Episode Transcript
[00:00:10] Speaker A: You.
[00:00:12] Speaker B: Hey, guys. Welcome to the investors, agents podcast. I'm Steve Seymour, and today's guest is Amanda. Sokal, Amanda, thanks for being on today.
[00:00:19] Speaker A: Thanks for having me.
[00:00:20] Speaker B: Absolutely. She had a drive out, you said about an hour drive from Jersey?
[00:00:24] Speaker A: Yeah, I'm in South Jersey.
[00:00:26] Speaker B: Cool.
[00:00:26] Speaker A: Like 15 minutes from Philly.
[00:00:27] Speaker B: We're going to shift it. Since we just came out of Thanksgiving weekend, I want to start off with just one thing that you're grateful for relating to your your business.
[00:00:35] Speaker A: Oh, really? Is my business. It would definitely be my partners, for sure.
[00:00:38] Speaker B: Your partners?
[00:00:39] Speaker A: Yeah.
[00:00:40] Speaker B: And then I typically start off by just going back. Give us a little backstory about what got you into real estate in the first place.
[00:00:46] Speaker A: So I've been in real estate probably my entire adult life. I bought my first triplex in college, and then I did deeds for the Philly Sheriff's Office.
I negotiated short sales and deed and lose and loan modifications, and then I started renovating single family homes.
[00:01:05] Speaker B: When you were negotiating the deed and loo and the short sales, what was that through?
[00:01:10] Speaker A: So my ex husband is a real estate attorney, so I worked for him.
[00:01:14] Speaker B: Okay.
[00:01:14] Speaker A: Yeah, I learned a ton.
[00:01:15] Speaker B: So you were the negotiation specialist in the background. That's fun.
[00:01:20] Speaker A: Yeah, it was pretty.
[00:01:21] Speaker B: And what year was that? Was it during?
[00:01:23] Speaker A: That was, like, the crash. Yeah. So I wanted to work on Wall Street. That was, like, my goal. And the company that I had worked for was a startup, and they didn't get their second round of funding, and that was 2008, so I couldn't really get a job, to be honest, so I went to work for him.
[00:01:43] Speaker B: So you had your plan, and then life had its plan.
[00:01:45] Speaker A: Yeah, exactly. And it all worked out like it always does.
[00:01:48] Speaker B: But you're probably glad it worked out that way, right?
[00:01:50] Speaker A: Yeah, I think so. I don't know that I would change anything.
[00:01:52] Speaker B: Although you don't want to go back to Wall Street.
[00:01:54] Speaker A: Maybe I would have crushed Wall Street. I don't know.
[00:01:56] Speaker B: May have. All right. And you started flipping houses after you kind of got your feet wet in real estate because you don't have your real estate license. Correct. You never went down that pathway.
[00:02:07] Speaker A: So I never really flipped. I would do maybe one or two, but I really did the burr method. So I'd buy a house during that time, it was single family homes in my area. You could get them for anywhere from, like, 40,000 to 80,000.
[00:02:23] Speaker B: And what area was that?
[00:02:25] Speaker A: That's south Jersey. So, like, Camden County, gloucester county? Burlington county.
Like a single family beat up house from the 50s, basically, is what I bought. And bungalows, mostly, and I would buy those, and I tried to stay all in under 100. So, like, if I bought it for 50, I'd put 50 into it, bought it for 70, put 30 into it, and then I rent them out for like 1500.
So those houses I have a lot, I probably refi them now three times, three or four, maybe.
And they're worth bank? Yeah, they're worth like triple what I bought them for, probably. They're like 350, which is crazy to.
[00:03:10] Speaker B: Me, but it is crazy, right?
[00:03:12] Speaker A: Yeah.
[00:03:12] Speaker B: Three and a half times.
[00:03:13] Speaker A: Yeah. And now I can rent them for like almost $3,000 a month.
[00:03:16] Speaker B: Wow.
[00:03:17] Speaker A: Yeah. So it went from 1500 to 3000 in just a couple of years.
[00:03:22] Speaker B: That sounds like a pretty good return.
[00:03:23] Speaker A: Yeah, just don't sell them because then you got to pay taxes.
[00:03:28] Speaker B: So when you talk about the burst strategy, you're saying buy, rehab.
[00:03:32] Speaker A: Yeah.
[00:03:33] Speaker B: Refinance.
[00:03:34] Speaker A: Repeat.
[00:03:35] Speaker B: Yes, repeat if you want to.
[00:03:36] Speaker A: Yeah.
[00:03:37] Speaker B: And with that, how did you start off with like when you because the first one, how do you finance it? Did you have capital saved up? Did you use private money?
[00:03:46] Speaker A: So I use private money, and I wouldn't have been able to get it without my ex husband. Nobody would have given me money, I don't think. So. He's never even been to well, for.
[00:03:56] Speaker B: The people listening, do you think they have to have I think yeah, you.
[00:03:59] Speaker A: Have to have somebody to like if it's your first, I'm going to challenge you on this where you think I.
[00:04:04] Speaker B: Didn'T have a husband.
[00:04:05] Speaker A: No, not a husband. Listen, I wish I didn't, but you need somebody that knows what they're doing. You can't just wing it. I mean, I guess you could you.
[00:04:14] Speaker B: Have to have someone that believes in you.
[00:04:15] Speaker A: Yes, you definitely do. And I would start small because you never know what could happen.
[00:04:23] Speaker B: Yeah, I just had to challenge you on that. Yeah.
[00:04:25] Speaker A: I mean, listen, if you want to take the chance and somebody will give you money and you can convince them to give you money, then that's a different story.
[00:04:32] Speaker B: So you bought the first one with private money, rehabbed it, refinanced it, and then you just kept going and you build up a pretty substantial portfolio.
[00:04:41] Speaker A: Yeah, so I did that 88 times.
[00:04:43] Speaker B: 88 times?
[00:04:44] Speaker A: Yeah.
