Transcript:

Krista Testani  0:00  

You can go out and market your brand and talk about your business and simply share what you’re learning.  you’re already doing the first step of marketing, which is getting your name out there.

Taylor   0:14  

Welcome to passive wealth strategies for busy professionals. Today our guest is Krista Testani Krista is a multifamily real estate investor and syndicators based out of Long Island, New York. Today, we’re going to talk about contract negotiations and some specific experiences that she has had in her multifamily investment experience. 

If you’re out there, investing in multifamily real estate, this is certainly one to listen to, because you’re going to learn some important things that could come up in your deals that you should really watch out for, and plan for.  just expect so that it’s not unexpected. just as a note, there’s a little bit of an issue with the audio, but we fixed that about 11 or 12 minutes in so that goes away. Don’t mind that too much. You’re really going to enjoy this one. I certainly enjoyed recording it.  I’ve enjoyed going back and listening. Without further ado, here’s Krista. Krista. Thank you for joining us today.

Krista Testani  1:22  

You are very welcome. I’m so excited to be here.

Taylor   1:25  

Yeah, I’m happy to talk with you about this. Today we’re going to talk about contract negotiations and asset management will say secrets that you’ve learned in your experience with multifamily. Before we get into that, though, would you mind telling our listeners about your background and getting into multifamily what you’re doing right now?

Krista Testani  1:48  

Sure, absolutely.  I started out as a lawyer by trade, but disgruntled lawyer, sort of because I really hated practicing.  today, thousand and seven, I stopped practicing. it was actually I was kind of fumbling around a little bit. Everyone’s like, oh, how’d you get in real estate? And did you have a passion for it? It’s kind of like something that’s snuck up on me. My husband actually suggested that he wanted to do something with real estate investing. He was a retired fireman. If anyone knows firemen, they all have these trades. 

They all do these other things.  we partnered up with a few of his fireman friends.  we started flipping we started buying distressed homes on Long Island in 2009.  there were plenty of foreclosures back then right right after the 2008 crash. plenty of inventory.  we bought we have sold. we did that for a couple of years. I wanted to scale and I couldn’t really figure out a business model to scale in that world. 

Krista Testani 

I just couldn’t figure it out not to say that other people aren’t doing it, but I couldn’t figure it out. I started looking for it information on what I could do different. Found a coach on Long Island that was into multi families and and had a coaching platform at that time. Unfortunately, he doesn’t have that platform anymore. I was lucky enough to get in as a student studied with him for a year 2011 to 2012, got into my syndicated right out of the gate, syndicated my first 20 unit deal in Ohio in 2013. Then I bought 36 units in Tennessee a year later 56 unit in Atlanta That same month, close two deals at once.  

I’ve really been in the Georgia market since then. I mean, since 2014, we purchased a 56 unit.  then in December, we just took down 174 units. we’re about to take down 100 units in August. I’m heavily entrenched in the Georgia market at this point, having really networked and said I really have a vast deep network managers, brokers, everything everything that you need to just kind of move forward at a faster pace.  that’s what we’re trying to do faster.

Taylor   4:10  

So you know, it’s interesting that you started, I don’t want to get too bogged down at all this but as soon as you can you started by syndicating at 20 unit and normally I think of a 20 unit property of just being too small to make sense for syndication, giving the fixed costs, legal costs of putting together a syndication compared to the size cost of a 20 unit property that you might be doing, you might have $20,000 in syndication, legal paperwork, costs. How did that deal turn out? And so that made sense as a syndication?

Krista Testani  4:46  

I think because the cost for syndication was not that high. You’re right, because it wasn’t a 20 unit deal. The structure was different, there was less involved because it was a debt structure for the investors. Interestingly enough, it was a Death Star, but I gave them a kick. All right, you’re right, we can’t go We can’t go off on tangents. 

