Ep #1,083 - MFRS - Why Bigger Real Estate Deals Are Easier

[00:00:03] So you know that apartment building or complex you drive by every day? Someone owns it. And it's probably someone on this podcast. Multifamily Rockstars. Join the growing numbers of real estate entrepreneurs who have made the jump to buying multifamily properties for lifetime cash flow. Multifamily Rockstars. Using OPM for an OMG ROI. Now, here are your hosts, Rod Khleif and Mark Nagy.

[00:00:28] Welcome back to Multifamily Rockstars. Now, as you guys know, these are the episodes where we deep dive into our guest deals and just really give you practical and actionable items for getting started and doing your first deal, especially if you're brand new to multifamily. And as always, I've got my co-host Mark Nagy with me. Mark. Hi, Rod. That's another thing I like about today's guest is another deal being done in under a year of working with them. So excited to get into it.

[00:00:53] So I've got a couple of guys on today. I've got Stephen Wright and Eric Williams. They are partners and best friends and they're with EST Equity. And we're going to kind of do it together. They're both of them at the same time, which is awesome. Hey, guys. Welcome. Hey, Rod. Good to be here. Awesome. Well, why don't you guys tell a little bit of your story and, you know, kind of why real estate, how you got together, maybe a little bit on your background. So then we'll dig into that deal you guys just got.

[00:01:21] Absolutely. So, again, pleasure to be here, Rod. A little bit of background on us. So Eric and myself, we met about 13 years ago in college, swimming at Florida Atlantic University. So we were both college athletes and it was sort of a day one friendship. You know, you're going to be best friends for life kind of thing. And, you know, as the years went on, we started to develop skill sets, which would eventually become very valuable in what we're doing now.

[00:01:48] For the last eight years, I was a construction and architecture consultant developing marketing and business initiatives for some of the largest construction and architecture firms in the country. And, you know, ultimately got to see a lot of really cool things get built, a lot of really cool real estate developments occur. And I just in the back of my mind, I personally always had sort of a pulling to get into that industry.

[00:02:11] And then after hearing about your group last year, you know, I talked to Eric about it and, you know, one thing led to another. And here we are. Love it. So what's your story, Eric? Eric. Yeah, so I actually met in 2012 at FAU, Floralamic University, took charge in the pool, loved every second of it, and it gave us more character of leadership. But a little bit down south, I actually ran a two-minute truck franchise. They're all independently operated and sold it in a couple of years after that.

[00:02:40] Moved back up to the Melbourne area. It was about 45 minutes from Orlando. I started affiliating with a diagnostic center called Neuroskeletal Imaging, where I promoted MRIs, CTs, X-ray, dextra, ultrasounds, the whole nine. But the cool thing about this with the leverage is I affiliated with every referring physician and attorney in the county. So it made me break the ice and get in front of people just to expand my horizon. And on top of that, I was a realtor.

[00:03:04] So that actually gave me more of a boost to dive into your program, where I sold about nine or 10 homes without even putting a cent into the residential side for real estate. So it was pretty cool on that. And then Stephen introduced it with the syndication joint ventures. Like, I don't know how this is going to work. And then you inspired us in that boot camp of 2023 in September in Orlando. And then now we're here. Here we are. Love it. It was two men and a truck. That's like a moving company that you had, right?

[00:03:31] Yeah, they're independently owned and operated throughout the nations, even some out of the country. So it's pretty similar on that. So if you ever need moving, call them. Cool, cool, cool. Okay. So I know you guys just closed on a deal in San Angelo. Oh, wow. That's interesting. It's in San Angelo. We're actually looking at a deal in San Angelo right now ourselves. That's really funny. Okay. Well, tell us about that deal. Where do you guys live, by the way? So I'm in Orlando and Eric is in Melbourne, pretty close to Cape Canaveral.

[00:03:59] So we're both central Florida and I don't see that changing anytime soon. Right. No, we love it here, don't we? Yeah. By the way, so you guys were swimmers. Is that what you said? Yep. No kidding. I was on a team for 10 years. I can't do very many things well, but that is one of them. So that's interesting. All right. Which team was that? Oh, no, this is junior high school, high school, and that's it. Yeah. Actually, I exaggerated. It wasn't. Yeah, no, because I started even before junior high school. Yeah. Because it was 10 years. Yeah. It was a lonely sport, though.

