Establishing the Right Track Record with Craig Berger

Welcome. This is the Insider's Edge to Real Estate Investing with James Nelson, the principal and head of Avis and Young's Tri State Investment Sales Group. In this program you'll learn game changing strategies to outperform the market. James will teach you how to source, execute and capitalize on the best real estate opportunities in New York and around the world. Now here's your host.

Welcome to the Insider's Edge to Real Estate Investing. This is your host, James Nelson for episode 144. And we are back. Yes, second episode after the break where we launch the book the Insider's Edge to Real Estate Investing. And wow, what an incredible experience it has been to get the book out there. And I have really enjoyed getting, going out and speaking to a lot of groups. I've already been to Cornell, I've been to Columbia, nyu. I plan to speak to Wharton in a few months and a lot of other schools out there, Fordham, Queens College, Baruch, they keep coming. And for those of you listening, if your alma mater, your real estate program would like me to speak to your group, I am here to be of service.

This is a great way certainly to.

Teach those not only how to get into the business, but how to outperform the market. And the greatest thing also is I've found that many of our veteran listeners have said, hey James, I' picked up some actionable steps as well from the book. So I can't wait for your feedback. If you have not done so already, please go to Amazon. Please order a copy. And I love your comments and your ratings and that really helps spread the word. So thank you. For today's show. We have my friend Craig Berger on. He is the founder and CEO of Avid Realty Partners, a commercial realty firm focused on hotel and multifamily acquisitions nationwide. Like Sandra on last week's show and go back and give that a listen if you didn't hear. I met Craig at the Biz Now Escape Retreat when I had a chance to really get to know him in a relaxed environment. And I really appreciate his approach to the business that he started from scratch. After fixing and flipping a dozen homes, he tackled a 95 unit apartment building in St. Louis, which was truly baptism by fire. Although he said he wouldn't recommend doing that again, it certainly paved the way for him. That investment to this day remains one of his best. He went on to improve a 109 unit hotel in Colorado and what I really love about his story is he's willing to jump in and take on a new opportunity where he sees value. He's built a portfolio today of over a dozen properties with 2,100 units. Before scaling his commercial realty business, Craig spent more than a decade as a top sell side semiconductor equity research analyst at such places at Smith Barney, Citigroup, where he won several awards from Forbes, Thomson Reuters and he's had numerous media and press interactions including more than 70 appearances on CNBC. And he's applied this same research and diligence to real estate which has made him the successful investor that he is today. Craig talked about his intense focus on value identification and his hands on approach throughout the process. He talked about always doing right by his investors, even prioritizing them above his interests. I know you'll enjoy this episode as always. You can find out more about Craig, the links to the show, everything@james nelson.com while you're at it, why don't you go ahead and connect with me James Nelson NYC if you have not already on Twitter, LinkedIn and Instagram. So we're gonna have a brief word from our sponsor and then we'll get right into that interview with Craig. Thanks again for joining today.

A different approach to putting our clients first Avis and Young's Tri State Investment Sales Group sells multifamily office, retail, development, health and specialty sales throughout the New York metro area. As experienced thought leaders in our industry, our 35 member group is available to help you make informed investment decisions by advising you on your current holdings or identifying new opportunities in the marketplace. Our one unified team is built on an industry unique platform which promotes unparalleled collaboration and teamwork. We share core values of hard work, integrity and expertise. We we put our clients first providing tailor made strategies to achieve superior results. Please Visit us at aytristateinvestmentsales.com and follow us on Twitter, LinkedIn and Instagram amesnelsonnyc to learn more.

And now it's time for our investor spotlight. And with us today thrilled to have Craig Berger who is founder of Avid Realty Partners. Craig, welcome. Great to see you.

Hey James, thanks for having me.

Great. I know we were trying to piece together the last time that we spent some time together. I think it was down at the Biznow Ascent conference. Or do we escape? I always forget that there's two of them. There's the Ascent for kind of the young up and comers and then escape for the sea level. Do you remember which one it was?

I've aged out of Ascent and I'm in Escape now.

Okay, I think I'm in The same boat. I'm hoping it's a good thing. But no, I, I really enjoy that conference and so it's been great to spend some time and really looking forward to hear your story. So you know, just reading some of the materials on your bio and on your site. You grew up in St. Louis, so is that maybe tell us a little bit about your start? I don't know if your family was in the business or maybe tell us a little bit about your story.

