JF2358: Reaching a Passive Income Goal With Brian Briscoe

Brian’s first experience with real estate started when he purchased his first house after reading Kiyosaki’s “Rich Dad, Poor Dad”. As an active duty Marine, Brian was relocated every couple of years. Every time he moved, he added a new single-family home to his portfolio. 

In 2016, he did the math and found out that he was nowhere close to his passive income goal. Looking for ways to scale, he jumped into multifamily units and formed a real estate investment firm with three partners. With his latest acquisition being a 167-unit property, he’s finally approaching his income goal and getting ready to retire from the Marine Corps.

Brian Briscoe Real Estate Background:

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Best Ever Tweet:

“Wherever you’re at, just start small. ” – Brian Briscoe

TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. 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 fluffy stuff. With us today, Brian Briscoe. How are you doing, Brian?

Brian Briscoe: Doing well. Thanks a lot, Joe.

Joe Fairless: I’m glad to hear that. And a little bit about Brian. He is an active duty US Marine. I appreciate everything you and your colleagues do for us, keeping us safe and protecting our freedom, first and foremost. Brian was assigned to the Pentagon and is the co-founder of Four Oaks Capital, which is a multi-family investing firm. He’s a host of a new podcast called The Diary of an Apartment Investor. In 2007 he started real estate with a single-family house, and in 2018 he jumped right into multi-family. Right now he’s got five apartment communities, and the total amount of units among those five is 250. Based in DC. With that being said, Brian, you want to give the Best Ever listeners a little bit more about your background and your current focus?

Brian Briscoe: Sure, absolutely. Thanks a lot. So first of all, to back up, I’ll start with when I was in college. I was going to college to be a professor. I was always really good at math, and I enjoyed teaching, and when you put those two together, I think the natural path for me was to be a college professor in mathematics. I’ve got a bachelor’s degree, a master’s degree and I applied to a PhD program. Following the “Get good grades, get a degree, get a good job” pathway. I applied to a bunch of the top 10 schools and I got into a couple of them.

So I started a PhD program at the University of Minnesota in August of 2001. And that’s significant, because it was just right before September 11. So like most people, I watched three airplanes fly into the World Trade Center and the Pentagon, and that event changed my trajectory significantly. I decided to put my studies on hold, and basically went down to a marine recruiter and said, “I want in.” And I’ve been on active duty ever since. It wasn’t the plan to stay active duty. The plan was actually to do a three to four-year tour, do my part, and go back to school. But I ended up liking it, I guess, a little too much. I’ve been on active duty ever since.

And along the way, roughly 2005 timeframe, like a lot of people – I’m very cliché – I read Rich Dad, Poor Dad. And that got me thinking on, “Okay, I need to start minding my own business. I need to start investing into income-producing assets.” And I realized as long as I was in the Marine Corps, I’d be moving every two to three years. So I did what I thought I could do, and that was, every time I moved, I would buy a house.  So 2007 was the first house that we bought. And we bought another one in 2008. And every two to three years afterwards, pick up and move again and try to rinse and repeat the process.

Several years later, I think this would have been late 2016, I realized that the light at the end of the tunnel of the Marine Corps career started growing bigger. I started looking at my portfolio, and I was not making a ton of money off the single-family properties that I had. I had a lot of trapped equity, but I wasn’t cash flowing like I thought I would be by that time. So I pulled out my handy spreadsheet… Once again, math background, pretty good at spreadsheets, and just crunched some numbers. I realized that needs 60 or so single-families to hit my goals. So I started looking for ways to scale.

Right around that time, I picked up a Bigger Pockets book on buying a 24-unit apartment building with little or no money down. and that really kind of lit the fire. Shortly after I found this podcast and a couple of others, and I just started consuming everything I could about multi-family. I was listening to the Best Ever daily podcast on real estate on a daily basis, I was listening to several others, I was reading everything else, and I decided that multi-family would be the way that I would basically start to create wealth and cash flow.

I started touring properties and realized that I needed more help than just what the podcasts were giving me. I think podcasts give you a lot of motivation, talk a lot about stories. But there’s a lot of skills that are not quite covered in them. So I bought an analysis tool, I started going to events, getting around people who were doing the same thing. Eventually, we got our first property under contract. I found a couple of partners on the way, formed the company Four Oaks Capital. I’ll let you dive in on any area you want later, but that’s just the broad brushstrokes. But got the first property under contract in South Carolina, we were able to close on that one, and this point right now we’re sitting with 250 units under our belt, and with another 167 apartment community under contract.

