August 7, 2024 • 56 mins
Connect with the host:
LinkedIn: https://www.linkedin.com/in/brandon-e-jenkins/
Website: https://www.birchprosper.com/
--
About the guest:
Steve Sherman has been a real estate professional since 2008, initially owning and managing a single-family rental portfolio in Northern Virginia from 2008 to 2019. With over 18 years of experience as a senior project manager in construction, Steve specializes in large, complex government and transit projects. He holds a BS degree in Business Management from Radford University and is an active member of Brad Sumrok’s Personal Mentoring Group since 2019, as well as the Investor Fuel Mastermind. Currently, Steve serves as a General Partner and CapEx/Asset Manager in real estate investments, leveraging his extensive expertise in project management and asset optimization.
Connect with Steve Sherman:
Instagram: @sherman_multifamily
Website: www.shermanmultifamily.com
Facebook: https://www.facebook.com/steve.sherman.904108
Episode Highlights:
✔️Emphasizing operations and CAPEX
✔️From property management to syndication
✔️Underwriting, budget management, and contract negotiation
✔️Managing and mitigating risks in a deal
✔️Geographic and property type diversification
--
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_01 (00:00):
Right.
So your business plan beforeclosing may not be what it ends
up being.
I think you gotta have you gottahave the the vision to see once
you start something, you don'thave to go all in on that if you
see it's not working or maybethe ROI isn't there.
So you have to do a pivot andyou gotta get into something
different.
SPEAKER_00 (00:22):
How successful would you be if you had the blueprint
for building wealth as a realestate investor or as someone
who acquires small businesses?
If you want to move the needlefinancially in your life, then
you need to understand one thingthe capital stack.
I'm your host, Brandon Jenkins,and this is where your journey
to financial freedom begins.
(00:43):
Hey, what's up, everyone?
Welcome back to the CapitalStack.
I'm your host, Brandon Jenkins.
Um, you know, we uh talk quite abit on this show about the
various pieces to the puzzle asfar as the syndication team goes
and sort of the knowledge thatwe need to have in order to have
a successful um deal, asuccessful uh operation,
successful syndication, okay, sowhere to where our investors um,
(01:06):
you know, we get some goodreturns for our investors and we
kind of build that confidenceover time in our ability to
manage an asset, okay,efficiently.
One of the most important piecesof that puzzle is understanding
the capex, understanding theconstruction work, understanding
real operations.
Okay, and I have found thatthere are not very many uh
syndicators that have thatbackground.
(01:26):
And so um, we are fortunatetoday to have someone who has
that background, an extensivebackground, of understanding
kind of where the rubber meetsthe road or where the hammer
meets the nail and getting downinto okay, where are the capex
dollars being spent and how, youknow, what comes it as far as
budgeting and planning and allthese things that are so
important to this business.
So our guest today is SteveSherman.
(01:47):
Steve, how are you doing today,man?
Great, Brandon.
SPEAKER_01 (01:50):
Thank you for having me on.
SPEAKER_00 (01:51):
Absolutely.
Thanks for being here, man.
So Steve is the president ofSherman Multifamily, a firm
specializing in the acquisitionand operation of large
multifamily assets.
In fact, his portfolio uhhistory includes over 1,900
units.
So very impressive.
Steve has been in the realestate business since 2008.
Interesting time to be in thebusiness and brings his
experience as a professionalproperty manager to the projects
(02:14):
where he invests as asyndicator.
And so, um, you know, Steve,with that, man, welcome to the
show.
And I kind of, you know, want toget uh, you know, into this uh
this this uh this business andkind of your side and and where
your journey has taken you.
But before we kind of get intothe details, why don't you share
just a little bit about yourhistory uh and your journey with
us?
SPEAKER_01 (02:32):
Yeah, absolutely.
Um I started as a businessmanagement major um in college
out in Virginia.
Um so and I mentioned businessman or business management
because it kind of got me intothe career that I'm in um in a
sense.
So I got into um projectmanagement as a sophomore in
(02:53):
high school.
I was an intern actually um at aat a large electrical contractor
in Washington, DC area, andmanaging projects.
So after after graduating, gotinto full-time project
management.
And this was 2008, 2009.
Um, you graduate college, youknow, you finally have start
(03:16):
making some money, you don'treally know what's going on in
the world, you know, the the theGFC.
Um I I didn't really understandthat.
So, you know, I got in aconversation with uh my my
manager, my my mentor at thetime, and he was like, Steve,
you need to buy a house.
I was like, I was like, okay.
(03:36):
I was like, why?
I said I don't I I find I'mfinally making decent money.
Why, you know, why am I gonnaspend it all on a house?
Well, in in 2009, in November2009, ended up buying my first
home.
It was a townhouse.
I think I bought for$90,000.
Um ended up living in it, and Ihad I had a few roommates.
(04:00):
Um so essentially I didn't haveany rent.
I at this point I still didn'tget the bug yet, right?
The real estate bug.
Um so continuing on, um, endedup moving out of that property
and renting it.
I, you know, you you go throughsome um some lessons learned
(04:20):
there and through relationships,which we can get into in a
little bit, because I think thatwas a big piece of kind of where
or how I got to where I am todayum through relationships.
So I moved moved out of thatproperty, rented a rented a home
up in Arlington and wanted toget closer to my friends and you
know, kind of a little more umsocial circle.
(04:46):
So I I rented that house out,um, the first house I bought,
and I started to see the powerof rent, right?
Leveraging my money and gettingthe rent income and seeing
multiple streams of income.
I didn't really, I wasn't reallyeducated on the space, but that
came a little later.
Um so that one house turned intoa second, and then I learned
(05:12):
about 1031 exchange.
I got that first house, I 1031that into a better neighborhood.
And I started to realize thatmarket, right?
There's a um, there's a MarineCorps base, Quantico, and it's a
couple miles away from Quantico.
So I got educated on the marketand the surrounding area and
(05:33):
learned aboutmilitarybiowner.com listed on
there.
And I got some good qualitytenants, and I had two um two
single family rentals that wereyou know covering a lot of my
living expenses.
So that's kind of the early partof kind of getting that bug.
Um, and then my my projectmanagement experience started in
(05:57):
as a sophomore in high school,working with this electrical
contractor and eventuallygraduating and starting to work
with them full-time.
And project management is agreat springboard into um a lot
of things multifamily,understanding the the business
side of it.
Every project as a projectmanager is is a business, right?
(06:19):
You have a budget, you have afee or profit that you're trying
to get to, and increase.
Um, you have a team, right?
So managing that team um tosuccess and making sure you're
delegating um the rightactivities and then leading that
team to success for a successfulproject.
(06:40):
And there's subcontractors,right?
This is where the capex comesin.
You're managing subcontractors,and that is there's there's a
lot of key points there.
It's coming up with a with agood, solid, and clear scope of
work.
So you can go out to themarketplace and get the same
number or the same quote for thework that you want done.
(07:02):
I see a lot of people bringingin um contractors and saying,
hey, this is my problem, fix it.
What do you want to fix it?
And then they bring in somebodyelse, and they're not getting
the same quote, right?
Because every contractor sees itdifferently.
You gotta have the eye to go inthere and say, This is what I
want done, right?
How much is this scope of work?
(07:24):
So I think that that, and and wecan get into more as well, but
there's there's little nuggets,right, in project management
that is a good segue or goodeducating piece that works
itself into multifamily, whetherit be underwriting and
understanding finances andbudget to negotiating contracts,
(07:45):
right?
Negotiating um negotiatingcontracts with your your CapEx.
So there's a lot of a lot ofgood um segue from project
management to asset managementand just being a good operator
in the multifamily space.
SPEAKER_00 (08:05):
Man, absolutely.
I I really appreciate you goingum into kind of that detail
there and sharing yourbackground.
And this is exactly what um whatI was getting at in the in the
intro there.
And so I've been over herescribbling and taking notes.
And so I'm gonna go, I'm gonnago back to um um to some of the
earlier stuff before we kind ofget into the later thing.
The first thing is it's reallyinteresting that you 1031 um
(08:26):
that property early on likethat, um, because it it's the
first thing is it's it's anintimidating um process.
Uh, but but but it's interestingthat if you it's intimidating
for people if they kind of pullin too much information to kind
of make it plain.
But if you if you start off byjust looking for the plain
answer, then it becomes maybenot so intimidating.
(08:46):
But how but how did you kind ofland on that as okay, this is
what I'm I'm going to do?
Because a lot of people wouldn'thave done that after their first
property, but I think it's why.
So, how how did you do that?
SPEAKER_01 (08:56):
So it goes back to relationships.
I grew up, so a little morebackground, and then I'll get to
the point.
So I grew up playing ice hockey,and a lot of my, you know, my
friend circle, my even myparents' friend circle, my
brother and sister's friendcircle.
They we spent so much time atthe ice rink, and a lot of the
friends and family all came fromthe hockey world.
(09:17):
My real estate agent at the timewas a hockey guy.
His kids played, he played, hewas always around the rink, and
we built a great relationship.
And once I started, you know,getting that rental bug, he
goes, You can turn this intosomething, right?
And um, so I was like, I reallywant to get out of this
(09:38):
property, the first property Ibought, and get into something
nicer, a little bigger, get theequity out and 1031 it into
something.
I didn't know what a 1031 was,but that's where that
relationship came in.
And I leveraged his knowledgeand experience to help me out.
So he guided me through, he gaveme the you know the resources,
(09:58):
the 1031 specialist, um, got mein touch with the right banks,
the his, you know, his innercircle, and I leveraged that.
So they kind of walked methrough and he helped me
identify which in within thewithin the time period, um, and
then find a great property.
So it's again, it goes back torelationships.
And I think that seeing thatearly on in my real estate
(10:21):
journey has obviously helped meget into where I am now as a
limited partner, as a generalpartner, and then finding
finding partners, buildingrelationships with CPAs, with
brokers, with investors, right?
Relationships are a big part ofthis world.
You can't do anything alone.
SPEAKER_00 (10:41):
That is 100% correct, man.
I um I share with people uh alot that one of the best ways to
build your team, because that'stypically when people before
they start, um, they they say,Well, I don't, you know, don't
have the contacts, I don't havethe people.
And usually what I tell them isyou can build your team from uh
the other contacts that youmake.
So you can you can say, hey, youknow, uh to your agent or
(11:01):
broker, you know, hey, who's agood inspector?
You know, who's a good um GC,who's a good uh property
manager?
Who's you can you can start itthere?
Um there are many ways to do it,but that's one of the most
effective ways because they'reonly going to give you the name
and the contact of someone thatis at least somewhat
trustworthy.
And so you're right.
I mean, those relationships uhthey mean everything because
it's the difference betweentrying to fight through it and
(11:24):
and get burned out andeverything, figure it all out
yourself, which will take yearsand years and years to do, or
you can do what you said, whichis to leverage someone else's,
you know, knowledge andexperience, they're gonna point
you in the right directionquickly.
And so um, you know, it justcan't it can't be you know said
enough that it's like makingthose connections, fostering
those relationships, and thenlearning how to network
(11:47):
intentionally so that you canyou know mutually benefit is
powerful.
And you've done that.
So I think that's I think that'soutstanding.
SPEAKER_01 (11:53):
It's like it's like being in the fast lane, right?
It's like a cheat code forgetting further in whatever
you're trying to do, right?
So yeah, leveraging thoserelationships is is super
important.
SPEAKER_00 (12:07):
Yeah, absolutely, absolutely.
Um so there's something elsethat you said there that I like
when you were kind of talkingabout the uh uh every project is
um I'm sorry, every yeah, everyproject is a business to a
property manager or to a projectmanager, excuse me.
