Jerome Myers aka "J" is the founder and Chief Inspiration Officer of DreamCatchers and The Myers Development Group. He pioneered Holistic Transformational Life Coaching more than 15 years ago. J has built a multi-million-dollar portfolio following the principles of Myers Methods. After almost 400 episodes of How to Scale Commercial Real Estate, Jerome Returns to share more about himself especially finding his purpose in guiding people and optimizing their live experience. Highlights: [00:00 - 06:09] Who is Jerome Myers Jerome Myers is a real estate investor and coach He discusses starting out in Richmond, Virginia and how he has since built a multifamily portfolio in North Carolina. He talks about how money is not the ultimate goal, and how helping people find their purpose in life is what drives him. [06:09 - 12:29 Finding Purpose In Life Jerome was employee number 2, he was task to check on every performance metric of their employees and have to layoff 175 people. He realized this was not what he wanted for himself and decided to change his career path He found this new purpose in multi-family real estate. [12:29 - 20:55] How This Multi-Millionaire Real Estate Investor Found Success in the Housing Industry The key moment that led Jerome to real estate was when he realized that he wasn't able to impact the way he wanted in his previous role. He started down the path of real estate and began to share his story with others in order to help them see that it is possible for them to achieve their goals too. With multifamily he was able to find a good conenction with people helping them out in finding good deals Jerome has been interviewed hundreds of times and has published hundreds of articles about real estate. [20:55 - 22:00] Closing Segment Reach out to Jerome Links Below Final Words Tweetable Quotes “.Everybody starts chasing. Once they figure out the money problem, right? And everybody's got a money problem. They have some living expenses. They've probably got some transportation expenses. etcetera. Once you figure out how to drive what you want, eat what you want live, where you want to live. The world gets really boring if there's nothing else there. And so being able to hone in on. Why am I here? Who can I help? And how should I help them? If you can answer those three questions, your life gets a lot of meaning really quickly.” - Jerome Myers ----------------------------------------------------------------------------- Connect with Brian by visiting his website www.jeromemyers.co Connect with me: 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 → firstname.lastname@example.org Want to read the full show notes of the episode? Check it out below: [00:00:00] Jerome Myers: Everybody starts chasing. Once they figure out the money problem, right? And everybody's got a money problem. They have some living expenses. They've probably got some transportation expenses. [00:00:09] Jerome Myers: There's some food, et cetera, etcetera, cetera. Once you figure out how to drive what you want, eat, what you want live, where you want to live. The world gets really boring if there's nothing else there. And so being able to hone in on. Why am I here? Who can I help? And how should I help them? If you can answer those three questions, your life gets a lot of meaning really quickly. [00:00:45] Sam Wilson: Jerome Myers helps people make their dreams a reality in case you don't remember. Jerome came back on the show on May 9th, 2021 and episode number 161. Jerome, I don't know what episode number this will be. We'll probably be pushing five. [00:01:00] Sam Wilson: 75 or five 80, by the time you come on. So almost 400 episodes later. I certainly enjoyed our conversation there on the first episode, we talked a lot about your four step process to buying real estate. Talked a lot about what you guys were doing and how you were doing it. I think today, maybe we're gonna take this show a little bit different direction, but, either way, one, welcome to the show. [00:01:20] Jerome Myers: Sam Grateful to be back with you. You guys are crushing it. I mean, 500 plus episodes released by you. Come on, man. You got a commitment to this thing that most people only imagine being possible. So thank you so much for being so grateful or gracious enough to let me come, hang out with you for a little [00:01:40] Sam Wilson: bit today. [00:01:41] Sam Wilson: The pleasure is all mine. There are three questions. I ask every guest who comes from the. You answered this the last time. But for, just in case people don't, didn't listen to that episode and maybe they don't remember cuz again, that was 400 and something episodes ago and 90 seconds or last, can you tell me, where did you start? [00:01:57] Sam Wilson: Where are you now? And how did you get there? [00:01:59] Jerome Myers: Oh man, where did I start? I'm laughing because you said 90 seconds, right? Right. So where'd I start, my first deal let's talk about deals. My first deal was in Richmond, Virginia. I had just left corporate America a little less than a year out. We got that thing done, moved to North Carolina after that and started buying and building a portfolio. [00:02:22] Jerome Myers: Here did a number of deals we sold off of the first deal in Richmond. We're working on a development deal here in Greensboro, and we've got a small portfolio, few properties here where we've done them through joint ventures. That's my track record a multifamily to this, that point. [00:02:40] Sam Wilson: Gotcha. Very, very good. [00:02:42] Sam Wilson: Now, again, if you wanna go back and listen to that episode, Jerome give you some really good insights onto , how to find opportunity. I mean, even a year ago, we were talking about just the difficulty of finding an opportunity. You kind of pulled back the curtain on what it takes and how you guys were specializing in certain size of units and locations and saying, Hey, this is the way that, and I remember that I'm not even, I didn't even have to research this. [00:03:04] Sam Wilson: I remember our conversation from that, which I don't. I mean, I can't say I remember a lot of conversations cuz. I mean that's 400 something episodes ago, but I was like, man, this guy's on to something. So, if you wanna go back and listen to that highly recommend that again, that was on, it had published on May 9th, 2021. [00:03:19] Sam Wilson: But, tell me something that you are passionate about now. We're not gonna spend a whole lot of time to be today talking about nitty gritty real estate, cuz again, you can get that. You can get Jerome's insight on the last episode, but tell me what you're passionate about today. That really gets you outta bed in the morning. [00:03:35] Jerome Myers: Yeah. So Sam there's a lot of people who feel like money is the ultimate goal. And so they self actualize. They get to the place, they got prosperity. They can vacation where they feel like they want to, they can stay at the level hotel they want to, they probably drive the car that they really enjoy. And they've got a pretty good idea of when they're gonna be able to retire, but this is a big. [00:04:00] Jerome Myers: The majority of them still have this empty feeling inside they're questioning whether or not their life matters or if there's truly meaning and helping people go from that place of self-actualization to transcendence is a thing that has just had me the most excited over the past nine months. I really had a hard time saying that I was a coach even a year ago. [00:04:26] Jerome Myers: And back in the fall. I actually did a lot of, self-reflection spent a lot of time and money flying around the country, trying to get in rooms with people who were further along on their journey to see if there was a way that I could kind of overcome this split identity, maybe a schizophrenic that I had where it was like, Hey, I'm the multifamily guy. [00:04:50] Jerome Myers: And every now and again, I coach to. I'm a coach who has specific expertise, specialized expertise in multifamily investing. And I own that fully today. And I just watch so many folks out there trying to catch the next thing, the next achievement, the next dollar. And they risk everything. That's actually meaningful in order to achieve that. [00:05:16] Jerome Myers: And I'm just on this mission to help people find out what their real purpose is. Then how can they actually orient their life in a way that they can actually earn a living from that? [00:05:30] Sam Wilson: Yeah. And I think that's an important distinction of somebody I had, actually just, I was interviewing just before you and I jumped on here and he was just talking about starting not, and we've all heard it start with your, why. [00:05:43] Sam Wilson: , and I think it's a foundational , part of the equation, is, start with what drives you and then build your business, around that, that meets that need or whatever it is that creates that drive. [00:05:52] Sam Wilson: I know if that makes any sense or not. And it sounds like that's where you have really gone. When you say, I don't want to be a coach, but yet at the same time, helping people kind of, figure that thing out. It sounds like where you are right now. And then, if they have real estate it's involved with as well, then that's just, icing on the cake. [00:06:09] Sam Wilson: Is that right? [00:06:09] Jerome Myers: Yeah. I mean, here's the thing, right? It's really easy for me to. Justify my value. If somebody does a real estate transaction during the time that we're working together, cuz I'm either gonna help them negotiate a better deal for themself on the purchase, or I'm gonna help them get more money on the exit from the proceeds when they're negotiating offers with a person who's purchasing from 'em. [00:06:30] Jerome Myers: So that part makes it really easy. That also is probably the largest transaction that most people do unless they build a business and then they sell that. but even then I'm there in advisory capacity and I can help them figure out how to, because we do the real estate stuff, get their net operating income up to a place where it makes it more attractive to other folks. [00:06:51] Jerome Myers: Also with the system implementation piece, because businesses that have a manager in place, and that's not the owner sell for higher, multiple than those that don't. And. Being able to guide people or be an advisor in those transactions. In addition to helping them optimize their life experience or live a centered life as we call it in our world, I think is the entire game for people to get that last level. [00:07:20] Jerome Myers: So our model's got six layers and, significance. Some people call it imortality other people call it legacy. Is the thing that everybody starts chasing. Once they figure out the money problem, right? Every, and everybody's got a money problem. They have some living expenses. They've probably got some transportation expenses. [00:07:38] Jerome Myers: There's some food, et cetera, etcetera, cetera. Once you figure out how to drive what you want, eat, what you want live, where you want to live. The world gets really boring if, if there's nothing else there. And so being able to hone in on. Why am I here? Who can I help? And how should I help them? If you can answer those three questions, your life gets a lot of meaning really quickly. [00:08:05] Sam Wilson: I think that's brilliant. Who can I help? And how can I help them? Who can I'm write that down? Who can I help? And how can I help 'em? I mean, that's absolutely brilliant. I love that sixth level of significance, because as you said, there's so many people who've gotten all the way to the top on to find out there's nothing there and a, that's a scary and lonely place to be. [00:08:25] Jerome Myers: It's some people killed himself when they get there. Right? Because they did all of the work only to find out that there's not a pot of gold at the end of the rainbow, right? The pot of gold was their journey. It was becoming the person you had to be in order to get to that place. But you know, one guy, he had his first a hundred thousand dollars month last month. [00:08:50] Jerome Myers: And. He usually feels a great sense of remorse once he achieves his goal, but he is clicking his Hills and he is like, man, I gotta do it again because it wasn't the money. It was the person he had to become in order to be able to generate that type of revenue. And so now he's gotta prove to himself that he can do it over and over and over. [00:09:16] Jerome Myers: So now he wants to go from a business that was probably doing 300,000 to one. That's doing a million because he sees that it's possible. He he's becoming and owning that he is that person. Right. And I, I think there's a person that we have to be in order to earn. And then there's a person that we have to be in order to help or impact, and that impact. [00:09:41] Jerome Myers: Is probably the only thing that most people are gonna talk about when they get to the end of the road. Right? They're they're not gonna know that they made extra a hundred thousand dollars. They're not gonna know that there's another million dollars in the net worth. Like none of that is ever really gonna matter. [00:09:57] Jerome Myers: But being able to tell the story of the person that they helped, who was dealing with the challenge, that they didn't know how to overcome, and you gave them a path or a product in order to fix that problem. and then when they look at you an admiration, because they don't know how they would've gotten there without you, there's no amount of money that's worth that. [00:10:19] Jerome Myers: Mm-hmm you, you can't replace that. Right. Right. And so, there's a lot of people who are promising folks, Hey, we're gonna help you make a lot of money and that's great. But I work with the people who've already figured out how to make money. They wanna make a lot of impact. And the more people that I work with who impact more people helps me achieve my mission, which is freeing a hundred people from work. [00:10:42] Jerome Myers: They're not passionate about. I think a lot of folks are going doing something because it pays well. Right. And I'm guilty. That's how I know that this problem is this, but the reality of the situation is like, if you're in purpose and on purpose, you'll make more money than you ever made. When you were doing something just cuz it paid well, [00:11:02] Sam Wilson: right? [00:11:03] Sam Wilson: No, I love that. It sounds like there was a catalyst event or maybe a series of events that kind of woke you up to this reality in your own life. Is that a fair assessment [00:11:17] Jerome Myers: without question? Right. So I was in corporate America. I started on January 13th, 2015. I was employee number two in the division. And by September 30, if we had 175 employees on my team, wow. [00:11:34] Jerome Myers: By the end of the year, we'd done $20 million in revenue. And I get a call on December 24th at 4 55. And it goes something like this, Hey, Jerome, we're gonna lay about half of 'em off. I said, no, we're not. Jerome you and I have been going back and forth on this for a few weeks and I've made a decision and about half the folks have to go. [00:11:54] Jerome Myers: Yeah, no, that's not the right answer. Jerome. This isn't a debate. This is not a, discussion. I'm informing of a decision that's been made. And of course I retort. And then it's 4 59. Hey, Jerome, I'm gonna go spend the rest of the year with my family I'll talk to you in the new year. And then the phone goes dead. [00:12:15] Jerome Myers: And I was like, well, how do I make this as objective as possible? How do I make sure that somebody doesn't say, oh, well, they just kept the people who were their friends, cuz they think that's what happens all the time. And so I went and found every performance metric that I could find to evaluate the staff on in a way that would leave them. [00:12:39] Jerome Myers: With no question about whether or not they should be there or they shouldn't be there. And when we got done with that, I was like, man, they made me do it. Right. It, it was me that had to do it because if I didn't, then I was gonna lose the F-150 and I was gonna lose the salary and the bonus and all this stuff. [00:12:59] Jerome Myers: And then I was standing in front of the room two days before Thanksgiving of 2016. And I said, Hey guys, don't spend all your money on black Friday, cuz I'm unsure. What's gonna happen between now and the end of the year. And it was at that point, cuz I thought I was a big leadership guy. I thought I knew what I was doing that I felt like I lost all of my leadership credibility. [00:13:17] Jerome Myers: Mm. And it was at that point that I realized that I couldn't stay in the matrix. I had to drop out because they didn't make me do. I chose to do it right, because I didn't wanna experience the consequences of not doing it. Right. I didn't actually have the true autonomy. The buck didn't really stop with me. [00:13:35] Jerome Myers: I talked to my supervisor every other week. I saw him once a quarter and in my head I was running it, it was my show, but the reality was he could still swoop in and tell me what to do or what not to. It just didn't sit well with me. So Sam, I, I decided that I was gonna go do something different because I didn't want anybody telling me that my team who made $6 million in profit the year before needed to go find somewhere else to work. [00:14:06] Jerome Myers: It just didn't make sense to me. [00:14:08] Sam Wilson: Yeah, those are those. The man, I don't, I've not spent a day in corporate America and I can't, say I ever longed to, and you hear stories like that and you go, Nope. glad. I I'm glad I didn't go down down that road. That that's, that's incredibly tough. And it sounds like that's the story that led you into real estate and then specifically into multi-family. [00:14:28] Sam Wilson: Was there a time even inside of multifamily though, when you hit, when you hit that, hit painter and then at the same time, you go, gosh, I'm earning, but maybe I am, or I'm not impacting the way I want to. Yeah. [00:14:40] Jerome Myers: Oh yeah. So this one's a good one. So when I was a junior level engineer, I worked at corporate headquarters of a company that had a little over 17,000 employees. [00:14:52] Jerome Myers: Wow. And there were 88 executives and there was one African American man that was an executive at the company. And I would see Craig in the parking garage, in the hallways from time to time. And I always say, Craig, you let me know that it's possible for me to be an executive here cuz you're one. And he would always. [00:15:10] Jerome Myers: As gentle as he could be. He said, Jerome, doesn't matter what your race is. Just be the best engineer you can be until you get a promotion to the best supervisor you can be. And then be the best manager you can be. Then the best director you can be. And then the best vice president you can be. And then one day you'll be able to run a business unit, just like me. [00:15:29] Jerome Myers: Just be the best in the role that you're in. None of the other stuff matters. And I was like, yeah, I hear you. But I see. and you give me hope that it's possible for me too. And then I started going to conferences. I started going to meetups. I didn't know. That was a thing before I started buying stuff. [00:15:48] Jerome Myers: Right. And I would get in the back of the room and there'd be a group of three, maybe six of us. And somebody would whisper wears all the black people because nobody was on stage. Nobody was speaking and they had to whisper. Right. And I just got tired of people whispering at that question in the back of the room. [00:16:10] Jerome Myers: Right. Because there were some people having some success, including me and I wasn't telling my story. Mm. And so I was doing a disservice cuz Craig, Craig was an executive. This picture was on the website. And I was like, man, I'm just over here doing my thing. I'm not really telling anybody about it. I'm not showing them that it's possible for them. [00:16:32] Jerome Myers: And then I had to dig in and say, you know what, as uncomfortable as this is, as much as I don't want to be on social media with my face or pictures of myself or any of this other stuff, as much as I don't really want to get up and do public speaking, or try to present at conferences or risk being rejected by asking for the opportunity to share with somebody else's audience. [00:16:55] Jerome Myers: I needed to do it. Mm-hmm . And so. I started down that path and then I would get comments like, well, if you did it, that means I can do it. You're the first person that looked like me, who I heard on a podcast. It might be on Sam's podcast. Right. And that's the reason. And the only reason why I do these things, I've, I've probably been interviewed about 300 times on different podcasts. [00:17:24] Jerome Myers: I've wow. Done numbers and numbers of conferences I've published. Hundreds of episodes of my own podcast. And I don't know how many thousands of social media posts I've done, but we've done those just to help spread the message that there are people who look just like you, who are doing the thing that you're interested in doing. [00:17:46] Jerome Myers: And so that eliminates the excuse. If you're using that as a reason why you aren't doing the. Now let's move on to the other stuff about being the best and doing all that you can in the, with the opportunities that you have. And I think Craig's advice is pretty solid at that point, but I, I had to get out of my comfort zone. [00:18:09] Jerome Myers: I had to be open to whatever scrutiny may come and. I accepted that and moved into it. So that was really the pay dirt moment for me. And, we talked about the four step method for buying multifamily in the past. And there's a, was a unique challenge for at least for me. And maybe it isn't a challenge in reality, maybe if I went to one of the syndication courses, maybe it wouldn't matter. [00:18:37] Jerome Myers: But for me, I grew up the son of a soldier to stay at home. Mom. For me, I went to college with a bunch of first generation go away to school students. Right. And so when we start talking about accredited investors, I knew one when I started buying multi-family properties. And so this concept of raising money and people send in 25 or 50 or a hundred thousand dollars checks kind of escaped me. [00:19:03] Jerome Myers: And so what I thought was probably more valuable and is the path that I went. It's connecting with people where you do a joint venture. And it's a group of friends who are putting together a business and in that business, everybody's active and we're all just putting in and getting this deal done. And we own more of the deal in concept. [00:19:26] Jerome Myers: There's probably more risk by doing the deal, but, and I think it's a big, but you've got a bigger vested interest, right? [00:19:35] Sam Wilson: Jerome. That is really cool. I love, I love the idea. Where the story there of going from earning to impacting and, you know, hitting that your sixth point there of doing something that is significant both to, yourself and, and those around you the, who can I. [00:19:53] Sam Wilson: And the, how can I help them mentality? And I think that's the, that is the, and it takes, I always say that at one point in my life, I would've said that, didn't really care if I ever became, ridiculously wealthy. And now I'd say that's probably not exactly accurate anymore. [00:20:10] Sam Wilson: Like I wanna be stupid, wealthy, but it's not stupid wealthy, so I can just again, buy, buy a bigger, faster car. It's like I could do more. I can do more good at this slogan written down that's I can do more good in the world as a rich person than I can as a poor one. And it's like, I have to be able to earn so that I can impact. [00:20:29] Sam Wilson: And not that I can't impact I don't have earnings, cuz obviously I've I've I have learned life lessons from some of the poorest in the world and it, they too have impacted me in ways that, they didn't have to earn to do, but I still think that there's, that there's ways ways to frame the finances and the impact discussion in such a way that it brings significance. [00:20:48] Sam Wilson: So, thanks for, thanks for sharing that story with us. If our listeners want to get in touch with you, learn more about you learn what you do what is the best way to do that? [00:20:57] Jerome Myers: Everything's email@example.com. We got a bunch of free resources for folks to, learn how to exit corporate America. [00:21:05] Jerome Myers: If that's what they want to do. If they wanna learn more about our four step process, there's information there as well and ways to follow us on social media and everything else. But J meers.co is the [00:21:17] Sam Wilson: hub. Awesome. And for those of you who are listening, that is Meyers, M Y E R S. So Jerome, meers.co Jerome. [00:21:26] Sam Wilson: Thank you again for coming back on the show as always. It's a pleasure. You bring incredible value. So thanks for doing what you do, [00:21:33] Jerome Myers: Sam. Thanks for having me, man. This was awesome.
Brian Wagers is a multi-family investor. He grew his family's portfolio to 500 units before moving on to syndication where he is now involved. Been involved in over 150 million worth of apartment transactions. With over 2,000 units through his experience as an owner and general partner. He now seeks to invest and help other high-growth professionals and business owners put their money in a tax-advantaged, risk-adjusted growth space that is multi-family. Highlights: [00:00 - 05:48] Opening Segment Brian Wagers started out in Northwest Arkansas and bought a single-family home before moving on to multi-family and building a portfolio of 500 units Brian partnered up with Elevate Commercial Investment group. [05:48 - 11:38] How to Capital Raise Like a Pro: Tips from a Veteran Brian discusses how he has succeeded in the capital raising space by being organized, adding value, and being competitive. He talks about the challenges of the capital raising space, including interest rates and cap rates. He emphasizes the importance of underwriting for higher cap rates and staying ahead of the competition. Transparency is Important in Communication [11:39 - 15:00] Investors Shift Focus to Classier Properties Their Company is keeping its cap rate at 2% or 3% annually, depending on the location and asset class. They are starting to look more seriously at A-class assets due to the compressed cap rates. The market for A-class assets is appealing to institutional investors and provides less risk than buying a house. Developers Look to Multifamily Properties as an Exit Strategy The interest rates for multifamily properties have decreased, which has made them more affordable for buyers. Multi-family properties are becoming more liquid, which makes it easier for buyers to find and exit these properties. Class A developers are looking for premiums in multifamily properties, so buyers must find a value that they can add to the spa [15:06 - 17:36] Closing Segment Reach out to Brian Links Below Final Words Tweetable Quotes “I think, transparency is really important in communication and making sure we are updating our investors, whether things go wrong or whatnot .” - Brian Wagers ----------------------------------------------------------------------------- Connect with Brian on LinkedIn Facebook Instagram or email him at Brian@elevatecig.com or visit their website: Elevatecig.com Connect with me: 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 → firstname.lastname@example.org Want to read the full show notes of the episode? Check it out below: [00:00:00] Brian Wagers: I think, transparency is really important in communication. Making sure we're updating our investors, whether things go wrong or what not just when things are going right. [00:00:09] Brian Wagers: If things are slower than expected to let them know what's happening in the market, there's a lot of people are worried about where the market is headed, is it, too hot interest rate changes. So just keeping them updated with educational material on that, I think is important. [00:00:23] Brian Wagers: Making sure you explain your underwriting, I think. Investors are getting more and more sophisticated. [00:00:41] Sam Wilson: Brian Wagers is a multi-family investor. He grew his family's portfolio to 500 units before moving on to syndication where he is now involved. Been involved in over 150 million worth of apartment transactions. Brian, welcome to the show. [00:00:54] Brian Wagers: Hey, thanks. Thanks Sam. [00:00:56] Sam Wilson: Good to be on here. Hey man, pleasure's mine. [00:00:58] Sam Wilson: There's three questions. I ask every guest who comes in the show in 90 seconds or less. Can you tell me, where did you start? Where are you now? And how did you get. [00:01:04] Brian Wagers: Yeah. So I got started in Northwest Arkansas. About six years ago bought a single family home quickly, diverted over to multi-family had a 12 unit scaled that into another 12 unit and a 20 unit combination of family money, seller financing. [00:01:20] Brian Wagers: Got my hands dirty with a medium sized, small multi-family projects, built up a portfolio of about 450 to 500 units with just me as a lead sponsor me as the only general partner with, friends and family. And just as of recently partnered up with elevate commercial investment group, where now I'm a general partner on, thousands of units. [00:01:43] Sam Wilson: That is really, really cool. I love that story of, building, building a portfolio of 500 units. I'm really curious, once you had figured it out and once you had made it to that 500 unit mark, which is a lot of units, by the way, if you're just a single general partner in 500 units, that's a lot of units, what was the impetus for, joining another team and being a general partner with other people when you can really own a hundred percent of your own deals right now, [00:02:09] Brian Wagers: right? [00:02:09] Brian Wagers: Yeah. So it was always in the back of my mind. It was, I don't know that it was a aha moment. I think when I first got started in multi-family, the people that I was learning from, they were doing the syndications and they were doing the larger projects. But for me to get started, I really wanted to, have a track record proof. [00:02:25] Brian Wagers: I have somewhat of a proof of concept, My hands dirty and do you know all aspects of real estate. So I've always had multi-family syndications in the background of my head. That's always thinking about different things, but I knew I was gonna focus on multi-family. Just, I was open to doing it different ways, so, About two years ago, I was scaling my portfolio and I was starting to make offers on some of the same deals that I had seen before, they had come back full cycle. So I knew I was playing in a somewhat smaller space. so I knew. that thought of going bigger was going to have to come soon. [00:03:00] Brian Wagers: So I, I was really starting to plant some seeds with some other bigger time operators and looking at how I could provide value to them as I continued to grow. So yeah, I could keep, a hundred percent, and keep trying to do the smaller deals. But I think for me, it was one was the inventory there, where I was coming across. [00:03:19] Brian Wagers: Some of these deals, a couple times. So that was kind of, a good moment for me know, knowing that I had to expand. and it was okay giving up, a portion of that in, in order to really grow, it's who not how you get there. So I'm firm believer in that, partnering up with strategic people to get you to continue to grow. [00:03:38] Brian Wagers: And I didn't want, I'm always trying to be the best version of myself , in all aspects. So. It's okay. To relinquish some control in some areas. And, for me that was partnering up and giving up some of that [00:03:50] Sam Wilson: partnership. [00:03:50] Sam Wilson: I like that idea there, Brian, that, Hey, I gotta get outta my own backyard. [00:03:53] Sam Wilson: I've gotta go somewhere where somebody else has local market knowledge that you don't have to then rebuild. You don't have to go get into a new market and say, all right, how do I figure out this market? You got somebody else that you that's experienced in it. I guess the question I would have if someone's already in a market and they've already got people on the ground, they're already running a very large operation. [00:04:12] Sam Wilson: What did you bring to the table? Or how did you position it, such that they would say to you, Brian, I'd love to have you be part of the team. What did that conversation look like? Not that you're not a great guy and you don't have great skills. Cause obviously you do cuz you've taken down 500 units on your. [00:04:25] Sam Wilson: But even, so it seems like they would already had all the seats on the bus taken care of. [00:04:30] Brian Wagers: Yeah. So for me, that was positioning myself, to continue that track record. So it wasn't just, Hey, I'm gonna be a partner with your firm. Like, let's go, it was a deal, work with them on a kind of a JV. Case by case basis. [00:04:46] Brian Wagers: So it wasn't just, I was like, Hey, let me give me an opportunity to prove myself, that's all I wanted was an opportunity to, say I'm going to do what I say I'm going to do. So, that was raising on a couple deals. So we raised on three or four deals before we actually, agreed on a partnership. [00:05:05] Brian Wagers: And that was. Asking for me, I focus on the capital raising piece. So that was going to be my focus. So when I was reaching out, I was reaching out to other operators and seeing if, Hey, is that something that you could bring on? And for the operators that I'm looking at, I'm looking at high. I was looking at high growth operators. [00:05:23] Brian Wagers: So, the two main. Flows of multi-family real estate is, deals and equity. So that was. My main, pivot point was, Hey where can I bring value? And that was in the equity piece. [00:05:36] Sam Wilson: Right? Right. No, that's that's really cool. What, and again, I'm sorry for digging in, maybe on this so much, but I think it's an important, stepping stones for people who are in this business looking to scale, looking to grow. [00:05:48] Sam Wilson: They want to go, okay. How have other people done? So focused on capital raise. Why not just cog? What would what was the impetus again? I'm just trying to figure out again, not that you're not a bad, not a good guy, but you know, for the other at elevate, was it elevate equity? [00:06:03] Sam Wilson: Was that, was it two elevate commercial [00:06:04] Brian Wagers: investment group. Okay. Yeah. So, right, right. Like, so, and additionally to just COGP in there was,. Okay. What areas of their business did I find? Like bringing I'm just, when I'm just cog and I was just the capital, but right. Adding value outside of that, during these other deals. [00:06:22] Brian Wagers: So, jumping on calls, trying to add value as, as far as marketing goes or trying to, help coordinate with other cogs that we may have on the deal, take it saying, okay, I'm just gonna raise my, I'm gonna commit to a million. And I raise 1.2 million. That's great. That's a good track record, but going beyond staying super organized throughout the whole deal, maybe GI giving recaps of what everybody's doing. [00:06:47] Brian Wagers: Try to find little value, add pieces and each part of the deal. So going above and beyond, I think was a main part there. And starting to kind of ma I was starting to manage some of the other co razors before I was doing that kind of staying ahead of our next steps. Hey, what do we need to get something on the calendar? [00:07:06] Brian Wagers: Where are we at? So I think just over delivering on those on that piece, [00:07:11] Sam Wilson: that's cool. No, I love that. That's absolutely awesome. Tell me, you know what, as you look at the portfolio, I guess, do you still own that 500 unit portfolio? Is that still yours? [00:07:21] Brian Wagers: So it dwindled down to around like, 250 - 300 units. [00:07:25] Brian Wagers: we're selling. So I just, we just sold 102 units today. I sold 54 units earlier this year. we did sell. 82 units, but we bought 72 more at the end of last year. so, it's right around, 250, 300, but we're looking at selling a lot of that. A lot of my personal portfolio is [00:07:46] Sam Wilson: that because it's just, I mean, the market is just red hot and you can just get top dollar for it. [00:07:51] Sam Wilson: Is that kind of your thinking there? Or was there other things that, that are driving those decisions? [00:07:57] Brian Wagers: Yeah there's several different factors, but that being, one of the main reasons, the market is super hot, where, more and more people are looking at our market of Northwest Arkansas two, we've implemented a lot of the value add business plan. [00:08:10] Brian Wagers: Some of these deals we've only held for two years, three years, but you know, we've got it to about where we wanna be. And if we can get those offers that we expected to have in five years and two years, Might as well, especially with me focusing on, these larger deals, it just gives me more equity to put back alongside of the, on, on these larger deals. [00:08:32] Brian Wagers: So it's a huge plus having that, I built up quite a bit of equity in these smaller deals too, place in, in the larger deals [00:08:40] Sam Wilson: yeah, that's a great point is that you can recycle that back into your own opportunities. And, develop more the limited partner side of things. As you invest in your own opportunities than you could maybe on the active investor side. [00:08:53] Sam Wilson: Yeah. Yeah. [00:08:54] Brian Wagers: So I'm investing as an LP in all our deals too, as well as, helping on the GP portion. [00:08:59] Sam Wilson: Right, right. Oh, that's cool. And that certainly gives your investors a vote of confidence as. As they, [00:09:05] Brian Wagers: yeah, it's definitely an extra, there's a lot of reassurances in multifamily, but I think, being able to invest alongside of your investors is super important to them. [00:09:13] Brian Wagers: But I wasn't always able to do that. I had to that's, one of the reasons I had to do those small and medium sized deals was to. Really help one, get my track record and prove the concept like I mentioned before, but, get that equity two, be able to invest with them. [00:09:28] Brian Wagers: Yeah, [00:09:28] Sam Wilson: no, I think that's awesome. What are some challenges that you see in the capital raising space right now? [00:09:36] Brian Wagers: I think, transparency is really important in communication. Making sure we're updating our investors, whether things go wrong or what not just when things are going right. [00:09:45] Brian Wagers: If things are slower than expected to let them know what's happening in the market, there's a lot of people are worried about where the market is headed, is it, too hot interest rate changes. So just keeping them updated with educational material on that, I think is important. [00:10:00] Brian Wagers: Making sure you explain your underwriting, I think. Investors are getting more and more sophisticated. So, it's important to show them your underwriting, your assumptions, and make it clear on, what the risks are and what the potential are. [00:10:14] Sam Wilson: Yeah, absolutely. What, and let's talk about that, if if we're standing on shaky ground or who everybody's been calling for a recession. [00:10:22] Sam Wilson: Lord, who knows how many years? Five, seven years. But I mean, even, so there are some things changing. We continue, especially in the multi-family market to see cap rates compress, and now we're seeing rates go up. What are you guys doing in this environment to remain competitive? [00:10:36] Brian Wagers: Yeah. So underwriting more deals is a big thing. [00:10:39] Brian Wagers: Getting in front of more deals, bringing on more boots on the ground partners that can find us deals that are local. I are finding more and more important that, , people local in the market are sometimes getting first looks at deals. So sometimes we'll bring on partners who find deals and their local market have relationships with commercial brokers. [00:10:58] Brian Wagers: And as far as the cap rates, you want to make sure you're underwriting for higher cap rates. That's huge. And the interest rate changes now, refinance events in year three. We definitely wanna make sure we're not. Keeping the same interest rate or a lower interest rate at what we're coming in at. [00:11:15] Brian Wagers: So we're making sure that interest rate is going up at year three. And we're also accounting for a higher cap rate at sale in year five. [00:11:23] Sam Wilson: Yeah, no, that's that's absolutely important. What do you think this is? This is pure, just subjective questioning. We've seen rent rates and I mean, I own some multifamily properties and we've just seen rents, just, I mean, just up into the right. [00:11:39] Sam Wilson: All of us have, what are you guys doing on your underwriting side for rent growth? If any [00:11:44] Brian Wagers: Yeah, we're keeping it around 2%. We try to keep it around 2% annually, 3%, depending on the location, depending on the asset class. That can vary from C class to A class. So, so we are looking more and more at a CLA the way with cap rates compressing, we have started to look more and more at the, a class opportunities. [00:12:03] Brian Wagers: Now five years ago, I would tell you I'll never buy an a class. I'm a value add, C class to B class property buyer, but the way the market is, we're starting to shift that outlook. As far as. With the way the cap rates are going, but, definitely. And if it's a deep value add, obviously we can increase those rents quite a bit more than just a 2%, 3%. [00:12:25] Brian Wagers: But once sta once, upon stabilization, we're looking around 2% rent growth. [00:12:30] Sam Wilson: Gotcha. No, that's really interesting. You say you're moving into a class. Can you gimme some really Insight into why you're finding more value or even potentially less risk in an, a class asset. [00:12:41] Brian Wagers: Yeah. So the, a class stuff that we're looking at one, if you think about a class in general, you kind of think less headaches, it's a more, appealing investment to more institutional, equity that we are getting more and more of, they see it as a more safe. [00:12:58] Brian Wagers: Whereas the way that the housing market is going, it's becoming harder and harder to buy a house. And so for young professionals to really fork up, to buy a $400,500,000 house, they may see it better to ride it out and live in a nice, a class community with good amenities for a while before they can move into a permanent home. [00:13:19] Brian Wagers: So, the factors, the way the single family market. Less maintenance on the front end, so we can, you can underwrite for that. And more of a safe, longer ride, for some of our people are wanting to hold closer to the five year. Five [00:13:33] Sam Wilson: year terms. Got it. No, that makes a lot of sense. [00:13:36] Sam Wilson: Yeah. Offsetting some of that risk by buying newer, nicer assets. Maybe you don't have the maintenance, but also like you said, is that your institutional players tend to like that space. So if you guys are looking for an exit and in three to five years, your buyer pool probably exists at a much a much larger buyer pool on those types of assets. [00:13:54] Sam Wilson: Yeah, [00:13:54] Brian Wagers: exactly. Right. So you're always looking at who, what your exit plan is and who you're going to ultimately sell it to. So now we have a lot more capital chasing, multi-family real estate, a lot of these people in Covid that we're buying office space and retail space are now looking at multifamily. [00:14:10] Brian Wagers: A lot of these people that have. Their money in the stocks and the money in, other vehicles are more and more looking at, the real estate market. So I think that also helped offset some of its interest rates. We're seeing it's becoming a more liquid space, because like you said, you have a lot more exit buyers for your properties, [00:14:28] Sam Wilson: right? [00:14:29] Sam Wilson: No, that's really cool. How do you overcome? I would think though, as you move into the, a class space, That your return profile just, get gets diminished. I mean, is that a fair assumption? Yeah, it's definitely [00:14:42] Brian Wagers: fair. The A class developers, builders, they are looking for premiums. [00:14:46] Brian Wagers: So you really have to find, it's like, if it's an, a class, you have to find the value that you can add. So, hopefully we are, when we're buying a class we're trying to buy from the developers. So they've got it to 90% lease up. And they're just getting it leased up however they can. [00:15:02] Brian Wagers: So they're offering concessions, they may be putting a little bit higher expenses in, they just wanna get that property leased up. So we're then able to get some of those expenses down a little bit. And start pushing the rents up to more market rents versus to the rents that they were just to get people in the door to where they can eventually exit. [00:15:20] Brian Wagers: So finding that value in that space is really important, cuz not every a class is an opportunity, but we definitely like to buy. From the developers from, for that reason, [00:15:30] Sam Wilson: right? No, that's an interesting strategy. Not one I hear a lot about, but I think it has a lot of merit in that, like you said, you can improve their operations, decrease expenses, bring rents up to market. [00:15:42] Sam Wilson: And yet at the same time, you're not having the risk of being the developer, getting the project done. So it's kind of like a, it's a nice hybrid approach to development in its own. Exactly. [00:15:51] Brian Wagers: You just have to be upfront with your investors, they just, and if they're buying into an opportunity like that, the cash flow is going to be low, especially on the front end. [00:16:00] Brian Wagers: Right. But that's what you get when you are buying those kind of opportunities. Right. [00:16:04] Sam Wilson: Right. And as long as everybody understands the rules of the game, then that is what it is. So I think that's really cool. Brian, thank you for taking the time to jump on today and really tell us. [00:16:13] Sam Wilson: The the nuances of transitioning from owning 500, your own units to then just joining a team, it's kind of like that idea of McDonald's it's like, do you wanna own a hundred percent of your own deal or 1% of McDonald's? Well, I'll take 1% of McDonald's all day long. So I love the the idea for you, joining a bigger team and just owning the smaller piece of a bigger pie. [00:16:33] Sam Wilson: I think that's really cool and love just how you've. Brought value to that team and shared the way that you've done that in order to make this all work. So, thanks again, for sharing your insight today, do appreciate it. If our listeners wanna get in touch with you and learn more about you, what is the best way to do that? [00:16:49] Brian Wagers: Yeah, just you can email me, Brian@elevatecig.com. I'm on Facebook, Instagram LinkedIn message me on one of those. If you're active in the space too, just Brian Wagers. Awesome, [00:17:00] Track 1: Brian, [00:17:01] Sam Wilson: we'll be sure to include that all in the show notes. And certainly thank you again for coming on. [00:17:05] Brian Wagers: Yeah, absolutely. [00:17:06] Brian Wagers: Sam, thanks for having me. Sorry about the background noise today. Hey [00:17:09] Sam Wilson: man, no sweat at all. Appreciate it.
