The Wealthy Apartment Investor Podcast

Merilee Karr is the CEO and Founder of UnderTheDoormat. Her vision is to make short term rentals a possibility for everyone. She's been featured on many different news outlets, and although she's been in the UK for the last 20 years, her experience is incredibly valuable for the US short-term rental market.UnderTheDoormat believes there is more to short-term rentals than posting an opening on AirBnB. They're looking to capitalize on the 300 billion dollar short-term rental market. UnderTheDoormat knows that people are valuing flexibility higher and higher, and are looking to support that market need.In This Episode, We Cover: What you can do with the 330 billion dollar short term rental market to improve your investmentsHow short term rentals are evolving with business trips and expensesWhat residents want in the current housing marketHow to prepare for short term rentals instead of just putting it up on AirBnBWho the best target market for short term rentals is going to beHow it's more than just a way to control vacancyWhy subletting is a powerful option for any multifamily propertyWhat operating models are available to make short term rentals a successHow even a 1% change can completely change the profitability of a propertyHow short term rentals better let you follow the weekly and monthly changes in prices to maximize revenueMerilee KarrCEO and Founder of UnderTheDoormat Additional ResourcesUnderTheDoormatRegister for the 2023 Multifamily Investment SummitWealthy Apartment Investor Podcasts

Paul Colgan is the Managing Partner for EA Americas, and is the Government Affairs Consultant for the Home Builders Association of Greater Chicago. He's heavily involved with how governments are handling the desire to be more environmentally friendly in real estate.This Episode Discusses:How the private sector (like Salesforce) is pushing a reduction in business's carbon footprint onto other businessesHow the government is pushing for verification and monitoring of carbon footprints of companiesWhy you need to be ready for federal regulations to come into play and how to prepareWhy you need to be following an international standard for regulating your carbon footprintWhat the timeline for decarbonization plans is going to look likeCompanies and investors want to be more environmentally friendlyWhat your first steps to working on your ESG should bePaul ColganManaging Partner for EA Americas and the Government Affairs Consultant for the Home Builders Association of Greater Chicago

Parag Goswami is the co-founder and CEO of clik.ai. He previously owned an underwriting company and saw the pain of the repetitive tasks being handed to college graduate professionals. Using his incredible background in technology and computers, he created a solution.  Clik.ai is an AI powered platform that aims to make underwriting fast and painless. It tackles the problems that asset managers, banks, investors, and more face in the real estate market. Clik.ai knows that having a fast underwriting process can allow users to execute on deals before the competition.  This episode discusses: Why underwriting needs to be done by an AI instead of by hand How AI can turn 4 hours of underwriting into 4 minutes How underwriting AI lets investors capture opportunities that would otherwise be lost What it means for AI underwriting to be the new industry standard and how to use it to make better investments What makes clik.ai stand out from the rest of the growing underwriting AI niche Why access to underwriting AI drives profits for both the biggest and smallest companies  Parag Goswami Co-Founder and CEO of clik.ai

Kayla Neller is the Director for Program Management at Migo. With over a decade of experience in all facets of the real estate and multifamily industry, she has now launched hundreds of short-term rentals across multifamily. Richard Chandler has his background in hospitality. Now at Migo as the Director of Product and Data, he's able to merge that experience with the expertise of multifamily professionals such as Kayla. Short-term rentals are a mix of hospitality and multifamily, so his experience is invaluable. Migo partners with Airbnb to make flexible, short-term rentals a reality for multifamily properties. They aim to make the process simple and easy and guide operators through the pitfalls of loaning out apartments for short periods of time. Migo is a part of RealPage, a real estate and property management company. This episode discusses: How to regulate home sharing and short term rentals to keep risks low Who is really wanting to take advantage of being able to rent out their own apartment when they're not around How easily the management and regulation can be handled Why property owners and residents both want to rent out their apartments while they aren't there That 65% of AirBnB rentals already takes place in multifamily, despite the risk of being evicted How to tackle cleaning and quality to make sure short term rentals are kept to a high standard, which is already the #1 most common complaint on AirBnB How to help residents make the best of renting out their apartment Kayla Neller Director for Program Management at Migo Richard Chandler Director of Product and Data

Craig Shannon is the President of Grovemont Capital Advisors. There he helps connect real estate companies with capital. As such, he has enormous insight into what investors REALLY want. As changes are happening faster and faster, Craig is able to make investors and operators get the most value possible. This episode discusses: What are the three things an investor needs to be looking for Why real estate is so popular as an investment right now What the current excess of capital means for the investment market Why trust is the most important factor in making any investment How realizing your tenants are really clients can turn an investment around Why a 0% vacancy is a bad thing for a multifamily property What top properties are using for an advantage in the real estate and investment market When it's correct to use equity instead of debt to raise capital, regardless of interest rates Why high quality people are the best asset of any investment How to take risks in investments and technology that will pay off instead of leaving you with arrows in your back Why it's critical to always have an advisory board Craig Shannon President of Grovemont Capital Advisors

