Welcome Back to How To Scale Commercial Real Estate Podcasts, Today we are joined By Hendra Tambunan. In this episode, we're discussing the challenges of selling a business or property, shifting from a transactional mindset to one that focuses on cash flow. We also discussed how to overcome common challenges, such as zoning issues or prohibitive pricing. Hendra has been involved in Multifamily in multiple projects, he is an expert in data architecture and design, leading the migration and deployment planning. He Has a solid background in analyzing and developing systems, database implementation, and data integration across various database platforms. Let's Join Hendra and Listen to his Journey! [00:00 - 06:16] Opening Segment Hendra Tambunan has been involved in multiple multifamily projects with over 1500 doors as both a general and limited partner. He is involved in commercial grade short-term rentals and he also leads the San Francisco chapter of multifamily. [06:17 - 12:01] Joint Venture: Looking for a stable, high-return industry, like farming or manufacturing Some people looking for an MSA may want to look into 400,000 or above or 250,000 above. It's not going to be one size fits all when it comes to criteria for an MSA. Some areas may be focused on farming while others may be focused on manufacturing. There is a market cycle and everything is cyclical. EV electric vehicle manufacturing is pretty hot, but who knows 10 years, 15 years from now might be different. [12:01 - 17:59] How to Sell a Bed and Breakfast that's Already a Short-Term Rental How to sell a property, focusing on the idea of converting it into a short-term rental. One unique challenge faced was getting the property zoned for short-term rentals, as it is already a commercial zone. By telling the potential buyer of the intentions of the property, they were able to get buy-in before the hearing. [18:03 - 22:20] Closing Segment Reach out to Hendra Tambunan Links Below Final Words ----------------------------------------------------------------------------- Tweetable Quotes:“ One thing that people forgot is what you wanna sell is the experience.” - Hendra Tambunan Connect with Hendra Tambunan by following Him on Facebook by visiting their website at www.ideaboxcapital.com. You may also call him at (510) 270-2920 Connect with me: I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns. Facebook LinkedIn Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on. Thank you for tuning in! Email me → sam@brickeninvestmentgroup.com Want to read the full show notes of the episode? Check it out below: [00:00:00] Hendra Tambunan: when I invest in multifamily is always gonna be creating a clean and safe environment and affordable. Those aiming for a worker that can never afford it, but doesn't mean that we're gonna take advantage of them, but we are trying to create a clean, safe, and affordable environment for them while we're still able to providing a good return for our investor as a partner. [00:00:33] Sam WIlson: Hendra Tambunan has been involved in multiple multifamily projects with over 1500 doors as both a general and a limited partner. Additionally, he's involved in commercial grade shortterm rentals and he also leads the San Francisco chapter of multifamily and more Hendra. Welcome to the show. Thank you for having you Sam. Hey, the pleasure's mine Hendra. There are three questions. I ask every guest who comes in the show in 90 seconds, or last, can you tell me, where did you start? Where are you now? And how did you get. [00:00:58] Hendra Tambunan: Well, for me, I started with like, everybody else started with single family home start seeing and realizing it's not scalable fast enough. Start looking into things to ways to scale up and always going back to commercial motel family, because that's a part of the force appreciation that I can go deeper later on. But that's what my main focus right now is basically focusing on. Commercial great multifamily. And in terms of the scaling up, well, it's a team sport. Well, the, you basically team up with people and that's how you scale up and that's make you scale up a lot faster in this kind of asset class. [00:01:35] Sam WIlson: How long ago did you make, cuz I know, I think at one point you were investing in single family. Wh when did you make that switch from single to multifamily? That [00:01:43] Hendra Tambunan: was like a three years ago. Okay. [00:01:46] Sam WIlson: Yep. All right. And it's been a wild ride in multifamily, these last these last three years, we've seen incredible price appreciation. We've seen incredible rent growth. I mean, how are you guys finding opportunity in the midst of a very competitive environment? [00:02:02] Hendra Tambunan: So in that kind of market cycle, that says a lot of thing that people don't realize that market SI we are in a different micro cycle. Given time of the year. You gotta employ a different strategy for me. I live in California. There's no way for me to find a deals. However, I have a lot of capital through my network. That's how I partner up with operator and that's how we find and partner up and then take down larger property that. And that's how we able to scale up going back again, a