333: Real Estate Rockstar Acquires Nearly 4,000 Units in 8 Years

SHOW NOTES FOR EPISODE 333: REAL ESTATE ROCKSTAR ACQUIRES NEARLY 4,000 UNITS IN 8 YEARS

He started out looking for a side hustle to fill an income gap resulting from reduced sales commissions and ended up building a real estate dynasty in just 8 years.  In this podcast episode, Robert Martinez, apartment investor extraordinaire with 17 prestigious city, state and national real estate awards, shares how he was able to grow his extra-income side hustle into a multi-million dollar real estate enterprise with nearly 4,000 apartment units under management.

What You Will Learn

• How to break free of the 9-to-5 hamster treadmill
• The value of local real estate investor clubs
• The advantages and disadvantages of real estate investment partnerships
• Why a 100 plus apartment building is less work than a smaller apartment building
• How thinking “too small” can hurt your business for the long-term
• Why Texas is the best state in the US to be a real estate investor
• The power of recruiting and training a team for the long term
• Who to hire first as you grow your real estate business from the ground up
• Why you should structure your business to retain tenants above everything else
• The critical importance of building a strong brand for your business and properties

About Our Guest

Robert Martinez

Robert Martinez is a real estate expert, digital influencer, public speaker and the Founding Principal of Rockstar Capital Management – a privately held real estate firm that focuses on acquisitions in multi family apartments. He has built an award winning real estate firm that has won 17 National Association awards with 2 of them being Independent Owner Operator of The Year awards. Other than the awards, Robert has been recognized as a sought after business thought leader and shared his thoughts on Forbes, Entrepreneur, Money, CNBC and more. Graduating with an Engineering degree, Robert entered corporate America in the oil and gas industry. After grinding in his 20’s and early 30’s, he decided it was time for a change and joined Lifestyles Unlimited where he learned about the fundamentals and the art of operating real estate. After starting Rockstar Capital in 2011, he has successfully built the firm to $335MM and 3699 units in the last 8 years with an all star team. Robert’s goal is to scale the firm to $1B AUM and 10,000 units. He also showcases his journey on social media and through his web show: The Apartment Rockstar on YouTube and documents his journey to 10,000 units while providing full transparency of the good, bad and the ugly side of real estate.

More About Robert

• Grew up in McCallum, TX
• Went to Texas A&M
• Got engineering degree
• He was doing what everyone else was doing
  • Go to school
  • Get good grades
  • Get a job
  • Set-up a 401K
  • Plan to retire at 65
• Unfortunately, what everyone else does is like the hamster on a wheel, where you get running and running but never really find your way off the wheel
  • Graduated college

First Job

• Got an engineering/sales job in the oil and gas industry
• Did that for several years
• He was good at sales but didn’t love what he did
• Good with numbers but very good with sales
• He was on commission and quickly earned that “you’re going to have to kill what you eat tonight” and that thought stayed with him for a long time
• The company changed hands a number of times while he worked there and, each time, there would be…
  • New management
  • New philosophy
  • New business ideas
  • The new company would always want to cut expenses
    • The quickest way to do that was to go after the sales guys – the ones who are making the most money
      • They tried to re-direct the sales team’s focus
      • Cut their numbers
      • Have them grow a different segment of the business
      • After this happened a few times, he realized that he didn’t have control of his financial future
        • His bosses had control
        • The owners of the company also did
        • But Robert found that he was limited
          • When he reached a certain above a number…
            • They’d cut him back down
            • Give him new sales territory
            • He’d have to restart the game
            • And, in the meantime, the company would just grow larger and larger
            • That’s fine for he company but it didn’t work for him

Introduced to Real Estate Investing

• He remembers one day sitting in his car during the lunch hour
  • He should have had a sales call but he didn’t on that day
  • He was listening to a local Houston radio show hosted by Dell Walmsly, who founded Lifestyles Unlimited, a real estate club that taught people how to buy apartment buildings
    • Liked what he heard
    • Continued listening to the show for about a year
    • Asked himself, “Why can’t I do this?”
    • At first, he was just looking at replacing some of the money he lost from his salary from the new management
    • He went to one of the club meetings and really enjoyed it
    • Then, went to a weekend boot camp January 2007 and was blown away
      • Was introduced to the book “Rich Dad Poor Dad” by Robert Kiyosaki
      • Introduced to a whole different way of thinking
      • He was hooked!
    • Signed up for the club

