Latest / The Capitalizing Your Life Podcast / Maximizing Income Streams: Jeff Ervick's Guide to Multifamily Investments

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Maximizing Income Streams: Jeff Ervick's Guide to Multifamily Investments · The Capitalizing Your Life Podcast

• Glenn (00:10) Today my guest is Jeff Ervick with Valoris Capital Partners. Welcome, Jeff. Jeff Ervick (00:15) Hey, what's up Glen? How you doing, man? Glenn (00:18) Great to have you on. We're actually, you're in town in Tampa and we were able to go out and get some steaks and then hung out for a couple of days at a conference. It was a great time. Jeff Ervick (00:26) Yeah, no, it was excellent meeting you. And that was such a cool conference too, just hearing from so many different people, all like, you know, within the same mindset, right? was, was, it was pretty powerful. Glenn (00:39) Yeah, just to summarize the conference, it was a capital raising conference, but it was for all different types of real estate, niches, businesses. it was really, it wasn't, I don't think it had much to do with raising capital. It was just more of just conversations to talk about. And I thought it was great. Jeff Ervick (00:59) Yeah. Yeah. It's funny. It's like, you know, you go to this thing and you think, I'm going to find some type of nugget from each of them. Right. And, and, and use that in my, in my, you know, my businesses or whatever it is you're going to do. And one of the things that, that, that conference really did to me is it almost, it inspired me right. You know, again, you'll like say, yeah, we've got, we went there because we want to learn how to raise capital or raise better capital. Right. I I took away just the fact that there's so many high level people in that, in that room. That just getting around them and being in that room is more important than learning how to do something. Right. I'd rather do it by action than do it by like reading a book or podcast or no, no offensive podcast, but yeah, I learned a ton from podcasts, but going out and actually doing the thing, right. Whatever it is you're learning is more important to me. Then, you know, Glenn (01:44) Yeah. Jeff Ervick (01:54) anything else. It's the act of doing which is important. Glenn (01:57) Definitely. And with podcasts, you get to get in the weeds a little bit. But I think when you go to the conferences, you're like going to dinner, you're hanging out after dinner, and you really get to know people. The one thing I got out of that conference was riches are in the niches. And yeah, just like mobile home parks. all we have to do is just focus on what we're doing and make sure we do it right. Do it as good as we make. Jeff Ervick (02:09) Yeah. Yeah. Glenn (02:27) be the best at it, you know? Jeff Ervick (02:29) Yeah, for sure. mean, you know, it was, was cool. It was good getting to know you as well, meet you and a couple of your partners also, John and, and, I didn't meet Garrett, you guys have a, a phenomenal, like business going, right? Your business model, what you have going on. Like, honestly, you inspired me to be like, okay, I think I need to get into mobile home parks, right? So, so, yeah, I might be one of your investors here in the near future, by the way. So yeah, maybe partner, hopefully partner. Right. Glenn (02:51) Yeah, yeah. Well, when, yeah, definitely when cost seg kicks in in 2025, there'll be great tax benefits coming. It already is pretty tax favorable, but I think the 100 % cost seg coming in again will be great for real estate. Jeff Ervick (03:03) Yeah. yeah, it's crazy. Yeah. It's going to be, I'd be, I'm anxious to kind of see what's going to happen, right? Because we can, you know, estimate or guess as much as we want, but until like there's actual actionable items that happen and we say, okay, now we can go back, you know, to 22 or 24 and 23, cause they, maybe they they're putting a hundred percent bonus appreciation back in play since it fell off in 22. Then maybe. we'll have more that we can go back, will that cause more issues? Who knows, right? But again, all those things. And one of the things, mean, before we get into it too, one of the things I really took away from that conference was that we should probably buy more businesses, right? So I've been thinking about it for such a long time, but hearing a couple of stories of folks who've gone through and they've bought, You know, the different businesses you package them up, kind of like what Sam is doing with the pave company as well too, right? All those sorts of things. it's, it's now it's like, okay, how do I, how do I keep progressing to be able to get to that point where I can start, you know, acquiring a business, you know, and then bolting them on. then you, you maximize the EBITDA and then you sell it off to a, you know, a PE firm or something like that. Right. Glenn (04:19) Yeah, definitely. Yeah, so we're going to get into your story in a second. But my thought about that is I also had the same idea, but then it's hard to know what is a distraction from your own business compared to a growth towards where you're heading in the right direction. I always think of my big one is dumpster rental companies because we're going to spend $100,000 on dumpsters this year. you know, dumpsters, roofing, and then construction. You know, those are the things that we use all the time. And then I think to myself, it, is that really the business that we want to be in or is it to buy real estate and to just make it better, you know? Jeff Ervick (05:12) sure. Yeah. Yeah, I mean, you know, if you could, if you could vertically integrate your business in a way, you know, with, with the dumpsters, for example, like, yeah, yes, your, your primary business is buying mobile home parks. But if you use a hundred thousand dollars worth of dumpsters and that's just you imagine everybody else that's going to be using it too. So if you can maybe have 10 of you, right. And then that's a million dollars of