The Everyday Millionaire Show
The Everyday Millionaire Show
From Police Officer to Real Estate Mogul: The Journey of David Hathaway
How do you transition from a demanding career as a police officer to becoming a successful real estate investor with 19 rental units? Discover the compelling journey of David Hathaway in this episode, where he shares his story of leaving his policing career in DC to focus on his passion for real estate in Baltimore.
Our conversation takes a deeper look into the evolution from hands-on property management to strategic leadership and scalability. David explains how delegating tasks to skilled contractors and auditing business practices can lead to substantial growth in the real estate landscape. We also learn how hiring virtual assistants can transform business efficiency and productivity. Tune in to gain practical tips on optimizing your real estate investments and managing a successful portfolio.
I significantly purchased a ton of properties. I purchased 19 units.
Speaker 1:So did you make a shift in your systems and hiring, definitely at the start I felt like I still had to be involved, but definitely started realizing the importance of working with A players and A player contractors and how much time and efficiency they save you. I think the point that maybe some people miss is that when you have a process that you do the same way every time, you raise the quality and then you lower the amount of time that you're wasting. One of my philosophies is like time in the game. I call it time in the game, but just to get really good at something, you have to have been in it for a while. Welcome to the.
Speaker 2:Everyday Millionaire show with Ryan Greenberg and Nick Kalkas. All right guys, welcome back to another episode of the Everyday Millionaire Show. We're here today with David Hathaway, the richest sounding guy we've ever had on the podcast. What's up, david?
Speaker 1:I appreciate that. How's it going, guys? Good Thanks for coming. Thank you for having me.
Speaker 2:We say that because I feel like our audience can maybe weigh in and let us know what they think. But I feel like David Hathaway there sounds like a famous, either actor or maybe a writer, I don't know, but it's a cool name, so congratulations on that. Thank you, I'll take that award for today, Nick, how you doing man.
Speaker 3:Good, good how you doing.
Speaker 2:Ryan, living the good life. You know, I'm feeling good, feeling good today.
Speaker 2:We usually do these podcasts at night when I'm like after the day has just beaten me alive and now it's like I'm fresh, I'm feeling good, energetic. Yeah, I'm feeling good today, david. So what's going on? Man, you're another. You're not a Baltimore guy, but you invest heavily in Baltimore. We consider you a player in the game here, so why don't you break down like a little bit about your business? What do you have going on now and where did it kind of? Where did it start?
Speaker 1:Sure, give you a little background. Went to Mason, grew up locally in Northern Virginia. After I got out of college, I was always interested in money, which sounds terrible, but always interested in making money, whatever that side also was. I was always interested in money, which sounds terrible, but always interested in making money, whatever that side also was. I was selling cars. I mean, I sold cars off of eBay for a while but dabbled in the stock market and real estate was always coming up.
Speaker 1:So in college, read, did a bunch of self-reading about real estate, purchased my first property senior year of college. Then would purchase like one or two a year for several years, but right out of college became a police officer, was a police officer for nine years, got married to my wife, we had kids, and realized, hey, I'd been building this portfolio for a while and at some point in there I just was like I have. I have three options and one of them has to go. I have real estate investments, I have my wife and kids and I have police work, and police work at the time, uh, which I think was six years ago, just wasn't fun anymore.
Speaker 2:we're just like. This is not enjoyable. How old are you? Let me stab you there. How old are you? 38, 38, okay, okay, cool 38 years young you look like between anywhere from like 28 to 38.
Speaker 1:So I was. You know, once you get past 21, everybody's the same age.
Speaker 2:You have no idea, so you don't want to offend anybody so, but it does matter in the sense that you had some real life application experience like I had a full-time job before, like I did full-time real estate and running the businesses and having that like real life application to realize like maybe this isn't for me or it is for me that's, I think, really important, because if you just do it like right out of college, you kind of don't know what the other side looks like. But we all kind of know what both sides of that coin look like.
Speaker 3:Nick never really. You never really had like a real, like career job, right. You just always built your own business, right. Yeah, I mean I used to work. I worked at costco at one point and my first, my very first job was at river watch restaurant in essex it's now lunacy and I was a dishwasher there when I was 13. I was super excited. I got paid under the table it's 5 15 an hour and that was like worked there for a couple of years and then that was pretty much it.
Speaker 2:Yeah, I definitely and I don't know about you, Dave, you can answer this too Like I value the time that I spent grinding as a teacher, making like probably similar money as a you know, a police officer, and I value that time because now I know that that's never what I want to do again.
Speaker 1:Yeah, I mean it's, it's a good, good point. Um, I actually made pretty good money. I work downtown DC Metro transit police department, so I was actually making a hundred K, oh yeah.
Speaker 2:It was double what I was making. What year?
Speaker 3:did you stop working as a police officer Just to kind of get an idea of like what the salary was back then In 2018?
Speaker 1:2018, I could be off give or take two years. Gotcha, pre-covid, yeah, I mean maybe 2017. But my epiphany came. So, as I was acquiring properties, I would build up as a police officer. We get time and a half and instead of just taking it out as money, I would just put in vacation time. And so people are like you're always on vacation, dude, you don't do any work. And it was me just working at properties while they're doing the work myself. A lot of times I did the work on my own properties back in the day, but when I started investing in Baltimore, I was actually like doing the work instead of doing the commute, drive in sleep at the property, do work. So I didn't have to do the commute back and forth, so I'd like stay there for the night. But I had an epiphany one day as a police officer, I'd court the next day and then, right after I'd, I'd worked like a police court like from being a police officer in court yeah.
Speaker 1:so going to court as a police officer and um had worked just a really long shift. So sometimes you get rest, you have to stay, you have to process the rest. So sometimes the shifts can turn in, you know, from 10 hours to like a 20 hour shift. Or maybe you work you know more because you just not going to go home for an hour when you have court, like at 9am and you're like just finishing up the process, and at 8am.
