Bruce started his career as a stock broker. Around 1991 the market changed some and he was not able to make a lot of money in his career anymore. After an 18 year stint in the retail industry, Bruce started educating himself in real estate. His very first deal was a 48 unit syndication in Austin, Texas. Now he only looks at 200+ units and shares his experiences on podcasts for people to learn from. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Bruce Petersen Real Estate Background:
– Owner of Bluebonnet Asset Manager
– Serial syndicator of large multi-family properties ranging in size from 120-292 units.
–Awarded the Austin Apartment Association Independent Rental Owner of the Year for 2016
-Awarded the National Apartment Association’s Independent Rental of the Year for 2017
-Say hi to him at www.apt-guy.com
-Based in Austin, Texas
-Best Ever Book: Rich Dad, Poor Dad
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TRANSCRIPTION
Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.
With us today, Bruce Petersen. How are you doing, Bruce?
Bruce Petersen: Good, man. How are you?
Joe Fairless: I’m doing well, and nice to have you on the show. A little bit about Bruce – he is the owner of Bluebonnet Asset Manager. He is a serial syndicator of large multifamily properties ranging in size of 122-292 units. He was awarded the Austin Apartment Association Independent Rental Owner of the Year in 2016, and the National Apartment Association’s Independent Rental Owner of the Year. Congrats on those two awards! You can say hi to him at his website, which is in the show notes page. Based in Austin, Texas… With that being said, Bruce, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Bruce Petersen: Sure. My background – I’ve started my work career as a stockbroker, believe it or not, in the early ’90s. I was the guy that went to college because he was supposed to go to college; he should have not gone to college. I was going for a finance degree, and I wasn’t the best student in the world. I applied for a job, and I got a job as a stockbroker, so I’ve decided to quit school and never went back.
That lasted for a little while, until the market kind of changed on me in ’91. I wasn’t saving any money, so I was going hungry as a full-commission stockbroker. I did that for a little while, and I had to get out of that because I was not eating. I fell into retail, actually, which was not exactly fun, but I did it for 18 years, finally hit a wall in the end of 2007… I decided I couldn’t keep doing the 90 to 110-hour weeks, I walked away from that, and started doing —
Joe Fairless: What retail were you doing?
Bruce Petersen: It was big box store retail. I ran stores from Best Buy, Bed, Bath & Beyond, [unintelligible [00:03:53].17] I did that for a long time. Like I said, I basically drilled myself into the ground. I guess you’d call me somewhat retired at 43. I was a Dave Ramsey guy that lived way below my means and invested my money wisely, so at 43 I was able to walk away from the retail gig and started educating myself on real estate… Because you always hear about real estate, but I didn’t know anything about it.
So I educated myself, got rolling in 2012, bought my first property as a syndicator, a 48-unit property in North Austin, sold it two years and four months later for about a 300% profit, and it’s just been the best thing I’ve ever done. We’re up to — currently, we own 860 units spread over four properties as syndicators, and we are a partner in a 250-unit here in Texas also.
Joe Fairless: The 43-unit, the first one that you did in 2012, why did you syndicate it versus doing a joint venture partnership?
Bruce Petersen: Because as a syndicator, the way I structure my deals, the people that invested with me, they still had a life; they had a family, they had a job to go to… They didn’t want any part of operations, they didn’t want any role in the company at all, so they were willing to be silent investors or basically limited partners. It just made for an easier deal for them, an easier deal for me… I was the sole operating partner, so I could move quickly and do the things that I needed to do without having to consult with anybody else.
Joe Fairless: What is the threshold for when you do a syndication versus a partnership or neither, because it wouldn’t be worth your time?
Bruce Petersen: The only thing I ever do is syndication, so I can’t really speak to the other stuff. Now, the one thing that I would do is just be an independent owner without a syndication behind me, but [unintelligible [00:05:42].27] on joint ventures because typically joint ventures are partnerships; there’s equal say at the table, it’s hard to make moves a lot of times, you get things locked up… I’ve seen friends around me do it, and it can work and it can work very well, but it also has the tendency to get kind of bogged down because you can’t come to a consensus. So the syndication is all we will ever do, unless we go out and start buying our own stuff at some point.
Joe Fairless: Let me rephrase the question – what is the lowest threshold, whether it’s unit size or price point or whatever, that you would do a syndication, versus you wouldn’t do the deal?
