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Winning the Pitch Slam & Building a 12% Fund: Inside Justin Spillers' Playbook · Carson's Corner: Entrepreneurship & Investing

• 0:00
  SPEAKER_04: We underwrite about a hundred deals per month.
• 0:02
  SPEAKER_04: So about twelve hundred per year.
• 0:05
  SPEAKER_04: We're only looking to buy two to four deals per year, so I'm only hunting needle in a ASACs.
• 0:09
  SPEAKER_04: Holy moly.
• 0:10
  SPEAKER_06: When we buy it, I only am buying home runs in my crazy man.
• 0:14
  SPEAKER_06: Joining us today is Justin Spillers, seasoned attorney, sea level leader, and real estate investor managing millions in assets.
• 0:20
  SPEAKER_04: Please welcome Justin Spillers from Real Estate Alpha.
• 0:23
  SPEAKER_04: Imagine investing in an already successful portfolio of over 600 units.
• 0:27
  SPEAKER_04: Imagine having over 30 million of equity protecting your investment.
• 0:30
  SPEAKER_04: Imagine receiving fixed 12% annual returns with no tax until year nine.
• 0:34
  SPEAKER_04: That's what we do at Real Estate Alpha.
• 0:35
  SPEAKER_04: I'm Justin Spillers.
• 0:36
  SPEAKER_04: What are your metrics?
• 0:37
  SPEAKER_04: What are you looking for when you do go in and buy?
• 0:39
  SPEAKER_04: We've spent an unbelievable amount of time, energy, and money on underwriting.
• 0:44
  SPEAKER_04: I've probably spent$400,000 on mentorship, mastermind, coaching classes just on underwriting, honing in on that skills, me and my business partner, Brandon.
• 0:52
  SPEAKER_04: And we've done every type of underwriting you can imagine.
• 0:55
  SPEAKER_04: The sole focus we have on the value add side is we want to get 100% of our capital back in 18 months or less.
• 1:03
  SPEAKER_07: That's the only thing I care about now.
• 1:05
  SPEAKER_07: I've looked at rents where it's like you pull it up and you're like, this is like$500 under market.
• 1:10
  SPEAKER_07: And you're like, what in the world is going on?
• 1:12
  SPEAKER_07: Yeah.
• 1:13
  SPEAKER_07: And then you're almost scared to raise it.
• 1:15
  SPEAKER_07: You're like, holy man.
• 1:16
  SPEAKER_07: I mean, if I raise it, they're gonna move out like the next day.
• 1:20
  SPEAKER_04: We're gonna have 40 meetings with all 40 residents in a fully turned unit already that we just finished.
• 1:25
  SPEAKER_04: So they're gonna be sitting in a brand new turn unit, and we give them three options, which it's just the hard conversation you just alluded to.
• 1:31
  SPEAKER_04: First.
• 1:33
  SPEAKER_02: Welcome to the Carson's Quarter.
• 1:37
  SPEAKER_07: All right, ladies and gentlemen.
• 1:38
  SPEAKER_07: I'm sitting here with Mr.
• 1:40
  SPEAKER_07: Justin Spillers, fresh off the pitch slam at best ever conference.
• 1:47
  SPEAKER_07: He won that in front of about 500 people.
• 1:50
  SPEAKER_07: But there's more to Justin's story than just that.
• 1:53
  SPEAKER_07: He's uh been a corporate attorney, been in the e-commerce business.
• 1:58
  SPEAKER_07: He's a serial entrepreneur, so we're gonna jump into all that and you know kind of talk about his journey before he got into real estate and uh what he's up to now in real estate.
• 2:08
  SPEAKER_07: So anyway, Justin, how you doing?
• 2:10
  SPEAKER_04: I'm great, Carson.
• 2:12
  SPEAKER_04: Appreciate uh you having me on.
• 2:13
  SPEAKER_04: Um yeah, BC, that was great.
• 2:15
  SPEAKER_04: Uh we got a flood of of interest from that, so kind of been riding that wave, so it's been a good couple of weeks.
• 2:21
  SPEAKER_07: Awesome, man.
• 2:22
  SPEAKER_07: Um I have to ask this: were you nervous?
• 2:25
  SPEAKER_07: That's a lot of people out there, 500 people or a thousand at a conference of that size.
• 2:30
  SPEAKER_04: Yeah, I wasn't too bad.
• 2:31
  SPEAKER_04: And and the reason I wasn't is because I believe nervous is just lack of preparation.
• 2:37
  SPEAKER_04: I was I was extremely prepared.
• 2:40
  SPEAKER_04: Um, I like to operate that way, kind of in all facets of life, but most importantly, we just started raising capital.
• 2:47
  SPEAKER_04: We we were pretty much self-funded the last 10 years in real estate, and and we were passing a couple of too many good deals, so we started our preferred equity fund that we're raising into now.
• 2:55
  SPEAKER_04: And I like to do things on my own and really figure it out.
• 2:58
  SPEAKER_04: So I have led the charge on the capital raising.
• 3:01
  SPEAKER_04: I did 350 30-minute video pitch calls with real leads and investors leading up to that event.
• 3:09
  SPEAKER_04: So I was coming off 350 presentations that were 30 minutes.
• 3:14
  SPEAKER_04: The hardest part was condensing my 15-minute pitch into four minutes.
• 3:18
  SPEAKER_04: That was the most difficult.
• 3:19
  SPEAKER_04: Every slide I had to take out was like deleting part of my soul, not being able to say what I wanted to say.
• 3:25
  SPEAKER_04: But um, so long-wanted answer, but I wasn't too nervous because I had just practiced it so many times.
• 3:31
  SPEAKER_04: It's like second nature to me now.
• 3:33
  SPEAKER_07: That's awesome, man.
• 3:34
  SPEAKER_07: Um, I I agree with that.
• 3:36
  SPEAKER_07: You know, it's probably about the tenth time you pr uh you pitch it, you're perfect by then, you know.
• 3:41
  SPEAKER_07: You kind of screw it up the first couple times, but after that you're like, okay, I'm good.
• 3:45
  SPEAKER_07: Um that's that's a pretty big accomplishment.
• 3:48
  SPEAKER_07: There's probably a lot of competition in that.
• 3:50
  SPEAKER_07: How many people were in that competition?
• 3:51
  SPEAKER_07: Like five or ten, or they didn't they have like a finalist round, or you had to be there was a selection for it, wasn't there?
• 3:58
  SPEAKER_04: Yeah, so all the operators GPs got uh got a pitch before the event, and they selected the best 17, and the best 17 got to come present on stage, and then they whittled that down up to the first round of the best five, and out of the best five, they picked one winner.
• 4:13
  SPEAKER_07: So a little bit of a taxing process, but well worth it.
• 4:17
  SPEAKER_07: Yeah, that's awesome, man.
• 4:19
  SPEAKER_07: She knocked it out of the ballpark.
• 4:21
  SPEAKER_07: Um, was it you or the deal why you won?
• 4:24
  SPEAKER_07: I'm just kidding.