Um, but I just think that's avery powerful concept for people
(12:27):
to to really grasp, you know,because as you um as you get
into each deal, you know,especially for someone who maybe
has done it multiple times,there is this complacency that
can set in where it's almostlike, well, this is kind of just
another deal.
And it's like, well, this is ait's a business, you know, and
you have to treat it with theseriousness um of a business.
(12:49):
Otherwise, you won't be in thissector for very long uh because
you didn't you hurt yourself,you hurt investors and you hurt
the tenants and everything else.
Um and so so how how did you howwere you able to sort of
leverage your your professionalbackground um into you know to
maybe to maybe kind of usingthat same concept and approach
um on the multifamily side?
(13:10):
Like what's your what what'syour your role typically on the
syndication team?
SPEAKER_01 (13:15):
So it started out as the CapEx manager.
So creating the business plan,helping them with the, you know,
creating the business plan fromthe underwriting before closing.
And during closing, it was a lotof you know walking, um, walking
all the units with the duediligence team, taking notes,
(13:36):
and then doing our um doing ourmarket surveys.
So walking other properties,seeing what they're getting for
rents, what their interiors looklike, what their exteriors, what
amenities do they have versuswhat we have, right?
Where's the opportunity in theproject that we're looking at or
about to close on, and reallytaking that, you know, looking
(13:58):
for the ROI.
So if we're gonna, if we'regonna either raise money up
front, or if it's gonna befinanced, it's how do we how do
we most effectively andefficiently deploy that capital
to increase the ROI or the thevalue of the property?
So I think having an eye forjust the the little things,
right?
(14:19):
It can be as small as if youhave a B plus in like an A, or
your you you gotta know yourclientele, right?
Your tenants.
But as a very small example foryou know seeing things as a
project manager is receptacles,right?
(14:39):
Just a normal receptacle like ina kitchen.
You can replace that with areceptacle with a USB.
And if it's something small, youstart seeing hotels have it.
It's like everywhere you go, youstart seeing like these little
details, like would that makesense in multifamily, right?
Maybe not in a in a Cneighborhood or in a C building,
(14:59):
but maybe something a littlenicer with some nicer upgrades,
you know, granite, stainlesssteel that lends itself to you
know the younger generation, youknow, the the right out of
college, you know, the youngertype.
So seeing those things andsaying, how can the small cost
when you're turning a unitreplace this?
Right?
(15:20):
Replace the receptacle, put thatin there.
It's just one little thing thattenants are walking through and
making sure you're educatingyour property manager on, you
know, hey, we we have these,these are different, right?
But it's I think it's justhaving a good eye um of you know
understanding what yourcompetition has, what you're
(15:40):
starting with, right?
What is your canvas, and thenhow can you how can you lift
that up in the most economicalway, right?
For the biggest bang for yourbuck.
Um and things always change,right?
So your business plan beforeclosing may not be what it ends
up being.
(16:01):
I think you gotta have you gottahave the the vision to see once
you start something, you don'thave to go all in on that if you
see it's not working, or maybethe ROI isn't there.
So you have to do a pivot andyou gotta get into something
different.
Um so in project management,every day is different.
I wake up, there's a new issue,there's a new problem, right?
(16:24):
And the mindset shift there isit's you got to stop using the
word up or uh issue or problemand start turning into
opportunities, right?
So it's an opportunity to eitherfix something or figure out how
this happened, right?
And make it not happen again,which goes down into like
systems and procedures, which isalso something that's very big
(16:46):
in asset management andoperating a property.
SPEAKER_00 (16:50):
Yeah, you know what?
I I like that you um that youthat you said that you have to
see it sort of as anopportunity.
And the other thing I think thatthat requires a mindset shift is
understanding that every daythere's gonna be a new issue
because some people freak out bythat, you know, when they when
they show up and things thataren't all steady state and
they're not all exactly the sameas it was yesterday with no
change, then they think that'show it's gonna be every day.
(17:12):
Um, but it requires a shift tosay, yeah, there are going to be
problems every day and issues oryou know, concerns or
opportunities, right?
Using the right uh uh languagethere, that there's gonna be
opportunities every day.
And how can you address them?
But but it's almost beingcomfortable with the fact that
listen, this is a fluidsituation.
And so it's not be just justbecause we we put it on a uh put
(17:34):
it in a spreadsheet and we havesomething typed up doesn't mean
that it's gonna be stagnant.
Um, and so you almost have tolook at it as good, you know.
I mean um it's it's a good thingthat it's fluid because it, you
know, it keeps us alwaysthinking about uh things that
are outs outside the box.
Um, and I want to ask yousomething really quickly too,
because you mentioned uh brieflythere that a part of what you do
is uh walking units with the duediligence team.
(17:56):
And for the benefit of thelisteners, what is the due
diligence team and kind of whatwhat do they do?
SPEAKER_01 (18:01):
So due diligence is uh usually a 30 30-day period
before we or after we get ourLOI accepted.
Um we go into do the duediligence period, and we have
about 30 days, and what we do isuh we've done it a couple
different ways.
We've we've hired a third partythat specializes in due
diligence, and they'll comethrough, they will walk every
(18:23):
single unit, they will inspectthe exterior and interior of the
property, your HVAC, yourelectrical, um uh the bones of
the property, structure, theroof, everything.
And they'll give you acomprehensive report on you know
what they recommend or what theyou know, how old is the roof.
You know, if you have a 20-yearroof, 20-year roofs don't last
(18:46):
20 years, you know, they lastmaybe 15, 12 to 15 years,
especially in Dallas, right?
With the heat.
So you take all that informationand you you come through it, set
up a meeting with them, and youcan kind of either re redo your
business plan.
So say we got this bucket ofmoney, this is what we were
gonna do with it.
We have some contingency fundsthat we wanna, you know, maybe
(19:09):
we have some roof patches totake care of.
So we also not just the bonesand the structure and the the
systems of the the property, butyou're also going through the um
the tenant files.
So you're doing lease audits,you're understanding, you know,
who's living at the property?
(19:29):
Do they all do they all haveinsurance?
Is all the paperwork there,right?
Um, you need all those recordsand having all of your
contracts, right?
What contracts are currentlyactive?
Which ones can we get out of?
Um, is it lawn care?
Is it laundry?
You know, what are we cominginto?
What are we dealing with?
And you're verifying all of theinformation that you got in the
(19:52):
broker package or the offering,the offering memorandum, and
you're and it gives you a chanceto say, um, you know, you came
out there and you saw somethingthat was materially different or
not true, or something that's agame changer, right?
It's it's going to affect yourunderwriting so much.
(20:14):
Like, for example, if you had toreplace the entire roof because
it was damaged and you couldn'tsee that just from the ground,
but through due diligence, um,the inspection came back and
they the roof is this old,that's not the information we
had it underwriting.
You can go back to the to theseller or the broker and say,
hey, this is what we foundduring due diligence, and you
(20:34):
can negotiate some of thesethings.
So it's it's just a lifting,lifting the curtain, pulling the
curtain back, and saying, whatare we dealing with here on a
very granular level?
SPEAKER_00 (20:46):
Yeah, I mean, you know, it's interesting, uh,
Steve, even in the the the kindof rundown that you gave there,
um, your your professionalbackground is very apparent,
right?
Because you just kind of threwsomething out about the uh about
the roof, right?
A lot of people will misssomething like that in their in
their underwriting.
It that's the reality.
A lot of people won't say, well,hey, how old are some of these
structures?
(21:06):
Because you have to absolutelyplan for it.
And you're you might have toreplace it in year uh three or
year two or four or whatever itis.
And so you have to be ready forthose kinds of things.
But some people, you know, ifthey look at an underwriting,
they just assume all of thosethings are smooth.
And you can have these thingsthat will require a significant
boost.
And um, whether it's from yourcapex, I mean, you know,
depending on what the what whereit's coming from, but it'll it
(21:28):
can cost you a lot of money.
A lot of times it can put asqueeze on the deal.
And so um, so again, I just youknow, your your experience there
is really is really critical.
And I appreciate you you knowsharing kind of that due
diligence.
And I think, you know, when Ithink about uh what's at the
core of kind of the duediligence process, I really
think about risk, like riskmanagement, you know, because
it's around material risk.
(21:49):
It's around, I mean, someproperties that might, if it
depending on the condition, itmight present a safety risk.
Um, you know, you've got thingslike financial risk, vacant
vacancy risk.
And so you're really, and thenultimately.
risk to the project.
And so if you've underwrittenthe deal with with a certain uh
uh you know uh amount ofinformation and it's materially
different then now you the dealitself is at risk and so you
(22:11):
might have to walk away you knowor you might have to come back
to the table and say well listenthis this changes things um so
so just again uh you know I likeI said I mean I think that the
your background and the rolethat you play is vital.
It's one that we don't hearoften enough because people tend
to farm that out and think thatsomeone else can do it.
It's like but if you havesomeone that you can that you
(22:32):
can find that um does thatthemselves then you know it's
it's a I think it's outstandinguh ad.
And so let me ask you okay justnow on your your you mentioned
ROI a few times in there andthis is a point that I like to
make as well with people is youknow so you go into a deal and
you have a plan.
(22:53):
It just like you mentionedthings change.
And so you don't necessarilyhave to take the full CapEx
budget and hit the hit theproject with all of it because
the plan before you you boughtsaid that we're going to do all
these things.
Instead you kind of test themout because you might be able to
get a good portion of thatuplift um by doing less work and
(23:13):
um or you might you know do awhole bunch of work and not get
any uplift.
And so it's it's wise to thensort of have this gradual you
know let me do some of the worklet me test it out test the
results and to uh determinewhether it's uh it makes sense
to keep going down this path.
You know so so how how do youhow do you do that?
SPEAKER_01 (23:31):
Like what what have you kind of done to maybe
determine well whether we shouldor should not continue to spend
capex dollars toward thisparticular uh value ad yeah so
you know I guess I'll give you afew examples here we were
looking at we have a propertythat's kind of in a it's in a
neighborhood right so we wereone of the things that we wanted
(23:54):
to do was say hey let's you knowone thing we can do here is put
a fence around the propertyright like a um like a not
really security fence but just afence around the property to
make to give the feeling ofsecurity um we're trying to keep
people out you know the peoplewalking through um which you
know I early on it made it madeit made some sense um but I
(24:18):
think it's one of those thingswhen you look at it and you
start asking people and you askthe property managers, you know,
what are you seeing during theday when we walk through the
properties you know that'ssomething we're looking at um
you're not it didn't really makea lot of sense though.
So we took that budget and wemoved it into something else.
We moved that into um extendingthe patio fences right so it's
(24:41):
if we were so it's understandingwhere you're at like where the
property is located.
If you're next to a lot ofshopping or um you know a strip
mall or right behind a stripmall there's a lot of apartment
complexes see you know seeproperties maybe some bees that
are close to a lot of foottraffic right that people that
don't live there live in theneighboring community um but
(25:02):
they're walking through um thestrip mall or whatever going to
the gas station so thoseproperties I think it makes a
lot of sense to delineate yourproperty from the you know from
the public and give that senseof security to tenants.
Here I don't think that wasnecessarily something that was
(25:23):
going to create that you knowget that traffic coming in and
there's not a lot of ROI on asecurity fence right um we're
we're kind of out in the back sothat's just one little example
but what we did was instead oftaking or putting that money to
a security fence and you knowelectric gates for um car
traffic it's we moved it intoextending the patios right so we
(25:47):
did a nice seater extended itand we're in we're able to
increase rents on first floorunits that have the extended
patios right so that's just onething every little dollar right
you apply a cap rate and it'sit's exponential so those little
$50 things or$50 increases areare huge.
