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*****Thank you so much for listening to the Making Money in Multifamily Real Estate Show! This show covers everything to do with Multifamily Real Estate Investing to help you, the listener, become an expert in your real estate ventures. The host, Dave Morgia, brings on guests who are already experts in their respective fields to discuss what principles and practices they follow that have helped them achieve their success so far.
Chris' Background:
In this episode we cover:
Connect with Chris:
Connect with Dave:
Other ways to listen/watch:
Follow or Subscribe:
If you enjoyed this episode or like the show, please subscribe and leave a review! It is a huge help for just a little effort
*****Thank you so much for listening to the Making Money in Multifamily Real Estate Show! This show covers everything to do with Multifamily Real Estate Investing to help you, the listener, become an expert in your real estate ventures. The host, Dave Morgia, brings on guests who are already experts in their respective fields to discuss what principles and practices they follow that have helped them achieve their success so far.
Welcome to the Making Money in Multifamily Show, where we discuss everything to do with multifamily real estate investing. We believe it's the best way to gain financial freedom and build lasting wealth. This is where you'll find it the best information and practices to help you succeed in your real estate business, whether you're already experienced or just starting out. Here's your host, Dave Morgia.
Dave Morgia:Hello listener, and welcome to the show. I'm your host, Dave Morgia. And with me today is Chris grant, just for the listener, Chris is the founder and CEO of Evolve equity. He has personally over a decade's worth of experience in real estate, with his background before that, as a production manager in the aerospace field where he has another decade of experience. Him and his wife, Chelsea, who actually has the investor relations for the team. They live in Arizona and focus investing primarily in Arizona with their last deal in Phoenix. And Chris mentioned his superpower, I like to ask that for the guests before the show, just so we can have a little bit of a niche to get into his deal analysis interview for their deals, their LP deals, and the broker deals that he gets sent. So yeah, Chris, really appreciate you coming on the show. I know, we've talked a lot in the past kind of a lot of good stuff going on for you guys in Arizona. So really appreciate you joining me today.
Chris Grant:Dave, I really appreciate you having me on the show. It's always great to chat with the fellow investors and kind of go through the details of deals and you know, the market in general.
Dave Morgia:Yeah, so I guess we can maybe just lean into the deal analysis and see where it gets us. Maybe we'll, you know, drop a specific deal that you guys just exited out of as we go along. But But yeah, deal analysis, deal flow all these things. It's a market where it's probably, you know, looking at two 300 deals, maybe even depending on the market at this point. So how do you guys manage that? You know, what pipelines? Do you have maybe just kind of give us a brief overview to start?
Chris Grant:Yeah, so we have various pipelines that we're looking at to get deal review. So you had previously mentioned, you know, we purchase deals for ourselves, we syndicate deals, but we also passively invest in other deals we see. So what that does is we get a lot of deal flow from not just the markets we're looking in, but markets across the country. So those are a couple of different avenues that we have. So within those, you know, networking with other people who are syndicating deals is a good way to, you know, partner with them, but also passively invest. And then finding our own deals, we have some campaigns that we do direct to seller, where we'll reach out to owners directly that fit our criteria, and try to build a relationship there to source deals. And then obviously, going through brokers, the more traditional route is another another way that we kind of get the overwhelm.
Dave Morgia:So we could probably start a bunch of different ways. To me, there's a lot of different channels, and with different channels comes kind of different data to pick up our deals, you mentioned, you know, broker led deals, or maybe even a sponsored video where you're actively investing, that, to me is more of looking at a pitch deck, whether it's the broker pitch deck, or the sponsors deck, kind of a little cleaner, a little bit nicer to look at things a lot more organized, then you got like the complete opposite ends of the off market stuff where you're looking at very raw data a lot of times talking to very local sellers and trying to pick apart what's really going on. So how do you kind of transition between the two? How do you make sure your time efficient? And maybe we'll just start with the, you know, the pitch tech side of things, whether it be the brokers, or the the LP where you're investing passively, you know, how do you how do you kind of start with those types of deals where you're picking apart? Maybe a memorandum?
