ATE-Underwriting Deals and Raising Capital with Andy McMullen and Brian Pownall

A conversation about quick tricks to underwrite deals and how to raise capital with Andy McMullen and Brian Pownall.

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Originally aired on May. 31, 2021

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Andy McMullen
Andy McMullen is a Managing Partner at Legacy Acquisitions and operates as its Director of Acquisitions.  He also sits on the Board of Directors for a number of top-flight real estate companies including RAD Ventures, LLC in Los Angeles, CA, and in San Diego  NSD Ventures, LLC and NSDPM, LLC. He has long-standing personal relationships with brokers, operators, investment banks, institutional lenders, private equity firms, and has orchestrated over $750 million in commercial real estate transactions.
Check out his website  www.legacyax.com.

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Brian Pownall
Brian Pownall is a highly motivated leader in the oil and gas industry with a demonstrated track record of merging technical and business evaluations. Brian is also a Multifamily real estate investor partnering with others to syndicate 100+ unit deals. He is passionate about working with multidisciplinary teams on highly complex issues to achieve a common goal.
Graduated from Texas A&M University with a Bachelor of Science in Petroleum Engineering.
Connect with him on Linkedin https://www.linkedin.com/in/bpownall
And check out his website http://newdayinv.com/

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Your host, Brian Briscoe, is a co-founder and principal in the real estate investing firm Four Oaks Capital.  He and his team currently have 485 units worth $21 million in assets under management and are continuing to grow.  He will retire as a Lieutenant Colonel in the United States Marine Corps in 2021. Learn more about him and the Four Oaks team at www.fouroakscapital.com  or contact him at brianbriscoe@fouroakscapital.com - be sure to let him know where you found him.

Connect with him on LinkedIn or Facebook.

Transcript

Brian Briscoe: 0:00

Brian, we have Andy on the line, what do you want to ask him?

Brian Pownall: 0:02

When a deal comes across your desk? How do you maximize your efficiency and screen that opportunity?

Andy McMullen: 0:08

If you are looking for your own deals, what I would be looking at is where's the IRR? How can you get to that IRR number that you want how much room is there, you know, if you can conservatively underwriting it, you know, zero for year one, rent growth. I think if you're looking at a heavy value add and everybody loves a heavy value add you got to really make sure that there's a lot of room in there in order to do it. We see just even as a fund, we see probably 50 deals before we're really willing to pick on one. These are deals that are already under contract and active. Right so you can imagine the amount of deals that Dave had to go through before they could pick one.

Brian Briscoe: 0:53

Welcome to the diary of an apartment investor podcast with your host Brian Briscoe. In this podcast we bring some of the top professionals in the apartment investment field to discuss various aspects of the apartment investing journey with the sole purpose of educating listeners to make wise investment decisions. The Diary of an apartment investor podcast is sponsored by four oaks capital bringing you high yield returns through apartment complex investing. This is journal entry number 140 and part of our past the experts series. Say we speak with experienced investor Andy mcmann. And aspiring investor Brian Pantanal. Keep listening for a conversation on quick tricks to underwrite deals, and how to raise capital. And now this show, welcome to the diary of an apartment investor podcast. I'm your host Brian Briscoe with froze capital very excited for today's show. As usual. It's one of our Ask the Expert episodes, we got two amazing people on the line. I've got Andy mcmillon, with us and Brian pawn out. So first, we're going to talk with Andy, our experienced investor here. Andy, welcome to the show.

Andy McMullen: 1:56

It's so great to be here, man. You know, I was you know, we've had so many conversations. I was like, why isn't Brian ever asked me to be on the show? Well, I do to Brian. Yeah, I looked back at my old LinkedIn. few months back, you actually did. So. Yeah. We're right where we're supposed to be right.

Brian Briscoe: 2:13

Exactly. I was scratching my head thinking. Why hasn't Andy answered my question? Yeah, I mean, no, no, no harm no foul on that one. But it's great to be here. Man. I've

Andy McMullen: 2:25

been a fan of the show for a long time. So it's exciting.

Brian Briscoe: 2:27

I appreciate that. I appreciate that. I was just gonna say if I if I had $1 for every you know, message that I left you know, unread I'd have a lot of dollars sitting wouldn't even know how many cuz I just haven't seen those emails. But anyway, Andy, do us a favor. Tell us a little about yourself. Give us your your background and history and kind of lead us into what got you into apartment investing?

