Adam Torres and Pete Schnepp discuss multifamily real estate investing.
Subscribe: iTunes / Spotify / Stitcher / RSS
Apply to be a guest on our podcast here
Show Notes:
Multifamily real estate investing is a path many have taken to diversify their portfolios. In this episode, Adam Torres and Pete Schnepp, Founder of PRS Properties, LLC & Envision Painting & Roofing and Co Founder of Bug Science Pest Control, explore multifamily real estate investing and the upcoming book Pete will be launching with Mission Matters.
Watch Full Interview:
About Envision Painting & Roof Coatings
Envision Painting started as a painting contractor company determined to fill the void where a dependable expert was needed. The Phoenix area was previously lacking a reliable and skilled Phoenix painting contractor willing to take on any type of job, no matter how big or small, for both residential and commercial clients.
Their professional background in interior and exterior painting, combined with their professional associations, makes them the company they are. They believe in using quality products paired with dedicated craftsmanship, in order to achieve superior results.
With over 20 years of collective expertise, the work they do is always topnotch. Plus, they personalize your experience with their consultation services or options like environmentally responsible paints. They also work with non-profit and fundraising programs and continue to be a respected member of the local Chamber of Commerce.
Full Unedited Transcript
Hey, I’d like to welcome you to another episode of Mission Matters. My name is Adam Torres, and if you’d like to apply to be a guest in the show, just head on over to missionmatters. com and click on Be Our Guest to Apply. All right, so today’s a special episode. We have Pete Schnepp on the line, and he’s founder of PRS Properties and Envision Painting and Roofing, and he’s also co founder of Bug Science Pest Control.
Pete, welcome to the show. Really appreciate getting to see you today. All right, Pete. So for those that have been watching the show for a long time, you know, I’m a, a fan of Phoenix and fan of real estate in Phoenix, and you know, some of my backstory, I lived out there for years before coming out to California.
And so I’m excited to, to talk about really multifamily investing in that market, what it’s. Done for you, trend, see what’s going on. It’s been a long time since I checked it out. But before we get into all of that we’ll start this episode, the way that we start them all with what we call our mission matters minute.
So Pete, me at mission matters. We amplify stories for entrepreneurs, executives, and experts. That’s our mission. Pete, what mission matters to you? Really the mission that, that drives me honestly is making positive and meaningful impacts on the people around me, as many people as I can. And, and the biggest impacts as possible.
That’s great. Great bringing. Mission based entrepreneurs onto the show. And really my goal here is to, you know, find out what you do, how you do it and what we can all learn from that so that we can all grow together. So, and, and of course, we’re going to talk just a little bit. We’re not going to go too far today, but we’ll be talking about the upcoming book that we’re going to be launching together.
So I’m excited to get into that as well. But maybe just to get us, us kicked off here, like, how did you get started as an entrepreneur? Where’d all that begin for you? Well, it started, I guess, when I was a kid, my mom was an entrepreneur. She had several business ventures, none of them too successful, but I definitely saw the life of an entrepreneur growing up and everything.
And you still signed up for a P and I realized everything that I didn’t want about it, right? All this dress and wearing all these different hats and being the last person to get paid. So I saw, I saw those growing up and I guess when I was in college, I did an entrepreneurial internship that kind of sparked the interest again.
And I did that for three years and I realized that I did not want to be an entrepreneur at all. I needed safety. I needed a paycheck every, every week or every two weeks, something I could count on. So I went after college and went into a home building or construction management, and I worked for home builders.
I got a paycheck and bonus opportunity. I did that for a while. I did really well at it. And went through the housing boom and bust of Phoenix and, you know, the country really, but we had a really bad year. And then I decided what I realized was that I was never going to reach my goals as an employee, at least what I was doing.
Right. And so I came to the realization that I had to go into business for myself. And was that boom? I’m just curious, timeline wise, was this around 2008, that boom and to bust? Yeah, 2008 and you live that out in Phoenix. Is that right? Exactly. Yeah. I was, I was managing all the homes being built for the, for the, for the investors that were buying them up left and right.
And I was building them for them. So I saw a ton of people get really, really rich. And then I saw all those people lose everything that they had. And I saw the subcontractors that we were using to build the houses. Go bankrupt. Yeah. I mean, I saw it. It was crazy. First hand. And I, you know, I wound up losing my first house in that too.
