MFM Live: Real Estate Q and A

For this MFM Live you got the chance to ask anything about Multifamily Investing with our own Feras Moussa, Powell Chee and Garrison Gilbert!

• Underwriting
• Raising capital
• Finding deals
• Networking
• Property management
• Operations
• And More!

VIDEO TRANSCRIPTION

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[Music] we [Music] are recording this is multi-family masters live we do this once a month
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free content tons of value multi-family masters was formed and
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kind of initiated around the premonition of creating as much value as possible for everyone around us long story short
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we want you to know this business inside and out because we want you closing deals because plain and simple what’s in
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it for us we want to partner with you if that situation ever arises so we created multi-family masters we
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have about 60 meetups across the globe 60-70 i don’t know that exact number covet has hurt us somewhat so like
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powell mentioned a little bit ago if you’re interested in hosting a local meetup we have a turnkey system
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for you reach out to one of us admin at multifamilymasters.com
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we have a mastermind group we have the best mastermind in the world we’re all about teaching the ins and outs of this
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business because like i just said a few minutes ago we want you closing deals we want you knowing this business inside
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and out because we want to partner with you multi-family real estate storage commercial real estate is a team
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sport and we want to be on your team multifamily multifamilymasters.com we have a facebook group
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uh we do these facebook lives once a month i have the best business partners in the world
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my name is garrison gilbert i am from the baltimore maryland area 21 years
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full-time real estate experience uh that’s a little bit about me i’ll go
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ahead and let pow and ferris introduce themselves and then we’re gonna we’re gonna kick it off tonight with a uh a
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question and answer a q a ask us anything and everything anything multi-family anything real estate
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anything business anything mindset related we’re here to answer and if we can’t answer it we’ll figure out
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the answer for you we do not know everything but we have a wealth of knowledge and experience behind us take
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it away pal okay and and i think we’re just gonna go over our bios real quick and you know
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what i think would be good too garrison is maybe you just talk about maybe one of the latest deals that you did
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and just so that people get a real quick idea of of what the questions that they can ask you as well sure so
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um and you know the great thing about pal ferris and myself partnering up and doing multi-family masters is we have
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very different backgrounds but we’re all focused around real estate i focus on small medium medium large apartment
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buildings typically a hundred units and less our focus is on self storage and ferris
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buys a lot of big deals i run the mastermind here at multi-family masters and
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a couple recent deals that we closed on a couple of small medium-sized apartment
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buildings in the georgia area recently i relocated from baltimore maryland to florida so i focus on
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typically the georgia florida markets anything medium anything medium large
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kind of related i try to hit that target right between kind of the mom and pop buyers you know
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the 5 10 15 20 units and the commercial institutional buyers which is like 125
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and plus so i try to hit that sweet spot right there where we can go direct to seller and we can kind of get some
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value-add properties there that the big boys aren’t quite looking for go ahead pal
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awesome awesome i think that’s great thanks garrison so my name is powell chi i um
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i live in los angeles uh all my real estate investing has been outside of california so i’ve invested in so i’m a
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general partner on five different syndications uh they were all around 2019 that i got involved in them
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and uh they happen to be like you know all different markets so i’m not a person that concentrates on a specific
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market uh they’re in let’s say dallas um atlanta
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phoenix jacksonville sort of all over the place and when covet hit when kobe came about
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uh because of the way that i operate uh my multi-family i really decided that hey i
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need to look at another asset class too so i added basically self-storage to my asset classes so now i’m involved in
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both multi-family as well as self-storage and since since covet hit i closed to
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let’s see in 2021 i closed six self-storage properties that year
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i just closed my seventh one earlier this month and i’m under contract right now for my
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eighth so um heavily involved in both multifamily as well as self storage happy to answer
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any questions that we have that people have about uh either the asset classes and and um and i’m being on the sponsor side
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or being on the general partner side raising capital uh finding deals all those types of things um definitely
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looking forward to the to the conversation today so from that i will uh pass it on to ferris
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first go ahead all right thank you pal thank you garrison so hello everybody i’m ferris of a company called disrupt
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equity we uh primarily buy properties throughout texas and georgia and we’ve done
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everything from kind of the deep value-add you know down units that the
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seller should have never owned a property and they kind of accidentally stumbled into it to you know a nicer newer property so i
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mean our last deal we closed was a deal actually here in houston which is where we’re based it was a
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387 unit a-class deal that we bought so you know we’ve done we’re very nimble
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very dynamic and we are vertically integrated as well we do have our own management company and you know i like to say management is the worst business
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in the world but a necessary evil so we do first and third party management so i can talk about anything from
