you couldn't do on your own, which makes a partnership just slightly in, I don't know, inadequate, I feel like. But like, say when you say, hey, they're good at this, I'm good at this, let's bring that together. Now you're both adding a ton of value to each other. It seems to work better. I, I love that. So, pardon me, the, the way you structured these, were these like 50, 50 equity splits or did you do like, were they. How did you structure these partnerships?
- [09:54]
A
So just like anything in life, you really got to crawl before you walk, before you run. Right. And I highly recommend that when you're getting into real estate, take on easy stuff, turnkey stuff initially, and start building up the complexity of the project. And I highly recommend that when it comes to partnerships as well. Right. So in my particular case, once I, once I started targeting some of these five, six Plex is like, I don't have 25% down on a million dollar asset, and I do have 30, 40% of that. So at that point I decided to really just find people who complement my skills and just split, you know, just split a 50, 50, a 1/3, 1/3, 1/3 in a joint venture structure. And then I would kind of handle the management and just give myself a manager. Right. That's how I kind of. Because I, I'm. Because I'm very efficient at management. I'm a certified project manager. My specialty is stabilizing properties very quickly and getting them pretty close to pro forma rents in a quick manner. So that's kind of how I structured it. And then the more experience I gained, the better deals, I found. That's when I started kind of taking more of the equity in the form of. So I started syndicating. Right. So in that particular case, you know, the investors bring the money, then that's a 70, 30 split. Right. And I may bring a little money, but I'm not bringing all the money. So as I grew experience, as I grew knowledge, then that's when I really got more sophisticated with these. Partnership.
- [11:17]
B
Yeah, so the, the, your partnership started with just joint ventures. You know, you just kind of like you maybe set up an llc, you have a joint venture agreement, whatever, it's, it's pretty basic. But then you actually moved into like true syndications where you got like attorneys in and have like FCC like laws and all that stuff. How much did that cost you to get into actually starting your, your first syndication?
- [11:41]
A
So my first indication was actually brought to me. I didn't even find the syndication. Somebody else found it through direct mailer and they didn't think they had the capacity to raise capital, but they thought I did because I established a brand online because I host the largest real estate meetup. Because I'm out there and I tell people what I do and I show the world what I do on a daily basis. They brought it to me. So that was like key number one is like get the deal flow to come to you. Right. And in regards to the legal paperwork associated with syndications, it can get very expensive. It can definitely get very expensive. I mean, you know, it can range from 20 to $50,000 for the legal paperwork. So you bring up a good point in the fact that like the deal has to be big enough to support those sunk costs. Right. If you're buying a $500,000 asset and you're sending 30 can syndication costs, you think that's going to make sense from an RI perspective? It's not. Right. So when it comes to syndicating properties, the asset, the cost of the asset has to be over a certain point. So the sunk costs don't eliminate the returns to the point where it doesn't make sense.
- [12:42]
B
Gotcha. Because you're using the funds from the project to pay for the attorney to pay for the syndication fees. So there's got to be enough meat on the bones to cover all those costs. And then you just hire it out and just get it done. Because I think that's something that intimidates a lot of people. Like, oh, syndications are expensive, they're, they're law intensive, they're complicated compared to just buying a house act, you know. But like I said, if you find the right deal, and this is true with anything of scale, it's like, oh, you're also not self managing a 20 unit, you know what I mean? You're going to have to hire a handyman, you're going to have to hire maybe an in house guy and you're going to have to hire property management and there's money to cover all those bases because the deal is big enough. Which actually at the end of the day means less headache for you, you know what I mean?
- [13:28]
A
Yeah.
- [13:28]
B
Than trying to do it on your own.
- [13:30]
A
And you could also joint venture a large property as well. Which I mean, honestly, from the best case, from a best case scenario, like if I, if I could have joint venture at a $6 million asset with three investors, like that would have been the easiest thing in the world. But most, most investors don't have that sort of capital. And especially when you're starting, most of your close network are not accredited investors. Right. So how do you expect to raise that capital? A lot of times that's with syndication models, especially if you're trying to get people who do not have, do not have access to the real estate asset class into, into real estate. Syndications are a great, great way for like bringing your family and friends on the ride.
- [14:08]
B
Yeah, this is great. Andrew, I love this. Maybe you could explain for the listeners a little bit the difference between a joint venture and a syndication. Like what, what are, what's kind of the difference with that? Because I said you could just do even a big one with a joint venture with, I mean, how many people could you do? 20 people on a joint venture? Like what's kind of the differences and why would someone do one versus the other?
