Gaining the Edge to Outperform the Market

Welcome. This is the Insider's Edge to Real Estate Investing with James Nelson, the principal.

And head of Avis & 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 episode number 133 of the Insider's Edge to Real Estate Investing. This is your host, James Nelson. Thank you as always for joining. I really appreciate your tuning in. I know people are busy out there, there is a lot going on so I appreciate your taking the time to give this a listen and share this with other friends. And by rating and your comments that's what helps spread the word. Because what we're trying to do here is to help give you the inside edge to real estate investing to outperform the market, which is the title of my upcoming book. And if you didn't hear last week's episode, I announced that yes we have begun pre sales. So if you go to james nelson.com which has a ton of helpful resources for you. I built this site for you to not only provide the show notes for the podcast but also the exclusive video series on the various steps that base the book on with my writing partner Rachel Hartman. But you can now pre order either on Amazon, Barnes and Nobles or you can also sign up for a bulk order which is eight or more books and we could then discuss ways that I could engage with your audience whether that's coming and speaking to your group doing customized training so would welcome the opportunity. So today I'm going to be speaking with Dorothy Alpert. Dorothy is our principal and Tri State President here at Avis and Young. She's got an incredible experience, 30 plus year career where she was last at Deloitte where she was focusing on strategy and operations consulting in the real estate industry. But she's also has a lot of board experience having been on ULI with Women's Leadership Initiative. She's been on the Board of Trustees for the American Red Cross and the new 42nd Street. She's been honored numerous times, Real Estate Forums, Women of Influence as well as other countless awards. She holds an MBA from Fordham University and a BA in Mathematics from Bates College. So today we're going to be talking about the upcoming book. So Dorothy is going to take a turn and she's going to be interviewing me talking about why decided to write this book but also talk about some of the things going on today, the impact of interest rates and inflation and what you all should consider for your first purchase and who you should team up with and what's important when inspecting the property. How do you value it? How do you raise capital? Really taking you through step by step to give you this advantage. So I think you're going to get a lot out of this episode which is going to be a great precursor for the book. So we're going to have a brief word from our sponsor and we'll get right into that discussion with Dorothy. Thanks again for joining. A different approach to putting our clients first Avis and Young's Tri State Investment Sales Group sells multifamily office retail development 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. Dorothy, thank you so much for joining us today and having this conversation about my upcoming book. I am so excited about this and you've done such incredible things for the office. You're a mentor to me. So this is really exciting to have this chance to have this conversation with you. So without further ado, let's dive into it. I know I've given you a couple suggestions on questions, but I know you'll certainly take liberties and feel free because I'm looking forward to the conversation and want it to be most helpful to our listeners.

So I also want to say that this is a privilege. I was really humbled when you asked me to do this, so really excited. So let's dive into a couple of questions. I have a few that I think you'll be able to handle. They're softballs. But let's talk first about the actual book. I mean, you've been in the business how many years now?

Going on 25 years, which is a little hard to believe.

25?

Yes.

Okay, so I have you beat by fear. So why now for a book?

You know, the Pandemic was an incredibly challenging time for a lot of us. And thinking back to those dark days of, you know, mid-2020 when we didn't know how long we were going to be in this. And I was speaking with another mentor of mine and a long term coach of mine, Blaine Strickland, and we talked about because clearly business was frozen, right, and we were staying in touch with our clients. But clearly I had a lot more free time than I'd ever had up until then. And that was also the time when I began the podcast. So a lot of great things come out of these challenges. But you know what Blaine Strickland told me was, and he actually gave me the example of the Disney organization and he said that when the pandemic hit, Disney decided to because their hotels were already offline and closed down. He said they're going to use this time to completely gut, renovate. When would they ever have an opportunity to go in? Because they're 100% occupied all the time. And so when would they have an opportunity to do these things that you would not have a chance to do? And so he said, do you want to look back? He says, I don't know if we're going to be in this for a month. I don't know if it's going to be, let's hope it's not 10 years. But how are you going to look back on this time and say that you were able to make an impact and actually do something? And that is where the podcast was born out of. I said, look, I'm here, I can interview people. We had this new technology, Zoom, so suddenly it was new at the time. Now obviously it's part of the daily vernacular, but all this great content to check in and not just get evergreen content. What's going on today? Because again, there wasn't much going on at the time. But okay, how did you get there and how did you handle adversity in the past? What lessons did you learn? And so that kind of began once I was probably a couple dozen episodes in. I said, you know what, I'm going to start putting together a book to focus on each of the lessons learned. And I apologize, this is a long answer, but I wanted to get to why now. So the working title of that book was Real Estate Investing the Keys to Success. And it's going to come out in the future. But as I was writing this, I was saying, this is inspirational. There are incredible lessons learned, but what's missing is the how to. You're going to read this book and you'll be all inspired. But then you say, okay, I'm ready, I want to go buy buildings. What do I Do?