• 4:26
  SPEAKER_07: Let's say both.
• 4:27
  SPEAKER_04: I'll answer it for you.
• 4:28
  SPEAKER_04: Yeah, no, that that's actually the first time I've been asked.
• 4:31
  SPEAKER_04: So that's a great question.
• 4:32
  SPEAKER_04: Um, I'd say a combination of both.
• 4:34
  SPEAKER_04: Um, we have an extremely unique uh fund structure.
• 4:38
  SPEAKER_04: Um, I was a real estate attorney by trade.
• 4:40
  SPEAKER_04: I used to build syndications funds for my clients.
• 4:43
  SPEAKER_04: I sold the good, the bad, and the ugly.
• 4:45
  SPEAKER_04: And for the last nine years before we took on private capital, I was kind of building in my head a perfect investment structure for our investors, which is what we rolled out to into our preferred equity fund.
• 4:56
  SPEAKER_04: So it is very different.
• 4:58
  SPEAKER_04: I do think it solves a lot of syndication and real estate investor problems that they don't like about the real estate investment side.
• 5:04
  SPEAKER_04: So that was super helpful in that it was novel and unique.
• 5:07
  SPEAKER_04: And then I think the fact that I I've done it, uh done did the presentation so many times, and um, there's a lot of investors that are pitching there that are just like the capital raisers, where I've built the entire business from scratch, from one unit to over 700 units.
• 5:23
  SPEAKER_04: I know everything about my business start to finish.
• 5:26
  SPEAKER_04: And so even on all the QAs, I just know all the answers off the top of my head because that's I I've I've lived and breathed it, right?
• 5:33
  SPEAKER_04: Where a lot of the competitors they had to say I'll give back to you on that, where I could just rattle off the numbers and the info like second nature, because this is this is my business.
• 5:42
  SPEAKER_07: Yeah, that's pretty impressive.
• 5:44
  SPEAKER_07: Uh, did you have fun at the conference?
• 5:46
  SPEAKER_07: Let me ask you that.
• 5:47
  SPEAKER_04: Yeah, it was a great time.
• 5:49
  SPEAKER_04: Uh, if anybody's looking to get investing in in real estate and they don't know where to start, the BEC conference every year is a great place to start.
• 5:56
  SPEAKER_04: Um, they just obviously had it last month in Salt Lake.
• 5:59
  SPEAKER_04: They're gonna have it again next year, it'll be the 11th one.
• 6:01
  SPEAKER_04: But it was a great event.
• 6:03
  SPEAKER_04: I was there all week.
• 6:04
  SPEAKER_04: I did all the bells and whistles, I did the the private dinners, the the luncheons, etc.
• 6:09
  SPEAKER_04: So it was a really good time.
• 6:11
  SPEAKER_04: Awesome.
• 6:11
  SPEAKER_04: So that's like what, a three-day event?
• 6:13
  SPEAKER_07: Uh it's four days if you do it all.
• 6:15
  SPEAKER_07: Yes.
• 6:15
  SPEAKER_07: It's it's a long event.
• 6:16
  SPEAKER_07: I think I'm gonna do it next year.
• 6:18
  SPEAKER_07: I I missed for health reasons and I had some family stuff this time, and then I was gonna sponsor it one year.
• 6:26
  SPEAKER_07: I'd like the last three years I've been meaning to go, and I haven't made it out yet, but um I'm gonna make it out next year.
• 6:32
  SPEAKER_07: I'll be in Salt Lake, I think, in October.
• 6:34
  SPEAKER_07: Um, tell me about so before you were it got into real estate, um, you were an attorney, right?
• 6:41
  SPEAKER_07: That's right.
• 6:42
  SPEAKER_07: Yeah.
• 6:42
  SPEAKER_04: So I uh I went to uh Ohio State for undergrad and law school.
• 6:47
  SPEAKER_04: I thought if I just kept going, I'd get better student football seats for the football games that that'd be on the sidelines by my seventh year there.
• 6:54
  SPEAKER_04: Yeah so I just kept kept the ride going.
• 6:57
  SPEAKER_04: But yeah, so I did all my schooling in Ohio State.
• 6:59
  SPEAKER_04: Um left to practice or uh I went to a firm in Columbus called Bailey Cavalieri practiced for about seven years, mostly on real estate law, business law, some MA work, some securities law, and uh had the entrepreneurship itched the entire time.
• 7:13
  SPEAKER_04: Um waited until I had all my student debt paid off.
• 7:16
  SPEAKER_04: I had a couple of good ideas.
• 7:17
  SPEAKER_04: I had always had some side hustles and hobbies throughout law school and undergrad, and even when I was practicing, and then in 2016 left the practice and started a couple of companies, including investing in real estate.
• 7:28
  SPEAKER_04: Okay.
• 7:29
  SPEAKER_04: So you did e-commerce, didn't you?
• 7:32
  SPEAKER_04: Yes.
• 7:33
  SPEAKER_04: Yeah.
• 7:33
  SPEAKER_04: So when I left the practice in 2016, I kind of split my time.
• 7:37
  SPEAKER_04: Um, I partnered with uh an individual, we started buying real estate together, and I partnered with another individual, we started doing contract manufacturing together.
• 7:44
  SPEAKER_04: So real estate started pretty traditional, buying small um single family homes, duplexes, et cetera, just kind of rinse and repeat, building that model.
• 7:53
  SPEAKER_04: Um, but really the bulk of my focus early on was on the contract manufacturing side.
• 7:58
  SPEAKER_04: Um we manufacture products in Asia, mostly in China, uh, pretty much anything and everything.
• 8:03
  SPEAKER_04: It was really during the e-commerce drop shipping run-up uh when Amazon has its heyday.
• 8:08
  SPEAKER_04: So we did a lot of white label products for our clients, like floating shelves and different types of widgets like that, anything they want made in bulk offshore.
• 8:17
  SPEAKER_04: We'd manufacture, do all the freight consolidation, logistics, get it to the United States, be the 3PL forum, and ship it and fulfill the orders.
• 8:24
  SPEAKER_04: And then we did a lot of components like assemblies, um, castings, stampings, etc., for like uh um tier one, tier two automotive suppliers, a lot of different uh manufacturing industries.
• 8:35
  SPEAKER_04: So that was a great learning experience.
• 8:37
  SPEAKER_04: Built that business up with my partner.
• 8:39
  SPEAKER_04: Uh, we did over a hundred million in sales in five years.
• 8:42
  SPEAKER_04: So really, really good run up.
• 8:44
  SPEAKER_04: Uh, COVID was absolutely crazy um having to learn uh everything about uh COVID and the harmonized tariff um schedule with the fund Trump trade war.
• 8:55
  SPEAKER_04: Like you could get a hundred years of uh international manufacturing and supply chain management and about a two-year stint there.
• 9:02
  SPEAKER_04: So we actually created our created our own company in China, a wholly owned foreign entity there, had a team over there.
• 9:08
  SPEAKER_04: It was a really great experience.