RV parks are booming, but there's still plenty of opportunity. Here to talk about how we can take advantage of the space before institutional investors come in is Jeremy Hans. Jeremy is the co-founder of Climb Capital and has been an active multifamily real estate investor since 2010. He believes that RV parks are a great investment because of the high returns and low risk and discusses their opportunistic approach in finding deals. Jeremy is also passionate about what he does and shares inspiring insights of choosing a lifestyle he wants to live. [00:01 - 03:29] Building a Lifestyle You Want From reservist to real estate investor How Jeremy is finding work-life balance [03:30 - 19:38] Pivoting to RV Parks The opportunities in the RV parks industry What a deal looks like in the RV resort space The advantage of being the frontrunner in a lesser-explored asset class Investments that Jeremy and his team are staying away from The long-term potential in destination RV parks Adding amenities and testing the market Launching an RV park investment fund [19:39 - 21:03] Closing Segment Reach out to Jeremy! Links Below Final Words Tweetable Quotes “You could give me multiple millions of dollars in my bank account tomorrow, I wouldn't change what I'm doing. I've chosen the lifestyle that I want to live.” - Jeremy Hans “If I had better criteria, there'd probably be a lot of more people in this space because there'd be a lot more data, but right now there's not. So I'm making my own and we're making it work.” - Jeremy Hans ----------------------------------------------------------------------------- Connect with Jeremy at the Climb Capital website. Email him at email@example.com and follow him on LinkedIn, Instagram, and TikTok! 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 → firstname.lastname@example.org Want to read the full show notes of the episode? Check it out below: [00:00:00] Jeremy Hans: I think it's more of an issue of where does it kind of fit in the local kind of economy in both size, location, and distance to things that people want to be at. So if you're an RV'er, if you ever RV'ed, you don't necessarily need to be right next to where you're trying to go, but you want to be close and close is relative. It might be an hour. It might be 30 minutes depending what you're looking at. And so, Hey, is there a draw? Is there a reason somebody want to be there? It's it near a major highway? Does it have a water feature and is it a place that I or my family would ever want to visit are kind of the basic criteria that we look at. And if I had better criteria, there'd probably be a lot of more people in this space because there'd be a lot more data, but right now there's not. So I'm making my own and we're making it work. [00:00:46] Sam Wilson: Jeremy Hans is the former Navy helicopter pilot who began investing in multifamily and commercial real estate while on active duty. He skipped residential real estate almost entirely and recently he has pivoted from multifamily syndications to RV parks, amongst other things. Jeremy, welcome to the show. [00:01:03] Jeremy Hans: Sam. Thanks for having me glad to be here. [00:01:05] Sam Wilson: Hey man, pleasure's mine. Three questions I ask every guest who comes in the show: in 90 seconds or less, where did you start? Where are you now? And how did you get there? [00:01:11] Jeremy Hans: Sure. So, Jeremy Hans started as a middle class, white kid from the suburbs of America, as white bread as they come, right? So, I did all the right things, went to school, and learn nothing, but, you know, just keep taking the next step to get a job, join the Navy ' cause I thought that was the next step in my life to get, get me started. That was great, had a great time, but realized pretty quick, the harder you work in the Navy, the more work you get, and you don't get paid a dollar more. [00:01:30] Jeremy Hans: So, started planning my exit pretty early on. First thing I ever bought was a fourplex in San Diego as a 22 year old kid. House hacked and BRRRR before those were words and then got moved, not by my own choice to Pensacola, Florida and realized I got to do something else, right? There's no fourplexes to buy here. [00:01:44] Jeremy Hans: And so jumped into commercial real estate on a small scale, met a partner, trying to buy the same mobile home park. And then together we kind of get, got a bunch of education, started just doing deals, started syndicating on a small scale, and slowly kind of grown that to Climb Capital. So today we're a team about 10, primarily focused on syndicating RV parks and then doing some private equity stuff on the side as we continue to sell and operate a few of our apartment and mobile home park deals still. [00:02:07] Sam Wilson: Wow, man. That's a lot of moving pieces. Now you are, you're still active military? You're reservist? What's your status? [00:02:14] Jeremy Hans: So I I'm a reservist, so I left active duty in 2017, did a couple more years on active orders as a reservist, but now I'm just a part-time 60 day a year flying helicopter pilot in the Navy reserves. [00:02:26] Sam Wilson: Oh, man. That's, that's really cool. You, you have a lot of things in the air. What's something or a lot of moving pieces, like balls in the air was the phrase I was looking for, a lot of balls in the air, a lot of moving pieces. How do you organize all of it? [00:02:38] Jeremy Hans: You know, I, I think the thing that I tell people all the time, right, I also got four kids, got an airplane, do a lot of stuff at church, right? I keep it busy, right? You could give me multiple millions of dollars in my bank account tomorrow. I wouldn't change what I'm doing, right? So I've chosen the lifestyle that I want to live. I want to run a company. I want to be able to do these things. I know that's going to mean a lot of work right now. I'm okay with that. I know that's going to be a lot of long days with little kids. I'm okay with that. And it's just putting kind of, you know, lifestyle priority in check. And maybe that means I don't hang out and watch as much Netflix as I'd like. But I go, I'm done. So, I think that's my answer. [00:03:05] Sam Wilson: Netflix isn't that much fun anyway. Let's, let's all be honest. [00:03:09] Jeremy Hans: Listen, when you don't watch it for a month or two and you go back, like, there's nothing you want to watch. Like, it's amazing how, you know, it becomes an addiction that you don't even realize when you stop, you know, doing some of that stuff that... [00:03:19] Sam Wilson: Oh, for sure. For sure. and again, you're building a lifestyle that you want. And I think a lot of people at times people use Netflix as an excuse to get away from the lifestyle they built. So, that's, that's awesome, man. Good for you. Tell me, when did you guys switch from multifamily to now syndicating RV parks? [00:03:35] Jeremy Hans: So we made a pivot, really at the end of 2021. We bought our first RV park beginning of 2020, kind of, we're not really planning to do it, just kind of a deal fell on our lap. And then a second one, the same. And then we looked up in the middle of 2021 and we said, Hey, COVID eviction were terrible. [00:03:48] Jeremy Hans: These deals for class C multifamily are getting really thin. The people are not getting any better, locations aren't getting any better, but these RV parks. They're making a ton of money. The people are happy to be here. They're growing by leaps and bounds. There's no information. Let's jump and do something a little bit different. [00:04:01] Jeremy Hans: So, we kind of had a hard conversation, lot teeth sucking and said, okay, let's do it. So, we said, let's sell off everything else. And let's put our full focus on this kind of macro trend right now. And we'll ride this until the wave crashes, I guess. [00:04:13] Sam Wilson: Well, hopefully the wave doesn't crash, but tell me, tell me what I guess what were the things that turned, you know, the deal fell in your lap, which I think is funny part of the story, like for most of us where all sudden it's like, oh yeah. And then there it was, and then I just did it, but it, there had to be enough compelling information that came your way as you guys dissected this first deal that said, man, this is where we need to go long. [00:04:34] Jeremy Hans: Right. So, you know, we kind of stair stepped it. Our first deal was an RV park, in the RV park space, wasn't an RV park, but it really looked, operated more like a, a mobile home park. And so we had to learn some of the complexities of the RVs specifically, but the actual model was much more mobile home park esque was something we understood and done for years. And in that process, we brought on our own in house management from day one. [00:04:53] Jeremy Hans: And so we had a little bit more flexibility. So then when we bought our second RV park, that was actually a traditional kind of resort style, you know, destination RV park. We kind of already had built half of the team necessary to run that thing. And so what has been hard for a lot of other people to switch to, which is you can't just call up somebody off of the internet to go run your RV park. [00:05:10] Jeremy Hans: We had already built basically half the system to be able to do that. And so, that second RV park is when we really realized if we kind of dig into this a little bit deeper, there's a lot of opportunity. And so that's when we really started, hey, to expand, you know, basically provide the same CapEx kind of turnaround that we did into a classy multifamily. Similar idea, right, into a hospitality product and just kinda watch that continue to succeed. And then macro, I mean, people want to do, you know, live on the road, remote work, ubiquitous internet's everywhere so people feel like they can do it now. People want to take, you know, midlife retirements, traveling with their kids for a year. [00:05:39] Jeremy Hans: I mean, van life, you name it. There's people that want to be on the road. COVID has changed, I think, a lot of people's outlooks on what travel looks like and what they want to be doing. And so, I think we're really meeting a demand that right now has not really been kind of eaten up by the institutional investors yet. [00:05:52] Sam Wilson: Right. No it hasn't. Why do you think that is? [00:05:54] Jeremy Hans: It's hard, right? It's hard because nobody has the management system in place to be able, in a box to go buy an RV park tomorrow, right? They're all different. They're businesses that require a lot more work. Totally could be in time as that people kind of build out these systems a little bit better, but until your hotel type spaces moves into the RV park space, I think there's going to be a lot of opportunity to kind of play that delta cap rates, which you still buy RV parks a lot better than you can buy mobile home park and make a lot more money. [00:06:20] Sam Wilson: Yeah, absolutely, absolutely. What's your long term plan with it? I mean, 'cause these are, these are known, like you said, for producing an excellent income stream. Is your idea to hold onto 'em in perpetuity? You going to package 'em all up and sell 'em once the institutions start coming in? What what's your long term play? [00:06:37] Jeremy Hans: I see myself as a deal junkie, right? And so at the end of the day, when somebody wants to pay me, what I would assume is too much money for them in the future, we'll likely package them together and try to sell them off to institutional investors. [00:06:47] Jeremy Hans: But I think the only place you can, the only way you can get to that is when you have years of experience, really solid system and some really good product. And so our process right now is to continue over the next two to three years to really try to buy as much as we can, update, systemize, make sure things are running really at peak efficiency, continue to scale and then be at a position to kind of see, hey, we want to hold these long term and we want to be the guys or, hey, we want to sell these off and go find our next big adventure. But I'm an adventure guy, so I can't claim that in 10 years or 20 years I'll necessarily be the RV park guy I am today. [00:07:15] Sam Wilson: Right. Understood. Understood. What does a deal look like in the RV resort space right now for you? [00:07:23] Jeremy Hans: For us, it's trying to provide an opportunity for us to provide value, right? So we want to create value. Typically that looks like some kind of expansion, typically some kind of ability to raise rents to a more of a market standard. That market is really fungible. It's hard to kind of tell where it's at, but trying to, you know, understand where that is and can we push it, providing other ancillary services that we can also get paid for. And I think the big one for us is just marketing and, and putting together business systems and processes. We're buying RV parks from people that don't have online booking, right? We're buying RV parks from guys who, you know, they've got the same lady that's running it for 20 or 30 years and she's doing a great job for what she knows, but she doesn't know how to use online, digital marketing, right? And so they're just leaving money on the table, 'cause they're not running like a business. And so if I could run a business where somebody else has had a hobby, I typically can find a way to make some money on that. [00:08:08] Sam Wilson: Yeah, absolutely, absolutely. Is there, you know, a geographic focus for you guys? Is there somewhere you say, hey, this is better than that? What is that? [00:08:18] Jeremy Hans: Yeah, so I think that's a funny question. Our company's name is Climb Capital, right, which is supposed to be like climb out capital, the idea of like flying, taking off, right? Climb out also kind proceeds, maybe climbing out of like a ditch. And so we just went with climb. [00:08:29] Jeremy Hans: But the reason we, we named that, right, both military aviators, my partner and I that founded it. We wanted to create a business that built a lifestyle that we wanted to have. So one, right, we both liked to RV. I met my wife, actually, growing up with my parents, you know, RVing, going on camping trips, but we wanted be able to buy an airplane. [00:08:44] Jeremy Hans: So we bought an airplane and we want to be able to have a reason to fly it. So we want to buy stuff in the Southeast. We're based out of Pensacola, Florida. We want to buy stuff far enough away that it convinces our wives that we need to keep this airplane. So really anything from Texas to the Carolinas and any place where I can go get a reason to fly away, a place. I want to be myself, right? So, tired of dealing with class C places, class C people, class C problems. I want to go buy vacation properties and vacation areas with vacation people and enjoy my life while I make a little bit of money. [00:09:10] Sam Wilson: So that's an interesting point and maybe a differentiator that you put on there was vacation properties in vacation places that you want a vacation. Is there a difference between the RV resorts you were looking at versus maybe something in a fly overstate? [00:09:24] Jeremy Hans: There's absolutely opportunities for destination RV parks in flyover states. You know, we're really heavy in places like Alabama. Some people don't think Alabama's like a place that you want to be, but we're doing great there. [00:09:35] Jeremy Hans: I think it's more of an issue of where does it kind of fit in the local kind of economy in both size location and distance to things that people want to be at. So if you're an RV'er or if you ever RV'd, you don't necessarily need to be right next to where you're trying to go, but you want to be close and close is relative. [00:09:49] Jeremy Hans: It might be an hour. It might be 30 minutes depending what you're looking. And so, hey, is there a draw? Is there a reason somebody want to be there? It's it near major highway? Does it have a water feature? And is it a place that I or my family would, would ever want to visit, are kind of the basic criteria that we look at. [00:10:02] Jeremy Hans: And if I had better criteria, there'd probably be a lot of more people in this space because there'd be a lot more data, but right now there's not. So I'm making my own and we're making it work. [00:10:09] Sam Wilson: That's it? That's it. And I think that's where the opportunity lies and that's, that's something that you know, that a lot of people are, it's overlooked because there's just, there is no data. There's not data. There's not good management. There's not, it's a, it's a very fragmented, I think, industry, which, you know, for those who are willing to, you know, be the front runners into it and pioneer the professionalization, if that's even a word, kind of just made it up, of the space, you know, as you, as you bring more, more of a institutional approach to owning and operating. [00:10:39] Jeremy Hans: I mean, this is, yeah, this is to us this is not an unknown, right? This is the same thing that happened in apartments 10 or 15 years ago, right. Happened to mobile home park seven or eight years ago, happened to sell storage, happened to short term rentals, happened to residential real estate. We're just providing the same opportunity, right, with a new asset class. And knowing that we have really kind of a short time, we feel like, before it is going to be institutionalized and that advantage kind of goes away and we'll have to go find the next asset, and the next thing to go, kind of find our niche in the world. [00:11:04] Sam Wilson: What is a, a deal that you would look at? And you'd say absolutely not. That is just a bad RV resort or park to buy. [00:11:12] Jeremy Hans: So for us, I think the biggest one is size. We want to be able to have a full-time property manager on site, and we don't hire property managers. We hire people that want to run businesses and we, you know, teach them how to be a property manager and how to run it. [00:11:23] Jeremy Hans: And then we let them have a whole, much more control than anybody's ever given that person, or probably use most of their employees, right? We find a lot of opportunity by having that super high trust. And so if we can't have a, a site that will ever make enough money to support that person and then still have any kind of profit on top of it, it's probably just not going to be for us. [00:11:39] Jeremy Hans: And then the second one is if it's really hard to get to and there's no reason to be there. I don't care if a lot of people have been there in the past. There may not be that anybody in their future, 'cause there's no reason to be there. So, for us, a lot of times I'd be like, you know, man camps, places that are, you know, work, you know, way out in the west, Texas or up in North Dakota, not a bad place. [00:11:56] Jeremy Hans: People make a lot of money on it. That's just not our business model. And so we try to stay away from places we don't think is a long term kind of defensible vacation investment if that makes sense. [00:12:03] Sam Wilson: Right. Right. Tell me about the long term component you said earlier that these functions to an, to a certain extent, sort of like a mobile home park. What did you mean by that? [00:12:14] Jeremy Hans: Well, so the first one we bought was 36 space RV park, had two rows, one road down the middle of it, and functionally people live there like they were mobile homes. So, one of the things that we kind of recognize is that we're trying to buy destination RV parks, where people have short term stays and they're, they're paying a higher rate for that shorter term. [00:12:29] Jeremy Hans: But we also know that based on the lack of affordable housing in this country, that we always have the opportunity, if things would turn and people just decide to not vacation anymore, which by the way, hasn't ever been a thing. But if people stop vacationing, right, we can always take either a portion or the entirety of that park and really turn it back into more or less an RV park mobile home park, which would allow long term renters. [00:12:48] Jeremy Hans: We might turn down what we provide for amenities or other services. But there's always kind of a baseline. Like, if you have it, somebody will pull in. And so for our long term spots, more than a month at a time, we typically have 10 or 15 people on the wait list for each spot, because there's just not enough places to park these RVs as if they've been printing 'em so fast and there hasn't necessarily been the same building for the actual RV park spaces. [00:13:09] Sam Wilson: Right, right. Are there, are there code considerations or municipal restriction considerations around converting an RV park to a long term stay RV park? [00:13:20] Jeremy Hans: I can't speak to everywhere. Generally, no, it typically depends on your zoning, but most of our zoning allows us to have longer term. We choose not to because we can get a higher, you know, return. [00:13:29] Jeremy Hans: And then generally as a business, we're choosing to not sign leases because just like a hotel, if you don't pay, you got to, we don't want to deal with the evictions. We don't want to deal with the government oversight and we don't want people to feel like that they're intruding on somebody's living space if they're coming to vacation. [00:13:43] Jeremy Hans: So if you want to pull out your your plants and you're starting to, you know, start guarding in front of your, your trailer, that's probably not going to be a place that somebody else is going to feel comfortable coming for a night or a weekend. And so we have to make that consideration too. And it takes, you know, I don't mind somebody that stays two or three or four months, even a year. [00:13:59] Jeremy Hans: Traveling nurses, traveling contractors, people that are on the road, working remote. Great. Just living there and just leaving all your trash out front, treating like mobile home park ain't going to work ours. So just kind of a business choice. [00:14:09] Sam Wilson: Right. And again, this, this goes back to the vacation theme. Like it's, that's a really good point that you don't, you want other people to come in and be like, oh, Hey, I belong here, not, oh, I'm intruding on somebody else's, you know, backyard barbecue. Okay, cool. That is really cool. What about amenities and things like that ?I'm sure every park you look at has different amenities. Are there certain amenities you find that bring value? Certain ones you'd say, man, that's that's, you know, we're getting rid of that on every park we buy, what's that front look like for you? [00:14:39] Jeremy Hans: I mean, it's really relative based on location and what the park is. For me personally, I, you know, I've got four kids. Like, if I'm going to an RV park, I want some water. Like, I need those kids to go burn some energy, get messy, you know, not sweat all over me all day. [00:14:51] Jeremy Hans: And so if there's not some kind of water feature, it's probably not a place for me, personally. And so that's probably not going to be a place for us, you know, professionally either. But besides that, there's nothing in the RV park space that I feel like I'm really strongly for or against. Generally if I can find a way to bring that in as part of the business and then not take away. [00:15:08] Jeremy Hans: You know, either from time or effort for my, my property manager, it's kind of an add on, then I'm always willing to try it. And then I'm always willing to throw it out. If it doesn't make sense, you know, we've tried to do like paddle boats and some, some rentals like that great idea. And then we found massive headaches of dealing with, you know, local municipalities on legalities and insurance. [00:15:24] Jeremy Hans: And so, Hey, okay, great. It's not going to work. We'll just take it away. It's not going to hurt my feelings. We're still there. But you know, it's just things like that. Just testing the market and being very willing to kind of continue to learn in a space where there's not a lot of information. And then we'll create that information over time and tell people in two or three years exactly how to do it. [00:15:40] Sam Wilson: Tell me about this classes of RV park, so there are similar classes like there is in multifamily or is, I mean, what's the... [00:15:49] Jeremy Hans: Well, there's, definitely, yeah, there's definitely kind of the, the, the high highs and the lows lows, the middles, definitely a lot more squishy. I would describe it. When you start talking about high end kind of RV resorts, where, you know, the, the RVs for a lot of these owners of those resorts have to be within 10 years or newer. [00:16:04] Jeremy Hans: And if they're not, you have to get, you know, special permission, or whatever that's tippy top, right? You're talking people that are spending, sometimes even buying condos RV spots, whole different business model than what I'm looking for, right? So we're definitely kind of more that B class family style park. [00:16:18] Jeremy Hans: And then when you start thinking about RV parks that look more like rundown mobile home parks, that's also not what I'm looking for. And so I've not seen a classification system that I love. It's kind of like, you know, when you see it you'll know. This is a place. This is a place for me. This is not a place for me. [00:16:30] Jeremy Hans: And a lot of that comes down to just kind of personal feel like would my family be able to comfortable here? If not, it's probably not for us. And if so, then let's keep digging and see if this is the right deal. [00:16:39] Sam Wilson: Right, right. No, that's I think that that's absolutely right. I mean, and again, the classification system probably largely doesn't exist because it is so fragmented. It is so mom and pop and it is so nuanced to, you know, to its exact location. [00:16:53] Jeremy Hans: And some of it listen, like, I don't want to stay at some places that are perfectly fine to stay, but it just doesn't meet my design or style or whatever, right? And so, if it's a place that, you know, really, you know, caters to motorcyclists, that's great. [00:17:04] Jeremy Hans: I'm a motorcyclist. I love it. But I probably don't want to stay at a park where it's got you super loud bike going off all night, Right? So there's so many kind of variability kind of steps there that it's tough to, to note. And if you've ever been to RV parks, even KOA, right? The KOA is around the country, which is a franchise RV park and campgrounds. [00:17:19] Jeremy Hans: There's a lot of variability in kind of the classification of how nice they are too, right? So a lot of it comes down to just your local who's running day to day and making those decisions to spend the money. [00:17:28] Sam Wilson: Love it. Tell me about your fund. You guys are launching an RV park investment fund. Tell us about that. [00:17:35] Jeremy Hans: So, so the idea here is that a lot of our investors want to get in the RV parks. We want them in the RV parks with us. When you start making a bet on an asset class, right? And you start trying to do that on an individual property perspective, you need a lot of data. So it's really easy to make an investment in the apartment space on a deal by deals, because you can really understand that data's really, really well, really granular. [00:17:55] Jeremy Hans: What we decided was, Hey, we think it's probably better for us and for our investors if instead of investors buying into each individual deal and it ran a place in Alabama or South Georgia, that they, Hey, let's take a bigger swing of the bat here, have a, have a bigger swath, right. Kind of make a bigger bet on the asset class. [00:18:10] Jeremy Hans: So that's what we're doing, we're doing a 20 million RV park fund and allow us to move a little bit faster, buy some of these deals with cash right away, and then refinance out to be able to move even better for some of these mom and pop owners who sometimes have very weird requirements for purchase and be able to kind of start moving a little bit faster and a little bit faster spend, a little larger scale than we would've had to go deal to deal. [00:18:28] Jeremy Hans: And we think for our investor base that they're going to be really happy by being in the asset class and then have some opportunities to get some broader you know, not only depth, but also breadth of what they're investing in. [00:18:39] Sam Wilson: Well, a 20 million fund, what would be the total assets under management that that fund could potentially absorb? [00:18:45] Jeremy Hans: We're looking probably 60 to 70 million would kind of be our, our expectation. You know, naturally we have kind of delevered as we move into RV park space. There's not the institutional capital that there is in the mobile home park, in the apartment space. And so we've already kind of naturally delevered just because we can't go lever up to 80, 85% on these deals like we could in the past. [00:19:03] Jeremy Hans: And so we'll keep a little bit lower leverage, one, because there's some unknowns in the economy, but two, that's just kind the natural kind of place for the space. And we're still making really good returns without having to go kind of unnatural leverage to get there. [00:19:14] Sam Wilson: Right. Man, and that's, that's absolutely, you know, as, as we've observed that space, that's one of the things we've found too. It's like, we don't, we don't have to go high LTV in order to juice returns. Like we can deleverage take some risk off the table and still hit exceptional returns. Like, that's a win-win. [00:19:32] Jeremy Hans: Yeah. Let's not tell anybody. But if you're listening right now, just turn it off. We didn't talk about this. Yeah. [00:19:36] Sam Wilson: I have no idea. No idea. Jeremy, this has been a blast, man. Thanks taking the time to come on today and really talk about the opportunities you guys see in RV parks. It sound like you got a lot of a lot of passions and a lot of fun you know, that, that you incorporate into your life. And I love the way that you've built a life of style around the life that you want. And, you know, like you said, Hey, in two or three years, you may be outta the RV park industry as a whole and made your exit and moved on. But, but you are very opportunistic and I love, I love the enthusiasm and the just go for it mentality you bring to the table. So thanks for sharing with us today. [00:20:10] Jeremy Hans: Absolutely. [00:20:10] Sam Wilson: Appreciate it. If our listeners want to get in touch with you and learn more about you and even maybe your fund, what is the best way to that? [00:20:17] Jeremy Hans: Easiest place to find us, of course, would be the internet. So going to climbcapital.com. You can always email me directly email@example.com. And I could be found in many of the major social media platforms to include some TikToks. [00:20:29] Jeremy Hans: Nice. I'll have [00:20:30] Sam Wilson: to look that up. TikTok, Jeremy Hans. There it is, folks. Jeremy, thanks for your time today. I do appreciate it. [00:20:36] Jeremy Hans: Thanks guys. Thanks for having me.
Colby fryer civil engineer that is now a multi-family investor, specializing in C and B minus class assets. And the Principal and Founder of Mountain Bridge Capital, a Multifamily Investment Company specializing in apartment real estate. With a goal to maximize returns for their investors and provide a stable income source for them over time. Colby and his team are very passionate about providing clean, comfortable housing for people across the country in need of housing. Highlights: [00:00 - 06:04] Colby Fryer: Multi-Family Investor, Specializing in C and B Minus Class Assets He started investing in 2013, bought six houses and then decided to get a coach and mentor to help him transition into the multifamily market. Since then, he's invested in over 136 units of multifamily, which has been an exciting journey. One of the biggest challenges he faced was learning how to overcome uncertainties when investing in C and B minus class assets. He recommends reaching out to family and friends for help when starting out, networking with brokers, and doing your due diligence. [06:05 - 11:49] Colby's 4,000 Door Goal Colby's team is now focusing on turning the property around and getting it rented again. They are expecting to increase rents by 50%. He shares that they are looking to transition out of the real estate business within the next few years. [11:49 - 17:33] How to Succeed in the Real Estate Market in Today's Economy Colby discusses how he scaled into the multifamily space, from no deals to 136 units in a year and a half He recommends starting with lower returns, but going with something that is already done if possible Mentorship is key, selecting someone who is not a guru but will be a mentor [17:34 - 18:50] Closing Segment Reach out to Colby Links Below Final Words Tweetable Quotes “I think once you start doing it and you talk to a few people, it gets easier and easier. And, I think you just gotta own up to who you are and. What you're really doing and you have to come up with that new identity.” - Colby Fryar ----------------------------------------------------------------------------- Connect with Colby on LinkedIn or email him at: firstname.lastname@example.org Connect with me: 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 → email@example.com Want to read the full show notes of the episode? Check it out below: [00:00:00] Colby Fryar: I think once you start doing it and you talk to a few people, it gets easier and easier. And, I think you just gotta own up to who you are and. What you're really doing and you have to come up with that new identity. [00:00:12] Colby Fryar: I'm a, apartment investor now I'm not civil engineer. I'm not whatever else you have to identify that with yourself and when you do that, That really changes the game for you and helps you to connect with people. And people want to help you if they trust you and they like what you're doing. [00:00:29] Sam Wilson: Colby fryer is a multi-family investor, specializing in C and B minus class assets. Anything over a hundred units, Colby. [00:00:49] Sam Wilson: Welcome to the show. [00:00:49] Colby Fryar: Awesome. Thank you for having me, man. Appreciate [00:00:52] Sam Wilson: the opportunity. The pleasure's mine. 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. [00:01:00] Colby Fryar: My background's in civil engineering doing a lot of construction project management. [00:01:05] Colby Fryar: So it really transitioned well into what I'm doing. In, multifamily. So we started investing in single family in 2013 bought six, six houses and then decided, well, that's not scaling as much as we like to be. So jumped in, got a coach and a mentor and over a year and a half ago. And. Right now we're sitting at over 136 doors of multifamily. [00:01:29] Colby Fryar: So it's been a journey, really exciting. [00:01:31] Sam Wilson: I'm sure it has. I mean, going for C and B minus class assets and coming from the engineering perspective, everything I know about engineers tells me that you guys really like to know. Like to a very, very fine degree, what it is that's going on. You're getting into C and B minus or class assets and there's quite a bit of uncertainty, I would think sometimes when you're investing in those projects, how do you overcome that? [00:01:57] Sam Wilson: Yeah, so [00:01:58] Colby Fryar: It was huge to have the guidance of a coach and a mentor through the process. Somebody that had been through that a little. But yeah, there was definitely some challenges to learn and having that engineering background, you like everything lined out and kind of organized in a package and this business is not that way. [00:02:18] Colby Fryar: You kind of put things together on the run and, it's crazy sometimes but well worth it just a lot of challenges to overcome [00:02:25] Sam Wilson: for sure. Right. And having a mentor is one thing. What do you feel like some of the questions were that you had early on that were like, I guess, things that made you concerned about your next steps in this business. [00:02:38] Colby Fryar: some of the big things were how are we gonna get money? how are we gonna find the deals, all those things that you have to wrap your head around. And, you kind of have to do a little bit , of both. And so the big thing for us was to start reaching out to family and friends and just let 'em know what you're doing. [00:02:56] Colby Fryar: Tell everybody, and so you start to build those relationships, start to network with people. , and that was really big for our first capital race that we did. , but at the same time, you're, meeting with brokers and so I find that's important for an investor. You don't want to just be a one trick pony show. [00:03:13] Colby Fryar: Or have one, wear one hat per se. You want to be able to do multiple things when you're starting out. I think that drives a lot of value, brings a lot of value to a team in order to get involved in this business. How did you [00:03:27] Sam Wilson: select your first market? [00:03:30] Colby Fryar: So our market kind of came through my network and the mentorship group that I was in. [00:03:35] Colby Fryar: Also I'm from New Mexico. So I grew up there and knew Albuquerque well, which was our first multifamily asset that we purchased. And then Las Cruces. I went to college there. So a lot of background in the state and familiarity with the market. And so that, that really helped. [00:03:55] Sam Wilson: Right, right. [00:03:56] Sam Wilson: absolutely does help. Tell me about this. I mean, know, you went from single family investor in 2013 and 2019, or I can't remember when you said it was, but you decided, Hey you're gonna go into multifamily. Was there ever consideration of any other commercial real estate asset classes? [00:04:09] Colby Fryar: not really. I. looked at mobile home parks. I had looked at a little bit of office space in terms of businesses and that sort of thing, really like the mobile home parks and not opposed to that may do that someday. Storage. I've seen that a little bit, but I think multifamily was really what we wanted to focus on. [00:04:29] Colby Fryar: I think you can get, if you start looking at too many things, you get that, shiny object syndrome. And then, and I think that takes away from your focus sometimes. And I think, especially to start with, you need to just focus on one. And that was why we went with multifamily. Just great asset, I think in terms of cash flow, stability through recessions just can't beat it. [00:04:52] Colby Fryar: Right. And [00:04:53] Sam Wilson: that's why we chose it. Absolutely buying C or C and B minus assets, probably more in the C class assets. This question may be framed, but how did you know, I guess when you're looking at those assets, there, there can be in what we call a lot of hair on the. How did you know, you could turn 'em around. [00:05:09] Colby Fryar: Yeah. That that's a good point. And we always heard that you gotta be really careful when you go into those types of deals. especially on the C class, you gotta really do your due diligence, but, our main focus was just really trying to get a deal. And this seemed like a great opportunity. [00:05:27] Colby Fryar: And that's the thing with these C assets is even though there's a lot of hair out on 'em, there's a lot of opportunity there because you have the value add. And so if you can turn those assets around, you can typically get 'em at a pretty reasonable price and then drive that value, increase the value which can really help your investors. [00:05:45] Colby Fryar: Now. Other side of that, there is increased risk with those investments which we've learned a lot about. [00:05:51] Sam Wilson: Tell us a little bit about that. I mean, is there anything you can, as you kind of review, the last year and a half, is there anything you feel like you could've done better or that you would do differently? [00:06:01] Sam Wilson: Yeah, [00:06:01] Colby Fryar: I think during our due diligence, we could have done a lot better job. There was some things there we could have seen. And I'm talking about our bigger deal in New Mexico that we did. It was a syndication. This particular deal, like you said, had a lot of hair on it. and when we visited the properties and did our inspections, I think we missed out on, on seeing some of the issues there were, that were there with tenants. [00:06:24] Colby Fryar: We had some, some problem tenants that we had that we're having to deal with now. And, there was some signs we missed, like broken windows and other things that, that could have really helped us when we started. [00:06:38] Sam Wilson: What would you do in that case? If you could go back and say, Hey, look, there's problems, tenant it's on this property, you see these broken windows. [00:06:45] Sam Wilson: How would that have changed the conversation either with the seller, with the broker or even amongst your team [00:06:50] Colby Fryar: Yeah. And we did have those conversations. Some of it was going on, but I think, I Really would've got some like a contractor or really know person that was knowledgeable in that space property manager to go visit the property with us and really give us an idea of, Hey what exactly are we gonna run into here? [00:07:08] Colby Fryar: And, that, that would've really helped. Of course you never know exactly. Sometimes you just have to go with your gut, but. But I think that's what we would've done differently, for [00:07:17] Sam Wilson: sure. Right. And so let's say they came to you and said, all right, Colby, you got some problem tenants here. It looks like you're gonna have a really hard time collecting rent from them. [00:07:26] Sam Wilson: You may have a higher than normal vacancy. What would've been your next step as you look to the deal. [00:07:30] Colby Fryar: we probably would absolutely have gone to the seller and, talked to him about how we could possibly resolve some of those issues. Maybe negotiate on the price. That sort of thing. Yeah. I think that would've been really good. [00:07:44] Sam Wilson: So I guess, what steps then let's ask this, what are you guys doing now? What's your active plan? Because these are things that people can learn from and say, oh man, they've got vacancy to property. You've got problem tenants New Mexico, as far as I know, isn't necessarily a landlord friendly state. [00:08:00] Sam Wilson: Maybe correct me if I'm wrong. I don't own anything in New Mexico. But, what's the plan going forward? How do you guys overcome those challenges now? [00:08:06] Colby Fryar: Yeah it's sort of in between, it's not landlord friendly, but it's not tenant friendly, the most tenant friendly. Okay. But, yeah, so the steps that we're taking now is, we, our property managers done a great job of getting problem tenants out. [00:08:20] Colby Fryar: And so our effort now is just really focused on market. Advertising and filling up our units and turning the units, getting those ready to go. So we do have a little bit higher vacancy, but that's our main focus is turning that around as quickly as possible. [00:08:37] Sam Wilson: Right. Right. And have you guys been able to achieve rent bumps with this property as you do renovations? [00:08:43] Sam Wilson: I mean, is that the [00:08:44] Colby Fryar: value you add plan? Yeah, there's been for renters there, so that's been good. So our, we expected to increase our rent to six 50 for one bedrooms and seven 50 for two bedrooms at this property. And we've been able to do that very successfully. That's [00:09:00] Sam Wilson: really cool. [00:09:02] Sam Wilson: That's really cool. Tell me about raising money. I know you said that you've gone out, you've talked to all your investors or family and friends. Was that a hard conversation initially? Especially without a track record in the space or what how did you work that out? [00:09:15] Colby Fryar: Yeah it is it's, especially coming from an engineer, more of a introverted type person. [00:09:21] Colby Fryar: So it's, it's something that's a challenge for sure. And, but I think once you start doing it and you talk to a few people, it gets easier and easier. And, I think you just gotta own up to who you are and. What you're really doing and you have to come up with that new identity. [00:09:37] Colby Fryar: I'm a apartment investor. Now I'm not civil engineer. I'm not whatever else you have to identify that with yourself. And when you do That really changes the game for you and helps you to connect with people. And they, people want to help you if they trust you and they like what you're doing. [00:09:54] Sam Wilson: Yeah, absolutely. Yeah. Coming from the civil engineering background was what was the tipping point for you? And you could walk away from being a civil engineer and go directly in actually [00:10:05] Colby Fryar: haven't walked away, still doing that, but, still working the W2. my plan is to transition out over the next couple of years. [00:10:11] Colby Fryar: but you know, that's kind of a tough thing too. Cuz when you're still working, people are gonna ask you. Oh, so what do you doing? I mean, you gotta tell 'em. But it's not the first thing I identify with. I always say I'm investing in multi-family properties. Right. And if they ask and I say, yeah, it still work, but I'm transitioning out over time. [00:10:30] Sam Wilson: Right, I think that's great. And that's a good point. what's the plan for that? Have you hit a certain say, Hey, when we hit a certain revenue number, when we hit a certain number of assets under management, I mean, is there, have you kind of built the plan for the exit or is it really when you want to. [00:10:44] Colby Fryar: Yeah it's a plan. My plan is 4,000 doors in like in five years, I would like to obviously do less, less years for that, but that's the goal and what I'm pushing towards. And I think that would be the number that would offset set of income. Really, what I define as a success in this business is replacing. [00:11:05] Colby Fryar: Income that I'm making now with the passive income from real estate. And at that it's not the number of doors. It's not the money. It's just really will I, can I support myself and my family off the real estate and not have the job anymore? That's it right there. [00:11:21] Sam Wilson: Right. 4,000 doors in five years. [00:11:23] Sam Wilson: That is, an amazing goal. I love it. How did you guys select that number and what do you feel like you were going to do to achieve that goal? [00:11:33] Colby Fryar: Yeah, so the thought was, based on that number of doors and the income off of that using the syndication model that would offset my current income that I'm making. [00:11:44] Colby Fryar: It's a lot of doors for sure, but yeah, to get there, the main focus is you gotta take the baby steps. Okay. I gotta do this many deals. This year, this mini deals the next year. And so you set those goals and your priorities, and then you break that down on a more frequent level. Okay. I'm gonna underwrite this mini deals a week. [00:12:02] Colby Fryar: Put in this many Lois and so you start to build out your steps towards that progression just to make sure it happens. We're [00:12:09] Sam Wilson: seeing obviously an incredible amount of interest in really all real estate asset classes, but especially in multifamily seeing cap rates compressed, and we're also seeing rates go up, what are you guys doing in this environment to one, continue to find success. [00:12:25] Sam Wilson: And then how are you offsetting, those two kind of obstacles. [00:12:29] Colby Fryar: Yeah, that's a very good point. And it is difficult in this environment. It seems like there's a huge disconnect in what sellers are asking and what we're able to offer. Now, I'm starting to see that more and more, although they are, the sellers and the brokers are becoming aware. [00:12:45] Colby Fryar: That there is a change. But so what we're doing is to really look at ways to, to evaluate more deals. How can we scale this and really underwrite more deals? Because I think that's what it's gonna take. You're gonna have to look at more to get the one that works. It's not gonna be as easy as it was before [00:13:04] Sam Wilson: for sure. [00:13:05] Sam Wilson: Gotcha. So underwriting more deals is one of the plans. Is there, are you guys doing additional broker outreach? Are you doing yeah. Your own off market outreach? What, is there anything on that front? [00:13:16] Colby Fryar: More just working with more brokers and trying to build those relationships, looking at more markets to get the deal flow. [00:13:23] Colby Fryar: We're looking in Houston and other areas of Texas. Of course, New Mexico. Tucson has been a big focus of ours. We're also interested in Phoenix. We'd love to get something here in Tucson. [00:13:35] Sam Wilson: Gotcha. Gotcha. Very good. How have you guys defined, who does, what on your team? I think you said there's five of you, is that right? [00:13:42] Sam Wilson: Yeah. So, [00:13:43] Colby Fryar: Our team is made up of my, my partner, Danny and I we kind of handled asset management, property management, overseeing the property manager. The bank accounts and the meetings. And then also Les he helps with a lot of that. And then we have a couple other partners that help us on the money raise side, but they're active in the meetings as well. [00:14:02] Colby Fryar: So everybody has to be active on the asset management side doing something, right. So we kind of split up our duties, who handles proper manager. Handles, social media, the website different items. So we're kind of spread that out, but we really focus on the, money race part of it too. [00:14:19] Colby Fryar: All of us. [00:14:20] Sam Wilson: Yeah. Gotcha. That is really cool. If you were to say to someone else and they said, Hey, Colby, I wanna follow in your footsteps. And I like what you've done. You've gone from no deals to having 136 units. in a year and a half. What would be the first thing you'd tell 'em to do? [00:14:36] Colby Fryar: I would say, really, you just gotta, you gotta jump in. You're not gonna find the perfect deal I think, to start with. But, I think one thing that we did that really helped on our first deals, we found a deal that, Probably wasn't, the best revenue generating deal it, it didn't look that good on paper, but it, a lot of the work was done. [00:14:59] Colby Fryar: The CapEx was done on it. There wasn't a lot of hair on it. And so I would encourage people to possibly look into that. Maybe you get lower returns, but go with something that's already done. B class, if you can try C class, a nice C class that's fully occupied with stable tenants. I think that's really important on your first deal. [00:15:19] Colby Fryar: I don't think you want to get into something with a lot of vacancy. To start off with, [00:15:23] Sam Wilson: right? No, I think that's great. That's great advice there that there is, there is no such thing as the as the perfect deal. And I think that's what a lot of people are hunting for right now in, in, and you do need to be selective. [00:15:33] Sam Wilson: No doubt. As you said, there's, things due diligent, and I think [00:15:36] Colby Fryar: just if it cash flows, it, it it's reasonable. And you can make it work. I think go for it. It doesn't have to be perfect. [00:15:44] Sam Wilson: Right, right. No, I think that's great. That's absolutely great advice. Yeah. Wonderful Colby. I love what you've done. [00:15:50] Sam Wilson: Here so far, you've gone from you still are a civil engineer and successfully found a way to scale into multi-family properties. You guys are looking, you've got a clear game plan. You've got your team lined. I know you said early on that it was mentorship really, that helped you in the beginning, have the confidence to take the next steps. [00:16:07] Sam Wilson: Talk to us about that here as just kind of a closing thoughts on mentorship. How did you select cuz listen, you and I both know that there's a million, one gurus out there. How did you select somebody that wasn't a guru, but that really would be a mentor for you in the space. Yeah. [00:16:23] Colby Fryar: So my mentor Jens, he was, I heard him on a podcast and, I liked what I heard from him. [00:16:29] Colby Fryar: He was on rod Cleves podcast. and so we connected on bigger pockets. I had looked at a few mentors and I was actually thinking about going into Rod's program and the warrior group. I know that's a great group, but, I chose this group just because I knew it would be intimate and I'd get the one on one setting with my coach and mentor. [00:16:50] Colby Fryar: And I think that's important. I also think the network. Is important. So the size of the network and the people and the experience that they think that's a big thing to consider when you go into a program. But also the experience level really reach out to somebody that has experience and make sure that they're gonna be the one that's gonna be talking to you, working with you. [00:17:11] Colby Fryar: I think that's a, a huge part of it. [00:17:13] Sam Wilson: Right? Right. Absolutely. Absolutely. I think that's those are awesome. Very, very valid points as. Review and people, a lot of people wanna know that. I mean, there's a lot of programs out there and not, no two programs are created the same and no, no two programs are for, for everybody or no one programs for everybody. [00:17:29] Sam Wilson: So I love absolutely love hearing how you made that selection. Is there any other closing thoughts that you'd like to share with our listeners or pieces of advice that you would give them? [00:17:38] Colby Fryar: just be persistent and keep going. Don't give. I think there's deals out there. You just gotta be willing to meet with brokers. [00:17:45] Colby Fryar: I think the big thing with brokers is to get in front of 'em sit down with them, meet 'em for lunch. And I think that'll really help. They they'll know you're serious and wanting to. you're gonna be a player , in the game, [00:17:58] Sam Wilson: right? I think that's great Colby. If our listeners wanna get in touch with you or learn more about you, what is the best way to do that? [00:18:04] Sam Wilson: They [00:18:04] Colby Fryar: could reach out to me at Colby @mountain bridge capital.com can email me. I'm also on LinkedIn, Facebook and my website's www dot mountain bridge, capital.com. Do have an ebook in the works. So look that will be coming soon and look forward to getting that out there. [00:18:21] Sam Wilson: Awesome Colby. Thank you for your time today. [00:18:23] Sam Wilson: I do appreciate [00:18:24] Colby Fryar: it. Thank you.
