Navigating Taxes, Multifamily Investments, and Unique Storage Solutions with Wayne Courreges III

Are you one of the many busy professionals working in offices day in and day out? Do you wonder how some people grow their wealth fast, retire early and play on work days? Well, you're in luck because Ginny Bolling hosts this show Pivots of Prosperity where she interviews people that can do just that play on work days. Many guests have become financially free. She also interviews people that are on their journey and people that are in support roles like attorneys, contractors, brain brokers and others. Commercial real estate is the common element. She is on a mission to be sure. Busy professionals know they can own substantial commercial properties too, like apartments, self storage facilities and others, and not have to do the work managing them. Passive investing is the key. Syndications are the typical method. Tax write offs are some of the biggest rewards. Ginny and partners find the deals, build a strong team and business plan, then offer the investment opportunities to passive investors. New episodes are released every Tuesday at 12, so watch for new releases. If you want to get involved, let us know. You need to get pre qualified to hear about most deals. See the show notes for contact information.

Hey, hey.

Jenny Bowling here with Pivot to Prosperity brought you by Pivotal Real Estate Investments. And we have as our guest on the podcast today, Wayne Courageous Wayne, thanks for coming on.

Yeah, thank you Jenny for having me on today.

Yes, well, I have been looking forward to having you for quite some time. We've done webinar and we've talked, known each other for I guess a few years now. Right.

Yes, you've been on my, you were on my podcast when I was doing podcasting. So always fun to talk to you.

Right. And you are located in Texas.

I am right smack in the middle of the Texas triangle. Bryant College Station is where I hold my hat.

Well, and Texas has been a learning experience for me because as you know, I used to be an appraiser. And then I found out Texas is a non disclosure state.

Yes.

Makes people like me go crazy. And talking to my friend appraisers, I started calling, it was like, you know, and in Texas they say you got to be on the inside track, you.

Know, but even then it's, you know, I wouldn't tell anybody what I paid for a property. Like we take it out of the deed like all that. Like there's no, I mean taxes are, I mean Texas gets their real estate or their income, know, through real estate taxes. I mean primarily because there's no income state tax right here. So real estate is, is the big money generator for the Texas.

And another strange thing about Texas, I think but, and I don't know if it's just certain counties, but isn't it really common to appeal your taxes?

If you're not appealing your taxes in Texas, you're not, you're stewards. Yeah, that's. It's an automatic. You shouldn't, you should be doing that on your residential home. Like, regardless if you're an actual investor or just a homeowner, it. Every year, you should be protesting your taxes.

Why do they want to ask for that problem? Holy moly. That's, that's like a lot of work.

And actually, for our. We don't even accept the. Because what happens is, is when you protest your taxes, your tax consultant will actually go and go to the appraisal board or the appraiser for the county. And, you know, there could be a number that they agree to, and then even from there, we'll take it one step further, which is a mediation. And that's where you would go. You literally sit around a room. There may be four or five people, but then there's a mediator, and you're really negotiating back and forth on values. And then if, and usually it's settled there because the next step after that is litigation. And, and so a lot of times there is, you know, maybe a big tenant moved out or something drastic has changed the value of the asset, and you may have to take it to litigation. I mean, I'm not a tax person, but, you know, there's, there's the cost approach and then there's the income approach, and depending on what city you're in, could be a different valuation structure of, of that property. So, yeah, Jan, we, we, we protest, but not only protesting our taxes, we take it up to mediation. I've never taken anything to litigation because then you're a jury would be really deciding the future of your taxes. And I, I'm not going to think 12 people are on a jury. Right. I'm not going to give up the 12 people we'll negotiate before.

12 is only in murder and, and eminent domain. I think six. I think it's six.

Oh, six. Okay. Well, there's. Regardless, you know, we'll, we'll settle outside the courts, so.

