Table of Contents - Transitioning Your Investors From One R.E.I. Strategy To Another with Todd Dexheimer
Dave Debeau [00:00:09] This is Dave Debeau with the Property Profits Podcast. It's my pleasure to introduce Todd Dexheimer. He's done all sorts of stuff and he's focused on multiple families these days.
Todd Dexheimer [00:00:35] Thanks for having me on Dave it's been a long time.
Dave Debeau [00:00:41] But how did you get started? Smart, beautiful, clean Alice.
Todd Dexheimer [00:00:48] And what else was it? It was just a being in educating myself that I decided, hey, I want to run my own business. And this real estate thing seems like a fun thing to do. So probably timing couldn't have been worse or better. Depends on how you look at it. Everybody now looks back and goes, well, timing couldn't have been better, but at the time, the real estate market was taking a complete nosedive. At the time I was starting to kind of research. The market was still pretty hot, but it took a complete nosedive, obviously in two thousand eight twenty seven to two thousand eight nine. And, you know, it was kind of scary waters, but I really wanted to do something else, get involved. And it made a lot of sense. So that was the kind of start is just honestly just through self education and getting involved in it. Like you said, I did a lot of fixing flips. I did some wholesaling. I bought a mobile home park on a ski resort. I've done all kinds of different developments, seller financing stuff, multifamily, kind of done it all, done some commercial. So and now my focus is multifamily syndication value, add properties, buy and hold them and keep them for five to eight years and kind of turn them over and do it again.
Dave Debeau [00:02:07] So how long was it before you started getting into real estate, even in like the worst real estate market in living memory in the United States before you're able to quit that good secure school teaching job
Todd Dexheimer [00:02:21] and well, teachers in the US? I don't know what they make in Canada, but teachers in the US don't make very much money. So I think I was making about thirty thousand dollars a year by the time I quit, and that was five years into my teaching career. So it took me from when I started buying real estate. It took me roughly two years before I quit my job.
Dave Debeau [00:02:42] So did you jump right in? You start doing flips were the first thing you started doing is because you're a handy kind of guy or what? What was it?
Todd Dexheimer [00:02:48] So, yeah, first thing I did is actually about three houses all at one time, all within they weren't. One transaction was three consecutive transactions, all within a couple of weeks of each other. The first property and I don't remember what order they came in, but the first property was single family my wife and I bought to live in and to fix up. It was a foreclosure, a complete wreck. We bought it. We fixed it while living in it and sold it a few years later to avoid the capital gains tax. The second property was a buy and hold rental property. I still actually own the house today purchased that did a little bit of renovation, got the got the tenant. Now talk about numbers I purchased versus sixty five thousand dollars, put about fifteen thousand dollars into it and I was able to rent it for fourteen hundred dollars and wow that was fantastic. Then a third property was a fix and flip and purchase that and I honestly made no money on it on my first fix and flip was just, it was just nothing. And I really wasn't into fixing flats at the time. I didn't want to make that a big part of my business. It was more of the rental properties. The Fix and Flip started coming later after I ran out of money, honestly, to buy more rental. So it was a means to continue to buy rentals.
Dave Debeau [00:03:58] So, yeah, I know a lot of people kind of think that way and it sounds like you've transitioned, but they think, you know what, I want to buy the properties myself. I want to control everything myself. To do that, I'm going to go do some flips, create some some chunks of change to go out and buy more long term buying old properties. Is that what you did for for a chunk of time? Yeah, absolutely I did.
Todd Dexheimer [00:04:22] But a hundred and fifty fixed and flips and I bought a bunch of rental real estate as well. And so it was pretty much every two to three properties. I'd flip. I would then buy a rental property. So yeah, it was it wasn't an exact science on the formal, but it worked really well to be able to get down payments for the properties. And it was just a good way to make some additional capital.
Dave Debeau [00:04:46] Yeah, well, especially after you quit the quit the school teaching gig. You need to put the food on the table too, right.