Sure, yeah. I grew up in St. Louis, Missouri. My family's still back there full time and I have a couple of my older legacy deals in St. Louis. Try to keep those Midwestern values and roots with me wherever I go. You know, went, went to school in Austin, Texas. Studied accounting, went into corporate finance out of, out of school. Worked at intel for a few years doing corporate finance at a large, you know, tech company during the.com. bOM was always interested in Wall street. So from there went to go work for semiconductor equity research analyst up in San Francisco. Spent the next 12 years on Wall street writing research about semiconductor companies. Sort of learning equities and economic cycles and stock market up and down and institutional mindset and communication, sort of risk management and lived and breathed that. And that was, that was a great experience. But I guess I got tired of sort of living in a world of theory. At some point I just wanted to sort of become entrepreneurial, do something more entrepreneurial. And so I, I set off on a, on a journey to do that.

That's awesome. So I want to go back to UT and picking an accounting major. I don't know if you just assume that that would prepare you for a business in finance or was there something. I mean, I will definitely be the first to admit I could not hack accounting in college. I figured, you know, look, this is going to be, I don't want to say easy, but it's black and white I guess. And this whole balancing the ledger, I guess it wasn't for me. But was this something that, that you just thought would kind of prep you for the future or. I don't know, you might tell me. Aspired to be an accountant at an early age.

You know, I get your point. 1, 1000% well said. UT has a really good accounting program. It's a sort of a five year undergrad, master's program. I thought it was the best education that I could get at that institution. It's the language of business. And although I didn't thirst to be an auditor or a tax accountant, I I figured it would give me some skills that would be helpful as I progress forward in my career. I had to whip out some of my accounting knowledge yesterday on a call with, with property accountants when we were discussing bad debt write offs. So it has been helpful. I did have to call them out. I did have to cite Gap. It doesn't happen often, but it's been a helpful baseline of, of knowledge. And you know, it's not making my career and in real estate or anything like that, but it's a helpful sort of, you know, foundation perfect.

And going into sell side equity research and especially something specific is semiconductors. So how did you, was that just the sector that was assigned to you? Did you find that interesting and, and what was that work like and how have you carried over some of those skills to real estate investing today?

Sure. Well, I worked at Intel Corporation and Intel back then was the world's largest semiconductor manufacturer. They're still among the largest. They certainly don't have the biggest market cap. They do manufacturing really well, but they've failed to innovate outside of manufacturing and they just do what they do, they do it well and they don't do much else. But being the largest semiconductor company by market cap and sales, you know, 23 years ago, that's sort of why I went to work with one of the leading semiconductor analysts at Smith Barney, Citigroup in 2002. You know, he was someone that I respected. His name was Jonathan Joseph. He had a few great calls. He called the peak of the, of the upcycle. In March 2000, he downgraded semiconductor sector to a sell. Nobody ever said sell on Wall street back then. So, you know, I didn't, I didn't, I guess I wanted to, you know, give that Wall street thing a try. The sell side equity research role is its own world. It's not working for a hedge fund. It's not actively managing money. So it, it serves its purpose. But you know, 12 years was, was a long run in that role and, and, and I wanted to do something else.

So how much of that research was just from finding, you know, reading through quarterly reports as opposed to actually talking to people on the Street? Because this is where I'm going with, with real estate and you know, maybe for your investment themes today, but how much time were you actually spending speaking to, you know, the C suite, trying to figure out what, what you could, and you know, again, can, can any of that kind of diligence if you will be applied to what you're doing today?

