Business
Bill Manassero is proof that it’s never too late to invest in real estate. Bill made his first deal at the great age of 60! Based in Irvine, California, he has worked in offices, worked as a musician, and operated his own businesses all his life. His music led him to take part on a mission in Haiti, where he started his organization named ‘Child Hope International’ which helps the children of Haiti. After a few years on the mission, he and his family moved back to the states and hit the ground running in the world of real estate. In this episode, Bill talks about his life in Haiti, how he came up with the idea of helping orphaned and abandoned children. He also discusses why & how he jumped into real estate, about his first deals, his lessons learned from it, and how he made the transition into a 22 unit deal. Episode Highlights: Bill’s Mission in Haiti His Start In Real Estate Paralysis of Analysis Hiring Property Managers Connect with Bill: Website: OldDawgsREINetwork.com - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - TRANSCRIPTION Intro: Hey guys, and welcome to the show. Today, I'm very excited to host Bill Manassero. And Bill's story is very inspiring, particularly because of the fact that he started investing in real estate when he was 60 years old. A lot of people say that they're afraid of jumping in because they feel like that ship has already sailed, or they're too young and many other excuses why not getting into real estate. But how about being 60 years old, not having enough money to retire or thinking about retirement and getting into real estate at that particular point? I think that's inspiring, and it doesn't matter the situation, I think it's something that we should learn from. So, without further ado, let's have Bill Manassero. Lady: Welcome to the commercial real estate investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to off-market strategies. Don: Hey, Bill, welcome to the show, and happy Thanksgiving. Bill: Hey, it's great to join you here today. This is Happy Thanksgiving to you too. Don: Thank you for much. I'm actually Israeli. I know Thanksgiving is an American holiday or like an American event and I have been in this country for eight years. And it's my favorite holiday here, I guess because it reminds me of home. As Israeli people, we assemble every Friday for a Friday dinner with our families. Bill: Shabbat Don: Yes, Shabbat dinner. And that is the closest that we got here. So, I love it. I love this holiday and I love the atmosphere and I love the fact that Florida is getting a little bit colder. That's amazing. Bill: How cold, down to 70 now or something? Don: Oh it's 75. Bill: Oh, man, you must have big down coats on. Don: Yeah I'm wearing a jacket, don't ask. How's the situation in California, right, you're based off California? Bill: Yeah, I'm in Southern California. It's called South Orange County which borders San Diego County. A very nice area here. Just love it. The beautiful and yeah, I think we're down in the 60s and 50s here lately, so we're getting really cold. And the people, of course, listening and Michigan and places like that are just saying. Yeah, right. What are you guys talking about? Don: That's right. Yeah. Okay. So, Bill, how about you tell us a little bit about yourself in your real estate career? I know you're a very accomplished man, and you've done a lot in your career. So, tell us about yourself, what you're doing right now, what you've done in the past. Let's hear all about it. Bill: Oh, you bet. Sure. Well, I don't know how far back you want me to go. It'd be a long show here but I'll just try to give you an overview. Mainly grew up in Southern California, started off early in the banking industry, or at that time, what they called savings and loans, and learned a lot about just the financial transactions that occur and how funds are taken in and dispersed in the way of mortgage loans and so forth and did that for a number of years. And then I opened my own consulting firm, mainly in marketing and public relations. Did that for a long time. Work with the automotive industry. Moved into the technology area. Eventually got involved with a new tech startup, an internet company that was started by a group of Harvard MBAs, one of the persons who was who started eBay and Meg Whitman. Everything is going great, exciting, we're just kind of watching our stock options grow and then boom, the internet bubble burst. And so, I kind of got my first... Don: Talking about '99 right? Bill: Yeah, exactly. And then I went into a sort of a totally different direction. I felt like I was called into the ministry and actually started, I've been a musician. I earned my way through college, playing in clubs and doing all that kind of stuff. Don: It sounds like a very Californian life. you're a musician, you stumble upon the founder of eBay, like across the street. Bill: Kind of like that. Yeah, a little bit more complicated, how it all came together, trying to rush through here so I won't give you a four-hour version. But that was it. I have been playing guitar since I was a kid. So yeah. And then we started a