A Decade of Experience in Multifamily
On this episode of Next Level American Dream, Abigail and Sean are joined by Tim Bratz. Tim is the CEO of Legacy Wealth Holdings and has been in the industry since 2009. He has focused on wealth and personal development throughout his professional career and recently created his own children's personal development books, Little Legacy Library. Today, he discusses his approach and experience in the multifamily field.
Key Topics
What do you think is holding people back in terms of single-family moving into multifamily?
How are your deals structured?
How do you pay off a commercial loan?
What is the best advice you would give someone just starting out in multifamily?
Connect with Tim Bratz:
facebook.com/tlbratz, @timbratz, www.legacywealthholdings.com, www.littlelegacylibrary.com
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SUMMARY KEYWORDS
Multifamily, deals, money, buy, pay, years, refinance, property, people, apartment building, create, investors, business, sell, stabilized, portfolio, American Dream, real estate, build, bigger
SPEAKERS
Tim Bratz, Sean Thomson, Abigail Thomson
Abigail Thomson 00:01
Welcome to the Next Level American Dream Podcast brought to you by Thomson Multifamily Group. Your hosts, Abigail and Sean, will discuss how you can take your American Dream to the next level, through real estate investing, business practices, and personal development. Join us as we share our experiences as a father daughter duo who are trying to accomplish our goal of financial freedom. We hope you learn more about how to define and achieve your American Dream. Here's another episode of Next Level American Dream. Hello, everyone! Before I talk to you about our episode today, just a quick reminder to subscribe if you haven't already, and please like, comment, rate, and review on your favorite platform. Today, Sean sat down with Tim Bratz. Tim is a CEO of Legacy Wealth Holdings and has been in the industry since 2009. He focused his career on wealth and personal development and recently created his own children's personal development books, little legacy library. Today he discusses his approach and experience in the multifamily field. If you learn something from our episode today, please recommend this show to a friend and help us grow. For more information on our sponsor, Thompson Multifamily Group, visit: www.thomsonmultifamilygroup.com to start taking your American Dream to the next level through passive investing.
Sean Thomson 01:28
Hi, Tim, welcome to the Next Level American Dream Podcast! Thanks for being on the show.
Tim Bratz 01:33
I'm excited to be here, Sean. Thanks for having me, man!
Sean Thomson 01:36
Yeah, thanks again for being on. I'm going to tell a little story about you've already heard this once. But I'm gonna tell a little story about how you impacted my decision to move into multifamily. You know, about three years ago, I was kind of struggling with my single family business and wanting to move into something more. I've always wanted income for my family and my my business. And one day at a time with single family was just getting so frustrating. I kept asking myself, there's got to be a better way to do this. And I started investigating multifamily, and heard Corey Peterson talk and tell his story. And then I heard your podcast with Greg Helbeck on page of a podcast. And after that I was hooked. And I completely committed myself to moving into the multifamily business, I started shifting my single-family business over that direction. So, I wanted to just let you know, too, that that that podcast for me was a critical sort of time for my decision-making time to go into multifamily. So, I really appreciate you doing the pockets with him and and convincing me to kind of move in that direction. So, thanks for that.
Tim Bratz 02:34
I love it. Man., I love those kinds of stories appreciate you sharing that with me. It's kind of, again, the stuff that feeds the soul. You know, it makes me feel really good about what we got going on and inspires me to share my story a little bit more, because I can promise you, if some kid from the suburbs of Cleveland, Ohio can do this, anybody can do this. So, there's a lot of wealth out there. And there's plenty of it for all of us.
Sean Thomson 02:56
Yeah, well I appreciate it. And it was really good. It was a really good show for me so well tell people a little bit about your journey in getting into multifamily where you come from what you where your kind of how you got kind of got here and what you guys have gone on today.
Tim Bratz 03:09
Yeah, well, I'm a kid from Cleveland, Ohio, raised in the suburbs. My dad was a cop. My mom was a stay-at-home mom. So blue collar family, one of four kids, and was always, you know, motivated kind of by money. And so, I had some entrepreneurial endeavors. When I was in high school, I'd make mix CDs, and I'd cut people's hair and I started a painting company. When I was in college, I painted houses in the summertime. And then I interned for this. And I was going to college. Oh 3207. So, this is when the markets going crazy. Everybody's making money in real estate, you got a pulse, you can make money. And I interned for a big home builder at that time and realized like I wanted to be involved in real estate. So, after I graduated from college, I moved out to New York City, just kind of on a whim. And I got a job I thought you got involved in real estate by becoming a real estate agent. So, I got my real estate license and ended up parking it with a commercial brokerage that did a lot of like retail leasing and investment sales and office leases and that kind of stuff. So, I brokered a few leases over the course of about a year that I worked there and just realized I need to be owning real estate not brokering real estate, I saw, you know, as I was brokering these leases, you do the math on how much residual income the landlord is going to create by brokering one lease, they're going to get paid on the next, you know, 510 15 years on this lease term. And I'm like, what am I doing? I need to be doing that, right. And so, I realized it was, you know, a 22-year-old kid in New York City and couldn't afford anything there. So, I decided to move down to Charleston, South Carolina, want to move down to Charleston, got involved in residential real estate and so this is 2008 2009. Now the market crashes. So, every running for real estate I just showed up to the party and everybody, you know, run out the back door, and I was like what somebody's going so it was It was cool because prices were so cheap. Everything was like fire sale, you could buy whatever you wanted on the MLS for, you know a fraction of what it was selling for even 12 months prior. And that was cool. The problem was, nobody's investing in real estate because everybody's saying run from real estate, like the whole reason for the recession was real estate. The second thing was, nobody's going to lend money to a punk 23-year-old kid, and nobody's going to lend money to somebody who's never done