Brian is a Chiropractor by trade, while also being an active real estate investor who helps other people safely invest in real estate. He had a client come in and tell him he just retired, put his savings in the stock market, and then it crashed. That client lost 30-40% of his life savings overnight. Brian never wanted that to happen to him so he started learning about real estate and hard assets. We;ll hear what he learned and hear some case studies of his deals, the good and the bad. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
“Fortunately we found it or it would have been an environmental nightmare, sometimes the best deals are the ones you don’t do” – Brian Robbins
Dr. Brian Robbins Real Estate Background:
- A successful entrepreneur before entering the multifamily investment arena
- Owned his own small apartment complex, a 32,000 sq. ft. shopping center and some SFR’s
- Based in Danville, VA
- Say hi to him at www.wealthgencap.com
- Best Ever Book: Ten X Rule
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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, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff.
With us today, Dr. Brian Robbins. How are you doing, Brian?
Dr. Brian Robbins: Doing great, thanks Joe.
Joe Fairless: Well, I’m glad to hear it. A little bit more about Brian’s background — and first off, what type of doctor are you?
Dr. Brian Robbins: I’m a chiropractic physician.
Joe Fairless: Got it. A little more about Brian’s background in real estate – he is a successful entrepreneur before entering the multifamily arena, and in the multifamily arena. He has owned his own small apartment complex, a 32,000 square foot shopping center and some single family rentals. Now focused on helping others reach their financial goals. With that being said, Brian, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Dr. Brian Robbins: Sure. As you said, I’m a chiropractic physician by trade, but we have multi-discipline pain management facilities, so that’s primarily what we’ve done – chiropractors, medical doctors, PTs, all working together and providing that kind of care. Not all that long ago I branched out and saw the benefits of commercial real estate. It’s a long story, but I walked into a room one day and I had a patient sitting on a table, and he was actually in tears… And that was unusual because this guy was a big, rough, kind of gruff guy who worked in a blue-collar job his whole life.
He asked me what he was gonna do, he said “What am I gonna do Dr. Robbins?” and I had no idea what he was talking about. I thought we were talking about his back. He said “I just invested all of my retirement funds in the stock market, because I just got out of the [unintelligible [00:03:40].07] and it crashed two days ago. What am I gonna do?” This was in ’07-’08.
We talked for quite a bit, but unfortunately he had put all his money in the stock market. He didn’t have it in hard assets like apartments and self-storage and those kinds of assets. Unfortunately, he lost about 30%-40% overnight, and that was of his lifetime earnings. I realized I never wanted to be in that position, so that’s what really got the ball rolling on the commercial real estate for me.
Joe Fairless: After you had that moment with the gentleman, what did you do after that?
Dr. Brian Robbins: I began to research. I had dabbled in a few single-family homes, and we just weren’t pushing it down the road much. We were just doing it really slow, and low-key; and again, research, research, research, read, read, read and wanted to become as knowledgeable as I could in this asset class. So that was where I really started, in the research component.
Joe Fairless: Okay. Any particular research sources that were more beneficial than others?
Dr. Brian Robbins: We did Bigger Pockets… I actually eventually went through a mentoring program, kind of like what you guys have. It’s with a company called 37th Parallel.
Joe Fairless: Yup, they’re close by where you live.
Dr. Brian Robbins: Yeah, exactly. It was close, and those guys are pretty sharp, so we did that and it really advanced our learning curve very quickly.
Joe Fairless: And then, once you got the research phase complete, or rather enough to where you felt like you were ready to rock and roll, then what happened?
Dr. Brian Robbins: Another fella that I partnered with – we started Wellings Capital, and we took on a third partner, who was more of a silent guy, but could sign the carve-outs, and we began looking for good-sized apartment deals.
Joe Fairless: Okay. How did you meet these two people and what were their roles, high-level?
Dr. Brian Robbins: High-level – Paul Moore was my primary partner initially, and we were friends from church. We just had an entrepreneurial bond. My other partner, Wade, is a fellow that we had met through some other opportunities. He’s out of Dallas, and Wade is the CEO of 12 different companies and was very much interested in being involved in this, as well, so that’s when we brought him in.
