Affordable Housing with Sep Bekam

Welcome to Ladies Kicking Assets and I am here today. I'm Robin Binkley. I'm here with my partner, Courtney Moeller, and. And we have the amazing guest with us today, sepakom, who is the founder and CEO of Bakcom Investment Group. And his focus is affordable single family housing in emerging markets. And so he is going to dive into that with us. But before we get started, I just want to share a couple of nuggets. We are going to talk about some things, but we are not your CPA or your attorney. And so we would ask that you would take those nuggets and go talk to those experts who are licensed in those fields. We also ask that you would too subscribe and like Ladies Kicking Assets. And Sep is going to tell us how we can all reach out to him towards the end. And we would love for you to email everyone and just give us some opportunities to share with you. Some. Some projects that we're in and some information. I know Sep has a plethora of information that he's put together, a lot of pieces, so I look forward to hearing about that. So I have spoken enough. Welcome. Welcome. Seth. So glad you're here with us.

Thank you, Robin. Thank you, Courtney. Pleasure to be here.

Yeah, we're so excited to have you. And I'm so excited to kind of dig in and really talk about all of the different things that you're involved in, because this is a space that I have not, you know, an avenue. I haven't been down myself. And I think when people, you know, think about investing in real estate, they initially think about single family homes. So I'd love to kind of talk maybe a little bit about how you evolved into that space and what that looks at now, because when I heard the other day how many properties that you own and are managing, my mind was blown. So that's super exciting.

Thank you. Yeah, well, it's. I. I'll say single family and especially affordable housing. I think those two asset classes are the most misunderstood asset classes nowadays. There's no Grant Cardone beating his chest or her chest, you know, proclaiming that single family is amazing and all that. Right. It. The direction tends to go one way. It tends to be people get into single family and then they're like, oh, well, I got to get into multi, or they get accidentally into affordable housing and they're like, I'm never going to do that again. I'm going to get into A and B class. So, yeah, my. My journey originally background electrical engineer, wired, you know, was in the Rat race. And I, I, I, I got into the Robert Kiyosaki books. A friend had recommended that to me and just kind of changed my life. Uh, it, it was literally like the red pill, blue pill moment from the Matrix, right? Like blue pills, you just keep trading time for money. You stay in the rat race. You get told when you can go on vacation, when you can take a bathroom break, um, who you can work with. And you know, whether or not that's even the reason you put on the planet. And the red pill is you control your destiny. Like, you go serve the market and, and if you deliver value, then you get rewarded for it. And the instigator to kind of go from blue pill to red pill was understanding inflation. So I see real estate investing as a good way to hedge against inflation. Inflation is all over the news right now and it wasn't as talked about like five years ago or even like 10 years ago. Right. But when people are feeling it at the supermarket, it's, it's like, it's more pressing. So the journey to go from like engineer into affordable single family housing, like there was, it was kind of like a lot of zigzags along the way. I, I just thought I was going to keep my engineering job and invest passively on the side and maybe over 40 years or after 40 years, I'll, I'll have enough properties to, to retire. So I was like, I'll just buy one property per year. And the, the mistake I made was initially I thought I was buying like C class properties. You know, I listened to the books, the audiobooks, I listened to the podcast, joined the seminars, joined masterminds. So I thought I knew what to look for. I was like, okay, if I'm not seeing graffiti on the walls, you know, if, if the windows aren't bashed, then it's, it's C class, right? Or maybe even like B. And then it wasn't until after I bought the properties I realized that these are actually like DNF properties. Um, because just because they look good at the beginning. Right. Doesn't mean they're going to stay that way. And having gone through 16 property management companies, and that includes actually 16 property managers, that includes property management companies, district managers. That's probably even higher than that now. I think about that, having to let go of 14 of them. Having been fired by two property management companies, I've, I've realized that the team is way more important than the property. Um, like those same pretty, pretty properties I was buying initially on, they, they looked like war zones after the first couple of evictions. So it, it was definitely a learning experience. It, it wasn't like it was pink cloud and butterflies. Um, and, and I can see why a lot of people when they get into initially like ah, you know, this is, this is like, this is basically like dealing. It reminds me of like a scene from Kindergarten Cop when, when Arnold Schwarzenegger is like the cop and you know that he's, he's showing up as a kindergarten teacher and like all the kids are just running around and they're, they' ceiling climbing the fan. There's paint everywhere there, food fights and all stuff and he's just losing his mind.

Yeah, it's like how do I get this under control?

Yeah, sounds like one of my properties you want.

How did you navigate that?