[00:04:29] It is a lonely sport. Oh, yeah. I mean, it has the appearance of being a team sport, but when your head's underwater, you're not talking to anybody. It really does develop your sort of mental fortitude. Okay. So tell us about that first deal. I know it's in San Angelo where we're actually looking at a deal. So tell us about it. Yeah. So San Angelo is a really fantastic market. After joining the Warrior Group, you know, Eric and I started building relationships with other warriors, and one thing led to another.

[00:04:56] We were eventually brought on to a team who ended up taking down the deal at this San Angelo property in order to help raise about $750,000 of additional capital expenditure budget and to sort of overtake the investor relations. So we're speaking to investors on the phone. We're sending out the monthly webinar updates, the newsletters, all that kind of stuff. So we're very engaged with the investors. And, you know, it was just a really, really wonderful opportunity for us to kind of come in,

[00:05:26] learn the ropes, and just be a part of this amazing deal. So this was a team that's done some deals before. You joined them. You liked them. These are warriors you connected with. And, well, tell us about the deal itself. So, yeah. So we started full-time with EST Equity in March. So I had to do a strong networking with all the warriors. I came across one fellow warrior named Charles Zhu, and we hit it off perfectly for like that 30-minute intro. So he actually gave me the knowledge of San Angelo quite a bit more.

[00:05:55] And then when I met a few other warriors, they were on the project also. And I actually gave them information. They came, it broke the ice where they wanted to help us partake with this property. And it was a stellar one, like Stephen was saying, with a 3.4 assumable loan. And we had the great idea with the extra strategy when it came to ASU, Angelo State University, and the Goodfella Air Force Base, and then the Shannon Hell. So we just, we love this idea so far.

[00:06:23] And it was a smaller project for us in the beginning. We just wanted to get all our ducks in a row, get our feet wet, just to understand the process of the algorithm of how to go through this whole process of this property. And then after that, then we actually got a good understanding because they gave us the helping hand. And then other than that, we're on to bigger ones. But in the beginning, this was a solid one for us in the beginning, just a comfortability level. And it was great for our investors. It was great for our investors. You said you gave the team some information.

[00:06:53] Did you do some research and give it to them? Is that what you did? Or tell me about that. Initially, when we looked into San Angelo, the team had done a fantastic job. Charles, Alec, Jordan, Patrick, the team had done a great job at analyzing the market and understanding what it was going to take to ultimately take down this deal. What Eric and I did was we looked into potential alternative exit strategies.

[00:07:21] So a thing about this property, it's very close to, as Eric mentioned, a military base, like an Air Force base, a bunch of different hospitals, and Angelo State University right next to the property itself. And so what Eric and I did was we looked into some potential exit strategies for those entities potentially purchasing this property when we get to the end of the time frame. All just things to help the conversation move down the field.

[00:07:46] But like I said, ultimately, the team did a fantastic job at analyzing and underwriting very conservatively, which made it very easy for us to sell to our investors who ended up funding that $750,000 of capital expenditures. So what's kind of the strategy on this deal then? Is it just a typical value add, you know, under market rents? Is it, you know, an old seller that wanted to get rid of it? How did this deal even – I know you guys found it from other warriors, but how did they end up getting this deal? And why was it a good deal at the end of the day?

[00:08:16] Yeah, absolutely. So this one is a pretty traditional value add. Essentially, distressed seller, the previous owner bought it at the beginning of COVID, like literally right before COVID began. Unfortunately, due to a property manager that was underperforming and an owner that, quite frankly, was in over his head, the relationship that Alec, one of our key GPs, had built, you know, with the broker in the area,

[00:08:41] had ultimately ended up lining us up to jump in to where this previous owner had failed. So it's a 52-unit property. Essentially, two-thirds of the units were left to renovate. So one-third had been upgraded. And for us, or rather for our GP team, the goal was to get in, renovate as many units as possible, as quickly as possible, and bring their rents up to market rate. We were about 15% below market rate. And the market itself was growing.

