Real Estate Underground

The Real Estate Master: Gino Barbaro's Journey to Financial Freedom

• Ed Mathews • Season 4 • Episode 124

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Ever wondered how a pizzeria owner could transition into a successful real estate investor? 

Join us as we sit down with Gino Barbaro, co-founder of Jake and Gino, who shares his remarkable journey from the kitchen to managing a portfolio of over 1,200 real estate units. Gino opens up about the life-altering moments, including his father's passing and the Great Recession, that led him to pursue personal development and ultimately pivot his career. 

Discover how his partnership with Jake Stenziano was formed, their strategic focus on mom-and-pop properties, and the creation of their three-step framework: Buy Right, Manage Right, and Finance Right.

Learn the intricacies of maximizing profit in real estate syndication with a deep dive into profit per unit (PPU). Gino shares the challenges of managing large portfolios, especially during the tumultuous COVID-19 pandemic, and the critical importance of tracking PPU to identify profitable property types. He discusses the strategies for managing various costs, such as insurance and utilities, and emphasizes the importance of proactively addressing utility cost spikes. Gino also underscores the crucial role of managing work orders and delinquencies to ensure long-term profitability and sustainability.

Listen in as Gino unfolds creative financing strategies that can make or break your real estate investments. From the spy technique to identify seller pain points to leveraging seller-financed deals and master lease options, Gino provides valuable insights and personal anecdotes that shed light on these powerful tactics. 

We also touch on the benefits of whole life insurance and the concept of infinite banking for asset protection and estate planning. 

Finally, Gino highlights the importance of family and personal fulfillment, featuring his podcast with his wife, Julia, which focuses on family topics and notable guests, reinforcing that success is truly holistic.

New outro for Season 4 (2024)

Additional Resources:

Ed Mathews:

Greetings and salutations. Real Estate Undergrounders. It is Ed Matthews with the Real Estate Underground Today. Today is a special show. This gentleman, gino Barbaro, has kindly joined the show and, gino, I am a huge fan and, like I said when we were offline, your MM4, mm5, mm6 conferences have been some of the best I've ever attended. I've enjoyed your books and I've certainly enjoyed your podcast, as podcasts plural, as well as your YouTube channel, which I am a voracious subscriber to. So, welcome to the show. Thank you very much. Buckle up, because I got a ton of questions to ask you, sir.

Gino Barbaro:

Ed, I'm doing great brother. How are you doing?

Ed Mathews:

I am, I'm good. I'm good. Life is good. Gino, the unlikely event that someone doesn't know who you are and what you do for a living, why don't you tell us a little bit about yourself?

Gino Barbaro:

I'll start with how I got into real estate. I was in the restaurant business for years in New York and I loved it until I didn't love it anymore. My father passed away in 2007. I had owned it for about 15 years. I had been working with my dad since I was around eight years old. So at the age of 37, he passed away and I started evaluating my life. I said, am I living his dream or am I living my dream? And I felt as if I was living his dream.

Gino Barbaro:

To be completely honest, the Great Recession smacks me in the face. I start blaming everybody. What am I going to do here? I'm not making money. My kids like to eat. How am I going to provide for them?

Gino Barbaro:

And I picked up a book by T Harv Eker called Secrets of. I think that really changed everything for me. That line in the book that says your fruits are in your roots. The fruits are what we're all focused on, the shiny object that we see. Very few of us actually focus on the roots, myself included. I didn't provide value. I didn't know what it was to help others. I didn't know how it was to create impact. I didn't have the skills to make the money.

Gino Barbaro:

I understood at that point after I got over the fact that I wanted to punch T Harv in the face when I read the book the first time because I'm like he don't know me. But then I stopped. I said honestly, he does know me and I'm starting to learn myself. I'm calling BS on myself and I think everyone needs to start doing that. Start claiming responsibility for your life. It's a tough thing to do. All of a sudden, at the age of 37, I'm sitting there going. I'm blaming everybody, but everything I've done up to that point in my life is what's gotten me to that point in my life. I have to own that and if you don't and you play the victim, you're going to get stuck there. So I proceeded to join mentorship groups. I started investing in my education not looking at it at an expense and, as luck would have it, jake appears in 2009. He's a pharmaceutical rep in the, taking orders out of the restaurant, selling them and bring selling pharmaceuticals and going to the doctor's offices.

Gino Barbaro:

I partner with jake. In 2011, he moves up down to knoxville, tennessee, and at that time, barbara and stenziano in east tennessee only doing business down here. It took us 18 months to find the first deal. I I always say life before Jake and life after Jake. I had many mishaps in real estate before Jake but when I met Jake, all of a sudden, we focused on the mom and pops we focused on and we created our three-step framework by Manage Right and Finance Right and after that 18 months finding our first deal I don't want to say things became easier, but they became clearer and we had a framework and we had the process. The second deal came three months later. The third deal came six months after that and within five years, believe it or not, we had a thousand units and I credit it really a lot to personal development, a lot to mindset and a lot to the process and the map, but a lot to my business partner as well.

Ed Mathews:

Yeah, it's interesting. And in getting ready for this and preparing this show, that was something I discovered about you that surprised me, which was your first full cycle syndication was only in 2020.

