Former Aerospace Engineer Christopher Lento Shares the Key to a Successful Multifamily Syndication

Foreign bowling here with Pivot to Prosperity brought to you by Pivotal Real Estate Investments, where we help our investors build wealth and income through commercial real estate that improves communities. And today we have Chris Lento as a guest. Thank you for coming, Chris. Appreciate it.

Happy to be here.

And so I would say a brief intro here and then I'm going to let Chris take it over. He's the founder and CEO of EM Capital and focuses on providing turnkey real estate investment opportunities in emerging US markets. He has a portfolio exceeding $100 million and his team excels in commercial real estate acquisitions, asset management and raising capital. Go ahead and tell us more, Chris.

Sure. So I'm engineer by trade, so I was a electromechanical engineer for 17 years in the aerospace industry. But the entire time in parallel I was doing a small apartment building acquisitions and management in the Boston area. And then kind of all along that journey, I was constantly thinking about how I could transition to real estate full time. And kind of the planets aligned. About seven years ago or more like nine years ago, I kind of saw the path, lined everything up and started this company in 2018. So been doing this full time for seven years and it's been great. You know, it's been a amazing learning experience and I couldn't be happier about the transition.

So do you remember the day you left your W2?

Oh, yeah, definitely.

What's the day?

Oh, is August 20th in 2018?

All right? Yeah. Those are big days, right?

Yeah, absolutely. Good for you.

Well, congratulations and it sounds like you've accomplished a whole lot. So where would you like to start? You want to talk about a first deal or more most recent things that you're doing? I, I'd like to, I think rather.

Talk about, to start most recent. So we're actually under contract right now for our biggest deal to date. It'll be a $49 million property in Atlanta. And we're flying down this evening to start our kind of pre purchase and sales agreement due diligence. So we're very excited about this. It's been, you know, kind of a slow year with interest rates high and you know, the big buy sell gap in the market. It's been a lot of offers, a lot of best and finals and not, not much to, to show for it. So we're happy to get this under contract and really excited about this opportunity and you know, we really want to have something for our investors as well. You know, long time periods with slow, slow acquisitions, your investors kind of get, get antsy. You know what Do I do with my money? What's the next deal coming? And you know, they can start to trail off and find other. Other things to invest in.

I hear you. Definitely. Well, so. And how many units is that?

This one is 268.

All right. And that going to be a 506B or C?

We were going to run a 506B and then a 506C.

Gotcha. Okay. Right. Which means for the audience that doesn't understand that the bees are our friends and family. So you have to already have a relationship and otherwise you wouldn't know about these opportunities. So that's why it's so important to call us and talk with us and stay in touch. And then the 506Cs, you can see, that's how I tell people to help them remember it. They can be advertised that you can see them advertised. So that's terrific. And so congratulations. It has been a tough year, year and a half almost. But so when you are approaching one of these deals, where are you sourcing most of your deals that you're vetting?

They're all coming through brokers, whether they're on market deals through brokers or sort of limited market deals, you know, where they are not going far and wide, but they're certainly going to their, their network of people that they know are interested.

Good for you. Yeah, yeah. And as far as this one, would you be the operator and including asset management or what, what all would you be looking to do?

Yeah, we partner with third party property management. So there's a big company in the southeast, first communities that was recently acquired by asset living. They manage three of our other properties. So we're gonna, we like the team. We have another complex within 10 miles of this asset. So we're gonna work with them on this asset. So I'll be the asset manager, you know, overseeing the property management, executing the business plan. But they'll be doing the day to day leasing, screening, maintenance, things like that.

We should probably even talk names later. I think that some of the people that I know here in Orlando also control some of that area.

Yeah, that's very possible.

Not that far away, right? Yeah, it's amazing. But that's a good company.

Yeah, yeah, they're very solid. They have a good kind of career path which I think then has good, you know, good employees or enables them to have good employees.

Right. And they've got systems. Systems are critical, as you know. But yeah. And then as far as the turnover, when you go into something like this or say to estimate Your capital improvements. Are you bringing in contractors and getting quotes actually, or are you doing it internally or how do you usually approach these?

So we do both, you know, prior to, prior to, you know, due diligence. We, we do estimates based on property improvements that we've done in the past discussions with our property management team. And then, you know, this week, Thursday, Friday, we're going in there with, with vendors. So there'll be a landscape landscaper there, there'll be a roofer there, they'll be a GC there and they'll be giving us quotes, you know, quick quotes, but, but you know, at least ballpark, so we can start, start figuring out how much capital we need to raise. So we should have that, all that information relatively solid by the end of next week following kind of, kind of this week's pre inspection, we'll call it. So there's no, you know, it's not a environmental inspection, it's not a lender inspection. It's just us and the property management team doing a financial audit and then a physical inspection of every unit. Roofs, drains, kind of the whole soup to nuts.