How do I do it?

I said, I got to write the how to book. So suddenly I went from never having written a book to suddenly I'm working on two books. And so we'll get to this. But the answer fortunately, I've had a lot of help. I've got a great team here. The company here has been very supportive. So thank you. But also my friends over at KA writing their agency, as well as my writing partner, Rachel Hartman, who we did a series with before, and she helped me put this on paper.

So, interestingly, I thought the now was because we're kind of at a unique spot in the market. So you mentioned adversity. We've got inflation, We've got rising interest rates. Is that going to play into your book? And the how to how do you deal with these changing economic situations while you're trying to invest in real estate? And is real estate really a hedge against inflation?

Right. So again, this podcast, this show, the book, I want it to be evergreen, right? Because if it's, you know, written on this day, certain dealing with this certain set of facts, six months from now, no one's going to read it. Right. And maybe it'll be a nice chronicle of, you know, what happened back in the day. But I want this to be on the bookshelves, relevant, both physical and virtual for all you E book readers out there. So the question is, how do you deal with these challenges? And if you go back and listen to my interview with Don Peebles, he said that his greatest success came in those downturns. And yes, we have challenging times. And yes, there's unprecedented inflation, well, maybe at least over the last four decades, but real estate's also an incredible hedge for that. Right. And they're also an opportunity. And I think even in and I know we're going to get to kind of the different aspects of how this impacts real estate, because it's very difficult to paint the market with one brush. But no question there are opportunities, really in any market. And so that's, you know, this book. I want to give the readers the tools to succeed in any market.

I probably had my best experiences in real estate in 1981. So I'm not afraid of this situation that we're in now with the rising inflation. So as somebody considers real estate and they want to get into it, and I'm not talking about the big institutions, but let's talk about an individual. What's their first step? Where do they start? Do they start with your book?

Well, I hope so. And I really I believe there's going to be a big interest coming from college students, certainly for the master's programs. One thing that I do, and I used to be an adjunct professor at NYU and I still love teaching, going in, guest lecturing and I've taught there. I've taught at Columbia, Wharton, Cornell, my alma mater, Colgate. And what's interesting is when I ask the professors, I always say, well what's the book? What's the recommended reading for the students? They say, well I just, I have my own notes and here's my three ring binder, here's the, you know, the PDFs for the lesson plan. And you asked the earlier question why write this book? I realized there's no book that tells you kind of the how. Right. There is certainly textbooks on how to underwrite. But I really want someone to read this book and say even if they've never invested in real estate before, they know where to start. Right. And so this book is, could be for the college student who wants to go and start buying some multifamily, live in one unit, rent out the rest. I mean that's a great place to start. But it could also be for that master student who's looking to do a larger transaction, raise capital. So this book really dives into all this. But to answer your original question is where to start. I think you first have to assess, assess your time and your expertise. Real estate is generally a hands on asset class. Certainly if it's something like multifamily, of course you can get a third party manager but sure they'll collect rents and they'll pay your expenses. But you need to oversee, you're the asset manager, you need to make sure that the property is being operated most efficiently. And also a big part of the book talks about creating value and that's where your creativity comes in. But that takes time. You need to make sure before you dive into this, if you are going to be the sponsor, that is the person who actually goes in, finds the deal, acquires it, builds the team that you have the time to do it and the expertise part of that is to really understand the area where you're investing and the asset class. If you're someone who says look James, this sounds great, I'm really interested to learn about this investment but I don't have the time to do this. Well look, you might be better suited to be a limited partner. For many of our listeners they're probably pitch deals all the time and you're going to get that deck from the sponsors Saying this is the most incredible investment opportunity ever. But it's going to be your job to actually diligence this and, and find out. And if you know really the fundamentals and the principles, you can look at that to determine is this a good investment, is it aligned? So there's all different ways that you can get involved, but you really do need to start with assessing your time, your expertise and what you can devote to this.

