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From Residential Rentals to Multifamily Success with Matt Kontoff · The Academy Presents podcast

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  Did you know that 90 % of the world's millionaires
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  invest in real estate? Well, I'm Angel with the
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  Academy Presents Real Estate Investing Rocks,
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  and I'm here to help you if you want to go for
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  your piece of that pie. Are you new? Are you
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  new to this and you just don't know where to
• 0:20
  start? It's okay. Are you someone that has invested,
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  but you feel stuck, you feel like you've lost
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  momentum, you don't know where to really head
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  from here? Are you a seasoned real estate investor
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  who is doing great but maybe you just want to
• 0:35
  hone a few skills here and there? This is the
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  place for you. The Academy Presents Real Estate
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  Investing Rocks podcast will connect you with
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  industry experts so that you can save time, avoid
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  costly mistakes, and begin living the life you've
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  dreamed of all through real estate investing.
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  You're already taking the first step. just by
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  joining us here today. Hey guys it's Angel and
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  I am so excited to have you here for the Spring
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  REI Rock Summit. You know these are my favorite
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  six days of the year because we do this twice
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  a year, two three day summits, twice you know
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  we do it twice a year, six days, most amazing
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  days ever. I do want to make sure that you listen
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  and you hear about that really spectacular, super
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  stealthy way to get that VIP upgrade for free.
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  And that is through the VIP subscription. So
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  not only do you get to go to all the live events,
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  you get all of the recordings. We're at summit
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  seven. So that's like, gosh, 400, 450 hours,
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  pre -recorded content that let me tell you something.
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  I didn't learn all the stuff that I know from
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  reading a ton of books and listening to massive
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  numbers of podcasts. I did that stuff, but where
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  I really learned All of my information was from
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  these right here. It's just like one on one with
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  incredible experts in the space. And I got all
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  of that 400, 450 hours of content. through the
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  last seven summits, so over three and a half
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  years. And I'm offering that to you. I'm giving
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  you the opportunity to have access to those sessions.
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  You can go through them. You can go through them
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  at 2x, 1x, 0 .5, whatever speed you need to go
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  through them at. You can rewind them. You can
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  take notes. You can watch them multiple times.
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  All of that is open to you with a subscription.
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  So at least consider it. But there is a ton of
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  information on the side too. And we are also
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  going to be adding my friend Matt here. Matt
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  is going to talk a little bit about kind of his
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  journey into the space and some of the things
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  that he's become an expert in on his own. And
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  before he tells me, oh, my God, I'm not an expert.
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  We learn on the job, right? And we are at least
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  two steps in front of certain people, a lot of
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  people, and we can always help somebody out.
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  So before you try and discredit yourself, you
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  don't get to do that. But I'm going to turn it
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  over to you so you can give us a little bit about
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  your background and then we can get going. OK,
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  sounds great. Thanks, Angel. I guess my real
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  estate journey started way back in the 80s when
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  my dad and I invested in a fourplex together
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  in Boulder, Colorado. And he put up the cash,
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  and we went on at 50 -50. I managed it. And it
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  was a huge learning experience. I actually ended
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  up driving from Denver to Boulder so often to
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  clean and meet tenants. deal with whatever issues
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  there were. And we ended up moving away and I
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  ended up having to hire a property manager. So
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  I guess that was my first experience in asset
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  management way, way back. And this was before
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  everything was done on paper. So I would get
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  a monthly hand typed report on income and expenses.
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  And that turned out to be a pretty good, pretty
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  wild success. From there I invested in some duplexes
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  in Massachusetts. I bought one, lived in half,
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  and then later on bought another duplex. And
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  I still own that one and own some short -term
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  rental properties in Vermont. And starting about
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  three years ago, almost three years ago, I started
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  investing full -time in multifamily, initially
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  as a limited partner in a bunch of deals. some
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  existing apartments, some new bills, and since
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  then I've started focusing on being a general
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  partner. And that's kind of where I am today.
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  That's awesome. I think there's a lot of people
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  out there that take that same kind of route.
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  You get started in residential, you get comfortable,
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  then you find out about multifamily and what
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  it's actually like to be a passive investor.
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  We've been in residential for 20 years. We thought
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  we were passive investors. Then we got into multifamily
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  passive and we were like, what is this? This
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  is magical. We just get these deposits. We don't
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  have to field phone calls about the roof or the
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  plumbing or, hey, we had somebody move out. We
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  need to up the marketing so that we can get a
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  new person in. It was just totally different.
