Agents Building Cashflow

EP 176: Journey From $10K Flips to Multifamily Success with Randal McLeaird

• Randal McLeaird

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In this super insightful episode, Randal is interviewed on The Best Ever CRE Show with Joe Cornwell to uncover his journey from flipping houses to scaling a multifamily real estate empire. Randal shares hard-won lessons from navigating market crashes, the complexities of syndications, and managing value-add multifamily projects. 

With anecdotes ranging from his first $10,000 deal to navigating bridge loans and managing challenging assets, Randal offers a roadmap for investors to build wealth while minimizing risk. Tune in to hear actionable advice and cautionary tales that can transform your approach to real estate investing.

Key takeaways to listen to:

  • Learning how to spot real estate opportunities by analyzing market downturns.
  • Navigating the risks and rewards of bridge loans in multifamily investing.
  • Exploring strategies to scale from single-family flips to syndication projects.
  • Highlighting the importance of due diligence and vetting sponsors before investing.
  • Understanding how personal and professional priorities shift as you scale your portfolio.

About Randal McLeaird

Randal is the Managing Partner at Ridgeline Investment Group, a privately held real estate investment fund focused on stabilized and value-add projects in the multifamily and storage facility space. In his capacity as the primary decision-maker at Ridgeline, Randal assumes the pivotal responsibility for concluding investment determinations on behalf of the organization. 

Having successfully overseen more than 500 transactions, he possesses a substantial reservoir of expertise. Randal's judicious methodology, unwavering commitment to safeguarding capital, and emphasis on fostering enduring increments in cash flow and wealth generation have been integral to the consistent and progressive expansion of the firm. 

Randal is also the Founder, Broker, and Realtor at RAM Realty Group which is composed of his companies involved in his real estate business. He focuses on buying, selling, renting, rehabilitating, and owner financing his own properties.

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To connect with Randal and learn more about passive investing, visit www.ridgelineig.com and follow our social media pages below!

[00:00:00] Intro: If you're a real estate agent earning 200, 000 a year and you want to grow your passive income, this show is for you. Learn secrets other agents use and hear from experts in our field who will guide you on your journey to investing in assets like apartment communities. So you can take your commissions and turn them into cashflow.

[00:00:20] Intro: Here's your host, Randall. Let's dive in. All

[00:00:27] Randal McLeaird: right, guys, welcome back. Today is an interview that I did with the best ever Podcast group of podcasts, they have the best ever advice and best ever real estate investing advice. Um, they're they're huge podcast and I was honored to be invited to go onto their show and talk about my story and, you know, what I've been doing and what I'm working on currently.

[00:00:45] Randal McLeaird: So. I hope you enjoy this episode. It is again, as I go on these other podcasts and I talk about some of the stuff that I'm working on more so than interviewing other people. I want to be able to put it on our channel here so that you guys can get me on the other side of the microphone as well [00:01:00] and kind of see what it is that I'm working on.

[00:01:02] Randal McLeaird: So I hope you enjoy the show. If you would go on written review helps us a ton. Always with all the guests that I'm trying to bring onto the show to provide value for you and your real estate journey. So here we go. Let's jump into the conversation with the best ever CRE podcast.

[00:01:21] Joe Cornwell: Best ever listeners. Welcome to the best ever CRE podcast. I'm your host, Joe Cornwall. And today I'm joined by Randall McLeard. Randall's the owner of Ridgeline Investment Group. He also is the host of the Agents Building Cashflow Podcast. He's done single family flips, owner finance deals, syndications, multi family and more.

[00:01:39] Joe Cornwell: Uh, right now his portfolio is 250 units and single family notes. He's also done over 100 flips. Uh, first time on the show. Randall, welcome. How are you today? 

[00:01:48] Randal McLeaird: I'm doing great. I'm excited to be here. You guys have such an awesome show. It's an honor to be on. 

[00:01:54] Joe Cornwell: Well, we appreciate your time and you joining us today.

[00:01:56] Joe Cornwell: So since it's your first time on the show, let's jump into [00:02:00] your background. Where are you from? And then how did you initially get into real estate? 

[00:02:03] Randal McLeaird: Sounds good. Um, I am from San Antonio and, um, been buying and flipping here and doing, doing my investing here predominantly. Um, I got into real estate, I mean the, the short version is, you know, got out of college, went and worked for a buddy of mine who didn't go to college, same birthday as me, same everything, guy already had a mortgage company, he had houses, he had assets, he had toys, he had all kinds of stuff.

[00:02:25] Randal McLeaird: I was like, okay, what the hell was I doing the last four years? So um, anyway, that got me into real estate. It gave me, you know, rich dad, poor dad, read that, and then started looking at, at buying some things. Didn't actually buy anything until 2009, I went traveling, I was overseas, came back in 2008. Great time to, to want to get into real estate in the United States, right?

[00:02:45] Randal McLeaird: Yeah. Uh, but anyway, yeah, the, the, that's, that's. When I got back into, into the States, I wouldn't work for an attorney because I thought I was going to go back to law school, kill some time, wait for the market to change, learn, do all those things. Um, and so I worked for a fee attorney doing the [00:03:00] title side of the business and, and learned and saw a lot of, uh, real estate investor transactions that were happening.

[00:03:06] Randal McLeaird: Um, ended up buying a deal that one of the investors walked away from, and that was my first deal. That was in 2009, give or take, and then from there just kind of ramped up and started buying and flipping and, and progressed from there. So. What was the first deal? First deal, 258 Bundy, San Antonio, Texas. Um, it was on the east side of San Antonio, and again, the investor walked at closing.

[00:03:28] Randal McLeaird: I was doing the paperwork, I was closing, and the, the seller was there sitting in front of me, nice lady. She was like, the guy just walked away. He had a contract for 15, 000, and um, and I had like 12, 000 to my name. Offered her 10 and she took it. Wow. Um, at the closing table? At the closing. Yeah. I mean, I, we had four title, we had everything ready.

