Latest / The Capitalizing Your Life Podcast / Avoiding the Overpay Trap: Axel Ragnarsson on the Power of Pipeline and Negotiation
Transcript
- Glenn (00:03.969) Today my guest is Axel Ragnarsson, host of the Multifamily Wealth Podcast. Welcome, Axel Ragnarsson (00:11.566) Appreciate the invite Glenn, looking forward to it. Glenn (00:14.315) Yeah, so if you could just tell us a little bit about your story. Axel Ragnarsson (00:18.606) Yeah, I mean, let's go back to 2016, I guess it's about eight years ago. Around that time, I mean, without diving too deep into the, or going too far back, I guess I should say. Grew up in New Hampshire, was born and raised in New Hampshire, and then I moved to Boston in 2018. So, yeah, I currently live in Boston. So, been in the Northeast, been in New England my whole life. And I've always been a little entrepreneurial, right? I've never really had a real job. I've always been buying and selling stuff, whether it was Craigslist or eBay when I was younger, or, you know, just always trying to find a way to make a buck that wasn't necessarily going and getting a job at down the street, right? So I've always had kind of had that bone. And that led to in high school and college, I was buying and selling cars. So I had a business where I had flip cars. And that was kind of how I was making money at the time. And back in 2016, I was a junior in college. was thinking about what I was going to do when I graduated. you know, I knew that I wasn't really cut out for a real job, so to speak, a quote unquote real job. So I was thinking, what can I, what can I, you know, it's kind of start a business. What can I buy and sell? That's a little bit bigger than cars. Cause I knew that wasn't going to be what I did forever. and I think one day I was watching HGTV and saw some guys flipping houses and I was like, that, that seems pretty cool. So I went and got my real estate license, started learning about real estate investing, flipping homes, all that. And eventually ended up stumbling across multifamily real estate and rental real estate. You know, the idea of passive income that really stuck out to me as something that I was like, yeah, pretty good deal. You buy real estate and you get money every month and you could build a portfolio and you can work when you want. And that was the real kind of high level thought there that dragged me into the business. And the way I got started in the business though, was I was very focused on going out there and finding direct to seller deals, going off market to find deals. through YouTube videos and podcasts and bigger pockets, like all the resources that were available back at that time, just learned all about direct mail, cold calling, cold texting, how to find distressed deals, how to find below market deals. And, I met a couple of guys who did some hard money lending through some real estate events and then an internship I had at the time. Just coincidentally met somebody who did private money lending and started putting two to two and two together. Axel Ragnarsson (02:35.406) started buying two, three and four unit buildings kind of throughout New Hampshire, built a portfolio of 50, 60 units or so, in a few years. And when 2020 had, came around and COVID hit, it was right around this inflection point in my business being into it for three, four years and growing a portfolio of my own money where I knew I wanted to scale the business. knew I wanted to do bigger deals. I wanted to build infrastructure around the business outside of just me kind of run, running around gunslinging and all And to do that, I had to start raising money. So 2020, I'm trying to figure out how to do that, trying to meet the investors, all of this stuff. started the podcast as a way to market and get in front of folks. 21 and 22, started doing some deals with Investor Capital, both in New England, and then we did a couple of deals out in Florida as well. Late 22, we sold some of the deals that we bought, did very, very well. And around that time, we started a property management company up in New Hampshire as well that managed all of our own real estate and also does third party management. And really the last couple of years has been the business starting to take real form in the sense that we're doing on average larger deals, we're doing a higher volume of deals, and we're raising capital to capitalize the vast majority of the deals that we do through syndications and joint venture partnerships. And our property management company has grown. to be able to really manage everything that we have under our umbrella, specific to New Hampshire. And that business manages, we'll just cross the 700 unit mark in terms of the real estate that we manage there, about half of which is stuff that I'm involved in. And that basically leads us to today, which is our business aligned real estate partners. We're in the business of finding small to mid -size multifamily deals throughout New England, executing value -add business plans, raising capital