Planning to get the deal requires consideration of a strategic exit too. In this episode, Sam Wilson talks about his investment and exit strategies, avoiding mistakes in the future, and how important it is to make sure that there are out clauses in contracts in order to protect oneself. Listen closely as Sam provides listeners with valuable advice on how to make life count by doing the things that don't always count. [00:01 - 13:36] How to Secure a Contractual Agreement with SellersHave reasons for walking away from a deal, even if it's difficultSam discusses his background in the real estate spaceSlow down and get to know the seller before getting into a contract[13:37 - 18:36] Simple Contracting Tips to Protect Yourself from Multifamily MisstepsHave a written contract that outlines the terms of the dealHave an exit strategy and ensure to understand the seller's motivation to sellContracts should be simple and easy to read, with no hidden fees or penalties[18:37 - 20:06] Closing SegmentMake life countFinal words Tweetable Quotes:“There are unfinanceable deals out there. So, you know, whatever your reasons are, make there's enough in there that's broad enough to get out of the deal… Don't be like me who is afraid to walk away from deals.” - Sam Wilson“That's the thing about mistakes. I think that entrepreneurs, in particular, are willing to fail… And we're going to fail… And when you do that, you just got to be able to learn from that lesson and remember those mistakes.” - Sam Wilson Learn more about Myers Methods of Multifamily Investing: http://bit.ly/37u6oK3Register for Myers Methods Multifamily Investing Course: https://bit.ly/37iozkBLearn more about the Mid-Atlantic Multifamily Conference: https://bit.ly/2V7SlCCSupport the show
Finding investors is easier than we think. In this episode, Ace Karimi reveals the secrets to getting investors interested in your deals. He is the co-founder of Invest Capital, a real estate investment firm that is dedicated to buying A and B apartments to provide double-digit returns to its clients. Ace goes to the nitty-gritty of their unique syndication model, how they are turning around projects with heavy deferred maintenance, and the importance of setting the right expectations with investors to increase the chances of success. [00:01 - 06:47] Getting Out of the Hamster Wheel of Wholesaling and Flipping Making the leap from single-family to multifamily Ace breaks down their first deal Taking massive action and getting the word out Finding an asset that feels right Running the numbers [06:48 - 20:26] Building a Unique Syndication Model Presenting the offers to investors The #1 thing investors are looking for: when will they get their money back? Ace on asset management fees Taking on heavy-lift assets Offsetting refi risks Looking out for the worst-case scenarios Helping everyone to be an investor [20:27 - 21:50] Closing Segment Reach out to Ace! Links Below Final Words Tweetable Quotes “Just getting your name out every single place possible. That's the thing. It's like, you got to let everybody know you're buying unapologetically.” - Ace Karimi “Investors are hungry for deals. There's so much hunger and desire for just an opportunity, right?” - Ace Karimi “Money finds deals. Money's trying to find deals to go into and the only thing is you need is to have good enough deals that the money wants to be a part of.” - Ace Karimi ----------------------------------------------------------------------------- Connect with Ace! Follow him on Facebook, Instagram, and LinkedIn and visit the Invest Capital website. 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 → firstname.lastname@example.org Want to read the full show notes of the episode? Check it out below: [00:00:00] Ace Karimi: The owners, they don't care. Like, they're not looking after the property. They're just, Hey, I'll just take a check and whatever happens, happens, and property management's usually not involved. And you know, that's just, what's going on. Nobody really cares. Like, we care about our properties, right? My team's involved every single week. [00:00:16] Ace Karimi: We're on Slack. Well, we have a communication channel, 24/7. We do weekly pulse checks. You know, we're looking after our asset for our investors, but also for ourselves. That's always how I am with any business I do. I'm keeping my eyes on the prize. [00:00:41] Sam Wilson: Ace Karimi buys cash flowing apartment buildings through a unique indication model, and he teaches others how to do the same. In 2021, he bought 35 million in deals and they are growing. Ace, welcome to the show. [00:00:53] Ace Karimi: You're welcome, Sam. Thank you for having me. [00:00:55] Sam Wilson: Hey, man. Pleasure's mine. There's three questions I ask every guest who comes in the show in 90 seconds or less, can you tell me, where did you start? Where are you now? And how did you get there? [00:01:04] Ace Karimi: Wow. I like it. Rapid fire. So we started, I think three years ago, we, we jumped in from single family. [00:01:10] Ace Karimi: We used to do a lot of wholesale and flipping, pretty sure you're familiar with that, doing the hamster wheel, always hunting the next deal, next deal, next deal. Like, looking for those single checks, I realized we wanted a better way. We wanted consistency. We wanted predictability. So, we made the jump. [00:01:25] Ace Karimi: We made the leap one day. It was actually. Right before COVID happened, believe it or not. But we went really, you know, full all hands on deck. Like, Hey, we're not turning around. This is it. And that was the year that we ended up buying 35 million in apartment buildings through our unique syndication model in which we're able to give the investors, their money back a lot sooner, 24 to 36 months usually give 'em an infinite return while still kill while still keeping most of the deal. [00:01:51] Sam Wilson: Now that is really cool. So you guys went, went long in multifamily at the beginning of the pandemic. How long did it take you to get your first deal? [00:01:59] Ace Karimi: Let me think. So here, here, it's the funny thing is, you know, how you start doing it initially, you're kind of just looking at deals on a side here and there. [00:02:07] Ace Karimi: And if I look at it from that regards, probably like, I don't know, three four months, something like that. But when we really went like committed, Hey, this is it. We're going to find a way. It was like maybe 60 days. [00:02:19] Sam Wilson: Okay. Okay. That's pretty fast for people, you know, out there listening. I mean a lot of people we talk to on the show, just say, Hey, look, you know, be patient when you get your first be patient, you know, as it cuz it takes time to get your first deal. [00:02:32] Sam Wilson: What do you feel like you did differently that allowed you to find your first deal? So fast? [00:02:37] Ace Karimi: Massive action. [00:02:39] Sam Wilson: What does that mean? Can you define that for us? [00:02:41] Ace Karimi: Dude, just, just getting your name out every single place possible. I mean, that, that's the thing. It's like, you got to let everybody know you're buying, you know, unapologetically. [00:02:48] Ace Karimi: I was letting it be known. Like, Hey, I'm going to buy apartment buildings. And everybody that I was talking to, I was flowing up with them consistently. And I'm like, Hey look, do you have something for me? Do you have something for me? I'm looking, I have capital sitting right here. Then I eventually found one. [00:03:01] Sam Wilson: Okay. Tell me about the first deal. What, how big was it? What, what were the parameters of it? And, how did you know that was the one for you? [00:03:10] Ace Karimi: Oh man. So yeah. Great question. So, you know, your first deal, it, it means so much 'cause once you can really identify what a deal is, you know, it, it makes everything a lot easier for your second, third, fourth that, you know, the domino trickles down. [00:03:23] Ace Karimi: My first deal we got, we were at our first deal four different times. I had one down in Georgia. I had one down over in Maryland, like I'm in the east coast by the way. Right. I'm in DC. So I'm over here looking out of the area, which, you know, you're as an more of an inexperienced investor getting into multifamily, you're just looking anywhere and everywhere for a deal, which is a big mistake, right? And so, it was so many close times where the numbers looked good, everything looked good, but something just didn't line up. And we had to pass on it, which, you know, you have to have the discipline to do. And we ended up finding this deal that literally passed and checked every box that those other properties didn't right. [00:04:01] Ace Karimi: It was a 72 unit property, in my home state here in Virginia. So I'm right out of the DC Metro I'm in Northern Virginia. And great property. Beautiful, right? Still, it was like a seventies build, but it didn't look like it. Right. It just, you know, the owner had, was already starting to put a lot of CapEx into the property as we were looking to buy it, which was great. [00:04:22] Ace Karimi: Already started doing the windows, the roof and the plumbing work and a lot of the exterior stuff. So, you know, he was already getting that ball rolling for us. We, we came across the deal and it had a beautiful view of the mountains. Believe it or not, which was, you know, amazing. That's just one of the things that's like, it felt good. [00:04:39] Ace Karimi: I think that's one of the things that you just know of. It's the deal. Something feels good about it. It's in a great location. You're just like, dude, I would love to own this asset. Right. And then the numbers, like I, the numbers look kind of slim at first. Like, we bought it for 3.8 million. It was a 72 unit asset, right? Market rents were nuts. They were, they were at $600. And at the time, yeah, exactly. And at the time the, the rents in the market were like 900. So there was a $300 discrepancy. And now fast forward to now it, they went up to like 1100, by the way. So it we've got a big, big boost. [00:05:16] Ace Karimi: We came across a deal, you know, we, we had a discussion and we went back and forth and then we ended up, putting it under contract at 3.8 million, put $600,000 into the property. We knew we could drastically increase the value. So, we underwrote the valuation around six and a half million, I believe, conservatively. So there was, you know, there was a couple million in equity at play and from our modeling, we realized that, Hey look, we don't necessarily need to give up most of the meat of this bone. [00:05:43] Ace Karimi: It's, it's a heavier value add property. We have a lot of work to do, really have to, you know, roll up our sleeves. And so we used our own syndication model in that regard and we gave up a higher preferred return and we actually kept most of the equity for ourselves because of the work that was involved. [00:06:01] Ace Karimi: And we promised an 18 to 24 month principal return, which we're actually on pace to do that even faster right now we've already initiated our refinance and essentially that's it. And they get to stay in the deal in, in perpetuity and they get a hundred percent of their capital back and a check and they get to keep the press, you know, and they get to stay in the deal. [00:06:22] Ace Karimi: And on top of that, they get a, they get a check at exit. So it's pretty awesome. And our valuation, by the way, for this deals coming between 9 and 10 million. [00:06:30] Sam Wilson: I was going to say at a, 10 cap you're, based on the rent bumps, you know, I'm sitting here running your numbers behind and I'm like, okay, it's worth about nine and a half million bucks at a 10 cap. [00:06:39] Sam Wilson: Yep. I mean, so that's ridiculously, probably low, I would think, you know, actual valuation so that, that's really, really cool. Tell me, I want to hear more about the actual structure of how you brought investors in on this deal. 'Cause what I heard was that, did you identify and line out those terms, obviously on the front end? You said, okay, Hey, here's exactly how we're going to take this down because we just see huge runway here. And then I guess, break that down for me. Let's assume I'm, I'm an investor and I say, Hey Ace, I want to put a hundred grand in your deal. How does it work? [00:07:15] Ace Karimi: Oh, great question. So essentially, yeah. So, Hey look, we, we, if it's this type of a deal, right, it has to be a specific type of deal, but you know, I'd go into the conversation and be like, Hey, look, I have a great opportunity. [00:07:26] Ace Karimi: There's a lot of upside, you know, several hundred dollars of upside. We have several comparables to prove that. It's not just one or two, this isn't speculation. Like, this property has not been bumped up in a, in a while. Owners kind of had some deferred maintenance to it. There's a lot of work involved to go in there and to raise these up to market level, turn all the tenant base and we're prepared to do that. [00:07:47] Ace Karimi: But in order to do that, and to, to make this property worthwhile for everybody, we ran a numbers, you know, we're buying it at an incredible price, far below market value. And so here here's where it's going to be valued. In 18 to 24 months, we're actually going to be able to give you your full principle payment back and we're giving you a higher preferred return. [00:08:06] Ace Karimi: Here's a structure. And then I show them, Hey, look, you're going to be able to make, I don't know, 30%, 20, 30, 40% in that short amount of time. And you get your a hundred percent of, of your principle back, 'cause at the end of the day, what they care about most number one thing. Isn't how much money they're going to make. [00:08:24] Ace Karimi: And you know, those too, Sam, they care. How long is it going to take to get their money back? If I can tell them, Hey, look, I'm, I'm telling you right now, from what I'm seeing here, 24 to 36 months, you get all your money back, you get an eight to 10% pref, virtually guarantee it. You can't ever guarantee anything, but it's like, dude, you're, you're getting the pref. [00:08:42] Ace Karimi: All the money's essentially going to them. I'm working for you essentially. I'm not getting paid. I'm getting paid, maybe some fees, but the, the alignment with that is, is because there's not really going to be any cash flows during the, during the period of time. Most indications don't really have cash flows anyway. [00:08:58] Ace Karimi: So it's like, why, why does it even matter? But it, you let them know, Hey, look, I only really get paid when I do the, what I'm telling you is possible. You don't have to believe me and, and see the numbers that it's going to hit this metric. But you are going to have the security to know that. Look, you're going to get your pref. [00:09:14] Ace Karimi: You're going to get your principal back one way or another. And the only way I'm really going to get paid is on the backside when I increase the valuation up. And you've already got your money back in your pocket safely. [00:09:23] Sam Wilson: What is the investor split once you give them their money back? So you've done a cashout refi you've given 'em a 10, a 10 pref on the deal, cashout refi. I got my money back. What's your investor split going forward? [00:09:36] Ace Karimi: 30%. [00:09:37] Sam Wilson: Okay. So it's still a 70, 30 split. [00:09:40] Ace Karimi: Yeah. And they get the stay a deal. Exactly. [00:09:41] Sam Wilson: It's flip flopped in this case, most of the time, it is 70% to the investor. 30% to the sponsor. In this case, you're saying, look, if I can get your money back in 24 months, give you a 10 pref. [00:09:52] Sam Wilson: Of course the profit goes away once the capital is returned. At that point, you collect 30% of the upside on the cash flow and then upon disposition and you as the sponsor collect 70%. Do you guys, and again, I'm sorry, I'm getting in the weeds on this, but this, this is very different than what we see, you know, a pretty standard syndication model. [00:10:11] Sam Wilson: So this is why I kinda want to spend some time on this, just to hear that, give other, give listeners the idea that there's other options out there for how we structure these deals, you know? So, so you return the 30% to your investors, but do you guys take acquisition fees? Do you guys take other fees in the front end of these deals or do you wave all that just so you can say, Hey, you know what? We are truly getting paid only when we perform. [00:10:33] Ace Karimi: No, I still take the fees because, you know what, the reality is, like the kind of deal that I'm talking by here, by the way, they're not something that you just find. Like, we have to hunt for these deals usually, right? So if I'm hunting for these deals and I'm spending time, resources, money, months to follow up, like, this is something that yes, we will still take a feet on upfront. [00:10:53] Ace Karimi: You know, and, and it's not like it's going to go straight into all my pockets. It's, it's just the reimburse really for our soft costs, right. That that's not even money that we're really grabbing. And then on a second hand, asset management fee is just there to just take care of, of the asset management team in the meantime. [00:11:09] Ace Karimi: But it's really pennies. Like, this isn't like you you're really, you're not really doing this on a large scale that that's, that's the differentiation I want to make here. You're not doing this on like, kind of 80 to a hundred million dollar property. I, I think you could, if you find it properly, but you know, these are, these are, this model is great for somebody who's just starting out, who sees an opportunity with an asset that's got heavy, deferred maintenance and needs a lot of work. And you're like, dude, I could come up there, scoop up a lot of the equity, do a lot of hard work once, twice, grab that equity, give my investors a return and then go put it into something better. Does that make sense? [00:11:42] Sam Wilson: It does. So I guess that's the, that that's a follow on question to your investors. Heavy lift, heavy value, add, you know, maybe low occupancy, maybe there's crime, maybe there's a lot of those things that go along with, it feels like additional risk, you know, to a lot of investors. How do you frame that conversationto let them know, Hey, we can, we can make this work. And you know, the, it, it's not as risky as it may seem. [00:12:08] Ace Karimi: Oh, for sure, here's why our model still has certain metrics. It still has to be a B area, like C plus at the worst. I'm not going into the hood. Like, I'm just not, there's no way I'm going to go in there. You know, some people want do that. I'm not. Like, these properties still exist where they're in good areas. They are just mismanaged. They're just not they're, you know, they're not looked after properly and the right operator can go in there and turn things around. [00:12:34] Ace Karimi: And so at the end of the day, like if it's 40% occupied or something, I, I wouldn't really look at it too much. You know, like I'm not, I'm not taking on that much extra risk where I'm saying, Hey, look, I'm going to go into a D class area and take on a property that's low occupied. No, that, that that's just trouble. [00:12:52] Ace Karimi: We, we stay away from that completely. So there's complete no's that we do. Our, our properties, I did three of these in one year. They were all in over 90% occupied. Wow. And they were in good areas. [00:13:01] Sam Wilson: 90% occupied. [00:13:03] Ace Karimi: Yeah. [00:13:03] Sam Wilson: Submarket rents because the place looked like garbage. [00:13:07] Ace Karimi: Yeah, they just didn't treat it. Right, dude. And, and here's the thing it's like, and I, and I tell people this, and when they ask me, it's like the owners, they don't care. Like, they're not looking after the property. They're just, Hey, I'll just take a check and whatever happens, happens, and property management's usually not involved. And you know, that's just, what's going on. [00:13:24] Ace Karimi: Nobody really cares. Like, we care about our properties, right? My team's involved every single week. We're on Slack. Well, we have a communication channel, 24/7. We do weekly pulse checks. You know, we're looking after our asset for our investors, but also for ourselves. That's always how I am with any business I do. I'm keeping my eyes on the prize. [00:13:43] Sam Wilson: Right. And, and we bought one like that last year is just like, I mean, absentee owner, running to the ground. They didn't care. Didn't care. So I get it, you know, then again, they were making their money along the way 'cause they bought it, you know, eight years ago for a, for a... [00:13:57] Ace Karimi: Exactly. Dude, they're happy either way. [00:14:00] Sam Wilson: They're happy. They're clipping a coupon and the place looks terrible. [00:14:04] Ace Karimi: To be honest, you want to be them? Like, that's the funny, that's what I tell people. I'm like, dude, it's not that fact that I'm winning. These guys already won. They're like 8 to 10X-ing their money doing absolutely nothing. [00:14:14] Sam Wilson: Well for sure. For sure. They're also slumlords and those are the people that we want to get out of the business. So it's like... [00:14:19] Ace Karimi: That's true. That's true. [00:14:20] Sam Wilson: They're the ones that give us a bad name, so, and you're the one going in there and, and giving us a good name. [00:14:25] Sam Wilson: So you're doing, you're doing right. And I like that. Tell me about how do you offset refi risk, especially in today's rates environment. I mean, your business plan sounds incumbent upon being able to refi this property in two to three years. [00:14:39] Ace Karimi: No, I could also just sell it, too. Like that, that's always something we, we let 'em know, like, Hey look, 'cause because if you sell it, they're, they're, you know, they actually get a higher than average returns metrics. [00:14:48] Ace Karimi: It's usually like 3X, two and a half, 3X or something. So if we sell it, they're even happier. They're like, wow, I'm making all my money. But to be honest, they want that capital to be used all the time. So we, we always run at both scenarios. We present both in front of 'em here. Here's our plan A, it's to go and refi. But if we can't do that, if we saw here's what it looks like. And on one of our deals, it was flip flopped. We're saying, Hey, look, we're looking to sell this deal, but if we can get an above average valuation above higher than our conservative number, then we're going to get a refi. So we always run both scenarios 'cause it's like, I don't ever like having one exit and be enforced into a position. Not, not a way you want to do that, especially with these big deals. Yeah. That's usually it. [00:15:28] Sam Wilson: Right. Makes no, that makes sense. That makes sense. You could, you could always sell it. What is, I guess when you guys look at a cash out refi, are you maximizing the amount of capital you can pull out of the deal? Or is it, are you de-leveraging in some capacity or what's that. [00:15:43] Sam Wilson: How, how, how do you like to look at that? I'm sure it's on a deal by deal basis, but what's your general feeling around that? [00:15:48] Ace Karimi: No, no. The funny thing is, so this first deal that we just refinance, right? Like, we're going to only going to pull out 70%. You don't need to pull all of it out. I don't, I, I think, you know, definitely keeps some in the deal for just cash flows to always pay things off, you know? [00:16:02] Ace Karimi: You always got to be looking out for the worst case scenarios, man. I'm just like thinking in the back of my mind. Sometimes I'm like, okay, some crazy thing happens. I don't know, like you've got to have months where you're able to have reserves, something drop, something crazy happens, you know, like, you got to make sure you can always break even. You have extra months to pay things off. You do all this work. Like, what's the point, you know, you pull out 80% and then your, your margins are thin as it is. And you always need to keep it 98 to 99% occupied. It's not smart. [00:16:31] Sam Wilson: I hear you. I hear you, man. That, that makes a lot of sense. Ace, one of the things we talked about before actually hitting record on this was that you feel like finding investors is really easy to do. [00:16:44] Sam Wilson: That runs kind of counter to what a lot of people experience, especially getting started. Why do you say that? [00:16:51] Ace Karimi: One, it's perspective, man. I, I really think it's like just a perspective. Like I've always had that belief even before I raised any money. You know, when I was wholesaling and flipping, I think that's one of the things that I saw. [00:17:01] Ace Karimi: It's it's investors are hungry for deals, man. There's so much, like, hunger and desire for just a, an opportunity, right? They will jump on it. I've seen when I used to wholesale houses, 'cause a lot of times we flipped, but sometimes when we wholesale, if I send it out in an email link, okay. And I had a property with some margin, with some meat on the bone and they can make, you know, 15, 20% dude, you should see how often it would blow up my. [00:17:27] Ace Karimi: Hey, what is it going to take to get in this deal? What's it going to take? You let me know, give me the number. Hey man, I don't want to be in a bidding war, blah, blah, blah. And I'm like, dude, here's my process. If you want to get the deal, I need you to come and highest and best and stop playing around, you know, because I have the opportunity. [00:17:42] Ace Karimi: I want to build a relationship with you, but you're not going to come and undercut me. So it's a respect thing, right? You have to come from a place of, of respect of holding yourself in a way where he's like, dude, like I got to, I got to understand that this guy has the value and I'm trying to build a relationship with him. [00:17:56] Ace Karimi: You know, I always look to the future. Sometimes I'll even take a little bit less, but I always go with the guy that I felt better about, that I knew had more principles instead of going for the extra five grand, six grand on, on somebody I did not like, I didn't like the way they were carrying themselves and they acted like they could run me just 'cause they had extra money. [00:18:13] Ace Karimi: I don't, I, you know, it's like, it's always about principles to me. So when I saw that in, in wholesaling that people wanted opportunity, you know, and, or everywhere. Hundreds and hundreds and, like, that, that I had just in my local market who just wanted single family houses, you know, but when I started talking to 'em, they were also just down for any opportunity. [00:18:33] Ace Karimi: That's the thing is if people, if you have an opportunity to make money, money finds deals, money's trying to find deals to go into. And the only thing is you need is to have good enough deals that the money wants to be a part of. That's how it works. So like, now that I did my apartment building, I probably raised, I don't know, five, 10 million by now in really over in about a year. The thing is it's like, as long as you structure it clearly, they see the upside, they understand, to me, everyone is an investor and everyone should be an investor, right? Like, I have my shirt here, right? Like, like part of our mission in our business is to help everyone become investors. I've, I've invested my own family's money and on, on my properties, I believe in it that much, right? [00:19:16] Ace Karimi: Savings accounts for years, I have friends of family that are investing with me. They're investors. Everyone's got money stacked, stacked away. They just want to be like, that guy's an expert. I trust him. He's an authority, knows what he's doing and I feel good. And you set the right expectations and you just lay back. [00:19:35] Ace Karimi: You should, you should see the responses. They, some of them, they just do it 'cause they trust you. And then throughout the actual stabilization period, dude, they're collecting monthly checks and they're happy. They're not getting that from stocks. Where else are they getting that? You know? So just from the monthly dripper loan on 6, 7, 8% pref, dude, they're happy. I promise you. And then, and they don't even realize that like when I return their money and then I'm going to give them an extra check and refi, dude, their mind's going to be blown, right? But just the pref alone, like that's powerful. It is. [00:20:07] Sam Wilson: It really is. It really is. And that's, I got one of those texts from somebody the other day that just said, Hey, thank you. Thank you for giving me an opportunity to get outta the stock market. And get paid on a quarter. We, we, we do quarterly distributions, but get paid quarterly. This is awesome. Yeah, I really appreciate it. It's like, oh right. What you're, what you're doing is of value. Ace, thanks for the time to come on the show today and share with us what you've been doing, how you've done it so quickly, your perspective on , you know, finding investors is easy to do, how to take on a heavier lift project and yet still offset ,risk and, you know, really, your unique indication model. [00:20:42] Sam Wilson: I think that's really cool the way that you've kind of turned this on its head. And yet at the same time, are really attracting investors to your deals in a unique way. So, and congrats on that one deal that you've taken from basically four and a half million to a 10 million deal in a very short period of time. That is super cool. If our listeners want to get in touch with you or learn more about you, what is the best way to do that? [00:21:03] Ace Karimi: Social media is usually the best. Add me on Facebook, Ace Karimi, LinkedIn, Ace Karimi, and then on Instagram, @ace.Invest. That's it. I'm happy to provide the rest of the details to you. My email, if they have anything they want to talk about for sure. [00:21:19] Sam Wilson: Certainly we'll put all that in the show notes. Ace, thanks for coming on the show today. Certainly appreciate it. [00:21:24] Ace Karimi: Sam. Thank you.
For 12 years Andrew Leedom has been working successfully with his W2 job as a Structural Engineer, being a father, and finding he transitioned into commercial real estate specifically in self-storage. Highlights: [00:00 - 04:19] Transitioning from a Structural Engineer to an Investor in Real Estate Andrew Leedom is a husband and father to four kids. He transitioned from his structural engineering to investing in commercial real estate, focusing specifically on self-storage. [04:19 - 08:33] Self Storage: A Hot Asset Class The self-storage market is hot and there are opportunities to invest in this sector. Self-storage is a good investment option because it is a hot asset class and the market is consolidating quickly. It is important to make deals that are profitable and have long-term potential. [08:34 - 13:06] Trying to Focus on Projects that are Already Available Conversion of a 60,000 square foot warehouse to indoor vehicle storage Looking at deals where the market isn't oversaturated and there's still some demand Underwriting for an indoor vehicle storage facility Andrew shares about doing a feasibility study specifically on boat and RV storage He expects to start leasing within a month [13:06 - 16:11] Closing Segment Reach out to Andrew Links Below Final Words Tweetable Quotes “Going to the dealership Just making sure they know what we are doing and that we're here, that could assist them in selling the vehicles. If their customers know they've got a place to put them” - Andrew Leedom ----------------------------------------------------------------------------- Connect with Andrew Leedom on LinkedIn or visit their website at: Self Storage Stewardship Connect with me: 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 → email@example.com Want to read the full show notes of the episode? Check it out below: [00:00:00] Andrew Leedom: a lot of it will be word of mouth going to the dealerships and getting in touch with the folks that are selling the vehicles. Same thing with the RVs going to the RV dealers and just making sure they know that what we're doing and that we're here and, that could assist them in selling the vehicles. If their customers know they've got a place to put 'em. [00:00:31 ] Sam Wilson: Andrew Leham is a husband and father to four kids. He transitioned from his structural engineering w two to invest in commercial real estate, focusing specifically on self-storage. Andrew, welcome to the show. [00:00:41] Andrew Leedom: Thank you for having me, Sam. I'm glad to be here. [00:00:45] Sam Wilson: Hey man, pleasure's mine. There's three questions.I ask every ghost. She comes in the show 90 seconds or less. Where did you start? Where are you now? How did you [00:00:50] Andrew Leedom: get there? Well, where I started, I studied to be a structural engineer and did that for 12 years and transitioned to the commercial space about a year and a half ago. And currently investing in self storage and working with a. [00:01:05] Andrew Leedom: A group doing multi-family self storage, some hotel conversion stuff, but I'm focused on the self storage part of that. [00:01:11] Sam Wilson: Interesting. So you were a structural engineer for 12 years? Yes. What were you doing as a structural [00:01:18] Andrew Leedom: engineer? I got to see a little bit of everything. I did started my career off in the inspection world, doing some bridge inspections and transitioned to building design and then to waterfront design. [00:01:29] Andrew Leedom: So designing bridges, designing peers and waterfront structures doing some work for the shipyard port of Virginia doing some my, my latest job. I got to do some underwater inspecting, which was, A lot less glamorous than it sounds [00:01:44] Sam Wilson: right. I mean, you're like decked out in scuba gear doing other water inspections. [00:01:48] Sam Wilson: Oh, my word. Yes. That's that's wild. When you look at the difficulties of the projects you were designing and building and inspecting, and then compare it to self storage. Do you feel like you, you now it's much easier or is it just different. [00:02:05] Andrew Leedom: It's it's different, but you know, one thing that, that led me to pursue self storage when I was determining kind of between the various asset classes was the It's not an easy business, but it's a simple business. [00:02:19] Andrew Leedom: So the simplicity was very appealing. Both the structure as well as the business. I mean, the structure you're for drive up units, you've got a concrete slab and steel building. And not a lot of moving parts. So I appreciate that. [00:02:34] Sam Wilson: I bet you do. Yeah, I would think from a construction perspective, you're like, okay, this is really easy compared to say a bridge over an enormous river. [00:02:46] Sam Wilson: Yeah. Yes. That That is really cool. So you made a point there where you said some of the effect of, when you were, assessing the various asset classes. Trying to figure out which one maybe you wanted to pursue. What was that process like [00:02:58] Andrew Leedom: for you? I started off my investing career back in 2015 in the residential multifamily, a few duplexes Plex and through the years, saw that, real estate really is, there's nothing like it's it was doing. [00:03:12] Andrew Leedom: What I thought it would and growing but the time it was gonna take was gonna be a lot longer than I like. And so that was kind of what got me set on the commercial space. And I started just as a passive investor and some multi-family syndications and and then made the decision with my wife, that we were gonna make the commercial thing work. [00:03:31] Andrew Leedom: And so the start of that was just evaluating. Various various asset classes and really came down to three. It was multifamily mobile home parks and self storage. And so I just broke those down. I really like all three of those asset classes. I think they've all got a lot going for 'em recession resistant. [00:03:50] Andrew Leedom: Multifamily is the bread and butter it's, the everything's built on that. When I was looking at where I was with my W2 and just trying to figure out something that I could build and get my foot in while working a full-time job. I thought the multi-family space just with all the institutional money and the. [00:04:11] Andrew Leedom: How hot the space was gonna be a lot more difficult than the other ones and same thing with mobile home park, what led me, I, I really like that asset class. It really serves That affordable income and especially when you can own the ground and and lease the space. [00:04:29] Andrew Leedom: But really in that space, similarly, they're building and developing fewer and it's most municipalities aren't allowing 'em. And so. I just saw the competition growing and growing in that space as well. And so self storage was kind of where I landed, both what I mentioned earlier, just with the simplicity of the business model and the ability to really set up a business, to run remotely. [00:04:50] Andrew Leedom: So you're not as stuck in the location and with the self storage it's still several years behind multifamily in, in that the market is consolidating rather quickly. , it's definitely been the buzzword the past probably four to five years and is a hot market. [00:05:09] Andrew Leedom: But there's still a lot of potential right now, currently the market there, it's still over 50% mom and pop. And so there's that opportunity to have direct to owner contact conversations and really pick up opportunities direct from those mom and pop. Owners. And so that's where I felt like I could get my foot in the door and, focus more on the secondary tertiary markets and and get started. [00:05:34] Sam Wilson: Got it. That's that's really cool. Tell me at what point in time did you know you could transition from your W2 and what steps maybe would you recommend to somebody else thinking about that. [00:05:44] Andrew Leedom: Yeah. I the the W2 transition was was actually a mix. I closed on my. My first two properties last year, and both of them were from, mom and pop operators and really kind of run into the ground. [00:05:57] Andrew Leedom: Very low occupancy needed a lot of capital improvements. So I knew purchasing those. It was gonna take a while before the cash flow caught up to where I would be able to step away from my W2 job. Right. And so the plan was just to, to run them until we hit. Hit that break even point and be able to step away and, try to scale. [00:06:18] Andrew Leedom: But fortunately com I mentioned earlier community investment group, who I had invested in as a passive investor and they're local to me. And I've really grown to be friends with a lot of the guys in that group. And they knew what I was doing and. Had kept them up to date. [00:06:34] Andrew Leedom: And and so once I got to that point they offered me a position with their team and just said, well, why don't you just come and join us and start our self storage division? So you don't have to wait until. Wait until your cash flow catches up to where you need it to be. So you can take the jump and start doing this stuff full time. [00:06:52] Sam Wilson: That's cool. So you went, you, I mean you, so you're still a w two or did you go in as a partner? How did you [00:06:57] Andrew Leedom: arrange that? Yeah, it's right now I'm a 10 99, but also have some partnership on the deals. . Hi little girl. [00:07:05] Andrew Leedom: What are you talking about? I am talking about self storage. Can I come see you after I'm done? All right. Bye. Bye. [00:07:11] Sam Wilson: You know, Andrew, I think we might leave that in. That's that one that's super cute. And two, the reality of, what it takes to business, right. I mean that's right. [00:07:23] Sam Wilson: A lot the stuff from home there's kids in the background, there is transition there's just everyday life. So that's really cool. I love that. Fantastic. That's right. So you went to work with them, 10 99 you said, Hey, , we're gonna start taking down properties. Talk to me like what opportunities are you seeing right now in the market? [00:07:43] Sam Wilson: Self storage, like you said, it's a hot asset class. How are you guys finding opportunity? [00:07:47] Andrew Leedom: Yeah, really the market right now listed properties are just going for insane values and cap rates. [00:07:58] Andrew Leedom: And, , a few of the properties I've looked at recently are just these buildings, whether they're conversions or new development that go up and with where the market is, the developers are basically just listing these empty buildings and selling them for year three, year four performer numbers. [00:08:18] Andrew Leedom: Right. And so , when you're competing with that, it really takes making, creating deals. Either with trying to make those connections with owners directly we're still gearing up our acquisitions team and trying to accelerate. Build that out to focus just because we've been trying to focus on the projects we've already got in house. [00:08:39] Andrew Leedom: So, one of 'em that we're working on now is the conversion of about a 60,000 square foot warehouse to indoor vehicle storage and the back five acres doing a boat and RV enclosed covered, open storage trying to make that. Work with that. So, so yeah, as far as as far as the deals, we're, looking at some of those conversion type deals where you can get into markets where the market isn't oversaturated, there's still some some demand and trying to get in on that side where it's not, you're not purchasing an on market deal, but you're purchasing something where you can buy below replacement value do a conversion and and be up and running. [00:09:22] Sam Wilson: So how do you underwr. An indoor vehicle storage facility. I mean, it's not like you have all these, they're everywhere and you can go, oh, okay, cool. We'll just, we'll plug in the things that are normal. It's like, that's a pretty nuanced thing. How did you come up with idea and then how in the world do you underwrite that? [00:09:39] Andrew Leedom: Yeah it's been a process. Originally, being a self storage guy, the start was boat and RV and indoor climate control and maybe some indoor, just some indoor boat and RV storage. But the guys that I work with over at community investment group particularly the founder, Brad Newton, it's been a lifelong dream of his to have an indoor, like an exotic car. [00:10:02] Andrew Leedom: Storage, facility, club high end a place that has, like the executive lounge and just various amenities, detailing services attached to it. And so, it kind of morphed, I had, the underwriting started with, kind of splitting the space, but then we really came down to. [00:10:20] Andrew Leedom: We wanted the space to be dedicated to that and have the storage stuff in the back that we're developing, boat, RV some of the larger enclosed units. And so, we just did some research just throughout the country of other similar models and just looking at various various pricing models and and looking at the demand, we got a feasibility study done particularly more focused on the boat and RV side, but also just some of the other things in the area and knowing that, there really is nothing like it in our area and seeing seeing the success of other similar models in other areas. [00:10:57] Sam Wilson: Got it. So what's the timeline on that project? How what's the build out? What's the timeline? What's the cost? I mean, walk us through that side of the project. I'm really curious about this, cuz it's just not something we talk about a lot here on, on indoor vehicle storage, especially, exotic car storage going the higher end. [00:11:14] Sam Wilson: You're serving a very niche market, so yes. You hear kind of your thoughts around that and some of the parameters of the deal. [00:11:20] Andrew Leedom: Yeah. So we're we're set to close in probably little over a month. We anticipate a. Three month window for the finalization of architect design drawings some of the the building permit side of things. [00:11:34] Andrew Leedom: The land is already approved as far as the zoning for what we're proposing And then we've got a nine month window for the construction and build out some aspects will be quicker than others. Some of the, once we can get the demo and the site work done, we'll be able to start on a lot of it. [00:11:51] Andrew Leedom: but you know, things like the enclosed units in the back and the canopies really that's. Primarily a lead time issue. , once the materials are delivered, those go up pretty quickly. Right. So we're anticipating, being able to start leasing, a lot of, especially the outdoor stuff. [00:12:11] Andrew Leedom: Sooner than later. And, , and even within the warehouse, being able to have some of the space, where it's not, , we've got it split into some nicer places where are more like a showroom type feel and then other spaces where it's more just , parking , glorified parking. [00:12:29] Andrew Leedom: And so once we open it up and clean it out, we'll be able to utilize some of that space. , and then same thing with the back, once we have the site cleared and graded, then we'll be able to start some of the open parking while we're developing the canopy and enclosed, and then start Leasing all that up and anticipate having a pretty aggressive marketing plan to try to get a lot of this preleased and, and going as we're doing the construction, [00:12:55] I [00:12:55] Sam Wilson: was gonna ask that, how will you market this property for, especially the higher end indoor vehicle storage, how do you reach out and find people that. [00:13:07] Sam Wilson: Those vehicles that want to be stored. I mean, again it's a nuance and niche market. So finding those clients, I would think would be a pretty specialized. Art. [00:13:16] Andrew Leedom: Yes. Yeah. I'm not really in those circles, but we've got guys on the team that that run in those circles that have those cars. [00:13:23] Andrew Leedom: And so, I mean, a lot of it will be word of mouth going to the dealerships and getting in touch with the folks that are selling the vehicles. As well, same thing with the RVs going to the RV dealers and make, just making sure they know that what we're doing and that we're here and, that could assist them in selling the vehicles. [00:13:41] Andrew Leedom: If they. Their clients know that customers know they've got a place to put 'em. And so, so yeah, I mean, I think that's partnering with some of them doing some some online. Obviously, online marketing and Google ads, things like that where folks can find it. [00:13:58] Sam Wilson: Gotcha, man. That's great. I love that. If you were to rewind maybe five years and do one thing differently, what would it be? I [00:14:10] Andrew Leedom: would say Just to allow myself to dream bigger. It was one of those things. I mean, even just the idea of commercial real estate and multi-family syndications, self storage, all of these asset classes. For so long, It wasn't even in my realm of thinking, because that was just for those guys out there that are crushing it. [00:14:30] Andrew Leedom: And that's not something I could ever do. And so, I mean, it was the, that, Napoleon hill calls it the definitive purpose of really just making up your mind and making that decision to, we're gonna make it happen and whatever it takes, whatever training we need, you know, once my wife and I made that decision, Things just started falling into place. And I mean, you're still pushing through all those levels of fear and uncertainty and, I don't know what we're doing and trying to figure things out and just networking, meeting folks. [00:15:00] Andrew Leedom: But but I think just opening your mind to the possibility that if other people are doing it, then you can do it. Just as you take those steps and take action. The dominoes fall into place. [00:15:11] Sam Wilson: Wonderful. Andrew, I've enjoyed it today. Thanks for coming on the show and sharing with us, your journey thus far, look forward to keeping track of you and seeing where where the next few years take you. [00:15:19] Sam Wilson: So this has been a blast. Thanks for sharing with us today. If our listeners wanna get in touch with you or learn more about you, what is the best way to do that? [00:15:26] Andrew Leedom: Yeah, they can find me on LinkedIn or go to our website. It's www dot self storage, stewardship.com. And you can shoot me an email or reach out. [00:15:37] Andrew Leedom: I'd love to connect to your listeners. [00:15:39] Sam Wilson: Wonderful. We'll make sure to put that information in the show notes as well. Andrew, thanks again for your time today. I do appreciate [00:15:45] Andrew Leedom: it. Yeah. Thanks Sam.
