359: From Dreamer to Dream Catcher – Building A Real Estate Business to Change the World

SHOW NOTES FOR EPISODE 359: FROM DREAMER TO DREAM CATCHER – BUILDING A REAL ESTATE BUSINESS TO CHANGE THE WORLD

How going from corporate civil engineer to house flipper to creator of a modern affordable housing development in North Carolina helped Jerome Myers to see his dreams come true in amazing ways.  In today’s episode,  civil engineer, executive coach, real estate investor, business strategy consultant, and CEO Jerome Myers shares how he is using real estate investing to make a long-term positive impact on his community and on the lives of many others.

What You Will Learn

• The pros and cons of real estate investing self-education
• What it takes to buy your first apartment building
• The importance of putting a strong management team together for bank loan approval
• Why making allowances for extra capital is key for the success of any new value add apartment project
• How critical thorough inspections are for every new asset purchase
• The value of being involved in and making a positive impact on your local community
• How anyone can go from dream chaser to dream catcher to improve your life and the lives of others

About Our Guest

Jerome Myers

Jerome Myers is founder and CEO at The Myers Development Group, LLC (MDG), where he also serves as executive coach, real estate investor and business strategy consultant.  MDG was established in 2006 to offer private lending, business strategy, organizational development and engineering consulting services to businesses and individuals in Virginia and North Carolina.

Prior to forming MDG, he was an employee in corporate America where he led an organization that built a team from 3 to 150 employees over the course of two years and sustained financial results of over 15MM annually with more than a 25% profit margin.  Prior to that, he worked with a number of domestic and international organizations in the public and private sectors ranging in size from small startups to Fortune 500 companies.  Jerome has served as engineer, engineering manager, project manager, six sigma master black belt, inspirational speaker, executive coach, author and business development representative.

His passion for growing minority participation in STEM (Science, Technology, Engineering, Math) disciplines has driven him to chair the marketing subcommittee for the Richmond Minorities in Engineering Partnership Board.  He helped to establish the first fully-endowed engineering scholarship at North Carolina Agricultural and Technical State University, where he routinely gives inspirational keynote speeches and mentors young professionals who are working in STEM disciplines.

When asked why he is so passionate about his current role his response is simple, “I believe dreams should be real. There are far too many people who simply give up on their dreams because the people around them don’t support them. I have one purpose at this juncture in my life. It is to support people on their journey from a dreamer to a dream catcher.”

More About Jerome

• His father was in Marine Corp (joining when he was 16)
• Mother was in the Navy
• They both met in Adak Island, Alaska
• Had Jerome and his mom became a stay-at-home mom
• He was raised in Fayetteville, NC
• Parents married nearly 40 years
• His parents were his two heroes
• His mom was his best friend
• His dad raised him to be a man of integrity and dependable
• Jerome is the kind of guy who, when he says he will do something, you know he will

Looking at Career Options

• One day he was playing in the backyard and he told his mom he wanted to be a trash man because he knew the trash man and thought it would be fun to hang on to the back of a truck like that and pull the lever that crushed the trash.  Plus he always was home by 3pm and Jerome’s dad didn’t get home until 6pm
• His mom said, “Baby, that’s not going to be the lifestyle you’d like.  You like too many nice things.  You need to get a career that will give you the lifestyle you’ll want.”

Engineering School

• Jerome ended up going to school to become an engineer
• Studied civil engineering
• Was hired by a corporation as a structural engineer
• Went back to school to get his MBA to get on a leadership track
• Left the firm to do work for consulting firms
• Got some international assignments
• He made a lot of money early in his career
• His lifestyle was very comfortable
• But he still felt like he had “golden handcuffs” on

Corporate Executive

• He helped grow a successful company to over 150 employees
• But had to lay-off employees and he didn’t like that – he said, “I wasn’t built for it.”
• He help “re-engineer the company” to get it back on track but then had to do another wave of lay-offs
• The lay-offs happened during the holidays, making it even worse – on Christmas Eve
• That was the last draw.  He said he didn’t want to do that anymore
• He wanted to do sometime that would help build up people’s lives

Career Change

• He wanted a change of careers
• Although he had the aptitude and skill set to be a good engineer, he didn’t really like the day-to day work
• He hungered to build a business that would make a difference in the world
• One day, while hanging out with one of his buddies, they got to talking about the apartment building where they lived
• They knew what they paid for rent and the number of units in the building, so they calculated what the owner was bringing in every month
• They said, “The owner of this building is making $700,000 a year but we’ve never met him.  How can we do that?”
• Jerome didn’t know anyone that owned apartments so he started researching to see what it would take

