Posted 6 months ago Fly on the wall, transcribed, Edified Equity Investor Insights An investor that started investing in 2013 and currently owns/operates a portfolio of >70 units reached out to me asking for a 20min phone call as he wanted to learn more about multifamily syndication. I said yes not realizing he was going to have the interview transcribed and made available. Here’s your opportunity to be a fly on the wall and gain some Edified Equity Investor Insights as well. Enjoy-Dino - Interview questions transcribed“The best way to find new clients is to genuinely add value, educate, give without expectation, and have them find you” - Dino PierceHow did you start in real estate?I started 5 years ago with residential redevelopment. I was marketing direct to the seller and going under contract when I found a true opportunity. I was selling my position for a small, quick, and heavily taxed profit. I also partnered with people that were redeveloping the properties and I’d lend a small amount of private money to help with the rehab (usually $25,000.00, no points, just straight interest). I did this for 3 years.For the past 2 years I have gone “all in” - in regards to syndicating multifamily apartment communities and it’s my sole focus moving forward. I honestly believe I have another 30, plus, years ahead of me in this industry.I switched over because it is much more long term, provides consistent cash flow, there are more tax benefits, there’s always a demand (currently demand is outpacing supply) and people in need of that product, and (through syndication) it gives me the ability to help others get into a solid investment. We invest in safe affordable workforce housing, where demand is currently outpacing supply. Further, this asset class will always be in demand, especially as we transition to a renters nation, as it serves a basic human need, shelter.Finally, I see it as a legacy for my children too, even if it’s something that doesn’t interest them they’ll have seen their father build something great over a 35-40 year time-span. Having a vision, the fortitude, patience, ability to enjoy the process beginning to end, and a long game - marathon approach is a lesson I want them to learn and put into practice toward their goals. How did you transition between those two activities?I hired a mentor I aligned with and educated myself on every aspect of the business. I also got active right away and partnered with professionals in the multifamily space. These are people who have been in the business for 10 - 20 years; I would not have attempted to do it alone in the beginning. We syndicate and that means partnering with our private equity investors. The fiduciary responsibility isn’t something I/we take lightly, in fact it’s at the forefront. Capital preservation is paramount; I wanted professionals with ample experience on my team and I share the same views and values today.I had to bring value to my partners’ existing operation to get started. I have business acumen, have built trust with, and made connections to, private equity, I’m a thought leader, and educate people on this alternative investment. I also focus on market analysis, investor relations, and underwriting.The other way to have partnered with these people would have been to bring them a deal.You sometimes hear: “if you have good deal the money will come”, in my experience, that’s not true. You need to build trust with your equity partners and that takes time. You really need to get know these people and develop a good relationship with them; it takes time and trust to build relationships and partnerships. A solid track record helps, but there’s no way around putting in the time to build lasting relationships when it comes to investing.How did you know those money partners?Some were longtime friends, others were people I met at meetup groups or conferences, and there are those who approached me through my thought leadership platforms on YouTube, iTunes, LinkedIn, BP Blog, Closed FB group, etc… Further, in addition to the Edified Equity podcast, I am invited as a guest on other podcasts and people reach out to get to know more about me after hearing my interviews. The best way to find new clients is to have them find you by becoming a relevant, credible, and trustworthy source of value in the business. Educating this community of investors has helped me. Please tell us about your first syndication deal.It was a 60 unit apartment community in the Southeastern United States, my partner acquired it off market as this is his specialty. I helped bring the private equity (offered my relationships and opportunity), did market analysis, and provide investor relations for it. We’re getting ready to refinance after owning it for 1 year and we plan on returning a larger chunk of our investors’ initial investment which will boost their cash on cash return.How do you keep growing?By educating people, asking for nothing in return, and giving just to give. In return, people have established a level of trust and they reach out to further the relationship and may, or may not, end up partnering.Where are you trying to go?As for 2019, we’ve closed on a 100+ door apartment community and I’m fine with acquiring 0 or 1,000+ more doors this year. We’ll do as many deals as we can BUT they have to be deals! If the numbers don’t work we don’t move forward – it’s that simple. It is long term for me, I am focused on cash flow, we’re investors, and I want us to build up a solid portfolio in the B and C class workforce housing market. Our firm has the luxury of, and ability to, be very selective with investments so we are opting out until we find the right opportunity. We’re not in the business of doing volume and collecting fees - we’re investors and if the numbers don’t pass our stress test we don’t move forward. Having said all of that I believe