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acquisitions to raising money to management if people want to talk about it so with that said i think like powell and
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garrison mentioned you know we’re all pretty candid transparent people and so really you know i think
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we’ve always found the most value both as attendees and speakers to be q a
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and that’s kind of where we all decided hey let’s just do a whole webinar on q a i think people get the most value and
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we’re big on you know doing things that are valuable to people not wasting our time or other people’s time and so you know this is all for you guys so feel
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free to ask questions and we can kind of deep dive on topics or you know keep it light and bright so if you have
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questions go ahead and leave it in the chat and you know we can all start to moderate it and ask those questions
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and let me go ahead and state real quick that this is being recorded so anything you say
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can and possibly will be held against you and as you’re as you’re coming up with
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the questions where you’re thinking about whether it’s acquisitions or how to choose a market or how to raise
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capital how to choose partners whatever your question is or more if it’s a deep dive into a
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specific deal um definitely write them in but we’re happy to answer those questions but also the
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plan is at um let’s see well it’s 6 30 my time i don’t know what everybody else’s time is so at about 45 minutes
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uh we will break for um a session of uh breakout rooms okay so we’ll go for a
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session and i’ll put about six to seven people inside of a breakout room and the then you can network inside
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that break room breakout room uh with a smaller group of people definitely exchange your contact information there
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and um and we’ll be doing that for a few minutes after we uh after we do this
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part of the session okay and then we’ll end and then we’ll end right after that okay hey pal i got a couple uh questions
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texted over to me do you mind if i go ahead and ask you the first one sure let’s do it
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it was it was just to the group but i’ll go ahead and ask pow or affairs which everyone wants to answer this
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when raising capital what is the single most important part of raising capital number one and
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number two what did you find most difficult when you’re raising capital on your first deal
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uh well i would say that probably the single most important thing is that you’re doing it right okay that there
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are some rules and you need to know the rules around how to raise capital right and
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and how to do that right so uh we could dive deeper into those rules but there are certain things that you
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can you can and cannot do and who you can target and who you cannot target so you want to make sure you understand
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that and basically who you who you are broadcasting your message to right so
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there are things that you cannot do and you you could basically put your whole investment in jeopardy
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if you do the wrong things so you really need to understand the rules around raising capital um so that is probably
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the most important thing i guess the second part of the question was what was the second part of the question garrison about first your first
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time raising capital uh whenever you raised capital for the first time what did you think was the hardest part about raising capital for
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that first deal um let me see the hardest part about doing
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it i mean you know i would say
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let’s see i i didn’t really find that there was like a hardest part right it’s it’s really like i guess the hardest
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part was really just putting yourself out there that this is what you’re doing and letting people know what you’re doing right because sometimes you’re a
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little nervous to talk to your friends and family about what you’re trying to do or what you’re getting in real estate or i’m trying to raise capital on a deal
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i’m trying to do this you don’t really want to come across as a person that is not very confident
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in what you’re doing right you want to make sure you understand the deal you understand what it is you’re doing and then you have some confidence to tell
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people hey this is what i’m doing i’m really looking forward to this i’m really excited about this property and this is why we’re doing it and this
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is what you can do if you’re interested in getting involved in it right and then just kind of lead it to them to take the next steps moving forward absolutely
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and i’ll add to you i mean you know people ultimately want to invest in someone they like know and trust so figure out how to get them to like know
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and trust you before you have a deal don’t wait till you have a deal before you start to talk to people about you know wanting to invest right that’s why
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i tell people to do things to create awareness with your potential investors as to what you
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do right like take a screenshot being on this webinar right post that that shows people that you’re getting educated
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right the last thing people want to do is be the first person they think you went to whenever you had this new crazy
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idea right there’s always that in the back of people’s head oh pal has this new crazy idea and now he’s doing you
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know real estate and you know two weeks ago he was doing something else right people always have that right and so
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it’s more about showing people look you’re educated right you’re you know you’re not brand new to the show right
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and show people that you’re someone that they need to like know and trust absolutely and and to touch upon two of
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those things that pal just mentioned definitely know the rules inside and out um i’m looking at a deal right now that
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we’re making an offer on where the owner got fired literally the sec fired him it is
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a property that is under receivership meaning uh we’re making an offer directly to the attorney who’s just
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trying to get the money back for the investors because that gentleman he did not go to jail he didn’t get arrested
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but what he did do was he borrowed money from unaccredited investors into a 506 c
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they found out they fired him they made him walk away from the properties now they’re trying to sell them themselves
