Real Estate Investing Strategies and Analysis

Ed Mathews

So the big question is this how are real estate investors who don't have a ton of free time , don't have access to off-market deals and didn't start life on third base , how do we grow a real estate business conservatively to support our families , finally leave the corporate rat race and build a legacy ? That is the question , and this podcast will give you the answers . I'm Ed Matthews and this is Real Estate Underground . This is the Real Estate Underground Podcast Show number 83 . Greetings and salutations , real estate undergrouners . It's Ed Matthews with the Real Estate Underground Podcast . Thank you so much for joining us today . Today is an interesting conversation because this lady that I'm about to introduce is a professional capital raiser . She operates , and she is also someone who is an expert in underwriting and analyzing both markets , deals , sponsors , you name it , and so Vessie Kapulian . Thank you so much for joining us today . You're with DBA Capital Group and I'm grateful for your time and your expertise . Welcome .

Vessi Kapoulian

Thank you so much , Ed . It's a pleasure to be here, and I look forward to our conversation .

Ed Mathews

Absolutely , absolutely . So where I found you is . I don't really watch a lot of TV and I don't listen to the news because it makes me sad and angry , right . So I listen to podcasts , and one of the podcasts actually several of the podcasts I listened to you were a guest on and you were absolutely brilliant . So I spent a better part of a month begging you to come on and you graciously agreed , and so I'm grateful . But for those of us out there that haven't come across your story yet , you want to tell us kind of who you are , what you do and how you got here .

Vessi Kapoulian

Yes , I'm happy to share . I'm originally from Bulgaria , so my journey started a while back behind the Iron Curtain . One could argue that it was also a good opportunity because at the time when people talked about investments , they really talked about hard assets , so the seed for real estate was planted a while back . They didn't come from a family of me's , but my dream was to study in the US . So I studied hard , worked hard , earned a full scholarship and that's what brought me here .

Vessi Kapoulian

From there on , I kind of followed , you could say , the traditional path of going to school , getting good grades and quickly realized getting a corporate job .

Vessi Kapoulian

And quickly realized , after a few clues along the way , that I was climbing the wrong ladder , if you will , and the await recession being one , my own employer going through a couple of restructures , and that really prompted me to take a step back and think well , there is only so much you can control . But what can I control ? And I decided to start a small set up a small retirement , a nest egg , by acquiring my first property out of state . And so happy I did that because that worked out beautifully , which prompted me to buy a couple more and at that point of time I think the light bulb went on as wow , this is not just a small retirement stake and a way to diversify away from the stock market . It could be something bigger . And the desire to scale is really coupled with ability to leverage . My background and analyzing deals , selecting markets , asset managing the portfolio prompted me to look into multi-family . So I made that transition and looking to continue to grow and scale from here .

Ed Mathews

Excellent , excellent . So I'm curious about your choice of asset class . So you and I obviously share that right in that I'm a multi-manly operator as well , and so what drew you to multi as opposed to another asset class , single family storage , whatever ?

Vessi Kapoulian

A couple of things . One is , as I briefly mentioned , is being able to leverage my experience . So I started in the single family space , actually in the residential , and even though that's a different asset class , there are some similarities and at the end of the day , it's still in the residential space , so I could leverage the skill set and the knowledge . But secondly , as I was looking at different asset classes and their risk adjusted returns , multi-family emerged on the top , being a little bit more risk averse . I took that approach and decided to stay in my lane and that's what inspired me to look into that .

Ed Mathews

I was on a podcast yesterday and the gentleman asked me a similar question . For me it came down to my Maslow's hierarchy of human needs . Right , the base of that is shelter , right , and other things , but shelter is one of them . And the fact that they are human beings require , or prefer , a roof over their head . And if you provide a good product , then you should be able to fill your buildings very quickly and serve those people and have them live there a really long time and pay rent over that time span , right .

Ed Mathews

It makes a lot of sense to me as well . Yes absolutely .

Vessi Kapoulian

It's very tangible , achievable and you have the ability to do good while you're doing well . Absolutely why not Absolutely ? We totally agree with that .

Ed Mathews

Yeah , I was . I was talking with a friend of mine who's trying to figure out you know , what exactly do you do for a living ? And I said I buy crappy apartment buildings From landlords who aren't very good at their jobs and then we make them clean and safe , and then we make them beautiful and Hopefully the folks that live there live there a really long time and we take good care of them , right , I mean , that's it's . It's .

Vessi Kapoulian

It's not an easy business but it is straightforward , right , right . It's a win-win for the resident , the investors and the operator .

Ed Mathews

Absolutely , absolutely . And you get to lay your head down on the pillow at night , knowing that you're doing right by those people , right .