to fund them. and then managing them with our in -house company. And that's really what we're up to today. Glenn (04:27.191) Awesome. And I know that that was the one thing that some Sam Silverman mentioned your name to me. And he was saying that you were buying like you hear a lot of these guys that are buying like the hundred to 200 unit apartment complexes, but he was saying that you kind of specialized in the what's like a small to midsize. What is that definition to Axel Ragnarsson (04:51.31) Five to 50 units is how I define that. Really a million to five million bucks, or I should say a million to really seven and a half million dollars is kind of the range that we're typically doing deals in. Once we start to get seven and a half, $10 million plus, we're entering a different class in terms of who the buyers are and who the players are. And that's just a fundamentally much more efficient marketplace. And it makes it harder to compete and to buy great deals at discounted prices. We'll be there someday. I'm, I'm not going to be in this lane forever. At some point I'll graduate to doing deals where we, where we make less percentage returns, higher nominal dollar amounts, which is why people play in that space. but right now we, we have a really, really great business built out to do a high volume of these smaller deals. And so for example, in 24 so far, and we're recording this, in August or August 1st, we've done 14 deals this year, about 90 units and change. A lot of those deals are smaller. They're in that five to 10, five-to-12-unit range. We did a 27-unit portfolio this year. We're on the contract in a couple of 10 units that are $2 million each in size. But we just find great deals in that range. And that's where we're focused now and in the future that may change. But it's a great place to be in if you want to earn higher percentage returns. Glenn (06:09.399) Definitely, and I think we have very, yeah, we have very similar models. For us, we do mainly mobile home parks, and we're buying between 10 and 50 units at a time. But at the same time, I think that there's that area where there's, there's certain, like I was literally just filling out a spreadsheet for a mortgage company, and I was thinking how if like a lot of our deals, we can kind of do them on the back of a napkin, you know, like if just a few numbers added together and yeah, yeah, this will make sense. This will make a ton of money. And you get into the spreadsheets and then you start to like finagle to figure out how like, it's like you can create deals through a spreadsheet, but I really believe that quick back of the napkin math. Axel Ragnarsson (06:46.028) Yeah. Glenn (07:09.185) could, it should start with that at least. Like, this is gonna be really good. You know what I mean? Axel Ragnarsson (07:16.334) No, absolutely. I mean, that's fundamentally our business. It's when we're doing the smaller deals, we're not throwing them into 10 tab models. I mean, there's it's a waste of everybody's time to do so. Right. It's what are we buying? What is our renovation budget? What's our all in cost? What is the NOI we can generate? What's our yield on cost? Is there a spread between that and the market cap rate? If so, then we probably have a deal on our hands, right? A positive spread, I should say. Glenn (07:19.104) Yep. Axel Ragnarsson (07:40.744) And, and, and, know, that's, it's, again, it's fundamentally because we're, we're pursuing these smaller deals. If you're buying a hundred plus unit asset, you're going to have a hard time finding capital that's interested in investing. If you aren't modeling out cashflow and are doing some kind of cashflow analysis over a five to seven year hold period where you're modeling in rent growth and you're modeling in, you know, the, the, business plan implementation period and getting very granular, And our deal, you know, in our business, we're buying a property that's worth a million bucks for 800 grants and we've already won it closing. Right. So more of our time is spent on the, on the direct mail side, on the acquisition side and building the top of the funnel. and the successful operations downstream only further magnifies the returns and the infrastructure that we've built. But it all starts with back of the napkin is as you described. And for us, I mean, it's, that's 90 % of it, right? We can do 90 % of our underwriting, you know, just, just by looking at a simple one page. Excel sheet. Glenn (08:36.599) You definitely want to put it into the Excel spreadsheet after the fact to like spot check it because I feel like you really find like all the expenses, but at the same time, I kind of like, feel like it's, if it's like, if it doesn't make sense, almost like doesn't seem like past the sniff desk right away, it's, it's actually harder to raise money on it as well. Cause then you're, you're trying to relay the message to investors and you're Yeah, this is a great deal because of location and stuff. It's like, but for us, mean, yeah, location's