In this episode, Brian Briscoe tells us his top secrets to dominating the passive investing game in the multifamily side of real estate. Find out what you should leverage to thrive as a passive investor and how to win profitable multifamily deals. Keep on supporting the show for more success ideas!

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Differences between single-family and multifamily rentals in terms of benefits
Key elements of a successful passive investing 
Reasons to invest in multifamily rentals during a recession


MB 197: Joint Venture to Accelerate Your Multifamily Success – With Brian Briscoe
MB 119: Building Your Multifamily Resume Through Partnerships – With Danny Woodford
Rich Dad Poor Dad by Robert Kiyosaki
54. Multifamily Investing Outside Top Growing Housing Markets – Salem VanderStel


Brian is a full-time apartment investor with ownership interests in over $100 million in assets. He is also the director of the multifamily educational community The Tribe of Titans and the host of the “Diary of an Apartment Investor” podcast. He recently retired from the US Marines after 20 years of service.


Website: Streamline Capital Group
Website: Tribe of Titans
Podcast: Diary of an Apartment Investor
LinkedIn: Brian Briscoe

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Full Transcript
Brian Briscoe  00:00
you’re leveraging other people’s time and you’re able to make money from other people’s time. A lot of people have single family homes or negative cash flowing. A bank is happy to give you a loan that’s going to negative cash flow on an investment property, but single family, because your incomes gonna pay it, they know that you’re gonna pay it.
Greg Lyons  00:17
Welcome to the passive income brothers podcast.
Tim Lyons  00:20
Here we take the fear out of real estate investing using real life stories of everyday successful investors. Let’s go. Welcome to another episode of the passive income brothers podcast. My name is Tim Lyons and today I’m joined by none other than my brother Greg, how you doing today, buddy? Jim
Greg Lyons  00:34
doing fantastic another great day to be Alliance. That’s for sure. excited to have our guests on today, Brian Brisco. He’s the guy that’s making it happen and made the transition in his life into the apartment investing journey and just a really, really cool story.
Tim Lyons  00:50
So if you want to hear a cool story. Well, first of all, before I get into that, I just want to introduce Brian Brisco. To the listeners. I don’t say Brian, doing really well. Thanks, guys. Well, it’s a pleasure to have you here. We’ve been trying to make this happen for some time. So I’m grateful that we had the opportunity to make this happen. But just a quick intro story, when I heard Brian’s story originally was a couple of years ago. And for people who know me, they know I’m not a big runner, but I’d taken up running. And I had my little iPhone armband and I get Brian Brisco on Michael blanc apartment investing podcast. And I set out for my run. And Greg knows is very well placed to call him all the time on a run and I couldn’t breathe. So he knew exactly who I was when I was panting into the phone. And I just said, I stopped running after I heard Brian’s story. I said, Greg, I said, drop everything. I said, you have to listen to Michael blanc episode, whatever it was, I go Skype, Brian Briscoe, you have to listen to the story. And I continued on my run. And lo and behold, a couple of years later, here you are on our podcast. So welcome.
Brian Briscoe  01:54
Hey, thanks a lot. I appreciate that. We talked a month or two ago, I shared a similar story that there’s a podcast also on the Michael blanc podcast that had a similar effect on me. While I was running, it was Daniel Woodford and I stopped on the bridge and he put his phone number in the show notes. I texted him, you know, I stopped to text him is that a calling? But yeah, similar things. The podcast that really resonated with me, reached out to him had lunch with him a couple of weeks later, that really helped me too. But you know, when you told me that it brought a smile on my face. And I’m like, Yeah, I remember doing that once I remember where I was, and trying to tap out a text when you’re sweating. Not fun. So
Tim Lyons  02:34
anyway, that’s about it. So Brian, I mean, like, what really struck me about your story was you are a newly or somewhat newly retired US Marine. And for that, I want to thank you, I got the American flag right behind me for those on YouTube that can say, I’m a huge advocate for our servicemen and women. And so thank you for your service, number one. And number two is it’s not every day that you hear a full duty service member, right? A US Marine, doing his service to the country, right, building a career in the military, and then simultaneously having a side hustle in the multifamily commercial real estate space. So I think that really hit home for me as a New York City firefighter, because a lot of the guys that I work with are former Marines and in the reserves, currently. So that’s really what kind of struck me number one. So can you take the listeners through a little bit of that journey? Right? What was it like before real estate even came on the scene? And then kind of how has it transformed not only your mindset, but your life?
