An Aussie’s Journey into U.S. Real Estate | PREI 036
On this episode our guest is Reed Goossens, the owner of RSN Property Group. He lives in Los Angeles and is originally from Australia down under. His background is as a structural engineer and currently owns properties in New York, Pennsylvania, and Texas.
Reed moved to the U.S. in 2012 to pursue a career in structural engineering, however he discovered a passion for real estate investing. With limited funds and no credit, Reed went from purchasing a small duplex to growing his own real estate investing firm, RSN Property Group. Reed now syndicates large multi-million dollar deals across the U.S.
Listen in as Reed shares his journey into U.S. real estate from his first property to commercial syndications.
If you missed last week’s episode, be sure to listen to Make Better Decisions Using Neighborhood Info.
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An Aussie’s Journey into U.S. Real Estate
Today’s show is a little different than most of the shows we’ve been doing. It’s more of a story with some golden nuggets throughout the episode. I met a person a few months back named Reed, who was a person from Australia, who came to the US. He was working a cubicle job, something that he was trained in, but didn’t really want to do for the rest of his life. At least, he didn’t himself wanting to do that for the rest of his life. He made the decision to jump into real estate investing here in the United States and started off with a property in New York and built it up to the point where he is now doing multi-hundred unit property syndications. This is his journey to the US and how he got started and what’s he’s looking for and where he’s investing. Really, what I want you to takeaway are some of the key concepts and nuggets that he shares with us today.
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It’s my pleasure to introduce Reed Goossens to the show. Reid is the owner of RSN Property Group, focusing on multifamily acquisitions. He lives in Los Angeles and is originally from Down Under. His home country is Australia. He has properties in New York, Pennsylvania and Texas. His background is as a Structural Engineer. Reed, welcome to the show.
Good day, Marco.
I wanted to bring you on the show, Reed, because I’ve got introduced to you several months ago. I’ve been doing a little digging on you and learning about what you’re doing. I’ve heard you on several other podcasts. You have an interesting story. I wanted to bring you on to be on a show about an Aussie’s journey to the US, and what brought you here and what you’re doing in the US. I know you’re a big fan of passive real estate investing and passive income, and that really resonates with me. Let’s start off by you telling us about your background and really what brought you to the US.
I guess I do have a little bit of an unusual story. My background, as you mentioned, is in structural engineering. I studied in Australia, in Queensland at the University of Queensland. I studied Structural Engineering. My background is in that. I got to a point after graduating from university, not knowing what I wanted to do with my life. I’ve been away traveling overseas. As soon as I graduated, I went to United Kingdom and worked on the London 2012 Games back in 2008. I did a bit of traveling through the United States. I loved the US at the time back in ‘09. I returned back to Australia and was in my cubicle asking myself, “What am I doing with the rest of my life?” I’m sitting at this cubicle. It can’t be what I’m made to be doing for the next 40 years of my life, answering to a boss who answers to a board of directors. I knew I had more to give. I actively went out and said, “I want to be able to get someone to pay me, to live my life essentially, to go surfing, to go hiking, to do what I love doing.” At the time, I didn’t know what that was. I didn’t know what passive income was. I didn’t know what real estate investing was.
I actively went out and started educating myself on different ways to create passive income or just to have the stability knowing that if my job wasn’t there tomorrow, I could essentially rely on other sources of income. That’s really my “why” factor. I was seeking my day job. I only just started in my day job. Engineering wasn’t for me. Fast forward a couple of years, I was really actively learning about a bunch of stuff to do with real estate. I was going to pull the trigger in Australia on a flip project. My girlfriend is American. I really had a passion to move to New York, because it was a desire in me to go and live the dream in the Big Apple, in the Big Smoke.
In 2012, we packed up our bags from Australia and I moved to the US. I didn’t have a job. I rocked up without a job. I found a job. We’ve got a really awesome visa system with the United States and Australia, and I found a job in engineering. Within a couple of weeks of being on the ground, I was just still really hungry to get my first deal done. I was at my first networking event in Manhattan and just blown away. I thought networking in Australia was good, but Manhattan was networking on steroids. I’ve got to the point where I was in New York, learning a lot about real estate investing. I started to see that there were a lot of lower barriers of entry in the American market compared to the Australian market. That is where I bought my first triplex.
