Latest / REL Freedom Podcast / Michael Messner, Nick Haraden. & Marc O'Bryan - Achieving Your Real Estate Goals By Working Together

Transcript

Michael Messner, Nick Haraden. & Marc O'Bryan - Achieving Your Real Estate Goals By Working Together · REL Freedom Podcast

• 0:00
  Speaker 1: We see a lot of operators just kind of just falling out right now because they grew too fast, they didn't know what they were buying, or they knew what they were buying, but they didn't know the cap race and all this stuff Right.
• 0:11
  Speaker 1: So you know, our team is really tight and we're able to, you know, throw at the right speed for our investors too.
• 0:23
  Speaker 2: Welcome to the Real Freedom Show, where we inspire you to pursue your passion to gain time and financial freedom through opportunities in real estate.
• 0:30
  Speaker 2: I'm your host, mike Swenson.
• 0:32
  Speaker 2: Let's get some real freedom together.
• 0:33
  Speaker 2: Hello everybody, welcome to another episode of Real Freedom, talking about building time and financial freedom through opportunities in real estate.
• 0:48
  Speaker 2: You know real estate is a great gateway for people to achieve their dreams, and so for a lot of people, you know it's I'm doing my work by day and I'm investing in real estate at night, and maybe that turns into something full time or it just stays something passive, more passive, that I can do in addition to my job, as I'm building additional income in addition to my W2 income.
• 1:11
  Speaker 2: And so today I'm super excited.
• 1:12
  Speaker 2: We've got a great story.
• 1:13
  Speaker 2: We've got three guys here who all work together on putting together real estate syndications, and they all play different roles.
• 1:20
  Speaker 2: Primarily, they're investing in the St Louis area with apartment buildings, and so we'll talk to them and hear a little bit about how they all work in tandem.
• 1:29
  Speaker 2: And so we've got Michael and Nick and Mark here and they're going to share their story.
• 1:32
  Speaker 2: So feel free, guys, to introduce yourself, share a little bit about your background, and then we'll kind of get into your roles and how it works and how you guys are working together to achieve your goals through real estate.
• 1:42
  Speaker 3: My name is Michael.
• 1:43
  Speaker 3: I grew up with real estate, a little bit in the background.
• 1:48
  Speaker 3: My dad was an architect.
• 1:49
  Speaker 3: My brother is currently an architect in Chicago.
• 1:53
  Speaker 3: I grew up in Wisconsin, so not too far from you.
• 1:56
  Speaker 3: I have a lot of friends in Minnesota and yeah, you know, I think my mom actually as well owned several properties and you know was kind of accidentally house hacking or doing the thing where you know she would move and rent it out and then eventually, you know, fix it up and eventually flip it, kind of unintentionally.
• 2:18
  Speaker 3: And yeah, I started being interested in real estate over 20 years ago but it took until like 2018 to actually, you know, pull the trigger.
• 2:28
  Speaker 3: And yeah, I'll save the full story for a bit, but I've been working in tech and real estate or sorry, tech, and you know the business side of tech and finance, I should say for a long time, but you know it's been mostly real estate for about three years now.
• 2:44
  Speaker 1: I'm Nick Heridan and you know similar background with Michael with.
• 2:49
  Speaker 1: You know family was always in real estate.
• 2:51
  Speaker 1: You know real estate agent.
• 2:54
  Speaker 1: My dad's a contractor, builds, you know, development stuff Never really thought about it too much on the real estate side until really like right before COVID and my wife and I were just talking about how we can get another revenue stream going, just kind of jumped in and did a ton of research Boss from single family stuff, some Airbnb's, met Michael and we kind of teamed up and bought a apartment unit and then from there we kind of just expanded.
• 3:23
  Speaker 1: And yeah, that's pretty much my background for that I also was in hospitality before.
• 3:30
  Speaker 1: So kind of led me to be able to manage people better on the real estate side as well, because it is a people business.
• 3:37
  Speaker 1: So you know that's something that really helped me succeed to where I'm at now.
• 3:42
  Speaker 4: Yeah, I'm Mark O'Brien.
• 3:44
  Speaker 4: I think I'm the only one in the group who doesn't have any real estate in their family background, but I have a similar background to Michael.
• 3:52
  Speaker 4: Actually it worked a lot in tech Actually used to work with Michael at a previous company and for the last eight years I've been doing mostly digital marketing.
• 4:01
  Speaker 4: But again I was kind of brought in to kind of help with streamlining some of the operations in the back end, just keeping things organized and keep things flowing.
• 4:12
  Speaker 2: Let's kind of touch before we dig in a little bit deeper.
• 4:14
  Speaker 2: Why are you choosing real estate as kind of your vehicle to where you're going to?
• 4:19
  Speaker 2: Obviously you're spending a lot of time in it and then obviously you're hoping to get a lot out of it.
• 4:24
  Speaker 2: But there's a lot of different opportunities of what you can do.
• 4:27
  Speaker 2: You know you can invest in other things and you know for some people they're kind of all in on real estate.
• 4:32
  Speaker 2: For some people it's I still diversify and invest in other places.
• 4:34
  Speaker 2: But just kind of curious for you guys, being outside of real estate kind of with your day job, why are you choosing to spend your time in real estate long term?
