Creative Financing & Out-of-State Investing with Steven Weinstock

Steven Weinstock (00:00)
some of the earliest successes I had was when I learned about creative financing, where I ran out of money real fast for down payments.

I had lots of equity and I just didn’t know how do I move forward. And I was introduced to seller financing where I could get into the property with no money possibly.

Erika (01:55)
Hey everyone, welcome to the Real Estate Pro Show. I’m your host, Erika. And today I’m thrilled to be joined by Steven Weinstock, a multifamily investor and podcast host who’s been making waves in the investing space. Steven, it’s awesome to have you here today.

Steven Weinstock (02:11)
Thank you for having me.

Erika (02:13)
Yeah, yeah, we’re really excited. So let’s dive out in Steven. For those who don’t know you yet, give us the rundown. How did you get started in the investing world?

Steven Weinstock (02:23)
Sure. Back in 2001, I was living at home with my parents. I had a corporate job, didn’t have too many expenses, but I always knew I wanted to get into real estate. And I just didn’t know how or what. And I decided to call a bunch of brokers and I settled on a certain market about 45 minutes from where I live. I am born and raised in New York City.

and New York City was and is a very tough market to break into. And I did have limited funds and I was able to find a house in Trenton, New Jersey, single family home with the listing price of $32,000. And I put down 10 % back then. The mortgage standards were a less than they are today. And I was able to close.

and buy this house for about $6,000 all in with closing costs. And it had a tenant inside paying about $900 a month rent. And I thought, great, I own a piece of real estate. I’m done. I could pay this off over the next 30 years. And when it’s time to retire, besides a fully padded 401k, I could sell this house and not have to sell my current primary, which I didn’t have at the time. I was still…

a kid living at home, but I wouldn’t have to downgrade. could keep my current house and just sell this investment house. And after two or three months of collecting rent, the numbers really started clicking. And I figured, why just one? Why not two? Why not three? Why not four? And it took me a while. And ⁓ what enough where I decided to

get rid of my W2 job and do this full time.

Erika (04:20)
Yeah, that’s really awesome. When it comes to your journey with investing, what was it like making that leap where you no longer had the W-2? Was it a pretty smooth transition? Was it a leap of faith? What was that like?

Steven Weinstock (04:36)
So again, I guess I was lucky because I wasn’t married. I didn’t have kids. I didn’t have people relying on me to eat. I had a car payment and some spending money I needed to do to spend on for myself. And as soon as I was making a few dollars, I realized, why work for somebody else? Let me put my nine to five into my investing career. And that’s what I did.

Erika (05:51)
That’s great. When it comes to the properties that you have now, what’s your, what’s like your, your, your focus, you know, which markets and are there specific property types or strategies that you tend to go with?

Steven Weinstock (06:05)
Sure, so for the first 10 years of my career, I was buying ⁓ one to fours. I started with single family, but after three or four, I was really buying two, threes, and fours. I really liked those. ⁓ Stayed with that asset class till about 2012. 2012, I started buying larger, but not much larger, five units plus. It was a different, ⁓ it’s considered a different asset class where you need to now get commercial mortgages.

And I was buying fives and eights and twelves and some mixed use properties, know, with a store, a retail on the bottom and two or three apartments on top. And then in 2017, I started looking at larger multifamily and I was looking at different markets. There were people that I was, I guess, networking with or people I was in touch with that were buying and investing out of state.

And I started looking at a bunch of different markets. And in 2017, I found a property in the suburbs of Cleveland and raised some money from outside investors. And over the years, I always had people who always asked me, you know, could I invest? Did I get it with you? Could I buy a house with you? And I never really penciled, you know, to get them involved in, you know, a house for $300,000. But here I’m buying.

you know, this multifamily for, you know, a few million dollars. I needed to raise some money and made all my calls. And I was able to raise the money pretty easy at the time, pretty seamless at the time. And we purchased the property and I still own it today.

Erika (07:51)
It’s awesome. When it came to venturing out, when you started getting to different states, did you have to change what you were doing to balance it all?

