 This is Keena Nicely with the life of the land is in its real estate, and I am an agent at Heller Williams, but today we have a special guest. We have Vince Gevings from Tri-City Equity here to talk about multi-family investing. Hi Vince, thanks for joining us today. Hey Keena, how are you? Thanks for having me. Hey, so tell us a little bit about yourself. Okay, yeah, so I'm active duty Air Force. I've been in for 14 years, a little 14 years. Been investing in real estate for about four years, going to my fifth year of investing. I started investing in multi-family only about three years ago. So I'm fairly new, but fairly experienced. It's been quite of a rollercoaster the last three years and lots of scale, lots of growth. And we're looking for a great 2021 going forward and lots of things happening in the market with our company and our other groups as well. So great. So what is it exactly that you do? So in Tri-City Equity Group in that capacity, I wear a couple of different hats. One of the ones is the acquisition director. So I go out and develop relationships with brokers, do a lot of market research, figure out what markets we're going to go into, why we're going to go into them, what's the job growth, population growth, income growth, crime rates, things like that for all the markets we identify and then engage brokers in that market, owners in that market of assets that we'd like to acquire that are buying criteria. And then that's the acquisition side. Then from there, I go into due diligence. I run a lot of the due diligence of negotiating inspections, dealing with contractors, building up business plans, performance, engaging with lenders on getting the right kind of lending and debt on these assets. Then once we close, I change seats and put a different hat on, which is the asset manager. And that's where I really thrive. That's my favorite role is being an asset manager. Currently, our portfolio is 290 units, roughly around $14, $15 million assets under management. We close on another property here in about two and a half weeks. We'll add another 50 or so units to that portfolio. And we have a pipeline full of at least two more deals coming down that we're under contract in as well. Wow. So this last year, the real estate market's been quite crazy along with the COVID-19. So what have you seen? Has anything changed in the last year? Has it been harder to get properties? How has that been working for you? Oh, man, it's been a roller coaster. So let's go back to April of 2020. That's when everything kind of hit the fan, so to speak. So April 2020, actually, this time last year, we were under contract on a 48 unit property in one of our target markets, which is El Paso, Texas. Everything was going smooth and March hit and everything went crazy. We ended up negotiating that deal because we were almost pulled out of that deal because the world was ending March 2020. And we ended up renegotiating that deal with the sellers and getting ourselves in a really good cash position by getting a seller credit. So we had enough cash on hand that we felt very comfortable in going through any kind of storm that's going to come. We had enough cash to make it a whole year without any income. So I was like, we're pretty good on that one. So we chose to move forward on that deal. So the lending got a lot tighter at the last minute. We're talking 11th hour. The lender came back and they said they wanted a $75,000, which is equivalent to about one year of interest reserves on that property, at closing to go escrowed. So we had to come up with another 75 grand. So the lending was getting tighter. The seller was getting pretty stressed out of, they felt like they were holding a time bomb at the world ending and everything like that. So we ended up staying calm, cool, collected, sticking to our business plans, sticking to our criteria, getting really conservative on our underwriting and saying, okay, what's the worst case scenario that could happen? Plan for that. We came up with a solution. We executed it. We ended up closing that deal. And it's that deal actually turned into a homerun for us looking at, you know, crossing one year later. Since then, we've closed three more deals all through COVID and all different business plans, different scenarios, different markets. One of them was in Michigan. One of them was in Virginia. One of them was in, another one of them was in El Paso, Texas. And it's been, it's been crazy. The lending requirements have, you know, they, they'll ease up and then go right back into, as like another wave hits or something like that. So the best thing to be is agile, flexible, stay true to your underwriting is another thing that you do a, you do, you build a pro-form, which is like a business plan, your financial analysis. Be very conservative on it. Meaning don't, don't plan on, you know, raising rents because we're talking rental properties here, raising rents, you know, the whole bunch of money, like 10%, 20%, keep it very minimal the first couple of years because we don't know what's going to happen if the deal still works. Then you can, you can move forward in that deal pretty confident that you're not going to end up losing a whole lot on it. So what are you seeing since you are dealing with rentals with this rental moratorium? Do you, are you guys being impacted by that at all? It depends. So one thing, and I'm pretty