Learn about the good and the bad of the self-storage space with our guest, Mark McGuire! Mark is a limited partner in 12 syndications ranging from multifamily to industrial hospitality and self-storage. He talks about how storage units are becoming an increasingly popular asset, why it's important to build relationships with brokers, and what bad investments to avoid in the market. Starting from the bottom of the ladder in his career, Mark also shares the lessons he learned as he worked his way up to success. [00:01 - 03:08] Taking Action and Following Up How Mark climbed the ladder to success Investing time with people smarter than us [03:09 - 21:03] What You Need to Know About Self-Storage Investing The self-storage industry is controlled by a select group of brokers This is the right way to approach and interact with them Comparing the first and the last self-storage deal he did Looking for locations The landscape then and now Mistakes multifamily investors make when transitioning to self-storage How Mark and his team position themselves and make moves in the current market The benefits of investing in self-storage What is a bad storage investment? [21:04 - 22:24] Closing Segment Reach out to Mark! Links Below Final Words Tweetable Quotes “Find someone smarter than you, go ask them what you should do next, do that thing, And then once you're done, let them know that you did it and ask 'em now what the next step should be.” - Mark McGuire “Self-storage is like the halfway house for recovering multifamily addicts.” - Mark McGuire “The people who are willing to pay the most are young females and young females want properties that are well lit, and that are aesthetically pleasing, and have a lot of security cameras.” - Mark McGuire ----------------------------------------------------------------------------- Connect with Mark at InvestingInMark.com and follow him on Instagram, Facebook, and LinkedIn. 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 → firstname.lastname@example.org Want to read the full show notes of the episode? Check it out below: [00:00:00] Mark McGuire: We've been in an atypical market where we've been up to the right for the last four years. So, you know, despite how poorly you've operated a deal or priced a deal like you could sell it just in spite of your knowledge base, but there will come a day when you reach the high water mark and then pricing starts receding. And then at that point in time, brokers are going to be calling you asking, what do you think this is? [00:00:33] Sam Wilson: Mark McGuire's biggest passion is wealth building and investing. He's a limited partner in 12 syndications ranging from multifamily to industrial hospitality and self-storage. He's invested in multiple private companies in the biotech, finance and AI spaces. Mark, welcome to the show. [00:00:49] Mark McGuire: Thanks for having me, Sam. I'm pumped, man. Excited. [00:00:52] Sam Wilson: Thanks for coming on today. Certainly appreciate it. Here's three questions I ask every guest who comes to the show in 90 seconds or less: can you tell me, where did you start? Where are you now? And how did you get there? [00:01:00] Mark McGuire: Yeah. So started in, as the maintenance guy, the assistant to the maintenance guy. So I started, if there was a bottom rung on the ladder, I think I started in the ground and currently now functioning as the chief investment officer at Hearthfire Capital. And we focus in the syndication of the self-storage space and, you know, my journey getting there was from, you know, doing all of the work that nobody else wanted to do and kept finding people who were smarter than me and asking them for advice and then executing on the advice they gave me and going back to them and saying, Hey, I did that, now what? If I could give one piece of advice, find someone smarter than you go and ask them what you should do next, do that thing. And then once you're done, let them know that you did it and ask 'em now what the next step should be. [00:01:48] Sam Wilson: And that is the follow-up that I think 90% of people miss is that, Hey, I did it. Lots of people are willing, lots of people are willing to say, Hey, you know, what do I do? And then they listen and it makes 'em feel good to hear what they should do. Then one, they don't do it. And then secondly, they don't follow up and go back and say, Hey, I did it, now what? [00:02:06] Mark McGuire: I mean? Yeah. Some of the smartest people that I know, people that have mentored me, you know, I've asked them after the fact, like, why did you choose to invest time with me? Because, you know, time is a resource that people who, it doesn't matter how wealthy you are, you can't make more of it. [00:02:21] Mark McGuire: You can earn more money. You can earn more time. And the answer that I got from multiple people is you were a dealer. You went and you did what I told you to do. And then you followed up with action. So take action. [00:02:34] Sam Wilson: Absolutely. That's an inspiring story. I think for all of us, I love starting, if there was a bottom rung of the ladder, I started in the ground. Did you, did you go to college? [00:02:43] Mark McGuire: I did three semesters, non consecutively, and never graduated. [00:02:47] Sam Wilson: I love it. I love it. That's one I'm my, now it makes the story even better. Tell me what you guys are doing today. [00:02:53] Mark McGuire: Yeah, so Hearthfire Capital, we currently own 12 facilities, about 420,000 net square feet buy, operate, manage, improve self-storage facilities. That's what we do. [00:03:08] Sam Wilson: That space has seen, I mean, as all, I think real estate asset classes have, have just seen an incredible interest from the institutional side of things. How is that changing what you guys do, your strategy, your return profiles. I guess I asked that question and then like, we'll start there got too many questions for you, but we'll start with that one. [00:03:30] Mark McGuire: Hey, fire away. It's interesting. I was actually just on a call before I hopped on here today with a broker in the space. Just asking them what they're seeing. 'Cause we've been, self-storage has really been controlled heavily by a small group of brokers. So it's interesting in self-storage, that's different from other asset classes is that it's not, like there's a bunch of people, especially everyone comes from multifamily. Everyone knows multifamily. It's the easiest one to get into requires the least amount of capital. There's the most amount of possibility, but there's not a lot of like good trophy properties. And they're, the brokerage of those properties is A, a lot of them don't ever get on the market that they maybe get limited bid at best. [00:04:10] Mark McGuire: But two, there's a lot larger pool of brokers competing for the inventory versus in self-storage, it's controlled by like eight or nine groups that really do the vast majority of the industry across the country. So when you get in with a couple of them, you prove that you can perform, you sign deals up on the front end. [00:04:29] Mark McGuire: You don't retrade them. You take them down on the back end, obviously, assuming that, you know, you didn't get lied to or debt didn't go up 200 basis points over the time in which you had it in your contract. That's how you get in with these people and self-storage is really controlled by a select view group. [00:04:46] Sam Wilson: Got it. So how did you crack that egg? If you're coming in is the new guys on the, on the block, like what would you say to somebody if they wanted to get in front of these people and actually become a credible buyer? [00:04:58] Mark McGuire: Yeah. So, you know what I would tell anybody who's looking to make that move, you know, reach out to them, sit down with them, tell 'em what you're looking for. And then when new offerings come in, that are what you're looking for, offer on them within like, you know, 24 to 48 hours. And, and if they don't work for you, tell them why that property wouldn't work and give them actual reasons, not just like, I don't feel like buying this today. [00:05:27] Sam Wilson: That is, and I hear that over and over and over. I think I've heard that 10 times in the last three weeks from guests on the show and it's something I just think that just needs to be reiterated again. I mean, I, I can't thank you enough for saying that, which is tell 'em, tell 'em why it doesn't work. [00:05:42] Sam Wilson: Communicate with your brokers. And I think that's, I need to go back and just kind of splice all these and put like a broker advice podcast together from about the last 30 guests and say, Hey, this is, this is how, you interact with brokers, 'cause it is, it is an interesting art and figuring out how to get in front of, and stay in front of them and what it means to be a valuable buyer to them. [00:06:01] Mark McGuire: And so many people misunderstand that they, they have the relationship with brokers confused. People think that brokers are supposed to bring them deals and, you know, brokers are out looking for deals, but the expectation of you telling somebody that you want something one time, A, is bad that, that's a horrible assumption that they're going to actually remember that they talk to you, let alone remember the specific criteria that you gave them. [00:06:28] Mark McGuire: And you want to find a way to bring value to them. 'cause sometimes brokers missed a mark on their pricing. And sometimes, you know, they look at it and we've been in an atypical market where we've been up to the right for the last four years. So, you know, despite how poorly you've operated a deal or priced a deal, like you could sell it just in spite of your, your knowledge base, but there will come a day when you reach the high water mark and then pricing starts receding. [00:06:51] Mark McGuire: And then at that point in time, brokers are going to be calling you asking, what do you think this is worth? And that's where the true relationship, it's a true two-way street at that point where they're coming to you asking, Hey, what would you pay for this and help me understand why because if they're not getting the pricing that they told a seller, they want to be able to go back to that seller and articulate why, what's changed in the market that's prohibiting them from executing on what they said. 'Cause it's an all about reputation and integrity and if you don't have those two things, you're out of the business. [00:07:19] Sam Wilson: Exactly. And you know, to the point, yes, you are a buyer. Yes, you are a quote client of the broker, but like you said, it becomes a two-way, the symbiotic relationship in the sense that you need them, they need you, yes, they get paid, but you also get paid by buying deals as well. So it's and it becomes very valuable when that last step, I think, occurs. Like you said, where they suddenly go, oh, okay. Hey, you know, Mark, what do you think about this? [00:07:43] Sam Wilson: Tell me this is a project we're looking at. What's it worth? And, and they'll, they'll smell. They'll smell it. If you, if you're not telling, you know, giving 'em accurate feedback, low balling 'em with something that, that doesn't make market sense. That's a cool point you make there. Tell me about your first deal you did, and then compare it to the last deal you did. And tell me how things have changed and maybe what you guys are doing differently from the first to the 12th. [00:08:07] Mark McGuire: So the first deal that we did with Hearthfire Capital or the first deal that I ever did relative to one that I just did with Hearthfire Capital? [00:08:12] Sam Wilson: Let's talk all self-storage. [00:08:14] Mark McGuire: Okay, cool. Very first self-storage deal we did, we purchased for, I think it was about 1.7 million. We're actually on market right now at 3.5 million to take that full cycle as we speak here. A lot smaller facility worth about a third of the value. And actually it's worth less than a third of the value. [00:08:37] Mark McGuire: It's just less, it's less decimal points. That's all it is at a certain point though, you know, if you're playing for big, for more decimal points, you got to really know your craft because when there's bigger decimal points, you can create more wealth. The process is the same, but the stakes are higher. [00:08:56] Mark McGuire: You want to kind of start a little smaller, so that way, if you do make a mistake, it, you don't get, I'm going to say totally crushed and knocked out of the game. Go a little smaller in the beginning and that one had no expansion. That one was just a pure revenue play, a pure, you know, optimization, doing some parking lot renovations and converting a particular area, the facility to climate control. [00:09:19] Mark McGuire: And the one that we just did, we bought a 31,000 square foot facility with a 34,000 square foot expansion that we'll be doing. So we're building 34,000 square, effectively taking this facility size to 65,000 square feet and upgrade in the class of that facility. [00:09:34] Sam Wilson: What was the purchase price on the 12th one? [00:09:36] Mark McGuire: Man, now you're testing me. The equity, I think, the purchase price of the, the 12th one was like, you know, dirt and existing facility was like 4.7 million stabilized values going to be in the eight or 9 million range. [00:09:55] Sam Wilson: Okay. [00:09:55] Mark McGuire: And the first one was 1.7 million going to three, three, somewhere between three and three five. We'll see how it shakes out. [00:10:02] Sam Wilson: Right, right. So, so yeah, I mean, obviously you're getting into bigger projects. It doesn't sound like you're playing for the 1.5 or 1.7 million dollar projects anymore. You guys are looking at bigger assets. Tell me on a square foot basis. Like I know 31,000 square feet, is that a small, I don't, I don't own, no, I don't own any, I have a passive investor in self-storage. I don't own any personally. So tell me you know, what's the size of a good facility for you guys? Like where do, where do the numbers make sense? [00:10:28] Mark McGuire: Yeah. So from a sizing, it really kind of depends because, and, and, and I hate to say that, but it's the truth. If you're already established in a market and you can get economies to scale by pulling a property manager from a local facility nearby, and then getting cost shares on the operations side of things, you can go and take that facility and that facility makes sense. If you're going to go and penetrate a new market and stand, set up a flagship, buying a 20 or 30,000 square foot facility is, is going to be challenging unless there's a big, like we're doing here a big expansion on the backside to really get that economy to scale. So if we're, we call them bolt on sites. [00:11:06] Mark McGuire: So if we're going to look at a bolt on-site, we would do 20 to 30,000 square feet. If we're looking at a flagship, it's going to have to be 50 to 60,000 minimal. [00:11:15] Sam Wilson: 50 to 60,000 square feet is a, okay, so that that's kind of the entry-level where you say, Hey, we're starting in a new market. It's gotta be at least 60,000 square feet. How have things changed on the buy side competitively? Like what, what's that landscape look like now for you? [00:11:31] Mark McGuire: You know, it's funny you say that literally that was the call I had this morning with a couple of brokers. I've been reaching out to some brokers I have relationships with 'cause we've been swinging and missing on some deals. And we're just getting outbid and it's, and like, these are deals that when we hear what these things are selling for, I'm like the IRR at the investor level was like 11%. Nobody wants them, invest in a private equity deal with an expansion component for 11%. That assumes everything goes right. If anything goes remotely wrong, you're toast. [00:11:59] Sam Wilson: Right. 11 became 4. Thanks at best. [00:12:02] Mark McGuire: Maybe at best. Yeah. So, you know, we're, like you alluded to earlier, there's a lot of capital pouring into this space and there, and this is like, I always say self-storage is like the halfway house for recovering multifamily addicts. [00:12:16] Mark McGuire: And it's everyone who's sick of chasing diminishing returns and doing stupid stuff to try to acquire a facility that's way overpriced and overbid. And you know, there's not a lot of meat on that bone, it's been picked over. Now all those people are coming into self-storage and people are starting to put non-refundable deposits, which is stupid. [00:12:36] Mark McGuire: And they're starting to do, you know, waving due diligence. Stupid. I mean, it's just literally like, let me just increase the risk factor as much as I possibly can and be as ignorant as possible so I can absolutely make sure to get burned. [00:12:52] Sam Wilson: Do you see, I guess that, and if, and if that's the way you, I guess that is the way you see it, is that eventually they will get burned Where do you want to be when that happens and how are you positioning yourself for that? [00:13:04] Mark McGuire: Well, I don't want to be competing for their deal. I don't want to be competing for the deal the first time, I want to be competing at it after they've lost their shirt and the bank calls their note because they don't make their debt covenants. [00:13:13] Mark McGuire: That's where I want to be. But we're right now, like in order to acquire, I mean, it's an off-market game right now. I mean, and self-storage has for a long time, been controlled by brokers and a lot of the inventory was traded by brokers. And self-storage didn't have that popularity. And I mean, there were times, man, these things are trading for 10 to 12 caps. And that same property that traded for 10 to 12 cap five to six years ago is now trading for six. Like, it's nuts. [00:13:44] Sam Wilson: Right. Yeah. It's absolutely insane. What are the economic things or the environmental moves that maybe have to occur for you to think that it will return to a point where you can then pick up these properties at a discount when these people can't cover their note? [00:13:59] Mark McGuire: So self-storage, what no one talks about in the whole recession resilient thing about self-storage, during 2008, 2009 as a part of CMBS defaults, self-storage was at 0.03%. That is three-hundredths of a percent. Like that's a lot of decimal places in, in front of the decimal, smallest. The next closest, I forget whether, I think it was industrial, I think was the next closest. And it was like, not even close. So self-storage has traditionally been low leveraged. You're talking 65 to 70% loan to value. And you have people that, like, it's not a lot of money. I mean, you're talking like a hundred dollars a month for a unit and the alternative is put it in your house. [00:14:49] Mark McGuire: Well, if people don't have the space in their house, they don't have the money or the income to go buy a bigger house. Guess what? A hundred dollars a month is cheap alternative. So that all being said, I completely forgot the question. [00:14:59] Sam Wilson: What has to happen economically for you? Because you had said, Hey, you see people taking a huge risk, people doing things, you go, gosh, that doesn't make sense. You guys are just, you're making this as risky as possible, paying the most you can. And when you get burnt, you can't cover the note. Then I want to be there to pick it up. [00:15:15] Mark McGuire: So what has to happen is that people don't do their due diligence and a new facility gets built in the three or five-mile ring that totally crushes that other facility who had marginal returns to begin with. [00:15:28] Mark McGuire: And they, and, you know, either they don't meet their debt service or they just barely meet their debt service and, you know, make it out, you know, by the skin of their teeth. But the deal returns are you know, super compressed. [00:15:40] Sam Wilson: Right. [00:15:40] Mark McGuire: So it, honestly, it just takes patience and time. [00:15:44] Sam Wilson: Yeah, absolutely. Tell me about, you know, again, but you just kind of stay on the economic times conversation. You've invested as in, as a, maybe even an active investor in industrial and some other asset classes. How do you feel like you guys are going to weather any, any economic uncertainty and really, why have you favored this asset class over another? [00:16:05] Mark McGuire: So self-storage just provides a really unique aspect to it where it kind of blends hospitality in terms of the dynamic pricing of the rates. [00:16:16] Mark McGuire: But it, it manages that and then has a better sticky factor that's more along the lines of multifamily. But it's got agility to it. So what I mean by that is people don't want to go and move their stuff. With self-storage, if you think about multifamily, right? And your rent is 2000 bucks a month, and someone says, Hey, I'm going to give you a 10% rent increase every six to eight months. [00:16:40] Mark McGuire: If you go from 2000 to 2200 to then, you know, 420 dollars within 12 months, you're going to be like, I'm out of this place. Forget it. Self-storage has 30-day leases. And, you know, if someone's unit rent is a hundred dollars a month and you raise it 10%, that's meaningful in terms of your revenue collected in your NOI. [00:17:02] Mark McGuire: It's not meaningful to the person who's renting the unit who has to then rent the U-Haul truck, pick up all their stuff and then go put it down somewhere else. At which point they may be able to find a place that's the same and probably not cheaper, probably more expensive. And then they got to take the time to move at all. Nobody wants to do that. For $10 a month, you're not moving that. You're not moving your stuff. [00:17:24] Sam Wilson: Right. Yeah. You're going to spend eight hours and 500 bucks moving all of it. And it's like, well, I'll just pay the 10 bucks a month to be done. [00:17:31] Mark McGuire: So then if you go and get another 10% rent bump in eight months, people were like, eh, I don't really feel like moving it for another, you know, $11. That's what happens. And this is how it's just like, you're just tweaking the dial and turning the heat up. And that frog doesn't realize that that water's getting hot. But man, before you know it, it's boiling, that frog is cooked. [00:17:50] Sam Wilson: Right. Right. Tell me about this. What are some storage units right now that you just look at and you go, man, I wouldn't buy that if it were free? What's some garbage out there on the market that makes a bad storage investment. [00:18:03] Mark McGuire: Man, so, you know, what's interesting is aesthetics are such a, an important part about self-storage. Self-storage was used to be marketed to the cheap and three or four years ago, people realized they started doing more analytics, data. [00:18:19] Mark McGuire: I'm sure it was always being done, but it became more widely understood that the people who are willing to pay the most are young females and young females want properties that are well lit and that are aesthetically pleasing and that have a lot of, they have security cameras and solid gates and fencing. [00:18:40] Mark McGuire: They want to feel safe at the facility, 'cause if they feel safe while they're there, then their belongings are safe and therefore it's a good place to rent. And if they have to pay more for that. So be it. That's sanity that's well spent. So a couple of things I wouldn't buy. A, a facility I could buy, you could, you could build an A class facility in, in an oversaturated market that can't support the rent and I don't want that facility. So a facility that's located in an oversaturated market and how do you know if it's oversaturated? You know, there's base rules around square foot per capita, and it's historically been eight to 10 square feet. [00:19:15] Mark McGuire: I think that's totally busted. It really depends on the three and the five-mile rings. You gotta really understand your supply-demand analysis and how to execute that. Once you execute that, or you understand that, like the 8 to 10 square foot per capita is a great 1% rule of thumb, if you will, for storage, but it could be six square foot per capita, but there may not be enough population there to support the demand. Or you got stuff that's built to the wrong sizes. So if you go in and when you're doing your supply demand analysis, you're noticing that this facility is way under-rented, but it's all five by fives and five by tens. And the, the, the market wants ten by twenties. [00:19:54] Mark McGuire: That's a facility that I don't want, like, 'cause you could be 50% vacant. You're like, oh man, there's so much occupancy I could use here. But if it's not what the market commands, unless you can convert it, I don't want it. And then, I mean, ultimately it comes down to, I want a facility that looks, that looks nice, or I have the ability to make nice. And if I can't, the turd is a turd all the way through, and there's no amount of polish that's going to make it sparkle. I'm out. [00:20:20] Sam Wilson: Right. That makes a lot of sense. No, that's really cool. I was just curious, you know, again, with the, with the buying frenzy, it seems like that we are in on so many fronts, you know, what it looks like or... [00:20:30] Mark McGuire: It's asset class agnostic, man, the buying frenzy doesn't care what asset class it is. There's just a ton of liquidity and there's sovereign money coming in now. Where these people, I mean, sovereign wealth funds where they're losing principle balance by not being spent. So these people were like, Hey, if I get 5% on my money, I don't really care. [00:20:47] Sam Wilson: Right. Yeah. That's, that's really, really interesting, but still even in that, even in that buying frenzy market, I'm always curious what those, who are active buyers, aren't, aren't buying and why. And you did a great job of kind of explaining deals that just simply don't make sense even right now. So thanks for doing that. Mark, thanks for taking the time to come on the show today. It was great to have you on learn about your business, what you guys are seeing in the market, how you guys are interacting with brokers, what you guys are doing to get deals sent to you. Again, I love the, you know, just the, the, the information you gave us about how to interact with brokers, how to stay in front of 'em and then, of course, your info there on mentors and how to be of value to them and let them know that you are actually doing what they're saying, and then get them to continue to pour into you by, you know, giving them feedback and following exactly what it is they say to do. [00:21:31] Sam Wilson: So I think that was all awesome information. If our listeners want to get in touch with you or learn more about you, what is the best way to do that? [00:21:38] Mark McGuire: Yeah, best way is investingwithmark.com. That'll put you right through our, our website and capture or contact form and or if you're in on socials Instagram slash investingwithmark. Facebook, same thing, LinkedIn, same thing. [00:21:51] Sam Wilson: Awesome. Yeah, we'll make sure we put those also in the show notes. Mark, thanks again for coming on today. I certainly appreciate it. [00:21:57] Mark McGuire: Awesome. Thanks Sam.
Ep. 573 Building Lasting Wealth with Multifamily Real Estate Andrew Cushman is a former chemical engineer who found his entrepreneurial calling in real estate. He started out flipping single family properties in Southern California. In 2011 Andrew transitioned to multifamily acquisitions and has successfully syndicated and repositioned over 2,500 multifamily units. Highlights: [00:00 - 06:58] Find the deal, the money will come there is truth to that, but there's caveats Andrew Cushman, decides to quit being a chemical engineer in 2007 and has since flipped houses full time in Southern California. Andrew and his wife decided to go into the apartment market and found the guy who had already done 18,800 units. They syndicated their first deal in 2011 and have since done around 26,700 units. One of the things they learned in their first process was that you need to have both capabilities - finding deals and raising money - simultaneously. [06:58 - 13:55] How to Scale Your Business When the Deals Are Harder to Find Andrew notes that the current market is much more competitive than in the past, with prices for properties increasing significantly. It is now necessary to have a good relationship with a broker in order to find and buy properties. There are many things that can be done to make brokers think of you first when looking for a property, such as being reliable and truthful, being consistent and predictable, and having a clear understanding of what you are looking for. [13:55 - 20:59] How to Put Yourself in a position where your broker thinks of you first Being top of mind. Not only because building an actual real relationship, but by knowing exactly what you want the brokers would exactly know what you want They think of you first when that thing shows up and that applies whether you're looking for any Real Estate Assets. [21:00- 22:27] Closing Segment Reach out to Andrew Links Below Final Words Tweetable Quotes “It's about being top of mind. Not only because you've built an actual real relationship, but by knowing exactly what you want so that they know exactly what you want.” - Andrew Cushman ----------------------------------------------------------------------------- Connect with Andrew Cushman by visiting their website at: https://www.vpacq.com/ Connect with me: 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 → email@example.com Want to read the full show notes of the episode? Check it out below: [00:00:00] Andrew Cushman: Find the deal, the money will come there is truth to that, but there's caveats, right. The assumption there is that you've built an investor pool, or if you haven't. The assumption is, well, you're gonna take it to somebody who has, and now you're going to be giving away either control or equity or something like that. Andrew Kushman has syndicated over 2,600 value out apartment units in the last 10 years. Andrew, welcome to the show. Hi, good to be here, Sam. Hey, the pleasure's mine. Thanks for coming on today. There's three questions. I ask every guest who comes in the show in 90 seconds or less. Can you tell me, where did you start? [00:00:47] Sam Wilson: Where are you now? And how did you get there? Is that 90 seconds [00:00:50] Andrew Cushman: for each or 90 seconds? Total, total. Ooh, geez. All right. well, I started back in 1977. My dad had a twinkle in his eye and, fast forward a little bit. I was a chemical engineer. Quit doing that in 2007 to flip houses, full time in Southern California. [00:01:05] Andrew Cushman: That was great, but it was the equivalent of another full-time job. Right. And so we want my wife and I, my wife's a business partner. We wanted to move into something that was more scalable and also provided more recurring income and had the higher probability of building lasting wealth. And so in 2010 we said, Hey, everyone just got foreclosed on. [00:01:26] Andrew Cushman: And they, so that means that no one can either can buy a house or wants to buy a house. Cuz they're all scared of it. We had a huge recession, which means we're going to be having probably a long expansion so that rentals should probably do well. So we went and found the guy who'd already done. [00:01:39] Andrew Cushman: 18, 800 units hired him as a mentor. Did our first syndication in 2011, it was 92 units on the other side of the country in Macon, Georgia. And. since then, I've been doing it full time and we're somewhere around 26, 2700 units. So [00:01:53] Sam Wilson: that is that's really, really cool. I love just you found something you liked and you stuck with it. [00:01:58] Sam Wilson: Was there ever any temptation along the way to look at other asset classes? [00:02:02] Andrew Cushman: No, not really. I'm a big believer and there's different theories on this when you're building businesses about having like, multiple businesses and diversification. And for us, we found the best thing is try to be really good at one thing. [00:02:15] Andrew Cushman: And that's what we're striving to do. I know guys that do multi-family and industrial and self storage and bunch of other things, and those are great investments and they've done really well. There's nothing wrong with 'em at all. Right. I. Feel like we know and understand multi-family and I feel like we're getting pretty good at it. [00:02:31] Andrew Cushman: And we wanna just get that much better. So stay focused, [00:02:34] Sam Wilson: right? No, I think that's really great. I guess, uh, talk to us about this process. You said, Hey, we're gonna go buy our first 92 units in 2011 syndication. Really? We're probably wasn't even a buzz word like it is today. [00:02:48] Sam Wilson: How did you guys take those down? [00:02:50] Andrew Cushman: That was a struggle. That first deal is a. Big part of why my hair is as gray as it is. and you're right. Syndication. Wasn't a buzzword. There was no one, Dave Al was like the one guy out there teaching people about apartments and that was it. [00:03:03] Andrew Cushman: There was no one else. There was no billboards in Dallas about how to become an apartment syndicator and So, we had, like, I, like I mentioned, we had started flipping houses in Southern California. And so we had some private investors that, if we bought a $400,000 condo I'd go to invest and be like, Hey, give us the money for this. [00:03:21] Andrew Cushman: We'll give you an interest rate and then we'd flip it and do all that. Right. And so we went into the, apart into the apartment world so that first one we bought 92 units for 1.2 million out in Macon, Georgia. And for anyone who's looked at a deal today, you're saying, well, wait, hold on, Andrew. No. You said something wrong. You said 1.2 million for 92 units. No, that was the price. [00:03:41] Andrew Cushman: I think as, again, works out to roughly 7,500 a unit that's. That's what the market was like in 2011, right? It's either really easy to get money and really hard to get deals, which is kind of today, or it's really easy to get deals and hard to get the funding. that's what it was in 2011, the market was at a bottom lots of distress and everyone was scared to death of real estate and no one wanted to touch it. [00:04:07] Andrew Cushman: And there was no liquidity and you couldn't get loans on a lot of this stuff. So the pricing reflected that so 1.2 million, and that included the rehab, the actual purchase price was 6 99. And the total that we needed is 1.2. And we had our mentor uh, we were a bit naive in terms of how easy it would be to raise $1.2 million. [00:04:25] Andrew Cushman: Back then it took us six months just, one investor at a time, 10,000 here, 50,000 there. And actually at the end part of how. Got there is we got the seller to carry a $200,000 note. So that we could at least get to closing and get it finished. And then we actually raised the last few pieces over the next few months after closing. [00:04:46] Andrew Cushman: So it was, a brutal process that first one. But wouldn't be here if we hadn't done it so glad we did. What [00:04:52] Sam Wilson: were some things you feel like you learned in that first process that you could help other people either, emulate or avoid. [00:05:00] Andrew Cushman: one of the big questions that you hear is, oh, well, do I get the deal first? [00:05:03] Andrew Cushman: Or do I get the money first? It's both work on your deal, finding capabilities and your money raising capabilities simultaneously. Don't wait until you have a deal. To then start talking to your investors, to potential investors. Then also don't go and get a big pool of investors, all excited about investing with you. [00:05:24] Andrew Cushman: If you don't have anything to ever show them. Right. So it's a simultaneous thing. And if you're like, well, but I haven't done a deal, so what do I talk to investors? Then? What you do is you look at deals, you analyze 'em, you put 'em together, you put together like a little package. [00:05:37] Andrew Cushman: And then when you're talking to people, say, yeah, these are the kind of deals I'm looking. Right. And you're not gonna, you're not gonna mislead people and say, oh, I'm buying this deal or anything like that. You're gonna say, you know what? I offered on this one. We didn't get it. But if we had, oh, it would've been a great deal. [00:05:52] Andrew Cushman: And I'm looking at lots more like it. Right. So be transparent and honest about it, but that's what you do while you're looking at deals. Then when you have one. Hey Sam, good news. Remember that deal that we looked at a month ago. I showed you that I didn't get, that was really good. [00:06:05] Andrew Cushman: I got another one just like it. And this time they accepted my offer. Right. So you build both at the same time. Right? Right. [00:06:12] Sam Wilson: Yeah. I think that's that's really valuable cuz that is, I mean you hear the find the deal, the money will come, which is nonsense. But I also like the idea that you said that you have to build, you have to find the deals as well, because it is, I've been in that season before where you've got loads of investors lined up and you've got nothing to give 'em and it's like, oh, well, hold tight while we go find something else, it's gonna take, if it's 90 days before I bring a deal to you, a lot of those people have already moved. [00:06:36] Andrew Cushman: Yeah. And, what you mentioned a minute ago, you hear that a lot. Find the deal, the money will come there is truth to that, but there's caveats, right. The assumption there is that you've built an investor pool, or if you haven't. The assumption is, well, you're gonna take it to somebody who has, and now you're going to be giving away either control or equity or something like that. [00:06:58] Andrew Cushman: Right. So yeah, you're, right. It's not just to find the deal. It's not like, field of dreams, right. Where everyone just shows up and everything's happy and fun. There's costs and caveats to that. So, these days the deal is the tougher part of it but. You want to scale both at the same time, either on your own or by partnering with the right person. [00:07:15] Sam Wilson: Absolutely things have changed. You're no longer buying 90, what'd you say? 92 units or 96 units for 6,000 bucks a door [00:07:24] Andrew Cushman: yeah. long gone. Well, we will not see that again. [00:07:28] Sam Wilson: I don't think so. I don't think so. I think one we've rented too much money to see that. And I just think it's things are very different right now. [00:07:34] Sam Wilson: It's a very competitive market and you guys are paying a lot more, probably adding a zero plus to a lot of what you're buying. If not, gosh, the zero times one and a half, probably how are you guys finding deals in a competitive market? So [00:07:46] Andrew Cushman: , it's kind of gotten a little better now, but for the last couple of years, we're averaging having to look at anywhere from one to 200 deals just to buy one And when I say, look at that means, at least put 'em through a screening process and, check things like median income and population growth and all of that. [00:08:02] Andrew Cushman: All of our deals, I don't, everything we've bought. And at least the last six years has been off market through a broker, meaning. It's a broker that we have a relationship with, and that knows what kind of markets and what kind of properties that we like to buy in. And that knows that if they connect us with the seller or owner, that they've built a relationship with that, we're not gonna make them look bad. [00:08:29] Andrew Cushman: But in reality, we're gonna have a high probability of being able to put a deal together. And then if we do actually get it closed. So it's just been nurturing those relationships, now over 11 years. But you know, candidly, we've done, we've bought three off market deals from one broker. [00:08:46] Andrew Cushman: In the last 12 months that I've just met for the first time, like 18 months ago. Right. So please, I just want, then the reason I say that is I don't want everyone to hear, oh my gosh, I gotta build relationships for 10 years before I get a deal. That's that's not true. It definitely, it benefits you over time as you persist with it. [00:09:02] Andrew Cushman: But we're finding. The best deals, cuz the broker , , I get direct calls all the time from people everyone's trying. Everyone tries to circumvent the brokers thinking they're gonna get a better deal. You might get one or two. But the brokers, they spend their lives. Like all they do is. [00:09:19] Andrew Cushman: Hunt down these owners and build relationships with them. And they, good, the good ones know every property. They know the state of every seller, what their intentions are. And the most effective way to to do a large number of deals is to leverage the relationships that they've built. [00:09:36] Andrew Cushman: Right. Right. One good broker knows every property in your city and can save you and them a whole lot of time. Now. That applies, I'd say, especially for 50 units on up when you start getting to smaller stuff I'd say between 10 and 50 units, that's where if you want to go direct to seller, it's a, I'd say it's a little bit more fragmented and a little bit more mom and pop, and there's probably some more opportunity for deals in that smaller space. [00:10:04] Andrew Cushman: But as you move up good brokers and good broker relationships really is the way to, to scale again, not saying you can't grab a great dealer to the other way, but for any kind of real volume you want those relationships. [00:10:17] Sam Wilson: Yeah. And it's certainly, like you said they devote their lives to this. [00:10:21] Sam Wilson: And this is really, I mean, the brokers control the market especially when you get into the bigger assets. So that's, you might as well just go straight to the store, save yourself some time. I mean, it takes an incredible amount of time to build the database. For an entire city, let alone, all the outreach, the cold calling, the whatever your method is to get that far. [00:10:38] Sam Wilson: So you might as well just go straight to the source and go to the brokers on those deals and nurture those relationships. Are there things other than being known as someone that can get a deal done and get it closed that you guys do to make sure that brokers think of you first? [00:10:52] Andrew Cushman: There's a couple things. One is, there's the I'm, I'm sure everyone's heard this before, but basically, you know how you do the little things is how you do everything, right? [00:11:02] Andrew Cushman: So be consistent and reliable and truthful in all of the little things. Right? So if you say, if you tell a broker they send you a property. and regardless of whether it's good or you like it or whatever, and you say, oh cool. they send you a property on Monday. You say, Hey, I'll get back to you on Wednesday. [00:11:20] Andrew Cushman: Get back to 'em on Wednesday. Right. And maybe, life happened and you haven't had a chance to look at the property on Wednesday, send him an email, say, oh, Hey, thanks for sending this. I really sorry. I wasn't able to get to it. Like I thought I would, I'm gonna look at it tonight. I'll be in touch tomorrow. [00:11:34] Andrew Cushman: Right. It's just feedback. another example is when you look at a property and this is me, most of them, and it doesn't work. Don't just delete it and leave the, leave. The guy hanging and I've heard I've had brokers tell us this over and over again. [00:11:46] Andrew Cushman: They appreciate being told. No, because their job is to find buyers. And if you have all these buyers that have just not answered. That means it's a task for them to follow up with you. And now you're becoming a pain in the butt. Whereas if you just reply, say, Hey, you know what, Sam, thanks for sending me this property. [00:12:03] Andrew Cushman: Looks like a good asset, but it does not quite a fit for us because it's a little too old or we don't like the submarket. But again, thanks for the chance to look at it and looking forward to the next one or something like that. Tell 'em no. So they can take you off the list and they're not looking for you to say yes to everything. [00:12:17] Andrew Cushman: They're just looking, are you interested or not? So they can do their service to the owner or the seller. So just little bits of follow up go a long way. And then the other, another thing. And that you can do again without having to have, huge track record or anything like that is in a sense. [00:12:35] Andrew Cushman: Train them to know exactly what you're looking for. Right. And the assumption there is that, you know exactly what you're looking for. Right. Right. So, for us, it's we want, ideally properties built between 1990 and 2010, that are 200 units in secondary and tertiary markets in the Southeast United States. [00:12:56] Andrew Cushman: And then we have, certain things about population growth and median income and crime and all that. Right. And so the more conversations that we have with brokers about, Hey, that's what we're looking for. And so someday when, topnotch broker, Sam Wilson is out there having lunch with the seller and the seller goes, you know what, actually, yeah, I think I'm considering actually selling this thing. [00:13:18] Andrew Cushman: Sam goes, oh, you know what. You need to talk to Andrew and his group and cuz they could be the perfect buyer for this. That's how that off market deal happens that no one gets to see. Right. And like literally we bought, we closed 200 units, 173 units in March. That's exactly what happened. The broker was having breakfast with somebody who said actually yeah, these guys made me an offer and I think I'm gonna take it. [00:13:43] Andrew Cushman: And he said no, hold on. Let me hit, let me call one guy he actually texted me an hour later. I was over there, met with that seller may have been offered the next morning and we B closed on that property in March. Right? Wow. So it's about being top of mind. Not only because you've built a, an actual, real relationship, but by knowing exactly what you want so that they know exactly what you want, so they can go, oh, so they think of you first when that thing shows up and that applies whether you're looking at industrial or self storage or multi-family, or even, Duplexes or, I mean, fourplexes, that principle applies across the board. [00:14:22] Sam Wilson: I love that, that is some very tangible steps and advice that you've given there on just managing broker relationships and telling us how really we should be interacting with the brokers Devo, put yourself in a position where they think of you first. Are there things that you guys are doing outside of competing on price? [00:14:43] Sam Wilson: That makes your offers get accepted over somebody else [00:14:45] Andrew Cushman: yeah, we've never won on price. If I do I get nervous or I would, if we did, I would get nervous. So, how we win without winning on price. Number one is kind of what we're just talking about is we. Just don't get into bidding situations where we're up against 20 other, people and all this kind of things. [00:15:03] Andrew Cushman: So, but whether you're doing it off market and that's, I should mention too, just cause it's off market doesn't mean there's zero competition. Right, There's other guys just like you who are doing the same thing. And so there may be two or three or four other offers, even though it's not listed or marketed. [00:15:16] Andrew Cushman: So other ways to stand out, number one, larger deposits. If most people are giving a $50,000 deposit, maybe you put a hundred or 75 the other, another thing you can do and getting kind of relating to the deposit is hard money, which basically means, once, once you make that deposit, it's not refundable. [00:15:36] Andrew Cushman: Like you have to be certain. That you're you wanna close on that property? Right? So you can't come back 30 days later and be like, ah, you know what? The roofs don't look that good. And ah, this don't, we don't wanna buy this well. Okay, great. But they're keeping your deposit, right? So that hard money gives the seller comfort that you really are gonna close in. [00:15:57] Andrew Cushman: You're committed to closing. Another thing we'll do is we provide just a really short, like three sentence. Bio at the bottom of our letter of intent, which is our offer that this kinda says who we are. And, we adjust that to the property that we're buying. So for example, if we're buying a property in the Florida panhandle, we might say, oh yeah, we've done 2,600 units, blah, blah, blah, including recently acquiring and you know, units in. [00:16:25] Andrew Cushman: Like, oh, these guys just bought units here. Oh, well, okay. Well they, they're in the market. They understand they close, they can perform et cetera. We'll also provide, references, meaning other brokers that we've closed deals with loan brokers that we've closed loans with. [00:16:39] Andrew Cushman: So that we can, say so seller can be like, oh, okay, well, these guys just closed the loan. Flow loan with this company, or, and actually, maybe for example, we just, so we just were in the process of selling two properties and the guy that we accepted his offer, he did that. And when I looked at his references, I personally knew the two brokers he put as references. [00:17:03] Andrew Cushman: I'm like, oh, alright. I can call these guys and talk to him. And if he's working with these two brokers, then I know he's a legitimate guy. Right. Because I know those brokers. Right, right. So, just that, that extra level of, did that one thing win him the deal? No, but it was an extra comfort point, like, oh, alright, well, he's working with these guys. [00:17:20] Andrew Cushman: I've worked with these guys. He's, clearly knows some people and has been doing things. So tho those are some of the ways that that you can do it also have your financing arranged in advance as much as possible. [00:17:32] Sam Wilson: That is some excellent points. I appreciate that. That like you said, there are, larger deposits. [00:17:38] Sam Wilson: You can go hard on your money early on. You have a short bio and a letter of intent. You can have references to other deals you've done in other brokers, as well as, talking, even in that short bio talking about. Putting maybe the deals that you've closed nearby, the ones that you're looking at there. [00:17:52] Sam Wilson: I think those are those some excellent excellent things to really keep in mind as we put offers out there. Tell me about this. You are going on a pretty big adventure here. I think sometime this year. Tell us a little bit about what you're doing. It sounds a little bit risk. To uh, guys like me, but tell us about that, why you're doing it and then how you view that from a risk adjusted perspective and then how you relate that back to multifamily [00:18:19] Andrew Cushman: Let's see. Well, yeah I love to go. I love to do back country skiing. Which means a couple, I've got a part, one particular friend. I do it with a lot, but I go, I never do it alone, but what that means is instead of going to a ski area and buying a Lyft ticket, we just drive around the Western us. [00:18:35] Andrew Cushman: And find really cool looking mountains and the Tetons or the seas or wherever and say, Hey, it'd be fun to ski that. So let's climb it. And then we'll ski down. And we've been doing that for 20 something years around the Western us. We've done it in Alaska. And we are, going to go do that in Antarctica. [00:18:53] Andrew Cushman: Yeah. I spend some time on the Antarctic peninsula climbing mountains and skiing. 'em down there. No, and we're not doing it alone. It's not just me and my buddy. Like, Hey, let's figure out how to get to Antarctica and, die in a CVOs or something. Right. We are going with people who actually know what they're doing but yeah, really looking forward to doing that. [00:19:08] Andrew Cushman: And, it is exciting and, stepping a little bit outside the comfort zone. I don't know how I'm gonna. Get across the Drake passage without throwing up. Cuz I get Sea Sick of not looking forward to that. but yeah, I guess relating back to multi-family one it can be pretty scary to make a jump from doing, fourplexes or 10 units to a hundred or 200. [00:19:27] Andrew Cushman: So it's a bit of a jump to go from climbing a mountain, two hours from my house to. Go into the literal ends of the earth to climb climb stuff that you're days away from any kind of assistance. And then actually now I think about it might be a business trip because the other people there might make for good investors. [00:19:45] Andrew Cushman: So [00:19:45] Sam Wilson: that's absolutely awesome. What are some other than going along with people that know what they're doing? What are some other things you're doing on this trip to kind of mitigate risk? [00:19:53] Andrew Cushman: Preparation. I mean, we, I try to be fairly physically fit as just in general, always have, but we're, making it in an extra effort to be in as. [00:20:04] Andrew Cushman: Fine tuned condition as possible before we go down there. So, being a healthy condition as possible also I'm having all my gear tuned up and going through it, making sure it's in, in good shape. So we don't have any gear failures out in the middle of nowhere. And also relating to business. [00:20:22] Andrew Cushman: I've been really fortunate. This is something I did too late, but three years ago I finally started building a bigger team around me in our business. And we've had, our success has multiplied because we've been fortunate. We've got some amazing people that have joined us. So this is also a good forcing factor for, making sure. [00:20:41] Andrew Cushman: If Andrew's off the grid for 10 days or whatever that everything runs smoothly without me. So this has been a good catalyst to, to push forward on that because one of my flaws is a lot of times it's just like, it's just quicker for me to just get something done, right. Instead of take the time to build the system. [00:20:59] Andrew Cushman: So somebody else can do it. And many times there's other people who would love to do it and want to do it right then mom's like, well, it's just faster. If I just handle this well, Maybe at the moment is faster, but not in the long term. [00:21:09] Sam Wilson: That. Yeah. I heard building systems is never fun. Like, I think it's fun to get something checked off the list, but it's also not scalable so without building systems, there's no scale. [00:21:20] Sam Wilson: So that's that's absolutely awesome, Andrew, thanks for the time to come on the show today. Best of luck on your trip and Antarctica. I can't wait to follow along and see how that trip shakes out. That sounds absolutely amazing. You've given us some awesome things to think about in immediate ways that we can, [00:21:33] Sam Wilson: some of these very hands on approaches in our business. So appreciate taking the time to come on today. If our listeners wanna get in touch with you or learn more about you, what is the best way to do that? [00:21:42] Andrew Cushman: Yeah, just Google vantage point acquisitions. The website is VP acq.com. [00:21:48] Andrew Cushman: There's a bunch of tabs on there for how to get connected with us. I mean, I'm on bigger pockets in LinkedIn and all that stuff, but just going to the website's probably the best way. Awesome. [00:21:58] Sam Wilson: Andrew, thank you for your time today. Certainly [00:22:00] Andrew Cushman: appreciate it. All right. Take care, Sam. Good to talk with you.
