Dan Handford is one of the founders of Passive Investing. He also is one of the founders of Multifamily Investor Nation. His passion is helping educate people and also help his partner’s friends and family, make, create and preserve more wealth through value add multifamily real estate, we’re excited to announce the opportunity to work with Dan Hanford and his team to bring our clients opportunities to invest in more and more multifamily deals.

One of the main reasons why Dan Handford got into real estate was because of taxes. So he started to do some investing inside of real estate, and then started the private equity real estate firm passive investing.com to build and bring on other investors that were in similar situations that can also help to offset some of their taxes. 

 

Watch the episode here:

 

Listen to the podcast here:

 

Building a Multifamily Investor Nation with Dan Handford

 

Brett:

I’m excited about our next guest. He’s actually a repeat guest. He is one of the founders of Passive Investing. He also is one of the founders of Multifamily Investor Nation. His passion is helping educate people and also help his partner’s friends and family, make, create and preserve more wealth through value add multifamily real estate, we’re excited to announce the opportunity to work with Dan Hanford and his team to bring our clients opportunities to invest in more and more multifamily deals. Please welcome to the show, Dan Hanford. Hey, Dan, how are you doing?

Dan:

Doing great. Thanks for having me on. Appreciate it.

Brett:

Absolutely. Excited to dive in today. For our listeners getting to know you for the first time, would you give them a little bit more about your story and your current background?

Dan:

Sure. So I’m actually an actual investor myself and all of the properties that we have put together ourselves, and also a passive investor in 39, different passes of LP positions, and side of multifamily as well as some self-storage assets. And actually one Food Hall out of Nashville, Tennessee, kind of a unique one there. And we’re one of the main reasons why I got into real estate was because of taxes. So I have a group of medical clinics that I own and that I have run. And when I was cashed, I still have those today, I still cash for that 100%. But when, you know, at the end of the year, or even totally had to write these large six-figure checks to the government was a little frustrated with that. So I started to do some investing inside of real estate and then started the private equity real estate firm passiveinvesting.com to build a bring on other investors that were in similar situations that can also help to offset some of the taxes that they had to pay on a regular basis. So prior before I even got into real estate, I started those medical clinics, I also started a couple of online companies selling one of the main ones is a company called shopanatomical.com. And we sell all types of medical models like skeletons and skulls and brains and hearts and those types of things. And, and so then when I was in chiropractic school, which I started as a chiropractor, but when I was going into chiropractic college, that’s how I started that business. And then in chiropractic learn, learned all the route, the tricks of the trade, if you will, in the chiropractic side of things, started my own clinic, realized I was kind of in a kind of stuck in a job even though I was working for myself. And that is what allowed me to think about trying to hire other people that can do the things that I do, and then quickly converted, decided to change the clinic from a kind of a single disciplinary clinic from chiropractic to join what’s called a multidisciplinary clinic doing medical procedures as well as chiropractic. Then about five years ago, five or six years ago or so, we actually completely removed the chiropractic services in the office and so solely focused on the model on the medical component of it, because it was a niche that was underserved in the markets that we were in. And we grew from one clinic to four clinics, and we primarily do non-surgical orthopedics and some sports medicine to do a lot of prolotherapy, PRP stem cell, and stem cell treatments for orthopedic conditions in those clinics.

Brett:

So a serial entrepreneur would be an understatement for you, Dan, right? Yeah, started out as a chiropractor, and then moved into some other products related to health, and then all of a sudden found out all this cash flow and hidden with all this tax? What’s a good way to offset and minimize that tax? Let’s own some investment real estate. Is that a fair summary?

 

 

Dan:

Yes, that’s correct. So it’s one of those things where I needed to find a way to offset that taxable liability. And that’s, that’s what I had to go into and do it. I would definitely, you know, agree with the assessment that I’m an entrepreneur, I have multiple businesses, and I enjoy the business of it. And it also allows me to build to have the flexibility and the freedom to be able to you know, do what I wish to do.

Brett:

Beautiful and now you’re on a mission to help others be able to do the same, right? Because essentially, if you can invest passively, or actively at a certain point, hopefully, the cash flow offsets your expenses, right? And that gives you back your time right? And your energy, your stress if you can find trusted folks who are experts in what they do. And I’ve been following Dan now, I think for about five years now and I first attended multifamily investor nation a couple of years back and had a chance to be on his podcast as well. And what I love about  You guys is your focus like a laser on multifamily value add. Now mainly in North Carolina, South Carolina, although you’ve done I think a deal and another deal in Texas and Tennessee and you’re looking at Florida and Texas, love those locations. But walk us through what you’re seeing right now when it comes to inventory and returns and maybe a recent deal that you’ve done for multifamily for passiveinvesting.com. 

