[00:00:00] Brian Grimes: And when you’re in a real estate game and you’ve going through some market cycles, you’ll start to understand this stuff and understand that there are times where credit is available, people are lending and doing 80% cash out refis, and then things can tighten up in a heartbeat. So you have to stay pretty liquid and you know, keep your ear to the ground and know what’s going on on a macro level.

[00:00:49] Nicole Pendergrass: Hey everyone. Welcome back today. Oh my goodness. We speak to Mr. Brian Grimes The conversation was beyond, you know, impactful. He really has a deep mission. You can hear it when he talks and everything. He’s super focused, laser-focused, on what he’s trying to do, and his mission is all about helping other people be able to help create impact and extend affordable housing into communities, so that instead of gentrification happening, we have a degentrification, is a density gentrification, I think he called it, I couldn’t tell the term. He coined a term that I think was actually great, but he’s making areas more dense because he has a certain model where he’s rehabbing to a high-quality standard and then he’s creating still affordable housing for people who don’t qualify for voucher programs or for Section 8 or for anything else. There’s this middle ground. You’re either super, super poor and you have to get these vouchers or you make enough in your high net worth or you, you know, you have a high income and you can have regular housing, but there’s this like middle ground where people can’t afford vouchers, but they still need affordable housing and it’s just not there for people. And he is really passionate about changing communities and spreading this impact across different cities across the country. So let me tell you a little bit about Brian. Brian is an Ivy League-educated real estate entrepreneur, and he is a coach. Upon graduating from Columbia, he embarked on a career in financial planning, and then he transitioned into high-net-worth asset management. In 2015, Brian launched a real estate development company in Philadelphia, and he’s since gone on to gut renovate over 300 rental properties even across the country, not just in Philadelphia. He has two young kids, a nine-month-old and a three-year-old, and he lives with his wife in the Bronx. He now has transitioned into Cash Flow University. Actually, the name of it is called 24/7 Cash Flow University, and it’s to teach students how to create passive income and escape their nine-to-five desk job if that’s what they want to do. Through his hundreds of key masterclass students, he teaches them how to gut renovate, acquire, and stabilize cash flowing high rental property portfolios. He contains proven methods that allow him to scale his operations from one deal to over a hundred properties per year. And most of his masterclass students that implement his strategies are able to retire themselves from their day jobs in 12 to 36 months. So overall, from the conversation I had with Brian, it’s really not even just he wants to impact the lives of students who want to implement the strategies and even learn how to renovate properties and build properties from your computer, sitting at your desk in another state somewhere else. He teaches you all the systems how to do that as well. But beyond just impacting the lives of his students, he also wants to impact communities like I mentioned before. And you really need to just listen to the full episode. We talk about what are the strategies, even once you build up this capital from getting these properties, how do you keep it, How do you pass it on generationally ’cause you know that’s what we’re all about here at this show as well, is the generational aspect of it. But really listen to the episode. You will not be disappointed. And let’s just get to the show.

[00:04:27] Nicole Pendergrass: Hello. Welcome back everyone to another episode of the Share The Wealth Show. And today we have with us Brian Grimes. Oh my goodness, I am super excited for this conversation. Just because since I’ve met Brian and seen his background and what he’s done, I’m just super impressed and awe-inspired by what this man has been doing, and I can’t wait to dig into the conversation and learn even more about his background and his projections and goals and everything for the future. But anyway, Brian, thank you for coming.

[00:05:01] Brian Grimes: Oh, thank you for having me.

[00:05:02] Nicole Pendergrass: Yeah, you’re welcome. You’re welcome. I’m honored. So this is the show where we actually focus on conversations to build, grow, and protect minority wealth. So we’re going to talk a lot about your journey and then talk about, you know, your mission, your goals for the future, and just other things that can help minorities build wealth and then protect it at the end as well. I gave a brief overview of your bio and some of the things we’re going to talk about, but how about you tell the audience what you’re doing now and kind of how you got to this point?

[00:05:36] Brian Grimes: No, definitely. I mean, what I do now in a nutshell is I go into C-class neighborhoods across the country and I full gut renovate properties. I do something like, a lot of us have heard the word gentrification, and it’s kind of like a frowned upon word. What I do is dentrification, so I add density back to the community, and I do this by full gut-renovating these properties and reconstructing them into co-living units, and creating affordable housing within the community. So I’ve done a lot of Section 8, like, I’ve done maybe over a hundred Section 8 deals. I’ve done over 300 full gut renovations and, you know, from Philly to Baltimore, Texas, New York, Wilmington, Delaware, kind of, you know, all over the northeast as well. But I spend all of my time either doing deals for myself, building properties for some of my students, my mentees, and just staying boots on the ground, staying locked in.