Steven Weinstock (08:01)
⁓ Yeah, mean, when I was ⁓ buying primarily in New Jersey, it was more of an owner-operator type of business. Everything was me. I got all the phone calls. I delegated, you know, if something needed to be fixed, I would call the plumber and would call whoever it was that needed to be done. I would collect the rent. Obviously, rent collections got a little easier logistically, just with Zelle and…

electronic payments and better software. But I used to drive down to collect the rent ⁓ all the time. So when we purchased this property ⁓ in ⁓ Ohio, ⁓ it really taught me that it’s not an owner-operator business. It’s really about teamwork and different teammates and team players. What might be my strength is not necessarily somebody else’s strength.

I realized I needed to create a team in order to balance this. And when I say a team, ⁓ to deal with investors and investor feedback, investor relations, to deal with the banks, the banks, you know, to purchase a two family home, ⁓ the application process is a lot easier than when you’re buying a $10 million property. And, you know, I just needed to really create a team. So.

I was always a jump in, first type of guy and we purchased this property, got a great deal on it, but it really taught me real fast that I need to get a team in place and I was able to get that done. ⁓ And I was able to buy more in Ohio and ⁓ a couple of years later moved to or added another market that we buy, which is Louisville, Kentucky. And between those two markets,

We own about 1200 units and we self-manage these properties here in my office in New York. But we obviously have some boots on the ground, employees at the various properties that handle a lot of the legwork.

Erika (10:48)
Yeah, yeah. And with building that team, did you have any growing pains? Was it hard finding the right people or was there a, you know, a method that helped, you know, that process become a little bit more smooth?

Steven Weinstock (11:02)
⁓ yeah, so it definitely was hard. when I started looking for a property out of state, I took on a partner who basically is the opposite of me. He’s very organized. He’s great with, you know, details and Excel and paperwork. And, you I was more of, you know, operating out of my car and, know, everything was written down and a lot of the stuff was in my head. And.

And all of sudden when we’re dealing with a larger property, you need more systems in place. So while I knew that the systems in place needed to be done, I didn’t know how to do it. And this partner came from a Wall Street background and he really knew how to figure out the best software, the best payroll software.

⁓ But the best method is the best way to just deal with different employees that I typically, I never dealt with employees. I dealt with one-off ⁓ plumbers and contractors, but to have employees that are relying on their weekly paycheck for me was a little out of my personal comfort zone. But for my partner, this was like a walk in the park. ⁓

I took on a partner for this project and still with the partner with these other multifamily projects.

Erika (12:37)
That’s great that that’s still working out for you, Steven. When it comes to the commercial and multifamily that you do, what’s a trend that you see right now that you think investors should be paying attention to?

Steven Weinstock (12:52)
⁓ I mean, a lot of people the last couple of years are nervous about interest rates, nervous about inflation. ⁓ On a side point, as an investor, I love inflation. I don’t like paying extra for my eggs and milk in the supermarket, but I love inflation because if I have a loan from three years ago that let’s say it’s a million dollar loan and inflation drops 10%.

Effectively, that million dollar loan that I have is really only like 900,000 because yes, the dollar amount is the same, but it’s only worth about 900,000, so to speak. So anybody who owns assets, and that’s why the stock market did very well as well. Anybody who owns assets and then inflation jumps, yes, it’s going to affect you at the grocery and stuff that you’re buying because, you know, paychecks might not.

⁓ rise as fast as inflation does. But if you’re lucky enough and fortunate enough to have as many assets as possible, all of a sudden, your values really went up. So that million dollar loan that I had or that $20 million worth of mortgages that I had is now ⁓ worth $22 million, so to speak, because of the inflation. Interest rates, if you asked me a year and a half ago, I would have told you I’m optimistic.

that interest rates will go down. If you asked me a year ago, I would have said, don’t ask me the question. In general, I’m an optimistic person. I’m not afraid of the interest rates really going up at this point. I’m just really waiting for that to come down.

