David Sanford is an active duty Army Recruiter and investor in multifamily and commercial real estate. In just a few years, he has grown his portfolio from nothing to owning 55 single family homes and about $2.6 million in commercial office space. In this episode, David talks about the power of using other people’s money to make investments, how he went about tackling his first commercial real estate deal, and lessons he’s learned about working with brokers and lenders.
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TRANSCRIPT
Ash Patel: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I'm Ash Patel, and I'm with today's guest, David Sanford. David is joining us from Richmond, Virginia. He is active duty Army, and David's portfolio consists of 55 single family homes, and $2.6 million in commercial real estate. David, thank you for joining us, and how are you today?
David Sanford: Hey, man. I'm doing really well. It's a beautiful day outside for February. I was out today in short sleeves, so it's a great day... But doing well, and thanks for having me today.
Ash Patel: It's our pleasure to have you, and thanks for that poke coming from Richmond, Virginia; the nice, temperate climate down there. We're up North, it's a little colder. David, before we get started, can you give the Best Ever listeners a little bit more about your background and what you're focused on now?
David Sanford: Yeah, so my background [unintelligible 00:01:25.08] or interested in investing in real estate back in 2016, when I started picking up single family houses. Pretty slow progression from 2016 to 2019. So within those three years I only got eight houses. But then I realized the power of using other people's money, and started raising capital. And then from there went from eight houses up to 50 houses over like the next two years. So I closed out in 2022, I have about 55 current properties, and then I've done maybe a dozen, probably close to like two dozen flips. And then this year, I decided to kind of take the leap into the commercial world. So I started looking at some commercial assets here recently.
Ash Patel: Alright, you're gonna have to backup for me for a second... In two years you added how many houses?
David Sanford: Two years - it was probably 40, 45 houses, something like that.
Ash Patel: That's incredible. And all while you're full-time military?
David Sanford: Yep, active duty Army National Guard. I served as a recruiter in the Richmond area, Virginia.
Ash Patel: Got it. And do you have a team, or was this all done solo?
David Sanford: I don't think you can do that category solo working full-time... I definitely had a team.
Ash Patel: Who's on your team?
David Sanford: I had like a boots on the ground person that was kind of like -- I should have had two people truthfully, but I had him kind of running materials to sites, and checking out new houses, new properties, and like acquisitions, trying to find deals and whatnot... And then I had a team of virtual assistants as well.
Ash Patel: Got it. And what was the transition into commercial real estate, and what was your mindset? Why? Were the single families getting overwhelming?
David Sanford: I think I just looked at the scalability. In the single family world - it's a great asset, it's a low barrier to entry, considering when you're looking at commercial properties. And single family - I just realized that if I want to scale and get where I want to get, I've got to up the game, so I've got to step into larger deals, and kind of do the stack, as many people refer to it as. So back in September 2022 I decided it's time; I went to like a real estate conference here in Richmond, and I just got super-motivated. I met a lot of people that were doing really big deals, and I was "I really want to do that." So I left the conference and kind of got to work with looking at that.
Ash Patel: What is the stack?
David Sanford: The stack - essentially, you just go from like a single family house, and then your next one's like a duplex. And then you go to like a four unit, and then an eight unit, and then a 16. You just kind of keep doubling and just kind of stack it from there. So when I left in September, that meeting, I was "I'm gonna go find a multifamily property." But office space came across my plate, and it was too good of a deal. it penciled out excellent, so I was "Cool. Maybe this is my sign. This is it. Maybe I'll pursue the office space."
Ash Patel: What does that mean, it came across your plate? Was it just an email sent to you?
David Sanford: So I was at the conference in September, and when I left there, I immediately was "I'm going to get into the commercial space. So I called dozens of commercial brokers in the area, and nobody would take me serious, because I hadn't done a deal yet. So I was a little bit unmotivated; it was just a little difficult to get into the space. But one broker finally took me seriously, and he actually sent me a deal, and he was "Hey, you should take a look at it. It's not multifamily like you were mentioning, but it is a commercial asset." So he sent it to me, and I was looking at it like "What's the catch here? I'm new in this industry, but this is looking a little bit too good." So yeah, we dug into it, and we just closed on it about two weeks ago, and it's a great asset to pick up.
Ash Patel: Can we dive into the numbers and the asset?
David Sanford: Yeah.
Ash Patel: What was the purchase price?
