130 Rentals Later, He’d Do It Differently w/ Joe Meares

Joe Meares

Like the company the bank made up a rule retroactively and I was just like, I'm gonna be a number. I'm always gonna be a number at this place. They don't care about me as an individual and the fact that I'd already been there for like seven years working. so I started reading about side hustles and like ways to make money on the side. And when you do that, as I'm sure you've realized, like a lot of times it points you towards real estate. And so I had heard that there was a guy up in our Boston office.

Who'd been investing in Philadelphia since 2009 and was really killing it. So I pestered him to get on the phone. And I remember because I was on vacation with my family, went out into the parking lot of the hotel, got on this call with him, and he described his process and it was super straightforward. He was just buying houses that were a little dilapidated, fixing them up and then renting them out. So it was easy enough for me to understand. That initial phone call was August of twenty eighteen.

And I bought I bought my first rental property in October of 2018 out in Indiana. And I just kind of started buying up properties. I bought four that year. I bought eight the following year. And then he and I liked working together so much that we ended up becoming business partners. So in 2020, during the pandemic, I started buying apartment complexes. Bought a nine-unit, a 12-unit, and a 24-unit. Fast forward a few years.

I actually ended up getting pushed out of the bank in November of twenty twenty-three. And I had this decision to make of like, am I gonna get another job? And I actually started interview processes with a couple other banks. Am I gonna get another job or am I gonna try to do this stuff full time? and I decided that if I didn't do it then, they call it the golden handcuffs. Like you make good money on Wall Street, so it's hard to it's hard to leave.

And I just decided I gotta I gotta try this, otherwise I'm never gonna do it. and so I left, and now I would say I spend my time in three main buckets. The first is like owning and operating the properties we already have, the second is you know looking at new deals, and the third is that I do consulting work, and I'm sure we'll get into the details of all this stuff, but I'm gonna stop talking because I've been

Jeff Albaum

Dude, I love it. I love it. That's amazing. So I I want to go back to that first deal that you talked about in Indiana. Can you share the numbers of of like what that was, like purchase price, rehab costs, and then what it rented for?

Joe Meares

Thank you. Sure.

Yeah. Absolutely. So that first deal was a two bed, one bathroom. And it's so funny because if you look at it, like it's it looks like the cartoon idea of like a little cottage house. Like it's so small, it's less than a thousand square feet. But it was I paid fifty thousand dollars for it, five zero. it actually wasn't that bad on the inside. I I it cost less than ten at the time to renovate it. This is back in twenty eighteen.

In a small tertiary city in Indiana. So the prices were way lower to renovate back then. And we painted the walls, fixed the flooring up a little bit, put in some new appliances, like nothing crazy. and it rented out of the gate for if I'm if I recall correctly, either like seven twenty five or seven fifty. But that property, if you if I look at like a zest like a zesttimate, like which is not accurate, but directionally it's it's right, is like around a hundred K now.

And it rents for nine fifty now. So it's been a good little rental. but yeah, that's what's possible in these tertiary, these smaller, you know, fifty to a hundred thousand population cities.

Jeff Albaum

Dang.

And were you flying out and doing the work yourself or like how did that do you have a property manager? Who was who was the boots on the ground?

Joe Meares

Yeah, that's a great question. So when you invest out of state, I call it the core four. You definitely need to have these four people, in my opinion. You have you wanna ha especially if you have like a serious W two job, you need a property manager and he's the he or she is the most important. You need a contractor, real estate agent, and a lender. So when I started out there, I was going out there.

I actually bought this property site on scene, but there were a lot of pictures online. And the reason the reason or the way that I was able to get comfortable doing this long distance, well, there was a few things, but the main thing was that at the beginning of my career, I had bought stocks that were like penny stocks and put, you know, several thousand dollars into them and saw them go to zero. Like

the in investment vanish, right? So in my mind, I'm like, well, if I'm putting down twenty five percent on this house, right, it's twelve and a half thousand dollars. And the worst case scenario is that like I'm breaking even every month, like maybe not cash flowing, but I still own a house, right? It's not gonna go to zero. So that made me a lot more comfortable doing it from long distance. But to your point, yeah, I would go out at the beginning I was going out about once every two months for the first year.

