Gary Griffin, one of PCG’s passive investors, joins the show to explain how he went from being broke to a passive real estate investor. Gary Griffin was born and raised in Central Texas, is a graduate of Texas State University, and currently lives in Austin. Gary began his Real Estate career after losing his job and going broke in 2006. In 2008 Gary obtained his Brokers License, and opened Adelfo Capital Group. Gary considers himself “addicted” to investing and is always looking for a good deal. Garys’ Real Estate mentor, and teacher, is a longtime friend and student of Robert Kiyosaki (Rich Dad Poor Dad). Along with his wife of 23 years, Irene (a native of Jerusalem), Gary enjoys investing, and running their companies, and especially the challenges of making money. Along with Real Estate, they also own positions in restaurant’s, memory care centers, and assisted living communities, along with multiple other businesses. Gary and Irene have two wonderful children. Their daughter is freshman at the University of Texas studying Business and Economics, and their son is a junior in high school, and is planning on being a Mechanical Engineer. In his spare time, Gary likes to read, attending investing seminars, traveling, and trying all the great BBQ Restaurants around Central Texas.
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Gary Griffin: I think we are due for a small correction. I think especially in the Austin, Central Texas area. We’ve got so much industry coming here, and so many people moving here. I don’t think we’re going to see too much of a correction, but I think it will correct a little bit.
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Aaron Fragnito: All right, ladies and gentlemen, welcome back to the Passive Cash Flow podcast. I’m your host, Aaron Fragnito, and we have a special guest here today, Gary Griffin. How are we doing today, Gary?
Gary Griffin: Good Aaron, good. Good morning.
Aaron Fragnito: Thanks for coming on the show here. Glad to have you. Absolutely. Gary, you’re down in Texas there, correct?
Gary Griffin: Correct. We are in Austin, Texas.
Aaron Fragnito: Austin, Texas. Wow, hear a lot about that market, that’s been in the headlines pretty often last couple of years.
Gary Griffin: We do get a lot of press down here. We’ve got a lot of things moving to Austin, a lot of companies moving here. As you know, a lot of big businesses moving here. A lot of people relocating from all over the United States coming to Austin, Texas.
Aaron Fragnito: Great. Now, Gary, glad you can join us here for a little bit of time on the Passive Cash Flow podcast. As you know, you’re one of our passive investors, which is very exciting. You’re also active in the industry. That’s why I wanted to have you on, because you are able to move from that active income, and move that into passive returns, and passive ownership of real estate. That’s really the golden ticket.
That’s what a lot of our listeners are looking for, how to work a little bit less and earn more, and build that retirement account through real estate. Tell us about your story a little bit. How you got started in real estate and were able to climb that ladder to finally being a passive investor in real estate as well.
Gary Griffin: Sure. Be glad to. Back in 2006, I actually lost my job. We went broke, we actually lost almost everything we had. Much like you, we’ve talked about this before. Somebody gave me a copy of Rich Dad Poor Dad. Honestly, the book was a life-changer. I read the book many times, and I really enjoyed it. I decided to get into real estate.
At that time. I was actually a real estate Inspector, I’d gone through the inspector course, and was doing real estate inspections. I found out real quickly that in Texas in August in Central and South Texas, the Attic is not the place to be roaming around doing inspections. I realized real quick.
Aaron Fragnito: Wow, unless you’re [unintelligible 00:02:35] 20 pounds.
Gary Griffin: Yes, that’s it. They don’t do that. I realized real quick that I didn’t want to be crawling around in the attic in the middle of August in Texas. I decided to go ahead and get my real estate license. I was blessed in the fact that I met a man who was actually a good friend and student of Robert Kiyosaki. He actually traveled with Robert for many years. He is still good friends with him today, him and his wife own the Austin Institute of real estate, or the business school.
I walked into there, walked into his business school. That was 15 years ago, and I never looked back. I absolutely love the industry, ended up two years later, after getting my real estate license, ended up getting my broker’s license. We’ve been a brokerage firm ever since. We’ve really enjoyed it. We love the business, and we love the real estate business itself. We love the property ownership part of it.
Aaron Fragnito: That’s amazing. That’s a little bit about how I got started as well, as a realtor trading the properties, selling the properties, and that’s really a great way to learn the industry. Learn how a transaction works, learn how to find a deal, and learn from other guys, people you meet that are have been doing this for years, buying real estate, and they’ve been making some mistakes, you can see from the outside looking in, and also see what they’re doing right. Take the good things and the bad things in from all your clients, and try to learn from everyone you come in touch with.
