Ways Everybody Wins in Multifamily and Assisted Living Investments with Raymond Hightower

Foreign. Hi there, Ginny Bowling with Pivot to Prosperity, sponsored by Pivotal Real Estate Investments. And I have with me today Raymond Hightower. Ray, thank you for coming. Welcome.

Thank you for having me, Jenny. It's a pleasure to be here with you.

Yes, well, this has been a time coming here and you have been a busy guy flying all around the country. And so I want to hear and share the audience some of the takeaways from all these conferences you've been at. But first, if you would, let's hear you tell us about your background.

Sure. I'll just do that very quickly. My name is Ray Hightower. I run a company called Bridgetown Partners. We are syndicators. We buy multifamily apartment properties. We fix them up, and we give people a great place to live. At the same time, we invite investors to invest alongside us and benefit from our work. Investors get capital preservation, tax advantages, and return on investment. So that's me in a nutshell.

Terrific. Terrific. And so as far as the types of assets you're involved with, would you go ahead and tell the audience?

Yes, we target assets that are 75 units or larger, multifamily apartment properties. 75 units or larger, Class B or C. That would be what people commonly refer to as workforce housing. The markets we're in are Arizona, Tennessee, specifically Nashville, Tennessee, and Texas. There's a part of Texas we're looking at which is Boca Chica, Brownsville, right where the Rio Grande river empties into the Gulf of Mexico. And if your listeners want to know why we chose that part of Texas, be glad to talk about it.

Yes, please do say, oh, do I.

Okay, I'll say more. When we're looking at markets to pursue, we're looking at job growth, income growth and population growth. We want to see employers that are growing. And one very powerful employer in that part of Texas, in Boca Chica is a company called SpaceX. SpaceX is making rockets to get humans to Mars. Right now, they've, they are the only company that has a reusable rocket system. They have taken humans to the International Space Station. They've launched satellites into orbit. They have a service called Starlink, which is a high speed Internet service that is a, a subsidiary of their company that they own. They charge people for Internet access all over the planet. They are blanketing the planet planet with satellites in low earth orbit, which is, if I remember correctly, it's like 450 miles roughly, whereas geostationary orbit is like 22,000 miles. Low Earth orbit is around 450 miles and so SpaceX is doing a lot of that in Boca Chica. They have a location in Hawthorne, California as well. But in Boca Chica, that's where they're launching. And what's so exciting about that is if you are investing in an environment where you have high paid employees, high paid technicians, high paid engineers, high page support people, they need a place to live and that is prime opportunity for multifamily operators like you and me.

Excellent. I love the space program. That's why I wanted you to say that.

Oh, yeah, yeah, yes. Yeah, there we go. That's right, you're in Florida. Yeah, I'm here in Arizona, but you're there in Florida. So yeah, you're right there on top of the space program. So yeah, there you go.

I want to own some property closer to the launchpad, that's for sure.

But there you go. There you go. It might be noisy, but won't it be exciting?

Yes, yes, it's noisy all the time and it. Okay, as you know, you can't get that close either, but yes, yes. Yeah, yeah, yeah. Well, so exciting. And so you've gotten into multifamily and I believe there's one other asset type that you're into as well.

Well, multifamily is, is our primary asset class that we're in. We did recently complete a deal in the assisted living space in Sierra Vista, Arizona. And what's so exciting about that is this property. I don't want, I don't know how deeply you want me to go. You know, I don't want to, I don't want to take up all your time talking about one deal, but this property was a hotel and we converted into, into assisted living. It's a remarkable space. One reason we're so proud of it is that we, we're giving elderly people who need a place to live a nice place to live because it was a hotel. There's, you know, restaurant on site and there's, there's a movie theater on site and places where they can gather for functions with each other. And it's the type of property and type of space where anyone who lives there will be proud to have members of their family come and visit them there. And so we're so excited that we did this. And I can go into details on that deal if you like that. It's just the way the whole deal came together is very exciting.