team up and working together. [00:02:37] Sam WIlson: That's really interesting. So are you working with multiple operators in multiple markets? [00:02:45] Hendra Tambunan: Not just any part, any market. The way I started, I pick one market that I know that is gonna be growing because of the fundamental of the population growth, job growth, multiple industries, and there's enough demand in that market. That's how I pick a market to begin with and work with operator over there. That's pretty stable and really ready to take it. That's how I able to get into Dallas corporate market three years ago. [00:03:14] Sam WIlson: How so? So let's think about some really tactical steps someone could take if they wanted to follow in your footsteps. You tell me this, Hey, find a market that has the right demand features that has the right demographics that you want in. It has the right job growth, population growth, all those things. What's someone's next step. If they wanna break into a new market, how would you recommend someone going about finding and locating that operator partner? [00:03:40] Hendra Tambunan: Yeah. Well, I do believe with the intentional relationship. Obviously a lot of people like networking and a lot of people, especially when they started in commercial multifamily space, they tend to attend every single meet up every single networking, zoom, everything like that. That's great. But be intentional though. Do your homework, what are you looking for? What kind of customer base for your multifamily investment gonna look. Because as that not every multifamily is created equally. Are you aiming for a blue collar worker? Are you looking for a lap star, renter be intentional? What you are aiming for now, if I'm saying that I'm looking for a lap star renter, but somewhere in the suburb of Montana, it will never gonna be working out because they don't really have anyone like. But if you do your homework, you understand what you're looking for during the networking meeting, you state your intention, like, Hey, I'm looking for an operator in such and such market. That's focusing in this kind of customer base. Then you are most likely someone you met not doing it, but they might know someone who might be doing it. That's how you create that relationship established over. Right, [00:04:55] Sam WIlson: right. Yeah. I mean, cuz that's that's it is outta the gate, is it is networking, but then defining the criteria of what it is you're looking for, which brings yet the next question, which is how do we define that criteria? What did you do? [00:05:08] Hendra Tambunan: Well, for me, I'm looking for my mission and when I invest in multifamily is always gonna be creating a clean and safe environment and affordable. Those aiming for a worker that can never afford it, but doesn't mean that we're gonna take advantage of them, but we are trying to create a clean, safe, and affordable environment for them while we're still able to providing a good return for our investor as a partner. So if you see it, this will be create like a win-win win solution for everyone. That's the intention of when I jump into commercial multifamily space. So with that kinda understanding, I know that I'm not gonna looking for like, Property in San Francisco or LA, because that's a little bit different market, but I'm looking for a bread and butter where there's a manufacturing heavy industry that people can never really, really afford a house, but they still can be provided with those quality of living. So that's kind of the market that I'm looking for. It could be the Sunbelt belt could be in the suburb, the Sunbelt belts, and then also looking for the population growth and job growth. Some people looking for MSA, like maybe like 400,000 and above or 250,000 above, that's something that you have to do your homework on because everybody criteria is gonna be different. And then looking in the sector of the industry that you're of your target market too. It's not gonna be one size fits all. Some area may be focusing on farming. Some area may be focused on manufacturing and again, that's part of the homework that you have to do. How stable is that industry? Cause like, just like, market cycle that we are in, everything is cyclical. Right now, EV electronic electric vehicles manufacturing is pretty hot, but who knows like 10 years, 15 years from now. Right. But farming for me is pretty stable. Right. But again, farming's also come with some, cycles too that who knows. So maybe lab food being created, like beyond meats or something like that down the road. I don't know. Right. But again, you gotta be, forward looking in some of industry that you're really focusing on. [00:07:15] Sam WIlson: Yeah, absolutely. Absolutely. Tell me this. I know you and I talked about this a little bit off air. You guys are doing something outside of the syndication model. What are you guys currently doing? I know you're moving into markets. You're selecting your operators. You're involved in multifamily, but you're structuring the deals a little bit differently. What are you guys doing? [00:07:34] Hendra Tambunan: well, my, my main focus has been shifting a little bit. I'm still doing some syndication, but also