Yes, that’s a great way to get started. I always say to people, if you’re a salesperson and you like sales, look into becoming a realtor, or a broker if you like real estate as well, because it’s a tough job too, it’s a lot of driving around. Sometimes you feel like the low man on the totem pole at the end of the day. That’s really interesting how you were able to then transition from being an active real term broker into being a passive investor. Do you recall the first passive investments you made, and how you came about them?
Gary Griffin: Yes, I do. We hadn’t invested in any real estate properties at that time, and we had a friend of ours call us, and wanted to sell her house, and that’s the benefit of being in real estate. Before we actually marketed the property, I made her an offer on it, because we can do that in the industry, which is good. She took it and we ended up buying the property.
It was a good deal on the property, we still own it to this day. That was many, many years ago. It’s been a great rental positive cash flow, good ROI on it. From that one, it just snowballed out, refinanced on that one, purchase another one, refinance on that one, purchase another one. It’s just been a phenomenal property, we still own it, we love it. It’s still giving us quite a bit of cash flow every month on it.
Aaron Fragnito: That’s great. You did the buy, renovate, refinance strategy, and you able to keep your costs low enough on your renovations, buy at the right price. Also, I think in a good time and a good market. Right? What year was that when you started investing?
Gary Griffin: We bought that one in 2010. We’ve had that one quite a long time. Like you said, it was a good time in the market. It wasn’t crazy like it is now in Austin. Deals are not anywhere to be found right now. We’ve held on to that one. We’ve done a couple of cash-out refinances on it, adjusted the rents to cover that. It’s been a phenomenal property to have.
Aaron Fragnito: Now you’re talking my language absolutely that’s a [crosstalk] As you know here, you’ve seen enough of my webinars and podcasts to know, of course, the updates on our investments together. Nuts, very, very cool stuff. The magic of investing in the right markets, working with the– Right now, it’s a shame that there aren’t any good deals, because interest rates are so low, and rents are so high.
It’s easy the cost to borrow the capital to buy the real estate, in contrast to what you can collect, and rent in your market down there in Austin, up here in North Jersey, similar type of types of markets in the same way, very high demand, high price to get into in a way, and huge population hubs. Those can be the gifts that keep on giving. I’m envious of that 2010 market.
Gary Griffin: Yes, it was right after the ’08 debacle with all the real estate, and we ended up picking it up at a very good price. Like you said, you touched on something about the markets. Austin, trying to find a deal around the Austin or Central Texas area right now is very, very difficult. Normally, on a normal year, at this time of the year, going into the summer months, we would have about three months of inventory on residential properties. We’re down to below 15 days now. While people are coming in with 30, 40, 50, 60, $70,000 above asking price on these properties.
Trying to find a deal right now is it’s really, really tough. We’re always looking, but it’s just the problem of actually capturing something that you think would be at a good price. Aaron, I give you credit, you made a statement many, many months ago on one of your webinars that I really enjoyed. You’d never get rich paying $20 for a $20 bill. I remember you said that, it stuck with me all these months. That’s one of the most phenomenal statements I’ve ever heard, because it’s absolutely true. You can’t pay over market price for something expect to build wealth in it, because it just won’t happen that way.
Aaron Fragnito: Yes, absolutely making money when you buy, and we are sitting back a little bit right now as well, just not being picky. If you’ve looked at enough deals through the years, and been in this market long enough, right getting started that 2010 market, oh my gosh, you know what a deal is. You remember 65 cents of after repair value minus repairs. That’s where we used to buy these things at, and we’d find them up and down with the auctions and everything.
Goodness, those days are over, buddy. I think we are going to see a well-needed correction. It’s inevitable. I just hope it’s nothing like 2008. I don’t think it is, because I was also with mortgage-backed securities. That was just tri-folding or 10X-ing the bad loans that were given out, because they were trading against those loans, and deflating the value, and the risk of them.
I don’t see that happening. There’s definitely needs to be a slowdown in prices. I think we need to see this foreclosure market open back up, and that’s a part of the system that has to be in place for the economy, the housing economy to work the right way. What’s going on with the courts down there? Are they opening up eviction courts at all, or foreclosure courts? Where are they with all that right now?
