RES 201 | Passive Income

 

Buying real estate properties can generate continuing passive income and can be a massive long-term investment because the value increases over time. One who can attest to this is Chad Hudson, owner of Savoy Companies – a family-owned and operated company which specializes in buying, selling, building, remodeling, and owner-financing homes since 2000. Chad started with the goal to have passive income, but from then on developed skills that would take him to great heights like managing a successful construction and renovation business, owning several rental properties, and holding multiple private mortgage notes for customers. Learn his success formula as he unravels the first step to take when jumping into real estate investing, the benefits of having a construction and renovation business, the hardest part of the syndication process, landlord unfriendly issues that you should be aware of, and ways you can improve your syndication business.

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Making Passive Income Through Real Estate with Chad Hudson

Our guest is Chad Hudson. Thanks for being on the show, Chad.

Thanks for having me. I appreciate it.

Chad is the owner and Founder of Savoy Companies, which specializes in buying, selling, building remodeling and owner financing real estate since 2000. He has done over 100-plus transactions, held over 30-plus rental properties and has over 700 apartments. In addition to managing his successful construction or renovation business, Chad also owns several rental properties and holds multiple private mortgage notes for customers. Chad, thank you so much for your time and being on the show. Obviously, you’ve been in many aspects of this industry and you’re going to be a wealth of knowledge. I appreciate the value you’re going to provide. Give the audience a little more about your background and your focus in real estate.

Whitney, thanks for having me. It’s a great show you have. I have 30,000 views of the twenty-year experience that I had. I started in 2000 and I was very fortunate. I graduated from Texas A&M. I was fortunate enough to play baseball there. I got to college station on a baseball scholarship. I came out debt-free. I learned so much by being at that university. When you get out, you’ve got to get your feet wet. I knew I wanted to be in real estate. I was in a couple of other arenas as far as business-wise that led to a platform of success as far as real estate investing. I knew I was a real estate guy early on. I wanted to do that. I needed a place to obviously stay. I purchased a condo in Rockwell, Texas out on Lake Ray Hubbard. Nowadays the new term is house hacking. I had one of my best friends live with me. It was interesting because my mortgage note was roughly $700 and that’s what I charged in rent.

At night, I was sitting there thinking, “That was pretty easy. I need to get more of those.” We’re best friends, we’re still friends to this day and I tease him. He paid about six years of equity in that place. I’m a real estate guy. I wanted to be in real estate investing, but I needed to learn. I had another company that I worked for and developed. That whole time it allowed me to go out and not only do fix and flips early on, but to build my portfolio and obviously develop and do new construction as well. The whole time the goal was to have passive income and we got up a little over 30 units. Life chapters as far as getting married. My life partner, which is my wife, Lindsay, she’s chief counsel for our company. She is a huge help in helping grow our portfolio and the foundation so to speak. I’m sure you’ve heard this story before when we got up to 30 units. It was not scalable and we needed to figure out a way to do our job maybe a little better or a little smarter. That’s where we are now as far as selling off our assets and investing in syndication passively, then getting more involved.

I do hear it often. You’ve got up to 30 units and you found out that it was going to be hard to scale and so you started looking for another avenue to be able to scale faster. Is that accurate?

Yes. When you’re young, your ego’s big. My goal was to have 100 units and self-manage them, do everything, talk to the tenant and lease it. All the while, build and develop. I knew after having our first child, your priority shifts. It was more important for me to be a dad and a husband. I obviously started continuing to learn. There are tons of smart people out there and it just seems that was the direction as far as if I wanted to scale up, then I had to get a little bit smarter about it.

What were some struggles that you had with the 30 units that pushed you into wanting to do multifamily or even into syndication?

Throughout the process, there are tons of struggles, but we just persevered, fight through it, hustled. I would say probably my first eviction, I had pretty good units, good properties and I was familiar with tenants. I was familiar with the type of tenants, great people. I knew that I had to remove myself from that particular side after that first eviction. That wasn’t a five-plex that I had. It was the writing on the wall there that I needed to exit from that side and continue to obviously grow the company or grow our portfolio. Maybe not be so involved on that side anymore and let a professional do it. I knew after I listened to people saying, “You do such a great job,” it’s the learning process and it’s much easier to attack the 200-unit apartment versus a twenty-unit. After many nights and many calculations, we decided to start selling most of our units and then go big. It’s been good so far. I tell people all the time, it took me eighteen years to get 36 doors and it took me about a year to over 800.

