JLM Blog | Episode 15:Real World Advice on Wholesaling, Fix-and-Flips, Investing, and More.Real Estate News, Updates, and Tips
Multifamily Real Estate Advisors in San Diego
Podcast Episode by Jason Lee – Premiered October 14, 2021
What You’ll Learn in the Podcast:
● Information about Ryan’s real estate education company that helps people become real estate entrepreneurs with an emphasis in wholesaling houses, fixing, flipping and buying rental properties.
● Information about RZ Holdings, Inc, which is Ryan’s real estate investment company.
● What wholesaling is and how Ryan makes money through it.
● How Ryan find the deals that he is able to find, of properties that are often below market value.
● Why Ryan chose to go into real estate, a story that begins with him owning the house he lived in during college.
● Based on what Ryan knows from his real estate skills company, what are the most common first mistakes he sees real estate investors making.
● Advice about performing fix-and-flips and what’s so important about finding the right contractor to work with.
● Lessons learned about doing new builds, which present unique challenges but also opportunities.
● What are some of Ryan’s favorite sub markets around the U.S. to invest in right now.
Summary and Highlights:
In Episode 15 of The Multifamily Millionaire, we talked to Ryan Zomorodi, a real estate expert.
He owns a real estate agency in San Diego, RZ Holdings, Inc.
Ryan has been both an entrepreneur and an investor for more or less than 9 years now. He also went to San Diego University and earned a degree in Business Management. He specializes in entrepreneurship and some marketing.
Hence, this makes him one of the most credible people to give us pieces of advice about the field.
In the video, the. discussion revolved around the concept of wholesaling properties, how to find the best deals (in terms of buying and investing), why fixing and flipping houses is a good and profitable strategy even for beginners.
The video will be perfect for all expertise levels in the real estate field. No matter if the person watching is a beginner, an expert, or someone who hasn’t even started yet, they will surely understand the concepts explained by Ryan.
The reason behind this is because the explanations are fully yet briefly given. It wasn’t too jargon-like, and at the same time, won’t leave the viewers hanging.
Concept-wise, it’s a good thing that topics like fix-and-flips and wholesaling are brought up. These are innovative and aren’t that high in competition levels compared to regular real estate work.
Let’s add that Ryan gave his opinions on the latest US submarkets that tend to provide high investment returns.
Here are the key points discussed throughout the video:
RZ Holdings, Inc.
Ryan introduced his real estate agency in San Diego. This acts both as an investment and wholesaling company. For a background, their main goal is to help multi families, and house flip enthusiasts start their foot right in the field.
How to Find the Best Real Estate Deals
The speaker introduced some ways on how to find the best real estate deals even when under the market. To be specific, Ryan referred to finding other wholesalers or going through partnerships. He also mentioned saving real estate properties for a later time, when its price fluctuates.
Common Beginner Mistakes
Ryan thinks that the most common mistakes done by beginners in real estate are burying themselves under misconceptions, the wrong mindset, and opting for shortcuts.
Based on his real estate skills, he was sure that starting to debunk misconceptions, like the thought of needing a million dollars to start real estate, is a good step. You should also have the right mindset, which means being up for challenges and opportunities along the way.
Moreover, you should go through a complete step-by-step process instead of taking shortcuts.
As you can see, the 40-minute video also guarantees a comprehensive take on the field of real estate as a whole rather than simply giving inadequate snippets.
Real estate is profitable. It can, however, be much more than that. This is what you will be able to see in The Multifamily Millionaire’s Episode 15. This is worth checking out, especially if you’re looking into a profitable niche.
Episode 15: Real World Advice on Wholesaling, Fix-and-Flips, Investing, and More
Watch the Podcast | Read the Transcript
[Intro] Welcome to the multifamily millionaire podcast. The show that interviews multimillionaire real estate investors and top producers in the real estate industry.
If you’re looking to create passive income and achieve financial freedom so that you can do what you want whenever you want, you’re in the right place. Our goal is to simplify and make real estate investing easy for you. For more information, you can find us at www.jlm.realestate.
Jason Lee: All right, everyone. Welcome back to the show/ today, I my good friend here, Ryan Zomorodi. I initially met Ryan about four or five years ago when I was in school still. And we’ve kind of kept in touch and I’m super excited to have him on the show today. He’s a real estate entrepreneur and the co-founder of real estate skills. So I’m very excited to hear what you have to say Ryan, how you doing?
Ryan Zomorodi: Yeah. Hey Jason. Great to be here. Doing phenomenal. Thanks for inviting me on.
