Chad Duval: You’re listening to Start FM episode number… Oh, man, episode number 15 you guys. Episode number 15 of Start FM.

Gino: Yeah, the first property we did, I think what happens is we’re just accustomed to avoiding pain in our society. And I think if you can embrace the pain and embrace the suck, you’re just going to get a lot stronger mentally and emotionally. And our first property within the first year, we were sued for bed bugs, we had a $9,000 septic blow up, we had a person pass away in the unit, and then we had rampant drug use on the property. And that’s what I knew. Jake didn’t obviously tell me everything that happened every day to day. That’s the first year, and then transitioning from weekly to monthly to yearly renters is another thing. We went through a couple of resident managers and it was a tough time for us.

Announcer: This is Start FM. Now, here’s your host, active real estate investor and entrepreneur, Chad Duval.

Chad Duval: What is up guys? Welcome to another episode of Start FM. We are officially back from Thanksgiving. I hope you guys had a great holiday. You’re all rested, you’re all burning off all that turkey and stuffing. Stuffing is my favorite, but yeah, we’re back to another episode. Sorry I wasn’t around last week. I took a week off. I’m really struggling to keep up. It’s the end of the year with my 9:00 to 5:00. I’m trying to hit some targets for the end of the year with that and everything going on with my dad with the surgery as you guys heard on my last quick little episode. He’s all good. Everything went well. He’s actually recovering a lot faster than they had anticipated, so it’s all good. We’re getting back into a cadence, getting back going.

Chad Duval: This episode is a really good one, definitely a more tactical one, but real quick before I dive into that, I just wanted to shout out real quick to Shady 12 SM. He left an awesome review this week on the podcast, which is a nice reminder to everybody. If you guys can really help me out and leave a rating or a review for this episode. Like I’m saying, I’m struggling to manage my time and there’s tons of hours that go into this podcast and the Instagram. And as you guys have probably noticed, my Instagram has been lacking a little bit in posting. I just had a hard time keeping up with everything, so it would mean the world to me. It’ll help keep me motivated to read these reviews and keep pushing forward and hoping to bring more value to you guys. But with that being said, yeah, Jake and Gino is on the show today.

Chad Duval: If you guys haven’t heard of Jake and Gino, they’re crushing a multifamily real estate. They have over 6,000 units. They’ve done it in like six or seven years. They’re just crushing it right now. So in the episode, we dive into everything that value adds and ways to bring value to your properties. The little things like sure deposits and we dive into rubs and moving fees and what Jake dubs the trash bill creep and how they’re managing that with longterm agreements.

Chad Duval: So there’s a lot of little things in there that you can apply immediately. And we also dive into their first property and the horror stories that came out of that. Not to scare you guys, but just bring some perspective. So on all, a really good episode. I hope you guys enjoy it. And yeah, without further ado, here we go. How are you guys? So we have Jake and Gino here in the house as Jake likes to say it. How are you guys doing?

Jake: In the house baby.

Gino: We’re doing good.

Chad Duval: So anybody who’s listening who does not know who Jake and Gino are, I’ll let you guys give a little intro for the few listeners that do not know who you guys are.

Jake: Yeah, we kicked it off just a minute ago-

Gino: And we’re still in the house.

Jake: … saying we’re going to help… Gino, we got this overlap thing going here. I don’t know what’s going on. But anyways, we were talking a minute ago about helping folks get started and early on in your career what things to look out for and how to get going. And that’s exactly where Gino and I were in 2011. We had zero units… Gino had a duplex I think, and maybe a three family, but we started off in Knoxville, Tennessee looking for deals and we started off in all the wrong ways.

Jake: We were very aggressive with brokers. We thought that they were the sales reps and they should be selling us deals and we just went about it the wrong way early on it. And most of that side and me, this is Jake. I think that getting started, you have to get your mind right and you have to understand what it is. And some people say, “You know, commercial real estate’s an old boys club,” and they kind of put a negative connotation around that. But the issue we had was we were in the wrong mind space thinking that the broker should bring us the deals and it was almost an aggressive, aggressive posture while they had the thing that would set us free for the rest of our lives. So understanding that mind mindset shift early on was very important.

Jake: It took us about a year and a half to really get that. And then, when we started to change that mindset and we started to actually present brokers, our credibility book and why we were the guys to close the deal. I think that’s when things really started to change for us. And that’s when we got into our first 25 unit deal. Started in 2011 with Gino. We were looking in Knoxville and took us to February of 2013 to actually close that first deal.

Gino: I think Chad, the most important thing for anyone starting out is the word clarity. I want everyone on the call to really think about why multifamily. What is multifamily going to do for you? For me, it changed my lifestyle. I was able to move down to Florida two years ago with my family. I was able to create the generational wealth that I’ve always dreamed of. I created the financial freedom for me, which was a picture of working when I want to, with who I wanted to, why I wanted, and wherever I wanted to.