Joe Fairless: Well, congratulations on the 167. That is quite a jump from the 250 total units that you’ve gotten. We’ll talk about that. Let’s rewind a little bit, just to get a little bit more context. Every time you moved… Once you had the idea of “Hey, I want to do this”, and then every time you moved, you bought a house – how many homes did you end up with?

Brian Briscoe: We ended up with three. One point where lenders looked at my income to debt ratio, and they said “Single income… You don’t have enough income to buy another house, so we ended up with three, actually. And like I said, the cash flow coming off of those wasn’t great cash flow.

Joe Fairless: What was the cash flow?

Brian Briscoe: One of them was kicking out a couple hundred dollars a month. And one of them was actually sucking up about $500 to $600 a month. And the other one was breaking even. So if you look overall, for the first part of it, we were negative cashflowing. Towards the end, with the three properties together, we were breaking even.

Joe Fairless: Okay, help me with that — oh, towards the end. So initially, you were making 200, and one losing 500 to 600 on the other, and the third one you were breaking even. But over time, you eventually were about breaking even. You said you did an analysis, and you needed 60 single-families to hit your goal. What was your goal?

Brian Briscoe: My goal was to basically match my current income. So I figured that we were living a pretty good life right now, we had everything that we needed, and if my passive income could match my current income, we’d be set. And I was also calculating in that I will retire in about a year from the Marine Corps and I’ll get a retirement pension. So I think that number was about 120k to 150k per year, based on certain parameters.

Joe Fairless: So if it’s 150k, then it’s $2,500 a property a year. So that’s $208 a month that each property would bring in. Does that sound about right?

Brian Briscoe: That sounds about right. And the only thing I didn’t mention is I was also planning on putting 20% down, and everything else, and it was… Anyway, it ended up being a pretty daunting task once I sat down and looked at it. I’m like, “Yeah, that’s not going to happen in a long, long time.”

Joe Fairless: You went through the same exercise I went through. I had three single-family homes. Oh, four. I ended up with four. But I don’t know, at three or number four I realized, “Wait a second. How am I going to get the down payment for each of these to get the cash flow goal?” I think I was wanting $10,000 a month. So around where you were wanting…

Brian Briscoe: Right about the same.

Joe Fairless: Yeah, and I was like, “That’s going to take a long time and a lot of money, unless I do creative financing. And how am I going to do that? And, man, it’s going to be a lot of paperwork.”

Brian Briscoe: Yeah. I wasn’t creative at the time; I didn’t think I’d be able to use other people’s money effectively. And I figured, “Hey, if I scrimp and save and do everything I can, I can probably manage to do two per year.” And I thought, “Oh my gosh, I’m 40. That’s going to take me until I’m 70 years old to get this financial freedom thing.” I’m like, “That’s too long.” Maybe if I started when I was 20… But anyway, that’s…

Joe Fairless: Which doesn’t factor in the value-add plays, and then you do a refinance, and get money out, and then you put that into deals… So there are some things that, to be contrarian to our thought process, someone who is doing that, they might say, “Well, you’re not factoring in the value-add play and refinancing and rinsing and repeating.” Yeah. Fair enough.

Brian Briscoe: Yeah. That was before I heard about the whole BRRRR method. So it was a straight out one loan. And at the time, we had refinanced all of our houses several times, and our loan balance kept on creeping up. So that model, honestly – you’re right, it didn’t have all the factors in there, all the money-making things in there; it was just “Get a 30-year loan and start paying it down.” And that was the model that I built. But like I said, it was right when I was struggling with that philosophy that I ran into Brandon Turner’s book. I’m like, “Wow, if I can buy 24 at once, I can take this 30-year plan and turn it into maybe a 10-year plan.” So that really kind of opened up a lot of doors for me, just that one little paradigm shift of apartment buildings or something that’s accessible. I think prior to that my own limiting beliefs told me that apartments weren’t even accessible to me.

Joe Fairless: So let’s talk about the first apartment building. Well, before we do that, why was the second house losing $600 initially? What happened?

Brian Briscoe: We were living in San Diego, and when we moved to San Diego, fortunately, we didn’t buy when we did. Because we moved there in 2006. And I couldn’t imagine putting two kids into what we could afford in San Diego, which was about 800 square feet. So we started renting. And then the market crashed, and I thought “Oh great, real estate’s on sale.” And we were patient, we were looking around in our neighborhood where we wanted to live and we found a place. And the numbers on this one, at the time, made perfect sense. It was like, “Okay, this property was bought two years prior, at 450. And we can get it for 300,000.” So I was looking at the difference between the peak and where we were at the time, thinking “This is a great deal.”

