When to Trust Your Gut with Steven Libman and Kaitlyn Nortz

Updated: May 31

Episode 131 of the Diary of an Apartment Investor Podcast with Steven Libman and Kaitlyn Nortz, hosted by Brian Briscoe. Transcript by Otter.ai – please forgive any errors.

Listen to the episode here

Brian Briscoe 0:00

Kaitlyn, we got Steven on the line here. What do you want to ask him?

Kaitlyn Nortz 0:03

If you were a professor real estate professor at Boston University what two to three real estate classes? Would you teach what what the topics the tax law around real estate?

Steven Libman 0:10

Generally, I mean, the LP investor, the GPU investor, I don't care where you sit in the capital stack on these deals, understanding the tax benefits and how that pours gasoline on your investment returns. And then second from that is, it's a negotiation class, right? like everything's a negotiation because if you don't get on the same page with whoever you're talking to, a deal doesn't get done.

Brian Briscoe 0:47

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 episode number 131. Part of our Ask the Expert series. Today we bring on an experienced investor Steven Libman and aspiring investor Kaitlyn Nortz. Keep listening to find out when to keep digging and when to just trust your gut. And now this show Welcome to the diary of an apartment investor podcast. I'm your host Brian Briscoe with Four Oaks Capital. 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 us right now. We've got a man with a ton of experience in this business and other real estate ventures, Steven Libman and a very motivated aspiring investor Kaitlyn Nortz. Steven graduated from Boston University in 2004 spent 10 years in real estate versus a broker than as an investor, Steven endeavors to partner with growth oriented like minded partners and investors to assist them in achieving their goals of passive income and generational wealth creation. He currently manages, owns manages over $150 million in assets. And I'll put the rest of bio in the show notes. And I'll let Steven tell you about all the other wonderful things that he's done. So that said, Steven, welcome to the show. Thanks, man.

Steven Libman 2:20

Thanks for having me on. Yeah, that gets a little long winded. I got to shorten that, huh? You know, yeah, well, we can we can, like,here's all the stuff I do. Know, it's all good.

Brian Briscoe 2:23

You know, things I do the same thing. You know, I'm on podcasts and and BIOS but you know, now that I'm now that I'm actually reading the BIOS, you know, I've done like three bullets, you know, but that's absolute waves. It's good. Yeah, a whole bunch of stuff there to unpack. And you know, for anyone listening, definitely head down to the show notes. Check it out. Lots of goodness in there. But, Steven, go ahead, and why don't you introduce yourself?

Steven Libman 2:45

Yeah, so I am one of the managing partners of integrity holdings group, we are a multifamily and self storage investment company. Those are the two asset classes that we live in for volatility reasons. And we could touch on that later. But I started in residential real estate, as I think a lot of us do. I was a broker I wasn't well as an agent, right showing houses. And then I was a broker or managing an office and my niche in that space was finding good deals for investors to flip quick story, one of my last deals I ever did, I made this guy a bunch of money finding a bunch of good flips. And one of our closings, he held my feet to the fire because a pool ladder went missing. I came out of my commission, it was $600. But it was the best $600 I ever spent. Because that was the day that I decided, I don't want to work for anybody else anymore. And I started integrity holdings group with my partner, Travis. And then we grew that residential business 200 to 150 flips a year, got kicked in the teeth a lot along the way, but figured out some systems and processes and hiring and our why right? And that's kind of the biggest thing that drives the business and then recognize that this is a very transactional business, right? You do a flip, you get paid once and then you have to go find another flip, or another wholesaler whatever you're doing in the residential space and not only is a very transactional where you get paid once, but you get killed in taxes along the way. Yeah, it's it's it's not tax friendly to flip flip houses. It's not your ordinary income tax when you're in I just moved to South Carolina a little bit more tax advantageous than New Jersey was but up in New Jersey, I mean, we were paying upwards of 50%. And now with the potential new tax laws coming down, they said that New York in New Jersey could be 60 to 63%.

Brian Briscoe 4:32

Oh my goodness. So

Steven Libman 4:33

like, it just didn't make sense. And one of our mentors said, Hey, you should start investing some of that active capital into some passive deals and get some of that depreciation and I said, I don't know what that is. And he said, well go read tax free wealth right. from Tom wheelwright is Kiyosaki is a CPA advisor and read tax free wealth and recognize that the tax code is not necessarily a book of rules that I should be afraid of, but a playbook on how to pay less taxes if I use a proper And, and that's how we got out of residential and into commercial. And since then we've built three ground up self storage facilities totaling 350,000 square foot. And we have a couple 100 units of multifamily in Dallas and Columbus and we're buying a 384 unit right now on Daytona Beach. So that's been the evolution of the business. And and that's kind of the sweet spot that we sit in now.

Brian Briscoe 5:24

Nice. So yeah, there's tremendous tax advantages to this business. I just talked to a realtor who very similar to what you said, with flips, it's a transactional business. The way he put it is, I go through closing, you know, we celebrate, you know, I always bring champagne out to everybody. And I wake up the next morning and I'm unemployed again. And I've got to start working to do it all over again. But yeah, it's I think that's something that a lot of people look for is get away from the transactions and get more towards something that's going to produce, you know, multiple, you know, checks along the road for accents you're doing right now. So just curious in my wife is from Lexington, South Carolina, where in South Carolina, you guys land.