So let's dive in on expertise. What expertise would you think somebody needs to have? Like, do they have to have a master's in real estate? Do they have to have a passion for investing in real estate? But what actual skills do you think people need if they're going to go into real estate?

It's a great question and passion, definitely you can tell I'm excited about real estate. I love real estate. And certainly the expertise, learning the fundamentals, yes, of course, going and getting a master's degree again. This book is to give you an introduction, to tell you all the things, the insider tips to give you that advantage. But even though we talk about the principles of underwriting, a book's not going to teach you how to do a 10 year cash flow projection right now, do you actually need to know how to do a 10 year cash flow projection to invest in real estate? Not necessarily, but you have to understand the principles. Do you have to have, if it's a certain type of asset, the right team members in place who have that skill set? Yes. So that is important to make sure that where you don't have that expertise, that you have the right team in place. You asked earlier what is the first step and after you have identified what you want to be going to do, which is also not only just the asset class and we touched a little bit on multifamily, but geography, Right. So sometimes investing in your own backyard is a great place to start because you know a lot more about that neighborhood than investors who are coming in from out of the state. You know, they don't know what, you know, where the best local coffee shop is. They don't know where necessarily the new developments are happening and what, how you should position an asset. Right. So I think that having knowledge on an area is super, super helpful in understanding what are the needs. But then just to kind of round this out, I think the other part is, look, if you've never done this before, there is a lot to this, right? And bringing in a trusted partner, a real estate operator, developer who has done this before, I think is a great way to Start and you can bring value by that local expertise and hopefully finding the opportunity. So if you find the opportunity and you bring it to that partner and say, I've got this great opportunity, even if you don't have millions of dollars in your bank account, a great thing to do would be to go to that partner and say, look, I found an opportunity. Will you give me a stake in this transaction? We call that sweat equity for finding this opportunity. I would like to learn. Can I shadow you? As you run this project, as you redevelop it, you have this incredible investor base, you have these great banking relationships. And so I think after you and look, you find a great partner, you might never need to go off and do this on your own. Right? But that certainly is a great way to start and think about it.

So one thing that occurs to me as you describe that is how would I pick a great partner? I mean, if I really didn't know people in the biz house, how would I go about picking a great partner? Are there resources out there? Industry organizations, how would you do it?

It is a fantastic question. It is the most important question when you're thinking about partnering with someone. And obviously it really helps when you know the person over time. Right. And trusted partner. Okay, this is a people business. So as you think about building your team, having the right people on the team, your reputation is everything in this business. So you can't go at this with the mentality this is going to be a one shot deal and you can get away with every try to get every last inch and it's not going to catch up with you. You really need to find that partner who has that not only a track record but that reputation. And that doesn't mean they're always successful. I mean if you've been doing this long enough, you've hit downs in the market. This is a cyclical business. The question is don't just partner with someone who every single time they double and triple their investors money. It's okay in the downturns. How do they behave when it really got tough? How do they deal with those situations? Did they do the right thing with their lender? Did they communicate? So that can be tough if you've never met a person before. Okay, if you've known them for a long time, you're way ahead of the game. But as you mentioned, there's also wonderful organizations. I know you and I are both members of uli, for example, a lot of great real estate professionals in that organization. And I also find, especially when you're thinking about building the team, finding a partner. You start asking around and you start getting references and you kind of see. And you really want to diligence that because it is so important. Right. And I would almost encourage our listeners, you really need to start thinking about this before you even have the deal. Because once the deal presents itself in New York, you might just have a matter of weeks to react, if not days. And so sometimes if you find a great opportunity, then you try to scramble to put it all together, it can be very difficult. So thinking about this, not just who the right partner is, but, you know, real estate attorney, mortgage broker, architect, general contractor, you know, again, and the theme is, you know, great track records, great.

Reputations, and I imagine you can rely on people's references. And then you do the reference checking and check out the person, whether it's the attorney, the mortgage broker, et cetera.

