Learn How to Buy Right, Manage Right, and Sell Right with Gino Barbaro, Ep 110

Looking to dive into real estate investing and level up your financial game? 

You’re in the right place! Gino Barbaro, a seasoned real estate investor, entrepreneur, and co-founder of the thriving Jake & Gino community. Gino’s journey from restaurant owner to managing over 2,200 multifamily units with $350,000,000 in assets under management is nothing short of inspiring. 🎙️

Gino shares the valuable lessons he’s learned throughout his impressive career, from the importance of avoiding bridge debt to the power of joint ventures versus syndication. He emphasizes how education, mentorship, and mindset are the real keys to success in the world of multifamily real estate. Whether you’re an experienced investor or just starting out, Gino’s wisdom on navigating market trends and building strong investor relationships will leave you ready to take action.

Tune in to hear how the Jake & Gino community has helped their students close over 83,000 units with $5 billion in deal volume, and learn why Gino believes in the "Small Giants" philosophy. You won’t want to miss this deep dive into what it takes to succeed in the multifamily space!

Episode Topics

[01:23] Meet our guest, Gino Barbaro
[05:06] Challenges and Lessons in Early Real Estate Deals
[15:01] Current Real Estate Market and Opportunities
[21:01]  Embracing the Small Giants Philosophy
[23:30]  The Reality of Syndication and Market Cycles
[27:38]  Advice for Real Estate Investors
[32:31] What is one red flag every investor should look out for?
[33:17] What is a myth about the real estate business?
[37:13] Connecting with Gino

Notable Quotes

• "If I want to learn business, you can either learn on the street or you can learn in the classroom. The street ain't going too good for me." - Gino Barbaro
• "Brokers are the gatekeepers, especially multifamily... They had deal flow, but nobody was buying." - Gino Barbaro
• "These lessons are too expensive. That money may be better spent in shortening my learning curve through coaching mentoring." - Tim Little
• "Action times implementation is key. Learning without implementing leaves you stuck." - Gino Barbaro
• "Deal sourcing and fund sourcing should be daily activities for every real estate investor." - Tim Little
• "Syndication isn’t always the answer; sometimes a higher percentage of ownership in long-term deals makes more sense." - Tim Little

👉Connect with  Gino Barbaro

• LinkedIn: Gino Barbaro
• Website: Jake and Gino
• Email: hello@jakeandgino.com 
• Podcast:

👉 Connect with Tim

• Linkedin: Tim Little
• Instagram: @tim_at_zana 
• Email: tim@zanainvestments.com 
• Visit www.ZANAinvestments.com for more info on Tim and how you can passively invest in multifamily real estate
• Get your Passive Investor's Cheat Sheet  FREE

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Transcript

[00:00:00] Gino Barbaro: No deal is better than a bad deal. And a lot of these deals that people were doing, they were buying stabilized deals. on bridge debt. If you take a look back and you think about that for a second, it is insanity. But that's what was going on. And most of our students really leaned on, Hey, we're not going to go for the two or three or bridge debt because we're not even experienced enough to pull through a business plan to get it done in that amount of time. It's expensive. We're not sure where rates are going to go. So a lot of the students didn't do that. Now, if you got caught in that, Yeah. you're in the process right now. Please. Let's extend and pray here because that's what a lot of people are doing.  

[00:01:10] Tim Little: Hello, everyone, and welcome to the journey to multifamily millions. I'm your host, founder and CEO of ZANA Investments, Tim Little. And today we have with us on the show, a legend in the game, Mr. Gino Barbaro. Gino is an investor, business owner, educator, entrepreneur, and podcast host. As an entrepreneur, he has grown his real estate portfolio to over 2, 200 multifamily units transacted at 350 million in assets under management. You probably know him best as the other half of Jake and Gino, a thriving multifamily real estate education community. Their students have closed over 83, 000 units and have 5 billion in deal volume. Gino, welcome to the show.

[00:01:54] Gino Barbaro: Tim, thank you for having me on. And I've got to say, we all start with being legends in our own minds. And that's where I started. And that's where I think I'm going to stay, Tim. I

[00:02:03] Tim Little: There you go. Hey, confidence is a real thing. And it is one of those ingredients. to success. You can't have just that, but it's part of it. All right, we're definitely going to get into coaching and getting started real estate and scaling. But first, please tell us more about your background and how you got started on your real estate journey.