Bruce Petersen: I gotcha. Really, I would syndicate anything. Where we are now though, we’re not looking to do anything below 200 units. But again, my first deal was a 48-unit. I’ve got friends that get started in the business with a 12 to an 18-unit property and they’ll syndicate that just to get a ball rolling, because once they get some experience, they can start getting into a little bigger and better loans, some non-recourse debt… So a lot of people will actually syndicate their very first deal on very small stuff, but again, for myself, we’re only looking at 200 units and above now.
Joe Fairless: I’m surprised on the 12-unit, because there’s legal costs involved in putting together a private placement memorandum and all of that, so I would think unless it’s a high price point per unit, I would think that the cost would be prohibitive to do a syndication on a 12-unit, but clearly they’re finding a solution for that. Do you know how they’re able to find a solution for that?
Bruce Petersen: First of all, the guy that I use – and it’s the person that I’ve turned them on to for attorneys – we can get a PPM, a full offering placket together for about $8,000, which is still not cheap when you’re talking about a 10-15 unit property. What they typically find is that’s just their starter property, just like mine. It’s not gonna come close to paying their bills, but as long as that legal fee and all the structural costs don’t hurt the deal so much to where they can’t return an 8% to 10% cash-on-cash to their investors – again it’s a stepping stone.
It’s a good way too to build a loyal following. You bring people in on a 12-unit, you prove yourself to them on that 12-unit, they’re more likely to start following you into the 50, and the 100, and the 150-unit properties. So again, it’s a small step toward that snowball.
Joe Fairless: What has been a challenge since 2012 to today with a particular property, and how did you overcome it?
Bruce Petersen: A challenge… We did have a property that we own – a 250+ unit property in San Antonio. We bought it last August, so right now we’ve had it for about 15-16 months… But we’ve bought it in August of ’16, so what happened in August, September, October and November of ’16 was a very, very ugly presidential race. Everybody I talked to, usually election cycle years things get a little squirrely; people start moving around or stop moving around, sales aren’t as often and as plentiful, you don’t have as many people looking for apartments, because everybody’s trying to figure out what’s happening in the political environment. Then with the people we had running this past cycle, on both sides, it tended to freak a lot of people out.
We saw a drop in occupancy throughout the state of Texas. Austin was fairly well spared, but San Antonio, Houston, Corpus Christi – a lot of the Texas markets saw a really marked drop in occupancy… So it kind of threw us all for a little bit of a loop.
Joe Fairless: Where were they going?
Bruce Petersen: That’s the thing, I can’t find anybody that could tell me where they all — I mean, how did they all just stop going anywhere? Because in my neighborhood, for this property, we were the highest occupied property in the neighborhood, and we were still barely cranking 90%. Most of our submarket was well into the 80%. So I don’t know what happened… I’ve talked to all the brilliant people that I can find around me, nobody really can kind of figure out what exactly caused it, other than the election cycle. But again, it’s not like they all left the country.
Since that, we just kept our nose to the grindstone, we doubled down on our marketing efforts, which to me is key. Don’t freak out in the face of adversity. You have to push through that adversity. I think the natural thought for people would be “Oh, we’re not as occupied as we were. Our cashflow is not what it was, our income is not what it was, so we’ve gotta pull back on marketing.” No! That’s exactly opposite! So we started throwing more and more parties at the property, we were hitting up social media like crazy, using the internet listing services like TheApartmentGuide.com, all that… So we doubled and tripled down and we made it through. Right now, in the fourth quarter of this year, we’re comfortably above 97% and doing really well.
Joe Fairless: When you are in the middle of that challenging time — I guess first off, for some context, are you self-managing? Do you have your own management company, or do you have a third-party?
Bruce Petersen: We self-manage.
Joe Fairless: Okay, you self-manage… What is your approach with the staff? Do you just simply say “Hey, double down on each of these things”, or is there a different conversation that takes place with the staff on site?
Bruce Petersen: With the staff I actually wear the hat of regional manager in our company. We haven’t brought in a regional yet, we probably will on the next property or two… Basically, I’m the one data mining; I’m the one looking at all of my lead sources, where I’m getting traction, and we start doubling down on that up in our marketing spend with the channels that are working properly. And just making sure the staff completely understand their role, how to sell the product. Because what I tell every one of them from the day we take over a new project, ‘My job as your boss, as your regional is to give you a great asset to sell, but now I need you as trained as you are to go out and sell that asset.”