Gino Barbaro:

And you now have, if memory serves, about 1,200 plus units, right, yes, so we started out, I would say, maybe the non-traditional way. It's like Mark Twain's quote it's not what you know that's going to get you in trouble. It's what you know for sure, that just ain't so. It's not what you know that's going to get you in trouble. It's what you know for sure, that just ain't so. Well, we thought we had to do everything ourselves and we were just very fortunate that we were very diligent. We had a really strong business partner with a strong balance sheet, so we were able to buy these assets. And what people have to understand is you don't have to be in a rush in life. If you do one or two or three deals a year for the next three or four years, you look back and go holy crap, I've got four 300 units or 80 units. And then those deals, you're able to add value, refinance the money out. Our very first deal 18 months after we did it, we refinanced at $164,000. It really is tax deferred because you're taking a loan to yourself. And 164 grand for me. That's a lot of pieces. That's the next deal for me. So we continued to buy. We continued to buy add value. On our sixth deal, it was a 281 unit deal $11 million. That was fully seller financed 20% by the seller, 80% by the bank. That was a huge windfall for us, so that got us going. We didn't need to syndicate.

Gino Barbaro:

Then in 2018, syndication comes into our lives because we have the Jake and Gino community. People want to learn how to syndicate and it just becomes the rage with the 2017 Jobs Act. So we've done three syndications. We ran out of money, like everybody else does. We got some acquisition fees, but we've sold all three. Our third one we just sold two months ago IRR of over 20% average on all three.

Gino Barbaro:

It's a great tool in the toolbox. But there's seller financing in the toolbox. There's JVs in the toolbox. There's other ways to buy real estate and especially multifamily, and you need to learn all of them because they don't always work all the time in every part of the market cycle and seller financing is coming back now. Syndications may be a little bit more challenging right now. Refinancing and rolling your money may be a little more challenging right now because of where interest rates are, but once you learn all of these and you understand market cycles, it becomes a lot easier. It's not easy. It becomes a lot easier and you start understanding it. I love the way you said it creating multifamily entrepreneurs, becoming an entrepreneur and looking at it as not just an asset to invest in, but building a scalable business with systems and processes to grow your portfolio.

Ed Mathews:

Yeah, and I want to talk about that because we talk about buy right, finance, manage. First two are really sexy, but that third one is where the money's made, and I was watching a YouTube video of yours a week or two ago talking about the four key metrics that you guys really focus on, and one of them was actually a new one for me and that was PPU.

Gino Barbaro:

Oh, yes, p-p-p-u-r. Yeah, and it's interesting because most investors don't even talk about it. Because when you've grown up in the syndication era, that's not your focus. Your focus is to really scale. It's a different model, it's a different mindset. You have very little capital and what you're trying to do is to try and collect fees, trying to get as many units as possible, and you're probably using third-party property management because, especially during COVID, try to buy a thousand units and try to hire a hundred people while you're doing that, or 50 people. It's very challenging. So when you're doing the syndication model, there's less equity for you and you're making your money on the back end. It's more of a fix and flip model where you're trying to crystallize the equity. If you're fortunate, you can refinance the money and keep the investors in. But a lot of people like to just sell out the syndication. So for us, profit per unit is really one of those metrics where, when we buy a deal, we want to average between $250 and $300 of profit per unit after all expenses, after everything's paid for. So if you have 100 unit property times 250, you're looking at $25,000 a month in cash flow. But the important thing is it's not going to happen in day.

Gino Barbaro:

One Years ago it was pretty good. Seven, eight years ago you could buy deals at an 8%, 9%, 10% actual cash on cash return. But now, where interest rates are, where rents are and expenses, you need some work to do that. But that's one lens that we look through and the great thing about it is when you're looking at your portfolio look at your two beds, your three bedroom townhomes, your studios, your one beds which ones perform the best and which ones have the highest PPU. So then maybe when you're underwriting deals, you're like oh wow, these two bed townhomes and garages they crush PPU. They're averaging $400 a month. Maybe those are the deals that you should be looking for, instead of the one-bedrooms or the studios that are doing $120 a month. So it's just one metric that we like, because it's really about ownership and about equity and it's something where you can actually derive it and see what's going on and you can put a number to it, because if you can't measure it, then you can't manage it. So that's one metric that we really love.

Ed Mathews:

Amen. And there's three things that I take from that. First, the fact is you got to know your numbers, and being able to track that is so important. The second thing is that it also keeps in mind that when you go to figure out, I'm a court like you. You had a life before real estate in the restaurant business.

Ed Mathews:

I was a techie flying all over the world and slinging software. You've got to figure out your breakaway right. How many units at what profit per unit do you need to be able to not need your job anymore? I counsel people all the time. I was like don't make a move until you figure that out Right? And the third thing is what measures? What you measure can be managed, and not only can you look at the profit per unit, but if you are looking at the profit per unit, there's all a whole bunch of follow-on KPIs that you should be tracking, and I'm going to leave it to the folks. If you want to go and watch Gino's and Jake's and Gino's YouTube videos, there are, I don't know, probably 25 or 30 different key metrics that you pay attention to.

