Dave (00:00):
Hey everyone, welcome to the BiggerPockets podcast. I’m your host today ah Dave Meyer, and I’m joined by my friend Henry Washington. Henry, how are you?
Henry (00:09):
I’m doing fantastic, Dave. Love, love being here with you,
Dave (00:13):
Man. I’m excited to be here too. I’m just excited that you’re my co-host today. I’m excited that everyone is here listening to this podcast. I mean, you could listen to like 10 million different podcasts, but I am glad that whether you’re new or you’ve listened to 900 episodes of the BiggerPockets podcast, that you’re still here with us today learning about real estate and how to be a successful investor. Henry, what do we have in store for all of our friends and listeners today?
Henry (00:40):
So today, today we have an investor story and we share investor stories weekly here to get you inspired and to take action and provide a glimpse into what are real investors doing, what kinds of deals are they doing, and what’s happening right now in the market. So this week we’re bringing on Don’nell Greer, who’s done over 150 deals. You’ll hear about how he started investing in the Dallas-Fort Worth market, how he scaled his business there, and why he chose to exit that market.
Dave (01:08):
Don’nell has such a cool story, it’s just one of those stories of scaling really quickly, and I think he’s gonna bear it all for us. He’s gonna tell us the good parts about it, the challenging parts about it, how you get through some of those difficult times as an investor. He’s also gonna share with us how he did something that I think is super cool, which is finding the right strategy that matches your personality and your personal circumstances, and figuring out really what’s right for him. How he used my private money to scale. So there’s so much good stuff in here that I think everyone listening is gonna gain some value from. So let’s bring in Don’nell. So Don’nell, you bought five houses in 2018 in the Dallas Fort Worth area. Can you tell us a little bit about your strategy with those deals at the time and why you chose to invest in Dallas of all places?
Don’nell (01:59):
Well, first and foremost, that was just the area that I, I currently reside in. And then secondly, I, I’ve been an agent, I was an agent four years prior to that. I had a little analysis paralysis, uh, going in and uh, I mean that’s why it probably took so long for me to get from 2015, 2014 ish to, to then, uh, is because just the reading everything and, and making sure all my boxes were checked, utilize bigger pockets to, uh, understand and learn. The brrrr strategy is, is how I was able to go to buy those five houses as quickly in that, uh, first year. And then from there scale to start doing more fix and flips.
Henry (02:42):
You’re saying things that I think resonate with almost every investor looking to get started. Right. Especially if they’re in a market like a Dallas-Fort Worth, where it’s like, I am just over analyzing everything. I don’t know when I’m ready. And so what were some of the things that finally made you like, yes, now is the time, now I’m ready to do this. Like what kind of eased that, that process for you?
Don’nell (03:05):
I don’t think I actually ever got there. I just, I saw a house and I was like, I, this is the one I’m gonna do just, just for, yeah, I’m going after.
Dave (03:13):
So how Danelle did you learn to even analyze deals in the first place? ’cause I feel like that’s what some people just stop. They’re like, I’m so overwhelmed. There’s so many different things that I could possibly buy. And then they never actually start running the numbers or learning how to analyze deals. So what sort of, how did you gain that experience that you mentioned?
Don’nell (03:34):
Uh, I, I contribute a lot of that to just being an agent and running comps for, ’cause I, I worked with an investor and he finally kind of gave me, but didn’t gimme his playbook. Um, and essentially I, I, I understood how he was analyzing deals and how he looked at comps, and I basically copied and pasted what his strategy was and how he viewed some of these things. And I just basically did the same thing. Uh, and then it, it helped that I had access to MLS to where I didn’t have to go buy like prop stream or, or these other, uh, real estate softwares out there that, that do give or offer comps as a, as as a service.
Henry (04:14):
So your experience as an agent allowed you to practice running numbers, I’m sure. ’cause you were probably running numbers that your clients wanted you to run on top of the fact that you had access to the MLS, and so you had probably the best set of data you could in order to run numbers. And so you found this property and you were like, I’m just going for it. So how did you do it? Did you have any partners? Like what what’d that process look like?
Don’nell (04:38):
I, BiggerPockets was my partner, uh, <laugh>.
