How Relationships Create Billion-Dollar Real Estate Opportunities with Andy McMullen - Episode- 544

You know, I'm very, very kind of disciplined in what I do each day. And for me, what's really important each day as part of life, just as I would go to the gym or just as I'd be reading, it is pouring into those relationships. So whether that's just checking in on folks, you mentioned, you know, that intros that were made, most of those referrals and intros are so much stronger, right? Because they're already kind of— They emanate from that foundation that you already built with that person.

Build wealth that lasts. Why waiting to act could cost you generational impact. True wealth isn't just about returns, it's about legacy. But here's the catch: every year you wait to put the right structures in place is a year of compounding you'll never get back. Today we unpack how to align values, capital, and Timing to create wealth that endures. This is about more than money. It's about the future you'll leave behind. Welcome to Streams to Impact, powered by Steedtaker Capital. I'm your host, Dr. Allen Lomax. The professionals we meet are thriving in their fields, yet most are still caught in the cycle of trading time for money. Even more concerning, many of their portfolios carry hidden risks they don't even realize are there. And that's why Steve Talker Capital was built for doctors, dentists, architects, engineers, and other high-income professionals. Over the years, we've reviewed more than 750 operators, and only 1% make it into our exclusive deal vault. This careful process is designed to safeguard your capital and connect you to opportunities that are usually reserved for the ultra-wealthy and a select circle of insiders. If you're a doctor, dentist, attorney, lawyer, architect, engineer, or any other high-income professional, you can do this yourself. You can build this system one post, one fence, one gate at a time, or you can ride with the herd that's already cleared the trail. And that's what The Great Tax Escape offers. It's for professionals who are busy healing, designing, building, or leading, and this is the That does the heavy lift for you. It's the accumulation of every lesson, every structure, every vetted opportunity, and every system I've built to help professionals like you break free from the IRS corral and let your wealth run wild. So when you visit our site, thegreattaxescaped.org, you'll get instant access to a short video that walks you through exactly how this framework works. And when you enter your Your information, you'll receive the powerful bonuses: the Wealth Stallion Compass, the Dale Stallion Detector, the Wealth Professional's Freedom Formula, and the Ironclad Wealth Fortress. In appreciation for you being here today, this is all free to you. So because every day you wait, the taxman clips your wings. You've worked long enough and you've earned the right to live free. Now It's your turn to run with the wind. Because the real danger isn't only in bad deals, it's in the silent cost of lost compounding. Just a short disclaimer: all information shared on Streams to Impact is for educational purposes only. It's not to be construed as investment, financial, legal, or tax advice. All investments carry risk. You should not invest if you are not prepared to lose 100% of your capital, and you are always encouraged to consult your legal, accounting, and tax advisors before making Well, what happens when you combine 25 years of experience, nearly $1 billion in orchestrated transactions, and a relentless focus on relationships? Well, you get insights that refine how wealth is built. Today's guest is Andy McMullen, managing partner at Legacy Acquisitions. Andy has mastered the art of partnering with world-class operators and delivering white glove services to investors. Over his career, He's leveraged trust and built relationships with brokers, operators, institutional leaders, and private equity firms to create opportunities that few investors ever see. When he's not structuring deals, Andy is deeply committed to his community and family life in San Diego, where he and his wife are raising their 3 children. Andy, welcome to Streams to Impact. We are very delighted to have you with us. So Andy, in your career, as a testament to the power of relationships in real estate, what life experiences most shaped your philosophy around building and sustaining those connections?

Yeah, so I—

that's a great question.

Great to be here with you, Allen. I love, love your show. I love what you're doing for folks and, and with your, with your wisdom and experience. My, my experience as a real estate operator really kind of goes back to, as trite as it may sound, to my childhood. Both my parents were teachers. My dad was a basketball coach. Most of my upbringing was surrounded around what kind of relationships folks had. So, we didn't have a lot of money, but I always felt like there were people in my life that were willing to kind of go a little bit deeper. We talk about our business a lot with the 80/20 rule. And typically, if people are willing to go a little bit deeper on the relationships, I think they'll get a little bit more out of it. So, we think back just in our experience and getting particular, we do development. So, development deals, they all kind of, they get built from the same group of people based on trust, right? And not the number of people that we know or the number of people in our network. It's really kind of interesting the way when you think back about your life, how many of those folks were the ones that kept producing, whether it was wisdom or coaching or capital when you needed it or relationship introductions. It's usually the few that you've dug a little bit deeper and invested with, invested in the relationships with.

