Edna Keep joins the Passive Cash Flow Podcast to explain how she went from owning 0 to over 700 multifamily units. The secret is in the details and the systems. Edna and Aaron swap stories of acquiring large-scale properties and how they navigate the challenges of being large-scale real estate syndicators.
Edna Keep, real estate investment teacher and author of Multiple Ways To Wealth: Creating Your Prosperous Lifestyle, has a deep understanding of what investors want in a deal. As a former financial advisor, Edna helps connect investors with everyday people who want to create true passive income for the long term. Edna’s team has a portfolio of $75 Million they built in less than 14 years primarily multifamily units and primarily with none of their own money. They have over 778 doors, with 178 units having been added in just the last year.
Edna is currently working on a deal that will almost double the number of units her team owns and manages! Her process is proven, and she now shares this system with others through her coaching. In addition to coaching real estate entrepreneurs, Edna lives near Regina, Saskatchewan between Calgary and Winnipeg with her husband Warren and teenage daughters Desiree and Dhani.
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Peoples Capital Group has been helping passive investors build wealth in NJ real estate for the last 10 years. Visit www.PeoplesCapitalGroup.com to learn more how Peoples Capital Group helps qualified investors build wealth and passive cash flow. Self Directed IRA’s and Solo 401K’s are accepted.
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Edna Keep: There’s so many things that can go wrong. I’ve seen so many people buy because they have the money, like the deals we just bought, they had the money. It was a group of doctors. They had the money, they buy this big deal, but they don’t know what to do with it after. You really got to know your staff and not just because you got the money to throw at it because you don’t want to come out on the losing end of something like that. You have to get educated.
[music]
Aaron Fragnito: All right, ladies and gentlemen, it’s Aaron Fragnito, your host of the Passive Cash Flow Podcast. We’re back here with another episode, we have a guest named Edna Keep. Say hello, Edna.
Edna: Hi guys, how are you?
Aaron: Doing great. Doing great. I really glad we have you on the show here. You seem like a ball of energy and your stats, the numbers you put on the board are really impressive as an investor. What do you do Edna?
Edna: Primarily, nowadays, I coach and train people to do what we do, but we also are still active in the game. We still buy real estate. We own primarily multi-family although we did start out in the single-family space, like most people do. We have 778 doors and always looking mostly in Canada, but our last 260 doors were in the US in Memphis actually. My passion is just helping other people get in the game. We’ve done well and we’re in our give-back phase of her life.
Aaron: Good, good. I love that. I love that so much. It’s nothing like being able to give back and that’s really the best feeling in the world. That’s why we do this after all. That’s why we try to build our wealth at the end of the day. Right?
Edna: It is. Sometimes people will ask and I think you’d probably get the same thing. Why if you’re doing so well, why do you want to stop and train other people? I think it’s a natural progression, you just want to share what you learned and some of the hardships you went through too to help other people avoid some of that stuff.
Aaron: Oh yes, absolutely. Plus after a while 770 units, you want a little change of pace some of your day.
[laughs]
Edna: Exactly.
Aaron: I’m up to about 120 and there’s certain days, I’m like, “Boy, real estate investing is a lot of work. You really got to be committed every single day, a lot of long hours,” so absolutely. Anyway, someone listening, [unintelligible 00:02:27] 770 units, I own a two-family and four-family, it’s a lot of work. How do I possibly get to 770 units that doesn’t sound realistic? How does someone do something like that?
Edna: The first thing is you have to let go of some of the control. I don’t do everything. My specialty is the raising capital side of it. I don’t get into the trenches. I don’t even, I seldom even look at the properties. I have partners that do that stuff for me. I will help with the financing, getting all the money in place, not just the private financing, but also, the lender working with the institution lending and stuff like that too.
Those are my roles, and then once we have the building and maybe optimized it for the first year, really don’t have much to do with the buildings after that. We work a lot with managing partners and property managers. We have renovation teams and all that stuff too. The biggest thing is not feeling like you’ve got to be the one who does everything.
Aaron: Absolutely. I’ve definitely made that mistake as a business owner of trying to just have too much control or just trying to do everything to save a buck as well, which ends up costing you more money a lot of times. It’s so funny, people might hear, “Well, oh, you don’t go out to the property or you don’t get on a plane,” really, you want to hire professionals for a lot of these things. I’ve seen home inspection reports on the apartment buildings we buy and I’m not capable of creating one of those reports
Edna: No, me either. I know how to read them really good, but I’m not going to create them.
