21: Investing in the U.S. With Reed Goossens

Welcome. This is Real Estate Investing Live from New York with James Nelson, the principal and head of Avis & Young's Tri State investment Sales Group. In this program you'll learn about the world of commercial real estate and find out why it is one of the largest investment opportunities in New York and around the world. Now here is your host, James Nelson.

This is James Nelson, your host of Real Estate Investing Live from New York. This is our 21st show and first and foremost I just want to send our listeners, your friends, family, my best during this challenging time as we get through this coronavirus outbreak one step at a time.

If you are interested in more information on how this does impact the real.

Estate market, Avison Young has put out a white paper which I have shared through social media channels. So please look out for that for today's show we have with us or.

Dialing in Reed Goossens who is a.

Fellow podcaster and author and multifamily investor.

And he talks about how he came.

From Australia having no real estate experience and over the years building out quite a portfolio through his syndication network. He gave he has some incredible tips for investors and his book is definitely worth reading and make a point to check out his podcast as well.

And then afterwards we're going to have our panel on project and asset management. But before we get to that, it's time for the Week in review Powered by the Daily beat last Thursday US.

Stocks plunged to their worst day since the 1987 crash. The Dow Jones Industrial fell 10% and the S&P 500 and Nasdaq tumbled nearly as much to join the Dow in a bear market. The Dol the Furious Falls in Share prices on rising Fears of a global slowdown due to the rapid spread of coronavirus occurred despite a 1.5 trillion intervention in short term funding markets by the Federal Reserve. All 11 sectors of the S&P 500 tumbled with losses led by the real estate and industrial sectors. The Yield on the 10 year U.S. treasury finished Thursday at 0.842%, slightly up.

From the day before.

The Federal Reserve said it would make vast sums of short term loans available on Wall street and purchase treasury securities in a coronavirus related response aimed at preventing ominous trading conditions from creating a sharper economic contraction. According to the Wall Street Journal article. In the deals that are driving the day, Amazon is acquiring the former Lord and Taylor flagship at 424 Fifth Avenue from WeWork and Roan Group for $1.15 billion. The 11 story building spans 660,000 square, will serve as the e commerce giant's New York City headquarters. The deal consists of Amazon paying off $750 million in construction loans taken out for the WeWork lavish renovation of the space. The remainder consists of more than $350 million in equity for the building's current owners. WeWork has waived any economic interest in the asset in exchange for getting out the prohibitive lease it signed for its own building. The property will house around 4,000 employees for Amazon in 18 months. Elsewhere, the Gadiq Group has acquired 44 Wall street in FIDI from Blackstone for $200 million. The 24 story office building spans 354,000ft and is 84% occupied. Tenants include Cullen and Dykman as well as fashion conglomerate SMCP North America and WeWork. This marks the first transaction by Manhattan for the firm that's based in Dallas. Their portfolio encompasses 3 million square feet of office holdings elsewhere in Texas, Arizona, Florida and D.C. blackstone had paid $116.3 million for the asset in 2016 and subsequently undertook a $24 million renovation, according to the Real Deal and Commercial observer articles. In retail leasing, Modell's Sporting Goods has filed for Chapter 11 bankruptcy and will be closing its remaining 115 stores. The the family owned sporting goods chain became the latest traditional retailer to go under in real estate means politics. The tenants at Stuytown and Peter Cooper Village are suing to block Blackstone from deregulating thousands of apartments after a regulatory agreement expires this year. Per the agreement, Blackstone could raise rents in those 1,400 units by 5% each year starting this summer as part of its massive $5.3 billion agreement to buy the two complexes in 2015, Blackstone and Ivanhoe Cambridge agreed to maintain 45% of the apartments in the complex, 5,000 units as affordable. The lawsuit points out that it conflicts with the new rent law and Blackstone could adjust the deal. So that's it for this week.

We're gonna have a quick break and.

We'Ll be back with that interview with Reid. Thank you.

And now it's time our Investor Spotlight with us today. Dialing in I believe from San Antonio is Reid Goossens. Reid, good day mate.

Good day mate. Thanks for having me on the show.

Awesome. Huge fan of your podcast Investing in the US I know right before we were just catching up that I think we both share the same passion and goals of educating investors out there to break into the business. Really impressive story that you have. We're looking forward to hearing.

Awesome.

I should note You've been a source for NBC, abc, CBS News, Fox. And in addition to that book, Investing in the the ultimate guide to US real estate, you also have the book 10,000 Miles to the American Dream, our story of financial freedom. So definitely worth for our listeners to check out.

Exactly. I hope I can provide some awesome information for you guys today.

Perfect. So, Reid, I know a little bit about your story. Just having read the book and hearing. So you're In Australia, it's 2011, and if I'm not mistaken, you've been out traveling the world. You worked on some ultra wealthy financier, I guess, on his yacht, you've been backpacking around Europe and then you decide to come to New York. So how did that happen?

Yeah, so during the time that I was backpacking around the south of France, which was in 2009, I actually fell in love with an American girl. It's a good news that. It's a very good reason. So the story has it that she comes out to Australia in 2010, 2011, and at a time when she finishes her university degree, I was really chomping at the bit to be an expat, live abroad again and have that lifestyle or that expat lifestyle. And New York City was sort of the second love in my life. And so I said, screw it, let's go, let's quit my job. You're an American, let's move to New York City. You're going to find an easy time finding work. I'm going to be the hard one finding work. But we'll make it happen. And we just sort of backed ourselves and just went off on an adventure. And eight years later, here we are speaking on a radio show.