Well, we did spend time talking to the C Suite and we spent a lot of time digging through the financial reports and being on the earnings call and, and you know, doing the analyses. But, but more than that, I spent my entire life in that sector and I lived it and breathed it every day, week by week, month by month, quarter by quarter. The next quarter would roll off. It's the next column in the spreadsheet. You live and breathe the cycles and so sort of works into, into one's DNA, right? And then there's, there's certainly a lot of analysts that have spent a lifetime doing that work and in one sector. And so it's, it's innate. It becomes innate. But we did talk to the C suite guys and we went to their analyst roadshow days and we'd go marketing with them, do the hedge fund and mutual fund clients and we did our own independent analysis and we spent a lot of time on the phone with the buy siders, the hedge funds and mutual funds that owned the largest positions in those companies and what are they hearing and what are they seeing? And, and so we got it from both sides and, and ultimately we worked to make the best recommendations that we could and provide the best analytics and, and a lot of that is transferable over to real estate. To be, to be frank, we're doing the same thing now. I talk to the sellers, I talk to the brokers. I'm, I'm a buyer. I talk to my buyers. What's happening in the market? Where, where is pricing moving? You know, is it, can we, can we, you know, should we buy now or should we wait two, three more months until we, we get it cheaper? Is kind of one of the conversations that's happening right now. But there's a lot of things that were, that were helpful, including the economic cycle is a big one. We, we sold a bunch of our deals in late 21 at very high prices. And, and that's the difference between being successful and thriving versus not, you know, that's the difference between growth and failure is, you know, when you're, when you're in startup and growth mode.

So I, I noticed that your, your latest post on, on Wall street that, that you were involved in a lot of media as well. So you know, you've done 80 live interviews on CNBC, Businessweek, Forbes, et cetera. You know, have you thought about applying that to the real estate business? Is that element. Because I've seen on your site that you do a lot of white papers, a lot of research, taking that analytical approach. So have you Thought about how to kind of leverage that content if you will to have that media strategy?

Well, first of all, our website's in the process of being redone. It's about eight years old and if, if you look at it in four or six weeks it'll be totally different. We do put out a lot of research. I'd love to send you our, our three piece series on our 2023 outlook. It's helpful for me to ground myself and what I expect and then sort of travel through the year accordingly. You know, the media stuff is, is great if it can help us increase our investor base and, and make us more approachable to folks that, that we might work with either institutions or individuals and that's. Then that's great. I don't know that it helps me buy a great deal at a reasonable price which is kind of the most important thing to growing this business and then executing on that deal is the other most important thing to, to growing the business. So it's maybe a skill or icing, but I don't, you know, it's, it's. There's a lot of successful people that don't do any media so you know, give or take maybe.

Well, that, that thesis though and I would be very interested to see your 2023 thoughts. And you know it's probably been about a year or about a year or so that I interviewed Scott Rechler and that's still a very important thing they do at their, they write and this is an internal document but they really, they put together an investment thesis for the future and they make predictions and you know that's the old Wayne Gretzky skate where the puck is going. So I'm sure even to just put these thoughts on paper it helps you get organized with your thoughts and have conviction. So next I see before and obviously we're going to get to the founding of Avid, but in between Wall street and real estate, you were a senior financial advisor to an E commerce solution for a beverage brand. So maybe talk about how that happened and your job is to help the growth there. So curious again kind of skill sets that you brought to the table from that.

When I left Wall street and I sort of left it twice, I left it once in early 13 and I left it again in late 14. But I really had a desire and a thirst to be entrepreneurial, to build something meaningful, to leave my mark on the world and I didn't know what I wanted to do and I didn't want to go work for someone else if I knew What a long, hard journey it was going to be. Maybe I would have gone to work for someone else, but I wanted to take a swing at it while I was still under 40. And so I spent a year throwing spaghetti at the walls and trying this, trying that, seeing what would stick and sort of weighing risks and rewards and what I could be successful at. I did do some outsourced CFO work and outsourced consulting work and a little bit of, you know, startup advisory. And you know, those guys want you to have an unlimited scope and work and work for almost no money. So it was, it was never ending, scope creep and, and, and very little, you know, compensation. And so I'm like, you know, I don't think I want to do this unless I go sync up with an incubator and, and really get with more experienced and, and folks that are in place and, and, and in the business. And so, you know, after zigging and zagging through some different efforts over the course of 15 or 18 months, I really did come to real estate as a, as a place where I felt I had the best odds of building something meaningful and, and being successful and managing risk. And I gave myself, frankly, no better than 50, 50 odds of survival back then. And now I'd say my odds are, are better, but they're, they're not, you know, 95, 5 even still, you know, entrepreneurs and folks that run a business and, and, and grow and, and are going through this journey. I mean, they're never, they're never totally safe. And there's, there's, there's never a point where you have no risk or at least not until you're a lot bigger than I am.

So talk about your decision to make the move to real estate. And did it start with a transaction? You mentioned one of your first purchases was in St. Louis. So were you investing in real estate along the way, along the side, or was it a purchase that kind of landed you full time in the industry?

