On today’s episode, our guest Carlos Gutierrez is based out of South Carolina. He started flipping homes and eventually made his move to commercial real estate. He started with a 20 unit deal and since then has doubled his success with recent deals. He has an avid passion for motorcycles and he owned a shop Deltona, FL.
In today’s episode, Carlos discusses how he entered the real estate game, details on his first house flips, how he found his first 20 unit deal and his future plans. He also shares with us, his goal with multifamily properties and how he found his formula to success.
Episode Highlights:
- Details on His 1st Deal
- Recent Deals on Multifamily Properties
- What Book Motivated to Enter the Multifamily Sector
- His Future Plans
Connect with Carlos:
Email: cg4properties@gmail.com
Facebook: @CG4propertiesllc
Office #: 843-934-4250
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TRANSCRIPTION
Intro: Hey guys, and welcome back. Today I am interviewing Carlos Gutierrez. I think Carlos and I share a similar path as well as so many other real estate investors. We both started in flipping homes and ended up deciding we want to scale up and start doing something bigger, hence getting involved in commercial real estate. So, I think this is the standard evolutionary process and progress of the typical real estate investor. And I’m sure many of you guys are either in this position or have been in this position in the past, which is why I think this episode is super important. So have fun, and let’s get started.
Lady: Welcome to the commercial real estate investing podcast with Don and Eden where we cover all aspects of real estate investing with special attention to off-market strategies.
Don: Hey, Carlos, it’s nice to have you here. How are you doing today?
Carlos: Good. How are you guys doing?
Don: I’m doing just fine. I just got back from North Carolina looking at a property that is close to South Carolina, obviously, which is where you’re based off. How are things in South Carolina? I can tell you that when I went to Charlotte right now when I was on the flight, there were a few tornadoes that just hit the city. So, when I landed in Charlotte, everything was like a mess.
Carlos: I’ve lived here in Charleston probably for almost five years. We’ve had experiences with some close tornadoes in the area. When I mean close, I mean, like two or three miles down the road.
Don: Wow.
Carlos: Yeah, so we had one real bad one, think that September of 18. Took the roof off of the DMV building, a place that sells trailers and cars, flip trailers upside down. It was destroyed like Main Street, which is Machs Corner, which is five to 10 minutes up the street from where I live. I’ve lived through a lot of hurricanes because I’m originally from Puerto Rico and then grew up in Florida, so hurricanes don’t bother me as much and you have time to prepare. And I tell you what, man, those tornadoes are scary. I was telling my wife the other day I was going to build one of those doomsday bunkers underneath our house. You literally have no time. And by the time they said there’s a tornado on top of that you got less than a couple of minutes.
Don: Yeah, to get in right? So, I know you flip a lot of homes in South Carolina. Did you ever have any situation where you had one of your homes get impacts from any type of bad weather whatsoever?
Carlos: I’ve been fortunate enough to have any disasters hit any of our houses or any of our commercial property. We’ve been through hurricanes, we’ve been through tornadoes, we’ve been through some flooding and I haven’t had anything major other than maybe a couple of our units getting flooded.
Don: That’s a good thing. I know you flipped a lot of homes. So, you’ve done like over 20 flips, right?
Carlos: Yeah, yeah.
Don: So how about you tell us a little bit about that and how it started. How did you get into real estate and what was your first deal and how did they go?
Carlos: I lived in Florida for about 20 years and before my real estate career, I had a big passion for motorcycles, and I own a small motorcycle shop in Florida in a place called Deltona, Florida. So, it was a really good solid mom and pop shop business. We did great for about three to four years. And then, of course, the ’08 recession happened. ’09, I started seeing the wave of revenue was split in half the landlord of that we were in a retail shop and the landlord was, there are people closing up left and right. So, going through that recession, I learned that I was in the ‘want’ business and not the ‘need’ business, which taught us a real valuable lesson. You might want the motorcycle, you might want a jet ski or a boat but when it comes time to a bad recession or anything like that, you usually have to let go of all of it. I wasn’t in the real estate business then but I did see it. I saw people that were living in $75,000 houses, which is kind of normal in that area, and selling it and buying a $200,000 still having the same job. I was just like this doesn’t make sense.