super important, but knowing that it cash flows very strongly is the way you're able to hold on for a long period of time. Axel Ragnarsson (09:19.438) Yeah. Well, you need to align the capital as well. I think with the deals that you're pursuing, right? We're typically not raising money in our business from family offices or sophisticated investor groups, not because they wouldn't be interested in what we do, but it's just such a different conversation comparatively to what they normally do. Like we're under contract on a deal right now where we're taking rents from the mid thousands, 14, 15, 1600 to the mid 2000s. Like the rents right now are 60, 70 % below market value with, that's without doing renovations. And it's because the owners owned it for 15 years and they just don't care. And they, you know, it's just, they're totally checked out. It's a 10 unit deal. It's 1 .6 million bucks. It's on a large deal. But you know, if I have that conversation with a sophisticated family office, they just, there's no, they can't conceptualize how that could even be a situation because all of the deals that they look at on a regular basis are institutional assets that a hundred plus units in size, $20 million plus that are operated, even terrible operators at that level. Maybe they're 15, 20 % below market on like the worst case. And there's some story that can be told there, but a lot of what we do suspends disbelief or suspends belief. should say creates disbelief because of the fact that we're, we're, doing things that are not everything we do. And this is funny. I always, I always tell people this Glenn (10:31.818) Exactly. Axel Ragnarsson (10:41.09) The small to mid -size multifamily sector is not even remotely comparable to large institutional multifamily. They are two completely different asset classes. So it's hard to take an investor on one side and have them invest on the other side, right? It's hard to tell that story. So a lot of who invest in our deals are other real estate investors that buy the types of deals that we do. And they just want to invest 50K passively while they're out there looking for their own deals. We have a lot of real estate professionals that kind of understand this. have a lot of high net worth individuals who are again, retail check writers. but we're not typically working with the folks that are used to investing in deals where they are diving into the model and they're like, you used, you know, yeah, it's like exactly. That's not really who we're working with. We have the capability. I mean, we bought a 45 unit deal last year. It was just shy of 7 million bucks. Like, that goes in a full model and we're going to model. Glenn (11:24.745) entrance cap rate. Axel Ragnarsson (11:35.726) That's a $10 million deal now a year later with a minimal cap X. But fundamentally we're raising capital on the story of there's a ton of distress on the seller side. That's why we're buying this deal at a discounted price. Look at those sales comps. That's like 80 % of the underwriting. And then the other 20 % is doing a of the cash flow analysis. But it's like we are de -risking this deal so significantly at closing based on how we sourced it and what we're paying. Glenn (11:52.043) Yes. Axel Ragnarsson (12:04.287) that all of the other stuff is ancillary. It's downstream from a good decision upfront, but there's a lot of investors that don't think that Glenn (12:11.211) Yeah, so the one person, know, Sam Zell, there's a book he, his biography, I think it was his autobiography, Am I Being Too Subtle, talks about buying property for less than what it would cost to build it kind of thing. And like when we're buying like mobile home parks, the way we like to look at them is we're almost buying it for land value and we're getting infrastructure with it, you know, And with apartments, obviously you have a lot more construction, so you can pay more because there's land and construction, then you have to, like generally if you're able to buy it for less than what it would cost to build it and then work out the cash flows to be able to hold onto it is, should be okay as long as the deal structure is done correctly. Axel Ragnarsson (13:03.15) It's a bit of a different ball game. think, I always laugh when, in our market, when a broker's like, you know, 50 % below replacement costs. It's like, of course, dude, this was built like 50 years ago. Like I always love like a broker using that as a sales pitch is always funny to me because literally everything can be bought below replacement costs today. It costs more to replace everything today. That's, that's just what it is. That's why construction costs are high. Materials are high. Labor's high. Interest rates are high. You can buy literally any product for less than replacement costs. I think it's a little bit more relevant as a, as a metric as it relates to selling a deal, whether you're selling it to LPs or your broker, trying to transact on a deal. If it's been built in the last few years and it's comparable to