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Full Notes

[00:01:08]

Sam’s Contact Info

Schedule a Call with Samhttps://calendly.com/sam_newell_real_estate

Instagram: https://www.instagram.com/samnewellrealestate/

https://Sam.YourUtahAgent.com/

High Cash Flow Investmenthttps://ipiacquisitions.com/

[00:17:23]

Rod Khlief’s Multifamily Boardroomhttp://multifamilyboardroom.com/

[00:21:23]

Sam looks for markets with a good job base, not a huge amount of crime, stable real estate market. Get 8 to 10% cash on cash return.

[00:22:16]

Tertiary markets will have one to two large employers/ industries

[00:27:37]

Sam team up with property managers, and commercial brokers in the area that know the area well and ask them where do they not want to go and collect rent. Or where do they not want to buy in.

[00:34:24]

Buy and hope is not a good strategy

[00:37:28]

Property Evaluator (http://www.propertyevaluator.com/)

[00:38:05]

David Toupin’s Deal Analyzer https://www.obsidiancapitalco.com/dealanalyzer

Michael Blank Syndicated Deal Analyzer https://themichaelblank.com/syndicated-deal-analyzer/

[00:42:12]

Sam shared the most profound lesson that he had learned

Check out last week’s episode: Bretts Swarts – Freedom From Capital Gains Tax

I served a mission for my church so they sent my church send me down to Peru for two years where I knock doors and sold religion basically to people and help them learn about the Bible and Jesus and and when I came back we’re in school and during the summers I was I was selling pest control to pay for school so I would knock doors all summer get rejected a lot sweat my butt off you know get get thrown out of neighborhoods or sometimes chased out by people and but you know that it was great because I learned how to work hard and just be an honest good, hard working guy and made some great money so finally my my buddy bugged me enough about flipping that. I bought my first flip my junior year of college.

Sam Newell  0:50 

Welcome to the show you were listening to the real estate lab podcast in this lab. we decode the stories, secrets and skills of the most brilliant minds in real estate investing. Turn that wisdom into practical advice and knowledge that we can use to boost our income. And now let’s turn it over to our host

Vee  1:08 

Vee. Hey there, Labmate, welcome to another episode of The Real Estate lab podcast. Our guest today is Sam Newell. Now his passion lies in income-producing real estate while attending BYU studying construction management. Sam successfully started his own real estate flipping and long term holding company as an investor and licensed Realtor. Sam has bought and sold and participated in over 100 million dollars in real estate transactions over the last nine years now started out flip small homes to now developing well over $35 million in four Plex complexes and buying large apartment communities. Sam has a vast experience and expertise that has not only benefited his family and partners, but many more loyal customers, investors clients, there’s one thing that’s really important to Sam and that is it. Integrity. That’s the most important thing when working with clients and partnership. Now on a personal note, Sam loves the outdoor and the beauty that Utah has to offer. Now being a dad to Heidi and Liam, that’s his highlight of his life. Lauren is his wife and his best friends. They enjoy traveling the world together. Sam, one thing he loved particularly is fly fishing. Okay, so let’s talk business right now. He currently resides in Lehi, Utah, the silicon slopes but you know, Sam Newell is someone who I just met in another mastermind group and I did not know this about him, but he holds a designation that not many realtors in the US hold and that is the CCMI designation certified commercial investment members takes a lot of time and dedication to learn and to get that designation. In fact, only less than 10% of all the realtors in the US has this designation. You will have a lot of fun listening to this episode and you will also learn a lot from Sam and now let me share with you how to get a hold of Sam because he is a busy, busy person. He works for century 21 and to get to him you can go to www dot Sam dot your utah agent.com or you can go to his personal website for investment IPI acquisitions dot com You can also find him on Instagram at Sam Newell NEWELL real estate and you can reach him at his phone 801952220 and without further ado, this is my conversation with my good friend Samuel Newell. Hey, welcome to another episode of The Real Estate lab podcast. And it’s an honor today for me to have a special guest from Utah Sam, it’s an honor to have you here man. Thank you for coming to the show. Yo,

Sam Newell  4:00 

hey, thanks a lot man. I’m excited to be on the show and and excited add value where I can

Vee  4:05 

awesome and and I understand you also have a new podcast. Can you tell us a little bit about that project? Oh sure.

Sam Newell  4:13 

Yeah, thank you. It’s called recession-proof real estate investing just like you I’m looking to educate people on what to do what not to do, how to invest for high high amounts of cash flow and just trying to add value to people and help them learn what to do and how to not get caught during the next recession and and even better how to thrive and not just survive during the next recession.

Vee  4:36 

And that’s an important point, because everyone is thinking that the next recession is right around the corner. Maybe it’s in the next 12, 18 to 22 months, especially after the inverted yield curve.

Sam Newell  4:49 

Yeah, in inverted yield curve, I mean rates dropping people talking about interest rates going to negative rates, which is just crazy. just crazy. So you know, I I know a big syndicators, he’s got one and a half billion under management. He thinks the recession already started that are started, but we just haven’t started feeling it as much yet. You know, I am seeing the market softened in certain areas. So, yeah, it’s it’s interesting to see what’s happening. And either way, you want to be ready for it, be ready to take advantage of it and not get caught red handed, right?

