Turning Historic Properties Into HUGE Profits With Eric Rice

Eric Rice: [0:00] Our buildings are historic in nature, but not in a technical registered historic district. That comes with a lot more nuance and a lot more regulation. We, you know, have to run some things by kinda town council. And just by default, we wanna make them look like a really, really good version of what they would have looked like originally. We just kind of renovate them in a historic manner. So, you know, in a lot of cases where, for example, you were taking a piece of original baseboard from the place, taking it to a lumber mill, having them make a new die and cut, you know, mill all the baseboard to match the original. So just lots of little details like that that make them, you know, stand out or restoring the tin ceilings that are in place or something like that, which makes it unique for the tenants to come into and and set up their, you know, their cool spaces, whether they're restaurant or retail.

Speaker 2: [0:49] Welcome to the Collecting Keys real estate investing podcast with your host, Mike DeHaan and Dan Austin. From wins, losses, horror stories, and tactics for optimizing your business, Mike and Dan take a real uncensored deep dive into the ins and outs of running a full time real estate investment and wholesaling business.

Mike DeHaan: [1:13] What's going on, guys? In this episode of the collecting keys real estate investing podcast, we have Eric Rice, who is an investor out of the Pittsburgh area and has a really unique niche where he buys and, I guess, like, I don't say gentrifies, but he makes more usable, like historic properties in the area. And the way that he does it is kind of the antithesis of what most people expect from real estate investors where, you know, tend to get a lot of flack for taking away a lot of the charm and a lot of the visual appeal of some of these older neighborhoods and older areas. But he actually does things in a way where he keeps, you know, the original aesthetic, right? He makes sure that they keep the old school charm of how the buildings were built, and just makes them more functional, whether that's as like a residence, or as, you know, like a commercial unit, or like a storefront or whatever it is. And, you know, there's a lot of benefits for doing that, right? Like, there comes with some sort of challenges with like the older building structure and those sort of things, but you do get a lot tax benefits for doing so depending on where you are. So he does a lot into those details, which is super interesting. We haven't had anyone on that talked about that before. Eric is also one of our Instant Investor Pro clients.

Mike DeHaan: [2:21] So basically, what that means is that he joined our Instant Investor Program to start finding off market deals, and then he said, you know what, I don't necessarily wanna do all this work ourself. So he joined our pro group, which means that we run his marketing and his lead intake for him. And by the time StepZote is released, he will have closed on his first deal actually that he got from our marketing, which is a pretty sweet four unit property in the Pittsburgh area that he got at a pretty nice discount. So that's pretty cool as well. We don't do this for everybody, but if you are a somewhat established investor, you have a little bit more money than you have time, and you don't want to, you know, go through the headache of building out a lot of the back end, you can go to collectandkeyspodcast.com/store, and apply for the instant investor program, and see if you'd be a good fit. And what that will do is allow you to jump start to start funding off market leads without having to do a lot of the BS of like, you know, building marketing systems, running data, and also, we'll do it. And then you guys get a close deals, and talk to leads and do all the fun stuff. So anyways, guys, go to collectingkeyspodcast.com/store, you can check that out. Besides that, please share this podcast with anyone who might find interesting, anyone who wants to buy larger assets, or has any sort of interest in maintaining kind of historical properties in their area, while also making money doing it. Eric goes into all sorts of details about how to do that, and the best ways to sort of like even analyze those deals, and how to get the most benefits from it.

Mike DeHaan: [3:41] So anyways, guys, thanks so much for listening and enjoy the show with Eric Rice. Historic mixed use commercial properties. And what the hell does that mean? I don't even think we have those on the West Coast because I weren't too new.

Eric Rice: [3:55] No. You have. So picture a small town outside of, like, a major city with a three to 10 block main street with a bunch of really cool old buildings that Yeah. Yeah. Maybe maybe need some love that happen to be in the path of progress. We jump in and we buy those in some different areas and kinda renovate them and put them back to their kinda highest and best use.

Mike DeHaan: [4:17] Nice. Gotcha. Nice. Okay. Perfect. So help and keep the charm in some of these older Small towns. Neighbors and older parts downtown. So cool. So you're crushing that. You're buying multi families and also add you're also one of our marketing clients that has recently joined our our ranks, I guess, of people that we've been working with. You're in the instant investor group, and you are one of our, I guess, premium clients. We're doing the marketing for you that's been crushing up there on the East Coast. That is it. So awesome. We're glad to glad to have you, Eric. I'd love to hear just kinda like your background and, you know, sort of the stuff that you're working on right now. Because I know you've made some shifts recently

Eric Rice: [4:51] Yep.

Mike DeHaan: [4:51] After being a realtor for a while and getting into this endeavor. So how'd you get into all this? And, you know, what is your plan of everything you're working right now?

Eric Rice: [5:00] Yeah. So I had been an agent, a licensed agent for kind of the past twelve years or so, pretty successfully in in the Washington DC market and then for the last ten years or so in the Pittsburgh market. The thing about being a real estate agent, it was great. I loved it. I I got to work with all kinds of great people. I had a great time. I was able to make a great income. But I always felt the whole time like I was kind of working and taking all the risks of having a business, but then didn't really have a business to sell at the end. And when I stopped working, the money would stop coming in. So six years ago or so, I started to kinda take that a little bit more seriously. I was like, alright. I gotta buy some properties, create some long term income, or at least some additional income stream. So I bought my first property to flip, I think, probably in 2015. And then that one took a year. I think I lost $5,000. And There you go. And

Dan Austin: [5:58] Loving it.

