Episode 194 of the Diary of an Apartment Investor Podcast with David Kamara and Nick Haraden. Transcript by Otter.ai – please forgive any errors.
Brian Briscoe 0:00
So we got David on the call with us.
Nick Haraden 0:02
And you want to ask him, how did you grow bigger for your next one? What steps do you take to get to that next level,
Unknown Speaker 0:08
we have a unique approach to growth, our approach to growth says, don't grow too fast, which may be counter to what many people think, again, I want to be very measured about the things we do, right? So it's not an all linear, let's double and double and double the number of units. I would say you want to make sure that when you grow, you have the right people on your team to take on the growth if that is Investor Relations, right? Maybe when your first deal you have like you said eight people, maybe you can communicate with those people around but if you grow that to, I don't know, 30 or 40 people, you may have a lot more questions to answer right. You want to make sure that you grow in a very thoughtful manner.
Brian Briscoe 0:53
Welcome to the diary of an apartment investor podcast with your host Brian Briscoe. In this podcast we bring some of the top professionals in the apartment investment field to discuss various aspects of the apartment investing journey with the sole purpose of educating listeners to make wise investment decisions. The Diary of an apartment investor podcast is sponsored by four oaks capital bringing you high yield returns through apartment complex investing. Welcome to the diode apartment investor podcast. I'm your host Brian Briscoe with aurochs capital. Very excited for today's show. It's another Ask the Expert episode. Two great people on the line with us today. We got David Kamara and Nick parrot. And so first of all, David, you know, coming on as our experienced investor today, welcome to the show.
Unknown Speaker 1:38
Thank you very much, Brad. Great to be here.
Brian Briscoe 1:40
And incidentally, it was good seeing you in person. You know, I know it's been two months, but it's always good when you can, you know, see someone in person that you see over zoom so many times, but I was happy to be able to see again.
Unknown Speaker 1:53
Yeah, and it's good to see you again. Good to get to be at the conference in Dallas where we were in person.
Brian Briscoe 2:00
Yeah. It was fine. It was good. Good. That was the first post COVID conference for me. And it was good to you know, be back in the same room with a lot of people. So anyway, that said, go ahead and tell us a little bit about yourself.
Unknown Speaker 2:12
Sure. Um, I was born in Ukraine, from the Soviet Union. And my dad was studying there as he started as like a medical technician but my mom kept him down until he got his PhD in medicine. My dad's from West Africa and when he finished his studies we moved back to West Africa Sierra Leone and actually I remember as a teenager one of my first experience with the US military was some of the guys that were stationed down there because we had beautiful beaches and I remember these guys just throwing around this weird looking ball I'm like, What is that American football but I talked to some of those guys and I know you guys have no your show has a big military audience. It was kind of cool to hear you know, like younger me teenagers early 20s guys just deploying and seeing the world and traveling and being in various places. It was years later we had a military coup and one of my best friends actually got evacuated by the US Marines because they had the green card so shortly after that incident is what I ended up coming to the US and everything came Michigan because of my friend who ended up living in Michigan. A nice community in Sierra Leone and there's a lot of nice community Michigan that's up in Michigan
Brian Briscoe 3:27
nice nice so so Ukraine to Sierra Leone to Michigan I said that's that's probably a unique path I don't think I've heard anybody else with a similar similar background so so you landed in Michigan What then?
Unknown Speaker 3:41
Yeah, so my dad like I mentioned as a medical doctor and their goal was you know, you grow up in a in a developing country and really the way to be successful is through professional education right? So parents kind of like always instilled in you you need to go be a doctor or a lawyer or an engineer of some sort. I had also had the added an opportunity to see my dad do surgeries. We had a clinic in our house and actually connected me with my dad. It's very different setup, right? There's not a lot of doctors per population. Yep. And so I ended up connecting these my dad made sure to cut any of the wrong parts and people. There's no there's no litigation, there's no insurance, people come in and say, Hey, here's a couple of chickens or here's a bag of mangoes. So I really wanted to come and be a medical doctor. But when I got here, again, it was right after a military coup, I came to the US with 1000 bucks. Actually, I had to borrow. I very quickly realized that I couldn't go to med school because I didn't have the money. And the next best thing that I was good at was math. So I ended up settling for computer science so transferred to University of Michigan for Community College. Your Computer Science worked in Chicago, in computer science for a company that was a really good management of program as we learn about what they're they paid for Business School ended up being a management consultant traveled a bunch and finally realized that I'm not seeing my family as much as I need to be and that's kind of what led to a pause where we had to my wife and I basically evaluated and
Brian Briscoe 5:18
yeah yeah i think i think a lot of people hit the same point you know for for different reasons you know I hit that spot you know I was you know on a big ship and somewhere in the middle east right and being away from your family and just realize I got to do something different you know, I've got to do something different where I'm going to keep on having this experience I'm going to keep on being away from my family so so you caught that you you you had that moment and you decided that you really decide multifamily or did you do you know something else first
Unknown Speaker 5:51