So I was I was a young professional watching it happen to everybody else and watching it happen to myself. But at that time I didn’t have a whole lot to lose, so I didn’t get burnt too bad. But the experiences. Have never left. Right? Yeah. Yeah. It was a crushing time, I remember. And I so I was just a, a, just a little bit younger, just coming outta college.
And I and I remember getting out there and I was a couple years in, I think I moved to Phoenix originally in like 2006. So I was probably like two years into my career, I, I wanted to buy in the market. I remember 2006 to 2008, it was like every week you’d see property values just. Skyrocketing. And like on paper, I mean, California investors and out of state investor, just driving the market out to these ridiculous valuations.
It’s like, like it doesn’t matter if you doubled somebody’s rent in some cases, you still couldn’t like have positive cashflow on a, on a particular property, depending again on the class, the property, all that stuff. But, but yeah, it was some wild times during that time. I remember that. And I remember looking at the market and it kind of, and the reason I bring that up is because As we get into the multifamily investing, what you do it’s definitely not that like it’s, it’s a whole different investment thesis.
There’s a different, you know, kind of approach to what you’re doing and we’re going to go into that as well. But I think what I want to go with first is like, when did you decide to maybe start, so you, you, you go to become an entrepreneur, which business came first? Cause I know you have multiple. So what, what kind of came first there?
So when I was an employee in construction, I got my real estate license because I saw so many realtors doing well. I knew that if I could get that. Even if I did a couple of deals or just use it on my own for the, for my life, I I’d come out on the positive side, but I started dabbling in a couple of deals.
My first real estate deal ever was actually, I bought, I got a deal under contract, I think it was on the MLS. I had a realtor and I had no money to buy this property. And then I went on Craigslist. And I, and I marketed it. I put it up for sale saying that I was selling my contract and I assigned my contract.
For 5,000 bucks. Wow. And I was like, I don’t know, 24, you know, and that was my first real estate deal ever. It was crazy. It was too good to be true. I mean, it definitely took some work to, to do that. But anyway, I wasn’t really in the real estate business then. Mm-hmm. , but I had my license and but then in in oh seven, I guess I started my painting company, at least on paper.
And I started kind of running it on the side. While I was still employed and then it started taking off and I you know, eventually I wound up working my way out of the employment and full time into the painting business. To me at the time, the painting business, painting was still, it was what I knew best and it had my, it was probably for me the safest bet.
Cause I still needed income to pay the bills and it was quick turnaround. And so that’s what I started and ran strong. That was really the main business for so many years, but along the way for 10, 12, 15 years, however long it’s been, I’ve been taking, you know, as much profits as I can at the end of the year, middle of the year, whatever I’ve got built up and buying rental properties.
You know, home that I lived in and I moved out. I got another home, but I didn’t sell that first one. I kept that as a rental. And I still have that one today. So I guess I was really in the painting business first. I did sell a few houses here and there, but it was really never, it was really just like a side gig properties for the, for the long haul.
Yeah. And then so you’re, I mean, I, I love the kind of mythology like how you methodically built you know, one business and then you started investing the capital and because the reason why I, I’m a fan of your story, number one, and I like to kind of draw it out a bit is because sometimes people you know, get this idea that to be an entrepreneur or to do certain things, you have to be this, you know, Mark Zuckerberg or do this or do that, or like China, you know, come up with this new invention or idea, but, you know, Like there is money to be made in the traditional businesses.
So whether it’s painting, or we’ll talk a little bit about your other businesses as well and bug control and like all these other things, like there’s money to be made and there’s value to be, you know, given into these different marketplaces. So how did, so take me a little bit further down the story.
So now you got some houses going or some, some rentals painting businesses is still going strong. What happens next? I just kept going and picking up steam really. And I had the methodically building, right? You’re a builder methodically building. That was, we lived clear, deliberately and purposefully.
So to me, real estate was the end game and building the painting business was. Was great. But it’s really, it was a high paying job, so, you know, it could have been a sales job or whatever, but I had to wear all the hats and there’s the, the ups and the downs of being self employed, but I knew that I would never get, you know, true wealth comes from real estate or other methods.
And in a painting business, a local service company, yeah, maybe people can build them real big, but the odds of doing that and the effort to do that to me. Was way too great. I don’t, I don’t want to work that hard. And so I realized that the path to earning money while I sleep and generational wealth and eventually not being, not having to work for money was good for me was going to come from rental properties.
