Flipping Cars to Owning 750 Units: Axel Ragnarsson's Multifamily Success Story

In this episode of Inside The Deal Room, Gabe Bowling sits down with Axel Ragnarsson, a seasoned real estate investor, syndicator, and host of the Multifamily Wealth Podcast. Axel shares his inspiring journey, starting with flipping cars in college before getting into real estate, where he began with small, direct-to-seller deals. Over the years, Axel has built a portfolio of over 750 units and developed a multifamily firm that thrives on sourcing off-market deals and optimizing property management.

Throughout the conversation, Axel explains how he navigated the challenges of scaling his business, the lessons learned from his early mistakes, and the strategies that continue to drive his success today. From his approach to deal sourcing and building relationships with property owners to his focus on executing business plans with speed to maximize returns, Axel offers a wealth of knowledge for investors at any stage of their journey. Whether you're a beginner looking to close your first deal or an experienced investor looking for strategies to scale.

Links:

• Website: thedealroom.io
• Circle Community: Join The Deal Room Community
• Schedule a Call: Book Here
• Axel’s IG: @multifamilywealth
• Axel’s Podcast: The Multifamily Wealth Podcast

Episode Transcript

(00:00):
All right, welcome back to another episode of Inside the Deal Room.

(00:08):
My name is Gabe Bulling and in today's episode we have an incredible guest speaker, Axel Ragnarsson,
up from Boston, Massachusetts.
Welcome to Tampa.
Thank you for being here, Axl.
Thanks for having me.
All right, so the way that I always typically start these things out is I always have people
here.
They're in different phases of their real estate career.
Some people are in year one, year two, year three, year five, year 10, and year 30.

(00:32):
Today where would you say you're at?
And then I guess introduce yourself to where you're at today.
And then I want to kind of pull back the curtain on how in the world you got there.
Yeah, so technically speaking, I guess I've been a full-time real estate investor since
2016.
So we're coming up on nine years here, but I will say that the first three, four years
was, I don't know, a lot of stumbling around in the dark.

(00:55):
So I would say probably year five or so is how I would describe where I'm at in our journey
as it relates to really pouring gas on the fire and actually really building a business
and to provide some context around where we're at now.
So like you mentioned, I live in Boston.
We buy a throat, New Hampshire, and then New England at large.
Although we did a few deals on a Florida.
We still own one over in Barto, Florida.

(01:16):
But long story short, 2016 to 2020 was me just doing deals with my own money, a lot of debt,
a lot of direct to seller buying stuff that was two to 10 units in size, but a lot of
hard money, private money, stuff like that, creative financing, built a portfolio of 80,
90 doors or so.
And then 2020 COVID hit.

(01:37):
And then when nobody was doing deals, I kind of took a step back because we had a chance
to kind of pick my head up and was asking myself at the time, is this really the road
that you want to keep going on?
I was doing smaller deals, no partners.
Like it's going to be hard to build a portfolio of size doing that or any real business.
And it was around that time, I started learning about syndication and structuring deals,

(02:01):
working with joint venture partners.
And basically how you could do deals without your own dough or without just using a ton
of debt, which is what I was doing was like leveraging every deal to the max just to reduce
cash out of pocket.
So between 2020 and 21, 22, started doing some deals with some LP capital, but it was
on a very small scale where maybe we're raising a few hundred grand, 400 grand for smaller

(02:23):
10, 15 unit types of deals.
And then towards the end of 21 and really into 2022 is when we really built out the
platform in terms of, you know, started doing some like email marketing, started becoming
really comfortable with the process of actually raising equity, started to understand exactly
what we needed to find from a deal standpoint to make it work with investors.

(02:44):
And that's now been the last call at, you know, two and a half, almost three years now
has been pouring gas on that fire.
A big component of what we do is direct to seller prospecting marketing to find deals.
So just pouring gas on that fire, finding a lot of deals, pouring gas on the capital
raising fire and starting to raise more money, both from new investors and our existing folks.

(03:04):
And we've just been buying more deals.
And along the way too, we brought our property management in-house and we have basically
under a separately branded company up in New Hampshire.
We manage all of our own buildings as well as third party and that business manages about
750 units right now, about 50-50 split between what I'm involved in and then what's third
party.

(03:24):
But in the last three years, we bought about 350, 360 units.
We since sold a little bit of that since starting, you know, in real estate back in 2016 or so
in the last nine years, bought 550, 600 units or so.
And really now the business model is I still buy deals myself because my whole long-term
North Star is a portfolio of real estate that I personally own that nobody can tell me what

(03:48):
to do with and that I don't have to report to investors on.
So I still do that, but those deals are 5-10, 5-15 units.
And then we're out there looking for stuff that's 30-70 doors, you know, $3 million to
$10 million in purchase price.
And those are the deals that we're going in raising investor equity on right now.
And that's what the business looks like today.
Yeah.
Well, thank you for that.

(04:09):
My guide here is solo per newer building out your real estate portfolio, creating some
financial income or the pops that you're probably getting from doing the flips.
And then over the last three years, you're really focused on building a...it sounds like
a real firm, like an investment firm.
Yeah.
It was at first the construction piece, the management side, and then finding the deal

(04:30):
sourcing.
We're going to dig into the off-market approach.
And now at the last couple of years, it's been investor relations actually raising money
from investors and trying to focus on the scale.
Yeah.
Under the portfolio.
Yeah.
I think the last couple of years, I think you hit the nail on the head, like the constraint
in the business became money, right?
It wasn't deals.
It was money.
So that's been the last two years is me solving for that constraint, which is just in-person

(04:53):
networking and asking for referrals to new investors from our existing investors, pouring
gas on the content stuff we do, which is like the Instagram and the podcast and all of that,
bringing in some co-GPs or JV partners who are going out there and actually raising the
money for our deals.
So maybe I'm raising half and then I have a partner who's raising half.
And that allows us to keep doing deals without having deals that we can't fund.

(05:14):
So that's really been the last couple of years and then building out the infrastructure
of what has become a real business, which is like I have a full-time acquisitions guy
now and we're about to hire a full-time operations guy so I can stop spending so much time on
asset management and spend a little bit more time on the capital raising and all of that
and the content and stuff that really drives the money coming in the door and the deals
coming in the door.

(05:35):
So really that's been the last couple of years is turning it from a solo business where it's
just a lot of stuff going on at any given point in time to trying to get our arms around
a little bit more.
And there's a whole bunch of things that come into that.
But as you mentioned, right, capital was the big one, at least the last couple of years
for it.
Yeah.

(05:55):
Well, everybody runs out of money at some point.
Yes.
So capital intensive business at the end of the day.
All right.
So there's so much to unpack and hopefully you don't mind going a little bit over 45
to an hour.
Yeah.
We have a lot.
So I want to kind of bring it back.
A lot of people are in the year one or maybe jumping into real estate today.
So I want to always start with what was the first deal and how did you actually get into

(06:17):
the business?
Yeah.
So from learning about real estate to first deal was like a year.
So let's, you know, that...
So what...
Often times people don't talk about that but yeah, it was a...
I was 20 so I was in college.
This is 2015.
And so without detouring too much into end of high school, early college, my way of making

(06:38):
money was I flipped cars.
That was my hustle to make money.
It was like buying used cars on Craigslist and selling them.
So did fairly well, I guess, relative to being that age.
So I had a couple bucks, you know, 15, 20 grand at the time to where like I was like,
okay, I want to go and do the...
Real money back then.
Real money in college.
Oh yeah.
Oh, I felt like I was living a dream.
But I would say not nearly enough to really get into a deal, assuming you go out there

(07:03):
and you just go put like 25% down.
And in my market at the time, you know, two, three, and fours, and this is Southern New
Hampshire and our north of Boston, you know, at the time you're going to spend 300 grand
for like a duplex, right?
Like that was four, 450, 500 for three, four unit types of deals.
So I couldn't like go to a bank and put the money down.
That wasn't an option.
And also I wasn't financeable because I had no credit.