Jeff Albaum

Yeah.

Joe Meares

And I would just drive around, literally the drive for dollars thing, but just to get like a better sense of the city. The way that I found the city originally was that I went to Notre Dame for undergrad, which is in South Bend, Indiana, but I had a roommate from the city called Terre Haute, Indiana. And when my mentor the guy that I met mentioned earlier started telling me kind of what to look for in terms of like price to rent ratio, I was like, well, maybe.

Terrahote would make sense because I'd been there a few times. And when I looked at the numbers, it was like, yeah, this is like because you could find places that you've heard of have you heard of the 1% rule? It's like Yeah, so the 1% rule, which nowadays doesn't really work, but back then the 1% rule stated that if you could find properties for properties that had a monthly rent that was at least one percent of the purchase price, that they might cash flow.

Jeff Albaum

Yeah, but just but break it down.

Joe Meares

It's just like a screening tool, right? So if the house, if that house in particular was, you know, 50,000, if I thought I could rent for 500, it might make sense as a rental. And again, this is back when mortgage rates were, you know, four, three, four, five percent. So right now that's that that rule is kind of broken. But at the time, like that was my first one and it was like one point five percent. Further down the road, I was finding like two, I was finding like two percent out there. So the the numbers just made a lot of sense.

Jeff Albaum

Mm-hmm.

Yeah. So you're like, this is awesome.

Joe Meares

but yeah, that's kind of the story behind the first one.

Jeff Albaum

Dude, that's amazing. And so you did this first deal. You you I mean, it sounds like A, you moved very quickly. So you had this conversation. I think you said August. By October, you were closing on your first deal, which is amazing. And then you said you did like four more that year, or is that the next year? So was that and were these all by yourself? Were these with your mentor? Like how are you financing? What was the

Joe Meares

Thank you.

Yeah. Yeah.

I did. I did four more that year.

Yeah, they were by myself. So like I know that that's probably not for for a lot of the listeners, I I don't think that that's a good idea, nor do I think it's probably possible for them just from like a savings perspective. The thing that I had on my side was that one of the things that my dad drilled into me growing up was live below your means. And so when I started on Wall Street, I was putting away like a third of it, all my paychecks and just putting them into the stock market. So I had a good chunk of money saved up.

Jeff Albaum

Mm.

Joe Meares

By the time I started doing this, because I was was I I was 30, I think, when I started. Yeah, 20, 2018. Yeah, I was I would have been 30 years old when I started. So I've been working on Wall Street for about eight years already. and was just saving and saving and saving and like not I don't like I'm I live in I still live in a s like a studio apartment, so I don't have like crazy expenses. but yeah, I was deploying money that I had had in the stock market and using my own.

Jeff Albaum

Got it. Got it, got it.

Joe Meares

Later on we started having outside investors come in. But I do think it's good to kinda learn with your own if possible. Because when you're you know, when you're next on the line, it's it shows that you're serious about it. Yeah.

Jeff Albaum

For sure. For sure. Yeah. So when did that switch happen? So when did you go from okay, I'm deploying my own capital, but eventually you run out of savings, right? Like you k it's doesn't it's not sustainable for the long term. So when did you start taking outside capital or partnering with others and and what did that look like?

Joe Meares

Right.

Yeah. It was those it was those deals that we did during the pandemic. So you need to have a track record to raise d any type of decent money, I think. At 'cause at the beginning you can raise money from friends and family just because they, you know, they know you and they trust you. But once they become like third degree connections, I do think you need to have a bit of a track record. So

My business partner and I at that time, like he said he had, you know, he had been doing it since 2009 and was doing very well. I have been doing it for two years at this point. so that nine, twelve, and twenty-four unit deal that we did, the nine and the twelve unit we bought in one LLC with one family that wanted to invest. And again, that was like a friend of a friend. And the twenty-four unit, similarly, it was another w wealthy family that wanted to get diversified into real estate. So

Yeah, that was that was when we started.

