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Peter Von Der Ahe: Navigating Today's Real Estate Market · Beyond the Break

• 0:00
  SPEAKER_00: Welcome to Beyond the Break, a podcast where we dive deep into the stories behind today's entrepreneurs, leaders, and change makers.
• 0:08
  SPEAKER_00: And we uncover what it takes to build something that lasts.
• 0:11
  SPEAKER_00: Let's get started.
• 0:12
  SPEAKER_00: Beyond the Break.
• 0:15
  SPEAKER_01: Alright, Peter Vondre, welcome to Beyond the Break.
• 0:18
  SPEAKER_01: You ready for this?
• 0:19
  SPEAKER_02: Awesome, yes.
• 0:20
  SPEAKER_02: Beyond the Break.
• 0:21
  SPEAKER_02: Love it.
• 0:21
  SPEAKER_01: Alright, well, welcome to the office.
• 0:23
  SPEAKER_01: It's about 40 feet away from your office, right here in Pontavidra Beach.
• 0:27
  SPEAKER_01: That's right.
• 0:28
  SPEAKER_01: And you've we've had similar paths where we both went to the finest uh education uh location, Boston College.
• 0:35
  SPEAKER_01: Yeah, for sure.
• 0:36
  SPEAKER_01: But we're really looking forward to just digging in on your journey.
• 0:39
  SPEAKER_01: Uh you mentioned something about being in a band.
• 0:42
  SPEAKER_01: Uh you're an entrepreneur, you own and run your own company, you work with clients across the country or the world.
• 0:48
  SPEAKER_01: So we really want to dig into that and just get to know you better and inspire us.
• 0:52
  SPEAKER_01: Great.
• 0:52
  SPEAKER_01: Yeah, happy to and looking forward to it.
• 0:54
  SPEAKER_01: So tell me a little bit about what you're doing now and and what what inspired you to be on your own and run your own business for your client business.
• 1:01
  SPEAKER_02: Okay, so sure.
• 1:02
  SPEAKER_02: So I run a company called MFP Capital, uh, which is a boutique real estate investment firm.
• 1:08
  SPEAKER_02: And uh we invest in multifamily properties mainly in the Southeast, and then about 30% of what we do is what I would call opportunistic net lease uh commercial properties, which are our you know kind of some special situations in that category.
• 1:22
  SPEAKER_02: So um we we you know at the current moment we have about 650 million uh uh under management of total property value.
• 1:30
  SPEAKER_02: And um, you know, mainly we make those investments with our own money, and then um primarily high net worth individuals invest alongside but inside us.
• 1:40
  SPEAKER_02: And um yeah, you know, so so that's you that that's essentially what the company does.
• 1:46
  SPEAKER_02: And um, real estate is a great, you know, the the one thing about uh you know a smaller company is we we can be we can be more nimble and react to the m to the to the market.
• 1:57
  SPEAKER_02: And so I I just find that a lot of the private capital is looking for that.
• 2:01
  SPEAKER_02: And and you've you've got to be creative in turn in terms of like how you're gonna find the returns today.
• 2:05
  SPEAKER_01: Yeah, and we'll well circle back to what you're doing now, but it's interesting you came from a totally different market.
• 2:11
  SPEAKER_01: You just mounted Southeast multifamily.
• 2:14
  SPEAKER_01: Yep.
• 2:14
  SPEAKER_01: But you uh you but prior to that you were doing something totally different.
• 2:17
  SPEAKER_02: Yeah, uh yeah, well yeah.
• 2:18
  SPEAKER_02: Well I I I started my career um in in real estate in New York City.
• 2:24
  SPEAKER_02: So um yeah, you know, after after you know working in real estate consulting for a while, um I ended up um being one of the founder founding members of a brokerage group called the New York Multifamily Brokerage Group, which was you know inside of uh you know Marcus and Melichap's um you know New York uh New York hub.
• 2:44
  SPEAKER_02: And um that that started you know right uh basically you know just just in 2001 that started.
• 2:53
  SPEAKER_02: Oh wow.
• 2:53
  SPEAKER_02: And uh that was that was me.
• 2:56
  SPEAKER_02: I was an army of one.
• 2:57
  SPEAKER_02: And and by the time I kind of handed the keys over to my my former partners, we were 55 people and selling a billion dollars a a year of New York City multifamily properties, and we were you know undoubtedly like the the the leader of the mid-market of of that uh you know of that asset class in the city.
• 3:18
  SPEAKER_02: Wow.
• 3:18
  SPEAKER_02: So um that was a that was a a great journey.
• 3:21
  SPEAKER_01: Yeah, that's now there are challenges.
• 3:23
  SPEAKER_01: I'd love to just hear your feedback of the direction of real estate in New York City now and the challenges of being a landlord, let's call it.
• 3:31
  SPEAKER_02: Sure.
• 3:32
  SPEAKER_02: Well, the thing about New York is it's it's uh it's really its own it's its own beast.
• 3:38
  SPEAKER_02: Um you know, adhering the the regulations.
• 3:41
  SPEAKER_02: It's funny, I I uh this is many years ago, but I did a post on on the the regulatory book um for uh multifamily properties in New York City, and and you can see the book over here, and I I put the you know like five years apart, and the the book started about this thick, and then five years later it was this thick, and then the next one's about this thick.
• 4:00
  SPEAKER_02: So it just keeps growing.
• 4:02
  SPEAKER_02: Yeah, yeah.
• 4:03
  SPEAKER_02: So there's a there and some of the regulations actually contradict each other.
• 4:06
  SPEAKER_02: So you could follow one law and by doing that you're breaking another law.
• 4:09
  SPEAKER_02: So so so the you you know it's really it's its own world, it's its own beast, and um you know how you operate and run and and the risks and the things you're trying to maximize for uh you know are completely different in in New York.
• 4:25
  SPEAKER_02: You know, for example, like we have a funny statement that's that's partially true, is that uh uh in New York you're trying to get the tenants out of the out of the building.