(07:25):
Like I had to get like a credit card.
So I was like, all right, so I want to do this real estate thing.
And I think I learned about it through an Instagram ad or HGTV.
I don't even know.
But I ended up on, you know, bigger pockets and then starting to listen to podcasts, watching
YouTube videos and just became obsessed with it.
So at the time I was like, the only way for me to do a deal is I got to buy a deal at

(07:46):
a significantly discounted price.
That's going to allow me to go out there and borrow a ton of money.
And I had a couple, once I was like in person, Rhea events in Southern New Hampshire and
you know, asked a bunch of people like, how do you buy stuff with no money?
And they're like, she's a lot of debt.
Go get hard money or go get private or something like that.
So the first deal I did was I was messaging for rent ads on Craigslist.
Just like, hey, I don't want to rent your place, but are you interested in selling?

(08:09):
Yeah.
Probably message, I don't know, hundreds of owners.
And then I finally hit a guy who was like, yeah, I'd be interested in selling.
And he had a three unit property in my hometown.
This is 45 minutes north of Boston in New Hampshire.
And I grew up in Southern Hampshire.
And what at 195 Ford is three units up.
I thought it was going to be worth like 250 and it's long story short.

(08:29):
I had a private money lender lined up who's going to loan 90% of it.
And I was going to fund the rest and construction and all that.
So brought all the money I had to closing and put, you know, some of the renovations
on a credit card type of thing.
And that deal actually didn't go that well, long story short.
I went to go refied and all the banks are like, dude, we're not going to lend you any
money.
You have like no W2.
You have nothing like, so the only options I had were like crappy commercial loans or

(08:53):
like local banks, long story short.
I was like, it doesn't really make sense when you do this.
I just went to sell it.
And I basically, I missed a whole bunch of things during DD, just all beginner mistakes,
but I sold it and basically broke even on it.
Long story short after all was said and done, but obviously experienced being invaluable.
So that was deal one.
And then it was replicating that strategy for the next, you know, few dozen deals was

(09:13):
buying, finding these small deals direct to seller, you know, very different approaches
using a lot of debt and buying it a margin in which I could refi out and not have to
leave money in the deal and just cycle it into the next one and every once in a while
selling one.
So more money was coming back in the business.
But very cool.
Well, thank you for sharing that.
Most of the time it's either I just skated by, but I got my learning lessons, which was

(09:34):
great enough.
I didn't need to make 500 grand on that as long as I got out of the deal so I can move
on to the next one.
It didn't kill me.
I'm happy there.
But hopefully didn't make the same mistakes that you made in the first and to the second.
Definitely did not.
Yeah.
All right.
So, first deal and then are you, what are you doing for income during this period of
time?

(09:55):
Because what I hear from you is I do the same thing over and over and over.
It's not, I do a three unit and then jump up immediately to a 300 unit.
What was the, what was the years like in that grind?
Yes.
So really it was like, if we call it February of 2016, which was deal one to basically call
it end of 2020, it was the same thing over and over and over and over again.

(10:17):
And if I were to do one thing differently, it'd be like go buy the three, then go buy
the six, then buy a 10, then buy a 15 and start to increase the average deal size, which
I wasn't doing.
I was just buying the same types of deals over and over and over again.
But really the approach at the time was, you know, the first deal was 21.
And then shortly after that, I got my real estate license because I was like, when I
graduate, I can, I didn't know what I was going to do.
I was like, maybe I'll go take a job.

(10:39):
Maybe I'll, I'll get my license though because it's really easy to do in New Hampshire.
And I think it's pretty similar in Florida, right?
It was a 40 hour class.
I was like, I can just do that.
You can fail it up to three or up to four times.
Yeah.
Exactly.
I failed it the first time too and then passed it the second time.
So I got my license and then I started, I just worked as a real estate agent.
I was selling like small multi-families and I got linked up with a broker who was like

(11:01):
the definition of a guy who had like a little too much business for himself.
And I met him at a networking event and I started helping him out and he'd kind of
like give me a deal here and there.
I'd work with like a buyer.
So yeah, I was making 50, 60K a year commissioning income.
Like nothing crazy, but my living costs at the time were, you know, were nothing.
I was living with four guys after college and, you know, I'd spend in a thousand bucks
a month maybe.

(11:22):
So all of this money that I was saving and then after that first year I broke even, but
the subsequent deals I was doing after that, it was the same approach of find killer deal,
use as much debt as anyone will give me.
Literally.
It was just, I was like, I would ask everyone around, I was paying 13, 14 points, like 100%
leverage.
Yeah.

(11:42):
I mean, not an advisable strategy, but being 22, 23 with no downside.
It's like, I was like, yeah, of course I'll go do that.
And I was buying great deals.
It always came back to like, I was buying $400,000 properties for, you know, 275, 300 grand,
all kinds of margin.
So I'd sell some of them and that was where the real money was coming back in the business.
And then, or I'd, you know, refi the ones I thought I'd want to hold a little bit longer.

(12:04):
And then I was working as an agent and money was coming and doing that.
Now the real inflection point in the business was 2018, where I think I had like 15 units
or something and so working as an agent, couple of years, well, now I'm like 18 months out
of school.
And I realized that I was like really no longer lendable.
Like the lending piece with banks was becoming the big hurdle.
So not a lot of credit history, completely out of whack to the income ratio.

(12:29):
You know, even if I was going and getting commercial loans, which is property for his
borrowers second in terms of how they're underwriting, they're still getting to the point to where
they're like, it's just we're, we're make, we're betting a lot on you.
You're a younger guy, like you're not, you haven't been in this for a while.
So the terms that I was being offered were either, well, either I wasn't getting offered
any term sheets or the terms were terrible.

(12:50):
And I was like, I might have to just go get a W2 to kind of make this process a little
easier.
So I took a job down in Boston and I moved down to Boston with a few friends of mine.
It was a sales job at a startup down there.
So whatever kind of like business development job.
It was really for the W2.
Now the third day on the job, a guy who got a direct mail piece for me, I'm up in New
Hampshire at a 12 unit and I left me a voicemail like eight AM while I was in training, couldn't

(13:14):
call him back until six, seven PM when I got home that night.
And I called him back and he's like, it just took an offer from somebody else.
And he told me what the number was and it was, he was, he just gave this property away
to a guy like 50% of market value.
Like comically to the point where I was like sitting in my living room with a, with a friend
of mine, I was living with a time going like, I'm just going to go in tomorrow and just
quit my job.

(13:34):
And I literally did.
So the next day I went in and I quit the job and now I'm down in Boston with Elise.
So I, you know, I'm down there, but that's when at that time I was like, I'm not going
to do the real estate agent thing anymore.
Cause that's just like, I'm not working for that much money.
I'm selling like small crappy starter homes.
Like it's just a total pain in the ass.
I'm going to go all in on the deal sourcing thing.
Cause I was like, this really works.
I'm really good at this.

(13:55):
I define that as like, you're doing way better at this than everyone who you're competing
with.
So just go spend all your time finding the deals.
And that's when I started assigning some.
I started flipping some, started buying some.
And that's when the money really started to come in in a more meaningful way.
And then, you know, 18, 19, 20, it was just growing the portfolio.
And then got it to a point to where the portfolio was somewhat self-sustaining, right?

(14:17):
The cash flow from that was allowing me to reinvest into more deals.
My living expenses weren't going up.
They were just the same, right?
So it was all going back into real estate.
And then, you know, 2020 was kind of the inflection point of let's go raise money.
And that's where that, you know, kind of pivoted the business into like, let's go do bigger
deals and raise some investor equity.
Yeah.
Because it did get to the point to where even if I was finding great deals, like it's still

(14:38):
so capital intensive.
You buy a value-added multifamily project, there's no, money's going out the door for
nine months, 12 months before any of it starts coming back in.
And managing my cash with high interest debt on acquisition across a bunch of these deals
became, started to feel a little bit like a house of cards.
And I was like, I'd rather give up more of the equity in these deals and run a little
bit more of a predictable business.