Ep. 571 From Management Consulting to Commercial Real Estate Investing' Matt Jones is a real estate investor based out of Minneapolis who specializes in investing in both small and large multifamily properties. He has a master of science in mental health counseling which comes in handy for building positive relationships in real estate. Let's hear him as he shares his thoughts about adding value to your clients and maintaining that relationship to achieve exponential growth. Highlights: [00:00 - 05:08] How to Add Value to Others and Get Ahead in Real Estate Matt Jones is the CEO of Hawkwing capital, which raises capital from passive investors to own large apartment buildings. He also wrote the book Book About Real Estate. In 2019, he learned about real estate syndication and decided to switch to this model to speed up his progress. He currently owns 244 beds of senior assisted living and is looking to raise capital for some other deals. Opportunity for him right now is through broker relationships. [05:08 - 10:19] Real Estate Investor Shares Tips for Success Matt's shares his experience in real estate, including their time as a manager of group homes for adults with disabilities and their current focus on multifamily properties. Success for the author is defined as achieving goals that expand one's horizons and making progress towards those goals. Matt anticipates transitioning more from an active investor to a passive investor in the future. [10:19 - 15:20] How to Raise Capital and Take Down Deals Matt suggests that you should raise capital from people who you trust and who understand the risks and rewards of the investment. When raising capital, you want to make sure that you're the people raising capital from and that they understand what they're getting into. Matt's approach is to first ask somebody if they would be interested in investing in a deal, and then to show them the investment and how it would benefit them. If someone says yes, Matt will ask them for their contact information so that he can contact them about the investment. Matt had success raising capital by being patient and being prepared with possible outcomes as seen today's market [15:21-16:56] Closing Segment Reach out to Matt Links Below Final Words Tweetable Quotes “You want to add value to other people and it doesn't even necessarily have to be real estate related. Let's say you meet somebody who maybe they wanted to play the guitar and if you know how to play the guitar, you can offer them some free lessons right there. Then they're going to want to do business with you. Or you never know where things go with this, but by adding value to everybody around you at all times, good things are gonna come back your way ” - Matt Jones ----------------------------------------------------------------------------- Connect with Matt Jones by visiting their website at: https://www.hawkwingcapital.com/ Resources Mentioned: Book About Real Estate Connect with me: 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 → firstname.lastname@example.org Want to read the full show notes of the episode? Check it out below: [00:00:00] Matt Jones: You wanna add value to other people and it doesn't even necessarily have to be real estate related, yes, it's great. If you're able to raise money or you're able to find deals or, you know, some kind of real estate related value, but let's say you meet somebody who.Maybe they wanna play the guitar. And if you know how to play the guitar, you can offer them some free lessons right there in an instant value. And then they're gonna like you, and then they're gonna wanna do business with you. You never know where things go with this, but, by adding value to everybody around you at all times, good things are gonna come back your way. [00:00:36] Sam Wilson: Matt Jones is the CEO of Hawking capital, which raises capital from passive investors to own large apartment buildings. And he also wrote the book about real estate. That literally is the name, the book about real estate and co-host of pillars of wealth creation podcast. He also owns 244 beds of senior assisted living. [00:00:56] Sam Wilson: Matt, welcome to the show. [00:00:57] Matt Jones:Hey, good to be here. [00:00:59] Sam Wilson: Hey man. Thanks for coming on today. There's three questions. I ask every guest who comes in the show in 90 seconds or less. Can you tell me, where did you start? Where are you now and how did you get there? [00:01:05] Matt Jones: So in 2015, I bought my first Plex. I was living I house hacked it and I saved up money from my W2. It took me a few years before I was able to buy a second triplex and by a second Plex. And I was just so frustrated at how slow my progress was going. Like the idea was like eventually own like a large complex. And I was like, oh, this is gonna take me. Years before I can scale up at this pace.And then I learned about real estate syndication in 2019 and thought like, oh, this is bananas. Like, like it solves all my problems with now. I don't have to save up my own money. I can use other people's money and I don't have to wait to scale up to bigger properties. I can just jump in and start right now.And so then I found a mentor to help me out who actually I co-host the podcast with now. And Recently raised some capital with him for a 228 deal in Kentucky and then looking to raise capital for some other deals as [00:01:58] Sam Wilson: well, man. That's that's really, really cool. I mean, 2019 till now that's pretty fast progress.I would say. , know you said , you had a mentor, but what are some other things you feel like you did right. That other people should emulate [00:02:10] Matt Jones: I think, well, the biggest hurdle that I had to get over was my own mindset. So if you can, change your mind of thinking, like, how can I do this rather than like, oh, I, I couldn't buy a a hundred unit place. [00:02:20] Matt Jones: Like, whether you say you can, or you can't you're right. think it was Henry Ford that said that. And so, Getting into the mindset. Like I can do this. I just need to figure out how or better yet who I can work with to get me to that level. [00:02:33] Sam Wilson: Right, right. That's that's really cool. Tell me what are you guys doing? I heard you say something about opportunity there in Louisville. What are you guys doing right now to find opportunity? You moved on from the Plex world, cuz you said that was two slow growth. You moved into mostly multifamily and I hear some also assisted living, but what does opportunity look like for you right now? [00:02:52] Matt Jones: It's primarily through broker relationships. So, built to connections with brokers. And so we're seeing a lot of on market deals, but I think some people prefer off market or on market, but with, on market it's you get all the numbers like it's presented in a way that's they're the seller is ready to sell.And you have the broker there to help make sure everything falls into place. So, plus through, on market deals, we get a lot of deal flow and right now you gotta look through a lot of stinkers before you find that one gem . [00:03:19] Sam Wilson: Yeah, you do. How are you underwriting those to where it makes sense.That's what we're seeing a lot in across all asset classes is you're just. I don't even know how the current buyer is making this pencil. So what do you guys doing differently? Feel? [00:03:31] Matt Jones: Well, we just go through the numbers. Yeah, the I'd say yeah, 99 out of a hundred deals, we just kind of shake our heads at like , I don't know how this is gonna work at that price point, but once in a while we find that one that actually does pencil in and then when we think oh what did we do wrong in the underwriting?But we're still underwriting conservatively. We're still, stress testing the numbers to make sure like, okay, if. If there's another recession and we get to like the record high, they can see raids or record high concessions and things like that. Is the property still gonna make money to ride through a potential recession?If yes, then that is a good deal. But a lot of these properties are like you say, they're going at these prices that if anything goes wrong for these operators they're gonna lose [00:04:10] Sam Wilson: their pants. Talk to us about positioning, how are you positioning yourself in front of. The sellers. It's a, it's almost an art.I think of putting yourself in front of the sellers in a way that makes the seller wanna work with you, which is kind of a weird place to be in the cycle where it's like, Hey wait, like, why am I trying to court? You? Shouldn't you be courting me as the buyer, but it's not the way it's working. What are you guys doing on that front? [00:04:32] Matt Jones:Well, it comes down to relationships as well, relationships with our lenders, property management, the brokers, when you can build a reputation, or if you don't have one right now, partner with people who already have a good reputation. And so you can say like, my team, this is our experience and to show to the sellers that like, Yes, we can close we've closed on, X number of units and, taken so many units to, full cycle and such. And we already have the professional property management, that's local. That's gonna do a good job that already does a great job with these other properties. Just to show the seller like, yes, we can close. Yes, it's gonna go smoothly. And we can make it happen [00:05:08] Sam Wilson: right now. I saw, we read that there in your in your bio there in the, in intro that you are also involved in assisted living. So, is that a core focus for you or is that just an opportunity that came your way and you participated in it? Walk us through. kind of being diversified across asset classes [00:05:23] Matt Jones:. Yeah. That was an opportunity that came up my way. And the numbers were really good. It had an IRR of 21 plus, so I couldn't say no to that.And I come from a background of managing like group homes for adults who have disabilities it's really, really similar the operation side, which I'm really well versed with. And so. And multifamily is where my focus is, but it's on a different cycle than senior assisted living. Like multifamily is high right now, senior assisted living.And a lot of times, and we focus on rural areas actually that's cheap so we can buy these mom and pop shops for a song from operators who didn't do well during the Covid but we're hitting the silver tsunami here with the baby boomers that are getting to that age where they need are starting to need more intensive care from senior assisted living.And so there's just a lot of opportunity right now. The, demand is gonna be much stronger than supply here shortly. [00:06:15] Sam Wilson: When you look at things like that, is that a a potential core focus for you when you see opportunity? [00:06:23] Matt Jones:Yeah, I think it there's the potential thought we might shift focus to that being our primary. But multifamily is our bread and butter. We understand that we've done well with it and we know how it works. [00:06:31] Sam Wilson: Got it. Got it. That's that, that is very, very interesting. Tell me what's a an excellent piece of advice that you were given. Say like in 2019, when you said, Hey, I wanna switch, I wanna go into something that can scale quickly. [00:06:44] Sam Wilson: What's something somebody told you, you feel like that, that everyone else should also hear. [00:06:48] Matt Jones: you have to add value to other people without expecting value in return. And, if you try to just take and take from other people, take their knowledge, take their time, take their money without giving anything in return.You're gonna, it is really off putting like you you wanna add value to other people and it doesn't even necessarily have to be real estate related, yes, it's great. If you're able to raise money or you're able to find deals or, some kind of real estate related value, but let's say you meet somebody who.Maybe they wanna play the guitar. And if you know how to play the guitar, you can offer them some free lessons right there in an instant value. Like, and then they're gonna like you, and then they're gonna wanna do business with you. Or you never know where things go with this, but by adding value to everybody around you at all times, good things are gonna come back your way. [00:07:30] Sam Wilson:What are some surprises or potential pitfalls maybe that you learned or that you feel like other people should avoid? [00:07:36] Matt Jones: I think my biggest mistake starting out was trying to do it all on my own. I consider myself a smart guy, very capable. And so I was trying to do everything on my own and I was just spinning my wheels for years before I realized I needed to take a nice big slice of humble pie.And, I, I'm very shy. And so I had to force myself to network with other people and just get out there and find people to partner with to make things. And once I did. My, my career propelled much faster than I, I could've on my own. [00:08:06] Sam Wilson: When do a lot of education in this space.I think that's where your book about real estate really comes in. What are some of the common questions or common things that people come to you and you say, Hey, we're gonna start at square one. What's square one for you. And then how do you kind of work 'em through the process? [00:08:21] Matt Jones: Square one is exploring the different types of asset classes and deciding which one two it the most, but preferably one that you wanna focus on right away. And because like there's a million different ways to. Make money in real estate. And if you try to do 'em all you're gonna do, 'em all poorly. So you're much more better being niche and focused. And like my book, it covers the whole spectrum of real estate investing. So to help people explore, like self storage units or mobile home parks or multifamily, or, all these different things.And then you choose like, okay, this one makes the most sense to me. This one, I think I can do, and then become specialized in that [00:08:57] Sam Wilson: Got it. Got it. So yeah, if I'm hearing you're right, you say, pick two at the most asset classes, and that goes back to the, and I'm even gonna contradict your statement there a little bit, but it said, he, he would chases two rabbits cases.He would chases two rabbits catches none. Right. If I could speak today. And I like that idea of that. You gotta really, that there's a lot of ways in this business that you can make a lot of money. Talk to us about success. If you were to define success for you, what is success and where do you look? What does success look like for you in the future. , [00:09:26] Matt Jones: you know, success is just, having goals that really expand you as a person and having a good plan to be able to achieve those. So whatever it may be, whether it's financial freedom, so you can hang out with your family more or being able to travel which I enjoy just, I guess living the kind of life that you want and taking the actions necessarily to make that happen. And as for the future I anticipate I'll transition more from an active investor, to a passive investor, so that I'll just have my various investments and enjoy the free money that shows up at my bank. [00:09:58] Sam Wilson: I hear that, man, I'm a passive investor in a lot of deals and I can't wait till that is all I am. I love being an active investor, but there's something really special about that ACH in your account once a month. And you're like, oh, that was relatively easy. I could do more of that. So absolutely hear that. Raising capital, you went out and said, Hey, I've figured out that this industry, I don't have to have all the money myself. I can go out and pool other people's capital and take down deals. Talk to us about the capital. Raise side for you. Can you walk us through that journey? Getting your first deal done. Maybe some of the hiccups or the things that you would do differently on that front. [00:10:32] Matt Jones: Yeah. Well, I guess just in general, when you're raising capital, you wanna make sure you're the people that you're raising capital from, understand what they're getting into. So, you don't wanna be like some scammer type of person. You I'm very upfront and honest, so. I make sure that I'm not taking, somebody's like last $50,000, for example, I don't want that. Like, if you need that money to live off of this is not the right kind of thing for you. So I, first make sure that they understand that like the risks and potential rewards and what'll happen with their money. And and then I, show them like what that, like, I'm myself. Investing my own money into the deals that I'm raising capital for. I just increase their confidence that okay. Like he's putting his money where his mouth is so that this must be a good deal. [00:11:11] Sam Wilson: Right, right. What were there strategies or I guess, methods you employed on your first capital raise. [00:11:18] Matt Jones: Yeah, you start out with friends and family and like work acquaintances and, people like that. But I would say my approach is, I first ask somebody like, Hey, could I ask you a couple questions about your finances? And if they say they're, usually say yes, if they say no, that's fine. But once they say yes, then you say like, would you be open to a 10% return on your. Through an investment and which, is conservative very conservative for a real estate investment or the kinds that I'm looking at. Sure. And, they'll generally say yes because that's better often than the stock market will provide them and with their 401k such, but once they say yes, then I say, like, if I found an investment that could provide you with at least that much a return would that make sense for me to contact you about that? And just run it by you, and then they're gonna say, yeah, sure. Cuz that doesn't hurt for me to just like tell 'em about something. And then okay. If I found something like that, how much money would you have available to be able to invest in that kind of deal? And then they'll tell me like, whatever amount it is. And so now I've got, sort of a soft commitment and I can shut that down and like, get their contact information. What's the best way for me to contact you if I do find a deal like that, cuz I, I don't have anything right now, but you know, if I do. So then you can contact them. You've got their soft commitment already, and then you can show them like, Hey, there's a deal. That's gonna give you a 15% IRR or what have you then they're gonna be like, all right, here's that original money that I said. [00:12:34] Sam Wilson: Are these conversations you're having, like, under what? In what environment are you having these types of conversations? [00:12:43] Matt Jones: all environments. Because if you don't tell people about what you're doing, nobody's gonna know. So you really have to be, open and honest about yourself and authentic with that. And plus I think of it as all, there's all these people around me that are missing out on great opportunities if I don't tell them about it. If and so I'm doing them a disservice by not having this conversation with. [00:13:05] Sam Wilson: Yeah. Yeah. And that's there you're absolutely right there. It's, I think it's uncomfortable. I'll be honest. You're you're I think the questions you asked there are excellent, but I was kind of envisioning myself asking those so directly and I'm like, oh man, that makes me uncomfortable a little bit, in, like you said, in all environments going. Hey, tell me about your finances. Like, well, maybe no, like okay. But it sounds like you've had great success with that. [00:13:26] Matt Jones: Yeah. I would say the first time I did it, I certainly felt awkward, but it I got through it and I'm like, oh, that wasn't so bad. I can do that again. Do you ever get any, [00:13:35] Sam Wilson: any any complete, just like, no. We're not talking about that responses. [00:13:38] Matt Jones: I haven't yet because it's not, like you say, like, hi, my name is Matt. Can I ask you a few questions about your finance? build a little rapport first, right? [00:13:45] Sam Wilson: Right. I get it. Okay. No, that's cool. I like that. And I think that's an encouragement to our audience. And even to me to be more direct where it's just like, Hey look, we've got we do have excellent assets. We have excellent opportunities for investors. And, we're achieving amazing returns for 'em and it's kind of, it's bad on me if I don't actually just go out and tell people about it. [00:14:07] Matt Jones:Yeah. You're keeping people from achieving their financial goals from achieving their dreams by not talking about it. [00:14:11] Sam Wilson: Right. Oh, for sure. For sure. Yeah. I had an investor call me she had received her first distribution in a passive deal and and maybe this is bad, it was extended family. So I, don't hang me for maybe not doing my My know, you're know you're customer as well as maybe I could have, but they're like, Hey on, wait. So I get this money. Like you get a distribution. And yet I still retain my equity in the deal. I'm like Uhhuh, like you still have your a hundred grand in the deal and you're gonna still get a quarterly payout. And they're like, wow, where's this been all my life. I'm like, , I'm on, I'm onto something here. So yeah, I wish they'd understood maybe the mechanics of the deal light slightly better, but that's okay. It all worked out. So that is fun. You're absolutely right. Not sharing that stuff with your investors is yeah, it's something we should all take certainly more seriously. What are you guys working on right now that you were excited about? [00:15:01] Matt Jones: We're in between deals right now? My. Partner. He just did a his fire step five, six C offering, which I wasn't involved with. But before that did some that raising for that 228 unit deal. So looking for the next deal being really patient, being really cautious right now, cuz we're, potentially seeing some changes I guess in the market, but being prepared for that. [00:15:21] Sam Wilson: Right. Absolutely. Absolutely. Matt I've enjoyed our time today. Certainly appreciate you coming on, telling us how to get out of the triplex rat race, if you will, and how to scale and grow quickly, certainly look forward to sharing the links to your book, hear the book about real estate. Again, that is the title of the book about real estate that I don't know how you got that title, but that's awesome. It couldn't have been absolutely more clear. And then, just some of the values that you add the day, adding value to other people. Without expectation is one of the ways to certainly grow. You said, one of the mistakes you made early on was trying to do it all on your own and the bigger deals we go, certainly the more, this becomes a team sport and then also about sticking to your niche and not going too wide. [00:16:02] Sam Wilson: So I appreciate that. Thank you so much. Is there any last piece of advice that you would like to share with our [00:16:07] Matt Jones: listen? It takes three things to get going in real estate, educate yourself, networking with other people. And most importantly, take action. [00:16:15] Sam Wilson: Love it, Matt, for listeners. Wanna get in touch with you? What is the best way to do that? [00:16:17] Matt Jones: You can go to my website, Hawkwingcapital.com and you can schedule a call with me through there, and you can also even download a free chapter for my book as well. [00:16:26] Sam Wilson: Awesome. Matt, thanks so much your time today. I do appreciate [00:16:29] Matt Jones: it. Yep. You bet.
Ernest has more than 12 years of experience as a management consultant providing technology and business consulting to Fortune 500 companies. His project/program management, business development executive background, an entrepreneurial mindset, provided him with opportunities to merge his enthusiasm to work in the technology sector and real estate as a broker and investor in residential and commercial RE since 2010. In this episode, Ernest Peralta discusses his journey from corporate consultant to successful real estate investor. He advises listeners to seek out mentors and learn as much as possible about the industry before jumping in, and to focus on specific asset classes during turbulent times. Highlights: [00:00 - 05:35] How to Scale Your Business in 6 Months or Less Ernest Peralta started 12 years ago and has experience in management consulting and real estate. Took the route of consulting after he graduated with his undergraduate degree He networked with people in the industry and took courses to learn more about the business Right before the pandemic hits, Ernest educated himself about real estate and did some research. He considers Covid as a time of education and Post-Covid as implementation. [05:35 - 10:50] How to Scale Your Business and Attract Investors with Strategy Ernest uses programs such as Microsoft Office to create a project plan outlining steps to scale within six months to a year and where they could be to where they are today. He also recommends reaching out to potential investors through mailers, conference calls, and mastermind groups. Ernest shares that bad advice often includes telling people to find their passion. [10:51 - 16:00] Follow Your Passion But Work on Your Daily Plan One of the main things Ernest recommends is to not only follow your passion, but also to work on your daily plan and action plan. Ernest has found that the current market is challenging, but he is still optimistic about the future. One of the biggest challenges Ernest faces is finding investors who are willing to pay a high price for his properties." Tweetable Quotes “I would say it would be better advice to not only follow your passion, but work on your daily plan, work on those things that you don't want to do on a daily basis, because those are things that you actually need to do in order for you to accomplish your goals.” - Ernest Peralta ----------------------------------------------------------------------------- Connect with Eric Peralta on LinkedIn or visit their website at mvpequitygroup.com You email him through email@example.com Connect with me: 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 → firstname.lastname@example.org Want to read the full show notes of the episode? Check it out below: [00:00:00] Ernest Peralta: How can I scale within six months to a year? And where could I be to where I am today. So, you know, the first thing that I wanted to do was really understand the business. [00:00:08] Ernest Peralta: So I always go back to COVID because to me that was my learning year. And then the following year after that was my implementation year. So the first year was all educational for me, just really trying to understand, put together a plan of how can I learn as much as I can about the industry. [00:00:24] Ernest Peralta: But aside from learning, a lot of it is trying to, to implement can learn as much as you can, but if you don't implement, you're never really gonna pursue or grow. [00:00:45] Sam Wilson: [00:00:45] Sam Wilson: Ernest Peralta has combined his passion for multifamily investment management, consulting and personal development with his personal philosophy of goal setting, envisioning and manifesting success to help people who wanna live their best life. Ernest, welcome to the show. [00:00:58] Ernest Peralta: Thanks a lot, Sam, thank you for having me. [00:01:00] Sam Wilson: Hey man. The pleasure's mine. There's three questions. I ask every guest who comes to the show. Can you tell us in 90 seconds or less, where did you start? Where are you now? And how did you get there? Yeah, [00:01:08] Ernest Peralta: absolutely. So I started about 12 years ago. My background entails management consulting, but my family had a small portfolio of residential real estate. [00:01:18] Ernest Peralta: And so that's kind of how I got my start was kind of through my family. And over the years I basically had always had real estate in the back of my mind, but I took the route of consulting cause I had finished my undergraduate degree. My master's degree kind of did the whole educational thing worked in corporate arena for, several years long and long story short is that I ended up stumbling into commercial real estate right before COVID and tried to find out what asset classes or what areas could actually help me sustain if anything was to come again like this to impact me and my family in the future. [00:01:51] Ernest Peralta: And I came across commercial real estate. Man that's and that's [00:01:54] Ernest Peralta: where I am today. Tell me real quick. I mean, the term corporate consultant for somebody that has no experience in the corporate world doesn't mean much to me. [00:02:01] Sam Wilson: Can you break that down for us. [00:02:02] Ernest Peralta: Absolutely. Yeah. It's always a confusing thing. [00:02:04] Ernest Peralta: When you say corporate consulting or management consulting, it's like, what is that? Right? So what it is basically is I provide advisory services, whether it's project program management for fortune 500 companies. So you name the big retailers I've consulted for, companies like, and I'll say this here, like Microsoft AT&T , Costco. [00:02:24] Ernest Peralta: Bill Melinda gates foundation, all of their companies, basically I come in and I provide strategic type of guidance, whether it is pushing an initiative, a business initiative that they have a new application or a software. Sometimes it could be data privacy or security type of issues. These are things that I help them. [00:02:40] Ernest Peralta: Either document work with a team. It's usually a global team that I work with and we have timelines and processes that I typically kind of project manage until delivery of, these products and service. Is [00:02:51] Sam Wilson: that something you're still involved in today or have you switched completely to commercial real estate? [00:02:55] Ernest Peralta: I did. Yeah. I actually had switched over about a year now. Okay. And so I ended up making that switch over. I spent about a good 16 plus years in that arena and I decided like, I mentioned earlier before jumping on COVID actually had impacted me. So this is where that pivotal moment for me actually happened is when I decided to look back into commercial real estate since I had done, residential real estate many years ago. And so that was my pivotal moment. And this is where my focus is right now. [00:03:26] Sam Wilson: What was your strategy? jumping into commercial real estate just before, COVID probably had to be a little bit unnerving, but what was your strategy? [00:03:34] Sam Wilson: Once you said, okay, I'm stepping out of corporate consulting role. what did you do to get involved in commercial real estate? [00:03:40] Ernest Peralta: Absolutely. Yeah. Great question, Sam. I think for me, one of the, one of the things that I always like to do is I like to strategize like, okay, I don't know too much about commercial real estate. [00:03:50] Ernest Peralta: Where do I start? So the first thing I ended up doing was trying to find individuals out there that actually could help me as a mentor or maybe I could take courses. So I did a lot of, research online and I came across a couple of individuals, like the Michael Blank of the world, the Peter Harris' and Dylan Borland, those individuals were folks that I had actually looked at research prior to me jumping on board and, really dedicating myself into commercial real estate. So that was number one, was trying to find experts in the industry. Secondly, I networked with people at that time, a lot of zoom calls. [00:04:23] Ernest Peralta: So a lot of interactivity, in, in, in the social media realm, if you will. So I did a lot of. Connections through LinkedIn social media with individuals that already had experience in commercial real estate. Now at the time I was really trying to focus on, okay, what aspect of commercial real estate do I wanna focus in? [00:04:40] Ernest Peralta: Cuz there are various different asset classes I realized at the time that, multifamily mobile homes, as well as, different types of retail could potentially be lucrative. In times of turbulent recessions, if you will, that happen in our economy. So I ended up just focusing on multi-family for the fact that it was kind of a segue for my family and I, when we had owned a couple of duplexes in the past. [00:05:03] Ernest Peralta: So for me, that was kind of a no brainer to kind of step into that arena that had became my focus, going forward. So kind of to where we are today, I ended up just really networking very well with individuals that are in the industry, tried to learn what it was to be like as a limited partner. [00:05:20] Ernest Peralta: What is a cog, what is a GP? And also, how do you equity raise? All those things kind of came into play for me to really understand, okay, what aspect of this business do I want to focus in? And how do I get involved? So that was basically my start. [00:05:36] Sam Wilson: I love it. I bet. From the corporate consulting side, you did a lot of strategy in planning. [00:05:42] Sam Wilson: So what did you do? Find the experts network on social media. Did you lay out like a 10 step plan and said, okay, I'm gonna do this first and I'm gonna do this. And here's how I'm gonna raise equity. What did that blueprint look like if you had one and I'm sure you probably did. [00:05:56] Sam Wilson: I did. [00:05:56] Ernest Peralta: Yeah. I created an Excel file. Basically. I used a Microsoft Excel document or basically it was Microsoft. And I pulled up my document, created a project plan, if you will. Basically, it was my steps to, how can I scale within six months to a year? And where could I be to where I am today. So, you know, the first thing that I wanted to do was really understand the business. [00:06:17] Ernest Peralta: So I like to use, I always go back to COVID because to me that was my learning year. And then the following year after that was my implementation year. So the first year was all educational for me, just really trying to understand, put together a plan of how can I learn as much as I can about the industry. [00:06:35] Ernest Peralta: But aside from learning, a lot of it is trying to, to implement you can learn as much as you can, but if you don't implement, you're never really gonna pursue or grow. So, about four months into it, after I put my plan together, my whole intent was to have a 90 day plan. And so, that's kind of what I got. [00:06:52] Ernest Peralta: It was kind of the theme after, a networking with various folks that within 90 days, I should definitely try to, know, go out there and start making some deals. So that's what I ended up doing. So one of my plans of action was learn as much as I could. And then also start reaching out to potential investors, whether it was, through mailers just cold calling and really trying to get exposure in that sense. [00:07:12] Ernest Peralta: So that was basically my first 90 days to, I would say, four to five months of just doing that and then also trying to make offers. So I would get on these conference calls. Or mastermind group calls with my group and basically talk about these different scenarios and go through different ways of how we're approaching it. [00:07:32] Ernest Peralta: If we did get a deal, how would we evaluate and analyze it? So it, there was a lot of brainstorming and just working with individuals that I team with to really understand the business, as much as I could. One thing that I'd like to say is that there is a really good underwriting course that, that I actually, well, it's more of a conference call, but it's a, an underwriting conference call that I attended on a weekly basis for almost a couple of months. [00:07:58] Ernest Peralta: And this gentleman, I can name him here in a little bit, but he is. Exceptional. And I would say that he was the foundation of me actually, really trying to understand the underwriting process and everything, for multifamily. [00:08:12] Sam Wilson: That is really I love the multi step, approach. [00:08:15] Sam Wilson: Hey, we're gonna line this out and then we're gonna go do it, I guess. You've brought up a few questions I have along the way. I mean, you talked about mastermind group calls. I mean, that's something that a lot of people like the idea of, but even just selecting a mastermind can take an enormous amount of time and going, gosh, especially if you're new to the industry, it's like, there's How many, a thousand masterminds you could possibly pick from there is, a thousand ways you can reach out to investors, I guess. [00:08:37] Sam Wilson: How did, I mean, it sounds like you, you broke this down on a very granular level. Like how did you even go about selecting? Let's just start there with your mastermind. [00:08:44] Ernest Peralta: Yeah. Well, a lot of it was. Mainly geographic. I looked at folks that were geographically located to where, or an area that I wanted to invest in. [00:08:53] Ernest Peralta: For me, one of the lucrative areas outside of the state of Washington is kind of the Southwest, if you will, and the Midwest. So I tried to find mastermind groups that kind of focused in those areas and, just through social interaction, just meaning them online. That's how I developed, a lot of the relationships. [00:09:08] Ernest Peralta: So a lot of it also was based on building relationships folks that I just connected with right away. I think that's very key. And just developing that trust factor, when you invest in real estate, you just wanna make sure that you align yourself with the right people. The people that probably have done at least a few deals under their belt. [00:09:24] Ernest Peralta: So they've got a track record that is good at the same time. You wanna be able to, be able to. Talk to these individuals and to just be open with them. So I think having that connection and that connectivity, as well as a history of success would be ideal. Right, [00:09:38] Ernest Peralta: right. [00:09:38] Sam Wilson: No, that's really cool. Tell us the the conference call you were on for underwriting. I think that's a valuable tool and resource that our listeners may really appreciate it. [00:09:45] Sam Wilson: Oh yeah. So, gentleman's name is Charles seamen and he is incredible. As of this call, I believe he's still doing it every Saturdays. [00:09:53] Sam Wilson: That's right. If that's something that, your audience members or folks that are listening here on the conference, call one. 10, I would say, reach out to Sam or myself, and be happy to connect you to him. Yeah. But I would say he is ideal and [00:10:04] Sam Wilson: certainly Charles has come on the show. [00:10:05] Sam Wilson: Gosh, it's been maybe a year and a half ago. So you can go to our website at brickandinvestmentgroup.com slash podcast and just type in Charles Seamen, S E A M E N yeah, look up Charles Seaman and you can find their information there right on our website. [00:10:18] Sam Wilson: And you can probably attend that, that conference call. So there's a great tool and resource. Thank you for sharing that earnest that actually absolutely forgotten that. Tell me, is there been any bad advice that you were given along the way that you either implemented or immediately knew it was bad? [00:10:33] Ernest Peralta: Bad advice. I would say, you hear this a lot. It's like, find your passion. And I believe that to some extent, passion, I think is something that is relatively gets you moving gets you motivated. But I think it's short term. to me, by following my passion, I've done many numerous things prior to getting into into commercial real estate. [00:10:51] Ernest Peralta: But I think one of the main things and things that I would say would be better advice is to not only, follow your passion, but work on your daily plan, work on those things that you don't want to do on a daily basis, because those are things that you actually need to do in order for you to accomplish your goals. [00:11:06] Ernest Peralta: I think, , that to me is an advice to where if I were to flip that, I would say work on things that you don't want to do that you need to accomplish, , what you want in life. If it's, commercial real estate, you have to put in the work, you have to put in the grind, making your daily calls, working your action plan. [00:11:23] Ernest Peralta: Passion comes out of doing that for a number of days until it becomes a habit, then it becomes a passion because you're gonna end up liking some of the things that you do, whether it's the grind or it's gonna be talking to people or putting a deal together. I think that to me is probably one of the most misconceptions that I hear. [00:11:41] Ernest Peralta: And I think that if you flip that around a little bit, I think it would , be better advice that's from my perspective, the least, no, I think [00:11:47] Sam Wilson: that's great. I mean, there's the it's always, I think it's always a a blend there, right? There's like the, Hey, you gotta get your reps in. Right. Yeah. If you wanna stay fit you, it doesn't matter. [00:11:55] Sam Wilson: If like I read that in the, on the workout plan for yesterday, it was something like, Hey, you know what, maybe you don't love the day's workout, but it's just, it's a matter of showing up and doing the work and then you'll get the results you want. Yeah. Do you love it every day? Maybe. Maybe not. But I think there's a blend there of like finding what your skill set is and what really, you can bring value to the table. [00:12:13] Sam Wilson: How can you bring value to the table, but also going, Hey, what is it at times? Do you just have to say, I just gotta get through this. So. It's it's a nice, but I like the idea of, maybe not necessarily following your passion, but following your plan at first and then, your passion will certainly come out of that. [00:12:26] Sam Wilson: What does your portfolio look like today? [00:12:29] Ernest Peralta: Yeah, so portfolio today, we own over 600 units. It spends across the Southwest. I'm basically an LP, a GP co GP and a capital razor for for these assets. They're mainly multi-family their class B and CS. We typically look at, little bit of capital improvement. [00:12:48] Ernest Peralta: We don't come in and do huge renovations, but something to where we can come in and do some potential upside, whether it's mainly raising rents or just, adding different things to the To the property itself. And for us, that's been our stronghold and kind of our focus for now. [00:13:02] Sam Wilson: Gotcha. That's really awesome. Tell me you mentioned this earlier in the show where you said that you were reaching out to investors before you'd ever had a deal. Like yeah. What did, how talk, walk us through that conversation? Because for me, I would think that would be a hard conversation of like, Hey, I'm planning on getting into this, but I don't have a track record. [00:13:19] Sam Wilson: How'd you overcome that? [00:13:20] Ernest Peralta: Yeah, well, for me, I always try to reach out to folks that have the experience whether you're a VP SVP or an investor, in any situation, I'll definitely go to you because you have the knowledge. So for an me going out to an investor, my whole plan of action, there was basically to reach out to them to say, Hey, I understand that you own a few properties. [00:13:42] Ernest Peralta: I'm kind of getting into the industry. Do you have any best practices or any, anything that you could provide me in terms of how did you get your education and how'd you get your start? That was basically my segue and most people are very cordial. Those that have as you probably know, Sam, those that have success or have tremendous success, they're willing to help for the most part, and provide you advice. [00:14:03] Ernest Peralta: So to me, that was my segue because. You never know what opportunities come out that way. And that was the way I started. Yeah. [00:14:10] Sam Wilson: No, I think that's absolutely great Ernest, tell me, what's one of the biggest challenges, now that you've kind of gotten your, I'm gonna call it your feet wet. Obviously you're firmly in the business now you've kind of developed your plan. [00:14:20] Sam Wilson: You've implemented part of it. What are some challenges that you face scaling from this point going forward? [00:14:26] Ernest Peralta: Yeah, that's a very good question. I think one of the challenges that we have right now is that it's definitely a seller's market for the most part. So I think there's a lot of individuals now I think over just even a couple of years now, there's a lot of individuals such as myself that have done. [00:14:42] Ernest Peralta: Corporate work and are now starting to look into investing. So I think there's an influx of this group, this kind of group. Now that's getting into the industry. So it's challenging. It's more challenging at the same time. You have a lot of savvy investors. Now, a lot of these individuals are smart. [00:14:57] Ernest Peralta: They know how to come in underwrite. And so they're making it fierce in that sense. , think in combination with, a lot of folks coming now into this arena, because they understand that it's a great niche to be in for longevity, but at the same time, I think the investors also have the certain mindset of what they think their price is for their, their assets. [00:15:18] Ernest Peralta: You know, they're thinking six months ago that the price is still, relevant today. So they're asking for, a pretty hefty price on, on, their assets. So it's a challenge there it's a double-edged sword. You wanna make it work, but at the same time you wanted to be able to. [00:15:32] Ernest Peralta: Get the property and also make it lucrative for your investors as well. So I think that's probably one of the biggest challenges that I [00:15:39] Sam Wilson: see. Yeah. And it, and I think as we see, who knows where interest rates, for those of you who are listening to this this is being recorded on May 12th, 2022. [00:15:47] Sam Wilson: So, we don't know right now where interest rates are going, what effect that's gonna have on a, as a, on a cooling, are we gonna see a continued rise in especially in multifamily, in, rent, rent increases, things like that. And so when you say six months ago, I wonder, just because it is fierce and it is competitive though. [00:16:06] Sam Wilson: Are we seeing a tapering in the prices in multifamily or at least a leveling off, or is it that people are still looking, for that, kind of almost vertical trajectory in sales [00:16:14] Ernest Peralta: price? Yeah. Well, one thing is that I notice is that. A lot of the investors are holding firm on, what they believe their property is worth at this point. [00:16:24] Ernest Peralta: . And so I think for right now, I know inflation kind of, I think it slowed down a little bit last month from what I read. But you know, it's very minimal. It's probably not too impactful at this point, but For the most part. I think a lot of investors are still holding on. They're still holding firm. [00:16:38] Ernest Peralta: I don't think they're gonna budge anytime soon, but at the same time, I think investors are willing to pay, what they're asking. Right. So I think you really have to underwrite, look at the market and when you're doing your deals, just really make sure that you're coming. [00:16:51] Ernest Peralta: You're coming to the table with something that's worthwhile and you're not just paying just to pay, and I think that's kind of the challenge right now for us. I think we're taking the standpoint of, we're gonna hold onto our portfolio for now, but we're definitely looking at properties on the daily basis, we're just underwriting and if there's a good deal, then we'll definitely pursue it. [00:17:09] Ernest Peralta: But for right now, I think a lot of it is just kind of looking at the way that things are going right now in the market. And just evaluating things as we move along. We'll see what happens here in the next six months though, [00:17:20] Sam Wilson: right? Right. Like to say time will tell last question for you. Is this 10 year plan? [00:17:26] Sam Wilson: Where do you wanna be in 10 [00:17:27] Ernest Peralta: years? Well, yeah, in 10 years, we'd like to have at least close to 50 million in assets. If not more what we'd like to do eventually is look at other asset classes right now. As I mentioned, we're looking at, we have a multi-family portfolio, but it would be nice to diversify that. [00:17:43] Ernest Peralta: Potentially get into mobile home parks or maybe into storage facilities too as well. Those are other, asset classes that we want to get into, but I think over time, that will definitely happen. But for right now, our focus is on multifamily. It's a great area for us to focus our efforts in, but that's our tenure plan. [00:18:01] Sam Wilson: I love it. I love it, Ernest. Thanks for taking the time to come on the show today and really break down your business and tell us your awesome story. I love the the precision with which you have enacted your plan and even putting the plan together. So many bullet just lack that out of the gate. [00:18:14] Sam Wilson: So some great tips, some great tools. Appreciate it. If our listeners wanna get in touch with you or learn more about you, what is the best way to do that? [00:18:21] Ernest Peralta: Yeah, the best way is you can look me up on LinkedIn. You could also reach out to email@example.com. That's basically our private equity company. [00:18:30] Ernest Peralta: And yeah, you could just reach out to me also firstname.lastname@example.org. [00:18:36] Sam Wilson: Awesome. Thank you for your time, Ernest. [00:18:37] Ernest Peralta: Appreciate it. Thank you, Sam. Appreciate it.