[00:03:49] Randal McLeaird: It was all ready to go. Just had to change. 

[00:03:50] Joe Cornwell: Talk about mo talk about motivation. 

[00:03:51] Randal McLeaird: Yeah. In the moment. Exactly. And the, um, and yeah, the attorney just changed the docks, did everything. Boom, boom, boom. We were done anyway. Found, [00:04:00] found out there was a massive hole in the roof. Um, there were, you know, a lot of burned down houses in the neighborhood.

[00:04:07] Randal McLeaird: So when I drove up, I thought it was just going to be a foundation that I bought. Um, but got, got to it and, you know, first deal just sight unseen, bought it and, and ended up flipping it for 15, 000. So it like made five grand on my, on my 10, 000 investment. So it worked out well. And then from there just started buying, you know, I bought.

[00:04:26] Randal McLeaird: Uh, a bunch of houses that year and owner finance and we're buying houses for 20, 000, you know? Yeah, um, and so I still have some of those notes today 

[00:04:35] Joe Cornwell: Okay So a couple of were you from san antonio or did you? Okay, so you knew that market you were comfortable with it Obviously, it sounds like you were taking some pretty large leaps of faith here buying stuff sight unseen for your first deal So I guess what went into?

[00:04:50] Joe Cornwell: The mindset of having the confidence to do this deals with, obviously, you know, limited background. 

[00:04:55] Randal McLeaird: So, that's a great question. To preface all of that, when I, when I [00:05:00] went to work for my buddy when I got out of college, he was a loan officer, so I got out, went straight into the mortgage side of the business, and I was a loan officer.

[00:05:10] Randal McLeaird: So I knew that side of the business, and I'd been in real estate, been looking and researching and doing a lot of digging, right? Went to Australia, lived there for three years, and wanted to do like lease options because I couldn't invest over there, didn't have a lot of money, so I was trying to do sandwich lease options.

[00:05:26] Randal McLeaird: Um, and then when I came back, I was working for that attorney, and the attorney told me, He gave me the advice. He said, look, you need to go and just get the reps. Look at a bunch of houses. Here's my fob. I'm a, I'm a real estate broker. I can, you know, get you into houses. So he gave me his fob and I just went every day.

[00:05:41] Randal McLeaird: I was looking at houses. Okay. I'd seen a lot. And plus I was from the city, but I, I'd never been down this street. I'd never been to that side of town. Um, so what gave me the confidence was the fact that the other investor had it under contract and I knew him, I'd closed a bunch of deals for him and he, it wasn't a, um, [00:06:00] It wasn't a property, excuse me, it wasn't a property issue, it was a fund issue.

[00:06:04] Randal McLeaird: Like, he didn't have the money, it just closed on something else and he was trying to get rid of this other deal. So, anyway, I knew him and I talked to him about it and, and so that also gave me the confidence. So it was just, I had a lot of reps, I had seen a lot of properties, um, But I would just hadn't found a deal yet.

[00:06:20] Randal McLeaird: Um, and so this one just kind of fell in my lab, literally fell in my lab. I was sitting there and it came to me. So 

[00:06:25] Joe Cornwell: what's, and what's interesting to me, and I obviously have talked to, you know, hundreds of investors who were investing at that time, that was a little before my time, um, and I wasn't able to take advantage of, you know, kind of the lows of, of the great recession.

[00:06:38] Joe Cornwell: Uh, but what, what always, I guess I, when I try to look, put myself in investor's shoes at that time and look in hindsight. It seems to me the feeling would have been if I buy this property for 10, 000 there's very few ways I could get hurt. Was that, was that the belief at the time or was [00:07:00] there, did you have fear that you were making mistakes and buying these cheap properties?

[00:07:03] Randal McLeaird: I was so ignorant to the downside, honestly. You weren't 

[00:07:09] Joe Cornwell: even thinking about what could go wrong? I mean, 

[00:07:11] Randal McLeaird: in a sense, yes, but again, I talked to somebody about this yesterday. If I had to sell that house for 5, 000, okay, great, I went through a transaction, I figured it out, the house was actually there, it wasn't just a foundation, even if it was just a foundation, it was the lot that I bought, probably could have sold that lot for something and made some money, and I would have learned, hey, don't just buy site unseen, go, you know, so, At the time, I remember the next two deals that I did.

[00:07:38] Randal McLeaird: I bought them both from the same broker. They were both REO properties. They were both 000. Closed on the same day. And, and they were in the same area. Right? And, and so it was just, um, Again, 20, 000 for a house. Had I known more at the time. Had I known, I would have bought everything I possibly could have.

[00:07:56] Randal McLeaird: Right. Um, So there was [00:08:00] some, I guess, fear of loss at the same time, but you know, it was, there were just very inexpensive houses and I was new and I was green and I just wanted to get in there and get my hands dirty and buy something. Right. 

[00:08:11] Joe Cornwell: Yeah. No, I think that's a lot of great points. You know, looking at, especially for new investors when they, when they look at it through this lens, it's like, okay, what is, what is my upside?

[00:08:21] Joe Cornwell: What is my potential downside? Can I live with the potential downside? And even if they're even if worst case scenario, as you said, you had an optimistic viewpoint of like, okay, this is just the cost of tuition. I'm paying for this education. If a deal goes bad and obviously at that time, you know, like you said, your exposure was five or 10 grand.

[00:08:38] Joe Cornwell: Um, You know, pretty minimal when you look at today's dollars and, and how expensive deals are today on average, and how much more exposure there is today versus the pit of the recession. Um, so yeah, I think, and, and the reoccurring theme at almost every investor I talked to at the time is I wish I had a ball more.

[00:08:54] Joe Cornwell: Oh yeah. I've probably heard that, you know, a hundred times, if not more. Um, so yeah, I [00:09:00] think that's a lot of good things for new investors to take into mindset going forward. 

