REIA 78 Randy Langenderfer: If I Can Do It Anybody Can – Multi-Family Made Easy

Welcome to Real Estate Investing Abundance, the show for busy, fulfilled professionals like you to learn how to develop financial independence built on solid passive real estate investments. Now, here is your host, Dr. Allen Lomax.

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Enlightened Investors. Today's guest, He makes the claim that if he can do it, anybody can. Let's take a dive into multifamily made easy. Randy Langendorfer is president of InvestArc Properties, LLC, focusing on creating investor value and passive income returns for the busy professional. He has been in multifamily real estate since 2014 as both a general partner and key principal. in 250 doors and a limited partner in over 4,000 doors. InvestArc offers the busy professional who wants to include multifamily in their portfolio an opportunity to partner with experts who are aligned with their investment goals. Randy, before we get into real estate investing, share a memorable experience from your formative years that helped you to be who you are today.

That's a great question, one I don't think I've ever been asked. First, let me thank you for the opportunity to be on your podcast, Alan, and talk to your audience. It's always a pleasure. So I guess I would, off the cuff, I would default to, as a young person, I wanted to be a professional basketball player, as many young boys do. I was in love with the game of basketball. I actually still enjoy it immensely. Thought I wanted to be that, a professional athlete. I only had 2 problems. I couldn't dribble or shoot.

That seems like a problem for a basketball player.

Well, actually, I could shoot, but anyhow, trying to make light of this discussion that it was a— but it taught me an awful lot. I actually played football in college and basketball was my first love. But the reality of what it brought to me was the competitive nature that grew out in me as a young man that I think instilled to me as an adult, even in business. I don't think I am uber competitive to the fact of detrimental relationships, but it is part of my DNA. I like to compete in many things that today it's on the golf course or it's in business. And I love to compete in real estate today. I'm not competing against anyone really except myself today. And so I take that lesson Learned that we all need to look inward and challenge ourselves as to where we want to go and how we want to get there.

Yeah, self is, I think, the best competitor. I think when we're looking outside and competing against the world, it takes us off course oftentimes and we lose focus. If we know ourself and can compete against ourselves, I think that's the way to build excellence. So good example.

And even if you do compare yourself, my point is if you compare yourself to the world, you're going to lose because there's always somebody doing something better, somebody different. But if you compare yourself to yourself and look at incremental process, incremental gains, I mean, that's all about real estate is taking a long view.

Yeah. It's always good to look outside for inspiration, but for comparative purposes, it's always going to be a losing game.

Yeah.

So you'd say that education is important for the real estate investor. Where does a person who wants to get into passive real estate investing, where's a good place to begin?

Today, I serve as a coach in Rod Khaleef's organization. I'm part of his mastermind and one of his coaches. So I get to ask this question a lot from new students and new investors as I try to network. The short answer is I don't think there's any one particular path for everybody. I think before the education One has to develop a personal strategy. What do they want out of this? Are you looking to be just a passive income with a nice consistent stream of income? Do you want to be an active investor? And maybe you don't even want to be in the multifamily space. Maybe you want to be in the single-family space or the other aspects of commercial real estate. So the answer to your question though, is there are many opportunities out there today. This podcast is a great one. And if you simply were to do an iTunes search on real estate podcasts, you'd quickly become overwhelmed. There is, in your local market, wherever you're at, there are meetup groups. These are all the free approaches to begin to network with like-minded individuals. So the key is, when you wanted to get educated, you went to college because you're around like-minded individuals. And the illustration I use too is I go to church because I'm around like-minded people that believe as I do. And it is the same thing with real estate. As you associate and network with people like that, you're going to get enthused and you're going to do comparisons, what you're going to do too. But it is go at your own pace. There's the self, and I'll say the free side of it. And then there's the natural progression into a large educational group. I mentioned I'm in Rod Khaleef's organization today for that very reason, because I want to continue my education and networking with like-minded professionals. His is a great group. There are others across the country, wherever you're at. I mean, I could name the Sumrock Group, the Lifestyles Group in Texas, Dan Hanford's Multifamily Nation. He's out of Carolinas. You got Micah Blanc, who's in Pennsylvania, and they all have a national focus. So that to me is the next evolution. And then at some point, it's kind of like, you got to do something though. You can educate yourself, And we can talk more about that, but at some point you got to pull the trigger.