Brian Briscoe  03:37
Yeah, we won’t get a good question. You know, so I was one of those guys. And you being a firefighter in New York would also appreciate this September 11. I was in Minneapolis, Minnesota. I was a grad student. I’m from Salt Lake City, but I was in Minneapolis at school, had been lived there for about a month and I see the world trade center the twin towers on TV and I see the Pentagon on the TV, and just burning and ended up calling the recruiter and just saying hey, look, I want to go active duty. I was a reservist at the time marine reserves. I’m I don’t want to go active duty. How can we make that happen? And so that was the start of everything. And couple years later, I’m stationed in Okinawa, Japan, and I read Rich Dad, Poor Dad, I think that was really one of the things that made an impact to me. And I started thinking, okay, oh, by the way, in that book, he talks a lot about apartment syndications. Okay. He doesn’t call them apartments indications, but he talks a lot about apartments indications. And I started thinking, Okay, I can’t buy commercial. It’s too big. That’s too hard for me. And once a little more about my background, my dad worked for the post office for 30 something years. He’s a retired post office worker right now. Did zero investing. His investing was putting 30 years into the post office so he could get a pension. That was his investing. And that’s what I knew about investing at the time. So, my mindset was such that, okay, I can’t do what he’s telling me to do. But I can probably buy a single family house. And so I bought a bunch of books from the local bookstores and whatnot, about how to buy a single family house. And when I moved from Okinawa, back to the States, I made a goal to buy a couple of houses a year, or a couple of one house per year for the next several years. And you mentioned, it is difficult, while you’re active duty, you know, we have when you’re in a deployable unit, the units that actually pick up and move and go to combat, you’re usually really busy with training. And then a lot of times what happens is like every other tour, they’ll they’ll stick into a job that’s in the support establishment, we have a little more time. And what I ended up finding out over the years is when I was in a deployable unit, most of my extracurriculars, my investing activities, and things like that, basically came to a full stop was just like, Okay, I can’t really coach my girls soccer team, because I’m gonna be gone for three weeks, he type stuff, but along the way, when I could invest in real estate, when I could buy single family homes, when I could do that stuff, I would, and I ended up with three single family homes, it was far fewer than I wanted, but I really saw the potential and the possibilities. I saw the equity build up, I remember 2016 timeframe, 2017 timeframe, I was deployed, and I was kind of looking at things. And I’m like, I’ve got six figures of equity and a couple of houses here, and I’m making money every month. I want to scale this. And so I started really looking at how to scale and that’s how I landed on apartment investing. And for a lot of it, I knew where I was at, I was somewhere in the Middle East. And we were moving at round a lot. So I was in a lot of different places. That’s why I say somewhere, it’s not that I can’t tell you, but I was moving around a lot in the Middle East and ended up just kind of putting that on hold until my life had stabilized a little bit. And so fast forward a little bit. I’m reading a lot of books, I’m listening to podcasts, I’m formulating my plan, I know I want to do multifamily. And I get transferred to the Pentagon, I’m thinking, Alright, you know, I know I’m going to be at the Pentagon for a while I’m not going to deploy, okay, Pentagon, my Pentagon job is I show up every day at 730. I leave every day at 430. And it was like clockwork. And so that gave me the opportunity that I was looking for, for the longest time was, I’ve got a little bit of stability. Now I can start working on the side hustle. And that’s exactly what I did. So I signed up for a coaching program. And Michael blanc brought me on his podcast, I was coaching store and one of his coaching story successes, and he actually still uses that episode for to bring new coaching students into the fray. But yeah, so essentially, while I was active duty, I had to cut everything else out, I had to really look at my days and think, okay, if I’m going to do essentially two full time jobs at once, how am I going to work this. So I sat down with my wife, we discussed it, and she was extremely supportive, but I told her, you’re gonna have to not have me around a lot, or when I’m around, I’m gonna be doing other things. And so there were definitely a lot of compromises that we made a lot of cut out some hobbies, I used to play the guitar a lot, I wasn’t great. But one day I put the guitar on the wall holder and left it there used to read a lot of books for fun, I stopped doing that. So basically cut out all of the hobbies that I had and spent all that time working on multifamily. And my goal at first was to be able to retire from the Marine Corps and not need another job. That was my first goal. And you know, most people, I think, understand that when you retire from the military, you do get a pension. So it wasn’t like I had to replace my entire income. I had to replace a good portion of my income. And so that was goal number one. And I ended up retiring October of last year. So 2021 It’s still 2022 I don’t know when you’re going to release the episode, but it’s December 22 right now. But yeah, so I ended up retiring in 2001. And my philosophy right now is I want to build my own passive income. And I obviously have the pension which provides some of that passive income. My wife works right now. So we’re okay. And so what my goal is right now is I’m going to keep buying apartments, I’m gonna keep syndicating I’m gonna keep doing everything I can and when the money off of these projects when these projects come full cycle, just take that money and reinvest it is the idea and so look for ways to build my own passive income, whether it’s through a deal that I’m running, you know, one that I have under contract, or if I have money burning a hole in my pocket, I’ll park it with somebody else as well. But my goal right now is to convert a lot of my activity Come through apartment investing into passive income. So that eventually I never have to work again at this point right now, if I stopped working right now, you know, I have my pension, which is okay. But you would eventually have to sacrifice lifestyle. But I do this for a couple more years, I think we’ll get to the point to where everything’s gonna be paid for forever. That’s the goal now.