• 9:10
  SPEAKER_04: I really liked it, but the real estate really was the whale that swallowed the rest.
• 9:15
  SPEAKER_04: Um I was focusing probably 20 or 30 percent of my time on real estate and the rest of manufacturing, and the real estate just kept outgrowing the manufacturing.
• 9:24
  SPEAKER_04: It was a bigger opportunity.
• 9:25
  SPEAKER_04: So sold out of all the manufacturing entities, um, focused solely on real estate with my business partner Brandon and been doing that full-time exclusively for the last couple of years.
• 9:36
  SPEAKER_04: And that unilateral focus was critical.
• 9:39
  SPEAKER_04: So um I liked having a lot of different businesses, a lot of different irons in the fire, but being solely focused on one thing, having blinders on, um, even in the real estate space, we used to do, I mean, we did everything.
• 9:51
  SPEAKER_04: We did we had a wedding venue, storage units, industrial properties, triple net lease properties, commercial excuse, right?
• 9:58
  SPEAKER_04: We did it all.
• 9:59
  SPEAKER_04: Uh and uh multifamily value ad was definitely our sweet spot.
• 10:04
  SPEAKER_04: We did the best there.
• 10:06
  SPEAKER_04: And even there, we shed all the other real estate, and all we do is we turn C class multifamily into B B plus class in Western Ohio better than anybody.
• 10:15
  SPEAKER_04: And that is it.
• 10:16
  SPEAKER_04: And I have full blinders on everything else now.
• 10:19
  SPEAKER_07: So you're saying you you jump in onto the C class and you basically turn it around.
• 10:23
  SPEAKER_07: Is that your niche right there?
• 10:25
  SPEAKER_04: That's exactly right.
• 10:26
  SPEAKER_04: We're full, fully vertically integrated.
• 10:28
  SPEAKER_04: We do everything in-house, we do over own acquisition, property management, leasing, maintenance, construction with our in-house teams.
• 10:34
  SPEAKER_04: So um try to keep all the dollars inside our own ecosystem, and that allows us to just focus solely on speed.
• 10:40
  SPEAKER_04: So speed is everything here.
• 10:41
  SPEAKER_04: We turn the entire property in 12 months or less.
• 10:45
  SPEAKER_07: Well, I was about to say, you know, the problem with most of those deals is you know the construction and getting it thrown off schedule, because you know, one thing leads to another, then all of a sudden you're six months behind, and you know, when you have empty units that you need to get renovated and rented, it kind of kills your deal, or it can, you know, but the fact that you guys are on top of that's a huge deal.
• 11:06
  SPEAKER_07: Um it looks like you're uh you have a huge track record of executing.
• 11:11
  SPEAKER_07: Um, I can see like the spillover.
• 11:13
  SPEAKER_07: I'm looking at your website right now.
• 11:15
  SPEAKER_07: Um, I think people really to get a glimpse of like who you are and where you've come from.
• 11:21
  SPEAKER_07: Um, you know, I talk about like a lot in my newsletters about building trust at the same time.
• 11:26
  SPEAKER_07: When you look at your website, you're like, man, this guy's really on top of it.
• 11:30
  SPEAKER_07: But you can kind of see the trickle over, maybe from e-commerce or whatever, but it's probably like the nicest website for a real estate syndicator I've seen in my life.
• 11:40
  SPEAKER_07: I'm like, whoa, this thing.
• 11:41
  SPEAKER_07: Because you go from like leasing to you know the investment side and it jumps from one of your one arm of the company to the other, and they're all really nice and professionally done.
• 11:53
  SPEAKER_07: Um, did you do them yourself or did you outsource that one?
• 11:57
  SPEAKER_04: Now uh early on I figured out Web WordPress and created my own websites, but now we have a full-time uh marketing guy who does it for us.
• 12:05
  SPEAKER_07: I was about to say, yeah, those those are that looks like it's really well put together.
• 12:10
  SPEAKER_07: So anyway, um the the you see trickle over from different uh businesses come into real estate and it all kind of teaches you something.
• 12:20
  SPEAKER_07: You know, I think uh supply chain and stuff like that kind of keep teaches you to run a tight ship on certain things and keep a schedule, and I think that's probably translated over to the project management side for you on the value add uh uh multifamily.
• 12:37
  SPEAKER_07: Um, so um what are your plans going forward?
• 12:40
  SPEAKER_07: Do you continue you are you gonna continue to expand in multifamily?
• 12:44
  SPEAKER_07: Are you looking, is there like a certain unit count that you like to focus on or a dollar size?
• 12:50
  SPEAKER_04: Yeah, so uh our buy box, uh, we're pretty focused in 30 to 300 unit apartment complexes.
• 12:56
  SPEAKER_04: Oh, wow.
• 12:57
  SPEAKER_04: In in Western Ohio.
• 12:59
  SPEAKER_04: We're looking for out-of-state owners, mom and pop owners, somebody who hasn't improved the property in 10 years or longer, ton of deferred maintenance.
• 13:06
  SPEAKER_04: We come in and buy it.
• 13:07
  SPEAKER_04: We do that heavy renovation capex project that the seller didn't want to do.
• 13:11
  SPEAKER_04: We're looking to increase rents at least$200 to$400 per door per month as fast as we can.
• 13:17
  SPEAKER_04: Um, that's really our sweet spot for a buy box.
• 13:20
  SPEAKER_04: So we're hyper focused on that.
• 13:22
  SPEAKER_04: Like I said, we do everything in-house.
• 13:24
  SPEAKER_04: Our acquisitions team is a massive um value proposition we've been building out for the last 10 years.
• 13:29
  SPEAKER_04: We do it all in-house.
• 13:30
  SPEAKER_04: I have an acquisitions manager, three analysts.
• 13:32
  SPEAKER_04: All they do is monitor the 20,000 multifamily properties in Ohio.
• 13:36
  SPEAKER_04: Of that, 4,000 fit our buy box, and we hammer those.
• 13:40
  SPEAKER_04: We cold call, email, direct mail, text message, brokers, call them on our behalf.
• 13:44
  SPEAKER_04: We send them video mailers, we network, etc.
• 13:47
  SPEAKER_04: We're constantly in front of them.
• 13:48
  SPEAKER_04: So at the right time, right place, when any of them have the inclination of selling, we want them to us first and we want them to call us.
• 13:55
  SPEAKER_04: And we underwrite about a hundred deals per month.
• 13:58
  SPEAKER_04: So about twelve hundred per year.
• 14:01
  SPEAKER_04: We're only looking to buy two to four deals per year.
• 14:03
  SPEAKER_04: So I'm only hunting needle and a haystack.
• 14:05
  SPEAKER_04: Holy moly.
• 14:06
  SPEAKER_04: When we buy it, I only am buying home runs in my mind.
• 14:10
  SPEAKER_07: That's crazy, man.
• 14:12
  SPEAKER_07: I mean, it's it's really not if you want to be successful.
• 14:15
  SPEAKER_07: I mean, but that's a lot of deals that you're going through just for a couple.