Chris Grant:Yeah, and that's a really good point, you know, because there are different levels of detail, especially on deal analysis, right? You if you're getting deal flow, you're not going to get into this deep dive on underwriting, especially in today's market, right where, you know, most deals are grossly overpriced, then, you know, you're passing on a lot of them on the surface. So really, whether it's us underwriting our own deals internally or US evaluating LP opportunities or other GP opportunities, everything comes down to validation of facts, right? So underwriting is really just validating facts, whether it's cap rates, whether it's rental growth, where it's target rents, expenses. So really we start at a very high level and we pull from various data sources on how do we validate facts that are being used in a broker om facts that are being used in another syndicators OM or maybe even our own deal structure. It's all very similar. So yeah, we start with, you know, various sources such as costar, you know, if we, if we feel like it's a deal that's, you know, potentially worth pursuing. You know, we'll look at data and costar to kind of look at historical trends for rent, cap rates, other other metrics like that, that maybe aren't just readily available online and easy to digest. And why that's important is because if we're looking nationally, right, every market is just so different, right? So here in the Phoenix market, if you buy something at like a four cap, right, you're probably doing pretty good, right? But if you buy that in the Midwest, it's probably a horrible deal. So if you're Looking at? And you know, that's going to depend too if it's a value add, there's a lot a lot that goes into that. But just in general, every market is different. Right? So understanding what's going on the market now. And then historically, and applying that to your deal evaluation is so important, right? You know, for example, exiting an exit cap rate is the very first thing I'll look at outside of just looking at the general area for crime and income, you know, the basic metrics to see if it's even an area that I want to be in, like a D class or zone type of area. And if it gets to that point, you know, if I'm evaluating someone else's deal, I started just looking at assumptions, very high level assumptions. And I'll say, okay, so what are we planning on exiting for a cap rate, right, because we all know that deals or value or the valuations of a property are based on NOI and cap rate, right? So it's a very simple equation. But you know, in that equation, noi has a lot packed into it, right? We have income, we have expenses, we have, you know, rental growth, we have all these other variables, it's gonna take some time to verify those. But cap rate is one variable that we can get into and you know, value validate right off the bat, right out of the gate, right? You know, so that's the first thing I start with, I start with the path of least resistance, right? So if I pull up like a costar report for a particular property, whether it's my own brokers or someone else's, what I'm looking for is what's been going on in the market historically, for cap rate, and where does costar aggregate that data to say that market is for that type of asset right now, right. So just give a simple example, if I'm looking at a pitch deck from someone else are evaluating my own deals, and you know, a stabilized asset, that market is trading for like a four and a half cap, right? We know that when we exit, we want to be more conservative for, you know, for our investors and for our own underwriting. So we're going to exit at a higher cap rate, right? So if we go in there, and like, again, let's say the cap rate, and that sub market is four and a half percent right now, right? So we'd expect to for doing a five year hold. At a minimum, we'd exit at like a five cap, maybe a five and a half with where we're at with interest rates and some of the variables going on in the market right now. That's just a you know, adjust adjusting for risk. But you know, if you pull up a pitch deck, and what's going on to the sub market is, you know, four and a half, and they're exiting at like a four, you know, then you start saying, Okay, well, something's a little off here. And then you just ask, right, because you just want to understand where these numbers come from. Because we're just fact finding right now we're just verifying validating facts. And when you hear things like, Okay, well, so and so's boots on the ground, or, you know, we just kind of know the market, that kind of stuff. Not good enough, right? Because we're validating facts based
Dave Morgia:on data. Give me some basis. Yeah.
Chris Grant:So it's all just like this turn of evaluation, right? And of course, when you see like a red flag, or a green, you know, something that's really good, right? Let's say they're really conservative on the exam, well, that gives me a little bit of confidence going to the next level that okay, they check this box, and you know, I feel pretty good about where we're starting, you know, if I see an immediate red flag, right out of the gate, it's, you know, I'm going to be pretty critical from that point forward. Just because, you know, cap rate has such a dramatic effect on the returns the deal. So, you know, and especially when you depending on the response that you get, right, if it's not a very data driven response, it's going to make you kind of wonder what else is kind of, you know, what they're winging on the rest of the underwriting? Where are you going, this is all goes for my own underwriting, too, right? Like, I want to validate facts and my own underwriting to make sure that I'm using data to guide. So yeah, that's how we evaluated validate cap rates to start out, of course, the next step would be if that's, you know, green checkmark, I'll dive into the NOI. And I don't know how much we want to get into detail on that. But there's a lot of metrics that you can really look at there. But I guess at a high level, it really just comes down to fact finding right and validating assumptions. Because really, when you're projecting out into the future on a p&l, or you're underwriting, you know, you're having assumptions and you want to those assumptions do be backed by data, right, not just emotion or opinions.