Eric Rice: [5:59] That I did did it all wrong. Then did a couple more in a more successful fashion, then jumped kind of all into to multifamily investing after that with a couple of partners. Yeah. So the one the

Dan Austin: [6:12] one flip you're like, and then you move you pivoted. Is that what you're saying, or have you continued to flip?

Eric Rice: [6:17] I did the one flip. I did it all wrong, and then I realized all the right things to do. And I found one really right, and I did it correctly. And it was done, you know, I think we paid 200 for it. We put $27 into it. I had the contractors in there the day after closing. We were on the market three weeks later. Three weeks after that, we were closed with a a $300,000 offer. So we made, you know Beautiful. Grand or something like that on that deal in about forty five to sixty days, something like that. See, that's how it's supposed to be.

Mike DeHaan: [6:50] Yeah. Yeah. Right. That sounds way better than spending a year to lose $5. Yeah. I mean, there's a lot more fun ways you can do that than trudging through some terrible rehab. I know. And the thing is too, imagine that one that you lost on, you probably used hard money or something on.

Eric Rice: [7:02] I used all my credit cards and a home equity one. Oh, jeez.

Mike DeHaan: [7:07] That's how you do it. So even on that, like, were totally just a victim to the financing. Bet if you had, you know, gone faster, you hadn't had as much money cost, you probably could

Dan Austin: [7:15] have done even Definitely 5,000 margin on interest rates when you're using credit cards.

Mike DeHaan: [7:19] Yeah. Yeah.

Dan Austin: [7:20] One thing that you said too that's really important that I see a lot is, as a real estate agent, you said you were taking all the risk of having a business, but not all the, you know, if you stopped working, your money went away. So many real estate agents, successful real estate agents fall into that category where they're like busting their ass, they're killing it, they're at the top of their game, but if they stop working tomorrow, all their income's gone. Within forty five days, whatever they have left in escrow, all their income's gone. And so that's that's really important, like what you said, just to pivot at some point in time to start actually having that, like, passive cash flow because, man, none of us wanna work all day every day for the rest of our lives. Sure.

Eric Rice: [7:56] Yeah. I mean, I love work. I just wanted to stick around. I want the money to keep coming when I when I feel like taking a month long.

Dan Austin: [8:03] Yeah. Exactly. That mean, that's so important.

Mike DeHaan: [8:05] Yeah. I I mean, as as it's it's it's And then, no matter how big people get to,

Eric Rice: [8:24] because as much as you don't want your your spending to grow with your income It will. Especially with a fast lifestyle like that where the checks come in big and fat and almost always come in, but not always. Like, it's easy to let your expenses get get too. So should we hang

Dan Austin: [8:39] out with other rich guys?

Mike DeHaan: [8:40] Yeah. Especially when it's like all realtors, it's just like a dick measuring contest all the time.

Eric Rice: [8:45] I will say I drove a a 2007 Toyota four Runner with 200,000 miles on. So I was not the typical Mercedes Benz

Dan Austin: [8:53] driving a BMW. Yeah,

Mike DeHaan: [8:55] yeah. Yeah. Yeah. That's how Dan used to be. And then, you know, he's all into like his wants to get his Tesla. He's got his big fancy house.

Dan Austin: [9:03] I'm cheap. But I you did when you said that you when you said that you paid 27,000 for a rehab, it made my heart just freaking drop because I'm freaking gonna contract out there right now building a, like, shed that's probably gonna cost me

Eric Rice: [9:16] that much. Yeah. Like,

Mike DeHaan: [9:19] gosh. Damn it. So now that's awesome, though. So you start getting into larger projects. And then so I guess those first ones that you started to get into were those the historic mixed use find out a property you don't have to bat?

Eric Rice: [9:30] Yeah. It was kind of a mix in another small town outside of Pittsburgh. It was a a dirty portfolio, like the second half, which is the shitty half of a portfolio that from an estate. And I think it was, like, 39 units, and it the biggest thing in it was a 12 unit apartment with I think there was nine apartments, and there's three ground level retail spaces. And then it ranged, you know, from that to some smaller multifamily to, like, some abandoned houses, a vacant lot. It all came with the portfolio, and I think we paid 1,223,000 for that and then budgeted about 400 k in rehab dollars so that we could turn the stuff we wanted to keep and bring the rents up. But it was, like it felt fairly risky, and it probably was, but it ended up fantastic. I mean, we we were able to cash out. I have two partners. So when I did that, I brought on my brother and a friend of ours as a partner. So there's three partners in the company, and we split everything, you know, equally. And we were all kinda like, alright. Let's do it. We all kinda put boots on the ground and and hit it pretty hard. So I think on month 11, we refinanced that and cashed out 85% of our initial principal.

Dan Austin: [10:44] Nice. That's awesome. When you say that, what did you have to come to the table to put this deal together with?

Eric Rice: [10:49] I think we each came to the table with about a 140,000, something right in that, very close to that. This was at the very beginning of twenty eighteen. So we worked on the deal through the end of twenty seventeen and closed, I

Dan Austin: [11:05] think, early twenty eighteen. Gotcha. And then you guys had to just split the 400 k as you as you spent it for the rehab, or did you guys have that wrapped in your note?