• 14:19
  SPEAKER_07: What'd you say?
• 14:19
  SPEAKER_07: 1200?
• 14:20
  SPEAKER_07: 1200 per year, we underrate.
• 14:22
  SPEAKER_07: That's right.
• 14:23
  SPEAKER_07: Wow.
• 14:24
  SPEAKER_07: That's incredible.
• 14:25
  SPEAKER_07: Um, so what kind of uh cap rate are you buying at?
• 14:28
  SPEAKER_07: Is it it's probably more to do with it than cap rate?
• 14:32
  SPEAKER_07: You know, there's there's so much to it.
• 14:33
  SPEAKER_07: I hate saying that.
• 14:34
  SPEAKER_07: That makes me feel dumb for focusing on cap rate, but you know, what what are your metrics?
• 14:39
  SPEAKER_07: What are you looking for when you do go in and buy?
• 14:41
  SPEAKER_04: Yeah, no, it's a good it's a good question and a fair question.
• 14:43
  SPEAKER_04: So we've spent an unbelievable amount of amount of time, energy, and money on underwriting.
• 14:49
  SPEAKER_04: I've probably spent four hundred thousand dollars on mentorship, mastermind, coaching classes just on underwriting, honing in on that skills, me and my business partner, Brandon.
• 14:58
  SPEAKER_04: And we've done every type of underwriting you can imagine.
• 15:01
  SPEAKER_04: The sole focus we have on the value add side is we want to get 100% of our capital back in 18 months or less.
• 15:10
  SPEAKER_04: That's the only thing I care about now.
• 15:12
  SPEAKER_04: And a combination of that's typically obviously buying at a good cost basis, but being able to maximize the capex dollars.
• 15:19
  SPEAKER_04: So, how many dollars can we put in?
• 15:21
  SPEAKER_04: And then what does that equate to on the value add on the back end, which is all just a function of increasing NOI, which is a function of increasing revenues, decreasing expenses.
• 15:30
  SPEAKER_04: So we're looking to underwrite a deal.
• 15:32
  SPEAKER_04: We want to be able to increase revenues about 35 to 40 percent top line and decrease expenses about 10%.
• 15:38
  SPEAKER_04: And that's kind of the magic formula for us that does not translate into a cap rate very well.
• 15:44
  SPEAKER_04: So cap rates can be all over the place.
• 15:47
  SPEAKER_07: I hate cap rates.
• 15:48
  SPEAKER_07: Uh, you hear it all the time on the broker side, and I'm like, this deal sells, you know.
• 15:52
  SPEAKER_07: I don't I don't give a shit what the cap rate is, you know, it's got all this upside on it, and it's you know, at 87% occupancy, and these people have ran it into the ground.
• 16:02
  SPEAKER_07: You know, you can turn this thing around in six months to a year easy.
• 16:06
  SPEAKER_07: So I know I I just I'm kind of just basically saying, you know, what are your metrics?
• 16:10
  SPEAKER_07: But that's very interesting on you know the upside that you look for, you know, downside controls.
• 16:15
  SPEAKER_07: I mean, a lot of a lot of things that I think people miss is like you know, something that you learn in different aspects of business is like if you look at like Chick-fil-A, um they increase prices every year in November, or at least they used to.
• 16:32
  SPEAKER_07: I had a friend that was an operator, but even when there was no cost increase on their side, they always raised it because they were they say they would train their customers to get used to little because they said the next year it might, you know, so they want to keep it consistently so the so it just kind of over time, but those mom and pop owners when they're out of state, they're scared to raise rent at all.
• 16:55
  SPEAKER_07: And I'm like, just raise it five bucks, you know, raise it something, and they don't.
• 16:59
  SPEAKER_07: So that that gets a lot of opportunity for somebody like you to come in there, you know.
• 17:04
  SPEAKER_07: I I've looked at rents where it's like you pull it up and you're like, this is like five hundred dollars under market, and you're like, what in the world is going on, you know, and then you're almost scared to raise it, you're like, holy shit, man.
• 17:16
  SPEAKER_07: I mean, if I raise it, they're gonna move out like the next day, or or they'll just be like, Well, they finally did it, you know, or something.
• 17:24
  SPEAKER_07: So I don't know.
• 17:26
  SPEAKER_04: That that's exactly right.
• 17:27
  SPEAKER_04: And everything we do being fully vertically integrated feeds itself with the full focus on speed.
• 17:34
  SPEAKER_04: So just kind of uh if you bear with me, I can kind of show you how you piece that together.
• 17:39
  SPEAKER_04: So when you see, yeah, there's a$400 delta.
• 17:42
  SPEAKER_04: Well, how I have confidence we're gonna achieve that delta, fully stabilize the property in less than 12 months, is how it all feeds in.
• 17:49
  SPEAKER_04: So when we buy now, we do two things that are very unique.
• 17:52
  SPEAKER_04: In our purchase agreement that we signed, we get to turn all the vacant units to our silver level finish before we even close on it.
• 18:00
  SPEAKER_04: So I get a fully turn it on my dime, it's my risk.
• 18:03
  SPEAKER_04: Why would the seller do that?
• 18:04
  SPEAKER_04: If we don't close, he gets brand new fully turned units.
• 18:07
  SPEAKER_04: So I'm turning all the vacant units before I own it so I can get the marketing collateral ready.
• 18:11
  SPEAKER_04: 2D, 3D virtually staged.
• 18:13
  SPEAKER_04: I'm already building up a wait list.
• 18:14
  SPEAKER_04: I'm doing virtual showings, I'm having pre-leases signed for units at full market rate before I even own the property.
• 18:21
  SPEAKER_04: That's one thing on scheme.
• 18:23
  SPEAKER_04: And then the second is all the leases that lapsed during the hold period, that 75 to 90 day closing period, the seller can only renew them for month to month.
• 18:31
  SPEAKER_04: So when I go to take over, about 40% of the property is month to month.
• 18:35
  SPEAKER_04: And what I'm gonna do is me and my asset manager, we're gonna have a meeting with all 40% of those residents.
• 18:40
  SPEAKER_04: Let's say it's a hundred-unit apartment complex.
• 18:42
  SPEAKER_04: We're gonna have 40, we're gonna have 40 meetings with all 40 residents in a fully turned unit already that we just finished.
• 18:49
  SPEAKER_04: So they're gonna be sitting in a brand new turn unit, and we give them three options, which it's just the hard conversation you just alluded to.
• 18:56
  SPEAKER_04: First, I'm gonna pay you a thousand, I'm gonna pay you a thousand dollars to move out this week.
• 19:00
  SPEAKER_04: Go find a new place.
• 19:01
  SPEAKER_04: This place isn't right for you.
• 19:02
  SPEAKER_04: I want to get the unit back sooner to turn it.
• 19:04
  SPEAKER_04: Second, you can stay for three months, but your rent's going up, usually two to three hundred dollars per month.
• 19:10
  SPEAKER_04: That's just that hard conversation.
• 19:11
  SPEAKER_04: This is where the rent should be.
