Ed Mathews

So the big question is this how are real estate investors who don't have a ton of free time, don't have access to off-market deals and didn't start life on third base, how do we grow a real estate business conservatively to support our families, finally leave the corporate rat race and build a legacy? That is the question and this podcast will give you the answers. I'm Ed Mathews and this is Real Estate Underground. This is the Real Estate Underground Podcast Show number and you believe it 75. Greetings and salutations, Real Estate Undergrounders.

Ed Mathews

It's Ed Mathews, again with the Real Estate Underground Podcast As we have grown this podcast. and first off, thank you very much for all your subscriptions and your downloads and your likes and your comments. I want to also tell you that we've been working really hard to get more national-oriented guests. Obviously, we're based here in Connecticut, but I've always been intrigued by the southeastern market and the Atlantic markets as well. I found this gentleman probably about six months ago. I came across him and his wife, kristen, and their real estate practice. Then I started to dig in and realize, wow, this guy really is doing well and he's serving on a whole lot of people in a whole lot of ways. Luke Andrews, welcome to the show. Thank you so much for your time today. I'm excited to have this conversation.

Luke Andrews

I'm really excited to be here and it's fantastic to meet you. I can't wait to talk a little real estate here.

Ed Mathews

All right, let's get into it. Obviously, you and I have similar backgrounds in that we've started off in corporate America and then found our way into the real estate world different ways, but it's a journey and there's multiple paths. Why don't we start off with who you are, what your business is, and let's talk about that? or businesses are.

Luke Andrews

Sure, i'm Luke Andrews. Like you said, i'm based in Louisville, kentucky. My team services the Kentucky and southern Indiana markets. My real estate business really has about three phases to it. One we've got the sales side. I am in production. I do some helping clients buying, sell homes, but I also manage a team of 21 agents, really helping them grow, develop the mentorship there.

Luke Andrews

That's phase one, is the sales side. Phase two is the investment side. I do buy a few flips, but mostly buy and holds, and then starting to get into some short-term rental, airbnb stuff as well. Fortunate enough to be in what I call the 40 under 40 club, i did purchase my 40th rental property before I turned 40. Just squeaked in barely under that wire On. The third aspect of my business is something relatively new and that's been the education side, primarily working with real estate agents and some with investors as well, but really trying to take my experience working with new agents, new investors, people like that, and trying to help people eliminate some of the mistakes, learn from some of the ones that we made so we can shorten and flatten those learning curves and try to get people as successful as possible.

Ed Mathews

Excellent, excellent. Obviously, this is a real estate investment show, so we're going to focus mostly on the deals that you've done in your coaching. In terms of your background and where you come from and all that, what drew you to real estate as a potential asset class.

Luke Andrews

It was something I've always had a little bit of interest in. It got to dabble in it initially. My wife and I we built our first house in 2006 in Denver. We built it right at the very height of the market and even overbuilt for the neighborhood that we were in. Then, obviously, 2008, 2009 hit. That was right in the time where our family was expanding and it was like, hey, we need to upgrade. Fortunately for us, everything was on sale to go upgrade, but we were in no position to sell our first house. We were able to keep that house. We were able to float that note. Market was flooded with an abundance of actually really good renters who just got caught up in a bad loan. Before We had our pick of the litter, so to speak. We had some great tenants in there and it was really just started by keeping our first house. Even when we moved away from Denver and back to Kentucky, we actually kept that property out there for several years and managed it from afar.

Luke Andrews

Then, beyond that, it was talking to a friend like you talked about. We had similar backgrounds coming from the corporate world. I had a coworker that I was working with and we just both just interested in getting into this real estate investment game. We decided we were going to buy one property together. We were going to find there was this up and coming neighborhood where you could find a little shotgun house that needed a decent amount of work, for about $20,000. We were going to buy it, pay cash, fix it up, do the work ourselves, rent it and then just gradually build it.

Luke Andrews

It was luck, serendipity, whatever you want to call it. He's having dinner with his girlfriend's parents. They've got some friends over and he's talking to them about what he does, but he's talking to them about real estate investing. They said, hey, interesting enough, we're actually investors, but we're getting ready to retire. We want to sell our portfolio. Are you interested in buying it? He was like, oh well, hey, send me over the details and I'd love to take a look at one or two of them. And they were like no, no, no, no. You buy the whole thing or you buy nothing. It was like 13 doors falling into our lap.

