Voted Top 40 under 40 in North America Private Equity / M&A industry, Dr. Mike is a multifamily investor, professional speaker, capital raiser, podcaster, and Marine Corps disabled vet. He is the author of Effortless, Tax-Efficient, Monthly Cash Flow, and host of the Florida Multifamily Investing Show.
www.FLMultifamilyGroup.com
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Dr. Mike Lorence: We’re working on a one right now. It’s a $27 million transaction and Tampa market is pretty competitive. There’s about 1,000 people a day moving to Florida, that has been accelerated by the pandemic. The joke is when you go to the grocery store here, pretty much what you hear is a New Yorker yelling down the hallway to his wife in a Brooklyn accent. That’s what you hear at the grocery store.
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Aaron Fragnito: All right ladies and gentlemen, welcome to the Passive Cash Flow Podcast. We’re back here with another episode. We took a little vacation. We had some fun but we’re back here with another episode of the Passive Cash Flow Podcast and we have Dr. Mike Lawrence. How are we doing today, Mike?
Mike: Excellent. Fascinating. Really enjoy your content, Aaron, and coming on the show. Thank you so much for having me today.
Aaron: Excellent. I’m glad to be back here in the seat of the podcast doing another production here. Very exciting. Mike, you’ve been up to a lot of different things. I enjoyed our conversation for the last few minutes, just getting to know each other a little bit. Why don’t you talk a little bit about what you do in the Florida Multifamily Group?
Mike: We create effortless tax efficient, monthly cashflow for the self-employed through Florida Multifamily investing. Basically we’re syndicating properties in the multifamily space here in what most would call central Florida and some might call north central Florida. We’re super, super focused in one area. We’ll probably talk on the show here today about the concept between geo niching and wide area investing. Really, when you look at the multi-family space, the world breaks into two groups. Geo niched investors, which is about, by my count about 5% of all syndicators fall into that category. The other 95% of syndicators are wide area investors who typically invest in two, three, four, five states. Maybe we can talk about that here today.
Aaron: Yes, absolutely. I always realize with real estate it’s location, location, location, but you know, it kind of is but it kind of isn’t. It’s also more about boots on the ground, infrastructure, having good people, knowing your market. You could put me in a really great market but if I don’t know it like I know my market, I’m just not going to crush it. So definitely the same page there, but let’s figure out how we got to this conclusion and where are the 5% that focus on buying where we live and everyone else is doing it different? It’s kind of strange. How’d you get started with this?
Mike: I think it probably goes back to way, way, way back to when I was a kid. I grew up on a dairy farm in Pennsylvania and I shoveled cow poop for many years before I decided that that wasn’t going to be something I was going to do long-term. But we had everything in one area, like the place where we went to get the meat, the place where we went to get the groceries. Everything was in about a three or four mile radius, so my entire life growing up as a kid was like super localized. I literally didn’t even leave the state of Pennsylvania, I don’t think, maybe once or twice before I graduated high school. This whole insular concept of being hyper local was just part of my experience growing up and I think it stuck with me.
I enlisted the Marine Corps when I was 18 to get off the dairy farm and they had a program back then where they would take so many kids every year that sign an enlistment contract with some of the college on full scholarship. That’s what I did. I went back on active duty as a Lieutenant and did a couple deployments, got out of the Marine Corps as a captain in ’05. That experience of going all over the world, there again, it further beat into my head that life, and particularly real estate, is a very localized game because we would go into all these other countries and much like me, all these other people that we work with, they grew up and really didn’t leave within two or three miles of where they grew up.
Although the world become more global, I think the more global we get the more localized life gets. That’s kind of now, we’re going to bring it around to today is, my wife and I sold a business in 2018 and we knew that we wanted to apply this concept that the riches are in the niches, but we weren’t really quite sure how to do it. We looked around and we said, “All right, we’re going to put our money where our mouth and we’re going to pick up and move to where we’re going to invest.” Because if we’re going to take money from people, if we’re going to ask them to take their hard earned money and write us a check and invest in our deals, ethically, morally, maybe legally, it’s probably helpful to de-risk that investment in the best way we can.