[00:02:23] Gino Barbaro: Tim I love the format of your podcast. I love getting into the first and second deals because those always seem like the most challenging and I am no exception. I am known as the pizza guy. The other half, my business partner, Jake was the drug rep. We both met at the restaurant in 2009. I was slinging pizzas, washing dishes, hating my job to be completely honest with you, and I was looking for something different. And the reason why I just didn't like what I was doing is I had been working with my father in the restaurant business since I was eight years old. And in 2007, my father passed away. I sit there and I say to myself, am I living his dream or am I living my dream? And I really had to stop and ponder. And if I was being completely honest with myself, I was living a little bit of his dream, but I loved working with him. I loved working in the restaurant because it was a family feel. It felt comfortable. I was doing some really great work. We were feeding. Thousands and thousands of people every year. I really enjoyed that aspect. When I picked up the book, T Harv Ecker's book, the secrets of the millionaire mind, everything for me changed. I realized that T Harv Ecker was a prick, but then he wasn't a prick because his book really hit me. It really hit me in the mouth because. When he says your fruits are in your roots, my fruits were pretty shallow. I didn't have that many, that many fruits out there. The roots were shallow. I didn't have a lot of value to offer people, right? I wasn't being responsible in my life and that changed everything. Meeting Jake in 2009 was another life changing moment for me. In 2011, Jake decided to move to Knoxville, Tennessee. For New York, we started looking at deals and it took us 18 long months to find that very first deal. And after we found that first deal, we closed in February of 2013, three months later, we closed on the second deal and then six months we closed on our third deal and as they say, the rest is history, Tim

[00:04:01] Tim Little: All right, let's go into a little bit of that. I think that's probably going to resonate with a lot of people, when you talk about these family businesses that are passed down, because there's this certain sense of responsibility I would have to imagine, especially if it's owned by the family. And so it, It was probably pretty hard for you to break away from that. I was in a different situation. My dad was a TV repairman. So his job literally disappeared. So I didn't have to worry about all that hanging on my shoulders. But, it's interesting cause you were able to be successful and it sounds like your father was able to be successful in that business for a Long time, which is no small feat in itself Given the failure rate within the restaurant industry So so kudos to both of you for being able to keep that up and then you started talking about the deals and what I Noticed what struck me was Quickly in secession one deal led to two to three and that's the experience for a lot of people But not necessarily everybody and that's okay Talk to me about what that first deal looked like. Was that a single family? Was that a duplex? Was that a 10 unit apartment? I don't know

[00:05:06] Gino Barbaro: I love to break my journey down into life before Jake and life after Jake. And that's the reality for me, Tim. life before Jake was pretty brutal. I bought my first. Three triplex or a quad. It was a triplex, but it was supposed to be a quad, but I bought it as a triplex back in 2002, great deal. But I went through some heartache in 2005. I invested as an LP, didn't know it as an LP, but I invested with the mobile home park operator. I lost 172 grand in 18 months. That was real painful. Though I learned my lesson. Then I moved on, bought a strip center up in New York retail. That was a disaster. And then I said to myself, timeout, I got, what the hell am I doing here? I'm making so many mistakes. I'm Mr. El Cheapo like everybody else. But if I want to learn the business, you can either learn on the street or you can learn in the classroom. The street ain't going too good for me. I've got to figure this out. I didn't know how to underwrite. I didn't know what a deal was. I didn't know what due diligence was, and I didn't want to keep making hundreds and hundreds of thousands of dollars of mistakes. So I joined a couple of mentorships and for me, that really helped me out because I'm a process guy, like other people who are entrepreneurs, they see something, but Someone's doing something successful. Let me see what they're doing and let me copy it. It's that simple. It's really not rocket science. And that's what I do with my first couple of mentors. And I was fortunate. Remember where I said, I was lucky that I met Jake in oh nine. When I met Jake, I was in the midst of all of this education. So I was able to provide Jake value. And Jake was able to provide me value because when he moved to Knoxville in 2011, I was the right real estate guy. He was just the boots on the ground. And the reason why it took us 18 months is because we didn't understand that brokers are the gatekeepers. Especially multifamily back then, let's take a little revisionist history. It was really crappy back in 2011 and 2012. And I think some of that's going to hit us right now in the next 12 to 18 months, brokers had no deal flow. They had deal flow, but nobody was buying. We bought our first three or four deals. They were all on loop net and they were amazing deals. rents were 300 bucks for one bedroom. Back then. We still own that very first asset, rents or 1100 bucks plus rubs. Debt was hard to get back then. But that one broker. that found this and like this helped us close those first few deals. And even that very first deal, I partnered up with my brother and Jake. It was a 600, 000 deal. We had to bring in 10%, 10 percent down payment, 10%. They were going to finance it. The seller carried back 10 percent and we got an 80 percent bank loan. So we had a total of 83, 000 in that first deal and everyone's saying, wow, I wish I had those deals today. there was a lot of risk back then. The environment was completely different. This is a weekly renters. If anybody's dealt with weekly renters, It's a very strange group of people where they're willing to pay, more per week than if you tally that per month, but that's the resident base. It was constant turnover, but there was massive value that we could find with this property. Little did we know it was going to be a heartache for six months turning the property over from monthly, weekly renters to yearly renters. That was a whole project in and of itself. But I think for me, I had enough pain and I had what we call the process. Jake and I created the buy right, the manage right, and the finance right. When I was doing it by myself, I had no process. I just thought, Hey, let me find a deal that cash flows. What does that even mean? Let me, how am I going to manage this deal? There was nothing there. There was no foundation. And I think through my mentorships and through doing one or two deals, we got to understand, Hey, there's a yellow brick road in real estate and we call it the buy right, the manage right, and the finance right. And every deal that we buy, we underwrite, we manage, we finance, we use that lens, that framework, that map to go through every deal.