Dave (04:40):
Nice. We like to hear that. <laugh>.
Don’nell (04:44):
No, it was, uh, I was like, all right, I got the house on the contract now what? And I at the time was trying to figure out between hard money and utilizing private money in which I was able to utilize private money, uh, to where I <laugh> I did a little audible and instead of utilizing the private money to just buy that one house, I utilized the private money of, it was about a hundred thousand dollars and bought <laugh> all five, the the other five houses essentially is what I did. And so yeah, that’s, that’s basically I utilized, yeah, my first deal was actually from MLS, so I utilized MLS to buy the deal. Once I got the deal, I started, yeah, I was literally all over BiggerPockets forums. Like, what do I, what do I do next? Uh, I’m trying to find contractors. I’m, I’m like, oh shoot, I forgot I gotta get insurance.
Don’nell (05:36):
So all of this stuff is like happening. And mind you, like, again, like <laugh> in my head, I had all of that information and it’s like different if you, if you’re not putting it, putting it to practice. And so, yeah, like once I’m in it, now, I’m, I forgot everything from the previous years of what I’ve read or, or watched or whatever. Uh, so yeah, o once I got in the game or yeah, when I, once I got my, my jersey a little, little sweaty and dirty, uh, is when, yeah, like it, I just, I had to swim is what essentially happened. So Don’nell,
Dave (06:09):
I know you were, you were sort of joking about BiggerPockets being your partner, but I think a lot of people who listened to the show necessarily know how they can use the BiggerPockets website and the sort of broader BiggerPockets community to help them with their first deals. So do you have any advice for people about tricks or things that you did to leverage the power of the BiggerPockets community?
Don’nell (06:31):
Uh, BiggerPockets insurance contacts, right. <laugh>, like I, it literally was the playbook. Um, and I did have a few other investors that I, I asked them like, what were the resources that they were using? But again, like, I’m like BiggerPockets, BiggerPockets basically I, I learned the brrrr strategy through BiggerPockets. I, I, I, I think I was connected with a few hard money lenders through bigger BiggerPockets. So that was, it was <laugh>. It was almost like my, my, my, uh, real estate bible at the time was this, is, this is the source that I’m going to for all this information until I get to these first few deals. And then like figure out, okay, what are the, some other source or like other resources I can
Henry (07:12):
Use, you know, I think that’s helpful. ’cause a lot of people feel like sometimes with BiggerPockets they need to like dive directly into the forums and know exactly where to go look for things. And you can literally just do exactly what you did BiggerPockets house under contract and it will pull up all the articles and you can, you can read through like, the hundreds of articles of people who are in the same position of you. So I, I think that’s great information for people to see. Um, I want to, uh, backtrack a little bit on this deal. So you were on the MLS, you found this deal. Um, how did you find this deal? Was it, uh, listed for a certain amount of days? Like what, what made this deal stand out to you for
Don’nell (07:50):
This particular deal? It was in the market that I was looking in because, uh, the rental rates were pretty, pretty high. Uh, and the, the, the values of houses were just low. And the demand in this particular area is Cleburne, Texas, uh, was just booming at the time. And so I saw the listing on MLS, it popped up and it was at like a 100k or something like that. Uh, and I saw in like, as y’all know, like how, how the agents position or, or make the verbiage on a listing description, uh, like needs work or TLC stuff like that, or, uh, slightly dated or you wouldn’t need. And I’m like, this is all in my name. ’cause I was, again, not trying to get in over my head and I didn’t want anything over like 150,000 to start with. Um, and so I started, I called the agent and I started asking questions, seeing what offers that they had, um, and seeing if the, the seller was interested in, in, well if the price was flexible, we negotiated it down to $80,000 on top of, since I was an agent, I got 3% commission.
Don’nell (08:56):
So I just basically rebated it back to, uh, or put that to towards the sales price.
Henry (09:01):
So, so there’s, there’s so much gold in what you just said because, um, a lot of really analysis kind of went into you finding this deal that I don’t want people to miss out on. So if I heard you correctly, what you said was you knew the area of town that you liked, because typically the price points on those homes are lower, but the rents are fairly high. And so that’s the kind of analysis I think investors need to be doing when they’re trying to pick where they want to invest in. So you already knew if I can find a house and this price part of town for under $150,000, I think I’ll be good because the rents are high and I feel like the price points are good in that area. So then you’re looking on the MLS, you see a house pop up in that area, and then you’re looking at the keywords of that listing and the keywords are indicating to you that this house probably has some level of distress.