Vee  5:23 

Yeah, that’s absolutely correct, man. And so for our audience that don’t know you, I want to bring up everyone’s childhood to let them know who you are, so that they know where you started and then where you are now. So Sam, what was it like growing up in your household? Let’s say you’re around eight or 10 years old. What was it like back then for you?

Sam Newell  5:46 

Oh, geez, that’s taken me way back. Well, I lived in North Salt Lake. So I grew up until I was 11 in North Salt Lake, Utah and then Boise From then on, until I went to college. But this is a great question because we were living in 1950s style red brick duplex that my parents were renting while my dad was in graduate school. So he was going to the University of Utah to get his PhD in psychology. I don’t know how. Yeah, my mom did that with three little kids, but they did that. Well actually, it didn’t go super well. They ended up getting divorced a couple years later, but you know, he made it through school, got his PhD and he’s he’s a psychologist now, but you know, that’s what I remember is the landlord’s would come over once a year give us a nice gift. Know wherever we lived when I was a kid, my parents would manage the property to get discounted rent, which was smart. So when I was eight, nine years old, I would start mowing the lawn for this landlord who owned two or three duplexes right there in North Salt Lake and and I don’t know if I even got paid I think you’re just part of what I was supposed to do to help my family get cheaper rent and don’t really remember other than it was a really steep hill and and as an eight year old, it was tough mow that lawn.

Vee  6:57 

So you got involved in multifamily even back at 8 and 10 years old,

Sam Newell  7:02 

yeah, I remember my parents saying something like, man like our landlord, he’s making so much money. And as a young kid, I remember thinking, Man, I gotta make money when I’m older and have a better life for my own family cuz, no, it was pretty rough for us. I mean, we didn’t we didn’t have a lot of money, obviously a college student with three little kids. That’s, that’s rough. So yeah. Exposed early on and and kind of have seen both sides of the coin for sure.

Vee  7:30 

Yeah. And then fast forward to your teenagers years. Let’s say you were We were friends in high school. Who were you back then? Did you have this entrepreneurial drive and wanted to do something in real estate back then?

Sam Newell  7:44 

You know, I hadn’t really thought about real estate too much early on. I was laying carpet and and I was for almost a 4.0 student had a 4.0 I think until my senior year, but if we were friends, I was thinking about basketball. And girls and I wanted to be an Air Force fighter pilot so I was all ready to submit my application as 18 to attend the Air Force Academy fly F16 and kill bad guys and you know get my Top Gun Tom Cruise on and that’s what I was going to do you know, as trying to get a 4.0 and study hard to do that and hadn’t really thought about investing. I just thought about dropping bombs on on terrorists and that was my goal in life but I also had a very salesy. I was a natural salesman, so whenever we did a fundraiser for basketball, I was the top guy that made the most sales and did the most door knocking when I was a kid, I knock doors selling snacks and trinkets and stuff to my neighbors to make money and so I’ve always been a good salesman and just wanted to work hard and get stuff done.

Sam Newell  8:56 

My best friend was an entrepreneur by spirit and So if we fast forward to college he said hey, you know we ought to flip some homes now these are two kids in college we have no money I was again not I decided not to go the Air Force Academy I served a mission for my church so they sent my church sent me down to Peru for two years where I knocked doors and sold religion basically to people and help them learn about the Bible and Jesus and and when I came back we’re in school and during the summers I was I was selling pest control to pay for school so I would knock doors all summer get rejected a lot sweat my butt off you know get get thrown out of neighborhoods or sometimes chased out by people and but you know, the it was great because I learned how to work hard and just be an honest good, hard working guy and made some great money so finally my my buddy bugged me enough about flipping that. I bought my first flip my junior year of college and and made seven thousand dollars on it and said, well wait a second, my job offers are like $50,000 $55,000 $60,000 Why would I ever go work 12 months a year, when I’ve already been making good money during the summers making about $40,000 a summer, knocking doors and then I can flip with that cash and make 50 60 70,000 a flip. So I tried to finish school I got within five classes. And by the time I was senior year, I was losing so much money by staying in school that I had to just take a break. So 10 years later, I’m still taking a break or eventually get my degree. But my incomes gone up by at least 50,000 a year every year since then, through flipping through multifamily, through house hacking, all these different things they do and I’m so grateful that my best friend Tyler told me to, you know, kind of convinced me to get into flipping because he’s always got these great ideas and then I go Do it with them. And sometimes we don’t make money. But usually we do. And we have a lot of fun doing it.

Vee  11:06 

So your first flip was 10 years ago you started.