Getting Educated

• He said he “enrolled in school” to learn real estate investing at “Podcast U” and “YouTube University.”  He went online to learn everything he could about buying apartment buildings
• He said it may take a little longer but you can learn a lot for free online without having to pay $40K to a guru
• However, he knew he would feel better if he could find an experience real estate investor to run his questions by
• He didn’t want to buy into a bad deal
• He had a friend that didn’t get any training did his first flip — he lost $10K.  Jerome told his friend, “You should have just paid a coach!” – “Either way, you pay for the education.”
• Jerome did the same thing on his multifamily project where he underestimated the rehab costs
• If he had to do it over, though, he would have spent the extra for a coach to shorten the learning curve
• If you’re getting involved in apartment buildings, you’re not talking an investment of tens of thousands – you’re talking millions!
• You’re going to make mistakes in the beginning, you just want to reduce the cost of the mistakes as much as possible

His First Apartment Deal

• Bought a 23-unit apartment in Church Hill, a subdivision of downtown Richmond, VA
• Second biggest purchase in his life
• Bought it from a guy who bought it but never executed his business plan
• Average rents were $695.  Today, they rent for $1,195
• Spent a fortune on renovations
• He re-did the full exterior (siding, roofing, new parking lot, landscaping)
• On the interiors, they added a half-bath and laundry room on the first floor, re-configured walls to give an open concept, granite counter tops, stainless steel appliances, paint, drywall, etc.
• Installed central HVAC in each unit
• Building permits, capital was complicated
• Costed more than estimated

The Challenge of Financing Bigger Deals

• Jerome thought he could just go into a bank and get the whole thing financed all by himself
  • He had money in the bank
  • Had a good credit score
  • The banks didn’t laugh at him but they did basically told him he didn’t have the experience to do what is necessary for this project
  • Banks don’t invest in people’s dreams, they invest in solid businesses run by people with a track record.  That’s why you need to put together a solid management team before you present to the bank
• He was standing on the porch of one of his fix ‘n flip projects when a guy drove up who just bought a property the street.  He also tried to buy the one Jerome was trying to buy.  The guy told Jerome that he thought that the apartment needed a team.  So they put a team together that included:
  • The guy
  • Jerome
  • A contractor friend of Jerome’s
  • The real estate broker
  • A property manager who manages 3,000 doors in Virginia
• They went back to the bank with a revised plan that included the new team and the bank liked it.  They liked:
  • Their financials
  • The complimentary skill sets of the team
  • And since the bank already held the current mortgage, they liked the property already and they felt it made sense to rewrite it for their purchase
• Once they got the loan, they launched their business plan

Implementing Their Plan

• Their business plan blew up in the second month
  • They were going to upgrade the units on turns but, instead, they ended up bringing the property down to 0% occupancy
    • Some people weren’t paying so they were evicted
    • Whoever didn’t have a lease was given notice or when a lease expired, they didn’t renew
    • They had a sewer issue and they didn’t have working sewage so the rest of the tenants left
  • Now, they had no income and huge capital demand
  • It would have bankrupt Jerome if he didn’t have other partners
  • Having the right people on his team made all the difference
  • Even though the bank provided money for construction, there were other expenses they didn’t plan for that had to be done
    • For example, they underestimated HVAC costs
      • Budgeted $2,000 per unit – actual cost was $4,500 (times 23 units)
• They have plans to re-finance to pay back investors’ principle and will still do well on the deal but there were a lot of lessons learned
• The team is the best
  • He’s known them and/or worked along side them for a minimum of 4 years.  Some he’s know for 20 years

