34: John Catsimatidis - The American Dream

Welcome. This is Real Estate Investing Live from New York with James Nelson, the principal and head of Avis and 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.

Welcome to show number 34. This is James Nelson, your host of Real Estate Investing Live from New York York. And we have a very exciting guest today. John Kasmetides, the self made billionaire will be joining us and telling us all about his incredible story. From humble beginnings, coming from Greece at a very young age and getting into the grocery store business, working his way up. By the time he was 25, he had 10 grocery stores and you're going to learn and hear about how he parlayed that into a real estate empire as well as his other businesses in aviation, energy and insurance. And most recently also his announcement how he's exploring another run to become New York City's next mayor. So you're not going to want to miss this one. Afterwards. We have with us our multifamily panel with Danny Rublin from Dallin Management, Brandon Polakoff from Avison Young and Eric Hamm from Corporate Corcoran. But before we get to that, let's have our week in review powered by the Daily Beat. In the story that's driving the day, shoppers are returning to reopen stores faster than expected. Macy's CEO Jeff Jeannette said sales reopened. Stores are down by about half compared with before the pandemic, which is about 85% decline the company had predicted. At Kohl's, stores are doing about three quarters of of their pre pandemic sales volume, up from about two thirds in May. That being said, Starbucks elsewhere announced plans to close, renovate or move 400 traditional cafes in the US and Canada in the next 18 months. For every store that is closed, at least one alternative location will open. The company said it aims to open 40 to 50 pickup only locations in the next year and a half. Elsewhere, Simon Property Group is terminating its $3.6 billion deal to acquire Taubman Centers. The deal, announced in February, would have combined two landlords as the industry struggles with an oversupply of malls and the decline of traditional retail stores against the rising tide of E commerce elsewhere. In positive news, Amazon has leased a 200,000 square foot warehouse at Prologis, 1055 Bronx River Avenue that was previously used by its rival Jet.com, the E Commerce giant has inked a deal for the space at the Bronx warehouse along the Bruckner Expressway on Soundview. Elsewhere, Neiman Marcus, with its bankruptcy related and Oxford Properties are now marketing the department store at the Hudson Yards Mall to office tenants. In total, the developers put the 380,000 square feet, or roughly 40% of the shopping complex on the market. In Real Estate Meets Politics to simulate the economy in the past decade, with interest rates pinned near zero, the Federal Reserve made promises about how long they would remain low. Now Fed officials are thinking hard about a new tool that would reinforce such promises by committing to buy treasury securities in whatever amounts are needed to peg certain yields at low levels, according to the Wall Street Journal story. And then lastly, to take us out, two more good pieces of news. Empire Real Estate Trust is inked more than 100,000 square feet of leases, a mix of new deals and renewals in its New York City and Connecticut property portfolio between mid March and May. And they've signed five leases as well as one Grand Central place, according to the Commercial observer report. And according to the Daily Beats, shares of Real Estate ETF VNQ are up 48.8% from the market's low point on March 23rd. The fund tracks a broad index that captures much of the US Real estate market. So we're going to have a quick word from our sponsors and we'll be right back with that interview with John Cassametides. Thank you.

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And now it's time for our investor profile and wonderful to have with us today John Casimotitis who is a American billionaire, businessman and radio talk show host. He is the owner, Chairman, CEO of Prestige Food and the largest grocery chain in Manhattan and also the head of Red Apple Group, a real estate and aviation company with 2 billion in holdings in New York, Florida and Pennsylvania. John is a firm believer in giving back to the community and is a strong supporter. Longtime supporter of the Police Athletic League and is also a board member of the Columbia Presbyterian Hospital, among others. So, John, you truly are the American dream. So thank you so much and welcome to our show. Welcome, John.

Yes, thank you. We certainly want to get the truth out, and that's my policy. I started my radio show six years ago after I ran for mayor because people wanted to hear the truth of what's really going on. People that don't believe FOX News and people that don't believe cnn. Well, I'm the guy that tells you the truth regardless. And we bought WABC Radio because we want to get the truth out there, whether it's Democratic or Republican, liberal or conservative, whatever the truth is, that's what we are aiming to get out. And that's my policy.

