Mark Hamilton has considerable experience in partnership formations and operations, project planning and implementation, asset management and management oversight, landlord-tenant and rent-control issues, risk management, and zoning and building department matters. Prior to co-founding Hamilton Zanze in 2001, Mark owned his own commercial brokerage and investment business after starting in the San Francisco office of Marcus & Millichap in 1981. In 1988, he co-founded Property Resource Group (real estate brokerage) and Quantum Land Company (development). Mark's main focus has always been locating value-add properties in changing urban neighborhoods and then re-working them into higher-quality buildings with higher incomes, improved tenant profiles, and higher resale values.

Mark shares his insights into investors' mindsets focusing on growth and income and how one should commit to staying in power, Let's hear more from Mark in today's episode of How to Scale Commercial Real Estate.

Highlights:

[00:00 - 07:08] Opening Segment

• Mark Hamilton has been a player in the national commercial real estate industry for over 30 years and has accumulated $5 billion in assets under management.
• Risk has shifted over time, with interest rates and capital being the main drivers of change.
• Hamilton advises investors to sell when they believe they can get the same amount of money out at a later date, as rates of return are currently low.

[07:08 - 13:54] If You're An Investor, Your Focus Should be on Growth and Income

• How an investor's portfolio should serve their short-term, intermediate, and long-term interests.
• An investor's strategy should include a focus on growth or income, with a preference for income over growth if there is a fear of an impending recession.
• Since 1985, the focus of Hamilton Zanze Investors has shifted towards more of an income approach.
• Rates of return have gone back down in some markets and leverage has decreased, but cap rates are still moving upwards.

[13:54 - 20:52] Commercial Real Estate Investors Should Commit to Stay in Power

• The correlation between a B and C property that has held their value the best and suffered less capric compression.
• Having a growth or income strategy when investing in commercial real estate, and advises against investing in C-Class properties that are experiencing capric decompression.
• Mark recommends owning a C-Class property that is producing an incredible amount of income in order to be immune to market fluctuations."

[20:53 - 22:06] Closing Segment

• Reach out to Mark Hamilton
• • See links below
• Final words

Tweetable Quote

"If you put financing on it, you're serving a master of paying off the debt. But other than that, your masters are generally a combination of growth and income." - Mark Hamilton

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Connect with Mark Hamilton by visiting their website at www.hamiltonzanze.com

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Want to read the full show notes of the episode? Check it out below:

[00:00:00] Mark Hamilton: For your own sake, commit to staying power. What's your staying power strategy, right? If you're starting out, what's your income gonna be? Do you have no need of an income? Do you have an income stream? Do you have a spouse that's bought in that provides enough income, but you gotta commit to staying power and that means your.

[00:00:18] Mark Hamilton: Because you will want to eat and do the thing that I did this morning, which is get out of bed. You will wanna be able to do that every day and meet the challenges, right?

[00:00:27] Intro: Welcome commercial real estate show. Whether you are an active or your real estate investing business into something big.

[00:00:39] Sam Wilson: Mark Hamilton has been a player in the national commercial real estate industry. For more than 30 years, his main professional focus has been locating value, add properties in changing urban neighborhoods, and then reworking them into higher quality buildings and higher incomes, improved tenant profiles and higher resale values.

[00:00:56] Sam Wilson: As of today, they have about $5 billion in assets, under management solicit somebody that we should absolutely pay attention to mark. Welcome to the.

[00:01:06] Mark Hamilton: Hi, Sam, thank you for having me. And thank you for the generous introduction nobody's ever called me a player before.

[00:01:14] Sam Wilson: well, I certainly appreciate you coming on the show today, mark.

[00:01:17] Sam Wilson: There are three questions. I ask every guest who comes on the show in 90 seconds or last, can you tell me, where did you start? Where are you now? And how did you get

[00:01:24] Mark Hamilton: there? Okay. So, I started by accident. We can come back to that if you want. My wife and I purchased a duplex in, a very rundown duplex in San Francisco in 1985.

[00:01:35] Mark Hamilton: And despite the agony of dealing with it the property made her mother cry. It was so rough. We, we kind of got bit by the. So for a solid 15 years or almost 15 years I practiced really only in San Francisco purchased. A few dozen small buildings that needed a lot of tender, loving care and heavy lifting.

[00:01:54] Mark Hamilton: Eventually we started lost the ability to find the kind of yields that I wanted in San Francisco. So moved across the bay and moved to other parts of the bay area, Oakland Alameda, Hayward and then in 2001, I met Tony Zs who had a very institutional pedigree and career. To that point in time, it was good marriage.

[00:02:11] Mark Hamilton: I was good at getting my hands into the dirt and getting my arms around deals. He had a lot of really valuable institutional experience that helped us kind of work both sides of the barbell . That was 2001. Our first deal was 16 units for a million, one 50 last year we acquired about a billion, one 50 in [00:02:30] properties.

[00:02:30] Mark Hamilton: And so it's been as steady as you go experience, go show up, do the work every day. Be careful. You better love the work because you're gonna do a lot of it. And if you're lucky, you'll discover you're proficient at it. Primarily through being committed about it and putting your own skin in the game and then you'll draw good people.

[00:02:46] Mark Hamilton: We've been really lucky to draw a really great group of investors and a terrific staff. And we're building for the long run through that staff. But when there's treasure and you spread it around, it tends to work.

[00:02:59] Sam Wilson: That is awesome. 16 units of 2001.

[00:03:02] Sam Wilson: So that's 21 years ago. Now you are at 5 billion in assets, under management. What are some things as you review the last 21 years, how has risk shifted in the marketplace and how are you guys addressing that today?

[00:03:17] Mark Hamilton: I think it's shifted. I think the single biggest component that's changed risk has been interest rate movement interest rate movement Over the last 40 years, I'll refer to it.

[00:03:25] Mark Hamilton: As the bond market as a bull run in the bond market, , rates were at 20 when I started my career last year. And when I say rates, it could be anything from the fed rate to the 10 year bond. What have you, but last year, , in the pandemic, the tenure bond went below two.

[00:03:40] Mark Hamilton: Right. So when interest rates go from two to 20 and rates of return follow it means there's a huge amount of capital out there. Evermore each year, chasing assets. And so you build up a lot of value. So if that's a risk you gotta be aware that it could change interest rates could go back up.

[00:03:53] Mark Hamilton: I think we're probably finally at that time where interest rates are gonna start going back up long term rates, 10 years out, five years out. I think they'll probably still come back down. But rates are a risk. And then if you've held assets during the bull run and, as, and as rates of return have gone down, you have a lot of made capital.

[00:04:10] Mark Hamilton: And so you have to be careful about, honoring what you want from that capital and what you expect to get in terms of preservation and returns.

[00:04:18] Sam Wilson: When you say made capital, can you define that for me?

[00:04:21] Mark Hamilton: Sure. If you have a property and you buy it in a market that expects a 10% return, that means to induce take favor investors to come in and part with their cash.

[00:04:32] Mark Hamilton: To take favor and they're expecting a 10% return, which, favor return we haven't seen in ages, but it makes the illustration easy. Favor have a million dollars of net you

[00:04:42] Sam Wilson: cannot

[00:04:42] Mark Hamilton: pure whether it's in a triple net lease property

[00:04:45] Track 2: episode

[00:04:46] Sam Wilson: cannot

[00:04:47] Mark Hamilton: pure or in an apartment

[00:04:50] Sam Wilson: cannot

[00:04:51] Mark Hamilton: But at the end of the day what goes into

[00:04:54] Sam Wilson: cannot

[00:04:54] Mark Hamilton: financed? It is a 10%.

[00:04:58] Mark Hamilton: bucks, 10%. If a [00:05:00] million dollars is 10%, it means the value of the asset is $10 million. Right. Right. Cap rates. Haven't been at 10 in more than 30 years. Right. However they have recently been in the range of five But in a normal world, that would be the lowest they would go, but they haven't, they went even lower than that again, which means there's lots of cash chasing assets.

[00:05:20] Mark Hamilton: Good value is hard to find, so people are paying up, but again, if you have a million bucks. Of pure income INI what's available after paying all your expenses. And now it's a 5% return market that asset's worth 20 million. The income's the same, right? The property's the same, nothing has changed. The only thing that's happened is valuation and the big drivers' valuation movement have been capital.

[00:05:44] Mark Hamilton: Capital is for years, if not decades has been feverishly, trying to find returns. And as there's evermore capital chasing returns go. But that means the value of the assets go up. So if you're holding a highly value asset and you think you might transact at some point in time our feeling is always, has always been it's better to sell when it's white, hot than when it's Rocky.

[00:06:08] Mark Hamilton: So we, I think. Meticulously evaluate our portfolio every month. And when we think we've really completed a business plan on something, and we're not likely to do a heck of a lot better we'll generally sell that asset. And the last five years have been a good time to sell assets, but if you sit on them and hope to get the same amount of money out at a later date, if rates of return have gone.

[00:06:29] Mark Hamilton: At that point, which they are right now, then your values have gone down.

[00:06:33] Sam Wilson: Right. Right. And so that's what you mean by made capital is when you're sitting on that property that is now in increased in value that do I sell it? Do I that's made capital, do I dispose this property? Do I hang on it?

[00:06:46] Sam Wilson: You know the ultimate question, I guess that everybody's probably, yeah. And

[00:06:48] Mark Hamilton: It's not an error. To sit on it. If that's your strategy, if it's a family asset that you wanna hold indefinitely, then that's your as asset, that's your strategy, right? You honor the strategy, you have a piece of the rock and it produces income.

[00:07:01] Mark Hamilton: Right. But if you're also trying to serve. So you're gonna serve a few masters, right? One master you have to serve is expenses. You're never gonna get away from that. If you put financing on it, you're serving a master of paying off the debt. But other than that, your masters are generally a combination of growth and income.

[00:07:15] Mark Hamilton: You're gonna skew toward one side or the other, and if you're a heavily growth oriented investor and you can use the tool of a 10 31 exchange our view has been that it's better to use the 10 31 to put it back into something that you think is gonna grow again. [00:07:30]

[00:07:30] Sam Wilson: Right? Absolutely.

[00:07:32] Sam Wilson: Absolutely. Do you feel like, like there should be a focus in an investor or in an investment firm's portfolio or they say, Hey, we're focusing on growth or we're focusing on income or is there a way to

[00:07:43] Mark Hamilton: have both. Yes, and yes. And yes. So your investment portfolio should serve your interest should ideally it'll serve your short term interests, but it should serve your intermediate and long term interest.

[00:07:57] Mark Hamilton: Right? So you're gonna, you're gonna make choices you're gonna meet with somebody. It might be your spouse. It might be your mother or father-in-law, it might be your neighbor, right? It might be you talk it over with a CPA. Or with a wealth advisor. But I think you need to have a basic strategy.

[00:08:11] Mark Hamilton: You need to be committed to it, which doesn't mean to be casting concrete. But at least that'll give you a measuring post. And then you measure accordingly in the early going our emphasis was all on growth. We were, simply finding things that we thought were undervalued to get something that's undervalued.

[00:08:27] Mark Hamilton: There's gonna be some problems that come with it. Otherwise there'd be a flock of people chasing it. Right. And you have to be prepared to do the corrective, no, the corrective effort, you have to be prepared to, to put in the blood, sweat, tears of money. But you weren't even a wee lad there, then that was in 1985.

[00:08:43] Mark Hamilton: So. Since then as we've succeeded and grown equity, our . Investors tend to have shifted to more of an income approach. They still want an expectation of growth. , if you don't have the expectation of growth, you might wanna buy a triple net deal, you might wanna buy a bond.

[00:08:56] Mark Hamilton: But if you have some expectation of growth and tax efficiency along the way, our investors expect that, but , they're a little more centered on income right now. And some of that's about age and some of it's about having racked up big gains.

[00:09:09] Sam Wilson: Yeah. And that's, I think that's an investor sentiment that I have in my investor, conversations has been kind of shifting.

[00:09:16] Sam Wilson: And even the last eight to 12 months, I hear a lot of investors who are calling me saying, you know what, I'm moving into the income side of things. I want a stabilized asset that is now producing revenue versus I'm looking for the home run. And I think that's coupled two things go into that.

[00:09:31] Sam Wilson: One is the fear of an impending recession. And also, with that impending recession, also just the fear that the equity multiples aren't gonna be there. Like they, maybe they have been in the last six to eight years.

[00:09:42] Mark Hamilton: Well, that's certainly true in the stock market right now. The stock market is correcting.

[00:09:45] Mark Hamilton: People are looking at it through various lenses, but you can be sure that one of 'em is price, earnings, ratios, and price earnings ratios have come down. And again, that means that the value against its net. Is not what it was, cuz people aren't bidding for it. [00:10:00] Right. To the same extent. Right. So, yeah I think there are good reasons to be looking at income at all times.

[00:10:05] Mark Hamilton: And again, I would say probably. Oh boy, I would say fully 60% to two thirds of our investors at this point in time are content to collect income. And I think at this point in time, it's in part because they know there's gonna be . Growth. Right. , a lot of folks have been with us for more than 30 years.

[00:10:20] Mark Hamilton: Wow. So they know there's gonna be growth. And then they can get per and because of that, they can get persnickety about income.

[00:10:28] Sam Wilson: I love it. I love it. Yeah. And I think that's a, an interesting point there where you say people aren't bidding for it. Have you guys seen any softening in the multifamily market on the acquisition side and maybe even on the disposition side?

[00:10:41] Mark Hamilton: Yes. It had really within. The last two years during the pandemic with interest rates going down cap rates went down too. Cap rates are the rates of return that we look at. And again, it comes back to that ratio of net income to value, right. Cap rates went down. Just horrifyingly.

[00:10:58] Mark Hamilton: There was a steep drop and that's great if you're holding, right. It makes it harder if you're buying. Right. And so we're, we are always buying what we buy a little bit can differ certainly where we buy differ. But I think we figured out that in the last 21 years of Hamilton Zs, we've been out of contract on an acquisition for precisely one week.

[00:11:17] Mark Hamilton: We are always in the markets. It means you gotta be concerned about overpaying, right? I mean, we can overpay. There's no limit, there's no law against overpaying. You pay as much as you want. But we have to be careful. Our investors are friends and family and credentialed. Real estate people.

[00:11:30] Mark Hamilton: They can pick apart a proforma and then we have marks, we have marks that we have to hit in part because people expect us to, they've seen it, right. So, but we are in 30 metropolitan areas. We're in 17 states and there'll be probably. Two thirds to three quarters of those markets that we can't even look in right now as buyers, because they're so fully Christ.

[00:11:51] Mark Hamilton: Right. But we turn over rocks. We started out in one market. Then we were in two. Then we were in three and over the last 21 years, we've grown to 30 markets and it's just, we look for places we wanna be where there's good story. And then we start turning over rocks. And so, we'll take in three to 4,000 submissions, a.

[00:12:08] Mark Hamilton: After shaking 'em down, we'll underwrite, maybe 250. We'll write offers on maybe 50 and we'll be able to get into the ring and get into the finals on 15 to 25 and come out with 15 to 18 acquisitions. Right. And it's just because we have to find the returns. But, you do it with hard work, you do it with persistence, you do it by forming [00:12:30] relationships with people.

[00:12:31] Mark Hamilton: And right now in some of those markets, people are talking about transaction velocity in the second half of 2 0 2, 2 being off by fully 50% from the second half of 2 0 2 1. Wow. And so we are seeing cap rates move back. leverage has come down. We're typically a 65 to 70% borrower leverage right now is probably mainstream.

[00:12:53] Mark Hamilton: Leverage is gonna be more. 50 to 60%. We can make that make sense. If we like the asset because we're investing more for long term income at this point, , not every time, but many of our partnerships have racked up big gains. And if people just get a nice, steady ride and a pretty picture to look at you're gonna make, you're gonna please a lot of people that way.

[00:13:10] Mark Hamilton: But values have come back and it's market specific, rents are still white hot , in Manhattan and in Brooklyn. So I would expect rates of return. There have gone back down in some of the Rocky mountain states some of the Mid-Atlantic states cap rates have gone up broker told me the other day that in salt lake where we've seen just like brutally low capric in the low threes, that case by case.

[00:13:32] Mark Hamilton: In salt lake, which is a highly desired market and a growth market that cap rates may have moved by anywhere from a hundred to 125 basis points. And what that means, nobody's sitting there watching a monitor saying, what are cap rates doing? They're behaving. Right. We're all behaving, right.

[00:13:48] Mark Hamilton: And what are we doing? We're either buying or we're not. And so few fewer people are buying PE the people that are buying are being more selective. And I think generally speaking, you're gonna see a correlation between a B and C property that a properties have probably held their value the best and suffered the least capric decompression B properties are hanging in there doing okay, and have suffered a little more capric compression and C proper.

[00:14:12] Mark Hamilton: Have gotten hurt the worst and have suffered a lot of capric decompression.

[00:14:17] Sam Wilson: And again, that goes back. I think the key point there is to what is your strategy? Is it growth or income? And so we don't really care. I, we are proud owners of a C-Class property that is producing an incredible.

[00:14:31] Sam Wilson: And

[00:14:31] Mark Hamilton: it's like, as long as it's doing its job and it's not wobbling and you structured your financing so that you're not gonna get whipsawed by hostile movement in interest rates, then the asset's doing its job. Right.

[00:14:45] Sam Wilson: That's exactly right. That's exactly right. Yeah. And so we're not, again, it goes back to your very, the very point in the beginning, which is, what do you want out of this investment?

[00:14:54] Sam Wilson: Is it growth? Is it income? What's your strategy and the honor of that strategy? So

[00:14:57] Mark Hamilton: that's I think I think for me, [00:15:00] and maybe it's just because I've gotten on in years, I'm 63, right? So you're talking to almost an official senior citizen But at this point in time, I just want it to work out.

[00:15:08] Mark Hamilton: Right. I want stuff to work out and that doesn't mean I wanna move to the sidelines. I'm too fidgety to move to the sidelines. But you have a basic strategy and if it works out, it's doing its job. and so we know that we could make it work with growth and income, we knew we could make it work with growth.

[00:15:21] Mark Hamilton: There wasn't much income. It was mostly about it. It was a big renovation business, but we know how to do it with growth and income. We know how to do it with income . And growth. , we took down a portfolio in bankruptcy last year of almost 60 properties. And we knew it had been mismanaged and we knew that it was out of the reach of most investors who would bid for it.

[00:15:40] Mark Hamilton: Right. So we felt we were getting good pricing going in and we felt we felt, we knew we could run the portfolio. We were uniquely positioned because it was both apartments. was probably two thirds of the value of the portfolio and suburban office. And we have an affiliated company that, that does that.

[00:15:55] Mark Hamilton: And the other thing too is on our home court, it's in the bay area. Right. So, nobody's ever gonna be nonchalant about a bonafide growth deal. But at the same time, those sort of things are, I guess the term of the stock market is unicorns, right? Those things are unicorns a little bit.

[00:16:10] Mark Hamilton: So if we didn't catch a unicorn, we at least caught a horse with a bump on its head. And but everybody likes growth. And if it's real growth, you're not gonna have any trouble having people be interested. But at the same time, you have to look at what's sustainable. And investors want what's sustain.

[00:16:24] Mark Hamilton: Yeah.

[00:16:24] Sam Wilson: That's absolutely right. Absolutely. Right. Tell me, this is your view in the market right now. , are we in a lull? Is this the eye of the storm? Where are we right now? And where are you guys positioning yourself for the future?

[00:16:39] Mark Hamilton: That's a really good question. And curiously, I think events on the global stage are gonna affect us real estate markets.

[00:16:47] Mark Hamilton: More than you might expect. Certainly inflation is a worldwide phenomena right now and it's gonna affect worldwide interest rates. On the other hand, the United States is also still a Haven for investors and there's certainly inflow of. Foreign capital. We don't deal with foreign capital very much.

[00:17:03] Mark Hamilton: We deal with it a little bit. And so I think, certainly the likelihood of stability it won't be perfect stability. It's gonna, we'll suffer some capric decompression just like anybody, but what's happened on the world commodities market because of.

[00:17:16] Mark Hamilton: Central banks, flooding economies with money and because of the war in Ukraine in terms of the impact on energy commodities et cetera, is a big deal. Any instability in China would be a big deal and they have people [00:17:30] there that are publicly. Boycotting making interest payments on properties that they have never been delivered to them.

[00:17:37] Mark Hamilton: And so, growth I think it's fair to see that China. Has made economic rising economic prosperity and rising stability and rising growth rates, a pillar of their whole form of government in terms of keeping people bought in. And so when you see growth start to slow down, which it has in China, and then when you see people boycotting mortgage payments That's a concern.

[00:17:59] Mark Hamilton: It should be a concern. It would, it will affect the world market. And then domestically it's, it's interest rates. I don't think there are any newfound challenges in the tax code that are gonna drop on us. I think Fannie and Freddie are gonna be there are there for the duration in terms of cap being capital providers, being debt, capital providers.

[00:18:15] Mark Hamilton: And so it comes down to operations and I won't say that we're protected from a downturn affecting working people in the United States. I don't think we're protected. I think that occupancy exposure and delinquency exposure is gonna be the lowest with a plus properties.

[00:18:33] Mark Hamilton: And it's gonna be the highest with C minus properties. So you just have to be, you just have to be prepared. To be that operator, if you have a real occupancy and, or delinquency challenge. And I. I think there will be some of that, but let's be honest. I mean, unemployment right now is at three to 3.5%.

[00:18:51] Mark Hamilton: And there are a lot of people who are just saying, eh, it's not good enough for me yet. I'll wait it out. I'll find a job, but I'm not in any hurry. And household formation is still on our site. We are probably 85% of our investment activity is in multi. we do have investment activity in our suburban office platform, but the vast majority of it's multi-family and what we experienced in the great recession was that if we met the market, did a good job operating the properties, kept the staff happy and kept people in their apartments.

[00:19:22] Mark Hamilton: It was a refuge for us. In a rough time. Because , if you can win your occupancy, you've won a big part of the battle with multifamily.

[00:19:29] Sam Wilson: Absolutely. Absolutely. Mark, this has been fascinating. Thank you for taking the time to come on today and just kind of give us a breakdown really on the current events, how you see things through a lens of.

[00:19:39] Sam Wilson: How many years is that? 15, 20, 35?

[00:19:42] Mark Hamilton: Well, the dirty secret is 40. But I didn't buy my first property until 1985. So 37. Okay. So the year I got

[00:19:49] Sam Wilson: married, that's awesome. I absolutely love it. If you could give our listeners one piece of advice that pertains to investing today, and you said, Hey, [00:20:00] this is what I recommend to anybody who's investing in commercial real estate.

[00:20:03] Sam Wilson: What would it be

[00:20:04] Mark Hamilton: For your own sake, commit to staying power. What's your staying power strategy, right? If you're starting out, what's your income gonna be? Do you have no need of an income? Do you have an income stream? Do you have a spouse that's bought in that provides enough income, but you gotta commit to staying power and that means your.

[00:20:23] Mark Hamilton: Because you will want to eat and do the thing that I did this morning, which is get out of bed. You will wanna be able to do that every day and meet the challenges, right? Apartments are multi-family is a very activity based business, right? It's a very demanding daily business. So you have to be prepared to, to meet that where it is.

[00:20:42] Mark Hamilton: And then you have to have a strategy. That's gonna an asset strategy. That's gonna allow you to navigate it when things aren't so great and benefit from it when things aren't. So I may always say commit to staying power and satisfy yourself that you've answered those questions.

[00:20:57] Sam Wilson: I love it.

[00:20:58] Sam Wilson: I love it. Mark. Thank you so much for coming on today. If our listeners want to get in touch with you or your firm, what is the best way to do that?

[00:21:05] Mark Hamilton: Well, I'll tell you, we have a pretty good website that we like. Other people have told us that as well. It's Hamilton, H a M I L T O N Z as in zebra, a N as in Nancy, Z as in zebra, E as in edward.com.

[00:21:18] Mark Hamilton: We think that tells the story pretty well. And then otherwise my email address is mark M Ark. Hamilton zands.com.

[00:21:26] Sam Wilson: Wonderful. We'll make sure we put those things there in the show notes, mark. Thank you again for coming on day. Certainly

[00:21:31] Mark Hamilton: appreci. Appreciate it. You got Sam. Thanks for having me. It was fun.

[00:21:34] Mark Hamilton: Good luck with your property. Thank you, sir.

Outdoor hospitality is a fast-growing market, especially with the growing desire for unique stays and experiences. However, it's still a fragmented industry and there's work to be done to meet the demand.

The Dyrt aims to provide a solution to the 70M Americans looking for outdoor destinations. Founder Sarah Smith joins us to talk about creating a platform that offers reliable camping and RVing information online and the need to move the fragmented outdoor hospitality industry into a more consolidated one. She also shares how she's grown the company through connecting with the community, how they are putting properties in front of their 30M visitors, and gives her take on the trends in the space.

[00:01 - 07:23] The Outdoor Boom

• Sarah on why they founded The Dyrt
• There is a huge opportunity in the outdoor hospitality space, and RV camping is on the rise.
• A lot of people who are working from the road need the reliability of an RV resort

[07:24 - 20:12] Making Camping and RVing Easier and More Accessible

• The Dyrt is a platform where users can find campgrounds and RV resorts to stay at for free.
• Amassing 30M visitors
• They don't charge commissions from campground and RV park owners
• Creating the platform
• Even though Sarah has no technology background, they were able to innovate by working with the right people
• Integration with other PMS
• Important question entrepreneurs must ask themselves: are you solving a real problem or are you just doing this for fun?
• How they leveraged the community to crowdsource photos and reviews
• Using incentives to encourage contributions
• What's next for The Dyrt: expansion to other countries, the opportunities in the Glamping market

[20:13 - 22:15] Closing Segment

• Sarah's advice: Keep looking forward
• Reach out to Sarah!
• Links Below

• Final Words

Tweetable Quotes

"It seems like a no-brainer because all we hear about is it's so hard to find a place to go camp or I wish there are more places." - Sarah Smith

"If you're doing any sort of startup, it's really important to understand if are you solving something that needs to be solved, or are you just doing something that sounds fun?" - Sarah Smith

"Bringing this fragmented industry of camping and RV into one area is really what we want to do." - Sarah Smith

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Connect with Sarah through The Dyrt website. See if your property is already listed at thedyrt.com/claim.