so we we we got into single family earlier so when we moved to Chicago my wife and I rented for a year I kind of did the big city living and then we said Why are we paying all this money in rent like we could probably own something with very much a similar payment as we're as we're renting for. So we bought our first house and frankly, that experience was when I got very excited, right because again, growing up outside the United States you never really appreciate leverage because it doesn't typically exist you're gonna buy anything you buy cash and so this was a period where I was like wait, you can put down 5% and you can buy a house I really own this house by just borrowing the house. So I got very excited that point and that's okay, we need to buy at least one more house and see if we can rent it. So actually, that was 2006 is when we bought our first duplex did that and of course then life happened and we didn't really have a lot of money coming in kids happened but by the time I got into consulting we had I think five or six units and the properties were working right so their cash flow but they just weren't enough to move the needle so we had you know, 567 $100 a month coming in. It was nice but it wasn't something we could content not life changing. Exactly. So when I had worked for medical consulting companies which is a very exciting career and pays really well I had left that and started my own management consulting firm and was fortunate enough to have some really good clients that stuck with me and said we don't really care the letterhead on the on the deliverable that you submit love your work. So then we were fortunate enough to make some money we use that put a bunch of money into our house and that's what my daughter asked me Hey, Dad, are you going to work tomorrow which was Sunday Monday Monday is when I typically ship out right I'm dropping out not for as long as your deployments where Brian but I'm ugly Monday out Thursday night I'm home or Wednesday night I'm home from Lucky nonetheless right? I missed a bunch of activities right? I miss want to miss and so I mean at that point, my wife and I went and talked to him like hey, this is a really good question. Like what's the point here right? Yes, I'm no longer working for anyone I'm working for myself we have our own firm but I'm still traveling a lot. So we have this kind of sideshow thing going with the real estate apartments that we know works it's just not significant enough how do we how do we make that a bigger part of what we have so that I can get that was the the aha moment for us and then I mean into kind of consulting fashion we discussed that and I said I could probably figure this out right we bought a few smaller apartments we probably could buy bigger ones, but it made sense to go get a mentor to make this prop the process get accelerated. Because at that point we had the funds we knew that we could go buy something and truly if you think about it, right the mistakes you can make in multifamily are much larger because the numbers are just after that let's get some mentorship and let's let's do some things and get some advice
Brian Briscoe 9:08
yeah and that's something that you know I think a lot of people look at you know, multifamily is being able to scale absolutely you know, the the profit scale, the numbers scale, you know a lot of things scale with it, but you bring up a good point, the risk also scales you know, the mistakes also scale you know, now if you make a mistake, you know, you got a zero or two zeros added to the end of the property value and, you know, the mistakes the dollar value of mistakes skill as well. So, you know, I think you did, what a lot of people do is you go find a mentor, you know, and a lot of people are, you know, fortunate enough to find a mentor that can just take them under their wing and, and work out. You know, people like you and me, we pay for mentorship, you know, and it, it works as well. But anyway, so tell it tell us a little bit about that and tell us about how that helped you.
Unknown Speaker 9:57
Yeah, so I like that. At this period I was I was working a lot of projects and remote areas and to pass the time, I basically would listen to podcasts and register for a run. So I was doing all kinds of marathons and long distance runs. And so I started listening to a podcast and apartment investing. The I connected with the host. And a lot of this stuff made sense, in that it did help a bit that his background was somewhat similar at a tech background, I had a tech background. So I went to one of the conferences and right there and met another gentleman who I had heard on a different podcast who happened to be from Michigan. And then we basically agreed that I would like to work with him as a mentor. And that, that that's where that took off. I think that was for me. I mean, there's all kinds of different mentorship programs out there. What I was looking for specifically was someone who had been in their shoes that I'm about to step into, and who could answer specific questions about things that I'd be needing answered, right. I didn't want like a group setting where I had to wait my turn and raise my hand and see if somebody else had similar questions. I really was at the place where mentally I knew I was ready to go. And then financially, my wife and I knew we're ready to go, we've discussed for the first deal, we're going to take in a massive like home equity line of credit out of a house, and just do it and see how that went. And then further, we knew we had some other funds lined up that we could use as well. So that first year, essentially, we did four deals, we bought about 180 units all for us. And I mean really took off from there.
Brian Briscoe 11:32
Nice, nice. Yeah. And incidentally, if if I if I remember, right, you are now a coach in the same mentorship program. Correct?
Unknown Speaker 11:39
Okay, yeah, that's correct. I went to the Michael Blanc coaching program. And then just over a year and a half ago, they reached out and said, Hey, would you mind coaching for someone you really have time to? And yeah, I mean, it's, it's something I love doing because it keeps you sharp, right? If you have to explain these concepts for people that were in your shoes. I mean, the more people you speak to, the more questions you get that you haven't thought of right? All of these individuals are pretty sharp and have good questions. So I feel like I am learning as I'm as I'm teaching. The other reason I like it, too, is like I now I'm looking at areas of the country or markets that I wouldn't have otherwise been looking at. Yeah. From that perspective, it's pretty interesting as
Brian Briscoe 12:23
well. Yeah. Yeah, very much. So. And incidentally, you know, when I was going to the coaching program, we partnered with, you know, one of our coaches on our first deal as well. So I'd imagine it brings some partnership opportunities for you as well. Yeah,
Unknown Speaker 12:37
so yeah, I think definitely partner of the students on at least a deal. You know, like, you have to make sure that the individuals, the personalities make sense. And you mesh and also the deal has to be dealing in a market you care about.