Jason Lee: For sure. It’s a pleasure having you. Can we just start the show maybe by telling the listener about who you are, what you do and kind of what your background is?
Ryan Zomorodi: Yeah, absolutely. I’m Ryan Zomorodi, co-founder of www.realestateskills.com. We’re an online real estate education company and we help people become real estate entrepreneurs with an emphasis in wholesaling houses, fixing, flipping, and buying rental properties. We have a national presence, so we help people virtually wholesale, really, no matter where they’re located leveraging technology and you know, being able to do this from the comfort of their home In many cases. I’m also the president of RSE holdings, Inc.
That’s my real estate investment company. I started in 2015 and specializing in the acquisition of single-family and multi-family assets for wholesale fix and flip and buy and hold, had exposure across 12 states and currently holding properties in three. And so, you know, over the years I’ve had my hands in virtually every role in the transaction, being the principal buyer and seller, representing clients as an agent, as well as managing property for close to a decade, lending capital and also borrowing capital as well as construction management.
So more recently been getting into the new construction space here locally in San Diego or where I’m located doing ground up construction of the accessory dwelling units. So really adding onto the existing portfolio. I see that as a big opportunity and something that I want to grow into and get into larger development deals, building more units and really contributing to the lack of housing inventory in our state here in California. So really excited about that and definitely see it as a growth opportunity for myself and just to be able to contribute to the world and, you know, provide much needed housing inventory.
Jason Lee: That’s awesome. You’re a Swiss army knife in real estate. That’s great. I guess kind of, you know, going back to the first thing you said is, you know, I haven’t really talked about wholesaling on their show that much at all. For someone who doesn’t know what that term is or wants to know more about it, can you explain more about what wholesaling is and how you make money doing it?
Ryan Zomorodi: Absolutely. So the thing about wholesaling is there’s a lot of misconception about it, can mean a lot of different things to different people. But ultimately what it is being able to identify opportunities in the marketplace in real estate, and to be able to source those opportunities for other investors for those who can essentially take down the deal and improve the property themselves. And then put it back on the market, whether it’s for a long-term hold or for resale. So wholesalers essentially act as the middleman with their sourcing opportunities and are able to monetize it well many times without actually having to close on the property, without having to invest their own dollars in the property or even take title. So depending on the way you structure the deal, there’s really three common ways to do so.
The first is the assignment of contract. So that’s essentially putting a property under contract, great deal that makes sense for you know, number of exit strategies that you can evaluate it for. And then assigning that contract to another buyer and receiving a fee in exchange for that. There’s, the other strategies it’s called double closing, where you actually do close on the property and then immediately resell the property often within the same day or within a couple of days to the end buyer. There’s also a strategy called whole tailing, which is essentially, you know, buying, actually closing on the property, and then relisting it on the MLS without doing any repairs.
Oftentimes you can, you know, make a lot more money because you can, you know, help the seller originally close on the deal within a very short timeframe, close it all cash, and then relist it and capture a buyer who can actually have time to acquire financing. As we know, loans can take, you know, 30 to 60 days to close. So giving, you know, having that extra space, you can usually charge more of a premium for doing so. So yeah, wholesaling, you know, in a nutshell is finding deals and being able to monetize it without actually having to improve the property yourself.
Jason Lee: Got it. Yeah, That’s a great explanation. And how have you been able to, you know, find those deals that are below market or in distress or seller has to sell quickly?
Ryan Zomorodi: Yeah. So I’d say the number one resource for, you know, acquiring wholesale properties over the years has been the MLS there’s, you know, 9 out of 10 properties that trade hands do so on the market. So we’ve seen that, you know, in many cases you can put a property under contract that has a lot of spread for an investor and you can still have enough spread for another buyer to come in and pay you an assignment fee, or you can close on the property. And then, you know, re-list it at a later time so that someone else who is willing to acquire financing and they can even pay a lot more for it. One of my also favorite ways is through partnerships and through finding other wholesalers, finding other investors who need to liquidate, who have properties that need to be improved, that they just want a quick sale, that they don’t want to even list it on the market.
So there’s pocket listings from other agents, there’s other investors who source deals through their marketing efforts. They do direct mail, they do cold calling. They do, you know, they have marketing budgets where they can put properties under contract and ultimately getting your name out there, telling people what you do. You can source a lot of deals just through the network effects.