Started His First Real Estate Business

• Met a guy at one of the club meetings whom he later partnered with
  • They started a management company
  • Bought and managed 2,000 units
  • Bought the properties with investor equity
  • The partnership ended early 2011
• When he started, he didn’t have the confidence and didn’t think he could do it by himself
• Partnered with a guy from London whose experience was built in the UK
• London guy responsibilities
  • Syndication guy
  • Handled the investors
  • Face of the company
• Robert responsibilities
  • Had local knowledge about Houston (speaks some Spanish)
  • Became the operations guy – ran the 2,000 units
  • Directed them through the recession
  • Sales knowledge
  • Able to teach/train the team, especially sales techniques
• His partner told him he couldn’t do it without him, which motivated him to go solo

Going Solo

• Started his own company – Rockstar Capital Management
  • He had a wealth of knowledge at that time because of the first business venture
  • He “re-started” the company with his own brand
  • In just 8 years, they have accomplished much
    • Grew from zero properties to 21 today
    • 3,699 units
    • $100 million in transactions over the last 12 months (busiest buyers in the Houston market)
    • Recently acknowledged as the first two-time “Independent Owner of the Year” by the local Apartment Owners Association
    • His company has received 17 city, state and national Apartment Association awards
    • He was recognized as the “Most Admired Company CEOs” by the Houston Business Journal
    • Property manager on his team was the youngest property manager to win “Property Manager of the Year” at just 20 years of age
• 80% of his properties are in the Houston area
• Recently expanded out to other nearby market  areas
  • South Texas – a month ago, acquired $51 mllion from 2 assets, adding 450 units to portfolio
• Why Houston?
  • This is where he moved after he graduated – near his home
  • Texas, as a whole, is very business friendly and has best tenant/landlord laws in the country
  • Very affordable
  • Low cost-of-living
• Started buying one deal a year 2011-2013
  • Guarded each property with his life

Growing His Business

• Lifestyles Unlimited helped him get started but they are not used to growing large businesses
  • Geared to replacing your income
  • Finding financial peace for yourself
• He added many young millennials on his team
  • Property manager on his team was the youngest property manager to win “Property Manager of the Year” at just 20 years of age
• All grew together
• Around 2014, they realized they could ramp up even faster
  • 2011 – one deal
  • 2012 – one deal
  • 2013 – one deal
  • 2014 – four deals (100-150 unit deals)
  • 2015 – two larger deals (160 and 240 units)
  • 2018-2019 – 6 transactions in last 12 months totaling over $100 million (2 in South Texas alone at $51 million)
  • Stated challenging themselves to grow even faster

Finding First Deals

• Started in 2007 and learned a lot
• Had experience with the 2,000 units he managed
• Made many broker contacts
  • They started seeing him as a legitimate operator
  • Saw his success
  • By 2010, he was established in their eyes
• It was the recession
• Looking back, he wished he would have bought everything he could
• His first deal
  • Bought 118 units
    • He owned 10% of the deal
    • Syndicated
      • Lifestyles Unlimited had great network to find syndication investors
    • Raised $1.5 million
      • 10 investors at $150K each
  • Owned by large REIT
    • Bought it cheap
    • Was worried about the recession
      • Working with REIT and pension money
      • Didn’t want to lose investors’ capital
      • Didn’t know when recession was going to end
    • Sold it at good price
      • Bought it at $24K per door
  • Within 160 days after to Robert’s company first bought it
    • Marketed the property heavily
    • Discounted rents to boost occupancy
    • Leased it back up to 100%
  • As market corrected itself
    • Able to boost rents back up
    • Today, would sell for $100K per door
  • Wanted to stay in the 80-100 unit deal size
    • Smaller properties require more of your time because you can’t have onsite management – you’re buying yourself a job, not passive income
    • Over 100 can get you onsite manager and management
  • Next deals
    • 126 units
    • 108 units
    • 162 units (had 2-man onsite management