John Carlson is the President of Mark-Taylor, and has been with the company for 20 years. He leads the strategic direction and oversees business development, operations, and the property performance portfolio.  Mark-Taylor owns, develops, and operates quality multifamily properties. With over 20,000 units, they are one of the largest multifamily operators in Arizona.  In This Episode Patrick and John discuss the following: Where the real estate market is and where it's going What the acceleration of deals being made in 2022 means for investors after an already record setting 2021 What 10.2% CPI change since the beginning of COVID means for the future market How the current market is different from the pre-crash market in ‘04 to ‘06 Why investing in people is the most valuable investment you can make How smart home technology is starting to become a necessary amenity over time Why increased flexibility is critical to the future of multifamily Why giving an amazing experience is the #1 priority for any in-person interactions How John managed to get through moments where projects failed

Sam Grossman is the Managing Director of Real Estate Services at Inveniam. He has a big focus on what you can do to increase the yield on multifamily investments without “just raising rent”. He's helping companies recognize how that's possible. Inveniam uses blockchain technology to verify data. Trusted data and digital asset management is critical for every company in this day and age. Everyone wants more and better data, for a good reason. It can make the difference between a subpar investment and an excellent investment. In This Episode Patrick and Sam discuss the following: Why you need to do what you're good at, but let other people do what you're not good at Why raising rents and decreasing costs, what everyone's done for years, is not going to get you to your investment goals anymore How new technology increases transparency with investors and managers How smaller businesses can get top level reporting with minimal work How to compete with the big names in multifamily investing Why it's important to educate yourself on new opportunities and technologies before you jump on a deal What your team can do with faster and easier reporting

Danny Court is a Partner and Senior Economist at Elliott D. Pollack & Company. His analytical and data-focused mind helps him present data and forecasts in reliable and easy to understand ways. He also has experience creating and utilizing the proforma models used to make real estate purchases. Elliott D. Pollack & Company offers real estate and economic forecasting services. They base their forecasts and analysis off of national data and strive to make it transparent.  In This Episode Patrick and Danny discuss the following: A LOT of facts and data about the current real estate market, where it is, and what the economists are predicting for the future What the lowest vacancy rates of apartments and homes means for the real estate market How the absorption of the oversupply in real estate from 2008 is causing problems today What it means to have the most units under construction since the 1970s when there is an undersupply in the real estate market The problems brought up by the decrease in affordability and what we can do about them What it will take to get out of the low housing supply in the coming years Exactly what the increase in rent has been, and what the experts predict it will continue to be in the next 5 years Why this isn't a real estate bubble and what that means for investors

Samson Jagoras is the CEO of Growth Vue Properties. He was able to scale his marketing technology company to over 100 million in revenue in 9 years. He is now bringing his expertise to real estate.  Growth Vue Properties is a commercial real estate acquisition and asset management company. They work with various entities to diversify and improve their portfolios. In This Episode Patrick and Samson discuss the following: How the “value add” plan for multifamily is changing from just “renovate and increase rents” when you're looking to improve an investment Why bringing in new technology is the best way to increase the value of your investment How technology is changing even faster, from 20 years for the internet, 10 years for a smartphone, and only 1 for COVID to completely reshape the landscape What he thinks is going to happen with how long investors are holding onto their properties Why you shouldn't be betting on the market always improving and what you should be doing instead Whether you should be looking at multifamily investment as a “net zero” or infinite game What is going on with the economic correction from COVID and how it could affect the market

Wendell Hill is an Asset Management Consultant with Realty Value Advisors. He has helped real estate investors reach their desired outcomes, and has been an asset manager for 20 years. He has a lot of knowledge about the environmental impact of real estate and what it means for investors. In This Episode Patrick and Wendell discuss the following: Why ESG (Environment, Social, & Governance) should be a major part of any real estate investment planning Why you need to be able to measure and report your ESG impacts How it's not a problem that good ESG planning slows down the production and development Why each industry needs a unique ESG plan What the US government is doing to enforce and measure each company's ESG impact How property development may change as the market transitions to more environmentally friendly development How you need to be socially responsible for your development

Todd Wood is the CEO of Christopher Todd Communities. Although his background may have been in bread production, he gained valuable insight into business in the process. He is now taking these learnings and applying them to the real estate and multifamily industries and challenging the current status quo. Christopher Todd Communities is built around an innovative product: the single story rental community (SSRC). They take built-to-rent to another level, building complete higher-end communities of separate homes to rent. The new approach is now changing how investors and local government look at new developments. What the #1 complaint is from multifamily residents Why being pet friendly is so important to renters How SSRCs reduce friction for previous homeowners that are now looking to rent How exactly an SSRC compares to a standard multifamily property in construction, rents, costs, and more (and it's looking good!) How SSRCs are able to get approval from local government faster and encouraged to build more Why it's important to be different in any investment, including multifamily Why SSRCs are better than apartments or individual rental homes How quickly the momentum behind SSRCs has built up compared to expectations Why building a strong brand will make a bigger difference than a focus on operations