Jason Lee: That’s a great answer. I thought the more you put yourself out there, the more deals you come across. So it’s well said. Kind of switching gears a little bit. How did you initially get into real estate and why did you think it would be a good path for you personally?
Ryan Zomorodi: Yeah, yeah. I appreciate the question. So, you know, my first exposure to real estate, I think everyone is living in a house. You know, that’s the beautiful thing about this business. It’s an essential need, you know, but besides that, you know, while I was in college, when I actually moved to San Diego state which is where we met instead of, you know, renting a property my parents and I actually went in on a short sale. So this was about 2011. And so we thought about it, the concept of purchasing an investment property versus paying, you know, several years of rent and just kind of front-loading that expense.
Putting that into a down payment, you know, I went from being a renter at that house. So we actually closed on the property. Then I became the landlord and started collecting rent from, you know, my roommates, essentially my housemates. And then over the years started getting experienced with leasing out room by room managing the lease contracts managing the turnovers, the maintenance and essentially, you know, operating that property for many years while I was in college. But it didn’t really occur to me while I was in school that I wanted to be you know, turn real estate as my full-time career. So I wanted to do something else, entrepreneurial you know, got involved with different startups, creating my own products on Amazon. So, you know, tried a lot of different things and eventually I went the corporate route. So out of college, I got involved with one of the largest companies in the world started doing sales for Pepsi.
And that kept me here in San Diego, which was great, you know, had a decent salary right out of college. But then I quickly realized that the growth trajectory there just didn’t really align with the vision that I had with myself. You know, I wanted to do something a lot bigger and the skill sets I needed to learn weren’t going to help me be the person I wanted to be. And so it was through that you know, I read rich dad, poor dad at the time. I read millionaire real estate investor, started talking to different people who were really out of the nine to five grind. And then I found real estate and, you know, listening to podcasts. And then right around the time that I left my job at Pepsi, I bought my first rental property on my own, which was out of state and Tennessee.
And so, you know, a couple of months after that bought another, these were single family houses. So acquire another one and then, you know, bought a triplex and then just, you know, over the years just started to acquire more and more of these properties. And just, you know, my goal was always to replace my income from my job, you know, once I did that, you know, it started to just really snowballed from there. And so, you know, got into the game with buy and hold rental properties. That’s really my passion is income investment properties. And along the way you know, started getting into wholesaling and started getting into fixing and flipping houses.
Because I had acquired the skillsets of identifying opportunities that grown my network and was able to monetize these deals and you know, more than just one way. So there was a good, you know, three-year period from I’d say, 2017 to 2019, 2020, where I was really focused on fixing and flipping and wholesaling and raising capital. And so that’s when I got exposure to 12 different states. And, you know, I think, you know, one of the last times we spoke, I was with you know, doing a lot of deals with a capital group based in San Diego that was just, you know, chomping up all these deals. And so really just not crystal clear on what they wanted, and this is something that we teach our students is you’ll get very clear on your criteria and then you can just go after it. And so they were a national buyer and I was just sourcing deals really in any market.
And so when you have the whole you know, the whole country as your market, you know, there’s just so many different opportunities. It’s just, who can you network with? You know, how many offers can you send out? And, you know, it was a good run, you know, shifted focused into the education side of things. And the past three years we’ve been really focused on helping others, you know, replicate that success so that they can leave their nine to five and create their own destiny, start their own businesses and experience really the power of real estate.
Jason Lee: Yeah. That’s amazing. And, you know, when you started your real estate skills company, I mean, what are some of the biggest concerns or hurdles that you kind of saw from people who are looking at me by their first or two deals, first or two investment properties, and how did you kind of overcome that through your, you know, your coaching and stuff like that?
Ryan Zomorodi: Yeah, there’s a lot of misconceptions, you know, there’s a lot of noise out there, especially about wholesaling and just about real estate investing in general. I think people are afraid to pursue you know, money and capitalism and they have a lot of limiting beliefs, which hold them back. So, you know, we really try to encourage people to overcome that and be okay with, you know, wanting to improve their financial position and really seek out you know, making a larger income. And so just kind of overcoming that I think is something that we really try to help people with. And, you know, the, really the fact that you don’t need a lot of money to get into real estate, it sure helps.
But you know, the thing is when you have a lot of money and you don’t have the education, like that’s kind of a dangerous combination. You can make a lot of expensive mistakes if you don’t know what you’re doing. So I think if you don’t have a lot of capital to begin with, you start to really think, and you, you become a lot more resourceful. So, you know, we really want to help shortcut the learning curve so that people like really do have a step-by-step process, no matter what their resources are. So I think overcoming the limiting beliefs about wanting to improve their position and really just that they have to have a lot of money to get into the business.