Steven Libman 6:07

So just outside of Hilton Head in a town called Bluffton, it's right over the bridge. I literally went on vacation the week before Christmas, never been down here. And being an investor. We always are looking at Zillow, right? So we're like, this looks like a good deal and a nice community. Let's go take a look and make an offer and buy it and go home and sell all our stuff. And now it's exactly what we did. And now we're moving with three small kids. And yeah, it was impromptu, which is not my wife. That's very much me. I'll jump and grow wings on the way down my wife. We prayed about it. She had peace. We pulled the trigger. And here we are. Nice. Yeah,

Brian Briscoe 6:42

I love South Carolina. It's where we do most of our investing. And incidentally, two weeks ago, we spent the weekend Myrtle Beach, you know, so that's that's kind of our annual vacation spot. Awesome.

Steven Libman 6:53

Well, we'll get to play some golf, then you can head out here.

Brian Briscoe 6:56

Absolutely. I mean, Myrtle Beach has some great golf. Hilton Head has some great golf. You know, either way, when I'm down there, you know, I'll look you up. And we'll definitely, definitely hang out. But sounds good. All right. So So back to multifamily ventures. So you say multifamily and self storage? We we don't talk a lot about self storage on this podcast, I'm going to deviate from my my normal. Tell us why you like self storage and kind of kind of compare it to multifamily if you would.

Steven Libman 7:25

Yeah. So when we got into this business, we were looking for something that would be less volatile. I mean, even the even the single family space, it was pretty volatile. Right. And when it rains, it pours. And when it's a drought, you know, you're still burning marketing dollars in cash. But there was a lot of ebbs and flows in that business. So, you know, we were tired of doing that after a decade, we said how do we figure out the least volatile asset classes and we just dove in started doing some research. And during the last downturn, Self Storage was the only asset class to actually grow year over year through the downturn, you're talking the 2008 downturn or COVID. downturn? 2008 2008? Yeah. So you know, when that meltdown took place, Self Storage actually increased 5% year over year through the downturn. So we like that. And Forbes calls it the recession proof asset class, it's getting pretty crowded now. So it's harder to find good deals, but how's it like multi and multifamily? Everybody always needs a place to live, right. So we have A, B and C class assets, some value add. But those are the types of deals that low volatility I think the stat was in 2008, it was a four and a half percent mortgage default rate, which is what created the downturn. And in multifamily was like point 4%. Yep. Right. So defaults were. So those are the two asset classes that we like, because of the lack of volatility. We like consistency in the portfolio. We're building long term generational wealth here. So we don't need to hit homeruns on every single deal. So that's why we chose those two.

Brian Briscoe 8:48

Nice, nice. And the one thing that I've heard, and it kind of makes sense with the Self Storage, asset class, you know, things are really good. People buy a lot of stuff. And if they buy a lot of stuff, it goes into storage facilities, right. And when things are really bad people downsize, and then all of their stuff that they bought when times are good, goes into storage facilities, but you know, it's so a lot of macaroni art. Yeah, absolutely. You know, yeah, something, you know, I'm active duty military. And one thing that I think I'm somewhat grateful of, it's one of those double edged swords, but when you move every two to three years, you know, we tend to go through our stuff a lot more frequently. So So purge stuff, you know, and haven't had to do the Self Storage

Steven Libman 9:31

yet, but I'll do it from from, from a personal perspective, don't do it from an owner perspective. Come with all your stuff, right, but

Brian Briscoe 9:39

and parking your spots, you know, not not, not their spots.

Steven Libman 9:42

You know, we'd like to say it's a sticky business, because once somebody gets once you get them in the door at 100 bucks a month. It's one of those fees that just gets charged to them every single month and they don't come and visit their stuff. Forget about it, right. It's like you forget what they have. But yeah, it's a sticky business in that You know, there's not a ton of turnover but you know, college kids moving in and out, obviously. But yeah, it's it's an interesting business and price per square foot rentable is almost comparable to multifamily, really. But without all of the kitchens and bathrooms and, you know, plumbing issues and roofs and all that stuff, right. So it's we just we built three ground up. So you know, it's steel in concrete.

Brian Briscoe 10:22

Yeah. Yeah, pretty straightforward. Well, you know, as far as the ground up so I listened to one of your podcasts the other day where you talked about one of those and I encourage everybody podcast let me if I got it right, I had it right here from Wall Street to Main actually going to tell us what the what the the title is, cuz I just I just screwed it up. Yeah. So it's free from Wall Street free from Wall Street. Okay. I just gave you somebody else's podcast. That's right. I'm sure that one's great, too. Yeah.

Steven Libman 10:48

Yeah, free from Wall Street, because my dad lost half of his money in Wall Street in the last downturn, but then he passed away, he didn't get to ride that wave back up. So you know, we always like to say it's a game of musical chairs, you better hope that when the music stops, you have a place to sit, but that's what Wall Street is. And, you know, in terms of researching lack of volatility, and why we don't put any of our money in Wall Street unless it's gambling money. I do. I do take a couple of Gamble's on like Tesla and Zoo legalized

Brian Briscoe 11:15

gambling. Right. But absolutely.