[00:09:10] Amazon is putting a new distribution facility there. And there's a lot of other, you know, new initiatives that are happening in San Angelo. So while it may seem kind of out in the middle of nowhere, there's a lot going on. And we really wanted to, you know, prime ourselves to profit and bring our investors back to capital that they deserve. Yeah, you know, it's funny. It's just funny that that's a town that literally I'm looking at right now. So I know it's a screaming area. So definitely a great find for you guys. Now, I heard something interesting.

[00:09:41] You mentioned the guy bought it before COVID. So he's only owned it for a few years, which usually with distress, it's people that have owned it for, you know, a decade plus. They're getting out of the business, whatever. What was the distress that was hitting this owner that made him want to get rid of it so quickly? Well, so when the previous owner took over, it was at about 92% occupancy, kind of fluctuating between 90 and 95%.

[00:10:06] Well, the new owner came in and hired a new property manager that he didn't have experience with. And ultimately, I think because of COVID and his and the owner's inability to be at the property and understand the sort of local market conditions and the things that were important, you know, to the tenants and the surrounding community, that that number dropped from 92% occupancy all the way down to 61%. Wow. Wow.

[00:10:36] For that four-year period. And so when we took it over, it was at 61%. We just got our new reports this month or, excuse me, this morning of our, you know, sort of upgrade over the last two months. We are currently at 77% occupied. So we're getting back up there and, you know, executing our business plan. And San Angelo is a market that is worthy of that. Yeah, for sure. How long have you owned it? April 18th was our closing date. Oh, wow. Two months. Absolutely kicking ass.

[00:11:05] So this is a 52 unit, 1965 build. You got that fantastic interest rate. So the plan is to hold it for five to seven years. And talk about the team. Is there anybody that's boots on the ground there or you all like taking turns checking it out? How are you managing the asset management component? Basically, our team is broken into three teams of two. Alec and Charles Zoo make up the first team.

[00:11:35] And then Jordan and Patrick Vogel, who are both warriors, make up the second team. Jordan and Patrick co-own a commercial or, excuse me, a residential construction company. So they do renovations in the area quite a bit. They are our boots on the ground. They're going out to the property, you know, once a week, once every other week and speaking with the property managers on a very, very regular basis. Alec lives in Austin, Texas, and Charles lives in San Francisco.

[00:11:59] So they were involved in the initial underwriting and sort of the, you know, preliminary preparation phase of the deal. And, you know, have obviously been on all the calls since then. And then, you know, Eric and I, like I mentioned, work on the investor relations side and the capital generation. And so there's very much a boots on the ground presence. Quite frankly, Eric and I would not invest in a deal on a team that didn't have some boots on the ground presence. Yeah.

[00:12:24] Well, especially with, you said, the previous owner, the reason why they screwed it up is because he wasn't present and, you know, didn't understand that market. So I think that's a really important aspect, especially if you're raising funds for that sort of deal. Now, you brought up a really great point there that everybody kind of has their own role that they play, right? Rod talks about this being a team sport. That's super important. How did you guys figure that out for yourselves?

[00:12:50] Did you kind of have an idea that that was something, you know, in terms of capital raising, investor relations, that that's something you wanted to do? Or was it really just you went out and built relationships and the opportunity presented itself and you just, you know, walk through the door of that opportunity? How did that happen? So on the investor side, Stephen does presentations and commercial side and I do more of the residential and the medical side. So these four legs make a perfect share where we could have the avenues for many investors.

[00:13:20] I know you guys heard about that Oakley deal in Charleston, South Carolina. We're not GPs and we're not LPs. We had no skin in the game, nothing at the moment. But I did show that webinar with Mark McGuire knocking it out of the park and the wells. I showed it to a couple of radiologists and they jumped in right away. So I'm like, wow, we actually have an influence on these doctors and attorneys. I mean, they know how to save money by, well, they know how to save lives or bring justice. But do they know how to make their money, make more money?

[00:13:50] So where I'm getting at is it was a universal language for us, but it just made us more comfortable that we had this big influence on all these doctors, attorneys and others. You stole my freaking thunder because I was going to ask you how you guys raised the money. And I knew it was those relationships you built in the MRI business and all that stuff, because that's kind of a no brainer.