Todd Dexheimer [00:04:52] Yeah. You know, but like I said, it wasn't too difficult. I didn't quit until I replaced my income. I needed. I had. Six, I think six rentals at the time to make that thirty thousand dollars back, so, yeah, it didn't it didn't take very long.
Dave Debeau [00:05:09] Very good. So at what point did you transition from focusing on single family homes and start getting into multifamily properties?
Todd Dexheimer [00:05:18] So I was stuck into the fix and flips in the single family rental duplex and stuff like that for quite a while. And I didn't transition until 20, 15, which I probably would have done it a little earlier. But, hey, you know, I had some good experiences along the way and really was able to learn and grow. So I can't complain. And even though sometimes I say I wish I would have done it earlier, I really can't complain about the experiences I've had so. Well, yeah. Twenty fifteen to transition into the multifamily and have been doing that full time since.
Dave Debeau [00:05:49] Nice. So, so now out of your portfolio you've got about five hundred and fifty units in your portfolio right now. How many of those are multifamily families and how many are larger multiple families versus single family homes.
Todd Dexheimer [00:06:04] Yeah, a large majority of them are multifamily. I mean nearly five hundred units is going to be in my multifamily stuff.
Dave Debeau [00:06:11] Nice. All right. So you build that up in a pretty short period of time. I mean, at the time we're recording this, it's starting to get to be late. Twenty nineteen. So you're looking at about four years that's been really rocking and rolling with multifamily properties. How did you make that transition? What was it that kind of spurred you on to switch from single families to multifamily? Well, what kind of triggered me
Todd Dexheimer [00:06:35] to do it? First of all, when I first started doing this business, I wanted to buy multifamily. I wanted to get a thousand units. That was my original goal back in two thousand seven, two thousand eight. And I just didn't know really how to get there. I didn't understand multifamily that thinking I could buy a two hundred unit building like that didn't make any sense to me. I was a schoolteacher like that doesn't make sense. So it took me a while to really process that and be able to do it. But what ended up happening is I had a business partner for a while there and him and I went different directions. And when that happened, I really looked at my portfolio and decided, OK, what makes the most amount of sense do I keep on doing this? Weps which I kind of had burned out doing, quite frankly.
Dave Debeau [00:07:21] One hundred and fifty of them.
Todd Dexheimer [00:07:24] And I'm going, what do I buy more single families and duplexes and stuff like that? Well, does that really get me to where I want and how long is it going to take to really get there? And multifamily just made a lot of sense. So I revisited that and really looked at my portfolio and said, well, first of all, my rentals are making as much or more as the flip's as far as ROIC goes. So that makes a lot of sense to continue the rentals. And then when we can start scaling and get into the larger multifamily, well, that makes a lot more sense. So I had investors that I used for my fix website. I just had a conversation with pretty much all of them are with all of them and told them what I was going to plan on doing and wanted them to come with me. And they all said, yeah, let's do it. So they all came along for the ride on the transition and so far so good.
Dave Debeau [00:08:13] Well, that's awesome. So let's switch gears here a little bit, if you don't mind, Todd, and let's talk about working with investors, because that's that's kind of my main focus these days. And I'm pretty familiar with how it works up here in Canada, but things are a little bit different in the States. So let's go back to when you were doing some flips. Yeah. How were you typically structuring those kind of deals with your investor partners? How did how did you know without going into too much detail, big broad strokes? How did that work?
Todd Dexheimer [00:08:43] Well, so I had two different methods of doing it and sort of transitioned through the years. Both the first one was an equity play. They would get me 50 percent or 40 percent or whatever it was of the of the profits. The second one was it was a debt structure. So they'd get depends on the time period, but anywhere from 12 to 15 percent, they would get on their money. So they loan straight. One hundred thousand, they'd get 12 percent, 14 percent, 15 percent, depending on the during the time, you know, things things always kind of changed and adjusted. But that's pretty simple.
Dave Debeau [00:09:15] Yeah. And were they how were they secured where they secured on title of that particular property or another property that you'd have, or how did you secure them?