That's wonderful and certainly a need for it in these uncertain times. And you have an incredible story, which I know our listeners are going to really look forward to hearing. But before we kind of go back to where it all started, I've got to ask you, with these recent reports, very excited to hear that you are forming an exploratory committee for a 2021 mayoral run in New York City. So why are you considering this time?

Because I think the city needs a lot of help and that the fact is that you need a fusion ticket. You need a coalition of common sense Democrats and common sense Republicans that care about the city, looking to put the city back on top.

So, you know, the city is also in very bad financial shape. I mean, I think it was before this pandemic. The budget office is now projecting a $9 billion shortfall through June of next year. And if I'm not mistaken, our mayor has talked about taking on 7 billion of debts. Yeah. To take care of that. What are your thoughts?

Tom Napoli on my show. And it might be more than 9 billion. And Richard Ravitch was on my show. I think you need confidence in the system. People are willing to put up the money, but you need confidence that the money is not going to just go to waste and just go down, down the drain. In the last six years, the city has gone from up from 270,000 employees, I think, to over 300,000, 30,000 employees. Can you see where they are? I can't see where they are. So when you go up 30,000 employees. And when I ran for mayor the budget was like $70 million. It went to 97. $70 billion and it went to 97 billion. That's a lot of increases. The inflation has not been that much in the last six years. So I think you got to put controls on the system.

Yeah, I would say without the. They established universal pre K. So those were certainly some jobs. But yeah, beyond that. And we had an interview last, Andrew Ryan was on from the Citizens Budget Commission. I think their number was 35,000 jobs that have been added to the tune of two and a half billion. So it's, you know, these are tough decisions, but there's going to have to be cuts because I don't see how we can tax our way out of this.

You will never be able to tax your way out of it. I have all the Florida politicians on my show and you know what they say to New Yorkers, come on down. Now I'm going to give you an interesting statistic. The whole state of Florida, the budget is 89 billion and there's no taxes. But New York State, New York City, New York state is 170 billion and New York City is another 97 billion. You got almost $270 billion compared to Florida of 89 billion. And Florida has 21 million people. New York state has 19 million people. And going down, Florida has 21 million people and going up. It's not hard. You don't have to be a nuclear scientist to tell you what those numbers mean.

Has that also influenced your real estate investments? Because I know and I want to get to your New York portfolio and your thoughts on investing in New York. But I know you're also an investor down in Florida. I think you're doing a large scale project. Is it In Tampa or St. Pete's.

And then also St. Pete, we have on our boards that we're going to spend $400 million on a condo development, the tallest condo in the west coast of Florida and a hotel development.

And I think I heard an interview where you once said that dealing, getting a project approved in Florida was a matter months. Whereas you know, New York, we know how involved the process is. So you know, fair to say when you're doing a real estate deal, pretty pro business environment when you're talking about Florida.

Both Democrats and Republicans in Florida, pro business environment where the mayor of St. Pete, he says I'm a progressive Democrat, but I am a pro business progressive Democrat. So what does that tell you?

Yeah, you bring up a lot of good points. With that all in mind, thinking about New York now And what the opportunities that might exist again. I mean, with all these challenges, there's no doubt pricing has come down. Do you see this now as an opportunity to invest in New York, or are you still waiting now to see how this all shakes out?

Well, if you get the wrong mayor, fasten your seatbelt. You're going to sue her.

Fair enough. Fair enough. So let's go back to your childhood, because I'd love to bring us up to today. I mean, you have such an incredible story. Greek immigrant family come to the city when you were 6 months old, lived in Spanish Harlem. I think you said that you learned English from watching tv, is that right?

Well, my parents only spoke Greek at home. So the joke I tell around people is English is my second language. Well, I had a little 5 inch Emerson TV set and by watching a lot of television, I learned how to speak English to an extent. You can't be perfect to the extent where on my math sats I had close to 800. On my English sats I only had like 490 or something. So when you, when at the age of one to five, when you don't learn to speak the right English in the right environment, then it hurts you long term.

Is that how, I mean your math skills, is that how you were able to get into Brooklyn Tech? I mean, were you, were you a good student, would you say?

I would say my math skills exceeded my English skills.

So then you start after that, you graduate, you get into nyu. But at that point you were also.