Greg Lyons  10:22
That’s great, Brian, there’s so much to unpack there, right? It’s when we grow up, sometimes we kind of see what was in front of us, right? And for you was working at the post office, get a pension, we’re good to go. Right. And sometimes when we get outside of our comfort zone, we’ve read Rich Dad, Poor Dad, and we say, Oh, yes, there is something else out there. I think Tim and I are in the same boat, Mark in Tim’s in the fire department. And we were fine. Right? And it goes from being fine to how do you take that next step in the wealth building kind of process? And I think before we kind of unpack your story a little bit, can you just kind of tell the listeners a little bit about single family rentals versus multifamily kind of the positives and negatives of both of those?
Brian Briscoe  11:09
Yeah, I mean, single family rentals, they’re their buddies you buy. So anybody can buy a single family home? Well, you have to have a certain amount of income. But yeah, you go to a bank and say, hey, I want to buy this house, you give me a loan, and the bank looks at your income. If you make enough money, they’re gonna say yes. So anybody with a decent salary, a decent w two job can buy single family homes and get into it. What I found is difficult with single family homes is finding somebody who’s going to take care of them for you single family homes, it is not a passive investment, either you’re taking care of it, or somebody else’s. And what I started realizing with single family homes is how difficult it was to find somebody who would take care of your investment property like you wanted to take care of. And one day I had this lightbulb moment, I was wondering why I couldn’t, I cycled through several different property managers, and none of them were taking care of it. And I finally put myself in the property managers shoe. And I’m thought, Okay, I’m renting this house out for $1,500 a month, the property management company is taking 9% of that. They’re making math and public 130. I don’t know what the number is. But I asked myself the question, how much work would I do for 130 bucks a month. And then all sudden, that was, like I said, the lightbulb moment, because my answer is not a lot, I wouldn’t do a whole lot of work for somebody else’s house for 100 bucks a month. And so that’s one of the difficulties with single family homes, is it’s really hard to find somebody who’s going to manage it for you, like you want to see it manage. And so what ends up happening with a lot of people who do single family homes, is it ends up taking a lot of their time, you know, in our single family homes, were taking a lot of our time we were managing them. So that’s one thing about it. Number one, I mean, so one of the pros is anybody can do it. And there’s a lot of benefits that I think exists in most of real estate, you’re going to buy it with debt, so the bank is going to pay most of the purchase price. So you have a little bit of leverage there. So if you come in with a 20% down payment, and the property appreciates by 20%, you’ve doubled your money is kind of how that looks. So that’s one benefit, you have a loan, somebody else is paying down the debt on your loan. And so that ends up being money in your pocket when you sell. And then once again, somebody’s paying you money every month. So that turns into some sort of, I’d like to call it passive income, but with single family homes, it’s not passive. Okay, so that’s kind of the idea of single family homes. And when most people choose to invest in single family homes, or basically creating a side hustle or a second job with multifamily, I think the biggest difference is just the management. If you have a portfolio of 100 homes, somebody’s going to be driving across the city to all these 100 different homes to take care of them. You have multifamily 100 unit apartment complex, you have everything under one roof, or maybe two or three roofs. So you know, depending on how many buildings you have, but everything’s all together and compact, and when you start looking at the management now now you’re paying $100 per month per unit for management, you times that by 100. And now you can afford two full time employees to be on site every single day. And so there’s a lot of things that end up working out a lot better with multifamily. So the management’s a lot easier. And now instead of trying to twist people’s arms to get out to the homes, and you have somebody who’s showing up to the property every day, but everything, all the benefits you get from single family real estate appreciation is there. The leverage is there. The cash flow is there as long as you’re buying right and managing it right. You have all of the same benefits