[00:04:46] Speaker B: Or not 90.
[00:04:48] Speaker A: Well, now I've sold a couple of, so maybe we were down.
Well, I did do it 88 times and then I started buying bigger stuff.
[00:04:55] Speaker B: Apartment building.
[00:04:56] Speaker A: Yeah, but like smaller multis. That basically the stuff nobody wants, like the mid size, the smaller multis. Really? I started buying anywhere from like four units to eight. And they have not so great financing options.
The refis aren't as great, so there's a lot less competition.
[00:05:18] Speaker B: So you were able to get better returns because less competition or not necessarily.
[00:05:23] Speaker A: No, the single families, I did way better. Yeah, but they're just harder to come by now and then even.
[00:05:31] Speaker B: So give me the time frame. So you started what year? And then when did you transition? After single family into multifamily.
[00:05:37] Speaker A: So I probably started buying single families in 2010 all the way to 2017. And then in 2017, I started buying bigger stuff. And then in 2000 and what's a small multi?
[00:05:53] Speaker B: Like six to ten?
[00:05:55] Speaker A: Yeah, like under ten.
[00:05:56] Speaker B: Under ten, yeah.
[00:05:57] Speaker A: And then I started buying bigger stuff, like 2000 after COVID.
[00:06:02] Speaker B: What is bigger stuff?
Give us some ranges, because I guess.
[00:06:07] Speaker A: More than 20 units, I guess.
[00:06:09] Speaker B: 20 plus.
[00:06:10] Speaker A: Yeah. So I bought like a 38 unit and then I bought a 40 unit.
[00:06:14] Speaker B: All same strategy. Private money?
[00:06:17] Speaker A: No, I did bank financing for one of them, and I was going to do bank financing for the other one.
[00:06:23] Speaker B: What about for the down payment and all that?
[00:06:25] Speaker A: So one I did pref.
[00:06:28] Speaker B: So you syndicated?
[00:06:29] Speaker A: Do that with caution. No, I just went to this equity firm.
[00:06:34] Speaker B: Okay.
[00:06:34] Speaker A: And they'll leverage you to 100% with pref. It's accrued at 15%. So you just have to be careful that your deal works.
[00:06:42] Speaker B: You're paying 15% interest.
[00:06:43] Speaker A: It's accrued, though, so you don't pay it until the end.
[00:06:45] Speaker B: Right, but it's a bridge loan.
[00:06:49] Speaker A: Yeah.
[00:06:49] Speaker B: For like 18 months or what? Two years.
[00:06:51] Speaker A: So really the minimum is a year. But they cross collateralize double of what you take. So like a million? They cross collateralize two on other assets? Yes, but it's like a silent cross collateralization. There's nothing's recorded.
[00:07:09] Speaker B: But you use bank financing for the first position. No. You went all pref?
[00:07:14] Speaker A: No, I tried.
[00:07:16] Speaker B: Meaning like, all the capital came from 15% no, sorry.
[00:07:21] Speaker A: Two separate entities.
One I use for the debt, and then the pref I use, but it's backed by the same family office.
So it's different money, but the same money at the same time. I got it.
And again, this is like something I.
[00:07:39] Speaker B: Wouldn'T recommend people do because it's risky. But if you didn't get into did the deal work? Did the deal work?
[00:07:46] Speaker A: I was going to lose the deal if I didn't do it this way.
[00:07:48] Speaker B: Right.
[00:07:48] Speaker A: Because I was going to get financing with a bank and then they didn't like the pref, so I only had a week to come up with a million dollars, which is a lot in a very short period of time. So that's why I decided just and.
[00:08:04] Speaker B: You were able to refi that out?
[00:08:06] Speaker A: I haven't done it yet.
[00:08:07] Speaker B: Okay.
[00:08:07] Speaker A: It's due in February.
[00:08:11] Speaker B: Perfect timing. With rates.
[00:08:12] Speaker A: Yeah, I bought it.
[00:08:13] Speaker B: They're starting to come down a little bit.
[00:08:15] Speaker A: Yeah. I mean, I'm not really rate sensitive, to be honest, because I buy such value add stuff that it doesn't really affect me. Like, I'm used to paying hard money rates. It really doesn't. To me, it's like, whatever.
[00:08:26] Speaker B: That's a big lesson, I think, for anyone listening that if the deal works, who cares about the interest rate?
[00:08:31] Speaker A: Yeah, I've never cared about interest rates. I've paid crazy. I mean, look, I'm paying 15% accrued, but when you think about it, if you're just doing it over a year, what's the difference between 10% or 8% and 12%. It's really not that much money if you're just a short period of time.
[00:08:49] Speaker B: Yeah.
You have to really believe in the deal. But, I mean, think about it. If you partnered with someone and they took 50% of the deal and they put up all the capital, it'd be way worse.
[00:08:59] Speaker A: Yeah.
[00:08:59] Speaker B: So that's my only 15%.
[00:09:01] Speaker A: I try to keep as much period of time as I can because it's a lot of work for me. I'm literally there, like a couple of days a week. I've already vacated and renovated 22 of the 40 units, and I just bought it in January, so I'm there all the time.
And for me, it's just not worth it to give up 70% of a project that takes up so much of my time.
[00:09:21] Speaker B: And you run everything in house. Correct. Like management, all that? Obviously, you do do the construction project management.
I know you're probably not swinging a hammer at this point, but I do.
[00:09:35] Speaker A: Sometimes I hang out there.
But I do have on site property managers, so I kind of manage them, which makes it easier, I think. And then some of my partners will manage some pieces of it. So that also helps, but my own stuff.
[00:09:53] Speaker B: Do you have, like, an operations person that helps keep all this together?
[00:09:58] Speaker A: No, that's me.
[00:09:59] Speaker B: That's you?
[00:10:00] Speaker A: Yeah.
[00:10:01] Speaker B: You're the owner operator?
[00:10:03] Speaker A: Yeah.