I will tell you this, it was a debt structure.  they were not supposed to get a ticket sale. I turned the property unexpectedly, I turned the property over so quickly and made such a quick profit, that I gave them a kick of equity when they didn’t have you know, there was nothing in the paperwork that said I needed to do that. why do you think I did that? And that’s what I was trying to convince my partners who I’m no longer partners with? Why would I do something like that? When there’s enough money on the table? Why would I give them a little equity kick,

Taylor   5:32  

you want them to come back for more later and reinvest,

Krista Testani  5:36  

of course, and there was another deal lined up.  they all signed up so fast that made my head spin. you know, just to show them how much I appreciate it, because it was the first deal I ever did.  they jumped in. it was family and friends.  

to answer your question, it was a small deal. My costs were not as much as the bigger deals, it’s why I was able to do the syndication and it’d be worth the while and again, it was a debt structure.  they weren’t actually going to get as much as an equity structure would have given them if I had done that deal that way. it was too small for an equity structure. it worked out fine. they did roll over and those investors are with me to this day. That’s 2013 by and there with me to this day, awesome going over.

Taylor   6:21  

Yeah, that’s what it’s all about the goal, from a passive investing standpoint, I think should be to invest or seek to invest with syndicators and partner with people who you’re both in it for the long term. I mean, 2013, what we’re Six years later, and they’re still investing with you, you still have them coming into your deal.  

that’s great on both ends, and hopefully, it keeps going. Yes, but you know, like I said, we don’t want to get bogged down in that too much. We’re here to talk about contract negotiations.  we need to update our contract negotiation skills and standards, if you will, from say, up 2011 to 2013. Standard to the 2019 market standard, where a seller can say no, this is the due diligence term. This is what it’s going to be because there’s probably another buyer right around the corner who is willing to accept Oh,

Krista Testani  7:19  

yeah, term. That’s it. That’s exactly right. Taylor, my point is, if you want to stay competitive in the market the way it is right now, there are certain things that you should probably just give up and not try to fight for.  don’t try to fight for you know, getting the due diligence clock starting after the last document, resign yourself to the fact that you need to the due diligence is going to be 30 days, a hard start date and a hard end date.  

that’s it don’t, because they will, there are so many buyers out there, they will move on to the next buyer so quickly, because they’re going to realize if they see, and I’ve been on the seller side, okay, I just closed a deal I just sold the deal Friday, if you start seeing a contract being pulled apart, and a lot of nitpicky stuff being asked for that is just not standard requests anymore, you are going to move on to the next guy really quickly. Because there is someone lined up with an offer that’s probably you know, as strong or in the same ballpark.  don’t nitpick on that issue. here’s another big surprise that people will be surprised about in this market, as opposed to again 2011 2012. 

Krista Testani 

When I came into the market, at least in Georgia, where I am, guess what’s disappeared. Financial contingencies. This was something that really I only learned when I took down the hundred and 74 unit was, which was only in December of this past 2018.  I was working with a broker that I had taken down to deals with previously. he knew me, Well, I know him. I shoot him over my Li and he goes, Krista, when was the last time you close the deal.  

it had been a while embarrassingly, it had been 18 months, almost, or almost two years.  he goes, Nobody puts financial contingencies in there. Otherwise anymore. I was like, so what does that mean? That means exactly what it says it means you cannot pull out of a contract anymore late in the game, because something happened with your lender, and you no longer have the financial capacity to close on the deal.

Taylor   9:32  

So for those out there who might be asking, well, what’s they can force me to buy the property? what is at stake, if you can’t get the property financed, and you cannot buy the property? Because you cannot get financing, then what do you as the potential buyer who got thwarted, what do you lose?

Krista Testani  9:54  

You lose that deposit, you certainly lose your deposit immediately.  also be careful, I mean, depending on what happened, you lost some credibility with the broker because he or she is in the business of putting parties together that get deals done.  and not to say this has never happened. you know, I’m not going to speak for brokers, but you lose a little credibility, they’ll be much more cautious working with you the second time around. if something like that happens now. 

You know, there’s not listen, most people as a seller, I’m in the business of not taking people’s deposits, I want to close a deal.  it’s not to say that if something happened, and you can’t go to the table, and try to negotiate for more time to get the deal done. what I’m going to recommend is be very transparent every step of the way, what’s going on with your lender, if lender starts throwing up any roadblocks or red flags, talk about it with the broker make sure the broker is very much aware of what you’re going through.  