the deal before, right? So, I had three things working against me. And I just kind of had to get creative on this thing. And I think that's kind of one of the one of the attributes that's helped me really, you know, have the success that I've had is, I had this resourcefulness kind of thing. When people say, Hey, I don't have the time, I don't have the money or the knowledge, I don't have the resources. If you're resourceful, you can find those resources. And I've always asked myself questions like, how can I get the money? How can I get the knowledge? How can I take down this property? And that led me down like this trail of more questions and better answers, and, and solutions to those questions. And so I ended up contacting my credit card company got them to increase my credit limit. And I bought the house, my first house in 2000, was April 2009, on my credit card, and I physically flipped it myself, I did all the work, I painted it, I changed out carpet, I changed out light fixtures, it was a piece of crap, and I just really put lipstick on a pig. But I was able to turn around, I sold it to one of the neighbors within 110 days, and I made like 13 or $14,000 on a deal. So I was like, you know, numbers run for real estate, saying like, nobody can make money in real estate, I just made money on my first deal ever. And so I did it again. And again, then it kind of got into wholesaling. And then I started meeting people who were still buying properties. And they had maybe access to cash, but didn't have any more bandwidth to take on more deals. And so I ended up you know, finding my first private money lenders, they said, Hey, I'll bring the money, Tim, you do the work. And then we'll split it up. And so started accumulating a small rental portfolio of single family houses. And you know, at 25 years old, I had 10 units, and I wasn't rich, but I was financially free, my monthly expenses exceeded my I'm sorry, my monthly residual income exceeded my monthly expenses. And I thought I got this thing figured out. So then I start chasing some shiny objects, I start, oh, I could I could go and start another business and do this. And then I sold some real estate to go start another business. And another business just completely crumbled. And it was not a very good steward of capital back then. And so I found myself in in August of 2012, completely broke at 80 bucks in my bank account, I had $25,000 in credit card debt, I had to borrow money to make the minimum payment on those credit cards, I had to borrow money to make my house payment. I was selling furniture in my house on Craigslist to try to just be able to put food on the table. And that was a pretty crappy position to be in. But I was able to get out of that because I sold my house real estate save me. And so I sold my house down here in Charleston and had moved back to Cleveland, Ohio. And that moved back in with my parents at the age of 27. And so I was able to pay down a little bit of credit cards pay back some of the debts that I owed, and just really press the reset button started again. And I reached out to some private money lenders that works in lending and real estate, they put up some cash. And then I went to work, you know, and built up a portfolio over the next three years of around 140 units. And that's really when I started getting into multifamily. I bought my first multifamily around Christmas of 2012. And a little eight unit apartment building, again, bottom of the barrel pricing, you got it for $30,000 and eight unit apartment. And I put 50 grand into it and needed a lot of work. It was bank owned, and it was later c minus kind of an area. And you know, put a bunch of tenants in there. And I realized like, I like these apartments, there's just more scale to it, there's more, I can go to one house or one location instead of 10 locations, I look at one roof instead of 10 roofs, I can look at one foundation set of 10 foundations, I can meet my contractor at one spot instead of going 10 different location, you know, it's just it's a lot more scale and easier to manage that type of stuff. And because of the economies of scale, you know, the expenses are far, far more reduced. So you can make a little bit more profit a little bit more money on multifamily stuff. And that's what we're really focused on for the next couple years. So I got up to about 140 doors, the partners that I was partnered up with the private money guys, we just kind of had a came to a spot where life happens and we decided to go our separate ways. And so we started liquidating our portfolio and liquidate it in 2016 and started kind of doing my own thing in late 2015 again, and so again press the reset button had to liquidate my entire portfolio but what they couldn't take away was the mindset right I had the experience now of how to buy an apartment building and how to do some due diligence on it and how to manage it and how to renovate it and do a lot of that kind of stuff. So I I started Flipping Houses again and started flipping about 80 to 100, turnkey houses for the next few years, started a management company. And then, you know, slowly accumulated apartment buildings again. And in 2017, I remember sitting back on vacation, and you know, getting real pensive, thinking about my net worth looking at my personal financial statement, my goals and all that stuff, and realizing that 90% of my wealth came from my apartments, but it was only about 10% of my time back then. And so I was like, What am I doing, I just totally burned the ships on my residential real estate. And I just focused on commercial. And so, you know, fast forward today, as we're talking, it's, you know, November 2020. And I have 4256 units right now 90% of that is multifamily. The other 10% is kind of a mix of a lot of self storage, I have some vacation rentals, three office buildings, and a little bit of retail type stuff, too. So that's kind of where we're at, man. So portfolio value around $330 million. And that's cool. But what's more exciting is like, the way that I buy is similar to the residential side of things. We're like, Hey, I'm all in for 65% of the after repair value. And so we only really owe about 215,000 I'm sorry, 250,000,300 $30 million worth of property. So it's a good good spot to be in. We're real. It's not all mine, right? I have business partners and stuff. But I got a big chunk of that equity. So it's, it's pretty cool. It's given me the lifestyle that that is what the American Dream is all about.
Sean Thomson 11:31
Yeah, exactly. Bringing it bringing it back around. Let's talk about how you kind of buy deals. You you you do it a unique way. Because I think you kind of you're self taught in this in this business. You kind of started with smaller projects. And you've just you've continued that through your larger projects, right. So now when you buy a deal, like you said, you're looking at, you're looking at, well, you will explain it to me, I guess, really, but how Tell me how you kind of look at your deals as opposed to the traditional underwriting?
