First Deal Criteria with Mike Morawski and Brandon Rued

Episode 77 of the Diary of an Apartment Investor Podcast with Mike Morawski and Brandon Rued, hosted by Brian Briscoe. Transcript by – please forgive any errors.

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Brian Briscoe 0:00

Brandon, we've got Mike on the line here. What do you want to ask him?

Brandon Rued 0:02

If you had to start all over and you had limited capital resources? What would be your strategy initially for sourcing capital? And what would you be looking at as far as investment criteria?

Mike Morawski 0:13

I would say, Go secure a property, put the deal together and go find the funding. I always look at it like this. You got a good real estate deal. The money is going to show up. I always have done that first. Well, I'll go find a property. I'll secure property I'll put it under contract and how would I find funding today? I would just start talking to everybody and asking everybody how they feel about real estate investing and do they have a piece of real estate in their retirement portfolio.

Brian Briscoe 0:50

Welcome to the Diary of an Apartment Investor Podcast with your host Brian Briscoe. In this podcast we bring some of the top professionals in the apartment investment field to discuss various aspects of the apartment investing journey, with the sole purpose of educating listeners to make wise investment decisions. The Diary of an Apartment Investor podcast is sponsored by Four Oaks Capital, bringing you high yield returns through apartment complex investing.

This is journal entry number 77 of our Ask the Expert series, David green, an experienced investor Mike moravsky, and aspiring investor Brandon room. Keep listening for tips on first deal criteria. And to understand why it's so important to have an exit plan when you're buying an apartment complex. And now this show Welcome to the diamond apartment investor podcast. I'm your host Brian Briscoe. With forex capital. I'm super excited for today's show. It's another one of our Ask the Expert episodes. We have two amazing people on the line with this you got a man with a tonne of experience in this and other businesses, Mike Morawski and a very motivated and energetic aspiring investor Brandon Rued. First let's talk about Mike he's a 30 plus year real estate investment veteran, he control over $285 million in real estate transactions. He's an entrepreneur, author, real estate trainer, public speaker, and personal coach with strong personal resilience and a deep desire to help others live an extraordinary life. He's coached hundreds of real estate investors to fulfil their dreams. And that said, Mike, welcome to the show. Hey, thanks, Brian. I appreciate being here. Yeah, this is this is fun. I mean, we talked just about a week ago recording an episode of your podcast insider secrets, you know, so it's fun to spend learn a little bit more about you now and hear your side of the story. Speaking of you want to tell our guests a little bit about your podcast first. Oh, sure.

Mike Morawski 2:33

Yeah, thanks for asking. I do a I do a weekly podcast called insider secrets. I try to find people from three different walks in the multifamily space, so the multifamily investor, and then the property manager, so the operation side, and then also anybody who helps facilitate those. So attorneys, insurance, people, lenders, and the goal over the next year is going to be to compile a bunch of data. And then we're going to turn around and write three books at the end of next year. Oh, nice one on each one of those sections. So we're kind of revamping it right now. And it's really, the strategy that we've put together and the flow is going to work out really well. So, in fact, your episodes not going to run till January, we decided so I know we had kind of talked about that. But you're going to run the first week of January still.

Brian Briscoe 3:32

Nice, nice. This episode right now is scheduled for you know, mid December. So that ends up working out, okay, because people, you know, get out mid December, and there'll be Ripper and ready to go in January. So well, that's good. And you know, it's podcast with a purpose. So you're doing it deliberately to help you write some books. And speaking of books, you know, just for all the listeners, you know, Mike has a giveaway for us at the end that involves another book. So stay tuned, listen all the way to the end. He's gonna give an offer to everybody here. So that said, Hey, Mike, why don't you tell us a little bit about your background and your history in the multifamily arena? Yeah, sure.