- [14:30]
A
So a joint venture, all the partners in a joint venture in an LLC say there's an LLC and there's three people who own the property. There's three members of the llc. All three members of the LLC have to be active participants in the deal. They have to have some role in the deal where they're actively working the deal. Once you start getting investors who are passive, who just do nothing but sit back and collect, you know, checks in the mail, that's when it be, that's when, that's when that turns into a syndication and that's when you really have to seek an exclusion from the sec. So that's the real major difference is whether the investors are passive or active. Right. So to your point, like you can have a joint venture on like a 30 unit with like 10 members. As long as like everybody is active, everybody has a role. Maybe you set up quarterly meetings, maybe you have some sort of voting system on the stabilization plan. Right. But if they're completely passive, that opens you up to SEC violations and it opens you up to legal liability, right? So that's kind of the main differences. And with syndications, because just comes more paperwork, right? More tax costs, you know, more legal costs and things of that nature. So that's kind of the main distinction. And, and with syndication comes more upfront work because you're essentially raising money for a business, right? So you got to put a slide deck together, you got to talk with investors, you got to have a CRM and track your notes. It adds a whole new layer of complexity to real estate that's not in the joint venture space.
- [15:58]
B
And so that someone would want to jump into joint venture over or jump into syndication over joint venture when they one, they want to start raising money from more people, especially people they don't even know. This isn't friends and family anymore. They need to reach out to a larger base and they want to have partners that are truly, truly passive, where they can just raise the money. But if these are people who are friends, family, co workers, you know them, they're not strangers and they can all be active, then it's easier to just do a joint venture. It's cheaper and more functional that way.
- [16:35]
A
Just imagine yourself like Batman. You have many tools in your tool shed, right? It depends on what the deal calls for, right? If you're running across a $20 million deal, good luck to find three JV partners, I got to bring $2 million each. Like that's not going to happen. Then you're going to want to pull out your syndication tool, right? You run across a five plex. You know, like it doesn't make sense to syndicate. You got to pull out your JV tool. So it really depends on the asset class and what you're looking to achieve and what structure makes sense to you or the deal.
- [17:01]
B
I love that. I think that that's the way to do. You know, you find the deal and if it deals a deal, then you figure out the structure to take it down and make it profitable for whether it's just you or you and your partners or a whole syndication or whatnot. That's cool. So you run a syndication as the general partner, like you're actually running it. And then you bring in limited partners under it. Is that correct?
- [17:25]
A
That is correct, yes. So I am one of the GPS of a syndication. I've also JV Joint ventured a large 32 unit as well.
- [17:35]
B
Oh, nice.
- [17:36]
A
Which is similar, but all of our vestors on there are active. But yeah, the larger buildings that I'm involved in, I am the general partner and I very much with my partners lead the stabilization.
- [17:47]
B
Yeah, let's talk about the stabilization because you know, you mentioned earlier that's kind of like your specialty. You're like, I can get these stable fast, I can get them up to market rent. I think that is obviously a huge value add to anybody that works with you. I'm sure they're stoked, like, oh, Andrew knows how to do this. That's exactly what we need. And you know, it's something that's vital for properties to be profitable and. But I think it's honestly something that most investors are a little intimidated by and they're like, well, what if I can't get it up? How do I stabilize it? What do I do there? So maybe you could dive into some of your best practices with, with stabilizing, getting things where you want them to be at.
- [18:26]
A
Totally. So the key when it comes to stabilizing quickly is ensuring the entire building or most of the units are month to month, right. If they're on a signed lease that goes with the property, like the lease, if it's 12 year lease, you're stuck with those rents for 12 years. So I can't stabilize something in three to four months. When it has 12 months lease, like I'm locked.
- [18:44]
B
You're saying before you buy it, you're like, hey, before I buy this, I only want to buy ones that are on month to month because then I have power to move fast.
- [18:52]
A
That's exactly correct. And you have like ability to, you have the ability to get to pro forma rents or market rents as quickly as possible. And to be honest, all the multis I buy, like the current in place rents like don't make sense. Like you have to underwrite based off market rents, like that's the only way things make sense. You really have to underwrite based off where you think you can get this property in six to 12 months. Right? Because if you didn't, like you would never get anything under contract. Like you really wouldn't. And the key when it comes to stabilizing for me is you got to, you got to develop systems in place as quickly as possible, right? So as of day one, I make sure like I, all the keys are set up on the property. There's lockboxes on site, there's electronic locks on site. I have electronic Rolodex of all my contractors, three plumbers, three electricians, three handyman test people, right. So if anything happens, I got a long list of Rolodex, a long list of contractors that can address those issues. And in regards to actually stabilizing the units, this is a people business, right? And if, if you think it's not a people business, and so you're going to be very unsuccessful in this business. And that's the approach you really have to take with these tenants, is really taking empathetic approach, right? So what I normally do is I utilize the binder strategy. I don't know if you're familiar with that strategy, but it was made famous by Dion. Talk financial freedom. But more or less the binder strategy is when you go, you meet the tenants face to face, you know, you go there, you build some rapport. You know, you ask them, you know, is there anything I can address in, in their unit that may, that may positively influence your stay here? Usually it's something small, like a faucet or a window or like a hole in the wall, a couple hundred dollars which I'll pay all day to buy Goodwill, right? And then at that point I show them, you know, market rents. I'm like, all right, I can get two grand for this three bed unit. You're paying $1,000. Like what do you think makes sense, right? And it's human nature to choose the 50% mark. So in that particular case, they're going to choose $1,500 as the rent, right. And a lot of times, you know, when the difference between market rent and what their current rent is is like two, three hundred dollars, it's actually more, it makes more sense to keep the tenant at that rate than to get them out and turn the unit. I mean, if it costs you 10, $15,000 to turn a unit, there's a 2, $300 delta, like how long is it going to take you to get a return on investment on that turn unit? It's going to take three, four, five years to get a return on investment, right? So I very much try to negotiate with existing inherited tenants, try to get the rents up first. If I cannot, then, you know, obviously we try to have some sort of negotiation with them leaving. I'm in a landlord friendly state in Mass. So maybe that involves cash for keys, maybe that involves creating some sort of win win scenario. But that's really how I address stabilization. And it's been very effective. I think 60 to 70% of my portfolio are inherited tenants.