Building His Team

• He was able to bring over some of the best staff he had at the previous partnership business he had
• He added many young millennials on his team
  • Property manager on his team was the youngest property manager to win “Property Manager of the Year” at just 20 years of age
    • She was the first onsite property manager in his first property
  • Next, her husband became available and Robert hired him for maintenance.  He was the “National Maintenance Technician of the Year” and “Houston Maintenance Man of the Year”
• They all grew together
• Hired and trained his own management team
  • Tries to surround himself with people with the most heart, not just skills
    • Didn’t want someone to just quit when things got tough (and they will get tough)
    • He can teach skills but can’t teach a person to have heart – you either have it or you don’t
  • After he would buy a property, he would retain existing management for the initial transition but would eventually replace 90% of the original staff
  • Because he buys value-add properties, usually there is something wrong that needs to be fixed – often a big part of that is existing management
  • The onsite management staff is a direct reflection of the ownership
    • If current staff sees trash on the floor but just walks right by it, it says a lot about who they are
    • That type of person didn’t meet the standards that Robert wants for his propertie
• Built business around them
• You can’t do everything yourself
• You need at some point to train others to come aboard – to delegate
  • Many are afraid at first to trust in others
    • They won’t do it the same way you want
    • You have to slow down to take the time to teach them
    • You feel like you’re being inefficient
    • But you have to if you want to scale up
• Real estate is a people game
  • You’re taking care of people’s homes
  • You need people working with you who are concerned about your tenants well-being
• As you get more properties you need to promote or hire  “regional managers” (he prefers to promote from within because they already know “your way”) to oversee your other managers
  • They made this move at 1,000 units, deal number 9
  • The leasing managers they hired in 2011 became his regional managers in 2017
• Non-Operational Employees
  • Quality Control
  • Training Director
  • Marketing Director
  • Tech Person
    • Need to understand the times we’re in
    • Social media
    • Grant Cardone
      • Met with him to learn
  • Call Center
    • Making sure calls are answered 24/7
  • Acquisition/underwriting
  • Fundraising
• Outsourced
  • Accounting (done since the beginning)
    • Meet with once a week

Customer Driven and Building Renewals

• As the business grew, they did everything with the customer on mind first and foremost
• Built his systems around the “renewal”
  • You make no money if your tenants just leave when your lease expires
    • Expenses when a tenant leaves are
      • Make-ready (carpet, paint, etc.)
      • Commissions for placement of new tenants
    • You make money when the tenant renews
  • He offers concessions for renewals:
    • Free carpet shampoo
    • Touch-up paint
    • Upgrade an appliance for free
  • All the money you make as an owner is after the renewal
  • One way he maintains renewals is by providing quality housing
    • One thing they do in their renovation process, right up front, is to completely replace all the A/C units with new units.  Why?
      • The number one reason why people move out is due to poor maintenance
        • And one of the top areas is with the A/C units – especially in Houston, during the month of August when it’s 100 plus degrees

Social Media and Brand Identity

• He realized that he had to understand the times we’re in and how image is being shaped by social media
• Taping into Social Media expertise
  • Grant Cardone – Sales
    • Met with him to learn growth strategies
  • Gary Vanderchuck – Brand
    • Met with him in New York
      • Since then, have a videographer that films properties
      • Market the Apartment Rockstar brand
• Putting content regularly on Social Media
  • Instagram
  • LinkedIn
  • Other social media
  • The people found on social media pay higher rents and are better tenants
• Out of 100,000s of top apartment resident-ranked properties nationwide, Rockstar properties are found in the top 1%
• Today, they have a 7-person marketing team focused on brand and image development

Your Biggest Mistake

• He doesn’t believe in mistakes
• He believes that there are “lessons you learn that make you better”
• One lesson happened early on when they wanted to jump into “Class A” properties in the hot part of town
  • They were buying smaller properties (51 units), thinking it would be less risk
  • A 51-unit does not produce much budget
  • 100+ and 200+ class A produce more budget
  • You need budget
  • Grant Cardone says, “You don’t have an expense problem, you have an income problem.”  In other words, you need to look at how you can get more income.
  • They also didn’t understand website management, SEO, reputation management and social media
  • He said learning was a rough process, like going into a gunfight with a knife
  • Also they didn’t see the recession hit Houston: when they did the underwriting on the property, oil was $100 a barrel.  By the time they closed, it was $60 a barrel.  By Christmas of that year, it was $30 a barrel.
  • With all the energy jobs getting hit in Houston, the job market was hit so hard, that few could afford the A class properties
    • Had to discount rents
    • New properties class A properties coming on the market
  • Despite all the problems and roadblocks, they still survived and were able pull a 27% return in three years
  • He learned lots of viable lessons:
    • Social media
    • Reputation management
    • How to survive
    • Was able to leverage that property’s great reputation to their other properties
  • Today, because of the lessons learned on that property, they have:
    • Websites for all their properties
    • Blogs for their websites
    • SEO optimization

His Current Value-Add Approach

• Buys properties today for a 7-10 year hold
• Heavy extensive renovation upfront
• Looks for value-add opportunities
  • Optimize expenses
  • Increase income
• Gets a refinance event
  • Has done 11 so far
  • Giving investors 100% outs
  • Able to put away “rainy day” money away for more renovations in years 3 or 5
• In year eight, they make the decision whether they want to hold or sell
• Today, working on the 12th refinance for $12.8 million at 4.18%