(14:59):
Got it.
So thank you for answering the questions and expounding on like everything beneath it.
I don't think many people do it on a podcast style.
They typically stay on the poker as you'll probably find.
My wife calls me a professional yapper.
It might be bad for the people listening, but hopefully everybody's enjoying it.
All right.
So I've gotten up to the point of you're in the business and you're repeating what you're

(15:23):
doing.
You take the sales job.
That's funny.
Did you always, the deal sourcing, did that just naturally?
Come to your like, okay, well, because I've been flipping cars, I know, I know what a
deal is.
Are you just a deal maker at heart?
And how important has deal sourcing been for you and really developing that skill set?
Because it truly is a skill set.

(15:43):
Yeah.
You know, it's an interesting question.
I think a lot of it is probably just my own personality type.
Like I was the kid like selling like baseball cards on eBay.
Like using my mom's eBay account.
Like I've always kind of had that like gene, like high school, I used to go by, you know,
sporting equipment and flip that for as a car.
I was like, there was never really had a real job.
Like I worked at a grocery store for a little bit and quit that because I was like, I'm

(16:03):
making more money doing this thing on the credit.
So that's always kind of been, I've always like just been doing that, which is a weird
way to describe that.
And then specific to real estate, it was like, it doesn't take long in terms of looking at
deals that are listed on the MLS for your like, well, none of these make any sense.
And after a while you're like, well, why am I wasting time looking at the 40th deal that
hits the MLS that goes into contracts at a price that I don't understand how anybody's

(16:26):
making money?
And I can understand, even if I do understand how they're making money, that doesn't work
for where I'm at.
Like I don't have a high income earning job or a business to go plow money, to go plow
money into real estate where I have this other income source.
I was like, I have to buy killer deals or else I hit a roadblock because I can't pull
my money out and then everything stops.
So that's the one thing that I have to solve for.

(16:48):
And then it was, so I knew that very early, like before I even did the first one, I was
like, I got to solve for that piece of it.
And then after that, it was just a whole bunch of, I was like, now that I've identified that
is what I have to figure out.
It was just spending all my time getting educated on doing that, right?
Where it was, I go and take all the house flippers in my market out to lunch and just ask them
how they were doing it, right?

(17:09):
And I started networking a ton with all the wholesalers, you know, and send me all the
multifamily stuff you have that doesn't work for your buyer list.
You know, got very, very intentional with like direct mail, calling and email.
And New Hampshire was an interesting market where, or it still is an interesting market
where there's a ton of transparency behind corporate filings.
If a guy goes and makes an LLC to go buy a property and the owner is the one who made

(17:31):
the LLC, not an attorney, he has to list his email.
Everybody uses their, you know, their best email when they're doing legal stuff, right?
So I had the emails for all of the people that own properties outside of the people that
hired an attorney to make their LLC.
But for what I was pursuing, which was three to 10 unit deals, yeah, I had, I was getting
in their email inbox with no, nobody else was doing this like 2016 to 2020.

(17:53):
Now way more people do this.
But seven, eight, nine years ago, everybody, like that wasn't really a thing yet or at
least as widely understood as, you know, because think about how much content and podcasts
and YouTube videos has taken off over the last eight, nine years.
So for me, I was like, and I think I was, one, it was like, I pulled my head down, never

(18:13):
really picked at it back up, which the pros where I was making a lot of progress pretty
quickly.
And I was being, I didn't stop and say, Hey, maybe you can go buy a 20 unit deal doing
the same approach.
Like I never even occurred to me to go after larger deals.
Cause I was so like, I don't want partners.
I don't want investors.
Like I just, I don't want to have to answer to anybody.
I think to a degree, you kind of have to have that little, I'm locked in.
I've learned that what that phrase is lately.

(18:35):
I'm locked in.
I'm no distractions.
Like this is the only thing I'm going to commit to every single day.
Yeah.
And that was very much what I did.
And it was funny.
I was like two years out of UNH and I was going back to like a lot of the internship
programs at UNH and I was like hiring interns, UNH, university in New Hampshire.
That's where I went to college.
But I was like going back to the college I graduated from and like hiring interns from

(18:56):
school who like, you know, through the internship programs, like 500 bucks, a thousand bucks
a semester.
And then I was just giving them my playbook.
So I had, I had people just going out there and just hunting deals and I was sharing a
percentage of the deal that they found it.
And that was just more gas than the fire.
Yeah.
So, um, and the reality is like early young, when you have a great deal, like all of your
options open up, right?

(19:17):
You can flip it, you can assign it, you can buy it, um, or, or you can go and partner
out with somebody on it.
It's a lot easier to partner.
Um, and I, you know, I probably had a couple of people early on tell me the same thing
or just like, just go buy great deals and everything will just work itself out.
Um, so that, that became really the focus.
But I think the short answer to your question is there's probably, probably something a
little innate, um, just in terms of my own personality type.

(19:38):
But, but the other piece of it was like, it was very clear that that was what I had to
do or else I was going to go buy it.
And the risk was like, I buy it a little too much for a deal, I can't refine my money out.
Well, now I can't do any deal.
Then your whole equation to like creating well stuff.
Yeah.
I was like, well, now I'm going to sit in my hands until in let time, you know, put
that money back in my pocket through appreciation and all of that.
Or, you know, and I had the option to go to assign stuff and do that.

(20:01):
But like my goal very early on was like, I want to try to hold and buy as much stuff
and control it as I can and set like assigning deals.
Um, but in any event, I think, uh, I think it just became clear that that had to be the
process moving forward early on.
And that's, that's never going to change the development of a skill set of being able
to source a home run deal, whatever that's defined as for each listener.

(20:24):
Um, that will never go away ever.
Something that, no, I think it's most value.
What do you think that skill set of like, I can't go into your head and say, okay, I
need you to forget everything on how you find these sellers that have deals.
Um, you have a deal under contract that you're raising money for right this second.
That was seller finance, right?
Direct to seller?
So not seller finance, you have a bank on that one, but it was direct to seller.

(20:44):
Yeah.
From a mail piece, um, been mailing the guy for three years and finally he goes, all right,
man, I'm ready to sell it.
How big is it?
72 units.
So a $15 million deal.
I'd say $5 million equity raise from a mail piece.
Um, and that was a little special one where I was saying, so we have a very small portion
of our list, which is like the dream list is what we call it, right?

(21:04):
Like the stuff that's right in the area that we want to buy, right by all the other properties
we own and manage, you know, right size from a deal size standpoint, um, ownership of,
of, you know, a long-term ownership, 10 plus your ownership where it's like, this is exactly
who we want to talk to.
Yep.
And we send certified mail to that list.
Um, so we spend like six to eight bucks per mail or two that list, but the open rate's

(21:26):
a hundred percent because somebody gets certified mail.
They're like, well, you know, important.
So I had that guy with a few certified mail pieces and he's, he's a funny guy.
I was a guy in his partner, we've owned it for 26 years.
Yeah.
And he's coming up on fully depreciating the whole thing and that's why they're looking
to sell it.
Like, you know, it's time for us to sell and whatever.
And um, and he's like, yeah, we always joke, like it was a psychopath who keeps sending

(21:47):
us FedEx envelopes to certified mail.
Really?
Yeah.
You gotta be different.
You gotta stand out.
You gotta stand out.
Yeah.
And it's like, and so I have a conversation with a lot of people.
I've told this sort of to other people who were like, you know, like, doesn't this feel
like a waste of money?
You know, I probably spent like 500 bucks on mailers to them.
And I was like, no, because this deal, even just the acquisition fee, let alone the
perm out pays for our direct mail for the next 40 years.

(22:10):
Yeah.
Like it's so, you know, it all works out.
But very cool.
Yeah.
What's a very quick, like couple minutes, everybody's listening, they hear this specific
part.
They're like, okay, I need to go learn how to do off market deal stuff.
I know you have a little bit of the education.
Where would you recommend people starting?
Because it's unless you have the high income job or you're in the private equity world and
you're like, okay, I'm going to go syndicate 50 million bucks of deals and you're like doing

(22:33):
it.
And then you're like, well, like the entry point is either find a great deal or raise
some money for somebody else's deal.
Yep.
What would you best recommend for people if they wanted to take a look at sourcing off
market stuff?
I think very simple kind of first few steps, right?
You got to have your acquisition criteria like very clearly defined and nailed down.