(26:08):
And there are projects that maynot create the ROI but make a
lot of sense to attract whetheryou're adding an amenity a dog
park or a gym or renovating thegym or creating something that
will attract tenants into yourproperty because all of the
surrounding all of yourcompetition right your cops in
(26:29):
that neighborhood have somethingyou want to get up to that level
to start getting those rents andattract those tenants those
walk-ins the you know theinternet ads and all that stuff
right the people that are comingfrom Facebook marketplace.
SPEAKER_00 (26:43):
So um that's just one example yeah that that
that's a really good one too Imean because you're right it's
it's an if it's evaluating okaylisten do do they do they need
this what you know talking tothe property management talking
to the you know the tenants likeis this something that they
could even really uh use andthen also considering the
project like you know what's theROI on it because you're right
there are a lot of things thatyou can do to a property but the
(27:05):
question is is it really goingto boost the the value of the
return on your your dollar spentum and that conversation is it
has to be had you know otherwiseyou just end up spending money
on things that really aren'tgoing to move the needle at all.
And I like that you youmentioned there um you know you
kind of touched on forceddepreciation there where you you
mentioned just kind of a$50bump.
You know if you got a 100 unitproperty and you're at a five
(27:27):
cap and you do it you know yougot a$50 uh bump uh on average
per unit you you jacked up thethe value of the the property
about what about a milliondollars or something like that.
And so um so it just to me isjust an absolutely incredible uh
I call it the secret sauce of ofthe business but you only get
there by by having that eye fordetail like you said well let's
(27:48):
stop and think about this beforewe go and spend you know this uh
we allocate these funds um tosomething like that might not
add the value that we think itwould.
So I want to quickly you knowkind of ask a question about
your story a little bit, right?
Because um we wanted to sortalmost almost finishing the
journey because you had a reallyimpressive amount of growth um
(28:09):
in terms of your portfolio andand also we we can even tie this
into building relationshipsright so you're now over a 1900
units and so how how did you howdid you get there?
Like what was kind of the youknow what what followed some of
the early you got bit by the bugand then it's like I'm I'm going
in like what what what what tookyou from there?
SPEAKER_01 (28:29):
Yeah I think that's multi-pronged but I think the
the underlying the under theunderlying um answer to that is
relationships which I think I'vesaid probably 15 times on on the
podcast already so I I reallybelieve in the power of
relationships and and your yourproximity right proximity is
power.
(28:50):
So I I moved out to CaliforniaI'm gonna I'm gonna continue
with the story from the from thebeginning here um moved out to
California and when I made thatmove it was for me I I got
really comfortable back east andthat's uh another story um but I
got really uncomfortable or I Iwas very comfortable right back
(29:11):
in that circle in thatenvironment and I had a lot of
opportunity out on the WestCoast in construction and
project management.
And that was like wow I can Ican go out there and be in a
different part of the world it'sa different hub and I can meet
new people be uncomfortable andkind of go down another path
right and by this time I knewabout multifamily so I was
(29:34):
starting to study it I waslistening to podcasts I was kind
of absorbing as much as I couldI was underwriting.
I didn't know what underwritingwas right I just thought you
know I heard the wordunderwriting when I was sitting
in the mortgage broker's officesaying oh the underwriters have
it's like that's actually kindof dark like what is an
underwriter so um that led me ona path to so multifamily right
(29:58):
so I started getting into that Iwas also uh parallel to this I
was really getting into theworld of financial education and
educating myself on finance andthe Fed what is money right and
what is you know what 401k IRAand just understanding that
(30:19):
there's all these other assetclasses out there other
investments that you can deploymoney in like multifamily right
and there's a there's a ton ofthese assets that you can you
can invest in in your privatecapital into funds like you know
you raise money Brandon and youcan invest with someone like
(30:40):
yourself and get a wholedifferent type of return.
You can get you know you get thecash flow you get the
appreciation you get the taxbenefits right so educating
myself on all that it's justyour eyes got huge right and
then I I so I'm in Californiaand I get a I got an email about
(31:05):
a meetup from the uh the realestate guys radio show.
So Robert Holmes and I think hehad Michael Michael Becker was
out here I didn't know whoMichael Becker was or the real
estate guy so that and that wasout here in the Bay Area.
So I went to that and they weretalking about this multifamily
(31:27):
conference out in Dallas, Texas.
And Grant Carnone was there andI was doing a little bit of
following of him listening tosome of his educational stuff on
multifamily so I went and wentto this event in Dallas and I
was like this is what I want todo.
Multifamily is what I want todo.
So I was having some issuesoperating my properties in um
(31:50):
Virginia um from afar and I hadmy real estate agent that I was
talking to you about kind ofoperating them for me.
And when I was not managing themthey were so that was taking a
little bit of my cash flow away.
But anyway I ended up sellingboth of those immediately so I
sold both of my single familyand I said I'm getting into
multifamily and what I did was Istarted plugging myself into all
(32:13):
of these networking events andeducational events whether it
was around raising money or justlearning how to underwrite um I
joined a mentorship program andstarted meeting people having
conversations and buildingrelationships and my first goal
was to was to invest money intoit.
I'm a firm believer in justwatching something or educating
(32:37):
yourself isn't enough.
I think you gotta you gotta putsome skin in the game so I
wanted to make an investmentbuild a relationship with
somebody and try to getsomething out of it right so I
was having conversations and Iwas like I want to invest in
this deal right this individualhad a deal and I like the deal I
like the bones um and I likedhim as an operator.
(33:00):
I think the conversations we hadthe relationship we built was
great so I was like hey I youknow I want to do this right I
want to get into the generalpartnership and start being an
operator eventually and I waslike can I would you mind if you
kind of gave me some insight asto some of the decision making
you know maybe let me on anasset management call or you
(33:22):
know a weekly call here or thereand it was absolutely right so I
was like okay so I invested withthem and that goes back to
relationship right but that kindof springboarded me and gave me
kind of an insight I wasn'tmaking any money off of it but I
was deploying my capital and Iwas in the game now right game
(33:43):
on.
It's like plugging your gameinto a gaming system and just
like I'm in.
Yeah so then you're in it andyou start learning all the terms
learning all the words thedecision making and tying it to
project management it's like howcan I take what I'm doing in my
everyday life right my myexperience of the you know 15
(34:03):
years as being a project managerand project executive to asset
management or to operationsright it's understanding what's
my superpower and you've hadDallin Schultz on your podcast
who's I've had multipleconversations with and he he
gives me a lot of you know he'slike Steve you're doing you're
doing too much right you want todo too much and he's a great
(34:24):
he's a great guy he's he'sawesome he's he's he's great but
it he really check he checks mymy i I don't know if he goes the
right word but he's he just hechallenges me right to just
focus on your superpower what isyour superpower and focus on
that right and what yoursuperpower is you need to find
(34:48):
somebody right back torelationship build a
relationship with somebody elsewho can do everything else and
that's their superpower and thenbuild a team and go get that
deal right or go do a deal so umso that started like the passive
right the limited partnershipand I got the bug and I got the
(35:08):
education I ran into some speedbumps kind of finding that deal
I was starting to underwrite Iwas getting really good at
underwriting and I was I washaving these conversations um
with a lot of these experiencedoperators and I was getting a
lot of like hey if you were mehow would you go get into that
first deal what would yourecommend me do and every person
(35:31):
I talked to I got a differentanswer.
So I was I was a little confusedright it was like oh man I feel
like I'm spinning my wheels hereso um I went to a Tony Robbins
event with a lot of experiencedsyndicators right it was a it
was a Sunrock event and he hebrought a lot of the team and a
lot of experienced generalpartners over to um palm beach
(35:54):
Florida and I went to that andthat was just a different
experience right you're you'rehaving intimate conversations
constantly you're in a greatsense of great mindset and
you're having theseconversations so I I did it
again and I was talking to thesetwo guys and it was like listen
don't don't try to do everythingyourself stop under like you can
underwrite for education butthere's a lot of people just
(36:17):
here at this event that havedeals go form a relationship
with them and say this is thisis what I can bring to the table
right this is what I can do andgo build a relationship with
them right so I had thoseconversations and about three or
actually it was less than thatwas about two months later I
(36:39):
formed a relationship and I waspart of a general partnership
team for my very first deal inuh 2019.
SPEAKER_00 (36:48):
So it again it was back to the the key word here
right is relationships and howimportant that is to building
you as a person and getting toyour goals right so setting your
goals finding who can help meright and having those
relationships and it it reallystreamlines the process and
(37:09):
helps you get to where you wantto be that that is absolute gold
um you know that and I like Isaid you everything that you
laid out there uh for thelisteners that that's it right
there that's the ticket you knowI share there there's so many
things to pull from with withinthat um you know I share with a
lot of people that um becausewhat you did was you did among
(37:31):
other things you kind of did theearn while you learn where you
you said hey I'm gonna investpassively and there is a
difference between sort ofgetting education and
understanding the the businessversus going and actually
putting some capital some skinin the game and um you you had a
conversation with the sponsorand said listen I like you I
like the deal I think it'sincredible and if you wouldn't
mind I'd like to sort of maybejust be a fly on the wall for a
(37:53):
couple of conversations here andthere.
I know I might not be able be uhmaking the decisions or anything
or influencing them but I wantto understand how it works.
And I tell people that all thetime is that you have to uh if
you're gonna make an investmentand your goal if your goal is to
be a GP then you absolutely wantto at least have that
conversation to see if they'regonna be amenable to it.
(38:15):
And and oftentimes they will bebecause you make it clear that
hey I'm not trying to influenceanything I just want to
understand a little bit everyonce in a while how how this
works because that is my goaleventually um and and be stating
that I think is very powerful.
And then also you know likerelationships, you know I mean
if if the listeners haven't ifit's not clear then it needs to
be you know there it's it'sclear now.
(38:37):
You know that is the the key.
Too many times we feel like wehave to do it all before we can
be a part of a team.
And that's really that'sbackwards thinking because the
whole point of being a part ofthe of a team is to say here's
my strength and let me plug inwhere I can but but that's how
we all start especially if westarted off on like the single
family side because I I startedoff on the single family side as
(38:57):
well and for me it was like youknow I'm so used to being the
one that's making all thedecisions.
So when I switched into themultifamily space and and I'm a
part of a team it was difficultfor me to say you know let me
spread the work here but that'salso the beauty of this
business.
You know so it just like I saidman there's a lot to pick from
in there and mentorship groupsyou you and I are in the same
(39:19):
mentorship group and and um andI you know I have found that the
people who you know who we meetand who we've built
relationships with they're somuch uh they're so open so warm
and welcoming they're they'rethey're they're able to sort of
uh help you out in so manydifferent ways just a
conversation right earlier youcalled it I think uh a cheat
code you know it's almost like acheat code where you have a
(39:39):
conversation with someone andthey literally are compressing
five years worth of you beatingyour head you know because think
about how long would it take forus to go and get a deal
ourselves that's you know youyou you have one deal that's um
I think your your largest dealis I mean what it's a portfolio
right I think it's almost it'sover a thousand units or
something like that.