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Absolutely. But I like that you pointed out that the best way to start is with the free information. And there are so many attractive programs out there, and I have heard time and time Again, from investors who have spent thousands and thousands of dollars and got absolutely nothing out of the programs. And that may be because they really weren't that good in terms of programs, even though they had a fancy price on them. It may be that it just wasn't the correct fit for somebody. But today there are just thousands of ways to get started free. And that's really the way that I really encourage people to do that and to Get your feet wet with all of the free programs. There's excellent books out there, there's excellent podcasts, and like you mentioned, there's free meetups, free masterminds, there's local real estate investment associations. Many ways to get out there and start free or at very, very low cost and, and find out where you want to go. Like you mentioned, you have to, to know your own strategies and what it is that you want. And once you have have investigated all the free materials, then you're going to know where it is you want to invest your money for the best buck there. So thank you for pointing that out. Yeah.

I got to interrupt you just to say, when I first got started in this, I paid a lot of money to learn the underwriting process. I'll just say a lot of money. Today, you can do that online course for probably $100 with templates and tools and et cetera. So the prices have come down. And those free and great tools out there, as you mentioned.

Great tools, yeah. Education is great. And with the plethora of information out there, we could get into that aspect of just getting more and more and more and more education. And I've been there, done that. So I know how that can be. So how do you get out of that mode? When have you had enough education to know that you really have to dip your foot into the water?

Yeah. And I would say that wherever you're at on your real estate journey, whether you're a seasoned syndicator that's been doing this 10 years or 20 years, or you're starting, your education is always ongoing. It just takes a different venue than it does previously. And it just evolves. It's a natural evolution as to what you're looking for. So I wanted to make that point. But in terms of getting action or taking that first step, so for me, I can talk about my personal journey. That personal one is I was in one of the national groups And I had decided I did not want to be an active general partner yet. I didn't have the time, family, and professional relationship. So I, this is my path, was trying to find sponsors, general partners that I— the old illustration of know, like, and trust. And I did that. And so I dipped my first toe in the water by being a passive investor. And I think that's a natural progression for a lot of people. As they have W-2 jobs and are looking— I still am W-2'd today, have active employment. So you can do both. It just depends on how involved you want to be. So we talk about passive investors investing in people they know, like, and trust. So first, just really encourage, develop a relationship with somebody, even if it's just when they send you a deal to ask a lot of questions on it or to proactively— I mean, I am out As I identify investors, I always try to schedule a personal call like this. What are your investment objectives? Are you looking for a yield play that you just want a 6%, 10% cash-on-cash return? Or are you looking for something that is, you're a more risk-taker and you want to see a 20% IRR in 5 years? Well, let me just pause right there. Those are 2 different strategies. And then there might be a hybrid in between where you get some of both. None of those are wrong. They're all effective in helping you build wealth. But the passive investor has to decide what they want to do, what their strategy is so that they can know what they want to invest in when the opportunity comes along. I always give the example, if you sent me an opportunity in Anchorage, Alaska, I'd say pass. I don't know anything about Anchorage and I'm not disparaging if any of your listeners are from Anchorage, but I don't know anything about Anchorage and I don't really need to take the time to understand it because there are a lot more opportunities in Texas where I live today. At some point, give the illustration of Ready, aim, fire that I've heard in the business world. People, their personalities are ready, aim, fire. So you're ready, you're educating yourself, aim, you analyze an asset, and then you fire and you pull the trigger. So there are personality types all along that spectrum. There are those who aim, aim, aim. They're always getting educated. They never— I'm sorry, ready. They're ready. They're always educating themselves. They never aim. They never really underwrite or they never understand the process. And they're certainly not going to pull the trigger. My bias as a professional in the corporate world with a finance and accounting background is I'm already aim, aim, aim, aim. That was my bias when I started before I pulled the trigger and fired on an investment. And when you write your first check for $50,000, hand begins to shake a little bit, even though I had the money. So know your strengths and weaknesses, know your bias, Maybe you start small. You can group with a couple of people and form an LLC or a trust to invest, to make the $50,000 threshold. There are ways to get around that $50,000 if that bothers you. With most sponsors, there is an opportunity there. If you're developing that relationship with the person and know their track record, developing a list of questions to ask them, it's going to make that fire So much easier. To the point today, fast forward 8 years later that I've been doing this, there are some sponsors that send me a deal. The first time I drove the assets, I looked at them, I asked tons of questions. Now their third, fourth, and other deals that come along, I don't analyze them much at all because I know the person's track record, I know their history, and it's a matter of if I have funds or not and if I like the submarket. So firing becomes easier as you progress and get educated, but at some point, You're either going to fire or you're going to walk away from this investment strategy.

