What does it take to build better investments in real estate? Jay Helms says that building relationships goes a long way. With 300 properties to his name across four states, Jay emphasizes that finding the right people to trust is key. He is the CEO of The W2 Capitalist, a company dedicated to helping others find their way to wealth. In this episode, Jay talks about the mistakes they made when they were starting out and how they found their way through it. He also shares about how he found his real estate team and the success they’ve gotten together.
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Helping The W2 Worker Invest In Real Estate With Jay Helms
Investing in Real Estate With A Full Time Job
I have Jay Helms of W2Capitalist.com. Jay, welcome to the show. How are you?
I’m good. Thank you for having me.
It’s my pleasure. Jay, tell us a little bit about yourself.
The first thing I got to tell you is I’m a husband and I’m a father. I’ve got three beautiful kids. Some people when I tell our ages they think we’re crazy, they’re like, “I’ve got friends who have twins.” A four-year-old, a two-year-old and a three-month-old. We started on this real estate investing journey a few years ago. My son is almost five and this hit home with us. I read the book, Rich Dad Poor Dad, which I’m sure most of your audience is familiar with.
Definitely, that’s the standard for a business guy that’s getting into real estate. That’s the standard read.
That’s 101. One of the things that hit upon me during that book, you go through your life, your single life, your married life, but then when you start being a parent and getting into that mindset of a parent, that book slapped me in the face. It was about, “How are you going to build wealth for you and your family going forward?” That’s when we started dabbling into real estate. We didn’t land on buy and hold to begin with. Everybody wants to hear about the good stuff. That’s where we’re at now and it’s working out well for us.
Because of your son and then your two other kids after that, now you have your why. When you got your first deal, was it a single-family? How did you go about getting that first deal?
I like to talk about our first deal was when we started actively investing. That’s when we got things as clear as mud. There’s a whole backstory of how we lost money on our first property. We won’t bore you with those details unless you want to get into them.
No, please, you’re teasing our audience whether that’s not all gravy. We have ups and downs.When you start being a parent, you get into that mindset of a parent. Click To Tweet
Back in 2006, I bought my first property. It was a few years before I bought my second property. We all now know that 2006 with the height of the market. It was a single-family. I was single at the time. I bought it, but it was going to be a living flip. It was the 1950s best part of town. It hadn’t been touched since. I thought the price was good. I didn’t know what I didn’t know. I spent the next couple of years remodeling it. I did a lot of the work myself. I also hired some good contractors who helped me out when I knew I was above my pay scale there, but we ended up turning it.
By this time, I’d met my now wife but we ended up turning that into a rental. I thought we were doing well. We found these formulas and these definitions for cashflow. We’re like, “We are losing $300 a month on this property. We’ve got to figure something out.” As time went on, we did have some equity in the property. We sold that guy and used that cash to buy a much smaller home. This was close to 2,000 square feet, three-bedroom and two-bath house in the best part of town. We then went and bought a 600-square-foot house, one bedroom and one bath in an up-and-coming part town.
I wouldn’t say the worst, but not somewhere that it’s going to get people’s eye. We bought it as a foreclosure, paid cash for it from the sale of the last property. The thing rented right away, $600 a month since we owned it outright. We did all the repairs upfront. It was all cash. We paid for that, we paid for the repairs and cash, rent it right away and it was cashflowing $350 a month after all expenses paid. I’m like, “Now we’re getting into something.” I’m going into it with a mindset of, “I’ve got to get these class B-plus areas.” Back then I was like, “It’s got to be in a good part of town.” It’s not like that, not if you’re focused on cashflow.
I wanted to backtrack, Jay. You always hear and I’m pretty sure you’ve heard this, other investors say never get a one in a one, one bed, one bath. That didn’t even faze you and it’s true. Somebody will rent it whether it’s a couple or a person. Did that go into consideration when you went into that one-one?
It did. I didn’t look at the size of the property as much as I looked at what was going on in that street and that block. The house right across the street from us was a teardown job. About a year later, somebody tore it down. They built a $150,000 house. Two blocks to the east, the same thing was happening. I knew that was coming. I didn’t know and we don’t know on that property now, we sold it for a pretty good profit. I looked at it as, “I hear people say, ‘Don’t do one bedroom and one bath.’ I’m going to go do one bedroom and one bath.”
I agree. Somebody’s going to live in it.
We had it professionally managed part of the time, part of the time we managed ourselves. We had the best tenants in there. You talk about low maintenance. One person, we didn’t run into any problems like that. I would do it again for sure.
It’s gradually building your portfolio. You bought the first property, you lost some money on it, obviously you learn from it and then you bought this 600-square-foot property. What were the next steps after that?