Dave Morgia:Yeah, it's, you couldn't have said it better. It's validating assumptions. And when you're looking at someone else's data, their underwriting, whatever you're looking at, at the time, it has to be, you know, you have to have the mindset that the risk is mitigated. Nearly every channel that you're looking at, whether you're talking about the cap rate, the exit cap, where you're talking about the rents, all that has to be mitigated, because like you said, it's a projection. So you have to really be careful to not be putting the best case scenario because because if you do that, then your sensitivity is just way off the charts. And you have to basically execute a perfect business plan to even make money for anybody that's getting a deal and that's just, you'd never want to over promise and under deliver. That's just about the worst thing you could do an analyst someone else's money so so yeah, great, great things to keep in mind. And Chris, you mentioned you know, exit caps, and we had spoken before rules of thumb and the risks involved in that. So I'd love to touch on that a little bit. You mentioned you know, this little example here, a reversion and cap rate on an A exit, which, you know, is definitely risky. But a common thing thrown around just as a kind of slap it against the wall is maybe like a 10 bits or 15 bits every year increase. So basically you take it, you know, 15 percentage points, and then you exit you know, if it was a five year hold, you would exit 50 percentage points over your original cap rate. I just can't emphasize enough that to me, and I know you agree with me, that's just a crazy assumption to make. And maybe that's where you start some underwriting but it can't be where are you at in it? So do you want to just touch on that for a minute?
Chris Grant:Yeah. And I think you already kind of pinpointed down, right. Like, if you think about it, everything in life is about risk mitigation, whether we're talking about underwriting and just life in general. Right. So yeah, I think as far as the cap rate goes, there's a lot of rules of thumb being tossed around out there. Right now. We live in a big country, though, right? You know, every every, every markets. So different. I had mentioned like, the difference between like a cap rate and Phoenix versus the cap rate in the Midwest, right? So a good example of that would be, let's say, I'm looking at something in a low growth, maybe even a negative growth market in the Midwest, right? You know, you would adjust, you know, your assumption would be your risk adjusted returns, you would expect higher cash flow unless maybe equity, upside on the exit, you know, because that's adjusting for your risk, right? So maybe, you know, you hear someone say, okay, a cap rate, we're going to exit at a seven cap, right? And it makes you feel really good, because you're like, oh, my gosh, a seven cap, that's fantastic. I'm used to these low cap rates, and Phoenix or other hot markets. But until you really validate that data, maybe a seven cap isn't enough, maybe that markets at a seven cap right now. So that's just an example of like, you know, looking at stuff and too much of a macro view or too much in general, is not good. Right. And that applies to you. You'd mentioned some rules of thumb. So I'm just taking on a couple more rules, okay. I think the underwriting some people really like to look at, okay, I'm just gonna use like, 3% annually, just like a flat, you know, that's what we're gonna use, because that's what everyone else uses, right? Different. I'm not saying one is bad or one's good, right. But you just need to understand what's going on in that market. Right? You know, Phoenix, for example, over 20% rental growth in the last year, just insane, right? A lot of that's caused by the pandemic, it's a strong markets, a fantastic market, and I love it. But it wouldn't make sense for me to use an anomaly like that, as my projections, right? Because we're gonna get back to some state of normal, right? So I look at everything pre pandemic, right, I want to kind of see what were the averages before we had this anomaly. And so yeah, you know, the word purchasing a property and, you know, five to 7%, on average pre pandemic was, it was hitting that no problem, I'm still using 3%, because I want to under promise and over deliver. But on the other side is like, you can look at a different market to where, unless you have the data, or you're evaluating the numbers, you know, some markets are flat, right? Like you can get into some markets where there's like, 0%, rental growth, even sometimes there's negative, right? And that doesn't mean it's a bad deal. That just means you need to adjust for those risks within your underwriting by not assuming some rental growth, or maybe reducing your rental growth. And it wouldn't be crazy, you know, if it's a deal, you really like maybe it's a high cashflow deal to maybe assume some negative rental growth, you know, depending on where the markets been, and the type of market it is in. So when you have a general rule of thumb, like just adding 3%, for rental growth, or, you know, those types of things that aren't validated by anything, but they're just validated by what other people are doing, it's not a good thing to do. And that goes with like expenses, too. I mean, you have discussed this quite a bit. You know, there's some rules of thumb out there that you hear, whereas everyone says, like, Oh, he's a 50% expense ratio, that should be good, right? That's really not that good, right? Because every market again, is so different, right? We can have the exact same market or the property here in Arizona, and we could have the exact same property and say, a market like Texas, right? Oh, fantastic. Markets are great, right? But using a 50% expense ratio may not make sense. Because you know, property taxes in Arizona, and insurance is about three times less, right? And that's just a fixed cost, right? So you're gonna kill a lot of deals, by just using too many rules of thumb that are nationwide, right? You can develop your own rules of thumb with, you know, micro market, right, like, if you're looking at Phoenix, or maybe a sub market, and you develop, you know, some rules of thumb based on that specific market in that specific area. I think that's good. But you just got to be cautious, you know, on a macro view versus a micro view.
