Brad Sumrok, founder of Apartment Investor Mastery

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Welcome to The Multifamily Investing Show, your source for market forecasting, investment, and operational strategies. Your host is Michael Becker, a Principal at SPI Advisory and a Dallas-based multifamily operator who has purchased over 10,000 apartment units and manages over one billion dollars in assets. Join us as Michael interviews the top players in the world of multifamily brokerage, investment, financing, and economics. And here is Michael Becker.

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[0:33] Michael Becker: Welcome to The Multifamily Investing Show with Michael Becker. I’m your host, Michael Becker. It’s our first episode of 2021, Episode 6. I’m excited to start the year off right. We have one of my long-time friends, Brad Sumrok, joining us today. Brad, thank you for joining us today.

[0:48] Brad Sumrok: Hey, I’m excited to be here and kicking off 2021 with you, Mike.

[0:51] Michael: Yeah. Thanks, Brad. Brad is the founder and president of Brad Sumrok Investor Apartment Investing Mastery Group. It is a multifamily mentoring program, ecosystem, and a lot of things. Brad, tell us a little bit about what you do day-to-day, and we’ll give your history and have a nice conversation today.

[1:12] Brad Sumrok: Yeah. Well, thank you. Everything started with me being an investor. I still say, “Look. I invest first, and then I teach people what I do.” My first deal was back in 2002. I bought a 32-unit building. This was after struggling in corporate America with not one degree, but two degrees, engineer, MBA. I always wanted to climb that corporate ladder and be a C-level person in the corporate world, and I never really got there.

[1:41] After considering studying for the LSAT and becoming a lawyer, I actually picked up the Rich Dad, Poor Dad book, and that book changed my life. It taught me about being a business owner. It taught me about being an investor. So, I sought out mentoring; I sought out a peer group so I could be around people that were doing what it is that I want to do.

[2:06] Eight months later, I went out and bought this 32-unit building. Within three years, I was making almost twice as much with my apartment investments as I was with my job, so back in 2005, I quit my job, and then I started doing more and more deals. Eventually, along with my wife, launched what we call Sumrok Multifamily Mentoring. We don’t go by that. That’s actually the name of our company, but it’s really Brad Sumrok, and then our programs are under the Apartment Investor Mastery name.

[2:37] Michael: When did you start your program? It was about 2012?

[2:39] Brad Sumrok: 2013 was when we did our first training event and had our first, what we call students.

[2:46] Michael: Yeah. That’s awesome. I’ve known Brad a long time. When I was a banker, I used to loan to a lot of his students at the time, and I’ve seen you guys grow quite a bit. A lot of people that are watching this might know who you are, but a lot of them wouldn’t. So, talk a little bit about your program.

[3:02] Before, when we were starting, you gave me a couple of stats. You really didn’t start tracking the kind of volume you guys did, but just give a perspective for people in 2015, which was the first year you said you started tracking stuff. Your students purchased 26 properties with a total deal volume of $140 million; average deal size about $5.4 million.

[3:26] Fast-forward to the last full non-COVID year, I guess it would be 2019. You guys did nearly 60 deals, about $790 million, and the average deal size is about $13.5 million. So, you nearly tripled the average deal size, and you almost quadrupled your deal flow. Talk about that; that’s really what I want to talk about today.

[3:50] Before we get into the growth of the program and the impact that you and some similar investment clubs have had with an impact on the market, talk about who is your average student? Where do they come from? What’s the avatar of someone that comes to you, and why are they seeking you out?

[4:09] Brad Sumrok: In the beginning, and it still is part of our avatar. In the beginning, it was 18 years ago, and it was somebody with a professional job, typically a college degree, somebody that makes, back then, a high five figures and six figures now. Of course, with inflation, it’s a six-figure income earner. It could be an engineer or accountant, maybe a doctor or lawyer. But somebody, like I was 15 to 20 years ago, that just wasn’t where they wanted to be financially.

[4:41] To me, it’s all about financial freedom, and then the vehicle was apartment investing. I think apartment investing is one of the best ways to become financially free from the cash flow, the upside, the tax savings. Again, the avatar is somebody that is what Kiyosaki would call that corporate rat race that wants to get out.

[5:00] It expanded, though. Now, we’ve found there are a lot of people that are already doing real estate investing. So, anyone that is already doing real estate, I’d like to have them look at the benefits of multifamily real estate because just like you, Mike, and you and your company have what – 8,000 or 9,000 units? I lost track.