Biggest Success

• Because the company name is “Rockstar,” they get a lot of attention, but they also have a lot to live up to
• Key events that changed the way they operate as a company
  • Meeting with Gary Vaynerchuk 24 months ago in New York and recently for a revisit
  • Meeting with Grant Cardone a year ago
  • He learned how to brand his company and operate very differently than they did in the past, resulting in tremendous results and returns for his properties
  • He had to tell people who they are
    • The people won’t know that you have 17 city, state and national awards unless you tell them
    • He learned that you have to learn how to “tell stories” about what you are doing
      • For your properties
      • For your national brand
    • YouTube and Instagram stars happen overnight
      • They’re not afraid to talk about themselves
    • It’s vital to have a good brand and social identity
      • People buy from people they like and would like to associate themselves with
• They are customer driven
• They are very decisive
  • Conversations can become policy tomorrow
  • They act quickly on things that will boost customer satisfaction
  • He doesn’t have a board
  • He makes decisions for the long term – he doesn’t make short-term decisions
  • He’ll spend more for “the right” software program it it will make sense for the long-term

Advice for Old Dawg’s Looking at Real Estate Investing

• You need to take action now.  The best time to invest in real estate was yesterday
• Real estate has better returns than the stock market
• People invest in stocks because its easy
• You need to take more command of your nest egg and personal finances
• Good ways to get started:
  • Join a real estate club today!
    • Interact with others who have similar goals
    • Network
    • Ask people for help
    • Save yourself from mistakes others have made
  • Educate Yourself
    • Read the Rich Dad Poor Dad Books
    • Watch YouTube videos
    • Read Grant Cardone books
    • Read Gary Vaynerchuk books
  • Take action
    • Don’t be a tire-kicker
    • Take action now and learn on the fly

Current Business

• Short-term Goal
  • Reach 10,000 units – that’s their battle cry
  • $1 billion in assets
  • You can watch and learn about his journey on YouTube
• Long-Term
  • Always moving
  • Just wants to be better than he was yesterday
  • Wants to know that he’s challenging himself – doing new things (i.e. 7 member marketing team)
  • Grow the business
  • Bring attention to the company
  • Continue to acquire quality assets for their investors
  • Wants to be one of the best known independent operators in the country
  • Go to 30,000 units, to 40,000 units just to see if he can
• Personal
  • He’s already met his financial goals
  • His family is blessed
  • He’s had opportunities like he could never have imagined
  • Disrupt the market
  • Redefine how to do things
  • Set new benchmarks
  • Gary Vaynerchuk wants to buy the New York Jets.  He loves how he sets his goals high
  • He wants to compete with the big dogs
  • The journey is really the fun part

Rap-It-Up

• Favorite real estate book: Rich Dad Poor Dad by Robert Kiyosaki, Real Estate Investing by David Lindahl and How to Create Wealth Investing in Real Estate by Grant Cardone
• Favorite podcasts: The Ask Gary Vee Show and Old Dawg’s REI Network
• Favorite app: Facebook and Instagram
• Favorite quotes: “Choose happiness.” and “You do you.”
• 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? Find a good real estate club.  Find out what they do.  Spend the money on their training. Network there.  And get back in the game.

How to Reach Robert

• Website: RockstarCapital.com
• eMail: robert@rockstar-capital.com

This show was sponsored by SMARTMOVE

SmartMove is part of Transunion, a trusted consumer reporting agency with more than 4 decades of experience.  They built an online screening service for independent landlords that delivers critical credit and background reports to you in minutes. It is a really valuable tool to have when you are trying to decide who to put into your rental property.

And they can help you find your next great tenant.

• Only SmartMove has a credit score built specifically for rental screening called ResidentScore, which can identify eviction risk 15% better than a traditional score.
• With the SmartMove report you’ll also get a criminal background check, eviction history report, as well as a full credit report.
• And, only SmartMove has Income Insights, a report enabling you to analyze renter income to determine if further verification is needed.

See why 9 out of 10 users recommend SmartMove and more than 4 million landlords have used SmartMove to make better leasing decisions.

SmartMove has a special offer just for Old Dawg listeners.  Go to tenantscreening.com, enter code “OLDDAWG25” and you’ll get 25% off your next screening.

SmartMove.  Reduce your risk of Non-Payment and Evictions.

IF YOU LIKED THIS PODCAST, we would love if you would go to iTunes, Stitcher, GooglePlay, iHeartRADIO and Spotify and Subscribe, Rate & Review our podcast.  This will greatly help in sharing this podcast with others seeking to learn real estate investing as a means to achieve a successful retirement.

Check out our other podcasts at olddawgsreinetwork.com.

Get a FREE copy of our 3-Minute Rental Property Analyzer at olddawgsreinetwork.com.

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