How an Entrepreneur Scaled from 2 Duplexes to Over 1800 Units in 6 Years with Jason Yarusi: An EOFire Classic from 2022

0:01John Lee Dumas:Boom! Shake the room, Fire Nation. JLD here and welcome to Entrepreneurs on Fire, brought to you by High Level, the all-in-one sales and marketing platform. On today's classic episode, we'll be breaking down how an entrepreneur scaled from two duplexes to over 1 ,800 units in six years. To drop these value bombs, I brought to Jason Yarusi and the EO Fire Studios. Jason is the founder of Yarusi Holdings and has acquired$180 million in real estate across 1 ,500 multifamily units, hosts two podcasts, and is an avid ultra runner. And today we talk about how everyone has something to offer. You may lack money, but you have time to learn and find opportunities.

0:37John Lee Dumas:Your only limitation is your mind and oh, so much more. And a big thank you for sponsoring today's episode goes to Jason and our sponsors. Stop duct taping your business together. High Level runs your website, your funnels, email, automation, scheduling, payments, and memberships all in one place. And when you sign up at highlevelfire.com, you get a 30-day free trial. plus my exclusive bonus stack that includes weekly office hours with me and much more. Visit highlevelfire.com. Highlevelfire.com. Fire Nation, are you ready to build something special in the next 50 days? Check out my free YouTube series, 50 Days to Something.

1:17John Lee Dumas:Short and strategic step-by-step videos by me, JLD. On day 50, you'll have a valuable asset. And the best part is it's completely free. Visit eofire.com slash YouTube and start day one today. Jason, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with. Sure. Yeah, I'm excited to be here. And what do most people disagree with about, honestly, is that you have to be lucky, right? And most times say what you hear that is that I'm not lucky. I just, I don't have lucky. I haven't grown up in the right family or I haven't been around the right people.

1:58I didn't get the right school or the right education. But it's the action that keeps most people from where they want to be. It's the thinking about where they want to go, the thinking about what they want to do and not taking productive steps to get there. And when they do take that first step, ultimately just giving up too early, right? The path there, so many times, what is it? We think the destination is actually the vehicle, but the vehicle is what's driving us to where we want to be. And if we can just continue on that road, everything we want is in front of us. It's just the action steps to get there that have to be taken as soon as possible to put yourself on the path forward to where you want to be.

2:37John Lee Dumas:Well, Fire Nation, I can tell you with absolute certainty that Jason is an action taker. Because as you heard about in the introduction, we're going to talk about how he scaled from two duplexes to over 1 ,800 units in just six years. So, Jason, let's cut to the chase, brother. How the heck did you do that? It does come down to the mindset first of just choosing where you want to be, right? And I was in a position where I wasn't happy with where we were. It was actually my husband-wife company here at University Holdings, my wife, Peely, and myself. And we wanted to get back our time, which were working in New York City bars.

3:13So even more than that, we were bartenders probably a little more than 10 years ago, right? And so we started saying, we want our time back. And what we found is that all the activities, all the jobs we were having were driving our day. Everything that was happening was happening to us and we didn't have the control.

3:28John Lee Dumas:And so we were looking for real estate. We were looking for other points. And we were doing active real estate like flipping and wholesaling, all these things that continue to take our time away. And we came upon investing in multifamily. And at the time, we thought that was two duplexes, two unit buildings. And we were buying them and they were doing great. We were putting together teams. We were doing this about a thousand miles from where we lived. We were setting them up and they were performing great. But just the economies of scale was not there. And just having a bunch of random duplexes around town, trying to run around and create a vision with that, it wasn't there.

4:04And it came upon, like on a podcast just like this, someone investing in large apartment buildings. And that was that aha moment. Because most of the time when we look at buying an apartment building, we think it's REITs or big, big companies that are doing it. But there is the availability to each and every one of us who want that path, whether you be an active or passive investor. So we sold out those little properties. We dove all into learning all about the space, how people do it, how people look to do it, what kind of buildings, what kind of market they look for. And we did that back in 2016.

4:38that led us down the path to buying our first 94 unit. And that was in the middle of May of 2017.

4:46John Lee Dumas:So a lot of people are scared of the economy right now. So I want to talk about where there are great opportunities in both the good times and the bad times. What's been your experience? Sure. Multifamily investing and multifamily real estate form in good times and bad. And so we go all the way back to 2007, 2008, and multifamily had a default rate that was about a 20th of what single-family houses have. When you look at rental rates, there's only been one year on record. It was back to, I think, 2007 when the average rental rate over the U.S. actually went down. And what stands out about multifamily investment is that there's, say you buy a 100-year building, there's 100 tenants that can come up to pay your rent, right?