[00:08:39] Tim Little: Yeah, there's a couple of things I want to hit on because you had, what I would consider a very untraditional, uprising in the, real estate community because so many people talk about, hey, learn it first, then, find out how you can provide value and you did those things. But first you did the,Doing which a lot of people are afraid one to pull the trigger at all, which is what gets most people stuck. They get in that analysis paralysis and they never actually do a deal. so they're really real estate admirers, not real estate investors. It sounds like you went dangerously in the other direction where you were doing things that were a little beyond your capabilities. I'm sure you learned a ton, but those were very expensive lessons from the sounds of it. And it sounds like you had to pause at some point and say, you know what? I am learning a lot, but these lessons are too expensive. That money may be better spent in shortening my learning curve through coaching mentoring. Was that basically the case? Yeah,

[00:09:45] Gino Barbaro: times action equals results. I was taking massive action, but I wasn't educated, but then I would also put a third layer onto that. It may be in a fourth education times, action times implementation. Which is what a really good real estate coach or community should help you do because you can learn all you want, but if you don't know how to implement it, you get up Monday morning. What's my next step? And then what's my next step after that? And then the accountability piece. I was doing it all by myself and it's really hard, especially multifamily or even any venture you want to do in life to do it by yourself. Once I've got an amazing partner in Jake, that accountability piece, I'm not letting my brother down. I'm just not, I may let myself down, but I am not letting him down. That really and truly helped me out. Listen, in the middle of the process, it took us 18 months to find that first deal because Jake, his fiance moved down and they got to buy a house, but I didn't quit. And I'm like, Jake, we're not quitting. Let's take a pause for a couple of months. We'll figure this out. And for us, that, that partnership, I probably wouldn't be here right now, right? Be really a condensed version of what we have because that partnership has allowed me and him to grow, to hold each other accountable. I'll give you a quick example. We've got a deal that we just closed last month. We've got a 12 million deal. We're closing at the end of this month. We've got 33 units with a 4 million deal. We're closing at the end of September. He just texted me this morning and said, we've got possibly another 90 units in November, December, and we're not syndicating these deals. This is all our own capital. my first reaction was Broseph. You're killing me here. I got linked to my pockets. I, where am I going to get the money? Cause I, we put it over 2 million bucks each last year. We're over 2 million this year. we're not using any capital from investors. And you know what? It was amazing. Cause what he did was let's stop and let's brainstorm. We've got some assets here that have a ton of equity. We may have to refinance and go to a credit union. That's fine. Maybe short term pain for the foreseeable future, but there is a solution. And if I was sitting on an Island all by myself, I wouldn't even be looking at those 90 units. But the fact that I have a partner, he can bring it to me and we can discuss it with me has changed my entire world.

[00:11:54] Tim Little: it's not just the accountability. That's super important. But like you said, that exchange of ideas that varying perspectives, when you have those team members, whether it's 1, people, whatever it is,that's huge that and they can temper your stupid ideas.not you personally, but you come to the table, it's like, Hey, I found this. This property is amazing because of this, and shoots holes in it. And that's what they're there for. and you expect them to do the same, the other way around. I, and I really liked the implementation piece too, because what that gets at is something that we don't often talk about enough. Like you said, we often emphasize taking massive action, which is important because you. You can't get started without that action, but then that tends to gloss over what's required after that massive action, which is the follow through, which is the implementation, which is the longer, more painful part of this whole process, right? If you're holding a property for five years or 10 years or forever, that's a long time to be implemented and you just have to be mentally prepared and prepared on paper. To do that, you can pop the champagne when you sign the papers and that's all good, but that's when it really starts.

