Jordan Arand Spills the Secrets Brokers Aren't Telling | The Jake and Gino Show

[00:00:10] [SPEAKER_03]: Hello everybody this is Jake Sensei and I host Jake and Gino Podcast here with my co-host,

[00:00:13] [SPEAKER_03]: the multifamily mentor, the coach, chef, father of six, the best selling author,

[00:00:17] [SPEAKER_03]: the G-Daddy. Gino Barbaro, Gino how's it going? Jake I'm doing good this morning,

[00:00:21] [SPEAKER_03]: how you doing brother? Always making it happen big man. So we got a broker on today Gino,

[00:00:26] [SPEAKER_03]: today's guest is a multifamily broker with Capstone Apartments, the largest

[00:00:32] [SPEAKER_03]: privately owned apartment brokerage in the US of A. Since joining the firm in 2020 he has been

[00:00:39] [SPEAKER_03]: involved in over $1 billion of apartment and land transactions. So without further ado,

[00:00:46] [SPEAKER_03]: Jordan Arand welcome to the show. Yeah I appreciate you guys having me on,

[00:00:49] [SPEAKER_03]: I've been looking forward to it. So 2020 that is an interesting year to kind of

[00:00:56] [SPEAKER_03]: become a multifamily broker. Let's talk about that a little bit. What were you doing before that and

[00:01:03] [SPEAKER_03]: were you doing any brokerage? And let's start there and then that transition into Capstone.

[00:01:08] [SPEAKER_05]: Yeah absolutely. So 2020 prior to moving down to Nashville getting into brokerage,

[00:01:14] [SPEAKER_05]: I was a Chicago guy, was a finance pro for six years prior to moving down here. And so my last

[00:01:21] [SPEAKER_05]: four years in Chicago was at JP Morgan, was raising assets for their funds business there.

[00:01:29] [SPEAKER_05]: So selling mutual funds, ETFs, alternatives, covered all the wire houses. My clients were

[00:01:35] [SPEAKER_05]: Merrill Lynch, Morgan Stanley, Willis Fargo, UBS. Really fairly similar to what we do in

[00:01:42] [SPEAKER_05]: multifamily was still investment sales. Just selling equities and fixed income products

[00:01:49] [SPEAKER_05]: versus real assets in multifamily communities with what I'm doing in brokerage now. And so

[00:01:56] [SPEAKER_05]: my path into brokerage was kind of a random one honestly. I think my path into multifamily and

[00:02:03] [SPEAKER_05]: into real estate was fairly calculated and... Expand on that. So yeah, you moved from Chicago

[00:02:10] [SPEAKER_03]: to Nashville and then into the multifamily space. What was the rationale and thought

[00:02:15] [SPEAKER_05]: process behind that? Yeah. So candidly, I was a little bit

[00:02:18] [SPEAKER_05]: burned out on what I was doing in finance at the time. And it was a phenomenal job. I had a ton

[00:02:24] [SPEAKER_05]: of fun with it. JP Morgan was a great organization to work for. I think I knew pretty early on I

[00:02:31] [SPEAKER_05]: wasn't a corporate guy. I wasn't a corporate soldier. And so I've always had a lot of interest

[00:02:37] [SPEAKER_05]: in real estate. I'd read all the books. I actually found your guys' podcast, Bigger Pockets,

[00:02:42] [SPEAKER_05]: some other podcasts as well. And so I knew at some point either wanting to start a business

[00:02:48] [SPEAKER_05]: or get into real estate or both. And so I'd actually looked at jumping to the principal

[00:02:52] [SPEAKER_05]: side of the business, either getting more into owner and operator type role,

[00:02:57] [SPEAKER_05]: what you guys are doing or getting into development. And so it was going back to

[00:03:03] [SPEAKER_05]: I think the start of 2020, COVID, heat of COVID in Chicago. Things are weird anyways.

[00:03:10] [SPEAKER_05]: And I was in Charlotte for a trip, met up with one of the guys that started Capstone going back

[00:03:16] [SPEAKER_05]: 16 years ago. Shout out AJ Clank. And I had a coffee with AJ. Actually talked a lot about

[00:03:22] [SPEAKER_05]: development, ended up talking a lot about brokerage. Realized how similar it was to what

[00:03:26] [SPEAKER_05]: I was doing and thought that'd be a good path into real estate and into multifamily.

[00:03:31] [SPEAKER_05]: Was actually trying to move to Charlotte at the time. They just hired a couple brokers in that

[00:03:35] [SPEAKER_05]: office. There were quite a few guys who were already... And AJ asked me, he said,

[00:03:39] [SPEAKER_05]: Hey, would you ever move to Nashville? And the timing ended up being funny because I was

[00:03:43] [SPEAKER_05]: in Nashville the following weekend for one of my best friend's weddings. He's a guy I grew up with

[00:03:48] [SPEAKER_05]: in Illinois. Ironically, our houses are blocked from each other here in Nashville now.

[00:03:53] [SPEAKER_05]: And so when I was in Nashville that following week, I met up with Adam Clank, who you guys know

[00:03:58] [SPEAKER_05]: is one of my partners in the Nashville office now. And we're both Midwest guys. Adam and I

[00:04:03] [SPEAKER_05]: hit it off. And I think it was a week later, I'm still living in Chicago. I had bought a house

[00:04:08] [SPEAKER_05]: in Nashville. I put in my notice at my job and I was like, what the hell am I doing right now? But

[00:04:15] [SPEAKER_05]: I jumped in head first and I'm really happy I did because the last 4 years have been incredible.

[00:04:20] [SPEAKER_05]: And work aside, Nashville has been a phenomenal city to call home.

[00:04:24] [SPEAKER_02]: Jordan, as you jump in head first, what are some of the things that you were just taking

[00:04:28] [SPEAKER_02]: it back and you didn't know about the multifamily space?

[00:04:32] [SPEAKER_05]: The truth is I didn't know a lot about multifamily at the time. I had a good

[00:04:36] [SPEAKER_05]: sales background. I think I had all the fundamentals to be successful in this business.

[00:04:41] [SPEAKER_05]: But when you jump in this business, there's 3 things that you have to learn as quickly as

[00:04:47] [SPEAKER_05]: possible. And it's first off just multifamily in general. How to underwrite deals, what you're

[00:04:52] [SPEAKER_05]: doing. You have to learn who's who. You have to learn who the owners are, who the buyers are.

[00:04:58] [SPEAKER_05]: So it was learning groups like Rand. I remember touring you guys

[00:05:02] [SPEAKER_05]: on a deal at Knoxville. I think that was my first year down here. It's trying to sound educated

[00:05:08] [SPEAKER_05]: when at the time, the reality is you know nothing. You're learning on the fly.

[00:05:13] [SPEAKER_05]: And then it's learning the geography. I'm a Chicago guy originally. I knew a little bit

[00:05:16] [SPEAKER_05]: about Tennessee. I've been to Nashville a dozen times prior to moving down here. I've been to

[00:05:22] [SPEAKER_05]: Knoxville. I've been to Chattanooga. But really just getting up to speed on the geography as well.

[00:05:27] [SPEAKER_05]: And so those are your initial hurdles. It takes some time, certainly. But I would say within

[00:05:33] [SPEAKER_05]: 12 months into the job, you have a pretty good grasp. And from there,

[00:05:38] [SPEAKER_05]: it's just tenacity and hard work and learn as much as possible and continue to build on that.

[00:05:43] [SPEAKER_03]: Did you realize at the time... You're getting into 2020 and then 2021 is happening. Did you

[00:05:50] [SPEAKER_03]: just think it's always going to be like this? And I just stepped in shit and wow,

[00:05:54] [SPEAKER_03]: the money's just coming and people are lining up to buy these things that I'm selling.

[00:05:58] [SPEAKER_03]: I mean, that was a very interesting time to get into the business, to say the least. Can

[00:06:02] [SPEAKER_05]: you just expand upon that? Look, when I moved down here,

[00:06:07] [SPEAKER_05]: money is free. Literally, cost of capital was not existent. You're getting loans at 2%, 3%

[00:06:14] [SPEAKER_05]: on multi-million dollar properties and money was easy to come by as a broker as well.

[00:06:20] [SPEAKER_05]: Transaction volume, to put it in perspective, so 2022 at its height,

[00:06:24] [SPEAKER_05]: transaction volume in Nashville is over $6 billion. Looking at the trailing 12 months right

[00:06:30] [SPEAKER_05]: now, we're at $1.6 billion. So transaction volume is down substantially right now from its height.