[5:19] Michael: Yeah.

[5:19] Brad Sumrok: You’re a smart guy. You probably analyze a lot of different types of commercial real estate or real estate and honed in on multifamily. People are out there doing single-family or small multi-units, duplexes, fourplexes. My message to them is simple: you don’t have to start out small. You don’t have to graduate from single-family or duplexes and fourplexes to multifamily property.

[5:44] Those are my main students or people that are doing small multifamily or maybe single-family and want to go bigger, faster. Or people that have a good job. They have some money saved, and they have aspirations to get out of corporate America.

[5:56] Michael: What does the program look like today? I think I might have gone to one of your first events you ever did when you launched your program in 2013. What did it look like then, and what does it look like now as far as the number of people, average deal size? As I mentioned, it has tripled, basically, in the time you’ve been doing it. Why is that? What’s has happened in the growth of your company over the last eight to nine years?

[6:20] Brad Sumrok: I look at it like a snowball rolling downhill. Since the beginning, our programs are essentially the same, except we’ve added more content; we’ve added some higher-level programs; we’ve added the Master Mind. But, in a nutshell, our programs are designed for two types of investors.

1. They’re designed for people that want to be passive investors.

[6:49] I know a lot of passive investors are like, “I just want to invest. I don’t want to be educated.” But I think the best investor is an educated investor. Then when we look at the whole SEC requirements, if you’re a non-accredited investor, you need to be sophisticated. Our passive investor program, which we call the Foundations Program, is designed to enable people to become sophisticated investors, enable them to make intelligent investment decisions for themselves and their families.

[7:16] So, whether it’s myself, or you, or someone out there, or one of my students that puts together an offering and puts it in front of them, they understand it. They know what a cap rate is, and they know what vacancy rate should be, and they understand bad debt, and they understand NOI, and debt-service coverage ratio, and all those types of things.

[7:36] A lot of people, as you know, just invest in things because they meet somebody, and they like them, and they trust them, and that could be a disaster. So, by understanding all the foundational concepts of apartment buildings, they’re able to be a better investor. That’s part of my program.

1. The other, people that want to put together deals, is a syndicator.

[7:55] As you know, syndication is a way to group money together in an SEC-compliant fashion and buy bigger deals that have more control, make more money, and help more people. I would say half of my students that come in want to be passive. The other half that come in are ready to go and start syndicating deals.

[8:16] I already said half and half, so that leaves out anybody else, but there is a percentage of people who want to do their own deals. There are some people who just don’t want to syndicate, so they come into the program too, and the MI team will personally work with them.

[8:29] And there are a lot of people that start off as passive, and then they realize that the people they’re investing with aren’t any smarter or have higher skill sets; they just made a different commitment that they said, “Instead of my being passive, I’m going to be an active syndicator. I’m going to be a general partner of a deal. So we have a lot of people who start as passive and then ultimately end up syndicating and putting together their own deals as a GP.

[8:52] Michael: You guys started out in 2013. Like I said, your average deal is $5 million, give or take. Now, the market has really grown as part of that. As I mentioned, the Investment Club has been changed and revolutionized the workforce housing space of our industry, and I view you almost as the center of the bullseye when it comes to the Investment Club space.

[9:16] I don’t mean to make it too generic for the Investment Club, but the mentoring program – and it’s really not so much the education that you provided, but it’s providing a platform or the ecosystem, as you call it, where you get a lot of passive investors, sponsors, and the various vendor from debt to property management to all the various vendors that it takes to put one of these deals together. You put it in a common place for people, and they’re able to come in and have – not quite a turnkey solution, but everything they need to get a deal done is located within a room. That has allowed these people to do bigger and bigger deals.

[9:54] I don’t know if you maybe have an example of one of your students (I’m not going to say name names) that started out a few years ago doing something a little bit smaller, and then where that has progressed. It might be a good case study of what’s really changed in our marketplace, in general.

[10:09] Brad Sumrok: Yeah. Mike, you hit the nail on the head. My vision, when we put this company together, was to – because I’ve been investing. I know what it takes to put a deal together. So, yes, we offer mentoring, but so much more. My vision and what I think we’ve done successfully is to identify everything somebody would need to be a successful, multi-family business owner, business operator, and bring that into the Sumrok program.