Jason Lee: Yeah. I think that’s amazing because I think one of the biggest misconceptions in real estate is that you have to have a lot of money to start. And that’s what I was told when I was getting into like, oh, how are you going to invest in properties, you need a million dollars to start a real estate or something like that. And the other thing you touched on, which was huge is mindset.
I think if you have the right mindset in real estate, you could definitely, you know, the sky’s the limit. I mean, if you want to buy an X amount of deals, sell an X amount of properties, if you just set your mind to it and you have a big enough why you’re going to get there, which, you know, you know, obviously, and that’s what you coach your students, I’m sure. It’s all good stuff. How many flips have you done? I don’t want to get it wrong. You’ve done a lot of flips, fix and flips.
Ryan Zomorodi: Yeah. Yeah. Fix and flips. I mean, kind of that full sales and fix and flips kind of in the same bucket, but I’d say around 50 total.
Jason Lee: It’s a lot and you’ve done it in 12 different states. I mean, what are some of the pros and cons you’ve seen of flipping houses? Because I feel like that’s one of the biggest trends right now because people see it on TV and social media and stuff like that. But I feel like there’s a side of flipping houses that most people don’t see, which is very difficult. I’m just want to hear your insight on like the pros and cons from your experience in flipping houses personally.
Ryan Zomorodi: Absolutely. I think there’s a lot of costs that people don’t consider. You know, the longer a flipped takes, the more your costs are going to incur here, typically borrowing capital. There’s a cost to that. You’re paying your monthly insurance you know, again, your utilities, you’ve got your taxes. So I think there’s a lot of costs that people don’t consider that the closing costs, the real estate commissions and working with contractors can be quite the challenge. I think even for seasoned investors working with contractors can be you know, it can be hit or miss make or break your investment. So we’ve had deals go extremely well. We’ve had deals that didn’t go so well. And a lot of it was from the contractor side of things. So really just, you know, trust, but verify you know, everyone you work with, especially if you’re doing it long distance, just make sure you have checks and balances that you’re verifying where your funds are going.
When you’re cutting a cheque to a contractor, you want to make sure that the work is done, that you have a third party verify it. You want to just have these things in place to where you can, you know, make sure that the work is getting done. And then also to the quality that you’re going to need to, you know, depending if you’re going to rent it or especially if you’re going to sell the asset, you’re going to want to make sure that the quality is where you want it to be, or else you’re going to have to redo the work. And, you know, that’s just going to eat into your profits. So I think the construction side is really something that you always want to work on. You always want to be sourcing good contractors to work with, and when you have good ones, you want to treat them right. You want to pay them on time and you want to retain them. The other thing I think people get caught up with is the you know, overestimating after repair values. It’s easy to, you know, really want to get into a project and really want a deal and look at the comparable and, you know, be very optimistic with numbers, going into a project and not expecting things to cool off or expecting the market to just keep going up the way it hit has been kind of recently.
So I think just being ultra conservative, especially if your only plan is to resell the asset, you know, if you don’t have a plan B or a plan C, then you need to be very confident that you can sell the property and liquidate it and still come out at least with your principal or else, you know, you need to have a backup plan. So I think, you know, having those additional exit strategies, you know, which is something that we really encourage everyone to think about when they’re getting into a project is, you know, what’s going to happen if you can’t sell the property, you know, can you seller finance it? And so be in good shape, can you rent it out? Is there, you know, alternative strategies that are still going to allow you to hold the property and, you know, just not lose your shirt on it. So just, yeah, those alternative strategies are key factoring in all the costs and, you know, really just checking in on things, either yourself or having third-party trusted boots on the ground who can go and, you know, manage the people that, you know, you’ve entrusted your asset with that you’re spending a lot of capital with. So just having those cheques and balances are key.
Jason Lee: Yeah. I mean, I think that’s an extremely good answer because I think flipping houses takes a lot of work. I mean, I’ve done a decent amount and I’ve realized that managing a good contractor is probably the most important thing for me, at least, and not hiring the most the cheapest guy. I think when I hired the cheapest person on one property on this duplex, I flipped the work was just low quality and, you know, it was a pain in the ass to manage him. And he was always, he was never on time, gave me a lot of change orders.