Basically, again, I’m just data-mining P&L, looking at leads, where we’re getting traffic, and just exploring those, working on some move-in gifts… A lot of my neighborhood, they were giving away first month’s free and a 50-inch TV. Like, what?! We never did that. We’ve got a big enough social media presence, really high reviews. We really cultivate that stuff, so we fortunately did not have to do any of that crazy stuff.
Joe Fairless: What are some ways that you cultivate your social media presence so you get the traction and the gold, which is the reviews?
Bruce Petersen: Right. The main thing we use is Facebook. We don’t do a lot of Snapchat or Instagram… I’m a 50-year-old guy, I really don’t understand those two; I need to bring somebody into my ecosystem that does. But we use Facebook a lot, and what we’ll do is we will say — well, first of all, basic stuff. We do a toy drive every December for our properties. We do a food drive every November for every one of our properties. And what we’ll typically do is say “Look, if you will bring in an item, we will enter you into a drawing… If you bring in the item and you like our page.” Or we’ve also done — this is a goofy thing, but it really works… We bought a little garden gnome, we gave the garden gnome a name, and we told the residents “Go find the little garden gnome. If you find the little garden gnome tomorrow, take a selfie with it in the picture, post it to your timeline and mention us or like us or tag us, and we’ll enter you into a drawing.”
So we do all kinds of fun stuff like that. It gets them engaged, they’re having fun, they’re getting some gifts cards (sometimes it will be a turkey dinner for Thanksgiving), and it helps spread the word and that helps us with our social media stuff. I believe right now our Facebook review is either a 4.8 or a 4.9, so it really works well.
Joe Fairless: Yeah, that does work well. Very creative, and it gets that organic word of mouth going. When you applied for the Apartment Association award and then you ultimately won it, what were some of the bullet points that you think put you over the top that differentiated you from the other applicants?
Bruce Petersen: What we do on everything we do, it’s all based on community. This is not just a business; we are providing people’s homes for them. Our goal is to provide community; create a place that they want to live, they know their neighbors, they like their neighbors, so we’re always looking for ways to give back… And what really was the tipping point on this year – one of our properties in North Austin, a 120-unit property – very working class neighborhood; we have an elementary school on both sides of us in this property… What we did is we reached out to all the local elementaries and middle schools and said “By grade, I want a list of your school supplies data for this year.”
So we went to Walmart, we went to Amazon, we went to Target, we bought all the school supplies for every child – 83 of them on our property. We bought backpacks for them, we had an event day where we set up in a vacant unit and we ordered pizzas for the residents that came through. So they would stand at the door, they’d be let in one or two at a time; first up, they’d go get a piece of pizza from my daughter; my daughter is in the kitchen, passing up pizza. They go over to a table with my wife and the manager of the property, and they stop there, they get their little backpack, they get to choose boy or girl, choose which one they want, then they leave that spot and they go into one of the bedrooms where my autistic 21-year-old daughter is in that room, and she’s asking what grade they’re in and she hands them their packet. They get to put it in their backpack, and they run out with a pizza in their hand, with the biggest smile you’ve ever seen on their face, because now they don’t have to go to school and be embarrassed or be behind because they don’t have what they needed, because their parents couldn’t afford $20 to provide that. We were told directly that was probably the biggest part that got us that award.
Joe Fairless: That’s incredible. How does that idea come about?
Bruce Petersen: We believe firmly in work ON, not IN our business, so we’re above the [unintelligible [00:16:10].14] We’re able to sit there and brainstorm these great ideas. We have quarterly manager meetings and we’re always looking for ideas. I don’t have the best ideas in the world, my wife doesn’t either, so we’re always tasking our staff to help us plan the next big event, the next big outreach thing that we’re going to do.
Now, that one was actually the brainchild of mine and my wife. We just decided “What can we do to help them?” because the better life we help create for our residents, the less likely they are to move, and of course, the less likely they are to move, the more profitable we get. So it was just a brainstorming session one day.
Joe Fairless: Is that gonna be an annual thing now, or you —
Bruce Petersen: Absolutely. Yeah, we did it in 2016, we also did it in 2017 now, so we will do it going forward. Now, not every property lends itself to that; this is very working class, and it was a very big need, and the residents asked the second year “Are you gonna do it again? Are you gonna do it again?”