Dave Morgia:Yeah, I just wanted to get your take on it, because I knew we had talked for such a long time. And it was just a great conversation. So I want to basically hear it again. And like you said, it's it's just got got to be validated. And yeah, maybe you can use a rule of thumb to maybe do like the very initial pass, like pass fail on something just to kind of do a sanity check. But that's like, if you're talking about sculpting a mold, that's like the first edge that you took, and then you're not even close to creating David, if we're equating this to like a similarly right now. So validating data to me is, you know, the biggest hurdle you want to have the freshest, most relevant data, you have to be essentially very local and in tune to what's going on in your market. You mentioned you know, we're looking at a big nation. There's a lot of Things that can vary when you're looking at different markets comparing apples to apples is really apples to oranges. You mentioned costar a couple of times. I know you guys are also local in the Arizona market. So how do you use costar? To what extent do you use it? And then how do you supplement that with your boots on the ground to be able to validate all of these numbers that you're seeing? Because, you know, costar is a great tool. But you also do have to be careful with any tool, whether it's costar or reonomy, or any of them to solely rely on it. It just was one level deeper Trust, but verify one next to another level. So so how do you take it from there?
Chris Grant:Yeah, I love that. I'm so glad you brought that up, too. Because we really like you mentioned with the sculpture, right? When you're evaluating deals, you start at this very high level, and then you're constantly honing the deal in right, like, even up to the day you close, right? Double check it double checking rental comps, what stuff renting for the area, what has changed, and you're really validating a lot of stuff as you're progressing through the deal. And even Honestly, even post close, right? It's just this never ending ending cycle or should be this never ending cycle of just sharpening the pencil, you know, you had an S, you know, at some quotes or some targets for your renovations, you know, and, you know, inevitably some stuff goes over, but then you have opportunity to pivot and have some stuff come under. So it's this constant turn, right. And as far as the data goes, right, like you should never just trust one source like this is this is the end all say, All right, so you know, costar is good for some things, but it's actually really bad for other things, right? Like I, I usually don't use any like rental target numbers out of costar, I'll look at historical growth, because that has like a backwards looking component to it with a data that's already been aggregated. But I don't use like really future forecasts too much. Because no one has a crystal ball. There's some major note things I do like to look at is where have cap rates been, whereas rental growth, Ben to kind of get a better prediction of maybe where the future could be or at least have a data driven look at where could be, you know, rental comps, I don't really use costar to say, hey, the rents could be this, I find that their data is very outdated. That's a lot of just, you know, getting into your market, right looking at what's for rent now calling them see how many units are available, how quickly stuffs renting secret shopping, rental comps, that's real time data, right? And there's other data sources too, that you're going to check. And maybe they're looking at 2020 census data or 2019, older census data. That's stuff that's information that you're going to have to go validate and other areas, right, like housing prices, you know, a lot of people will look at what's the median housing value in the sub market, compared to the price per door that you're purchasing, just to kind of compare and contrast, right? We'll be looking at census data from three years ago, it's wildly outdated versus what's going on now. So you're probably gonna want to find some more real time data for that right now. So it again, it's just validating the accuracy and the how current your data is. And if it's not, current enough, validating that from a different source. Yeah, it's really hard to just find one data source that's good for everything. I think it'll probably
Dave Morgia:too expensive for most people Anyways, if it was that accurate?
Chris Grant:Yeah, exactly. Yeah. And other costar data, I think a lot of people are a little scared of the, you know, the costar data, or they feel intimidated because it is very expensive, like, the software is very expensive. I actually don't have costar myself. So what you'll find is you're engaging all these brokers, right. And if you're building good relationships, you can request these reports from them. Right. And, of course, you don't want to abuse that you don't want to be requesting costar reports on, you know, properties that, you know, you're not going to buy, but you know, if they get through your first few gates of, you know, validation, you know, then you move on to the next step and say, hey, you know, I'd really like to sharpen my pencil, which is the truth. Can you send me a costar underwriting report, they should be more more than willing to do that they almost all have access to it in just a couple of minutes.