Andy McMullen: 2:50

Yeah, so I started about 20 years back, I came out of school, I kind of magoon my way into real estate. Honestly, I wasn't sure exactly. I always was fascinated with real estate, but I never thought it was accessible to me. So right out of college, I got a job at kind of a boutique Investment Group, they had a brokerage and property managers and asset managers. And so I kind of just started on the commercial brokerage side, probably sucked at it for a while, I mean, I made enough to kind of stay afloat. But then I kind of got the bug on the investment side, kind of late nights at the office trying to figure out what a you know, financial calculator was and all the manifestations of IRR and, you know, compound interest and all the rest of it. We don't have a lot of resources then. So that's about when I kind of started really looking at alternative opportunities and development and investing. So that's a little bit about

Brian Briscoe: 3:42

my background. Nice. And I know your San Diego area right now, where were you at the time,

Andy McMullen: 3:47

I was la Yeah, most of my life in LA. And so the office that we had was in Marina Del Rey beautiful. I remember my, my boss kind of sitting me down, he's got a, like an eight storey office with this ocean view. And he kind of sits me down. He's like, Mac, you know, you obviously have a lot of great relationships, and you're obviously bright, but some of this files that you put together, they just suck. So I just wasn't very good at like, you know, the conscientious part of it yet. I needed I needed training and mentorship. So that's kind of ultimately where I was able to get from from him. Yeah,

Brian Briscoe: 4:27

yeah. Interesting. So I mean, LA and you say, around 20 years ago, so early 2000s. What was the commercial market like back then?

Andy McMullen: 4:36

So when I came in, man, it was like.com Crazy, right? So, you know, all my friends that got out of school, they're paper millionaires, and I'm kind of working on some office leasing and sell into some pets.com types, you know, businesses that we put on like a letter of credit, that's a million bucks, and hopefully they can survive. And so really quickly, but if you remember what happened 2000 The lights went out right? And then.com bubble burst. And then you know, not too long after that we hadn't kind of, you know, the 911 after that. So it was, it was a tough, it was a tough time to come up with a lot of learning, certainly a lot of falls and slips. But But ultimately, you know, I was a good time to learn real estate because you kind of really understood what a down cycle was. And so like, technically say that I've been, you know, a couple or three of them.

Brian Briscoe: 5:24

Yeah, yeah, absolutely. You know, and there's, there's something to be said, I think a lot of the new generation of real estate investors, you know, haven't seen that down cycle and how it affects the real estate. and myself included, I mean, I had to single family properties during the 2008 crash, you know, so I saw a little bit of what happened. But, you know, I think your experiences is absolutely valuable. So So here's a question with that. I mean, a lot of people, a lot of people are saying, you know, there's a bubble right now. So I don't know if there is no, I mean, I don't have my crystal ball, and it broke a couple years ago. But you know, what, what are the lessons learned from the last couple of cycles that you know that you've applied to what you're doing today.

Andy McMullen: 6:09

So in 2008, we were finishing up a development, we had finished one development already, we were already on a second development, we'd already pre traded. So we sold all the units 2007 hits, basically had to re trade all of those units back down, probably about 50%. So we really didn't even get out of that particular development, pinch until 2010 11, maybe even 12. And the only reason we did is because we lucked out and Google moved in right next door to us. So what I remember about that was one what true leadership was like, because the mentor I had at the time, was able to navigate calsters and CalPERS coming in, and McFarland coming in all, you know, basically, the world was falling apart, and there was the lending completely stopped. So what I like to tell people, I stole this from Jeremy roll is, if you're looking at a deal, and you're thinking about it, if this was 2007 or 2006, how would you approach that particular deal? What kind of risk mitigant would you have? And I think that's, you know, a really low breakeven, I think the loan terms, maybe you bring down the leverage a little bit, I think it's got to be conservatively underwritten in the way that you and I consider conservatively underwritten, you know, that they're right, you were raising enough money, and we're not trying to boost IRR. So things like that I would, I would look at

Brian Briscoe: 7:32

Yeah, I think those are, those are good tips. breakeven occupancy rate is huge. I mean, if you're getting agency loan, I mean, you can almost turn that on its head and you know, if you get an agency debt, I think the breakeven occupancy rate is almost automatically high 60s, you know, so high 60s, low 70s, and some of that a lot of stuff. I think lenders have learned the same lesson, but a lot of the stuff the lenders are already enforcing, you know, especially the the agency type and you know, some of your definitely are non recourse products anyway, but good tips there. I mean, underwrite conservatively, you know, risk mitigation is huge. And the low lower leverage is actually better in times like this. So, dilutes the returns, but lower risk, but make puts a lower risk for everybody. So let's do this. Let's, let's talk about some of the investment opportunities you've had participated in. Tell us about your maybe one of your favorite ones.