The next steps after that, we had a realtor who brought me that deal. The foreclosure coached me and guided me through the process and I was like, “This guy is pretty special. I’m going to hold on to him.” For the next-year-and-a-half, we do several transactions with him. We went from having one cashflowing property to nine within a couple of years. It was a range. There were mobile homes in there. There were duplexes there. I think that was it and then we sold that 600 square-foot house and bought a fourplex. We 1031 Exchange into a fourplex, it was a good deal. It’s $350 a month in cashflow. We went from that to $850 in cashflow. I’m digging this buy and hold stuff right now.
You do that. It’s funny because I like how you did the process. It’s like you took a step at a time before you did the single-family then you went to a duplex. Was it a fourplex after that?
The fourplex came later. In between that duplex and fourplex, I partnered up with some guys and we closed on a 42-unit apartment complex. Friends and family put enough money together to close on the deal and that thing is still going. The fourplex was an off-market deal. I like to joke about off-market deals because I see people advertising as off-market deals and I’m like, “Maybe I don’t understand the definition of an off-market deal, but if you’re advertising that this is an off-market deal.”
How much is it off-market?
I belong to our local REIA group, if you don’t do that, if your audience don’t do that, I highly recommend it. Most of my deals have come through there. This is one example. We have a private Facebook group for that REIA. I posted in there, “I’m under the 1031 Exchange clock. I need to identify,” and gave a couple of criteria. Within an hour or two, a couple of people responded, “I do have an off-market.” It truly was off-market, it wasn’t listed. It wasn’t a pocket listing for a realtor that somebody, I think his buddy said, “If you know somebody who’s wanting to buy something like this, let me know,” and that worked out.
Jay, you’re telling me that you found a couple of maybe investor-friendly realtors? That’s unheard of everywhere else. How did you find this realtor? What was the magic that got you guys together?
It was the first deal. I’ve got two that I’ve worked with primarily, mainly because they’re in different cities. That’s hugely important. When I first started, I was like, “This realtor brought me a deal, maybe I can work with another realtor, and they can bring me a deal.” I go back to that old saying as, “Dance with the one that brought you.” The guy who brought me the first deal, that 600-square-foot house. I’ve done overall fifteen transactions with him in the last few years. He’s treating me well. He’s helped me buy and sell my personal homes as well. He’s a good guy to have on my side. I’m trying to think of what the magic was, but he was open and honest and I was too. We clicked and I told him, “Here’s what I’m looking for.” We’re focused on cashflow, which means I’ve got to buy these properties at a discount.
I’m not paying retail at least to what the market is doing now. He likes to joke around. He goes and calls me Mr. Low Ball. The biggest thing that makes me want to work with him again and again is that when I make an offer, he doesn’t care what’s on the paper. He’ll submit it. He will give me a little lip service to give me a hard time and which I appreciate, but he doesn’t come back and say, “No, the market is not going to do that. The sellers are not going to accept it.” There may have been once or twice where he’s done that, but over and all he basically says, “You put it on a sheet of paper, I’ll submit it. I don’t have a problem with that.” He understands me. I understand him. Knowing when we get there is to know each other. We’ve looked a lot of properties together. It’s building that relationship.Be open and transparent about your track record. Click To Tweet
I like the fact that you have a realtor on your team. For all of us having someone on your team that has the inside to properties that are available, whether foreclosures or owners are looking to sell something, it’s valuable to have someone. When you get the 42-unit property, are you looking to manage it yourselves? Did you hire a property manager? How did you go about that? Was it through word of mouth? We also hear some horror stories about property managers unfortunately, but how did you go through?
We did not go into it thinking we were going to manage it ourselves. We wanted third-party management involved. We started this process about a month or two before we closed on the property and we interviewed several folks. It was mainly a phone interview. There was one guy who regardless of when we called, he answered the phone and he said, “Let’s meet. I want to meet you guys.” Out of all the guys that we had talked about, guys and gals that we had interviewed on the phone, he was the one that was persistent and consistent. We thought that was a good sign.
That’s pretty good. He wants the job.
He wants the job. It turns out he was extremely hungry and he couldn’t get the job done. We had to move on. We ended up finding a broker, but in the 42 units in a small community north of Mobile, Alabama. She also sits on the board of the economic development team. Through this entire process, we’re chatting with her and getting to know her, back to that whole relationship piece. She’s turned out to be one of the best decisions we’ve made and we’re extremely thankful that she was willing to take the job. She’s done a great job since we hired her, which I can’t believe it’s probably been a couple of years since we’ve done that. It was one of those things initially we thought we knew what we wanted in a property manager. Being responsive is one piece of it. It shouldn’t be the entire criteria and that’s where we messed up.