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So beginning, you need to be ready and you really need to look at your aim before you fire. And as you develop your skills, your aim just becomes more focused and you spend less time aiming and more time firing. So you have to decide where you are on that spectrum and where you are in conjunction with your team. So tell us a little bit about building that team, which is critical in real estate. And everybody talks about teams and team building in real estate, but just give us really the fundamentals Fundamental aspects of how you go about putting that team together. That's a real challenge.

It is.

And again, it's part of that evolutionary process. So I heard that a lot when I first started to build a team and I said, what team? I'm not going to be a GP. All I need to know is— there's still a team aspect of it. I mean, it is labeled a team sport for the reasons because the team aspect is you need to know your sponsor or your general partner. You need to know their investment strategies, their success rates, et cetera. Today, I spend a lot of time focusing on general partner building team with joint venture partners who I could co-venture with to take down a property, making sure we're like-minded in our approaches and our strategies and our bias towards providing investor value. It's key for me. It's legal. You got to have legal. You got to have relationships with financing companies. Financing arm is 80, 75, 70 to 80% of the acquisition price. So spend a lot of time developing that with brokers, mortgage brokers. And then the other piece of it is developing relationships with the brokers themselves who are selling the properties. So there's— I live in Houston area submarket. It's a huge 4th largest metro in the US and huge opportunities today. There seems like everything in America is for sale today from a multifamily perspective. It's building a relationship with those brokers because They're going to be the ones that really prompt the seller to encourage the seller to accept my bid over somebody else's. And so I've just outlined 3 or 4 things that could be overwhelming to the new person to the industry. You don't have to be concerned about that your first one out of the box or even your second one or third one. You just have to know the sponsor. If you've been in it longer and you're trying to move towards the GP side, all those things I just said become very time-consuming. And that's why sponsors get compensated a little bit differently because they not only do all that, but they have upfront capital at risk as well. So it's a journey.

And so I guess what you're saying is take it one step at a time, but take that first step.

It's easy for the person to think about, you know, I use the illustration with my son, you want to be in postgraduate school, you're only a freshman in high school. You don't just go, there's a sequential event to go through. Some people's sequence may be very short, but they still go through the process.

Yeah, and those people who have shortened that process make it look easy, but they've probably been investigating and doing it really longer than what it looks like there on paper. You have a habit of paying it forward, so share with our viewers and listeners how it is that they can get in touch with you and take advantage of your years and in-depth experience.

Well, thanks. I mean, paying it forward is truly something, maybe I'm just old, but I do get enjoyment out of helping people because, Alan, I'm sure you can relate. There's been many people that have built into your real estate journey, your professional journey, your private life, a lot of mentors. I spend a lot of time on the phone talking to people about real estate, and I guess I'm just a nerd. I enjoy it. And I do enjoy giving back to whatever extent I can. What I would tell your listening audience is happy to speak with you. The easiest thing to do is go to my webpage, invest-ark.com. There's a Contact Us on there and you can schedule an appointment with me or send me an email there. Either way, happy to talk to your listening audience really about almost anything they want to talk about real estate-wise.