Were those through the syndication processes getting those 800?

Yes. We’re up to a little over 1,100 now, but that’s the syndication process. Strategically, I felt like if anybody was going to take me seriously, I felt like I got a good resume. I needed to invest and be able to apply passively before I ask to be a part of anybody’s syndication. As you know, this space is so small, everyone knows everybody. I like that. My biggest take is it’s a team sport. I love that aspect. I felt there is help and if you’re going to be good in this industry, you better make sure to get it.

A lot of people at first are hesitant to be part of a team or partnership. They’re focused on thinking they’re going to give up something. I heard somebody say that their spouse was against them partnering because they’re going to have to give away part of the business or even half of it, something like that. What he talked about is after being in that for a few years, just more than quadrupled their business by being a partnership, being able to focus on specific tasks. Not being so overwhelmed with thinking you’ve to do everything yourself. They got so much further down the road so much faster because of that partnership.

If you're the smartest person in the room, you need to find new friends. Click To Tweet

It’s those nights and discussing with my wife and she said she’s the legal beagle and she peels the onion back on every document and reads it. She said, “The only negative I see is you giving up your control.” At that point I said, “If we want to accomplish our goal, my ego is not big enough. I’m okay with that.” We grew the company and our asset base in a year. I would not trade that. That was self-taught. It was perseverance. I learned so much. I got to learn every angle, every arena. I feel real estate investing, which could a broad definition. I’ve done it all and I’ve got the answers to the test now and I’m ready to go.

It’s impressive that right out of college, you knew that you wanted to be in real estate. I wish that I had known that early on. I find a lot more people are getting started earlier now, but I hear it time and time again someone that’s starting in real estate in their 40s or 50s, they say, “I wish I had known earlier about starting in real estate.” What would you say as far as from your experience? You had single-families, you’ve had the construction business, you started with that condo and then now you’re into syndication. Someone that’s getting started right out of college or maybe they’re 30, what would you advise them from your experience? What part of real estate should they get in?

Everyone whether it’s a single-family, I don’t recommend that. I recommend and going and buying a duplex, a quad. Whatever it may be to start with. You get out there and get your feet wet on that occasion as far as doing it yourself. You’ve got to get skins on the wall. That’s the best way to go in and get your own unit. I’ve got to tell a story. When I was in college and playing ball, there was a lady named Margie Stibora from College Station, Texas. She piqued my interest. She would go around and there were probably 40 units and several baseball players that lived in these units. At the first of the month, she’d pick up rent checks. I knew most of those units were hers. She still was a realtor in town, but she had this passive income. I said, “Forget baseball. I know it’s one day going to end. I like that gig.”

As far as a kid, there are two things. Never hesitate to ask questions. I immediately asked Ms. Stibora everything and she probably got sick and tired of me. She gave me more knowledge and I got out of school down there for a four-year degree. I would watch her and ask questions. To answer your original question, I would say go buy something, be smart about it. Get in there, live there, similar to what I did with the house hacking and then if you want to grow from there and you want to sell it or you think you could scale up. I wouldn’t waste too much time on the single-family, more so I would start looking at scaling up at an earlier age. I wouldn’t trade how I did it, but if kids ask me now or someone asks me, I would say, “It depends on where you’re at or if you’re risk-averse. I would go big.”

You also had a construction and renovation business. Was that something in addition to your rental properties? Did that benefit your rental business or is that something that you would even recommend somebody with a large portfolio having their own construction business?

It helps me analyze properties. I know construction. I know how to talk to the general contractor and the sub. It’s a team sport. I feel like that’s another equation that benefits me as far as for the future. I can go out and analyze a property ground up and look at the construction and see what’s needed. I still do that, Savoy Builders. It is a company that I have. I have built houses still. I’ve got a partner in that, a gentleman named Chris Pruitt. He knows more about construction than I do. I listen to your shows and the smart people hitch their wagon to smart people. I’ve said it a hundred times, if you’re the smartest person in the room, you need to find new friends.

RES 201 | Passive Income

Passive Income: Throughout the process, there are tons of struggles, but persevere, fight through it, and hustle.