Eric Rice: [11:13] We rolled that in. So Okay. Yeah. Had that construction financing piece in there. So we brought 20% Beautiful. Purchase and construction dollars.

Dan Austin: [11:21] That's a great strategy right there. I love it, like, bringing in the partners. So you said you all three had you were all three kind of boots on the ground. Did you each have separate roles in this? Were you guys just kinda like, let's figure it out together. We don't know what we're doing. Let's see what happens.

Eric Rice: [11:34] Yeah. We just kinda figured it out together, I would say. Clayton and I were both in town. My brother still lived in New York at the time. So he was doing everything he could do for the company kinda remotely because we were also really, like, just standing up the company at that time as well. Mhmm. So he was doing a lot of remote stuff, and then Clayton and I were kinda heavy boots on the ground with contractors, you know, working with the property management company. We used a third party property management company initially Yeah. On that project because we didn't have scale to do it ourselves. Gotcha. Would not be great at property management.

Dan Austin: [12:05] Right. So is that the your company is such a tangent rice pager? Is that their partner's name and you and your brother are rice?

Eric Rice: [12:11] Yeah. Yeah. Yeah. We've tried to get him to change his last name to rice because it would be more simple. But I

Dan Austin: [12:17] was thinking change it to baby, then it could be rice rice baby. So dumb. Go play with your kids, Mr.

Mike DeHaan: [12:24] Dad joke. Jesus. What is that? I was waiting this whole time to bring find a good spot to bring that out.

Dan Austin: [12:30] They're right in.

Mike DeHaan: [12:31] So awesome. So so that was, you know, pretty good first deal. That was that was your first historic missy mixed use deal. And then after that, did that become like a niche that you started to pursue? Like Yeah. I mean, that's super unique. Like, what are the nuances that even come along with that?

Eric Rice: [12:46] Yeah. So it was a niche that we kind of I would say, you know, we were looking to buy apartments as well, and we were doing that after that deal. But we really got into it more in that town that I live in in Sealy and Opal, Pennsylvania, which is North Of Pittsburgh, small town, kind of same old historic mixed street, like mixed use street that I kinda explained before. And we, like, we had an opportunity to buy this this old building. It had been a restaurant, but it had been shut down for, like, eight years. The roof was gone mostly. It was just a total disaster. Nobody else would touch it. We were kinda like, woah. This doesn't look that different from what we bought. We could probably do this. And I think we leased most of that space up before we were even even maybe officially under contract. Like, we had the LOI out, and I just went and started talking to people and was like, hey. We're interested in this space, and so they were signing letters of intent after we were signing the contract. So we we decided that there was a model that would work. Interesting.

Mike DeHaan: [13:46] Okay. And so when it comes to something like that, historic mixed use properties, I imagine there's sort of, like, rules and regulations around how you can modify the building, things you can do. Like, is there rules around, like, the kind of tenants that you can have? So a

Eric Rice: [14:01] lot of that really depends on what type of a district you're in. The our buildings are historic in nature, but not in a technical registered historic district. That comes with a lot more nuance and a lot more regulation. We, you know, have to run some things by kinda town council and, you know, just by default, we wanna make them look kind of, you know, like a really, really good version of what they would have looked like originally. So we kind of stick to those criteria on our own, and then we're limited just like any other commercial property and the types of tenants that we can put in by the zoning laws that are in place. So so we do have, like, quite a bit of free reign as to exactly what we do properties. We just kind of renovate them in a historic manner. So, you know, in a lot of cases where, for example, you were taking a piece of original baseboard from the place, taking it to a lumber mill, having them make a new die and cut, you know, mill all the baseboard to match the original. So just lots of little details like that that make them, you know, stand out or restoring the tin ceilings that are in place or something like that, which makes it unique for the tenants to come into and and set up their, you know, their cool spaces, whether they're restaurant or retail, and and also makes it cool for customers to come in, you know, off the street, and they're like, oh, wow. People really appreciate Gotcha.

Mike DeHaan: [15:17] Right. That's interesting. I bet that varies by, like, just area to, you know, certain places that probably have, like, more, emphasis on their their history and their culture. I don't know, they maybe they don't want a Nike store, like the old building.

Eric Rice: [15:29] They want it

Mike DeHaan: [15:30] to be like some sort of mom and pop things that creates like that sort of micro culture that people want. Well, I

Dan Austin: [15:35] have to imagine too that the niche that you're not talking about to or you haven't talked about yet is, like, small towns that maybe are just thirsty for this money to come in, and you just get a you get away with a little bit more. As long as you're doing right by the city or the town, they might be more willing to help you.

Eric Rice: [15:50] Yeah. It's very collaborative. So from the beginning, in all the different little markets that we work in, we almost always go right to the borough office, introduce ourselves to the borough council, the borough manager, the police chief, kinda tell them who we are and what we do. And that's we found that to be extremely helpful in terms of getting things done. And and, you know, if they know we're doing the right thing and there's Mhmm. There, it's very helpful.

Dan Austin: [16:16] Absolutely. You're a person and not some big company, some big development company coming in just to just to straight, you know, pull money out of the economy, but actually put back into the community.

Eric Rice: [16:24] Yeah, we're not stuffing dollar mall stores into every available. I mean, we're trying to

Dan Austin: [16:30] do know what mean. I do know.