Vessi Kapoulian

Right , yeah , exactly .

Ed Mathews

So so , in terms of you know your business , one of the things I think is true is you have not left corporate America . Is that true ?

Vessi Kapoulian

That is . That is correct . I'm still doing this in parallel . I hope I'm having holding a w2 job .

Ed Mathews

Wow . So do you not like sleeping , or is ?

Vessi Kapoulian

Yes , it's . It's still a still a side hustle for me . Eventually I hope to be able to transition into this full time , but it takes time . Real estate is it's like a marathon . It's not on something that brings quick riches overnight , so I need a little bit of a longer runway . I one regret I have is not starting sooner because , again , these things I take do take time , but I'm in this for the long run and willing to put in the work I . I really enjoy what I do . I don't . To me this is not work . So Evenings , weekend and early mornings , I just have it . Have fun and love , love , business .

Ed Mathews

Well , it's amazing when you find your passion and you can actually make money at it . It it really doesn't . It may be a job , but it doesn't feel like one right . Exactly exactly it's .

Vessi Kapoulian

I wouldn't call me to call me because there is a lot more work involved . But again , Right , exactly yeah so you know it's interesting .

Ed Mathews

I followed a similar path and it took me a better part of seven , almost eight years for you know our business here to turn from a side hustle to to an actual operating business and yeah , I mean it was Whole lot of fun and I too wish so . I bought my first property when I was like 41 and that was about 12 years ago , and I wish I had started at 21 .

Vessi Kapoulian

Right , right , yeah , so that's , that's the one regrets . I would encourage folks Don't wait , don't sit on the sideline .

Ed Mathews

Well , it's the old axiom . You know , the best time to buy real estate was 10 years ago . The next best time is right now right .

Vessi Kapoulian

Oh , I love this saying it could not be especially for real estate or anything in life , but it could not be more true , yeah .

Ed Mathews

So so I'd like to talk about . You know your expertise and what you enjoy doing within your business . So you know , obviously underwriting is a huge part of your business . So I would love to understand your process in terms of let's start at the macro level , let's start at a market and then we can work down to a property . So how do you , when you're , when you're thinking about , okay , the , the market I'm in is kind of played out and it's time to search for another opportunity , you know what are some of the things that you look for in a , in a market or a region that that kind of pique your interest as an investor at an underwriter .

Vessi Kapoulian

Yes , and I'm so glad that you started with the market , because it's very tempting and many times people want to start with the deal . And , yes , there are a lot of things you can do to a property , but you cannot approve it and relocate it . So it is important , right , that's your tailwind during tough times or some will propel you further during good times . So I really resort to the fundamentals , and for me these are the population growth right , you need people moving to the area , which drives demand for housing or potentially new development opportunities . Secondly , job growth ultimately won't paying tenants tenants who can afford to live their jobs , enhanced income , which so median household income .

Vessi Kapoulian

Growth is another factor that I look at Job quality and job diversity . You don't want to be in a single employer or single industry town , because what happens if leave ? Right , the consequences could pretty dire . And quality of jobs also matters , because when you look at , say , high paying or export related jobs like technology or manufacturing Basically things that are income generating Versus maybe lower-end warehouse jobs , I'm sure a certain company may be putting in a lot of warehouses during peak times , but those jobs could quickly disappear during times .

Ed Mathews

Yeah , they're one of the first bit tronches of Employees to get laid off right .

Vessi Kapoulian

They don't exactly . So those are the fundamentals , and then it's drilling into the Submarket and looking at crime rates , poverty rates , again , median household income , rent to own , rent to income ratios , home values and a whole lot of Factors , but the first four that I mentioned is where I start with the funnel , if you will , before digging to the specific Submarket you know , one of the things you just said is interesting and I want to , I want to drill into it a little bit and that is around home values .

Ed Mathews

Right , you're buying apartment buildings , so you know those are not in Above five units , it's a commercial property and and they there's not necessarily a a direct relationship between the Types of property . So I'm curious , why home values ? What does that tell you ?

Vessi Kapoulian

when you , when you see that those figures Absolutely , and there are a few things to consider right . One is the price per per home single family home versus price per door Because ultimately then that leads to a decision Well , if it's cheaper to buy a home , most people will probably do that Versus renting one , and of course there are a few other considerations that go into that , like mortgage payment versus rent payment . So that's one . But secondly , when you look at home values and you see appreciation over time , that's also an indication of the underlying market , of the residential market , potential demand , and so that's a good indicator that kind of tells you are we going up down or new right , and ultimately you make a decision , along with a few other factors that I noted .

