Be really intentional about making a habit and making something stick.

-Darren Smith

Darren is a commercial and residential real estate investor. His companies have purchased hundreds of homes across Colorado and Pennsylvania, as well as several light industrial and retail properties in Pennsylvania. He partners with people looking to make a secured and consistent return on their money, backed by cash-flowing real estate.

In this episode, Trevor and Darren discuss:

  • How Darren started his real estate investing journey.
  • How Darren managed building a team in 2 different markets.
  • Why Darren decided to go back into real estate investing after experiencing the hardships from the crash.
  • How investing in other markets keeps you going.
  • How to value your property and who are the best people to help you find great deals.

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Full Transcription Of Today’s Episode

Trevor Oldham  00:00

Hey, everybody. Welcome back to The Real Estate Investing exposure podcast. I’m your host, Trevor Oldham. And today on the show, we have Darren Smith. After serving years the army, Darren has has spent the last 18 years as as a successful professional real estate investor, he has flipped, rented and wholesaled hundreds of residential properties. And in recent years has purchased several million dollars worth of light industrial properties as long term as holds. His greatest achievement has been to surround himself with an incredible team of industry and military veterans who are passionate, who are every bit as passionate about helping people as he is. And his biggest supporters are his wife, Lauren, and his son, Henry. Darrin excited to have you on the show today. Thank you so much, Trevor. It’s great to be here. Appreciate it. I certainly and as we dive into it, you know, it seems like you’ve encompassed a lot of different areas in real estate. But I’d love for you to take our audience back to you know, what was, you know, why did you decide to get started in real estate investing? What was? What did you see in it, you know, just take us back to that beginning journey.

Darren Smith  01:14

Like, like so many people, you know, I didn’t grow up with real estate wasn’t anywhere around that. I went into service, actually, after high school because I didn’t know what I wanted to do. And that was a great choice. And I had a lot of fun doing that. It was after I got out of the service, I spent almost six years in, I was in a computer field, and my co worker, sat next to me. And he was he had a couple of rentals. And for me, it wasn’t just that was that was like a huge deal. I mean, I look back now he’s a couple of houses. And not to say that’s not impressive. But it was really something that spoke to me, I’m like, This guy has a property that is paying him money and earning him money. While he’s here at work. He’s doing this other thing. And so that, of course, led to just reading every book under the sun, you know, Rich Dad, Poor Dad, and a lot of those other ones that kind of sparked that interest, and then took it from there. And I actually stayed in computers for for many years, I didn’t fully get out of computer industry and about five years ago, but was doing real estate most of that time as well.

Trevor Oldham  02:12

And as you get started in real estate, or you know, you I’ve known when I mentioned I was reading your bio, you had done a residential, you know, wholesales flips is, you know, is that where you got your star was doing this whole sales and flips and and obviously, now it seems like you’ve gotten more into the the industrial side of the business.

Darren Smith 02:28

Yes, I would almost Well, there’s many different segments. But I would really break my real estate investing career up into two part two parts, because I did it from 2003 to about 2008, or nine. And I got hurt really badly in the last crash. So I was doing some flips, but it was basically, I was knocking doors, I was writing letters, I was doing all of the manual, really hard time intensive things that it takes to learn and do real estate back then. And I did a couple flips and was successful at it. But honestly, everybody was successful. If you could buy a property back then it’s almost like flipping a house right now to be honest, the market is going up so quickly that no matter what you do, if you can buy it right, you’re gonna be okay. Where I failed was I got into investing way over my head out of state into trailer parks. And I bought a bunch of bunch of mobile homes and was managing remotely. And that was not smart. So that if I had a lesson learn from that, what I do now is I try and stay a little bit closer to home when I’m getting into something new. And I try and learn it and perfect it and then I can scale it out from there. So right now I’m in two markets, wholesaling on my residential side, I’m in Colorado where I used to live, and I’m in Pennsylvania as well. And we’re working both those March markets. Honestly, my all my employees are in Colorado, but it doesn’t matter. They run both businesses, they do very well. And even most stuff we do in Colorado is all virtual.