- [21:45]
B
That's really cool. I want to hit on one point there. So, you know, you, because you talked about buying these, getting them stabilized, getting them into market rents, but you actually don't necessarily try to force everything to true top dollar market rent. You'll compromise in the middle to avoid the vacancy and have the goodwill of a happy tenant long term. So you're not worried about pushing it all the way to the top market rents. And you work that into your pro forma. When you're analyzing it, you know you're not going to go from 800 to 1500, you're just going to go 800 to 11. And you plan on that. Is, is that right? Or how, how do you work that if you're not going all the way to the hot top?
- [22:24]
A
You, you plan on going to market. You plan on the get ready cost to get it there, right? But if I get the mark, the market runs slightly below it. I don't have to infuse 40, $50,000 into this property. Like I can use that money to buy more property, right? So it, it's a mix, right? Like I do plan for, if I do turn the units like I'm going to put, if I am diffusing this money into the deal, is it still going to make sense for me? But if I can avoid, if I can avoid putting $50,000 in a deal and use that to buy another 3, 4, 5 Plex, I'll do that all day, right? And that's how I've been able to scale so quickly is I've been, you know, buy a project, get in there three or four months, you know, maybe turn one unit, negotiate with inherit tenants, get it pretty close to market and then move on to my next project. What I think, what I think people make the mistake in, in real estate is people try to get a home run deal, their first deal, right? They want like, they want a complete burr. They want to gut the whole thing from top to bottom, right. And that sounds great and all meanwhile, you'd use all of your capital in that deal. It takes you a year to get the deal done and Great, you create 150, 200k of equity. Fantastic. But you wasted a year investing. Meanwhile, I'm over here doing three, four or five single base hits. I'm creating four, five hundred thousand dollars of equity with my, with my, with my quick, with my quick plays as opposed to your long, your home run, right? And then at the end of the day, who do you think is in a better position, right? So that's kind of how I've approached building my portfolio and wealth building in general.
- [23:50]
B
I love that. Yeah, that's a really good way to look at. Like I say, everybody wants something to be perfect. Right off the bat. And so they just don't end up doing anything. One thing that you mentioned is when you're looking at these deals, you're like, they're not necessarily cash flowing or an awesome deal day one. You're like, you're like, you're not going to buy anything. If I heard you right, you're saying you're planning on it taking six to 12 months to have it hit the pro forma numbers that you're actually making the money you want and why you bought the deal. And if someone's going and say, hey, I need this to be a fully cash flow cow from day one, that, that's a lot harder.
- [24:28]
A
That never happens. If you own multifamily, at least in my area, it doesn't tackle until 3, 4, 5, 6 months into it because you got all the inspection items you got to address now. You got to, you got to have that con about increasing rent. You got to deal with added vacancy unit term costs. Like if people expect day one, it's gonna cash flow. At least in multifamily, you have a very unrealistic expectation of how real estate works, man.
- [24:51]
B
I, I just think that's so important for people to realize because newbies will look at that and they'll just like, oh man, there's no deals, right? They're like, nothing's gonna work, nothing's gonna cash flow, there's no deals. But you say, I know it's not gonna, but once I stabilize it will. And you work all that in to the numbers, right? So when you're raising money for this deal, you're not blindsided by 12 months of holding costs that you're covering because the cash flow is not there. You've worked all that in, you know, okay, I'm going to be covering all the expenses and the vacancies and for 6 months, 12 months, and the money's all there. And then, and if you can do it quicker, like you said, you have access to roll into the next deal. Like, that's such, such good foresight.
- [25:32]
A
One of my best metrics when it comes to evaluating multifamily is the cost per unit plus the get ready cost unit, right? So say for example, I'm paying $100,000 a unit and it's going to cost me $20,000 to get that unit to market. Be with vacancy, unit turn costs, lost rent, things of that nature. I'm all in on that unit. 120,000, right? If I get $1,500 for that rent, it's far above the 1% rule, if you base it off of the unit cost with the startup cost. Right. So right there, that's how I figure out a lot of my deals, is what am I paying all in on a cost per unit and comparing that to the pro forma or market rents. Right. And if it's well above the 1% rule, 1.1, 1.2, 1.3, then that's a good deal for me.