Aaron: Right. I get halfway through and I start to glaze over here. They are long, there’s a lot of information, you have to pick out what’s the value, what’s just a normal rigmarole of depreciation on a building, but it’s important to have those professionals in place to give you those reports. Then we act a little bit as a gatekeeper, essentially just reviewing everything and deciding what’s important, what we need to do further due diligence on. You feel like that’s sometimes in a sense?
Edna: Yes. I see where a lot of people, when they’re attempting to scale, where they get stuck too because they feel like they have to do that all themselves. It comes naturally, you buy your own house, you do, you may walkthrough with the inspector, if you get in inspection, then the next property is a rental, well, it’s the same thing. With multi-family, like we deal with, those reports are mandatory for your lender.
They don’t even care if you’ve walked through the building, they want to know the building condition report is done by a professional, that the environmental is done by a professional and not something that you said anyway. They’re not going to give you any credit for it anyway, so you got to hire the professionals, use them for their knowledge.
Aaron: Oh, yes, absolutely. Absolutely. It’s also when you get local professionals, they know a lot more if you’re buying in an area may be that you’re not familiar buying in or just a new market, working with local professionals can be priceless.
Edna: Yes, absolutely. Got to build boots on the ground wherever you happen to be investing. Yes.
Aaron: Yes, absolutely. That’s a good strategy, so what is your investment strategy as far as the types of real estate, you focus on owning and purchasing?
Edna: We’ve done everything. There’s some times that it just makes sense to buy a turnkey property where you just walk in, take over and start managing it from day one. You’ve got cash flow from day one, that sort of thing, but our biggest home runs have actually been when we’ve done the BRRRR strategy, where we went in and maybe taken a property that’s got some vacancy, has been underperforming, and needs some updating and renovations to bring it up to even current market rents.
I find a lot of times what happens is landlords get tired. After they’ve been at it for a while, it’s like, “Uh, I don’t want to deal with that, don’t want to deal with that,” and then pretty soon, their building gets run down and that gives you some really good opportunities to buy. The ones we just bought in Memphis, that was exactly what happened. They had hired property management, expected that property management would look after everything, but they don’t, we got to oversee all of that.
Then got themselves in a bit of a pickle with lots of vacancy and hadn’t really kept up the renovations and stuff like that. That’s how you get some really good deals sometimes. Those are our favorite.
Aaron: Oh, yes, absolutely. Value add properties, Seth and I, we do the same thing. We look for both. We like those turnkey properties. We bought a 25-unit last quarter, actually last year, the end of last quarter last year. That was really a nice turnkey property that’s producing better than targeted and those are nice assets to own. However, we are also buying now a 27 unit.
We like these types of buildings. We’ve bought plenty of them and putting another $330,000 into it. Rents are 30% below market value, it’s two blocks to the New Jersey Transit Train Station, that gets into Manhattan 45 minutes. It’s a goldmine location, but the owner just forgot to manage the billing properly for the last 5or 10 years. Those diamonds in the rough, much harder to find these days and they were a few years ago, but when we do, we try to strike on them pretty quickly.
Edna: In some owners, one of my students just recently, she bought an– it was a 9 Unit building and seven of the nine units were vacant. After talking to the son, she found out that the parents had actually owned the building probably way longer than they should have. They were in a nursing home, so it got left to the son to look after. He had no interest whatsoever, except for how fast can I get rid of this.
She found out after the back that they had actually developed dementia. There, the last few rent checks, they had not even deposited them, and so you cannot manage a building like that. It was worth way less than it should have been had they maybe sold it 5 or 10 years prior to ending up in this nursing home, but the son just wasn’t interested. He was in Vancouver. These guys were in Toronto and it just got left too long.
She ended up with the amazing opportunity, bought it for 1.1, put in 200,000, refinanced it at 1.85, and increased the rents that the old owners had had, the average around 800, the two that were left, and increased the rents to $1,850 a month. She cashflows of one, little nine-unit property, 5,500 bucks a month.
Aaron: Wow, that’s incredible.
Edna: It’s all my own money out of it. Yes. It still happened, that was maybe– I think she financed it in April, so it just happened. Yes.
Aaron: That’s great.Yes. The buyer renovate refinance strategies is amazing. I just feel like it’s gotten harder and harder as the market gets higher and higher. Are you seeing that in the Canadian markets you work in?