Jeff Albaum

Dude, that's awesome. And so did you guys just do like a a J V like a joint venture?

Joe Meares

Very, very, yeah, we try to keep it as simple as possible. So like we've never done large syndications. We try to keep it super simple. So like I'll use the 24 unit as an example. We had the investor come up with 35% of the purchase price, which covered the down payment as well as you know deferred maintenance out of the gate. And then they get an we create an LLC with an operating agreement, which states like what are the ownership splits.

Jeff Albaum

Mm-hmm.

Joe Meares

what are the responsibilities of each party. And then on that investment that they made, the way that we wrote it up was that they would get a a coupon, like a seven percent coupon, until they were made whole on their investment. And that could come either through that could come either through the the coupon payments or if we do a cash out refinancing.

Jeff Albaum

Got it. Okay.

Joe Meares

they would get a significant chunk of the equity proceeds, like the cash proceeds from the refinancing. but retain retain their equity ownership. So it's almost like a hybrid debt equity product where they're getting the coupon, they're getting return of capital and return on capital and retaining their ownership. so yeah, that's kind of how we structured it. And that's how we do most of our deals, try to keep it as simple as possible. Yeah, thank you.

Jeff Albaum

Okay. That's awesome, man. That's super cool. So okay, so yeah, you mentioned a lot of stuff that was working in twenty eighteen. But I I think you kind of alluded to it. Like the one percent rules kind of broken in twenty twenty-six. So what are what are you looking for now and what are you finding and like how are you making deals penciled today?

Joe Meares

Yeah.

Yeah, so really the way that some of the deals are working is just trying to find cash buyers. So the most recent deal that we did was helped a client purchase a 12-unit property in June of this year out in Indiana. It was a 12-unit apartment complex, but it also had a 7,000 square foot industrial warehouse on it.

That client was doing a 1031 exchange where they were selling an apartment that they had owned for like 14 years in in New York, in Brooklyn, and they wanted to buy income-producing property with it. So that was how that one worked out of the gate, was because

they don't have a debt payment to make right, you know, immediately. And so what we're foc what I'm focused on now with them is helping them to increase the value of the property so that when, you know, it's more stabilized and producing more income, they can do a refinancing on it, pull some of the pull some of that cash out and then go buy another one.

Jeff Albaum

Got it. Got it. Got it. Okay.

Joe Meares

But I also helped another client do a deal they closed two weeks ago. Yeah, Friday, two weeks ago. And off market house, $75,000 house. that was turnkey and it just rented out for a thousand, one thousand five hundred or sorry, one thousand fifty dollars. Yeah. So yeah, so you're look, I don't think the one percent rule the one percent rule works if you're a cash buyer. And look, they're out there. I don't think probably I would imagine most of your audience is.

Jeff Albaum

Damn, that's pretty good.

Joe Meares

and I you know I've only done cash deals when the prices were super cheap. You know, houses that I bought that were less than thirty thousand dollars. But there it's still possible. If you are using financing, yeah, I think you need to be closer to 1.3 to 1.5 if you can if you can find it.

Jeff Albaum

Mm-hmm. So yes, let's let's talk about your consulting, because you said that that was one of the buckets that you spend time on now. So what does that look like?

Joe Meares

There's a couple different ways that I do it. So I'll I'll go from like the most hands-on to the most hands-off. The most hands-on is that I do one-on-one mentorship where I'll meet with the person for 10 months. we meet one-on-one like this on like a video call once a month. And before each call, there is a homework assignment. So it's kind of like Shark Tank where I make them produce a presentation.

And the first one's always like, okay, analyze three markets and present them. There's obviously more details in the assignment than that, but it just gets your brain firing. I find that if well, because when I started, I would just lecture for an hour and it was awful for both parties. Like I was dying trying to talk for an hour and their eyes were rolling into the back of their head. So like it's much more interactive now and it's all kind of real world stuff. So that's one way that I do it. And you know, people that have done that.