[00:06:37] [SPEAKER_05]: In 2021, it was the same thing. And by the time I moved down here, I got to Nashville the second

[00:06:42] [SPEAKER_05]: half of 2020. And so we had worked through that awkward phase in COVID where volume...

[00:06:49] [SPEAKER_03]: There was a pause at the beginning of 2020. I know exactly.

[00:06:52] [SPEAKER_05]: Exactly. Nobody knew what was going on. Everyone was on pause and there's money sitting on the

[00:06:57] [SPEAKER_05]: sidelines, not really looking to be put to work. But yeah, my first 2 years in this business were

[00:07:02] [SPEAKER_05]: unbelievable. And it was an incredible time to learn because you're drinking from a fire hose.

[00:07:07] [SPEAKER_05]: There were literally more deals than we knew what to do with. And so we're looking at hiring

[00:07:12] [SPEAKER_05]: a second analyst and we got a transaction coordinator. And then middle of 2022 rolls

[00:07:19] [SPEAKER_05]: around as you guys know. We've seen 11 rate hikes over the past 2 years. And volume drops off this

[00:07:26] [SPEAKER_05]: clip. And so I think at some point, I'll look back and I'll realize how fortunate I was to see

[00:07:32] [SPEAKER_05]: both sides of that spectrum at the start of my career and pretty early on within the first

[00:07:39] [SPEAKER_02]: call it 4 years of my career here. So Jordan, there are 3 things you mentioned.

[00:07:43] [SPEAKER_02]: Learn how to do multifamily and underwrite. The second one is to learn who's who. And the third

[00:07:49] [SPEAKER_02]: one is geography. Now, it's very interesting because that's what we need to do as multifamily

[00:07:55] [SPEAKER_02]: investors. I think that's the 3 pillars right there. And I'm a buyer. I want to get on Jordan's

[00:08:02] [SPEAKER_02]: list. I want to be Jordan's pal because I don't want those deals going to anybody else or going

[00:08:06] [SPEAKER_02]: to LoopNet. What do I need to do to really get on Jordan's list? Yeah, I mean, I think a good start

[00:08:12] [SPEAKER_05]: is shoot me an email and I'll give out my email and my cell phone number here. I hope I don't ever

[00:08:18] [SPEAKER_05]: regret that because I know you guys have a great following and a great platform. But yeah, my email

[00:08:23] [SPEAKER_05]: is jarend at capstone-companies.com. So J-A-R-E-N-D at capstone-companies with an IES.com.

[00:08:34] [SPEAKER_05]: My cell is 815-291-9250. But a good start is just make an intro, send me an email with specific

[00:08:43] [SPEAKER_05]: criteria, very specific buy boxes where I always recommend. So I have a very good idea of what we

[00:08:49] [SPEAKER_05]: should keep on your radar. We'll get you added to our system and our database if you're not

[00:08:54] [SPEAKER_05]: already in there. And from there, shoot me a text, give me a call. I'm probably one of the few brokers

[00:09:00] [SPEAKER_05]: that takes the majority of the calls I get unless it's a blatant call that I don't want to take or

[00:09:09] [SPEAKER_05]: it's some sort of scam or whatever. But I'm always open to an intro conversation. I've had a lot of

[00:09:15] [SPEAKER_05]: people that have opened doors for me throughout my career. And so I definitely empathize with

[00:09:19] [SPEAKER_05]: other people, whether they're just getting into the business or trying to get a foothold

[00:09:23] [SPEAKER_05]: in Tennessee and maybe already on assets elsewhere. So I think that's always a good start.

[00:09:26] [SPEAKER_05]: Give me some background on your group, maybe deals that you're working on right now,

[00:09:31] [SPEAKER_05]: deals that you've already closed. And obviously for us as brokers, we don't get paid on deals

[00:09:36] [SPEAKER_05]: unless they actually close. And so that's the other thing. It's just providing us with

[00:09:41] [SPEAKER_05]: credibility and any sort of faith that you're able to transact and you're going to be a good buyer.

[00:09:49] [SPEAKER_05]: We want to get paid. We want to get the seller paid. We're in the business of representing

[00:09:52] [SPEAKER_05]: sellers. But the other part of that is if we end up doing a deal with a buyer that drops the deal

[00:09:58] [SPEAKER_05]: for random reason or whatever it is, we run the risk of freeing our reputation and our relationship

[00:10:04] [SPEAKER_05]: with that seller. So we take that very seriously. We vet the buyers we work with

[00:10:09] [SPEAKER_05]: extremely diligently. But I think that's probably the best start is just shoot me a call,

[00:10:15] [SPEAKER_05]: shoot me an email and kick off the conversation from there.

[00:10:18] [SPEAKER_02]: I want to recap that real quick before I ask my next question because it's important.

[00:10:22] [SPEAKER_02]: The first element to that was Jordan was not giving out his cell phone two years ago because

[00:10:27] [SPEAKER_02]: Jordan didn't have to. And now maybe Jordan did, but for the vast majority, Jordan didn't have to

[00:10:32] [SPEAKER_02]: because as you said, there were so many deals out there. So if you're thinking about getting...

[00:10:36] [SPEAKER_03]: Get in line, mofo. Take a ticket. It's like the deli counter, right?

[00:10:40] [SPEAKER_02]: So if you're thinking about getting into multifamily and you're saying now is not the

[00:10:43] [SPEAKER_02]: time, Jordan, through his words and the way he answered that question, now is the right time.

[00:10:49] [SPEAKER_02]: Don't call Jordan in two years when the deals are back on the table and he's already met Jake

[00:10:53] [SPEAKER_02]: and Gino and the people that got in right now. That's very important for everyone to understand

[00:10:57] [SPEAKER_02]: right now. Get on Jordan's list. The other part, which is really important,

[00:11:02] [SPEAKER_02]: it's not finance right, manage right. It's buy right, finance right, manage right.

[00:11:08] [SPEAKER_02]: Don't call Jordan and go, hey, Jordan, you got any deals for me? Jordan's going to say,

[00:11:12] [SPEAKER_02]: get lost, click, hang up, come up with your credibility. And I empathize because Jordan

[00:11:19] [SPEAKER_02]: doesn't have time to waste. If he's not closing, if he's not killing the deer, he ain't eating.

[00:11:23] [SPEAKER_02]: That's the reality. So the reality is come prepared. What's your credibility? What's

[00:11:28] [SPEAKER_02]: your business plan? How are you adding value to Jordan's life? And what's your buy right criteria?

[00:11:33] [SPEAKER_02]: Don't come with him to say, what's a deal? He doesn't want to hear that. He doesn't know

[00:11:38] [SPEAKER_02]: what the deal is to you because it can be different for you than it is for Jake and Gino.

[00:11:41] [SPEAKER_02]: So that's really important. Now, we had a bootcamp this past weekend for the Jake and Gino community

[00:11:46] [SPEAKER_02]: and there was a student who said to me, hey, I'm selling my property. And I said to him,

[00:11:51] [SPEAKER_02]: you need to call a couple of brokers and let them help you with the listing of the property

[00:11:56] [SPEAKER_02]: and get it prepared. If I'm considering selling a property, how does Jordan add value to my life?

[00:12:01] [SPEAKER_02]: How do you help me get that property ready for sale? Yeah, yeah, 100% too.

[00:12:07] [SPEAKER_05]: With us, I think it starts with the marketing package we put together. We've listed a deal

[00:12:13] [SPEAKER_05]: actually for you guys recently and it was awesome to have a chance to work with you guys at Rand.

[00:12:20] [SPEAKER_05]: We put together a 40-50 page property depending on the asset we're selling.

[00:12:27] [SPEAKER_05]: Very detailed information, not only at the property level, but market, sub-market level.

[00:12:33] [SPEAKER_05]: So that's where we start once we have a signed listing agreement. From there,

[00:12:36] [SPEAKER_05]: we have 5 brokers working every deal. That's where we're a little bit unique is we bring the

[00:12:42] [SPEAKER_05]: entire office to every deal. We run a very aggressive, fast-paced 30-45 day marketing process

[00:12:50] [SPEAKER_05]: once we're on market. We start out, we send the deal out to our entire database,

[00:12:56] [SPEAKER_05]: 75,000 plus investors in principals across the country. As soon as that hits our database,

[00:13:04] [SPEAKER_05]: from there over the next 30-45 days, we're just working that deal from every angle.