[10:39] So, we’ve don’t that, whether it’s the capital raise, mentoring, underwriting, tools, checklists, a source of equity, a source of debt, the relationships with brokers, relationships with providers so that somebody that’s new or relatively new, or doing smaller deals could come in and level that playing field and be taken seriously by the brokerage community and by the selling community.

[11:05] A great example of just in a few short years: one of my student’s first deal was a $5 million deal. It was a C Class. It was right here in East Dallas. I think their first equity raise was maybe a million-and-a-half dollars. They were very nervous about raising that kind of money.

[11:23] Michael: That’s a lot of money.

[11:24] Brad Sumrok: Seriously, if you’re new, where else do you get a million-and-a-half in equity? We were able to leverage the relationships that we had with the broker, and they awarded it to us, or my students, in this case, as a first-time buyer group. They’ve done nine transactions now in the last four months. The last time I heard, they shared with me that they’re making $42,000 a month. By the way, their net worth went up from about a million dollars to over six-million dollars. Their most recent deal was a $33 million dollar transaction that they just closed at the end of 2020.

[12:02] That’s a progression that is possible, and that’s not a unique situation. Another student of mine, her first deal was a $4 million deal. She did a million-dollar equity raise. Fast-forward over four years, her most recent deal was $42 million dollars. So, within four years, she went from doing deals under $5 million to deals over $40 million.

[12:26] Michael: To your point, especially in Dallas/Fort Worth, we’re now growing, and we’ll talk about that a little bit. It’s been a large percentage of the workforce housing deals that have traded are students of yours. It’s been a big impact. I don’t know the exact percentage, but enough to move the needle.

[12:45] You’re pretty well known here in Texas, Dallas/Fort Worth, and now the majors have grown there. You are based here. Your company is based here. This was the first market that we had a big impact. As we were about to record, we were talking about that we both recently saw an article where Dallas/Fort Worth has taken over from New York City in 2020. It just took over in 2020 as having the most transactional volume in commercial real estate.

[13:09] I’ve always thought of Dallas as the center of the multifamily universe, and maybe now, we literally are the center of the multifamily universe. You have had a big impact within our marketplace, but if I’m out in North Carolina or the Midwest somewhere, I might have never heard of you, but now you’re starting to see some of your students in Phoenix and Atlanta, and maybe some other markets. Talk about the growth of the geography of your program and some of the impacts of some of the markets you actively have students buying deals in.

[13:40] Brad Sumrok: Again, I started in Dallas. I didn’t do research and say, “I’m going to locate myself in Dallas because this is the best place to be. I was in Dallas. I started my investment career in Houston. I moved to Dallas in ’08 and started buying in Dallas. I don’t believe things in life are a coincidence. I believe I was here for a reason.

[14:07] The point is, we started in Dallas when we launched our company in 2013, so I believe I know Dallas as well as anybody, especially the B and C Classes. When we started, we were basically buying deals in Dallas and a little bit in Houston and Central Texas. We dominate Dallas. Dallas is the #1 market for apartments. We’re #1 Workforce Housing Buyer Group, the Sumrok Group.

[14:36] We are very well-known in Texas. You mentioned Phoenix, Atlanta, and the suburbs around Atlanta, Jacksonville, Orlando, Tampa. We’re well-known there. I have deals in Jacksonville. I have deals in the Tampa Bay area. I’ve owned property myself in Colorado Springs, and now we have students that buy in Denver and in Colorado Springs. Those are the markets that were well-known.

[15:01] If you think about it, Mike, 95% of deals are traded through brokers. I know your audience isn’t necessarily the newbie audience, but if you are a newbie and you’re listening, this isn’t a no-money-down type of deal. We’re buying businesses: 10, 20, 30-million-dollar businesses.

[15:23] It’s all about the relation of the brokers. So, where I’m going is brokers now in North Carolina that are with CBRE, New Mark, The North Mark, Marcus & Millichap are learning about us through our relationships with the brokers and the markets where we’re very well-known. Now, we’re leveraging those relationships to penetrate new markets because Sumrok students are all over the country. That’s how we’re doing it.

[15:49] Michael: if I’m a first-time aspiring apartment owner, what are some of the challenges that they face that you’ve observed over and over. Are there any common things, common concerns, or fears that these people have that you guys help overcome? Talk about that a bit. How do you get your first deal done?