Connect with me:

I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.

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Want to read the full show notes of the episode? Check it out below:

[00:00:00] Sarah Smith: I'm really excited to be the top-ranked camping and RV out there in the app store. So if anything, I'm proof that you don't need a background necessarily if you have a passion and you hire the right people.

[00:00:24] Sam Wilson: Thank you to everyone who is a dedicated listener to the How to Scale Commercial Real Estate podcast. Just want to give you a heads up that today, we had some audio issues on actually three or four episodes that we recorded in a row. They were such good episodes and the guests were so kind of course, to share their time and insight with us that I couldn't ask them to rerecord it. So we're going to go ahead and publish these episodes. I am aware of it. The audio is not what I like to put out, but running a daily show at some point in time, we're going to run into a hiccup along the way. And today is one of those days where I get to share my mistakes and hiccups right along with you. But again, it's a great episode. You can hear the guest a lot better than you can hear me. And it's just part of what it is that we do. Nevertheless, here it is. Thanks so much for tuning in. Certainly appreciate it.

[00:01:07] Sam Wilson: Sarah Smith is the founder of The Dyrt, which is the number one app for camping, with the most active online camping community. Sarah and her husband, The Dyrt CEO Kevin Long, were avid campers who struggle to find campground information online. So they started The Dyrt, that's spelled D Y R T, which I think is a really cool name. Sarah, welcome to the show.

[00:01:26] Sarah Smith: Thank you, Sam. Very happy to be here.

[00:01:29] Sam Wilson: Hey, the pleasure's mine. Sarah, there are 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?

[00:01:37] Sarah Smith: Sure. Sure. I started as a camper who was very frustrated because I couldn't find reliable information about camping online. So created The Dyrt, which now is the most active online community of campers out there, including RVers. And we have crowdsourced over 4 million photos reviews and tips of campgrounds over the past several years that we've been doing this. We've recently expanded our focus onto bookings. It was kind of a natural evolution of going from focusing on campers finding campgrounds to campers booking campgrounds. So we've done that in a way that really supports campground owners and RV park owners by offering commission-free bookings. So campground owners keep their full nightly rate when campers book through The Dyrt. And we're really excited about kind of expanding this whole thing. And it really, you know, we kind of got to this point, as you may have heard, I don't know if you're a camper, but camping and RV really boomed in the pandemic. Didn't really know if that was just going to be a blip or if it would stick around and indeed it stuck around. And 2021 was even busier than 2020 as far as camping and 2022 is turning out to be so as well. So, really excited that more people are getting outside and happy to have a platform where we can help them.

[00:03:08] Sam Wilson: Outdoor hospitality has absolutely exploded. That's been one of the transitions that we've made actually is out of multifamily, even some other assets, and started buying RV resorts this year, just because of it. And said, Hey, you know what? There is a huge opportunity here. And what we have found, I just want to kind of compliment what you're saying, by what we have found is the price difference. You know, the number of people buying RVs, the prices of the RV resorts have not kept up with the influx of people buying actually RV. We can still find value inside of the RV resort acquisition space. I love what you were saying there about how it's not just a fad. You know, it's been several years now that the outdoor hospitality space continues to grow. Can you give some kind of background information as to why you think that is?

[00:03:54] Sarah Smith: Sure. It's amazing. We saw 8 million new Americans go camping last year, never camped before. And so it's a big new thing. And a lot of those people were trying RVing. And if you think about the sort of investment you need to put into RVing as a camper, you need to buy an RV. That's not cheap. You need to buy equipment. None of this is cheap, even if you're a tent camper, it's an investment. So once you make that investment and once you've camped or RV'd for the first time, and you kind of break the barrier and understand how it works. And if you don't know, if you didn't grow up doing it, it's like a big mystery to you. It's like, I don't know what RV to buy. I don't know what tent to buy. So once I think you break through that, it becomes something that you understand how to do, you realize it's easy to do other than back in an RV into a spot, that's never easy to do. And yeah. I just think it's going to continue to blossom.

[00:04:49] Sam Wilson: Absolutely. I like that idea where you said that, you know, once you kind of broke into the space, I mean, you bought the tent, you got a sleeping bag, you got your marshmallow sticks, you've got whatever all the stuff is, your coffee pot, you're going to put on the fire, you name it, I mean, you're well invested into equipment and time and thinking through all the things that you're going to get in order to go out and partake in this hobby. And so it's not typically just a one-off, use it once and then move on type of thing.

[00:05:15] Sarah Smith: Totally. You know, we did a camping report last year. We surveyed our users and other campers out there. RVing is the fastest growing type of camping right now. And you're absolutely right. I always say I should go into, I should buy campgrounds and RV parks, which I'm sure a lot of you have. And a lot of your listeners are interested in that. And as someone who's not in that side of it, not in the real estate side of it, but providing a platform for you all to put your RV resort or your campground. It seems like a no-brainer because all we hear about is it's so hard to find a place to go camp. I wish there are more places.

[00:05:54] Sam Wilson: Right. And a lot of our investors are saying the same thing. You know, a lot of our investors own RVs. They travel around, especially around the Southeast. And they're saying the same thing. They're like good grief. And of course, we're buying RV resorts. We're not buying just one-off RV parks in the middle of the country, you know, fly over state. So we're buying RV resorts and those are especially hard, especially hard right now to get into, I mean, months in advance.

[00:06:16] Sarah Smith: Right. You know, what's interesting is my husband and I, we bought a sprinter van and we spent six months last year on the road. And we're normally more like we camp in the middle of nowhere or like national forests. We're definitely not normally in an RV resort, but we were working full time while we were on the road. So we stayed, for the first time ever, in RV resorts, because we knew we could have reliable electricity, we could, you know, have showers and there are so many more people who are working from the road who need that reliability, who are going to turn to places like RV resorts and they didn't use to.

[00:06:55] Sam Wilson: Right, right. Yeah. That's absolutely awesome. I'm glad to kind of get, of course, you know, we've compiled a lot of kind of industry research before we ever went long in the space. We said, okay, let's do our homework. Let's make sure this is not a fad. And we came to the same conclusion, but it's also nice just to hear from other people in the industry, especially you running a platform to say, Hey, look, this is not just a fad. This has, you know, this has legs, and it doesn't seem like it's going away anytime soon. Sarah, here's a question I have for you. One of the things that you had mentioned early on was that you had originally started off making a site where you could get reviews or could find open sites, things like that. And now you've made it possible where campgrounds, RV parks, RV resorts can post their platforms or their listings on your platform and have commission-free booking. I'm really curious as a RV resort owner, how in the world does that work, and how do you monetize?

[00:07:49] Sarah Smith: Yeah, that's a great question. Well, the first thing to understand about The Dyrt is we make money through our subscription that campers pay for. So The Dyrt is totally free for users to use, but if they want some additional tools and some additional discounts, like not paying fees themselves on bookings, then they pay a $36 a year fee. That's how much it costs and that's how we make money. And that is how we are focused on making money. So we do not need to make commissions off campgrounds and we are really excited to support them and help them get in front of our 30 million visitors who come to our site every year, looking for places to camp. You know, campers don't always know exactly what they're looking for. So they search North Carolina and they search around an area and zoom in and look at what's on The Dyrt and they find something. And once they do, they want to book it and they can book it right on The Dyrt. We do not charge any sort of commission to campground owners or RV park owners. And honestly, there's a good chance your RV park is already listed on The Dyrt. We have users adding places all the time that we then verify and make sure are accurate. But I've gone to different RV resort conferences where I've talked to owners and found their listing on The Dyrt that they didn't know about. They had six five-star reviews, raving reviews about how great their place was and they didn't even know it. So it's very easy, yeah, to go to TheDyrt.com/claim, search for your property, see if it's already on The Dyrt, and if it is, claim it. And then we go through a very easy process to help you set up, you know, all your information, make sure it's accurate. We also, we partner with PMS's, you know, booking software out there. So if you're using a booking software, there's a chance it'll integrate with us as well, so that it will disperse your information onto our platform. And you don't actually have to do much for that. And then you are, like I said, getting in front of the 30 million people who are coming to our site to find a place to camp and RV.

[00:10:08] Sam Wilson: Right. Yeah. I mean, that's one of the innovations that we, and it's not even an innovation really, but it's one of those things that we've seen in the outdoor hospitality space at large is the lack of dynamic pricing the space. Now I know this maybe not, doesn't necessarily pertain to you, but I think it ties well into the fact that these two softwares, a lot of these softwares can integrate because the resort we just bought last Friday, today is the 26th, on Friday, we bought a resort. The same price was to same in a book an RV site was on April 4th as it was on July 4th. And for those of us who are, you know, listening to this you're going, wait that doesn't make any sense at all, like July 4th, the busiest week into the year. But we're seeing this a lot in the outdoor hospitality space because it's mom and pop owned, a lot of it. They just, it's easy to remember that, well, right, 49 bucks a night or 59, whatever. It's 99. I don't know. Made up numbers. But you know, for us just bringing simple dynamic pricing to the table. So you can answer the question I have for you. How does our prices get translated over to your guys' platform? Who going to actually see what that daily price is today 'cause our price has change, like the airlines, Airbnb, et cetera, on a daily basis?

[00:11:17] Sarah Smith: Exactly. Yeah, you integrate through these systems. You know, we have everything from RV resorts to people who have private land and they just have one little site that they want to put on The Dyrt, you know, more like a Airbnb-type situation, but for the outdoors. And they can do all this directly on through our backend portal where they can go in and set their pricing and everything themselves. So you can do it either ways, either through a system or just, you know, through The Dyrt yourself. So we try to be accommodating to all sorts of, types of places to stay.

[00:11:52] Sam Wilson: Now tell me this. Do you have a background in software development? Is this just your first foray into something and it was really cool, you had a great idea and then you just made it happen?

[00:12:03] Sarah Smith: Yeah, that's a great question. My background is actually in international education. I had never done anything like this before in my life. Being a tech founder is a little bit intimidating and I think I was like 46 when I started it, you know? No, I must have been 43 'cause I'm 53 now. And it was 10 years ago. So in the past 10 years, we've raised $24 million from investors, but we have a staff of about 50 people now. So we've, you know, come a long way since we were just me and a contractor. Really excited to be the top-ranked, camping and RV out there in the app store. So if anything, I'm proof that you don't need a background, necessarily if you have a passion and you hire the right people.

[00:12:46] Sam Wilson: Yeah, that's really cool. Let's talk about the scaling side of your business. I mean, that's one explosive growth, but how did you, to market and grow your company, like, what would you feel were the top two or three effective strategies that you used that took you guys to the top of all these platforms?

[00:13:04] Sarah Smith: Yeah, that's a great question. First of all, if you're doing any sort of startup, it's really important to understand, are you solving something that needs to be solved, or are you just doing something that sounds fun? So are you actually solving a problem? And as a camper, I did a lot of research to make sure that this was indeed a problem. For this 70 million Americans who camp and RV, finding a place to camp online was super painful. Having a consolidated place to find them and then book them, super painful. And then the other thing we did is we really leveraged our community because The Dyrt is all about having photos, reviews, and tips from users. And if you don't have that, it's just an empty shell of a directory. No better than what used to make me so frustrated. So we had to learn how to incentivize people because it's not easy to ask someone to come to your website, sign up, leave reviews, leave photos. That's a lot to ask of people, right? So we gamified the whole thing and worked with different outdoor brands so that, you know, you do a review of a campground in Tennessee, you get three points for the review, five points for the photo, 10 points for the video. There's a leaderboard for Tennessee, you're competing with other people. And then at the end of the month, the top reviewer would win a prize from one of the outdoor brands that we partnered with. And then we would start over the next month. And we've done that for years and years and years, and that's really helped us get our platform to where it is now, where, you know, we have someone buying The Dyrt PRO, the upgraded part of The Dyrt, every couple minutes, you know. It's really phenomenal to see a little idea spark into something like this.

[00:14:48] Sam Wilson: Right, right. What, And there's so many platforms like this. I mean, the hotel industry has had it for, you know, a pretty long time. I'm subscriber to, like, AllTrails. I think AllTrails.Com is one of the, you know, it's all the hiking trails across the country, but it's like, oh my gosh, we're going to go out in the park, like, well, what's the best route? What are the best days? What are the sites like? I mean, you don't know, looking at a cellphone map. Okay, can I get from a, to B in the same time 'cause that's maybe a six mile trail, but that six miles may take me 14 hours too because it's 9,000 feet of elevation game, whatever it is. But the problem, you know, and I wonder just how many other things like this have yet to be solved. You know, you guys have found a unique niche and I think what you said there was really great, are you solving a problem? And clearly, this is an absolute problem. What are some other things that you look to the future and say, OK, cool, you know, we've been able to allow people to find open sites, open RV resorts will now allow them to book online. What's the next big thing you guys are looking to tackle?

[00:15:48] Sarah Smith: Well, I mean, a more short term, we really, you know, we've kind of historically been known as a rating and review site, you know, more like Yelp. And we want to be known more as bookings.com for camping. We want to be the consolidated place where you go to find camping and RV and to book it. So, you know, kind of like what happened with the hotels? You know, I don't know, 20 years ago when it was also fragmented. So bringing this fragmented industry of camping and RV into one area is really what we want to do. And once we've done that successfully in the United States, of course, we'd like to expand to other countries.

[00:16:29] Sam Wilson: Gotcha. Oh, that's really, really cool. I love that. I love that. What are some innovations, I guess, that you're seeing, or are you seeing any innovations in the RV resort, RV park, camping space? Or maybe we didn't have 10, 15 years ago outside of, you know, accessing information like that.

[00:16:47] Sarah Smith: Oh my gosh. Yes. I mean, we just did an award thing on The Dyrt called The Glampys and we chose the best glamping sites in the US. So I think glamping has become such a big thing. And it's really interesting to see, you know, our V parks and our V resorts starting to have a couple of sites that are kind of set aside for like a tiny home that has a theme of like, it's the outdoor bear theme or it's the sailing theme or something, make it a little more special. And I think there's something to be said for doing these glamping type sites, adding those to an RV resort that really, really make it more interesting to a wider range of type of people who are out there camping.

[00:17:40] Sam Wilson: Yeah. And do you think that, I guess that's a question, 'cause a resort we bought in May, part of the plan is adding glamping sites to it? Do you think that'll stick around or is that a fad?

[00:17:52] Sarah Smith: I think it will stick around. Personally, when I think of camping, like I said, I'm more of a dispersed in the middle of the woods sort of camper, but there is something so special about going to stay in a caboose in the middle of the woods in Northern Minnesota. I mean, it's so fun and unique and I don't think it's going to go anywhere. I just think it didn't really exist before. And now that, that, that whole market has opened up. I think people love it and they're going to keep doing it.

[00:18:20] Sam Wilson: Yeah, even on a national level, we've moved as a society into a more experienced-based, I guess, more experienced-based society. So we want to get out and touch and feel. It's not so much necessarily, you know, all packaged up and neat and tidy. It's like, oh, Hey, let's go experience the environment, but maybe we can go experience the environment in a place where there still might be, you know, air conditioner in the corner in our dirt or whatever it is. So we're not necessarily sweating out with the mosquitoes, but yet we can get right outside if we want to our glamping site, whatever it is. Yeah. But certainly, bring some fun to the experience. That's really, really cool. I love what you guys are doing. You guys are making outdoor hospitality accessible for people. You're making it easy to find sites. You're making it easy to reviews and, you know, really just bringing innovation into space if hasn't, I guess probably seen it in a long time. So this is absolutely awesome. What are some other things that you think about when you look at this space you love to share with our listeners, you guys are working on or that you know, you just see in the industry as a whole?

[00:19:21] Sam Wilson: Well, I just really, you know, we've seen a lot of people doing different sorts of camping in the report that we just did last year. And I'm a good example. I was only a tent camper. And then I bought a camper that I towed behind in my car. And now we have a van. You see more and more people doing new sorts of camping and exploring different ways of camping, like glamping or dispersed camping in the middle of the national forest. Even, you know, larger RVs can do that. If they know where they're going. So, you know, it's really fun to see people having open minds to the different sources of camping that they can do, even if they've only done it one certain way their entire lives.

[00:20:01] Sam Wilson: Yeah, I think that's really cool. Dispersed camping is loads of fun. Anytime you can get off the grid, get off somewhere in the middle of nowhere and set up and make it your campsite, I think that's loads of fun. Sarah, I've really enjoyed having you come on today. Thank you for breaking down. Kind of what you see in the industry where you see it going, what you guys are doing to innovate. Is there anything that you would do differently that you would tell yourself if you could?

[00:20:25] Sarah Smith: Oh my goodness. How much time do you have?

[00:20:29] Sam Wilson: As much as you want to give.

[00:20:30] Sarah Smith: Yeah, no, I mean, you always look back in hindsight and think I should have done that differently. The thing I always encourage people to do is look forward. And when you do look backward, think of how far you've come. It's always easy to look, oh, I should have done that differently. I wish I would've done that. But look at how far you've come. If you're a property owner and you now own two properties instead of zero properties, that's awesome. If you start a tech company and you now have 30 million visitors instead of one, that's awesome. So be positive in that sense.

[00:21:02] Sam Wilson: I love that. I love that. Look how far you've come. Yeah. 30 million visitors a year is a substantial number of people coming to TheDyrt.com. That is absolutely awesome. Sarah, if our listeners want to get in touch with you or learn more about you. What is the best way to do that?

[00:21:16] Sarah Smith: Well, that's a great question. I would love to encourage people to check out The Dyrt and see if their campground or RV resort is already listed at TheDyrt.com/claim, that's T H E D Y R T.com slash claim. And you know, it's a hundred percent free. It's just a little effort to get it set up, but you know, 30 million people are coming there looking for camping and RV resorts. So I encourage people to make sure their property is listed.

[00:21:44] Sam Wilson: Absolutely. Absolutely. Sarah, thank you again for your time today. I do certainly appreciate it.

[00:21:48] Sarah Smith: Thank you, Sam.

Marketing your business is different in today's information age. In this episode, we discuss how to improve your marketing strategies by utilizing social media to help scale your assets

Eli is a retired veteran and entrepreneur who has been involved in the real estate market for over 20 years. He and his wife started purchasing apartments to help replace income when Eli retired from the military. In 2018, Eli and his partners joined a real estate group and have since purchased and operated over 800 units across three states.

Highlights:

[00:00 - 05:35] Opening Segment

• Eli Vo started buying up houses in Fort Worth, Texas to replace income when he retired from the military.
• He and his wife realized they needed to scale their business and started networking and joining real estate groups in 2018.
• They now own and operate over 800 doors across three states.
• One of the biggest lessons they've learned is that they need to be more intentional with their marketing and branding.

[05:35 - 11:04] Improve Your Content Marketing Strategy

• Eli points out that anything you do for your business can be a content
• He also adds to be very intentional when creating content for social media platforms to get the most traction.
• It can take time to figure out how to best use social media platforms for your business.

[11:04 - 16:32] Is It Time to Shift Gears in Your Real Estate Company?

• The company is in a growth phase and has entered a new stage where they need to shift gears from acquiring assets to building something.
• The company hired a new marketing manager who is not from the real estate industry and she wanted to learn how multifamily works.
• The company helps her learn multifamily and be part of the deal as a GP

[16:32 - 18:03] Closing Segment

• Reach out to Eli
• • See links below
• Final words

Tweetable Quote

"We had to shift our mindset from just three dudes out there hitting the pavement and buying properties to we need to be intentional with our branding and higher on marketing and, getting to the 21st century and get across social media." - Eli Vo

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Connect with Eli Vo by visiting their website at https://www.investwithamg.com/

Or email him at [email protected]

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Sequence

Eli Vo: I think people are kind of taught that if your deal is good enough, the money will just flow in that's such a, that's such a fallacy that cuz if nobody knows likes and trust you, they will not give you a damn dime.

Regardless of how good, like the deal is.

Intro: welcome to the how to scale commercial real estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something

big.

Sam Wilson:Thank you to everyone who is a dedicated listener to the how to scale commercial real estate podcast. Just wanna give you a heads up that today. We had some audio issues on. Three or four episodes that we recorded in a row. They were such good episodes and the guests were so kind of course, to share their time and insight with us that I couldn't ask and be recorded.

So we're gonna go ahead and publish these episodes. I am aware of it. The audio is not what I like to put out, but running a daily show at some point in time, we're gonna run into a hiccup along the way. And today is one of those days where I get to share my mistakes and hiccups are right along with you.

But again, it's a great episode. You can hear the guest a lot better than you can hear me. And it's just part of what it is that we do. Nevertheless, here it is. Thanks so much for tuning in. Certainly appreciate it.

Eli VO is a retired veteran where he proudly served his country for 21 years as a paratrooper in us army. And later as an specialist in the air force, he co-founded the Atlas multifamily group with his partners, Chris and Nathan. They are based out of Texas. Eli.

Eli Vo: Welcome to the show. Man. It is great being here.

Thanks for having me on

Sam Wilson: Sam. Hey, man. The pleasure's mine, Eli.

There are three questions. I ask every guest who comes in the show in 90 seconds or less. You tell me, where did you

start? Where are you now? And how did you get.

Eli Vo: Yeah. Sure. So kinda like what you mentioned before, I'm prime military spent 21 years in about 15 years in my mil into my career, my wife and I kind of realized we needed extra income to come in to replace whenever I go to retire. And so about that time, we started buying up houses. We got to a few bid, very well with them, but we're like, Hey, at this pace, we're not gonna be able to hit our goals. So, I'm gonna drive around town one day and this is in Fort worth. And I saw an apartment complex and, I was like, man, Who buys those things, like that'd be way more efficient to own something like that, right. Yeah. Rather than 40 or 50 houses spread across town. And so we started kind of networking and, kind of learning, who buys 'em how you buy 'em. And then we joined a membership group about 2018 and now we own and operate, 815 doors across three states, Arkansas, Oklahoma, and Kansas.

And we're actually under a contract now that's gonna close, in the middle of next

month. So after we close on that deal, it's 200

units in Texas.

We're gonna be just north of a thousand

doors.

Sam Wilson: That's awesome, man. A thousand doors, four years. What are some things that have been surprises to you? I guess that you look at

and you go, gosh, I can't believe we're

here.

And then I guess in, in a good, in a bad

way, what are some surprises, I guess the last four years have

brought

Eli Vo: man there's surprises. Okay. Yeah. So there's tons. I'll say that, we started our marketing. Late in the process. Right. I think it was kinda like our mindset was just to kind of go out there shake hands, do transactions, do deals.

And, thinking that if we operated correctly and bought right, people would, it would just attract people and money and capital. And we really weren't putting our name out there. We really weren't tooting our horn, you don't wanna be boastful and things like that. so we get that, but it wasn't until the end of last year, we had about seven, almost our doors, then we're man if we wanna scale the company and kind of pull ourselves out, we have to be able to bring on partners and bring in capital and no one really knows us.

Like we have these, we're great operators, but you know, our names aren't really out there. And so I think for us, like, we had to shift our mindset from just three dudes out there hitting the pavement and buying properties to no, we need to, Be intentional with our branding and higher on marketing and, getting

to the 21st century and get across like social

media, things like that.

So that's been probably one of the biggest lessons like, or,

Gotcha. Lessons for sure.

Sam Wilson: you mentioned social media. What does that mean

though? When you say, we're gonna market our. What were some practical things that you guys did, you had to put a playbook together of some sort that said, all right, here's the plan.

Now we're gonna execute the plan. What was that

Eli Vo: sure thing. So probably

so for one, we started a podcast. We're like, Hey, we're gonna, we're gonna, we're gonna start a podcast and kind of talk about, we had a defined,

okay, Hey, so what are we gonna, what are we gonna talk about? who's our who's our target audience? How can we bring them value? How can we show them who we are? And, things like that. And, and with the podcast, saying that you can, chop up that and then, put out little snippets. Different platforms So that was, that was one of the first things. Number two was, we weren't, we weren't even leveraging the basic platforms very well.

I mean, I was on LinkedIn, but I wasn't being very creative or very intentional or very thoughtful with how, how I put out content, like how I craft my message. who do I wanna talk to? Who don't wanna bring into, into our world. So, we had to start thinking about, okay, well, how does Instagram work?

Like how does TikTok work? Because I guess if you're an older person and I mean, thirties, forties, fifties, you can think that it's not, it's not useful, but like everyone's on it, but the way you utilize it, you gotta utilize Facebook differently because that's a different crowd. You gotta utilize. Instagram differently, and they're very powerful tools if you use 'em correctly. And so for us, I mean, I didn't even have an account up until the end of last year.

And so I kind of shift my mindset and say, okay, well, everything we do, If we're filming content or if on the podcast like behind the scenes or if we're on a property doing a tour, or if I'm just at my desk analyzing a deal, everything is content. If I'm out lunch with an investor, get pictures, get videos, and then that way we can kind of.

Edit it, modify it and then send it out, and say, Hey, this is what we're doing, guys. We're looking at like this asset now, we're doing this. And I think by doing that, it helps people kind of, understand like who you are, like your mindset how, you approach problems.

And how you approach investing, right? It's just like those simple things. I mean, like even LinkedIn, duh, update it, be more intentional with your title so people can know who can know who you are and like what you're about, it's just like this, those small things.