[00:13:09] [SPEAKER_05]: We want to be sure that no stems are left unturned. We're not only fielding inbound calls,

[00:13:14] [SPEAKER_05]: groups that go sign RCA and register for the deal, fielding inbound calls and questions from

[00:13:20] [SPEAKER_05]: those groups, but it's proactive outreach. We're calling every regional owner. We're calling every

[00:13:24] [SPEAKER_05]: buyer we know that's already in that market, buyers we're talking to on a daily basis that

[00:13:29] [SPEAKER_05]: we know we're trying to get into that market where the deal we have is listed. We're doing

[00:13:35] [SPEAKER_05]: mail merges, sending out emails, doing voicemail drops. It's a very aggressive,

[00:13:42] [SPEAKER_05]: fast-paced process over that 30-45 day window to be sure that for you guys as the owner,

[00:13:48] [SPEAKER_05]: we're bringing you as many offers as possible. We'll typically take five to seven business days

[00:13:54] [SPEAKER_05]: to collect those offers, run a best and final process. And from there, we're just trying to

[00:14:00] [SPEAKER_05]: push pricing as high as possible, tighten up terms as much as possible. We send a buyer questionnaire

[00:14:06] [SPEAKER_05]: out to every single buyer in the best and final process. That goes back to the vetting process

[00:14:10] [SPEAKER_05]: I just alluded to where right now execution is more important than it's ever been.

[00:14:16] [SPEAKER_05]: We're in what's still a very shaky capital markets environment. And so we want to be

[00:14:22] [SPEAKER_05]: sure that we pick the best horse in every race. We're picking somebody that's going to close for

[00:14:26] [SPEAKER_05]: the seller we're representing in that process. You've mentioned some pitfalls about not hiring

[00:14:32] [SPEAKER_02]: Jordan just to list my deal. What are some of the other reasons if somebody is thinking

[00:14:37] [SPEAKER_02]: about doing it themselves and they're the mom and pop, I want to list this, I don't want to pay

[00:14:40] [SPEAKER_02]: Jordan a commission? Convince me that I need to hire you because I'm just too cheap to pay

[00:14:45] [SPEAKER_05]: a commission. Yeah. So look, we see these deals trade from time to time.

[00:14:51] [SPEAKER_03]: The daisy chains.

[00:14:53] [SPEAKER_05]: Exactly. We see a deal trade and I'm doing the math in my head. I'm thinking,

[00:14:59] [SPEAKER_05]: hey, I could have made you $3, $4, $5 million, depending on the deal size.

[00:15:05] [SPEAKER_05]: We actually ran a study, I think it was probably a couple of years ago. And it was really interesting.

[00:15:09] [SPEAKER_05]: And we put together a flyer for when we're pitching deals to groups. But it was a difference

[00:15:14] [SPEAKER_05]: between on market and off market pricing. And there was close to a 15, I think it might have

[00:15:20] [SPEAKER_05]: been a 12% discount for off market deals versus deals that were running a competitive process.

[00:15:26] [SPEAKER_05]: And so that's always my recommendation. When we're talking to a seller, I think you'd be

[00:15:32] [SPEAKER_05]: remiss to not list the deal and to just shop it around off market. And the other part to that is

[00:15:37] [SPEAKER_05]: not only the ability to push pricing, but if you're shopping to do off market, you have that

[00:15:41] [SPEAKER_05]: one group, you've chosen that one horse in the race. The deal falls out with that group,

[00:15:46] [SPEAKER_05]: you're back to square one. Where if we're running a competitive process, we have

[00:15:50] [SPEAKER_05]: five groups after that best and final process that are sitting on the back burner,

[00:15:54] [SPEAKER_05]: that are chomping at the bit and you're ready to step in if that top group makes a mistake or drops

[00:15:59] [SPEAKER_05]: a deal for whatever reason. I think the most common reason over the past 18 to 24 months has been debt

[00:16:05] [SPEAKER_05]: markets. Treasuries have been all over the place. And so it could be that, it could be something

[00:16:09] [SPEAKER_05]: found in the property. It could be issues with equity. That's a common one right now as well.

[00:16:14] [SPEAKER_05]: Right? Groups that think they have the equity properties under contract, they find out that

[00:16:18] [SPEAKER_05]: there's not as much an appetite from their typical equity partners as they thought. But yeah,

[00:16:23] [SPEAKER_05]: listing a deal is always my recommendation. Buyers give us a hard time. They say,

[00:16:28] [SPEAKER_05]: hey, you guys are... You brokers run prices up. And my response to that is always,

[00:16:32] [SPEAKER_05]: well, that's why you sell the deal with me on the back end.

[00:16:35] [SPEAKER_03]: That's interesting though what you just brought up because you weren't seeing this

[00:16:38] [SPEAKER_03]: a few years ago. So you'll get a group that's ready to buy and you're really excited about it,

[00:16:45] [SPEAKER_03]: and then they can't get the equity together. Have you seen that recently? Has that happened to you?

[00:16:50] [SPEAKER_05]: Yeah. Yeah. That happened to me on a deal.

[00:16:53] [SPEAKER_03]: Did you call the guy a loser?

[00:16:55] [SPEAKER_05]: I did not because they've been a phenomenal client of ours.

[00:17:00] [SPEAKER_05]: But yeah, if it were...

[00:17:01] [SPEAKER_03]: So did they lose hard money?

[00:17:03] [SPEAKER_05]: They did not in that deal. And I think in general, we're still seeing some deals with hard money.

[00:17:09] [SPEAKER_05]: There's still competitive deals out there. I think it's way less common now than it was

[00:17:13] [SPEAKER_05]: 18 to 24 months ago.

[00:17:16] [SPEAKER_03]: What was the seller's response? What's wrong with this guy?

[00:17:20] [SPEAKER_05]: They weren't thrilled about it.

[00:17:24] [SPEAKER_05]: I think that they were a little bit understanding just given where debt markets are at right now.

[00:17:29] [SPEAKER_05]: Luckily for us, we had a couple of good groups on the back burner as well to step in.

[00:17:33] [SPEAKER_05]: Tell me again.

[00:17:33] [SPEAKER_05]: Yeah, it was never launched.

[00:17:35] [SPEAKER_04]: Tell me again. They weren't thrilled with it?

[00:17:37] [SPEAKER_04]: I didn't know Jordan and Brokers were politicians too, man. That was a great answer, brother.

[00:17:41] [SPEAKER_04]: Well said.

[00:17:42] [SPEAKER_04]: Well, he came with a jacket today. He's ready to go, Gino.

[00:17:46] [SPEAKER_05]: I'm a very transparent guy. That's the reality of the situation, right?

[00:17:50] [SPEAKER_05]: Yeah.

[00:17:50] [SPEAKER_05]: And I think for us as brokers, all you can do is you can control the process so much.

[00:17:55] [SPEAKER_05]: I think we're very good at what we do.

[00:17:58] [SPEAKER_05]: I think that we're very aggressive at what we do and have to be.

[00:18:02] [SPEAKER_03]: Let's be honest about this situation. Let's be honest about this situation. That group

[00:18:06] [SPEAKER_03]: that couldn't put the money together that you entrusted is falling down the rung, right?

[00:18:13] [SPEAKER_03]: On the list now when... I'm coming right here for you guys.

[00:18:16] [SPEAKER_03]: Jordan, you're going to look at them. They're going to come with an offer next time. And in

[00:18:19] [SPEAKER_03]: the back of your mind, you're going to go, can this guy actually get the money together?

[00:18:22] [SPEAKER_03]: Because now your confidence is reduced whether you want to admit it on air or not. It is.

[00:18:27] [SPEAKER_03]: Gang, don't get out over your skis. If you can't close, then be careful because reputation matters

[00:18:36] [SPEAKER_03]: in this business. And I think the next time you step up to the plate, people are going to be going,

[00:18:40] [SPEAKER_03]: ugh.

[00:18:41] [SPEAKER_02]: Talking about skis, we got skis going on right now. Jake and Gino are at that best and final.

[00:18:47] [SPEAKER_02]: We're doing good. We're okay. How can Jake and Gino shine and get that offer? Maybe if our price

[00:18:52] [SPEAKER_02]: is even a little bit less.