[16:08] Brad Sumrok: There are so many I could think of. One is the mindset. One of my students that I can think of has done a bunch of his own deals, but he’s never syndicated a deal. So, you can tell he has a lot of experience buying apartments and managing them. He’s never used other people’s money in a syndication. That’s what he wanted to learn, and he was blown away because he was like, “Brad, I came to your event in December, and even though I have 600 units of my own, I met people that are raising $10 to $12 million on their first or second deal, and it blows me away how confident they are.

[16:47] So, part of it is the mindset. For me, the mindset was, “I’ve got to get a job and work hard, and get good grades, and climb my way up the corporate ladder.” There are people that have been taught they should start with a duplex or fourplex, for example. Then they listen to me, and not only to me, but also my other successful students, and they could walk out of one of my weekend training events thinking, “I’ve got to think bigger.”

[17:12] So the mindset is one, but once you make that decision to be an apartment investor, which I think is a major step to success, by the way, is just making that decision. Then you have challenges like where do I get the equity? People always say, if you have a good deal, the money will come. Well, try raising $2 million when you don’t have an investor database, or you don’t have a track record. The money doesn’t necessarily come unless you can surround yourself with people that are ready to invest that are educated. So, we’ve solved that problem.

[17:45] Say you’re buying a $10 million dollar loan. You’re going to need $3 million of equity, so we’ve solved that problem by putting together hundreds and hundreds of people that want to invest. We solved the debt problem. You go out and get a $7 million dollar loan. You need net worth and liquidity requirements. A lot of these syndicators buying a $10 million dollar deal don’t have a net worth of $7 million where they could be the sole guarantor on the loan, so we could combine people to be loan guarantors.

[18:14] I don’t make these introductions. I just facilitate the networking events. So, through them participating in the in-person, and now our virtual networking events, they can meet each other and build investor databases, build up loan guarantors, meet providers, meet people who can do their loans, do their legal, get their insurance, and everything they need.

[18:38] Then, of course, there’s my team and me that hold their hands through the process: mentoring, underwriting, a second set of eyes. All those things are parts of the problem. To answer your question, securing the debt is an issue for people, and we’re able to help with that by meeting lender requirements and having multiple guarantors on a loan.

[19:05] An example was, I just had five students team up to be GPs, so there are five GPs. They have 147 investors, but they took down like a $36 million deal, and they needed to have a combined net worth of $25 million. They have seven or eight people that are loan guarantors that are able to make that up. We’re able to assist with that problem.

[19:34] Then, just the peer group. Tony Robbin says, “Success leaves clues.” I don’t know who else said, “You become like the five people that you spend the most time with.” So, by immersing yourself around people that are doing what it is that you want to do, that confidence is going to rub off, but also the content, the roadmap, and the blueprint, so that not only are they getting that blueprint, that roadmap from my team and me, but they’re getting it from the other people in the ecosystem.

[20:05] Michael: You’ve been around a lot of people. You’ve seen people succeed. You’ve seen people be less successful. What common things do you see from more successful investors? What do they do – people that maybe aren’t as successful or fail in this business? What are some of the differences in the way those two different groups act?

[20:23] Brad Sumrok: I think one is, focus. I know that is one of the things that I like to think has led to the level of success that I’ve had, which is, we say no to a lot of things. I call it Shiny Penny Syndrome. So many people come to my events; they get excited; they start underwriting deals. We’ve had people that got their first deal closed within three months, but sometimes it doesn’t work that way. How many deals do you look at, Mike, before you can buy one?

[20:57] Michael: Dozens and dozens.

[20:58] Brad Sumrok: Yeah, and there’s no rule of thumb. I’ve never going to say you need to look at 100 deals to buy one. I have looked at three deals this year and bought one. But the most focused you are, the most honed-in you are, then when you find something you like, you go after it harder than anybody else.

[21:14] But also, focus meaning like – I have very few successful students that are doing five things besides multifamily, meaning they’re not opening up a jewelry store. They’re not owning carwashes. They’re not doing self-storage and then doing multifamily. Most of my successful students made the decision to be honed-in, and dialed-in, and focused on multifamily. That’s #1.