I did roughly 10 fix and flip homes when I had my desk job in 2010, 2011, 2012. And so that's how I sort of got introduced into the business. Got my feet wet. And it wasn't really until late 14 or early 15 where I said, all right, I've tried some venture capital, I've tried some outsourced cfo. I've tried some, some independent research. I've tried some of this and some of that, and I don't want to work for someone else in a regular job anymore. And so that's really When I came back to real estate and said, let's, you know, this multifamily thing seems to be pretty huge. You know, let me give that a go.

So what was your, your first purchase? And maybe tell us a little bit about it. How did you find the opportunity? How did you raise the money for it and what was the business plan?

It was a 95 unit deal in St. Louis. Sort of, you know, rough demographics. But we had a unbelievable purchase price. We bought it on auction.com, which is now 10x I think we paid roughly 14 a door. So it was a $1.3 million purchase plus a little bit of working capital. And me, and, me and one of my younger cousins brought the 400k of equity to the deal ourselves. Nobody would give me money since I didn't have any track record or experience. So we just kind of did it ourselves and, and, and dove in.

How did you. So, I mean I, I gotta, you do these 10 fix it and flips, but then to go from that to 95 units and it sounds like this is kind of like workforce housing. I mean, from a management standpoint. I mean, were you just totally over your skis? Like day one? Was this like the old baptism by fire?

Yeah, yeah, pretty much. I don't know if we were over our skis, but I didn't have anything else to do. So I flew into town and worked the asset and tried to, tried to hire the best folks I could. I mean, when, when the property manager that I inherited quit on the first of the month without notice, I flew to town and I was the property manager for six weeks, collected rent and metal, metal our residents and sat in the chair, which was kind of a formative experience for me.

How did you even know what to do? Like, how did you even know what a lease was or how did you figure this all out?

Well, you know, I, I'd done some of those fix and flips. A couple of those turned into, you know, rentals for a couple years. But you know, it's, there's info on the Internet. I mean, I, you know, I know what the rental business is and you know, you, you try to collect as much rent as you can and provide a great living experience and, and deliver cash flow for your investors. And you know, we were, we were upgrading, upgrading some of the property when we could here and there. And you know, we just set about blocking and tackling. I mean, multifamily is not rocket science. It really helped that our basis was phenomenal in that asset. If I didn't have a. A great basis.

How did you know it was a phenomenal basis when you bought it?

I looked at this gigantic, huge building that was full for $1.3 million, and I said, this is cheaper than a house.

And what was the cap rate going into it?

I don't know. I don't even know if there was a cap rate, but.

So I assume if it was on auction, it was probably mismanaged. I meant, I'm sure you went in there, tenants weren't paying rent. I mean, it was probably a disaster when you got there, right? Bank owned or something?

It wasn't bank owned, but it needed some tlc, you know. But look, if you want to be in real estate, you have to buy real estate. If you want to be a multifamily guy, you need multifamily. So I'm like, all right, big, huge building. 65,000ft, 1.3 million. I paid 20 bucks a foot. I'm like, how? You know, I'm like, even if this is a train wreck, how bad could it be? So I jumped in. I don't necessarily recommend this approach for others. If you want to be in real estate, it's probably best to work two or three years for the best company you can, and then two or three years for the next best company you can. And yeah, you know, maybe one more, one more tour of duty, depending on how old or young you are, and then go out and build your relationships and give it a go that way. But I wanted to do something new. I wanted to do something different than what I did before, where I had control over my own destiny. And, and I just figured, I don't want to spend three years trying to. Trying to learn off the Internet. I'll just jump in and do what.

You must have made definitely some mistakes starting up. I mean, were there any, like, stories from that first acquisition where, you know, I. I don't know, maybe you got into it with a tenant or, you know, evictions?

I definitely got into it with a few tenants when I, when I, you know, worked as property manager for six weeks. But look, anything in life, you're gonna, you're gonna, you know, do some things well, maybe a few things less well, and you just try to make the best decisions you have with the information at that time. But no, I think, I think we, we did well. And look, in 2018, we did a. A cash out refi that, you know, I don't know, 3x star equity out of the deal. I mean, we only had 400k of equity in that deal. You still own it today in 21. We got really close to selling it in late 21, early 22, and you know, then we sort of missed our window in, in early 22. But it's, it, you know, I have great staff that works at that building and you know, I'm thankful that they take care of me and run it kind of as, as if it's their own. We're obviously engaged in asset managing and pushing them and helping them be successful. But I have great staff there and you know, we've, we've done well and it. Cash flows pretty well.

