Brick x Brick Podcast

Meet the Partners

Join Host Ben Shelley as we "meet the partners" - John Errico and Ryan Goldfarb.

We'll dive into the origins of how John and Ryan wound up in the field of real estate and into the genesis of their partnership.

(Transcript below.)

Ep1.MeetThePartners - Transcript

Ben Shelley: [00:00:07] Welcome to the Brick by Brick Podcast where we take you from the ground up on all things real estate. I'm your host Ben Shelley. Today, I'm lucky enough to be sitting with the two principals of Liberty Hudson who teamed up to create a thriving business as they invest and build homes throughout the wider New Jersey area. Liberty Hudson primarily invests in one to four family residential homes. To date, they also manage properties and build homes as general contractors themselves under Liberty Hudson Construction we now are fortunate to get to meet the principals of Liberty Hudson, Mr. Ryan Goldfarb and Mr. John Errico. Gentlemen it's a pleasure to have you both in studio today. Off the bat, it would be great to hear about some of your accumulated experiences as well as some of the reasons why you got into real estate and how you got to where you are today. So let's jump right into it. Ryan, how about we start with you.

 

Ryan Goldfarb: [00:00:59] Sure. So I am Ryan Goldfarb. I began my real estate investing journey several years ago I was actually as I was finishing up my undergrad career at the University of Maryland, go Terps! I started actually looking at turnkey investing opportunities out in Memphis Tennessee way back when. This was in late 2012 going into 2013. Long story short, I ended up securing my first investment out there with my brother. We went in on something together as 50/50 partners. Closed on a turnkey rental right around the time when I graduated which was April or May of 2013. Got you and I knew that was the kind of thing that was never going to make me rich never gonna leave me broke but I figured to be a good opportunity to get one under my belt. So we went through went through that experience did what I wanted to do that went under my belt. And since then I've dove into it a little bit further.

 

Ben Shelley: [00:01:57] So I know you said Long story short although we're here today to get the long story as best we can. Before I go to John I'm just curious. I know you talked about what the first project was but what is it about real estate in general that story. Was it since you were younger that you knew that you wanted to get into it or was it some experience maybe later as you had gotten to college.

 

Ryan Goldfarb: [00:02:16] It's actually something I've wanted to do since I was maybe ten, eleven years old. I was like to say it's from moment I realized I wasn't to be a professional baseball player.

 

Ben Shelley: [00:02:25] A true story for every Jewish male out there in the world today.

 

Ryan Goldfarb: [00:02:28] Exactly. I know I'm not alone in that here. So, Ryan, please continue.

 

Ryan Goldfarb: [00:02:34] Yeah, I actually I have a vivid memory when I was a kid going to Pier Village. I want to say that development in Long Branch, New Jersey. Ocean front, kind of luxury development. I was maybe 12 years old at the time something like that. I think was right around and it had just opened up. And I remember going there for the first time and just being in awe of this brand new development, right on the ocean in the middle of New Jersey on a place that was previously, you know, downtrodden remnant of decades and decades of neglect.

 

Ryan Goldfarb: [00:03:09] And I remember being fascinated by the fact that you could take something like that from a state of nothing or a state of despair and with a little planning with some resources and a little bit of time you could turn it into something that's a bustling vibrant oceanfront community. I think it's still standing today and every time I go back there I think about that same like that same feeling of awe I had when I was probably pre-teen, seeing it for the first time.

 

Ben Shelley: [00:03:34] This is for listeners out there.

 

Ben Shelley: [00:03:36] I think it's important I mean because there's a reason that everyone obviously money is a reason for a lot of people. But fundamentally I think the back end of what drives us to do what we do is a love of real estate a lot of shaping communities and opportunity you get your hands dirty with real substantive and productive work. And I appreciate you sharing this Ryan. We're going to continue that way but John I want to I want to bring you in here now. John is a real mystery to most of us. He's a brilliant individual. He's like a multilayered milkshake. He's a fifty thousand piece puzzle. He's in a Rubik's cube. We want to know who is John Errico and what makes him tick.

