What's going on YouTube? I am Justin Fraser, filling in for Matt Faircloth.
Doing the best I can to fill those big old shoes. I'm here for Mentorship Monday. So
excited to have some guests today. I got a special surprise guest for Mentorship Monday.
And really just excited to be here. Starting the week off strong, had a very, very productive
week. It's a little hard to do some of this banter on your own, so I'm going to bring
in ... But I want to bring in my partner today, Mr. Herve Francois. Herve, thanks for joining
me, man.
Justin, thanks very much for having me here, my man, I appreciate it.
I wanted to bring you on because our questions today are all about finding properties. And
as we know, Herve is our property acquisition specialist -
Right.
... who happened to find this really, really big deal that we're working on right now.
For now, I'll call you the expert fishermen, because you have got one on the line for us.
I appreciate it. I don't know if you guys are cursing under your breath as you go to
sleep, [inaudible 00:00:59] ... property, but I like presenting you guys a nice big
challenge. And I think that's what we have under our belt here right now.
I think it is a challenge. It certainly is a challenge. Today, Herve, our questions come
from DeRosa insiders. And let's start with, a few people said they're having a problem,
their biggest challenge this week is finding an apartment complex to purchase.
[crosstalk 00:01:26]. Okay.
I'm an investor, I say to you, how do I find an apartment complex to purchase? What do
you have for me? What do I do?
Justin, it's a great question. And I get this a lot. I literally got it from another investor
today who hit me up on Facebook messenger. He's like, "Hey dude, I'm looking to find
an apartment in this particular area, how'd you do it? Is there a way that you can help
me?" Kind of a thing. And if it's all right with you, I'd like to split this answer up.
I'd almost like to bracket in regard ... Because I think the answer is a little bit different
versus if you've never done a deal before, versus if you have done a deal in the past.
Sure.
But maybe you want to scale up to a bigger size property if you already have one or two
underneath your belt. I'll first start off with those that currently don't own any properties
whatsoever, and they're trying to get their first one.
And then when you look at that group, you can segment to looking for one in your own
state versus looking for one out of state. Here we go, let's start in state, right? Justin,
you and I are in New Jersey. New Jersey, you want to try to find your first property in
New Jersey, New York, Pennsylvania, whatever state you're located in, is ... And this is
the easiest, just get on the road. Get on the road, drive around. Drive around particularly
to the city, to the town, to that market within in your specific state that you are interested
in purchasing your first property.
Whether it's going to multifamily, it's going to be mix use, whatever it is, drive around
that area. As you drive around that area, you're going to see signs for commercial brokers
that have leases of properties, multi-families, that are available in that particular neighborhood,
in that particular town. You're going to take pictures of those signs.
Of those brokers, You're going to get the name of the broker, you're going to get the
name of the firm he or she works for, you're going to get their phone number, you're going
to write it down. You're going to continue driving around that town. You're going to
continue to do the same thing. You want to get more than one contact information. Because
you can go ahead and say, well, here are some of the big national brokers, M&M, C&W, Capstone,
and so on and so forth, right? Berkshire Hathaway. You can get those, but the thing is, they
may not be big in the particular market that you are targeting for your first purchase.
That area might actually be covered by some lower, maybe some local commercial brokers,
not the big national ones that here at the [inaudible 00:04:10] group, get in contact
with more on a frequent basis. Because we've done pro purchases before any of the bigger
purchases out of state. That's a separate conversation.
If you're in your backyard, drive around, get those names and contacts. Once you get
those contacts, call them up. I know that we're in a COVID world, if you can meet up
for them at a Starbucks, meet up with them at a Panera Bread, something like that. Start
having conversations with them exactly what you're looking for, what you're in the market
for, what your interests are. You're going to want to talk a little bit about your current
capital situation, because that's going to be able to keep help them in mind with what
they're looking for when they are looking at something for you.
And listen, brokers ... Justin will tell you this, they like to know that you can close
quickly. You said earlier, Justin, that someone told you that 99% of the time the brokers
don't call back. There's a reason why they don't call back 99% of the time, because they
don't want to feel that their time is being wasted. Because, for them, commercial brokers,
as many of them are getting compensated on a commission basis, time is money for them.
That cliche fits commercial brokers probably than any other industry profession in this
country. They don't want to feel that they're wasting time. How do you make a commercial
feel like he or she is not wasting their time is when you sit them down, you have that face
to face with them, you even come with a list saying, this is my criteria of the type of
purchase I'm looking to make and this is the kind of capital that I can come with, either
on my own or with alignment investors that I've already spoken to about my first purchase.
You want that commercial broker to partner up with you into helping you find your first
purchase. Does that make sense?
