How do you use real estate to create wealth in your life? Our new TV series, Built For More, explores the many ways different people have been successful through real estate. We’re pulling back the curtain on what makes these people tick, to provide you with the inspiration you need to get started or take a risk on that next deal.
I was in Minneapolis in the summer and had the pleasure of meeting with Danny Perkins and Drew Levin of the hit HGTV show, Renovate to Rent. The former University of Florida classmates met in freshman year, hit on a business idea, and dropped out after their junior year. There were some tough times, even tragedy, along the way, so we spent some time in the rooftop garden of their multi-family apartment building, talking about the industry, how it works for them, and how they got started. Here are some snippets from our conversation.
“We started a similar business to Facebook exactly as Facebook was launching. We saw the opportunity for a college campus social networking site. The idea was that strong that we had a half-million-dollar investment and a partnership with Nick Lachey when Newlyweds was the hit show. He had such a strong brand at the time and opened so many doors for us with celebrities and sportspeople.
“We had a decision to make. Do we take the $500,000 investment and start a business, or do we go back to college? We dropped out after our junior year to focus on the business.
“We had the marketing, the idea, the funding, and the celebrity connections, but in the end, we didn’t have the technology right and couldn’t handle the traffic. We missed the opportunity and we were left bankrupt and embarrassed at 24 years old.”
Danny: “I had a credit card debt of $60,000 and I couldn’t see the light at the end of the tunnel. Bankruptcy and foreclosure was the only option for me and that was a scary thing.”
Drew: “For me, my concern was him moving out of Minnesota and the partnership breaking up because it was actually a really good partnership. I was circling in survival mode – what can I do to get him to stay? And what can we do to figure out business so it makes sense for us to be together?
Drew: “I remember thinking I want to buy real estate. I don’t remember what our first conversation was, but I do remember bringing it up and Danny saying, ‘I was thinking the same thing’.”
Danny: “It was a weird type of lightbulb moment. I always had a fascination with real estate. My friend growing up, his family was really wealthy because of real estate. Drew’s friend’s family was really wealthy because of real estate. It was a vehicle for us to get there.
“We saw a market opportunity around the University of Minnesota because we knew just from being not that far from being college students ourselves that all those kids at the university would have to bid on properties and houses just to get the right house for them. There was such great demand and small supply that it was the perfect opportunity to get started.”
Dan: “That was our intuition, our gut feeling. We actually did research to show that the University of Minnesota was one of the top public schools in terms of enrolment with the lowest amount of housing. So now we actually have data to support that.
“For us, our work is almost 100% gut and that’s one of the things we struggle with. We’re not data guys but we partner with data guys and we seek out data guys’ input to confirm our assumptions and our gut and our instinct. For example, the type of neighborhood and the type of tenant we’re trying to attract.
“We’ve never lost money on any deal.”
“We were bordering that line between the market crashing and financing still being available for anybody who could sign on the dotted line. So we did that. We got one loan each and bought our first two properties. They were both single-family homes near UMinn.
“Then the market crashed and rents skyrocketed and nobody could buy anymore, so we had to figure out how can we do as much as possible before the market totally corrects.”
“We invested in the UMinn area and then we asked ourselves where are these kids moving to afterward? So, we invested in that area and bought a bunch of properties there and then saw other areas and pockets of Minneapolis that were really exploding with other strong restauranteurs that we know and close proximity to mass transit.
“We always wanted to hold properties for the long term and pay down debt as quickly as possible. We have only ever sold one property.”
“We want to stay focused on what we do well. We want to stay here, although it would be nice to move for the winter months. Everything revolves around having a work-life balance now. We’ve achieved enough financially that we don’t need to go and do more, so it’s got to be a value add to our lives. We can handpick our projects.
Dan: “Flexibility. It allows us to do something else with our time. The most priceless commodity that we have is time.”
Drew: “Money plus health is the freedom to do what you want and enjoy your life.”