Gino: So that’s what was really driving for me. I had that clarity and Jake and I always like to stay in your lane. If you’re going to pick a niche in real estate, you need to pick one niche, especially if you’re beginning out and really stay focused on that niche, stay in your lane. Also, another topic that Jake and I find near and dear to our hearts is education. We say education times action equals results. It’s important to take massive action, but if you’re not educated as I was back in 2005, you’re not going to buy the right asset. You’re not going to do proper due diligence and you’re going to make a ton of mistakes. So I want all the listeners out there to do.

Gino: When I talk about education, it’s not just listening to podcasts. It’s really going out there and finding a mentor, finding somebody who’s doing it and all success leaves clues. And as our community director, Josh likes to say, ‘You either pay to play or you seek to serve.” It’s one of those two. So if you really want to accelerate your ability to buy assets in multifamily, you really need to start surrounding yourself with like minded individuals and start going out there and start finding what, how, what successful people are doing in the space to start buying these assets.

Chad Duval: That’s awesome. That’s awesome advice for everybody. It’s something that comes up time and time again at the… on our show is trying to figure out how to get mentors and how to position yourself in a place where you can actually take that first step. But so you guys, I mean you guys obviously are partners and all everything that you guys are doing. How did that partnership come to fruition? I mean, was it a mentor type dynamic or was it two friends, two buddies, that sort of thing.

Gino: As I like to always tell people we hit it off real quick as soon as we got introduced. The three things that Jake and I wanted, I should say three things that led us to where we are. I like to call them desperation, inspiration and perspiration. Those three keys or I think what fueled Jake and I to be where we are. Because we were both desperate in our jobs, we both hated our jobs. We both felt like we could accomplish so much more when we met each other. I think we were both inspired that Jake was moving down to Knoxville, Tennessee and I was like, “Wow, I finally found somebody who’s a real partner who’s going to work his butt off, who’s really going to take this thing seriously and who I can really trust.” That was where I was looking for.

Gino: And then obviously the third component is perspiration. It’s a lot of work. Calling brokers while you’re working, going to manage properties, selecting the market, creating a credibility book, underwriting deals, walking properties, putting in due diligence, doing those property inspections, talking to bankers. All of that takes an inordinate amount of time. But if you have the clarity and you have the education, and I think more importantly if you have a partner or some type of support, it is a lot easier. And believe it or not, it’s a lot more fun. You hold yourself accountable because you have a partner where you’re feeding his family and he’s feeding yours and you just work hard. And there’s no such thing as, I did this and you did that. In the beginning, it’s the [inaudible 00:08:54]. I’m going to do this and we’re all going to do it together and then we figure it out.

Gino: So for me, I was fortunate to have met Jake, through the restaurant. I was a pizza guy and he was the drug rep. So he was catering food out of the restaurant. He knew what he was actually better friends with my brother who worked in the front of the house. And I had met Jake but you know, gotten to be good friends with him about a month or two before he decided to leave to Knoxville. And I said, “Jake, when you get down there, let’s look at some properties, some deals because nothing’s working in New York.” So, for us that’s how, that’s how our relationship started.

Chad Duval: Oh, that’s awesome. Yeah, so I-

Jake: So I know I was just going to elaborate on your question a little bit to go a little deeper because people also ask sort of what to look for in a partnership or I’m scared to partner. But multifamily is a team sport and that’s one thing that I think people are going to have to really get comfortable with. That doesn’t mean you have to partner with somebody, but we get asked that all the time. What makes a good partnership? And I think number one is given at the time this season and you have to find out, do you share a similar moral compass with that individual? That’s when one of the reasons that our partnership works so well. We were both right in line with the values and we take that very seriously. But to Gino’s point earlier, he said, stay in your lane.

Jake: We wanted to create cashflow, we wanted to create generational wealth and we wanted multifamily. So this wasn’t… that we weren’t chasing the shiny object. Next week we’re going to fix and flip. The week after that we’re going to do Bitcoin. We stay focused on multifamily. Took us almost two years to get that first deal. So this doesn’t work if you’re not in it for the long haul. And then the work ethic piece, whatever it takes, we’re going to do it. I know I can count on him. Partnerships get really sour when people aren’t responsive. And I’m never in… since the time in 2011 when Gino and I started working together, never have I wondered, “Oh is this guy going to get back to me?” Or when in the callback the responsiveness and the work ethic has been there from both sides.

Jake: So I think those three things, a similar moral compass, aligned values and goals and then the work ethic really makes for a strong lasting partnership. Because this is business marriage and I think that’s what people need to understand and don’t just rush into it. But if you have time to let it season, get to know someone and really kind of vet those three areas, it can really prevent a lot of pitfalls in the future.