• 4:32
  SPEAKER_02: And everywhere in else in the country, if you have a building, you're trying to get tenants into it.
• 4:36
  SPEAKER_02: So why would you want them out of the building?
• 4:38
  SPEAKER_02: Well, yeah, you know, that's that that really is uh a nod to uh you know rent control, rent stabilization.
• 4:45
  SPEAKER_02: Okay.
• 4:46
  SPEAKER_02: Um those laws you know are really bad for housing for the public, actually, but also you know they they they limit what a owner can do to improve the property and basically improve the the housing stock.
• 4:58
  SPEAKER_02: So there's a so that's why you actually have that.
• 5:01
  SPEAKER_02: You could have a a building that's a hundred percent occupied.
• 5:03
  SPEAKER_02: You could have the exact same building in New York that's a hundred percent occupied in the exact same building that's a hundred percent vacant, and the vacant one almost always is worth way more.
• 5:12
  SPEAKER_02: Oh wow.
• 5:12
  SPEAKER_01: So so uh because you have more rent upward uh you just can do whatever you want.
• 5:17
  SPEAKER_02: You have freedom.
• 5:18
  SPEAKER_02: You actually own the building.
• 5:19
  SPEAKER_02: You can do what you want.
• 5:20
  SPEAKER_02: So so uh so um yeah, so that's just one of the the kind of idiosyncrasies uh about the New York market.
• 5:29
  SPEAKER_01: Because the simple statement of rent's expensive, let's cap it.
• 5:33
  SPEAKER_01: Walk me through what that means to the a developer in New York City who might look at the next building knowing in that environment.
• 5:40
  SPEAKER_01: Trevor Burrus, Jr.
• 5:41
  SPEAKER_02: You know, I I guess just from a high level, if you want more of something, you want to incentivize it.
• 5:45
  SPEAKER_01: Yeah.
• 5:46
  SPEAKER_02: And and you're gonna you want the marketplace to work that way.
• 5:49
  SPEAKER_02: So that's if something's incentivized.
• 5:51
  SPEAKER_02: So if there's a housing shortage in New York, which there is, if you in if if you incentivize the uh the profit and you incentivize the capital coming into that in industry, you're gonna get more of it.
• 6:03
  SPEAKER_02: That's just the way you know the the the capital markets work.
• 6:08
  SPEAKER_02: And so by capping the rents or by uh by increasing the amount of restrictions, you're basically uh you know starting to tighten the flow of capital that's going into that asset class, which means you're just gonna get less of it.
• 6:23
  SPEAKER_02: And by getting less of it, you now are gonna make the housing shortage and the housing crisis worse.
• 6:29
  SPEAKER_02: So a good example that's really from the current day is if you look at the last three years, the rents in New York City are, I think right now, uh, are the highest that they've ever been.
• 6:38
  SPEAKER_02: Yeah.
• 6:39
  SPEAKER_02: If you go to another popular place like, say, Austin, Texas, for example, um, the rents in Austin have come down now for three years in a row.
• 6:47
  SPEAKER_02: So that uh, you know, and both of these places are obviously New York's much bigger, and and you know, but at least from a housing perspective, these are side by sides, and you can take the exact same economy, uh, you know, there's a lot of fun things to do in Austin, and you can look at what's happening with housing prices and see the result of those uh, you know, regulations and how basically public policy really impacts housing for everyone.
• 7:12
  SPEAKER_01: Now it's funny you use those examples, because uh my two oldest sons, one lived in Austin for the last four years and lived it.
• 7:19
  SPEAKER_01: Uh-uh, that the peak in the valleys, and one lives in New York City.
• 7:22
  SPEAKER_01: And what we saw in Austin was like 25,000 units hit the market in a three-year span.
• 7:29
  SPEAKER_01: And his rent went up the first year, and then over the last three years it was successful, it was going down, down, down because the supply hit.
• 7:36
  SPEAKER_01: Right.
• 7:36
  SPEAKER_01: And like you're saying in New York City, my kid's paying$2,500 for a shared three-person apartment.
• 7:42
  SPEAKER_02: And that's why politically, you know, all these housing regulations are sold as a benefit to the tenant.
• 7:47
  SPEAKER_02: Yeah.
• 7:47
  SPEAKER_02: And you you know, because not everything can be completely understood in a hundred and forty-character tweet, so you have you know the you know, basically the part of the population, or maybe all the population that's not really in the industry and doesn't know how the mechanics of it work below the surface.
• 8:04
  SPEAKER_02: So those you know, politicians will say this is for your benefit.
• 8:06
  SPEAKER_02: They'll say, Yes, okay, that sounds good.
• 8:08
  SPEAKER_02: But like you just pointed out, it actually is keeping the rents high.
• 8:11
  SPEAKER_02: Oh, yeah.
• 8:12
  SPEAKER_02: And yeah, you know, in your son's case, you know, you had that, the supply hit, and now his rents actually went bad.
• 8:18
  SPEAKER_02: So who benefited from that?
• 8:19
  SPEAKER_02: Uh I'll tell you who didn't is the owner of that building with rents going down for three years.
• 8:24
  SPEAKER_02: So when we buy a building, I'm not buying a building hoping that the rents go down.
• 8:27
  SPEAKER_02: Uh-huh.
• 8:28
  SPEAKER_02: So you who the person who benefited was your son, who has lower rents now.
• 8:32
  SPEAKER_02: So really connecting those dots, like you have to understand how the industry works, and that's where uh you know, politically there's like wool being pulled over people's eyes.
• 8:42
  SPEAKER_02: Like, oh, the it's being sold as a benefit, but really it's not.
• 8:45
  SPEAKER_02: It's it it you know, it it could be about power or whatever, or or or really just you know, misguided understanding of how the economics of the business actually function.
• 8:55
  SPEAKER_02: Trevor Burrus, Jr.
• 8:55
  SPEAKER_01: And you look now, so you've moved your whole business.