Mike DeHaan: [16:33] You don't dollars in I don't know. Feel like there's certain states like Southern states that are super red where they're saying everything's capitalism. You know, they just like shove them in everywhere that they can.

Dan Austin: [16:43] Man, they got this store stuff.

Mike DeHaan: [16:45] No. Yeah, it's true. But have you ever been down to like Florida, for example, If someone in Florida and like shit on me, but it's like every single strip mall has a Cracker Barrel. Yeah. Like, why?

Dan Austin: [16:55] Yeah. Like, every good food. It's good quality food and family fun. Family fun.

Mike DeHaan: [17:00] It's like they could put anything in there, you know, but Applebee's wants to go in there. They're just like, no. This is a Crackle Barrel state. Like, get the fuck out of here, Applebee's. You called it Cracker Barrel. You can't even hear they're really

Dan Austin: [17:12] gonna jump down your throat. Yeah.

Mike DeHaan: [17:13] I know. Probably. Sorry. I'm not part of the Florida culture. We're literally as far as you can get while being in the economy. This is true. But although I do love their beaches, they're great. Now that that that that's super interesting, though. And I feel like that that's a good balance to the bad rap that a lot of real estate investors get. Because, know, kind of the typical view that people look at, like real estate investors, they're like, oh, they're gonna come into like this historic area and throw up like a super modern apartment complex, they're just gonna completely butcher all these old neighborhoods, but you're doing like literally the opposite. You know, you're basically creating modern amenities and while still maintaining the sort of historical aesthetics to the building in the neighborhood.

Eric Rice: [17:53] Yeah. And it's not a chair. You know, we're also Yeah. We also do it and make money. So it was work for anybody that says you can't do it well and and still make money there. Maybe they're in a different market than me.

Mike DeHaan: [18:04] Yeah. Right. I mean yeah. Or or they're just ignorant. Let's be honest. But no. So that's cool. So how many of those sort of projects have you done now? Like, what's your portfolio look like? Do usually keep all those? Do you, like, flip them?

Eric Rice: [18:16] No. We've kept everything so far except for a couple of, like, really rough pieces of that initial portfolio stuff we we bought. But all this stuff, all the historic kind of renovation stuff that we've done, we keep I'm sitting in one of them right now. So we have our offices here. We've got four buildings in this town done, and we have two more in in the works right now. So one that we closed on, like, four weeks ago, we're working with the architect to do the design, and one that we just finished architectural design that we're we're doing our our contractor business starting next week. So that would be rolling up in January.

Dan Austin: [18:53] That's cool.

Eric Rice: [18:53] Yeah. And they're all they vary in size from, you know, 5,000 square feet to 15 or 18,000 square feet per building.

Mike DeHaan: [19:00] Okay. And what's just curious, like, what's typical purchase price for something like that? I know that that varies by market. Yeah. I know a lot of people, they tend to think things like that are incredibly expensive.

Eric Rice: [19:11] Yeah. Which, I mean, I'm sure they can be. But Yeah. So for instance, the, like, the building I'm sitting in here, I think we bought this. This is a it's three levels. Each level is about 2,500 square feet, and then it's got another couple thousand square feet on the back of it. I think we paid $3.75 for this, but then I think we put in I think we put in a million 1, something like that.

Mike DeHaan: [19:36] Oh, wow. Okay.

Dan Austin: [19:38] It's a good amount of money. Was that also wrapped in a construction loan?

Eric Rice: [19:42] Yeah. We financed a lot of that, but then went over budget on that quite a bit. And then we but then we refi ed them recently, and we tied two or three of these buildings together, and we cashed out. I think we're we're out pretty much all of the money that we put into them. So

Dan Austin: [19:57] Oh, nice. It was the shiplap in your background. That's what got you on the budget. The shiplap. Yeah. That's that's this. So that's a good point, actually. I wanna talk about for a second. So you said in the first deal, you burned out 85% of your capital. So you didn't get it all Obviously, 100 bur is really cool. But I'm assuming so you paid $3.75 for this one, put a million in it. But I'm trying to drive to a point here. But what'd you say at $3.75, you paid what it was worth? Right? Yeah.

Eric Rice: [20:23] We paid more than anybody else that had been in this town for a long time thought it was worth. Right. And we put more money into it than anybody else was willing to. And then we we got a valuation based on an appraisal higher than anybody thought you could achieve in the in the area.

Dan Austin: [20:38] Well, I think that's just a great point. Mike and I, because, know, we love a good deal just like anybody else. But we've talked about a lot lately is like, what's wrong with paying like what a property's worth, the value add can happen still, you just need to pay for what it's worth, you don't need to pay or negotiate what it's less less than it's worth, just so you feel like you got a deal. It's okay to pay what it's worth. Sometimes it's okay to leave some money into it, because there's still a return on your investment. That's what return on investment means, There is an investment. So that is just a great point, and then that that was one another question I wanna ask you is, do you have a typical analysis that you're running as far as what ROI, ROE, IRR you're looking for for for your portfolio for these each of these properties?