• 4:43
  Speaker 3: For me, you know I was always, I've always, invested in the stock market and with a background in business, I think you know I had a small advantage in that I could interpret Financial statements and things like that, right, where most people were just looking at charts and making a guess, and that was helpful.
• 5:02
  Speaker 3: But I think where it falls short is you have no control over operations of the business, right, so you can't actually implement any changes.
• 5:10
  Speaker 3: You just, you know, you're kind of at the mercy of management and I also hate that aspect of you know, watching charts go up, you know, day by day and stuff.
• 5:18
  Speaker 3: Not that that's a healthy habit either for people investing in the stock market, and you know we still do.
• 5:22
  Speaker 3: Obviously, you know you have to, you have to diversify.
• 5:25
  Speaker 3: I wouldn't tell anybody to put all their eggs into real estate.
• 5:28
  Speaker 3: But what I love about real estate is not only is there the aspect of analyzing the business and and you know, looking at the financial statements and where are we strong and what needs work, but we can also actually influence them and I think that's a.
• 5:42
  Speaker 3: I think with our particular combination of skills, we have a huge advantage compared to most other investors and that's why we do well at it.
• 5:51
  Speaker 1: Yeah, just all the benefits of real estate is just, it's just insane.
• 5:55
  Speaker 1: You know tax benefits you're getting.
• 5:57
  Speaker 1: You know your rent.
• 5:58
  Speaker 1: You're getting your mortgage paid off by someone.
• 6:00
  Speaker 1: You know you're getting equity bill.
• 6:03
  Speaker 1: You know you paying down your principal.
• 6:04
  Speaker 1: You're getting your equity bill down.
• 6:05
  Speaker 1: As well as years go by, you can take loans out on the house.
• 6:09
  Speaker 1: I mean there's, there's so many vehicles you can go with real estate and you know, we certainly do.
• 6:15
  Speaker 1: Yeah, we certainly do real estate as our full time jobs, and I mean at this point for sure.
• 6:20
  Speaker 1: But you know, I think that the major benefit for me was, you know, just financial freedom with it.
• 6:27
  Speaker 1: Yeah, I mean, I have, you know, stuff in the stock market, but real estate was the fastest, most efficient way to and also I love it, but most efficient way to get to the financial freedom for our family and and also along the way.
• 6:41
  Speaker 1: Now it's just, you know, it's the job.
• 6:43
  Speaker 1: That's not really job is something I just, you know I want to do for as long as I can.
• 6:51
  Speaker 4: Yeah, for me, when I was brought on, I could just see that these two guys are very intelligent guys and they have a very repeatable process for successfully going full cycle on these properties, and so for me it just seems like a safe bet and a fast way to grow investments.
• 7:10
  Speaker 2: I say it's an entrepreneurial playground.
• 7:11
  Speaker 2: There's a lot of things you can do with it, and once you gain some knowledge on real estate, you can choose to specialize in different areas.
• 7:19
  Speaker 2: You can choose to kind of go really deep.
• 7:21
  Speaker 2: If you want to, you can pop over to something else.
• 7:23
  Speaker 2: You know if it was storage units or you know something like that.
• 7:26
  Speaker 2: If you learn how to do syndications, then it's maybe identifying a different asset and partnering with different people.
• 7:32
  Speaker 2: So there's a lot of flexibility that way as well.
• 7:35
  Speaker 2: So there's just a lot of cool stuff that you can do inside of the real estate space.
• 7:39
  Speaker 2: Now you guys are you know at least now that you're together choosing to invest in St Louis.
• 7:44
  Speaker 2: So for a lot of people, as they kind of decide on markets, sometimes for people it's paralysis by analysis, right Like I could choose any city anywhere in the world, and so I'm going to choose to do nothing instead, or I pick a city and go with it and we'll continue to grow off of it, and you can also add other places.
• 8:01
  Speaker 2: But what was it about St Louis, or even just the type of market you were looking for, and this seemed to kind of check off some of those boxes.
• 8:09
  Speaker 2: I'm curious to hear your journey on choosing markets.
• 8:12
  Speaker 1: I could, I can start it and, michael, you can tag on the end but or tag wherever.
• 8:17
  Speaker 1: But for me is where our first portfolio was.
• 8:21
  Speaker 1: So my wife and I found St Louis by doing a lot of market research.
• 8:24
  Speaker 1: I literally picked up the phone, called property managers, insurance agents.
• 8:28
  Speaker 1: I tried to learn everything about a lot of different little cities and then St Louis was really the one that kind of stuck out where we could buy something and still make some good money on the rent and cash flow or something.
• 8:39
  Speaker 1: So at the beginning we you know we we didn't want to take a huge risk.
• 8:42
  Speaker 1: So it was that lower and price points.
• 8:45
  Speaker 1: I mean like we're talking like 100 to $200,000 homes but renting for 15 to $2,000, $1,500, $2,000 a month, right, so we wanted to cash flow and it ended up being a great market because appreciation was going crazy, the Midwest was just going nuts.
• 9:01
  Speaker 1: And then the people that we met, that I met on the ground there, were just awesome, like our property management company from day one.
• 9:09
  Speaker 1: They're still with us on 265 plus units now.
• 9:12
  Speaker 1: So they've expanded with us, they've grown, they've made us a priority.
• 9:17
  Speaker 1: So finding those, those, those markets where you can actually connect with people and also that you can also go there and check it out if you need to, obviously.