Cause I already liked real estate. I know construction, I have my license. Like this is what I love. So I knew that was the end game. And once I determined that, I mean, don’t get me wrong. I love the painting company as well. I love, of course, love all the customers that I’ve interacted with. We make a lot of positive impacts through that company.
Either directly to our customers or through the community. So I loved it, but I used that basically as a means to an end. My amazing wife and my family, you know, we live modestly. And the problem with most people is as they start earning more money, they buy a bigger house, they get bigger expenses, they get bigger cars.
And for, I mean, we’ve sacrificed for 10, 10 years or so so that we could plow as much extra cash into real estate as possible, that was my number one priority. And in hindsight, I’m glad I did. It really is a great story. And at what point, so at what point in the real estate journey did you decide to not saying you weren’t serious in the beginning, by the way, I just mean like in the beginning you were accumulating properties for yourself, but what I mean by like, when did it Change or when did you get serious is more.
So when did you decide to kind of start taking the leap and to start taking on, you know, investors or outside capital? To me, that’s when I feel it gets to like kind of transitioning from, you know, accumulating to now a professional, once you’re on the hook for taking on outside capital, like that’s when it gets real, in my opinion, when did that part of things start taking place?
Yeah, well, I mean, you’re so right when you’re buying properties on your own. It’s there’s a lot of pride that I had in that, you know, a self building a self funded portfolio and not having to answer to other investors. But at the same time, you know when you work as a team or with partners, you can go a lot further for sure.
And so every, most real estate investors. Come to that conclusion and they either die off and level off or they push themselves out of their comfort zone and go forward. And so I’ve done that, you know, I guess it’s been a few years now where we started allowing friends and family to invest in the deals in some accredited.
You know, we’re not a big firm like some of the big national companies that do that on a huge equity scale, but there’s something to be said when you can, when you’ve got a good system down that you’re doing well in, and you can share in the profits with people that you like and people that trust you.
And believe in you. And so it’s, it’s another way that I personally can fulfill my mission of making positive and meaningful impacts, right? If I can do what I do best and what I love best. And help somebody or somebody’s family’s financial future at the same time. It doesn’t get much better than that.
Yeah. Tell me a little bit about, about your investment thesis. Like, are there the types of properties that you’re looking for that you’re investing in? Like let’s, let’s go under the hood a little bit on, on what it takes for you to make deploy and make an investment decision on capital. Sure. Good question.
So I personally like small multifamily properties. I feel like it’s kind of a sweet spot where there’s you don’t have institutional capital that you’re, that you’re fighting against, and you don’t have like the retail homeowners that you’re fighting against, and there’s also a lot of like kind of mom and pop old school owners that have all these properties.
For a long time, they’ve got a ton of equity and they just don’t want to manage it anymore. So there’s, there’s a lot of opportunity there to buy, buy right. And once they’re fixed up, I can easily manipulate them with, by improving them, getting the rents up to market rate and managing it property to find the upside on, on the valuation.
Right. And so. The other thing is multifamily is, you know, people are always going to need apartments. So I generally like something a little bit older, like a B or C class. Those properties, they just, they work out well. And so in Phoenix with that property, I feel like we’ve got the sweet spot here.
At that age, at that age and in this location, it’s not easy, but you can find properties that cashflow really well and have a lot of potential for. You know, natural appreciation over time. And you’ve got the forced appreciation when you buy it, right. And do all the things that I just mentioned. And the reality is everybody’s, there’s always going to be a need for older apartments.
We’re not building the brand new ones that people are charging. Two or three thousand bucks a month for right. What we have, there will always be a need for the lower income class. Yeah, I’m a fan of your investment thesis. And that was the same place that I used to play and it does. And there’s no shortage and you’re right.
Like the institutional investors, they’re not going to go, they can’t do that. And then the and then if you’re playing in that, that, that, you know, depending on the amount of doors, then you, once you take yourself out of the single family spot, now all of the really small investors, like they can’t necessarily play in that space.
So that sweet spot of depending on how many doors you’re going for is a really nice niche. And then, and then a lot of people that have held those properties. It’s what you’re saying. I completely agree with the age out of it. They’re like, okay, I’m ready to retire. They’ve been, they’ve been making money on that thing for so long.