Edna: In certain areas, yes. We see a lot of money that people have made just even in their own personal homes in Toronto and Vancouver areas, especially. They just, there’s nothing that they can buy that would cashflow, make them any money. They’re starting to look outside their cities and they’re maybe looking at more Northern areas or different parts of Canada to look for actual cash flowing property. Yes, in one sense, their homes have done really well, they’ve got all this equity built up but they’ve got to make smarter decisions and get out of their area and start looking at something. With the stuff that we bought in the US, you just have to dig. You have to find, you have to look. At the last bunch, we bought $21,600 a door, and then probably put in about $16,000 a door but after repair, the value will be around $60,000. You can still find them, but you got to be looking.
You mentioned before about people doing too much of the work on their own, that’s the other thing that I noticed. When we took our training, we took it to the Robert Kiyosaki Group. In 18 months, we had 50 doors, cash [unintelligible 00:10:45] $5,000 a month, I think our net worth had increased like $800,000 and people would say to me, “Edna, what did you do? What did you do so different? We took the same courses.” I said, “Well, I didn’t step over dollars to pick up dimes.”
I found out in most cases, what they were doing is property managing themselves to save that $100, doing the maintenance on the weekends to save that $50, and then after about four doors, they were totally stuck because they were doing all that little stuff and they didn’t even give themselves any mind space to keep looking, keep finding the deals, keep looking, and that was the part that I noticed was what we did different from most people.
Aaron: That’s one of the biggest challenges that building up, building out of that place because I remember I bought my first five family in Newark, New Jersey for $135,000, by the way, just appraised for $675,000 when we refinanced it.
Edna: Yes, that’s awesome.
Aaron: Put about $50,000 of innovations into it, and this was about 2011 or so, 2012, and just really doing everything myself. Then finding a hire management company but they really didn’t care all that much about my property, were actually quite disorganized themselves so I had a lot of challenges there also along the way. It took until we got to about 75 doors to really develop our own management company, because we buy local here in North Jersey, so everything is within about an hour of our office so we’re able to manage in-house.
Management of real estate, boy, is that probably the hardest parts of the– it’s probably the hardest part of this business.
[crosstalk]
Edna: Well, too, we get it. If you’re dealing with your property, you are also emotionally involved whereas a property manager. It’s their job and they are our liaison. At one point, my oldest daughter was our property manager. We did like you guys did. We just did our in-house stuff but she would bring me some of the challenges. I would just get mad, “How could that happen? Get them out of there.”
Finally, I just learned to say, “You know what, just send me the bill. Don’t tell me the story, just send me the bill now.” [chuckles]
[crosstalk]
Aaron: That’s my attitude. You can’t get emotionally involved.
Edna: You can’t.
Aaron: You have to do the best job you can do with property management or managing property management. Of course, I’m not running around knocking on the doors. We have staff in place, but it’s just constant problem-solving and constant setting up systems, checking your systems, trust, but verify, contractors always trying to pull fast one.
Edna: Yes. [chuckles]
Aaron: The last meeting I had was with a contractor we just had to let go because they’re constantly, constantly trying to trick us into paying them more money. My wife and I just had a baby and we were out of town for two weeks.T
Edna: Congratulations.
Aaron: The first thing this contractor did was send us pictures and trying to trick us into giving him payments for jobs he didn’t do, and just really shows your true colors when you step out of town for a couple of weeks.
Edna: The thing is they’re short-term thinkers, that never works long-term, does it?
Aaron: No. It’s a shame. We’re doing a lot of business, but just one of the challenges of working with service providers and managing properties. We’re developing new holdings in Wouthern Vermont right now, hotels, here, my wife wants a short-term management company and Peoples Capital Group is buying the properties up here. that’s very exciting stuff from my business partner who manages our New Jersey operations, New Jersey buildings.
One of the reasons we moved up here is because it was so hard to find deals in New Jersey, so we’re definitely in that boat of moving out of a very congested, competitive market moving out to the suburb or the rural markets. You’ve seen people doing that in your courses and just fellow investors as well?
Edna: Yes, absolutely, because it doesn’t always make sense. I had someone reach out to me the other day and she said, “Edna, my building, my 12-unit building has been valued at $2.5 million, but I can’t even refinance it, I can’t even get $1.5 million on it. I got about–” I think she had a $600,000 mortgage, they might have moved it up to a million. I said, “That’s because there’s no cash flow. There’s nothing to give the real value to the building.”