Patrick Antrim, Founder and CEO of Multifamily Leadership, Producers of the Multifamily Investment Summit, the Multifamily Innovation® Summit, the Multifamily Women® Summit and the Best Places to Work Multifamily® bring you the Wealthy Apartment Investor Podcast to help Multifamily Investors better understand Financing, Due Diligence, Proforma Deal Analysis, Syndications, Developments, and the Capital Stack. You will better understand the process and fees associated with Multifamily Investments. We help people that are winning in Multifamily win even more as we extract success strategies from top Multifamily Investors and those thriving in the industry and showcase them on our platform. We hope to empower people with the resources and knowledge to become a better Multifamily Investor. Family office and Wealth Managers subscribe to better understand the Multifamily Investments they direct. Investors with 1031 exchange north of 1 Million, Ultra and high net worth individuals, and those who experienced a liquidity event attend our events to protect investment capital. We help you understand the not so obvious that will give you the competitive advantage to attract and retain premier investor capital.

Patrick Antrim, CEO of Multifamily Leadership says he was trained by a developer, and they tend to have a long-term view of things. A syndicator might not bother to fix long-term problems, which affects the brand. Now, Tanner Bickelhaupt is starting developing work. Mark Taylor was the manager for the first deal Tanner Bickelhaupt ever syndicated.  “We kind of take things from different management companies. Each one has a different strength. But Mark Taylor with data in particular… it just can provide some clarity sometimes when things are out of skew,” said Bickelhaupt. (3:54) – Averages from deal points can get lost in the mix.  From the investor perspective, Bickelhaupt gave the example of LP investors who ask for a track record.  “They get it, but they're not really sure what they're looking at. Some companies will boast, ‘We've had a 30% IRR' – I'm just making that up, but a round number. But when you go through an you look, there's anomalies in there.” He'd rather track NOI growth. “I will look at deals, underwrite deals, and it'll be 10 million dollars more but the NOI hasn't changed. In fact, sometimes it's gone a bit different where expenses have gone up a bit. But because of the cap rate compression, they've been saved. So that can be tough.” (6:00) – Make sure you have a firm view of the project. Look at all the averages. 700 square feet for a unit isn't a universal measurement – it could mean you have a lot of hallways, or a lot of open space. (7:18) – Just don't count on average numbers. “We joke all the time with the brokers, it's always roses,” said Bickelhaupt. “There's always a story, whether it's mismanagement or what have you. ‘They're so low, for no reason!' There's always a reason.” (8:00) – Right now, brokers are pumping out Broker Opinion of Values (BOVs) all the time. That's the how the Tanbic Company can fish for off-market deals. “They can't even necessarily talk about averages anymore. It used to be you'd get skeptical on a BOV – if the high BOV was too high, that could be a bad experience,” said Bickelhaupt.  Bickelhaupt suspects brokers have been smothering their BOVs for a few years.  (9:45) – Of course, you also have to think about unit size. A lot of brokers will churn out smaller units because they can. Renters are just looking for what they can get for their total available income, not necessarily price per foot.

Using Data to Reduce Bias in Real Estate John Carlson, President of Mark Taylor Investment Management   John Carlson is responsible for strategy, operations, new business development, and property portfolio performance for over 19,000 luxury apartment units across Arizona and Nevada for Mark Taylor. Jeff Mark and Scott Taylor founded the company in 1985. Today, Mark Taylor is the largest multifamily developer in the state of Arizona; the company has built more than 20,000 units there.  Decades of Data (1:44) – Today, about 82% of Mark Taylor's apartment units are managed by third parties. “What you have to know about Jeff and Scott is, a lot of their decision making over the course of those three plus decades has been translated through the lens of data. A lot of it through Scott's background – he's a CPA by trade,” said Carlson. “He really had to, from the ground up, understand the fundamentals of Phoenix, understand how the metro ticked from jobs to population growth, to what markets mattered from a multifamily perspective.” He used that background to build a data set that's now grown for decades. That, combined with intuition, has led to their success over time. (3:40) – The market is as hot as ever, and Phoenix continues to be a huge target.  Before 2008, Mark Taylor mostly went for garden-style communities. That's about 15 units to an acre. After the recession, they started to elevate different styles. They started building upward, so now there are about 40 units to an acre.  “We talk about the arms race to amenities,” said Carlson. “You look at the fitness centers, the amenities, the common areas are tremendous. So if you compare multifamily product to single-family home product in 2008, it was significantly different. Today, I'd argue that you can go to any multifamily deal that's been built ‘15 and beyond and argue the finish levels are comparably better with amenities and locations you want to be in from a lifestyle perspective.” (5:35) – Mark Taylor has the benefit of being able to look at things through the lens of developer-owner and manager. (7:24) – Mark Taylor believes deeply in the Phoenix metro, even when the market tanked. They also feel they should always strive to be better. “We really focused on how could we be better and create a product, a management, a lifestyle, that residents would want and seek? We focused a lot on that aspect at that time, and truly believed the market would come back,” said Carlson, adding that Mark Taylor has been around for so long, they'd seen crashes in the past and knew what to expect and how to handle things.  (8:45) – Why Phoenix?  “We think about Phoenix as having a large funnel over the metro of capital investments or cash and it's spitting out chunks of money. You just can't find enough deals. There's so much appetite and demand for so many reasons,” answered Carlson. One thing to consider is why people are leaving the markets they are and heading to Phoenix instead. A lot of people are heading out of coastal communities or areas that don't have enough job growth, and they want to be in the Sun Belt.  Phoenix has one of the top three STEM schools in the nation, and the advancement in education can propel