Well, why don't we save that for another time? But enough to say that I love adaptive reuse and I think that there's a great argument for that. And I didn't realize it had been a hotel before, and that's really exciting to think about that. But yeah. Now, multifamily, given the housing shortage though, is. Is more what I think we ought to talk about for both of our audiences.

Sure.

So. So tell us what you're working on right now.

Yeah, we're working well. We got a variety of assets in Tucson and in Phoenix. And what's so exciting about the assets we acquire is that when we acquire them, we fix them up, give people a great place to live. And I can tell you stories, one in particular. On the day we closed the property, we had our property managers. You know, the people are doing the day to day work on the property. They were on site, they knocked on all the doors, they introduced themselves to the residents, handed them flyers to tell them where the rent should be paid, and they had porters with them on site to pick up trash because prior to our acquisition, the previous owner wasn't picking up the trash. And it's such a fundamental thing to do. But you know, it's one of the ways you show respect for your residents. When you show respect for your residents, they pay the rent on time, the cash flow flows, investors benefit from that flowing cash flow. Everybody wins. And so we were on site there. They thanked our property managers for doing that. We were all excited. Everybody was excited. Another thing we did that we've done on one of our properties, all of the electrical panels were really old. They were made by a company called ZINSCO in 1960, like late 50s, early 60s, right in that time frame. And these Zinsco panels, and you're nodding your head because you've gone through this before, you've gone through this. You know exactly where I'm going with this. But for our audience, I'll share. These panels were prone to catch on fire. They were just very fire prone. And because of that, they were unsafe. And insurance rates were higher. In buildings where you had these panels, there were some insurance companies that would not insurance insure us because we had them. So when we found one that would, our rates were really high and the panels were not safe. So one of the first things we did as part of our capex on this property is we went through all the units, replaced the panels with more modern electrical panels and now the property is safer. The insurance rate rates have gone down and everybody wins. You know, the, the safer property, of course the residents want to live in a safer property. Lower insurance rates means that our net operating income is higher, which is great for our, for us and for our investors. Everybody wins across the board. So those are the kinds of things that we do that I get excited about, where we're very, very close. We just finished the LOI and a property got an accepted LOI on another property in Phoenix. And we're real close to having that psa, the purchase and sale agreement lined up. And we're going to be raising money on that property, too. That's 120 unit property in Phoenix. We're really, really close. We're almost ready to announce that. And again, we're excited because that's a property where we will go in where maybe it hasn't been maintained well in the past, but we will go in, we will improve. It will give people a great place to live. They'll be more willing to pay elevated rent, you know, higher rents, which is what our investors want. And everybody wins when we do that. So that is the business model we go through. Everybody wins when we do that. You know, we believe in roi. You know, my podcast is called ROI Clear, so I've got the ROI Clear banner back there. We believe in return on investment, and we believe in communicating clearly with everyone we do business with. And that's it in a nutshell. That's what we're working on.

That's great. Great. How many units do you currently own, have under management?

570.

Right.

So that's what we have. Yeah. And we're acquiring more. We're. We're acquiring more. That 120 will take us up over 600, you know, close to, close to 700 there. And we're, we're submitting an LOI and a property in Tennessee tomorrow. We've done other Lois, you know, letters of intent, and you never know what's gonna, what's gonna get accepted by the seller, whatever. But we are actively looking in Arizona, Tennessee and Texas.

That's terrific.

Yeah.

So here's a different kind of question that I don't know if anybody else gets into, because I know you have a technology background, and since I worked in communications and telecom.

Yes.

I'm wondering, do you do any value add play with WI fi or telecom in any way on your properties?