Mike Morawski 4:08

So, you know, I've been in the industry for about 30 years, and I entered the industry as a real estate sales agent selling residential properties. And you know, Brian, I've always been of the opinion that success leaves clues. And so when I went into the business, I really didn't know anything about real estate sales or sales at all. And what I wanted to do was find out from somebody who was successful, how to go be successful. So I sought out a local real estate agent who had helped me on a couple of foreclosures that I had done, and asked him, I said, Todd, you know, can I come and shadow you for a couple of days and find out what you're doing to be as successful as you are. He said, you know, Mike out, I'll do something better than that for you. Now, I'm going to date myself here because he said, I'll make you a cassette tape. So Recording they have cassette tape that I listened to continuously for a few months and took all this information and, and in my first eight months in real estate sales, I went out and sold 78 properties all in the for sale by owner market. And I believe those techniques today still are effective in that business, as well as if you're an investor looking to find off market deals. So those techniques really work, sold residential for about 15 years built a team we were selling, but 125 listings a year, and in 2005, decided to go into the apartment business. And Brian, what I always tell people is I didn't wake up one morning and just decide to go into the apartment business. It was something I had a fascination about for years, I watched a couple of large syndicators in the Chicago market grow their business. One as a matter of fact, as the largest retail syndicator in the world today. And I understood the model as very simple, raise private equity, find a real estate deal, marry the two, run them, operate them and everybody makes money. So in 2005, I went and syndicated my first apartment deal, it was 11 units. From there, we raised $18 million in 30 months, but $60 million worth of real estate and was about 4000 apartments in five different states. Wow. Built a property management company managed around 10,000 units, unwound those deals and built another property management company, which I sold and brings me to today, which is I'm a coach and a trainer. And love giving back to others. So yeah,

Brian Briscoe 6:45

I mean, that's, that's a lot. I mean, you're talking about, you know, mid 2000s. So you look at the dollar price today you said $18 million in how long? 30 months? Sorry, months?

Mike Morawski 6:58

Yeah, so we very rapidly and I think it was a time in the market where people were looking for a place to put capital. And it was interesting how we raise that capital and where those people came from. So

Brian Briscoe 7:11

yeah, yeah. Now what did you What did you see was most effective at raising capital back then? And then do you think that's still effective today?

Mike Morawski 7:20

Yeah, I believe it's effective. It's educational process. So two things that were really prominent back then, first of all, I entered into the syndication business with a database of maybe 250 people went from there and built a database of about 7000 people. And what we did was we just we used email. This was long before social media, right? There was no Facebook, I think it was my space or something, which was nothing back then. Right. You're laughing Brandon.

Brian Briscoe 7:53

But, so we have MySpace account. I mean, still, not still. I had had a MySpace, you know, and I was, I picked a lot of losers lately. You know, MySpace, and Facebook came out about the same time I chose MySpace.

Mike Morawski 8:09

Why not? Right. But so but I emailed and what I did was I did a training seminar. I taught people how to invest in real estate. I did two seminars a week on a Tuesday and a Thursday, I put 20 people in a conference room, twice a week, brand new faces, and I grew it from there. Then what else we did was Donald, this was back, Donald Trump used to have these real estate seminars. He had him in LA, New York, Dallas, Chicago. And we I went and had a table or a booth at these real estate seminars for a weekend, it cost me about $25,000. for the weekend. In one in LA, I did one in Dallas, I did one in Chicago, and I grew my database to 7000 people as a result of it, I probably raised five or $6 million as a result of spending $100,000 on those seminars. Wow.

Brian Briscoe 9:06

Yeah, that's something that we're looking at right now is, you know, how much money do we spend for for a person, you know, what's it going to end up getting for us? And so for $25,000 table, I think a lot of people would shy away from that, you know, $100,000 led to several million dollars in in commitments for your real estate deals. I think proofs in the pudding there. You know, sometimes sometimes you got to spend a lot on advertising to be able to bring a lot of money in and that that was true for you.

Mike Morawski 9:33

But here's the deal today, you can do so much for free on social media with enough content and the right content to the right audience. You can you can do so much and tailor your message where you don't have to spend that kind of money today.

Brian Briscoe 9:51

Yeah, that's that's true. That is definitely true. Well, interesting. So Let's peel back the onion a little bit. Let's focus on your wire your motivation. A little deeper, you know, why do you do what you do?

