Financial Freedom Through Real Estate in 5 Years

Feb 28, 2022

Is it possible to retire early by investing in real estate? 

Joseph Cornwell, formerly a police officer and now a real estate agent, believes that it is possible. Also a general contractor and real estate investor, he buys distressed properties and turns them into value-add investments that are attractive to many buyers.

He shares in this episode the events that led him to jump from the police force into the real estate space and the steps that investors can take to scale into larger multifamily properties. 

 

[00:01 - 02:47] Opening Segment

• Joseph Cornwell turned from police officer to real estate investor
• • How did he do that?
• The story of how he acquired 35 apartments with 13 garages

[02:48 - 07:25] A Creative Way to Generate More Real Estate Income

• The potential revenue of a garage in your real estate investing
• Joseph shares his experience so far scaling multifamily real estate
• • What many real estate agents lack according to Joseph
• He reveals his secret in finding new clients as a real estate agent

[07:26 - 12:25] How to Scale to Large Multifamily Real Estate

• Joseph talks about his plans to scale into larger multifamily properties
• The biggest challenge that Joseph anticipates in finding a deal
• You can replicate Joseph’s successful entry to real estate
• • These are the steps

[12:26 - 15:03] Closing Segment

• A tool or resource you can’t live without
• • BiggerPockets
• A real estate mistake you want our listeners to avoid
• • Working with the wrong contractors
  • Find referrals first from people you trust
• Your way to make the world a better place
• • Promoting financial freedom and literacy
  • Educating new real estate professionals
• Reach out to Joseph
• • See links below 
• Final words

 

Tweetable Quotes

“Having relationships with those brokers…focusing my time on reaching out to those brokers, and trying to be one of their first points of contact and move those properties is very important.” - Joseph Cornwell

“ I think you have to decide early what is your goal and that will help you develop your strategy.” - Joseph Cornwell

“When working with contractors especially, I would definitely try to get referrals from people you trust.” - Joseph Cornwell

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Email [e-mail] to connect with Joseph or follow him on LinkedIn. Visit Sibcy Cline Realtors to find out if you’re fit to become a real estate agent!

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Want to read the full show notes of the episode? Check it out below:

Joseph Cornwell  00:00

I think you got to decide, you know if you want to be a full-time investor, which is, you know, what I'm into now, where I'm headed. You got to decide to make that obviously, you know, a big part of your life and world. And for a long time, I did the W2 job and the investment. And it was very difficult. I was working, you know, 60, 80, 90 hours a week sometimes and it was not sustainable, and I shouldn't have done it as long as I did. So I think you have to decide early what is your goal and that will help you develop your strategy. But you know, if you're looking to operate a business like mine, where you're offering multiple services within the real estate business, then you have to kind of dive into it. 

 

Intro  00:38

Welcome to the How to Scale Commercial Real Estate Show. Whether you are an active or passive investor, we will teach you how to scale your real estate investing business into something big.

 

Sam Wilson  00:46

Joseph Cornwell is a former full-time police officer turned real estate investor, agent, and general contractor. Joseph, welcome to the show.

 

Joseph Cornwell  00:55

Hey, thanks for having me.

 

Sam Wilson  00:56

Hey man, pleasure’s mine. Same three questions I ask every guest to come on the show, in 90 seconds or less, can you tell us where did you start, where you are now, and how did you get there?

 

Joseph Cornwell  01:04

Sure. Yeah. So as you mentioned, I was a full-time police officer for the past 10 years. I just quote-unquote, retired from my W2 job last year, started real estate investing about six years ago, which led me into getting my real estate license and becoming a general contractor a couple of years after that, as I started doing rehabs on my properties. And that led me to scaling up my portfolio. Right now I have 35 apartments and about 14 garages spread out on those properties, and lucky to scale up into larger multifamily this year.

 

Sam Wilson  01:38

Man, that's fantastic. Tell me the 35 apartments, but then 13 garages? What's that?

 

Joseph Cornwell  01:45

Yeah, so I actually bought a six-plex, here in Cincinnati, where I'm based, that had 10 storage garages behind it. So that kind of got me into very small scale, self-storage. Those are all separately rented either to tenants or non-tenants. And that kind of gave me the idea with the construction company that I own to maybe start building some more garages to add income on some of my other properties. So like I said, I don't know the exact number. But we have 14, 16, garages, something like that, that we rent on our properties, thE rental properties.