you get from single family, but you can really just put a property management company on it. And as long as you’re hiring the right people at on site, I spent a lot less time I’m on 100 unit portfolio than I probably would on 10 single family homes. So when you start looking at it, it ends up being a lot less work for a lot more property, and a lot more cash flow and a lot more appreciation. And then when you look at what we can do as far as helping other people, something else that scales is the downpayment. If you have to put 20%, down on a single family home, guess what, you’ve got to put 20% or 30%, down on an apartment complex, and you’re adding a couple of zeros on the back end. And so what we ended up doing is we ended up using other people’s money, we invite our friends and family to invest with us in the Properties, and they get the passive income, they wire funds, sign the legal documents, and now their job is done. We still do the work, we manage the managers, they start benefiting from that. So from my perspective, it’s a little bit more work to manage 100 times the amount of units, but it’s not 100 times as much work in the profit scale. So for me, it makes a lot of sense. In the last several years, I’ve been able to put millions of dollars back into some of the passive investors pockets from the deals that we’ve done. So for me, it’s a win win. It’s something that I enjoy doing. It’s something that I make money from, and I help other people create the passive income that they’re looking for it
Tim Lyons  16:22
I love that I love that. That was a masterclass on single family rentals versus multifamily right there. So I highly encourage people to pull the car over, get the notebook out, get the pen out. And because Brian, we grew up in New York, just outside of New York City. So we didn’t think it was even possible to invest in single family homes in wall Island, or Westchester or New York City because the prices were always so high, right? The people that we knew growing up that invested in real estate, which was very few and far between. They looked like heroes a couple years ago, 30 years later, after they just sold and had a windfall, right. And they’re like, oh, man, we should have been doing that the whole time. Meanwhile, they were probably cashflow negative the entire time, but was carrying costs. So for us, single family home rentals was like never even a thing. It wasn’t until we got to be older and traveled the country and realized that you could do this long distance, you can do this by setting up teams, property management companies, you learn the rules of the game, you can apply those rules anywhere you want. But again, the hardest thing for investors that we found is that people want control. They want to be able to drive past the house, mow the lawn, shovel the snow, collect the rent, drive past it, because it makes them feel like they’re in control. So a lot of times, that’s why this is not called the active income brothers podcast. It’s called the passive income brothers podcast. Because what we discovered Brian and I think it takes a lot of people their own time, right to discover what they want, how they want to live and what they want to do with their capital. But what we found was, what I found was when I had my first three family property, I was a firefighter in New York City, I was an ER nurse in the hospital, I was a father of three little girls, I was married, I was stressed out dude, like, the three tenants were all single moms with kids. And they called me for everything, right? And all of a sudden, when I see snow in the forecast, and I’m like, not only do I gotta shovel my own driveway, and my own walkway, now I gotta go 30 minutes and do that to somebody else is like, it was an active job. And when I realized that this was not as passive as I had heard on podcast, as I had written books, that’s when the lightbulb went off for me for commercial real estate. Right? That scalability is huge in commercial real estate, whether it’s self storage, multifamily, industrial, it’s just scalable, right. So now here’s what I want to pivot into. What was the mindset shift that had to occur for you as an active investor, to the passive investor, right. So like, Greg and I have done I don’t know, close to 20 deals with cityside capital, we’ve invested in almost all them, right. And we’ve also invested in other people’s deals that we don’t sponsor with cityside capital because the light bulb has gone off, we can put our capital to work and we can get monthly checks direct deposited into our account. And I don’t have to worry about collecting the rent, screening new tenants fixing ACs. I mean, it’s incredible. So tell me about that mindset shift.