Gary Griffin: In Austin, Travis County right now, and I met with my lawyer on this the other day, my attorney we talked about it, to get an eviction done right now. They’re still closed on that, they’re still not wanting to do evictions in Travis County, some of the outlying counties if you own properties, which we do, around the Tri-County area they will actually entertain an eviction notice, and entertain the property they’ll bring it, you can bring it to the courthouse, and you can actually get it done. In Travis county itself as of right now, they’re not letting any evictions happen.
They still have a moratorium on them. Hoping that that’ll open back up soon, and we’re blessed, we haven’t had any issues with any of our renters, we’ve actually worked with them. We understand their issues, and we work with them on the rent. They’ve all paid, which is a blessing.
I think that’s just to the fact that we actually work with them, and we let them work around what they want to pay, and how they want to pay it every month as long. As you get it to me by the end of the month, I’m happy, and we will let them break it up. We’ll let them do whatever they need to do to get it to us. Luckily we haven’t had to file one, because like I said, our attorney did say that it would be a nightmare to get somebody out at this point.
Aaron: We’re in the same boat. About 10% of our tenant base is falling behind, or on a payment plan of some type, and about half of that 10% is about 5% are not really cooperating, but another 5% they really- the other half are trying to work with us, as we put them in touch with non-profits, and government assistance programs, and really try to guide them in the right direction, so that we can serve that win-win, and they can work with these groups that can help pay the rent this time.
It’s definitely an interesting time right now. It’s really unprecedented with what’s going on with interest rates so low, the amount of money they’re printing, real estate values are going up with inflation now. I do think that around June or July I’ve been hearing whispers that we’re going to see the courts open up more in New Jersey here [inaudible 00:11:49]. You can file in New Jersey. It doesn’t really go anywhere. You just get in line in the cities we’re working in, so there’s that–
Gary: That’s what we’re experiencing down here. You can file on it, but like you said, just get in line and they may get to you, they may not get to you. That’s just the way it’s going to be.
Aaron: Some of the counties are doing sheriff’s sale auctions, but it’s very limited what’s going through right now. It seems like most of the stuff cannot be auctioned off, any Fannie or Freddie Mac loans, and different rules there. The auctions, sheriff’s sale auctions were a gold mine in 2014 through to 2017. Right around 2018, everyone and their mom started showing up, and then bidding on the properties. Have you dealt with sheriff’s sale auctions in Texas there?
Gary: We have. We’ve got a couple that we’ve dealt with. One of our agents really likes those. She does a couple of them, and the problem is in like we were talking about a little while ago, you’ll have several thousand people show up, and bidding on one property, and that’s the issue. You can do it at the courthouse, they’ll do it at the courthouse steps, but then you’ll have several hundred to 1,000 people show up trying to bid on one property.
They realize that that’s where the deals are, and they can’t get them anywhere else, so they’re heading over to the sheriff’s office, and just trying to pick them up.
Aaron: Well, that’s how it goes up here as well. We see a lot of competition. We do find we’ve had a lot of luck with direct mail marketing, but just our network, in general, has really been the gift that keeps on giving. Being a broker, you are at the front door. Good broker’s deals coming in, working with investors and that’s really the best part about being a broker in these times, is sometimes you can find a really good opportunity that works for your portfolio. You can add to it as long as you’re not the listing agent of course or anything like that, but it’s good to have your pulse in the market there.
Gary: That’s what we’ve done. Every property that we’ve picked up, everyone that we own has been one of those type of transactions where somebody would come to us, want us to broker the property, want us to sell it for him, want us to market it for him. We explain to him that we’ll take it off your hands, we’ll close it in 30 days, and you won’t have anybody coming overlooking at the property, you won’t have to show it, we don’t have to do anything and usually, it works out well for us. We ended up picking the properties up at a pretty good rate.
Aaron: That’s great. That’s what I did for years as a realtor. Offering that option as well, and sometimes it works for homeowners, and other times it doesn’t. That’s really interesting stuff. At this point what’s your crystal ball show with the mark, well how many more years of growth do you think we have, and/or is there a correction due? Are we just going to keep on growing with inflation here?
Gary: That’s a good question and somebody brought that up the other day. We were talking about it with some of my agents, and I think we are headed for a correction. I don’t think the numbers in Austin especially in the Central Texas area is sustainable at this point. We’ve seen a 25% to 30% equity growth in all of our properties which I just don’t think is sustainable. It seems like at this point it’s, cooling a little bit. We’ve got more properties on the market than we have buyers for right now. It’s slowing down just a little bit.