Sure. And we certainly do that from a brokerage point perspective, too. So again, when we go out and sell product and I'm dealing with a new buyer, okay, the first thing I'm asking them is, what's your track record? And have you. And if they said, well, this is kind of the first one, okay, well, appreciate the honesty, that's great. But. Okay, can you show us how you're going to do this? I'm probably at that point going to ask for proof of funds. And look, you might have just sold your tech company for $100 million. And great, okay, you've got the money. Check. Okay, so let us make sure you have the right team. And we talk about the value of an investment sales broker. They can help you build your team as well. So you find the right broker, they can really be helpful not only to build that team, but maybe find you a partner as well.

So I've found my sort of niche that I want to invest in. I've got some capital, I've lined up my team. I've got a broker if I need that, an attorney, et cetera. So now I'm down to the property. What do I need to do to make sure the property is okay?

Right. So different. Great question. And there are certainly different considerations. One is the financial aspect. So that is the underwriting piece. Okay. And when you underwrite a property, if we're going in and we're buying a vacant property together, very important. And look, the brokers, we try to do a good job. If we have a vacant building, we'll put projections, but they're generally pretty rosy. And so, yes, trust but verify. Right. So you need to go in, check those assumptions, right? So that means if you are looking to reposition an apartment building, you want to go speak with a rental broker and say, look, this is a tired old building and you've got these large oversized one bedrooms. What's the market? You get the right rental broker, they might say, look, you need to convert this into a two bedroom. This is a share market. This is how you do it. This is where you move the kitchen, this, that. So you need to make sure. And then they'll give you the real projections, okay, what rent can I really get and how long is it going to take me to get it? Am I going to have to give any concessions? Verifying the expenses with a managing agent. So sitting down with them and saying, hey, what do you think about these expenses? Definitely look out for those real estate taxes too, because what they were before does not necessarily mean what they will be next year. Right? So you don't just need to think about what's happening right now, but you got to think about the future implications. So that's really the financial aspect of it. But there's also that physical, physical piece that I referred to, which there's no substitute for that walkthrough to go in. And really that's where the creativity comes in. That's the fun of how do I reimagine this property? Because that is how I believe you outperform the market. Right. You can never time the market perfectly. Right. But if you have a plan that even if, let's say you asked earlier about rising interest rates, okay, so maybe there's going to be more cap rate expansion, meaning investors are going to look for greater returns in the future. So the days of, hey, I'm going to buy this at a 5 or 6% return, I'm going to fix it up and sell it at a 4%, that might be a little too tight these days. So you really got to think about how am I going to grow this? So I think understanding is that feasible. And then the last piece to it above all is really understanding what is the motivation of the seller. And you'd be surprised how rare it is that investors ask me, James, why is the owner selling? There's a big difference when there's an estate selling or there is a, we call them aspirational sellers, discretionary sellers, especially once things start getting challenging. When the selling broker comes back to you and says, look, this owner doesn't need to sell, you know, if you can give him $10 million, great, but if not, he's happy to hold. You know, thanks. Appreciate it. You know, I'm going to keep looking. Right. Whereas you get those signs, hey, you know, the kids just inherited this property. This thing is a management nightmare. We know things are tough out there, but we got to just clear this asset. Now, they might not, you know, be as sometimes you have to tease this information out, but it's very important to kind of understand the seller's mindset because you can also be a more attractive buyer by giving them some of the terms to work with. Oh, okay. You're selling this because you're looking to trade up and buy a bigger property. Okay, well, I can be flexible with you as a buyer because you're going to need to go find another Property, do a 1031 exchange, which you can learn about in the book. I can give you extra time to close. And hey, time is good because I'll be able to work on my plan while I'm in contract and hit the ground running. So I think understanding to go back to your original question of what makes for a great investment, I think really understanding kind of that motivation, the why and then how you're going to reposition that asset.

So you didn't mention this specifically, but I think you're alluding to it in your comments. Comments. But is it like buying a home where you actually need to have people come in and do physical inspections for you to make sure the building is sound?