Dave Morgia:So no, that's excellent. And you mentioned, you know, you have to essentially, one notch down, verify everything that you're looking at. I think any of these sources, like you say, can be very good to add kind of, you know, a piece of that puzzle to get an idea of the story and figure out where you're going from there. But the sweat equity or this is involved, you know, like you said, just kind of doing the mystery shopping to see what rents are like, once you narrow down to three or four true comps and your deal for that market. Because there's probably you know, realistically only that many if you're actually really niching down in the sub market to really know, who's comparing what property what tenants are comparing the properties and everything, there's probably only a handful, it's actually that's that's the legwork, and then you only have a few phone calls to make, hopefully to get that kind of number. Those numbers panned out. So it does make a lot of sense to make that extra call and to get that that real time data like you're talking about because no matter how quick these these subscriptions are usually a couple of months out and and that could kill a deal for you very quickly. So especially in today's market, let you say 20% Arizona, you know, it's in the same in a lot of other states. So, yeah, very, very important. I think on the flip side, there is some data that's a little bit more historical, like on the expense side where stuff kinda is a little more rigid? Do you kind of use anything like it for either its costar or just through your Pm or any kind of data more historically to kind of work with numbers that fluctuate a little bit less, if you even would call it that?
Chris Grant:Yeah, that's actually a really great question. Because I think expenses is such a large component of what's going on. And again, it could vary from every market. So let's say I'm looking at a deal that someone presents to me out of my normal markets, right, that I'm not looking in, not not in Arizona, but maybe somewhere in the Midwest, and I'm not picking on the Midwest, which is an example right? You know, you know, so the first thing I'll do is off the coast, I'll report pulled and they have in their, you know, by asset class, so whether it's a CBA, they call it, they have a star rating, so it's one through five, but you know, they'll break it down by asset type, as you know, quality and sub market know, kind of give you an idea of like, okay, what are the expenses per square foot in that sub market, right, so now you've narrowed down to a sub market, you've narrowed down to an asset class, and then you're getting some general aggregated data. But again, that is not always 100% accurate, like nothing, none of what we're talking about should be like the gospel. Right, you should always use it, but validated. So I'll start there. And, you know, just get a quick gut check. Right, I'll look at okay, costar says, expenses per square foot should be around here. Their underwriting shows a different number, maybe they match. And so that gives me that level of confidence on the expenses. And then, you know, continue to validate that through like a t 12. The historical numbers, which I think you had kind of touched on a little bit. But there's so many different resources within a sub market that you can really validate us maybe at a high level you look at costar for and expenses per square foot, is that good enough to kind of get to the finish line? No, it's not right. But it could be a good starting point to kind of give you a good gut check. You know, next thing is you have property managers on your team, right, you should leverage them. They're, they're managing properties of the sale. So hopefully of the same size that you're purchasing, if you're picking the right property manager, they have all this data at their fingertips, most of them can tell you right off the bat, you know, a rough way on what your expenses per unit is, or expenses per square foot, I've yet to actually find one that tells me like, you should use this percentage, which is a general number, that
Dave Morgia:it's funny, it's funny, they don't use that.
Chris Grant:Either. They're the people who are actually in there, you know, managing these properties, putting together the financials. So great resource, you should totally be reaching out to them. And then also leveraging that against what are you seeing on the T 12? What is the property then doing? And you know, it really just depends on the the quality of the numbers of the financials that you're getting. But that's another check. So you can really combine those three and get a really strong feeling what's going on at a particular property?
Dave Morgia:Yeah, like you say, validating the PM, and I'll just even make a little more blanket, just bringing in the expert, when you're going to be working with these partners literally Anyways, on these deals. That's always the move, it's going to relegate the most risk. Chris, you're in Arizona, I'm sure you're still learning new things about the market every day, every single deal when you bring it up, and they say actually, we see this Chris, and you're probably like, Oh, good, good thing, you brought that up, because I didn't think of it. Because I'm seeing similar things, you know, you think you have some the nail you're definitely wrong, because there's always something new to learn, and they definitely are the closest to the properties in the area that you could ever be. So whether it's that the GC anybody on the team that's going to be really doing the work. Just bring them in and you know, help them help you underwrite the deal, because they're looking for business just like you are. So it's really symbiotic in that way, which is really helpful.
Chris Grant:Lachlan, yeah, they help they help validate facts. And really they're the experts, the GCS are the experts at the construction, right? Like, are you going to, you know, as every GC again, it gives you the most accurate quote, no, but you're gonna ask multiple experts in that area. Right? So always validating?