 

Sam Wilson  02:15

That's really interesting. So you've got a single family home or a multifamily home, whatever it is, I'd say it's a quad Plex. And it's got some garage that's not attached to the structure. And you separate that out on the lease and say, “Hey, we're going to lease that separately to somebody else.” Is that right? 

 

Joseph Cornwell  02:30

Exactly. Yep, we offered to our tenants for a discounted rate, obviously, you know, especially if you're like a duplex, for example, I know having people come and go through the driveway, and the property is not ideal. But I've had times where tenants don't want it and usually can get a lot more rent, you know, for a non-tenant. So we offer both ways and do whatever is easiest.

 

Sam Wilson  02:48

That's really, really intriguing. I love that. Yeah. How do you navigate the coming and going of random people at the property?

 

Joseph Cornwell  02:55

Yeah, so we are storage, strictly states that is daylight hours only. And it's only for storage. So you know, we don't have people run in, you know, oil change shop or something like that ever garage, it is strictly for storage of items very similar to like, you know, the mom and pop or franchise storage company would work. And typically our tenants are gone during the day. So it's not an issue. But if we did have an issue, then those tenants communicate, we do an introduction. And obviously, you know, it's kind of a small-scale housing. So everybody kind of knows each other, obviously, if this was 100 units or something to be a lot more management to coordinate all that.

 

Sam Wilson  03:30

Right. Yeah, that's interesting. What is the additional revenue that a garage like that can produce?

 

Joseph Cornwell  03:36

Yeah. So for example, and this was pre, you know, lumber prices jumping up on us a couple of years ago, but we were able to build a large, side by side like 24 by 24 garage for about 20 grand, that was our costs through the construction business. And we're able to rent that out for 300 a month. So you know, it's a 1.5% rent-ratio, new construction with you know, no expenses, no utilities, no CAPEX, because it's all brand new. So obviously, you know, we could buy apartment deals like that we do it all day long. And you know, to do that with storage is even less headaches than residential. So, nowadays, I would probably cost quite a bit more to do, but it made a lot of sense a couple of years ago,

 

Sam Wilson  04:12

Right. That's absolutely intriguing. Thanks for breaking that down. Scaling small multifamily. You said you started about six years ago. Is that right? Okay. Cool. And so in that time, you've been able to acquire 35 apartments, and that was enough to allow you to, you know, quit your full-time job.

 

Joseph Cornwell  04:28

Yes, exactly.

 

Sam Wilson  04:29

That's fantastic. Talk to me about what your business looks like today. I know you guys have your hands on a lot of different things. What's been the iterations of your business? And then how did you scale each of those pieces?

 

Joseph Cornwell  04:40

Yeah, so I like I said, I got my real estate license about five, six years ago. And mainly I started as a brand new investor, I started working with some real estate agents that I had just known from buying personal houses and things like that. And I quickly realized that most real estate agents don't know anything about investment property. So that kind of led me down my path of getting my own license at the time I thought you, “No, I'm just gonna do this to buy and sell my own investment property.” But it kind of organically grew into, you know, its own business. I had other investor friends, like, “Hey, I know you got a license, do you mind showing me this or might help me do this,” and it kind of out of my controls almost, you know, grew into its own business. And I was like, Hey, I'm making decent money doing this, I should maybe actually put some time and effort into it, see how much I can scale this. So that led me into scaling that into a much more profitable business than my previous law enforcement job. And again, same situation, I started hiring contractors on my properties, I was buying to rehab, I started doing all the work myself. And when I ran into things I didn't want to do I started hiring people, I quickly realized that hiring and firing contractors was not a lot of fun. And I had the idea that if I, as an investor, I'm struggling with hiring reliable contractors, then it's probably a lot of other people in my market with the same issue. So I'm going to put the time and effort into building out a business around that service. And I started hiring full-time employees to do my contracting for construction and scale that up. So as of now we have seven full-time contractors that work in the business, and I've one full-time assistant, and she helps with the construction and the sales side with the agent business as well. So as far as the agent business, it's still just me and my assistant that run all that.

 

Sam Wilson  06:13

Gotcha. That's really, really interesting. How did you go out and find new clients? I guess, you know, for the construction business, I mean, you're running two very different, it seems. Businesses, obviously, they both serve probably the same person. But how did you even find those clients?