• 9:26
  Speaker 1: But I mean we're, we're, we're on the West coast to go in the Midwest.
• 9:30
  Speaker 1: I mean it's a short flight, but you know, we, we were able to build those connections where we didn't have to be, you know, walking the streets every day, where we can learn street by street.
• 9:38
  Speaker 1: And then Michael had his profile in Wisconsin.
• 9:42
  Speaker 1: So we were just kind of going back and forth to seeing when we met, you know, we wanted to get bigger.
• 9:47
  Speaker 1: Hey, are we going to go to Wisconsin or are we going to go to St Louis?
• 9:50
  Speaker 1: Cause we already knew those markets so well, we knew the contractors and the PMs and everything, and we ended up finding a great property in St Louis.
• 9:57
  Speaker 1: So we kind of just stuck with that and just grew in the market there.
• 10:02
  Speaker 3: Yeah, I was.
• 10:04
  Speaker 3: Before I met Nick, as he mentioned, I had a portfolio in Wisconsin and that was partially because I just I knew Wisconsin well I and I, you know I had friends there who were realtors and it happens to be.
• 10:17
  Speaker 3: I mean, I love the Midwest as a market in general, just based on on on the numbers.
• 10:22
  Speaker 3: Really, the main, the main metric I look at with the market is the GRM, the gross rent multiple.
• 10:28
  Speaker 3: So how much you know how much does it cost to buy property?
• 10:32
  Speaker 3: You want that number to be as low as possible and how much are these properties renting for?
• 10:35
  Speaker 3: You want that to be as high as possible.
• 10:38
  Speaker 3: And the buy price divided by the rent is the, is the GRM, is the gross rent multiple and still a really important part of how we underwrite individual properties as well.
• 10:45
  Speaker 3: But you can look at that on like a metro wide basis and Wisconsin you know ranks really well and it's also looking a lot in Pittsburgh and Cleveland, I think, and a few other cities that when they mentioned St Louis I was like oh yeah, I think you know I had a list and I was like I think St Louis is really high on that as well, and there are other factors, you know, obviously, but I definitely wanted to invest in property that was already cash flowing.
• 11:13
  Speaker 3: Everybody was buying in Texas and Florida and stuff and they're all just getting crushed right now.
• 11:17
  Speaker 3: You know we wanted it to cash flow from the from the start and you know it's it's been fantastic.
• 11:24
  Speaker 3: I was familiar with St Louis.
• 11:26
  Speaker 3: I had been going there since I was a kid, you know with my dad and you know for work and things like that.
• 11:32
  Speaker 3: So had a sense of you know the people and the.
• 11:35
  Speaker 3: You know there's that sort of Midwestern pride and work ethic and things like that.
• 11:40
  Speaker 3: So, yeah, when we found that one like Goldilocks property where all the numbers worked, it was a no brainer.
• 11:47
  Speaker 1: Yeah, and people are just awesome in St Louis.
• 11:49
  Speaker 1: I mean, like everybody that we meet, we've built some really great relationships and we wouldn't be able to do what we do without those people.
• 11:57
  Speaker 1: So, you know, it's you know, always come across people that are very ethical and honest, and of course, we come across some that aren't, but the majority of the people that we've met in St Louis have been, you know, amazing.
• 12:10
  Speaker 2: Now you talked about relationships and so like.
• 12:12
  Speaker 2: As a real estate agent that works with out-of-state investors, I know that you know they can choose to invest with me.
• 12:19
  Speaker 2: They can choose to invest in other areas and that's why a lot of my investors you know they live on the coast, they like investing in the Midwest, but I also know people are choosing the St Louis as the Milwaukee's, the Ohio's as well, in addition to investing with me.
• 12:32
  Speaker 2: But you talked about relationships.
• 12:34
  Speaker 2: You know keeping with the same property manager and I think that's a thing.
• 12:37
  Speaker 2: Sometimes investors, they may lose some efficiency or they may have some learning I don't know if I wanna say mistakes that happen when you bop around a little bit in a lot of different spots.
• 12:48
  Speaker 2: And so it's kind of like if you've got a good thing, stick with it right.
• 12:51
  Speaker 2: If you've got a property manager that you know like and trust, you can continue to find good deals, continue to, you know, go down that road and build deep.
• 13:00
  Speaker 2: And yeah, you guys can decide to invest somewhere else in the future too, but you might get better deals, more efficiency and you know the matching up.
• 13:10
  Speaker 2: I also tell it, tell you know, like what's on a spreadsheet doesn't always match what actually happens.
• 13:14
  Speaker 2: But maybe you guys have found that you'll be able to produce what your projections are when you have great people that you're already working with, versus kind of losing some of that efficiency going in other markets.
• 13:26
  Speaker 1: We always talk about our buy box.
• 13:27
  Speaker 1: You know, and we know exactly what we want, where we want it.
• 13:31
  Speaker 1: You know when we want it and how we're gonna get it, because we've met all the people on the way.
• 13:35
  Speaker 1: And you know it's funny.
• 13:37
  Speaker 1: The first person I called in St Louis was the owner of our property management company, zane's Chad, and I talked to him for like 20 minutes.
• 13:44
  Speaker 1: I'm like man that is hard to get you know.