revenue coming in. And obviously you can write off the cost of the dumpster itself, probably, right. I appreciate that asset. Glenn (05:31) Yeah. Yeah. Yeah. Yep. Yeah, probably pretty quickly. Hopefully, probably in the first year. Jeff Ervick (05:55) Yeah, so maybe you call your guy who you get dumpsters from and ask him if he wants to sell his business to you. But stay in the business so you can run it for me, but I'm gonna buy it for you. Glenn (06:03) Yeah, definitely. Exactly. That's the part. Do I want to run a dumpster business and I need to find one big enough to where I don't have to run it? Jeff Ervick (06:10) Yeah. And you don't want to cause whatever you're doing to be your own dumpster fire. That's the last thing you want Glenn (06:17) Yeah, exactly. So if you could just tell us a little bit about yourself. Jeff Ervick (06:23) Yeah, yeah. So my name is Jeff Irvick. I'm an IT tech exec. I've in IT sales for, I say executive, but really I'm an IT sales guy, right? I've been in IT sales for over about 20 years. Really got into real estate in the mid 2000s. You know, bought my first house in 2009. you know, right after the, the crash happened. So I luckily was able to get into a good deal. we only stayed there for about. I think maybe about just under two years. And then we bought into went to a bigger house. Our family was growing. We needed to get into a bigger house. So kind of that kind of caught my itch a little bit because I was able to buy this townhouse. We did some upgrades to it, not like your basic, not like your full in like live in rehab type thing. Right. But we did some upgrades to it and we end up selling it and made a profit on it. So that kind of gave me the itch. That was like my first real estate transaction. And then Transfer jobs up here. I live in just out the Annapolis, Maryland area and and kind of put my real estate purchasing on hold a little bit after I bought my current residence and got into Both not most of them. Sorry got into buying some rentals rental properties really Kind of got the itch even more right but realize I'm like I love rental properties. love buying them. I don't have the time to rehab them, right? So I have to hire somebody to do that, right? And then hire a property manager as well to manage them so forth. But I mean, this is going to be, it's a lot of, to me, was like, was, it was going to take a long time for me as still a W2 employee to be able to scale a portfolio that I feel was, you know, where I wanted to be. Right. So I asked myself like, what do I need to do differently? And so instead of doing single family homes, I ended up getting into multifamily. And so we, you know, joined a mastermind program mainly to learn and to network with like-minded folks. And then we got into that. And then since then we've been really just buying as many as we possibly can, scaling them into syndication. And here we are today. Yeah. So. Glenn (08:49) Awesome, so And you I know you said it earlier if you could just give us a little bit of the breakdown of The amounts that you've actually been like a limited partner in and also GP in Jeff Ervick (09:05) Yeah, so to date we've acquired just over 1,500 units and I'm an LP and a GP in all of them, right? And then I also do have another syndication that I was an LP in for about 224. So I think total, you know, in my portfolio is read by 1,700 units and that's in under management and development. So we've got... two big development deals we're currently working on as well. So, but I'm a limited partner in every one of my deals. Like I invest in a deal as a limited partner and I'm also there as a general partner too. Glenn (09:44) So being in a W2 job and being a general partner, how do you balance that? How do you do both? Jeff Ervick (09:53) Yeah, it's, it's, it's not easy. All right. That's for sure. Let's just put it that way. This is, I wouldn't say this for everybody read to do it. but I've, you know, I read a lot of books, listened to a lot of different podcasts on how, how to effectively manage time. And you also have to be in a W2 job that's flexible as well, too, right? And I'm lucky to be in position where I basically run my own line of business, right? So it's kind of like a mini business owner, so to speak, right? Where I have a few folks that work for me that do some different tasks for me so I can offload a bunch of that kind of stuff, right? But the relationships is what I do. I develop and build relationships with all of my customers. And so I've gotten to a point where I've got that schedule very, you know, not autopilot, right? But it still kind of works well. But I also do block schedule, right? So a lot of people like to write down a big old to-do list in the morning and then you got to like knock off your to-do list and you still got things you got to keep carrying over. So what I do is I actually, I block out certain time, right? So I've got, know this morning I had to take care of, you know, a bunch of different things for my W-2. So I put a block on my calendar to handle that and I focus on that for the entire time. And then I focus on my next task at my hand, right? And then I continue to scale that. And it's a mixture between both, right? So whether it's my W-2 business or real estate businesses. But I also do have to say I've got amazing partners. And I think that is a... And you can attest this well too, is this is not a, if you're doing single family homes, you can buy a single family home yourself, you can hire a contractor, you can hire a property manager and you can continue down that path. But in multifamily or even in mobile home parks or development, you have to have a team that you work with. So I always like to say, kind like getting in the room with the right people. I always like to say that I like to, that I partner with people who are much smarter than me, right? So we compliment each other as far as our skill sets and what we can do, but I have partners who run the operational and