96. How He Built a $10M Real Estate Business (while working full time)

0:00I'm Alex Freeman, and on the show today I have Andrew Freed, a current W2 employee turned multifamily investor. If you find somebody doing what you want to do at a large scale, go out of your way to try to help them in any way you possibly can to take stuff off of their plate. And if you do it enough, they're going to feel a need to help you. It's just a simple concept, reciprocity. If you put one hour into something every single day, in 10 years, you have 10 ,000 hours under your belt. You'll be considered an international expert. So why not amplify that? Everybody is born with strengths and weaknesses.

0:32Everybody is born with advantageous things in their lives and not advantageous things in their lives. You have to figure out where your strengths are, where you're advantageous, and utilize those strengths to enhance your business. The way people really get ahead in this life is they do more deals with more people that want to work with them, right? And more people want to work with you when you create win-win scenarios. All it took was a little over two years for Andrew to accumulate 95 rental units, and he credits it all to what he likes to call the purple pill. Andrew, welcome to the show. Thank you, Alex.

1:04I really appreciate the opportunity to educate your community on real estate investing. I love it. So let's start with your story. When did you start investing in rental properties? And why did you decide that that was the way you wanted to go? So like many, Alex, you know, during COVID, I had very much of an awakening where I read Rich Dad, Poor Dad. That's a purple book. That's where I refer to, you know, having the purple pill. But I read Rich Dad, Poor Dad, and that awakened my mind to the power of real estate and achieving financial independence. and the fact that I could achieve financial dependence in, you know, five, 10 years, as opposed to going the traditional route of, you know, saving for 40 years, having a 401k and retiring at 65.

1:41So, you know, when I read that book, that really opened my mind to the possibility of actually reaching financial dependence in my 30s, which I'm currently on that journey right now. And it's been a whole ton of fun. Did that entrepreneurial drive exist before you encountered the book or was that kind of awakened in you as you read Rich Dad Bordet? You know, that's a really good question. You know, I've always been an entrepreneur at heart. I mean, at the end of the day, when I was a child, my father left real early and I didn't really have much of a male role model. So I really had to rely on myself.

2:14And I really internalized that even from like from a sustainability standpoint or from a financial dependency. But I always want to rely on myself for my financial stability. And that was really ingrained in me when I was really young. That helped me kind of with the drive to go after my own dreams. and kind of not be scared of the repercussions. I mean, at the end of the day, I could always just go back to get a W-2 job and retire at 65 like everybody else. So it came in early for me at a very young age. I want to ask about that kind of like the fear of the repercussions aspect of it. You know, for a lot of people, it can be scary to actually like step out and take the plunge and putting your money into things that feel non-traditional and scary.

2:52How did you overcome that fear of failure? It was less overcoming the fear of failure for me and it was more overcoming the need to be a perfectionist. You know, growing up, I mean, especially in our school system, everybody gets in, you know, you either get an A, a B, a C, a D, you have a 4.0 GPA, you have a 3.0. We're all fighting for perfection. And we're taught that at a very young age. You can talk to any entrepreneur out there. To achieve success, there is absolutely no perfection. You just take action. You go, you course correct as you go, right? So once I got over that need to be a know-it-all and kind of just understood that, you know, there is going to be failure in life, in real estate, in journeys, and just accept that and use that as learning lessons.

3:32That really kind of brought me to the next level. And I was able to scale very quickly, essentially just being coachable, right? So that really helped me. That really helped me achieve a certain level of success. In the other W2 life, you're a project manager. So how has that helped you in the real estate business? That's a great question. I mean, project management, I really view it as task architecture, right? So what's great about project management, you take a large goal, right? And you break it down into small bites that are chewable, right? So in project management, I really use that expertise in scaling my business.

4:04Every single morning, I go over kind of my 10-year vision, my five-year vision, my one-year vision. And then in my one-year vision, my original goal was to get to 20 units this year. I'm already at about 80. But my original goal was like to get to 20 units, what do I have to do every single day to get that goal achieved, right? So what's that mean? That just means like, you know, underwriting five deals a day, putting two offers on a property a week, walking two properties a week, right? So just figuring out the overarching task and small, doable steps to get me to that task is really project management in a nutshell, in my opinion, just getting everybody on the same page, keeping everybody accountable and having everybody view the big picture.