Erika (14:40)
Yep. I’ve been hearing that a lot on the podcast. Steven, let’s pivot a little bit and talk about, you know, ⁓ more about your journey. And as I’m sure you know, every investor has a moment where things might get hairy, a deal that goes sideways or a tough lesson learned. Maybe you had to pivot with what you were doing to close a deal. Can you share one of those moments on your journey?

Steven Weinstock (15:49)
Um, yeah, I mean, uh, as somebody who’s been through really hundreds of closings, I’ve had many mistakes, uh, many pivots. Uh, the goal is obviously to be on the winning side. So as long as I’m, uh, you know, in that game, uh, I’m ahead of the game. Um, but yeah, let’s try to think of something. Um, I bought this house, uh, I don’t know, about eight, nine years ago. It was on a busy street in New Jersey.

great house and I was very confident and I was looking at a lot of property at the time and I guess I didn’t do the best due diligence and I remember I closed on the property in like October time and after the closing I come to the property and knock on the doors and introduce myself, hey, new sheriff in town, et cetera, et cetera.

⁓ And, you know, introduce myself to the tenants and the tenants asked me one by one, will we have heat this winter? And I said to them, what do mean? They said, we haven’t had heat. Said, I’m living here three years. We haven’t had heat for three years. I said, really? Said, yeah, I mean, we plug in, you know, the previous landlord bought us plug-in heaters and we plug it in, but my electric is expensive, et cetera, et cetera.

And I quickly go down to the basement and I notice that there is not a single boiler furnace in the basement, which means all the units have no heat. And believe it or not, I missed it when I bought it. So I quickly called the plumber and he got a quote to put in a bunch of boilers. I ended up putting just one in the property and Jerry raked so all the units could share off that boiler.

And later on the season, when things calm down and plumbers are not so busy, like in the springtime, I added a bunch. And this was like a real wake up call. And this was far from my first deal. I mean, I was already rocking and rolling. was living in a paid off house for myself. I I had money. I had success in deals. ⁓ I guess I got too cocky. ⁓ Maybe the deal was just too good where I just made the offer and did it.

didn’t really dot my eyes, obviously. But that was definitely a costly mistake. And it’s something that I think about on regular basis because at the time it was pretty embarrassing. And now I’m sharing it on a podcast for the world here.

Erika (18:36)
But you know what? It’s moments like that when people come back from that, that it separates people from, I just do this on the side, to like, no, this happened and look where I am today. So bravo to you, Steven. So another thing that I want to chat about with you is relationships in real estate. I’m sure, as you know, it’s so important with

Steven Weinstock (18:50)
Yeah, yeah.

Erika (19:05)
what you’re doing, what has been the biggest game changer for you? Like what relationship or networking group has helped you level up?

Steven Weinstock (19:15)
That’s a good question because over the years, I’m in this since, I guess, 24 years, almost 25 years. And every couple of years, I have these epiphanies that I think change the world and everything’s going to change. But if I look back,

some of the earliest successes I had was when I learned about creative financing, where I ran out of money real fast for down payments.

I had lots of equity and I just didn’t know how do I move forward. And I was introduced to seller financing where I could get into the property with no money possibly.

I’d buy a property, let’s say for $100,000. I would get a loan for 80,000 from a bank. And then I would ask the seller to finance the 20,000 over a four or five year period. And while I…

the cash flow wouldn’t be great because I’m fully leveraged and that 20,000 is over a five-year period, not over a 30-year period. It allowed me to not just buy a property without any money down, but it allowed me to start thinking very creatively on how to do a deal. And fast forward 15 years or so, I bought 180 unit property with seller financing.

