Latest / The Capitalizing Your Life Podcast / Multifamily Mastery: Bill Hamel’s Secrets to Thriving in a Competitive Market
Transcript
- Glenn Today my guest is Bill Hamel, founder of Hamel Real Estate. Welcome Bill. Bill Hamel Hey Glenn, thanks for having me on, I appreciate it. Glenn Yeah, you're one of the first people I joined in the Fully-Funded Group and you were the first one of the first people I ever talked to off the platform and super, super nice and welcoming. Glad to have you on. Bill Hamel No, once again, it's great to connect with people in the group, like-minded, are just looking to grow their investments. So, I started off as a cook in a restaurant in Albany when I was 20 years old and did not have any idea of what I was going to do with my life. Read a book, off I went buying small properties for years, self-managed along the way. Built sizable portfolios in Albany, New York. And in 2019, I pivoted into larger multifamily, not only in Albany, but also in the Tampa area, Gainesville, Florida, along with Knoxville, Tennessee. So, at this point in my career, I focus on raising capital for lucrative deals in those areas and managing those assets, particularly in New York. Glenn So, I guess let's break that down a little bit. How much real estate is it in New York? What do you manage in New York? Bill Hamel We have eight assets totaling 200 apartments, maybe a little less. They range from 15-unit buildings up to 150 or 60 unit buildings. Glenn Okay. Okay. So then, and then you started pivoting to outside of just raising capital for your own operations. You started raising for, I guess, with other operators out of state. And so how did you come to the conclusion with, like St. Pete in Tampa? Bill Hamel I selected the Tampa market back in 2020. In 2019, when I pivoted, it was a complete burnout from self-managing our portfolios for over 25 years. So, it all happened one night when I'm going through the commonplace of in-between property managers and house. And I’m down in a historic area of Albany with my maintenance guy, I'm involved, we're gonna knock out a handful of work orders, this guy disappears, I'm left fixing this historic window at five o'clock after being in this business for a couple decades and that was it for me. I was no longer gonna be that hands-on property manager and after reflecting for several weeks or a month, I wanted to start buying larger communities, utilizing a lot of the experience and success I have had building a lucrative portfolio and also take advantage of diversifying location. So, after we sold the majority of our small properties within that portfolio, I was flying down to North Carolina, South Carolina, Florida in the middle of COVID and looking for a property to utilize the 1031 tax free exchange. And after looking at probably four markets seriously, I had two properties on my calendar to look at in Tampa, never had been to Tampa and fell in love. I was aware of the demographics. It was on my list for that reason, knowing that people are flocking to Tampa, jobs are increasing as fast as the population grows, and it's a beautiful area. So, Tampa was exciting for me back in 2020, and it still is. I love what it's done in three years, and I'm excited for the future. Glenn Yeah, definitely. I was watching this one development podcast on YouTube. Yeah. So, it pretty much said about the growth of population from St. Pete and Tampa together. And they, they're what, what the guy was, he was interviewing he was like a traffic logistics guy for development. And, he pretty much said that from Tampa and St. Pete, they, had a 10 year growth in one year. So like the amount of that they expected the population for Tampa and St. Pete was supposed to be in 2030. It was like in 2021 because of the amount of people that moved to this location during, you know, COVID and everything that happened. So, yeah, so interesting. So how do you go about finding the right person to give your money to? Like, how do you feel safe about, you know, investing in the right operator? Bill Hamel I met my partner in the Tampa-St. Pete area in a mentorship group, Mastermind, whatever you want to call it. So in 2019-2020, part of my transition was getting into Mastermind and doing it correctly. I guess you can say I was an expert or am an expert at buying two families and three families and five families. Using the value add rent growth deals that that that we all do on the larger multifamily, but as I was making this transition at 47 years old, I wanted to make sure that I was doing it as efficiently and effectively as possible. And these mentorship groups that the one area that I didn't expect so much value was meeting so many like-minded people that end up being either great friends or people that you can just call for advice or people that end up being great partners. So it takes many, many months to identify that, but once you do...and you're looking to discover that that first property with that person, once that first deal goes well and you've been able to build that relationship further, the confidence builds. The beginning is always going to be the most challenging time for anything. But once I developed attraction with my partner in St. Pete and saw what he was capable of based on our result, I knew I picked the right guy and I picked the right area. Glenn Yeah, because I was thinking that if I were to come across a guy that had 25 years of real estate experience, buying and operating his own real estate, it would be the last guy I would even try to convert to capital raising. because it just seems like it's probably very hard, I would say, because me personally, handing my money over to somebody else when you have the… and I could totally see it for myself. like, it's like, what do we do this for? It's like, we're doing this to build out a job for ourselves to manage real estate? Or are we doing this for financial freedom? And that seems like that's the syndication way, like when you actually put, give your money to an operator to handle it, it's gets as close to passive as, it can