Certainly. And even more so in commercial, because in residential, usually you get this nice seller disclosure form. Right. And although most attorneys, when I've sold homes, they've always said, you know, pay the $500 thousand penalty to not do it because you know, the sellers will represent, hey, yes, there's a newer roof. Yes, there's this, there's that. And if you find out in your inspection there's X, Y and Z wrong, you're usually talking about a credit off the price where they have to make it right. Commercial is as is where is no representation. And so you need to do your homework up front. Now, sometimes a seller will have an engineer's report, will have an environmental report, and they'll say, look, I'm going to share this with you just to be helpful, but I'm not going to represent it. So you need to make sure and do your own diligence. And sometimes you can go to that inspector, you can have them reissue that for you. But no, you need to understand what you're getting yourself into. Now, this is probably in the more highly competitive markets like New York. If you're investing in a tertiary market, you might get the benefit of a due diligence period. What's a due diligence period? That's when you put a soft deposit down, meaning it's refundable. They might give you 60 to 90 days to go, do your homework and say after you've done it, hey, I found out that there's X, Y and Z wrong with this property. I can still close, but I'm going to need a credit on the price. Well, that sounds really great when you're buying a property, but then when it's time to turn around and sell it, guess what? The buyer on the other end is going to be asking for that same thing again. So as challenging as it is to buy in New York, it's also a very liquid market because once you're ready to go, you're going to sell it to the next buyer as is. Where is cash deal? No contingencies.

Yeah. We talked a little bit about cash flows and you don't need to necessarily know how to do one, but you need to understand the fundamentals behind it. Is that how I would value the property? And if so, you know how long a cash flow? I guess I get my inputs from brokers in the market and comps, et cetera.

Right.

Talk a little bit about valuation.

Sure. So again, it depends on the size and the type of assets. So if you are going after 50 $100 million office buildings that have dozens of tenants.

Yes.

You need to understand how to do an ARGUS run or have someone who can help understand what happens to your cash flows over time. And then those investors, especially if you're going to go out and look for institutional equity to invest, their question is, what's the irr? What's the internal rate of return over the life of this investment? What is that worth? What is that return over the course of time? Right. But for those of you who are going to buy your first 10 family, you're probably looking more at what your stabilized yield on cost is. Okay, so that is, where am I going to get this property to? Okay. What am I going to pay for it? And then what is it going to cost me to get there? Right. So if you add that all up, if I can build this to a 6% return, that feels pretty good. And then, you know, from there on out, you're hoping that you pick the right neighborhood and it appreciates. So it really does depend on the type of asset. But. But before you even go there and start running numbers, because I Can get Dorothy, I can get a model to say anything. I can get a model to say a building's worth 10 million or 100 million with one keystroke. Right? And so those assumptions are very, very helpful. But also they're not going to really tell you if you're just coming up with these numbers in your head. That's where it is so important to understand the comparables in a market. Right. So there are great sources out there today where you can research comparables, but your sales broker too, looking for examples of past sales. I like price per square foot because unless if they. And I know square footage can sometimes be a little fuzzy also, is it gross? Is it rentable? But as long as you have a source that gives you an apples to apples comparison, okay, this building sold for $10 million and it's 10,000ft. This building getting a sense on price per square foot, price per unit. If you're talking apartments, that is very easy to make an apples to apples comparison. As far as cap rates. When this apartment building sold, what was the return that it sold at? Well, okay, that depends on a lot of factors. Were the rents below market, what was the location? If you're talking retail, what is the credit of the 10? There's a lot that goes into that. But I think if you kind of understand, okay, these are the previous sales to get an understanding, okay, where's kind of the box that I'm solving for? And then when you're looking for those important assumptions, like how long is it going to take me to lease up the retail, Right. What are the concessions in the market? Do I have to do a build out for the tenant? You know, these are all market driven. And that's where again, brokers can be very helpful to tell you what type of assumptions you should make in the underwriting.

So I develop my cash flow, I have an equity partner, but I still need some financing in my stack. I go to a bank, are they going to rely on my cash flow? Do I need an actual appraisal to go to the bank? Or. Or the bank's going to do their own cash flow anyway. So what matters? Do they all matter?

They all matter. But first thing is I would start with a mortgage broker. Now some. Look, if you've been doing this for a long time and you've got a great banking relationship, there's a lot to be said for doing repeat business because they know you, they know there's that track record. But if you are going out shopping, your first deal, all the more reason to Use a mortgage broker because they know how to position the asset, what the banks are looking for. Of course, the banks then do their own underwriting to stress test the loan to see if it works. Ultimately, they'll take it to their committee and yes, they will hire the bank, will hire the appraiser to get that third party to say, okay, are you paying a market price?

Yeah. Okay, let me ask. So now I've made this investment, investment. I'm five years into the investment and our holding period, I got a fund to invest and their holding period is sort of five to seven years. How do I know when it's right time to sell? I know you said you can't time the.