(22:53):
And that's where you want to buy deals, the size of deals that you want to buy, and then
the types of deals that you want to buy.
Do you looking for a heavy value?
Are you looking for stabilized stuff?
Or what city, what county, what state, whatever it is, is it five to 20 units?
Is it 20 to 100?
Get all that figured out because then you got to take all that information.
You got to go buy a data list.
Reonomy, CoStar, ListSource, Big 3, go buy a data list of location, types of property,

(23:19):
filter based on some metric that narrows it down and increases the likelihood that people
you're chatting with want to sell, which is in our business, it's like no sales in the
last five years.
It's like the easiest way to do that.
Application criteria, data list, now you got to pick a channel, an approach.
Going to depend on people's time availability, their budget, obviously.

(23:41):
You really have two roads.
It's marketing or prospecting.
Marketing you're trading dollars for leads and then prospecting you're trading your time
for leads more or less.
So marketing being like direct mail, I'm going to go spend 500 bucks on 500 mail pieces
or I'm going to spend the time to do it myself, but you're still going to pay for the postage.
All that goes out, you're going to get calls from people who are interested.

(24:03):
Prospecting being I got their phone numbers, I got their email, I'm going to call them
up, maybe I'll text them, maybe I'll email them, whatever.
Pick an approach that works for your budget and your time with the knowledge that especially
in multifamily, single family a little less so because it's a little bit more transactional.
You might be able to send one mail piece and catch Aunt Sally at the right time because

(24:24):
she inherited whoever's house and she might sell it.
But multifamily, especially as you size up in terms of the deals that you're pursuing,
more sophisticated ownership, less financial motivation to sell.
They're not typically dealing with the foreclosures or whatever.
And those deals just trade less often.
It's a bit of a longer sale cycle.
So if you're going to send mail, you got to be comfortable sending at least five rounds

(24:48):
of mail.
And for me, we send every quarter.
So you got to be comfortable at least one plus year's worth of mail that you should be
sending out.
You should be calling, you should be comfortable calling your list every month or couple months
for a year if you're the same thing.
You got to have a very long term vision.
So whatever strategy you're picking, make sure that they're standing power there.
And then I think it's easiest.
You pick one channel, whether it's mail and you layer in or whatever it might be one channel

(25:12):
and you layer in a second.
A lot of investors kind of do some half-ass direct to seller stuff through one channel
without consistency.
You want to not be one of those people.
Not a lot of people pick two channels and do it consistently.
Hardly anybody picks three and doesn't consistently.
So at least you want to be doing two.
So let's say you're going to send mail and you send it on January 1st or whatever.

(25:34):
Few weeks later, go through and email the list or text the list or call the list and
say, did you get my mail piece?
You know, I'm so-and-so.
This is what we buy.
We want to talk to you about your property.
And then all of your, the fundamental objective in doing all of this is not to buy deals.
And I think it's a subtle mindset shift, but it's just a network with other people that
own stuff.
If you don't want to sell, that's totally fine.

(25:56):
We just love to meet another investor in the marketplace.
Like put that copy in a direct mail, say that if you're chatting with someone over the phone,
put it in an email.
And your goal is to just develop some level of a relationship with a seller.
And you're going to, the topic of selling their property is assumed in the fact that
you're reaching out.
It doesn't have to be the only thing you're talking about.
Oh, when did you buy it?

(26:17):
Are you looking to buy more?
What are you kind of struggling with?
When I introduce you to any vendor, like networking, as you would if you met some guy at a real
estate meetup.
And every time you have a conversation with someone, move them into some kind of a CRM,
you know, HubSpot or Zoho, a couple of free options, follow up every however many months
or weeks in between that conversation makes sense based on that conversation.

(26:38):
And if you do that over a year, you're going to do deals, right?
I mean, that's just going to happen.
Assuming that you don't screw up along the way or you have some wildly unrealistic pricing,
like where you're like, I want to buy everything at half off.
Okay, well, you may not do a deal and that's something you should be okay with.
But assuming you're realistic in terms of what you want to pay and all that, just expanding
your time horizon and just making that part of your routine from a sourcing standpoint

(27:00):
is going to bring deals in the door.
But that's, I mean, it's really just the fundamentals get you 80% of the way there.
And the last 20% is, you know, maybe you're kind of doing some things from a messaging
standpoint or the certified mail like I'm talking about, but it's just doing the fundamentals
over a long period of time.
And then you have those conversations.
Thank you for that.
I'm pretty sure everybody will thank you as well for actually going over resources and

(27:22):
tangible steps.
That's something I've always picked up from.
I'm studying you and your content, what you do.
And you always give tangible like, hey, it's not easy, but here are the steps if you want
to actually go and do it.
And then that serves as the barriers like, Hey, I actually did what you did and I bought
a deal because of it.
Thank you.
So, all right.
Now I want to move into the fun stuff, or the fun stuff, which is deals.

(27:45):
So how do you define a home run deal for you today?
And then what was a home run deal for you when you first started?
Because I want to see how that has evolution or evolutionized, I guess is the right word.
Because I'm sure the home run deal for you today isn't the exact same home run deal as
it was when you first started.

(28:06):
Yeah, they have changed a little bit.
There is a lot of overlap in that Venn diagram, so to speak.
But I think early on, what I described as a home run deal was, it's funny thinking back
to what I was even looking for.
It was more like, I kind of had a sense of what I wanted to buy.
Because you went from an individual, it's like, okay, I want to make money.

(28:28):
And then you're like, okay, now we have a company, I have people on my payroll, and
then we also have investors to watch out for.
Buybox and the risk tolerance probably much different than the individual that wants to
pick up on dirt or whatever the money that you're looking for over here.
That's why I asked the question.
It's a good point.
And I think early on, kind of the rough criteria for the first few years was like two to 10

(28:52):
unit deals.
So size-wise, that's what we were looking for.
It was very specific to this one little area in Manchester, New Hampshire for an hour north
of Boston.
Head up Route 93, an hour north of Boston.
It's the biggest city in New Hampshire, but it's 125,000 people, which makes it a pretty
small city in general.
But there was like an area within Manchester that was, it's primarily C-class housing.

(29:16):
Everything at that, well, everything, I say everything, the vast majority of the housing
in that area is early 1900s built.
The vast majority of what we buy in our businesses early 1900s built.
That's just the predominant year built of the housing stock in all of New England, whether
it's Massachusetts or New Hampshire or Connecticut or wherever.
So it's two to 10 unit deals.
And it was sellers who were very mom and pop, very unsophisticated with some serious level

(29:39):
of distress, whether it was like tenants who were just totally delinquent and they're working
through an eviction process, buildings that were in rough shape from a construction standpoint,
a lot of deferred maintenance, deferred capex, maybe some other type of motivation that's
layered on top, whether it's lifestyle, I want to retire, I want to go somewhere.
Maybe there's some level of financial motivation, operational distress being we have tenants

(30:01):
who are not paying, financial being, well, that's now resulting in, you know, we're having
a difficult time paying, and a mortgage, what have you.
So we were looking for like pretty heavy value at stuff.
And really that was because I knew that that was the avenue to secure like the biggest
discount.
I was like, I'm 50 or 60 cents on the dollar.
I got a step.
I can be all in on my costs for this thing at 70, 75%, which is, you know, I got plenty

(30:24):
of margin and I might pull my equity out.
Now, as the years have passed and as we've started raising money for ideals, the seller
profile is still very similar, long term owner, someone, someone unsophisticated, somebody
who's motivated by maybe some lifestyle motivation, they, you know, they want to retire, maybe
they want to get into a different asset class, like they're saying multifamily, they want
to sell it and go buy a strip mall or something with like less management requirements.