You know, obviously it wasn’t structured the exact same way, but without some of those early wins with seller financing and with creative financing, I would have never thought to get it done on a larger $11 million property. creative financing is definitely something I always think about. There’s lots of ways to lots of lots of deals that might not make sense with the typical.

you know, 75 % mortgage, 25 % down. But if you could structure it creatively where, you know, both sides are happy, sometimes, you know, you can make any deal work. ⁓ That and I gotta say networking. I wish I networking was so important. I used to think, hey, it’s, I’m an owner operator. This is my business. I’m the secret sauce. I don’t wanna…

talk to anybody, there’s no reason to talk to anybody, maybe a few brokers here and there, but why would I talk to another owner? They’re the competition. And it took me a while to realize that in real estate, there really is a competition because the real estate business is so fragmented, it’s so large, where I’m talking to a guy from California and we’re in the same exact asset class, he’s not…

bidding, you know, he’s nowhere near the properties that I’m interested in. And for the most part, anybody I speak to or meet in real estate, unless they’re literally bidding on the same exact property at the same exact time that I’m interested in, there’s no competitors. You know, we’re not fighting for the same customers. You’re not really fighting for the same tenants for the most part. So it took me a while to figure out the networking was so important. And

You know, it took me a while to come out of my shell. You know, what are they going to think? What are they going to say? I look like a fool. I sound like a fool. And then I realized, hey, everybody sounds just as foolish as I do. So, you know, why not? And that really upped my game. It allowed me to raise money, you know, raise capital for deals. It allowed me to have, you know, by being out there, allowed me to…

It allowed brokers to call me and say, hey, I have this deal. And I remember when I started getting deals sent to me, there were good deals, not just, you know, MLS listings. I’m talking like a real pocket listing or a seller would call me and say, hey, I know you own over here, X, Y, and Z. You’re interested in this. And, you know, if we make a deal, you you cut out a broker and there’s no, you know, the price is lower, et cetera. And I realized that, you know, putting myself out there.

It’s very hard to quantify the exact ROI of networking. Just to give a, if we have time, just to give an example. And I heard this the other day, someone told me that there was this guy, I think one of these big podcasters, not podcasters, one of these big influencers, social media guys. He was in a meeting with one these corporate, like Pepsi or Coke, like 20 years ago. And he was trying to convince them.

Erika (23:46)
No.

Steven Weinstock (24:06)
to advertise on social media. 20 years ago, social media, what’s that for? And they kept asking him, what’s the ROI? And he didn’t really answer. And throughout the meeting, I was sitting at a table with a whole bunch of Henancho’s at Pepsi or whatever it was. And there was this one woman who kept coming back, but what is the ROI? If I spend a million, am I going to get 1.2? What is the ROI? And he turned around.

And he said, what is the ROI of your mother? Now, he didn’t mean that disrespectfully. He basically said like, as a kid, your mother gave you encouragement all day long. You’re great. I’m going to buy you a piano. I’m going to buy you a baseball glove. And it’s hard to quantify what’s the ROI of your mother or somebody as a kid giving you all this encouragement.

that now shaped you to who you are. So here’s this executive of a city making couple hundred thousand dollars a year on the board, in Pepsi or Coke, whatever it is. And some of it has to do with the way they were brought up. And it’s hard to quantify the exact ROI every time this person’s mother said, you’re great. You can do whatever you want. You can be president, you know? And, you know, I heard that, I realized that, you know, I go to these networking events, I fly to them, I go to them all the time.

And people ask me, is it worth the airline fare? Is it worth the hotel? And the answer is yes, because I might walk away from an event and not have closed the deal. But four months later, I might see the guy at a second event. And now, a month after that, talk to him about a deal and maybe something happens. again, as long as I’m net positive, networking is great.

Erika (26:01)
Yeah, I loved it. That was that was a really, really great story. Really, really interesting. So Steven, what’s next on the horizon for you? What you know, what do you see with your future in investing?

Steven Weinstock (26:05)
Thank

Sure, so obviously I’m full speed ahead to buy. I recently launched a real estate fund to buy one to four, it’s single family up to four family houses in certain counties in New Jersey. And I’m using the fund to buy these properties in cash. And the reason I’m offering and paying cash for them is because I’m buying them at a big, discount. So just to give an example.

I’ll see a three family house for $675,000 and I’ll visit the property. I’m not just doing this by mail. I’ll visit the property and I’ll make an offer of $590,000 or $600,000. And most of the time the seller or the broker tells me to fly a kite. Hey, it’s $675,000. We listed it two days ago, you know? And I say to them, no problem. My offer stands. Come back to me in a month, three months, four months.