Sure. And you before you were a civil engineer, I think you'd worked on the Olympics.

That's correct.

Yeah. So I guess you had a little bit of experience to real estate. But when you moved here to New York, how did you decide that you wanted to make the plunge?

Yeah. So the big thing here, moving to the United States, that a lot of Americans maybe don't realise, is the barriers to entry into the United States market is so much lower. And when I first moved to the United States, I had to get a job as a civil engineer. I had to keep the roof over my head and the food on the table. But what I did realise is that outside of the major metros like New York City, Louisiana, San Francisco, there's some pretty affordable markets. And I found a little market in upstate New York in Syracuse, and I got on the Greyhound bus and I started going up and down every weekend and checking out little triplexes and duplexes and I'm a fresh faced Aussie, fresh off the boat. I had no idea what Section 8 housing was. I had no idea about these cheap properties. And within I think six months, being fresh off the boat, I had purchased my first triplex for like 38,000 bucks. And that just does not exist in Australia. So I quickly realised why there's so plentiful those little properties. But it was a great learning curve to get me started and get my feet driving the deep end, so to speak. The old saying is you don't get to deal number 10 without doing deal no. 1. It was a really great learning curve but got me off to the races.

Perfect. Did you have obviously a $38,000 buy in? Not a huge amount of capital that you needed for your first, but early on in your book you talk about creating something out of nothing. Had you saved up money at the time or. I know today you've built out an incredible syndication business. Did you have early investors?

Yeah, very good question. It just was my own savings from working as a professional, as a civil engineer. I had a very well paying job in Australia. I just had saved some money. Obviously moving to the United States took a little bit of that money out of my own pocket, but the rest I had was mine so I could go and buy something for things. $38,000 and it was all my own cash. If I made mistakes, it was my money, it wasn't anyone else's money. The first couple of deals was all on my own, but then really quickly realized the power of syndication as you alluded to. I do have a syndication business today.

That's still for your first deal. New country, new investment. I don't know if $38,000 at the time was still a significant amount. I'm sure it's not something that you wanted to lose. Was it a risky proposition at the time? Did it keep you up late at night when you made your first buy?

Yeah, look, you got to understand at that point I had been self educating myself for about two and a half years. There was a period of time in Australia after gallivanting around the south of France in 2009, I moved back to Australia in 2010 and that's when I picked up the book Rich Dad, Poor dad. And so in 2010 and 2011 I was really educating myself about just real estate in general. And I was going to do a deal in Australia, but then decided to move to the United States in 2012 and still had that capital sitting ready to deploy. And it was just more the case that whether I did a deal in Aussie or I did a deal in America, and it happened to be that I moved to the United States and fell in love with an American girl and fell in love with New York City. And so I made it happen in the US and $38,000, some of your listeners may seem like a lot of money, it is a lot of money. And to your point, it wasn't necessarily a risky decision. It was an educated decision that I made because up until that point I'd be self educating myself for two and a half years. Ups and downs, the risks, what I should and shouldn't do. But I got to the point where I was sick of reading a book and reading books about it, I needed to go out and get it done. And that was sort of that analysis paralysis. So I vividly remember riding the subway in New York City to work with my nose stuck in a book, reading about cash flow and small triplexes and duplexes and realizing to myself it's sort of like reading about going to the gym. You don't lose weight by reading about going to the gym, you lose weight by going to the gym. So I had to go again, started. I got to that point where I said, enough's enough, let's go buy my first deal.

I love how you talk about cash flow in New York and I've been a broker here for over 20 years and a lot of the times the profit is made on the sale. But I know we share a mutual friend in Doug Marshall who you've also had on your show and talking about the power and especially where interest rates are today. Do you remember that first deal? What was the. So you had one tenant there or three tenants. What was the.

Yes, on paper it was like a cap rate of like 13%, right. But it was in a class D neighbourhood. And you know, what I didn't understand was what class D neighbourhoods meant. And I had a really quick learning of Section 8 housing. The reason these properties are so cheap is because it is in the ghetto. Now you can make money in these types of neighbourhoods, but you have to buy in bulk. And what I didn't understand was being a fresh faced Australian is that I didn't understand that. And so all I was looking at was, oh, and it's a cap rate of 12 or 13%. It looks so good to be true. For the first six months it worked out really well. It was going as it was performing, it should have performed on paper. But then when we had tenant issues, that was when things started to go wrong. I had to drive by shooting at my property and I quickly realized why. You have to really understand the game of Section 8 housing to be successful in it. And someone when I was living in New York City, but investing in Syracuse, New York, which was four hours away, and I had a property manager and I had all the team members in place, but it still was just something that I wasn't being that successful at. And also, I must add that it was only a small amount of cash flow that I was getting. I was making maybe 700 bucks a month in cash flow, which is not better than a poke in the eye. But it was more to do with the fact that I wasn't scaling the business through that. That's where I decided to get into real estate syndication.

Perfect. So that was the deal that got your feet wet and then you were on your way. Early in your book, you talk about you make money when you buy, not sell. Tell us a little bit about that and what you look for in an investment today, how you source opportunities.