Ed Mathews

Indeed , indeed . So you know it's interesting because you know I look

Investment Strategy and Property Criteria

Ed Mathews

at . I've worked in the past , and actually do now , with Charles Dobbins , who's one of my mentors , and you know one of the things I got from him was you know , you want to know everything that's going on in a market and a sub market right , and so one thing that I've incorporated into our underwriting process is you know , we're looking at the city or the county's tenure plan . I'm also subscribing to the local newspapers because I want to know , you know , what the business community is doing and what you know , because that's a pretty quick , efficient way to tap into you know what the next 36 months look like , because if a convention center is coming in or they're , the mall is falling apart . You know , pretty good chance you're going to see that in the paper .

Vessi Kapoulian

Absolutely , and you need to be aware , right , because these are the events that also impact your business plan , right , like one of my markets , for example , is Orlando , and one of the largest county within Orlando is Orange County and earlier this week there was final resolution to it , but almost for a year , right , there was the question of will rent control be implemented ? So you need to follow those news and a lot of times people think , well , it's Florida and yeah , ultimately it did not pass because it's illegal in Florida . But what if it did right ? And it wasn't in Florida specifically , right , it wasn't until late seventies when rent control was prohibited . So that's not something outside of the question . So you really need to follow those trends and events because that ultimately affects your business plan and how you navigate , knowing that information .

Ed Mathews

Absolutely , and there was rent control provisions that were being considered here in .

Ed Mathews

I mean , you're obviously in Florida , I'm in Connecticut . Same thing People are looking at I think COVID is informing a lot of that , at least here in the Northeast and so a lot of legislators are looking for ways to navigate when not should , but when the next pandemic or health crisis or crisis in general happens , what are the tools that they can put in their toolbox to manage . You've got to pay very close attention to that , because here in Connecticut there was not only was there , well , there was an eviction moratorium that actually just wrapped up a few months ago , and a lot of residents took that as oh , I don't have to pay . That's not what the governor said , but yeah , you do need to pay . And so obviously , paying close attention to the local and state laws is really important and , in addition to the legislation that's potentially coming down , in the future ?

Ed Mathews

Right , absolutely so in terms of underwriting , let's take down another level . When you're looking at properties , what are some of the things ? What are the attributes ? What are the financials , the returns ? What are you looking for for you and your investors ?

Vessi Kapoulian

So we focus on stable value adds , class B , c plus properties , no heavy repositioning . We're staying in our lane and looking at more traditional or market rate multi-family . So not considering student housing or condos or assisted living facilities does anything of that sort , ideally something newer 1985 , 1919 or newer property . And I would say those are the main characteristics Just at this stage , looking to avoid higher risk or heavier lift kind of assets .

Ed Mathews

Yeah , and go ahead .

Vessi Kapoulian

I was going to say the second part of the question . As far as returns , what we're looking at is ideally 15% to 20% . Irr 1.5 to 2 times equity multiple over a five-year period,3 to 7-year period . Cash on cash anywhere from 7% to 10% . Those would be a few of the metrics that shape our investment decisions .

Ed Mathews

Okay , excellent , and so when something pops up in your radar , so you're looking in your back , you're looking in your backyard , predominantly right in Florida , just Okay .

Vessi Kapoulian

Yeah , just to clarify , I'm actually based in Los Angeles , so you are . So you are . Yes , yes , so I'm based in LA , thank you . I'm investing in Florida and , of course , I don't do this on my own . Multifamily is a sports , so I have partners who are there in Florida as well , and we collaborate on those opportunities .

Ed Mathews

Yeah , All right . Well , I had it in my mind that you were a Floridian , so thank you for setting me straight .

Vessi Kapoulian

My Norris .

Ed Mathews

Yeah , so you know two very interesting markets , right , and you know being in Southern California versus , you know Central Florida , two dramatically different markets . Do you ever look for properties ? You know closer to the West Coast ? Are you predominantly focused in the Sunbelt ?

Vessi Kapoulian

Focus on the Sunbelt . That's where I started . I've always invested out of state because my investment goal was cash flow . Secondly , landlord friendly versus tenant friendly locations yeah . And then the last factor is liquidity . To get properties to cash flow here in LA , you typically need to put a lot more money down and properties are a lot more expensive . So my dollar goals way further in the Sunbelt . So that's what shaped my decision to look out of state . Yeah .

Ed Mathews

Makes sense . So with the economy kind of changing and when inflation went through the roof and rates also jumped up ,

Market Perspectives and Investment Strategies

Ed Mathews

I'm curious what your perspective is on the market , especially down in the Sunbelt there .