start shifting into joint venture joint ventures, little rather than like syndication, it's still taking on commercial multifamily but in the case like joint venture, you, everybody is participant is an active participant in the deals rather than just like passive and active, like typical syndication does. So in this case there's some opportunities in this current market cycle, given that higher interest rates, still that for smaller property that we can take it down. And the idea is just like everybody just chip in. And then that way that we can keep the property for a longer term. That's the only intention, rather than like looking for 5, 6, 7 years. Now, we are planning to keep it for a longer time and then eventually passing it to our next generat. Which is our kit. So that's the only reason that we, we do it that way rather than a syndication model. [00:08:31] Sam WIlson: So I guess that requires, I would think, one high net worth investors, that can bring the capital to the table. Is there a deal size that you're working with that fits your buy box for a joint venture right now? [00:08:45] Hendra Tambunan: That's correct. Yeah. There's gonna be some high network that could be acting. Like I said, KP there's also obviously. All the, your partners who dealt with the, in the syndication previously, they get some extra equity that they can put in together. So thing about it, look is shifting it from syndication, which is considered like a transactional. Now you moving it for interim, like the form of equity that you keep doing it, and then you can do cash refi at the property value grows. Right. And, but you keep the property for the, in meanwhile, up to that, do you guys [00:09:17] Sam WIlson: structure the, Can find you can find the right word, but do you guys do this with a waterfall? Do you guys set it up like a typical preferred return with a 70, 30 split? Like, or is there are the terms of the deal very different with a joint venture? [00:09:31] Hendra Tambunan: Typically there's gonna be some split for those who are gonna be in the beginning. Who's helping with the bringing the deals, but the rest is just gonna be Perada based on the equity that you put in. Got it. [00:09:46] Sam WIlson: Got it. That's really interesting. Why did you guys decide to go to that model as opposed to syndications? [00:09:53] Hendra Tambunan: Well, there's some opportunity there in the market right now, given the higher interest rate, they're still gonna be mid-size units that still able to give the return that you're looking for over a long. So for us that's what we are liking. And then plus we also like to keep it for a longer term that pass it to the next generation. Right? It's not the intention. Like it's not just like, Hey, a hundred unit, 200 units. It sounds good. But for me, you gotta balance that in portfolio, rather than like transactional. You also wanna keep the equity to grow. That's kind of, again, it's like rebalancing the portfolio. That's the intention. Got it. [00:10:32] Sam WIlson: So, so more or less, this is for you guys an opportunity to say, Hey, look, we're not gonna do the typical five to seven year disposition. I wanna buy this, I wanna hold it. And so you have found some other like-minded investors that said, Hey, you know what? We wanna just hold this in perpetuity or as long as it makes sense, there's no point in, the proverbial, selling the milk cow. No point in doing that. So let's all just go in with a higher check amount per investor. You probably have fewer investors, I would imagine, right? Yeah. [00:11:02] Hendra Tambunan: That's definitely what's happening. That's the, that's actually the disadvantage of joint venture, right? Because obviously rather than like, you're getting like X amount of investor that playing passively now you have only had limited pool number of partners that everybody have to work together. For a smaller project too. Right? [00:11:20] Sam WIlson: How long from conception to actually getting a deal across the finish line? Did this idea kind of come into your head where you said, Hey, look, I wanna have a joint venture. I need four or five partners, higher net worth individuals. How did you get that done? [00:11:32] Hendra Tambunan: So actually this is happening like about a couple of years ago, we got a, our 44 units that we partner up together and we stopped looking at, and obviously everybody's still doing Sy syndication, but the more we look into it, like, Hey, it kind of makes sense right now because we kind of enjoy it. We do a full cycle on that one because we do a Casa app refi and we see the model already. And then say like, this is kind of nice. Because now you'll get refi cash out. You've got your cap capital back. Now it's still producing a cash value. You're looking for, imagine if you keep doing it again and again, hash and repeat, right? That's that's pretty much the model. That's something that you keep, like what you said. The golden goose is still there and keep producing golden egg for you on an annual basis while you ticking in out without killing the golden goose per se. And just do rinse and repeat. Right. [00:12:25] Sam WIlson: That makes a lot of sense. And that's something I've