JF2373: Maximizing Profits By Optimizing The Turnover Rate With David Grabiner

David started his real estate career back when he was working as a hospital administrator in the Democratic Republic of Congo. He was looking for financial freedom and the ability to live and work wherever he wanted.

David partnered with his father, and they started a real estate business together. By the time he went back to the United States, his company has already had an impressive portfolio. To acquire these properties, they followed a simple recipe that worked: save, pay the 20% down payment, rinse and repeat. They now mostly work with small multifamily units, but they also work with commercial properties.

David Grabiner Real Estate Background:

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Best Ever Tweet:

“Normally, what hurts the revenue and increases expenses is when you have inefficient turnovers” – David Grabiner.

TRANSCRIPTION

Ash Patel: Hello, Best Ever listeners. This is Ash Patel, and today I am speaking with David Grabiner from Chattanooga, Tennessee. David has six years of real estate investing experience and has acquired 137 multifamily doors and 14 commercial units. Let’s figure out how he did this. David, welcome.

David Grabiner: Hey, Ash. Thank you so much for having me on the show. I really appreciate it.

Ash Patel: Yeah, I want to hear the story. Tell me, six years ago, how you got your start.

David Grabiner: Oh, wow. Let’s go back six years ago… I was working in The Democratic Republic of Congo as a hospital administrator. Not where most people start their real estate investing career… When I was over there, I was like, “Okay, I want to get into real estate investing as a way to financial freedom.” That’s what I was looking for, financial freedom; to basically live wherever I wanted, do whatever I wanted and be financially free. Real estate was that vehicle. I started to look in the Chattanooga market because I had lived there before, and saved up some money and bought a quadplex. That’s basically how it started all those years ago.

Ash Patel: And you did this while you were in Congo?

David Grabiner: Yes, I did. I partnered with my father who still lived in the Chattanooga area. We were 50/50 partners. He would get the loans in his name, I would spend my nights looking on the MLS, trying to find deals, and going over them, and making sure they’re a good deal. I would send them to my dad, “Hey, this is a good property. Let’s go for it.”

So the first property we got was a quadplex for 125,000. We put about 25,000 down. At the time it was renting for 450 a unit, now it’s renting for about 650 a unit. But that was the very first deal.

Ash Patel: So I’m going to rewind a little bit. As a hospital administrator, what brought you to Congo, or how did you end up there?

David Grabiner: I grew up as a missionary kid. I grew up in Zambia, went to high school in Kenya, I met my wife in Kenya. She’s from Argentina, and her parents had a hospital in the Congo; they started a hospital. So after college, after working around the Chattanooga area for a while, they wanted us to come help in the hospital over there. My wife’s a nurse, and I had an MBA in Healthcare Management, so I went over there to help them.

Ash Patel: So MBA, hospital administrator, but you chose real estate to fulfill your dream of financial freedom.

David Grabiner: Yeah.

Ash Patel: Did you not think your corporate career would take you there?

David Grabiner: No. And I realized — I liked working in the hospital in Africa, and that environment, and it’s more like a family business, and that freedom and flexibility… I did not like from before my corporate jobs, I did not like having to punch in and punch out and that sort of thing. I knew — when I moved back to the states and decided to do real estate full-time, if I came back and I decided to do hospital administrator, I’d have to just go wherever the job was and I would just have to follow that career wherever it took me. That did not really entice me. I wanted to be free as soon as possible, and so real estate really let me be free a lot sooner than trying to work a high-paying job and saving up the money and put it in the stock market or something like that.

Ash Patel: How old were you when you purchased this four-unit, and then how old were you when you quit the whole corporate gig, hospital administrator gig?

David Grabiner: I was 29 when we got the first property, and then three years later I quit and moved back. Really, we moved back to be closer to my dad, he had some health issues, so it kind of accelerated the process and that kind of pushed me overboard to jump into it quicker than I thought I normally would have. But within three years, and now I took over managing them all myself, so there was some extra income there. It wasn’t a passive cash flow that was enough necessarily for me to quit after three years, but the passive income combined with me managing my own units and that savings of a management fee – now that was enough for me to become completely full-time in real estate.

Ash Patel: So for three years you’re essentially remotely managing this unit, along with the help of your father?

David Grabiner: That’s right. And he had a full-time job. It wasn’t just that one unit; in three years we built it up to 24 units.