Eric Neely is a truck driver and Acquisition Manager & Customer Relations of Febros Captial, Eric who has been in the real estate industry for over 20 years. He started to learn more about investing and networking with other professionals in the finance world and created his own podcast, The Wealthy Trucker, in 2017. Recently, he partnered up with another real estate professional and invested in a smaller apartment complex. Eric Neely handles broker relations and even speaks directly with asset sellers. He also maintains relations with bankers and our investors. As a highly educated and experienced entrepreneur, Eric brings specific skills to the table, and always asks the right questions when evaluating a possible asset. Highlights: [00:00 - 05:48] How to Succeed as an Investment Professional Eric Neely is a real estate professional who focuses on developing private placements in apartment complexes. He is also the host of the Wealthy Trucker podcast and has invested in larger apartment complexes. He recommends networking to build trust before attempting any deals. [05:48 - 11:39] Full-Time Truck Driver Becomes Property Manager. Eric shares his experience in scaling a real estate business, including their first deal and subsequent deals. He recommends avoiding relying on myths about real estate and instead of learning as much as possible from personal experience. he added the importance of regular communication with property management companies, as well as taking care of finances and distributions. [11:40 - 17:45] Closing Segment For Eric it learning the importance of screening tenants and learning the importance of being personable and talking to people while taking care of them should be priority as its not only making money for yourself but also impacting lives. Final words Reach out to Eric See links below Tweetable Quotes “Cause we don't allow, people to just come sit on the property, so we're impacting more than just the people who live there we're impacted the community. And then beyond that you're impacting people who are looking for passive investment opportunities.” - Eric Neely ----------------------------------------------------------------------------- Connect with Nick Neely visit their website at FebrosCapital.com Or listen to his podcast: The Wealthy Trucker Podcast with Eric Neely Connect with me: 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 → email@example.com Want to read the full show notes of the episode? Check it out below: [00:00:00] Eric Neely: the fact that we self manage that it really ironed into my head, how. , you may be creating an investment vehicle for somebody. You may be trying to make money yourself, but you're also impacting people's lives that live in your Eric Neely is a real estate professional focused on developing private placements in apartment complexes. So the everyday professional has an opportunity to invest in high yield cashflowing real estate. And he's also host of the wealthy trucker podcast. And if I'm not mistaken, Eric, you're calling me from the road today on interstate. [00:00:43] Sam Wilson: I think it's i70 there in Kansas. Welcome. Welcome to the. [00:00:48] Eric Neely: Thank you, Sam. It's a pleasure to be here and yet that's correct. I'm sitting on the side of the highway right now in my office behind the windshield. [00:00:56] Sam Wilson: Yeah, I have to say this. I give you props for having fairly good audio for a guy sitting in a semi-truck. [00:01:01] Sam Wilson: That's pretty good. I've had people sitting in their own home offices with poor audio, so that that sounds good. I appreciate it. [00:01:08] Eric Neely: Nope, no problem. Well, I, I have a lot of experience of listening to podcasts. And also like you said, I run my own podcasts. So audio is something that I had a little bit of time to research because I knew it was pretty important. [00:01:21] Eric Neely: So the headset I bought was specifically so that I could do what we're doing right now. Oh man. That's [00:01:26] Sam Wilson: fantastic. I love it. There's three questions. I ask every guest who comes on the show in 90 seconds or less. Can you tell me, where did you start? Where are you now? And how did you get. [00:01:35] Eric Neely: Sure. Well, I started, honestly it probably, driving a truck, I've been a trucker for 20 years almost. [00:01:41] Eric Neely: And, really didn't take investing seriously at all. Honestly I had a 401k and I always put money. But I just ignored it pretended like it wasn't even there that way. It wouldn't never be tempted. So I didn't even know how well it performed. So that's where I was. And as I was driving trucks, I spending all this time out on the highway. [00:02:04] Eric Neely: I started, thinking about how am I going to get out of trucking. Eventually I can't do this forever. It's beaten up my body. And I don't know. What I need to do to prepare for retirement. So, ended up starting to educate myself through podcasts and ran across the infamous BiggerPockets podcast and thought, well, maybe I can start flipping houses, something like that. [00:02:27] Eric Neely: And just ultimately the more I learned about it, the more I realized, man, I'm already working 60, 70 hours a week out here on the road. There's no way I can flip houses and do it consistently. And I also have a close friend of mine who's in the finance world. So I started talking to him about this multi-family syndication thing that I'd heard about and said, what do you think about that? [00:02:49] Eric Neely: And he he said, man, I've got clients that, that I do their taxes, and this is exactly what, I already understand this. I'm like, well, what do you think about us? Getting into partnership and doing something like this. And he goes, let's do it. Let's make it happen. So. I said, well, I'm going to spend the next couple of years learning how to do it while I'm out here on the road. [00:03:05] Eric Neely: Use the highway education tool. So podcasts, audio books, and started networking. We created our own meetup a few years ago that I host in our local community in Wichita, Kansas. And and then I started the podcast the wealthy trucker and. The sky's the limit and wherever the Lord will take us is where we'll go. [00:03:27] Eric Neely: And so now, today I own my I joint ventured into a apartment complex a couple of years ago. I J I've invested passively into larger apartment complexes and we are in the process of closing a larger syndication. So. If you take the education you get and apply it, you can go anywhere. [00:03:51] Eric Neely: And I still worked full time driving a truck. So it's still sitting in a truck right now, [00:03:55] Sam Wilson: man. That's a lot of moving pieces and you've done what I think a lot of people. Are unwilling to put themselves out there and do right. I mean, you started a podcast, you started a meetup. [00:04:06] Sam Wilson: You those are obviously thought leadership platforms but also just kind of built a brand and a following around what it is that you're doing. I think that's really cool because then that takes a little bit of courage. Did you do that at the same time that you already had deals going? [00:04:19] Sam Wilson: Or was that something you had first? What would you recommend to somebody in your shoes? [00:04:23] Eric Neely: You've got us. You've got to tell people what you're doing and it's challenging to do it when you haven't done a deal yet. And that's where, I mean, I guess if I look back on what I did and how I could maybe do it different, the one thing I regret is not starting the podcast, as soon as I did. [00:04:39] Eric Neely: I mean, I get more reach with the podcasts. I talked to more people because of it. and again, Your name out there so that people know what you're doing. And that's ultimately what it boils down to. People have to know what you're doing. This is very much a people business. If people don't know what you're doing, they're not going to invest with youth. [00:04:54] Eric Neely: They don't know who you are. They don't know. They don't know. I can trust you. That's the common thing you hear. So they don't know, like, and trust you. Why would they invest with you? I don't know how many times I've heard people say, well, if you have a deal, the money will come. I think. Not really true, because if people don't know who you are, if they don't trust you, why would they invest with you? [00:05:13] Eric Neely: I don't care how good your deal is. So that's kind of how it is, but that's how my mindset works. Anyway, if I could do it different, I would have started the podcast sooner. We did do the meetup pretty early, but, and Wichita, Kansas. Anyway, it's a smaller community, don't know how many people we have there around less than a million. [00:05:32] Eric Neely: And so. the reach, there was not as great as it might be in a bigger metropolitan area. So my meetup ranges anywhere from 10 to 20 people on average per month, it's a small amount of people. It still gets me there, but The more people you can reach, the more people that you're talking to, the better off you're going to [00:05:48] Sam Wilson: be. [00:05:48] Sam Wilson: Right. Tell me about your deals. You said, can you rewind that a little bit for me? I know you said what you guys have bought so far. Can you give us the S the summary on what you guys own currently? [00:05:59] Eric Neely: Sure. We bought our first one, like I said, it was a JV deal. It was really between me and my business partner. [00:06:05] Eric Neely: I was telling you about that. Does the finance, and then one of them. Primary capital partner. He put more, most of the money into the deal between the three of us. We bought that we self-manage it. And really that's because that third partner that I'm talking about, he is retired and he wanted something to do. [00:06:25] Eric Neely: And he's been in business most of his life. So anyway, long story short, it's been, it was an amazing learning. Curve buying that property and self-managing it because you really learn what you're going to ultimately end up hiring a third party to do. Right. And that in itself was worth quite a bit. [00:06:45] Eric Neely: So, learning the importance of screening tenants and learning the importance of being personable and talking to people and taking care of them. I mean, the fact that we self manage that it really ironed into my head, how. , you may be creating an investment vehicle for somebody. You may be trying to make money yourself, but you're also impacting people's lives that live in your property. [00:07:10] Eric Neely: And if you don't think about that, I think you're not really seeing the full picture. And if you're just being ingredient and wanting to make money, then I mean, you can do it, but that's not what this is all about in my mind. So. Self-managing it really drove that home for me that, Hey, this is somebody's home. [00:07:27] Eric Neely: They're living in my property. I need to treat it like that and take care of them correctly. And so if I'm going to hire a third party, now I've got a whole new set of criteria and standards that I'm going to hold this third party, property management company to, and if they're not taking care of the people out the way I wanted to take care of the people, then that I have no business dealing with them any longer. [00:07:49] Eric Neely: So it's very valuable. [00:07:51] Sam Wilson: Absolutely valuable. And that's a that's an education, I think like you said, that everybody probably needs even if you learn it on a smaller property, just to get your head wrapped around what you're going to expect from your property management company on a larger on a larger scale. [00:08:07] Sam Wilson: Tell me about the biggest deal you guys have done in the syndication space. And tell me the, kind of the things that you learned in raising capital for that and bringing investors on board, and I'm gonna keep throwing questions at you all at once. And then maybe tell me about the conversation you have with investors as it pertains. [00:08:24] Sam Wilson: I'm sure you get asked. Hey, wait, you're still a full-time truck driver. How are you going to take care of this asset? [00:08:29] Eric Neely: Right. It's it was a 66 unit in our local market. Wichita. The reason I stuck to which doll was because I needed something in my backyard that I could still have eyes on regularly because I work full time. [00:08:42] Eric Neely: So that's been one of the discussions with people that, well, listen, I'm going to be there on a very regular basis. , My communication with my property management company is very regular, and ultimately they're the ones managing the asset anyway. So, and then when it comes down to doing distributions and taking care of the finances, well, my business partner has his own accounting company, so that all gets handled through there. [00:09:07] Eric Neely: So. Anyway, that's been some of the conversation on that as far as how I'm going to take care of it as a full-time driver. And then beyond that, like it was a 66 unit complex. It was about a $2 million raise and, I did the capital raising through. The platforms of talking to people on the wealthy jerker podcast or going on other people's podcasts. [00:09:30] Eric Neely: Once again, back to just talking about it all the time and then met quite a few people through the meetup that we do in town. I'd go talk at the other real estate meetup in town, even though it's mostly single family people there, there's still people looking for passive investment opportunities and they've got the mindset of investors. [00:09:47] Eric Neely: So, I'd go talk at their meet ups. And really just getting out and talking, talking, talking that's that's. That was the, that was the key element of raising capital. And then, oh, I don't know. I mean, there's a lot of different things. You do. I built a website, which I did myself. I sometimes I think I should have just hired somebody. [00:10:07] Eric Neely: It would have gone faster and looked better, but ultimately I did build it myself and in managing a CRM, That's something that I went through a few different iterations before accounting started figuring out, all right, this is the way I need to do it. And just trial by error. [00:10:24] Sam Wilson: I like it though. I mean, that's what it takes. [00:10:26] Sam Wilson: I think that's what a lot of people, especially as they're coming in new to this space, they want to hit the home, run out of the gate. They want it to be, they want it to be fast. They want it to be now. And it's, and this is a slow. A slow growth process. And I think that oftentimes gets overlooked and underappreciated because, we're, we live in a society that once, once it done, we want it done. [00:10:47] Sam Wilson: Now we want it done. And this is a, this is not an overnight success business. So I think I think you've set the bar appropriately for what it takes. Building a meetup, building a podcast, building a website, talking about your deals to everybody, you know, it's a moving train, but once it gets started, it's hard to slow down. [00:11:04] Sam Wilson: Tell me, was there bad advice that you have received along the way in the scaling process where you're like, yeah, that was, that just didn't work out the way that I was told. [00:11:13] Eric Neely: I think I kind of mentioned it earlier, but I think the idea that if you have a deal, the money will come. I think that's bad advice. I don't think people should lean on that. [00:11:23] Eric Neely: I just think that's going to inevitably happen. The reason that it kind of does happen is because if you're actively pursuing a deal and trying to make things happen, you should be out talking to people and networking and to make it happen. And the more you talk about it, the more that people will want to invest with you. [00:11:43] Eric Neely: And inevitably you'll start finding the money. but to say that it's just going to come almost as if you don't have to put any effort into it. That's bad advice. [00:11:53] Sam Wilson: Was there good advice that someone gave you along the way that was a pivotal? Hey, this is something you should think about or was there a mentor that gave you something that said, Hey man, this is, here's a good piece of advice that comes to top of mine. [00:12:05] Eric Neely: It's all about your mindset. I mean, the knowledge required to run a syndication or buy a property is. It's not a heck of a lot more than what you need to just buy a single family house. I mean, there is more, I'm not going to lie, but it's not overly accessible that. Anybody couldn't just go out and get the education. [00:12:25] Eric Neely: Like I said, I got most of my education listening to podcasts and reading audio books. I didn't get it all there. We did end up hiring a mentor that helped us really refine the underwriting process, which is pretty important. If you're going to be able to give somebody a perspective on what kind of return you're going to give them. [00:12:42] Eric Neely: But that, that was really the only thing I paid for this as far as knowledge is concerned. So. Really? The best advice is, just, you got to get your mind in the right place. If you look at a hundred thousand dollar house and think, oh, I can easily afford that, but Julie get a million dollar apartment complex. [00:12:59] Eric Neely: It's like, there was no way I could do that. Well, honestly, man, it's only one more time. And there's no reason you can't do a $10 million property as your first one, as long as that, what you set your mind on and you're focused on it and you don't tell yourself you can't do it. So yeah, our first indication was a $2 million raise. [00:13:19] Sam Wilson: Yeah. That's a strong raise out of the gate. [00:13:22] Sam Wilson: Absolutely strong raise that's fantastic. Tell me if you were to fast forward five years from now, what do you want your business in life to look like? [00:13:30] Eric Neely: I want to be able to hit the road when I want to, as opposed to when the company tells me I have to. So that would be an ideal situation. [00:13:38] Eric Neely: I love driving. I really do. I can see the mountains every other day, cause I'm on my way to Denver right now. And. It, I would like to be in a situation where I can go hop in a truck and do it just because I want to do it. I enjoy real estate. I really do. I love touring properties, figuring out the problems and how I can make them better. [00:13:59] Eric Neely: So I would imagine five years from now, I'll be doing a lot of that and just solving problems. I mean, the beyond that got five kids. So five years from now, I want to be spending as much time as I can with my kids, even though some of them are already be out of the house, that's fine. I can still spend a lot of time with them. [00:14:19] Eric Neely: and then just volunteering more at church really is one of my big goals of volunteering the high school ministry now. And I'd like to be able to do more there than what I'm able to do right now. [00:14:30] Sam Wilson: Got it, man. That's great. I love that, future thinking and, , did not just thinking in terms of business, but also personally where you want to land with that. [00:14:39] Sam Wilson: And I guess this is maybe the last question here I'll have for you before we sign off. But when you think about the word impact, can you define that word for me? And then tell me what type of impact do you want to have on other people? [00:14:51] Eric Neely: Oh impact. I mean, you're changing lives when you're impacting somebody. [00:14:56] Eric Neely: I think about that 24 unit property we bought, we impacted the lives of 24 people when we bought it, because it was a beat down, run down class C almost class D property. And now, even though it's still in a class C area, it's almost a B minus a at this point because of what we've done to turn it around and not just from an aesthetic standpoint, but we got rid of a lot of bad people and almost well, really everybody in there now is a great individual, even though they're lower income, they're a great individual. [00:15:35] Eric Neely: So the impact that we had, I mean, I don't personally see it in the entire community, but I'm sure I know it's happening. Cause, cause we don't allow, people to just come sit on the property, so we're impacting more than just the people who live there we're impacted the community. [00:15:53] Eric Neely: And then beyond that you're impacting people who are looking for passive investment opportunities. You're giving people the opportunity to finally start making mailbox money in an asset that is so proven that it's one of the safest investment vehicles in the world, real estate. so the impact is vast right in this business. [00:16:16] Eric Neely: I love it. I love it. It's what I enjoy. [00:16:19] Sam Wilson: Yeah, we can clearly tell that Eric, I certainly appreciate you taking the time to break down today. What it takes to grow a syndication business, even when working full time. For those that say it can't be done, you can clearly prove that they're wrong. You've done it from the road. [00:16:32] Sam Wilson: Mostly you've done it fairly rapidly and with precision, I think I think that's it. And you're clearly what your definition of the word impact you're impacting the people. And lives around you, both on the investor side and on the tenant side. So kudos to you for making it happen and doing what it takes to get it done. [00:16:49] Sam Wilson: If our listeners want to get in touch with you and learn more about you, what is the best way to do that? [00:16:53] Eric Neely: Well, you can schedule a call with me if you go to my website, it's capital.com. And then also if you listen to podcasts or you're on YouTube, look up the wealthy trucker, and the ability to connect with people on there as well. [00:17:08] Eric Neely: And [00:17:08] Sam Wilson: that's FEBROS capital spelled F E B R O S Capital Febroscapital.com. We'll make sure we put that also in the show notes, Eric, thank you again for coming on the show. Certainly appreciate it, [00:17:20] Eric Neely: Sam. It was fun. I appreciate it.
Often in the media, Rennie supports individuals and business owners to create work as a choice, instead of a requirement, just as he did for himself. Complete Financial Choice® As a highly rated instructor at the University of California in Los Angeles (UCLA), Rennie uses his award-winning, #1 best-selling book, Wealth on Any Income, to teach the effective money skills from both the emotional and psychological aspects, as well as the practical components. His book has been translated into eight languages. Stay tuned and listen to Rennie Gabriel and his knowledge of the secrets of being wealthy. [0:00 - 06:53] Opening Segment Rennie Gabriel is the author of the best-selling book Wealth on any Income. It's been translated into eight languages, just as a Fun Fact: He failed high school Math and was broke at age 50, and is now a multimillionaire He considers himself an execution master, and he works side by side with people he calls visionaries. Rennie realizes that most of his success happens when he does it with other people and failures come when does it alone. [06:53 - 13:13] How to Handle Money Powerfully: The Foundations Doing an income and expense report: How Rennie was taught to help other people by maintaining or enhancing their wealth, but not how to do the day-to-day items regarding money. He discovered this and shared it in his book, He now has enough, Rennie says that if he can continue to donate to charity the happier he can become. Setting aside 10% of your income for Emergency. This is his challenge to most people. [13:14 - 16:34] Closing Segment Reach out to RennieSee links below Final words Tweetable Quotes “If I look back at my situation where at one point I had to actually, collect soda bottles and cans to get the refund money, to buy food for my family. When I look at the tens of thousands of dollars a month of income now, and I'm living on maybe 40, 50% of that, I've got enough. If I can continue to donate to charity. The thousands of dollars that we donate. I mean, granted, it could be more, but it's enough. “ - Rennie Gabriel “The more money I can donate to charity. The happier I am”- Rennie Gabriel ----------------------------------------------------------------------------- Connect with Rennie Gabriel. Visit the following websites:renniegabriel.com Wealthonanyincome.com Resources Mentioned:Wealth on any Income The Richest Man in Babylon Connect with me: 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 → firstname.lastname@example.org Want to read the full show notes of the episode? Check it out below: [00:00:24] Sam Wilson: Rennie Gabriel is the author of the best-selling book wealth on any income. It's been translated into eight languages, just as a fun fact, he failed high school. Math was broke at age 50 and is a multimillionaire by the age of 58 Rennie. I am looking forward to jumping into today's episode and learning about you and your story. [00:00:55] Sam Wilson: Welcome to the show. [00:00:56] Rennie Gabriel: Thank you, Sam. My pleasure to [00:00:58] Sam Wilson: be here. Pleasure's mine. Three questions. I ask every guest who comes to the show in 90 seconds or less. Where did you start? Where are you now? And how did you get there. [00:01:06] Rennie Gabriel: Where I started, I've always been an entrepreneur. And I guess I could say in terms of real estate started pretty much at 50, after two divorces and the business failure, that's the reason I was broke. [00:01:17] Rennie Gabriel: And where am I now? Don't have to work for a living because of the rental income from the properties we have. [00:01:23] Sam Wilson: That is fascinating. I'm looking forward. Looking forward to this always been an entrepreneur. You said two divorces and a business failure. Can you tell us what were some lessons you learned in that business failure? [00:01:38] Rennie Gabriel: Biggest lesson is that when I have partners, I have success. And when I do things on my own it's mediocre or a failure. [00:01:47] Sam Wilson: Okay. Break that down for us. Cause one of the things even though we talked about here off air was that building wealth is a team sport. So can you talk to us about that? [00:01:57] Rennie Gabriel: Absolutely. So I had a pension administration company in the 1980s. [00:02:03] Rennie Gabriel: I had two partners. We sold it off to a public company. I had a lot of money at the time and that was the first time I could choose to work or choose not to work. Then I got divorced, so I kind of ate that up. I had an art gallery business that failed and I was the solo person involved in that art gallery business. [00:02:24] Rennie Gabriel: In the real estate business. When I started at age 50, I had my wife as a partner and a realtor and the three of us, Worked together. And what I recognized, at age 50 and looking backwards, the successes who are when I had partners and didn't do it alone. And the failures were when I tried to do things by myself. [00:02:46] Rennie Gabriel: And then I decided to be an angel investor and really saw the value of partnership from this standpoint. Oh, Sam, you know who Warren buffet is, right? I've heard the name. Yeah. And probably also know who Charlie Munger is. Do you I've heard the name. Okay. But most people, when I ask that question, they don't know who Charlie Munger is, but he's half of Berkshire Hathaway. [00:03:11] Rennie Gabriel: Right. And you go Steve jobs and Steve Wosniak you go to Elon Musk, Elon admits he knows nothing about building cars or rocket ships. But he has execution masters. Elon is a visionary Warren buffett's a visionary. Steve jobs is a visionary and what they have in their business organizations are people who can execute on those visions. [00:03:35] Rennie Gabriel: In the real estate business, we had a realtor who was a visionary. And I was the execution master. I had taken a class at UCLA on how to manage apartment buildings 14 years earlier. So I took care of the tenants. I, oh, I met the plumber at the job site, or I met the painter at the job site and he found the properties. [00:03:56] Rennie Gabriel: We bought the properties by X, but I executed on keeping tenants, happy renting showing units. [00:04:03] Sam Wilson: Now is that what you guys did? You went into the multifamily space and that was what really set you up to financial [00:04:09] Rennie Gabriel: independence? Yes. As a matter of fact, when I met my wife she, and this realtor had three rental houses and I said, Well, I actually have a bias against rental houses. [00:04:21] Rennie Gabriel: I think we should buy a multi-units and now again, I was broken 50, but what I did was I took a principal that's 5,000 years old and I paid myself first and I was making 5,000 a month. I set aside $500 a month. And in three years I saved up a whopping $18,000. Right. And that's what was used to be a partner in the first property we bought, which was a triplex. [00:04:50] Sam Wilson: Got it. Oh, that's wow. That's a long, I mean, saving $500 a month for three years in order to accrue 18,000 in investible, capital is a, that's a lot of plans. [00:05:02] Rennie Gabriel: Yeah. Yeah. Well, I was looking at the future from the standpoint of, oh my gosh, I'm flat broke. Like I said, two divorces in business failure at age 65, 15 years from then, am I going to be eating cat food or am I going to eating tuna? [00:05:17] Rennie Gabriel: And it was out of that desperation I said. I've got to make this work. And this principle has worked for 5,000 years. It's going to work when you and I are dust. I got to get serious. [00:05:29] Sam Wilson: Right. No, I liked that, that they do put tuna and cat foods. So you could have it both ways if you go to the shop or pet shop. [00:05:39] Rennie Gabriel: Yeah But I don't know if it's the quality tuna. [00:05:42] Sam Wilson: Just want to throw that out there that may, maybe that you might have a dietary meet in the middle, if you really wanted to that. That's really cool At what point in time did you really start to see success though? I mean, 18,000 bucks, three years in you get your first triplex [00:05:56] Sam Wilson: when did you finally know man, we're on the pay dirt and I got the traction going that I've, I've been working so hard for, [00:06:02] Rennie Gabriel: I'd say in another couple of years, what I could see as this property was increasing in value because we were able to remodel it. Now I put physical labor into it. [00:06:11] Rennie Gabriel: We'd re rented it. We increased the rents and with multiunit properties. The value is a multiplier of the gross rents. Right. Really simple. And so I could see my gosh, this is working. I borrowed money to make down payments with my wife and the realtor. And we went from that first three in a purchase within five years, we added another 47 units. [00:06:36] Sam Wilson: Right. Yeah. And that was enough to really set you up for success. Is that what your book is about wealth on any income? Can you kinda give us kind of the backstory on the book and the principles that we may learn in that? [00:06:48] Rennie Gabriel: The backstory on the book has nothing to do with how I made all this money in real estate. [00:06:53] Rennie Gabriel: It's the foundational concepts of handling money powerfully. The first third of the book deals with the emotional stuff. That's in the way of people actually taking action. And okay. Sam, let me ask you a question. Let me put you on the spot here [00:07:08] Sam Wilson: Sure. [00:07:09] Rennie Gabriel: Do you know anyone who is obese? Yup. Okay. Let me ask you, do you know what the two primary things are for someone to lose weight? [00:07:18] Sam Wilson: Well, [00:07:19] Sam Wilson: 80% of his diet, 20% of its [00:07:20] Sam Wilson: exercise. Okay, fine. So if they move and they change their eating, they can lose weight for sure. Do you think there's an obese person who doesn't know that. [00:07:31] Sam Wilson: Nope. I think people maybe don't I think it will get it. Flip-flop I think it's 80% exercise, 20% diet. [00:07:36] Sam Wilson: But outside of that, no, [00:07:38] Rennie Gabriel: okay so I [00:07:39] Sam Wilson: know the two ingredients, they just mailed the mixtures wrong. [00:07:42] Rennie Gabriel: Yeah. So they know the two ingredients and the knowledge is the booby prize. Right because there's emotional stuff. That's in the way of them taking any action, whether it's reducing what they eat or moving. Right. [00:07:54] Rennie Gabriel: And so the first third of the book has to deal with getting that emotional stuff out of the way, dealing with the messages. Someone may have been taught as a child, determining what they want out of life and that they can have it. And then I can, the latter two thirds are the tips and techniques of handling money powerfully. [00:08:11] Rennie Gabriel: we talked about my being broke. I was also certified as a financial planner. Okay, but did not know the basic foundations of handling money, how to do an income and expense report. What to look for in a balance sheet for personal wealth, I was taught how to help other people maintain or enhance their wealth. [00:08:33] Rennie Gabriel: Right. But not how to create a personally, not how to do the day-to-day items regarding money. And that's what I discovered. And that's what I have in the book, because. You probably have people in your sphere that make a lot of money and burn right through it. Yep. And I was the same way. I thought if I just made more money, things would work out and up until 50, I would make more and more money and have nothing to show for. [00:09:02] Rennie Gabriel: I lack the foundation. I mean, I literally went 6,500 a year as a school teacher to $102,000 in sales per year. And I went from a hundred dollars a month short as a school teacher to $2,000 a month, short earning over a hundred grand. [00:09:23] Sam Wilson: Right. So you were, it doesn't matter how much money you make. [00:09:26] Sam Wilson: You were still losing money on a month, over [00:09:28] Sam Wilson: month basis. [00:09:29] Rennie Gabriel: Exactly. And so I had to turn that around again, that's a part of the process at age 50, paying myself first, making sure that how much money came in, we were able to set aside reserves. I took care of the financials because I finally learned what to do. [00:09:46] Rennie Gabriel: Right. And that's why. Eight years later, I could choose to work or choose not to work. [00:09:51] Sam Wilson: I love that wealth on any income is the name of the book. If we want to get in touch with you or not get in touch with you, but if we want to actually find that book, where can we buy that? [00:09:59] Rennie Gabriel: The best place is my website wealth on any income.com, because that way I can donate a hundred percent of the price of the book to charity. [00:10:10] Rennie Gabriel: If they get it from Amazon, I get like a buck big deal. [00:10:13] Sam Wilson: Right, right. Yeah. And I think that's a cool point to make is that because you don't need the proceeds from these books, sales, you're able to donate a hundred percent of that profit to animal. And what'd you say animals and veterans [00:10:24] Rennie Gabriel: veteran charities correctly now. [00:10:26] Sam Wilson: That's really cool. That is really cool. What's a challenge, I guess, since you've, you've been able to achieve financial independence, but what's a challenge you find right now that you're trying to overcome. [00:10:37] Rennie Gabriel: being able to let go, my kids are talking about, Hey dad, when you pass away, we don't want these properties. [00:10:44] Rennie Gabriel: We're not going to take care of these properties. And you ought to have a management company in place because you're going to get old, you're going to die and what's going to happen. And so I started interviewing management companies and the difficulty is. I've run the properties I've met. [00:11:00] Rennie Gabriel: It's a property that was taken care of the tenants through this entire pandemic. 100% of my tenants have paid 100% of their rent and only one of them needed assistance from the government program. Wow. I don't know of a management company. I don't know of another landlord that can talk about [00:11:21] Rennie Gabriel: that [00:11:22] Rennie Gabriel: And when I started interviewing management companies, my assistant said, you know, Rennie, I've been looking for an apartment and one of the companies you interviewed had eight properties I had applied for or gone to see, and they don't get back to. [00:11:40] Rennie Gabriel: I mean, the person who showed me the property said, if I want to turn in an application, I got to call the management company. I call the management company it's two days later before they even get back to me. Jeez. So guess what? They're they, it all looked good when I interviewed them, but with the experience of my own assistant, I could see, they can't do the kind of job I can do. [00:12:05] Rennie Gabriel: So what's going to happen is I'm going to tell the kids when I dropped dead, sell the properties, you've got to step up in basis. Have a good time, [00:12:13] Sam Wilson: right? Yeah. Looks like you guys just to find a good realtor and call it a day. Yeah. Wow. That's it. And so I guess out in the spirit of that question, are you still acquiring assets or is what you have right now? [00:12:25] Sam Wilson: The bread basket. He said, Hey, this is what I've got for the duration. And I'm done. Where are you in your inbox? [00:12:30] Sam Wilson: I'm done. I've got enough. We've got more money coming in. Then we need to live on. We're able to set a lot of money aside anyway, so that, yeah, I've ha I have enough. [00:12:42] Sam Wilson: I'm done. [00:12:43] Sam Wilson: Talk to us about that. Cause for most people enough, there is never enough. How did you figure that out? [00:12:50] Rennie Gabriel: Well, I talked about having been broke. If I look back at my situation where at one point I had to actually collect soda bottles and cans to get the refund money, to buy food for my family. [00:13:02] Rennie Gabriel: When I look at the tens of thousands of dollars a month of income now, and I'm living on maybe 40, 50% of that, I've got enough. If I can continue to donate to charity. The thousands of dollars that we donate. I mean, granted, it could be more, but it's enough. [00:13:21] Sam Wilson: That's awesome. So it sounds like you've achieved financial and time and independence. [00:13:26] Sam Wilson: And your main motivation is that you want to devote or donate to charity and to put it where you want be. [00:13:34] Rennie Gabriel: That's it. It's the more money I can donate to charity. The happier I am. You do [00:13:38] Sam Wilson: talk to a lot of people, I'm sure, because of the book about finances, what are some of the, what are some of the repetitive conversations you feel like that you have that you just go, this is something I think everybody needs to hear. [00:13:52] Sam Wilson: Maybe save you the time of having that conversation all over again [00:13:55] Rennie Gabriel: it would be such a simple formula. if someone just lives on 80% of the money that's coming in, they set 10% aside for when things go wrong, the car breaks down, they need registration expenses back to school, clothing for the kids, whatever I've found for hundreds and hundreds of people. [00:14:13] Rennie Gabriel: It's an average of 10%. Sometimes it's 15 and the 10% they keep for the rest of their life. It comes from the book, the richest man in Babylon from a hundred years ago. Right. That formula 80 10, 10 will help anyone handle money powerfully. [00:14:31] Sam Wilson: yeah. liked that book. That's a good idea. [00:14:34] Sam Wilson: Very wise and easy, certain read. Are there any other resources you would direct our listeners to? I mean, because this is a topic that people talk about a lot. They go, it's at the front of most people's minds. Are there other resources you direct people to, that you feel like would be a value. [00:14:49] Sam Wilson: [00:14:49] Sam Wilson: Yeah, actually they, I've got a nine step roadmap on my website and they can hear my Ted talk as well. and this nine step roadmap comes with 27 pages of explanation on how I went step-by-step from broke to philanthropic. [00:15:07] Sam Wilson: That's cool. Awesome. And we can find that there on your website wealth on any income.com, [00:15:13] Sam Wilson: correct. [00:15:13] Sam Wilson: And then just put forward slash TEDx. And they'll see the roadmap and can hear the Ted talk, man. [00:15:19] Sam Wilson: That's fantastic. Rennie, are there any other closing thoughts you have here for our listeners today, as it pertains to how you've achieved financial independence investing in real estate, living on wealth on any income, anything else you'd like to share with the listeners before we close out? [00:15:33] Rennie Gabriel: Just a reminder that wealth creation is a team sport, not a solo sport [00:15:38] Sam Wilson: I love it. Rennie, thank you so much for your time today. Again, we can find you on wealth and income.com. Appreciate you coming on the show today and look we're connecting [00:15:46] Rennie Gabriel: soon. Thank you, Sam. My pleasure. Thank you so much.
Real estate investing has long been one of the proven ways to become wealthy. But like any other business, it's not as easy as it sometimes appears. Wesley Yates is the Co-Founder of VFR Capital Investments, a real estate investment company focused on the acquisition, management, and disposition of opportunistic to core-plus multifamily assets that can be repositioned on behalf of and for its investors. With his years of experience in real estate space and management, he shares valuable lessons on how you could start investing in real estate with little capital, finding the best people for your team, and how to qualify deals. In late 2018, he turned down an Operations Management opportunity with Amazon to begin actively networking within the real estate investing community. Quickly building relationships with other like-minded entrepreneurs, he has created an extensive network of accredited investors who believe in his vision for methodically acquiring commercial assets. Wesley is an enthusiastic leader and brings with him skills crucial to building successful teams and driving performance. [00:01 - 03:14] Walking Away From a Job Opportunity to Get Into Real Estate Get to know Wesley Yates How Wesley led his team in growing their portfolio from zero to 862 units in just a little over 15 months [03:15 - 09:11] Learning from Failure Experiencing his first failed deal Putting up his own team together Achieving self-confidence with his wife's support Being willing to admit defeat and reflect on what went wrong [09:12 - 17:31] Tips on How to Stand Out and Succeed in Real Estate The bad advice he received while scaling When it is best to get greedy Learning to say No Take the time to build relationships with the gatekeepers How Wesley leaves a good first impression Know who you are working with [17:32 - 19:49] Closing Segment The best piece of advice Wesley has ever received Reach out to Wesley! Links Below Final Words Tweetable Quotes “It's not a matter of when you hit a problem. It's not a matter if you have a problem. It's a matter of when. So who you have with you fighting those is really going to determine on how successful you are.” - Wesley Yates “Sometimes you got to look yourself in the mirror and just really go, what do you want? What can you live with? At the end of the day, what can you live with? Can you live with saying, I failed to chase a dream? Or I was too scared to try?” - Wesley Yates “You can't make a bad deal good. But you can make a good deal better.” - Wesley Yates ----------------------------------------------------------------------------- Connect with Wesley Yates for commercial real estate investment opportunities! Visit the VFR Capital Investments now and follow them on Facebook and LinkedIn. Email Wesley at email@example.com. 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 → firstname.lastname@example.org Want to read the full show notes of the episode? Check it out below: [00:00:00] Wesley Yates: One thing I will say and whatever advice you're taking it from vet out who is giving it, right? So if someone's telling you it's okay to overpay, meaning you know what if it's a good deal and you believe in it, then it's okay to get more aggressive on your price. [00:00:28] Sam Wilson: Wesley co-founded VFR Capital Investments, a syndication company that is owned by a team of veterans and first responders. He served as the CEO and he's led his team and growing their portfolio from zero to 862 units in just a little over 15 months, estimated about $70 million in assets under management, Wesley, welcome to the show. [00:00:47] Wesley Yates: Thanks, Sam. I appreciate you having me on. [00:00:49] Sam Wilson: Hey, man pleasures mine three questions I ask every guest come to the show 90 seconds or less. Where did you start? Where are you now? How did you get there? [00:00:56] Wesley Yates: Where did I start? I started at the bottom. Where am I now? Closer to the top? How did I get there? A lot of hard work racking my brain and most importantly, having the right team by my side. Because it's not a matter of when you hit problem. It's not a matter if you have problem. It's a matter of when. So who you have with you fighting those is really going to determine on how successful you are. [00:01:20] Sam Wilson: Man, I love that. That's absolutely right. Tell me when did you decide to take the plunge from smaller deals into larger deals? [00:01:29] Wesley Yates: So yeah, like a lot of people I think, you know, they started with residential, really wholesale. And I was more like a plus one. My wife was the one that was really in real estate. I was on a contract to go to Amazon. So I'm like, Yeah, I'm just here, you know. So as I was networking, it was really that was the story. But I got a phone call on July 19 of 2019 said, Hey, do you want to do some syndication? I said, Do I need a license for that? They laughed. I was serious. But showed up the very next day and just started networking had about 250 cards in my pocket after the first event. First conversation went something like this, Hey, what do you guys do? They said, You know, we're investors, investors, investors, I'm LP and this many doors, all that what do you do? Oh, I'm gonna be raising capital for a group. That's, you know, syndicating multifamily. They asked me, you know, the typical questions, what's your cash on cash? What's your target IRR? What's your total returns holding times? I didn't know a single thing that they had said. So I reverted back to my old days of being a leader in the military. You never could say, I don't know, you could say I will get you the answers. So that's exactly what I said. You know, those are great questions, I'd really like to get you the right answers. So whenever we get closer to ironing out our numbers, I'd like to be able to get those to you. Do you have some way for I can reach out to you later on? Boom, boom, boom, five cards, went back to the group that invited me there. said, Yeah, I have no clue what cash on cash IRR. So back and forth, I went for a good hour and a half of that event. And still, by the end of it was having full-blown conversation. So cared more about the journey ahead and building momentum than how dumb I looked asking what people would call dumb questions. So that's where I started. And that was, you know, was that almost three years ago now? So [00:03:15] Sam Wilson: Oh, and so you started off raising capital for somebody else? Yes, sir. And is that what you do now? [00:03:23] Wesley Yates: No, I will like I am now in a more the CEO route, found out that I was better with my brain doing the operations overseeing the formulas, the processes, you know, I've got the whole six sigma training, the, you know, I was gonna go work at Amazon as one of their manufacturers was the operations managers. And so a lot of tracking performance, tracking efficiency, you know, driving that all forward. And so that's kind of what I did to our team and our processes is put a manufacturing engineer mindset to it. And we really started cranking out some deals. But it wasn't until I put, I guess, my own team together that I ever closed the deal our first year and a half of syndicating with other teams, I was not successful. [00:04:11] Sam Wilson: What do you mean by that? You were not successful? I mean, if you're putting deals together with other teams, did all the deals fall through today? [00:04:18] Wesley Yates: Just yeah. So in a nutshell, the, you know, as I was raising a capital A, you know, raising capital for that first role for that first team. You know, there were some things that I found out later on, once we really got into due diligence of our first deal, kind of notice that or some unethical things that have been done in the underwriting some unrealistic things that had been changed in the underwriting to just make numbers work. And, you know, I kind of rapidly dove into everything to where I could, you know, read the underwriting, or at least started catching on to those things. So yeah, I had to say, hey, look, I can't move forward with this deal in my better judgment, and told my investors in good faith I cannot advise you to invest in This deal, some of them kind of said, Okay, most of them respected that. And one of them is actually now one of my partners on my company today. So one of the co-founders of our company, Robert Newbern was actually originally going to be a passive investor. So, you know, less than I kind of learned a lot. I mean, still is, you know, you can have many different definitions to that. But did I close a deal? No, I did not close a deal, until I started my own team with the right people. So up to that point, it was more of an I was learning, and it was a trial, and fail and learn and move forward. So [00:05:40] Sam Wilson: what gave you the confidence to keep moving forward or being as the new guy to the space you're learning from some other people, then you get involved and you put time, effort and energy, you're going to conferences, you're shaking hands, you're talking about deals, you're, you know, have an investor conversation, then you get halfway through it, you're like, oh, wait, I don't like any of this. And I don't want to work with these guys anymore. I mean, that's, that's, that's a lot of setback for somebody new to the industry. What gave me the confidence to say, you know, that I'm on to something, I just haven't figured out the right way to do it yet. [00:06:10] Wesley Yates: Well, I don't know. To be honest, sometimes I made the joke that I was just too dumb to quit. I guess it's that inner marine and us we hate failure. I mean, you gotta practically kill us before we'll stop trying. Right. And I think that's what it was, is I still saw every step of the way, I did learn, I did grow. So I was scaling up. Even without, you know, closing something, I went from just investor relations to, you know, operations of a hospitality company, to a co-manager of $100 million fund. So I was still scaling up and building up experience and building up skill sets, learning more rapidly growing. So I still believed in myself at the end of the day, but I'll be honest, a lot of it has to do with my wife. My wife really supported me through all of that at the end of the day, she she kind of let me know, you know, you can do this. You've got what it takes. My family didn't feel the same sentiment of that, you know, a lot of my family flat out, tell me you're you're an idiot. What are you doing? You walked away from a guaranteed paycheck with Amazon and all the bells and whistles? To do this? What do you what do you do? So sometimes you have to look in the mirror and just really go what do you want? You know, can you can't What can you live with? At the end of the day? What can you live with? Can you live with saying I failed chasing a dream? Or I was too scared to try. You know, which regret Do you want to have? And I felt like I would rather chase this thing down to the bitter end until I could catch it, beat it and make it mine. Before I wanted to say nah, I gave up. [00:07:48] Sam Wilson: I think that's a valuable lesson. And I'm butchering this, this quote, but it's something like failure weighs ounces, regret weighs tons. Something to that idea, [00:07:58] Wesley Yates: one of the things that I think I've read, I've read, you know, the little motivational quotes that and it's funny because I hate rah, rah. But some of those quotes still get me okay, they still get me I think the one that really helped me when I needed it, it said, Winston Churchill says success is going into a new endeavor with the same enthusiasm. You started the last, huh? And I was like, well, there you go. So, you know, a lot of people say, as long as you learn, you didn't fail. And I think that's one thing that, you know, throughout my time in the military, throughout my time as an entrepreneur, I realized that if you don't look back and reflect on the lessons learned the Hey, what did I do wrong? What did I do right? Then? How are you going to grow? You have to be willing to admit defeat, you have to be willing to meet to address. Where did you mess up? versus what's that? And, you know, that's something that I've always been able to do is look back on whether it was a successful takeover, it was a complete fail. Where could I have made that process better? What can I have done? What could I have had differently in place to make overall something move better in the future? [00:09:12] Sam Wilson: That's a great stance, and one that is often sorely lacking in today's society is just that personal responsibility piece. What's what is though, perhaps, some bad advice that you received during the scaling process? Has there been anything that you dislike? And somebody told me this and that was completely bogus. [00:09:31] Wesley Yates: It's okay to overpay. [00:09:35] Sam Wilson: Elaborate, please. [00:09:38] Wesley Yates: One thing I will say and whatever advice you're taking it from, vet out who is giving it, right. So if someone's telling you it's okay to overpay meaning you know what if it's a good deal and you believe in it, then it's okay to get more aggressive on your price. Like okay, but then I stood back and I reflected on who was telling me that was the guy that required me to use his broker to buy his deal that gets paid on commission based on price. So of course, he's going to tell you it's okay to overpay. But yeah, I would say that right? There is probably one of them. That's still It's like no, you mean, in real estate. And really anything, you make your money on the bot, right? You make your money on the buy, because there is a ceiling to a market, there is a ceiling to, to an industry, and including into every asset. So you've got to know what that is, and believe in your numbers stick to a criteria. And don't fall for it. You know, was, since we're big on quotes right now was Abe Lincoln said, Whoa, it was like, find your stance and stand firm or something like that. Like I probably butchered that one worse than you did. But, you know, basically, you know, that's a lot of the advice that I look at from the, you know, true leaders and true successful people. You know, Warren Buffett is a good one. I think right now, in today's times, it's never, it's never been more true, then be cautious when others are greedy, and greedy when others are cautious, right. And as we are going through this syndication has never been more hot of a topic. And I was looking at some people that were studying justification, they say there's going to be a 60% increase of syndicators in the next two years. So it's like, wow. And everyone's just trying to, you know, get there do get a deal. Get a deal, right. So, you know, in some just being out flat, greedy, we've had the lowest interest rates, and you know, whatever, almost right. And now we're fixing to go from that switch to where, look, the feds have just announced they're gonna rise again, and be even more aggressive than the last race. So and they're not done. So now's the time to really be cautious, and let others be greedy. And then later when the shoes on the other foot and you know, maybe we could see, hey, it might be a buyers market here soon. That's when it's time to get greedy with the right plan. [00:12:01] Sam Wilson: Yeah, that's for sure. Give me that. In practical terms, though. I mean, you guys are still actively buying, you're still actively looking at deals? What are you guys doing differently now, maybe than what you weren't doing? Or what are you guys doing differently now that you weren't doing six months or a year ago? [00:12:17] Wesley Yates: saying no. What I mean by that to elaborate is, you're gonna have some opportunities that come your way. And you got to understand is it a valid opportunity? Or is it just a time suck? Is it a, you know, risk? How much risk is with saying, yes, how much risk comes with actually acquiring the assets? We've had a whole lot more deals that we had the opportunity to be a part of that we said no, than the few that we were, I will be under, you know, understanding, looking back to where I was looking for that first deal. And so hungry and so almost desperate for it, it's hard to say no, it's hard not to try to make something work. But one thing that I've realized very early on, and I've just instilled it into every one of my team members is, you can't make a bad deal good. But you can make a good deal better. And that's really what it is of that is we screened more finally, we stick to our criteria. And at the end of the day as a syndicator, you're not looking for deals for you. Whether you realize that or not, you're not looking for deals for you. You're looking for deals for your investors, right? So what are your investors ultimately looking for? Because if you don't have a seller, if you don't have an investor, you better have the money yourself. So, you know, that's a lot of what we had to get, you know, more fine-tuned of what we're looking at and branching out to say, you know, what, there are more markets than just my backyard. [00:13:48] Sam Wilson: What? Yeah, I like that. Maybe that's you maybe you're gonna answer this question already. But what are you guys doing to be competitive? Like when you do put in an offer on a property, especially in multifamily? It's unlikely you're the only offer? So what are you guys doing to be competitive? [00:14:07] Wesley Yates: So a lot of that goes back before you even make that offer. A lot of that goes back and when people realize that this is a game of relationships with other co sponsors, but more importantly, with the gatekeepers, that's what I call my brokers. Ultimately, the brokers are the gatekeepers to the good deals, if they don't have a good feeling about your you and your capabilities, and ultimately, obviously, it's not just me, but when I say you, I mean my team, your team, then they're never going to push your package forward in front of that seller. You know, example right now, I was a good 300 I think maybe 500,000 under some of the other offers going into best and final. But the broker liked our team to the point where he encouraged the seller to still take our offer even a lesser amount because of who we are and what we have done. So even if you are looking at your first deal, co sponsor with someone that has been there that has a sucessful track record, that's how you can still overcome that. But take the time to really build your relationship with your brokers. Because that'll go a long way when the time really counts and do more than just put in an offer. When I put in my offer, I have a nice brochure that says who is VFR Capital Investments? What do we stand for? Why us, the bios of every member, the team and our portfolio and a nice PDF brochure versus just a letter, just a, you know, a Word document bio, or even worse an email, Hey, this is who I am in the body of an email. So take the time you get one first impression to that seller. I've had sellers actually come to properties and come up and say, Hey, while we were doing our due diligence, and they recognize us from our from the logo on my shirt, it was like, Oh, you're the VFR Capital Investments team. Yes. Hey, you know what, guys, I really want to let you know, I really liked your story. And your brochure really impressed me I had higher offers. But because y'all look like y'all were more prestige and more sophisticated, I ended up going with y'all. I've been told that twice now on two different properties during the due diligence that the sellers had to come out just to meet us. [00:16:23] Sam Wilson: That's cool. And that's, that's a good gold nugget, you know, getting, you know, developing your relationships with as you call it, the gatekeepers and doing more than just putting in your offers and finding ways. And those are relatively almost cost-free ways. You know, to stand out, some people are taking much more aggressive stances, and putting down you know, hey, we're gonna throw in a half-million bucks of hard money, day one, whatever it is, you know, trying to stroke the bigger check, which is, you know, that may be necessary to that's another card in the, in the deck of cards you can play, but I like what you're talking about. They're just an easy way to stand out. [00:17:05] Wesley Yates: Yeah. And I didn't have the deep pocket to go. I mean, I started this, I was making $24,000 a year, I was broke. So you know, having the deep pockets to be like, You know what, I'll just do a little bit more. Let me slide this over there. So I worked what I had, and I had the ability to take the time to actually get to know who I was going to be working with. And that was to me, in some cases to others. More important than how much dollars were on an offer. [00:17:32] Sam Wilson: Yeah, absolutely. What's one great piece of advice, we asked this question earlier a bad piece of advice he received? What's probably the best piece of advice you feel you've been given? [00:17:43] Wesley Yates: Hmm, that's a good one. I think you would probably be you know that. It's okay to say no, I know, I kind of discussed that. That's really something that that I've struggled with, but it's okay to say no, it's not an admittance of failure if you're saying no to something that is ultimately a dead end. Right. And that's something that I know some people might not relate to, but, you know, everything that dangles in front of you is not, it's not something that you need to chase, they could just truly be a carrot on the stick. [00:18:14] Sam Wilson: Right? Right. You have the stick at the end of the carrot. You gotta watch out for that stick. Yeah, yeah. That's absolutely awesome. Wesley, thanks for taking the time to come on today, really break down your story, how you have found success, the things you're doing to remain competitive, protect your downside, giving us some kind of insight on what you do to establish relationships with brokers and really just kind of your investment thesis and mindset that you've taken and implemented to get you to where you are today. If our listeners want to get in touch with you or learn more about you, what is the best way to do that? Yeah, [00:18:47] Wesley Yates: So I've got my email, email@example.com. And you can look it up on Facebook or LinkedIn, we're there as well. And I'd be happy to connect and if there's anything I can do to help another co-sponsor, with their first deal or their hundreds of deals. We're always happy to sponsor beyond co-sponsor a deal and, and hopefully add value as well as hopefully maybe learn from another person's strategy. So that's, that's what we're about. [00:19:19] Sam Wilson: Awesome, Wesley, thank you so much. Appreciate it. [00:19:22] Wesley Yates: Thanks, Sam.