get. Somewhat you need to do a lot of due diligence and kind of keep up with it. But at same time, how did you shift that way of thinking from moving from owning your own stuff to managing it to handing it off to somebody else? Bill Hamel It's interesting on how easy it was for me to let go of the control because I was a control freak. I had a management company for a couple of decades with property manager as an employee. I talked to one of them who came back with us to manage our 60-unit complex. It's the second time she's been with us, but we were talking about it last week where I basically structured it where - yes, she was my manager- but I was also the it was like she was my assistant manager because I didn't structure that property management business to have me as the owner and then the manager as the manager. You know, once I burned out, looking back, I think that's a big reason why for the right person, especially after getting that proof of concept with this area and my partner Alex, you know, I give him all the grace in the world. Fortunately, he'd laugh because he doesn't need my help. It's absolutely amazing to watch. And I'm grateful that I didn't know I was going to get a, he's probably 28 - 29 years old and he's operating on a super high level. He's our boots on the ground in Tampa. He finds, you know, great deals that we do the same deals over and over again. We look for value add deals, which are underperforming commercial multifamily that have a lot of rent growth potential. So it's been a repeatable process for us. Glenn That's awesome. And it's really just knowing with your background, I would imagine this you would, you can kind of sniff out what's right and what's wrong. You know, you kind of been like, I've been down this road. I already know. I know where this guy's, you as you know, when you're talking with an operator, it's like, it's like you said, you give them, you give them a little bit more grace, I guess, cause you understand. But at the same time, it's a road you've been down, you know, a lot of this stuff and you can just like let somebody else do the heavy lifting. Bill Hamel Well, once we start a deal and we're analyzing a deal, before we get into that underwriting, we're staring at that rent roll. And I love a rent roll because it tells you so much at this point in time. And it tells you how long a tenant has lived at that complex and some other helpful information. But that turns into our game plan to really set up our underwriting. you know, one other area that I have to point out that has been challenging for many people, you know, is, that the debt side and your projection side of the underwriting is where a lot of people have gotten into trouble, whether it be adjustable rate debt, or, their assumptions with, insurance or taxes or rent growth have gotten people into trouble. There it is. There's the two sides of our analysis. fortunately, I've always been very cautious. My partners agree whenever we're getting into any project, when we're choosing debt, we're going with a fixed product. That's one area, even right now, yeah, we will pay seven, seven and a half percent for a loan to cost product, but that's just one line in our underwriting, but we have certainty there. So fortunately, selecting that type of debt and having heavy familiarity with these areas we're investing in, it allows our projections to be much tighter. We've done very well there. Glenn Yeah, it's constantly being reminded. It's like the two things that kill… I think it's two or three, but the first one is how the deal is structured. Then the other one is the term of the deal. Like how long are you thinking towards the deal? And those are the two, like two big ones that are, you know, that are cashflow and everything. It's interesting when you see these things happen, these floating rates, and it's like, we didn't think it was going to happen again. It happened in 2008 and we're not going to have it again. Whenever the market is at all time low, you know, the interest rates are at all-time lows. We have to expect that rates are going to have to go up and but yeah, the fixed rates I've always liked. We actually pay a little bit extra to have the extension. Sometimes it's a five-year balloon, so we'll pay a little bit extra just to have a 10-year balloon on it. It's like adjust at five, but it's still a 10-year note. That’s in case like at the year five or so, for whatever reason, it's just extra security. It's like 0.25% increase in the rate to me it's like I would do that all day long just like to know that I'm not forced to try to get financing when there's no financing available, you know, so it's like I like the long-term aspect of financing, of course. Bill Hamel Yeah, the pro forma has enough unknowns, you know, that we don't need to add another one, which is the debt. And a lot of people experience this. A lot of good operators had problems or are having problems. Once your rate goes from 4 % to 7 % or 8 % or more, it doesn't matter your operations. There's no way that is sustainable. Glenn One thing that kind of did come out of, I mean, it's not new information now, but insurance on the apartments, we've always had a hard time underwriting apartments just because of the insurance aspect of it and the cost of insurance. How do you guys get around that or how do you look at that? Bill Hamel Well, we're using the same technique that I have used for years in New York. It's very efficient and it's always had a lot of cost savings is blanket insurance policies. I went to the Tampa market saying this is going to be my second market. I didn't plan on buying a property or two and then having another opportunity in North Carolina or another opportunity in another state. Glenn Mm-hmm. Bill Hamel The goal was to have it as my second market that I become very, very familiar with to build a portfolio. At this point in time, it's five properties in this area. My partner Alex is in control of a total of eight properties in that area. We're able to be as efficient as possible with insurance in this area