Luke Andrews

I analyzed the deal. It was a phenomenal deal. The problem was Wow, that's a lot. We didn't know anything about taking on 13 properties. We didn't know anything about how to manage those, about how to find financing. And even when we could find financing, we couldn't afford it, like we couldn't afford a down payment at that point.

Luke Andrews

And so we just we went to people who had done it before us, who had been doing it successfully, and just started asking a lot of questions And we got to one that we knew fairly well and they're like hey, what would you do in this deal? And he said, well, he was like, if I were you, i'd bring on a partner like me to help split the costs and the work. And so we decided that that was a great opportunity. So he was gonna be a 50% partner. We were 50% partners. The only issue that we ran into there we still didn't have enough for 50% of the down payment, and so it was just like we kept hitting roadblock after roadblock after roadblock but knew that this was a really solid deal. So, outside of the box, thinking, i said okay. I said we're gonna hire a property manager for this thing. I said why don't asking this other guy, why don't you put up our deficit for us? So we'll bring everything that we can You make up the deficit. We'll remain 50, 50 partners and we'll manage these properties for free, on a schedule, until we get that deficit paid back.

Luke Andrews

So what that did? it did a couple of things for us. One, it just it got us in the game right. But number two, we learned so much I mean it was trial by fire going out there, and I mean just learning so much taking on these 13 properties that had some deferred maintenance and had some things with it, and so that schedule was really designed to pay back in about 15 to 16 months. We were able to raise the rents enough that we got it done in about seven Wow congrats. So we were even and we had actually raised the rents enough to where the values had gone up enough that we turned around, we refied, we pulled the money out and then turned around and found a package of 14 more to go out and buy. So our portfolio went from 13 to 27 in about a year. So it was, we hit it pretty quickly. But there were a lot of areas where we could have easily just said I you know it's a great deal, but it's just not in the cards for us right now.

Ed Mathews

Right, yeah, resourcefulness is a quality that I see that most investors have in infinite quantities. Right? It's not. You know, it's the old key sake thing. It's not and I buy this it's. How can I buy this right?

Luke Andrews

Yes, that is by far. people ask me all the time like what is what's your favorite quote from a book? And that's exactly it, and I use that for all kinds of areas of my life. It's not I can't do this, it's how can I do this, how can we?

Ed Mathews

make it work. It's, and you know the fact is is that, you know, being that dog on a bone is what separates the, you know the weed from the chaff, so to speak. Right.

Luke Andrews

Well, it does, and I mean. but it really starts with being able to analyze a deal and knowing if it's a deal worth chasing Right so once you get to that point, yeah, yeah.

Ed Mathews

So when you're looking at a deal like that, you know what are you looking for.

Luke Andrews

You know it really did. I mean, back then we didn't know a lot of what we were looking for. It was just like I knew how to kind of run comps and I could say, okay, i think that this makes a lot of sense at this point. Now we're looking for cash flow, like I'm not buying with the hopes of appreciation down the road. That's one of the things that I try to teach new investors is, and I know, with interest rates where they are and values and prices going where they're going, you know ROI is going down significantly but it's still. don't buy on appreciation has always been my advice. It's because, if it, it still has to cash flow, because I can't guarantee what appreciation is going to do And at the end of the day, if it's not cash flowing and I don't have enough money to put in there, the appreciation down the road doesn't really matter if I can't afford to pay the bills today.

Ed Mathews

Agree, and that's I couldn't agree more, i mean, you know. The fact is that the reason that real estate is considered recession resistant is because of cash flow. Right, it has nothing to do with appreciation. The fact is, values fluctuate on a monthly, quarterly, annual basis and there's not a whole heck of a lot you can do about that, especially in the residential world. Commercial, you can force appreciation, but there's only so much you can do there as well, but it's cash flow that gets you through the hard and lean times, right.

Luke Andrews

That's right, and the appreciation, that's just my bonus. I mean, that's the icing on top that you know that, yeah, so Excuse me.