Sam Newell  11:09 

Yeah. So 10 years ago, I bought my first flip. We got a small inheritance from my wife’s grandma. I married into money. By the way, I was grew up poor. I remember being being on food stamps at some points and high school, my mom remarried. We weren’t poor, but compared to my wife’s family, I sure was, I mean, I had no idea how much how much money I was marrying into. And so her grandpa, my wife’s grandpa made his millions upon millions through multifamily real estate in California, in the 80s and 90s 70s 80s and 1990s. So he was dead by then, but he had left his wife with 20 30 40 million. I don’t really know how much I just know. She never ran out, that’s for sure. And she still had a number of the assets sending her checks for 15,000 a month. 10,000 a month. 8000 a month. And she didn’t visit these properties. She didn’t see them. So she gave us a check. She said, Hey, here’s your inheritance. Go buy a house, I want you to buy a good house for my granddaughter that you guys can live in for the next 30 years. And I was like, Okay, sure. So I bought a disgusting flip. And the whole family was furious with me. You know, my wife’s parents were like, what the hell? What did this kid buy? I mean, I mean, they’re like, you should have consulted with us. I mean, it was a cat p house. It was gross. It was in West Provo, Provo Utah 1990s build so it wasn’t that old. But the people before me I just trashed it. I mean, the carpets will were still wet with your in from the animals that they didn’t clean up after and so our friends that helped us move in, wouldn’t even walk into the house. They were just unloading stuff into the garage for us basically. So we paid someone to get that carpet out of there and we bought it for 170 during that that was in 2010 during the peak of the market, it had sold for 330. So I figured I couldn’t lose. I didn’t that was my due diligence. I said, Okay, what did itself or in 2007? Okay 330 it’s for sale for 170 and there’s 15 other offers on it. So I offered one at appraised for 170. So I bought it for 170 ended up selling it for 242

Vee  13:23 

of course and you live in it so you didn’t have to pay capital gain.

Sam Newell  13:26 

Yeah, we lived in it. We actually lived in it for two years while we’re working on other deals. So yeah, no capital gains that was nice, did all the work myself, which I don’t recommend while I was in school, so I’m going to school for construction management. I’m getting started in real estate and in my all my spare time I’m flipping this house, you know, doing all the work myself. So, you know, when you’re 22 years old, 23 years old, how old I was, I guess you can do it all. I my wife and I made a pact this year that after 10 years of flipping homes and house hacking, we will never ever, ever do another one ever again. That’s all big multifamily from here on out.

Vee  14:08 

Right And now that you have made the switch to big multifamily, I noticed that you also have a prestigious designation for realtor. Not everyone has it. So CCIM, you’re in the top 10% of the realtor in the entire US.

Sam Newell  14:26 

Oh yeah, thanks. I mean you have to basically pass a course that’s very intensive and understand investments investing selling commercial real estate and so I wanted to educate myself so if we rewind it back to when I got into real estate, I was just selling homes and helping other flippers flip homes I was only doing a couple transactions a year on my own because sales was so good you know, I’m then and natural salesman kind of all work hard enough I guess for it to be natural, but so it’s selling a bunch of homes and helping other people flip and and I soon realized the funnest guys to work with were these guys buying duplexes and four Plex and apartments.

Sam Newell  15:08 

And so I decided to educate myself and I’m very lucky to have been working for the right broker who understood that asset class and really understood how to buy duplexes and 4 plexes for profit and taught me about cap rates and, and running the numbers. So I really ran with that. And and when I say I’ll never flip again, I just cashed a check for $100,000 for the last flip that we just sold. So by no means do I think it’s a waste of time. It’s just a lot of work. And we’ll never do it again. Because now we have the partners and the the ability to buy $20 million buildings, $30 million buildings, $50 million apartment complexes and rehab them and we have the funds backing us and it’s economies of scale. So it’s not that I don’t support flipping I have good friends that still flip and make great money. Personally, I just don’t want to deal with flips anymore. And I don’t want to, if I’m going to work 60 70 hours a week, which I do, I want that to be on multi million dollar deals.

Sam Newell  16:12 

And, you know, if we take it back to the CCIM topic, whatever you do, you have to get educated you must educate yourself better than the next guy. Everyone knows what a cap rate is. Everyone wants to flip. So what makes me different is I’m better at running the numbers I’m more conservative, more educated than the next guy and and I think if you really want to do well in real estate, you can’t just watch HGTV and Joanna Gaines and, and Chip and say, Okay, well, I’m going to go buy a flip and do it even though that’s what I did. Once you get into multifamily. You really have to know your stuff and know what a stress test is. And, and you know, I’ve spent thousands and thousands and thousands of dollars other than the CCIM on education mentors mastermind groups.

Vee  17:02 

Yeah, definitely you are highly, highly qualified in this field just by having the CCIM. And then on top of that you’re in numbers of masterminds that you have to qualify to get in not just anyone can just walk into your mastermind that you participate in. Yeah.

Sam Newell  17:23 

Yeah, I’m very lucky to be part of Rod Khlief’s multifamily boardroom mastermind. And I think the last meeting we had all of us together represented, like over four or $5 billion dollars worth of holdings. So that was fun to be listening to and learning from some of the top minds in the industry.

Vee  17:43 

Yeah, definitely. And now, Sam, that I understand you, besides that conference that you just went to you just came back from a trip far from New Mexico for your deal that you were looking at.

Sam Newell  17:59 

Yeah. They call Albuquerque the Las Vegas of New Mexico. Not really. I don’t think anybody calls it that but

Vee  18:08 

there is a Las Vegas, New Mexico though.

Sam Newell  18:10 

I saw that actually. That’s funny. My wife asked she’s like, what is Las Vegas mean? And I’m like, well, it’s the Vegas family Las is the Vegas is the Vega family so fun fun thought fun fun fact there it’s just the Vegas so no Albuquerque so it’s not sexy it’s not this silicon slopes you know Utah like market it’s not a Boise where everyone in California with their tech company wants to move to you know, Utah’s got Adobe and Oracle and, and Amazon and eBay. Literally every Facebook. Every big tech company is setting up a headquarters in Utah. A bunch of them are setting up in Boise. Those are our primary markets. But when it’s hard to find a good deal in a Boise are you to Or Reno, or Dallas, Houston, these other markets that were actively looking in and buying properties in the Kansas City’s, you have to go to a secondary market and tertiary markets.