[00:06:31] Nicole Pendergrass: Okay. Wow. So I actually have never, like I, I know about BRRRR and all that, but you create more density by creating a co-living space. Now, so are you renting them out by the room?

[00:06:44] Brian Grimes: Yeah, let’s talk about what it looks like and, like, why I do this. So I kind of stumbled into this, right? So I was having a conversation with my zoning attorney, and I was arguing with my partner at the time, and the conversation came up, Well, how many people could we rent to in one single-family residence? Like, can we rent to more than two people, more than three people? And every municipality or city will. Some regulation in the zoning code that will say you cannot rent to more than X amount of people not related by blood, right? So they’re going to tell you this number. In Philly, it’s three. In Baltimore, it’s four. In parts of Atlanta, it’s like six. In Florida, it’s like six, right? So once you get that number, you can reconstruct these properties to fit that number. So what I would do is go into a three-bed, one-bath property in North Philly, let’s call it, or West Baltimore. And I will pretty much blow it up full, gut it down to the studs and reform it into three master suites. Each bedroom has a bathroom that is only accessible through the bedroom. So now I have three beds, three baths, three master suites. If you think about a row home, you open a door, there’s the living room, then there’s the dining room, then there’s the kitchen in the back, then there’s the backyard. So I’m flipping the kitchen to the front. And I’m putting a co-living unit in the dining room and where the kitchen was. So now I have this shared kitchen space, this eat-in kitchen, breakfast bar, small area to socialize. But everybody essentially has their own studio. And when you ask somebody, like, if you were going to live with people, what would you want to share? The kitchen or the bathroom? I mean, everybody says, I don’t want to share my bathroom. And it’s like, okay. So you start to rebuild properties in a way that people can utilize them. And what it does is it takes a property that would rent for $1200 a month, $1250 a month, and now each one of those co-living units going to rent for $750 a month, utilities included. So you’ve bumped up the rent roll of $2250 on the same property. So it’s a thousand dollars more of additional cash flow coming in on that property. You know, there are millions of Americans who are living on their parents’ couch in the basement, in the bedroom they grew up in. You’re giving them affordable housing for the working class person, the person who’s driving Uber, the person who’s driving for Amazon, the person who’s just younger, working and looking to get started. Also, you have people who are retiring and trying to downsize, who want to live together. They don’t want to go to like a, you know, senior home or something like that. So you create affordable housing where it’s needed desperately, in c class neighborhoods, you’re restoring the community. You’re using local contractors to build these properties. It’s just like, a win-win for everybody.

[00:09:26] Nicole Pendergrass: Wow. Okay. That model is crazy. I haven’t heard of people doing it like that. Yeah. So if the property can only house, let’s say, three people and you create three co-living spaces, but then a couple wouldn’t be able to share one of those kind of studio suites. Or would they?

[00:09:48] Brian Grimes: Yeah, now you’re getting into the conversation with like the eviction attorney, and you and you essentially have to bring, like, you put them all together and it forms Captain Planet, right? So you get your zoning attorney, your architect, and your eviction attorney. You put ’em in a room and it’s like a little think tank. So then the question becomes what is a person in accordance with contract law? Well, they’re going to have to be a competent person. So a kid is not necessarily a person, right? So there are going to be scenarios where you’ll have like a single mother with a child, and they can share a co-living unit together because only the parent is going to be on that lease. And you might make that a house where there it’s like, all single women with a child so that everybody is living together of the same type of a mindset and lifestyle. But yeah, you do have to be careful with, like, am I renting out to couples and different things? There are going to be different screenings, things that you have to go through to make sure you’re putting the right people on the property and staying within the single-family ordinance.

[00:10:47] Nicole Pendergrass: I love that, especially if you can help people who are, like a single mother type of situation and they just need a nice place to live, but they can’t afford a full rent. Or maybe, you know, that would stretch them and they’re trying to save for something bigger, but they can rent out a studio suite and just share the kitchen. That’s so helpful. It’s like a special needs population without really being a special needs population, you know?

[00:11:11] Brian Grimes: Yeah.

[00:11:12] Nicole Pendergrass: What made you come across this idea?