Well, yeah, I don't know if it was out of just, you know, just the, the timing of the market back then was good. So this is back in 2010, 2011, you could still find good deals on Loopne and that's really hard to, to do right now. Kept buying properties and just kept educating myself and I knew that especially listening to the real estate guys, they constantly said that there's no such thing as a problem property, there's only problem owners. And that my interpretation of that is okay, it's the problem owner who's either self managing it, who doesn't have the right team in place. And through the real estate guys I've, I met other syndicators, other investors who were good at solving these problems and they told me that I, I have to understand that there's different types of teams for the properties. One mentor had said, you know, you have, you have Walmart, you have Target and then you have Nordstrom. All three of them sell shirts. But the type of client that's going to buy a shirt from Nordstrom is, is going to have a different expectation for the quality and the price compared to Walmart. Right. Like if you picture a shirt from Walmart, it's going to be very different and different price point than Target or Nordstrom. And, and the mistake is having a Nordstrom property manager manage a Walmart property. Right. So you're giving a Nordstrom property to a Walmart property manager. Right? Because like Nordstrom property, for example, like property in Beverly Hills, that tenant will call in if the, you know, garage door opener doesn't have the right batteries or they'll call in if, you know, the neighbor across the street is, is not, you know, mowing their lawn. Right. There's A different level of expectation. But C class, they, you know, they'll change the batteries themselves. Like, they'll call in when the heat doesn't work or they'll call in when, you know, there's, there's a broken window. Like something more, you know, more severe. Right. And when I had that mismatch, that was a big, that, that was probably the biggest reason not, not blaming them as the teams. But I didn't, I didn't, I just didn't have the right people in the bus, as Jim Collins would say. And, and Russ Grace says too, is like, you want to find properties. You know, instead of just finding properties first and then finding a property manager, go find property managers and then ask them, hey, what type of properties can I give to you to manage? Like, what would be the best properties for you guys to manage? And, you know, over years, you know, interesting approach. Yeah, yeah, yeah.

Because I think that comes, you know, when you're trying to put your team together and making sure that everybody's kind of, you know, complimentary and, you know, picking up, you know, where you're maybe weak in some areas. I guess that's part of building that team and having that team in place so that you can go in and, you know, take care of whatever property or, you know, investment opportunity you're moving into. So that's great.

Right?

A quick question set. When you were talking about your journey, when you started out, were you buying single family homes yourself with your own money or when, at what point did you morph.

I'm so glad that you just asked that because I was wondering the same thing.

Yeah. Because I just, you just, you know, I, for example, I didn't know anything about syndicating until a little over two years ago. I had not heard the term Courtney kind of in that same window of time. And so, so I'm just curious how you did that.