Speaker 1:But so I had this realization that I was like working at a property. Then I had this really long shift and I was like, oh, I'm so done with this, but I wanted to go back to the property and I was like this is weird, I don't want to be here, but I want to be. And it's like most people would be like, why would you want to work on a property or be involved in real estate? And it was just like this epiphany of like, oh, it's definitely my passion, like I could do it. The thing was I could do it all day long. I think I'd been working on the property for like 20 hours straight, then came to my shift, had a really long shift, I wanted to go back to the property, but I didn't want to be there at my shift anymore. So that was my epiphany of like hey, this is definitely my passion, I love it.
Speaker 1:So how long do you have to be a police officer before you can retire and receive a pension? Is that 25 years? It depends. I mean, different places have different things. So I worked for nine years and there was a. I could have actually resigned after 10 years and then I would have been able to have a very small pension but it only would have been without collecting.
Speaker 1:When I'm like 60, like, it was like collecting. Okay, after I had'm like 60. It was like collecting.
Speaker 3:Okay, I had to wait and I was like that's kind of dumb. So how many properties did you have and how did you know that you were in a right spot to just quit your job as a police officer?
Speaker 1:So my wife I mean my wife has a great job, so we had health care covered there. So I always knew like, okay, I don't have to worry about the health, that. So we had healthcare covered there. So I always knew like, okay, I don't have to worry about the health. That's usually like a piece that people are like, oh, healthcare, healthcare. So my wife had a good job so I could just rely on her for healthcare. I think I had like 15 property, maybe 12, 15, probably 15 properties at the time, so decent amount of cash flow. And I just started investing in baltimore and I knew that I just I couldn't do as much as I wanted to do.
Speaker 1:But you didn't have the time to have the time I mean, it's just, and I was, you know, I wasn't willing to not be a good dad, not be a present husband, you know, that is that's that's its own job Like husband is one, dad is like another. Those are like full-time positions. So the time I was actually mentally like I have three full-time jobs, One's definitely got to go.
Speaker 2:Yeah, we have a similar story in that sense of like had to had more wife was also a teacher, that's how we met. So I had the healthcare covered. And then, from when you look at it and you're like what, the amount of time that I can actually get to put into this thing that's making good money, that has potential outweighs the you know the risk of leaving that job. Like that's how we, that's how I had to, like look at it in my head and then as soon as we quit both my business partner and I quit our jobs our business doubled. Like it just instantly doubled.
Speaker 2:And we were like I wish we almost did this, you know, years prior, because I kind of knew in my head, like if I had just dedicated my entire schedule to and I don't have kids like I had, you know, we've been together, my wife and I now have been together for a while, but like we don't have kids, so like I don't have that job, and now I'm able to dedicate all this time to the business, it just instantly took off and we found all these inefficiencies and problems. Instantly we were like we need to start fixing this stuff. And it wasn't even like that. We started doing that much more business. It was that happened too, but we fixed a lot of the issues that, like, we had staff that were making more salary than we were making at school, so we were paying our employees more than we were making at school. And in our heads like, what the heck are we doing?
Speaker 2:and we finally made that move and that's when things like really really started taking off so did anything significant happen when you did quit your job as a police officer?
Speaker 3:whether good or bed like shortly after that, um so, right, no, you're good.
Speaker 1:So right after that, um, I significantly purchased a ton of properties so that like year after I left, I want to say I purchased 19 units, which is like way more. Before it was always like one or two properties, it was very like put 20 down conventional route and then it was like a complete different ball game. Once I was like okay, I mean it's almost like burn the boats, but not really, cause I was already involved in real estate for a long time at that point, um, so I kind of knew that my real estate was good. Um, I knew like equity had been built up. I had sold some properties at this point, um, and I've always been a saver, like I'm not a huge spender.
Speaker 2:Um, so so when you were, you were doing this and you scaled up quickly, bought 19 units before you were saying you were working on these properties yourself. You can't possibly work on 19 units at one time. So did you make a shift in your systems and hiring and how did that work? And did you start working less physically like with a hammer, because you had to kind of be like a global leader of that portfolio?
Speaker 1:Yeah, that's a great question. So definitely at the start I felt like I still had to be involved, just as like a cost saving measure. I still had to be involved, just as like a cost saving measure. Um, but definitely started realizing the importance of like working with a players and a player contractors and how much time and efficiency they save you. And there was definitely the like epiphany in there of like I'm actually costing me money being at these properties doing any work, whether I wouldn't be able to do the right plumbing or something, and then I'd have to hire somebody else and I was like damn.
Speaker 1:I wasted a whole day on that. And I could have just been done in like an hour by like a master plumber.
Speaker 2:Chase, you did press the record button on the audio right. Okay, we did a podcast recently. Sorry to interrupt.
Speaker 1:We didn't record anything.
Speaker 2:We did an hour long podcast where we did not record audio. Famous, so famous like now everyone I'm like we gotta remember, we gotta remember, we gotta remember.
Speaker 3:But yeah, sorry, sorry to interrupt you, um, but yeah, well, now that you interrupt everyone, so let me just talk about so.
Speaker 3:It's pretty cool, like the time is very important and I want to talk briefly about when I was in the in the truck in the lands, because I have a landscaping business I was in the truck every single day a landscaping business.
Speaker 3:I was in the truck every single day and that year I think it was 2019, maybe I got out of the truck, maybe it was 2020 because I had my daughter in 2020 and I'm like I need to be present, as you mentioned, and I needed to figure out a way to get out of the truck so I had more time to be there for her birth and all that. So that year, 2020, I bought I think it was eight properties. The very next year, I replaced myself, got out of the truck for that full first full year and it was 2021 and I bought 22 properties. So it was just like that transformation of me having to be in the truck every single day and not having that time to focus on something that was much bigger. And then, as soon as I was able to get out of the truck, I almost tripled the amount of properties. I bought that very next year because of it.