[00:13:07] Gino Barbaro: And let's go back to what you had said, how do you get in your first deal? And I'll even discuss and show you what the implementation looks like. You're in real estate. You're looking to get into real estate. The very first thing that anybody should do as an investor is understand what the relationship they have with money is. Number one, number two, understand why they're getting into it. And number three, what are their goals for me getting into it with Jake? I just wanted to create a little passive income on the side. I couldn't fix and flip another thing where people get into the real estate space, whether they're getting into single family homes or wholesaling, I couldn't do that. Jake and I both had full time jobs. So we said, you know what, this limiting belief of you need to buy a single family, then get into a multifamily. That wasn't stopping me. I said, let's get into multifamily. Once you've fleshed all of that out, the next step is really to select the market. Okay. So you're getting educated on selecting a market, but how do you implement that? My real estate coach showed me the market data, how to start calling brokers, how to have, start having that conversation, how to start doing property tours, and how to get on brokers lists. Those are all things that you need to implement. Once you start implementing that, then it's getting deal flow. Once you start getting deal flow, how do you implement that and start underwriting deals, you can be at home in your underwear all by yourself. You may not even know how to use Excel. You may not know what an IRR is or what a cap rate is, but when you have a coach or somebody teaching you this stuff and looking at your underwriting and going, that doesn't look right, let's do it again. That implementation is so important. Then from underwriting deals, I've never put in an LOI. What's an LOI? It's a letter of intent. If you've never put one in, you're not in the business. When you put that first letter of intent in, your coach should show you exactly how to do it. You put it in. Then what happens if your offer gets accepted, you've got a purchase and sale. If you've never done a lot of these steps by yourself, they can be daunting, harrowing, scary. But if you've got somebody helping you implementing throughout the way, you won't lose 172, 000 like I did on my first deal.

[00:15:01] Tim Little: Yeah. And it's really interesting to me when you talked about, the parallels between, was it 2012 and now in terms of where brokers are at and, the potential, I'd say opportunities for real estate investors. given the current situation because they have very little deal flow and that presents an opportunity because before where they had tons of deal flow and they were only taking calls from the biggest and best buyers. Now, maybe there's an opportunity to make friends with some of these brokers who are getting a little lonelier because they don't have any deals to do, but maybe, once those deals come along, they're eager To call whoever they can in order to get those deals done. Is that something you're seeing as well?

[00:15:45] Gino Barbaro: Absolutely. And Tim, I may be living in the twilight zone, but I've been hearing over the last couple of years how this economy is great, how we've added millions of jobs and blah, blah, blah. I just don't feel it. I'm sorry. I just see prices have escalated. I see people can't afford things. And for me, with the deal flow, like it was back in 2011 and 12, this sentiment is not there. They're not reporting it because I think the whole media is completely corrupt as far as I'm concerned, but the sentiment is not there. And you're seeing brokers getting really desperate over the last 12 months. 18 months ago, they would not call you back because they didn't have to. You'd sign a confidentiality agreement. There were 50 people looking at one deal. There was a lot of capital that was being raised. So they're doing their jobs. they're trying to keep up, but over the last six to 12 months, deal flow has really slowed down and now they've got to go back to being boots on the ground, back to grinding it. So if you have the opportunity to get in right now, you can do that. It's easier to get in and start talking to a broker. They'll call you back, get on their list. And there are less, there's less competition as far as I'm concerned right now, because there's a lot of deals right now that aren't working. So when syndicators don't have a deal working, they can't go back to their list and go, Hey, by the way, I've got this other deal. six year deals aren't performing. How are you going to raise for this next deal? And I think there's the opportunity. And I think that's what we're seeing right now in the market. And for people to say, I'm going to wait till the market crashes. The market peaked back in 2022. We're already down 20%. Don't try to time the market. I think right now the opportunity is to get in, create those relationships with real estate brokers, with property management companies, and start talking to investors. Because I don't want you to wait till you have a deal because if you've got a deal, but you don't have any investors, then you can't fund that deal. That's one of the biggest mistakes that our community members make is I'm never going to find a deal. Then all of a sudden a deal falls in their lap and they don't have any investors.