I was a candidate for West Point. Congressman William Fitz Ryan on the west side gave me the competitive nomination and I ended up going to NYU because I was an only child. And my parents yelled and my mother cried. Nyu uptown campus, the school, school was a great school.

And during this time you were also working, I think you said you were working till 1 o' clock at night, that this was at your friend's uncle's grocery store. Was that, were you always doing odd jobs, kind of paying your way through? Is this, you know, hard work? I mean, is this something pretty consistent through your story?

You know, I wanted a car cause it was in the Bronx campus and I wasn't gonna go to my mother and father to pay for the gasoline for my car. So I always had odd jobs in a grocery store to earn a few extra dollars to pay for gasoline for my car. And in my junior year, my senior year, I ended up owning the store that a cousin had and I ended up being short like eight credits from graduate. So I always tell Everybody, I'm a college dropper.

So how did you. I mean, you went from working at the grocery store. And I don't know if this is kind of an entry level where you're helping out around the store, but you know, somehow by the time you're 25, you're a part owner in the business, you've got 10 grocery stores. How did that all happen? Did your friends uncle say, hey, you know, John, come be a part of this. You know, I assume you didn't have any money to kind of buy in at the time. How did you convince him and become a partner of all this?

You beg and borrow. What happened is I had that one store and the wholesaler, I was doing business with one of my mentors, a guy named Sam Stein, the law firm of Stein and Rosen. And he became my lawyer and he became my mentor. And as a matter of fact, he owned a wholesale grocery company called Filigree Foods. And every time he fell in love with me and every time I needed more money to build another store or to open another store, he would call up the controller at Filigree Foods, Frank Serretta, and say, give John more money because he needs to build another store. And that's how it went from one store to 10 stores by the age of 24, 25. And as a matter of fact, his brother was Lou Stein, who was chairman of Food Fair. And when Food Fair went bankrupt, he ended up. They ended up because I had a relationship selling me the Pantry Pride stores in Florida. And we had all the stores from Key west all the way up to Palm Beach.

Amazing, amazing. You know, and all by the time you were 25.

Well, the pantry Pride stores came a little bit later, but not much later. Right.

So when did real estate start coming into the picture? These grocery stores that you were running, did you own the real estate at the same time? Were you?

No, no, I didn't know the real estate. I didn't know I was. Don't forget, I didn't go to business school. I was learning as I go in, and I found out that you don't have a business unless you have a very, very long term lease like CVS does, you know, 10 years with 10 five year options in New York. If you have a short lease, you know, you lose. So about 1976, 77, I realized that and the world was coming to an end in real Estate in 1976, 77. But I was too stupid to know where the world was coming to an end. So I started buying real estate. I Started buying commercial real estate. One story, taxpayers with the theory that if the tenant didn't pay for the rent, I could always open up another supermarket. And I ended up buying a lot of real estate. And it was a real bad recession. And I bought this real estate for nothing. And I had a lot of Jewish mentors. And I remember sitting down with my ice cream guy is even saying to me, john, you're doing the right thing. And I said that I hope so. And I would buy this real estate, I would borrow money from the company, and at the end of the year, when I had to pay the company back, I would borrow money from Chemical bank to pay back the company. And I end up owning the real estate personally. And what he said to me, john, you're going to wake up one morning and you're going to be rich. Well, the recession ended in real estate. And I woke up one morning and the real estate that I laid out, $5 million in cash, and Chemical bank had given me the money back to pay the supermarket company. So I kept the supermarket company separate from the real estate company. That $5 million I put into real estate in 1977. By 1980, 81, it was worth $100 million. So when did I make my first hundred million? I made it before that.

Amazing. So the business was kind of a vehicle to help you get there. And ultimately your real estate empire has become many multiples of the actual grocery business.