[00:18:53] [SPEAKER_03]: Maybe you start by having the cash, right? You step up with the money. That helps.

[00:19:00] [SPEAKER_05]: I mean, that's exactly right.

[00:19:03] [SPEAKER_04]: He said, show me the money.

[00:19:05] [SPEAKER_05]: That would be my advice. I think we've went with groups on deals, especially recently in the past

[00:19:11] [SPEAKER_05]: year where it might be a slightly lower price. And actually, the deal I just alluded to is exactly

[00:19:15] [SPEAKER_05]: that. They were at a marginally lower price, but better terms. It didn't end up working out

[00:19:21] [SPEAKER_05]: with that group. But that's what I would say. As a buyer, anything you can do to give us

[00:19:27] [SPEAKER_05]: more confidence in your ability to close, whether it's hard money up front, it's giving us

[00:19:36] [SPEAKER_05]: references. Deals that you've closed recently, have other brokers call us.

[00:19:41] [SPEAKER_05]: I've had groups do that recently. You transacted in Dallas, but we know nothing about you.

[00:19:46] [SPEAKER_05]: Your broker in Dallas calls us. He says, look, this guy's a closer. This was the

[00:19:49] [SPEAKER_05]: seamless transaction I've ever closed with a buyer. Things like that, it goes a long ways right now.

[00:19:56] [SPEAKER_03]: So here's the deal. 2 years ago... And for the longest time, Gino and I have been

[00:20:01] [SPEAKER_03]: buying deals with our own cash. We did a few syndications. We understand the process. And

[00:20:07] [SPEAKER_03]: ultimately, we didn't want to compete with our community. We got a community of investors,

[00:20:11] [SPEAKER_03]: and we didn't want to be like the guys that were raising from the community and whatnot.

[00:20:14] [SPEAKER_03]: So we've been buying deals in-house with our own capital. A year or 2 ago, no one gives a shit.

[00:20:19] [SPEAKER_03]: You're like, no, it's our own money. It's in the bank. We can show it to you right now.

[00:20:23] [SPEAKER_03]: So you just gave me a competitive advantage. Now, the next deal I'm bidding on, I'm going to say,

[00:20:28] [SPEAKER_03]: just check my bank account. You don't got to worry about me pulling the money from

[00:20:32] [SPEAKER_03]: syndicators right now. That's it, Gino, right there. We're off to the races, buddy. We got this.

[00:20:36] [SPEAKER_05]: Yeah, I agree with that 100%. It makes a difference.

[00:20:39] [SPEAKER_02]: Before we go to the short answers, this is an important question, especially for the

[00:20:42] [SPEAKER_02]: Jake and Gino community. This weekend, we had that BuyRight Bootcamp. And everyone discounts

[00:20:47] [SPEAKER_02]: property tours, and everyone discounts really making a connection with a broker like Jordan.

[00:20:52] [SPEAKER_02]: Can you walk us through what you think is a really successful and a good property tour?

[00:20:57] [SPEAKER_02]: And why people should do tours with you? Because I'm out in California, but I'm investing in

[00:21:01] [SPEAKER_02]: Kentucky. I really don't have the time to get out there. If I'm in Kentucky, I want to get on

[00:21:07] [SPEAKER_02]: property with Jordan. I want to walk the property. I want to touch it. I want to feel it. I want to

[00:21:11] [SPEAKER_02]: talk to the property management. I want to talk to the maintenance. I want to see the lift station

[00:21:15] [SPEAKER_02]: in the back that's spewing sewage into the creek. I want to let Jordan-

[00:21:19] [SPEAKER_03]: You're scaring people now, Gino.

[00:21:20] [SPEAKER_02]: I want to let... That's right. It lets people for us to bid against. Jake, come on. That's what

[00:21:24] [SPEAKER_02]: I'm trying to do here. But I want to really create the relationship with Jordan and tell

[00:21:28] [SPEAKER_02]: him that, hey, I'm not a tire kicker. I'm willing to come out to see as many properties as I have

[00:21:32] [SPEAKER_02]: to to close. Can you walk me through what a typical property tour looks like? And what

[00:21:35] [SPEAKER_02]: a successful one looks like? And how do I follow up with you afterwards?

[00:21:39] [SPEAKER_05]: Yeah, absolutely. That's a great question. I think first off, you hit the nail on the head.

[00:21:43] [SPEAKER_05]: The first step is literally showing up. You would be surprised how many groups are willing to submit

[00:21:49] [SPEAKER_05]: an offer that we don't know we've never transacted with. And they say, hey, if we end up winning this,

[00:21:54] [SPEAKER_05]: we'll come out and see the property. And the challenge with that is we've already presented

[00:21:58] [SPEAKER_05]: offers to the seller. We run the risk if they come see the property, they don't like something,

[00:22:02] [SPEAKER_05]: something goes wrong.

[00:22:03] [SPEAKER_03]: That is such a shit response.

[00:22:06] [SPEAKER_03]: How do you ever win a deal with that mentality?

[00:22:11] [SPEAKER_03]: Yeah, I agree.

[00:22:13] [SPEAKER_03]: And again, you're competing. At the end of the day, you're competing to win this thing. The

[00:22:17] [SPEAKER_03]: broker needs to have confidence and trust that you're not going to be a shithead. That's a

[00:22:22] [SPEAKER_03]: shithead response.

[00:22:23] [SPEAKER_05]: Yeah. $500 plane ticket. Wherever you're at in the country, you get to Nashville for $500 or less.

[00:22:29] [SPEAKER_05]: Jump on a plane, come out.

[00:22:31] [SPEAKER_03]: And Jordan will take you to Morgan Wallen's new bar, right? Maybe toss some chairs. If you have

[00:22:35] [SPEAKER_03]: enough time.

[00:22:37] [SPEAKER_03]: Right.

[00:22:38] [SPEAKER_05]: Exactly. Yeah. Favorite pastime in Nashville. So that's step one, come out and actually see

[00:22:44] [SPEAKER_05]: the property. From there, I think it's being educated. You can tell pretty quickly as a broker

[00:22:52] [SPEAKER_05]: what groups know what they're doing when you're touring them. And part of that is if I'm touring

[00:22:56] [SPEAKER_05]: a group, I usually do my due diligence on the front end as well. I learn as much about them

[00:23:00] [SPEAKER_05]: as possible prior to that tour. So I think it's being educated. It's asking intelligent

[00:23:08] [SPEAKER_05]: and intuitive questions. Asking the right questions while you're at the property.

[00:23:13] [SPEAKER_05]: Making sure that no other questions are going to come up further down the path

[00:23:19] [SPEAKER_05]: after you've already offered. Obviously, your questions are going to come up. But it's being

[00:23:23] [SPEAKER_05]: sure that you've covered your bases as much as possible during that tour in your initial due

[00:23:28] [SPEAKER_05]: diligence process. From there, I think it's follow up. Personally, I enjoy the groups that

[00:23:34] [SPEAKER_05]: are hounding us after that tour, after they submitted that offer, seeing where things stand.

[00:23:41] [SPEAKER_05]: Groups that you can tell are aggressively trying to get the deal.

[00:23:45] [SPEAKER_05]: Hungry.

[00:23:46] [SPEAKER_05]: Yeah. Just groups that are hungry. Exactly.

[00:23:48] [SPEAKER_02]: Jake, I lied. I've got a couple of questions. So if you would indulge me.

[00:23:52] [SPEAKER_02]: Take it away. Take it away, man.

[00:23:53] [SPEAKER_02]: There's two other things that we talked about this past weekend where two years ago, it would have

[00:23:58] [SPEAKER_02]: been unforeseeable. The first one is lowball offers. And I mean lowball offers where a property

[00:24:04] [SPEAKER_02]: is at $10 million and Jordan has to put food on the table and he's got to take this listing. And

[00:24:08] [SPEAKER_02]: he's telling the seller, 10 million is high. I don't think we're going to get there, but I need

[00:24:13] [SPEAKER_02]: 10 million. I think the property is worth more like nine. And then you have buyers coming in

[00:24:18] [SPEAKER_02]: going, you know what? I can give you nine for the property. Should I submit that offer? How do you

[00:24:22] [SPEAKER_02]: work with a seller who is obtuse and not knowing that where the market is not where it wants to be?