Dan:

Sure. So one of the most recent deals that we did, and kind of in a value add space was actually out of Raleigh, North Carolina, it was actually a $57.6 million acquisition. And this one, we were able to, we were raising right about 21 and a half million from our investors 21.49 to be exact, and this one’s 288 units, and it was very well occupied 97% plus when we acquired it, and it had about 50% of the units that still needed to be renovated from the prior owner. And so we were able to acquire this property and raise the funds to be able to do the renovations on those on those, you know, those vacant units five to $7,000, and not vacant units with the five to $7,000. And the classic units. So the non-renovated units to bring them up to where we want to be able to get them for the current market rents. And of course, so this one’s a value add deal. So usually, there’s gonna be a kind of like a three to five-year hold, we model our projections on the underwriting on a five-year hold period.

Brett:

Excellent. These are for accredited investors, of course, you know, so you’ve got to be there. And most of all of our clients that are selling, and using the deferred sales trust to defer the capital gains tax, our accredited investors, our minimum deal size is a million, and that automatically qualifies them net equity in the deal. So but one of the biggest challenges is, hey, how do I invest the funds? once I have them? What are some of my options? I’m not a big stock market person, right? I want options. I want to be able to diversify, I’m more comfortable with real estate. And so finding value adds multifamily opportunities to be able to passively put in is a big benefit for our clients. That being said, what are some questions that clients should be asking when they’re meeting folks like yourself for the first time and also bring in the multifamily investor nation, how you’re educating and equipping syndicators, like yourself, operators like yourself to grow their business? Could you kind of touch on that?

Dan:

Sure. So the first part of your question was about what are some questions that you should be asking, and operators before you actually invest with them. And, you know, my wife and I, as I said earlier, we invest inside of other multifamily assets as an LP. And we’re right now invested with about 1415 different operators across the country in about in those 39 different investments. And in being able to vet operators up to this point, we actually wrote an article and kind of put together our heads to kind of figure out what are the seven red flags for investing in apartments. And I’m not gonna go through each one of those seven items here today. But if your listeners want more details on that, they can go to our website, passiveinvesting.com. Inside the Knowledge Center on the top, there’s a little link there for the Knowledge Center, you can just type into the search box in the Knowledge Center red flags, you will find this article, so you get some more information in there. But one of the biggest things is that I want to make sure that there is someone at the helm of the operations team that has some form of background in business, they have actually been able to run a business before and not just run it, I want them to make sure that I want to make sure they have a successful background and running the business because I think you and I both Brenda probably met people that know how to run a business, but they know how to run it into the ground, right. And so I want to make sure that with my passive investments that I have for my family, that it’s being managed by somebody who actually has a background in business and understands how to make pivots, how to make changes, how to actually put set certain KPIs and parameters in place, so you can make changes whenever it’s necessary instead of when it’s too late. That’s one of the key things that I look for. And then I also want to make sure that they are full-time in the business. Because of this multifamily space, there are a lot of people getting into this space, trying to be their own syndicator and raise money. But they’re also trying to hold on to a W-2 job at the same time. And I’m not a big fan of that. So my wife and I have worked very hard for the money that we have. And I know our investors have as well. And so we when we place capital inside of other investments, we always make sure we ask the operator, Are you full time in the business? Or are you treating this more like a night in the weekends kind of hobby-type gig, right? And so I feel like, with our money, we want to make sure that we have full-time efforts that are watching it every single day. And obviously, being an active operator in the business I realized that this is a full-time business right? And it needs to be treated as such as that as well. So that’s that those are a couple of the things that we look for that would suggest other people asking operators before they’re actually starting to invest with them. Obviously, there are other things about having skin in the game and things like that. And, and for me usually, there’s preferred returns and kind of different nuances that we like to see In our own portfolio, those are some of the things that we like to see.

Brett:

Excellent. Yeah. So full time in the business, always make sure that they have actually run a business successfully. Because when you’re buying a multifamily property, not just purchasing a property, you’re purchasing a business, right? It’s an existing business. Yeah, this is a business that happens to be in the business of renting to tenants and getting a good return for your investors. And so there’s a lot in there. And then, of course, skin in the game. As you said, not a side hustle but a full-time effort here focused on the operator. But sometimes there’s not to be confused as an operator, there’s those that are raising the funds. There are those who are out there marketing, building relationships with brokers and, and other owners of properties to source the deals. So walk through just a couple of those roles. And I think a path passive investing, how you guys have set up your structure?