Correct. And I kept building the real estate, kept building the real estate empire, I kept building the supermarkets, and I used one as a, you know, a helping hand in the other so they would support each other in addition. Then I always wanted to fly jets. You know, when I wanted to go originally, it wasn't West Point I wanted to go. I wanted to go to the Air Force academy. So in 1977, when I was 28, 29 years old, I started flying airplanes. And I bought my first jet from Roy Disney. I remember the tail number, 44Rd Romeo Delta, Roy Disney. And it was expensive owning a jet at the age of 29, being in the grocery business. So I convinced my pilot, I said, why don't we go into business? And guess what business we went into? We started flying. We started using the jet to fly to customers in Atlantic City. Atlantic City used to pay, take the people to Atlantic City by limousine. But how about the people that lived a little bit further away? We convinced them that if they pay us $5,000 for round trip trip to Hartford, that you can't take limousine. And the customer lost 10,000. You have a gross margin of 5,000. And we ended up building that company up to over 48 company jets. And guess what? We sold it to Santu Li and that company became NetJets.

Amazing. Which I think Warren Buffett owns now. If I'm not mistaken, their fleet's probably close to 1,000 aircraft.

Well, it was up to 800. And then in 1983, people know we were in the real estate business, we were in the airplane business, the jet business, we were in the supermarket business. People knew I loved airplanes. So what happens? They come to me with a deal. Capital Airlines out of Nashville was in trouble. I ended up investing and running Capital Airlines, which was the 10th, 11th largest fleet in the country, was a scheduled carrier, went to Europe, Caribbean, west coast of United States. And it was a real lesson learned how flying. I helped run that company. And it was running. I had an office in Smyrna, Tennessee where I used to fly my personal jet to Smyrna. So instead of going from Southampton to Manhattan, I would go from New York to my parking spot outside my office at Smyrna Airport and run that company during the week. And it was a great company.

So how are you able to, I mean, for some people, your real estate empire alone, I mean, that's a full time business. And this was on top of the grocery business. Now you're in aviation, you're in the energy business in a big, big way. Insurance, if I'm not mistaken. How have you been able to grow into this conglomerate? I mean, how big is your organization? I know a lot of the people in your organization. You got a lot of really good people. I would imagine that's part of it. But how is it possible to be in all these businesses and keep your eye on the ball, so to speak?

Well, you have to work hard, you have to keep an open mind. And when you're running one business on a Tuesday, you got to keep your mind on that one business. You can't let your mind wander. So now, like I said, I go in Monday, Tuesdays and Thursdays, I have staff meetings. And we don't let our mind wander. We go and we run that company. And the management is under you. Watch it carefully. And hopefully we have good management.

Yes, I think you absolutely do. And it's apparent with all your success and all these businesses. So I want to now talk about something that's near and dear to your heart. Coney Island. When I've heard you speak before, you're really someone who has vision. So talk a little bit about ocean dreams. You know, what you saw there when you bought the land, when you thought it was time to move forward. And a little bit more about that project.

Well, I went to Coney island and I looked at this land right on the beach, and I looked at the beach and I fell in love. When you go to Coney island and the sun is shining and you look at that ocean, you look at that beach, you fall in love. Now we built two beautiful buildings, 425 apartments. Because of the virus, renting has been slow, but we're pushing off in June, towards June, July and August. And we're having a big kickoff party in the next couple of weeks. And I may do one of the commercials. I can see the commercial I'm going to do because I live on the ocean. I've lived on the ocean for 10 years. I'd say in the morning, if you live on the ocean and you breathe in that ocean air, I'll certify that you're going to live 10 years longer.

That sounds fantastic. Well, that's really good to see what you've been doing there and for the area. Now, is it always rental that you're looking at or do you ever think condos? How do you decide what to pay and if it's going to be a profitable endeavor?

Well, we've only done rentals so far. We have the option of doing some condos in Florida in Coney island, but Florida will be condos because we don't know the market as well. And I think people that go to Florida, from the Midwest to the west coast of Florida, they want to own. So we'll probably do condos in Florida, but we've only done rentals so far because I wanted to build long term assets for my kids. And you know, we didn't need the cash because we have a lot of cash coming in from other companies. Like I said to you, each company is interrelated. We're in the energy business. We're in the oil refining business. We're in the pipeline business. We just closed the on a new pipeline deal with Enbridge a few weeks ago. We have one refinery that we bought while it was in bankruptcy 1984, and we saved 5,000 jobs. And that company was a New York Stock Exchange company originally. Well, it's doing phenomenal. And each, all of our businesses throw off a lot of cash. And the cash. You know what my job is now? My job is the chief allocator of money. If the companies come up with an excess 300, 400 million in cash a year. I have to decide where that money is to be allocated. And do I allocate it. Do I buy another supermarket chain? You know what my kids say, dad, God forbid they hate retail. Or do I buy another refinery, which we're looking at right now, or do we buy, do we build more buildings? Or we also have another company is our investment company where right now my son is the chief investment officer and he manages little over a billion dollars. And he said, dad, I can supply 8% return on investment. Why do you want to buy another chain? So as chief Allocator of Money, I have to make a decision where the excess cash goes.