So what was the next investment after that? How long did it take you? And at that point did you start kind of formalizing yourself as a company where now that this was going to become business, you know, raising outside capital. What, what happened next?

Well, you know, it's, it's, it's all, you know, steps based on what you did before. So from there I bought a value add hotel, hotel motel. It's an exterior corridor deal in, in Colorado. We renovated that property. That was 109 units. I like the hotel business. I learned a lot about the hotel business. I sort of had a, a hotel guy who said, I've owned hotels, I manage hotels, let's buy some hotels. And I'm like, all right, let's try this. And you know, we did that and we, you know, that was a challenging project, probably more challenging even just because, you know, you fill it up every night as opposed to every year. But we renovated that hotel. We, you know, did some things well, we did some other things less well. Right. Finding great workers and, and labor is, is a challenging, whether they're your full time employees or whether you're, you're contractors. Right. You really have to pay up and get the best people. And when you're doing a value add exterior corridor hotel, you don't really have the resources to pay up and hire the best people. But we, we bought that about seven or eight months after my first deal. I owned that hotel for about three years and I sold it pre Covid in late 2019.

So what did you buy the hotel for? What do you think you were all in for? And then what, what did you end up selling it for?

We were all in for like 2.9 million. We sold it for like 3.7 million. I mean, we didn't, you know, we didn't get rich on one on one value add hotel deal, but we made a few bucks. I had, you know, it was limited equity into the deal, we generated some returns. I got more experience, I got more track record, and that sort of propelled us onto the next thing.

So I gotta ask because, you know, your first investment, you figure out multifamily, you figure out St. Louis, and then you're going into a new asset class in a new state. I mean, were you thinking at the time, okay, I figured out how to do this in St. Louis. Why don't I just go buy more multifamily in St. Louis?

Well, I like that. And we did. We've bought a couple other multifamily deals in St. Louis. We bought one in 2018 and we bought one in 2019. We've since sold one of those deals. I think it was roughly a two year hold, and we did about a 70% IRR in two years.

It sounds good.

It was. It was good. We did more than a. More than a 2x multiple in. In two years. So. Yeah. But, you know, look, I'm. I'm open to. I don't have all the answers. I'm looking for the answers, and I'm open to trying this, trying that, and figuring out what the best opportunities are. I don't own any hotels today. I'm not really looking at hotels today because I don't think my company has capitalized the right way for hotels. But one thing I've learned about hotels, it's a great business. There's a lot less players in hotels than there are in multifamily. Those assets are priced a lot less efficiently. They're much more thinly traded. You can go in and lowball hotel folks that, you know in a way that you can't really achieve the same outcome in multifamily because it is a much more competitive business. I like hotels. You obviously need a strong operations team in place, whether it's internal, internally managed, or or third party managed. But it's a lot of overlap with multi. It's about great location, great real estate and, and, you know, getting the best price you can get. But you do need a lot of capital for that business in particular. It's very up and down. The revenue swings are massive. The cap rate swings are massive. The financing requirements are more onerous. You know, so we're, you know, I would love to get back into it down the road as we continue to scale the organization, but it's not my focus today. Mm.

So how you found most of your opportunities? When you find a great deal, how are you looking for them? And where have you had the most luck?

Well, I'd Say that answer changes as the environment changes. So in, you know, 2015 to 2020, you could buy any broker deal and you looked like a hero. Prices just went up and up and up. And in Texas and Atlanta and. Very true. And Phoenix, you know, you didn't have to be smart, you just had to, you just had to transact. Obviously those days are gone and frankly, I'm a little happy that they're gone so that folks that are value conscious and great operators can, can rise. You know, the cream can rise and, and it's not just buy at any price and you're a winner, which is sort of how it was for the last seven or eight years. So we did, you know, we do look at a lot of broker deals. Multifamily is an institutional asset class and the quality assets are mostly institutionally owned and institutions generally want a, want to run a process. So a lot of those quality deals run through brokers. That's sort of the reality. You know, you're not going to find many institutions that'll sell $100 million asset off market without showing it to anyone else. We're looking for those opportunities. We'd love to see them. If you want to sell your stuff off market, contact me. But we do look at a lot.