Sure enough, the recession hit ’08 ’09 and those same houses that were selling for $200,000 are now selling back to $75,000 and even less in some instances. So, I met my wife in Florida and we moved to Northern Virginia. She’s from Northern Virginia. She wanted it to raise kids there. The economy was really bad in Florida so we moved up to the Northern Virginia/ DC area. I saw the real estate market being dilapidated in Florida. I was like when I get to Northern Virginia, I’m just going to start looking. I started looking with some realtors. They walked me away from a lot of houses, probably three or four houses that I could have made some good money, so I decided to get my real estate license. I said, if I’m going to do this, I’m going to do this myself, having that small mentality at that time, but I saw opportunity out there. I bought a HUD home for $68,000, put about 24 to 25 grand into it because I was doing a little bit of the work myself, which I don’t recommend, but since it was my first I had more time than money, right?
Don: And you wanted to learn.
Carlos: And I wanted to learn. Yeah. And I knew a little bit about construction because I had done some construction before.
Don’t: You invested $92,000 in the property, right?
Carlos: Correct. Yeah, I was able to actually talk to a broker that was like a hard money lender at the time. So, she did the loan and we worked everything out, was $92,000 into the property maybe a little bit more with some holding costs. And it took us about a month and a half to do all the renovations. Three days before Christmas, I put her on the market. And I had two or three offers within a couple of days. I ended up selling it for $142,000.
Don: $142,000. So, you cleared about $30,000 closing costs. Yeah, so that’s a decent return. You can’t get that done easily today.
Carlos: No. Back then, if I would have known what I had in my hand, I could throw a dart and hit a good deal back then. They were throwing houses. I didn’t have enough money to buy them all.
Don: Yeah, didn’t we all I mean, we’re talking about a time where you could pick up a house for literally cents on the dollar. And I was thinking that if I lived this era all over again, I would have never sold anything. My biggest regret is selling real estate. Everything that I ever did in real estate that’s one thing that I’m truly sorry about, the one mistake is I sold real estate. I should have never done that, I should always keep it. I don’t believe in selling it. I started as a wholesaler. And so, at these times, we were making good money.
And now in 2017 and 2016 people started hearing there’s a lot of money in wholesale. And, and so they got into it. And there’s also podcasts and audible and so people can get information. Very easy way. So, then it got saturated. I know what a flip is. So, you’re averaging between $40 and, and $50,000 if you’re doing well. So, you’re making $200,000 a year, but that’s the point where you realize that essentially you have a job and that’s not going to get you anywhere. So then move up the ladder and start investing in some bigger things. That’s when things change and you move up to commercial real estate, right?
Carlos: Correct. Yeah. So, my whole mentality from the beginning is kind of the same thing that you were just talking about is holding for the long term. But I wanted to flip houses to get a big nest egg to start putting it down on bigger properties and holding them for longer. I didn’t want to hold single families for a long time, but I wanted to buy and hold multifamily. So that was the goal from the beginning. I read a book, a real good book back in probably ’09. Dave Lindell’s ‘Multifamily Million.’
Don: I went to a seminar.
Carlos: Yeah, me too. He’s from the New Jersey, Philadelphia kind of area. So, I went to one of his three-day boot camps up in Maryland.
Don: I went to his three-day boot camp in Tampa. Yeah, well, let’s get back to the topic. So, you read Dave Lindell’s book 2009, multi-family millions and then that makes an impact and you decide to start investing in multifamily right?
Carlos: Correct. Like I said, I’ve always wanted to invest in multifamily. I was never one of raising money from other investors. Obviously, I learned later that that’s probably the best and easiest way to do it. But starting from the beginning, that’s kind of how I was. So, there was a transition around our lives back then in ’15, where we wanted to move out of DC. Because my wife was from DC as from Florida, I was tired of the snow, she didn’t want to be in Florida. So, I said, Let’s pick somewhere in the middle.
So, we ended up in a little town called Summerville, South Carolina, which is a market of Charles place that’s growing leaps and bounds. While we were here visiting, I came across a building that was empty. So, I wrote it down on my phone, and I said, when I get back home, send the owner a letter, and he called me back like two or three weeks later, so I said, that’s kind of where I made the transition from single-family to multifamily.
Don: So, did you buy that?
