Today, I’m chatting with Bruce Petersen, also known as The Apartment Guy. In just eight years’ time, Bruce has grown his real estate business from owning and running a 48-unit building to more than 1,100 units. Not only that, but he was the National Apartment Association’s independent rental owner of the year in 2017 and is a regular television personality and public speaker. Bruce is here today to discuss his new book, Syndicating is a B*tch, and he also talks through some of his thoughts about moving through the COVID crisis, from a property owner and manager’s perspective.

Nikki Van Noy: I am joined today by Bruce Petersen, also known as The Apartment Guy, to talk about his new book, Syndicating is a B*tch: And Other Truths You Haven’t Been Told. Bruce, thanks for joining me today.

Bruce Petersen: Thanks so much for having me, this is going to be a lot of fun.

Nikki Van Noy: Absolutely, we have lots to talk about today in light of the current situation, along with your book.

Bruce Petersen: Yup, absolutely, there is a lot of weirdness going on right now that everybody’s aware of. We’re recording this, in April, and we’re dealing with a lot of the coronavirus fallout I guess you could call it that. You know what I do. I own and operate apartment complexes, so it is little nerve-wracking how many people have lost their jobs. How many people are actually going to be able to pay their rent? Because I still have to pay my bills.

We are just all in a fingers crossed, holding pattern right now, but so far so good.

Beginning in Real Estate

Nikki Van Noy: Absolutely. Bruce, let’s rewind a little bit. You’ve mentioned what you do but talk to me a little bit about the trajectory of your career and how you got to where you are today.

Bruce Petersen: All right, a little back story I guess. I was a retail guy. I dropped out of college because the formal learning environment was not good for me. I didn’t thrive there. In fact, I struggled with it because I’m too hyper to sit still and to listen to stuff. In my mind, like many kids, many young adults, I thought, “This is never going to come up in my life, ever.” I struggled with that and I dropped out. Through a lot of changes and moves along the way, I ended up in retail for 18 years.

I thought I loved retail and I think a lot of people in retail tell themselves they love retail. Well, I loved retail until I hated retail. And then I realized, “This sucks.” The last year I worked for somebody else in retail, I was working 80 to 110-hour weeks. I retired, I guess you would call it, at 43, because I’d always lived well below my means, and saved my money, and invested my money wisely. I had enough money to walk away and not worry about anything. I was single, no kids, no wife, I didn’t have a dog. I was kind of done, I was spent.

Then I realized I have another 50 to 70 years of this? I need to figure out something to do with the rest of my life. So, I tried to figure out real estate and I found mentors to teach me how to buy and invest in apartment complexes. I’ve done that since 2012.

Nikki Van Noy: Apartment complexes strikes me as a very specific type of real estate. Talk to me about why you were drawn to that particular area of real estate?

Bruce Petersen: As you said, you have a lot of different niches within real estate. You have what I would consider true commercial. You have strip centers and office buildings, warehouses, and that kind of thing. Then you have multi-family, which is what I do. It’ s not in the commercial space, but a lot of people will buy single-family rental homes. Of all those asset classes or niches, I listened to my mentor, because at the beginning, I didn’t know anything about this. I had bought my own house but that’s all I’d ever done.

But with multi-family, first of all, you have the economies of scale, if you’re going to compare it to other residential, like single-family rentals. It’s a lot easier. I guess you could say you smooth out a lot of the rough edges because you have so many tenants, that if you lose one or two here or there, you still have a very high occupancy.

I prefer it to single-family. But, then when we start dealing with retail and office space, you can make a lot of money and do very well there and I know a lot of people that do. When things like this happen, what if I’ve got a lot of tenants that are restaurants and bars and people that have been pretty much mandated to close almost nationwide?

There’s a lot more risk in my opinion. There’s potentially a higher payoff, but it comes with outsized risk in my brain. It’s the way I look at things. I think multi-family will withstand market corrections, recessions, and depressions. Hopefully, we’re not headed there but people have to live somewhere. It’s going to be the last thing that they get rid of. They’ll shut their business before they’ll live under a bridge.