• 19:12
  SPEAKER_04: I know we haven't renovated it yet, but you can stay and figure it out with the goal of the end of three months, then transferring them to a brand new turn unit.
• 19:20
  SPEAKER_04: And the third option is we can transfer you into a new unit we're turning right now.
• 19:24
  SPEAKER_04: We're going to market rate, you can sign a new 12-month lease.
• 19:27
  SPEAKER_04: Those are the options we give.
• 19:28
  SPEAKER_04: It's usually about a third, a third, a third for all of them.
• 19:30
  SPEAKER_04: And we get huge rents bumps just from having those hard conversations and letting them know that that we're okay getting the unit back, right?
• 19:38
  SPEAKER_04: Because my in-house leasing team, I have seven three-man crews are coming right behind them.
• 19:44
  SPEAKER_04: We turn entire units in seven days or less.
• 19:46
  SPEAKER_04: So we're doing all new LVP floor paint trim, cabinet countertop, baths fixers, appliances in seven days.
• 19:52
  SPEAKER_04: My leasing team, my leasing team's right behind them.
• 19:56
  SPEAKER_04: I have it fully automated.
• 19:57
  SPEAKER_04: I have 35 lead sources.
• 19:58
  SPEAKER_04: We get 150 leads per day.
• 20:00
  SPEAKER_04: We do about 40% showings, 50% show rate.
• 20:03
  SPEAKER_04: My leasing manager's closed 2%, and they're fully filling these units.
• 20:07
  SPEAKER_04: So on day eight, a tenant's ready to move in for full market rate.
• 20:11
  SPEAKER_04: So I have the confidence with all the teams and systems to know we're gonna move these to market rate whether you stay or not.
• 20:18
  SPEAKER_04: And we have those conversations, we can be very frank.
• 20:20
  SPEAKER_04: And I have the construction team and the leasing team to back it up.
• 20:23
  SPEAKER_04: So even when we're fully turning an entire property, I keep it 93% occupied or higher during the entire turn process until it's stabilized in less than 12 months, and then we're occupying it at 98% plus.
• 20:36
  SPEAKER_07: I like that.
• 20:36
  SPEAKER_07: Just have the conversation.
• 20:38
  SPEAKER_07: If you're like you can't let them live there for like four or five hundred below market, you know.
• 20:43
  SPEAKER_07: Yeah.
• 20:44
  SPEAKER_07: But it's just crazy when you see it on paper, you're like, I can't believe this is going on, you know.
• 20:49
  SPEAKER_07: But anyway, uh, when's your mastermind start?
• 20:52
  SPEAKER_07: It sounds like you need to start one.
• 20:54
  SPEAKER_07: You're a smart guy.
• 20:55
  SPEAKER_07: All the uh this is really good stuff for you know, potential apartment investors, people that want to invest with you specifically into your fund, they can see how you think, you know, how you're able to um, you know, take a tough situation like I just described and you know take the bull by the horns and tackle it and get it done the way it's supposed to be, you know.
• 21:18
  SPEAKER_07: Um yeah, that's that's really good stuff.
• 21:21
  SPEAKER_07: I'm really actually more impressed with the fact that you can turn a unit around in seven days on a renovate, you know.
• 21:28
  SPEAKER_07: You gotta you gotta have some pretty good staff.
• 21:31
  SPEAKER_07: Uh is there any kind of motivating bonus to get them in and out of there?
• 21:34
  SPEAKER_07: Do you pay them by the unit?
• 21:36
  SPEAKER_07: Is that how you do it?
• 21:37
  SPEAKER_07: I mean, it's probably more simple than I think.
• 21:40
  SPEAKER_04: You know, well, I mean, we we do time studies on every facet of our turn process.
• 21:45
  SPEAKER_04: We have everything bought, bought, pre-kit, palletized.
• 21:47
  SPEAKER_04: It's delivered the day the tenant moves out.
• 21:49
  SPEAKER_04: We have three man crews, we have a crew tree for Renotech one, Renotech two.
• 21:53
  SPEAKER_04: Everything's timed out.
• 21:54
  SPEAKER_04: We know how long it should take.
• 21:56
  SPEAKER_04: They already have the materials, there's no excuses.
• 21:58
  SPEAKER_04: They're working 10 hour shifts.
• 22:00
  SPEAKER_04: Our painters are working at night, and then they have the pressure knowing my leasing team already leased this unit.
• 22:05
  SPEAKER_04: It has to be done on day eight because we already have a move-in date scheduled.
• 22:09
  SPEAKER_04: So the whole system flows and works cohesively.
• 22:12
  SPEAKER_04: And if there's a chink anywhere, we make sure that that communication's um being being uh utilized throughout the team, and then everybody's bonused upon speed and hitting their metrics.
• 22:22
  SPEAKER_07: You know, the thing I hate about real estate is people always kind of say, How long have you been doing this?
• 22:27
  SPEAKER_07: And you know, it's one of those things where people go around, oh, I've been doing this for 30 years.
• 22:32
  SPEAKER_07: When I hear a business guy like you come in from logistics and put times on different stuff, I'm like, this guy was built for real estate, man.
• 22:42
  SPEAKER_07: Like you you're like a you're a dream come true for investors, like having all this nailed down.
• 22:48
  SPEAKER_07: Um, but it's at a logistics background.
• 22:50
  SPEAKER_07: I think different business aspects, even like running a McDonald's, you know how they have like times for everything.
• 22:57
  SPEAKER_07: It's like, okay, how long does it take an employee to drop fries and stuff like that?
• 23:01
  SPEAKER_07: But you actually applying all this to real estate, nobody does it, but to see you do it, you're like, whoa, somebody's actually running this like a real business.
• 23:11
  SPEAKER_07: So anyway, I think it's uh phenomenal what you're doing there.
• 23:15
  SPEAKER_04: So you know, and and the the to piggy bug off that, you're right, right?
• 23:19
  SPEAKER_04: It's it's it's a spreadsheet business.
• 23:21
  SPEAKER_04: It very much is.
• 23:22
  SPEAKER_04: Obviously, there's a lot more under the hood than that with the culture and the training and all the aspects that go into it.
• 23:28
  SPEAKER_04: But for example, on leasing, like people who outsource leasing, outsource third party management, outsource construction, right?
• 23:34
  SPEAKER_04: You just lose control of everything.
• 23:36
  SPEAKER_04: By doing it all in house, you have full control, even on the leasing side.
• 23:39
  SPEAKER_04: Like I absolutely love the sales side.
• 23:42
  SPEAKER_04: If someone says like my occupancy is 93, 94% or have any issues, I know, like clockwork, every hundred leads, I give 40 showings, 20 show up, 18 applications, two leads to sign.
• 23:53
  SPEAKER_04: I can ramp up my pay to ad spend and get something filled immediately.
• 23:56
  SPEAKER_04: Because I know my numbers and we have the systems in place to take on that lead flow.
• 24:00
  SPEAKER_04: So those are the things that I do think a lot of real estate investors, especially those who outsource to third-party management companies who don't have the same vested interest that I have, they just lose sight of a lot of that, right?