good at market research. It's again, one of the hats I wears as director of acquisition. And one thing I never really paid too much of attention to was the, like, the governor's stances on things, the state governor. It's always been not really, we always look at like landlord tenant laws, like those things are important. You want to know what you're getting into and play out different scenarios that could happen. Understanding the governor's politics has never really been on my radar. It is now because I have the benefit of comparing different, different parts of our portfolio. So we have a Virginia portfolio, Michigan portfolio, Texas portfolio. And they are apples to oranges, how they, how they performed over the last 12 months couldn't be more different. The Michigan one has been impacted heavily on, on that for COVID, the moratorium, our rent collections, things like that. I believe a lot of it, in my opinion, has to do with the policy that was put into place and how the local governments and the state governments handled that. Texas, on the other hand, completely different. We had the best year ever. Very little rents, past due balances and bad debt. A lot of our tenants communicated a lot better on that property when we had to go and get some relief for tenants that were affected and residents that were affected and laid off. The state was a lot more responsive in getting the residents the help that they needed there. And again, they also had the federal moratorium, just like everybody else did. It was just how it was executed and handled. It's completely different. So moving forward, the lesson there is pay attention a little bit more to who the mayor is, look at maybe their background, who the governor is, look at their background. Because again, a lot of real estate investors, that wouldn't, it would never be on the radar to think of those things. Now, now I look at those things. Yeah, yeah, that's not something I would have even thought of with investing or real estate is the politics of the area. So how do you, you're in different different markets. How do you choose a market? So how did you choose to be in Texas and Michigan? And how do you choose the market to be in? Yeah, great question. So one of the things, I know, and we're going to get to this, how am I doing this from Hawaii? One of the answers for that is a lot of people say being in Hawaii or out of state, you're looking at out of state investing, it's very a daunting task. But if you switch it to, as with the benefit that is I can go anywhere, but if I choose to go out of state, literally, I can go to any state, I can go all 50 states where if you're state side, on the mainland, a lot of people are like, well, I need to find something in my backyard. And they're very, kind of, they're looking at only like maybe a two or three hour radius. But once you're here and you make the decision, well, there's nothing here in Hawaii that's going to work for my, my business plan and my goals. So I'm going to go mainland. Once you make that decision, that mental decision, you can go anywhere. So the entire country's up for grabs. So it's pretty rewarding to be able to look at all these different markets. So one of the, the main criteria is I would look for, like I mentioned earlier, our population growth, job growth and income growth. All three of those need to be, you know, trending upwards over the last few years, you can do look at census data. There's a bunch of resources out there to track that kind of information. All of it's free. But those are the big three. Then I look at things like crime rates, make sure that those are trending down or consistently low. And then I look at things like proximity to major interstate systems, major airports, because you want to find places where transportation is good, because that'll lead to good manufacturing, good people, good for business travel and things like that. So you want to see the airport is within, you know, 30, 40 miles is a pretty decent size airport. It's a good metric. A lot of people do rail systems with some kind of rail hubs of transportation for manufacturing. Look for those things that drive economic growth. Or one of the other, as we start getting down to the weeds of what I look for. But those are the biggest ones, job growth, population growth, income growth. Once I get through all just the numbers, the boring side of it, or unless you're analytical in the very fun side of data analysis. Then I look for things, okay, what do I have a competitive advantage in these markets? The reason I'm in Michigan, that's a very odd market to be in, is because I had a competitive advantage in there. My wife is from Michigan, her whole family's from Michigan for generations. Even though I've never lived in Michigan, that was a competitive advantage to me when I was starting to get into real estate investing, because I could call up my mother-in-law or my brother-in-law and be like, I found this property on the MLS, it's a four-unit apartment complex. It's going to be a great property. Can you go do a drive-by? Let me know what you think, or maybe go meet the agent out there. So I can get a different perspective. I'm not just going to agent's testimony of what this property is. I can get somebody I trust. So that was my competitive advantage. Not saying that agents cannot trust worthy, but you know what I mean. So different