Dave Morgia:Absolutely, yeah. And then we kind of covered more of the, like, broader OMS. And that type of stuff. Maybe we'll just spend a few more minutes on flipping and we talked about, like raw data and how you would maybe source off mark, and we won't get into sourcing but but you know, once you get a deal, what it looks like, and kind of shaping things from that side of things where it's a little bit more unrefined. And, you know, you got to kind of do some more digging, has there been anything that you found kind of helps get that process started with sellers? Because you know, you're talking to people who have owned these properties for for quite some time. Now, potentially? Maybe the books aren't the cleanest? Maybe, you know, not everything's up to speed. So you kind of whether it's like the top 10 Things you need from a checklist to get from them? Or, or what are the kinds of big to do that really help you shorten the gap to learn the most about the property in the quickest amount of time?
Chris Grant:Yeah, that's a really good question. And it's gonna depend like most things, right? Of course, it's gonna depend on the level of the detail of the financials of the the seller, right. And a lot of times when you're reaching out to sellers directly, you know, maybe you give them a phone call and say, hey, you know, your asset fits what we're looking for, we're looking to expand, right, so, most of the time, they're not just like, okay, yeah, give me your email. I'm gonna send you all the financials you need, right? The most common responses are like, no, don't ever again, or you know, we're not quite ready yet or, you know, what's your price, right? And none of them are very helpful. Um, so you got to kind of work backwards. And in the most ideal situation, you know, with that seller, you would get, you know, the rent roll and the T 12 are the best places to start, right? Because then you can start looking at what's been going on historically, where the current rents at, and then you can leverage your property manager or your own research to kind of really figure out okay, this is where the property is at, is it underperforming? Where can we take it to, and you can really put together a good, you know, basis of an offer, or at least the start of an LOI? You know, to them before you collect even more information, right. You know, if you don't have though, that data, right, you can work backwards, even further, let's say, you know, reach out to a seller, and they say, Okay, well, yeah, I don't know, you, and I'm not gonna send you financials from my property, I'm not gonna send you a rent roll, I'm not gonna send you a t 12, I need you to just let me know where you're at. Because if you're not even close, I'm not gonna have this discussion. And it's pretty, you know, you got to take it from there, take it from their point of view, right? It's, that's a reasonable response. So then, you know, you kind of work backwards and say, Okay, I can't get everything right now, but I can kind of work towards Is this a deal? So you know, of course, asking, Hey, what's your price? Or do you have a price in mind, that's a good place to start. Because you'll know pretty quickly if it's realistic or not, or if it's within striking distance. And then, you know, if they're not wanting to do financials, you can just say, hey, you know, I just want to validate what are the unit mixes? And can you just tell me about what the average rents are in place for each unit mix, right. And then from that, you can use a lot of the sources that we've already talked about, to kind of build out what your potential expenses should be for that property, you know, working with your Pm and saying, hey, you know, we're looking at this 50 unit property, it's in this sub market, this is the age, you know, here's some pictures of the property, if you can get some Google Street views, if you want to do a quick analysis, or go drive by, and you can tell a lot by looking at a property on the condition that's likely and right. And then you can really work backwards from there. And then get back to the seller and say, hey, you know, I really don't have a lot of information right now. But based on what you're telling me, I think I could be in this range, based on the data you validated with your property manager going on site, or even just other online resources, and you can really get pretty close. And honestly, like, what you're looking at here, brokers PM, you're really doing a lot of this stuff anyways, you're trusting everything that's in there from a broker, you're doing something wrong, you need to validate all of that, too, right? I know, they're professionals in the field. But we also got to remember, they're also salespeople, they have something to gain from the sale of the property, you'll see a lot of times, expenses will be understated cap rates will be wildly overstated. So you know, all of this really applies to whether you're talking to a broker, a direct to seller, another syndicator, for LP, opportunity, or partnership opportunity, you should really be validating all of these things. Anyways,
Dave Morgia:I think the interesting piece of takeaway from the off market that Chris is kind of the working with the seller, it sounds like for you guys, the success has been doing as much of the legwork upfront, not getting as little of the information from the seller, but you know, not pestering a seller who you are kind of forming a relationship with to give up kind of all their information, which, you know, it's sensitive data, and they probably own the property for a long time not really wanting to give that up yet. But once you kind of do your legwork, give them at least you know, some ballpark of an offer, they can kind of see you're a serious player looking to actually do a deal and not just kind of kicking a tire. So I think that probably helped to kind of move the way it's long, and then it creates that worker ownership. I think that's the biggest takeaway from that whole process to me.