Brian Briscoe 12:54
Yeah, you know, I tell people, you know, we've had a lot of people reach out to us and ask if we'll partner will come in as experienced partners on deals. And I have two simple criteria, you know, very simple, we got to like the people, we got to like the deal, you know, that's 100% our criteria, and it sounds like exactly the same thing. You're saying you got to like the group get along with them. You got to like the deal. It's going across your desk, otherwise, it's not gonna make sense. So. Yep. But Cool. Cool. So one question, I'd like to ask everybody, and you kind of alluded to it earlier. But if you can talk specifically about this, what is your big burning?
Unknown Speaker 13:29
Why? Yeah. So for me, it's unequivocally being able to spend more time with people I care about people I love. And for me, that's my wife, my kids, I have four girls, four daughters, my parents, I'm fortunate to have both my parents around still, and I mean, this is a time when you know, our parents are getting older, if we can spend more time that is meaningful time when they're still healthy and able to go places with us. And that's a that's a great blessing. So for me, it's really spending time with people that I love to spend time with. I think a secondary one is just to be more in control of your time, right? I think there is this kind of maybe perception of when when you've kind of achieved quote unquote, financial freedom, you can just sit on the beach and do nothing. I think you'll find the reality right, very few people are interested in that, I mean, sure of the ocean. But I mean, most of us are, I would say kind of challenged intellectually and kind of curious individuals. And I mean, if that means having more time to go volunteer in your favorite charity or or nongovernmental organization, or even going to start a business or teaching I mean, all of those things are great things. For me, one of the ways that we can find ways to give back is to contribute to kind of develop and progress and care and then continues to be a country that's very underdeveloped, and my dad still lives there. So we were able to build a clinic in a very rural area, my dad kind of support that as things continue. So it's just it's been, it's allowed us to do things that we feel meaningful.
Brian Briscoe 15:07
Yeah, and go back to your roots as well, you know, so Help, help your family out, help your own community out and everything else. So does your dad still practice medicine?
Unknown Speaker 15:17
My dad does still practice medicine. He's actually here for a month. His philosophy is doctors, especially in developing countries never retire. They just keep on working. Yes, this woman planned and I mean, he's like, he literally just does it because he enjoys doing it. And I mean, there's not a lot of doctors there period. And so you don't really care what kind of doctor you are, they bring you anything, right? If if the ER if it's a, I mean, there's very few specialists, right? They bring surgeries to him, they bring infectious disease cases to him, amputations or whatever, it's like you're adopted, we don't care if your ob gyn or whatever, your
Brian Briscoe 15:55
your doctor. Yeah, that's all that matters. Yeah. And I mean, talking about good causes, you know, one cause that I've really liked is the Doctors Without Borders, you know, it's it's same concept, a lot of developing nations, you know, and you mentioned it yourself, you know, the number of doctors per capita are extremely low in a lot of developing nations. So that's one of the charities that I've, you know, followed and donated to in the past as well, you know, you're you're having a more specific impact on your community, where you came from. But I think there's a lot of good travel organizations that can help out too. So
Unknown Speaker 16:30
I'm actually supported that one too, especially as I mentioned, I've been running a bunch of races. So with some of these marathons, you can register to support a particular organization. And it's also from here, Doctor without borders, by all means is a big one. And, I mean, we had we had the Ebola crisis in Sierra Leone just five, six years ago. And they did a ton of good work there which I mean, it's super commendable. These are quickly you can't put a price on that. They do. Yes, absolutely.
Brian Briscoe 16:57
Absolutely. So anyway, yeah, that's that's one thing that I liked doing as well and you're giving back but there's there's many different ways many different good organizations. You know, that's one of many but that's it. Let's talk a little bit in detail about you know, one of the deals you guys did you know, pick pick your first pick your most recent pick your favorite and tell us a little bit about it.