Speaker 2:Yeah, yeah, I think that. And then you the next year you bought like 30 something properties and then so on and so forth.
Speaker 2:So yeah, that I think removing yourself and David we were talking before this about kind of what I'm doing in my businesses right now and it's really like one of the big goals is kind of separating my name and my face with putting in infilling employees and business partners, that and strategically doing so, so that I can take a step away and and sometimes it's good to just like look from the top down and do like an audit of all the things you have going on, because we still find like we were talking about bookkeeping like our bookkeeping systems are great, like we're doing really well with that, but recently we're finding issues with like efficiency and project manager spending money and how we're tracking that and kind of what we're doing with like labor reports and all this stuff and like if I was managing projects every day, I would have never been able to meet with our bookkeeper and find that that issue was happening and it would have just kept going and it would have been fine to a sense. But we're doing 45 projects right now. If we did 90 projects, that system would fail. We wouldn't know where that like there would be a break in that system.
Speaker 2:So, without taking the time to like look down on top of everything and say what's going right and what's going wrong and like what can we change for efficiency? You're going to, you could kind of just plateau and stay in this kind of like you know, um, so are you doing that? Because I know you said you have one va. Um, it seems like you are very much hands-on to your business. Do you have any help with like auditing yourself?
Speaker 1:um. So again, I want to go back to like who you're working with, and there's like a players, yeah, I'd probably say the people that I don't have like business partners. It's very solo, um, but my accountant, my bookkeeper, so I run everything through quickbooks online um, so my bookkeeper I guess what you could say keeps me in check. Um, I'm a very conservative investor and I'm very much about efficiency, something that you said earlier about like hey, you can kind of be complacent and you start losing money, or I'm very much like it's important to be, to be efficient, so you can scale a little bit. But, um, I don't even know where I was going with that.
Speaker 2:I should ask you that then too, because at the same time I said kind of what we're doing, but like is your goals to scale to a certain point? Do you have like an end goal in mind or are you just along for the ride?
Speaker 1:So I love that question. It's a great question and I actually do think about it a lot. I don't have the perfect answer for like end goal. I definitely think that opportunity is super important when we talk about like freedom. Time freedom is like super important, but also just like opportunity freedom.
Speaker 1:So I like to do things that allow me opportunities in different things, whether it's social media or I'm like, oh, I could use this and whatever.
Speaker 1:If I'm a partner in a syndication, I can use this skill, but just having not tying myself into one thing. So I mean, we discussed a little bit about you know, I don't want you know 1000 or 3000 units. It's not like an endgame. I kind of actually feel like it ties you down a little bit about you know I don't want you know 1000 or 3000 units. It's not like an in game. I kind of actually feel like it ties you down a little bit and I'd rather do like passive investing into larger syndications and to really we'll call them super valuable assets that I wouldn't be able to purchase myself, whether it's like a parking deck next to the Phoenix Sun Stadium or some like really awesome winery that's on the water on the Chesapeake Bay and it has like a dock and a boat slip. I'd rather be invested in something like that, where I know I wouldn't be able to take it down by myself, but I can be a passive investor, receive a return and really be hands-off on stuff.
Speaker 3:So you did mention that you were selling some of your units, just a handful of them. Was that to put you in a position to do some of that syndication that you mentioned?
Speaker 1:Yeah. So one of my philosophies is like time in the game. I call it time in the game, I don't know what other people call it, but just to get really good at something you have to have been in it for a while, or you can be this all-star right off the bat. You flip a property and you make $100,000. But usually if you do that and you're really successful right off the bat, it's really easy to lose money. Or you make some poor decisions because you didn't really have that. You're trigger happy, yeah, or you just didn't have that. I mean you can call it experience or whatever. You're like oh, I could have seen this coming, so I wanted to start investing now. Just because when I think about like in-game, I think about talking to my 60 or 70-year-old self and he's like hey, I'm glad you purchased 100 units or I'm glad you purchased 1,000 units, and I don't think my 70-year-old self is like, I'm glad you purchased that next, you know that, next property.
Speaker 1:I feel like I'm transitioning from like hands-on having all these rental. I'll always probably have properties, whether they're vacation rentals. I've owned vacation rentals. I've owned I mean, townhouses are my bread and butter. I think I'll always own real estate in some capacity. But I wanted the passive investing just to be a bigger piece of the pie because it provided that time freedom number one, and it provided that kind of that opportunity for like, hey, I can work with who I want and the family's covered, like the safety security part, that portion's covered, even if for some reason, I get taken down in my property somehow. Maybe I get crazy, somebody sues me, I run somebody over in a car by accident and they take all my properties, which we do have some fail-safes there. But I know the passive investments is completely separate, so it's almost like its own investment business that isn't tied to anything of my own. For real properties.
Speaker 2:That makes sense. So I have a question for both of you now, because I've been rummaging this kind of idea in our head about. It's safe to say, nick, you gross over $100,000 a month in rent, right? What if you just took all of your cash flow and might have taken out your living expenses and just started paying off all your houses and didn't buy anymore, like we just stopped buying now and just paid off all the houses and you're making a hundred thousand dollars, let's just call it. It takes you seven years to do and you pay off everything now. Wouldn't it be in a sense like that? You make a let's just call it $100,000 a month, which it's probably more, but you make $100,000 a month. You don't need that much money. You can invest let's just call it 50% of it into the S&P 500 and, just you know, do the Berkshire Hathaway way or the. You know, just buying the indexes, you're easily $10, $20 million in net worth, or more, because you're a real estate by the time you retire. Doesn't that sound good?
Speaker 3:Yeah.
Speaker 2:Like, but do you think about that at all? Like just paying everything off and just collecting on all your rent?
Speaker 1:Uh, I mean, I think, a lot of different scenarios. I mean in that scenario I don't love the. I mean a lot of our properties are like five percent, six percent and the return is better elsewhere. Um, so I like using the leverage in that, in that scenario, um, but rates keep creeping. Rates do keep creeping. I mean it's not. I don't think there's a perfect way.