Krista Testani 

If something happens, and he’s not surprised, He can argue more on your behalf for an extension for you to try to line up another lender.  I would also say, have relationships with lender B and C. Even though you chose lender for this deal, make sure that you floated this deal in front of another lender as well. someone that you can go to if the ceiling falls.  suddenly your lender pulls out, which has happened to at least two of my colleagues that I know, last minute lenders have pulled out. this does happen this does go on. again, a seller who wants to sell if he knows that you have the means to jump back in the game, get another lender lined up, yes, it means it’s going to delay the deal. it may be worth it for the seller to stick with you then to start all over with the new seller. be ready because that seller will probably ask for another deposit from you to get that extension.  

that deposit is going to go hard immediately.  yes yes, bye, I can give you another 45 days while you run around trying to get a new lender, you need to put another $25,000 down hard to that extension.

Taylor   12:08  

Yeah, so we’re talking some pretty to me, I mean, pretty big numbers here that we have risk. I mean, for your offers. Uh, you’re finding your competitive right now, just to see earnest money deposit? What are you finding, in terms of a percentage of the deal? And days of hard things like that?

Krista Testani  12:29  

Okay, yeah, there’s some very standard.  you know, these 50 units, 100 units, even the hundred, believe it or not the hundred and 74 unit, they only took a $50,000 deposit.  minimum is 50. Yeah, I would have expected that guy, we did an ally with 50. I anticipated him coming back and asking for 100. he didn’t.  

It was like, great. I’m going to say the minimum is 50 for these midsize deals, and the larger the deal you can expect 100 to be done be the minimum for I’m going to say a hundred 50 units and up, you’re going to probably only be competitive if you at least offer $100,000 deposit down. 

Krista Testani 

You know, it could keep going up. I mean, there comes a point where you’re not going to put a half a million dollars down, no matter how big the deal is. yeah, you’re easily looking at in the world that I’m in now, it’s probably minimally at this point, $100,000 deposit for that initial deposit.  then if you want extensions, again, you gotta put more money down to get extensions. Yeah, it’s like you’re buying an extension, basically,

Taylor   13:29  

you have to put more it’s earnest money, it’s showing that your earnest about closing on the property and you’re not wasting time, you’re really putting in the work to do it.  you have a few specific situations that we wanted to discuss here about your this a contract negotiation, recent experiences. you know, that we want to get into those on some of your recent property.

Krista Testani  14:01  

Yeah, what I love about doing things like this podcasts or you know, speaking at meetups, I love giving out little tidbits of experiences that I just went through where there was some type of learning lesson that I didn’t get from the coaching the books, whatever, because it’s just, it’s just this my new show. it’s important. It’s, it’s something that could happen to a listener.  I love sharing. something recently just came up, this is the first point I want to talk about in our contract negotiations as a seller.  

This is the deal that we just sold on Friday.  we had what’s called a yield maintenance pre penalty, which means it’s not.  I don’t even know how to explain your maintenance, because it’s that far above my pay grade, but it’s not a step down a step down pre penalty is okay in your one, your prepay penalty is 5% of the loan now in year two is 4% of the loan amount. 

Krista Testani 

That’s what I like your three 3% of the loan amount, because it’s a set figure that you can figure out.  when you’re working on your exit strategies, which by the way, everyone should be working on their exit strategies when they’re buying. When you’re working on your exit strategies, you know what it’s going to cost to get out of that loan. 

Yield maintenance does not allow you to do that it is this weird equation that the financial world comes up with, the only thing that I can tell you is that it has an inverse relationship to interest rates.  if interest rates go down, your yield maintenance penalty goes up. if interest rates go up, your yield maintenance penalty goes down. Okay, an inverse relationship to the direction of where interest rates are.

Taylor   15:41  

So to clarify some of this, if I can, before we continue on, move on. It’s it’s something from the lender to make sure that they’re still making money that they will they have some amount of money that they want to make.  since you sold on Friday, as we talk right now, mid August 2019, interest rates going down. as interest rates are going down, yield maintenance penalty is going up based on that relationship that you just shared, is that correct?

Krista Testani  16:09  

Absolutely. In fact, when we first got an estimate of what our yield maintenance pre penalty payment would be, it was 90,040 days later, or 50 days later, when we sold, it was 124,000. Interest rates have gone down. Maintenance went up. Okay, so now, so it’s an uncomfortable position to be in, especially if you’re in this time period, where the interest rates, you just you don’t know where anything’s going every day is just with politically what’s going on in the world, like you just don’t know. Right? So you know, for longer reserve

Taylor   16:45  

going to Federal Reserve. Yes.

