JF2114: Creating A Deal Through Nurturing With Robbie Faithe & Tosh Hoshino

Robbie Faithe & Tosh Hoshino Real Estate Background:

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“Find out where you want to be, and find a mentor who is crushing it. Listen to podcasts, and always educate yourself. ” – Robbie & Tosh 

TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I’m Theo Hicks, today’s host, and today I’ll be speaking with two guests. Today we have Robbie Faithe and Tosh Hoshino. How are you guys doing today?

Robbie Faithe: We are doing great!

Tosh Hoshino: Thanks for having us.

Robbie Faithe: Yeah, thanks for having us. Great to be here.

Theo Hicks: Absolutely. Thanks for joining us. I’m looking forward to our conversation.

Robbie Faithe: A little bit more about their backgrounds – Robbie has 11 years of experience in real estate, and Tosh has two years of experience in real estate. Robbie’s current holdings consist of 66 doors that are mixed between single-family, multifamily and a mobile home park. Tosh has 59 units under management, including one single-family home. Both are from Albuquerque, New Mexico. Say hi to Robbie at robbiefaithe.com. Do you guys mind telling us – maybe start with Robbie – a little bit more about your current background and what you’re focused on today?

Robbie Faithe: Yes, absolutely, and thank you again for having us on. It’s an honor to be here. So I got started in real estate actually when I was in college; I got my real estate license when I was finishing my undergrad degree at the University of New Mexico. This was about 2009 at the time. The market was not doing so well, and I had accumulated  a couple homes, and I decided the best thing to do at this current point in time was to sell the homes, and I decided rather than to hire a real estate broker to sell my homes, I just reallocated that money into my own education and got a real estate license. That’s how I got started as a broker, and I’ve been selling real estate ever since.

So I started with a brokerage that focused on distressed sales. So I really cut my teeth on the REOs and distressed sales, short sales as well, and just kind of built my business from there.

Right now, as you’ve mentioned, I’ve got about 66 doors that I currently own. It’s a mix of single-family, multifamily and a mobile home park, and the focus now is starting to get more involved in some of the larger multifamily properties, with the most recent acquisition being that mobile home park.

Theo Hicks: Thank you for that. Tosh, what about you?

Tosh Hoshino: For me, I think probably like most of the people, I just bought a residential property to live in, and met my wife, and moved in with her… And since day one had a tenant, who’s lived with me, and I guess 14 years later I still have a tenant, and the house is paid for. That’s how I got started. And the recent acquisition of the mobile home park with Robbie… And for me, I’ve been a commercial real estate broker for two years now, and before I joined this industry I was in the car business. My qualifying broker recruited me after I’d decided that I just did not wanna be in the car business any longer… And it’s been just eye-opening every day, just learning about the industry.

My focus is mobile home park acquisitions and dispositions. I sold three mobile home parks currently, and trying to find a good deal, which is pretty tough to come by nowadays… But analyzing deals, and trying to get more under our belt.

Theo Hicks: So how are you two involved together? Is it just that mobile home park deal?

Tosh Hoshino: I’ll answer that, Robbie, if it’s cool with you.

Robbie Faithe: Yeah, go ahead, Tosh.

Tosh Hoshino: So the car business that I was telling you about – I met Robbie through that relationship. He’s bought two cars from me, and he was in real estate at that time, and after I’d decided to leave the industry and join the commercial real estate world, I read — just doing research about what are good investments, and mobile home parks kept coming up. We have always kept in touch, but – I mentioned about the mobile home park, and I think at that time, around the same time or right before he was really getting into it… So when this opportunity came up, we’ve known each other — and of course, not business-wise, but I think just understanding his character, and we just decided to partner up and jump in it. That’s how this happened.

Theo Hicks: So you were interested in becoming a broker, and decided to pursue the mobile home park deals. You found this deal and presented it to Robbie, and you guys both agreed to go in on it together?

Tosh Hoshino: It’s actually the other way around.

Theo Hicks: Oh…

Tosh Hoshino: So Robbie, why don’t you fill in on that part?

Robbie Faithe: Yeah, so I’ve been researching mobile home parks, and it’s a very interesting asset class… I decided to start out by building  a database… I decided just to kind of go down this road and see what I can do to find an opportunity. So I built out a database of local mobile home parks, I was able to skip-trace the owners, and I just started cold-calling.

This park actually was the second phone call that I made, and it took months and months of nurturing the relationship before we even got to the point where the seller was comfortable enough providing me with information… But that’s pretty much how it happened. I just cold-called someone in my database that I built out, and just asked simply if she was interested in selling, the answer was yes, and we immediately scheduled a coffee meeting, and built rapport, and eventually got it under contract.

After it was under contract, I was really interested in bringing on someone who may have a little bit more experience in this realm, and I did. Tosh was already more versed in mobile home parks than I had been at the time, so we decided to partner up on it.

Theo Hicks: You said it took you a long time to nurture that relationship… Do you mind explaining maybe let’s say from the first phone call – what you said on the call, and then what steps were taken with that individual until you eventually got the deal under contract?