the acquisitional side of the business. I handle most of the capital raising and the investor relations side of the house as well too. Glenn (12:17) So what would you say like the long-term plan is with both jobs? you looking to, it seems like it's almost like your W2 is like you're running a company and also the GP is definitely like running a company. What would you say the long-term plan is to that? Jeff Ervick (12:29) Yeah. Yeah. so, you know, nothing will last forever, right? you know, you're, I guess there was two things that are, that are always out there, right? There's death and taxes, right? So, but I, you know, I didn't get, let me step back a little bit. A lot of people get into real estate because they want to get out of their W-2 job, right? They're, they're tired of the W-2, they're working the nine to five, this kind of stuff, right? I'm kind of the opposite, right? I actually, love my W-2 job. I love what I do, right? I have a very, it's very mission focused, right? So, you know, and I love, you know, the customers I have and so forth for the W2 side of the house, technology sales, right? Building technology and putting together different cybersecurity solutions and different cloud-based solutions. Like, that's fun. Like to me, that's exciting, right? Now I've got engineers who are the, again, I surround myself by smart people. have engineers at work, work for me as well, too, work with me, that are putting together the technology solutions and so forth. But I think that it helps me understand that I don't need to, I didn't get into real estate to get out of my W2. I got it to complement my W2. I think we've talked about this before, Glenn, but. I love to add multiple streams of income into my portfolio, so to speak. And so my entire life is a portfolio, right? So what do I have? I've got a W-2 job, right? I've got different asset classes in real estate. I've got different lending businesses. I do different type of policies and so forth. I've got a lot of things that kind of come together to be able to diversify my own portfolio, but. I got into real estate mainly because I just have a love for it. It's like a passion for mine. don't know. I guess most people do it because they want to get out of their job. I'm doing it because I want to keep both my job and build a portfolio. So yeah, it's wild. Glenn (14:47) while helping your taxes. Jeff Ervick (14:49) Well, I'm not going to lie. helping my taxes is a big part of it as well too, right? So yeah, for sure. Glenn (14:57) So let's talk about the, I think you were saying it's like the seven streams of passive income or. Jeff Ervick (15:04) Yeah. Yeah. so I kind of alluded to a little bit, but, you know, I've, I've looked at like, you know, my portfolio, as a whole and, know, I decided that I need to diversify, you know, and most people who have, you know, high income earners will have a financial planner or financial advisor, and they're going to stick all the money with them. And then that's, you know, that they've got a 401k. and they're w two, right? And so basically they only have really about two different streams of income. Cause the 401k is really not because you're using your active income to offset or to offset your taxes, so to speak, right. And putting into your, into your 401k, and then you have whatever's leftover you give to your financial advisor and then they create that. Right. So I looked at it and said, you know what? What if, if something happens to me in the future, right. And I'm not around, right. What can I do to make sure my family is set up right for future? you know, wealth and generational type wealth and stuff that, that, doesn't necessarily rely on me to be, you know, actively working for my income. Right. So passive income for me is a big thing, which is again, another reason why I got into real estate or I got into real estate because I wanted to, you know, provide and create a passive income. you know, like there's, know, and I say seven, right. Seven, because seven's a really good number. It just rings very well. but also if one happens to fall off, then you've got six others you can rely on, right? And then you can pick up another, stream of income, right? To be able to offset the seventh that maybe fell off. Right? So, I got to do, have, I count like my active income W two, right? Is, is the first one I do. the next one is the single family portfolio. So I got a single family rental portfolio. next one would be like a short-term rental portfolio. So I got a short-term rental portfolio. I do some private lending as well too. So, hard money, private lending as well. the real estate syndication is, is, has been a massive one. All So that, that's a, you know, both on the passive and kind of active as well too, cause I'm a general partner in all of the deals, but I'm also an LP in them as well too. kind of, and, and really Glenn, you can even go and you can just, you can diversify inside that portfolio too. Right. Which is great cause you can get Glenn (17:18) Yep. yeah. Jeff Ervick (17:22) Multifamily, you can do different asset classes in multifamily different locations. You can do mobile home parks, you know, you can do You know strip malls right new development it just kind of you know office spaces and industrial Kind of keep going through it, right? And I mentioned also the portfolio. So I do have a stock portfolio, right? so I do have a financial advisor, right and he doesn't necessarily like all of my real estate transactions, right, but But it's fine, right? It works out well. He does what is required. And I love it because it helps build and grow that portfolio. And then you can also talk about diversifying inside that portfolio too, right? So you can get into real estate in the stock market. can get into private stock. You can have tax-free bonds. You can have money market accounts, all those sorts of things, right? So that's like the sixth one. And then the seventh one is, we've talked about this in past too, is