My offer stands, I won’t try to retrade you. My offer stands. On top of that, I’m paying cash. Here’s proof of funds. And my deposit that I give when we go into contract will be non-refundable. So you know I’m here to close. On top of that, I can guarantee a closing in 14 or 21 days. And, you know, my offer stands. So if I see 10 properties today,

Just about all 10 of them will tell me fly a kite. They’ll say, I just listed it. It’s an insult. How dare you? And within three or four months, I’ll get two or three phone calls from those 10. And maybe one will accept. Maybe one or two will try to negotiate a little further and maybe won’t work out. But usually when they come to me after two or three months, it’s usually because they’re either pissed off at their broker. ⁓

you hey, you promised me I can get this and I can’t or they’re upset that they were in contract with a deal that fell through. And most of these deals that fall through on these types of properties have refundable deposits. So here the seller wasted two, three months in contract. The broker stopped showing it. He had no backup offers. And, you know, the person got back his deposit and now he’s starting to square, you know, first base or square one or whatever. And ⁓

So when they come to me, they usually like pissed off and they hate their broker. They hate everybody else. And they just say, screw it. OK, I’ll take your offer. And so I’m buying these properties at this big discount. And what I’m doing is I’m keeping it mortgage free for the first year. This eliminates a lot of risk, a lot of the biggest risk to investors, real estate investors is the bank. Why? Because the bank has to get paid no matter what. So if something is not working,

outweighed with the property, bank gets paid, investors don’t. God forbid the bank takes away the property, investors lose everything and they’re just wiped away. See here, I’m buying the property and the first year of ownership is when a property has, I guess, the most risk and I’m eliminating that risk because there’s no mortgage. So my investors effectively have like a first lead position on the property because there’s no mortgage on it. So it’s a

It’s a $6 million fund that I have and we’re buying properties in cash. And after 12 months, I am refinancing the property, pulling out as much as I could. Sometimes I’m able to pull out more than I put in because I’m buying them at such a big discount. And when I get them appraised a year later, they’re appraising it. They’re valuing it at the value that it really is because everything else on the block sold for $6.75.

This sold for $590, they’re still going to value it at $675. So what doing is I’m taking the funds from the refinance and I’m rinsing and repeating, I’m buying again in cash. So just to give a quick overview, $6 million fund, buying 10 houses in a year one, $600,000 a piece. I’m going to the bank in the beginning of year two, I’m pulling out about 75 % of the value, which is $4.8 million.

I’m taking this 4.8 million and I’m now buying six or seven houses instead of 10. I’m buying, let’s say, six or seven houses again at a discount in cash. So now, you know, I have the first 10 houses with a mortgage now after the first year. I put a mortgage on it and I’m able to buy and I’m rinsing and repeating. It’s a five year fund and, you know, distribution to get paid monthly to my investors and, you know, an investor who

invest about 100,000 should walk away with about 190 at ⁓ the end. the properties itself are very, I don’t want to say secure, although one to fours are considered the most secure real estate out there. Every time there’s a pullback from lending, lot of lenders will say, okay, we stopped lending on everything except one to fours. Blackstone.

wants to park a few billion dollars during the high inflationary period, they’re going to buy 5,000 single-family homes. The 1 to 4 market has a double pool of buyers who are willing to buy it. If I sell a building that I own in Kentucky for $10 million, the buyers

is really open to sophisticated buyers. You’re not going to have a mom and pop buyer, which means the person underwriting the deal, you know, they’re sitting by a computer, they’re looking at Excel. The rates are 25 basis points too high. I can’t, you know, offer that for for the, for the building or it’s worth a million dollars less. So you have a lot of people who their exit was planned for, let’s say 2022.

rates went up, all of sudden they’re stuck holding the property for another two or three years because they can’t sell it. When you’re selling a two-family house or a four-family house, a one to four, there’s two types of buyers. There’s mom and pop investors, you smaller investors. I don’t want to say not sophisticated because it has a bad connotation, but mom and pop investors or a homeowner.

somebody who wants to actually live in the house, they want to buy a two family, live upstairs, run down downstairs. And not that rates don’t affect the purchase. the, well, since the overall loan amount is much smaller, it affects it less. But when somebody is ready to move into a house, you know, they’re 32 years old, they have a kid, maybe a kid on the way, they’re married, whatever, whatever that step is to buy a house. That’s when they’re ready.