You know what it is?
[00:10:07] Speaker B: No. Employees.
[00:10:09] Speaker A: I brokered debt and equity for a while, and all the deals that I would get that were in trouble were from bad property management. And that's why I got in my head, like, I'm always going to manage my own stuff.
[00:10:21] Speaker B: Because, you see, a bad property manager can ruin a great deal.
[00:10:24] Speaker A: Yeah.
They don't care if your plumbing is $400 or $800, and they don't respond right away, or I answer all my tenant complaints within the hour.
[00:10:37] Speaker B: Probably you personally.
[00:10:39] Speaker A: Yeah. They don't know that it's like me, but I do through the system.
[00:10:43] Speaker B: That's wild.
[00:10:44] Speaker A: Yeah. And I at least get back to them.
[00:10:46] Speaker B: So you work a lot?
[00:10:47] Speaker A: Yeah, like last year on Christmas? Was it Christmas Day? I had, like, a couple of buildings where the pipes broke. It was literally Christmas Day. I had one parking lot that froze over four inches. It was a nightmare.
[00:10:59] Speaker B: All right. I'm always curious when someone has your level of work ethic, what is the driving force behind it all? Are you aware of it?
[00:11:08] Speaker A: It's not really like, proving people wrong. It's definitely not money for me because I put most of my money back into the real estate, so I don't really spend anything for me.
I always say to people, like, burying me in my buildings, I want to be a real estate hoarder and just buy as much as I can and have it. And I don't want to ever sell anything.
[00:11:31] Speaker B: Why?
[00:11:31] Speaker A: I don't know. I just like to.
[00:11:33] Speaker B: We're going to dig deep here. Right now.
[00:11:35] Speaker A: Yeah.
Well, my main goal is I want a skyscraper. So that's like my big, which I think I'll get there because I have plenty of time. But I think there's something about building something and making something beautiful and then having it there forever. I drive by and I'm like, oh, I own that, which is probably a dream of mine. I grew up on a farm, so my family's not in real estate and know anything about real estate.
[00:12:03] Speaker B: So you just love big, beautiful buildings.
[00:12:06] Speaker A: Yeah, and I like renovating stuff. I really like the construction part of it is my favorite part.
Yeah. I would like to do ground up, but I'm doing an adaptive reuse, which is kind of like ground up.
[00:12:16] Speaker B: But tell me more about that. I'm not familiar with.
[00:12:19] Speaker A: So in Hackensack, I bought a warehouse, and it's going to be like a conversion. Yeah, it's a conversion. Yeah.
[00:12:27] Speaker B: Just with a fancy name.
[00:12:28] Speaker A: Yeah.
So it's going to get an addition on the top, and then it has, like, a whole roof deck, and it's super cool. It's going to be like new construction, but it's still an old building.
But yeah, I want to do something new construction. Now is just not the time for me.
[00:12:43] Speaker B: Yeah. All right, we got to talk about overcoming fear more for the listeners. So think about who's listening, right. And all the people out there that have different lives, that are constricted with finances and how real estate could really impact their life.
Because when you talk about all this, it sounds so casual, right. Like, I'm just doing a big warehouse conversion and 40 unit building and want to build a skyscraper.
What have you found helpful in overcoming fear and taking action? Because a lot of this is really where people mostly get stopped, especially going from nothing to getting started, but from getting started to scaling.
[00:13:23] Speaker A: Yeah. I think it's important not to put limits on yourself.
I don't say, oh, I need to have X number of units, or I need to do this. If the deal makes sense, I buy it.
And I've had deals that didn't work out, and I've spent a ton of time underwriting them and putting things together. And I don't close I probably only close on, like, 10% of the stuff I work on, which is you're getting a lot of no's, it's a lot of like, you go to financing now. I definitely do a financing contingency on every deal right now because banks are just really tough. So it's like if you're going into something, definitely put a finance contingency.
And I think just you have to be comfortable with risk, and you have to be comfortable with pushing yourself, or you don't want to make bad decisions either. And I ask people a ton of questions, and I think having people to.
[00:14:19] Speaker B: Can you go back to a time where you felt like, man, I'm like, you're really nervous to take action and make the decision now and how you.
[00:14:27] Speaker A: Overcame I so I had a couple of deals come across my desk, and I'm, like, second guessing myself, because I had one in Osling, New York, and I was doing a capital raise for it. And it was my first real syndicated deal. So I had never syndicated anything, and I didn't get the money. And to me, it was, wow, like, this is the first time I've tried this hard to get something done. And I learned a ton from it. So it's not like it was a waste, but it definitely was a blow to my ego. And I've noticed that I'm a little hesitant now to move forward on things when before I think I would have just done it. So I think it did affect me, and I'm trying to work past it, but that's one thing. You just have to be self aware.
[00:15:18] Speaker B: Thank you for being so honest about that.
[00:15:21] Speaker A: Not everything is a success story.
[00:15:23] Speaker B: No, it's so important.
[00:15:25] Speaker A: Yeah, I had, like, a month to.
[00:15:27] Speaker B: Get but good for you for going after something really big, having it not work and not looking at it as a failure, but a learning lesson.
[00:15:36] Speaker A: Yeah, it was a failure, too. Failure. It wasn't a failure learning lesson.
[00:15:40] Speaker B: Well, let me say this. Are you never going to syndicate again?
[00:15:44] Speaker A: No, I think I will.
[00:15:45] Speaker B: Exactly. Then it's a learning lesson.
[00:15:47] Speaker A: Yeah.
[00:15:48] Speaker B: It's only failure if you quit. Yeah, that's the way I look at it.
[00:15:51] Speaker A: And I learned that investors don't like to be behind preps, which was a huge thing for me. I never need that, and I risk that. Yeah, right.
[00:15:58] Speaker B: Because they'll lose everything returns.