Steven Libman 11:18

But it's not predicated on anything real, right? I mean, it used to be predicated on earnings and stuff, but now it's whatever Ilan wants is gonna drive the market, which I don't, you know, I can't invest in that. Maybe I'll make some money in that. But I can't invest long term for myself and for my kids retirement, to figure out if that's gonna be sustainable. Right.

Brian Briscoe 11:38

Yeah, you know, and I have the saying, I have a lot of misgivings with the stock market. And I don't know if it's fortunate or unfortunate Time will tell. But you know, I've got very religious leaders deposited money every month into a, you know, government sponsored retirement plan, you know, so that's the only place I got,

Steven Libman 11:55

Yeah, seriously, military guys are the only ones that I'm like, Yes, go do that. Right. Because it's just a safe place to put it. You guys have different options than a lot of people in 401k is like, they're not driving you to buy mutual funds. Particularly. It's so yeah, we have a lot of military investors and partners. And yeah, I mean, they recognize that they should do it. Because it's, it's easy to do.

Brian Briscoe 12:18

You know, and that that's, that's why I did it. It was you know, 20 something year old Brian, who made that decision and put it on autopilot. And I think that's a good thing to put on autopilot. But at the end of the day, you know, if if 40 something year old, Brian was, you know, in 20, something year old Brian shoes, you know, I think I would have invested my money differently is all you know, so I would I would focus a little more on real estate and a little less on on the markets. But yeah, for sure. But, I mean, I've got money in there now. And I'll be able to pull it out when I retire in 97 days now. And I know, right? Yeah, that's, yeah, that's one of the first things I'm gonna be doing is, is rolling it over into a solo 401k. And, you know, dropping it in somebody else's syndication. So anyway, I'm almost as excited for that as I am for retiring. So, yeah, but, absolutely. Anyway, so one question I like to ask everybody, Stephen, and this is, you know, kind of peering into your soul, you know, what's your big burning? Why? What's your motivation for, for doing all of this.

Steven Libman 13:26

So our tagline is invest with purpose. And we, so we're a Christian company, we are trying to build the kingdom for Christ. And what that means is love on people solve some of the hurting in the world, and try to be kind of a light in a dark place, right. And very simply, what we do is we carve out a percentage of cash flow, and ownership in every single deal that we do for a nonprofit. There's no shortage of need in the world. And we'll give probably over seven figures over the next three years just to nonprofits that we've already partnered with in some of these deals. So that's our Y, right? We want to impact the world in a positive way, we want to leave a legacy for ourselves, for our children, for our children's children, in a way where we can say, wow, you know, we've had a lot of fun, we've done a lot of cool stuff, but we've really left a mark and impacted people in a really positive way.

Brian Briscoe 14:16

Yeah, and when you do it that way, when you when you're leaving the legacy for your kids, it's not just the legacy of wealth, it's, it's the legacy of giving as well, you know, and hopefully, you know, and I wish the same thing for my kids is, you know, hopefully, you know, when when they grow up, and you inherit some of what I've worked for, they're giving as well, and my, my wife and I also contribute to, you know, our church, and we were just talking last week about you know, let's, let's see if we make a six figure per year donations to charitable organizations, you know, and that's so yeah, I love what you said, you know, immigration resonates a lot with me. Yeah, I mean, six figures, you know, but to give six figures annually, you've got to be making you know, you got to have more than six figures coming in the door. attracts,

Steven Libman 15:01

well, your you can overflow, but you have to be filled up first. Right? And that's that's kind of the rule. And as our income grows, your budgets don't grow necessarily for the stuff you want, right? You get to a certain place and you recognize that, okay, we're good. How What else can we do to impact saving girls from sex trafficking in the Philippines digging wells in Western Africa for people that don't have it. And you know, our whole team is, you know, we get together every year, every quarter, and we're talking about the nonprofit's that we're going to support that year. And we're all rowing in the same direction. We know that the day to day is multifamily it's and what I love about multifamily too, is not only do we get to give in the abundance of the deal flow, but you're impacting all of those families that live in your complexes, right? We're buying 384 units with almost 1000 people, and you get to impact their lives now, is it going to be in a positive or negative way? Right is up to you as the landlord. So that's kind of the the route that you get to really touch people in a bunch of different ways through this business. It's amazing.

Brian Briscoe 16:03

Yeah, and we also buy the B class and C class and you know, we've put dog parks in just about every every apartment complex that can support it, you know, and that's that that's a huge deal. We do that to its playgrounds, I mean, not a lot of people use playgrounds, and a lot of people tell us it's not cost effective. But for the handful of mothers that have the small kids, I can tell you personally, when we move one of our criteria is we want to be close to a playground for the kids. We don't go there a lot, but the playgrounds really help and I again,

Steven Libman 16:33

yeah, we do the same thing. Brian, it's Yeah. And yeah, it's a simple thing, right? We try to make some outdoor hangout spaces too, right? Put some benches out with some, some grills, grills and things like that, because you can create a community there, right. And if you want to talk the monetary side of it, the more community based your community is, the less likely it is that people will move out and your turn over

Brian Briscoe 16:57

here your tenants are Yeah, there's not a direct, you know, if you look at rents, you know, you put a playground up, it doesn't really affect your rent levels, like other things, too. But I mean, you hit the nail on the head, it affects your turnover rate, you know, you have a higher renewal rate, which means your turn costs go down and your vacancies go down. So there's definitely a monetary aspect to it as well. And it doesn't cost a whole lot, you know, to put up, you know, 100 meters of fencing for a dog run or dog. Yeah, so

Steven Libman 17:28

absolutely. But and you get to charge them pet rent and pen security.