I have one client that just did their fourth class and they're already putting in offers on property. So it can it can be pretty quick that you can get ramped. I also created a video course. It's like a seven-week video course, and I I was charging for that, but I decided literally last night that I think I'm gonna put that on YouTube and just have it be out there for free. and then people that find me on LinkedIn can can look at it and use it if it's worthwhile to them.

and then I I will do, you know, I'll just find a deal like the thing I mentioned earlier, that two bed, one bathroom. I just charge like a small finder's fee for that. And every once in a while, I I may even sell one of my own properties. So that would be the easiest way to work with me. Yeah. Yeah.

Jeff Albaum

Got it. Got it. Okay, very cool. And sorry, going back to when you when you left your W two.

Joe Meares

Mm-hmm.

Jeff Albaum

I know you said they kind of got pushed out, but what was like that decision? Cause you're like, I was interviewing other banks. So that was the potential, but you obviously decided not to. So can you walk me through like what was your cash flow position looking like when you made that decision? Cause I think a lot of people hear like, I want to go full time in real estate. But if anybody has real estate, you know that your cash flow is pretty not even.

Joe Meares

Yeah. So yeah, it's not ev well, it's not it's not even that it's not even, it's more so that it's just not as big as people would imagine, right? 'Cause like one of these houses is gonna cash for like two hundred dollars a month, right? It's like not it's not these are yeah, these are exactly so these investments and like when I mentioned earlier that I would have gone slower.

Jeff Albaum

Yeah, yeah, yeah.

Yeah. Until the water heater breaks.

Joe Meares

What I was super focused on at the beginning was like maximizing the buying power of every dollar. So like trying to do the burr strategy like doing the burr strategy where like you buy a place, you fix it up, then you refinance it, and then you use that money that you took out of the refinance to go buy another one and you just keep rolling out properties. And that that strategy works, but I think that what I've the conclusion I've come to is that if I started over.

I would just go more slowly and focus more on cash flow per door versus number of doors and like overall maximizing cash flow because once you get to a hundred units and like in Philly we manage two hundred units. And in Indiana have the third party manager, but that just it just becomes like a a new a whole new job for you when you're managing that many units, right?

When I when people ask me like when should I leave my job, there's two numbers, right? There's first is like what are your living expenses? And are you still in a cash burn scenario with your investments or are you in a cash flow scenario? Regardless of that, like I I almost think that you have to you you almost have to use the properties as their own thing, right? Because as you just alluded to, something can happen where

The cash flow for the whole month from the whole portfolio could be you sucked into a new roof or a new hot water heater or whatever, depending on how many units you have. So what I tell people is you you really want to have six months worth of liquid expenses at least. Like I think even probably a year. And this idea that you're gonna like, you know, start investing in real estate and then leave your job in two years, I think is kind of crazy.

Jeff Albaum

Mm-hmm.

Mm-hmm.

Joe Meares

Unless you have other sources of real estate income, like if you're a leasing agent or you're a real estate agent or you work in property management, right?

The idea that you're just gonna live off of if you're using debt, the idea that you're gonna just live off the income from the properties, the only way that that is gonna work, in my opinion, is if you live somewhere that is super inexpensive. Like you live in a southern or midwestern state and you live in a tertiary city and the properties are nearby.

And you're self managing. Like it's very I think it's very tough nowadays to leave a W two job just from rental properties. Yeah.

Jeff Albaum

Mm-hmm. And so what what was that position like for you? Because obviously you made that decision and you and you did it, which is awesome.

Joe Meares

Yeah. Yeah. So I so I had s savings that I had saved up. I think I probably had like eleven months of runway because I also got a severance package from the bank. and I also just tend to be like I I I'm kind of the do as I say, not as I do type person where I'm very aggressive because I just have like a strong confidence that I can figure it out.

Jeff Albaum

Gotcha. Okay.

Joe Meares

But I I don't wanna put I don't put my students in that in those situations. Like I try to get people I want people to I call it the sleep test. Like you need to be able to sleep at night with these investments. Yeah. And if it's getting to the point where you can't, like something's probably off. Yeah.