Ed Mathews

So you know, obviously you're a coach and you help other people launch their careers. You know, one of the phenomena that I had noticed is that, or that I've discovered over the years is I belonged to the. I used to run the local RIA here real estate investor association with a few partners, and I and you know one of the things that we recognized when we first took over was that a huge portion of the people go through the training, spend the time, spend the money, spend the you know the effort, and then don't do anything Right, and so you're nodding. So I think you probably have seen similar things. Why do you think that is?

Luke Andrews

I think there's a couple of reasons. One, especially with the advent of social media. I mean, social media does some phenomenal things and there are some very well-known podcasts that are out there that talk about real estate investing and they'll give you the truth. But they give you kind of half the truth. I mean they're always painting it in a rosy way because they need people to tune in, and people on Instagram and TikTok, i mean they're. They're all just like look at, look at my highlight reel. So it turns out.

Luke Andrews

It's not quite as easy as everybody thinks that it is. Even when you've got a property manager, it's not mailbox money like they tell you it is. There's still a good amount of work that goes along into it, but a lot of it, i think, is just time. So I looked at this like when I made my transition out of the corporate world into full-time real estate. My wife and I set up a 24 month transition plan for getting out of the corporate world and the things that we had to do, milestones we had to hit before I could go full-time entrepreneur real estate. But then we had a second 24 month plan of kind of that first 24 months, kind of going, getting into it and being business owners and like the the initial 24 month plan, we hit our milestones quick, like it was.

Luke Andrews

I actually finished that in about 10 months. So that was, that was phenomenal. But that second 24 month plan of moving in, it took every bit of that 24 months. Now, the first six months crazy easy, i mean like it's, because even you're just running off adrenaline and even when you're getting kicked in the teeth it's like man, i'm out here, i'm doing it, things are great, right. But months kind of seven through 12, seven through 13, they start getting a little bit tougher, yeah.

Luke Andrews

And months 13 through 23 and 13 through 24, and they're just damn hard, like it is really really hard out there. So it's you don't have that resilience to fight through Right, it makes it tough and you want to give up.

Ed Mathews

So we always talk about the easy stuff and the fun stuff, right? So let's talk about the hard stuff. So in that 13 to 24 month time frame, you know what were some of the things you were challenged by.

Luke Andrews

Well, mine was. Mine was a little bit different than than what some of your audience is, because I was also coming in and starting a real estate agency. You know a practice of being an agent, being a team leader, so that that was all a piece of it. But also, i mean with the, with the properties that we had. You know, that's around the time when, when leases start turning over and when you're managing the properties yourself, plus you have a full time job. You know, trying to show properties like that is just that that's a full time job in itself. But that's also the time that new tenants come in and all of a sudden they all the water heaters go out at the same time. Or you know one goes out and then you know all the one tenant hears and then I go well, i want a new water heater, i want a new furnace. You know, i want this, i want that.

Luke Andrews

And so you kind of start stacking these not problems but just challenges that are that are all coming together, and then it starts to really feel like OK, now we've got a month or two of negative cash flow. Is this really? are we going to be OK? Yeah, so it's you. Just you got to stay on top of it, but you have to. You have to stick with it And you have to know what that plan looks like, be able to analyze that deal and know that if it really is a good deal, that you've got to stick with it and that it's going to turn itself around.

Ed Mathews

One of the other things you said that really hit home with me is the numbers cash flow, right, and whether you're positive or negative And you know so many people, i mean I've been guilty of it at one point or another The fact is that the chase you know finding the deals, getting them done, getting them, you know, in place, and you know over the finish line and closed and stabilized. That's fun, right, it's hard work, but, yeah, accounting and operations and asset management little, dry, right, very dry, and so one of the things that I see a lot of investors stub their toe on is not paying attention to their numbers, right, not understanding. Is each building property single family home, multifamily home, doesn't matter. Is each property producing the cash flow that you anticipated? And if so, great, how can you grow it? asset management right, and if not, what can you do about it? right, and let's go.