Again, I listened to a mentor, but that’s why I decided to go into multi-family.

Real Estate Syndication

Nikki Van Noy: You’ve done a great job of illuminating the pros and cons there. Let’s get a little bit more specific and talk to our generalist audience about what exactly syndication is in the context of real estate.

Bruce Petersen: Syndication is really basic. You pool a lot of people’s money together to go out and buy something together. That’s really what it is. What we will do on a project, and I’m buying usually 15 to 25, maybe 30 million-dollar assets that will be two to three to 400 units per property, these are really large apartment complexes. So, I will bring in anywhere from 40 to a hundred different investors with myself and my wife–we’re a team, we do this together, but we’re the operating partner or some people will call me the general partner.

My wife and I, we manage the process, we manage the asset, we have our own property management company as well. We manage the investment for our investors who are silent or limited partners, and they walk to their mailbox every three months and take out a distribution or you could kind of look at it as a dividend check. Again, we’re doing all the work and they’re doing no work, it’s like putting money in the stock market in that sense. They put their money to work and they get a return for their money, but that’s all it is, we’re pooling money from many investors, and we’re going out and buying an asset.

Nikki Van Noy: That strikes me as a lot of relationship management, both with the investors and as a property manager also.

Bruce Petersen: That’s all it is and that’s part of what I’m trying to get across in the book. For those listeners that are familiar with real estate investing and within real estate investing and syndication, people think, “It’s easy. This is a big deal. I only have 50,000 maybe $100,000 of my own money, but I can go out and buy something that would cost me 500,000. I could buy much bigger properties than I could have with my own pocketbook.”

That’s true but people are believing some of the stuff they’re hearing at different conferences and expos and meetups about how easy all this is. When I raise money from 40 to a hundred investors, I do my best to vet those investors just like they should be vetting me. But I want to make sure we’re a good fit, that they understand what it is they are investing in, that they’re a sophisticated investor. I want to develop a relationship, an actual relationship with these people because no matter how hard I try to vet these investors, it’s like a dating situation. You’re always going to put your best foot forward on your initial date, or if you’re interviewing for a job, you’re always going to look your best at the interview.

Sometimes people will get through that and really weren’t a good fit, and somehow, I missed a quirk here and there because you’re dealing with a lot of usually fairly wealthy individuals that have personalities. Even though they’re silent partners, they still have a voice. Sometimes it can get a little weird and a little testy with all the relationships in every step of what we do. If you’re not a good people person, if you’re not a good communicator and somebody that can get out in front of an issue or a problem that I promise will happen, this is just not the thing for you.

Proper Expectations

Nikki Van Noy: What to you is the biggest challenge in all of this?

Bruce Petersen: The biggest challenge honestly is just setting the proper expectation. We do our best to set realistic expectations, but people are going to hear what they want to hear. I’ll say, best case scenario, maybe a 10% return, worst-case scenario, maybe a 5% return, middle, maybe an 8% return, but they’re only going to hear 10%. The most difficult thing is being comfortable. Again, communicating and being transparent, but making sure they hear what I’m saying. That I can’t make you any promises, just like the stock market can’t make you any promises.

These are my best projections, based on lots of history and experience. But things can and will go wrong. So again, the hardest thing is making sure everybody understands fully what’s going on.

Nikki Van Noy: This begins from day one it sounds like and extends onward from there.

Bruce Petersen: Right, it begins with the initial contact. Before I can let you in one of my deals, for the most part, there are ways around this, but for the most part, I have to have a substitutive preexisting relationship before you’re allowed into one of my deals before I can even send you the information on one of my deals.

From the first contact, I need to really get to know you and I need to be able to try to read you and let you know who I am. Just because I feel comfortable with you and I’m okay with you coming into a deal because I’ve gotten to know you well enough now, you might not like me. And that’s okay.