Chris Grant:Yeah, exactly. And I think you, you do want to present yourself and, you know, credible and sophisticated, really, right? You want to really get back to them, you can say, hey, you know, I really appreciate it. You think from their standpoint, we already talked about this, but, you know, you're asking for all their financials for the property, right, some guys who just called them they don't know. So I mean, you gotta you know, you want to let them know that you say, hey, you know, I understand, it's kind of a strange request. But to give you the most accurate offer, I need all this information. But understand, if you're not willing to, you know, kind of get down, get to their level, right, like, level with them, and then work backwards. And that's going to build a lot of trust. And then they can get you the financials and you guys are ready or for you in the realm of possibility. And a lot of times you might find that, you know, maybe they're really unrealistic with their number two, you know what I mean? And you still end off on a good relationship, and then you follow up with them. And a few months, you say, hey, you know, I really appreciate it. It's not something that works for me right now. We'll reconnect and see if anything changed in like three to six months.
Dave Morgia:No, excellently put, and, you know, Chris, just to kind of sum up the whole show, before we get into five key questions. It's validate, validate, validate all this stuff is, you know, whether it's raw or polished data, it's, it's got to be trusted, but it's gotta be verified. So you got to make sure that you're doing your due diligence, because if you're gonna make some assumptions, they better be conservative. And if on the flip side, if you just trust old data, and it's too conservative, you're never gonna get anything done. So you got to really just nail the market and know what you're looking at, you know, present day so that's a key takeaway. Yeah, unless you have anything else I'd love, love To get into these five key questions,
Chris Grant:I would just tag on what you said like the phrase trust or verification is one of my most one of my favorite ones, right? Like, it's like, that's really what you're doing to trust into verification. And then you build relationships. And like I said, you know, you get the green checkmark for a lot of a lot of these assumptions to be made. And then you really naturally build this relationship. And you don't have to be so intense about it. Right? But in the beginning, you want to understand this, you're taking people's money, and you're putting into the deals right? You want to be responsible.
Dave Morgia:Absolutely, yeah, I couldn't agree more, Chris. And yeah, let's just hit these five key questions. Well, I got your first one here, if you could only pick one trait that explains your success. What is that trait? And why?
Chris Grant:I would say for me, as I'm a very detail oriented person, if you can tell, I'm very into like, again, validating facts, verifying assumptions, even my own. You know, when I'm when I'm doing something, I like to consciously think, Okay, why am I doing this? And what supporting the assumption that I'm making?
Dave Morgia:Yeah, I think that's why we get along. So well, we had quite a quite a good first, you know, in person, kind of chat at the Sarasota event A little while ago. So definitely, essentially nerding out for all this stuff for about 20 minutes. And then the night had done. But yeah, I couldn't agree with you more there. And then what is the most uncharacteristic trait? I'm pretty sure things are you have done your business, Chris, and why did you do it?
Chris Grant:Yeah, as odd as this may sound, you know, when we got started getting into the you know, because we were originally buying properties ourselves, right. But then we got into the syndication space, and let's say it was actually raising capital. Right, it was an awkward feeling, like feeling like I was a salesperson or pitching a deal, right. And really, how I overcame that is I just kind of backed up and said, Okay, what I have here is an opportunity that I'm gonna put my own money into, that's how much I you know, I believe in it, right? Providing an opportunity, and that if that draws people in, and they want to join us, I'd love to have people on, because, you know, I want to help them advance too. So I kind of spun it is like, I'm not, I'm not selling a deal, right. And I never like give a hard sale on a deal or pitch or anything like that. It's like, hey, here are the facts. Here's the deal, the opportunity, love to have you on board. If this isn't the one I understand. And let's just keep in touch. So yeah, it's kind of switching that mindset to an opportunity versus a sales pitch.
Dave Morgia:Yeah, and I'm sure you'll agree, you find much more when you're not looking for money, if you will, kind of like you said, like, that's that screams like, need versus like you, like you said, it's an opportunity. You're not trying to be pushy, you're trying to invite people to invest with you. It's quite a different business proposition than, hey, we're looking for capital, please, please invest. You know, that doesn't make anyone sit? Well,
Chris Grant:don't want to do that position. Absolutely.
Dave Morgia:And then, Chris, can you name a time where you where you felt like you were not going to end up successful? And how did you overcome that fear?