[00:17:37] Tim Little: You should be doing both deal sourcing and sourcing for funds. Those are two things that every real estate investor should be doing on a daily basis. Yeah, no, I agree completely. There's this whole argument on which you should have first. And I think it's a no brainer. you need to have something to act with. And that is the money, whether it's from a bank investors, other partners that almost doesn't matter so much as having the assets available, the capital available in order to take down a deal if you just so happen to stumble over one,Yeah, and so when it comes to scaling, you alluded to this earlier. There's a few different ways that we can do it, right? you can either start to, say You find lint in your pockets and you're like, Oh man, I need capital. You can either start to partner up with other folks in a joint venture and maybe, take down, some larger properties than you had done in the past, or you can go the syndication route where you're taking money From passive investors and in talking to some folks that have done coaching, with your program, it sounds like you guys focus more on the joint venturing and owning more of the property vice, giving that equity to those passive investors one. Correct me if I'm wrong, but if that is true, then why was that your focus as you went into the coaching space?

[00:19:35] Gino Barbaro: we started buying our own assets early on and we didn't have partners. And then I found an excellent balance sheet partner, my partner, Mike, that was currently still investing with us. He lent us money for our third deal that we were fortunate to start refinancing out those deals within year three, four, and five, getting that capital. And what we did was we. I was fortunate for me, and this is like another misnomer that all the gurus out there will teach you to quit your job and go into real estate full time. I was fortunate for the three or four years that I was at the restaurant. I was able to pay my bills through the restaurant and all those millions that I was making with the real estate. I was putting it back into the real estate. So at a certain level, five years after I met Jake in 2016, I was able to leave, but 2018 comes and we're at around 800 units. We had just done a 280 unit fully seller finance deal, but we were running out of money. And in 2018, we syndicated three deals. So we had three syndications under our belt, over 500 units. We've been able to exit those since then, but it was a stop gap and we love syndication. I love syndication. My students have raised over half a billion dollars syndicating deals. It's just a tool. In the tool belt and for us, we're vertically integrated. So we manage our own properties. So for us adding two or 300 really good units a year comes with scale. You need to hire five or six other maintenance techs. You need to hire the four or five other property managers. And we focus on something called PPU profit per unit. And right now we're around 300 in profit per unit. That's what our metric is. When we read the book, Small Giants by Boba Erlingham, that changed everything for us. We're like, we don't have to be the next 10, 000 unit company. We didn't want to have that. We wanted to have a smaller company that had a culture that had core values that we could control and that we didn't outgrow our infrastructure. That we felt comfortable with. That's what we were shooting for. We wanted to be the small giants. We wanted to be the Chick fil A of apartment investing when it came to customer service. And we thought, hey, if we keep syndicating, we may get too big. We may outgrow our infrastructure. We may put our investor money at risk. And we said, let's just slow back down. And fortunately, or unfortunately for us, the years 21 and 22, we were able to do that. We're great for deal flow. So there weren't that many deals out there. We were actually thinking of going into the RV space for about 30 seconds. And then we said, no timeout. If we want to be the Chick fil A of apartments, how are we going to go into another business model and have a completely different management system? Let's stick to what we are. So in 2023, we got fortunate. We closed on over 300 units this year. We're probably going to close on around 200 units this year. So the deal flow has come back for us, but I think. What I would really stress to everybody listening to this is learn all of the strategies in real estate. Learn how to creatively finance, learn how to do master lease options, learn how to join venture and partner with others, learn how to raise capital and syndicate because not every deal is the same. If Tim, if a deal, a 50 million bucks comes on our desk and it's a life changing deal. We're going to be syndicating that deal. We don't have the capital to take a deal like that down, especially after the run that we've had. So just, just have an open mind and make sure that you understand once again, what your goals, what your investments are, what you want to get out of the real estate. And I think that'll give you a clear path, what tool you want to use when you're taking down your real estate deals.

[00:22:45] Tim Little: Yeah, that makes a lot of sense because there's different payoffs depending on the different models that you're doing. And especially if someone is working full time, figuring out what those financial goals are. when they can expect to see returns on that investment of time and money. I think those are really important because that lays the foundations for your overall financial goals, right? And maybe syndication is the right answer for that. Maybe, a higher percentage of ownership, that longterm deal that, that you guys, Hey, keep for 10 years versus, syndications that, that may only be, Five to seven, all of those things could factor into what makes the most sense for that person's, overall real estate investing and financial goals.