Todd Dexheimer [00:09:24] Typically. Mostly just on the property, typically just on the property that we're working on, that you're working on. That makes sense.
Dave Debeau [00:09:31] And these investor partners, especially the first batch, were these people that you kind of knew, people that you had a preexisting relationship with. How did you how did you find these investor partners?
Todd Dexheimer [00:09:42] Yeah, so they were either people that I knew or my partner knew and just had some sort of relationship with, you know, none of them, especially my early on investors and more like close friends or family. I shouldn't say that one of them, one of my original investors, was a close friend, but for the most part they are more of just kind of acquaintances that I got to know or referrals to. So that's kind of most of my private investors came like that.
Dave Debeau [00:10:14] Interesting. All right. So then let's fast forward to twenty fifteen. You're making a big switch from doing flips where you're getting your investors 12 to 15 percent, probably in three or four months.
Todd Dexheimer [00:10:28] Yeah, everything was quick. Yeah. Because you guys you guys had things going on on a conveyor belt. There are factory production line, it sounds like.
Dave Debeau [00:10:36] So then you switch from that to a much longer term by an old strategy, it sounds like you got a lot of those investors to come on board with you to the new long term buy and hold. How did you convince them that this is the way they should be going after they were used to that? Yeah, sure.
Todd Dexheimer [00:10:54] Well, it was pretty simple, honestly. We just sat down with them and showed them the numbers, just would give them some sample deals and say, well, look, here's the deal. Here's the return. This is what I'm expecting to get. And the results look attractive to you. And for the most part, when I'm looking at these sample deals, I can go, OK, you're going to get eight to nine percent on your money on an annual basis, on your cash, on cash. And then you're going to get an IRR of 15, maybe 20 percent to kind of the higher end. And so when you boil the numbers down, it actually is is just pretty much just as good because I'm paying a straight 12. At that time, I was paying a straight 12 percent interest, 12 percent annualized interest.
Dave Debeau [00:11:37] So simple interest and
Todd Dexheimer [00:11:38] simple annualized interest. So when they look at that go, oh, this looks really good. I mean, I'm going to have yeah, my money's tied up for five years, but they don't want their money back anyway. They want to recycle it with you anyway, right. Yeah. And so yeah. More stable, committed investment. And so I think it was a pretty easy transition and they all trusted me. I'd given them their money back. They had no reason not to trust me.
Dave Debeau [00:12:05] You had a track record. You had the credibility already.
Todd Dexheimer [00:12:08] And that's really important, obviously, as you're somebody going out there and going, oh, I want to raise some capital. Well, have you done it before? What's your track record? And so you've got to somehow create a track record, whether that's through how I did it working my way up or whether that's bringing in partners or whatever, you've got to do it, but you've got to build a strong track record that's going to be vitally important, in my opinion.
Dave Debeau [00:12:31] Oh, definitely. Yeah, that makes sense. So if you don't mind explaining the transaction, so it's pretty cut and dry with the fix and flip of a single family home in and out fairly quickly. Now you're focusing on large multifamily properties and you're syndicating these deals for folks that aren't familiar with what syndication is. What does that mean to you? What does that look like with your current properties and your current investors?
Todd Dexheimer [00:13:00] Yeah, pretty simple. Just pooling a bunch of people's money together. So you might we might need a couple of million dollars to three, four, whatever, five tonight. It depends on the size of the deal. But we need so we get two different debt structures. Right. So we've got a debt structure with the lender. They're going to lend seventy, maybe seventy five percent of the purchase price. OK, and then I've got that gap then. So I got the lender that led let's call it seventy percent and I might have an additional five million dollars that I need to come up with. Well, it's not sitting in my piggy bank then I've got to figure out how do I get it. And that's going to be brought by the equity partners then and the equity partners that are my partners, their limited partners and also limited means is that they have limited liability. Basically, they've got very limited responsibility. They're their responsibility is bringing money to the table and their liability is their money. So they're limited partners and they're getting a chunk of the deal. So they bring five million dollars into the deal. They in my case, they get 70 percent of my deal for bringing that five million. Now, it doesn't mean you bring in all five million. Usually, you know, we have 30, 40, 50 investors that are going to bring in that five million collectively and you get that share of whatever you brought in. It's very similar to investing in the stock market just with a real snap product set up a little differently, of course, but it's similar to getting shares. You're very limited in your liability.