and it's not necessarily an income stream. It's more of a, a way to grow, build wealth, right? Is using whole life insurance policies. so those are like the, the seven different ways that I like to diversify and organize my portfolio. And I actually have a, or I'm developing Glenn, I'm developing a, you know, an ebook about this as well too. So, you know, if anybody's interested, you can reach out to me. and we can go ahead and get you guys a copy of that as well too. Glenn (18:48) Cool, we'll put it in the show notes. So let's talk about the, there was so many things I was coming across as you were talking, I was just like, but, so. Let me Jeff Ervick (19:04) The development side, I think, has been really fun. So I think when we were down there, we were talking about, because we met in Tampa, I have a development deal that we closed on back earlier this fall, right, in the beginning of September. We purchased entitled land in St. Petersburg, Florida. Right, this is right before the hurricanes came through too. So as soon as the hurricanes, everybody was like, my God, what's going on? I'm like, well, it's fine, it's just dirt, so there's no issues, right? but we bought entitled land. Yeah. And while we're at the floodplain too. it's nice. So even once we build the, the, the buildings, we'll be out of the floodplain. So insurance actually won't even be really the top, expense either. but we are, we are actively, building or we're going to be starting to build. Glenn (19:34) We'll see if it floods. Yeah. Jeff Ervick (19:57) A 16, this is crazy. I love it too. It's a 16 story, 150 unit class A building in St. Pete with like a rooftop pool, awesome amenities for the, for the residents. and then next door we have another 150 unit, which is like a garden style apartment. We're going to build that as kind like the second phase of the, of the project. So very exciting stuff getting into development. Glenn (20:21) Yeah, I was thinking about development this weekend for whatever reason. And it's like always a one of those places where everybody wants to get to. And with the financing on it, like how do you guys structure that for a long term play? Because it seems like it seems risky, but I guess if you have the right capital, it is a very good long, I would say it's like if you're investing in the right areas, you're like, and 10 years from now, it's like hard to see how it could go wrong is what I would say. Jeff Ervick (20:56) Yeah. You know, so some of the wealthiest folks out there are developers, right? I mean, that's, that's the, it's where you, know, and again, you know, we're going through the hard process of, of getting the entitled land into plans and permits phase. So that's kind of where we are right now. where we've got the, we purchased the land. we syndicated the deal, right? So we purchased the land. We had brought some investors, we brought investors into it. pulled our, most people understand what a syndication is on this podcast. I assume, Glenn (21:00) Yeah. Jeff Ervick (21:25) We pool our money together with investors so we can go out and we can have bigger buying power. So we did that. We pulled together a bunch of investors' money in our own and we purchased the land. And then we're going through, we hired the architect and the civil engineering firm. We're going through that process to get the permits done. Once we get the schematics done, then we'll hire, we've got four. different GCs that we're gonna be, and we've already interviewed a bunch, but we four that we're gonna be shortlisting it to. The financing portion of it, right? So again, we syndicated it, we have a loan on the property. Once we select our general contractor, we're gonna apply for a construction loan, right? That construction loan will take us from where we are now, right? Through the building phases, right? So we'll be able to use that. capital to pay for the construction of the project. And then also it'll take us through lease up. So the timeline for the first portion, for the phase we're in right now is the plans and permits is roughly about a 12 month process. So it takes about a year to go from entitled land to plans and permits and to be able to get yourself what I call shovel ready. And then from there, it'll take 18 months or so. That's a rough timeline. to build once we were able to break ground to actually build our structure and go vertical. At the point where we're about 90 % vertical, where we're about to launch the property, we'll start leasing up that property, right? So we'll bring in our property management firm, we'll start doing the lease ups. So we'll have people ready to go when the property's opened for business. And then we'll lease that up and once we get to a certain... point, right? So we're roughly about 90 % least, we're going to go, we're going to seek institutional loans, right? So an institutional level loan from Fannie or Freddie, where we'll take it from a short term construction loan, we'll take it to a long term debt, right? So we'll have really good fixed rate, long term debt, you know, probably have a couple years of interest only on that as well. And that'll take us through our exit strategy is to sell it after year five. So actually, we've got you know, a really good pro forma, really good returns, very conservative and underwritten for that area in St. Pete, where we'll be able to have a three X returns on the property, 35 % IAR on the property. But if we, if we hold it long-term, you know, we could refinance, could, you know, pay all, once we refinance, pay all the investors back all their money, right? They could stay in the deal and we can just cashflow this brand new building until, you know, 10 years from now, right? So. That's beauty about it, right? It's like the equity we were building for this for just on ourselves, but for the investors is it's pretty significant. Glenn (24:26) Yeah, the thing I like about class A is somebody is going to eventually somebody will pay a price. It's