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603: Unintentional Real Estate Tycoon

March 7, 2022bmanasseroUncategorizedNo comments

SHOW NOTES FOR EPISODE 603: UNINTENTIONAL REAL ESTATE TYCOON

He didn’t set out to be a success in real estate. In fact, he never planned to get into real estate at all. In today’s podcast, entrepreneur and real estate investor Gregg Cohen shares how he went to college, got a corporate job, got disillusioned with the corporate job and then read a book that changed his life.

What You Will Learn

Why networking is such a critical element to real estate investing success
How Gregg decided on the best real estate strategy for him
Why choosing a single market where you live can be the best investing approach
How his company survived the Great Recession
Why, when everyone else was running for the hills, he decided to triple-down
The value of partnerships
Why long-term leases is one of the smartest moves a rental property landlord can ever make
How he redefined the term “Turn-Key”

About Our Guest

Gregg Cohen

Gregg Cohen never intended to be an entrepreneur, but when the corporate world left him disillusioned, depressed, and demoralized, he decided to take a leap of faith. So Gregg created JWB Real Estate Capital, a vertically integrated real estate investment company dedicated to making rental property investing easy for clients. Gregg doesn’t just want to own a successful business; he wants to change people’s lives. With 4,500+ rental properties under management, more than $40 million in positive cash flow returned since 2011, and 1,200+ clients served across 43 states and 13 countries, it’s safe to say real estate investment is the vehicle that helps him do both.

More About Gregg

Gregg is from Jacksonville, FL
He was raised by a single mom
He didn’t start out looking for real estate or entrepreneur opportunities
Neither of his parents were in real estate or entrepreneurs
Went to college at the University of Florida
Worked hard
When he graduated, he tried to get a good job
He got a corporate job and was really proud and his parents were very proud
He got measly signing bonus but he was still excited about it
After working there for a year and a half, he felt demoralized and it wasn’t what he expected
The thought of working his way up the corporate ladder no longer appealed to him
He didn’t know what to do
A friend gave him a copy of Rich Dad Poor Dad
He started reading it 9pm and finished it 2am and was powerfully motivated
He looked at himself in the mirror and said, “I’m going to quit my job and start my own real estate company.”

Starting a Real Estate Company

In 2006, he contacted one of his best friends (who became his partner in the company)
They started on the journey to build this real estate company
They didn’t have any much knowledge, experience, or money
They had the attitude that they would figure it out as they went along the way
They went to as many REI meet-ups they could, asked people out to lunch to get as much free advice as they could
One thing they saw was that most real estate investors out there treated it like a hobby
They thought, it they treat it as a business they might do better

Getting Educated and Finding Mentors

Instead of doing just one deal, they decided to first surround themselves with education, mentors and training
They found some really great mentors along the way
It wasn’t about how to do the first deal, it was about how to build a business for their clients, for the community and for themselves
They also had to look at their survival
Their motto was “grip it and rip it” and see what works
In their first year, they got an article written about their company in the paper

Their First Deals

They weren’t sure what type of real estate investing they wanted to do so they just started trying different things
They tried:
- Wholesaling
- Flipping high-end homes
- Flipping low-end homes
- Lease options
- Seller Financing
- Little bit of commercial
- Rental properties
Two things they learned early that really helped them was the value of passive income and the value of holding rental properties
- They saw this as key, especially since they were starting at such a young age
They started setting money aside
Then, they built up a portfolio of 40 rental properties in the first year and a half
- They bought homes, renovated them and worked on the financing so that they were positive cash flow – that was to be their retirement fund
He added another business partner

The Great Recession Hits

2007 and 2008 hit!
They were rough years
Not having much experience as business men and real estate investor made it even harder
They took some large losses
It forced them to learn from that experience
They had to take a look at what was working and what wasn’t working
- It was taking so much time to find the real estate, renovate, selling, etc. and they were still loosing money – they felt that that was time lost
One day, they looked at their financials just to see how the rental properties were doing
- The rents were still coming in
- Now, the values were going down but they didn’t care much about that because they were for retirement
- In the midst of everything else going on, this was very cool

Re-Engineering Their Business

They realized they had to make a decision
While everyone else was running for the hills, they decided to triple-down
- They decided to:
  - Borrow more money
  - Hire more people
  - Invest in more systems and technology
They knew that real estate was cyclical
If they could get through this, they knew that real estate values would come back
And when they do, they could double-down and triple-down and be so far ahead of their competition that they will be in a position of strength
That’s what they did
They said no to all the other activities they were doing
They sold for massive looses across their business and stopped all other activities
Their focus switched to only rental properties and on teaching others how to do the same
That’s what they have done over the last 16 years
They now have helped thousands of clients from 49 states and 13 countries to buy properties in Jacksonville, FL
They are also only committed to single family homes – only in Jacksonville!

