Episode Summary: "Brothers in Arms to Real Estate Partners"

Real Estate Investing School Podcast | Episode 181
Guests: Eric Berman & Austin Hartman (Berman Property Group)
Host: Joe Jensen
Date: August 5, 2024

Episode Overview

This episode centers on the inspiring journey of Eric Berman and Austin Hartman, two former U.S. Marine Corps officers whose shared military background laid the foundation for a thriving real estate partnership in Beaufort, South Carolina. Host Joe Jensen explores how their disciplined, process-driven approach and hands-on operational styles helped them scale Berman Property Group to over $5 million in assets and 40+ deals. The discussion weaves together themes of partnership, business process optimization, real estate investing strategy, and building a team-oriented company.

Key Discussion Points & Insights

1. From the Marine Corps to Real Estate Entrepreneurship

Timestamps: 03:45–07:00

• Eric and Austin met during their time at Camp Pendleton, eventually deploying together across Southeast Asia and the Middle East.
• Their bond was forged through “burning the midnight oil” on deployments, collaborating intensely on joint military operations.
• During downtime at sea, their mutual interest in business and investing was sparked by books and Mr. Money Mustache’s financial independence blog.
• Both credit their military training with instilling leadership, discipline, and an action-oriented mindset.

  "We built PowerPoints together, set up ops together, trained together non-stop… setting up advanced training in different host nations." – Austin (04:08)

2. Business Structure and Philosophy

Timestamps: 05:41–10:00

• Early investing was slow and methodical; Eric approached his first deal as a year-long case study.

• The company is split into two arms: investment and construction.

  • Three main pillars:
    • Acquisitions (Eric: 80% of his focus)
    • Conversion/Construction (Austin: 80% of his focus)
    • Disposition: Completely outsourced (property management, sales)

• Importance of systematization: Both partners use Lean Six Sigma and continual process review—including monthly after-action meetings—a legacy from their military background.

  “We view the business as three pillars: acquisitions, conversion, and disposition… Acquisitions is 80-20 my split, and Austin is the other way around.” – Eric (09:21)

3. Benefits and Challenges of In-House Construction

Timestamps: 11:31–15:51

• Major motivation for integrating construction in-house: alignment of incentives, minimizing risk and project overruns common with third-party contractors.

• In-house construction also opens up new revenue streams—client work ranging from decks to gut remodels—that act as a risk hedge during slow investment periods.

• Keeping subcontractors busy with client work maintains high-quality labor and supports local employment.

  "A lot of pain [comes] from outsourcing construction over the years… at some point you just have to rip the bandaid off." – Eric (11:31)
  "For our own projects… it's more efficient if we just buy the same things over and over, but client jobs force learning on us and reduce risk." – Austin (14:13)

4. Forming and Structuring a True Partnership

Timestamps: 16:23–31:36

• Austin joined Berman Property Group after extensive travel and work experience. The mutual Marine history made trust foundational, but the actual transition required months of negotiation and legal consultation.

• Practical partnership advice:

  • Clearly separate equity—everything prior to the partnership remains separate; all new ventures are done as 50/50 LLC members.
  • Use an umbrella holding company with property-specific subsidiary LLCs for layered liability.
  • Formalized accountability through legal and CPA review, regular whiteboarding, and graphical entity mapping—a process borrowed from the military ops world.

  "Even though I trust him implicitly and vice versa… a slow, deliberate approach to a partnership is the way to go." – Eric (27:58) "If he does something that pisses me off, I tell him right away, and vice versa—no emotion about it. Otherwise, I don't think it would work." – Eric (26:38) “[Clarity] creates confidence to actually move forward instead of just getting… messy.” – Joe (30:56)

5. Accountability, Operations & Division of Labor

Timestamps: 31:57–36:02

• Operations are split: Austin leads field work and project management, while Eric handles finances, admin, and investor relations.

• The duo leans on military-style camaraderie (“always berating Berman”—ABBAB) to keep each other sharp, plus regular, no-nonsense feedback.

  “There’s some edge there...holding each other accountable just comes naturally because we’re always putting each other down… it's a carryover from the Marine Corps where you're constantly having to prove yourself." – Eric (33:45)

6. Why Real Estate? The Asset-Backed Business Model

Timestamps: 36:36–42:01

• Real estate offers tangible, appreciating assets with enduring value and passive income potential, unlike service businesses that “dry up” if owners step away.

• Flips and client construction fund further portfolio acquisition, but the focus is building a lasting asset base.