Speaker 2:I mean a lot of times we try to shoo into like hey this is the perfect.
Speaker 3:I think that's a great way. I don't think there's a perfect way.
Speaker 1:I mean a lot of times we try to shoo into like hey this is the perfect.
Speaker 2:I think that's a great way. I don't strategies, yeah, I don't.
Speaker 1:I don't judge, I don't judge.
Speaker 3:Uh, anybody's way, I don't I don't like to press my way on other people, so I do think I mean I agree with that at the point to where I think I'm done buying, then it would make sense to go ahead and transition to let's start paying off these higher seven-8% interest rates off houses first and keep the low 4.25% where they're at, and then maybe just do something like that, like a hybrid.
Speaker 3:Yeah, but I think, as we're still growing and I'm still trying to grow with higher interest rates, it's a little bit more difficult. But once I get completely sick of it and want to throw in the towel, then maybe that's a strategy that I might switch to.
Speaker 2:Yeah, I always, just always, just I'm like in my head running these companies is fun right now. You said before you can't respect me yet because I don't have children is that on camera?
Speaker 2:so, so in my head though, like I'm thinking, well, that is the next step for me, right, and and in in my head, how can I safely say to I'm going to be the best dad, the most present person for that person, you know, for my wife, for the kid, whatever. And if I'm doing what I'm doing now, that's not possible. Like I can't run four different companies and manage all this stuff and also dedicate a decent chunk of my time to that. So, like, how do you go about fixing that? And I feel like in my head it's like, instead of me thinking about managing 1250 units, like we were just talking about economies of scale and stuff, well, it's either me giving away equity, which I just did you know, we gave equity to Diana DK law and that's been a great thing for us but then the next step is paying off these assets and not growing it. So then, if I wanted to self-manage and not have a property scaled company with a lot less headaches, a lot less people that can try to sue me every month because they're living in my property, that may have had a fire or whatever it is, because the liability increases as you grow more right you have a hundred houses, there's more of a chance that you're going to get sued for something than somebody that has 25 houses, whether they're paid off or not.
Speaker 2:So in my head I'm just thinking that and I don't think there's a perfect strategy. Like you said, I think everybody's got to live to their personal goals and whatever else. But I just like to hear from other people that are in the same kind of boat, where you're like huh, maybe this is a strategy. If the rates are at 10% next year and inflation's out of control, maybe it makes sense to pay off the portfolio and then get like a blanket Hila kind of loan from a bank or something that you can use to kind of play with or something when you want to. But other than that because that was the one video that did really well for us 50,000 plus views on YouTube his whole strategy he buys commercial assets with no debt, only equity partners. So every asset that they own they do like industrial right, like I was doing like he does like industrial, so he rents to a lot of small businesses and stuff.
Speaker 2:His strategy is no debt from the bank, because during the downturns his partners get paid a little bit less but there's no way that they can come at a refi and say you owe me a quarter million dollars or a million dollars. He's always insulated in that sense. So instead of maybe making a let's just call it a 15% cash on cash return, his investors are good with 10% or 8%, because they know that they're completely insulated from any kind of downturn.
Speaker 1:Yeah, I mean much to your point. I also think you have to think about like, what time of person, what type of character you are. For me, I'm like super, super sensitive, which I mean as I've gotten older. I mean back in high school, people would say, oh, it's the athlete, it's like, you know, it's the rough guy. But I've always just been really sensitive. So a lot of times and I'll give you an example of like why I don't necessarily want to do that christmases ago, when it was super cold, I don't know if you remember this oh yeah, we frozen pipes okay so you know exactly where I'm going.
Speaker 1:I even know I mean I did get involved, but it's christmas eve. I mean we're trying to enjoy christmas eve. We got family over I. So we use ring central as part of our process and so my VA can you know she can use RingCentral. She dispatches that to the contractors, to the tenants. But I still have it on my phone that I can see what message you're going through. And I take a peek every now and then. I see got frozen pipes here. It's Christmas.
Speaker 3:Eve, what do you got?
Speaker 1:And it was like we had two different frozen mains. And I mean, even if you're not involved, so even if I'm 100% hands off, I guess I would just not have to see that and be like, hey, you don't call me for nothing, but if you're, how, if your apartment building is on fire, you're going to want your staff to say, hey, we kind of have a thing here, and so it's going to be mentally wearing. So for me, I, you know, I felt for my tenants. I'm like, well, we got to fix this. It's Christmas Eve, we're not going to have them not having water.
Speaker 1:I mean, it was a, it was a multifamily, it was two multifamilies, so it was like a bunch of tenants. And then when they turn off the that both, um, and then, like an idiot you guys can learn from me like an idiot, I tell the contractor. I was like, all right, I'm gonna get involved. I was like he's like it's just frozen. What do you think I do? Oh, the pipe's just frozen, there's no burst. You guys know what I did put heaters in it put heaters in there dumbest thing you can do.
Speaker 1:Do not do that. Do not put space heaters in there. Then, like three hours later, tenants are like hey, I think there's like water in the backyard. I was like, oh god they're like and we don't have water anymore. So he goes back there. He's like, oh my god, this is like a pool in your basement. So, but where I was going with that is, I'll go back to the first original point. You just kind of have to know who you are and when you talk about like paying down properties, it's totally. I think if you can kind of like detach, then that's great. I don't know if I can totally do that. I don't feel like I'm a super strong like team builder. I think I'm a good leader, but not a good like hire the teammates person. I don't know why, and everybody's got their skill set and their thing. Yeah absolutely.
Speaker 2:That's why I like talking to people and that's one of the biggest things with the podcast man Like Nick and I get to sit down and I was telling you this before Like we get to sit down with people that have done way more than us, people that have done less than us, people that are in a completely different realm than us, people that have started liquor stores, people that have done commercial stuff, and I get to just like we get to ask them questions and learn from them. And like you're always a student and we get to sit here and anything that you say might click in my head. I'm like, oh well, maybe that makes sense. Or what you just said, like maybe it's a hybrid. Maybe we keep those two and a half percent, three and a half percent rate mortgages and maybe we sell. We just look at our portfolio from a where's the highest debt and just start paying that off.