4:42So that's kind of how I've used it in real estate investing and it's helped me tremendously. Now, the other part of your bio I want to ask about is being big into video games. how has your gamer past helped you in real estate investing? So gaming early on was, it was an escape. It was an escape from reality that I didn't want to live. And I wanted to create the reality that I did want to live in a box, right? So how video games helped me was it showed me that I can create the avatar when I can't create the skills I want if I put enough work into it. And when I read Rich Dad, Poor Dad, and I realized that, you know, why put all of my effort in this video game in creating this fake avatar when I can create the true avatar that I want in this real life and create the best version of myself every single day.

5:24And that's where video games really taught me is when you have to put enough skill, enough effort, enough drive into anything, you can create any avatar, any skill that you want and be successful in this world. Now, how did you go about changing those habits? Because that can be quite the insurmountable challenge for a lot of people. I would say the way I went about changing those habits is really focusing on positivity, focusing on gratitude, practicing gratitude every single day, focusing on time management, right? So I don't know if you ever read Stephen Covey's Seven Habits of Highly Effective People.

5:56Great book. Yeah, amazing book. It's not only a good book on how to be effective, it's a really good book on how to live your life in a really good manner, in my opinion. But on that book, he has a time matrix, right? And on that time matrix, it's separated into four quadrants, urgent and important, not urgent and important, not important, urgent, and not important and not urgent. So when I realized kind of how I was using my time, which a majority of my time was spent in not urgent, non-important tasks, aka video games, movies, I really focused on how can I spend my time to get my time in the important and the urgent categories and the not urgent and the important categories.

6:34And the entire goal is to eventually work on creating systems that make those urgent and important tasks move into the non-urgent and non-important tasks. by hiring people, by creating systems, by automating things, right? So once I realized where I was spending my time in inefficient ways, that really opened my eyes to how I can use my time in more efficient ways. Listeners, make sure you check out upflip.com for more actionable advice from real world entrepreneurs and business experts that can help you start and grow a business in any industry. Now, Andrew, with that in mind, I'd love to kind of hear about your daily routine and habits.

7:08What are kind of some of those specific things that you make sure that you do every day and why are those valuable? The thing about being successful in business, it's not about the actual business. It's about how you develop yourself every single day. So every single morning, I wake up around 5 a.m. and I spend the first three to four hours all on personal development. So I utilize the Miracle Morning. I don't know if your audience are familiar with that, but it's a morning ritual that incorporated this acronym called Sabers, which is silence for meditation, A for affirmation, B for visualization, E for exercise, R for reading, S for scribing, right?

7:44So I do that every single morning and I actually go to nature. I go into a park, I meditate, I ruminate about kind of my goals, where I wanna be. And then by nine, I am ready to go. I educate myself from a reading perspective. I exercise my body's in great shape. I meditate it so I'm good from an emotional standpoint. I scribe or I journal so I write about my goals and how I'm gonna get to my goals and what I'm gonna do that day to get to my one-year goal. five-year goal, 10-year goal. And when I do that, I feel like my path is clear as day. And when I miss that, I feel like I'm wandering aimlessly in a desert, like fires happening left and right.

8:19So to be successful in business, in my opinion, it all starts with the morning and all starts aligning yourself as early as possible with self-development and focusing on yourself first before you focus on your business. And how important is getting the mindset right for an entrepreneur? It's incredibly important. It's incredibly important. I mean, you know, I think they say all the time money doesn't buy happiness. I mean, you can see that for yourself. Somebody who's uber successful has hundreds of millions of dollars and they keep chasing more and more and more money and they're never fulfilled, right?

8:48So it's really important to have a good mindset so you can actually enjoy the journey along the way. Because I mean, at the end of the day, it's like, you know, whenever you say, for example, you watch an adventure movie, it's never the end goal. That's the exciting part. It's always the adventure and the journey along the way, right? So that's why mindset's incredibly important because you have to value and appreciate the journey and love the journey along the way, or it's just going to be a grind and you're eventually going to burn out. I could spend all day in this mindset conversation, but I want to get to some kind of nuts and bolts stuff for our listeners about real estate investing here.