Joe Fairless: And high-level what did each of you do?
Dr. Brian Robbins: I was kind of the physical asset guy. I was out pounding the pavement, looking for assets. Paul was the marketing guy, and he was out looking for investors primarily. And then Wade – he’s got a lot of contacts, but he mostly was a silent partner for the most part, and was there to help make sure that the deal got financed properly.
Joe Fairless: Got it. So balance sheet liquidity?
Dr. Brian Robbins: Yeah, exactly.
Joe Fairless: Okay. What was the first transaction you all did, and how many transactions in total did you all do?
Dr. Brian Robbins: Yes, we haven’t done a ton of transactions. We got started kind of at the wrong time. When I say wrong time – we found out very quickly that over about a three-year period we did (when I say “did”, we evaluated) deal after deal after deal, and it was about four and a half years ago, and the market was very frothy. Everybody had found out about multifamily properties, so as you probably know, it’s difficult to find deals that make sense in this environment. We made it to best and final on probably 20 deals, and just what we like to call “dumb money” outbid us, and whether it was 1031 money that knew they were gonna lose 20% if they had to pay taxes on it, so they didn’t care to overpay, or if it was foreign money that knew if their economy just took a down hit, they would lose the money, so they didn’t mind overpaying… So we lost a lot of deals to that.
Our first deal was in Chattanooga, Tennessee, and — I know you like to hear the goods and the bads… We got all the way through due diligence — and this is both our best and our worst deal.
Joe Fairless: [laughs] Okay…
Dr. Brian Robbins: It was our worst deal because as we were doing due diligence, there were 16 buildings in this property, and we got into the crawl spaces and they were all full of — well, excuse me, 10 out of 16 were full of black mold. And I mean, not just a little here and there; it was up into the walls, it was in the insides of the building… It was a nightmare. And fortunately, we had about 35 people doing due diligence and they were crawling all over that place… And fortunately, we were able to find that, because if not, it would have been an environmental nightmare, and it would have taken us to the bottom of the ocean on that one.
So even though we had put a hundred hard on that deal, we were able to back out because of this undisclosed environmental nightmare. So it was our worst deal, because we didn’t turn it, and it would have been a bad deal, but sometimes the deal you don’t do is your best deal, and that saved our shirts by not doing that deal.
Joe Fairless: What would have been the process to get rid of that mold, and how much did it cost? I’m sure you all looked at it like “Well, alright, it’s got black mold. Someone’s gotta fix it, so what do we do to remediate it?”
Dr. Brian Robbins: Yeah, the remediation process is very lengthy, very expensive. We actually talked with some of the folks that were working there; they were maintenance staff, and that management/ownership team had already got bids on it… And if I remember correctly – it’s been a couple years, but if I remember correctly, they stopped asking questions when it went over $650,000, so we just decided at that point, because there were so many unknowns, there was no way we were gonna do that deal… Especially since that was our first deal together as a team. So we just decided to step back.
Joe Fairless: What happened with that property?
Dr. Brian Robbins: After we got our money back, we just turned our shoulder and went the other way.
Joe Fairless: Right. Not even curious…
Dr. Brian Robbins: Well, we just decided we didn’t wanna disclose anything; we weren’t trying to hurt them in their process, and we just decided that we’re gonna just take the high road and be gone. I’m not sure, but I have a feeling they went in and finally remediated it.
Joe Fairless: Okay. How many deals did you all close?
Dr. Brian Robbins: After that we closed a 125-unit deal in Lexington, Kentucky, and we still own that one. It’s a townhouse apartment complex, and that’s going very, very well. I just got off a call a few minutes earlier and we’re 100% either pre-leased or leased. So that one is really starting to turn around. It was a little bit older property, 1968 or 1972, I forget now, but had some issues and had some things we wanted to do to it, so we did those things, we had some initiatives for some cap-ex…
Joe Fairless: Like what?
Dr. Brian Robbins: We put in a grilling area, we put in a pergola, we put in a dog park, we put in all-new exercise equipment, we had some wood fascia type problems on the exterior, so we had those repaired, and then we completely painted the entire property on the exterior.
