How Peter Fondini Built 500+ Doors & a Family Legacy

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Show Summary

In this episode of the Real Estate Pros podcast, host Erika speaks with Peter Fondini, a seasoned commercial real estate investor. Peter shares his journey into the industry, emphasizing the importance of creating residual income and building a legacy for his family. He discusses the dynamics of running a family business, the challenges and opportunities in various markets, and the strategies he employs to enhance tenant experiences. Peter also delves into the unique aspects of managing sober homes, the risks and rewards associated with them, and shares valuable lessons learned from past challenges. Finally, he outlines his future expansion plans into new markets, highlighting the potential for growth in the real estate sector.

Resources and Links from this show:

• • • Investor Fuel Real Estate Mastermind
    • Investor Machine Real Estate Lead Generation
    • Mike on Facebook
    • Mike on Instagram
    • Mike on LinkedIn
    • Peter Fondini’s Email: [email protected]
    • Peter Fondini’s Phone Number: (781) 589-4868

  Listen to the Audio Version of this Episode

  Investor Fuel Show Transcript:

  Peter Fondini (00:00)
  Yeah, so we use QuickBooks for our accounting software, but we built the financial model myself and my business partner, who’s a certified financial analyst. We built our own Excel spreadsheet 23 years ago where we analyze properties and there’s a number of ways you can analyze a property. Ours is more generated on a cashflow basis. The property has to cashflow and cover itself.

  at a certain level. If we can’t get our asset fully stabilized with permanent debt on it to function and break even with 30 % vacancies we don’t go after a property.

  Erika (02:03)
  Hey everyone, welcome to the Real Estate Pros podcast. I’m your host Erika and today I’m thrilled to be chatting with Peter Fondini. He’s been making serious moves in the commercial real estate world. Peter, I’m so excited to have you on the show today.

  Peter Fondini (02:20)
  Thank you very much, Erika. I’m very happy to be here today.

  Erika (02:22)
  Excellent. So let’s dive on in. So first off, Peter, for people who aren’t familiar with your world, can you give us the rundown of what drew you to commercial real estate?

  Peter Fondini (02:34)
  What drew me to commercial real estate was creating something and producing something that would create residual income for me and my family that would not be just like a second job, something that I could build over a period of time to whatever level I wanted to and that I would have for the rest of my life and or that’s something that I could pass on to future generations.

  Erika (02:53)
  Yeah, and you’ve really built something incredible here. Can you share more about that journey? Was there a moment for you that you knew this was gonna be your lane and that you were sticking with it?

  Peter Fondini (03:06)
  Yes, for us, we’ve been in real estate since before the turn of the century. So we’ve lived through a downturn in the market in 2005. was people who know it was pretty ugly for a lot of people. I knew coming out of that, that things were going to be OK, that the market would rebound and that this was the place I was going to spend the rest of my time building something, building a legacy for my family and being able to pass something significant on to future generations.

  Erika (03:31)
  Yeah, and ⁓ with ⁓ in your real estate world, real estate is a family affair. What is it like building a business having so much family involved?

  Peter Fondini (03:41)
  It’s very rewarding, but it also comes with its challenges. My wife runs our back office. She also has an accounting background like I do, but she’s been running our office since we started having children. We have four, our oldest is 35. Two of my adult children work in our office. So it’s very rewarding to be able to teach them. They’ve grown up in the house, they’ve grown up around this. So there’s a lot they know, but it does come with…

  those challenges of, you have to be able to separate those two to go, oh, okay, we’re like, this is dad, who’s gonna come in and tell people what to do, and this is how we’re gonna do things. And then at the end of the day, you shut that off and now this is dad, your father. Like, so in the same thing with my wife. So there’s, we actually have one of our maintenance guys who’s my brother-in-law. So you have to be able to draw those lines very quickly and very distinctly to make sure you separate that so that those relationships.

  Don’t get stressed and straight.

  Erika (04:32)
  And with your family business of real estate, Peter, what markets are you in and what challenges and opportunities are you seeing?