Sam Wilson is an active investor in self-storage, parking, retail, multi-family apartments, RV parks and single-family homes and participated in over $30 million in acquisitions in 2021. Learn More About Sam Here: Bricken Investment Group - https://brickeninvestmentgroup.com/ Connect with the Global Investors Show, Charles Carillo and Harborside Partners: ◾ Setup a FREE 15 Minute Strategy Call with Charles: http://ScheduleCharles.com ◾ FREE Passive Investing Guide: http://www.HSPguide.com ◾ Join Our Weekly Email Newsletter: http://www.HSPsignup.com ◾ Passively Invest in Real Estate: http://www.InvestHSP.com ◾ Global Investors Web Page: http://GlobalInvestorsPodcast.com/
As contrarian investors we always want to find unique opportunities that may be overlooked by the majority of less savvy investors. For this reason, I'm excited to present three real estate niches that are not commonly discussed in the industry, but provide some incredible cash flow and appreciation potential. This IIREC 2022 episode features 3 all-star speakers…. Brian Spear is a Co-Founder of Sunrise Capital Investors which operates multiple mobile home park investment funds. Drew Wahlgren, the VP of Investor Relations at MAG Capital Partners, which is a proficient industrial operator. Sam Wilson, the Founder of Bricken Investment Group, an RV Park operator, with a ton of experience in the space. These three experts reveal their favorite niche in today's climate, especially when uncertainty is at an all-time high. In this episode, we discuss… Why Drew focuses mostly on the tenants when evaluating industrial real estate Brian's key drivers of demand for parking real estate How Brain has systematized the a powerful MHP deal flow process Sam's powerful explanation of why RV storage will prosper for the foreseeable future If you want to learn about some of the most exciting real estate niches in 2022 from leading experts in the industry, check out this informative episode! Take Control,Hunter Thompson Interested in investing in ATMs? Check out our webinar. Please note that investing in private placement securities entails a high degree of risk, including illiquidity of the investment and loss of principal. Please refer to the subscription agreement for a discussion of risk factors. Tired of scrambling for capital? Check out our new FREE webinar - How to Ensure You Never Scramble for Capital Again (The 3 Capital-Raising Secrets). Click Here to register. CFC Podcast Facebook Group
Ep. 563 Why Industrial and Self-Storage Will Remain Strong For The Next 5+ years!Dan Kryzanowski is a serial revenue driver and active alternative asset investor. Prior to joining Rocket Dollar, Kryzanowski led new initiatives, partners, and teams across multiple startups and Fortune 50 companies, including General Electric and Merrill Lynch. He also serves as an advisor to entrepreneurs and executives across the FinTech worldand self-storage industry. In addition, Kryzanowski is a certified Project Management Professional, and a graduate of GE's exclusive Experienced Commercial Leadership Program. He also serves as the Corporate Board President of Hugh O'Brian Youth Texas Capital Area. Kryzanowski graduated from the Wharton School of the University of Pennsylvania and has an MBA from Thunderbird, graduating with distinction (top honors). He resides in Austin with his wife and son. Stay tuned and listen to how Dan Kryzanowski shares his knowledge on Why Industrial and Self-Storage Will Remain Strong For The Next 5+ years! [00:00 - 05:26] Sponsors Get 20% on Raise if You Use Your Retirement Dollars in My Next Deal using your retirement dollars in your next deal. This can help sponsors get about 10-20% of their raise. The solo 401k is a powerful tool for sponsors because it allows them to defer taxes and generate high yields. Sponsors should go talk to a lot of people before investing in a deal, as the market has changed and preferences have shifted. Investors still want some appreciation in their investments, even in an inflationary environment. Classing a class B can provide this [05:26 - 10:54] Delaware Statutory Trusts Can Help You defer taxes The benefits of a Delaware statutory trust (DST), which is a type of trust that allows property owners to sell and take the appreciation without paying taxes on the gain. Many DSTs are portfolios that contain different properties, which can provide diversification and low-to-mid single-digit returns. As an LP, it's important to be aware of when a DST expires and to get moving on selling the property as soon as possible in order to avoid paying taxes. [10:54 - 16:11] Storage Industry Continues to Grow The industrial fund closed on four properties in four Q last year, allowing the company to enter the California student housing market at a favorable cap rate Storage is now a natural extension of the housing experience, with demand for RV and boat storage increasing Specialized storage is becoming more popular, with high-end facilities catering to those with high incomes and multiple properties" [16:12 - 19:34] Closing Segment Reach out to DanSee links below Final words Tweetable Quotes "Once again, you on property, You own and operate today. So what's your options. You can keep on owning and operating or you can sell. Now, if you sell, you generally have two options.A of course you pay your taxes or you own and operate property. B pretty much the same. It's just a different property. Now in the middle. I like to say per se as well, I don't want to own an operate, but I want to maintain the tax benefits. - Dan Kryzanowski ----------------------------------------------------------------------------- Connect with Dan Kryzonowski on LinkedIn. Connect with me: 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 → firstname.lastname@example.org Want to read the full show notes of the episode? Check it out below: [00:00:00] Dan Kryzonowski: My suggestion I've seen this play out time and time again, is that in your communication to your investors, to your prospects, one sentence saying, did you know, you can use your retirement dollars in my next deal? That alone from my experience sponsors tend to get about 10 to 20% of their raise. [00:00:17] Dan Kryzonowski: Whether it's through an STI rate with the legacy custodian or solo 401k. And of course that ties to rocket dollar very powerful, especially as more folks are moving self-employed for better or worse. The solo 401k is pretty exciting [00:00:29] [00:00:40] Sam Wilson: Dan Kryzanowski is a capital raiser equity owner and LP investor generating double digit yields and lower taxes, but via commercial real estate, he's currently bullish on Texas commercial real estate, industrial self storage, and 10 31 and Delaware statutory trust. [00:00:56] Sam Wilson: Dan, you're a wicked smart dude. I'm lucky to have you on the show. Thanks for coming on. [00:01:00] Dan Kryzonowski: Sam. It's great to be here. And if the calendar's right, I think I was originally a number 44. So thank you for bringing me back. And I think today may actually be my 44th birthday. So, Hey, how about that? Hopefully there's something. [00:01:11] Dan Kryzonowski: Well, look [00:01:11] Sam Wilson: at that number 44 on your 44th birthday. That's right. Yeah. You came on the show January 12th, 2021. So it's been, yeah, that was 500 and something episodes ago. Tell me, what's happened here in the last, almost year now. [00:01:27] Dan Kryzonowski: Yeah. I think high-level, and I was at a CEO conference here in Austin and one of the gentlemen on stage so that, Hey, in 2021, people were buying and in 2022 people are shopping and this extends everything from going to the supermarket cause inflation to I think our world. [00:01:44] Dan Kryzonowski: And I think it's, in some ways it's a great thing. In some ways it's a challenge. So for fellow sponsors and hybrids on this call, realize. You're not the only game in town and somebody, if they are interested, your buddy that you worked with for 20 years at corporate, he or she is now listening to multiple podcasts, going to a few shows, talking to multiple sponsors, doing the diligence. [00:02:03] Dan Kryzonowski: So just throwing a deal out there and thinking, ah, if you build it, they will come. Not as much. So, I always think it's what education, what can you play into, are you, have you listened to your audience? Your investors in the past, year and a half. And then what are you bringing them down to fulfill their needs? [00:02:18] Dan Kryzonowski: So I feel this in all walks of life, but especially here in our real estate of passive investing world, [00:02:24] Sam Wilson: man, I'd say it's absolutely true. The number. I feel like the investor conversation has changed. For me, I don't know, I probably have 15 investor calls. And it's changing, the preferences are changing. [00:02:36] Sam Wilson: You're right. I'm hearing that more and more. It's like, oh, Hey, I've talked to X, Y, Z. You're like, they're shopping, I'll hear, eight to 10, we're talking to eight to 10 sponsors figuring out what's out there as well. They should, as limited partner, I encourage that. Go talk to a whole bunch of people. [00:02:47] Sam Wilson: You may find you hate what I do. And I don't want you in my deals. If you hate what I do, you may find that I have bringing something unique to the table that you really find valuable. So I want you to, I want this to be a win-win, but they are shocked. And the other thing I think I've seen here recently, maybe you can attest to this is people are shying away from the appreciation play and really hunting for just cashflow go in. [00:03:08] Sam Wilson: And I hear that across the board. Have you seen that? [00:03:10] Dan Kryzonowski: I have, and we in that spirit at the, we recognize that, especially with inflation, creeping up, A lot of folks said, Hey boy, I'd love to get, I love to know I'm going to get a win for a year and then let's see where the world plays out. [00:03:23] Dan Kryzonowski: So, typically a development multi-family is three to five, three to seven years through this feedback we have DV said, Hey, how about we chop it up to a stage one and stage two. And as a thank you to our current investors, we paid upwards up to 20% on money for up to a year on the stage. The, once again, listening to your investors, this is what was valued. [00:03:43] Dan Kryzonowski: Now that said that we feel a lot of them are going to roll the principal and interest into the second stage. But I giving folks, Hey guys, you want to hop off the train or you want to wait a year and come on the train. I think investors prefer the sort of optionality. And once again, if you have the scale and you do your diligence to legal, et cetera, it's something you can provide your initial. [00:04:01] Sam Wilson: Now stage one versus stage two, or are you talking about on a development deal where there may be no potential cashflow early? [00:04:10] Dan Kryzonowski: Yeah. So think of generically called stage one, the land, almost a land loan per se age, two's going to be your typical development. And this can be your, development multi-family or maybe it's lots. [00:04:21] Dan Kryzonowski: And you're say you're putting the pipes underground and the people come and purchase a lot. Both of these we've seen pretty attractive at least here in time. [00:04:29] Sam Wilson: Right. Yeah. That's really intriguing. Yeah, you're absolutely right. I think that's something that providing that options, providing those options for your investors. [00:04:36] Sam Wilson: And we've seen that also just in class shares. That's become a big thing is to class a class B do you want to clip the coupon? Do you want to clip the coupon with upside, but take a smaller clip? What's that look like? Tell me, what are you guys investing in right now in BV cap? [00:04:51] Sam Wilson: And then maybe if you can give me a, some color to that as to what you guys are doing to protect against inflation, but also just protecting us market risk. [00:04:59] Dan Kryzonowski: Yeah. So one thing, kind of in the spirit of our parents stock bond portfolio, we at BV feel. There's still a similar want and need that folks want some appreciation. [00:05:11] Dan Kryzonowski: And that at times folks want a portion of their portfolio. That's a little more predictable. So, for example, and frankly, we haven't even market this. We have a triple net industrial portfolio that pays a monthly distribution. I like to say it's wonderfully boring. Cause guess what? You write a check. [00:05:26] Dan Kryzonowski: And every month the check comes in the mail and it's a great way to also mutually know. Right. To the point that we have up to, close more than a half dozen investment advisors have actually trusts us with their client money. If you've ever been through that route, it's a hell of a lot of due diligence and everything else, just even have that conversation. [00:05:43] Dan Kryzonowski: So that was a pretty good proof point. Yeah. Separately. We've had some stuff with sizzle on the multifamily side that we feel is going to be a good historically has been a 20 plus IRR, whether it's in student housing, Of course housing. And what I think is unique is I call it the mid point between doing a 10 31 and just painful taxes today. [00:06:03] Dan Kryzonowski: There's many folks. In all stages of life, that own a few properties, whether it's inherited, they've had it forever and they want to probably get rid of some of that. Why as well, they want to cash in, or they're just like, Hey, this is a 1940s build. It's just tired of operating it. There's turnover. Or my time tenant is moving out. [00:06:23] Dan Kryzonowski: Now's a good time to break Frank's. I don't want to pay high taxes in a place like Texas. So, one thing I think that's unique that we're looking into is. DST. So a Delaware statutory trust and lay person's terms is think if you have a property called property a is probably at a gain, you can sell, take the appreciation, move it to property B. [00:06:42] Dan Kryzonowski: Okay. It's kind of the same logic that you're owning enough. Or you can pay the taxes, pay a pretty heavy tax. Now in the middle, if your goal is to defer, you can do that. So there's a saying called swap tea drops. Some people they say, ah, they never going to pay and I'm going to take it to the grave. [00:06:57] Dan Kryzonowski: And part of my legacy, part of my planning for the next generation, that's what a DST can provide. Now that said. What rubs me a little bit wrong as an LP is a lot of these DSTs are only four or 5%. This is all in, not just a prep and I'm like, something just doesn't smell, right. It seems like pretty high in fees and everything else. [00:07:14] Dan Kryzonowski: Not saying this isn't good product. But , in good faith, I think an operator could pay double digit returns on a DST and still have a healthy return for them for the time and effort to go into it. So, summing up on that, and this is all feedback from our investor base is folks ahead, I'm selling something. [00:07:30] Dan Kryzonowski: I don't still want to own it. I might take out a little, a few hundred thousand for myself, but the rest I want to defer, let me think about a bit more three to five years. I think at DST particularly a property with double digit returns is going to be a pretty solid niche for the second half of this year. [00:07:44] Dan Kryzonowski: In the next few years. [00:07:45] Sam Wilson: How does a DST differ from a 10 31? [00:07:50] Dan Kryzonowski: And I'm not the all I'm at, I'm not the CPA, the lawyer expert, but the as explained to me is that once again, you on property, You own and operate today. So what's your options. You can keep on owning and operating or you can sell. Now, if you sell, you generally have two options. [00:08:07] Dan Kryzonowski: One of course you pay your taxes or you own an operate property. B pretty much the same. It's just a different property. Now in the middle. I like to say per se as well, I don't want to own an operate, but I want to maintain the tax benefits. Right? You could go into a DST, many DSTs are a. Usually a portfolio and there's different reasons behind that that generally pay low single digits or mid single digits overall. [00:08:35] Dan Kryzonowski: But once again, what they are selling is, Hey, here's a diversified portfolio and you're not paying taxes. So, folks that main goal is I want to defer taxes. That's the attraction of the DST now also. What I think is cool historic. They said it's been a portfolio. There's a lot of fees baked into it. [00:08:51] Dan Kryzonowski: Like anything, the curtains getting pulled off the wizard of Oz per se. And I think it's becoming time like, Hey, here's a pretty slick property that frankly, if I just had cash on the side, I may even consider, it might be a mid-teens IRR for example. So anyways just cool little niches, I think are out there for as, going full circle as folks continue to shop per se. [00:09:09] Dan Kryzonowski: This is something I think too, not just us, but you know, investment advisors folks that play that role for their families should become a little more aware of [00:09:17] Sam Wilson: is the DST set up by your firm and then multiple people can in pin roll their properties into the single DST, or is it a DST, each individual sets up and they then roll into your [00:09:32] Dan Kryzonowski: there's some paperwork and there's folks that are. [00:09:34] Dan Kryzonowski: Experts that have been around the block a few times , for example, if we at BB go down this route, we're going to partner with there is some paperwork, probably for a different discussion of, for today's call. It has to be completed. But one thing I would be aware of there is a timeline, there is kind of these windows. [00:09:49] Dan Kryzonowski: That it's much like a 10 31 where it can't be, Hey, we sold the property and X days ago, and there's three days to go before I have to pay taxes. You have to get moving a little bit sooner. So, as I just spitball this in conversation, folks are saying, well, yeah, I'd like to sell maybe may, maybe June. [00:10:05] Dan Kryzonowski: These are conversations I had back in April and March, even. So people are, I think they're aware at least that if they want to defer taxes, you really have to start thinking a good few months ahead. So I compliment, you and our community for sharing this on the podcast. So this is now kind of something that people do in their mental checklist as they look at their. [00:10:25] Sam Wilson: Right. No, I think that's great. That's absolutely great. Tell me, what are you guys? What are you guys investing in? I know you, you do industrial multifamily and you even mentioned student housing. What are you guys doing right now to find opportunity at BV? [00:10:38] Dan Kryzonowski: Yeah. So, the benefit being boots on the ground in Texas for many years, particularly in the two largest cities Dallas, Houston is we tend to find some pretty good off market opportunities and I get it, it's a buy high, sell higher, but I think it would be shown over the decades is certainty of execution. [00:10:54] Dan Kryzonowski: For example, our industrial fund we closed on four properties in four Q last year. So we also have that ability. Something a little unique I think we can all pick on our California friends here. They weren't as versed in student housing. Let's just say occupancy was comically low. [00:11:10] Dan Kryzonowski: We have the ability to come in at a great, very favorable cap rate. Which in turn we share those benefits. So those are a few things, sorry. That was my I, they call it my birthday buzzer that went off, sorry to scare you there on the backend. Otherwise it's something you didn't mention, but you know, folks that know me I'm still extremely bullish on self storage and why is that? [00:11:29] Dan Kryzonowski: I feel storage is now it's a natural extension of the housing experience. So when I say housing, living, living in the 21st century, a few things on that. So, historically we can joke storage was for stuff that we really didn't need or, kind of the crap as they would say, what it's changed into. [00:11:49] Dan Kryzonowski: I think in COVID show this as folks know, like, Hey, if I can even find an extra bedroom, I'm paying at least a grand in rent or sitting in Austin, it could be in the hundreds of thousands of a house. So with that in case I don't want to feel like a truly hoarding, I want to use storage. And it's not just for the Christmas tree it's it could be for your kids. [00:12:07] Dan Kryzonowski: Winter clothes can be for your tax documents, some pretty important stuff here. That's becoming whether it's literally at a storage facility or onsite, say I have an apartment complex or something that you consciously build that. In your garage, but most people aren't going to go through that effort. [00:12:19] Dan Kryzonowski: They're going to defer cause it's still a pretty favorable cost. So with that, I still think there's a very healthy appetite for storage. There's also specialized storage for folks of higher income. Think of the Tesla crowd pick your zip code. With six figure income plus there's many of these. [00:12:33] Dan Kryzonowski: So they call it a very exclusive man-cave. One of my buddies said he couldn't say that his lawyer said he couldn't say that, but, frankly, there's some of that out there. So there's a whole bunch of types of storage that go into it. And, I think it really comes down to, is folks want to declutter even today, some folks might say shit, I can't have. [00:12:49] Dan Kryzonowski: A crib in the background. Cause my, my newborns and I was six years old, things like that. So it leads into storage. So I think it's kind of a natural extension of especially as cultures are emerging too, folks want to do this. Not just even climate controls, you're talking for boat are B, we talked about the Tesla, the fun storage, a lot of folks are refurbing. [00:13:08] Dan Kryzonowski: Think of the Kmarts, the Woolworths of the world. They're being referred to the storage project being in the middle of the country. So, yeah, a lot of folks it's becoming a natural, I think, way of life in the 21st century. And I don't think people are already crazy stuff that some of the stories, as I said, it's just folks get used to it. [00:13:23] Dan Kryzonowski: They get used to it at a price point. You check in every three to six months to move some inventory for your personal and you go from there. [00:13:31] Sam Wilson: Yeah. And I think you bring up some really interesting nuances. I think the storage space that most people aren't considering, and you call it specialized storage. [00:13:40] Sam Wilson: And certainly we're seeing that demand on the RV and boat storage side of things. It's. It's insane. Just from the delivery side alone, they had no place to put them, but I also think it's interesting how you clearly said look the days of just storing piles of useless clothes in general. [00:13:57] Sam Wilson: I think those are not behind us. Cause everybody there's still going to be days of piles of useless junk, but it's also it's changing. It is becoming smaller homes. People move into the tight, tighter spaces. And like you said, if it's a few hundred grand for an extra bedroom that you're not going to use, why not just get a rough storage unit for a hundred bucks a month? [00:14:15] Sam Wilson: Okay. We can put all our tax documents and our Christmas trees and all our other random stuff in there. One of the, one of the storage, specialized storage things that I've looked at and obviously not invested in, but I think it's really interesting. Have you seen those like high class, like you call a man-cave, but they also make them, they make them for boat and RV storage where they're actually selling the. [00:14:35] Sam Wilson: So they, they build this super swanky facility, with wash bays and clean out this and detailed crews and everything else. And they sell you your man-cave. So they'll maybe build 200 units and sell them each off their, the parcel amount and make actually sell them by the unit, create an HOA, basically for the storage facility. [00:14:51] Sam Wilson: That's specialized storage [00:14:53] Dan Kryzonowski: is definitely specialized storage. Yeah. I know it's out there and it'll continue to be in, certain zip codes for sure. Yeah, for [00:14:59] Sam Wilson: sure. And I think that's a really, just a a neat way to look at that know there's lots of runway there for a variety of reasons. [00:15:06] Sam Wilson: I think that's the other thing that people have said in the storage market all along is that no matter what the economy, there's reasons that people want stories. So it's either up-sizing downsizing, changing life, changing careers, moving it's always in fashion. What are you guys doing right now to take advantage of the the kind of the market dynamics that surrounds. [00:15:27] Sam Wilson: Yeah. [00:15:27] Dan Kryzonowski: For me, like a lot of us on the call, I'm a hybrid. I have a, fortunately I've built up a pretty sizeable retirement accounts, self-directed accounts, solo, 401k, food storage. We've had some myself as an LPN investor and those that I've introduced over the years. So I've had some, I'd say pretty sizable and attractive exits and like anything, every few years I call it the next generation of storage, whether somebody is up and coming or they're coming from some recent exits in multi-family. [00:15:53] Dan Kryzonowski: Folks that are long, maybe, call it two to six facilities, but their goal is to get to 20. So, so far, so good. I've probably invested with four, I'd say newer folks to the semen storage and whether it's development, we're on track for development, or if it's a value add, it's pane out as it's supposed to be at the moment. [00:16:11] Dan Kryzonowski: So, I'm excited and it varies, some folks are doing strictly. Everything's automated from when you book there's no humans in any way, shape or form. Are there folks are a little more old school. And then as we talked about kind of the luxury storage, that's just kind of a really unique fund model that I still think has tremendous upside. [00:16:29] Dan Kryzonowski: Yeah, [00:16:30] Sam Wilson: absolutely. Now BB capital also invest in multifamily is that. Yeah. The backbone [00:16:35] Dan Kryzonowski: of BV historically isn't multifamily is a bit more DFW total exits of over 250 million to date. So, and it's been a good mix of, as I alluded to before our student housing, workforce housing, some development, some value add I think the new thing once again, just Texas is still real boots on the ground state. [00:16:54] Dan Kryzonowski: We do have a lot of folks with the BD logo. So we found. Even in this market, the needle in the haystack of a piece of land that's, I don't want to say pennies on the dollar, but less than a dollar, which is a minor miracle these days. Right. We can do stuff with it. We found a track over a hundred acres in Galveston there. [00:17:11] Dan Kryzonowski: I think the only one out there, a lot of folks want a second house. I want a beach. So it's a little things like, Hey, as an investor, in addition to getting double digit returns, how about you on first look at buying one of these plots. That's very important to some folks. So, we've done some really strong surveys. [00:17:25] Dan Kryzonowski: Obviously a lot of one-on-one some more exclusive events with 20 or so folks and. We're going to hop across the states of the large cities for that to really get feedback. And that's what we'll, that's, what's kind of led outside of the fund to our our single asset offerings over the past year. [00:17:42] Sam Wilson: Got it, man. That's fantastic. Dan, we're almost out of time here, but I've got one last question for you for people that know you well, they know that you've got extensive background in the self-directed IRA space. What do you see as the number one opportunity for capital raisers in the self directed IRA? [00:17:59] Dan Kryzonowski: My suggestion I've seen this play out time and time again, is that in your communication to your investors, to your prospects, one sentence saying, did you know, you can use your retirement dollars in my next deal? That alone from my experience sponsors tend to get about 10 to 20% of their raise. [00:18:16] Dan Kryzonowski: Whether it's through an STI rate with the legacy custodian or solo 401k. And of course that ties to rocket dollar very powerful, especially as more folks are moving self-employed for better or worse. The solo 401k is pretty exciting. So yeah, I just think that, and also for folks that are thinking of JV and Koji pain with. [00:18:34] Dan Kryzonowski: Your old corporate money. This is a great pocket of money that frankly you can't touch anyways without paying taxes for a while. So take advantage of it now. Anybody with any questions just ping me on LinkedIn. LinkedIn is great. Say you heard it here and we'll have a chat. [00:18:50] Sam Wilson: Awesome, Dan, and that's my last question here for the show is if we do want to get in touch with you, what's the best way to do. [00:18:55] Dan Kryzonowski: Yeah, LinkedIn is great. And then I joke, if you can spell it, you can get it. And we'll get you a few pennies off of your rocket dollar. And for fellow sponsors out there I'm happy to share my VIP code, so, please reach out one alone. [00:19:06] Sam Wilson: Awesome, Dan, thanks again for your time today. It was great to have you back on the show. [00:19:09] Dan Kryzonowski: great seeing you brother.
From the Atlanta area, Jake Marmulstein is an entrepreneur and business executive with a variety of experience, including ERP to SaaS, digital marketing to education technology, and hospitality to real estate. He has advised executives of early-stage companies, lead operations and finance, product, sales, and customer success efforts. In his current operating role, Jake is the Founder, President & CEO of the Real Estate Investment Tech SaaS company Groundbreaker Technologies. He made the initial angel investment, completed key hires, established selling, financial and operational systems, lead a Series Seed-round of financing, and continues to grow the company. Jake received his bachelor's degree from Cornell University, where he emphasized hospitality and minored in real estate. He studied abroad in Rio de Janeiro and at Cornell was involved in grant writing for grassroots community service organizations while also forming a non-profit peer-to-peer mentorship organization. Jake has worked abroad in London, Madrid, Rio de Janeiro, and Puerto Rico and has a working proficiency with Spanish and Portuguese. Stay tuned and listen to how Jake Marmulstein shares his knowledge on the future of Real Estate Syndication through their Groundbreaker Technologies. [00:00 - 04:29] Groundbreaker Technologies: How to Scale Your Real Estate Investment Business Jake started his CRE investment career in 2011 at Watermark Capital Partners, a hotel REIT in Chicago He co-founded Groundbreaker, a software platform for real estate syndication, and began to build it out The platform is now used by real estate operators to raise money and manage their deals Jake has experience in software development and engineering, which helped him build the platform [04:30 - 12:19] Groundbreaker Partners with JV Equity Partners to Bring on Larger Deals Jake shares that they were able to get press coverage for their solution after building a basic version on the web. This helped them to attract interested prospects, which led to them being able to pay their office expenses with revenue from their solution. They are looking to build a comprehensive ecosystem of services that will help their customers grow and be successful. [12:19 - 17:20] Groundbreaker Software Introduces Education Program to Help New Class of Real Estate Syndicators Succeed Knowing that operators don't do deals alone, Jake and his company study carefully what that experience has to be and build a feature that allows people to do deals with each other without the problem where they share the data from their own investor list with the other group. They Don't want to be a CRM system or an email marketing system, but instead an investor management software. Jake notes that they have overcome alignment within the organization, but it's really hard to be able to work with people who aren't yet successful at doing a deal. [17:20 - 18:45] Closing Segment Jake Marmulstein, CEO of Roundbreaker, offers listeners a three-month free trial of their annual subscription if they type "Bricken" into their website's request form. Jake also recommends LinkedIn and Roundbreaker's website for contacting him. Reach out to Jake See links below Final words Tweetable Quotes "At the end of the day, were we going to be a financing system, were we going to be software? We can be both and really fielding those all structuring my questions and doing customer discovery." - Jake Marmulstein “It's real estate syndication. There's some complexity in doing that. Even marketing yourself to investors and building your investor base requires you to have an investment thesis and understand who the investor is that you're going after.” - Jake Marmulstein ----------------------------------------------------------------------------- Connect with Jake Marmulstein on LinkedIn. Visit their website Connect with me: 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 → email@example.com Want to read the full show notes of the episode? Check it out below: [00:00:00] Jake Marmulstein: if you're an operator and you're looking at who can be the best partner for you. You want to surround yourself with companies that are gonna really care about where you are now and help you to scale as you continue growing to set objectives that are mutually beneficial for both of you so that they have a vested interest in your success. [00:00:21] Sam Wilson: Jake began his CRE investment career in 2011 at watermark capital partners, a hotel REIT in Chicago, and after struggling to raise capital for his own deals, he found a groundbreaker a software platform for real estate syndication, Jake, welcome to the show. [00:00:47]Jake Marmulstein: Hey man, pleasure's mine. [00:00:49] Sam Wilson: There's three questions. I ask every guest who comes on the show in 90 seconds or less. Can you tell me, where did you start? Where are you now? How did you get there? [00:00:58] Jake Marmulstein: So when I studied at Cornell university an undergrad, I did a real estate minor. I graduated, worked in the city government of Rio de Janeiro doing foreign investment promotion. And that's where things all started for me. Now I'm in. Chicago, Illinois as a CEO and founder of groundbreaker technologies, a real estate investment management software company. And I got here by getting the experience, the basic experience that I needed. Throughout my early corporate career to identify there is a pain in the space for a lot of real estate operators experiencing it first myself, and then going to the market and looking at the way different firms were dealing with the problem. And I just, started with 10 grand in my bank account and the dream. [00:01:48] Sam Wilson: That's awesome. I love that. Do you have a background in software development, engineering, anything on that front? [00:01:56] Jake Marmulstein: I have friends. [00:01:58] Sam Wilson: All right. I liked that. I liked that. So tell us, how did you from concept to getting the idea hatched and built? Give us that quick story, because I think this is compelling for a lot of people that are sitting on ideas and don't necessarily know where to start. [00:02:12] Jake Marmulstein: So the, when, when groundbreaker was conceived as a idea, it was the first step frustration. And then there was changes in legislation, such as the jobs act, which pushed real estate platforms that were technology driven to do crowdfunding and market themselves pretty widely. So you think of like fundraise and Realty, mogul and Realty shares, and groundbreaker. Started basically as a result of some of that, we came into the market and said, well, there's a lot of people that are raising capital and underwriting deals, but the software in this technology to infrastructure is still needed.Is there going to be a world in which everybody has a technology and they're raising money from their own investors or crowdfunding, or, how's this all going to play? And we saw that the technology is needed in the space. And it's just a matter of time before all real estate operators will be tech enabled to have a system that they can use with their investors. So that raising money happens over in electronic means data and information is no longer stored in Excel. And that's the vision that I had when all of that was happening. it's a combination of laws that were changing and just the times, and, consumer behavior where people are moving towards using more digital solutions to interact with financial technology, looking at banking, brokerage, all of it is going towards having a login and a portal. So you can check your information from your phone. Why not real estate? [00:03:52] Sam Wilson: Yeah. Yeah. That's a, that's, you're absolutely correct. So what were some of the first steps you guys took in building this out? Having friends, but then going all right now, we're gonna develop a software. Now we're going to bring on team members. Now we got people to pay salaries, payroll, like how did all that work? And then when did you say man, this thing's actually gonna make money. [00:04:12] Jake Marmulstein: So that part was a little bit more nebulous when we began. We had a vision and that vision was strong enough to get people to come on board and spend their time working with us without having to necessarily take a salary. So we had equity in the early days, they were giving to the talent that came and built the product for us. And then we use that vision to convince. Reporters to talk about our solution. After we had a very basic version up on the web. And so we got press, which gave us free advertising, which brought in a lot of interested prospects to our website. And I would feel the calls and talk to them about their problems without actually knowing what the solution was going to be at the end of the day. Where we going to be a financing system where we're going to be a software where we can be both and really fielding those calls, structuring my questions and doing customer discovery. There's a course that Steve blank does called customer discovery. If you're ever going to start a company, you should absolutely take that course because the process to understand the customer segmentation and their pain points. Helps you to be able to chart the course on which problems you want to solve and which problems you don't want to solve and for whom. And so we identified that the problem was while people wanted access to capital, there was also a segment of the market that wanted better systems to be able to manage the capital that they did have. And so looking at the way that the market was moving. And the risks associated with being the capital provider and underwriting all those deals. We wanted to move in that direction of being a technology provider. And so we use that vision to sell those early prospects were really interested in what we're doing to pay us, $500 a month for the software and pay us an implementation fee to get it started. And so really we use that vision, that dream to sell people on the product before. We really had much of a product built by making them early customers and helping them build the product with us. And then it took me about Six months of not taking any salary and the business, really not making any money, just, paying its office expenses in order for us to crack through some revenue that resulted in a distribution to the partners. [00:06:34] Sam Wilson: I liked that. That's a lot of the way that people who are starting out in, especially building teams early on as the active. Sponsor or investor. A lot of us start out that way where it's like, Hey, we're all going to get together. And we're going to, we're going to put our heads together and work really hard. And then it might be six, nine months or a year before we crack the nut and actually begin started making the money. So I like, that's not an unfamiliar chart or an unfamiliar territory for many of us. Tell me, you said there that you guys were trying to decide early on whether or not you want to do. Finance company, or you want to be a technology, you guys went into technology, but yeah, one of the things you and I talked about off air was that you guys are looking to build a comprehensive what you call it, a comprehensive ecosystem of services. Can you break some of that down for us? [00:07:17] Jake Marmulstein: Yes. So the real estate operator who uses groundbreaker and we focus on is a small to mid-size. Syndicator that may have a couple of deals that they've done using Excel. And they're mostly communicating with their investors through email. Maybe they use Dropbox or a CRM system, and they want to formalize their business and be more professional and more efficient by using a solution like groundbreaking But also these folks don't have a well-established network or relationship with capital partners and services. So there's other solutions that we can provide as a business to be able to make that experience of going from. One to two deals to 10 deals or 20 deals or $2 million sized deals, $10 million sized deals, easier and more scalable for the company that's working with us. So when I say the services ecosystem, if you're an operator and you're looking at who can be the best partner for you. You want to surround yourself with companies that are gonna really care about where you are now and help you to scale as you continue growing to set objectives that are mutually beneficial for both of you so that they have a vested interest in your success. And groundbreakers is doing that for the sponsors that we're working with by having a long-term vision where we rolled out. Different services that are embedded into our core product and our system so that you can get everything you need from us, whether that comes from legal or underwriting or capital or insurance, or even help operationally on the deal. Because we are a technology company that's providing that infrastructure, that layer to organize your business. But once you're using us, you're also. We're also, in a way, partnering with you because the more that you grow and the more deals you do on groundbreaker, the more successful you are as a customer, the more we're we are successful, the more you're likely to bring on other deals or other customers to us. So we want all of our customers to grow up and supporting them through those services as a way of helping them. And it's also a way of us creating additional revenue opportunities for the business. [00:09:40] Sam Wilson:What's it been like, cause each of those sound like their own siloed kind of business, if you're bringing on, JV equity partners and getting to know those people out there that are looking to joint venture, but don't want to necessarily be the active sponsor. And now you're building out a technology platform and then you're connecting all of those. What's that actual process like and how do you silo those and perfect each of those without distracting from your corporate. [00:10:04] Jake Marmulstein: That's a great question. And we've thought about that a lot as we worked on piloting some of those services and getting initial traction from them, our core business is to bring on. Early in up and coming real estate syndicators that want to build and scale their business. On top of groundbreaker looking at us as a partner, that's going to help them to grow and the way that we impact growth through the. Other services is mainly by partnering with best-in-class providers and allowing those partners to have access to customers so that they can render their services and the customer can get value when they need it. So an example of that would be. One of my clients is doing a $12 million deal. It's one of their first larger deals. Initially when they began with us, they were doing smaller deals, like $3 million, $4 million deals in C class with C class assets, C class locations. And they really proved themselves out over the last two years and build their business. And they were successful in turning a lot of those assets. But now they want to swing for larger size deals. And their investor base is also confident to be able to invest more capital in them at this point. But they're going to need some additional capital to be able to fund some of these larger acquisitions. And by having that relationship with groundbreaker, we're able to know where they are in their cycle, what they need. So we've told them about our programs. Okay. They're entering into those services by giving us the information on their deal, and then being able to have calls with our equity partners, to be able to source capital from them and see if there's a fit amongst the investors that we can bring to the table. [00:11:59] Sam Wilson: That's really a really unique. Are there any other elements of the kind of tech platform that you guys are thinking about or building out or see things coming down the pike that you say, Hey, this is this something we're considering? And here's ways that we plan on implementing it? [00:12:14] Jake Marmulstein: Well, we're doing a co-sponsorship is the really big one. We know that. Operators don't do deals alone. A lot of them work with others. So we're studying really carefully what that experience has to be and building a feature that. Allows people to do deals with each other without the the problem where they share the data from their own investor lists with the other group, because a lot of sponsors, care so much about that investor list that they've worked so hard to build. And even though you're partnering with someone and you trust them, you still want that data to belong to you and only yet. So that's one of the big ones. And then we don't want to be a CRM sister. We're an email marketing system. We're an investment management software and we're going to continue being best in class in that. Whereas the CRM is going to be integrated into groundbreaker so you can continue to use your active campaign or your HubSpot or whatever CRM use, but it'll sync the data with our system so that those triggers. Anything else that you're running in those campaigns can be run in tandem with what happens on groundbreaker [00:13:30] Sam Wilson: right. that's really cool. And that's one of the things that. Finding those integrations, I'm going to use that word. I'm not a tech guy, so you'll have to forgive me is that I can barely send an email, but I know that the integrations, when they work smoothly makes life so much easier. And I think that's what we're seeing is across the web and everything else is just all these different programs that we have to use because each one specializes in its own thing. But if they don't integrate and talk, it's like. This is really frustrating. So that's really cool that you guys are solving that problem. What are some challenges that you guys are facing right now that are not maybe have you stumped, but certainly have you scratching your head? Go, gosh, how are we going to overcome this? [00:14:10] Jake Marmulstein: No, that's a great question. Until recently it's been. Focus on focusing on the core customer segment that we're dealing with and understanding what you know, what to build in for whom. But we've really overcome that alignment lately within the organization. It's really hard to be able to work with people who aren't yet successful at doing that. And we want to be able to serve those operators and help them. But a lot of them just don't have there. There's just a lot more that they need to be able to be successful. And we can't address those needs in the market. So we want to be able to be a big and successful company that serves a lot of operators, but we just have to stay focused on the operators Actually can, can value our help and use it to be able to build and scale their business. So I think a lot of the people that may be listening to this call would be appropriate. But there's many people that are entering the space as beginners who, haven't done a deal yet. And that's a real challenge is figuring out a way it is, I would love to figure out a way to work with them, but unfortunately I don't think we can. [00:15:25] Sam Wilson: Yeah. You can't be all things to all people. That's a, that's certainly true. And I think that's an interesting point you make.Cause you want to be able to find a way for people to adopt your software early on. You want to build to bring them on and say, Hey man, come in, come into the fold, get to know us as you grow. Won't this be great. But it also sounds like you also don't want to be the baby. Saying. Okay.] All right. Let me teach you all about what you're doing and how to raise capital and how to use this. And it just, it sounds like there needs to be some level of not just rudimentary, but some sophistication involved before somebody can really adopt what you guys do. [00:16:00] Jake Marmulstein: Yeah. It's, real estate syndication. There's some complexity of doing that. Even marketing yourself to investors and building your investor base requires you to have an investment thesis and understand who the investor is that you're going after. And it's, it is a beautiful thing what's happening right now in the world. I think that the market that we're in right now is growing significant. More people who are working nine to five jobs in the corporate world, or working from home and exploring ways to invest in real estate. People who are commercial real estate brokers are figuring out, Hey, why don't I invest, and do my own deals. There's a lot of people that are entering the market and will be entering the market and in the future. And I think we're in a good position to be able to help all those people, but there needs to be a base level. Education program. And, we work with groups like Jake and Gino and Joe Fairless and other types that are helping to educate that a new class of real estate syndicators. So I'm hopeful that those guys will continue to be the babysitters for the market if you will. [00:17:10] Sam Wilson: Yeah. That's absolutely right. I absolutely love it, Jake. Thanks for taking the time to really break down what groundbreaker does, the problems you can. Are seeing and solving in the marketplace. I think that's really cool. You're building something that I think even across is as can fairly familiar with, everybody has competitors and I'm fairly familiar with even some of your active competition. And I think you guys are doing some things very differently that are solving problems, maybe that other people aren't in the marketplace.So that's absolutely cool. I love it. Jake, , Hey, so one of the things that you offered to our listeners to this show certainly appreciate it. I found it here was that if you're listening to the show and you type in the word BRICKEN, when submitting a request or your website, you can get three free months of groundbreaker when you sign up for an annual subscription. So, Jake, thanks for offering that up to our listeners. Certainly appreciate that. And last question for you here. If our listeners want to get in touch with you and learn more about you, what is the best way to. [00:18:02] Jake Marmulstein: Please add me on LinkedIn, Jake Marmulstein, and also go to our website groundbreaker.co. And if you fill out a demo request form, then we'll be in touch with you and you can go over our software and learn about your business. [00:18:16] Sam Wilson: Awesome. Jake, thanks for your time today. I do [00:18:18] Jake Marmulstein: appreciate it. Thanks Sam. I appreciate it as well.