The interiors had been upgraded approximately three years prior, so the interiors weren’t too bad, but everything else kind of needed some new life, so we went through and did all those things, and now it’s paying off.
Joe Fairless: How much did you buy it for?
Dr. Brian Robbins: It was in the nine range… It was just under nine.
Joe Fairless: And how much are you putting into it?
Dr. Brian Robbins: We put about seven-something, off the top of my head. In that range.
Joe Fairless: Five-year business plan?
Dr. Brian Robbins: Five to seven. We like to do accelerated appreciation schedules. It will kind of use that up in about seven.
Joe Fairless: And what type of financing do you have on it?
Dr. Brian Robbins: A four-year IO.
Joe Fairless: A private lender, bridge loan, or…?
Dr. Brian Robbins: Arcadia.
Joe Fairless: Okay, so private. Got it. You mentioned 100% leased or pre-leased, so people might be thinking “Well, that’s good, and an opportunity, because your rents could be pushed more.”
Dr. Brian Robbins: Exactly.
Joe Fairless: How do you think about it?
Dr. Brian Robbins: The exact same way. In fact, that was our conversation. We are leased, we have six units that are empty, but they’re pre-leased, so we told them go to full market rent and bump it past that.
Joe Fairless: And see what happens.
Dr. Brian Robbins: Exactly. It’s an opportunity.
Joe Fairless: So that 125-unit – was that the one property that you all closed on?
Dr. Brian Robbins: That’s the one multifamily, and we turned our attention a little bit after being frustrated on so many of the deals just not making sense, so we’ve raised money for a couple other deals, but they were both self-storage, that closed last year.
Joe Fairless: Okay. What about this 3,200 square-foot shopping center? That piqued my interest.
Dr. Brian Robbins: Yeah, 32,000. That falls under my–
Joe Fairless: 32,000, yeah. A zero is important.
Dr. Brian Robbins: So I wrote a book, and my book is really for professionals, for physicians. As a healthcare provider, I really wanted to do something for them… It’s about multifamily investing, and I [00:11:51].17] my worst deal ever, when I bought this property I was young, I was naive, and I was listening to my accountant. My accountant, it turns out, was in bed with the seller… So I bought this big property because my accountant said “You’ve gotta do something for taxes. You need a place to grow into. Your business is booming, let’s go do this”, and little did I know that he was getting (I believe) paid on the side… It was one of his best friends who was selling it.
I bought this property with the idea that “Oh man, I can put commercial tenants in there and it’ll be great. They’ll pay it off.” That was about the time NAFTA hit this part of Virginia, and we lost manufacturer after manufacturer, so the retail industry — I know that a lot of people are talking about that now, that retail is having a tough time because of the internet, and e-sales, and all that… Well, it hit South-West Virginia long time before that, because all of our manufacturing went to Mexico. So I would say in the 65% range as far as occupancy in the retail space.
I’ll tell you, one of the biggest things that I talk about in my book is that it doesn’t matter if you’re a physician, it doesn’t matter if you’re the president of a company… If you’re gonna invest in an asset class, you’d better take the time to become an expert, and not just listen to the advice of your accountant, your attorney, your buddy, your colleagues at work. You’d better know all of the ins and outs, and you’d better be able to vet it yourself and do your own due diligence, because no one has your best interest at heart other than you. That’s one of the big lessons I pulled from this – you’ve got to do your own due diligence, and you’d better become pretty much an expert in that field. If you’re gonna invest in multifamily, you’d better learn it inside out.
Joe Fairless: You currently have that shopping center…
Dr. Brian Robbins: I do. I’m in the process of actually converting it right now to a mixed use. Part of it is — I’ve got a great tenant in the basement, which is half the building, and it’s a school. In the upper spaces I’ve got a couple medical facilities, and then we’re gonna put in self-storage… So it’s gonna be a mixed-use facility.
Joe Fairless: Okay, office and self-storage?