Ed Mathews:

But the thing is you got to make sure that you are managing your insurance costs, managing your trash costs, managing your water costs. That's a big one, and within that there are dials you can turn to be able to turn up that profitability to enable you to become more profitable, to build cash and cash is king, especially in uncertain times where you've got to be very careful about becoming over leveraged and when times turn south pandemic being an excellent example of that you've got to make sure that you have enough cash to weather that storm.

Gino Barbaro:

Ed, I would push back on that, not from what you're saying, but from the mentality and the perspective of that's what most people do. When times are great, we're a little loosey goosey. Numbers don't matter. Revenue is vanity, profit margin is sanity, cash is king. We're looking at the revenue numbers. It's really sexy.

Gino Barbaro:

Don't worry about utility costs. But then all of a sudden, when crap hits the fan, it's well, you need to buckle up. If you were being mindful when the times were good, when times were bad, it'll be okay, and that utility cost is another one. That's another metric that I want your listeners to focus on. Look at what the utility cost per door is and see what it should be in your market. Some markets are really expensive at water and some aren't. If you've got a property that's got an older vintage, your utility costs are gonna be higher. There's gonna be a lot of leaks, and that is one metric that Jake religiously. If you watch the video he's I hate having water go in the I forgot how he said it so eloquently but letting money on fire by having water go into the dirt, and it's really true. What is that number? Is it $500 per unit per year? Whatever that number is track it and see it monthly and if you see a spike you can be proactive. You don't have to wait three months later and go what happened to my utility costs? That's something where you measure monthly and you look at it with your property managers and you review it. Epu monthly review that number Percent work orders open.

Gino Barbaro:

Look at that number. How many work orders do you have open? What is it? You have 10 work orders on 100 unit property, 90% work orders. Do you want to get that to 98% or 100% Delinquencies? How many delinquencies? How much is your delinquency amount? You're tracking those weekly. You don't want to wait till the entire month is over. You want to be able to see them by week and say by week three we have like $4,000 left in delinquencies. What's going on here? Let's send that a text. Let's send that reminders. Let's start posting notices. Let's start on the outlay, I mean late fees. Don't wait till the month is over, and then it's just too late.

Ed Mathews:

And that's all about systems and being a techie that I think in terms of checklists, standard operating procedures, enabling technologies.

Ed Mathews:

And it's very important again investment in your business to be able to appropriately run your business and make sure you're paying attention to each and every line item on that T12 that you're focusing on.

Ed Mathews:

So, in terms of where you think the market is today, I saw Neil Bawa, who I think is a mutual friend of ours, speak at a local conference. Zawa, who I think is a mutual friend of ours, speak at a local conference and one of the things that he was talking about is really, yes, interest rates are high, but historically speaking they aren't. They're right smack dab in the middle of the historical range and there's certainly opportunities here. And I also believe and he had said as well that the whole hysteria around the multifamily businesses and trouble is actually not accurate, because it's only of the millions of buildings that are out there, it's only about 3,000 of them that are having any trouble in terms of liquidity and being a little bit burdened with their debt for whatever reason. So I'm curious what you're seeing out there working in the central states and, excuse me, in Tennessee area and all that.

Gino Barbaro:

It's interesting about interest rates. I learned the other day that interest rates from the Civil War to about 1966 were around 6%. That's where they stayed for over 100 years and then the 1970s came and they just completely shot up. There were more bank failures early 1970s than there were during the Great Recession. I didn't know that and I think you're going to say it's historical, but it was a huge shock to the system.

Gino Barbaro:

When you raise interest rates 11 times, even though they're historical averages, it does take a lot of wind out of a lot of people's sales. It does, and I think maybe Neil may be understating this. It really comes down to consumer confidence and confidence in the system and confidence in the assets, confidence in the market. If you're in a great market where people are moving to and there's demand for your product, you're going to weather the storm. We have had to lower rents in Knoxville for our two beds. They dropped 75 bucks, so we're not in trouble with any of our assets by any means. But if we had bought that asset two years ago thinking that rents were going to go up 300 bucks, they only went up 200. We're going to be in trouble with that asset if rents don't go down and we bought bridge debt. So if he's only looking at 3000, and then you have to look at the overall real estate market, multifamily may not be having issues and I don't think it will. But you have office and you have retail and they're part of the debt problem. So if banks can't work with Ed or with Gino to extend our debt, we're going to be having issues. And oh, by the way, the little person in the closet that's not really saying anything is that limited partner who doesn't want to give Ed and Gino his money because he's been burned by a lot of other syndicators out there.

Gino Barbaro:

So it's very challenging for a lot of people to raise capital in this part of the market cycle, especially if you're newer or you've had a capital call. Now those people have these amazing brands. I'm not talking about them, but the average mortal is going to have more problems. So what? That is an opportunity for someone like Neil, because there's going to be less competition for these assets, because you can't go back to that LP pool, because LPs like to gather around their collective coolers water coolers and talk about how those GPs are screwing me, I'm not getting paid, they've stopped, or those payments aren't coming right now and I'm getting a capital call and that feeds to the frenzy, that feeds to the negativity of the market. And don't tell me that's not real, because that is real. That's going on right now and we're in a holding pattern. Rates were supposed to drop. Inflation hasn't gone anywhere. All these experts talk about rates you don't know, I think, going forward, if you're going to tell me, give me a three to five year window, I think we're going to be okay. I'm just hoping that more deals come online right now because pricing has still been stubborn. I'll tell you one telltale sign that I know that there's going to be opportunity.