Carlos: Yeah, so I sent the guy a letter. He called me back about two weeks later. So, he’s like, “You sent me a letter, you were interested in the 8-plex?” And I said, “Yes.” He actually owns 20 units on the street. “Are you interested in buying the eight, or do you want to buy 20?” I said, “Hey, we can come to an agreement on all 20.” So, this is a very slow process. So, it took about six months, but we ended up buying the 20 units.
Don: I want to get the numbers from you because I think that that helps the audience here that listen to this show to basically feel like they’re inside your shoes when making the decision of pulling the trigger. And that’s what I want to get.
Carlos: And what I like about these podcasts is it opens people’s minds and it gives them hope to be like, Hey, listen, this guy did it.
Don: I can do it. Yeah, exactly. That’s what happened to me. That’s how I started.
Carlos: Yeah, that’s what happened to me. I was reading books and looking at podcasts and going to seminars, and finally, I was like, there’s not that much of a difference between that guy doing 200 units and me, all I’ve got to do is just go after it.
Don: Exactly, exactly because sometimes we feel like real estate investors are superhuman and they have natural powers, but we don’t, we just try.
Carlos: I agree.
Don: It happens to be that the potential of success in this industry is humongous. If you make money here in real estate, then you make a lot of money. The fact of the matter is that some people work harder than us, make less money than us and they’re smarter than us.
Carlos: That is correct. And I still put on my old dirty jeans and still go to work. I’m no different than anybody else. I remember reading Robert Kiyosaki’s ‘Rich Dad, Poor Dad,’ he knows the difference between successful people and not successful people is action. Some take action and some don’t take any action.
Don: Some just talk. It’s not enough to talk. You also need to do something about it, right?
Carlos: You gotta do it. Right. The 20 units were all on one street. It was a six-plex and eight plex and two triplexes, that 20 units. So, we were able to purchase that for $750,000.
Don: Okay, so question. these units, they’re all adjacent to each other?
Carlos: No, they’re all right next to each other.
Don: But they have different addresses.
Carlos: Correct. They all have different addresses. This building has a TMS number.
Don: Wow, that’s cheap. For my audience, if you guys want to know if looking at something that’s cheap, so it’s very easy to understand that. So, what you need to do is with this number you go to any website like BetterPlaces or like City.com and you can just find out about the median house value. So, try to understand how much your house is worth, right? And then despite the fact this is not a house, this is somewhat of an apartment, but it still gives you a ballpark. So, you could see that a house in Charleston is going to be worth about $150,000-$140,000 right?
Carlos: Yeah, 150 the median household income and some of them are like 186.
Don: Yeah. You can see that if you’re getting anything or you’re getting a door, right condo or an apartment for $37,500. Doesn’t matter what the situation is, even if it’s completely distressed right and you got to put $10,000 at CapX to each one of them. You have a lot of equity, you’re just getting something that’s worth a lot more money, right?
Carlos: I was modest at my value and I thought they were worth about 50 grand a door. I get called literally every week to sell these things for $1.3, $1.4 million. But I wanted to stay conservative. So even if they were worth $50 grand a door, I got 13 five of equity built into our door, got two $300,000 worth of equity. When we estimated the rehab obviously the eight plex was going to take everything of $80-100 grand to get it renovated because it needed about $10 grand a door and needed a roof and they needed some brickwork and they needed some asphalt work. So that right there took most of the, if not all the renovation because the other 14 units just needed some carpet paint and just TLC.
Don: You’d say that we closing costs nothing you got in for $900,000 including renovations?
Carlos: Give or take. Yeah.
Don: So how much time did it take you to stabilize it and get tenants in?
Carlos: Take the eight plex out of its 12 units that were available on day one. Out of those 12 units, six of them were rented. Those other six units, we got up and running within the first three months. So, what we did was a combination of some equity and some cash flow to get the rest of the renovations done.
Don: Nice. And so how much did you raise?
Carlos: We actually got a local bank to give us a loan of 80%. So, we had to just come up with 20%. $150,000 and when we raised $50 more for the renovation.
Don: Okay, okay. So as far as the loan, what kind of bank did you go to?
Carlos: So, we went with a local credit union actually, and we’ve actually developed a great relationship with them now. So, all I’ve got to do is call them, “Hey, I got this deal. I got this.” “Okay, how much do you need?” type of thing.
Don: That’s exactly why the rich are getting richer.
Carlos: Correct.
Don: You really duplicate that success into two other deals, right? So, you bought another 41 units, right?