Well, yeah, I actually started out as a multifamily investor. And, and I want to make sure that I, I say this before I, I go on. You know, I, my, my passion is, you know, providing affordable housing. That's my team's passion. The investors, too. The, and the, the solution to the affordable housing crisis is more housing supply. So more single family homes, more apartments, more mobile homes. You know, there's this been, there's been this idea about turning shipping containers into housing that's been around for a while, but the NIMBYs always shoot that down, or the bureaucrats always shoot that down. Right. They say they want affordable housing. They just don't want in their backyard. And not only do not want in their backyard, they don't want it in their neighbor's backyard. My philosophy is it's none of their business. Like you know, they, you know, and that's something that's probably debatable. I don't have to go too far down that rabbit hole. But there's, there's plenty of land in the US and it's, it's, it's possible to, to solve that problem. It's just, you know, the, the bureaucrats often get in the way of it. So then I'll go back to what we were talking about. The, the, the passion originally for me wasn't to just get into affordable housing. I didn't get into it, you know, like trying to be like virtual, virtual signal or anything like that. I, I did it selfishly. I was like, I, I can, you know, reposition these properties and syndicate them and help my investors and I get out of the rat race, help my investors and I hedge against inflation. And I thought that multifamily would be the, the fastest and easiest path to do that. So I had some friends, masterminds. This is actually part of the real estate guys as a mentoring club back in the day. And they were doing single family at the same time. Like they had just started doing single family. They had more experience than I did, but they were buying houses in Atlanta and the same time I was, you know, repositioning and buying apartments in Phoenix. Originally I started with my own money. I just buying fourplexes from turnkey providers. I learned really quickly that there's no such thing as a turnkey property because they'll sell you the, and that's, that's actually a big difference between turnkey and syndication is the turnkey providers will make it sound like you just buy the property and it's just going to automatically cash flow. But the compensation structure is, is off because turnkey providers get paid the day you close and, and they have no incentive to see that property cash flow or to see that you have good property management in place. They'll say that they have, you know, investment advisors or whatever it is, counselors or whatever to help out. But that's, it's just lip service. Right. And a syndicator is incentivized to see the deal from start to finish. Right. That and, and a good syndication should be where, when the investor profits, that's when the syndicator profits, not when it's, you know, one way or the other. So back to the, you know, Back to the, the mistakes, you know, buying turnkey fourplexes and then apartment buildings. And it, it for single family, it's, you know, it's, it's a lot faster. That, that's kind of what I, I realized with multifamily, especially in the affordable housing aspect of it. You have to reposition the property. You have to reposition whatever property is. If it's an apartment complex, mobile home park or a single family house, it's got to be made resilient. So it, tenants that aren't going to treat it the same way as like a Nordstrom tenant. Right. A Nordstrom tenant cares about their credit. A Nordstrom tenants doesn't want to have a judgment on their record. Right. A Walmart tenant is probably living paycheck to paycheck. They probably don't have a good credit score. They probably have medical collections, they probably have bankruptcy in the past. So there's just more likelihood for that carpet to get destroyed. The paints needing to be repainted. And there was one complex in particular, it was a 52 unit apartment complex. And we did the repositioning. Like we, we made it look beautiful. It was the ugly duckling. And in a good neighborhood, Rebit, you know, redid the outside, did landscaping, repainted all the units, you know, remodel all the units, put in LVP flooring and all that stuff changed the management. But there was one tenant that was in there that we inherited and that tenants ended up getting killed. And we were in the process of evicting him. He, he was killed and it was drug related. And the, the day that that happened, the occupancy went from like, I think we're at 90% down to 80% overnight. And then it just, it was just like a house of falling cards. Like every day there were more and more tenants moving out. And I still have voicemails from the property because it was a digital service and, and I remember the phone calls that those tenants were leaving. It's like, I can't stay at this property because there's bullets coming in through here. Like I don't care if you guys are going to keep my deposit. Like, I'm not going to keep my, my kids at this property. And I sympathize for him. Well, you know, we can't control who our tenants hang out with, right? That tenant that got murdered wasn't hanging out with people that are going to Star Trek conventions. They weren't hanging out with people who were into podcast like Ladies Kicking Assets. Right. They're probably into like, you know, Breaking Bad. Nothing wrong with that. And it's a great show. But you know, actually I think they're, they were, they weren't just, you know, they weren't just watching the show. They were trying to do it in real life.

Yeah.

So, you know, that, that's, that's just, it's unfortunate, but you reap what you sow. Right. It's, it's not that the property is jinxed and that just happens. Right. So what we can do as, as the investor is do the credit screening, criminal background screening to prevent those types of tenants coming in. What we should have done is just completely vacated that property from day one and not try to work with tenants that a slumlord had let in previously. So when we finally got him out, you know, crime went down, but occupancy was down. So we're at like 50% occupancy and we had a balloon on a mortgage and the bank's like, hey, we can't refinance this property until you get it back up to 80. And that was the kind of the paradigm shift was like we went through like three years of, you know, agony. Had gone through four property management companies, had the property on the news, had multiple drive by shootings. Like we fixed the crime problem. Crime was down 95%. It's safe now, but just because the occupancy wasn't there and there was that one unit that had that reputation, it ruined it ruined that, that exit plan or it delayed it, I should say. We had to rebrand the property with the change management companies and we got it fixed. But if that was 50 houses and the same thing happens, if there was a drive by shooting on one house, it doesn't affect the other 49 houses. And we didn't have to wait three years to pull the equity out of those houses. Like it doesn't take three years to remodel, you know, a 1200 square foot house so you can keep them occupied and you can kind of be more strategic with it. So not right or wrong, but just for, you know, we like doing more of the heavy repositionings that the single family was, was I guess more aligned for being able to, to serve their affordable housing need.

Wow, interesting background.

Yeah, I guess I've never really thought about how, you know, something like that and affecting that. So that, that's such an interesting take. My, my brain is going in several different directions now. So. So no, now mostly you're in single family home. Are you in any multifamily anymore.

Most of my investor friends are multifamily syndicators. I know you guys are pretty active with the two and my, you know, I, I kind of look at it as like single family portfolios, right? So now we're not just doing like one house in a market, right? We're doing kind of like scattered multifamily. So instead of like vertical building, it's, it's more of like a horizontal. I'd gone through multifamily trainings and masterminds, and I don't, I don't think I could be doing what I'm doing now without having that background. Because I think if you could do, if you, if you know how to be a multifamily operator, then single family is easier. Right? Because multifamily, you have to, you have to boost up that noi for the property to get the highest profit out of it, right? Commercial appraisals. So it's just based on the income, right? That's, that's what leads to the value versus single family. It's just based on the comps. But if you can, if you can apply that, that business mindset to single family, then you can really stand out. Out of a neighborhood of like mom and pop investors or slum lords because they're just looking at trying to keep things as cheap as possible instead of trying to make the properties as resilient as possible and more as profitable as possible without having to milk the tenants, you know, on their budget.