• 13:46
  Speaker 1: So to be able to like call someone and actually talk to like the owner of the company, you know it goes a long ways and I think for, like you know, agents and stuff like that, just you know how do you you know, just being available, learning the market for, for your you know investors and such is a big portion as well.
• 14:07
  Speaker 3: This happens to me all the time.
• 14:08
  Speaker 3: I get sucked into the, into the spreadsheets, you know, and I'll look at so many properties you know.
• 14:12
  Speaker 3: Then I'll go to Nick and say like, oh my God, I have one that works great.
• 14:15
  Speaker 3: You know, this is the gross rent, multiple right, this is the you know potential NOI cap rate.
• 14:20
  Speaker 3: And he's like, oh, you know what's the address, what neighborhood is it?
• 14:23
  Speaker 3: Oh yeah, I forgot to check that.
• 14:24
  Speaker 3: Like I don't even look at the location.
• 14:26
  Speaker 3: And then Nick will call you know what our broker, our insurance broker, our banker, our PMs, and they'll all just go.
• 14:35
  Speaker 3: Yeah, they'll just go drive, you know, drive by.
• 14:37
  Speaker 3: We have relationships with all these people and they'll all just go drive and check it out.
• 14:41
  Speaker 3: And sometimes they come back and say like nope board, you know boards on the windows and the whole neighborhood is you know whatever.
• 14:47
  Speaker 3: And I would never have been able to tell that from a you know, from a spreadsheet.
• 14:50
  Speaker 3: But yeah, you really do need to have have boots on the ground, even if you're remote.
• 14:57
  Speaker 1: Like, just literally last week, our inspector that we use for all our properties and when we buy properties, he called me.
• 15:04
  Speaker 1: He's like, hey, I was just across the street from, from Wild Cherry, the property that we bought, you know, early last year.
• 15:10
  Speaker 1: He's like, hey, everything looks good.
• 15:11
  Speaker 1: You know, I'm like, hey, can you go check out the trash situations or having a couple of little issues?
• 15:15
  Speaker 1: He's like, oh yeah, no problem, let me turn around and write down the screen.
• 15:17
  Speaker 1: So like stuff like that where someone calls you for no reason, just to be like, hey, your property's looking good, I was just driving by, you know nothing to worry about.
• 15:26
  Speaker 1: Hey, yeah, no problem, I can go back and check it out really quick.
• 15:29
  Speaker 1: So you know, stuff like that is that's like gold for an investor, right?
• 15:33
  Speaker 1: Especially when you bring on investors, you need to have people that can actually like watch your back and, you know, give you that little extra.
• 15:40
  Speaker 1: Like you know nuggets here and there, like, hey, this is looking good.
• 15:44
  Speaker 1: Or you know, don't worry, or something like that.
• 15:46
  Speaker 2: I'll say a little bit more, maybe like a VIP type level of service.
• 15:50
  Speaker 2: Not that a property management company wouldn't give you good service, but it's some of the little extras that you don't necessarily ask for to expect because you have a good relationship.
• 16:00
  Speaker 2: They want to keep that with you and it's not like you know.
• 16:03
  Speaker 2: Oh, this is Nick, I better go give him a high priority, like he.
• 16:07
  Speaker 2: Just he likes you, he's worked with you, he trusts you and it's like oh yeah, I can just swing back and do that.
• 16:11
  Speaker 2: So I think that's sometimes people don't put it.
• 16:14
  Speaker 2: It's hard to put a price tag on that, but it really matters.
• 16:17
  Speaker 2: Now I'm sure it's.
• 16:19
  Speaker 2: You know, for some people you maybe were just fortunate enough to run across to great property manager from the beginning.
• 16:24
  Speaker 2: Some people might they might have to cycle through a few that don't work as well to find that good one.
• 16:29
  Speaker 2: But yeah, it does.
• 16:30
  Speaker 2: It takes time too.
• 16:31
  Speaker 1: Like it takes work for the investor.
• 16:32
  Speaker 1: On the investor side too, you can't just expect.
• 16:34
  Speaker 1: You know you call someone like, hey, I got one property, can you manage that?
• 16:37
  Speaker 1: You know that's not going to do much.
• 16:39
  Speaker 1: Right, you got to like put in the time and actually like care about these people.
• 16:43
  Speaker 1: Right, like the people are like going to be your main people on the ground and, like you know, give them a call, ask them how their day is going.
• 16:50
  Speaker 1: You know, maybe write down when their birthday is, send them something.
• 16:53
  Speaker 1: I mean the first agent I ever worked with in St Louis for single family stuff.
• 16:57
  Speaker 1: He was awesome.
• 16:58
  Speaker 1: You know he like walked through all the units with me, took the time and you know, for his birthday I sent him a golf club.
• 17:04
  Speaker 1: You know, like like stuff like that just goes a long ways to build those relationships and you never know where it's like going to lead you later on.
• 17:12
  Speaker 1: And you know we've gotten deals off market deals from everywhere at this point, just because you know we took the time to put in to build a relationship.
• 17:21
  Speaker 1: So it can't just be like the PM helping you.
• 17:24
  Speaker 1: Right, you got to help them out too with different things.
• 17:26
  Speaker 1: So we make sure we pay your people on time, right?
• 17:30
  Speaker 1: That's a big one, stuff like that.