Robbie Faithe: Absolutely. It was just a very casual conversation. I simply called the seller up, and she happened to answer, and I just told her who I was, and I asked her if she was interested in selling that park. The answer was “Well, maybe…” So the conversation was just very casual, I just was trying not to be too intrusive and ask too many personal questions; I just kept it very casual, and decided that the best thing to do was just to get the seller more comfortable with me. So I decided just to see if we could schedule a coffee meeting. We met at Starbucks, and it probably took about 5-6 different meetings for her to get comfortable enough to disclose some of the financials on the park.

It was definitely a process. We were in escrow for about ten months after we got it under contract, because this is a typical mom-and-pop operator, very sweet lady, we still keep in touch post-closing… But she didn’t have the best records, so it was a little tricky to obtain all the necessary information that we needed to make an educated decision. Eventually we got there, but that’s kind of how the conversation started.

Theo Hicks: One follow-up question on the actual back-and-forth… So you said you had that initial coffee meeting, and then you guys met 5-6 more times. Was it just quick coffee meetings, just catching up on life things, was it just talking about  the property itself? Because you mentioned it took a while to actually get numbers on the property, so I’m just curious what you guys talked about all those times.

Robbie Faithe: Yeah, she was pretty good about just giving me some general information. I had a bunch of questions about the property. So it was a lot of discussing how the property was being operated, who was managing it, her involvement, what her goal was in the case that she would want to sell it… Just so I can get an understanding for what the motivation was.

Then a lot of the rapport building was just kind of talking about where she came from, her family, a little bit about myself and my family… So by the time we were into the second, third, fourth meeting, we established a pretty good friendship, and that really helped enable us to get the terms that we were looking for. We were able to get some wonderful seller financing terms, and that was partially because during those conversations I was able to find out what her motivation was. She was at the point where she was looking to divest, and she didn’t want to be involved anymore in the operational aspect of the park. She was just interested in receiving monthly income, so it worked out perfect. That was a great segue for owner-financing; she was educated on it enough to feel comfortable pursuing that… So that’s how we were able to get those terms.

Theo Hicks: Thanks for sharing that. I think it’s gonna be very helpful, because a lot of people talk about “You need to cold-call people, and built rapport”, but not many people get into the specifics; you went into a lot of specifics there, so thanks for sharing that.

So you also mentioned that you were in escrow for ten months after getting the property under contract. It sounded like it was difficult getting all the information you needed to fully underwrite the deal… So either one of you can answer this – do you mind telling us overall what types of things people need in order to fully underwrite a mobile home park? And then maybe you can also talk to us, if this is true, about how to make assumptions when all the data isn’t there. Because it sounds like a lot of these are owned by mom and pops who aren’t using the fancy property management software and they track every single line item. So the two questions are “What do I need to underwrite?” and then “How do I get all the information if it’s not readily available from the owners?”

Tosh Hoshino: As far as the “What do you need to underwrite it” – rent roll is definitely important, and just checking that along with the bank statement; make sure that the income is coming in… And just the operating expenses – what is the seller paying, and what are the tenants paying, and what are the maintenance and repairs and any cap ex items that has been done in the last few years. Let’s say if some of those items are missing, then – it’s not a rule of thumb, but if it’s tenant-owned homes, then you would typically use 30% to 40%, 40% being that if the water and sewer is not charged back; and if it is, then you use typically 30%. So that’s some of the things that we use… But both of us actually underwrote it, and just  kind of comparing notes and make sure that we were on the same stance as far as the financials.

Robbie Faithe: Yeah. He’s talking about expense ratios when he’s saying 30% to 40%.

Theo Hicks: Okay. So rent roll, along with the bank statement… So is that something that you can get before you put the deal under contract, or is that after?

Robbie Faithe: I think it’s on a case-by-case basis, depending on how the property is being operated. In this particular instance we had an idea what the general numbers were… And this was just purely off of conversation, when we were talking. She was able to eventually share some of the financial information about what the monthly gross scheduled income is… And sometimes that’s just what the sellers are willing to share with you. But in this particular case, we were able to get some supporting documents after contract; it does sound a little backwards, but before we went into contract I made sure just to have a conversation with the seller, that “I understand you’re not wanting to share a ton of financial information for me at this point; I’m okay, I’m going ahead and putting together an offer for you based off of the numbers that you’re representing. In the case that there’s some inaccuracy here, I just need you to understand that we’re gonna need to adjust the price again.” And that’s actually what happened.

Initially, we went under contract and it was based off of a monthly figure that she had given us that was not accurate. After we went under contract and we obtained rent rolls, tax returns, it turned out that she didn’t intentionally misrepresent the property, but she was factoring in some of the utility bill-backs into the gross scheduled rents… So after incurring the utility costs she wasn’t actually collecting that monthly amount… So we were able to actually negotiate $100,000 off immediately, before we even really began physical due diligence on the property.

Theo Hicks: That was my follow-up question, which is “What types of contingencies did you put in place, or conversations did you have before putting the deal under contract?”, when you don’t have everything; but you mentioned what to do there, so thanks for sharing that as well.