If I feel that you don’t like me, I’m not going to let you in my deal because that tells me that there’s something wrong there. We’re going to married in a deal for five to ten years, very often. Again, I may feel very comfortable with you, but if I get weird feelings that you don’t like and trust me, I’m not going to let you in because you’re going to be kind of a pain, to be very blunt about it. You’re going to be a pain, and this is not going to be a good relationship.

Every step of the way, I’m trying to figure out who you are, are we a good personality fit? Then on top of all that, do you understand the risks involved, do you understand the game of investing in real estate, specifically?

Nikki Van Noy: It sounds so much like dating. That was a very apt metaphor you gave at the beginning of this.

Bruce Petersen: It is. People ask me all the time, “Okay Bruce, I want to do what you do. I heard you on a podcast, I read your book. I want to do what you’re doing.” I say, “Okay, let’s talk about it.”

Now, I want to give them the warts. All the bad things that can and will go wrong, but I’m also going to bring up to them, are you a people person? If they say, “Yeah. I’m good with people.”

Okay, you like people, people like you. I ask, “What if you had to fire a management company, can you do that, can you fire somebody?” They say, “Yeah, I think I could do that.” Then I ask, “Well how about an investor? How about a millionaire investor, a rich person that is investing in your deal, can you fire that person?” They say, “What? What do you mean fire the investor?”

If you start talking with somebody, and you think this person is a good fit, and then you start getting down the road with him. You’ve sent all the documents to them, and they see your projections, they show you all the pretty pictures, and you go over all the details and you start getting a weird feeling that this is not the same person–now there’s money on the line and they’ve changed. Well, you need to pull the plug on that. You need to have a very tactful and respectful conversation that, “Look Mr. or Mrs. Investor, I’m sorry, this is just not a good fit for you. There are tons of other deals out there, but I don’t think we’re going to be able to work together.”

If you can’t do that, you can’t do this.

Nikki Van Noy: I would have to imagine that that discounts quite a few people right there.

Bruce Petersen: Not everybody, but a big part of this is you have to be self-aware. You have to know exactly who you are. It’s a Gary Vaynerchuk thing. I mean, he didn’t coin that phrase, he didn’t come up with that thought but he talks about it all the time.

You have to be self-aware and know who you are. Don’t lie to yourself. “Oh yeah, I could do that,” if no you can’t. If you’re answering that, well you can’t do this. If you lie to yourself because you’re seduced by the dollars and the earning potential, it’s going to end miserably. Let’s say, the hundred percent of people that come to me asking for help, “How do I do it, teach me how to do it.”

I would say 20 to maybe 30% of them have the mental constitution to do it. And then even of those 20 to 30%, once they actually get into a deal, once they own a deal and they’re running the deal on behalf of other investors, I’d say, 50% of those people come to me later and go, “I just want out, dude. I want to sell. I want no partners. It’s a lot harder than I thought.”

I tried to tell you. Do not try to convince yourself of something that’s not accurate. Just understand who you are. There’s a lot of ways to make money in real estate if that’s what you’re set on doing.

This might not be the right avenue for you.

Nikki Van Noy: Magical thinking is an amazing thing.

Bruce Petersen: Absolutely. People believe their own crap a lot of times and they talk to themselves into stuff they should never have done.

Find a Mentor

Nikki Van Noy: One word that has come up with you a few times now is mentor and how that played such a role for you especially at the beginning of your career. It strikes me that with this book, that is what you’re doing. In written form, you’re telling people what this field is really like, and walking them through it step-by-step. Talk to me a little bit about mentorship and with that, why putting all of this information down in book form was so important to you?

Bruce Petersen: A lot of people think of mentors as gurus, and the word guru has a very negative connotation right now. People are pushing back from that whole guru thought. A mentor–Tony Robins talks about it, Napoleon Hill talked about it. Find somebody to model yourself after that’s done what you’re trying to do.