If your content isn't getting very much traction, it's probably boring. Right. So, so, so, so like you gotta figure out, okay, well, am I talking to everybody? Cuz if I am, I'm talking to nobody. Right? Right. So then, so you have to be very intentional and then start figuring out, okay, well what's the best way that I can craft, a strong, creative and valuable message

for people.

Sam Wilson: I love what you're saying there, I think for all of it, just in the sense that like figuring out how these platforms work, figuring out what the algorithms are, figuring out, putting out an Instagram reel, putting out a Instagram story, whatever it is. And I'm with you. I turn I'm 40 right now and figuring out how Instagram works.

It's like the last thing I ever wanna do. Yeah. I don't care how Instagram works. I don't have it. I mean, I think I have it on my phone, If I do have it on my phone, it's never. So, what do you say to those of us who are maybe in my boat? It's not like maybe you were too, you said you didn't have the

account until the end of last year. How do you do this?

without this? Just becoming another to do another black hole of time that you just endlessly pour into and how do you know you're actually getting

results?

Eli Vo: So I would say two things was first was my mindset with it was because I was like, ah, this is going to, this is gonna be so pointless.

I can make some stupid videos and it's gonna, it's gonna just waste my time. But then, first was mindset for sure. But what helped me with the mindset was we hired on a young marketing manager. Right. And so she kind of came in and she was like, Hey, this is how she kind of understood how each one.

So there's three of us in Atlas, right? She helped, kind of sit down like over time and figure out, okay, well, Eli, this is how you think, and This is how you, push stuff out best Chris. This is how you do it. Like you're good in this format. And Nathan you're good in this format.

Right? So she was able to kind of explain to us like, Hey, this is your camp. This is how we're gonna craft your campaigns. This is how we're gonna present you to people, because you cuz can't craft like an in inauthentic message, right? So she's Hey, this is how you guys act and think and do stuff.

So we're gonna create the messages like this way, and it will attract, partners and, views and people that you guys wanna work with. Right. So, I'll be honest. It took time. It is taken many, many months to, to kind of transition. And get us used to. Okay. Well, to see and understand, okay, well, yeah these videos, some are corny, some are funny, but some are very serious, right?

So depending on what you do and how you chop it up and put it out across the platforms, it's very powerful stuff. And so, it is taken us, a while, but now that we've kind of figured it out and we're, we aren't perfect by any means, but now that we've trained our minds to think differently. Now we're always out. If we're at a seminar or if we're at an event, it's Hey get content, film it, video it, get pictures. And then what's helped us out also is that we don't do it ourselves. So we just send It to her. So I'll right. I'll do videos. And I'm like, Hey, here you go. He been on the weekends, I'll wake up early and I'll go for walks or whatever.

And then I'll talk about a subject that's on my mind. So maybe it might be mindset. It might be economics. It might be real estate. Well,

I'll film a quick video and I'll send it to her and then she'll make it all

Cool and jazzy and then

she'll, and then she'll, play it out across, whatever

TikTok or

Facebook or whatever

it is.

Sam Wilson: that's awesome, man. So you've given us two things here. When you talked about, your market.

You said your marketing was late and then you guys worked really hard on getting your name out there. The first thing you did was you, started your own podcast, which, let's get a shameless plug here while we're on this.

What is doing

Eli Vo: your podcast? yeah, we're called the real MF guys. Gotcha.

Sam Wilson: The real MF guys. So you started your

own podcast, then you said number two was, that you guys began to leverage the various platforms that are

out there. And then is there was, is there a

number three on that list for.

Eli Vo: Well, we hired a marketing manager like that was a big thing because we had, as our company was growing, but okay, well, Do we have the kind of funds we need to hire people.

Right. So we're trying to pull ourselves out of working in the weeds to working on the company. Right. And not necessarily like in the company. And so, I, one of the big things we did that

really changed things for us was okay. Our first, hire under

Atlas was hiring a marketing director.

Sam Wilson: Got it. And that's that? I mean, that's a big move is somebody that is based locally to you. Is it somebody

right there? You're in the BFW area

if that's right. Yeah. Is that somebody right there locally? Or is

it somebody that

you hired online or how does that, how

did that position come about? and then. How did you know who the right

hire was?

Eli Vo: It's kind of funny. It is kind serendipitous in a way. we were so at that point where we were kind of talking about growing the company and scaling and, kind of hiring people on, who we wanna hire first, we were, at a random meetup and we'd met this little, like 22 year old.

A female. She came in, started talking to us and she's big on marketing. And so she wanted to learn how, multifamily works and we needed marketing. And we just, we started talking like over the next like week or two and realized that we had really good chemistry. She's pretty driven. We're pre driven.

And we said, Hey, okay, well, this is what we're thinking. We can help you learn and, help you learn and grow. If you wanna help, help, us market our deals and raise capital, you can be in the deal out the

GP, so that helps you out. Right. And they can learn from us and then we can learn, use like your

skills as well.

And so, it was very symbiotic

In that manner.

Sam Wilson: That's awesome. And I think, bringing somebody on, in the marketing position that maybe doesn't have a background in commercial real estate can be really valuable just in the sense , because we think that everyone knows what we know.

Right. There's this idea that yeah. Okay, sure. I know how to buying apartment, but no people don't, they don't know the both basic steps of. Wait, how do you guys buy a part? How that I don't even know the first thing to do. So I think it's actually just done right. Kind of cool that somebody came home and maybe doesn't understand it.

Cause they get to bring a fresh lens for content. And for putting you guys out there saying, Hey, our fresh view saying, Hey, you know what, we're gonna break this down to some really just kind of elementary

steps. Probably most people want to hear about that. You and I maybe think, nah, nobody

wants to hear about this. But when in fact they actually.

Eli Vo: Yeah. Yeah. It's not without sin. Right. So, I mean, because she was so new, I mean, she'd been with us now for, eight, nine months or whatever it is. but. We've had to train her and mentor and lead her because, maybe she's maybe we're in a phase during an acquisition where she's thinking that it's not important, or, the deadlines, the timelines are different.

Right. So, so with the, like kind of like. Remind her and constantly coach her and say, Hey, no, put this, campaign down, we're working on this. Cause this. is more important. We have a day to, to do this or whatever. but it's been, I think overall, like you said,

it's been way helpful having someone come in and kind of figure out, how you guys think, how you guys operate and get to craft messages around.

Sam Wilson: Right now that's super cool. One of the things that you mentioned early on

was that you guys have entered a growth phase of

your company. How would you differentiate

that from the previous phase maybe your company was in?

Eli Vo: so for the last four, four years, we just been kind of out there at there, like buying properties, right?

Thinking that, we're gonna go and. Property we buy is gonna increase our wealth. And we really didn't have the idea of scaling the company. So there's a difference between. Buying assets and then growing a real estate investing company. And I guess, cuz like it's not really widely talked about in the industry.

Like everyone like all these groups, all this, all these podcasts, all the books, they talk about how to buy apartments and you know, how to build your wealth. But then like when you get to a certain level, we kind of realized man, running around. With our heads cut off and we have only 800 doors and how's it gonna look when we're at 2000, but when we're at 10,000 or we're at 5,000 doors, plus, new development and storage units, so as we like, what's our plan to actual, to actually, pull ourselves out the weeds and, become the CEOs of the company. And so I think that's kind of one of the things that we had to kind of step back at the end of last year, and to begin this year, we said, okay, in order to do this, we have to figure out what we enjoy. What we're good at. And then what you think I'm good at, also as partners and then everything else we're gonna start hiring out over time.

I mean, we didn't have the, we don't really have the capital to hire out, like everything all at once. But but we were in a, in a phase where we've been buying properties, We got enough capital. We could hire

out a few positions and then kind of plan on doing more

over time. So that's kinda like what we were thinking about.

Sam Wilson: Got it. Got it. Yeah. And I love that. I love that. kind of, it's an iterative process, but as you grow thinking, okay, we're gonna have to shift gears from just acquiring assets to now going, wait, we're actually building something here and I'm gonna have to focus on the structure that we're building as much as I am, what we're putting in that

structure.

Whereas before it seems like you could have just a few assets and okay, we can all run

around and help your skel. And then at some point we go, wait, we have to put the brain work to this. If we want it to grow, if you could

rewind what is one piece of advice you would give

yourself? And maybe, or maybe the other way to think about that is what is one thing you would do

differently? If you could rewind

Eli Vo: for you? Do differently. There's probably two things. I'd probably say the, for sure. Start marketing earlier. I think a lot of people who come in this space, this is kind a male dominated like industry.

It is. I mean, there's plenty of female in here, but I think a lot of it's just these, operator mindset due to come in. And they just wanna buy stuff, do transactions, and then it really put themselves out there. And that's how kind of we were at

least, and I could be wrong, but that's kind of how we thought, at least. So I would say, I wish I would have started and kind of told my journey from the very first beginning, back when I was in the military. And I was about to get out and I started my company, I started buying, like houses and then we transitioned it into multifamily.

I was still in the military back then. right And so I think that was kind of a really powerful story that I really didn't capture at the time. I mean, I could have been doing blogs, videos, things that kind of, kind of, talking about that Hey,

like I've got like this, this government military.

Job mindset or whatever, and I'm, but I'm doing this right. So, the marketing for sure. And then probably number two is raising

capital. I think people are kind of taught that if your deal is good enough, the money will just flow in that's such a, that's such a fallacy that cuz if nobody knows likes and trust you, they will not give you a damn dime.

Regardless of how good, like the deal is. So, I wish, I, wish, but you know, I, if I could have done it, I would've been more intentional with, meeting people, not, like trying to build, deep friendships with them, putting our

voice out there and that way we would've had like a bigger platform to, to raise capital for our.

Sam Wilson: That is awesome. Very, very

good advice. Eli I've certainly appreciated having you on the show today. This was lots of fun. Just hearing your guys' story. you've given us some great insight and some very actionable steps there from starting a podcast, leveraging platforms, bringing on marketing managers, you've explained to us very clearly what the early phase of your business is, and now kind of how you guys are in growth phase and how you're Thinking through that again, kind of tying all that together. You gave us kinda the steps that you rewind the tape a few years, that you would, how you would do things just slightly differently. So this has been tons of fun having you on the show today. I certainly

appreciate it. If our listeners wanna get in touch with you, what

is the best way to do

Eli Vo: that?

You can do it one of two ways. you can go to our website, invest with amg.com or reach out to me, through my email,

Eli, investwithAMG.com

Sam Wilson: fantastic. Eli, thank you again for your time today. I certainly appreciate

Eli Vo: it. Absolutely. Sam, thank you so

much.

(OUTRO) HTSCRE: Hey, thanks for listening to the how to scale commercial real estate podcast. If you can do me a favor and subscribe and leave us a review on apple podcast, Spotify, Google podcast, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories.

So appreciate you listening. Thanks so much and hope to catch you on the next episode.

Is your portfolio prepared for a recession?

Simon Severino is a Business Strategy Advisor who has executed hundreds of go-to-market strategies with B2B teams around the globe in his 19 years of entrepreneurship. After 17 years of strategy execution from NY to Sydney, he created the Strategy Sprints® Method, a practical method to run an agile and resilient company. He has fired himself from client work and now enjoys working above the business.

In this episode, he shares how you could prepare your business for a recession and thrive. He also talks about the strategies you could implement in your business to increase revenue and investments. [00:01 - 04:29] Opening Segment

• Welcoming Simon to the show
• The one big problem that Simon fell in love with

[04:28 - 15:57] It's More Than Just Business

• Here are common company problems that Simon thinks are easy to solve:
• Revenue
• Focus on organic marketing and less on paid ads perform activities that increase conversion

• Improve monthly cash flow by paying marketing partners on a performance-based instead of a monthly retainer

• Investing

• Build your cash during a recession and take advantage of many investment opportunities

• How to identify weak assets versus strong assets

• Weak assets - something that deteriorates in value
• Strong assets - limited supply but high demand
• Opportunities in recession: Buy competitors and strong assets for a cheaper price

[15:56 - 23:18] Prepare Your Business for a Recession

• The investing system that makes Simon gain more market share during a downturn
• How to prepare yourself for opportunities
• The critical move you should be doing right now to keep up with recession and stagflation
• Increase your business resilience
• Simon shares the only three things you can control: Daily habits, weekly habits, and your monthly habits

[23:19 - 24:40] Closing Segment

• Reach out to Simon!
• Final words

Tweetable Quotes

"Earnings is one part, that's the revenue part. Liquidity and cash flow is what will keep you in the game." - Simon Severino

"Real wealth is of course created during recessions." - Simon Severino

"Prepare yourself for the opportunity, so when the opportunity comes, you know exactly what to do." - Simon Severino

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Connect with Simon on LinkedIn or check out strategysprints.com if you want to know how you could scale your business faster. Find his book, Strategy Sprints, on Amazon and leave him a review!

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Want to read the full show notes of the episode? Check it out below:

[00:00:00] Simon Severino: How do we create an investing system? Because this is important, it starts before you start building your cash position before the recession. So you build cash in the bull market. And when you're in the bear market, you have now an increased cash position.

[00:00:28] Sam Wilson: Thank you to everyone who is a dedicated listener to the How to Scale Commercial Real Estate podcast, just want to give you a heads up that today we had some audio issues on actually three or four episodes that we recorded in a row. They were such good episodes, and the guests were so kind, of course, to share their time and insight with us that I couldn't ask them to rerecord it. So we're gonna go ahead and publish these episodes, I am aware of it. The audio is not what I like to put out. But being a daily show at some point in time, we're gonna run into a hiccup along the way. And today is one of those days where I get to share my mistakes and hiccups right along with you. But again, it's a great episode, you can hear the guest a lot better than you can hear me, and it's just part of what it is that we do. Nevertheless, here it is. Thanks so much for tuning in. Certainly appreciate it.

[00:01:12] Sam Wilson: Simon Severino helps business owners in SaaS and services run their company more effectively with results in sales that soar. Simon, welcome to the show.

[00:01:22] Simon Severino: Hello, everybody. Happy to be here.

[00:01:23] Sam Wilson: Simon, thanks for coming on today. We're having some major tech issue on my end, my sincere apologies. But appreciate you working with me here today. And making sure we get this episode in. You're calling all the way in from Vienna, Austria. I certainly appreciate you taking the time to on today. There are three questions, Simon, I asked 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?

[00:01:50] Simon Severino: Well, it's easy. 21 years ago, I did fall in love with one big problem, which is how do you solve the go-to-market problem? So landing products in the right market and dominate the market? How do you do that? How do you launch etcetera? It's a big problem, right? How you dominate the market? And I did fall in love with that problem. And I did nothing else for 21 years. Every day I have been, you know, immersed in those problems with teams around the globe, from New York to Singapore. And that's what I do. And so there's they started asking for more. And I had some templates and some stuff working. And now it's a global business. But it started really just by Simon solving the big go-to-market problems of teams. And that led to more teams. And that leads to learning and knowing more and having more knowledge and more tools in that space.

[00:02:49] Sam Wilson: What was the thing that kind of turned you on to that idea that, hey, there's a go-to-market problem, whatever it is, you know, there had to have been a moment where you go, Wait, there's a problem here that I can help solve.

[00:03:01] Simon Severino: So I want to spend my life on exciting things that are intellectually stimulating, and that are tougher for most people to solve because I'm competitive. But I don't want to do something that everybody can do. I want to find the edge. Where can I be slightly better than whatever there is right now? Because that creates interest for me and energy. So I'm, in my free time, I'm a triathlete. So I like to explore my limits and to go a little bit beyond because that keeps me awake, keeps me healthy, keeps me moving, right? And so the intellectual stimulation of one big market domination problem. I love that and sometimes have to be five days, six days, seven days in one room with a team, like a team of BMW. Before we came out with the Born Electric strategy, we were days, multiple days in one room, before we get out, we need a plan. But we don't have a plan how to beat Audi, there is no plan, we have to create one. And so that's intellectually stimulating, it brings me to the limits and beyond hopefully, so it makes me a little bit of a smarter person or a better person because I couldn't use something, I could learn something and I could improve the quality of something. That makes me proud. And then I go home and I'm a better dad and I'm a better husband. That's basically the loop that motivates me.

[00:04:29] Sam Wilson: What are some of the key and I think about this as it pertains to commercial real estate and for us that are scaling a business and growing in our own right we are we have our own go-to-market problem. Because we can have some really tremendous asset. We could have you know even the financing lined up but one of the components of this business is that we always need passive investors. We always need to be expanding our investor base when it comes to our company. What are some things that we commonly see inside of companies, big and small, that you can say are the common problems as they go to market with their products, right? Got an amazing asset I need people to invest in. I just need to find investors. What are some common things that you see inside of every company you work with where you say, man, these are things that are easy or reasonably easy to solve.

[00:05:23] Simon Severino: So we have revenue problems, and we have investing problems. So the first problem is how do we generate multiple reliable streams of income, that ideally are passive, or become passive at some point. And then the second problem is alright, and now that we have those profits, how do we keep them around in an environment that is deteriorating, like the current recession, inflation, then the losing of purchasing power of most currencies, and even an even in real estate, the last, wonderful place where you, you would have value going up even that might be at the end of a certain cycle, and reach a moment where it's not that easy anymore to increase your wealth by just putting it there. So first, problem revenue. When you create multiple revenue streams, we help people especially in this path conditions, wherever right now, like we have right now, to spend less time on marketing less time, in paid, especially paid marketing, we basically happen to stop paying for marketing and find sales activities that bring in more cash faster in a more organic way. So you can do that with different systems or joint venture systems, you can have multiple system, outreach system, cold calling, you can have email systems, you can have a ton of systems that you implement, you have to find your own. But the important thing is that you focus on three things. So basically, you go through your list of activities, what do you have on your, on your plate right now, and just pick the ones that contribute to those three things. They either raise by 25%, the conversion rates from your existing conversations, so same conversations, but 25% more closed deals, or they have you increased by 25%, the frequency of your sales, so shorter sales time, from awareness to closing. Or they increase by 25%, the price that you can charge for the same thing that can be done with better positioning. There are eight things in the book Strategy Sprints, where I walk people through to do those eight things so you have better positioning, takes you 10 days, 7-10 days, then you have a better positioning. And then you can increase by 25% your price for the same thing because there is a higher perceived value and the lower risk of working with you. Because you're better positioned. So you're de-risking the process for the other side. And then they can pay more. Now, if you increase those three things by 25%, there is compounding magic, it creates plus 99% revenue. And that's what you want on the revenue side, you can double revenue in 90 days by just doing these three things. In the book, I explain exactly how you do that. It's Strategy Sprints on Amazon. And we can go into the depths if you want of some parts of it here. But basically, you pick the three things that raise conversions that make sense time faster and that make you charge 20 represent more for the same thing. You focus on those three things. That's what I will do in a recession because that keeps your cash flow high and keeps your liquidity. And this is what you want to have in a recession. Who stays in the game? Even Walmart today had problems because they don't have enough earnings. But earnings is one thing. Will Walmart stay in the game? Yes. Why? Because they have liquidity and cash flow. That's what you need. Earnings is one part, that's the revenue part, that liquidity and cash flow is what will keep you in the game. So you don't have to worry for Walmart, the stock will go down for a while. But the liquidity and cash flow is what makes the difference so they will still stay within

[00:09:25] Sam Wilson: That really I think insightful because we are I think entering and maybe I'm self-creating the problem, but I think we are entering a recessionary phase. And a lot of businesses, I remember for us in 2008 you know, I saw a lot of businesses in the industry I was in just completely go out. I'd say 90% of my competition died, and we certainly suffered pretty hard times ourselves in the business I was in. We weathered the storm, but I've thought a lot about this, but gosh, in the next recession, how, how am I going to position ourselves and our company to take market share? I think that's one of the things that happens in a recession is that it provides incredible opportunities for those who are prepared to really expand their, what they own in the marketplace. And I said, Man, the next, the next go round, this is one thing that I'm hyper-focused on, is growing our company by leaps and bounds because there's just new opportunities that present themselves like a good solid recession for you to take more money. So talk to us about that. I know you've said that the three strategies, and one of them is kind of like focusing on revenue, what are some other strategies that you are actively coaching your clients on right now for expanding the company on the time of recession?

[00:10:41] Simon Severino: The opportunities in recessions are to buy competitors and to buy strong assets for a cheap price. So before we go to investing, one last thing we have to check are our costs. How can we turn the costs, the main costs, let's say personnel, etc, contractors, suppliers, how can you turn your main costs from fixed costs into variable costs? For example, a PR agency, instead of paying them 4k per month, say, hey, I want to be in Ink Magazine, I'm gonna pay you 3k for being in Ink, and I'm gonna pay you 7k for being in Harvard Business Review. And 40k for being in the New York Times. Instead of a monthly retainer, you do that performance-based, which means you are de-risking your site, and you're also keeping them on their toes, which is better for everybody. And so you are distributing the risk 50-50. Same thing with SEO agencies, they land high-quality backlinks, you pay them $200 and low-quality backlink you will pay $70 Instead of paying them $1000 per month. So creates those situations where if you have more work, you pay more, if you have less work, you have less costs, that makes you resilient. Now with that cash flow, we have improved your cash flow, and we have reduced costs. Now we move to the investing side. And this is where stuff gets exciting. Because real wealth is of course created during recessions. And these, you know, your competitors will have a liquidity crunch, will have a cash crunch. If they don't do the last four things that we were talking about, they have a liquidity problem. Now they will come to you and say can you buy us? So there will be opportunities. How do we create an investing system? Because this is important. It starts before you start building your cash position before the recession. So you build cash in the bull market. And when you're in the bear market, you have now an increased cash position. So what do I do in a bull market? In a bull market, I am 25% in real estate, in commercial real estate. It's is the best. And I'm 25% in stocks. And I'm 25%, me personally, in digital assets, in crypto. And I am 25% cash. So that's my general way, but I build those 25% up during the bull run because I skimmed the profits from stocks and from crypto when they run up. And so I layer out some of the profits. And that increases my cash position. Now before the recession comes I will be that the 27%, 8% 30% cash, ideally 35% cash this week. So if you had that, and I am doing that, since November that I'm selling so profits. November selling profits, December selling profits, January selling profits, and then it was over. The party was over, but I have increased the cash position. And now July, I am buying this week. I am buying. I'm looking for stocks, I'm looking for cryptos, I'm looking for, of course, competitors that I can buy. This is why you build the cash position because now this is shopping time if you are ready. And then there are strong assets and there are weak assets. This is something that I learned quite late. We don't learn this in school, unfortunately. We should. So weak asset is something that deteriorates in value. So you buy a car, that's the worst thing that you can buy because like one week later, it's worth less. So why should I buy a car? And the opposite of it is a strong asset. For example, real estate, prime real estate, prime commercial real estate in a limited area like in Miami Beach, in Manhattan, New York, that's an strong asset. Because we are trying to try to build in Miami and you will see it. It's limited and everybody wants it. And that combination, limited supply and high demand. That's a strong asset. And now you might go through your assets and identify some of those for me, it's commercial real estate in prime zones. It was gold. It's not working so much anymore. Right now, it's more Bitcoin probably. It's not completely sure. But that's where my bets go. I think Bitcoin is limited enough is enough in demand, but we will see if that's true, right? It's a bet right now. But it's limited in supply. Some energy companies right now, if you look at coal, natural gas, there is some limited supply in Europe for energy, that might be something you want to play with. But when do you build your cash position in the bull market? So that was up until November. And now it's time to buy and to deploy your cash and then to go low cash for the next bull run.

[00:15:156] Sam Wilson: Right. Yeah, absolutely. I like how you have broken down your own personal portfolio there. And also, like what you said there are when it comes to taking fixed expenses, you know, when things start getting tougher in the economy, taking fixed expenses, converting those variable expenses, making sure that people are more of a performance-based trajectory. Is there a way that people should be thinking in terms, you mentioned some of that on the marketing side of things, but is there is there a strategy or something that comes to mind when you say, Hey, here's just kind of a broad way to take more market share in a recessionary environment?

[00:16:36] Simon Severino: Yeah, the difference is, how much cash did you skim from your profits during the bull runs? Because that's exactly now your possibility, your liquidity that you can add, that's what you can do right now. And so the opportunities come, all of a sudden, like this week, will be full of opportunities. We have earnings coming up from Google, Amazon, etc, Walmart have just earnings and boom, down 10% after earnings. So there will be opportunities. I hope I can buy some Berkshire this week or some Amazon because they will have heavy dips after announcing earnings, but we don't know. So I'm ready. That's why I call it an investing system. Because you see, it's not just a one-time thing. It's you to prepare yourself for the opportunity, when the opportunity comes you know exactly what to do. You have some price goals, you have some enter zone, some exit zones, and you have a way of checking in which part of the cycle are you. Is this now an uptrend and downtrend? Is it a 10-year cycle? Is it a one-year cycle, what kind of cycle is this? And so when should I layer in, when should I layer out, when to increase the cash position and when to decrease the cash position, when to deploy it, when to be in the market? Because generally being in the market beats timing the market. Most people cannot time tops and bottoms. It's better to be long-term, like 40 years in a market. And imagine if you have bought 40 years ago if you had bought Apple, now you would be very happy. And so just stick around with something that is fundamentally strong. That's definitely better. And then you might have a 20% maybe have a trading position where you go in and out of things as the opportunities arise. For example, competitors, you cannot really plan that at some point, some supplier that you are working with will say I can't work anymore. And then you might say, well, I can buy you. So these things happen spontaneous and quick. And you can use them but you can prepare for them. That's why I call it an investing system.