On some of our B, B+ assets, a little higher end properties, we don’t do that kind of stuff. We just figure out better ways to have big parties with DJs, and food trucks… So each property is its own individual animal, and we treat them that way.
Joe Fairless: What is a challenge that you came across whenever you’re executing a plan like that?
Bruce Petersen: The biggest challenge is logistics… Trying to figure how to get enough supplies for each place that we have to hit; we have to go to three, four, five different Walmarts and just rip everything up that they have off the shelf. That’s logistically tough. But other than that, for the most part we empower our on-site staff to help with a lot of it, and we get the kids involved. Our kids love being involved; they’re invested in the deals, but our 18-year-old daughter actually works for our management company, and she helps accommodate a lot of that stuff; she helps us with the books… So it’s a group effort.
Joe Fairless: From the in-house property management company’s standpoint, what are some things you recommend to a multifamily owner who’s scaling his/her business and they do want to have their in-house property management company? What are some things you’d recommend to them?
Bruce Petersen: Well, the biggest thing — I’ve heard a lot of people say “Well, you can’t really do a management company. It doesn’t make financial sense until you get up to 300-400 units, so I really can’t get there to get the management company–” Look, grow it organically. If you wanna do this, you have to be willing to wear a lot of hats yourself. I didn’t start a management company with a regional in place, with an accountant in place, with an ops director in place… We didn’t have all that. We were all of those roles until we did finally get to scale; now we have an ops director, now we have a bookkeeper, now we have a personal assistant. We have all these people to help take a lot of the load off of our shoulders, but until we got to the scale where it supported that payroll, I was the regional. My wife is a CPA, so granted, we’re a little luckier there than most, but she was the bookkeeper, she was the accountant, she did the tax returns — well, she did it on the first one, then we pulled it away from her and gave it to an outside company… But I would say get in there, do the job yourself until you can afford to hire. Because we’ve been profitable with our property management company from the very first day, because we were doing all the roles.
Joe Fairless: Why apartments and not storage units, mobile homes, retail etc?
Bruce Petersen: Well, I looked around and I was trying to figure out what did I really wanna learn? So I first started thinking about single-family homes, and I realized “No, that’s way too much work. I’ve got the money, I’ve got the time… Let me go after some apartment complexes instead.” And the reason that instead of a trailer park and a storage unit or a strip center, I saw this, especially for somebody never having done this before – everybody needs a place to live. If I go out and buy a strip center and we have another market correction, we have another hiccup in the economy, some of the smaller tenants in a strip center – I imagine; I’ve never been in that space, but this was my thought process – they might go out of business. If they go out of business, now I’ve got a lot of vacancies I’ve gotta deal with.
The last thing somebody’s going to give up before they’re living under a bridge is the place they live, so to me it was just the safest, most rational thing I could find to put my money into… And so far, it has been by far the best thing I’ve ever done.
Joe Fairless: From a building your business standpoint, what’s been a challenge? We’ve talked about a challenge earlier on a particular deal, but just from building your business, what’s been a challenge?
Bruce Petersen: The biggest challenge really is just trying to juggle it all, because I’m not gonna lie, it’s not easy, especially when we wear all the hats. My wife, like I said, is the accountant, the controller; I’m the regional manager, I’m the acquisitions guy, I am the rehab guy… So I do every step of everything in-house. Most people I think in this industry, it seems, they will have like a 3-5 person general partner (GP) group that goes out, and everybody has their specialization and it works fantastically well. We go about it a little different. We raise all of our own money, we do all of our own marketing, I’m the face of the company… So everything’s in-house; it makes us more profitable.
Now, I might not be able to grow as fast as some of these other people, but you know what, we’ve still got four properties and 860 units in two years, so it’s working really well for us. But the biggest thing is trying to juggle everything at once; you’re trying to close on a property while still running a rehab on this property… Well, that property over there lost two staff members for whatever reason; well, now I’ve gotta go over there and help them interview and let’s get some people restaffed. So it’s just keeping all the plates in the air. It’s very doable, but it’s a challenge.
Joe Fairless: What type of system do you have that makes it doable, versus all the plates coming crashing down?