Brian Briscoe  19:34
It’s really going back to Robert Kiyosaki. It’s the difference between being self employed and an investor. It’s difference between kind of what you’re leveraging when you become a passive investor. you’re leveraging other people’s time and you’re able to make money from other people’s time. When you start looking at just kind of what you said about that three Plex when you start looking at multifamily properties Snow removal, you’re gonna budget that into your schedule. And something you mentioned is a lot of people have single family homes or negative cash flowing, a bank is happy to give you a loan, that’s going to negative cash flow on an investment property, but single family, because your income is going to pay it, they know that you’re gonna pay it, okay? But when you get into the multifamily properties, that’s all budgeted in, you’re accounting for that. And so now, I’m going to talk about from two different perspectives as me putting the deal together. Now, I’m somewhat removing myself from that, because we have budget items for all of those things. And so I’m not going out and shoveling the walks. And for the passive investor, it’s one more step of leverage. So now, instead of them talking to property managers, or them going out and shoveling the walks themselves, now they’re leveraging the property management time, all the employee, all the third party contractors that are doing all the work, they’re leveraging their time. And if I’m putting the deal together, they’re leveraging my time all the time it takes for me to find a new property to put the offer in to get it under contract to conduct due diligence to get a loan on it, to find insurance to do all the things it takes to run the property. And it is a lot, they are now leveraging my time and they’re able to take advantage of something that the operators are really good at. And now instead of them spending 1000s of hours trying to figure it out. Now all they have to do is spend a couple of hours being able to vet a sponsor, and being able to understand how the deal works. And so really, I think the mindset shift is I learned how to leverage dollars early on, and that was getting loan for properties. Now, as a passive investor, I’m learning how to leverage other people and other people’s time and other people’s skill sets. So yeah, as a passive investor, now it’s a matter of, okay, who do I trust enough, I know, they’re going to take care of my investment. And when you start looking at the properties, you can come up with certain criteria on properties you want to invest in. But end of the day, it’s a leverage issue of leveraging your money, and then leveraging other people’s time.
Greg Lyons  22:14
Yeah, when you’re investing with someone else, as a passive investor, it’s the know like and trust factor, which is just so very important. It’s important for Tim and I, and when we invest, Brian is important for you. But for any passive investor out there know, like and trust that this person can get the job done. You are kind of the definition of the long distance investor, whether you’re overseas or kind of where you invest right now. What markets do you personally invest in? And how do you qualify those markets when you’re looking to purchase.
Brian Briscoe  22:48
So as far as markets, I’ve invested heavily in the southeast, I was living in DC at the time. And my wife was born and raised in Columbia, South Carolina. So really, what I’m looking for stuff that I purchased for myself is, I need to have a competitive advantage in that market, something that I can exploit in a way to find deals that other people can’t. So in South Carolina, my competitive advantage is my wife has dozens of cousins that live there, aunts, and uncles and everything else. And so if we wanted information on a neighborhood, I just asked my wife, I’m like, Hey, I’m looking at a property in this neighborhood. And she said, Oh, my cousin lives there and pick up the phone call cousin. So we had kind of a built in network there based off where my wife grew up and all of her relations. So that gave me a competitive advantage in South Carolina. And the other thing for me is we were going there several times a year anyway. So it was we lived in DC, it’s about a seven, eight hour drive. And we were going down there for holidays and long weekends. Anyway. So that was something that I looked at, I had a competitive advantage there. I also look at the market dynamics, the general trends, the United States is people in money are moving from north to south. So a lot of New York money. It’s not, you have a couple of people who are moving long distance, but for the most part, people are making shorter moves. So people are moving out of New York City into the suburbs. And so a lot of the money is kind of trickling down towards the southeast, new Carolinas, Georgia, Florida, and Texas. So you follow the trends. And you figure out, okay, what markets are going to do well over the long term, and then the competitive advantage thing works out. So for me when I’m looking at the properties that I’m purchasing that I’m syndicating, I’m looking for places where I have a competitive advantage and the next market I’m jumping into Salt Lake City, which is where I grew up and now two hour drive away from me. But when I’m investing passively, I want to see that the operators have some sort of advantage competitive advantage in that city. So one of the properties that I invested in a couple months ago, the operating group has 3000 units. The people that I invested with have 3000 units