[00:09:06] Randal McLeaird: I try to figure out now, like what that looks like now. And again, what is that 20, 000 house now? Cause is it a hundred thousand dollars?

[00:09:13] Randal McLeaird: Is it, you know, what are we going to look like in the next 10 years? And, and, um, same on the multifamily front. We were just talking a second ago about these small multis, you know, and, and I just had one under contract, 23 unit deal, and it was a, a fully vacant property. And we had to go in and do all kinds of work to it.

[00:09:31] Randal McLeaird: And, and, I like that asset class because, or that size unit, because again, I'm not, I'm not pulling in other investor funds when, when we're talking about, um, risking capital, you know, like doing these larger deals. Sometimes you're risking other investors money, but if it's, if it's like my money and I'm going in doing this deal, um, then I've de risked it and I'm okay taking that educational loss if I were to lose money.

[00:09:55] Randal McLeaird: But anyway, that 23 unit deal is, um, um, [00:10:00] like ended up having to walk away just because the due diligence in the in the in the repairs just got out of hand, but You know, that's that's kind of what I'm looking for now I'm like, what is that price point if I bought that 23 unit and then over the next 10 years What is that thing gonna look like?

[00:10:14] Randal McLeaird: Even if it cost me an extra hundred thousand dollars on the repairs, which is kind of what it got to what I have won Yeah, I don't know. You know, it's it's a So I don't know how, like, is that how you're looking at things now? Yeah, 

[00:10:25] Joe Cornwell: I mean, that's an interesting kind of way to frame it. Because if, you know, if I had to extrapolate values out, right, let's say for 10 years, if I had to make a prediction model for 10 years out, it's hard to imagine that we would have the same percentage of growth we've had the last 10 years or 15 years.

[00:10:44] Joe Cornwell: Um, it, but, If you would have asked somebody 10 or 15 years ago, if they thought values would be today, what they are, I guarantee you nobody would have been that bullish on real estate. Correct. So the, so while it's, I think it's less likely that we're going to have the same [00:11:00] percentages of increasing value proportionally.

[00:11:02] Joe Cornwell: I also am confident, at least in the areas I'm investing in, that the longterm value of those neighborhoods is going to continue to grow. And that's what I invest for. I look, you know, I look, my philosophy is, um, Can this cashflow in a stressed model, you know, worst case scenario type of model, um, what are the things that I have risk exposure to?

[00:11:24] Joe Cornwell: And even under those exposures, can I still cashflow this property and survive through some volatility if it happens? Um, and you know, that's kind of fundamental question one. And the fundamental question too is, okay, Is this going to be worth more in 10 years than it is today? And how confident am I in that growth of the rents in the market?

[00:11:44] Joe Cornwell: My overall fear, I guess, for any significant long term real estate value growth is. Especially when we're talking about multifamily is the, um, or the constraints on income growth, right? Because [00:12:00] the only way we're going to have a big run like we did the last 15 years is if we continue to have really high inflation.

[00:12:05] Joe Cornwell: So that's a bad thing for everybody. Um, it's a good thing for people holding assets, but there's obviously a cap, right? A ceiling there. And I don't know what that cap is. Like what can tenants and, and, you know, obviously this is local, a local thing you have to look at, but it's like, what can tenants really sustain?

[00:12:22] Joe Cornwell: Um, especially when you look at some of these really high price markets, you know, the coast, New York, Southeast, like the areas that have had these massive run ups and rents, can they really sustain, you know, five, 10, 15 percent year over year growth for a long period? It's hard to imagine that being possible.

[00:12:38] Randal McLeaird: Yeah, yeah, I agree. I saw, uh, uh, I don't know, a newsletter came out today and it was the, the, the rent growth. It hasn't gone negative. You know, it's, it, it just went from 14%. This is a single family, but it went from 14% growth year over year to 2%. You know? Um, and so it's declined in the sense that year over year, but the, the rents themselves haven't dropped.

[00:12:59] Randal McLeaird: And so, yeah, [00:13:00] I agree. It's like, I, I don't know when we're gonna see that again or how we're gonna see that unless you are in a coastal area and it dropped significantly, you know. 

[00:13:07] Joe Cornwell: Yeah. Well, and that, you know, and me personally, I invest in the Midwest and the reason why I believe in the Midwest, you know, over the next 10, 20 years is because we didn't have those massive run ups.

[00:13:19] Joe Cornwell: Now we've had large rent increases, um, you know, in the last 15 years, but it wasn't, you know, 300%, you know, like our, if you averaged out our last 15 years, it's probably somewhere between, you know, like, Four to 5 percent year over year. 

[00:13:33] Randal McLeaird: And I think 

[00:13:34] Joe Cornwell: that's more sustainable growth longterm. Um, and it, and it allows affordability for those middle income, you know, type of tenants.

[00:13:42] Joe Cornwell: So, you know, I'm, I'm more bullish on the Midwest than I would be in some of the other more volatile markets. 

[00:13:47] Randal McLeaird: Yeah, that's, that's how I feel about San Antonio. Similar, you know, a lot of, a lot of Texas and surrounding areas, secondaries, tertiaries, that sort of thing. Those are, that's where we're looking for those.

[00:13:58] Joe Cornwell: So, okay, alright, so you did a [00:14:00] few smaller deals. How did you get into flipping? I mean, you said you flipped over a hundred houses. That's obviously a lot. Like, what did that business look like? 

[00:14:06] Randal McLeaird: Uh, so, I was always of the mindset, you know, seeing all these transactions on the, you know, the escrow side, the fee attorney side.

[00:14:14] Randal McLeaird: Um, and in talking to wholesalers, going to meetups and all of that, I always wanted to just control the asset. It's so hard to find a deal. This is my mentality. It's so hard to find a deal. I want to maximize the profit potential of that, of that deal. Um, especially if I'm going to direct to seller and having those conversations with them.