• 8:58
  SPEAKER_01: You no longer operate anything in New York City.
• 9:00
  SPEAKER_02: So yeah, so I don't so so the you know, to to keep it on New York City, the the the the business uh um and really part of New York City's renaissance, if you remember the you know iHeart New York uh slogan and all that kind of stuff, um, that also correlated with um a big change in the housing policy which occurred in 1997.
• 9:26
  SPEAKER_02: And at that time is when you had the first big rollback of the rent stabilization rules.
• 9:32
  SPEAKER_02: And when that occurred, it basically allowed uh owners and investors to make improvements to properties and and and and be financially rewarded for making those improvements.
• 9:45
  SPEAKER_02: Okay.
• 9:45
  SPEAKER_02: And what that started to do is unlock the boroughs in Upper Manhattan and Brooklyn and Queens, and you know, you know, now you know you have someone, a young person moves to the city, they may want to live in Brooklyn more than Manhattan.
• 9:59
  SPEAKER_02: Now, if you would have gone back like 25 years ago or 20 years ago, like that that really wasn't taking place at all.
• 10:04
  SPEAKER_02: So that's happening today.
• 10:06
  SPEAKER_02: So part of that was you had this opening of the floodgates of the regulations that occurred in 1997.
• 10:13
  SPEAKER_02: And that lasted kind of unabated for about 15 years.
• 10:17
  SPEAKER_02: And then in 2011, they started to shift and started to constrict.
• 10:22
  SPEAKER_02: In 2015, they constricted again, and you could tell by 2015 where this where this was heading.
• 10:28
  SPEAKER_02: The political tides were tur were turning, and you and and you could really tell that the the door was closing.
• 10:35
  SPEAKER_02: Oh, okay.
• 10:37
  SPEAKER_02: Um in 2019, they really closed.
• 10:39
  SPEAKER_02: So so there was there was um you know a massive change to housing policy in 2019.
• 10:45
  SPEAKER_02: So um as a participant in that market, uh and I was investing, you know, all through those years, kind of in, you know, from you know 20 2007, 2011, you know, 2005, but by 2015, I could see where this was going.
• 10:59
  SPEAKER_02: Uh ultimately, I didn't know exactly when or how bad, but you could see.
• 11:02
  SPEAKER_02: So we started um diversifying our business from an investment standpoint.
• 11:08
  SPEAKER_02: I was running the brokerage business, but started making investments elsewhere around the country, knowing that that would eventually materialize into something.
• 11:15
  SPEAKER_02: And then in 2018 we formalized MFP capital, turned it turned it into its own, you know, kind of living, breathing thing.
• 11:22
  SPEAKER_02: Uh and then after the laws were passed in 2019, um, you know, and shortly thereafter, um decided to focus my time full-time on that.
• 11:30
  SPEAKER_02: And that that that kind of uh were the the predecess uh you know the moves that set the precedent for me to to uh you know be here uh because a lot of our properties are in Georgia and Alabama, which as you know are really are you know they're drivable to us.
• 11:44
  SPEAKER_01: Sure, sure.
• 11:45
  SPEAKER_01: Well that's a smart pivot, but it's also an example where restrictions on investment opportunity makes capital go elsewhere.
• 11:52
  SPEAKER_02: Yeah, a hundred percent.
• 11:57
  SPEAKER_02: Trevor Burrus, Jr.
• 11:57
  SPEAKER_02: Yeah, yeah.
• 11:58
  SPEAKER_02: And I think the the real part there is, you know, the past couple of years, and especially like you know, what recently has happened in New York, I you know, I've got a I've gotten a lot of comments of like, oh, that was a really smart move.
• 12:09
  SPEAKER_02: How did you know how to do that and all that kind of stuff?
• 12:11
  SPEAKER_02: And and you know, I think anything, any success that someone has, like part of that is just luck and you're in the right place at the right time.
• 12:18
  SPEAKER_02: Um but the the real part, the the the hard part of that was to actually make that decision, knowing what I saw on the ground and kind of trusting your gut of like, hey, what I'm seeing is real, and now I've got to make a massive move.
• 12:33
  SPEAKER_02: And um, you know, you mentioned like you know, some of the topics that you talk about on the podcast.
• 12:38
  SPEAKER_02: That's not easy.
• 12:39
  SPEAKER_02: Yeah.
• 12:39
  SPEAKER_02: You know, try you know, trusting making massive moves.
• 12:41
  SPEAKER_02: I uprooted my family, I did a big business business uh you know business pivot.
• 12:45
  SPEAKER_02: Um there were and just you know, in those two categories alone, there are several components to actually actually do that.
• 12:51
  SPEAKER_02: And not to mention, you know, there's massive risk.
• 12:54
  SPEAKER_03: Yeah.
• 12:54
  SPEAKER_02: So it's your beyond the break moment.
• 12:56
  SPEAKER_02: Yeah, you're you're beyond the break.
• 12:57
  SPEAKER_02: Yeah.
• 12:57
  SPEAKER_02: So it's funny when you say that because I had a New York City podcast called uh Behind the Bricks.
• 13:02
  SPEAKER_02: Oh, really?
• 13:03
  SPEAKER_02: So when you first sent me the email be about Beyond the Break, I had to I had to like look at it a couple of times because it's a good name, catchy name.
• 13:10
  SPEAKER_01: No, no, well, I think you know what you just summed up is you put in your 10,000 hours, you mastered, you know, an understanding of a of a of a business, yeah, and then now you've pivoted and took the risk.
• 13:21
  SPEAKER_01: Yeah.
• 13:21
  SPEAKER_01: And and I think you know your clients are are happy with that.
• 13:25
  SPEAKER_01: So tell me about how you look at this world now, Southeastern multifamily.
• 13:30
  SPEAKER_01: What what opportunities are out there?
• 13:32
  SPEAKER_02: Um so so it's interesting, like to pick up on on your son's experience in Austin, um, coming out of COVID, there was so much, you know, you had so much migration.