Eric Rice: [21:17] Yeah. I mean, I wouldn't say it's a hard and fast system, but basically, like, we've got a a big spreadsheet that we plug the numbers into. And if we can end up with a product that is worth more than we put into it, and there's a path to getting our money out, Not even that. I mean, a lot of times we're looking for a path to getting our money out within a couple of years, two or three years on a refinance. Yeah. But if the DSCR works and the property pays itself down over time and we've got positive cash flow on it, We don't look for we're not like, oh, it's 15.1%, and we were looking for 15.5%. So we're not gonna do the deal. It's more of a, does this logically make sense? And can we put some cash into this and and do something that you know? Because we we're often investing in areas where we have other properties. So it also helps our other properties to have other good properties near them. So Oh, sure. Absolutely. Awesome.

Mike DeHaan: [22:10] I wanna give you a shout out to Dan for using all the terms that we learned yesterday from the guy we interviewed about doing his syndications and how he analyzes them. Dan was literally like, wonder if he

Dan Austin: [22:22] I was like, this guy has gotta know. I'm gonna sound so smart.

Mike DeHaan: [22:25] Coming in here like an expert. Like, this you've just been analyzing these for years.

Eric Rice: [22:29] I I mean, I can tell you on the syndication piece, we haven't really syndicated any of these deals, so to speak. But we have syndicated, like, multifamily apartment complex deals. One, like, 62 unit vacant and condemned project that we started last summer. And that one, I think our our target we ended up, like, kinda returned to the limited partners. Our target is somewhere around 14% on that one. We're gonna smoke that based on what we're seeing already. But so we do in the in the cases where we're bringing outside money and we we're a little more stringent on what we're looking for because we need to attract investors.

Mike DeHaan: [23:05] Absolutely. Yep. That's cool. Like, that's that's some unique stuff, though, that, you know, like, always have these sort of conversations with people and always gets my brain thinking because we have, like, a lot of historical sort of stuff downtown here that would be ripe for that. From we have here, though, is there's like two asshole families that own like everything and refuse to sell any of it.

Dan Austin: [23:25] Well, in the shitty city council that will make anything unprofitable if he wanted to redevelop it, like, quite literally.

Eric Rice: [23:30] Like, quite literally. Yeah. Yeah. That's tough. That's one thing we have gone for us, at least in this this town that I live in and that we've invested lot in, is the town count. The council is fantastic. Like, they just Nice. They really understand what town needs, and they're they're out there money and doing great stuff for town on their own, and it's bringing other investors in here too.

Dan Austin: [23:49] What size? Like, how many people live there, for example? 100,020?

Eric Rice: [23:54] Like, this little town, I think the population is probably, like, 4,000, but there's a there's a town below us that's like a giant suburb of Pittsburgh, and there's, like, 30 Oh, okay. 35,000. Gotcha. Okay. Like, everything around the towns we're in is gonna turn into suburbs, basically. Right. You like you

Dan Austin: [24:09] mentioned earlier, path of progress likely.

Eric Rice: [24:11] Yeah. Yeah. So we don't have, like, a a metro system here like like we had when I lived in DC. It was really see where the development was going there. You just look at the metro stuff, like, that was done. And you, like, look at the next one that was super rough. We have, you know, a couple of big highways, and this is just one exit up from that giant that giant community. Okay.

Mike DeHaan: [24:31] Yeah. Awesome. Very cool. Sweet. So yeah. Yeah. Lots going on. And then I know you've been shifting towards the multifamily stuff as well, pretty heavily recently. That's one of the reasons that you started working with us. And we've been running some marketing for you to find just different opportunities. And you actually told us before the show that you sent out your first contract actually, from the the marketing started doing for you just over two weeks ago.

Eric Rice: [24:52] Yeah, man.

Mike DeHaan: [24:53] So you wanna break down that

Eric Rice: [24:54] deal for us? Yeah. Absolutely, man. We're we're pumped. So I think realistically, like, we've been now working on that for two weeks, and we've had a bunch of leads to call on, and and they've all been, like, real people, which is great. I see. These gaps. Yeah. It's helpful. So we have one one that we're actually gonna execute on. It's it's like a a relatively small deal. It's it's a four unit kinda townhouse complex that was built in the early two thousands, right, close to where we have a bunch of other stuff. And, you know, we presented them with a couple of different options and, you know, a lower cash offer and then a couple of creative financing offers where we mixed in some seller financing to the deal, and we ended up at 425 k. It's the seller's gonna hold a twenty five percent second lien position note on the property, and our lender's gonna finance 75% of the purchase. So there might be 5 or $7,000 out of pocket to us in the end of the day. So awesome. Yeah. And it will kinda return to the company, you know, when you combine the management fees that we charge ourselves because we do our own in house management and then kind of the the leftovers at the end of the year from kind of the profit. Somewhere between 10 and $15,000 a year on an ongoing basis for, you know, 5 to $7,000 out of pocket.

Dan Austin: [26:12] That's a 33% ROI. No. More. 66% ROI. No, 300% ROI.

Mike DeHaan: [26:22] This guy tried to try to do it. That's so funny, man. I'm so worried you went out with our accountants today, Dan.

Dan Austin: [26:33] Just trying to sound smart.

Eric Rice: [26:34] Yeah. Yeah. No. That's that's incredible. Anything you know, that's it's easy. Percentages are funny when you look at when you look at small numbers because, you know, it's it's not a huge number coming in, but, you know, a 100% money or 200% money on $5,000 every year is great. I mean, I'll take that.

Dan Austin: [26:49] Yeah. All day long. That's that's actually a really good deal. And and your cash offer, what was your cash offer compared to this creative financing offer?

Eric Rice: [26:57] $3.80 fives. $3.85. And, you know, we're under contract of $4.25. The property is probably worth 500. That's a great deal.