unrealistic. Like, like they're going to, there's going to be some institution that didn't want to do what you had to do. Start with the entitlements, do all this stuff that you did to get to that point. And it'll be that they just want to buy it, stabilize. already kind of predict what the cash flows will be in the future. Jeff Ervick (24:37) Yeah. Yep. Glenn (24:56) and they'll pay you because the class A building, great location. And I've seen one person do it that I'm friends with. he pretty much had a hundred. By the time he was done, was like a hundred million was invested and they sold it for two hundred million, which is insane. And it's not I guess it's a class A building, but it wasn't in a class A location. Jeff Ervick (25:15) Yeah. Yeah. Okay, gotcha. Glenn (25:24) I mean, it's in South Tampa, but it wasn't, it's South of Interbay. So it's kind of, it's on the up and coming. Jeff Ervick (25:32) Yeah. Well, you've got, you've got different phases of investors, right? So you've got people who want to buy the dirt, right? So you buy the raw land. and then that process of taking that entitled, right? That, that takes the time that takes a little bit of time, probably about, you know, I would say almost could be 24 months, right? Before you finally get that entitlement done, which basically gives you the, I'm sorry. Glenn (25:36) Yeah. Yeah. with no distributions, no distributions while you're doing that process, Jeff Ervick (25:58) Yeah, usually, like I said, it is riskier, right? Because there's a lot of other outside factors, federal governments, local, state local governments and so forth. Glenn (26:01) Yeah. Jeff Ervick (26:08) that have to go through and do a bunch of different approvals, right? So yes, it is a little bit risky. There is no cashflow, but it is an equity play, right? So it's a longer term hold, which is why it's for credit investors only, right? Because that's a deal where you have to, you kind of have to set it, forget it, right? And like in three years, somebody will be like, wow, I made 3X my return. My 100 grand turned to 300 grand, right? In three years, okay, cool. I forgot about that investment I did back then, right? But. Glenn (26:15) Yep. Yep. Yeah. Jeff Ervick (26:36) The 24, the entitlement period, right? There's people who buy the dirt and go through the entitlement period. There's people who buy the entitled land and take it through the plans and permits. And then there's other teams who buy the land when it's ready to be built, right? So you have a shovel ready land. There's developers that don't wanna go through that two or three year process beforehand, right? So they're gonna buy at that point. And then there's also people like you mentioned that will buy the stabilized asset. Right. So there's, there's like almost four phases of investors, right. That, that go through a development process, right. Or you could be the single one developer, right. And go through the entire thing. We've actually got two different kinds of deals. One is like the one you just mentioned, the one in St. Pete. also have one where we purchased the entitled land and we're taking it through plans and permits, which is out in San Antonio. So that one's another. Class A, 815 units we're bringing online. We'll sell that one to a developer and make it a phenomenal return. So we're currently in that process right now. Glenn (27:39) Cool. So with the one in St. Pete, say there's, you're able to raise capital for just, you know, to get the entitlements and obviously more risky. At what point do you actually start to raise more capital as the deal progresses? And then it turns into like, how do you figure out the values of the original shares to moving up to the, you know, the next level of the deal? Jeff Ervick (28:09) Yeah, there's different phases for sure. So you have to raise right when you're buying the property, you know, and we give 15 % preferred returns on all different phases, right? But, your, you know, your shares that you buy, you know, from the, from the beginning, right, are 15 % preferred. You just hold onto it longer, right? The second phase will come in, same thing will offer 50 % preferred, but your timeframe is shorter, right? So your preferred return doesn't stack as far back as the first people who are in the deal. So let's say there's a three-year cycle. have investors that come in on the first part of buying the dirt and they're on a 15 % preferred return. And then year two, we buy, we have investors come in when we are at that phase where we're to go hire the architect to get the plans and permits. So there's might only be a one year, 15 % preferred return, right? When the other people might have a three year stacked cumulative preferred return, right? So it does give you a more, a better basis by buying in in the beginning, right? Or investing in the beginning of it versus coming in towards the end. So I mean, Yeah, that makes sense. Glenn (29:21) Does that compound annually? Jeff Ervick (29:24) Yeah, it's cumulative, not compounding. So we don't compound the returns, the preferred returns, but cumulative. So every year, they'll have a 15 % preferred return until we meet that, right? Glenn (29:27) Okay. So it'd be like you have $100,000 investment and you get paid $15,000. You don't get paid, but it grows by $15,000 a year after that. Jeff Ervick (29:45) Yeah, cumulative, not compound. Compound would be great for a lot of things, but not good for most people. But that's why we do whole life insurance policies at compound annually. So yes. Glenn (29:56) Yeah. So let's talk about the whole life. I don't know if I want all my listeners running off or hanging up or turn off the podcast, but it's one of my favorite topics. Yeah, I love the topic. I literally was on the phone with a life insurance agent right before this call, working with getting another policy for the wife. so anyways, so Jeff Ervick (30:05) Yeah, we've talked about it enough, right? Yeah. no. Okay. Glenn (30:23) If