Speaker 2:Or, like this year, we got a couple tenants moving out of like single family houses that I went to flip a couple years ago and then saw the profits weren't that good, so I ended up renting them out because the rates were so low and you couldn't miss. So I have like a three percent rate on one, but I have like it's like 150K sitting in there now. So I'm like I'm going to sell that house. It's a single family house with a lot of walls on the outside, a lot of siding, a lot of stuff that could go wrong. I'm like it's still nice. We fully renovated it. We're going to sell that this year. We're going to get rid of that. That is a strategy where we take that 150 50k and push it into one of our eight percenters that we just refinanced recently. And maybe that's the strategy, you know, and figuring, playing with those numbers.
Speaker 1:So that's one of the reasons I just love talking to people I think I mean if we want to like put this into like one box. I think we're talking about deployment of capital, like where are you putting your capital and why? And I think about that a lot like where am I deploying my capital, why? Why would I pay off the house? Would I put it in some sort of syndication? Would I buy another rental? What's going to be the best return for my money, or what a lot.
Speaker 1:Sometimes at this point in my life, I mean, it's not always like I don't always think of what's the best return. Luckily I don't have any investors right now, so it's not like, oh, he doesn't think. Sometimes it's like I really want to support this person, because I really see eye to eye with them, for whatever reason. Maybe I really like some philanthropy they're doing, maybe I really like just something about what they're doing and I just want to support them. I'm not going to lose money with investing with somebody. But I'm like, oh, I'll take a little bit less return, maybe I'll take a little bit less return, maybe I'll take a 8% return, just because I really want to be involved in something. But I think it's when it boils down to what we're talking about just where do you want to deploy your capital and are you okay with the returns when you're talking about, like the properties? I'm in a very similar boat.
Speaker 1:So I'm going to sell two properties that I've held for a really long time. They're not in Baltimore and they have a ton of equity and I think I did an episode on this a while ago that a lot of people don't talk about. But it's return on equity you look at, instead of just the cash on cash return, which is, hey, I put $20,000 in this townhouse and you always think, oh, my $20,000 making X and you don't think about, well, that townhouse is appreciated. I actually have 120 if I sold it in there. So actually, in both of these houses I'm going to sell, my return on equity, I think is like 2.8% and like 2.6% and it's like 200-something thousand per house. I'm like I got to sell these things Because you can always have the one-off expense of like a lot of times we don't think of as investors.
Speaker 1:We think of like expense ratio and a lot of we'll make like a percentage to be like, oh, I'm gonna have like 10, that goes to expense. Yeah, capex, um, and sometimes we don't think of that. Those capex come in bursts. So if you have a water main leak, all your capex is all in like a 15-day period and you're like dang. If I would have sold this two months ago, my returns would have been amazing. Now they're not as good because I just had to put 15 grand this month New HVAC, new roof.
Speaker 2:Yeah, and I don't think.
Speaker 1:A lot of people think that. So sometimes I'll think about like how much life do we have left in a property? And I'm like I don't want to put on a new roof, we're just going to sell this thing. Because if I have to put on a new roof? Or more recently, I sold a couple of duplexes because they had these AC units that were on the roof and it wasn't just the AC, it was an all in one AC heater on the roof. So you got to have a crane. They're really heavy.
Speaker 1:I want to say each one was like 10 grand maybe, maybe a little bit more. And I was like 10 grand, maybe a little bit more, and I was like I do not want to take that expense. I know we had been kind of keeping them going for a while but I knew eventually in the next year, two years, three years, somebody's going to have to pay. It's going to be me or I'm going to sell them. So I took the money. It was a good return. It would be less of a return if I had to pay 10 grand for each.
Speaker 2:And that's where we're going to come up with soon too. Like Nick and I started investing at the same time, but like we did most of my properties, are we fully gutted and renovated Right?
Speaker 3:Yeah.
Speaker 2:But now they're. Some of them are seven years old. So now those HVAC systems that were brand new have been getting kind of beat up. Probably the filters weren't changed the right times. Now we have systems in place for that, so that gets done right now, but for a couple of years they probably were just getting the crap beat out of them. So we have a life expectancy on these houses that maybe we did the roof, but they're rolled roofs. They don't last for 25 years. They're not shingle roofs, right. So now we got roofs coming up where, yeah, sure, we were making 500 bucks a month when we started, or 650 bucks a month, but taxes have gone up, insurance has gone up, so now that $650,000 is $450,000. And now in three years from now we're starting to change HVAC systems, we're starting to change roofs and all that profit that we made for sometimes a year, two years, just goes into one stupid yeah.
Speaker 1:That's hard. It's hard to talk about. People don't totally realize it. They just look at the numbers on paper. It's not a 30-year hold don't do anything for 30 years.
Speaker 2:That's not a true statement. Maybe your loan is 30 years, sure, but you have people living in your houses for long enough without like really keeping up with redoing things or whatever it is. Even the vinyl floors like they get beat up after a while. These houses aren't perfectly level. You're going to start changing the floors and even with people people like Nick and I, who I own a construction company Nick has his own cruise. It still costs money. All of it still costs money. This stuff's still $2.50 a foot, Like whatever it is. That stuff will add up and it will beat you up after a while. For the people that are getting into it, thinking for 30 years, I'll just sit hold, collect the money. That's not what. That's not going to happen.
Speaker 3:So, dave, I kind of want to jump back to when you first started. I think this will help out some of our listeners. Sure, because you're. You're about an hour and change away from Baltimore. However, you are still considered an out-of-state investor, so, and you're very hands-on from the beginning. So how can you, if somebody is listening who's maybe out of state, who do they reach out to to get started? How did you become familiar with the Baltimore area to feel comfortable, to start investing in that market?