Krista Testani  16:48  

So what we did, and I strongly recommend that everybody do this, if they get because you will get locked into loans for your yield maintenance is the only thing that’s on the table. I mean, the last year we just took down, we strongly argued for a step down penalty, for the reasons that I stated why it’s so much easier.  

it was not feasible, the lender was willing to offer it, but the interest rates that they were offering, it didn’t make it feasible, the deal got much more attractive.  the lending terms got much more attractive if and only if we agreed to yell maintenance. this particular deal that we have right now was interesting, it was a yield maintenance prepaid penalty for the first four years.  then after four years, it dropped down to a step down pre penalty. in our minds, we were not going to sell until year four, because in year four, or the end of year four, it was now a solid pre pay penalty that we can calculate.  we were not planning to sell. 

Krista Testani 

However, I am in Atlanta, it is an extremely hot market, the moment you buy a property, you’re getting cold calling and letters in the mail, people are looking to buy your property.  we had many offers on this deal over the years. a recent offer that came in, we just just couldn’t resist. we decided to sell early, but we have this issue of yield maintenance. what we did, is in our pro forma, we plugged in what we call the lender and said if we sold today, what would your maintenance be? 

Krista Testani 

He said 90 grand, okay, we put in 90 into our pro forma and then we started tweaking.  we kept pushing that 90 up. again, and then you’re seeing all the domino effect on the returns.  we push the yield maintenance penalty to a point where we said, All right, if it goes over 120,000 according to our pro forma, this deal is not worth selling, because we are trying to sell in order to give back beautiful nice returns to our investors who it’s our fiduciary responsibility to do that.  we’re certainly not going to sell to sell early I should say right to return less than good returns, renegotiated in that contract, the following language is our prepay penalty exceeds $120,000, we have the option to cancel the deal within 24 hours of closed.  

Krista Testani 

it’s like a rip cord that we put in the contract that says even as late as what because we weren’t sure when we were going to lock in at that point. In time when we were negotiating the contract. We weren’t sure what the lender would do like how late in the game, they would give us the number.  we said within 24 hours of closed, we can cancel this contract, if we can provide proof that the lenders prepaid penalty went beyond 120. the buyer agreed to it now people get ready for this, we need to get that clause in there, we did have to agree to take on reasonable and proven due diligence costs of the seller.  we said to seller if we have to do this, and it will be unfortunate. If we do we are going to pay your due diligence costs your inspection fees. we also kept it because we wanted to make sure that you It didn’t get out of hand. we made sure that it wasn’t more than I think we said $35,000 or something like that for his due diligence inspections and lender fees.  he agreed to it. 

Krista Testani 

Now the reality of the situation is if we had to pull that ripcord what we anticipated may have happened is that seller may have wanted to look and see, well, how much more you really paying in your pre pay.  maybe there would have been a negotiation where he would have taken on to get the deal done. Because he wanted that deal. Right? Yeah. it would have been very disappointing for him and his investors to walk away.  

maybe he could have absorbed paying another 20 grand if our prepay went up by 20 or 30, whatever.  that could have happened. what we wanted to ensure we wanted to ensure an out clause to protect our investors and ourselves from you know, it would have been a bad deal for us to sell if that pre penalty went up too high.

Taylor   20:53  

I’m thinking back because we tried to put myself in your shoes here. The when this post, it’ll be you know, later from now, when we’re talking about the recent Federal Reserve decision on whether or not they were going to lower interest rates or keeping the same and all that. It wasn’t that long ago. you know, I can see where your lenders position was, well, I don’t know what’s going to happen.  I don’t want to give you an answer with too much time in between when you actually close, like I can’t give you that much of a head start. 

you need to know so you can negotiate your contract.  a 24 hour cancellation period before closing is crazy. It’s nuts. That’s crazy, as crazy as right.