Unknown Speaker 17:20
Sure, I guess I'll talk about one of the deals we closed this year, we closed 124 unit deal in the Upper Peninsula of Michigan, this one closed in March. It's an It's a unique deal for a couple of reasons. It took a very long time to close. This was a deal that first came on the market, late 2019. But we looked at it I said, Hey, this place is just really far away. Right? So I'm in lower Michigan and closer to Detroit. I live in Auburn University of Michigan big house. And this the deal is in Marquette, which is whether Michigan University, Upper Peninsula Lake Superior, it's about a seven and a half hour drive from me, it's still in Michigan. I think I can get to like Kentucky or so I'm going the other direction at a time
Brian Briscoe 18:03
now driving ferry right? I mean, there there's a
Unknown Speaker 18:07
this is just driving you go straight if you read and then you go across towards Wisconsin law ferry, you can't take that away, but not necessarily. It's not really direct. So I told my broker I said, Listen, I think I'll pass on this deal. It's kind of a remote area. It's not a place I necessarily know very well. I think a month passed by and my brother came back and said, hey, I've been up there toward this deal. It's a really good deal. You should take a look at it. It's similar to other deals you've looked at. So I said, Okay, fine. Let's look at the numbers really looked at the numbers. I mean, it was a very interesting deal. So the owner had been up there and put a lot of capex into it, did all of the siding, all of the windows, all of the roof, so it looked really really well maintained. And then for whatever reason, I think, I think some deals sold up there and owners started seeing the kind of values they could get for that deal. So I think the owner was in his late 50s, early 60s and he said, You know what, I could probably sell this and move to warmer climes later taking he said, I've lived up to here forever I love swimming in Lake Superior. But it's like in July Lake Superior water temperatures like 58 Yeah. So it's like I love swimming in the Gulf and Florida and the temperatures like
Brian Briscoe 19:22
88 right are much nicer Yeah,
Unknown Speaker 19:25
yeah. So it's like I think that's that kind of pushed it over the edge and recent, even though we had spent on this property, as though we wanted to own it for the next 20 years. We thought better of it. So long story short, we offered We made an offer and the seller said no, he said we think we can get a better price for it. So we said okay, fine. We think that's the number we can stick to and we moved on. So fast forward. Five months right, Corolla starts we have the Coronavirus 2020 spring. I see the deal. Come back on the market. So talk to my broker, I'm okay, I thought this deal. So what happened is like, yeah, somebody took it. Try to close didn't close, so it's back on the market. So I said, Well, I mean would still be interested if if the seller is willing to consider a previous price seller kind of shook their head said we'll think about it took about a month and a half. And they said, You know what? We will do it. But here's the deal. We don't want to close too soon. Like, what do you mean, too soon? So then if you think about what was happening, right, about a year ago, or last summer 2020, because of the pandemic, banks didn't know how to price risk, and so the Treasury notes kind of fell off a cliff. Yeah, so this owner had a prepayment penalty, which was pegged to the top of the 10 year t note. And because the rate had fallen so far, the 10 year Treasury was trading at about point 6%. And instantly at about like 1.3 1.2%, his prepayment penalty was kind of the arbitrage between what his thing was and what this thing is. So he was facing upwards of a half a million dollars in prepayment penalty based on how far the 10 year to fallen. So he said, we would do the deal, but we want to close at least four months out, we want the teenager to come back up. Right? He wanted to walk up. So I said, I mean, that's fine. That's okay. And we actually wrote that into the purchase agreement, we said, we will close, I think it was like 120 business days. So it gave some extra time. That's a long time. Yeah, then gave him the option to extend. If at that point, like the tenure, Tila wasn't at like point eight or 0.7. So it really was kind of like, we will be accommodating, but we knew the The price was good. And while when we said we'll accommodate this long duration, we didn't know a thing. I don't know, I'm brokers and I said, Can I Is there a way that I can use more leverage on this deal? My broker's like, yeah, there's this thing called the HUD law. I'm like, well, what's that is like, well, you can actually take 85% value, but actually 85% loan to cost, which would find any kind of repairs or anything else you want. But it does take a long time to close. So our strategy was fine. If the seller wants to go along, we'll go along. But at the same time, we're going to use this HUD loan thing, which really allows us more leverage, but provides this really great rate, right. So if anyone who doesn't have law knows it's restrictive, it's a pain in the butt with because their, their inspections are way more aggressive than any kind of Fannie or Freddie inspections. And you typically are locked down for about 10 years with that kind of a loan product. So your prepayment penalty, the one we did was 10 years 10 down starting at 10% going down to 1%. So the downside of the difficulty for us was in the syndication we have to tell our investors that expect to hold for 10 years. And I mean, at some level, we said listen, it's the pandemic, I would rather hold for longer and know I have a really good, great, then promise you the world and then not deliver. And some investors said, You know what, 10 years is a long time. We're not going to do it. But we had basically a good investor base that said, yeah, we we, we trust that we like it. Let's go with it. And I mean, the best part of the whole deal was interest rate all in for this deal. Is 2.46% fixed five years. Yeah. So I mean, it's just really hard not to make money on that deal.
