When Jake & I decided to join forces and create the Jake & Gino community back in 2014, I was still working at my restaurant and in the midst of trying to grow another company called Gino’s family, a passion project that was a complimentary business to my restaurant. It was an attempt to broaden the reach of the restaurant by creating multiple streams of revenue, such as a cookbook and E-Books on gardening and cooking, and physical product sales, such as cutlery and vertical gardening bags. Little did I know that Gino’s family was a precursor to the success that we have created at Jake & Gino.
As you might guess, I ultimately abandoned the Gino’s Family brand and the restaurant, and focused my efforts on Jake & Gino and expanding our multifamily real estate portfolio. But, I never lost the learning lessons of why my Gino’s family venture was unsuccessful and Jake & Gino is flourishing.
In this article, I am going to document the seven levels of building a successful multifamily real estate business to help you buy your first deal and begin to grow your portfolio, but these levels can be utilized for any business. My goal with this article is to be able to provide clarity to you, to make you realize that it is ultimately your decision whether you want to buy a few properties and stay small, or scale the portfolio and introduce systems and processes to help you achieve larger goals.
Here are the seven levels:
- The epiphany/AHA moment
- Massive education
- Buy your first deal
- Acquire your next few deals
- Make your first hire
- Scale the business
- The epiphany/AHA moment
We all have a moment in our lives where we begin to evaluate ourselves and if our life has had any meaning. For me, it was 2008, right in the midst of the Great Recession, a year after my father passed away. The question I asked myself was “Am I building my dad’s dream, or am I building my own?” It became apparent that the restaurant was my dad’s passion, and I was using the restaurant as a means to generate a lifestyle. There was nothing wrong with that, until I realized that it was not my soul purpose, my reason for owning a business.
That was my AHA moment, and it spurred me to action and to consider investing in multifamily real estate. It was exciting, yet terrifying at the same time. I was so used to working at the restaurant that a life without it seemed incomprehensible at the time.
- Massive education:
Once the AHA moment wears off, the reality that you don’t know where to start or how to achieve your massive goal starts to set in. I immediately realized that I needed to seek out a mentor or real estate coach to provide me with the systems to begin my education. I tried my hand in real estate a few years before, and it ended in disaster because I had no experience, training or guidance in investing in real estate. I wasn’t going to make the same mistake twice.
My next step was to sign up with a real estate coaching program and dive into podcasts and real estate books. Here are some of the books that I found to be helpful:
This step is all about focusing on your education and increasing self-awareness around your limiting beliefs you have, and to start to let go of those limiting beliefs. Your behaviors are belief driven, and if you think that you will not be successful in real estate, then your actions will reflect those beliefs. Having the right mentor and community is so important as you begin to educate yourself.
Now that you are immersing yourself in education, it’s time to take action. Our motto at Jake & Gino is:
Education X Action = Results
Paralysis by analysis has left the building. Our motto has become “We commit and then figure it out.” The more decisive a person becomes, the more successful they will be in the long run. Taking small steps of action, and continuing with the momentum of those actions will ultimately lead to achieving the goal.
What do I mean by that? Let’s say you decide to call a broker to see if they have any deals, making the call may be the first action. Most investors quit there when they hear deal flow is minimal and the deals are terrible. Or, you can take action like Grant, a young Jake & Gino member who decided to tour a property with a broker. It’s a scary step for a new investor, and most people would rather not step outside their comfort zone.
I give Grant a tremendous amount of credit. Not only did he build rapport with the broker and learn invaluable information about the market, the broker was going to send him another deal later in the week. From that one action of deciding to tour a property, Grant received numerous benefits!
I have one bit of advice for those who are still contemplating taking action. Go out there and look for a partner. My partner Jake has been instrumental in my success, and I know for sure that I would not have been able to accomplish what I have without the help of an amazing partner. Jake holds me accountable, pushes me out of my comfort zone, and compliments my skill set. One plus one does not equal two when you have a terrific partner, it results in much more.
- Buy your first deal:
After all of the hard work, and the property tours, and the underwriting, a deal comes to you, and it looks too good to be true. Did they make a mistake? Can this be happening? Your thought is “This looks too good to be true!”
Once you calm down and realize that you’ve got a deal, you begin to get a queasy feeling in your stomach, and your hands begin to sweat. That’s how I felt once Jake & I found our first deal. Your next thought is “Now what?” Are you really going to send in the Letter of Intent?
When you finally come to your senses, you fire off that LOI, and the broker relays it to the seller. After haggling for some time, the seller finally accepts it, and it’s off to creating the Purchase & Sale agreement (PSA). Now, there’s no turning back. A bunch of the sleepless nights awaits.