[00:19:00] Sam Wilson: Right now, I think what you mentioned there was, it was again, skimming the profits over the year in the bull run. One of the other things I think that you pointed out was interesting, obviously, no one can time the market. But when we see things softening, and certainly we're seeing that in, in the commercial real estate sector. You know, just I've just finished a call with somebody here before you and I jumped on, and he was talking about how you know now that now they're getting what they call for offers on multifamily real estate, whereas before there were no call for offers. It was 20 people bidding on the same asset. And his contention was that we're down to at least we have a third of the buyers in the market maybe now that we did six to nine months ago, which to me, that just screams gosh, now's the opportunity, or at least the beginning of the opportunity to go out and, you know, continue to acquire, which that again, I love your point there that being in the market is more important than attempting to time the market. I think that was really, really sound advice. So certainly appreciate that. Is there any other things that come to mind when you think about this and you think about entering and recessionary slash inflationary, potentially stagflation environment that you're telling your clients right now you say, Hey, here's some, other than stacking cash, are there any other things coming to mind you where you say this is the critical move that people should be making right now.

[00:20:22] Simon Severino: Yes, simplify your business. So in the book Strategy Sprints, we start with the first chapter how you simplify your business. So you go through the activities that you do, and you identify your winning horses, you will have probably four or five up to 17 different things that you actually offer for three to four different segments of people. That's an average, when we're working with so many hundreds of entrepreneurs, that's an average. In average, they have 17 different offers, at different prices, what we call for ideal clients. And so simplifying a business means pick the winner from your offer, and pick the winner from your ideal clients. So now you simplify. Now, your sales becomes easier, your marketing can work better for sales, and your operations are easier. Now every week, you can improve by 1% your operations. This makes everything, you know, frictionless and effortless, now your people are happier, they will stick around longer. Now you are happier because you have now something that works actually. So you can relax, it works also a little bit more independent from you. And it all starts by simplifying. We call it the value ladder, where you start mapping out your business in a specific way. And in chapter one, I show examples and there are clients of us explaining how they did it, to simplify their business, because when you've simplified it, now you can manage it better. And it's much more resilient. And the second part is you go through the costs and make them variable costs. So with all your contractors, you start having performance-based contracts, and weekly check-ins, weekly progress reports that they are actually meeting those goals because then they will get paid. You increase the resilience of your business. And that is the only thing in your control. 95% is not in your control, market is not in your control, sales is not in your control. So what is actually in your control? I always say it's just three things, your daily habits, your weekly habit, and your monthly. Daily habit is how did you allocate your time today and d what will you delegate tomorrow? What will you automate? What will you systemize? The weekly habit, getting your sales numbers, marketing numbers, operations numbers reported every seven days in a simple dashboard. Monthly habit is doing a strategic analysis, what is the market doing what our competitors doing? Do we need to change something? Where do we cut costs? Where do we reinvest? These three things, daily habit, weekly habit, and monthly habit are the only things that are always in your control, recession, bull run, stagflation, whatever, war, these three things are always in your control. The rest is actually never in your control.

[00:23:19] Sam Wilson: I love it. I love it. Simon, thank you for taking the time to come on today. This was certainly insightful. I love everything you shared with us here today. It is a great timing on this episode, just getting people to think about how to expand their companies and how to really take market share in times of, you know, potential recession. So certainly appreciate it. Thank you for that. If our listeners want to get in touch with you learn more about you and or get a copy of your book, what is the best way to do that?

[00:23:45] Simon Severino: So I hang out at strategysprints.com. And the book is on Amazon. It's called Strategy Sprints. And it tackles the biggest problem, the marketing problem, the sales problem, the operations problem, the hiring problem. And if you go, if you buy it on Amazon, leave me a review. I'm super curious how you experienced the book.

[00:24:06] Sam Wilson: Awesome. Certainly, I will make sure I get a copy of that myself. Simon. Thank you again for coming on the show today. I certainly appreciate it.

[00:24:13] Simon Severino: Thank you. Keep rolling everybody.

Real estate investor, multi-family syndicator, and land developer. General Partner in 1200 doors in Texas; Limited Partner in 45+ deals / 15,000 doors across fourteen states. Principal in ground-up development projects spanning 157 acres in the greater Austin area. Acute business expertise developed over 30+year careers in high tech as a business owner, entrepreneur, executive, program manager, and engineer. Father of four phenomenal young adults and husband to a fantastic supportive wife.

[00:02 – 05:46] ]Opening Segment

• Joel Fine Started doing real estate as a side gig
• He bought a house in Texas for himself and his wife and find interested in the process.
• He started buying real estate properties in Ohio.
• and was able to learn and join Multifamily and how to Scale up by partnering with investors.

[05:47 - 09:02] Ground Up Developers

• Joel Shares, they have 6 properties in Texas
• Joel's Team works with a particular property manager that manages all 6 for them
• Joel considers that having a 75-door property is a little bit scalable and 40 doors is too small to support an onsite-full time staff
• Joel and his team make sure to work on metrics week by week and see how many leads they are getting for each property.
• Using technology for your deals can be a good way to add when you needed assistance.

[09:03 – 17:05] Having Great Partners and Building Experience in Ground Up Development

• Joel considers "Finding Great Partners" as the theme of his real estate career
• Because of these, he was exposed to capital raising and how to partner up with passive investors to help him scale up
• Joel Shares that the constructions phases can be in two parts
• Horizontal
• • Vertical
• Joel adds that they have a specific financial model
• • partnering up with builders that can help them with specifications needed such as permits etc.
  • Also partnering up and hiring surveyors and civil engineers
• Joel likes projects that give them multiple exit opportunities

[17:06 - 20:01] Closing Segment

• Reach out to Joel
• • See links below
• Final words

Tweetable Quote

"It's a way we're creating value, not just in the land that we're flipping to somebody else after we're done titling, but we're also creating value for our investors in giving them a great return on their money." - Joel Fine

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Connect with Joel Fine by visiting his website at www.lakelineproperties.com

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[00:00:00] Joel Fine: it's very common for people to put retirement money into syndications money that maybe is in a self-directed IRA or 401k.

[00:00:07] Joel Fine: And that's perfect for development opportunities because people , who have money in retirement funds. They're not gonna use it in the next three to five years. Somebody who's 40, they're not gonna draw that money for 25 years. Until they're in their sixties. So, it doesn't matter in a sense what, whether there's cash flow or not, cuz they're not gonna touch that cash flow anyway, what they really care about is overall return , and a good risk profile.

[00:00:39] Sam Wilson: Thank you to everyone who is a dedicated listener to the how to scale commercial real estate podcast. Just wanna give you a heads up that today. We had some audio issues on. Three or four episodes that we recorded in a row. They were such good episodes and the guests were so kind of course, to share their time and insight with us that I couldn't ask and be recorded.

[00:00:58] Sam Wilson: So we're gonna go ahead and publish these episodes. I am aware of it. The audio is not what I like to put out, but running a daily show at some point in time, we're gonna run into a hiccup along the way. And today is one of those days where I get to share my mistakes and hiccups are right along with you.

[00:01:13] Sam Wilson: But again, it's a great episode. You can hear the guest a lot better than you can hear me. And it's just part of what it is that we do. Nevertheless, here it is. Thanks so much for tuning in. Certainly appreciate it.

[00:01:23] Sam Wilson:

[00:01:23] Sam Wilson: Joel fine is a full-time real estate investor, syndicator and land developer based in Austin, Texas.

[00:01:29] Sam Wilson: He's a general partner in 1100 doors, a limited partner in 12,000 doors. He's a principal also in ground up development project spanning 157 acres in central Texas. Joel, welcome to the show. Thank

[00:01:41] Joel Fine: you so much, Sam. I appreciate you having me on.

[00:01:43] Sam Wilson: Absolutely. The pleasure is mine. Joel, there are three questions.

[00:01:46] Sam Wilson: 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

[00:01:52] Joel Fine: there? Wow. Okay. That's a, that's a lot to cram it in 90 seconds, but I'll do my best. So I studied in college to be an engineer, was an engineer and then a project manager for many years, worked in high tech in Silicon valley.

[00:02:05] Joel Fine: Started doing real estate as a side gig. Bought a house in Texas, really as a way for my wife and me to plant a flag, cuz we knew we were gonna move to Texas some years ends. So we bought this house as a way to. begin that process and then caught the bug. That one house was my gateway drug and , I did a lot of real estate after that started buying in Ohio, bought some duplexes and plexes and quads looking for cash flow, not so much appreciation.

[00:02:33] Joel Fine: Wow. Also started learning. Multifamily and how to scale up using syndications and partnerships and so forth. And once I got to understand that better. Jumped over into that realm started investing passively in other people's deals on the value, add multifamily side and a little bit on development side caught that bug and then started doing my own deals.

[00:02:55] Joel Fine: So since then, I've done about a, I think 11 deals total that I've sponsored. I'm actually up to 1200 doors, not the 1100. I gave you my bio cuz we just closed a, a deal in downtown Austin for was 91 doors. So not quite a hundred and still rocking and rolling. Got, got a bunch of deals on the pipeline.

[00:03:13] Sam Wilson: That is awesome. I love that. It sounds like you have a quest forever improving

[00:03:18] Joel Fine: your craft. I do. Yeah. And, and along the way, by the way I moved, I was in California in my high tech career, did move to Austin, Texas about two years ago. And really happy with that move, able to invest locally in central Texas and watch it just blow up here as people move in from out of state and Austin's just a great place to do business.

[00:03:39] Sam Wilson: It sure is. Yeah. I mean, Austin is, is Austin is booming as you well know. I'll have to tell you that. I'm curious. Let's just, I saw this 91, you mentioned this 91 door deal. You just did. How are you finding and securing opportunities in Austin, Texas? I mean, you say 91 doors in, in, in what'd you say downtown Austin?

[00:03:58] Sam Wilson: Was that what you

[00:03:59] Joel Fine: said? Yeah. How are you finding that? I say a neighborhood called Hyde park, which folks who know Austin would know that's basically next door to downtown. It's about maybe a mile and a half to two miles from the university, from the state capital, really from the heart of downtown. So yeah, to answer your question, how do I find those deals?

[00:04:16] Joel Fine: Through great partners? I've networked a lot, met a lot of great folks, made friends with people and just connected with folks who have the relationships with brokers, with sellers and Tried to find ways to make myself of value to those people in closing deals. And through that have been able to be, become part of deals.

[00:04:36] Joel Fine: I'm not, I'm not solo on any deal that I do. I've got partners on everything and I'm perfectly happy owning a minority interest. And being part of a deal that I think is, is a solid business prospect. So that's how I do business. And that's how I've been able to do as many deals as I've done in the time I've done.

[00:04:53] Joel Fine: 'em

[00:04:53] Sam Wilson: right. What opportunity or what, what what value are the sellers overlooking? Let's, let's talk about this 91 door deal. Like there's clearly an opportunity for you guys to increase the value of this property. What are they leaving on the, on the table that you guys say, man? I think, I think we can make that.

[00:05:10] Joel Fine: Yeah, so it's actually, this particular one is, is two properties about, I don't know, three or four blocks from each other 50 unit and a 41 unit. And out-of-state owners they're scaling up to bigger stuff. They're moving a lot of their assets out of Texas to other locations. Just really, weren't paying a lot of attention to the property.

[00:05:31] Joel Fine: It's in decent shape. Doesn't need a lot of renovation but by doing some rehab and by focusing a little bit more on bringing rents to market, we think we can create a lot of value there. The rents are pretty far below market. Previous owners were content to have. Pretty low turnover on the tenant base.

[00:05:49] Joel Fine: And didn't really push things the way they could have. So it's understandable, it's, it can be a little bit risky to raise rents to market, cuz you are gonna lose some tenants. You might make some tenants a little bit upset. But the fact is that the market is moving. We've got inflation, we've got high demand in that part of Austin and really in Austin, Austin in general.

[00:06:08] Joel Fine: And so there's opportunity to create more value from, from assets, from folks who maybe have owned the assets for a long time. And, and don't really have the energy to put into 'em.

[00:06:17] Sam Wilson: Are you guys managing that in house or do you have third party management for that property? It's third party. Okay.

[00:06:23] Sam Wilson: How did you guys secure, do you own other assets nearby where you can kind of aggregate and have economies of scale with property management? Or did you find somebody that said, Hey, I'm good with 91 doors across, four or five city blocks?

[00:06:35] Joel Fine: Yeah. So in this case, we've got, we now have six properties in Austin.

[00:06:39] Joel Fine: And we're, we're working with one particular property manager who manages all six for us. These two are on the smaller end. We've got. 110 door and 126 door maybe four or five miles away. And those are a little bit more traditional in the sense that you can have onsite leasing agents and maintenance folks.

[00:07:00] Joel Fine: Once you get over 75 doors, it's a little bit more scalable. So, we're gonna have to tune our management model a little bit to make sure. What we're doing makes sense for properties that are relatively small in the scale of value, add multifamily, 40, 40 doors is too small to really support an onsite, full-time staff.

[00:07:19] Joel Fine: So we're gonna have folks that, either do on call or maybe part-time, maybe a few, few hours here and there certain mornings of the week, that sort of thing. So we'll, we'll work it out with our property manager to do something that makes. Yeah,

[00:07:32] Sam Wilson: I guess that, that brings up a really interesting kind of conversation or topic for me is how do you, how do you make sure that when somebody wants to see a unit or they are interested in leasing a, a an apartment from you that they are responded to quickly, like, are you.

[00:07:47] Sam Wilson: I mean, what's the, what's the process for somebody to, to make sure you don't have leads fall through the cracks.

[00:07:52] Joel Fine: So that's really in the domain of a property manager, they, they own that task to make sure that they've got the support system and the infrastructure to properly respond to inquiries and, to, to turn leads into showings appointments and ultimately to paying tenants we've got metrics that we track.

[00:08:12] Joel Fine: Week by week to see how many leads are we getting on each property? How, how many of those leads turn into appointments? How many of those appointments turn into visits and so forth? So we track those but we leave it up to our property manager to make sure they've got the, the infrastructure.

[00:08:27] Joel Fine: And there's a lot of ways to, to handle that, technology can be of some assistance, right. Making sure you have a good website, making sure you have a good presence on other websites like apartments.com.

[00:08:37] Sam Wilson: one of the questions I have for you is about ground up development.

[00:08:41] Sam Wilson: I know you've spent an in order, an inordinate amount of time, learning and kind of developing your craft over the years and mastering what it is that you're doing. Ground up development is something that most of us included are fairly not afraid of, but it's something I just don't know that much about how did you educate yourself?

[00:08:59] Sam Wilson: And then how did you know when the right project came along, that it was the, the right project for you? And

[00:09:03] Joel Fine: then. So I'll go back to maybe a theme of my, my real estate career here, as I found great partners. And that was my entree into the, that part of the business ground up development. So met somebody at a meetup who had been doing subdivisions for a long, long time.

[00:09:22] Joel Fine: In fact, They were part of a family business that had been doing it for a couple of generations. So literally decades of experience doing subdivisions. And what I mean by subdivisions is they do, they would take, let's say a 50 or a hundred acre parcel of land. Slice it up into maybe five acre ranchettes put in some roads put in utilities and then sell off those ranchettes to individual owners.

[00:09:45] Joel Fine: Who maybe wanted to build their own house on it, or just have a place to go way out in the country. These, these were fairly rural places for the most part. But that, that was their business model as they would take very large tracks of land and, and carve it up into smaller tracks of land. So.

[00:10:00] Joel Fine: Found this, this a couple who lived not too far from me who was doing this but they were doing it basically with their own capital, just whatever they could afford to take down. And with my experience in value, add multifamily, I had been started being exposed to capital raising and how to partner up with folks who could be passive investors in deals and help to help me to scale up.

[00:10:24] Joel Fine: If, if if I can afford, let's say a half million dollar property on my own. I can get investors and buy a property. That's 10 times that size and share in the spoils, share the profits with my investors and all of us can benefit from that. And so I brought that to bear on that model in subdivisions, and then later in, in Roundup development with this, with this couple that I've met.

[00:10:47] Joel Fine: So rather than just buying, a few acres here and there, we started scaling up into bigger things. So first project we went after was a, a 20 acre parcel in a town just south of Austin called Lockhart. We're in the process. Now I'm getting that parcel rezoned to be a higher density use, and we're aiming for a 200 unit.

[00:11:06] Joel Fine: Town home community there. I got another property, 15 acres, just east of Austin, right by the Tesla plant. We're looking to put a 265 unit apartment complex and a 40,000 square foot retail center on that land. Then we've got another property, 35 acres we're looking to subdivide. Something like 215 houses that one will just sell off the lots to builders.

[00:11:28] Joel Fine: We won't do the build. So there's a lot of different ways you can carve up that task of ground of development. Some people just do the entitlements and then sell off the land. Once they've got it legally entitled and permitted other people actually do the builds. So we're exploring different business options.

[00:11:45] Joel Fine: As we go, we've got different exit strategies that we can pursue as we get further into these projects. And just having a lot of fun, exploring and learning.

[00:11:54] Sam Wilson: How do you handle the finances on those various projects? Cause none of those are producing an income right now, buying it. You're saying, Hey, it's a 20 acre parcel.

[00:12:05] Sam Wilson: We're gonna turn that into. And I can't remember what you said there a few hundred units town. I think maybe development. How are you, how are you projecting the, the, the whole period, the finances, the development risk from a refinance size construction loans mean there's a lot of moving pieces in there.

[00:12:25] Sam Wilson: Break down, I guess, how you even model that?

[00:12:28] Joel Fine: Yeah. So there's different ways to model it financially. There's spreadsheets out there that can help with that. But what we do is we break it down into phases. So we typically have a land acquisition phase, an entitlement phase, and then a construction phase.

[00:12:43] Joel Fine: And sometimes the construction phase can be in two parts. There's a construction of the infrastructure. Meaning the roads and the utilities, that's the horizontal. And then the construction of the buildings that's the vertical and any one of those pieces provide an exit opportunity and potential for a.

[00:13:03] Joel Fine: A very specific financial model. So for example, if we acquire land and entitled to get it permitted, now we've got a more valuable piece of land because another, a builder can come along and build to the specifications we've put together. They now have the permits in place that it's been largely de-risked because one of the risks of, of construction is whether you'll get permission to build what you want to build.

[00:13:26] Joel Fine: So by doing that, we're adding value to the land. We're making the land more valuable. And so we can model that. We can say, Hey, projecting forward. If we can get this land entitled if we can get the permits well, apartment units in this part of Austin are permitted apartments, prebuilt are worth let's say 25,000 per unit.

[00:13:46] Joel Fine: And so if we multiply that across the number of units, this is the value of the land after we're done. Now, let's see what, what the land will cost us. Let's see what the entitlement process will cost us. There's, there's a fair amount of work that goes into that and a fair amount of expense, not just in terms of buying the land, but also hiring civil engineers.

[00:14:06] Joel Fine: Surveyors. Sometimes you gotta deal with figuring out if the, what, what, what the condition of the, of the soil is. So you hire geologists you've got architects, you gotta plan out a lot of things about the property. Maybe, you gotta put together a site plan that makes the fire marshal happy enough.

[00:14:23] Joel Fine: Parking. Structural integrity. How many floors you gonna go up? And if you go up more than so many floors, you've gotta make sure you've got the right kind of materials that can support that structure. So all of that takes time takes effort, which translates into money for the, the people who are bringing their expertise.

[00:14:39] Joel Fine: So again, you just, you figure out what that's gonna cost. You build that into the financial model. So it might be that let's say the land is gonna cost 2 million. The entitlements are gonna cost another. Million million and a half. So by the time you're done and you've got, what's called a, a, paper lots or, or a paper design, maybe you're into it for three to three and a half million, but you can make a claim that now the land's worth six to 7 million.

[00:15:03] Joel Fine: So you've created a lot of value in that process. And so you put that story together for investors. You tell your passive investors, Hey, this is what we're gonna do. This, this is our business plan. This is the value we're gonna create. And based on that value, here's the returns you can expect. Now, you, and what I do is I make sure it's clear to my investors that there's risk here.

[00:15:25] Joel Fine: I'm making some guesses about the future in terms of the value of the land and the risk of problems along the way. And so, given that risk, I'm compensating my investors for that risk with good returns. And so you just gotta find the right kind of investors who have patient money.

[00:15:41] Joel Fine: People who have money that where it's okay not to have cash flow for a few years, but then you get a nice big pop at the end, from the appreciation. So in particular, it's very common for people to put retirement money into syndications money that maybe is in a self-directed IRA or 401k.

[00:15:57] Joel Fine: And that's perfect for development opportunities because people , who have money in retirement funds. They're not gonna use it in the next three to five years. Somebody who's 40, they're not gonna draw that money for 25 years. Until they're in their sixties. So, it doesn't matter in a sense what, whether there's cash flow or not, cuz they're not gonna touch that cash flow anyway, what they really care about is overall return and, and a good risk profile.

[00:16:19] Joel Fine: So, so that's the kind of money that, that oftentimes invests in the ground of development projects is money. That's fairly patient and can tolerate the, the level of risk we've got with our projects.

[00:16:31] Sam Wilson: Gotcha. I think that's, that's really, really cool. When you look at these projects, they're a preferred.

[00:16:37] Sam Wilson: Exit that you have, do you say, man, I know plan a is, get, get it paper a paper project, get it all ready to go. I think is how you put that. Is there like, is there any, is there any desired exit for you or is it we'll just keep moving ahead. And then when the makes sense, we'll take it.

[00:16:52] Joel Fine: It depends on the project, but I like projects where there's multiple exit opportunities. Cuz that gives us a way to mitigate the risk, just in case let's. Construction becomes difficult in a particular period of time or for a particular market. Then we can back out of the deal, sell the land to somebody else.

[00:17:10] Joel Fine: Who's willing to deal with those headaches. Once we've got a, a plan in place and we've done the entitlements. On the other hand, we may choose to go ahead and do the construction if conditions, warrant. So it's nice to have multiple exits options. I do like the early exits when they present themselves and there lucrative because.

[00:17:27] Joel Fine: Then you get a nice velocity of your money. We've got a deal that looks like we might be able to exit our investors out within about a year and a half maybe two years. And we should be able to get at least 50%, maybe 75%, the way things are looking a again there's risk. It's not a certainty until we're done until the money's in the bank.

[00:17:47] Joel Fine: So things could go haywire in a lot of different ways. But right now that, that project's looking very promising and, if people can do nearly double their money in a year and a half and then turn around and, and put that in the next event, opportunity, the next investment. That's phenomenal.

[00:18:04] Joel Fine: That's exciting to us. It's a way we're creating value, not just in the land that we're flipping to somebody else after we're done entitle, titling, but we're also creating value for our investors in giving them a great return on their money.

[00:18:16] Sam Wilson: I love it. I love it. Joel, if you could rewind the tape. however long you've been investing, what's it been 5, 7, 10 years, maybe what?

[00:18:23] Sam Wilson: Five years? Five years. What is one thing you would tell yourself to do differently, maybe that you would do differently if you could go back?

[00:18:30] Joel Fine: Well, so in that hypothetical, if you said I could rewind the tape to when I started investing, I'd rather rewind the tape further and start investing earlier.

[00:18:40] Joel Fine: so rather than waiting until I think my first investment was around when I was 50. I would do it, when I was 25 or, or, as young as possible, just get started and get into it. Early on when I was living in California, you know, everything in California is relatively high priced, especially when you look at the.

[00:18:59] Joel Fine: Price to rent ratio. And I did some analysis back, you know, way back in my youth and determined that there's really no cash flow in California, real estate. It's all about the appreciation. I mean, in hindsight, the appreciation's been just amazing, but when I was looking forward, projecting what I could do, I said, you know, I.

[00:19:18] Joel Fine: I don't want to count on appreciation. I don't trust it. Without cash flow, this, this investment just doesn't make sense. And I projected, I said, Hey, what you know, I'm in, I'm evaluating California real estate. I guess that every real, all real estate markets must be like that. So real, estate's just not a market that I'm interested in.

[00:19:34] Joel Fine: I'll I'll put my money elsewhere. And in hindsight, that was dead wrong. You know, I should have invested either in California or elsewhere for cash flow. And so that's what I would change if I had a way back machine is I'd just, I'd get started in real estate much earlier.

[00:19:48] Sam Wilson: Start earlier. Absolutely love it.

[00:19:50] Sam Wilson: Joel, thank you for taking the time to come on the show today. I certainly appreciate it. If our listeners wanna get in touch with you or learn more about you, what is the best way to.

[00:19:58] Joel Fine: Awesome. Well, thanks for asking. Yeah, I've got a website it's called Lakeline properties.com, L a K E L I N E Lakeline properties.

[00:20:05] Joel Fine: All one word. People can go to that website and learn more about me. There's a contact us page, or they can just email me directly. I'm Joel Lakeline, properties.com, always happy to talk real estate folks who have money. They wanna invest folks who have partnership opportunities. You know, I just like to get to know people and get connected with folks who are in the business.

[00:20:26] Joel Fine: Awesome.

[00:20:26] Sam Wilson: Joel, thank you for your time today. I certainly appreciate it.

[00:20:29] Joel Fine: My pleasure. Thanks for having me.

[00:20:30] Sam Wilson: Cool. That's a wrap, Joel. Sorry about the hiccup on the tech side of things. I still don't have internet. I gotta jump onto the next one, but you will get notified with our show artwork, the links, all the stuff share across your channel.

[00:20:42] Sam Wilson: Ill certainly you know, notified via email, we'll it out and wide. And it was a pleasure to meet you. And thank you again for coming

[00:20:48] Joel Fine: on the, my pleasure, Sam. Great meeting you. Sorry.

[00:20:51] Sam Wilson: I'm a few minutes over time, but that yeah,

[00:20:53] Joel Fine: certainly appreciate I'll you get you on your way then

[00:20:55] take

[00:20:56] Sam Wilson: care. See you now.

[00:20:56] Sam Wilson: Bye-bye.

Should you join a mastermind group? What is it and how does it help successful entrepreneurs achieve their goals?

Jeff McKee of McKee Capital Group is a General and/or Limited Partner on 15 Class B and C multifamily apartments communities, 4000+ apartment units/doors with $200M+ Assets Under Management (AUM) across 10 cities/MSAs and 7 states in the South and Southeast of the United States. Out of these 15 syndications, he is a General Partner on 10 of these assets, 2,500+ apartment units, Key Principal/Guarantor on 4 assets including Fannie Mae and Freddie Mac non-recourse debt all in less than 18 months with support from mentors, partnering, and networking.