That’s what a mentor is. It doesn’t necessarily have to come with a cost–you might be able to find somebody that’s willing to do it for you for no fee, for no charge, for no cash, but with a mentor, you’re going to cut a lot of the errors out. You’re going to speed up your timeline. It’s that whole thing–don’t try to reinvent the wheel. This has been done for centuries actually, going back to Thomas Jefferson. It’s been around forever.

Why not learn from somebody that’s made a lot of mistakes on the way? They can help you avoid those mistakes. That’s what to me a mentor is all about. The impetus behind the book was I would go to real estate expos and free seminars and you would hear the people at the front of the room–I am not saying they are bad people, I am saying the people at the front of the room are trying to sell you their educational program. That will run anywhere from five to 35,000. I have even heard a few of them over $100,000.

They might legally try to protect their backside by saying, “Now look, there are risks in this. Things can go wrong. What we are showing you here doesn’t necessarily mean that will be your result.” Then they quickly walk away from that and now all you hear are success stories. You never hear any of the stuff that can and will go wrong again. You just hear the students talk, and all of them bring students up to give testimonials and those are real stories. But there are other real stories where somebody crashed and burned, and you are not hearing those.

So, I know a lot of the national figures that are doing these seminars, these weekend events, they’re good people, but again they are trying to sell you something. So, if they tell you some of the scary parts of this, you’re less likely to give them 30 grand. I wanted to write a book to kind of pull back the curtain and let you know what this is really like.

Because again, most people that tell me they want to do it, once they realize how difficult it is, the level of stress and liability of it–man I have sleepless nights and I am not too proud to admit I have cried because things don’t always go well. We’ve had people die, we’ve had arson, we’ve had all kinds of weird stuff. So again, I want people to understand what this really is. There is nothing wrong with using a mentor but just be careful who you’re using.

Be careful what you are listening to and what they’re saying and try to hear through all the fluff. So that is the big thing again. I think most of those groups are good groups they are run by very good people. The one thing that the book is not designed to do, and a lot of cynical people don’t believe this for a second, but it is the honest to goodness truth–I am not trying to gather clients or mentoring customers. I am not looking for that.

I don’t want to mentor you. If you want help, I can probably provide it but if nobody reaches out to me, I don’t care. I am trying to make sure you understand what it is you are about to embark upon and if 80% of you read this book and go “Crap, I want no part of that,” the book has been successful. That’s really what it is for me.

A Few Stories

Nikki Van Noy: I got stuck about a minute ago when you talked about how a guy died on you. Can you share one of your more extenuating circumstances, just to give people a realistic idea of some of the things that potentially could happen?

Bruce Petersen: Yeah, absolutely. So, I am sitting in my office one day and by 8:30, 9:00 in the morning, I get a text from one of the lead maintenance guys at one of my properties here in Austin where I live. He wanted to let me know as the owner what was going on. He didn’t really need to, there is a chain of command here. We needed to tell the property manager or the regional manager that has that property in his portfolio.

I know all of my employees in the management company. So, he wanted to send me this text himself. Well, it was just a picture. It wasn’t an explanation, there was no bracing me for what was coming. It was a picture of a man lying face up in the bottom of a pool with his eyes open, dead. Yeah, you are talking about a really crappy way to start a morning. I’m like, “Holy crap dude, ugh.” So, I called this property manager and talked about it.

We have video cameras everywhere on the property and we saw at 4:00 in the morning this man had been completely just blitzed out of his mind. He was inebriated. We watched him jump the fence of the pool, take off his clothes down to his underwear, and then he jumps in the pool. He never came back up. His brother is his roommate on the property, so we got that to deal with. I go up to the property and I sit with him and make sure everybody is doing okay.

“Do you guys need counseling? What do you need from me?” Because this is very, very traumatic. So yeah, that kind of stuff happens.