SPEAKER_01 (39:58):
That's a that's a limited partnership deal yep
right and so but but so how longwould it take someone to kind of
be in a in a deal like that umon the actor side but having a
couple conversations it's likeyou know and building
relationships it it it gets youthere it compresses that time um
so I just think I just thinkthat's that's incredible and I
(40:19):
do I do want to ask you nowabout about market selection
right so you're in Californiaand um and um and this this it
even to help kind of benefit thelisteners a bit how were you
able to come to terms withinvesting um out of state so I
think when you when you start tounderstand the markets um so the
(40:41):
macroeconomics right justunderstanding the country
understanding you know tenantlandlord laws and growth markets
once you start understandingthat you start to learn that you
kind of focus on the sunbeltright you have great markets
right now and obviously allmarkets are cyclical um but you
(41:01):
see a lot of growth and theeducation um that we have
obviously our our mentorshipgroup is based in Texas so
there's a lot of relationshipsthere and a lot of boots on the
ground there so it made a lot ofsense and it also happened to be
a great obviously Texas isbooming you know there's a lot
of in influx from Californiafrom New York so you kind of see
(41:25):
that it has I mean it has itsstrengths and it has some
weaknesses just like every stateor every market does and then I
think it just made a lot ofsense and I think that's where
the relationships were so um soright now yeah I'm I'm heavily
in Texas um because that's wheremy relationships are that's
where my my partners are andthat's where it makes a lot of
(41:48):
sense I live in California umI'm I'm not gonna buy really
anything in California itdoesn't make sense so my goal is
not just to stay in Texas Ithink my my goal now is to kind
of do some I want I do have somepassive money that I do want to
invest out of state and then Ithink for my from operation
(42:10):
standpoint I think it justdepends on the relationships
right I'm constantly you knowobviously building relationships
with people who are doing dealsin North Carolina in Georgia you
know I I like North Carolina umI'm an East Coast guy I was born
in North Carolina so it it kindof strikes a chord with me but I
think there's some great marketsum all around the country and I
(42:32):
think it just it it just dependson where they are um I think you
can follow the money right whereare companies going where's
where what states or what citiesare investing in their economy
in their growth right and thenwith that investment you see the
population growth you see theinflux of um you know good
(42:54):
paying jobs and that you know itjust big investment right so
when you see that growth it itjust makes a good incubator for
a good investment right you youwant that growth you want to see
that growth um and it'sinvesting out of state is uh
(43:14):
obviously there there's there'sthings that I can focus on as an
operator out of state right thethe financials the capex I do go
as much as possible right andyou got to be on site you got to
understand yeah and feel likethe pulse of the property right
being on site gives you adifferent feeling so you know
(43:35):
every other month once a monthit just depends on what's going
on and what you know my role ison those properties.
So it's doable I definitelydon't want to discourage anybody
from you know saying hey I liveout of state how can I be a
general partner provide valuefor this general partnership
team in Texas or in Georgia orFlorida right there's a lot of
(43:59):
roles on a general partnershipthat you know may you know the
listener or somebody that'sthinking about getting on a GP
can do right if you have a CPAbackground you know or if you
have a strong financialbackground those are great you
know investor relations thoseare things that you can easily
(44:20):
do and not be boots on theground but it is important to
have somebody on your generalpartnership or on your operation
side be boots on the groundclose to the job site or
property.
SPEAKER_00 (44:31):
Yeah yeah yeah no that that's right I mean I I
think you're I I like that thatyou said um that it depends on
where the relationships are likeI I really like hearing that
right you because you're sayingum that's that's what's at the
core of having confidence andand being able to invent because
because ultimately if you havetight enough systems and
relationships that you've builtup it really doesn't matter
where you are that's my that'smy opinion on it you know um and
(44:54):
so I love that you really reallyuh mentioned that because that's
something that I think we allneed to understand.
And uh also you know I I likekind of that you mentioned
there, you know, focusing on uhthere was something in
particular that you said that Iwanted to really really
highlight um it'll it'll come tome.
But but yeah by focusing on youknow our strengths and kind of
(45:15):
where we fit into the deal I dothink it makes it a lot easier
then to say okay well here's mypiece and I'm going to as much
as possible focus on um justthat piece because sometimes
sometimes I think the theconcept of hey we all have to I
mean you know we all have to bethere the entire sponsorship
team the only reason people sayyou know come to that conclusion
is because they don't focus onwell hold on what's my exact
(45:38):
specific uh piece of this youknow and also what's the deal
like so if it's a you know ifyou got a class A property and
you don't have a deep heavyvalue ad, uh then yeah you you
don't exactly need to be thereon site every day, right?
You're not in a you're not in adeep value ad where you're
having to just about do italmost a tear down or you know
not a tear down but justextensive work.
(46:00):
So uh it's kind of it all it allkind of comes together uh to to
to say okay well it doesn't makesense to I'll go after this oh
no I I now I remember so youwhen you said follow the money
in terms of market selection Ithink it's important follow the
money which which play whichmarkets and submarkets are
investing in their um theirlocal area which um markets have
jobs that are coming to itbecause with jobs comes uh uh uh
(46:25):
people right so populationgrowth all these things and
usually that's if you can find away to to follow the money that
is what's at the root cause ofgrowth and so um so I think
that's probably one of the mostimportant things following the
money understanding where yourrelationships are and if there's
a market where you've thatyou've identified that you
really like then building therelationships there so that you
(46:46):
can then invest there.
So those are are two twoabsolutely valuable pieces of
information for people um here.
So so I want to ask you whatwhat advice then right because
uh again you have uh 15 uh moreover 15 years experience in your
business and so what what advicemight you give to someone who
they're they're in projectmanagement they have that
(47:07):
understanding but and maybe theythey're interested in investing
in this business but they're alittle bit hesitant right so
what advice might you give tothat person so there so I'll
I'll take this two prong so forthe for somebody who's a a
project manager in you knowconstruction or kind of anything
right when you're managingsomething managing a project um
(47:30):
and you want to get into thereal estate space and as a
limited partner right you haveyou have the ability to get on a
you know obviously build arelationship with somebody and
you know when they have a dealyou can take the you know get on
the webinar and understand whatthey're talking about right you
can see this is what they'redoing this is what they're going
(47:52):
this is what their goal is andthis is the end result and you
can kind of check that rightdoes that make sense in your
head I think there's they caneasily understand some of that
from a general general partnerstandpoint I think capex makes a
lot of sense um you know thebusiness plan capex is really
where they're gonna excel and Ithink just from a business and
(48:15):
running a business I thinkthey're gonna have a lot of
insight to you know either comein and assist as as an operator
or an asset manager oreventually build into one with a
good baseline right a goodfoundation from project
management and understanding thelife cycle of a project it's
understanding the life cycle thelife cycle of a business right
(48:39):
so from from closing or projectnotice to proceed to close out
right it's it's heavy in thebeginning it's heavy in the end
and it it's just a it's a lifecycle right and it's very
similar in project management asit is in multifamily right from
(49:01):
soup the nuts.
SPEAKER_01 (49:02):
So I think understanding that and having
that visual you can kind of seewhat's coming up next.
And you can start seeing thebusiness plan and visually see
how it's shaping up whether youneed to pivot or not.
SPEAKER_00 (49:16):
So I think there's a lot of benefits and I think
there's some built-insuperpowers that a project
manager project executivesomeone in construction or
project management you know cancome in and say I'm good at this
I have this experience how can Ihelp you guys or this is how I
(49:36):
can help you do you need thishelp right can I be a part of
the team this is what I canbring and you know if you build
the right relationships andenough of them you'll find
somebody or a team that you canjump on and be an asset
instantly yeah I I love thatadvice I think that's I think
that's powerful you know becauseit's how often have we seen or
(49:58):
heard um of teams getting toclosing and then um after that
they kind of drop the ball youknow and you usually it's
because they didn't have kind ofthat um line of sight on the
full scope of the project thelife cycle you know and and and
before they get into it you knowthat's why like I so I I I um I
was a petroleum engineer for a agood while and I worked as a
(50:21):
drilling engineer which is kindof operations heavy and one of
the things that we absolutelythat we swore by was the the
procedure you know so we hadthis manual where it's like this
is what's going to happen inthis phase of work then this
phase in this phase and thisphase and then once we're done
here the things we're gonna doto rig down and move off
location.
And so you you we went into theproject with an understanding of
(50:43):
what's going to how it impactseverything and then what's the
eventual you know task that wehave to do before we leave
location.
And so um I believe more teamsneed to have that view that you
just mentioned uh there isunderstanding the life cycle
before you buy and it's alsointeresting that that really
that carries out in um in everyaspect of the deal.
SPEAKER_01 (51:02):
So even uh from underwriting you have to
understand the life cycle whowhat's the next buyer's uh
upside you know I mean why wouldsomeone else buy it once you're
ready to exit you know you knowwhat's the exit strategy right
what's the exit strategy alwayslooking at the exit strategy and
market changes right there's abig market swing right now right
things are changingexponentially right your
(51:23):
controllable expenses aresomething that you're focusing
on right your uncontrollablesare going up like crazy yeah
right Texas market insurancetaxes so being able to like oh
what do I got to do right that'swhere the pivot comes in right
this isn't working but this is ahuge change what can I do about
(51:44):
it those are things you can'treally negotiate right you just
got to go to the marketplace andthis is what's happening.
SPEAKER_00 (51:52):
So yeah exit strategy is is key and those
things are all part of thepuzzle right part of the pie and
you got to bake all that in yeahyeah absolutely absolutely man
um well listen so Steve we'regetting close to kind of the
actionable tip portion of theshow and there's just been uh
again so many nuggets um droppedin here so I appreciate it so so
(52:14):
what what advice might you giveto someone who uh regardless of
their background but they'relooking to get into this
business and I'll say as a I'llsay as a passive investor so
someone who's wanting to investpassively um but they're on the
fence you know what what wouldyou kind of say to to get them
to take action now so the firstthing obviously it's going to
(52:34):
come down to relationships rightfor many reasons not just
because that's what I've beentouting um all morning here but
I think education is is oneright it starts with education
learning about the space boththe rewards and the risks and
then building relationships withsomeone like yourself go to your
and education right your youhave a meetup in the DC area
(52:58):
your podcast those are bothgreat areas to get educated
educated build and build arelationship with a with
somebody who's a general partnerand jump in right I think you
know and come in invest a littlebit you can use your 401k right
I always as a passive investor Ipersonally invest all my passive
(53:21):
money is 401k or Ira becausegeneral partnership you got to
use you got to use cash right sostrategically right my
investment plan is my 401k moneyis my passive money and that's
what I use to buildrelationships and maybe that
investment will lead to me doinga general partnership deal with
(53:41):
that person.
SPEAKER_01 (53:42):
So I think as a as somebody looking to get into a
limited partnership deal is geteducated like again what are the
risks what are the what are therewards um and ask questions
yeah I think it's beneficial togo to go to a couple events um
go to a meetup a local meetupyou don't have to travel to
(54:03):
Dallas if you live in Virginiaor DC or California I don't
think that's necessary I thinkthere's a lot of online
education um there's localmeetups that you can go to and
just get educated ask questionsand then jump in um I think that
there's a lot of benefit to thatand like early on in my career
when I jumped in took someone'sadvice to buy a single family
(54:25):
house with the little bit ofmoney that I did have turned
into eventually a 2000 unitportfolio of multifamily so um
it's just getting the gettingthe wheels turning really right
it's a it's a it's a superpowerful industry and I I think
everyone should have at least alittle bit of real estate in
(54:48):
their portfolio.
SPEAKER_00 (54:50):
Yeah yeah yeah I could couldn't agree more I
think that um getting thateducation and in addition to and
not not even just kind of likethe uh more structured you know
type of education but also likeyou mentioned going to meetups
and having conversations becausethat is in fact a form of
education um so so I would 100%agree with that as an action.
