106. Finding the Right Mentor with Nic Espanet

Connect with the host:
LinkedIn: https://www.linkedin.com/in/brandon-e-jenkins/
Website: https://www.birchprosper.com/
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About the guest:
Nic is a multifamily real estate investor who also coaches and mentors investors with aspirations of becoming general partners (GPs) on their own deals. He has 6 years of experience in the commercial real estate investing space, 9 years of experience as a small business owner, as well as 24 years of experience managing physical therapy teams. He has been a GP / co-GP in +1,000 units, and a limited partner in 1,780 units.


Connect with Nic Espanet:

• Email: nic@flexequitygroup.com
• Website: https://flexequitygroup.com/

Episode Highlights:
✔️ Tenant retention strategies
✔️ Navigating market cycles
✔️ Seeking mentorship and coaching
✔️ Investing in personal growth to live a fulfilling life
✔️ Finding motivated sellers

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Transcript

SPEAKER_02 0:00

You it's getting around a group of people that can help you. Because it you you can't, I mean, unless you have a significant uh net worth and liquidity and people to raise money, doing a hundred unit by yourself is would be extremely challenging.

SPEAKER_00 0:18

How successful would you be if you had the blueprint for building wealth as a real estate investor or as someone who acquires small businesses? If you want to move the needle financially in your life, then you need to understand one thing the capital stack.

SPEAKER_01 0:31

I'm your host, Brandon Jenkins, and this is where your journey to financial freedom begins. Hello, what's up, everyone, and welcome back to the Capital Stack. I'm your host, Brandon Jenkins. Um, you know, one of the things that I share on this show all of the time is the impact of coaching, mentorship. Okay, and also highlight the importance of consistency and um sticking with it and just really uh stepping back and kind of understand that it takes time to grow. But you would be amazed by how much one can achieve in a uh relatively short amount of time when they apply you know the principles and philosophies that um that uh uh that we know uh are uh essential, sorry, to do well in this business. Okay, so our guest for today is Nick Espinette. And uh Nick, how are you doing today? Doing great. Thanks for having me, Brandon. Absolutely, man. Thank you for being here. So, Nick, you were on the show back on episode five. So this is over a year ago, and um, and uh, you know, really, really honored to have you back on the show because I think it's important to highlight for people kind of, you know, uh what again, what someone can do when they really stick to it and um and when they power through some of the ebbs and flows of the market. So I'm gonna do a quick little bio for people who maybe missed uh the first show. Um, Nick has seven years experience in the multifamily real estate business. He's got four years as a multifamily coach with over 1,000 students coached. And something I'm gonna highlight right there. So, first of all, um, I'm also in the same coaching program um that Nick is in. And Nick was my first uh coach in the program. Okay, and so I like to, you know, as much as I talk about mentorship and coaching and the importance of getting into these programs, one thing that is vital, I believe, um, to someone who gets into a program is to have sort of what I call like a warm welcome, to have someone that will let them know, hey, listen, you've got uh someone here that can help you when you need a touch point and when you need some clarity and some guidance. Okay. And so Nick Espinette um is that person in the uh Brad Sumrocks uh personal mentoring uh coaching program. And so um, so he was my first coach. And so he's really, really helpful, someone who uh is definitely in the right in the right place. Okay, so he's also got 10 years experience as a small business owner. He has uh 24 years experience managing physical therapy teams. So and also I'm gonna do a unit count catch up, right? So uh total unit count um as an LP and a GP is over 3,000, I believe, right? So it's almost 3,100 units, very, very impressive. So Nick, um, you know, for for the people who missed the first show and who maybe aren't familiar with you, kind of give us a little background on on your journey and what got you to this point.

SPEAKER_02 3:01

Great, sure. Um, so Nick has been at 11 Fort Worth, Texas, so on the FW part of D FW. Like Brandon said, I've been doing uh multifamily for about seven years. Uh closed our most recent closure was November of uh 22. That was 168 unit property that that's been sent. And then we've got a deal under contract, should be closed most hopefully by the time this airs. But I mean, that'll put us north of um uh over 15, almost 1,600 units um total uh GP, and then another about 1,400, 1500 S SLPs that my wife and I have invested in in other people's deals. But you know, my background, I went to school to be a physical therapist, did that for almost 20 years, um, but really started looking at multifamily real estate to find something different to do with my retirement. And as I you know, thought I was going to go into the single family route and what I'm really maybe for my luck, had analysis, paralysis, and never took action in the single family, then came across um a couple of different programs on multifamily and started re-looking at that. I'm like, this makes a lot more sense. There's you don't have to go from the you know one door to four plex to 30plex to you know then to 100. My first property was a 100 unit property by going through a mentorship program, meeting people within that group and finding partners that we worked on that deal up to, you know, now I've got a um a 288-unit property under contract. Well, maybe my most expensive by dollar, but will be the biggest unit count um just because of the location, uh different, it's a secondary market, but still it's uh you know almost 300 units under under um one property is is exciting. But um, I'm just say that so you can go, I think with mentorship like Brandon talked about, can you do it on your own? Sure. But I think it's uh you've got mistakes along the way that the mentorship program will help you avoid just because they've already gone through the program through the process and can help eliminate some of those mistakes, especially if if if you utilize the mentorship program, it can almost should eliminate all of them. There's nothing's a hundred percent uh guarantee, but it it will reduce your mistakes significantly.