Vessi Kapoulian

Yes . So we're going through very turbulent waters , but I believe long term , in the asset class , which is multifamily , I do think there will be great buying opportunities coming on the horizon . Unfortunately , due to some distress that some owners may experience and due to short term debt that I got into , that is floating rates , and we all know rates rose pretty rapidly , pretty much starting since March of last year , and we're probably due for another rate hike Just one more , possibly at least one more Until the Fed pause after . Maybe a lot of it would depend on other economic indicators . I know they've been really focused on raining in inflation and that is coming down , but not as fast as they would like it to be .

Vessi Kapoulian

So you can't really control what the Fed would do or what the macroeconomic events would be . So in those scenarios , I think it's important to focus on fundamentals , making sure you do your diligence upfront , you underwrite upfront with realistic , conservative assumptions , set adequate reserves aside , because unexpected things always happen during good times or bad times . So for me it ultimately boils down to fundamentals and the things you can control . And again , in the long run , I do believe in this asset class , which is why , despite some of the uncertainties in the market . We're still continuing to look for properties , underwrite properties and , of course , make offers only when the numbers make sense . So not going after any deal , but only the ones that make sense .

Ed Mathews

Right , yeah , we make offers , as I think you know , I'm sure you know that asking price is always a lagging indicator , and so the fact that the interest rates went from the low single digits now into the 789 plus right , depending on the deal people are . There was a Moody's presentation on what the outlook looked like , end of last year I think , and they were saying and I've backed this up with , I've researched this with local banks here in Connecticut and it was about 23% of the adjustable rate mortgages , the bridge loans , that are not going to be refinanced because they got it at 3.5% and now they can , you know , they can refi at 7.5 and there's not enough . There's not enough meat on that bone to cash flow , right .

Vessi Kapoulian

Right , Right , or they have to bring more capital right to bring the LTV to a point where it can cash flow appropriately . So , unfortunately , as some owners will be forced to sell , and beyond that too , rents are also moderating right , they're not rising as rapidly . So I know we saw a few or not a few , many deals that were about a negative leverage over the past couple of years and the rapid rent growth in some markets 20 to 30% maybe offset some of that imbalance in the short run , but that's no longer there .

Ed Mathews

So I agree , rents don't always go up in perpetuity , and neither does value right Right . And so you know it's an interesting point you make , because when you're underwriting a property you know being conservative and looking at historical norms , you know I've seen so many offering member andems where you know everybody's assuming , you know , 7% rent increases year over year for the first in the next five years and you know , the cap rate is either going to stay exactly where it is or it may even drop a few bips , and neither of those things are true , right ?

Ed Mathews

And so if you based a model on 3.5% interest rate buying at a 4-cap and you were hoping that you know rents would overcome that purchase , College getting tight right now , right ?

Vessi Kapoulian

Absolutely , yes , absolutely .

Ed Mathews

And you know the thing is , historically you look at mortgage rates over the last 50-plus years . We are right on the historical mean . Yeah , the fact is that it's not abnormal ?

Vessi Kapoulian

Yeah , it's not abnormal . I think probably that's where we'll settle in the long run , which then you bring up a great point with cap rates . Right , they have reversed and continuing to reverse in any market . So are we going to settle at 6% , 7% percent ? I don't know , and it's very market specific as well . It varies by market and sub market . But those are things to take into consideration because , especially a thing like cap rate , it has a multiplier effect on the valuation . And so I always encourage investors look under the hood and peel the onion , because whatever numbers you put , that's the kind of output you're going to get . Don't fall in love with the returns presented to you . Look under the hood and make sure you're comfortable with the underlying assumptions of the operator .

Ed Mathews

Absolutely , absolutely . So you mentioned earlier that you have partners , and I assume over the course of time , you've also had either coaches or mentors , formally or informally , and so I'm curious about how you gained your experience and how you the mistakes you made and how you overcame them . So I'm going to ask a question about advice . So what is the best advice you ever got , and I'm curious , who gave it to you ?

Vessi Kapoulian

Yes , that's a great question . To me , it's be bold and take action . I got this from my uncle , who passed away , but he said if you squeeze a stone , and turn it into water , and that's be persistent and consistent . Nothing is easy in life . Right Difficult is almost the rising , especially when you're an entrepreneur . There are always challenges and you need to . You have two options you can sit there , cry , lick your wounds , or you can get up , own the mistake or extract the learning from that experience and keep moving forward . So that would be that's one thought that comes to mind as you brought up the question .

Ed Mathews

Yeah , no , that's really good . The fact is that , wanting to grow , somebody once told me that the reason that being an entrepreneur hurts is because growth hurts , right , if you're not in pain in some way or shape or form , you're just you're not thinking big enough , right , and so complacency is the enemy here , right ?

