Strategic Investing with Peter Hungerford

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.

This podcast is for educational purposes only and should not be relied upon for investment decisions. The opinions expressed are those of the guests and not their company. Listeners should not act upon the information without first seeking appropriate advice from an accountant, lawyer or other professional.

Welcome to episode number 208 of the Insider's Edge to Real Estate Investing. This is your host, James Nelson. I'm principal and head of Tri State Investment Sales, Graveson Young. We have a treat for you today. I feel like I say that every single time. Every time I finish these episodes, I feel myself saying, wow, this was the best interview ever. But what's really great about this format, getting this long form interviews with these incredible real estate investors, developers, visionaries. You get so many different perspectives, which is one of my favorite parts about the real estate business. No two investors do things the same way and I feel like I learn something new every day. I certainly learn things by doing these interviews myself. I'm not just, you know, doing, asking these questions because I know the answers. I'm sitting here, gain this knowledge as well. So today is going to be no exception. We have with us Peter Hungerford. He is the principal and founder of PH Realty Capital, a vertically integrated private equity real estate platform. They've got an aggregated transaction volume, more than $5 billion. Peter shares his journey from renting apartments to owning to operate a portfolio of over 4000 units. I love what Peter's doing. Again, I had heard him though. I've known Peter Parker, but I heard him on Brian Flanagan Mitchell Flaherty's podcast Brokers Brunch, which I had the pleasure of being on as well. They interviewed Peter. I just love what he had to say. I also talk about a recent post that he just put on LinkedIn. This is the first time that I've heard someone put something like this out there. So you'll hear very shortly what that was all about. But Peter has such a unique approach to real estate investing. He uses social media platforms like LinkedIn. He connects with people, he sources deals, he expands his network. He covers navigating competitive markets like New York City and scaling, selling operations. So, you know, as always, you can go to james nelson.com that's where you can find the show notes. That's how you can figure out how to connect with Peter. There's also incredible resources there. Hey, while you're at it, sign up for the newsletter. We aggregate everything per month to make it super easy for you. Nothing in expectation for return. We just want to deliver great content to help you gain the insider's edge to real estate investing so you can gain game changing strategies to apply the market. You know what, if you like that title, that was the title of my book and the subtitle might want to check that out as well if you haven't already. So we're going to have a brief word from our sponsor and we'll get right into the interview with Peter Hungerford.

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 their industry, our 35 member group is available to help you make informed investment decisions by 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 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.

Hi everyone. I am here today with Peter Hungerford who is the principal and founder of PH Realty Capital. Welcome Peter. Great to see you. Good to see you. Yes, thank you again for joining. I know that you drove here. We were talking because I've heard your story because and we've known each other for a while, but I heard your interview on Brian Whalen and Mitch Flaherty's podcast Broker Brunch. So I heard the story and driving around from Staten island. So we appreciate your making the track. I've got to say that interview was unbelievable. I heard so many good things. I said I gotta have Peter on the show so really appreciate it.

Hopefully I have something else entirely on this podcast.

Well, I mean look, even in the last what was a month or two since you did that, I've gotta say when I read your bio on your LinkedIn profile I say okay, I buy deals, I buy non performing deals. I do a lot of deals. Call me if you have something. And then what amazed me. I thought this was really great, because I didn't see anyone else do this. So Floyd Mayweather just bought a $402 million portfolio and you post. Does anyone know Floyd? I'd like to do business with him.

Yeah.

And I was like, wow, that's, that's pretty cool. Was that just something that you thought of doing?

Well, you know, I think I could be wrong, but I think Floyd's deal is still under contract. I think, you know, the news these days, media in New York City real estate is so devoid of transactions, they're willing to report on anything even if it's just in contract. So. And I see him buying things that are very similar to what I'm buying these days and getting excited about.

Right.

And so I think of Floyd Mayweather not as competition, but instead somebody that I should communicate with and think about deals in similar ways. Apparently do. And so, you know, I don't, I don't think about the world as there's not enough for everybody. There's plenty to go around. Let's talk with like minded folks and think about, you know, how we view the world.