Brian Briscoe 17:31

Yeah, absolutely. Yeah. And it attract increase your noi. Yeah. So yeah, well, let's let's talk, we talked kind of in a little bit of very vagueness about some of the deals or project, let's dive in specifically about one of the projects that you're proud of, or just want to talk about,

Steven Libman 17:47

we could talk about those. But let's talk about when we got our teeth kicked in on.

Brian Briscoe 17:50

Oh, nice. Even better, you know.

Steven Libman 17:52

So when we started in this business, we were mostly on the capital side. Right. So we were fundraising for sponsors that had a track record. And that was the fastest way to get involved in the business, from our perspective was we had some money raising capabilities because of our single family experience. And so we did the first three or four projects nearly, I don't know $45 million worth of assets that way. And then we I don't know what it was, maybe, you know, there's always that little voice in the back of your head that says, No, you should be the operator, right? You should raise all the money and be the operator, you'll keep the lion's share of the deal. You'll be inconvenient piece of the pie. bigger piece of the pie, right? Yeah, well, that comes with its downside as well. Right. Asset Management and property management for those of you who have not done it yet, is a bear. Right? So you have to have systems and processes and people to asset manage what is asset management? And how does that relate to property management? Well, in this deal, 66 units, c minus property, we took it down because there's good upside gentrification in the area. How hard can it be to turn the tenant base? Well, quite hard, actually. Yeah, a lot of crime in there. We put cameras in and the things that we saw on these cameras. I mean, it was just, I can't believe what we saw. It was horrendous. And, you know, we have families that are living in there. So we are trying to make it safe. So now we have 24, seven, you know, guarded patrol and returning the tenant base and then COVID comes and it was difficult season, we got this thing down to 67% occupancy, right and turn on all the bad apples away and getting new tenants in and now we're getting spending capex and it finally turned around, but it took about a year of real hard work and a lot of learning the process on how to asset manage and by the way, when you ask your property manager what their plan is, that's not the plan. Right? your property manager is not telling you what your asset management plan should be. Maybe they will after you build relationship with them, but don't take their word for it out of the gate like we did, because it literally just lights money on fire. So we've been in this deal now about two years, and we are under contract to sell it. And we are giving the investors exactly what we promised them in the pro forma in terms of return profile, which means we actually are taking a little bit of a haircut on the deal, not like we have to kick money into the deal. But we're taking less than we expected to make on this deal, just so that we could sell it. And the reason that we're selling it is because another operator with a couple 1000 units in that market, who has the asset and property management experience is going in there, they're taking it over. And thank God, we bought it well, because now we're getting the returns back, we're getting the investor capital back returning that into another project that's more cash flowing and stabilized. And we have learned our lesson that we don't necessarily want to do these c minus d class properties in a little bit of a war zone area. Because we're not that operator. And there are those operators out there that do well, but I'll be glad when this thing closes, oh, I'll just be honest, it's, you know, it's the only business by the way, that I think you can make this many mistakes and still make money. So thank God, right, we're still safe, and everybody's making money, but it was, we built ourselves a job. And that's not why we got in this business in the first place. You know,

Brian Briscoe 21:16

a lot of people talk about the, you know, buying at a higher cap rate, you know, and, you know, cap rates right now, or I think, almost ridiculous levels, you know, when you're looking at some of the major metros, and I think there's, there's a lot of people who say, Well, I can still get an six cap, well, an eight cap or maybe a nine cap, if I do a C minus. And they look at that as a good idea. But I'll I'll be, you know, second person on this podcast and tell you probably not a good idea, unless you are that type of operator, you know. So yeah, I'd love to tell you a similar story. And we actually have a similar story. But you know, we're turning that property around and it's been, it's been a headache, we are going to be able to give our investors the returns that we promised. But for us, it's been a headache is really the answer to that. So. So, Steven, this is a question that I also really love, you know, what's next for you?

Steven Libman 22:14

So we've pivoted back to our original model, which is partnering with institutional grade sponsors that have 40 years experience, 30 years experience. And we basically are becoming the investor first, right? We go into these deals, looking at the operator looking at the market, looking at the deal, doing the underwriting, and then saying, Is this a deal that we're going to put our own corporate money in. And once we decide, yes, we're going to do that, then we open up to our investors and invite them to come along for the ride with us. And then for that, we manage the managers, right, we hold the their feet to the fire, and we are looking at the monthly reports. And we're looking at kind of the budget versus actual variances. And it also gives us the lifestyle that we're looking for, because we're not in the day to day, we're not calling the police, when we see something on these cameras that we don't want to see we're also not buying that kind of building anymore, right? We're buying a $42 million asset in Daytona Beach right now solid Class B solid cash flow, solid six cap. And it's a very different type of asset. So what's next for us is more of that, right? Where we want to live in the 40 to $60 million asset range. We want to do four to six of those a year, depending on capital raising capacities. And eventually we want to be able to do these deals to where we're not carving out a piece for the nonprofit, but we're just keeping a small piece for ourselves. And we're doing deals and giving them away.