 

It helps me in every aspect. That’s what I meant by real estate can be a very broad definition. My passion is building and whatever the market bears, I’ll build houses if it’s needed. For personal gratitude and for my family’s sake, we invest in long-term wealth building, slow growth. The greatest saying ever, “Don’t wait and buy real estate. Buy real estate and wait.” That’s my motto. I’ve got to stay busy and make money to buy real estate. That’s the real estate development company that I have. I still do that and it helps me every day as far as investing.

As far as the syndications that you’ve completed and been involved in, what’s been the hardest part of the syndication process for you so far?

Speaking of broad, there are so many smart people in there whether it’s from the tech industry. When I would go look at deals, I would go touch them and feel them. I never put much on a computer. It’s a computer-based business. They analyze things down to a penny. Sometimes for me, it’s analysis-paralysis. It’s crazy how much goes into that most of the time. Let’s go do a deal. We can be smart about it. It’s been fun. It’s been fun learning. It’s very similar to what I’ve been doing. It adds another zero at the end.

What kind of buying criteria do you have now as far as looking for multifamily properties? What size properties are you looking forward? What are some things that when you are talking to your broker, “This is what I’m looking for?”

I want to be a part of a Class B value-add, very similar probably of what you’re looking for. I don’t know if I can say this, but I want to be in a red state. I want to be very tenant-based or very landlord friendly. It’s a capitalism market and I want to be able to have access to go in and clean up a place and get the rent raised and turn the property around. I look at demographics like we all do and it needs to be in a very positive demographic area that’s growing and for the foreseeable future is going to grow. That’s my standards. At the end of it, you start adding the crime rate and get down to the nitty-gritty. Just a positive growing place that’s well-represented from the town’s aspect.

Is there a specific size of properties? Is it strictly multifamily and certain size of property?

Find a mentor, ask questions, and don't be cheap about it. Click To Tweet

200 up. What I’ve learned you can hire the same amount of people for 200 that you can for a 100. I’m learning every day, but I like the 200-plus.

You mentioned landlord-friendly states. Are there specific landlord unfriendly issues that maybe we should be aware of when we’re purchasing a property that you’ve encountered?

Just look where everybody’s moving away from. Stay away from that area. Sometimes we want to make a big deal out of it, but it’s really black or white. It’s so simplistic as far as that. I hate to throw states under the bus, but there are certain states that I look at and go, “There might be deals there, but why would I go and invest there?” You know where I’m going with that.

In your experience, what’s a big reason why people fail in the syndication business or maybe you see ways that people are being too risky or something like that?

People have a hard time saying no. That’s one thing I tell my wife and we talk about all the time. At an early age, you’ve got to say no. This goes back to extracurricular activities. We have friends who said, “Go to Vegas and do this.” We were laser focused. We said no. We’re pretty simplistic. I love my family. I love investing. We love our careers. We would say no quite a bit and obviously, we live below our means and that’s important. We grew organically within the company. I get asked to do certain things and it just doesn’t make sense because it doesn’t make sense for my time. I don’t even watch that stuff. It matters when it comes to rates and what the rates are. I don’t bog myself down with that stuff because for me, I feel like it’s a waste of time. I feel like that’s helped us to be focused and to live below our means and stay within ourselves and say no. That’s not to say we don’t have fun. We’ve got great friends. You can get asked to do and spread out so many different directions that it takes away from the overall goal. For us, other than our faith and having a great family, it’s passive income.

There are many things that are good, but what’s best? Where’s the best place you can spend your time? It’s not there are other things that are bad anyway, but being laser focused is very important. Is there a way that you’ve improved your syndication business that we can all apply to ours?

RES 201 | Passive Income

Passive Income: Have a mentor and believe in the old adage that says your network is your net worth.

 

Having a mentor is huge. I was never embarrassed about reaching out and asking people questions. I had one gentleman who I thought a lot of and he says, “Never be embarrassed about what you do.” For even me coming on your show, it took some gut check and looking in the mirror and going, “This is what I do. I love it.” There’s nothing wrong with talking about it. When someone asks me what I do, I tell them, “I’m a real estate investor,” and I say it and I mean that. It took a while and that’s hard for some people. The old adage of, “Your network is your net worth,” you hear that a thousand times. With social media, I had to get over that hurdle as well and that’s really helped. I’ve met several people within this industry: Ben Suttles, Faris Mousa, Tom Reed and I could go down the list.