you could just tell us a little bit about, I like to talk to people that aren't selling life insurance about life insurance to see exactly how they use it. And it makes more sense to me then because then it's like, Jeff has nothing to earn from talking about this and also kind of nerd out, see how he actually operates his personal finances. Jeff Ervick (30:29) area. Yeah. Yep. I'm just kidding. I'm not getting my license. I have no, I don't make any money from selling any policies. And I can refer you to somebody who can do that. And that's basically what I do is I like to refer folks to people who help set up my policies. So I got into it because I read the book from Nelson Nash, BYOB or infinite banking policy or be your own banker. And that's what got me very interested. And then also, Glenn (30:49) Yeah. Jeff Ervick (31:16) also the fact that you have this death benefit that gets passed down to my children if something should happen to me. So I know that my family will be well taken care of in the future. And at the same time, I'm able to use the cash value of that whole life policy to go invest in a deal somewhere, whether it's a real estate deal or private lending or even purchase a vehicle. I kind of do a little bit of both. But it's also the, I like to also talk about the velocity of money, right? Because if you have money in a regular bank account, you're making a small percentage off that. Even if it's in a money market account, you're making 5 % off that at this time, maybe a little less at this point. But as soon as you pull that money out to go, you know, buy something that doesn't make you any money more, now you have that asset. Right? So what if you could do both? What if you could have the money stored in your own bank, right? That's constantly increasing or constantly accumulating interest, right? and a guaranteed return of interest, right, plus the dividend, which is massive to be able to get a guaranteed return that compounds annually. Talk about the compound interest effect, right? compounds annually and then also it earns a dividend on top of that. Right. But what I do is, I frontload my policies, right? So people, you know, talk about it. can, they, they engineer the policies, whichever way you, however you really want to, whatever works for you. And, and your, know, what you're using it for or what your lifestyle is. Right. So what I did is I actually frontloaded my policy with a big chunk of money. Right. And I, I almost like supercharged it, so to speak. Right. So I frontloaded. loaded it with a big chunk of money, but I also have a paid up addition portion and also a higher premium, right? Because I know I wanted X amount of insurance on myself, right? And I also wanted to be able to, you know, again, take care of my family, all my stuff I need to, but also I wanted a access to a big sum of money in my cash account right away. Right? So I was able to pull that out immediately, not merely, I guess it was within probably 15 to 30 days or whatever it might be, but I was able to pull 9 % of that out. So I put 100 grand upfront. So 60,000 was my supercharged, 40,000 is my premium. But it's not just 40,000. I think it's 22,000 and change is my paid-up addition, and 18 is my premium, which only has to pay that premium for about seven years. So I, again, supercharged this policy. Putting that, I was able to take 90,000 back out of that. And I actually lend that money out to other investors, right, that earns me a, like an arbitrage, right? So basically I pay a certain point of interest and it's actually, it's very favorable interest from the mutual companies. But I pay, I think it's 5.7 or something like that interest and it's simple interest. It's not like your... Mortgages right which are compound interest right so a simple interest right so the more principle I pay off the less interest I pay right so I took that money and I I Said I lend it out at 12 % right so I make a spread right so then I take that spread that money I make Glenn (34:38) What kind of product do you lend in? What's the kind of deal that you would lend in? Jeff Ervick (34:42) So it's all single family, buy and holds or invest flip investors, right? So it's investors in the Baltimore region, right? Maryland. cause that's where, closer I know. And, and I actually, I invest with a hard money lender who vets the properties. Right? So I, I, you know, he's the one who has, you know, our, you know, with me and him, got to. a loan together, right? Or he's got the first lien to the property, right? And it's confessed judgment note that I own, right? So, loan on that property, right? So loan to that investor, right? And it pays me a monthly return, monthly dividend. So I take- Usually they're roughly about 65%, 60 to 65 % right? Loan to value. And that's ARV, right? Loan to after repair value, right? Glenn (35:18) What kind of loan to value is that? Jeff Ervick (35:30) So that way when that and it's a six month loan. All right. So it's very liquid, right. Comes back very quick. So that way when the investor who we loan the money to, you know, buys that property, we know the market, we know the area, we know everything about it. So it's very well underwritten. And the operator is underwritten. So it can't be like a newbie has to be somebody who knows what they're doing, right? So we'll lend the money out to them. All right, they'll go they'll fix the property and let's say within six months, right or less probably less maybe even three or four months they'll be able to refinance that property because they got a They got a tenant in there. And so they'll do a DSCR loan. They'll refinance that property They'll pay us back, you know interest in full right and then we'll go loan that out to somebody else right so but the way I Glenn (35:51) Yeah. Yeah. Jeff Ervick (36:17) structure in the back end is I. pay myself like so for this one for the hard money loans, I'll take the interest and I'll put it right back into the policy. Right. So I'll