Luke Andrews

I'm so glad that you brought that up because now, putting on my real estate agent hat, being an investor myself, i tend to lean towards the investor market of people that I'm working with. I work with a lot of investors themselves, and especially relatively new investors, because I like to help them get their start. It's just a passion project of mine. But when we go to view and potentially purchase some of these properties, when you find these owners who are just kind of have one or two like one fourplex or like a duplex in a single family, the record keeping is so unbelievably poor. And so when you're having the conversations with them and they tell you like oh yeah, we made X amount of dollars last year, and then when you really start digging into one, they'll send you over a piece of notebook paper that they tore out of a spiral notebook. It's still got the little things on the side of it, it's all handwritten, and then, but when you really start digging into it, you realize that they actually lost money.

Luke Andrews

And they weren't and from talking to them, they weren't trying to be SU throughout the thing. They really just didn't know. They didn't know what they were looking for, they didn't know that they lost money. They're thinking, hey, i've got this great investment, i'll turn around and sell it. And then I got to tell them like, hey, man, the property's not worth what you think it is. Like this thing, it didn't make any money. I got to do this, this and this just to get it to a point where I can cash flow positive.

Ed Mathews

Right, right, so true, i mean, and that's not necessarily exclusive to residential buildings as well. I mean, the fact is, a few months back I was looking at our 16 unit property in East Hartford, which is one of the smaller cities here in Connecticut, and in talking to the seller I asked him for his T12. And the response was well, most of my residents pay cash, so I don't keep track.

Luke Andrews

Oh geez, oh really. Can you imagine if you were an IRS agent at that point? and thirsty Right? yeah, i'm not going to tell you where it was, but yeah, i know.

Ed Mathews

God, how do you do that? You know what I mean. Yeah, the IRS comes knocking on your door.

Luke Andrews

You've got a pretty big bill to Yes, yes, you got legal bill, accounting bill and a whole lot of explaining, right, yeah, so yeah, it's amazing.

Ed Mathews

I was just looking at a 36 unit in Oklahoma and it seemed like a pretty good deal, And I think it was a good deal. We ultimately didn't win it, but, the same thing, the gentleman who owned it had hired a property management company that unfortunately ripped them off.

Ed Mathews

And so when I asked for the T12s and the invoices, he's like I don't have any of it, It's you know. And so then you're trying to work with them to figure out, okay, exactly how many, what is the economic occupancy of this building And can I build a business model on that?

Luke Andrews

And sometimes yes, sometimes no, 100%, and I think you bring up an excellent point there about property managers, that you, especially as a new investor, you really need to vet some of these folks, because there are a few that will take advantage of it And there are some that are just they're no better at record keeping than you are And it's not, again, not for anything malicious, it's just it's not in their wheelhouse And it's like, well, hey, you know they're only gonna charge me 8% And this one wants to charge me 11. Well, yeah, i get it that you don't wanna give up to 3%, but as the 8%, at the end of the day, you might as well be managing it yourself.

Ed Mathews

Right, Yeah, If I'm gonna pay an extra 3% and my books are gonna be clean, I'll sign up for that all day. 100% Right. So you know you had mentioned early on that you know when you were trying to buy that first portfolio from your partner's, girlfriend's parents. Is that right? I got that right.

Luke Andrews

It was my business partner's, girlfriend's, parents' friends, oh friends That we're all having dinner at the parent's house.

Ed Mathews

I missed that one last jump. Oh yeah, well, i mean, it's quite the trail. So you know, and you mentioned you know, one of the ways that you got that deal done was seeking advice from people that had you know had been doing this for a while. So I'm curious about that in terms of the advice and the mentorship that you've received. You know what's the best advice you ever got and who gave it to you?

Sharpening the Saw in Real Estate

Luke Andrews

The best advice that I ever got was you know my It's as simple as can be, but one of my big mentors in real estate, both in the sales and the investment side, mr Jay Pitts, here in Louisville. he said you make your money when you buy, not with himself. It was just. that is always stuck with me, even before we got. obviously I didn't have as much control over the place that I had in Denver, but when we bought this package we knew that the price was so good that that was going to set us up for the future, because that was just ingrained in my head You make your money when you buy, not when you sell. It was like that for flips and STRs and everything else that we're doing.