And then when I would like the little more expensive person my life was a lot easier. He kind of manage everything and, and now I can trust them to do anything. So I think that’s a big side of, you know, construction’s a huge set of flipping houses and knowing your numbers is something that, you know, most people that want to get into it don’t really understand when they first do their first deal.
Ryan Zomorodi: Absolutely. Absolutely. Yeah. It’s tempting to go. Like you said, with the cheapest option, it’s going to make your numbers look a lot better on paper, but in reality, the quality might suffer. They might not finish the project on time and things could slip. So, you know, it’s really not just the cheapest bid you get, you know, we always want to get multiple bids when we’re working on these projects. So you want to check your references. You want to talk to other investors who use them. You know and referrals are really a great way to source additional contractors, you know, talking to other flippers in the area, you know, see who’s rehabbing properties. You know, sometimes they won’t want to give away their best crews, but, you know, it’s never hurts to ask.
Jason Lee: Definitely, yeah. Learned that the hard way for sure. And now you’re kind of getting into more new construction and ground up development, kind of how has that shift been from focusing on just growing your portfolio and doing fix and flips to, you know, ground up stuff it’s much more complex you’re doing with the city. So I’d like to hear more about that for sure.
Ryan Zomorodi: Absolutely. Yeah, you know, I’ve been fortunate to partner with some people who have a lot of experience, and I think that that’s really key for anyone looking to experiment with any new strategy is, you know, have mentors, and have people that are successfully doing it so you can leverage their teams, leverage their experience and you know, have a sounding board, you know, when you’re going through these different projects. So I think it’s, you know, especially with these 80 years, it’s been, probably not as difficult as I thought it was going to be going, you know, ground up, things are pretty much laid out in the plans. And with the city, you know, the city has a portal where you can actually follow the progress of the project. So I think it’s kind of a relief when you’re building something from scratch, you know, what’s going into it and you can see it at every phase. When you’re buying an existing structure, you don’t really know what’s behind the walls.
You know, you don’t know a lot of the times you can’t see every part of the structure. So it’s actually kind of comforting knowing what’s going into the property, you know, knowing that you can put quality materials in there and knowing that it’s built to last and, you know, especially right now, when, you know, in certain markets like here in San Diego, where you can build for a lot cheaper than you can buy, it just makes a lot more sense. You’re going to end up with a high quality product. And there’s really no guessing as to, you know, the durability of some of the materials that are going into it. So definitely a whole process, you know, fix and flips, pull sales, you know, they can be a matter of weeks you know, maybe sometimes months, but with new construction, you’re really at the mercy of the city, you know, getting permits. I thought it was going to be, you know, three, four months and ended up being seven months until we actually got stamp plans in our hands and we can move forward. So there were delays, you know, we’re definitely having to deal with some of the consequences of those delays you know, working on properties that have tenants in them currently.
And so just the dynamic of that aspect of things. So yeah, I think there’s a lot of good oversight that, that helps, you know, keep the contractors in check, you know, like we’re talking about, you know, making sure their work is being done properly. You know, when you have inspectors checking every step of the way, you know, the foundation’s laid, you have an inspector that comes out to make sure it’s built a code. You know, you have your rough utilities that go in, someone makes sure that those are being done properly. So it’s you already, you kind of have that oversight, which helps you as the developer, you know, know that things are being built the way they should. And so I think that’s pretty comforting and you know, you always want to make sure that there’s some oversight. So just to make sure that, you know, there’s nothing that’s being missed, but, you know, on that note, you have like professional inspectors that you can rely on and that can make sure that things are being built, that the way they should.
Jason Lee: Definitely, and to touch on your topic of, you know, bring up the ADU a little bit. I think that’s one of the biggest opportunities in California right now, or at least in San Diego. You know, I’m building two ground up ADUs at one of my properties and it’s bringing up the value by a ton. And the cost is definitely, you know, much less than I thought it would be. And like you said, the ADU permitting process is pretty straightforward. So I think it’s a great opportunity for anyone who’s listening to, you know, try to get into that market because it’s working pretty well for me and you so far. So have you ran into like any big challenges with building your ground up ADU besides the city? Like, have you dealt with any, like I’ve dealt with like a lot of material shortages, I’ve dealt with a lot of you know, just costs going up and down. So I kind of want to hear what you’ve been going through on that side of things.
Ryan Zomorodi: Yeah, for sure. I think, you know, the biggest, you know, initial thing was just the time it took to get the permits again, you know, time is money and you know, we’re building it in in the college area. So we have students and we rented to college students. So it’s a very seasonal leasing period. So once you kind of miss out on a semester, there’s limited renters that you can occupy those units with. So we kind of have to have to shift into, you know, we’re, we’re anticipating you know, shifting that a few months out. So that impacted us a bit. I would, with regards to the actual construction, we had a little bit of a surprise where we had to add a sub pump on the property.