Carlos: Yes, we had the major three on this deal, so, we were able to pay the investors back, I was able to keep a property for the long term. Property cash flows about a hundred to $110, a door. 2-$3,000 comes in a month. I get a ton of depreciation on taxes, and I get mortgage-paying down.
Don: And you get appreciation.
Carlos: And I get appreciation. Yeah, because I get calls all the time for $1.4-$1.5 million.
Don: Yeah, real estate appreciates all the time. You can go through a crisis, you can go through any ordeal really in the market, as long as it’s not Doomsday, real estate is going to appreciate because at the end of the day, there are more people that are inhabiting the planet every year, so they’ll need somewhere to live. And that’s what I will say is always appreciating. And people always ask me, “You’re heavily invested in real estate, what if there the market crashes? Do my properties cash flow?” They cash flow. So that’s it, I’m protected. I don’t realize the loss unless I sold it. And if I’m not selling it, then I already know that there’s a crisis.
What I wanted to say before was that It took you six months to get that deal from being in the works to being finalized. And now, you have managed to duplicate that success into two other deals of 41 units and 64 units. And so, what I want to ask you is how easy was it to duplicate the success in relation to the first deal?
Carlos: Very easy. So, once you get a deal under your belt, getting the experience and the deal under your belt and getting it done, is what gives you that momentum and gives you that confidence to know that you can do it. Once we got this deal done, and we refinanced everyone out and the investors were just waiting for us to find another deal, it was so easy. There were no hiccups. I was almost like afraid. I’m like, “why is this going so easy? I’m waiting for the hiccups. I’m waiting for the phone call. I’m waiting for the deal to fall through” and then never did. I remember one investor telling me one time it’s like I invest in multifamily because it takes the same amount of effort to flip a house and it is to buy 100 units.
Don: It’s exactly that. You have knowledge. Knowledge is really what is worth money here. The actual knowledge is acquired when you do a deal. People ask you how come it’s so easy for you to make money? It’s not so easy. It’s just that knowledge is critical. The knowledge is a goldmine.
Carlos: Right. It’s like anything, once you’ve gone through it, you know what to expect and you have the confidence to know that you can do it. Before you do it, you’re like, oh, maybe I can do it, maybe I’ll fail. Once you do it once and if you fail again, it doesn’t matter. Because you know, eventually you’re winning. So, it gives you the confidence to go through the bad times as well.
Don: Exactly. I love that. So, what’s your plans for the future now that you’ve done a few deals and you already have a decent portfolio?
Carlos: I keep rinsing and repeating. I keep doing the same thing until the market tells me otherwise. Now it’s just a little bit harder to get these types of deals. They’re out there, don’t get me wrong, but there’s a lot more competition. But there’s still deals out there to be made.
Don: There’s always is. I agree.
Carlos: So, we went from that 20 unit and we bought 41 units. We purchased that one for 1.3 million. They were selling it for, it’d been on the market for a while. We’re just back and forth with the broker and we ended up at 1.3 million.
Don: Nice sounds like a good deal too.
Carlos: I’m still in a, what I like to call a small town. The other deal that we bought was in Hampton, South Carolina, which is even a smaller town, but they’re all growing. So, we bought that deal for 1.3 million about $31,000 a door and deals around it were $45-55 grand. So, I was very surprised that the investor was selling it because he bought it at a good deal because he bought it and the foreclosure. He bought the note as a foreclosure.
Don: Okay, so I mean, I think you’re doing obviously awesome and so I’m sure there are a lot of investors trying to get in touch with you. So, what would be the best way for anybody to do that in case they want to learn from you, or invest with you?
Carlos: So, the best way to get in touch with us is probably by email or by phone, cg4properties@gmail.com or you can call our office at 843 934 4250. And we have Facebook or things like that.
Don: Awesome. Okay, Carlos. So, thank you very much for being on the show today. I appreciate you coming and sharing all your insights and knowledge with us. And I hope you have great success and whatever it is that you’re going to do in your real estate career. And good luck in the future. Stay in touch.
I appreciate it. Thank you very much for the opportunity. Have a good day.
Don: You too. Thank you. Bye-bye.
Carlos: All right. Bye. Bye.
Lady: Thanks for listening to the real estate investing podcast with Don and Ed. Stay tuned for more episodes. Till next time.