(30:48):
Maybe it's a couple of partners, ones like I want to hold on to the other ones, like
I want to sell and they're like, screw it, we'll sell a type of thing.
But managerially, and then from a physical construction standpoint, there is, that's
where there is a lot of overlap where we're still looking for Mama Pop owned properties
where there's a lot of month to month tenants and there's some level of deferred maintenance.
Now if I were to define like what the perfect deal is, it's class B or C plus, right?

(31:15):
We want to get away from kind of the true class C stuff.
We're getting into an area, higher median income, lower vacancy, higher average tenant
credit score.
Class B just being an easy way to describe that, right?
Class B, minimal deferred maintenance, but massive issues with management.
So we want the bulk of our returns to come from us going in there and optimizing the

(31:36):
management, whether that's we're going to collect more rent, charge more rent, bring
some of the legacy folks closer to market rent, start charging pet fees, parking fees,
storage fees, maybe the expense out of the P&L is a little out of whack and we can save
money there.
But we want the vast majority of how we're being compensated in terms of the value add
showing on the NOI to come through management upgrades versus CAPEX.

(31:59):
The deal that we briefly talked about, the one that we have in the contract right now,
buildings are in great shape, great roofs, great heating systems, great windows, good
siding, the units are in pretty good shape.
The sellers have taken good care of it, but they've let rents lag behind because they
don't have to keep them in the market.
They don't allow pets, which is crazy.
So not only are they not charging pet fees, they just don't even allow it in general when
it's a perfect property for that.

(32:20):
A bunch of storage units that they're not charging for, massive, beautiful three stall
garage on the property that they just have a couple of cars and that would rent for
1500 bucks a month.
All of these areas where we can add value that don't require us to spend a lot of money
renovating units or fixing the roofs or doing whatever.
So the higher percentage of returns that we can generate from management versus CAPEX,

(32:41):
the better because it's lower from a risk adjusted standpoint.
Anytime money is going out the door, you run the risk of misunderwriting it or going over
budget or something happening along the way that you didn't expect.
So that's our holy grail deal.
That's what we call that in our business is class B, we're going to get paid for our knowledge
really and what we can do on the management side over CAPEX and one that's located in

(33:04):
an area that has above that markets average or above that markets meeting income and meeting
rents.
So we just have a higher quality tenant base.
And if we can find a deal that's got a lot of those things at play, then that's one that
we're really going to go aggressively pursue both in terms of the time we spend on it,
but also what we're willing to pay as a percentage of that deal's market value, so to speak,

(33:28):
where it's like, we're going to have a value add, we got to buy that thing in a really
healthy price to compensate us.
Whereas if it's one of the deals, a deal that I'm talking about that checks all those boxes,
we're willing to get a little bit more aggressive on pricing because we know that it carries
less risk than something that's a little heavy.
It's funny you say all that because in our rent stack, in our underwriting model, we
have average in place and then sellers proven on his rent roll and then we have a column

(33:49):
that says upside without any renovations or any CapEx going out, it's just the opens
change.
And then we have the final tab, it's like, all right, we got to spend money to get this
return.
We break it out from that risk profile.
I'd rather take a 15 IRR here with all of the upside in the management upside versus
an 18 or a 19 and all of it's baked in, and we got to go spend 10 or 15 grand a unit.

(34:11):
100%.
Yeah, it's like, we think about CapEx as a percentage of the purchase price a lot.
So for example, this $15 million deal, we have a $575,000 CapEx budget.
It's basically four or 5K unit.
The place is in great shape.
There's only four or five units that need a full renovation.
Everything else is great.
Just for bringing rents to market.

(34:32):
And it's like a very straightforward business plan.
The other thing, which I think I kind of mentioned, but I skipped over quickly is we like a lot
of month-to-month residence.
Sometimes that scares a bank.
Sometimes that scares a more risk averse investor because you don't have that guarantee of
a living.
Yeah, 12 months from now is same tenant, paying the same amount.
Yeah, we love it if we had a lot of folks for a month to month because we can get in

(34:55):
there and start.
We know where we can take that rent roll on 90 days, 120 days.
And we can just really start adding value quickly and get into our business plan right
away, which is the case in this particular property.
But for example, a deal that carries maybe a 2% of the purchase price, CapEx budget, which
would be really small, you know, 20 grand on a million-dollar deal.
Maybe that's just you're fixing some stuff in the common.

(35:17):
You're not even doing anything in the units versus a deal that carries a 10% CapEx budget
or even higher, 15%, whatever it may be.
That's kind of the critical data point to where that should inform the returns that
you're seeking.
And I think a lot of folks who are out there, if you're looking for like light, moderate
value-add, multi-family deals, you'll start to see your per-unit CapEx come in kind of

(35:38):
around a range on a lot of the deals you look at, and then you're going to throw a percentage
on it.
But that's a big number in our business.
It's like, if we're at a tent, if this is a deal that carries a 10% CapEx budget of
the purchase price versus 15, then we're going to start to underwrite that a little bit differently
in terms of the projected returns we want to achieve.
And we've started to kind of like define that a little bit more in our business versus,

(35:58):
this just feels like it's a safer deal.
So we're okay at a 15 on this one, and this one feels a little bit more risky.
So we want to underwrite to a 17 or something like that.
Yeah, makes sense.
All right, so how important is speed?
You mentioned it right here with the month of months, and I want to touch on it because
the operator side of it, there's very few people online that are actually operators.

(36:19):
So thank you for being one of them.
How important is the speed component in executing your business plan?
Because that correlates into more IRR in a quicker period of time for the investors,
which entails more investment, more deals all of it.
That is a really big factor, how important has it been for you in your career?
Yeah, speed is huge.
I mean, if you're looking at IRR in terms of net to LP returns, like speed in the execution

(36:44):
of the business plan and getting to a capital event, whether it's a refire sale is such
a massive determinant of what that is, as you mentioned, right?
So obviously, we want to get things done quickly so that we all the benefits trickle down to
our LPs.
Now, if it's me personally, and I'm just doing a deal myself, it's the same thing, but it's
just my own capital, right?
So, which is, that's a speed being a big reason why we like those month to month folks.

(37:09):
Our goal is to spend all of our money on our common areas exterior or systems capex, like
within the first 90 days closing the deal.
Really?
As much as within reason, right?
And usually we can do that because we don't have to bug tenants or we don't have to vacate
units in order to do all of that.
But when you compress the timeline that it takes to do all of the things that you want

(37:29):
to do in your business plan, you're like, you know, in that first year, I think we're
going to go do the roofs, think we're going to paint the common area, and maybe we're
going to try and stripe the parking lot and do all of that.
Like the faster you get that done, the faster the benefits of that trickle down into the
rents that you can achieve in the community.
I think one of, you know, now I'm getting deep in the weeds, but I think something that
a lot of folks who operate deals are plagued by when they close a deal is there are these

(37:51):
different components of the property that we could do this year, but we might get another
couple of years of life out of them.
Yeah, the heating systems are 25 years old and but they still work.
Yeah.
So they might, you know, should we hang on and wait until they fail?
Like the roofs are, I don't know, they're 20 years old.
They got a 25 year lifespan.
They kind of look crappy, but we could probably get a few more years out of them.

(38:15):
Just do it all up front because it trickles down.
The benefits trickle down to all the residents and you start to, and that's, it makes it
easier for you to outperform your rent projections.
Also what it does is it allows you to manage your cash so much easier because you don't
have these ticking time bombs of these big capex, you know, these big line items on your
capex budget coming down the pipeline year or two years in the future.

(38:36):
So what we want to do is we want to get all of our money out the door, like take care
of everything that we got to do.
Now we get into the interiors and then we're starting to rent and we just know that what
we're doing here is now we're renting a complete product, which makes it a lot easier to just
communicate to tenants like, you know, we just did all of this stuff.
Yeah.
And this is why it trickles down to the disaster.
Yeah, that's interesting, right?