I’m skipping over a lot of stuff, but by the time I was landing in 2012 in the United States to buy my first triplex was probably a good year later. I did that in Upstate New York. I cut my teeth on this triplex. I’ve got to a point of analysis paralysis, but I wanted to develop some passive income. I purchased a property for $50,000. I was just blown away that I could buy something for $50,000 and it has a net income of $1,500 a month. It was cashflowing crazy. It was just incredible. I had to buy that all cash because I didn’t have any credit here in the United States, being a new guy to the US.
After about six months of stabilizing that asset, I did some rehab to the property, and stumbled across what I like to call re-positioning. I improved the property. I was able to increase rent. Through doing that, I was slightly able to increase the value of the property and increase my passive income at the same time, which was a win-win situation for myself. I refund some money out of it and then purchased a second property. Then I did the same thing with that and purchased a third property and the fourth, and so on, and so on.
I got to the point after about a year. I purchased a couple few properties under my belt. A buddy of mine actually from Canada, from your neck of the woods, Marco, he came down to New York. We’re talking about all this stuff about passive investing and real estate investing and the tax benefits. He just told me he’d purchased a large commercial property. My mouth dropped and I didn’t realize really what he was talking about. Then he went on to explain the value of forcing appreciation through commercial properties. That kicked me off in just starting my own company of RSN Property Group. Fast forward a couple of years later, I was able to leave the day job and go out full-time in real estate development. I now live in Los Angeles with my girlfriend, because my girlfriend is from Los Angeles. I’m really enjoying living here in the United States, buying US real estate and slowly building my long-term wealth through passive income from my real estate investments. Hopefully, that just covered everything in a nut shell.
There are a couple of questions I want to ask you. First of all, I’m curious, that triplex you bought, the first property you acquired, what did you purchase it for because you bought it all cash? Second, what was the gross monthly rent on that property?
I purchased it pretty short for $40,000, all cash. It needed some work. I had educated myself enough to know that I would need a GC. I would need a good property manager. I would need my team members. Just to let your listeners know, I was living in New York. I obviously couldn’t afford New York City prices. I gave myself a four-hour driving radius, so I could get anywhere in four hours’ driving in any direction from New York, I would purchase something there. I found some cheaper properties in Upstate New York, in Syracuse, to be specific. It was just more than I wanted to cut my teeth. I had a little bit of cash in my bank account to get started. That’s really the biggest thing is to take action and get started, because you can keep reading books, but not actually do anything about it. $40,000, I purchased it all. It was two separate dwellings on one lot. It was a single-family and then a duplex. The idea was if things went south, I could potentially split the lot and sell them individually. The total gross income was a little bit over $1,900 a month. That’s how much it was generating for me.
Whenever I hear $40,000 property, especially if you’ve got a duplex and a single-family on one lot, that tells me that you were probably in a sketchy or a pretty rough neighborhood.
Yeah, you’re right. I’ve learned a lot buying that property through tenants. I had Section 8 tenants. As I said, I cut my teeth on that back in 2012. It was a really big learning curve. At the end of the day, I made sure that I had exit strategies. One of the exit strategies was to split the lot. The other exit strategy was to just sell it, because it was a cash cow. I did learn a lot because of the neighborhood that I was in and the types of tenants I was renting to. That is correct.
You share something in common with a lot of listeners that listen to the show. I’m sure I speak for the majority of real estate investors out there in general. That is you mentioned you were in a cubicle and you worked 9 to 5, or whatever it was. There are a lot of people that want to generate passive income. They want to become financially free. There’s something that is bigger. I alluded to this in my second last episode after my father passed away. That’s not just financial freedom, but time freedom, just the ability to be able to do what you want, when you want, to be able to get away for two weeks if you need to. That’s something that you are building right now. A lot of people have successfully done that. There are a lot of people who are in the process of doing that. If you’ve got a passion like you have, you pursue it and you take action on it, you can definitely achieve it. You moved from Australia to the US, got a job, jumped in, bought your first property all cash, granted it wasn’t in the best of areas, but you cut your teeth and learned off of it. Kudos to you. You’ve come a long way.
Thank you very much. For your listeners out there, it wasn’t easy in terms of just understanding different things of what an LLC is and what a cap rate is, and what NOI means, all that stuff that goes into underwriting, as I like to say, analyzing a property to make sure that the numbers pencils out. For this particular property, the numbers did pencil out and we’ve had some really good success with it. I have sold it subsequently because I wanted to buy some other more stable assets in a different market in terms of Syracuse in general, as a market. That was definitely a good learning curve. It was able to kick-start my portfolio, which was the biggest thing. You can’t get to deal ten if you don’t start with deal one. I think that’s really important.
