Buy Apartment Buildings for Nothing From the City with Tyler Sheff

Jack Butala: Buy Apartment Buildings for Nothing From the City with Tyler Sheff. Every Single month we give away a property for free. It’s super simple to qualify. Two simple steps. Leave us your feedback for this podcast on iTunes and number two, get the free ebook at landacademy.com, you don’t even have to read it. Thanks for listening.

Steve:
Tyler Schiff founder of cashflowguys.com, is a licensed real estate problem solver, educator, investor and syndicator. Tyler has been involved in real estate for over 16 years and now maintains 100% focus on investing for cash flow and helping others do the same. Tyler’s team help others to acquire, stabilize, and then provide clean, safe, affordable housing to those in need when it matters most. Boy, I have some questions about that, what a great job description. As the host of Cash Flow Guys podcast, teaches the public how to avoid the common pitfalls found in real estate investing, and inspires others to take massive action toward their goals.

Tyler, it is such a pleasure for Jill and I to have you on the show.

Tyler:
Thanks guys I appreciate it.

Jill:
Glad you are here.

Steve:
That was an awesome big picture description, maybe you can tell us a little bit more about what you do.

Tyler:
Well Steve, this all started when I was working for the Federal government. I was out on a ship in the middle of the ocean as a merchant mariner and of course, your tax dollars were paying me way too much money. That was all great on the surface, it looked really cool on the top part of the pay check, but when the IRS got ahold of they said, “Oh, Tyler, thank you for your donation, sir.” I was paying more in income tax than most people made for a living, it was kind of scary.

Steve:
Yeah, a W-2 can do that to you, huh?

Tyler:
Yes, it sure can, so I obviously need to find a better way. I come from a real estate background, I grew up in real estate with my mother. I have had my real estate license about 16 years now. I was on a little sabbatical, I was out there bobbing around the ocean and I had to figure out a way to legally, address the word legally, mitigate my tax obligation and then I discovered the power of passive income, that was the game changer right there.

Steve:
That’s great. How long were you out there? Let’s talk about the boat experience first. We are actively looking to buy a fairly large boat right now.

Tyler:
I spent 5 years working for the National Oceanic Atmospheric Administration, that’s NOAA, that’s who predicts your weather and all that. They have a fleet of ships that are based around the world, pretty much. I went to them with virtually no experience. I was a turner boat captain here in town, I did that part time when the real estate market was not performing to expectation in 09′ and early 2010, I was out doing charter fishing for people and doing real estate while the market was at it’s absolute worst.

I got hired by NOAA because I am a US veteran and they give preference to US veterans for employment. It was pretty much a shoe in job. My first duty assignment, guys, was Honolulu, Hawaii. You can’t really argue with that.

Jill:
Love it.

Tyler:
At the time it was … NOAA, ironically, also runs the national marine fisheries. Being in the charter business, for taking people fishing, they had so heavily regulated the fishing industry, it made it harder and harder and harder to get people out on the ocean to take people fishing. Ironically, the government organization that put the charter business on hold, was where I wound up going to work, if you can’t beat them, join them, type of a thing. I can tell you … We could go on for hours about my experiences at NOAA, that was an absolute blast. I had so much fun working for that organization, a good group of people.

Steve:
It sounds like my dream job and something that I would want to pursue after the whole real estate thing is put into place.

Tyler:
If I were you, I would just buy more cash flowing assets, buy your own ship and go out there and bop around and have a good time.

Steve:
You just described our life right now.

Tyler:
See? There you go.

Steve:
You acquire, stabilize and then with safe, affordable, housing when people need it the most. It sounds kind of like non-profit-ish, but hopefully there is some profit in it.

Tyler:
There is profit in it, but prior to that. I’ve traveled all around the world and I’ve seen all kinds of different cultures, when I worked for NOAA I was out in the Marshal Islands. I looked at how the Marshallese people live out there and it was kind of sad that nobody was really doing anything for them. You see these government housing projects in the inner cities and what not. They are run down and they are falling apart. The landlord ideology is do the minimum amount possible to a piece of property for it to generate revenue. Over time the properties continue to deteriorate as does the cash flow numbers, so these people that deserve, because they are human, they deserve a decent place to live at a price that is affordable. I thought to myself, “There has got to be a way that I can do this and not run myself into the poor house at the same time.”