[00:11:15] Brian Grimes: Well, I have a buddy, right? So he comes from a good family. He designs commercial office buildings in New York, and we get together for lunch, like, at least once a year, and we would always talk about like how he’s designing things. And his whole philosophy was, I’m not building office spaces like they used them in the eighties. I’m building ’em for today. How do tech companies use ’em? It’s all different. You have to build how people use the property, and he got me thinking outside of the box, naturally. And then when you’re engaging in things like Section 8, you start to get crafty. I read a book and once again we’ll say, like, it’s almost like a dirty word, a Donald Trump book. And for some of us, it’s like a dirty word. So I read a Donald Trump book, right? He’s talking about how to make money in real estate and how you make money in real estate is not by buying, just buying better than people or beating people to the deal. There is some of that, but it’s not all about that. What it’s about is vision, having a deeper vision than the average investor. So if you can see further than them, you can see opportunity where they can’t. So as I started thinking outside of the box, I would look at, like, a Section 8 and think how can I increase the cash flow in a Section 8 property? So I’m going to go in and first start doing a kitchen flip. So a kitchen flip is where you take that three bed, one bath property, and you take the kitchen from the back of the house, flip the kitchen into the dining room, get the living room, you kind of condense it in, so you have this eat-in kitchen. And you put a bedroom in the back on the first floor. Now you got a four bed. You might put a bed and a bath back there. You got a four-bed, two-bath out of a three-bed, one-bath footprint. And because Section 8 pays by the bed, you’re getting more cash flow by doing the kitchen flip. So first you start kitchen flipping, and then after you do that for a while, you start thinking about what if I just started building master suites, would people come? Because I got exposed kind of to some investors who were doing room rentals. I’m not a huge fan of room rentals because I wouldn’t necessarily live there. I don’t want to share a bathroom with anybody. Like, I just don’t want to. So I started to get into that, co-living, especially once I had that conversation with my zoning attorney and my eviction attorney and my architect, and everybody kind of gave us the thumbs up. It was like, all right, well let’s build this thing. And if you build it, you know, they will come. And in terms of demand, peak COVID, like, 2020, March 2020, like the shutdown that hit us all, I attended a hundred co-living units between March and June of 2020 people barely even wanted to leave the house. People were so afraid, like the COVID’s airborne, like you walk out your door, you’re going to get COVID. They were running into these properties in the middle of that, a hundred co living units in 90 days. So, the demand is insatiable because this is affordable housing. America has this affordable housing crisis in our C-class neighborhoods where, you know, like I grew up in, in the hood of Philly. We have this affordable housing crisis. How many people qualify for Section 8? Not a ton. And they got a 20,000-person waiting list In most of these major cities, how many people qualify for the low-income housing tax credit type of properties? Not very many. There are millions of people who don’t qualify for anything, but they still need affordability. So when you start to build this type of asset, you’re just tapping directly into the demand. So people who don’t have vouchers or any of that, but they still need the affordability. And then here’s your product. And we’re putting in stainless steel appliances, hardwood floors, granite countertops, many split systems. So you have heat and AC that you can control, internet. We’re loading up the property, utilities included. And then setting the rent at a point where we can, you know, do a total market share across the tenants living in the property. So it is been working out pretty well.

[00:15:06] Nicole Pendergrass: Oh my gosh, that is genius. I really have not heard of someone doing it at this type of model. Okay. So you are renovating the properties though, and doing these kitchen flips and then creating these mini-suites. But are these properties that would already have needed a full gut renovation or are you doing extra on them? Like, in order to create these mini-suites, you have to do a renovation that wouldn’t necessarily had to have been done if you weren’t doing this model. You know, like how, what’s the return on the renovation cost for the increased rent?

[00:15:40] Brian Grimes: Yeah, I’ll break down the numbers of a deal, but after going through 300 full gut renovations, really once you go through like 50, and I’ve I’ve done, in 2019, I did 153 of these. But after you go through so many deals, you start to learn, like, these properties, most of these major cities, if you look it up, they were built in 1910, 1915. All of these properties are a hundred years old, so they all need heavy development. Anything you get, you can try to cut corners, put a little paint on the walls and, you know, you’ll have outlets in the baseboard and tube and knob wiring. Your house is going to catch you on fire. Like, these houses need a full gut. And I started to learn that as I tried to cut corners and tried to get away with things and it just didn’t work. I will specifically target properties that are like in tear-down condition. If anybody goes on my Instagram at any point in hearing this, you’re going to see, when I say full gut, I mean we’re looking at the guts of the property. Like, I’m breaking it down to the four walls half of the time. It’s just an easier process. Once you get into full gut, you start to learn that it’s easier ’cause you can just break it down. You can get it right the first time and then you just set up that property  to be a long-term asset where, once you put tenants in, things aren’t continuously breaking and setting you backwards on your cash flow. In terms of the numbers, like, what I like to do is operate within a developer spread, so a developer spread would be like, I’ll buy a property for $30,000 like a shell in Philly or in Baltimore. The after-repair value will be $230,000 or $240,000. So there’s this spread of $200,000 Now, because I’ve been doing this so long, the way that I teach people how to do this, we pay directly for materials and labor. We pay the direct cost of construction. So we’ll cut out a lot of middlemen, a lot of GCs, a lot of markups, and you can at scale start building these properties for $120,000, $130,000 in materials and labor. So you’re buying ’em for 2030. You put in, you know, 150 to 130, you’re in it, around 150, 160 is worth 230, 250. So you can actually cash out, refinance at a break even, or even get paid to build properties. And typically I’m targeting properties I get paid to build, so I can do that cash out, refinance on the BRRRR strategy, maybe make $20000, $30000 per deal that I build and recycle that money into new deals and kind of keep running.