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you do not want to be in that position um so definitely know your rules have a good sec attorney um with that being
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said power a follow-up question is pow or ferris do you always use the same sec attorney
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on every deal or do you price compare amongst other ones or do you kind of switch it up every couple deals
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yeah i’d say find the attorney that you like and stick with it i mean it’s not worth trying to save a few thousand dollars by trying to switch
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attorneys it’s a lot of work to review the ssc docs right we have ours dialed in that it’s just such a
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headache if i was to go to a new scc attorney and start over new and have to go review those and vet those and put
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the whole enchilada together i mean so find someone you like you know make sure that they the quality
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of the work is good the pricing is good and stick with it yeah i would say that i’m
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i’m heading in that same boat too i i have used different attorneys and for some reasons you find certain
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attorneys i mean you don’t have to stick with your first one well at least i don’t feel like you need to stick with your person
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i was with one and i was like ah truthfully there was a lot of issues with that one and there’s a lot of things that kind of messed up and i i
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just don’t feel like we’re in this we were found the right one so we’re we’re looking uh we found another
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attorney and we’re working with another attorney um in general i’ve i’ve had some pretty
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not so great experiences with a lot of attorneys um and so i still am looking for that attorney that i can just kind
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of work consistently with for sure how about you garrison how do you what
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do you uh what do you do with uh your attorneys um i’m i definitely i’m definitely price conscious on everything
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that i do but once i find a good one i’m gonna stick with them um i feel as if we have a pretty good one right now and i
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have no plans on switching it up unless something drastic and dramatic happens it doesn’t mean that we’re not willing
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to switch up our team or kind of move on from someone but um if it’s not broke i’m not trying to
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fix it i’m not trying to reinvent the wheel for sure yeah and and one thing i should mention too is that not everybody
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is doing all sct uh you know you’re not everybody’s not everybody is syndicating right some of you have mentioned when we
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talked earlier on that you’re doing deals in the you know five to 30 unit
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range right you may be not syndicating those deals you might just jv those deals right you got an eight unit deal
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you probably just do a jv in that case you may not want to talk to an sec attorney you may want to talk to
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um a state like a local you know state uh attorney that’s uh
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familiar with the state that you’re investing in right so i’ve done that too as well as reach out to a real estate attorney that’s familiar with the state
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that i’m investing in and they’re not as you know they’re not a syndication attorney they’re a real estate attorney
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sure you want to go ahead and uh you got any questions in the chat below i see we got
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a couple comments here i’m trying to share this around facebook right now
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so one thing that somebody did ask i think frank you guessed that you know will this be recorded uh yes if you just
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check on our youtube page um probably within a day or so here we’ll be posting this to our youtube page so you can you
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can check out the recordings there um let’s see
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oh i didn’t get one person asked a question uh what was the hardest deal you closed and why
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so maybe we can all answer that but i mean all uh i guess i’ll answer first um hardest
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deal we closed was actually a deal we were selling i won’t mention the deal because i don’t want people to know who it was and why
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but i mean ultimately it just boiled down to a very i don’t want to put it
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a very paranoid buyer right they really you know everything was always delayed
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right from insurance to other things and you know on top of that it was a deal that
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the lender was also dragging their feet and it’s just there was no sense of urgency so everything about it was
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really dragging the buyer kept asking a million and one questions and it just became a huge grind for us and we’re
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literally spending so much effort and energy to go sell this deal right and you know from everything along the way
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was paid from them trying to retrade you know they came back and asked for a million dollar retrade to all sorts of
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stuff and so this is where whether you’re a buyer seller make sure you understand who the other
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party you’re working with is right this was a group that was really i mean it was vetted right but we still had you
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know prevented by the broker the broker had worked with them but for whatever reason you know the early on they just got paranoid and that just led to
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you know a never-ending barrage of things and ultimately you know it was a deal that we were happy to finally get across the finish line but it just it
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dragged and dragged and dragged uh i’ll go next in terms of i don’t know
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if it was necessarily my hardest deal but it’s the deal at least kind of stands out just because i just closed it so
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i just recently closed one uh in the houston area self storage deal
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and now he didn’t even come in and say hi to us whenever he came down man it was maybe that was a blur it just
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flew into the wrong airport so i’ll just leave it at that yeah um so this you know this deal in self
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storage the lending is a little different than multi-family right so you’re looking at different types of lenders so that’s
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that’s first a difference is that i was working with a cnbs lender not a
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fannie mae freddie mac techno lender so working with cnbs now a lot of times cmbs you are working with some huge
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banks so we were working with one of the huge wall street banks right so like big banks right