Yeah. Okay. I'm glad you clarified because I used to do tax appeals back in the 80s, you know, and we, we did have the hearing officer and all that, but. Yeah, so maybe it's, it's more handled administratively in a lot of cases than in Texas. Is it?

So I've done the gamut where we, you know, my tax Consultant myself, would go and actually meet with the appraiser. And on the cost approach, like, on the office side, they, you know, when I worked, like, in IT for cbre, we would protest our. The office buildings and it. I'm gonna say Property A, you know, it could be a valuation of 30 million, and down the road, it could be a couple years older.

And.

And so if that valuation came in less, maybe there was deferred maintenance or something. Like, we would argue, like, how bad our property is. Like, the goal is to, like, like, our property sucks. Like, it is an awful property. We have so much deferred maintenance, Our tenants are paying less than market, blah, blah, blah, blah. So you, from that standpoint, you're trying to stack the properties of like, hey, property A is a nicer property, so they should be paying more in valuation than my property. Right? And so you sort of stack it that way. And so a lot of times, that's how it works, where you can value the properties, get on board, like, hey, I feel comfortable paying my taxes here because I know a nicer building is paying another tax. When you look at. From an income standpoint, that sort of goes out the window. It's all based on your rent roll. And so, you know, cities like Houston, you know, it is heavily on the. Especially on the multifamily side, income. So now one of the things that we also do and, you know, we're. This is a different time than it was a few years ago. A few years ago, you know, taxes would be a lot less than what you're purchasing. Like, the. The valuation that the city has on file would be less than what you're buying the property for because the city hadn't caught up to the valuation increase is spiking. When now is happening, valuations are High, say $12 million for an asset, but the property is only worth $10 million. And so I bought two properties like that where the valuation of what I've actually been buying is less than what's on the appraiser. And so from that standpoint, it's the easiest protest. You just take the sale agreement right to them. So that's been very, very nice for us and realizing those instant expense reductions flow and valuation of our property. So. But, yeah, that's. But you. If that appraisal meeting, like the initial one, doesn't get you to where you want to be, then you would take it to mediation. And that mediation is, you know, a lot of times with a judge or, you know, a city appointee, where they would come in A neutral party between the city and you. And, you know, there's literally passing of papers of this is my valuation note. They leave, they like it. It could be an all day back and forth. And then if that doesn't work, then you do take it to litigation and you do have a jury that would make the ultimate decision.

So the big question is, after you go through all that one year, do you have to do it again the next year or does absolutely.

You absolutely do it every single year? Yeah.

Oh my gosh, what a waste of time.

Yep, you do it. But here's the thing. The tax consultants, they get their money by the savings that they can get you for the property. So you're not paying an attorney or a tax consultant anything unless they can find you savings. So there's, you know, incentives and I'm sure in the back some good old boy club type talks of like how they negotiate down prices. But it's something you absolutely do. And, you know, so it's not an. When I look at it from a real estate, it's not really a separate line item from an underwriting standpoint because it's only paid if your taxes have some savings. So usually there's that buffer in your property tax number to pay your consultant because they found you savings, if that makes sense. You're not having to pay them if they don't find the savings.

So do you underwrite at current taxes?

Yeah, it's a great question. So currently I underwrite it for 95% of the purchase price that I'm purchasing at. You know, typically we can see 90 to 85%. But year one, in today's market, it's really based on my purchase price, 100% of purchase price because usually it's already less than what the valuation is. So it's 100% at the current tax rate. Year one and then year two, I usually bump at 10 to 15 each year just to give it a little bit. I don't tie it straight to my other expense pool, which may be 2 to 3% increases. It's going to be a little bit more similar to insurance. You know, there's going to be larger increases on that as well.

Well, and so we jumped right into the thick of it. But that's because you're so knowledgeable because talk a little about your, oh, I didn't even read your bio.