[00:14:30] Randal McLeaird: So, um, that's how it started. And it, and it really started at a, at a meetup. This guy shows up, and he's got a little pamphlet, and I think some VHS tapes, and it was literally him walking properties, on the VHS tape, talking about, this is what I look like, look at, this is the crack in the wall, okay, this tells me, and him walking property, and once I saw that, I was like, oh, okay.

[00:14:55] Randal McLeaird: Fantastic. I know what to look for when I'm walking a property and, and, I mean, that's something [00:15:00] that anyone who wants to get in a flipping can go talk to a contractor or a rehabber and walk properties with them and, and, and see that happen and see what they're looking at. And, you know, um, so once I had that, then, um, I started buying, I mean, those first two houses that I bought that for 20, 000, those were rehab, light rehab.

[00:15:18] Randal McLeaird: I, I, I went in as little as I could spend on them and then I owner financed them. Um. But then the actual full retail flips, when those started cranking over, it was after I saw this pamphlet and talked to some other guys, had a better, uh, contractor base to work with. And, and then we started going after some of those deals, you know, um, and I think one of the first big retail flips that I did, it was with my brother and I was like, look, if we de risked it for one, gave me the confidence, right, two, um, to, to go after like a higher price point and, and take on that risk.

[00:15:53] Randal McLeaird: And I was like, if we make 500 bucks, like this is it. I'm full time quitting my job, doing everything, you know, like I'm just going into this and [00:16:00] doing it. And then we obviously made more than 500 bucks, but um, you know, that's, that's what kicked it off and really got me going. 

[00:16:06] Joe Cornwell: What year was that? 

[00:16:08] Randal McLeaird: 2010 probably.

[00:16:10] Joe Cornwell: Okay. And then you went full-time in real estate? Yeah. After that? Yeah. Yeah. Okay. Yeah. Gotcha. So, so you started flipping around that 2010 time, how, like, was this like 10 a year? Like what was your kind of runway on flipping? Yeah. Are you still doing them? 

[00:16:21] Randal McLeaird: It was give or take, 10. 20 a year, I would say, you know, and, but we sprinkled in some wholesale deals in there, you know, things that I wouldn't, wouldn't take on some, a lot of them were, um, owner finance deals, uh, you know, carry paper.

[00:16:37] Randal McLeaird: We did some sub two wraps. We did all kinds of different strategies, right? Throughout that period. Um, then I'd say 2018, 19. 2017, you know, I started ramping things up, had a private lender who was like gung ho, hey, go buy as much as you can, do things that you can. Um, and so it made the friction of getting into deals non existent, you know, just a matter of driving to pick up a [00:17:00] check and taking it there, you know?

[00:17:01] Randal McLeaird: Yeah. And so, yeah, we ramped it up and I mean, we were doing. 50 transactions a year. How many flips? I don't know, 25 a year or something like that. Um, and, and just cranking out some business from 15 to 2020 really is when we were really heavy into it. 

[00:17:18] Joe Cornwell: Okay. And it's, so obviously to do that kind of deal flow, it sounds like you had a really big marketing machine going, was this, you 

[00:17:23] Randal McLeaird: know, off market, direct 

[00:17:24] Joe Cornwell: mail.

[00:17:25] Joe Cornwell: What was your strategy on main source 

[00:17:27] Randal McLeaird: that worked for us over and over? Just consistent, tried and true was, was mailers. Yeah, it's simple just to get the phone to ring. And then we'd had, we had, uh, lead intakes. We had a, uh, The, the, the whole business model was, um, lead manager. And then once they got it locked up, we'd have, uh, acquisitions rep go out actually toward the house, get it under contract, and then it'd come in.

[00:17:49] Randal McLeaird: We'd have transaction coordinator, then it goes to Dispo. So it Dispo is either me buying it or we'd sell it wholesale to somebody else. Got it. Interesting. Yeah. But it was, and 

[00:17:59] Joe Cornwell: it's [00:18:00] crazy to me how much that business has changed. You know, like I look back at when I was first learning about real estate.

[00:18:06] Joe Cornwell: You know, probably about the same time, maybe 2015, 2016, trying to get into investing, find my first deal. But like the people I knew who were successfully like marketing off market, direct to seller, all those types of deals, uh, wholesaling, the amount of competition they faced then versus, you know, Maybe not so much today, but like a couple years ago at the peak of the market.

[00:18:28] Joe Cornwell: I mean, it was insane how much growth that, that, that marketing side had, had seen in competition. 

[00:18:34] Randal McLeaird: Yeah, yeah, I agree. I mean, we were 40 to 50 a month in postcards. 

[00:18:41] Joe Cornwell: Yeah. 

[00:18:41] Randal McLeaird: Uh, 40, 50, 000 a month just in spend. And then I talk to guys now, a buddy of mine who actually worked for me for a while, Yeah. Yeah. Like, yeah, I do PPC nationwide.

[00:18:50] Randal McLeaird: I spent 5, 000 a month and, you know, I closed a hundred thousand dollars in profit, you know, I'm like, all right, good for you. That's a much different model. Um, you know, it's, it's [00:19:00] just a, uh, larger net that you're casting and your cost per lead is so much lower and you know, close rate is a little bit higher when you get somebody on the hook and that sort of thing.

[00:19:08] Randal McLeaird: So yeah, that's different. 

[00:19:10] Joe Cornwell: Well, and it's tough because it's like, I like, I mean, I can speak from experience. I've, I've done intermittently, you know, direct marketing. I mostly, I go to just kind of buy a couple of deals for myself and then I kind of turn it on. I'm not like a consistent year round marketer with a team for that, but I'll do it sporadically when I'm in my kind of acquisition mode.