And we bought the house, we moved into the house. And honestly, I was expecting on living there for three to four years at the time. And I ended up getting orders across the country, so we lived there for one year. So the bottom line is I didn’t really do my homework on what I would be making month to month after we moved out. I just wanted to jump in as quick as I could, and say, “Hey, real estate’s on sale. We qualify for a loan, we can get a house. This is building our portfolio.”

When we ended up moving out our mortgage at the time was 2400 bucks a month. And we rented it out at 1850 with a property manager. So we were out of pocket about six 650 for the first year. And then, like I said, we refinanced. The interest rate we had on it was 5.5%. We refinanced it twice. And when we sold it, we were coming out of pocket about $300 a month on that property. But when we sold it, we walked away with $150,000 in our back pocket. So it all worked out in the end, just – I think that house prevented us from purchasing more at the time.

Joe Fairless: The first apartment community was in South Carolina. How many units?

Brian Briscoe: 55.

Joe Fairless: 55 units. So you went from three single-family homes to 55 units. You were in Washington DC at the time, is that correct?

Brian Briscoe: Yep. I was in Washington DC.

Joe Fairless: Okay. You said “we” when you talk about buying it. Who’s “we”?

Brian Briscoe: My partners at Four Oaks Capital. So there are four of us total. And at the time, we weren’t Four Oaks. I was involved in a mentoring program. I met one of my partners through the mentoring program.

Joe Fairless: Which one?

Brian Briscoe: Michael Blank’s. Anyway, just being around other people with similar ideas, I think was really the key point to any mentorship program. But I met Eric, one of my partners, through the Michael Blank network, and he introduced me to the other two. But when we got that property under contract, it was me, Eric, and Brian Mallin that were going to run the show.

We sat down, we looked at the purchase price, we looked at what we needed, and we said “We need one more person to help us raise money on this” and Eric says, “I know a guy.” Eric introduced us to Todd Butler. And we decided that we would collaborate and go in on this one deal. And three or four months later, after working with each other, getting to know each other, we had a couple of times where we’ve all met together, we decided to form a company Four Oaks. So that’s how we all met, that’s how we got together, and every deal since has been the four of us collaborating, and so far, so good.

Joe Fairless: What went wrong on 55 units?

Brian Briscoe: The biggest thing that went wrong is we got pinched on our interest rate. Going in, our debt service ratio was tight as far as getting the proceeds that we wanted. But we closed just over a year ago… And if you remember what was going on, Fannie and Freddie were coming up towards their mandated caps. So they artificially increased interest rates to be able to slow down their lending. I still remember getting the call from my broker, saying, “Hey, I know we’ve been telling you to expect three point something interest rate… But rates went up, and we’re at a 5.2% right now.” So that was the biggest thing that went wrong, was we expect to get 3.0, 3.3, $3.4 million in proceeds at about a 75% LTV, and at the end of the day we got mid-60s on our LTV, because of the interest rate hike.

We ended up scrambling to close that. We dug into our back pockets and basically put a bunch of our own money in there to bridge the gap. But that was the biggest thing that we had to deal with through the whole thing. But we ended up bringing in one other partner, who brought in some money as well. And we ended up getting across the finish line, and it’s a performing asset now.

Joe Fairless: That one is in South Carolina. Where are the other four?

Brian Briscoe: The other four are actually all in South Carolina. The one we have in our contract is Augusta, Georgia. In general, we’re looking in the Carolinas and Georgia for our new deals.

Joe Fairless: Okay. What’s the size of the other four that you currently own?

Brian Briscoe: We’ve got a 33 in Columbia, we’ve gotten 80 just outside of Greenville, and an 82 right next to Clemson University.

Joe Fairless: Okay. Is it focused on student housing, I imagine?

Brian Briscoe:  It’s actually not, it’s about three miles away from the university, and the average person who’s living there is an employee of the university, not a student. So it’s not getting the same rents that the student housing would get. The rent points are a little lower than the ones that are focused on student housing, and by the bed. But mostly two bedrooms, one bathroom… But still a good little property.

Joe Fairless: Which one has performed the best?

Brian Briscoe: The one that is performing the best so far is one called Windwood. And that’s the one next to Greenville, 80 units. When we bought it, 72 of the 80 were rentable. And we’ve been able to push rents even through COVID on our renewals. We’ve been able to, on the renewals, transfer the centralized water billing to the tenants, and we’ve been able to bring, as of right now, three of the eight down units [unintelligible [00:18:08].19] and they’re occupied. So we’ve maintained a fairly high occupancy rate even through COVID, and we’ve been able to push the numbers up.