[21:43] I think #2 is that they partner, whether it’s an informal partnership, say with a management company or a lender or a lawyer. But they’re not out there shopping for every loan they do. They’re not out there shopping for all the different providers. They meet people that they know can get them to the finish line, and then they build up this relationship because relationships matter in this business.

[22:10] Michael: For sure.

[22:10] Brad Sumrok: Especially when things are tightening up. Loans need to get done, and things need to get across the finish line, so those relationships matter. It’s the people that understand the value of relationships that focus, and they also realize that talking about partnering too is when they do form partnerships, they’re forming partnerships with people that have complementary skill sets.

[22:38] If you’re a good promoter and capital raiser, you’re not going to want to partner with somebody that a great promoter and capital raiser. You’re going to want to partner with somebody that’s a little bit more focused on the nuts and bolts of the deal. I was talking to a friend of mine, and I don’t mind saying that he’s a friend of Grant Cardone. I think everybody knows who he is, and everybody knows him for Cardone Capital and all these deals he’s putting together, whether you love him or hate him.

[23:05] Everybody knows Grant Cardone, but one of the things he told me is he’s got a partner in Cardone Capital, and nobody even knows his name, but that’s the guy that does all the technical stuff and the asset management once they close the deals. So, Grant’s strength is out there promoting the deals and raising the money. So, I think it’s important to identify what you bring to the table, and as you form business partnerships, you partner up with people that have complementary skill sets. I’m sure you have some examples of that in your own company.

[23:36] Michael: Sure. It wasn’t as well thought out as I would have liked it to have been at the beginning, but it’s exactly how I set my business up. My partner, Sean, is very analytical and a genius when it comes to chopping up numbers on our varying deals where he’s not the promoter or the marketer.

[23:50] Not that I’m Mr. Outgoing here, but I’m at least competent and capable delivering the message out to the marketplace. That’s definitely something I’ve observed when people that are a little bit more successful tend to partner-up, scale. It’s a team sport. As we all like to say, you can’t do everything on your own. You need to rely on your vendors, your management partner, whether that’s you or when you’re vertically integrated or getting a professional by the management company, lawyer, lender, all those people, and a roster of past investors if you’re going to be a deal sponsor [crosstalk].

[24:25] Brad Sumrok: I imagine you had to do all that yourself. I imagine one of the things that you do really well is – promoter doesn’t just have to mean being a bad-ass on social media, but it’s networking. It’s like you love to go to networking events; you build relationships with brokers. Everybody knows who you are, and they know what you can do, and they know what you’ve done. So when there’s a deal that becomes available, you’re probably on the top three of the list to say, “If this is in Becker’s wheelhouse, then this is the deal Mike’s going to want to look at.” Right?

[24:56] Michael: Great. Yeah.

[24:57] Brad Sumrok: That’s a skillset, and if you had two other business partners, and you were all at the same networking events, but nobody was tight on the analysis, the underwriting, the budgeting, and all that kind of stuff, you wouldn’t have a successful organization. So that’s the key, which is finding complementary skillset people to partner with, being extremely dialed-in or focused. You don’t have to say no to everything, but you can’t be – I don’t want to say you can’t be, but multifamily investing needs to be in your top two or three things that you’re doing with your life.

[25:35] Michael: What risk do you see in today’s marketplace? We just came off of a very choppy year, a very uneven year. Maybe before we get to that, maybe anything that you’re reflecting back on 2020 now that we’re into 2021; any lessons learned from 2020, and how are we going to apply those going forward in 2021?

[25:58] Brad Sumrok: Lessons learned. It’s funny looking back, and people ask me a lot, too, about some of the biggest mistakes I’ve ever made, and one of them was not buying more. I look back and say, “The world shut down in the middle of March;” basically, the whole world shut down.

[26:18] In our Q1, not just for me personally, but in our event mentoring company, we’ve been in supporting our students buying deals, our Q1 was on pace with 2019. Our Q4 was on pace with 2019. It’s those two quarters in the middle, and things shut down. A lot of things shut down because sellers were hesitant to sell because buyers, at least in my view, wanted a discount.

[26:46] What happens is, when there’s a lot of uncertainty, the majority of sellers looked at their numbers and said the first three months of April, May, and June, most sellers saw very little change to their financials. I’m sure you can concur on that.

[27:02] Michael: Very much.

[27:02] Brad Sumrok: Maybe 1% or 2%. Right?

[27:04] Michael: Yeah.