little rock band for kids and it was wild and we just traveled around the US and played at festivals and churches. Don: What about real estate?? Bill: Okay, I'm getting there. Okay. So, anyway, so this kind of brought me into old-time mission opportunity in Haiti, specifically, it's in the Caribbean. And Haiti is one of the poorest, if not the poorest country in the Western Hemisphere. Don: I know much about it actually. It was just a matter of who occupied the country. The Dominican Republic was occupied by I think it was France? Bill: That was Spain. Don: Spain and France occupied the Haitian people. And so what happened was that the French people and excuse me if your French guy listening or friends you're listening, sorry about that but they were known to exploit the land so much that the land is just, it doesn't have any vegetation that grows. There was no advantage in raising crops when you compare it with the Dominican Republic and up until this day, If you ever look on this island, which is the exact same terrain both these nations have, if you look at this island from an aerial perspective, then you will see that Haiti is like barren and kind of brown from satellite pictures, whereas the Dominican Republic is all green and forest. Bill: That's true. It looks exactly like that. Of course, there are different versions of the story. The island initially was founded by Christopher Columbus and it right before he came to America, and it was called Hispaniola so it was all owned by Spain. And, of course, Napoleon and the Spanish were fighting and negotiated basically this island and they split off into smaller third was Haiti which became the French-owned part of it. And that's where the majority, in fact, all of the coffee and I believe the sugar at that time was supplied to Europe through Haiti. It was extremely productive. Also, all the slaves rose up. Don: Yeah. The people stayed poor. What were you doing there though, I mean, how does it do it real estate? Bill: Well, it's part of the story. I had been 20 years in business and corporate had been an entrepreneurial side, just a full run a business. So, when I got over to Haiti, I think was coming into my 50s. And we set up a mission over there. And we worked primarily with the street kids in Haiti. We set up vocational training programs and micro businesses for them. They had orphanage for girls and four boys and a guest house and a medical clinic and a school and all these different things primarily because there are 300,000 orphans on the street. So, it's a big problem over there. We spent about 12 years there. It was kind of getting near the end of our mission time and getting older and it's just a tough place to survive and live. We were prepared to stay, for the duration, but at the same time, my kids are growing up and going back to the States. I have seven kids, a lot of activities going on. And so, we prayed about it. We said this thinks what we want to do is prepare for retirement in the states and so my going to try to get a job with somebody. I thought 60 who's going to hire you, realistically. And then I'd run businesses, I thought that's probably more likely, it makes more sense to me, maybe starting my own business. I'm looking at all kinds of things. I started venturing while I was in Haiti into online businesses and started, generate some income with that. And I thought, wow, this is too much work and I want something that would be passive. And so, I got an unexpected inheritance check in the mail. And I was heavily invested in the stock market and thought I just don't want to take this and put it into the market because that one, it was pretty volatile at that time. And so, I'm looking at what options, maybe as an alternative. Don: Okay, tell us what you got. Bill: Okay. I have a board of directors, a nonprofit organization called Child Hope International. That's the organization that funds Haiti and so forth. A couple of guys on my board were heavily into real estate. We had a developer, we had a guy that just invested. They did well and I was going well, that could be something for me. So, I just started digging into books and I started researching. I went online, YouTube, went to webinars, I read tons and tons of books, just trying to get an idea of what's real estate investing all about and order people's programs, I had flipping programs, I had programs. I would order these programs in the mail and was trying to learn what I'd want to do. At first, I thought I was going to flip and I thought that'd be good, but I'd go like that's another full-time job. I don't want to do that, moving into my retirement years, right. So, looked at rental housing and it's in it seemed to make sense to me and it's it seemed to be the thing that I thought would be the best move. And so, I started researching, I started looking at where good markets to invest because I knew California real estate is way too overpriced. So, I looked at some of the emerging markets and I decided Atlanta and Memphis were good markets and this is back around 2014. Don: This is a pretty accurate guess. Because of these two markets, in particular, I