It’s all a learning process and you found someone now that’s under A-game all the time, which helps you guys because it’s all about getting the cashflow. It’s having little management issues for yourselves as investors.
She does a good job of handling that stuff. We’re at a position now. We’re looking at being able to refinance and this is a couple of years into the deal. We closed on a September a couple of years ago and we’re looking to be able to refinance a property and return all the investors their initial investment back. That’s what we’re hoping for.
You have over 300-units across four states. How did that come about? I live in New York City and some of my friends that are investors, they want to look outside of New York to invest. What was your process of finding, besides Mobile, Alabama that you are in, these other three states? What was your process?
I live in Pensacola, Florida. I’ll probably get a pass there because where I’m at in Florida, it’s maybe an hour drive to Alabama. Maybe I get a pass and maybe it’s not four states. We’ve got those two. I’m a limited partner in an apartment complex in Texas and also one in Greenville, South Carolina. Those deals came through relationships. The folks that I’m partnered with, the one out in Texas I got to know over the course of about a year. I saw him not necessarily grow up, but get after it and understand it. He knows what he’s doing. He created that comfort level for me to say, “I would like to invest with you. If you have another deal, come up, let me know.” The same thing for the other one in Greenville, South Carolina, which technically we haven’t closed on yet.
It’s supposed to happen. I was a little ambitious when I put that 174 units, but that’s supposed to happen. Don’t count your eggs but our chickens for that. It will be fine though. It’s in that area too. It was about building relationships. I met the group that put that together. I met one of their partners at a conference and kept in touch. I got to know her and had a good feel for them. You hear these horror stories about people getting their money taken or not necessarily taking their money, but they get suckered into a bad deal. One of the other things that I really appreciate is people who are open and transparent about their track record. It’s not just the good stuff but also the bad stuff.
Unfortunately, too many investors or people that we know will give you just the good stuff. You don’t know anything about the bad stuff until later on and you’re like, “I’m into this now deep. How am I going to get out of it?” With the properties that you’re affiliated with from Pensacola, Alabama, Texas and South Carolina, did you go to any of these places to view these properties? Did you go through word of mouth? Did you have boots on the ground? I guess that’s important for people that are looking to invest outside of their home state.
The ones in Pensacola, Mobile, we have gone to those. If you interviewed me months ago, the answer would have been not all of them because I sold a duplex. We owned it for a few years. The return on that was ridiculous. It was a 428% return. We never stepped foot in it from the time that we made an offer to the time that we sold it. One of the things that I’m trying to get myself to do is not to have to go to every one of them. I knew that Pensacola, Mobile markets were heating up to the point where I could not find anything that would meet our criteria. This was when I started looking at a state. I wanted to challenge myself to do some out-of-state investing because I’ve never done that. I don’t necessarily count Mobile, Alabama out-of-state from Pensacola.
I can drive there within a couple of hours. It’s not long-distance investing for me. I wanted to challenge myself to do this. There are times when I think about, “What the heck did I do?” I sent these guys all this money. I didn’t drive the play. It’s funny because I had to go to Dallas for work and we grabbed an Uber. The Uber driver, I’m asking him, “Have you ever been to Waxahachie?” It’s a small community south of Dallas. “Have you ever been there?” He goes, “No, I can tell you it’s rural. It’s not like Dallas.” Dallas, there’s concrete everywhere. I’m in the Uber with a couple of my coworkers and he asked me, “Why?” and I was like, “I’ve invested in an apartment complex down there.”
My coworkers are like, “You’re already invested?” I was like, “Yeah.” They’re like, “Without ever going to it?” I was like, “Yeah.” I love this, Marco Santarelli gave me this line, he goes, “You don’t have to live in Atlanta to own Coca-Cola stock.” That hits home with me. You don’t have to tour the Coca-Cola facility to own stock either. When you look at a due diligence piece or a packet for an opportunity, you can make those numbers up, especially if you’ve never gone there. If you’re not intimately familiar with the market, you can put whatever in there. Do I look at those? Yes, I want to make sure that they’re not too far off base.
It comes with trusting the person who put it together and understanding where their heart is and what they’re trying to do. The reason why I went out of state, number one, our local market pushed me to do that. I also wanted to challenge myself to do some long-distance investing in properties that I’ve never visited. I had the perfect opportunity. I was in Dallas, I could have taken an extra 30 minutes and drive by there. I was like, “I’m not going to do it.” This is going to be the story whether bad or good. I’m in it already. There’s nothing I can do. The funny thing is what helped me get there is that duplex, we owned it for a few years. We never went inside of it. That property is less than five miles of where I’m sitting. We never did and we didn’t have any reason to. We challenged ourselves to get out of the, “Let’s not go to them.” In some sense, you’d go to them.