Mike Morawski 10:04

Because I'm different. Um, you know, I used to do what I did, because I wanted to make money. That was, that was my goal. That was my dream. But you know what, I've made money. And now it's because of being able to do something different. So I'm in the coaching and training space, because today, it helps me, I enjoy when I see somebody else become successful. And I see somebody else achieve something, it's not about the money anymore. Today, it's not about the money. It's about the journey and who I become, and have become as a person along the way, right? You know, nothing ever, always go smoothly, you're going to have struggles and you're going to have triumphs along the way, but it's how do you get to the Triumph out of the struggle? You know, one of the things I say in my bio, is that I am resilient, right? And where's that resilience come from? I mean, you have to dig way down. So you really discover who you are. But more so when I can take somebody who's a brand new investor, or somebody trying to go to the next level and help them do that, get in the market, or go to the next level, I've really accomplished what I really want to accomplish. And that's just given back. Yeah,

Brian Briscoe 11:24

yeah, that that's an important thing. It's something that, you know, my parents instilled with us early on was was being able to give back and, you know, something I realised, you know, later on in my life is you have to have something to be able to give to give back when you've had phenomenal experiences a lot of success. And you're able to take that those experiences and that success, and be able to help other people do exactly the same thing. And that's extremely commendable. So good. So let's, let's talk a little bit about some of the properties you've done, or your your kind of investment criteria, what you would look for in properties and how you'd go about the purchase of the properties.

Mike Morawski 12:03

Great question. You know, when I first got in the business, I don't, I didn't have any criteria, I didn't have a buying standard. I just knew I wanted to buy apartments. But I didn't know what that look like. And I had a broker at the time, who was relatively new in the business, had done a bunch of deals, and he really didn't know a whole lot more than me. And I think he and I kind of both learned a lot along the way. He might not admit that today. But I looking back on it. I think that that that's kind of true. So what I would do is made that first deal, I listen to what the seller said, where the seller said, hey, it's a great market and the renter under underrated and you'll be able to raise the rents and if you do these repairs, and I really bought into the seller story, right? And something I learned to do is not buy into the seller stories. I buy this first deal. And you know, it's like, oh, we're gonna crash and burn before I knew what I was I don't want or and couldn't give the thing away. But what it taught me was to build a Buying Criteria, and by state to build standards around what was important. So things like, you know, really do the due diligence and look at the traps, you know, what is the market? Like? What are the schools? Like? What is the population growth? Like? What are the demographics? Like? What is the unit mix, like, you know, I don't want anything that's that doesn't have 65%, two bedrooms or more. Yeah, I want to make sure it's got pitched roofs today. And that all the apartments are interior entrances not exterior. And I want to make sure that I have, you know, good curb appeal, and things that are pleasant to the eye sight gets, though, a lot of these are our buying criterias that I kind of built along the way. And I had a list of about 20 of them in different categories, everything from curb appeal to what the cap rate was, and, you know, price per unit. And the properties were because I knew that if I went in at a certain price per unit, I'd be able to come out at a certain price per unit. This goes back to exit planning, right? Yes. I can't I can't plan a good exit unless I know how I'm gonna get in. So markets were really important product class product type, real important.

Brian Briscoe 14:22

You know, I mean, you bring up the point exit plan, you know, I'll just hammer in on that one. I mean, if you were to invest in multifamily in 2012, or 2015, you could argue you almost didn't need an exit plan. You know, the market was going up, cap rates were going down. A lot of good things were happening. People who had no business being in the apartment business, were making millions of dollars, because of the economic tailwinds that were blowing. But now I think we're at a point right now where cap rates are, are extremely low, extremely compressed. Can they go further, maybe a little bit but you I think right now the exit plan is going to be so much more important than maybe it was two, three or five years ago. Yeah.

Mike Morawski 15:06

So, you know, that's my book is called exit plan, everything you need to know about investing in multifamily and why you need an exit plan before you buy. I, I wrote it because I've spent hundreds of 1000s of dollars over the years and coaching and training and books and tapes. And I've read 1000 books in my life. And here's the here's what I've always learned, I've always learned how to get in a deal, how to find a deal, how to get in it, how to operate it, but nobody ever has taught me how to get out. And when you look at it, you need to know how to get out, you need to know when to get out. And getting out doesn't always mean that you're selling or liquidating or giving up control. It just might mean you're changing ownership, it might mean that you're changing structure that you're refinancing, there's a number of different ways to exit a deal, and give up control or not give up control as well. And there are things that that we all need to look at as an investor walking into a deal.