Well, that certainly has been my experience and not just in investing in real estate, but Like you said, it's the relationships that are sustained really throughout the course of our lives that really make, I think, all the difference in our success in life. Because, you know, no person is an island. And it's those relationships that, I think, build our success. And it's always those that have been there and those that we can rely on that really make the biggest difference. Not that we— you know, I've had lots of new introductions over the years, and some of those continue to stick and some of them don't. But it really is, I think, the foundation of building a legacy and really building any kind of investment network is really dependent upon those relationships.

Yeah, if I can just add to Allen, you know, practically, you know, I'm very, very kind of disciplined in what I do each day. And for me, what's really important each day as part of, like, just as I would go to the gym or just as I'd be reading, it is pouring into those relationships. So whether that's just checking in on folks, you mentioned, you know, that intros that were made, most of those referrals and intros are so much stronger, right? Because they're already kind of— They emanate from that foundation that you already built with that person. So that's, that's why I say for those people that aren't maybe to have a higher EQ or aren't technically, you know, people that like being around folks, think of it as going to the gym and as that being some kind of capital that you're going to utilize at some point. So, you know, make it a discipline for those folks that doesn't come easy for. Almost all of the people that I know as founders or real estate operators that do it well, they've got people in their life that are really focused on the relationships part. So, maybe we've talked a little bit too much about it, but I just think it's so important. It's worthwhile breaking it down to specifics.

Well, yeah, I appreciate you adding that because I think it's easy to really— I don't know if the right word is take advantage of, but to To just— Yeah, take for granted. The relationships that are closest to us, it's just easy to take advantage of them because they're there. And I think it really is important to be really intentional about really supporting, not just expecting support from our relationships, but to be there to give support and to do it on a an intentional and regular basis from a set discipline. So thanks for pointing, pointing that out. Moving away from, from the relationships, and let's move into what your core business is, which is build-to-rent. What makes this an asset class that has been so powerful for you in creating passive income for Uh, for LPs? And how is it in— and also in all ground-up, in all startups, there's a whole lot more risk than there is in existing structures. So how is it that you offer protection to investors?

Yeah, great question. So, you know, from, from the beginning, um, build-to-rent kind of maybe over the last 7 or 8 years, we started really looking at it a little closer. If I can just peel back a little bit, you know, I was developing, you know, kind of live-work projects in Venice, California. And when the crash hit in 2008, we kind of started to see the Blackstones of the world buy up these kind of scattered homes and rent them out. Right. And it made a lot of sense theoretically, except that kind of difficult— It became very difficult to manage those projects because you got managers in many markets and it's— the efficiencies are difficult. So we started developing these projects, you know, 100 to 200 units at a time. And, you know, we were able to kind of, you know, with economies of scale, you got new product and it makes it a little bit easier. What we probably couldn't really predict was that so many of the millennials are focused on kind of they've been renting for most of their lives now, right, with streaming culture, that they love the idea of being in rental communities that have new technology, you know, that basically have the dog park, that have all of the kind of community that a for-sale or an apartment would have without that kind of stigma maybe of our generation, Alan, right, where you'd have that one single home in a neighborhood that was maybe less, less, less maintained or worse maintained. So, so that was kind of the thinking of it. And then in addition to that, as people are active longer, we learned that a lot more of our residents are maybe empty nesters that are still living active. They love the idea of having people over, their barbecues, their dog walk trails, whatever that is, just that we cut the grass. So that was kind of the impetus of it. And then over time, we said, how can we make this the most marketable for an investor? Because it is relatively new. Even now, people think, well, that build-to-rent seems strange. Basically, build this brand new home and you're not going to sell it, you're going to rent it. Isn't that what apartments are for? And so, there's been some education on that part. But what we thought is, how can we potentially make this as easy for an investor who's maybe a little bit unsettled about the development process in general? How can we make that a little bit more marketable? So, that's kind of what I can talk a little bit further, but rather than having investors come in in the entitlement phase, let's strip all the risk away in the front end and make it a— put our money in on the front end, strip away the risk, and then bring investors once we get to the infrastructure piece. So that's kind of what we've tried to do.