Gino Barbaro:

A year ago, ed would call up a broker and ask for a CA, sign a CA, and Ed would never hear from that broker. Now Ed, before he got on the podcast with Gino, hit up a CA with the broker and while he's on this podcast, his phone's ringing because the broker's calling him back with the confidentiality agreement. There's the difference. The difference is that they are hungry right now. So if you're thinking about getting into real estate multifamily, single family now is the time. We've passed the height.

Gino Barbaro:

I'm almost sure that we've passed the height, and if we haven't, it's okay, but now's the time to create the relationships. Now's the time to learn, buy, finance, manage. Now's the time to start talking to investors. So start talking to these brokers, because they will call you back and oh, by the way, they will go out with you for a cup of coffee, whereas two years ago they didn't have the time, but now they've got the time to do that. It's a little jestful right now, but you get the point. I think long-term, neil is probably right we will be okay, but there will be bumps in the road going forward for the next six to 12 months.

Ed Mathews:

Yeah, without doubt. The fact is that when interest rates rise as quickly as they did, there's got to be a little chop in the market. But one of the things that I am seeing and you mentioned it a little earlier is the reemergence of seller financing, and so I know that's one of the things that helped you grow your portfolio, and I'm curious when you look at a potential seller financing deal, what are you thinking about in terms of approaching that owner, whether they've offered it or not? I'm curious how you approach seller financing in any kind of deal that you've done in the past.

Gino Barbaro:

The first thing you do is you don't lead with seller financing. You underwrite the deal traditionally as a traditional deal and when that deal blows up and there's no opportunity, the second thing you do is you sit there and go Is this a candidate for seller financing? Because if it's an, a asset, there's no motivation and they can get that financing and they could go to another seller. You're not going to get seller financing. But since the market's changed and debt's gotten a little bit more difficult and these assets are harder to go out and actually get debt on. Huh, you need to look at it through the lens of what we call the spy technique. The spy technique is seller property. You, as the buyer, need to create value for that seller. You need to find their pain points. If they're motivated and if they are, what's their motivation? Are they burned out? Do they hate their job? Do they hate the tenants? Do they want to go into a bigger asset? Are they retiring? Try to create value for them. Understand what their problem is. The next lens you look through is the property itself. Is that property good for what we call your buy-write criteria? Are you looking to this asset? And it is in your buy-write criteria. The why is the last one, which is you are the last person in this equation. You need to solve the seller's problem and then from there, if you can, it's okay. How do I use this? Do they have all equity where it can be a total seller finance deal, or do they have a ton of equity where you can do as part of a seller carry back? That's the next option. And if you wanna get into master lease options, listen, go to buy creative cash. We go through this entire process. We've written a book on it. It talks about master lease options in depth. It talks about creative financing. But it's an amazing tool because it will help you get into deals and the great thing about it is for a person who really understands it, when they're selling a property, they're really creating mailbox money. They're creating true passive income and if you can understand the tax benefits for them and you can explain it to them, it's a great thing. I know investors who bought properties on seller financing. 10 or 15 years later they're selling their properties on seller financing with notes and all of a sudden they've created a beautiful income stream for themselves. So it's an amazing tool to use, whether you're buying.

Gino Barbaro:

I bought deals with seller financing and we just exited a deal in New York three months ago on a seller finance note that my mom took six years ago. We were the burned out motivated sellers. We had no other buyers. The only buyer was the tenant in the building. It was a tenant whose owner occupied. We sold it to him at a seller finance note. I remember the note. It was a $650,000 sale. We took $500,000 as a seller finance note.

Gino Barbaro:

How creative we got. He came up with $100,000 day one. He gave us $25,000 after the first year, $25,000 after year two and then after year seven, the note actually reset and it went to balloon. What ended up happening was he didn't sell the deal, he was trying to sell it. So I extended the note for another six months. He sold it back in January and we collected the rest of the proceeds. But for those seven years my mom was making $3,265 per month with a seller finance note secured in a building. So it works both ways and for her now she's got the money. She's like Gino, you got a deal, I need to make money on this thing. If I keep the money in the bank, I'm not making money. So, sellers, if you can explain it to them. Where are you putting the money? Are you putting the money in the bank? How about we create a seller finance notice six or 7%. It's an amazing tool if you understand how to use it.

Ed Mathews:

Yeah, I always like to question a guy that I've gotten to know, casey Miracle, and he always asks about the what about your partner? And they look at you and say, what partner? Uncle Sam, you're about to spend 20 plus percent with your partner and I can help you manage.

Gino Barbaro:

I love that.

Ed Mathews:

Yeah, that's pretty good and it opens their eyes, because most people think so traditionally in terms of, okay, I buy a property, I put 20% down, I go to the bank, I get the other 80%, I pay him mortgage for 30 years and then I either give it to my kids or I sell it. And there are so many other ways to acquire and sell property, and you just mentioned two of them in terms of seller financing as well as lease options. One of the other things that I was interested about is becoming the bank, and there's a handful of ways to do that. One of the things that I learned from you was about wholesale insurance, or whole insurance, excuse me, and I was curious if you could tell us more about that.