Brian Briscoe 23:36

Nice. Yeah. So so looking at your progression, you know, once you got into multifamily, you started raising capital for other people's deals, decided to do a GP or a sponsorship of your own. And now you're back to raising capital. So

Steven Libman 23:51

yeah, we did three deals, by the way, I mean, over 200 and something units where we were the lead sponsor, that one was the hardest. The other two are, we've learned a lot and we're, we're okay there. But also, it's still a time suck for somebody in my company, right. And we want to keep the team lean. And now finding these institutional grade sponsors that have all this experience. We're basically stealing those guys from wall street that the, the guy that we're working with on this next deal has been historically funded by rates. He loves the free from Wall Street idea, because we're giving higher returns to our investors than Wall Street is. And we're able to keep more of the returns in the deal versus giving it to Wall Street. So

Brian Briscoe 24:30

helping them become free from Wall Street. Yeah, that's right. podcast plug right there. If you guys didn't catch nailed it, but yeah, and if you're watching the video, you may have seen me pick up my phone to actually double check the title before I threw that out. But that's that's all right. Anyway, thanks for thanks for sharing your story. We're going to shift gears right now and bring on Caitlin Caitlin nortz is a former college and professional volleyball player turn sales professional, he loves to Run Cycle play tennis. She lives in she cago tundra is how she puts it. Hey, Caitlin, Is it cold? Is it cold there right now?

Kaitlyn Nortz 25:05

It actually kind of is we took a turn and then we're right back where the 30s Today I think,

Brian Briscoe 25:11

oh geez. Yeah, I mean, I I've got a jacket on. I woke up this morning and I identified with summer and so I put shorts and a polo on but the weather. The weather did not identify the same way as I did. But anyway, I'm gonna I'm gonna finish your bio and then we'll we'll discuss them a little more, but so lives in Chicago, she fell into real estate as a mentor suggested that she turned her primary residence into a rental. She then got her broker's license in Illinois joined a condo board, lp 72 unit and is now looking to GP in the space while still pursuing LP opportunities. So that said, Kaitlyn, welcome to the show.

Kaitlyn Nortz 25:51

Thank you. Thanks for having me. Brian. Steven, I'm happy to meet you and congrats on the move to South Carolina. I lived there for seven years, and it was amazing.

Brian Briscoe 26:00

Oh, cool. Yeah, yeah. 80 degrees today. You guys are Oh my god. Yes. I'm gonna play golf later. So, yeah, my kids are in the water two weeks ago. You know, I mean, it was it was beautiful. So we're in South Carolina. I mean, let's have the south south carolina love fest. We're in South Carolina. did you live?

Kaitlyn Nortz 26:17

So we were in a really small town called Greenwood, South Carolina. I think it's like 45 minutes from Greenville, which a lot of people know. But yeah, my dad was transferred down there when we were little. So we spent seven years there. And then I spent another five in North Carolina. That was more like in my adult life.

Brian Briscoe 26:36

We just looked at a property in Greenwood actually. So I know exactly. It's kind of Yeah, I mean, it's funny, small small world. It's it is a small town and it's we passed on it but you know, it's it's kind of like if you put Columbia Greenville and Augusta on a map green was kind of like right in between all three where it's like 45 minutes to an hour to to all three. So yeah, Greenwood I know the area. Well, I love South Carolina. It's a nice place. But anyway, Caitlin, let's let's talk more about you. Tell us about yourself your background in history and kind of walk us up to what got you really super interested in apartment investing?

Kaitlyn Nortz 27:15

Yes, sir. So I grew up in a big Midwestern family, um, my dad's like one of 1240 cousins on that side of the family. And then just like, my life was full of sports, like playing three seasons of sports, and ended up getting a college scholarship, and then played for about a year in Spain as well. Then after Yeah, and I decided, you know, I think it's time to like, come back to the states get a corporate job, climb that career path in corporate and I went to limited brands got a job there. And I just was super unhappy. So transition got into sales, which was like, as much as an entrepreneur I felt I could possibly be without owning my own business. And my family also like said, you know, that'd be a good next step and a couple of mentors. So I listened to them and then eventually bought my first property. And they said, you know, you should put 10% down on this condo, buy the one beside it, rent that out. And like, this is the biggest paycheck I've ever heard the biggest check I've ever wrote. So I can't imagine doing too and just being a property manager and owning a place, it seemed overwhelming to do solo all while like taking on a new job. Um, so fast forward, I bought the one property moved out really quick, my job transferred me rented it out, it's been a rental for since 2017. I'm actually getting ready to sell it in a couple months, and I'll make like 50k on it. So it's been an amazing accidental purchase, and just cash flowing the whole time. So as I'm learning this, I have these side by side investments in the market, and I'm watching what's happening here alongside the accidental real estate. And I just, I've really enjoyed like not only just the actual asset class of real estate, and there's so many ways to invest within but I mean, financially, just create it can create freedom, building passive income and whatnot. So, and like you said, Steven, like I can't you know, who wants to sit back and wait on someone's tweets to determine like your financial future. It's just it's an uncomfortable way to live. And rather comical, so