We were just having a conversation about that today. Before we acquire a property, we go into conversations with our property management firm to determine whether there's value in doing that. You know, honestly, Jenny, I would put WI fi and high speed Internet in every unit and every one of our properties if I could do it. Just because I love the Technology. However, this is what we have to consider. Will the residents on the particular property care about it? Will they use it? Will they care about it? Is it a big deal to them? You know, for example, for me, I don't care about anything especially fancy in the place where I live. I happen to have granite countertops, you know, where I live, or whatever. But I, that doesn't impress me. I would be fine with Formica. The big thing for me is I need a comfortable bed. I need a high speed Internet connection and a great shower. Those are the big things that I need personally. And everything else is just, just, you know, added benefits. There's a dog park here and a swimming pool, all that. I am a swimmer. I'm really strong swimmer, a really strong swimmer, but I don't use the swimming pool. And on. It's not a big deal where I live. So what we have to evaluate is not what we as the owners would want, and you know this already, but what not. We have to evaluate not what we as the owners would want, but what do our customers, what do the residents want? And we just had a conversation today about whether our residents would care about having WI FI on site or care about having Google Fiber on site. You know, they're, you know, they're moving into town right now. And before we put something in place, we need to know that it's something that the residents will find valuable and that they would be willing to pay for. Otherwise. We're being irresponsible with our investors money. You know, we are stewards, you know, as syndicators, as operators, as owners, we partner with our investors and we are stewards over the money that our investors put into our deal. So when we make a decision about whether to put WI FI or tech package in or whatever. Ray High, to the technologist, we say, yes, let's do it. Let's jump on it right now. But Ray Hightower, the syndicator, has to sit down with a property management firm and, and make a very serious evaluation as to whether or not it will be valuable to the residents and whether it's something the residents will want to pay for. So very long answer to your question, I could have just said, yeah, of course, Jenny, let's do it. But I thought I'd give you, you know, there's some nuances there, nuances that you are certainly aware of. But yeah, as syndicators, we have to consider those nuances.

That's, that's a great example. The way you, you talk that out. One of the things in the property that we're doing right now up in Jacksonville, we talked before buying it, even with the tenants, about it's a low density project with backyards. So we're giving backyards that are fenced now to a lot of them. Paying extra for that. Yes, A good value add play.

That's what they want. They want fenced backyard. So you give it to them. So. And you have conversations with them. So, yeah, that's what you have to do.

Great. Well, so what, are there any other kinds of new types of improvements you all are doing? Dog parks, of course, and dog wash stations are something that's common more and more.

I don't know what a dog wash station is, but I imagine it's kind of like a car wash station, but for dogs, right? Yeah, it's a shower.

It's an indoor shower.

Indoor shower. Okay, There we go. Wow. All right. We do have dog parks. Like, it has been necessary and encouraged for us to put dog parks on our properties. So we do. We do dog parks. You know, certainly on one of our properties, like my very first deal that I got involved with here in Arizona, in Tucson, Arizona, we're doing solar panels on there. Again, you have to do the evaluation. My inclination is, yeah, absolutely. Makes sense to do solar panels. We're in Arizona. The sun shines 350 out of 365 days out of the year. Some ridiculously high number like that. Right?

Yeah.

So, yes, solar panels absolutely makes sense to someone like me who gets into technology and solar panels and all that. I take solar panels when I go camp camping because, you know, it's just cool to have electricity that way. And I've done that for years. At the same time, when we were making the decision about putting solar panels on that property is actually the GPS on that property. I'm an LP on that deal, but I know the GPS well, and I. I bother them with questions. I annoy them with a whole lot of questions because they're good. And we ended up being GPS together on another deal, so I get to talk to them. But key things you need to look at is before you put solar panels on the property is you need to consider, when will you get paid back? When will the savings in electricity justify the cost of installing the solar panels. Otherwise, it's just a vanity project and we have to be very good stewards over our investors money. And as good stewards over our investors money, we must always consider the payback, how long it takes to get paid back for that project we put in place. So yes. Solar panels are absolutely big here in Arizona, and we're doing it on one deal in Tucson, and we're considering it on some other deals where I. Where I happen to be a gp. But again, we have to consider the payback. How much will it cost for the solar panels? Do you lease them or do you purchase them? What, you know, what is the efficiency of the solar panels you're considering? Do you tie them into your common area electricity or are you providing electricity for your residents? You know, all of those are factors that go into. Essentially, we underwrite the solar panel installation, too, or we underwrite any capex decision we make on any of our properties.