Speaker 1:It's a great question. I had looked at Baltimore a couple of years before I actually started investing and I drove you guys will like this, invest in Baltimore. I drove the streets and I said no chance, am I investing in Baltimore? I was like that you're crazy, because it's a. I don't even know how to explain it to a lot of people.
Speaker 3:It's a gritty, it's a gritty.
Speaker 1:I mean some area. I mean some people describe it as like bombed out. I mean it looks like war zone or like zombie, like it could be a zombie apocalypse in parts of the city, and so, if you're not familiar with that from Northern Virginia, like everything looks good, like it's all nice, and then driving I'm like, oh, no chance. And you get scared of the supply. So then when I came back, I just did a contrarian thing. I had the same feeling and I was like you know what? I just going to invest, just going to start invest. We'll see how it goes, cause I'm scared.
Speaker 1:I think most other investors will be scared of the areas that I'm going to invest in, and so I think that would give me the advantage and I also really liked that I was an out-of-state investor.
Speaker 1:It gave me a different lens than people from Baltimore where I'd have like really good investors that would be like you're crazy to buy in that zip code and they just blanket entire zip code and it would make me nervous and I was like, oh, I'm probably an idiot, but some of those properties that they were like hey, you're an idiot for buying those zip codes, have been my best, most profitable properties and I'm like if I were to listen to this person that has, you know, so many properties I think at the time person had like 80 like you're an idiot for investing in 212 and 7. You're dumb Then I wouldn't have made the money that I made on the. I mean it was probably the best deal. I purchased a fourplex or four different buildings at the same time in 212 and 7. And they're all multifamilies, they're all like two units and three unit buildings and they've been awesome.
Speaker 2:They've been awesome and great. What were some of the systems that you had to change from being a Northern Virginia guy, where things are a lot different than coming in to build a portfolio, manage a portfolio, do the construction? Did you have some systems that you were working down in Northern VA that probably didn't work up here, and did you kind of change at all?
Speaker 1:So another great question the system. So I think the two huge books you know, for people that are like, hey, I want to start my own real estate stuff, I want to be investing, I want to build a portfolio. Two biggest things for me was profit. First was like a game changer that I incorporated four years maybe, maybe a little over four years ago. That was like a huge game changer for me. And then um, EOS traction. Um was a big game changer for me. And then EOS traction was a big game changer for me of like how we look at projections, why we do what we do, what's the company culture. Even though it's just me and the VA, I just I can look at like our core values, which are like integrity, transparency and it because it's on the wall, cause I see it, even if a contractor calls me and is like, hey, I can do that for like 20 grand, I'm like you are like 10 grand over budget, what are you talking about? And I don't really want to call them back Cause I know I'm never going to work with them. I'll see that core value of like transparency, integrity and I'm like, well, I'd want somebody to call me back and be like, hey, dude, I just can't. I can't work with you. You're a little overpriced for for what I'm looking for. Um, so that was a big. Those are two systems. Um, I also built out a my own property management processes and systems on Trello and it's very much.
Speaker 1:If you guys have read checklist manifesto, just I mean it's just being like anal with checklists on how you do each one of your processes, whether it's move out, turnover, whether it's lease up, whether it's property acquisition, whether it's just looking at a property. I mean I'll share this one because I think it will help people. I have this process. It's called a background check. So if I'm thinking about purchasing a property, we have all these different checklists. One's like look at the tax ID, pull up the permits. It's like go look at the water bill and so the VA goes through, looks at everything, pulls it all, but there's like links and all the checklists. So it makes it very easy.
Speaker 1:So if I'm thinking about purchasing a property, I say, hey, can you do a property background for one, two, three main street? They hit these things. It's very quality assurance, cause I know if I was just doing it on my own, like back in the day, I'd miss, you know, a $3,000 water bill or something, and then at closing they'd be like oh, do you know? You have a $3,000 water bill. Like, oh, we got a broken pipe, you can still close on it or we can back out, so it allows you this quality assurance. But just, I mean, if one thing that I can give to investors that has helped me is just to do things the same way it's almost like a franchise model and that property background of doing it the same way every time and going through a checklist when I'm looking at purchasing a property has been super helpful. I feel like a lot of people don't do it.
Speaker 2:Yeah, I think the systems are what have helped us so much, where, like in the beginning, you're kind of just like well for us anyway. I don't want to speak to anybody else, but like we were just kind of like scrambling and learning, you know, trial by fire, this and that. And then as soon as you get a system that works, you're like, oh wow, we were working way too hard for the same output. Like then you then you're like okay, well, what's the next thing that we can systemize? And I was Chase.
Speaker 2:Just I got Chase a VA for the brokerage because he's kind of like our lead agent. He's spearheading a lot of big efforts in the brokerage and I said like one of the big things is you got to meet with them, get a standard operating procedure and learn basically the processes that they're going to do and like put it down on paper. And then, as soon as as his va started, she started kind of with a guide of what we're going to do and I think chase could speak on. That was kind of like helpful to have something before you hired it. Because he was always saying like, oh, I need a va, I need a va. I was like first build out the scope of work build.
Speaker 2:The va needs to do what they're going to do, and then do it, record it on loom, put it in a folder and tell them to watch it five times before you meet about it.
Speaker 1:I think what? Yeah, it's great. I think it's awesome, it's been helpful. I think that's awesome. I think what I think that point that maybe some people miss on this is that when you have a process that you do the same way every time, you raise the quality and then you lower the amount of time that you're wasting. I mean, for example, a lot of investors, when they're looking for properties, we'll probably go on Zillow. Maybe they don't have a filter and so they're looking. I remember doing that. So I'm speaking from example. I'm not, I'm not shaming anybody. I did this quite frequently when I didn't have a filter of exactly what I was looking for. I remember going on Zillow and clicking on the same property and being like have I looked at this property? Yet? I mean, you guys probably know what I'm talking about have I looked at this property? And then you start clinging for oh, I've looked at this one.