Chad Duval: Yeah. So I mean you guys both have different paths. I mean, Gino, you already had a property or a few properties under your belt before you went into this partnership and I don’t think Jake, you had any under your belt. Do you guys, now that you guys have been in this long enough, do you guys suggest that people get like a dealer to under their belt before they get into a partnership to kind of understand the game, understand what kind of value they can bring to the partnership? Or do you think of looking at somebody who is a mentor or try to mentor and then become a partner with them or are certain strategies, I’m just curious on [crosstalk 00:11:45].

Gino: Yeah, there’s so many different ways to get into multifamily and we, what we didn’t know, we didn’t know in the beginning we thought we just needed to buy ourselves. Jake and Gino are going to go out and buy properties together. I think what people really need to do is to take a step back and you know, one of the regrets that I had early on in my career is I never went to live events. I was always working at the restaurant. I was always busy and people will say to me, “Hey, I need to make money or I need to buy a deal before I can invest in my education.” Well, how are you going to go to an event and learn how to make money if you can’t get to the event? So you need to educate yourself. You need to go to these live events.

Gino: You need to surround yourself with people before you know you actually go out and do it because you need to go to these events. And then from there you’re going to learn. When we first started out, we bought, our first property was, 10% down, 10% owner financing was a $600,000 deal. We partnered with my brother. It was a total of $27,000 from each of us to buy a 25 unit property. Our next deal came three months after that. We solicited another partner, our partner, Mike, was on the rest of our holdings. So you could start out as a partnership. The next way you can start out with, you can start up by raising capital for some of this deal. If you think that you want to start small and you don’t have the credibility to raise money for a deal, you’re going to need to know how to vet a sponsor, you are going to need to know how to underwrite deals and look at markets and all that.

Gino: But maybe start raising money for somebody else’s deal. Help somebody else with the capital raise. The next one is you could be boots on the ground for somebody. If you’re living, let’s say I’ve been living in Jacksonville, Florida and I have potential investors in New York who would like a deal in Jacksonville. I can be boots on the ground, I can property manage for them. I can go and take a look at the property. I can do some due diligence for them, whatever that may be. That may be the case. The next case is why not be in net worth or a sponsor in a deal where if you have the substantial balance sheet, because sometimes to get into multifamily, people buying the property don’t have a strong balance sheet. They need that help so you can get in to it from that aspect.

Gino: So it’s not just doing and buying deals yourself. You can lend, I guess your value, wherever your value is, try to find that. But if we’re not the education, I wouldn’t have known all of these different strategies. I wouldn’t have been able to shift my mind and say, “Hey, there’s so many different ways I can get into multifamily.” So it’s important to go out there and just start talking to people who are in the business and see how you can add value to their lives.

Chad Duval: Yeah, that makes perfect sense. And I can totally see how without the education it’s going to be very hard to figure out where you can bring value to a partnership. So yeah, it’s all really good advice for everybody listening. But you guys mentioned something about a credibility book. Can you guys elaborately elaborate on that a little bit?

Jake: Yeah, it early on it’s one of these things that you need a business plan and you need to be able to share with folks, whether it’s a banker or it’s a broker, what you are about. And we didn’t have much credibility, but we realized that our credibility was being questioned. And our first deal, this was our business plan. We took it to the bank and said, “These are our plans, this is what we want to do.” And I think it the bank a lot of confidence that we took the time to prepare that because up to that point, they never saw something like that. And we allowed the brokers over time when we started to really hone in on, we like to buy mom and pop apartments.

Jake: When they saw something that they considered a mom and pop and they started to understand our strategy. They were bringing it to us first because brokers like to think of a deal is who’s the buyer for this deal? So we started becoming known as the mom and pop guys. So they were looking at identifying these deals that were great for us and they were bringing them to us because they knew we could close them. So on a lot of levels, the credibility book works with banks and it works with brokers and anyone else you may be trying to partner with somebody, let them know what you’re about. Maybe trying to raise some money. I think credibility book is great for you know all of that.

Gino: And Chad, if you want, I can send you the credibility book. You can put it in the show notes and you can share our credibility book. We have a micro course on how to create one. But basically what you want is something that’s pretty clear, concise. Maybe when you’re first starting out, you might not have any assets, but it’s just a business plan. Eight to 10 pages. You’re going to lay out what market you’re in. So if let’s say you’re, for instance, you’re investing in Knoxville, Tennessee market, you want to let your business plan your credibility book, tell people why, you want to narrate a story. Well, a job growth has been great in Knoxville. We’ve got over 5%, almost a 5% rent growth for the last 12 months. You want to talk about the market, first of all. The next thing is if you own any assets, obviously list your assets in this credibility book.