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And you're an interesting person to talk to. Well, Randy, share with us one of your most difficult setbacks in life and how did you come through that time and What did you learn from the experience?

Well, I'll stick to the real estate. That question is a great question. It also makes me want to go different directions, but I'll stick to the real estate side. So there's a couple different illustrations. My first investment, when I wrote that first check, was with a 225-unit apartment complex in Port Arthur, Texas. And for your listening audience, that's about 120 miles due east of Houston. It's right on the golf. I knew the sponsorship team very well. I liked them. It had a great story. And I plopped down my $50,000. And the single play was this was not leased up. So I learned they took bridge debt and now I know what bridge debt is. At the time, I really didn't know what bridge debt was. They got it above the 90th percentile for agency debt and they refinanced it. And so after 18 months, they gave a 60% return to the investors. So I got 60% of my money back. And about that time, At that time, I was kind of pumping my chest like, yeah, I'm a smart real estate investor. And then there proceeded to be all kinds of problems with the asset. There was a hurricane that took out all the downstairs units. So 112 units taken out, just one storm. That started to get rebuilt. There was a fire. Regrettably, a couple kids died during that fire and a long, long rebuilding process. And so the mistake, or not a mistake, I call it a learning process. Learning process was after 6 years, I got all I want my money back. So I got all my money back, but I didn't make anything. So I use that illustration and various examples to say that these are businesses, each one of them, and reverting back to the assumptions, know your sponsor, know the business plan, and evaluate the risk to you. So in my corporate job, I spend— that's what I do for a living is evaluate different risk protocols and compliance, privacy, IT security, and we're constantly identifying corporate risk and mitigating them. And so I would encourage investors, you know, and if I'd have lost that money entirely, I only lost 40%. I had 60% back. So nobody wants a loss, but I wouldn't have been devastated. I wasn't going to sit on the food lines, but it's a business and investors need to educate themselves and beware.

Well, in this example, it doesn't sound like it was the team. It was just circumstances that could happen in any any deal you go into. Even if you're not on the coast, in most places, certainly throughout the Midwest, there are tornadoes that could wipe out a complex. And anywhere you are in the country, there could be devastating floods.

You do this long enough, you're investing long enough, somebody's going to have a fire in one of their properties.

Yeah.

Fire.

And in this case, somebody lost their life. 2 people lost their lives. These are devastating things that are going to be very, very difficult to come back from. I think given the circumstances, you're fortunate you at least were able to retain your capital, even though over a 6-year period, you certainly expect to have something to show for that, and which you didn't. So good examples there that you have to look at the risk.

The advantage of going back to what I said is kind of diversification for those of your passive investors out there. You certainly don't want to bet the farm on your first one. I have taken multiple different passive investments over different geographic areas with different sponsors. For that simple diversification strategy, different markets, different sponsors. So they're not all— they are correlated to multifamily, but they're not correlated to a specific industry. And just in case your listening audience is thinking that that was typical, I would say over that same period, you track all my investments, both passive and active, I've been able to return 2.2 equity multiplier. So that means for every dollar invested, I've gotten $2.20 back. And because there is a portfolio of them, There's not just one. If one's non-performing, there are many that are performing to offset that. So you can understand by the simple math that if I had one zero in the equation, there's got to be some really big winners in there, and there were.

Well, excellent examples there, Randy. Let's tie this up here with our last question. Imagine that you have come to the end of your life, and as you lay on your deathbed, what do you look back on with your greatest sense of fulfillment and satisfaction?

I hate that question. I think That one is kind of easy for me. I'll tell you what I don't want to be remembered for is the greatest real estate investor there ever was. And obviously that would be a stretch, but I'm a husband, a father, even a grandfather. And so I would hope that at the end of the day, my kids and grandkids don't look at me and say, wow, he was a really great real estate investor. I hope they look at me and say, he was a great dad, a great husband, set us example, set us on the right course of life. and that he did pay it back to us and others.

Well, excellent, Randy. It's been a pleasure having you today. As always, thank you for being on the show.

Allen, thanks again. Appreciate the opportunity.

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