Trevor Oldham  03:46

And what does that experience been like having, you know, looking at these two different markets when you’re talking Colorado and, and Pennsylvania, and obviously those states aren’t that aren’t that close together? You know, there’s a play at least, you know, 1000 2000 miles in between them. So what’s that been like building a team in these two different markets, and then having them be able to, you know, help run your company from two totally different geographical regions?

Darren Smith 04:08

Yeah, it was, it was something that was kind of thrown on me a little bit because I didn’t have to do it. But I was living in Colorado, my wife and I for four years. And we made the decision move back to Pennsylvania, and I had a few employees, but not definitely not something where I said I could have stepped out, I was still very much on the ground, doing appointments, you know, I needed to be there. And so within a matter of three months, I had to build up a team quickly enough to be able to move out of state and literally not be able to do anything. And I’ve been through a couple of employees since then. But it took I would say about a year to really settle it in and now it’s been fantastic. I have I have an A plus team. And we learned so much how to work in a but we were doing zoom and we were doing everything remotely and virtually even before COVID but I’ll say we set ourselves up really well even going into COVID we probably had about 20% of our contracts that we have done virtually before then and you Now since what as soon as COVID started, it was like 9010 the other way, like 90% of contract virtually. And I’d say it’s still at least that level or higher.

Trevor Oldham  05:10

Like, slindon, I want to take you back to the Pyrex, I was speaking with an adjuster earlier today. And he had mentioned that he was an adjuster before the crash of you know, Oh, 708. And he took a big hit, as well, I just want to, you know, I feel as though a lot of people in our audience listening today that they see the real estate market that the way it is today, and you can buy a house back in 2020, let’s say 400,000. Now, it’s worth 500,000. It’s, you know, the prices are going up so much. And I feel as though a lot of our listeners may not have, you know, have any knowledge of what a crash like is going to be like, because you think, last 10 or 12 years the markets been pretty good bones that experience like overcoming the crash and why did you decided to keep going back into real estate investing after experiencing all the all the hardships back then to.

Darren Smith 05:55

Excellent questions. And so going through the crash, that was one, to be honest, it was I had even though I noticed significantly less than than I know, now, I was able to predict that crash a heck of a lot easier than I am, if there is even one coming at this point, because I’ll be honest, I don’t know. Back then lendings was extremely loose. I mean, it was no doc loans were no way to prove anything, you know, for payments were way behind. So it was obvious something was coming in was it was a balloon, what it was I going through why I got hit so bad was again, I was doing things were were I was highly leveraged, I was always trying to grow as fast as I possibly could. And I was out of the market, I didn’t have control. And I never acknowledged what I was doing. I never even done it, a trailer local to me. So if I was to give advice to somebody who’s, you know, scared about getting in the market right now, first off, you should be prices are absolutely high. So if you’re getting into a property, you need to make sure you have a couple of things in place that you’re not, you know, super leveraged on it. If you’re going to have debt against the property that you maybe you have a couple of options to get out. Like, if you’re going to flip it if this doesn’t flip, right, you know, what’s what can I What can I do, if there’s a big correction, and I rent this property out. So I have the ability to refinance, if need be, if you’re you’re trying to flip a house, that’s $500,000, odds are, you’re not going to be able to, to rent that property out why I got back in real estate was it for me, it really was a passion. I mean, just as excited as I was about it. I mean reading books till two in the morning and all that before I got out of it. And because I had, I had the safety of a really good computer job at the time. And so I was making good money with that. And it was just it was an easy kind of way to fall back into. But I still wanted to do it. And when I got back in, I started at the bottom, I went right back and I started signing up the wholesalers list to see what properties are out there like trying to relearn, you know, how do you analyze properties, you know, I was going to go to good go to showings. And one of the wholesalers actually called me up and said, Hey, I saw you sign up my list, what are you interested in? And I just told him, that’s another piece of advice I give is just be honest with people out there, like don’t don’t try and oversell yourself, don’t try and say I’m the best or whatever I had done, you know, many flips, I don’t dozens of properties, and I still want them and say hey, I’m learning this again. And you’ll How can I help? How can I be of assistance to you and I was his assistant, I made almost no money, you know, that next year working with him, but I learned a lot so that then when I moved out to Colorado, I was able to start my own flipping business and buying properties and wholesaling even grew from there.