Gino: And then lastly, let’s talk about your business plan. Or your value add buyer or you’re more of a momentum player. Are you micro repositioning a deal? Whatever it is elaborate on your strategy. We did the refined role three or four or five years ago. We talked a lot about that. How we refinance these properties, roll the money and give it back to investors or give it back to ourselves and get into the next deal. So when brokers or investors looked at the business plan, they knew exactly where we were investing. They knew exactly what assets we own and they knew exactly how they were going to get paid and how they’re going to get their money back.

Chad Duval: Yeah. So it kind if ties back into the education part of things. I mean you got to have the education upfront and then also be able to use that education to figure out where your value comes. And then from there you can take the value and put it into some sort of credibility book. Even if you don’t have a property under contract or property yet. You could also use any kind of life experiences to kind of put it in there, right? I’m I understand that right?

Jake: Yeah, you put your own, you can put your own team members in there. If you’re partnering with other people, you can put it in there, you can put your current occupation. If you’re a physician, if you’re an IT specialist, whatever that may be. If you’re looking to a certain deal, just put your note down, credibility, what you’ve done and put it in the book. And that’d be fine.

Chad Duval: Yeah. Perfect. So it’s basically like a resume on steroids. No, that’s such a good idea. Because I mean any bank or broker doesn’t know you from anybody else. So without that, it’s very hard to build that relationship upfront. So that’s pretty cool advice for everybody. So can we go into that first property and kind of unpack it a little bit more as far as the numbers and how you found it and then what sort of things you guys did as you progressed in the ownership of that building.

Gino: Sure. Jake, why don’t you paint the picture of what the building looked like and then I can jump into some numbers and some of the value [inaudible 00:18:02].

Jake: Sure, going back even a little bit further, I remember having a lunch in market square in Knoxville and this was in December of 2012 and I was meeting with the broker and a banker and this is going through again, 18 months, 16 months at the time of rejection and kind of pitching the banker on the deal and with the broker having lunch. And you basically said, “Yeah, this is not really the kind of thing where we’re looking to finance.” And it was almost like, man, we just keep getting punched in the gut and we can’t get the financing for it or we can’t get the price on the deals.

Jake: So this time we actually thought we had a deal, but now we’re thinking, well, we’re not getting any money for it. So I walk out and the broker saying, “Hey mate, keep your head up. I think we might even have an opportunity to own finance this thing.” And I said, “What did you hear what the guy just said?” The banker, he said, “There’s no opportunity for this at all.” And he said, “No, there’s more guys in town, be patient.” I mean when you go through as much rejection as we went through, we got kicked out of broker’s offices in the beginning. I mean it was just one thing after another. To dive a little bit more to the property, it was a beauty. I mean this is your A class, sexiest thing that you’re ever going to see.

Jake: It had dilapidated roofs on it. It had a failing septic system. It was little cottages. It was 25 units. There was a old motel on the property. This was the only thing that Jake and Gino was getting going back to 2012. Okay. But, the numbers worked and we fell in love with the numbers, not the property and fortunately again, we kind of use that credibility book to actually go to the bank that currently had the financing on it. They were very comfortable with it. The owners made their payments religiously and once we told them the plan that we wanted to do and kind of go in and clean the property up, we were kind off to the races. Gino, you want to touch on the numbers a little bit?

Gino: Yeah. Before I go into the numbers, I just want to preface this by saying it’s never the right time to buy multifamily. It’s never the right time to have a kid. It’s never the right time to get married. It’s only the right time when you decide. So back in 2013 everyone forgets how crappy the economy was. There was no sentiment going on, 1% job growth, 1%… the GDP is growing at 1%, rents for one bedrooms in Knoxville, Tennessee back in 2013 were 350 bucks a month. [crosstalk 00:20:27] Now there were $600 with rubs. So you’re over 650. Let’s put that into perspective. At that point, there was no money in the market, right? There was no way to raise money. There were a lot of deals. Fast forward to now. Now there’s a lot of money and there’s not as many deals. So the problem with that is you really have to stick to the buy rate, the manage rate and the finance rate that we teach, you need to have to buy these assets properly. That’s the three step framework that we teach.

Gino: And I’ll throw in another one out there for all the students. One of our coaches talks about the three pillars of real estate. And I love this because it’s all about the market cycle. What part of the market cycle you buying this asset and what is your debt strategy on the property and what is your exit strategy on the property? So if we go back to our first deal, the market cycle, we’re probably out of the recession getting to the recovery phase. So in that part of the cycle, this was a perfect asset. A [inaudible 00:21:18] minus asset with a lot of deferred maintenance but with a lot of value add and cap rates were starting to compress or buying at a higher cap. Cap rates are going lower. So in this, that type of asset in this type of the market cycle right now is a little bit riskier.