So, you know, since the ADU is a sloped lower than the sewer line, going to the street, you know, we have to add an additional some pump to move all the sewage up to the street. So that’s an additional cost. And also Solar’s a requirement for all these new ADUs. So just adding solar onto these it’s just, you know, additional costs and, you know, besides the timing you know, things have been relatively smooth, honestly. I think, like I mentioned, the tenant management since we have existing tenants on the property just navigating, that has definitely been a management challenge as well, but yeah, overall, like with the city and getting our inspections on time, it’s been relatively a breeze. So, you know, we got one of them very close to completed. We got the construction done in about 12 weeks, so relatively very quickly. And you know, another one we’re probably about 40 to 50% there already, so probably about another two months out.
Jason Lee: Nice. And I’m kind of switching gears a little bit here. What do you personally enjoy most about being in the real estate industry?
Ryan Zomorodi: Yeah, I’d say really the flexibility that it provides the opportunity and, you know, the way that I see it is that you can really do, you know, you can build your business the way you want to build it. You know, you can be your own boss, you can build a lifestyle business or you can really build an empire. So I think that there’s a lot of different directions you can go in and it’s not just one path that anyone can follow and you can also be yourself as well. You know, coming from the corporate world, you kind of have to fit into this mold where you can’t really be, you can’t show your personality, you can’t really dress the way you want to dress, and you have to, you know, be this corporate ideal.
And it’s kind of soul crushing, you know to put it that way. But I think real estate, it allows you to you know, be yourself and really carve your own destiny, which is very difficult to do if you’re following the traditional path of, you know, getting a job and, you know, saving for retirement and essentially working for someone else. So I think you know, that’s really the beauty of it. Like an everyday person can start a business and build it the way they want to build it. And ultimately you create a path for financial freedom and retirement. It’s the most accessible asset class it’s most relatable.
Just cause, you know, the government encourages people to buy real estate. There’s so many incentives, there’s so many different financing programs that, you know, they want people to get into real estate. And so I just think it’s really the most you know, relatable and something that everybody can play a part at. You know, whether you’re a renter, whether you’re a landlord whether you’re looking to get to development wholesaling, I mean, there’s just so many different routes you can go. And it’s just, every day is a new opportunity. You know, there’s really never a dull moment in the business, you know, you could wake up and that can be the day that you get your next deal and change your life with it. So, you know, such a special place to be. I feel like just coming from you know, working so many jobs throughout my career and now it’s like, there’s really limitless opportunity, you know, like you said earlier.
Jason Lee: Yeah. I think the best thing ever is when I go to a property inspection and you know, there’s a multimillionaire real estate investor that comes in basketball shorts and flip flops and messy hair. It’s the funniest thing. I mean, it’s hilarious. I think you covered all the best facets of real estate. I mean, you can be whoever you want to be. I mean, you can come up in a suit and a tie, but you don’t have to, you can be who you want to be. You can buy deals You want to buy, talk to people you want to talk to, if you don’t want to talk to someone, you don’t have to talk to them, because it’s not an office corporate environment. So I think it’s the best place to be, I feel like. So that’s a great answer.
And then one question I really want to ask you is before this podcast, you kind of talked about how you’re in three major markets, right now it was Ohio, Tennessee, and California, right? San Diego. How are you managing your operations and being in multiple markets? I mean, you’ve been in 12 states, so like, I’m kind of curious to see how you’re operating your business in so many different areas.
Ryan Zomorodi: Yeah. Phenomenal question. So, you know, when I started buying single families and, you know, apartment buildings out of state I really factored in the team. You know, the team is such a big part of investing long distance. You can have an amazing property in a great location and you can buy it right. But if you have the wrong team in place, your investment can go south. So I really you know, really just want to give a shout out to my teams out there. We have amazing property managers who really just you know, made these investments perform. And so really factoring that in when buying these investments has really allowed me to you know, focus on other things like, you know, the education side, like focusing on projects here locally.
So, you know, whenever I’m buying out of state, you know factoring in that management component, so outsourcing property management and making sure that the property can afford it. And you know, typically property managers charge, you know, eight to 10% plus there’s leasing fees and, you know, maybe some other fees here and there. So just making sure that the house can afford it as allowed me to, you know, hire really great professionals in each market who can lease up these properties for top dollar minimize vacancies. And also the turnover costs as you know, vacancies and turnover costs are some of the larger expenses that we incur with longer term real estate holdings.