Yeah. What I mean by that is that you make money on the buy side. And if you're not buying a good deal, then no matter what happens throughout the, you're just praying that the market's going to go up or market is going to go down or whatever. You're praying for hope to make the deal work. Well, that's not really a thesis to invest in. You've got to be going into an investment opportunity looking to add value to a property. And I don't care whether you're investing in New York City or San Antonio or in California, you have to be adding value to the asset in a way, whether through flipping or through renovations or through buying it from a distressed seller. Something where you're making money on the buy and you're knowing that you have an upside. So in the business I do today is we buy apartment communities and we make sure that at the current in place, rent is lower than the market rent. And when I can go in and spend $5,000, $6,000, $10,000 a unit to renovate these units and then increase the rent $100 to $150 to bring it up to market. I'm not trying to beat the market, but I'm adding value to that property. And through that, I can then force the net operating income and I can force the value and the cash flow. No matter wherever you buy and whatever asset class you're investing in, you've got to know that you can add value somewhere, whether it be through renovations or through operational efficiencies. And that comes back to understanding your numbers on the buy side and making sure that you are buying, you're making money when you buy.

How do you decide today where to purchase? Because clearly not a neighborhood where you fear there might be a drive by shooting. But I know now you invest all over the country. How do you find an attractive market to invest in?

Well, first and foremost, you've got to follow jobs. I'm heavily invested in in Austin, Texas and San Antonio. More so in Austin now than San Antonio. In years gone by, more in San Antonio. But as the markets have changed, definitely doubling down in markets where there's true job growth, where there's true supply demand issues. And what I mean by that is where there's increased jobs, there's going to be increased demand, and where there's a high barrier to entry for new renovations or new product, meaning new construction, then the existing product comes at a bit of a premium. But it means that you can always have a tenant base to rent from or to rent to. And so making sure that you're investing in those markets where the jobs are going, where there's that true growth and that supply and demand constraint is where you're going to have the best chance of having a really good investment over the long term. And given that the looming recession is just around the corner, or we're currently in one, depending on who you speak to, we're doubling down and backing. Our investment thesis is that we want to be in a true growth market in order to ride out a downturn when and if it comes.

Yeah, I was going to ask you about that, about the scarcity principle, and couldn't agree with you more that job growth is the number one driver on where to look to invest. In New York, it's very challenging. The barriers of entry are so high to not only acquire property here, but to build. What I've heard in Texas, and I'm sure you're going to tell us that it varies kind of city to city, is that in some areas where maybe there isn't zoning restrictions, the fear is you buy a complex, maybe it's 90s 2000 construction, and then someone decides to build right across the street, newer products. How do you guard against that from.

A zoning point of view I think you're referring to is Houston, Texas. We're not invested in Houston, but in San Antonio and Austin, there's always zoning requirements, particularly in Austin and Texas. It's pretty much like a coastal city. It takes two or three years to get through the zoning department and then takes another two or three years to build. So there's again that high barrier to entry and not a lot of new product coming online or if there's new product coming online, it takes a long period of time. But to your point of how does an existing asset compete with new product? We constantly look at what new product is coming on the market and we always want to be below that and want to have some significant gap between between 10 to 15% on our rents, our effective rents, between what the new product is asking for. The reason is because we know that we're not going to have as nice amenities as a brand new class a built in 2015 or 16 product compared to my 1990s product. But that's some of the value add opportunities that we see that we'll go buy a 1990s product, know that the market rents in the property are lower than what the current new construction is and we can still add a premium on those rents and still be below the new product rents. But go in and add some really great amenities, make it feel like a hotel as they first walk into the leasing centre, as they see the gym, as they see the pool, as they see the dog, you know, the dog park. And so it's still affordable in the renters eyes because they can go and get a new product for two bedroom one bath in downtown Austin, Texas for $2,000 a month or they can come rent for us for $1,200 a month and we've still made a premium of 200 bucks because we bought it when the two bedroom one bath was at $1,000 a month. So there's always consist value add opportunities, always consistently looking at what other product is doing in your market, what new product is fetching for and just keeping your finger on the pulse and understanding what tenants want. As we go along in this cycle and as millennials continue to rent, we're trying to offer the best, most premium, best in class product we can for all our renters.

It's a really smart business plan and couldn't agree with you more that you want the assets which have upside opportunity because if you're buying the best in class, especially if more competition comes online, you might even have downside really smart approach. Since 2013, I think you've been involved in the acquisition of 150 million in properties. I believe these have all been multifamily Is there any reason why you've stuck with multifamily? Any thoughts on mixed use with retail at the base? What about office industrial? There's a lot of different ways that you can get involved in investing.

Yeah, my investment thesis is that I'm buying existing product and making it better. Think of I'm getting an older machine and I'm going in there and I'm putting an oil on the machine to make it work more efficiently. Mixed use or mixed use product has really been something being built in the last decade, last 15 years. So I'm not in the new build construction world. It's high risk. Doesn't mean you can't make money in those areas. You got to understand how to build stuff and how to entitle land. In terms of office space and other industrial areas. I still think residential multifamily is that people always need a place to live. And one of the reasons why there's been so many investors involved in the multi family space since the last recession and why things are so hot right now is because there's been two reasons. A lot of capital is coming into this type of market, but also people are becoming longer term renters. The percentage of people owning their first home is diminishing. And so the next generation of homeowners is renting for longer because they want to be in the urban core, they want to live near the downtown, they want to live next to where they work and they want to live where they go out and party and have drinks and have fun with their friends. And so the old adage of living in the suburbs is maybe not as important to them anymore. And they want to rent in and around the urban core. And so that's what we're investing in to make sure and why we like the multifamily space is because that is going to be a product incoming into the future as wages don't increase, as things become a little bit stagnant in the wage growth area. That we can capitalise as owners of these properties because people always want to need a place to rent and need.