in the same city, the city was Houston and a lot of good dynamics in Houston. It’s a large city, it’s growing fast. And when I started looking at the city dynamics K, there’s a lot of goodness happening, very diverse and robust economy, and a lot of growth happening. So that checks the Metro box. And then when I started looking at the group that I want to invest in, like I said, they have 3000 units there already. And so they have a competitive advantage, or they already have management in place. It’s not like they’re moving to a new city. And it’s like, Oh, crap, now we got to find a property management company. They already have all of that. So that’s kind of what I look for. I want the group to have a competitive advantage where they’re investing. And I want the place where they’re investing to have somewhat of a want to have somewhat of a tailwind, not necessarily headwind. So,
Tim Lyons  26:01
yeah, that’s what I’m what I tell you what, like every person who we talked to brag, brag. It’s like market dynamics, right. So follow the trends follow the data. Where’s the job growth? Where’s the population growth? What’s the median income, right? And like, those are all like the plain vanilla canned answers. I’d say. What I love about Brian’s answer is that it was not canned. And he said competitive advantage. And I don’t know that we ever heard that answer. Definitely have podcasts. That’s awesome. Right. So like, here’s the thing, like we had Sanlam van der STEL, I think Episode 54, if I’m not mistaken. And he has a very niche, investing thesis, right in Michigan and into Ohio a little bit. And it’s not one of those sexy markets, right? We talked about that in the podcast. It’s not the investor. Somebody doesn’t have palm trees and nice pools, and granite countertops and glossy pictures, right. But guess what? Him and his team, they’re from the neighborhood, right? They know these properties. They know the tenants, they know the bankers in the community bank, they went to college and their best men at weddings, where the brokers and whatnot, right like so that is a competitive advantage. Right. And they have 2600 units in this market. So I love love that answer. And I would highly encourage passive investors when you’re doing your due diligence. If you have a liquidity event, or you have a windfall or you have 300k in a savings account burning a hole in your pocket. You have to find out those groups that yes, they have a track record. Yes. They’re not a scam. Yes. Maybe you have a referral. But what’s their competitive advantage? I love that answer. Got, Brian. We are this is going to come out probably early January, maybe mid January. And the holidays will be behind us the new year 2023. Right. Who knows what’s going to happen with the stock market, the bond market and talking to investors right now. It’s the end of the year, no one’s really throwing money into deals as much as they were probably in the, you know, the past couple of quarters. But I think everyone’s scared, right? There’s a lot of fear. There’s a lot of anxiety, right? There’s the mainstream media has all these articles about the housing market crashing? And what when you peel back the onion? Do you actually if you nerd out on it, like Greg and I do right, and we become these really macro economic nerds, you’ll find out that that’s not really the case. And the special thing about real estate is that it’s not marked to market every single day or every second of every trading day. Right? So can you kind of let’s talk a little crystal ball stuff. I know you don’t have one. I don’t have one or else we’d be super, super wealthy. But let’s talk about a little crystal ball stuff. Why multifamily why real estate for going to be in a recession? Who whatever in 2023, what makes you sleep well at night with with the multifamily portfolio?
Brian Briscoe  28:57
There’s a couple of things. I think the first thing is, people have to live somewhere, that’s probably the most compelling factor people have to live somewhere. And right now, if you look at generations, the generation of people who are most likely to rent are more likely to rent than previous generations. So I’ve got 220 Your daughter’s in their 20s. And their generation and the people tend to 15 years older than them are putting off homeownership. I think the average age of first time homebuyers has gone up significantly over the last 20 or 30 years and so you have a lot more people who are choosing to rent so that just makes the rental market and apartments a thing that people are choosing to do over homeownership. So number one, that’s going to happen number two, we start looking at, okay, what happens when people start when the economy goes bad and people have a hard time paying the bills? Start looking at what’s the last bill that people are going to stop paying and I would say nine times out of 10, it’s going to be their rent or their mortgage, you know, their housing costs. So there tends to be a lag between you and when the economy goes bad when things really started happening, going bad for apartment owners. And then another thing is the way the loans are set up, there are some people are having issues with loans right now, obviously, interest rates are going up. So if you had a variable rate loan from two or three years ago, you might be having problems. And when you see headlines right now, those are the type of people that are having problems right now. But right now, every property that I have, is either a fixed rate loan or as a loan cap rate cap on it, but when you start looking at