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and they are very much in the box and when we’re closing we were on conference calls with them
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probably weekly conference calls as uh once we were um you know once we were once we signed the
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agreement to work with them the term sheet and so these weekly conference calls there was 12 people on the call and i
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was like 12 people that that’s a lot of people on this there’s committees of all these committees that are on the call
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and i was like okay i’m used to maybe one or two people but 12 people need to be on this call
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and then they also um because they’re wall street banks
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they require you well i don’t know about require i would say choir but it’s probably
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unwritten rule that you have to have an attorney represent you as well
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on the on these calls so in this deal i actually had three separate attorneys
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on working on this deals in all different capacities right there was sec the syndication attorney i had a lending
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transaction attorney i also had an attorney specifically based in in texas right so
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uh so you have to pay for all these attorneys too right so you pay for all these attorneys which is uh it was a big chunk of money um but also
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the lenders cmbs lenders you know at least this one tends to be a little bit you know you have to work with people
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that are kind of in the box when you’re working with all these committees so there uh we were able to get it through but
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i mean at the last minute i mean we had to raise another like 1.2 million dollars right the last week of the deal
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before it closed that’s not easy and when i got that news that week i was like i was
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pissed and then i was and then i was sad and then i was like angry you know so i went through all the emotions and my
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business partner’s like all right you done because we gotta get we gotta we gotta hustle on it we gotta get this
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thing done right we can do it let’s go so um and so yeah but you know it was a lot
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of things you know it’s like a lot of different things a lot of different requirements a lot of different uh you know we had a list of
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basically 88 different things that we’re going through every week okay this needs to get done this needs to get done this
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is good and it’s all different people doing all different things and you know we’re in the middle of it
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trying to make sure that everybody’s doing doing their doing their job so i would say that’s the hardest one but it
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certainly was one that stood out and probably gave me some good brain damage have you had any absolute nightmare
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stories pow anything crazy happen in any of your apartments or any of your self self-storage units anything that just threw you for a while i can’t believe
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that just happened um you mean with the closing of the deals like that closing of the deal
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operating of the deal someone got i don’t even know what in one of your apartments like just any anything crazy
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crazy happen um well let’s see i’ve had the police
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called on me uh while i was visiting my property so i was under contract my very first one and um i was actually doing a
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facebook live and it was at night and so we always go to visit our properties at night because we want to
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see when you’re in self-storage you want to see how they’re lit up right because you have to become they have to be safe
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or else people don’t want to go there so we go with it like check it out at night and
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and as we’re kind of you know doing our due diligence and walking through the property and you know there’s nobody there at night and all of a sudden
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the police come in full force real fast and you know and they’re like ready uh ready to arrest us
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and uh and i’m literally on facebook doing a facebook live at this moment talking about self storage
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and um and you know i knew nothing was gonna happen so i just kind of continued with my with my
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facebook live and i asked the police officer i was like i don’t think you probably want to be on camera right now
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just considering all the things that are going on with police on camera and he’s like no i prefer not to so you know no
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worries but you know we had to show them all this documentation that we are we have a
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purchase and sale agreement and this is us and we signed it and this is going to be our property that we are buying um
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but truthfully it ended up being great it ended up being great knowing that hey within say 15 20 minutes of some
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suspicious characters at our at our storage place the neighborhood the neighbors are
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calling the police and and calling the police and getting the police out there so that’s great and the police came there really fast
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and knowing that actually the police were very helpful and uh he waited there basically until our uber came and our
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uber was probably a little bit suspicious of picking up people i wanted to see a police car right there so
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yeah but that was a fun story i would say and powell forgot to mention that he sold that guy two self-storage units the
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guy signed one year releases on both of them yeah i know i i should have hit him up
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then ferris what’s the craziest thing you’ve had happen in any of your apartment
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buildings or any of your real estate transactions
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hey you’re on you first you’re muted fair you guys can just hear me yeah all right i’m saying you guys
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don’t want to know i mean we’ve had everything happen from shootings to killings to killings the
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weekend before close i mean everything and anything right and i see some facial reactions but
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you guys got to realize i mean you know there are thousands upon thousands of people living at any of our properties
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right shootings happen on a-class properties they happen on c-class properties and you know life happens
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right we had one incident where it was a week before closing and a deal we were buying and they found a body of the
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dumpster and so i get paranoid because usually that will scare the lender right well the cops ended up ruling that it