Steven Libman 29:37

terrifying. 80% of Americans, that's how they retire. Yeah,

Kaitlyn Nortz 29:41

yeah, it is. And I've been fortunate enough to like, get some good advice from my mentors. I have one that's a lot more seasoned than I am and he's retired and he he's a Midwestern guy spent a lot of time in corporate live in Chicago, moved to Florida, and he goes, You know, I retired at this time. And I look at myself and all my buddies who retired and those that invested heavily in the market just didn't end up in a good spot. And he spent more in real estate. And he's in a good place. I'm like, there's living proof of a guy that I know and respect, like, I think I should listen. And I'm also firsthand experiencing, like, the difference in what's getting better returns. So that's kind of why I pursued it, you know, some something that,

Brian Briscoe 30:26

that I noticed, you talked about the writing that big check for the investment, you know, and I went through the exact same thing on our first two investment properties, you know, is, is feeling uncomfortable writing the biggest check of my life, but I will tell you, six, 810 years later, those big checks have turned into cashing the biggest checks of my life, you know, and that's, that's really, you know, seeing the cash look alone along the way was was nice. But at the end of, you know, coming full circle on those when when we decided to finally sell them. And incidentally, we decided to sell them to get into multifamily. You know, just cashing those biggest checks, you know, it just all of a sudden, it's a lot easier to write bigger and bigger checks, knowing that, hey, I turned 3205 1000. And then I turned 15,000 into 150,000, you know, so, and yeah, the returns between my real estate ventures and all that money, I've got locked into my retirement account. I mean, it's, it's lopsided. And you can obviously tell which direction is lopsided, because I'm moving into the apartment industry. So

Steven Libman 31:33

well, it's a great, it's a great year to write. I mean, the market made 20% this year, and I actually had one of our investors say that like, Hey, you know, the market did better than this investment. And I said, will it do better next year? and the year after? and the year after? Yeah, so I've been paying the state returns for 12 years, right. But the market can't say that. So that's the thing, right? volatility causes money. But if you just want to look at it in a, you know, through a spotlight or through a particular lens for a blip in time, yes, the market can do well, yeah.

Brian Briscoe 32:03

Yeah. And that's absolutely right. I mean, the volatility is it. I mean, the average returns are one thing, but that volatility kills you. You have a down year, like, you know, 2008 2009, where you lose 20%, it takes you three to four years to get back up to the level you were at prior.

Steven Libman 32:19

Yeah. And if you just do the math, right, I mean, if you lose 20% on 100k, you don't make 20%. And get back to even you get to make 25% to get back to you. And so, you know, but this is this is very basic stuff that I wasn't taught growing up, right. They're not teaching this stuff. I went to Boston University and teach me this stuff in Boston University. Right. So but this is how America is taught to invest. And this is what they're taught to invest in. And, you know, that's, that's part of what we do, right is through these podcasts and stuff is educate people that this is a possibility more people that become wealthy become so through real estate. And this is how you can also insulate yourself and your family from downside risk. Yeah,

Brian Briscoe 32:57

absolutely. All right. Well, Caitlin, I got one more question for you. And then I'm going to turn the mic over. You talked a little bit about how you got in but what's what's the motivation that you have? What's your big burning? Why?

Kaitlyn Nortz 33:10

I mean, as I alluded to, before, I absolutely I think the asset classes fascinating, whether it's multifamily, industrial, retail, I find it all very interesting. But I just I truly think the ability to like create financial freedom for yourself is it's unique in this industry. And I'm drawn to that. So the opportunity financially, nice,

Brian Briscoe 33:37

nice, love it. All right, now comes my favorite time. I have lots of favorite times in this every episode, but I get to say, Caitlin, we got Stephen on the line here. What do you want to ask him?

Kaitlyn Nortz 33:49

Yes, sir. Stephen, I am one of my curiosities is how do you quickly analyze deals? And I'm sure it's been refined and over time. But yeah, I guess just like a cliff notes on how you? What's your five to 10? minute, I'm just gonna take a look.

Steven Libman 34:08

Yeah. So I mean, first, it's geography, right? Is it in a market that we like to be in and why? And, you know, we choose our markets based on growth. So if there's population growth, job growth, and then we're we like that market, right? We're in Daytona Beach, which is that area that MSA is the fourth fastest growing in the country. We're in Orlando, which is the third we're in Dallas, which is the second and we're in Columbus, Ohio, which is the 15th. So first, it's knowing your market, right? knowing why you want to be there. don't invest in New Jersey, New York and California unless you want to lose money. There's a mass exodus from those states, right? Where are they going? They're going to Texas and they're going to Florida. So that's where we invest. Pretty straightforward. And then what what does a good deal look like? So this is a little I mean, there's always a back of a napkin to see if it's a deal. It's, it's trusting right up front and then verifying as you dig into due diligence. So meaning you're looking At the net operating income, you're looking at the expense ratio. And then you're seeing what that cap rate is, and does it fall in line with what you're buying in those mshs, right. So if it's very simply, here's what the net operating income is, if it's running at a 55% expense ratio, then we know we can pull that down typically to 47 48%. Just the economies of scale, if it's already. The other side of that is if this owner is doing all the work himself, and he lives on site, which we've seen those deals do. And then his expense ratio is 32%. Well, that's not a real expense ratio, unless you want to go live there and be the property manager. So you know, it's really just gauging kind of what, what falls within the realm of reason and calling a property manager in that area and asking them what their expense ratio per unit is, is an easy way to do that. Right. So and then once you get more in that market, you know, kind of what those numbers are. But if you have the noi, and you have a going in cap rate, even if it's going in four and a half percent cap rate, right? It's low. But where's the upside? Right? Is there 10 units that have been turned that have $145 rent bump that's being achieved? Well, now I might buy it at a four and a half cap, because I have the upside there. $100 rent bump at a four cap