Dr. Brian Robbins: Correct. So when I say basement… So the back half of the building — it’s on-grade, so the back half is walkout, so they just have to drive around to the other side of the building… But it’s a special needs school. They work with the Down syndrome, they work with Aspbergers, they work with autism… And it’s owned by the hospital. They came in and they pumped $300,000+ in buildout, and they signed a seven-year, with another eight-year option, so we’re good there.
Joe Fairless: What was the purchase price for the property?
Dr. Brian Robbins: For this building? All-in, with buildout and the whole nine years was 2.7.
Joe Fairless: With the 65% occupancy, is it costing you money every month?
Dr. Brian Robbins: Because my medical clinic is here, it’s really kind of right at that breakeven point. So it’s not costing me anything, but it’s also not turning into a great investment; that’s why we’re gonna transition it.
Joe Fairless: What are some things that you’ve tried to do to increase occupancy that haven’t worked?
Dr. Brian Robbins: That have not worked… Well, I’ve worked with some of the local realtors that said they were the best commercial realtors in the area, and they’ve done a very poor job at getting folks in. That’s primarily what we’ve done. We’ve tried ads, we’ve tried a bunch of different things, but it just hasn’t really panned out as what we had hoped originally when our accountant was pumping us up about it.
Joe Fairless: On the flipside, what are some things that helped you get to 65% occupancy, besides your business?
Dr. Brian Robbins: It turned out that the hospital was a lead through another real estate contact I had, and their boys just happen to play basketball together, and traveling with basketball, and he was the president of the hospital, and he found out about our building, so… Having contacts and having a good reputation in the community is kind of what’s brought them in, for sure. So that’s something that obviously I think anytime you could have a great reputation, it’s important.
Joe Fairless: What type of process is involved in converting an office to self-storage?
Dr. Brian Robbins: This is a building — you could consider it very similar to a warehouse, to some extent. It’s got high ceilings, it’s got some openings. It’s got a few firewalls, but primarily you can commend and you can do buildout and you don’t have to touch the structure. Also, the buildouts can be relatively inexpensive. They have a product which is basically sheet metal, and they come in and they measure it, and in a short time, as long as you cut them a check, they come back with all the walls, all the doors, and it’s gonna be all set up for it. So it’s really pretty easy to do a conversion like that.
Joe Fairless: Approximately how much square footage are you converting, and what’s the approximate cost for doing so?
Dr. Brian Robbins: Upstairs we’ve got 16,000 square feet. About 6k of that is utilized, so it’s gonna be about a 10,000 square foot space when we’re building out. You can usually get about 75% of that to be usable, rentable space, not including your hallways and all. It’ll be under 200k to do that, probably a fair amount less. We’re still putting all of the estimates together, but we’re gonna come back with LED lighting, motion sensors, we’re gonna have dehumidifiers in this part of the country; there’s gonna be climate controls, so we’ve gotta make sure that that’s all squared away. A lot of the expenses have already been paid, because we own the building, so that’s why it’s a pretty easy deal to do.
Joe Fairless: You don’t own the building free and clear, do you?
Dr. Brian Robbins: No, not yet.
Joe Fairless: Okay. So when you do the $200,000 in conversion costs, does that come from a new loan?
Dr. Brian Robbins: It could, and we’re still in the process… We may just pull it out of the pocket. We’re talking with a couple banks right this minute. We’re actually talking with a couple of hard money lenders as well, so we’re just kind of looking at our options right this minute.
Joe Fairless: And who’s “we”?
Dr. Brian Robbins: Me and one other person.
Joe Fairless: Okay, so you’re 50/50 on this deal with–
Dr. Brian Robbins: No, I’m 100% owner, but my wife is the other… [laughs]
Joe Fairless: Oh, got it. Fair enough.
Dr. Brian Robbins: I wasn’t trying to be cryptic or mystical.
Joe Fairless: Yeah, yeah… I was just wondering if you had another JV…
Dr. Brian Robbins: No partner on the building, no.
Joe Fairless: Okay, got it. Cool. So that’s what you’ve been focused on, as well as what you’re about to be focused on. Anything else that is coming up for you, that you’re excited about?