(38:56):
And then when we refi, we know we've done all of our capex.
We don't have any of this stuff kind of lingering behind us like the boogie man.
Like we're going to have to go do the roofs next year because we thought we could squeeze
another year out of them.
And now we have to like manage the cash and distribute some new investors, but we got
to hold back a bunch.
So it helps from a cash management standpoint.
I think that's actually a really under discussed component of that, especially when you're
raising LP dollars because managing your reserve account and managing what you distribute

(39:20):
versus what you hold back is a really fine line.
So that makes that whole process easier and then obviously speed trickles down to absolute
returns, which is another component of that.
Yeah, man.
Well, thank you.
All right.
Completely moving to a different direction.
We've talked about this a couple of times and I think we're in both in complete a grants.
I worked at grants for three years, raised 100 million bucks there, went through 19 institutional

(39:44):
transactions.
I've syndicated 50 million bucks to deals, raised $7 million of equity from doing that
since quitting.
I am not the big fan for most people to start in the syndication business.
I think most people should start in five to 10 or 10 to 15 or whatever comfort they can
find in a similar, you call it small deal in their backyard or somebody else's backyard.

(40:08):
Would you agree that if you're just starting out in real estate, maybe you're flipping
homes and you're looking to go into multi-family, you see a bunch of people online that pound
their chests and say, you need to raise money, be a syndicator.
What would your advice be to them on getting started?
Is it become a syndicator day one, raise a bunch of money, become the next Steve Schwarzman
or is it a don't like it's not the sexiest thing in the world, start small, start with

(40:33):
something that you can actually get into?
Because I think the quantification, I wish we could do the whiteboard, you can make more
money in those smaller deals than you can doing the bigger syndications.
I just want to get your input on it.
Yeah, and as you know, I have pretty strong opinions on this topic.
I think there's a couple lanes I want to go down.
First being what we do or what you do when you get into the business.

(40:57):
It depends on how you want to participate in the business, first of all.
The real quick way to describe that is if you're somebody who wants to raise money for
deals and you're not going to be a deal finder and operator, well, it doesn't really matter
the deal size.
You can go raise for a 200 unit deal or a 20 unit deal.
You're out there trying to raise money.
Oftentimes it's a little easier to raise for somebody's deal who's established who's doing
a bigger deal because you're leveraging their track record.

(41:19):
Not speaking to those folks because I think that's a little different, but speaking to
the people that want to go find the deals and buy the real estate, whether they're the
ones who are raising the money for their own deal or they're going to use their own capital
to buy their deal or what have you.
You got to start small.
I don't really understand the approach of so and so says I got to go big, so now I'm
going to go wait to do my first deal until I find a big deal because it's infinitely

(41:42):
harder to do big deals than it is to do small deals.
It's not even comparable, frankly.
Also, early on, and I'll talk about the financial piece of it in a second, but you just have
to build momentum.
You got to stack wins.
You got to make progress.
Waiting to do, let's call it a 50 unit deal, which I'll use in an example, is the time

(42:02):
between you wanting to get into real estate and closing a 50 unit deal is that time horizon
is so much longer than you just going and buying a five unit deal with whether it's
your own money or it's you and a friend's money or one investor.
My brother, yeah, one person for 25 or 50 grand.
Exactly.
Then you go through the transaction process.
You go through the process of doing due diligence.
You go through the process of adding a property management company.

(42:24):
You go through the process of going through the lending.
The knowledge you gain on doing deal one is so significant.
Even if you're in a mastermind group or a community or you're taking educational courses
or whatever, nothing is going to prepare you if you're doing that period.
You just have to do it.
You might as well just go do it.
Doing a small deal gets you so much farther because the next one, it makes it so much

(42:46):
easier to go do the big deal after that if you do want to go jump into that deal size.
Then financially speaking, that's the other piece of it.
This is what I think most people don't see.
I can get specific on the money.
No, I want to.
People see, for instance, our asset management fees are 120 or 130 grand a year.

(43:07):
We've syndicated 50 million.
We've raised $7 million of LP equity.
Yeah, position fees, a couple hundred.
To syndicate 50 million dollars is a pretty hard thing.
In relation to you buying a 10-year-end deal with your own cash, executing the business
plan and going full cycle in a year, you'll pick up the same 150 or 200 grand that we've

(43:28):
picked up doing this big syndication model.
I want to get that deep and quantify it because I don't think people see it.
It's like five universe 50 units.
Let's just say whoever's listening, you can go out there and buy a five unit yourself
or you want to go out there and raise money and buy a 50 unit.
100 grand a unit for both deals.
Let's just say they're valued the same.
The five unit being $500,000 and then the 50 unit deal being $5 million.

(43:53):
Five unit deal, let's say you go out there, you buy for 500, you pay market.
We're going to leave closing costs out of this because we want to simplify it.
You got to put 20% down and you go and get a credit union or a loan to the money, a bank,
whatever.
You put down 100 grand and now you own a five unit property that's worth 500 grand.
Conversely, on a 50 unit deal, one, you got to go out there and you got to find the 50

(44:14):
unit deal.
There's less of them to do.
They're harder to find and they're more challenging.
You got to beat people like us who will compete on it and have a better relationship.
100%.
Yeah.
That deal is going to take a million dollars to close.
In a bank, they're going to give you 80% LTV on that deal.
You need a million dollars.
Let's say you got your own 100 grand to invest, that's your 10% co-invest.
As an LP, invest 100 grand and you go out there and you got to go raise 900 grand.

(44:39):
Let's say you have to go out there and you're probably going to have to partner with someone
to help sign on the loan so that you can get the loan closed because you need a balance
sheet that's equivalent to the loan amount or more.
You need somebody who has liquidity, nine months plus to post-closing liquidity.
Probably need someone to help you run that deal.
You probably don't have the skills to be going around 50 unit deal.
Now let's say you got a million dollars in equity, 70, 30 split on that, a 70, 30 profit

(45:03):
split, very standard syndication terms.
We'll just leave the preferred return out of it for use of communication.
70, 30.
Of that 30, let's just say you keep a third of it in the best case scenario.
You're probably 10 out of 30.
So they own 10 out of 30.
Exactly.
So you got 10% of the upside in this deal versus having 100% ownership in this five

(45:25):
unit deal.
Fast forward a few years.
Values go up in this marketplace and now they're each worth $120,000 a unit.
So now your five unit deals were 600 grand and the 50 unit deal is worth 6 million.
So you sell your five unit, again, closing costs out of it, you make 100 grand.
Great.
So you invested 100, you made 100, perfect.

(45:47):
50 unit deal.
You sell for six, you pay up the bank's debt of four, you return that million dollars in
equity to your LPs, you get a million dollars in profit.
Split 70, 30.
70% goes to your LPs.
They're happy, they get a good return.
Now you have 300 grand in profit.
Now you have to slice that up amongst the partners that we just talked about, right?

(46:08):
You're only getting a third of that.
You're only getting 10% of the upside.
You make 100 grand.
You make the same amount of money and it's 10 times as hard to do the 50 unit deal.
You have to find a good 50 unit deal.
You have to convince the broker to just communicate to the seller to take your offer or if you're
going direct to seller, you're going to knock on, you know, I have a lot of conversations
find a 50 unit deal.
You got to put together the capital, right?

(46:29):
And let's say you brought someone in to raise that 900.
Well you got to give them a percentage of the upside.
Let's say you raise all the money.
Now let's say you got two thirds of the GP, you got 20%.
Okay, cool.
You make 200 grand.
All right.
So you made some money there.
And I will say that the part of this analysis that is left out in my quick little example
here is any acquisition fee that you earn, any asset management fees that you earn, 2%

(46:52):
acquisition fee on a $5 million deal is 100 grand.
Again, you're splitting that 30 re-ways.
So you know, you make 30 grand there.
Cool.
So you make 130 grand, whatever it might be.
But long story short, the point that I'm trying to get at, and I think, you know, that we're
talking about in general here is if you, even with the acquisition fee, even with making

(47:13):
some money on the promote, even with, you know, your co-invest making some money as well,
maybe you make twice as much money as you do on the five unit deal, but it's five to
10 times as much work to do it.
And that's the big takeaway here.
And the last thing when I mentioned as it relates to doing a smaller deal, whether it's
five units or three units or eight units or whatever, it's so much easier to go and buy

(47:35):
that five unit property that's worth 500 grand for 400 grand, 420 grand, 450 grand, where
you close with a lot of equity at closing.
It's much easier to find a discounted opportunity in that size range.
And the last point is you're receiving the cash flow on your five unit deal that you
just bought with your own money.
Any syndicated deal typically has a preferred return.
All of the cash flow from that deal is going to the LPs.

