SHOW NOTES FOR EPISODE 669: HOW TO GROW YOUR PORTFOLIO TO 1,500 in 5 YEARS

Success in real estate investing can be as simple as just having the right mindset and unrelenting persistence. In this episode, podcast host, marathon runner and real estate investor Jason Yarusi shares how he applied competitive running principles to go from bartender to real estate tycoon — all in just 5 years.

What You Will Learn

• Why buying a small multi (duplex, triplex or fourplex) is better than starting with a single family home as your first real estate investment
• What are the key characteristics of a good apartment rental market?
• The value of selecting the right criteria to target potential property acquisitions
• How creating a strong team early on can 10X your investing efforts overnight
• What is Jason’s “100-Mile Mindset” and how it helped him grow his portfolio so quickly
• What are the key purchase considerations when buying in today’s economy?
• How to reposition underperforming properties through operational efficiencies, rebranding, and value-add renovations

About Our Guest

Jason Yarusi

Jason is the founder of Yarusi Holdings with his wife Pili. They have acquired $180M in real estate across 1,500 Multifamily Units since 2017. He is an avid ultra runner and workout enthusiast. Jason also hosts The Multifamily Live Podcast and The Jason and Pili Yarusi (YouTube Channel). He wakes up daily at 4:32 am. Is an Aspiring Ukulele Player. Beyond real estate, Jason spends his time with his wife Pili and 3 young kiddos Luke, Lily and Leo and now lives in Tennessee.

More About Jason

• Born and raised in New Jersey
• Moved to New York City in his early 20s
• Lived in NYC 12 to 13 years
  • Worked in bars and restaurants
  • Met his wife Pili there
  • Opened bars, restaurants and a brewery in NYC
• 2011-2012, Hurricane Sandy hit the East Coast
  • A couple thousand homes were hit
  • Jason’s father, who lived in New Jersey, has done construction all his life (family has 4 generations of construction)
    • His father specializes in lifting and moving houses
      • He would normally do 10-12 projects a year
      • But when Sandy hit he had an overwhelming number of requests (1,000 a day)
      • Jason, Pili and Jason’s brother moved to New Jersey to help their dad until 2017
      • They went from 10-12 up to 300 moves a year
• Jason realized that everything they were doing – from restaurants to construction – are all service businesses where that had to continue to be active to get any results
  • If you’re not working, you’re not making money
• Jason and Pili were now married and expecting their first child
  • They were concerned that they had little time to invest in their family

Investing in Real Estate

• The one thing that kept popping up that could give them more time back was real estate
  • Pili went out and got her real estate license
  • They started flipping and wholesaling homes
  • They were still doing projects with his dad
  • Now they had even less time
• Pili was at a meet-up where she met this firm that was investing out-of-state in single family rentals
  • This inspired them
  • But instead of just single family homes, they would invest in small multis – duplexes, triplexes, quads
• There were buying completely distressed homes, recruiting contractors and property managers to set up rental homes and transferring the workload to others
  • They saw the power of delegation
  • Soon they were getting checks in the mail, without them using their own hands to do the work
• They knew they were on to something
  • But the thought of owning 20-30-50 duplexes all around the country seemed overwhelming
  • They wanted to know what else was out there

Enter Large Apartment Investing

• In 2016, they sold all of their smaller properties and focused on learning how to buy large apartments
• In May of 2017, they bought a 94-unit apartment in Louisville, Kentucky
• At this time, they were listening to other successful apartment investors
  • One person said, “Find a good market and dive into it!”
    • Characteristics like:
      • Good population growth – 2-4% a year
      • Good job growth and job diversity
      • Strong demand for workforce housing
      • Landlord friendly state
    • Louisville, where Jason’s sister lived, met these requirements
      • They dug into the market to get very specific
      • New Jersey had some good qualities but also a lot of negatives
        • Cash flow is poor
        • Older buildings
        • Costs of mechanicals are high
        • Taxes and insurance are high
        • Not a landlord friendly state
      • They went full-force into Louisville

Developing Criteria

• In Louisville, they got very specific with what their criteria would be for apartment purchases
  • 75 to 100-unit assets
  • Garden style apartments
  • C and B class assets built between 1970 and 2000
  • Workforce housing
    • Located in the South and South Central sub-markets of Louisville
    • That’s where the largest concentration of workforce housing

Building a Team

• Next, they began building their team:
  • Brokers
  • Property Managers
  • Lenders
• They presented team members with a clear outline of the vision and criteria

Expanding to New Markets

• They have since bought 5 properties in Louisville and sold 4
• They have moved into Nashville and Atlanta areas as well
• Each property has onsite fulltime employees of Jason’s organization

Value-Add Optimization

• Their approach in each market is to improve the property’s value by making key strategic moves to:
  • Improve and update overall appearance of property
  • Update units
  • Update amenities
• They want to provide affordable nice housing in comparison to surrounding properties
• They typically hold properties today for 5 to 7 years to do all the improvements and to increase value
  • They used to turn properties around in 2.5 to 3 years but today’s market is different

Today’s Apartment Rental Market

• Since Covid, there has been a certain degree of uncertainty
• They continue to move forward
• Banks can’t get used to the changes but are definitely lending again
  • Some, however, are on the sidelines putting out term sheets that they won’t likely go foreword with
• Sellers are less likely to sell now for such discounts
• The good thing is:
  • Rents are still going up
  • There’s still a housing shortage of 5 million units
  • Renters will continue to rent longer in light of high home prices and interest rates