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was someone that committed suicide right and you know it’s
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it’s sad right i mean the whole situation is a sad situation but you know at least a suicide is very
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different than a murder right within lender’s eyes and you know things happen right like i lived in seattle i remember
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an a-class property a woman shot her husband right so you know the thing to tell people is that stuff happens and
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it’s worried it’s about working through the problems and the you know the challenges and finding a resolution
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right we had one where the weekend before we bought it the lender
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saw some tweet by the sheriffs that they said they had life flighted someone from the parking lot right some you know two
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i forget what it was like two two kids or the drug deal or something stupid like that so the lender you know
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saw that like literally i didn’t think the letter was going to find out and of course they find out the day before closing so then the lender tries to
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re-trade so you got to play hardball with the lender and say well here’s what happened and here’s why that’s not a problem right and so
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yeah things happen you know and realize that people right like no you know we’ve we’ve had it all happen right we’ve done
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enough transactions both on the buy and sell side you see it all and just be ready right so
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how about you garrison what kind of what kind of crazy story you got you know normally i talk about a murder
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whenever someone asks this question or i talk about i went to jail one time for doing an illegal eviction
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um and the sheriff actually did the eviction i did not do this through the eviction i lived two hours away i got
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called on for four o’clock when a friday afternoon said we want you in the judge’s chamber um i went to jail for two days over a
24:08
weekend in baltimore city that wasn’t fun but actually here’s kind of a learning lesson for anyone on this call
24:14
this is something we preach and something we say and something we coach but not something you think that will
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actually really take place in real world uh first one of the first apartment buildings i bought i was about 25 26 i
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bought a 13 unit stole street baltimore maryland hood it’s called brooklyn park bed area
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um i bought it and every property had a fake lease on it i did not know it um
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this is where you come with let’s analyze all the leases let’s dig through all the leases let’s make sure there are
24:45
no red flags every apartment 13 apartments everyone signed their new lease just
24:51
hypothetically say february 1st i bought this property on april 1st i
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collected the first two months rent the third month i collected zero rent fourth month zero rent i went to the tenants
25:02
asked them why they were not paying and why 100 of them were not paying
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long story short the guy who sold it to me i still remember his name his name was ivan ivan hasn’t stopped by and
25:13
given us any money so i bought 13 apartments that had 13 fake leases
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um i had zero percent occupancy i almost had to file bankruptcy i handed this
25:24
property off i wholesaled it out to a group of people who bought a lot of properties from me i
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had ended up giving them their wholesale fee i gave them like 75 000
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and i babysat the property had to renovate it out of my own pocket and get at least back up for them and it took me
25:40
like four or five months absolute headache absolute nightmare um so audit your leases long story short
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that would be my uh that’d be my worst story you don’t want to put yourself in that position yeah no for sure that’s good info for
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it’s not it’s one of those things it’s not always uh it’s not always brightness shiny and rainbows and unicorns when you’re when you’re doing you know real
26:01
estate investing sure so ferris i got a question that came up for you uh i think you’d probably be a
26:07
good one to answer this one at adrian s asked when raising capital and structuring it as a syndication how do you pay for the
26:14
upfront fees your lawyer your paperwork if you don’t have any capital for yourself to pay for those lawyer fees
26:21
yeah so you know on a deal right what fees does the sponsor have to come up with upfront
26:28
it’s really the earnest money right you know and then the it’s the earnest money and then usually the application fee for
26:34
the loan right so earnest money is whatever you negotiated right whether it’s a hundred thousand or a million dollars right we
26:40
you know we’ve done the full comment on that so that’s money that us and our partners have to come up with and there are people that will will provide that
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for for a fee right they’ll provide the earnest money if you don’t have the liquidity and then the other piece is the application fee usually that’s
26:53
50 60 70 000 everything else usually gets rolled in and paid at closing right and you do get
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reimbursed for that application fee and some of the other stuff too and so those are the things that you usually need to fund up front everything else like you
27:07
know the sec attorney who does not get paid if the deal doesn’t close right i don’t think i mean we’ve never had a deal didn’t close but i’m pretty sure
27:13
that if a deal did not close you know they would not expect payment so all that gets paid at closing
27:20
okay and then let me see garrison i think i have one for you that that came up here
27:25
um you see i think it’s adrian also sorry i’m on my phone sorry
27:31
well pal looks through this uh we are live on facebook this is multifamily masters live if you’re watching this on
27:37
facebook if you’re seeing this live on any social media channel feel free to share this if you see value in this we
27:42
do this once a month it’s just us hopping on here we have a lot of experience trying to give back to the community and trying to grow the
27:48
community really go ahead pal awesome uh garrison i’m just going to ask you as
27:54
from adrian s as well it says how do you know when to structure a deal as a jv or a syndication can you elaborate on the
27:59
difference between a jv and a syndication i’ve done a lot of both early on i did tons of jv because it was hypothetically
28:07
easier um the biggest difference for me would be how much capital do we need and how
28:12
many people are there in a jv everybody has to be active everybody has to participate everybody has to add value
28:19
you can’t just bring money into a jv agreement and say hey here’s my money let’s partner up i’m going to go live my
28:25
life send me my money you got to be involved with it so if you can raise the capital and take the deal down with two
28:31
three four maybe five people and everybody has an active role let’s do a jv let’s skip the sec attorney let’s
28:37
skip the 10 15 25 000 you may spend on that sec attorney but if you’re raising
28:43
capital from several people you need to raise a couple million dollars it’s probably better to structure that as an sec
28:49
uh syndication how you do a lot of jv’s what would you say would be your biggest uh
28:55
determining factor between the two yeah i mean truthfully it is just what you mentioned it comes down to me as
29:01
like uh how big of a raise are you doing how big of a race do you guys need to come up with can you do it in a jv
29:08
where you can do it with a couple group you know small group of people or is it a larger raise and you need to