[00:23:30] Gino Barbaro: Tim. A lot of our coaches, what they've done is they've gotten into the business. They've started syndicating deals. They get asked for asset management fees, acquisition fees. They get ownership with a little bit of money. They get experience, then they get full cycle deals. Then after they've sold their first or two syndications, they're like, wow, I've got this little pile of money. Let me go and do a couple of small deals just by myself. And they're doing both. And all of a sudden you've got a 30 unit deal. That's giving you two 50 to 300 in profit per unit. And that's all yours. That 30 unit deal is printing out 10, 000 bucks a month in cash flow and it's yours. So you have that little nest egg going, then you have your syndication business going. It's a great thing to be doing both, especially early on. And then at some point you may say to yourself, I don't want to deal with these smaller properties. I love dealing with investors. Go back into the syndication model or you know what, I've had enough investors that like my boss. I want to do stuff on my own. And you switch back to the other one, but I've seen investors use both of them really well to their advantage to when, to wherever the market cycle is right now, it may be a little bit more challenging in the next 12 months to syndicate deals. It may be more challenging to find those investors out there, but it doesn't mean two or three years from now that model is dead. You just need to use it for what you're trying to accomplish.

[00:24:40] Tim Little: Yeah, that makes a lot of sense. And I think, I don't know. Syndication got so big for a little while that there were a lot of naysayers to anything but that. And I think that absolutist mentality just doesn't make a lot of sense. It's almost a form of diversification if you have these different cash flows coming in at, at different intervals and from different sources. I'm always willing to look at it and see what makes sense.

[00:25:06] Gino Barbaro: If you're a syndicator, it's an awesome model because you can even put money on the LP side. You can invest passively in your own deal. It's phenomenal. I love it. That's what we ended up doing. We ended up taking our acquisition fees and just rolling it back into the syndication. Now it's unfair to say that syndication was the rage without giving the reason why. Private equity comes into the game. Interest rates are two to 3%. The cost of capital is cheap. People are just chasing yield. That's why syndication got to be, so frothy. Then you throw on the tax benefits in real estate and you can see the perfect storm brewing. And everyone's focused on that and they're not focused on the fundamentals of the business, which is really taking down good deals and operating good deals. So that's what ends up happening when there's a peak in the market and the market cycle is that of a seller's market cycle, that's what ends up happening.

[00:25:51] Tim Little: Yeah. And so everybody knows it's not all rainbows and butterflies anymore. because as soon as interest rates started going up, all those bridge loans were affected. Not only that, but the cost of people 's materials. When all of those things go up at the same time, that really hurts the numbers on. And I'm sure there's going to be a bunch of, I don't know,Excel quarterbacks, sitting here saying, Oh, if you did conservative underwriting, there's virtually no way to underwrite for a perfect bad storm when all of these things go up by rate, percentages never seen before. They could say that all they want, but not many people were worth putting that into their underwriting at

[00:26:35] Gino Barbaro: you forgot insurance and you forgot

[00:26:38] Tim Little: Oh yeah, sorry, and I'm in Florida, right? yeah, you don't have to talk to me about insurance.

[00:26:42] Gino Barbaro: Yeah, like you can look at any underwriting now, granted, rents went up, that's what sort of saved them, but when the cost of capital more than doubles, but your expenses are going up 10 to 12 percent a year, that's a pretty painful number. And now I think it's great because now you've seen insurance stabilized. A lot of expenses are stabilized so you can start underwriting. What actuals are right now and I don't think you're going to see the spikes that you saw over the last couple of years. And I think rents are going to stabilize. I think rent's going to be three to 4 percent a year. You can have that kind of conservative underwriting. And I think deals will start making sense again.

[00:27:14] Tim Little: Yeah, exactly. I think we're at a point of stabilization is probably the best way to put it now. Hopefully the worst is over. and so it's really a matter of who gets through this period and is able to return that capital to their investors. If they were, if they hit some rough seas and there's going to be some that don't. And that's just the reality. There's some that already haven't, right. That, that has gone under. So that brings me to the next point, which is, as a coach, I'm sure you're running into people who are in this situation, it's almost inevitable. And how are you working through that with them? Something that maybe they haven't seen before, because they got in during the boom times and now all of a sudden, Hey, things are pretty bad and they're running into problems that they haven't seen before.