Ash Patel: Wow. So the whole time you’re in Congo, you’re acquiring additional units?

David Grabiner: Yes,

Ash Patel: Tell me the challenges of that.

David Grabiner: Obviously, the one would be financing. Now, fortunately, we were able to get them in my dad’s name, and I didn’t have to put my name on the loan. We had an agreement that we structured at the beginning and that we signed and everything… But really, it was more about trust; we have complete trust in each other and in our decision making, and how we have the same goals. I was very fortunate to have that. Not a lot of people have that even with their parents where they could completely trust them with their finances, but I definitely can with my father and he can with me.

So that was definitely a challenge, but it was overcome by, obviously, my connection with my father. But really, it was a good time to be buying properties, they were easier to find, I could find them online, I could do all of that. My dad was managing them pretty well, even though we had a full-time job. We weren’t maximizing them, but it was going decently well. We had this part-time maintenance guy that was helping out as well. So it was going decently well, but nothing compared to when I started doing it full-time. That’s when it really took off. Actually, the information in the intro is a little bit old. I’ve got 170 multifamily units now, and I’m about to close on two other commercial deals as well in the next month or so. So by the time this comes out, I’ll probably have about another 10 million worth of commercial property.

Ash Patel: So by the time you hit the States, you already had a great portfolio, and you were able to dive in full-time, manage them. Were most of your acquisitions up until then fully rented, or were they value-add?

David Grabiner: It was really, really just basic stuff. Yeah, they were mostly rented, we would buy them, save up our money 25% down, just really generic. Just save, save, save, buy a property; save, save, save, buy another property. Nothing fancy, just buying properties off the MLS. Or some of them were off-market, because listing agents started bringing them to us. That’s one strategy that I employed really early that did help me grow, was we started going directly to listing agents, and didn’t use a buyer’s agent.

Ash Patel: These are in the Chattanooga area?

David Grabiner: All in the Chattanooga area.

Ash Patel: Alright. So you come back to the States. You’ve quit your job. Tell me how you hit the ground running and dove into managing these complexes. What were your challenges then, and what type of things did you implement to maximize returns?

David Grabiner: Okay. Obviously, I didn’t really have any experience managing properties, but I did have experience talking to people and managing people, and I kind of realized — and I have a numbers background for my MBA, and I like accounting… I still do my own accounting for everything. So what I realized is I need to increase revenue and reduce expenses… And normally, what hurts revenue and what increases expenses is when you have a turnover or you have inefficient turnover. So I started focusing on making sure my occupancy got really high, and that when things got vacant, that I would turn them really quickly. That’s really where I focused. I didn’t focus on trying to make the rents as high as possible, because sometimes that increases your vacancy. But what I focused on in my market was when someone moves out, I’ll raise the rents. I’ll raise them a little bit on people on there, but I’m really just focused on trying to keep paying tenants in there.

I had to develop systems and figure out how I’m going to market these units quicker, so that they read quicker. Before it was just like, “Okay, let’s just put it on Zillow and see what happens.” At that time, I think we were just using Cozy, because it was free. We were using Cozy to do the rent collection, and our marketing, and stuff like that, but it would take too long. Then I started saying “Okay if I put this on Facebook Marketplace, I’m getting way more leads. Okay, put this on Zillow, Zillow is also good.” But I started doing all those things and started really focusing on the reduction of vacancy, and the time something was vacant. And then I also implemented a property management software called Buildium. Before we were using spreadsheets, which was fun but it took a lot of time. Buildium definitely streamlined it.

Ash Patel: Are most of your holdings smaller four, sixes, eights, quads, twos?

David Grabiner: Well, now the majority, number-wise, is actually small multifamily or medium multifamily packages. So I have three separate streets of duplexes. They have like 10 or so duplexes on them. So I have one street with 10, another with 11, and other ones with 12, and I just own that whole street. And two of them are private streets, so there are no other properties on them. It’s just my properties. Then I have a 35 unit apartment complex. Then the rest is kind of spread out. Then I have another 18-unit that we just got. I forgot about that. So the majority of the properties now are small multifamily, but we started with just a quadplex here, a duplex here, that sort of thing.

Ash Patel: And then the commercial, tell me all about that.