Ruben has a popular podcast about raising money for multifamily syndication called the Capital Raiser Show where he learns from the best multifamily syndicators in the country. In 2019, Ruben partnered with a local syndicator on the acquisition of 190 Units, and has since become a fund manager who is building a 98 unit housing subdivision in Louisiana, a 154 unit housing subdivision in Alabama and partnering with multiple select syndicators bringing equity, advisory and investor management. He primarily uses Regulation D. Exemption 506(c) in his deals including ones discussed here. He has partnered in $5M of capital raising partnerships. He got his start by bringing joint venture capital to successfully raise $625K for small Multifamily deals during the post-crash buying frenzy in Phoenix. Stay tuned and listen to how Ruben Greth shares his experiences and insights on how to raise your capital. [00:01 - 03:36 Opening Segment Ruben Greth started selling Mortgages and learning about Truth and Lending. He learned how to raise capital without actually asking for money Moving in Join Venture Capital raising during the real estate crash And eventually moving into Heavy Lift Multifamily Syndication Started “The Capital Raiser Show” Launching his fund structure. Ruben recommends using a fund structure rather than a Co GP structure to avoid legal compliance issues. [03:37 - 15:32] How to Fund Your Security: Fund Structure, Interest Rates, and Returns Raising funds and deploying a check as a limited partner into somebody else's deal. As a limited partner, you don't participate in the decisions. But you have to do investor relations, Underwrite deals, Market the security, and operate the fund. Finding a way to get a side letter agreement with your deal sponsor if you want to participate in acquisition fees or advanced economics is essential. Vertical multifamily is detached multifamily units or, better said, houses like a full-blown house with the backyard [08:06 - 12:35] Smaller Neighborhood Development Takes More Time to Get Approved in Big Cities In larger markets can take longer to get approvals for multifamily projects than in smaller markets. In smaller markets, building a subdivision of two or 300 houses can be faster than in a bigger city. The biggest headache for financing a multifamily project is dealing with the moving parts of the construction process, such as lumber costs and interest rates. [12:36 - 16:13] How Vertical Multifamily Development Can Improve Stability and Rent Potential Ruben shares that their development goal is to sell the entire subdivision off to one particular buyer. Vertical apartment complexes typically require building the entire complex and then renting it out, while horizontal multifamily developments can be built in stages and leased out as they are completed. The density per acre difference between horizontal and vertical multifamily development is a critical factor in deciding which approach to take. In Phoenix, built around developers are building 2000 square-foot houses, while in Louisiana, a 1200 square-foot cottage is being developed. [16:14 - 23:44] Selling off your building The similarities between two-bedroom, three-bedroom, and four-bedroom townhome-style homes. The advantages of selling off a building instead of individual homes. There is nuance to the underwriting process, and the investor experience can be different depending on when they are paid. The goal is to calculate when the project will be profitable and then start distributing money to investors. [23:44 - 24:14] Closing Segment Reach out to Ruben See links below Final words Tweetable Quotes “It's more about the operator and how we feel about them versus the deal. So, it's not about the market, it's not about the deal. It's about our relationship with existing operators” – Ruben Greth “When you're building a vertical apartment complex, you typically have to build the entire thing and then start renting in order to make it. So that it's not Vacant anymore. You have to give away concessions and that's a problem. You have to wait a couple of years in order for it to stabilize. The thing that's different about horizontal is if you're building 10 or 20 at a time, you're leasing them up as they're being built. So, if you've built 50, you know, by the time you get to 60, 40 of them are already rented out.” – Ruben Greth ----------------------------------------------------------------------------- Connect with Ruben Greth on LinkedIn. Visit their website. Capital Raiser Show 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 → firstname.lastname@example.org Want to read the full show notes of the episode? Check it out below: [00:00:00] Ruben Greth: one thing that I would say is like, when you're building vertical apartment complex is you typically have to build the entire thing and then start renting and in order to make it so that it's not . Vacant anymore. You have to give away concessions and that's a problem. You have to wait a couple of years in order it to stabilize [00:00:18] Sam Wilson: Ruben Greth is a fund manager podcast host and build a rent subdivision developer Ruben. Welcome to the show. Thanks [00:00:38] Ruben Greth: man. I'm so stoked to be here, Sam, man, I really appreciate you. Hey [00:00:42] Sam Wilson: pleasure.Is mine man. Three questions. I ask every guest that comes to the show in 90 seconds or less. Can you tell me, where did you start? Where are you now? And how did you get there? [00:00:49] Ruben Greth: So I started in mortgage. I guess selling mortgages. And then from there learned a little bit about this thing called truth and lending. And really what I learned from that is how to capital raise without asking for money and also how to not promise any guaranteed money. So I moved into joint venture capital racing back during the real estate crash, eventually moved into. Syndication heavy lift multifamily syndication with the local mom and pop operator here then started my show. The capital raisers show learned about these capital raisers, their strategies. And I met all these sponsors and then the lawyers told me if you want to make money, putting these guys together, you need to start your own fund. So I left to go launch my own fund. When Andy McMillan, my partner at legacy acquisitions approached me and said, Hey Let's get into the build to rent space and then raise capital for these ultra other multi-family sponsors using fund structure so that we can legally stay compliant. And now, I'm a partner in his company and legacy acquisitions, and that's essentially what we do. We build out subdivisions and then sometimes we raise capital for select sponsors in the space and the multi-family value ad space. [00:01:58] Sam Wilson: It's a lot of moving parts. So yeah, just to make sure I understand that where you guys are now you're developing subdivisions. And then also when the opportunity and deal makes a heck of a lot of sense, you'll take your fund and you'll say, okay, we're gonna deploy capital into your opportunity as well. [00:02:11] Ruben Greth: tip typically it's more about the operator and how we feel about them versus the deal. Sure. So it's not about the market, it's not about the deal. It's about our relationship with existing operators and yeah, so we have two divisions of our business. One where we raise capital for other sponsors in fund structures or Co-GP structures. And then the other part is we build out subdivisions and raise capital for our own deals that way. [00:02:36] Sam Wilson: Right, right. Let's talk about that. What we'll kind of tackle both of those and succession there fund versus co GP. How do you guys select which way you're taking it down? What are the differences and why? [00:02:49] Ruben Greth: So a Co-GP P structure requires some kind of an ongoing duty in order for you to stay legally compliant. Typically that's either asset management or marketing or investor relations, underwriting of the deal and market analysis and stuff like that. So we have to have a board of advisory kind of position where we're constantly participating in the decision-making and the operations of a deal versus a fund. It's quite the opposite, right? So if fund you're your own security, you raise money in the fund, you deploy a check as a limited partner into somebody else's deal. And you're essentially not obligated to do anything, maybe participate in board of advisory, but you're managing your own security, right? So you've got to do investor relations.You've got to underwrite deals, you've got to do marketing, and then you got to do the operations of your own. But as far as operations of the deal go, it's completely hands-off because technically as the limited partner, you don't participate in the decisions. Right. So, but then the question becomes, well, how do you pay for your fund?When does it make sense? Well, there has to be, different tiers of money, or I should say interest and returns that you get as a fund. That's gotta be a. And beyond what a 50,000 retail investor makes. Right? So sometimes the fund makes money because it gets advanced economics like a better return structure, something.The money, I should say the fund gets paid because they participate in acquisition fees or other kinds of structures like that. And every time it's different, right? So every sponsor, even some sponsors will allow you to do both. You can either coach GP or you can do a fund. It just depends.You always wanted to make your investors the greatest amount of money, and you're always probing with your sponsors. Hey, what is that form? And in some cases, the coaching piece structured in some cases, [00:04:42] Sam Wilson: Right, right. Yeah. And that's been one of the, one of the challenges that the fund structure has had is that, it does or could potentially dilute investor returns.So like you said, finding a way to get a side letter agreement with your with your general or with your deal sponsor. If you do want to participate in acquisition fees, or if it is like you said, a what'd you call it advanced economics, that's a nice way of. So, so I really love, like you said it's truly, it's an iterative process.It sounds like for you guys in that each person you work with, it might be a slightly different arrangement, but yet it's something that a. Just figure it out on the [00:05:18] Ruben Greth: fly, even with the same sponsor from deal to deal, the agreement can change. But yeah, like you mentioned, the side letter agreement, which is extremely important when somebody comes and approaches us and says, we'd love to have you participate in our capital raise and you have a few weeks left to raise for XYZ deal At that point, it's too late because there's no side letter agreement in place typically. And we, it takes us time to build our own entity, create that structure, deal with our lawyer, probe our investors, to make sure that they liked the market and the sponsor. So at that point you're it's way beyond, too late. Right. Right. So you have to have the relationship in place with the side letter, understanding what you're going to get before the deal is even coming down the pipeline, honestly. So you need a great deal of time to raise in a fund, make sure that your investors have an appetite for whatever's that your investing. [00:06:10] Sam Wilson: Right. No, that's a, that's great. Let's talk about the build to rent side of things. You I'm sure you're busy, but before we get into that, define the difference between, say vertical Mo multifamily and horizontal multi-phase. [00:06:23] Ruben Greth: Okay. So vertical multifamily typically is like a garden style, four story building or something.That's built units on top of units on top of units with no backyard, no personal driveway, no, space of your own, right. You're sharing that space with other people that are above and below you in a lot of cases. Whereas bill to rent, at least the way that we approach it and look at it is it's horizontal.Multi-family meaning it's detached. Multi-family units. Or better even said his houses like a full-blown house with a backyard and a doggy door and a driveway and some cases technology. And we build these things out all in one subdivision so that all of your units at one place, so you can operate at the same way that a multifamily is operated, where a property manager can be onsite in some cases, or at least, have the general vicinity all in one place.And people love that because they want to buy a house. I should say institutions and really big buyers. They want to have like a hundred or a thousand or 8,000 houses, but they can't have them spread out in different counties. You can't property manage it effectively that way. So there's a big appetite from institutions and reeds and all these other huge buyers that are looking for, these mom and pop operators that are building about a hundred to 300 units at a time.And then here's the other thing too. It's like, you can do. In certain markets and it's going to be a lot easier and faster, like a sub market Or a secondary market better said in Louisiana, which is where we're building and an Alabama, you, the cities want to help you get across the finish line quickly because they need affordable housing and they're in growth stage.Whereas if you go to a city like Phoenix, Dallas, Atlanta, there's all this red tape. It may take two or three years before you can even entitle the land. Right? So our investors were wanting their money pretty. Quickly. So the, in these bigger markets, unless you're very well integrated into that market and have a track record and have figured out ways to move quicker, because you have a ton of private equity or private money from these big institutional players, you probably going to go through the process a lot slower.So in those cases, maybe bill Trent looks like, Hey, I'm going to buy a two acre piece of land and build five. Townhome buildings, right? Four units each or something like that. It's a lot faster to get through the red tape in a big city doing something like that. Whereas, if you're trying to build a subdivision of two or 300 houses in Phoenix, man, you better be able to wait because it takes a long time to get across the finish line. [00:09:02] Sam Wilson: Yeah, no, that, that makes a lot of sense. You mentioned Louisiana and Alabama. I mean, what are the size of neighborhoods you're buying or building, I should say, and talk to us about the financing as it pertains to that. I mean, it's like a, it's like a construction loan, but it just keeps going on. I would imagine it's gotta be a really interesting kind of way that the financing. [00:09:24] Ruben Greth: It's the biggest headache of the financing part, when you compare it to multi-family value, add syndication, right? Because there's moving parts, there are supply chain issues that are changing lumber costs and your lenders constantly looking at like, what's the cost for the next 10 units that you're going to build.And if it changes from 10 units to 10 units, well guess what? All of a sudden, the reserves change, the interest rates change. So it's a little bit trickier and it's. It's kind of more of a moving animal versus, you know, it'd be great. If some banks of community or regional bank was just like, Here's, like a huge check that, you can take out and draws, but it's a guaranteed interest rate for the duration of your construction. That would be like the ideal scenario. Some places will do that. And some places won't and then it based it's based on. Your market, your track record and your relationships, right? So like where are you building? Are you building right on the coast where hurricanes are landing and, we have to worry about insurance issues and tornadoes and hurricanes and cyclones and all that stuff or are you building in a place where it's a little bit safer where there's not going to be any fluff? Those things kind of taken to account are taken into account. So you asked about the size of these developments. The first one that we're doing is a little bit over 11 acres, maybe just shy of 12, we're building 98, what they refer to as cottages, but they're like little mini tank houses, all cookie cutter with the exact same floor plan that are built with cement board. So, they're designed for hurricanes, right? So the only thing that you're going to deal with. It's possibly a few shingles being blown by, heavy with. They're elevated. So you're not worried you're not in a flood zone, but you still have to do in this particular market, these things called retention pond. So if there's a hundred year storm, like the water has somewhere to drain within that subdivision. Right. But other than that, maybe like the worst thing that could happen is. A fence gets blown down. Nothing too crazy. But the big deal for the RA for the residents is like, if there's a big storm that comes through, how long is it going to take before my power comes on our, as the food in my refrigerator gonna survive are the fish. That get, circulating air in my aquarium. Are they going to die? Because we don't have electricity for 36 to 48 hours or whatever for whatever long it takes. So those are kind of the things. This next project is 18 acres that we're going to be doing. It's a 5 0 6 C all the stuff that we do is 5 0 6 C typically in the build to rent space. But this next one's going to be a unit mix of twos, two house, two bedroom houses, three bedroom and four bedroom. And then there's going to be a couple of attached townhome complexes, like three units. And the whole thing, I think if we ever try to sell it out individually would have to be like condo converted.So we'll probably sell the entire community. Not subdivided, but like this one that we're doing in Louisiana is each house is subdivided. So we have the opportunity if we need to, or want to sell them off as houses or chunks of house, like 10 at a time. But ideally what we want to do is just sell the entire subdivision off to one particular buyer. [00:12:39] Sam Wilson: Yeah. And that's a great, that was the next question is what's the end game and it sounds like that's it. You're going to build these, get them stablized. And then move them off to an institutional buyer. Is that right? Yeah. And [00:12:49] Ruben Greth: you asked about the differences between horizontal and vertical. And one thing that I would say is like, when you're building vertical apartment complex is you typically have to build the entire thing and then start renting and in order to make it so that it's not Vacant anymore. You have to give away concessions and that's a problem. You have to wait a couple of years in order for it to stabilize. The thing that's different about horizontal is if you're building 10 or 20 at a time, you're leasing them up as they're being built. So if you've built 50, you know, by the time you get to 60, 40 of them are already rented out. And then when you get to like hundred, you don't have to give away concessions for rent that the whole community is almost already rented typically in the markets where we are developing. [00:13:36] Sam Wilson: Yeah. That's a brilliant point. Not something I would have thought about is that you could, it's a stabilized as you build approach. And that's a, that's really, that's a really compelling reason to go down that route. Is there a density per acre that I don't know, maybe asking the wrong term. So, what I'm thinking of is like on a vertical multifamily, there may be, I don't know, again, I don't know the right numbers here, but is there a, see if you can help clarify the question density per acre difference in horizontal versus vertical multi-family [00:14:09] Ruben Greth: you're talking about zoning delineations and like how much density. In a specific area you're allowed to build, right? So for example, in our Foley Alabama project that we're going to be doing in about a month in may of 20, 22, or maybe June of 2022, we have a piece of land 18 acres that allows for 180 units, 180 houses, better set, but we're only going to build 150. And part of that is, to allow for, walkways. Places where people can run and have doggy parks and have amenities and things of that nature, it's going to increase the value to the point where we believe it. It's more effective to build bigger units versus that, which we can rent out for longer. By the way, when a renter comes into a house versus a apartment, they tend to stay for 40 months versus the average apartment rent, or might be there for 18 months. So that's another reason you really like the stability and long-term mindset of the renter in there and, or the resident as we call them. And then the other factor about that is, well, I mean, that's it in the internet. [00:15:21] Sam Wilson: Right. Okay. Okay. What's the square footage, build the rent. Are they typically smaller? I'm just thinking on a typical home compared to a typical apartment apartments are typically smaller or the is the build for rent houses. Is that footprints? [00:15:37] Ruben Greth: That's a pretty loaded question. Cause just depends on what you're trying to do. I know in Phoenix, the bill, Trent developers here are building like 2000 square foot houses. What we're doing in Louisiana is a 1200 foot little cottage, right? So it's a two bedroom, three bath. It's got some extra closet space and a living room, but it's nothing too grand, other than maybe a little bit of technology implemented, it's pretty basic. Cottage style home. And we like that on this next project, we're going to be doing similar floor plans, but we're going to be integrating a couple of unit mixes, right? Where there are two bedroom, three bedroom or four bedroom, or count home style. But essentially they're all going to be very cookie cutter when you compare them to each other. And they will look very similar on the inside, even though the elevation or exterior may be a little bit slightly different on the. [00:16:27] Sam Wilson: Right. That's a that's cool. I love the thoughts around that. And really, I mean, in that space, there's, I would say, I would think the only competition is really speed to market and. [00:16:39] Ruben Greth: that's a big part. Like how fast can you build these? How fast can you get your investor money back? So one of the things that we do to increase that speed is we entitle the property. Like we buy the property or either that, or put it under contract and entirely. And have it ready to go so we can stick the shovel in the ground, right? When the capital raise begins. So we're not raising money and then entitling, and then dealing with city, civil engineering and city red tape and everything else. Like we're already like way along the way, by the time that we start raising for these deals. As typically we do them as syndications, but at some point we're hoping to. A project or two to a fund model and say, Hey, we're just going to do this over and over in this fund. And at some point we're going to get there. But right now we're running these as syndicated. [00:17:28] Sam Wilson: Right, right. Yeah. And I guess that's a question in it doesn't sound like you've gone full cycle on an entire neighborhood yet. [00:17:36] Ruben Greth: Is that we're barely building our first one. Right? So we have eight, our first eight units on the it's called the Crestone Colorado. It's in Lafayette, Louisiana. And then we're about to. Starts while we're going through the entitlement process. And the city department has approved our plans, our architectural plans for this next one. And it's in an area of the country where they're starting to put in moratorium. So we've already been approved.That makes it exciting for us because they're not going to allow a bunch of developers to come in here. So we're going to have exclusivity in some, at some degree, but. That's kind of where we're at there. Right, [00:18:13] Sam Wilson: So Ruben, tell me, I guess, on the investor side of things, because these get built, they get rented. Walk me through because I don't know, from my perspective, modeling that out and then modeling returns to investors would be very unique or different compared to say a multi-family project. We buy here's the value add plan. Here's what we're gonna, , rents change. And then we're done. I mean, is there some nuance to this and how you underwrite and then how you plan for distributions to your invest? [00:18:40] Ruben Greth: Well, there is definitely, I wish I could say that I do the underwriting, the civil engineering, the construction management, but I only have one part that I really focused in on, which is creating relationships with investors and raising capital and bringing capital racers to become part owners of our funds.And there's definitely something to what you just said. Like, how do you underwrite this versus the multi-family syndication and like your calc, I think some of the moving pieces that you would add. Is like, what's your projecting? What are development costs along the way? Right? And then you get hit with a new charge that the city is wanting in order for you to create something or they say, in order for you to make this happen, you have to add this to the property. And you're trying to calculate that as best as you can. And the other part that we mentioned earlier is what's the loan product, right? So you're not dealing with the stabilized bridge loan that you know exactly even. That's less of a product that you want to keep long term, maybe it actually is not a bad situation for some multifamily syndicators in this market with the mark with the way that the economic climate in terms of interest rates is changing. But you have this moving animal where their bank is constantly. Re underwriting you right as you are going. So the investors get a little frustrated in comparison to multi-family syndication, where they know what the loan product is. They know exactly what it's going to be throughout the duration of the first three years. And then maybe they don't know what the refinance is or what the next loan product is. But with us, it's constantly changing for every 10 units that we're building. Unless we find a very specialized, sophisticated debt fund or. Building housing development, kind of loan, construction, private equity firm. That's already on board with the whole idea of bill Tourette's, but they're typically harder to find than than most, regular agency debt, lenders, or banks that you may join. [00:20:34] Sam Wilson: Talk to me real quick. Your last question, before we jump off, talk to me about the investor experience. When does an investor in your models, when did they get paid? How does that work? Because again, it's, this is it's just a very different thing. So really. [00:20:48] Ruben Greth: You're attempting to calculate at what occupancy are you breaking even? And what if that number is like 40, 50 or 60%? So once you get to 60% of the houses built and rented, even though the entire project maybe.Not completed. You can start collecting cashflow and then starting to start doing distributions to your investors. But the other thing that we typically like is that we're building these things out, or our construction team is very quickly so we can build a group of 10 houses every month, so we can build an entire subdivision and around 12 months possibly we would underwrite it and say, just in case of, for unforeseen circumstances, we're going to say that we're going to build this thing out in 18 months and sell it out in 30 months or something like that.But the reality is we can have these things completely built out and rented in about 18 months. And at that point you can potentially sell it. It may take you a few more. But you can beat the projection, a five-year projection. And in this space, you can typically get a two X equity, multiple, which means you can double your LP, your limited partner.Money in about 30 months or however long it takes you just to stabilize and sell the project, which once again, we're being very conservative because we believe that we can sell these. We can build these in about 10 months, we're projecting 18 months just in case anything crazy happens, but in reality, we're selling, Hey, we can double your money in about 30, 36 months. But the reality is we have these things stabilized and going in about 24, if not much. [00:22:24] Sam Wilson: That's awesome. I love it. Ruben, thank you for taking the time, but to break down your business, how you guys are raising capital, where you see opportunity in the market and what you guys are doing to take these deals down a certainly love it. And thanks for breaking down, kind of that build to rent model. That's not something we've talked about a lot here on the show and I love. I love the way you guys are doing it. So thanks again for taking the time to come on today. If our listeners want to get in touch with you or learn more about you, what is the best way to do that? [00:22:51] Ruben Greth: So Check out the show at capital raisers show.com or check out our opportunities and my business, my construction and development and capital raising fund management business. That legacy acquisitions.com or just find me on LinkedIn. [00:23:05] Sam Wilson: Awesome. We'll certainly include all of those links. Thank you again for your time, buddy. Ruben. [00:23:08] Ruben Greth: Appreciate it. Thanks brother. This has been a blast.
Building good relationships with your investors is a must for Keisha. She believes that having a deal is a marriage. You will be with them for several years, and creating that good environment for them ensures that they understand before investing in a deal. Keishia is an army veteran with six years of service in the Army National Guard. During her enlistment, she was a Human Resource Specialist and also deployed to Kuwait as part of Operation Enduring Freedom. She has also pursued education by earning a Bachelor of Science in Chemistry as well as a second Bachelor of Science in Exercise Science and a Master of Arts in Homeland Security. Following her enlistment, she began investing in real estate in 2011 and has been expanding and managing her portfolio of properties for the past 10 years. In April 2021, she decided to take the next step on her entrepreneurial journey by founding Kennedy Remedy Investments. Kennedy Remedy Investments will focus on investing in commercial multi-family properties in Virginia, with plans to expand to other southeastern states. [00:01 - 03:36 Opening Segment Keisha Kennedy focuses on multifamily real estate She started investing eleven years ago and has been successful so far. She is a passive investor who buys bank foreclosed properties and then invests in new multifamily properties Focusing on apartment investing and she thinks she can do it alone until she finds out about apartment syndication. [03:37 - 15:32] How to Become a Limited Partner in Real Estate Keshia suggests educating yourself first before investing. Through syndication, a partner can have a faster growth rate than if they were to do it independently. General partner vs. Limited Partner: What's the difference? General Partner is Active Investing Limited Partner is a Passive Investing Keisha does both Surrounding oneself with investors and picking deals based on personality Living the Luxury Life as a General Partner in Kuwait Keisha recommends becoming a general partner while living in a different country, giving you more perspective on the industry. Establishing good relationships with operators and investing in deals Keisha also shares how she started building her investor base [15:33 – 18:26] Secrets to Keisha's Success: Building Financial Freedom and generational wealth The key to Keisha's success is credibility and building a brand She emphasizes the importance of time blocking and auditing one's progress to ensure that they are making the most of their time [18:27 - 20:17] Closing Segment Reach out to Keshia See links below Final words Tweetable Quotes “I believe in educating all of my investors first and foremost, prior to them investing in apartment syndication, because this is foreign investment for most. And a lot of people have never heard of it.” – Keisha Kennedy “I built those relationships prior to investing with them. Because it's just like a marriage. If you're investing in a deal, you're with them for X amount of years. As long as the deal makes sense, as long as the numbers pencil, and as long as I have that relationship built over. And I really look through the deal. Then I will go ahead and share that deal with my investors and ensure that they understand prior to investing in the deal.” – Keisha Kennedy ----------------------------------------------------------------------------- Connect with Keisha Kennedy on Instagram and LinkedIn. Visit her website you may download The Beginners' Guide to Investing as A Limited Partner here: 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 → email@example.com Want to read the full show notes of the episode? Check it out below: [00:00:00] Keisha Kennedy: Massive action equals massive results. And because I'm putting in the work, that's how I'm seeing the results [00:00:16] Sam Wilson: Kesha Kennedy is the founder of Kennedy remedy investments. Her company focuses on building strong partnerships with fellow passive investors in multifamily. Keisha, welcome to the show. [00:00:26]Keisha Kennedy: Thank you for having me, Sam. I'm so excited to be here with you [00:00:30] Sam Wilson: today. Awesome. Glad to have you on the show. [00:00:32] Three questions. I ask every guest who comes on the show in 90 seconds or less. Where did you start? Where are you now? And how did you get. [00:00:39] Keisha Kennedy: Sure. I started investing about 11 years ago in the residential space and I have been still investing and I'm investing from a reside in a country called Kuwait. I am from Richmond, Virginia, and currently I help fellow investors invest in apartments through apartment syndication. [00:01:01] Sam Wilson: That is great. So 11 years ago you were investing in multi-verse give me a single. In what capacity were you buying them as turnkey properties? Were you buying them as, you know, buying them and managing yourself? What did that look like for you? [00:01:17] Keisha Kennedy: Yes. I started buying bank foreclosed properties, so. Those are no longer in existence, the prices that I was paying. [00:01:25] Right. And I was self-taught and I figured it out on my own. So my first property I paid $29,500 for it came with the lot next door. And I invested in this property in 2011. The property was built in 2010. So all I had to do was go in and pull up the flooring, lay down new flooring and stick a for rent, sign outside and figure it out. [00:01:49] Sam Wilson: Wow. It was a year old property you bought for $29,000. Now this was an REO or was this a foreclosure at the auction block? [00:01:58] Keisha Kennedy: Now this was the REO through the bank. Wow. And it came with the lot next door. [00:02:05] Sam Wilson: That's crazy. That's crazy. Why? 9,500 bucks you've replaced the flooring and put an REO or put a for rent sign out front. [00:02:13] Where did your business go? [00:02:15] Keisha Kennedy: Yes. And so the next year I said, man, this is pretty simple. Let me continue to grow and to invest in other properties. And so the following year I invested in another deal that was a bank foreclosure, and then continued the cycle. And then last year I decided to, I wanted to scale into apartments and I thought that I had to do it all alone. [00:02:36] And, but this. I'm not going to be, you know, I'm not gonna figure it out on my own. I'm not going to be self-taught. I went to educate myself. And so when I started educating myself through podcasts, reading books, blogs, and joining Facebook groups, I came across that little key term called apartment syndication and realized that, Hey, I can have a partner in scale much faster. [00:02:59] And so that has been the key to success to scale so fast within the last. [00:03:04] Sam Wilson: What do you, what were some things, you know, syndication is its own. It's its own kind of sub world or subculture, if you will, because I was speaking to a very successful single family investor here in Memphis, then. You know, I don't know, 800 a thousand homes. [00:03:19] And he goes, man, I still don't understand syndication. I have no idea how that works. I mean, so there's a lot of nuance to it, but I guess, were there some things that you thought that certain things had to be in place or worked in a certain way? That aren't actually how they work? That once you figured it out, you're like, oh wait, this is very different than. [00:03:36] Keisha Kennedy: Yeah. So I assumed of course that I had to be the one to sign my name on the loan and on the debt. And that is not the case and it's called leverage. And that's why I'm able to scale so fast. As I mentioned earlier through apartment indication and just, you know, as a general partner on a deal. Active in the deal. [00:03:58] Whereas a limited partner is passive in the deal. So limited partner investors, their capital, and the general partner is active. And so I have invested both as a limited partner and an active partner as a general partner. And so I'm getting the best of both worlds at this point. [00:04:18] Sam Wilson: Right, right. Yeah. [00:04:20] You said you mentioned something about signing on debt. I mean, as a general partner, You are signing on the debt in some capacity, whether or not it's recourse or non-recourse is, you know, I got something else to talk about. So is that one of the things you've I mean, when you say leverage via syndications for the debt side of things is that what you mean by that? [00:04:38] Where you're able to bring in other partners that can help you take it down and sign on the debt? [00:04:43] Keisha Kennedy: Correct? Correct. So we have key principles and sponsors that bring the net worth to the deal. Right. And so that's what I meant by not myself, me personally, I do not have to sign on the debt just yet. I'm still building my net worth and eventually I will, but I'm so blessed to partner up with people that are willing to sponsor and be a general partner and a key principle [00:05:04] Sam Wilson: in the deal. [00:05:05] Right, right. Yeah. That's necessary, absolutely necessary bringing on either a balance sheet. Or KPI's that have the net worth to to make the deal go around. That's a that's really cool. How did you get involved in your first deal? And tell me about that experience, that process, why you decided that was the deal for you deal as you passed on. [00:05:24] Give us, they'll tell us about the first deal first. Then we'll talk about deals. Maybe you've passed. [00:05:28] Keisha Kennedy: Yeah, absolutely. So I'll tell you about my first limited partner deal that I invested in on. And then I can also tell you about the first co GP deal that embassy and on. So the first limited partner deal was located in Richmond, Virginia. [00:05:43] I am from that area. And so that was the first deal I invested in a year ago, back in may of last year. And so I was still new to the commercial space. However, I had to educate myself and understand the terms, cause it's just like speaking a second language. And so I already knew the market. I knew where I was going. [00:06:03] I just had to understand how the numbers, you know, work in the commercial space. And so. I consider it a home run because you invest your capital in the deal. After two years, there was a cash out refi. So I was getting a hundred percent of my invested capital back. And then I was still remaining in the deal until it's, it sells, you know, between year five and seven. [00:06:28] And then there was an exit strategy. One of the exit strategies is to sell each unit as. A condo. And so this was a, no-brainer already had the capital just sitting in my account and I wanted to make my money work for me and test out how it, you know, the perspective of being a limited partner since eventually I wanted to become a general partner. [00:06:49] And so I was really excited about the deal I'm from the area. And I knew that I would, you know, get my money back in two years. So that was a no-brainer and I consider that a home run for my first limited partner [00:07:01] Sam Wilson: investment. Has that deal [00:07:03] gone as you expected? [00:07:06] Keisha Kennedy: Yes, it has. It has. And that has also allowed me to invest in other deals. [00:07:12] So the first deal I invested in was 27 units in Richmond, Virginia. the home run deal that I just mentioned. The second deal I invested in was in Florence, Kentucky that same month in may of last year, 81 units followed by two more deals, which was student housing in July. [00:07:28] So 19 units in Scranton, Pennsylvania, and then 24 units in Columbia, South Carolina. And those four deals I invested passively as a limited partner. And then fast forward to October, I had my first opportunity as a co GP on 56 units in Waco, Texas. So this time I was more active in the deal, so I helped raise capital and then I also helped asset manage. [00:07:55] So that was my first coach GP opportunity alongside I also invested as an LP and a month ago we close on 120 units in Des Moines. And I invested both as a GP and as a LP. And currently we are working on 174 units in Tulsa, Oklahoma. So I'm really excited about that. Followed by a couple of other deals that we have in the pipeline. [00:08:22] So a lot has transpired within the last year. And again, I am investing from Kuwait outside of the country. So I hope this inspires you along your journey, whether you're on a journey or you're thinking about investing in real estate and just remember me that I am investing outside of the U S and if I can do it and make it happen. [00:08:42] So can you [00:08:43] Sam Wilson: bright? Yeah, absolutely. I love the I love the starting as a passive investor first. I feel like that's where a lot of people should start. Cause they ask me all the time, Hey, what's the, you know, if I want to kind of grow bigger, it gets, you know, do some bigger assets. I would say start as a passive investor, like start there. [00:09:01] I mean, assuming you have the capital to do so to great way to learn. Early on and get a front row seat to how deals are packaged up. The things that people are doing, the investor communication styles, like you get to learn so much, it's a pay to play program. Yeah. But it's also pay get paid to play program. [00:09:18] So, it's not a bad way to do it, especially if you're halfway around the world. [00:09:24] Keisha Kennedy: Yes. I love how you put that in. And I also highly recommended as well. You know, a lot of people want to be so eager to jump into the general partner role. And I advise, you know, the same thing, go ahead and learn from an LP perspective. [00:09:40] So that way, when you are a GP, you can speak about your experience and that also builds credibility. [00:09:47] Sam Wilson: Yeah, well, for sure. And you get to see, , what other sponsors are seeing, what they're thinking, why, , why have they chosen to invest in this particular market or this particular asset? [00:09:58] And I think those, all of those are just little and again, none of it's going to be the thing that's oh, this is the pivotal moment, but it's going to be all the little building blocks that help you along the way. How did you select. Your general partners to be a limited partner with, out of the gate. [00:10:15] I mean, that's five different, , student housing in Scranton, Pennsylvania is not the same as an 81 unit in Florence, Kentucky. Those are very different asset classes that I'm imagining with different options. [00:10:26] Keisha Kennedy: Yes, absolutely. So out of the first four deals that I invested in as a limited partner, three of them are under the same operator. [00:10:35] And two of the student housing is under the, is with the first operator that I invested in at, from Richmond, Virginia. So. My thing is about relationships. Whether I'm eliminate partner or a general part, I'm going to make sure that I like no interest the operator. And I felt comfortable after the first deal. [00:10:55] So I was even more comfortable investing in the two student housing deals as well. [00:11:00] Sam Wilson: Got it. So they were the same operator. That's really interesting. How did you have competence in this operator for student housing and multi-family apartments? I mean, cause again student housing, especially seems like a much more nuanced nuanced assets. [00:11:15] Keisha Kennedy: Yeah. Yeah. So both of the operators actually have experienced on the residential side and in smaller multifamily units as well. One of them in particular came from the hotel industry. So I was able to leverage his experience and, you know, believe in him. It's all about trust, like it, knowing who you are investing with prior to investing in the deal. [00:11:37] Right. So. I was comfortable in deploying capital in the deal. The deal made sense. I did my due diligence, the numbers worked. And so I executed and I'm so proud that I did because man, the returns on that, because you know, you get to charge per bed versus, you know, three bedroom, two bedroom in some really excited when both of those deals exit. [00:12:00] Sam Wilson: Yeah, no, that's really cool. I love that. And now let's talk about the general partnership side of things. I mean becoming a general partner while living in Kuwait and working as, you know, as a, you're a veteran working as a military contractor. I mean, at what hour of the day are you doing this? And then how are you making sure that what you're packaging up and bringing to your investor group is the right answer. [00:12:26] Keisha Kennedy: Yeah. So I am seven hours currently. I'm seven hours ahead of Eastern standard time. So right now, as we record this podcast, it is 7:19 PM here. So the time difference is crazy. I'll be honest. There are some nights where I'm up late. Early in the morning and even up in the middle of the night, but it's how bad do you want it? [00:12:48] Massive action equals massive results. And because I'm putting in the work, that's how I'm seeing the results all the way from another country again. And so I have to balance and manage my time. I do a lot of time blocking. I do time auditing as well. I'm a big believer in also working out I'm a bodybuilder. [00:13:09] So I find discipline in that and it helps me, as far as like my mental health and relieve stress and things like that. So if I can beat myself mentally and the gym, then I can, you know, face anything when it comes to adversity and challenges in life. And so the military has also taught me to be disciplined and, you know, go after what I want. [00:13:31] So. I believe in educating all of my investors first and foremost, prior to them investing in apartment syndication, because this is a foreign investment for most. And a lot of people have never heard of it. I didn't even hear about it. And so last year to be honest, so I educated myself and so I want to educate my investors first and foremost. [00:13:51] And so I ensure that the deal makes sense. And it's something that I personally wants to invest in. And once the deal does make sense. And I built that relationship to work with other general partners in the deal, because I built those relationships prior to investing with them. Because it's just like a marriage. [00:14:08] If you're investing in a deal, you're with them for X amount of years. And so as long as the deal makes sense, as long as the numbers pencil, and as long as I have that relationship builds over. And I really look through the deal. Then I will go ahead and share that deal with my investors and ensure that they understand prior to investing in the deal. [00:14:31] And again, this is happening all the way from Kuwait outside of the U S but I'm investing in the U [00:14:36] Sam Wilson: S how has that worked for you? So now this is a lot of questions, or, you know, especially if those are scaling the question of how am I going to raise capital? How am I going to build an investor base? How have you gone about building an investor base? [00:14:52] Keisha Kennedy: Yeah. So I started with zero emails again. I started last year and I have an email list of over 600 people and it took some time. It did take some time. It took a lot of work. I post every day on social media. So I use that platform to educate, inspire, and motivate as many people as possible. And so, because I am speaking about my real estate journey, I am attracting investors on a daily basis. [00:15:23] I am also using a lead magnet. And then I'll also mention previously that I had. So every month I have an educational webinar. I started this back in January. And so I have guest speakers that come and, you know, educate my investors on different topics like this month, tomorrow, actually, we're speaking about infinite banking. [00:15:43] Back in January, we spoke about leveraging your self-directed IRA and being able to invest in apartments. You know, the next month we had spoke about investing in apartment syndication and just walking through investors on. How they can invest pass Libby passively in a syndication through a sample deal. [00:16:02] So again, I started with zero investors a year ago. I am constantly being requested to come speak on podcasts because people are blown away by how am I investing from Kuwait in the U S and it's all about credibility, you know, building your brand. And then I'm basically just using social media as a platform to, as I mentioned earlier, to educate, inspire, and motivate, and just speak about my personal journey in real estate. [00:16:33] Sam Wilson: I love it. That is awesome. Yeah. And I love the idea of time blocking time auditing, and then just saying, Hey, how you know, what was your question? You said earlier, how bad do you want it? And I think that's the question that many need to answer when they're not seeing. Not seeing results as well. [00:16:48] How bad do you want it? And then take the necessary. So, you know, get in the middle of the night and doing a webinar, I'm sure is not priority, you know? Cause I guess that'd be, especially if you have people in the, all, you know, you're doing a seven o'clock or 6:00 PM webinar here in the central standard time. [00:17:03] That means you're up at one in the morning or no, it'd be two in the morning for you hosting a webinar. [00:17:09] Keisha Kennedy: Exactly, but it goes back to Sam. It goes back to your why, you know, why am I doing this? I'm doing this to not only help myself, but to help others build financial freedom, generational wealth, you know, educating fellow veterans. [00:17:24] And you know, my, my target investors are fellow veterans because I'm a veteran. My father was a veteran, my grandfather, my great uncles. And then also minorities. There aren't many mines. Minorities in this space, especially women. And so I am being the voice to help others, you know, to acknowledge and let them know that, Hey, I started from nothing and you can as well. [00:17:47] And so just helping, bridging that, that wealth gap and continue to inspire, educate, and motivate others. I love it [00:17:55] Sam Wilson: . I love it. Yeah, that's absolutely awesome. You know, that the idea that anybody can do, this is just something that people certainly need to hear. I had an interview with somebody else earlier this morning, and it was nine years ago. [00:18:06] They moved to the U S with 180 bucks in this. And now he owns like $40 million in real estate. It's like, okay. He goes, Hey man. You know what? Nine years ago I had nothing. I was broke. But if I can do it, so can you, so that's really cool. Keisha, thank you for taking the time to come on today and tell us what the secrets to your success. [00:18:25] And it sounds like a lot of it is. They get it done. You put your nose to the grindstone, figure out your plan and go implement it. And you've given us a lot of things here really, to think about. So certainly appreciate that if our listeners want to get in touch with you or learn more about you, what is the best way to do. [00:18:40] Keisha Kennedy: Yes. So I have a free guide. It's the beginner's guide to investing as a limited partner in apartment syndication. So if this message earlier resonated with you, feel free to get it from my website at www of course dot Kennedy, like the president, K E N E D Y. Remedy, R E M E D Y. Investments with an S. [00:19:02] So Kennedy remedy investments.com backslash. We are the remedy to your investment. So that's the first thing. And then the second thing is to reach out to me on LinkedIn. I love getting on phone calls and getting to, you know, getting to know my future and fellow investors. And you can find me on LinkedIn Kesha. [00:19:23] K E I S H I A Kennedy. And I am also on Instagram, so Kennedy remedy. And then of course on Facebook, we have Kennedy remedy investment. So feel free to reach out and I would love to connect with each and every one [00:19:38] Sam Wilson: of you. It's a lot of great ways to connect with you and we'll make sure that we also put those in the show notes, Kennedy, excuse me, Kennedy Collie. [00:19:45] He got me saying Kennedy. The last thing you said Keisha, thank you for coming on the show today. I certainly appreciate that. [00:19:51] Keisha Kennedy: And thank you for having me. It was a blessed.
Amazing investors, have you considered the amazing possibilities found in RV parks? As odd as it may sound it can be a bit more complex compared to other investment opportunities, however, there is major cash flow potential. Before you jump into making a deal though, there is always due diligence. The common question amongst many investors, new and old, is how do you vet a deal?Sam Wilson is a seasoned investor, exploring the parking lot spaces, all the way up to RV parks. He even has a quick 10 min guide to help with vetting deals! Join Sam and me in a fast-paced amazing conversation that fuels you with tons of information for moving forward in expanding your investment portfolio.For More information on Sam, head over to https://brickeninvestmentgroup.com/Or contact him by calling (901) 500-6191To find out more about partnering or investing in a multifamily deal schedule a call here https://calendly.com/threekeysinvestments/get-acquainted-callDownload a free e-book on Why Invest in Multifamily at ThreeKeysInvestments.comPlease RSS: Review, Subscribe, Share!Support the show (and my reading addiction)! https://www.buymeacoffee.com/AskMeHowIKnow