Henry (09:52):
And if that house has a level of distress, what you’re really saying is that the seller may be motivated to sell that property at even more of a discount. And so in order for you to figure out if that was true, you read the keywords, saw the distress, and then you reached out to the agent and had a conversation to say, Hey, what’s really going on? And you said, you said, I want to know what’s the seller’s pain point? ’cause if I can solve for that pain point, I can probably get a deal done. And I don’t want people to miss this because A, this is gold, but B, you don’t have to be an agent to do exactly what you just did. You can find a market where you feel like the price point and the rents are gonna mesh for you. And then you can set up a search.
Henry (10:36):
You don’t have to set it up on the MLS, you can set it up on realtor.com, or if you’re not an agent, have an agent set up that search for you. Say, I want homes in this particular part of town under $150,000. And then in the keywords, please indicate or look for these keywords in the, in the, in the comment section. And then as those things pop up, you’ll just get an email with those listings, and then you can have your agent reach out to those sellers and do exactly what Don’nell was just talking about. Like, this is real estate investing deal hunting 1 0 1, and I think you did a really great job identifying your deals. Okay,
Dave (11:14):
So we’ve been talking about how Don’nell got started and how he’s looking at deals, but the question is sort of how is he funding them? What would he do differently in his next partnership? And does he even like being a landlord? We get into all that right after the break. Hey everyone, welcome back. Henry and I are here with investor Don’nell Greer. Let’s jump back into our conversation.
Henry (11:37):
So you got your deal, you got the, the deal under contract at 80 grand, and you’re like, oh crap, now I need money. And so you said you raised some private money, and so what did that look like? Was it somebody you knew? Did you go cold calling people and say, gimme money? Like where did, where’d the money piece come in?
Don’nell (11:54):
It came from a family member. Um, and again, it, it was through, uh, some formal BiggerPockets about raising capital and basically the commentary or what their direction was or what they recommended was comparing it to, well, if you’ve got it in your Bank of America Chase account, you’re only making about, what, two, 3% on that in a savings account. And it’s like, I could promise you 10% interest on your money, uh, which is far greater than obviously what you’re getting now. Um, and that’s how I position it. And they kinda already knew that I was in real estate. It was from a family member and basically just saying, Hey, here’s what you’re currently getting. Here’s what I can give you.
Henry (12:36):
Boom, man, I feel, I feel like you <laugh>, you ran the, you ran the real estate investor play to a tea -I-I-I tell people all the time, if you need money for a deal, there’s probably enough money for your deal in your phone if you are willing to call people and have the right conversation. I tell people, like, when I call people and I’m looking for money, I say, look, I am going to borrow this money anyway. And if I’m going to borrow it, that means somebody’s going to make the interest. And I would much rather pay somebody I know like, and trust this money rather than some stranger who knows nothing about me or cares about me, uh, at all. And so it’s an opportunity for you. And you ran the play, you got the money, you were able to buy the deal, and so then you wanted to exit this deal, I’m sure. And so what was the exit strategy for this deal? Was it a rental? Was it a brrrr, was it a flip?
Don’nell (13:28):
Yep. So we, it was a brrrr So we, I basically did a cash out refi, paid back the, uh, private money and then, uh, rents, rinse and repeat is essentially what, what happened. Um, and from there, after doing that, I realized very, very quickly that I, I did not like being a landlord. Why not
Don’nell (13:47):
<laugh>? Yeah. Tenant started calling and I’m like, ah, man, I gotta, now I gotta find, I gotta find that contractor and then send them back to, to do X, y, Z. Now we’re getting into disputes about bedbugs and all these, these things that you don’t think about, read about really until like, once you get the deal, it’s like onto the next one. Uh, but not like the in intricacies of like actually owning that real estate now. Um, and so that’s actually when I decided I wanted to, to transition from doing the brrrrs to, uh, fix and flips.