Sam Newell  19:14 

So we’re looking in El Paso, we’re looking in Roswell, New Mexico, we’re looking at Albuquerque, which is a really stable market. So if you look at at why we would ever go to Albuquerque because it’s not that cool, the place it’s just stable. So the population hasn’t changed a ton in the last 30 years. It doesn’t have a net migration in small net migration now, but Intel this opened up shop again there, so we’re going to have more people moving in. It’s just very, very stable. So we have two types of markets that we target. We target markets that have a good cash flow, and will have really great really, really great upside as far as increase in population, increase in jobs and increased in equity.

Sam Newell  20:00 

Then we have the Shreveport, Louisiana’s we have the Albuquerque is that just have a stable blue collar low and white collar job force that haven’t changed a lot. And then the last 30 years and in those type of markets in the Midwest and, and in these type of markets like Shreveport and Albuquerque, you can get really great cash flow. It’s a long term hold. It’s not a sexy big equity bump deal in three to five years. You’re going to buy it known at 10 to 1520 years and it’s going to net you eight to 10% a year every single year and I’m all about get rich, slow, but get rich for sure. So I don’t need to swing for the fences. I don’t need to go to Las Vegas and gamble that’s not me. That’s that’s not my business model. I make great money as a broker. I’m not trying to get rich off a couple deals. What I want is to get to $1 billion dollars in assets owned through syndication through my own purchases and get rich for sure. But you know not get rich quick, get rich, slow, but get get rich for sure. And that’s the type market Albuquerque is is not sexy but stable, and a great market owner property and for the next 10 to 20 years.

Vee  21:14 

So you want to make little chunks of money but you want to make it consistently in a lot of deals spread out in multiple markets.

Sam Newell  21:23 

Absolutely. I will buy anywhere where there’s a good job base where there’s not huge amounts of crime which would actually probably get rid of Shreveport but you know, anywhere where there’s a good job base and it’s a stable real estate market, because you know, if I can get an eight to 10% cash on cash return, do a little bit of rehab here there have a fantastic property manager. I don’t care where the property is, you know, I’ll buy in Canada, you know, I’ll buy in New York is long as it’s a big enough deal that justifies us going on. out there will buy it.

Vee  22:01 

So Sam define Good job base for for you What does it mean for you to for cities have good job base? Is that one industry and multiple industry certain percentage of the industry that provided jobs in that market?

Sam Newell  22:16 

That’s a great question. You know, your tertiary markets are probably going to have one to two. You know, we were just looking at deals in Springfield, Missouri and they have the universities and, and some health care and that’s pretty much it. So a little bit of manufacturing. We get spoiled here in Utah, where we have copper mines, we have huge amount of tech jobs, we have shipping jobs. We have financial jobs, ton of white collar, high end financial jobs, so we have a little bit of everything. So we’re very, very spoiled here in the silicon slopes of Utah. So when I’m looking at these other markets, like Albuquerque, for example, they have government contracts, they have a military base. They have some technology. And you know, I never even look at construction.

Sam Newell  23:05 

So one thing that you do want to look at like a, like a Las Vegas or maybe a, I don’t know, a phoenix or something, how much of the jobs are, are actually construction. If most of the job force is construction workers that means it’s a basically a one horse town. And so like, for instance, Boise in the last crash, they were mostly construction. They weren’t a very, very diversified workforce, there is huge growth because it’s a nice place to live. It’s a gorgeous place to live. People are so nice there. But it didn’t have job diversification.

Sam Newell  23:41 

And they got crushed. I my best friend’s dad lost his home and, and as a construction company, and many people like that because unlike Utah, they didn’t have diversified employers. They add up job base of construction workers and that was about it. They had micron and HP but you know, they weren’t very big in those locations back then. So Boise figured out what Utah did. They said, Okay, let’s see what Salt Lake did and Salt Lake for years and years and years have been giving tax benefits and they’ve been going out and courting these companies and that’s why Adobe just moved here and brought on 3000 employees here in Utah.

Sam Newell  24:21 

That’s why Oracle just moved here and, and companies like micron in Boise are building another $200 million facility because they’re getting tax incentives. And Utah’s been good at it and now Boise is has learned how to entice a lot of those companies to move over there. So that would be probably on the extreme example of the best job diversification. You have the Dallas the Houston’s the Salt Lake’s, the Boise’s, but on a low end, I don’t want a one horse town. I really don’t you have to stay away from a one horse town because you know if someone comes in and buys that company And decides to consolidate you’re in real trouble you’re going to have massive vacancy and no ability to exit that property.

Vee  25:07 

Just like in Detroit and they’re still trying to recover right now. You know, 10 years after the crash.