• 13:45
  SPEAKER_02: Basically, if you draw a line from you know Washington, D.E.
• 13:48
  SPEAKER_02: to San Francisco, there's so much migration that uh that is occurring in the country below that line.
• 13:53
  SPEAKER_02: A lot of it, obviously, you know, Florida is one of the biggest beneficiaries of it in this whole area.
• 13:58
  SPEAKER_02: So along with that population growth and that big bump that happened out of COVID, there there's been a ton of development.
• 14:03
  SPEAKER_02: And so a lot of the bigger markets um are oversupplied.
• 14:08
  SPEAKER_02: Okay.
• 14:08
  SPEAKER_02: Um and that's you know, that that's starting to normalize.
• 14:12
  SPEAKER_02: It's been normalizing actually for a couple years.
• 14:14
  SPEAKER_02: When the interest rates changed uh in the middle of 2022, that basically put a limit on all new development because the the economics didn't make sense to the costs were too high between the land, the construction costs, the financing costs.
• 14:29
  SPEAKER_02: It made it no longer made sense to develop new properties and rents were starting to come down.
• 14:35
  SPEAKER_02: So so um what we're having now is we're still absorbing that big supply uh uh you know drop that happened or that really was, you know, started delivering in 23, 24, and 25.
• 14:47
  SPEAKER_02: So now we're you know right at the end of the first quarter of 2026.
• 14:51
  SPEAKER_02: Um so in many of the markets that supply is still being absorbed.
• 14:55
  SPEAKER_02: Um so so that's that's the phase of where where we are like broadly in the cycle.
• 15:01
  SPEAKER_02: Um a lot of the markets that we invest in, you know, we look for pockets or submarkets where that supply, uh that, that supply-demand balance is not too far out of whack, where there hasn't been that much supply delivered, so we can uh see ourselves to a you know one, two, three, four-year, you know, uh time horizon where we can hit the returns, or we think that the the you know, the risk reward uh ratio for the returns is pretty good.
• 15:28
  SPEAKER_02: So for example, uh you know, just this morning we met with um or we were finished finishing a conversation.
• 15:35
  SPEAKER_02: There's a there's a property that we own next to one of the big car manufacturers.
• 15:39
  SPEAKER_02: The car manufacturer is gonna have 8,000 people, uh 8,000 jobs generated at this one one plant.
• 15:45
  SPEAKER_02: Um so we have a property about 20 minutes away.
• 15:48
  SPEAKER_02: Yeah.
• 15:49
  SPEAKER_02: Um that property today, or that plant today, only has sixteen hundred people in it.
• 15:54
  SPEAKER_02: So we know they've, you know, they've invested billions of dollars.
• 15:58
  SPEAKER_02: We know the next three years, like there are gonna be jobs created.
• 16:02
  SPEAKER_02: For every one job in there, there's probably two or three ancillary jobs.
• 16:05
  SPEAKER_02: You know, you know, one job means maybe it's a two-person household, maybe there's kids.
• 16:08
  SPEAKER_02: So we know that the population growth that's gonna that's gonna follow those jobs is gonna be pretty substantial, and we know there's a pipeline, you know, two or three years in the future.
• 16:17
  SPEAKER_02: That's an investment that we like to make.
• 16:19
  SPEAKER_01: And what you've done, correct me if we're wrong, is you're not building from the ground up.
• 16:24
  SPEAKER_02: No.
• 16:24
  SPEAKER_02: We we we're we're not developers.
• 16:26
  SPEAKER_02: We generally we will make some investments occasionally in in new development, and we'll partner with developers to do that, because I like to have that.
• 16:34
  SPEAKER_02: That's a nice aspect to have in our portfolio because you're delivering something new, there's a little delay in timing.
• 16:40
  SPEAKER_02: There's a whole there, you know, there's a whole business reason why we like to participate in those, but we don't do those directly.
• 16:46
  SPEAKER_02: Um, mainly what we buy are uh properties that are built within the last 20 years and are you know are looking for a new ownership to come in and kind of give it a refresh.
• 16:55
  SPEAKER_01: Okay.
• 16:56
  SPEAKER_01: Yeah.
• 16:56
  SPEAKER_01: So you're investing, you're improving the properties?
• 16:59
  SPEAKER_02: Yeah, we are so it's not it's not unusual for us to have uh you know, we'll have you know four or five million dollar uh renovation and upgrade budget.
• 17:08
  SPEAKER_02: Oh, okay.
• 17:08
  SPEAKER_02: Yeah.
• 17:09
  SPEAKER_01: So then at least you're getting instant, you've got rents real time increasing uh your revenue through improvements as well.
• 17:16
  SPEAKER_01: So your risk profile is a little lower.
• 17:18
  SPEAKER_01: Trevor Burrus, Jr.
• 17:19
  SPEAKER_02: A little a little lower, yeah.
• 17:20
  SPEAKER_02: And and as you uh as you know, just you know, in any business, the money's really made with the people.
• 17:26
  SPEAKER_02: So uh if you're gonna be in the real estate business, you've got to be able to do the renovations and do the physical work.
• 17:32
  SPEAKER_02: That is kind of just table stakes for getting in the game.
• 17:34
  SPEAKER_02: Yeah.
• 17:34
  SPEAKER_02: So so we don't look at that as any type of uh of real um separator in terms of uh you know, or distinguish distinguishing characteristic in terms of what we can do.
• 17:46
  SPEAKER_02: I mean, you know, we we think we do it, we do a good job, but um you know, I think that you know what we see is that it's actually the people in the process, in the at the property themselves, what systems are they using?
• 18:00
  SPEAKER_02: How are they marketing themselves?
• 18:02
  SPEAKER_02: What's their what's their training?
• 18:03
  SPEAKER_02: What's their what's their process?
• 18:05
  SPEAKER_02: So there's a lot more renov, there's a lot more more revenue uh and efficiency to be found in the people than uh, or I should say maybe equal with the people than the actual property itself and the work that work that you're doing there.