5:34If it's a single-family home, it's either someone's paying it or there's no one there to pay it and that falls back on you. So that creates an environment where lenders love the multifamily space because it has a lot of ability to be able to have the safety net, right? Because of the larger asset, because of the kinds of skill. And you can build it like a business where this business can have a full-time leasing person, full-time maintenance people that can be afforded by the property. And where this trends well, like talk about today, is that multifamily real estate does very well in an inflationary environment because you have short-term leases that are basically year-long leases that are renewing or releasing throughout the year.

6:12So you're able to adapt to market conditions and change to market conditions. And for commercial real estate sectors, say office or retail, you may have three or five or seven-year leases, sometimes longer, where you get locked into a rate. And if we see the drive up in rental rates of what it is today, well, you may be locked into that rental rate with very minimal increases within there. Couple that is that inflationary environment also trends to the success of the worth of the buildings, because right now, as we stand today on this decade, we're going to come up short about four and a half million homes over the course of this decade.

6:50We actually haven't built to the amount we needed per year since back in 2007, 2008. And although we need housing very badly, it's very hard to get it started. And with the rise in cost and now cost more to do so, harder to get labor, slower to come on board. So people wait. And as they wait, it makes the assets, the current apartment buildings, worth more because the replacement cost costs more to do that. Couple that with multifamily real estate. You have so many different avenues for which you can create value. Instead of potentially flipping a home or with a stock, you know, you'll hopefully buy low and sell high.

7:29With multifamily real estate, you have cash flow that comes from your tenants paying rent, which is now paying for your expenses, which is paying for your mortgage. And what's passed and left after that becomes cash flow. You have appreciation. Some we talked about just with the inflationary environment that can happen from just the market conditions itself. But the improvements we do to the building creates more value in the buildings. We're actually able to force the appreciation forward, specifically accelerated depreciation. depreciation. And what that allows is we're able to force forward the depreciation of the building that creates paper losses that can offset some of our other taxes that are coming from some of our other income coming from other areas.

8:09So it's a great way to basically offset your tax exposure. Then you have the diversity, right? You have the diversity where you can invest in multifamily real estate in any market, in different situations, in different types, different building sets, different building classes. And then you have your tenants paying down your debt over time. So that's really the thing that gets forgotten a lot is that as the tenants continue to pay the rent, they're slowly paying down your building. So it gives you so many opportunities to have value within this space that ultimately is limited on many different spaces because they're usually limited to one or two of those parts.

8:50John Lee Dumas:Diversity, passive income, tax benefits. I mean, Those are just a couple of the reasons that Jason just gave us for why there's a huge opportunity when it comes to doing what he's doing in the real estate game, Fire Nation. You have a phrase, the 100-mile mindset. What does that mean? Especially today in the day of social media is that we see the result, but we miss the action. We miss the action that's been taken and all the steps have been taken to get to that result. And so our thoughts about how quickly things should come or what should be in front of us gets eluded, right? Because we think, oh, man, I tried something and it didn't work.

9:28And I started running about a little over a decade ago. I've done dozens of marathons, a dozen of ultra-marathons. And what it came up to is I was doing my first 100-mile race. And I thought to myself, like, how am I going to prepare for this? Because the marathon, you know, you'll maybe go out and run some 20 or 22 mile runs before you do the marathon as part of your training package to training up to that. And it wasn't like I was going to go run a couple 80 mile runs, right, prior to this 100 mile hour. So I said, I'm going to get up and run every single day six miles, whether it's cold, hot, rainy, snow, my knee hurt, my ear hurt.

10:04I'm just going to continue to do it, right? And that is going to set the frame for what it is. Because what I found is when you get into these races, if you think about your life and your success and your goal, if you think about that goal, if you've never achieved it before, many times it's not the fear of failure that gets us, it's the fear of success because we can't understand that feeling. And so out of the gate, we stop ourselves from getting started. But ultimately, if you can think about, say you want to climb Mount Kilimanjaro or something, what's that first step we need to take, right?

10:33So when I started this race, I said, okay, let me just get out to the first training station. That's about five miles out. And then I'll just kind of see where I am and figure it out from there. And then let me run to that next aid station and the next drink station and the next point. And just, I'll just keep figuring out from there. And, you know, and each point that got difficult, I said, well, let me just see if I can just get to that next point and just see how I feel. And so, um, 25 miles, you know, 30 miles, then it might be, let me get to the bridge, right? Let me get another 500 steps.

11:02Can I just run another 200 steps? Maybe another, let me run another hundred steps. Can I just run to that tree? And you've just completed a hundred mile race. And for me, I did a hundred miles in five and two and one mile races. And that's a lot like success in business and entrepreneurship. We think about the goal as that point that, oh, I don't know how to get there. But if you just take that first step, you understand if that step's in the right direction or not by just getting yourself out of the gate. And most of our success is that we surround ourselves with good people and we also take action.