perspective. That was my competitive advantage. I bought my first 20 units like that, where I've never actually seen them before I bought them. It was all going to a market, adding a competitive advantage in. I sent a couple people to the property that I trust. They all kind of give me their story, their testimony on what that property is. I kind of put all together on my end back here and got a pretty good picture of what the property was going to be and executed on it, bought the property and they were great for me while I had them. Wow. So you don't always keep every investment that you buy. Can you go into that a little bit more? Yes. So going back to those properties. So I started investing, I guess we go back to the beginning. So I started investing real estate in 2016, I guess is when I officially would call myself an investor. I did what's called the house hack. So I lived in a house. I kind of flipped it while I lived in it and then I sold it tax-free because of the whole two-year rule there. So I took that capital and I was like, I want to buy more real estate. That's when I got into more education was like I need to learn more about this and find websites like bigger pockets, online forums, go to local meetups and start figuring out these strategies. At the time, 2016, bigger pockets was starting to become really big. There's a great resource. It's also 99% free. So definitely a good place to start your journey without spending a whole lot of money. And you go on Amazon, get a bunch of books as well, which is also very low cost. So my start was getting like duplexes and foreplexes. That's what I knew those residential properties. I was like, okay, I'm going to get as much of these as I can. So I took that capital from that living flip. It was about $130,000. It was Bay Area, California, 2016-17. So kind of like here, you can just buy a property set up for a couple years and make a pretty good amount. So that's essentially what happened. Took that and I bought the first 20 units. It was I think six properties, some duplexes, some foreplexes, equaled up to 20 units. And then I started finding the limitations of that strategy. And they hit me like a brick wall and completely stopped my growth. And some of those limitations are your debt-to-income ratio that most people don't think about. So every time you get a loan, you're getting a conventional loan because it's a residential property. So you can get these good conventional loans, 30-year amps. They sound great until you start stacking them up. And then you go to the bank and they're like, you're at 70% DTI. We're not lending to you anymore. And I was like, well, okay, well, I need to solve this problem. And because you're buying them in your personal name, even if you quick claim them into an LLC, the mortgage is still on your name because you got the conventional loan. So your debt-to-income ratio goes up. That's one of the limiting factors of trying to scale with the small properties. So I was like, okay, I'll refinance them into my business name. The problem with that came, the limiting factor. And it was kind of another aha moment was residential properties are valued off of the comp value, the comparable value approach. So even though I bought these properties, did a bunch of work to them, these duplexes and fourplexes, when I went to go get the appraisal done, the appraisal came back at the exact price or a little bit over the price I bought it for. And I was like, I did all this work to it. And they're like, that's great. But it's still a comp property. And the only comp is that duplex across the street. And that one's worth 170. So yours is worth 170. I was like, well, I paid 170. They're like, what do you want me to do? So that was the other aha moment for me of the residential properties, those sub five-unit properties, are not really the best for scaling a real estate investment company. That's what your goal is. And we can talk about goal setting and clarity too. But if your goal is to scale a good size portfolio to replace, say your W2 income, I probably wouldn't do it with duplexes and quads or single families because you're going to run to those issues where you're going to run out of conventional loans, your debt to income is going to increase to where it's going to ruin your personal credibility or credit. And then you're stuck with the comp value approach as well. So that's when I made the decision. That was my last aha moment. And I was like, I got to do large multifamily. So back into the books, back into education, join some groups, figured out the whole multifamily thing. And it's been off to the races since then. That was 2018. So 2018 went from 20 units to 290 units is what my portfolio is now. And it's about to double again by Q2 this year. So it's like kind of solving the Rubik's Cube. We figured it out, built the systems, built the processes, developed those relationships. And now it's just rinse and repeat, kind of like the first strategy. So let's step back a minute. And you talked about you're here in Hawaii, but you're doing it on the mainland. So why is it that you haven't invested in the multifamily's multiple doors here in the islands? Great question. So I tried looking and was quickly realized that the return on the properties here didn't meet my goals. So when we're talking about things like cap rate, and I know it's where you're going to go with