 

John Errico: [00:04:10] So I got into real estate in maybe an unusual way so I'm actually a lawyer by education and experience. I went to law school and I had no real particular interest in in real estate in college or law school. I actually worked in law for a little bit and then I left that to do technology startups. I ran a couple of startups in the real estate space, or at least a startup in the real estate space. Then a few others in related spaces and I was living in Manhattan. This is maybe four or five years ago with my then girlfriend now wife. We really wanted to we didn't want to rent anymore, and we wanted to buy our own place and started looking in areas within commuting distance of midtown Manhattan. We settled on northern New Jersey just because of the cost and the relative distance to where my wife was working at the time and bought a 2-family. It was a foreclosure so we had no no real conception of what it would be to live in a property that had been foreclosed on and had been abandoned. This is early 2014. So we we immediately moved because we were so excited but we realized that the property basically didn't have a roof. Didn't have electricity in one of the floors and didn't have a working bathroom and so very quickly we sort of were forced to learn a lot about home ownership. We learned about renovating our place and kind of all that the details that go into moving into somewhere that hasn't been lived in for a long time. We eventually started renting out the second floor which was a two family house. We started running at the second floor to tenants that went really well. We eventually moved from the first floor to the basement and started renting out the whole property to tenants and we had originally been living in Manhattan paying $3,000 a month in rent. And by living in this house living in the basement renting out the two units that were renting out we were essentially making, I think at least a grand a month above our carrying costs the property so above the mortgage and taxes and insurance.

 

John Errico: [00:06:14] So we had within a six month period of time like a $4,000 dollar per month income shift which was transformative. So we all of a sudden were able to start saving money start investing in other real estate we bought a second place and we've kind of been growing since then. But so the genesis was maybe four years ago that I've been doing real estate. I'd been doing real estate full time for about two years.

 

Ben Shelley: [00:06:37] Well what I love about that is it's it's a background of yourself but you also worked in there some of that genius that that allowed you to be successful early on in the business and there was cultural reasons why you moved out there, too, right? I know you and your wife are both bilingual. Obviously we know that northern New Jersey has a big Hispanic population there's a lot of Spanish spoken among other languages. So can you talk a little bit about that as well?

 

John Errico: [00:06:58] Yeah. So we where we moved from Manhattan is a city called Union City which is actually the most densely populated city in the country I believe. If you assume that New York is one city and not just Manhattan but so it's a city of I think it's about 50,000 people right on the other side of the Hudson River and it's predominantly Hispanic, Latino population so probably 95 percent of the population speaks Spanish or grew up in a Spanish speaking household. And my wife speaks Spanish basically fluently. Had lived in Spain for a year. So we were drawn to that culturally. We looked at other places in New Jersey like Jersey City and some places in Queens and the Bronx. But we liked culturally Union City a lot. The food the language the culture. So that was a humungous draw for us. And it's funny when we move to Union City, the story that I always tell is that maybe the first week that we're living in Union City we were the first people on our block that I think was not or is not of Latino descent or heritage. So we were walking outside of our house and one of our neighbors stopped us and said oh you're going the wrong way Hoboken is that way, the opposite direction.

 

Ben Shelley: [00:08:12] You can't live here.

 

John Errico: [00:08:14] Yeah no it's funny that that same neighbor I think told me like you know we all get along here we have, you know, Colombians, Hondurans, Mexicans, Ecuadorians, then Americans putting to us that is you.

 

Ben Shelley: [00:08:26] Well it's kind of a beautiful thing. I mean people don't realize sometimes like Union City for example, it's a hop skip and a jump from Manhattan. It's right across the river. And the dichotomy between what you find right in Manhattan and the diversity not just ethnic diversity but lingual diversity that you find right across the water Union City et cetera is quite profound. And so I guess Ryan I'm curious what got the wheels turning about working together in this field.