Brian Briscoe 16:08

So in today's market, you know, what are the factors you think one should look at when doing an exit plan?

Mike Morawski 16:15

Well, I think you need to start with the end in mind. Right and Stephen Covey, in his book seven, seven habits wrote a long time ago, always start with the end in mind, I think that was the second chapter in the book. But I need to know what I want on the back. So do I want to 20% 25% return? What do I What do I want my IRR to look like? What do I want my return on investment to look like? Where do I want to be able to get my capital out? You know, if I look at a deal today, and I put a spreadsheet together, and it's a 10 year run on a deal, I can see that maybe in year seven, it makes sense to dump the property and not hold it for 10 years. Because of the equity squeeze and the buy down and everything else that comes in at that point, right. There's like a perfect storm that happened somewhere along the way. Maybe at that point, all's I do is recapitalize pull my capital out, hold on to the deal and run for another 10 years. So what happens if I if I look at it plan like that, and run it run the numbers? That would tell me that? So I think looking at it today, you want to know where your profitability is going to be? Where do you have to get out? What are your investors want to see if you're syndicating the deal? What are your tenants Want to see? What do I have to do as far as going in and doing cap x and upgrades and repairs? So and probably, you know, you mentioned it earlier with properties being so the cap rates being so compressed right now, you know, can they go lower? Anything can happen? Brian, but you know, will they I don't know. I don't know if the investor populational let it happen.

Brian Briscoe 17:57

Yeah, you know that that's something interesting that I've recently realised with with low cap rates, you know, obviously, it makes your prices higher. But at the same time, if you look at the valuation formula, you know, the value is the noi divided by the cap rate, when you have a low cap rate, each dollar of noi counts a lot more towards purchase price, you know that that's something that's actually beneficial for lower cap rates, you know, once when you're purchasing is you bring an extra dollar of in Hawaii to the table, that's going to amplify your overall value a little bit more. So obviously, you know, a lot of people looking at these lower cap rates and thinking, you know, it's it's less of a good deal for you. In a lot of ways, it's actually better for you if you're especially if you're doing value add projects. Yep. Wow, interesting. So tell us what's what's next for you and for your company.

Mike Morawski 18:47

So my current tensions is a coaching and training platform. What's next for us? Like I said, you know, insider secrets is my podcast. The goal is as we get into 2022, will be to write three books based on the data that we compile over 2021. The goal is to help a bunch of new investors come into the market. I like to teach new investors how they can create short term cash flow and long term wealth in small multifamily, whether that's on the residential side, or the low under 100 units on the commercial side. And then there's that transition, right. So it's like playing Monopoly where you know, you buy four houses, put them on boardwalk or Park Place, Cashman buy a hotel and do it again. That's what that's my whole philosophy behind coaching and training is how do we take people in? I teach them to build their portfolio, cash it in and go build a bigger portfolio? Because all in all, that's what a lot of people want to do is they want to accomplish that, you know, yeah. I think I find two different types of investors out there. How many units can I own or how much is my noi overall? Right. So they kind of run hand in hand, but how do we teach people how to do that? So as a 13 step system that I continually try to perfect and you know, build into people with so

Brian Briscoe 20:13

well good go Yeah, I've been on your your website quite a few times. You know, I think I think you have a quality product that you're offering, you definitely have the experience, you have the know how. So you know, I'd encourage anyone listening to this, you know, check, check out my Korean tensions calm. We'll talk about a little about that later. But anyway, I'm excited to see how these books turn out. But that said, let's introduce our aspiring investor. Now we got Brandon rude on the line. He was born and raised in Central Wisconsin, and he's currently active duty Air Force officer stationed in Hawaii, graduated from the University of Wisconsin and earned his commission with the Air Force in 2016. He's got an analytical background in military intelligence combined with a success in sales that led to a unique passion for real estate investing. And he's got a longtime friend and business partner max that you'll probably see on the show in a couple of weeks. We've been trying to bring him on to But that said, Brandon, welcome to the show.

Brandon Rued 21:01

Hey, Brian, thanks for having me on. Really appreciate it. Yeah, yeah,

Brian Briscoe 21:04

appreciate you. And appreciate your service as well. You know, Air Force is still kind of good.