Let’s fast forward to today. What are you involved in today? What markets are you in? What exactly are you doing?
Back when I met my buddy from Canada, he was telling me about commercial real estate. Through what I was doing with some smaller duplexes and triplexes in Upstate New York, forcing that appreciation, I really saw the value in multifamily space commercial real estate. I’ve now gone on to help syndicate a 250-unit property in Houston, Texas last year. I’m also actively looking at some ground-up construction deals here in LA, based in my structural engineering background and the re-entitlement process. Essentially, you’re taking a piece of land to the city and saying, “I know I can build X amount of units on this, will you allow me to do that?” Then, I sell those approved plans to another developer who wants to build it.
My general focus of my business is large institutional multifamily deals across the United States, in what I’d like to call tier-two cities. Houston, Texas is where I’m focused. Dallas-Fort Worth is another place. I like San Antonio as a market because it’s just down the road. I also like Kansas City as a market. I really like Philadelphia. I’m actually finishing a flip project in Philadelphia at the moment or have finished the flip project. I love Philadelphia as a market just in terms of its metrics close to New York. I feel like it’s Brooklyn ten years ago, where the cost of living is good. You have a 1.5 million people population. It’s two hours from New York. It’s three hours from Washington D.C., wherever it is. You can still pick up a Brownstone for $150,000, which you can’t pick up for in New York. I love Philadelphia in terms of maybe a flip-type of model. In terms of my cashflowing passive income type of model for investing, it’s the tier-two cities in the Midwest, Houston, Kansas City. That’s where I’m focused right now.
For listeners that are not familiar with what a Brownstone is, it’s a reddish-brown sandstone building, correct?
Yeah, that’s it. It’s exactly what the word means. If they’re shooting a movie in Brooklyn, you see these lovely grand steps. It could be brick or can be the sandstone-type facial or facade. It’s this grand architecture. They’re older buildings in New York. They go for an absolute arm and leg. They’re very, very expensive. In Philly, you can still pick up some really nice, beautiful, old-looking houses with that quintessential architecture from the early 1900s for a reasonable price.
You mentioned four markets that we’re in: San Antonio, Houston, Dallas and Kansas City. Those have been somewhat perennial markets for us. In fact, if I’m not mistaken, we’ve probably been selling property in those four markets for the last twelve years, at least ten. They’re great markets. Tell our listeners what you like about those markets. Why did you pick those markets and maybe drill down a little bit and tell us what you look for when you’re picking markets to invest in.
The reason why I chose those markets was because of the higher cap rates that they can generate. It goes back to cashflow. For me, cashflow is king. I like to think of my investment portfolio as a pyramid. On the bottom third of the pyramid is solid cashflow and properties that will generate me good income for a long time to come. Towards the top of the pyramid is flip projects or re-entitlement deals, which you need to have your finger on all of those different pies, so to speak, or buckets.
In terms of my fundamentals of my portfolio are those types of markets. The reason that is, is because they have a higher cap rate. Their population is in a good plus one million people. They have good employment opportunities and since the crash, most of those markets have diversified their employment basis out of just, say, solely on oil and gas, and have diversified into banking or healthcare or more Internet startups. I know San Antonio and Houston, Texas are starting to get some really good startup communities in those areas, which is just helping funnel and create more and more jobs, and more and more sustainability in those markets. I can still get really good cap rates of 7%, 8%, unlike in tier-one cities, which I like to talk about; that is New York, San Francisco, the Portland, Oregon, the Seattle, the Los Angeles, the San Diego, where the cap rates are a lot lower. Your cashflow will be a lot lower. They’re typically the markets I look in and why I look in those markets to provide me stable income for a long time to come.
Are you looking at the market cycle at all or is it just based on the rates of return that you’re finding in a particular market?
I am looking at the market cycle somewhat. I keep my eye on how much in terms of what new properties are coming onto the scene. I have a rule of thumb just for my experience, my limited experience is that if your supply becomes more than your demand for new homes, that’s a bit of red flag in terms of how the market’s going. Even though I’m in a multifamily space, I like to still see what new content is coming onto the market versus what is being sold or is being picked up by buyers. Those are definitely one of the key factors I like looking at when I’m analyzing a market, and looking at the cycle trends. I hope that answers your question.