A roof over their heads, makes a lot of sense. You think about what's happened with retail and with E commerce and even office where now between coworking and much more efficient space or even people now working from home, it would seem that a rental apartment, that's the one thing that you can't replace online or figure out another way to do that. Of course there's co living, but again I would agree with you that this is Definitely the safest approach. You also work with a lot of foreign investors. Having done this yourself, I was really pleased to hear we get results on this show of where people are listening in from. We still have a very strong contingency from the US But I was surprised to see we have a lot of listeners from, from China, Russia, I think even Finland, Sweden and across Europe. Thank you everyone for your support. Reid, what advice would you give to foreign investors who are looking to come here to the US what is the best vehicle to do that? What's the best approach?

The best thing you've got to understand is that as a foreign investor, well, two sides of the coin. If you want to invest here in the United States, you need to get set up properly. You can't just buy property without being a US Entity unless you're buying it all cash. If you want to get lending, if you want to get financing here in the United States, you need to get yourself set up correctly. And that means you're going to have to start a company or an LLC or an entity here in the United States. A foreign based person can be a managing member of an entity. Once you've done that, you need to set up your bank accounts. Because when lenders and when property managers, they want to deal with American based entity which has American based bank accounts, there are other ways of getting around it. But just from the simplicity point of view is that you want to be set up here in the United States. There are a few steps you need to go through. Two of them already talked about getting entities set up. Get your bank account set up. You then also have to have what's called an itin, which is an independent tax identification number. And that is just a way to show the IRS that you're going to pay money or taxes on any earnings that you earn from your property. You ultimately buy here or invest here in the United States. And then the third thing you need to do is get set up is obviously get set up with the right CPAs in order to file US taxes when they come around. So all those sort of things do take time. And so for any of those investors out there listening in those foreign countries, they want to bring money to the United States. You got to understand, if you want to be an owner, operator, you want to own your own assets or you want to invest in syndications, you have to be set up yourself first and foremost. And then you can go off and start investing in other people's deals or buy your own.

I was going to ask on that because Multifamily, even if you have a third party manager, is a really hands on business, especially if someone's spending most of their time overseas. Do you typically advise foreign investors to work with a local operating partner?

100%. You've got to have your local team set up on the ground. A couple of team members are really key to your success. If you're going to come here and buy, whether it's single family or office or retail or multi family, is having a property management company whose boots on the ground who can oversee the day to day management of it and can make sure that it's hitting its projected numbers. You also spoke about a cpa. You're also going to need a local attorney that can help you navigate any of the legal ramifications you might need to work through as you're buying assets here in the United States. And you also got to remember that each state here in the United States has its own different laws. So making sure you comply with those individual state laws. And also you're going to need a general contractor. They're sort of the handful of people that you're going to need on your team, on your bench to make sure that you are successful investing here in the United States.

Perfect.

Yeah.

And I know in your book you talk about there's no I in team and the seven professionals that you have to have on board. And I want to thank you for putting brokers number one. We like that spot, so appreciate that.

They have the keys to the kingdom. Right.

So on that note, and not to give you a super slow pitch softball for my benefit or actually you're a rugby player. So I don't know what the analogy is as far as to, you know, give you the ball to run down the field. I can never figure out which way you guys are actually running on the field. I was watching last night and there was something about putting the ball when you get tackled and you have to drop it behind you. But I can never seem to tell which way they're going.

Well, next time in New York, I'll have to give you a rundown over a beer. Exactly how the rules go.

Good. So talk about working with brokers. And this kind of goes back to sourcing opportunity. I happen to be on the sell side of the equation. I represent owners. My job is to get top price. But there's also brokers who find off market opportunities. How do you work with brokers?

Yeah, the number one, particularly in the commercial space, it's really important to have a great broker relationship. Now people Always ask how do you develop those as a buyer? Because you're trying to get the best leads and from your point of view, you're trying to sell at the best price for your clients, people who want to sell, the sellers. At the end of the day, you need to be establishing credibility with your brokers and have a big network of brokers. And it takes time. Anything that's worth doing doesn't happen overnight. Making sure that you're spending time courting brokers, understanding what leads they're sending you. And if they are sending you some leads, they know it might not be the best leads or the most cracking deals, but you're responding to the broker and saying, hey look, the reason I can't buy this deal is for xyz. And they that puts in the broker's eyes a vision that this person knows what they're talking about and so they've got to take them more seriously. But it takes time and we get all our leads through a certain broker network. And here's the big thing, once you prove that you're a buyer, you're going to get so many more leads coming to you. May not necessarily be off market, but they may be pre market sales that say, hey look, there's a deal I've got coming down the pike. It's not public yet. Do you want to have a quick sniff at it before we go out to the market? They're the type of relationships that you want to start building. It only happens over a period of time. And when you start proving to the broker that you are a competent buyer, you say what you're going to do and you close on the deals.

I think I might have shared this on the show before, but once sold a property to a pretty famous investor now who's taking down billion dollar transactions. When he came back to New York and he said, look, look, after we closed he said don't worry, I've got the press on this right there in the Wall Street Journal says that he paid the record price for the property.

I was thinking, why would you ever.

Want to essentially brag that you paid the most money? He said, are you kidding? Do you know how many people called me after that article? Being known as an established buyer in the market, the brokers will certainly find you credibility and track record is important. So on that note, how do you get that track record? Because for those of our listeners who are starting out, maybe they're in the real estate business, maybe they're a broker, maybe they're an architect, but they're looking to do their first deal and they're trying to attract investors, but they've never done it before. How do you create that track record when you're new to the game?