• 18:19
  SPEAKER_02: So that's that's something that I think is like under the surface that doesn't get talked about enough.
• 18:23
  SPEAKER_02: Aaron Powell So you've become a better property manager, it sounds like Yeah, well we do the asset management, but but you know, I've taken a lot of the tools and strategies and just basically the business thinking that um I learned growing that first business from you know myself, myself in a desk and a phone to you know eventually walking away when we're 55 people.
• 18:45
  SPEAKER_02: Yeah you know, there's several cycles of business growth there, and you're kind of covering every part of it, you know, the whole wheel of business from you know marketing, hiring, you know, your your your P ⁇ L, sales, you know, process, technology, you know, strategy, leadership, like you know, everything that would that would encompass you know being a leader of a company, all those, all those uh areas, um, you know, so now just applying them on a smaller level and then duplicating it.
• 19:13
  SPEAKER_01: Yeah.
• 19:13
  SPEAKER_01: So do you think what are your skills?
• 19:15
  SPEAKER_01: Are you running the firm or I mean you obviously the the real estate guy as well?
• 19:20
  SPEAKER_01: So it's an interesting blend.
• 19:21
  SPEAKER_01: Yeah.
• 19:21
  SPEAKER_01: Some people might hire a business manager and then you just focus on the deals.
• 19:26
  SPEAKER_02: Yeah, yeah.
• 19:27
  SPEAKER_02: So so I mean I'm the the you know, the founder of the company, so so I am I you know I would say like I'm the chief storyteller.
• 19:34
  SPEAKER_02: Okay.
• 19:35
  SPEAKER_02: So I um you know, part of that is uh you know, setting the strategy for the company and also setting the strategy so when new so we have uh you know people who work in acquisitions.
• 19:46
  SPEAKER_02: I I have a another partner who I would I would kind of say is like our our CIO, our chief investment officer, and he you know he's taken the charge on a lot of those of saying, hey, this is a good one.
• 19:57
  SPEAKER_02: That's that's not you know that's not uh you know, and a lot of the other capital stack um uh you know aspects that are in that, which is you know the the financing and and putting it together and with the renovation budget and how does it work.
• 20:10
  SPEAKER_02: So but that that will eventually be identified to me.
• 20:13
  SPEAKER_02: And then you know one of my unique abilities on on this is being able to look at something and say, or look at a property and be like, okay, here's the story about it.
• 20:23
  SPEAKER_02: Here's here's what what we like, what we and here's does what we like match up with what investors want today?
• 20:31
  SPEAKER_02: Yes.
• 20:32
  SPEAKER_02: And um you know that there's like a through line there from my uh original or from my you know my first career of like, okay, what you know, what's the marketplace looking for with this property?
• 20:43
  SPEAKER_02: You know, so now it's just well what are investors looking for?
• 20:45
  SPEAKER_02: And and is what we're seeing is that the same thing?
• 20:48
  SPEAKER_02: You know, maybe it doesn't look like the same thing, but if we are able to, you know, do something different or look at it a certain way, is it you know you know, so so you gotta sell yourself, you gotta tell the story to yourself, is tell us tell the story to the to your own team.
• 21:01
  SPEAKER_02: Well, because you have skin in the game.
• 21:05
  SPEAKER_02: Yeah, we have a lot of skin in the game.
• 21:06
  SPEAKER_02: Yeah, so so so we invest 10% uh you know of the equity in every deal, which is uh you know it's not it's not very common in our industry.
• 21:14
  SPEAKER_02: So um, you know, and that's part of the aspect of just being a boutique company.
• 21:18
  SPEAKER_02: So we don't do a ton of deals, the deal we we do a smaller number of deals, but we put skin in a lot of skin in the game in each deal.
• 21:23
  SPEAKER_02: Trevor Burrus, Jr.
• 21:23
  SPEAKER_01: You know what's interesting is like so where I'm in the institutional pension world, all of our big clients are putting money in these real estate funds.
• 21:31
  SPEAKER_01: So money's flying in, and then the real estate company has to put it to work.
• 21:36
  SPEAKER_01: They almost have this pressure of too much cash coming in.
• 21:39
  SPEAKER_01: That's right.
• 21:39
  SPEAKER_01: Where you're not operating that way.
• 21:41
  SPEAKER_01: That's right.
• 21:42
  SPEAKER_02: Yeah, yeah.
• 21:42
  SPEAKER_02: I think you know you there are benefits.
• 21:45
  SPEAKER_01: Then they're just putting good money after bad funds.
• 21:47
  SPEAKER_02: You're exactly right.
• 21:48
  SPEAKER_02: So there there are real benefits to funds, and there are real benefits to doing things deal by deal.
• 21:53
  SPEAKER_03: Yeah.
• 21:54
  SPEAKER_02: We do things deal by deal, and what you just pointed out is one of the benefits there.
• 21:57
  SPEAKER_02: Yeah.
• 21:58
  SPEAKER_02: You have a fund, you raise the money.
• 22:00
  SPEAKER_02: You've kind of got a gun to your head to put it out.
• 22:02
  SPEAKER_02: The other part of that is just administering a fund itself is expensive.
• 22:06
  SPEAKER_02: So you need to put the money out and you also need to to generate the fees and the revenues just to pay for the fund.
• 22:14
  SPEAKER_02: So I didn't like, you know, at the size of our company and where we are, and just my general investment philosophy, I I I don't I don't want to have anything like that where I have a gun in my head to do the deal.
• 22:24
  SPEAKER_02: Yeah you know, or to pursue an opportunity.
• 22:26
  SPEAKER_02: So and I think there's there's a ton of things like that in the investment landscape, not only in my industry, but uh but in every industry.
• 22:34
  SPEAKER_02: Private debt, private credit.
• 22:36
  SPEAKER_02: Everything where it's sold to the investor as, oh, this is a benefit for you.
• 22:40
  SPEAKER_02: Uh like for example, okay, this is a fund, you know, you're you're you're crossed, uh, you know, you're getting exposure to all these properties, et cetera, et cetera.