At least for me, this is not for everybody. You go to them, you get emotionally tied to those properties. When emotions get involved, the best investment decisions don’t typically happen. The same reason why I don’t buy craftsman-style homes for investment properties. I love the look of those houses. I’m going to try to make it look even better or hold onto it. It’s going to be the worst investment decision than if it was some property that I don’t care about, you don’t care about the look. It was on purpose. We have boots on the ground. These properties are big enough to have their own on-site property managers. We closed on the one in Dallas, Texas on Waxahachie. The one in Greenville is scheduled to close. It’s all relatively new.
I wanted to backtrack a little bit about these relationships that you make. These relationships that you connect with, are these people that you meet online? Are these people that you have gone to networking events? That’s important for all of us to know the importance of having these connections. Is it a combination of both online and in-person networking?When emotions get involved, the best investment decisions don't typically happen. Click To Tweet
Yes, both. Sometimes I count interaction like you and I are doing. Not necessarily in-person, but you get to know somebody a little bit better because you’re doing this, especially if you do it on a frequent basis. The deal in Texas, the relationship I have with the guy that put that together, he is part of the mastermind group that I have. He and I have been chatting on a weekly basis or biweekly basis. I got to know him fairly well. Not just chatting virtually in-person, but also swapping some emails, get to know the person and what they’re looking for. The one in Greenville, I did meet the lady who put that together.
We met originally online and then we physically met at a conference, I got to know her. Throughout the last year or so, we swapped emails. She did something for my mastermind as well. It was a combination of all of it. For me, it’s not necessarily, “Do I have a checkbox? I have met them in person.” It’s not about that. It’s getting to a certain comfort level of feeling like I know the person and have a good read for the person. If their heart’s in the right place and they bring me a deal that looks like it makes sense on paper and I can say, “That makes sense,” and the rest of the people that are backing that have a track record of success, then I’m like, “Let’s give it a shot.”
Real estate is such a people-related business that you can’t avoid it. You’ve got to get into this business or you want to get in, it’s all about the people, whether they’re good or bad, you’re going to meet them on the way to success or failure, unfortunately. Where do you see your company in the next couple of years? Where do you want to go personally and professionally?
When you say professionally, I struggle with that because with the W2 Capitalist, one of the things that I strive to help everybody understand is that you can invest in real estate and have a successful, fulfilling, W-2 job. A lot of people who get involved in real estate investing, one of the first things that you’re slapped with by choice or by coincidence is this whole fire of movement. As I retire early, I don’t know that I’ll ever retire. I started a new job. Professionally, I hope in the next couple of years, I’ll have some director or VP title in front of my name. I know that typically comes with a little bit more travel and we’ve got those young kiddos that I don’t want to spend time away from. We’ll see. I’m not sure about that one. I probably should have more clarity on that but I don’t.
Real estate-wise, there’s a big question mark there too. I started out the first of 2019 saying, “I’m not going to do anything. I’m not going to make any transactions.” These opportunities kept coming up that I thought, “They’re fine. I’ve got to do this. This is buying and selling.” I didn’t start out. We had 51 units in our portfolio. Through a series of transactions, we’ll have over 328, I think is what the number is. When I set out at the beginning of 2019, that number was nowhere near my head. There’s a lot of talk about what’s the market going to do? There’s a downturn coming and everybody’s getting squirrely about that or has their own opinion of it. I feel like it is coming. I told myself, “We’re going to sit back and we’re going to hold on any cash that we have. We’re going to stock up our cash reserves. When the market does turn, then we’re going to take advantage of it.”
That went out of the wayside because these deals were too good. We’ll still probably do that. We’ll focus on that. I don’t think with Trump in office, I don’t love him or hate him. I don’t think he’s going to allow anything to happen to the economy until after the reelection. There will be a slight incline, if anything it will be flat. Until that happens, who knows what? As deals come up and continue to make sense to us, we’ll look at those seriously. For the most part, we’re going to sit back and start stacking cash for that downturn for everybody who can’t see me. We’ve been on a good run for a while. It’s got to happen. It could be one that goes flat for a little bit. It could be one that slowly goes down and takes a few years to recover. Who knows?
You got a full-time job, you’re an investor on the side. How do you structure your day? I always find that fascinating. Some of the entrepreneurs I interviewed, this is their job. We both work. You’ve got your 9 to 5 and then afterward. How does that work for you?