Speaker 3:I don't want that one. You're like oh, you see the stupid pink bathroom yeah.
Speaker 1:Remember the pink bathroom and up a filter and like what you're looking for. So you're not looking to the same properties over and over. So once you build out, just even if it's just a checklist and it doesn't need to be anything fancy- a lot of my stuff is not like crazy fancy. It's just like, okay, I can click this box, so I know I've done the step, and then your qualities goes way up and you're like holy smokes.
Speaker 1:I'm not wasting any time or I didn't miss a step. Often and every now and then, when we miss our process or maybe the VA overlooks it.
Speaker 1:Maybe they didn't turn on the BGE utilities. It needs to be part of your process. When you close on a property, somebody's got to close on BGE, or else what's going to happen? Contractor's going to come over and he's going to go hey, we don't got any utilities here. The crew really can't do any work without any utilities and it's like super hot in here and so you lose like a week. Maybe you can't get back on the schedule, and that's just a process issue and a quality issue, but I don't know if I just I think it's super important to have that checklist, so you're like or just create one, even if it's not perfect, and then you can start to see where your issues are Right.
Speaker 3:Yeah, How'd you determine when was the best time to hire your VA?
Speaker 1:That's a great question, um. I just thought it was a progression, um, and it's not perfect. I mean, you have to learn a new role. Um, you go from solo operator to like leader. Feel like you're actually doing more work when you bring the VA on right For a while and you're like, wow, I'm doing so much work. This is not what I signed up for it's very frustrating.
Speaker 3:I recently hired.
Speaker 1:Chase a.
Speaker 2:VA, and then I hired Jocelyn, a VA who's like stepping in as part of a leader of my property manager company, and I told her and I told him the same thing. I said it's going to be work in the beginning. It's going to be work building out the systems. It's going to be work meeting with that person every day, learning their personality, learning what motivates them. That's work. But once it clicks, my VA dude runs my life. He is a stone cold killer. He is so good at anything that I need, anything that Chase needs.
Speaker 2:Like I could text right now and say most of the things that I would need to do today and he can do them and I hope he listens to this because he's he's been a game changer to just our business and the other day I sent them a nice little bonus because I'm like I'm throwing all these projects at him. I'm like I told you about the, the thing that we're're rolling out with like the conglomerate and all that stuff. I'm like I need a landing page, I need to split this website and this website, and like I just see emails between like our web designers and him and like I just told him my goals and he's fully taking that on that whole role is just him, while still answering my phone calls, while still doing whatever else we throw at him. And that, to me, has been like the biggest investment that I made in the beginning, where I was meeting with him every day and I told Chase in the beginning my biggest mistake was I didn't realize how much better they would be at certain tasks than me, so they were doing things way faster than I could do them and I was like, oh, I'm going to give him this, this and this today. That'll take him eight hours.
Speaker 2:And then by like noon, he's like, hey, I'm done, what do I do next? And I'm like that would take me three days. How did you do it? And he's like, oh, I have AI for this, I use this, I have this system that I use with my old people that I worked for, you worked for a KW organization or whatever. And he's like, yeah, I just know it way faster than me. So that was work.
Speaker 1:We definitely often procrastinate on the things we don't want to do, and so when we hand it over to somebody that maybe wants to do it or doesn't just not want to do it, you're like, oh, I don't want to do that to you. They do it really quick, yeah.
Speaker 2:And sometimes you have to realize what you're good at and what you're not good at.
Speaker 1:I'll go back to your question, ryan. Is that your first VA that you've hired, or have you gone through like one or two? No, that was my first VA.
Speaker 2:I've had in-person assistance since we started, basically, but never a virtual assistant, and that was somebody. Recently, a friend of mine recommended this company that hires VAs for you and blah, blah, blah and the next thing you know that's it Cyberbacker. For those that are listening, I was going to ask.
Speaker 1:So you guys are. It was coming out.
Speaker 2:I have a referral with them, so if you are looking for a VA, let them know that the Everyday Millionaire Show sent you and we have a referral kind of partnership with them and they've sponsored our events and we have a referral kind of partnership with them and they've sponsored our events and they're great people and they train their people so well and they've been a game changer to us. And my friend, Jesse, who we were talking about, told him about them Like you've got to hire a VA and he's like I've had them. They're not that good. I'm like go to this company, Hire them, Train them, and they will be a game changer. And he has been then said thank you.
Speaker 1:On my VA and I'll answer. I mean, I've gone through a few. I thought you were going to give me a different answer.
Speaker 1:It didn't go the way I thought it was going to go. I had like one or two VAs and this is super important, the first VA that I hire. I didn't know how vulnerable that I was actually making myself and I had just had like password, just like stuff that they didn't even need access to. But I was like I have all my just trying to simplify all my stuff in one spot and I didn't totally realize, um, until I hired my, my second VA, and they're like, why do you have all this stuff here? I was like I don't know, it's all in the same spot so anybody can use like your VA doesn't need it. I used a, I used a outsourcing company, so they hire the VA. And then, um, or a job placement company and our VAs in the Philippines, I think yours is the same Do you have a VA? I don't, Okay, but I use our VA, I'm getting around to it. So I went through a, a cycle.
Speaker 1:Our first VA, I think he was working for like two different companies. I think he was like moonlighting. I think that's a lot of times what VAs do, Because there was things that he should have known that I was like how do you. How do you, you like, did this work order yesterday? How do you not know what this work order is? I was like you, you got too much going on, or it's like I need you only for me. You're 40 hours a week and you are for us. You can't have you working eight hours for somebody else and then you're not like dialed into our stuff. Um, so that was my, my epiphany.