• 22:48
  SPEAKER_02: And so there's all these benefits are sold.
• 22:50
  SPEAKER_02: But you know, there are some drawbacks to that.
• 22:51
  SPEAKER_02: Yeah.
• 22:52
  SPEAKER_02: And um, so you just need to go in eyes wide open so you can see both aspects.
• 22:58
  SPEAKER_02: It's not necessarily that one is better than the other, but they do have, you know, maybe at different times in the economic cycle, you're going to want to, you're gonna you're gonna you're gonna prefer one strategy over another.
• 23:09
  SPEAKER_01: Yeah.
• 23:10
  SPEAKER_01: So then I'm guessing your clients, if they want to have X percent of their personal money in real estate through you, they might wait for four deals, right?
• 23:19
  SPEAKER_01: They don't put it all in on this next deal.
• 23:21
  SPEAKER_02: Aaron Ross Powell Yeah.
• 23:22
  SPEAKER_02: I often have that conversation where, you know, so so where one of our investors will say, well, I have this much, and I may chop it up into two or three chunks and say, just do the next two or three, depending on what my visibility is in the pipeline.
• 23:33
  SPEAKER_02: Yeah.
• 23:34
  SPEAKER_02: You know, or what they you know are saying they they want.
• 23:36
  SPEAKER_01: What do you like as a pace with the size of your company now, your research staff, how many acquisitions?
• 23:42
  SPEAKER_02: You know, I would say we're we're you we pace out for about one to one and a half per quarter.
• 23:46
  SPEAKER_02: One per quarter.
• 23:48
  SPEAKER_02: Yeah, new uh new deal.
• 23:50
  SPEAKER_02: Um, you know, new acquisition.
• 23:51
  SPEAKER_02: Now it doesn't mean that that will happen according to the calendar that way.
• 23:55
  SPEAKER_02: Yeah.
• 23:55
  SPEAKER_02: Because just the the the market cycle and when we find our deals, they don't those don't line up exactly.
• 24:03
  SPEAKER_02: But you know, that that's generally what the pace is.
• 24:05
  SPEAKER_02: Trevor Burrus, Jr.
• 24:06
  SPEAKER_01: How much are you outsourcing, like legal and whatnot, versus do you find an in-house at this point?
• 24:12
  SPEAKER_02: Um our our legal is outsourced.
• 24:14
  SPEAKER_02: Um we have a full accounting team uh and then we augment that with an outside accounting firm that you know handle some of the tax part of it.
• 24:20
  SPEAKER_02: But so what you know my philosophy on that is is that we bring we we insource the parts of the business process that um you know there's there's these crossover points where you're paying for it out, and uh and uh there's a point in which you're paying more than the service you're getting.
• 24:39
  SPEAKER_02: And and um so you've got to take that risk, bring that functionality inside your business, but now you're gonna get like two or three times the the power or the creativity.
• 24:49
  SPEAKER_02: So a good team member, and I've found this like this is kind of like hounds down, uh if you hire a good team member, um they will multiply your company hands down.
• 25:00
  SPEAKER_02: And and generally a good team member will you'll hire them for one thing and then you'll get two or three ancillary benefits where they, oh, they can also do this, or they have this relationship, or they you you know they have they have creative ideas or or whatever.
• 25:13
  SPEAKER_02: You're just adding better brains to like the the nucleus of of what you're doing.
• 25:17
  SPEAKER_02: And that's powerful.
• 25:19
  SPEAKER_02: I really I really enjoy that part of the business.
• 25:21
  SPEAKER_02: Yeah.
• 25:22
  SPEAKER_01: The opposite is true where poison can really ruin a group fast, right?
• 25:26
  SPEAKER_01: Yeah.
• 25:26
  SPEAKER_01: Yeah.
• 25:26
  SPEAKER_01: I do like you guys have a very good coffee machine.
• 25:29
  SPEAKER_01: That's right.
• 25:29
  SPEAKER_01: Yeah, yeah, it's good coffee machine.
• 25:34
  SPEAKER_01: So all of that's important, right?
• 25:36
  SPEAKER_01: The way the staff works together, the way your clients get to know the the team as well.
• 25:41
  SPEAKER_01: Yeah, for sure.
• 25:42
  SPEAKER_01: And uh what's the head count now on the team?
• 25:44
  SPEAKER_02: Uh uh we are ten people.
• 25:46
  SPEAKER_02: Oh, okay.
• 25:47
  SPEAKER_02: That's good.
• 25:47
  SPEAKER_02: It's just like the Goldilocks level.
• 25:50
  SPEAKER_02: Yeah, yeah.
• 25:51
  SPEAKER_02: We'll probably add another one or two more this year.
• 25:52
  SPEAKER_03: Oh, yeah.
• 25:54
  SPEAKER_02: That's pretty much our pace.
• 25:55
  SPEAKER_02: We had, you know, you know, somewhere between one to three people a year.
• 25:58
  SPEAKER_01: Oh, okay.
• 25:59
  SPEAKER_01: Well that's fascinating.
• 26:00
  SPEAKER_01: You know, uh one other thing just to understand is generally how does financing work?
• 26:04
  SPEAKER_01: Let's just use for round numbers in this world if a project costs$100 million.
• 26:10
  SPEAKER_01: How does it work with capital raise versus the banks?
• 26:14
  SPEAKER_02: Aaron Ross Powell Okay, so so that would generally that's gonna fall into two categories.
• 26:20
  SPEAKER_02: First of all, is the property stabilized?
• 26:23
  SPEAKER_02: Meaning is it just you know running smooth and you're just gonna continue to have it run smooth and incrementally improve it?
• 26:30
  SPEAKER_02: And if that's the case, you're probably going to one of the government agencies, Fanny or Freddie, uh and you're gonna get a loan anywhere from 65 to you know 70, maybe slightly more than 70 percent.
• 26:42
  SPEAKER_02: Okay.