Brian Briscoe 23:23
Yeah, you know, I've heard I've heard people get low rates on HUD, that's, that's the lowest one I've heard. You know, some of somebody one of our mutual friends, I think, said he got a 2.6 or 2.8 on a HUD, you know, not too long ago, but you know, right now the Fed target for inflation is 2%. They're estimating we're going to get about two and a half percent for the next three to four years. That's basically your they're basically giving you money at that rate. I mean, it's not like they're charging you to take it they're they're basically paying you to take the money when you look at the time value of money added in. So yeah, that's one of the drawbacks, like you said at the HUD loan, it takes an awful long time to get to, to get closed out awful, terrible process, you know, as far as qualifying for it as well, but
Unknown Speaker 24:12
a long time. And I mean, I would say this too, for people that you really have to have a lot of confidence that you can get all the investors to the table. Because I mean, at some point I got people call him and saying, Hey, is this thing happening? Or what? Because I mean, we have committed to you, but it's taking it's been six months? Yeah. It's been six months. It took us I think, eight months from beginning to end to close that. Yeah. And you you can't, you can't like tell people don't go do anything else with your money, right? I mean, it's their money. So you just have to be very confident that you can close real confident enough that I mean, if the few people that had that kind of a question mark fell off, we would be able to just put our own cash. But again, I mean, it definitely you can lose investors that way, I guess is the lesson learned there and I want the listeners to know. So the long and short of it is not too many syndications do hide Loans For that reason, there is another process where you can get like a bridge loan, and then do a hub loan if you really want to, but it's more expensive. Yeah, but for us, and I'm extremely excited about that deal, just, you know, whatever, five, six months into it, we are from our from our collections perspective. And from a rental perspective, we're kind of between years four and five of what we had predicted, just because we bought the deal. And we found out that there was just such a shortage of quality housing up there, that we were able to, I mean, people were moving out, and our plan was to go and renovate a bunch of units and then raise rents, while people are saying no, like, just just give me the unit will pay an extra 100 $250 more without doing anything to it. And so, I mean, so far it's been it's been one of those markets that has performed some of the markets, we own things, and we are not coming close to those kinds of rent increases. So
Brian Briscoe 25:58
it's nice when you get your rent increases without putting the capital in, I mean, doesn't happen often, we've had a couple of cases where we've been able to do that. But man, if every property did that this would be an easy, easy profession, but not so easy. And we last question for you before we bring Nick on now what's next for you?
Unknown Speaker 26:18
Yeah, so um, we try to not do too many deals actually. Right. So my wife and I are the key principles of our firm. And the the purpose of starting this for us was really to get me off the road. And that really has been kind of where we stay. As I was still in my consulting role. Some of the clients and people that I was talking to, basically as taken we invest with you, they said, Could we, I mean, we like to be, we'd like to have the exposure to real estate, but we don't want to deal with tenants, toilets and trash. And you are solving that for us. So really, most of the people who raise from a kind of like, our connections, there's definitely new investors that come on board that here are some through podcasts, or whatnot. But I think the big thing for us is to stay disciplined, right and try to focus on not overpaying for deals, especially in this market. upgrades are compressed a ton. A lot of the pricing is pretty high, and we invest for cash flow. So what we try to make sure our returns come from as a healthy portion of our return comes from the cash on cash distributions. And then whatever, whatever happens to valuations happens to valuations. Clearly, we force appreciation through that but it's not something we try to rely on very heavily. So what's next for us is doing a few more deals, not doing too many more deals and probably saying no to more deals than we say yes to you know,
Brian Briscoe 27:43
I think that's just kind of the nature of the game right now. You know, we're looking at hundreds of deals every month, you know, and you know, maybe putting in a couple of offers and i think i think that's what a lot of groups are looking at right now. Alright, that says switching gears we're gonna meet Nick Nick, welcome to the show.
Nick Haraden 28:00
Thanks Brian. Appreciate it.
Brian Briscoe 28:01
He wasn't they were tell us about yourself. Yeah,
Nick Haraden 28:03
thanks Brian. David great great listen about your background they're really honored to be on the podcast I appreciate you bringing me on So a little bit about myself you know and kind of how I got to this point where I am now but you know my my wife and I we have two kids you know, a four month old and three year old so everything is kind of based based around that but you know, in my in my previous jobs I was in hospitality now I'm in you know, aerospace and defense. And I think everything I've kind of done kind of is led me up to this real estate kind of career now. But you know, we started off in single families, you know, buying single family homes about two years ago. And, you know, it went really, really well we purchased six single family homes kind of within a year so and we did a ton of market research on different places, we ended up settling in on St. Louis, Missouri, actually, so we live in Los Angeles, and we took that step and just said, let's just do it, you know, I kind of came from a real estate background with my family, my mom was a real estate agent, my family always kind of had real estate, I never really understood it much. But, you know, had had a good childhood growing up because of that, probably a little bit more. And we really wanted to have that for our for our kids as well. So we said, you know, let's look into this a little bit, see what we can do. Like I said, we did a lot of market research, and we kind of landed in St. Louis and we found some really good little little towns in St. Louis that we're producing really well and you know, had a couple challenges or at the start but you know, got through that and, you know, our assets are performing really well but about five months ago or so, you know, we kind of came to this conclusion that you know, probably most of your listeners and you know, you guys have come to at some point but, you know, we're like, Hey, we need to get a single family. And we need to get into something a little bit bigger.
Brian Briscoe 29:54
Let's go scale. Yeah. Larger. Yeah.