hear a lot of people that have made a fortune in these years. So yeah, Go ahead. Bill: Basically, researched that and I found a turnkey company that was based out of Singapore and they had a number of properties there. I was looking at their properties and weighing out which one would I want to invest in and eventually I narrowed it down to a number of them in each market. So, I hopped on a plane from Port-au-Prince, flew into Atlanta, checked out the properties, visited them, boom, bought a single-family home in Atlanta. Hopped on a plane went to Memphis, did the same thing except that there I got a single-family in a duplex. Don: So, you are buying these properties with that check you got in the mail right? Bill: Exactly. Don: Okay, so I don't want to get into your business, but it sounds like a pretty big check. So, did you use any leverage or did you buy cash? Bill: I paid cash. I'm definitely a newbie. And so, I learned a lot. And I'll tell you a lot about turnkey... Don: For my audiences, you guys don't have to do this right? Even if you have savings like $100,000 and you want to start in real estate and you can just put down 20% and leverage the rest of it. And just make sure that your debt is less than your income. So, you'd be able to pay the debt and still make some cash flow. So yeah, go ahead. Bill: Yeah, exactly. And so, I hopped on a plane flew back to Port-au-Prince and next month I was making income. They had tenants already, and they had been rehabbed already. I thought this was great, I mean, I don't have to do anything. I got money, what they call mailbox money, right? Don: It used to be a mailbox, but now... We used to call it a mailbox. Bill: Right. And so, I'm going this is great. And at first, I was just thinking, well, I'm just diversifying my portfolio right? And as thinking yeah, I real estate, I got precious metals, I got stocks and bonds and so forth. This is just another one of those things. But then I started thinking gee, I should have started this a long time ago. Okay, I like this, let me do the same. So, I started, went into another market and Indianapolis. The first day bought a duplex because one thing I'd found out very quickly and it was only after a few months of getting these checks and also you get experience also when you get vacancies and I had plenty of those and so forth. But it made so much more sense to get a duplex as opposed to single-family because, again, the economies of scale, I paid about the same price for all three properties that I purchased. But I was making twice as much in income from the duplex. I had a vacancy, it's only a 50% vacancy, in a single-family home it's 100% vacancy. So, it just made more sense to me. And then I started thinking beyond that. I said, “Why limit yourself? Why not go for larger multifamily?” Don: It's a great idea because I think what happened to you, if I'm analyzing that correctly, was that since you had no experience in real estate, then you were buying the first single families that you were buying, you paid market value for them. And so that is why you can't see the advantage of buying a single-family versus a duplex because as an investor, I've been doing that all of my adult life so I know that the typical seller, it could be anybody. Be somebody that inherited a property and they live in California, but they have a property in Florida or vice versa. So, they're not as knowledgeable as the investor that buys a duplex. Because a duplex is typically an investment property. So, the person you're dealing with is more sophisticated. Therefore, it's going to be a little bit more difficult to get a good deal. Right? So, the advantage of buying single families versus duplexes is that you can get a better deal. But as far as equity, so you can buy at 50 or 60 cents on the dollar if you're looking for the right properties, but with a duplex, it's going to be a little more difficult, you're going to pay 80 cents on the dollar, if you got a good discount, or sometimes going to pay market value. The advantage is the fact you have one roof sometimes, one AC unit and so it's easier to maintain it right? Bill: Right, depends on the market and that's another thing I learned about too is that these were all in “C” markets and some markets are better than others. And so that's where I started to see some of the differences. The duplex I bought an Indianapolis for example, okay, I paid roughly $55,000 for it. That was getting at that time $650 per side and there were three, one on each side. Don: And your tenants were good? Bill: Tenants were in place. Yeah, tenants were good. But what happened is over a very short period of time, within a year's time went from $55,000. I bought it, it was another turnkey. So, it was already for the most part rehabbed. I saw that the value goes from $55,000 to about $200,000. Don: Yeah, and you got lucky there because you got into the market exactly where it was going up, especially multi-families. They were just booming. If you got a property in 2014-2015, there could be very, very little things you can do to not make money, if you bought multi-family because they