Trevor Oldham  08:21

And I want to get into the the industrial, you know, the industrial and light industrial properties that you have now, you know, what sort of, you know, I’m not too familiar for that. And I’m sure that there’s people in our audience that aren’t too familiar with it, you know, you have the standard, you know, multifamily and, and some of these other sectors, would you mind just diving into, you know, what, I guess what that entails? What type of property that is?

Darren Smith 08:41

Yes, so I I focus on the the light industrial bit more, but I could probably expand that out a little bit now, because I have lots of manufacturing and some heavier stuff. But really, it’s just it’s more warehouse space. It’s things where you have loading docks, you drive in doors, you have places maybe to park some tractor trailers, maybe it’s a mechanic shop, or a carpenter shop, or, you know, just something for logistics, where they’re moving stuff in and out. So industrial, as a class can be many, many, many things. I mean, if you think of like a, an oil refinery that’s industrial, I’m clearly not buying something that’s going to be complicated and crazy. So that’s the asset class. And what really drew me to it was, you know, I’m in a mastermind with a lot of really high level investors, and so many of them are going into multifamily. And these are like some of the smartest people in the country. You know, to be honest, these guys and girls are doing really high level stuff. They’re really good at what they do. And I saw how hard it was for them and they’re, they’re being successful, but I’m like, I’m not, I’m not as smart as those guys. You know, what can I do that maybe is a doesn’t have a flight, you know, the attention on and there’s so many multifamily podcasts out there and everybody’s kind of looking at it, because it is a great asset class, but that’s just that’s what makes it so challenging. So I looked at retail, I looked at office and I looked at industrial and I played around a little bit of each of them and industrial is just Kind of the one that spoke to me, it’s, it’s a little bit simpler, it’s easier to figure out not that it can’t be really complicated, if you if you make it and there’s some things that are tricky, but for the most part, I liked the simplicity of it, you know, it’s it’s one tenant or a couple of tenants usually was multifamily, it’s, it’s many, many tenants, I have buildings, I haven’t been to a year or two, you know, that I’ve owned. And it was that less competition also meant, I’m usually, I mean, I use the skills that I have from buying, you know, so many houses, and I apply that over the industrial side and have those conversations, and it’s usually just me and them, or maybe they’re talking to some brokers, and see if we can solve that problem and make it work. And because there’s less focus on it, I found the returns were just a little bit more flexible, you know, a little bit better of a cap rate on these versus multifamily. And that obviously, is nice as well.

Trevor Oldham  10:45

And I could imagine for these properties, you know, they’re probably, you know, not like a, like, you’re going out there and buying a wholesaling house, I imagine that there, there’s a good chunk of change, that you’re investing into these properties. And when it comes to financing them, are you bringing on partners, are you raising capital? Are you financing it yourself? What does that sort of the business side of the business look like?

Darren Smith 11:05

Yeah, that’s a great question as well. So all of this back to the just how when I talk with sellers, when I talk with lenders on houses, and I’m always trying to solve that problem and make it work for them, I said, I apply that over to commercial as well, why do the same thing with financing so I one, one differences, it is definitely much more likely to get bank financing on these properties. So a 70% bank loan right now on industrial is something that is, you know, pretty pretty easily achievable if you have the right property. Whereas if you’re looking at some retail, some office, you know, 70% can be harder depending on you know, the product and where you’re at. So there is bank financing involved. But I also, if I can solve the problem for the seller, I’m a lot of times I’m able to even negotiate a partial seller financing with the seller as well. So they’re looking to try and get top dollar for the property, we’ll get more, it’s just like a house view, you have a cash offer is X number of dollars, well, I have a, I can pay you more, if you’re willing to hold a little bit of, say 10 20% on second, now I can get you more money plus you earn interest on your money plus that 20% they’re not having a big capital gains on it in that year. So if they spread it out over time, sometimes I’d save them some money on the taxes as well. So that’s the financing part of it, I have not brought any on the partners. Because the deals that I’m able to do, it’s either small enough that I’ve been able to buy them for, you know, for cash or 30% down or have been able to negotiate them, I have a building, I’m closing on July 1, it’s almost $3 million, but the seller is holding 20% of it. So I’m only having to bring 10% of it to to the purchase. And that allows me to get a little bit lighter and make that deal. So I don’t I don’t have to bring partners for things like that.