 

Joseph Cornwell  06:27

Yeah, so I very early on in the process, and not really even intentionally, I started posting everything I do on Facebook, you know, I was taking pictures showing before and after photos, I made business pages for those companies. And that quickly, organically grew as well, people started kind of liking and following our pages, enough, where we were getting the word of mouth, people have seen what we're doing, and they're like, “Wow, that's a great kitchen, you know, let me call them and see if they would do our kitchen or bathroom or basement or whatever it may be.” So we started getting outside clients that way, very organically through Facebook, you know, not even doing any paid marketing or anything like that just kind of word of mouth and seeing it on social media. And then we also obviously get a lot of referrals from our sales business. So if I sell a house for somebody, and they want a kitchen done, they know I have a construction company. And we kind of pass referrals back both ways, right? If I redo a kitchen for somebody, and next year, they get to sell their house, they already know me and like me, and trust me, hopefully. And then they've called us to, you know, help them buy and sell real estate as well. So both businesses kind of, you know, help prop each other up in that way.

 

Sam Wilson  07:26

Right, no, man, that's absolutely fantastic. You know, those are revenue-producing businesses, I think that we talked about earlier, you know, that allow you to continue to invest your own money back in real estate. So what does the future look like? And do you see it changing kind of on your investing strategy?

 

Joseph Cornwell  07:42

Yeah, so historically, I've done you know, the BRRRR method, I buy very, very, you know, distressed properties that, you know, sometimes need full structural rebuilds, you know, foundation issues, everything you can imagine. So, on the residential side, from the 2, 4, 6, 8 unit properties, I bought the last five, six years, that's what we've been doing. As anyone who's in, you know, large rehab business knows with labor issues, supply chain issues, material issues, it's becoming increasingly difficult to hit, you know, budget and timeline on those construction projects. So I'm hoping this year to transition into more of a stabilized asset that is not necessarily turnkey, I mean, I'm still going to look for value add properties, like we all want, but I'm hoping to get into larger multifamilies, you know, the mid-size, the 20, 30, 40, 50 units, that's kind of my next goal. And instead of doing full, you know, rebuilds on these properties, we want to focus on just doing apartment turns, which were, you know, a little bit more efficient, easier to find material for. And, you know, we can turn those apartments a lot faster than we can do an entire, you know, structural and mechanical rebuild on a house.

 

Sam Wilson  08:47

Right. Yeah, that's an excellent point. You don't know what your turn time would be per unit. But it's got to be a lot less than a single family house. And of course, if you can go one apartment to the next to the next, I mean, your scalability on that is just so much greater, you know, job sites across town, that is absolutely intriguing. I love that. What do you think is going to be your method for finding and acquiring those larger properties?

 

Joseph Cornwell  09:10

Yeah, so at least here in Cincinnati, I mean, most of those mid-sized multifamilies, which is a small percentage of the inventory is controlled by the commercial brokers. So having relationships with those brokers, which I have with some, you know, focusing my time on reaching out to those brokers and trying to be one of their first points of contact and move those properties is very important. There are some still owned by Mom and Pop owners that you can direct market to which we've done in the past and plan to do again, because typically, it's a little bit smaller than, you know, the large scale funds and syndicators are looking for, you know, they're looking for the 100+ units typically, so there's not as much competition with the big boys and that's mid-sizeD space. But you know, it is still mostly broker controlled as far as the sales so doing direct mail and working with the brokers will be our opportunity to find those deals.

 

Sam Wilson  09:59

Right. That's interesting, what are some challenges you see in that kind of, you know, middle market, but that kind of lower multifamily count? Like, what are some challenges you perceive, you know, acquiring that 30 to 50 unit size property?

 

Joseph Cornwell  10:12

Yeah, I mean, I think just inventory is an issue. So, you know, I don't know the exact number of top my head, but let's say, you know, if there's 1,000, you know, multifamily units in my area that are over 10 units, I'd say, you know, probably 10% fall in that mid-range category. So just from a numbers standpoint, you're already looking at a very small percentage of inventory. And then obviously, as we all see, there's a very short inventory issue on every size of real estate, right, so large multifamily, small, and even residential, a lot of people just aren't selling right now. So that's gonna be the biggest challenge is even finding deals that are able to be sold. And then once you find them in, you're trying to get them at a price that makes sense for the value add strategy that we're looking to do.