• 24:12
  SPEAKER_04: And it's all good enough, where good enough for us is not the right standard, right?
• 24:16
  SPEAKER_07: Yeah.
• 24:17
  SPEAKER_07: Property management sounds good when you're talking to a bunch of uh people that are trying to graduate from single family rentals to multifamily.
• 24:24
  SPEAKER_07: They're like, oh, I can just pay somebody to manage it, but they just don't manage it the same way you do.
• 24:29
  SPEAKER_07: They don't have the incentive and the skin in the game and all that.
• 24:32
  SPEAKER_07: But um, very good point.
• 24:35
  SPEAKER_07: Um well, uh golly, man, you're like killing it.
• 24:38
  SPEAKER_07: If I were gonna um I I love this type of stuff.
• 24:41
  SPEAKER_07: I could see why you won that pitch fest.
• 24:44
  SPEAKER_07: And then I could see why it was hard to fit everything you know into like four minutes, you know?
• 24:49
  SPEAKER_07: It's like, golly, there's there's so much to it, man.
• 24:52
  SPEAKER_07: I mean, I could probably talk to a guy like you for four days about apartments and investing.
• 24:57
  SPEAKER_07: So I love this kind of stuff.
• 24:59
  SPEAKER_07: What is the uh best way to uh get a hold of you?
• 25:04
  SPEAKER_04: Yeah, so if if you search my name Justin Spillers, uh usually my LinkedIn pops up, everything kind of feeds off of that.
• 25:11
  SPEAKER_04: But Justin at realestatealpha.io, that's realestatealpha.io, that's also our website, is my best email.
• 25:18
  SPEAKER_04: People can reach out to me there, they can DM me on LinkedIn, um, email me anytime.
• 25:22
  SPEAKER_04: I'm I'm super available.
• 25:24
  SPEAKER_04: I love to give back.
• 25:25
  SPEAKER_04: You reference that mastermind.
• 25:27
  SPEAKER_04: Um, we've been head down operating like crazy.
• 25:29
  SPEAKER_04: We've not really had a public brand um and promotional items until we started raising capital the last year just because we've been self-funded, we really didn't need to make too much noise.
• 25:40
  SPEAKER_04: Now we're starting to make more noise so you can see more about us online.
• 25:44
  SPEAKER_04: I'll I'll be doing more um sharing and posting.
• 25:48
  SPEAKER_04: But uh, as I tell all of our investors, even if you don't invest, um, reach out to me anytime.
• 25:52
  SPEAKER_04: I'm happy to give back.
• 25:53
  SPEAKER_04: I'm happy to point you in the right direction, give you any resources, time, tools, etc.
• 25:58
  SPEAKER_04: as needed.
• 25:59
  SPEAKER_04: Um, but if you're interested, like I said, BC is great, but also invest with the good operator.
• 26:03
  SPEAKER_04: You just ask them questions, right?
• 26:05
  SPEAKER_04: Read the investor updates, ask them why they do things, ask them if they can write along, right?
• 26:10
  SPEAKER_04: Ask if they can come see a deal, ask if they can see the underwriting for a deal.
• 26:14
  SPEAKER_04: Those are the ways you're gonna learn much faster by osmosis and just constantly be with people who are ahead of you or where you want to be.
• 26:21
  SPEAKER_04: That's what I've done my entire career, and I've just been really fortunate to have a lot of people as mentors to give back.
• 26:28
  SPEAKER_04: So I'm happy to always be that role for anybody else.
• 26:31
  SPEAKER_07: I I don't disagree with you on that because no matter where you come from, like you have the logistics thing and coordinating the team and all that, like down to a T, you know.
• 26:41
  SPEAKER_07: But somebody always comes into a business, whether it's like they haven't raised capital, but they've managed apartments or they've done construction, and there's something that were kind of lacking, but having somebody that you can kind of ask questions is a is a big deal.
• 26:55
  SPEAKER_07: Um let me ask you this was uh the money you spent on underwriting coaching worth it?
• 27:01
  SPEAKER_07: Or is that something invaluable?
• 27:04
  SPEAKER_04: No, no, invaluable, invaluable, of course, yes.
• 27:07
  SPEAKER_04: All my I've spent more on non-traditional education than traditional education, and that's worth a hundred X more than what my college university degrees were worth.
• 27:18
  SPEAKER_04: That's where you learn absolutely everything.
• 27:20
  SPEAKER_04: And without that, we wouldn't have the business we have today.
• 27:23
  SPEAKER_04: And we're constantly spending money, going to seminars, um, going to masterminds, um, learning from people who are ahead of us and elevating our game.
• 27:32
  SPEAKER_04: It's the best shortcut there is paying for access, paying for information, paying for other people's learning experiences, um, etc.
• 27:40
  SPEAKER_04: Uh very much valuable.
• 27:41
  SPEAKER_07: So, my background, I have a background in uh I've done like uh financial statement, you know, modeling and accounting and stuff.
• 27:50
  SPEAKER_07: And I really don't like going to masterminds about uh underwriting.
• 27:55
  SPEAKER_07: I just always say it's the model, but it's never right.
• 27:58
  SPEAKER_07: But I think it's good to look at different scenarios and you know go through go through the process that you're going through to give you conviction about what you're doing.
• 28:08
  SPEAKER_07: So anyway, I'd be kind of curious to look at some of those models, but um I appreciate you sharing all this.
• 28:15
  SPEAKER_07: Um, it's easy to see why you've been successful and all that, and um look forward to uh following the journey, and I'm sure you're gonna be successful.
• 28:24
  SPEAKER_07: I think you're uh knocking it out of the ballpark.
• 28:26
  SPEAKER_07: So I appreciate you coming on, and uh, we'll go from there, man.
• 28:30
  SPEAKER_07: So anyway.
• 28:31
  SPEAKER_07: Thank you, sir.
• 28:32
  SPEAKER_04: Okay, appreciate it, Carson.
• 28:34
  SPEAKER_04: Great chat with you.
• 28:35
  SPEAKER_07: Hope to be on someday in the future.
• 28:36
  SPEAKER_07: Yeah, absolutely.
• 28:37
  SPEAKER_07: Thank you.
• 28:38
  SPEAKER_01: You guys ready in the back?
• 28:40
  SPEAKER_01: All right.
• 28:41
  SPEAKER_01: So this first gentleman has built a portfolio all by himself and is raising money for the very first time after having quite a bit of his own equity and his partner's equity in it for the first time to the best ever conference.
• 28:53
  SPEAKER_01: Please welcome Justin Spillers from Real Estate Alpha.
• 29:06
  SPEAKER_04: Imagine investing in an already successful portfolio of over 600 units.
• 29:10
  SPEAKER_04: Imagine having over 30 million of equity protecting your investment.
• 29:14
  SPEAKER_04: Imagine receiving fixed 12% annual returns with no tax until year nine.
• 29:18
  SPEAKER_04: That's what we do at Real Estate Alpha.