[00:28:01] Gino Barbaro: It's interesting. When we were, the last few years, what we've been doing is we've been really leaning on the finance portion of the framework. I'd already been through a tough cycle. I went through the Oath cycle. I almost lost the deal because of finance, right? And because I didn't time my debt. So for Jake and myself, we took no bridge debt whatsoever. We were looking for more long term fixed rate financing. And you know what that means, Tim? That means we weren't doing a lot of deals. And that means a lot of the students weren't doing a lot of deals either, but no deal is better than a bad deal. And a lot of these deals that people were doing, they were buying stabilized deals. on bridge debt. If you take a look back and you think about that for a second, it is insanity. But that's what was going on. And most of our students really leaned on, Hey, we're not going to go for the two or three or bridge debt because we're not even experienced enough to pull through a business plan to get it done in that amount of time. It's expensive. We're not sure where rates are going to go. So a lot of the students didn't do that. Now, if you got caught in that, Yeah. you're in the process right now. Please. Let's extend and pretend and pray here because that's what a lot of people are doing. They're extending their loans. They're trying to do rate caps, trying to do capital calls. Now, if the deal is salvageable, that's what you got to do. If you think you can make it through for these next 6 to 12 months, you need to go back, raise a little bit more capital, put some more capital in yourself. The worst thing? Is going into foreclosure. It's not the end of the world. We've all had problems in real estate, but what I would say to anybody going through this right now is see what's see how your deal looks. If you have to sell your deal at a loss. Right now, I would rather sell it at a 10-20 percent loss now than hold on for another year and lose the entire thing. You have to make that kind of call right now to see what's going on with your deal. I do think it comes down to market specific. If you're in a great market, you may be able to hold on. But if you're in a market and you don't see anything going on the next 6 to 12 months, you really have to assess it with what's going on with your deal and go to a broker, get a price on the deal, see where the price can land.

And if you have to exit with a loss, I'd rather exit with a small loss than exit with, having, being able to recoup nothing on my investment.

[00:30:07] Tim Little: Yeah, I couldn't agree more. It's about looking at every deal on a deal by deal basis, right? And looking at those fundamentals and seeing what's realistic. you talked about,there's refinancing, they're selling. and then there's the cap rate. getting the, the, what's the word I'm looking for? the extension on that. and those are very expensive and prices are coming down and rates are starting to come down as well. And so that's why I say, likely the worst is over because things are starting to soften. but they're not at a point where it's, Still, nearly as good as it was. so I think you're right. It, a lot of work, especially this gets complicated if you have private equity. And your deal as well, because I promise you, they will want their money first and they do not give a damn about your passive investors. Not one bit. And they have an army of lawyers who are there to back them up. on, on those things. So just a word of warning, right? not that I'm bitter. Hey, okay. moving on. And like I said, I think that's really important because. it will get better. And I think that's something that a lot of people who are coming into real estate need to understand . Hey, this might be the time to come in.

And again, I don't recommend trying to time the market. I think more accurately there, there's always good deals. They may be harder to find in certain times than other times, right? you did a deal like right before COVID, everything went gangbusters. It was hard to find a bad deal for a couple of years now. That's not necessarily the case, but I think a lot of passive investors, folks who were limited partners like you and I have been in the past. They're nervous too, I guess my advice to them would be, if the deal is starting now, it's already baked in. In terms of, the rates and where they're going, and it's probably not going to get 10 times worse like it was before. So there's actually less risk now than if you invested, say, a year ago or two, two years ago.

[00:32:12] Gino Barbaro: It's a great point. I love that point. I agree with you.

[00:32:15] Tim Little: All right. Hey, this is, this has been some awesome conversation, but we do need to transition to the turbo round. All right, Gino. So I'm going to ask you three questions that I ask every guest that's on the show. Just ask you for a quick, honest answer. You ready? Okay.

[00:32:29] Gino Barbaro: Hit me

[00:32:29] Tim Little: All right. First one. What is one red flag every investor should look out for?

[00:32:35] Gino Barbaro: only one,

[00:32:35] Tim Little: Yeah.

[00:32:37] Gino Barbaro: one red flag. I would say due diligence. I would say older buildings right now, anything pre 1970, you've got aluminum wiring, you've got clay plumbing, the pipe out the exterior. Just look out for older buildings that have exterior and deferred maintenance. Be careful about that. You need to watch out for the price points and make sure that you have your budgets in line and you have enough money set aside for reserves.

[00:32:59] Tim Little: Yeah. Absolutely.roofs, everything. Because of that, that stuff can give you a big unexpected headache. if you're not looking at it ahead of time. And as you say, the older the property, unless it's been just gutted and renovated, Then it's certainly much more of a concern. All right. What is a myth about this business that you would like to set straight?