there are deals to be made in today’s market.Can you please walk us through a conversation about stock market versus real estate?Real estate operators have so much more control over the investment, they chose a market that’s in the path of progress, with a growing economy, where the population is increasing, and a mismanaged asset with below market rent is ideal. You can increase the net operating income (NOI) by managing efficiently and as long as we buy in the right market, finance properly, don’t over leverage, and manage well – B & C class workforce housing is going to weather the storm. If done correctly, this can be a, profitable, recession proof asset class.In the stock market, it could take something as simple as the wrong Tweet to turn things around. Right now developers are focused on building A class luxury apartment buildings versus affordable housing (B Class) which is in high demand. We’re not negatively affected by new Class A developments and, to be safe, we look for absorption rates and new constructing trends in our market analysis. I also mention the tax advantages as you can depreciate approximately 30% of the asset in the first year by accelerating depreciation through bonus depreciation and cost segregation.I talk about our track record, past deals, field their questions, and I start building trust by showing my confidence in the opportunity. Finally, I discuss everything related to the deal at hand to include the risks and how we plan to mitigate those.Do you use the value add strategy?Yes, we like to buy a buildings that are mismanaged and below market rent. We renovate and improve the asset and bump the rents to market (or just below market). It is a hassle to move, oftentimes when we increase rent, residents will stay as they recognize the asking rent is standard and appreciate the new management and community we’re building. Once we paint, replace the carpets, lay new tile, new counter-tops, new closet doors, hire a best in class property management company, etc… our leasing agent will test the market as we push rent to where it needs to be as leases renew.Where do you like investing?Right now we are focusing on the Southeastern United States. We look for properties that are below market rent and self-managed (or mismanaged) in Kentucky, Tennessee, Alabama, Georgia, and Mississippi.How do you look at cap rates?A low cap rate can make sense if the price per door is low and there’s enough value add and upside available. Cap rate is a snap shot of how the asset is currently performing NOT how we’ll operate the asset. We do use the cap rate of each market, specific to each asset class, to help us get a feel for where we’ll be regarding our conservative exit strategy.How does a typical day look like in your life now? I have 3 littles ones, so my day starts with my kids, getting them where they need to be.I then do emails, phone calls, have business meetings, connect with partners, etc… I also operate a medical device business on top of my syndication business.I use checklists to keep myself on track, I am very strategic with my time. I really enjoy creating educational content, helping others, operating businesses, and apartment building investing - I’m 100% operating in my element.Do you have any recommendations in terms of productivity and routines?I have a list for all the things I have to do every day, I schedule them before I go to sleep or super early in the morning. Everything I need to do for the next 24 hours is planned out; sure things come up but if you schedule your day and focus on doing the things you have to do - you can get a lot done in 24hrs. I’m in action and moving fast so to keep on time with my schedule I use my phone and set multiple alarms, giving myself 5 minutes of notification to transition and be ready for the next task. How do you meet family offices and ultra-affluent families?Through thought leadership, conferences, and introductions. I am still building relationships with them, it takes time but that doesn’t matter to me and I welcome the journey. I have another 30, or more, years in the space and I’m enjoying the process.How do you use BP? What are the benefits for you? What have you gained from being on there (funds, expertise, exposure, connections...)?I use BP as a way to give back. My blog is on BP and I help out on the message boards answering questions for other investors. My recommendation to anyone that wants to get started, and specifically for you because you have some experience, is to learn the business and build a team or align yourself with a team. Tell them, specifically, how you can add value to their existing operation. If you can underwrite deals - bring them a deal, if you have a network of people with private capital that like multifamily - help them raise capital by offering their opportunities to your relationships… Regarding the SEC exemptions: In a 506(b) you cannot publicly advertise or talk to people about your investments unless you know them and have a substantive understanding of their ability to intelligently make the investment decision. I use an SEC qualification questionnaire and an investment needs/goals analysis to make sure we’re aligned and to identify accredited &/or sophisticated investors. We build on our relationship from there. 506(b) allows you to raise an unlimited amount of money from up to 35 sophisticated and an unlimited amount of accredited investors. It’s NOT a fund - it’s a deal specific SEC exemption.506(c) requires a 3rd party to prove accredited status, the general partners can publicly advertise, and sophisticated investors are not allowed to participate. 506(c) allows you to raise an unlimited amount of money from an unlimited amount of accredited investors. It’s NOT a fund - it’s a deal specific exemption as well.The End of the Interview hope it was helpful and insightful!