Tim Bratz 12:01
Yeah, I mean, you see a lot of traditional syndicators and I've never taken a class I've never read a book on syndication or multifamily investing. I've learned from like, again, self taught school of hard knocks, you know, I just kept on messing up on smaller buildings and didn't mess up as I got into the bigger stuff. And because I learned my lessons. And so, you know, because I'd never learned to develop broker relationships and never learn how to do you know, the old school methods of sourcing deals like a lot of traditional syndicators? Do. I just taken residential strategies, and I deployed them in into multifamily. So driving for dollars, you know, just like there's houses with tall grass and boarded up windows, there's apartment buildings with tall grass and boarded up windows. And then we would you know, skip trace the owner and reach out to them and say, do you want to sell? We would, you know, you can do pull lists of delinquent taxes, you can dial for dollars, instead of calling for sale by owners, I call for rent by owners. I said, Hey, I'm not interested in renting your apartment. I'm interested in buying the apartment building, do you have any interest in selling. And I do things like that. You can do direct mail to apartment owners, same way that you can do direct mail to residential owners. And so we've done a lot of those things in order to kind of find, you know, the motivated sellers in commercial real estate. And and then I got pretty active on social media. And I just started telling people about how I'm buying and what I'm buying and how I structure deals and try to offer personal finance strategies and wealth, building ideas and giving people value on social media, and hopping on podcasts and things like this. And all of a sudden, there was like this, this army of people that started sending me deals, every time I post on social media, they'd be like, hey, Tim, can I sell a deal to you? Can I buy a deal from you? Can I joint venture with you? Can I lend you money? Can I do coach Do you mentor and so it created all these other opportunities that then created more deal flow, and more private money lenders because of that. So I think social media is really, really powerful. I love what you're doing on on the podcast side of things, too. And the more value I know, you don't like, tangibly get paid for doing this kind of stuff. But the more value you create for people out there, I promise you, it comes full circle. And it's not to get what you get, you actually get much more than what you get, which is pretty, pretty incredible. Pretty powerful. But as long as you're doing the right things with it, right, with a lot of responsible with a lot of power comes a lot of responsibility.
Sean Thomson 14:19
Yeah, I haven't seen that for us. I mean, I just do the podcast, my daughters have been by business and we kind of just wanted to share our journey to success. We're, we're fully committed to this path, and we and we fully expect to achieve our dream. So we're kind of just saying, hey, come along with us while we while we try to do this, you know, we don't know really right now. If it's gonna happen or not, but we're just kind of putting ourselves out there saying, hey, come along and see what happens. Right? So it's been good. But so you used in terms of like finding deals, getting deals, you use a lot of this. That's all that's the single family, you know, classic single family stuff. And when you're when you're getting into your bigger deals, do those things. I guess you're getting a lot of those things through your social media. But are you finding that the single family strategies are still feasible at, you know, like, the bigger 100 plus type properties? Yeah, I think or have you thought you should do your business back home?
Tim Bratz 15:17
No, I think a lot of the what, what you will find is, a lot of gurus out there teach you to just work with brokers and only buy units that are 75 units or bigger, but we're buy buildings that are 75 units, 100 units or bigger. Maybe it works, I don't, that's not how I built my business, I organically grew my portfolio to a level of 150 200 300 doors from a bunch of smaller buildings. And then that allowed me to then go and get a seat at the table to negotiate on a 200 unit apartment building, you know, and then I had, you know, 400 units, and that allowed me to go and take down a 600 unit portfolio of apartments. And so I know that it works, that you can go and develop broker relationships, I can tell you that if you don't have any apartments, right now, it's gonna be very hard to get credibility from brokers, to start sending you deals, especially the good deals, the pocket listings that they have, if you don't already have, are shown that you can perform on these things. So I don't think that's a good and I don't think it's good advice to tell, especially newer people that are looking at, like, you know, level up into commercial real estate coming from residential, and looking to get into that that bigger type of property, they're not going to get the respect that you need, in order to have broken relationships, I have broke relationships. Now. That's because I have 4000 doors, you know, they know that I'm a real buyer. If you go to somebody, you don't have any doors, you go to a broker and you're like, No, but I know this guy who does have some money, and this guy doesn't have experience and, you know, I'm trying to find deals, they're gonna send you a bunch of the garbage, you know, they're gonna think you're a bottom feeder. Let me see if I can get this Putz to overpay for the D class apartment building in the hood, you know, and so you're not going to get good deals that way. So I always tell you know, people who I mentor and coach, I'm like, Listen, go and start doing deals, like the momentum that you create is worth more like, that's, that's more important than going and waiting out for the perfect deal. Go and buy an eight unit, go buy a 15 unit, go buy a 50 unit, go buy a 25 unit, just start getting some deals under your belt. Because if you can't raise money on 25 units, you're not gonna be able to raise money on 250. You know, if you can, if you can't manage a 15 unit apartment building, how the hell are you gonna manage 150 unit apartment building, you know, so get the experience, you know, like, like, do some small deals, raise some money, get some wins under your belt, you know, build up the team organically grow organically learn. And then as you experience some of the success and people see you start taking down these deals, then you're going to get some respect in your community with the commercial brokers. And that's when they start bringing you the 100 unit. And then all of a sudden, you double your portfolio and a single deal, or they bring you a 300 unit portfolio, and boom, you've doubled, tripled your portfolio, because you took down that one. So I think it's more important to build your balance sheet, than it is to wait out for the perfect deal. I think it's more important to build the balance sheet and create momentum than it is to wait out for the perfect deal.
Sean Thomson 18:14
Yeah, that's interesting to me, because I'm, I'm sort of following the other path. So I can do smaller deals right now. But I've been passing on a lot of the smaller deals just because I'm waiting for that, that big, that you know, kind of big hit. So, that's an interesting concept.