We felt like to do that was to pick up and move so we could be local to where we were investing. We looked at a couple different markets for job growth and population growth and all the demographics that you’ve probably talked about here on the show. Phoenix, Arizona, Dallas metroplex, that’s DFW, and central Florida, really were the top three when we were looking at them and we went and looked at them and traveled there and just turns out that Florida is nice. The weather’s nice. It’s a very business friendly state. No state income tax so that’s quite a blessing. We just picked up and we went through the pain of moving here and I want to be an inch wide and a mile deep.
Aaron: I love that. That’s a great mentality. I recently moved myself, with my wife, up to Southern Vermont. When the pandemic happened a year ago now. Around this time a year ago, the whole world was changing so fast and it was a pretty scary time. We actually moved up to Southern Vermont to enjoy just a couple of weeks off to figure out what’s going on. Just try to reconnect here with nature for a couple of weeks also. It was a great time, but what ended up happening was as the things dragged on and our Airbnbs picked up massively here, we realized holy mackerel, there is an opportunity. The real estate’s cheap, the rent is sky high.
Everyone from Boston, New York is trying to get up here. We took advantage of that. We realized, we built our holdings up here and bought three properties in two months, and just completely have been building and building our infrastructure here. I live here now with my wife and it’s really an amazing place to live. I always wanted to live near a ski resort so I killed two birds with one stone there. Dream come true for Aaron and also building my business. Two great things. You want to be happy and enjoy life as well. It’s so important. I agree. How do I honestly look my investors in the face and say, “I’m gonna take your IRA, your hard-earned capital, put it into an asset six states away. I got ABC management and they’ve assured me with this nice PDF they sent me that they will do a great job on my real estate.”
I get it. That’s a model that works for a lot of people. I can’t knock it too much, but I’ve also heard horror stories and there’s risks investing whether you’re there or not, but at the same time, I think you got to be near your assets. If you’re the operator, you are the general partner, you’re the person calling the shots. It’s hard to do it four or five hours away, five, six states away. It can be done but it is harder. It is riskier in my opinion. That’s why when I talk to people I say, “When you’re shopping around for a syndicator, ask, do they live in the market? Do they know the market or are they just hiring third-party management companies because that’s an added risk.” Awesome, that’s so cool. I like that mentality. That’s worked out for you then. It sounds like you’ve been there, how many years ago was that?
Mike: We’re coming up on a year and a half. When you’re starting over in a new area, obviously you just can’t snap your fingers and hit the ground and be a hundred miles an hour. We had to really think very strategically about how to build a big pipeline of both networks, broker relationships, other owner operators that we want to develop a relationship with them so that when they’re ready to trade their property, they think of us rather than having 10 brokers come through and tramp through and give them an opinion of value.
It took a lot of effort and a lot of hard work to really put the sweat in. A lot of people just see the tip of the iceberg. What they don’t see is the 70 hours a week for a year that I had to go through full time and build a massive database and relationships through Zoom meetings and coffees and all the other stuff that was hard work, to be able to create the deal flow that we have,
Aaron: Oh my gosh, yes, there’s so many hours behind the scenes [unintelligible 00:09:00] It’s an amazing industry where it’s very glamorized in a lot of ways. HTTV and all the different people selling you books and CDs, making it look easy. You got to really recognize that the amount of hours behind a computer screen, or just talking to people, connecting with people, it’s a big part of what we do.
My partner, Seth Martinez is in charge of the deal flow in New Jersey. Boy, he’ll talk to landlords for three or four years. Go meet with the diner every year. They won’t even talk about the buildings sometimes. You just sit down and chat and they just- when people like you, they want to do business with you.
Mike: It’s hard to say no to a friend. The people that know, like and trust you are- it’s just like wrapping your tentacles around them. I think Dale Carnegie said the sweetest word in the English language is your own first name. The more you can be interested rather than interesting, it’s going to be a lot easier to make those deals happen.
Aaron: That is so important. You’re right, absolutely. Be able to listen to people and really relate to what they’re saying is so important, but also understand who you’re talking to, who’s on the other side of the table. What’s important to them without them necessarily telling you what’s important to them in this scenario or whatever is happening. Whether it’s someone who’s considering investing with you or someone that’s considering selling you their real estate they’d owned for 20 years.