what new construction would look like. you know, if you got something that was built in like 2021 class a build class a location. Yeah. If that's a 25 % discount to replacement. Now there's actually some credence to that sales pitch because of the fact You're basically buying new products for a discount as to what it would be to build. But I always find it interesting when that's sales pitch for eighties, nineties, early two thousands built real estate. It's like, you know, of course, of course it's cheaper. And then in our market, it's funny, we buy a lot of people outside of New England are shocked to hear this, but the vast majority of the real estate we buy is built over a hundred years ago. We buy mostly 1880 to 1920 built real estate because that's 90 % of the housing stock through all of New England. Glenn (14:27.895) Wow. Axel Ragnarsson (14:28.11) New Hampshire, mass Boston, you know, all the way most of New York is early 1900s. so we look at that. We're paying a buck 30, a buck 40 a unit for something that would cost 300 a unit to build. Total, totally different ballgame. Right. And it's, and at that, at that level, at that scale in our market, it's so supply constrained because of the fact that it's so expensive to build. that's just the build costs. That's not even factoring in land costs, right? You have to build to, to average rents in four thousands for a two bedroom apartment in order for it to be profitable. So it's another interesting dynamic of where we buy tours. It's so supply constrained and it's really hard to add supply that a lot of what we're buying, we know we're not really competing with a lot of other folks or at least other apartments that are going to be coming to the market, which, is a good thesis for Glenn (15:17.867) Yeah, we bought a man. how is the how's the is the insurance gone up like it has in Florida? Axel Ragnarsson (15:26.158) Well, we still have one building in Florida. We have a 48 unit in Florida and we've taken it on the chin. We're central Florida, so we're in a town called Bartow, which is about 30 minutes south of Orlando, 20 minutes outside of Lakeland. Glenn (15:30.081) We're part. Glenn (15:35.755) Yep. Yep. have Lake Wales is where we have a bunch of our apartments over Axel Ragnarsson (15:41.014) Yep. So you're very familiar with that area. mean, yeah, insuring, I mean, no matter where you're at in Florida, insurance the last couple of years has been a challenge, but it's a little bit easier if you're in central Florida than if you're on the coast, luckily. Like we don't have to deal with flood where we're at, which is nice, but it's funny, New Hampshire, New England in general, yeah, insurance has gone up, but it's mainly just due to building values going up and replacement costs going so it's, we've seen like 6 % increases year over year on a lot of our policies, which is very manageable. You know, it's, that's a, we probably under owed three, but you know, we got hit with a six and it's like, that's okay. We can, we can absorb that because we still have rent growth throughout most of New England as well. so, and otherwise have still been either staying steady or growing, unless you have some really specialized insurance case where maybe you're in like a flood zone on the coast somewhere in your flood insurance jumped more 6%, maybe that jumped 10, 15, but for just building insurance, hasn't really been that much of a deterrent, but Florida is a different ballgame. think we're currently at 1100 per unit right now for our building, 48 units. we're in the, I think we're at 54, 55 K as our premium. So a little bit more than 1100, guess, but, but we had a peak of 70 at one point, which really was painful. But when we closed that deal in early 22, I think we were at, 800 a unit. Glenn (16:45.527) That's cheap. Axel Ragnarsson (17:03.15) So, you it's gone up 30, 35, 40%, but it hasn't been completely like crippling for us, luckily, which a lot of folks in Florida, I think it has been, but it's been a challenging dynamic. Glenn (17:15.223) Yeah, we had when we bought this, the building, was 100 years at 1920 1925, I think is when it was built would frame, which isn't common in Florida. And we got a quote, one was like 36 ,000. And we're like, this is right when insurance spiked. And we're like, what, what happened here? No, it's not going to work. And they're like, okay, well, the, Comparable quote is 70 ,000 and we're like All right, let's figure that out, you know, so yeah, we we ended up closing it but it was like that was one of those things and I've talked to other operators like Houston They're up, you know, they're in Houston and they're buying like newer construction like, you know class be class a buildings and they're still 2 ,000 a unit and Just getting annihilated. Axel Ragnarsson (17:47.242) Yeah. Axel Ragnarsson (18:11.63) It's insane. It's crazy. It's so, and it goes to show how different, you know, I always think it's funny when I see just nationwide news sources releasing nationwide commentary