Of broker deals and you're just getting like flyers. You're looking them online or you, do you have a broker network? Do you have certain brokers that you're routinely checking in with or vice versa?

Yeah, yeah. So we know all the brokers. We, you know, have relationships with hundreds and hundreds of brokers. We have three dedicated sourcing and acquisition people on the team now. Their job is to go and talk to brokers and ask them, hey, what do you have that we can look at early? You know, NMHC is coming up. You're going to launch deals in three weeks. What do you have that we can take an early look at? What do you have from last year in 22 that hasn't transacted or is a deal that fell apart or, or fell out or, or unwound. Right. Right now we're obviously and, and others are as well. We're combing through COSTAR or TREP for lists of properties that have bridge mortgages or other mortgages coming due over the next six or 12 months. And we're reaching out to those owners directly, saying, your mortgage balance is huge. Are you going to cash in refi or are you going to sell? And we'd love to take a look at the asset and see if there's something that we can do constructive now that opportunity wasn't there 18 months ago. Right. Nobody was cash in refiing, everybody was cash out refine and not entertaining those conversations. So what we do shifts with, with the environment. But certainly brokers and a broker network is huge. Being close to those brokers is important. Treating them with kindness and respect is important. Staying close to them and talking regularly so that you're always top of mind is important. We're obviously competing against larger firms that have more resources. So we have to work twice as hard, three times as hard to achieve that. But you know, we, you know, we're looking for off market stuff with mortgages coming due. You know, we, we, we talk to owners directly. We obviously leverage the broker network. We, we talk to some of these smaller niche brokers that might only work one market. And aren't some of the big boys, you know, or some of these off market brokers that, you know, nothing's really off market but they're, they're, you know, semi off market or a little below the radar. So can we talk to all of those folks? Mm.

And how do you differentiate yourself as a buyer if you are competing with the big institutions? How do you convince the brokers or owners that they should go with you?

Yeah, I mean that's a challenge for sure. Right. You know, if Graystar wants to buy a deal for their own book versus me, I better A offer more money or B offer a lot of non refundable day one hard money. I would say those are the two things or you know, three, touting our, our network of existing institutional investors. But yeah, the reality is I can't move as fast as Harbor Group or you know, True America or greystar when they're buying for their own book. It's just another challenge to overcome if we want to, you know, find our patch of sunlight and grow.

And what does your portfolio look like today? I mean, how many assets, how many, you know, what's the average deal size that you're going after now?

So We've, we've bought 13 deals, 2,000 2100 units since we founded the company. We've been growing a lot over the last few years. Most of that's over the last, you know, three years. Right. It's sort of baby steps into, you know, bigger, bigger steps in the medium steps into, you know, into institutional assets. You obviously don't start with a 95 million dollar transaction. Although we, we did do our first 95 million dollar transaction last year and, and we did another 51 million dollar transaction last year and we also sold a bunch of stuff. So selling and closing trades and putting points on the board and delivering for your investors is what allows this whole thing to keep going. This whole effort allows us to staff up, allows us to build a track record that we can hopefully leverage more in the future. So we've bought about 2100 units across 13 deals. We currently have six assets in the portfolio and it totals about 1200 units net of what we sold.

That's awesome. And you already mentioned that you have three people on your acquisitions team. Who else is part of your team?

So we've done a lot of hiring over the last six months. Again, I mentioned we sold a bunch of assets. I've taken that money. Instead of spending it on fancy cars or big houses, I'm spending it on payroll and you know, trying to build a real platform here, to be a real platform. Your investors need confidence that this enterprise and their investments will keep going with or without you. And that means personnel, infrastructure. And so we've hired a, a gray haired warrior as our president. He was president at a 15,000 unit platform previously. We've hired a chief operating officer, we've hired a chief financial officer. All of those folks have joined in the last three or four months. And so now we're really starting to gel as a team and getting a lot more accomplished and spinning our flywheel faster, if you will. Faster and faster. But it's still early days for us together as a team. I do have a full time sort of asset management professional that works with our, our president, our COO and, and, and helps carry out a bunch of that stuff. And then we have one capital markets marketing guy and then we have the three folks in acquisition. So there's about eight of us, eight or nine of us. We definitely have a lot of personnel infrastructure relative to our unit count. And we've hired in advance of what I hope is a big acquisition year in 23 and hopefully at attractive prices. So, so that we've got the, you know, the, the infrastructure in place ahead of that growth.