[00:24:27] [SPEAKER_01]: You like obtuse. Stubborn brother. I just, I want my property. This is my number. I need my number

[00:24:33] [SPEAKER_01]: and I don't care. Well, brother, two years ago, cost of capital was three. Now it's doubled. You

[00:24:39] [SPEAKER_01]: can't get it. Rent growth is gone by the wayside. We're, you know, this is not, we're living not in

[00:24:44] [SPEAKER_02]: 2022, but I need 2022 pricing. And that's Jordan. I spoke to you two years ago and you told me I

[00:24:50] [SPEAKER_02]: was getting that price. How do you deal with like a buyer who's got a legitimate claim and a seller

[00:24:55] [SPEAKER_02]: who won't entertain or maybe not? Do I put that offer in with you and how do I, and I want to

[00:24:59] [SPEAKER_02]: maintain that relationship with you all at the same time. How does that work? How do you dance,

[00:25:04] [SPEAKER_05]: Jordan? Yeah. Yeah. Well, you don't want to see me dance. It's not great. But I mean, a couple

[00:25:10] [SPEAKER_05]: of things are the first is you know, $9 million offer $10 million valuation, right? And I think

[00:25:18] [SPEAKER_05]: if you're within 10, 15%, my recommendation to a buyer is always submit that offer. Now there's a

[00:25:23] [SPEAKER_05]: difference between submitting that offer and what is an egregious offer, right? Like we, there's

[00:25:28] [SPEAKER_05]: five or six groups that come to mind and every deal that hits our system, we just immediately

[00:25:34] [SPEAKER_05]: we get an offer. There's no underwriting and it's like 20% of the listing price. That's not a good

[00:25:39] [SPEAKER_03]: look for anyone. Half the time... What's the etiquette though? Let's discuss the etiquette.

[00:25:45] [SPEAKER_03]: Do you put it in writing or do you run it up the ladder? Is it better to have a conversation

[00:25:54] [SPEAKER_03]: I'm buying and Gino's selling, right? And I go to you, Jordan. Hey, look, I think I'm at nine.

[00:25:58] [SPEAKER_03]: I know he's not, you know, wants 10. Is it better for me to put that in writing and give it to you

[00:26:03] [SPEAKER_03]: or is it better for you to have the conversation with Gino in like a conversational way? What is

[00:26:09] [SPEAKER_03]: the most effective strategy? I think that at the end of the day, how do we get business done here?

[00:26:13] [SPEAKER_02]: And Jordan, I don't dance, but I sing really good. So if you need me to sing later,

[00:26:17] [SPEAKER_02]: I'll sing. But I want to hear your story. I want to see you dance and I'll sing. How about that?

[00:26:21] [SPEAKER_05]: I'm going to take you up on that. I want you to know that. But yeah, I mean, I think that's a good

[00:26:26] [SPEAKER_05]: place to start, right? Like if you think that it's going to be potentially, you know, agregious or

[00:26:32] [SPEAKER_05]: offensive offer, just ask me. I'll give you my honest feedback on it. I mean, I would still

[00:26:37] [SPEAKER_05]: recommend if you think you're even somewhat in the ballpark, I always recommend sending a written

[00:26:41] [SPEAKER_05]: offer over. It doesn't hurt to put it in front of the seller as long as it's something that isn't

[00:26:47] [SPEAKER_05]: super offensive. And so the average marketing deal that we have, we probably have usually

[00:26:54] [SPEAKER_05]: double-digit offers. The deal we just closed last week in Columbia, just south of Nashville

[00:26:59] [SPEAKER_05]: area. I think we had something like 25 offers on that. Now there's a pretty wide range in those

[00:27:03] [SPEAKER_05]: 25 offers, right? The top five are competitive, legitimate offers and middle of the pack. It's

[00:27:10] [SPEAKER_05]: not offensive, but it's not going to get a deal done. The lower offers, we still include them.

[00:27:14] [SPEAKER_05]: We put them in front of the seller, but some of them, candidly, they might be a little bit

[00:27:19] [SPEAKER_05]: offensive to the seller. And so I would always recommend, just ask me. I'm happy to give you

[00:27:24] [SPEAKER_05]: my honest feedback on it if it makes sense to put it in writing or if it doesn't. But generally

[00:27:29] [SPEAKER_05]: speaking, I would say, always send over a written offer. It's something that we're going to put in

[00:27:33] [SPEAKER_05]: front of the seller either way. The other thing that I would say is just generally speaking right

[00:27:39] [SPEAKER_05]: now, you guys kind of mentioned it, but the bid-ask spread is still pretty wide. We're

[00:27:45] [SPEAKER_05]: starting to see a convergence there. I think we have month over month for the past year. I think

[00:27:51] [SPEAKER_05]: buyer and seller expectations are starting to come closer together. But buyers are not coming up.

[00:27:58] [SPEAKER_03]: Sellers are coming down, right? Yes. To be fair. For the most part, yeah.

[00:28:02] [SPEAKER_05]: Certain deals, right? The deal that I just mentioned in Columbia, that deal closed at

[00:28:08] [SPEAKER_05]: actually mid four caps in place, but there's massive rent premiums that have been proven out

[00:28:15] [SPEAKER_05]: with a few other deals in that particular sub-market recently. And so-

[00:28:18] [SPEAKER_05]: Was that a build-to-rent deal?

[00:28:20] [SPEAKER_05]: That's not a build-to-rent deal, no. It's a 70s vintage value-add garden stall.

[00:28:25] [SPEAKER_03]: Well done, Jordan. Well done. If you're looking to sell,

[00:28:27] [SPEAKER_03]: Jordan's the four cap king here. Get him.

[00:28:30] [SPEAKER_05]: That's right. That's right. Give me a call.

[00:28:33] [SPEAKER_03]: Dude, who's going to brand themselves a four cap king? I think this needs to be your branding.

[00:28:38] [SPEAKER_03]: It's great for the sell side of things, right?

[00:28:41] [SPEAKER_05]: I saw somebody post a picture recently and it was somebody's license plate that said two cap.

[00:28:46] [SPEAKER_05]: And I'm like, that is dangerous territory to enter.

[00:28:49] [SPEAKER_05]: Woo, smoking. Was this in Nashville?

[00:28:55] [SPEAKER_03]: I don't know where it was at.

[00:28:56] [SPEAKER_03]: Oh, it was like a meme online or something?

[00:28:58] [SPEAKER_03]: Yeah.

[00:28:58] [SPEAKER_03]: I should say the two cap king. Man, that's power.

[00:29:02] [SPEAKER_02]: We had a student this past weekend that traded a deal in Waco. And he actually had the broker

[00:29:07] [SPEAKER_02]: say to him after he got a retrade, he goes, well, that's just common nowadays.

[00:29:11] [SPEAKER_02]: Everyone's retrading. I mean, can you give me litmus tests of what's going on

[00:29:16] [SPEAKER_02]: in the deals that you've been doing? Because like two years ago, that word was like,

[00:29:20] [SPEAKER_02]: that's a mortal sin two years ago. You weren't even allowed.

[00:29:22] [SPEAKER_02]: You're getting blackballed, right? You're out of here.

[00:29:23] [SPEAKER_02]: You couldn't even bring that word. Now it seems as if brokers are like,

[00:29:26] [SPEAKER_02]: hey, that's just part of the game right now.

[00:29:28] [SPEAKER_03]: It's not a retrade anymore. It's a negotiation.

[00:29:31] [SPEAKER_05]: Yeah, exactly. I think it depends the reason for it, right?

[00:29:35] [SPEAKER_05]: If a group just drops a deal and goes silent, I mean, that stuff happens.

[00:29:42] [SPEAKER_05]: I'm probably never talking to that group again.

[00:29:46] [SPEAKER_05]: Now, debt markets have been all over the place. Debt markets have been high threes up to 5%

[00:29:52] [SPEAKER_05]: on the 10-year over the past 12 months. And so that's something that if you think about

[00:29:58] [SPEAKER_05]: the shift in your proceeds in a deal from just a 10 basis point increase in the tenure,

[00:30:05] [SPEAKER_05]: it is material. And so that's something that we try to empathize with.

[00:30:11] [SPEAKER_05]: I think that in certain situations, sellers can understand that and JQs support negotiation.

[00:30:18] [SPEAKER_05]: Some deals I think are negotiable in certain cases. At the end of the day,

[00:30:23] [SPEAKER_05]: nobody wants to see a retrade. A seller doesn't want to see it. We don't want to see it as brokers.