[00:19:28] Joe Cornwell: Um, but for me personally, I probably get at 30 postcards a month. Um, for various properties and then, you know, now it's definitely falling off a lot. I might get a couple of months now, but you can tell as the market slowed and transactions slowed, um, the people spending money on, on marketing, the wholesalers and other people are, are really ramped down their businesses as well.

[00:19:52] Randal McLeaird: Yeah. I mean, when COVID hit, we, we had. I think three months, no phone calls or three months with like, it just died. It [00:20:00] was literally, and I was like, all right, that's it. And I'm not dropping another, you know, excuse me, sorry, man. Um, I'm not, I'm not dropping another month worth of marketing on this. It's just not going to happen.

[00:20:11] Randal McLeaird: So, 

[00:20:11] Joe Cornwell: yeah, yeah, yeah. The world kind of shut down and then, you know, I think it. At least in my market, you know, kind of peaked in like 22, obviously before rates started climbing. And then, you know, just now, I think right now it's starting to market starting to slowly pick back up, but I mean, you know, transactions fell off a cliff here.

[00:20:31] Randal McLeaird: I mean, I've seen, so. It's funny, talking to wholesalers and talking to guys, so my business shifted. I'd go all wholesalers now, if I'm going to buy something, it's either on market or it's a wholesaler or a friend is selling something and, you know, it's a deal that I can pick up. But, um, the, the, the shift is still, you know, selling things that are overinflated ARVs with, you know, no repairs needed.

[00:20:54] Randal McLeaird: You know, buy this thing, you know, it's like, Guys, come on. Um, so if that's dialed [00:21:00] in and I have a few, like a handful of wholesalers who are like, Hey, these are real numbers, you know, it's just, just, just buy them quickly type deal. Uh, but it saves a lot of time and brain damage on my side of, of talking to all the sellers and going to all the appointments and doing all that stuff.

[00:21:15] Randal McLeaird: So yeah, 

[00:21:16] Joe Cornwell: that stuff, the stuff to do that as like a small scale business, you know, you really, if you either have to kind of be all in or all out to be successful and the marketing side of it. Um, and that's why, you know, like you said, the good wholesalers that are legit and actually have, you know, real numbers, um, You know, they're the ones that are going to be successful long term and make money and are worth spending your time to get to know.

[00:21:40] Joe Cornwell: So, okay, you switched into multifamily, it sounds like. Um, so what was your kind of transition into your first larger multifamily deal? 

[00:21:49] Randal McLeaird: So again, that came around COVID, you know, we had, we'd been doing really well. And, um, I, I turned 40 at the same time. I mean, this could get into a philosophical conversation as [00:22:00] well.

[00:22:00] Randal McLeaird: The, you know, had, had, um, my son, I think my daughter was just born and this is 2020, 2021 timeframe turning 40. All the things are happening, you know, midlife crisis, whatever. Um, I was like, how do I really want my life to look over the next 10 years? You know, my son's 13, I'm going to be 50. And, um, I don't want to be running around, you know, transactional randle.

[00:22:24] Randal McLeaird: You know, it's just, there's a lot of moving parts. There's a lot of stuff going on. And if you can scale that business and systematize the business, fantastic. But there's still people involved. And there's still, you know, I need more commission. I need more of this. Whatever it is. So, um, I, I, you know, kind of paused.

[00:22:39] Randal McLeaird: And I went and took some courses and learned a lot about syndications and setting up funds and setting up, um, you know, crowd funds and all of, all of these different things. Because I wanted to just go and have a pool of capital that I could deploy and put into either, uh, multi family or single family or whatever it was, right?

[00:22:56] Randal McLeaird: That's kind of the The, the holy grail, if you're flipping [00:23:00] properties or you're doing something, you just want that capital able to be deployed quickly. So anyway, I spent some time on that and, and I'd always considered getting into multifamily. Arguably, it was a very challenging time to start looking at multifamily because, uh, and luckily I didn't buy anything in the, in the, in the very tail end of, you know, the, the 23, I guess, or in 2022, whatever it was, and overpay for something.

[00:23:25] Randal McLeaird: But, um. That's really what got me into it. And then I started going to meetups, started, uh, joined some masterminds and that sort of thing and, and, um, ended up, uh, partnering on a 75 unit deal just outside of Dallas and then another deal outside of Atlanta and, um, and just, you know, one was, the one in Atlanta is more of a, you know, I'm on the GP team and I'm, you know, put some risk capital into the deal and so I get to see the whole thing and what that looks like.

[00:23:52] Randal McLeaird: Um, the other one is more partnership ownership type deal. Um, and both are just learning experiences, getting into them, seeing what it looks [00:24:00] like. Um, and, and I've been looking personally, I'm like, I want to buy something locally and just be the lead and own the thing outright myself. And that's, so, you know, I've, I've had a number of deals either under contract or, you know, in the, in the, uh, offer stage.

[00:24:15] Randal McLeaird: Um, but that's what I'm working on currently. It's, it's finding something like that and, um, and buying it and operating it locally. 

[00:24:22] Joe Cornwell: Okay, got it. But so you're still, you know, sounds like multifamily is what you're most interested in continuing. 

[00:24:28] Randal McLeaird: Yeah. Again, it's right. So right now we've got a crowdfund where we're raising capital to buy single family and owner finance them.

[00:24:36] Randal McLeaird: Right. So that, that is just bread and butter. That's kind of going and that, that thing is, is, is up and running. Um, 23 unit deal, that is a heavy value ad that I can get in, you know, rehab, you know, Either sell or refinance. That was the other challenge with that one. I, we would have had more money on the table and, and we can [00:25:00] talk about this if you want to, but like bridge lenders being okay, lending you more money than you really should be borrowing and, and then not being able to refinance on the back end.

[00:25:09] Randal McLeaird: Um, but anyway, that, that, um, yes, to answer your question. Yeah, that's, that's what I'm working on right now is multifamily and, and, um, we've got some other deals that, you know, we, we. Would look at that are Kind of like this structure that we're in right now. It's a warehouse with industrial industrial office type of deal.