Brian Briscoe 36:10

is a lot better than $100 rent bump at a six cap. I mean, just say I

Steven Libman 36:14

mean, and that disparity right is gonna get you to that future value. So you know, it's just making sure that people are being honest with their numbers. And so first, we'll trust right, we'll see the, he's cute ci. For those of you on audio, my dog just popped up on the couch. And he's like, seven pounds? Yeah, I often have my kids interrupt these. And it's like the, like the BBC podcast or the live guy or the ladies. So that's how we we typically just underwrite it quickly, right? It's, do the numbers make sense? And do we want to spend a little bit more time digging into it, because as you do, you'll start to find out that sellers are maybe not always as honest as they can be with their numbers. And then when you dig into them, you can find out like, hey, that being said, you know, we have found great deals where they, the seller had like, an insurance in there twice, right to where the yearly insurance premium was in there twice, and we found it. Other people were passing on the deal, because it was like 200k off of the noi. And my partner, Travis found it and he was like, This doesn't look right. So we called and we found out that they paid it. And then they got a different policy, and they were waiting on that 200k to come back. Right. So showing on the paperwork, but it wasn't actual numbers, right? So that extra $200,000 a year and net operating income made it a deal. You know, so when you dig into these things is when you really find the true story. But sometimes you're moving fast, and you have to do a quick back of the napkin and get it under contract, and then go dig in during due diligence. So I hope that's, yeah, that's

Kaitlyn Nortz 37:54

great. One quick little follow up on that one, if the numbers seem to check out and the underwriting looks good analysis is good. But you're kind of 5050 on it for some reason, will you rely on your gut to make that like final decision?

Steven Libman 38:11

Yeah. So you know, we're, so we're actually praying company, right? So we'll actually pray about a deal before we'll put an offer in on it. So but yeah, other people could call that a gut reaction, right? But we actually, we sit down, and we'll pray about it as a company and see, like, does this make sense? Or doesn't make not make sense?

Kaitlyn Nortz 38:29

Like that? That's nice. Um, next question, which fullcycle deal that you've completed, would you repeat, it's got,

Steven Libman 38:37

we don't have a ton of fullcycle deals. By the way, we're only been in the commercial space for three years. So 150 million under management makes us sound like maybe we've been in the space longer than we have. So we don't have a ton of full cycle one we discussed before, right, the kick in the teeth, 66 units in Columbus. And then the other one, we're actually exiting all three of our storage facilities right now.

Kaitlyn Nortz 38:59

I would do those, again, full

cycle, take out the full cycle, which deal that you kind of start with

Steven Libman 39:05

probably the one that we're doing right now. Right? It's it's a Class B 384 units. It's 98% economic occupancy. 50% of the units are already showing the rent bumps and how they were achieved. So we're just going in and showing it off. It's it's a very straightforward deal with the operator that sends me 165 page report every 30 days and a weekly report every Tuesday. Wow.

Brian Briscoe 39:30

That's nice. That's toner. Right. That's Daytona Beach. Okay, nice. Yeah, one of the fastest growing now I do I do a very much appreciate the metro first approach. You know, if a Metro is doing super well, you can expect rising tides, you know, almost across the board, but wow, I love that 98% economic occupancy is hard shit.

Steven Libman 39:52

In a post COVID world, right I mean, so it's, yeah, it's that's why I like it. It's it's a recapitalization. Not even if Full acquisition so the operators already owns it has been there for 18 months knows the asset inside now it's very, you know, we're like we said, we're pretty risk averse. This is a very low risk, a great cash flowing deal. And they're bringing in more

Brian Briscoe 40:13

money to finish renovations. Is that the play on this? Oh,

Steven Libman 40:16

so it's kind of so if you've listened to like how Grant Cardone does his deals, this operator did the same thing he'll go in, he'll plop $10 million of his own cash down and then recapitalize his and get his money back out Jada can continue to pursue other deal flow. Got it? Got

Brian Briscoe 40:30

it got it. Makes sense. Makes sense. Sweet.

Kaitlyn Nortz 40:34

Last question for you, Steven. On if you were a professor, real estate professor at Boston University, which I don't even know if they have that as a major they do. But I got a degree in what two to three real estate classes? Would you teach what what the topics?