Steve:
What does the typical deal look like for you then?

Tyler:
Well, we generally acquire C-class property which is the lower end of the spectrum. If you could use the different types of retail outlets out there as an analogy. You have your Wal-Mart, you’ve got Target, and then you have Nordstrom, which is the high end stuff. I usually play in the Wal-Mart space. My ideal tenant is a blue collar worker, someone who gets up every morning, punches a clock, goes to work, comes home and needs a place to raise there kids, maybe a transition place, things like that. Those are the types of people that I help out.

Steve:
Do you find the tenant first?

Tyler:
No, we do a little bit larger apartment buildings. We start now at about 10 doors, 10 units, and go up from there. We help people get into the smaller stuff but as far as our investing activities we have focused on the larger stuff now. That is really our sweet spot, really is from 5-50 units. It’s too big for the little guy but also too small for the big guy.

Steve:
For sure, smaller apartment building are an unfilled niche in my opinion.

Tyler:
They absolutely are and unfortunately in a lot of major cities across the country, they are run down or abandoned. The ones we usually buy are the ones that most people drive by and kind of hold their hand over their head and don’t want to see it. We buy them, usually empty and ugly and what we do is we turn them into something nice again. We restore them back to the way they were intended to be. By doing so, I believe, we provide a better experience for the people that live in the neighborhood. When you have that one property that is looking good. When we can, we try to acquire additional properties in the same general location, the type neighborhood. We feel that we are improving the quality of life for the people that live in the area. That is what the tenants are telling us.

Finding tenants, we don’t have a problem finding tenants, ever. We have very little vacancy loss because of the experience we provide to the tenants.

Steve:
It sounds like you are treating them like a real customer, in a real business.

Tyler:
Absolutely, because they are a real customer and it definitely is a real business. It comes down to how you treat them and with that it comes to the management piece. That is the most important piece of my team. I hope the rest of my team doesn’t get jealous but I gotta say, my management team is second to none, they are exceptional. Everybody on my team is exceptional, but these guys are some of the best. We are very careful about who we pick for management because they are the middle man between us and the tenents and we want to make sure we provide that experience to the tenants that they expect, or should come to expect. For us, we don’t have any competition in the marketplace which for us, is pretty cool, that’s why we do so well attracting investors.

Steve:
Do you seek section 8 approval?

Tyler:
No, we don’t. After working for the government for 5 years and seeing how they spend their money and seeing this craziness that is going on with this election this year and things like that. I don’t want to put all my eggs in one basket in relationship to the section 8 housing. I think at some point, they are going to either start reducing or tightening the purse strings a little bit. I wouldn’t be surprised if some day they eliminate or drastically reduce the program and I don’t want to be caught in the wake of that. The housing that we are providing is a little bit over the section 8 market. These are people that are paying, self paying.

Steve:
That is awesome man. I completely agree with you on the government subsidy piece. Do you concentrate geographically in any one or two areas?

Tyler:
Our two markets right now that we are focused in is Memphis, Tennessee and the Tampa Bay market, where I live here in Florida.

Steve:
Wow, those are kind of far apart, are there any management or marketing challenges?

Tyler:
Initially getting started in a market where I don’t live provides it’s own unique set of challenges. However, I spent a lot of time on the phone talking to people. The more I did that the more I learned what is going on in the marketplace. If I get on e plane I can be up in Memphis in an hour and half plane ride, and there are 3 or 4 flights a day leaving out of Tampa, if I need to. The beauty is that I have been able to put together a really rock solid management team up in Memphis. I don’t really have to go up there very often. I usually go up there when I am sourcing properties or around Christmas time we will go up there and do a little something for the tenants in our buildings. Just our way of saying thanks for being our tenant. We do the same for our management piece, for us, it is not a huge deal.

Initially it was, that fear factor, which is one of the topics that I have been talking about lately on my show, getting over the fear. It is crippling for them, they can’t get started. We are trying to help work through that process with them so we can get them to the point where they can start pulling triggers.

Jill:
We find that a lot with our members, too. They spend so much time analyzing the deals and they are waiting to make sure all the stars are in alignment. We say, “If you keep doing this you are not going to buy anything.” It is interesting, you can get stuck there sometimes.