Aaron: Exactly. You never want to buy for negative cash flow, at least the personal rule of mine is–
Edna: Oh, me too.
Aaron: These people buying in Manhattan for negative cap rates, just doesn’t make sense to me. I think a lot of them lost their shirt in the last few years as well, class [unintelligible 00:15:22] real estate.
Edna: Yes, that’s not a long-term plan. I’ve seen people like that one student of mine that bought the set the nine-unit that seven were vacant, but it was a very short term like within six months later she was turning this property, added a tenant, turn this, added a tenant, so it wasn’t a long-term project. There was a plan in place to make sure it was going to cash flow, and it did. She even had an after repair value evaluation based on rent and renovations. She knew going in what needed to happen, and then that’s exactly what did happen.
Aaron: Yes, you got to know your numbers. I was just talking to investors the other and they didn’t understand that when you go to refinance the property, it has to make a certain cash flow to get that mortgage.
Edna: To even get the financing, yes.
Aaron: Yes. Buy, renovate and just like get it rented out as quickly as possible and then refinance. No, you really actually need to renovate the right way, lease-up the right way, get top dollar, take your time, it’s probably not going to be done in a year if it’s a larger size building. In fact, more like two and a half years for any decent-sized building is a good timeline to really reposition it properly.
We’re seeing that rents do remain strong right now and our markets are strong here in North Jersey. Now you’re investing primarily in southern markets, is that what understand?
Edna: Well, the last two purchases we made were in Memphis, Tennessee and we’re looking actually in Jacksonville, Florida right now, and Memphis. We’re still focusing on Memphis but we’d really look at any place where it’s a landlord-friendly state, first of all, and then also where the numbers work. Not just the numbers, but that there’s good potential for the area to stay long-term. We’re also not scared of smaller markets.
Some people like to stick with the bigger markets, we found some very best cash-flowing properties in some smaller areas.
Aaron: Absolutely. Well, if it’s on the headline of CNBC, then it’s too late in my opinion.
Edna: Yes, it is so true, it’s so true.
Aaron: You really want the secondary markets. I’m a big fan of secondary markets, we don’t invest in Manhattan or the boroughs in Manhattan. We do smaller cities that play off that metropolitan market here, and so we see a lot of value there. The South is great for cash flow, it’s harder in North Jersey and things like that, the cash flow. We really buy for equity growth over time with the buy, renovate, refinance strategy.
The hotels are good for cash flow and the apartment buildings do cash flow over time, that’s always a nice thing to see. Now you’re also on the coaching and training side, just talking a little bit about how you work with new real estate investors, people who look to learn more.
Edna: Well, generally, have people come to me when they’ve maybe bought a few houses or and they already know that they definitely want to scale their real estate business. I show them how to get into multi-family. We use a lot of investor capital to do that, and mostly, I help them buy the first two, three buildings because once they understand the system I’ve set up, then they can just rinse and repeat, and do it again and again in whatever market they choose to because the way that I set up the system is you can plug and play it anywhere.
You got to start with your power team wherever you are. There’s a system to getting those right in place. You got to have your lenders in place, and then you got to have your property managers, all that kind of stuff. It’s really building that power team and understanding where to buy, why you’re buying, how to analyze the property, how to find the right deals, and stuff like that.
Then, there’s a training component, there’s a networking component because I find that sometimes I’ve got people in my group who got the money but can’t find the deal and vice versa, so they partner up, and then the coaching comes one on one when they’re actually working on a live deal because the first one or two are the hardest, and then I make myself available for later on if once they get established.
They’re buying their first hundred, well, there’s just a few different things you got to think about. Some of it is just a mindset. When we add one more zero, what does that mean?
Aaron: That’s scary.
Edna: Brainstorming and helping people just through that challenges of just the whole growth part that comes with becoming a multimillionaire real estate investor.
Aaron: Yes, absolutely, that’s very interesting. How can people connect with you and learn more about your program?
Edna: You see my name behind my head? That’s my website, ednakeep.com. My email address is also edna@ednakeep.com What I recommend to people, if they are reached out to me, I have a 25-minute webinar that I share with people, that gives them more background, so I can tell my story, then book a strategy call with me. If it’s something that interests you, you want to learn how to do this yourself because I know some of you’re dealing with a lot of people who just want to be passive investors and invest with you.