• 29:20
  SPEAKER_04: I'm Justin Spillers, my business partner Brandon and I created in 2016.
• 29:23
  SPEAKER_04: We're an Ohio multifamily value ad company.
• 29:25
  SPEAKER_04: We're fully vertically integrated, we have about 50 team members.
• 29:28
  SPEAKER_04: Brandon's a former engineer, owned a construction and a roofing company, sold that successfully to invest full-time with me.
• 29:33
  SPEAKER_04: I went to Ohio State for undergrad in law school, practiced real estate law for seven years.
• 29:37
  SPEAKER_04: In 2016, left the practice, started investing with Brandon, bought our first property, grouped over 700 apartments all in Ohio, pretty much self-funded today.
• 29:44
  SPEAKER_04: Capital is our only constraint.
• 29:46
  SPEAKER_04: We created a preferred equity fund last year.
• 29:48
  SPEAKER_04: We have a 50-50 strategy where we bring half the capital, the fund brings half the capital for new acquisitions.
• 29:53
  SPEAKER_04: Our entire fund is an evergreen open-ended fund, meaning you get exposure to our entire portfolio of all of our existing assets and future purchases.
• 30:01
  SPEAKER_04: It's in that pref equity position.
• 30:03
  SPEAKER_04: So you're number two in the capital stack right after the banks.
• 30:06
  SPEAKER_04: You get a fixed 12% annual return.
• 30:08
  SPEAKER_04: It's paid out from our global cash flow.
• 30:10
  SPEAKER_04: This is not some aspirational or targeted IRR to true fixed 12%.
• 30:13
  SPEAKER_04: Our investors get two good options.
• 30:15
  SPEAKER_04: You can reinvest that 12% every year for that pre-tax annual compounding at 12% you double your money every six years.
• 30:21
  SPEAKER_04: Or you can take the cash distribution every year on December 31st.
• 30:25
  SPEAKER_04: We have a super unique tax strategy called return of capital tax distribution.
• 30:28
  SPEAKER_04: So you pay no tax on that 12% until year nine.
• 30:31
  SPEAKER_04: It's equivalent to a 15 to 19% annualized return.
• 30:35
  SPEAKER_04: Best yet, it's liquid.
• 30:36
  SPEAKER_04: After the first year, just 90 days' notice, you can get somewhere all your capital back so you invest in your own timeline.
• 30:41
  SPEAKER_04: It avoids all the typical issues with syndications, skeptical IRR numbers, long-term lockups, third-party risk, low skin in the game.
• 30:48
  SPEAKER_04: We we change all that with our fund.
• 30:50
  SPEAKER_04: This is the evaluation of our investment portfolio of the last 10 years of me and Brennan investing together.
• 30:54
  SPEAKER_04: In 2021, we went full cycle on about 200 units, reinvested the game for that hockey stick growth the last couple of years.
• 31:00
  SPEAKER_04: Left map is our scatter site of all the properties we own up and down the I-75 corridor in Ohio.
• 31:06
  SPEAKER_04: Mostly eight large assets, 44 units to 200 units.
• 31:09
  SPEAKER_04: The right side's our exit and refinances over the last couple of years.
• 31:12
  SPEAKER_04: This is our capital stack.
• 31:13
  SPEAKER_04: We have$72 million of value.
• 31:14
  SPEAKER_04: This is using a very conservative cap rate in our real-time NOI.
• 31:18
  SPEAKER_04: We have$3 million of cash.
• 31:19
  SPEAKER_04: We only have$37 million of lender debt.
• 31:22
  SPEAKER_04: We've only raised$4 million so far, so you'd invest in that same private capital tranche.
• 31:26
  SPEAKER_04: We have$31 million of equity and protecting your investment.
• 31:30
  SPEAKER_04: I'd have to lose all$31 million before your first penny's at risk.
• 31:34
  SPEAKER_04: This is a snapshot of our cash flow.
• 31:35
  SPEAKER_04: We have$9.5 million of revenue,$3.7 expenses,$3.3 million debt service fund interest, net cash flow,$2.5 million.
• 31:42
  SPEAKER_04: Our sole focus is creating$70,000 of NOI as fast as we can.
• 31:45
  SPEAKER_04: It equates to a million dollars of new value.
• 31:47
  SPEAKER_04: Real estate's a$15x multiple.
• 31:49
  SPEAKER_04: The best way to do this is being vertically integrated.
• 31:51
  SPEAKER_04: You decrease expenses, increase revenue.
• 31:53
  SPEAKER_04: We do all our own acquisitions, leasing, property management, maintenance, construction in-house.
• 31:57
  SPEAKER_04: Construction is our secret sauce.
• 31:59
  SPEAKER_04: Speed is our sole focus.
• 32:01
  SPEAKER_04: By way of example, we do 210 hours on average in each turn.
• 32:05
  SPEAKER_04: We have 95% SKU standardization.
• 32:07
  SPEAKER_04: We do this exact same LVP floor, paint, trim, cabinet, countertop, bath fixtures, bolt ons in every turn.
• 32:12
  SPEAKER_04: We're trending for seven-day turns.
• 32:14
  SPEAKER_04: I want to be at five-day turns and ultimately 96-hour turns.
• 32:17
  SPEAKER_04: This is the next property we're buying in Middleton, Ohio.
• 32:19
  SPEAKER_04: Great off-market deal.
• 32:20
  SPEAKER_04: $10.4 million purchase price,$2.7 million capex.
• 32:23
  SPEAKER_04: It's 126 units.
• 32:24
  SPEAKER_04: Our target NOI is a little under a million dollars.
• 32:26
  SPEAKER_04: Target refinance values$15 million.
• 32:29
  SPEAKER_04: Our CapEx we plan to do in just 15 to 18 months with that speed focus.
• 32:33
  SPEAKER_04: We're going to decrease expenses 10%, increase rents 30%, cash to close$2.5 million.
• 32:37
  SPEAKER_04: I'm bringing$1.25 million.
• 32:39
  SPEAKER_04: The fund's going to bring the other half.
• 32:40
  SPEAKER_04: Again, to recap, you're investing into a fund with 12% fixed annual returns, 90-day liquidity, no tax hit until year nine.
• 32:48
  SPEAKER_04: We have 30% historical cash flow after debt service.
• 32:51
  SPEAKER_04: We have$31 million of equity protecting your investment.
• 32:54
  SPEAKER_04: I'd have to lose 43% of my value before your first pennies at risk.
• 32:58
  SPEAKER_04: That's never happened in the history of multifamily in Ohio.
• 33:00
  SPEAKER_04: No small or large company can outperform us in Western Ohio.
• 33:03
  SPEAKER_04: We come to win.
• 33:05
  SPEAKER_04: All right.
• 33:06
  SPEAKER_02: Perfect four minutes.
• 33:09
  SPEAKER_02: Judges questions.
• 33:11
  SPEAKER_02: The the$31 million in equity.
• 33:14
  SPEAKER_02: Uh when did those properties get valuated to come to that?