David Sanford: I'll back it up a little bit further. So the broker that sent it to me - he's actually a residential real estate agent, but this property was posted on the residential MLS, even though it's a commercial property. So you're not going to find it on like your LoopNets, and you're not going to find on Zillow; it was just kind of like buried in the MLS. They had nobody that was interested in the property. So this one was a 7000 square foot doctor office; the tenant had been there for 18 years, so they're very well-known in the area. They were asking 1.1 million for it.
So we went and looked at the property, and while we were looking at that one, they were "Oh, if you're interested, there's another property we have, that we're asking 1.54 for. It's roughly 13,000 square feet of medical office space." And I was like "Well, hey, it sounds great. Let's take a look at both." And then I looked at both of them, and combined, it was a $2.6 million that they were asking, which is exactly what the tax assessment was on it, and it was bringing in $23,000 a month in rent. So I was like "Let's look at this." And we got it under contract.
Ash Patel: Are these triple net properties?
David Sanford: Yes, both of them are triple net. I was looking at them like "I'm not really sure why nobody else is interested in this, or anything, or what the catch is", but everything worked out really well.
Ash Patel: Yeah, I've been sharing that tip to the Best Ever listeners for the better part of 10 years... Well, I've been sharing it with people, but the Best Ever listeners since I've been doing this podcast. One of the greatest ways to find commercial deals is to look at the residential MLS for when residential realtors post commercial deals. What's the cash on cash on both of them?
David Sanford: This one, when the seller brought it to me, they were telling me that they had the other property there, and they were asking however much they were asking... And I was like "I don't know if I can really afford the downpayment on the whole thing there. So I would definitely be interested in taking both properties, but I need some help with[unintelligible 00:06:29.05] So I asked them -- my initial offer, I was like "I'll give you what you're asking, but I really need you to carry 25% of the purchase for me." And they agreed, at 2.5% interest.
Ash Patel: For how long?
David Sanford: It's amortized over 15 years, with a seven-year balloon on it.
Ash Patel: So if you had gotten a loan with 20% down, you could have gotten paid to buy these two properties, and you could have made monthly cash flow with no money out of pocket. I'm assuming your loan is 25% down?
David Sanford: Yeah. So they carry 25%, and then I have a bank that brought 70%. And then I just put in 5%. So I put in like $130,000 on it. You asked the cash on cash - it's like 40%, or something like that.
Ash Patel: David, did you look for lenders that would do lower down payments?
David Sanford: I looked for tons of lenders. That was almost the hardest part of the deal; every lender I approached, they wouldn't let anybody carry a second on it. So I was having a hard time finding a lender that would. And then the ones that would allow a second, even though the leases were triple net, they were still deducting 30% of the rents. So once you take that out of the rents, and then what's left plus this, the coverage ratio just wasn't there that they were looking for.
Ash Patel: How long are these leases good for?
David Sanford: The leases? They are three-year leases. So there's about two and a half years left on them.
Ash Patel: Okay. And again, the cash on cash - do you know what that is for these properties?
David Sanford: It's like 40% on this one.
Ash Patel: Yeah. Which is shocking that you couldn't find lenders willing to do more... Did you consider partnering with anybody that has lending relationships?
David Sanford: I don't have a network that large yet. So I did reach out to some folks, but I couldn't find anybody that could come to the table with enough cash.
Ash Patel: Okay. And going forward, you're increasing your commercial network knowing that, right?
David Sanford: Yeah, absolutely. So I took down that deal and I was like -- you know, I've been behind the scenes in the residential space... The average friend of mine probably doesn't know what I'm doing, so I was like "I really need to get my name out there and start talking about what I'm doing, and growing my network, so that way for my next deal I'm ready to go a little bit better."
Ash Patel: A lot to talk about here, but before we dive into that, the question that I wanted to ask is - you set out on this journey to acquire multifamily. Are you still looking for multifamily, or are you now all commercial?
David Sanford: Yeah, I'll continue looking for multifamily. I think that's where I would prefer to be.
Ash Patel: Can you find 40% cash and cash in multifamily?
David Sanford: [laughs] I'll aim for it. I don't know. We'll see. I feel like, with the rates being high, you have a little bit more leverage [unintelligible 00:08:55.21] seller finance portion, and then we'll see. Hopefully, that will be an amazing [unintelligible 00:08:58.29]
Ash Patel: Yeah. So you're in a good position, because now you can look at commercial assets, as well as residential multifamily, right? So the potential pool of deals has opened up for you. Let's dive into a couple of things that you mentioned earlier on. The brokers wouldn't take you seriously. How did you get the one broker to take you seriously? Were they new? What did you do differently with that one broker?
David Sanford: He wasn't new at all. I think to the only thing that really helped is --
Ash Patel: So they just took a chance on you?