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  And then when we became general partners and
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  we went active -sided multifamily, I was like,
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  this is really, really similar to what we were
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  doing in residential, as far as like the level
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  of involvement. And so then you start to beg
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  that question of, you know, is commercial multifamily
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  and even using a property manager in residential,
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  those are very similar as far as like what the
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  time suck is. And so it's like, wow, where am
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  I really getting the most benefit? And I think
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  that's why a lot of people will leave residential
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  and go strictly to multifamily. We chose to keep
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  our residential. We have our own residential
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  portfolio and we'll just keep it. We're not going
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  to do anything with it because none of our original
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  money is tied up in it. So those are infinite
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  returns. And there are a few people out there
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  that focus on infinite returns and multifamily,
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  but that's not the norm. most people are doing
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  their three, five, seven year business plan,
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  and then they're going to turn it. They're going
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  to sell it and hand back that change to their
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  investors. So that was how that goes. Yeah, that's
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  a common common thing. So one of the things that
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  I jumped in on early on late last year was the
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  asset management aspect of a property that I
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  was invited to raise capital for. And so we're
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  in the asset management meetings every week talking
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  about various issues and my property management
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  experience over the last, I don't know, however
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  many years, really prepared them for that. This
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  is stuff that I've seen before, very similar
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  to my own experiences. So that was really an
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  eye -opener. It's like, oh, I thought I'd do
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  this. I've done that before. That's what makes
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  it so frustrating that like, you don't get credit
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  for your residential experience. But now that
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  we've sat in both residential and multifamily,
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  basically active side on both, it's like, these
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  are really similar. Like having to have your
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  list of vendors. So you still need a list of
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  plumbers. You still need a list of electricians.
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  You still need people you can call on. And that
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  was something that I recognized is with the commercial
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  Walter family with your third party property
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  management. Yes, they have lists of approved
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  vendors, but sometimes those approved vendors
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  can't get stuff done on time or they they can't
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  open up any availability. And so it made me really
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  happy that we've been on this. We've been investing
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  on the residential side here in Wichita Falls
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  for 15 years. And even though we have property
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  managers, we're also involved in the local area.
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  We've got a lot of connections here in town.
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  And so we've been able when things, you know,
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  when all the approved vendor list has been exhausted
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  and people don't want to drive from DFW to do
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  work for us, we can usually reach out to friends
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  we have here and get things taken care of because
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  we still have the list of people that we use
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  for our residential stuff. So that's been that's
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  been kind of cool. And just being able to like
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  understand, you know, your your bidding process
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  and getting estimates and all of those things
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  that you have to do with a residential you really
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  should be doing for your commercial multifamily,
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  too. And so you know, just like what you were
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  saying, a lot of that experience can carry over.
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  I just wish we got credit for it. Yeah. It's
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  really a level of comfort that you get, that
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  I got when I jumped into the asset management
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  team. And, you know, the meetings, there's like
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  four or five of us on the GP team and then the
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  property manager and maybe one or two other people.
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  You know, it's yeah, it's about we have Yeah,
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  we usually have like six or seven people, because
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  we'll have the on -site person in the meeting
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  along with the regional. And it's really some
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  pretty cool conversations. We talk a lot about
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  what our occupancy looks like, what's happening
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  on the turns, whether there was some discussion.
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  I guess about six months ago now we talked a
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  lot about hiring a floater. And so we wound up
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  hiring a floater. And basically what the floater
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  does is And there's a few different properties,
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  not just our properties that are here with this
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  property management company, but the floater
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  can go to any of the properties within that property
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  management company and just help out where needed.
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  One of the other things we do, too, is we make
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  sure that we try to make sure that the people
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  that we hire are HVAC certified, at least the
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  main maintenance person. So the maintenance lead
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  for a property, we really need that person to
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  be HVAC because this is Texas. we get very hot
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  and we spend a lot of the year pretty darn warm.
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  And then during like the fall and the spring,
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  there will be days where the heat is running
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  in the morning. The AC is running during the
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  day and the heat is running again in the evening
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  because we get some pretty broad swaths of temperature
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  swings, which are variation. Yes. So and then
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  even within a week, like, let's see, today is
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  what is today? Wednesday? So last week we had
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  some 20s and 40s. Right now it's 50. You know,
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  yesterday it was 60. I think it actually got
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  70 yesterday. So it's just kind of crazy, you
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  know. Last week we were having a rush to go get
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  our kids because there was a huge ice storm.
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  And this week people are wearing shorts and t
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  -shirts. So it's just wild. And so I feel like
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  that's another reason why we really focus on
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  having maintenance leads that can take care of
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  the heating and cooling and the climate control
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  because of just the huge variance. I mean, that's
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  I think that's unique to where you are because
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  you're familiar with that area. But the GP team
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  is mainly from out of state. There's one person
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  that's local. So we're really relying on the
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  property management team. to have those connections,
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  to have that experience in managing properties
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  in that area, to have the right contacts and
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  connections. Our regional's been here forever.