Dave (14:19):
Well, Don’nell, I I really like that ’cause I think it’s really important for investors to find strategies and tactics that match their personalities. Like some people, me, I would never flip a house, it’s just not for me. And I have a tolerance for tenant relations that apparently you don’t. But I was curious if you, like, do you think it’s your personality, like it’s just not for you? Or did you have like just a bad luck first experience with being a landlord? It
Don’nell (14:46):
Was, uh, it’s, I think it’s a personality thing. ’cause uh, from the jump I remember going to a house that I own, that I had the direction of the, the rehab. I’m talking to a, a prospective tenant and instead of saying, yeah, we can, when they ask the question is this, is the owner negotiable on price? Well, me being the owner and talking to the prospective tenant, like right there, I’m like, ah, yeah, well let me, let me talk with him and see what he says. And like obvious little did the prospective tenant know that I’m the owner. But again, like my personality is obviously non non-confrontational. So I’m like, oh, I don’t really like, and again, so when we got into tenants asking for repairs that technically they should be responsible for, I’m, I’m basically folding and, and doing it just because I don’t want anybody to be mad at me. So
Henry (15:39):
What I hear you saying is, I won’t bill for this.
Dave (15:42):
Yeah man, I wanna be your tenant Don’nell, I’m gonna come to your, to your property and just ask for a, a rent reduction <laugh>.
Don’nell (15:50):
And yeah, like that’s the, that’s the part where you gotta have either the spouse or a partner or somebody that has that like type A personality that, that they’re like, no, like kick rocks. Like this is, this is what it is, take it or leave it. And me, I’m like, well, like maybe I can work it out. But yeah, it’s just, yeah, again, it was a personality thing for me. Well, well
Dave (16:11):
I we’re just joking around, but I do, I do really think that is super important and honestly impressive. You just need to know what you like and what you don’t like. Otherwise you’re gonna burn out like you, and, and I respect the fact that you looked at this, tried it, said, you know what, there are other ways in real estate that I can make money. So what’d you do next? Did you sell those properties and then go into sort of the transactional flipping side of things or how do you unwind that situation?
Don’nell (16:38):
So I actually still, uh, hold onto them to this day. Um, the next step for me was, I was talking with a
Dave (16:45):
But you hired a property manager?
Don’nell (16:47):
I actually, I actually didn’t because, uh, of all of those tenants, uh, well, I’ll take it back. Four of the tenants were perfect, three were felons. Uh, and what I’ve realized or come across like mistakenly was as a felon, they <laugh> they don’t have a lot of other chances and so they
Henry (17:10):
Don’t wanna screw it up.
Don’nell (17:11):
Yeah. So they’re, they’re like, I, I’m, I started texting him like, Hey, everything okay. Like, I, I hadn’t heard from you. I, I hadn’t heard from you. The rent comes and it’s never late. But at the same time I’m like, this other tenant’s calling and, and like they’re talking about a light bulb went out, but you don’t tell me anything. And he’s like, oh no, I, it’s all good. And again, we had a heart to heart conversation. He’s like, man, I just appreciate you giving me the opportunity because I don’t have any other place to go if you kick me outta here. And so he’s like, I could handle all the repairs or anything that is deficient in the house because again, I don’t want you to be upset to where you gotta raise the rent or, uh, something like that or of that nature.
Henry (17:54):
I know you said something that I think is hugely important that a lot of people don’t frequently talk about. And you said that you have, is it three tenants that are felons that have a felony conviction on the record and they are, um, great tenants. And so this is something that I think is hugely important because we as landlords have the opportunity to provide housing to people who really, really need it. And as landlords, landlords, I think we’re often taught that if somebody has a felony conviction that that’s a red flag, you should avoid them at all costs. Right? And, and that’s just not the stance that I’ve taken with my portfolio. Now I’m not saying you want to go out and rent to anybody that has a felony conviction. It’s not just, it’s not just about that they’ve made a mistake. It’s about what is that mistake?