Sam Newell  25:13 

Yep. Detroit and then you know a bunch of cities in the Midwest You know, I’m Florida so look at what happened in Florida if you own single family in Florida during the crash, you probably lost your shorts because it was a bunch of second homes and construction jobs and industry that that service to people who were there with disposable income. Soon as the economy tanks disposable income tightens up quite a bit so if you’re in the Phoenix is the Las Vegas is the the Florida’s where you’ve got that older generation, the baby boomers coming there to buy their second homes and spend their retirement money and all sudden that economy tightens up. Those are the first locations of struggle and then they struggled the most. during the recession,

Vee  26:01 

okay, so now going back to your Albuquerque deal, what did you see in this market besides that stable in terms of population and strong job base? What was the crime? Well, with the crime rate, like, what was the property like the one that particularly the one that you tour?

Sam Newell  26:19 

Yes, there’s a part of Albuquerque you want to stay out of. And so what’s nice is my business partner lives in Albuquerque, they went his wife’s a physician assistant, she went to school there. So he knows the areas. You know, if I didn’t have a business partner there, I actually would have been a lot more hesitant to go to Albuquerque, because it does have a little bit of a bad rap for crime. And when I went there, I realized and just like Shreveport, there is crime. There’s some serious crime areas where cops don’t feel safe, let alone property managers trying to collect rent, but they’re there in specific areas, you know, and so the area we were looking at was ne Albuquerque.

Sam Newell  27:03 

And I thought it was an awesome area it was it was lower end. It wasn’t a class area. It was low end B class high end C class, but I felt safe. It was a nice nice rental type area. And I loved it. I would love to own assets there because of the jobs it’s a affordable place to live. People are nice. You have mountains around you and it’s just a cool area and same thing in Shreveport the one we were looking at in Shreveport, it was the worst property and actually a really great area next to a mall really nice little area.

Sam Newell  27:37 

I think there’s people dealing drugs there. I don’t think I know but when you’re driving around the neighborhood it didn’t feel you know, I didn’t feel like I was going to get mugged back when I was knocking doors for for to pay for school. I was out in Philly and a few times I almost got mugged or got chased out of a neighborhood by guys trying to mug me so that’s that’s where I don’t want to buy and so there’s parts of Albuquerque you do. need to stay away from. And I would say one of the most important things that we do is before we ever visit a location before we ever make offers on a location, we team up with a property manager or a couple property managers, as well as commercial brokers that know the area well, and we asked them, where do you not want to go collect rent?

Sam Newell  28:20 

Where would you not want to buy a property and they’ll tell you they’ll say, don’t go to South Albuquerque below central road, you’re going to die. You know, it’s a war zone down there. You hear shots, you don’t want to be here in shots when you own a rental property. So we always do that and and you learn very quickly, all you have to do is make three or four or five calls and people tell you the same thing over and over, stay away from the east side. Stay away from that or you know in Shreveport stay away from the airport. Same thing with Albuquerque, the airport area probably isn’t very good at all. So I like Sri Sri for I sorry, I like Albuquerque and it’s It’s a great little market and it’s stable and and the demographics and the population it just hasn’t changed a ton in the last 10 20 30 years.

Vee  29:10 

And that’s the point that I wanted to ask you to, on your take on this, because I have listened to another member of your mastermind with Rod Khlief. Actually two of them, Neil Bawa and Adam Adams, and both of them hate markets that have no growth in population. Right. And you have a different take on that. Why? Why is that

Sam Newell  29:32 

so? I can’t speak for Neil. Neil actually loves Utah. He’s building in Provo, Utah right now loves Utah you already owns in Utah smart guy. But I mean, the most basic example I have is if you own a property, you want to sell it for more, and it’s hard to sell it for more than you buy it for if the location is not growing. So that’s the most basic way I could put it is I’m with Neil and Adam on that I would love to see massive population growth. And absolutely for buying in a market with large population decline, then that would worry me. But if I look at a graph of, let’s say, Shreveport, the population literally has not changed in 40 years, that’s pretty darn stable. So I’m okay with that. As long as I get an amazing deal on the property, as long as I’m getting at least a 10% cash on cash return all by in a tertiary market like that. The reason Neil and Adam want want that population booming, or at least increasing is because they want the seven to 10%. I’m guessing this is just me guessing they want that cash on cash return. And in addition to that, they want a big equity bump. They want their investors to make a killing, selling the property in two to five to 10 years. And while I would love that as well, it’s really hard to find a Good deal in Salt Lake City, Boise, Dallas, Houston, it’s really hard. So I teach my investors and I, and I talked with them. And I say, look, this isn’t as sexy as a Dallas market. But if your goal is to get an amazing return a 15% ROI plus and eight to 10%, cash and cash, this will still do the trick. We’re just not swinging for the fences anymore. We’re hitting doubles, doubles, win ball games as well.

Vee  31:29 

Right. And this goes back to what you said earlier, you want to make consistent income and cash flow year over year and you’re maybe you don’t get that a forced appreciation, like in other markets where population keep on growing. But in this market, at least, you know, you’re going to hit that number year after year after year.

Sam Newell  31:48 

Right. Right. Yeah. So stay away from markets that are declining. Absolutely. You know, that Detroit, you know, where people are leaving their year after year. It’s growing now, but I think it’s being forced by a couple billionaires other locations in the Midwest that just anytime there’s a hiccup in the market their population drops because people go looking for jobs somewhere else. Those are the markets that really scare me that the Albuquerque is in the Shreveport where they really haven’t changed in the last 30 years. That gives me at least a feeling that I have a security blanket of hate or in the worst last three recessions. vacancy didn’t really change population didn’t really change. We’re probably good to go.