For people that say, “Hey, I want to be like you, I want to be like the Aarons of the world,” that’s what I do, I teach people how they can do that themselves. Aaron, I find that some people, they think they want to do it, then they realize how much work it is and they go, “No, I think I’d rather just be the passive investor.”[laughs]
Aaron: No, I was just going to say that actually, took the words out of my mouth. I had the conversation all the time with people. I tell them, I’m like, Okay, here’s what I do day in and day out and here’s the steps you need to take. Generally, by the end of the phone call, “What am I going to make if I just invest with you again?” and like, “Okay.”
[laughs]
Edna: There’s just a learning curve with any of that kind of stuff that you take on your own. Still, there’s a bunch of us crazy ones that want to do that, right? We want to do it on our own and we want to be the one in charge and the one running things. That’s okay too, there’s room for everybody.
Aaron: Once they say, heavy is the head that wears the crown, right?
Edna: Exactly.
[laughs]
Aaron: I just had a newborn baby, as I told you. It was like, “Oh, you’re going to have sleepless nights.” I’m like, “Buddy, I’ve been running a real estate syndicate for 10 years, I know sleepless nights. I’m up anyway at three in the morning. Right now we’re getting it, now I have a friend to hang out with, at least.”
[laughs]
Edna: Exactly.
Aaron: Oh, no, just in the beginning, just getting started. Right now, you get up to– The first one is the hardest, right?
Edna: The first one’s the hardest. Then, like I said, once you get a system in place, then it’s rinse and repeat. That doesn’t mean it’s passive though, you don’t want to be one of those owners that ends up selling us a property because you didn’t look after things and you think the property manager’s going to do everything because they are not. You got to be on top. Like you just said, you got to be on top of your renovation guys, you got to be on top of your property managers, so it’s never really passive on our side of the fence.
Aaron: Of course not, no, no, no. Being the operator is far from passive, quite the opposite. It’s interesting. No, Edna, it has was been great, speaking with you. I’ve definitely learned a lot about your side of the business here and how you help real estate investors. Hopefully, our guests were able to learn a lot or our listeners were able to learn a lot as well. Before we go, what is just lesson you’ve learned, the biggest lesson you’ve learned in real estate that you can advise other real estate investors on?
Edna: You know what? Educate yourself. There’s so many things that can go wrong, I’ve seen so many people buy because they have the money, like the deals we just bought. They had the money, it was a group of doctors. They had the money, they buy this big deal, but they don’t know what to do with it after. You really got to know your stuff, not just because you got the money to throw at it because you don’t want to come out on the losing end of something like that. You have to get educated. The other thing is get around like-minded people, you know what? This happened to one of my students, just recently, he was telling me.
He was having a conversation with one of my fellow workers and he said to me, “Oh, why are you getting into multifamily and what do you mean using other people’s money, why don’t you just use your own money and just buy a house?” I said, “Does he own real estate?” He said, “No.” I said, “Well, what’s your thoughts on that. What areyou thinking?” He said, “No, I want to own real estate,” and I said, “Well, then you got to take your advice from people own real estate, not from people who don’t.” He said, “Yes, come to think of it, that guy doesn’t even have a furnace in his house.”
[laughs]
Edna: I go, “You’re wanting to take advice from them, hello.” He goes, “Well, I think he’s just being kind.” I go, He’s not being kind, he’s being an ass. He does not know. You’ve got to deal with people who know and people who’ve done it. Otherwise, it’s all theory.
Aaron: Absolutely. Oh, my gosh, I got so many stories of people that take financial advice from broke people, just the biggest mistakes one can make.
Edna: I know, I know. [chuckles]
[crosstalk]
Aaron: It doesn’t makes sense for me, but that’s what happens sometimes. It’s our job to try to stop you from doing that and show them really how to build wealth. Hopefully, we can do that, and that’s always the goal. Thank you, Edna, for your time. Again, our listeners, I’m Aaron Fragnito with the Passive Cash Flow Podcast here. Thanks for listening, check out our other 60 plus episodes and you can learn more at our peoplescapitalgroup.com.
I’m co-owner of Peoples Capital Group. Seth Martinez and our management company, we buy, own, reposition and refinance apartment buildings in New Jersey and hotels in Southern Vermont, so check us out at peoplescapitalgroup.com. You can connect with Edna at ednakeep.com as well. We’ll put her link there in the show notes, so you can connect with Edna. Thanks a lot for coming on.
Edna: Thanks so much for having me here and it was my pleasure.
Aaron: Have a good one.