• 26:42
  SPEAKER_02: So that's that's where that's gonna be.
• 26:44
  SPEAKER_02: What's the rate on that ballpark?
• 26:47
  SPEAKER_02: Um, ballpark.
• 26:49
  SPEAKER_02: So the the the one of the things you're gonna do with those loans now is you're also gonna buy down the rate a little bit.
• 26:55
  SPEAKER_02: And today that'll put you somewhere in the lower fives.
• 26:58
  SPEAKER_02: Oh wow.
• 26:59
  SPEAKER_02: Okay.
• 26:59
  SPEAKER_02: So you so you're gonna you you know, there's a whole bunch of mechanics within the loan that when you buy down the rate, that it, you know, it helps obviously helps the cash flow, helps you uh achieve more loan dollars, so there's you know, you hit some of the ratios better.
• 27:13
  SPEAKER_02: So it makes sense even though you're making the loan itself uh more expensive on the you know in the initial stages um as that flows through the investment period and pay it paid, it pays off.
• 27:24
  SPEAKER_01: That's a lower rate than I would have guessed.
• 27:26
  SPEAKER_02: It is, yeah, yeah.
• 27:27
  SPEAKER_02: So so I mean multifamily in terms of all the real estate categories, it's it's one of the safest.
• 27:32
  SPEAKER_02: Okay.
• 27:32
  SPEAKER_02: As long as you're you you know you're you're checking the boxes in terms of quality, what the tenant base is, you know, what you're planning to do.
• 27:39
  SPEAKER_02: So, you know, as you know, like we just the the country is in a housing shortage everywhere.
• 27:43
  SPEAKER_02: Yeah, you know, generally.
• 27:44
  SPEAKER_02: That's some so um and what's the other side?
• 27:47
  SPEAKER_02: So and then the other side is is a property that you would be not stabilized or value add or something where you're gonna do uh a moderate amount of a moderate to major amount of work on it.
• 27:57
  SPEAKER_02: And by doing that, you're gonna take the income.
• 27:59
  SPEAKER_02: So for example, we bought a property that only had you know the occupancy was I think just about 70 percent the day we closed.
• 28:06
  SPEAKER_02: That property is in a market where the occupancy is 95 percent.
• 28:09
  SPEAKER_03: Okay.
• 28:10
  SPEAKER_02: So if we went and put seven-year permanent financing on it when the property was when we closed and it was 70 percent uh 70 percent occupied, we would not get the loan dollars that would be appropriate for that property once the occupancy is 95 percent.
• 28:25
  SPEAKER_02: Okay.
• 28:25
  SPEAKER_02: So in that case, you're gonna do some, you're gonna use bridge financing, you're gonna do short-term financing that's going to allow you to buy the property, have the capital available to do the work, make the improvements, and then you know, one, two, three years later, you'll wrap that up and uh re- and refinance it with permanent financing, take the bridge money off, and then get get your um you know the full value of the loan dollars that the property would would uh support.
• 28:51
  SPEAKER_01: Okay.
• 28:51
  SPEAKER_01: And then are you a buy and hold?
• 28:54
  SPEAKER_01: Like do your clients say, just I love my dividends for the next 20 years, or what's what's a general.
• 28:59
  SPEAKER_02: Um I we have like kind of a tongue-in-cheek phrase at the company, which is cash flow is freedom.
• 29:04
  SPEAKER_02: So I mean, generally our investors want monthly cash flow.
• 29:07
  SPEAKER_02: Uh we make everything very, very simple to them.
• 29:10
  SPEAKER_02: We have like it's all a digital login, you know, you put your bank account information in there, and then you just get an email on the first of every month.
• 29:16
  SPEAKER_02: Like yesterday, everyone just got an email and on their you know, on their checking account, boom, the money drops in.
• 29:22
  SPEAKER_02: So so I I would find that most of our investors want that.
• 29:25
  SPEAKER_02: When we underwrite a property, we are um you know, we have our pro forma where we're gonna have a sale.
• 29:31
  SPEAKER_02: It's generally not sooner than five years, you know, it's five, five or seven years.
• 29:35
  SPEAKER_02: But there's a lot that can happen there.
• 29:37
  SPEAKER_02: So we we've had a property that we got to, you know, year three and a half, and someone made such an offer to us that everyone was gonna make almost three times their money.
• 29:45
  SPEAKER_03: Oh, okay.
• 29:45
  SPEAKER_02: And we so okay, we you know, we're gonna take that offer.
• 29:48
  SPEAKER_02: Like that's that that's the bet that was the best way to maximize the return for our investors.
• 29:53
  SPEAKER_02: And we were also concerned about the future.
• 29:56
  SPEAKER_02: We weren't as hot about the future of that property.
• 29:59
  SPEAKER_02: And then we have another we have others where you know you get to, you know, later on in the investment cycle and we're able to refinance and hand everybody a uh uh uh you know a significant amount of their initial capital back and still hold the property and still make money any month every month and refinance proceeds come back, but you don't pay any tax on them.
• 30:18
  SPEAKER_03: Yeah.
• 30:18
  SPEAKER_02: So that's a great outcome for a lot of people.
• 30:21
  SPEAKER_02: A lot of people say, hey, that would actually be the best out outcome because now I own the property, I have my money back, I didn't pay any taxes, and you're still sending me checks every month.
• 30:29
  SPEAKER_03: Wow.
• 30:30
  SPEAKER_02: So if you can achieve that, yeah, that's great too.
• 30:33
  SPEAKER_02: That's beautiful.
• 30:34
  SPEAKER_02: Yeah.
• 30:34
  SPEAKER_01: That's good.
• 30:34
  SPEAKER_01: Well, you got a good thing going.
• 30:36
  SPEAKER_01: I think you pivoted, you went beyond the break.
• 30:38
  SPEAKER_01: Let's dig in quick on health and wellness.
• 30:41
  SPEAKER_01: What are your secrets?