Vee  32:28 

Okay, so while you were underwriting this deal in Albuquerque, what other metrics were you looking at when you did your underwriting?

Sam Newell  32:37 

Roswell, New Mexico, Dallas, Salt Lake Boise, Shreveport. So we’re analyzing deals all over the place

Vee  32:48 

What I meant was like a metrics that you use all the metrics Yeah, the metrics so for instance, you looking for a certain amount of cash flow every every year before tax or You need to hit a certain cap rate. What are you looking for?

Sam Newell  33:03 

Yeah, so what are we looking for in these other markets? You know, we’re, we’re looking for, you know, cap rates, great. If we can be a six cap, at least that’s great. That’s less important than an upside. So let’s say it’s a 4 cap, well, we’ll still look at a four cap if there’s significant upside. So what I need to be able to do is offer at least an 8% return to my investors.

Sam Newell  33:26 

So if we can come in and buy a property, do some capital expenditures of $5,000 to $8,000 a door and increase the rents 100 to $200 a month that that’s a really, really good deal. That’s a great value add deal. And most of the time that what we’re being what we’re being pitched is deals where there’s maybe $25 a month and upside and you got to spend $5,000.

Sam Newell  33:51 

So that’s not something we would do or, you know, or it’s it’s a five cap and there’s really no upside. That’s, that’s The real problem is the sellers are selling for a price where, basically you’re buying it and just praying for appreciation because you’re barely going to cash flow. That’s not what we’re looking for, we have to be able to get at least that 8% cash on cash return on our money and, and really be able to bump those rents up by quite a bit.

Vee  34:19 

Right. So hope is not a strategy buy and hope that’s not a strategy in real estate investing.

Sam Newell  34:24 

Hey, the Actually, I’m going to disagree with you. There’s a bunch of people deploying that strategy right now. So I would I would correct you and say it’s not a good strategy.

Vee  34:35 

That’s true. But you know, I see I’ve seen a lot of people in So Cal, you know, that’s their strategy, just buying the hope. They’re eating the negative cash flow every month, hoping that it will get up. Yep.

Sam Newell  34:48 

Well, that’s one way to do it. I’ll get a bump. Right.

Vee  34:50 

Right. And, and it’s been happening, it has been happening for the last, you know, five, six years because they have had a good run after the recession, but then when it hit it again? Is they going to get wiped out again?

Sam Newell  35:02 

Yeah. And and you know, it’s funny, I was just in California and these people are just Oh Yeah, you know, it’s, I’m going to get this big equity bump and I’m going to make all this money because I’m buying a house in San Jose or I was just in Newport Beach. And if you run the numbers, if you buy something that’s going to give you an eight to 10% cash on cash return every year. You know, let’s say you buy that in Boise. Well, you know, Boise doesn’t have the massive dips that California does. And by cash flowing every year and buying something, you’re going to get a way better return then some hope for a huge equity gain in the future in California.

Sam Newell  35:40 

So when we compare it to Apples to Apples people in California when I was teaching that seminar were like just blown away. They’re like, Oh, so buying this negative cash flow house in Cupertino for $900,000. hoping it goes up to $1.8 million isn’t the best strategy and you’re right. Hope is It’s just killing these people this negative cash flow and these high risk investments.

Vee  36:05 

Yeah, definitely that’s there’s gotta be a better way and what you’re doing educating investor. I feel like that’s really important because not every one knows what they’re doing and if you just buying and hoping that your house would double in value and while you’re eating the negative cash flow every month, you’re going to get eaten alive when the economy crash and it’s coming.

Sam Newell  36:28 

Yeah, absolutely. You know, it’s funny, there’s a lot of syndicators operating on hope, you know, these their syndicators that never invest money with. They’re telling you telling their investors you know, we’re going to get a 10% cash on cash. We’re going to put $2,000 and upgrades to each unit, we’re going to raise the rents by 200 a month. They’re buying in the ghetto where average income is 20,000 a year where there’s no way in Heck, they’re going to be able to raise rents by 200 a month. So they’re just they’ve got a good idea that You’re on the right track. They haven’t fully vetted their business model though they haven’t stress test. They haven’t done the right research. So in every aspect of real estate right now, there are a lot of people not doing their homework and just operating on hopes and dreams that they’ll hit a big

Vee  37:19 

Talking about stress tests. Do you have a particular software that you use to run simulation like, or anything like that?

Sam Newell  37:28 

Yeah. So on smaller deals, there’s a software in pulled up. It’s called property evaluator, RE tools. com so it’s only available on Apple. So for small, smaller deals, it’s a really powerful little tool. It’s 40 bucks. I use it for all my townhomes duplexes for places that size of stuff. And for my larger things, I just have a an analyzer in excel we get you know, for 100 200 400 deal, deal size or doors. What am I trying to say? 200 doors for a deal. That big we’re using Excel and, and a very intense analyzer that’s that’s linked.

Sam Newell  38:05 

It’s a custom Excel and and there’s, there’s, you know, Michael Blank has a really good one David Toupin has a really good one. So I would buy theirs as if I was new in this and actually did buy both of theirs and then we created our own based on what we liked from there. So, but yeah, we’re analyzing how much we can raise rents, we’re doing the rent comps. We’re doing average income comps. I mean, we’re literally throwing everything into our an alyzer to make sure that we’re not being too optimistic.