Andy McMullen: 8:25

You know, I think it's a recent one I honestly because I feel like my entire life kind of was leading to how can I really be involved in transforming some of these communities that we're doing deals in, and a recent one was a deal in North Carolina, we were partnering up with with another lead sponsor, and the community was about 300 units in Winston Salem, North Carolina, it was completely it was completely dilapidated from the outside, like the playground was, was down the pool was a pond, you know, the parks were all torn up. And it was really kind of almost tragic when you were walking in. Now the interiors were done, really backwards, the operator done the interiors first, and kind of left the exteriors. So as a result, there was kind of a timeout, and there's couple bad actors. It was a very great vision from the street. So we were able to come in, partner up with a group called partner life, which is really near and dear to my heart. They basically go into a community. They're kind of like an array of a community. They can be kind of the resource for the landlord. They put together barbecues and Bible studies and community events. And then we brought in the new playground, we had all the investors kind of involved in picking which playground we had so really kind of turned this project around. And as a result, we had multiple skips the first couple weeks, which was fantastic, because we're able to get keys back those people. Yeah, absolutely. Yeah, we those people were probably you know, gonna be trouble. And so in fact, we ran through a couple tough months, not when we thought like COVID Firstly, the stimulus was fine, but then you know, maybe February and March it dipped a little bit. But now I think we're back on track. So I'm just really proud of that deal because you actually are, we're hearing from the tenant base, how excited they are about being there. And we're seeing kids outside now. So things like that kind of giving investors an extra charge. And most investors, if they realize and they look at it, some people think, Well, why are you taking that money out of my return, etc, etc. But they don't understand is that boosting the community, boosting the rents, boosting the stickiness of these these residents, and ultimately giving you a better return. So that's what I'm proud of. Yeah, and

Brian Briscoe: 10:36

I love that that term sticky when you're talking about tenants, you know, and that's just, you know, if if you can get a tenant to renew a lease, that is going to save you money, you know, and $1 saved is literally $1 earned in this business. But I would say that, you know, apart from your capital expenses, tenant turnover is by far the single biggest expense. And if you can avoid that, I mean, if you if you're putting $30,000 playground in, and that keeps a handful of tenants there, I mean, that's worth the ROI, you know, every don't do it all day, every day, and especially the 300 unit property, you've probably got a lot more budget to play around with to get things fixed up. So now, I think I'm familiar with this property. I think we've talked about this one before. But tell us about the things you talked about earlier, the risk mitigation tell us about the leverage you guys had and your breakeven rates, what what are those look like?

Andy McMullen: 11:30

Oh, yeah, that and so that was really impressive. That one is one of the lower ones I've seen, has about 59% breakeven, I don't think in many of my years, I'd seen something that low. Now. Now, obviously, you know, a deal like that maybe it's a 15% IRR for some investors, they might think I could get my 18 1920. But we really did get the COVID discount, you know, it was in escrow when COVID hit 20 million picked it up at about 18. So there was there were some there was some room there. And we really thought felt like with the interiors already done, we had less of the interior to worry about and means as soon as we close, we could really attack attack the outside. So you know, so the breakevens obviously, one leverage was another one. I think that you really have to kind of consider what the tenant base is. Right? So we really spent a lot of time on the where when these tests came in, where were they working? How is this kind of put together the entire picture? How much is the construction? How much is in healthcare? You know, how much is it? Yeah, so though, I might have one coming in to you ever No. thing works, right?

Brian Briscoe: 12:40

That's always fun. You know, they found something that and it happens, you know, but the world we live in man keeps us keeps us humble. Yeah. And I don't even think we're going to edit that out, you know, let people know, hey, don't jump in all the time on phone calls. And I've had I've had kids on laps, you know, carrying during phone calls, but I used to shoo them away, you know, but if they come in toward the end of a phone call, you sit in the lap, and they're they're pretty good about it. But

Andy McMullen: 13:09

it was on a webinar. I was on a webinar about two weeks ago and we're to the nitty gritty about a deal we're working on and my daughter is banging on the door and she's going, Daddy, where's my mac and cheese? Perfectly love it.

Brian Briscoe: 13:25

Yeah, it happens. That's the danger. You know, and not really a danger. But that's, that's, that's what happens when, you know, kids are tele schooling and everyone else is teleworking. But yeah, cool. But anyway, that back back to that property. You know, I saw the investment opportunity. I thought it was a phenomenal deal. Incidentally, I think the Delete sponsors have both been on. I've been on the podcast, your husband and man. It's great, man.

Andy McMullen: 13:54

I mean, they're just they're just so good at what they're doing. Jason Justin Frazier, if you haven't had him on, you should have him cuz he's just a fantastic asset manager. You know, we have our board meetings. And, you know, Brian, I should share with you maybe later some of the things that they've they've been able to do. But But when you just consider almost anything in life, right? There's iterations, right? So you're constantly getting new information. It's not what you predicted no deal ever is. But if you can move out some bad apples if you can, if you can really monitor the crew, they're the property managers, all that stuff is is so key. And if he's doing things on top of it constantly, then we that saves us two months at the end right or three months return for the investors. So yeah,

Brian Briscoe: 14:40

yeah, we had a property that when we bought it had some some bad apples as tenants. And there were there was a lot of it was adjacent to a park. So there was a lot of transients just walking through, you know, and that that led to, you know, vandalisms here and there and a couple of thefts here and there but it wasn't budgeted, but we We realize that was what was happening. You know, we reached down deep and built a fence, you know, and it's amazing the difference just that fence line along the park makes, you know. Yeah, I mean, now you no longer have the transient people walking through there. They're finding different ways to get from point A to point B, you cut down the the car thefts that were happening and cut down a lot of the undesirable type stuff. But yeah, it's just it's just one of those things. Yeah, you look, you see what's happening and you pivot. It's like, okay, we didn't budget for a fence. But let's, let's find out how to do it.