11:37And with action, it gives you better questions so you can get better results. Because every time I haven't been able to get to the results I want, it's because I haven't learned the questions that I need to ask to get me the results that I want to get.

11:48John Lee Dumas:Fire Nation, I love that old Indian proverb, how do you eat an elephant one bite at a time? And something else that really struck me to the core, I hope you heard it, Fire Nation, the fear of success, the fear of success. Everybody talks about the fear of failure. What about the fear of success? Because so few people have experienced it. They don't even know what that feeling is, and it just hits them in this crazy way. And I hope that that comment hit you, Fire Nation, because it's hard to hear, but it's so true for so many. We're going to be talking about funding, raising money without asking for it, producing massive income and niches when we get back from thanking our sponsors.

12:28John Lee Dumas:Fire Nation, ideas are exciting, but systems will allow you to create freedom. That is where High Level comes in. High Level allows you to build and run your entire business from one platform. Website builder and hosting, funnel and landing pages, email marketing, automation and workflows, calendar booking, payments and subscriptions, even course and membership hosting. Everything works together seamlessly. Plus, award-winning 24-7 support, so you are never stuck. And when you go through my link at highlevelfire.com, you unlock my full bonus stack, a 30-day free trial of High Level with full access, a private 50-minute coaching call with me, weekly live office hours with me, a digital copy of my book, The Common Path to Uncommon Success, my 50 Days to Something execution roadmap, and more.

13:13John Lee Dumas:Stop piecing tools together. Start building momentum. Visit highlevelfire.com and start building your something today. Fire Nation, are you ready to create something special in just 50 days? If you just thought yes, then check out my free YouTube series, 50 Days to Something. Every video is short, clear, and built to move you forward one intentional step at a time. Clarity, offer, validation systems, momentum. By day 50, you are not working on something. You have built something. Something to be proud of. And this is completely free on my YouTube channel right now. If you're done letting weeks just drift on by, visit eofire.com slash YouTube.

13:58John Lee Dumas:That's eofire.com slash YouTube and press play on day one. 50 days will pass in the blink of an eye. The only question is whether you'll still be thinking or finally building something special. Jason, we're back and let's be blunt. Attaining funding of any kind is tough. Asking for it can be even tougher. So let's talk about how to raise money without asking for it. Sure. And we talked about the benefits of multifamily investing, the opportunity to have cash flow, appreciation, and more profit, the debt pay down, the tax advantages, the depreciation. Well, we bring in past investors to this opportunity.

14:38What that allows is we do this through syndication. There's Reg D opportunities that the SEC allots for that we can go and raise capital, whether through accredited investors or through sophisticated investors, as long as we have a pre-existing relationship and certain type of offerings here. And we do this in a way that there's so many benefits for them. But just like we said that we didn't know that this was available because we thought it was only available to big companies, big REITs. Most investors don't know that this opportunity is something that's out there for them and also how it can benefit from them.

15:13And when you think about buying an apartment building, it can be staggering. And we did not want to put investors on the spot where you hear a lot that if you find a deal, you'll find the money. And sure, you might find the money, but you're also putting a lot of stress on your investors because you need to raise capital. And so you ultimately need their money. So before we brought that first 94 unit, we made a list of just all kinds of people in our network. And we went out and we created a mock, a sample deal, a one-page deal of what kind of apartment building we're looking for, the area we were looking for, how we were structuring it, how the returns would work for them.

15:52And we went out and started having conversations to ask them. And ultimately it was one, telling them about us. And so a lot of them had known us, but they knew us from different spaces, right? So I'd open, you know, restaurants and open bars, open soda breweries. So they, They knew me from other spaces, so they knew I would commit and take action. They did not know me from the commercial real estate world. So I had to talk to them about why we were so excited about this, like I explained earlier, and then how the process worked. And then next, how this could potentially be something that could be beneficial for them, depending on what they're looking for, if they create passive income or the tax vintages, right?

16:29And we would give them the option to take the time to understand this. Now, remember, we only had a mock deal, but it was a representation of what we wanted to find. And we would allow them the time to take this all in, to understand how it worked. And then we would ask them if this is something they would be interested in. And if they were, you know, and we would have a lot of conversations that they would, then say, would you be interested to invest$50 ,000,$25 ,000,$100 ,000? And this allowed two things. One, it gave them the time without having the real pressure of the deal to understand the process, understand the parameters of how this worked.

17:05And then from us, it gave us the certainty that when we did find that deal, that we had enough. Now, we didn't take anybody's money at the time, but we had enough commitments, soft commitments, that we felt good that we could raise capital to be able to go out there to buy that type of investment. So when we came upon that 94 unit, we had a raise of somewhere between about$700 ,000 and$800 ,000. And although we had already done the legwork for it, we went back to that same investor set and we raised that money in a day. It wasn't a day at that time. It was weeks and months prior of preparing investors.