9:18I want to take you back to before you got into your first property, what kind of research and learning did you do before you actually started investing your money? So I poured into education as much as possible. So I made it the point to read 10 to 15 pages a day on real estate investing topics. I made sure to listen to a real estate podcast every single day, attend meetups, underwrite properties, and essentially do those daily routines. I mean, more or less, I poured into education for a good three, four months, five months, and put a good three, four, five hours into education every single day.

9:53And surprisingly, most people aren't willing to do that. Most people aren't willing to put three, four, five hours into something every single day. I mean, if you put one hour into something every single day in 10 years, you have 10 ,000 hours under your belt. You'll be considered an international expert. So why not amplify that, that ability to learn? If you do three, four, five hours of learning in a single day, you can become an international expert in two to three years, right? So I really went hard at that. And I went completely dove into self-education and anything that did not get me towards my goals was eliminated.

10:24That could be, you know, friends that didn't get me towards my goals. That could be relationships. That could be, you know, time commitments or job commitments. Whatever didn't get me to my goal, eliminated. So that's kind of how I got started. And probably a good three, four, five months after putting that amount of education. And I probably knew more than about 80 to 90 % of real estate investors. So just serious self-education got me there. As you've done that self-education, then you get to actually making that first purchase. Where did you find that first property? and where would you recommend that first-time investors look for a property to invest in?

10:58Just like many people here, I got started in what's referred to as house hacking, where you move into a multifamily, a two to four unit property with a low down payment at three to 5 % down, sometimes as little as 0 % down. And what's great about that is you can get into, if you do that, you can house hack a property every single year. So I got into six units with those little as$50 ,000 because I house hacked two properties back to back. So house hacking is a fantastic way to get started for new investors. And I highly recommend that. So I actually ran into this dilemma myself. I own a condo in Boston.

11:30I have a six figure job in Boston, swanky little condo. I was looking for a multi in Boston, right? However, supply is so sparse in Boston. The amount of multis in Boston is sparse compared to other markets. So what I recommend for other investors who are looking to do multifamily, and that's exactly what I did, was I specifically targeted markets with a lot of multi. Worcester, Massachusetts, specifically the market I invest in, I own about 29 units in Worcester, that has the highest concentration of multis at any city in all of Massachusetts. 30 to 40 % of the housing stock are multifamily properties.

12:04So my advice to new investors would be, first of all, house hack. You can get into a three, four unit property, a five,$600 ,000 property with as little as three to 5 % down. Additionally, choose a market where there's a lot of supply. These assets are in high demand, right? So if you can get into a market with a lot of supply of these multis, that's going to increase the likelihood of you finding them, right? So in my example, I put offers in in Boston. I put probably 30 offers in Boston. I never want a property because, you know, it was just, there wasn't enough supply. Went out to Worcester, got a property probably like six or seven off, just because there was just an immense amount of supply in Worcester.

12:40And what kind of information should somebody be gathering about a property before they buy it? And any sources of that information that you might recommend somebody checks out? There's a plethora of information you should be finding out while you have a property under contract. Obviously, always get an inspection, especially if you're a new investor. I mean, you can make your inspection informational only, meaning you're not going to ask for cost reductions, but you still have the ability to walk away. So incredibly important, always have an inspection clause. My second piece of information, which is really important, is put a public record request in with the city or the town on that particular property and ask about the inspection information, ask about housing violations, ask about any outstanding issues.

13:20You can put public record requests in the properties and find out all the history of the property. Then you can find out maybe there's a rough tenant base. Maybe they didn't file permits to put another unit in. Maybe this is a legal three when you're buying a four, right? Like you probably want to know that. So it's really important to communicate and touch base with the city, specifically inspection department to ensure you're getting what you are getting. And the other thing is if in a multifamily, your success is largely dependent on your tenant base. So it's really important to do due diligence on those tenants, find out who they are, get their leases, make sure they're paid up to date, you know, make sure that these people don't have any evictions on their record, are upstanding citizens, would be good renters, right?