Gino Barbaro:

Yeah, I was introduced to it years and years ago. I was curious if you could tell us more about that. Yeah, I was introduced to it years and years ago. It was 2001,. Actually it's a long time ago now. Wow, I'm dating myself.

Gino Barbaro:

I remember a gentleman came in. I met my accountant. He sold me a whole life policy. Didn't know the same way it was. It was a guardian policy. It was $5,000 a year at the time and there was a death benefit involved in it. I'm like okay, fast forward. 20-something years later I've got almost $200,000 in cash value. The death benefit has risen to $550,000.

Gino Barbaro:

Some of your listeners may be saying, oh, what's the big deal? What's $200,000? It's only $5,000 a year. To me in the beginning it was an expense. But what I love about whole life insurance, especially the design from a mutual life insurance company, that's what we're talking about here. The infinite banking concept. Nelson Nash has made it really, really popular. Years ago they weren't designed as well as you can design them now.

Gino Barbaro:

But think about the power of having that life insurance and people are going to say term is cheaper, but term is appropriate. When you're younger, you can't afford it. The problem is, if Gino buys term at 35 years of age. It lasts about 20 years. 55 afford it. The problem is, if Gino buys term at 35 years of age, it lasts about 20 years. A 55 term expires and then guess what Term gets to be really expensive at 55 years of age.

Gino Barbaro:

This is more of an asset protection estate planning tool where you have insurance today we call your buying life insurance for today, you have that cash value in the policy today and you have the death benefit so that if and when you do pass away us real estate investors, we're not very liquid. There's a liquidity event. There's a death benefit that follows that policy. Your heirs will be able to collect that death benefit. But while you're alive you have that cash value. You pull the cash value out of that policy. You're borrowing. Actually, your insurance company is giving you a loan on the policy. They're using the cash value as the collateral. So you're still earning money uninterrupted.

Gino Barbaro:

Now people are like why would I borrow money? It's uninterrupted. Here You're borrowing that. It's the opportunity cost. You take that cash value. You buy an asset with it. That asset produces cashflow. You get that cashflow. If you want, you can pay that loan off and at the end of the day you have the whole life insurance with the death benefit, with the protection. Guess what OJ Simpson just passed away? Guess what he owned a lot of that they couldn't take away. He had a homestead and he had a crap ton of whole life insurance and 401ks that are federally protected. But you have money in there and then you have the asset we used to call that the dual asset strategy and when you can velocitize your money that way and you can wrap your mind around that, it is such a powerful strategy.

Gino Barbaro:

Listen, I just bought all six of my children whole life policies. I purchased for each child $10,000 a year policy for them for 10 years. So I'm the beneficiary, I own the policies. When they get to be of age, if and when I want to give it to them, hey, policy's yours. What if it does guarantee them a level of death benefit? Let's say they get sick and they can't qualify for health insurance or life insurance. I've got at least something for them. And for me it's more about mindset. Dad, what is this? Because my daughter, when she was 15, saw the policy. She's like I got a million and a half dollars. I'm like Veronica, it's not your death benefit, you've got it if you're not here.

Gino Barbaro:

What you do have is this cash value, which is like 30,000.

Gino Barbaro:

So the idea of having money in that, growing it and being able to utilize it and pull it out to buy an asset is how I'm trying to train them to be able to think as an entrepreneur and to be able to look at money at a different lens. Yeah, and it's using the power of compounding and then being able to leverage into other assets, other cash probably what you do. But I couldn't touch that money until I retired. I couldn't take that money out, and then, when you do retire, 30%, 40% of that money is completely gone. I would challenge the listeners Do you want to pay when you plant the seed or do you want to pay when you harvest the seed? I'd rather pay money when I'm planting the seed than when I'm harvesting it. So that's the way I was looking at it. So there's so many benefits Just Google, infant banking concept and whole life insurance. You go down a rabbit hole, but you will definitely start looking at money and the velocity of money and controlling money and opportunity costs in a different fashion, a different light.

Ed Mathews:

So we've talked about managed right. We've talked about finance right, at least at some level. I'm curious about buy right. One of the things that you touched on and I bounced across the top of is understanding the types of properties and the minimums in terms of the KPIs you're paying attention to when you're buying a property. So one key thing that I wanted to ask I think I know the answer, but when you're talking about $200, $250 profit per unit, at what point are you achieving that? The day you buy it or after you've rehabbed?

Gino Barbaro:

it the last this part of the market cycle. It's after the rehab. Like I said, when we were buying it five or six years ago, expenses were absolutely obviously a lot less, interest rates were less, so the cost of capital is cheaper and there wasn't as much demand for the assets. Now what I will say? With the buy-write criteria, it's important for everybody out there to create their own criteria when buying deals, and you need to look within. What are your goals in multifamily? Are you looking to replace your job? Are you looking to create some type of passive income? Are you going to do this part-time, full-time? That will really help you with your buy-write criteria. But the first thing you need to do is you have to select the market Because, ed, if you're in Connecticut, I'm like I'm going to be in Carolinas, I'm going to be in Florida, I'm going to be in Georgia. They're all different markets with different metrics, different income, different expenses. So let's say, for argument's sake, I'm going to pick Warner Robins Georgia. Let's pick Warner Robins Georgia. Are you going to buy there? What's your buy rate criteria? And this is a mistake that Jake and I made early on. We were fortunate because it was the early part of the cycle. Whatever you bought, you fix it up. It worked really well. But what we've learned? The first thing we want to really focus on is the area. So we look at median income. Pick a median income that you feel comfortable with, because the higher the median income, obviously the more qualified the resident base is. We, the resident base is we bought median incomes in the mid-30s. More challenging, more 10 turnover. You can't raise rents. You have to be careful. Where rents are $50,000 and above seems like it works really well for our market of Knoxville.