SPEAKER_01 5:16

Yeah, absolutely. Um again, just thank you so much for sharing your background there. And there's some things I want to I want to sort of pull out, and I'll start with that last point. Um, and you said it was sort of subtle, but it's very important, right? You said, especially if you utilize the mentorship program. So the reason I I think that's an important point is, you know, listen, um so I I've been in a number of different coaching programs and mentorship programs, okay. And one thing that sort of that I've observed is once you are comfortable with investing in yourself and in your own growth, um, it becomes easier to sort of get into different ecosystems, right? Because you find some area that maybe you need to work on, maybe you need to work on public speaking. So you go into an ecosystem there, maybe okay. And so um for someone who has been in a number of these time uh types of environments, you we we we all run the risk of maybe not actually applying the stuff that we're learning. And so we get into the group, we have all the resources and all the connections and the proximity, we have everything we need, but um, but either you know time gets away from us or we think that just by virtue of being in the group that we're gonna get the benefit. And and that's not true. You have to actually utilize what's there. Um, there's no even even you know the old phrase pay to play. Pay to play, uh, there's there's two parts to that, right? The other part is okay, you pay to get in and then to get out access, but you still have to take the action. I want to get your thoughts on that, right? So so someone may be joining a group, but they think that their hands are going to be held all the way through, you know, because they've gotten into the group. What are your thoughts on that?

SPEAKER_02 6:46

No, um, very good points. It's you know, like the Sumart program, it's a teaching program. We put the content out there, the student, the new student or person who signs up for it has to go through the content, then has to take action. You can watch the videos and the training modules, go to your coaching uh uh Zooms, uh, but not take any action. You still got to get out there and underwrite deals. You got to go out there and meet people who you can, one that can partner with you on a deal, maybe do your local boots on the ground or help you raise capital or you know, help in whatever way, maybe on the balance sheet on the deal. You need partners and then you need investors. You got to get out and uh uh meet people that want to invest. You got to go to events where there are there will be people that have money to invest, you know, and things like that. So if if you just sign up and then go through the motions, you you but most likely won't have success. And some people who keep applying and get knocked down a time or two, but get up and dust themselves off and and keep going. You know, I I I often say that this it's not it's challenging to do this, but it's it's not impossible. You know, you don't have to be an engineer or an IT professional, you just have to be persistent because it's the people that keep going that that end up doing it. If ever if everybody had success on their first try, it wouldn't be worth doing because then everybody would do it, and everybody there the there wouldn't be money. It's you you we you know in the end, we're we want to help people, we also want to make money. You know, we're we're investing in our future, but we're also looking for a way for me that I I didn't have to work the nine to five, and that's not what I originally started as. I just wanted something different from my retirement, then saw that within the group that and you can do this full-time and and and actually greatly exceed what your your W-2 or 1099 job was. And and I enjoyed a lot more than I enjoyed being a physical therapist, but I the the uh you know the networking part and the running you know operations and things like that. I I enjoyed it. Those things if I could go back, I would have definitely done it right out of high school. But um, you can't go backwards and who knows where life would have been. So you just take it, put it enjoy. But it back to what you had asked is persistence, you know, just do it getting in there and trying and failing and failing forward. You know, it's it's that's what's gonna get you there. And if you don't, if you're just hoping on osmosis, unless you've got a already have a giant database that can raise money, and that's your niche, um, and you can help out a little bit in other places, you you've got to get out and hustle to get it done. And even then, your your database eventually may tap out, so you're gonna need to find new investors.

SPEAKER_01 9:24

Yeah, that's right. That's right. I mean, it it's it takes a lot of work, and um, the beauty of getting into an ecosystem like the Sunrock ecosystem is that um you have access to the tools that can help you get it done. Okay, and you have a long track record of success in closing deals, you know, um uh good exits, you know, strong returns, and so you have good coaching and and everything else. And so you surrounded yourself with uh um, you know, with people who can help you accomplish your goals, but it's still it always will take that extra step. I had um actually interviewed someone recently um who's also in the program, and you know, they they and they've had success in the program. And they mentioned that, you know, look, I um one of the things that uh that sort of caught them off guard, but that they're glad that they went through was that you know, they even in getting into it and understanding the mechanics, I had to issue a number of LOIs, and those LOIs, some of them they didn't even get a call back, and then other ones got rejected, and then finally, you know, an LOI got accepted. Then after that, they had a couple that where they went uh um best and final, and you know, a few of those got rejected, and then one or two got through, and then now they're the GPU on multiple, multiple deals. Okay, so so it's it's you're right, it's it's that consistency, that discipline, the application of what you're learning. Um, it's not easy, it's not it just isn't meant to be easy. I think that's another thing that's interesting, right? We all I believe we all inherently know that having true success, financial success in this life is not easy. We know that. But when we get into a group um where it's it's now tangible or it's close to us, it's almost like we kind of forget, you know, it's like we think now it will become easy, but we we know that it was never easy, so it just it just takes that work um to get it done.

SPEAKER_02 11:07

Sure. And you you said something hit on something that helped me early on and being in the group, also charge your batteries because it took me a little less than two years, just under two years, to close my first deal. So it took a while, but we have meet we have networking events every other month, and I, you know, you start a couple of months, you're not getting a deal. You're seeing some guys that start, guys or girls that start at the same time as you did getting deals. But we would go to I'd go to those networking events and recharge, I'd call it recharge my batteries. I'm like, oh yeah, it's you know, get fired up. You're seeing other people have success, and it's a very abundance mindset group too. We're you know, having a a meal or beer or something after the networking, and people, hey, try this. Have you tried doing this? Or, you know, you know, here's something we're doing that's successful that may help you, you know, other people that aren't even coaches that are just part of the group that are you know have had success. Um, and they're sharing their their secrets or you know what they've done. So that that was a blessing too, I think being part of a mentorship group is there's not only the coaches, but the other the ecosystem or the group of people around that that are also very helpful and in and giving.