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  She's amazing. There's been a few things here
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  and there where we've been able to help out a
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  lot, like when it came to putting in the covered
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  parking. There was a guy that actually used to
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  work with Jason when he had his W -2. during
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  one of the sets of layoffs, this guy's like,
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  you know what, I'm going to start my own company.
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  And so we did. And so Jason reached out to him
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  and was like, hey, we need covered parking. We'd
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  like a bit from y 'all. And so we got three beds.
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  He came out. I don't remember if he was the least
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  expensive, but the way we saw it was he was local
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  and we wanted to build a relationship with him.
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  And so then he became an approved vendor on their
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  vendor list and. It also solidified more of a
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  relationship between him and Jason, because this
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  is one of those crazy things that maybe you don't
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  think about, but anybody can be an investor.
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  They don't have to be doctors, lawyers and engineers.
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  So by building that relationship, hopefully we'll
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  be able to say, hey, man, you know, would you
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  consider investing alongside of us in this property?
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  So you're building relationships with people
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  and. I'm not, I'm not always thinking, Oh, I
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  want to build a relationship with this person.
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  Maybe there'll be an investor. Um, that's not
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  like the thing that I'm always thinking, but
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  I am. Yeah, but I am thinking, you know, I always
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  want to be creating relationships because you
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  never know who can help you out. And you never
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  know who will, who you can help out by letting
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  them be an investor. Because I think, uh, you
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  know, at the end of the day, I don't want to
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  say you're letting people be an investor, but
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  you do get to choose. And there are going to
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  be people that come. into your investor pool
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  that you know things about them. You know what
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  life throws at them. You know that they need
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  big chunks of change often and that long -term
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  investments probably wouldn't be the best fit
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  for them. And so you get to make those calls.
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  And I'm not going to say people aren't going
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  to be pissed at you. There's going to be people
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  that are probably going to be upset if you don't
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  let them in. But you get to make that call. That's
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  why it's super important to have those relationships
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  and make sure you just know people and know the
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  people in your circle. So hey, I have a question
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  about due diligence because we got, it was kind
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  of a funny story. So we had allocated on a property
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  a sizable amount of money. So like almost $300
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  ,000 to flooring. And as we're walking units,
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  I guess it never clicked in our heads. Hey, these
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  have LVP. We were told 70, I think it was like
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  77 or 78 of the units had carpeting. And so we're
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  going through and we didn't realize LVP in all
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  these units. So we, we aren't going to need $300
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  ,000 for flooring. So we're going to be reallocating
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  that to a different area of the capex. But do
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  you have any like, I've heard that that's not
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  the norm. like, usually you're short. Do you
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  have any crazy due diligence stories? Where something
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  like that happened or? Nothing like that. I mean,
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  I suppose in that case you would definitely reallocate
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  for something else or even even bolster your
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  reserves in case you need something down the
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  road. So that that's something you lucked out
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  that way. So you have a little bit of wiggle
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  room because there's always something that's
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  going to come up. So I think the main, so I did
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  due diligence a couple times. I actually walked
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  some units for a friend, which is educational
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  in Jacksonville, North Carolina, of all places.
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  And so he had us load apps on it. He had a whole,
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  he just put out an email blast to potential investors.
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  Do you want to come help me do due diligence?
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  It was like 400 units or something. Holy night.
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  Yeah, so we got an app. We walked the doors,
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  walked through every unit, and that was an eye
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  -opener for sure. A lot of them, I think most
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  of the units needed some level of updating. This
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  is a B -class property. But then fast forward
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  to about a year ago, I did due diligence on a
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  property that we had offered on and had an LOI
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  accepted. And our clause in the LOI said we had
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  early access to the property. So that means that
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  we can go in and walk in as before we even have
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  a PSA signed. So we did that. We all got together
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  and met in Columbus, Ohio and toured this property
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  and it was actually a mixed use building with
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  24 units in the building and two retail units
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  on the first floor. And we discovered a few things.
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  It's a relatively new building, so there weren't
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  really many physical surprises. Maybe a leak
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  or two here or there. But we did discover two
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  of the units that were allegedly rented to some
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  corporate entity were actually vacant. And so
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  that's, excuse me, hang on a second. Yeah, that's
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  almost like finding one that's just down. So
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  two units is. That's like 10 % of the properties
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  of the units. So that was an interesting head
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  scratcher. And the retail spaces, one was rented
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  to a yoga studio. I guess they were doing pretty
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  well. But it was during the pandemic. So it was
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  some question as to whether or not they were
• 17:29
  going to survive. The other space was just gray
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  space. totally unfinished. Gray space is where
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  there's just like gravel floor. Some utilities
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  are just popping up through the ground. It's
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  really a blank slate to do whatever your retail
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  tenant that you're going to bring in wants to
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  have done. So you have to have, I know, $75 ,000
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  to $100 ,000 just to finish that space for your
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  potential tent.