Gino Barbaro:

The next part is the vintage. Early on in the market cycle you could have bought older C properties. They would have worked. Price points were okay, cap rates were seven or eight. Well, in the last couple of years C properties are four caps. We call those four caps foreclosures. That's the reality. So you have to be able to look at and go all right this part of the market cycle. We're buying newer vintages 80s and newer. We're looking for newer assets because the price points and cap rates are on the same. Older properties have a lot of deferred maintenance, have a lot of costs. So not only are you buying a property at a lower cap rate, you have to have a substantial amount of cost. And if your strategy is buy and hold, you're buying an old asset having to put a lot of money, hold it for the next 10 years. It's still going to be older 10 years from now. So just understand what you're trying to do. So you have median income, you have vintage.

Gino Barbaro:

I would also say what type of outside brick, hardy plank, vinyl siding. That's really important. I would say unit mixes. Do you like one bedrooms, two bedrooms, garden style, washer, dryer, hookups, amenities outside get really crystal clear. We've gone so far as to say that we really hate breezeways, but what we've done with our breezeways is we've put vinyl siding in the breezeways because they just they do not stay. For some reason. After six months it looks like Chernobyl. No matter what you do, residents just come with their couches and just destroy and damage it. There's holes. So that's something where you're looking at an asset going okay, I need to put away 100 grand in CapEx because I need to fix those breezeways. So you need to start looking at other things like decks.

Gino Barbaro:

Decks that are exposed get to be a costly repair item, especially 1970s assets that have old decks. You're going to have to put that as a capex item. Now, if you're buying the property at a great price, you can afford to do that work. But if you're buying it at a four cap, that's going to be a frigging challenge right now. That's the problem.

Gino Barbaro:

So, understanding your criteria, number of units that you want to buy. So when you have all this package you can go and say, hey, ed's a broker, ed, I'm looking for 100 units plus in Knoxville. But hey, if you've got 20 units to 50, love that also. 80s newer I'm looking for two bedrooms love townhomes. Garden style are okay, but I love them with garages If they've got.

Gino Barbaro:

Exposed decks not really a fan of it. Washer, dryer, hookups love them. Clubhouse pool also looking for that. Now the broker knows you're serious. They're not going to ask you for proof of funds and you've built rapport with the broker. You're not a beginner. That's what really the buy-write criteria is and the reason why you want it is when you create that clarity, you're able to focus on that, that clarity, you're able to focus on that. So when a deal that looks somewhat like your criteria comes along the desk, you don't even have to underwrite the deal. 100 a door rents are 1300 bucks. 80s asset, 72 units that's not waste time. How do we get this deal on the contract? That's what ends up happening.

Ed Mathews:

I think one of the really important things you just mentioned is you want to be easy to do business with brokers right, because brokers are the fastest way to a deal. Yes, you can reach out to property owners and try and create those relationships, going to a broker who's been entrenched in that market that's what they do all day Meet your potential sellers. The fact that you're providing what I call a buy box, you're calling it buy right criteria. The fact is that when you're crystal clear on what you're looking for, it's okay if you miss a deal right. But in your wheelhouse, if it's in that box that you're chasing, the brokers you're working with are going to know ah, that's a deal I got to send to.

Gino Barbaro:

Gino. Exactly, great point, brother. Yes, you made the point right there. That's so important. You just said that. Thank you.

Ed Mathews:

Just be easy to do business with right. The more clear you can get, the more likely you are to see those deals. And then you got to perform and as you perform, you'll build rapport and reputation and credibility with those brokers, even if it's not the one you're doing business with. Everybody knows who's doing what deals and the fact is that then you will start to see deals that don't see the light of day. Yes, you've now earned. You've earned your right to those pocket listings, which is where the real gold is.

Gino Barbaro:

To expand upon what Ed is saying everybody. It's real simple. If the broker sends over a deal and you say to the broker, I've got a W-2 job, I'll get to it in the next couple of days, broker's not going to do business with you, you get that deal. You somehow underwrite that deal at 11 o'clock at night. Because I've done it, because I want to get the deal, I want to get the numbers, I want to see if it makes sense and I get back to that broker ASAP because you cannot wait.

Gino Barbaro:

Even in this kind of market where there's not a lot of demand, you still want to be prompt, you want to be courteous, you want to say what you do and do what you say, because next time the broker has a deal, they're going to send it over to you because their job is so incredibly hard, especially now. A couple of years ago it was a lot easier, but still you have a seller who wants to sell their property at an exorbitant price. They've got Ed and Gino, the cheapos, who don't want to pay for the property. They want to steal it and they're in the middle getting flack from both. And now they're stuck with sellers who are unreasonable and buyers who are not going to overpay, sellers who are unreasonable and buyers who are not going to overpay. The days of overpaying have long gone. So these deals aren't even hitting the market.