Andy McMullen: 15:32

Yeah, in fact, in this one, I think we spent$65,000. And just tree cutting, just because it was just so kind of consumed with all just shrubs and trees. And so that just opened it up from the road now now you can actually see it right. And people can't walk through the fences at night. So yeah, it's a big, it's a big deal.

Brian Briscoe: 15:53

A lot of good stuff there. But So one question I like to ask everybody, I call it the big burning. Why, you know, what's your big burning? Why? What's your motivation for for doing what you do?

Andy McMullen: 16:03

Yeah, so I'm unbeliever. And so my motivation is is him but but as it as it kind of relates to, to the business? It's it comes out of everything that we do, right? So my group legacy weave comes out of everything that we do, we're thinking about how are we going to build the kingdom. So that means the team that we hire, that means the the people that we're helping, some of them aren't even on our team, right? We just want to help the real estate community. And you know, one thing that I've noticed, Brian, is, is the multifamily or maybe it's just today, when I came out, it was so much more insular. Like, I think I told you I was, you know, at the office, just trying to figure out what up how to do the financial calculator, right? Yeah, hours, they're just kind of teetering. And certainly, there's mentors to help. But you couldn't go, I couldn't go to Brian and say, hey, look, take a look, this deal doesn't work for me. You know, in fact, meet my introduction with Matt and Liz came from somebody, another operator said, Hey, I know this doesn't work for you. But so I think that, that there's just a burning desire to help. And I think that's kind of what comes through. And for us, too. For so many years, I invested as an LP or was in partnerships, where the investor was kind of an afterthought, right? He spent so much time on finding the deal and reporting and executing the deal and considering the exit, but the crews along the way, trying to put together if you're an operator trying to put together report on a Sunday night, well, you know, no one's gonna read. Yeah, like that's just that, that I know, because I was there. That's just not a priority. So in our fund, we really spend a lot of time on how do we figure out to give them the white glove service. And so it takes a lot of vetting. You know, sponsors and

Brian Briscoe: 17:46

operators. Yeah, good. Good enough. Now, another question that I always ask everybody, and always, always look for what's coming up in the future. So, Andy, what's next for you?

Andy McMullen: 17:57

Right now, we're currently building out a built to rent community in Lafayette, Louisiana. So we've got a fund that we've been kind of working on for a while, we've already actually started building, we started building, we've got it all in title, and we've got about six out of the 100, there's a single family houses, treat them as a community, we would sell them and buy them as one. So that's kind of what we're really focusing on, we feel like that's kind of the next trend, we feel like there's a lot of multifamily that want their own backyard, their own singular space. And we can do a lot of the things same community oriented things that we would do in an apartment for this single family community. Obviously, we have to keep an eye on where lumber prices are and supply chain appliance. So we talked about, you know, risk mitigations I don't think I've ever written, you know, a 30% contingency into any deal, which could be fantastic for the investors if we never hit that, but those are the kinds of things that you know, if we're investing in this world, those kinds of things we have to think about,

Brian Briscoe: 18:58

yeah, a lot one supply chain issues, you know, as a result of the COVID you know, lock downs and everything else it's disrupted a lot and I mean, speaking of supply chain, you know, right now I can't even go to a gas station get gas because the pipeline on the East Coast, you know, so yeah, hey, Brian, you're you're in oil gas, right? What do you fix that? Yes. Yeah.

Brian Pownall: 19:20

I mean, yeah, a lot more regulations. But that's a whole nother podcast like Yeah, but

Brian Briscoe: 19:25

yeah, a lot of the a lot of supply chain issues are just making the business difficult. But so yeah, but back back to you in a year. I mean, you're building a fund and you're gonna be doing a single family development, you're going to run as multifamily. I love the idea. And I think you're absolutely right, people are looking for communities. And you know, especially parents or small kids are looking for backyards, and I think you're you know, looking looking back at you know, me and my wife You know, 1015 years ago that would have been perfect you know, a built it built and ready made community with exactly that. So sounds awesome. Thanks, bro. Yeah, that said You know, we're going to talk with Brian right now bring him on. And Brian pournelle Welcome to the show. Appreciate it big

Brian Pownall: 20:06

fan. You bring a lot of Titans in the industry through the podcast. I love the format. So, and he's just another one that.