Yes, yes, no. So look, sometimes the way you position that question is sometimes, yes, you have to sell, sell in a defined timeline. Because if you're dealing with a fund and it's, you know, sometimes if it's a five year hold, sometimes there are extensions that are available. And of course you could always have a conversation with your equity partner if you do not think that this is the right time or if the business plan is not completed. But I think, look, if you are looking to, if your business plan is to buy, reposition and then sell, I make the case that it really depends on when that business plan is completed. Right. So it's really stabilizing that asset. So if you buy the vacant building, you do the work, you tenant it as soon as it's tenanted, that's a good time. Because then just holding it from then and there, you know, now you're kind of shifting from, you know, a value add type strategy to a more core strategy. And look, some of our listeners, their plans are, look, I want to hold this asset forever. I mean, some of my wealthiest clients, they've held buildings for decades and decades. They buy, they increase the rents, they refinance, they go, they buy two more properties. That goes back to what is your strategy? Why are you doing this? Are you doing this for cash flow? Are you looking to really grow, grow a portfolio a lot faster with other people's money actually going on syndicating? Because when you do that generally, I mean, and look, sometimes there are partners who say, look, our interests are aligned. I want to hold this forever as well. So that is a big part. But timing the market, that is really tough. I mean, I get asked the question all the time, hey, how are we looking here we are in the summer, how are we looking in the fall? And it's, I mean, there's so many factors out There, it's tough to say, but again, if you bought in at the right price and you executed the right business plan, the hope is that you will be able to succeed and capitalize on that even if the market takes a dip from when you acquired to when you sell.

So one of my takeaways from what you just said is that making sure your interest, if you're the investor, are aligned with your partner. So you know, is it a repositioning and sell? Is it a hold and clip, a coupon of income? Making sure you know that up front doesn't mean it can't change over time. But having aligned interests, right.

So certainly on the alignment, although what I will say is don't try to, if you find an opportunity and you see the business plan that works right, you have to think about what is the right capital for this. Because you might say, look, my objective is to gain some returns here and then want to parlay that into another investment. I'm not looking for that long term hold. So you need to find that equity partner who is a little aligned with that for sure. But yeah, stick with your business plan, your convictions and find the right capital to help you do that. And then I would also say most importantly is look, unless if you're planning on coming up with half the equity or all of it, when we talk about that lp, that limited partner, sometimes we call them a silent partner. Well, they might be on the day to day activities and they're perfectly happy to let you run the bill day to day. But when it comes to major decision making rights, they show up that major lease, that when are you going to sell, when are you going to refinance? You might not have the luxury to decide when you're going to do it. So we're talking as if you're going to figure out the time you bring in a partner in these 90, 10, 80, 20 deals, whoever's putting up the bulk of the money, rest assured they'll probably have a good idea of when they want to monetize that investment.

Yeah. So James, I know your, while your focus is the tri state area, you've done deals over your career, probably all over the country. Do these principles that we're talking about hold true no matter where you're investing? And I want to say where you're investing sort of within the US because obviously if we go outside the US and we're talking about different countries, then total different ball game. But in the US does what applies in terms of principles here in New York City? Does it apply in San Francisco and Chicago.

Absolutely. Yeah. The principles, for sure. Right. So when we talk about building the right team, what I talk about in the book is finding a transactional real estate attorney who is active in your market. Right. So if you always think, okay, I'm not going to go with the generalist, the family attorney who's just finished your will, you need a transactional attorney who knows what the customs are in that market. And if you are looking to invest outside your market, yes, you're going to find that local representation. But the principle of making sure that you have that team with the expertise is certainly universal. There's also throughout the book, there's insiders, tips, tips to gain that advantage. And again, some of these tips have to do with things like how do you communicate to the broker. So if the investment sales broker is the one who's going to come up with the opportunity 80, 90% of the time. And we also talk about in the book the different types of deals. There's on market, there's off market, everybody loves off market because they go, no one knows about this. And there's know pros and cons to each. But again, the point is if, because brokers can source off market opportunities as well, if they are going to be the primary deal source, then understanding how to cultivate those relationships with brokers is super important. So I would make the case, again, that is universal, you know, wherever you look to invest.

Yeah. So what would you say? We've talked about it, lot of different aspects of investing in real estate and what people have to do. Is there a single most important in your mind?