Gino: So you need to know that most people don’t know that they would see that as a deal right now. You’re probably overpaying for this type of C C-minus value add asset in this type of the market cycle. For the majority of the markets in the United States, it’s market specific. You need to know what market you’re in. So for me that was really important. We bought it at the right part of the cycle. That was the first thing, the debt component we bought with community financing and owner financing because we thought at the time, Jake really didn’t know what refi role was. I knew what refinance was. I said, “Jake, we’re going to refi this thing, pour money out.” And he was looking at me like I was crazy and I keep telling that to my wife nowadays and my wife has no idea what refi means. She doesn’t understand where the money comes from. It’s made up.

Chad Duval: That’s where all the money comes from now Gino, that’s a bidding everyone has to understand. It’s a fugazzi it’s a fugazzi, all right?

Gino: But it was amazing. Right? So we bought it with community financing. 18 months later we were able to refinance out $165,000. We put down 83,000 we refinanced out 163,000. Some of the value add components on this property that we identify right away. We had weekly renters, terrible renters in there. We actually had to clean up the tenant base, took about 12 months to do that. The next thing is, I remember the cable bill was $6,700 a year. We wipe that off. We’ve made the tenants pay their own cable. The next thing was the garbage bill. The garbage bill was so huge. It was huge amount of monies. We went out and we bid out all the contract services. The next thing was the utilities. We were paying for water for the tenants. We ended up actually pushing it off to the tenants.

Gino: So although it wasn’t a huge income jump, the expenses were just dramatic and how much you were dropped. The better tenant base meant that we were turning units a lot less, so tenants were staying longer so that that expense also drops. So there’s a lot of value add components. We’re pulling a lot of levers and like I said, it’s never the right time to get into the deal. We were lucky, but I think the harder you work, the luckier you get. And that’s what happened with this first deal. We were lucky, but we committed and then we just figured out once we got into the property.

Chad Duval: Yeah, that’s so awesome. So you’re saying that you basically pushed a lot of that expense off to the tenants or at least like the water and sewer and that sort of thing. And I know you guys are huge proponent of the RUBS program and, I use that in some of my buildings as well, but I was curious. So right now, do you guys have any buildings that you do not utilize RUBS on? And if you do, like what sort of value adds can you bring to those type of properties to increase the NOI without having to do the RUBS program?

Jake: Yeah, we have properties that actually have individual meters and I love them and then we’re not even dealing with it because there’s no collection. It’s just they’re going directly to the water company. And then from that point it’s just, it’s service. I think that we talk about our blue ocean strategy. There’s a book that talks about finding ways that you’re not actually competing. And I always refer back to Chick-fil-A. We want to be the Chick-fil-A of apartments and that is our customer service strategy. We want to be able to separate ourselves with good service in the C and B apartment space so that you know as you go around town you are on Knoxville, you see rent property management signs all over the place. You see the Rand man, you see our logo and you know that stands for something.

Jake: And we want to make sure that we’re creating that brand that people are going to resonate with where they come onto our properties and they know they’re getting good service. So that’s what we’re really pushing across the board and we’re trying to get a lot of good resident feedback so that we know that our folks have a great customer experience. And if you want to talk about, some of the more in depth ways to actually like move the needle in terms of okay, what are the ways, can we reduce expenses? One thing that we do is we try to lock in and this is something, dealing when you’re doing a deal, it’s really hard to deal with the owner and get a good price. Right behind that it’s the bank. The bank is going to bust your chops.

Jake: You’re going to have a hard time getting the deal financed the way that you want it. Right behind that is the garbage company. And you want to talk about having a hard time getting like a 10 year. So you’re dealing with a community bank, you want to get a 10 year term. The garbage companies are the Kings of the price creep. Every year they will try to ding you. So what we’ve done is we’ve started pushing really hard and this is not… I don’t want to say this is great, but in my experience dealing with the garbage companies, we get actually three year terms in place. Because I’m going to tell you right now, if you do not watch your garbage bills, they will creep on you five bucks here, 50 bucks there and you won’t even notice it. So we get them locked and we review them every month as they come in because these garbage companies are ruthless. And so a lot of properties we’ve actually saved big in terms of the garbage expense and the marketing because we find that many times it’s been bloated.

Chad Duval: Yeah, that’s so funny. It’s almost like the cable company. Every couple of months, I do the same thing. My dumpster service on all my properties creep by. You’re right, it could be two to $5. But I mean that adds over a year or maybe [crosstalk 00:26:30].

Jake: We did a big blanket deal that it’s $75 per eight yard for a onetime pickup. And then we do the math from there and that’s spread across all 1600 units that we own. And we get it a three year price lock. And it’s one of those silly little things, but it makes a big difference. So, if we’re not going in and doing rubs from that point, we’re trying to offer a superior service, we’re going to have a good retention rate so that we know we’re not turning the unit every time, we’re doing our annual rent increases. One thing that’s worked really well for us of late as well as this artificial intelligence, Lisa, that’s actually through our software provider.