Bruce Petersen: [laughs] Well, again, the biggest thing I can point to is just I’m really good at delegation, putting smarter people than me around me… By that, I mean at the beginning when it was just us, I’ve gotta make the right hire on the property. A lot of people have heard this, but it’s so true; hire slow, fire fast. That sounds cruel (fire), but if somebody’s not working out, you’ve gotta understand quickly, and you have to move.
My job would have been miserable and just about impossible if I had really sub-par staff. We take a long time to make sure the right person is in that position, then we give them everything they need to do that job… But for whatever reason, some people are just not a good fit, and we have to separate quickly and then start looking for that next person.
Joe Fairless: You said earlier that when you speak to your staff, you tell them that your job – you meaning you – is to get a great asset for them to sell, and then their job is to then go sell it. What are some effective ways that you either tell them about how to sell it to potential residents, or that they’ve come up with for how to sell it to potential residents?
Bruce Petersen: Everybody’s got basically the same process. You have your little tour, you walk them by the gym if you have one, you walk them by the clubhouse, and the model, and all that stuff… But it’s about the mentality. Sales is all about belief, it’s about a mentality and it’s positivity. You have to know that what you have is the best thing in this market, and that’s my job – to try my best to position this as the best asset in the entire market. So now they have to go about this with confidence. I talk to them all the time about this, because in this industry – like every industry – costs go up, so prices have to go up. Rents have to go up every year, they have to, because my taxes go up every year, so I have to work with them to know that “Look, this year we’re gonna be bumping rents on average, say, 3%, 4%.” That might be a $30-$50 rent bump, and instinctively they go “Oh, ugh… I don’t wanna have that conversation…” Look, you have to understand that this is the best product in the neighborhood; you have to understand also that you absolutely are the best staff in this neighborhood, and they get you when they move in here. You have to sell that, but don’t go “You know, the rent – it’s $1,100 for this two-bedroom…” – no. Say, “You know what? You get all this stuff, and it’s only $1,100.” It’s all a mentality.
Joe Fairless: I appreciate you talking about that. That’s helpful. What is your best real estate investing advice ever?
Bruce Petersen: That I give or that somebody gave me?
Joe Fairless: Either one.
Bruce Petersen: That somebody gave me was “Don’t go into single-family.” It’s not that it’s a waste of time. You can make money in single-family. You can have a decent life in single-family, but thank goodness, at the beginning of my educational journey, I listened to somebody that said “Look, don’t tie yourself up with single-family.” Three and a half years ago I married into a duplex that my wife had when she came into the marriage. That duplex took more of my freakin’ time to run than my 120-unit property in the same city. So that was the best thing that I got – to have somebody tell me not to go the single-family route if I didn’t have to. It’s a good route if that’s the way you need to go, but it wasn’t for me.
And then the best advice that I give is basically you’ve gotta get out of your own head, get out of your own way, but you have to be self-aware as well. A lot of people that I come into contact with, they wanna do what I do. I have a lot of fun doing what I’m doing; it’s pretty lucrative, I’m not gonna lie, and it’s very rewarding… So they tell me, “Man, I wanna do what you do.” Okay, that’s fine. It’s a blast, but it’s a lot of work. You’d better make sure that you have the stomach and the intestinal fortitude to get bloodied in the mouth, take a punch in the mouth and keep going, because it’s gonna happen no matter how good you are, how perfect you think you are, your systems, your processes – something’s gonna happen. You’re gonna have a death on your property, you’re gonna have a fire, you’re gonna have a Hurricane Harvey hit you. Can you deal with that? Can you mentally be okay with that, pick yourself up and keep going? If you can’t, you probably just need to find somebody to invest with.
Joe Fairless: What’s an example of where you metaphorically got bloodied in the mouth on something?
Bruce Petersen: I’ve got two big ones that I like to talk to people about. It was probably about 3-6 months ago now; I was sitting in the office and I get a text from one of my lead maintenance guys on one of my properties here in Austin, and he thought he was doing me a favor by sharing this picture with me… Well, it’s not a picture I cared to see, and honest to goodness, it kind of screwed me up for a couple of days emotionally… But I had to keep going. He sent me this picture of what he found when he went to work that day. He went to clean the pool and there was a gentleman on the bottom of the pool…
Joe Fairless: Oh, my…
Bruce Petersen: …straight up, with his eyes open. He jumped the fence at four o’clock in the morning – we have him on camera, on video – and he was stumbling about, you could tell he was impaired… And he decided to go swimming. Well, he never made it back out. So that’s rough. I’m dealing with my own emotional stuff when this happens, right? I’m a caring human being, and it sucks that somebody lost their life on my property. We didn’t do anything to contribute to it, we did everything we can to make sure it’s a safe environment; we had the pool locked, he climbed the fence… But I have to go up to the property now and just sit with him for a good day and just make sure I’m there for them to listen to my staff, to be there for them to lean on, and to see if they — you know, “Hey, seriously guys, do you need some professional help?” There’s no shame in that. This is very traumatic.