David Sanford: Yeah, exactly. There was a mutual connection there. So they always say your network is your net worth, and I think that kind of came into play on this one. So this particular broker - he was a residential agent, but he had sold a house to a great friend of mine. I think we saw that we were mutual friends on Facebook, or something like that, so I think he was a little bit more willing to take that chance on me.
Ash Patel: It was the network that allowed this deal to get done. He took you seriously because of that. Going forward, knowing what you know now, how can you get brokers to take you more seriously when you call them?
David Sanford: Letting them know what my portfolio currently looks like and what I've done so far. I think when I was calling brokers back in September, I was mainly just saying, "I'm looking to get into the commercial space." I didn't really go back into my background, and what my portfolio currently looks like, or anything like that. So I think maybe making like a credibility booklet or a template or something like that, like a portfolio packet, and providing it to the brokers probably will go a long ways.
Break: [00:10:24.26]
Ash Patel: David, the advice that you would give our Best Ever listeners that are maybe looking to transition into commercial - when they call a broker, how should they approach that call? How can they maybe avoid some mistakes, or have the broker take them more seriously on that first conversation?
David Sanford: It's a great question. I think that would fall under like just building the relationship before you try to ask for something; try to get to know them a little bit, let them get to know you a little bit, form a relationship and then go and let them know what you're looking for from there. But building the relationship upfront I think will probably be very beneficial.
Ash Patel: Yeah, good point. And find some commonalities. Get on LinkedIn, get on Facebook, see if you have any mutual connections, and start with that. And then if you're new into commercial, and you have a network - say "My team and I are looking to take this down. My partner and I are looking for these types of assets." It's hard to get brokers to take you seriously when you haven't done commercial deals, you're new.
You can also try another approach and just say, "Hey, look, I really want to get into commercial. I know your time is valuable. Here's what I can do to add value to you. In exchange, can you throw me a couple of deals that I can underwrite?" So either I think just go in there very humble and open, or build yourself up, and align yourself with partners or teammates, and use that leverage with brokers. But nonetheless, always find some common ground, mutual connections.
In terms of lenders, it sounds like you had a hard time getting lenders to take you seriously on this deal as well, because it's your first commercial deal. What would you do differently with lenders?
Ash Patel: I think I probably would have had more of a connection with lenders prior to jumping in and getting something under contract. Kind of getting the tools in the tool bag before you go to the job site. But yeah, I should have probably screened a lot more lenders up front. Initially, back in September, when I realized I wanted to get into this business instead of waiting until I had a deal under contract that needed funding or I would lose the [unintelligible 00:13:21.29] or something like that, before I started finding lenders.
Ash Patel: I think it's very important -- in commercial real estate it's much different than multifamily, where we treat our lenders as partners... Where multifamily often brokers are used to get the lowest deal possible, and lenders are often seen as commodities.
So with commercial deals, our deals typically stay on the books of that bank for the life of the loan; there's not really a secondary market to sell those loans off. With residential, with multifamily, there's secondary markets. You can sell it to agencies, you can sell it to other banks... With portfolio loans on commercial deals, there is not that secondary market. So this bank really has to believe in you, and believe in your deal.
So lender relationships are extremely important, and having that narrative where you present yourself and your deal, I've learned, is very important. Or I guess it could be expensive if you don't do it right. But it's almost like a job interview. You're selling yourself and you're selling the deal. It's very important, because that lender you interact with, they have to go up to a loan committee and they have to sell on your behalf, sell you and sell your deal. So having that narrative is extremely important. Basically, a resume; pretend you're going to interview for a job. Your resume is your previous deals in your narrative. So very, very important, lender relationships in commercial real estate.
Another thing you mentioned was not many people know what you do, so that's why your network in commercial real estate wasn't that great. What are you doing to change that now?
David Sanford: Yeah, just started within the past few months getting active on social media. So I've hired a virtual assistant that solely just helps me put together different posts and whatnot for the social media world, and just trying to help me get my name out there. I've been jumping on different podcasts, things like that. I've joined a local mastermind, different Facebook pages, and just kind of chiming in and giving my two cents on a couple different posts, of course, if I'm familiar with the subject... But just trying to get my name out there more. I think that's -- like you said, it goes back to the relationships and the network building, how important that is to help you grow the business.
Ash Patel: Good. You're going all-in. What does it mean being more active on social media? How often do you post, what platforms do you post on?
David Sanford: So right now I'm posting three times a day, mainly on Instagram. I post on LinkedIn as well, and I do some TikTok and Twitter... But I'm not really a social media -- I'm younger, I'm only 34, but I've never really been very big on social media. So learning all the different platforms is a job in itself...