Gino Barbaro:

And guess what? Go on LoopNet. If you think I'm wrong, go on LoopNet. Go on LoopNet. In Kansas City, knoxville, you're going to start seeing assets on there because these deals are overpriced. Brokers know it. They need to market them as many places as possible. So please be friendly to your broker. Have a little bit of empathy for their job. They've got a tough job.

Ed Mathews:

And their most valuable asset is time right, and the less time you take to give them feedback, the more likely it is they're going to pick up the phone and call you when they're trying to. Gina, we have been cooking along and I can ask questions for days, but I'm going to land this plane at some point. What I'd like to jump into is the final four. Ready I'm ready. Brain smoke. All right, here we go First one. Please finish this sentence. My purpose is.

Gino Barbaro:

My purpose has changed. I think my purpose now is to teach people how to become monthly family entrepreneurs and to teach people about happy money. I read a book by Ken Honda and I interviewed him called Happy Money, and after the podcast he challenged me because I was talking about legacy and family and he said you need to write the next happy money book. It's about happy money, happy family and happy legacy and I'm like challenge accepted. So I'm writing about it and it's just been a wonderful discovery for me, because I always looked at money as being stressful.

Gino Barbaro:

I've got to pay the electric bill that's unhappy money. But when you look at it from a different paradigm, we're able to be on this podcast. I've got lights, I've got air conditioning that should be a happy expenditure and if you start just tweaking the way you look at things, amazing things start to happen in your life. So I want people to really look at money and view money as really happy versus unhappy. If you're in a job that you hate and it's soul sucking, you do it and you continue to do it, you're creating unhappy money and what you continue to do you will attract. I want people to start looking at money as happy and doing things that make them happy. And then all of a sudden you will start to attract that happy money. And the more money happy you attract, the more money that you put out that's happy. And then all of a sudden you start attracting those kinds of people and those kinds of opportunities from happy money.

Ed Mathews:

I look at it in terms of the words that you use, both outside and inside your head, are really important. The difference between I have to and I get to is the same. You're saying basically the same thing, but it's a huge difference in terms of so well said. I appreciate that. So I'm always curious about folks when I meet them, in terms of the mentors and coaches that they've had in their lives, regardless of wherever. It could be family, it could be business, whatever. I'm curious about the best advice you ever got and who gave it to you.

Gino Barbaro:

There's a lot of amazing tips. I think my father probably summed it up for me it's not what you make, it's what you keep, and that's the reality. I see people living in California giving 60% to the government. No matter how hard you're working in California, it's going to be much more difficult to become financially free and to enjoy an amazing life. So look at the tax benefits. That's why multifamily has gotten popular. It at the tax benefits. That's why multifamily has gotten popular. It has been the rage for the last four or five years. It's called cost segregation. It's called these amazing tax benefits in real estate.

Gino Barbaro:

And once you start to realize that, don't hate the player, don't hate Donald Trump, don't hate all these developers, they just understand the tax code. There's 70,000 pages of code. It's the playbook. Once I realized that and I stopped hating on the rich and the wealthy, what are they doing differently than I'm not? Oh, they're investing in businesses. They are putting their money into whole life. They're buying real estate. Oh, I need to start doing that. My roots aren't strong enough. I'm seeing the fruits that they've developed. How do I develop those roots?

Ed Mathews:

Yeah, the fact is that success has a framework and all you have to do is they leave breadcrumbs right. Yes, you don't have to recreate the wheel, you just have to do what they did and model what they did. And the fact is that there's a lot of opportunity out there and the I remember I think it was Charlie Munger who was who talked about show me the outcome you want and I'll show you the, I'll show you the, the way I'm paying for it, or something like that.

Ed Mathews:

And the fact is that the tax code is written as an incentive package, and the fact is that the reason that multifamily is incentivized is because government wants us to create clean, safe and well-appointed properties for folks to live in so that they can live out their lives in happiness. Right, that's it.

Gino Barbaro:

You said it. It's to stimulate behavior. The government wants certain behaviors so they give incentives to people who are entrepreneurs to start businesses. That's why a person who has a W-2 job or even a small business, but they have very little incentives, there's very little risk. But someone who's creating thousands of jobs, they're going to get much more material benefits with tax breaks because they are providing massive value. That the government knows it cannot, so it's going out there and incentivizing others to do that.

Ed Mathews:

Exactly right. All right, question three. So I'm always fascinated by how people take in information, and I know that leaders tend to be readers. And so I'm curious about, first off, how do you take in information, how do you sharpen your saw? And I'm also curious about who you're paying attention to these days, which authors, which creators?

Gino Barbaro:

It's actually interesting, as you said, that I'm like how we do podcasts every week, so I'm interviewing guests every week, whether it's a Garrett Gunderson or it's Dr Benjamin Hardy or it's Gina Wickman. It's amazing that I'm able to sit and spend an hour with these amazing entrepreneurs. And I've been reading books for the last 15 years. I probably read about an average of book every two weeks because I have to interview these authors and these thought leaders and I need to be prepared for the show. If you're going to spend an hour of time with them, their time is valuable. The least you can do is to be prepared to show up and to respect their time.