And how do you find your talent, your team members? Did you go out? Are these just relationships you had or did you use a search firm?

So I've talked to search firms, they said I should pay 400k ahead. I don't want to pay 400k ahead, at least not today. And so we're paying, you know, still attractive wages plus equity in our deals. And we're trying to get the best talent we can while managing the bank and managing Risk. And you know, that's what startups across the board have to do.

And are you all based in New York or you do you have some people that are virtual too, or.

We're pretty much virtual. I tried to hire the best people that I could, regardless of their location.

And.

So we're spread out. Our, our presidents in Salt Lake City, our CFO Mary Tucker's in Columbus, our COO Jim McCarthy's in Boston, our capital markets guy, Lenny Pisano's in Charleston, South Carolina. Our asset management team member Jeff Feldman's in St. Louis. Our acquisition guy is in Montreal.

Wow. So are you all on Zoom or teams? Constantly. Like how much are you interfacing?

We interface all the time. I actually like it. I don't waste time talking to them at the coffee machine, but we waste plenty of time talking to each other on Zoom. Zoom's great. You see, when anyone's online, their green, their green button is either lit up and they're on their machine or they're, or they're not. But you know, we don't, I don't make it a philosophy to say, hey, you have to clock in by 8:00am and, and you have to work till 6. Some of us are night owls, some of us are early morning people. I manage on results and output and achievements and accomplishments, not on how many hours you're sitting in front of your computer or what time you are, you're doing. So this is a marathon, not a sprint. So we have to give when we need to give, we have to take when we need to take. And it's a, it's a two way street with our, with our team members. They're like family to me. So, you know, that's, that's how it goes.

That's fantastic. It makes, it makes a ton of sense. So talk a little bit about investor relations, raising capital. So, you know, you started off with your own money in the deal and it sounds like that's still been a consistent theme. But when did you start taking on third party investors? Were these high net worth? Did you do this deal? Specific? I assume you're not doing a fund right now.

Right. So first it was my own money. And then my second deal, I convinced a couple family members to kick in and they did me a solid, so I made sure to pay them well. And then for our third deal, we started taking a few individual investors. You know, I've also had to sort of work with folks that have a network, pay those people equity or upfront or a mix. You know, it's so it's been a series of, of steps and progressions that's built on what comes before it. In 2018, I'd say we took our first institutional capital from a publicly traded firm in Toronto and they've been a great partner. We've done done a couple deals together and I'm totally open to doing more deals with them. You know, I'm still searching for the unicorn, right? Reasonably priced money that's easy to work with and, and has a lot of it and I've never found it, but if I see it, I'm going to capture it alive so I can study it. But no, look, you know, the capital, the capital raising and capital markets game, it's a never ending process of building relationships, creating value for these folks, treating them well, paying them, overpaying them, and hopefully getting them vested in our, in our shared outcomes so that they want to invest with us again.

So when you're doing a larger deal, you know, the 50, $90 million, it sounds like you had an institutional partner for those, but if it's like a 20 million and under and you know, if you wanted to raise $10 million in equity from high net worth individuals, like how deep is your investor base? You know, how many investors, you know, if you're, if you have a deal under control and you got to raise that capital in 60, 90 days, you know how, tell us about, you know, that process.

I have about 75 individual investors, so I wouldn't really raise $10 million from my network of individuals. Our network is growing, it continues to grow and it gets a little easier with every deal. But we've worked with other folks that bring their own network to the table. So we've worked with folks that can bring 2, 3, 4 million dollars from their network to the deal and a Garrett and again I've, I've shared front end economics with them and I've, and I'll share and have promised and have paid out on deals. We've sold back end economics with these folks because I have to grow. I can't be greedy, right? So most of my AC fee, to the extent there's an ACT fee left after these institutions, you know, bargain around that point. To the extent the ACT fee exists, I pay most of that out, right? It's not really going to me, it's going to folks that, that help bring capital and, and folks that, you know, and frankly my team members now and, and you know, maybe I'll keep a few bucks but you know, it's really not much. So we have to pay it forward and incentivize our partners and those that, that have a network. And as we continue to grow, hopefully that gets, you know, better and bigger and easier. And it is, but it's, look, it's a long road to build that kind of network.