Jake: It just really has been auto booking, the appointments left and right, and it’s actually texting directly to the residents, sending appointments. So it’s forcing more appointments and taking the human error out of it. And that has been really filling up our units. So we see the high occupancy and we’re able to increase the rents from there. Then the same kind of amenities that everyone else does. We’re trying to make sure that the folks have good fitness centers when applicable and the pools and the dog parks and all that good stuff. But just some of the things we’ve worked on recently.

Gino: Chad, I want the listeners out there to write down these several additional things that we do on our properties. I think the first thing is late fees. You have to be wary of fees, pet fees, late fees. The next one is applications. You can generate revenue on applications. If you’re collecting $50 for an application fee, but you’re getting charged 15, that’s a big spread there. Laundry is a huge component to us. We service out the laundry, with the company. We get a 60/40 split. We’d love that. We don’t have to maintain the machines. They’re newer machines, great way to generate revenue. Cable is another one. We get cable contracts on our properties. Storage, if you have garages, you want to build micro storage’s on your properties. On that first property we had bought, there were four garage that had crap in them.

Gino: We ripped everything out, pulled everything out and we rented out the amount of storage units. Billboards, if you have billboards, you can create some type of revenue with advertising on billboards. That would be great if you could do it on your property. This one is the bane of my existence. Cell towers. I’m trying to get cell towers on our property. Can’t do it. When I get one Chad I’m going to call you up [crosstalk 00:28:45]-

Chad Duval: I’m still trying to [crosstalk 00:28:45]. I want one of those too. I’ve been trying to-

Gino: It’s tough one. There’s a couple of things you can do. Renters insurance, if you want to charge renter’s insurance to your tenants, possibly charge them a little bit of a fee. Work with somebody where you can do that. That may be a benefit to you. Additional units. If you can put an additional unit or two on the property, convert something, uh, whether it’s an office or it’s a laundry room and see if you can go to the town, get a [inaudible 00:29:10] converted. That would be awesome. And I think the last one I think Jake should really dive into. It’s the moving fees. Moving fees have been tremendous for us. About 10 to 15% of our total income comes in from these other fees. So Jake, you can jump in and just discuss with them how we ever moving non-refundable moving fees. That was like a really an epiphany for us five years ago when we started implementing it.

Jake: Yeah. We were just lean and mean we had a very small team and we didn’t want to mess with security deposits and do we have to pay out the interest and… The other thing that happened with them is that the tenant moves in and the thought process that the feedback that we got from the residents was that they’re always kind of wondering in the back of their mind, am I ever going to get this back? And so it creates a little bit of a fractured relationship right from the beginning with the management, the ownership of the complex. So we just started doing, we do Shavonne’s, tacked on with a typically a 425 to $500 moving fee. So it’s non-refundable, it’s, you know, many times less than what you’d have to pay if you have to put up two months from rent.

Jake: So we do a typically a $500 bond, which is about $80, and then the moving fee. So it’s anywhere between about 500 to $580 on the front end, typically less than what it would be to do that security deposit. And that is non-refundable. And it’s been a huge profit center for us. And believe it or not, people seem to be perfectly fine with it. And so it was one of those things we tested early on and it’s worked out really well for us.

Gino: And it also gives you the flexibility. If you’re having a tough month and you can’t rent, all of a sudden you have a 199, not in front of a moving fee special for that month. So it gives you the flexibility for that also. So, and I’ve heard it from a lot of people, well, they don’t do that in my market and nobody does it. Well, we’ve ran into the same situation early on and we were, I would say one of the first, but we took a chance and it’s worked out really [crosstalk 00:31:04].

Jake: You know who was doing it. The idea was the first mom and pop group that we bought from, they were actually doing it. And that’s where we got the idea from. So it wasn’t the big players that were doing this, six, seven years ago. That’s what we found out. But-

Chad Duval: So the logistics of that, because I’ve heard of like sure deposit and that sort of thing. And I haven’t implemented it yet, but I’m very interested in, because yeah, I see the value in it. But so logistically if you do like say a $500 move in fee, which, and then you go and take $80 of that and apply it to a $500 bond.

Jake: No, no, it’s in addition.

Chad Duval: Is that… Oh, it’s an addition to, okay. So do they have to purchase the bond or do you guys buy the bond?

Jake: No, they purchase it directly. We have computers set up in the offices they go on and they have to have proof of it before they’re able to move in.

Chad Duval: Oh, okay. So it’s almost like a requirement. Like even it could go along the lines of having like a rentals insurance, that sort of thing. It’s just one more line item that they have to be… they have to purchase before move in.

Jake: Satisfy on the front end.

Chad Duval: Oh, okay. Oh, that’s sweet man. That’s sweet. So you’re saying 10 to 15% of your income is based on that stuff?