Krista Testani  21:42  

And what they gave us was they gave us it’s not like we locked in a month before clothes or two weeks before clothes, they gave us our pre pay penalty lock in five days before clothes. That’s crazy. Five days and not business days, five days, you know.  if there was a Friday and Saturday in there, that meant you know, we will lock in on a third day to close on a Monday or Tuesday. it wasn’t like they gave us that much more time than 24 hours. we were like, Wow, thank God, we did that because it really could have swung in a really bad, bad way. Had we not protected ourselves. 

Krista Testani 

That’s the craziness with yield maintenance. You know, and don’t think for a second because everyone and we said it too. We just won’t sell we just won’t sell. You never know when an opportunistic sale is going to come up.  one of the other reasons that we wanted to sell even though it wouldn’t yes, the pre pay penalty, that’s more step down is more predictable. someone’s going to say, Well, why didn’t you wait a year and a half? I think we only had a year and a half to wait. Well, there’s a heated market going on in Atlanta.  we were getting per door pricing that we weren’t so sure we would get a year and a half from now. Yeah. Also just with, I don’t want to call it a bubble. there is a little bit of a frenzy going on in the world in general, and market adjustments are coming. with market adjustments and the cooling off of a particular market like which may happen in Atlanta, we really felt Well, we can wait three or four years to get that known prepay penalty, but we may be selling a $15,000 a door less.  at the end of the day. Yeah it’s weighing your options, your risks, and it would be great to return. 

The Money in Your Pocket now is worth more than it is it two years from now.  let’s return it to them now. oh, hey, by the way, we have another deal lined up for them so they can roll it over if they want.  and that’s just beautiful timing that the universe has provided to us. I’m very grateful.

Taylor   23:46  

Yeah, that’s saying a burden, the hand is worth two in the bush. It’s definitely true, especially when you have a real sale with a solid return to the table.  you don’t know what the situation is going to be in a year and a half. then the question becomes Alright, well, now I have my cashback. 

Now, what am I going to go by I’m I certainly don’t want to sit on cash right now because the world is not on fire. It will be eventually again at some point in the future. right now as we speak, it’s not on fire.  what am I going to go by? And hopefully I’m not going to be that excited buyer that we’re selling our property to? That’s right.

Krista Testani  24:24  

Right, right.  you know, and it’s our job is, I mean, it’s what we do for a living, it’s our job to try to line up the next opportunity as quickly as possible. I mean, this is a unique situation where literally, we’re cutting checks to people, and they’re going to be giving them right back because we’d be closing in another 30 days. 

You know, some of our deals have been six, seven months apart.  our investors, some of them have waited, because they really they know us like us trust us and they want to roll into our deals, and they were very patient and waited.  some investors there’s lots of syndicators out there lots of opportunity. we may have lost one or two along the way. what we will never do, what our team will never do is rush into a deal. Just to have a deal on the table to roll people’s money into. I mean, there are lines that we won’t cross.  luckily, in this situation, we do have another deal lined up, though, so good. I don’t even want to say luckily we created that situation. 

Because we’re out there pounding doors down looking for the next opportunity for investors. Luckily past you put in the work to put current you where you are now, I guess if you want to keep saying Luckily, but we don’t even want to say luckily anyway.  right. It’s a bad habit. It is a bad habit.

Taylor   25:35  

Yes, we want to count on ourselves to make those opportunities.  the other scenario and then

Krista Testani  25:41  

the other quick point again, I got burnt. All right, I got burned on this particular contract, we were buying.  for this one scenario, I’m addressing water sewer utility charges for water sewer, in many, many markets. If people are not in them yet, you will eventually discover your water. sewer bills usually don’t come monthly. They come every two months. sometimes it could be every three, it depends on the market that you’re in, I was in Atlanta, we bought a building, we closed we expected and it was represented by seller that all the utilities final bills were paid, and were good to go.  we bought the building.  

lo and behold, two months later, we get a very large water sewer bill. That was for the time period right before we bought, and it was about it was you know, it was a little chunk of change. It was about $15,000.  it was not ours. To the extent that we didn’t own the property at the time. the water sewer department does not care about that these bills run with the land, they don’t run with the physical owner. the water sewer department isn’t going to chase the previous owner to pay that bill. They’re going to chase you.  then I had to go and chase the seller. I would after many weeks months of chasing, I did get that money from them. 