Ed Mathews

So when you look at sharpening the saw and growing yourself and I know that you obviously help other people do this, but I'm sure leaders are readers I'm curious, two things really. One is how do you consume information podcasts or audio books or regular books or videos on YouTube or something else? And then I'll ask the next question.

Luke Andrews

So for me it's all podcasts and it's audio books. It's sitting down and reading for me. I used to love it. I struggle with it now and part of it is because I'm in the car so much or I'm exercising or I mean whatever it is. So audio books are the way that I can consume as much as possible, like I said that, and podcasts. So those are my go-tos constantly.

Ed Mathews

Okay, so that leads to the next question, which is what are you paying attention to these days, or who are you paying attention to these days?

Luke Andrews

in terms of our readers and creators.

Luke Andrews

So for me, I tend to go back to the tried and trues. Now it's like from a podcast perspective, I'm listening to several because in some of it, like a bigger pockets that's out there. I'm not necessarily following everything that they're doing. I'm actually listening to them as an agent and as an investor. I want to know what these other investors are taking from it, especially these newer investors, because I know the majority of them are listening to that, And so it's like I have people call me and try to pitch me all day long. Sure, And I'm like, yeah, I heard that episode as well, buddy.

Ed Mathews

I know what you got here. Yeah, episode 506. Were you?

Luke Andrews

actually a cash buyer, or You're right So, but from a book perspective, i tend to read the same books over and over again. I mean, i read Rich Dad Poor Dad once a year. I read Rich Dad Poor Dad's Cash Flow Quadrant once a year. I read Thinking Grow Rich at least once a year. I read Shoe Dog by Phil Knight at least once a year The fascinating story that Nike should not be where it should have been bankrupt even after it was Nike. It should have been bankrupt numerous times. Just the resilience aspect of that is just a fascinating story. That's inspiring. I use it as inspiration to just persevere and go on Excellent.

Ed Mathews

So, yeah, it's interesting. you get like through podcasts I always hear I want to know what other people are seeing. I'm always wary of confirmation bias and I'm pretty good at convincing myself of things, and so listening to podcasts, listening, meeting guys like you and reading blogs and listening to audiobooks and all that I really want to know what other people are seeing in the market at the time that we're talking. Podcasts are great that way.

Ed Mathews

These videos are great that way, blogs are even great that way. But the other part of it is and I think that with books, in particular audio I'm an audio book guy too You know you're basically boiling down five, 10 years of the author's experience into 250 pages, right, right And so and I'm a firm believer in history repeats itself, right? So you know we're looking down the barrel of a, you know, potentially a pretty substantial recession, especially here in the Northeast. And you know people are, you know half the world is saying this is 2008 all over again, which I've not really. I don't believe. Or you know that it's a what was the term? I heard a soft landing, you know, and it's probably somewhere in between. But I'm always curious about what others are seeing out there. So I'll ask you I mean, you're in Kentucky, i'm in Connecticut What's your market like these days?

Luke Andrews

Our market still as hot as can be. Okay, now, we're always going to lag behind. I mean it's, you know, being kind of middle, middle of the country, low median price point. You know we're always going to lag behind the coast. You know, I like to say there's a famous line from the show Parks and Rec. He was like you know, they're just citizens here are just now getting into Nirvana. I have, i don't have the heart to tell them what's going to happen in 1994. You know, it's so we're, we're still, we're still riding that wave, we're still riding high. I mean we took a little bit of a pullback, you know, in November, december and just a touch of January, but right now we're, we're still at a massive inventory shortage. We've got a lot of industry here in our town And so there's people constantly moving and shaking And now that everybody has kind of just come to grips with the interest rates that we've got, you know it's, we're just back at a more normal level. That you know, 2.75 was phenomenal And if you got it hold it But.

Luke Andrews

I mean, you know it's, if you got to move, you got to move, And we're not, you know, we're not the early 80s where it's 18%.

Ed Mathews

So I mean historically we're. we're spot on where interest rates typically are in that six to eight percent range. right, yeah, that's reality. So, yeah, this is you know. people are talking about the new normal. Well, no, this is just normal.