So just finding the right teams so that they align with my goals, that they align with you know, the standards that I set for managing properties, you know, having managed properties myself for almost 10 years, I know the ins and outs of what it takes to find a good tenant, how to screen good tenants and you know, really you know, filtering and vetting these managers from that perspective has made a big difference. So I like to buy real estate and better locations you know, usually like the, you know, like the B or Hey locations, it’s just, you’ll get a higher quality tenants and there’s just less headaches, you know, less things to deal with. And so the management is a little bit lighter, you know, they’re the ones who can you know, find and vet tenants, they’ll take the calls manage the turnovers, produce a profit and loss statements every month.
And so it’s very passive with those investments. And getting into those markets, it was really more about the cashflow potential. There are lower price points, like you know, we were chatting earlier, there is lower price for units than obviously what we see out here in California. So you’ll get a better price to rent ratios. You’ll get nicer you know, net returns overall, and, you know, fortunately past couple years the prices have gone up, just because I think a lot more investors are looking for investment properties. They’re looking for yield on rental real estate, especially single family houses have been more institutionalized. So there’s just a lot more you know, a lot more capital chasing these properties. So I think that’s definitely increased pricing even in these Midwest markets.
Jason Lee: Awesome. And what cities are your favorite submarkets to invest in right now, out of those areas? The state, sorry.
Ryan Zomorodi: Yeah. So in Ohio, I’m specifically in Cleveland and so Cleveland, Ohio I had you know, my older brother was going to medical school out there. And so got to know the market, just visiting him and, you know, seeing the opportunity out there, like pretty early on, and really piggybacking off of where he wanted to live and, you know, where his friends were wanting to live and just, you know, making some trips to go see him and was just able to identify certain pockets that, you know, people were talking about or going to increase in value. Like where do the young people want to live, You know, where are the cool bars popping up, the breweries.
So you can tap into that, you know, that’s a pretty good trend that you want to capture. So and he was able to serve as a boots on the ground when I first bought that first triplex you know, he was there to you know, help oversee the construction and he was, you know, busy medical student, but he was the boots on the ground and, you know, he could definitely leverage that oversight. So we have Cleveland in Ohio and then in Tennessee is Memphis. So Memphis, Tennessee is you know, where we have several single family houses and just those cities in those states.
Jason Lee: Fantastic. And I kind of want you to just picture in your head the best deal that you’ve done so far in your career. And just kind of want you to tell the story of how you found the deal, how you executed the business plan, and then what your exit was on the best deal you’ve ever been a part of.
Ryan Zomorodi: Oh, best deal, that’s a tough one. I mean, several come to mind, you know, one of which I’m working on right now. So I guess I haven’t exited that one. So I’ll refer to one that is actually done and closed. So there was a property in Chicago when I had sourced it from an investor who I was working with. We had partnered on several fix and flips in Chicago. He had brought a deal that a wholesaler had brought him. So there were kind of several people involved in acquiring the deal. But the story was a wholesaler had basically walked up to the property. It was, if you know, Chicago there’s a street that’s like right next to the lake.
And, you know, it was basically prime real estate. It was a triple wide lot, a zone multifamily. And there was a distress Triplex on one side of the lot. And so there was a wholesaler that called a sign on that property and he was able to get it under contract. And then he told my buddy about it. And then my buddy told me about it cause he wanted a partner on it. He wanted to fund it. And so, you know, kind of long story short I ended up buying it and raising the capital. So I brought in an equity partner. They put up 85% of the total deal. And then I brought on a second equity partner who put up the 15%. So I was in the deal zero money out of pocket. We acquired the property in about 30 days. I had split the lot into three lots, so there were three separately developable lots. And the plan was to build I think it was three condos on each one, like three luxury condos on each lot. So total nine condos, you know, we bought the property I think was about $350,000. And the ARV for all the condos was about 3.6 million. And so I think the construction costs was probably in the, you know, million, million and a half range. I don’t remember the exact number, you know, took us about, I think it was like $1,700 to split the lots. And then we listed it right back on the market and then sold it for about $650,000.
So it was a pretty hefty profit and, you know, all in all you know, I was able to walk away with about, you know, six figures in profit and my partner, I split the profits with my partner. You know, everybody was pretty happy with it and it was, you know, took, I think it was like three months total. And so, you know, the return on investment was really through the roof and it was a win-win all around.