I have a management company. Most people that do what I do will have a third-party management company manage their stuff. In the book I talk about one time, there is a division of Homeland Security, and I probably got that one wrong, but it is called OFAC.

That division of the government, they’re our watchdog. They are chartered with trying to prevent money laundering to support drug cartels and terrorist organizations around the world. So, when you do a bank wire transfer like I did to purchase a property, $5.2 million, it got wired out of my business account first thing in the morning to buy this property, well, it goes to the Federal Reserve and while it’s there they are making sure everything looks okay.

While it’s there, OFAC comes in and they look at this wire. They look at the sending and the receiving parties of this wire and they’re looking to see if I get any hits against known bad actors around the world. The name of the property was the name of a known drug cartel in Columbia. Well, they don’t have a customer service department. So, I didn’t get a “Dear Mr. Petersen, we have confiscated $5.2 million of your money while we figure out who you are, what you are, and what the hell you’re doing.”

It just disappears. The seller hasn’t seen it. The seller’s attorney is screaming at me through my attorney. My attorney is now screaming at me and I’m like, “I don’t know what is going on.” So, the day closes, I have to go back to the office and email my investors and say, “Hey, today was closing day. Well, I hate to tell you, but we didn’t close today, and I’ve got a little bit more bad news. I don’t even know where your money is.” That is what I am talking about. Things are going to go wrong.

Maybe not those specific things. You are going to have a fire eventually, you are going to have a tornado, you are going to have hurricane Harvey wipe out a building or two. You are going to have coronavirus that you have to deal with. Even if you are an owner and you don’t have the management company yourself, you still are very, very involved. You have to communicate a lot of not so happy information to your investors. So that is just some of the things that go wrong.

Current Circumstances

Nikki Van Noy: There is the real deal for you right there. You mentioned the coronavirus and I do want to talk about that and just the experience of being in property management and being a property owner at this time and being reliant on renters. How are you feeling, and do you have any words of wisdom to share with people?

Bruce Petersen: So we’ll start this–I am the eternal optimist and I probably drive everybody around me ape shit because I always say, “You know, we’re going to be okay. There is a silver lining here. We will come out of this stronger.” It sucks what we are dealing with right now, but we are going to get through this. With me having my own management company, I not only have to communicate with investors and tell them that the normal every three-month distribution checks are not coming again for a while until we figure out exactly what is going on.

I cannot afford to send out cash from the company. I need to reserve it on the balance sheet to make sure that we can pay our bills if people quit paying their rent. So far, we have been lucky. In April, we have collected 85 to 95% of the rent on all of our properties. Well, I think March, most people worked for the first two weeks of the month. So, your paycheck usually trails two weeks I believe, so two weeks later at the end of the month you get a full paycheck probably.

Well, so you can make your April rent. The people that got furloughed or laid off or just fired or their company went out of business, well that second half of the month they may not have a job. So, we are about to see in May the real impact. So far, we are doing well but we have a lot of nervous people in our industry right now trying to figure out, “Oh my Lord, what do we do?” What is coming, how do we prepare for it?

Not only are we worried about that but again, going back to the fact that I have a management company. I have a responsibility. I am responsible for all of my employees to some degree. I have to make sure that while we are deemed an essential business, we must stay open because somebody might have a water leak somewhere. An air conditioner goes out when it is 95 degrees outside. There are things we have to be able to do for these residents that we are responsible for.

Now I need to make sure that my staff is safe. How do we conduct business as normally as possible and not put you at risk? So, we have come up with all kinds of new things. They’ll go to the office but only one person will be in the office at a time. A lot of our properties have three office staff. Well, only one of them can work a day now. We are trying to limit contact there so everybody is working very abbreviated hours, but I have not cut their pay.

When they go to work, they do not open the office door for anything unless they open it, take a check for somebody and close the door immediately. Again, that is another level of stress if you decide to open up your own management company to self-manage and now you have to make sure you don’t put your people in harm’s way. So far, it’s been really good but we’re bracing for May.