So Steve again man I've reallyappreciated always good speaking
(55:12):
with you and I really appreciateum the value the amazing value
that you've added uh for thelisteners and for myself and so
for the for the listeners thatwant to reach out to you maybe
hear more about you or see moreof you how can they do so yeah
so you can you can visit thewebsite my website is
Shermanmultifamily.com email umyou can email me uh Steve at
(55:35):
Shermanmultifamily.com and thenthe socials um instagram is
where I spend most of my timeInstagram and Facebook and I'm
uh handles at Sherman underscoremultifamily um so yeah you can
find me there all right man wellI'll add that to the show notes
and once again look it's alwaysbeen a it's always a pleasure
speaking with you man and um uhthanks so much for for your time
(55:56):
Brandon thanks for having me onappreciate it as always thank
you so much for tuning in to theshow today brought to you by
Bridge Prosper if you enjoyedtoday's episode and you'd like
to learn more about commercialreal estate investing please
like subscribe and share andwe'll see you again next week
I'm Brandon Jenkins and this isthe Capital Stack where we help
(56:18):
you learn apply and
Right.
So your business plan beforeclosing may not be what it ends
up being.
I think you gotta have you gottahave the the vision to see once
you start something, you don'thave to go all in on that if you
see it's not working or maybethe ROI isn't there.
So you have to do a pivot andyou gotta get into something
different.
SPEAKER_00 (00:22):
How successful would you be if you had the blueprint
for building wealth as a realestate investor or as someone
who acquires small businesses?
If you want to move the needlefinancially in your life, then
you need to understand one thingthe capital stack.
I'm your host, Brandon Jenkins,and this is where your journey
to financial freedom begins.
(00:43):
Hey, what's up, everyone?
Welcome back to the CapitalStack.
I'm your host, Brandon Jenkins.
Um, you know, we uh talk quite abit on this show about the
various pieces to the puzzle asfar as the syndication team goes
and sort of the knowledge thatwe need to have in order to have
a successful um deal, asuccessful uh operation,
successful syndication, okay, sowhere to where our investors um,
(01:06):
you know, we get some goodreturns for our investors and we
kind of build that confidenceover time in our ability to
manage an asset, okay,efficiently.
One of the most important piecesof that puzzle is understanding
the capex, understanding theconstruction work, understanding
real operations.
Okay, and I have found thatthere are not very many uh
syndicators that have thatbackground.
(01:26):
And so um, we are fortunatetoday to have someone who has
that background, an extensivebackground, of understanding
kind of where the rubber meetsthe road or where the hammer
meets the nail and getting downinto okay, where are the capex
dollars being spent and how, youknow, what comes it as far as
budgeting and planning and allthese things that are so
important to this business.
So our guest today is SteveSherman.
(01:47):
Steve, how are you doing today,man?
Great, Brandon.
SPEAKER_01 (01:50):
Thank you for having me on.
SPEAKER_00 (01:51):
Absolutely.
Thanks for being here, man.
So Steve is the president ofSherman Multifamily, a firm
specializing in the acquisitionand operation of large
multifamily assets.
In fact, his portfolio uhhistory includes over 1,900
units.
So very impressive.
Steve has been in the realestate business since 2008.
Interesting time to be in thebusiness and brings his
experience as a professionalproperty manager to the projects
(02:14):
where he invests as asyndicator.
And so, um, you know, Steve,with that, man, welcome to the
show.
And I kind of, you know, want toget uh, you know, into this uh
this this uh this business andkind of your side and and where
your journey has taken you.
But before we kind of get intothe details, why don't you share
just a little bit about yourhistory uh and your journey with
us?
SPEAKER_01 (02:32):
Yeah, absolutely.
Um I started as a businessmanagement major um in college
out in Virginia.
Um so and I mentioned businessman or business management
because it kind of got me intothe career that I'm in um in a
sense.
So I got into um projectmanagement as a sophomore in
(02:53):
high school.
I was an intern actually um at aat a large electrical contractor
in Washington, DC area, andmanaging projects.
So after after graduating, gotinto full-time project
management.
And this was 2008, 2009.
Um, you graduate college, youknow, you finally have start
(03:16):
making some money, you don'treally know what's going on in
the world, you know, the the theGFC.
Um I I didn't really understandthat.
So, you know, I got in aconversation with uh my my
manager, my my mentor at thetime, and he was like, Steve,
you need to buy a house.
I was like, I was like, okay.
(03:36):
I was like, why?
I said I don't I I find I'mfinally making decent money.
Why, you know, why am I gonnaspend it all on a house?
Well, in in 2009, in November2009, ended up buying my first
home.
It was a townhouse.
I think I bought for$90,000.
Um ended up living in it, and Ihad I had a few roommates.
(04:00):
Um so essentially I didn't haveany rent.
I at this point I still didn'tget the bug yet, right?
The real estate bug.
Um so continuing on, um, endedup moving out of that property
and renting it.
I, you know, you you go throughsome um some lessons learned
(04:20):
there and through relationships,which we can get into in a
little bit, because I think thatwas a big piece of kind of where
or how I got to where I am todayum through relationships.
So I moved moved out of thatproperty, rented a rented a home
up in Arlington and wanted toget closer to my friends and you
know, kind of a little more umsocial circle.
(04:46):
So I I rented that house out,um, the first house I bought,
and I started to see the powerof rent, right?
Leveraging my money and gettingthe rent income and seeing
multiple streams of income.
I didn't really, I wasn't reallyeducated on the space, but that
came a little later.
Um so that one house turned intoa second, and then I learned
(05:12):
about 1031 exchange.
I got that first house, I 1031that into a better neighborhood.
And I started to realize thatmarket, right?
There's a um, there's a MarineCorps base, Quantico, and it's a
couple miles away from Quantico.
So I got educated on the marketand the surrounding area and
(05:33):
learned aboutmilitarybiowner.com listed on
there.
And I got some good qualitytenants, and I had two um two
single family rentals that wereyou know covering a lot of my
living expenses.
So that's kind of the early partof kind of getting that bug.
Um, and then my my projectmanagement experience started in
(05:57):
as a sophomore in high school,working with this electrical
contractor and eventuallygraduating and starting to work
with them full-time.
And project management is agreat springboard into um a lot
of things multifamily,understanding the the business
side of it.
Every project as a projectmanager is is a business, right?
(06:19):
You have a budget, you have afee or profit that you're trying
to get to, and increase.
Um, you have a team, right?
So managing that team um tosuccess and making sure you're
delegating um the rightactivities and then leading that
team to success for a successfulproject.
(06:40):
And there's subcontractors,right?
This is where the capex comesin.
You're managing subcontractors,and that is there's there's a
lot of key points there.
It's coming up with a with agood, solid, and clear scope of
work.
So you can go out to themarketplace and get the same
number or the same quote for thework that you want done.
(07:02):
I see a lot of people bringingin um contractors and saying,
hey, this is my problem, fix it.
What do you want to fix it?
And then they bring in somebodyelse, and they're not getting
the same quote, right?
Because every contractor sees itdifferently.
You gotta have the eye to go inthere and say, This is what I
want done, right?
How much is this scope of work?
(07:24):
So I think that that, and and wecan get into more as well, but
there's there's little nuggets,right, in project management
that is a good segue or goodeducating piece that works
itself into multifamily, whetherit be underwriting and
understanding finances andbudget to negotiating contracts,
(07:45):
right?
Negotiating um negotiatingcontracts with your your CapEx.
So there's a lot of a lot ofgood um segue from project
management to asset managementand just being a good operator
in the multifamily space.
SPEAKER_00 (08:05):
Man, absolutely.
I I really appreciate you goingum into kind of that detail
there and sharing yourbackground.
And this is exactly what um whatI was getting at in the in the
intro there.
And so I've been over herescribbling and taking notes.
And so I'm gonna go, I'm gonnago back to um um to some of the
earlier stuff before we kind ofget into the later thing.
The first thing is it's reallyinteresting that you 1031 um
(08:26):
that property early on likethat, um, because it it's the
first thing is it's it's anintimidating um process.
Uh, but but but it's interestingthat if you it's intimidating
for people if they kind of pullin too much information to kind
of make it plain.
But if you if you start off byjust looking for the plain
answer, then it becomes maybenot so intimidating.
(08:46):
But how but how did you kind ofland on that as okay, this is
what I'm I'm going to do?
Because a lot of people wouldn'thave done that after their first
property, but I think it's why.
So, how how did you do that?
SPEAKER_01 (08:56):
So it goes back to relationships.
I grew up, so a little morebackground, and then I'll get to
the point.
So I grew up playing ice hockey,and a lot of my, you know, my
friend circle, my even myparents' friend circle, my
brother and sister's friendcircle.
They we spent so much time atthe ice rink, and a lot of the
friends and family all came fromthe hockey world.
(09:17):
My real estate agent at the timewas a hockey guy.
His kids played, he played, hewas always around the rink, and
we built a great relationship.
And once I started, you know,getting that rental bug, he
goes, You can turn this intosomething, right?
And um, so I was like, I reallywant to get out of this
(09:38):
property, the first property Ibought, and get into something
nicer, a little bigger, get theequity out and 1031 it into
something.
I didn't know what a 1031 was,but that's where that
relationship came in.
And I leveraged his knowledgeand experience to help me out.
So he guided me through, he gaveme the you know the resources,
(09:58):
the 1031 specialist, um, got mein touch with the right banks,
the his, you know, his innercircle, and I leveraged that.
So they kind of walked methrough and he helped me
identify which in within thewithin the time period, um, and
then find a great property.
So it's again, it goes back torelationships.
And I think that seeing thatearly on in my real estate
(10:21):
journey has obviously helped meget into where I am now as a
limited partner, as a generalpartner, and then finding
finding partners, buildingrelationships with CPAs, with
brokers, with investors, right?
Relationships are a big part ofthis world.
You can't do anything alone.
SPEAKER_00 (10:41):
That is 100% correct, man.
I um I share with people uh alot that one of the best ways to
build your team, because that'stypically when people before
they start, um, they they say,Well, I don't, you know, don't
have the contacts, I don't havethe people.
And usually what I tell them isyou can build your team from uh
the other contacts that youmake.
So you can you can say, hey, youknow, uh to your agent or
(11:01):
broker, you know, hey, who's agood inspector?
You know, who's a good um GC,who's a good uh property
manager?
Who's you can you can start itthere?
Um there are many ways to do it,but that's one of the most
effective ways because they'reonly going to give you the name
and the contact of someone thatis at least somewhat
trustworthy.
And so you're right.
I mean, those relationships uhthey mean everything because
it's the difference betweentrying to fight through it and
(11:24):
and get burned out andeverything, figure it all out
yourself, which will take yearsand years and years to do, or
you can do what you said, whichis to leverage someone else's,
you know, knowledge andexperience, they're gonna point
you in the right directionquickly.
And so um, you know, it justcan't it can't be you know said
enough that it's like makingthose connections, fostering
those relationships, and thenlearning how to network
(11:47):
intentionally so that you canyou know mutually benefit is
powerful.
And you've done that.
So I think that's I think that'soutstanding.
SPEAKER_01 (11:53):
It's like it's like being in the fast lane, right?
It's like a cheat code forgetting further in whatever
you're trying to do, right?
So yeah, leveraging thoserelationships is is super
important.
SPEAKER_00 (12:07):
Yeah, absolutely, absolutely.
Um so there's something elsethat you said there that I like
when you were kind of talkingabout the uh uh every project is
um I'm sorry, every yeah, everyproject is a business to a
property manager or to a projectmanager, excuse me.
Um, but I just think that's avery powerful concept for people
(12:27):
to to really grasp, you know,because as you um as you get
into each deal, you know,especially for someone who maybe
has done it multiple times,there is this complacency that
can set in where it's almostlike, well, this is kind of just
another deal.
And it's like, well, this is ait's a business, you know, and
you have to treat it with theseriousness um of a business.
(12:49):
Otherwise, you won't be in thissector for very long uh because
you didn't you hurt yourself,you hurt investors and you hurt
the tenants and everything else.
Um and so so how how did you howwere you able to sort of
leverage your your professionalbackground um into you know to
maybe to maybe kind of usingthat same concept and approach
um on the multifamily side?