And I’ll, I’ll tell you one of the properties, the first properties I bought out there. I did the old move into one of the units and rent the rest out, man. I live for free for years. Pete, I’m telling you years I live for free. When I moved to California, I still remember this is my like late twenties at this point.
But When I bought it was my early 20s. It lived for free. When I got to California and I had to write a rent check, I almost felt like, what, what is this? I have to pay rent? I thought people pay me to like live here. That was my experience for most of my 20s is that exactly what you’re talking in the exact type of property type in my little one bedroom.
But You know, it goes back to like, there’s different types of people of risk aptitude. Like I didn’t have the risk of somebody else that’s going to do something else. I wanted to methodically build over time. Like that was my view. And, and also I personally never got to the point of taking on investors capital.
Like you did, but now as you continue that investment thesis and the system and what worked for you, like in order to make it work, in my opinion, and that type of market and with what you’re doing specifically, you got to have a guy like you in there and a team like you have in there really boots on the ground that are reviewing the properties.
I mean, what do you, how many, how many properties do you look at before then? This is my, I’ll give you like, before you think about maybe deploying capital, you’re talking hundreds, aren’t you? Yeah. I mean, I guess there’s different levels of screening, right? I mean, I’ve got a lot of people that send me deals and I probably glance.
Yeah. You glance at hundreds. That’s what I mean. And then you, you maybe, maybe a fourth of those or less a fifth of them. Maybe you really do a little bit a little bit deeper look. And then maybe, you know, half of those, you go a little bit deeper. And then you get into offer territory. Is it worth putting an offer out?
And generally, you know, if you put 10 offers out, I would hope to get one. But it’s tough to even get, get offers out. I will tell you, I mean, in the last few months, I think I’ve put 12 offers out. I got one deal under contract. So, but this is the time right now. When, you know, it pays to put out low ball offers and see what sticks and see who’s willing to negotiate because there’s, you don’t really need to buy a property, but Hey, if you can find one that makes a ton of sense, or if you can manifest it, you can create that deal.
Just by, by finding that win win and the seller that has some distress, boom, there it is. And you don’t, those don’t just get handed to you, you know, you gotta be constantly looking, hunting and trying because most people will look at properties for sale and they never make an offer. They never start that, that conversation or if they do it once and it doesn’t work out and they stop.
When did the the pest control side of things, when did that all kind of come about? Bug science pest control was founded in 2020. It was a COVID baby. And really, you know, my brother, Adam, who runs that business, good name, good name, Adam. Yes, Adam. So he’s been in pest control for the last several years in Phoenix.
And so he, he knew all the ins and outs and he had this, you know, realization that he he had a low ceiling as an employee in that industry and that he was never going to reach his dreams. In the position that, that he was in, or even like getting promoted. And I just happened to have an itch at that time to, to want to start something new also.
So it was perfect timing for both of us. And we went for it. It’s awesome. So Pete on the, on the property side of things, I understand you work with like investors out of state, obviously in Phoenix as well. Like tell me a little bit more about what you look for on the investor side when somebody is looking to invest with you, like what, what are some of the characteristics?
Yeah. So we usually have a hundred thousand dollar minimum investment. And that’s really just because we want to be able to do deals with simplicity and not have hundreds of people to report to. So the fewer, the better, but generally it’s friends and family or people that, that know me or are familiar with me.
And then If somebody else is, is interested, you know, we get to know each other. And so that they feel like, like we are friends at a certain point and they trust me. But yeah, the, the investing program really, it’s a no sweat program for the investors. They don’t have to do anything. I operate the business, you know, I use my, my resources here in town.
Basically I’m buying the property and I’m bringing in investors to help fund it and they get to share in the profits and it’s a pretty nice deal. It’s awesome. Any particular areas you mentioned kind of size of property, multifamily, of course any different areas you target versus others, or is it just the deal, like you spread out across the valley?
I really like Mesa. That’s where I’ve got several properties. It’s one pocket that that cash flows and has appreciation. What else? I’ve got a couple properties in Gilbert, which is really good. It’s tough to cash flow in Gilbert. Yeah. Now it is. And then I’ve got some more in Phoenix. I’m in like kind of North Central Phoenix and South Central Phoenix.