Well, can you talk a little bit more about that infrastructure that you built? You said that you're front-loading it with With your own capital? Is that what I'm understanding?

Yes.

So typically, if you think about dirt, just raw land that you would develop, a lot of people have the kind of idea that the real risk in development, mostly what they're thinking about is the early-stage parts of that, the entitlement, because you're putting your money in, you don't have an approved yet, you don't have an approval yet, you haven't got the engineering drawings. There's a lot of variables that can, can basically derail a deal, right? So what we do is we usually will buy the land or option the land, do all of the engineering work, all of the entitlement work with our own capital, so that once we get the approvals— that's really what the entitlements mean, is the approvals from those municipalities and where we're building— now we can start the infrastructure. So when I say infrastructure, I mean Streets, roads, utilities, all the things that kind of go underneath the unit build or the vertical development. So that's kind of the infrastructure is the horizontal development, the vertical, you know, is the unit build. And so what we start the relationship with the investor is usually in that horizontal phase where the streets, roads, and utilities go.

So essentially, when you bring investors into the project, You've essentially got the entitlement, the, the, um, the land, you know, the land, the environmental, and all of those, uh, municipality kind of regulations out of the way. And so you bring the money in when you're ready to start the horizontal, uh, the grading, the road development, the the sewer systems and so on and so forth. Is that correct? That's correct.

Yeah. And so typically, you know, as some people know, but hopefully this isn't too remedial, but typically, you know, it might take us a year to get through that entitlement phase and then maybe another 9 to 12 months depending on the market that we're working in, you know, to get through that kind of horizontal. And then when we get to the vertical phase, maybe we're building 10 to 15 homes a month, right? So if we've got a 100-unit project, you know, maybe it's another 10 to 12 months and then it takes a little bit of time after that to stabilize it. So, you know, what we've learned and I've developed— I know you're in Carolina. We've got projects that we're looking at in the northern Raleigh area. We've got apartment buildings in that Winston-Salem section. Where I'm in, in California, For us to do the developments that we do in the South, which is Lafayette, Louisiana, Alabama, Carolina, it would take us years, right? So we have to be in municipalities that want us, that understand the build-to-rent is actually, you know, greening up their community. And so, and that they're, that they're pro-development, because obviously at any stage there's going to be some issue that will come up. And we've got to be able to navigate that.

Well, not only knowing the communities, but, and like I said, the municipalities, do they really want you there? I mean, you would not really want to fight against a municipality that doesn't want you there. There's enough nightmares even with those who want you there. You mentioned just the aspect of actually greening up the community. From that, I am assuming that These are definitely growth communities. And being in California, I would think that it's going to be very challenging to find infill properties. And yet that's really where a lot of young people want to be, is more towards the center of the city communities. So is that what you're finding to be true or what's really going on there?

Yeah, I mean, it's interesting since we've been building before COVID so we've seen some trends. I think, as you know, Alan, in real estate, and I always, I should be calling you doctor. You should have put doctor up there instead of Alan, but I'm going to call you doctor today because you deserve it. But typically what we like to do is you know, make sure that, that we're working in markets that are ascending because as in real estate cycles, people like to think of it from the macro level. And certainly there's some to— there's something to that. But even during the great financial crisis, there was some markets that maybe were, were still ascending or that didn't get hit as hard. Right. Lending dried up for a lot of people, but there was still growth. So we like to make sure that we're in that kind of ascending market. And so every municipality is a little bit different. Yes, it's true that you want to work in areas that people want you, but when I say municipality, I mean the folks that are there, the neighborhood councils can be pretty powerful too, right? So we got to be building some of the projects that we like to do. We like to do veteran housing. Some of the projects that we like to do would be tax credits, although some of those are more difficult. We try to have at each of our projects, whether we own the real estate as a multifamily project or we're developing a single-family project, is that we like to have a community resource officer there that's putting together events, right, for the community. And it kind of goes back to the relationship piece that we were talking about, Alan, is if, if you have a person there that turns that place into somewhere people want to be and they know their neighbors. And they're, they're, they're, they're dining with them or they're having barbecues with them, or that particular resource officer is bringing outside schools to come and wash their cars. People stay and people refer, right? And that's how the kind of strength of those relationships helps us develop, develop projects where maybe the operational expenses are a little bit lower because people are staying longer. So things like that is kind of what we always— you know, consider in the markets that we're going to. And the infill question that you had asked about, it's— yes, there in the areas of the South, as you know, because you're starting to see so much growth, there are still some of those opportunities. California, we wouldn't see those opportunities.