• 17:33
  Speaker 2: So yeah, and you mentioned, you know, getting off market deals because, as you know, for people that maybe work with smaller multifamily, they might see stuff on the MLS or might network, but for the larger stuff it's through the relationships and you could reach out to somebody and say, hey, what do you have off market?
• 17:49
  Speaker 2: But it's much more likely when they find something off market they think oh yeah, these are the guys I got a call because they've owned this other stuff.
• 17:57
  Speaker 2: So you, you know, you kind of benefit from getting better deals when you've poured in a little bit more and built a bit a big reputation in a community like that.
• 18:06
  Speaker 3: So even before that you know, because we try to get on the list of every broker out there and it helps to have, you know, a track record of acquiring large properties, right.
• 18:16
  Speaker 3: But even before that, one thing I do is when a if a broker sends a property over, I'll always analyze it, always write up.
• 18:24
  Speaker 3: You know, if not an LOI, I'll still show them like the underwriting that we did and the number that we came to and why it wouldn't make sense for our buy box and send that so they don't just send.
• 18:34
  Speaker 3: You know, we don't want to be people that they're just sending properties into a black hole and they'd over here back.
• 18:39
  Speaker 3: We want to show them like hey, you took your time to send this to us, we took our time to analyze it and maybe this is why it's not working.
• 18:46
  Speaker 3: But you know, and a lot of agents have written back and said that they appreciated that- I feel like sometimes I've gotten, you know, kind of like the last scraps.
• 18:54
  Speaker 2: When you reach out to them it's like, well, I got this one property that I can't move and I've sent it to everybody else but maybe you're a sucker and it'll take it, you know, and so it's hard to do that.
• 19:03
  Speaker 2: Now, you had mentioned about, you know, when it comes to finding deals, michael, you kind of took a different approach to a thorough approach with your background, to be able to kind of analyze at detail some of these properties.
• 19:16
  Speaker 2: So so, talk a little bit about kind of finding and analyzing deals.
• 19:20
  Speaker 3: Yeah, I think you know one thing a lot of folks don't realize getting into it, you know, or even people who do get into it and unfortunately are.
• 19:28
  Speaker 3: You know.
• 19:28
  Speaker 3: Struggling is just the volume of analysis that you have to do to be successful, because most like literally most of the deals that you come across don't work.
• 19:39
  Speaker 3: And when I got started with I never did single families but with multifamily, you know, quads and duplexes and stuff like that.
• 19:47
  Speaker 3: But what I did was I worked with an agent and I said I want to see the entire MLS, like I don't want you to.
• 19:55
  Speaker 3: You know, bring me the handful of properties that you think will work.
• 19:58
  Speaker 3: I just want to see everything and I'll do the analysis myself.
• 20:02
  Speaker 3: And even she struggled with that a little bit.
• 20:05
  Speaker 3: I actually had to take an online video course to teach myself the software, the MLS, you know, software that she was using so that she could send me spreadsheets with literally hundreds or even thousands of properties at a time, like the entire her entire region.
• 20:18
  Speaker 3: Show me every property that is more than one unit, you know, for instance.
• 20:21
  Speaker 3: And then I put all those into a spreadsheet with each row as a property, right, you know?
• 20:29
  Speaker 3: So you have hundreds and hundreds of rows.
• 20:30
  Speaker 3: And then I started adding columns for, like okay, well, here's the income that it's generating.
• 20:35
  Speaker 3: Luckily, in Wisconsin, like most, most brokers are good about putting in the rents and stuff like that in the into the MLS.
• 20:43
  Speaker 3: Some put it unit by unit and I would have it do the math.
• 20:46
  Speaker 3: And then, okay, what is you know?
• 20:49
  Speaker 3: So, what's the asking price?
• 20:50
  Speaker 3: What is the monthly rent that it's earning?
• 20:52
  Speaker 3: Okay, now here's a column for, like, the interest rates that I would be paying and what a mortgage payment would be.
• 20:57
  Speaker 3: Here's, you know, for expenses, I just use the 50% rule, which is pretty common.
• 21:01
  Speaker 3: Usually about 50% of the revenue ends up being expensed, you know, and that would get me to like a very rough, very rough but rough underwriting that right away, let me eliminate.
• 21:13
  Speaker 3: You know 80% of those properties, right, that they're just not going to work, right.
• 21:17
  Speaker 3: And then I could focus on that top 20% and you know some of the ones at the top they would say I'm looking back at it now, you know.
• 21:25
  Speaker 3: It would say like oh, yeah, this is a.
• 21:26
  Speaker 3: You know 40% IRR.
• 21:28
  Speaker 3: You're going to get a.
• 21:29
  Speaker 3: You know 40% annual and you'd go in and it would be too good to be true, right?
• 21:34
  Speaker 3: These are the ones kind of like we were talking about with Nick, where like, oh, you look at the pictures and like there are boards on the windows and stuff, but you know that would allow me to get down to those two or three that actually would work.
• 21:46
  Speaker 3: So, like, I probably looked at 2000 properties before I bought two, you know, and that was how I got my first 10 units.
• 21:56
  Speaker 3: And with multifamily it's a little, with large multifamily it's a little harder.
• 21:59
  Speaker 3: I mean, the smallest properties we're buying now are like 25 plus units and they're not.
• 22:03
  Speaker 3: You know you don't get to look at dozens every day but you still have to look at a lot.