It’s important to understand what’s the biggest concern in this thing, because often it’s not money, it’s actually not money. It’s in making sure the transactioner is not paying for it.
Mike: That’s right, making sure it closes. Are they trustworthy? It also helps to really–I use the analogy of shooting with a rifle rather than shooting with a shotgun. For us, there are five criteria that all have to be met in order for us to entertain them. In fact, when you apply all five these criteria, there are only about 630 properties in the central Florida market. We know them by address of everything that we want to own. Again, when you’re looking at, I call it a bottoms-up approach and a lot of people say take top-down.
Well, we like Dallas, we like Houston, we like Orlando. They take this very top-down approach. It works for a lot of people, I’m not saying it doesn’t work but if you flip it around and you say, “Well, what’s every address that I would like to like to own?” Define the market by the address. The five criteria for us is it has to be built after 1970, of course, that helps with the control for the deferred maintenance. Florida climate is not so harsh as maybe it is in Chicago or Connecticut or New York.
It’s got to be 100 units, it’s multi-family only. A lot of guys in the multi-family space also do student housing. We do know student housing, we’re just straight up workforce housing. Workforce housing is basically the term that refers to the tenant makes $75,000 or less. The workforce housing concept is really that C product or that B product and it’s got to be located in central or north central Florida and it has to have traded at least 30 months ago the last time it changed hands.
When you apply those five criteria, they’re only 630 addresses. [unintelligible 00:12:25] If we look at the data, about 8% of them turn over every year. If you take 630 times 8%, that’s about 50 transactions a year, roughly one a week. We know that it’s plenty to support our business model and we want to shoot with a rifle that has a scope on it, not a spray and prey shotgun, which further substantiates the inch wide mild deep geo niching. Where again, to your point Aaron earlier, plenty of people make money and have been very successful in the wide area concept. It’s just not the way we go to market.
Aaron: When you’re marketing it’s so important to be not wasting your dollars and sending letters or online ads or whatever it is you’re focusing on, how to touch these individuals, it costs money. I spend $7,000, $9,000 sometimes on mailing pieces every month. We’ll do online marketing as well, social media, $60 a day, just continuous, going, going, going. It’s a lot. It really does add up. I’ve made the mistake, every business owner, of just throwing a dart with your eyes closed sometimes [inaudible 00:13:35] marketing, or I got a free list and I’ll apply lie $5,000 to it but then figure out the list, the reason it was free is because everyone else–
All those mistakes. Definitely when you create your own list like that, when you create your target market and narrow down exactly what you’re looking for, that’s what business is. Business is particulars, business is a system. I think sometimes we get mixed up in the glamour of it all and we forget the nitty gritty. That actually being a good business owner is about just having a very, very particular scope and just knowing exactly what you’re looking for and shooting as close to the target as possible day after day.
Then finally when you hit the target, fine-tuning that even further. I think you definitely hit the nail on the head there. Have you found any great deals down there?
Mike: Yes. We’re working on one right now. It’s a $27 million dollar transaction in Tampa. Tampa market is pretty competitive. There’s about 1,000 people a day moving to Florida, that has been accelerated by the pandemic. The joke is when you go to the grocery store here, pretty much what you hear is a New yorker yelling down the hallway to his wife in a Brooklyn accent. That’s what you hear at the grocery store. We got all these New Yorkers moving down here and and a lot of blue collar jobs have been created.
We’re hot and heavy into that one right now, and that’s consuming a lot of what we’re doing. We’re underwriting probably roughly 8 to 10 properties a week. The ratio is like you got to underwrite about 100. You’re probably going to make 8 to 10 offers, you’ll get one. I think the competition in Florida is increasing so that’s probably maybe 20 offers to get one, is probably more closer to the ratio today. But there are pockets, you also mentioned, you have your podcast.
One of the really interesting things, and I’ll go back to Dan Sullivan strategic coach calls this thing called the unique ability. We know that one of my unique abilities is talking to people. I love talking to people like you. I love interviewing people on my podcast. Because we know whose properties we want to buy, we can just invite them on our podcast. Now, not everybody says yes, but 1 out of 10 will say yes. They’ll come on, we can develop a relationship with them.