Nick Haraden 29:58
Yeah, exactly. We want To get out of the nine to five game right I don't want to work for my whole life I want to spend time with my family you know like I want to be there for my family and I guess we'll get to that a little bit later but you know it's at the time I didn't know about syndications you know i every time I heard on a podcast I was like skip because I'm like Oh this is so far you know so far ahead of me I was like No, it's it doesn't really apply like I just want to learn more about real estate you know besides reading every book I could obviously but I just really dove in and then you know i i took the next step to the syndication world I wanted to learn more about it I was on a lot of Facebook groups and all these you know different listen to a lot of podcasts about it at some point as well but the Facebook group really got me going and I actually at the time met my business partner on a Facebook group who is Michael who's also in tribe of Titans which
Brian Briscoe 30:48
him as well and he introduced us so I don't know him but he introduced the two of us
Nick Haraden 30:54
yeah so we met on there he was talking like really knowledgeable on there you know i i really like helping people I like to teach people and I was and I was able to teach a lot of people on on just in short amount of time in real estate just how to invest that estate you know, like what to do how to do it a little bit because we were so successful at it because we were picking up the phone and calling people you know talking to property managers and insurance agents and you know giving people our time and you know, we were very thankful for their time but they you know, they they helped us through so much and you know, I was able to kind of pass that knowledge over to a lot of people that were like hey, I can't invest in the Los Angeles I need to you know, I don't know how to do this well you know, this is this is how we did it, this is how you do it. And it was that was a great experience and I saw Michael and he was talking really you know, knowledgeable Like I said, I said hey, you know, you know, I know St Louis so well we get a lot of deals I have so many connections boots on the ground already. Let's see what we can do and Michael already has some experience with syndications and you know he's like yeah, you know let's do it and you know, like literally like a week later we found we found a deal one and it was going well the seller didn't that wasn't given us a lot of details so we actually ended up finding another deal almost immediately after that which we are actually closing on this this week or signed documents for so it's 2014 though almost about $2 million which we syndicated got our investors you know met with a ton of people man it was way more work than I would ever ever dream of we did all within like you know two months we had to do and I love it though i mean i loved it so
Brian Briscoe 32:34
that's the secret about this business it is a lot of work you know i mean if it was if it was easy they call is passive investing because we're not yeah so yeah, very active that's for sure. Yeah. And I've been been talking with you know with your partner more about the deal and sounds like you guys have done a bang up job so far you know getting in our contract due diligence capital raise everything out so I'm excited to see how this deal goes
Nick Haraden 32:59
yeah we got really we we got a great deal and we did our webinar and literally within two hours we had our full raise we actually raised almost a million dollars worth soft soft commits and then we didn't even have to go back to people I mean the we did first come first serve the first I think it was like eight people or whatever they all they all signed and sent their money it was yeah it was a dream come true and that end a lot of stress but I mean oh yeah yeah staying on so 1am working on my websites back in you know looking over numbers you know weekly calls with Michael I mean it was crazy but I loved it I mean it's much better than you know going to work which I'm still doing Don't get me wrong but you know, it's something I could get up and actually enjoy my family you know, is is on board and yeah, that's pretty awesome.
Brian Briscoe 33:50
Alright, Nick, you know what, we'll bring you back on you and your partner back down to talk about that deal specifically and I think that'll be fun to dissect here on the podcast but my question for you that everybody gets on this podcast is what is your big burning? Why?
Nick Haraden 34:04
Yeah. Man it's I feel like you know, it's a reoccurring one but you know, family and time you can't beat it. I was recently talking to someone that well my wife's a nurse so I she has some some some friends that work with some elderly people as well and you know, they they always you know, they they talk and say you know what do you wish you had What do you wish you did differently in your life or you know, like what, like just you know, just talking they say I wish I had more time and it's like man at one point in my in my career I was driving from 7am to you know, getting home at 6pm and that wasn't that long ago and you know, going to work driving the commute you know, driving the you know, 45 an hour each way and missing like you know, a whole day i mean i'm, i'm working at home now which is great. You know, never want to go back to work because like with my family so you know, our you know, Are my burning wise, you know, be there for for my family and be able to, you know, not miss one event at school or soccer practice or dance lessons, you know, whatever it may be, and then, you know, have, you know, have that childhood, you know, for, you know, have that, that upbringing for my family that I was able to be lucky enough to have with my family. You know, my mom was home a lot, and my dad worked a lot. But you know, he was still around, but you know, having someone there always and, you know, being able to be lucky enough to be there, you know, as they get older, and, you know, once you know, each step of the way, so
Brian Briscoe 35:38
yeah, that's huge. And like you said that that's a recurring theme on the big bring why question, I think it's for really good reason. But, you know, that said, Nick, we got David on the phone on the phone. That said, Nick, we got David on the call with this point you want to ask him?