• 30:42
  SPEAKER_01: You're a fit fit man.
• 30:43
  SPEAKER_01: I think you're very young because you're like a year or two younger than me.
• 30:46
  SPEAKER_01: Yes, there you go.
• 30:48
  SPEAKER_02: There you go.
• 30:49
  SPEAKER_02: Any advice out there for uh hardworking people?
• 30:51
  SPEAKER_02: God, what I mean, what's the advice?
• 30:53
  SPEAKER_02: You know, I mean, you know, there's on the internet there's so much so much of this advice.
• 30:56
  SPEAKER_02: I don't I don't think I have anything new to say for sure.
• 30:59
  SPEAKER_01: But well, you know what I've found a lot of people like me and you who dig down those rabbit holes of health and wellness, a lot of people don't.
• 31:06
  SPEAKER_01: So what what do you like to do?
• 31:08
  SPEAKER_02: So uh let's see.
• 31:09
  SPEAKER_02: So I I well, okay, so I think, you know, first of all, having your your kind of set morning routine is really is it is very powerful.
• 31:17
  SPEAKER_02: I know it's talked talked about all over the place, but that's very powerful.
• 31:20
  SPEAKER_02: I've kind of had something similar.
• 31:22
  SPEAKER_02: I've done a version of the same thing for many, many years.
• 31:27
  SPEAKER_02: Oh, okay.
• 31:27
  SPEAKER_02: Right?
• 31:28
  SPEAKER_02: So um, you know, which is uh you know, first you know, 30 minutes, 40 minutes, an hour, whatever, get your head on straight, you know, and then uh and then there's you know exercise for an hour and um you know and then and then I'll I'll eat and stuff after that.
• 31:44
  SPEAKER_02: Um but uh you gotta take care of yourself.
• 31:47
  SPEAKER_02: You gotta yeah, you gotta like, you know, just you know, like I said, wake up, like get your head on straight for the day, you know, what you're gonna, you know, you know, what your intentions are and you know what what you're planning to do, and kind of, you know, you gotta download all the ideas that came to you from from the night from from your dreams.
• 32:03
  SPEAKER_02: Yes, yeah.
• 32:04
  SPEAKER_02: So um yeah, and then get up and get going.
• 32:08
  SPEAKER_02: I that's that's probably the best way I improve my mood and just have a ton of energy is I I put my workouts uh in the morning.
• 32:14
  SPEAKER_02: In in the morning, and you know, I do a mix depending on the day of some strength and cardio and whatever, just moving around, you know, running and all that kind of stuff.
• 32:23
  SPEAKER_01: Because then we're caged in the office for the next few hours.
• 32:26
  SPEAKER_01: So uh do you have a walking?
• 32:29
  SPEAKER_01: Because I can see it's a good thing.
• 32:30
  SPEAKER_01: Yeah, yeah, yeah.
• 32:31
  SPEAKER_01: That's right.
• 32:31
  SPEAKER_02: And then down you know, down here, like you know, I'll take advantage of the weather for sure.
• 32:35
  SPEAKER_02: And so if I have to make two hours of phone calls, you know, and it's and it's not too hot, I'll I'll just you know put the AirPods in and walk around.
• 32:42
  SPEAKER_02: Okay.
• 32:42
  SPEAKER_02: Because so so I find, you know, obviously you're you there's you know a ton of health benefits from walking, but also your your ID.
• 32:50
  SPEAKER_02: You're I well, you're I uh yeah, but you're sometimes if you have to work through an issue, you're you know, you get a little movement.
• 32:56
  SPEAKER_02: For me, a little movement actually helps helps a lot.
• 33:00
  SPEAKER_02: Yeah.
• 33:01
  SPEAKER_02: So so I enjoy that.
• 33:03
  SPEAKER_02: And then um, you know, and then just for the most part, like you know, try to eat uh try to eat healthy.
• 33:08
  SPEAKER_02: I I uh uh the correlation for me is like on on the work schedule.
• 33:13
  SPEAKER_02: It's very easy for me to eat healthy Monday through Friday, and then I kind of don't care uh on the weekends, but um you know, so that that just fits because you you know you're you're maintaining a work schedule and you can kind of do your thing.
• 33:25
  SPEAKER_01: So yeah, avoid the snacks.
• 33:26
  SPEAKER_02: That's right.
• 33:28
  SPEAKER_02: Yeah, that's right.
• 33:28
  SPEAKER_02: Or if you snack, just get good snacks.
• 33:30
  SPEAKER_02: Yes, that's right.
• 33:31
  SPEAKER_02: So I eat a ton.
• 33:32
  SPEAKER_02: Yeah.
• 33:33
  SPEAKER_02: But you know, you you I move a lot too.
• 33:35
  SPEAKER_01: That's the key.
• 33:36
  SPEAKER_01: Well well, Peter, you've moved a lot over the career.
• 33:38
  SPEAKER_01: You know, I think you've you've been a self-made man and and served your clients well and your family as well.
• 33:44
  SPEAKER_01: But I appreciate you spending the time and helping us understand this part of the real estate market, because it's important.
• 33:49
  SPEAKER_01: It's important to America what we're doing right now, and a lot of there's a lot of misconceptions of what's happening with supply-demand.
• 33:57
  SPEAKER_01: And I think you you gave us a good explanation today for sure.
• 34:00
  SPEAKER_02: Really happy to, Chris.
• 34:01
  SPEAKER_01: Well, thanks.
• 34:01
  SPEAKER_01: Keep up the good work, Peter.
• 34:03
  SPEAKER_01: Great seeing you.
• 34:04
  SPEAKER_01: Take care.
• 34:05
  SPEAKER_00: Thanks for tuning in to be on the break.
• 34:07
  SPEAKER_00: If this conversation brought you value, make sure to like, subscribe, and hit the bell so you never miss an episode.
• 34:13
  SPEAKER_00: We've got more real stories, sharp insights, and powerful turning points coming your way.
• 34:18
  SPEAKER_00: See you next time.