Dr. Brian Robbins: Yeah. I was one of the founding partners of Wellings Capital, the company we talked about previously. I’m in the process of being bought out there; my other partner is taking it over 100%. So I’m in the process of creating a new company, and we’re gonna probably just work to be passive investors. Again, my love is professional contacts, so I’m really focusing on the niche of helping medical doctors, physical therapists, chiropractors, dentists, you name it, professionals – really focus on… A lot of us, unless you work for a big healthcare system, you don’t have a predetermined retirement plan, so helping those folks figure out a way to make sure that — they’re highly paid, but wage slaves for their entire life, so helping them create passive income. So our new company, WealthGen Capital, is gonna be focused on that.
We’re probably about a month away from putting a podcast together, and we’re gonna get all the infrastructure in place; it’s gonna be called The Rental Nation, and really focusing on just the whole mindset of renting and how entrepreneurs can take advantage and create wealth for themselves from that mindset of just renting, and not owning.
I’m looking up to people like yourself, who have had these long-standing podcasts. I’m a little bit older guy; I didn’t even know what a podcast was not all that long ago… So I’m in the process; I’ve got a couple of young guys pushing me in that direction, so we’re in the process of creating that. That’s what we’re excited about. It’s a new direction.
I don’t think we want to actually run the assets anymore. We’re in the process of vetting a few syndicators, guys that are out there that do this for a living and they’re professionals, and they have lots and lots of deals in their background, and they’ve handled them well… A lot of physicians don’t even have time to really spend it looking at all these different syndicators they could invest it, so we wanna take that out of it for them, and really work to bring the two together… So that’s kind of what we’re doing – we’re in the process of vetting them and putting all the infrastructure together, so I’m pretty excited.
Joe Fairless: Based on your experience as an entrepreneur, as a real estate investor, what is your best real estate investing advice ever?
Dr. Brian Robbins: My best ever advice – so when I wrote my book, I came across this article… In 2014, it was by Fidelity and it was entitled “Physicians’ savings behaviors and retirement readiness.” And the article discussed how many of the physicians are not really ready for retirement, and because they entered the planning or funding stage of their retirement life later than their contemporaries, they kind of run up against this high level of retirement funding pressure. It’s not real, it’s self-imposed, and it reminded me of the white coat syndrome. It’s a medical condition where people just walking into a doctor’s office, their blood pressure goes up. You can measure it, it’s a real deal… And so I coined the term professional’s white coat syndrome, because of this retirement funding pressure.
So these guys and girls that are very intelligent, they’re at the top of their fields, but they make crazy decisions on investing — in fact, I read a few articles that talk about some of the Wall-Street firms out there… There’s lots of great ones, but some of them would take advantage of this and say “Oh, well, physicians are an easy prey.” So my best advice ever – and I explained this a little bit earlier – was to make sure that you’re not investing because your buddy said to in this deal. “I’ve got this insiders deal and you’ve gotta check it out.”
Joe Fairless: Or your accountant. [laughs]
Dr. Brian Robbins: Your accountant, or your colleague said he did it… Because a lot of times they didn’t do due diligence either. That’s the key – really doing your due diligence, learning about the asset class, taking the time to become an expert. That way you’ll feel confident and you can go with your gut, and when you come across a good deal, you’ll know.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Dr. Brian Robbins: Absolutely.
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Break: [00:21:40].29] to [00:22:20].13]
Joe Fairless: Best ever book you’ve recently read?
Dr. Brian Robbins: Best ever book – I’m gonna put three. Obviously, I read the Bible quite frequently, and that’s number one. I like Grant Cardone’s 10X Rule book, and then I’ve just started Tim Grover’s “Relentless: From Good to Great to Unstoppable.”
Joe Fairless: How would you start over if you had little or no capital?
Dr. Brian Robbins: Of course, I am kind of starting over with this other company, but if I was–
Joe Fairless: The money part though, because I don’t imagine you’re starting with low or no capital. You’re reinventing yourself.