on the multifamily market. And it's like, it could not be more different in a market like Houston or market like, most of Florida, most of the major cities in Florida, other, you know, kind of Southwestern markets where supply has been just there's so much supplies been added markets like Austin and Phoenix where rents were going down double digit percentages. It's like New England is like, it couldn't be more different. We don't have supply. We don't have the insurance challenges. Rent's flatlined a little bit because just people were moving less often. So there was less household migration. So therefore there was less activity on the leasing side. So rents flatlined, but they were never going down. We were never seeing rent declines. and it's, you know, The Southeast and the Southwest have all of the great metrics from a population growth, job growth, income growth standpoint. And they are, that's, that's all true, but it's important to understand the other side of that coin as well, which is supply is typically meeting that demand and a lot of those markets, not exceeding the demands. Whereas New England, yeah, the demand metrics are less attractive, but when you pair it with virtually no supply growth, it makes for a better buy and hold environment in some cases. It's interesting. It's such a different ball game for those who have their entire portfolio in a market like Florida than those who are predominantly in the Northeast. just two different games right Glenn (19:41.537) Yeah, definitely. And so I guess if you could, what would you suggest to somebody that's just getting started out, how they would get into real estate? Like what would you say their suggestion would Axel Ragnarsson (19:55.982) Yeah, man. Get good at finding deals. mean, think that's, well, first you have to get educated. You have to learn the fundamentals, right? You have to, you have to know how to underwrite. You have to know, like you have to understand basics of real estate investing, which five podcasts, 10 podcasts, a book or two, like you're basically there, right? We're not splitting the atom when we're underwriting real estate. It's pretty straightforward, but you have to understand that piece of it. Once you understand the mechanics of underwriting and the mechanics of how a real estate transaction works. After that, you should be spending all of your time finding deals and that's not spending a ton of time on Zillow. That's spending a lot of time networking with the people in your market that find deals. So wholesalers, agents, brokers speak with all the other service providers like property management companies, insurance brokers, title company, all of these people start networking, tell everyone what you're looking to buy, tell everyone what you do. You want people to associate what you buy with So you should have a specific criteria. buy, I'm looking for, I'm in the market to buy a two to four unit multifamily property in these specific towns. This is kind of the type of deal that I'm looking for. Have the ability to close, et cetera. And you should be talking with a bunch of people on a regular basis around what you're looking for. And then if you want to go above and beyond, you start going direct to seller. you know, it's so funny. People just forget that the best deals, especially when you're starting out and when you're doing smaller deals are typically done without other people involved. In terms of like brokers or other middlemen, right? You should be buying a list. You should just start calling or sending direct mail or texting owners, just telling them, Hey, I saw you own this property. I'd love to make you an offer on if you're interested in selling, right? It's a pretty basic process. But what you want to do is you want to increase your reps. You want to look at a lot of deals. want to, you want to evaluate a lot of deals. You want to offer on a lot of deals. All of that work compounds into understanding your market better, understanding your product type better, understanding where the opportunity lies a little bit more. just, then fundamentally it all leads to an increased likelihood that you actually buy a deal. And what we're hoping to do early on in our portfolio, when we're growing our portfolio, I should say is you want to. You definitely don't want to lose money. That's an obvious one, but the first deal, if you make a little bit, it doesn't have to be a home run. You just need to get in the game. You just need to buy something. Axel Ragnarsson (22:15.266) so that you go through the transaction process, right? That's just all it is. You just want to get your feet wet. And then the next one, now that you're familiar with the process, you maybe you've solidified your relationships. Maybe you got a property management company. Maybe you're doing it yourself and you feel comfortable with it. The next one, you really want to lean on finding a great deal, something that's a below market price so that you can buy it, do your value out and pull your money back