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SHOW NOTES FOR EPISODE 589: REAL ESTATE INVESTING WITH JOINT VENTURES AND THE BRRRR METHOD
He went from law enforcement to real estate mogul – all while trying to earn just a few extra dollars for retirement! In today’s podcast, former police officer turned entrepreneur and successful real estate investor Adrian Pannozzo shares how he was able to leverage one duplex into more that 350 multifamily units almost entirely without using banks or syndicating.
What You Will Learn
- What a joint venture real estate transaction looks like
- The advantages of a joint venture vs. a mortgage
- How the BRRRR strategies can be applied to multifamily projects
- Why small multifamily properties are better than single family properties
- What a “Power Team” is and how it can boost your real estate growth
- Why it makes sense to take out ALL of your equity on a BRRRR re-fi
- What is the biggest mistake most real estate investors make?
- Why investing for the long-term makes makes sense than multifamily flips or value-add deals
About Our Guest
Adrian Pannozzo
Adrian completed 21 years as a police officer and was able to retire early as a result of his real estate investments. He is now a full time real estate investor and entrepreneur of multiple companies. His professional portfolio, built in less than a decade, consists of 72+ investment properties or the equivalent of 350+ units. He is the founder and co-owner of Executive Properties Inc., a high scale full-service property management company that services over 600 doors in the Hamilton, Ontario in Canada. He is also the founder of Investors Edge Construction Management, a full-service construction company that focuses on multifamily conversions and renovations and Executive Properties Capital Inc., an investment company that raises capital through joint venture partnerships to purchase investment properties. His passion is helping others achieve generational wealth through his “buy, renovate, and refinance” strategy. He also hosts the “More to Life: Real Estate Investing Podcast”
More About Adrian
- He was a police office in the GTA in Canada
- He served for 21 years
- His goal was to reach 30 years with the force but real estate investing changed all that
- For the last 9-10 years of his career he has been investing in real estate
- He bought his first investment property while he was working full-time for the police force
- He wanted to create cash flow so that when he finally retired, he could live the same lifestyle, even though he would be on a pension
- He also wanted to supplement his income
- The mortgage on his primary residence was coming due for renewal
- Adrian and his wife met with a mortgage broker who actually planted the seed with Adrian to invest in real estate
- They didn’t really have money in the bank
- They had good jobs and equity in their primary residence
- The broker saw how much equity they had in their home and recommended that they take out a HELOC and purchase an investment property
- It seemed like a good way to go considering his goal to supplement his income and plan for retirement
His First Property
- Adrian purchased a small duplex near to where he lives
- He wanted to be close to his home so he could watch the property
- It had a 3-bedroom apartment upstairs
- And a 2-bedroom basement apartment
- He purchased it for $310,000 (Canadian)
- He still has the property today
- He liked the property because, even if you have a vacancy, you have another tenant who can continue to pay your mortgage until you replace the old tenant
- If it was a single family property and the tenant left around December, it could take months to find another tenant and you would have to pay out-of-pocket to cover the mortgage and other expenses
- Also, there’s just more cash flow with multifamily properties
Unplanned Growth
- He never really had a plan to grow to the size his portfolio is today
- He initially thought he would have 2-3 properties max
- He initially thought he would just get a few properties to supplement his pension so he could maintain the same lifestyle
- His portfolio really took off about 4 to 5 years into it
- Their third property was a fourplex, making four properties he now owned
- Adrian and his wife, at that time, based on their incomes and their debt service, they had reached a max for leveraging and the banks wouldn’t approve additional mortgage loans
- Their largest property is a 45-unit apartment building
Joint Ventures to Explosive Growth
- Since the banks were no longer able to fund their purchases, they looked for partners that could act as their “bank”
- They were looking for likeminded investors that were interested in investing in real estate with them
- They had build a reputation as successful investors
- Over the years, they managed to put together a “power team” around them that helped them by investing or referring investors
- Entrepreneurs and professionals with young families were drawn to them to invest
- These were people who did not have the time for investing and Adrian and his wife could be the “boots on the ground” to find good investment opportunities
- That’s when their portfolio scaled aggressively — once they could leverage other people’s money (OPM) and buy properties together
- It was primarily just word-of-mouth that attracted new investors
- Later, he was interviewed on a podcast, where he shared his story and results, and that attracted more investors
- By 2017, he had grown his portfolio so much that he was able to retire early
Becoming a Full-Time Real Estate Investor
- At this point, he knew it was more than just having a couple of rental properties – it had become a real business
- They are now marketing themselves through every platform of social media
- They now have a property management company, a construction company and an investment company
- Since Adrian is looking for properties that are distressed, they put a construction team together as a separate business