(13:10):
Like what's your what what'syour your role typically on the
syndication team?
SPEAKER_01 (13:15):
So it started out as the CapEx manager.
So creating the business plan,helping them with the, you know,
creating the business plan fromthe underwriting before closing.
And during closing, it was a lotof you know walking, um, walking
all the units with the duediligence team, taking notes,
(13:36):
and then doing our um doing ourmarket surveys.
So walking other properties,seeing what they're getting for
rents, what their interiors looklike, what their exteriors, what
amenities do they have versuswhat we have, right?
Where's the opportunity in theproject that we're looking at or
about to close on, and reallytaking that, you know, looking
(13:58):
for the ROI.
So if we're gonna, if we'regonna either raise money up
front, or if it's gonna befinanced, it's how do we how do
we most effectively andefficiently deploy that capital
to increase the ROI or the thevalue of the property?
So I think having an eye forjust the the little things,
right?
(14:19):
It can be as small as if youhave a B plus in like an A, or
your you you gotta know yourclientele, right?
Your tenants.
But as a very small example foryou know seeing things as a
project manager is receptacles,right?
(14:39):
Just a normal receptacle like ina kitchen.
You can replace that with areceptacle with a USB.
And if it's something small, youstart seeing hotels have it.
It's like everywhere you go, youstart seeing like these little
details, like would that makesense in multifamily, right?
Maybe not in a in a Cneighborhood or in a C building,
(14:59):
but maybe something a littlenicer with some nicer upgrades,
you know, granite, stainlesssteel that lends itself to you
know the younger generation, youknow, the the right out of
college, you know, the youngertype.
So seeing those things andsaying, how can the small cost
when you're turning a unitreplace this?
Right?
(15:20):
Replace the receptacle, put thatin there.
It's just one little thing thattenants are walking through and
making sure you're educatingyour property manager on, you
know, hey, we we have these,these are different, right?
But it's I think it's justhaving a good eye um of you know
understanding what yourcompetition has, what you're
(15:40):
starting with, right?
What is your canvas, and thenhow can you how can you lift
that up in the most economicalway, right?
For the biggest bang for yourbuck.
Um and things always change,right?
So your business plan beforeclosing may not be what it ends
up being.
(16:01):
I think you gotta have you gottahave the the vision to see once
you start something, you don'thave to go all in on that if you
see it's not working, or maybethe ROI isn't there.
So you have to do a pivot andyou gotta get into something
different.
Um so in project management,every day is different.
I wake up, there's a new issue,there's a new problem, right?
(16:24):
And the mindset shift there isit's you got to stop using the
word up or uh issue or problemand start turning into
opportunities, right?
So it's an opportunity to eitherfix something or figure out how
this happened, right?
And make it not happen again,which goes down into like
systems and procedures, which isalso something that's very big
(16:46):
in asset management andoperating a property.
SPEAKER_00 (16:50):
Yeah, you know what?
I I like that you um that youthat you said that you have to
see it sort of as anopportunity.
And the other thing I think thatthat requires a mindset shift is
understanding that every daythere's gonna be a new issue
because some people freak out bythat, you know, when they when
they show up and things thataren't all steady state and
they're not all exactly the sameas it was yesterday with no
change, then they think that'show it's gonna be every day.
(17:12):
Um, but it requires a shift tosay, yeah, there are going to be
problems every day and issues oryou know, concerns or
opportunities, right?
Using the right uh uh languagethere, that there's gonna be
opportunities every day.
And how can you address them?
But but it's almost beingcomfortable with the fact that
listen, this is a fluidsituation.
And so it's not be just justbecause we we put it on a uh put
(17:34):
it in a spreadsheet and we havesomething typed up doesn't mean
that it's gonna be stagnant.
Um, and so you almost have tolook at it as good, you know.
I mean um it's it's a good thingthat it's fluid because it, you
know, it keeps us alwaysthinking about uh things that
are outs outside the box.
Um, and I want to ask yousomething really quickly too,
because you mentioned uh brieflythere that a part of what you do
is uh walking units with the duediligence team.
(17:56):
And for the benefit of thelisteners, what is the due
diligence team and kind of whatwhat do they do?
SPEAKER_01 (18:01):
So due diligence is uh usually a 30 30-day period
before we or after we get ourLOI accepted.
Um we go into do the duediligence period, and we have
about 30 days, and what we do isuh we've done it a couple
different ways.
We've we've hired a third partythat specializes in due
diligence, and they'll comethrough, they will walk every
(18:23):
single unit, they will inspectthe exterior and interior of the
property, your HVAC, yourelectrical, um uh the bones of
the property, structure, theroof, everything.
And they'll give you acomprehensive report on you know
what they recommend or what theyou know, how old is the roof.
You know, if you have a 20-yearroof, 20-year roofs don't last
(18:46):
20 years, you know, they lastmaybe 15, 12 to 15 years,
especially in Dallas, right?
With the heat.
So you take all that informationand you you come through it, set
up a meeting with them, and youcan kind of either re redo your
business plan.
So say we got this bucket ofmoney, this is what we were
gonna do with it.
We have some contingency fundsthat we wanna, you know, maybe
(19:09):
we have some roof patches totake care of.
So we also not just the bonesand the structure and the the
systems of the the property, butyou're also going through the um
the tenant files.
So you're doing lease audits,you're understanding, you know,
who's living at the property?
(19:29):
Do they all do they all haveinsurance?
Is all the paperwork there,right?
Um, you need all those recordsand having all of your
contracts, right?
What contracts are currentlyactive?
Which ones can we get out of?
Um, is it lawn care?
Is it laundry?
You know, what are we cominginto?
What are we dealing with?
And you're verifying all of theinformation that you got in the
(19:52):
broker package or the offering,the offering memorandum, and
you're and it gives you a chanceto say, um, you know, you came
out there and you saw somethingthat was materially different or
not true, or something that's agame changer, right?
It's it's going to affect yourunderwriting so much.
(20:14):
Like, for example, if you had toreplace the entire roof because
it was damaged and you couldn'tsee that just from the ground,
but through due diligence, um,the inspection came back and
they the roof is this old,that's not the information we
had it underwriting.
You can go back to the to theseller or the broker and say,
hey, this is what we foundduring due diligence, and you
(20:34):
can negotiate some of thesethings.
So it's it's just a lifting,lifting the curtain, pulling the
curtain back, and saying, whatare we dealing with here on a
very granular level?
SPEAKER_00 (20:46):
Yeah, I mean, you know, it's interesting, uh,
Steve, even in the the the kindof rundown that you gave there,
um, your your professionalbackground is very apparent,
right?
Because you just kind of threwsomething out about the uh about
the roof, right?
A lot of people will misssomething like that in their in
their underwriting.
It that's the reality.
A lot of people won't say, well,hey, how old are some of these
structures?
(21:06):
Because you have to absolutelyplan for it.
And you're you might have toreplace it in year uh three or
year two or four or whatever itis.
And so you have to be ready forthose kinds of things.
But some people, you know, ifthey look at an underwriting,
they just assume all of thosethings are smooth.
And you can have these thingsthat will require a significant
boost.
And um, whether it's from yourcapex, I mean, you know,
depending on what the what whereit's coming from, but it'll it
(21:28):
can cost you a lot of money.
A lot of times it can put asqueeze on the deal.
And so um, so again, I just youknow, your your experience there
is really is really critical.
And I appreciate you you knowsharing kind of that due
diligence.
And I think, you know, when Ithink about uh what's at the
core of kind of the duediligence process, I really
think about risk, like riskmanagement, you know, because
it's around material risk.
(21:49):
It's around, I mean, someproperties that might, if it
depending on the condition, itmight present a safety risk.
Um, you know, you've got thingslike financial risk, vacant
vacancy risk.
And so you're really, and thenultimately.
risk to the project.
And so if you've underwrittenthe deal with with a certain uh
uh you know uh amount ofinformation and it's materially
different then now you the dealitself is at risk and so you
(22:11):
might have to walk away you knowor you might have to come back
to the table and say well listenthis this changes things um so
so just again uh you know I likeI said I mean I think that the
your background and the rolethat you play is vital.
It's one that we don't hearoften enough because people tend
to farm that out and think thatsomeone else can do it.
It's like but if you havesomeone that you can that you
(22:32):
can find that um does thatthemselves then you know it's
it's a I think it's outstandinguh ad.
And so let me ask you okay justnow on your your you mentioned
ROI a few times in there andthis is a point that I like to
make as well with people is youknow so you go into a deal and
you have a plan.
(22:53):
It just like you mentionedthings change.
And so you don't necessarilyhave to take the full CapEx
budget and hit the hit theproject with all of it because
the plan before you you boughtsaid that we're going to do all
these things.
Instead you kind of test themout because you might be able to
get a good portion of thatuplift um by doing less work and
(23:13):
um or you might you know do awhole bunch of work and not get
any uplift.
And so it's it's wise to thensort of have this gradual you
know let me do some of the worklet me test it out test the
results and to uh determinewhether it's uh it makes sense
to keep going down this path.
You know so so how how do youhow do you do that?
SPEAKER_01 (23:31):
Like what what have you kind of done to maybe
determine well whether we shouldor should not continue to spend
capex dollars toward thisparticular uh value ad yeah so
you know I guess I'll give you afew examples here we were
looking at we have a propertythat's kind of in a it's in a
neighborhood right so we wereone of the things that we wanted
(23:54):
to do was say hey let's you knowone thing we can do here is put
a fence around the propertyright like a um like a not
really security fence but just afence around the property to
make to give the feeling ofsecurity um we're trying to keep
people out you know the peoplewalking through um which you
know I early on it made it madeit made some sense um but I
(24:18):
think it's one of those thingswhen you look at it and you
start asking people and you askthe property managers, you know,
what are you seeing during theday when we walk through the
properties you know that'ssomething we're looking at um
you're not it didn't really makea lot of sense though.
So we took that budget and wemoved it into something else.
We moved that into um extendingthe patio fences right so it's
(24:41):
if we were so it's understandingwhere you're at like where the
property is located.
If you're next to a lot ofshopping or um you know a strip
mall or right behind a stripmall there's a lot of apartment
complexes see you know seeproperties maybe some bees that
are close to a lot of foottraffic right that people that
don't live there live in theneighboring community um but
(25:02):
they're walking through um thestrip mall or whatever going to
the gas station so thoseproperties I think it makes a
lot of sense to delineate yourproperty from the you know from
the public and give that senseof security to tenants.
Here I don't think that wasnecessarily something that was
(25:23):
going to create that you knowget that traffic coming in and
there's not a lot of ROI on asecurity fence right um we're
we're kind of out in the back sothat's just one little example
but what we did was instead oftaking or putting that money to
a security fence and you knowelectric gates for um car
traffic it's we moved it intoextending the patios right so we
(25:47):
did a nice seater extended itand we're in we're able to
increase rents on first floorunits that have the extended
patios right so that's just onething every little dollar right
you apply a cap rate and it'sit's exponential so those little
$50 things or$50 increases areare huge.
(26:08):
And there are projects that maynot create the ROI but make a
lot of sense to attract whetheryou're adding an amenity a dog
park or a gym or renovating thegym or creating something that
will attract tenants into yourproperty because all of the
surrounding all of yourcompetition right your cops in
(26:29):
that neighborhood have somethingyou want to get up to that level
to start getting those rents andattract those tenants those
walk-ins the you know theinternet ads and all that stuff
right the people that are comingfrom Facebook marketplace.