Meeting those guys who have been in this space helped me get out there. My goal was, “You know the game, you know what you’re doing, you’ve got a good resume, quit being embarrassed about it and go make it happen.” Number one, if you’re asking me, find a mentor, ask questions and don’t be cheap about it. Bomb something or giving half of the deals and then to your network, go out, listen. Whitney, your show is free. You’ve got a ton of knowledge and experience and you can get a whole year of a college education by listening to your podcast and a few others as well. I wish I had this twenty years ago for you and me.

That is one way I started is by listening to podcasts when I was opening my eyes to this business and trying to educate myself. What’s the one thing that has contributed to your success?

One thing that has contributed to my success is back to the mentor. Learning from those guys’ or girls’ mistakes. I had several that I can count on probably both hands. They’ve been a big part of my life, my parents. In that generation, they loved it. They’ll tell you their success stories. More importantly, they’ll tell you their failures. If you could live and learn from those and not make those mistakes, to me, that’s another whole semester of education there. Learning from other’s mistakes has been a big play for me and I’ve tried to take that and teach that as well.

Chad, how did you like to give back?

There’s not one organization I love really, back to the one-on-one with the tenant and I did miss that. I love going to the local mall around the school and spending all day there and buying kids new school shoes. Seeing the parents look at me like, “Are you going to buy these?” I said, “Absolutely. You go take your funds and maybe buy school supplies or allocate them somewhere else. Let the kid get the exact shoe he wants and it’s on me.” I stay there all day and get to hear all these stories and see these kids smile because I know back when I was at the age, shoes were everything. They still are your first-day outfit. Seeing the kids get all excited about getting the exact shoe they want and seeing the parents just overwhelmed. That right there then giving to an organization, which is nothing wrong with that. I like to see the expression and you see how thankful they are and then you see the kids. That’s one less thing off the parents’ plate. That’s one thing that the kids are excited about. What’s most important is to go to school, learn and get an education. I wish they would implement Robert Kiyosaki’s book in the school administration and get some of those silly books out and let them learn some stuff.

You’ve got to get skins on the wall. That's the best way to go in and get your own unit. Click To Tweet

There are definitely a few books that I’ve come across going down this entrepreneurial journey that would be beneficial in school. I haven’t heard anybody that’s doing anything like that, going and buying shoes. Hopefully, you’re having a lot of fun. Chad, you’ve been a great guest. Tell the audience how they can learn more about your business, your company and get in touch with you.

My website is SavoyCompanies.com. On top of that, my email address is Chad@SavoyCompanies.com. Feel free to reach out. I’ll be happy to talk or discuss with anybody first learning or wanting to just chat or talk. No problem.

Chad, thank you so much for your time and the value provided from your experience and just being so experienced in many avenues of this business. I appreciate the audience being with us and I hope you all will reach out to Chad. I hope you’ll also go to Life Bridge Capital and connect with me and also join us on the Facebook group, The Real Estate Syndication Show so we can all learn and grow our businesses together from experts like Chad. We will talk to each of you soon.

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About Chad Hudson

RES 201 | Passive IncomeChad J. Hudson is the owner and founder of Savoy Companies which specializes in buying, selling, building, remodeling and owner-financing real estate since 2000. Chad, as the sole owner of Savoy, has done over 100+ transactions, held over 30+ rental properties and has over 700 apartments.  Over the years, Savoy has moved away from Single-Family, Condos & small multi-family to passively investing in apartment syndications. Chad’s current business strategy is to continue investing in apartment syndications and move into a sponsorship role while continuing to grow his custom home business known as Savoy Builders.

Chad oversees every facet of the construction, remodel or renovation process, including managing vendors, subcontractors, project supervisors and updating clients. He has a keen eye for detail and is highly skilled in time allocation, cost control, and total quality management. His artistry, energy, and passion for building and rehabbing are matched only by his desire for perfection.

Chad has been professionally involved in the real estate market and development field since 2000. In addition, managing his successful construction and renovation business, Chad also owns several rental properties and holds multiple private mortgage notes for customers. For the last 19 years, Chad has split his time between his real estate development company and the family business which provided private lending to individuals for car loans. After selling the family business in 2016, Chad now focuses solely on Savoy Companies. Chad seamlessly uses his knowledge and expertise in private lending to assist qualified individuals who are looking to purchase a house or a piece of property.

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