Ash Patel: Wait a minute, what does that mean, I'm only 34? Does that mean you're too young or too old?
David Sanford: I just mean, I should be a lot more familiar with social media than I am. Most 30-year-olds, they're probably a lot more active on social media, and they're familiar with the TikToks and YouTube's and all that... But to me it's relatively new.
Ash Patel: I applaud you for going all-in. Where did you learn to post three times a day on Instagram? Is that the metric that builds the best following?
David Sanford: Oh, I have no idea. I just shot from the hip.
Ash Patel: Alright. Cool, I like it.
David Sanford: You know, I'm a big follower -- I like Grant Cardone, he's very motivating, and he posts probably 30 times a day. But I was like "Well, if he posts all the time, maybe I just need to post more than just once a day or once every couple of days" or something.
Ash Patel: Got it. In terms of social media and having a VA do the posts, do you approve the posts? Do you make suggestions? How does that work?
David Sanford: So she takes like podcasts and divides it up into like little 20-30 second clips or something like that, and then she saves them into like a Google Drive, and then I can go into the Google Drive and just kind of look at it and be like "Hey, let's let's change this, let's edit this." And then she handles the posting schedule and everything. I just kind of look it over before she posts it.
Ash Patel: Good for you. David, what's the hardest lesson you've learned in your real estate journey so far? Whether it's about money, deals, friends, partners...
David Sanford: I think the thing I regret the most - it's kind of twofold, but getting my name out there sooner, to find more partners or more teammates to take down deals, with raising capital and whatnot, finding deals... I think I went at it solo way too long, and that really kind of slowed my progression. Even though it was a decent progression, I think I could have went a lot farther by now had I teamed up with people a lot sooner and got my name out there.
Ash Patel: If it makes you feel better, I had the same experience. A couple of years out of my 15-year IT career, my wife and I would go out to dinner and people would be like "And how's the IT business?" and I got so tired of correcting people, letting them know I'm in real estate... I would just be like "Everything's great. How are you doing?" And that was a failure, an epic failure on my part. Because a lot of those people later on became investors in my deals... But I should have capitalized on that much sooner. So don't beat yourself up, especially now that you're going all-in. So thank you for sharing that with us. David, what is your best real estate investing advice ever?
David Sanford: Best advice ever... Get your name out there. I tell people now - like I said, I'm a recruiter for the military, so I'm recruiting with young 18, 19 year old kids, and a lot of them express interest in real estate once I tell him what I'm doing... And I'd say just start posting and get your name out there now. Even if you're just learning what ARV means, 90% of the population doesn't know what that means. So that's the material right there. That's something you can help teach other people. You might not have taken down a deal yet, but you're learning a lot of material that you need to know to take down a deal. So just start getting your name out there, start building up that network.
Ash Patel: Our Best Ever listeners are very savvy... For any new Best Ever listeners, what is ARV?
David Sanford: After Repair Value. So what a property should be worth after you put some money into it.
Ash Patel: After Repair Value. Thank you. David, are you ready for the Best Ever lightning round?
David Sanford: Yeah, I'm ready.
Ash Patel: Alright, David, what's the Best Ever book you've recently read?
David Sanford: Best ever book I've recently read is the 10x Rule Mentor. Like I said, I'm a big fan of Grant Cardone, and he's extremely motivating. I read it once back in like September, October, and I've probably read it two or three times again since then.
Ash Patel: David, what's the Best Ever way you like to give back?
David Sanford: I love to teach people, help people, mentor people. When I started in real estate, I was just self-educated through YouTube. So anytime I find somebody that expresses interest, I probably talk to them way too much, but I'm just happy to share my experience and help try to speed other people's process up. Just to coach and mentor.
Ash Patel: David, how can the Best Ever listeners reach out to you?
David Sanford: Instagram or LinkedIn are probably the best places. On Instagram I'm @dealwithDavid. LinkedIn, David Sanford. You can easily find me on there.
Ash Patel: Awesome. David, thank you so much for sharing your story. Thank you for your service to the country and sharing your journey in pivoting from going into multifamily, finding a great commercial deal, and having the wherewithal and the courage to pivot, taking down to great medical buildings... Thank you for sharing that with us.
David Sanford: Definitely. I appreciate you guys having me. Thanks for the conversation.
Ash Patel: Best Ever listeners, thank you so much for joining us. If you enjoyed this episode, please leave us a five star review, share this podcast with someone you think can benefit from it. Also, follow, subscribe and have a Best Ever day.
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