Henry (18:48):
When was that mistake? And, and then you make a call because you could be providing somebody an opportunity for housing who doesn’t get much opportunity for it. I have a tenant who is a felon. He spent 14 years in prison for a nonviolent drug charge. And when he came to us to look at our place, he said, guys, I’ve spent several thousand dollars on application fees, uh, in order to look at places just to have them turn around and tell me no, uh, not based on anything other than the fact that I’ve been to prison. And so he, uh, he, he just wanted a shot. And so we pulled his record, we looked up everything we saw. It was a nonviolent conviction. He served his time. We met the guy in person. He seemed like a really great person, and he was remorseful for what he did.
Henry (19:46):
And he said, I just need an opportunity. And so we gave him an opportunity. And this guy has by far been the best tenant I’ve ever had. He mows the grass for the whole place. There’s an elderly woman next door, he mows her grass, he takes care of her. Like this guy just needed a shot and we were able to give him that. And so I love that that’s something that you do because I want other people who are landlords to consider this, like, do your due diligence and make sure that that person fits. Obviously I’ve had a, I’ve had a convicted felon who wanted to live in a multifamily, but his crime was, um, a little more violent. And so we couldn’t allow him to live in that multifamily ’cause there’s other families that live there. Um, so you have to do your due diligence, but there are people who’ve made mistakes who just need an opportunity. And we as people who provide housing can, can provide that, that opportunity. And I just love hearing somebody who didn’t just see a felony conviction and turn somebody away. So thank you for,
Don’nell (20:46):
For doing that. As I transitioned from, uh, holding these and not hiring a property manager like I probably should have, but, um, I was talking with a buddy of mine <laugh> to, uh, to see how we can scale it up. Because again, it, I was, I was doing a cash out refi from these brrrrs, but at the same time I was, I was putting, putting it into another property versus like, not necess, well, not necessarily going into my bank account. Uh, so my net worth was growing, but not my, like, not my active income was growing. Um, and so talked with a buddy of mine and, and we were trying to figure out how to scale it up. And so he, he put me in touch with a, uh, guy. He, he had sold his scrap metal business here in Dallas, and he was sitting on about 30 or $40 million and he was, he’s been ready and looking to get into real estate.
Don’nell (21:40):
So we, we met him over coffee one day, uh, I think it was maybe 30 minutes, and I think he showed up like 15 minutes late. Um, and so he, he heard all he needed to hear. We had the, the, the documents just kind of showing like what, what I’ve done, like the ROI he could potentially make. And that day he basically lit, lit me $160,000 and it was like, what’s, what’s the catch? And, uh, no, like that <laugh>. I’m like, are you gonna follow me? And like, what, what’s what’s happening here? Like, uh, don’t
Dave (22:13):
Ask any questions, just go
Don’nell (22:15):
<laugh>. Yeah, no, I’m like, in my head I’m like, is is he gonna kill me after like I’m, this can’t be true. ’cause again, like I’m like, that’s $160,000. Like not a, like if I lend you $200, like next week, two weeks from here, I’m, I’m probably like, Hey, like, where’s that $200? And like the, the beau the beautiful part about that was he, half the time I was trying to track him down to like give him updates. ’cause I’m like, man, he’s, he’s reached a level of money that I know nothing about. Uh, so anyway, we, we’ve utilized that $160,000, uh, to, to flip the first deal. He was all on, all on board from there, uh, when it was all said and done, he was, I think he was all in $750,000, which again, uh, I think we went like three months of sending him a text, trying to call him it, my man’s this ghost, like didn’t hear anything from him. And I’m like, that’s crazy that you’ve got all this money sitting in an account with basically a stranger you met over coffee. Um, and so again, like I used to hear and read like people raising money and it was just like, nobody’s gonna give you a hundred thousand dollars. Like, that’s, that’s, that’s crazy to think about. Uh, but again, like as I, I I’ve been on this real estate journey and just started asking, but also utilizing my experience to back like the reasons why you should basic, you should, uh, lend to me.
Henry (23:45):
I feel like you, you did all the things right, right? You went to this person who you were going to say, I would like a piece of this umpteen millions of dollars that you just had, but you didn’t just say, sir, give me money. I heard you say you went to him and you had kind of like a portfolio or some documentation showing your success history. And I think that that’s huge. I teach people to do that all the time. Every deal you do, just make it a slide and a PowerPoint and keep that PowerPoint running. Just a picture of the property before and after what you paid for, what you put into it, what you did to exit it. Like that’ll go a long way to showing these people who have this money, who want to make more than you know, 1% in the bank.