Dan Austin: [27:05] And you're in the that I love the options, like, when you can when you're dealing with a good seller, like, a logical seller, and you can give them options, and they pick the best one for them, which also is a great one for you for them to do a seller carryback on the on the down payment. I mean, that is a great deal.

Eric Rice: [27:20] Yeah. And sophisticated guy, doctor, you know, just was and has a, like, a brother-in-law partner on it and just kinda ready to ready to move on to something else, but they still like the idea of having a little bit of cash flow. So in this kind of current interest rate environment, it you do I mean, I really think you have to get creative on deals to make them passive Yep. Until sellers really, on the larger stuff, adjust their expectations. I mean, we're still seeing, you know, we're still seeing sellers that want, you know, a six cap on a 35 unit apartment complex in Pittsburgh, like, not in the city. That's kind of like workforce housing. Not half many. It's time to adjust. Yeah.

Mike DeHaan: [28:01] Yeah. That's I think that's super valid. And, I mean, that's something we work a lot with off our our instant investor folks too is, like, trying to find those different opportunities when, like, the cash offer doesn't make sense. And, you know, I I I'm I'm stoked that we were able to get that opportunity for you from the marketing stuff that we've been running for you. But the fact that you had the wherewithal to recognize that the cash offer wasn't gonna work for him, and then I'm assuming that you're the one that pitched the seller wrap, unless the guy was sophisticated enough to do that himself. No. I'm not. He might have been.

Eric Rice: [28:28] We definitely pitched. And I, like, went and met him. You know? So, like, I was like, just come up. We'll have coffee. We'll talk. Because he was pretty local. So Yeah. Great. I mean, he liked that too. But but, yeah, man, you know, I love making deals. That's like that's what I'm the best at. So it's funny.

Mike DeHaan: [28:43] And that's how you know you're a pro too is when you can start to think about things that way and and, you know, find those those gray areas that I said I said, I say gray areas. You find those unique opportunities that 95% of the people don't even think about. And I think especially right now as you're going into, like, higher interest rates, you know, they just raise rates again. You know, anything that you can do to even, like, capture that debt. Like, we're starting to see a lot more people that are doing, like, subject tos Yep. On, like, larger multi families where they're taking over, like, a 4% debt and these different things. And that's gonna be so mega Yeah. Going in the next couple years.

Eric Rice: [29:16] And in these creative finance type deals, especially if the seller's holding the note and you're, like, a reputable person or company, like, it's a win win for f like, everybody wins. Like, it's great. They get ongoing cash We get the property. You know? I mean, they get a bunch of equity out, and it's awesome. So it's cool to put together a deal where, you know, everybody feels good about it and is happy with the result.

Mike DeHaan: [29:37] I know. Yeah. Yeah. That that that is nice. That is one of the down down things I will say about wholesaling is most of the time, not all the time, most of the time, we are their last resort.

Dan Austin: [29:48] Yeah. So it's always good feeling for them.

Mike DeHaan: [29:50] No, it's not, you know, and like, sure, people can have a good experience, we can help them out as much as want. But like a lot of times, people that have been just going through shit for like, in the last few years even and then find there's like, you know what, we gotta just like offload this thing. Yeah. You know, we can't afford to fix up anymore. We are gonna lose the house. Like we have to just dump it. Yeah. So cool. That's awesome, Eric. So what's coming up next for you guys in the future as you're sort of continuing to, you know, keep chasing deals? Like, what exactly are you guys trying to put together with Fresh Pay Your Capital?

Eric Rice: [30:21] Yeah. So I mean, one thing I did earlier this year before kinda making the jump over and and moving into this full time is, you know, I I read a book that I don't know whether it was who recommended it to me, but it's called Vivid Vision. And, man Great book. Was so helpful. It just it was a book that I read and took the time to kinda do the exercises laid out in the book and kinda create this three year vision for Rice Beggar, and that just, like, clarified a bunch of things for me. So, you know, I stopped counting doors because I think it's a stupid metric. I like, I just think about it more in terms of, like, what is the gross, you know, value of the assets we have within the company, and I'd made those targets. So the target is to be a have a 100,000,000 in assets in RicePegger within thirty six months. That was, you know, nine months ago when I did that. So Wow. We've still got a ways to go. But it's funny because, like, I see that number, and I wanna march toward it as fast as I can. But I also am trying to be patient right now because I know we're experiencing this shit in the Mhmm. Yeah. And it's I wanna grab deals, but I'll I'll have to just, like, satisfy myself with with smaller creative deals or larger creative deals if we can find them until until the metrics make sense again, and we'll just we'll go hard and and go get some bigger stuff, some fifty, hundred unit stuff.

Dan Austin: [31:42] So barring the fact that, yeah, maybe the twelve months might be a little rocky on the acquisition side, when you set that vivid vision to do a 100,000,000 under management, did you change anything immediately in your business, or was it just like, we have the processes. Let's just keep marching forward as is?

Eric Rice: [31:58] Yeah. So we started to add more processes and started to add people. That point in time, we had one maintenance technician and three partners. Now I've come work full time in the company. So I moved full time into the CEO role. We hired a full time property manager in the company, and we hired another maintenance technician as well. So we're starting to build some processes inside the company that allow us to layer on a 50 unit or a 75 unit, and it's not like we have to start from scratch. You just you just pull them into the mix, and you release the units up, and the systems are already there. So that having that you know, trying to grow to that scale, which is still small by a lot of people's, you know, metrics, is is not possible without some systems in place.