Their Definition of Turn-Key

They own the house before they sell it
They renovate or build, from ground-up, the home
Gregg’s company also manages the property with their own property management company
His company in a “vertically integrated” company
- They not only focus on how to reduce maintenance costs and collect rents
- It is their goal to manage the property for a full market cycle (10-20 years)
- They have vertically integrated departments
  - A department focused on boosting median incomes in the area. If median incomes don’t rise, it’s likely values won’t rise
  - Serving the community at large
  - An innovation department
  - Committed to one market
How they work with new clients
- First, they build a plan
  - Understand what goals and resources are of the client
- Then, the client gets to choose a crafted portfolio from assets Gregg’s company owns internally
  - Gregg buys land years in advance
  - Gregg’s company builds new construction homes on the land
- Then, they put a new resident in the home
  - the tenant signs a long-term (2-3 year) lease
- They’re more like financial advisors than real estate agents when working with their clients
The client buys the home outright
- Median price in Jacksonville right now is $325,000
- But they are selling homes lower-prices $180,00-$280,000
  - Newly constructed homes are$225,000-$280,000
- The buyer should be prepared for about $50,000 out-of-pocket for down payment, closing costs, etc.
- The buyer controls the asset
- 60-70% of their clients use conventional financing
  - With rates so low, it’s a great value
- They really work with clients to determine what the best strategy would be for them
- They help them find local financing
  - They will match them with their lender – one that is likely to convert
The client has to be comfortable being a “passive investor” That means:
- You need to let your team make a lot of the decisions (not every decision) for you when it comes to managing your investment properties
  - Decisions like selecting good tenants would go to the team
Right now they are building homes and then renting them
- They are generally in “C class” neighborhood”
- Below middle neighborhood – not low income – workforce housing
- Low prices and high rents
- Jobs nearby
- Homes have appreciated above the national average since 1982
- High growth
Returns
- Cash-on-Cash – slightly over break-even
- If you look at other profit centers – 7-9% (with tax savings and principle pay-down)
- If you include the upside to home appreciation – over 20%
- Look at all 5 profit centers
  1. Net rental income (positive cash flow)
  2. Tax savings
  3. Principle pay-down
  4. Home price appreciation
  5. Hedge against inflation
Long Term Leases
- The longer your tenants stay, the more advantages for the owner
  - Decrease in maintenance and repairs costs
  - Decrease in vacancy costs
  - Decrease in property management costs
    - They make money when new tenants come in – usually one month’s rent
    - They make money when tenants renew their one-year lease 0f 50% on the monthly rate
    - These fees are 25% of their income
    - They also make money in a turn-over – painting, cleaning, repairing – it can be as much as one year’s cash flow!

Biggest Mistake

2011-2012, their company survived the great recession and had finally hit their stride
- Went from sales of 60 properties to 174 in one year
- They realized that they had a product and service that was of appeal to people
- They had customers that were beyond friends and families
They experienced “shiny object syndrome”
- They thought, because they use Title companies to sell their properties, that they should start their own
- They thought that maybe hey could open their own lending arm
- It was a disaster

Biggest Success

He was thinking, “How could I bring more business into their company?”
He saw how, when they spent more time with people, the client experience is better
So, he thought, how could we spend more time with our clients
They created an online community called “Not Your Average Investor Show” and the “Not Your Average Investor Community”
- Started it in January 2020
- When Covid hit in March, it went from 5 people participating to 100s because people were scared
  - People didn’t know what was going on with real estate
  - People didn’t know what was going on in the real world
  - They were locked down
  - They were looking for answers
- It was a very special time
  - He got to be there with his clients
  - He didn’t always have the answers but he at least was there
- It’s still continuing
  - It’s every Tuesday and Thursday
He learned a lot about community through the experience

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

This is a really special time to be investing in rental properties
He has been investing for 16 years and it has never been more clear about the big market dynamics and how they are going to affect real estate over the next 12 months
Interest rates are going up based on the feds actions and that is expected to continue and that will have a direct impact on financed rental properties
If a property goes from 4% to 5%, that could reduce cash flow by 30%
Supply and demand for housing is way off
In Jacksonville, he sees it first hand – there are not enough homes to meet the demand
New homes are being built but it will take a long time to balance things out
In the meantime, there will be higher than normal home appreciation
Interest rates are going up
Home prices are going up
If you buy a property today, it will have a better return and more cash flow today than if you buy that same asset one year from now
If you talk with the most savvy investors, economists and pundits, there are big changes ahead for real estate investing
However, if you plan things right NOW, you can still do well but it takes a good team professionals that can guide you through the process

Current Business

There’s a lot more than buying, building, selling and managing properties
If that’s all you’re doing, it becomes pretty hollow
The properties are the “widget”
But they really want to do is to change people’s lives
The best day of the year is when they do the annual JWB Charity Golf Tournament
- They raise hundreds of thousands of dollars from sponsors, their network of clients, and friends and family
- They also do car washes
- It’s all “homegrown”
- And they use all the money to build a brand new construction home and they they give the home to a local veteran who really needs a hand with affordable housing
- Gregg said, “When a military man or woman shakes your hand and tells what an impact you have made on their lives it’s something that I take with me forever.”
- Those are the things that matter to Gregg and his team

Rap-It-Up

Favorite real estate book: Rich Dad Poor Dad by Robert Kiyosaki
Favorite business book: Good to Great by Jim Collins
Most valuable web site for success (other than your own): The website for the local Business Journal in your investment area
Favorite app: TrueBill
Favorite quote: “The man who says he can and the man who says he can’t are both right! Which one are you?”
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? First, I would do all the free things I could to learn how to invest. I would use the $1,000 to put as a down payment or as an option fee. Then, I would option that contract out to another investor. Basically wholesaling. You can make substantial gains if you know what you’re doing.

How to Reach Gregg

Website: JWBMakesitEasy.com
Phone: 904-677-6777
Podcast: Search for Not Your Average Investor Show
Podcast website: NYAIS.com
JWB Facebook Group – jwbfacebookgroup.com
JWB Facebook Business Page – facebook.com/CashFlowProperties
JWB YouTube – youtube.com/c/JWBRealEstateCapitalJacksonville
JWB Twitter – twitter.com/jwbcompanies
Gregg’s LinkedIn – linkedin.com/in/gcohen31/

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Check out our other podcasts at olddawgsreinetwork.com.

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

bmanassero

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