  Peter Fondini (04:41)
  So we’re in multifamily residential property. We also own behavioral health properties, sober houses and state licensed facilities. We’re in central Massachusetts, we’re in Hartford, we’re in New Hampshire and Nashua and further north and we’re in the Ohio area, Cleveland and Columbus. I think we see the same fairly specific changes that a lot of other commercial real estate investors would see, markets that are mature, prices that are…

  higher in the last three to five years, interest rates are up. So a lot of deals, they don’t make sense. They don’t pencil out. although purchasing on the market hasn’t slowed down, you know, I question are some of those people buying those properties going to turn, are there going to be problems three, four or five years down the road? there going to be properties that are going to be foreclosed on? So those are the challenges I see. I also see it from the rental side with new construction with, you know,

  properties being put up that are brand new and then they take the rates that we already think are too high and they go 30 % over that and they’re renting them what that does to the average renter and how that potentially could cause a problem down the road financially which if property owners aren’t paying attention that’s going to come back on them.

  Erika (06:39)
  Yeah, and you know, with all those considerations, do you have tools and systems in place that kind of help keep things, you know, to be more predictable, as predictable as they can be?

  Peter Fondini (06:50)
  Yeah, so we use QuickBooks for our accounting software, but we built the financial model myself and my business partner, who’s a certified financial analyst. We built our own Excel spreadsheet 23 years ago where we analyze properties and there’s a number of ways you can analyze a property. There are a lot of tools out there. People talk about cap rates. People talk about other things. Ours is more generated on a cashflow basis. The property has to cashflow and cover itself.

  at a certain vacancy level. if we can’t get it to that, we use 70%. If we can’t get our asset fully stabilized with permanent debt on it to function and break even with 30 % vacancies with a bunch of estimates, for utilities and maintenance, we don’t go after a property.

  You can’t.

  We’ve seen too many people get in trouble. We’ve seen what happened in 2005 and 2007 when everybody said, well, the market’s just gonna keep going up. The market’s just gonna keep going up. Well, the market doesn’t always keep going up. And when you have those corrections, it can take you three years, five years, a decade based on the type of property and the size to fix that. And a lot of people can’t weather that storm.

  Erika (07:55)
  Yeah, you know, Peter, you’re dealing, you know, potentially with all different kinds of storms. I say that because you are operating in five different states. How do you, you know, keep all those plates spinning?

  Peter Fondini (08:09)
  That’s what I have a team for. So you have to automate things and get technology working for you as quickly and as efficiently as you can. We have a property management software, it’s called Buildium. There’s other competitors out there to Buildium. There’s one called Abfolio, but you have to have all the tenants using that so that you have a central repository for if they want to message you, if they have a complaint about maintenance, if they want to have a question about something. We also have software for the property management.

  team so that they know, you know, one person sits down on Sunday night at, know, six o’clock and for an hour and here’s the schedule for the week. Here’s all the tasks. Here’s what everybody’s doing. And then you monitor that, of course, for someone calls in my toilet’s overflowing. Someone calls and my heat’s not working. Like you have to adjust for that. But you can’t, you know, when, you’re a small landlord and you buy a three family.

  your tenants could pick the phone up and call you and you can be at their disposal anytime anything goes wrong. When you have over 500 doors, you have to have a process in place to manage that or it just becomes unruly. just can’t handle it. Same thing in the office. You have to have the same system that everybody uses for accounting that they can use. If not, you can’t scale and you can’t grow and you can’t keep track of things. At tax season, you’re running around, you have no idea what’s going on, so you have to keep track of all that.

  Technology and systems is really where you pick up the efficiencies to grow and move forward.

  Erika (09:29)
  Yeah, absolutely. Earlier, Peter, you had mentioned the importance of having the right percentage of tenants. When it comes to having happy tenants, having enough of them in your properties, what strategies have been helpful to you? Are there certain value adds like renovations or repositioning that have helped you out?

  Peter Fondini (10:28)
  Yeah, so we always go into our market, any market we’re in, and we will go around and go tour a dozen to two dozen properties before we go into a market as prospective tenants so we can see what the housing stock looks like. And then we come back and strategize, okay, how do we make our properties better? you know, we’re not going to compete with brand new build A class Avalon type properties, but we can go out into the area and go,

  Well, the average property out here looks like this. So I can give you some specific examples. We do granite countertops in all of our kitchens. We find it’s not cost prohibitive, but in the areas we’re in, maybe 18 to 20 or 21 % of the housing stock has granite countertops. So it makes a difference when people come in. They look at it immediately. There’s like, oh my God, we do all recessed lighting in all of our rooms.