SPEAKER_01 12:13

Yeah, that's an excellent point. I love that you uh that you phrase it that way too, the recharge your battery, you know, and and I agree. It's like I said, I have a meetup here in um in the DC area, it's in Virginia, and um I always tell people that as well. It's like you have to stay plugged in because the unfortunate reality is most of us are we're it's it's easy to find people who have a scarcity mindset. Um, and unfortunately, that mindset is uh it's almost something it's like um, oh, I don't know how to say this. It's it's uh what's the word? It's it's contagious. It's something that if you aren't if you aren't surrounding yourself with the antidote to it, then it is a very contagious and infectious um mindset to have. And so recharging your battery by staying staying in in into the ecosystem, staying active, uh, you know, attending the conferences, attending the the calls. And this really applies to you know, listeners who are in any um similar type of group or meetup or whatever it is, you you have to stay plugged in because in my opinion, and from what I've observed, the longer that I'm away from it, um then the the I start to feel like this this sort of distance from my goal. But once I get plugged back in, I'm like, okay, you know what? I see Nick is having success. I see other people appro in the program are continuing to apply. I'm gonna keep moving forward. It's it's an extremely, extremely powerful thing, but it's something that is it's easy to overlook, you know, because you you can't exactly reach out and touch something like that. But it is extraordinarily powerful to be around people who have an abundance mindset and who are doing the things that you want to do.

SPEAKER_02 13:40

So it's I don't remember who the quote is, maybe Tony Robbins, but you're the average of the five people or the people you're around the most. So if you're around a lot of naysayers, you're gonna start you know, just it's you can't help it. It's gonna start ingraining in your thought pattern. But if you're around a lot of people that are trying to lift up and having success, you're gonna move that direction. So yeah, that's I think extremely important is getting around other like-minded people that are moving in the same direction and have the same goals, and not saying that your friends might or my friends at home or people that I might be hanging around are bad guys or girls, but it's you know, if they're not wanting, you know, if they're happy with their W-2 and just trying to work and then have enough money to hopefully outlive their money, outlives their their life, and that you know, it's just not not a path I want to go down. So I'd love getting around people that are more um forward-thinking, or you know, I don't I'm not trying to insult, but it's gonna pull me up to where I want to be.

SPEAKER_01 14:37

Yeah, that's that's right. Uh, you know, it's I like that point too, because I so there are a lot of people who is sort of espouse this uh message of you got to cut people off. And I'm like, well, yeah, I'm not saying you gotta cut people off. It's like it just means that um, you know, you have to guard your time a little bit. That this, you know, that just means you have to spend more time doing things that will uh help you and that will add value to your goal, you know, because it's the way I look at it is if you say yes to doing the things that um will not benefit you, you're also saying no to doing the things that will benefit you. So we're all we all have a limited time, and so you need to spend it wisely and and make sure that you're doing things that will uh help you, you know, move forward. So uh great points. Yeah.

SPEAKER_02 15:18

I don't know if you I it I don't can't believe I just read it because it's an older book, but uh atomic habits.

SPEAKER_01 15:24

I heard yeah, I heard the book, yeah.

SPEAKER_02 15:26

And that I mean he talks about every every decision you make is a vote, either I mean, just use nutrition to eat really bad, eat a bad food, eat a ice cream or to to eat something healthy, you're voting for what you want your health to be. Not to say you can never have ice cream or you know to sleep in or to exercise. It's a little tiny vote for what what you're wanting your life to be like. So every decision, if you think about it that way, and when you're making those decisions, yeah, yeah, absolutely, absolutely.

SPEAKER_01 15:52

And so um, so so I want to talk about uh real quick about sort of kind of getting getting caught up, you know. So last last year um you closed a couple deals. Um well maybe just catch us up in terms of kind of what what uh your your your di flow and and uh what what happened sort of following the first quarter last year.

SPEAKER_02 16:08

Yeah, last year we uh I only closed one deal in 22, it's a 168-unit deal in Arlington, Texas. And it was a bit of a challenge, you know, capital raising, lending was a little up and down, and it took us almost four months to close, but we got it done. Um we ended up raising between we had a uh a 1031 investor that we thought was coming in for close to a third of the raise, but they ended up going a different route. So then we had to pivot and uh raise that capital, and then our loan proceeds got cut quite a bit. We ended up doing a our loan was uh just slightly under 50% loan to value on that deal. So it was um you know it's good leverage, safe leverage, but it it was more challenging, more money. We we ended up having to raise quite a bit more money. So it took us a little longer, but we were able to get it across the finish line. Um, and so kept looking, been looking in 23, but nothing really being it was it was slow first half of the year. And then um, we've got uh properties in Abilene, Texas, which is about two hours west of DFW. Right now, we have uh 580 units there. We're selling 124, but we've got a uh just under 300 unit under contract. My first thought was, oh, it's big a raise. We're gonna have to do on it um close to$9 million. And it's like, man, I just don't know about raising that much money right now, you know, because I keep hearing horror stories, but uh it's across the street from two other properties we already own that have just been smooth as can be. They stay. I we we started this system of tracking occupancy and a few other KPIs about 19 months ago. One of them is averaged 95.8 or something. The other's averaged 96, over 96 percent occupancy, physical occupancy. And we've had waiting wait lists a couple of times, which um isn't necessarily a good thing, means our rents aren't high enough. But and we've been um we've achieved about three to eight percent on our renewals on rent increases and and and new new leases coming in. So just knowing we have that across the street, I mean, literally across the street and one one block over. I mean, same blocks are diagonal across you can a street from one another. It's like this is just you know, this is one of those opportunities. If we don't take it, I'm I'm gonna regret it. And then I I did the riding and the returns look good. Being in in a secondary market, we try to push to have our returns a little better than DFW, just because there are some people that say I only invest in in you know, the Texas triangle, DFW, Houston, San Antonio, Austin. So we try to, you know, when we're making offers on deals in Abilene, we I want the returns to be a little better than what what deals that are coming out in the in the major metros. But I will tell you this that if I can pick right, because I've got two properties in Houston, two in DFW, four in Abilene, I would take my Abilene properties, I would trade them out any day for any of my major metros, just because they've just it's been a nice steady. We didn't have the blast off like Houston or Dallas did, but it's just been nice, steady um uh movement upward. And uh it's more conservative. So the judges are more landlord-friendly. We we um even though that it's Texas law, but they're we don't get near the appeals and the extensions. And so all four of our properties out there, our delinquency closes under a thousand dollars, most of them at zero every month. So, you know, it's we people know that if they don't pay, they're gonna get evicted, and it motivates them to pay, and it'll be evicted in a timely manner.