He talks about the value of surrounding yourself with like-minded individuals, and how to get started in real estate investing through the mastermind group.

[00:01 - 03:32] From W2 Employee to GP

• Welcoming Jef to the show
• Jeff shares his story of how he started in real estate investing and got into a mastermind

[03:33 - 12:20] Why Real Estate Investors Join Masterminds

• What can you get out of a mastermind group?
• Understanding the value you can provide to a project or a team
• The cost-value analysis of joining a mastermind group
• Building a network within the mastermind and managing communication

[12:21 - 17:59] LP and GP: Everything You Need to Know

• How the general partnership percentages are broken down
• What has changed in today's economy compared to a few months back
• There is currently a softening of the multifamily market due to various factors
• Jeff's advice on people who are just getting started

[18:00 - 21:55] Closing Segment

• If he could go back in time five years, what would he do differently?
• Connect with Jeff!
• Links Below
• Download a free copy of his ebook: Passive Investing In Multifamily Guidebook
• Final Words

Tweetable Quotes

"Part of a mastermind is just surrounding yourself with successful people that have experience and that can help along the way." - Jeff McKee

"You need to specialize. It's hard to be a generalist and be very successful." - Jeff McKee

"Finding what your special sauce is, what your niche is, and then that's what you can add to the team." - Jeff McKee

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Connect with Jeff through the Mckee Capital Group website and follow him on LinkedIn!

Resource Mentioned:

• Rich Dad Poor Dad by Robert T. Kiyosaki

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 protected]

Want to read the full show notes of the episode? Check it out below:

[00:00:00] Jeff McKee: The other lead sponsors that found the deal, they generally have pretty good experience. And now, you know, we have experienced as well but but it's one of those balancing things of you do want a general partner team that has a track record that has experience in that asset class, preferably, you know, in that state or that sub market. And that's typically who we partner with.

[00:00:33] Sam Wilson: In the past two years, Jeff McKee has become a general partner in over 3000 apartment units representing $250 million in assets under management and the Southeast. Jeff, welcome to the show.

[00:00:44] Jeff McKee: Thank you, Sam.

[00:00:45] Sam Wilson: Hey, man, the pleasure is mine. Jeff, there are three questions I ask every guest who comes on the show, and 90 seconds or less. Can you tell me where did you start? Where are you now? And how did you get there?

[00:00:53] Jeff McKee: You bet. So a lifelong W-2 employee five years ago, read Rich Dad, Poor Dad. Then we moved into a single family mastermind here in Austin, Texas. Did one fix and flip one buy and hold and realize that was pretty hard to scale. And this is my wife, son and I. Then after about a year of that we moved into another mastermind it was multifamily based in Dallas, we invested as limited partners and five deals, then we decided we wanted to be general partners. We joined another mastermind group two years ago, and we've been general partners on 13 deals, you have 3000 plus doors in the south and southeast.

[00:01:28] Sam Wilson: That is a lot of moving pieces there. And this is a conversation that don't you know, we don't have a lot of talk around, you get a breakdown for us the mastermind progression. I mean, a lot of times people join, you know, they'll join a coaching program, and we'll hire a particular mentor. It sounds like the mastermind pro we're kind of route was the way that you took this down. Can you can you break down how you chose your masterminds? You know, and then pivoting out of those, you know, kind of where that decision making tree kind of broke down along the way?

[00:01:57] Jeff McKee: Sure, sure. Yeah. So I read Rich Dad, Poor Dad five years ago, then we decided to start in single family. So the fix and flip the buy and hold the homestead strategy, we actually bought a wholesale house and tore it down and built two houses on it. We did Airbnb and the back house that we built, and we live in the front house is our homestead. And then, you know, that was through meetups. And once I got you know, educated on what I was missing in terms of driving passive income beyond the W-2 job, I said, Well, there's got to be a better way. So that was then one of the people in that single family group said, hey, you need to come to a Tuesday launch. You know, here in Austin, Texas, where we talk about commercial property investing, specifically apartment syndication, which I didn't know, the average person could invest in whatever a syndication was, so there was a lot to learn. So then we went up to a mastermind weekend, where they spent three days teaching you all about multi multifamily apartment investing limited partners, then we joined that group. And then we took some of our capital and put it in five different deals. They were all in Texas. And then after a few years of doing that, we said, well, we wanted to go bigger, faster. Beyond the 700 doors as LPs, we wanted to be general partners. And then we looked around for another group, because we wanted our son to continue investing with us. And the one group that we did the limited partner, a mastermind date, they really wanted him to pay for his own membership to become a general partner. And we went to another group that was much more family oriented. And so we just paid for one membership fee for the whole family. And we have another son and a daughter, and they can participate in this as well.

[00:03:33] Sam Wilson: That's really, really cool. What do you feel like the value was in joining a mastermind like, tell me how the deals were structured? Tell me how the opportunities presented themselves. Can you can you talk to us about that? Because I'm probably fairly fuzzy on kind of the mechanics of how a mastermind, and then taking down deals works.

[00:03:52] Jeff McKee: There's all different kinds of masterminds that, you know, that people can kind of look at. And some of them are small, some of them are large, some of them focus on education, some of them focus on getting you into deals, and there's a few that really focus on getting you in your first deal. And then you got to figure out yourself, what value do you add. So for example, if you don't have capital, maybe you can find the deal. So you could become an acquisition specialist, maybe you know, something about construction, property management, you could be an asset manager on the general partner team. I didn't really you know, have those skill sets nor the time because my wife son and I were all in W-2 jobs, you know, at the time, so we focused on the middle part of the syndication where I can sign is a key principle on some of the loans. I raise capital through this McKeecapitalgroup.com. And then we also provide earnest money down at risk capital at the front end of the deal. So that's where we added value to a team of people. And that's one of the things I've learned over the years is to specialize not only in maybe in an asset class to be able to scale but also within that asset. that class, you need to specialize. It's hard to be a generalist and be very successful. And so the other part of a mastermind is just surrounding yourself with successful people that have experience and that can, you know, help along the way. But then you also add your unique value proposition to that general partner team.

[00:05:19] Sam Wilson: I've seen mastermind prices range from reasonably affordable for most people to incredibly expensive six figure masterminds? Can you talk us through kind of the cost to value analysis someone should be making when they when they look at joining a mastermind group?

[00:05:38] Jeff McKee: I mean, you know, part of it is you always hear people say, you know, invest in yourself. So some of this is invest in yourself. I mean, we didn't really have much success with the three types of groups that you can join. And so we decided to invest in ourselves and invest in these masterminds. And so the single family one, mastermind ranges from, like an entry of 20k to 50k, one time fee, no annual renewing some of the other apartment masterminds multifamily, you know, they could range from five to 10k, you know, up to 50k. And usually, they've got a renewal fee, that is a percentage of that initial fee that you pay that first year and so that's just part of it is it's a balance of how much capital do I save for my own deal to put in, in that deal as a general partner to put skin in the game? And how much do I invest in myself, and maybe my family if you're investing with others in your family? So that's the balance. And we did a little bit of both right, we invested on the front end in the masterminds and held back some capital to go then invest in originally as limited partners, then eventually, general partners.

[00:06:46] Sam Wilson: How did you gauge that when you said, Alright, so and again, I'm just pulling numbers out here. But let's say you put 20 grand in a single family mastermind group, you do a few deals, and then you say, hey, look, we're gonna pivot and do something else. How did you? How did you gauge that? And I guess the question, How did you justify it? Because for me, like putting down 20 grand into a mastermind, man, I'm gonna squeeze that, you know, get all the juice out of that I possibly can. And then once I feel like I've learned everything, I can then maybe move on to the next thing. But it sounds like for you, you're quickly in rightfully so quickly able to pivot.

[00:07:21] Jeff McKee: So the single family was an interesting one, because we put the 20k. And we went through all this training. And we ended up partnering with someone that was actually outside of that mastermind group that I had met through LinkedIn. And we did a fixin flip together. And he saw Austin, and the profit before taxes up for our LLC and for a partner was 40,000. So our half of that was 20. It was a 50-50. So the 20 actually paid within the first year for that single family mastermind. And then we did some other things about you know, you buy leads, and you're looking for motivated sellers, the whole wholesaling. And that really wasn't for us. We just didn't have time during the day to do a lot of that. So you got to figure out, you know, where that fits in. But then, you know, after 12 months, we said, that was a little bit of work. And so why don't we look to scale? And then that's when I started going to the multifamily meetup weekly. And then we did some training on the weekend.

[00:08:12] Sam Wilson: Yeah, gotcha. That's, that's really, really cool. You talked about some of the skills that you bring to a team. One of the things that, you know, we're seeing right now, and maybe I'll put my foot in my mouth here a little bit. But some of the some of the deals I see coming across my desk have just, you know, 10 - 15 - 20 general partners on the team, none of them have experience. And to me, when I look at that it screams risk. Yeah, you speak to that? Yeah.

[00:08:40] Jeff McKee: I mean, we typically in this mastermind, or general partners, there's always the lead sponsor who founded the group like eight years ago, he's got, you know, high net worth, he's got, you know, 20,000 doors of experience. And so we always partner with him on these deals. And then there's usually the other lead sponsors that found the deal, they generally have pretty good experience. And now, you know, we have experienced as well, but, but it's one of those balancing things of you do want a general partner team that has a track record that has experience in that asset class, preferably, you know, in that state or that sub market. And that's typically who we partner with. But you're right. There are some syndications out there that everybody's new, it's all their first deal. And that can be a little bit risky,

[00:09:23] Sam Wilson: Absolutely. Yeah. And I think that's just when it comes to the especially for the passive investor side of things. That's one of things I always stress is, is getting to know first and foremost, your general partners, like that's 80% of your work should be on your GP team. The other 20 is the deal in the market. And then but that's just my own my own analysis on that, but helped me figure this out. So you're, you're a general partner, but I bet you have some general partnerships with several different makeups of teams. Is that right?

[00:09:52] Jeff McKee:That's right. Yeah, we have some repeat teams and some new teams. Right.

[00:09:57] Sam Wilson: How do you handle communications on that it gets I mean, because there's so many seats on the bus and everybody has to fill those seats. So how do you guys decide when you're launching out these various teams, which I too am a general partner with multiple teams, but I want to hear from your side of things, how you guys handle communications?

[00:10:13] Jeff McKee: Yeah, in that particular case, we use Slack once you're part of a team. But before you get to be part of the team, there's usually a private Facebook group, you know, that we got within the whole organization within the mastermind saying, Hey, I'm looking for someone, I need an asset manager on this asset in the city, I'm looking for some people that have capital and that have the ability to raise capital. So the lead sponsor starts looking to fill out the team, basically. And then we may raise our hands and say, yeah, hey, we've got some earnest money down, we can put at risk capital upfront, I can sign as a key principal on the loan. And then, you know, we can do put in our own money as LPs, but then also capital raise. And so it's private Facebook groups, and then this particular mastermind has a group call every two weeks, so we just have one, this Monday night. And it's, it's also 15 minutes get allocated to who has a deal that they need help on. So they explain what the deal is. And they've already posted it in Facebook, but they basically are reaching out to everybody on the call. And these calls get recorded for people that can't make it. And so that's how we got into our first deal. My wife had listened to a recording a week after we joined. And then she and my son drove out to Arkansas to this asset to do the due diligence, and we became part of the team. And then we just sold that asset after holding it for 18 months. And so you know, that's how people get involved in these deals.

[00:11:33] Sam Wilson: Got it, it sounds like a pretty well oiled process. For somebody who's new or that wants to get involved. It's just but it's more like a pay to play process, you got to, you got to pay the upfront fee to join the group to understand what's going on, and you got to bring something to the table.

[00:11:50] Jeff McKee: Exactly. I think it's a pay to play being around others that are generally really successful experience. And then you need to have some unique value proposition, you know, whether it's time and you can go find deals experience with, you know, being a general contractor, an asset manager, a property manager, or maybe you have capital, or you have a good network of friends and family that you can, you know, offer these opportunities for them to invest. And so you know, finding what your special sauce is, what your niche is, and then that's what you can add to the team.

[00:12:20] Sam Wilson: Got it? How do you guys break down? How do you break down general partnership ownership percentages?

[00:12:27] Jeff McKee: Yeah, so we typically do a 70%, limited partner 30%. And we do an 8%, preferred return paid to the LPs, that 8% comes off the top before we do any of the 7030, then up to 30% General Partner allocation. Typically, it's 20% to the acquisition who found the deal and spreading that then it's capital raising 20 to 30%, depending on the deal, it's earnest money down 10 to 15%, key principle 10 to 15%, you know, asset management 10 to 15%. And sometimes we do consulting marketing, where we get advice, and we bring other people in on the deal to help market it. So it's roughly that range, and there's a framework and then it's adjusted based upon every deal.

[00:13:12] Sam Wilson: Right? Yeah, absolutely. When you're starting out and you were putting down earnest money, you said you were you're putting down the at risk capital. How did you know that the at risk capital you're putting down wasn't going to ultimately end up being risk capital?

[00:13:28] Jeff McKee: You don't know that? Yeah, that's that's the whole point of that risk capital. Now we're moving into a phase where some of these multifamily apartments, you can now do refundable deposits for the last couple of years, it's all been non refundable, hard money, and you're totally at risk, you put up 100k, 200k, you're totally at risk of losing it, if you can't close the transaction. Now, this group that were a part of, they successfully closed 90 transactions. And like the last six years, there hasn't been a deal that we started that we haven't completed the deal. But there are groups that can't raise the capital, they can't qualify for the loan, something happens near the end of that transaction when they're under the purchase and sale agreement and then it goes back on the market and the sellers typically get to keep the deposit money.

[00:14:12] Sam Wilson: Right which is certainly a certainly a scary place to be but it's interesting to hear because I'm not in the multifamily space. We're not actively buying there right now, but it is interesting to hear kind of a softening, you know coming from various sources saying hey, you know what, suddenly we can get refundable earnest money and you know, deals are coming back on market now brokers are reaching out the buyers saying hey, you know, would you like to make an offer because, you know, that's, you know, call for offers on multifamily is is not something we've seen for years

[00:14:41] Jeff McKee: Right? Right. There's probably like 1/3 the amount of active buyers in today's market than there was six to nine months ago. There's also a price reductions going on of you know, 5-10 15% all these assets that the seller wants to sell and the buyers like us are out there doing the underwrite it and because of the interest rate increases, because of some of the cap rates, you know, we have a lower offer price. And so that's the softness, you're seeing, in addition to, you know, having refundable deposits are starting to come back, and then early access periods to do the due diligence before the formal due diligence that started to come back. So there's definitely, you know, pros and cons of of a softer economy. But you know, we're still net buyers. It's only when we're trying to sell an asset that we've had for a couple of years that we feel the pain if we need to lower the price by 10%, for example. So some of those, we may just choose to hold on longer and wait for a little while longer for the rebound.

[00:15:40] Sam Wilson: Right. Yeah, that was gonna, that was gonna be my next question. So has that affected your plans, you know, for disposition? But I mean, again, if you're only a couple years in on a lot of these deals, what you know, why not just hold it long term? And just keep, you know, clipping that coupon?

[00:15:54] Jeff McKee: Exactly. That's right. And, you know, DC, typically cash flow from day one, and then we're paying the preferred return. And so it's definitely you know, you're trying to improve the net operating income through, you know, better revenue management, such as rent increases, as well as better expense management. Typically, we have new property managers, we bring in on every deal. And about half the time we rename the asset and the do the rebranding, you know, focus on the outside improvements, focus on the interior upgrades.

[00:16:22] Sam Wilson: Got it. Now, that's really cool. You said that you'd skipped small multifamily entirely, you went straight into straight into the big stuff. Tell me, I guess, you know, what, what's something you would recommend? Or is that something you'd recommend to somebody else, if they're getting started, just go big early on.

[00:16:22] Jeff McKee: Yeah. So that gets back to, you know, if you're more comfortable as a generalist and doing a 10, or 15, or 20, unit apartment building from A to Z of that, you might feel more comfortable doing that having a lot of control, having a large share of the pie, we decided, because we were my wife, son, and I were still doing w two jobs, we decided our strategy was to go for a small slice of a very large pie. And so the amount of effort that a general partner team takes to do a 20 unit is similar to a 200 unit. And so why not do the 200 unit. And so that was just the strategy. So we totally went from single family, to large multifamily limited partner and learn that for a couple years, then we went to even larger general partner multifamily apartment deals and that was just the decision in strategy that we made. Now, that's not to say, somewhere down the road, we won't look at doing a tenancy in common deal of a 50 or 80 unit deal with one or two other partners. And now that we know what we know, doing it from A to Z, but starting out, we felt like we wanted to be around a mastermind, people, we had a certain area of expertise or value we could bring and we certainly didn't know A to Z on how to do the whole transaction. So that's where we went, we went Lauren, so it's kind of like the Grant Cardone, 10x, you know, add zero to it, if you're gonna do 21 do 200.

[00:18:00] Sam Wilson: Love it, I love it, rewind the tape five years. And if you can start over, what would be one thing that you would tell yourself to do differently,

[00:18:08] Jeff McKee: I would say I would have held back more capital as a limited partner to save it to become a general partner and start that process earlier, we were probably in the LP deals for two years, on five deals before we decided to go to the general partner route. You know, I think we did a good job of only spending one year on single family and we try the one fix and flip, we did the one buy and hold of a duplex in Waco, which we just sold after five years, a couple months ago. But I think I would have accelerated through the LP had gone to the general partner faster. That's probably one of the lessons I've learned over the years.

[00:18:43] Sam Wilson: Right? Because yeah, I mean, as you're given to the breakdown of earnest money, you know, percentages that you get out of a GP, if you're sitting out of a GP stake. If you're bringing the at risk capital, and you're you're giving 10 to 15% of that general partnership away for the people that are posting that at risk capital, that's a heck of a much greater return on your potential greater return on your money than it would be say going out as an LP. Even if you to extra money over five years, I think I would, I would imagine that 10 to 15% is worth a lot more.

[00:19:11] Jeff McKee: Exactly. And then that's where during the limited partner training, you know, the lead of this mastermind started teaching hey, here's the eight ways you can get paid as a general partner and we started looking at Oh, acquisition for us your asset management was like, wow, you know, we didn't we didn't think about that. What would it take for us to go from LP to GP, and then that's where we started focusing our time

[00:19:32] Sam Wilson: And that fits for you and your particular style. I mean, for a lot of people, you know, my 10 year goal, quite honestly, Jeff is to be nothing but an LP. In 10 years, man, I want to be shipping Jeff McKee a pile of money and saying hey, man, just the money in my account and otherwise, you know, just tell me if there's everything's on fire, otherwise, leave me alone.

[00:19:54] Jeff McKee: Exactly. Yeah, I do have a lot of people. It's like, hey, I want to be your best limited partner. I have no interest in being a general partner. Now I'm gonna write the check, I'm gonna see you know the quarterly distributions and see the, you know, the disposition. And we'll just keep doing that again and again.

[00:20:09] Sam Wilson: Absolutely. I love it, though. But yo u've you've given a very clear path for someone to scale and to scale quickly. And that that fits very nicely within the theme of this show, which is how to scale. And I think, yeah, you've given us join the mastermind, get surround yourself with a group of people that know really well what they're doing, find a seat on the bus that you fill, figure out how you can fill those voids. And then just, you know, stay within that ecosphere and grow. So I think that's, that's really, really cool. Thank you for taking the time to come on the show today. Jeff, if there are if listeners want to get in touch with you, or learn more about you, what is the best way to do that?

[00:20:45] Jeff McKee: Yeah, the best way is to go to the mckeecapitalgroup.com. You know, you can, you can book time with me there. The other thing is, I have a free giveaway on that website. And it's from a best selling book I was in last year from another mastermind that I joined. And so it's bringing value solving problems and leaving a legacy. And so that's a free download full geek PDF, my chapter in that book, there's like 40, authors on one and 40 my chapters about going from single family investing to multifamily investing in scaling. So that's what my chapter so that's a free download a PDF on the key capital group.com. And you can reach that way. Plus, I have weekly blogs out there about multifamily and people can learn quite a bit from what content I share.

[00:21:24] Sam Wilson: That's awesome. Jeff, thank you for taking the time to come on today. I certainly appreciate it.

[00:21:28] Jeff McKee: Yeah. Well, thank you for having me.

Vertically integrating your business into commercial real estate allows your company to streamline operations by taking direct ownerships to various phases of your business process.

Tyler Cauble is the Founding Principal and President of The Cauble Group. He's a native Nashvillian, not only a witness to the city's tremendous growth but is also involved in it through his developments, renovation projects, and volunteer work.

As President of The Cauble Group, Tyler helps bring together buyers, sellers, landlords, and tenants in retail, office, industrial, and multi-family real estate. He's committed to helping business owners understand the market to grow their businesses and be part of Nashville's future. Cauble is also the best-selling author of Open For Business: The Insider's Guide to Leasing Commercial Real Estate.

[00:01 - 05:16] Opening Segment

• Tyler Cauble started his career as a project manager for his grandfather's construction company.
• Creating a company to buy debt - going through learning curves
• In 2013, he was brought on to work for a boutique developer and leased a couple of properties.
• Tyler's first project was selling 42 townhomes down in Bellevue, A 10-minute drive Southwest of Nashville.
• He wrote a book on leasing commercial real estate called Open for Business.
• Tyler started the Cauble Group, which is his commercial real estate brokerage.

[05:17 - 10:17]How to Grow a Vertical Business with Multiple Channels

• Tyler Started multiple businesses to grow vertically integrated
• His key to success was being very in the same lane with his team and doing this similarly with development and investment groups
• To do this, getting people trained and putting the right people in their rightful seats.

[10:18 - 17:33] Industrial Real Estate: The Bright Future

• There is a limited supply in the current state of industrial real estate.
• Industrial real estate is a good investment because it has a low turnover rate and high demands.
• There is an opportunity to build flex spaces
• Flex space can be from 12 to 18 dollars a foot.
• Tyler buys properties that are already zoned. He suggested that if you are buying properties that need rezoning, talk to your local Alderman, Councilman, and politicians and make sure your neighborhood supports your request.

[17:56 - 20:01] Closing Segment

• Reach out to Tyler
• • See links below
• Final words

Tweetable Quote

"If you've got to go through rezoning, just make sure you talk to your local alderman, Councilman, politicians, etc. And make sure the neighborhood's going to support it."

- Tyler Cauble

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Connect with Tyler Cauble by visiting his website at https://www.tylercauble.com/

Resources Mentioned

Open for Business: The Insider's Guide to Leasing Commercial Real Estate

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 protected]

[00:00:00] Tyler Cauble: One thing that I will say about starting multiple different companies and, growing them all is make sure that you're very much in the same lane, right? Like we are very vertically integrated. The cobble group was my main project for the longest time. And every time the cobble group would go get a listing.

[00:00:17] Tyler Cauble: persol which is my property management company would get the management

[00:00:20] Intro: Welcome to the how to scale commercial real estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big.

[00:00:32] Sam Wilson: Tyler cobble is a commercial real estate broker, developer, and investor based in Nashville, Tennessee. Tyler. Welcome to the show.

[00:00:39] Tyler Cauble: Sam. Thanks for having me on buddy. I'm excited to be

[00:00:41] Sam Wilson: here. Hey man, I, I appreciate the pleasures of mine. I think you might win the award and I'm sure you get this a lot for the best beard on a podcast.

[00:00:49] Sam Wilson: I'm absolutely jealous. How long have you been growing

[00:00:52] Tyler Cauble: that? Thank you. Man it's been about this link for, I don't know right now, probably a year or two. I've usually got a pretty long one. Yeah. I used to keep it a little more trimmed up, but now, we live in a post pandemic world, I wear t-shirts and grew my beard out.

[00:01:05] Tyler Cauble: So it's

[00:01:06] Sam Wilson: I hear you different. I hear you, man. I can't grow any hair on the top of my head, but I can grow a heck of a beard, but I just could never, I just never had the

[00:01:14] Tyler Cauble: patience. I'll take that trade off all day. I'd rather have a beard with no hair on my head.

[00:01:18] Sam Wilson: Absolutely. Absolutely. I would not grow. I would never not be bald. Like I love being bald. There's no complaints. Absolutely none. Tyler, there are three questions. I ask every guest who comes from the show and 90 seconds or less you tell me, where did you start? Where are you now? And how did

[00:01:31] Tyler Cauble: you get there?

[00:01:32] Tyler Cauble: So I jumped outta college after my freshman year at the university of Tennessee moved back to Nashville and started working as a project manager for my grandfather's construction company. And about three months into that, a boutique developer that I had actually sold to from a summer job. The year I graduated from high school.

[00:01:49] Tyler Cauble: Heard that I was back in town and he wanted me to come work for him and lease a couple of properties that he had. This was back in 2013, the commercial real estate market was very different. It was very slow. We had nice assets that were 70% occupied, which is really bad. So they brought me in, I started working on those.

[00:02:05] Tyler Cauble: I got to sit in on the development meetings every week for two years, three years. Until I finally learned how to put my own development together. So my first project was 42 town homes for sale down in Bellevue, which is about 10 minutes Southwest in Nashville and left shortly thereafter wrote a book on leasing commercial real estate called open for business.

[00:02:25] Tyler Cauble: Started the cobble group, which is my commercial real estate brokerage. Six months later started Perol property management. And then about a year after that started my investment in development company. Since then we've acquired about 2.1 million square feet of commercial real estate mostly office and retail.

[00:02:40] Tyler Cauble: A little bit of industrial in Tennessee. So national and Chattanooga eventually we'll expand beyond that, but that's where we.