(47:57):
It's not, you're not seeing any cash flow as a GP.
And that's, I think one of the biggest misunderstanders components of raising money and doing deals
was just at a conference this weekend, as I mentioned to you, everybody there wants to
do big deals.
And it's like the harsh reality is, okay, you can do that, but do the math.
And then also accept the fact that you're not seeing cash flow as a GP.
There's no cash flow as a GP outside of an asset management fee.

(48:17):
Even that could be meaningful to you depending on where you're at, but you're not seeing
any cash flow from operations until you do a really large refi and return a very large
chunk of investor capital, which two, three years down the line probably on really any
deal.
Really you're being compensated when you sell.
It's fundamentally when you make the money.
Whereas you can build a portfolio of smaller properties along the way and actually generate
cash flow.

(48:38):
Yeah.
I have a very strong agreement with the statement.
And the reason I say it is because I'm a big numbers guy.
I'm a big probability guy.
So what's the probability of somebody that's listening, they're in a job or they want to
jump in the multifamily, they're doing the single family home.
What is the highest probability of success for them jumping in the multifamily as a whole?

(48:59):
You have different options.
You can go down the small five, 10 off market or you just have other people bring you deals
or you can go down the syndication route.
I see even myself being at grants.
It's like the only thing I wanted to do was big, big, big, big deals.
And the more people that we have in our community are like, hold on a second, let's look at
performance.
Let's look at how many otherwise it went out, what size deals were we going out.

(49:19):
Interesting.
We actually see more deals close, one close actually get awarded and close on the 10s,
the 8s, the 12s, the 16s.
Then we do the 172 unit.
But all you hear about is this $25 million deal is 172 units.
Nobody talks about carried interest and how much it's retained.
No.
And I think this is a bit of a sidetrack, but I'll kind of bring it back.

(49:44):
We're weaving.
I mean, yes, yeah.
I'll weave, I'll bring it back.
I'll do it faster than Trump did at Joe Rogan's pod.
But you have kind of what we've been talking about is small deals, which let's assign
5 to 20 units to that size range, what have you, right?
And you can, let's say those are deals that you can do yourself maybe with a joint venture
partner or something like that, but you were on a very large percentage of that equity.

(50:07):
Then you have what I call the messy middle, where it's like 20 to 100 units.
And I'm out here raising money for those deals and doing those deals.
So take it from me, I know the economics of those quite well.
And unless you're doing those at like scale in terms of you're doing a couple hundred
units a year, which is kind of the volume we do with those types of deals.
So we're doing a higher volume of deals approach, but individually on those deals, the promotes

(50:28):
and the fees aren't that significant.
That's what I call the messy middle.
Let's just call it $15 million plus in deal size, 100 units in Indiana is a lot different
than 100 units in Miami, but casually speaking, $15 million plus in deal size.
When you get to that large deal size, obviously you're making money via a promote, but it's
much easier to build a platform around doing those deals because the fees are much more

(50:51):
meaningful.
So the messy middle, you're not really making that much money on fees and you're not really
making that much money in your promote.
Relatively speaking, a lot of money is different to different people, but it's harder to build
out a platform when you're going out there and you're doing 70, you know, eight prefs,
70, 30 splits on these three, five, $6 million deals unless you do a lot of them.
So it's much easier to kind of pick a lane.

(51:12):
So for me, early it was, I picked my lane of doing these small deals that I own and
I still do those now.
Like, I, you know, I'm going to close on a seven unit deal.
That's a million bucks in a couple of weeks that I own, like, or that I'll just be doing
personally.
And for me, those deals make as much money, nominally speaking, as me being a sole GP on

(51:33):
a $4 million deal.
When you look at basically the same analysis I just did, the reason that we do those deals
that are kind of in that messy middle is we find them.
You know, it's like, we're finding a good deal.
So what are we going to do?
Not buy them.
So that's one.
Two is it allows us to build out our infrastructure a little bit more easily in terms of the property
management company, you know, more units under the roof of the management company allows

(51:55):
to hire and make that business a little less fragile.
It allows us to continually transact in the marketplace, get our name out there, et cetera.
I don't have the money to do them myself.
So really the only way to get them closed is to raise them.
But, but they're not, but the economics are out of whack until you get to, again, a much
larger deal size.
So the fees are a really large absolute percentage return as a GP.

(52:16):
So when you're early, you should try to almost pick one side of the other.
And obviously my opinion is the smaller stuff.
Do some deals yourself that are smaller.
You know, if you're going to raise for a deal in the messy middle, like understanding the
economics may be out of whack, but you're doing it for other reasons.
And now where I'm at in my business is trying to mitigate the amount of deals that I'm raising
for in the middle.

(52:36):
Either do deals myself or with like a partner or two, you know, not syndicate those deals
in the middle and only syndicate deals on the larger side.
That's when economically makes sense for our business.
Well, thank you for breaking it down.
I'm telling you, I think I really do think people are going to enjoy it.
All right.
So let's wrap it up with where, what does the next five years look like for you guys?
I guess two things.

(52:57):
What's the future look like?
And then crystal ball 25 predictions.
That's how we'll wrap it up.
Got it.
So start with the crystal ball and then I'll talk about what we're trying to do with the
next five years.
So one of the really common, I guess, talking points right now, for lack of a better way
to put it, data points that a lot of people in multifamily are tracking is supply of a
cliff.
A million units?

(53:18):
Yeah.
We own, you know, we had a 48 unit in Florida, you know, we were up to about 100 units and
change in Florida between a few deals.
We sold a couple of them, did well, and we still have a 48 unit.
And then we have, you know, a few hundred units in a very concentrated area in New Hampshire.
And we got up to more than that.
And we've been selling some to try to put some in cash, kind of take advantage of where
we're going.
And I mean, those are two of the two polar opposite markets, but speaking geographically,

(53:40):
you have the Southeast, Southwest, Northeast, kind of Northwest West Coast.
And the high level comparison being supply constrained versus not supply constrained.
A ton of people moving to Florida, a ton of people moving to Arizona, a ton of people
moving to Texas, but they're building the crap out of new development and they added
all of this new supply.
So we have this 48 unit in Bartow.
That's where we own it.
And like we're keeping the units full, we're doing a good job, but like supply is really

(54:05):
something that we have to contend with because it's been a lot of supply added to that market.
There's been no supply added to the New Hampshire market really.
So in 22, 23, 24, when a lot of rents are going the other way throughout the country,
they were going up.
We've still seen rent growth.
Supply falling off the cliff as a result of nobody starting any deals this year because
construction costs are still high, rents are flat lined on a lot of markets, interest rates
have been high, it's harder to pencil new development.

(54:27):
That falling off the cliff, I think is going to be a nice tailwind for people that own
existing deals, especially for the folks who already own stuff in supply concern markets
where there wasn't a lot of supply being added anyways.
And then for the folks who are in like in Austin, Texas where like they're just trying
to hold on, just keep their buildings full, like it's going to help those folks.
So I think that's number one.
And I think it allows you to be a little bit more precise with projecting rent growth.

(54:50):
We're not one to go into an underwriting model and do like four and a half, five percent
rent growth out of whole PLA.
I think there's a little bit of a response.
Well, every people will pencil out if you do that.
But if you've historically been at two, two and a half, maybe you could try three, three
and a quarter, something like that, right?
A little bit more nominal growth in the first two years of your whole period if you're doing
deals today.
Other components of this, I don't really see a world in which single family home pricing

(55:11):
comes out because it's the same dynamic, right?
We're not adding new single family homes in the vast majority of the markets for the same
reasons.
It's expensive to build, interest rates are high.
And it's really hard to, for a first time home buyer should go out there and buy a property.
So I think percentage of the population that is renting will continue to increase as a
percentage of the overall population.