SPEAKER_01 19:34

Yeah, that that is an excellent point. You know, um, so the the first uh the first market that I invested in was outside of uh of Houston. It was uh in Beaumont. So it's a second kind of a secondary market there. Um one of the things that I enjoyed about having this is when I was on the single family side, and I actually want to ask you, I asked you a question about that in a moment there, but um uh one of the things that I enjoyed about it was the consistency, was how it was predictable. Yes, you know, you didn't get those bumps, you know, and and things like that. You didn't have these uh spikes and values and sort of the ebbs and flows of of uh, you know, from that standpoint, but it held. And so, and so I knew really, really well exactly what the returns were going to look like. I knew if I bought a deal in this in this uh pocket, I knew exactly the kind of rents that it would produce. Um, and I already had the systems in place to be able to manage it effectively. So just kind of a point for people who are, you know, if you're considering investing, you know, passively in a secondary market, usually that's what a good operator is going to target. Um, if they invest in secondary markets, is going to they're gonna target that because of the consistency and the predictability. And and for my money, that's uh that's a very, very powerful um, you know, um attribute uh to have.

SPEAKER_02 20:48

Um definitely it's kind of to me the little engine that could. It just keeps going. It's you know, you're not gonna have those giant spikes up. And we do look in all the secondary markets that I looked in. We wanted at least three major, major drivers. Uh, you know, some of them like you get further out west and it becomes a lot more oil and gas dependent. And so that you know, those neighbor those submarkets concern me because it it's it can be, you know, Middle Odessa was showing us like the best place had the highest rent growth in the nation probably three years ago, but you know, the current administration is less favorable to uh oil and gas. So right now that you know it's more challenging to have a property out there, even though it was like rated you know over every every submarket in the nation at for rent growth there for a while. And but it it's very when oil and gas drops, it drops. You know, Abilene, they did a really good job starting in the 80s of diversifying and not being oil and gas dependent. If you look at their 30 largest employers, like the first oil and gas company is like 27. It's towards the bottom of their largest employers. So there's you know, they don't have that, you know, they're not gonna fill it when the price of a barrel of oil drops to significantly. Like a lot of other West Texas areas might.

SPEAKER_01 22:04

Yeah, yeah. And that's and that's a good point because that's one of the risks of um, you know, we're talking about the benefits of secondary and maybe potentially tertiary markets, but one of the risks is uh just that, you know, it's who what's the dominant industry in that area? And I I tend to, if I can, I try to um consider markets where I can sort of cap in any one industry or sector at about say 20, 25% of the employment base or something like that, just to kind of give me a sense of, you know, because I've had the same thing. Like I had a there's a deal I was invested in passively, where it was in a market that depended heavily on oil and gas, same thing. And then um uh, you know, long story short, but it was actually kind of it's a bit of a COVID thing, but it's also um tied to the industry there. And it just um it got wiped out, you know, and so it really in the end was not an uh an incredible deal. But uh that's one of the things that I kind of look out for now. So okay, I want to make sure that I'm in an area that's predictable, you know, um that has some consistency, but I also want to make sure the industries there don't there's not one or two kind of just absolutely dominant industries that also are um uh uh vulnerable to sort of the uh you know the commodity price swings and things like that. So sure, very, very important.

SPEAKER_02 23:14

If it's one company, major employer, and they for some reason decide to move somewhere else or go out of business, it could be or it's a you know, not that being close to a military base is bad, but if it's if that's the only thing that's driving that area and and there's a big deployment, or the government shifts um bases around and that one doesn't make the cut, and all of a sudden you could lose you know half your your employment, you know, even with a base or anything that's a decent paying job, you know, usually two or three jobs come along with it, the service industry or you know, landscapers, things like that that are you know, that one good paying job stimulates two or three other service industry jobs.

SPEAKER_01 23:56

Yeah, yeah, that's right. That's right. Kind of kind of feeds off of it. Um, there's a couple things I wanted to circle back with you on. This is one you mentioned um that you had a 1031 investor in one of your deals and you thought they were going to bring a third uh to the to the subsequent deal. Can you help um, you know, for the listeners maybe understand some of the complexities of having a 1031 investor and then trying to get them to roll into the next uh opportunity?

SPEAKER_02 24:19

So we've gotten a couple of different opinions, and I'll start with the one that I initially had is that in a syndication, if you're bringing in a 1031, you want to make sure it's somebody, one, that they're bringing enough because it there's more paperwork, more legal. And then two, that they will be aligned with your business plan because the 1031 has they can't be, they can't buy a share of the syndication like your LPs do. They have to be on own part of the property, so they have to be on the deed. So they will own a small portion and say you as a syndicator wanted to sell, but the 1031 said, no, I want to hang on to it another year or two. You couldn't sell because they're a little, even if it's a you know, one percent, they they you have to all agree. And so that that's one of the challenges. So you want it to be significant enough to bring them on, and then um speaking with our legal team that we're working with now, um, we were talking about doing a smaller one, a family member of mine that had some. So we're you know, I knew they would be in alignment business-wise with us, but that legal team said that if you're bringing 1031, they have to qualify for the loan standalone by themselves. So say, you know, usually your GP team's combined net worth has to equal the loan amount, and combined post-closing liquidity has to be five or 10% of the loan, depending on what what they're looking at. What this lawyer said is that the 1031 also has to match, meet those requirements on their own. And that's the first time I'd heard that. So I am seeking another, well, it's not the timing's not gonna work out on this one, but I do want to dig further into that in the future. So that that could be an issue if if it's an individual and they're trying to get in on a syndication, it might be a you know,$15 million loan. Not many people, there's some people will, but not everybody's gonna meet that um net worth on their own.