Yeah. And so I'm going to go a little deeper on that with you. How far deep do you go? Do you scope all the lines or.

We're actually just talking about that right now with our RPM team. I asked them that and I'm waiting for a response because I want to know whether they're going to scope the lines and if so, how many. I don't expect that we'll scope everyone in a 268 year property, but getting, you know, the one near the oak tree maybe or the five in the.

Yeah, you're talking Georgia, you're talking 10.

Yeah, right.

Yeah, that's a nice.

And then we also want to have them thermal image kind of under sinks or in potential wet areas to see if there's any signs of leaks as well.

Good. Yeah. Right. Then as far as inspecting the units, do you go in every single unit or do you do a sampling?

Yes, no, absolutely. Every unit.

Every unit. Okay.

Yeah, they have, they have a pretty good piece of software that everyone has in their phones and they sort of like snap the, the door and that cues up what the unit number is and then it cues them to hit, you know, the 20 pictures per unit that then will populate a report. So it's pretty, it's pretty efficient. But yeah, we got to hit every unit. So we're going to have a big team and divide and conquer.

Wait a minute, did you say you can you can get the unit number in your phone and the pictures to all sync in per unit?

Yep.

Oh, what's the name of that program?

I don't know actually. First Communities. Yeah, yeah, it's very cool. So, and then, you know, there'll be five phones out there all doing it and then it will all kind of come together on the website to create a report.

That's really sweet. Yeah, yeah. And then so as far as when you. Do you prefer to see the tenants or do you prefer not to see the tenants when you're going in on this?

I want to talk to people, I want to get kind of the inside info on, you know, what's going on there. Do they like the place, do they not like the place? What are, you know, persistent maintenance issues or management issues?

Yeah.

You know, this particular property has had the same on site people for a significant amount of time and they take a lot of pride in that. So I think it's likely that we will hire them on the transition.

I see. Okay. And do you get estoppels?

We typically don't get estoppels now because quite often the sellers are just unwilling to get all these samples.

Yeah, it's a lot on them for sure. And when we say estoppel's we're talking about an affirmation basically from the tenant that confirms what security deposit, what issues, what, what the lease says and start end dates, that kind of stuff, the facts of the lease.

And so we do a lease on it though. So we'll, you know, pull the rent roll and then go through every lease and make sure it's consistent with, you know, what's in the rent roll and that it's signed and that the people are the same people. So you know, we're, we're confirming the lease as with the information we've been given, but we don't have the resident sign anything testing to that again.

Right. Well if you get an actual copy of the lease, that, that does a lot for sure.

Yeah.

Do you do that personally or do you hire a third party to do, to do the review of the leases?

And all our property management team does that as well. So when we get on site tomorrow at 9am they'll probably have, there'll probably be a dozen people from their company. They'll pull kind of on sites from the region and then half of them will sit down with the on site property managers and you know, with a big stack of manila folders or their laptops and they'll just say, you know, they'll just get a system going and you know, unit 206, okay? Yep, yep. Confirm next and then the other half will go and do all the physical due diligence. So. Yes, kind of a 24 hour push.

It's intense, especially in the hut heat of the summertime. Right?

Yeah.

Well, that's great. Well, I'm happy for you. When is your closing likely to be?

I would say probably 60 days, 75 days from now.

Yeah.

Hopefully everything goes. Goes smooth.

Good for you. And do you, I guess, certain counties. I don't know Atlanta real well. I know there's some counties you want to stay away from because they're not very landlord friendly, right?

Yeah, there's some that have slower eviction processes or the courts are more backed up. But typically, at least, you know, coming from Boston, Atlanta is just landlord friendly across the board. But we tend to not really avoid specific Atlanta counties for that reason. I mean, we're really going for like, what's a quality asset? What's a good. An area that has good population and job growth. So we're aware that there's differences, but I think with good management that can.

Be overcome is this class A, B.

C. This is an 89 build. So we like to. And this is actually very well maintained. 89 builds well, we'll say it's a class B. A lot of times we try to get like a C, you know, formerly class B that needs a heavy value add and we'll bring it back up. This one is, is in very good condition. It just needs interior renovations. It's good.

You have a system for that?

Yeah, I mean, we have, you know, a lot of experience cranking through units at different renovation grade levels. So we work with a number of different vendors, get quotes, identify the material needed up front, set a schedule for number of units per month targeted. And then, you know, as they become available, we, we crank their own.

So are you usually doing granite counters and upgrading hardware and whatnot too? Or do you go as far as granite?

So just recently we started doing granite. I think on this, this property will do. Granite up until last year is primarily, you know, Formica countertop updates. But I feel like the price of granite and Formica has come close enough and the demands there that it's worth the extra. It's really sometimes just a couple hundred dollars.

Yeah. Depends.

Kitchen because labor and. Yeah, exactly.

Yeah.

So, yes, we'll do lights, plumbing, fixtures, floor.