Luke Andrews

Yeah, it's not the new normal, it's just yeah, it's, it's different than what it has been. And you know and we say that from a real estate market because I see all these articles and I was I was invited on a panel yesterday and we were discussing an article that said you know, well, we're we're seeing year over year sales down. You know, miami was seeing it down like 25% and that, and the single family homes 38% in condos. You know, from this time last year And I said, yeah, that's, it's perfectly fine And we probably needed a little bit of a slowdown. And we're actually back to like 2019 kind of sales numbers And in that case, if you go back to any agent that was in the business in 2019, that was the best year that they'd ever had.

Luke Andrews

Yeah, you know, leading up to that, 2019 wasn't a bad year by anybody's standards. Now, was it 20, 21 and early 22? No, it wasn't that high. But I mean, it's not like we've. We've pulled back to next to nothing and agents can't eat, right, you know, we're just, we're back to even above normal at this point.

Ed Mathews

Yeah, And it's. It's not necessarily a demand problem, it's an inventory problem, right Yeah?

Luke Andrews

It's an. I don't see anything that's going to solve that at this point. I really don't, other than people who are just sticking around in these 2.75 rates that they got and not not willing to give them up. Yeah.

Ed Mathews

Well, i mean something to be said for that. Yeah Right, i mean that's tens of thousands, potentially hundreds of thousands of dollars in interest savings over 30 years, absolutely. Right, So all right. Well, hey, Luke, I've really enjoyed this conversation, You know. Congratulations on all your success. I'm curious when you, when you are not saving the world from real estate, what do you like to do with your?

Luke Andrews

family. So my kids. I've got 2 boys that are 13 and 11, both very active in sports, and I know that we're coming up on a time where I'm not going to be able to coach them any longer, so I'm coaching any and everything that I can. They're both big into basketball and football, and then I've got a younger one that plays golf as well, and so it's I. I'm just, i'm trying to be as present and involved as I can. Awesome. But with the real estate ventures and coaching my kids, i I have time, for sometimes I get to sleep.

Ed Mathews

Yeah, yeah, but it's worth it, right.

Luke Andrews

Absolutely. You only get them for 18 years, but that's right.

Ed Mathews

They're only home for 18 years, and so I'm, i'm, i'm a little bit beyond you and that I've got a 15 year old and a 20 year old. And you know 20 year olds, a sophomore in college and she the two girls and you know she's having the time of her life and experiencing new things, and you know mom and dad aren't really cool to hang out with anymore And I know our old degrees.

Luke Andrews

I'm I'm dreading those days, yeah, dreading.

Ed Mathews

Yeah, well, it's you know, they come back. But usually when they want tuition they come back.

Luke Andrews

Yeah, that's right. When they, when they want money, they come back.

Ed Mathews

Right. So, uh, hey, luke. Um, if people want to learn more about your business or, uh, you know, catch up with the online, you know what's the best way to reach you, i am by far most active on LinkedIn, Um, so you can.

Luke Andrews

You can find me on LinkedIn, or, you know you can go to my website. It's got all of my books there. Luke Andrewsus Um, you could always send me an email. I do answer all my own emails. I don't have a VA doing it, Luke. At Luke Andrewsus Um, or you know, actually, if you've got relatively new investors in there, I wrote a book not long ago, Um, it was the. It was my third book that I wrote and it was strictly for investors and trying to help them avoid some of the mistakes that I made early on. If they go to 10investormistakescom and that's the number 10. So one zero investor mistakescom, they can download that book Absolutely free.

Ed Mathews

Wow, that's really generous. Thank you, that's wonderful. Well, uh, luke, um, it's a pleasure. Congratulations And uh, i, uh, i'm actually going to be down in Louisville, hopefully in the next month or so, so I'd love to buy you a cup of coffee and, and, yeah, hey, look, look me up while you're here, man, we'll be happy to get together with you.

Luke Andrews

I'd like that.

Ed Mathews

All right, luke Andrews, thank you so much. Thank you. This has been the real estate underground podcast, a Clark Street Capitol presentation. Thanks for joining us. If you're enjoying the show, please remember to subscribe and share it with your friends. If you'd like to learn more about Clark Street Capital and our upcoming projects, please join our investor club at clarkstcom. Until next time, happy investing.