out in a short period of time so that you can go on to the next one. The fastest way Or I should say the slowest way to grow your portfolio is paying market and having to wait for the market to appreciate so that you can pull your money back out. And the fastest way to get stolen walled is to do that, right? The easiest way to predictably and quickly grow a portfolio and fundamentally the safest way to do it is to buy at the right price, to buy that $500 ,000 four unit property, whatever it is in your market. If you buy that for 400. You can just refinance a few months after closing, pull that capital back out that you put down and go ahead and do it again. And that's fundamentally how you rapidly grow a real estate portfolio. All the stories that everybody hears are the people that went from zero to 50 units and two years or three years or whatever. The it's not because they were paying market or anything else. It's literally because they got good at finding deals and they bought them at the right price. That is the one ingredient that you must have in your equation. If you want to rapidly scale. If that's not your goal and you're cool buying one property a year with some, with some investable cash that you have and you know, by all means go for it, right? You know, if you don't want to spend any time doing that, that's totally fine. You could certainly make a lot of money in real estate, just paying market and letting time help you. But if your goal is you want to build a real estate business, you want to buy real estate quickly, you really want to maximize your returns. You have to figure out the top of the funnel and the deal finding part of the equation. Glenn (24:00.885) Yeah, so I could say for myself, from my experience with talking with guys and the key that I've seen is also to add to that is figuring out how to do it without the banks. Those are the guys that I've actually seen become super successful is like, figure out a way to get either seller financed or get somebody else's money to invest with you to help leverage that aspect of it. For me, I actually did what you said not to do. But the one thing I would say that I did that most people wouldn't is I bought properties like nobody wanted. I bought the property that was like a hoarder situation. I just knew that I was gonna have to trash out the unit and fix it up so that it would be considered a value add, but it's like you don't wanna buy property that was just turned by somebody else and they're selling it to you. You know, so. Axel Ragnarsson (24:59.082) Yeah, exactly. Yeah. I mean, it's also important to find your skillset, right? Like if you have a construction background, like get into a hairy project, you can maybe pay a little bit more because you're going to save money on the construction side because you've got some guys who are going to work cheap and you can, you you understand that. Like for me, I had no construction experience. That was the biggest weak spot in my business. Right. And I, I didn't necessarily have the operational experience. Let's say you want to start buying real estate and you worked at a property management company for the last five years. Well, you've got a great skillset that you can capitalize on. All I had was a kind of a sense of how to get in front of sellers and how to market myself. so for me, I had to buy properties at the right price cause I was going to overpay for the construction. was going to hire a third party management company. wasn't doing any of that. So I'm paying the GC 15 grand to renovate an apartment that some guy who's there every day managing a crew or doing it himself could do for 10. But I was like, that's fine. I'll just go find deals and pay five grand a unit less to compensate for that. You know, so I, again, I shouldn't say it's a one size fits all by any means, but I think the big takeaway is finding great deals at a discounted price. And then if you pair that with what you describe it, create a financing seller, financing stuff like that, you know, that's like pouring gas on a fire. But, but in general, you do, you don't want to The one, and it's funny because I'm cross -talking here, but you don't want to let the pursuit of finding like a really great deal prevent you from doing the first deal. The first deal it's pay market. It's okay if you pay market, if you get a great deal, perfect. But like the first deal is not about making money. It's just about doing it. Like you, now you've worked through the lending process. You've walked through the transaction process. Now you've got some sense of property management. You kind of have a sense of real estate ownership. Glenn (26:23.231) Yes. Axel Ragnarsson (26:42.668) All of that stuff is so scary before you do it. so, it's the, it's the deep blue sea. You don't know what it's all about. Just buy a property, get the ball rolling. And then you'd be surprised at how quickly the ones after that come. think that's, you know, at least that's my takeaway. And that's what I did, frankly. Glenn (26:58.337) Yeah, I listening to your story, I was thinking that it actually, wouldn't even think like car sales was gonna help you buy real estate, but negotiating is like the key factor of car sales. And then you learn how to really make offers or stand strong on your offer. Those are big things that what you were saying, saving money or making a good price purchase price. Axel Ragnarsson (28:13.998) And it was just rifling out offers. was just pure activity. It's the same thing with real estate. It's, I'm not doing this with publicly listed deals, but grow the top of the funnel. I, if I contact a hundred owners this week, probably going to have conversations with 10 of them. I'm going to make offers on those 10 deals. That's way more than I would if I was just waiting for other people to bring me deals, agents or other folks in my network. And, I think fundamentally speaking, the greatest negotiating tool or leverage you can possibly have is an alternative. Right. It's I don't need this deal. Not needing any one deal is your greatest negotiating power. And when you look at a lot of deals and you're offering on a lot of deals, when you have a good pipeline, you never become emotionally attached to that one deal. And that's frankly, where a lot of investors screw up is they just don't look at enough deals. And when they find one that's finally kind of working, they just become obsessed with it. And they just, next thing you know, they've overpaid, right? Or they, or they bought the wrong deal or they compromised some other part of their criteria. It's easy to negotiate when you're like, dude, I don't have to buy this from you. Like we, I offered on a bunch of deals this week, best of luck. hope you sell it to somebody else and truly being able to walk away is, the negotiating power that you have when you just maintain a high level of activity and you speak with a lot of folks, you know, and I think that's, that's a lot of investors get wrong is they don't have that pipeline, right? To of deals where they, they're not married to any individual deal itself within that pipeline. Glenn (29:38.687) And generally the properties I would imagine that you're trying to buy and that we buy are, you know, there's some hair on the deals, you know, so it's kind of like, the, the sellers are generally ready to sell and it, and when you are negotiating to an extent for, for us, it's, I always think to myself, you know, we don't want to take on your headache. So we're going to offer this and this is what we're paying. If you don't want sell it for that price and you can keep your property, you know, and especially for now, you know, 2022 or we'll say 21 to 22 is like, it was a hard time to put offers in, but at the same time, we're constantly putting offers in. Like it wasn't like, and I hate, like you hear about people saying it's a bad time to buy real estate, but I don't think there's ever a good time to buy if you watch the news. And if you're, know, interest rates being It actually makes it a better time to buy real estate. You know, you're like, well, that means you can get better seller financing. can get, you know, along with, you know, the prices go down and, you're able to get higher yields generally when, that happens. And then when the market was on fire, it was like, everybody wanted to buy real estate. And at that time it was a lot harder to find deals. to pencil out, but at the same time, there was a lot of people still saying, this isn't the time to buy, it's too hot, whatever. you know, so then you, but you're still, it's like, you still have to figure that out. Like there's, there's other areas to adjust, like a value add or something like that. And that's been my experience. Axel Ragnarsson (31:25.85) Yeah, it's, it's, so interesting. I, every once in a while I'll have like an LP ask me like, where do you see the market going? I'm like, I am not qualified to answer that question. Like I, I make no, and it's funny. I tell other GPs, who are sending me sometimes, you know, have other folks that are in the business that are doing what I do and they'll send me a deck and, you know, they're making macro economic comments or opinions or sharing their opinion. I'm like, dude, get rid of all of that. You don't know what's going to happen. Jerome Powell doesn't know what's going to happen. And he's the one literally with his hand on the trigger. He's just trying his best. Like we don't know. Right. And I think, at any given point in time, it's a good time to buy real estate provided you are buying a deal that services its debt, that you're paying below market value. That's in a good location that you have a good business plan around that's in a market that you know, well, those constants are the same at any point in time in the market cycle. And yeah, of course the news is going to tell you all that. mean, news, they get paid based on clicks, right? Any negative headline gets the clicks. So it's never going to be a great time to buy. But I get that question a