Joe Fairless: How’d you find these deals?

Brian Briscoe: These were all through brokers. Three of them were through one brokerage, and that’s Fireman Capital. One of them was a Marcus & Millichap broker that brought it to us, and the other was a broker with Aligned Capital. So all of them through brokers. And Eric, one of my partners is the acquisitions guy, and he’s the magic behind it. He’s the one that’s dealing with the brokers, calling the brokers every day and doing all the analysis and making the offers.

Joe Fairless: What’s your primary role?

Brian Briscoe: My primary role right now is outreach. I’m kind of the wide end of the funnel. We do the podcast, and like I’m doing right now, I go on other podcasts as well. But in general, content plus marketing.

Joe Fairless: You have four partners. I imagine that roles responsibilities need to be defined clearly, so that there are not people stepping on each other’s toes. If that is the case, how do you categorize the roles for individuals?

Brian Briscoe: So Eric’s our Director of Acquisitions, Todd Butler does the majority of the asset management, Brian Mallin is handling the finance end, the bank accounts, the portals, the website, everything else. And the three of them right now are actually working full-time. And because I’m still about eight months away from retiring from the Marine Corps and still have a full-time job, my role is a little smaller for the time being. So like I said, podcast and outreach. I do a lot of the social media postings, and basically trying to bring new investors into the fold.

Joe Fairless: What’s been the biggest challenge that you all come across, practically speaking, on a property?

Brian Briscoe: The biggest challenge right now is none of us have a finance background. So we’ve struggled a little bit with that. We’ve hired a bookkeeper, we’re talking about bringing in a controller to be able to do our finances… But it was just one gap that we had. And we didn’t realize that it would be what it is, but right now, that’s our biggest challenge is trying to figure out… We know how much money we have in the bank. We know everything else. How much can we give as distributions and everything else. So we’re working with a couple of people, we’re interviewing a couple of people right now to come in and to be a part-time controller for us and help us with that piece.

Joe Fairless: Based on your experience, what’s your best real estate investing advice ever?

Brian Briscoe: I would say take action. I firmly believe that there is a virtuous cycle that can occur if you believe and you take action, and just keep on rinsing and repeating. You end up getting a little more confidence. And every time you take action, you’re stretching your own boundaries. So your belief gets a little bit bigger, I guess, and then you’re able to do more. So I would say wherever you’re at, just start small. Take action and keep on pushing the ball forward.

Joe Fairless: Do you still have those three homes?

Brian Briscoe: I’ve sold two of them.

Joe Fairless: Which one did you keep?

Brian Briscoe: I have one in DC.

Joe Fairless: Okay, is that the breaking even one?

Brian Briscoe: That’s the breaking even one.

Joe Fairless: We’re going to do a lightning round. Are you ready for the Best Ever lightning round?

Brian Briscoe:  Ready.

Joe Fairless: Alright, let’s do it. First, a quick work my Best Ever partners.

Break: [00:21:23] – [00:22:11]

Joe Fairless: Alright, best Ever resource that you use to do your job as it relates to a real estate investor.

Brian Briscoe: Best Ever resource – right now, I would say partly my podcast, because I’m able to talk to so many different people with so many different experiences. And a lot of times I’m able to contact these guys who are light years ahead of me and ask them questions.

Joe Fairless: Best Ever book you’ve recently read.

Brian Briscoe: You know, I’ve read or listened to hundreds. I think the one I keep on coming back to and the one that I read daily is the Book of Mormon; it provides clarity and focus for me. As far as business books, I would have to say Seven Habits of Highly Effective People by Stephen Covey.

Joe Fairless: Best Ever way you like to give back to the community.

Brian Briscoe: Well, I give 10% of all my income to charity… And like I said earlier in the program, I do like to teach. So I do spend probably several hours a week talking with aspiring apartment investors who want to learn more about the business, and I feel like that’s a good way to give back to people who are trying to do what I’m doing as well.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?

Brian Briscoe: The best places are our website fouroakscapital.com, or once again, through the podcast, Diary of an Apartment Investor, which is available on all major podcast apps.

Joe Fairless: Brian, thanks for being on the show. Thanks for talking about how you got started and the reasons why you transitioned, as well as how you got up and running, going from single-family homes to apartments. You’ve got an analysis tool, you went to events, and you found partners through those events and mentoring groups. So thanks for being on the show. I hope you have a Best Ever day, and talk to you again soon.

Brian Briscoe: Thank you so much. I appreciate you and your time today.

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