Nikki Van Noy: The thing that strikes me as interesting about this is that mandates on what all of these means vary from state to state. So, it seems like people in your position are also, to an extent, going to have to figure this out as it rolls at them on a case-by-case basis.

Bruce Petersen: Right, so there are all kinds of aid out there for our residents and that it is our job. Now I am sure that they are aware of a lot of it but maybe they are not. So, it is our job to electronically through Facebook, and through texting, because we have mass texting for our residents, through email notifications, notices in the laundry room, on the office door, we want to let them know all of the resources available to them. Because unfortunately, they might have a window of maybe one to three months where we’re going to defer their rent payment because we realize they don’t have a job, but at some point, they do have to pay their rent because if they don’t pay their rent, I lose the property and then where they live goes straight downhill and it falls apart.

So, we are trying to share resources as we have them pop up. We are also dealing on the business side of it, we are trying to figure out how do we keep our doors open as people don’t have the ability to pay.

So, we are working through all of that and it never ends. Like you said it is dynamic, it is changing every single day. I am extremely fortunate that I have a wife that is 100% bought into our companies together with me. In fact, she is a board member with the Austin Apartment Association, and she is an alternate at the Texas Apartment Association. So, she is way in the know there. She is on conference calls constantly with those two organizations.

They are getting information that the general public sometimes doesn’t have. We are getting all of that information out to our investors that may need some help to get through this time, our residents that might, and then our staff also. We are just staying on top of it all the time. We are in conference calls constantly right now.

Nikki Van Noy: Oh the world of Zoom, one of the businesses that is thriving in the midst of all of this. I love that tip though about providing residents with all of the resources as you become aware of them. I think that that is really savvy and also very kind. This information can get really overwhelming as everyone is trying to figure out how to navigate this from all angles.

Bruce Petersen: Yeah and my staff has heard very, very loudly from me–do not cite any story from Fox News, from MSNBC, from any politically leaning source, whether you agree with their ideology or you do not, I don’t care. Don’t do anything hyper-political. Both of those sources tend to be a little hyper-political. So, we are trying to get objective news to people, not histrionics, not overblown fake news. There is a lot of crap going around out there that is just not true.

What I am trying to drive home with my staff is, look, this is a time we can shine. We need to make their lives as easy and as stress-free as possible. We’ve waived all late fees. We are working with people that can’t make their payments, we are allowing them to carry their payments over a 12-month period and kind of spread those payments out to make it more manageable. We understand they are going through a lot right now.

You know most of them are not leaving their apartment at all. We are trying to figure out things that we can do to help people that are homebound right now. I don’t know what that is, we are brainstorming right now. We’ve got some pretty good ideas, but do we get meals delivered to everybody? I don’t know if that is practical because who is going to want strangers showing up at their door that they have to take something from?

We don’t know what the right answer is right now, but we are trying to do everything we can to make sure they understand, we are here for you. We are going to try our best to help you through this, we care, and you matter. You could call it PR, but that sounds kind of jaded. We can be a voice of reason and calm in their life right now.

Nikki Van Noy: Bruce that seems like the perfect note to wrap on. Again, the book is Syndicating is a B*tch: And Other Truths You Haven’t Been Told. Outside of the book, where else can listeners find you, Bruce?

Bruce Petersen: I am on a lot of the social. I don’t do Snapchat. I can’t figure that out and I haven’t looked at TikTok yet, but I am on Instagram @apt.guy. I am on Facebook @apt-guy or you can visit the website–I’ll say that and then qualify it. The website is being revamped completely. It is not so great by us manipulating it constantly over the years, so we are rebuilding the website, but it is

Nikki Van Noy: Bruce, thank you so much for joining me today and best of luck to you with the book and also the current situation.

Bruce Petersen: Thank you so much and I really had a fun time. Thanks for having me on.