[00:14:09] I mean, talk about a foot in the right door, you know, because I mean, people people kill themselves to get in with the medical community and maybe present to doctors and present, you know, to that to that demographic. So the fact that you're already there is I mean, as a no brainer and guys, you have to you know, those of you listening, you've got to think about your network and your skill sets and the things that that might translate to something here in this business. Maybe you've got, you know, some construction experience and some project management experience or management experience. You could handle the tail end.

[00:14:39] Maybe you've got, you know, great sales ability and you could handle and work in the investor relations piece or, you know, analytical. You can help with the underwriting. There's so many hats you can wear. But so how do you two divide up your roles? Have you and you're fairly new in this business, so maybe that hasn't evolved yet. Sometimes that's an evolution. But I'm just curious if if you're starting to see any, you know, any complementing skill sets as it relates to the multifamily business yet.

[00:15:08] Yeah, absolutely. Great question, Rod. So initially, you know, one of the things that I heard at your event in Orlando was you need to find, you know, partners who complement your skill set. And then every relationship is just like a marriage. You know, so if you're going to if you're going to partner with someone, you really need to think about it long term. And so I was actively thinking about that concept as I was recruiting for someone to be my partner.

[00:15:37] And quite frankly, Eric fills in the gaps that I am weak at myself. Eric's a charismatic, fantastic communicator, loves going and being in person. He's quite literally the extrovert personified. I'm totally the opposite. I realize that, you know, communication and speaking is sort of a necessary evil, but it's really not what I like to do. I like establishing the business systems, developing marketing strategies and sort of like being behind the scenes.

[00:16:05] And so I think that's really where we work so well together. I am shocked, frankly, because I actually thought it was the exact opposite. I actually totally I totally thought it was the exact opposite. So that's very interesting because you're a hell of a communicator. So I actually thought it was the opposite, you know, but that's interesting. Well, awesome. So so so you're the you're you're more the analytical, the detail person. Yeah, I'm actually flabbergasted because I actually thought it was the opposite.

[00:16:32] So so talk about so this is the first deal. And when did you join the warrior program? September. It was actually a week before the Arizona warrior event. OK, did you go to Arizona? Oh, we did. We did. Oh, yeah. So you met you met a ton of warriors there. OK, fantastic. Yeah, we've got another one of those coming up in Sarasota in September. Guys, if you don't know, we do these these events just for the warriors so they can connect because we discovered three and a half, four years ago,

[00:17:02] our most successful warriors by far are the ones that are the most connected in our warrior community. And so we do these events. We do other things as well. We do, you know, speed dating. We can randomly meet warriors. We send you the warriors that live in your state just to try to connect to facilitate these connections because they're so critical for success. By the way, if you're interested in the warrior program and you want to apply, text the word crush to seven, two, three, four, five. So we can help you crush it in this business. Our warriors are well over 200,000 units at this point.

[00:17:30] We can't even keep track anymore, honestly. And how are you how have you guys liked the program? Give us a little shout out if you would. So actually, we were inspired in that Phoenix trip. We actually had a three year plan going over there and leaving our W2s. And then when we got back from Phoenix in mid-November, I actually it's just such thing. I put my three month notice in. So I was full time with that diagnostics. And now we're the part time for nothing at all, actually. And we're full full send right now with the real state of the warriors. So we are so inspired with you guys.

[00:17:59] I think one of the biggest assets is that Facebook rod that you created. I reach out every day to at least 20 to 30. I get a couple of replies, use a calendar link and literally have those intros. I think those are the most pure, like it's the best asset in the world because then you could fill in the gaps, the weakness and the strengths and you fill it in and you actually bring stuff to the table and you actually have these teams that are forming and you can expedite the process and it's incredible.

[00:18:28] So it is one of the best powers for sure. I couldn't agree more. Quite frankly, the first deal that we went through would not be possible without the warrior group. The second one wouldn't have been either. And so I think the goal that you were trying to achieve because you talk about it, every one of the groups has really been realized with our experience. And there are a ton of groups that you could join, competitive groups that would scam you and take your money and set wrong expectations.

