RG 044 – Multifamily Investing: Buy Right, Finance Right, Manage Right with Jake & Gino
About Jake and Gino
- They are co-founders of jakeandgino.com
- Jake is the author of the book Wheelbarrow Profits
- They have acquired 674 units in the last 4 years
Unrelated to real estate
- Gino owned a restaurant when he first met Jake
- Jake was a pharmaceutical sales person before he started in real estate
NUTS & BOLTS:
Jake and Gino are the cofounders of Jake and Gino; a real estate investment company that specializes in refinancing deals to raise money for the next investment. Gino worked in the restaurant business for 20 years but after realizing that he needed a more secure income for his six children he moved into real estate. Jake worked in pharmaceutical sales and used to bring his clients into Gino’s restaurant. After Jake moved out of New York City the pair started working together and invested in a 25 unit multifamily as their first deal.
Buying an asset can be a laborious process, since you make money when you buy and not when you sell it’s important to find the right investment, and this might mean you need to search through 20 places to get the right one. When looking at markets Jake and Gino recommend that you chose somewhere that’s close so you can keep an eye on your investment. Jake is based in Knoxville and Jake will be in Jacksonville so these are their main markets. They ideally like to do 2-3 deals a year however this is more difficult in the current financial climate as CAP rates are compressing, however in this situation Jake and Gino recommend waiting for the right deal rather than buying something that’s not perfect. They like to invest in properties with a CAP rate of 8% and a minimum of 10% cash on cash return between C and B classes. They target “mom and pop” style properties which might have a burnt out landlord, this means that the property hasn’t been taken care of and can be restored to improve the NOI.
Jake and Gino were lucky enough to be able to organize owner financing on their first deal, in order to do this too they say the key factor is being able to educate the seller about the merits. The seller needs to be informed that owner financing will bring them monthly mailbox money and that they’ll be able to defer capital gains tax. On their first deal they got the remaining money from the bank with a deal which they admit was a mistake in retrospect. They secured a 20 year amortization schedule on an interest rate 2% above the market. Having learnt from previous mistakes they have now refinanced their old investments to a 25 year minimum amortization schedule on a non-recourse loan and they look for sub 4% interest rates.
Jake and Gino have re-financed many of their deals; 4 deals for 6 figure re-fi’s and they will have just completed their second 7 figure re-fi. By doing this they haven’t had to go to private equity or syndication for new investment money. The key to re-financing a deal is working with a bank that wants to grow its portfolio and knows the market well. Their plan usually follows the same template; find a new deal, renovate and then increase rents, re-finance the property and withdraw the money.
Jake and Gino have a formal framework of steps they take when they take ownership of a burned out property. First they renovate the vacant lots and upgrade the fixtures, they aim to fill these units straight away at market price. This immediately bumps the NOI. Then they implement RUBS (ratio utility billing systems) for all tenants to bill them back for water usage. Finally they raise all current tenants to market rates. Jake and Gino recommend Rainmaker and Yield Star as programs to match market rates and ensure the correct return is being generated. Jake and Gino recommend that all real estate investors work out who their niche tenant is; for example for Jake and Gino their ideal tenant is C class because they’ll remain in the property for longer than a B class who might be looking to raise money and move to an A class property.
Top investing tips
- Most successful habits – Jake’s is weekly planning for every hour of each day and writing daily goals. Gino’s is reading and doing an hour of research a day.
- Most influential tool in your RE business – The Jake and Gino underwriting template called the deal analyzer for multifamily properties.
- Most exciting project right now – Creating their management company and becoming the largest apartment owner in East Tennessee.
- Who is your most influential person – Jake’s is Gino and Gino’s is his parents.
They have the same jakeandgino handle on Instagram, Snapchat, Facebook and Llinkedin.
Until next week! Happy Investing!