So in terms of the economics, of course, when developers are looking at putting in an apartment complex, they're looking at But can they build this less than a person could build a single-family home and thereby keep the rents lower than what their house payments would be for a single-family home? But you're competing with, it seems to me, like a very different clientele than what would typically rent an apartment complex. So are you still looking at essentially those same— economies of scale? Are you building so that they can rent for less than what a house payment would be?

Yeah, yeah, such a great question. You know, you've seen kind of already what the kind of delta is between what a mortgage is going for and a rent. You know, when we started, Doctor, we had maybe 2,000 It was pretty even, right? You would probably even a little bit in the black if you were a renter, right? That you— I mean, if you were a homeowner, that you were basically even a little bit lower than the rentals. Now we've kind of seen it go in many markets, $2,000 difference. In our market, there might be a $1,000 delta. That's, that's pretty substantial. So, you know, as I mentioned earlier, That kind of disqualifies even those folks that wanted to get in a home or own a home that couldn't. Our argument and thesis is that there's probably a lot more people that like being in these communities rather than holding it, owning a 1960s home. But to answer your question, yes, that we're building, you know, maybe $180 all in. And we can do that because we're, we're, you know, We're doing pretty simple three-bedroom, two homes, two two-bath homes, and we're renting them for you know seventeen to twenty-seven depending on larger projects that will do four bedrooms. But yeah, I mean, so if you think about somebody that's going into Lafayette, Louisiana, and nice kind of neighborhood there, maybe they're paying twenty-two hundred for their rent. They'd be in that thirty-two hundred for their mortgage for that same type of. You know, so I don't know that that's always going to be the case. I think as interest rates come down, but but I think we kind of have to think about that trifecta, right? One, the rents will be going up a little bit. Two, supply. We're still four million units undersupplied in this country, and many of them happen to be in the South. And then the three is, you know, even if people wanted to to be in that community, they're they're even if they wanted to own a home, many people just can't do it. So that's kind of where we're trying to fit in that middle section there.

Well, I'm kind of getting an idea of how you operate these communities, but fill us in a little bit more on the detail. You talk about a community organizer, and you alluded to the fact that you're doing the yards and even bringing outside vendors in to To do the automobile detailing, as you would call it.

Yeah. So what I think most people are curious to hear is, you know, if they've invested in real estate, they might understand apartment building, your operating expenses are in that 45% to 55%, right? You're somewhere in there. We're building new stuff, right? So the operating expenses are much lower, probably in that 32% to 38% range. But one thing that I like to remind people is if you're investing in apartment buildings, a big part of your operational budget is pulling out, you know, terms, right? Where you got a resident moving out like over a year. He probably hasn't met many of the people that are below him or above him. And that operator is, you know, putting in a bunch of dollars in order to fix up the unit and release it. With the Built-to-rent communities that we're building, one, they're newer and they're staying longer. So if they're staying maybe 2, 3, 4 years, obviously our operational budget is a little bit less. We thought, well, we could do even better than that if people know their neighbors. That's just more of a kind of bet that we're making, right? I go to my church community. I know those folks. I get with my neighborhood. I know those folks. It's a lot easier. It's a lot more difficult for me to just bail right after I know those people and those faces. So we like to bring that community organizer there to help kind of bridge those folks that if they're elderly, get them some food, get them to their events. If they're younger, get them playing hoops and— getting out there and earning a couple of bucks washing people's cars. If they're new members of the community, we'll bring them a welcome meal. So, that's all for just kind of what it goes back to is that people can look at it as a detached business. But if they think about that element, and even investors that have given us pushback, if they think about it holistically that what we're building is actual communities— Then it makes a lot more sense on the relationships and investing in the people.