[00:25:27] Randal McLeaird: Okay Yeah, yeah, just because it's I like this asset class. Yeah, and there are some guys in San Antonio doing it that I'd either invest with or I would would partner with to maybe do some of these Yeah. No, it's at 

[00:25:42] Joe Cornwell: the, the flex warehouse space is taken off in, in my market as well. It's, uh, yeah, you're seeing them pop up developments all over.

[00:25:48] Joe Cornwell: I know a couple guys developing those as well. 

[00:25:50] Randal McLeaird: Yeah. So, but yeah, that's all it, it, the long, the, the long term goal is owning apartments and, and having, you know, the, uh, a [00:26:00] system that we are managing these 40 to 50 to, you know, 150 unit complexes. Um. Um, but again, it's my offers have been lower than what sellers want to take.

[00:26:10] Randal McLeaird: So until that changes or until the deal starts to make sense to me, then I'm not going to go in and buy something. Um, that doesn't really make sense. But again, I have this conversation, just like I was asking you a second ago, you know, I could easily argue with myself and say, I could buy it today. And if I put the right kind of debt on it and low leverage, then, Uh, you know, five years, if rates drop or this app, whatever, you know, it's going to be more valuable no matter what.

[00:26:38] Randal McLeaird: So I may as well just go buy one, right? You know, that's kind of the argument that I have with myself. 

[00:26:42] Joe Cornwell: Yeah, it's tough. I, you know, you kind of, you kind of alluded to this, but it's like the older that we get as investors, your priorities change and what's, and what matters in a deal changes as well. You know, like, and this is kind of common sense, but it's like when I was a brand new investor and I'm still working my W [00:27:00] two job, I.

[00:27:01] Joe Cornwell: I didn't have money, you know, I didn't really have much time either, but I didn't have money. So it was like I had to find deals that were small enough for me to self manage, turn them around and have a huge equity gain that I could, you know, and I was kind of doing the burr model like before that was really the burr model, but it was like, that was the only way for me to grow my capital because, um, you know, I had to find ways to do that and I wasn't going to be able to do it just by saving money.

[00:27:26] Joe Cornwell: Uh, and, and so. So all of my time, effort and capital went into this, you know, the first few years, but it's like, I, as you mentioned, then I started having kids, I now have three kids and it's like your priorities change. What's important to you changes. And now one of the biggest metrics I looked at on a deal is how much of a pain in the butt is this going to be?

[00:27:44] Joe Cornwell: For sure. And that's a vague term, but it means, okay, how much time, how much stress, how many sleepless nights? You know, how many times am I going to? Have to problem solve, um, really difficult, complex problems on these heavy value add deals that we do, um, and that's certainly something I look at and it's like, okay, [00:28:00] well, if I know going in, this is going to be a nightmare deal, and I've had a lot of those, is that upside equity or cash flow or whatever it is that, you know, kind of best use of the deal.

[00:28:10] Joe Cornwell: Is that going to be worth all the blood, sweat, tears, time, headaches? Um, and I've learned that there are deals that even though there were great deals, and I made a ton of money and ton of cashflow, um, weren't worth it. Like in hindsight, I would not do them again. Yeah, I think that's kind of the wisdom that comes with experience.

[00:28:27] Joe Cornwell: Hopefully 

[00:28:27] Randal McLeaird: it's very funny because I have this mantra where it's just because you can, doesn't mean you should. And I was literally given a house. I was given a house. I was trying to think about this the other day. And I don't know why I took this house. And it had to be because I had a vacant lot just north of the city.

[00:28:45] Randal McLeaird: And I was like, okay, cool. We can move this house. It's small enough. I had the house mover who I wanted to move it. Go look at it. He's like, nah, boom. Okay. 20 grand to move this house. Okay, great. Turned into the biggest nightmare. I had a house mover, steal the house, drive it to South Texas. I [00:29:00] had to follow him.

[00:29:00] Randal McLeaird: I'm not even kidding. That's a 

[00:29:01] Joe Cornwell: first. Yeah, 

[00:29:02] Randal McLeaird: man. It was, I have, I'm driving down the street, just videotaping and they were booking it out of the city to try to get away. You know, they had a police escort, like all this stuff. So wild, no permits, nothing. And somehow they moved this whole house. I ended up having to pay double to move it from where they were to where my lot was, just to get it back.

[00:29:22] Randal McLeaird: I had to sue them. And I'm like I, I lost 5, 10, 15 thousand dollars on that deal just to, just to get a free house. And I was like, no, you know, just because you can, doesn't mean you should. And you know, it's more complicated than you think it is, real estate, you got to be patient. And yeah, I don't know, man, it's.

[00:29:40] Joe Cornwell: Yeah, no, that's a great point. I, you know, so I'm, I'm a broker here in Ohio and I, I work with a lot of out of state buyers who want to invest in Ohio. And I have to explain this to them a difficult conversation and it's hard for people to wrap their head around. But it's like, there are neighborhoods, there are properties that if they gave me it for free, I would not take it [00:30:00] to your point to your story.

[00:30:01] Joe Cornwell: Because Sometimes a free house is going to cost you 20, 000, 30, 000, 40, 000 loss, uh, when you're all said and done. 

[00:30:08] Randal McLeaird: Yeah, not to mention all the time, you know, that's just monetary. And that, that deal, the stress of that deal was ridiculous. My wife, we, we laugh about it now because it's such a silly story, you know.

[00:30:19] Joe Cornwell: Well, hey, you, you were the first. You might be the first guest ever on, uh, Best Ever CRE, uh, whenever we're at 30, 000. Almost 4, 000 episodes or whatever it is that have ever had a house stolen from them. That is, yeah, you might have the first, uh, award for that. 