I think the biggest thing is surrounding yourself with people that you aspire to be. So I'm talking about mentors, coaches, other folks that are in your network who are out there doing deals and seeing if you can shadow those people for a period of time in order to build up your credibility. The biggest thing that I focused on when I first got started in the syndication space was I went out and I hired a coach. He was doing deals and I could use his credibility to attract investors to his deals. And that was just an opportunity that I could start slowly building the credibility with people that were in my network. Because the thing is, what's the old saying? You've got to tell someone 10 times before they change their thought or they're thinking of who you are and what you do. And being a structural engineer and a civil engineer, everyone thought like, what are you doing in the real estate space? So changing that mindset all the time and using someone else's credibility, riding the coattails of someone else's success in the beginning is really, really important. It also helps you not make mistakes when you're going out to start doing your own deals. They can look over your shoulder and make sure that you are making the right decisions, you are making sure you're buying the right deals and you're doing the things correctly. So mentors and coaches are really, really important as you grow in this business. And people underestimate how important they are because look at some of the best sports stars in the world. They constantly have coaches helping them to be better athletes. And as entrepreneurs and real estate owners and real estate entrepreneurs, we need coaches in our lives to help us be the best business owners for our investors to make a lot of money. So I think that's a really, really important piece of advice for anyone out there thinking about getting started in this business.

Could not agree more. I'm also a huge fan of coaching. And for those of you who have listened, you know that Blaine Strickland has been on our show and then Rod Santomasimo will be joining us soon. So always good to have that sounding board. And I really like in your book how you have these comfort challenges at the end of the chapter, which is kind of really getting outside your comfort zone and kind of, to your point of finding mentors, you said, hey, call a big time developer and ask them to meet Call one of the top lenders out there and maybe talk a little bit about that.

Yeah. So I think at the end of the day, the whole point is just getting yourself out there to be seen and rubbing shoulders with guys that you aspire to be. Now when you first start doing that, people are going to probably fob you off and say, who's this guy Consistently reaching out to? Me. But if you be consistent and persistent with reaching out to folks and asking them to take them to coffee or take them to lunch or take them for a beer, then and you'll eventually get someone to say yes and through that you'll get referrals and through those referrals you start to get to know people. One of the things that I did early on in my career is that I used my structural engineering background to pivot and actually get a job. If I still had to work full time, I went and got a job with a big time developer so I could continue learning the business of real estate investing whilst earning a living, whilst doing my deals on the side and whilst building my own business. And so for anyone out there who does have a skill set that could be transferable in the real estate space, maybe you don't have have a real estate business right this second, but you could go out and be valuable to someone else's real estate business, then that's another opportunity to get started and surround yourself with people who are in the business and who you aspire to be. So there's many different options that you're out there, but it's about putting yourself out there, being vulnerable and knocking on doors and picking up the phone and saying, hey guys, I aspire to be you. Can I please spend some time with you so that I can see that some of your juju can rub off on me.

And we've even advised our listeners. I mean, if you find a really great opportunity and you don't have the ability to pull it all together, it's a great thing to reach out to an experienced operator and say, hey, let's co GP this together, let's do this together. Because your role in it is finding the opportunity and usually that GP has that track record and once you've partnered with them, you'll start building yours. So, so we only have a couple minutes left and I want to get to your syndication platform, I want to Talk about your 4P's to raising capital, but before we get to that, let's talk about deciding whether or not you want to be an active or passive investor. Because I Think that plays into this. So what advice would you give there?

Yeah. So I think when you're getting started, you have to understand what are you good at? Right. Like when you're sitting in your day job. People listening to this episode, right now, they're in a cubicle. At the end of the day, real estate is a vehicle. You can invest in businesses, you can invest in the stock market. You need to understand what is your ultimate goal and why are you investing in the first place? Is it to create financial freedom because you hate your day job, or is it to create some certainty that you do actually love your day job and you just want some extra comfort and send your kids to a really good university? You have to really be specific on that. Once you be specific on that, you can determine what path you go down. For me, my sort of gripe with life was that I just didn't want to sit in a cubicle for the rest of my life. I wanted to be in control of my own time. I wanted to be an operator, I wanted to be my own boss. So I had that fire within my belly to go down that path. But some people might really love what they do, and they just have some extra money that they want to invest in. They might be a passive route of investing, might be more in line with what their goals are. They love their job, they love, love going home and having the freedom on the weekends to spend time with their kids and family, and they don't want to go and start a real estate business. Well, passive investing is for you. And so that is what I implore people to go and think about and start doing is really looking inwards and seeing why is the purpose of me investing in real estate and what will it help me do? And do I want it to get out of my day job, or do I want it just to help support my current life and my current family to be more stable and in the future? So really understanding the differences between those two will help you decide what path you go down.

Perfect. So that brings us now to syndication. So at a high level, what do our listeners need to know about syndicating syndications?

If someone has never heard of the word syndication, I'll break it down in a very easy format. If I was to go, Reed Goosens, go out and hire a Boeing 747, because I didn't want to, to get from San Antonio to New York City, it would cost me a hell of a lot of money to go and do that. If I was going to be a single person but if I split the cost up with hiring that Boeing 747 with say 200 other people, then we can all enjoy the journey from point A to point B. That's the same thing that occurs in real estate syndication. It's a pooling of people's money together to go and buy a big asset that is commercial real estate to enjoy the journey from 00 to long term wealth or cash flow along the way. And in that plane of syndication, you're going to have the captain and the co pilot, which might be your operators or the lead syndicators. You might have first class, which might be the general partnership, which we might have some folks in there that help you bring the bank balance to the table or might help find the deal or underwrite the deal or asset management. Then you've got all the folks back in coach who don't lift a finger, but they're enjoying the journey. They've invested some of their money money into the deal. They've only invested a portion of the total worth because they've split the cost up with the other passengers and everyone's enjoying the ride. At its very basic form, it is just the pooling of investors money together to go out and buy a larger, more safe asset to invest in.