• 22:08
  Speaker 3: You know we still look at.
• 22:09
  Speaker 3: You know loop net and all those where people say that's where deals go to die.
• 22:13
  Speaker 3: You know that's kind of the MLS of large multifamily.
• 22:15
  Speaker 3: But we also broke or sending us lots of lots of properties and and, yeah, we underwrite everything and most of them don't work.
• 22:22
  Speaker 3: But you know, if I hear of so many people who, like will see some property and they'll be like, oh yeah, nice neighborhood, this and that, like maybe this will work out, like the chances of just chancing into you know, a property where the numbers work really well is very, very low.
• 22:38
  Speaker 3: You know I'm a big proponent of just get as much deal flow as you can, get as much data as you can, you know, and kind of go from there.
• 22:45
  Speaker 2: Yeah, I have.
• 22:46
  Speaker 2: I tell investors, you know, it's like looking for a needle in a haystack, because but we've got to go through the haystack to find the needle.
• 22:52
  Speaker 2: Like, if we really want to find a top notch property, it's going to take some work.
• 22:56
  Speaker 2: And I've got an investor now.
• 22:57
  Speaker 2: That's kind of bugging me, like when's the next deal going to be?
• 23:00
  Speaker 2: It's like, hey, I'd love to find a great deal, but I also I also, you know, I definitely want to make sure that I feel comfortable with the returns that that property is going to produce.
• 23:11
  Speaker 2: So I could go rush and find one tomorrow for you, but if you want one that's really going to help you make money, it's going to take a little bit of time.
• 23:18
  Speaker 2: And so it's finding that balance between getting a good enough deal to move forward with.
• 23:22
  Speaker 2: And yeah, you could take deals that are okay or maybe above average, but we're looking for the top deals here and it's going to take some time to find those.
• 23:31
  Speaker 3: It took us I'm thinking of Ben and Shirley Garten's Nick it took.
• 23:35
  Speaker 3: There was a physician who wanted to place some capital with us and he kind of led a group of four physicians or was sort of speaking for them and I was like what they were looking for?
• 23:49
  Speaker 3: I was like that's not really an R by box, but I see those properties all the time but it still took almost it took over a year, I think of looking at the properties that kind of came by to find one that worked for these guys and then it worked out really, really well because we had been so picky and then those guys ended up making introductions for us that led to a deal literally almost 10 times that size and introduction to some real estate funds and stuff like that, because we had been so picky, found a property that works so well, and then they were like these guys are the real deal and if you can get those introductions made like holy cow.
• 24:31
  Speaker 1: Yeah, and that's why it's really important to know your market.
• 24:33
  Speaker 1: Because once you find the numbers that work, then you got to be like okay, is it in the right spot?
• 24:39
  Speaker 1: Does it hit all the boxes?
• 24:40
  Speaker 1: Is it all one units?
• 24:41
  Speaker 1: Like what is it right?
• 24:43
  Speaker 1: So it's got to be.
• 24:46
  Speaker 1: You can't be spread too thin on all your markets because then you'll be finding stuff left and right but then you're not going to know, oh, it might be a bad area or it might be just crappy place, like who knows.
• 24:59
  Speaker 1: So you got to make sure once you find your damage, flood zone, crime, like Endless stuff yeah.
• 25:08
  Speaker 3: These are the things that don't show up, that's French and straight.
• 25:11
  Speaker 4: Just to add to that I mean the level of due diligence that we do for these properties is really insane.
• 25:16
  Speaker 4: I mean Nick and I on the last property, walked 144 units individually just to kind of write down like what things would be needed for rehab or just to get our rehab budget in order.
• 25:28
  Speaker 4: So it's a tremendous amount of work and you are actually going to go in and potentially buy a property.
• 25:34
  Speaker 2: Yeah, I think a lot of times people think capital raising is just trying to get somebody to give me some money for a deal.
• 25:40
  Speaker 2: But there's a responsibility aspect to it.
• 25:42
  Speaker 2: Like they are giving you their future retirement or future whatever money and they're trusting you.
• 25:49
  Speaker 2: You've got to be a good steward with that money and if you're going to promote some returns, obviously you're not promising anything.
• 25:57
  Speaker 2: But if you're going to advertise like here's what we're expecting you, better make sure that you've got your stuff figured out to be able to confidently feel good about saying here's what I think this building's going to do.
• 26:08
  Speaker 1: Yeah, I can tell you 100%, it keeps every one of us up almost every single night.
• 26:12
  Speaker 1: Yeah, yeah, it's true.
• 26:13
  Speaker 1: It's true, Thinking about every single thing that goes wrong.
• 26:17
  Speaker 1: What are we going to do differently?
• 26:18
  Speaker 1: How are we going to fix it?
• 26:19
  Speaker 1: Everything?
• 26:21
  Speaker 1: When you buy a place, stuff goes wrong every day, right or not every day, but definitely weekly.
• 26:26
  Speaker 1: Something is happening, Not always wrong, but something different than you planned on.
• 26:30
  Speaker 1: And when you have other people's money in your hands and you're responsible for me, I think about it at 1 am, 2 am, 4 am, like multiple times a week for sure.
• 26:43
  Speaker 3: We had a.
• 26:43
  Speaker 3: I'm part of this group.