- [26:18]
B
I love it. I love it. That, that's. Do you, do you use a specific, you know, when you're evaluating these deals, do you use a specific calculator or asset analyzer that you developed or use someone else's or how do you kind of really run the deeper numbers on that as well?
- [26:35]
A
I like the bigger pockets calculator. Very intuitive. Fits on a nice fancy report for any investor. Right. So that's what I use.
- [26:42]
B
Awesome.
- [26:43]
A
To be honest with you. Like, you can use that on a three plex. You can use it on a 50 blacks. Like when it comes to the larger properties, the 20, 30, 40, 50 unit properties, like, if the numbers don't make sense on the back of a napkin, it's not going to make sense in your fancy fancy Excel calculator with all the assumptions, like, you know, so it doesn't, you know, us as investors, we know it's a good deal or not. Right. So I think that's key, is just being able to just underwrite it quickly in 30, 45 seconds so then you can go deeper once it actually makes sense. But if you're like going deep on every single deal, you're never going to make any offers.
- [27:19]
B
Yeah, it's kind of like you got to have a couple of filters, like you said, like the 1%, you know, and then like, okay, that passes that. I'll run the numbers deeper. Okay, that passes that. I'll go, I'll get it under contract now. It's under contract now. I'm going to do the real work. You can't do the real work. I see newbies doing this all the time. They're trying to do, do all this due diligence. They don't even have a property under contract. It's like, no, no, what was the point of that? You know what I mean?
- [27:43]
A
I've seen newbies run calculator after calculator. This, I've had a seller finance this fourplex. Meanwhile, the seller's not even going to sell at that price. It's like, why are you wasting time?
- [27:53]
B
I, I just had a partner deal, like, that this guy brought me deal. Like, hey, we're gonna flip this deal this. And I was gonna be the finance partner. I'm like, cool, this looks awesome. Like, let's do it. We go to get it. It's under contract with somebody else. I'm like, bro, you didn't even have this under contract. What was the point of any of that? So tell me a little bit about. You've kind of got these core foundations I really like. You have your core belief, your core problem, and your core solution, which I think just puts a lot of clarity for people. I was wondering maybe if you could expound upon those a little bit to kind of let people know how the mind of Andrew Fried works.
- [28:33]
A
Absolutely. One of my core beliefs when it comes to really achieving the life that you want, is this concept of thought freedom. Very being very controlling of, like, the thoughts that go in your head and whether they get you towards your goal or away from your goal, right? Or towards your dreams or away from your dreams. And that may mean anything. Maybe you want to be a fantastic father, right? So maybe a thought should go towards, how can I serve my children? How can I help their future, right? And maybe it shouldn't go towards, you know, what's going on with this sports game or how's this politics going? Or maybe I should vote for this kid. Like, that's not affecting your direct world right now. So I'm very intentional about where my thoughts go and whether they go towards my goals or away from my goals. And one of the influential books for me on that was was the Wealth Mindset by Neville Goddard. And in there, he talks about the Coin of Heaven, and more or less, he talks about the fact that people have a finite about a thought in their head at each given day. And if you're directing that towards your goals, if they're directing that towards your dreams, the likelihood of it happening increases exponentially, versus if you direct. Direct the Coin of heaven towards fruitless endeavors. It really doesn't get you any closer to your goal.
- [29:46]
B
Man, I love that. I think there's so much power for that. I found that even if I'm not able to articulate it every time I found that in my own life, when I'm like trying to buy a. If all my focus and energy is going there, it's like, I'll end up finding one. But when I'm kind of like half assing it, I'm like, I want to find a deal, but I'm not really, like, focused on it. And it's Not a top priority, like just nothing happens, you know what I mean? But once you put that focus there, it's crazy how the universe will just deliver. I like that.
- [30:17]
A
I'm a big, I really like sci fi and like, I don't know if you ever studied the concept of quantum mechanics, but in quantum mechanics, like an electron can be anywhere, right? But it actually selects a location when you, when you apply consciousness to it, when you actually apply, like somebody actually looking at it, then the electron chooses somewhere to be right. And everything is built on quantum mechanics. Our entire world is built on that. So I, I'm a big believer in the fact that like where you direct your consciousness and the level of focus you have on something can determine any, can create any reality or anything you want.
- [30:53]
B
That's some deep stuff. I remember I read Einstein's biography. I think Walter Isaacson wrote it. He kind of gets into that stuff and it's crazy when you really think about it, but I really like how you're approaching, almost makes it more real and tangible. The way you just described that. That's cool. That's great, man. So that's one of your core beliefs, is that, like I said, we can create our reality, you know, however you want to describe it, Quantum mechanics, this or that, you know, faith, you know, a lot of people are religious, whatever, like you can describe it a lot of different ways, but the truth is like we have the power by our intention and our focus to make things different in the reality of our lives. And, and I think that's a powerful core belief that, that you gotta have to really do the things that you're doing, you know, because, because you, you went from. Are you mean, we didn't really talk about your job situation, but you know, what did. Are you full time with real estate now? Did you quit a job? Did you have a job before? It seems like you're very passionate and knowledgeable. All this with, you know, only being in it a couple years, you know, what was the foundation, the build up to that and what was the transition over the past couple years look like for you?