[00:16:00] Speaker A: Yeah. I mean, it makes sense, but I didn't go into the deal, like, addressing that as a concern. And it kept coming up and kept coming up, and I really didn't have a rebuttal for it. There is no you're right.
[00:16:12] Speaker B: So taking action in the face of fear is really what I was trying to dive down into. And what I heard in the first part of it was that when you underwrite something, you only close on about 10%, and that helps you take action in the face of fear because then you feel comfortable, like you know your numbers and you have faith in the deal. So you have faith that it's going to work out. At least that's what I'm hearing. Because I think when someone's new and they're trying to do something new like you just did, you don't know what you don't know.
[00:16:42] Speaker A: Yeah.
[00:16:43] Speaker B: So what's your suggestion for anyone out there in terms of getting started, getting over a hurdle where they're kind of stopped in their business?
[00:16:50] Speaker A: So I guess the first is identifying what the hurdle is.
Like how I told you that I knew I was scared of not getting the money. Right.
I think now that I identified that as my hurdle. I kind of can work through it.
Knowing your challenges, knowing what could come up. I mean, right now I think the biggest problem is bank lending. Banks are retrading a lot. They're requiring like 30% deposit relationship. So if you're trying to get a big deal done, it's going to cost you so much money, it's just not worth it. Your IRRs are like, low.
[00:17:31] Speaker B: Because of the cost of capital.
[00:17:33] Speaker A: Yeah, I had a huge deal with a huge company.
I source deals too. So if I get a deal and it's either too big for me or it doesn't work for me, I'll give it to somebody else, like bigger land developer or something. So I had a huge deal with a huge company who backed out because of the capital markets. So for me to see them nervous kind of made me nervous.
It's just not a good time to do a big project.
And then I also too recently did like a luxury fix and flip, which cost me about 10,000 a month and I wasn't expecting it to sit right.
[00:18:14] Speaker B: Did it sell? Is it still on the market or.
[00:18:16] Speaker A: Still on the market? Yeah, there's a little bit of fear.
[00:18:19] Speaker B: Out there in the marketplace right now.
[00:18:21] Speaker A: Yeah, I didn't think that people in that price range would be so rate sensitive because most of them are cash.
But I realized that those people in that want a completely redone house, so I didn't redo the whole thing because it didn't need it. Do you know what I mean? It was like wrecking things that didn't need to be wrecked to me.
They want the farmhouse.
Total gut, which I didn't do here.
Yeah, it's sitting and it's like, when is it going to go? Cost me a lot of money.
[00:18:57] Speaker B: But yeah, lots going on with going back to the multifamily. And you were just saying it's really hard to make the returns work.
But you also said on the other one where the interest rate doesn't even matter because you're doing such a big value add. Can you dive into that and what that looks like for people in terms of I think at least from what I'm hearing, is the typical multifamily deal just doesn't work right now. But you have to get creative. There's got to be something.
[00:19:27] Speaker A: Yeah. You can do like seller financing.
You can do where you purchase the LLC. A lot of deals aren't working because of either interest rates or insurance. Insurance is another big one.
Always get quotes on insurance before you close because whatever's in their pro forma is not what your insurance is going to be. So I underwrote a deal in Miami.
The insurance was like 20,000 and then I got a quote for 80.
[00:19:55] Speaker B: It's a little different four times.
[00:19:58] Speaker A: Yeah. And so the deal didn't work because of that, just because of the insurance.
[00:20:02] Speaker B: Everything else was, how did you learn how to underwrite?
[00:20:06] Speaker A: So I worked for a company, diligent Capital Advisors in Philly. And my friend owns it, and I worked for him, and he's a genius. Literally can do numbers in his head, and he taught me everything. I mean, I went to school for so, like, I learned stuff there, but really the hands on stuff I learned through, like, now when I see a pro forma and it know pet fees in it and stuff, I'm, like, take them out. Yeah.
[00:20:31] Speaker B: What else do you like? To poke holes in it.
[00:20:33] Speaker A: Oh, what, in people's performance?
[00:20:35] Speaker B: Yeah. What are the biggest things that you.
[00:20:37] Speaker A: When there's no sources and uses? Drives me nuts. Yeah, every pro forma should have a sources and uses or don't send it to anybody. It's embarrassing.
How do you figure it out?
Definitely sources and uses.
Late fees. You cannot include late fees in your income, and it just makes you look like a bad operator.
[00:20:56] Speaker B: What do you put in for management, since you self manage?
[00:20:59] Speaker A: So I just do it like the bank underwrites it, but I really don't pay myself.
[00:21:04] Speaker B: And what do you see the bank underwriting on these larger three to five. Three to five? That low. Okay.
[00:21:08] Speaker A: Yeah.
[00:21:09] Speaker B: Because in reality, if you have a 40 unit building, you're not getting that done even for eight, because that might be 8%. But then all the added cost of.
[00:21:18] Speaker A: Yeah, I do my own leasing.
[00:21:19] Speaker B: Yourself? Right. The leasing and everything.
[00:21:21] Speaker A: So I do my own leasing, which is really time consuming, but I've tried to give it to other people, and it doesn't work out.
[00:21:28] Speaker B: So you must be extremely efficient because there's no possible way any person could run.
[00:21:33] Speaker A: I have a lot of VAS, so they set it up for me, and then I have my onsite property managers meet them. So I do all the screening.
I get the applications, I review them, and I try to just set aside a couple of hours in a day to review them because, like, the other day, I got 81 applications, so it's a lot. And then I go through them.
I send all the notes to one of my VAS, and then she calls them, like, maybe they need a cosigner or maybe they need pay stubs. Sometimes they don't upload the full application, and then she sets up the showing with the onsite property manager. So I've managed somehow to do that. I think I've rented out, like, 20 units in the past, like, three weeks.
Yeah, it's been a lot. Yeah, it's a lot of people, because then you got to get the CEOs. That part I have to get a little bit more efficient on is like, a system, because when you have bildium or AppFolio, they don't really have the pre part for the person moving in. Right. Like lease created, then lease sent to tenant, then deposit collected. That part isn't in there, so that's a lot.