• 26:45
  Speaker 3: I'm going to be speaking about underwriting with this group and they asked everybody to introduce themselves and say their goals.
• 26:50
  Speaker 3: And the dozen plus people that went ahead of me, all their goals were I'm going to acquire this many units this year and raise this much money.
• 26:58
  Speaker 3: And it got to be it.
• 26:59
  Speaker 3: I'm like I'm going to get my investors 15 plus percent IRR.
• 27:02
  Speaker 3: You know, like, beat our projections, like ultimately that's all that matters, like if you nail your numbers and you get your investors the returns thereafter, like Then it's easy to raise capital right, and then it's.
• 27:14
  Speaker 3: You know it doesn't help find deals, but you know then you can start going after the much, much bigger stuff.
• 27:20
  Speaker 2: Now talk about a partnership here, because I know for some investors it's like I want to do this on my own.
• 27:26
  Speaker 2: I'm a lone wolf.
• 27:27
  Speaker 2: What I love about kind of larger and especially syndication is there's very much a partnership piece to it, because you have to work with each other to be able to put things together, cause there's a number one, there's a lot of work involved and there's a lot of moving pieces.
• 27:41
  Speaker 2: But two for you guys talk about finding each other like kind of a shared vision and saying like, yeah, these are the group of, this is a group we're going to kind of link arms with here, if not for life, for at least the next phase of life, to be able to build this together with each other.
• 27:57
  Speaker 3: Yeah, I had stuff in the Midwest.
• 27:58
  Speaker 3: I was on Facebook and some forum and people were asking how we made the numbers work in Southern California and I said we don't, we buy in the Midwest.
• 28:06
  Speaker 3: And Nick saw that comment, I think, and he reached out and said hey, I'm in Southern California, I buy property in the Midwest.
• 28:17
  Speaker 3: I'm looking to scale just like you are let's compare notes and I had been through a couple of partnerships before that.
• 28:23
  Speaker 3: That didn't work out for various reasons, but for me what worked out really well is like when we talked about what sort of energized us and charged us up.
• 28:32
  Speaker 3: It was very different between the two of us.
• 28:34
  Speaker 3: I could see Nick liked the construction side, he liked the people side, he liked the you know, he was more detail oriented things like that and like.
• 28:44
  Speaker 3: For me, I liked looking at financial statements, analyzing the business, making a business successful, like that's what was sort of my background.
• 28:52
  Speaker 1: I can't imagine someone being in the syndication world as an operator by themselves.
• 28:56
  Speaker 1: I mean, if they are, they're not being hands on.
• 28:58
  Speaker 1: There's no chance, because there's so much work that needs to happen.
• 29:02
  Speaker 1: And I mean we brought on mark because we knew like if we wanted to get bigger, we had to have everything covered for our investors, not for us, but like literally for people that are investing with us, like we wanted to make.
• 29:16
  Speaker 1: We wanted to make it the best experience possible for them, obviously, and we wanted to keep buying and getting bigger.
• 29:23
  Speaker 1: So the only way to do that is with a partnership there's, I mean, you can partner with your property management team, but there's no chance that they're going to take care of anything like you will, you know.
• 29:33
  Speaker 1: So for me it was like really similar.
• 29:35
  Speaker 1: Obviously, that's how Michael and I met.
• 29:37
  Speaker 1: We both had similar goals that we wanted to reach.
• 29:41
  Speaker 1: I just always wanted to kind of get bigger.
• 29:44
  Speaker 1: I was always a hands on person with my single family stuff and my smaller stuff.
• 29:48
  Speaker 1: So I just, you know, I wanted to learn the property management business more.
• 29:52
  Speaker 1: So I took a bigger role in that when I first started I did some property management stuff locally too, for where I am.
• 29:59
  Speaker 1: So that was just an easy transition for me.
• 30:02
  Speaker 1: I just learned the construction side a little bit more and contractor talk a little bit.
• 30:08
  Speaker 1: I mean, that's not too hard to pick up, but you know we hire good people to help us with that, of course.
• 30:14
  Speaker 1: But you know I knew the PM company already.
• 30:18
  Speaker 1: I knew a lot of people on the ground, so that wasn't, you know, a hard transition for me either.
• 30:22
  Speaker 1: So you know, that's something that I really wanted to do.
• 30:26
  Speaker 1: And then Michael had all the business background and how to actually put it all together, how to bring on investors.
• 30:31
  Speaker 1: And then we took the leap.
• 30:32
  Speaker 1: You know we found a 24 unit.
• 30:34
  Speaker 1: That was like way more than we've ever done, but we both are extremely confident in our own abilities and we'd raised our capital in, I think, two hours after our call.
• 30:44
  Speaker 1: So we were able to lock down that property really fast.
• 30:48
  Speaker 1: And then, you know, like I said, we brought on Mark last year and he's been a huge asset to our team, making sure that we can grow and do it successfully without failing.
• 30:58
  Speaker 1: We see a lot of operators just kind of just falling out right now because they grew too fast.
• 31:04
  Speaker 1: They didn't know, you know what they were buying, or they knew what they were buying, but they didn't know the cap race, and you know all this stuff right.
• 31:10
  Speaker 1: So you know our team is really tight and we're able to, you know, grow at the right speed for our investors too.