Dr. Brian Robbins: Yeah, that’s right. I’d either be a deal finder for other people, and just bring them deals and get paid for that… Or I’m very intrigued by just using arbitrage in the Airbnb space. Or I would maybe work with local real estate investors and just wholesale deals – get them under contract and then wholesale them, and I’d never have to invest myself until I built up a war chest. Or, lastly, I’d just go and be a trout fishing guy.
Joe Fairless: [laughs]
Dr. Brian Robbins: Because you know, trout never live in ugly places. They only live in nice places.
Joe Fairless: Oh… Hey, I have a feeling based on the tone in which you said that that would be the number one option for you if you had to start over financially.
Dr. Brian Robbins: It could be, yeah. You never know.
Joe Fairless: What is the best ever deal you’ve done?
Dr. Brian Robbins: I’ll tell you, the best deal — we spent $31,000 to make $509,000. It was a forced appreciation on this 125-unit asset that we have. They had $35,000 in gas costs per year, that was paid by the previous owner. We invested $31,000 in digital thermostats; we’re now billing back the tenants, because everybody else in the same submarket was billing their tenants for that. If we average a 92% occupancy and we collect 95% of that $35,000, 32k will be added to our NOI, and a 6% cap that creates $509,000 in value.
Joe Fairless: I love cap rates, when you’re selling especially.
Dr. Brian Robbins: Forced appreciation is cool.
Joe Fairless: And forced appreciation, yeah. Even more the forced appreciation. We talked about some challenging deals… What’s a mistake you’ve made on a transaction that you haven’t mentioned already?
Dr. Brian Robbins: Okay, so the worst deal ever — I saw that you were a Texas Tech Red Raider…
Joe Fairless: Yeah.
Dr. Brian Robbins: I was on a college baseball scholarship, but a little school South of there – my worst pitching performance ever was giving up three home runs to the Red Raiders and one inning.
Joe Fairless: Ohhh…
Dr. Brian Robbins: Oh, you meant investing mistake… [laughter] Okay.
Joe Fairless: Where — was that in Lubbock?
Dr. Brian Robbins: That was in Lubbock, yes.
Joe Fairless: Yeah, it’s a home run friendly park, so I’ll throw you a bone.
Dr. Brian Robbins: Okay, I appreciate that. And the wind must have been blowing at like 90 miles an hour.
Joe Fairless: Of course, clearly. Well, there is a lot of wind.
Dr. Brian Robbins: For sure. My worst investment ever – and it will eventually hopefully be one of my best, as I convert this into a self-storage.
Joe Fairless: What is the best ever way you like to give back to the community?
Dr. Brian Robbins: My wife and I adopted eight children. We have a total of ten, but we adopted seven Russian orphans, all at once. At the time we were told it was the largest single adoption in U.S. history. Now, I don’t know if that’s true or not, but that’s what they told us at the Russian Embassy. But raising eight kids that are not our own is a major way we do it. We support a couple kids, and we are really hoping to use commercial real estate [unintelligible [00:25:16].18]
Joe Fairless: What are the age ranges? I won’t ask you to say all their ages, but now what are the age ranges?
Dr. Brian Robbins: Now, 35 to 6.
Joe Fairless: 6 years old to 35 years old.
Dr. Brian Robbins: Yeah.
Joe Fairless: Wow. Best Ever way the listeners can get in touch with you and learn more about what you’re doing?
Dr. Brian Robbins: It would be Brian@wealthgencap.com. It’s probably the easiest way to get a hold of me.
Joe Fairless: Cool. And then we’ll put your website, wealthgencap.com in the show notes, so Best Ever listeners, you can click through and check that out.
Brian, thank you so much for being on the show, talking about lessons learned on your 32,000 sq. ft. shopping center. The lessons that you learned – not the hard way, fortunately – on the Chattanooga property with the black mold, and the thermostat forced appreciation example for the 125-unit in Lexington, Kentucky, and how you’re reinventing yourself as well, or rather evolving your approach to what you’re focused on. And then also getting into the details of the shopping center conversion. Very interesting stuff. So thanks for being on the show. I hope you have a Best Ever day, and we’ll talk to you again soon.
Dr. Brian Robbins: Thanks so much, Joe.