That's fascinating. And in fact, that's. Those are the questions going through my mind. Does that mean you're starting to pay electric for the tenants and boost the rent?

Yes.

So which way did you end up going on that project?

On that project, we're doing it only for the common areas, the places where we provide lighting for safety, electricity for the office, electricity for other parts of the property, for the security gates and that type of thing. Any common area electricity that is not paid for by the tenant, by the residents, is covered by this. This solar installation. Interesting.

Yeah. Yeah. Well, being Florida, we. We definitely have a lot of solar panel discussions on that too, but I hadn't gotten involved in it yet, so that's great.

Yes. Yes.

So do you have any funny stories to share with us about something that happened on one of the properties or in the process of buying?

You know what A lot of the funny stories have to do with going out and hanging out with. With my partners when we're going out looking at properties. Yesterday I was out driving with one of my partners, and he said, he texted me, he sent me a text the day before and said, hey, mind if I bring my daughter with me? And he. And I said, yeah, sure. Got to train the next generation. His daughter is a student at Arizona State University, so she's a college student. She's, I don't know, 19 or 20 years old, something like that. But it's so wonderful that she's getting involved with this at. At an early age. And the fun part is just noticing the, you know, generational differences, you know, And I asked her when I met her, I said, what is it, you know, what are some things that you really admire about your dad? What is it that's so spectacular about your dad? Because, you know, I want to hear the K say good things about their parents. Right? And so she says, he's. He's a really serious learner. Like, he's always learning, you know, he's always, you know, always has a book or always has a podcast or something like that. And that was the first thing she said. And the second thing that you said was he's a problem solver. He's really good at solving problems. He's been in real estate for a few decades. He's been very successful at it. And I'm honored to have him as a partner on, you know, some deals we're working on here. And it was great to hear this, you know, this teenager, actually, she's coming to the end of her teenage years, but say these good things about her father. And then we're driving along further and you know, he's cracking jokes about all this stuff. And I told her, hey, you forgot number three, he has a great sense of humor. He's a comedian, he's a stand up comic artist. And that's the other thing you should have said. So, you know, there we go. So a lot of the humor comes in the interaction with my partners or with our residents or with our property management firms or all of these. That's, that's where a lot of it comes in. Because, you know, this, you and I are fortunate. You and I are blessed to be interacting with people in this industry who are just good people.

Yeah, right.

You know, just good people. And a lot of the funny stories and the humor comes about and just how we interact with each other and how sometimes we see things differently from each other and all of that and celebrating our differences, you know, just because, you know, I had a pastor once years ago who used to say, different does not mean deficient. Just because someone's different from you doesn't mean they're deficient or you're deficient relative to them. You're just different. Humans are different. So, yeah, so those, those are, you know, there's funny stories and, and other, other stuff like that and, and sometimes I catch them on video. If you go to the ROI Clear podcast@roiclear.com or go to our YouTube channel, you'll see some of those captured on some of our, some of our YouTube. So there we go.

Here's another unusual question. Maybe I just want to throw it out there because there can be some real weird things there that's permitting when you're doing your capex projects. What's been your experience in Arizona, for instance, with pulling permits and getting things approved? Have you had any bad experiences?

Have we had any bad experience with permits? When we're pulling. I'll tell you this, as the syndicator, as the operator, I'm mostly involved with the asset management piece and with the capital raising piece and the acquisitions piece. At the permit level, that's mostly done by a general contractor or property managers. So I'm not hands on at that level. I'm personally involved with the permits. The only time I had to be involved with permits is when I lived in Chicago with some deals that we were working on there years ago. And sometimes permits took a while, but you know, it varies depending on what part of the country you're in and how conscientious the people are in the municipality or in the county locality where you're pulling the permits. That's huge. Right, right, right. It is.

How about new?

Have certainly dealt with that in Florida. From what you've done, you have certainly dealt with that experience.

Right? Right. Yeah. Yes. Are you into any new construction, build to rent or otherwise?