  So there’s no lights on the wall, lights in the ceiling, there are recess lights. So you get better light. We do simple things like all the outlets are replaced with square outlets and every room has an outlet that has a USB, USC plug in it in the wall. So those little things tenants walk around and be like, wow, these folks have been thoughtful about what’s going on in the property. We always trying to add, is there a way to put laundry in the property? Is there a way to add parking? We’re always looking for those little things to make…

  make ourselves, especially when you’re in an older housing stock area, that there may not always be laundry facilities or parking or something else. You try to find ways to make that more comfortable for tenants.

  Erika (11:59)
  Yeah, that makes a lot of sense. Peter, you said something earlier that I wanted to go back to, which was that your portfolio has a number of sober homes. know, there aren’t too many people on the podcast that talk about that. What would you say are some of the risks and rewards with getting into that space?

  Peter Fondini (12:21)
  So from the reward side, can be number one, you know you’re not just providing housing. like providing housing, you’re providing a value to people. When you’re in the sober home business, you’re providing housing to people who are in recovery. So from that standpoint, you can be providing more of a service other than just providing housing. We don’t run the sober houses, we rent to someone who runs the sober houses. So for us,

  It’s you dealing with one person and not a group of people. But your reward on that can be you’ve got people that take care of your property sometimes better than a general tenant. These folks are coming out of detox or they’re coming out of a problem and they’re trying to put their lives back together from a struggle. And so they’re more grateful than, say, a regular tenant sometimes would be. So they take better care of your property.

  because they’re always trying to make it better because they’re trying to better their lives. So they have a greater sense of pride and gratitude for having the property. On the negative side, on the challenge side, it comes with certain types of life safety issues that don’t happen a lot of times in regular residential properties. And it’s varies by state, so you definitely have to dig into your state laws.

  You know, like in Massachusetts, you have to have, if you have a sober home, you have to have a sprinkler system, you have to have a fire alarm panel. So that’s not something that all of your multifamily properties in Massachusetts generally come with. And if you buy an older property that doesn’t have one, your grandfather, you don’t have to get one. That’s not the case with the sober house. So you have to be very careful with what you have to do. And there are state agencies that will help you with that. You also have to be careful with who else is out there.

  There are other people out there, just like if you’ve owned regular multifamily property, there are good landlords and there are not so good landlords and there are really bad landlords. You can talk to the towns and the cities you invested in. They know who the bad landlords are because they deal with them. It’s the same thing when you’re a sober house owner. There are people out there who do it very well like us. There are people that do it okay. And there are some people that do it really, really poorly that

  cities and municipalities go after. So you have to be careful not to get associated with them, get involved with them, or do anything the way they do it, because that tarnishes your own brand and your reputation.

  Erika (15:15)
  Yeah, absolutely. you know, with the portfolio that you’ve built, Peter, I’m sure you’ve seen a thing or two. Maybe a deal has gone sideways or you had to completely pivot on a project. Can you share one of those moments on your journey and any lessons from those?

  Peter Fondini (15:36)
  Sure, I’ll share two. One on the multifamily side and one on the sober house side. So we bought a 34 unit building in central Masson Lemmonster, owned second generation, undervalued, you know, lot of deferred maintenance. We bought it at 14 vacancies. So we would go in and we looked around and one of the big things we knew we had to do was an electric upgrade to the property, significantly undersized, know, 600 amps electric service for 34 units.

  So we get National Grid involved, we get involved in that, and then COVID hit. So like, what should have been a three to four month project was 26 months. So you have to pivot very quickly and go, do you make a decision? Do I put a bunch of people in these vacant apartments knowing that six months to a year, a year and a half from now when this project finishes, I’m going to disturb them all?

  at the same time and run all the electricity into their apartments and make a mess and you basically have a bunch of very unhappy people or do you take the decision to go dope? I’m just going to weather this storm because I can financially and wait and do it the right way. So that was one where you have to plan for that because if you don’t plan for something like that, one or two projects like that can crush you. On the sober house side, same thing.

  bought a building, had someone who was going to do the construction and then run the sober house afterwards. This this group already had four sober houses, came fairly highly recommended. We bought the building, contributed it to our partnership. We paid for the rehab. About nine months in, they were three or four months behind on the construction and about $150,000 over on budget. And we had to go in and extricate them from the building.

  pretty quickly and you you learn very quickly. You have to pivot on things like that. You have to make a change. And you know, even at that point in time, been in real estate at that point in time, 21 years and was kind of second guessing myself like, what do I do? What do I do? And then when I talked with one of the attorneys I use, he was like, why have all your paperwork? It’s your building, right? Yes. He goes, go change the locks and tell them to come get their equipment.