[00:18:56] But to anyone listening who is on the fence about joining the warrior group, freaking do it. It's going to be the best decision you've ever made. It already has been for Eric and I. One thing as well that Eric, you mentioned earlier is that you sent investors to another warrior's deal without GP, LP, any piece of it. And we find those are our most successful warriors, right? The ones that just give without any expectation of return. And obviously it worked out for you guys. But if we could get even a little bit more granular for the people listening that are

[00:19:25] maybe more introverted or not so good at those things, what exactly was your system for building those quote unquote relationships? Did you just Facebook message and say, hey, I'm Eric. Let's set up a call. Or what exactly did that process look like to build those relationships? So when I knew we were going three months into it for put our three month notice in, I was I got to know everyone. Steven inspired me. He's like, attack this Facebook because I'm terrible with cameras sometimes, if you could tell a little bit. And the Facebook, I barely go on it.

[00:19:55] I should flaunt with my wife and her beautiful photos more. But I can't as much for some reason. I just can't. But where I got into this is I reached out, hey, brand new warrior. And I tried to find how close a relationship. Hey, you're a few months. We joined a few months apart. Let's pick each other's brains. Let's collaborate a little bit more. And a lot got back to me. And then I just kept going down further down the group. And then I just reached out. Hey, you've been in the group for two years. I'd love to hear more of your experiences. Help me pick out a little bit more.

[00:20:24] And then once they hit those calendar leads, I think those 30 minute intros are the most important thing. Like I said, you bring everything to the table and you fill in the gaps. You really do. Yeah. I mean, what you just described was building rapport. I mean, you used your length of time in the warrior group to build rapport. And, you know, whenever you're starting a new relationship, it starts with rapport. You know, guys do it by talking about, you know, how about those Broncos? You know, women do it. Oh, I love that top or the, you know, the blouse or whatever.

[00:20:49] But you build rapport and then you find commonality is how you build that rapport. And so what's the goal for you guys? Tell me the goal. Yeah, that's a great question, Rod. When Eric and I came together and started this company, I think we that one of the first things that we needed to do was, you know, agree upon what the next two to five to 10 to 25 years looks like. And for us, it's very much financial freedom and being in control of our destiny. You know, the way that we perceive commercial real estate, again, having you as sort of our,

[00:21:18] you know, sort of North Star, if you will, is this isn't this is a business that will give you as much back as you put into it. There's going to be downturns, there's going to be upturns, you know, and as long as you're consistent with it, this is a way for you to really take control of your life, your happiness, your finances and get anything you want while also helping other people live better. It's a total no brainer for me. I know it is for Eric, too.

[00:21:44] But that's the that's the end goal for us is to, you know, continue to develop financial freedom through commercial real estate investing. So tell us about this next one that I know you guys, this business is very often Rod says this all the time. It has a snowball effect, right? Once you get your first one, you build confidence, you build credibility. Then, you know, the second, third, fourth, fifth come. Obviously, right now you guys are under contract for self-storage. You can tell us a little bit about this.

[00:22:10] Now, did this deal come from the same partners on the first deal? Is it different partners? How did the second one come about so quickly after the first one? You know, I think two things were at play. So one, Eric continued his sort of, you know, rapid marketing approach to get as many warriors, you know, in our contact book as possible. And that alignment with Ed Modzel, who's the key partner on this property,

[00:22:36] the self-storage facility happened right just days after we closed on our Texas property. And so we had just come off saying, you know, we successfully raised the 750 that we needed. And, you know, now we're on to the next one, whatever that may be. When Ed and Andrea and Michael, three of the main GPs on this other who are also warriors, came to us and explained this property. I mean, we live close by. The numbers are incredible. We've always wanted to get into a self-storage facility.

[00:23:05] So for us, there was really no reason to not do it, especially with the team as strong as the one that we have here. You know, we see Ed speak at every Warrior event. And, you know, we've been friends with Michael for a long time. So it was really just the perfect opportunity. Nice. Where's it at? It's Vero Beach, Florida. Oh, it's in Vero Beach. Okay. Right down the road. Okay. Are you okay with listeners reaching out to you guys if they've got any questions? And if so, you know, where and how can they do that? Absolutely. Absolutely.

[00:23:33] So, you know, we got the best matchmaker in the business sitting next to me. It's Eric W. at estequity.com and Stephen W. at estequity.com. Perfect. Perfect. So, guys, what have you enjoyed the most about this? I mean, you're just really getting rolling, but what are you enjoying the most about this new journey, this new endeavor you're both on? Meeting everyone, meeting the new networking, just learning every day. And it's awesome. I understand real estate even more.