I do not do new construction or build to rent. I have some friends who are doing that right now and they're doing a remarkable job of it. And I was working with some people earlier this year where we were considering that and I decided that I needed to really define my buy box really tightly. You know, Charlie Munger says that if you're going to have a circle of competence, it needs to be small and tightly defined, not big and fuzzy. And if it's small and tightly defined, you can get really, really good at it. And then you become known for that. And then people who will pay you for that skill will come to you. So I don't specialize in anything involving construction or build to rent, but what we do is mostly light value add. Where we're going in, we're replacing electrical panels, we're replacing cabinets and sinks in the kitchen, we're replacing toilets and showers and tubs in the bathrooms. Every now and then we have to bust open some concrete and do some plumbing, but that's rare. Every now and then we need to do that. And of course we'll do exterior painting and things to make the curb appeal. Great. Because that's important to people. You know, they want to come home to a place that they're proud of and all of that. Yeah.

When you're doing your diligence and under contract, are you usually scoping the pipes?

Oh, yes, we do. We will bring on a plumber to scope the pipes. We absolutely do. And it's. Isn't that equipment fascinating how they can do that? You know, it's a camera that goes down there. But it's just fascinating that they can go and identify problems without having to dig up the ground or break open a bunch of concrete, you know, and if. If you do break an open concrete, it's because you're fixing a problem that you know is there and you're attacking that problem there.

You said that in a way that it reminds me of. Actually, a funny story, I should add. One of our houses. We just bought this nice big house on a lake and had all the company come, like, the first week we moved in.

Yes. Yes.

All of these people taking showers and the plumbing backed up.

Oh, no.

We had two septic tanks on this property. It's a big property.

Wow.

And twice this happened, and we had to fix it, and we knew that it ran under a lot of concrete anyway, so we hadn't paid the. To get it scoped.

Yes.

And we bought this little puppy. First time we let the puppy go out by himself, he dug up where the break was.

Oh, really?

She. It was.

She. She dug up the break. That is remarkable. The puppy found the break. Yep. You need to put that puppy to work. The ROI in that puppy is remarkable. Holy cow. Jenny. That is amazing. That is so funny.

The little golden nugget.

Wow.

That was funny. Couldn't believe it.

I wasn't aware. So the puppy. What was. The puppy was drawn to the smell gases. The smell of what's coming out there. Really? That is amazing.

Yeah.

Wow.

I don't know if that would work for any age dog, but this puppy had a good enough nose.

That is a remarkable story. I got to remember that next time we're out doing due diligence, we got to bring a puppy with us.

Buddy. Well, so any other stories you'd like to add here? We're coming up on 25 minutes here.

Yeah. What I. What I could add is one. Just. Just gratitude. I'm grateful to you for the opportunity to speak to you here on your podcast. I've enjoyed hanging out with you in Florida and in Arizona because we run into each other at conferences all the time, and we've had a chance to get together for lunch or dinner, whatever, with some other people and some other investors. We've had some great conversations. I've enjoyed talking to you about your horses, you know, all of that. You know, and I just enjoy listening to the way you. You run things. I enjoy hearing about the things you've done in and around Florida, the things where you had to travel all over the state with the work that you did for the state, you know, some years ago, you know, at the intersection of real estate and technology. So really, if there's anything I have to say, I'm just, you know, grateful to be here, glad to have a conversation with you, and I look forward to running into you at another event.

Yes, we have to figure out what that next one is for sure.

There we go.

And why don't you tell people how to reach you as well?

Yes. Easiest way to reach me through rayhitower.com right behind me. If you go to rayhightower.com you will find links to Roi Clear, our podcast and Bridgetown Partners, our syndication company, and everything else that we're working on because you have a few new things in the works that, that you may hear about coming up soon. But if you go to rayhitower.com you'll reach me and you'll reach everything that I'm connected to.

And you're so fun to follow on your podcast, too. You really are. So thank you. People will visit that and see what it's all about.

Thank you so much, Jenny.

I appreciate that. Well, good. Well, thank you very much. You take care.

You too. Thanks.