[27:05] Brad Sumrok: As we know in multifamily, these properties are valued by income. So if your income stays the same, why would you sell at a 10% or 20% discount? But there were a lot of buyers out there because of uncertainly. Not because the numbers changed, but because their confidence changed, and then they started hedging against, “Well, what if this goes on for another two years.”

[27:26] Then there was the whole election wildcard. Now, that election is behind us, but the pandemic still isn’t behind us. To me, the lesson learned from 2020 is the fundamentals for apartments hasn’t changed. One of the lessons I’ve learned from 2020 is just how resilient multifamily really is. Hotels: no. Office: no. Retail: no.

[27:53] Then, if you look at some of these other businesses like restaurants and things like that where some people’s life savings have been wiped out, all that money from these other commercial assets like office and retail, a lot of that capital is now pouring into multifamily. So, I think the demand from multifamily, from the investor’s side, is higher than ever before, but also from the supply and demand of the residence.

[28:19] What happened with construction during the pandemic? Did it increase or decrease? It decreased, so there are less projects coming online. And prior to the pandemic, there was a shortage of housing, especially workforce housing. Now, that shortage – there’s an exclamation point on it, and that shortage to me, now, has now moved into the A Class.

[28:46] The A Class was traditionally something I would avoid because 1) I was less familiar with it. 2) You could go out and build an A Class property, but you can’t build a C Class property. Or nobody builds C Class properties. It’s not that you can’t build one, but nobody does. The economics don’t make sense.

[29:04] But now, I think there’s a play to be made in the A Class as well because construction is halted. You look at a market like Houston or even here in D/FW. How many projects have been sidelined or not started or just delayed, and now these new inventories are going to come on, and instead of in 2021, they might not come in until 2023 or something like that. So, I think the fundamentals of multifamily are super strong.

[29:31] Michael: It’s not just the product grades I’ve talked about many, many times, and you predominantly historically, like you said, focus on workforce housing, your C Class, and your B Class. But it’s not just that. It’s like the geography. Where are you putting your best million dollars to work?

[29:44] In the markets you mentioned, Phoenix, Atlanta, Texas, Florida, those are high-growth markets. Those are population in migration, jobs in migration markets, landlord-friendly, business-friendly. I know that’s part of what you teach like a successful recipe is to invest in markets like that, not in California, not in New York.

[30:07] But it seems like the virus has accelerated these trends that are already going on, and the migration of jobs and people are going. In Texas, alone, in the last month or so in 2020, it was Oracle, HP, Tesla moved to there as well, so all these big corporate reloads were coming from California to Texas, and the jobs and the money, and all that’s going to flow here, which will further drive the demand for what we do, which is housing, which is pretty great. If you do see a risk in the marketplace, I don’t know if it keeps you up at night, but what do you think about as the biggest risk as we’re entering 2021 right now?

[30:50] Brad Sumrok: I think the biggest risks are, unfortunately, things that we don’t have control over. One is the political climate. I believe the election results are clear. I’ll also state that it’s not how I would have wanted it to go. I think that Trump would have been better for real estate investors, just for the business climate and the taxes.

[31:17] Look. I’ve been doing this until 2002. I made money under Obama. I made money under George W. Bush. Did great under Trump, and we’re going to do great under Biden. But there’s still some uncertainty. What’s Biden going to do? Just in December of 2020, another stimulus package was passed. Now, Pelosi’s already saying, “There’s going to be another one in March. This is just the beginning. Wait until January 20^th,” which is in a few weeks away.

[31:47] Is there going to be another stimulus package? Is there going to be any rental assistance? Is there going to be another eviction moratorium, which, by the way, has had minimal impact on our operations? The whole uncertainty as far as what are they going to do, and how is it going to impact our business? That’s a remaining risk.

[32:07] I think the other that coincides with that is just the pandemic? Are we going to have four years of masking and social distancing and virtual business, or are we going to get back to normal within a few short months? Again, my preference is that we get back to normal in a few short months. And I’m not bashful about saying that.

[32:25] So, those, to me, are the main risks. But the risks are for me, personally – and I want to be able to say this. I’m doubling down right now. One of the mistakes I made in the past is being a little too conservative on my acquisition strategy. So, I’m doubling down. I’m putting my money where my mouth is, and in December, I just closed a $13 million, 152-unit property in Fort Worth that I bought mainly with just my wife and a few other investors. That deal is a great deal. And, I’m sure you know that I’m doing my first $100 million deal that’s closing in just a few days, so it’s $122 million in Houston. It’s A Class. The biggest property I’ve ever bought, and I’m personally putting $800,000 of my own equity into that deal.