It absolutely does. I love the action that you said, which is drive, which is required
for you to get out of your house and-
[crosstalk 00:06:14] Right.
You want to invest in buyer property, but you have to invest the time and energy, and
build relationships, and you have to do that, like you said, by going. And like you said,
it could be that I want to invest a few hours flight away, but guess what? Invest in the
plane ticket and invest in the hotel room, drive it, set up meetings, like you said.
Because I think, Herve, a broker is going to take you a lot more seriously if you say,
"Hey broker, I'm flying in from, wherever, New Jersey to Kentucky." Let's say. "And I'm
coming in and I want to meet with you. And I'm coming in just to meet with brokers."
That's right.
That right there sets you apart from a lot of people because you're already showing that
you're investing time and energy into coming. And you say, "Look, let me take you out for
lunch or let me buy your coffee." Right?
Absolutely.
Now they're getting free coffee and you're coming from out of state.
That's right.
Oh, this guy's a little more serious than the 10 other people that called me today and
said, put me on your private list or whatever. [crosstalk 00:07:25].
Right. Yeah. Have you ever heard of those? I want to be your first go to person that
you're going to call when you get off market seven cap.
Yeah. [crosstalk 00:07:37]. But to that point, it makes sense because brokers ... First off,
brokers get those deals, brokers do get off market seven caps, right?
Yes, they do.
But they don't blast it out to every other person who decided that North Carolina is
a great place to invest so if I'm a broker in North Carolina and I've got 700 people
from New York, and New Jersey, and Connecticut on my list, probably not calling all of them.
You're probably calling the people that invested the time and energy into building relationship,
coming down, taking me out, following up.
The other part of that, Herve, I think is providing feedback on the deals that they
do have.
Yes.
Because I think a broker is going to test you. The broker is going to say, "Okay Herve,
you've flown out here. You told me that you're excited. I got a deal down the street, so
why don't we go look at that? Or let me send you the numbers on that." What do you do with
that? Even if it's not a good deal for you?
No, that's a great question. And this happens a lot. And believe it or not, Justin, as you
probably know, this happens still a lot to us at our group. And when we get that incoming
email, sometimes even a phone call, from a broker or someplace around the country that
says, "Hey, Matt [inaudible 00:00:08:48], Hey [inaudible 00:08:50] group. You know what?
I have an interesting deal for you. You guys may want to take a look at this because you
own this particular property in Lexington Kentucky."
And all of a sudden they are putting something in front of us that absolutely has nothing
in sympathy with our criteria of what we look for in a multifamily, right? And my first
knee jerk reaction is just to go ahead and just delete that email, don't respond to that
broker, and so on and so forth. But at the end of the day, I can't do that. We as a team,
we can't do that because you never know when that broker is going to wind up bringing you
an opportunity that does match criteria, especially when you have the opportunity to jump on it
right away.
Typically what I'll do is I'll respond to that broker, "Hey, listen, you know what,
appreciate you reaching out. What you just sent me doesn't meet our criteria. Here is
our criteria." Right? We look for boom, boom, boom, boom, boom. Same thing if you're an
individual, you wind up meeting up with that broker, like you said, you invest in that
plane ticket, go out of state, you take that broker out to lunch. He says, "Hey, guess
what? We have this listing right here. Do you mind if I go to take you right now?" That
literally happened to me as I was making the rounds in North Carolina back in February,
before COVID broke out, as you know.
And I went in, I met up with a broker, that is a local broker, decent sized local broker
in the Winston Salem market. And then from there, he's like, "You know what? I got a
couple of things right now." The funny thing is because I had another meeting set up after
him I said, "Listen, give me the address, let me do a drive by, I'll take down some
information. I'll email you back our thoughts." And I did that.
Now, it wasn't a deal that fit our criteria, but I emailed him nevertheless. And I emailed
him why it didn't fit our particular criteria. Doesn't mean it doesn't fit your criteria
or somebody else's criteria. It just did not fit our criteria as a group. If that broker,
when you're having lunch with him or her, they have a listing right then and there,
could even be an off market pocket listing that they want to show you right after lunch,
right after dessert, then go and check out that property with them. Have your dessert
and go and check out that property with them.
It might be something that doesn't fit what you're looking for. It may not be in the neighborhood.
It may not be a type C class, type B class, depending what you're looking for. Maybe out
of your price range, but go anyway and say, "Hey, listen, I really appreciate this. It's
not my cup of tea because of reasons A, B, and C. Instead, do you have something like
this?" And they're going to tell you yes or no, but they're going to appreciate you. Especially
if you've taken time in the afternoon to go around with them in that neighborhood, in
that market, be it in North Carolina, Kentucky, Florida, Georgia, wherever it may be.