Gino: Usually [crosstalk 00:32:15] 10 to 50%. Yeah, depending on all those other fees, laundry, you have storage, you have the moving fees, you have the additional units or the application fees, all those fees. They comprise about 10% of our total income.

Chad Duval: Wow. Wow. So with, with the bond and the moving, has there been any up front in the first couple whacks at it. Were there any major issues with that from the tenants or did it pretty much just go pretty smooth?

Gino: I think the biggest challenge we had from our folks was selling it on the front end because it’s a little bit of a tongue twister of a situation. And that’s why we have leasing trainings on Saturdays to get everyone best practices. What’s the best way to present this. I think that’s one thing that worked out really well. So we kind of bring our folks together, work on the, kind of script in terms of how we present it so that people aren’t stumbling and fumbling over their words. Because you can get a little bit lost in the weeds with it because you’re talking on one hand and moving fee and then you’re talking about this bond and I have to get renter’s insurance so it can get to a little bit of a laundry list. So it does take practice.

Chad Duval: Right? Right. Yeah. Because that’s the only… The thing I can see in the back of my head is trying to understand it and finding a way to sell it or not really sell it, but make it understandable for them [crosstalk 00:33:33].

Gino: No, I mean you’re selling it though, right? And you didn’t get to your folks to do it, but we’ve successfully implemented it into over 1600 units. So I think to have fear and reject it versus attempting it, it would be shortsighted, right?

Chad Duval: Yeah, totally. Absolutely. Absolutely. So going all the way back to those first, one or two buildings, are there any crazy war stories that you guys have? Like funny stories that have happened?

Jake: Wow! There’s a lot there.

Gino: I don’t know. I’ve kind of like just rejected them and I just push them deep down and don’t want to really relive them or the ones that have happened this week.

Jake: Yeah. Everybody, like everything’s like painted as being very… I hear a lot of other shows or anybody who comes on yours paints a really decent picture of the real estate business. And I always like to kind of bring some perspective as to like the dead day is not always rosy and there are some major headaches and war stories that you can laugh at later, years later. But you know when you’re going through it it’s not the funnest time [crosstalk 00:34:38].

Gino: Well, I can… let me touch on the first property. The first property that we did. The first property we did, I think what happens is we’re just accustomed to avoiding pain in our society. I think if you can embrace the pain and embrace the suck, you’re just going to get a lot stronger mentally and emotionally. And our first property within the first year, we were sued for bedbugs. We had a $9,000 septic blow up. We had a person pass away in the unit, and then we had rampant drug use on the property. And that’s what I knew. Jake didn’t obviously tell me everything that happened every day to day. That’s the first year. And then transitioning from weekly to monthly to yearly renters is another thing. We’ve went through a couple of resident managers and it was just, it was a tough time for us. Jake, you need to elaborate on a little bit.

Jake: No, I’m not even going to get into, the weeds too much on it, but I’ll just say this is what’s happened to us in the last week. I’m not going to elaborate. We’ve had theft, we’ve had gunshots in the last week and we’ve had to fire two people. So, for anyone out there that thinks it’s going to be like sunshine and rainbows, it’s not. But I really do subscribe to the Ray Dalio belief that it’s, everything is another one of those and it’s going to happen to you and it’s going to happen to you again.

Jake: So it’s having systems and the right people that know how to deal with the different things that will come up and understanding your business. So, you know, back, if we would’ve gone back to 2013 and had a week like this, it probably would’ve been like devastating, soul crushing, insert whatever, you know, word that you want there. But it’s sort of part of the business now and people die. I don’t know, we’ve probably had five people at this point pass away in our properties. So it’s part of dealing with people’s homes and you have to do it in a professional manner and you have to make sure you have, the right people and the right systems and the right culture to deal with this because it is challenging. You’re in the business of people’s homes, so-

Chad Duval: Yeah, exactly. The Chick-fil-A of real estate as you say.

Gino: Apartments.

Chad Duval: One last question before we [inaudible 00:36:40] yes, apartments. One last question before we kind of roll into, you know, closing this out. So you guys would, that first property, you guys had weekly renters in there and then you transition them into monthly renters. For people that are new to real estate. Why, why would you do something like that? What’s the benefit of going to a monthly renter?

Gino: Well, I mean, when you’re weekly renters, believe it or not, they’re paying more per week to live there on a monthly basis. It’s just the tenant base is just so erratic and it’s constantly people moving in, people moving out and turn cost. So one of your biggest costs in a property. So you want to stabilize the property, you want to get a better tenant base, right? You want that tenant base to be better. And you also want the stable tenant base. You want them in there instead of being there for three weeks, you want a yearly lease in there so you have more stability with your income. So it’s really the quality of the tenants, the less turn costs. And you just want a better tenant in your property.