Krista Testani 

that was time and energy not well spent. The very simple solution for those of you and not saying this hasn’t been done. I think people out there may already know this. for those of you that don’t act closing you should be have your attorney require and escrow be set up. You look at the average bills, the average monthly bills for water sewer, let’s call it $10,000 a month, you request two months of water sewer payments to be put into escrow, assuming your bills come in every two months in that particular county, so that you have a question, just in case they didn’t settle up with the water sewer department the way they represented they did, you now have escrow to pull from if you get that bill after you close.  

real simple solution, nobody should really object to it. If no water sewer bill comes in, with any back timeframe, then you have the escrow agent releases the money back to the seller, and it should be resolved within 60 days.

Taylor   28:00  

So I like that and to put some more. to frame the situation a little bit more extreme, nessa I don’t know what of the situation.  you $15,000 bill, if you’re buying at a six cap, which many major markets are trading at a six cap, right now, that’s a quarter million dollars off of your valuation, or it would be capitalized at a quarter million dollars. If that was a difference in your noi or your co teach Well, that would impact the price that you would have offered on the property in the first place.  it’s a huge difference. It’s a it’s a big, big deal when that’s coming off of your income.

Krista Testani  28:39  

And I’ll tell you that some of these bigger properties of what to do with that monthly water sewer bill is can be really big. we’re averaging on the hundred and 50. On the hundred and 74 unit we’re averaging. Well, we’ve done some water conservation projects since then. when we first took over with it was averaging 15 a month.  two months of bills is $30,000. Right?

Krista Testani 29:00  

Yeah, exactly.

Krista Testani  29:03  

So I think what I’m proposing is a very simple fix. Real simple, and you know, can just save a lot of time and energy down the road.

Taylor   29:10  

Yeah, very fair. Alright, so we’re going to take a quick break for our sponsors. , Krista, yes, I’ve got three questions. I asked every guest at the end of the show.  are you ready? You’re asking right now? Okay. Of course. Okay.

Krista Testani  29:27  

What are those three questions? Oh, all right. I hit these three. I go ahead. I like these deep questions.  all right. Go ahead, shoot.

Taylor   29:36  

Yeah. All right, give us long or short answer is he like? Okay, so first one, what is the best investment in real estate that you’ve ever made?

Krista Testani  29:45  

I guess if we’re talking about the difference between the different real estate vehicles, I have made windfall profits investing both passively and actively.  as a sponsor in multifactor family, I mean, I it seems like a stupid answer, because that’s what I do, but give you an example, Ira money, I invest in other people’s deals, other colleagues, I can invest IRA money in my own. 

if I’m comparing real estate with the stock market, and I’ve always felt real estate to be that you won’t get windfall profits, but is it because it’s a more solid asset, it’s more dependable, it’s more predictable, you can at least count on some steady returns, maybe not windfall returns, but I have had windfall returns twice, investing in real estate, where I was getting back, I want to say I averaged over 35% annualized in one deal. 

Krista Testani 

I averaged over 52% annualized in the second deal. Both those deals closed within three years.  I got my money back quickly. those to me, that’s windfall profit, investing passively in in multifamily.  that’s my answer. Multi families. My answer, I’m sorry, multi family syndicators. no one should be surprised by that.

Taylor   31:07  

Yeah, no, it’s what you like. you know, I do my own deals actively. I also just like you, I use my IRA to invest in other deals.  it’s a great way to invest in real estate that nobody really tells you about when you’re first signing up for your IRA and slowly putting money away. You have to learn about self direction and all that. . Yeah, absolutely. On the other side of that, what is the worst investment in real estate that you’ve ever made.

Krista Testani  31:39  

I’m going to tell you right now, I’ve had some bad experience flipping houses.  so I don’t you know, for anyone out there that does that. I’m going to just say that I wasn’t that great at it. you know, the model, which is a simple model, I mean, you’re estimating your buy costs, your rehab costs, and then the time it takes to sell and then the anticipated sale price. 

Usually what happens is either an overrun in your rehab, or a time lag on how quickly you think you’re going to turn that over.  I got beat out on the last three houses that we did before I decided that I’m not flipping anymore. One I broke even, one I lost money.  Then the third one, I lost a lot of money. Wow. my last three deals as I was exiting out of that world, those last three deals really hurt me not to say that people can flip and be really successful at it. you’re asking me my personal experience. Yeah.  that happens. Yes, that happened with me with flipping.