Brandon Rued 21:10

Now, you know, Brian, my dad and my uncle, we're both in the Marine Corps. So you know, share your service, too.

Brian Briscoe 21:17

Yeah, I say that, say that tongue in cheek. You know, for anyone listening, there's inner service rivalries. But you know, truly, I truly do appreciate your service. My father in law and my uncle have both served in the Air Force. And there's no no unimportant service. So that's right. That said, let's let's dive into your background and your history a little bit. Tell us who Brandon root is.

Brandon Rued 21:39

Yeah, so born and raised in Wisconsin, and I've got actually some family on Lake bluff Mike, I'm sure you know, where that's at, and northern Chicago suburb, love the Chicago area. And my uncle that lives in Chicago, actually, he's an entrepreneur retired out of the army. And he really inspired me to be an entrepreneur in life and into to serve as well. So that's one of the main reasons why I joined the Air Force was him recommending me to do that. And I originally got picked up to be a Combat Systems officer, which is like a bat back seat fighter jet or navigator. That's what Max's is, he was a navigator in the in the B 52. And that's that's where we met actually wasn't training in Pensacola, we sort of had a shared vision of where we wanted to go in life, you know, use the Air Force as a stepping stone to serve and then learn, learn as much as we can, and move on from there. And that's what our plan is, you know, we're focusing on smaller apartment complexes and acquisitions and moving our way up, and using that as a long term, you know, wealth solution for our for our families. And also, we see it as a multifaceted return, not just on the money side, but also, we like the idea of improving our local communities as well. You know, Max is born and raised in Ohio, and he's working with his dad on re gentrifying some complexes and in Cincinnati, in an area that's burgeoning. And we like seeing that bringing the community up, as well as ourselves and our investors.

Brian Briscoe 23:01

Yeah, you bring up some good points. I mean, when you when you're investing in multifamily, you're helping a lot of people you know, you're helping the investor should go along with you, you're helping you, your cell, your family, and potentially use that the profits to help more people down the road and getting back. But you're also providing clean, safe living spaces for a whole lot of people at the same time, you know, so it's something that going back to Mike mentioned Stephen Covey's book, you know, that it's the win win win scenarios is what we're creating a lot here. So I think that was habit number six, think Win win. But yeah, that's it. So let's, let's talk a little bit more about your why or your your motivation, your big burning, why,

Brandon Rued 23:40

you know, actually, I grew up lower income, you know, mid mid Wisconsin life and always aspiring to get to the next level, seeing my uncle do it in North Chicago was really my my big inspiration and finding a method to do that. And so when I was in Intel training and Goodfellow, Air Force Base and middle of Texas, you know, I'm like, I've got to find a way to bring myself to the next level. And kind of like Mike, you know, Max and I are at the point where we're focusing on making money, right, so we can get to that next level where we can inspire other people and teach other people. And so I picked up, you know, Rich Dad, Poor Dad, for the first time, I'd read other books about real estate. And I think, like so many other people, that was the fire, you know, under my butt, so to speak, to really get moving on the cash flow aspect, get out of the rat race, so to speak. And so that's my real, why, and also securing a multifaceted investment strategy. So that way, my wife and I can, you know, live without without worry, like, like my parents did as far as like, Can we get food on the table? You know, that's something that I don't I don't want to have for my family or my children in the future. Yeah,

Brian Briscoe 24:44

yeah. I understand that. Well, good. Well, Brandon, we've got Mike on the line here. What do you want to ask him?

Brandon Rued 24:49

Well, you know, you teach a lot of people like me, like how to how to get into the end of the business more successfully. And one thing I'm interested in is if you had to start all over, especially Right now, and you had limited capital resources, limited access to individuals with capital, what would be your strategy initially? And for for sourcing capital, and what what would you be looking at as far as investment criteria? multifamily criteria?