I bet a lot of the listeners on this show would love to have that title, Cam Chief Allocator of Money. Yeah, so what? And it really seems like whatever industry you're going into, you're a true value buyer. So is it.

Yeah, we just bought WABC Radio.

I saw that. I saw that.

And really, I grew up with that and I grew up with Cousin Brucie. It's a great radio station.

You're bringing it back to life. It's been. And before I forget, we gotta make sure and make a plug for your roundtable show and make sure that people tune in. So I want to make sure that we put a plug in for that. That's every Wednesday night from 5 to 6pm on WNYM 970. But I know you also have and.

On Sunday mornings we're Catch Roundtable. We're on ABC and on 9:70am that's right.

That's right. So a lot of the listeners to this show are aspiring investors and they're thinking about how to get into it. And I mean, your story is absolutely remarkable and building really from the ground up, buying over time. But today a lot of listeners might say the market is so crowded, there's so many sophisticated investors. There's private equity out there with billions and billions of dollars. How is it possible for someone to break into the market now? Do they do it on their own? Do they come work with someone like you? Do they call you with a deal? What would be your advice for someone looking to get into the real estate game?

My advice would be don't necessarily go into the outer boroughs. Buy something that needs fixing, have an idea how to fix it. Buy cheap, fix it, sell it, and you turn over a lot of cash. And if you do that well enough at a certain level, then guess what? You'll be going up the higher levels of real estate within five years.

Fantastic. And how do you determine if something is actually cheap? How do you find the deal? How do you know when you have something that it's good?

You just have to have a gut feeling. So you have to, you say to yourself, boy, that house, oh, that building looks like a real piece of shit and you could fix it up and rent it out or whatever. You have to have a gut feeling. So you need a listen. It's not, it's not always easy. You have to have good gut feelings about things. Great.

Well, we only have a minute or two left, but this has been an amazing discussion and I would just, I'd love to get your thoughts on the future. And I know New York, a lot of it does depend on who our next leader is. And, you know, wishing you nothing but the best if that is what you know, you decide to do is to run. But, you know, why are you still bullish on New York? Why does New York have a chance to come back?

Being 70 years old, I've seen New York sink to the bottom, sink to the toilet three, four different times and New York always made it back.

Well, I'm certainly with you there. And it's been Fantastic over my 20 plus year career here to see all companies that want to be here, all the new companies and it's where the town is, it's where people want to work and live. And I think that even this pandemic, I think long term, that doesn't change. And so really excited about the future, as challenging as things are.

Well, thank you for having me on and fight hard for New York because New York is worth saving.

That's a great way to end. Thank you again, John, for everything that you do. This has been, your story is absolutely remarkable and I know our listeners really appreciate it. So please stick around. This is your host, James Nelson of Real Estate Investing Live from New York. We're going to have a brief word from our sponsor and we'll be right back.

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Welcome back to Real Estate Investing live from New York. This is your host, James Nelson. And now for today's panel. Thrilled to have with us a panel to talk about all the considerations that you need to know when owning and operating multifamily real estate. With us today we have Danny Rublin who is founder and principal of Dallin Management Associates. He's responsible for the acquisitions and oversees the day to day operations of the company. They manage a portfolio of multi and commercial properties in New York, Phoenix, DC, LA and Houston. They have over 50 properties, 1500 units, 100 commercial units comprising 1.5 million square feet. Also with us is Eric Hamm, who is a licensed real estate broker and a manager, senior managing director for Corcoran. And he's worked with hundreds of owners helping advise them on how to position buildings, overseeing their rental portfolio. Last but not least with us, Mitch Levine, who has worked with me, alongside me for over 10 years as a director at Avis and Young, specializing in multifamily sales. So gentlemen, welcome. Thank you so much for joining us today.