Yeah, it is. It's the people. It is the people that is. Yes, we're dealing with physical assets and properties and underwriting, but the team that you put together, right. Your partners and how you execute this, that's what really defines your success. The first podcast episode I ever did was with Bruce Ratner, legend. And that first episode, within an hour, he mentioned the word people over 50 times. It wasn't even that apparent until I went back and counted it. And every time, Bruce, how did you do this? Had great people, or maybe he said team, but the same kind of idea. It was about how did he surround himself with, with knowledgeable people to give him that advantage. Right. So it is about the people, but as we said right off the bat, it's about having the right people, the trusted people and having those relationships.

So is there hope for the graduates coming out of a master's program today? Is there hope for them to actually get involved on their own. Should they go work for a company first and get a couple years of experience under their belt? You know, just how hard is it as an individual without a family in real estate to go out and do all this?

Wow. I love that question. I know. Again, you're so involved with mentorship. And look, this is an incredible business industry to get into. Right. Because it is open to all right? There's a lot of different ways that you can go about this business, and it's not a one size fits all. So it really depends. What are your ultimate goals? Do you want to be an owner? Do you want to have your own portfolio? Do you like working at a bigger company? If you're working at a bigger company, yes, you're going to probably need to go get that master's degree. Yes. You'll probably start off as an analyst. You'll have to understand how to underwrite it. So you work for a larger firm. There's so many resources there. Right. And you can have a very focused experience. You go work for a small shop, you're going to be getting to do a lot. You might be going out looking to find opportunities. You might be underwriting, you might be asset managing. So it really depends what you're looking for as far as, are there opportunities again in a lot of these jobs? Okay, sure, you might be looking for salary bonus. But look, if you have some time on the side or if college students are looking for interns, saying, look, I would just like to come to your office for a couple weeks and spend some time and help out, and I'm not looking for anything in return. Who's gonna say no to that? Right? So there are a lot of ways to get involved in this. And by the way, clearly, I'm a broker and I do a lot of investing as well. And. And brokerage is a great way to get into investing because think about it, a very active investor, they might do five, maybe ten deals a year. We see as brokers, hundreds, if not thousands of transactions a year. So what works? What doesn't work? You kind of have that bird's eye view. So understanding, certainly for those of you who don't mind picking up the phone and calling and canvassing, look, if you know how to find opportunities as a broker, you have to apply that same mentality as an investor, because if you're just sitting back waiting for the deals to come to you, you're going to be waiting a long time. A lot of what I put in the book is, how do you Stay top of mind. That's universal as well. A lot of ways to get in this business again. I've been doing this close to 25 years. I learn something new every single day. It's just incredible. People. New developments, infrastructure, new ways to build things, zoning. I mean, the list goes on and on.

Yeah. And you can actually get involved in real estate. You don't have to do it on your own. If you start out at one real estate company, you could end up at a private equity fund, and you might get an opportunity to invest alongside the private private equity fund in real estate. So there's lots of different ways to get into it. So, James, I'd love to just shift gears a little bit on you. Okay. You work for a company where you're an actual broker. You mentioned you do investing on the side yourself. I know you're committed to. And in terms of giving back to the communities where you work and live, where did you. I know you said you did a lot of this during the pandemic, but you're still finishing the book. Where do you have time to do it all?

Well, it's very generous to say I do sleep. Not a lot, but. No, we have a great team and I have a lot of help. And like I said with this book, I've had a lot of support as far as helping. How do I find the time to broker, to invest, to teach? I kind of look at it as all one and the same in that these all. What I learn as a broker makes me a better investor, makes me a better teacher. But at the same time, I think it's also important to know how to differentiate between those. And as a broker, I. I don't invest directly and buy properties because if I bought properties here in the same market where I broker, my clients would say, james, are you helping me or are we competing? How does that work? Right. So the way I have invested over time, and I was a founder and a general partner of two real estate funds, River Oak, New York City 1 and 2. And there we were, the LP. So we brought the equity to the table. We raised $50 million, and we parlayed that into 33 transactions with a total capitalization of over $350 million. And so now, instead of competing with my clients, now I was able to partner with them. So by the time I saw the opportunity, it was already signed up. There was no conflict. And of course, we would never invest in something that we sold. That would be a blatant conflict. So typically, the things that we bought were Sold by another broker. And that's great. That seller had their representation. I think it's really important to understand the roles, doing things in the right way. But no doubt my experience has helped me become a better investor. And I think for our readers and listeners out there, again. And if you listen to the first, you know, hundred plus podcasts that I've done to be able to interview these incredibly successful investors and you'll hear how I ask, you know, how did you do it? Right. What's your key to success? Right. And so to be able to hear a little bit from everyone, I think. Also, I'm very excited to share all the information in this book. I know people get a lot out of it.