David Grabiner: So commercial, I kind of jumped into — an opportunity just arose from my connection with another investor. He brought a deal to me and I was like, “Man, that’s a nine cap, and it looks like a solid property. It’s going to be cash flowing.” So that’s really how I jumped into that. There are unique sets of challenges for commercial versus multifamily, but really, I just looked at it as an opportunity to get an asset that provides consistent cash flow, because that’s mostly what my goal is, is cash flow investing. The right commercial property does that. Now this whole pandemic, that sure put a lot of question marks and a lot of stress on that. But so far, it’s actually been good and I think there is actually a strong opportunity in a commercial. I don’t want to tell too many people about that, because they might start seeing that and start running over there… Because everyone right now is running to multifamily. All investors, whether they’re new, whether they’re big, whether they’re small, everyone wants multifamily investment, because it’s seen as such a safe, great investment. They’re kind of ignoring the triple net, commercial strip retail centers, and stuff like that. That’s not very popular right now. And even the lending on that it’s not very popular; the banks don’t really want to lend on that, which is probably why it’s not as popular among investors. But I think that’s going to come back strong, and those assets, if they’re a good assets, and you get them for a good price, when the lending comes back then the cap rates are going to go back down and the value is going to go up.

Ash Patel: What was that first commercial property that you bought?

David Grabiner: The first one I bought was an office space, and we still have that. Then the second one shortly thereafter was a strip center that has a Planet Fitness, a CVS, a Pizza Hut, a Subway, and two other small shops in it. Both of those came through my networking with other investors.

Ash Patel: So in terms of managing residential tenants versus commercial, talk about that.

David Grabiner: Yeah, commercial is great when it comes to management, you know… Oh, man, it’s so easy. I had a 42,000 square foot commercial center bringing in 30,000 a month in revenue, and it takes me 30 minutes a month to manage. It’s a couple of entries here in my software, maybe an email here or there, and that’s it. So easy. I think about that when I’m thinking about scaling, like, “Okay, I could really scale, managing myself a lot more big commercial deals than I can scale multifamily.” Because multifamily is so management-intensive… It really makes or breaks a property. I’ve seen so many properties sell for much less than they should because they had poor management. I’ve seen people buy properties that I managed before, and take them over, and it went down, even though they use professional property managers.

I know the difference that good property management is, so that’s why I’ve just, in my own model – this doesn’t work for everybody – I’ve just kept my management of multifamily in-house and that’s why I only buy in my local area. But with commercial, I’m happy to buy all around the Southeast, because if I can just get there in a day, I can definitely manage commercial… Because my commercial property – I hardly ever go by and see it; there’s no need.

Ash Patel: You’re still acquiring multifamily?

David Grabiner: Yes, I am. It’s a good deal.

Ash Patel: Okay, so you’re just chasing deals?

David Grabiner: Essentially, yeah.

Ash Patel: Tell me more about the office building, how many units are in there?

David Grabiner: It’s kind of weird. It can be broken up into different ways.

Ash Patel: Okay. And was that fully rented when you purchased it?

David Grabiner: Yes, it was. Now, we are about to have a knock-on effect from the pandemic where tenants are not renewing their lease this coming year. Their lease is up and they realize that “We don’t need all this space.” Fortunately, last year didn’t affect us, hardly at all. But this year, we’ll see what the effect is going to be.

Ash Patel: Is that more of a suburban location? Or is that in the city center?

David Grabiner: No, it’s not in the city. It’s kind of the outskirts of the city, near the airport of Chattanooga.

Ash Patel: Yeah. I think you’ll be surprised, there’s a huge demand for suburban office space with the pandemic. A lot of people are getting tired from working in their home office, they just want to get out of their house. A lot of larger corporations are allowing their employees to find an office closer to their house, versus coming to their city center corporate headquarters. So I think you’ll be pleasantly surprised and you shouldn’t have much of a problem trying to fill that.

David Grabiner: It is true. We did have one tenant move out because of the pandemic and another one moved in, and she was like, “I just need a workplace,” for her and her mom. She and her mom share it, and it was just like a one-room office, and they’ve been paying rent just fine. So you might be exactly right. But I do always get a little bit concerned when it’s like, “Okay, someone’s not renewing the lease. Now we’re going to have to lease it up.”

Ash Patel: So 14 commercial units… Tell me what they range in. We’ve got the office building, the class A shopping center… I’m assuming you have a whole bunch of properties in between those two.