Taylor   32:41  

Absolutely.  I had another bad kind of nail in the flipping coffin is the tax implication. 

Krista Testani  32:53  

At least for most people, flipping income is treated as regular income, ordinary income, right? So no capital gains,

Taylor   32:56  

no capital gains, the highest tax rate that you’re going to pay. Basically, any money that you make in real estate you’re going to pay by flipping. I know lots of people that make a lot of money flipping houses. Go for it. yeah, not for me, either.

Krista Testani  33:12  

Oh, yeah. Yeah, I know. That’s why I say I know, these people out there doing it well, but it was not. Yeah, it was not my forte. It was not my forte.

Taylor   33:19  

Yeah. Okay.  my favorite question of all these three, what is the most important lesson that you’ve learned in investing?

Krista Testani  33:29  

This is the deep one.  the only reason that it’s hard to answer.  let me think, just give me a second. Because, wow, have I learned so many lessons, and I learned lessons every day.  I got to think of a big, really big lesson for what I do. so I’m out there syndicating looking for deals and syndicating deals, raising private money and syndicating deals. 

One of the biggest lessons that I learned and so it’s something I didn’t do, and I should have been doing from the beginning.  I only learned it probably four years into my world of doing multifamily investing, I really only started doing it recently. this is really speaking to people who want to do what I do and what you do, which is raising money syndicating your deals from day one.  no, most people are not going to be comfortable doing it, you have to get out there and market yourself from day one, even when you haven’t done your first deal.  

Krista Testani 

When I’m saying and I was not this person, you have to learn about marketing, and what it takes to market and what are the strategies when it comes to marketing because I did not do that.  when I tell you my business grew at a snail’s pace, like I’m embarrassed to say I was I was doing like one deal every two years, you cannot sustain yourself doing one deal every two years. I couldn’t figure out what was wrong until I finally figured out what was wrong. I wasn’t willing to get out of my comfort zone immediately.  you know, blast emails to friends and family and get out there on Facebook.  

you know, people always like I have no experience, I have no this, you can go out and market your brand and talk about your business and simply share what you’re learning.  you’re already doing the first step of marketing, which is getting your name out there. you could just share your learning experiences, get your name out there. that when you are finally you know, putting forth your first deal, people will already know you, they will have followed you through your journey, they will trust you more because you you share your vulnerabilities, you share your mistakes as well as your successes. the bottom line is you gotta get out away from your desk.  I’m not saying that online networking isn’t awesome.  

Krista Testani 

it really is. It really is a catalyst. you also have to physically get yourself in a car or on a plane and go to these networking events and shake people’s hands and talk to them and network. The reason our business has total off and it only took off recently is both myself and my partner Chris Jackson, who is an introvert. Although once now if you met him, you would say there’s no way that guy’s a total ham. he’s a tech guy, his his whole life. He was a tech guy, he owned a tech company.  tech people tend to be much more introverted, they’re behind the computer, he’ll say they’re not super person, people. 

Krista Testani 

We both got out of our comfort zone, hit the streets marketing, marketing, marketing, doing videos, talking to people doing email blasts, Facebook posts, and been getting out there.  our business has blown up. Now, if I had been doing that from day one where would I be right now? 10 years later, pretty much better off. I will say that then where I am now. you know what? That’s okay. Because it’s a learning lesson. It’s what I can share with people. God takes us through this world, and he has plans for us and we grow and learn from all of our mistakes, I’m sure of it. 

I’m fine with the pace of how things are going right now. that was a big, big lesson. Because it’s a difficult one because people can hear it and they still may not do it. You know what I mean? That that’s why this lesson is so hard because they can intellectually totally get it and say, Oh, I totally understand what you’re saying. for them to physically now make that move and do what I’m suggesting you do, it takes a lot. if you’re committed to do this business, I’m saying do that from day one, and your business will grow way faster than mine. Mine grow?