- [32:06]
A
So what do they say? If you commit 10,000 hours to something, you're considered an international expert. And I absolutely did that in a matter of three years. I studied four, five, six hours every single day. I put those reps in to accumulate over 10, 10,000 hours of research, sorry, of real estate knowledge. So I did that. And I did that through, you know, going to meetups, through listening to every single Bigger Pockets podcast, to being on the Bigger Pockets forums, you know, like those are the things that I did, you know, underwrite deals, make offers. But to your point, I am still working at W. I actually, I still have my job. Meanwhile I own about 127 units. I self manage 24 units. I'm an investor focused agent. I have about three agents under me. Like I do a lot. However, I am very intentional about where my time goes and whenever I really think about like what I'm spending my time on, there's always two main concepts that come to mind. Corrado's principle, sending the 20% of my time that create 80% of outputs. The other concept I use is eliminate and delegate. So anything that takes energy away from me, I try to find some person to do that for me and, or eliminate that. And the last real main concept that I use that really helped me achieve my goals is the miracle morning. Every single morning. I get up in the morning about 5am and I do the acronym SAVERS. S for silence or meditation. A for affirmation. B for visualization. E for exercise. R for reading. S for striving. I do that every single day. And what that does is that allows me to really focus on what my 10 year goal is, 5 year goal is, 1 year goal is and how I can distill that into habit and tasks that I can do today to get me closer to my goals.
- [33:50]
B
Yeah, you seem so intentional about, I mean you'd have to be intentional about your day, your use of time to accomplish what you're doing. You're working a full time job, you're managing real estate team, you're doing all this stuff and you're still growing the way that you are with your real estate portfolio. It's crazy to think, man, how could someone get all that in. But one thing that's really interesting when you mentioned you're like, but you're also studying three, four hours a day on top of all that, which a lot of people are like oh, I don't have the time to do that. It's like, but if you don't do that, you're not going to have the, I don't know, the knowledge, the strength, the power, the competency to actually get it done. And so it's like that's a huge piece of the puzzle that you, you know, you were able to fit in on top of everything else. But yeah, you definitely seem like you're accomplishing a lot very quickly.
- [34:41]
A
I mean they don't at the time. Meanwhile they're sitting there binging on Netflix like, they're sitting there, they're watching, you know, every Red Sox game, there's like over 300 a year. Like, you have the time. It's whether you can create the time or not, right? You can sleep into 9am or you can get up at 5am and have literally four hours to yourself that nobody in the world is going to bother you like that. From 5am to 9am is the most peaceful time of the day. That's my favorite time of the day, because I really need to focus on me. I get the focus on my goals, and I don't have these constant notifications of the world coming, dinging me for information, Right? So everybody has the tools available. And I think, like you said, it's all about intention and it's all about prioritizing what truly matters to you.
- [35:22]
B
Yeah, I love that, man. So what's, what's next for you then? You know, you've. You've done this. You know, you, you started hot. You read, you know, rich dad, poor dad, which I love. It's the classic. That was what, you know, turned me on to it back when I was a kid. My dad had me read that. I was like, this is cool, you know, but, you know, you're. You. I didn't apply it as quickly as you did. You know what I mean? But, but you. You got the fire. You went hard. You've done some really cool things. What's pushing you? What's exciting you now and what's kind of the next step for. For Andrew?
- [35:54]
A
Well, what's exciting me now is I am very passionate about teaching others the power of financial independence. Like one of the core problems in the world right now when it comes to finance is everybody's playing the wrong game. Everybody's going after the wrong financial assets. Everybody's putting their money in these assets that provide. No, I like to. I like to call it return on net worth or cash flow or dividends. Based off your net worth, most people have their money in 401ks that provide you zero cash flow or dividends. Most people have the money in their primary residence in the form of equity that provides you zero cash flow or dividends, Right? And the key when it comes to building financial dependence and escaping the matrix, escaping the grind, is converting your net worth into assets that spit out cash flow that spit out dividends, right? So I think the biggest problem today is everybody's learning. Everybody's playing the wrong game. Like me and you are playing Monopoly. Everybody's playing. Sorry, over here. You know, they're literally playing the wrong game. They're like, why can I not escape this grind? It's because you. Because you're literally playing the wrong game. And like, And I mean, I don't blame them. I mean, financial advisors, I mean, wouldn't you be incentivized to. If you manage somebody's money, you got a yearly fee from it for them to not look at their money for 30 to 40 years. Like, that sounds fantastic. I would love that.
- [37:09]
B
Right, right.