I mean, we can be casual here. So a little bit about myself is I joined, I went in the Marine Corps 2003-2007. I bought my first single family home in 29 Palms when I was in the Marine Corps there. And then I joined CBRE in June of 2007. So I had just gotten out of the Marine Corps, joined CBRE literally like two weeks after getting out. And I was with them for a total of 16 years, heavily on their property management side with you know, some asset management involved there. So understanding the operations and the life cycle of a property is just what I have always known and what I've enjoyed. And so in 2019 I was like, I'm making these institutional groups and people really wealthy and doing a good job. I was like, I, I feel like I could be doing that myself. And so multifamily was something that wasn't competing with the day job because CBRE focused more office, retail and industrial. So I got into multifamily just because it didn't compete with my day job allowing me to do these and then over, you know, really quickly, honestly over that first six months and I got a mentor, you know, really just got all in on multifamily but just really got really bullish especially because I saw a lot of the ups and downs of office and retail and even industrial. And so I liked multifamily. And so that's so sort of that. In 2019, CRI partners and then last year, June of 2023, I gave my three week notice to CBRE after 16 years and went all in on our investments. We had grown the company to a point where it was hard to do both and do both well. And so I, I just felt guilty going into work every day of. Because all I could think about was our investments and, and that wasn't good for anybody on the W2 side. So I gave my notice and here we are about a year and a half later and I just hired two full time employees and excited for the future. So that was high level in a nutshell. So you didn't have to read my bio.

Well, that's terrific. And that's a fantastic background working, you know, with CBRE of course, and doing offices in particular. And I could get into talking offices and because I like urban renewal and we know they need to go through some renewal. Right. But we're not going to do that because I want to talk about the projects you're working on.

Sure.

So first let's talk about. You have an unusual industrial property approach. Will you talk about that for a minute?

Yeah. So for like 20 or 20 by 50 storage. Yep. Yeah. So I. Our family enjoys going camping and I really should say Glamping because in Texas it's pretty hot. So we have a travel trailer, we like to go camping. And you know when you get into like those parking spots and you're like next to the million dollar RV or half million 800, like it just makes you like wow, those are great. How do they one, own something like that and then two, you know, where do they store it? So I had always been thinking about these type things. And then one of our mutual friends, Stuart Heath, he was letting me know that he was buying a 20 by 50 storage facility in Huntsville, Alabama. So we partnered with him and brought our investor capital to it. And what these places are, they're all 20 by 50 in size. They all have 14 foot by 14 foot roll up doors and then a walk in door. They all have LED lighting, 30amp or 50amp power, 110 volt. And when I went to see Stuart and visit the property, this is after we, you know, bought it. We were changing out leases, we were changing out locks. And I just had realized like meeting these tenants that were there because I was trying to figure out like why do you all need the space? I mean the gamut is just crazy of like, you know, you got your hoarders, you got your personal like moves, right? But then what really got exciting were the businesses. There were so many businesses that needed this large space for their inventory. And this is go for H vac, electrical, mechanical generators, disaster recovery companies. There was a company that like goes and cleans trash cans in the way neighborhoods. So he has his trailer, he goes in and you know, pressure washes. I mean they were just. The list goes on with businesses. And then they had these high end RVs, these places that you know, when I was camping, like where are they storing it? Well, they're storing it. I mean these are 45 foot long RVs and 13ft 9 inches high, you know, tall. And so there's not a lot of places that have this fully enclosed feel to it. So I got super excited, Jenny. I was like, I need to develop these because they're just not there. There's not a lot of these around. So I came back home. Brian Cloud Station bought about, I'm gonna say a little less than five acres. And we bought that land in June. I got the loan and the investor capital by October and we finished developing and opening July 1st. And we're about 35% leased as of today. And so when you look at like your standard lease up for self storage, it could take three to four years to get into the high occupancy, we fully expect to be 100% leased in less than 12 months. And oh, by the way, Jenny, like once I hit 40 units, it's all cash flow. So if there's 72 units, it'll be 32 units at $750 a month that just, you know, cash flowing. And so, and so that's what we experienced at the Huntsville location. That's what we're doing here. Once we have the second case study, we'll continue growing. So that is, that's the 20 by 50 storage space it doesn't take. I mean most people don't need a 20 by 50. It's that 1%. And even of that 1%, there's probably another. There's like 10% of the 1% that need something like this. But once you find those people, they stay in the unit. They're not, they don't leave. So that's awesome.