Tim Bratz 18:32
You're not going to see those deals, unless you're already doing deals, it just doesn't happen, I can assure you that that's, that's the case, right? Or they're gonna see, Hey, who's who's gonna be the money guy behind you, and they're gonna move you out of the way. And then go try to talk to whoever whoever you're partnering up with. So it's more important, and believe me, you don't want to stay in small apartment buildings. And I think this, this goes back to your original question is like, all those residential strategies work for buildings under 100 units. When you get into like, the bigger doors, you're working with more, maybe, maybe, you know, larger groups. But there's also a lot of smart entrepreneurs who made money in another business that thought they could just park money in apartment buildings, and then they know what the hell they're doing. And then they get kicked in the teeth. And then they lose their butt on these things. So there's motivated sellers in all different sizes of buildings. But again, going back to building the momentum, and building your balance sheet, that's more important than waiting out for the perfect deal, because you're not going to be able to grow your portfolio fast enough, and you're going to get decent, you know, disenchanted you're gonna be frustrated it really if you're, if you're waiting an entire year to do a deal, like you can do what a 1015 unit apartment building deal and still be looking for your other stuff. And again, you don't want to stay in it forever, but build up the balance sheet get up to 100 200 doors, and then you can get into the bigger apartment building. So you start selling off your smaller things. That's that's one of the things that I've been doing right now is I'm selling off everything under 50 units right now, and it played its part got me to where I needed to be. But people are always waiting for the perfect, you know, oyster with with the pearl inside of it. And they're only looking for that one. And the reality is like, the odds of you finding that one are very minimal. First of all, like you're competing with guys like me all the time. And if if somebody with no experience in multifamily goes to a broker that's listing an oyster with a pearl inside of it type of type of deal, and then I come in, who do you think they're gonna, like, just give more attention to somebody with a, you know, third of a billion dollar portfolio or somebody who doesn't own any property. So you got to get the momentum going, Man, you got to build a balance sheet. Like that's the most important thing that you could be doing right now. And, and not just looking for the Grand Slam homerun deals, baseball games are won by base hits, consistent base hits over and over and over again, it's not about this deal. It's about the next 10 deals that come from you doing this deal. It's about the next 100 deals that you can do from doing this deal. So it's you got to have more of a long term mentality, you got to have more of an abundance mentality. And understand that, you know, there's certain things you got to do in order to set yourself up for future growth and future success.
Sean Thomson 21:12
Yeah, that's interesting. I appreciate I appreciate the perspective. So let's talk a little bit You and I both kind of your vessel different than mine. But you We both kind of come from the single family realm, I guess. And our transition, transitioning, you've transitioned into multifamily. What do you think? I know what I know what was kind of holding me back, it took me a while to kind of convince myself this was possible for myself to do. What do you think most of your single family guys that are that are that are active in single family are kind of telling themselves that's preventing them from going into multifamily? What's holding them back?
Tim Bratz 21:47
I mean, it's always, we are always our own bottleneck. You know, it's always self limiting beliefs. The only people that can the only individual who can, you know, stop you from achieving greatness is yourself, right? Like, you're the only one who can limit your own greatness. So it's always comes back to your own mindset. A lot of people creating excuses in their head saying, hey, I need to have this business totally on autopilot before I need to go before I can go into multifamily. Or I need to stockpile X number of dollars before I can then go and invest into multifamily. The reality is I was flipping houses, but I wasn't that good at it. And I didn't have that good of a business and it wasn't on autopilot. And I realized that and I realized that it wasn't a long term play for me, either. You know, I see a lot of people who, hey, here's my goal. But they're not putting themselves on a path to get to that goal. And all of a sudden they start flipping houses, if your long term goal is to flip houses, and then you should flip houses. If your long term goal is not to flip houses, and it's to own commercial real estate, then what are you wasting your time on flipping houses, like what like, the fastest way to get from point A to point B is a straight line, not not taking the scenic route or, you know, taking some some off road path, it's a straight line. So if your goal is to go and build a portfolio of apartments, that's what you should be spending your time on. I just feel like life's too short to be spending your time on anything that's not pushing you towards your long term goal. So I think that's a big deal. I think the the misconception that you have to be sitting on a ton of your own cash is a big deal for people to get past. I mean, I own $330 million. In real estate, I've only personally invested $125,000, ever, in all my all my properties. So obviously you don't need your own money, I do use my own credit, because I'm the one with I'm the Managing member of all my property. So I do use my own credit, I am the one who sponsors it, but you don't have to use your own credit, you can find a guy you know, like me or like Corey or somebody who has a balance sheet that has good credit that has the liquidity and the net worth and the experience of owning and managing that many units doors. And they can sponsor the loan cosign on it for you. So you don't need your own credit. You don't need your own money. You know, and, and a lot of times, you don't even need experience because you can bring in a third party management company that has the experience in order to help out with that. So it's a team sport. It's not like single family where and I think this goes back to one of the big things is like you think that you need to do everything, you know, in multifamily, because you do have to do everything and single family and single family. I did all the work. I found the deals, I oversaw the contractors, I raised the private money, I made payments, I did bookkeeping, I did the sales, the disposition side, like I did everything. And it's very hard for single family investors to give that up because they're used to doing everything because you're only talking about profits that or I don't know 20 $30,000 a house and it's hard to build up a team of a players in order to carpet you know, if you want to bring in a team of a players you got four eight players on your team and you're carving up 20 Grant like $5,000 isn't that exciting for an A player, but if you go and buy an apartment building, and it's a $5 million deal, and you're into it for three and a half million dollars, and there's 1.5 million, that now you can carve up amongst four people, all of a sudden, that gets more exciting, you know, it's $400,000 per person in net worth and equity from doing a single deal. And so and it makes your life easier, and your life more fun, because you can focus on the stuff you're good at. And you can partner up with somebody who can do the stuff that you're not good at, you know, or likes doing that better than than how you like doing it. So it's it creates a better lifestyle, makes you happier, builds more wealth, and it gets you to your long term goal faster by doing it that way. So, again, it's always our own self limiting beliefs. And I think until you're aware of those things, and you get educated on the other ways to get around that, that's, that's the biggest hurdle that I've seen in a lot of the residential investors that are trying to scale up into commercial.