Protecting Investor Wealth During Market Downturns Tanner Bickelhaupt, CEO and Founder of the Tanbic Company   Tanner Bickelhaupt has been investing, developing, and looking at new deals for the full cycle. He owns and operates a management company and has been successful across several asset classes in different markets. He's also made it through different economic cycles and come out on top.  Just Because the Market is Good Doesn't Mean You Don't Need to be Cautious (1:30) – Right now, the markets are at a high. It's normal to talk about how to protect investor wealth during a downturn, but you can't forget about precautions during the good times.  Bickelhaupt says some syndicators are in the mindset that they have capital and want to spend it right now in a get-rich-quick scheme. The healthier viewpoint is just to invest and preserve capital.  “Basically, how can I have enough runway? Because the things that never happen, happen all the time,” said Bickelhaupt. The pandemic was the perfect example of that, but it proved people always need to live somewhere. “We like what we can control, but we like the peace of mind knowing we're owning real good real estate that's being operated really well and we don't have a lot of surprises.” (4:20) – Growth for investors is very aggressive right now. Cap rates are the lowest they've ever been. People are buying up C and B class properties. There's a huge demand along with a slowdown in ability to build, so right now it seems like things are only going to continue to grow. That's especially true in the markets Bickelhaupt operates in, like Scottsdale, Arizona.  “The brokers will tell you, I've cost myself. I started locking in debt 2 years ago, 10-year, with the anticipation that rates are going to go up, but I just liked the fix that it provided a large fluctuation of cash flow,” said Bickelhaupt. “I would never even talk about bridge debt 2 years ago, but the bridge debt terms in that market have changed so much that we do talk about it. We're looking at a deal right now where that might be the play. We feel there's some low-hanging fruit that we can change stuff very quickly, we do not want to lock in that long-term debt but I will lock it in as quickly as possible. So the business plan would not be take it, flip it; it would be ‘Let's create the value then go put more debt on it, and we'll keep it.'”  Bridge financing can increase investor returns, so syndicators like it. You can hit 85% LTV, compared with a Fannie-Freddie set up where you'd get 65% or 75%.  “I really have to believe in the up-story to do that. Those deals are still out there, they're just harder to find.” (8:44) – Coming out of the pandemic, Bickelhaupt set up in an office in one of the apartment units Tanbic Company owns in North Scottsdale. Tanbic focused on what it already has and focused on rent collections.  “I think we had a lot of investors watching. We sent quarterly distributions, we didn't miss a cash flow. Now, we were down 30-35% on what the expectations were, but I think a lot of groups said, ‘Hey, we're pausing all distributions, we're going to stockpile cash' and that's a great strategy. I'd be lying if I said we weren't thinking about that. But, we were sitting on plenty of reserves.” Tanbic Company cash flowed then spent that on capital improvements. 