Mike DeHaan: [32:45] Sure. You hired a full time in house property manager. Yep. I mean, that's man, we gotta do it. We tried to do that. Awesome. And then he he sucked, and we fired him. But, like, it's just a hard thing to, like, find somebody that to do that, I think.

Dan Austin: [32:59] So who so who's on your staff then, like, right now on that side of your business?

Eric Rice: [33:04] So one property manager, two maintenance technicians, and then myself. Those are the only, like, full time paid employees, and we've got a bunch of, you know, kinda third party contractors and service professionals that, you know, help with our business but aren't, you know, on the payroll, so to speak.

Dan Austin: [33:20] Right. And so and that's how many doors are you guys managing right now?

Eric Rice: [33:24] I think we have a about a 140 ish right now, like 15,000,000 Okay. Assets. Okay. Cool. Those are all things

Mike DeHaan: [33:32] we gotta we had to get to work, Dan. We need some of these. If he's I know. The We do. He's the bullshit. We're always running around trying to do stuff that we haven't get. But it's kind of tough because like with ours, you know, we don't have as many doors to not quite have as many enough problems to like keep someone like that busy all the time. But like, know, it's just, like, just enough that it detracts from us being able to do. We're working out every single day.

Eric Rice: [33:55] So we we didn't have enough, like, to start, and I'd say we're still slightly operating in the negative in terms of, like, our our costs and Uh-huh. Personnel, but I have the path mapped out. Like, I know what we need to Right. To get the helps me get there much faster if I have those people and processes in place already. Okay. So I

Dan Austin: [34:16] have two questions in on that. So when you said a 140 doors, are those all your doors that you're managing, or is there other people's doors under that management?

Eric Rice: [34:23] All ours, but some of them are syndicated. Like, a chunk of chunk, like, the 62 units are syndicated. So Okay. Mostly are with some syndication, but nothing third party.

Dan Austin: [34:33] But you pay you charge all of those doors 8%, basically. Right. And so when you say you run a negative, probably your fee should maybe be 10% to cover your cost, but or whatever that should be to cover your cost, but this is not that's not your path. It's 8%, and your path is adding more doors to reach scale. That's right. Okay. I just wanted to clarify that. That's interesting to know because I think that's it's important to recognize is, like, this is our business model, and we're going to get there, but you do have to invest. That's what we're doing is investing in your company a little bit until you get to that point to where you are at scale, and you are, what do they call it, like, minimum efficient scale or max efficient scale or whatever, where you have enough and you're actually profitable at that point.

Eric Rice: [35:11] Yeah. Exactly. And it's also helpful. You know, the the guy that runs our management is awesome. He's a young guy. He's hungry. He's entrepreneurial. And, like, having like, knowing where the numbers are and knowing that, like, he's in the like, his business and our business is in the red is motivating to him. He's looking to keep things lean, add revenue to his piece of the business to get himself in the black. And I think that's that's helpful because he is an entrepreneurial guy. He's a smart guy. So think it's it's it's cool to do it like that.

Mike DeHaan: [35:40] Yeah. Very cool. Awesome. I love it. Lots of big things. Cool. So as we sort of get to the end of our time here, I wanna dive into our final questions with you, Eric. First off, the crowd favorite question. What is your craziest real estate investing story?

Eric Rice: [35:56] Oh, man. There's a lot of good ones. I would say that it's a story related to one of the things that led me to become a real estate investor. So real quick backstory in DC. When I first got to DC, it was 2009. It was the height of the great financial crisis, and there was foreclosures everywhere. So, like, Bank of America and other countrywide, other banks were our clients. So I sold hundreds of foreclosures down there, lots of them to investors that I helped with their redesign process and lease up process. And I was, damn. All these people are making all this this money. One property in particular that went to an investor, I was always the first guy in the door with, like, the drill, drilling out the locks. I was, like, in DC. And, you know

Mike DeHaan: [36:41] That's funny.

Eric Rice: [36:41] So I'm drilling out the locks on this really rough property. And, you know, I go in, and I'm like, oh, man. There's just a bunch of crackheads. And I was like, I I'm not going in. So I called the police. And I wait out front. Forty five minutes later, the police show up. They go in the house. I'm waiting out front. They go in the house. They're like, just wait out here. And, like, all of a sudden, all the 2nd Floor windows on the property just open up, and they're just people jumping out of the house. Like like, crazy, dude. The guy runs right in front of me in just his socks and, like, is under the just kinda running from the cops, and they're they're busting everybody out of there. Five minutes later, they come out. They're like, okay. We cleared everything. Good to go. And I was like, did you go in the basement? You know? And they're like, yeah. Yeah. The basement's good. I was like, well, it's pretty dark down there. Like and I'm just just me, and I don't have a gun. Can we, like, double check that? And it was like, in DC, there's a lot of doors under porches, and it's they're, like, separated English basement cell apartments. And so I go down and they knock on the door, and these two people just answer the door. These crackheads just answer. And he's like they're like, can we help you?

Eric Rice: [37:47] And we're like, did you not hear, like, 10 police officers inside running around busting everybody out of there? Like, no. We were sleeping. There's no lights down there. There's mold all over the walls and the ceiling. Oh my god. I mean, it was just that was the kind of shit you dealt with. But that house today, you know, that house probably sold for a $150 at the time that today is about an $850,000 house.

