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SHOW NOTES FOR EPISODE 279: ENGINEER QUITS JOB IN ONLY 2 YEARS WITH APARTMENT INVESTING
While browsing investing books at a local bookstore, aerospace engineer Pam Scamardo stumbled across Robert Kiyosaki’s Rich Dad Poor Dad. The book so rocked her world that it prompted her to pursue other books, including one on commercial real estate investing. In this podcast, Pam shares how buying apartments buildings allowed her to generate enough cash flow, in just two years, to quit her lucrative engineering job and become a full-time investor.
What You Will Learn
- Why apartments are the best real estate investment vehicle to help you become financially independent fast
- The importance of aggressive networking to find deals and partners (even at your workplace)
- How careful and diligent management of your contractors can result in your projects coming in under budget
- Why “cheap properties” are a red flag for future headaches
- How other people’s “reject properties” can become your “cash cows”
- How important your first property purchase is to your future success as a real estate investor
- Why your first property purchase opens doors for more deals and great lending rates
- Forming a partnership with Promissory Notes
- The importance of negotiating everything, not just the property deal
About Our Guest
Pam Scamardo
Pam Scamardo has committed the last 7 years to acquiring, managing, and repositioning apartment complexes. She specializes in maximizing passive income for partners while preserving investor capital. Pam manages a multifamily asset portfolio valued at over $4.3 million through successful syndications. Currently, Pam serves as the Founder and Managing Partner of TPK Properties LLC, a privately-held multifamily investment company that acquires, manages, and renovates medium to large sized apartment buildings in California, Arizona, Oregon, and Washington. Prior to founding TPK Properties LLC, Pam worked as an Aeronautical and Mechanical Engineer at Lockheed Martin, Boeing, and UTC Aerospace. She managed projects that entailed detailed financial projections, new product developments, product launching, analytical testing and reports, as well as managing a global stress and design team. Pam has a B.S. degree in Aerospace and Mechanical Engineering from the University of California, Irvine and a M.S. degree in Aerospace Engineering from the University of Southern California. Pam is also an Enrolled Agent with an emphasis on real estate taxes.
More About Pam
- Lives in Rancho Cucamonga, California
- Her engineering background has helped spur her interest in real estate investing, what with the analysis and numbers side of the business
- Also, her work as an Enrolled Agent, with an emphasis on real estate taxes, has been very helpful, as she has seen how her real estate investments flow through her personal taxes
- She has always loved numbers
- Was at a Barnes & Noble bookstore, looking at investment books, because she wanted to diversify out of just stocks, bonds and mutual funds
- Her work colleagues and she had often talked about their retirement because they thought it unlikely they would get any pension funds
- Stumbled upon Robert Kiyosaki’s Rich Dad Poor Dad – a “light bulb moment”
- This caused her to examine her future and the possibility 0f having more free time and possibly retiring early
- Bought “Commercial Real Estate Investing for Dummies” by Peter Harris and Peter Conte and the book spoke to her and got her interested in investing in apartment complexes
- She hunted down the authors, and ended up being coached by Peter Harri, who inspired her to pursue commercial real estate
- Investing in apartment buildings allowed her to eventually quit her engineering job and go full-time into real estate investing
First Apartment Building Purchase
- Was working, at the time, at an engineering firm in San Diego, California
- She wanted to learn and get started in real estate investing in her own backyard (within 15-20 minute drive) – Peter encouraged her in this as well for her first property – so she started networking and looking at properties in the area
- She signed up with a local REI (Real Estate Investors) club in the area
- Did a lot of face-to-face networking
- Developed relationships
- Connected with a real estate agent
- Received an email blast from the agent for a 6-unit apartment building in San Diego
- In 2012, Pam found a 6-unit REO (bank owned) apartment building
- Foreclosure property owned by Wells Fargo – they wanted to get rid of it
- 2 units were completely damaged and gutted
- It was located near her, it was smaller (which she liked for her first property)
- Peter Harris was coaching her at the time and helped direct her efforts
- Took a leap of faith and decided to go for the property (bought in August of 2012)
- Bought the property for $417,000 (included $10,000 for repairs)
- She also partnered with 2 of her work colleagues
- Would talk about the deal constantly with them at coffee and lunch breaks.