[00:18:12] Nicole Pendergrass: Oh my goodness. So, all right, one question that pops into my head and I might be getting off-topic, but in the middle of COVID and maybe a little bit after, but everyone knows about like supply chain shortages and it being almost impossible to find a contractor that was reliable or who even wanted to come out. You know, it’s hard enough to find contractors even when it’s not COVID. So how did you do so many flips in such a short period of time? Was your costs, like, all over the place because of the supply chain stuff? Like, were contractors charging out the wazoo, Like, how did you keep that all organized?

[00:18:48] Brian Grimes: Yeah. Shockingly I found out, I mean, the COVID shutdown, for people who weren’t in real estate at the time and don’t know, or weren’t at this level, basically, like, I got a call from a national lender and they were like, Hey, you know the refinance that was going to close on Friday, you know, Redwood Trust is not buying our loans anymore. It’s not going to happen. And they had a call with a guy before me where he had like a $10 million refinance that they just killed at the table. Like, just killed it. So the lending space just dried up. So that was completely dry, but I had so many deals going on that I still had liquidity through my construction lenders. Like, I had like 50 deals going on, literally. So I had draw money and different liquidity. I also had a warehouse, 20,000 square foot warehouse, that I pretty much stocked out, like my own Home Depot, and a fleet of trucks and drivers and everything else you can imagine. So I can just keep rocking and rolling. And even though there are supply shortages outside of getting a, you know, some of the masks. We had everything loaded. Like I was always loaded up for 10 to 15 houses anyway, like full gut in my warehouse. So I could just keep running and then order from China or, you know, get something off of a boat and just load me up with another hundred sinks, a hundred toilets, a hundred bathrooms, so I can just keep running at scale. So that was fine, but what I found out was that labor was so liquid. So I went to sleep. I went to sleep, and a plumber was like $400 a day. I woke up and commercial real estate has shut down. That’s what the government shut down first, the commercial guys. So everybody was on the couch. A plumber was $150 a day, the same guy. It was $150 a day. And it was like that across all labor. So the cost of labor got cut down to a third of where it was pre-COVID shutdown. So I have, of course, took that labor and kept running it through deals, and that was part of how, you know, I navigated even when the money drying up on the lending side temporarily. That came back online in like four months or so. It was definitely crazy. And when you’re in a real estate game and you’ve gone through some market cycles, you’ll start to understand this stuff and understand that there are times where credit is available, people are lending and doing 80% cash out refis, and then things can tighten up in a heartbeat. So you have to stay pretty liquid and you know, keep your ear to the ground and know what’s going on in a macro level.

[00:21:20] Nicole Pendergrass: Woo. Okay. You, you’re in super beast mode. All right. You know what? I want to go back to the beginning though. So you went to schooling for finance, right? Yeah. And you became a certified financial planner.

[00:21:36] Brian Grimes: Definitely.

[00:21:37] Nicole Pendergrass: I also read, like, in your bio, you were working with high net worth individuals, like, at managing their assets. So what made you, one, I want to get into that because I love to hear what high net worth individuals are investing in, what’s their investment strategy, what’s their mindset. And then I want to go into what made you transition into real estate from that.