Then we needed to reach out to the family that still lived on the property and kind of work with them through it… That was pretty dramatic.
Joe Fairless: Legally, is there anything that you also cover off on, or from an insurance standpoint that you do?
Bruce Petersen: Well, we’re protected… We have liability insurance, we have an umbrella insurance policy to cover everything over top of everything, so we’re really well insured, but we have all the proper signage up to make sure that they understand there’s no lifeguard on duty, no diving, no kids… That kind of thing. It’s closed down after ten, we had locked the pool… So we did everything that we could to mitigate the risk of somebody getting injured, but unfortunately the guy did lose his life, but we didn’t do anything wrong. We sent pictures, the police came out, they notated everything, we sent everything off to our insurance company, and we were just trying to be human for the family that was still there on the property. We’ve done everything we can to mitigate the risk, but things are still gonna happen.
Joe Fairless: Okay. And then the other incident?
Bruce Petersen: The other thing is just as syndicator, the stuff that happens. We were closing on a 250-unit property in San Antonio. Go to the bank at 9 o’clock in the morning, execute my wire transfer of 5.2 million bucks. Drive down to San Antonio from Austin to hang out waiting for the go-ahead on site, to say “Okay, it’s funded. You now own the property, now you can go to the property.” Well, we were waiting around and we noticed that the previous management company had gone in the night before, they took all the computers, all the phones, so the staff is just standing there looking at each other, and they can’t do anything – they can’t get any phone calls, they can’t do a thing.
So I finally thought, “Look, it’s gonna fund anytime now, so let’s just go and get everything set up. This is our newly-inherited staff, they need to be able to do their freakin’ job.” Well, I get a phone call at 11 o’clock in the morning now (two hours later), they still don’t have my wire. Like, what?! Well, it will be there soon.
They call me another hour later, they still don’t have the wire, so now I call the bank and I’m like “What’s going on?” They said, “No, I see at [9:30] it was sent to the Federal Reserve, so it’s out of our system.” Okay, so then I call my attorney back and say “Look, tell them that it should be there any minute.” So another two hours go by and still nothing.
I get a phone call from my attorney, “Get out.” “What do you mean, get out?” “You don’t own that property.” Like, “Oh, you’re right… I don’t own the property.” So we had to break everything back down, load up all of our computers and phones and pull out.
Well, what had happened – nobody knows where this money went. 5.2 million dollars is gone, and I don’t have a property. So this is where it gets tough. Be self-aware – can you handle now having to go back and tell all of your investors “Yeah, I know I told you we would own this property today. Well, guess what? We don’t own the property. And double guess what? I don’t know where your money is.” That 5.2 million bucks is not my money. Part of my money is in there, but I’ve got 40-50 investors and I don’t know where their money is. Luckily, the president of the title company finally figured it out that there is a division of (I think it’s) Homeland Security called OFAC… When you send a wire off, it goes to the Federal Reserve before it gets to its end user. The Federal Reserve looks at it, then so does OFAC; they come in and they look for it. What OFAC is checking – they’re checking the name of the sender and the receiver against a database of known bad actors. The name of this property was the same name as a known terrorist in Columbia. Uh-oh… So they see that and they kind of freak out, so they took my 5.2 million bucks; they don’t tell me they’ve taken it… We just have to kind of start poking around ourselves and we finally found it, and it finally did fund, but for a few hours that day we had no property, we had no money, and we were just stuck.
Joe Fairless: So it funded later that day?
Bruce Petersen: No, it never funded that day. It was Friday, and we left — they finally figured it out at [5:30], but by this time everybody’s gone, so it funded first thing Monday morning.
Joe Fairless: Oh, that’s fun… You had to wait over the weekend…
Bruce Petersen: No, that was not fun at all.
Joe Fairless: Got it. So what does your e-mail say to the investors? Or was it phone calls?