[00:22:41] Speaker B: So I find you fascinating, and I'll tell you why. Because I see people that are more on the bigger picture, visionary, be able to envision building the skyscraper, and then usually there's a visionary and integrator in most of the businesses that I've seen at your scale, and you seem to be two and one. You seem to be the visionary and the integrator. You seem to have that mind that can see the vision, the big picture, look at it, but also get down in the weeds to the point of looking at the process of what you were just talking about with the CEO.
[00:23:17] Speaker A: People make fun of me all the time for being overly hands on, but for me, I didn't have money. It's how I had to be. I had to be a one man show for the longest time.
I don't know how else I could have done. I couldn't just go out and hire employees.
[00:23:31] Speaker B: Well, you're definitely a unicorn out there, because I've met and interviewed a bunch of real estate investors, and it's usually two different parts of the brain. So somehow you've learned to develop it all.
[00:23:40] Speaker A: Yeah. I don't know, Dyslexic. Maybe that's it.
[00:23:45] Speaker B: All right.
You had started with single family, small multifamily. Now you're into larger multifamily and conversions. And when are you now I'm doing strip malls. Oh, you're doing strip malls?
[00:23:57] Speaker A: Yeah, I'm trying because I'm just kind of going into the retail space from tenants for the moment.
[00:24:03] Speaker B: And you see opportunity in the retail space?
[00:24:07] Speaker A: Yeah, cap rates are much better.
Less tenants? Yes, less tenants, less maintenance and longer leases.
Less maintenance.
[00:24:18] Speaker B: So are you looking to do, like, triple net leases or not even like triple net? I guess you can't really if it's all divided up, you can, but you.
[00:24:25] Speaker A: Could charge, I guess. You know, I made a couple offers. I'm hoping to just kind of switch over at some point.
[00:24:33] Speaker B: And are you doing that in Jersey?
[00:24:35] Speaker A: Yeah.
[00:24:35] Speaker B: Okay.
[00:24:36] Speaker A: So I have a couple offers that are kind of like, I'm waiting, and I think I would be able to fill the spaces pretty well. So I'm staying kind of close to me so that I know basically that it'll be busy. I drove by one on the way here, and I was like, wow, that strip mall, it was packed. And I was like so I'm definitely stopping there on the way home because I wanted to see what was in there.
[00:25:00] Speaker B: So how are you evaluating the demand for that in terms of the absorption rate and how quickly it's going to take to lease?
[00:25:06] Speaker A: So I'm buying occupied ones.
[00:25:08] Speaker B: Okay.
[00:25:08] Speaker A: But some with maybe a lease or two that are expiring. I looked at one recently, had a dance studio that was paying $5,000 a month, and I passed on it because it just seemed like, how does a dance studio afford $5,000 a month? Right.
[00:25:23] Speaker B: Doesn't that seem like how long were they there?
[00:25:26] Speaker A: Five years.
[00:25:27] Speaker B: Okay.
[00:25:28] Speaker A: Yeah. But I'm like how many students, how.
[00:25:32] Speaker B: Many years left on the lease?
[00:25:33] Speaker A: They just renewed for five. It just seemed I don't know, I was just like I don't understand. There's places near me, like one place sells tea and I'm like, how many bags of tea?
[00:25:43] Speaker B: I know you do wonder about these little boutique stop shops and stuff. How do they stay open? But they always seem to get filled again.
[00:25:50] Speaker A: Yeah, I mean, I want them to be successful, but it's not anchored by any major it didn't have like, a grocer national. Yeah.
[00:25:59] Speaker B: So the intention of this podcast is to transform the human mindset from scarcity and lack to abundance and wealth. So I don't know if you can go back, but was there a time where you just felt like you really didn't have enough and is driving this in some sense, or it seems like you love the it's almost. Like a game to you where some investors I interview, it feels like they're coming from a place, like I need to get more and more and more, which is how I started. I felt like I didn't have enough money and just had to make it happen. And where I'm going with this conversation is, for me, I just realized that there's like a major trap in that where it's always going after more versus being content with where you're at and balancing that. And to me, the abundance mindset is actually feeling like you have enough, like really embodying that, still being able to move forward.
Can you talk about that a little bit in terms of where you were, where you are? Do you still struggle with it?
[00:26:59] Speaker A: Yeah.
Right now I have offers out there, but I'm closing on 27 units.
That keeps getting pushed back, but I don't feel as busy as I usually am. And it's a very weird feeling.
I'm busy, but I feel like almost retired. Like I'm not working on multiple deals at one time. You're retired and trying to get to closing. Usually I'm frantically trying to get to closing on all these deals. That's how I usually am. It's like chaos and I'm like I got like a million things going on and it's not like Grind. Yeah. And right now I'm really working on stabilizing what I have, but it definitely feels weird. It doesn't feel like my normal hustle, but I think I'm going with it because numbers wise, it doesn't make sense. So to close on something big right now, you're either forcing it or you're getting really creative. That's the only way.
[00:27:59] Speaker B: Or you're finding a needle in the haystack.
[00:28:01] Speaker A: Yeah. Which is unlikely.
I'm not saying that they're not out there, but right now, with the interest rates, the way they are going in, if you're buying 200 units at 7.5%, if you're only upping your rents $100 across the board, you're not going to make the money that you would have made when they were 4%.
[00:28:23] Speaker B: Have you. Had any success in getting creative with negotiating seller financing on some larger deals?
[00:28:28] Speaker A: Oh, yeah.
[00:28:30] Speaker B: With them taking back the full amount or portion.
[00:28:33] Speaker A: I've done both. Yeah, I've kept them in the deal too. I've done that.
[00:28:38] Speaker B: Can you talk a little bit about the language and the conversations you have with them?