[00:02:46] Sam Wilson: Man that is a lot of moving pieces. It sounds like you regret dropping out of

[00:02:51] Tyler Cauble: college. Ah, it's the worst decision I could have ever made. I can't believe I did that. man, what's funny is seriously like the, the second year, like when all of my friends were graduating, I did truly regret it.

[00:03:02] Tyler Cauble: Commercial real estate is hard and I thought that coming into it, I was gonna make six figures my first year. Cause I was actually really good at. Got absolutely crushed. I made like 40 grand my first year. And the second year when all of my friends were graduating, I was looking at my my pay stub again.

[00:03:17] Tyler Cauble: And it was like, I swear, $40,500. It was like $500 difference. And here I am like, man, all my friends are graduating with degrees. I'm making no money at all. What did I do to myself? And of course that year I tripled my income. So haven't looked back.

[00:03:32] Sam Wilson: Right. No, man. That's great. I love that.

[00:03:35] Sam Wilson: I love that. Tell me, like, as you went through this process, was there a guide, was there a mentor or does this just come naturally for you?

[00:03:44] Tyler Cauble: So on the sales front, I think it's just a natural thing. It's very easy for me to sit down with somebody and have a conversation. I, I could talk to a wall if I really wanted to.

[00:03:52] Tyler Cauble: But you know, on the commercial real estate front, there, there have been many mentors throughout my career. I'm a big believer that, while you can gain some knowledge from podcasts, you can gain knowledge from books, from YouTube, whatever. Learning from somebody actually going through the process is by far the best way to learn commercial real estate.

[00:04:10] Tyler Cauble: I've had mentors from, the ground of development perspective. I've had mentors on syndication. I've had mentors on multifamily. I've had mentors on brokerage. I'm a big believer that you'll never have just one mentor. And I feel like a lot of new investors get caught up on that. I've just gotta find that one person that's gonna show me what to do now.

[00:04:28] Tyler Cauble: You don't find multiple people. Everybody has one thing that they're really good at. Just go learn that one thing from.

[00:04:34] Sam Wilson: Mentors either come with a price or you somehow know them relationally before. I guess, where you eventually figure out that, Hey, you might be able to add value to them and they can add value to you.

[00:04:44] Sam Wilson: How did you find a good mentor or mentors, I guess, as you're explaining to us?

[00:04:49] Tyler Cauble: Yeah, I was just getting out in the world of commercial real estate, as much as I could going to masterminds and going to real estate investors meetings. Just being as good of a broker as I could be, because, if you want a badass investor to start paying attention to you and to want to spend more time with you, go out and bring them deals, go out and make them money.

[00:05:10] Tyler Cauble: Right because the better deals that you bring them, the better tenants that you bring to their properties, the easier you are to work with the better your marketing is, whatever that ends up being the more that developer or that investor is going to want to be around you. And then if they see that you're really willing to put that much effort into it'll, they'll take you under their wing.

[00:05:27] Tyler Cauble: That's happened to me time and time again. .

[00:05:29] Sam Wilson: No, that's great. That's absolutely great advice. Let's talk about building a vertically integrated. You've got a lot of different channels in your business. I'm sure at this point with a lot of different people doing a lot of different things, what's been your key to growing and scaling that business.

[00:05:44] Sam Wilson: Walk us through that process. How'd you get it

[00:05:46] Tyler Cauble: done? Yeah, I just I cannot sit still. So, shortly after I started company, I have to start another one. Right. We've got the cobble group, which I founded in 2018 February of 2018. That's my commercial real estate brokerage. Six months after that we had several clients that were selling residential portfolios and 10 31 exchanging into retail shopping centers that needed management.

[00:06:06] Tyler Cauble: So I had a background in that from the boutique developer that I worked with started a management company. It's also pretty nice. You get income every month instead of just whenever you close deals. Right. And then a year after that started a development and investment company buying and developing my own properties and, the.

[00:06:22] Tyler Cauble: One thing that I will say about starting multiple different companies growing them all is make sure that you're very much in the same lane, right? Like we are very vertically integrated. The cobble group was my main project for the longest time. And every time the cobble group would go get a listing.

[00:06:39] Tyler Cauble: persol which is my property management company would get the management, right. Because we could kind of co-PItch them. So I didn't have to go out of my way to work for one company. I was kind of working for all the companies at the same time. And so now I'm doing something very similar with the development and investment groups.

[00:06:54] Tyler Cauble: So every time I go out and find a property to buy now, the cobble group gets the four lease listing or the, for sale listing and Persol gets the property management agreement. So, It makes sure that I don't get distracted, cuz it's very easy to just get distract. Like I didn't go start a bar while I'm doing a commercial real estate brokerage.

[00:07:10] Sam Wilson: Those are two very different. Right. No, well said. And I appreciate breaking that down. What were the keys though? How did you find the good people? How did you, for me, it's one of, one of the common struggles in this probably is not just for me, but for a lot of people is onboarding, getting people trained at the right people in the right seats.

[00:07:29] Sam Wilson: Like that's really granular. And really the more of the role of an integrator. Are you the integrator or do you have an excellent integrator on your team or what's .

[00:07:37] Tyler Cauble: No, I am definitely not an integrator. I am like a lone Wolf salesman. I just wanna go close deals. Like that's the only thing that I wanna do.

[00:07:45] Tyler Cauble: Cuz I'm really good at it and I love it. If I wanted to grow and scale and get to, some of my future goals, which is owning a lot of real estate and developing towers and stuff like that, I've gotta grow a team around me. I can't just be doing that, totally solo. So, no, I'll be upfront and honest.

[00:07:59] Tyler Cauble: Like I've never been the best manager of people. I'm not a good manager of people. So because of that, Have learned over the years to try and hire self starters, more independent people that are willing to just go out and do the work on their own. And so, we've got a team I've got probably 10 employees now.

[00:08:16] Tyler Cauble: And just about every single one of them is like that. I don't really have to tell them what to do on a daily basis. They know what they need to be doing. And they're bought in through. Profit share. And some other incentives, bonuses, stuff like that, that we've got set up based on their performance for the year, for the quarter, whatever that is.

[00:08:33] Sam Wilson: Right. Yeah. And that's, that's, that, that makes a lot of sense. Who was your first key

[00:08:37] Tyler Cauble: hire? Who? My first key hire was the second broker. Back in the day when I first started the firm, I mean, when I left the development firm to start my own thing, I realized just how much their influence on my marketing was stifling my own business.

[00:08:53] Tyler Cauble: Cuz as a broker, you're a 10 99, you're an independent contractor. Like you eat what you kill. Right. But this company would not let me a market in some of the ways that I wanted to like. Doing stuff through Instagram and Facebook and whatever, like they just wanted billboards.

[00:09:05] Tyler Cauble: Like they thought that was the way to market, which is hilarious to me. But as soon as I left and started doing my stuff I tripled my business that year. Like we went from probably four to $5 million a year to about $15 million a year in sales for the brokerage, which was pretty good for being in, I guess, starting your brokerage for the first.

[00:09:24] Tyler Cauble: So, that was pretty telling for me that I was headed in the right direction for sure. Yeah,

[00:09:28] Sam Wilson: Absolutely. Absolutely. So the second broker was your first key hire there. I love all that. Are there any other channels or businesses in the real estate sphere that you say, man, this is one more, one more bolt on to our current suite of businesses that I'm really looking to, to.

[00:09:45] Sam Wilson: Yeah.

[00:09:45] Tyler Cauble: We've toyed with the idea of construction adding that on before, but, it's it, that's so intense and sometimes it's just easier to be able to blame a third party and hold them true to a contract than it is to worry about, your team member, not falling through.

[00:09:59] Tyler Cauble: So that, it's kind of why we haven't started that yet. And then, underneath the property management company, we've looked at expanding and acquiring others. Companies beneath that. So, like all of the vendors that we use on every single property now that I own 2.1 million square feet we manage far more than that too.

[00:10:13] Tyler Cauble: We kinda get these economies of scale. So why not buy our own H V a C company that works for us, but also third parties? Why not buy our own landscaping company, our plumbing company, electrical company, whatever that ends up being because we'll be one of our biggest clients, right? This means that we know that we can support that business.

[00:10:28] Tyler Cauble: That business just needs to go out and find third-party work too. Right,

[00:10:32] Sam Wilson: right. Yeah. Those are all excellent. Excellent points. And I guess, just again, it goes back to, and this is something we talk about in this show all the time is just the right people. Like it's, it goes back to finding the right people and the right seats on the bus.

[00:10:45] Sam Wilson: Otherwise you're gonna buy an electrical company that you're gonna go,

[00:10:50] Tyler Cauble: oh my gosh. Now I just bought dad weight. I just bought a job. just bought a job

[00:10:52] Sam Wilson:. Right. And now we're trying to resuscitate a dying electrical company. Bad processes , bad employees and bad culture and oh, no, not about

[00:11:02] Tyler Cauble: that.

[00:11:02] Sam Wilson: No. So that's but that really, that is really cool. I love the forward thinking there where it's like, okay, what else can we tack on here that will supplement or not supplement, but. I can even find compliment. Hey, there we go. Thank you. Ding ding, ding, you win the prize.

[00:11:15] Sam Wilson: Compliment your current suite of business. That's really cool. I wanna shift gears here and talk about industrial real estate. Why you're excited about it. Why you guys are investing in it personally and why you see such a bright future

[00:11:27] Tyler Cauble: for it? Yeah, I think industrial real estate has been the darling out of this last economic cycle, before.

[00:11:35] Tyler Cauble: It wasn't really that sexy, right? , people just didn't really care about industrial real estate. It was just kind of a, it was out there. And now, with the rise of eCommerce, especially it's, as cities grow, industrial tends to get torn down, right. Because there's a higher and better use.

[00:11:50] Tyler Cauble: Maybe you can build multifamily or whatever. Well, as cities grow. eCommerce grows and industrial's getting torn down. That means that there's a very limited supply of this real estate asset. And it's performing exceptionally well almost all over the entire country, but there are, of course, like the Southeast very partial to, since I'm out here.

[00:12:09] Tyler Cauble: But look, online sales are gonna continue to. Like eCommerce, isn't going anywhere. If anything is going to just get bigger and bigger as these companies figure out how to sell you things even faster and better the supply of industrial properties is not growing rapidly. It takes a long time to build these buildings.

[00:12:24] Tyler Cauble: A lot of developers are focusing more on the a hundred thousand 500,000 million plus square foot building. And there's a massive need for the 20, 30, 40, 50,000 square foot building. So if you've got some industrial land, I would certainly look at building some smaller flex space. And then typically what you'll see in industrial properties is less turnover than you might in some other asset classes.

[00:12:46] Tyler Cauble: Because with a limited supply with prices rising and with just the absolute pain that it causes for some of these industrial tenants to move it's just not worth the move. So you'll, you likely have tenants there for quite some time.

[00:13:02] Sam Wilson: Yeah, that talking about the tenant comment. That reminds me a lot of mobile home parks where it's like the cost to move a mobile home is just so great that like 50 bucks, 50 bucks a month extra in a rent bump is like, well, I could spend 50 bucks a month or I could spend 10 grand or eight grand moving this.

[00:13:17] Sam Wilson: So I guess I'll pay the 50 bucks a month. Exactly. That, that makes a heck of a lot of. Flex space. That's a term that maybe our listeners and maybe I am only mildly familiar with. When you say smaller flex space, it sounds like there's an opportunity there that maybe has great demand, but maybe limited supply.

[00:13:32] Sam Wilson: What is that? What is flex space and then, walk us through what that means, I guess if you

[00:13:36] Tyler Cauble: can. Yeah. So flex space is a type of industrial real estate that. Flexible and it's use, I know we get very creative with our terms here in, in CRA . So what that means is, you could have, let's say it's 5,000 square feet and you've got 4,500 square feet of warehouse and 500 square feet of office.

[00:13:53] Tyler Cauble: It's kind of flexible in the use. You could. Add more office, get it up to a thousand square feet of office and 4,000 square feet of warehouse. You'll see some showrooms that look like that. You'll see. Sometimes it's just literally 3000 square feet of condition warehouse, whatever ends up being, but it's that smaller industrial sub sector that, your local electrician or plumber, or, some smaller eCommerce startup, that's making candles and needs to be shipping them out, but they need a little office as well.

[00:14:21] Tyler Cauble: that kind of business, those spaces just aren't being developed as often as they were back before this economic cycle. Right. Because again, everybody's now focused on distribution and logistics for eCommerce. So definitely an opportunity there to supply. The space for those types of tenants.

[00:14:39] Sam Wilson: How does

[00:14:40] Sam Wilson: someone evaluate that, that market and say, okay, this is a great spot for smaller flex space. How where does that, where do they

[00:14:48] Tyler Cauble: start? Yeah, if you see some other flex buildings nearby, smaller warehouses good access, right? Maybe near an interstate, maybe you're near some major thoroughfares you're not far from downtown.

[00:14:58] Tyler Cauble: You think about what the needs of those kinds of tenants are. Well, you know what an electrician could be. 30 minutes south and then 15 minutes east, and then they've got an appointment north of town. So they need to be centrally located. They need to be in a more affordable area , and they need to have, taller ceilings.

[00:15:14] Tyler Cauble: So it just depends on, you don't have to be in like a heavy manufacturing, industrial area. You can be kind of within a neighborhood. You see a lot of urban neighborhoods that have some smaller warehousing and industrial properties where that could be pretty good. Are

[00:15:29] Sam Wilson: there any headwinds in the industrial space as a whole, that you say, man here's a market risk that we should be looking out for.

[00:15:36] Tyler Cauble: I think just being careful of how much you're paying for land and how much you're paying for construction because construction costs have gone up. Land has gone up and at the end of the day, there's only so much rent that these kinds of businesses can pay. And you as an investor have to play that line of, okay.

[00:15:54] Tyler Cauble: How can we deliver a property that is going to be desirable enough to where it's gonna get leased. But, we're also maximizing our returns and, downsizing our risk. And when I first got started in the business nine years ago, you would look at flex space for six bucks, a foot, right?

[00:16:10] Tyler Cauble: Incredibly cheap. Now we're looking at flex space between 12 and $18 a foot. So, and that's in nine years. So you just think about if you were a small business, like you were a local electrician and your rent in the last nine years has tripled well, either you, your business better have tripled or you're gonna be looking for something else.

[00:16:31] Tyler Cauble: So that's probably just something to keep in mind is just your overall cost and how much rent you're gonna have to charge to make a return. Is

[00:16:36] Sam Wilson: there, are there any zoning restrictions? Are there, is it tough to get that space through. Permitting process from a, usually from a city level.

[00:16:45] Tyler Cauble: Yes and no. I would go after land. That's already zoned. But this is a light industrial use, right? If, if you're trying to get it rezoned for car manufacturing, that's a, an entirely different process and you're gonna have a lot of trouble, but for light warehousing, it's a co it's a commercial use.

[00:17:01] Tyler Cauble: So, I would, again, aim for something that's already zoned, but you know, if you've gotta go through rezoning, just make sure you talk to your local alderman, Councilman, politicians, whatever they call 'em in your area. And make sure the neighborhood's gonna support it.

[00:17:13] Sam Wilson: Right. Absolutely. Absolutely.

[00:17:15] Sam Wilson: Tyler, this has been fascinating, learned certainly a lot about how you have grown your business, how you vertically integrated all of your businesses actually. And I think that's been, that was a really cool conversation for taking the time to kind of break down how you've done that. And then really tell us about what you see in the industrial space and where it is now and where you know, where it's heading and, again, just a small nugget there that there is right now, a hu huge need.

[00:17:37] Sam Wilson: In the smaller flex space and really how to get involved in that. Are there any other closing thoughts here you'd like to share with the listeners before we sign off?

[00:17:45] Tyler Cauble: Sure. The only thing is I've got a couple of free downloads on my website for your team and a couple of calculators in case anybody wants to jump on there and calculate commercial rents or cap rates, anything like that.

[00:17:55] Tyler Cauble: I also have free downloads for my due diligence checklist, which is what we use every time we're going through the buying process. A letter of intent for whenever releasing, and then you can get a free copy of my book. Open for business, the insiders guide to leasing commercial real estate. That's all on my website.

[00:18:08] Tyler Cauble: Tyler cobble.com/.

[00:18:11] Sam Wilson: Awesome. Tyler cobble.com/scale. We will make sure we put that in the show notes. Tyler, thank you again for coming on today. I do appreciate it.

[00:18:19] Tyler Cauble: Thanks for having me, Sam.

[00:18:20] Outro: Hey, thanks for listening to the how to scale commercial real estate podcast. If you can do me a favor and subscribe and leave us a review on apple podcast, Spotify, Google podcast, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories.

[00:18:41] Outro: So appreciate you listening. Thanks so much and hope to catch you on the next episode.

Joseph Gozlan of Eureka Business Group is a multifamily broker, investor, and operator. Today, he shares his insights on how to navigate the current market for success and protect yourself from interest rate risk. He stresses the importance of having a good headaches to returns ratio when buying or selling real estate and explains why they are focusing on commercial and industrial assets. He also talks about a new trend in the restaurant industry and the opportunities in the space to look out for.

[00:01 - 10:14] Owning and Operating Over $30MM in Real Estate

• Joseph talks about starting from single-family and realizing it's not sustainable
• Going to the big leagues and helping residential investors to transition as well
• How to find opportunities? Stop looking for the unicorn deal. Make your own deal.
• Offsetting risk in the market
• Getting the right terms is important
• Commercial clients get better interest rates than residential clients

[10:15 - 13:24] What is the Headaches to Returns Ratio?

• Why Joseph and his team are investing in industrial, retail, and self-storage
• No more assets that people can sleep in
• When the headaches to returns ratio exceeds the acceptable ratio, you sell

[13:25 - 18:27] The Rise of Cloud Kitchens

• This is for people who want to run a restaurant but don't want the risk and the headache and the cost of the big retail side of a restaurant
• Leveraging online platforms and different delivery apps
• Young chefs entrepreneurs have the option to build a name first before opening a storefront

[18:28 - 20:37] Closing Segment

• Words of advice from Joseph
• Reach out to Joseph!
• Links Below

• Final Words

Tweetable Quotes

"We learned that it's the residential investors, that if we teach them and we work with them and we help them find good deals, then they graduate into the commercial side." - Joseph Gozlan

"Don't go and try to hunt for unicorns. They just don't exist. Instead of working really, really hard to find a deal, let's go make a deal. Find a property that fits all your other criteria except the price." - Joseph Gozlan

"The main resolution that we've come to is no more things people can sleep in. And that just comes from the most important benchmark an investor can have, is that headaches to returns ratio." - Joseph Gozlan

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Want to read the full show notes of the episode? Check it out below:

[00:00:00] Joseph Gozlan: The thing that I tell my investors is to have a PFS, right, have a personal financial statement and fill it up. And make sure you update it at least once a month. And when you do that, and you have residential properties, you realize that your property grows $200, $300 a month into the principal, which adds on to your net worth.

[00:00:33] Sam Wilson: Joseph Gozlan, welcome to the show.

[00:00:35] Joseph Gozlan: Thanks for having me, man. I appreciate it.

[00:00:37] Sam Wilson: The pleasure is absolutely mine. Joseph, in 90 seconds or less: can you tell me where did you start? Where are you now? And how did you get there?

[00:00:44] Joseph Gozlan: Good, great question. We started back in 2005, invested in single-family, grew to, you know, duplexes, read the Rich Dad Poor Dad. That's how we got started. And then somewhere along 2015, kind of realized that it's not sustainable and I want to graduate to the big league. So I started looking at the commercial assets. Yeah. And that's when we got our first multifamily property, it was a 20-something unit. And today we own and operate about 300 units close to 30 million in assets that we own with investors for the most part. And we got licensed in Texas back in 2008, 2009, and we've been working with investors mainly since then on residential and commercial transactions.

[00:01:31] Sam Wilson: Got it. So you're a broker, also an investor. And you found a way to kind of silo a couple of different lines of business there, the single-family residential investment side, but also the commercial brokerage side.

[00:01:44] Joseph Gozlan: Great. We learned that it's the residential investors, that if we teach them and we work with them and we help them find good deals, then they grow into the commercial side. They kind of graduate into the commercial side. So we like to hold their hands throughout the entire process. And not just, you know, a lot of commercial brokers will snub at the smaller investors. We want to be there for the journey for them.

[00:02:08] Sam Wilson: Right, right. Yeah, absolutely. Absolutely. And, I mean, it's common, I guess, a common path for a lot of us. It's the path I was on. It's like, okay, I'm a single-family investor. I do fix and flip, I own rental property, blah, blah, blah. And then eventually you're like, okay, maybe I need to find something bigger 'cause like you said, it's just, it's not scalable, which is the title of this show, which is yeah, more, more zeros in, in the same amount of work. Tell me this. What are you guys really interested in right now, personally in investing in?

[00:02:37] Joseph Gozlan: So we're very bullish on industrial these days. The whole COVID situation kind of impacted all real estate in different ways, but what it really did, one of the good things that came out of the whole COVID situation was econ got accelerated about a decade forward in two years period. So all the econ that has developed and grew all the people outgrew the garage, they need a 3000 square foot warehouse. So these guys outgrew the 3000 square foot, they need the 10,000 square foot all the way up to the million square foot warehouses of the Amazons, right? So industrial has been very hard in the market. We also see an interesting shift of institutional money flowing from multifamily over to industrial. So that's really where we are these days is we're focusing on the industrial side of things.

[00:03:28] Sam Wilson: How are you finding opportunity in industrial? I mean, not that anything's not competitive, but I feel like industrial's a pretty darn competitive space, and cap rates there just keeps shrinking. So what are you guys doing that says, man, here's how we're separating and finding value in this space?

[00:03:47] Joseph Gozlan: So it's no secret that the market's been hot for the last few years, right? Whether it's multifamily, industrial, a lot of the real assets classes have been hot. What I've been telling all my clients is that, look, we don't go and out and try to hunt for unicorns. They just don't exist, right? So instead of working really, really hard to find a deal, let's go make a deal. Find a property that fits all your other criteria except the price. And then let's go make a deal. You know, sometimes it works. Sometimes it doesn't. Sometimes we get creative with the financing or we get creative with the terms. But we've secured 6, 7, 8, even 11% cap rate deals just in the last six months so for our clients. They're out there, you just got to find them.

[00:04:31] Sam Wilson: That's awesome. I love that. Find the property and make a deal. Yeah. Finding the unicorn can be particularly challenging. Joseph, here's a question for you: when it comes to interest rates, and buying industrial property. A lot of these are sold on a triple-net lease, right? Or they're not sold, but they're bought and they put a triple net lease in 'em that might, it might not get renewed for five, seven, even ten years sometimes. How are you guys protecting yourself with that interest rate risk? I mean, let's assume interest rates just keep climbing. I mean, and then you got, and you got something that's maybe paying 4% or 5% on annual basis. Like how, how does, how does that work out for you guys and how do you protect yourself?

[00:05:08] Joseph Gozlan: So the way I look at real estate is rule number one in real estate, everybody thinks it's location. It's not. Rule number one in real estate is you make your money when you buy. Getting to the right deal, put the right terms in place, right? Even if you know, you're up for a refi in three years, five years, and the market is a disaster, a bank will give you a loan. You might not be happy about it. You might not like it. You might not make money for a year or two until things recover. But you're not going to lose the asset if you bought right. That's one thing. I could counter-argue that the same risk that we take on the refi and interest rates in the market, everybody else on residential and multifamily are taking that risk in property taxes. But I don't know how it is in Tennessee, but in Texas we've been slaughtered in the last few years. Probably taxes just going up and up and up and up 20%, 30% is like they have no mercy and that's a risk that residential and multifamily carry. But when you have a triple net lease, that entire risk is being transferred over to the tenant because the tenant pays the cams or the triple net and covers that risk for. So we might have a risk there, but we don't have a risk there. And unfortunately, the property taxes risk is guaranteed versus the interest rate, which is an unknown right now.

[00:06:30] Sam Wilson: Oh, absolutely. And as governments and even local governments continue to spend well beyond what it is that they're bringing in, then they're just going to have to keep circling back to the only source of income they have, which is, you know, largely property tax and taxes in general. And those are just going to continue to climb. So that's a really interesting point. I've never really thought about that. Yeah. On a triple net property, you go, you know, they're assuming all this other risk. Yeah. We might have some, we may have a fixed rate of return on this, but, but we've also got some, some downside that we're protecting against as well. Would you say that same thing as it pertains to inflation? When you look at inflation, you go, okay. Inflation, you know, could be skyrocketing, but even if we're not keeping pace it's okay. 'cause we're offsetting risk. Is that kind of the thinking there?

[00:07:15] Joseph Gozlan: So in the last 10 years, right, we've seen residential and multifamily really benefit from the fact that their leases are 12 months, right? So as rent go up and up and up every year when you renew the lease, you could get 5%, 10%, some percent, some places, 20% increases in rent year over year. So when you have a market that goes like this, having a retail or an industrial that have a fixed 3, 5, 10-year lease with 2% to 3% increase built in, it's not very attractive, right, cause you, you can't catch up to where the market is. But when you have a shift in direction, when the market is plateauing or maybe going down, then having those guaranteed increases and guarantee corporate level tenant that reduces the risk and ironically, or surprisingly, whichever you want to look at it, we've seen our commercial clients get better interest rates than our residential clients. So I have a residential client that is buying like a duplex or, or a single family, and they get 6% interest rate these days, six and a quarter, even while we just closed on a $3.7 million warehouse at a 4.99% interest rates. So you see, it's kinda like even the banks realize that the risk is a lot lower on these right now than it is on the residential side and they give preference and better interest rates.

[00:08:42] Sam Wilson: Wow. That's really shocking, but you know, obviously, it just shows you where the, I mean, the lenders are where they see risk in the market. And clearly it's on the single-family side of things. What do you tell your investors who are investing in single-family? I mean, do you tell them that like, Hey, you're buying a riskier asset?