 

Sam Wilson  10:54

Yeah. And I would imagine, you know, those unit sizes are going to be more vintage property, as well. So you know, then you're also working with an older product. Gotcha. That's absolutely intriguing. Hey, tell us I know, we've talked a little bit about, you know, where you've come from, where you guys are going, the type of products you're looking for, if somebody wanted to kind of replicate your success or do what you've done, what would be some things you would tell them to start off first steps?

 

Joseph Cornwell  11:18

I think you got to decide, you know if you want to be a full-time investor, which is, you know, what I'm into now, where I'm headed. You got to decide to make that obviously, you know, a big part of your life and world. And for a long time, I did the W2 job and the investment. And it was very difficult. I was working, you know, 60, 80, 90 hours a week sometimes and it was not sustainable, and I shouldn't have done it as long as I did. So I think you have to decide early what is your goal and that will help you develop your strategy. But you know, if you're looking to operate a business like mine, where you're offering multiple services within the real estate business, then you have to kind of dive into like it like I did, you know, get your real estate license, maybe that means getting trade licenses, depending on what state you're in. You know, obviously, if you're going to operate a general contracting company, there's a lot of hoops to jump through with that as well, depending on your state. So I think it's really deciding what you want to do and kind of work backward to build a strategy around that. Yeah. And I don't know if the way I did it necessarily makes sense for most people. But it certainly is a way to do it. And it works. And it has worked and hopefully will continue to serve me in the future. But you know, the hardest part is it is difficult, no matter what route to take is going to be difficult. So you just got to really dedicate, you know, a big part of your life to doing it.

 

Sam Wilson  12:26

Right. No, that's a sound advice. And certainly appreciate that. Let's jump here to the final four questions. The first one is this, what is one tool or resource you find you can't live without?

 

Joseph Cornwell  12:35

Yeah, I would say BiggerPockets is probably one of the best, you know, real estate, social networks that have been a part of I've been on there before I bought my first property. And it's been a massive resource. And I'm sure most of the listeners here probably have heard of it. But that's probably the most helpful resource I've had. Since starting real estate.

 

Sam Wilson  12:51

That's awesome. Question number two, what is one mistake you would help our listeners avoid and how would you avoid it?

 

Joseph Cornwell  12:56

When working with contractors especially, I would definitely try to get referrals from people you trust. And I would definitely have a system that whether it's a contract or some sort of structure in place where you're only paying them for completed work, and you're checking the work when it's completed. Either you or somebody else you trust is checking it, don't get burned, like I did in the beginning by, you know, giving 1,000s of dollars away to people who aren't doing the work are not doing it correctly.

 

Sam Wilson  13:20

Right. Oh, yeah. Happens all the time, unfortunately. When it comes to investing in the world, what's one thing you're doing right now to make the world a better place?

 

Joseph Cornwell  13:27

Yeah, I think for me, one of my you know, philanthropic goals, if you want to call it that is to give back to others who you know, are on this journey behind me. So I recently started a YouTube channel where I'm basically just gonna lay out everything I've done and, and I've had a few videos out now where I'm gonna try to help other people get to where I'm at. And hopefully, Excel passed that as well. And I do the same thing with some of the local high schools. I teach some, you know, financial literacy classes as a guest speaker. And that's something I want to hopefully grow into like an actual company, nonprofit, where we help other people, learn financial freedom, learn financial literacy, learn how to invest because unfortunately, in this education system we're in in America, it's not really taught. So we're hoping to pass that message on to other people that will hopefully have an advantage that we might not have had.

 

Sam Wilson  14:15

That's awesome. I love that Joseph, if our listeners want to get in touch with you, or learn more about you, what's the best way to do that?

 

Joseph Cornwell  14:20

Yeah, so you feel free to email me anytime, it's [e-mail]. My Instagram, Facebook, and YouTube, I think are on the links that we have here on the show. So feel free to reach out on any of those platforms or email me anytime.

 

Sam Wilson  14:35

Awesome. Joseph, thanks for your time today. Certainly appreciate it. 

 

Joseph Cornwell  14:37

Thanks for having me. 

 

Sam Wilson  14:38

Hey, thanks for listening to the How to Scale Commercial Real Estate Podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen, if you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners, as well as rank higher on those directories. So I appreciate you listening. Thanks so much and hope to catch you on the next episode.