that. So the cap rates here are very compressed is the terminology that we use the jargon. So we're talking two to 3% capitalization rates, which is the easiest way to understand that is your cap rate is your rate of return if you paid 100% cash. So if you went to a property and bought this apartment building for a million dollars and it was returning income for you, you would get a 2% return on your investment. So that didn't meet my goals. My goals is creating wealth, cash flow for my family, financial freedom, quit my W2 job, 2% returns, and you're going to cut it. So that's when you evaluate the opportunity cost of an investment. And to me, I didn't see the opportunity cost of investing in Hawaii real estate multifamily better than if I go stateside, develop it, create a team in a market that's a lot more affordable, the lower barrier to entry, higher capitalization rates, meaning I get more return for my investment, my capital injected. And all I had to do was just do a little bit of more work up front, developing a team and a system, a management team on place to execute that, it was well worth it. So that is why I do have some, I have that one single family house over in Capile, and it's doing great as a very long term rental, but it's not something that's going to let me quit my day job. So it's all about what your goal is. And I know a lot of people that do single family rental here or small and multi here, and that's great. And that's going to work well for them. But it just, it didn't, wasn't the tool for me to reach my goals. So what, what do you look for in an investment when you're out on the, you know, the MLS or you're looking, what is it that catches your eye? What are you looking for in efficiencies? So as a, as the asset manager in acquisitions director, I look for properties. So our buy box right now is, I'm going to go down real quick, and we kind of break it out is I look for C class and B class value add multi family anywhere from 50 to 100 units is what our general buy box is. So that generally we're talking our perfect deal would be like a 1988, 1990, 100 unit apartment complex in some tertiary market, you know, 20 minutes outside of a big city that some small group bought it, or a mom and pop we call them bought it. And they're just kind of been trucking along the last, you know, 20 years, but they don't really have any efficient business systems in place or kind of just running it as a almost like their hobby or side job. And you can see a lot of inefficiencies in the way they do management like rents are really low deferred maintenance is kind of creeping up. And that's what we look for is management inefficiencies and, you know, low rents, some deferred maintenance and we can go on there and we can implement our systems and increase the marketing, renovate the units is something that the residents in that community really want. Because they're usually outdated units. And increase rents decrease expenses is another big thing I look for I look at profit loss statements. And I look for expenses that are just way over what they should be for that market. And that's where I kind of queue in there like, okay, we can shave off 20% here, the water bill is crazy high, they probably have some leaks they haven't been addressing, and things like that. And I can increase the value of the property. Because once we cross over, if you remember earlier, I mentioned the sub five unit properties are called residential, once you go over five units called commercial, and they're valued entirely different. And that's where the power and the wealth creation from multifamily really kicks in. So the goal in multifamily is to increase the NOI, the net operating income. And you can either do that by increasing the income or decreasing the expenses. And if you can find a way to do both, you're going to do very well. So we find properties that the rents are maybe $100 below market, so we can bump those up to 100 bucks. And then we find properties where maybe the expenses are 20% over what they should be. So we trim them down, get the expenses down to where they should be, and say we add, you know, $300,000 in net operating income. Well, you divide that or put that on like a six cap or something like that, a six capitalization rate. That could be, you know, millions of dollars in value just created by just finding a property that's running inefficiently, and getting it tuned up, getting it on par with the rest of the market, and making a clean safe place that residents in that community love coming home to every night, and creating a community there. And you will do pretty well for yourself and your group and your investors if you bring on investors. Wow. So that leads us into bringing on investors. How are you funding these multi-door investments? Great question. So there's several tools for that as well. And a lot of it is, what is the best tool for the job? There's, if it's small units, say maybe sub 350 units, we'll do what's called a joint venture, where we get a very small group, maybe two, three, four of us, and we'll all chip in, you know, 25% down payment by the place, put it in our management system in our portfolio, and run it. Once we get over that maybe 50 unit, 100 unit type place, we bring on other investors. And those other investors come from our personal relationships, maybe your friends, family, co-workers. We have our meet-up