David Grabiner: At the moment, I just have those two commercial buildings.

Ash Patel: Okay, so it’s 14 units total?

David Grabiner: Yeah, exactly, and those two commercial buildings. Then I’m under contract for another A-class… But this is like a really A-class office building in a smaller market. It’s not in Chattanooga; for people who know it, it’s in [unintelligible [00:17:19].24], which is another town just outside of Chattanooga. A good-sized town, but it’s not Chattanooga. Then I got a commercial strip center under contract out in Oakland, Tennessee, which is just outside of Memphis. So those are the two deals that we’ll be closing here in the next month.

Ash Patel: Cash on cash returns… When I think triple net class A strip mall, I’m assuming the returns are much lower than a value-add office building or multifamily. Is that the case?

David Grabiner: If you’re looking at the cash on cash return right now, every market’s different and every multifamily asset class. But let’s just say, on average – because some markets are really low. But let’s just say you can get multifamily at a six cap. Most people would be like “Oh, I can get multifamily at six cap. Yeah, we want that. That’s a good cap for multifamily.” You’re seeing threes and fours in the hot markets. But right now, I’m buying A class, commercial property, great tenant mix, everything, and I’m getting it at just over an eight cap. So the cash on cash return, in the beginning, is better. There isn’t necessarily the potential upside like you can do with multifamily. With the multifamily it’s more, “Okay, I can come in, I can do this, this and this and this.” The commercial is a little bit slower, “Okay, when can I increase rents? Maybe I’ll get a new tenant in, we’ll get up rents.” But it’s not as high of a spike, normally, unless you buy a property with a lot of vacancy. But this one happens to be pretty much full. So that’s the difference.

Now, the cap rates, if they just go down though, when the lending comes back then there’s a lot of upside. But the initial safe cash on cash return is more there in commercial right now than it is in multifamily.

Ash Patel: So with your commercial, you had a Planet Fitness. That’s your anchor tenant?

David Grabiner: Mm-hmm.

Ash Patel: Who else is in that strip mall?

David Grabiner: CVS.

Ash Patel: Okay. How many years do they have left on their lease?

David Grabiner: That’s always a thing with mult– So just some advice to people out there. If you’re going to get into commercial, it’s all about the leases. And it’s different than multifamily. Multifamily, a lease is pretty much at lease; you look at it, whatever. You’ll get that tenant out in a year if you want, or renew their lease. But with commercial, you have to read those leases, because there are so many details in there, and there are no specific guidelines. It’s like the wild wild west. A lease can say anything if it’s a commercial lease, at least in Tennessee.

So Planet Fitness – unfortunately, they had some issues with the pandemic in the beginning and they couldn’t pay rent for two months, so we let them not pay rent. We got a deferral from our bank so we didn’t have to pay our mortgage. They put it at the end of the loan, which was nice of them to do for us. Then Planet Fitness asked if they could have a year to pay back those two months, spread it out over a year. We said, “Yes, you can, if you sign another extension.” So they signed their extension early. We got them 10 years, they’re locked in for 10 years now on Planet Fitness.

CVS has only got three more years on their lease, and I contacted them and said, “Hey, are you going to renew?” This was even before the pandemic, but I was like, “Do you want to leave early, and we let you out early and you just pay a portion upfront? Do you want to renew now for a discount, anything?” And the head of CVS real estate was like, “We’re not making any decisions this far in advance on the property.” I was like, “That sucks.”

So it’s unknown what’s going to happen. I do know, it is fortunate because we get to see their gross sales at that location; it’s part of the lease. We get a percentage of their gross sales, which is an amazing bonus that’s built into that lease. So here in March, I’ll get to see their gross sales for last year and I’ll kind of have an idea. Like two years ago, they did really good, and if they did really good again last year, maybe it’s an indication that they’re going to keep the store open. But I’ll know…

Ash Patel: Do you have something to compare those numbers to? Do you know what other CVSs coming at for gross sales?

David Grabiner: Well, I actually haven’t looked at what other CVSs are doing for gross sales. I have the historical numbers on this property.

Ash Patel: Year over year numbers.