Funding Challenges

• He has to be careful
  • If his exit plan is potentially shorter (2-4 years), depending on the Fannie or Freddie product, he could be limited to sell at that time because of pre-payment penalties
• They have been continuing to make great banking relationships so that they have a lot of options working with banks that can give them good debt terms but also are not very prohibitive on future sales
  • For example, they bought a property in Nashville with a 5-year term but has no pre-payment penalty after year one
  • They want to be able to make good choices with good options
    • Whether the debt market improves and they want to refinance
    • Or they get ahead of their business plan and want to sell
    • Or, if they want to sustain for a while and just hold on to a property
    • They can do these things with their current business plan
    • That’s usually the kind of debt options they want
      • They can have good fixed rate debt
      • They can have reserves
      • They can have cash flow on the property

Investor Climate

• There are some investors who are completely wary of economy
• There are some that are very active still
• Some are looking to capture on bonus depreciation 100% that is starting to fizzle down next year
• If you look at where we were with Covid, and a year later to accelerating growth, to where we are today, the market will continue to be dynamic
• Making short-term choices is what will expose them
• Therefore, creating the best business plan, with a great team to support them, will allow them to adapt to whatever comes up
• And it will put them in the best position to attract investor participation
• They are limited because of their debt to offer the highest returns – that would not be prudent

Are Good Properties Still Available?

• It’s always a competitive environment
• Their company goal is to find one asset per quarter
  • But, he adds, “We are aggressively patient.”
  • We won’t just buy to buy
  • It has to be the right property
• Jason feels there are always good properties out there to invest in
• He sticks to his criteria
• He knows the deals will show up in time
• They are remaining picky on the projects they go after

Biggest Mistake

• With their first apartment purchase (the 94-unit apartment in Louisville), Jason and his wife did everything:
  • Creating relationships
  • Finding the deal
  • Meeting investors
  • Getting the loans
  • Signing the docs
  • Raising the capital
  • Finding the property manager
  • Doing the asset management
• They realized, they were their own limitation
• After the first couple of deals they realized that, because they were doing everything, they were also holding them back from the full success of the business
  • They were spreading themselves too thin
• Once they realized that they were the hold-back, it allowed them to bring on team members who could help make sure that they could create a pace to move forward to success

Jason’s “100-Mile Mindset”

• A lot of times people see others’ success and they think that it’s much easier than it really is
• People get frustrated when they don’t see instant results
• As an avid ultra runner, he found in running a lot of races is, as you start to run longer and longer races, you don’t know what the outcome will because you haven’t experienced the event
• He’d run countless marathons but, going to run 100 miles, he didn’t know how to train for it because he had never run a 100 mile race before
  • He decided to run six miles every day regardless of the weather or other factors
  • What he found out, as he got into the race, is if he thought, “I have to run 100 miles today,” it would be daunting because he had never done it before, that he could get psyched out of completely the task
  • What he discovered was that, if he could just set mile markers of many tasks or many wins, it would help him get to the next part…
    • I’ll run 5 miles to get to the first-aid station
    • I’ll just run another 5 miles to get to the next one
    • I’ll run another 10 miles to get to the bridge
    • Let me just run another 7 miles to get to the gates
    • And so on… until he crossed the finish line
• What he found is that he could apply this to his other goals in life
  • If he could just set a series of mini-goals that he knows he can actually accomplish, then he will eventually achieve the biggest goals
  • We are the only ones preventing us from achieving our goals!
• If we can just show up with one thing we want to accomplish each day, we will chip away at the bigger goal
• He believes if people can just get up earlier each day, it’s a great start to achieving bigger and better things

Advice for Old Dawgs Looking at Real Estate Investing to Help Them in Their Retirement Years

• Real estate really is one of the best paths you can take to retirement and financial freedom
• But, without clear goals on what you are trying to accomplish, you are less likely to succeed
• Multifamily investing can offer numerous benefits:
  • Cash flow
  • Appreciation
  • Depreciation
  • Tax advantages
  • Debt pay-down
• However, some of the main things to ask yourself is…
  • “Do I need cash flow today?”
  • “Do I just want to grow my net worth?”
  • “What are my goals for investing in real estate?”
• If you want to invest passively, hopefully, you will align with the right partners who can help you achieve your goals

Current Business

• It has been great to have a lot of great relationships with their various investors and to see them achieve their goals
• It also has been helpful to have the referrals that have come in from those investors
• It has also been great to see the various projects go the full-cycle
• The have continued to grow, expand and achieve their goals for the company
• And to help people achieve their financial goals

Rap-It-Up

• Favorite real estate book: Best Ever Apartment Syndication Book by Joe Fairless
• Favorite business book: Meditations by Marcus Aurelius
• Most valuable web site for success (other than your own): Chatham Financial
• Favorite app: Podcast app and Google Drive
• Favorite quote: “Success is making rational reasonable choices.”
• If you lost everything – all your assets – and had to start all over, knowing what you already know, and you only had $1,000, what would you do to re-launch your real estate investing business? Social media is a very powerful tool to help you find your way to make great connections. I would start a podcast again and get out there talking to as many people as possible. Podcasts have help make great connections to great people that have carried forward.

How to Reach Jason

• Website: YarusiHoldings.com
• Email: Jason@YarusiHoldings.com

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