[00:28:42] Speaker A: Yeah. So I'm very upfront and I share my underwriting and I'm basically like, listen, this is where I'm at, this is how I got here, and this is where I need to be. Or I can't meet my DSCR requirements, or I can't meet this, or it's just not enough value. And usually I'll say them. I may know someone else who will pay you more. I don't know.
And I'm happy to ask because I have a lot of friends in real estate, but I'm very honest and I'm very forthcoming. This is where I'm at. If you'd want to do seller financing, I can make it work.
And I've had them do like 4% for like five years or whatever, like a short term.
[00:29:23] Speaker B: Do you ever make multiple different offers to kind of give them a ray to gauge what's most important to them in terms of price versus terms?
[00:29:29] Speaker A: Yeah. So what I started doing was I submit two offers. So I've done both with seller financing and then the other. But what's been a really big help to me is presenting two offers, one vacated, like, with maybe a certain amount of units vacated and then the other just as is. And when they're faced with the two, they always go with the lower one.
[00:29:54] Speaker B: Because they know the challenges.
[00:29:56] Speaker A: Yeah.
[00:29:57] Speaker B: It's painful.
[00:29:57] Speaker A: It is. It's very difficult and goes to show.
[00:30:01] Speaker B: You there's value in dealing with that problem.
[00:30:02] Speaker A: Yeah. But sometimes you have to show that to them and be like, these are your two. You could take this road or this road.
And I think when you talk about challenges and stuff, I think identifying the challenges of your seller is huge. Right.
[00:30:20] Speaker B: Their why.
[00:30:22] Speaker A: Yeah. Their why?
[00:30:22] Speaker B: Why are they selling?
[00:30:23] Speaker A: Yeah, why are they selling? And I maybe spend a little bit too much time psychoanalyzing, stuff like that, but I think it's helpful, like the why and what's important to them.
[00:30:36] Speaker B: I've found it to be the most important piece of the equation. So too, not that price and terms don't matter. They do.
[00:30:42] Speaker A: Yeah.
[00:30:43] Speaker B: But you can shape them and you can add things in and you can make their life easier in a certain way.
[00:30:49] Speaker A: Yeah. So you can't be scared to have those conversations, but I think you need confidence in order to have them. You know what I mean? You have to be able to know your numbers inside. And like, if somebody were to ask me right now what the NOI is in any of my buildings, I know it off the top of my head. You have to be like, boom, boom, boom. I could get a call from somebody right now. Ask me a question about a deal and I have to really think I think you really need to know your numbers.
[00:31:17] Speaker B: Yeah. That's a really important part of this deal.
[00:31:19] Speaker A: Yes. If you're caught off guard and I did get caught up, like that offsling deal, I got caught off guard a couple.
[00:31:24] Speaker B: This was the New York one.
[00:31:26] Speaker A: Yeah. And I was like, wow, what did.
[00:31:28] Speaker B: You see in it?
Not what did you miss in?
So was it just the investors being behind pref?
[00:31:38] Speaker A: That was part of it.
[00:31:39] Speaker B: Parts of it.
[00:31:40] Speaker A: The other part was they didn't like that the sponsorship team was so scattered. So I'm in South Jersey. It's in New York.
The people that were there didn't have anything of that size. So, like, the sponsor, that was mean. He was more than capable of doing, honestly, like, he probably could have done the deal by himself, but they wanted to see him complete other projects. And then the other part of it is I didn't exit anything that I had stabilized because my rates are low and they want to see proof of a concept, and you can't really prove the concept that you can get to refi if you haven't refined, like refiing an 80 unit.
[00:32:23] Speaker B: They wanted to see other previous deals that went full circle.
[00:32:26] Speaker A: Yeah, and I hadn't done that because I have like three year bank loans on some of them and it's like.
[00:32:31] Speaker B: I'm not going to not going to refinance it.
[00:32:33] Speaker A: It just doesn't make sense.
[00:32:34] Speaker B: Seven or 8% rate?
[00:32:35] Speaker A: Yeah. Why would I do that?
Yeah, that's a big thing for sure. Identifying what's important to them.
[00:32:48] Speaker B: What's really impacted you in terms of your career? Was it books, seminars, people that you've surrounded yourself with?
[00:32:58] Speaker A: Definitely people that I surround myself with, for sure. I have a lot of really smart real estate friends, land developers who have been through it and how did you.
[00:33:07] Speaker B: Build relationships with them?
[00:33:12] Speaker A: I find a lot of deals and I do a lot of stuff for free. Like if I get something, I don't charge. Like, here, I think this deal will work for you. Here's my underwriting, take it and run. I don't mind. It doesn't do anything, but it does help build rapport. And then a lot of times they'll do the same for me. And I think it's bigger picture is the relationship. It's not like shorter short vision is money.
[00:33:33] Speaker B: So you help them?
[00:33:34] Speaker A: Yeah, I do.
[00:33:35] Speaker B: You provide a lot of value.
[00:33:36] Speaker A: I do. I've gotten people financing, I've gotten people equity for free and not charge them.
[00:33:43] Speaker B: Because you have the bigger vision and you must have that.
[00:33:46] Speaker A: And now I can call them karma mindset.
[00:33:50] Speaker B: Give it away, you'll get it back.
[00:33:51] Speaker A: But to be able to call someone and ask them a question that wouldn't answer the phone for anybody is like literally priceless.
And I'm really thankful for the relationships that I have, and I definitely wouldn't be here without them for sure.
[00:34:08] Speaker B: So you obviously saw someone that was successful in an area that you wanted to grow into, and then you pursued that and then pick their brain, but also figure out what they're looking for.
[00:34:18] Speaker A: Yes. When I was a broker, when I did debt and equity, I had everyone's PFS, so I would always look and I'm like, I have more money than this guy, and I own more property. And he's building like, 120 units. And I'm like, how are you doing? Yeah. And it's obviously my job to sell him as a sponsor to the bank. And I'm like, if I can sell him, I can do this. And that's kind of what changed my mindset. I thought being at developer was so difficult.