Thanks so much.

Thanks for having me.

So, Danny, let's start with you from the owner's perspective. We've got a lot of listeners who are some are more experienced investors, some are first time investors and they're thinking about maybe where do they start. So kind of what would be the benefits of owning multifamily and then maybe kind of the flip side, what are some of the challenges?

Yeah, so I think the biggest benefit of owning multifamily housing is that everybody needs a roof over their head. And there's a lot of other asset classes within the real estate sphere that come and go in terms of demand with, with changes that we're all seeing happening in the world online and those sort of things. But you still need a roof over your head through all this and you always have and you probably always will, even in times like right now, and especially in times like right now. So I think multifamily sort of stands this test of time and the demand population's growing and so demand will continue to grow. So to me that's at a very high level, base level like one of probably the biggest benefit in investing in multifamily. And look challenges, it's not the same as buying a stock where you just put your money in and let the people run the company that run it and hope it goes up. And it's not really, it's certainly not a passive investment if you're running it yourself. There's a lot of things that.

You.

Need to do well in order to be successful in operating, financing, buying, selling, running multifamily properties.

Perfect. Yeah, no, that makes a lot of sense. And just to clarify, do you self manage your properties? Meaning you're the ones, your office is overseeing the operations of these properties? Maybe talk a little bit about that.

Yeah, sure. So, you know, I started my company in 2003, just my father and I and we literally did everything right. You know, from overseeing the super and the cleaning of the building to showing the apartments to you know, managing our budget and you know, repairs and maintenance and paying taxes and sort of all the things that you need to do and you know, and dealing with taxes. Tenants is obviously a huge part of the business in that regard. And so when I started, I personally literally did all of that. And then over time, as we've built up a larger portfolio, I have people within my company that deal with most of these day to day things. But I certainly have a hand in knowing what's going on in managing the budgets of each property. And they know when to come to me for bigger or more sort of questionable decisions that might come up in the course of running the properties.

Perfect. Eric, talk a little bit about how you work with owners. And if I'm not mistaken, and I know you've been helpful to some of our clients getting involved early on in the process, maybe it's a new development, maybe it's, you know, a renovation. But how do you help owners think about how to maximize the potential of a property?

Yeah, I mean, you know, I got into this 18 years ago and you know, we were. Most of what I did was more on the tenant side, which was helping them find property they were looking for. But you know, we're not the guardians of information anymore. You know, the days of The Village Voice 4 line ads or you know, came and gone, you know, through craigslist and other things. You know, really what, what we've turned into is more of the, it's the data analytics. When somebody's looking at a property and they're saying, hey, what, what can I do with this? Like, is this a poorly run building? Is this a building that, you know, the renovations are still from the 1970s, they still have an old yellow kitchen. You know, what can we do to maximize, you know, really the the income this asset can have. And I think that's where we come in with, you know, how much more is a washer dryer inside a unit going to spin off in terms of rent and demand and absorption, or how much value is there in doing some outdoor space or putting in a bike rack? You know, I mean, with the times and trends, they change. It used to be that a doorman building was a great amenity because, you know, it was service to feel like there's somebody for security. But you know, the next generation now, they don't care about somebody holding open the door. They care about who's going to accept packages. You know, when you're on an Amazon world where especially now with what's going on, everything's getting delivered, people don't want to go out. You know, it's. Who's going to be there to accept these things if you're not able to be there? But you know, where we come in, I think is, is that, you know, people are looking to invest their money. They're looking for an asset that's going to be either a long term hold and have some appreciation. And they're asking us, you know, what can we do? Should we change the layouts? You know, are these oversized one bedrooms where it's just too much square feet, where, you know, we can make a nice comfortable two, you know, should we put an amenity space in? How much value is there in a gym or a children's playroom or theater room or cinema room? I mean, that's where we come in, I think, from the onset. But, you know, we'll probably run numbers for, let's say, you know, a few hundred, you know, requests a year. A few of those turn into an actual purchase. And then from there, that's where we come in from, marketing side, which is how do we market the building? How do you give it its own identity? Because listen, I mean, there's a lot of product that's out there. But we firmly believe from our position, from what my team does, that two thirds of the housing stock in New York City is rental. That's what most people do. People will end up buying some of them. But a lot of people come into the market and they want to rent for a number of years before they figure out where they want to be. Right? And especially now where we see that sales may be on pause a little bit. I think a lot of buyers that were maybe thinking about buying in 2020 are going to rent, and I think we're going to see a surge of people coming out to rent in the next 60 days, which means there's going to be a huge demand on the housing stock that's out there.