Technology Road Development Project

• He is the chairman of the advisory board on civil engineering at NCA&TSU  (North Carolina Agricultural and Technical State University)
• He got together with one of the professors in the architectural engineering area at the school and they did some designs for in-fill lots in Eastern Greensboro
• The City Council and the Greensboro Housing Coalition heard about it and had his group present their designs at a Housing Summit last April
• After they finished presenting, one of the developers who’s in affordable housing gave Jerome his card and they said, “We have 6 acres you may be interested in.”
• There is a distribution center adjacent to the site
• The developer was not able to do the deal because it did not meet the requirements of their model, because of the distribution center
• If you get financing from the North Carolina Housing Finance Agency, they incentivize developers who do subsidized housing
  • They have certain criteria for sites
    • They don’t want high voltage power lines, distribution centers or train tracks
    • Because of the adjacent distribution center, it disqualified the site
• The property is in an “opportunity zone” and in a targeted investment area for Greensboro
• Close to a new loop that being built in the area
• Less than 10 minutes from downtown
• Right across the street from the technical community college’s largest campus in the county
• Jerome was not looking for a development project he saw it as a great opportunity for them to be first to market
• They are getting the property for a little less than what it was appraised for in 2008
• They had a conditional zoning for 72 units.  He got a re-zoning approval up to 120 units
• It will be a ground-up 123-unit development deal (his first ground-up project)
  • 20 Town Homes
  • 103 Apartments
• They’re building on an in-fill lot that’s nice and flat
• There’s a bunch of single family homes in the area
• It will be syndicated
• Jerome is a licensed contractor in Virginia and North Carolina but they will hire outside contractors
• The deal may cost around $10 million, estimating at $2,500 a door
• Going to do a HUD loan – 40-year, fully amortized, around 4%
• Long-term hold
• Targeting project completion for early 2021 completion date or/or can do in phases.  Possibly:
  • Leasing center and town homes in first phase
  • An apartment building built-out/lease-up phase two
  • He’d like to generate income before project is complete

Where He Buys

• Richmond, VA and Greensboro, NC
• He’s really excited about Greensboro
  • Jerome went to school there (North Carolina Agricultural and Technical State University)
  • It’s flying under the radar
  • People know about Charlotte & Raleigh but not Greensboro
  • They found a niche where there is not a lot of competition
  • He may be one of the few focused full-time in this market
  • They are primarily competing with doctors, dentists and lawyers in the area
  • Many deals around $500,000 to $3,000,000
• He usually looks for assets that are broken, figuring out the problem and executing the business plan to fix the problem

Biggest Mistakes

• Not getting the utilities turned on during due diligence
  • He had two down units on a project they were inspecting
  • And because the utilities were turned off, they missed a busted pipe in the wall
  • After they bought the property and turned on the water during rehab, they ruined the kitchen because the pipe leaked into the kitchen, on top of the cabinets that became de-laminated, Formica counter tops got soaked and ruined
  • If you don’t have the utilities on, your inspector isn’t generally going to complain (because it’s less work for them)
• Another property that had a broken HVAC unit
  • Resident had taped up all the vents (red flag)
  • Had window A/Cs running, even though the unit had central HVAC
  • Found out a raccoon got inside the HVAC and got fried on the heat strips
  • He had to replace the whole unit – $4,000

Biggest Success

• Being good at analysis
• They pro formed a 26-unit student housing property
• Re-positioned it away from student housing and into workforce housing
• Closed on it at $1,375,000 buy with $400,000 in equity
• Appraised for $1,750,000

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

• Don’t get another job by doing everything yourself
• When you retire, you want freedom
• Either “manage a manager” or partner with an operating partner who is executing on a daily basis and values your capital more than their own
• By creating cash flow from your own properties, you are able to get a better return than in the stock market
• Get well-educated
• Work with people who know what they’re doing
• And watch out that some of these projects can eat up your capital pretty fast

From Dream Chaser to Dream Catcher

• He has his “Dream Catcher” podcast where he shares how ordinary people are doing extraordinary things
• He wants to inspire people to not only “chase their dreams” but to “catch them” – finish what you start
• There’s a lot of people who say they want something but they don’t talk say what they are willing to sacrifice
• His goal in his coaching is to help free people from the things that they’re not passionate about and to help them get closer to their true dreams and to only  work on things that they are passionate about
• He sees too many people wasting their lives away doing things they don’t like just because they need a paycheck

Business Goals

• Short Term Goal
  • The development of “Technology Row”
    • A modern, but more affordable housing development
• Long Term Goal
  • Acquire 1,000 doors and have 100 partners

Rap-It-Up

• Favorite real estate book: Emerging Real Estate Markets by David Lindahl
• Favorite business book: Millionaire Success Habits by Nick Graziosi
• Most valuable web site for success (other than your own): DealMachine
• Favorite app: Google
• Favorite quote: “Dreams should be real.”  (his personal philosophy)
• If you had to start all over, knowing what you know, and you only had $1,000, what would you do to launch your real estate investing business? Send postcards through DealMachine to get a wholesale deal and build from there.

How to Reach Jerome

• Business Website: http://d3v3loping.com/
• Education/Coaching Platform: www.myersmethods.com
• Podcast: www.DreamsShouldBeReal.com
• MasterMind: www.PowWowattheMountaintop.com

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Additional Episode Sponsor: Meno Studio – menostudio777@gmail.com