You know, they have the job, they got the promotion, they’re ready to buy it. So if the interest rates are seven, they’re not gonna stay on and wait till it comes down to three because they need their house. If it costs them actually 200 bucks a month, so be it. If they have to buy a smaller house, so be it. But the pool of buyers for these types of properties are less affected by the externalities of what’s going on in the world, so to speak.

And also the mom and pop investors who buy these houses are typically, you can have like a rich lawyer who decides to put down 50%. You know, every couple of years buys a house in his neighborhood and, know, over the lifetime, you know, has a tremendous portfolio. Or he could have like a rich plumber, you know, makes a boatload of money. He’s putting down 40, 50 % and he buys a three family, you know, house two blocks away from where he lives.

So it’s not necessarily somebody underwriting with Excel and looking at every, basis points and the interest rate and every little detail. So when it comes to selling these types of properties, ⁓ I want to say it’s a lot easier because they don’t need to wait for the rates. Like I have property that I’d love to sell, some of the multifamily and I can’t because the rates haven’t gone down yet. Now I’m fine owning it and I’m happy with, you know, the benefits of owning it.

And the value does increase over time and my NOI goes up, my rents go up. But really I wanted to sell it because I told my investors I would sell it two years ago, but it just doesn’t make sense for me to sell it today. With the smaller properties, it’s just easier to offload. You’re selling one at a time. don’t have to sell all 150 units at one shot. I could sell off one or two at a time. So at the end of the fund, if it’s a five-year fund,

If the market is just horrible, I don’t have to offload everything at once. I could offload one or two at a time and gauge how things are going. that’s ⁓ just my long rant on my Gotthald’s Capital Fund is what I started.

Erika (35:39)
Well, well, that’s exciting. yeah, sounds like you got a really solid plan there, Steven. Before we let you go, if someone wants to reach out, connect, or maybe they want to hear more about that fun, what’s the best way to get in touch?

Steven Weinstock (35:54)
Sure, so I’m all over LinkedIn, Steven Weinstock. I think there’s more than a few of us. There’s actually another Steven Weinstock who’s in the real estate business and I get calls for him all the time. ⁓ But make sure this face matches up. And if you’re on audio, Steven Weinstock, my company is called WeCapital, W-E-Capital, C-A-P-I-T-A-L. The website is WeCapitalX.com. Y the letter X.

My partner is an Elon Musk fan, something with the letter X. I know he did it with Twitter, but I think he was already involved with the letter X before he bought Twitter, Musk. But either way, my my website is weak capital X.com. You’ll see details of my Dothos capital fund on the website. You’ll see some of my podcasts that I’ve done. Also write a newsletter to reach you by email. Steven, S T E V E A at weak capital X.com.

⁓ I’m on Instagram, but not really, so don’t message me there. Although my kids tell me Instagram, Instagram, Instagram, but I’m on LinkedIn, email, website, and yeah, I think that’s the best way to reach me. Or you can knock on my door, but I’ll get you my address later.

Erika (37:14)
Steven, that was excellent. I loved all your advice today. I know that it really is going to help people out. Thank you so much for being on the show today.

Steven Weinstock (37:26)
My pleasure. Thank you so much for having me, Erika I know we rescheduled. I think it was supposed to be on yesterday. Life got in the way, but I’m happy we got to do it today.

Erika (37:35)
Yeah, me too. This was awesome. And for our listeners, if you got value from this episode, make sure that you’re subscribed to the Real Estate Pro Show. We’ve got more conversations coming up with powerhouses like Steven who are crushing it in the real estate world. We’ll see you on the next episode.

Steven Weinstock (37:52)
Thank you, Erika.