• 31:19
  Speaker 4: Yeah, I will say, what I really like about our team is that we each have a pretty specialized skill set, so we each bring, you know, there's not a ton of overlap, so it's, you know, it's a very kind of efficient team, I would say, and we just work really really well together and also we have kind of the same.
• 31:36
  Speaker 4: You know, there are some people in this business who maybe don't operate with the highest standard of ethics and I can safely say that all three of us, you know we really care about our tenants.
• 31:47
  Speaker 4: You know we don't.
• 31:48
  Speaker 4: We always try to work with our tenants and we're always trying to be as fair as possible.
• 31:53
  Speaker 4: But that's also, I think you want to have people on your team who have the same mindset as you in that regard as well.
• 31:59
  Speaker 1: And also just being available.
• 32:00
  Speaker 1: I mean we meet multiple times a week.
• 32:02
  Speaker 1: I mean we're constantly texting and having our stand-up calls two times a week, but I mean we meet more than that, obviously, but we probably are on a video call, I would say, four times a week minimum.
• 32:15
  Speaker 1: And you know, our families all know each other at this point for the most part, I mean we've all.
• 32:21
  Speaker 1: We've taken investors out to dinner and all together with our family.
• 32:24
  Speaker 1: So a partnership is gonna be the biggest factor.
• 32:28
  Speaker 1: As someone starting off and they want to get into you know five, 10, 20, 50 units, you know you're gonna you might go through some some not so good partnerships, but finding that partnership will be probably their biggest asset as a girl.
• 32:43
  Speaker 2: Well, that is the thing that I love about syndication is it's really this one plus one equals three mentality.
• 32:49
  Speaker 2: Like you know, I can go flip houses on my own and I can build a pretty good life, or we can decide to do something like this together Everybody plays their part on the assembly line and we can, you know, produce a lot more results together when everybody kind of has their role, does what they're supposed to do, and and you can achieve it and really and then be a vehicle for investors, right, Like they want to place capital.
• 33:13
  Speaker 2: They don't want to take the time or may not know how to take the time to be able to go find these deals and find these property management companies and vet all this stuff themselves, and so they're trusting you.
• 33:24
  Speaker 2: So it really is the best of all worlds put together here to find great, great deals.
• 33:29
  Speaker 3: I'm stunned when I read you know in like bigger pockets, forums and stuff like that, the number of people who say don't partner, you know like.
• 33:37
  Speaker 3: You know like cause I partnered with my brother once and I got screwed or something and don't use property managers because nobody's gonna care for your property the way you do and stuff and like both of those are true.
• 33:47
  Speaker 3: You need to be thoughtful.
• 33:48
  Speaker 3: You know choosing partners.
• 33:49
  Speaker 3: You need to be very thoughtful choosing a PM.
• 33:51
  Speaker 3: But like nobody scales without partners or without property managers, you know you can't buy 144 pound homes like we just did and planning on.
• 34:01
  Speaker 3: You know painting every stuff like that, like it's a team sport.
• 34:05
  Speaker 3: You know and we've used, you know partnerships and property managers from the start.
• 34:11
  Speaker 3: So that's how you get big.
• 34:14
  Speaker 2: Well, thank you guys so much for coming on and sharing.
• 34:16
  Speaker 2: There's a lot of really cool stuff, so much that we, you know, didn't cover.
• 34:19
  Speaker 2: Maybe we come back and do another episode sometime in the future and talk about it, but thank you guys for sharing just about your goals, what you guys have accomplished, how you're working together for people that wanna, you know, reach out to you, learn more about what you guys are doing.
• 34:32
  Speaker 2: How can they do so?
• 34:33
  Speaker 3: We don't really have something to pitch today we're kind of in between acquisitions but we love, you know, meeting potential investors, other people who just wanna chat real estate.
• 34:42
  Speaker 3: You know that's some of our best relationships have just come from.
• 34:47
  Speaker 3: You know, talking, talking, rei with people.
• 34:51
  Speaker 3: So I would encourage anybody listening.
• 34:53
  Speaker 3: If you know, stuff we've said is kind of resonated with you, go to our website is matanzacapitalcom.
• 34:59
  Speaker 3: Hopefully you can put that in the liner notes.
• 35:02
  Speaker 3: The spelling is a little funny, but M-A-T-T-A-N-Z-A.
• 35:06
  Speaker 3: Capitalcom and I'd say, sign up for our investor list.
• 35:12
  Speaker 3: We don't spam at all but you know, when an opportunity comes along, we'll reach out and feel free to.
• 35:17
  Speaker 3: There's a button just to the left of that to set up a meeting with us and like you don't need to have a big agenda or anything like that.
• 35:24
  Speaker 3: Like we just like chatting real estate with anybody.
• 35:27
  Speaker 3: So you know, don't hesitate, set up a meeting and let's talk.
• 35:31
  Speaker 3: And if you wanna invest, we generally wanna have a pre-existing relationship with folks beforehand.
• 35:36
  Speaker 3: So we're doing those right now.
• 35:38
  Speaker 3: You know, we're just getting to know folks for our next deal.
• 35:41
  Speaker 2: Awesome.
• 35:41
  Speaker 2: Well, thank you guys so much for coming on.
• 35:43
  Speaker 2: We appreciate it and best of luck as you guys continue to grow in the future.
• 35:46
  Speaker 1: Thanks Mike, thanks Mike, thank you, thank you, thank you.