Tyler:
I’ve been a victim of that, unfortunately. I was able to work past it, but I can see that happening. It’s interesting, your average transactions are, the cost for the transaction when the students are buying these properties, are these big transactions? They are generally smaller ones, aren’t they?

Jill:
You know it depends on the person, it varies. We can teach you how to do multiple properties, buy a bunch for $500 and selling them for $1,500, do 10 of those a month. Or, but a bunch of 40 acre properties for three, four, five thousand dollars and sell them for twenty, it depends on where they are and their budget and all that.

Steve:
What we really teach, is how to source undervalued property, through direct mail, specifically. Like for you, there is no issues with tenants, for us there is just no issues with sales because we buy it properly, and that is what we teach.

That actually leads me to my next question. How are you sourcing the properties that you guys are buying?

Tyler:
Boots on the ground, primarily. We are very well connected with the local governments and municipalities to where we have established relationships with the key people in different sectors of government. More often than not, we will get phone calls from code enforcement and different parts of the city and county government, they know what we do, they know what we have done, and they will call us and say, “Hey guys, we have a real train wreck over here, it is right up your alley.” Property managers are also a good source of referral business. They will pick up the phone and call us and say, “You know, this building, the owner died, or it got inherited by the kids or it just changed management. Everybody is in an uproar and people are leaving.” We don’t really focus on looking for properties so much, it is more focuses on looking for problems, you follow?

Steve:
I absolutely do and this is how we start off our whole education process. If you want to, 10 or 20 years from now, wake up in the morning and go out and do the same thing that you are doing, which is go find deals, I really think you are going to get burned out. You have to find a way, we do it through direct mail and I’ve been doing it since the late 90’s. You have to find a way, to make the deals come to you. It sounds like you are aligning yourself with people who have a vested interest in bringing the deals to you and solving a problem. In that way what we do, it’s very different, but in that way I think it is really similar.

Tyler:
When you are out there looking at those lots, those people have those lots that are not producing any income for them. Every year they are writing a check for those property taxes, which, for a lot of people can be crippling. That extra hundred dollars or a few thousand dollars a year going out instead of coming in, that creates a problem.

That is a problem that can solve and when you are bringing those solutions to the market place, you basically eliminate your competition. In my opinion, I’m sure you would agree, I don’t feel like I have competition and I’m sure you don’t either because you are actually out there and taking the steps to identify those problems. Reaching out to those people via direct mail and providing them with a solution that makes sense.

Steve:
Well said, that is exactly right, we don’t have any competition at all. I’ve been in real estate my whole life and I’m sure you guys don’t either. I don’t say this kiddingly, you have a full blown, almost ready to go television show here. Have you guys talked about that at all?

Tyler:
We were recently approached about that, about doing a reality TV show and we are talking about it, we have definitely talked about it. It would make for some pretty entertaining television, but to some degree it would be rather boring as well, sitting there watching me talk to people on the phone and talking to the code enforcement officer for this city or somebody else. I used to be a police officer so I know a lot of people through those channels and I don’t know if that would make for good TV of not. There is not a lot of sensationalism to what we do.

Steve:
You would have more tenants lined up, well you probably do anyway, I think it would be pretty interesting. It is always interesting to see people succeed and at the same time helping people.

Tyler:
That is the key and it is funny because the little four-plex that we have in Tarpin Springs, we did a beautiful job of renovating it. It is more of a B-class, our Target or Nordstrom style properties, it is a little bit out of what we would normally buy. We were able to negotiate it, we found the opportunity, of course it was right here in plain sight, of course everyone else was ignoring it. We walked in and captured that opportunity, snatched it right off of the MLS and everybody chuckles when I say that.

When I do speeches and I am talking out in public, they say, “You were able to get a deal from the MLS”? Well, yeah! There is all kinds of opportunity in the MLS and the reason why that opportunity is on the MLS is because no one is looking there. It’s the one place nobody looks.

Jill:
I have to add one little comment, Tyler. Nordstrom is an A property, I’m sure your Jill would agree.

Tyler:
Definitely, and when she got done with the landscaping of this place it definitely went from a B to more of an A.