[00:30:28] [SPEAKER_05]: But I think as long as there's some sort of reason to it,

[00:30:32] [SPEAKER_05]: there's no good retrade. Some retrades are better than other retrades.

[00:30:36] [SPEAKER_03]: Well, here's the thing we got to understand as buyers and sellers.

[00:30:41] [SPEAKER_03]: I'm going to give Jordan one of our deals to list and he brings me a buyer.

[00:30:45] [SPEAKER_03]: The first question I'm going to ask is about the buyer's history.

[00:30:49] [SPEAKER_03]: What have you done with him in the past? Did he retrade last time with you?

[00:30:53] [SPEAKER_03]: So look, guys, buyers beware of this because that is what I'm going to ask every single time out of

[00:31:00] [SPEAKER_03]: the gates when I'm vetting who's going to take my lovely asset potentially off my hands. So it's

[00:31:07] [SPEAKER_03]: important. And so is it worth it to get 100 grand? Maybe, maybe not. You got to weigh it out.

[00:31:15] [SPEAKER_05]: Yeah. Most of the time, I'd argue no. I think the other thing I would add for your guys is...

[00:31:20] [SPEAKER_03]: Well, of course, it's never good on your end for any reason.

[00:31:22] [SPEAKER_03]: Yeah.

[00:31:24] [SPEAKER_03]: Well, it's putting your livelihood at risk because things start getting wobbly and it's like

[00:31:29] [SPEAKER_03]: the person may tell him to fly a kite. And then it's going to start getting weird.

[00:31:34] [SPEAKER_05]: I think especially if it's your first deal, for some of your guys as newer or younger investors,

[00:31:41] [SPEAKER_05]: what I would say is if it's your first deal, get that deal done. Not at all cost. You can't

[00:31:46] [SPEAKER_05]: buy a shitty deal. You can't ever pay for a deal. But I would scratch and claw and do anything I

[00:31:53] [SPEAKER_05]: could to get that first deal done because then you're on my radar. You're on every broker's

[00:31:58] [SPEAKER_05]: radar, right? You have credibility. You have a proven track record. So that's the other thing

[00:32:03] [SPEAKER_03]: I would add to that for newer guys. Dude, I cannot underscore how important it is what you just said

[00:32:11] [SPEAKER_03]: because it took Gino and I 18 months to get into the game, if you will, before we got that first

[00:32:15] [SPEAKER_03]: deal. The minute we got that first deal, everything took off for us. And it went from zero to 2000

[00:32:22] [SPEAKER_03]: units in 10 years. And it would have never happened without that first deal. That first deal is the

[00:32:27] [SPEAKER_03]: firecracker. It's everything. And it took us 18 months to get that first deal. With that being

[00:32:32] [SPEAKER_03]: said, just nail it though. Whatever's the size, get a good deal on the first one. Take your time.

[00:32:38] [SPEAKER_03]: Take your two years to do it if you have to. I'm never going to recommend someone to overpay.

[00:32:43] [SPEAKER_03]: But if you can get that first deal done, that is the gateway into opening doors for the rest of

[00:32:49] [SPEAKER_03]: your life potentially. So that's an extremely important point you just made. Yep. Fully agree

[00:32:53] [SPEAKER_03]: with that. Cool. Alright guys, let's take a quick timeout to hear from our sponsor. Now we have had

[00:32:58] [SPEAKER_03]: a great run at Multifamily going from zero units to over 250 million in assets. That's over 2000

[00:33:04] [SPEAKER_03]: apartment deals that we've been able to purchase through our framework, buy right, manage right,

[00:33:09] [SPEAKER_02]: and finance right. Now Jake and I, we created the Jake and Gino community back in 2015. We launched

[00:33:14] [SPEAKER_02]: our first book, We Own Our Profits. And since then, our students have closed over 60,000 units.

[00:33:20] [SPEAKER_02]: That's over $4 billion in assets they've been able to close over the last six years. And that's why

[00:33:25] [SPEAKER_03]: this community has been so successful. We call it results-based education. And we pour back into the

[00:33:30] [SPEAKER_03]: community everything that we've learned on our journey from zero to 2000 units and all our

[00:33:34] [SPEAKER_03]: systems and scale that we use on our very own property management and investing company. Jake,

[00:33:39] [SPEAKER_02]: I love that. It's not just education, it's implementation. So what I want you to do,

[00:33:43] [SPEAKER_02]: click on that link down below, apply to work with our team, see how we can help you on your journey

[00:33:49] [SPEAKER_03]: in Multifamily. Alright, we are back. Talk about the debt markets a little bit more. Recent

[00:33:56] [SPEAKER_03]: transactions, were they assumptions? Were they creative finance deals? What are you seeing out

[00:34:03] [SPEAKER_05]: there? Yeah, really kind of all over the place. You know, groups will ask us all the time,

[00:34:08] [SPEAKER_05]: they say, Hey, we're cap rates at right now in Nashville, we're cap rates at Knoxville,

[00:34:12] [SPEAKER_05]: Chattanooga. It's always such a loaded question. In theory, cap rates should be as close to six or

[00:34:18] [SPEAKER_05]: even above six as they've been in a very long time, right? On actuals or pro forma?

[00:34:23] [SPEAKER_05]: On actuals, right? I mean, if you're putting 10 year debt... Dude, I'm buying everything. I'm

[00:34:33] [SPEAKER_05]: not buying anything. I'm buying everything. I'm buying everything. I'm buying everything.

[00:34:34] [SPEAKER_05]: Part of the reason is loan assumptions that you just alluded to. The deal that we just sold

[00:34:39] [SPEAKER_05]: that we closed on last week, that was actually fresh debt. So that was Fannie Money, I think a

[00:34:45] [SPEAKER_05]: 10 year loan, 65% leverage, I believe. But that was fresh debt, low sixes.

[00:34:52] [SPEAKER_05]: Were there high fives on that?

[00:34:55] [SPEAKER_05]: I believe low sixes. But yeah, I mean, that's 10 year money right now, 65% leverage, Fannie and

[00:35:00] [SPEAKER_05]: Freddie. Depending on where you're at, you might be high fives, maybe up to six and a quarter right

[00:35:05] [SPEAKER_05]: now. But really all over the place. I mean, a lot of the deals that have traded the past year,

[00:35:11] [SPEAKER_05]: if I had to guess, maybe 30% to 40% of the deals we've gotten done have been assumption deals,

[00:35:16] [SPEAKER_05]: three to 4%.

[00:35:18] [SPEAKER_03]: Which historically is really high.

[00:35:19] [SPEAKER_05]: Very high. Yeah. Yeah. Very high. I mean, some of those deals are actually pretty low leverage

[00:35:24] [SPEAKER_05]: deals. One that we closed in Hermitage, some market in Nashville here end of last year. I

[00:35:29] [SPEAKER_05]: mean, that was a 50% leverage deal, right? So it's very cash heavy deal, but three and a half percent

[00:35:35] [SPEAKER_05]: debt. And so still a very attractive deal. And that was a deal that we had a ton of buyers

[00:35:41] [SPEAKER_05]: chasing for that reason. So yeah, I mean, there's a lot of loan assumption deals. I think quality

[00:35:44] [SPEAKER_05]: deals are still out there right now. At the same time, if the numbers work, if you have a very clear

[00:35:50] [SPEAKER_05]: path to positive leverage, we're still seeing a lot of fresh debt deals as well.

[00:35:56] [SPEAKER_03]: So be honest with me. Just expand on this a little more. 2021, you're in it for a little bit. And

[00:36:01] [SPEAKER_03]: it's the height, the historically best time to ever be a multifamily broker, especially in Nashville.

[00:36:07] [SPEAKER_03]: Were you like, man, I hit the lotto. It's going to be like this forever. And just go through that.

[00:36:14] [SPEAKER_03]: Because it had to be kind of euphoric for a minute, right?