appreciate it to the point where now, people pay five and a half cap rates for multi-families, which is unheard of. Bill: Crazy. It's changed a lot and that's affected a lot of where we're looking now on the type of investing we're doing now. But you're seeing that happen and being able to increase the rents and the value of that little $55,000 investment was phenomenal. There's also another sort of a major thing going on as well in real estate in downtown areas to where there's just a lot of millennials being drawn to downtown, there's gentrification, there are all these various things going on. Don: They work on walkability right now. Bill: That's what they want. They want to live there almost as you do in Manhattan. You don't have to own a car and the real estate in those areas is going just crazy. And there's still a lot of cities that are in that early stage. And that's where Indianapolis was when I invested in this one downtown area or close to the downtown area. It just took off. So, that sparked a lot and got me very motivated to move for larger multis. Don: Yeah, you got into real estate at the right time. Donald Trump got the presidency back in 2016 and everything has changed. People don't watch for that, but they don't notice what was done but everything was changed. Regulations, the market itself, unemployment, job growth, everything had changed. And so, multifamily is appreciated dramatically because of the improvement of the economy as well. So, it's a win-win and what happened to you. So how did you get from buying a duplex into 22 units in Indianapolis? How did that transition happen? Bill: I knew at that point that I loved Indianapolis. Just seeing what it was doing a lot of good stuff going on there. So, I was looking more for like a four-plex, eight-plex something along that line didn't expect to go into 22 unit but I was looking at all places, on Loopnet which usually while we're most of... Don: It is where deals go to die. Bill: That's where they go to die. That's their motto, right? And I was just looking through it, just start making broker contacts and maybe kind of look at what markets were offering and so forth. And I came across this property that was 22 units. They were mostly studio. They were like five one-bedrooms, but I think 17 studio, and it was located in a good place between a place called Irvington and Downtown. And both areas were growing, both areas had a lot of positive things going for them as well as real estate values were rising. Don: What about students? Is there any university or college nearby? Bill: The location of it is about 10 minutes from almost everything. So, it's convenient. Some of the major hospitals, downtown is 10 minutes away. Most of the universities are in a different area, although some are probably about 20 minutes away that isn't that far. But yeah, it didn't necessarily appeal to the college crowd, but a lot of working-class people. So, I looked at it and this is where I started to freeze up. This is where I had a sort of analysis paralysis. My first major multi-family and I'm just looking at all the numbers, I'm trying to understand the market. I'm looking at everything I could look at because I wanted to make a good decision that had cold feet and as had or know if I should do this. And so, what I did is this is where I started to leverages. I had those three properties that I had initially first purchased for cash, and I did a cash-out refi to get the down payment for this property. And I finally just said, "I'm going to do it." So, I knew where I was going to get the money, I was going to do it, boom, I made the offer and it was already under contract. So, I was just ah, and it's just so upset. It's going to take me all this time to analyze this and to look at it. Yeah, I even flew out there and looked at the market, walk around, did everything. Don: There's something I got to say about the paralysis of analysis. And that's something that I've encountered myself when I got into the commercial properties. And so, I guess there are a lot of people listening to this episode right now and thinking the same. How do I overcome this struggle of the paralysis of analysis, I have come up with a few ideas to get you through. So, the first thing that I understood that I need to do to get over this is to understand that I'm underwriting twice, right? One is based on the actual on the turnkey on how I'm getting the property. And the second is underwriting what I think it could do, not what the broker says it could do, right, what I think it could do, based on the market research in the market study that I'm able to do. And then what I need to think about is whether the lifting of the property from the first analysis and the numbers is doing currently, how heavy is that lifting? Is it very heavy? Is it difficult to get it to where I want it to be? And the way to understand that is, first of all, understanding the condition of the property of the improvement itself, whatever asset class you're looking at. And the second way to do that is understanding your market which is not that complicated. All you need to do is go on a