SPEAKER_01 26:17

Yeah, yeah. And I appreciate you for highlighting those issues because it's just some some of the nuances of of uh the business that that you know you might not encounter on a regular basis, but that's very, very um important to be aware of.

SPEAKER_02 26:28

You know, I would say something we learned is if you're talking with somebody that's gonna be 1031 and they they're showing a lot of promise, have them put earnest part of the earnest money non-refundable pretty early. So they it at least gonna make it a little more uncomfortable if they decide to change paths. So you'll get them down for part of the deposit. And if they want to leave, I mean, and have it in writing that that's non-refundable.

SPEAKER_01 26:53

Yeah, yeah, absolutely, absolutely. Um, and so so okay, and I wanted to circle back now. This is on the single family, uh, single family rental point, because I happen to agree with you 100%. Now, I started off um as a single family investor. Uh, but I have like I mentioned, I have a meetup here in in the DMV area. And one thing that I share with uh the people, the attendees is usually, hey, I I understand, I understand why uh we do that, while we kind of start there and then sort of want that transition. Uh it's it's usually because of a combination of uh maybe fear, maybe a little bit of a kind of a lack of of knowledge, um, and also familiarity, you know. And so I feel like, and also, you know, realistically speaking, there's also uh it requires less, or at least we think it requires less capital. Um, I would actually argue against that. I think that all in, um, that's not quite the case, to be honest. Okay, but uh I agree that it is definitely if if it is someone's aspiration to go to the multi go the multifamily route, I always tell them just go straight in. Don't tell yourself you have to take a number of years buying up single family properties and I got to get that system down perfectly. And then once I have that, then I can roll it into multifamily. I'll tell them, listen, if your goal is that seek out that knowledge, um, get around people, you know, get into the right ecosystem, right group, and you need to go in that direction. Because, well, anyway, I don't yeah, I'll tell you what, what what are your thoughts? How were you able to, maybe I'll say how were you able to jump straight into multifamily? Because I think it is very, very doable. How are you able to do that?

SPEAKER_02 28:22

Sure. No, I very valid point. So I didn't go a multifamily route. Now, maybe I would have, I mean single family. I wish I'd have done that in my 20s and 30s instead of goofing off, but I didn't. But I, you know, it was getting in a mentorship and ecosystem program that had other people that I can partner with. I wouldn't have been able to buy a hundred unit by myself. I wouldn't have been able to raise a million and a half dollars. You know, we on that first deal, myself and one other less experienced student partner with a guy that probably had four or five deals at the time. So he was our one, he gave us credibility when we talked to the brokers because we said, well, hey, we're partnering with this guy. And then two, he he brought net worth and liquidity and investors to that first deal. Now we gave him half the GP split, and myself and the other guy split the other half. So we, you know, we didn't make a ton on that first deal. And we actually were looking at refine. It's been a deal that's just been it's chugged along really nicely. It's one of the ones that's across the street from the deal we have under contract. But it's it it got my foot in the door to where now I have my night when we close this next roll be my ninth syndication. And but it's you know it's getting around a group of people that can help you because it you you can't. I mean, unless you have a significant uh net worth and liquidity and people to raise money, doing a hundred unit by yourself is would be extremely challenging. And because there's a small number of people, because you're just a reminder to qualify for the loan, the combined you can be more if you're one GP, your net worth has to equal the loan amount, and your post-closing liquidity has to equal five to ten percent, depending on the lender of the loan. And then you've got to raise the capital, which is usually you know 25 to 30, 35 percent of the price and your recapex and those things. So then you've got to have a net uh a network that can bring that much money. But if you do it with a couple other people, you you can do it, especially your first deal. I I I I like I kind of liken it to a loss leader. I didn't lose money, but you know, when a store may put I don't know, beer on sale, but they put it at the very back of the store, you're gonna walk back there and say, you know, they may lose a dollar on a case of beer, but you're gonna grab some chips and dip and all this other stuff that you walk to the back of the store. On that first deal, I wasn't looking to get a grand sum. I was just want to get my foot in the door, get a deal done, get, and then brokers will again have more credibility within in the in the uh world. It's a small world, and you know, the brokers start knowing they want to come up talk with you because they may want to list your deal at some point and they know that you've closed something because they have they have an improved certainty of close at that point, too. If they because a broker is really the gatekeeper to the seller, they're gonna present you in a positive or a negative light, even if you you may not have the highest offer price, but if they think you have and you're close and you have the best opportunity to close, they they're gonna push you and say, hey, this this guy we think will close. This other one has a little bit higher offer, but he's never done it, or has a track record of having to back out of deals or being difficult. Um, they're probably gonna choose you or the person with a lower price that's easier to work with, has has a rec a track record of success.

SPEAKER_01 31:34

Yeah, all excellent points. I mean, and you're right, it's it's absolutely that certainty of close is like gold to to a broker. They they they they want an easy process, they want a smooth process, they don't want to have you know someone where they had having a ton of back and forth on simple things like you know getting um you know, getting the contract pushed through, you know, someone getting, you know, sounding like they can close, but then all at the end of the day, they really can't, you know, all these things that um you know, for them it's important to guard their time as well. And so having uh that track record or at least partnering with someone, I call it, I call it partnering up, you know. It's um, you know, where you have to have someone who has a track record is important if if it's your your first deal. Absolutely. And so I'd like to actually also ask you on that point. Um, what so were you had you been a limited partner in deals before before that?