Makes a lot of sense. Now talk about the four Ps to raising capital again for our listeners. Check out Reed Goosin's website. He's got a lot of of useful guides that you can download and videos and of course his podcasts. But summarize that for us.

Yeah, it's actually grown to six P's but we can definitely go with the four P's. So the first P is professionalism. And a lot of people when they get started and this goes to any business or any career change or taking on a new business, we all are not born with just 15 years worth of real estate investing experience. But we have have a journey that we come from and we have skills that we've developed along that journey through past employment opportunities that you can use in your current business of being involved in real estate investing. And for me, I happen to have a skill set of engineering skills. I was really good at hosting meetings, I had really good analytical spreadsheet skills, I had good interpersonal skills. So all these skills that I can use. The professionalism is really important and understanding, that's the first. The second P is the pitch. And it's all in and around how you pitch someone. And we've got three different types of pitches when we go out and Pitch an idea. The first pitch is like a social pitch. So you're in a social gathering and you want to be able to pitch an idea to someone who can be emotive about the idea. The analogy I use is Martin Luther King, the I have a dream speech. He has a pitch that's really effective in terms of becoming emotive. But a social pitch is also something that you're not going to change someone's mind by just doing. By pitching it once. You have to go out there and pitch it a thousand times. And through that social pitch, and really a social pitch, no one ever says, oh, that was a really great pitch. They say, that was a really great conversation. And a social pitch is a way, which is an ice breaker, to get the conversation started, to engage, to go out and do a second pitch, which is called a scheduled pitch, which is, hey, I really like what you're saying and I really like what you're doing in real estate syndication. I'd love to sit down with you over coffee. Coffee and let's get our phones out and let's get a scheduled pitch on. The last pitch is called a sales pitch. That's when you actually have a deal in front of the person or syndication opportunity or investment opportunity. That's the person saying, I've got all these objections to me putting my money that is a sale before I invest in your deal. The second P is forming of three different pitches, which is the social pitch, the schedule pitch, and the sales pitch. The third P is in and around the profile. So when you are going out in the real estate syndication space, you are creating a business. The real big thing you have to understand is that people invest in you first and foremost, and your profile is really important. So when people look at you online, we live in 2020, it is the year of Google, and they want to understand who you are. They want to touch and feel you. I have a podcast. I'm vulnerable, my personal podcast. I talk about me and who I am, and people get to understand who I as a person am. And so thus they get comfortable with the investment opportunities. Your profile is really, really important. The platform is P4 platform is all about how you can go off and distribute your message. So it happens to be. We're talking on a radio show right now, so you're in a form of a podcast, but you might be another platform of a form of a blog or a newsletter or a video series. Whatever it is. You need a platform to get your message out into a tr. Attract people through educating them about the benefits of investing in real estate. Why people listen to this show is because they really like the content you put out and so thus they want to learn more about you. But you're leading with education piece and that's super important from a thought leadership point of view. And then the final P, as these are five P's now we're not doing the six is the practice. Sorry, this is the fifth P is practice. And you've got to get out there and start practising as much as you can in front of as many people as you can. And that is about having a pitch deck, flyers. Your profile online is really polished and just practice, practice, practice, because that is really important to get to the point where you are talking to a lot of different people. And it doesn't take one or two practices to get investors. It is going to take hundreds of people to talk to to get three or four investors. So the practice P is really, really important. And the final P is the most important of them all. And that is the payment. It takes time to get involved in a real estate syndication business. It takes time to build credibility with investors. It takes time to build a platform of education and thought leadership. So the patience is the most important part. And sometimes people underestimate that and they don't realise that anything that's worth building will take time. And it's okay that it might take three, four, five, six, even 10 years, but it will take time. And you've got to understand that going into any sort of business. And so they're the six P's Perfect.

I'll give you a seventh. Great advice and to take us out because we only have a minute left. But I love how you started your book with a quote from Tony Robbins, who I'm also a huge fan of Change youe Story, Change youe Life. So maybe just tell us what that means to you.

Yeah, for me it was, you know, if you keep running in the same story in your life, you're not gonna ever think nothing's gonna change. You gotta go out and push those boundaries, be comfortable being uncomfort. And that is exactly what I embody. The biggest thing that I fear is regret. And I never want to wake up when I'm 70 years of age regretting that I didn't make a move to the United States or didn't chase that American girl to the US or didn't go and have a go at that business. And so for me, it's changing that story and I'll ultimately change my life.

Reid this is really awesome. Can't thank you enough for coming on the show and for our listeners. Definitely check out Reid's books, his podcast and all, all of his useful downloads on his site. So thank you again for joining us.

Thank you so much for having me on the show. It's been an awesome pleasure.

This is James Nelson, your host of Real Estate Investing live from New York. Stick around. We're going to have a brief break from our sponsor and we'll be right back.

Follow us on Twitter voiceAmericatrn. Get the Lowdown on guests, new shows and your favorites. That's Voice America.

Trn.