kind of the dynamics, is, in order for a lender to give you a loan on a property, they want your debt service ratio to be about 1.2 or 1.25. And what that means for people who don’t understand that is, the income off the property has to be able to pay for the debt, your monthly payment with a 25% buffer, right. So typically, when you’re looking at apartments, you calculate what’s called a break, even occupancy is how many of the units have to be occupied. And we also talked about an economic occupancy where if somebody’s not paying, they’re still occupied, you don’t count them. But how many units had to be occupied for you to be able to keep on paying all of your expenses. And for most properties, that number is high 60s, maybe 70%. So as long as you have 70% of your apartment filled, and people paying, you’re able to pay your bills. So when you look at what happens in an economic downturn, usually your multifamily properties are going to come out the back end without any problems. Okay, so now, obviously, if you get down to 70%, if you get down to your breakeven occupancy point, you’re not going to be able to pay the investors out, right. So what ends up happening is you’re not going to end up losing money, but you’re able to make it through the downturn just fine. Now, you take another step back, and you kind of look at macroeconomics, interest rates have risen quite a bit, I think four, four and a quarter percent is how much the Fed interest fed, the Fed has raised their rate in the last year, which is significant, and that does impact pricing. So a lot of the multifamily apartments have actually gone down in price in the last couple of years in the last year. But once again, we got to look at a long term horizon. You know, it’s it’s not like the stock market where you can buy and sell. So if you have a long enough horizon on your investment, you’re gonna do okay, yeah, prices may go down this year. But you look at what the Fed is saying they want to keep rates somewhat high for the next nine to 12 months. All right, so next three to four quarters, and then we’re gonna start cutting rates, you know, and they’re gonna have to start cutting rates, because we’re probably going to be in a recession. But you know, they’re going to start cutting rates, there’s lots of reasons why they have to cut rates, but what’s going to happen, when rates start going down, you know, prices are gonna go start going back up the economy’s, they’re gonna start going back up, you know, so there’s a lot of things that are happening here. And most of them are either neutral to multifamily or beneficial to multifamily. I mean, what we’re seeing right now is prices are going down. Okay, that’s not a positive for multifamily. But as long as you’re in a position where you don’t have to sell right now, you know, you can keep on paying those mortgages, you can keep on paying all of your expenses, as long as you’re in a position where you can weather the storm, you’re going to come out on the back end just fine. And then, you know, ideally, and my crystal ball. And what you know, Jerome Powell saying is, the Feds going to start cutting rates again, and they’re going to get back down to a much lower interest rate environment, and prices are going to take off from there. And so, realistically, with real estate, I think if you look at any 10 year period, over the history of US commercial real estate, prices go up. And so that’s really what I’m banking on is any 10 year period in history prices go up. So when you’re in an economic downturn, you have to be a little more careful when buying, maybe use a little less leverage, so you don’t get caught with your pants down and have a little more cash in the bank. So you can take care of expenses or you can even if you get below your breakeven occupancy point, you can keep yourself afloat for a lot longer. So there’s a couple things you do to mitigate the risks. But overall, I think we’re going to come out of this in a year or so and prices are going to skyrocket again, and it’s gonna be game on again.
Greg Lyons  34:37
Yeah, that’s a great answer. And Tim and I always like to say food, clothing and apartments, that’s what people need. That’s what people always going to kind of go to when you talk about breakeven occupancy. I think a lot of that has to do on the homework you do on the front end, right, picking the correct market, making sure the market dynamics are right, and having that competitive advantage, I think is really, really important. Brian, this has been fantastic. We want to be mindful of our time and move on to our three questions that we asked every guest. And the first question is, what do you say to investors or people that you’re talking to when they say investing in real estate is too risky? Everybody
Brian Briscoe  35:18
has their own risk profile. And if they think it’s too risky, that’s fine. So I do try to educate them, if they’re interested in it, I’ll just explain the risks. There are risks involved. And what we do is we try to mitigate as many of those risks as possible. So I think that education is the answer. But end of the day, if they think it’s too risky, I’ll just move on.
Tim Lyons  35:41
That’s it, man. You can’t convert everybody, right? I mean, you got to meet people where they are. And education is certainly the antidote to fear. I love that. All right. Number two, is from Robert Kiyosaki. And he can say something that can turn people off if they don’t know what he’s talking about. He says that savers are losers and debtors are winners. What does that mean to you?