  He goes, we’re dealing with their attorney on separating the joint venture, but you own the building. And so there’s a 90 degree turn there. Down the next day with the locksmith, change the locks, call them, come get your stuff. They sent a couple guys over, they got all their stuff, pulled the dumpster off the property. We finished the project and we took care of it, but it’s an expensive mistake to learn, but you learn very quickly on things like that. Have all your ducks in a row, make sure your paperwork is strong so that, you know, and make sure everybody’s marching to the same.

  on the same page and things will happen to tell people that you can always figure this out, you can always write it up, you can always have it the way you want, you know, if you have strong paperwork, you talk with people, everything’s going to go right. That’s just not true. Things change. People’s lives change. You just have to be prepared for that stuff.

  Erika (18:22)
  Yeah, and you and your team, you’ve learned to power through because look at the portfolio you have. And ⁓ I know you got more coming up on the horizon. Can you share that with our listeners?

  Peter Fondini (18:34)
  Sure, so we own in five states right now, Massachusetts, New Hampshire, Maine, Connecticut, and out in Ohio. And we got out to Ohio through one of the people we own properties, one of the sober house owners in Connecticut. We have decided to expand out into that area, into Ohio. So we are, we’ve analyzed some of the cities out there and we’ve decided that Columbus is an area, but Cleveland is an area we’re going to expand into. We already own three buildings out there.

  We’ve closed on a couple of multi-families out there. We’re closing on more. So, you know, it’s an area we believe has great potential. It’s one of, I believe, three major metropolitan areas in the country where the average rent is still below $1,000 a month. It’s kind of unheard of. So there’s a lot of good things going on in Cleveland. We think it’s a great area to expand in.

  But that’s for us, that’s how we expand it because we can. I will tell people that are new or just want to get started, stay close. Stay within an hour and a half of your house so that you can get to your properties and take care of things however you manage it, whether you self-manage, whether you hire our contractors, whether you hire a mate, it’s man. Stay close so you can deal with things until you get to the point where you’re like, okay, I can handle getting on a plane. I can handle a four-hour ride because it’s different. I’ve been doing this

  two and a half decades and handling Cleveland is different from anything else I handle locally because anything else I have locally I can get to in less than two hours.

  Erika (19:58)
  That’s a really exciting, Peter. And for our listeners here who want to connect with you, learn more, collaborate, what’s the best way for them to reach you?

  Peter Fondini (20:07)
  So they can reach me. My email is [email protected]. And my cell phone number if they want to text me or jump on a phone call is (781)589-4868. Happy to answer questions for people, help people, give them any sort of advice I can give them to help them in their journey because you know there’s

  There’s plenty of real estate out there that’s not a closed market where everybody can’t be successful, but people should know it’s not fast money, it’s long-term money, but it’s residual. could buy something. I have a 10-year-old grandson, and in the next 12 months, we’re going to buy him his first multifamily piece of property. if he does nothing other than buy that property and pay it off, by the time he’s 35, he’ll have a multifamily property that he’ll own outright. That kind of thought process can change people’s lives financially.

  And that’s what real estate can do, but it isn’t gonna do it in a year or two. It’s long-term, it’s planning, it’s having that discipline to figure out your plan and stick with it.

  Erika (21:07)
  Yeah, absolutely. Well, Peter, I appreciate you generously sharing your expertise and ⁓ sharing your story on the show today.

  Peter Fondini (21:16)
  Thank you for your time, I’m happy to do it.

  Erika (21:18)
  And for our listeners, if you got value from this episode, make sure that you’re subscribed to the Real Estate Pros podcast. We’ve got more conversations coming up with experts like Peter, who are out there building a fantastic real estate empires. We’ll see you on the next episode.