Yeah. So I heard a story yesterday about a particular exercise regimen that you're involved in, and I know it involves like 50 reps of different exercises, and I hear that you killed it, but you also did it when you had headphones in and was on a conference call. Is there any truth to that story?

I don't know about that?

Is that how you really get it done, is you just cram it all in?

I am a voracious consumer podcast, so I can't just produce the podcast. So I do when I go for my runs, yes, I'm always listening. And I go out with a group once, twice, maybe a week. I was out with them this morning. We have to start very early, especially. I want to make it into the office in time. But, no, I think it gives me energy. I was Division 1 swimmer in college, and although I don't get in the pool as much as I used to, I like to stay active and, you know, spend time with the family, too. It's a. It's a great way to be together. I was grateful for your support. You know, we just did this charity swim for Swim Across America, so all three of my sons got into it. So that was a lot of fun as well.

Yeah, I know your children are on the younger side. I think you're oldest is 16.

17.

17. Are they showing any interest in real estate?

Well, certainly my oldest, after I brought his water polo team into our office for the day, and his first question to one of my team members is, how do you calculate a commission? So he's very focused. But look, how can you not? I mean, we come into this great city. I showed him around. Vornada was of kind. Kind enough to show us their sales center for the new Penn district. They're adding 15 million square feet on 34th Street. So I took them up to go see that presentation, see the views from the 52nd story. I mean, what's not to like? But I did, you know, I tell my kids that. Look, first of all, you don't. I didn't even know what I was going to do my senior year in college. I mean, thank God Paul Massey was a Colgate alum, offered me a position at Massey. Nackel learned so much from working alongside Bob Nackle early in those days. And it was complete luck. I think today when I see resumes, kids are so much more prepared because they've been doing the internships, they've been taking the underwriting courses. But based on my experience, it's never too late to jump in there.

Okay, last question for you.

Could.

Could you give us a snippet of what your group does at AY and some of the offerings so that people listening have an idea of the breadth and the depth of what you've built here?

Sure. Well, thank you for asking that, because the team is what I'm most proud of in my brokerage career. Right. So, look, I love going out there and doing deals and. And I'm still on the phones every day. Yes. I don't just record podcasts. But what I learned very early on, and this was with great coaching again from Blaine Strickland and Rod Santomssimo from the Massimo Group, is, look, if you want to grow your business, there's only so much I can do as one person. So if you don't build a great team, you're really limiting what you can do. So we've built this incredible team of over two dozen people. We cover all asset classes here in the tri state area. We are one unified sales team. I think that's a big difference. And key differentiator for us is that everybody is involved in every transaction. We meet every morning, we share a lot of information. You ask what we do, we inform our clients. Right. I spend so much time thinking about what do our clients need to be thinking. Thinking about to look out for? How do you prepare for what is happening, how do you look for those opportunities? And I think it's very much in parallel to what we're doing with this show and with the book is empowering investors to inform them, to give them the tools to be as successful as possible.

Great. All right. That was my last question. Well, thank you, James. Appreciate your spending the time doing this and I wish you the best with the book.

Thank you, Dorothy. This has been amazing. Thank you so much. I enjoy this so much. It's been such a pleasure working alongside you. And yes, could not be more excited for the book which is going to be out late January is the target. I've been told sometimes these things can slide a little bit, but the draft is in with the publisher and Chris could not be more excited about what we're putting out there. So just for our listeners out there, as always, thank you so much for tuning in. Check in with jamesnelson.com that's where you can find my content. That's where you can find the show notes for this episode, the videos on the 10 Steps for Success in Real Estate Investing and of course how to find this book and how to pre order it and your support. I cannot tell you how much it means to me. There's a lot of effort that goes into this and and it makes me so happy when I get the feedback from you all that you found this helpful. So thank you as always for listening. Until next week, this is your host, James Nelson of the Insider's Edge to Real Estate Investing.

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