Brian Briscoe: 20:13

Yeah. Yeah. I mean, like we said in the beginning, you know, I wanted to get Andy on, you know, eight months ago. But yeah, but, you know, I could have driven that a little harder. I mean, Andy's been coming. I do a weekly networking, but he's been coming to that very consistently, I could have pushed the issue a little more, but

Brian Pownall: 20:34

I listen to your podcast quite frequently, while at the gym. It doesn't maybe give me the same pump up as you know, some music. Yeah, it's great.

Brian Briscoe: 20:41

Yeah. You know, and I think the same for a long time. You know, I go to the gym, and everyone else is listening to the music to help them get jacked. And I'm, I'm listening to podcasts, you know. So there was a while where every time I was at the gym, I was listening to like the Michael Blanc or the rock Cleese, or the Joe fairless is, and this is like, three, four years ago, but those are really the only three that were around. But yeah, you know, there you go. Now there's the the duck urban apartment. Yeah, yeah. So take it to the gym with you. There you go. So anyway, thanks. Thanks for your kind words, Brian, I appreciate that. But let's let's talk about you a little bit. Tell us a little bit about yourself background in history. And what's what's gotten you interested in multifamily?

Brian Pownall: 21:22

Yeah, so my backgrounds in oil and gas, I was actually born and raised in St. Louis, and then moved down to Texas and went to college at Texas a&m University and somehow found my way into oil and gas down here in the great state of Texas. And so it's been a phenomenal career, lots of great people, you know, a great degree to get highly technical on, you know, what's led me to Real Estate's really over the last year, everybody saw that headline when oil went to negative $38. It's a pretty big shock. And I started to see some more stability to my income stream. And also, you know, as I began reading about real estate had a desire to diversify my wife's and my savings, you know, we're 99.99% in the stock market, and really was just eye opening even for someone that's always manage their investments, you know, all these alternative assets that you could allocate resources to other that'd be multifamily or other types of classes in real estate. So yeah, about half my career is spent as an oil and gas engineering manager, reservoir engineer. And so about half that career was an AMD. So just cranking through deal flow on the oil side, took down a $500 million deal in Oklahoma a couple years back at a private equity backed group now and so, day to day underwriting, I guess you could call it using the apartment term underwriting long gas deals that are a little bit more complex, and you know, 2030 year lives versus an apartment, but I felt very plug and play to come in and apply that to multifamily.

Brian Briscoe: 22:52

Yeah, there's gonna be a lot of similarities, there are a couple things that are different. And just to get down in the weeds here, here's one question that always comes up, you know, how do you guys forecast the oil prices when you're doing that analysis that would like throw me for fits very carefully right

Brian Pownall: 23:10

now. I mean, at every forecast, just like, you know, just probably like multifamily. And when you're building out your cash flow model, I mean, every model is going to be wrong, you just have to kind of define the ranges of the potential outcomes and figure out what, you know, good price gives you a, you know, the best risk adjusted return.

Brian Briscoe: 23:26

Yeah, okay. Interesting. Yeah, I guess we do the same thing with with multifamily with, you know, rent growth, and, you know, how the expenses are increasing over time, you know, everybody picks everybody picks their projections, you know, and it kind of, you know, looks at, okay, best case, worst case scenario. And I think back to what Andy said earlier, just mitigating risk, you know, looking to see what, what would happen if we have in 2008. But,

Brian Pownall: 23:51

yeah, rent growth is a perfect analogy, because you've got a bunch of research groups out there that put out great material and rent growth or on commodity prices. But at the end of the day, this global economy that's so complex, it's really hard to predict. And

Brian Briscoe: 24:02

so yeah, absolutely. And I know, I mean, in my day job, I have, you know, Latin American expert, and there's a couple of countries in Latin America that do very well when oil prices are up and do very poorly when oil prices are down and compared to 1520 years ago, oil prices are down right now. Anyway, that said you know, another question for you that once again I asked everybody what's your big burning? Why

Brian Pownall: 24:27

Yeah, so started with you know, stability of the income diversifying the savings, it's really turned into one word, which is legacy. And in nailed on the head, we've talked about transforming, you know, that community in North Carolina And to me, that's really the big burning, why I want to positively impact as many people as possible through you know, entrepreneurial business and I think it's twofold with multifamily and that's why I've really fallen in love with multifamily. You can improve the living conditions in these local communities, for the tenants and and those folks and in that part of society, and then you can also create generational wealth for your Family and investors and for me that goes beyond just your W two job and your you can create enough significant financial wealth that now you've got the time and money to donate to whatever cause may get closest to your heart, but that the day is going to benefit society and to Andy's point the kingdom that's really important.