Vee  38:36 

Okay, so it’s I mean, it seems like you are doing a lot of projects right now you have deals all over that you’re underwriting and with the help of software, definitely lighten your load a little bit. But are there times that you feel unfocused and what do you do it at that point?

Sam Newell  38:55 

You know, I just hired an assistant and I’m actually texting her as we speak because She has some questions for me. But I’ve been working crazy, crazy hours. And what I’ve always tried to do is either hire a really good assistant or if I really need a partner, I partner with someone, it’s where it’s a strategic partnership where I’m going to add huge amount of value to them. And they’re going to add huge, huge amounts of value to me.

Sam Newell  39:22 

So, my business partner on underwriting all of these deals. His name’s Linden and he’s a buddy from college. He’s a CPA. That’s what he went to college for really smart guy, successful business owner, very lucky to have him as a partner. And he’s really good at analyzing deals. I mean, I’m good, I’m nerdy, there’s my kind of joke, and maybe he doesn’t like it. But I’m kind of nerdy, like I love looking at the numbers and analyzing and he’s just a little bit more nerdy than me. You know, he’s just a little bit better at running those numbers and analyzing these deals.

Sam Newell  39:59 

So Right now what we do is he’s really doing the full analysis. And because I have 10 years more experience than him really in buying multifamily, then he brings me in and then we really go into depth over the comps everything that he’s thrown in and, and done and thrown into the analyzer to verify that it’s, it’s accurate and, and that he hasn’t missed anything. So, you know, on that side of things, you know, when I’m struggling to keep up, I always just bring in a good partner. So on the money raising side and, and the experience side, we brought in a partner who is in his 50s very, very wealthy individual from San Francisco, good, good friend of mine who owns over 300 doors paid off almost all the way paid off. And so he’s our guy that’s going to help us vet the deals and also raise money. And he’ll be our partner and all these deals and so we realized we really wanted someone older than us that’s been through the recession. That’s that’s done multifamily for a number of years and So strategically we kind of thought who the best person would be and we found Michael Michael Young to be you know a great third you know will be the three amigos buying multifamily together so we’re really good third partner for us

Vee  41:14 

then you just need a quarterback throwing to the three amigos.

Sam Newell  41:18 

There you go, there you go. Yeah, we just need someone to throw us all these deals. So now we’re literally expanding our network across the nation through the podcast through the top realtor groups that we’re in and we just need deals we need people to send us their deals analyze and and then we’ll cut them in on the deal. And if we buy it,

Vee  41:38 

yeah, so you need someone to give you deal flow across the nation, basically.

Sam Newell  41:43 

Yeah. And and so we’ve been educating others and and that’s, you know, it’s a win win scenario. If you help others, you know, they’ll bring a deal. So we’ve been doing that for a number of people. We educate them, teach them how we underwrite and they go out and look at deals and bring it to us if they think it’s a Good one.

Vee  42:00 

Yeah, definitely. Now, Sam what’s has been the most profound lesson lessons you have learned in your real estate investing journey,

Sam Newell  42:09 

you know, do the right thing.

Sam Newell  42:12 

I’ve got a good story for you. So when my daughter was held which which is probably six, six months to eight months old, she would she just been diagnosed with asthma and she had RSV and pneumonia. She’s very, very, very sick.

Sam Newell  42:29 

My wife had postpartum depression, struggling with that and it was a tough time in our lives. Very, very tough. I was not making a ton of money in real estate I was pushing really hard working a lot of hours and I remember I took this listing this and I was so excited as a half million dollar listing and and the realtor before me had done a terrible job and this guy just needed his house sold and, and so I did all the marketing, I put it up for sale and I just was crushing it.

Sam Newell  42:59 

Getting showing And I found this buyer through my marketing and I was at the hospital with my daughter and he said, Hey, can you show me the house? I said, You know what? My daughter’s sick, I’m at the hospital. I will call the owner to let you in. He said, Okay, perfect. And so he saw he loved it wanted to make an offer. Well, while he was at the house, they realized that they knew each other, the buyer and the seller. And while I had spent all this time and money, getting professional photos, marketing the property I found the buyer through, I think it was through door knocking or cold calling or what however, I found it, they decided, you know, we’re both we both have a lot of money.

Sam Newell  43:38 

If we need to, we can defend ourselves from a lawsuit. Let’s just cut them out of the deal. So they called me and said, Hey, we’re old friends. You’re not going to get a commission on this. I said what do you mean and the owner said, Look, I have a lawyer on on my payroll for a million dollars a year and I will bleed you dry. You’re not Getting a commission on this you’re done and come pick up your sign and and get out of here and take your lockbox off. So I was devastated because I you know I spent a lot of time and money getting that thing going and marketing it and and my daughters in the hospital we really really needed the money. And this guy is a multi millionaire. I mean he had he had about 30 Rolodexes, he had like 10 Audi those nice Audi’s and Porsches. And I think it’s Audi R8 and I mean, he had he had just gotten done showing me his his garage with like, 30 cars in it and, and for I think it was like a $40,000 Commission. He was willing to not do the right thing and just cut me out and said to me over the phone, you can sue me if you want if you want for the commission, but I’ll bleed you dry.