by using those blanket insurance policies. Glenn And that's including property and general liability insurance? Bill Hamel Yes. So, yeah, mostly on the property side, the loss side is where the heavy cost is. So, you know, that's where we benefit the most. If we were buying individual policies for each individual property, the sum of the parts would be astronomically higher than the sum of our blanket policy that we currently have. Glenn Yeah, that's interesting. I know we've looked into it for general liability, but it was from mobile home parks. We have a little bit different, obviously different than apartments, but different than most mobile home parks. We have a smaller mobile home park. it's, we had a hard time getting a blanket policy and then the insurance agent at the time, and I don't know if it's the right information, but I would say that she suggested against it because if there was a claim, then you would be out of policy, but I think for general liability is what she was meaning. So like if somebody sued us and we wouldn't have coverage on the rest of our properties, but for property, you're taking a pool of risk, no matter what, whenever you invest. So the more you invest, the more you spread your risk. And for property insurance, seems like it would make more sense for sure. But that was kind of like her thing. And I, we just kind of got a new agent, so we might have a new opinion. We’ll see… Bill Hamel And it's a challenge down there. You can't sugarcoat it. And once again, like many things in this business, being familiar with your market and having relationships in your market, I think makes the difference. I've heard conversations with people that aren't as familiar in their market or have as much of a footprint in the market. And no matter how hard they try, they can't get a premium that seems anywhere reasonable. And then you see other operators that are utilizing some of these similar techniques as the blanket policy and making it a heck of a lot more palatable for that line item. Glenn Does the asset have to be similar to keep it under the same policy or is it just like you kind of I guess you guys are just buying multifamily generally like - what is it like 30 to 50-unit buildings? Bill Hamel Yeah, we're between 20 and our most recent purchase is a 94. Until then it was 20 to 50 units. But he also has a unit outside St. Petersburg included there. So I think it is an ongoing discussion. We are 100 % multifamily, so it is that straightforward. The reason why I say it’ll end up being an ongoing discussion, if there was any shift in purchasing different asset classes. Because in New York, I had some parking. I had some mixed use with office space. And it wasn't a challenge necessarily. It was underwritten as such but then included in the blanket policy. And, you know, however they... whatever the algorithm was… or the computation is to create that ultimate premium for that the blanket of properties is what I left to our trusted insurance agent. But it always resulted in major cost savings. Glenn Yeah. So if you had, say you had a blanket policy, I don't know if you've ever experienced this, what happens when you say that they come up with a crazy quote, a renewal on it, and how hard would it be to transfer to a new insurance company to do the blanket policy? Do you have to get all new re-inspections on the properties or…? Bill Hamel I would say so, yeah. If you're gonna go from one to the other, you're starting from scratch, for sure. Glenn Yeah. Yeah, that's the hurdle. I mean it's a big business for them as well. Bill Hamel And this is, and once you're, if you're comfortable, yeah, it's good to double check on an annual basis to make sure that your cost is in line. But if you are thinking of making a move, it's, you know, don't do it reactively. You got to put everything into consideration. The one thing that has been frustrating for years and years, but it's part of the business, once you make a move to a new company and you're a new customer at that firm, almost guarantee that they're sending an inspector out there and whatever cost savings you might have, they're gonna, depending on your property and the quality and that stuff, they're known to give you pretty long lists of work and sometimes expensive. Your cost savings is gone based on what you had to do to satisfy the insurance. Glenn Awesome. Yeah, that's good information. I think I'm going to have to talk to my agent after this. So I guess, what's your goal for the next year? Bill Hamel Be consistent with what we've been doing since 2020. Since we shifted away just from the Albany market, bought two multifamily assets that fit my criteria in 2020. Four in ‘21, two in ‘22, one in ‘23. And in 2024, I was able to get into three multifamilies and I bought a single family outside St. Petersburg because I love it so much and that's where I stay when I go down to tour the portfolio. What I think about is keeping consistent with two to three properties, raise capital for each, participate in the deals as much as I can add value. It doesn't have to be only in Tampa. We're still looking at deals in Albany. And if something shows great returns and it's a great property and a great location that I have to purchase, I'm a player. Glenn Yep, that sounds about - I mean - not to say it's exactly like Grant Cardone, but I would say that there's always a demand for good location. So that's just one thing he says. It's 100 % true. Bill Hamel And just speaking like this, it makes it sound easy. I'm in the Albany area of New York, which the four counties have just over a million people. And there's only so many large multifamilies available. So there isn't a lot trading. It's very competitive. And the volume is way down. But you know, if you're professional in the business, we just stay patient. It's inevitable another deal comes along. We just don't know when. Glenn That's awesome. Well, I appreciate you coming on, Bill. And thanks for being on the show. Bill Hamel No, I appreciate it, Glenn. Thanks for having me. Glenn Alright, thank you.