Mike DeHaan: [38:09] Yeah. Yeah. Sounds about right.

Dan Austin: [38:10] Full of crackheads.

Mike DeHaan: [38:11] Yeah. That's crazy. Yeah. Yeah. We've definitely had our fair share in those two. So that's pretty good, though. So that was actually before you even started buying. That's back when you were just

Eric Rice: [38:19] Yeah. I I needed to buy some some crack houses. That's

Dan Austin: [38:24] Yeah. Hey, man. That's funny. Crack is not always whack.

Eric Rice: [38:29] That's right.

Mike DeHaan: [38:30] What? I think it is definitely always whack.

Eric Rice: [38:32] Yeah. I mean, I would I would argue that point, but you're the hottest. Yeah.

Mike DeHaan: [38:37] No. See? Because without crack, you wouldn't have crack houses. Without crack houses, you wouldn't have investment opportunity.

Eric Rice: [38:42] Well, that's not always why.

Mike DeHaan: [38:44] Alright, okay. Oh my god, it. You're just full of it today, Dan. You've been must have had some drinks without accounting at lunch or something. I did, yeah, totally. Alright. So next question, what's the number one piece of advice you would give for a new investor looking to get started with the real estate investing journey or in a kind of, like, lightly established investor looking to take their business to the next level?

Eric Rice: [39:07] Yeah. So if you're brand new, just no deal is gonna be perfect. Go buy something and do something. Even if you lose $5,000 on it, it's no. It's the start of the journey. And if you're already investing and you wanna do more, you just have to you just, like, put another zero on it kinda thing and and take that next step and find a partner if you need to. But just just hustle and get yourself to that next level because it's not as hard as it seems, you know, in your mind.

Mike DeHaan: [39:37] I think that's the biggest thing is limiting beliefs. I know a lot of people definitely struggle with that. Yeah. You know, even like, I mean, just

Eric Rice: [39:43] like, as you start

Mike DeHaan: [39:45] to grow, that even starts start to continue and it's Right. You know, you can reach out that one milestone of, I don't know, a million net worth. You know, you have 50 properties, whatever. And then all of a sudden, it seems like it's so easy. But then you go to a, you know, meet up somewhere and you meet someone that's like your age that's worth 25,000,000, and they have 5,000 properties, and they're they're talking to the guy that's worth a billion dollars, you know, and it's just like, you know, it's always about taking the next step. So awesome. So wrap up, Eric, where can people fall along, see what you're doing, and potentially reach out to you if you would like them to?

Eric Rice: [40:16] Yeah. Awesome. Rice peggar dot com. And you can get me at eric at rice peggar capital dot com, r I c e p e g h e r. Perfect. Easy enough. Any socials? Rice peggar's on Instagram. I think you could just search that and find it.

Mike DeHaan: [40:32] Yeah. Okay, perfect. Easy enough. Eventually, we're gonna have someone on here that's a real estate investor that is doing real estate content through OnlyFans. And we will, and we will sign up for it. That'll be the goal. I mean, I'm honestly surprised no one has done that yet. Been like, hey, I'm a guy that talks about like, you know, creative financing on the porn social network.

Eric Rice: [40:53] There's gotta be somebody on it.

Mike DeHaan: [40:55] They're trying but I haven't heard about it yet. So their

Eric Rice: [40:57] their marketing sucks. Yeah. So,

Mike DeHaan: [41:01] alright. Cool, Eric. Well, thanks so much for hopping on, man. We really, really appreciate your time. You got some good stories. You're doing some big things. And guys enjoyed the show. Please go and subscribe. Wherever you listen to your podcast, leave us a five star review. And besides that, anything else from you, Dan?

Dan Austin: [41:16] No, it's a lot of fun, Eric. Good to hear from you and all these cool stories. Can't wait to hear some more cool stories about crack houses. Crack is not

Mike DeHaan: [41:24] always wack. Yeah, that's Dan. That's Dan Dan's new favorite. I wanna go. I'm not gonna go. For how much you complain with all of our crack houses. I didn't realize that they were secretly just like your favorite. So we'll we'll find some more for you.

Eric Rice: [41:36] Thanks. Awesome. Thanks, guys.

Dan Austin: [41:38] Alright. See you guys.

Mike DeHaan: [41:38] Thanks so much, everybody. Talk to

Dan Austin: [41:39] you next week. Yep.

Mike DeHaan: [41:41] For listening, everybody. Please make sure you subscribe and leave us a five star review wherever you listen to your podcast. Also, please make sure you go and you share this with other people within your network. We are really trying to grow this thing, and the best way for us to do so is by you telling other people to come check us out. You can also follow us on Instagram. I am at mike underscore invest. Dan is at investor man Dan. You can follow the podcast at collecting keys podcast. And if you wanna learn how to make real money as a real estate investor or you want to grow your already existing real estate investing business, please go and check out instantinvestorprogram.com and book a call with either Dan or myself, and we will see if you'll be a good fit. Thanks for listening, everybody, and talk to you next week.

Speaker 2: [42:24] Thanks for listening. Please leave us a review on iTunes or wherever you get your podcasts, and check us out at collectingkeyspodcast.com for tips and guides on starting your own real estate investment and wholesaling business.