Dan:

Sure. So yes, you know, some people might say, well, how can I get into this business, while I’m still working with a W-2? Well, you can partner with other people and like Brett said, and still do certain aspects of it, but I don’t think that you should be the main operator on a property, when you’re still working the W-2 job not that’s kind of really the big distinction. So there, I know people that still work a W-2 but they do part-time Asset Management work, or they part-time work with investors and raise some capital for projects and, and then also participate in some of the asset management duties, you know, in between, you know, different calls and stuff like that. And there’s also from like, our three managing partners, we have different roles and responsibilities. So My role is marketing and Investor Relations and the overall strategic objectives of the company. And then we have Brandon Abbott on our team, his primary responsibility is acquisitions and on the capital expenditure side of things for looking at what are the capital expenditure budgets and things that we needed to do for these various properties for the value add side, and then Danny Randazzo on our team is his lane, and focuses is all about finance. So he does all the financial underwriting, the financial due diligence, he works very closely with our lenders and our broker, our mortgage brokers, as well as our attorneys, and insurance people to make sure that the properties are running smoothly. And he also does the asset management side of things as well.

Brett:

Excellent. Let’s touch on Investor Relations because it’s one thing to acquire the property implement the business plan, then there’s a whole nother thing with communicating and making sure that people are understanding, you know, what’s going on, you know, quarterly reports, financial statements, distributions, walk us through your systems and how you’ve set that up to make it as seamless for the client as possible.

Dan:

Sure, sure. So the main thing that the investor is having to worry about is keeping track of their distributions. And making sure at the end of the year, they received their K-1s and on a timely basis, right. And so from that perspective, it’s pretty straightforward. It’s pretty easy. You know, those are we do monthly distributions on all of our assets. Two of them right now are on quarterly, just because of potential concerns with some cash flow problems, or whatever, with COVID-19, and stuff like that. But the rest of the assets are still on their monthly original distributions. And we’ve still been able to maintain those distributions, even on the quarterly, it’s just, we’re doing quarterly instead of monthly right now on those. But when it comes to asset management, we actually have a full-time director of asset management, who is on the phone calls every single week with our on-site property management team to make sure things are being done properly on each one of those assets. And then usually a couple of times every other month, he’s actually going to the properties and actually putting boots on the ground or doing that on an as-needed basis.

Brett:

Excellent, fantastic. So COVID-19, and, you know, at least here in the West Coast, and I think most of the US to form a lot of my clients and the connections that I have, you know, rents didn’t drop much and vacancies didn’t go any which way. Are you concerned? Or what do you think if you feel like the storm is behind this here? Do you think it’s going to hit apartments very hard? What’s kind of your take given 2021? What we’ve been through in 2020?

Dan:

Well, I think we can look at the economic stability of multifamily in general and other recessions where there hasn’t really been a major economic hit to the multifamily assets. And it’s one of the reasons why we always say that multifamily is a recession-resistant type of an asset because next to food, putting people’s food on their table, they’re gonna pay for the roof over their heads within necessity, that no matter what kind of market conditions you’re in, you still need a roof over their over your head. So collections have been strong collections have been strong. And we have also seen rent growth in the markets that we’re in. And so we’re gonna continue to see that I think because we’re seeing a lot of people moving from this downtown kind of urban core infill areas to the suburban areas. We’re also seeing, especially in here in the southeast from places like New York City, New Jersey, Boston, we’re seeing a lot of people migrating Out of those areas, and coming into the southeast, and then also people from the west coast doing the same thing where they’re primarily migrating into, say, Boise, Idaho, Phoenix, Arizona, and then into the Texas markets at the same time.

Brett:

Yeah, 100% I’ve had some friends even go further all the way to Tennessee, three friends in particular, and their families, about my date, my age, you know, the late 30s. And they’re like, you know, what, we’re looking for a different pace of life, a different set of taxes, and, and ways to raise our family in a different place. So that is absolutely happening. I think Tesla, Oracle, and HP all announced and last 150 days, they’re all going to Austin, Texas, relocating to their headquarters there. So that’s a big, big deal. That being said, for investors who want to learn more about you, Dan, and your team, what’s the best place for them to find you and also touch on multifamily investor nation and your vision for that, and how, where that’s going and how that’s changed this past year as well?

