Best Real Estate Investing Advice Ever

CHAPTER 1: LEARN THE REAL STORY BEHIND A PROPERTY

Best Ever Guest: Justin Bajema

Justin Bajema is the founder of Access Property Management Group in Grand Rapids, Michigan. He is also an active investor focusing on multifamily properties and deal syndication.

Episode 13

After Justin graduated from high school, the whole academic game was not engaging or challenging enough for him, so he went directly into the workforce. Justin quickly grew bored with the 9-5 grind and believed there had to be something more to life than what he was seeing around him. Justin found his calling in May 2001, when he made the choice to join the Marines. When speaking with the Marine recruiter, he made it clear that the he would join as long as they promised to give him an infantry position. A couple months later, the 9/11 attacks occurred, so his life was about to change forever. Having demanded to be in the infantry, Justin knew that he would be sent to war, so he learned early on to be careful what you wish for. The four years and two tours that Justin served as a Marine provided him with a very interesting and unique experience. Reflecting on this time, he says he would never give it back but he would never want to do it again either.

The beginning stages of Justin’s real estate career occurred when he got back from his first tour in Iraq. He received a care package containing a book that changed his life forever, “Rich Dad, Poor Dad” by Robert Kiyosaki. This was the spark for his entrepreneur, investing, and real estate love. Justin says it was probably the first book he had ever read front to back. It changed everything for him. He started reading hundreds of books, and listening and reading everything he could get his hands on.

During Justin’s second tour, he was injured severely on two occasions, and was blown up on a third. After the third injury, he was immediately Medevac’d out of the country, and spent six weeks in the hospital. Due to his injuries, he required eight surgeries on his legs and had to learn how to walk again. Justin quickly became fed up with being in the hospital because it was very depressing being around people that were hurt, injured, and wounded. He knew that he had to go out and do something with his second chance at life. It was like a calling, saying “there is no way I made it through this stuff and not do something.” Six months later, Justin ran a 25k to prove to himself that he could do something after being blown up and learning how to walk again.

Using what he learned from his newfound love for real estate and after getting a second chance at life, Justin started investing in single-family homes after the market crashed. He believes it was pure luck that he happened to get into real estate at the same time as the global economic meltdown. Justin focused on purchasing small, single-family foreclosures, fixing them up, and renting them out. He continued to follow this model, but he eventually realized that buying at the right price was just one aspect of a great deal. The other aspect is property management. The Marines Corps takes pride in commitment, courage, honor, and professionalism. However, Justin was not really seeing this in the real estate industry. What he did see were amateur, mom & pop property management companies that were lazy and were not leveraging technology or many of other things that were out there. Starting from almost nothing, with only $105 in his bank account and zero clients, Justin started his own property management company. Six and a half years later, he manages over $40 million in assets.

While Justin was working on expanding his property management company, he also continued to grow his single-family rental portfolio. When his company was managing over 300 units, he decided to give multifamily investing a try. Justin’s first experience with multifamily was when he syndicated a small student housing complex by raising 100% of the $2.05 million purchase price from investors he had built relationships with during his property management career.

Student housing is a totally different animal compared to conventional multifamily. However, it was an incredible learning experience for Justin. He identified the property as an under-utilized asset because of deferred maintenance and poor management, repositioned the property, and put it under his management company, resulting in a great first multifamily deal. Justin believes that if he never learned how to manage properties well, he would have never identified this opportunity.

Justin believes it is important to invest in yourself before you invest in a deal. He understands that many people want to skip the learning period and just get a deal done. The reality is, however, that you will get your education one-way or the other. Justin is not saying that you should only read real estate books and never take any action. You should be learning, growing, and executing at the same time. He knows from first-hand experience the importance of investing in yourself first. If Justin had never taken the time to read “Rich Dad, Poor Dad” cover to cover, he may have never gotten started. In addition, without the expertise that he gained through starting and running a property management company, he would have never met the individuals who invested in his student housing deal and he would have not been able to identify the value-added opportunity in the first place.

The key is consistency. Justin loves to learn and is growth driven, so he is never going to stop educating himself. The world in general is changing rapidly. If you look back in history, there are many examples of companies that were around for over a hundred years. However, they didn’t keep up with what was happening in the marketplace and ended up going out of business or being purchased. If you are not constantly learning and evolving, it could be game over.

“The numbers tell the story” seems basic and elementary, but Justin believes this is the key to the whole real estate game. It is very important to be able to understand what the numbers are telling you. The types of questions Justin asks about a property in order to make sure he has an understanding of the whole picture are:

•   What are the trends?

•   What type of real estate are the majority of people investing in?

•   Is the property at its peak performance?

•   How is the property operating?

As a value-add investor, Justin looks for properties that are mismanaged so he can go in and add value to the tenants, community, building, investors, and themselves as managers. Many people are just looking at the profit, but he believes the secret is adding value and reaping the profits that result from that added value. Justin wants to identify situations where it is a win-win all-round. Justin does not believe in the cliché that “there is always a winner and a loser,” because through firsthand experience, he knows it is possible to added value to not only himself, but the tenants, his investors, the building, and the longevity of the asset as well.

Justin has seen many examples of investors who did not let the numbers tell the story, and the negative consequences that followed. He was looking at the pro forma (property’s financial projections) for an apartment complex and discovered that there wasn’t any money going towards maintenance or CapEx (CapEx stands for capital expenditures which is money saved up and then spent on things that benefit the property over a long period of time i.e. roof, HVAC, parking lot, etc.). They were ignoring these numbers in order to prop up...