Mike Morawski 25:15

Yeah, great questions, Brandon. And first, let me say thanks for your service and YouTube. Brian, I know that you guys that give us the ability to be able to continue to do what we all do. So thank you. I think that I look at it from two standpoints. Brandon First, if a new investors coming into the market, never done anything before wants to get involved in multifamily. And even if somebody's coming in as a single family investor, I try to encourage them to go into the multifamily arena. And you know, the common word today or the hot word is house hack, right? So let's buy a three unit or a four unit building. Let's live in a unit rent the rest, get some on the job experience, the experience to take the deal down, do some due diligence, do some operations, how do we rent it? How do we deal with tenants, and then grow from there over that year, year and a half that you live in there? That'd be one way. The other way is if somebody has been in the market, they've done some real estate investing, I would say go secure a property, put the deal together and go find the funding. I always look at it like this, you got a good real estate deal, the money is going to show up. So I never, and I always have done that first, well, I'll go find a property, I'll secure property, I'll put it under contract. And I know it's a little bit more difficult in today's market, because people are going hard in 24 hours and writing, you know, hard contracts within the first few days. And we used to have a little bit more time. And I think that that time will come back. I think we're gonna see that again here shortly, where there'll be some flexibility in how fast you have to move. But I would go secure a deal. And I would go find funding after I secured the deal. So and how would I find funding today? I would just start talking to everybody and asking everybody how they feel about real estate investing? And do they have a piece of real estate in their retirement portfolio?

Brandon Rued 27:19

Okay, and when when you initially start out so you already had a experience with real estate, as you said, and a small pool of investors. So going go into the the Trump events that was your, your main way of attracting investors initially.

Mike Morawski 27:36

That initially No, that was probably about a year in so okay. What I did in the beginning was I went to my database, which wasn't much it was only about 250 260 people to begin with. I think one of the biggest mistakes that I made when I first went in the real estate business, and I don't know if it was because I didn't know or because I was never taught or missed the lesson but added churn and burn business where I picked the phone up I prospected all day long, but I never kept names and numbers. And even on past clients and sales i did i never kept past numbers. And I learned that lesson when I walked in a grocery store one day ran into a past client and she said, Oh, you'll have to come over and say our new house. And I thought your new house. I thought I was your realtor, you know, so we learned these lessons the hard way. But I went to that database, and I beat that database. here's here's a key. Always ask for referrals. So if I tell, you know, ask me who I know.

Brandon Rued 28:38

Yeah, yeah, that sounds good. And that's that's been a way that Max and I have started talking to a lot of people how we met Brian, actually through through another contact. Julie Peterson and, and so it's a great way a great way to meet people. Great advice.

Brian Briscoe 28:50

This has worked really well for us, too. And I'm glad you brought that up, Mike, I mean that just because you get a note from somebody or not now from somebody always asked that question, you know, hey, is there somebody you know, that could benefit from what we're doing? Or there's somebody you know, that's interested in real estate? And we've asked that question a lot. And that's brought us a lot of a lot of investors. Yep, for sure.

Brandon Rued 29:11

Hey, Mike, I've got another question. When you started out investing in multifamily. Were you focused primarily in Chicago land, or were you were you looking at other areas of the country or doing long term or long distance investing?

Mike Morawski 29:23

Yeah, that's a great question, too. So my first deal I bought in Chicago, and that was part of part of that whole issue was I didn't do enough due diligence. You know, the price price per pound in Chicago at the time was about $100,000. The market was crazy. And I learned very quickly that I wasn't going to make money in that market at that price per unit. So one of the things on the Buying Criteria was I needed to be in a all in price range of about 75 to 85,000 my all in cost. So I went to markets in the Ohio Valley, you know, you talk about I think you talked about Cincinnati. I was in Cleveland, Indianapolis, Decatur. So if you looked on a on a map that Ohio Valley sector has probably had about 1800 units in that market in that market. And then some in Alabama, Northern Alabama, Huntsville, and then in the Dallas Fort Worth market was where I had my biggest footprint. But that's where I found that I could buy. And all in at about $80,000 make a good cash on cash return. And when I went to do a full spin on the deal and get out, we were able to capitalise on the sale sale end as well. And leave enough meat on the bone for the buyer coming in which I see that you know, and I don't mean to jump in here again. But I see that as being difficult with the way cap rates are today, if you're going into a deal, thinking that you've got a value add, but you want to leave some meat on the bone for the buyer on the other side. That's a difficult transition today, I think only because you've got to do so much to bring a property back to market status today.