David Grabiner: Yeah, the year over year numbers are growing and growing and growing. I would say that’s a good market, where your numbers are growing and growing and growing. In addition, I assume –and I don’t know, maybe I’m wrong– that they have a benchmark on the gross sales. So as soon as it goes up above a certain point, that’s when we start getting a payment. I’m assuming they knew what they were doing when they put that benchmark in there. Last year, they were well over the benchmark, so we got a return of it,

Ash Patel: You get a percentage of any revenue over that amount.

David Grabiner: Yep.

Ash Patel: Great. So with your triple net leases, what are your landlord responsibilities? Because I know a lot of people assume triple net is just straight mailbox money. But like you said, they’re all different. So in this case, what are you responsible for and what are your duties?

David Grabiner: Yes, so it’s all about the leases. People call it triple net and it might not be. Sometimes the landlord’s responsible for the AC, sometimes the tenants responsible for the AC. Sometimes the landlord’s responsible for the parking lot, sometimes the tenant is responsible. The roof, the structure, whatever it is, can vary depending on the lease. Now, fortunately, at this location, it’s a pretty good lease. The tenants do payback for repairs. So we still do them, we still take care of the parking lot. If there’s a roof leak, we’ll fix it, we’ll repair it, we’ll repair the outsides, but they pay back over time. What we do is they make an estimated payment to cover all the common area maintenance, and to cover the taxes and insurance. They pay their share of the taxes and insurance too, and they pay for the management fee, even though the management fee comes to me for managing. It’s a great situation. But that’s not always the case with every triple net; it depends on the lease. But in this instance, yeah, they pay an estimated payment every month, and then at the end of the year, I do a CAM reconciliation and I send them “Hey, this is all I paid for. This was the insurance taxes, CAM, everything.” And they paid more, I send the money back to them. If they didn’t pay enough, they send extra money to me for the shortfall.

Ash Patel: I think that’s so important for people to realize, because again, I think they assume triple net literally means “I never get to hear from my tenant and I just collect a check every month in the mail. But in reality, a lot of triple nets, if something happens with the roof, you’re getting a call. Granted, you’ll get reimbursed for whatever expenses you incur. When the parking lot is old or needs to be restriped, you’re getting the call, you coordinate the subcontractor to come out and do all the work, and again, you get reimbursed on the back end. But there is a fair amount of management that can occur with a triple net… So thanks for sharing that. That’s a great point.

David Grabiner: Yeah. If someone’s really looking for mailbox money, then they would be looking at what’s called an absolute net; some standalone CVSs, Walgreens, single-tenant. They sometimes will take care of everything. They literally take care of everything and they just send you a payment. But normally, the cap rates on something like that, that has a good lease on it, that doesn’t expire in the next three years, the cap rates are going to be very low on something like that. That’s really for old people who are just looking for a place to put their money and aren’t trying to be aggressive.

Ash Patel: Yeah, great point. So McDonald’s and Starbucks are single-tenant. You’re right, that’s how they work. It’s pure mailbox money. But I’ve seen those cap rates in the threes and fours, that’s rough.

David Grabiner: Exactly. Three and four; you’re not really making any returns on that.

Ash Patel: So in the future, what kind of commercial deals are you going to look for? Would you get away from the triple net and maybe do some with gross leases? Some smaller mom-and-pop shopping centers?

David Grabiner: Yeah. You’d be surprised, even in big deals there’ll be some gross leases in there. What I like about triple net is the security when the taxes and insurance go up that you’re not having to carry that cost. When you purchase a property, taxes can go up quite a bit, especially if it hadn’t been sold; that’s at least how they do it here in Tennessee. So taxes can really change, but with triple net you kind of have that security that if that goes up, you’re not bearing the cost of that, the tenants are. So that’s the nice thing about it. But it’s got a good cash flow potential. I wouldn’t turn it away just because it’s a gross lease. I would just have to make sure that I put in my underwriting that I’m taking into consideration when the taxes go up, what are my taxes going to be. When my insurance bill might be higher than the previous guy because it’s on a higher valuation, what are those numbers going to be?

I looked at another office building, and that’s why I ended up not buying it, because it worked at the current numbers. But I know with the new appraise tax value and the new insurance costs, it’s not going to work.

Ash Patel: That’s a great point. With your two tenants, the CVS and the Planet Fitness, CVS is a corporate lease.

David Grabiner: Yeah.

Ash Patel: Is Planet Fitness an individual franchisee? Or is that a corporate lease as well?