29:14
you know you need to bring in people who are going to be passive investors in the deal right so that’s all that’s all it
29:20
really is for me okay um let me see attila
29:27
attila tormachy asked um how did you get into your first large multi-family deal so uh once
29:35
both of you go ahead and answer this one i can answer as well i i added value to
29:41
a team of people that necessarily didn’t need my help per se i figured out how i
29:46
could add value to that team i wanted to learn by doing and get involved i got a small piece of the pie i got to watch a
29:52
big deal take place i got to watch it watch it go to closing i got to watch it go through operations i got to see all
29:58
the headaches by kind of being a fly on the wall and that was a huge benefit for me and my
30:03
team yep first all right um for me i’d say
30:10
you know i mean i just kind of learned enough hops you know read enough books hopped on enough webinars and
30:16
things to just be comfortable with going down and doing a 99 unit in elena so
30:21
you know i sourced the deal and you know got across the finish line and the rest is history so awesome awesome
30:27
um so for me uh how i got involved was my first large indication was i found the deal so um
30:34
the deal was kind of through my network found the deal uh went out visit the property went with my business partner
30:39
we checked out the property we liked it and we thought it was a great one but it was too big for us it was too big for
30:46
really for me and my business partner at the time to take that one down um and so
30:51
we you know we we did like we did rent comps we visited other properties around we just thought hey
30:56
this is a good one so found a uh you know a sponsor who we thought you know we’d like to work with and uh syndicate
31:02
this deal had some experience so brought it to them um kind of like garrison said add value uh be part of
31:09
the team got to see you know how these things are run and um yeah join the team and on a larger deal so
31:15
that’s how i did my first one here’s a question that just came in through facebook uh
31:22
if i wanted to partner with one of the three of you guys or all three of you guys what would be the best way for me to partner with you guys
31:30
bring us the deal right now the harder the hottest thing to find is a good deal so
31:35
i’m going to switch gears in that a little bit that’s exactly the reason why we created the multi-family master’s mastermind
31:41
we partner up with people in the mastermind um that would be my go-to
31:47
every deal that i do i try to get a couple mastermind people involved in that deal give them gp spots have them
31:52
help out with due diligence have them help out with operations learn by doing
31:57
that’s my favorite way of kind of taking action
32:02
yeah and like farrah said really to me it really comes down to you know finding the deal so you know none of us can
32:08
really be have our pulse on every single deal that that’s out there right we just we don’t have that capacity and i don’t
32:15
i don’t know if anybody that does but you know we don’t and so if you were able to find a good deal in your
32:20
neighborhood or or whether it’s not in your neighborhood somewhere else you found a great deal and you were just like hey
32:25
i would love to partner with you guys and i think that you know you like our vibe and you you want to partner with us
32:31
then reach out to us sure absolutely um here’s a follow-up question
32:36
if i was just getting started do you recommend i get a crm or an investor portal and i’m going to start off by
32:43
answering that saying that i use my investor portal for almost everything i have a good friend named perry who runs
32:49
cash flow portal and did i hear that someone on here works for yeah i think christine said she was on
32:58
i know chloe i don’t know christina very well but chloe and christina and perry
33:03
are my go-to cash flow portal um i like their portal better than the one
33:08
we were using prior to that but we we use that and we use a crm called hubspot
33:13
it’s free i know pal use well pal used to use it do you still use hubspot pal actually i use both the things that you
33:19
mentioned so i’m also a person that uses cash flow portal so they’re the team that i use as well um and i also use
33:27
hubspot for my crm so i would tell you though um
33:33
i mean ferris you can go you can tell us what you know like as far as like resources whether it’s crm or uh or management
33:40
investor management portal yeah my feedback to people is don’t overthink it right you need a way to communicate with your investors a lot of investor portals
33:47
provide crm functionality a lot of crms provide other tracking functionality so don’t overthink it anything works right
33:53
at first it’s about communicating and creating awareness just make sure you use whatever you’re going to use nothing’s good if you don’t
33:59
use it okay awesome
34:05
and pal we’re at the 45 minute mark now do you want me to you want me to open up uh do you want us get ready for the
34:11
networking session for this you want to answer a couple more questions i think we’ve got a bunch more questions i meant for about uh
34:17
about 15 more minutes so about 15 more minutes that we would start so some of the questions
34:22
yeah i got some questions that we could hit sort of in a faster pace uh i appreciate sarita helping me out here
34:27
with some of these questions so let’s see um let me see we got one from
34:34
jose let’s see how do you pro how do you provide a wholesaler how do you provide a wholesaler or a
34:41
proof of funds to prove that you’re a legit buyer when you’re not the person who will be the capital investor okay so
34:49
how do you how do you what do you do if somebody asks for a proof of funds basically if this the seller asked for a
34:54
proof of funds or the broker asked for a proof of funds uh what do you do let’s let’s just have one of you guys answer
34:59
it because there’s a bunch of questions we’ll just have one person answer so uh so my philosophy is if you’re getting asked for proof of
35:05
funds that means you didn’t do a good job building trust with the broker right like i’ve never been asked for
35:11
proof of funds honestly and but we spend a lot of energy getting to know brokers and you know turning them into friends so they know us and
35:18
they know we’re capable okay good garrison anything that or are you good there
35:24
ah pretty much i was going to say exact same thing that uh ferris just said okay
35:30
sounds good you know i’ve never been asked hey david hudgins have you ever been asked for a proof of funds
35:37
well i think the main thing is the broker wants to know that you’re going to be able to perform on the deal so as long as you have the relationship with
35:43
them and they’re comfortable that you’re going to be able to perform that’s the most important thing so if you
35:50
provide some of your track record of some deals you’ve done or some other brokers you’re friends with then that’s
35:56
usually a good starting point okay awesome awesome so we got a
36:01
question here for you ferris we got it from nelson says ferris at what point would you do you recommend starting uh
36:07
to consider your own management company for your complex if you could avoid it never
36:13
i mean management sucks in a lot of reasons right economically it doesn’t really make sense until you’re over 3
36:19
000 units and you know the only reason we did it just because we couldn’t find a competent manager that we would like to own trust in texas we have a good
36:25
management company in atlanta but in texas we really struggled so yeah okay so there you go 3 000 units and
36:33
the uh and if you don’t have a management company already that you think is great all right uh we got one
36:40
from bessie hey bessie how you doing um let’s see so one of you can answer this uh do you see investor returns ex uh do
36:48
you see investor returns expect expectations adjusting on the one hand inflation is high so cash on cash
36:55
uh is under eight percent maybe maybe unattractive on the other hand property prices continue to climb putting
37:01
downward pressure on returns one of you guys want to take that i’m
37:06
going to say that you have to educate your investors you have to let them know what the market looks like you have to let them know what deals you’re looking
37:12
for you have to let them know what the economy is doing and what they can expect in the future you know
37:18
2005 was a huge difference from 2009 2009 was a huge difference from
37:24
2018 and 2018’s probably going to be greatly different from 2022 and 23.