often struggled with in the syndication model, which is, we're doing that in the RV resort space right now where it's like, my gosh, these are enormous cash on cash returns. Why are we discussing selling this? I don't understand when it produces an income. It's hard. It's really hard. And that's been probably a growth for me as an investor is shifting out of that transactional mindset, which even in a five to seven year old is still kind of a transactional mindset into getting into the cash flow. And that's Robert Kiyosaki's whole thing is, get the cashflow quadrants, like, get into the place where consistent income comes in every month. And that makes a that makes a huge difference. One thing that we had talked about maybe was even there in your bio. I don't remember. Yeah, it was com commercial grade, short term rentals. That's something else that you're involved in. What is a commercial grade short term rental? [00:13:19] Hendra Tambunan: So one thing that we did my partners not our partners in Midwest they found an Airbnb, sorry, bed and breakfast. That for some reason, used to be operating as a bed and breakfast and somebody actually bought it and used it for personal residence. So it's a commercial great zone. It's a Victorian house, 1893 built. But obviously when they have an urgency, they become motivated to sell because of. Health situation. They cannot really sell it because number one is commercial zone. So when you wanna sell it, there's not really comp. And then if you wanna sell as a commercial, there's not really income because they use it for personal housing. But they, we end up doing though. We power up with people again, as a JV structure, we take it down as cash able to close according to the time that they're looking for. And. One thing that did down to us, like, Hey, why don't we make it a short term rental, but now becoming because we bought it cash. We can do whatever we want. We put a prototype with the 18 months. Pro profit model, then we can be cash out refi again. Cause that way now you have a substantial cash flow that you can use as a baseline to go to approaching a DSCR lender and cash out that way. So a lot of people are focusing so much on short term rental because of primary residents, but sometimes people forget. Maybe a motel that you can use it to become like a short term rental too. It doesn't have to be like a big, massive short term rental 20 units of hotel thing like that. Something you can be as like small, like 5, 6, 8, smaller motel that you can convert into commercial grade short term rental because. One thing that people forgot, what you wanna sell is the experience this Victorian home by the way, is by the lake site. So the moment you go out, you can see the lake, you can walk and then it's like sitting on a two acre lot. So you got a lot of green space over there that you can enjoy and then have an quite experience, a family for family gathering or even small wedding. [00:15:22] Sam WIlson: That's really cool. And that's something, I have heard where people are running into challenges, and I don't know if you ran into this with your project, but they've run into challenges in getting short term rentals zoned, or they may have short term rental restrictions in the area. A lot of municipalities are putting in short-term rental. Restrictions, but if you buy something like an existing bed and breakfast, it's already zoned. I mean, it's already a short term rental or to your point of motel, it's already a short term rental. You're just changing the way in which it operates. Exactly. Yeah, there's not the red tape. Oh, Hey, there's a short term rental movement in town. It's like, well, no, this is a bed and breakfast. It's been a short term rental for a long time. So I think that's really cool. What have been some unique challenges maybe that you guys faced and how did you overcome them in getting, cuz it sounded like the bed and breakfast. Was it still in, in business or had it closed? [00:16:13] Hendra Tambunan: It was closed way back then. Wow. And then it got convert to a single family residence. Now, when we, obviously we do have a pushback from neighboring because we tell they are afraid the typical, bad, Airbnb, typically like a party school party goers, right. It nuisance. Right. Noise problem. We bring it up to the hearing, by the way in this is located in an, in corporate area. So obviously already commercially zone. So we do have some upside on that one. We would do a hearing. However, we also be able to my partners going knocking door or neighboring to neighboring properties and tell 'em like, look, this is the model that we're looking for. We're not gonna be buying in just. A property just for our college kids come and party on a weekend. Right. But this is the intentions are gonna be like for corporate retreat family reunion thing like that. And then we also tell them, like, this is the price when they're looking for, we actually, our prospects, like about four figures. At night, right? Summertime. And then during wintertime, this is a Midwest Lakeside, as you imagine, the wintertime is very cold, but still gonna be less than a, , an higher triple digit. So we tell them like, look how many