Bruce Petersen: There was a lot of them, so I just sent out a bulk e-mail to say “Look, guys, I know today was the day, but unfortunately we don’t own the property.” By that time, I did have some information that Homeland Security had it, OFAC had it… But they could legally hold it for up to two weeks while they researched this is what I was told, so I was like “Look, we know where it is, we hope to get it resolved really quickly, but as of right now we don’t own the property, and it might take two weeks to get all this stuff cleared up.”
Joe Fairless: How did you know where it was, versus you seeing that and being like “Oh, well maybe the Federal Reserve has it?”
Bruce Petersen: Well, none of us had ever seen this happen; my attorney had never seen this happen, their attorney had never seen it – nobody had ever seen this happen, so nobody even thought to think about that… But the president of the title company that was handling this for us was like “You know what, I do think I remember something like this happened 5-6 years ago”, so he started making some phone calls and he finally figured out that “Oh, OFAC grabbed it, and they’re sitting on it while they do their research”, but again, they don’t have this warm and fuzzy little customer service department to say “Dear Mr. Petersen, I took your money and this is why, [unintelligible [00:32:51].01] is gone”, but we finally found it.
Joe Fairless: Are you ready for the Best Ever Lightning Round?
Bruce Petersen: Sure.
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Break: [00:33:01].09] to [00:33:53].14]
Joe Fairless: Best ever book you’ve read?
Bruce Petersen: Best ever book I’ve read now… I’m just gonna go business, and it’s gotta be Rich Dad, Poor Dad, right? It’s [unintelligible [00:34:00].16] that got most of us started, so easily that book.
Joe Fairless: Best ever deal you’ve done, not your first, not your last?
Bruce Petersen: Best ever deal, not my first, not my last… It would be the one in San Antonio. We had the big, big hiccup, but we’ve got the best staff in the world at that place, reviews through the roof (great reviews, that is), highest rent in the neighborhood, highest occupancy in the neighborhood, so by far that one.
Joe Fairless: What’s a mistake you’ve made on a transaction that we haven’t talked about already?
Bruce Petersen: I lost a lot of money. I went into a deal and it was a 132-unit property I was gonna buy, and we had to renegotiate the deal because toward the end we found something massive that was really gonna screw up the deal; it just didn’t work. So I pushed back, said “Look, I need to come down from 9 million to 8.65 million” and we just got hung up. The guy finally at the last minute decided “Oh, I don’t wanna sell it anymore.” I was like, “Oh, okay… That sucked.” So we lost $30,000 on that deal. We got all of our earnest money back and all that… We got our $90,000 back – so we got that back, but what we lost were all the due diligence sunk costs, all the inspections, the PPM… Now, we could recharacterize the PPM for another property, so that wasn’t a big deal, but there were sunk costs of about 30k that we ate.
Joe Fairless: Best ever way that you like to give back?
Bruce Petersen: That whole thing with the kids – anything we can do to help kids… It’s just such a rewarding thing to see their little faces. And secondly, something we’re working toward – my 22-year-old stepdaughter is an adult with autism, so what we’re going to be working on over the next five years is creating an autism home for adults with autism and Aspergers, because I know you know this, but believe it or not, even adults bully people… And when you’re different, which you are if you have autism, you tend to get bullied even by adults, so it’s hard for them to live in the general population, so we’re looking to start about a 24-36 unit apartment complex that we will have three shifts of caregivers that are with them at all times to help them cook, drive them to the store, to the library, all that stuff, and give them a safe place to not feel bullied. We’re gonna do it on an affordability scale – if you can’t afford anything, you get to be there for free. If you can afford market rent, we’ll charge you market rent. That’s what we’re looking to do in the future to give back.
Joe Fairless: Best ever way the Best Ever listeners can get in touch with you and learn more about your company?
Bruce Petersen: The website, it’s apt-guy.com. Or you can e-mail me at info@apt-guy.com. You’ve gotta get the dash in there or I won’t get it.
Joe Fairless: Bruce, thank you for being on the show, giving us some advice and really some case studies that we could replicate to generate positive reviews and build a positive and large and engaged social media following relatively speaking within a community, and some cautionary tales on some things that have been challenging with your properties, as well as the approach to take with the on-site staff from a mindset standpoint.
Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.
Bruce Petersen: Alright, my friend, thank you so much.