SPEAKER_02 32:21

Yes, I LP'd in two deals before that. Um, and that's a great way to start if you have um old IRA money from another job. My first two deals, um passive deals, I use IRA money because you cannot use IRA money in your own deals. So it's kind of worthless as a GP, the IRA money. Um, now we had uh good returns in those, and at the time you're still getting pretty good uh depreciation. I was able to cash out on my um IRA money uh um and then my depreciation eliminated my tax. I had to pay the penalty, but then converted it to cash just so I had more freedom with that money and could invest in my own deals. But I think if you have IRA money, um that's a great way to start out as an LP because you can't use it in your own deals.

SPEAKER_01 33:07

Yeah, absolutely, absolutely. And and so let's see, what what are what are your thoughts then? Kind of what what what is the benefit of being an LP in terms of being able to see the operation, the whole kind of learn while you earn uh aspect of things?

SPEAKER_02 33:20

I I think it's it's it's tremendously valuable because you're seeing how people, especially you can do it in more than one, you can see how those GPs communicated. I learned a lot on how they wrote their newsletters, how they did update, you know, monthly updates, and um and just how how the things work, you know. But back back in the day, we had to do everything on paper. So we would email PDFs and you'd have they'd sign page 1936, and you know, now it's all in a portal. So you just go through a docu-sign and hit next, which which is good, but at the same time, I wonder how many people actually read through this stuff and don't just hit hit the all the signature boxes. But um, you know, it it was great, I mean, tremendous learning experience. Mostly seeing how they deal and how they um when I had a question, maybe some of them are really teaching, have a heart of a teacher and would say, hey, you know, say Hannah understand this on the T12, they give me an explanation, or somebody else might have been short, like you know, one sentence and that's it. I'm like, so that helped me think, oh, all right, when people ask questions, I'm gonna do my best to be a teacher. Um, if they're newer, you know, so you know, I've had we've had some LPs occasionally that are root. If there's somebody that's only one that would send um send statements more than questions. And I finally said, Hey, if you're gonna send insulting statements, I'm not replying. If you have a question and you do it in a professional manner, we'll we'll answer every question. But don't, you know, I don't need snippy snide remarks.

SPEAKER_01 34:50

Yeah, yeah, that's a good that's a good point, right? It's like it's you get to learn kind of okay, the the types of questions that make sense to ask and how to sort of uh get the best results from your your sponsors. I I tell people that as well. It's like, look, you know, I mean, and again, to me, I always use that whole earn while you learn that phrase because that's really what it is. You get you get sort of um it not like inside, inside, you're not necessarily having calls directly with property managers, but um, but you you get sort of an inside adjacent look at the sp at the sponsor is the real is the real uh uh upside. And but you also get to see kind of the operations from a different a different perspective as opposed to trying to jump straight into being a GP. You know, that's one thing I always tell people is like you know, start as an LP, for one thing, it gets you used to making the commitment um to a deal because it's not it's not a small thing to you know to to commit a contribute a certain amount of capital to these deals. I mean, nowadays they used to sit around 50. I know it's nowadays it's kind of gone up. I mean, you know, depending on the deal, 75. And sure. So it's uh I so I think even that it's in itself, it's a bit of a practical sort of side to think it's like, okay, have you invested in a deal? Like you've read through the day that documents, you've asked the necessary questions to a sponsor. And the other piece is I what I tell people is look, I it's it's it's um, I understand wanting to go straight to being a GP, but an experienced sponsor is not as likely to say, let me pull someone up to being a co-gp on a deal if they've never invested in a deal. You know, that and so I is that is that am I off base on that? Like, what are your thoughts on on even that piece?

SPEAKER_02 36:25

I I think that's a great point because then they they've have some experience and they know what the process is. Um, you know, I think it brings a lot of value. If you're if you're comparing who you want to bring onto your team as a co-GPs, and one person has never done anything that new and the other has, then I would definitely pick the um the person who's had some experience and has invested as an LP because that that's gonna they've they've seen the process.

SPEAKER_01 36:52

Yeah, yeah, absolutely, absolutely. So um I want to ask you something else. And you mentioned this um briefly. Um, this is about you mentioned um quickly that you had a new system for tracking KPIs, right? I think this was around renewals, occupancy. Um is that system a new software, or is it just a system is in a process that you guys now have in place for the case?

SPEAKER_02 37:10

Um it's just some something I built. It's as a very XL neophyte, and I mean very um, but uh, you know, it's something where we it's so on our newsletters each month, we put just almost the last it's not almost, but it's the last three months. It has uh net rental income, total income, um, expenses, NOI, and uh occupancy. And then we compare it to the performa um and budget. Um I think it's mostly budget, but then we have a line graph that compares to our budget also for the last 12 months. Like, and it's a line graph that you know, sol I may not have the solid line is the performer, the dotted line is the the actual, so we can kind of see where we're tracking to to to uh performa because it keeping on budget is important, but really and truly keeping on performa, and that's what we presented to our investors when we did the original um uh presentation. So we'd like to track that. And you know, stuff we've got in 18 and 19, taxes and insurance have jumped jumped up a lot. We're hitting our numbers pretty consistently on properties on the income side, but expense side is is killing us on some of them. Not killing us to the point where they're in trouble, but it's definitely lowered our our uh uh distributions. Just you know, we the taxes in Texas have jumped up, but insurance too has gone through the roof in the last two years. You know, we're to a point where nobody was really projecting or predicting three, four years ago, five years ago.