Brian Briscoe: 25:16

Yeah. And this really is a business where I mean, I love Stephen Covey. You know, his seven habits book is one of the books I've read the most, but he's got a think Win win. That's one of his habits. But this is actually a business where it's like think Win, win, win, and sometimes another win because you're impacting tenants lives, you know, you're making your life better, you're impacting your investors lives all for the good. So definitely something that appeals to a lot of people in the industry. Yeah, I

Brian Pownall: 25:44

agree, when I first you know, kind of came to that realization, really towards the end of last year. I mean, I just started losing sleep at night. And that's how I knew I was onto something, just that passion and that drive to use my skill set and the business world to create that win win win. It's just extremely exciting. Yeah,

Brian Briscoe: 25:59

I mean, when when you're naturally up till one o'clock at night, you know, scrolling through your spreadsheets and realize, you know, that that's when you know, you're on to something that you can do forever. But that said, Brian, we have Andy on the line, what do you want to ask him? Well, thanks, Andy,

Brian Pownall: 26:13

can't wait to throw a couple questions as someone with your background. So I'll jump right in. I mean, you always hear multifamily deals and dollars deals and dollar. So I'm gonna focus on a couple questions on those topics. You know, the market seems extremely hot right now. And with it so hot, there's a bunch of sellers, I see a lot of deals come across my desk every day from brokers so he could walk me through your process, you know, when when a deal comes across your desk? How do you maximize your efficiency and screen that opportunity?

Andy McMullen: 26:40

Yeah, so I mean, there's there's a few things that we look at just right away, one, at the jockey, demean, that's the most important thing for us as the fund. So if you're, if you are looking for your own deals, what I would be looking at is, where's the IRR? Where How can you get to that IRR number that you want? How much room is there in the you know, if you can conservatively underwrite it, you know, zero for your one, rent growth? I think we probably see, you know, maybe you see 100 deals before you, I'd be curious to see what what Brian says because he's been a little bit more recent, we we see just even as a fund, we see probably 50 deals before we're really willing to kind of pick on one. And these are these are deals that are already under contract and active. Right? So you can imagine the amount of deals that Dave had to go through before they could pick one. So maybe a little more specificity. Are you looking for you mean your own deals? If you were gonna find your own your own deals? Yeah. Would you kind of Exactly.

Brian Pownall: 27:44

Yeah, and just yeah, you know, with such a volume of deals coming across, especially, you know, in someone of your stature, just how you efficiently screen those and optimize your time, you know, get rid of the ones that aren't going to make sense, while also not kicking one out, you know, before you've actually had a chance to, you know, dig into it.

Andy McMullen: 28:01

Yeah, I think I think also, the other thing is, is, at this time, there's a really kind of uneven, you know, value add type of deal versus a cash flow type of deal. And I think people are paying a lot more for a value add deal on a risk adjusted basis than they are for the cash flow deals. So I think if you're looking at a heavy value add, everybody loves the heavy value add, you got to really make sure that there's a lot of room in there in order to do it. Brian, what would you add? You know, I

Brian Briscoe: 28:29

would just say you have to have your criteria going in, you know, know what your criteria is. And you compare everything to your criteria, you know, so, you know, maybe maybe your criteria involves, you know, down to neighborhoods that you like, and then when a deal comes across your desk, you can look at it, is it the type of neighborhood that I want is the size I want? Is it the asset class I want? Is it the you know, does it have a value add component, but I think clearly defining what your criteria is, and what you're willing to purchase. I mean, that makes it a lot easier because, you know, you can really quickly see that some deals don't meet your criteria and move on other deals, you got to dig a little further before you're you can check the box saying criteria is met or not. But that's that's what we do. We have our criteria and, you know, 510 minutes, okay, doesn't meet criteria next. Sometimes it takes an hour or two before we realize that but if I

Andy McMullen: 29:21

could add one more thing, you know, in that same vein, it the better you know, the market and if this is like your deal, and you know, just a difference between Hey, this building had rubs this building didn't have rubs this building is this vintage this building is that vintage, it's in this pocket and maybe a mile outside of the pocket. And if you can know it that well, then you could you could be sifting through deals like that because one you might be able to throw out like Brian said, Look, it's not it's not fitting my criteria just based on whatever the vintage excetera is. But but but I think that's a way to kind of get through multiple deals because each time that you see something you If you like the building, you're gonna sit there for an hour. I'm trying to make it work, but but you can stay true to yourself and your criteria, I think that you get a lot farther faster.

Brian Briscoe: 30:10

Yeah, excellent points.

Brian Pownall: 30:12

I appreciate that. All right. So yeah, my second question, take that a step further, you know, go back to March of last year, and then maybe compare that to now is the economy's reopening, you know, what's really changed in your underwriting your analysis, going forward with some of the uncertainty on how all this is going to play out post stimulus and just had an ended, you know, second half of 2021 and into 2022?