Yeah, that is. Do you divide up any of them to split them in half or.

No, they're all, they're all 20 by 50. So you either need the space or you don't. You know, at 2 or 2 this past weekend, one was a company that does like car wraps. You know, they're. And it's part time, so they're just going to wrap. They go to the university here. So it's a couple students and so, you know, they'll have that. And then the other group, it was a husband and wife and you know, they have storage even they said like, hey, it's probably a little too much for us, but we can grow into it. Can you imagine? Thousand square feet of storage. It's too small for us, but we'll probably grow into it. It's like, you know, I've got one customer. They had multiple units at a local storage facility. And so they consolidate everything to one unit. I've got one customer who has three units. He's got his motor home, he's got his three or four high end cars that he rotates throughout the week. And then he's got his, his over whatever extra stuff that he has. And so just got cabinet companies, interior design. They just expanded into another unit because they have all their inventory. So when they go and put stuff in homes, there's a word for it. I don't know when they, when they go put in furniture that doesn't belong to the actual.

To Staging.

Staging. Yes. Thank you. So but they keep adding that storage and I'm like, it just. Yeah, yeah. And those people, once they're in, they're not, they're not leaving. You know, it's not like you have the turn.

So.

So I've been really focused on that. Um, and then, you know, of course, multifamily, staying true to multifamily when a lot of people are not staying as true to multifamily as they were.

Yeah, yeah, we'll get back to that about the multifamily. So tell us about your development deal.

Yeah, so I told you, I told you. We, we developed a Lux 20 by 50 storage last year. And so that got me a taste of development. We. I, when I worked for cbre, there were other developments that I was part of. I wasn't the developer per se, but I was part of a lot of the construction meetings. And I've always, like, had the interest of developing, but it didn't really hit me until, I guess, June, July this year that I'm also a developer. And I say that because it's easier to develop a property that already is zoned. You know, X, which was my 20 by 50. Like, it was already zoned for, like, warehouse. Like, it was, you know, submitted plans in the city. It was pretty easy approval. But most recently, we took a retail zoned property that we had purchased right off Highway 6 here in Bryan, and we worked with the residents and the city council to rezone that into a planned development multifamily, so there'll be 150 units there took two city council meetings, a lot of meetings on couches for the residents. And so I really enjoyed that aspect because, you know, you want to give a good product to the community and you want to be part of the community. Because I live here and, you know, I'm going to see these people at Kroger or the theater, which is right next to it and such. But a lot of rumors can start spinning out of control when a developer isn't as engaged with the messaging. And so I realized I was a developer once I was on the news and they were city council, it was a city council meeting and I was the evil developer, even saying I was based out of Houston and why don't I put this, you know, property on my land, you know, and all this stuff. It was just like, oh, my goodness. But anyway, it did get passed and so we were able to. To have this project. So that's, that's a project and then we are buying the land. We already bought the land next to it. And then we're buying the other piece of land. So we'll have a total of 12 acres. The multifamily will be 6 acres, and then we'll have another 6. And we're launching our broker request for proposals to, you know, start engaging, you know, that broker for a retail representation. And then this morning, I had a call with a a consultant who does hotel feasibility studies. And and, you know, that will be, you know, that will be a an expense that's not paid by equity investors. A lot of these, the risk and the expenses happen before we get equity from investors. But I think that's going to be a well worth, you know, five digigit expense to understand, like, hey, this is what's could a hotel go there, and if so, what type of hotel? Is it a full service, you know, type hotel or.