Hi, I'm Mark Rose, Global CEO of Avis and Young, the world's fastest growing real estate services firm. And we are proud supporters of Voice America. With over 5,000 professionals in 120 offices in 20 countries, Avis and Young delivers local expertise in partnership with global reach. Because we are principally owned, Avis and Young prioritizes client success over shareholder profits through our open architecture. Our firm's experts provide value added client centric investment, sales, leasing, advisory management and financing services to clients across the office, retail, industrial, multifamily and hospitality sectors. Our culture is the bedrock for collaboration that enables each assignment to benefit from the collective intelligence garnered from a company wide database partnership performance. Learn how we deliver different@avisonyoung.com to learn more.

We're with you wherever Alexa and Google are at home in the car on your smart TV and your connected devices.

Hey Alexa.

Hey Google Play my favorite Voice America podcast on TuneIn.

It's just that easy. But don't forget to make sure you actually mention the name of the podcast show to make it work.

Welcome back to Real Estate Investing live from New York. This is your host, James Nelson. And now it is time for our property and asset management panel. And with us today we have my good friend Michael Feldman, who's co founder and CEO of Choice New York Companies. We have Leslie Lisser who is Senior Director of Asset Management and Invesco Real Estate. And last but not least, Michael Sullivan, my fellow principal and Executive Director of Asset Services at Avis and Young. Welcome everyone.

Thank you.

Hi everyone.

Thank you so much for coming. Why don't we start very basic and for our listeners, maybe you can tell them a little bit about what you do. Michael, it's most basic, basic form. What is your job when it comes to property management? I think for today you're going to be focusing on multifamily property management. So tell us a little bit about your job.

Right. So A property manager really operates the building at the ground level. So the three delineated components would be overseeing the maintenance. We're not doing the actual maintenance work, but we're hiring the vendors to do the work. Resident relations, those are your customers really. And then the building financials, the bookkeeping and financial reporting.

Perfect. Michael. Commercial property management. Anything else that you're doing in particular on a day to day basis, Same.

Sort of thing, it's just a different client. We're office tenants as opposed to the residents in building, and we do the same thing. We oversee the operation of the property, the financial side of the property, and deal with the leasing end as well.

Perfect. So are you actually collecting the rents? Are you paying expenses? Are you keeping an eye on that as well?

We're doing all of that. We are collecting the rents. They'll go into a lockbox or a bank account that the owner has and from there we will pay the expenses of the building as well as distribute the cash to the various partners that are involved.

Great. Leslie, tell us a little bit about the role of the asset manager because if I'm not mistaken, you work in conjunction with the property manager. Tell us about your role.

Sure. I approach asset management basically the same way I would approach multifamily. I approach office as well. I'm the client, the owner owner. And my job is to develop strategies and implement those strategies to create value. So I am working very closely with my property teams to make sure, I like to say every lever is pulled. Every lever with income, every lever with expenses, taxes, utilities, energy, sustainability, everything is kind of all under this realm of asset management. So again, we're partners. I treat my third party manager as my partners because without them being successful, I'm not going to be successful.

Well said. So in a way, then the property manager reports to you on behalf of ownership and then you're making recommendations. Maybe talk a little bit about that relationship between the asset manager and the property manager.

Well, to really narrow down and get specific a little bit is basically the way I look at this job is I have daily interest with my property teams. You like to schedule regular calls where you review, you know, high level information, high level stats. But there's always things that come up so I can say, you know, at any given day I will be in touch with, you know, half of my properties for various issues. But I do like, and that could be via email or via phone call. But I do, I think it's good practices, best practices to schedule, you know, regular calls every other week and Touch base, starting with an agenda and really keep it as professional and formal as you can and give everyone a chance to participate and tell what they're doing. Because everyone is again, an important piece of this puzzle to create value.

So Michael Leslie works at one of the largest asset management firms you know in the world. I know you have some large accounts as well, but is there always an asset manager who you're reporting to or are you usually reporting directly to the owner or are they kind of one in the same?

Well, you're right. It really depends on scale is usually what is often the influencer on whether we're reporting to the asset manager, which is our client or the owner directly. But either way you're working collaboratively and it's really, you know, Leslie said at best it's about, you know, viewing. We like to be viewed as their non equity partner because we really are running the operation on the ground level.

Great. So Mike, who do you typically report to? And tell us a little bit about that partnership? Either whether it's working directly with the owner or an asset manager.

I would break it into two categories. Basically, you have the private owners. It could be one or multiple persons in a joint venture. Or it could also include like Invesco and other asset management companies. Because, you know, for the value of office buildings, it's quite large in New York City. So it takes a lot of money and that's where they come into play. And I think the biggest thing, in addition to the normal maintenance that we talked about in the beginning of the program is it's not only the asset manager's responsibility, it's the property manager's responsibility to find the value as well, to increase the noi, to increase the value of the property and assist them, whether it be looking down the road at what capital projects are necessary or perhaps even leasing and how to reposition the building. We're a part of that team, so we work together coherently.

I really like how you put that as again, working together for the best interest of the property. And it's not just your role goes beyond just collecting rents and looking at expenses, but you're really thinking about the future of the assets. Leslie, as the asset manager, how are you looking at that asset? Ways to improve performance? What is your role in that?

Well, I'm constantly looking at the analytics and improving performance. I'm judged on performance, to be frank.

So is that the bottom line? I mean, at the end of the day, increase rents.