SPEAKER_01 38:40

Yeah. Yeah, you're absolutely correct. You um yeah, those those kind of those non-controllables have have jumped up significantly. Um, and I'll tell you, but but it you you you touched on exactly what I was sort of getting at, right? Is that um as a passive investor, for especially for people who maybe have either not passive uh invested as an LP yet or you haven't seen sort of what a um a really effective sort of summary monthly report looks like, those are the things that it should contain, right? It's something to not only say, hey, here is kind of what the uh the recent historicals look like, but a comparison, a variance report essentially, of how it looks relative to performa. You know, I I I love that. You know, I think that that's something that it answers a lot of questions visually, you know, right off the bat. You know, if I'm an investor, I pull it up and I take a look and I say, okay, how are we doing relative to performer? You know, okay, well it looks, looks, you know, something looks good, or if it's if it's out of whack, then then maybe I might have some questions, maybe not, but at least I get a visual of of what it looks like as opposed to having questions and without much of an answer. Um, and so I think that's a very, very powerful way to reflect exactly the performance of the deal, you know, because there I've been in a limited partner on deals where I have not received that kind of information. And so um and then I've also been a part, I mean uh an investor on deals where I have seen that information. So I think it's very, very vital.

SPEAKER_02 40:00

I think it's important to put in there the good and the bad. You know, we've had a property that's had tremendous struggles by a bad management company, and then COVID hit right after, and it I did not like writing those newsletters, but we had to, you know, here's what's going on, here's what we're doing to try to improve it. That property's doing doing well now, it's seen in the 90s, but it was a big hole and it's gonna sell, and we're gonna make a little profit, our investors are gonna make a little profit on it. So it's gonna turn out well. But you know, there was a period there I was like, oh I hate having to write all this out, but we we've got it, we've got to do it. It's just you know, it's a beating. And even now, when we have a little dip in something, I want to go ahead and let's point it out. Let's not try to hide it. Point out, hey, here's a challenge we had this month, and here's why, and here's what we're doing to fix it.

SPEAKER_01 40:46

Yeah, yeah, yeah. Transparency, uh, I think is one of the most important. So for me, communication and transparency is absolutely essential, you know. Um, and even like on the on the deals that uh that I'm a GP on now, you know, I make sure that I have kind of a similar thing or I have a visual where it's like, okay, here's what's going on and some text with very, very uh broad, you know, highlights about where the deal is. And um, and that's kind of how we move forward. But communication, I think, is just vital because that half the time that's what that's what sort of keeps you up at night if you're if you're you've invested in a deal and you haven't heard anything and um or you have reasons to believe that maybe you're not, maybe you're only getting a rosy picture and you're not getting the full picture, um, you know, that kind of thing really weighs heavily on investors' minds. So I think it's I think it's really important to to to like you say, kind of show the good and the bad.

SPEAKER_02 41:33

Especially, you know, if there's challenges uh in the first year, because we're debating on this new deal we're doing, is after a year, year and a half going to quarterly news uh uh newsletters, go ahead and putting the financials in the portal every month. But you know, once you know, three of our four properties in Adeline are just they're cruising, they're doing fine. So we really don't have a lot of news every month to put into them. But um, we said we'd do monthly, so we're gonna stay with that. But we're gonna we're well, we sort of decided, we're considering saying after about a year and a half, we're we'll likely go to quarterly reports, but the financials will be in the in the portal, you know, around the 15th or shortly after once we we receive them from the month before. So they'll they will there'll be transparency to see them at that time. But um, even our lawyers said they they rarely see monthly outside of the Sunrock group. Um so you know, if we get a lot of pushback, we probably wouldn't do that. But I think but my biggest thing is we still will put our newsletter, not newsletter, uh financials in in the portal within a day or two, few couple of days after they come out to us.

SPEAKER_01 42:42

You know what's what's interesting. So um there's a couple things there. I I I think that uh part of the reason why it's it's not as common to see uh that level of granularity is because it takes time to form a trend, you know. And so if you've got um if you've got kind of monthly reports, then it it may or may not it's hard to detect what the problem could be or if things are going really well or if things are going not so well. Sure. Because it takes time to form a trend. Um, you know, and so I I kind of feel like that's that's probably one of the key reasons uh uh for that, the kind of a little bit less granular. Um, but but yeah, and and also I'll say that what one thing I've I've noticed is that it is interesting that you almost kind of uh indirectly train investors on what to expect, right? So if you if you have a deal, I think that's kind of what you're hitting at, right? It's like we'll just deal with maybe we'll keep it monthly or test it and see where it goes. But on subsequent deals, you might have quarterly just because that expectation has been set, right? So correct.

SPEAKER_02 43:36

Um definitely and listen to your investors, they're the they're your customers. So if we get pushback, we we'll go to monthly. Um that's probably my be uh I'll be fully transparent. My least favorite thing to do is write newsletters. It's that's not my pitch, but but it has to be done every month. And so we we get it done. I and once I do it, I'm like, yeah, that wasn't that bad, but I just for some reason I just dread sitting down to do it. Because that is not my niche. I love numbers. Putting typing paragraphs is not my not not what I find fun to do.

SPEAKER_01 44:09

You know what you got to get good at? There's a uh have you heard of uh Power BI by chance? Power BI? Yeah, Power BI. It's a Microsoft product, but they have so they have these different uh um platforms where they're basically visualization types of software, and you can set up a template, and and if you all you have to do each each uh time you want to update it is dump the numbers in, and if your template is set up, it'll spit out something for you. Okay, um so it's free.

SPEAKER_02 44:33

As well portals post that you just gotta figure out. I've done one, but we've got a I'm talking with them. I'm like, you guys, I need you to be able to upload my my T12 because I don't want to set and type, especially because I'd like to go back a year so it it has a trend, but we need to just start putting in our. It'll generate a newsletter. I just still a little I need to embrace it. I know it's coming, it'll make life easier. You still gotta read it and make sure it's not giving any crazy assumptions.