So what are your demographics on that in terms of age? Are you finding that you're able to have a fairly good mix of ages, or is it young people and old people and not much in the middle, or what are you finding there?

Yeah, it really has been kind of interesting over the, over the years to see In some communities you have the nurses and in some communities you have the, the police officers, right? Blue collar. And then obviously it stems around kind of where, what jobs. In Lafayette, Louisiana, it's a pretty balanced market. In Foley, Alabama, it's a pretty balanced— Carolina, it's pretty balanced. So you're seeing a lot of different types of residents. But if I was to try to, to think of our avatar, It is younger families that typically like these places. They've got, you know, 2 to 3 kids. And those are kind of, you know, they're in their school or family formation years. They like the idea of having a lower rent, but walking trails in the community and parks and all that around. And in some of our projects, we've just noticed a little more than we thought when we predicted Which was that kind of empty nester that loves the idea of still owning or still being part of a community and having that home and backyard and detached space. But yeah, we will do the grass, we'll do the maintenance. They don't have to do anything except turn their light bulbs on. But if I was to kind of, you know, every community is a little bit different, but if I were to kind of, you know, segregate it a little bit, it's probably leaning a little bit more on the young family. formation years. And those folks are, you know, as you know, it's longer, it's later and later in life now that they are owning a home. So it used to be that was maybe young mid-20s. Now it's, you know, young mid-30s. So that's a pretty large segment of folks.

Sounds like the community I grew up in. The difference was that most people were homeowners, but Mm-hmm. But it was very much that demographic of young families with children and a few elderly within it. So where do you see the future going with this, with the trends that are very likely? I mean, we still are going to have housing shortage for really projected for anywhere from 5 to 10 years in the future. Like you'd mentioned, interest rates may be coming down, but then real estate prices could be going up. So I don't really see that homes are going to become a whole lot more affordable. That's just my prediction. But where do you see the future going?

Yeah, it is interesting when you think about just the affordability. If I just read that 40% of homeowners are locked in less than 3% on their interest rates. So even if interest rates come down, are those folks really, really selling? Probably not, because we're not going to see interest rates come down that far. They'll still be in the 5s. And that's great for a lot of the economy that needs those interest rates to drop. But so I think that's part of it. You know, if you follow Warren Buffett, just sunk another billion dollars into homebuilders for this reason. A lot of their, you know, Lennars and D.R. Hortons have large build-to-rent You know, arms now of their businesses because they do see, like you had mentioned, really low, low supply, you know, high demand. We're, we're, we're in the kind of early innings. If you think about Wall Street owning, you know, 50% of or controlling 50% of, of the multifamily community, but only a small percentage of the build-to-rent community, and that it's become kind of the favorite son because of yields. You can kind of see that there's probably a pretty long trajectory here. You know, I think if you were to kind of follow the cap rates, for a lot of your audience, I don't want to get too technical, but in general, valuations for apartment buildings have started to fall a little bit. Part of that is the operators might be doing a fantastic job at operating the property, But interest rates have rose a little bit, and there's a capitalization rate cap that's got to be paid. So they got to pull that money out and put it back in, in many cases, and the value has dropped a little bit as the cap rates increase. In built-to-rent, because there's some more flow of money, the cap rates are starting to to go down a little bit, which means values are going up. So for those reasons, I feel like this has. Still a pretty, pretty decent trajectory, and we like to talk about maybe we're in the second inning, maybe mid-second inning on this because it also, doctor, makes sense when you think about it, right? The people that are coming up have been renting their whole life. They love the new stuff. It is beautiful communities without any stigma attached to it. It it it it it does kind of lend for that community feel. Everything that you've always kind of thought about owning a home is there with the community. And now I'm mostly buying businesses on my phone or crypto on my phone. It's not the same American dream that I or you had to own a home. And that's why I think that it's probably here to stay. I don't know if that answers your question. There's probably more we could get into with the advent of AI and all the rest of it. But that's, that's kind of the way I see, see it.