[00:30:33] Randal McLeaird: Not just physically. 

[00:30:34] Joe Cornwell: Yeah. Yeah. Actually physically stole your house.

[00:30:36] Joe Cornwell: Uh, yeah. So we'll have to mark this in the 

[00:30:40] Randal McLeaird: history books. Nice. Yeah. Uh, yeah. Got the pictures, man, the photos and the, and the brain damage to go with that too. So that's always great. It's a great 

[00:30:48] Joe Cornwell: story. All right. So, uh, So, aside from the deal you just mentioned, do you have another deal in mind that was, that went negatively?

[00:30:56] Joe Cornwell: Maybe you lost money, uh, maybe it may, you know, specifically, [00:31:00] maybe you have a commercial deal that didn't go to plan, uh, or one that comes to mind that didn't go well. 

[00:31:05] Randal McLeaird: Yeah. I mean that, that deal in Atlanta, it's not going to plan right now. And that, that the guys, the, the, I mean, it's a, it's a well known group that owns it and that.

[00:31:14] Randal McLeaird: So this is 

[00:31:14] Joe Cornwell: one you invested into? 

[00:31:16] Randal McLeaird: Yeah, I put risk capital into it. So I earn GP share on the deal. But you're not actively 

[00:31:20] Joe Cornwell: operating it. Not, correct. 

[00:31:22] Randal McLeaird: Um, and, and, and it, I mean, okay, so they, they bought it. Um, Race increased. It's on a bridge loan. The business plan was to, to, uh, repair a downed building, right?

[00:31:37] Randal McLeaird: An entire building was downed because it was a 175 unit deal. Uh, building was downed because it got burned, right? So, immediate value add right there. You get those units back online, increase the NOI. You've got, uh, a more valuable business. Um, asset that never ever happened, you know, and then, and then when COVID hit, I think the, um, the challenge of evictions in that market, for whatever [00:32:00] reason, the courts were not processing evictions, but it never really resolved itself until they got an attorney who figured it out.

[00:32:07] Randal McLeaird: And now they're able to actually get evictions the way you typically would in a timeframe. Um, in the, in the interim, you know, just trying to get the asset to perform. Um, they brought on or they allowed more section eight, um, that translated into a, another building burning down. Wow. Translated into another, not another, but a murder on property.

[00:32:31] Randal McLeaird: And, and so all these things just happened. And so, um, we, we still own it and, and we're working hopefully with the bank to, to get it back online. But, you know, once you, you know, Have that issue with the, um, compression of your, your, your rental income has just, it's gone, right? You can't get it back until you actually rebuild the units, get the insurance to rebuild that one that burned down.

[00:32:54] Randal McLeaird: And then, um, our CapEx was being used to pay down. So anyway, that's, that's been a very challenging [00:33:00] deal. That is a very challenging deal. And so I'm grateful that I did not. You know, raise capital or bring other investors into that deal. Again, it's me being able to risk my own capital to, to learn something and see how other people operate deals.

[00:33:12] Randal McLeaird: Um, but it certainly has, hasn't, has not gone. 

[00:33:16] Joe Cornwell: What did you guys buy it for? 

[00:33:17] Randal McLeaird: Uh, I want to say 19 million. 

[00:33:21] Joe Cornwell: 19 million. Okay. What do you think it's worth today? 

[00:33:24] Randal McLeaird: Oh, as, as is if, if it were to sell probably 17 Possibly? Yeah, the NOI is down. It's down. Yeah, it's not. 

[00:33:38] Joe Cornwell: What do you think it's worth stabilized? If you were able to get everything.

[00:33:41] Joe Cornwell: If you were able from here to implement a plan. Yeah, 

[00:33:44] Randal McLeaird: 22. 

[00:33:45] Joe Cornwell: Okay. 

[00:33:45] Randal McLeaird: Yeah. Got it. But, but you have two downed buildings plus a high vacancy rate that, you know, the, the, it's just. 

[00:33:54] Joe Cornwell: And what would the, what would the, from here, what would the capital outlay be just to get it stabilized? 

[00:33:58] Randal McLeaird: The last [00:34:00] conversation I was in on, I think we, we still needed like a million dollars or something just to, to buy a new rate cap or to refinance or to, to, to bring new equity in and, and get everything fixed the way and have a buffer so that this doesn't happen again, you know?

[00:34:13] Randal McLeaird: Yeah. Yeah. Um, but it, it's, it's not necessarily that we need that much money. It is, um, well, capex dollars are locked up until, you know, we have the building repaired, right? So you can't get the building repaired because we have other issues that came up that the money's been gone and money's been spent on.

[00:34:32] Randal McLeaird: Yeah. So 

[00:34:33] Joe Cornwell: in hindsight, what, what are your kind of like top three lessons you've taken from that deal so far? 

[00:34:38] Randal McLeaird: Um, for, if, if you're looking to be an LP vet, the sponsors, right. And I've added the sponsors. I don't think it's any, um, any. Issue on that front. They have a lot of assets. They own a lot of deals, and this one just happens to be challenged because of the type of debt they put on it and the, the issues at the property.

[00:34:59] Randal McLeaird: Um, [00:35:00] another lesson, not, not on the LP side, would be, Hey, in, in my, in my mind, in my world, if I have an issue with evictions or I have an issue with, with occupancy. I'm on site, like I'm getting to the bottom of it. I'm going to figure out, I don't care if I have third party management or not, like I want to understand and I will be there and I will be figuring out what is going on at the property.

[00:35:25] Randal McLeaird: And I don't feel like that really happened. I think there were too many different assets that this one didn't get the proper, um, uh, again, like, Hey, we finally found an attorney who is going to fix this problem. Okay, that should have happened within a week. Okay. Not, you know, like all hands on deck go figure that part out.

[00:35:46] Randal McLeaird: Um, and so, just things like that. Um, 

[00:35:49] Joe Cornwell: Lack of oversight and attention on this, on this particular deal? 