lot from my old P's and I say, listen, I am the vehicle in which you can deploy capital into a great strategy with a great operator. But I can't tell you what like, because frankly, I don't know. We're mitigating our risks today by buying deals below market value. And I always come back to that. We've built our entire infrastructure in our business around buying good deals. which a lot of folks say, but like we literally do it and that we send 10 ,000 direct mail pieces a month. have a full time acquisitions guy. Like this is the entirety of our model. and we operate well and we know the market really well. And it's like, if you think that real estate is going to go this way, the other, okay, I understand. I can't be the one to reinforce or share my opinion, frankly, because I got my head down on finding good deals. don't have my head up looking at the macro economic trends, you know, so But I think for a lot of folks, they get bogged down in that nitty gritty when in reality you're, should be focused on executing, right? You should be focused on finding great deals on operating them well and financing them well. and if you do that and you buy real estate in good areas with a good business plan, it's oftentimes you're the market's not necessarily going to dictate above and beyond it helping you. I think, trying to make determinations around your strategy based on where you think things are going to go macroeconomically is just a great way to, know, it's, just going to send you into analysis paralysis, in my opinion. Glenn (33:46.987) Definitely. Also, the one thing I love about real estate is that if you're buying it for cash flow, is that the cash flow pays you to wait and the price is how you get the equity. And then when it gets to a point where somebody is willing to pay you way more than you would ever pay for the property, then that might be a time to sell. But for us, we love the cash flow you know, just to continuously, you know, look for good deals to make them work. Axel Ragnarsson (34:22.572) Yeah. Yeah. I think, when you think about the life cycle of a real estate investment and where your returns come from, you're locking in the bulk of your returns at closing when you buy it, because you're dictating your purchase price, which is the largest number in the entire investing process. The second stage is you're creating value through operations. And that's where you're all that's, that's where the second most, or the second highest percentage of your returns are going to come from. And then after that, once you've stabilized the building, you've executed your value, you've done all your renovations, all your rents are at market. You're basically at the whim of the market over the, a longer period of time. You're at the whim of what occurs in that market from a macro standpoint. How many, know, how many people are moving there? How many people are moving out? What jobs are going there? What jobs are going out? And yeah, you can, you can create a little bit more of excess value throughout that period of time. If you're a great operator, but let's just say you're a market operator. You're, you're not terrible. You're not great. You're just right in the middle. You're just going to do what that market does. And you've started. Glenn (34:56.715) Yes. Axel Ragnarsson (35:20.206) You are not really in control of what happens from a return standpoint anymore. You know, and in our business, we recognize that we're in the value add game. we know that we make a lot of our money at closing. make most of the rest of the money we're going to make throughout that first 12 to 18 months of ownership. And then after that, yeah, there's benefits to long -term real estate ownership, but it's mainly just tax advantage, nominal cashflow, but the big dollars are made from closing to 18 months. And as a result, we're a little bit more transactional than I thought. think a lot of folks are. And part of that's because we do small deals as well. But, you know, I am by no means allergic to selling deals once we've done our value add and either 1031 and that money into the next project or just cashing everybody out because we've done our job. We've earned the bulk of the returns that we're going to generate. And after that, we're just making macroeconomic bets on that geographical area, which in some markets is a little wiser than others, right? It's if you're doing that in New Jersey, it's a little bit riskier than if you're doing that Georgia or Florida where there's more growth over a long period of Glenn (36:21.811) Awesome. So where can everyone find Axel Ragnarsson (36:26.542) The multifamily wealth podcast coming up on 250 episodes. So we've been doing that for a long time. It's we just talked multifamily on there. If you want to find me on Instagram at multifamily wealth, if you want to shoot me an email, Axel AXEL at aligned A -L -I -G -N -E -D -R -E -P dot Glenn (36:47.231) Awesome, Axel. Thanks for being on the show. Axel Ragnarsson (36:50.827) Awesome, I appreciate it