Multifamily Outlook Danny Court, Partner and Senior Economist with Elliott D. Pollack & Company   Danny Court is part of a group of economists focused on economic forecasting and how that plays into real estate. For multifamily, Elliot D. Pollack & Company is more involved with the planning and development part of things – scoping out sites, navigating regulatory or political issues, helping with zoning conflicts. They'll get involved in government if necessary.   Data for Multifamily (2:10) – Court's team has found that the economy is recovering very well, which he attributes to vaccinations. There's a lot of pent-up demand, and plenty of people who kept their jobs and built up income but didn't have anywhere to spend it. Overall, there's a great outlook for the next few years. “We didn't have a real recession,” explained Court. “There was a recession, we lost a lot of jobs, but this was not because of the economy, it was a government-induced shutdown for Covid-related pandemic reasons. The economy was in really good shape at the start of 2020 and had to forcibly shut down, and so again, we had those dynamics, no imbalances in the economy going into it, and now everybody just sort of waiting until they can fully recover and recover all those jobs. So there's lots of pent-up demand, lots of money waiting to be deployed.” (4:30) – So how do you know when the economy is in good shape? Objective data sources, and a wide variety of them, will help you get a good feel for what an accurate consensus is. In multifamily, real estate focuses on local markets.  (5:40) – Inflation is a concern right now. Short-term, we're seeing the highest numbers to have come forth in a while. There is some hope that will subside, but Court says it's an important indicator to keep an eye on, since it affects interest rates. Inflation matters for downside risk, even though all other indicators have been quite positive. You can track inflation through the CPI or the Fed. The number is publicly available and published frequently.  “There's an overall inflation that adds some more volatile products in there, and then sometimes they'll strip that out and say, ‘Here's base inflation' and things like that.” (7:45) – It's also a good idea to keep an eye on jobs numbers. Right now, the unemployment rate is misleading. As long as jobs are growing, we should be good. “When people stop looking for jobs, they're removed from the unemployment rate,” said Court. “So you see a lot of jobs being created but then the unemployment rate stays the same. Why is that sticking up so high? It's because more people are looking for work, so they're added back into the unemployment rate.” That's tracked through a survey.  (10:15) – Some real estate sectors are in a flux. Brick and mortar retail and physical office space are the prime examples. “The rule of thumb used to be 250 square feet per employee, private offices, things like that. Then it started trending down toward closer to 115 square feet per employee. That's an open office concept,” said Court. “This pendulum has swung to, ‘Go ahead, if you've got an internet connection and we've got our database in the cloud and our files in the cloud, you can fully work at home.' We've now come to understand that technology has caught up. A Zoom mee

Leveraging Strategic Relationships Tanner Bickelhaupt, CEO and Founder of the Tanbic Company   Growing a Business Outward, Not Upward (1:24) – When first bringing an attorney onto Bickelhaupt's team, he says he considered things like deal structures and experience. Tanbic's attorney and CPA, as well as his management team all contribute something specific. He says outsourcing things on the operations side has been more affordable and has lead to better sharing of ideas. “You can have a really big team by having relationships where they're on the payroll but we're only paying for what we're using specifically. Attorneys are very expensive, CPAs are very expensive, and it's just trying to be as efficient with the dollars as possible. That all flows back to the investor anyway,” said Bickelhaupt.  (3:16) – Patrick Antrim, CEO of Multifamily Leadership, brings up that growth isn't about headcount; business growth can be seen through cash flow or through other results. “The biggest competitive advantage is that it allows everyone to do what they're good at,” said Bickelhaupt. “So I'm not focused on the legal or on the operating side because we can scale up and add 5,000 units in a week with a back-end office, or we could scale down and the company maintains the same level of margin. That means that all of our fair housing is already in place there, so we're not focused on that… We get to focus on what we like to do, and that's working with our managers, leasing apartments. And I think that our managers now, even though their job scope is perhaps a little bit bigger, it allows them to be a little more hyper-focused most of the time on what's important, and that's leasing apartments.” (5:30) – “Do you see benefit in hiring the ‘who' that knows the ‘how' versus trying to become the expert,” asked Antrim.  “That's the only way you can buy experience, is to partner,” answered Bickelhaupt. He says that's true even at the broker level. He explains, the broker that gets the listing will usually remain loyal to the seller, since that's where the broker gets paid.  Antrim points out that those brokers can give you intel beyond what an internal team can provide. How Long Does It Take to Develop Those Relationships?  (7:30) – Building relationships is tough; everyone is busy. The length of time it takes to form them depends on size. “If someone just says, ‘I want to do an apartment syndication and buy 200 units, Class B or Class A right now in Phoenix,' it's going to be really hard to get a broker's attention if he doesn't already know you. They have a plethora of buyers. It's a seller's market right now. But if you're new and you want to buy 20 units, there's brokers out there that specialize in that. So it's just understanding what you want to do and what your capabilities are,” said Bickelhaupt.  Establishing credibility could help you with the lender. But keep in mind, the broker has probably already seen the deal you're approaching about, and has already chosen to pass. “When I first got started, that was the difficult, uneasy feeling of, ‘Why am I seeing this?' Because the broker is going to be loyal to the customer that's bought a lot of deals from him, rightfully so,” said Bickelhaupt. “So it's just more work, and it takes more time.”