37:29
especially if we go to war with russia and some of the things that could potentially happen um you just got to educate them
37:36
make them very informed of what you’re working on and and what your deals look like and what they can expect moving
37:41
forward um and kind of take it that direction yeah
37:47
yeah and i’d say you know the market changes right like we used to present a 17 irr and now we’re presenting 13.
37:53
right and so if you’re investing with an operator representing a 17 really ask yourself is that deal actually a 17
37:59
right some people have not tapered down their their what their what they’re projecting and you know they’re
38:04
just getting hyper aggressive and so it is a different market and for those that want to be operators i mean you
38:10
know the reason we’ve been able to grow the way we have is because we set targets that we can deliver on and i
38:17
tell people it’s better to under promise and over deliver than it is to over promise under deliver right that investor will be yours for life if you
38:23
can you know set the right expectation and continue to meet that expectation and with that being said whenever
38:29
something in your deal does start to go a little off track make sure communication is there communication is
38:34
the most important part of this business all aspects of this business
38:39
yep so uh i would say this too bessie you know like your investors truthfully are going
38:45
to be trusting you like paris mentioned in the beginning where they know and like trust you right so you have to establish that relationship where they
38:51
know and like and trust you because they i know a lot of my investors and the ones that are investing with me
38:56
oftentimes they invest personally they they want to invest with me personally right they they want to know who you are
39:02
personally and whether you give a 15 ir and somebody else gives
39:08
a 16 ir they may not even care if that person is going to give a better return than you’re in your particular deal
39:14
because they know you right and they want to know you and they trust you they won’t comfort they don’t want to
39:20
wake up in the middle of night thinking about what their money is doing yeah all right so
39:25
uh this is kind of a question here from ali this may be true or maybe not be true
39:31
but i hear that large uh maybe like 90 of multi-family apartments
39:37
are owned and operated by professional investors or large institutions
39:42
any uh i’m going to disagree well i’ll agree with that as in professional
39:48
because if you’re going to buy a building of that sort you should be professional you should act professionally you conduct yourself like a professional business
39:54
but i disagree with that stereotype because anybody on this call can buy a 130 unit apartment building
40:01
it is not that difficult the difficult part is operating that thing efficiently and staying on track to do what you
40:08
promised it was going to do to all of your investors i think the the more important part
40:13
actually is the other half of the question right where basically they’re saying because it’s professional investors they’ve already
40:19
squeezed all the juice out of it right and you know the answer is
40:25
deals sell for a lot of reasons right we had a deal that we sold that honestly i kind of regret selling i mean as a home
40:31
run deal did very very very well for our investors but you know we sold it for a variety of
40:36
reasons we already kind of hit all of our returns investors you know prefer the cash then versus holding on and we
40:42
sold it i know the next guy is going to make a killing off of it right so remember deals go through cycles too
40:48
right and a lot of times that you know someone with fresh capital can come in
40:54
that person will pay you a premium and they can and you know invest that money into the deal and push it higher right because
41:00
even if it’s a professional investor i mean look we have a deal right now that the you know essentially the previous
41:06
owners upgraded half the units we’re gonna upgrade the other half right they’ve already shown us the rents that we can get and guess what in five years
41:13
whenever we sell it the first half is already going to be dated and someone can come in and spend the money to upgrade that and make it nicer
41:19
and get higher rents so deals go through cycles it’s really understanding about the story
41:25
awesome i got i got a good question for for both of you here and i actually i think i might answer this too but um
41:30
this is from christina christina uh cash flow portal representative here
41:35
um how did each of you find your business partners i think this is a great one to talk about with
41:41
specifically since we’re mfm but how did you guys find your business partners
41:46
i found them at a meet-up this stuff works people
41:51
meet up i met pao and ferris from conferences we hung out at several conferences we
41:57
became friends next thing you know we started what’s called multi-family masters lives
42:03
and yeah for me it was in my storage business and also my my real estate business i met my business partner from
42:10
my meetup right like i was holding a meetup it was one of my very early meetups he was a guy he just
42:16
came up to me started showing me what he was doing and actually we it’s funny the thing is we are competitors we were actually
42:21
trying to buy similar type of properties in the same market we live and we both were living at the time in los angeles
42:28
but uh we were buying in indianapolis and so pretty quickly we started just kind of
42:34
sharing uh our underwriting with each other he actually shared it with me uh and i was like wow this guy’s pretty
42:39
generous sharing me with me is underwriting and then i started sharing mine we started sharing deals hey i saw
42:45