like the Honolulu multifamily and more, or our podcast or other things like this, where we develop relationships with other investors that are looking to get into bigger properties, but they can't do it on their own. They understand the power of the multifamily investing, but they see the barrier entry too high. So they can use us leverage us in our experience to get into those better class assets. And we can go team up, pull our resource together and buy a, you know, take down a 200 unit, you know, $12 million apartment complex in like, you know, El Paso or Austin or something like that. It's pretty powerful stuff. Wow, yeah. So if one of our viewers is interested in investing, can they do that with you? Or is it something you want a relationship already standing? Great question. So legally, we have to have a, because we do what's called a, so Reg D, 506B is the SEC regulation for how you can legally bring capital to a deal. So right now I can't like solicit a deal. I can't say I have, you know, one, two, three main sheet, 50 grand, somebody come, like that's illegal, I'll be in a red jumpsuit or orange jumpsuit by the end of the day, or whenever they see this. So I can't do that. But what we can do is if you're interested in learning more, we can develop that relationship. And it's, it takes time, right? Because we have to have a substantial relationship. We have to make sure you have to kind of see if we're the right fit for you. We have to see if we're the right fit together. Just a partnership. It's not, it's not like going into like Edward Jones or something like that and giving your money to a financial advisor. It's, we're going to be in this thing together. We're partners on a deal. That's the relationship you want to build. So we want to make sure we have the same goals, we have the same ethics, values, principles, same timelines, all of that stuff comes into play to make sure that it's almost like getting into a marriage. We want to make sure that we're the right fit because we're going to be tying the knot for five, 10 years as we get into this investment vehicle together. So we want to make sure that we have a good substantial relationship and we're the right fit before going into that. So if you're interested, the Tri-City Equity Group has a portal on there where you can contact us and we can just set up a call, go out, go out to lunch, have coffee and we can start there and see where that goes. Yeah. So we only have a couple minutes left. So what advice would you give somebody that wants to get started? What's a couple little pieces of advice? Great question. So real quick, if I had to do it again, I would get absolute clarity on what my goal is. I read a book a while back and it talks about, you know, people relentlessly work through life at whatever the business is if they're in a corporate or whatever the W-2 job is, they get to the top of the ladder and they look around and realize it's leaning against the wrong wall that they spend their whole lives or careers getting to the top of the ladder and it's like, this is not what I want it to begin with in the first place. I want to be over there. So if you're going to get into real estate, get clarity on what you got, what you want, what your timeline is, what your actual end goal is, if it's a cash flow number, if it's an equity number, net worth number, get clear on that and then figure out what the best tool is to achieve that sometime. Maybe it will be, I just want to, I'm going to get a pension, we talked about military pensions earlier before the call, like I don't need a full-blown portfolio, I just need some of the compensate or supplement my pension and that might be, you know, five, 10 units where that's where the duplexes and stuff like that would be great. But if I'm trying to replace my income, I need to substantially a lot more than that and that's where the limiting factor for those properties came in. So get very clear on what your goal is, what your timeline is, why you want that, like what are the drivers for you to achieve that that's going to keep you motivated to doing it. Then get started. A lot of people get analysis paralysis. If you're one of those people, join a mastermind, join a group of other like-minded individuals. You know, we have the Hollywood family more, there's other kind of the coaching type groups where you pay to get into, there can be very beneficial as well. But the point is just get into the game, jump in and get started. I still know people that I talked to from 2015 that we're on the same path and they're still waiting to do their first deal because they always talk themselves out to it. I'm like, you gotta jump in, the ship's sailed and you're still sitting on the shore. So get clear on your goals and join a group, get educated on what you're doing. Again, there's a lot of resources out there, books on Amazon, there's a lot of coaching groups and just get into the game. All right. Well, thank you so much. This was awesome information and thank you for joining us. Thank you viewers for being with us on The Life of the Land is in its real estate with Think Tech Hawaii and I will see you all in a couple weeks and we're going to have a visit from another lender to kind of understand where the interest rate's going and how is the market right now. So again, thank you so much. This was wonderful and I will see you all in a couple weeks.