Dave Debeau [00:14:44] So what's for somebody who hasn't I mean, obviously there's a lot to look into with with syndicating a deal. But are there do you have to get special consideration with the Trade Commission, the Securities Commissions, that kind of thing? You have that set up a corporation. Is it a big, cumbersome, legal, expensive process or is it fairly simple?
Todd Dexheimer [00:15:08] Oh, boy. I mean, that's kind of hard to answer. So you don't have to have any kind of licenses or anything like that. Anybody could do it. You're setting up an LLC typically that's going to buy the property. You're going to have your LLC. That's going to be part of the general partnership, which is the controlling partner. Usually there's a controlling partner or partners, and that's called the general partnership. And then you've got the limited partners. Who are the investors as far as the. Legal costs? Yeah, it's it's, I don't know, more expensive, it depends, but, you know, you're going to spend around ten thousand dollars, potentially a little bit less, potentially a little bit more. You're going to spend around ten thousand dollars and you've got to file with the FCC whatever rule or exemption you're using. So it's definitely something you want to bring attorneys into the mix and make sure. Everything's done legally the right way for sure, somebody who's trying to get into it, I think the biggest thing is you've just got to study, you've got to learn. It's like anything you've got to gain knowledge in it. Maybe you know how to do multifamily, but you've got to also know that how to do syndication. You have to learn the language. You have to understand the rules and regulations. You don't have to be an expert. You don't have to be the lawyer. But you have to know enough to understand what you're doing.
Dave Debeau [00:16:29] Now, that makes sense. Some stuff. So we're just wrapping up here has been very, very interesting. Appreciate it. Do you help other investors out? Do you help people out that are getting into real estate investing, especially multifamily investing?
Todd Dexheimer [00:16:45] Yeah, definitely. So I do some some mentoring. I've got some paid one on one coaching that I do. I also do some group coaching as well or mastermind I call mastermind groups or bring in a group of a dozen or so individuals. And we we have really solid group calls and lots of learning, lots of contacts. So I do that and I've got my own podcast as well. It's called Pillars of Wealth Creation. Anybody can listen to that, of course, after they list gear. And so that's definitely passionate about that. Like I said, I used to be a teacher. And so now I'm kind of back into teaching just in
Dave Debeau [00:17:24] in real estate. That's right. Well, that's a that is an awesome, awesome complete come around. So people want to know more about your Todd. What should they what do they do? Where do they go?
Todd Dexheimer [00:17:33] Sure. A couple of different websites they can visit venture D properties, dot com. They can connect with me in any capacity, honestly. But if they want to learn more about investing or just anything that I got going on, the definitely there there's some blogs and they can view my podcast there as well. The other site is Coach with DACs de X.com, and they can definitely learn more about my coaching if they want to get involved with that or just have a free call and kind of discuss if it's right for them.
Dave Debeau [00:18:05] Sounds good. Thank you very much for being on the podcast today. I really appreciate it. It's been
Todd Dexheimer [00:18:09] great. Absolutely. Thank you, Dave.
Dave Debeau [00:18:12] All right, everybody, stay tuned. See on the next episode. Bye bye. Well, thanks very much for checking out the property profits podcast and you like what we're doing here. Please head on over to iTunes, subscribe read us and leave us to review it. Very, very much appreciated. And if you're looking to create a regular flow of inbound investor inquiries about your real estate deals, then I invite you to attend one of my upcoming live online demonstrations. And you can check that out at Investor Attraction Demo Dotcom Ticker.