Chad Duval: Oh yeah. Yeah. That makes perfect sense. For sure. Perfect. Yo.

Jake: Do you know what a teardrop tattoo under the eye is supposed to signify?

Chad Duval: I have no idea.

Jake: Okay, so to answer your question, it’s that you’ve killed somebody. And when we first took over with the weekly renters, I saw people applying for the weekly rentals with the teardrop tattoos under their eyes. Okay. So it’s, Gino’s point you want to make sure that you’re serving a good reputable tenant base. And we took over that first property. It was tough to transition out of those weekly renters. It was a very challenging crowd. We definitely got beat up a lot there. But once we got to turned around and we stayed true to ourselves, people like the mail lady coming in saying, “Thank you, I feel safe coming to this community. Now you guys have made a true difference on this community.”

Jake: So I think that you’re going to on paper maybe look at it and say, “Oh, I’m running these for more every week. And it’s going to result in more money. But ultimately it’s not, if you don’t get the right folks in there and typically, people looking for a weekly rental where they’re not there for Airbnb or a vacation, they’re there because they live day to day. It’s not going to result in the kind of community that we’re looking to operate.

Chad Duval: Yeah, now that makes perfect sense. So the client base is not favorable. And then also the turn costs. I could see it would be a nightmare to try and go in there and clean and get those things turned every week. So it’s almost like you’re operating a hotel at that point. So it’s completely different. But that’s perfect man guys, this is awesome. You guys gave so much value here. There’s a lot of tangible things that the listeners can implement right away. I really appreciate you guys being on the show today. Where can listeners reach out to you guys or if there’s any kind of final thoughts you guys have?

Gino: Sure. Just real simple. We’re at We are on iTunes. We have have our profits to Jake and Gino channel. We host four weekly shows on there right now we’ve got the a book called the Honeybee that we just launched about a month ago. So if you gone to Amazon and type in the honeybee, it’s a business parable that Jake and I have written about getting unstuck and taking control of your financial future. So go out and pick it up right now off the next week or so, we’ve got a running on Kindle for 99 cents so you can pick that up real cheap. And it’s just a great book. It’s talking about complimentary streams of revenue. What happens from 25 unit little crack then property up to 1600 units and creating those multiple streams of revenue that are complimentary in the business. So I’m just go hit us up and go on Amazon and I’ll look up the Honeybee.

Chad Duval: Perfect. [crosstalk 00:40:28]

Gino: Yeah, and I think if anyone out there has… No there’s a little bit of delay there Chad. I was going to say if anyone out there has zero to say 200 units right now and they’re getting started and they want to kind of forecast and see what the future is like. The Honeybee does a great job of taking someone from starting maybe in that two job and then juggling both the real estate and the, and their job and what that journey looks like to really scaling up their real estate business.

Chad Duval: No, that’s perfect. And you guys, I’ll link all of this. I’ll get all the links from Jake and Gino and put them in the show notes so you guys can go check that out. Jake, Gino, I really appreciate you guys coming on the call today. You guys did a great job. This is awesome. I appreciate all the wisdom that you’re sharing with my audience.

Gino: Thanks Chad. Appreciate it.

Jake: Thanks Chad.

Chad Duval: Well guys, there you have it. That’s Jake and Gino. Love these guys. They’re super genuine and they really know what they’re talking about. So go check them out over at Check out their new book, the Honeybee. Let me know what you guys think before we get out of here too. I do want to ask guys like a question of the week. I’m trying to bring as much help to you guys as possible. What is the number one thing that scares the hell out of you about real estate? Shoot me a DM over on Instagram at I am Chad Duval. Or, actually if you decide to leave a review for the show, just put it at the bottom there and I’ll be able to see it there. It just helps me tailor some of this content for you guys and bring the most value where I can.

Chad Duval: Also, there’s not that many landlord in real estate movies out there and I was at Thanksgiving this past week and my uncle was a landlord as well. Well, he only has one property left. He sold everything off, but he was telling me about this movie called 99 Homes. And me and Holly rented it last night and watched it and let me tell you, I recommend it to everybody. It’s an awesome movie about like the ‘O8 eight crash in Florida about a guy who got evicted who basically to live out of a hotel and then kind of rallied back and started investing in real estate and how he kind of beats like Rose, like a Phoenix towards the end of the movie.

Chad Duval: So highly recommended. It’s called 99 Homes. Go check it out. I think we downloaded it on Amazon prime. I think we rented it. It was like two bucks or something like that, but highly recommended if you guys are looking for a real estate related movie. With that being said, you guys can always reach me over at and like I said previously, always on Instagram. That’s where I spend most of my time. I am Chad Duval. With that being said, as Zig Ziglar always says, “You don’t have to be great to start, but you have to start to be great.” See you guys.