few websites and do some reading. So, when you get over that struggle, everything becomes more clear. Do you agree with me, Bill? Bill: Yeah, I do. But I also learned, at least in this process being in three different cities, is that the markets vary from street to street to street literally. I can't even say the neighborhood. Don: But Memphis is known for that. Bill: Yes, you can buy in a generally good neighborhood. But you are on the wrong street. You got this dog property. So, it's not as easy sometimes to know the market is. The numbers are all there, you can get all the data you want. Don: It's the same in Houston, Texas. Bill: Yeah. Don: I know the market. You gotta understand exactly what you're buying, at what street and the best way to do that is by going there and checking yourself and asking people. But in Memphis, and Houston, Texas, these are cities that you know, everybody's aware of that. Even if you don't know about that, you could do some research and you would find out Bill: Yeah, I think you're right there is property management team is critical. If you're looking at a good company, be in multiple areas that know the area well, they know what rents are, they know what demand is, they're working on a day today. So, getting into communication with a property manager, maybe it could be the potential property management company you would hire. That is the key, I think, for these markets and just understanding the dynamics as well. So that's a good point. Don: Yeah. But I mean, if you're investing in Florida, for instance, it's difficult to pick up deals because everybody wants to invest here because of its most growing state in the country. So, if you're investing here and you got a good deal, then most likely you're going to be good because of population growth. So even if it's a little bit overpriced, you're going to be good, because people are coming into the state always. And that's going to keep happening. And so, you are always going to have demand, which is at the end of the day, it's the number one rule of supply and demand. If you got the demand, there is still supply then you'll be fine. Bill: Exactly. And just to finish the story about the 22 units. Like I said it was under contract, but I did something I hadn't done in previous deals, and that was I let the broker know, I said, "Look, if this falls through for any reason whatsoever, call me" and boom, you'll have a check on your desk the same day. I said I'd like the property, I want to invest in it. And yeah, I just said it and I'm going about looking at other properties and so forth. Three months later, this deal fell through, the guy didn't get the funding. And he calls me up and I said, Okay, we're in it. But let's talk about the price. I was able because he was desperate, the seller had gone through back to you. And that's exactly. One deal went bad so I was able to reduce things down. After inspection, I was able to reduce things down even further. Don: That's super cool. There's something I want to say about that. I heard from a very smart man, a very beautiful sentence, "You always got to be a flame, not the moth in the negotiations." You got to let the other person come to you because when they come to you, then you control the negotiations. Right? Bill: Exactly. They negotiated not only the deal I wanted, but it was about 20% under market. So that worked out good. And close the deal and a relatively short period of time. Don: Nice. So, tell us a little bit about the numbers of that deal. So, I'm curious about how much you paid for it. Bill: Well, believe it or not, I paid $350,000 for 22 units. You can't buy a tool shed out here in Southern California. Don: We're talking about almost 16,000 units; a door right? What was the renovation prior? Bill: That was a trick on this one. I had allocated about $50,000 for renovation. It wasn't enough. But basically, what I was able to do is I was able to come in, rents were $395 on an average for the studios. And by going in there and doing some common area renovations and just upgraded significantly and some exterior stuff before we even touched the apartments, we demonstrated to the tenants that we were doing good things that allowed us to bump it up. And we were able to bump it up to about $450. Don: Were you always fully occupied there? Bill: We were in the early stages. And then later, we started moving into some sort of major renovation. And when we start getting into the units, which brought our occupancy numbers down. But to get it to that place, and I bought this in ‘16, we're currently averaging about 650 per unit now. Don: Wow. So, let me just go with the number. So almost $119,000 right? That's your gross with $450 in rent. Right? Bill: Right. Don: And so how long have you had the property since 2016? So, your gross income is $171,600. Right? Bill: Yeah. Don: What would you say your expenses are? Bill: Expenses are roughly around probably about 48%. Don: So almost $90,000 right. So that's your NOI right now. That's after three years of holding the property, right? Now, you said something about the Cap X that you calculated the repairs for