Nick Haraden 35:55
Yeah, David. Like I said before, I know, I appreciate your story. And I'm sure there's more questions that I could ever think of that. But you know, one of our senses, you know, we are closing on this 24 unit, I'm gonna be, you know, asset managing this. And, you know, one of my main questions is, you know, what didn't, you know, go into that first deal that you were syndicating that you were really like, you know, you were in charge of everybody's money, you know, it's not just yours anymore. It's your investors, you know, you're responsible for getting people safely back their money more, you know, on a timely basis. Like, what, what really did you or what kind of advice do you have? Just to kind of get in on that first one?
Unknown Speaker 36:36
Yeah, no, I think, definitely, for me what I experienced that I think there's a big difference for me, when it went from just buying a deal that was ours, to taking invested money and owning a deal with investors because yes, it's, it's a different level of responsibility, right? If I lost my money, I lost my money. My wife and I would have more if and I would have words out but you kind of build your reputation with this business. So I would say you have to take care of the basics right. And I think things that people sometimes kind of miss sight off, there's there's a few expenses that are not kind of smooth, right? So there's things that are, you know, like your insurance bill, your tax bill those pop up at on time, so make sure you have those escrowed or at least make sure you're accommodating that that expenses coming. Similarly, make sure you have kind of your operating reserves, I think those are things that people kind of put in their formula and say on deposit to replacement reserves. But oftentimes, when you're in the heat of the moment, you don't you don't necessarily put that money away. Make sure you do try and put some money away right every month for unforeseen things, if it's a roof or Plumbing Repair and those kinds of things. That's kind of like the basic stuff, right? I would say on your first few deals and really any deal that things that we do right? If we have people's money in the deal we pay ourselves last right? So we make sure that we even even though this may not be in our legal documents, right? I make sure that everybody gets what we projected at least right as long as the deal is going well get that minimum to them and maybe a bit more before you pay yourself right? So just really kind of have that ownership mentality of this is a longer term business right? So you're building a reputation and I mean, you're not going to make your money on your first deal per se right if you if you take nothing home from that first deal and you return money to investors as promised, you're going to have a ton more deals right? I guess is the way to think about it.
Brian Briscoe 38:38
Yeah, very, very much a reputational business and we've got a property where you know we haven't taken an asset management fee because you know we're we're we're very close to hitting our projections and we want to hit the projection so that asset management fee has gone straight to our investors so i think that's that's we have the absolute same philosophy you know, we want we want repeat investors more than anything
Nick Haraden 39:00
right? Yeah, I think when you know we've been meeting with investors you know, since we like figured out we want to do this you know, per sec you know, regulations and everything of course but you know meeting with investors and you know, you could talk about it all day but you know when the day comes that you're signing on the dotted line you really got to perform and I think that's my my biggest thing you know because I'm you know, I love making these you know relationships with people and you know I want to deliver on what we've been promised you know telling people and you know, talking about you know, this deal we know it's a great deal we know it's going to do well we just I you know it's just that that you know thing in your mind you're like Alright, what's gonna go wrong what's gonna go wrong You know, like trying to go through every aspect So yeah, I think having those reserves like you said, it's gonna be like, you know, the main thing which which we do have which is which is good.
Unknown Speaker 39:53
Yeah, just build, build up those reserves. And I mean, you can always you can always send Back to investors right but especially I think for a deal that is new you gotta almost want to cycle through a whole month so I'm saying month a whole year worth of expense isn't the deal right so you want to make sure you understand what happens in the winter months in the summer months etc seasons before you get super comfortable I think some people that that have do come through they see the first three months of performance they're like automatically assume everything is going to be the same way for the next nine months you kind of just want to watch that a bit longer
Brian Briscoe 40:30
until you get the snow removal bill you know and then it's just like I paid how much for that you know? Yeah, exactly.
Nick Haraden 40:37
Fly out there and get that done myself. Yeah, exactly. I
Brian Briscoe 40:41
mean, I'll buy a shovel fly out there and oh my goodness but yes, some some Metro some areas have that on the have to pay for that others don't. So if you're lucky you don't
Nick Haraden 40:52
in David, stay on Stan on this topic. And then I'll get into the next one where how to grow a little bit. But like, What do you wish you did differently on your first syndication deal? Once you got under contract? Is there anything that sticks out? Or maybe everything you did wrong worked out to be better in the end? Because you learned from them? But is there anything that you wish you did differently on deal one or two with investors?
Unknown Speaker 41:18
Um, no, I we were I guess, fortunate enough not to hit any major snags. So from that perspective, no, I think you want to, you want to be super, I guess diligent with your numbers. And I think if anything, I could say, just over communicate, right, especially on your first deal. first few deals, just just communicate extra. Right? If that means, I mean, if every investors got a different, some people like we never hear from right, like I said, like, we created like this massive update. And then literally, like one person will respond, say thanks, or one person will have a question. I'd rather have that than you know, people are kind of guessing what happened. So for example, we closed on a deal in Mississippi this year. And since we closed I've been to hurricanes, right? So one of one of the one of the my partners on that deal. He texted and said, Hey, this text came from my mom. And the text is basically his mom is sending this to him saying, honey, have you talked to your property manager? There's this huge, like flooding happening and based on the storm, like, are you sure your building is okay? Right? He's like, I mean, guys, if my mom has like this concerned and not sure what's going on, I'm sure other people will that would just need to send out a release, right? And just say, yeah, everyone, by the way, either happen, just letting you know if you Bush's were knocked over. But I mean, if it's two, three lines saying Have no fear, everything's good. And that's better than you know, people guessing. And like you're not saying anything. You may have not even been on even crossed your mind, right to say, what are people thinking about? Right, but it's better to over communicate, I guess is my
Nick Haraden 42:55
point. Yeah, that makes sense.