Oh, I wanted to do it so bad.
Number one, it's not as lucrative as I thought it was. That's number one. It appears way more glamorous than it really is.
[00:34:59] Speaker B: What, you mean developing those larger buildings?
[00:35:01] Speaker A: Yeah, a lot of people lose a lot of money on those buildings.
Especially right now, a lot of stuff doesn't.
[00:35:10] Speaker B: Cost of construction?
[00:35:11] Speaker A: Yeah, cost of construction. Interest rates holding. Like when they stop renting, growth is.
[00:35:14] Speaker B: Probably not going to be significant anytime soon. So it's definitely pullback in certain markets.
[00:35:20] Speaker A: Yeah, it's definitely not what I thought it was.
I think I thought it was this.
[00:35:25] Speaker B: Like, yeah, you just build a building and you make $10 million.
[00:35:28] Speaker A: Yeah, that's what I thought, and it's definitely not. So I started doing things a little differently, is that I put the deal together and I take a very small percentage, but I have very little risk. And I'm doing that kind of now, so I'm partnering with bigger people who really don't need me, but then I can be kind of like the boots on the ground and put the deals together and all that stuff, and they don't have time to do that. So I've been doing that because so.
[00:36:02] Speaker B: Give an example of a deal and how that's structured. So you're doing what and what percentage are you getting and how's it structured?
[00:36:09] Speaker A: It's like 10%. So it's not much, but I'm not putting any money up, so I'm finding the deal and then sometimes I'll find the financing, sometimes they do it, but really I get to learn a ton in the process by staying in a larger land development.
[00:36:27] Speaker B: How big is that land development deal?
[00:36:29] Speaker A: Like 250 units.
[00:36:30] Speaker B: And it's for an apartment building or.
[00:36:32] Speaker A: It'S an apartment building.
[00:36:33] Speaker B: Yeah.
[00:36:34] Speaker A: So I'll stay in that deal. Like I said, a small percentage.
[00:36:37] Speaker B: So you'll be 10% equity in it.
[00:36:38] Speaker A: Yeah, but then I also get to put it on my PFS. As I've now built 250 units. I only own 10% of it.
[00:36:45] Speaker B: Right.
[00:36:46] Speaker A: And it'll be 10% of the GP. So it's not really like 10% of.
[00:36:49] Speaker B: The whole thing, but it's great experience and it's going to help you later on.
[00:36:53] Speaker A: Being a sponsor, it's very safe for me right now.
[00:36:57] Speaker B: So right there, that's going back to overcoming fear. That's a great example of derisking a deal and making it comfortable for you to get into something that you would never feel like taking on yourself right now.
[00:37:09] Speaker A: Yeah, and I just wouldn't do it. Especially when you're dealing with other people's money, you really don't want to do risk that you're not comfortable with. You need to be comfortable. It's okay to take risks, but feel confident in your risk. Know that the deal works, things will come up, and that's fine. But I think overall, you need to feel confident in the deal because you really never know what's going to happen.
One of the land developers I know told me a story about how he got everything approved. Everything was great with the town, and then a neighbor was just relentless, did not want the building built, just was relentless. Took five years. Then another guy had some snake that they found, some endangered snake.
[00:37:53] Speaker B: Oh, man.
[00:37:53] Speaker A: And that held him up for three years. So you never know.
[00:37:56] Speaker B: Someone probably put the snake on the property.
I know around here I've heard of, like, bog turtles stopping. No, they 100 unit development that someone's worked on for ten years, and they find a bog turtle and they shut.
[00:38:07] Speaker A: The whole thing down. It's scary.
[00:38:08] Speaker B: It is scary.
[00:38:10] Speaker A: But someone said to me a while back, and it totally changed my mindset. So this is probably important, is that I had a hurdle of raising money for myself, and obviously it's important to grow. You need to be able to get money from people in order to buy bigger stuff because you're always going to be limited by your own capital. So they said to me, they're like, you're going about it wrong. You're saying to them, I need a favor from you, when really, you know, you're doing them a favor, you're making them money. And that totally clicked in my head. I was like, you're right. I don't know why people love getting.
[00:38:48] Speaker B: A return on their money.
[00:38:49] Speaker A: Yeah. So why didn't I have that? It was really a big hurdle for me, was raising money for my rising.
[00:38:55] Speaker B: How many people once you believe in yourself, how many people will believe in you?
[00:38:58] Speaker A: Yeah.
[00:38:58] Speaker B: The other piece that you said it very quickly, but we can't glance over it, is that you're going to always be limited by your own capital, and if you want to do bigger deals, you have to use other people's money. Right. And to me, that's like such a big mindset shift that a lot of people have not gotten yeah, a lot of people have never gotten past that. Just the old traditional investor. Save up, 20% down, 30% down, rinse and repeat.
[00:39:24] Speaker A: Yeah.
[00:39:25] Speaker B: You started with burr, so you got that whole idea of duplication and replications.
[00:39:29] Speaker A: And I could work off the equity that I created. Yeah.
[00:39:31] Speaker B: But then opening up the capital stack to not only bank financing, but to using OPM and then other creative strategies.
It really is infinite. Like, you can structure if the deal works.
[00:39:46] Speaker A: Yeah.
[00:39:47] Speaker B: You can always figure out the capital stack somehow.
[00:39:49] Speaker A: I wouldn't go right from doing a four unit building to going to somebody and asking for money for 100 unit no.
Unless you have great partnerships.
[00:39:59] Speaker B: Right.
[00:40:00] Speaker A: And you felt confident. I feel like to go to people and ask for their money, you need to really feel confident. Or you're just because some of these people, it's like their life saving.
[00:40:13] Speaker B: Yeah. It could be their retirement.
[00:40:14] Speaker A: Yeah.
So it's something like, I treat their money way better than I treat my own. Like, I will not lose their money.