[00:33:21] Gino Barbaro: I may be burned at the stake for saying this, but I agree with the statement. One of my coaches said, you don't make money when you buy real estate. You make money when you exit real estate. And what I mean by that is you do make a little bit of money when you buy your, you're making cashflow, monthly cashflow, but you really make the big chunks of money when you either sell the deal or you refinance the deal. And I always say cashflow gets you out of your business. Equity keeps you out of your business. And it's really important for people to understand that. And it's simply you buy a hundred thousand dollar house. You're making 200 bucks a month in cashflow at the end of three years. What'd you make? Six grand three years later, you sell it for one 50. You made 50, 000 in equity. Where did you make the most of the money? You made more money on the exit. So it's just important to understand what you need to buy, right? Don't get me wrong, but you haven't made any money when you bought the deal. You're making the money when you're exiting the deal.

[00:34:11] Tim Little: the, and the only exception being like, if you have those fees associated with syndications where you may get a small chunk, as soon as the deal is done. as soon as you execute the deal, otherwise, yeah, it's going to be some distributions here and there, asset management fees, and then that other big chunk on the other side. And I think that's something that's honestly not talked about enough. when people are getting or getting interested in syndication, right? They're like, Oh, I'll make you, A millionaire after your first deal, you'll never have to worry about money again. And it's no, that's, you have to be very patient in this business. And I don't think people are mentally prepared for that all the time. And the big thing to remember is your passive investors get paid before you do. And that's the way it should be so that you're aligned and you're performing appropriately. But if the deal is not going gangbusters, then you're Guess what? They're going to get whatever profit is available. And if there's not a whole lot left over for you, other than those asset management fees and others, then you're not going to get a huge paycheck, every month, every quarter, whatever the case may be. I think we in the industry probably need to do a better job of tempering expectations for some folks who come into this thinking they're going to do one or two deals and be set for life. All right. Third question. What does success look like to you?

[00:35:34] Gino Barbaro: For me, success is always changing. Back in 2013, it was that first deal. Then it was the second deal. Then it was the first refinance. Then we did our third refinance. Then I left the restaurant and then I continued to scale. And then I started Jake and Gino. I think success to me right now is just to continue to grow the education community and I love that part of the business because I get to meet guys like you. It's just like a mini mastermind. After this we're going to sit down and chat for a few minutes, to find out what's going on in the market for you. I love the education of being able to do what I want, when I want, where I want with whoever I want to be able to have that autonomy. That's what success looks like to me. And it's transitioned from years ago when all it was about financial freedom. Now, what do you do with that financial freedom? So for me trying to create more impact for others through Jake and Gino's, what success looks like.

[00:36:23] Tim Little: Yeah, I love that. The creating impact. Of course, that's one of the reasons I have this podcast because I want to pass on those lessons. All the things that I learned and continue to learn by people speaking to people smarter than me like you. and. And then the other important point, you said success changes. And I think part of that is the mentality. we don't even know what's in the realm of the possible until we hit that first goal. Then we're like, Oh crap. I didn't even think I'd get here. then let me raise it up again. And before you know it, one unit turns into 10 units, turns into 5, 000 units, whatever it is, because your mind starts to believe what is in the realm of the possible as you start hitting those goals.

[00:37:03] Gino Barbaro: said.

[00:37:03] Tim Little: huge. All right, Gino. Hey, this has been awesome. I really enjoyed this conversation that we've had here. Please tell our listeners how they can get a hold of you. And if there's anything else that you'd like to share with them.

[00:37:13] Gino Barbaro: Just go to jakeandgino.com. I'm actually reading an interesting book right now called Psycho Cybernetics. And I think this will help a lot of the investors out there. The book really discusses communication with yourself and your self image. And I think it's important. And the turning point for me was when I was that pizza guy. Identifying as the pizza guy. Once I had the image or that self image of me being a multifamily investor, honestly, I think everything changed. If you're out there and you're trying to raise capital and you're the pizza guy and that's what your image is, your behaviors are belief driven. Start changing your self image. You can be anything you want to be. You just need to put the hard work into it. And once you put the hard work into it and you're disciplined, you can do anything you want. But you won't be able to do it unless you really think about what your self image is and who you're trying to become in the book that says be to do. I love that. If you want to be a multifamily investor, you gotta do it.

[00:38:03] Tim Little: Yeah, because if you don't believe it, then no one else will. That's especially true with investors.

[00:38:07] Gino Barbaro: That's right.

[00:38:08] Tim Little: All right. we'll definitely have all that information in the show notes. I appreciate you coming on and I look forward to continuing to see you do big things on your journey to multifamily millions.

[00:38:17] Gino Barbaro: Thanks, Tim.

[00:38:18] Tim Little: Thank you.