Those are where I’m at right now, but there’s areas that I’m looking at as well, you know, in Phoenix Metro that, that might work, you’ve got older areas, which like downtown Phoenix, where they’re built in the forties, thirties, forties, and fifties, I don’t like those. They have too many repairs. They kill your cashflow.
The newer stuff, nicer stuff in Scottsdale, you don’t get any cashflow. You’re, you’re lucky to break even and you’re banking on future appreciation. Glendale is an area. I don’t have any right now, but that it could potentially work in Glendale. So depending on the age of the property the location those are kind of what I look like, look at.
And then what value can I add as well? So I was talking to another broker today. They ask what I’m looking for. I’m not going to buy anything that somebody else already fixed up. Okay. Because I bought it a year ago and it’s trying to sell it for retail. Now that’s not me, but I’m also not looking for something that needs a complete gut.
So like ideal scenario just visually thinking about it, right? Okay. Let’s say you’ve got a mom and pop owner and they’ve owned it for 20 years and they never go to the property. They never visit it because. They don’t want the tenants to come out and ask them to replace the windows. The door doesn’t close right.
And the washing machine is broken. They don’t want to go out there and get a lobby list of stuff to fix. So they know we’re going to look at it. Right. And the tenants, when they see somebody new walking on site, they don’t go outside because they know they’re paying under market rent. Yeah. That might be the owner or the manager.
I don’t want them to see me because. You know, the place next door charges 200 bucks more a month rent increase notice yet. So you’re hiding from the rent increase. So that’s almost like an ideal scenario because you’ve got deferred maintenance, you’ve got under market rent. I can come in there and add so much value to a property like that.
It’s just, that’s, that’s the perfect scenario. Yeah, that’s great. And there’s so many of those out there in that market, like what you just described, and it’s funny to hear you say it because that’s exactly how it happens. Do it shows your level of experience though. Also with these properties, like that’s exactly what happens.
So I want to spend a moment or two. We’re not going to go too far into this piece of it today because we’ll be bringing you back on the show for part two of this interview series. But we have a book coming up that we’re going to be launching together. I’m keeping it high level. What are some of the things you hope to propose in the upcoming book?
You know, in the book, I’m writing the book for a few reasons, really. One is, one is it’s kind of a bucket list thing, and you guys make it nice and easy to fulfill that. Two, I want to teach, you know, some of my lessons that I’ve learned to my kids, and specifically about, around the importance of owning, buying and owning real estate, right?
I firmly believe, well, I was told one time several years ago, there’s three ways people get wealthy in America. One is by owning big business. One is by owning stocks and one is by owning real estate. Those three things are a combination of all real estate was, was, was just what I love the most. And It can truly provide wealth and time freedom that a lot of other things can’t, but it’s not easy and it takes time.
And so that’s, that’s kind of a high level overview of what I’ll be talking about. I’m going to cut you off there. Don’t worry because we got, we’re going to do a whole nother interview on that and you better believe I have more questions. But for today, I mean, first off, it’s been great having you on the show.
Pete been looking forward to doing this for a long time with you. You got your business growing, you’re putting in offers on properties. Congrats. You got, you got one under. Contract you mentioned. I mean, I’ll just ask what’s next. What’s next for you? What’s next for your businesses? Continuing to push forward, you know nothing, nothing really crazy, but it’s a weird market right now.
The rules are changing a little bit, but the people that figure out the rules of engagement are going to be big winners. Well said. If somebody, if somebody is watching this and they want to follow up and they want to connect with you and your team what’s the best way for them to do that? Yeah, you know, you want to shoot me an email, that’d probably be the best.
It’s pete, P E T E at P R S dot properties. Fantastic. And we’ll we’ll put a link to that in the, in the show notes as well, to the, to the website as well. And and, and, and definitely want our, our audience to go and check it out. And speaking of the audience, by the way if this is your first time with mission matters or engaging in an episode, we’re all about bringing on business owners, entrepreneurs, and executives and having them share their mission, the reason behind their mission really why they do what they do.
Like what gets them excited and motivated to go out into the market and to make a difference. If that’s the type of content that sounds interesting or fun or exciting to you, we welcome you hit. button. We have many more mission based individuals coming up on the line and we don’t want you to miss a thing.
Pete again, been a pleasure having you on this show. Can’t wait to the next time we get to do this. Thanks again for coming on. Thanks Adam. Take care. See you soon.