[00:09:00] Joseph Gozlan: No, because, look, we're still undersupplied data market, right? There's still a huge demand and not enough new construction going up. It's not the same situation like we had with 2008 where we had ghost neighborhoods, right, that were completed and nobody was leaving in them. We're not in the same world. The thing that I tell my investors is have a PFS, right, have a personal financial statement and fill it up and make sure you update it at least once a month. And when you do that and you have residential properties, you realize that your property grows $200, $300 a month into the principal, which adds on to your net worth, right? But you graduate to the big boys, right, you graduate to a million dollar, $2 million, $5 million property, all of a sudden it's a $10,000 mortgage or $15,000 mortgage. And then every month there's an excess zero in the amount that's adding to your net worth. So the principal piece, it's not 200 it's 2000 or 20,000, right, depends on the size of the mortgage. So I help them see that, you know, if you really want to build your net worth, the larger you go, the bigger you go, the more zeros are added to your net worth every single.

[00:10:14] Sam Wilson: Right. No, I absolutely love that. That's really, really cool. What are you personally, so you guys run a brokerage, you have lots of clients, I'm sure that you guys are bringing industrial properties to, what is your buy box right now and why?

[00:10:29] Joseph Gozlan: I'm actually against putting things in boxes.

[00:10:33] Sam Wilson: I like it. Okay. Let's hear it.

[00:10:35] Joseph Gozlan: That's the thing. So what I tell my clients is instead of looking at what I want to buy, right, tell me what you don't want to buy. And then we look at everything else, right? So, it's easier for me to say, I don't want to do war zones. I don't want to do student housing. I don't want to do voucher housing. And so on than to say, I'm looking for this, because if I'm looking for this, I could have a great opportunity over here that I'm not going to look at. So, for me specifically, right, in our personal investment portfolio right now, the main resolution that we've come to is no more things people can sleep in. And that just comes from the most important benchmark an investor can have. And unfortunately, this is a benchmark you learn to appreciate more with age and experience, is that headaches to returns ratio.

[00:11:27] Sam Wilson: Okay.

[00:11:28] Joseph Gozlan: It's that simple. The headaches to returns ratio and that is the only exception to the rule of never sell real estate, right, except when the headaches to returns ratio exceed the acceptable ratio, right? And that's really what it is. We manage over 250 apartment unit right now. And the amount of headache it generates. Because we also have the property management in-house is beyond what value and returns we get and the opportunity cost.

So for us, the transition is to retail, to industrial, to those self storage, all those other assets people can't sleep in, in, in a short way to say that. We also kind of like retail, but not any retail, mostly the small service centers because Amazon still can't figure out how to do your nails, cut your hair, get you a cup of coffee in the morning, right? So we still strongly believe in those small retail strips neighborhood service centers. We think those are great opportunity as well.

[00:12:32] Sam Wilson: Oh, neighborhood service centers, man. I think those are those, those are here to stay. I mean, and the people that specialize in that, it's it, yeah, there. There's, just like you said, you're getting your hair done, well, I, I'm not getting my hair done but somebody's getting their hair, getting their nails done, they're getting, I mean, there's just things, there's things that you just can't Amazon Prime to your door and yeah, I see those having certainly a long, useful life there. That's really cool. Joseph, we've talked a lot here about real estate. We've talked about, you know, brokerage, we've talked about, you know, think risk you're seeing in the market, how you guys are shifting gears. You've moved into industrial. I love your headaches to return ratio if you haven't trademarked that you should 'cause that's a pretty cool thing there. And then what, what was it there that, that you, you own, you buy things that, that no one can sleep in, as long as, as long as they can't sleep in it, then, then it's inside your buy box. Are there things outside of real estate or other businesses that you guys look at, you say, Hey, man, I see, I see opportunity here that, that you're currently looking into.

[00:13:36] Joseph Gozlan: Yeah, absolutely. So one of the things that kind of trains that we've noticed in the market recently is. What we call cloud kitchens. So in the world of restaurants and food, it's very expensive to get a, like a restaurant like BJ's or, Razzy's or a steakhouse or something like that. Because it's prime real estate, right? And you pay a lot of dollars per square foot to have that location. You pay hundreds of thousands of dollars to set up this thing and you don't know if it's going to work or not. So it's a high risk, unless you're a chain of restaurant, it's a high-risk move for chefs, for a small investors, people that want to get into that business. And the funny part is you pay the same price per square foot where you seat your clients and where the kitchen in is, the back end stuff. So it's very expensive. And what we've seen is the move to cloud kitchens. If you watch shark tank, they talk about that too, as well. It's basically people that want to run a restaurant but don't want the risk and the headache and the cost of the big retail side of restaurant. So they get a place in an industrial area or industrial building, and they built a kitchen in there and they reduced the cost of entry and they leverage DoorDash and Uber Eats and GrubHub and all those apps that came out and do the delivery for them to build their name, to build their brand. So when you go on DoorDash and you see a name of a restaurant, there might not be a restaurant behind it. It might be just a warehouse in the middle of somewhere where they cook the food and they send it out with delivery 'cause I don't know if you've ever talked to a pizza place owner ever in the history, one of their biggest headaches is the deliveries. You got to have a driver, you got to have the reliable car, you got to do all that. And the cost of gas impacts everything. But today, Uber, DoorDash, GrubHub. You got rid of the headache. All you have to do, if you're a chef or if you're an entrepreneur in the space, is focus on doing good food, great pictures, and promote it.

[00:15:41] Sam Wilson: That's really cool. Yes. I have heard of this and this is something even at one point I saw 'em turning these into like underutilized parking garages. They said, okay, we're going to put a quick service restaurant in there. Are you guys in, I guess, this is a, a perspective or prospective investment for you guys that you're looking at, say, man, I might see opportunity there?

[00:16:01] Joseph Gozlan: Well, yeah, absolutely 'cause again, it all falls into industrial buildings, right? So if industrial is, is where we're going to look at, then it's definitely a tenant that we're happy to have.

[00:16:12] Sam Wilson: Are they building these like unique brands where it's not just, you know, this is just, Hey Sam west to open a restaurant and I'm going to just put it in an industrial building and nobody knows about me yet and their doing it completely with digital marketing and DoorDash means that, is that the way that's going down? Is that what I understand?

[00:16:30] Joseph Gozlan: Yeah, pretty much. This is an opportunity for a young chef or a young entrepreneur to build a name, build a brand, right, until he is enough following, enough income first, he can decide that he never wants to open a storefront, right? This is basically the e-commerce of food. I don't want to brick and mortar store for shoes 'cause Amazon is going to destroy me. But if I have an e-com store for shoes, I can compete with Amazon, right? Same thing with the food. I don't want to storefront or retail place where I have to pay a lot of rent and I'm depending on foot traffic. That is gone, the days of that are gone now. So now I can use DoorDash and, and everything. And all I need is to compete on-screen space.

[00:17:12] Sam Wilson: Right. And you could dedicate an entire floor of a warehouse or of an industrial building or something to specifically being set up and even go with multiple kitchens, potentially, in the same exact space.

[00:17:23] Joseph Gozlan: And that's the next level, right? So I haven't seen that done yet, but that's the next level. Somebody that buys a warehouse sets it up with, even, you know, lack of better term kitchen suites, right? Like the WeWork of kitchens, basically, right? It's definitely something that, you know, if I could, as a young chef, come in and get for, let's say $2,000 a month or $1,500 a month, I can get a whole kitchen set up for me. Why not?

[00:17:51] Sam Wilson: Yeah, that'd be hard to compete with, you know, as it comes to startup cost of an actual restaurant with walk-in traffic and seating and everything else, I think it's fascinating to see how the whole delivery model is just changing. It's changing everything and the unique ways we can add value to both the properties into even our tenants. I was talking to somebody else today that they're charging their tenants 25 bucks for valet trash service. So all they have to do is set their trash at their front door and I'm like, wait, so now you have somebody walking around, picking up all their trash and carrying it to the dumpster for 25 bucks? I mean, it's like, okay, that's brilliant. I guess. I mean, but people are paying for it and I think it's just amazing the number of places we can go. Joseph, I certainly appreciate you coming on today. This was a blast. I learned a lot about what it is that you guys are seeing in the marketplace and how you guys are taking and finding opportunity. I love, of course, again, your headache to return ratio, that you might get a show asset or something that goes along with that the headache to return ratio and your trademark on it, but certainly appreciate that. Are there any other closing thoughts you have here for our listeners before we sign off?

[00:18:50] Joseph Gozlan: Yeah, the market is shifting, but we don't see a big dip or a big crash coming up. I know a lot of people, there's some YouTube videos that basically predict the end of the world as we know it. It's not going to be like 2008 'cause we don't live in the same world as 2008. The technology, the gig economy, you can, you know, drive Uber or DoorDash or stuff like that, and still make income, even if you lost a job or something like that. So, I think the crash is not going to be as hard as people are saying. But I do say now it's a time to kind of look at the right opportunities and not be afraid to put offers that are not asking price or above asking price like we used to see recently. It's time to get ready because when the blood is in the water, that's where the sharks are going to have fun.

[00:19:36] Sam Wilson: Absolutely Joseph, thank you so much. If our listeners want to get in touch with you, learn more about you, what is the best way to do that?

[00:19:42] Joseph Gozlan: Our website is the easiest way to find us. ebgtexas.com. And that takes you to our main website where we do the commercial real estate. And I'm on Facebook, Twitter, TikTok. You can find me everywhere, just reach out. I'm happy to discuss real estate anytime.

[00:19:57] Sam Wilson: Awesome. And can you give me that website one more time?

[00:20:00] Joseph Gozlan: Absolutely. It's ebgtexas.com.

[00:20:04] Sam Wilson: ebgtexas.com. Joseph, thank you again for your time today. I certainly appreciate it.

[00:20:10] Joseph Gozlan: Absolutely.

How significant is the value of sticktoitiveness, and how is it related to real estate investing? For Kevin Dureiko, it meant leaving himself with no choice but to keep going and execute to make life favorable for himself and for his family. He brings on a unique aspect of real estate today regarding debt. Listen in!

Kevin Dureiko is a fund manager at Birch Dobson LLC BirchDobson.com. He is managing Birch and Dobson's capital raising and deployment to short-term bridge clients. This fund specializes in funding short-term, value-add, and stabilization of income-producing assets.

[00:01 - 03:22] Opening Segment

• Kevin on transitioning to the debt aspect of real estate
• Creating a company to buy debt - going through learning curves
• The ins and outs of launching a debt fund

[03:23 - 11:33] Total Control of the Capital Stack

• Opportunities in multifamily syndications considering value-add and exit gameplan
• Kevin explains the profile of an ideal investor for debt-only deals
• Expanding and diversifying assets - the significance of connections

[11:34 - 17:55] The Virtue of Sticktoitiveness

• Kevin gets in-depth about the build-to-rent vs. build-to-sell projects
• When life happens, it is all about figuring it out and taking action

[17:56 - 20:01] Closing Segment

• Reach out to Kevin
• • See links below
• Final words

Tweetable Quote

"I just keep on pushing… It didn't matter what really was happening in the economy, what's happening with myself, I just got to figure out something because I'm not a nine-to-five guy, never have, never will be. I had to be something else. It's life and putting together an action plan." - Kevin Dureiko

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Connect with Kevin Dureiko on Linkedin. Visit his website and email him at [email protected]

Resources Mentioned

Three Feet From Gold by Sharon L. Lechter and Greg S. Reid

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Want to read the full show notes of the episode? Check it out below:

Kevin Dureiko 00:00

Having an innate ability to look past problems, there's no such thing as a roadblock. It's just how do you get around it? I don't know what it is, what's instilled that in me, but I just don't give up. I don't take no for an answer.

Intro 00:13

Welcome to the How to Scale Commercial Real Estate Show. Whether you are an active or passive investor, we will teach you how to scale your real estate investing business into something big.

Sam Wilson 00:25

Kevin Dureiko is a husband, father, private debt fund manager, and also a capital raiser. Kevin, welcome to the show.

Kevin Dureiko 00:31

Thanks for having me, man.

Sam Wilson 00:32

Hey, man, the pleasure is mine. 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 there?

Kevin Dureiko 00:39

I started in 2007, I had created the company to be debt buying funds, then realized that that's more of a game that I don't want to be into for many various reasons, transitioned into the debt portion of real estate. And now our three and four funds will be syndications, ground-up construction, and obviously just continuing to do real estate debt.

Sam Wilson 01:00

Right. So this is obviously you gave me a 2007 to 15-year span that you just said it's 15-30 seconds. That was pretty impressive, by the way. When have you thought about how you created a company to buy debt, like what we had, I mean, just wake up one morning and have a, you know, thing struck my brain, and here we go, we're gonna buy debt. I mean, how did that work out?

Kevin Dureiko 01:23

I wish it would have been that easy. But listening to the tales of my family and our history, my grandfather was a marshal, and in Connecticut, a marshal is basically a debt collector. Basically, told me, you know, you can buy judgments, buy debt, buy mortgages for less than what they are. And I was like, Man, that's crazy. You can buy money for less than what it's worth, right? And then there was like yeah, that was a concept you couldn't even comprehend. So I just went on this learning curve of what you can do with this type of stuff. And it just basically led me here.

Sam Wilson 01:54

Oh, wow. All right. But as you were into this, then you quickly figured out that, hey, you know what, that's one thing. But buying debt that's attached to real estate is probably a better spot to be, was that the conclusion? Or am I missing something there?

Kevin Dureiko 02:06

No, that was the conclusion. And then you figure that you can that you do put out or the debt that you do collect can be assigned to a real estate deal that can have pliers. There are so many different ways you can put money into more money. It's just made as the natural course and natural set that we went with.

Sam Wilson 02:22

Got it. Was there a particular asset class you focused on? Or was there you buying distressed debt? Were you buying, and what types of debt were you guys focused on?

Kevin Dureiko 02:32

Mostly distressed debt that our contract related that goes liens a house, we'll buy that lien out, and then eventually collect that.

Sam Wilson 02:41

Interesting. Okay, very well, I know, there's a lot to unpack there. Is that is that the same? Is that the same model you're using today? Or is that changed?

Kevin Dureiko 02:50

That's changed considerably or was not in that business whatsoever.

Sam Wilson 02:55

Okay, cool. But you said you guys are launching a debt fund here. Have one launched right now, I guess. Can you walk us through that fun and how that functions?

Kevin Dureiko 03:04

Sure. Yeah, we take accredited investor capital, we lend it out to real estate investors, the simplest form. So, if you're a guy in syndications, we're coming in with the stet. In your LP money, we're financing that portion of it, we're doing fix and flips. And up until recently, we're doing 30-year term rentals, long-term rentals.

Sam Wilson 03:23

So this is not a conversation I've had with anyone on this show yet. You guys are bringing debt to syndications in the first position like you guys are the bank. Is that what I'm hearing?

Kevin Dureiko 03:33

You're hearing correct.

Sam Wilson 03:34

Okay. Well, interesting. Tell me more about that. How did other asset classes you're focusing on? Do you see an opportunity? Why do you see opportunity, is there more color to that?

Kevin Dureiko 03:44

Multifamily syndication. That's where our main asset classes we want to see the value add, we want to see a little bit of experience, and we want to see an exit in a game plan. So you come to us with a deal for 5 million, you need to put 25% down or something along those lines, and we'll pick up the rest. That's really

Sam Wilson 04:01

That's really intriguing. How are you guys making money on that? I mean, obviously, you're collecting the interest on it. But is there? Are you flipping that debt? Are you holding it in-house? How are you guys monetizing those new debt positions?

Kevin Dureiko 04:15

In sheet, we don't sell anything. The model that we're running, especially with our fund, is that we want to have total control of the capital stack. It allows us to give you, as an investor, security knowing that our problem you could pick up the phone rather than me selling it to Wall Street, and then you'd have to deal with all that.

Sam Wilson 04:34

What type of investor, and I'm sorry to narrow in on this because this is just a unique thing that I think you bring into the market maybe it's unique, or maybe I'm just, you know, head in the sand. But I have met a lot of people that are out raising money for a fund that is the I mean, the raising money basically, you know, 100% lender, first position on a deal and then holding it in house. I mean one that's a lot of capital to raise. Right, correct, and two units to be a particular type of investor that is good with whatever the interest rates are that you guys are charging and in return, you're getting on that capital. So what type of investors typically come to you guy to say, Hey, man, I'd love to just come in and be debt only on a multifamily deal? I mean, there are some pretty competitive terms out there from other sources. So tell me about the investor that is your kind of ideal investor.

Kevin Dureiko 05:22

My investor is somebody that doesn't want to tie the Capitol up for a long period of time. But they want to be able to be having an asset-backed way to secure their money. So the debt that we're putting on multifamily properties isn't the length that it isn't the NA in the Friday, the government-backed debt. It's the Restabilization debt. So the purchase, maybe a one or a two-year hold, at some renovation budget into it, and then we're going to be taken out by sale or refinance.

Sam Wilson 05:51

Got it. Okay, cool. How have you guys changed the way you guys structure your loans last 12 to 18 months?

Kevin Dureiko 06:01

We've structured it a little bit more stringent. When it comes to experience, the leverage is relatively the same, we're still looking in a 65 to 75% range. And that's all depending on, obviously, the property. No loan is cookie cutter, no deal is cookie cutter, no borrowers cookie cutter. So it's an ala carte. You're out what the best scenario is for the property. We're not alone in our own lenders. And that's a terrifying string of words if you really think about it. So looking for the best portion deal. And the most part is getting your invested capital back to your investors. Because everybody needs to be happy. We don't need a string of lawsuits. So we're securing our capital with a great asset, a great income-producing asset, this particular type of investor that you know, wants to tie their money up for a shorter period of time, other than syndication itself. And we go about it that way.

Sam Wilson 06:51

Right. So your investor again, and you know, just be careful understand that somebody says, hey, look, I'm good with maybe a lower return profile, but yet I know I'm first position debt. And you know, where I don't want my money tied up for five to seven years, this is great. I'll get clipped my coupon and then hopefully, we'll exit in a few years and then do something else with it or, you know, invest, is that what I'm hearing? That's basically it. Cool, man. I like that even the reason I dig in on that is that I think all myself, in particular, came up speaking just for myself here is that I get this idea that there's one particular type of investor, right? It's like something the other day that was like, hey, invest in this and a 5% return. And I'm like, for me, personally, all of my investors' conversations through my own profile, what it is that I want, which is obviously not the right thing to do. But it's interesting just to hear out there that there are other investments or investor profiles are like, oh, you know what, I'm cool with just a coupon and a three-year plan, and then we're back out, and then we do something else. So that's, that's just a good encouragement to all of us to, you know, silo our thinking around who our investors are.

Kevin Dureiko 07:54

Yeah, it's diversification, just like our fund is fitting and reaching out through these that we are right now. At one point, I was only a debt fund, now we're getting into the ground up, rent, sell. And the best part about those types of assets, along with multifamily, is you can hold them, I can still pay a return regardless of the scenario. And that's happening, but we have to hold it longer. We hold it longer if you want. If I could sell it, return all the invested capital, and everybody's happy, we can do that. So we're leaving ourselves different avenues for investor capital to come in; you get to talk to a lot of people like yourself, I share you talk to a lot of people on a daily basis. And their sentiment of what they expect out of the market is different for nearly every person. So you know, people options or via syndication, different type of LP bucket or what have you. We can structure something that generally is going to fit people.

Sam Wilson 08:45

Tell me about this, 2020 changed a lot of investment theses. How has yours changed?

Kevin Dureiko 08:53

Absolutely changed the way we look at everything, honestly, don't know what's going to happen anymore. We have a country invade another country. And we know our capital markets. So basically, dried up secondary, you might not see it too much on the front end. But on the secondary market. I don't know if you've seen it in the last couple of weeks or last week. Rather, Sprott mortgage just closed its doors are the largest mortgage originations in the country, and they just shut the doors. So 190 million, probably toxic assets that are gonna hit the market in the next weeks. What's that going to do to the market? We don't know. So we've taken the ability to be able to change be liquid, the debt markets aren't going to plus out with providing just debt capital, but our investors still want a solid return. We'll start building some houses and markets that need either a home value on rent or home sale. You figure it out and just keep on moving.

Sam Wilson 09:46

That's really cool. I like that. I mean, build to rent is something that, gosh, here in Memphis, it showed up, maybe seven, eight years ago is when I first heard about it, and it was like, Oh, that's interesting. I would have never really thought about that. And yeah, it seems to have kind of caught fire across the country. And I hate to say it, but we're becoming a nation of renters. It's just a sad reality of it. But it's also, you know, if we're becoming a nation of renters, then why don't we provide what the people want? Which are rental houses. So it sounds like you know where you guys have gone? Tell me, how have you scaled that? How have you, I mean, because that's a whole new operating business, how have you guys entered that market and done it in a way that doesn't just create a new job for you?

Kevin Dureiko 10:28

The partnerships you gather throughout the years, so it's not something you can just jump into? You have to know markets, you have to know how it works in certain areas of the country, or ships with the right people. So that many people in that building space over the last decade? And through conversations and what are you doing here? What do you do on there a lot of the best opportunities right now and build the rent are developers that still have land from 2008. Fallout. So you have people in the South that bought big tracts of land, that are sitting on these things with low inventory, that you could just print houses with waiting lists.

Sam Wilson 11:05

That's crazy. If you'd asked me that question, I would have failed that were true and false. You had said, Hey, there's, you know, tracts of land out there from the leftover from 2008 that still aren't developed that have been like, now false. They're really not the case. That's a needle in a haystack. So it's either your partners know those people with those land or finding that needle in the haystack. How that how's that working out?

Kevin Dureiko 11:27

A guy who knows a guy who knows a guy. And that's just usually how it ends up working in almost everything.

Sam Wilson 11:34

Isn't that a fact? Man? It's not a fact. It's who you know, me this, give me the breakdown on build the rent versus build the cell? Because I know you guys are kind of doing Bowles be deciding what you sell what you build the rent? Is there a particular type and size that you guys are building? You're saying, Hey, this is we're doing this in this market? And this and that market? Because there's, you know, wants and demands? I mean, can you kind of give me the land on this if it were about what you guys are seeing?

Kevin Dureiko 12:01

Yeah, so the best part about build-sell-build-rent is that it's the same product. So you go into the deal, like, Hey, we're gonna build sell this thing? Well, what if the market really takes a turn? The rental market itself isn't getting any smaller. So we can fight theory be able to rent the property out, service our investors that coupon, and hold it until the time comes where you can sell it again. Do we think that the land for everything is absolutely not, but that is the plan when it comes to building and to selling? But we do build to rent portfolios? Absolutely. But we're going to take the opportunity to give our investors their capital back and their return before anything else.

Sam Wilson 12:47

Right, right. Are you guys building Whole neighborhoods? Are you doing a one-off infill? Lots? I mean, how does that work?

Kevin Dureiko 12:54

Most of it is in Florida, you haven't broken ground on the bill to sell and build the rent yet. We have a partnership that we're putting together in Florida, they have the land. It's already permitted. So it allows us to build for we're not doing big tracts of land because this developer has already put it together, it's already given you already. He's just allowing us to get into the community as an investor, which he does not normally do. So we get to piggyback on what he's already accomplished in the area already establishing his communities is a big builder, not to say, you know, he's like all over the south, he's got different developments or dealings. So it's given us our unique opportunity to work in that market without having to move equipment and not having to do all the permitting. It's already there. He's just allowing us to come into it. And starting with three to three to five homes at a time and little chunks because nobody has a crystal ball. We don't know what the markets are going to do. But, you know, if we do 345 House chunks, it served us - the investor and the builder, everybody should win.

Sam Wilson 14:01

Are any of these houses going multi-generational, I've seen that in some of the build-to-rent space where they're doing, you know, 1000 5000 square foot house, multi-generational you guys seeing any of that in the product, you guys are putting out?

Kevin Dureiko 14:13

There the product that we're putting out, it's going to be 1700 to 2300 square foot range, the perfect starter home, it's in a little bit more of an affluent area that we're you know, nice properties up a high demand for single-family homes and rentals. So, depending which way the market goes will kind of dictate the size of the home, the bill quality, and a certain threshold that we have to hold, especially in the community. But it all comes down to what people want it before they are more on the 2400 square foot range rather trended down a little bit, and that's not because of anything else other than we want to make sure they're not sitting there waiting for a particular buyer. You want many buyers, right?

Sam Wilson 14:55

Right. You want a product that has the largest pool of buyers waiting for We're absolutely let's shift gears a little bit here. And let's talk about some maybe softer skills that you have developed over the years when you think back on your journey from 2007. Until now, what are some things you feel like you've done really well that other people should emulate?

Kevin Dureiko 15:16

I just keep on pushing, and dependent didn't matter what really was happening in the economy, what was happening with myself, I just got to figure out something because I'm not a nine to five guy, never have never will be, had to be something else. His life and putting together an action plan. Know what the ability wasn't where it came from, man, I wish I could tell you what you could bottle it. But that sticktoitiveness not making money for a long time, knowing that there's gonna be something on the other end. I mean, that takes a special type of human, and I wish I could bottle it. Give it to people.

Sam Wilson 15:46

That's awesome. Man. I love that. What are some things you say when you say that? Are there some particular scenarios that come to mind where you're like, Man, this was something where I feel like maybe other people probably would have given up or just, you know, run over?

Kevin Dureiko 16:00

Yeah, so let's see. Here I was an engineer working for an underground utility company. I live in Connecticut currently, not for long, but right now, you shut down for half the year. Can you tell it is when the grounds are frozen, right? So was a Cauchy, when the ADK a year for the year. One year I just woke up. So I can't do this anymore. I can't sit here. You know, being away from that, people thought I was crazy. Basically, jump forward a little bit and meet my soon-to-be wife. And I was like, Okay, now I really got to figure this out. And a couple of years after that, I'm gonna retire her. And now she gets to stay home with my one son and to be a second daughter. And it's one of those things you just don't know how it's going to end up. And that goes to the sticktoitiveness. And just making any money on the side hustle to figure out your life. And it's just like 2007 Now, there's been some bumps, but steadfast. The company's been around, and it just figured it out.