Jason Lee: That’s amazing. So you just sold a lot to a developer that was going to use that lot to develop those condos. You didn’t do it yourself, right?
Ryan Zomorodi: Correct. Correct. So I would say it’s kind of like a whole wholesale deal. Like I was mentioning earlier, you know, buying distressed and then listing it on the open market. Cool thing about it. I never actually saw the property, didn’t even go there. So I did see it after the fact, but yeah, all from here in San Diego, just on a cell phone and laptops and, you know, it was just great kind of work.
Jason Lee: That’s amazing. And what was the seller’s motivation on that deal? Just curious, why was he or she in distress to sell it? Do you know?
Ryan Zomorodi: Yeah, the existing property was in shambles, so it was a boarded up triplex. There were animals in the property, the weeds were growing, you know, six feet tall. It was just an eyesore in the neighborhood. And it was an up and coming neighborhood, well located kind of on the south side of Chicago. And it was, you know, a prime development opportunity. So they didn’t really want to do anything with it. They didn’t have money to invest the capital into developing it. So it was just really kind of a matter of time until they got rid of it. And it was just, you know, right place, right time. There was a sign on the property. I think it was the property management company. And so the wholesaler saw it and called the number. They put them in touch with the seller and, you know, they were able to get the deal.
And, you know, we paid the wholesaler, I think it was like an $80,000 wholesale fee. And then, you know, we were able to purchase it, you know, do very simple lot split, realistic. And, you know, the developer obviously saw a lot more value in the property, so they’re going to do very well with it. And it’s just kind of, you know, adding value through the development process.
Jason Lee: That’s amazing. Love the story of a good deal. That’s fantastic. Kind of wrapping up here. If you were to give one piece of advice to someone listening to the show, who’s a beginner real estate investor looking to get their feet wet. What is one piece of advice you’d give to that person?
Ryan Zomorodi: Absolutely. I think just learn the fundamentals and get started, you know, trust the process, trust the math, and just don’t listen to the naysayers because more people are going to tell you not to do it, than do it. And there’s going to be a lot of people that doubt you and that think you’re not going to be able to do it even yourself. You know, I think we also have to struggle with our own limiting beliefs and you know, that voice in our head that says we can’t do it. So I think the strongest way to combat that is just get educated as, you know, learn how to analyze a deal, learn how to underwrite a property.
And so that takes the risk out of acquiring a property is really just understanding the fundamentals and knowing that you’re going to win and know that you’re going to make money on the deal and just getting out there, I think real estate is one of those businesses that you learn from doing it. You know, you can only read so many books, you can only partake in so many seminars, but it’s just, you have to just go out there and make it happen and, you know, make some mistakes.
And you know, on top of that, get a mentor, you know, just find someone that’s doing what you want to do. Find someone that’s already accomplished what you’re trying to accomplish and shadow them, bring something to the table, bring value shadow them and, you know, don’t necessarily do it to earn immediately, just understand that that education, that learning curve is, it’s priceless. It’s really worth so much more than you know, what you might think your time is worth at that point in time. And so just get out there, do it, you know, learn from others, and trust the process because you know, really anybody can do it. Anyone can be successful in this business.
Jason Lee: That’s a fantastic answer. Well, Ryan, it’s been an amazing show so far. Thank you for all the value provided to the audience. My last question is if someone wants to learn more about you, who you are and wants to get in touch with you, how can they do that?
Ryan Zomorodi: Sure. Yeah, you guys can definitely check out my company website it’s www.realestateskills.com. You can also follow me on Instagram Ryan Zomorodi, and I’m on Facebook, LinkedIn as well. You can also send me an email Ryan@realestateskills.com, love to connect with other like-minded investors and, you know, people who are trying to get into the business and, you know, I’m planning to do this for really the indefinite future. So it’s a wonderful place to be and look forward to connecting and helping any way I can.
Jason Lee: Awesome Ryan. Well, thanks for your time. And you know, hope we can put a deal together soon.
Ryan Zomorodi: Yeah. I would love that, Jason. Absolutely. Thanks for having me on today.
Jason Lee: Yeah. Talk to you soon.
[Outro] Thank you for joining us on the multifamily millionaire podcast. The show that interviews, multimillionaire real estate investors and top producers in the real estate industry. We’re here to help you create passive income and achieve financial freedom so that you can do what you want whenever you want. We’ll catch you next time on the multifamily millionaire.
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