[33:23] I believe, and my mentors believe, the people that I hang around with – by the way, I hang around with people like you. I hang around with people that have 10, 15, 20,000 units. Most of these people are doubling-down right now because they know the industry; they know the market cycles; they see the trends.

[33:43] We’re not doing that in every market like you mentioned, but we’re doing it in markets that make sense. We’re doing it in Dallas; we’re doing it in Houston; we’re doing it in the Tampa Bay Area. You look at the migration patterns. You look at where people are moving to. You look at where jobs are being created, and there’s a shortage of housing in these markets.

[33:59] Michael: One of the things I struggle with, and I know you do as well, is making sure you’re entering the market at a good time. But I heard a quote a long time ago, which I reheard it again recently from Warren Buffett, is people shouldn’t worry about timing the market; it’s more about time in the market, and that could be never more true than in what we do investing in multifamily.

[34:21] Time cures a lot of these problems or mistakes, or you just wait long enough. If you’re in the path of progress, you’re in these markets like we talked about, you fundamentally set your business up right, the rent always goes up. Over the long periods of time, when it goes up, there’s an inflation that comes in and helps it out.

[34:40] My tenure of doing this has certainly been the case. We’ve had the wind at our back, and it’s been an unbelievable run, so I’ve been through a lot of what saying. We’re trying to be even more aggressive. We buy over 10,000 units in my career now. We’re trying to buy – I wish I would have bought more, so we’re going to try to continue to buy more.

[34:56] As we start wrapping up here, maybe another way of asking our last question – you talk to a lot of first-timers. What are some fears that people have that you think are misplaced when they’re afraid of buying a deal or afraid of the marketplace? What are some of the misplaced that you commonly hear?

[35:14] Brad Sumrok: The two big ones, and they go hand-in-hand, are the price-per-unit and the cap rates. Price-per-units, “Oh, my gosh, you’re paying 85 a door or $100,000 a door.” Like you said when we were talking, the property that we bought eight years ago for $30,000 a door, the rents might have been $450 a month, and now they’re $880 a month.

[35:40] So, if you just do the numbers – just do the numbers, and if you take the rent times 12, and you look at the income, the incomes are up by the same factor as the price per door. So that $30,000 a door property is now selling for $90,000, you’re getting similar returns. The other thing in our favor is that interest rates are so much better. Eight years ago, buying the property for $30,000 a door, we were getting a 6% interest rate.

[36:11] Michael: Amortizing.

[36:12] Brad Sumrok: Yeah. No interest, no way. My first deal I bought in 2002 was 6.4% for $30,000 a door. Now, this was 18 years ago. Now, that deal might sell for $80,000 a door, but you get a Sub 3% loan, maybe interest only for three to five years. Your rate of return, your cash return potentially is even better now than it was before. I don’t look at price per door and acquisition cap rate. I look at them. Whenever I’m saying these things, you know what I’m thinking, Mike?

[36:50] Michael: What’s that?

[36:50] Brad Sumrok: You know how the politicians take soundbites and cut them off? Like, somebody could take a soundbite and say, “I bought a 13-unit property.” I don’t look at cap rate. Well, of course, I look at cap rate, but I don’t look at it as much as maybe other people. I think, at the end of the day, what you want to look at is every deal I do, I analyze based on a five-year hold with a sale at year five, so I have an apples-to-apples comparison. I look at what is my cash return? What are my sales proceeds? What is my tax savings? I have a simple property analyzer that helps me make decisions based on return.

[37:32] Then, the 152-unit deal – not 13-unit – but the 152-unit was $13 million that we bought, and this is just a good example. I was presented with two different deck quotes, and one had higher loan proceeds, but it had only two years of interest only. The other had about a million dollars in lower loan proceeds, but it had five years of interest only.

[37:53] So if I was tight on equity, I would have gone with the higher loan proceeds, but because I have equity sitting in the bank that’s earning nothing, I went with the program that gave me five years of IO because the cash return was higher, the five-year internal rate of return was higher, the total return was higher. So, by every metric, the return was higher to get maybe a little bit lower loan proceeds and have the five years of IO.