pay, I'll start paying the policy off with that. Right. So that way my money is still out there earning for me. Right. But my principle that I have is going lower, lower, lower. And the interest on that is going lower, lower, lower as well too. So eventually I'll get to a point where I still have all the capital back out there, but I've re infuse my policy already. So then my cash value has grown again, so I can take that money back out and then go loan it and then I can continue to compound my money in the policy as well as in the rental portfolio as well, so we're in the hard money portfolio. Does that make sense? Good. Hopefully it makes sense to people who are listening too. Glenn (37:02) Yeah, makes sense to me. So I'm gonna ask a question I would answer, but I would say that why would you not just buy term and invest the difference? Jeff Ervick (37:19) boy, that's the Ramsey question, isn't it? Yeah. I personally, I love the stored value of a level of a life insurance policy that stays with me until I die. Term, right. Is a very short term policy, right? They only go until you're about 60 or 65. And after that, you have to pay an absorbent amount of money, right? To be able to keep that policy active. Right. Glenn (37:21) Yeah. Jeff Ervick (37:46) I, you know, I see the value of having this, let's call it this, this nest egg, whatever you want to call it, right? This, this, this, bucket of money for my family, my kids, right in the future, right. that if something happens to me, you know, before I, you know, you know, hit 65 or 70 or whatever it is, they'll be able to have this, right. Or if I lived to 120, like, I mean, I'd be Amazing, right? With technology these days, maybe you live longer, right? And then it can also, I can use that money as my retirement. you know, if I have, you know, let's just say hypothetically, I have a million dollars of cash value in that policy, you know, and I want to be able to take myself a hundred thousand dollars a year, right? I can live off that money and I don't ever have to pay it back, right? I don't recommend that for somebody our age, right? I recommend that if you're in retirement age and you need the cash to live off of, which again, why I build these seven different streams of passive income. So I don't have to live off that kind of money too. To answer your question, term, invest the difference. I feel like you can make more money by taking the policy out, putting it into an investment to something that's going to actively. Create investment money right while it's storing and building up your own portfolio as well to inside your policy Glenn (39:12) I'd also add just from hearing your story, by the time you're, I mean, we'll just say 80, 90, a hundred years old, you'd have a big spider web of investments. So with that, you, there has to be some kind of bridge of figuring those investments out or whatever. And, you'd want to have, you know, the, Jeff Ervick (39:25) Yeah. Glenn (39:39) I don't know who it was I was listening to, but they were saying like, I don't want my business partners fighting with my wife about what they're getting. And it's like, you just have to make it to where they don't have to make impulsive decisions, right? Like at the worst time, you know? Jeff Ervick (39:57) Sure. Yeah, you want to, want to, you want to be able to delay that right as much as possible. But, but there's also, you know, the, the, have, we didn't really get into it we can have a whole nother conversation about it is a trust structure as well too. Right. So, you know, with, know, I do have trusts in place, right. That, that own the policies and own the, own the businesses. And I've got a, you know, family manifesto, right. That basically says like, you know, this is what we're going to do if something happens to dad, right. my kids will then know that they're. Glenn (40:02) Yeah. Yeah, definitely. Jeff Ervick (40:27) supposed to buy, well, hopefully they didn't learn if they, they, if I can teach them anything, right. When, when the money comes to the, to the trust after I pass, right. They'll use that money to buy policies for themselves and for their kids. Right. And then it eventually built up where we have a lot of family members, different generations owning policies that all funnel back to a trust. Right. So think of the Rockefeller method, right. So basically that's what the Rockefellers did. Right. They all, there's a spiderweb of now, right? That all have trust and they all live off their own bank, right? And that's ultimately what the whole, what I love about the policies again, and going on the bank side as well too, you have to at this, at our age right now, until I become, until I'm retired, and probably still do it when I'm retired too, but you have to treat it like you are the bank, right? So if you, so for example, with another policy, we took the money out, all right, and I went and bought myself, my wife a car, right? Glenn (40:58) Yeah. Jeff Ervick (41:27) So she needed a new car. The minivan was getting a little beat up, right? The kids spilled enough Cheerios and milk in there, right? So we decided to buy a new car for her. So I took the money out of that, right? And we went to the dealership and I paid cash for her brand new car, right? People might think I'm crazy, right? But you know what? In five years, we're going to own that asset, that vehicle while I'm paying the loan off. And I'm also going to be able to cumulatively grow or, you know, compound grow my insurance policy. So then I'll have a much bigger policy after I'm paying that in every month, right? Because what you do is I amortize my loans, right? So I look at a loan and I say, hey, I'm going to take $50,000 for this loan, right? What's the interest rate right now that I would go if I were to go get a car? OK, so it's 6%. And I always match or increase higher than what my interest is from the mutual company as well, So let's say it's 6%. So I'll amateurize over a five year period, 50,000 