Sam Wilson 16:59

Right, right. Yeah. No, I love that. I love that. Yeah, cuz there are a lot of people that do give up too early when they're probably right. Run to the brink of success, and they don't know it. So that's a–

Kevin Dureiko 17:09

Is that the book Three Feet From Gold?

Sam Wilson 17:11

What's that now?

Kevin Dureiko 17:13

That book Three Feet From Gold? Everybody turns around?

Sam Wilson 17:14

Haven't read it, but there you go. There's our book recommendation for the day, Three Feet From Gold, and what the write that one down. Tell me this, what's a mistake you've made as other people could avoid?

Kevin Dureiko 17:25

Selling assets. My father was a blue-collar real estate investor, wish I would have known what I know now. And not have and sell the assets in retirement, which he could have just held on to everything. basically told me how you can have this stuff, you really want to know that cash out without your retirement, I'll figure it out. And what I should have said was, well, let's put some lipstick on these things, get a little value out of them really set you up for retirement. That's what I should have done. But I just didn't know any better.

Sam Wilson 17:56

Didn't know any better, man. Isn't that a fact? And that's, that's a lesson we share in common where you go, oh, golly, like, I look back on everything I've sold, and I go, I shouldn't have sold any of that. Now, maybe one or two were dogs. But outside of that. It's like, Why did I sell anything? Didn't make any sense. That's awesome. Kevin, thank you for taking the time to share with us both done well and the mistakes you've made. You've shared with us about your debt fund, how your thesis has changed, and what you guys have invested in changed and really brought us a unique angle here on, you know, the debt side of multifamily syndication. I mean, that's the real neat. You guys are raising a lot of capital so you guys can go out and be that first position debt. And then also the opportunities you guys see in the builder and build a sell market certainly are built to sell space. Certainly appreciate that. Are there any other closing thoughts you have here before our listeners before we sign off?

Kevin Dureiko 18:49

Keep going don't stop as much information as you can. I mean, I've been doing this for a while I still watch every podcast and read every book. It just never stopped learning. The best investment you can make is in yourself.

Sam Wilson 19:03

That's absolutely right, Gavin if our listeners want to get in touch with you or learn more about you, what is the best way to do that?

Kevin Dureiko 19:09

Then you can find me Google me, a pretty hard name to miss out on. There's only one of me under Dureiko. Throw that into Google. And then, you can find me on my website BirchDobson.com.

Sam Wilson 19:26

Awesome, Gavin. Thank you again. Do appreciate your time.

Kevin Dureiko 19:29

Thanks, brother.

Sam Wilson 14:34

Hey, thanks for listening to the How to Scale Commercial Real EstatePodcast if you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google podcasts, or whatever platform it is you use to listen If you can do that for us that would be a fantastic help to the show it helps us both attract new listeners as well as rank higher on those directories so appreciate you listening thanks so much and hope to catch you on the next episode.

You don't have to quit your day job to become an investor.

This is what Andrew Schutsky lives by. He is the founder of Redline Equity, LLC and has built 15 years of real estate expertise while enjoying a career as a CIO of a medical technology company. He talks about how he got into multifamily real estate and how they are remaining competitive in the current market, and how he's able to be successful in both real estate and his W2.

[00:01 - 14:55] 1100+ Units and Growing

• Andrew shares his journey from house hacking to short-term rentals to multifamily
• Finding opportunities in the multifamily space
• There's still a lot of demand for multifamily
• Things are tilting in favor of the buyer
• Syndicators are becoming conservative
• Why Andrew is a fan of fixed-rate debt
• Submarket knowledge is an advantage
• How to earn "other income"
• Add value through valet trash and cable and internet packages
• Talk with the local township to learn about tax abatements

[14:56 - 19:11] Working a Full-Time Job and Investing in Real Estate

• He talks about how he's bringing technology to real estate and the entrepreneur mindset to his day job
• Building a team and learning to focus helped him avoid burning out

[19:12 - 20:42] Closing Segment

• Reach out to Andrew!
• Links Below

• Final Words

Tweetable Quotes

"It can't just be a guess. It has to be submarket knowledge we apply to win that deal." - Andrew Schutsky

"I think it's what sets me apart from a lot of my peers and my competition is I'm bringing that proprietor, business owner, entrepreneur mindset back to my day job." - Andrew Schutsky

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Connect with Andrew at the Redline Equity website and check out their podcast, blog, and their FREE 8+ part learning series.

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Want to read the full show notes of the episode? Check it out below:

[00:00:00] Andrew Schutsky: We're in a couple of submarkets that we know really, really well. We own and operate assets in those markets like Greenville, South Carolina, for example, we got another one locked up right now and we know there's certain things that we go after, and it's very infrequent in today's times that you'll win a deal or we will even get close in the top of the best end funnel with just rent increases. So we're looking at a bucket called other income. Those listing may do very well in this bucket, but that seems to be the differentiating factor for us.

[00:00:38] Sam Wilson: Andrew Schutsky is a passionate multifamily real estate investor who balances ownership in 1100 plus units with a full-time job as a CIO of a medical device company along with also being a family man. Andrew, welcome to the show.

[00:00:50] Andrew Schutsky: Thanks so much, brother. It's a pleasure to be here.

[00:00:52] Sam Wilson: Hey man. Pleasure is mine. There are 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 there?

[00:00:59] Andrew Schutsky: Yeah, absolutely. So real estate journey for me has begun back in 2007 and I started before anybody called this house hacking I'm using my air quotes, so they can't see the video. My first home was on the road 50 weeks a year, doing the consulting thing, learned a lot, quickly realized I wasn't utilizing my whole house at the time, put an ad on Craigslist with my wife at the time, or I guess like my fiancée, at the time found really creepy, but it was my entryway into learning what, you know, a house could, is not just a place to live in. It's a source of income. And from there I thought my journey was going to be great. I know I don't want to work for 20, 30 years. I got to start planting some seeds. So I thought I was going to do a series of single-family houses, you know, regardless of having, you know, that, that great bonus or stock structure coming up year after year, you run out of money pretty quickly. About a decade later, I found short-term rentals. I still do those and I enjoy them, but same constraints. Regardless, even with one or two really good W2-based incomes or other sources of income, you can only go so fast, fast forward to 2019, found a 60-something page thread on BiggerPockets. You may have heard of that site before around multifamily. It was actually a local guy syndicating, read his story, he was a CPA before and it opened my mind to this whole new world of possibilities, which I can't believe it took me that long to find it. It's almost embarrassing to admit. And from there I kind of went full tilt. You know, 30, 40 books digest every podcast I could listen to nagged anybody who had listened to my questions and joined a mastermind program, got a mentor, went all in, really, and just started to dial in on honing different crafts and just crafting new skills.

[00:02:30] Sam Wilson: That is really cool, Andrew. I love that. So you've been long multifamily since 2019.

[00:02:36] Andrew Schutsky: Correct.

[00:02:37] Sam Wilson: That's awesome. Okay. Very, very cool. Tell me what, when you say on the, on the short term rental side, you said that that was a tougher business for you to scale just because it was kind of, it was kind of like just a glorified version of a single-family rental. Is that what I was hearing there?

[00:02:50] Andrew Schutsky: Yeah. I, I think what lured me to it is originally we wanted a house at the beach and we're like, okay, the only way we can make sense of this at the time, right? We had one young. And another one on the way. My wife's like, you're absolutely insane. We can't buy a property. I'm like, what if we could make it generate cash? So that was my foray into that. And I'm like, Hey, you know, the pros and cons, there are the pros are you're dealing with happy people. They're on vacation. You're getting paid in advance. There's no such thing as an eviction in that world. But the big con is as houses became, at least in our area and the Northeast in the Jersey side, became very, very expensive. So your down payments and your closing costs could be well over a quarter million dollars. So, you know, unless you're fortunate to already have a running start and have, you know, seven figures to play with and invest, really hard to get beyond the first 2, 3, 4 properties that way, right, within, you know, especially in your early thirties, like we were at the time.

[00:03:38] Sam Wilson: Right. Yeah, absolutely. Tell us, what are you guys finding in the multifamily space right now? We're recording this on July 12th, 2022. So this will probably go live sometime mid-August of this year, but tell me, what are you guys finding in the multifamily space right now? That's making sense for you.

[00:03:55] Andrew Schutsky: We're in the Southeast generally Carolinas, Georgia, and even a little bit of the Midwest. Now we've got one property in Louisville. And still, you know, despite rising interest rates, despite all the chaos and the economy, there's a lot of demand still for multifamily. A lot of, you know, institutional and private equity are looking for a stable asset you know, hard, tangible assets to cash flow with tax advantages. And there's still tons of demand for multifamily. With that said, things do seem to be tilting just a little bit in favor of the buyer. You're seeing, you know, maybe not 25, 30 offers, but maybe 5. For the first time ever, I think 30 days ago, I saw the first price adjustment downward or guidance pricing came down. that was kind of actually relieving. You don't want to see terrible things happen in the economy, but also the silver lining of that is you get a little relief and you're not having to go. And it's not a blood bath as much as it was, you know, 60 days ago now.

[00:04:48] Sam Wilson: What do you think is driving that? Like, I mean, is that just because projected rents are coming down? Is that just be, I mean, why is that happening?

[00:04:56] Andrew Schutsky: Well, I think we were, you know, in a weird time the past year seeing double-digit rent growth, especially the Southeast and Texas, and even, you know, the entire Sunbelt really, and it's not sustainable, right? I mean, we know income's not keeping up with that. So you start to see, you know, CoStar and others backing down their rent projections. There's no longer, you know, 9%, 10%, or 12% forecasted in every market. Maybe some markets selectively. Sure. But you look at that's starting to stabilize and starting to tail off. And you also look at the drastic rise in interest rates, you know, both in bridged and fixed rate debt. The cost of capital is much higher, right? So people start to get a little nervous. What happens, you know, therefore, you know, us and others, and a lot of other syndicators are starting to be a little bit more conservative with their exit cap projections. So that in turn is going to soften your offers a little bit.

[00:05:42] Sam Wilson: Right. Yeah, absolutely. And that's something that, I guess, let me ask you that as a nuance question on an exit cap projection, are you guys underwriting refinances anywhere in your deals, right now?

[00:05:53] Andrew Schutsky: Never have, and probably never will, unless there's a very unique circumstance to do so.

[00:05:57] Sam Wilson: Got it. I like that answer. That's something that we commonly see in deals where it's like, Hey, you know, we're going to refinance, especially a couple of years ago when we felt like things were more predictable, like, okay, we're going to refinance three to five years from now or whatever it is. So, yeah, that answers the question. You're just not doing it.

[00:06:13] Andrew Schutsky: I know it's a, it sounds like a clear-cut answer and it is. I just it's not my philosophy. It's not any of my partner's philosophy to count on that, right? I don't have a crystal ball. I mean, I love to say, yeah, interest rates are going to be 1% higher at the end of the year, but you really don't know that. It'd be great. We always look at that as a scenario. What does that look like? But I never will make that our primary business case. I look at it like I'm investing a hundred percent of my own cash to buy a property. Just like if my investors are in or not, I look at it as like, I want to be as certain as I can be, right, and I know I can't predict interest rates. No one can, right, so I don't want to count on that as a variable.

[00:06:45] Sam Wilson: Right, that was going to be my question was how are you compensating, especially right now for the complete unknown of where in the world or interest rate going. That's how you figure it out or how you build that in you just don't.

[00:06:56] Andrew Schutsky: And I'm being, I may be in the minority here, but I'm a big fan of fixed-rate debt. I know it does hurt cash flow. I know there's prepayment involved in, in years, you know, one and two, and it may inhibit your ability to exit early. But I really like that. Maybe I'm a little bit of old school and you know, I'm a little bit of old soul that way. I like that stability, my investors like that stability. So whenever possible, and it doesn't completely crush the deal. I, I really like, especially in today's times the fixed rate product.

[00:07:20] Sam Wilson: While we're on this topic. Tell me about this. How are you guys underwriting deals and getting 'em to make sense right now? Like, what's your guys' unique proposition when you guys acquire an asset?

[00:07:32] Andrew Schutsky: Well, I will tell you there's no magic bullet and there's still the majority of the deals that don't make a lot of sense, but. The few that do we're in a couple of submarkets that we know really, really well. We own and operate assets in those markets like Greenville, South Carolina, for example, we got another one locked up right now and we know there's certain things that we go after. And it's very infrequent in today's times that you'll win a deal or we'll even get close in the top of the best end funnel with just rent increases. So we're looking at a bucket called other income. Those listing may do very well in this bucket, but that seems to be the differentiating factor for us. If we're, you know, even close, remotely close, we start at looking at things like valet trash, cable and internet packages. And again, there's small things, but when you collectively add them up, it could be 50, a hundred dollars a month. And that can be the difference between winning or losing a deal. So again, that other income bucket has been a huge factor. Things like tax abatements and looking, working with the township or, you know, especially affordable housing. There's some things at play there. So you got to really know the submarkets to know if they're viable or not. And I always look, you know, of course. It's as competent as we are looking to have, you know, one or two of our property managers also verify, yeah, this makes sense. We've been planting this out. It's been proven elsewhere. So it can't just be a guess. It has to be submarket knowledge we apply to win that deal.

[00:08:44] Sam Wilson: Breakdown valet trash for me. I don't even know what that means.

[00:08:47] Andrew Schutsky: Yeah. It's actually not commonly known. I learned it from another partner that implemented it on dozens of properties and it's basically they'll come and pick up your trash at the door and bring it out for you. It sounds simple, but it could be $20, $25 a month, but that might be the difference between winning and losing. And it's almost always received very well at properties from what we've seen.

[00:09:07] Sam Wilson: And it's amazing to me what people are willing to pay for. 25 bucks a month. Okay. So you're telling me I don't have to walk my trash out and, and again, it depends on, I guess you're in the Southeast, so it's not even like it's, you know, three feet of snow because I guarantee, my wife and I would probably be stroking the 25 bucks a month. It's like, okay, it's zero outside. So yes, only $25, but in the Southeast, it's not, like, but people pay for it.

[00:09:33] Andrew Schutsky: Well, especially if you look at it, like some of the workforce housing we're in, these guys work a really long day, maybe second or third shift are exhausted. They're like, you know what, it's just not worth the hassle. Maybe you've got two or three young kids at the house. Just one of those things like, wow, this is something that, you know, is a small burden on you, but Hey, I'm exhausted. I don't want to spend time, I don't enjoy walking down three, four flights of stairs waiting for the elevator. Hey, you know, it doesn't work for everybody. We've had a lot of success with it.

[00:09:59] Sam Wilson: And that is an almost expense free, like, value add, like it's not even capital. There's no CapEx in it.

[00:10:08] Andrew Schutsky: No, a lot of times you can get the maintenance crew that's already on in-house to do that.

[00:10:12] Sam Wilson: Right, right. I love stuff like that. Anyway, that you can add value to a property without incurring, you know, more cost to do so, I mean, that just pads the bottom line right away. That's what we're doing right now in the RV resort space where it's like, we can add dynamic pricing and online booking for, I mean, it costs us a little bit, but not much. There's no infrastructure. We're not, you know, repaving drive aisles and adding sites and everything else. It's like, this is really very simple. And yet it changes the performance of a property dramatically. So I love stuff like that. Tell me about the bundle when you said bundled internet TV, things like that.

[00:10:48] Andrew Schutsky: Yeah, a lot of times we'll look to, and this is, I think probably more commonly known, this isn't such a, you know, well-kept secret, but you can go and get a larger bulk agreement with a service provider, like an Xfinity or whoever is happens to be in your area and negotiate, hey, I would like to buy a hundred packages at $35 a month. Tenants on their own might buy it for $70 a month. We sell it for 55 to 60, again, 10, 20, 30 bucks here and there adds up, right? So it just, again, it's, it's a win-win for the tenant and for us, like we get a little bit of the commission there and the bulk, you know, economies of scale and the tenant saves money, you know, versus the individual packages.

[00:11:22] Sam Wilson: Right, right. Have you seen those, which we've done it at one of our properties, and there's another episode here on this podcast where I interview the company that actually handles this, but where the utility company via mostly the internet company, internet and TV will pay you as the property owner for the right to be on your property. Have you seen that?

[00:11:42] Andrew Schutsky: We've underwritten deals that that was the case. We don't own any and operate already now, but yes, absolutely have seen that in the past. The same with even renting, renting space on the top of the building for a cell phone tower, like that can be common or something. Seriously. I mean, that can be a huge money maker.

[00:11:57] Sam Wilson: Sometimes the cell towers are worth more than the building.

[00:11:59] Andrew Schutsky: Correct.

[00:12:00] Sam Wilson: When you, when you look at those leases yeah, you don't realize, and again, we've had, you know, I've had Meir Waldman come on the show here, who is, you know, kind of the cell tower lease guy. And we talked all about that. It was like, oh my gosh, like there's more money in the cell tower lease than there is in the sale of the building. This is madness. So that's absolutely interesting. Tell me the last comment you made though said you guys are working on our tax abatements. How are you guys figuring it out? This is why I need you to correct me. When I look at a property, I go, okay, there's a, you know, multifamily property, like certainly there's no tax abatements. There's nothing left there. I mean, that's all been extracted long ago when this was built and, you know, brought online. Tell me why I'm wrong.

[00:12:38] Andrew Schutsky: It depends on the position of the property. A lot of times you're absolutely right. There's not much there. And if there is anything there, usually the broker will pick up the phone. If it's an unmarked property, they'll put it and they'll count on it and the underwriting, the projections that's already factored in, but the true gems are where you work with the township and it could be, you know, either the building already itself as a business already qualifies for this, or maybe as you slightly reposition it, Hey, it's not affordable, now it's affordable housing or based on that distinction, you may now qualify for a new exemption or a tax abatement. So something to look into, talk with that local township, as you get to know a submarket more and more as you start to buy more properties, you may copy and paste from one or the other and apply the same strategy. But if you're brand new to the market, it's worth exploring, 'cause that can save you thousands, hundreds of thousands of dollars over the course of your whole period.

[00:13:22] Sam Wilson: Right, right. Yeah. What I hear you saying is if you could reclassify a property potentially from one to the next. The township may be hard up for, like you said, foreclosed housing below, you know, that's priced 70% of whatever the adjusted median income is.

[00:13:36] Andrew Schutsky: Yes.

[00:13:36] Sam Wilson: Cool.

[00:13:37] Andrew Schutsky: Or, or, I mean, something we've looked at too is maybe you can designate a portion of it as commercial space. Like you have, you know, a coffee store. We even looked at doing an arcade in a building where you have a percent, it has to be a commercial occupied. And then you now qualify for new exemption or 'cause it brings new jobs to the area. So again, some of these may be a stretch, but it's worth exploring.

[00:13:57] Sam Wilson: Oh, for sure. Is there a consultant that you guys work with to help you kind of explore that? Or is this something just you've self-educated on?

[00:14:03] Andrew Schutsky: This has been a lot of self-education between my partners and I, and a lot of them have been educating me actually. So I'm kind of the student in this scenario, just applying what we've learned.

[00:14:12] Sam Wilson: Man. That's awesome. Thank you for taking the time to break down just some really simple ways. I mean, again, 'cause right now, especially in the multifamily market, people are desperate to find ways to add value to these assets. Like how do we make this make sense? And you've just given us three relatively simple. I say simple 'cause tax abatement still confuses the heck out of me, but you know, relatively simple ways to look at these and go there's there, there may be another way to take this deal down and have it make sense other than just get into a bidding war.

[00:14:43] Andrew Schutsky: I mean, in summer you got to be creative these days, right? Unless you're wildly optimistic with your projections most likely to win, you're going to have to either accept lower returns or be really creative as to come up with a higher return, so bottom line.

[00:14:55] Sam Wilson: Let's shift gears here and talk about your full-time job 'cause you currently work a full-time job as a CIO of a medical device company. What are your plans there?

[00:15:06] Andrew Schutsky: Yeah, so I guess first and foremost, I really enjoy what I do. I know I'm probably in the minority of the guests you have on the show who have a kind of counter on calendar crossing out days, marking the time where they can do this full time. But for me, I actually got, I got a lot of pleasure and enjoyment of my job. I get to travel a lot to cool places. And most importantly, I have a lot of flexibility at work from home when I'm not traveling. So I'm not having to get up at 4:55 AM every day. And if I do, it's so I can spend some time working on my business. So I find there's a lot of good parallels, you know, for example, I work in the technology realm. I love bringing technology through investment portals and websites and marketing and funnels to the investing business. And I love the stuff I learned in investing around just being that critical ROI calculation that you know, that business acumen. I love bringing that to my day job 'cause we look at, you know, managing millions of dollars in budgets and looking at what if I put a dollar in, what do I get back? So I love bringing that acumen and I think it's what sets me apart from a lot of my peers and my competition in the day job, bringing that, you know, proprietor, you know, business owner, entrepreneur mindset back to my day job. So they, they kind of work together really well.

[00:16:12] Sam Wilson: That's really, really cool. Tell me, I guess when you look at the technology inside of what you guys are doing in medical sales, what are some things that are lacking in the commercial real estate space? You're like, man, this is a really cool way I can innovate over here in commercial real estate.

[00:16:24] Andrew Schutsky: There's still a lot. I mean, number one, when you look at structuring a deal and marketing a deal and just running all the intricacies and administrative parts of bringing in investors and marketing and then even the day-to-day operations and property management, there's a lot still pen and paper or email back and forth. So I look at things like automation of campaigns, you know, connecting people through, like, it's basically cutting out the manual task. I think that's really awesome. Whether it's the upfront part of like winning a deal and doing DocuSign, you'd be surprised how infrequently that stuff is leveraged, where I bring value to a team by saying, Hey, why aren't we using this? Or why are we do, why are we spending all the time doing this? We're highly paid professionals. We ship, this is a $50-a-month product. We could be saving hours a time. I love just doing simple things like that, like connecting Zappier, for example, to link a Google form back to my active campaign, to automatically create contacts and distribution lists. Just one simple example of what I think that's things are often overlooked.

[00:17:18] Sam Wilson: Right. Yeah. It's funny. I'm, I'm always torn maybe 'cause I can barely use email, right? Like I am, you and I are, are completely opposite ends of the spectrum. Like I suck at using things tech related.

[00:17:29] Andrew Schutsky: All good.

[00:17:29] Sam Wilson: Lots of help, but I get torn because sometimes like, okay, I do this task and I can get it done really quickly. Just doing it and, you know, trying to figure out how to make the tech work for me becomes more cumbersome than just getting it done. And it's like...

[00:17:44] Andrew Schutsky: I think it's important on every team to have a guy or a gal that really understands how to make that less stressful for the rest of the team, right, 'cause without that, like you said, it's just so much easier to throw in the towel and it can be so overwhelming to people who don't have those reps in. So I've been doing this first since I've been four or five years old, where I grew up with like one of the first computers. So it was in my DNA, but I totally recognize for most people it's not. They don't want it to be, and that's completely fine. And actually that's a great value, you know, driver for me that I can help bring to the team.

[00:18:14] Sam Wilson: Absolutely. Absolutely. And last question here for you is let's talk a little bit about the team. How have you effectively scaled your team while working a full-time job?

[00:18:22] Andrew Schutsky: Yeah, so for me, you know, it was a little bit of trial and error in the beginning, right, wanting to do everything, jump in and, and find my own deals and underwrite them, myself, and marketing myself. And I, I just found that wasn't effective. It was a quick way to burn out. So I've kind of dialed in. Let me just focus on, for the next year or two, becoming really good at one thing. Right now that happens to be investor relations, raising capital, you know, building decks and doing due diligence. Like I'm not going out. I'm actually stopped going to try to find my own deals. New market partners that I trust, I've got a few deals under my belt now. I knew who I trust. I know what I want out of a deal. I know what I don't want to be doing. I don't know what I'm not good at. Let me focus on what I'm good at. And then maybe a couple of years from now, I'll revisit and start to expand that repertoire. And maybe there comes a time where I'm doing this, you know, 40, 50, 60 hours a week on my own, and maybe I will still go back to the broker thing, but for now, just dialing in on what I'm good at and just continue to work that path.

[00:19:11] Sam Wilson: Man, that's fantastic. Andrew, thank you for taking the time to come on this show today. I certainly appreciate it. I've learned a heck of a lot from you, you know, talking about really easy ways to add income and value to properties that are maybe a little bit off the beaten path. We talked about your transition, you know, from house hacking into short-term rentals, and then finally discovering multifamily in 2019. And you also shared with us, you know, why you love your job. I think it's really cool that you're like, Hey man, I love what I do and I'm going to continue doing it, and maybe someday I'll transition out. That's not the comment, like you said that you or I probably hear very often where it's like...

[00:19:42] Andrew Schutsky: That's right.

[00:19:43] Sam Wilson: I just kind of like what I'm doing. So if it ain't broke, don't fix it. So absolutely, and then you know, talking about the tech stack and what it means to bring technology to a deal. I think you've shared with us some really cool things today, and I certainly appreciate it. If our listeners want to get in touch with you or learn more about you, what is the best way to do that?

[00:19:59] Andrew Schutsky: Best way to go straight to our website, everything funnels through there, contact, we've got the podcast in there. It's investwithredline.com. Company is Redline Equity. We've got blogs and we've got, more importantly, a free 8-part investing course. Go check it out, sign up, and follow us.

[00:20:13] Sam Wilson: Awesome. Andrew, thank you again. Certainly appreciate it.

[00:20:15] Andrew Schutsky: No problem, brother. Great talking to you.