David Grabiner: It is a franchisee, but they have 100 locations or something like that; 90 locations. It’s a very large one. All the other tenants in there actually are franchisees as well, like Pizza Hut and Subway. But CVS is the only corporate one.

Ash Patel: So can you tell our audience the difference between a corporate lease and a franchisee lease?

David Grabiner: Yeah. A corporate lease is guaranteed by the corporation. So really the only way that they get out of that is if the corporation itself files for bankruptcy. That’s very unlikely in the event that CVS is going to file for bankruptcy. Even if something was going to happen, it’s going to be like Rite Aid where they get bought out. Then when Rite Aid gets bought out they closed all those pharmacies, but they still pay the leases until they’re done, because they’re still honoring those leases. If it’s a franchisee, like Pizza Hut and Subway, if that franchise goes bankrupt, well that’s it; you don’t have any recourse against Pizza Hut. Even though it says Pizza Hut on the building really, it’s mom-and-pop pizza doing business as Pizza Hut. So really your lease is just with that LLC, and if that LLC goes bankrupt, well, you’ve got no recourse against the corporation.

Ash Patel: Do you have personal guarantees on your lease?

David Grabiner: Some of them have personal guarantees. It’s interesting in office space, obviously, we’ve got personal guarantees on that. But some of the leases I’m taking over have personal guarantees. I haven’t had to lease-up any of the big commercial space yet, so it will be interesting what I work out with. I would get personal guarantees, obviously, but I still think about “Okay, what terms am I going to put in the lease?” Because you can do whatever you want. I’m reading all these leases and trying to hold different ideas from all the leases I see.

Ash Patel: Yeah. So a great example of different types of lease backers – you have the corporate guaranteed lease where they can’t get out of it unless they declare bankruptcy. You have a franchisee lease, but in my book that’s almost the same as a corporate-backed lease with your case, because this person owns dozens of gyms, and the only way they can get out of the lease is if they declare bankruptcy as well, assuming that all of these are in the same LLC. If not, if this person has a personal guarantee, they still have to declare bankruptcy to get out of your lease. Then just your typical franchisee LLC lease, if they don’t have a personal guarantee, it’s quite easy for them to shut down that LLC, and they’re essentially out of the lease. So a great lesson here to be learned about who’s actually signing that lease in a commercial real estate setting.

David Grabiner: Yeah, and also making sure… What happened to me actually with our Pizza Hut – just to bring up another interesting point – the franchisee had 23 locations and then they sold to another franchisee that has 123 locations, and it’s growing even bigger. So it was a bigger franchisee taking over a smaller one. But they sent all this legal documentation “Okay, we’re taking over this. We’re getting a bank loan from Wells Fargo”, and they sent all these terms that they wanted to change. Some of it was requested by Wells Fargo, like you need to inform the lender if they’re in default; you need to give the lender the opportunity to cure their default for them, you need to do all these things… And I just said no. It was just so interesting. I’m like, “No, I don’t think I want to do that.” Wells Fargo is asking for it, but I don’t have any reason why I have to do that. I don’t need to put any more onus on me to do more steps. So I said no, and I sent it back to them, and they said, “Okay, fine.” They took all that language out. [laughs] It was really an interesting situation that just because it is a big corporation or it’s a big conglomerate, or it’s Wells Fargo, or whoever it is asking for these things, you don’t have to change a lease; you don’t have to make amendments to anything if you don’t want to when you have a lease in place.

Ash Patel: Once the lease is signed, it’s solid. Would you consider selling this building now, since you re-upped the Planet Fitness lease?

David Grabiner: Yeah. I probably would sell it for the right price, but because of where I’ve seen cap rates go for the short term, I don’t think it’s there on the cap right now. I would wait until it goes down to a seven cap and then I would sell, because it’s going to get down there. I got this killer deal on this; we got it for like a nine cap just over a year ago. It was just a really good deal that I just happened upon, honestly. But when things go back to normal with the lending and when the cap rates go back down to six or seven cap in commercial, then I probably would think of selling it, and 1031-ing it into something else.

Ash Patel: Was this listed on LoopNet or MLS?

David Grabiner: No. It was not.

Ash Patel: How did you acquire this property?