Chris Grant:You know, it's kind of along the same lines as the raising of the capital, right, you know, I kind of had this, this discomfort around raising capital or bringing people, you know, bringing other people's money on because it is such a huge responsibility, right? Like, if I lose money, is it going to be ending my world? You know, no, but you know, the other people who are passively investing, you know, they're investing significant amounts of money for themselves. And it's like, you have the responsibility to protect their money. Right. So, you know, that made me a little bit nervous. So doing our first capital raise on our first deal. You know, you always have a thought on Okay, well, I have this base of investors, I know people who really trust me who want to invest with me. And you have this this target capital raise, right? So before you have to deal with like, oh, yeah, I feel really good about this. But when it gets down to Okay, now we need to raise some money on the deal. That's a whole different story. So I kind of felt a little bit of reserved and like, okay, so, you know, I kind of think I could, you know, get the capital raise, and then you just got to kind of get into it again, lay out all the facts presented as an opportunity. And we raised all the capital on just a couple days, it went really smooth. But you know, when you get into it, you just don't know, right? Like, a lot of people will talk about wanting to invest, but until you actually close the deal and wire the funds, it's, it's just so different.
Dave Morgia:And I think, man, I think that's a healthy fear. Like, if that goes away completely for me, I'm gonna maybe have to take it, you know, a check on myself. But, like, if you're a good investor, you should have like, a healthy level of fear for that when you start raising funds for your first or 100 Thieves, at least in my opinion. You know, maybe don't lose hours of sleep every single time, but definitely, definitely, you know, making sure that you've you feel that in your gut, whether, you know, it's kind of similar to like the public speaking or whatever else. It's a healthy fear. I think so it's definitely good to have.
Chris Grant:I agree with you. And I think a lot of people probably have it, you know, the other thing, too, they should.
Dave Morgia:Yeah, definitely. They should. Yeah, and then pretty much flip to that. Can you name a time or something and your business went perfectly and what did you do to make that a reality?
Chris Grant:So kind of on the opposite side is like all everything we talked about, about validating facts and really laying out a good business plan and being conservative like actually being conservative. Everyone says they're conservative, but you know, you can only tell if you conservative by checking that against something right, like facts, not opinion. So we did that on the deal that we closed, the one that we raised capital on, and, man, we just nailed that deal. We exceeded expectations in almost every area. We like beat five year return. is like two times within like the first year. And it just went really well. Were there challenges within the deal, of course, right. But we were on top of on top of it, we pivoted always again, like we had mentioned churn, like when you close a deal, you're, the work doesn't stop there, you still validating stuff, you're checking your budget, you're validating things and you're adjusting. So you know, all of the legwork you do upfront to validate facts, to be conservative, and really lay out a good clean business plan, it really pays off when you get to closing.
Dave Morgia:Now, like we mentioned, if you're relying on one business plan that's pretty rigid, it's gonna be hard to execute. But if you have a lot of margin, or a healthy amount of margin, and you can kind of navigate the waters. And obviously, when you write a conservative deal, and you can capture, you know, a great property like that one and do a 2x. And under five is just always a good day, as well, you know, flipping to the opposite of the fear of the raise. And that's, we just talked about it before the show, you got a great day coming up this week to you know, start start the sale process and and get the money back to your investors. So that's a fun day right there. So yeah, exactly.
Chris Grant:That's the fun stuff. Yeah.
Dave Morgia:Yeah. No, that's awesome. And then last one here, Chris, what have you been focused on lately to improve yourself or your business?
Chris Grant:Yeah, a lot of what we're kind of talking about here, too, is like everything is a constant level of refinement, you had mentioned it already, like you're still even in the Phoenix market, you're constantly learning different things through your PMS, or do through deal evaluation. But really getting even more systematic within my business. You know, whether that's through, you know, when investors join us or sourcing deals and really having a good system built out to, okay, how do we handle this flow through our business and systemize it, you know, bringing on an assistant was a big help, she kind of helps a lot in the kind of the day to day and execution of those flows, but really kind of taking a step back out and getting systematic on it. So you can hand that off, you know, certain portions of that office has been really a big help lately.
Dave Morgia:That's amazing, Chris, I appreciate you joining me today. I know we covered a lot and this is you know, the very, like you said detail oriented show. I love these shows. It's my favorite type of show, whether it's this for the mindset stuff, or usually my favorite type show to cover. You've all got equity. Do you want to just plug where they can reach you? I'm sure the website but you have anything else you want to you want to mention go right ahead.
Chris Grant:Yeah, Dave? No, I really appreciate you having me on the show. These are the conversations that I love having, like I said, you meet you met in person. And you know, we were just chatting about this for a while. We probably could have done it for hours. There's so many dynamics, I really appreciate you having me on, you know if people want to reach out to me, Chris at Evolve equity or just go to evolve. equity.com We have some information on there. And again, I really appreciate you having me on Dave.
Dave Morgia:Yeah, much. Appreciate it, Chris. Thanks again. Thanks.
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