[00:35:52] Randal McLeaird: Potentially, yes. Uh, again, I'm, I'm a small guy in the, in the, in the pool listening in on what's happening with that deal. Uh, Sure. [00:36:00] And so, that's just my outside looking in. And it just took a really long time for them to figure out the, uh, the process of getting the evictions through.

[00:36:09] Randal McLeaird: And then lo and behold, somebody, somebody has figured it out. It's just took us six months to figure it out instead of finding that person as quickly as possible. Right. Um, and, and, you know, the other lesson is if you're going to invest in a deal, you might lose your investment and understand that going into it.

[00:36:28] Randal McLeaird: Real estate has risk just like everything else. Um, but at the same time, you know, the, the bank has been, uh, a very gracious in their, in their, uh, timing and letting the Um, management team try to figure out a way to get this asset back online. So that's performing so that, you know, it's not a total loss to all the equity that's in the deal.

[00:36:49] Joe Cornwell: Yeah, that makes sense. Well, we appreciate you sharing that. Obviously it's, it's a lot easier to talk about the deals that go right than the deals that go wrong. So yeah, we appreciate those insights and lessons you took from it. 

[00:36:59] Randal McLeaird: I, [00:37:00] you know, love talking about bad deals. It's, it's a, I mean, it happens to everybody.

[00:37:03] Randal McLeaird: If somebody tells you it's not that they have never had a bad deal, then I'd, you know, Be curious how many deals have done or what they looked at and what they've been involved in Just a 

[00:37:11] Joe Cornwell: matter of time. That's for sure. 

[00:37:13] Randal McLeaird: Yeah. Yeah, but it's also you know, that's how you learn That's this is what I tell my kids all the time.

[00:37:18] Randal McLeaird: It's great having kids because I get to teach myself lessons by trying to teach them lessons. I'm like, Oh yeah, you gotta be, uh, you gotta learn from your mistakes there. Uh, and you learn more from a mistake or from a failure than you do from just winning all the time. So 

[00:37:32] Joe Cornwell: absolutely. Yeah. Yeah. Yeah. I mean, you know, we've, we've talked about it a lot on this podcast, but it's like when we had a, You know, 10, 15 year, uh, bull run in the market and values are going up and rents are going up and it was hard to make a bad deal.

[00:37:46] Joe Cornwell: Everybody felt like a genius. Everybody felt like they couldn't do any wrong. And obviously the last couple of years we've, we found out that markets factors change quickly and, and a lot of people did get exposed to those risks that [00:38:00] 10, 15 years. So, um, you know, I think, I think that gives people a lot more perspective on the.

[00:38:06] Joe Cornwell: Both the upsides and downsides to real estate. 

[00:38:09] Randal McLeaird: Yeah. Yeah, and it can be great. Yeah I mean those are there's there's lessons on both sides, but yeah Um, if you got into it in 2018 and everything was roses I mean you could have been slapped in the face with a oh real estate Oh, what? Yeah, it's like one of those.

[00:38:25] Randal McLeaird: So, um, yeah, luckily I bought my first deals were right in a very depressed market. And so I've seen that side of it. And I saw a lot of investors who I'd worked with. From the title company, from the attorney's office who was doing all those deals. Literally one of the guys that ended up coming and working for or with, partnering with the attorney to buy self storage back then had just gotten laid off from a large financial institution right after the financial crash, right?

[00:38:51] Randal McLeaird: And so hearing his stories and hearing, you know, his whole process and going through that, um, kind of clued me into, you know, it can go down, you know, be [00:39:00] conservative and, and, you know, know your numbers and if it is going down, don't pay. 80 percent ARV of a deal, right? It's just, you know, you can't. Um, so 

[00:39:10] Joe Cornwell: that was a great lessons.

[00:39:11] Joe Cornwell: All right. My second to last question for you today is, you know, we're nearing the end of 2024. What are your focuses for the end of the year?

[00:39:24] Randal McLeaird: So, I'm still in the acquisition mode of a small multi, right? That is a big focus. So it's really, you know, having those conversations with brokers and calling some sellers directly and talking to them um, and just hunting for those deals. Um, and, and, you know, growing the, the single family, um, owner finance business to where we've deployed.

[00:39:49] Randal McLeaird: 5 million to buy those properties. So those are the two main focuses that I have right now. 

[00:39:56] Joe Cornwell: Got it. Sounds like a plan. So, all right, my last question for [00:40:00] you, Randall was working our best ever listeners connect with you and find out more about your business. 

[00:40:04] Randal McLeaird: Easiest way is at RidgelineIG. com. And we've got, you know, the, the single family offering up there.

[00:40:12] Randal McLeaird: Um, we've got, you know, a little chat button at the bottom. If they chat on there, it'll reach out to us and, and we'll be happy to chat with anybody that, that reaches out. 

[00:40:21] Joe Cornwell: Very good. We'll be sure to link to that in the show notes. And, uh, once again, we really appreciate your time and sharing your wins and losses with us here on the best ever podcast.

[00:40:30] Randal McLeaird: Yeah. Awesome. Thanks for having me. It's been a bit of blessed. 

[00:40:33] Joe Cornwell: Best ever listeners. Thank you so much for tuning in. If you enjoyed today's episode, be sure to leave us a five star review and share this with someone else who could value from it. Make sure you're following and subscribe to the podcast. You don't miss any.

[00:40:44] Joe Cornwell: Thanks for listening. Have a best ever day. 

[00:40:47] Randal McLeaird: Did you know that 80 percent of the agents we speak with got into real estate in order to gain passive income so they could obtain financial freedom and become work optional. If you want to stay up to date, the best way is to make sure you're subscribed. So if you haven't done that, [00:41:00] go ahead and do it now.

[00:41:01] Randal McLeaird: We'll catch you on the next episode. 

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