Henry (24:24):
Like I’m sure you showed him your success history and he was like, yeah man, let’s do this thing. So if you’re prepared and you speak from a place of confidence and uh, and you can talk about, hey, this is what we do, this is what we look for, this is how we monetize it, and this is the history that I’ve done. I think you’ve got a lot of opportunity to raise private money. And so I feel like, man, you ran, you ran that play to perfection. So you raised this private money, are you using it, were you using it just for flips at that point?
Don’nell (24:51):
Yeah, so I was, it was only flips. He told me to, it was we using a, a analogy of red light, yellow light, green light. And the, I had the green light. He was like, just go buy as much as real estate as you can. And which then that’s what I did. So we started pretty slow again. I’m like, is this, is this real life? Like was that a fluke? It’s almost like that kind of like a imposter syndrome in the sense of like, am I good enough? Is this real? Like, was that beginner’s luck? And so like, I kind of had a little self doubt in myself in the sense of like, <laugh>, if we lose on the house, like what, what happens then? Like, is he gonna pull all this money out? So like I’m, I’m like over analyzing deals just to make sure like this is the one, because again, like I, I, I don’t wanna lose this, this opportunity, that opportunity that, that I’ve been given and that I’ve basically been reading about this whole time that I genuinely didn’t believe I actually be done.
Dave (25:45):
But Don’nell, I feel like it’s that attitude that makes people want to invest with you, right? It’s ’cause like, as someone who invest in private deals, I don’t want someone who’s like coming in there super confident over, you know, over aggressive saying that they’re, they’re gonna do everything super well. You, you wanna invest in the people who are gonna take the responsibility of managing someone else’s money extremely seriously and are gonna treat it with the respect that you were talking about. Obviously you don’t want you having imposter syndrome, you know what you’re doing. But I think that mentality of, of being so careful of a steward to someone else’s money is really what a lot of passive investors are looking for.
Don’nell (26:28):
Yeah, no, that is, I think I go to every deal with that mindset of if it comes down to it, like what would that look like if I lost, what would that look like? What would all these steps look like? And so a lot of that is, goes into my underwriting in a sense of just making sure x, y, and Z are checked. And then now do we have multiple exit strategies, which when the interest rates took a, a spike in the wrong direction, that’s the obviously when things kind of went haywire.
Dave (26:53):
So tell us a little bit more about that Don’nell, you know, what happened to your business when interest rates started to go up and what did you do about it? It was
Don’nell (27:02):
Rough coming from, it’s like I went from being extremely like, tedious about everything, making sure like I’m, I’m, I’m being careful in deals to like, it, it almost was like I started putting on that, that, that that cloak of Superman and was like, I can’t lose. Like I’m, I’m crushing it now. Like I am I him like <laugh>. It’s like, yeah, it’s, it’s almost like a invincibility, uh, until like the interest rates, uh, hit and then we were, I think we’re sitting on 17 houses. Uh, and because our strategy, our strategy at the time was we were selling to a few hedge funds. We were selling as is. We were just listed on the market and people were just buying ’em up. So a lot of those re those houses that were sitting, uh, were not touched and they, they needed a ton of work.
Don’nell (27:57):
Um, and so once that hit, now we found out that buyers are way more picky now, now there’s a lot more competition that we we’re having to take a whole step back to, to assess all of this situ, like this whole situation to now make a plan. And at the time we had lost our, before we had crews, and then as we were just like blowing through inventory. ’cause everything was selling and obviously it was, in my opinion, it was just a momentum market, at least here in DOW everything. I felt like time just stopped once, uh, the, the interest rates rose. And again, like you, I we, you kind of could hear the chatter, uh, from like we were utilizing hard money at the time, uh, from our har hard money lenders kind of pulling back too. Um, and so yeah, that affected our business, uh, even to the point to where our partnership was dissolved, uh, based on just, uh, differences. And I think a lot of it was had to do with too many cooks in the, in the kitchen to where somebody wanted to do this, somebody wanted to do this, and the other person wanna do that. And it just kind of made things difficult to where everybody could work together.