How to Value Real Estate, Cap Rate vs. Return on Cost Tanner Bickelhaupt, CEO and Founder of the Tanbic Company   (0:50) – Price for unit matters right now more than it ever has, Tanner Bickelhaupt of the Tanbic Company says. People tend to lower their rent in competitive markets, but then it becomes a competition over who can go the lowest. “Specifically where we're focused right now is, we believe that when everything is trading and it's constantly just raising the price per pound, what people are buying for, what that's also doing is, it's locking in their rent,” said Bickelhaupt. “Because it's locking in these debt-service-coverage ratios.” Finding land is a big deal right now, though underwriting hasn't let up. Tanbic will look for tertiary markets that people would be interested in living in, but where housing rates might be sky-high, implying that people are more likely to be renting. “If we're in a spot that allows people to participate in the amenities, whatever that city has, then we like that.” Tanbic Company works with a lot of developers, each with its specific niche. Internally, they're looking for product they may never sell. Moving forward, they want to work on creating a competitive edge even further down the line. Looking for Land Deals (4:52) – It wasn't easy to decide to develop in secondary markets. There was no data for the area. Luckily, they ended up underestimating the market.  (6:30) – “We have made a lot of offers because I didn't think a lot of people were tracking this cap rate delta – Class B to Class A. So all of the sudden, I'm like, Class As to buy. Because eventually, the equity is going to figure all this out and they're going to all go to the Class A. They're going to compress the Class A cap rate. That was our guess. So these developers that were in construction – they're selling deals on performer rents right now,” said Bickelhaupt. “I would argue that their performer rents are low.” Bickelhaupt says there are merchant-type builders who build with a high velocity who are slowed down by trades; the Class B to Class A isn't as exciting because there isn't as much to see in the first two years or so, but they pay off if you capitalize them correctly. (8:57) – Bickelhaupt likes investors to be involved the whole way through. Some will communicate quarterly about financials and that's it. In some cases, investors will get in without reading the business plan, but really, you want them to be involved with the story. Additionally, you have to be nimble. (11:48) – It's important to stay active in development and management meetings. Bickelhaupt says building relationships and partnerships with people who have proven track records and accumulated knowledge has helped him immensely. Those relationships have to be able to withstand tough times. “For me to go to a market and do a development deal would be difficult, even though we were in discussions with some GCs in different markets. The level of trust isn't quite there yet. Because what's happening is, there's so much development, some GCs would tell you like, ‘Gosh, we're so busy, we have such a pipeline, we don't even know what to do.' They get plans and feedback saying no, they mark them up 30%, they take it back and the developer is like, ‘Cool, let's do it.'” (13:15

How to Be an Apartment Syndicator Thomas Morgan, Attorney with Sherman & Howard Tanner Bickelhaupt, CEO and Founder of the Tanbic Company   Tom Morgan works with apartment syndication and funds for Sherman & Howard. He's been there for about 8 years, after serving in a similar practice for 15 years prior. He has a background in taxes and securities.  (13:20) “I draw on that to structure the transactions, because they're both intertwined, because of how you structure the cash flow, the deal, the flow of funds, and then also how you make it complaint to raise money from the investors,” said Morgan.  His current practice focuses on capital markets, securities, finance, real estate mergers and acquisitions, and corporate and transactional law.  Tanner Bickelhaupt also works in acquisitions and says Morgan is his go-to guy anytime he's involved in that process. Syndication (:50) – Tanner Bickelhaupt says once Tanbic decided to get going on a project, his attorney, Tom Morgan, was his very first call. Once he's set up the trust fund, he sat down with his lawyers to figure out the path forward, including things like who would be the investor and what disclosures and other forms are needed. (2:47) – Morgan says getting a company's goals and focus in line is a crucial first step. Consider whether you're looking for a value add, low-income housing, whatever it may be – there are many different types of multifamily investing. Also consider how many investors will be involved and in what capacity. Lender financing is another piece of the puzzle to be solved. “Is it a traditional Fannie-Freddie, a CMO loan – which Tanner loves, I know – they're much more complicated, with many more fees and restrictions involved than your traditional Fannies and Freddies. And I think I've already said, but where's the asset? What is the asset? Do you have it already? Are you planning on trying to raise money then go out and buy something? Are you looking to do one property or multiple properties? All those questions are the initial mix of things you'd need to know to see where to go with the project,” said Morgan.  (5:50) – The team is very important. Morgan brings up that there are all sorts of disciplines. One is securities regulation, which is Morgan's specialty. That's focused on compliance, disclosures, filings with the SEC and various states, and the finance portion of dealing with lenders and loan structure. Then there's the straight buying of the real estate and getting to work on a construction project. Buying an existing apartment complex is a separate discipline.  (7:50) – Bickelhaupt says this is the one spot you can't cut corners. It's important to be prepared and put a good team around you. Morgan says he'll see people cut and paste from samples without understanding what goes into it. Lots of people bite themselves in the foot that way.  (11:14) – If you aren't in compliance with securities laws, you're basically guaranteed to fail your investors. Investors can ask for their money back if you don't present the right information, if you omitted material information, or if anything was misleading. (14:35) – Most of Morgan's work involv