We're in real estate to make money for our investors. So that's my goal and that's what I look at every day. So there's a lot of factors that come into that, especially with multifamily. The market is the market. So how do you work with it or against it? I can't make up what someone's going to pay in rent, the market's going to speak. But I can maybe lease more units, increase my vacancy loss. I can kind of play around with reducing expenses. I can put in energy efficiency, you know, low hanging fruit, as well as larger projects to create savings there. I can make sure I do my tax work every year to reduce taxes. And again, I can look at the long term capital projects too, and what could be strategic or I can get a return on. In multifamily, we look at ROI of unit renovations. We also look at ROI of common area space. And I think that ties to office buildings as well. If you renovate your lobby, if you put a roof deck in. Now these worlds of office and multifamily and hotel are all colliding in terms of amenities, you know, what is going to give you that return. So I think again, that's where I spend my day. But I do often also dig deep into each account code that you guys spend time on and see what am I missing, what am I understanding and what is a way that we can help improve value.

So Michael, how would you respond to that and what are ways that you look to add value for a property for your clients?

Yeah, I agree. But before we start adding value, I'm sure all of us would agree, like the first thing you think about, about is protecting value. That's, you know, we're not brokers, we are not controlling the market. We really look at the expenses first and we start with the insurance policies and kind of work our way out. There's lots of fun, kind of sexy, you know, things to talk about. You know, we, we like to bring in film crews or billboards or any type of antenna. I mean, there's all of kinds, kinds of ways, you know, beyond the typical value ads.

I was with you by the way, on the sexy on the filming and the billboard, the antenna, you lost me a little bit. But look, if it's bringing in income that's sexy, right?

Yeah, well, you know, it's a little bit of a reach with property management and sexiness maybe. But you know, I have to say that a lot of times, obviously for people who are listening, who are on the early side of their career, there's sort of this, particularly in the last More recent times, this fascination, almost this idyllic. Like everyone wants to be a developer and that's awesome. You build a building, it could be there for 500 years. But the great thing about property management is you come in every day and you'll be hard pressed to find a property manager that says the clock's moving too slow. You know, there's always a lot of action and you get to talk to a ton of people and rather than looking at like an investor might have to look at 400 deals to find the one deal to effectuate, you know, if you're someone who likes high volume and sort of that immediate gratification of task management, you know, it's a great, great side of the business.

Well said. So Mike, same question for you. Just adding value, controlling expenses. What are ways that, that you look to approach assignments to maximize value?

Well, certainly you start with the beginning looking at it to make sure that you're doing the best you can most efficiently. But you also need to always educate yourself in looking into the future. You need to see trends happening. So just as Leslie talked about amenity, space and how it's becoming desirable, prop tech, big buzzword. But it's true. There's diagnostic. Whether it be AI, whatever you want to call it, there are things that we need to make sure we're educated on and that we've explored and see whether or not that application might work for the property and actually make it more efficient. Whether it be the productivity of the people who are working for you or just energy wise, because energy is one of the largest expenses that we have on a property.

I'm really glad that you brought up the new advances and specifically in the prop tech arena. And, and this isn't just a bunch of apps that make our lives easier. From what I've learned is that there's huge expense savings available now, today, whether it's how you control your energy. So Leslie, any thoughts about new developments out there and ways that owners can benefit from the technology?

Well, what we've been successful with indicators. Again, this whole energy savings is definitely one of the things I really think is important. I'm a lead ap and ever since I got that lead designation I've been focused on this. But we've been very successful with smart metering and default detection and we've aligned ourselves with a group called Logical Buildings and we basically install that technology at all of our buildings. It's on an extra expensive technology, but really the heart of it lies with your maintenance crew. You know, that's Critical. They're the ones that are trained, they're the ones that know that get the notifications to either lower the air, raise the air and the whole building really works with ground up. Don't be afraid to talk to the guys working in the back of the house. Those guys usually know the stories, know what's going on with the building and can keep you some great ideas in how to create savings. So I think technology in the energy space is great again, smart metering and default detection. I think you also, especially in the multifamily side, with my more luxury properties, you've got to have an app. You don't want to build the app because I think that's ridiculous. But these property management firms sometimes come with apps or concierge services. Come with apps, use those, those apps. It gives you the availability, the ability to let people know when your events are pay rent, notifications, things broken. I mean use other technology that people have developed. I don't think it's worth anyone, you know, developing something on their own. But there are a lot of things and you can go down a path and I'm not sure if the return's there. So we test things out. But these are the two areas are really concierge service and energy.

Great point. And I really like how you stress the importance of knowing what's going on in the ground. You can't manage these from up in your office or from your smartphone. So we only have a minute or two left. But Michael, maybe take us out on the technology front. What are one or two things that you're using today that our listeners could benefit from?

I mean, first of all, there's just an incredible and accelerating inundation and if you're in one of our chairs here of a lot of smart people who are great at coding, creating these niches in sort of these far reaching little corners of an operation. So it could be as simple as a better screening process for your potential residents that can actually see the bank accounts even draw funds automatically with their authorization. So there's a lot of cool stuff out there both on the internal office operation side of running a property, but also the energy stuff is, is definitely the bigger dollars. You just have to be, as Leslie noted, a little bit skeptical because there are a lot of different options out there and you really have to, to be prudent about which one you choose to go with.

Well said. So I want to thank you all for joining us today. And even with all the technology out there, we don't have robots here doing the show for us with artificial intelligence. So we still need you out there doing the great work that you're doing. So thank you for joining us.

Thank you.

Thank you all for listening. This has been a fantastic show and look forward to our next show. Thank you again.

Thank you for tuning in this week to real estate investing. Live from New York. Please join your host, James Nelson for another program next Tuesday at 7pm in New York, 4pm Pacific Time on the Voice America Business Channel. All shows are rebroadcast Wednesday mornings at 7:00am Eastern Time, 4:00pm Pacific Time, as well as always on Demand. We'll talk again next time week.