SPEAKER_00 (26:43):
So um that's just one example yeah that that
that's a really good one too Imean because you're right it's
it's an if it's evaluating okaylisten do do they do they need
this what you know talking tothe property management talking
to the you know the tenants likeis this something that they
could even really uh use andthen also considering the
project like you know what's theROI on it because you're right
there are a lot of things thatyou can do to a property but the
(27:05):
question is is it really goingto boost the the value of the
return on your your dollar spentum and that conversation is it
has to be had you know otherwiseyou just end up spending money
on things that really aren'tgoing to move the needle at all.
And I like that you youmentioned there um you know you
kind of touched on forceddepreciation there where you you
mentioned just kind of a$50bump.
You know if you got a 100 unitproperty and you're at a five
(27:27):
cap and you do it you know yougot a$50 uh bump uh on average
per unit you you jacked up thethe value of the the property
about what about a milliondollars or something like that.
And so um so it just to me isjust an absolutely incredible uh
I call it the secret sauce of ofthe business but you only get
there by by having that eye fordetail like you said well let's
(27:48):
stop and think about this beforewe go and spend you know this uh
we allocate these funds um tosomething like that might not
add the value that we think itwould.
So I want to quickly you knowkind of ask a question about
your story a little bit, right?
Because um we wanted to sortalmost almost finishing the
journey because you had a reallyimpressive amount of growth um
(28:09):
in terms of your portfolio andand also we we can even tie this
into building relationshipsright so you're now over a 1900
units and so how how did you howdid you get there?
Like what was kind of the youknow what what followed some of
the early you got bit by the bugand then it's like I'm I'm going
in like what what what what tookyou from there?
SPEAKER_01 (28:29):
Yeah I think that's multi-pronged but I think the
the underlying the under theunderlying um answer to that is
relationships which I think I'vesaid probably 15 times on on the
podcast already so I I reallybelieve in the power of
relationships and and your yourproximity right proximity is
power.
(28:50):
So I I moved out to CaliforniaI'm gonna I'm gonna continue
with the story from the from thebeginning here um moved out to
California and when I made thatmove it was for me I I got
really comfortable back east andthat's uh another story um but I
got really uncomfortable or I Iwas very comfortable right back
(29:11):
in that circle in thatenvironment and I had a lot of
opportunity out on the WestCoast in construction and
project management.
And that was like wow I can Ican go out there and be in a
different part of the world it'sa different hub and I can meet
new people be uncomfortable andkind of go down another path
right and by this time I knewabout multifamily so I was
(29:34):
starting to study it I waslistening to podcasts I was kind
of absorbing as much as I couldI was underwriting.
I didn't know what underwritingwas right I just thought you
know I heard the wordunderwriting when I was sitting
in the mortgage broker's officesaying oh the underwriters have
it's like that's actually kindof dark like what is an
underwriter so um that led me ona path to so multifamily right
(29:58):
so I started getting into that Iwas also uh parallel to this I
was really getting into theworld of financial education and
educating myself on finance andthe Fed what is money right and
what is you know what 401k IRAand just understanding that
(30:19):
there's all these other assetclasses out there other
investments that you can deploymoney in like multifamily right
and there's a there's a ton ofthese assets that you can you
can invest in in your privatecapital into funds like you know
you raise money Brandon and youcan invest with someone like
(30:40):
yourself and get a wholedifferent type of return.
You can get you know you get thecash flow you get the
appreciation you get the taxbenefits right so educating
myself on all that it's justyour eyes got huge right and
then I I so I'm in Californiaand I get a I got an email about
(31:05):
a meetup from the uh the realestate guys radio show.
So Robert Holmes and I think hehad Michael Michael Becker was
out here I didn't know whoMichael Becker was or the real
estate guy so that and that wasout here in the Bay Area.
So I went to that and they weretalking about this multifamily
(31:27):
conference out in Dallas, Texas.
And Grant Carnone was there andI was doing a little bit of
following of him listening tosome of his educational stuff on
multifamily so I went and wentto this event in Dallas and I
was like this is what I want todo.
Multifamily is what I want todo.
So I was having some issuesoperating my properties in um
(31:50):
Virginia um from afar and I hadmy real estate agent that I was
talking to you about kind ofoperating them for me.
And when I was not managing themthey were so that was taking a
little bit of my cash flow away.
But anyway I ended up sellingboth of those immediately so I
sold both of my single familyand I said I'm getting into
multifamily and what I did was Istarted plugging myself into all
(32:13):
of these networking events andeducational events whether it
was around raising money or justlearning how to underwrite um I
joined a mentorship program andstarted meeting people having
conversations and buildingrelationships and my first goal
was to was to invest money intoit.
I'm a firm believer in justwatching something or educating
(32:37):
yourself isn't enough.
I think you gotta you gotta putsome skin in the game so I
wanted to make an investmentbuild a relationship with
somebody and try to getsomething out of it right so I
was having conversations and Iwas like I want to invest in
this deal right this individualhad a deal and I like the deal I
like the bones um and I likedhim as an operator.
(33:00):
I think the conversations we hadthe relationship we built was
great so I was like hey I youknow I want to do this right I
want to get into the generalpartnership and start being an
operator eventually and I waslike can I would you mind if you
kind of gave me some insight asto some of the decision making
you know maybe let me on anasset management call or you
(33:22):
know a weekly call here or thereand it was absolutely right so I
was like okay so I invested withthem and that goes back to
relationship right but that kindof springboarded me and gave me
kind of an insight I wasn'tmaking any money off of it but I
was deploying my capital and Iwas in the game now right game
(33:43):
on.
It's like plugging your gameinto a gaming system and just
like I'm in.
Yeah so then you're in it andyou start learning all the terms
learning all the words thedecision making and tying it to
project management it's like howcan I take what I'm doing in my
everyday life right my myexperience of the you know 15
(34:03):
years as being a project managerand project executive to asset
management or to operationsright it's understanding what's
my superpower and you've hadDallin Schultz on your podcast
who's I've had multipleconversations with and he he
gives me a lot of you know he'slike Steve you're doing you're
doing too much right you want todo too much and he's a great
(34:24):
he's a great guy he's he'sawesome he's he's he's great but
it he really check he checks mymy i I don't know if he goes the
right word but he's he just hechallenges me right to just
focus on your superpower what isyour superpower and focus on
that right and what yoursuperpower is you need to find
(34:48):
somebody right back torelationship build a
relationship with somebody elsewho can do everything else and
that's their superpower and thenbuild a team and go get that
deal right or go do a deal so umso that started like the passive
right the limited partnershipand I got the bug and I got the
(35:08):
education I ran into some speedbumps kind of finding that deal
I was starting to underwrite Iwas getting really good at
underwriting and I was I washaving these conversations um
with a lot of these experiencedoperators and I was getting a
lot of like hey if you were mehow would you go get into that
first deal what would yourecommend me do and every person
(35:31):
I talked to I got a differentanswer.
So I was I was a little confusedright it was like oh man I feel
like I'm spinning my wheels hereso um I went to a Tony Robbins
event with a lot of experiencedsyndicators right it was a it
was a Sunrock event and he hebrought a lot of the team and a
lot of experienced generalpartners over to um palm beach
(35:54):
Florida and I went to that andthat was just a different
experience right you're you'rehaving intimate conversations
constantly you're in a greatsense of great mindset and
you're having theseconversations so I I did it
again and I was talking to thesetwo guys and it was like listen
don't don't try to do everythingyourself stop under like you can
underwrite for education butthere's a lot of people just
(36:17):
here at this event that havedeals go form a relationship
with them and say this is thisis what I can bring to the table
right this is what I can do andgo build a relationship with
them right so I had thoseconversations and about three or
actually it was less than thatwas about two months later I
(36:39):
formed a relationship and I waspart of a general partnership
team for my very first deal inuh 2019.
SPEAKER_00 (36:48):
So it again it was back to the the key word here
right is relationships and howimportant that is to building
you as a person and getting toyour goals right so setting your
goals finding who can help meright and having those
relationships and it it reallystreamlines the process and
(37:09):
helps you get to where you wantto be that that is absolute gold
um you know that and I like Isaid you everything that you
laid out there uh for thelisteners that that's it right
there that's the ticket you knowI share there there's so many
things to pull from with withinthat um you know I share with a
lot of people that um becausewhat you did was you did among
(37:31):
other things you kind of did theearn while you learn where you
you said hey I'm gonna investpassively and there is a
difference between sort ofgetting education and
understanding the the businessversus going and actually
putting some capital some skinin the game and um you you had a
conversation with the sponsorand said listen I like you I
like the deal I think it'sincredible and if you wouldn't
mind I'd like to sort of maybejust be a fly on the wall for a
(37:53):
couple of conversations here andthere.
I know I might not be able be uhmaking the decisions or anything
or influencing them but I wantto understand how it works.
And I tell people that all thetime is that you have to uh if
you're gonna make an investmentand your goal if your goal is to
be a GP then you absolutely wantto at least have that
conversation to see if they'regonna be amenable to it.
(38:15):
And and oftentimes they will bebecause you make it clear that
hey I'm not trying to influenceanything I just want to
understand a little bit everyonce in a while how how this
works because that is my goaleventually um and and be stating
that I think is very powerful.
And then also you know likerelationships, you know I mean
if if the listeners haven't ifit's not clear then it needs to
be you know there it's it'sclear now.
(38:37):
You know that is the the key.
Too many times we feel like wehave to do it all before we can
be a part of a team.
And that's really that'sbackwards thinking because the
whole point of being a part ofthe of a team is to say here's
my strength and let me plug inwhere I can but but that's how
we all start especially if westarted off on like the single
family side because I I startedoff on the single family side as
(38:57):
well and for me it was like youknow I'm so used to being the
one that's making all thedecisions.
So when I switched into themultifamily space and and I'm a
part of a team it was difficultfor me to say you know let me
spread the work here but that'salso the beauty of this
business.
You know so it just like I saidman there's a lot to pick from
in there and mentorship groupsyou you and I are in the same
(39:19):
mentorship group and and um andI you know I have found that the
people who you know who we meetand who we've built
relationships with they're somuch uh they're so open so warm
and welcoming they're they'rethey're they're able to sort of
uh help you out in so manydifferent ways just a
conversation right earlier youcalled it I think uh a cheat
code you know it's almost like acheat code where you have a
(39:39):
conversation with someone andthey literally are compressing
five years worth of you beatingyour head you know because think
about how long would it take forus to go and get a deal
ourselves that's you know youyou you have one deal that's um
I think your your largest dealis I mean what it's a portfolio
right I think it's almost it'sover a thousand units or
something like that.