Andy McMullen: 30:32

Yeah, it's interesting, you know, that, that everything just kind of stopped, right, and margin, we didn't think we were gonna get alone. And, you know, we had deals that we had tenants that we knew weren't gonna pay. And just just, I don't know, by the grace of God, it just seems like we kind of turned a corner now with the vaccine, I think there's still a lot of uncertainty, I think there's a lot of owners that are that are a lot of buyers, rather, that are buying buildings that have about 10 to 15% of their rents being paid by stimulus money. So and it's hard for them to get any kind of reduction, right, because it's so competitive. So if you went in there and bought a building 10 15% of the rents are stimulus, this, that seller is going to tell you what, lb San, there's about five other guys that will be paying for that. So I think there's, I think there's some unknowns there that you got to be careful of. But overall, I'm relatively confident that you know, there'll be a pretty decent Christmas season and that people seem to be getting the vaccine, if you knew that this was 2007. You know, how would you underwrite it? And we felt like that in March, right? And so the deal had to be pretty good. And eventually lenders came around, right? I think that they kind of saw what we saw. I mean, Brian, you guys got, you know, great deals done last year. So

Brian Briscoe: 31:49

yeah, we got a handful of them that we were able to get COVID pricing on as well. But there, there came a time where the market kind of picked up, you had all that competition. And what we had to do is go back and sharpen our pencil is what I'll call it, you know, we pride ourselves in being conservative, but we started looking at each each expense category individually. And we always ask ourselves the question, okay, which factors are in our control and which factors aren't, you know, and that way we know where the risk is. So we we sharpen the pencil on all the factors that were in our control. All right, we can control certain expenses to a large degree. So that's where we started tightening up our underwriting is the expenses that we knew that we can control. And then the things that we couldn't control, we tend to remain a little more conservative on and that's where we found the happy medium. And, you know, it took a couple months for us to adjust. But, you know, we're back on track back with, you know, hopefully up our new one under contract soon.

Brian Pownall: 32:51

Awesome. Excellent. It's my third question is gonna be around the dollars aspect of multifamily syndication. So for someone who's just beginning out, you know, going down that path of trying to become an apartment syndicator, what do you think the most valuable product is that I can provide to potential investors? I guess that's the first part of the question. And the second part of, you know, very focused on, which is how do you create an effective marketing strategy without coming across as a sleazy salesperson or you know, overboard on social media online?

Andy McMullen: 33:21

Yeah, great questions, man. So I answer the second one. You're giving them an opportunity. And they can either take it or they don't take it. And we've had many investors that have basically, we've been on calls with them, they'll never invest with us, but they've referred us investors, right. And so I think if you can, you can sit on these calls, and really try to help people understand. You know, one thing that I think you'll be surprised with as you're getting investors, Brian is most people that are in the W two world or even even successful, maybe they're an oil gas, they don't think of real estate in that way. Right? They think of Hey, look, there's a stock market, you can get a dividend, and you can get your you know, your return, but they don't think about real estate in the way that you would describe it to him. Hey, look, we're not just talking about the appreciation. We're not just talking about cash flow, you can make money doing that. We're not just talking about depreciation, you can make money doing that we're not talking about loan pay down, make more money doing that, and we're not you know, and all of these things that they have available to them. They haven't thought about it that way. I wouldn't even say you said the word syndication. I wouldn't even use that word. But you compartment investing, and keep it keep it as simple as you can. And so anyways, to get back to this, this sleazy salesman, you know, I could just tell by the way that you carry yourself, that's not going to be a problem for them. You just show them what the deal is, and they'll say yea or nay or not now, but the one thing that I do think you can discern yourself is the investor relations part. Because I've seen so many young syndicators come in, they're focused on, you know, they'll sweep the property, right, they'll handle the the, the operating expenses, they're there, they're in it, and they're gonna execute the property. But the last thing they want to do, as I said, is report to investors. So if I can say, if you can get that part queued up, and you can show people exactly, here's like the sample deal, or you can team up with another senior person, here's a deal, here's how we report to investors, you're gonna, I'm on so many calls. And these are 3000 4000 unit operators, that just, they haven't thought about it that way. Because they haven't had to, they just, you know, over the last 10 years, you just keep sending checks out to people, you know, it's kind of like, you know, when he's the best deodorant, so, so, when the hits the Shan, then they get the calls, COVID comes in, they get the calls, but they don't have the reports together. So that's how I would start.

Brian Pownall: 35:58

That's excellent. I appreciate that advice. And then what do you think, you know, is a valuable product is a, you know, someone that's beginning to try to raise money from investors and, and, you know, raise awareness? Is that an ebook podcast blog? Or do you just try to niche down to one of those?