It does. About criteria, you were talking about your investment criteria about the markets. When you are looking at prospective properties to invest in, do you define a criteria for yourself? Outside of the cap rate, of course, are there certain other things that you look out for that you have to have in order for you to even look at it further?
Yeah, there is. One of the major lessons I learned with my smaller duplexes in Upstate New York is buying class D and class C neighborhoods. It has their inherent risks. You can get better cashflow on paper, but I also want stabilized assets. I don’t want to be constantly managing it. Otherwise, it just turns into a job. My portfolio turns into a constant management process because I’m constantly managing tenants. I definitely look at the C+, B- range. It has to have a value-added proponent to it, when I say value-added, I mean that the property is cashflowing already, but I can increase that cashflow because the rents might be below market value. It needs to be cashflowing. It needs to be in an area, as I said, a stable job growth. It needs to have population growth.
I like to look at what’s called good school districts. I really think that’s very important for the type of class of renters that I’m now looking for in a class B neighborhood or class B asset. I’m more focused on the teachers, the police officers, fire fighters, people who are just happy paying a thousand bucks a month or $800 a month in rent for a really clean unit, safe, it might have a gym or pool, nothing crazy. That’s the type of assets I’m looking at and the type of clientele. I’m not trying to rub shoulders with the millennials who are buying the latest multifamily deal that comes. It’s just being constructed because that’s a different type of investing altogether. It’s really about good school districts and solid employment base for that particular sub-market within a market.
You mentioned forced appreciation a couple of times. One nice thing about commercial properties, and more specifically with apartment buildings, is that you can drive up the value of the property by increasing the rent which thereby increases your net operating income. Listeners that are not familiar with how commercial properties and apartment buildings are valued, when they’re valued or appraised, it’s actually the net operating income that defines what that property is worth. If you increase the rent, by charging more, you increase the value. That’s forcing the appreciation. It’s not as easy to do that with residential property, meaning one to four unit properties, but it still can be done. Take your example, you bought this $40,000 property in New York, it needed work but you were still able to rent it for $1,900 a month. You put in $10,000 or $20,000 to renovate that property and bring it up to the best possible use; safe, clean, functional condition. You might be able to charge $2,200 a month. You can still do that with residential real estate, not maybe to the same degree because they’re appraised based on comparable sales in the area, not based on the revenue or the net operating income. What were you going to say?
I was going to say that what I’m seeing these days is the way the banks are lending on small portfolios of single-family houses, which is really interesting to me. I still own duplexes and one triplex. What I found is, from my experience, is you really got to look at those duplexes and triplexes like single-family properties, who is renting that duplex or triplex for $600 or $650 a month or $700 a month when you can get a whole house for, say, $850 a month. That’s where you’re going to look at it. I do like the motto where the banks are saying, “If you have five single-family properties, and it’s maybe under $500,000, we will lend on that as a portfolio.” That’s really still quite powerful. You can force depreciation of that entire portfolio from a macro point of view, because you might have bought identified like in the multifamily space. You’ve identified that these things are under market value. You’ve gone and done a bit of work and you’ve increased the cashflow, I should say, the net operating income. Inherently, you’ve increased the portfolio’s worth. You can still force the appreciation that way as well.
What are you involved in today? Have you moved completely away from residential properties and focused exclusively on commercial properties or is it a blend?
I have still some portfolio properties. If a deal comes across my desk, I can’t refuse. Like I was saying, the Philadelphia market, I really love the Philadelphia market. It’s a different investing tool over there. That’s more of a flip project. I will maybe pick up a single-family property here and there. Generally speaking, I’m focused on the large multifamily commercial side just because I’m a commercial guy. I know all your listeners out there are more into the single-family space. There’s still so much value to be had in it. As I just mentioned before, the wider banks are lending these days on those portfolios is really, really powerful. I definitely recommend getting involved in some of that stuff.
You’re building up syndications now.
That is correct. Back to a bit of my story, I got to a point where I ran out of money, like most people do. When you buy real estate, you can’t just keep using your money. I got involved in syndication. Syndication just really means that you pour money together. I put some money in. I go and raised some money from other investors. We all pull in money together and we can buy a larger asset, which is maybe more stable long-term wise and produces greater cashflow and we can all make money together. That’s what syndication is. Obviously, everything from A to Z, I’ll go out and find a deal. I’ll negotiate with the seller. I will oversee the purchase. I’ll go and oversee the rehab or the re-positioning, as I like to call it. Then I’ll oversee the day-to-day management of it, while investors who are investing with me get a great return on their money from day one. They have all the upsides of owning real estate. They might not have the time to go out and find a cracking deal. They might just be too busy with their day job. They still want to have their money working for them, but more so than just sitting in a bank earning, 0.5% or less 1%. They want to get involved in some real estate. That’s where I come along with being a syndicator. I can offer them a great opportunity to invest in a deal. That money is backed by real estate. They own equity in the property and they own equity in a company that owns the property. We make money together.