college kids can afford that kind of thing. Even though it's like eight bedroom, but still that's gonna be too massive for them. We're not gonna be letting any college kids coming in and have a party. Costing a lot of issue for you guys. So we are able to get buy in before even the hearing. So during the hearing, we just basically just stem up approval formals. [00:17:46] Sam WIlson: Got it. Oh, that's really cool. How have you guys found an effect or what have you done to effectively manage that from a long or from a distance? [00:17:55] Hendra Tambunan: So my business model, again, I live in California, west coast. I was able to, I always invest out of state because I always pop and rock with peoples who is acting as an operator who is living over there as oppos on the ground. So that's our always our model working. I come in this, the position of it'll coming in from capital raise for the syn. prospective there, but I also come from the asset management and as well also deal structured. And some ideation, obviously in planning in some of the execution. [00:18:27] Sam WIlson: Got it. That's really cool. I love that. So you said in 18 months, your plan was to buy that commercial grade short term rental. Turn it in actually get the business running and then do a cash out refi on that. Have you been able to implement [00:18:41] Hendra Tambunan: that? No, we are still in, we are in about September right now. We are in nine months. We still have nine more months to go. But so far it's hitting on the dot what we are looking for this summer. We're probably gonna be exceeding. The plan. [00:18:55] Sam WIlson: Gotcha. That's really cool. That is really cool. If you were to rewind, say I don't know how long again, I didn't get that maybe in the intro there, but how long you've been investing in commercial real estate, but if you were to rewind the tape, what is one thing maybe that you would do differently? If you could? [00:19:10] Hendra Tambunan: I would say that connect with people as many as you can. But not only just connecting, be intentional and see, how can you add value to people? Because that way you're gonna scale a lot faster, right? This podcast title help to scale in more commercial multifamily. But a lot of people are asking like, how do I scale up? How do I scale up? Well, you scale up when you scale yourself up first, by adding value to other people that you're gonna be getting a lot of opportunity and deals coming your. I love [00:19:42] Sam WIlson: that. I love that if you were to rewind a tape and then say, here's something I did really well, what would you recommend that people do to follow in your footsteps? [00:19:52] Hendra Tambunan: I would always say that to me and my wife. We are doing this together. Get comfortable in being uncomfortable. I'm not an extrovert to begin with. I'm an introvert by nature, right. But now I started becoming an Ambivert. But he just basically got comfortable and asked people like, how can I add value to you? What are you looking for? And how can I help you to grow? Instead of me grow. Cause I want you to grow first, then we'll grow together. That's [00:20:17] Sam WIlson: awesome. I love that. I love that Hendra. You've given us a lot of things here to think about. I like the way you're restructuring really the balancing of your portfolio and saying, Hey, look, we're going to do more joint ventures. We're gonna do things and hold 'em in perpetuity. We're gonna do stuff that we can then pass on to our kids if they want. I think that's really cool. It certainly speaks to my heart. I go, gosh, that's that's kind of the goal. I think for me as well is building that portfolio of things that we hold for a long period of time, as opposed to the transactional nature that we can certainly fall into on the syndication front. Commercial grade short term rentals. I hadn't heard that phrase before, but certainly like the way that you've put that, because again, taking things like a previous bread and breakfast and turning it into a short term rental, that's something that we've certainly seen a few people chip in here on the show and talk about, and the, in the ways they've taken that down. And I think that's a really unique opportunity as well, especially on the short term rental front, maybe that people aren't looking at. So you've given us plenty of things to think about. Is there anything else you'd like to share with our guests here before we sign. Yeah. Well, [00:21:16] Hendra Tambunan: I, like I said, I'll always love to add value to people. If you are a season or even the beginner in commercial family space, if there's anything I can help you with, they can reach out to me. I can be reached at Facebook through Facebook Hendra Tambunan or I'll give you my phone number too. If you want to connect with me 5 1 0 2 7 0 2 9 2 0. And then just mention that hear us from this podcast and I'll be happy to schedule a time and connect and help them to [00:21:45] Sam WIlson: grow. That's awesome. Yeah, we'll make sure we put all those things there in the show notes as well. Hendra, thank you for taking the time to come on the show today. I certainly appreciate [00:21:54] Hendra Tambunan: Thank you Sam, for having me.