SPEAKER_01 (39:58):
That's a that's a limited partnership deal yep
right and so but but so how longwould it take someone to kind of
be in a in a deal like that umon the actor side but having a
couple conversations it's likeyou know and building
relationships it it it gets youthere it compresses that time um
so I just think I just thinkthat's that's incredible and I
(40:19):
do I do want to ask you nowabout about market selection
right so you're in Californiaand um and um and this this it
even to help kind of benefit thelisteners a bit how were you
able to come to terms withinvesting um out of state so I
think when you when you start tounderstand the markets um so the
(40:41):
macroeconomics right justunderstanding the country
understanding you know tenantlandlord laws and growth markets
once you start understandingthat you start to learn that you
kind of focus on the sunbeltright you have great markets
right now and obviously allmarkets are cyclical um but you
(41:01):
see a lot of growth and theeducation um that we have
obviously our our mentorshipgroup is based in Texas so
there's a lot of relationshipsthere and a lot of boots on the
ground there so it made a lot ofsense and it also happened to be
a great obviously Texas isbooming you know there's a lot
of in influx from Californiafrom New York so you kind of see
(41:25):
that it has I mean it has itsstrengths and it has some
weaknesses just like every stateor every market does and then I
think it just made a lot ofsense and I think that's where
the relationships were so um soright now yeah I'm I'm heavily
in Texas um because that's wheremy relationships are that's
where my my partners are andthat's where it makes a lot of
(41:48):
sense I live in California umI'm I'm not gonna buy really
anything in California itdoesn't make sense so my goal is
not just to stay in Texas Ithink my my goal now is to kind
of do some I want I do have somepassive money that I do want to
invest out of state and then Ithink for my from operation
(42:10):
standpoint I think it justdepends on the relationships
right I'm constantly you knowobviously building relationships
with people who are doing dealsin North Carolina in Georgia you
know I I like North Carolina umI'm an East Coast guy I was born
in North Carolina so it it kindof strikes a chord with me but I
think there's some great marketsum all around the country and I
(42:32):
think it just it it just dependson where they are um I think you
can follow the money right whereare companies going where's
where what states or what citiesare investing in their economy
in their growth right and thenwith that investment you see the
population growth you see theinflux of um you know good
(42:54):
paying jobs and that you know itjust big investment right so
when you see that growth it itjust makes a good incubator for
a good investment right you youwant that growth you want to see
that growth um and it'sinvesting out of state is uh
(43:14):
obviously there there's there'sthings that I can focus on as an
operator out of state right thethe financials the capex I do go
as much as possible right andyou got to be on site you got to
understand yeah and feel likethe pulse of the property right
being on site gives you adifferent feeling so you know
(43:35):
every other month once a monthit just depends on what's going
on and what you know my role ison those properties.
So it's doable I definitelydon't want to discourage anybody
from you know saying hey I liveout of state how can I be a
general partner provide valuefor this general partnership
team in Texas or in Georgia orFlorida right there's a lot of
(43:59):
roles on a general partnershipthat you know may you know the
listener or somebody that'sthinking about getting on a GP
can do right if you have a CPAbackground you know or if you
have a strong financialbackground those are great you
know investor relations thoseare things that you can easily
(44:20):
do and not be boots on theground but it is important to
have somebody on your generalpartnership or on your operation
side be boots on the groundclose to the job site or
property.
SPEAKER_00 (44:31):
Yeah yeah yeah no that that's right I mean I I
think you're I I like that thatyou said um that it depends on
where the relationships are likeI I really like hearing that
right you because you're sayingum that's that's what's at the
core of having confidence andand being able to invent because
because ultimately if you havetight enough systems and
relationships that you've builtup it really doesn't matter
where you are that's my that'smy opinion on it you know um and
(44:54):
so I love that you really reallyuh mentioned that because that's
something that I think we allneed to understand.
And uh also you know I I likekind of that you mentioned
there, you know, focusing on uhthere was something in
particular that you said that Iwanted to really really
highlight um it'll it'll come tome.
But but yeah by focusing on youknow our strengths and kind of
(45:15):
where we fit into the deal I dothink it makes it a lot easier
then to say okay well here's mypiece and I'm going to as much
as possible focus on um justthat piece because sometimes
sometimes I think the theconcept of hey we all have to I
mean you know we all have to bethere the entire sponsorship
team the only reason people sayyou know come to that conclusion
is because they don't focus onwell hold on what's my exact
(45:38):
specific uh piece of this youknow and also what's the deal
like so if it's a you know ifyou got a class A property and
you don't have a deep heavyvalue ad, uh then yeah you you
don't exactly need to be thereon site every day, right?
You're not in a you're not in adeep value ad where you're
having to just about do italmost a tear down or you know
not a tear down but justextensive work.
(46:00):
So uh it's kind of it all it allkind of comes together uh to to
to say okay well it doesn't makesense to I'll go after this oh
no I I now I remember so youwhen you said follow the money
in terms of market selection Ithink it's important follow the
money which which play whichmarkets and submarkets are
investing in their um theirlocal area which um markets have
jobs that are coming to itbecause with jobs comes uh uh uh
(46:25):
people right so populationgrowth all these things and
usually that's if you can find away to to follow the money that
is what's at the root cause ofgrowth and so um so I think
that's probably one of the mostimportant things following the
money understanding where yourrelationships are and if there's
a market where you've thatyou've identified that you
really like then building therelationships there so that you
(46:46):
can then invest there.
So those are are two twoabsolutely valuable pieces of
information for people um here.
So so I want to ask you whatwhat advice then right because
uh again you have uh 15 uh moreover 15 years experience in your
business and so what what advicemight you give to someone who
they're they're in projectmanagement they have that
(47:07):
understanding but and maybe theythey're interested in investing
in this business but they're alittle bit hesitant right so
what advice might you give tothat person so there so I'll
I'll take this two prong so forthe for somebody who's a a
project manager in you knowconstruction or kind of anything
right when you're managingsomething managing a project um
(47:30):
and you want to get into thereal estate space and as a
limited partner right you haveyou have the ability to get on a
you know obviously build arelationship with somebody and
you know when they have a dealyou can take the you know get on
the webinar and understand whatthey're talking about right you
can see this is what they'redoing this is what they're going
(47:52):
this is what their goal is andthis is the end result and you
can kind of check that rightdoes that make sense in your
head I think there's they caneasily understand some of that
from a general general partnerstandpoint I think capex makes a
lot of sense um you know thebusiness plan capex is really
where they're gonna excel and Ithink just from a business and
(48:15):
running a business I thinkthey're gonna have a lot of
insight to you know either comein and assist as as an operator
or an asset manager oreventually build into one with a
good baseline right a goodfoundation from project
management and understanding thelife cycle of a project it's
understanding the life cycle thelife cycle of a business right
(48:39):
so from from closing or projectnotice to proceed to close out
right it's it's heavy in thebeginning it's heavy in the end
and it it's just a it's a lifecycle right and it's very
similar in project management asit is in multifamily right from
(49:01):
soup the nuts.
SPEAKER_01 (49:02):
So I think understanding that and having
that visual you can kind of seewhat's coming up next.
And you can start seeing thebusiness plan and visually see
how it's shaping up whether youneed to pivot or not.
SPEAKER_00 (49:16):
So I think there's a lot of benefits and I think
there's some built-insuperpowers that a project
manager project executivesomeone in construction or
project management you know cancome in and say I'm good at this
I have this experience how can Ihelp you guys or this is how I
(49:36):
can help you do you need thishelp right can I be a part of
the team this is what I canbring and you know if you build
the right relationships andenough of them you'll find
somebody or a team that you canjump on and be an asset
instantly yeah I I love thatadvice I think that's I think
that's powerful you know becauseit's how often have we seen or
(49:58):
heard um of teams getting toclosing and then um after that
they kind of drop the ball youknow and you usually it's
because they didn't have kind ofthat um line of sight on the
full scope of the project thelife cycle you know and and and
before they get into it you knowthat's why like I so I I I um I
was a petroleum engineer for a agood while and I worked as a
(50:21):
drilling engineer which is kindof operations heavy and one of
the things that we absolutelythat we swore by was the the
procedure you know so we hadthis manual where it's like this
is what's going to happen inthis phase of work then this
phase in this phase and thisphase and then once we're done
here the things we're gonna doto rig down and move off
location.
And so you you we went into theproject with an understanding of
(50:43):
what's going to how it impactseverything and then what's the
eventual you know task that wehave to do before we leave
location.
And so um I believe more teamsneed to have that view that you
just mentioned uh there isunderstanding the life cycle
before you buy and it's alsointeresting that that really
that carries out in um in everyaspect of the deal.
SPEAKER_01 (51:02):
So even uh from underwriting you have to
understand the life cycle whowhat's the next buyer's uh
upside you know I mean why wouldsomeone else buy it once you're
ready to exit you know you knowwhat's the exit strategy right
what's the exit strategy alwayslooking at the exit strategy and
market changes right there's abig market swing right now right
things are changingexponentially right your
(51:23):
controllable expenses aresomething that you're focusing
on right your uncontrollablesare going up like crazy yeah
right Texas market insurancetaxes so being able to like oh
what do I got to do right that'swhere the pivot comes in right
this isn't working but this is ahuge change what can I do about
(51:44):
it those are things you can'treally negotiate right you just
got to go to the marketplace andthis is what's happening.
SPEAKER_00 (51:52):
So yeah exit strategy is is key and those
things are all part of thepuzzle right part of the pie and
you got to bake all that in yeahyeah absolutely absolutely man
um well listen so Steve we'regetting close to kind of the
actionable tip portion of theshow and there's just been uh
again so many nuggets um droppedin here so I appreciate it so so
(52:14):
what what advice might you giveto someone who uh regardless of
their background but they'relooking to get into this
business and I'll say as a I'llsay as a passive investor so
someone who's wanting to investpassively um but they're on the
fence you know what what wouldyou kind of say to to get them
to take action now so the firstthing obviously it's going to
(52:34):
come down to relationships rightfor many reasons not just
because that's what I've beentouting um all morning here but
I think education is is oneright it starts with education
learning about the space boththe rewards and the risks and
then building relationships withsomeone like yourself go to your
and education right your youhave a meetup in the DC area
(52:58):
your podcast those are bothgreat areas to get educated
educated build and build arelationship with a with
somebody who's a general partnerand jump in right I think you
know and come in invest a littlebit you can use your 401k right
I always as a passive investor Ipersonally invest all my passive
(53:21):
money is 401k or Ira becausegeneral partnership you got to
use you got to use cash right sostrategically right my
investment plan is my 401k moneyis my passive money and that's
what I use to buildrelationships and maybe that
investment will lead to me doinga general partnership deal with
(53:41):
that person.
SPEAKER_01 (53:42):
So I think as a as somebody looking to get into a
limited partnership deal is geteducated like again what are the
risks what are the what are therewards um and ask questions
yeah I think it's beneficial togo to go to a couple events um
go to a meetup a local meetupyou don't have to travel to
(54:03):
Dallas if you live in Virginiaor DC or California I don't
think that's necessary I thinkthere's a lot of online
education um there's localmeetups that you can go to and
just get educated ask questionsand then jump in um I think that
there's a lot of benefit to thatand like early on in my career
when I jumped in took someone'sadvice to buy a single family
(54:25):
house with the little bit ofmoney that I did have turned
into eventually a 2000 unitportfolio of multifamily so um
it's just getting the gettingthe wheels turning really right
it's a it's a it's a superpowerful industry and I I think
everyone should have at least alittle bit of real estate in
(54:48):
their portfolio.
SPEAKER_00 (54:50):
Yeah yeah yeah I could couldn't agree more I
think that um getting thateducation and in addition to and
not not even just kind of likethe uh more structured you know
type of education but also likeyou mentioned going to meetups
and having conversations becausethat is in fact a form of
education um so so I would 100%agree with that as an action.
So Steve again man I've reallyappreciated always good speaking
(55:12):
with you and I really appreciateum the value the amazing value
that you've added uh for thelisteners and for myself and so
for the for the listeners thatwant to reach out to you maybe
hear more about you or see moreof you how can they do so yeah
so you can you can visit thewebsite my website is
Shermanmultifamily.com email umyou can email me uh Steve at
(55:35):
Shermanmultifamily.com and thenthe socials um instagram is
where I spend most of my timeInstagram and Facebook and I'm
uh handles at Sherman underscoremultifamily um so yeah you can
find me there all right man wellI'll add that to the show notes
and once again look it's alwaysbeen a it's always a pleasure
speaking with you man and um uhthanks so much for for your time
(55:56):
Brandon thanks for having me onappreciate it as always thank
you so much for tuning in to theshow today brought to you by
Bridge Prosper if you enjoyedtoday's episode and you'd like
to learn more about commercialreal estate investing please
like subscribe and share andwe'll see you again next week
I'm Brandon Jenkins and this isthe Capital Stack where we help
(56:18):
you learn apply and
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