That's, that's the abundance mentality. Right. I mean it's like kind of putting it out there. So I've got to ask, I mean, did it work? I mean, did anyone say, hey, I know Floyd?

It did, yeah. Through three to five different people that know him in different ways immediately reached out to me and were like, yeah, I'd love to, you know, help make the connection. So I haven't sat down with him yet, but I believe that's imminent. And you know, it's, it, it highlights the power of LinkedIn.

I think that's really cool. But I think some people again use LinkedIn for, you know, it's a newsfeed, it's this that you know, if you're looking to hire, but to actually use it as a platform to source deals and look for partners, I mean that's, yeah.

Tool.

Yeah.

And that's what I use it for. That's how I think about it. Yeah, it's a, it's a really cheap, fast, easy way.

Right.

Get a simple direct message.

Right.

To a lot of people.

Right.

We've had on this show, we've had several investors, developers who've really leveraged their social media platform to the drive deal flow. I mean I just had Alex Raven back on the show from Pete Capital, good buddy. Thinking of Stephen Cachani on close. They post very active with know what they're doing. David Shorenstein, I would imagine part of this is just kind of showing, you know, that you're active in the marketplace, putting the word out there, give a sense of the. How long you've been doing this for now and what, what does the portfolio look like now? And I know you, you're. If you're either in contract or you've closed on. What is it? Over a thousand units.

So, yeah, we just finished completing the. The 1300 unit acquisition of the Sentinel portfolio.

Congrats.

Thank you. So that was 24 elevator buildings, about two thirds in Brooklyn, a third in upper Manhattan. And we're working on another sizable portfolio right now. Can't say any specifics about it, but it's north of 1,000 units, and we're excited about that one too.

Is there this thing. I'm sorry, I cut you off. So the whole portfolio, how many buildings, units does this now consist of?

So we own and operate over 4,000 units. Now, that's not specific to New York City. In New York City, we're still about half of that number.

And where are the other units?

Manhattan and upper Manhattan mostly.

Okay.

But the other half, I'm sorry, because you have some. Rochester. Sure.

Upstate New York.

Yeah.

Got it. Okay. And is that where. I know you went to Syracuse. Is that part. Is that where you're from originally or.

I was born and raised in Syracuse, went to Syracuse University. Okay. The upstate portfolio is mostly in the Rochester area.

Okay.

Where I lived for a few years while my wife was finishing medical school.

Okay. You were at Syracuse. And I, I think your, maybe your major, your minor was supply chain logistics. Did I read that right? Was there something.

I didn't really end up ever doing much with that piece of paper.

Kind of fascinated.

Undergrad, business degree. And the way I thought about business school was, okay, I, I don't want to be an accountant. Part of my undergrad degree is in accounting. But I think the accounting is, is like good backup information for being a business owner and being in business.

Okay.

Supply chain management is just all about logistics and the logistics in business. So look at business school as like, okay, this is. I need a format how to think about and solve problems. And so, you know, I ended up in real estate. I'll say accidentally. Right. But it just happened to be the most exciting sounding opportunity to me at the time, coming out of college. And, and I've stayed with it.

So would you say that your approach then is you're very process oriented? I mean, as far as how you build systems, I figure you don't just snap your fingers and suddenly have 4,000 units. I would imagine there's a lot of systems in place from ranging from acquisitions to operations. I mean, is that is big a part of your business of actually acquiring but actually figuring out how to optimize the operations?

Yeah. So very process oriented. That's, you know, we've built the management company, you know, in house for a reason and, and we've built it and thinking about things as, as a process. And we need a process to manage this and a process to manage that, and that process needs to make sense and drive towards a specific goal. So, you know, ironically, even just in this conversation, you know, I said a minute ago, I don't really use the supply chain piece of paper for much, but I mean, I think, you know, maybe I've already contradicted myself accidentally that I do, I think about every piece of. Yes, the real estate machine process. That needs to be thoughtful.

Right? Yeah.

I was an English major and I could say, well, is real estate have anything to do with an English major? But the amount of writing a book, but emails just this, you know, again, constantly. And so that's a very interesting background. Now I believe you said along the way was, was real estate just kind of a hobby where you were kind of buying, you know, two, four families up in Rochester? Were you kind of born into a real estate family? No.