Sean Thomson 26:00
Yeah, for me, my business has always been about earning income, I've always wanted that, that mailbox money, you know, and I, I originally thought, since I was a kid, I've always driven by apartment buildings, I just thought to myself, if I could just own one of those, like it is almost all the time. And I always thought that hedge funds and riads and pension funds, those are the only guys that own those places. I didn't know, guys like me could do it, you know, at all. And then I heard Cory story. So that was kind of the one thing that I needed was just to know, that was possible. And then the second, the second obstacle was, like you said, overcoming your own sort of brain, right? And I had to start to believe that it was possible for me that I could have that too, right. So I knew Cory was doing it, I knew you were doing it. But but can Sean do it really. So I had to convince myself that I could do it. And then once I got to that place, you know, multifamily is in terms of creating income, is that's just the champion, I mean, that's the best, the best asset class, in my opinion that you can find, you know, just, it's just that mailbox money all the time. And it's like you said the scale is much greater, you know, then single family, you know, your single family visits, you're trying to buy this income, and you're doing it one day at a time, you know, it's like 300 bucks a month just is not. It's like, Man, I'm killing myself to buy these single family units and make 300 bucks on a rental property, I could flip this thing and make 30 grand, you know, so it's like, every time you buy something you're wanting to sell it not keep it you know, it's the opposite of multifamily. So a lot of that's a lot of that is just kind of shifting your thinking, I think from where you're at, in your single family business to convince yourself Hey, I can do this. And then for me, it was a matter of finding the information learning the process learning the the business, which I'm still doing every day, you know, every day, I'm learning new things, like I just learned, like five different things from you, just in our conversation. So it's constantly doing those things. But it's been it's been good. So let's talk a little bit about how you kind of syndicate your deals. So you you would you like to structure your your deals and and what's sort of the ideal setup for you and your syndications. Now in your business in the larger business, larger properties.
Tim Bratz 28:10
Yeah, I syndicate a little bit differently than traditional syndicators. I mean, core does it differently as well. And my entire model is essentially a verb model. They buy renovate rent refinance. So I use that in residential, and I just started doing it and commercial, I realized that one of the mailbox money on one long term residual and one long term wealth, and the best way of doing it is that by selling apartment buildings by refinancing and holding them, letting them cash flow, you know, letting the cash flow come in, pay down your principal, let the property appreciate over time, and then eventually, you got a lot of equity built up into your property. And so my model like in order to do that, I need to be able to buy it, renovate it, and be all in to one of my properties for around 65 to 70 cents on the dollar that allows me to then go and refinance with a 70 or 75%, LTV loan, and pay back my short term bridge loan, my passive investors and then own the property with only bank money in play, right. So all the chips are off the table. And now it's just house money in play. And its long term debt, fixed interest rates, long amortization schedules, non recourse loans. And that's where you want to be as you increase your net worth, you want to increase kind of that safety net, I guess that goes with it and reduce that liability. So that's always been my model. Because I can do that I can buy something that's distressed, it's physically distressed, managerially, distressed, and then I can improve it by putting sweat equity into it, I can, I can create appreciation versus speculating on it. And I can do it over a much shorter amount of time. So I can stabilize pretty much any building within 12 to 24 months. And that allows me to then go and have a very predictable cost of private money. So if I can go get a bridge loan, let's call it Alright, let's let's say I got a deal. For, I don't know, 10 million, it's going to be worth $10 million, once it's stabilized. If I need to be all in for 65% of that stabilized value, that means I'm all in for six and a half million dollars. On that six and a half million between purchase price and renovation costs, the bank's gonna give me around 80% of it. So let's say the bank gives me $5 million. That means I have to go and raise 1.5 million from my private money lenders, when I go and raise 1.5 million, their money is only to be in for 24 months, because I'll be able to refinance and cash them out when I get a new loan at 70% LTV. So because I know even if the property is not performing, because I know that I can have them the property stabilized and refinanced in 12 to 24 months, I just needed essentially create like an interest reserve to make sure I can pay my investors in the first 12 months, I found that investors really want predictable passive income, and they want equity upside. And so that's what that's the kind of the the hybrid that I've created for my investors. And so I pay my investors a fixed return while their money is invested. And then when we refinance, they get all their money back. And when they get all their money back, they still maintain a small percentage of equity in the deal forever. So let's say the investor pool might might still keep 20 or 25% ownership in the deal forever. So all the money is off the table, but they still get their percentage of refinance proceeds of cash flows of depreciation of future sales proceeds. And so it allows them to have more velocity on their money, because then they can go into a second deal, a third deal a fifth deal with me. And in a traditional syndication their money stuff for five to 10 years. With me, they can get the three deals in five years, you know. And so it seems like it might be less equity on the surface. But if you think about it, they're getting 25% of each deal. And there are three deals, so they're getting 75% of the equity, versus one deal where the money stuck there, it only pays if the property is performing. It doesn't pay if the property is not performing. And it takes five years to get their money back from that one deal. And and you're not diversified across three deals, you're not earning a fixed return across the wire money's invested. And typically, they're buying this at a retail, traditional syndicators are paying a retail price. And they're banking on speculative appreciation over the next five to 10 years. And their idea to get the investors their money back is to sell a property. So now the investor just has a high paying job. Also, they're not building real long term wealth. So I just, I think my model works a little bit better for what my investors are looking for. And it works better for us too. There's obviously more work on it, because we're doing heavier value ads, than just buying something that's stabilized. We just let it cash flow. You know, I think there's I think there's my syndication works better for value, add plays, traditional syndication works better for stabilized projects, my dilemma was stabilized projects is if it's stabilized, but it's renovated, and it's cash flowing, it's 90% occupancy, and it's at market rate rents, why would that seller ever sell at a discount, you know, very unlikely for them to sell at a discount, stabilized property. So that means you're gonna be paying a retail price, which is just, it's against everything, I believe, from an investment standpoint, I always believe in buying at a wholesale price, and then creating appreciation versus speculating on it. So I'm looking for those kinds of plays, I will say that since COVID, hit on kind of I'm not taking on as heavy of value adds. And I'm more in that, you know, 80, to 9080, to 90% occupancy with much or significantly below market rents. So, it hasn't been updated in 40 years, it needs, you know, cosmetic improvements, some physical improvements, better management, some scale and what we can bring to the table from a management perspective and asset management perspective. And that's kind of more like, what we're leaning towards right now is kind of like that, that middle grade stabilized, but still value add play.