  “Real estate, you can walk away and there’s still assets—something tangible there. If everybody in Congress is in real estate, you should probably be in real estate too.” – Eric (37:04)

7. Case Study: The 8-Unit Mixed-Use Acquisition

Timestamps: 42:01–59:10

• The partners share the fast-paced acquisition of a mismanaged, underpriced 8-unit mixed-use property.

  • Spotted via a realtor during a holiday; Eric immediately offered full price ($1.2M), hard earnest money, and a quick close—despite not having funding locked in.
  • Due diligence involved a blitz of inspections (engineers, HVAC, plumbers).
  • Property was undervalued due to years of neglected management and below-market rents—some tenants were paying less than half of market.
  • Rent increases were handled with sensitivity: phased rent hikes for renewing tenants, immediate turnover for some.
  • Funding was hard-won: 80% hard money loan, 20% raised from private investors after “hundreds of calls.”
  • Plan: Improve NOI over 12-18 months, then refinance into long-term commercial debt.

  "We were not fully sober, but knew it was a good deal… I just texted back: ‘write it up, cash, will close in three weeks.’” – Eric (42:26)
  “We did not have $1.2M in cash… we sprinted to the finish line, burning up the phones.” – Eric (51:01)
  “There’s an intuition that’s developed through experience… underwriting deals is doing reps—it matters!” – Eric (52:59)

8. Advice for Aspiring Investors

Timestamps: 60:01–65:19

• If starting over: Use a VA loan (if eligible) to house-hack a multi-unit property for low or no money down. New FHA/conventional products now allow similar benefits for non-veterans.
• Most expensive mistake: Hiring the cheapest contractor; lesson learned—"There’s a difference between being cheap and being frugal."

  “I would have house-hacked for sure with a VA loan.” – Eric (60:34)
  “Don’t go with the cheapest [contractor] because it will bite you… We’ve spent a lot of money redoing work we shouldn’t have had to redo.” – Eric (64:46)

Notable Quotes & Memorable Moments

• On Partnership:
  "It’s almost a marriage… If he does something that pisses me off, I tell him right away. There's no emotion about it. We just hash it out immediately." — Eric (26:38)

• On Business Structure:
  "Making each of us managing members made sense… we both act independently, and both have the same authority." — Eric (28:21)

• On Contractor Woes:
  "The most expensive mistake was trying to find the cheapest contractor… There’s a difference between being cheap and being frugal." — Eric (64:34)

• On Real Estate as an Endowment:
  "It’s akin to building your own endowment… If you have a rental and a tenant in there, you don’t really care if the stock market’s crashing or going to the moon… you just have this endowment you’ve created for yourself." — Eric (41:22 & 00:00)

• On Scaling:
  "Once we kind of combined forces, the business just expanded and started going… we’ve purchased 20-something units in the last couple of months, not to mention all the client work." — Austin (21:41)

Recommended Books & Resources

Timestamps: 62:24–64:22

• Rich Dad, Poor Dad – Robert Kiyosaki ("Red pill" for thinking about money)
• The Boglehead’s Guide to Investing – Jack Bogle ("Kick-started my entire investing journey" – Austin)
• Rocket Fuel – Gino Wickman (on business partnerships; see also "Traction")
• Real Estate Rookie (podcast)
• Lex Fridman Podcast (for “deep dives” in various subjects)

Key Takeaways for Listeners

• Partnerships require trust, relentless communication, and thorough legal/financial structuring.
• Systems and constant process improvement (Lean Six Sigma, after-action reviews) are invaluable when scaling.
• In-house construction minimizes risk and creates new revenue and funding channels, plus keeps quality labor local and loyal.
• Success in opportunistic real estate deals hinges on deep market knowledge, readiness to act, robust networks, and fearless hustle.
• Asset-building remains the heart of real estate entrepreneurship, providing financial flexibility and long-term wealth.
• If just starting out: Use every financing advantage available—especially VA or low down-payment loans. House-hack wherever possible.

How to Connect with Berman Property Group

• Website: bermanpropertygroup.com
• Instagram & Facebook: @bermanpropertygroup

“We don’t have many followers… Nobody likes us, so follow us!” – Eric (66:26)

Final Thoughts

This candid, wisdom-packed episode is a must for anyone considering a partnership or scaling a real estate business from small-time investing to a diversified, operational company. The Marine ethos of discipline, process, and open feedback is tangible throughout, making for not just business insights but life lessons on trust, grit, and growth together.

For more episodes and resources, visit Real Estate Investing School.