That's really great and some really good considerations to consider there. Mitch, you work with a lot of investors who are considering, considering multifamily. And sure, there's the new construction, what we would call core assets, where maybe some of the institutional buyers are just looking for more coupon clippers, so to speak. But probably fair to say that a lot of investors that we deal with are more value add, meaning they're looking to take the properties that Eric is talking about and how to reposition. So maybe talk a little bit more about some of how these investors are looking to maximize values for their investments.

So typically what we see is when someone comes in, they want to look at the layouts, they want to check to see if there's any, you know, air shafts with windows cutouts in the building in a way that they could add bedrooms so that they can get a price per bed and increase the rents that way, rather than just looking at the gross rent. Because if you take a 500 square foot one bedroom and you have lots of windows, you can make it into a two bedroom. So rather than getting, you know, 2,400amonth, you can have two bedrooms and try to get 1500amonth to get 3000 and increase value that way. They also look to, you know, add amenities to the units, whether it's a washer and dryer in the unit, whether it's, you know, creating something in the lobby where they can leave packages or drop off dry cleaning, you know, update a lot of, you know, old tired buildings. A lot of people, you know, feel that they can do it better than anyone else and they want to have something that's nice, new, you know, low maintenance, at least for the first couple years when they, when they own it. So that's typically what we're seeing as well.

And what's kind of the metric that a lot of the investors are looking for? Is it cap rate? Is it price per pound? Is it price per unit?

Mitch so before the whole change in the rent laws recently, everyone used price per pound as a metric. But if you can't get rid of tenants anymore more, or combine units to deregulate, or just increase rents and deregulate units that way, everyone's really focused on, I think, on a cap rate basis at this point as far as yields. But you always weigh both because you could always look, you want to compare your price per square foot with your cap rate, make sure they're in check. But I feel right now most people are, are really focused on yield right now, especially given what's going on in the current market.

Sure. So Danny, you invest in a lot of different cities and our listeners are from all over. So how do you pick a city? Was there any reason why, I mean I know you started in New York, but is there any reason why you've gone out west? You mentioned Houston is one of the newer cities. Phoenix, how are you picking these cities? And as our listeners think about where to invest, what are some of the things they should be considering?

I think traditionally and for us it's definitely been a factor is just looking at demographic trends, where people are moving, looking at supply demand dynamics. At the end of the day, this all comes back to that in a lot of ways like every business does. What's the supply? What's the supply growth look like? What's the demand growth look like? So that's definitely led to certain higher growth markets like Phoenix in recent years for us for example, and a lot of certain markets in Texas that have just a lot of population growth and a lot of people moving there. And so I think the supply demand dynamic and demographic trends are the traditional answer and a big part of it. And I think the newer add on to that is just the local political climate. And between SALT tax which has started to favor low tax states over high tax states and pushed a lot of companies, you hear about companies moving from Southern California to Austin, Texas for example, on a regular basis or where we're based in New York, you hear about a lot of investment firms moving down to Florida. And so I think that the state tax has become a bigger factor as well as just the political climate. Obviously we're all based in New York. So from that and all of us that are in real estate and do business in New York have learned very much what a negative or difficult political climate towards owners can mean to values and to into the real estate business. And there are some states where the government is giving tailwinds to the industry and there's other states where there are headwinds. And that's now a big factor for sure.

Yeah, that's really important to consider. And New York came out, they've had rent regulation on the books since back.

In the.