(55:32):
And again, that's going to hit some markets more so than others in a market like New Hampshire,
for example, where median home prices are $5,500, $6,000 in a lot of the markets that we buy
in, it's much higher than the national average.
Yeah.
You got to make $200,000 a year to go on a four to mortgage payment on a starter home,
right?
And even then, your alternative in terms of what you could rent for is so much cheaper.
So I think we're going to continue retaining a lot of residents.

(55:56):
I don't really see a world in which more residents convert to home buyers over the next couple
of years.
That's not something that we're predicting.
I think lastly, and this is less about economics and in terms of pricing and stuff like that.
And this is something I've noticed over the last couple of years, as I'm sure you have.
I mean, groups like the Deal Room, right?
Or impacting the market in a similar way where the average knowledge of somebody who's

(56:19):
getting into this game is just so much higher year after year.
It's almost like hard to be a new investor nowadays and not at least get into the business
without some hold on the process, right?
Some knowledge of the process.
Even just back in 2016, 17, it was a completely different landscape as it relates to really
the only education online was like some YouTube videos in bigger pockets.

(56:42):
And now there is specialized education depending on your strategy.
There's 20 times as many podcasts.
Go look anywhere on your phone.
It's just it's impossible to not get inundated with, let me show you how to do it, right?
So the new investors who are getting into the game now and the existing investors, the
baseline skill sets much higher.
And it's just a much more competitive game.
Even if the market adjusts and pricing comes down or what have you, the average player

(57:06):
is just better, especially for the younger generation of people.
I'm a little older than you, I think, but I'm 30.
So anybody who's like 22 to 35, 18 to 35, there's no excuse for them to be bad at
real estate investing because there's so much content.
And I think that the mom and pop owned era of these deals is we're starting to slowly

(57:29):
phase out of that where like we're still buying properties from someone who's 65 who has no
idea what they're doing.
Like they just, they're not collecting rent.
They're not using any property management software.
Like those deals are going to be less abundant year after year, which is why in our business,
I kind of feel that, right?
It's like our marketing is a little less effective now than it was two years ago, much less effective
than four years ago, way less effective than six, eight years ago.

(57:52):
But there's still opportunity in doing so.
And I think there always will be to an extent, right?
There's always going to be a motivated seller.
Like the fruit is not as easy to pick off the bottom of the trees.
You're going to start to climb a higher up.
So we're pouring so much more resources into that, knowing that it's not going to be, it's
never going to be as easy as today to find deals, which is a much more succinct way,
I guess, of trying to say what I took a little bit longer to say.

(58:13):
So that's a dynamic that we're noticing as well.
As for what we're doing, five year goals, I think a lot of people have a dream of owning
a large platform that owns and manages thousands and thousands of years.
That used to be my goal in terms of New England and then other states throughout the country.
I've since kind of re, the last couple of years, I've kind of re-focused on what I envision

(58:38):
being like ideal work-life balance, ideal day-to-day, I wake up and I'm going to go run
a business.
1500, a couple of thousand units in a market like New Hampshire is a really large portfolio.
Yeah.
3000 units throughout New England being maybe it's New Hampshire, maybe it's Southern Maine,
maybe it's like Northern Rhode Island, kind of our north of Boston, our south of Boston.
That's a really, really large portfolio.

(58:59):
That maybe is like a five year down the line objective is something that I'm thinking about.
The challenge for us is we're vertically integrated, so we have to grow that business
in conjunction with our portfolio.
But really, that is all a means to an end for me, which is I would, you know, my whole
north star in this business is I want to own 500 units of property that I own myself with
moderate leverage.
That's where the real money, all the wealth-

(59:20):
And generational, something you can pass on.
All the wealthiest guys I know in real estate, all the old timers in Boston, all these guys
who are worth maybe not 10 figures, nine figures plus, it's just a bunch of people who bought
stuff themselves and they just did it over a long time horizon and maybe they syndicated
along the way.
Yeah.
The majority of their wealth was built in just deals that they personally own in, you know,

(59:44):
1031 into 8 unit into a 20 unit.
They had that for a few years, 20 unit into 30 units.
And for me, it's also an ideal, because it's really hard.
It's really stressful to raise money to manage a large business.
We've probably raised $15 million, $18 million now.
We've got a hundred investors in our deals.
That's the most stressful part of the business is that part of it.
So it's like at some point when I'm 40, 45, 50, like having 500, 600 units or so that

(01:00:09):
I'm a sole owner of and I've phased out of some of the syndications, that's kind of my
ideal long-term goal.
Well, thank you for sharing that.
What is, so lifestyle, is it get super wealthy, give back impact?
Do you have any charities?
You don't work all these hours and work really fucking hard finding all these deals.

(01:00:30):
Do you have anything that you want to like touch on, on charity or something that you
do to give back?
Yeah.
I actually, I sell a couple of small educational programs.
I know you're aware of that.
We donate 5% of all the gross proceeds to a charity in New Hampshire called Families
and Transition, which is basically an organization.
They do public-private partnerships, privately funded with some public funding, and they basically

(01:00:55):
create transitional homes for people coming out of homelessness, 90-day, 120-days.
Big part of what they do is there's a lot of education around personal finance.
So it's above and beyond just a pure shelter, it's educational as well as housing.
So we donate 5% of the proceeds of that to that organization.
And another byproduct, I mean, without going too deep down this road, but oftentimes the

(01:01:17):
root cause of homelessness being drug addiction, challenges in my family as it relates to
that.
So part of that organization, they have an arm as well, which is more drug rehabilitation.
So that's a charity that kind of serves both of those purposes.
So everything that we do in our business, like educational-wise in terms of like selling
some of our programs and stuff like that, that's a big component of it is just 5% of
gross proceeds.

(01:01:37):
We donate to them.
I asked the question because the impact, like after you get to the, you know, you create
wealth for yourself and you build out a team, your staff, your investors, all that, it's
like you get to the point where you have a lot of money and then philanthropic approaches
and like charity and giving back and then the impact that you get from that.
I think oftentimes people, it's like, well, I'll do it at some point, but you never know
when that's some point is.

(01:01:59):
So the way that we kind of figured it out in our business was tying it to a component
of our business so that it scales over time.
And then, I mean, homelessness is like one of the biggest problems facing, I think, the
country, I mean, different areas.
It's a different issue depending on where you're at.
But I think part of a challenge of doing a lot of C-class real estate investing is you

(01:02:20):
see the other side of the people who are living in sometimes really challenging situations.
And oftentimes they end up either coming from a homelessness situation or they may be returning
to one at some point in their life.
So getting involved at that level, it's like a little bit more directly adjacent to what
we're doing in the core business anyways, which is nice.
Cool man.
Well, all right, I could probably sit here and talk for hours and hours and hours.

(01:02:43):
So you're raising money for the deal right now.
Not sure when this is going to air.
When is it close?
Early December.
Okay.
Sometime in November, we may have a few slots open.
Reach out to me.
So you do a lot of podcasts, you have a couple of educational programs, which by the way,
you should like, if you want to jump into the business and you're going to choose that
one thing of like, what am I going to be?
And you want to be the deal finder 100% you need to hook up on Axl stuff.

(01:03:06):
I do not, like I do not trust a lot of people.
There are a lot of bad actors in this business and Axl I can say with confidence that I trust
them and that you should grab at least some of this stuff, if not invest with them and
learn from them.
Where can people find you and like plug into what you're doing?
Well, first of all, I appreciate that.
Second of all, Instagram is one of the most active at multifamily wealth.

(01:03:26):
And then the multifamily wealth podcast is the podcast I host one to two episodes a week.
I'm really feeling it.
Two episodes when there's a little bit more going on.
It's one episode, but it's very, very tactical content associated with building a multifamily
portfolio specifically for operators.
Like people that are finding deals and putting them together and getting those deals closed.

(01:03:46):
Outside of that, Axl AXL at alignedREP.com.
Cool.
That's my email.
All right, ladies and gentlemen, that was an amazing episode.
Axl, thank you so much for being here and we will see you in the next one.