Speaker 1:But the one thing was like you need to be careful on what you're sharing with the va until they like develop that trust. They don't need every, they don't need the keys to the castle and everything. You kind of do. You divvy it out slowly. But I found go back to your original question was like when did you know you needed a VA? I just thought like I had a decent amount of work. The worry, I think, for most investors is always do I have enough work for the VA? They're going to sit around and and I think that you just accept that off the bat that they're going to waste some time. I mean you can develop a huge list, but sometimes it's difficult. But I also use my VA as a property manager. But my VA is basically like an EA. It's like an executive assistant.
Speaker 1:You fill out these financial documents. It has nothing to do with property management, but it has to do with, like, we're getting processed for a refinance. Can you fill out this document just to save me on time of stuff that I don't want to do? I'm like I don't want to fill out that. You know my stuff. Just fill it out and send it over to the lender and I use her as you know the way. Like real estate agents use their VA to get our stuff and do follow-ups, so we'll like incorporate follow-ups on and like incorporating everybody. Hey, you need to attach the insurance agent to the lender, to the title company, and you just keep track of them every three days. Hey, how are we doing? What do you guys need?
Speaker 2:And I think another thing the right way to hire somebody is if it's not going to financially sink you or put you in a risky situation. The right way to hire somebody is really right before you really need them. Because once you really need them, then I feel like it's like a scramble to first hire somebody quickly so you don't wanna have to just hire the first person and two when you need them. You're stressed out at that point so you're thinking I gotta just get this, this, this, and then you're overloading them with something. So really I feel like the right time to hire any kind of employee, like a project manager or whatever. Like if I had to train a new project manager but I was stuck managing 10 or 15 projects myself, how would I possibly take the time to train that person? You can't. You have to max out. So before you're actually maxed out, you got to hire that person.
Speaker 1:And there's the learning curve of you're stepping into a new role. Yeah, you have to. You have to lead somebody else or dictate to somebody else, which is does? There's no way to learn it until you do, I think. I think there's no like way to be like hey, you're trained to bring on this assistant. You're just going to the first time you bring on a virtual assistant. It's going to be like a month and it's kind of going to be painful and then should start getting better to be like a month and it's kind of going to be painful and then should start getting better.
Speaker 3:Um, so I have another question how do you handle your turnovers and tenant placement? Do you still handle your tenant placement yourself or do you sub that out to a tenant placement company?
Speaker 1:So we don't have any boots on the ground for in-house property management, but I do use, like, two leasing agents. Um, so I use one leasing agent, for that was. Am I answering the?
Speaker 2:question.
Speaker 1:Okay, Leasing one for market tenants, one for section eight. We I'm sure we all use the same section eight person. What?
Speaker 3:about walkthroughs for property turnovers.
Speaker 1:A lot of times it's the leasing agent. Sometimes they'll just send the contractor over. I'm still heavily involved in our project management. So if I like purchase a property and we're doing a renovation, I don't have that. It's not property management anyways. I mean, I guess it could be, but I've found that property managers usually are not great if you're trying to do like a big reno but I haven't. That's a whole nother set of systems and sometimes they have unique questions. Do we add a bedroom in the the basement? And that's not? If the va is in the philippines, they're not going to know. Or do we hey, dave, you want to bet? I mean just going to come back to me anyways. So I've just and I actually really enjoy that. I like working with our contractors. It's a relationship piece with me. I really enjoy the friendship, I enjoy the design. So that's a piece that I haven't given up.
Speaker 2:But I will let you know that is the hardest position to fill. A good project manager is the number one hardest position to fill in that construction piece 100% by far.
Speaker 2:It's like because they got to have somebody that thinks like you, that knows projects from start to finish, can talk to contractors and the contractors will answer them. That is a very, very hard position to fill. So that's just one of my pieces. If you are getting started, like, just be your project manager for a while, learn it so well, like be a perfect project manager before trying to hire somebody, because it's next to impossible to find somebody that's really really good and motivated the same way that you are.
Speaker 1:That's yeah, I mean, I think, yeah, I mean it's always good advice to do it yourself and then you can outsource it if you want to outsource it. I still think it's really hard for like those big projects and I had I'd had hadn't always had in-house property management right. I've used plenty of property managers. I purchased my first property and it was in Raleigh, north Carolina. It was my first property, so I was like all out of state. And then I did go down there to fix it up, drove down there, slept in the place for a week, fixed it up, fixed up what I could. Then came up and then was like all right, contractor, you can put in the deck, you can. And then was like all right, contractor, you can put in the deck, you can do this.
Speaker 2:But I don't even know where I was going with that. All right, so I'm going to start wrapping up here. So, david, how can people find you? I know you have a YouTube channel now Can you plug that? How can people get in touch with you? You have a Facebook group, the Real Estate Mastermind right, I do.
Speaker 1:So why don't you go ahead and plug that? So I don't misspeak, sure, so Dave H Media is the Facebook group. It's mainly geared towards people that are looking to invest in Baltimore. All mindset things, systems, everything I do for investing in Baltimore is there. And then in any of the YouTube descriptions you can find our private Facebook group kind of share things that are going on in Baltimore, best practices. You can connect with other investors, yeah.
Speaker 2:And what's your YouTube channel?
Speaker 1:you said Dave H Media. Dave H Media. But if you type in Baltimore, dave Hathaway, you'll find me. I mean, I don't think there's a ton of Baltimore niche YouTubers. I mean I've had a lot of random people that are like hey, I'm from Buffalo, new York, you're like the Baltimore guy. I'm like, all right, I mean not necessarily the Baltimore guy, but but I'll, but I'll take it, I think.
Speaker 2:Baltimore is an interesting city to be investing and people are from all over the country. I manage a bunch of properties for people that live in California and New York and Denver, all over the place, because Baltimore is one of those markets where it's a low barrier entry. So yeah it's a good place to be on YouTube. Um, we do have an event this week. It's not going to come out. This podcast is not going to come out, uh, before that, so not worth plugging it.
Speaker 2:but thanks for plugging it All right I plugged it I already did Um already done, yeah, so thanks for listening, guys, and uh, until next time.