If that broker is worth their ounce in gold, they're not at their desk. They are not at
their desk. They are out, they are shopping, they are showing people around properties,
they're at a closing, they're doing anything but staying at their desk, if they're worth
their ounce in gold.
And Cedric real estate says, why has the [inaudible 00:12:05] group elected not to buy in Philadelphia
versus investing in the markets that we're in? Can you talk about that Herve?
Well, Philly ... Yeah. Philly is, as you guys know, metropolitan city where ... Philly doesn't
meet our criteria. I have addressed this point many times and I can't stress it enough, just
because a city or a market does not meet our criteria does not mean it is not a good market
to invest in. It just means it doesn't meet our criteria.
Justin and I know plenty of multifamily investors in Philadelphia and they are doing tremendously
well. We know multifamily investors in Fayetteville, Lexington, and Winston Salem, and they're
doing tremendously well too. The reason why Philly is not a good market for us is because
Philly is a primary market. One of the tenants at that the [inaudible 00:13:03] group is
that we prefer to focus on secondary and tertiary markets. There's a common denominator between
Lexington, Fayetteville's, Wintson Salem, they are all secondary markets. That is what
we are attracted to. We are attracted to secondary markets in the east, southeast, mainly because
we believe, number one, obviously, they are less competitive versus the primary markets
like a Philly, like a New York city, like in Atlanta, like a Dallas.
We think there are more attractive cap rates in secondary markets versus tertiary markets.
And guess what? Here's the silver lining, amidst everything going on with COVID, we're
seeing and we've actually been told this by the property manager at the property, the
property that we're looking at in Winston Salem, there's a trading down effect that
is taking place right now as people are a little concerned about the job prospect, the
job market out there, and so on and so forth.
Perhaps they were renting a place that was costing them a thousand, $1,200 a month in
rent and now they're trading down to apartments that are costing them seven to $800 a month
in rent. I don't like to use the word recession proof because in a recession all of us have
seen all kinds of industries get hit, but I certainly like our chances of in the event,
this soft economy that we're in right now, winds up getting extended for who knows how
long, that we're comfortable with the rents that are being charged out of the properties
that we invest in are not rents that are going to break tenants bank accounts. That they
have to go ahead and scrounge and look for that last nickel underneath their sofa bed,
couch, in order to pay rent at the first of each month.
That's why we like the secondary markets. I'm not going to ever say that Philly is not
a good market, I'm just going to say that Philly does not meet our criteria. Why would
Philly meet another investor's criteria? It could be it's in their backyard. It could
be because of familiarity. There's a lot of good growth taking place in Philly right now.
Some of that trading down that I was talking about, not only are you seeing it within states,
you're seeing it from one state to another.
Folks moving out of New York city into markets like Philly, going a little bit west and so
on and so forth. There's a lot of good things going on in Philly. I would never shut down
Philly. I'd say, do your homework. Philly, as a major metropolitan city, is going to
have pockets of growth that are stronger than other pockets of Philly, not as strong, when
you start talking about central Philly and so on and so forth. That's what I would say,
we are just more attracted, the [inaudible 00:15:52] group, more attracted to secondary
and tertiary markets where we don't need to be in a market that has an abundance amount
of exposure to any one particular industry, we like to see more industry diversification
in the markets that we target.
Love it, love it. Really good stuff said. Thank you so much for ... Oh, thanks guys.
Awesome. Thank you for your comments and for watching, and we appreciate it. Herve, thank
you for popping in late notice, but I appreciate it. You always have a great knowledge on finding
markets and hopefully this helps you get out and find your next deal.
And I will take this time to say that we actually are partnering with a broker, not partnering
really, but we are allowing a broker to come on [inaudible 00:16:46] insiders. He's sharing
a portfolio of properties that is for sale in Kentucky. He's coming on this week, we're
setting that up. And if you want to see what's going on, I mean, look, it's publicly available
information, you can go find it, but if you want to hear how we interact with that broker
and break down the information that he's presenting, how I think about it, what concerns I have,
the questions I ask, and the team, and it's going to be open to all [inaudible 00:17:13]
insiders, you got to join [inaudible 00:17:15] insiders. Join us, come on, and it's going
to be a really, really great session.
And then we also ten unit that's going up for sale, not ours, but again, we're just
making a connection, no ownership, no fees or anything, we're just making a connection
between seller and buyer and showing you guys how we might evaluate that deal. And hopefully
helping our insiders to partner together and buy a property and get started achieving their
goals. Herve, thanks a lot, man. This was a lot of fun.
No problem. Justin, real quick, that session that you're talking about, where the broker
comes on, when is that session going to be taking place?
To be scheduled, but it should be this week so I'll let you know.
All right.
I'll get you on here.
[crosstalk 00:17:56] ... be interested. All right, man.
All right. See you later.