And this kind of comes back to your presence and the research that you put out. But how, what are you doing to cultivate that investor base? I mean, how often are you in touch with them? Are you doing calls? I would imagine you send out a quarterly report for the, you know, the deals that you have. But what are you doing to cultivate that investor network?

Sure. Well, since I've staffed up, we're doing a lot more. When it was, you know, me and one other guy two years ago, we did a lot less. And I had to work, you know, all the time, 24 7. But we do send quarterly reports on all of our projects, come hell or high water, good news or bad news. And I, I don't sugarcoat my reports. I give it to our investors straight. We've been sending out weeklies since our capital markets guy is on. Sometimes it's other people's content, sometimes it's original content, sometimes it's just a few brief thoughts. But we've been doing a weekly sort of newsletter and that's not that long since we've been doing it weekly. When I started out, I published more research because I had less real estate, so I had more time to do research. And then that sort of fell by the wayside. But we're, we're picking that up again. You know, thank you for letting me be on your podcast. We've been doing a little bit of that. You know, conferences are super important. You know, we've, we've built a list of 3 or 400 institutional investors of varying shapes and sizes and flavors, from common to pref. Big to little. But they're all institutional investors. And now we're in continuous dialogue with these folks or meeting at NMHC and continuing to build that relationship, leverage our, our victories and our sales and track record and letting them know that we're a serious operator who's not going away. So it's, you know, it's a never ending process. And the more help you have, the more qualified people that, that can help you do it, the better and easier it gets.

That's awesome. Well, Craig, with only a couple of minutes left to go. You know, the name of this podcast in my upcoming book is the Insider's Edge to Real Estate Investing. So what would you Say, is your inside edge over other investors and the way that you look to outperform the market.

Okay, well, I compete in the multifamily space, and there's a lot of people that play in the space, so I'm not sure anyone has an insider's edge, just to be honest. But I'd say if there's a few things that I do well. Number one, it's an intense focus on value identification, and that means not overpaying for our assets and. And being aware of what could go wrong as well as what could go right. Number two, it's an intensive focus on execution and making those assets perform to the. To the very best possible. And number three, it's always acting with integrity, honesty, and treating our investors well, always putting them before we put ourselves.

Wow, I love that. Especially that, that last piece to it. Well, Craig, this was unbelievable. The last question I would ask you is just advice you would give to aspiring investors. You know, I'm sure that there's, you know, we get a lot of students who listen to the show, people who maybe were like yourself. Maybe they're in a totally different industry and they're thinking about jumping into real estate. I mean, you went in, you know, two feet in, you know, baptism by fire, but, you know, you had to do it all again. Or if you're giving advice to someone starting off, what would you tell them to do?

Well, don't do what I did, number one.

Okay.

Find some people that are willing to build a relationship with you that are in the business. I. If you really want to be a professional in real estate, go get a job at the very best real estate platform that you can get into. Maybe you're only there two or three years. Maybe get. Get to work for a second platform. Learn as much as you can. Soak up and sponge up as much insight, knowledge, and processes as you can from those folks before you set out on your own. If you can't do that, you already have other obligations, professionally or otherwise. Reach out to other operators out there. Build a relationship. You know, I. I've had one intern who was phenomenal, who I still work with, and he just gives and gives and gives, and he works nights and he works weekends and he works. And he's actually learned the business. He's never asked me for anything. I. I give anyways because he gives so much to me, and I've taught him the business because he just does it at night or on the weekend. He's. He's in school full time, but he has literally learned this business working with me over the last 16 months. One of the smartest young people that I've had the pleasure of working with. But you could do it that way. But if you want something and you want to grow, it's going to take a substantial personal commitment. And you have to be willing to do the work if you want. If you want the upside.

That'S awesome. Parting advice. Well, Craig, this was incredible. Thank you so much for sharing your story. I know our audience is going to get a tremendous amount out of it. So thanks so much again for joining us today.

James, thank you so much for having me. And you've asked some really insightful and great questions.

Great to hear. Well, this is your host, James Nelson of the Insider's Edge to Real Estate Investing. Thank you as always for joining. If you've not connected with me yet, please do so at James Nelson NYC. Also go to james nelson.com that's where you can find the show notes for this episode. You can find out more about Craig and we'll have links to his site as well. So thank you as always for joining. Until next week.

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