13:59Because if they aren't, especially in my state, which is a tenant friendly state, evictions can cost as much as five to$10 ,000, right? I mean, it's okay to accepted eviction, but you have to budget that in your numbers, right? So, I mean, those are just a few I can probably go on for a very long time on this topic, but I'll just leave it at that. I love it. That was all really useful information to have. And I'm curious if you made any mistakes during that first deal that maybe you learned from and you could share that experience with our listeners. So my first deal was a three family in Worcester, Massachusetts.

14:29I bought for$560 ,000 and comps around that area for similar properties were$500 ,000. So I completely overpaid$60 ,000 for this property. So that was number one mistake, right? Thankfully, this was during COVID. Interest rates were really low. Two of the units rented for$3 ,200 total between both of them and my mortgage was$3 ,200. So from that standpoint, it made sense. But from a comp standpoint, I definitely overpaid for the property. However, thanks to COVID, thanks to rising rents, the property is probably appreciated to about$700 ,000 right now. But that was probably the biggest mistake was overpaying.

15:03But what I will say is when your house hack, when you're utilizing these low down payment owner occupied loans, sometimes price is all you have, right? So I get it. I probably shouldn't have paid that much for it. In the end, I'm happy I got the asset. In the end, I'm happy I moved forward with it, but I probably overpaid for that property. On that property, how did you finance that first real estate investment? This is actually how I got started in real estate. You know, when I reached that poor dad and I looked at my Mint app and that's how I actually track my net worth, I realized like, oh crap, 80 % of my net worth is deriving from this real estate thing.

15:35Maybe there's something to this, right? I had a one bedroom condo in Boston at that time. And at that point, I decided to take out a 200K line of credit, a HELOC on my property and use that as a battle chest to buy property, right? So I actually, for my first house hack, I moved from my condo to my three family in Worcester and I took about$40 ,000 out of that 200K line of credit and use that to buy the property. So essentially, I didn't pay any money. I mean, it was bank money. I borrowed bank money to buy another property. So that's kind of how I funded my first project. And any other advice you might want to offer for somebody who's looking to finance their first real estate investment, perhaps if maybe the HELOC option doesn't exist for them, where might they turn?

16:12Many people think they don't have money when they actually do. And what do I mean by that? So a ton of people have 401ks. You can actually borrow against your 401k alone to buy property, right? Or maybe your parents would be willing to offer you a loan. Give them a decent interest rate. You know, it is what it is, but you got to look at resources outside of what you normally think are available, right? So everybody is born with strengths and weaknesses. Everybody is born with advantageous things in their lives and not advantageous things in their lives. And you have to figure out where your strengths are, where you're advantageous, and utilize those strengths to enhance your business, right?

16:46So that would probably be my biggest tip is I utilize 401ks to buy real estate. I utilize lines of credit to buy real estate. I've utilized stock. I've utilized other people's money. So there's an array of possibilities to buy real estate outside just having cash in your bank. So this is going to bring us to a section of the show that we call our Fan Blitz questions. These questions come from our YouTube community. Listeners, you can join that YouTube community by going to youtube.com slash upflip and you can pose questions to future podcast guests. Andrew, I've got five questions here. We're going to do of about a minute.

17:17Are you ready? Let's do it. Right. First one up. Here we go. If something happens to you, what happens to the business? I'll be honest with you. I'll probably just give it to my family, you know, and let them achieve a certain level of financial independence and let them live the life that they truly want. They love travel. They love experience. I would love to pass on that benefit to them if I ever passed away. And I mean, at the end of the day, if I passed away, completely cool. I lived a happy life. I've done everything I wanted. I have no regrets. So please don't mourn for me. If there was a movie made about your journey, what would the title be?

17:45Create the Avatar of Tomorrow. Ooh, seeing that movie opening day. Can you tell us about your most bizarre business encounter? My most bizarre business encounter was when I probably hired one of my tenants to, he was a plumber, to fix another tenant's clubbing. And they were told not to go to the bathroom and they ended up doing it. And one of my tenants ended up going to the bathroom on another tenant. And that was not a fun experience. So yeah, that was my most bizarre What negative thing would your last boss say about you? I think I alluded to this, but I think they'd probably say that in the past, and I completely admit this, that I was a know-it-all.