Sean Thomson 34:05
Yeah, that's interesting. That's, there's a lot to unpack there. But it sounds like your investors are able to get a little bit more velocity with their cash, putting it in one deal and getting it back out in the next 24 months. So you can go back into another deal. It also it also affords you the capacity to get some velocity on your transactions as well. Right.
Tim Bratz 34:22
You can recycle 50 million bucks every 18 months, look at how many deals I can get into, you know, versus having that money sit for the next 567 years, you're going to keep on raising more and more and more money. So it allows me to grow faster, it allows the investors to grow faster, and it offers more almost like liquidity on their money, where if if life does happen, and they don't want to roll it forward, they don't have to wait five to seven years, they can get it back in two years, you know?
Sean Thomson 34:51
Even then they still retain that that portion of their cash flow on the New Deal they've already invested in so that that mailbox money is kind of hitting them all the time. That depreciation is kind of hitting them every year. So there's benefits to once they're in the deal. There's benefits long term too. So I could see how that would be really appealing for an investor to be into? For sure. Well, how do you, I guess you've just explained I was gonna ask you about paying off those loans. So how do you get to a place where you've got a property that you're kind of free and clear on is that is that always your goal is to is to, I guess your first goal is to buy it, stabilize it, refinance it cash out everybody, and then continue to grow that that that property with rent increases organically. And then your I guess your long term goal is to eventually pay off the debt and to just have that property debt free. Is that kind of the long term? trajectory?
Tim Bratz 35:44
Yeah, I mean, I don't mind debt, I'd become a good steward of capital, because I was such a bad steward of capital, I've learned a lot of lessons on that. And, and now I respect money Very much so. And I know that I put money into assets, I do not put money into liabilities, right. And I understand these these basic principles. And because I'm, I'm now a good steward of capital, I'm not afraid of debt, especially non recourse debt on multifamily. My goal right now is I get decently when I refinance, I try to get, you know, the most the highest LTV that I possibly can, right, I'm 35 years old, I got a lot of time left to pay these things off. And I'm in growth mode. So I'm trying to get as much money off the table when I refinance as I possibly can, because it pays back the investors takes non taxable refinance proceeds off the table, and builds my cash reserves personally. So if I can do more of that right now, that allows me again, a little bit more velocity in the growth of my portfolio, I probably won't always be my I know, it won't always be my my model. I know that, you know, once I get up to a couple billion dollars in assets, my goal is going to be now to start pounding down some principal, I don't think I'll ever pay them off in full. But I think I'll always have I think I'll always have some sort of debt, but probably much lower LTV, you know, 50%, LTV is probably where I'll always be, but I don't think I'll ever pay him off. Because I'll I mean, depends on where interest rates are depends on what lending terms and loan terms. But if loan terms always like this, where I can get fixed interest rate 50% 60% loan to value with with interest rates that are sub five, you know, and long amortization schedules, long terms, and non recourse loans, again, at a low LTV, like I don't think there's any problem with having debt on the property because I know that I could turn around pay it off, if I wanted to, I could sell it, I could refinance it very quickly, very easily with a different lender if I needed to. And so I don't mind having debt on my properties. I think I'll have a different kind of debt in the future. But if, as long as I'm growing, I'll always have debt on my properties. Maybe in the future, I'll pay them all off. I don't know. For me, I can just go and refinance. This is Hudson, by the way!
Sean Thomson 38:00
Hi, buddy. How are you doing?
Tim Bratz 38:03
Say hi! So for me, I can always just, you know, refinance the property, if even if I paid it off. I mean, I mean, refi proceeds are tax free, and allows me and the investors to take some cash off the table. And it's tax free, because you got to pay it back. But at the same time, it's not us paying it back, it's our tenants paying it back. And they're not only paying it back, but there's still an excess cash flow on top of that. So it allows me to then go and take some money off the table, and utilize that to go buy more assets utilize that I could, I could buy liabilities with it if I wanted to, at that point, because it's backed by an asset that's paying for for the debt. And it's such a low LTV doesn't really adversely affect me at all. So I don't know, maybe I will. But right now, I put 10 year to 15 year terms, I do a 30 year amortization schedule. And for somebody who wants to pay it off sooner and says, Hey, I want a 20 years or 25 years, you could do that. But you could still pay off your property in 22 years with a 30 year amortization, right, like you could make one extra payment or two extra payments a year. And you can still pay it off in 20 years, if you wanted to. What I don't like about a 20 year amortization is that you got a big lump a big nut to cover every single month, right. And so if the market does shift, or COVID does happen and occupancy or collections drop, or just cuts out some spooks in the in the economy occurred, you don't want to have that big nut you got to pay every single month. So I would rather make additional principal payments when the market is good, and pay it down faster. But when the markets you know a little bit shaky, then I got a minimal monthly payment that I just need, I know I need to cover good to go I only need to have 60% occupancy at my properties once they're stabilized and I can cover all my property expenses and my debt service. Maybe 65%. So I know that in my head, and I feel good about that knowing like that's why I put a 30 year in but I could still pay it off sooner. If I felt like it or refinances sooner if I felt like it.