• 33:19
  SPEAKER_04: Real time.
• 33:19
  SPEAKER_04: So we use our NOI as it sits today in our REO schedule, and then I use the conservative cap rate.
• 33:24
  SPEAKER_04: I usually add one point to it.
• 33:25
  SPEAKER_04: If it trades at 6.75, I use 7.75.
• 33:29
  SPEAKER_05: Thanks.
• 33:29
  SPEAKER_05: Do you get third-party appraisals or valuations done on those current properties to calculate, I assume, the NAV?
• 33:36
  SPEAKER_04: At purchase, we do an as is and then as rehabbed.
• 33:38
  SPEAKER_04: I have as rehabbed appraisals that support the 72 million valuation.
• 33:42
  SPEAKER_05: Do you do one after you've completed the renovations and stabilized?
• 33:45
  SPEAKER_05: We do them at refi, yes.
• 33:46
  SPEAKER_05: Okay.
• 33:48
  SPEAKER_05: How are you going to decrease expenses by 10%?
• 33:52
  SPEAKER_04: Mostly the efficiencies, we put a ton of money on the CapEx.
• 33:55
  SPEAKER_04: Our RM is very low historically.
• 33:57
  SPEAKER_04: That's the big one.
• 33:58
  SPEAKER_04: The other one is just being hyper-focused on outsourcing as much to our virtual team members and using AI to automate a lot of our systems.
• 34:05
  SPEAKER_02: You said the last deal was off-market, the one in Middletown.
• 34:08
  SPEAKER_02: Yes.
• 34:09
  SPEAKER_02: How did you find it?
• 34:10
  SPEAKER_04: Yeah, so we are hyper-focused on buying off-market deals through brokers, which is a little bit of an oxymoron.
• 34:16
  SPEAKER_04: But all I do is build broker relationships so that they know what our buy box is.
• 34:20
  SPEAKER_04: I want to take every single deal on their desk, then call me up first and put it under contract before they market it out to the masses.
• 34:26
  SPEAKER_00: Are these B class or C class?
• 34:28
  SPEAKER_00: Yep.
• 34:29
  SPEAKER_04: So we take C class and convert it to B class as fast as we can.
• 34:32
  SPEAKER_04: Typically, out of state owners, mom and pop owners, ton of deferred maintenance.
• 34:35
  SPEAKER_04: Somebody goes and touched the property in 10 years.
• 34:37
  SPEAKER_04: That's our where we kind of we shine on our sweet spot.
• 34:40
  SPEAKER_04: What kind of vintage?
• 34:44
  SPEAKER_05: How long have you been taking investor capital?
• 34:46
  SPEAKER_04: For the first time in a pref equity fund since last year, we've done a little bit of private debt over the years, though.
• 34:52
  SPEAKER_04: In 10 years, we've never uh missed a payment.
• 34:55
  SPEAKER_00: Any boiler chiller?
• 34:57
  SPEAKER_04: So what is that?
• 34:58
  SPEAKER_00: Any boiler chiller properties?
• 34:59
  SPEAKER_00: Boilers?
• 35:00
  SPEAKER_04: Boilers.
• 35:00
  SPEAKER_04: Uh half have boilers.
• 35:02
  SPEAKER_00: And chillers?
• 35:04
  SPEAKER_04: Uh I'd say half of those have chillers, yeah.
• 35:07
  SPEAKER_04: And half are window units.
• 35:09
  SPEAKER_04: And as an open-end fund, what are you looking to raise and what's your minimum to get in?
• 35:13
  SPEAKER_04: Uh minimum is 50,000.
• 35:14
  SPEAKER_04: We've raised four million.
• 35:16
  SPEAKER_04: I plan to raise about 10 million over the next couple of years.
• 35:19
  SPEAKER_04: That's how much capital I'd like to have in the ecosystem in addition to ours.
• 35:23
  SPEAKER_05: Can you explain your return of capital tax treatment?
• 35:27
  SPEAKER_04: Yeah, so uh our CPA, Ed Rate Meyer, he's the managing director at CBiz.
• 35:32
  SPEAKER_04: He just invested with us too, which was very telling because he knows my numbers better than anyone.
• 35:35
  SPEAKER_04: He developed the structure.
• 35:36
  SPEAKER_04: So as long as there's no earnings and profits distributed to the investors, you can take a return of capital first treatment.
• 35:43
  SPEAKER_04: So it's basically like you getting your capital back first, and then you realize all the gain on the back end.
• 35:47
  SPEAKER_04: So in year nine, that's when you deplete your capital count just for tax purposes, and only then does it become taxable to you, and it's only taxed at long-term capital gains, right?
• 35:56
  SPEAKER_02: What is your fee structure?
• 35:58
  SPEAKER_04: So we don't charge disposition fees, acquisition fees, any of that junk you see in syndications.
• 36:03
  SPEAKER_04: We have a flat 5% management fee.
• 36:05
  SPEAKER_04: It's mostly through construction fees, though, which is drawn out of our CapEx loans.
• 36:09
  SPEAKER_04: So very small hit on the capex or the actual operating expenses.
• 36:12
  SPEAKER_04: So most of it's pulled through that 5% fee on the construction management side.
• 36:17
  SPEAKER_02: What what uh how much do you put in per unit for renovations on average?
• 36:21
  SPEAKER_02: Uh about$15,000.
• 36:23
  SPEAKER_02: Uh so they're heavy value add deals.
• 36:25
  SPEAKER_02: Very heavy value.
• 36:28
  SPEAKER_00: Any any reserves on the chiller and boilers?
• 36:30
  SPEAKER_00: Those are the biggest field components?
• 36:32
  SPEAKER_04: Any sorry, what was that?
• 36:34
  SPEAKER_00: Reserves.
• 36:34
  SPEAKER_04: Do you keep any reserves?
• 36:36
  SPEAKER_04: So we we have three million dollars of cash on hand.
• 36:38
  SPEAKER_04: We try to keep at least two to three million dollars available at all time for both CapEx and so we have a full year's interest payment for all the private capital as well.
• 36:45
  SPEAKER_05: So you have a 90-day redemption period, right?
• 36:49
  SPEAKER_05: Um has any investors or NOPs redeemed their money so far?
• 36:54
  SPEAKER_04: Not yet.
• 36:54
  SPEAKER_05: And you feel confident you can redeem within 90 days?
• 36:57
  SPEAKER_04: Yeah, we have five levers of pulling.
• 36:58
  SPEAKER_04: Me and Brandon have about three to five million dollars liquid outside the fund.
• 37:01
  SPEAKER_04: We have three million dollars in the business.
• 37:03
  SPEAKER_04: That's option one.
• 37:04
  SPEAKER_04: Option two is we could do a refinance, we could sell a property, we could just hoard cash and stop CapEx for 90 days, or we could go to our sixty investor base.
• 37:14
  SPEAKER_04: All right, Justin Spillers, everyone.
• 37:16
  SPEAKER_04: Thank you.
• 37:16
  SPEAKER_04: Thank you very much, sir.