each property at $50,000 like that the entire thing. What was it at the end? You said it was more. Bill: Yeah, I ended up putting quite a bit more into it. It was different here. The first three homes that I had purchased were all more within the criteria that I had initially established and that was looking for homes roughly around the 80s, 1980s and above, newer homes that wouldn't require a lot. Well, the first duplex I bought there was built in 1900. In that area, they're all old like that, but that's what's kind of funky about it, where people like it, it's these Victorian houses and people fix them up, renovate them nice and they look great. The duplex I didn't have any issues with for the most part. Everything was upgraded. They did a good job on the rehab. But this one 22 units was built in 1925. One of the things that I knew I played a lot more in Cap X. Bill: Yeah, a lot more and that was my fault going into it because all I was looking to do is cosmetics. Primarily in the units, they were all gas stove and I switched them all out to electric. I've had a rewire to 22 each unit to get electric stoves, electric heating, everything. They operate on a boiler is time. For years it was very efficient, it worked great, but it didn't make any sense for me. Then plus the one that was there was going to have to be replaced and that's could be like $20,000 or more. So, they said it's going to get rid of the boiler, I'm going to go all-electric and so on our renovations, that was probably the costliest thing that I had allocated for was electric. Don: Let's say you ended up investing about $80,000 - $90,000. Right? Bill: Probably around that. I might have to look over the three years but yeah, it's probably a little bit more than that. Don: Well, you're buying that in cash so at least you were not paying any interest and your debt was not non-existent. So, it's possible to do these things when you have cash in your hands and you can get and invest and do some work into it. But I'm impressed by the NOI that you got because you're getting $90,000 right now and used to gross $104 when you bought it. What kind of cap rate you'd say you bought it for? Was a 10 cap or 8 caps? Bill: Greater than 10. It might have been even 11. Don: And now this thing is worth probably a six and a half? Bill: Yeah, I think the market cap is right around seven. Don: So just in comparison, if you're bringing $90,000 home, NOI on a yearly basis, and we're looking at it from a seven cap respective, then we're talking about a new value of $1,295,000. Bill: Yeah, that's what it looks like just by numbers here, right. Don: Yep. If we're looking at numbers only. Even if your expenses would increase, so you have a major ticket item in front of you of repairs, let's say you make $85,000 in NOI, and we divide it into seven and a half cap, which is going to hurt the value. The more the cap rate is high. So that's a $1.13 million valuation, which is outstanding. So, you've tripled your money in three years. That's a phenomenal return. Bill: Yeah, it was an education for me for sure. Especially not having any experience in jumping into that. Don: Yeah. This is why it's always best to jump into real estate even if you don't know anything because even if you're going to lose money, it's somehow going to be alright. Because you've learned things that are going to be useful in the future, even if you're 60, right? That's what I'm getting from you, Bill. Bill: But one thing I learned without a doubt, and I studied a lot of reads a lot of books, a lot of things. But I realized that the real education begins after you sign your first set of escrow. Don: When you take action. Bill: That's it, that's when the real education begins. When you purchase that first property. Don: You can only know so much in theory. Yeah. So that's an amazing story. And I'm very happy that we had the chance to break it down here for people to see that the amounts of money that you can make as a real estate investor. I think that's terrific and I think it's good that you've discovered it now. Better late than never right? Bill: You got it. Don: And what are the best ways to connect with you if anybody wants to get in touch and get to know you a little bit more? Bill: Yeah, well, we have a podcast also. It's called the Old Dawgs REInetwork, and it's geared for people 50 years of age and older. They want to get started. There's a lot of people approaching retirement or in retirement that want that extra cash flow or they want to create a legacy, they can leave their kids and stuff. So that's all we talked about. And we have a lot of younger people listening, but we try to focus on those folks that are sort of in that latter stage. So, it's called OldDawgsREINetwork.com. And dogs have spelled DAWGS. Don: Okay, Bill on that note, I'm going to thank you for coming to the show today. We appreciate it and of course, Happy Thanksgiving. Bill: Well same to you Don. It's been a pleasure. Don: Thank you very much. Bye-bye. Bill: Bye. Lady: Thanks for listening to the real estate investing podcasts with Don and Eden. Stay tuned for more episodes. Till next time.