Andy McMullen: 36:12

Yeah, I would say and to be honest with you, we've, we haven't been good at it either. But But the one thing that we started to do, because for, you know, many years, we just kind of recycled through investors. And I thought the most important thing is, let's take care of investors in the deals, but it's a marketing world, right? You've got to be known now. So I would say that getting on as many of these these podcasts that you can go into meetups, getting a clubhouse, you know, seeing and then I think the funnel, so maybe the Active Campaign or something like that, if you can really put out content consistently. So people know, you, I think funnel is probably going to be your best bet. I'd be curious to hear what you think, Brian, cuz you guys have done really good with the marketing part of it. You

Brian Briscoe: 36:54

know, I tried to reverse engineer things, you know, and it's, you know, for me, I think I started doing a lot of marketing without, you know, is really like shooting arrows in the dark, you know, just maybe I'll hit a target, maybe I don't, but I started realizing that there were certain groups of people that I naturally appeal to, and I started really thinking about it, I'm like, Okay, number one, I already speak their language, you know, military veterans, I speak the same languages, and there's a lot of terms that are very unique. And I started thinking, Okay, you know, these people that I naturally appeal to, are they able to invest? and largely, the answer was, yes, you know, if I, if I narrow it down to, you know, veterans who are, you know, 35 to 50 years old, you know, maybe, you know, senior, your mid to senior officers in various services, you know, yes, you know, they're, they're able to invest, I appealed to them. And then I took the step back, and I said, Okay, where do these people hang out? You know, I mean, are they on Facebook? Are they on LinkedIn? and largely, the answer was LinkedIn for me. And so the majority of my outreach is on LinkedIn. So I would suggest you do the same thing. You know, look at your current contacts, you know, people that you speak the same language to, and you know, which one of those you know what what subgroup of your current contract contacts, has the ability to invest in products, and then take a step back and say, How can I reach those guys? You know, the answer for me was LinkedIn. And, you know, partially that was the answer for me because it's free, you know, at the time, but now that we have marketing dollars, we're actually you know, working on other campaigns as well. But LinkedIn, still the bread and butter. So no four Oaks, tik tok soon. Now, you know, me amazingly. Yeah, that's something that, you know, we're looking for a more mature crowd, for the most part, you don't say no to the 20 somethings who want to join us. But you know, when we're looking for investors, we're looking for very specifically the investor that's hovering around that accredited status, you know, so, high six figure low seven figure net worth, you know, and that's, that's who we're aiming for. And, you know, that's like I said, that group is much more frequently on LinkedIn, and they're on, you know, the Facebook's, or the Instagrams or the TIC tocs of the world.

Brian Pownall: 39:13

But I think I've heard you mentioned before somebody else, you know, your investor avatar, I think that's a great piece of advice.

Andy McMullen: 39:18

Yeah, yeah. Yeah. And I think for you, though, at starting out, though, in this world that we live in, you've got to be known. And I think a big part of Brian's success is that he's got this platform, he's got the pie, he's got the meetups. He's on LinkedIn, he's posting people know him. So I think that, you know, you meet a young guy, you know, in oil and gas, and a lot of those same, you know, a lot of the oil and gas will have the same appeal, right, because there's a lot of the same kind of, you know, 1031 exchanges and opportunities there. You know, just considering, you know, inflation all the opportunities there. So, yeah, I think I think those are some great, yeah, great options for All right,

Brian Briscoe: 39:57

well, guys, we're coming up, running out of time. here so I'm gonna ask one question for each of you to finish off. Andy, you get to go first. What can our listeners learn more about you?

Andy McMullen: 40:08

Yeah, they could go to legacy, ai x.com legacy AI x for legacy acquisitions. And then I've got a couple of good lead magnets there that people like might like they might like their, their report on, on the sniffing out the Bs, as a passive investor, I got a pretty good one there that we go a little bit deeper, you know, yield the cost and try to really dig a little bit deeper so people can look out for some of those things that operators are sending them. And then I'm like, Brian, I'm, I'm all over LinkedIn and accessible, and I love to help. So if anybody's out, there's got questions. I'd love to talk with them.

Brian Briscoe: 40:45

All right, perfect. And Brian, same question for you. how can listeners learn more about you?

Brian Pownall: 40:50

And well, first of all, just say thank you, Brian. And Andy. I can't imagine a few months ago not knowing anything about multifamily syndication here I am on a podcast today talking to two of the best so I truly appreciate it. Yeah, so my groups called New Day capital, we're looking at apartment syndication and the major markets in Texas. So reach out to me at www dot new day, I envy calm. And like Brian and Andy, you can also find me on LinkedIn or Facebook or Twitter.

Brian Briscoe: 41:15

All right, and we're gonna have, you know, links to that in the show notes. So to websites, emails that you guys gave out, and that way, anybody who's listening, if you want to contact Andy or Brian, and I highly encourage it, you know, go to the show notes, you know, tap the links, and it should whisk you away. All right. Well, thank you so, so much, you too, for coming on the show. Appreciate your time. And you know, this was a great conversation and a lot of value was added. So appreciate your time. Really enjoyed it, Brian, thank you. Thank you for listening to the divergent apartment investor podcast today brought to you by four oaks capital. If you'd like to know more about how to invest in apartment buildings or want to be a guest on our show, visit our website at four oaks capital.com slash podcasts, or email us directly. If you're still listening, you obviously like the show. So pull out your phone, app, subscribe, and leave us a five star rating on your favorite podcast app. And we'll see you again next week.