Brian Briscoe 31:09

And quite frankly, if you leave meat on the bone, you end up getting more returns on your money, because those are the properties that get bid up a little bit higher, and that are sold more on future earnings. And they're so on present earning. So that's a tricky, tricky space to be in where you're evaluating yourself, but you're still allowing the next person to come in and value it. For sure. Like that.

Brandon Rued 31:34

I've got one last question for Brian and Mike here. When you're looking at exit strategies and talking to your investors, how do you find that balance between doing what you think is best as the asset manager, and what your investors think is best really, really for them and finding that, that balance of trying to sell them something versus convincing them this is the best thing for for the holding company.

Mike Morawski 31:55

So one thing that I always do is I don't give up that control. So as an investor, you know, my structures were always, hey, my investors had the lion's portion of everything, but they did not have an opportunity to partake in the day to day operations. So I wasn't calling them up about hey, you know what, we need some more landscaping done over here, or the gates broke. And we need to get a new motor for the gate. I was they they had a 30,000 foot view of the cap x and what we were putting in our offering Memorandum of what we were going to go in and do here, for instance, had a property for 150 units, we went in and bought we knew we had to put about 900 almost a million dollars in cap x money into and we laid that out in the original Performa, when we got into deal we found that there was about another $250,000 I didn't go back to my investors and say, Hey, we have to do this, just because it becomes brain damage. So I didn't give those voting rights, right. Because sometimes you have to make decisions pretty quickly. And you know, by the time you get a consortium,

Brian Briscoe 33:09

yeah, I mean, you get a committee and you're never gonna make decisions, you know, love my investors. But yeah, you know, and we do some similar I mean, we set up a general partnership, limited partnership, and the limited partners don't get a vote, but something that we we also do is we make sure the structure aligns our interests with the investors interests. Okay. So we do better if our investors do better is basically how we set things up, you know, so when it comes down to to making a decision on whether or not that property, you know, whether we're going to do X, Y, or Z with a property? You know, it's it's actually really easy to make if you've done a little bit of forethought on how do we align what the investors want with what makes us money, you know, and so that that makes makes it a lot easier in a lot of a lot of places. You know, and so one thing that we don't do is we don't offer a preferred rate of return, because I think sometimes that puts investors and the, the general partners or the sponsors at kind of a, you know, opposite end of the spectrum, as far as, you know, what, what the what the intent is in the property or what the where the money flows. So, end of the day. Yeah, absolutely, you know, agree with 100%, with what Mike said, you know, the limited partners are silent partners, they don't get voting rights. And then you just take it one step further, and you align interests between GPS and LPs. And that makes makes things go a lot smoother. Yeah. So all right. Good enough. Anything else you want to ask Brandon?

Brandon Rued 34:48

You know, actually, what you're talking about that I was thinking about about COVID and the impacts on multifamily. I know that's, you know, that's the talk of the town obviously, and people are, people are kind of getting sick of it actually. But but we're talking about exit strategies and refinancing versus sale of the properties like Mike was talking about earlier. Right now, what are your thoughts on that as far as how low interest rates are, and and the difficulty of trying to hedge against vacancies or, you know, bad bad debt on the properties, and then taking advantage of those low interest rates,

Mike Morawski 35:22

I don't think interest rates are going to stay low for a long, longer period of time, I actually listened to Ben Bernanke key and not seen her Johnny, who's the Marcus Millichap economist, just this week, and they talked about interest rates coming back up that they thought something was going to have to happen here in the market. And I know they've been talking about it for a while, but I think it's going to happen, you know, this whole COVID thing, I think the whole world is just kind of on edge, not really knowing what to expect, or where things are going to go. I don't have a good answer I talked to you know, like, Brian, you know, talk to a lot of people, not only on my podcast, but just a lot of networking and people on LinkedIn, and nobody's got an answer. I think it's all speculation at this point. And it's, it's a matter of just keep doing what you're doing as an investor as an operator, you know, because because there's that investor part. But then there's that operations part, right. And you got to wear both hats simultaneously. So as an operator, you just keep doing what you do best and creating revenue. And I you'll offset that.