[00:22:02] Brian Grimes: Yeah, so I’ll answer, I guess, first off, and it was shocking to me, to manage money for millionaires when I first started doing it. There are different types of millionaires. Some millionaires are like the wife was a teacher and kind of just saved and had a big 403B, and, and the, you know, husband did something and they just saved their money and lived frugally, and they have a couple of million dollars. And then you have the people who make a ton of money, like they’re a high power attorney for, like, Fox News, and they make 13 million and 2 million in stock options. And then you’ll have the privately wealthy, like family, like my grandfather started a company and they left the family stock and my stock’s worth a hundred million and it kicks me off 3 million in dividends every year. So you’re dealing with all of these different mindsets. What I was shocked by is some of the millionaires live like broke people, kind of like paycheck to paycheck. They had big bills and they spent all their money. They just live paycheck to paycheck, even as a millionaire. And so others were frugal. And what are they looking for when they invest is very, very, also kind of strange. Like, they’re not looking for big returns. You would think, Oh, millionaires, like they’re going to slap their money around and they want to be in these big hedge funds. They will put a little bit of money, maybe 5%, 10%, into a, like, a biotech hedge fund or something that can really supercharge it. But most millionaires are only looking for like 6% a year, 5%, 6% steady. They just don’t want to lose a lot of money in a down market. They’re willing to accept less on an upmarket if you can cushion them in a down market. I was kind of shocked by that. I thought, Hey, we’re going to be going a lot harder and doing some off-the-wall stuff. But a lot of these millionaires are just like you or me. The only difference I will say is most millionaires are business, unless they are CEO-level running companies, they’re business owners. So there are a lot of business owners because the tax code here was written for land owners and business owners. And the millionaires, because they own businesses, they pay a lot less than taxes to keep a lot more of the money that they make than a W2 employee essentially doesn’t keep much at all because you’re paying all the taxes and getting pinched in the middle. So if you can do anything to put yourself closer to being a millionaire, it would be to become a landowner or a business owner of some degree. How did that make the transition and why? I always knew that I wanted to be in real estate. I always wanted to be my own boss. Going to Columbia University, being an econ major, everybody got railroaded into investment banking, but that wasn’t for me. I wasn’t going to be the guy that was going to work like 20 hours a day, go home, take a shower, three hour nap, and come back to work all day. I wanted to have the free time to invest in me because I already knew, I had done a lot of research on just entrepreneurship, and I knew, like, the way that this game works is you have all the energy while you’re young, and then if you put all of that into some of these big corporations and companies, by the time you get older, you’re going to have more responsibilities, kids bills, drama. And you’re not going to have the energy that you had in your twenties and thirties. I wanted to be free to put my energy into me. So I always worked, like, my first job was a financial planner for AXA advisors. I was a hundred percent commission, so I controlled my schedule and did things my way. And even when I was working at these other places, like the high network firm or I worked at a startup, Policygenius, if anybody wants to look that up, so they sell life insurance and all different types of insurance direct to consumer. On the internet, I was always saving, paying myself first, saving 10, 20, 30% of the check and putting it all in the real estate with the plan of jumping out of the nine to five into real estate, which I did at 28 or so, 27, 28 and kind of, retired myself. I quit the nine-to-five for good at 30. Like, I was just like, I’m done with it, full-time real estate and haven’t been back.

[00:25:56] Nicole Pendergrass: Wow. Quitting at 30. I’m taking notes because this is very inspirational. Like, I wish I had had the mindset to want to get into real estate or know anything about it or know that it was even possible for an individual to do when I was younger ’cause I probably would’ve jumped ship way sooner. But now I’ve been like working slowly toward it because, you know, married, and kids, and all that stuff, and the job and the bills and all that. So, been building up slowly. But if I had, man, if I had started earlier or been aware of this kind of information, which is partially the reason for the show, right, to make people be aware that this is possible. You don’t have to be like a huge, you know, high net worth even get started, you know, you can start with what you have, and there’s a lot of resources out there, and I just want people to understand other people’s journeys and see that is possible by modeling after someone who did it like you. Even if you’re not going to do 300 flips a year because that still blows my mind.

[00:26:57] Brian Grimes: Yeah, and that stuff, you know, some of the hundreds and hundreds of deals like that stuff is intense. But I didn’t start there, right? My first deal, I did an FHA house hack. I had maybe $14,000 to my name. I got a seller’s assist negotiated into the deal. I ended up bringing 7,000 to the table on a duplex right in my backyard, kind of. And that property was cash flowing, like, a thousand dollars a month, got all my money back in seven months, and kept going. But I started off very small with the intent to buy one property a year for 10 years, and that would be, you know, $5000 to $10000 a month and I would be able to retire and kind of do it more full time. And that was my intent. It just, in this game, you will get exponential growth because you just get better every year. And that one deal a year turns into two and then four and then 30 and then 50 if that’s what you are going after. I mean, it’s definitely possible, especially with the BRRRR strategy.

[00:27:57] Nicole Pendergrass: Yeah. Did you meet anybody that kind of catapulted you into that going bigger kind of stage?