Brian Briscoe 42:58
We got time for one more question. So you know, if you got we got a silver bullet in there, and you're waiting to fire, now's time.
Nick Haraden 43:05
Yeah, I think, you know, how did you grow, grow bigger for your next one? Because we want we want to get bigger on our next one, you know, we want to, we want to double this one up. You know, we feel pretty confident with what we're doing. Like, what do you take? What steps do you take to get to that next level?
Unknown Speaker 43:24
Yeah, so we have a, we have a very, we have a unique approach to growth, our approach to growth says, don't grow too fast, which may be counter to what many people think. I think, again, I want to be very measured about the things we do, right? So I think we went from 42 or 48. We, I mean, it's not an all linear, let's double and double and double the number of units. I would say, you want to make sure that when you grow, you have the right people on your team to take on the growth, right? So if that is Investor Relations, right, maybe when your first deal you have like you said eight people, maybe you can communicate with those people around but if you grow that to, I don't know, 30 or 40 people, you may have a lot more questions to answer, right? And you don't want to start developing a reputation where people are like, well, I'm making team like, they don't really get back to me, right? So you want to make sure that you grow in a very thoughtful manner. I'm not saying that. That's bad. I mean, doubling if you're doubling from a $2 million deal to $4 million deal, restaurant, you're fine, right? I guess my point is just try to make sure that you think through the various tiers and the various tasks to and make sure you can do them well, if you can do that, all of those things, well, then, I mean, grow as much as you like. I think the other thing too, that I want to caution people is where this place in the market where I mean nobody really knows where we are in the cycle, right? It's been going up for a while. I'm not saying it's the top I'm not saying can't keep on going up, but like just looking at valuations. I'm starting to question some of the values I'm seeing. And so just try to make sure you understand what your exit strategy is, right? So as I speak to folks that are looking to invest, one of the things that they ask them is okay, so what happens if the market turns right? What do you do with the investment? What does that do to your projections? What habit? What happens if the cap rates just stay the way they are, they don't compress any further. And what happens if, of course, things continue? Well, you want to kind of think through all those three scenarios, and make sure you have you you kind of want to have some kind of a plan for what happens, right? And most of what we do is we like I said earlier, we invest for cash flow. So our plan in a down market is to just hold, right because if we if we have positive cash flow coming through, and as we can raise rents ever so slightly, not too many people will be upset if we're returning 10% cash on cash. So just think through those.
Nick Haraden 45:55
Alright, great, pretty sure.
Brian Briscoe 45:56
Solid advice there. Alright, so last question for both of you as we wrap up. And David, good to go first, how can listeners learn more about you?
Unknown Speaker 46:06
The best way to reach us is a website which is cape Sierra capital, it's ca p e, si e r a capital COMM And while you're there, you can check out our ebook. It's the personal cash flow formula. It's cape Sierra capital slash cashflow. And I answer emails as well.
Brian Briscoe 46:26
Yeah, and I would assume cape and Sierra have base are pointing to your roots.
Unknown Speaker 46:32
There's actually a cape Sierra in Freetown. So if we times the capital and free time is used to resettle slaves from the North American War of Independence, the Brits promised that any slaves that fought on the British side against the US independent movement would be resettled in this place in Africa where they're from and they named a capital Freetown and there's a there's a cape they're called cape Sierra
Brian Briscoe 46:55
All right, that's something I probably wouldn't realize without knowing your background but very very very good. I mean, I like it love the the name of the company really shows you reach there. And Nick, same question for you. how can listeners learn more about Yeah,
Nick Haraden 47:10
yeah. The best way would be to go to our website is Hudson Hall properties calm so h UD so and h a l l properties calm. And we have a syndication guide on they're a bunch of information, kind of links to our Instagram, Facebook, you know, all that good stuff. So there's the tons of ways to reach us through that website.
Brian Briscoe 47:35
Alright, awesome. Hey, thank you so much to both of you for your time today. And hopefully we'll talk soon.
Thank you for listening to the divergent apartment investor podcast today brought to you by four oaks capital. If you'd like to know more about how to invest in apartment buildings or want to be a guest on our show, visit our website at four oaks capital comm slash podcast or email us directly. If you're still listening, you obviously like the show. So pull out your phone, app, subscribe, and leave us a five star rating on your favorite podcast app. And we'll see you again next week.
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