How the Capital Stack Works in Private Real Estate Tanner Bickelhaupt, CEO and Founder of the Tanbic Company Deal Complications (0:40) – The simple question of who owns the deal can prove to be complex. Bickelhaupt chimed in with his own experience. “We picked a buyer and I was sent the deal for equity from another person that was syndicating into the syndication of the deal. If you think about that circle. So I'm thinking like, ‘Who's that equity and how many times are they getting promoted?'” Bickelhaupt explains, typically an investor in an LP pays a fee. If you're paying to more people than you anticipated, that fee multiplies. Understanding the organization of the LLC will help you understand risk.  “The business plan will show you the return parameters, but it doesn't show you the risk is getting greater as you go or as it changes.” (3:25) – Sometimes people figure the value doesn't matter if they aren't a seller. That's only fine if you're hitting your loan covenants. If the value changes on your deal, the lender can start getting upset about shifts. “Most deal syndications have a PPM for your protection. It protects the investors as much as it protects the sponsor,” said Bickelhaupt.  Bickelhaupt brings up that the people he works with have huge capital. It's important to understand how much money they're spending relative to their income. Is it play money that they can move around and not stress about? If it's a chunk of their actual base money, then it can make things tense.  Also keep in mind what everyone's goals are. What are you trying to do, when do you need a return?  (7:15) – Right now, there's a property the Tanbic Company is looking at where the owners had it for 12 years and haven't touched it. The location is great, but amenities need to be revamped. Plus, the demographic around him is affluent. The value would increase quickly; it would take about a year to revamp everything and bring in a new tenant base. If they're successful, they would go in, get the rents up, enter a Fannie and Freddie type deal rather than sitting on debt.  Resources (9:50) – Bickelhaupt deeply believes your relationships with others are crucial. He builds his team as big as possible, figuring that every person involved in a resource. That way, if he sees a deal he likes, he can send in people who are experts in all different aspects of the deal. Bickelhaupt says building his team was the very first thing he did when he started. “In this stage, you can put together a really big team that's not on your payroll until you do a deal. That's an advantage. We outsource a lot. And it keeps it competitive and for all the stuff you're doing with innovation, a lot of those companies are what I would call ‘partners' of ours. We rely heavily on them. Now, we have an internal team that knows what to do with that data and knows what to do with that stuff, but there's so much stuff in the multifamily space now that can allow you access to all of it.” (13:10) – Right now, the big players are getting involved with debt funds. There's been so much depreciation, they're capitalizing to keep their leverage up. Those have different risk parameters.  

Horizontal Apartment Developments Steve La Terra – Chief Executive Officer of TerraLane Communities   Steve La Terra started TerraLane Communities in 2019, aiming to build detached one-story one- and two-bedroom apartments. The one-bedrooms are paired within one structure, as are the two-bedroom units. These are not designed for family renters; TerraLane is renting to apartment dwellers that fall primarily into two categories: the Millennial renter, and the moved-out empty nester. The Learning Process (2:40) – La Terra came from the analytical side of things.  “What I've learned most is that this product that we've become a part of and was created by others has generated a spark in the market that no one anticipated – including me,” said La Terra.  He was doing analytics for people involved in this business and saw an opportunity. He jumped on board as a developer and operator. “In the last two years, what I've seen has been remarkable,” said La Terra. “The interest, not just from the investor community, but more specifically from the renter community, has been absolutely surprising to me. Pleasant, of course.” (3:45) – La Terra calls the people going after his apartments “premium renters.” He explained, they aren't going after luxury places, but they do have a little more income. All of the units have their own private, fenced yard. They all come with dog doors. It's meant to feel like a single-family home, but it's an apartment in reality.  “It looks like single-family and it builds like single-family,” said La Terra. “It's very efficient to build these units, but they operate and are capitalized like an apartment.” Another thing that plays into the feel of the community is that they have comparatively very few units within each community. They tend to look at suburban areas. They look for transportation quarters nearby with quick access to highways; a good job market within a ten-minute radius; and proximity to restaurants and bars and the like.  “What we don't care about is schools,” said La Terra. “And I don't mean that flippantly – we'd love to be in a great school district, it's just not one of our primary underwriting concerns. Because again, we have very few children in our communities.” (7:00) – Finding investors is a chore. These communities take up a lot of space and thus are very expensive, often clocking in around $50 million per deal. That means a lot of that money has to come from partners and equity. “The way we did it initially is, we had some quasi-institutional partners that were interested in doing this business. But their partners – the true limited partners that have the big checkbooks – didn't want to do it.” The institutional markets when they first started up were confused by the projects, so they would over-price the risk of the development.  Because of all that, La Terra brought in someone with a high net worth. Investors like that can go off their gut. He was open to extrapolating. He believed in the project when they first started, invested heavily in the first three communities, and is still a partner now. (10:23) – It isn't necessarily too early to tell how things might evolve. TerraLane collecting data every single week to mak