 

Ryan Goldfarb: [00:08:51] So we actually met I want to say it was about three or four years ago I think we were both fairly new at this. We had met through a real estate networking platform, BiggerPockets. I'm sure many people have heard of that. And we originally connected because we were both introductory investors. John was a little more focused on rentals. I was a little more focused on flips. But we met for lunch actually in Union City and we met on - I remember we went to a I guess it would be classified as an authentic Latin American-

 

John Errico: [00:09:25] Oh yeah, is that the place with the mirrors?

 

Ryan Goldfarb: [00:09:27] And back then you eat meat. I think...

 

John Errico: [00:09:29] Right.

 

Ben Shelley: [00:09:30] Enlighten us because there's a lot of inside there, the place with the mirrors. What is this place?

 

John Errico: [00:09:34] I don't know exactly. I mean it's...

 

Ryan Goldfarb: [00:09:37] I want to say it was on Bergenline...

 

John Errico: [00:09:38] Definitely on Bergenline and... Bergen line and 15 16 something like that and it's like maybe a Honduran restaurant could be I don't know.

 

Ryan Goldfarb: [00:09:47] I remember I got meat I got rice and I think maybe some plantains - it was good!

 

Ben Shelley: [00:09:53] These are important details.

 

Ryan Goldfarb: [00:09:53] Yeah. Leave no stone unturned. So yes that was that was I think our first encounter. And then I think we just kind of kept in touch after that I don't think we it is probably you know we maybe saw each other like six months after that.

 

John Errico: [00:10:08] I think we ran into each other at some meet ups. Maybe you could.

 

Ryan Goldfarb: [00:10:12] Did you have your meet up at that point?

 

John Errico: [00:10:13] Not At that time but I think maybe a year after I started doing that I think you came to you the first answer too. Yeah.

 

Ben Shelley: [00:10:19] So I'm curious because obviously you guys have brought me to an extent we like to joke. Ryan was very kind when we were off air. I said I work for them and he said I work with them which was very flattering very exciting to hear but I'm curious now kind of of how successful you guys have been individually over the last couple of years both in the buy rehab hold and flip range of all kinds of properties whether it be wholesale traditional foreclosure at market. What have you. I'm just curious what is sort of the this is a big question sort of the secret sauce method behind the madness for you guys when you're looking at these deals and maybe if you can bring in some of those background accumulated experiences what is the way that you look at this? John maybe we'll start with you here.

 

John Errico: [00:11:03] That's a great question and it's it's hard to give a really succinct answer to that. I guess I will preface my answer by saying that something that I see all the time in real estate investing among my peers and I run a Meetup group in New Jersey so people that come to my Meetup group and even in myself is this idea of analysis paralysis. So I think an obvious answer to your question is like, oh, well, I open up a spreadsheet and I run numbers and I do sort of you know underwriting kind of on my computer and that's a component of what I do. And I think we we both do. But for me if there are people listening to this that are just getting into real estate or just thinking about investing or maybe are buying their first place it's so important to just do it. You know to not get sucked into the details of you know the financial data that you won't be seeing. I mean just today I was talking to somebody about you know where we in the economic cycle or like the real estate cycle and you know maybe we're nearing the top of the cycle so maybe we should not invest at all and I don't know exactly where we are in the cycle it's really not the bottom of the cycle but if you have that mentality you're always going to find a reason not to invest. So not to not answer your question I just want to say that to begin with. How I actually invest is I you know I have primarily as Ryan alluded to mostly rentals so what I would call buy and hold property so I buy properties that are distressed or in poor condition that need renovation usually from you know not not a traditional kind of sale technique so I don't necessarily go on like the MLS and search for stuff but I might find stuff for sale by owner or maybe from foreclosure short sale anything like that. I'm familiar with a lot of the numbers in North Jersey in terms of how much stuff rents for. How much I need to pay in maintenance costs operating costs taxes insurance whatever else and I will put that into a very basic spreadsheet and look at things. Like the numbers that I care about are cap rate which we can go into at some point you know cash on cash and then just pure cash flow and by looking at all those numbers for me I can get a sense of is this an investment that I'm interested in and is not investment that I'm interested in. If it's an area I don't know I really want to go there drive around the neighborhood look at the streets north New Jersey is very block by block. Ryan knows super well in Jersey City that level of detail and I know to an extent in Union City too and other areas but yeah. So my approach is trying to find stuff that is obviously distressed using some very basic numbers putting into a spreadsheet looking at some metrics and then making a decision essentially from there.