Steven Libman 40:57

Yeah, so first, it would be tax law around real estate. I mean, the reason that more millionaires are made through real estate than any other asset class is because we also don't have to pay the incredible tax burden that we used to pay. I'm actually getting a six figure check back from the IRS because and this, I mean, I'm gonna frame this thing and hanging in my office, right? paying taxes for so long in the single family space. But buried in the cares act was a net operating loss carry back, meaning I could take all the depreciation from last year, and instead of just carrying it forward, I could carry it backwards up to five years. So I get the five years of taxes that I paid in the last five years of my residential real estate business, I'm getting back. So they're writing me a six figure check that I will mount on my wall somewhere. And, you know, and now in moving forward in perpetuity, you get to carry that depreciation forward, right on just this one deal that we're gonna be doing, it's going to be between 12 and $15 million in depreciation that we're gonna be able to take. So generally, I mean, the LP investor, the GP investor, I don't care where you sit in the capital stack on these deals, understanding the tax benefits and how that pours gasoline on your investment returns, right? I mean, so if you're getting 12% in the market, versus 12%, in real estate, that's great, right, but your real estate gains are actually like 15.64%, because you're actually not paying the 30% of taxes on it. Right. Or if you just take that 30% tax of your regular income tax, your ordinary rate, and you convert that to a capital gain rate of 15%, you're saving 15% in taxes, right. And I was in the single family space for a decade. And it wasn't until somebody else told me that I was paying too much in taxes, and I should start investing some of that active income into passive deals. But I started to really recognize that this is how rich people get rich. Right? So it's more, yeah, you get to keep more i. So I said to my wife, when I made this pivot into the commercial spaces that we can actually work less, make less money and keep the same amount. And that's not what happened. But you could write.

Brian Briscoe 43:09

It can happen, it can happen. It can happen. Yeah. So that's something I've always been attracted to. Anyway, go ahead, continue. Steven, please.

Steven Libman 43:16

Yeah. So I mean, so that's the first and, you know, that's the first topic that I would like to teach on is kind of just the depreciation and how it affects different gains. And, you know, I think you mentioned before the show, you're in crypto, right, so if you make some crypto gains, or you do some stock market gains, or you do some private lending on the side, and you're doing hard money gains, the depreciation can go against all of those passive gains, right. And if you're a real estate professional like I am, where this is what I do full time, it can go against your ordinary income as well. So there's little caveats in there, where you can just continue to figure out ways to save money. So that I think is an important textbook that has been written but should be discussed a lot more, especially at the college level. And then second, from that is probably just, it's a negotiation class, right? Like if if you know how to build relationship with people and get rowing in the same direction as your counterpart, you know, if you haven't read, never split the difference, read it, buy it, listen to it. I don't care. Like I've listened to the book. 10 times I've met Chris Voss. He's a FBI hostage negotiator that was the lead FBI hostage negotiator for like 20 years in Manhattan. And he wrote a great negotiation book and everything in life isn't isn't negotiation. Right? When you're talking to your investors, when you're talking to a counterpart on the other side of the table. Everything's in negotiation, because if you don't get on the same page with whoever you're talking to, a deal doesn't get done. Right. And that's in all walks of life. So I think a negotiation course on just how to communicate effectively with people and draw out what other people are looking for. Like to help them get their goal if you help people get what they want, you get what you want, right. So I think a negotiate Courses probably Paramount that it often gets overlooked.

Brian Briscoe 45:04

That's that's a book that I've been meaning to pick up. And now that you say it, I just happened to get an email right before we started saying I had an audible credit ready to use. So sold. Yeah. done right there. But so yeah, next next on my my listening series, but all right, well, we're about out of time here. But I want to thank you both for coming on the show. And one final question for each of you, Steven, you get to go first. How can our listeners learn more about you?

Steven Libman 45:33

Yes. So you can always jump on the podcast free from Wall Street. If you go to our website integrity, h g comm you can sign up for the investor club. And all that means is that we'll start talking to you about some of the things that we're doing and we'll get on the phone, we'll talk to you directly and kind of learn what your goals are and see if they align with ours. And if they do great, if not, that's okay, too. Make, make some more friends. And but yes, I'm known for the investor clubs, the best way to get me. Alright, sounds good. We'll

Brian Briscoe 45:58

have that information down in the show notes. So if you're interested in what Steve has to offer, just, you know, tap on your phone, swipe, tap again, and that interweb will whisk you away to the magical website, he's talking about. Caitlyn, your turn? How can investors learn more about you,

Kaitlyn Nortz 46:15

you can connect with me on LinkedIn, or you can add me on Instagram to, um, and I can give you those links to brands, you can put them in the show notes. And I'm also starting a new job in May as an acquisitions manager for a company called stable with properties. So I'll be buying or helping to buy and analyze retail assets all over the country. So if you're in that space,

Brian Briscoe 46:38

definitely hit me up. Awesome. Yeah, one step closer to you know, being the the mogul that you're going to be right. So yeah. All right. So let's get thanks so, so much. And speaking of Instagram, my daughter came to me yesterday, she texted me yesterday, and she's like, Oh my gosh, Dad, I can't believe you have more followers on Instagram than I do. And I was just like, right? victory. I had her beat by three not not joking. Three more than she did. I make sure I jump on there and follow you to get me up to win. Yeah. Anybody else who wants to add to my lead diary of an apartment investor that's also in the show notes. So just you know, click on the Instagram one and boom, there you go. But thanks again, guys. I had a lot of fun. Hope you guys did too.

Thank you for listening to the Durbin 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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