A couple of years ago I found the book called The Miracle Morning by Hal Elrod. My alarm goes off at 4:45. I get up in the morning. I’ll do something to wake my body up, wake my brain up whether it’s a seven-minute hit exercise, a quick jog, something like that to wake up. I get into my real estate investing task. I’ve got a daily check sheet that I go off of things I want to accomplish. Usually, it takes me about 1.5 hours to 2 hours to do that and then I’m off to get ready for work. My kids aren’t of school age yet. Maybe if they’re up, I’ll try to spend a little time with them. If not, then it’s off to work. When I get home, it’s nothing but family time. I try to make it nothing but family time. I’ll get maybe 2 to 3 hours with them before it’s bedtime and routine, the supper and all that good stuff. We try to all be in bed by 9:00. I’m taking advantage of the kids going to bed early, it allows me to get up early to do this. That is a process to go in itself. When I first found the book The Miracle Morning, I thought, “I’ll get up at 5:00, there’s no big deal. Let me try this out.” Here’s some advice for you. When you start doing this, don’t set your alarm two hours before your normal wake up time. You’re going to fail at it tremendously. At least I did.
You treat it like an exercise. You treat it like you don’t go to the gym for the first time in a few years and expect to put 300 pounds on the bench press and go knock it out for a few times. You’ve got to work your way up to it. What I did is I started backing that clock up fifteen minutes and fifteen-minute increments. My alarm goes off fifteen minutes earlier for two weeks. I get my body used to that. Once that two weeks is up, I back it up again another fifteen minutes. Now I’m at 4:45. I think I’m okay. I don’t know that I’m leaving to go any earlier. I’m to the point now where if I go to sleep at 9:00-ish and I have an alarm on my phone too that tells me when it’s time to go to bed because if not, I’ll get tied up with something and I won’t pay attention. I’m waking up almost without an alarm. Sometimes my wife does have to kick me in the ribs and say, “Turn it off or get up.”
That book has been hugely transformational. I’m a guy who traditionally has not been a morning person. What I found out is that when I get up and I get to spend a couple of hours focused on building this real estate empire, building wealth for my family, I get really jazzed up about it. Having conversations with some guys like you, I do most of my podcast recordings early in the morning. I am so pumped about going to my W-2. I spent two hours doing something that I’m truly passionate about. I’ve got to go turn on what I consider the engine to help us invest. I’ll get to go turn that engine on and work on it for eight hours and then I get to come home and spend time with my family.
You gave us so many great nuggets. If somebody wants to get in contact with you, what’s the best way?
W2Capitalist.com is the best way. There are links there to our community, which the community’s a private Facebook group. I believe my email address is on there. If it’s not, there’s a contact me section. That’s the way. That’s the landing page where they can jump off to do whatever.
Jay, thank you so much for being on the show. You gave us so many great nuggets especially out-of-state investing.
We can dive more into that next time if you want to.
Definitely, it sounds good. Thank you so much and have a great day.
You too. We’ll talk soon.
That was Jay Helms of W2Capitalist.com. Jay, thank you so much for being on the show. I really appreciate it. A couple of more things. If you go to Peer2PeerRealEstate.com, please check out our past shows, our blog, our resource page as we try to update these as fast as possible. Also, if you go to the Peer 2 Peer Real Estate Podcast, please look for us on iTunes. Please subscribe, leave a review, and give us a rating. It does help us. I’m asking you to please give us a hand on that. One more thing, I always talk about this. I get on my soapbox. Please go for your dreams. If there’s a career you want to pursue, go for it. If there’s entrepreneurship you want to pursue, go for it. Don’t let anyone talk you out of it. Thanks. Have a great day.
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About Jay Helms
Jay Helms has served the Information Technology industry since 2001 with a most recent transition and focus on growing a Direct Sales Unit and a portfolio of $2.5 MM in MRR for a global cybersecurity firm. Jay has earned several educational accolades: B.S. Computer Science (Jacksonville State University, 2001), Masters Business Administration (New York Institute of Technology, 2005) and Certified Project Management Professional (Project Management Institute, 2008) to produce a record of seamlessly driving complex projects to completion while balancing tight resource and time constraints. A savvy relationship builder with a proven track record of forging partnerships and driving account performance to the next level.
Jay started actively investing in Real Estate in 2014 and with a mix of single & multi-family homes and since has grown his real estate portfolio to over 320 units across 4 states. Recently he has started giving back to the real estate community by hosting the movement at www.W2Capitalist.com where the mantra EARN. INVEST. REPEAT. is helping every W2 Employee realize they can build legacy wealth through real estate investing AND have a successful and fulfilling W2 job. Jay and his wife Cassie have one son and two daughters.
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