I think we are due for a small correction, but I think in the Austin, especially in Austin central Texas area, we’ve got so much industry coming here, and so many people moving here. I don’t think we’re going to see too much of a correction, but I think it will correct a little bit.
Aaron: It’s just crazy the market I’m investing in right now, more aggressively southern Vermont, and it’s gone up 25% in the last year. Boy, and same with Jersey, we’ve seen not that much growth, but around a 10% growth in the last year, and it’s really not sustainable. We just haven’t gone up that much. It just doesn’t make sense. If you’re not getting paid 25% more, the cost of housing can’t go up that much more for it to make sense.
I do think there is actually an increase in price due for some of the New England markets, some of the more rural markets. If you go out to the more rural areas, I was amazed at how low the prices were two years ago or so. They had a little catching up to do. I never felt that way about inner-city markets, or more urban markets in New Jersey. They were always pretty high priced, and did come down a little bit in the 2008 real estate recession, but it really came roaring right back, and roared past that point around 2014 that it was worth in 2008.
Some of these rural markets, you’d go out and you’d say, “Wow, in 2019, properties were selling for what they would sell for in 2008.” That’s a deal to me. If you could buy a stock at what it was selling for 10, 11 years ago, that’s a great deal, so grab onto some. Now that ship has sailed a bit here.
Gary: I agree. We’re actually pushing our boundaries out a little bit. We’re actually looking down in the Houston and Dallas area now, because Austin’s growth is just so large and the property values are so high here. We’re actually moving out into the smaller areas, smaller communities between here and Houston, seeing if we can find some deals out there. We’ve actually been actively looking at properties out there, and that may be our next niche, just because we just can’t seem to find anything here in Austin, that’s a deal.
Aaron: That’s I think what a lot of investors are doing. You can only look at and swing the bat so many times in a market and realize, “Okay, I used to do well in this market. It’s super hot right now, we’re going to give it a little break, and try to build an infrastructure in markets around it, go further out.” We’re doing a bit of the same thing. We’re doing a lot of land flipping or so. We’re investing out in Warren county and Sussex county which are two very northern and western counties here in New Jersey.
We’re still looking aggressively in Sussex county and union and Hudson as we have for years, the more heavily populated areas. It’s like pounding your head against the wall right now. You’re just looking at a lot of stuff, we’re throwing offers in, and we’ll get out bid by 10%, 20% and it’s kind of silly.
Gary: It sounds like me. We’ve thrown a couple out there, and we weren’t even close. You said it 10%, 20% and we weren’t even close to what they took on it.
Aaron: It’s funny when this whole corona thing happened and the market it stopped for a second a year ago, we all panicked and that was a tough time for small business owners. I may have not shown it in my webinars, I was a little nervous behind the scenes.
Gary: No, I agree, it was a tough time. We all hit the pause button for a second and went, “Okay, let’s think about this for a minute. Where are we going to be with this?” You’re right, it did, and it was an unnerving time.
Aaron: Then around July and August, actually because my wife would say, she’d say, “Aaron you always say buy when other people are not, and this is the time.” I had to go, “You know what Diana, you’re right.” We started looking a little more aggressively around then, and we did scoop up some really nice opportunities about three good short-term rental properties between August and I know that you were following us then.
That was a good time, and right around January, March, we started, “Oh boy, these prices are just still going up, up, up.” Definitely have our eyes peeled, but I’ve learned not to reach, not to stretch, try to make a deal, if it doesn’t work out on an excel spreadsheet, it’s not going to work in real life.
Gary: No, I agree with you. If the numbers don’t match up, then it doesn’t do for us either. If it doesn’t come in at where we need it to be, we’ve got a certain number when we do our proformas, if it doesn’t match that number, we pass on it. I think that’s a good business practice for anybody that’s buying a rental property, or an investment property. If your numbers don’t add up, and you’re not positive cash flow, your IRR isn’t good, then just pass on it. It’s not worth the headache that it’s going to give you in the long run.
Aaron: I always say the word no has made me more money in real estate than the word yes.
Gary: I agree, absolutely.
Aaron: Absolutely. I learnt that one the hard way as well.
Gary: That’s true.
Aaron: Gary you offer a lot of services. How can people reach out to you, and what can you offer to the listeners here?