Financial Engineering Traps Investors Should Watch Out For Tanner Bickelhaupt, CEO and Founder of the Tanbic Company   Patrick Antrim, CEO of Multifamily Leadership, brings up that timing of money coming in or things like assumptions and expectations can create gaps. Internal Rate of Return Can Be Manipulated (1:05) – Bickelhaupt says he used to put IRR in his projections. “If anyone really fully tells you they understand IR, they're either in finance or whatever. So basically to simplify it, it's the time value of your money. So the way you can manipulate that is either the money of the time. Those are the valuables.” Check on things like whether the equity is going in at the exact same time as the rest of the capital.  Boosting IRR can raise the cap rating. A group can raise debt and have lines of credit. They'll buy the asset and use certain debt for the value-add things and burn through that, then they'll call in other capital. If they held a deal for two years and then manipulated things for a year; they can call the equity in for a year and a day, then sell things and the numbers are run as though that equity has been there the whole time. (3:30) – Just understand the risk parameter. The IRR is a real number. The problem is, the investor might create expectations based on that number. “I'm putting equity in, but what if the market turns. We're overpaying for this deal,” Bickelhaupt provides as an example. “You just have to understand when and where your money is going, where you fit into the deal, and if you're comfortable with all that, then great. But there will be a time, who knows when, when there will be a turn. And the last person holding the bag has the equity.” (5:00) – Loan covenants came up a lot during the pandemic. There's a debt service coverage ratio and each lender will write a provision that if you fall below that ratio, it triggers an appraisal. Credible groups will have reserves with debt service coverage ratios.  (6:35) – Antrim brings up that things are moving fast right now because people are excited about investing. Everyone wants in. Bickelhaupt points out that people get the PPM, which will tell them ways they might lose their money, but it also brings up fees, where you fall in the capital stack, the lending terms, the rate, and more. It serves as a blueprint. Bickelhaupt warns, there will be things in there that will make you uncomfortable, but it's important information that might not come up in the business plan.  Questions to Ask (8:20) – Bickelhaupt says to start simple. “Oftentimes, people will see the business plan. The business plan's going to show growth because there's NOI growth. I haven't seen a business plan yet that says, ‘We're going to buy, cap rates are going to compress, and we're going to sell and it's going to do nothing.' I'm sure that's happened, but nobody's putting that on paper. So it's understanding how they're going to grow the NOI.” If you're an investor, learn the story and make sure you believe it. Bickelhaupt advises that any and every investor should start with the NOI, then walk through the NOI growth. Don't buy everything that's in there, ask quest

Apartment Innovation Strategies David Haldi, Founder and President of CredHub   CredHub is a rental payment reporting company that helps property managers reduce delinquent payments and add new revenue. David Haldi is the Founder and President of this company that hopes to help investors get the money they're owed, while helping residents.  “We kind of have a program where everyone wins,” said Haldi. “The resident wins because they're finally getting credit for their largest payment: their rent. We have 52 million Americans today that are credit-invisible. So we've developed a system that's very automated that extracts the rental payment data and we deliver it directly to TransUnion, Equifax, and Experian. So it can increase their credit score on average 20-70 points.”  The tech includes a past-due revenue program that encourages people to pay on time. CredHub also chimes in ahead of the collections process. People will want their delinquent payment knocked off their credit score, so they deal with things before a collections agent has to get involved.  (2:30) – Patrick Antrim, CEO of Multifamily Leadership, points out that people view different bills with different priority levels. You'd think having a roof over your head would be your number one focus, but people are more likely to pay their cell phone bills first, since there are real and immediate consequences if you don't: your phone stops working. Haldi provides an example of one of his renters who hasn't paid rent, yet somehow has a brand-new car. With an eviction moratorium, there isn't much property owners can do. With CredHub, late payment can affect their credit. (4:00) – Something like this can provide a huge competitive advantage for investors. You're rewarded by a boosted credit score if you rent with a property that uses CredHub and you pay on time. “It's a huge marketing tool,” said Haldi. “We have certain clients that promote in the advertisement that they report your rental payments to the credit bureaus. One of the things they've found is that they get a better, qualified tenant who applies. Because if they're going to game the system, then they're not going to apply for residency at that property.” Rent is increasing these days, and your ability to pay should be reflected on your credit score. Haldi says people's credit score goes up an average of 42 points with CredHub, which is a huge advantage.  (6:30) – It's good to occasionally test assumptions about standard operating procedure. If you think about why you do things the way you do, the answer shouldn't be “because that's how it's done” – make sure it's really the best practice.  For state's that have eviction moratoriums, you can't report negative impacts for not paying rent. No problem – CredHub can report a “neutral” impact in the meantime, then when the eviction moratorium is lifted, CredHub holds people responsible for not paying. It happens automatically.  “We can back-date up to 7 years of debt, and in order to get it removed, you get to put a forbearance plan in place and they pay you, but we will continue to report that as long as they owe the money,” said Haldi. Haldi says it's an easy way to get people's attention. “We had a client in Texas recently that had $200,000 in outstanding receivables, bad debt over the last