Sure, sure. You know, I know in, in multifamily, you know, we saw, I mean, there was so much competition in the market over the course of this last couple of years. And I know, you know, personally, where I am in the Dallas Fort Worth area, single family was the same. Are you starting to see that change and shift in the markets that you're in?

So the institutional investors have slowed down depending on who you ask. I think that it's. I've heard that they own between 2 to 5% of all the single family rental houses. So I think what the U.S. population is about 330 million Americans. And the rental housing stock on single family is about 17 million houses. So the institutional investors own about 700, 000 houses. Sounds like a big number, but it's not, not that much. So they haven't been liquidating. We've seen more portfolios come for sale and you know, just, they've kind of slowed down. But the mama pops are still buying, you know, the funds like us, you know, we're still Buying. And it's, it's, it's more competitive when the property looks nice. Oh, sorry, you were going to say Robin.

Oh, no, no, no. I'm just listening. I'm just.

Maybe it was an echo. Sorry. Yeah, the, the competition is there when, when the property is, when it's stabilized, like when it looks pretty when, when it has LVP and the granite and the backsplash and it looks like something from like a hgtv, that's when people want to buy it. But when it looks like an ugly duckling, that's not when a. That's, that's generally when the hedge funds don't have an appetite for it. That's when the homeowners don't have an appetite for it and the renters too. So just personal philosophies. I, I don't like getting into bidding wars. I like to be like the only bidder on the property because then it's like you can have that, that secret sauce to basically improve it, to make it so it's something that people will want to bid on or want to rent and move into.

So what markets are you really looking to grow into and where do you have the bulk of your properties at currently?

Yes, I live in the People's Republic of California, but I don't know. There was someone who commented on a LinkedIn post recently about how they knew an investor that was investing in New York and it took them three and a half years to complete an eviction. So unless, unless there was a big pile of equity in a deal in New York, like, it would be very hard for me to move into a market where there's just so much bureaucracy and it's so anti capitalistic and anti landlord. So generally we like to be in like red states. So pro business, pro landlord. Jacksonville, Florida, Kansas City, Missouri, and on the Kansas side, Richmond, Virginia. We still have some properties on Phoenix. Regrettably sold off most of those which would have kept them. But those markets, like, you know, if, if a tenant is not paying rent, it doesn't, it doesn't take a year like California can, or, you know, three and a half years like New York. It did take a lot longer with the eviction moratorium. But they, you know, people over there understand economics, so it's like they, they understand if someone is stealing, then it's not something that they want to encourage.

Sure. Wow, that's interesting.

Where do you see, you know, yourself going? I mean, I, I know we're talking about red states, pro business, pro landlord, but where do you you see some future opportunities for your, for your investment group?

I love that you're asking that because there's so much, you know, economic uncertainty and people are kind of not sure what to do with their money. So. Yeah, that's such a great question.

Yeah, yeah, great question. As far as like expanding out to new markets. Like the teams that we work with, like the property management teams and actually one of the construction teams, like they're scalable where they already have a geographic footprint in other markets in like Texas markets. And we were in San Antonio before, still like love Texas, but we don't have any properties there currently. For us to go to a new market, a Texas or Birmingham or Indianapolis or St. Louis, we just want to make sure that the team is there because then to get the deal flow, it's pretty easy from like wholesalers or from the brokers out there, but still very bullish as far as like the, the affordable housing demand. Like our customer is not the, the home buyer looking to buy these houses. Like everything is buy and hold. Like our customer is the tenant. Like so when we do a repositioning, you know, we want to follow like Ken McElroy and Robert Kiyosaki's model, the whole infinite return model, right? Like that's, that's kind of like the North Star. Buy a property, value add, refinance it, pull out the equity and keep it. And as long as there's demand for that rental, then we'll keep doing that. And the demand for that for those rentals is actually, it's higher now than it was a year ago or five years ago. We're seeing more people have roommates, we're seeing more people move in with their significant other. And you know, there's even people who are down downsizing. You know, like if you have three kids, you can't really, that's kind of hard to manage in like a studio or like a one bed apartment. So that's not something that we're seeing like slowing down. I mean, if anything, you know, if inflation gets worse and if the economy gets worse, you know, if there's more bank collapses or whatever it be, I, I don't think that people are going to have more demand for like mansions in Beverly Hills. I think there's going to be more demand for workforce housing and for, for the affordable side of it as well.