Trevor Oldham  12:43

And when you’re out there looking for, you know, let’s say, for these properties, let’s say it’s, you know, warehouse manufacturing opportunities. You know, I could imagine, oh, at least for myself, when I’m looking online, like I’m interested in buying a first my first multi multifamily property. And those are fairly easy to find on you know, I go on like Zillow, or And they’re fairly easy to find, and they’re always getting listed there. When it comes to these sort of properties. Do you have a broker that you work with? Is it you know, are you able to find the properties on that site where you sort of sourcing your deals from?

Darren Smith 13:12

So there’s just like with houses, there’s a lot of different ways that I have the lead flow coming in. I will say, I’m gonna answer a question. I bet a lot of your brokers that I definitely answer your first a lot of your listeners are asking me, how do you value a property? Like how would I even know somebody calls me up and he said, Hey, I got a 20,000 square foot warehouse to sell, how do I know what that’s worth? And it is it brokers is a big part of it, once you do it enough, and you learn you kind of you kind of get a feel and you know, rough you know, price per square foot or release rate per square foot and those things. But even then, I’m usually contacting brokers on most of the properties and looking at just to get their feel on it, their take on it and see what it’s worth. As far as how I source those deals. brokers are definitely a source for me. So they send me leads. And, you know, if they they have properties, they think that it’ll fit the property I just mentioned a bit earlier, that was actually one of my property managers. He knows the seller, he manages the property as well. And he knew the seller was looking to sell and said, Hey, you might want to talk to you know, to so and so. And we were able to make a deal work. And so I was the only one you’re talking to the guy that worked really well. Where I’m finding a lot of success right now, actually is in mailers. And so we cold call and I definitely am having conversations and good conversations with them. But I haven’t put any deals together yet for cold calling. But I’m finding if I can get a really high end custom mailer in front of them, where they had these new thing, the things out there called auto pen where it actually gets a machine with a with a real pen and it writes on the letter and it writes the address on the outside it put a real stamp on it. And I find that that definitely gets their attention. In fact, it’s that that high end custom touch and then I put my business card in there as well so they know me and I’ve I’ve contracted and then purchased several properties that way.

Trevor Oldham  14:56

On it’s perfect and then I want to be respectful of your time. Today, and I know our audience has found a lot of value in it. I just want to ask you a couple of quick questions before we end our conversation today. And, and I know early in our call, you had mentioned that you were reading a lot of real estate books. So for our audience, do you happen to have a favorite real estate or business book that you’d recommend them to check out?

Darren Smith 15:18

Oh, gosh, so many real estate books out there. Most of what I learned real estate though I learned by talking with people and just going out and doing. And so business and mindset is really where the value I get out of most of the books I read. I can give you a whole list. But I have to say the one that really spoke to me it was it was Darren Hardy’s, the compound effect. And what that did for me was it, I’d always been pretty good at making a habit, but that taught me like how to be really intentional about making a habit and making something stick. And so that’s if I had to consider myself really good at something it’d be making habits if I if I promise I’m gonna do something and I say I’m gonna do it. I might not stick with the habit forever, but I’m gonna definitely stick with whatever time period I set myself to try out and make that habit and if I fail, or if I if the end of it, I want to quit, that’s okay. But I at least have to go for that period. So yeah, Darren Hardy was a great book. Perfect. Excellent.

Trevor Oldham  16:11

Excellent recommendation. And the last question I have for you today is working on audience find you?

Darren Smith 16:16

Love to help out anybody who would who has any questions about either the residential or the industrial side. My email

Trevor Oldham  16:29

Awesome. I’ll make sure to include that in the show notes. And Darren, thank you for your time today.

Darren Smith 16:33

Thank you very much, Trevor. Have a great day.