[00:36:17] [SPEAKER_05]: That 100%. And I mean, when I moved down here, like I said, I mean, transaction volume was the

[00:36:22] [SPEAKER_05]: highest it had ever been. And I, you know, look, I knew enough about the markets, everything's

[00:36:27] [SPEAKER_05]: cyclical, right? I understood that it was a bit of an anomaly. Yeah. You didn't want to believe

[00:36:32] [SPEAKER_05]: that though. I didn't want to believe it. It's a matter of how long can it go on for, right? And so

[00:36:38] [SPEAKER_05]: I learned back in my JP Morgan days, I'm surrounded by the guys with the 80 pound brains who are

[00:36:42] [SPEAKER_05]: smarter than I am. And nobody has a crystal ball on debt markets, right? And so I don't think anyone

[00:36:48] [SPEAKER_05]: would have foreseen what had happened middle of 2022 as treasury started shifting. And so,

[00:36:54] [SPEAKER_05]: you know, it was a matter of how long was it going to go on for? But yeah, I mean, I,

[00:36:56] [SPEAKER_05]: I couldn't even tell you how many deals we did, you know, in my first two months in this business.

[00:37:02] [SPEAKER_05]: I mean, the transaction volume was incredible. I mean, we've been very fortunate. All things

[00:37:07] [SPEAKER_05]: considered over the past couple of years, we're very nimble and scrappy in how we do business,

[00:37:11] [SPEAKER_05]: as a firm and as an office. I think... You're in a great market too.

[00:37:15] [SPEAKER_05]: We're in a great market that helps. I think last year volume across the industry

[00:37:19] [SPEAKER_05]: was down 70-ish percent and our office was down maybe 30%. Now at the end of the day,

[00:37:24] [SPEAKER_05]: it's not fun to work twice as hard for 30% less, but that's the reality of this business, right?

[00:37:30] [SPEAKER_05]: Things have been flowed. The good times are extremely good. And even the bad times don't

[00:37:34] [SPEAKER_05]: have to be that bad if you're doing the right things. Where did investors go wrong during

[00:37:39] [SPEAKER_05]: that period, 2021 to 2022? Yeah. So I think we're probably all aware of the extreme examples and

[00:37:46] [SPEAKER_05]: the groups that are in the real deal articles and being blasted online and everything. I mean,

[00:37:52] [SPEAKER_03]: the biggest thing is groups that were inexperienced. Are you guys behind most

[00:37:57] [SPEAKER_03]: of the real deal articles? Is there a capstone tied to that?

[00:38:00] [SPEAKER_05]: Yeah. Well, we wouldn't want to be behind it because we sold some of those deals.

[00:38:07] [SPEAKER_03]: That's what I'm saying.

[00:38:09] [SPEAKER_05]: It's probably not a good... Yeah. We probably played somewhat of a part in it as most brokers

[00:38:14] [SPEAKER_05]: did. But no, at the end of the day, we're in the business of representing sellers. We want to make

[00:38:18] [SPEAKER_05]: you guys as much money as possible. At the end of the day, we also want to get buyers as good

[00:38:22] [SPEAKER_05]: at deals as possible because we want good relationships there. We want to sell those

[00:38:25] [SPEAKER_05]: deals on the back end. But I think that's the number one, right?

[00:38:28] [SPEAKER_03]: Well, you want it to transact. So there needs to be a buyer for the seller, right? So you're

[00:38:33] [SPEAKER_05]: not going to work. We're there to make a market. Exactly. Yeah. We're a matchmaker. We're there

[00:38:38] [SPEAKER_05]: to make market for the deals that we take to market. And so, I mean, that's the number one

[00:38:43] [SPEAKER_05]: there, right? It's groups that bought deals with floating rate debt. Once again, nobody saw what

[00:38:48] [SPEAKER_05]: was going to happen with debt markets over the past 24 months. And now we're in this kind of

[00:38:54] [SPEAKER_05]: extended pretend environment where these deals have been getting workouts for the past really

[00:39:00] [SPEAKER_05]: two years at this point. And so, looking forward, the question becomes how long can this go on for?

[00:39:06] [SPEAKER_05]: How long can you continue to extend out these loans? We're underwriting these deals every

[00:39:11] [SPEAKER_05]: single day and they don't look good right now. They're definitely not going to look good in 12

[00:39:17] [SPEAKER_05]: months. And so obviously we're hoping for some relief in treasuries, hopefully in the next 6 to

[00:39:23] [SPEAKER_03]: 12 months, but who knows? Who knows, right? Survive 25. I've been hearing that for quite a

[00:39:29] [SPEAKER_03]: while now. So, you obviously mentioned floating rate debt. What differences have you seen from

[00:39:38] [SPEAKER_03]: groups that you'd evaluate are in a strong position right now to groups that may be

[00:39:45] [SPEAKER_03]: treading water? What differences in operations and just the mentality have you seen in the

[00:39:51] [SPEAKER_05]: successful versus the ones that may be struggling right now? Yeah. Good question. I mean, we're still

[00:39:55] [SPEAKER_05]: selling deals that have bridge debt, floating rate debt. I think it's probably less...

[00:40:02] [SPEAKER_05]: Oh yeah. Still a thing, huh? Yeah. I mean, it's definitely less common now than it was. But

[00:40:07] [SPEAKER_05]: once again, if you're buying a good deal, right? If you're buying a deal right and it's got a very

[00:40:11] [SPEAKER_05]: clear path to positive leverage, you're confident in your ability to get in there and turn units

[00:40:17] [SPEAKER_05]: quickly, right? You're sitting there with 9%, 10% debt on this deal. You're confident in your

[00:40:24] [SPEAKER_05]: ability to get in there, turn units, increase rents to drive NLY. Those deals still make sense,

[00:40:31] [SPEAKER_05]: right? It's just a matter of execution, feeling confident in your ability to do that. I'll tell

[00:40:35] [SPEAKER_05]: you the majority of deals we're doing right now is longer term agency debt. But that's really

[00:40:41] [SPEAKER_05]: the difference. I mean, we talk to groups on a daily basis now that bought deals right and put

[00:40:45] [SPEAKER_05]: long-term debt on it. That's a tough deal for me to sell right now as a broker, right? Because

[00:40:50] [SPEAKER_05]: they're sitting in a very good position. Now, if it's assumable that it's a different situation

[00:40:55] [SPEAKER_05]: because it's very attractive to a buyer right now. But I would say those are the groups that

[00:40:59] [SPEAKER_05]: are in the best situations right now. Maybe put long-term debt on it, maybe lower leverage,

[00:41:04] [SPEAKER_05]: right? It's not a deal that's underwater now that values have decreased 15%, 20% over the past 18

[00:41:10] [SPEAKER_05]: months. Those are the groups that I think are in a really good position. You guys are a great example

[00:41:16] [SPEAKER_05]: of that, by the way. I applaud you for that. You guys have bought some incredible deals and you've

[00:41:21] [SPEAKER_05]: still been active. Correct me if I'm wrong. I think you guys have bought a few hundred units

[00:41:26] [SPEAKER_05]: the past year. They've all been phenomenal deals. I'm upset that I didn't broker them

[00:41:31] [SPEAKER_05]: because they're really good deals. But you guys bought good deals.

[00:41:33] [SPEAKER_03]: Yeah. We're on our fourth one right now. I think, Jake, I want to mention this about bridge debt.

[00:41:41] [SPEAKER_02]: The problem with bridge debt a couple years ago, people were using them. They were buying

[00:41:45] [SPEAKER_02]: stabilized deals on bridge debt. That's the issue. You're buying deals with $900 in rents

[00:41:52] [SPEAKER_02]: and you got to get them to $1,600. The deal is stabilized and you're completely overpaying

[00:41:56] [SPEAKER_02]: and you have a smaller window. That's not how you use bridge debt. Jordan had alluded to it

[00:42:00] [SPEAKER_02]: just a couple of minutes ago that you're buying a deal that has a value-add component to it and

[00:42:05] [SPEAKER_02]: you can actually add value to it. What they were doing, they were vastly overpaying. They were

[00:42:09] [SPEAKER_02]: violating the buy right criteria and then they were violating the finance criteria because they

[00:42:14] [SPEAKER_02]: had that short term. You're running out of time. You either run out of money or you run out of

[00:42:18] [SPEAKER_02]: time. That's how you lose money in real estate and go bankrupt. They bought too high and their

[00:42:24] [SPEAKER_02]: finance was just not- But if you would have taken,

[00:42:26] [SPEAKER_03]: if you would have raised more money on those deals, been less greedy and put fixed rate debt

[00:42:30] [SPEAKER_03]: on them, you'd be fine right now. It's not that those deals didn't work. You got greedy and

[00:42:37] [SPEAKER_03]: ultimately, you thought you were going to cheat a little bit and if you'd have put fixed rate

[00:42:42] [SPEAKER_03]: debt on it, you would have ended up in a better spot ultimately.