- [37:10]
A
Like, so.
- [37:11]
B
It's so true.
- [37:12]
A
You know, I think everybody's playing the wrong game right now. And one of my goals is really to open to shed the light on the financial illiteracy in this nation and really direct people towards, you know, assets that can provide them that. That freedom that they want.
- [37:28]
B
Yeah, man, it's so funny. When I first started making decent money, I remember being like, okay, I need to go find a financial advisor in my mind. Like, a financial advisor is what that word sounds like. Someone who can advise across the holistic view of all your finances. Like, hey, you're a young kid. You start to make good money. How do you spend it wisely? And so then I go by, you know, I look up finance advisors, start meeting with these guys, and I quickly realize, like, wait, these are stock salesmen. That's all they are. Like, you know, sorry to offend anybody listening, if that's your job. But like, these guys, they just sell stocks, you know, they sell stocks and mutual funds, whatever, and they take a piece of the pie. And that's all they do. Because I was like, wait, you're not going to advise me to get into real estate? You're not going to advise me? Like, they don't tell you to do all these other things. They just tell you to buy this portfolio of stocks and buy this, you know, And I was just like, okay, there's a big demonstrated financial advisors and, and stock salesmen. And somehow they coined that really good term for themselves and made everybody think that that's what it is. And then people buy into it. So they give all their money to these financial advisors who are stock salesmen. And like I say, they're, they're, they're doing all the right steps that they're being told by society and by their advisors, but it's, it's all leading down the wrong path. That doesn't help them achieve what they're even trying to achieve, you know, and so it's like, it's the guys like you, these educators, that are actually teaching people the true way to Spend their money and build a portfolio to get out of the rat race and have cash flow and assets that are going up in value. Like, you're the financial advisor. It's all these real estate coaches that. These are the financial advisors that'll do way more than a stockbroker. But people are willing to give up a 1 2% of their entire portfolio for their entire lives, but they're scared to spend a couple thousand bucks on coaching or something like that, which is crazy.
- [39:23]
A
The last financial advisor I spoke to, he was managing my mother's money. He had this money for five years, historically the largest bull run in history. You know what average return he got her? 3%. 3%. And he had the gall to try to explain to me why active investing is better than passive investing. I'm like, you literally could have threw this money in the S&P 500 index and done freaking 2.3x better than you, right? So it's like they are literally lying through their teeth to protect their own at their own yearly salary, in my opinion. So, I mean, I'm sure there are good financial advisors out there for sure, but I think a majority of them are very much incentivized to hold on to your money as long as possible.
- [40:07]
B
Well, that's the hard thing is even if they're good and they intend good, the structure of the game they're playing, it's not what they are. They're not financial advisors. They are stock salesmen. And if you want to get in the stock market, you want some to help you manage it, cool, you can pay someone to do that. But that's where the confusion comes in, is because people think they're getting what the title is. And, you know, I'm probably going to get some backlash for going so hard on this, but it was blindsiding to me and it frustrated me. And I was like, well, where do I turn? You know, like, where are the true financial advisors who can say, hey, put some here for this, but you need to do this, and this is how you double your wealth, is how you actually can retire indefinitely. Not retire on a million dollars that's not worth anything when you're 75. You know what I mean? Like, the world lacks that and that. And you mentioned something really powerful is financial illiteracy. And that's we people don't speak financial terms. They don't understand that world, and so they try to hire it out. And guess what, guys? It's not going to work. You need to learn it. You need to learn English. You need to learn, you know, whatever language you're working with. If you're working in China, learn Chinese. If you're working in money, you got to learn to speak money or else you're never going to achieve your goals.
- [41:23]
A
You're absolutely right. I mean, you know, and the sad truth is everybody in the financial world is incentivized to take your money, right? So if you don't know the language of money, people have got to find ways to, to take money away from you, right?
- [41:38]
B
100%. And half them don't even realize it. I honestly think they're just like, they're just a product of the system they're in and they're just doing their job well. And they're not even stepping back and looking at the holistic picture because they don't even own a portfolio of cash flowing assets. They don't, they literally don't know what they're doing. And so they can't teach someone else to do it. And they're not even trying to take advantage. They're just working it into their own ignorance of saying, well, this is the only way to spend money because this is what my, my boss told me to say and this is what I do. And they're regurgitating this and then that guy teaches the next guy and it's like whether they're trying to be good or bad or not, they're just playing the wrong game. I love how you describe that. You know, they're playing the wrong game.
- [42:19]
A
And the biggest, the biggest thing that, that I learned in this wealth building venture is take advice from experts, right? So if I'm looking to build wealth, I'm going to talk with somebody who has wealth, right? Yes, yes. Or I'm looking to learn plumbing, I'm going to talk to a plumber. I'm not going to go talk to Lebron James and say, teach me how to change this toilet. Like, that's the stupidest thing in the world. But people do that all the time. People go to their family members that don't know real estate and be like, oh, should I buy this property? Like, what do they know? Like, come to me. Come to you. Like people who actually know the game. Right. And to that point, I think moving forward, and I mean, I'm just throwing it out there, Me and you bash the financial advisors.