18:21Completely know-it-all, completely unculturable. I thought I knew the answer before they spoke, right? And I've learned in business and in life, you have to be a constant learner. There's too much knowledge in this world. There's too many mentors. There's too much out there to think you know everything because you absolutely do not. What's the secret of business that makes me a billionaire? Every decision you make, think of it with a 100-year time horizon. Win-lose scenarios work in the short term, but they never work in the long term. I mean, the way people really get ahead in this life is they do more deals with more people that want to work with them, right?

18:52And more people want to work with you when you create win-win scenarios. So sometimes it's better to lose in the short term so you win in the long term. That's going to do it for the Fan Blitz questions. Listeners, you can find more advice for how to start a business the right way on the UpFlip hub at upflip.com slash learn. Andrew, I want to ask about investment partners. What are the pros and cons of investing with a partner? So the great thing about partners is it allows you to scale very easily. Like if I want to go after a six, 10, 12, 15 plex, right? I can cobble together four or five, six people's money, buy that asset together.

19:27And the great thing about that is when you're buying those larger assets, it's actually more profitable. They're cheaper per unit as opposed to residential properties, one through four unit properties tend to be more per unit. So it allows you to scale quicker. It also allows you to designate responsibilities based off strengths and weaknesses. Like I have certain strengths as a project manager and I have certain weaknesses, like I'm not the greatest salesperson. So it allows me to sub out the things that I don't like to do and take on the things that I'm superhuman at, right? So that's really, really key for partners.

19:59And lastly, lowers risk due to liability being spread among many people, right? So say, for example, you're in a 10plex and a$20 ,000 charge comes up and you have three partners. That's split three ways as opposed to one way. It lowers the risk and the liability across you. So when it comes to con, less control. You know, usually if you have a big decision, you have to run up by all of your partners, right? You're reliant on your partners to do jobs effectively. As I mentioned earlier, you know, it's really good to get people who complement your weaknesses so you can focus on your strengths and they can focus on their strengths.

20:31But sometimes they're unreliable. and they don't do their job and you got to pick up the slack for them, right? So that's a con. And then the last con would be the slow decision-making process. What are some of those kind of red flags that you look for when you're assessing whether or not you should get into a relationship with a potential business partner? Does your actions equal your words? When you say you're going to do something, do you actually do it? At least do you do it 80, 90, 100 % of the time, right? So as a partner, it's incredibly important to designate responsibilities to other people and let them stay in their lane, right?

21:07But if somebody's not doing their job in their lane, you gotta pick up the slack, right? It's really important upfront to see, do they do what they say they're gonna do? If they tell you they're gonna send you a vendor, if they tell you they're gonna take care of that contract, if they tell you they're gonna underwrite that deal, do they do it without having you to follow up or not? If you have to follow up multiple times, I guarantee you're gonna get frustrated with that partnership really quickly and it's gonna cause a lot of tension as opposed to the alternative, where if they do everything on time, you know, in a good manner, the partnership's got to feel light.

21:36So that'd be my biggest takeaway when it comes to finding good partners. And when you do kind of form that partnership, what kind of legal framework do you need to put into place? Is it like a partnership contract? What should be in that? Can you help us understand that? Absolutely. So normally when you purchase real estate, you create an LLC for that specific property. And within that LLC, you're required to have an operating agreement. So in that operating agreement, that's where you designate roles and responsibilities. That's where you designate if somebody dies, what's going to happen to that person's equity?

22:05Like that's who does it. All the things that are going to happen at the end of the day, just like a marriage, a partnership is a marriage. And it's incredibly important to maintain good relationships and to keep building that relationship as you go on, because the only time you're really going to reference that operating agreement is when you're going through a dispute, right? If me and you are in agreement on something, we're not going to go to an operating agreement to determine if something is going to happen a certain way, right? So keeping good relationships with partners is probably the utmost importance, in my opinion.