Brian Briscoe  36:02
Yeah, stuffing money in your mattress, you know, and it’s going to stay there, you’re losing money because of inflation. We’ve had seven and a half percent inflation over the last year, which erodes your purchasing power. So if you’re saving money, you’re going to in the long run, lose your purchasing power, and you know, the debt. You know, that there’s a lot of people that, you know, I think Dave, Dave Ramsey’s one of them that says you should avoid debt. But, you know, Robert Kiyosaki talks a lot about good debt and bad debt. And I take a lot of debt, I’ve got millions and millions of dollars of debt in my name. And it’s going to make me a lot of money in the long run, because I’m able to buy real estate with I’m able to buy an asset that over the five to 10 years that the loan is going to be active, it’s going to appreciate and that debt is just going to multiply my my gains because like I said, I’m if I put 20% down on a property and the property appreciates by 20%, over a 10 year period, I’ve doubled my money. So you know, that’s the way that that works out is you know, if you use debt, you can buy more assets you can leverage, and you can end of the day make a whole lot more money through investing, by using debt wisely.
Greg Lyons  37:23
Oh, absolutely. That’s the name of the game. Our last question is from Jim Rohn. And he said that formal education will make you a living self education will make you a fortune. What does that mean to you, Brian,
Brian Briscoe  37:38
I had a college professor, I wish I learned this before I was in grad school. It was like the last class before my master’s degree. And he said, a college degree will get you a job. Like I didn’t really understand how profound that statement was. But the way our college system is set up is your degree is going to get you your first job. Whether or not you do well, for the rest of your career depends on a lot more than that formal education, that formal education period for most people is four to six years in their late teens, early 20s. You know, but yeah, when you look at what makes a successful person, it’s not the formal education. It’s what they do with their time, how well they perform afterwards, is the same professor. I mean, basically, what he told us is, your college degree will get you your first job, your reputation will get you every set of subsequent job after that. But anyway, yeah, it’s when I grew up, I was taught to go to college, so you can get a good job. But I think, if changed significantly, when my dad’s generation, that people stay with the same company for 20 3040 years and then retired. It’s a much different industry right now. And I think a lot of people are that there’s a lot of been a lot of disruptors. And I think the formal education system is lag behind a lot compared to where our economy is at right now.
Tim Lyons  39:01
Oh, I would stack on top of that, Brian, this is going to be airing January. So people always seem to make these new year’s resolutions and goals. And maybe by the time that you’re hearing this podcasts, people have kind of fallen off the wagon a little bit on those goals. But I would challenge you. What if you read 10 pages per day, every single day for a whole year? Right? I mean, that’s 3650 pages of new knowledge, and how long did it really take you to read those 10 pages? And how much further along Do you think you could be if you wanted to invest in real estate or invest in anything invest in yourself versus what everybody else is doing? And it took me a long time to figure that out. Because after college, I wasn’t really knocking down the library door and killing the reading list, you know, but when I started to that’s when things started to change from my way. So I appreciate your answer, Brian, this has been awesome. I’ve been looking forward to this day for a long time. I’m glad I had a chance to obviously see you at the conferences this year. and I look forward to a lot more that in 2023. If people want to reach out to you and connect, what is the best way? And where can they find you?
Brian Briscoe  40:07
I’m very active on LinkedIn, just Google my name and you get a pretty face like this popping up. That’s me. If you’re interested in passively investing, you know, website, streamline If you’re interested in learning how to do what we do, you know, I also have, you know, what’s called the tribe of Titans, my way of helping the next generation do what we do. And last thing, I also have a podcast bring on people with a lot of experience, Tim, Tim has been on it before, but diary of an apartment investor podcast, and actually I like to have both the intent back on and then you know, Greg, if you want to come on to I’d open invitation for you. You don’t have to say yes, now. But the one put you on the spot while you’re on the air. But Jason is open. Well,
Tim Lyons  40:49
Brian, usually you have to focus on your podcast, right. And you have a little battle like a little like discussion. So I’d love to be against Greg. I mean, that could be really interesting. That would
Greg Lyons  41:00
be no problem to go against you. No problem. Let’s do it.
Tim Lyons  41:04
Let’s do it. With a little known fact, Greg broke my collarbone twice when we were kids. But anyway. Well, what happens So Brian, it was great having you on. Thank you so much for your time. We look forward to serving you again next week. Thank you for listening to another episode of the passive income brothers podcast. We would be grateful for your support of our podcast by giving our show a five star rating and review and subscribing to our show on your favorite podcast platform. Don’t forget to take inspired action after listening to this show, so that you can start building out your passive income streams. Finally, head on over to cityside to connect with us and find out more information about how to get started passively investing in real estate