The day arrives, and the closing goes off with a few minor hitches, but you are the proud owner of your first mom and pop apartment. Our student Jason Bass summed up the feeling perfectly on the Movers and Shakers podcast:
“I am sitting in a Lowe’s parking lot after I closed. It was a feeling of euphoria, and I just sat there happy. Then, I realized it was time to get to work”
This level is all about the I”ma mentality. I’ma do this, I’ma do that. It’s all about adopting the mom and pop mentality and trying to do everything yourself. I call this the bootstrap phase, where you encounter situations for the first time, such as a resident passing away in an apartment, bed bugs, mold, evictions, and you hit them head on and try to tackle everything yourself. There are many times that you ask yourself was it worth all the trouble and hassles.
Something else also occurs in this level. You are now a closer, and brokers begin to take you seriously. Momentum starts to build towards finding your next deal. It’s a great feeling when residents are paying you, but you still see real estate as only a cash flow play. The other benefits have yet to cross your mind. Just wait!
- Buy your next few deals
The last few months have been a whirlwind. Collecting rents, turning units, hiring vendors, still cutting your own grass. It’s been exciting, but also challenging. Deal flow starts to increase, and you start to close on a couple more deals. You are still in the mom and pop phase, but start to realize that you need to hire out some tasks, or else this real estate thing is going to consume you!
At this point, most of us are trying to balance a W2 job, or in my case, a small business, with the enormous tasks of trying to run a multifamily business. Yes, you heard me right! Multifamily is a scalable business, and it’s not jut tenants and toilets. When Jake & I bought our next couple of deals, we were still doing the bookkeeping and collecting rents. We were utilizing resident managers to help us, but we soon realized that we needed one or two more properties before we could hire full time maintenance and property management.
This level is where most investors either choose to continue to self manage their deals or seek third party property management. There is no right or wrong solution. The only concern should be what are you trying to achieve. Jake & I liked the control, and we saw property management as a way to drive operations and create another stream of revenue.
In any case, this is the level where you start to see light at the end of the very long tunnel and begin to see yourself firing your boss at a Taco Bell and transitioning into real estate full time. This is also where you begin to understand the true power of real estate. Our thought was “Why did it take us so long to realize how awesome real estate is?”
- Make your first hire
This is a big step in every entrepreneur’s journey, a huge inflection point that will never be forgotten. You are starting to shed the I’ma mentality, and now it’s time to hire a full time manager and maintenance tech. This is almost as daunting as buying your first property, but I think it is easier because now you have proof of concept, you’ve bought a couple of deals and you need the help desperately.
You start reading books like Traction, Scaling Up, and Scale, to learn how to create systems to help you hire and delegate responsibilities. I call this level:
You are being pushed further from your comfort zone, and it is an exhilarating yet scary feeling. Jake & I knew we needed a mentor to help scale the business, but our focus was to get to the next level.
- Leave W2 and begin to scale the business
The day has come to sit down with you spouse or significant other and decide it’s time to fire your boss and launch into real estate full time. You have accumulated around two hundred units, depending on what market you’re in and how much equity you control in those deals. Your friends and family, on the one hand think you’re crazy, and on the other hand, begin to utter phrases like “Lucky” and “I’m not sure”. You know luck has nothing to do with it. The harder you work, the luckier you get!!
You have entered your next inflection point, where you begin to obsess about systems and how to scale the business. Gone are the days of I’ma and doing everything by yourself. You will never go beyond this phase if you do not create the systems for your business. And if you do by some miracle, you will turn back into a mom and pop and be a slave to the business.
At this phase, you start to create core values and a mission statement to help you hire employees and create the culture for your organization. This is where Jake & I hired mentors to help us create core values and work on our business. Take a look at ours:
You realize that the week is starting to be consumed by meetings, and if you don’t create a cadence of accountability, you will drive yourself nuts. You also need to start planning quarterly priorities and yearly goals. I remember thinking to myself “What does this have to do with multifamily?” I now realize this IS multifamily, and if you’re not ready, then you better find a partner who is.
Ironically enough, you start to grasp the big picture. There are countless streams of revenue associated with multifamily, and multiple businesses that can be created. In this level, Jake & I created our education platform, along with our syndication company and our mortgage business. We call this our power wheel, where all of these businesses work in a symbiotic relationship and feed off of each other.
When I reflect back at this level, I remember thinking this was all created from buying that first deal, the deal that everyone passed on, the deal that we affectionately coined “The crack den”. Multifamily, like anything else that is important to you in life, is all about the long game. Staying in there long enough, taking the punches to the gut, and just figuring it out. Jake is famous for saying “Multifamily isn’t rocket science. If a drug rep and a pizza guy can do it, so can you.”
What level are you in? Even more importantly, what level do you want to achieve. Life is not one size fits all. The key to life is all about clarity and what YOU want to achieve.
Please leave us a comment below and let us where you are in your journey. And if you’re just starting, buckle up because it’s an amazing ride.