this deal over here did you bid on it did you did you put an offer uh here’s another deal i don’t know if you took a look at it and pretty soon we just we
42:51
just decided hey let’s just partner up instead of competing with each other let’s partner up on some of the deals so
42:57
and it was all started from i met i met him because i was running a meet up here in los angeles and he just showed
43:04
up and uh we and we talked afterwards and that’s how we started
43:09
um okay so let’s see what some of the other ones here
43:15
sorry i lost my place here uh maybe uh hey david you’re there david hutchins maybe you could talk about how
43:20
you met your your business partner as well i well i got started in this whole
43:27
endeavor going to chris collins meetup his mfm meetup and
43:32
met a lot of people started going lots of other meetups in la that’s the nice thing about la we have a lot of meetups
43:38
so met a bunch of people started going to conferences went to uh garrison’s secret x event
43:45
uh met garrison there met renato who’s on this call met
43:51
ferris so just going out and going to meetups and going to conferences is just a a
43:57
great way to meet people and you meet a lot of people here but then you go and meet them in person
44:03
and hang out and it’s a totally different thing so that’s been great for me about being in the mastermind
44:09
is we try to get together with little mastermind events around the conferences when everybody’s there and then you get
44:15
to hang out and see people like garrison had a little thing in uh
44:20
daytona beach and you know i was like 15 of us just hanging out and it’s it’s
44:25
great to get that nice intimate setting so i would try to do as many of those events a year as you can
44:32
awesome yeah that was great david so we got another question from julian this is a little bit more involved here
44:38
it says uh what service do you guys use for rubs so
44:44
we use the users what can service come service okay
44:51
all right um follow-up question we gotta follow a question from joey um
44:58
on the on the proof of funds question what if you are brand new and you don’t know the broker how to get you know how
45:05
to avoid or get around this proof of funds you got to get to know them number one
45:11
you got to add value number two surround yourself with some people who have some experience so you sound pretty
45:17
polished and uh come in as a team it’s a wii sport not a me sport
45:23
okay awesome awesome uh we got time for a few more here so let’s see adrienne asked um
45:30
are you guys having trouble finding positive cash flow deals right off the bat um are investors interested in investing
45:37
in deals with negative cash flow from the start say you know there is value to be added
45:45
yeah i mean it’s a tight market out there right we’re literally underwriting 30 40 deals week right now and so it’s about five paying deals that
45:51
have a good story most of the time going in gaps are pretty tight and you’re really trying to look for deals with with some clear upside
45:59
yeah and i’ll tell you this from you know you have to think of your investors in mind when you’re when
46:04
you’re getting your deal right so there are deals out there like let’s just say you know we’re not really
46:10
talking about development but if you’re doing a development deal development deals are different where you’re you’re probably not going to see any cash flow
46:16
for the first maybe three years and then after that you’re going to see a big big sale and they could have a big return
46:22
but the people that are investing in cash flow consistently and are used to like
46:28
investing in multi-family properties where they’re constantly getting cash flow or maybe not the same investors that are going to be investing in a
46:34
development deal where they’re getting no cash flow and they’re hoping for a big sale at the end so you got to know
46:39
in terms of what type of deal you’re going for and what type of investors do you have that are ready to to back you
46:45
into this deal so if you don’t know what your investors profile is um whether they want cash flow or
46:51
they’re willing to to say not have any cash flow and maybe look for a big sale at the end
46:56
you know you need to know that you need to know what who’s going to be bringing your money and what are the chances that
47:02
they’re going to like that particular deal all right so let’s see
47:08
can you go over rubs i think uh a few people don’t know what rubs stands for and
47:15
oh sure uh first let me talk about rubs what is rubs so rubs essentially is what you are
47:21
allowed to build back to tenants for for uh afford utilities right
47:28
and it varies by state there’s a lot of laws you have to follow and that’s where using a you know a company like conservis is valuable because they know
47:33
how to control it but essentially it’s a way to say look our water bill is thirty thousand dollars and you know legally we
47:40
can build back seventy percent of that to tenants and so they’re going to prorate it back to the tenants based on the number of
47:47
number of people that uh sorry everybody uh build it back to
47:53
the tenants based on the number of tenants that live in each unit and so a property that has four people on the
47:58
lease is different than a unit that has you know one person on the lease right and so there’s a lot of rules that they
48:03
follow and basically it’s the method of billing back some of the utilities to recapture that
48:10
yeah awesome awesome yep exactly thank you thank you charles
48:15
ratio utility billing system okay that’s what it stands for rubs all right a way to build back the tenants for those
48:23
utility costs because they can be i mean water electricity gas
48:28
uh trash silver those things can be enormous when you get into those big properties right
48:36
okay okay we’re about that time to go into our breakout rooms so