You can probably bet when that guy thinks about trading that property, he’s probably going to come back to the guy who knows him, who likes him and trusts him, who gave him a platform, who gave him a chance to tell his story. That was the main genesis for starting the podcast for us, is so we can interview the owner-operators whose properties we want to eventually buy.
Aaron: That’s a great idea. I do that with people in my business. It’s interesting when I find people that are, even if they’re an investor, but maybe they’re doing something outside real estate where they’ve been a successful real estate investor, or realtors or different people. Landlords, that’s a good idea. I really haven’t thought of inviting landlords on our– The thing is, a lot of the guys we’re talking to are pretty grumpy old man [unintelligible 00:16:40] I’m not sure how much fun they’d be on the podcast.
Mike: Everybody’s got a story inside of them and the problem is most people are not interested in the story. We will typically go through the apartment associations, so these are non-profits that are the lobbying organizations for the multi-family industry. You pay the fee, become a member, now you can reach out and network with these folks as a fellow member of an association, which is a way different way than you’re going to be cold-calling them or cold-emailing them or reaching out to linkedin and the guy doesn’t know you. That’s just a whole different way.
There’s a trust factor there, when you’re peers if you will, when you’re both in say an apartment association or whatever, for whatever niche the audience is thinking about. That’s also something else we did when we moved to Florida, that we did relatively quickly to try to again try to build that pipe of relationships.
Aaron: Great. No, that’s all about it, is being able to connect with people. When you’re connecting on a public stage, there’s even more trust involved. There’s just a whole other level of recognition and also allowing you to show your worth very quickly as a business owner and say, “Hey, here’s my platform, we’ve got a bunch of people, our meetup group, 4,000 people, our meetup group.” It’s nice to give exposure to people getting started maybe. Really build the brand. Absolutely, that’s good stuff. That’s good stuff, Mike. I see you’re a doctor, Mike Lorence. What’s your doctorate in?
Mike: I play one on TV. No, I’m just kidding. I have a PhD in business and it’s in the area of talent acquisition and management. Which is just a fancy way for saying how do you find and hire and manage the top one percent of people, which is a whole science behind it. I wrote a dissertation about it and really was fundamentally plagued by this problem as an entrepreneur. That’s why I decided to go there, again, an inch wide and a mile deep, and really get behind the science and the best practices and the strategies of how to bring on and and really create great teams.
Aaron: Cool. Well, I’ll go check that out. How can people find you and learn more about what you’re doing?
Mike: Thank you so much for having me on, Aaron. It’s been a blast. A couple of different ways to reach out to us. You can roll over to our website, Floridamultifamilygroup.com. That’s flmultifamily group.com. There’s a Contact Us page. We have a free Florida multi-family investor kit. Even if you never invest with us, it’s probably a pretty good resource for you. It’s $297 of product and content and some of our best secrets that we’ve learned about the Florida multi-family game.
You can roll over there to floridamultifamilygroup.com/kit, pick up your free kit. We pay for the kit, all you do is take care of shipping. Whether you invest with us or anybody else, it’ll make you smart about the Florida market and what’s going on here. Those would be probably the two best ways to connect.
Aaron: Cool. Excellent. Thank you so much, Mike, for coming on. I’m definitely going to check it out a little bit more and keep following you there. Of course, I’m Aaron Fragnito, your host here, the Passive Cash Flow Podcast and co-owner of People’s Capital Group. You can check us out at peoplescapitalgroup.com. We focus on the New Jersey market and the south Jersey market with short-term rentals and apartment buildings in North Jersey. Mike, here focuses on the Florida market, so he’s your down south man if you want to get some sun. If you’re more about skiing or, boy, it’s hard to sell Jersey over Florida.
Mike: Moving right along.
Aaron: Moving right along. No, I love Florida actually. We’re probably going to go visit down there later this year, absolutely, Mike. Thanks for coming on so much. Glad to have you. Enjoy your day.
Mike: Thank you so much.