Vessi Kapoulian

Right , absolutely .

Ed Mathews

So , obviously , being a leader within your company , I fundamentally believe that leaders are readers and so , constantly , people are people like you are out there trying to learn more , and it used to be . I read X amount of books a year , and now , with podcasts and YouTube and audio books and regular books and all that , I'm curious . First off , how do you take in information , how do you sharpen that your saw ? And I'm also curious , who are you paying attention to these days ? What do you read and then listen into ?

Vessi Kapoulian

Yes , so I like to consume multiple sources of information . Of course books is one of them , like you mentioned , podcasts , meetups connecting with fellow investors , conferences , of course , reading the news . Lately I will say I've been following actually a few individuals , mostly due to my underlying desire to learn and study the markets even better and be and inform my own decisions , versus solely relying on the messaging by the Fed and our government . So , those few people in the Harry Dent world , a number of books on market cycles , ray Dalio , that they both look far back in history and really looking to understand what are the underlying factors , because history repeats itself and , for better or worse , we don't learn from our mistakes . And again , I'm naturally curious , always looking to learn and grow and that kind of spike , my curiosity in learning more and devouring their content .

Ed Mathews

Yeah , staying curious is important . I mean , I'm at 53 and I tell people I still don't know what I want to do for a living . I mean , this is my passion , I'm loving this , I'm doing this , but there may be a day where I want to do something else . I don't know .

Vessi Kapoulian

We'll see you learn every day .

Ed Mathews

Every day , and that's the learning growth . Absolutely , absolutely . So let me ask you , knowing what you know , if you had to start over , what would you do differently ?

Vessi Kapoulian

I know this may be a very common saying , but I really mean it . I really wish I had started earlier and , specifically for me , the vehicle to personal freedom , financial freedom and living an impactful and meaningful life is real estate . That's not the only vehicle , but that's the vehicle for me , and I wish I had taken action earlier or started earlier and probably figure out a way to get in the right circles , because the circles I was in were really following the more traditional path and so my vision of success was defined by my environment at the time . So I really wish I had explored alternate resources and seeing , being able to see there is a bigger world out there and there are multiple ways you can make your dreams real .

Ed Mathews

Absolutely , absolutely so , vessie . I'm curious when you are not working your day job and you are not investing in real estate , what do you do for fun ? What do you like to do outside of work ?

Vessi Kapoulian

I like to spend time with my family , including my fur baby , and I also like running . At one point of time I ran marathons and half marathons . Now I just jog and run for fun several miles a week , but those are some of my hobbies .

Ed Mathews

Excellent , so tell me about your fur babies . Are you a cat person , dog person ?

Vessi Kapoulian

Yes , it's a small Yorkie and his name is Ricardo . Yes , ok .

Ed Mathews

Dogs are the best . I was talking to my wife which we have two golden retrievers and I'm fairly convinced that they are way better than most humans . They're just unconditionally loving and fun and relaxing and they're incredibly smart .

Vessi Kapoulian

Yes , yeah , absolutely .

Ed Mathews

So , vessie , I've really enjoyed our conversation today . If people want to reach out and contact you or get to know you , what's the best way to do that ?

Vessi Kapoulian

The easiest way to connect with me is through my site , wwwdbacapitalgroupcom . D is in dream , b is in believe , a is in achieve . My phone number is there , email , direct link to my calendar , as well as a ton of free educational content , including my first digital book , the Busy Professionals Quick Guide to Investing in Multifamily , designed to educate and empower investors .

Ed Mathews

Excellent , excellent . Well , congratulations on the book . I know how hard it is to write one so and and do basically two jobs at the same time and have a life on top of it . So I , you , must sleep about 45 minutes a night . I , with respect when you're having .

Ed Mathews

Yeah right , it's exactly Exactly so . Vessie Kapoleon of DBA Capital Group . Thank you so much for your time today . It was really a pleasure to hear your story and it's nice to finally connect in in real life so I don't have to just listen to you speaking to other podcasters . Now I get to call you friend so well . Thank you very much .

Vessi Kapoulian

I really enjoyed our conversation . I didn't thank you so much for having me as a guest .

Ed Mathews

Absolutely All right Thanks .

Vessi Kapoulian

Thank you .

Ed Mathews

This been the Real Estate Underground Podcast a Clark Street Capital presentation . Thanks for joining us . If you're enjoying the show , please remember to subscribe and share it with your friends . If you'd like to learn more about Clark Street Capital and our upcoming projects , please join our investor club at clarkstcom slash join Until next time . Happy investing .