Alrighty, for the money question – what is your best real estate investing advice ever? Let’s start with Tosh.

Tosh Hoshino: I would definitely say that listen to a podcast, always educate yourself… There’s an invaluable amount of information out there. So that’s the advice that I would give to anyone.

Theo Hicks: And Robbie?

Robbie Faithe: It’s a really good question… My perspective on that is find out where you wanna be, and find somebody who’s just crushing it in that area. If you can find a mentor who’s already in a position or a place where you see yourself or where you envision your business going, then that’s the most valuable think you can do – get a mentor who’s already at a place that you wanna be at.

Theo Hicks: Alright, perfect. Are you guys ready for the Best Ever Lightning Round?

Tosh Hoshino: Yup.

Robbie Faithe: Yes.

Theo Hicks: Okay. First, a quick word from our sponsor.

Break: [00:16:19].21] to [00:17:10].26]

Theo Hicks: Okay, so – Lightning Round. Both of you guys can answer these questions in whatever order you want. The first one is what is the best ever book you’ve recently read?

Tosh Hoshino: For me it’s “The Everything Store”, about Amazon and Jeff Bezos, and just his vision about being customer-oriented, looking for the future, and just not letting anyone getting in the way of his vision.

Robbie Faithe: Yeah, that’s a great one. For me it’s “Pitch Anything” by Oren Klaff. This is a fascinating book. It kinds of links science and psychology into sales, and there’s a lot of value there for folks who are in sales, and just people in general.

Theo Hicks: If your business were to collapse today, what would you do next?

Robbie Faithe: Tosh, do you wanna get that one?

Tosh Hoshino: That is a good question, “What would I do…?” I don’t know. I’ve never thought about that. I’ll let you answer that, Robbie.

Robbie Faithe: I think that having done a decent amount of deals, I really learned and discovered that you don’t necessarily have to have the money to be able to put together a good deal. You have to find the opportunity. So I would just continue to do what we’re doing, deal sourcing; I think that’s kind of the top of the food chain. Once you can secure a deal, the money always tends to flow… So if I had to start over, I would just focus 100% on just finding opportunities, and bringing the people together to be able to make that come to fruition.

Theo Hicks: What is the best ever way you like to give back?

Tosh Hoshino: I would say that just be available to anyone who reaches out to you, and just give advice as much as you can, that you’re competent of. That definitely will come back to you to help you as well.

Robbie Faithe: Best ever way I like to give back is I do some casual one-on-one coaching on the side. I’ve been able to create financial independence for myself, and I’m super-passionate about how real estate has enabled me to create that lifestyle. I love to educate others on how real estate investing can do the same for them.

Theo Hicks: And then lastly, what is the best ever place to reach you?

Robbie Faithe: The best ever place to reach me – I’ll go ahead and give out my email. It’s Robbiesellsabq [at] gmail.com.

Tosh Hoshino: And for Tosh it would be thoshino [at] gmail.com.

Theo Hicks: Alright, thank you guys for sharing your personal email addresses. Hopefully a lot of Best Ever listeners take advantage of that and reach out and ask some questions about mobile home parks and other things you guys are experts in.

Just to summarize what we’re talked about today – we talked about how you guys both got started in investing, and how you guys met (interestingly) at a car lot, where Robbie bought a few cars from Tosh… And then for the mobile home park that you guys worked on together, Robbie decided to do mobile home parks, started building a database to find opportunity, skip-traced to find the owners, started cold-calling and found a mobile home park on the second call.

You talked about how you initially met this person for coffee and it took multiple months to nurture the relationship… And we talked specifically about what you did. You called them, had a casual conversation, asking if she was interested in selling. She said “Maybe.” You guys met for coffee, you had about 5-6 different interactions after that. She talked about how the property operated, who managed it, what her goals were, you talked about her family, where she came from, your family… Just to build a personal relationship, but also get information about the deal.

Eventually, she began disclosing the financial information; you guys put the property under contract… And something that you mentioned is that usually you’re not gonna have all the information that you need to underwrite the deal – the rent roll, the bank statements, the operating expenses, the cap ex… So you make assumptions based off of what you were told, and then based off of the 30% or 40% expense ratio rule, and then let them know that “We’re basing this off of what you’re saying; if it turns out to not be true, we’re gonna have to adjust the price”, and you mentioned that you were able to adjust the price by $100,000 right off the bat, because of some misinformation… Not purposefully, but just misrepresenting something on accident.

You mentioned that the property was in escrow for ten months as you ended up buying it, and so we talked a lot about that deal. Then we also talked about your best ever advice; for Tosh, it was to listen to podcasts and always educate yourself, which if you’re listening right now, you are on the path towards doing… And then Robbie’s best ever advice was to find out where you wanna be, find someone who’s there already, and attempt to bring them on as a mentor.

So Robbie and Tosh – I really appreciate you guys coming on the show and sharing your story today about the mobile home park. Best Ever listeners, as always, thanks for tuning in Have a best ever day, and we will talk to you tomorrow.

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