It's just like that's in my head. I would just not be okay with it.
[00:40:28] Speaker B: So there's kind of like that investment triangle, right? It's like find fun and run or deals. Deals, money, operations. There's like a triangle. It's basically three things. You have to find deals, fund deals, and you have to run them. And I'm telling you're a unicorn because everyone that talks about the multifamily space, they all say it's a team sport. And I see how you're working with the teams of different people.
Which aspect of that do you like the most? Like, what fuels you the best inside in terms of fulfillment and what you actually love doing? I love finding them, funding them or running them.
[00:41:05] Speaker A: I love finding them. Yeah. Like, the one deal I got, I got it at like 55,000 a door.
Just so cheap, like it should have been at the time. Probably like almost 85 a door, maybe more.
I got it dirt.
[00:41:20] Speaker B: So you're a hunter?
[00:41:21] Speaker A: Yeah. I like that part a lot.
And I like the opportunity in that I love. My favorite deals are the ones that have been owned by the same person who doesn't put any money into the building and they don't raise the rents, and they brag about how they've had the same tenants for like 30 years. I've had the same people. They're great.
[00:41:41] Speaker B: And you haven't raised the rent.
[00:41:42] Speaker A: Yes. So the rents are like $600. Those are my favorite deals.
They are hard to find. So what I do is I go on like, apartments.com and you can search by stars and I reverse it. So I go to the lowest star, I go to the lowest star, the most unhappy people.
[00:42:00] Speaker B: You just gave away your biggest.
[00:42:02] Speaker A: I'm fine with it. I'll give my secrets to anybody who wants to know. I don't care.
And then I call. So I start at the bottom.
[00:42:09] Speaker B: I think there's a website that rates landlords too, right?
[00:42:12] Speaker A: Definitely. I hope I'm not on it.
[00:42:13] Speaker B: The ones like for employers or something, and then there's one for landlords.
[00:42:18] Speaker A: Right now I have so many lawsuits from tenants. Stupid stuff.
[00:42:22] Speaker B: Some people you're not a one star on there.
[00:42:24] Speaker A: No, but honestly, I didn't do anything wrong. But it doesn't even matter.
[00:42:28] Speaker B: It's the nature of the business for you. Yes, it's the nature of the business.
[00:42:31] Speaker A: And you can't let it get to you. You really can't. And it kind of got me in a little bit of a funk because to have somebody accuse me of being somebody I'm not just really got to me, but I'm like, you know what? I know I'm not this person, so I just have to prove it in court now.
[00:42:49] Speaker B: Well, I want to start to wrap it up. I appreciate you sharing so much of your knowledge. No, it was great.
What are just three takeaways that listeners could get in terms of the biggest three things that have impacted your career? And they could be things we've already talked about, just recapping them. Or they could be something else that we didn't talk about.
Just leave the listeners with three takeaways that you think are most important.
[00:43:17] Speaker A: So do you know strip mall Guy? No. Okay, so definitely follow him. Number one, he's really funny, but number two, he's super smart, and he put up a post recently that he tried to find an employee at a certain salary. And I thought my head, I was like, I would work for this guy for free.
I think any opportunity you have to learn from somebody, take it. That's my number one thing is I actually thought about messaging him and be like, I will come work for you. Actually, I'll put myself on hold and I will come work for you because I want to learn. And like, what better way to learn than from somebody who I bet you.
[00:43:52] Speaker B: You would hire for should, especially with your background.
[00:43:55] Speaker A: I think he's in New York, though, but I may do it. So, yeah, I think any opportunity to learn, for sure, take it whether it's podcasts, know, whatever you can do, and then reach out to the sure. You know, people will give you free advice. I've definitely underwritten deals for, like, if they're like, what do you think of it? I can do it kind of quickly, like, just quick glance at the numbers.
But I think definitely reach out to if there's somebody that you're like, wow, how did they do that? I think it's fine to reach out to them. You can't be scared. So that's number one.
Number two, I think, is identifying what's holding you up.
Why aren't you doing this? People always say to me, they're like, oh, I wish I could do that. And I'm like, well, do it. What do you mean you wish you could do it? Do it. I don't just figure it out. That's why I feel like I kind of live my life like everything's in God's hands, and I just roll and things fall into place.
That's how I live life. So I just let things kind of fall into place. I do the best I can and like I said, some deals won't work and that's fine. You can't let that hold you up. So that's number two and then number three.
I think you have to work hard.
You can't go into this and think it's passive income. It's not.
[00:45:19] Speaker B: Even though everyone says it's passive income. Right?
[00:45:21] Speaker A: Not passive income. Not if you wanted to run the way it should be run.
Now, maybe I'm wrong and there's people out there that have figured out a way, but I do this full time.
[00:45:31] Speaker B: You're running a real estate business.
[00:45:33] Speaker A: Yeah. So I think if you want to grow, you need to treat it like you're going to work as hard as you can. I've definitely painted and sheet rocked and helped just to meet deadlines and I don't think I'm above anything. You can't be. I've taken out trash before an inspection just because I didn't want the trash all over the front yard. You just have to be willing to do that in order, I think. Bigger picture, do I want to pick up people's trash? No, but I do it.
[00:46:09] Speaker B: I appreciate you sharing all that. Lots of words of wisdom there. So wise, really. No, obviously the proof is in the pudding and you've done it. So congratulations on your new ventures. I can't wait to skyscraper. Where are you going to build it?
[00:46:28] Speaker A: So hopefully Philly, I have a site.
[00:46:30] Speaker B: Hopefully you have a site.
[00:46:32] Speaker A: We'll see.
[00:46:32] Speaker B: Oh, man. All right.
[00:46:35] Speaker A: Very difficult, though. I've been working on it for years. We'll see.
[00:46:38] Speaker B: Thank you for your time.
[00:46:39] Speaker A: Yeah, thanks so much for having me. It's fun.
[00:46:41] Speaker B: All right.