Dating back before World War II. But now they really made it that much more stringent. California now has caps. Oregon, you are seeing this definitely spread. If Mitch said the name of the game is to add value, if Your rental growth is capped by limits. That's certainly something that you should consider or the price should be reflected. Eric, back to you. And you did a nice job with the setup of how you help investors Vision properties. But as far as kind of the nuts and bolts execution, you know, you've advised your plan, you know, you're opening up for rent. You know, a lot of our listeners, maybe their, their first investment might be a 10 or 20 family. Is that the kind of thing they can rent on their own? What are the advantages of working with the rental broker? You know, how does that, how does that work?

I mean, listen, I think for each owner it's different. You know, we obviously, in the course of what we do, you know, we do look for relationships that we don't have quite yet. I've made phone calls to, you know, to owners where they've owned a building for 50 or 60 years. They still show the building themselves. You know, it's an older owner that's probably been hands on. You know, they probably, you know, renovated the building themselves over the last 50 years. And that type of owner is probably still going to continue to do that. But you know, we're seeing that, that next generation, especially through multi generational owners that comes in, you know, they may not be living in the city, they may not be living in the building. It's not owner occupied. They might be living up in Connecticut or in the tri state area and they're simply going to say, listen, I'm not going to show the building on Saturday mornings. Like this is an investment. I have other things going on. I have a family that I like to spend time with. I'm going out east, I'm going down the shore. I have other properties that I own and manage. So you know, we really become more of the marketing firm and boots on the ground, which is, they have a vacancy that's coming up. We're going, we're getting access, we're scheduling to get in. Our marketing has come a long way. I mean, like I said, you know, we used to do these four line ads which, you know, you need like a decoder ring just to figure out what the apartment had. Because really, you know, who knows what a 1br1ba wik with an EIK is, right? You know that from there to where we are now, I mean you take Even just a $2,000 studio, we're coming in, it's professional photos and floor plans and 3D floor plans and virtual staging and you know, I mean now we're doing these virtual Tours, because, you know, the rentals we're doing right now, like today and yesterday, you know, they're obviously not seeing the property. So we have virtual tours where you can set up and walk through the unit from your phone, you know, and that might, that may be the new norm, which is to do that before you go view a property. But on one aspect, you know, we've become this full fledged marketing firm with, you know, digital ads and digital media and social media and getting the word out for these buildings. You know, that stuff that if an owner was going to do themselves, they need to find, you know, an advertising vendor, they need to pay for their own street easy advertising and Zillow and Trulia. But usually it's just the time. I mean, does an owner really have the time to go there on a weekend, you know, and Show Somebody at 8 o' clock in the morning, another person at 9 o' clock at night and have a life? You know, for our agents, this is what they live and breathe. So I mean, in some ways, you know, we're, we're really a free resource for a lot of these owners to be able to maximize their rents and get traffic. And on the other hand, you know, I think a lot of owners that do it themselves, they get pricing based on what the last tenant was paying, which is fine. But do they really know what the market rents are for them? Because we've walked into some owners who have been like, I've always done it myself, and they found out that they're 10% below market. You know, when you're looking at a building and looking at a rent roll, listen, 10% for a few units changes the value of the building sometimes by, you know, six digits. So that's kind of where we play great.

And a quick tack onto that as far as the online listing platforms now. And I know in New York it's street easy. In fact, I think they might even be in other cities. I mean, there's a lot of places now where you can find rental listings. And again, the owner might think, well, again, why do I need a broker? I can put it on street easy myself. But how would you respond to that?

I mean, listen, I mean, they can. I mean, at the end of the day, you know, we are, we're a service just like anywhere else. You know, I feel in New York that, you know, there are, there are some people that like to go grocery shopping. There's others that like to have it delivered. Some people like to cook at home, some people like to go out to a restaurant. You know, I've always said that we're a city where some people hire other people to raise their children. They hire people to clean their apartment, they hire people to deliver their food, they hire people to bring their dry cleaning. I mean, at the end of the day, we're a service. But when it comes down to just like dollars and cents, you know, advertising isn't free. And if an owner wants to go through spending a few hundred bucks for photos and floor plans and stage it and put it up online, I mean, they're probably going to be, you know, I don't know, 500 to $1,000 in on the apartment when all is done and said. And then they have to show it and go through the time of qualifying someone. So an owner could. But I gotta be honest, why would they?

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 7am Eastern Time, 4pm Pacific Time as well. Well, as always, on demand, we'll talk again next week.