Host: Trey Stone
Co-Host: Chris Bello
Producer: Bobby Duncan
More about Chris Bello:
The Entrepreneur Motivation Podcast (Available on all platforms)
Chris Bello’s Background
Chris and Trey met at a Baby Shower for Trey’s neighbor. The neighbor’s son was a good friend of Chris’ and they eventually started a business together.
Chris Bello grew up Cathoic, went to an all boys’ Jesuit high school, and then to Texas A&M where he studied business. He got into oil & gas but quickly realized that he wanted to get away from it. He saw how much work people were putting into the oil and gas industry without that much of a return. He decided that he wanted to work for himself. Chris and his friend (the neighbor’s son) invented something, filed a patent, invested in manufacturing, and ultimately stepped away from it when the product wasn’t working as planned. His goals of entrepreneurship hadn’t waivered despite this business failure. He prioritized quality of life and wanted that for himself.
While listening to a podcast, Chris discovered a Houston-based company investing in real estate. He heard that one of the owners went to Texas A&M and decided that was his foot in the door. He reached out, called, submitted a form, and eventually they made a position for him because of Chris’ persistence. He realized he needed a mentor and this start up felt like the place to learn and fit in before his journey into entrepreneurship. Chris got his real estate license, had record months in 2020, and entered 2021 with 9-10 deals under contract. He’s in a position where he feels he has the knowledge, resources, and motivation to achieve much larger goals.
Chris’ Goals in Real Estate
Several friends of Chris’ wanted to invest with him in single family investments and initially he thought this was his path. Chris met with Trey a few months ago and the conversation pointed him in a new direction. He thought about the benefits of skipping single-family investments and going straight to multi-family investments: less headaches... if there’s a vacancy there’s less worry in multi-family vs single family, etc. He later doubted his knowledge and access to multi-family investments and turned to Trey for mentorship.
Trey Compares Investment Types
Trey shares that when he first got into single family properties, he felt like there was a lot less risk involved. A lot of people feel that way because there are fewer zeros attached to the numbers in those deals. What Trey found in real life, however, after owning rent houses and thousands of units of apartment complexes at the same time is that actually in some ways you have more risk in single family investments. If you have 5 rental properties and 1 tenant moves out, you lose 20% of the income and occupancy.
For example, Producer Bobby shared his experience investing in single family. He recently had a tenant getting behind on rent, he decided to move the tenant out, upgrade the property, and bring someone in at a higher rent. Bobby lost about $3,000 while the property was empty. He lost over half of his monthly income by the turnover of one tenant. Trey says that represents a lot more risk to him than if he had 10 people move out of 1312 units. In multi-family investments, he could have 10-20x the number of people move out and still have a minor impact on his income.
It was also really difficult for Bobby to move the tenant out. He sought advice from Trey and his team to deal with this delicate situation.
In a single family investing structure, Trey points out that most people need a day job as they build up their investments. In this scenario, the single family investments are actually a side hustle to your day job.Trey warns, “the problem with side hustles is that you rarely develop the professional skillset that you need to make the same decisions that you would make if you did it all day, every day, all day long.”
By running 7,000 units, serving as president of the apartment association, and immersing himself in the apartment business for the past couple of decades, it’s really easy for him to handle tenant situations because it’s what he does full time.
Lastly, Trey points out how difficult it is to get from the side-hustle structure to a full-time structure one rent house at a time. Even if a house makes you a couple hundred dollars per month, that would require a lot of rent houses to make you feel like you can retire from your job and focus on real estate investments. On the other hand, apartment complexes can retire you.
Trey has seen friends and colleagues replace their income and retire off of one multi-family investment deal. It forces you, because you’re doing it on a larger scale, to get past some of the anxieties and insecurities of handling tenants. He also has friends who have done a number of deals and never had to make those calls themselves because in apartment complexes, you have enough scale to bring in a full team.
Trey has 13 people working at his complex with 560 units. He has a manager, assistant manager, leasing agents, lead maintenance, assistant lead maintenance, technicians, porters, housekeepers, security team, etc. At large apartment complexes, the lender is going to force you to underwrite a property management fee. This is another opportunity to say how active or how passive you would like to be.
Trey’s Advice and Career Path for Chris Bello as a Young Investor
Trey advises Chris to work as the property manager as he starts out, especially investing with friends and family money. Trey says he will help start an LLC for Chris’ property management company that is different from the one that owns the property. He also lays out his plan to put Chris into the right programs through the Apartment Association. The team of people who have been doing this all day every day will support him but at the same time Chris will learn it as he works in the property management side of things.
A lot of dentists, attorneys, engineers, doctors, etc should not do this with their full time jobs. As a young real estate broker, Chris has flexibility in his schedule to move it around and accommodate this property management role. In this plan, Chris will mitigate the risk by having a mentor. He will mitigate the risk by buying a larger property and budgeting for move outs.
He will also budget for the property management company even if Chris is the one collecting that fee. For those with full time jobs, they can act as passive investors and hire a property management company with a team of professionals to truly manage the property. For young investors like Chris, the benefit of managing the property yourself and setting up your own LLC for this is learning firsthand.
No one can ever BS you down the road if you learn every role and how it’s supposed to be done. The more you immerse yourself in the business, the more you know how to make good decisions. This is not a side hustle in this instance, it’s a career and it’s the best way to master it.
Chris’ Final Questions for Trey
Q: Other than the book, The Complete Guide to Buying and Selling Apartment Buildings by Steve Berges, how do you begin to fathom what to do to get to investing in apartments?
A: Trey recommends listening to Real Estate Riches Podcasts- specifically, episodes with Charlene Nixon, Russel Jones, and Tom Wilkinson. These are some of the multi-family brokers who specialize in this sector. The difference is that unlike single-family homes, which has MLS & apps like Zillow, etc. Multi-family is the opposite of that. There’s a service called LoopNet with overpriced deals. Experienced buyers actually go to a handful of brokers for multi-family real estate deals.
Others include Michael Thompson and David Schwartz- they finance the deals. Find out where they guide you into your first deals. More than likely, if you want to start out with a deal from 50 units to 200 units and you can find the access to the capital- and you’re willing to do it for no fee, you’ll find that people will go in with you. They’re likely to especially if you put all of your capital into it as well. The first steps are getting guidance on the finance side about what size property and what type of property you’ll qualify for and then at the same time talking with brokers to narrow down the profile. The next step is a business plan. Putting together a plan with certain fundamental metrics is an objective way to evaluate whether or not a property meets your criteria, it shows you if you would qualify, and it shows you how much money you would have to raise.
Q: How often do you check in with your team? What do I ask them, how do I check in? Do you have a process or a gut feeling?
A: Trey says he keeps a spreadsheet with tabs. Each tab has a name for one of his direct reports. On each tab there’s a list of short term objectives that he’s waiting for them to get back to him on and what are some of the bigger picture objectives. Trey also uses a product called Microsoft To Do- he subscribes to Microsoft 365 for himself and his employees. He shares the to do lists with his direct reports and they can check it off as they complete it. Trey is also a big fan of face to face time- there’s no substitute for that.