Brian Briscoe 36:36

Yeah, I'll just say that one thing that we don't do, we don't build the refinance and return of capital into our numbers. Because we don't know where interest rates are going to be two to three years from now. I mean, we could come in and you know, paint a rosy picture that we're going to give, you know, 80% of your capital back in two to three years. But since we don't know where rates are going to be, we don't know. And cap rates affect that and your cap rate, and your interest rates are typically tied together with a spread, but we don't know what that's going to be like two years from now. So just to keep things a little more conservative, we don't build that into the picture. As far as where we do our underwriting. And end of the day, you know, if two to three years from now, we have an opportunity to refinance and rates are still low, and we can return 80% of our members capital will absolutely do it. But you know, since since we don't know where they're going, we don't have a crystal ball. That's, that's our take on it.

Mike Morawski 37:29

So you know, one, one quick thing on that you can always build a hurdle in. And you can always tell your investor, hey, listen, if we achieve this, this could happen. Or if we achieve this, this could happen. You know, it never hurts to put a hurdle in or a couple hurdles along the way over a timeframe. But you're not committing to that happening.

Brian Briscoe 37:52

Yeah, yeah, that's a good point. Well, we're about out of time here. So I got one last question for each of you. And then after the questions, you know, Michael, let you get go ahead and let everybody know what the free offer is. So question is, how can the listeners learn more about you, Mike, you first?

Mike Morawski 38:08

sure that's great question. And I appreciate you asking, Hey, I just want to say this been great, too. This is a first time I've been on a podcast that's had this format. And I like this. So this is nice. But you can reach me at my Korean tensions. Or you can directly email me at Mike at my Korean tensions. And then my phone number office number is 312 608 07. You know, I'm open to any questions, any conversation networking, if you're looking for some coaching or some training, definitely reach out.

Brian Briscoe 38:45

Okay. And we'll have all that information in the show notes. So if you're listening, and you want to contact him, you know, hit the show notes. We'll have hyperlinks and the whole nine yards. Brandon, same question for you. how can listeners learn more about you?

Brandon Rued 38:57

Yeah, Brian, thanks for having me on. It's great to meet you, Mike. My first time on the podcast and really enjoyed it. You can actually find me on LinkedIn is probably the easiest way to reach out i'm i'm really enjoying that platform. And my my business partner, Max harkavy, who probably be on the show soon, he's on there as well. And, you know, we're building, building our pages in our company page, Rh capital and trying to connect with people through there. All right. Thanks

Brian Briscoe 39:22

a lot. And Mike, you know, thanks for being on the show again. And let's let's talk about the free offer you have for the listeners now. Yeah, you bet.

Mike Morawski 39:29

So, you know, we've talked a little bit about exit planning, and I wrote a book called exit plan. I mentioned earlier that, you know, years of training and experience has led me down a road that nobody ever taught me how to get out of a deal. And that's what I want to teach people is, you know, structure planning and how to get out. So feel free to go to my website, my corn tensions, calm and download a free e version of the book. And you can download that by going to the evil On the front page, and put in the word for oaks in the coupon code box, you'll download for free, you'll get your copy for free. Now, if you're somebody like me, and you like a book where you can dog tail, the corners or write in the margins or highlight, you can get that there as well. That won't be a free download. But you can get that there as well. So

Brian Briscoe 40:25

awesome. Now, I've already downloaded the book. And in thumbing through over the last couple of days, it's it's a very thorough book that talks about every part of the syndication process, you know, so, I mean, the title is exit plan, and it talks about exit plan, but it really talks about the whole process from beginning to end. So a great book, and definitely encourage anybody take advantage of that free offer. All right, well, Hey, Mike. Thanks again for coming on the show. I appreciate your time. And I appreciate you for all you've done,

Mike Morawski 40:53

Brian. Thanks for having me. I appreciate it. I look forward to staying in touch and talking to you soon. Thanks a lot.

Brian Briscoe 41:06

Thank you for listening to the Dave Rubin apartment investor podcast today brought to you by four oaks capital. If you'd like to know more about how to invest in apartment buildings or want to be a guest on our show, visit our website at four oaks capital comm slash podcast or email us directly. If you're still listening, you obviously like the show. So pull out your phone, tap subscribe, and leave us a five star rating on your favourite podcast app. And we'll see you again next week.

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