Jeff Albaum

Yeah, that's awesome.

That's an issue. What are you looking for like in today's market? Like, what are you looking to do? What are looking to grow? Are you looking to grow your portfolio? Are you looking to grow your consulting business? Like, what's the what's the focus?

Joe Meares

Yeah. So I think you found me on LinkedIn and LinkedIn right now for me is I almost view it as a like the the marketplace, like a business to business portal, right? And so I just post about what I'm doing and the algorithm is smart enough to know like, okay, if this person is posting about this, like I'm posting about, you know, Indiana property or Philadelphia property and you know

Maybe this property manager in Indiana sees it or a Philadelphia roofer sees it or something like that, right? I if they see it and we connect, I will just reach out and say, Hey, if you have want to bounce anything off of me or you want to talk shop, I'm happy to do that. And so what I what I kind of envision now is just becoming almost like a a trusted referral agent for a lot of this stuff.

And look, the coaching fits into that because if someone wants to invest outside of my core markets, I can put them in front of look, this is a good property manager that I spoke to in Ohio or this is somebody in Florida that can do insurance type of thing, right? So I almost view myself as more of like a real estate services broker at this point. And the nice thing about that stuff, obviously, is that I have the the knowledge of how all these things interplay from having built the portfolio.

But those types of revenue streams are, you know, ninety, ninety-five percent gross margin, right? They're there's no capital required for me to do those type of things. So that's that's actually what I'm very focused on right now. Rental rental properties are a delayed gratification investment. The real payoff is like five, ten, twenty years from those, once the debt's paid off and they're stabilized and all that stuff.

If you wanna if people wanna do something that's like super near term, and I'm this is not my specialty, so it's hard for me to, you know, speak to it. I'm a big believer in like the riches are in the niches. But if it's something where you're trying to do it where it's producing income super fast, like probably short term rental is the way to go, that requires a lot more time on on the investor's part.

So I think that works for people that are maybe like nurses who are working three or four days a week and have the other time to focus on it, or you know, gig workers, things like that. but you can make a lot more income if you do it right.

Jeff Albaum

Sure. Sure. Okay. Dude, that's awesome. That's awesome. What I mean it sounds like you've done you've learned a ton in your in your real estate career, but if someone came to you and they're a new student, they Hey man, like I want to get into real estate. I have no idea where to get started. w what should I do? What's the first thing I should do? I know, you know, I I know nothing, so to speak.

Joe Meares

Yeah.

Thank you.

Yeah. The first thing is to just become aware of your current financial situation. A lot of people just spend and they don't they don't know what their current inflows and outflows are. They don't know their net worth. Sometimes it's a lot better than they think. And sometimes, sometimes it's not, but you you just need to be aware. Like awareness is is very important, right?

Jeff Albaum

Mm.

Joe Meares

And nowadays it's so easy. So like one thing that I've done recently is I took all of my all of my bank statements, all of my property statements, all of my credit card statements, and I ran them through Chat GPT and I said, like, what are my what's my current inflows and outflows? What are some what are some financial blind spots that I'm not thinking about? Or like what are some easy areas to pick up?

some some cash flow, like maybe spending that I don't need to be doing. so it it's a lot easier now, right? Cause you can just or you can use, you know, I think Mint is one of the apps you can use. But just becoming aware of your current financial situation is is the first thing. And then asking yourself, okay, like what are my what are my goals here? Like do I have big cat like what are your cat what are your cash requirements in the near term? Like

Do you have a kid going to college and you need to pay for college, right? Because if that's the case and you have, you know, 100K liquid, probably not a good time to be buying rental properties, right? So you need to know what's coming up. Are you about to buy your own house that you want to live in? and so once you kind of parse those things out, you say, okay, like I have this money set up for this, this money's set for this, then what is left over, right? And

You know, usually you're probably gonna need like fifty K liquid to get involved in something that's a fixer upper, right? Because if it's a hundred thousand dollar property, twenty-five percent down payments twenty-five thousand, and then you know, renovation, you know, probably fifteen to twenty-five thousand on a on a light rehab one in one of these smaller, smaller cities. so so am I am I financially set up is the first thing, right? And then depending on where you're at, like some people.

work in finance so it's easy for them to figure out the numbers. If you don't know the numbers, if any of your students are interested, I have a a 70 page primer that I put together and I usually charge for it. But any one of your viewers like I'll just give it give it to them for free. So if they're interested, I'm happy to share that. And that goes through like everything like what is the mindset that you need? How do you get started? What are the very simple numbers of real estate? Like how do you even calculate the cash flow on a house?