Sean Thomson 40:03
Yeah, the goal is really what I'm hearing you say is the goal is not to have properties that are just free and clear. The goal is to take your operating capital, your equity capital, reinvest that as frequently as you can secure the property with debt that that isn't overburdening your cash flow every month. And then just keep repeating that process and keep that going. And that, you know, having that debt in place is not it's not something that's scary or bad, it's actually beneficial to you, and it allows you to continue to grow your portfolio. A lot of people they think of right, it's like any weapon. Yeah. Yeah. A lot of people think people are evil, right? Yeah. Yeah. A lot of people think of debt is some sort of like...
Tim Bratz 40:42
It just depends on how you're using it.
Sean Thomson 40:44
Yeah, exactly.
Tim Bratz 40:45
Most people look at it. Most people use it for credit cards, and to buy a bunch of garbage on Amazon and buy a bunch of, you know, fancy clothes with with, you know, fancy brand names and all this other stupid stuff. And to buy stupid cars and all these depreciating liabilities, you know, they're not buying assets with it. If they understood how to buy assets with debt, right? You can, you could build a lot of wealth. I've, I've done it. And again, there's different strokes for different folks. And some people may want to own a portfolio free and clear. And they can absolutely do that. For me and my ambitions and my long term goals. I'm just more of a growth type mindset. And I want to see how big how big I can build it.
Sean Thomson 41:23
Yeah, your target right now is a couple billion, I think you said?
Tim Bratz 41:28
Yeah, my short term is a billion dollars in assets, I'm at 330. Right now, I'm actually selling a big chunk of mine, I might actually drop down to around 150 million in assets, I think I'm gonna sell about almost 200 million in assets. Over the next six months here. It's more again, like I was telling it the beginning, it's more like the beginner stuff, it's more like the C Class C plus type properties that I still have some of my smaller buildings that I have, and it would certainly be class type stuff, but that they're like tertiary markets, and I'm looking to take that money, I'm going to pay back my investors, they're gonna get a boatload of cash back boatload of return, I'm going to get a bunch of money of my own back, my partner is gonna get a bunch of money on his back. And then we're going to roll in a more primary tight markets and more kind of B plus a minus kind of areas, and just get a little bit nicer of a class of asset. And, and, you know, I mean, hey, interest rates are so low cap rates are low, that means values are high, there's a lot of money coming in from New York, and California, that's buying into the southeast, which is where a lot of my property is right now. And they're paying good dollar amounts, you know. And so if I can sell my portfolio, right now, I know that I can source deals, no problem, because of the education side and social media side, my broker relationships now and the the reputation I have in the marketplace. And so I'm not concerned about finding new deals, I think I think as as long as you know what your long term goal is, like, I'm taking essentially one step back in order to make three, four or five, step five leaps forward in my business. So my kind of mid term goal. Yeah, Mike, kind of two to three year goal is hit a billion dollars in assets, I think I can do that next 24 to 36 months, I'm really confident that I could, and then I don't know what I want to go from there. I really don't do goals longer than about three to five years out anymore, just because things change so rapidly, you know, and, and so I know that that's my short term goal, I think after that is going to be a billion dollar fund, and create my own investment fund. And then and then that could probably partly in about $5 billion of assets. And who knows, I don't know, I also have kids books out, you know, I might, I might just say, hey, that's good. I'm where I want to be, you know, multiple nine figure net worth. And let me just go and focus on my kids books are more of a give back and impact type piece or no, no, go save the whales or save rainforest or something. I don't know what I'll do.
Sean Thomson 43:49
Yeah, exactly. That's good. That's awesome. Well, I just I always ask everybody, you, you're clearly living the American Dream, right? So I always ask everybody, you know, kind of what is what is your American Dream? how you define it? What do you what are you doing with it your American Dream? And then kind of what is it that you're doing to sort of take it to the next level?
Tim Bratz 44:08
That's a great question, man. Yeah, I mean, you know, I mean, here's the thing I see a lot of people are like, dude, I love what you're doing, and you're living the life and all that. And that's, that's cool. And I've designed a life and I've been very intentional about the life that I live. And, you know, and the things that I do, where I spend my time and a lot of those things, and but but I I don't like it when people like compare themselves to me, right? And I don't like when people compare themselves to other people. I don't think it's fair. You don't know the advantages or disadvantages that anybody was raised with. You don't know what their story was, you don't know how long they've been working, you know, kind of under the surface in order to create and become that that overnight success story, you know, to me, and so I don't, I don't like it when people compare themselves to somebody else in that regard. I try to compare myself to me I compare myself where was I a year ago to where I am today? Where will I be a year from now from where I am today. And as long as that needle keeps on moving forward, that to me is success, right? That to me is pursuing my dreams. You know, for me, the American Dream is entrepreneurship, I love it. I think everybody should be an entrepreneur, I don't think everybody's meant to be an entrepreneur, I think everybody could be an entrepreneur, I think in order to be one of these multiple hundreds of millions of dollars net worth or billionaires, I think that's a certain breed of person who's just kind of born maybe genetic with it. But I don't think everybody is born to be that kind of entrepreneur, but I think everybody is born to be, you can absolutely build a seven or eight figure net worth anybody, is what I truly believe. And so go and buy real estate, go and start a business go in. Join MLM I don't I don't care what you end up doing, but do something entrepreneurial, sell lemonade. So there's a billion different ways to make so much money, and just go and do something where you, you take control over your value, right, and you bring value to society, and let society dictate you know, how much money that it should be paying you. I think that's a pretty powerful concept of like having 100% ownership and 100% accountability over your life. That, to me is more of the American Dream. And I mean, being born in the United States, like we've had a leg up, we've got an advantage for sure over other countries. And, you know, if I had a lottery ball that said, Hey, here's Tim brought born to these parents in this state in this country in this time frame. And there were seven and a half billion lottery balls that you could put back in, like, I wouldn't put my ball back in, I know that I've lucked out, right, the way that I've been born into the my parents and the belief systems and everything that that opportunities that I've I've had, but being in America, like I know, I know, white males who live paycheck to paycheck and are complete, deadbeats don't contribute at all to society. And I know minorities and women and immigrants that have come to the United States and gone straight to the top more successful, far more successful than me, you know, and have overcome bigger adversities and didn't let other things dictate who they were, or set them in some sort of parameter of some sort, and dictate what they could accomplish or not accomplished. Like they there were no limitations, the only limitation was their own mindset. And they went straight to the top because of it. So I think that's truly the American Dream is just overcoming adversity and building up a lifestyle of whatever you want. And I think defining what you want is something that a lot of people don't do, and that they need to do, they need to figure out, hey, what do you actually want. And then once you know the destination, then you can create the roadmap in order to get there, you know, but unless you have that destination in place, then you just kind of, you know, floating on the wind somewhere. So make sure you know what you want. And then and then just pursue it.