- The construction company also handles regular maintenance for their various buildings
High Scale BRRRR
- Adrian started applying the BRRRR Method to his property acquisition strategy
- BRRRR, the strategy that stands for Buy, Rehab, Refinance, Rent and Repeat, worked perfectly for his multifamily acquisitions – just on a bigger scale than with single family homes
- Because they were doing so much construction, a construction company made more sense than hiring individual contractors all the time
- That way, they could have a dependable team that they could use all the time for both construction/renovation projects and build maintenance and repairs
- They buy properties that are structurally sound but need a facelift or renovation to upgrade to today’s standards
- They can raise the value and appreciation of the property right away with the right rehab – forced appreciation
Leveraging ALL of the Equity
- A unique aspect of his BRRRR strategy is that, after they do the construction upgrade, and when they re-fi, they take out ALL of the equity of the property and use all for the purchase of their next acquisition
- They still have the benefit of great cash flow for their investors but they also immediately leverage the property to continue to grow their portfolio
- Having their exclusive construction team helps them keep the construction prices inline to further boost the bottom-line
Managing Wisely
- To further control costs, provide top service and maintain efficiency, they set up their own property management business to insure that there properties are managed well, further boosting tenant retention and maximum yield for investors
- It also gives peace of mind knowing that his own employees are taking good care of the properties as well
A One-Stop-Shop
- Because they control all aspects of the full property rental experience, from acquisition through tenant service, it makes the investment that much more appealing to investors
- That way they can better control what happens to the bottom-line
Long-Term Strategy
- When he acquires a property, he holds on to it for the long term, as opposed to selling it offer after it’s been upgraded and rents increased, like a typical value-add deal
- He doesn’t like to flip his properties
- Long-term hold, long-term wealth is his focus
No Banks, No Syndications
- All of his properties are financed through joint venture partnerships – some at very high levels
- This way, he doesn’t have to deal with banks or massive numbers of investors, just a few
Biggest Mistake
- Not stepping outside of his comfort zone
- Not pulling the trigger
- There’s one deal in particular that he still looks back on with regret
- Early on in his investing, he came across an attractive 6-unit property
- He had the opportunity to buy the property off-market
- Unfortunately, the property was so far gone a traditional lender wouldn’t touch it – he would have had to use a hard money lender
- He had only been investing for 3 years
- But he was afraid of the risk and he didn’t do the deal
- His realtor at the time was pushing him to do the deal
- His realtor was also an investor
- The realtor told him, “If you don’t buy it, I will.”
- Adrian though he was joking but the realtor did end up buying it
- After his realtor borrowed the hard money and did the rehab, he was able to:
- Qualify for a new mortgage from a bank
- Refinance the property
- Pull all the initial capital out
- Pay back the hard money lender
- And take out an additional $250,000
- He considered it a big mistake because, if he didn’t hesitate, he could have had the same results
- He could have owned the 6-plex for free
- And have $250,000 on top of that
Biggest Success(es)
- His very first BRRRR acquisition
- He did an abundance of research
- He made all his money back, plus an additional $25,000
- That decision changed his life and allowed him to move forward to build up the real estate business he has today
- It also helped him develop a track record that opened things up to attracting other investors to fund many more deals
- Re could retire early
- He had financial freedom
- He can now live life on his own terms
Advice for Old Dawgs Looking at Real Estate Investing to Help Them in Their Retirement Years
- You can’t do enough research but sooner or later you have to “pull the trigger”
- You have to step outside your comfort zone
- Real estate is one of the safest investments out there
- It may go up and down but “ride the wave”
- Invest in multifamily properties
- Even if interest rates go up a little bit, you have cash flow as a cushion and you won’t have to dip into your savings
- Surround yourself with the right “power team” that can help you and that specialize in what you are doing
- For example, don’t just hire any real estate agent, but find one that specializes in investment properties
- Get off the fence and pull the trigger
Current Business
- He’s ready to start enjoying the fruit of his labors
- He hopes to be on a beach in the Caribbean in the next two years
- He has a daughter 21 years old who just graduated from college who wants to learn and work in her dad’s business
- She is very eager to learn
- He sees her being able to double what he has already built
Rap-It-Up
- Favorite real estate book: Be Obsessed or Be Average by Grant Cardone
- Favorite business book: Any book on the BRRRR strategy (I recommend Buy, Rehab, Rent, Refinance, Repeat by David M Greene
- Most valuable web site for success (other than your own): REIN.com
- Favorite app: Mortgage Calculator
- Favorite quote: “Be excited to fail.”
- 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? I would put $1,000 on a credit card for a down payment to purchase real estate. Use up the rest of the credit card balance to take people out to convince them to joint venture with me because of my abundance of knowledge that would make them lots of money.
How to Reach Adrian
- Email: Adrian@investwithepc.com
- All over social media. Just type in his name.
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