[38:23] Michael: Besides looking forward to maybe buying some more assets personally, what else are you looking forward in 2021? What’s on the horizon for you and your program?

[38:32] Brad Sumrok: Well, 2020 was a pivotal year. As you know, our program historically does live training events. Just think Tony Robbins and all these other people.

[38:44] Michael: 500 to 600 people in a hotel ballroom. Right? That’s what you have certainly done.

[38:47] Brad Sumrok: Yeah. Three to five times a year would get 500 to 800 people. Our largest event was 1,100 people when we bring in national speakers. So we, obviously, went through a virtual model. I think we’ve been really successful in that. We learned what to do and what not to do, and we learned how to deliver our content and add value.

[39:12] Virtually, and at first, it scared the **** out of me, but now, it’s actually fun, and we found a way in which we could interact with people from their homes and deliver the same or maybe – I don’t want to say a better experience because the live events are an amazing experience, but we’re able to bring a great content in a true interactive experience, which transcends a typical Zoom meeting.

[39:40] Nobody wants to watch an event on a Zoom format for eight hours, two or three days in a row. So, we’ve been able to figure out how do we bring people in using technology to make it more interactive as if they are in a seminar room? That’s what’s coming for 2021. We’re going to continue to do that, and even if and when things get back to a timing where we can do live events, we will be. In fact, we did a live event in December of 2020 to finish off 2020.

[40:12] But 2021 will be a combination. We’ll be doing live events, and we’ll be doing virtual events. That’s one of the things I’m excited about. Just like in multifamily, like leasing, people went from doing physical leasing tours to virtual tours. Well, that’s here to stay. So the virtual stuff is here to stay, but now the game is, how do you make that virtual experience – for lack of a better term, how do we monetize it? How do we make it just as profitable as a live event? Or in the apartment business, how do we have a virtual leasing experience, have the same conversion rate as an in-person leasing experience? And I think that’s where we’re at right now in the industry.

[40:56] Michael: So, Brad, I’ve been doing this a very long time. I’ve known Brad a very long time. I’ve personally seen numerous people that have taken his program starting with zero experience, learned what they needed to learn, formed relationships, and become very, very successful doing multi-million-dollar deals repeatedly.

[41:16] So, I’ve personally seen it with my own eyes. Certainly, if anyone’s looking forward to learning more about this business, or you want to aspire to be like me one day, form a company and start and buy larger-scale deals, I certainly encourage you guys to look up Brad. Reach out to him and try to take one of his introductory programs and see if this might be a fit for you or not.

[41:38] Brad, if people want to know more about you, find out more information about how they can learn about how to work with you, what’s the best way? Give the viewers a couple of resources.

[41:47] Brad Sumrok: Yeah. The best way is to go to BradSumrok.com. (There’s no c in my last name.) I’d also like to say, Mike, and in all due respect to many other programs out there, unlike yourself or some other people, I don’t have a podcast – not yet. I’ve been thinking about it for years.

[42:08] Michael: It’s a lot of work.

[42:09] Brad Sumrok: But another way to find me is, there are so many podcasts out there that interview people that started out and did their first, second, or third deal, and the vast majority of those people are on other people’s podcast are actually my students. That’s been a win-win for them.

[42:28] They come into my program. They get a lot of success. And one of the things I’ve found out is that people don’t just want to make money; people want to be the authority; people want to be famous. People love being famous. People love being well-known. So not only are my students out there making – we’ve helped over 190 people increase their net worth by a million dollars since I started tracking it.

[42:50] But not only that, many of them have been sought after to be speakers at events, and guests on podcasts, and stuff like that. So we’re not just helping people make money, we’re helping people – hey, there’s nothing wrong with wanting to be well-known and be famous. So, yeah. If you watch other podcasts, a lot of the people being interviewed right now are my students, so you could track them down and ask them: how did you get started in the business? Did you have a mentor? Who was it? Was it the person that interviewed you, or was it somebody else? BradSumrok.com. Of course, we do a lot of advertising and Google and things like that. That’s the best way to find me.

[43:32] Michael: So go to BradSumrok.com with no c. For Brad Sumrok, I’m Michael Becker. I appreciate you guys watching. We’ll see you guys next week.

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[End of Episode 6 – 43:55]