Steve:
I have had a little experience in the past, not in the recent past but in the distant past of rehabbing properties and new construction. I have almost always gone for new construction over rehab so when you guys are down, are you in the $25,000-$50,000 per door range that everybody loves to be in?

Tyler:
As far as the acquisition costs?

Steve:
The whole thing. When you are ready to turn the key and get the tenant in there.

Tyler:
When we are done we are closer to the $15,000 range with renovations.

Steve:
Now I am really intrigued and so is everybody who is listening.

Tyler:
$50,000 maybe down here in Florida in some of the Nordstrom properties, definitely, the Nordstrom or Target class maybe, but the C-class we are definitely $15,000 is a lot, I would need to be tweaking that and be closer to $12,500.

Steve:
If these municipalities are sending you deals can you negotiate a pretty serious tax break? When it is all up and running?

Tyler:
As a matter of fact many of the large cities have such tax breaks in place. For example we get, I believe, it is a 10 year break on our property taxes because we are revitalizing these buildings. That is both city and county and that is a huge incentive, you want to talk about increasing your passive income just eliminate your taxes in the equation and it is a game changer.

Steve:
You have to have 1/3 less revenue because you have that less expense, that is beautiful.

Tyler:
It is win-win across the board. Some of the municipalities have these land bank programs where if you are a property owner you can buy, if you are the contiguous property owner, if your property boarders a vacant piece of land or a sliver of land, you can acquire that, sometimes for a $100 bucks. Other people can’t qualify because they don’t own that property adjoining to it.

A perfect example where that is beneficial is we will buy a building that is trashed out but we will also acquire the lot next door, maybe on both sides and the one behind it. We will clear that land and put in maybe a BBQ pit or a little gazebo or a play ground for the kids and we fence it in. The lower income communities will fence it in to provide them that safety where the people can go and take their kids to play and have a good time. That is one of the reasons we have tenants standing in line to move into our buildings, we are taking that extra step and the cost of that is minimal as compared to the reward. I can eliminate my vacancy loss, virtually eliminate my vacancy lost and that has a huge impact on the numbers.

Steve:
That is the key, this is one of the easiest interviews I have ever done because you answer the question before I ask it. It is such a logical next step to acquire adjacent properties in C neighborhoods or C building areas because it is almost for sale or negotiable and you are already set up there.

Tyler:
The one thing I have found is … Everyday I learn something new which is cool about this business. I one of the neatest things I’ve learned is that apparently life insurance companies, and you guys probably know this being in the land business, they are required after a certain amount of time to invest their money in something. The same thing goes with Wall Street and hedge funds. They went out over the years and they bought up all these pieces of land all over everywhere just to have something to invest their money in. A little industry secret I discovered is that if start searching the property records by insurance companies, some of the larger ones, you will find that they own land all over the place. Land that they don’t even really realize that they own. It’s not like you are calling Tom Smith because it is Tom Smith’s lot, you are calling AIG. If you can put somebody in place to track down who at AIG is the decision maker on those properties, you can get properties for pennies on the dollar.

Steve:
Exactly, and we do that. We do that exact thing and I have not spoken with anybody who has talked about that out loud in a lot of years. My job right out of college, I did a full commission stint, I’m from Detroit and all I did was represent insurance companies, managing properties in inner city Detroit, or on the outskirts of Detroit. Managing large … most of them were office buildings, but try to manage them back to health and then sell them. They were ready to get out of those assets, that is a little known fact. I honestly forget about it until we started talking about it here. That is great, if you can find a decision maker, that is they key.

Tyler:
That is the key, that is definitely they key. I guess it is one of those things where everything works, nothing doesn’t. One of the little tactics that we use locally here in the Tampa Bay area, when I can’t get ahold of a land owner, I will just put a for sale sign in the front yard with my phone number on it. That works really well, all the tenants start calling the property manager that I can’t find. Saying, “Hey Mr. Smith is this place for sale”? “No, it’s not for sale.” Then I get a phone call and that leads me to the property owners, that little strategy works out pretty well.

Steve:
Back in the day when we wanted to get a new listing we would have a whole sign made up, this was long before the internet. We would lay the sign down in a place where everyone could see it driving by, but not put it up sticking in the ground, that was 80% of it. This is kind of similar. Where do you see this all going in 5 years or 15 years?