- They knew her and her reputation as an engineer and trusted her
- She shared the numbers with them
- Told them the kind of returns they would get on their investment
- Talked about the specific steps involved (renovations, financing, etc.) to get the deal done
- They created “Promissory Notes” to confirm the partnerships, terms and the specific details of their investment deal
- Local lenders were not impressed with Pam’s lack of experience but she persisted anyway to try to get the deal done
- Conventional lenders did not want to work with her so she had to go for a higher interest loan (7%). Was able to negotiate a loan with no pre-payment penalties because the plan was to re-fi ASAP
- She used some of her personal finances, combined with funds from her two partners for the down payment
- Because she was single and had a good salary, she was able save up a good amount for her first investment (didn’t have to touch her 401K or do cash out re-fi)
- Formed an LLC – TPK Properties LLC (her initials) and put the property in that name
- Estimated the scope of rehab/construction repairs herself (using her engineering skills – she designed/built airplanes)
- Got bids from three different general contractors (always gets 3 and averages it out)
- Two story unit
- Disgruntled tenant turned on bathtub, let it flow and did much damage (the gutted units)
- Much repair needed – electrical as well
- Shared the bids with her partners and would get their feedback
- Actual renovation costs came in under budget – $8,500 of the $10,000 budget (she managed every detail of the repair process)
- Bought second hand appliances
- Also, hired a property manager early on (her name is Pam, too)
- She is very transparent
- Loves negotiation, acquisition and repairs
- Took 6 months to get repairs done and leased up
- Once it was repaired and leased up, she was able to re-fi with a better, lower interest loan (4.5%)
- Property was recently appraised at $950,000
More Properties
- Bought basically one property a year, on average, ever since
- Bought next property in late 2013 – 8-unit apartment in Oregon – 8 units
- In 2014, she quit her engineering job to go full-time in real estate investing
- Next, bought a 4-unit in Arizona for $90,000. After 2 years, sold it for $167,000
- In 2015, did a more formal syndication with a 16-unit
- Got syndication attorney
- Set up LLC
- More investors
- Got documentation on who is going to get paid and how
- The work is pretty much the same as other types of real estate transactions she has done
- But now needed to be more aware of her investors needs and issues
- Currently, has about 70 units – mostly in Oregon
- Source of most property leads – word-of-mouth
- An agent came to her that heard about her buying properties in Oregon – they now have done 4 deals together
Biggest Mistake
- Bought a 4-unit property in Arizona for cheap
- It was a non-commercial property (commercial properties have to be 5-units and above), which was not her criteria
- Was only looking at the price
- Thought it was a “diamond in the rough” because of the price. It was no diamond – just rough
- When she had vacancies she felt it more because it was a smaller the property
- You cannot rehab a property in a bad market and expect it to do well. The market is important
- Took a lot of work
- Had turnovers almost every month
- Longest term tenant – 6 months
- Did concessions to get people to stay but didn’t work
- Outside market influences – drugs, other illegal issues in the area
- Sold it within 2-3 years
Biggest Success
- Staying with criteria has helped ever her the most since her “big mistake” with the cheap 4-unit
- Her criteria:
- 5 units and above
- Value-add – rehab
- Provide quality housing to tenants
- Be able to provide good investor returns
- Her criteria:
Advice for Old Dawgs Considering Investing in Real Estate
- Get out and meet people
- Old Dawgs are better at face-to-face relationships (millennials are good at “screen-to-screen” relations)
- Attend REI meetings or meet-ups
- Meet potential investors as well as property or real estate opportunity leads
- Invest in your education
- Get a mentor
Her Future Goals
- Empower more women to get involved with commercial real estate investing
- Recently joined C.R.E.W. (Commercial Real Estate Women) organization
- Wants to own 2,500 units in the next 5 years
- Wants to travel more with her family
- Build up a good college fund for her two kids
Rap-It-Up
- Favorite real estate book: Commercial Real Estate Investing for Dummies by Peter Harris and Peter Conte
- Favorite business book: The 4 Hour Work Week by Tim Ferris
- Most valuable web site for success (other than your own): YouTube.com
- Favorite app: Head Space
- Favorite quote: “Success is the successive realization of a worthy goal or ideal.” Earl Nightingale
- 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? Use the money to aggressively attend networking events, take people out to coffee or lunch, and continue education. Also encourage more women.
How You Can Reach Pam
- Website: TPKLLC.com
- Email: Pam@tpkproperties.com
- Phone: 619-800-6574
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