David Grabiner: I bought a six-unit for my sister. She wanted to get multifamily, I said, “Okay, I’ve got the perfect property for you. It’s a great starter property.” I did everything for her. I found it, I negotiated it for her, I found her the lender… She was in Alaska, and she didn’t do a single thing. I even signed for her, got the power of attorney to sign at closing… Everything, I did everything. And the seller shows up and he’s like, “So what are you getting out of this?” I was like, “No, I’m just helping my sister. I manage it for her, everything.” She did nothing.

Ash Patel: She’s a passive investor.

David Grabiner: Technically. [laughs] But she completely owns it. But she’s got a good situation there. I’m just trying to help my sister get into multifamily investing, because it was a great property, and it’s been a great deal for her.

Ash Patel: So the seller is talking to you.

David Grabiner:  The seller is going like “You can make money on this. You can’t be doing things for free. You can’t be doing this.” I get talking to him, and he has a bunch of units, and we have about the same amount of units… He’s a little bit older than me, but kind of close in age, and we kind of just hit it off… I get his number, he gets my number and then we talk and text… And then he calls me and he’s like, “Hey, I have this deal under contract.” One of his other partners backed out, so I was able to jump in. He got it under contract because he had this connection with the broker who was in another city, and before they listed it they asked him if he wanted it, he said yes, and he got it under contract. He didn’t bring me in until someone else dropped out, so it was kind of like a rush at the end for me to do my due diligence, because we’re already under contract, we’re in the due diligence period… I’m like, “Well, I’ve got to make sure we’re secure on this.” But it really worked out for me, because I was able to jump in and take over all this other equity that was supposed to be coming in.

It’s turned out great. I mean, we manage it together, we work really well together, and then he’s brought me this other commercial office building; it actually came from him as well, and he brought it to me. So it’s all about networking. Sometimes you’ve got to do something for free in order to make that connection.

Ash Patel: Yeah. So doing a favor for your sister really helped you out.

David Grabiner: Oh, yeah. Majorly.

Ash Patel: David, what’s your Best Ever real estate investing advice?

David Grabiner: Be courageous and be determined. I don’t feel like I’m smarter than anyone else, or I’ve had any other advantages necessarily than most any other average American. I didn’t have a bunch of money to start, I wasn’t making a lot of money. But one thing I’ve done consistently is just going for deals, be courageous and be determined to get them done.

Ash Patel: That’s a great story. David, are you ready for the lightning round?

David Grabiner: Let’s do it!

Ash Patel: Alright. First, a quick word from our partners.

Break: [00:33:52] – [00:34:34]

Ash Patel: David, what’s the Best Ever book you’ve recently read?

David Grabiner: I think everyone needs to read this – I need to reread it, actually – it’s Never Split The Difference by Chris Voss.

Ash Patel: Yep. What was the biggest takeaway from that book?

David Grabiner: Say no, literally. That book has made me hundreds of thousands of dollars, and given me even more courage to be like — when someone asks for something, say no in a polite way, and then starts the negotiation from there.

Ash Patel: Awesome. David, what’s the Best Ever way you like to give back?

David Grabiner: I’m actually starting this program, it’s called Homeless to Homeowner. I am buying single-family homes, rehabbing them in partnership with the city of Chattanooga, who’s paying for half the rehab costs, because I’m agreeing to rent them out to low-income individuals, and then I’m putting homeless people in them. At the same time, I require those homeless people to enroll in a program that helps teach them financial literacy and helps them move towards being able to become a homeowner, with the idea that they can then buy that same home that they’re living in.

It’s a brand new program and idea that I just started this year. I just have one house and I just got the first homeless person in there. She’s super excited. My goal is to have 10 of those this year, and 100 within three years. It’s not something I’m doing because it’s going to make a lot of money. It’s still going to be profitable, not the most profitable thing I can do, but I really have a heart for the homeless population. I already put a lot of them in my rental properties, but I wanted to take it to the next step, so that’s why I started this thing called Homeless to Home Owner.

Ash Patel: That has to be a great feeling, seeing them progress. David, how can the Best Ever listeners reach out to you?

David Grabiner: On Instagram, @diy_landlord is my Instagram. I post on there at least twice a week, and I’ll answer any DM questions that you want to shoot me over there.

Ash Patel: Fantastic, David. Thank you so much for your time. You’ve got an amazing story.

David Grabiner: Thank you, Ash. I appreciate it.

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