Tyler:
Well, retirement. That is the most immediate goals. We have family involved in the business and we are bringing people in, we keep adding to our team over time. We are getting ready to branch out in the educational piece. What I love about what you guys are doing is you put together educational materials that make sense, you are not gurus so to speak, you are not selling some garbage that doesn’t work. I see a lot of that on the regular real estate side as far as the rental property and the fixing and flipping and all this. There are these $30,000, $50,000, $100,000 programs out there that, by the time the people are down they are not taking anything away from it except a credit card bill.

I love what you guys are doing, that course that you are putting out, it’s actionable. It requires people to, number one take action, but it’s a great process and you provide the support after the fact which is huge. Frankly by looking through your website and some of your materials its kind of inspired us to take things to the next level and what information we put out, we have been giving away a lot of it for free in the marketplace. Talking about … we do workshops here … We are both licensed real estate, my wife and I are both licensed real estate professionals but we are not your typical realtors so to speak. Our next steps are … we are going to kind of do a little paradigm shift in the market place and bring a better educational product to the marketplace. One that is actionable that teaches people how to buy and hold for the long term. Buy for cash flow because really no one is teaching that, everyone is teaching get rich quick.

Steve:
I couldn’t pay for this kind of interview by the way, thank you Tyler. All kidding aside, I don’t know of any other entity … We set out from the beginning to provide the tools that the pros use, not just the education. Most of the education packages that I reviewed before we decided to go forward with this were just a lot of theory and some descriptions about some stories and somethings like that. We actually had released a product called Data To Doorstep, which is for a monthly fee, you can access the same data base that First American Title uses. It’s essentially a collection of 98% of the assessors databases, the county databases in the country. It’s the same stuff that First American uses to issue title policy. You have access to that data and then we show all of our members how to scrub the data down and then take advantage of sending out direct mail offers. Not just postcards and letters of interest. Using a printing entity in California that specializes in doing this type of printing, it is the cheapest and most efficient out there. We provide all the tools and education to succeed to and the support.

That is why we have such a high percentage of people who are succeeding as members.

Tyler:
Your reputation in the street proceeds you. People love you and what you are doing out there is great. You are inspiring people and not only are you inspiring people but you are giving them the actionable steps and providing them with the tools to necessary to actually making it happen. You are not selling them concepts you are selling them facts. That is exactly what we want to do. We want to provide them that step by step, we want to provide them that information that they need. When you have that data source, like you were just talking about, your Data To Doorstep, that is all fine and good, but if you didn’t provide the supportive materials to teach the student who to interpret that information and how to find opportunity within that information, which is what most of the guru types out there are doing. They will turn them onto a product so to speak, but not how to harness the power of it.

You guys have done a great job of taking the student all the way from A-Z through the process. I think that is great, hats off to you guys, you have done a great job with that.

Steve:
Thanks man, every time we get a compliment I just figure people want to look at Jill more, that is what it comes down to.

Tyler:
Well, there is that, there is always that. I have the same thing because I have my own Jill.

Jill:
We joke around here, and Steve will do. Now, with you and your wife we can say any Jill will do.

Steve:
Tyler, it has been a great 30 minutes speaking with you. It is so refreshing to hear a new take within the real estate market. Not just, let’s buy a house on the MLS and flip it. I think it is great that you are filling a niche and sourcing property. I learned a ton in this call and that doesn’t happen to often.

Tyler:
That’s great and I appreciate you guys taking the time to interview me, it’s a great honor.

Steve:
All right man, well let’s do it again. We don’t say that too often either, but let’s schedule something again.

Tyler:
I need to have you guys on my show because Atlanta investing is very intriguing and I love the way you guys are going about it, so yeah, we need to get you on my show. My listeners would just love to have you on my show.

Jill:
Thank you, we would love that.

Steve:
Tyler Schiff, how can I summarize this? Small apartment building, C-class extraordinaire. How’s that?

Tyler:
We have a ways to go, but I am okay with that.

Steve:
Let’s see how Jill says it.

Jill:
Oh gosh, no. That was good.

Steve:
So great to speak with you Tyler thanks, and we will talk with you soon.

Tyler:
Thank you very much and have a great day, guys.

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  1. I\’m glad I got to listen to this. I learn something new every time I listen to one of your podcast.

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