Gino Barbaro:

I love the last couple of years I've been reading books on psychology. I've been trying to really work on my relationship with money, so I've read the book Psychology of Money by Morgan Housel. He's put out a second book, which I think is great. The first one was phenomenal. I love that Ken Honda's book with Happy Money. Understanding that. I love Stephen Covey's Seven Habits of Highly Successful People.

Gino Barbaro:

I've interviewed Eduardo Briceño. He wrote a book on performance paradox. He was the test subject for Carol Dweck's book Mindset and that book was phenomenal for me Fixed Versus Growth Mindset, so really the book's on psychology, human behavior, because I was always confused about what money really was and once I understood that it was just a tool, instead of chasing money, chase opportunity money's the result. Once I started understanding that, everything started changing for me and I've just tried to become a much better steward of it and I've been trying to really understand how to pass that knowledge along to members in the Jake and Gino community and even to people who listen to the podcast. Because once you continue to hear that and continue to start looking at your relationship with money and how you view it, then you can start saying to yourself why is it that I'm not attracting the money but Ed and Gina are doing deals? And it really comes down to that self-awareness and that relationship.

Ed Mathews:

Yeah, and it's something you touched on half an hour ago, and that is you are the sum total of the choices and decisions you make. Right, you got to own it, so right on. So the last question for you finish this sentence. For me, success means-.

Gino Barbaro:

That's changed for me over the last couple of years as well. I would say success to anybody is their autonomy being able to do what you want when you want, where you want, with whomever you want has nothing to do with the amount of money you make. Now maybe you may need to make money or become financially free to do that, but to me, I think we all earn money, as Morgan Housel says in his book, to create that autonomy, to be able to have options, choices. Hey, ed, if I had to work and I was at the restaurant, I couldn't be on the podcast with you now at 3.30. This is such an amazing way for me to end my day.

Gino Barbaro:

I love being on shows and talking about money. I love that. If I didn't have your time to do that, I wouldn't be happy and to me, there would be less success in my life. That's how I view it. I don't view it as a balance sheet anymore. I don't view it as how many units I have or the PPU. Success is doing what I really love to do, I think, going towards my gifts or my talents or the purpose or the reason why God put me on this planet, and I think that's if we can all focus on that and we can all show up every day, that way I will guarantee you money will be flown. Happy money will be flown in your life.

Ed Mathews:

Couldn't agree more. Couldn't agree more. All right, Gino. So when not talking about real estate or the power and happiness of money, what do you like to do? How do you spend your time?

Gino Barbaro:

So we like to cook. I'm actually going to a cooking class with the kids at Sherlock's Habla on Saturday. All eight of us we're going to go cook ramen. I'm not Italians don't cook ramen, so I want to learn how to cook ramen. We do a lot of stuff. I go fishing I'm in Florida, so I I live 300 feet from the beach a lot of family activities and the last couple of years I've started singing opera, believe it or not.

Gino Barbaro:

So that's something where I said to myself I really want to get back to becoming a beginner, seeing how difficult it is, because I want to have empathy for anyone who wants to learn multifamily. It's an overwhelming thing. You're drinking from a fire hose. So I went back a couple of years ago. The kids were singing and I started singing with them and it's been amazing. It's a lot of fun. Every week I have a singing coach do my lessons and it's very similar to someone who's starting off a journey in real estate. When you don't know anything, you start as a beginner. It's great, the opportunity is endless and the growth there. You take one step forward, two steps back, but it's just a lot of fun and I get to sing with my kids as well.

Ed Mathews:

Yeah, and you can sing, sir, not bad right. I saw the video of you singing at MF5 and you've got. You can sing, all right. Hey, if people want to learn more about you or the Jake and Gino community or anything else in your world, what's the best way for them to get in touch and find out about you?

Gino Barbaro:

I'll direct them to two places. Just go to jakeandginocom. And if you want to listen to a podcast with my wife, just go to juliaandginocom. We host a podcast. That's one of those things where I just said the autonomy piece, that podcast.

Gino Barbaro:

I don't monetize the podcast, but it's such an amazing way to have a relationship with my wife. Every week we do a podcast together. We're talking about family. We do a podcast together. We're talking about family. We're interviewing the Kevin Sorbo's of the world Dr Gary Chapman, michael Franzese, jp Sears, kirk Cameron and his sister people that we've been able to meet and be able to speak to and share stories and talk about. To me, the importance of family that's one of my missions in life is to really show that the family unit is so important. What is the role of a father, what is the role of a mother, what is the role of the family and how to raise just really amazing, self-sustaining, happy children. That's what I think one of my missions in life is. So if you want to check out the podcast, just go to julianeginocom.

Ed Mathews:

All right, gino, I'm grateful for the opportunity to speak with you. You are an inspiration, and I truly mean that, and I thank you for all that you've done for this community, and I'm once again grateful for you joining us on the show. Thank you.

Gino Barbaro:

Thanks, ed. I will leave you with. If you want to change the world, go home and love your family. That's all you need to do. It starts there, and from there the happy money will flow Right on.

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Ed Mathews - Clark St Capital

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