Jeff Albaum

Mm-hmm.

Joe Meares

how do you decide whether or not the house makes sense to invest in? Like those very simple things. And then obviously like how to build your team, all that stuff is in it. It's just a PDF. I would start there because that's I built that with that in mind. Like what would I need if I was getting started? So yeah, a little bit of a biased answer, but that's that's what I would say.

Jeff Albaum

Well, that's awesome, man. Can I ask you about mentorship? Because you you mentioned that you had a mentor. So how how do you think about a finding a mentor, but now being in this kind of the the other side of the shoe and so being a mentor to others?

Joe Meares

Yeah.

Yeah. So you first have to have like a strong desire to make a change. If you're not if you're kinda like

If you're if you're I mean, look, you can find a mentor without having a desire to make a change, but like if you want to make a radical change, it's probably because you're uncomfortable with something that's going on in your life. Like for me, I wasn't happy with the the job. But what I have found is that because I get a lot of inbound DMs on LinkedIn, and a lot of them come from college students. And they're just like, hey, I'm in finance, like I'm I'm studying real estate, I'm I'm interested to learn about what you do. And I just jump on the phone with them.

And some of them, you know, it's just one phone call and then I don't hear from them again. But some of them stay in touch. And one of the cool things about real estate is like most people almost everyone had some sort of mentor and they want to pay it forward. because I think real estate especially for some reason, I don't know, I'm not really sure why, but it seems like most people in real estate are into some sort of self development and they realize that, you know, energy.

returns to you and if you put it out there it'll come back. So you just kinda have to be if you're younger listening to this and you're looking for a mentor, like one of the best mentees that I had, he reached out and he was just like, How can I help you with your business? Like I'll intern for you. I won't ask for any money in return. Like I just wanna help you guys and I want to learn. And he learned a ton. Go ahead.

Jeff Albaum

So was that helpful for you? Cause I've heard the other side of that is like that's now giving you a job to figure out what to give this person to do.

Joe Meares

Well, you could say that, but the other side of it is like if you're running your own business, you definitely know like, yeah, I have some tedious tasks that I don't want to do that like a college kid would be perfect for. So, you know, or maybe they're better at AI than I am and they can like shadow me and say, like, hey, like what are you why aren't you using this? Like I use AI constantly, but I'm sure I'm still only getting, you know, ten to twenty percent out of it that I could.

Jeff Albaum

Yeah.

Joe Meares

So look, there's always a negative way to look at it. You could you could and and look, sometimes it is it is hard. You could say like, hey, I just don't and I don't need this right now, but like ping me in three months or six months 'cause sometimes you're busy with stuff and it doesn't make sense to add another person. But I think usually you'll know. There's usually something that that could be helpful. I have pl I have plenty of stuff. I have plenty of stuff to give people, so

Jeff Albaum

Mm-hmm. Dude, I feel like I Well dude, thank you so much for coming on, Joe. I appreciate you and I love hearing investor stories. if people want to reach out, where's the best place for them to find you?

Joe Meares

Definitely LinkedIn right now. So my name is Jo it's as my name appears here, Joe Mears Junior CFA. just add me and send me a message and say you saw me on the podcast on Curiosity class and happy to set up a call and send you the primer and hopefully help you out a little bit.

Jeff Albaum

Awesome, man. Well, thank you again. We'll link to everything in the in the show notes. We'll get your LinkedIn up there and all that good stuff. So I appreciate it, man. Thanks for doing this. All right. See everybody next week. Bye.

Joe Meares

Absolutely.