 

Ben Shelley: [00:13:43] And it's funny you mentioned that and we will get into sort of the back in numbers in future episodes but I think the underlying skill here is a proactivity. This idea of jumping into the fire understanding the metrics behind what you're doing but having the confidence to take the bull by the horns. And I've seen firsthand John break into our own foreclosed properties going into through the windows and through the front doors and so I think there's a combination of understanding this from the back end and metric side and also just kind of going for it and being confident that you'll make some mistakes but the net gain will be worth it. Ryan what do you think.

 

Ryan Goldfarb: [00:14:19] Before I dive into my answer that reminded me of a story from a few months ago. Just real quick to give you a sense of how John operates. We were at one of our foreclosed properties trying to gain access to it for the first time and I would say we probably spent about a good hour trying to break our way into the basement. And then once we got into the basement John took a hammer and broke through the world's strongest solid core wood door. And eventually he he broke a hole through that door that was large enough for him to get through so that he could then unscrew the the studs that were holding it in place on the other side. After the fact we went back, we went through the house. Eventually exited and at the end of it we realized that the front door was wide open the whole time.

 

John Errico: [00:15:09] I was there this morning actually.

 

Ben Shelley: [00:15:11] See what that tells people is you guys are operators and that's what you do.

 

Ben Shelley: [00:15:14] Yeah you go in and you... I'm just imagining, picturing that in my head right now and it's too funny. But it's back to the essential question of not that that wasn't a wonderful sidetrack back to the essential question of the way you look at deals and how your accumulated experiences have affected that. What would you say?

 

Ryan Goldfarb: [00:15:33] So the way I look at things high level is to break it down into a few different categories. I think there are a few different ways that you can find deals and that you can make the numbers work and really drive returns. I would classify that as falling under into one of these four categories. It would be management, effective deal sourcing, financing, and construction. I think you'll find that most people who are in the real estate space particularly those who do this at scale and who do it well will tend to have some level of expertise in at least one of those areas. And I'm talking like true expertise to where you know they they've been a contractor for 30 years and really know the construction side or they're super well-connected on the financing end and have that on autopilot and they're able to get money at will and inexpensively. Or they're experts at marketing and they know how to find deals better than anyone can. Or you know they have a large management company and are able to handle that thing that stuff in-house. So, so typically it falls under that umbrella or one of those four categories within that umbrella. And one thing that I think working with John has got me to realize is how much of it is really just tenacity at least in the beginning. There is a resourcefulness that is almost a necessity. There's a the old adage that nothing's really a problem that you can throw enough money at it. But for a real estate investment you know that that may be an option but it's not always the optimal option. So you know whether it comes to, whether it's being resourceful in the sense of being able to fix things less expensively without compromising the longevity of that repair or whether it's just using a space and a little bit more creative of a way that's going to get you the highest and best return for that investment. I think those kinds of things go a long way and I think it's really hard to learn those things without being boots on the ground and without being in it.

 

John Errico: [00:17:27] I think that that's that's a great point. It's a super important point too about how different there's a lot of creativity in real estate investing that may not be obvious from the outside. I think when people go into it they they might have this opinion like I have to buy you know a turnkey property that will gross rents at a certain rate and that's how I'm going to do it. But pretty much every deal I think that I have done and I think the same is true for you Ryan that every deal is unique and different and the ways to make money on the deal are very unique to the deal. I mean we've had conversations where we bought something that we thought it was going to be a long term - I'm talking about myself here - I thought is gonna be a long term rental play I just have a long term tenant in there and it turned out that it was great to do Airbnb in that particular property for some reason. I think you've had properties where you thought maybe you were going to rent them out or that might have been an option then you ended up flipping them or even vice versa. Part of the, part of this skill is learning the suite of options that are available to you and I'm still learning that too about different ways to use properties and different to do deals.