Sean Thomson 48:05
Yeah, I met a guy the other day, I'll just tell a quick story. But I met a guy the other day, he moved here from India, when he was 10 years old, he saw a Western movie. And he said, I want to go there, you know. And he made a commitment to do that. So when he got older, he moved to the United States, and he wanted to live in the United States, he loves it here. And every two years, he has to renew his work visa. So he has to have a stable job and all these other things. But every two years, he runs the risk of getting thrown out of the country. And he's been here for 17 years renewing that visa, and he finally was awarded a green card. So the Green Card gives him another five year period, then he can become a citizen. But he's been building a life in a country that is completely temporary every two years, he may have to leave. But he wants to be here so badly that he's now a pharmacist, and he's very successful guy. And he's been just committing to being successful in this country, even even in spite of those challenges. And now he's now he's looking to getting into real estate. And that sort of leveling up is a dream that he's going through. So I thought his story, I'm gonna try and get him on the podcast, but I thought his story was amazing. It's the perfect American Dream. And since you mentioned those immigrants, I want to ask, yeah, I thought I mentioned that story. But I listened to his story really quickly. I was like, that's great. You know, that's great.
Tim Bratz 49:22
Well, the hardest working people that I've met, and are typically immigrants, they're typically people who were born in another country, and then came to the United States, and they go straight to the top. You know why? Because they have something to compare it to. I mean, like, like we being born here, we're so it's just like, we've never had to walk two miles in one direction or to get fresh water. We've never had to eat. I don't know, mud pies. We've never had to worry about our religious beliefs being suppressed. We've never had to worry about like, that's never even been a concern of ours. And so because we We've been so spoiled being born here, we don't have anything to compare it to, you know, and so that's why people just kind of live this life of mediocrity of, you know, not not pushing the limits too much, and at the same time not feeling any real pain, right? They're just kind of in this comfort zone. And they never really accomplished anything, and they live their life that way, versus people who have really had to overcome adversities, and they have to scrape up money in order to get a flight to come to the United States, and then overcome these, you know, the risk of being sent back every two years. Like, let me make sure that I'm overcoming and I'm contributing to society, and I'm paying my taxes, and I'm doing things that for the betterment of the community. And it's like, what if everybody had that mindset, you know, and like, that's what made America so great early on, because everybody was an immigrant, everybody was coming here, because it was such a land of opportunity. And now, it's just, it's become spoiled for a lot of people. And, you know, I've, I've been fortunate enough to meet a lot of amazing immigrants and a lot of amazing people who have contributed to society and contributed my life. And, and so I like to think I'm, I'm aware of enough to, like, respect what they've had to come through. And I have no idea really, what they've, what they've had to do what they've had to go through it, but enough, so where I'm not going to take my opportunity. And what I've been, you know, the cards that I've been dealt, and missplay them, right, and I'm going to make sure that I do as much as I possibly can and impact as much as I possibly can inspire as much as I possibly can. Because again, when when you have great opportunity, great ability, I think you have great responsibility to do the right thing and make sure you pay it forward. So and then I think with with with that, it's a good closing thought.
Sean Thomson 51:43
Yeah, exactly. It's perfect. Exactly. Well, Tim, I really appreciate you coming on the show, man, this has been awesome. You know, you have I guess you have Mastermind going on, you've got all kinds of activities happening if someone wanted to get in touch with you kind of what's the best path that you have a website they can go to or something?
Tim Bratz 51:59
Yeah, shoot me a message on Facebook, Instagram, you know, I'm sure you'll tag my social media handles when you use this. So shoot me a message there follow me friend me up on Facebook and Instagram. I'm very active on those YouTube channel, all that stuff, but just from the up on on Facebook or Instagram and shoot me a message. You know, I answer my own messages, you got a question? If there's something that I can help you out with make, make connection for you don't hesitate to reach out. And then my website is: legacywealthholdings.com. And I'm always trying to just, you know, give value and inspire and share how we're doing deals and how we structure deals and all that kind of stuff. So yeah, if you guys have any, any questions, don't hesitate to reach out. And Sean, I appreciate you having me, man. This has been awesome. And yes, a lot of really, really good questions. And I appreciate all the value that you're creating out there too, man.
Sean Thomson 52:48
Yeah. Thanks, Tim. I appreciate that. And it means a lot coming from you. So thanks again for coming on the show. And hopefully we can have you back on talking about some other things, you know, down the road. Okay?
Tim Bratz 52:58
Sounds great, man. I'm looking forward to it!
Abigail Thomson 53:01
Thanks for joining us for another episode of Next Level American Dream. If you would like to learn more about what we talked about today, want to contact the team directly, or are interested in passively investing and being a part of our deal room, head over to our website at www.thomsonmultifamilygroup.com. Before you go, please leave a review! Your comments help us create more episodes for you to enjoy.