That’s the powerful thing about real estate is the ability to leverage. You can leverage other people’s money, other people’s time, other people’s knowledge. You can be involved in real estate in so many different levels. You can be a direct investor, which is something we’re a huge proponent of. You can be involved on the financing end with notes. You can be involved with syndications where you are involved essentially in a partnership in the property. You can learn from other people and leverage their knowledge and mistakes and what they’ve invested in as far as time to benefit you, so you’re not starting from zero and making all the mistakes that they’ve made. It’s just such a powerful vehicle in so many different ways.
I completely agree 100% with you, Marco. Real estate is a team sport. That doesn’t necessarily mean that you can’t have one of your team members as just another investor as well or another person who wants to be involved in real estate. You might, as you said, leverage other people’s time. We’re all busy people. We all have things going on. I’m good at one thing and Marco is good at another thing and you might find someone who loves finding good cracking deals, or they’re just really good at bird dogging or something like that, which means identifying houses that are in distress. You can partner with those guys and say, “If you bring me those deals, I will bring money and we can make this partnership work.” There’s different ways in getting involved in leveraging, as you said, Marco, different people within your team.
What is the most successful habit that you’ve practiced to keep you on track and towards your goals?
I love keeping clean between the ears, which means keeping my mental state focused on what I need to be achieving the next day. To do that, I do it in a couple of ways, and that’s creating lists and to-do lists each week and each day. I also like to make sure that I’ve got to take care of myself physically first before I can help other people invest in real estate. I love going for runs. I love keeping fit. I like to keep that as part of a healthy routine. Definitely, making lists and keeping clean between the ears and that involves being active.
How often do you exercise?
I would exercise about four or five times a week, that gets anything from going for a surf or going to the park and kicking the footy around with some of my Australian mates here in Los Angeles. You guys call it footy, but we call it rugby in Australia. I also got a dog as well, so we go for a run or a hike. I sometimes go to the gym as well, so everything.
Last question, who was the most influential person in your real estate career?
They’re not directly as influential anymore, but it was the a-ha moment, and that was Robert Kiyosaki when I picked up his book, Rich Dad, Poor Dad. It was an incredible eye-opening moment where it got my mindset focused on what I really wanted to achieve, and that was long-term passive income. As I said before in the introduction, I didn’t know. I just knew that working full-time wasn’t for me. I needed to be my own boss. I wanted to go for a surf whenever I wanted to. I wanted to go over to Australia back home whenever I wanted to. I needed to create a business and I needed to create a long-term wealth through passive income. The vehicle I’ve chosen is real estate. Robert Kiyosaki definitely was the most influential person at the beginning of my career back in 2009-2010. It gave me the a-ha moment when the penny dropped, as I like to say, and really understood the power of creating passive income.
Weren’t you on vacation when you were reading that book?
I was towards the end of my traveling around the world, as you’re backpacking. I wasn’t just on vacation. I was doing what was called a working holiday. You go to a hostel and you work for a couple of weeks and you move on to the next hostel. There was a little bit of downtime, I picked up that book along the way. It was really, really eye-opening.
When I started reading that book, I literally cannot put it down. I have to just keep reading it. We were on a train going from Rome to Florence at the time. Instead of looking out the window at the beautiful scenery going by, I had my nose inside this book, Rich Dad, Poor Dad. Reed, anything else you’d like to share with our listeners?
If you are interested in learning a little bit more about myself, I do have a little podcast. I just started and it tracks my journey in helping international investors break into United States and start successfully investing in US real estate. It’s called Investing In The U.S., An Aussie’s Guide to U.S. Real Estate. Definitely check that out if you do have 30 seconds on iTunes.
Reed, I appreciate you being on the show. It’s a great story. I’m very happy to hear that you are on a fast path to big success here.
Thank you very much.
I appreciate you being on here. Thank you so much and we’ll talk to you again soon.
Thanks a lot, guys.
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