Dan:

Sure. So you can reach out to me and follow us by going to passiveinvesting.com. You’ll see on our website there, it’s pretty straightforward. There’s a box in the top right-hand corner of the screen that will allow you to join our Passive Investor Club. So you can fill that form out and one of our team members from our Investor Relations team will reach out to you to discuss your investment goals and see if our group is the right fit for you. And then if you wanted to connect with me directly, you can go to my LinkedIn page where you can connect with me there and follow some of the content, the material that we put out there. And of course, we have the Multifamily Investor Nation, we have information on that website, you go to multifamilyinvestornation.com, we have weekly training videos that we do every single week, we’ve been doing that now for a couple of years, and providing value to you from learning so you can learn how the business actually works. So whether you want to do it actively, or maybe you’re just a passive investor trying to learn a little more about the nuances so you know how to properly vet a deal. And that’s another reason why you’d want to follow us and pay attention there. And then, of course, we have, we have our MFIN Summit. We do those twice a year, they are virtual all, online. They’ve always been that way. We didn’t do it just because it’s COVID. Actually in June, will be our 6th Multifamily Investor Nations Summit that we’ve done. And you can find more information by going to mfinsummit.com and researching that a little bit further.

Brett:

Beautiful. The last question, then we’ll let you go. And it’s tied around the whole solution that we’re trying to provide here, which is capital gains tax solutions. So this is the question, what’s the biggest frustration, Dan, when it comes to capital gains tax especially if you’re looking to raise funds or connect with investors who have high in primary homes, cryptocurrency, businesses, and they want to defer that capital gains tax and they want to invest with you know, someone like with you, Dan, like a with your group, but they feel trapped? What have you found to be the biggest frustration there?

Dan:

It’s understanding the tax law, right? I mean, when you have a big taxable event, your frustration is how can I keep as much of that money as possible, close to me for as long as possible. And so don’t usually what you’ll see is these people will, that are that have, you know, businesses that they are selling or stocks and they’re trying to offload the cryptocurrency or other high-value stocks, they’re trying to figure out a way to properly exit those to be able to set yourself up for success with a hold-up, hold on to that money as much as possible. And it’s a concern, because you especially for somebody in the business in the business side, right. So you work all these years to build your business up. And you get to the point of being able to have this really nice successful exit, and you realize that you have to pay a lot of that money into the government for taxes. But if there’s a way for you to have a vehicle, that you all, you obviously provide, Brett, that can help people, you know, avoid, or kind of reduced that taxable burden of that liability. It could be a win-win for sure.

Brett:

Yeah, we absolutely always say defer versus avoid. All we’re doing is we’re deferring the capital gains tax, kinda like a 401k or an IRA. The government gives these legal loopholes to put in place so that one, it spurs the economic growth, which spurs more tax revenue and then to incentivizes the seller actually sell the asset and capture that value and redeploy it to something like multifamily investing where it creates jobs and housing for people or even stocks he grows the company. So it’s actually a win-win. But yes, you can learn more about that by going to capitalgainstaxsolutions.com and learn about the Deferred Sales Trust and how it can defer cap gains tax on the sale of primary homes, investment, real estate, cryptocurrency, stocks. In fact, we just did a deal in Colorado, Dan, it was about a 50 unit apartment complex, and about a $5 million sale and that is zero basis, and they’re older looking to retire not wanting to do a 1031 again, and they were able to sell the Firth tax as well. Move some dismiss state planning as well to help them out as well. So, that being said, That’s all we have time for Dan, I appreciate you being on the show. Everybody, look for the show to drop on iTunes real soon, but you can go to YouTube right now and review this. I appreciate you and anyone who wants help with tax deferral. Feel free to reach out to us at capitalgainstaxsolutions.com Bye, everybody.

 

Important Links:

• Dan Hanford
• Multifamily Investor Nation
• Multifamily Investor Nations Summit
• Passive Investing
• Shop Anatomical

 

About Dan Handford

 

Dan and his wife, Dennae, along with their 4 children (3 girls and a boy), reside and work in Columbia, SC.

Dan has an extensive successful background in starting multiple seven-figure businesses from scratch including a large group of non-surgical orthopedic medical clinics located in South Carolina. His family of companies has annual budgets in excess of $10MM.

He is the founder of the Multifamily Investor Nation where he educates a nationwide group (20,000+ members) of multifamily investors on how to properly invest in multifamily assets.

He is the co-host, along with his wife, Dennae, of the Tough Decisions for Entrepreneurs podcast which can be found on iTunes and Google Podcasts.

 

• Here’s How »

• capitalgainstaxsolutions.com
• Capital Gains Tax Solutions Facebook
• Capital Gains Tax Solutions Twitter
• Capital Gains Tax Solutions Tiktok