Absolutely. Well, I mean, as you know, inflation is, you know, kind of roared out of control. I mean, the cost of living has gone up. And you know, one of the statistics I Read the other day. I know we've got some of the highest, you know, credit card debt right now. You know, people don't change the way that they live. They want to. They're trying to maintain this current lifestyle and eventually that you kind of something's got to give somewhere and it's usually housing. You know, that's one of those first places that shift happens. So.

Right.

And, and we have such a. A demand that's not being met.

It's.

It's incredible when you really kind of dig into those statistics and what people need so affordable housing. Gosh. And I then, like you said, the mini. The tiny homes and the container homes, and I've seen so many really creative, you know, things kind of pop on the market, which has been really interesting to see and which kind of plays into, gosh. As people are being priced out of the homes and even as these interest rates are, you know, changing and lifting, it's having such a big effect because maybe somebody applied for a loan, they got approved, but maybe that changes. And then, you know what that new interest rate is, they're not able to close on that house. So we're seeing a lot of that happen as well too.

Right. There was actually a statistic to your point, Courtney. It was from, I think it was John. John Burns Consulting and Jeff Klein. I heard that at the Imn Sing Family Rental Forum, they said that when the interest rates doubled, the average cost for mortgage in the US Went up over like eleven hundred dollars per month. So unless a tenant, you know, got a raise where, you know, they're making more than 12 or $13,000 more per year, you know, that. That's a hard pill to swallow. Like, a lot of the tenants that we have didn't even get a raise. Right. So some of them, I mean, maybe they're getting some raise, but it's depending on what you think inflation is. If they get a 3% raise and their employer can say, oh, I g. But if you think inflation is higher than CPI, if it's 10 or 12% or 15%, then they're still losing purchasing power, unfortunately. And I think that's the opportunity with affordable housing. Right. Like, you can serve that need and that need is probably going to get even higher.

Absolutely. I mean, gosh, Joe called me from Walmart the other day, gone grocery shopping. And the price of eggs alone, I was cracking up because these memes with chickens carrying around Louis Vuittons was, you know, Internet all over the place. Just so true.

I mean, you just, you can't buy, you know, literally going to the grocery store, things like milk, cheese, you know, any dairy.

Basic things that people need three, four.

Five times in simple things. Simple things. You know.

Yeah.

You know, all the basic food groups. Bacon, avocados. Right, okay.

So.

The things that you must have, the things. Well set. You have shared so much with us. I mean, just some nuggets that you've said that I just have really resonated with me. You've talked about creative ways that people are figuring out how to afford housing. You know, living with friends, changing the way they live, downsizing. And so I, I do believe with all my heart that the demand for rentals is going to do nothing but increase. And that's in all these different asset classes, whether that's multifamily, you know, mobile homes.

Well, I mean, we've got inflation and people aren't getting raises. Property values continue to go and people just continue to get priced out of what they can afford. And so that demand, I think is just going to keep growing and growing. So loved, you know, for the people that are coming in. I had somebody message me yesterday and said, look, you know, I'm trying to buy investment properties. Do I need a business plan? What, you know, what do I do? So I love that you brought up, you know, getting that team in place, you know, kind of figuring out what you need and, and getting that in place.

Absolutely. And, you know, infinite returns. You know, I love, love that and resonate with that. Red states, pro business, pro landlord and emerging markets, you know, such key points. Well, I want to thank you for your time. Step. You want to share with our listeners and our viewers on how they can get in touch with you? You know, easy, easy to get in touch with you. How can we do that?

Sure. Well, I attend a lot of the, the events that Robin and, and Brett and Courtney attend too. Part of the same mastermind. So get a good, awesome privilege to spend time with you guys.

I'm looking forward to it.

Likewise. Yeah, yeah, you could, you could reach me at sep@become invest.com. i'm also pretty active on Facebook and LinkedIn. I especially with memes. If you like anything like memes, like.

We'Re gonna have to have you back. I know the real estate guys have their Halloween horror stories and you're like the, the leader. The leader of the pack. Yeah, we're gonna have to do that sometime. We should definitely do that sometimes.

Let's schedule that. Well, gosh. Well, thanks so much for your time. It's been a pleasure and you know, we just ask viewers, please like and subscribe. Ladies, can assets share these nuggets with your friends and please share SEPs contact and how to reach him. He has just got so much information out there.

It's just and always bringing value to everybody. Everybody, always, always.

You always say that, how can I bring value? How can I add value? You know? So thank you. You've added value to us today. So thank you so much.

Appreciate you both. Thank you guys.

Thank you.