Henry (29:07):
Alright, everyone, we’ve gotta take one more short break, but when we come back we’ll hear about how Don’nell is evaluating markets today. Stick around. Welcome back. We’re here with investor Don’nell Greer. Let’s pick up where we left off.
Dave (29:21):
Sorry. Yeah, so, so this was in 2022, I assume, just based on the timeline. Yeah. And so at that point, who were your partners that you were working with? And I’m just curious ’cause partnerships are such a challenging part of real estate and a great opportunity too, but like, who are your partners? And were some of the cracks that sort of evolved in 2022 apparent to you before interest rates go went up? Or was it sort of the stress of this new paradigm shift that started to cause some issues with your partnerships? It
Don’nell (29:55):
Was, yeah, it was, it was after that. And now again, we were, it was arguments about who was doing what. And I think the partnerships are extremely important and needed in real estate if you want to get to a certain level now, if you just want to be like two, three deals a month, yeah, you probably could do it on your own. But, uh, <laugh> being as ambitious as I was, we were, we were probably around 20 to 30 a month at the time, uh, deals per month. Um, and so yeah, once that stuff started cracking and, and, and buyers what weren’t buying like they were, uh, is that’s where yeah, just differences were just spotlighted. I feel like. Um, and again, just going back to your question, uh, I think it just, you have to have clearly defined responsibilities in a partnership because ours was pretty loose.
Don’nell (30:55):
It was like, oh, I know this guy we’re cool. Like, I like what he does. And then we had another, a capital partner come in from uh, uh, Massachusetts to where he saw what we were doing and he was, he wanted to be a part of it as well. And so again, like we just kind of came in and everybody was doing their own thing and nothing was really defined until like, there had to be, it is almost like the come to Jesus meeting <laugh> of, alright, like, what, what exactly are we doing here to like get through this inventory so we can continue to move on? And it just, it was just too many differences at the time to where we could even reconcile, uh, what was going on.
Henry (31:37):
Yeah. So it sounds like you, to backtrack, it sounds like you found your private money partner, you went out there, you started doing deals, and then somewhere along that path you decided I, I can do more volume and I could do more volume if I had partners. So it sounds like maybe you found another investor in the area that you partnered with.
Don’nell (31:55):
Yep. So, so it was, so it was a friend of mine, so initially it was me and a friend, and then we partnered with an, uh, the, the guy that sold his scrap metal business. Uh, we went with that partnership for about 18 months. And then from there we met another guy, uh, who was I guess even further along and, and he was ready to, he was ready to put literally millions into real estate. Uh, and that’s when we actually, we were buying houses in cash and we transitioned to, uh, leverage. Uh, it’s like, well, why don’t y’all just buy 15, 20 houses and obviously ultimately we got to like 25, 30 a month doing this this way. Um, and so yeah, that’s how we transitioned from buying all cash to now we’re, we’re leveraged, uh, through hard money lenders. Okay,
Henry (32:45):
Got it. So you were buying cash and then refining them, putting ’em on leverage?
Don’nell (32:49):
Yeah, well we were buying cash and just flipping. We, we were just flipping from at that point and then we, we were still flipping, but we just, we utilized leverage and then with, with that leverage, we, we, we found that,
Henry (33:02):
So the market shifted when you started to use leverage <laugh>? No,
Don’nell (33:05):
No, no, no. Well, thankfully, no. Uh, we, we did a a a huge run, thankfully. Um, but unfortunately we were left with, yeah, it was about 17 houses that had leverage. So now you’ve got these hard money lender payments coming every month on top of, now we have to enlist contractors to get some of these, these houses rehabbed to get ’em on the market, uh, to get ’em sold and off the books. So, um, yeah, it was, uh, yeah, again, it was eye-opening because at the time I was, I, I mainly was doing the acquisitions, the, the, the managing projects and dispositions because our business was built off of relationships, so we didn’t, we didn’t spend any money on marketing. Um, so yeah, like that’s where it was like, all right guys, I’m, I’m, I’m, I’m trying to figure out like whose role is what, and again, like I love partnerships. I’m in, I’m still in other partnerships, but just going back to making sure you just have clearly defined roles and responsibilities versus like trying to wing it. Like I’m, I’m, I’m usually used to
Henry (34:17):
So it sounds like if, if I’m hearing correctly, you were doing a lot of hotels. It sounds like you were buying ’em so cheap that you were able to not have to do much rehab, stick ’em on the market and you were making a profit. Interest rates started to shift and buyers could be a little more picky. And so now you’re like, okay, we need a plan. And that plan was to go ahead and bring in the contractors, renovate everything to where the point that it needs to be renovated to flip those properties and get ’em off the books. Yep. And you were able to then unload the properties by doing the full rehabs and flipping those. How’d that go? Did you make money on all of ’em? Were you losing some money? What did that look like?