Taylor   37:29  

Yeah, absolutely. I mean, there’s quite a lot that you said there are a lot of really powerful information. Yeah. putting yourself out there is absolutely critical.  in the same breath, you are the same token side of that coin, is you can’t give your past self, too much of a hard time for not knowing what you know now. Because if you let me give you an example, I don’t know what what your answer is going to be this. if you knew when you were, I don’t know. We’ll say 21 what you know now, would you go to law school, you went to law school? Would you make that same decision? If you knew everything about real estate to you know, right now?

Krista Testani  38:11  

Oh, man, my inclination is to say no, I wouldn’t go to law school. I hated it so much, right.  if I know what I know now, I would say no, however, to your point, because I know exactly where you’re going.  like I said, God has His plans. going to law school, even though it was painful for me to go through law school, because it’s painful for everyone law school sucks.  then going into a career that I was not happy with, right.  

I practice law for years and wasn’t happy, and then ultimately transitioned into real estate. The experience and the knowledge that I have, though, having gone to law school has helped me immensely.  if I knew what I knew, now, I wouldn’t go. it’s darn good that I went because it’s helping me so much now. that’s that vicious circle. to your point, we go through what we go through from for a reason.  we come out smarter and stronger on the other side of that long tunnel, because of it. yes, cut yourself some slack, if there are learning lessons and mistakes are being made, as long as you’re learning from them.  

these things are awesome, too. Because, again, people are giving advice, and they’re giving feedback.  sometimes you may have to hear something over and over again before it lands on you. I applaud people like you who are doing these podcasts and getting this information out to the masses. Because I know over time, all of these experienced people that are giving their feedback, it is helping the listeners they’re out there, they’re listening some of these things they’re hearing repetitively, and it will eventually make a difference in the decisions that they make. Yeah, so thank you, Taylor.

Taylor   39:46  

It’s, it’s my pleasure.  you know, I’m happy to be doing this. I’m learning just as much if not more, I would say certainly, I’m learning more doing this than I would just listening so you know, whatever it is an agree or pass experience. make us who we are today.  don’t give your past self too much grief for not having done the thing or not having known and give your past self some slack. don’t give your current self too much slack. You gotta hammer on your current self because your current self is going to be your past self someday and you’re gonna wish that you hadn’t given your past self slack if that all makes sense.

Krista Testani  40:26  

It does. I think I follow that.

Taylor   40:29  

No, I mean, without going too much down the rabbit hole. I mean, I went to school for chemical engineering, even though I want to know now I would absolutely do make the same exact decision again, because I feel like I learned a lot of good things along the way. I had a lot of great experiences along the way that helped me learn and grow and all that so absolutely, um we are where we are today.  what are we going to say? So anyway, without any further ado, where can people get in touch with you and learn more learn about the deals you’re doing? All that good stuff?

Krista Testani  41:01  

[email protected] is my email address also www.sharplineequity.com  . Our phone numbers are posted email addresses and yeah, we’re happy to take you know, anybody has questions wants to reach out to talk about anything. You know that I talked with Taylor today. Cool. Reach out to me. I love meeting new people, and sharing. I’m a sharer. I love it. Now. I love it by pastel. love it so much. Now I love it.

Taylor   41:39  

Once you get used to it, it becomes more fun. Yeah,

Krista Testani  41:41  

that’s like what’s not in your comfort zone eventually becomes your comfort zone. You just have to do it. You’d have to do it more often. That’s all.

Taylor   41:48  

Oh, yeah, you gotta push the line.  thank you for everything today. I appreciate your very specific lessons. I agree with what you said much earlier in our conversation that we can reach books and whatever to get the high level glossing over information. when you get down to brass tacks, we need these specific experiences that people have had.  that we learn to look out for things like water bill in arrears and plan for that or to look out for yield maintenance clauses in our loans or any of these other things will be discussed today. thank you for those lessons.

Krista Testani  42:24  

Thank you so much for having me, Taylor. I really enjoyed it.

Taylor   42:27  

I did too. Thanks for everyone. Thank you for listening. I hope you’re enjoying the show. If you are, please leave us a rating and review on iTunes is a big help helps other people learn about the show. If you know someone that could use a little bit more passive wealth in their lives, please share the show with them and bring them into our little tribe here. Once again, thank you for listening. I hope you have a great day and a great rest of your week and we will talk to you on the next one. Bye bye