[00:42:44] [SPEAKER_02]: Yeah. The problem is rates went up too quickly and we didn't expect that to happen. Rates were

[00:42:49] [SPEAKER_02]: going to go up but if rates hadn't gone up, we wouldn't have had the problem. Things would be

[00:42:52] [SPEAKER_02]: okay now. The problem is that the rates went up so quick, people weren't able to adjust to that.

[00:42:58] [SPEAKER_03]: It's- Yeah. I'm just not a fan. I don't think it's worth it. Not to sound repetitive and we

[00:43:04] [SPEAKER_03]: can skip this but any lessons learned from 2020 to 2022?

[00:43:08] [SPEAKER_05]: I think it's buy deals right. It goes back to the fundamentals and how are you underwriting the deal?

[00:43:17] [SPEAKER_05]: What sort of returns are you underwriting to? Why are you buying the deal to begin with? Yeah,

[00:43:23] [SPEAKER_05]: I mean, I think it comes down to buying quality deals.

[00:43:27] [SPEAKER_03]: Any deals in particular that you see right now that weren't down your fairway? You just mentioned

[00:43:34] [SPEAKER_03]: a 70s value add garden style deal, right? Is there anything right now that you see

[00:43:40] [SPEAKER_03]: that's unique to the marketplace? I'll give you an example. We're seeing some student deals that we

[00:43:46] [SPEAKER_03]: think make sense to convert to market rate. Some of the newer assets seem to make sense right now

[00:43:53] [SPEAKER_03]: for developers that need to get out. Anything that is trending that could add value to the folks

[00:43:59] [SPEAKER_05]: that you want to share? Yeah, yeah, certainly. The student

[00:44:02] [SPEAKER_05]: deal that you just mentioned, we're seeing that a little bit in Murfreesboro right now,

[00:44:07] [SPEAKER_05]: some market in Nashville here. Conversions to market rate, I think there's been two or three

[00:44:12] [SPEAKER_05]: in that market there. So I think that's a good one. Another one would be Y-Tech deals, affordable

[00:44:19] [SPEAKER_05]: deals that are backing up on compliance periods, right? There's an incredible amount of affordable

[00:44:25] [SPEAKER_05]: deals built in the early 2000s that are backing up on that compliance period.

[00:44:29] [SPEAKER_03]: What was significant about that? Why so many of these things built in the early 2000s?

[00:44:35] [SPEAKER_05]: To be honest, I don't know what caused so many of those deals to be built around that time. But I

[00:44:41] [SPEAKER_05]: can tell you there are a lot of those deals out there right now that just happen to have been

[00:44:44] [SPEAKER_05]: built that are backing up on compliance right now or will be in the next couple of years.

[00:44:50] [SPEAKER_05]: If you look at where those rents were capped out on those deals right now,

[00:44:54] [SPEAKER_05]: deals in Knoxville, Chattanooga, Nashville. I don't think there's any in Knoxville.

[00:45:01] [SPEAKER_05]: There's been a couple actually that have traded the past few years. Yeah,

[00:45:05] [SPEAKER_05]: you guys wouldn't know anything about that, would you?

[00:45:06] [SPEAKER_03]: There's nothing. Look to Murfreesboro. I think you got to go to Nashville for these things.

[00:45:13] [SPEAKER_05]: Exactly. Stay out of East Tennessee. But that's been a good area of opportunity for us. We

[00:45:17] [SPEAKER_05]: have an 1100 unit LIHTC portfolio. 6 of those properties, maybe 7 of those properties are in

[00:45:23] [SPEAKER_05]: Tennessee. We'll be closing on the next few months. That's actually a group that's going

[00:45:28] [SPEAKER_05]: to keep those affordable. But we've seen... You don't hear that too often.

[00:45:32] [SPEAKER_05]: Yeah. They're in the business of affordable housing. They're still actively...

[00:45:36] [SPEAKER_03]: There's a tax credit situation that they're getting some re-ups kind of deal.

[00:45:41] [SPEAKER_05]: Yep. Exactly. So I think that's one area of opportunity. The other one that you mentioned,

[00:45:46] [SPEAKER_05]: developers right now, whether they need out or not, there are some of these developers that

[00:45:51] [SPEAKER_05]: probably are maybe over their skis and are looking to sell at a discount. Those are obviously good

[00:45:59] [SPEAKER_05]: opportunities. The other area where we've had a lot of success, I don't think it's necessarily

[00:46:03] [SPEAKER_05]: exclusive to this environment. If anything, it's got a little bit harder in this environment. But

[00:46:07] [SPEAKER_05]: I think there are still great opportunities in a lot of instances. Selling a lot of forward

[00:46:11] [SPEAKER_05]: takedowns in pre-sale deals, where we know a lot of the builders and developers in some of these

[00:46:18] [SPEAKER_05]: more local markets outside of Nashville. These guys are able to build incredibly cost-effectively.

[00:46:24] [SPEAKER_05]: And so buying a forward takedown from these groups where you have the ability

[00:46:28] [SPEAKER_05]: to put this deal under contract in various phases of construction could be... At the start

[00:46:33] [SPEAKER_05]: of construction could be during lease up closer to stabilization. And usually there's some discount

[00:46:39] [SPEAKER_05]: associated with that if the buyer is taking on part of that lease up for it. So we've had a lot

[00:46:45] [SPEAKER_03]: of success with those deals as well. Awesome. Go ahead and tell folks again,

[00:46:50] [SPEAKER_03]: best way to get ahold of the firm to work with Capstone. Hit that one more time if you don't mind.

[00:46:56] [SPEAKER_05]: Yeah. Absolutely. So feel free to shoot me a text, give me a call. My cell is 815-291-9250.

[00:47:03] [SPEAKER_05]: Send me an email as well. I keep a clean inbox. I promise you if you text me, email me, call me,

[00:47:08] [SPEAKER_05]: I will get back to you at some point. So send me an email at jarends at capstone-companies.com as

[00:47:16] [SPEAKER_02]: well. All right, Gino, you're up. Jordan Arend, six years as a finance bro in Chicago. He's like,

[00:47:22] [SPEAKER_02]: I got to get out of this equities market. This thing is just dragging me down. I am getting

[00:47:26] [SPEAKER_02]: burned out. I'm on the hamster wheel and you know what? I think Nashville is a pretty cool place.

[00:47:30] [SPEAKER_02]: So let me move to Nashville. I get hooked up with Capstone and Adam Clank's group there.

[00:47:34] [SPEAKER_02]: And guess what, man? Holy, I mean, my world is turned upside down. I got deals everywhere.

[00:47:40] [SPEAKER_02]: They are flying at me off the shelves. I ain't making moolah as Jake would say, making bank.

[00:47:45] [SPEAKER_02]: I didn't think this business was as good as I thought it was. And you know what? A couple

[00:47:49] [SPEAKER_02]: years later, things start to slow down. But the great thing about it is that the work ethic that

[00:47:53] [SPEAKER_02]: his group has, the commitment, the model that they have, the customer service that they have,

[00:47:59] [SPEAKER_02]: even though everyone else is down 70% around the market, they're only down 30%.

[00:48:03] [SPEAKER_02]: He's working twice as hard making less, but it's called a market cycle. And he knows that now is

[00:48:08] [SPEAKER_02]: the time to get into the business because if you get in now when everyone's going to be up 10 or

[00:48:12] [SPEAKER_02]: 20%, his group is going to be up 40 and 50%. And it's the same mindset that if you're an investor

[00:48:17] [SPEAKER_02]: and you want to get into multifamily, don't wait till the market crashes. We may be in the midst

[00:48:22] [SPEAKER_02]: of a crash. Now is the time to pick up the phone, call Jordan's company, his group, get on his list

[00:48:28] [SPEAKER_03]: and start looking at deals. And get one of those deals in Murfreesboro, right, Gino?

[00:48:33] [SPEAKER_00]: Okay.

[00:48:34] [SPEAKER_03]: So gang, as always, we believe in buying deals for the long term. Think in decades. I'm Jake,

[00:48:38] [SPEAKER_03]: he is the G-Daddy. We make it happen. We'll see you next time. Thanks, Jordan.

[00:48:41] [SPEAKER_05]: Guys, I appreciate it. We'll talk soon.