Don’nell (34:52):
Uh, we lost money on the majority of those. Uh, but, um, the one thing I do, I, I, I guess I love that we were able to accomplish was our investors, if we had any investors, ’cause we were trying to raise other pro out, like outside capital because we were still looking into doing like land development and some other deals. We didn’t allow them to lose any money. Uh, and we stayed true to our promise. So whatever their principle was, they were paid back. Plus the interest that we promised
Henry (35:26):
Fact is why you are a person people are gonna want to continue to do business with. I tell this to students all the time. You have got, if you’re gonna borrow money, private money, you have got to make sure your investors get made whole. Whether you lose money or not, that is first and foremost. ’cause if you ever want to be able to borrow money again, you’ve gotta make sure your investors are made whole. And not everybody does that Don’nell, like not everybody will bite that bullet. There’s a lot of people who start making calls and asking for more money to try to keep the ship afloat and borrowing from Peter to pay Paul. And sometimes you just have to bite the bullet and you make sure your investors are made whole. And to, to hear someone say, look, we started to scale. We got into some trouble, we pivoted that pivot meant we lost money, but my investors did not lose money. Like, that’s the kind of operator that people want to work with. And I hope people listening to this like understand it’s not just about borrowing money to scale, it’s about borrowing money to scale and staying true to your word, no matter what happens with that deal.
Don’nell (36:28):
Yeah, I mean, through all of that is then we shift it to different markets. ’cause obviously now you’re, I think Dallas, Dallas, the Dallas market was tough because now you’re battling high interest rates and you’re battling high taxes, um, on top of like these inflated sales prices. So finding, trying to buy deals and trying to sell deals was, it was, it was tough to call. And so we shifted, shifted to the St. Louis market, Raleigh Durham, North Carolina, um, and even started looking into Nashville, Tennessee, uh, and St. Louis market. That was just a unique place just because it’s like taxes are like two, two grand a year. And I’m like, that’s, that’s two grand a a month in Texas, like <laugh>, um, on top of like, you can buy a, a livable house for $75,000. Like if you try to buy a house for $75,000 in DFW, it’s, yeah, you’re definitely in, in the hood like Oak Cliff or, or stop six or one of those places. So, um, which again, like even the rental, the rental rates in St. Louis was like, I’m like, is this really like somebody, somebody playing with my emotions right now.
Dave (37:44):
That’s awesome. So Don’nell, you obviously went through some setbacks and I’m, I’m sorry to hear that. That’s never fun. But how would you say you got through that and bounced back to kickstart your business?
Don’nell (37:59):
Yeah, it was more so just utilizing the mastermind that we were a part of because it was like, a part of that was, man, we’re <laugh>, we’re taking a beating. Like, nobody knows what’s happening in the market. Like what are other people, what are other investors experiencing? It was just eyeopening to see we’re not the only ones that, that we’ve experienced this. There’s like, there’re tons of others out there that are experiencing the same thing and now they’re just basically sitting on, sitting on the sidelines and, and waiting to see what the market does or like us just expanding to different markets to see if we can still real estate invest, uh, at scale as we once were doing, obviously just in a different market.
Dave (38:41):
Well, thanks so much for joining us today, Don’nell. We really appreciate you join, uh, being here. I
Don’nell (38:45):
Appreciate y’all. Thank you, sir. I
Dave (38:47):
Appreciate you. Or if anyone wants to connect with Don’nell or know to find more about him, just check out our show notes or the show description below for BiggerPockets. My name’s Dave Meyer, he is Mr. Henry Washington. And we’ll see you for an episode real soon.
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