Gary: We offer real estate brokerage company. We also do financial planning help. If you’re thinking about purchasing a rental property, you can contact us, and we will represent you on the brokers scale, on the broker side of things. We’ll gladly represent you on the purchase side of the property, or the sell side of the property, but we also will help you out if you decide you– If you’re thinking about buying a rental property, and you’re just now getting into the business, we will actually sit down with you, we’ll help you do a proforma, we’ll show you what a proforma looks like.
We’ll go over IRR, we’ll over the cash flow every month, and we’ll let you know if the property is a good deal or not. If it’s a good deal, we’ll give you okay on it, where we think it’s a good deal, and we’ll give you all the numbers so you can make your decision on it, whether you want to do that or not. We also do buyers and sellers representation all on our business as well. If you’re thinking about selling a property, or buying a property, or purchasing a property, give us a call. Contact us at Adelfo Capital Group. You can email me or you can call me, and we can set up a meeting with you, and we put you in contact with one of our agents, and we can see if we can help you out a little bit.
Aaron: That’s great. How many agents do you have in your brokerage down there?
Gary: We only have a handful of agents right now, just because the market is so saturated with agents right now. Honestly, I like the agents that we have, because they’re all professionals, but we’re not really taking on any new agents right now, just because I honestly is stretched thin as I am right now. I don’t have the time to take on any new agents unless they’re a seasoned agent, they can come on with us.
We have a group of ones that we really enjoy, and we really like, and that are professionals, and they’re very, very good at what they do.
Aaron: Great. You focus on the Austin market. Do you also do Dallas Fort Worth area, or what’s your specialty?
Gary: We can do Dallas Fort Worth, anywhere in Texas you’re thinking about selling a property, we’re licensed all throughout the state. We’re home-based in Austin, but we do belong to different MLS’s across the state. If you’re thinking about selling something, we’ve done deals in Houston, we’ve done deals in Dallas, all throughout the state of Texas, west Texas. If you’re thinking about selling something or purchasing something, we can help you out anywhere in the state of Texas.
Aaron: Now, is Texas like New Jersey where you have eight or nine different MLS’s, and it’s a racket, and you have to join all the different ones if you want to [crosstalk]?
Gary: It is absolutely like that. I live in one MLS, but I belong to several other ones, and you have to pay them, and you have to belong to part of them if you want to get access to that, or if you want to put a key box on there with the other agents to get access to. It is a racket, I guarantee you. [crosstalk]
Aaron: It really is.
Gary: It really is a racket.
Aaron: Why can’t we just have one central database? Oh my gosh, that’s [unintelligible 00:23:04].
Gary: You’ve got one license for the state of Texas as a broker, but yet you’ve got all these different MLS’s that you have to belong to, that you if you want do deals in Houston, you have to belong to theirs. If you want to do deals in Dallas, you have to belong to theirs. If you belong to all those, by the end of the month you’re looking at your bill going, “What am I paying for?”
Because the services are just crazy. The service fees, but yet you’re right. It’s the same type of racket, where you have to belong to multiple MLS’s in order to see what they got on their website, and what the properties are for [unintelligible 00:23:36].
Aaron: Certain areas you have to list on two MLS’s. If you don’t put on the other MLS they’ll charge you a fine, and then daily fine. Oh my gosh. It’s very frustrating.
Gary: Absolutely. It is frustrating because Austin we cover all the Tri-county areas here, but then you have the Williamson County Board of Realtors, which is just north of us, and they cover another area, and they like for you to put their own theirs, and they want to put it on here. It is that way. They want to see two different MLS’s.
Aaron: Boy oh boy. The realtor gets stuck with the bill.
Gary: That’s true, always.
Aaron: Absolutely. All right my friend. Thank you so much for coming on Gary, and we will put your contact information in the description, in the show notes here, so our guests can reach out to you for any brokerage services, or financial advising and just investment, running those numbers on investment properties, like you said. That’s great. Thank you guests for listening here, The Passive Cash Flow podcast. I’m your host Aaron Fragnito, co-owner of The People’s Capital Group.
You go to peoplescapitalgroup.com we have other podcasts there over 50 episodes, we have webinars that we’ve done in the past that explain how we buy properties, similar to the one you see behind me here with a group of investors, and will those properties produce cash flow and equity growth and tax depreciation over time. You can check our podcast for all information. Our webinar is peoplescapitalgroup.com. Thank you Gary for coming on. You’re the man.
Gary: Thank you for having me. I appreciate it Aaron. It was a pleasure.
Aaron: Have a good one.