Sam Newell  44:51 

And so that was that was really really hard for me and he didn’t know that my daughter was sick. He didn’t know that we really need needed the money that my daughter was in the ICU with her lungs being pumped and my wife was a mess and I was a mess that was rough. And I had one more seller like that that kind of did a similar thing to me a couple years later and said, hey, you’re not getting a commission I am not going to pay you money I can’t afford to and I said, you know, I’ve done the work like that that doesn’t make any sense I’ve done the work and and he ended up not paying me and and I didn’t have money to take them to court so I didn’t get paid.

Sam Newell  45:32 

So it’s it’s really interesting how people will justify a way to not pay you or they’ll justify a way to not do the right thing. And it can really, really hurt others and I have lots of other examples of how this property manager we just had on with some of my investors was doing a terrible job cost me and on my triplex and my other investors in there four Plexus thousands of dollars because they wanted to save money on marketing and not hiring, not doing the right thing. So I’ve seen that over and over again. I was listening to a podcast I think with Tim brat, Tim Bratz the other day and someone in his podcast said, You know what? If you if you’re professional, you’re smart, you’re educated. And if you just do the right thing, you’ll eventually people will hear about it because there’s so many people not doing the right thing. So many people getting burned. That if you have a spotless reputation where you’re never crossing the line, you’re just doing the right thing. You’ll do well and so that’s been my goal always but you know, those those stories reinforce that where we struggled because people just didn’t want to do the right thing. They wanted to save some money. So those were great examples in my life. Why I’m so committed to doing the right thing because you never know how bad it’s hurting someone else and and whether it hurts them a lot or a little she just just do the right thing.

Vee  46:57 

Yeah, Sam, thank you so much for sharing them. Man, I, you know, people, I only like to deal with people who have high integrity and from what you just told me, you are one of those people. So I really, really appreciate you sharing that story with with me with the audience, because it’s a people business and there are plenty of money going around. We don’t need to cheat people out of their worth, you know, to to save a few dollars here and there. It’s not worth it.

Sam Newell  47:31 

It’s not some people think it is they they really like money, or maybe they’re lazy. That’s usually what it is people, they’re obsessed with money or they don’t like other people to make money. I don’t know. But I’d rather know that I’m honest and never have to question that. And so there’s listings I’m turning down right now, there’s projects I’ve passed up on because I just I couldn’t be honest. And, you know, here’s a crazy example.

Sam Newell  47:58 

There’s a developer right now pitching deals. that I know of not going to say their name, but they’re actively selling a project where their pro forma is basically just a made up lie. The taxes on the property are wrong, they’re low by about half. So these people are buying these multi units from them expecting their expenses to come in at x and next year when taxes get levied, their taxes are going to be about six to $7,000 higher than what they were on the pro forma and that takes you from what they’re advertising is like a 6.8 cap down to like a 5.4 cap like these people are going to be barely breaking even where they thought they’re going to cash flow about 1000 a month.

Sam Newell  48:40 

That’s the kind of crap that just it just infuriates me and and you know, I backed out of a big development deal that would have made me a quarter million dollars last year because the numbers were just off the the developer was giving me weird answers. The numbers kept changing. I had already sold half the project. Luckily none of my clients money Was non refundable at that point. So I told them all to cancel, you know, I could have probably just covered it up and, and fluff to the pro forma a little bit and gotten paid. But it wasn’t worth it to me. But there’s plenty of realtors and investors and syndicators that they would rather just fluff that pro forma and get the paycheck. So I’m very sensitive to that. Yeah, definitely.

Vee  49:22 

And that’s why if you are going to get involved in any kind of real estate investment, you need to first educate yourself. Or you get involved with someone like Sam, who knows what he’s doing and who has high integrity, who’s willing to walk away from deals just because he doesn’t feel like it’s right for you. You know, it’s hard to have to find people like this in in this industry,

Sam Newell  49:47 

In world, man, any industry across the world. I mean, you’re right, it’s it’s hard to find people that put integrity first and everyone says it. Here’s the thing everyone says they have integrity. until there’s a lot of money on the line. Once there’s a lot of money on the line, you’ve got that good Angel, bad Angel on your shoulders talking in your ear and, and you start thinking about how you can spend the money how you’re in debt, or you want to buy that new house, that new car, and I’ve been through it myself. I’ve had to make those decisions. And it’s hard man, when there’s a lot of money on the line, it’s hard to stick keep your feet planted on the ground and remember that, you know, it’s there’s a lot more than money in life. So I get it, I get why people make those bad choices, but it’s definitely interesting as soon as money’s involved, people that said there and you know, they have integrity, everything changes.

Vee  50:42 

Absolutely, man. Sam, thank you so much for coming to the show. man, you are you have been awesome. I truly enjoyed our conversation today. And I you know you have been truly an inspiration and your job some good knowledge for all of us here too. listen and learn from

Sam Newell  51:01 

well thank you for having me Manny, I think you’re a great dude and just doing awesome stuff and I’ve been listening, you know, to a bunch of different podcasts. I’m excited to continue listening to yours and hear where yours goes and I think you’re adding a ton of value. So thanks for having me on

Unknown Speaker  51:18 

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