SPEAKER_01 45:07

Yeah, no, that's great, great point, great point. So uh so Nick, what's what's next for you? Kind of what what direction are you uh are you headed in?

SPEAKER_02 45:14

We're we're still plowing, you know. I think multifamily is still a great uh residential is still a great asset class to be in. You know, there's um always gonna be people who need a place to live, and then we're looking at you know, looking at states or submarkets that have positive job and population growth. There's still pretty good migration out of the northeast and the west coast down to the south. And so those areas you're still getting a lot of pressure on rents to grow, even as the economy has slowed down. You know, we're still you know, having a hard asset like an apartment complex or even a single family if you want to go that route where people need somewhere to live, it's going to most of the time going to appreciate over the long haul. It's just, you know, we we're hitting a little rougher patch here, and we get through this time. Yeah, these properties are gonna start going up in value again. And so it may be a great time to buy. You have your capital as we're we're hitting a slower, softer spot because prices have come down or leveled off some. And so we're gonna keep keep uh underwriting deals, stay with our fundamentals. You know, we we've softened on our um uh uh rent growth in some of the areas and and cap rate, even backing off on cap reversion cap rate, exit cap rate some. Um, so but I still think you know, you know, offices having struggles right now, and some of the different um uh real estate classes, whereas I've residential, especially in areas where the population is growing, I I think is a very good place to park your money. And oh, I something I was getting at is that you know, we're buying it today's dollars, even as we have inflation, we're gonna sell these at an inflated dollar down the road somewhere. So that's gonna increase our value there too. So it's something you know, if your money's sitting in cash in the bank, you're losing whatever current inflation rate is value on it every day.

SPEAKER_01 47:04

Yeah, yeah. Absolutely. That's you know, that's an interesting point too, because uh, you know, I tell people like so, so for people who are uh who invest in stocks, they're usually familiar with the whole term uh dollar cost averaging. And you can effectively do the same as a uh real estate investor, where it's like, you know, because because there are some people who say, Oh, I want to wait until the market gets better, I want to wait until so okay, well, you know, so if you buy a deal now, maybe the returns aren't as good as they were in 2019, 2021. Assuming the deal pencils out, right? Um, but you'll still get returns that are better, at least historical or or compared comparatively uh better than the stock market. So you get into a deal and it exits, maybe it's not a 2x, maybe it's a 117, 1.6x. Okay. You get into another deal a year from now, you know, as as the as the uh uh uh interest rates start to taper or flat flatten or go down, um, and maybe some more you know transactional volume picks up, valuations are up. Okay, so you get into it now. You got a deal that's a 1.8x or whatever it is, and then you keep just doing like that. So you're not, it's not all you no one can time the market, you know. So it's not this thing like I want to invest until deals are giving me a 2x. We we just don't know when that's going to happen. So what you can do is instead look at what what we have now, make sure that the assumptions and everything else and uh everything else makes sense, but get into a deal that's the best deal for what we have uh now, and then getting you know the returns as long as they meet your criteria, but getting the turns that that the returns that make sense and then kind of get into another deal and so forth and so on until you now have a portfolio of deals that um um that that I think you know make make sense for you.

SPEAKER_02 48:35

No, very well put, completely agree.

SPEAKER_01 48:38

Yeah. Um, and so uh so for the uh we I'm gonna I'm gonna get real quick in the actionable tip phase of the show. So for the listeners who uh who want to take action, okay, but they um are hesitant for whatever reason, uh what's something they could do to get started today?

SPEAKER_02 48:54

Well, if you're wanting an LP, is just contact somebody that's looking to GP deals, you know, start talking with them, find somebody that's willing to talk with you too. You know, some people will not spend time, even when you're new, you know, helping educate you on what what um what a syndication looks like. You know, if you're looking to be a GP, you know, start off, read a book, but find some type of mentorship program or find somebody that's in gone through it. Now, they you know, I think you really get value when you find a mentorship program just because they're assigned to you and they have time. You know, if somebody is a GP, they can pour into you a little bit, but you know, if they're trying to do their job, they don't they they're it's difficult for them to give you a full attention. So I think you get more bang for your buck with a mentorship program. The one we were in is great, Brad Summark, but there's others. Um, you know, find the one that fits best for you and that you feel has the best fit. But I think it's taking action, just taking it's kind of like how do you eat a well? It's just one bite at a time. You got to start taking steps forward and taking that action and keep moving because you're probably gonna hit a wall, you're gonna hit bumps, and you're gonna fall down. But it's the people that get up and dust themselves off or find a way to get through or over under the wall that end up ultimately having success in the end. Because it it's probably a rare occasion, but uh for somebody to have success on their first try or first offer, it's the people that that keep trying that that ultimately will have success.

SPEAKER_01 50:20

Yeah, I would agree with that. It's a it's a consistent application that discipline that really gets you there. Um, so so Nick, look, this has been uh just an incredible value-added conversation here for the listeners. Um, how can they hear more about you or reach out to you?

SPEAKER_02 50:33

Sure. We have a website which I've rebranded. We are now flexequitygroup.com. And then you can click on there and find my calendar link, or you can also email me at Nick with no K just N I C at flexequitygroup.com.

SPEAKER_01 50:49

All right, awesome, awesome. I'll include that in the show notes. Nick, once again, man, thanks for being back on the show. Really always a pleasure speaking with you. And um, thank you so much for your time.

SPEAKER_02 50:57

You bet, Brandon. Thanks for having me. Always a pleasure to hang out with you and visit.

SPEAKER_01 51:03

As always, thank you so much for tuning in to the show today, brought to you by Bridge Prosper. If you enjoyed today's episode and you'd like to learn more about commercial real estate investing, please like, subscribe, and share. And we'll see you again next week. I'm Brandon Jenkins, and this is the Capital Stack, where we help you learn, apply, and prosper.