with a 6 % interest. And let's say that's a $600 payment a month, right? I'll pay myself 600 bucks a month. I'll make sure I continue to pay like I'm paying a car payment, right? And I'll put it into a separate bank account that I don't touch. I don't use that for anything else. Only thing that does is it pays off my insurance policies, right? So I put that money in every single month. I pay myself no matter what. And I paid as a principal, as a principal insurance. And the beauty about it is I'm paying it as a compound or as a principal interest payment at that $50,000 a month or $50,000 policy, sorry, $50,000 loan. But every time I'm paying the insurance policy back, that principal goes down and down. So by the end of the time, when I have my last $600 payment, I won't have any principal left to pay off. and I'll own this vehicle outright and then I'll go recycle it and do it again. Be your own bank, but you have to be very diligent of paying yourself back specifically on that purpose or else, yeah, why do it then? If you're gonna do that, just go get a bank loan then if that's the case. Glenn (43:25) Awesome. No, yeah. Yeah. Awesome. So, okay. Jeff Ervick (43:41) We didn't talk about this to another, another, like you could do that with not just an insurance policy. You know, you can do that with a HELOC, your home equity line of credit, right? And now you're paying interest back to the HELOC, which I guess technically kind of paying back to your, your, your own self, right? Or back to your property. or you can also do a stock portfolio as well too. So I've got a stock portfolio that I have a line of credit on. So I take that and I put that into. you know, short-term like real estate transactions, like we're building a couple of houses down in Houston, right? So I took money from that. I invested into there. So when that house sells, right, I'll pay off that, that, line of credit and I'll have a big sum of money that I can then take and then put that into a syndication, right? And cause passive income from there. I'll take that money back out of the portfolio again, which again, that portfolio is still earning income. Right? Because that's still in the market, still velocity and money's moving, but I'm taking a loan off of that and going to build another house, sell it, pay that back and put that back again. So that that cycle of money is going to keep on moving me forward and grow my portfolio and grow my passive income. Glenn (44:57) Something that gives you lot of credibility just hearing your story is that you're actually a limited partner first and then you became GP. It's like you've been down the road working with GPs and it's almost like you know how it feels to be in that position. So it's a great trait to have for sure. Jeff Ervick (45:16) Yeah. Yeah. And I think one of the things we, when we were at that capital raising conference too, it's the no liking trust, right? So you gotta, know, someone has to know you in order to invest with you. Someone has to like you, right? So hopefully, you know, you and I, we're pretty likable guys, I would think, right? So they like us, right? But the last one I think is the most important thing. They have to trust you, right? Because... Glenn (45:27) Yep. Yeah. Jeff Ervick (45:43) they're trusting you with their life savings, right? Or their hard earned money, right? So if I'm not investing in my own deals, right? As a limited partner, what does that say about the deal, right? If I don't trust myself or I don't trust my own deal to invest in as a limited partner. then I can't go to my friends and family and even a new investor I meet and say, hey, yeah, invest in this deal. Are you investing it? Well, not really, but you should right now. I know, so we vet deals very heavily before we are in a position where we are raising capital for a deal. We vet that, we vet our partners. We make sure we do underwriting or we ensure it's very conservatively underwritten. We have good rent growth if there's moderate or no rent growth at all. We make sure that it's like a value add. I love the value add deals, right? So that's a big thing on our core capability is value add. But being able to vet that deal and then trust that it's going to, that our partnership is going to do that. And that's one of the most important things I think that we are. So, Valourous, just so you know. Valouris right there means value, right? In Latin, right? So whether we're adding value or we're giving value or we're understanding that the value is important to us and whether it's moral values, ethical values, whatever it is, like we want to be, we want to assure that we're doing the best for our investors and for the investments that we're working in. Right? So before I invest in any deal, before I ask anybody to invest in deal, I have to know that it's gonna be good for me and my family. So I think it's a big part of the trust too. Glenn (47:24) Definitely. Awesome. Where can people find you? Jeff Ervick (47:30) Yeah. So, LinkedIn is probably the best place, right? it's Jeff Irvick at LinkedIn. I don't know. I guess we'll put that in the show notes, what the actual URL is, but just Google Jeff Irvick and you know, where's my guy up there. might be, and I think there is actually one other Jeff Irvick in the entire world. which I don't know if he stole my identity or not, but, he lives in Canada. So it's not me. If you find somebody out of somebody in Canada. but yeah, Jeff Irvick on LinkedIn and also Facebook, are the best ways to get ahold of me. Or you can go to our website and we'll have some some stuff up there as well, So it's velourous capital partners.com. It's v a l o r i s capital partners Glenn (48:11) Also with Irvik is spelled with the E, not an I. Jeff Ervick (48:14) That's right, yep. ER, V as in Victor, ICK. That's how we do it. Glenn (48:19) Awesome. Thanks for being on the show. Jeff Ervick (48:22) Cool, Glenn, I appreciate it, man. Thanks for having me. Glenn (48:24) All right, thank you.