- [43:00]
B
I know we just like caught a.
- [43:01]
A
Bug, you know, But I think they should literally put their net worth on their resume. Like, don't advise me of money if you can't even make money yourself. Right. Like, I think last financial advisor I spoke to, I'm like, I was talking. I'm like, all right, how much money you make? He. And he cringe. He couldn't even tell me how much money he made. I'm like, all right, so you want to know all about how much money I make. You want to hold all my network, but you don't even tell me how much money you make? Like a little hypocritical, dude.
- [43:23]
B
100%. And I have this principle, like, don't take advice from somebody you wouldn't trade places with, you know, around the topic. You know, like, if you trade places with the. Your plumber's toilets. Yeah. Then, you know, take advice from him on that. But if you're trying to talk about money, yeah. You're like, well, how much real estate do you want? How much cash flow do you have? When are you going to retire? Like I said, if you don't know where they're at and you wouldn't trade places with them financially, why would you take financial advice from them? But the truth is, like I said, you usually don't know where people at. They don't even want to share that information. I love your idea. Every financial advisor should have to show their portfolio, show their net worth, show their income, and you can decide if you want to, because maybe there's some baller ones that have the best advice in the world. And. And if they're not, and if they're living it and they're doing it, you're like, oh, I would want that. You know what I mean? But because of the trashy ones, we've been all scared off. And you never know the good from the bad now. So I like that. Man. Man, we could bash on this stuff forever. There's so many things to cover. I do want to get into some of our final four questions, but if people, you know, want to follow you, Andrew, they want to do your meetups, they want to reach out to you. What's the best way for people to get in touch with you?
- [44:38]
A
Thank you. Thank you. I appreciate that. So I host the largest real estate meetup in Worcester, simplified rei. So definitely come check that out. I'm already investor. I'm also an investor focused agent in Worcester, Massachusetts. And, yeah, you could find me on Investor Freed on Instagram or Andrew Freed on Facebook or LinkedIn.
- [44:56]
B
That's awesome. And I want to point out, you know, he says, investor friendly agent. You know, I used to just hear that. I'm like, okay, yeah, you want more? You Want to sell more houses, right guys, There's a big difference. An investor friendly agent does two things. One, if they're a good investor agent, they understand investments, they have investments, they know what an investment is. So you're trying to go find one, they actually can find it for you. And then two, they're willing to put up with your crap because we all know as investors, we're the worst to work with. You know, you get some little cute family trying to buy their first house. You just find them a cute house in a cute neighborhood and they buy it and they're stoked investors. We look at 15 homes, we get four under contract, we don't buy any of them and then we buy one the next week, it's a mess. But if you find an agent that understands that world and is willing to work with you and knows what they're doing, that's super powerful. So find a true investor friendly agent and they can be one of the best people on your team. Well, sweet, man. Well, we're going to dive into our final four questions and, and then we'll let you go. This has been super fun. If feel like we barely scratched the surface. You're a wealth of knowledge. I look forward to learning more from you. But let's dive in. The first question. All right, Andrew, so what is a dream deal that you would hope to be able to tackle someday?
- [46:14]
A
I would love to just take down like a 20, 30 plex with just two, three partners. I would love for it to be in good condition and current rents are maybe 50% where they should be. So there's a big delta between current rents and market rents or noi which will allow me and my partners to go in there and really more or less guard it. Take money out by increasing the income of the property. So that's really my dream right now. If I got a building like that, like that would be. That would be right up my alley what I'm looking for.
- [46:46]
B
I love that it sounds like your plan with a lot of these are long hold. You know, it's not just a owner for a few years. Increase the cap rate or the noi have a get a better cap rate and sell it. Do you, do you plan on exiting a lot of your stuff or is it more long hold or just kind of depends on what makes sense at the time.
- [47:04]
A
I have never sold any of my properties. If I do, if I do sell, I plan on 1031 into something larger. When it comes down, when it comes to syndicating, that's A different story. Because when you're syndicating, you have to, you have to provide the investors a certain level of return that they're accepting. And a lot of times to get that level of return that they're hoping for, you have to have a refi and a sale in the process. Right. So with my syndication opportunities, we very much built in a disposition to get the investors the return they desire. But for my own personal stuff, I have a longer view, perspective and what I plan on doing is either 1031 ing sucking money out with a cash or refi or sucking money out with a, with a line of credit on my commercial, which I actually do it right now. One of my five flex. I'm thinking about 150k on a second lead on it. So that's kind of how I'm planning on, on utilizing my portfolio moving forward to kind of buy more stuff.