[00:24:02] And I just can't wait for the future on this. And it's just our new passion. That's basically it. And then another learning block is literally just stay in your lane. And you can't do this on your own. You really can't. So, divide and conquer. And then you stick with your strengths. And then you, like I said, sound like a broken record. Bring that to the table. Yeah. I would agree with that last part. That was actually mine. I was going to say that, you know, this is very much a team sport.

[00:24:30] And I think for any new, any person who's considering getting into real estate may feel overwhelmed at all the different verticals which exist on any team. But the reality is you, as a solo player, really only need to master one of those verticals. And then you find people who are masters of the other verticals and make a dream team. And so, that's really kind of what, you know, Eric and I are focusing on the capital generation for this first year. Maybe next year will be something different.

[00:24:56] But, you know, make it less than overwhelming by finding one thing to get really good at and then go find other people who need you. Love it. Love it. Are there any roadblocks that you guys encountered that you could share with the listeners that they might want to watch out for? I'd say that the roadblock that has come up, I mean, there hasn't been a whole lot of time, but the roadblock that I would say is in moments of uncertainty, you know, like in the capital

[00:25:22] generation part for us, there were sometimes days where we would reach out to potential investors and either not hear back from them or, you know, have some sort of indecisive answer or say, hey, you know, call me on Friday. So, those moments of sort of uncertainty, I think the important thing to do is to not get overwhelmed or not let that bring you down because there's always ways to educate yourself. Every moment learning about this craft is going to be more valuable, whether it's analyzing

[00:25:51] deals, looking at, you know, other warriors or other real estate investors who may be doing similar things. Educating yourself is not a valueless use of time, especially when you, you know, what you're wanting isn't exactly happening because I promise you that the investors who you're pitching to, if you're doing a good job pitching, they will come back to you. It is, you don't know what's going on in their own life. So, don't stress over it. Just educate yourself, do the right things and then, you know, your investors will come back to you.

[00:26:20] So, did you guys happen to get something in the mail from us when you got your first deal? Absolutely. Yes, we did. The thing that I was most excited about, I was like, man, we got to close the deal quick. Yeah. So, check out this sword, guys. You can't probably see it. It's a real freaking sword, metal sword that you get when you do your first deal as a warrior. It says warrior on it and it's pretty freaking cool. Anyway, guys, it's a pleasure to see you and really glad to have you on board with us and

[00:26:47] thanks for sharing this deal. And, you know, I want to see you back here in a year with a few hundred more under your belt. Okay? We'll be there. Promise. All right. Thank you. All right. Nice work, guys. Great job. So, one other quick thing. We encounter so many people that are frankly frustrated. You know, they're looking in the mirror and they're frustrated that they haven't been able to escape the rat race. They haven't been able to build cash flow to the point where they're able to have financial and time freedom with their families. You know, and maybe they see other people buying

[00:27:16] real estate and creating, you know, incredible cash flow and they think, well, it's just scary. You know, buying apartments is intimidating and I get it. See, that's why we created our Warrior Mentorship Program. They're our coaching students and they've had extraordinary results. My students, I've been teaching about five years and they've grown upwards of 140,000 units now that we know of, right? And we feel like it's just getting going. Now, we're looking to grow this group and really take it to the next level and honestly believe that the greatest transfer of

[00:27:45] wealth could be upon us right now with this current economic environment. Everything's going on sale. So, we're looking for people who want to follow a proven framework, really like a blueprint or a map, literally step by step. And then they're able to leverage our systems and our incredible network to raise money and equity, to find deals and close those deals and build partnerships really nationwide. So, if you're interested in finding out more about how you can become more in our incredible network

[00:28:11] and take advantage of the unbelievable opportunities that are upon us, you can apply to my Warrior Mentorship Program by texting the word CRUSH to 72345 or you can go to mentorwithrod.com. And what we'll do is we'll set up a call so you can check us out and we can check you out and see if it's a fit. Now, again, you can go to mentorwithrod.com or text the word CRUSH to 72345 to apply and we will speak soon.

[00:28:37] Thank you for watching Multifamily Rockstars. If you loved the show, please subscribe and leave us a five-star review.