 

Ryan Goldfarb: [00:18:32] And I think that's I think that's an evolution that you never quite reach the end of. I think that's particularly applicable around here where you have not just markets that change town by town, street by street, but you have buildings that have been here anywhere from since you know 150 years ago up through new construction and everything in between. And anything that was built in 1900, you can you can bet that at some point changes were made and even the two houses that are right next door to one another probably are a little different from each other when you look under the hood.

 

Ben Shelley: [00:19:06] It's interesting because I can even speak from a very short experience working with you guys that when I came aboard I looked at things in a very linear fashion and I've appreciated the diversity of ways that you look at deals. And we are running out of time here. But before we go in this introduction of the general partners of Liberty Hudson I would be interested to just hear from you guys maybe a last bit of advice or suggestion you would give to an upstart investor. Something you would say to somebody who was you 5 years 10 years ago as a way to inspire them or maybe a guide to what they should do first to make it in the business. John let's start with you.

 

John Errico: [00:19:40] Yeah I mean... So my point would be what I what I said before which is just to get started. Real estate investing is, I consider it, an entrepreneurial endeavor. And something that I think is very true about entrepreneurial endeavors is that they can be very lonely. Something that was great for me was discovering Ryan mentioned before a online BiggerPockets. It's actually how we met. But even beyond that just talking to people that are in real estate and do real estate is immense because I remember some very early conversations I had with people that were you know real estate brokers were on real estate finance and just asking them even really simple questions like "What is an FHA loan?" Or "how do I buy a house?" which are not obvious things I mean I didn't know that information despite going to law school, you know, I had really no conception. So I would say talk to people about it ask questions. There are great resources online and in probably your local communities friends mentors whatever you wanna call it ask talk about it and just get started. That's if I didn't... I almost was so ignorant I knew so little at the beginning that I didn't know how daunting a challenge my first house would be. But if I had a sense of that risk I never would have done it. So I'm very happy that I took the plunge.

 

Ben Shelley: [00:20:57] Ryan.

 

Ryan Goldfarb: [00:20:57] Sure. First of all thank you for putting us on the spot Ben.

 

Ben Shelley: [00:21:00] That's what I live for.

 

Ryan Goldfarb: [00:21:03] So I will go in a little bit different of a direction maybe something a little bit more tactical. I remember one thing that I think it took me a little bit of time to get passed when I was first beginning was you know I fell into the bucket of what John described before as paralysis by analysis. And I think that that is certainly not unusual for would be investors. One thing that I think helped me get passed that was to really focus on one area or two areas of a particular city in my case it was this Jersey City. And I'm not going to say that I was an expert on those after just a few months but I put forth all of my focus on those parts of town and those parts of that city specifically whereas previously I was distracted by every new town I was learning about or every new town I was exploring in North Jersey. And what I found was once I honed in on that one area on those those like two or three neighborhoods of that one town that gave me the baseline level of understanding that I needed to do every subsequent deal that I've done since then. So I don't know that that would have happened without having put forth that degree of focus at the beginning. It took some discipline especially when I just wanted more than anything to do my first deal in the area. But I think it was necessary and I think that was the catalyst for a lot of things that happened thereafter.

 

Ben Shelley: [00:22:27] I know I appreciate this I know the listeners appreciate it and guys thank you for your time and your expertise as always.

 

Ben Shelley: [00:22:42] And thank you for listening to the Brick by Brick Podcast where we take you from the ground up on all things real estate. We will continue to bring you the best and brightest the real estate world has to offer as we leave no stone unturned in helping you, the everyday investor. Thanks for listening.