Yeah, I mean, it's certainly— it's never easy to predict the future, but I mean, it isn't just economics that are involved here. I think there's just social, cultural issues, psychological issues. I think there's just all kinds of things going on in terms of the way that younger people are looking at the world. And like you had mentioned, it's empty nesters are looking at these opportunities because of a number of social, cultural, economic issues. They're looking at it because, well, they don't want to go into an apartment, but they want more freedom than what homeownership is ever going to give anybody. And just different things are going into that. The world is changing in so many different ways. And it's— I mean, it's impossible to really predict what's necessarily going to happen. But we can look at the trends. Do seem to be moving in this direction for all kinds of reasons there. Well, just to sum it up here, Andy, let's go back to the investor side of this. And you emphasize taking care of your investors. So how do you help your investors align their financial goals with their deeper values and their life missions so that they are finding fulfillment in the investment, uh, psychologically, emotionally, but also being protected, uh, financially?

Yeah, it's a great question. I, I, I think that, um, what I've started to see maybe over the last 3 years is a trend towards the private lending side for investors loving the idea as interest rates have gone up. Having that kind of passive money that's coming into their account, you know, every month or every quarter, current pay, right? That's kind of become the thing that a lot of investors— I like to try to remind investors that you've got to spread it around. It can't be in one asset class. It can't be in one investment. But I think you do need to consider having opportunities that are maybe long-term, And opportunities that are paying you monthly. Or if we take a lot of people's capital from self-directed IRAs, right? Why don't, why don't you guys make that decision on where your capital's going? Self-directed IRAs are big for us. As I mentioned, the private lending, you know, in that 12 to 14% range, a lot of folks like that idea because it's, it's backed by a personal guarantee of a strong operation team. And liquidity, as opposed to kind of investing maybe in one property in one area that maybe you don't trust as much. So those are those are options that I'm sure you're probably seeing trends as well, where you know it used to be that you could get your eight or nine percent pref preferred return in an investment property, you know apartment or medical or industrial. That's changed, right? Those, those aren't typically there. So people understanding that are investing in properties that may not deliver a return for 3, 4, 5 years. Maybe it's a strong IRR or strong average annual return, but it's not going to be consistent. So we've just kind of taken that into account as we change sometimes how we view our offerings to the, to the investors that we're taking care of. And we always try it, Dr. Ozzy. I know you do, you know, try to make them asymmetrical in their favor because that is the lifeblood of the business. We can't do what we do by not making our payments or, you know, not— I always tell people not every deal that we've done has been a home run, but we've never lost investors' money in the sense that sometimes it means getting them into another project. Sometimes it means getting just the capital back plus a little bit less than we But that has to be the focus, is how can we protect— because as for many folks, this is a lifetime of capital that they've spent building, right? We're the stewards of it.

Absolutely.

So, I don't know, you don't want to get me started on that. I'm sure you hear a lot of people say that. So, it almost becomes kind of white noise, you know, conservative underwriting, we take care of investors. Okay, well, duh, you know, but How can we figure out ways that actually structurally do help them get there quicker?

Well, Andy, I'm sure there are people in our audience who would like to learn more about this and learn more about legacy acquisitions. So how can they get hold of you?

Yeah, please. And we did a— Doctor, we did a nice, I think, Kind of book, small book, but ebook on build-to-rent. So people that are looking for a little more clarity, just go to legacyacquisitions.com, legacyacquisitions.com. And you can even find me on LinkedIn. But I would encourage people to go to our site because there's a lot of good resources there for you. Okay.

So that's legacyacquisitions.com. And you can find that information in our show notes as well. So today's conversation with Andy McMullen highlighted a truth that often gets overlooked, and that is wealth at scale isn't just built on spreadsheets. It's built on trust as well as long-term relationships and operators that look out for their investors. His nearly $1 billion in transactions remind us what's possible when discipline meets connection. So, if you'd like to go deeper, Andy is offering a free resource, as he mentioned, an ebook. So, just go to his website, legacyacquisitions.com, and you can get that free resource on Build-to-Rent Communities. So thank you, Andy, for being with us. And enlightened investors, thank you so much for being with us again. Until next time, live abundantly, and we'll see you in the next episode.

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