17:42When we went back to them, they were already fulfilled in what we had provided. And so they knew of the opportunity. So I wasn't putting the stress on them to understand something that was foreign to them before. and then make a decision about investing. And doing that, continuing to do that in our process, we've now raised tens of millions of dollars at this point, all through that same process of giving investors the opportunity to see if it's right for them. Because it's not always going to be right for them, but ask what they're looking for in investments, understand our side of what we do, so they can ask good questions, have time to review, and we've been able to raise millions and millions of dollars doing this process.

18:20John Lee Dumas:That is quite the process, Fire Nation. I hope you were taking notes. But hey, the good news is hit that rewind button and you can listen to it again to make sure you fully understand the process that Jason just broke down for us. Now, producing massive income with, and this is an important caveat, an effective management team is the dream. How can Fire Nation attain this dream? You know, when you look at what you're doing, whether it's in your core business or if you do want to invest with others, you have to see, well, what's the business plan, right? Because we can have a great plan, but if we don't have the team to implement the plan, it's all for not.

18:55And what I love about apartment buildings is it actually comes back to our days running very big restaurants and bars in New York City, is that you can look at a business and see how it's not performing. And it might not be performing because they're not maximizing our revenue, not sourcing out other income drivers. Or on the expense side, maybe they have too much labor or their resources will be allocated correctly or their management practices are poor. So when we look at these buildings, we see how they're underperforming. And it could be on the building side where the building has a lot of deferred maintenance or could be on the management side, right, where they're not seeking the things I just spoke about.

19:31So we look for ways to capitalize on the building where we can create more value and the same front drive more revenue and reduce our expenses so we can increase our bottom line. And that ultimately creates more value for the building, but also creates better revenue, of course, and cash flow for our investors to create better returns. And we can do this in a lot of ways. You can capitalize on just catching where there's other income drivers that weren't being allocated before. Or maybe the market says that you should be tenants should be paying for utilities and the owner on the property is paying for utilities.

20:05Maybe there's different ways to capitalize on contracts for cable or contracts for laundry. You can add in more revenue drivers. Maybe you can charge income for a trash valet or for covered parking or for preferred parking. Or on the expense side, we once had even that first 94 unit, we changed out all the toilets. We controlled and took down any of the leaks on the building, really set up aerators for the showers and faucets. And it allowed us to reduce our water bill by 25 to 30 percent. And the reason that's a big deal is that that when it gets to the bottom line, the way that apartment buildings and commercial real estate is valued is based on a capital cap rate.

20:47And that actually created just by changing the toilet. So say it was twenty five, thirty thousand dollars. We actually created something like$350 ,000 of value on that building. Just became able to go on the scale of what we were doing to accomplish our mission.

21:02John Lee Dumas:Fire Nation, again, this is just an example of a master at work at what they're great at, which to me is a great segue to the last thing that I really want to talk about here today, which is the niches. I mean, Jason, you become a master of the niche that you chose, and you become a person that's created systems and tools and processes all around it. You're figuring things out because truly the riches are in the niches. So break it down for Fire Nation, our listeners, as to why a narrow focus will actually produce the most opportunities. You know, so many times, and this is a great question, is that we think that more and more opportunity gives us more opportunity to get what we want.

21:45However, if you have too much opportunity and you're not selective for what you want to look for. Sometimes people will come to the space, they'll try to focus on a lot of markets. And so maybe they'll focus on Miami, they'll focus on Boise, they'll focus on New Jersey, they'll focus on Kentucky, right? And they're so spread out that they start to have a lot of deal flow come to them, but they can't tell what's actually a good deal because they're not focused on what they're looking for. And then they'll have too much supply of opportunity that by the time they figure out what's actually right for them, the deal has already gotten to someone who was very selective.

22:19So when we first started out, we started in Louisville, Kentucky. We picked that market. We were specific on what we wanted. We wanted a 50 unit to 125 unit building built between 1970 and 2000, which is a BCS, basically a workforce housing property, a garden style property. We wanted in the South or the South Central sub markets because we knew that's where a lot of the properties were. So we were really focused on that area. But what that allowed is that not only it's like the reticular activator when you want to buy a car, right? You start seeing that car everywhere. So I want to buy a blue Chevy Tahoe and just lo and behold, they just start showing up everywhere.

22:55Well, when you're very focused, you start finding that opportunity because now you're really dialed in to do so. But on the other side of it, what helps is that if I was to come to a real estate broker and I was to say, hey, I want to buy an apartment building. Well, to them, that could be a two unit, that could be a 700 unit. It could be a new construction building. It could be a 1940 building. It could be a development project. They don't know what we're looking for. So they're going to send us everything. But on the other front, if I tell them exactly what I want, well, what happens? I start to receive those type of opportunities back.