- [48:00]
B
I love that One of my rules of real estate is we never sell assets for money. We only trade them for better assets, you know, because it's like, oh, there's all this equity, I could sell it and make all this money. It's like, well, what are you going to do with. Like I said, no, no, if you're 10:30 wanting that into a better deal, if you're selling it even if want to, and then going and buying a better deal with better assets, with better cash flow, with better portfolio performance. But we don't trade, we don't, we don't sell assets for money. Like that's how you kill the golden goose. We only trade them for better assets. So yeah, I love it.
- [48:33]
A
As, you know, like we make most of our money on the tax benefits on the mortgage, pay down on the appreciation, on the leverage. Like the cash flow is great, but a lot of times that's just, that's just the defensive mechanism to make sure the property keeps up the stuff and runs itself. Right. But with like the tax benefits alone, like every dollar I get in real estate is a post tax dollar because I have all that depreciation sheltering all of my income, right? So I could literally make like 250 a year, pay no taxes on that, and literally make the same as a doctor who makes $500,000 a year as a 45 tax rate. Right. So I think people talking about like the tax benefits in real estate are honestly one of my favorite levers for building wealth.
- [49:18]
B
Yeah, I love that. Such a really good point. Like, I just love the way you spelled that. Like you could be making 2 or 300,000 but if you're able to shelter all the tax on it, you know, you're, you're, you're clearing as much as someone making half a million, you know, and, and you didn't have to do the 10 years of school and get in all the, the debt that you actually have to pay off. Our debt pays for itself. We're in a lot of debt, but we don't pay it. Right. The do you know, the doctor's got to pay his own debt. So. That's awesome, man. I love that. All right, question number two, Andrew. What's been one of the most pivotal books you've ever read?
- [49:57]
A
Well, I mean, I would say rich dad, poor dad, but I already did, so I'm going to say Seven Habits of Highly Effective People by Stephen Covey. I freaking love that book. That is a guide on how to live your life. One of my favorite rules in there is think with the end in mind. Right. So like, like, I think he makes an analogy. It's like imagine yourself like, you know, talking at your eulogy 50 years from now. Right. Like, what would you like your ideal eulogy to be? And then reverse engineer that into your current life today. Right. So that's, and I think they had, they had the time matrix in there with Pareto's principle and how to really control your time, which, that's how I, that's like my guiding principle for dealing, you know, having four jobs. Right. And managing all my time.
- [50:41]
B
Yeah.
- [50:42]
A
So I absolutely love that book and I would, I wouldn't have achieved, I would have achieved 10% of what I have without that book.
- [50:50]
B
Oh, I love that. That's been a classic, an all time favorite of mine. Literally one of the most pivotal in my life as well is the Seven Habits Five Effective people, long title, incredible book with so much. Just, just universal truths and principles that apply across the board. And I think that's something that's so powerful about that book. It's not niche, it's not, you know, time specific. It's like these are true principles. No matter if you're rich or you're poor or you're in the country or in the city. You know, these are just true, effective principles for life and everybody should go read it for the first time or reread it for the 10th time. I think that's a great reference. All right, question number three, Andrew. What is one of the most expensive or interesting mistakes you've made in real estate investing?
- [51:44]
A
I wouldn't describe it as interesting. I would probably just describe it as I'm sure many people have experienced this, where you're turning a unit and you give the contractor a third of the money up front. They do a little work, then they ask for a second payment. You give them a second payment, then they go MIA on you. And that's exactly what happened to me in one of my projects. I think we lost $15,000 to a contractor, and we came to find out later down the road that his license expired, that he had other cases going against him. So, you know, I would say that that's a lesson on me, to do more due diligence. And some of my contractors, especially these contracts, are taking on larger jobs. But that's. That's a mistake I. I made then. Honestly, I'm to blame more than the contractor because I should have done more detail on my end.
- [52:31]
B
A way to take ownership on it. Contractors can be a tricky one, guys. You know, and a lot of times people think, oh, the contractors, that's only for people who are flipping or, you know, burring or whatever. It's like. No. Like, even just getting a thing rent ready, you still need to know how to work with contractors and get the right ones. I think that's a really good thing for people to remember and keep in mind and prioritize, because I've had the same thing happen, right? And it's like, you gotta. You get burned once or twice, and you put that as a much higher priority to do your due diligence on your contractors. All right, last question, then we'll let you get on your way. So, Andrew Fried, tell everyone listening what the purpose of life is.
- [53:13]
A
I think the purpose of life is to, when you end your life, to provide more value to the world than what you took.
- [53:22]
B
Mmm. That's profound. I love that, man. Say that one more time for the listeners.
- [53:32]
A
The meaning of life, in my opinion, is to provide more value to the world than what you took.
- [53:38]
B
There you go. Well, this has been a treat, man. It's been super fun having you on. We look forward to following your journey and learning from you. And, you know, this is. We just appreciate you putting the time in to meet with us.
- [53:52]
A
Thank you. It's been. It's been an honor being the. The podcast, and I wish you and your viewers the best.
- [53:59]
B
Awesome, man. Well, without any further ado, this is Joe Jensen signing off for the Real Estate Investing School podcast, reminding you to be intentional and control your destiny.