So was, was definitely not born into a real estate family. Met a friend in college whose dad owned some buildings in Washington Heights.

Ah.

And so, you know, I had some other like, you know, sort of boring sounding desk jobs offered to me, you know, after graduation and that just wasn't exciting. But moving to Manhattan and starting a real estate brokerage with a friend of mine who I thought, you know, we were going to get a lot of, you know, inside direction, so to speak, and maybe even an insider's edge. There you go on the real estate business. That sounded a lot more exciting to me.

You said brokerage. So you. Were you renting apartments? Selling buildings for four years.

We started just renting apartments, but we ended up, you know, selling some buildings in Washington Heights and, you know, moved into.

What year was this?

2004. Okay. We started.

So what was it like renting apartments there? I mean, was there any. I mean, was this a lot of hustling around and doing a lot of volume? I mean, what. On behalf of the landlords, like, is it. I mean, what was that experience like?

So, you know, we would, we would advertise and you know, get tenants, people that want, you know, prospective renters that wanted to rent and then we'd search for their apartment and. But then we'd also, you know, canvas owners trying to get access to their rentals. So, you know, you mentioned the broker's brunch earlier. I, you know, told a story there about, you know, my interactions with Soleil Management. Obviously, yeah, you know, New York City landlord. But you know, this was back in the day where Street Easy didn't exist. There was no single, you know, resource for rentals. And so it was just an extraordinarily fragmented market. And you know, you had to, definitely had to hustle.

I mean, I would imagine, I mean, you've probably walked thousands of buildings right over your life. But I mean, I would imagine going in and it was that to learn the business, I mean, we get a lot of aspiring investors who listen to the show. I mean, starting off as a rental broker, I mean, if you want to go into multifamily, is probably not the worst way to start.

Again, I say all the time that, you know, our real estate, no matter where it is, it's worthless if nobody wants to use it.

Right.

And so when you buy a piece of real estate, the right to give someone else access to it and the right to give, you know, to give someone else the right to use it is the only thing that has any value. And so if you don't understand how that transaction works precisely and you can't put yourself in the shoes of the consumer, you don't understand real estate. You can't understand real estate. Yeah, so I think about our customer. Always we talk about them as a customer. People talk about tenants in my office, we talk about customers and we think about what does our customer want and what can we do for our customer to make their, to make that transaction better?

You know, I've heard that on the retail side. So I had Jeff Edison, founder of Phillips Edison, one of the largest owners of grocery anchored shopping centers. They actually call their tenants neighbors. And he talked about how important it was to curate a neighborhood and think about, you know, what tenants want to be close to, you know, good neighbors to each other and how do you make the best experience for them, you know, as far as on the residential side and thinking of, you know, who your customer is, your tenant. I haven't heard it expressed like that before. I think a lot of it is, okay, well, let's look at the comps, let's see what rents are. Let's think about how do we maximize rents? You know, certainly, okay, well, what's the demographic? Right? So you know, should this Be a one bedroom or a two bedroom. But I mean, how do you go about finding out what your, your customer, your tenant wants?

Well, I just, I bring it up in the context of how I got started in the business and, and I got started in the business as a rental broker and, and to, as a rental broker, you're interacting with those customers.

Right.

And you're trying to pull out of them. You know, what is it you want to.

Right.

You know, what is it you, the customer wants?

Right.

And, and so that gave me this like crash course in understanding the customer and understanding that transaction which, you know, any landlord then is seeking to, to purchase. So I think it's more so on the management side of the business where that mindset of who is the customer and what do they want is, is so critical. On the investment side, you know, I do think you can get away like with not really understanding that piece of it as much. But like, you know, even on the investment side, when we go to renovate an apartment, we're obviously thinking about, okay, what is going to make financial sense to renovate and to provide to the customer as an amenity. So it comes up in different contexts.

So how with Rochester was that where you started investing? So I assume you've made some commissions, you're looking to now buy, start your own account. So was Rochester then where you started acquiring?

Rochester was really where I started the management company and investing straight strictly as a principal, just for myself.

Okay, what did that start with? I mean, was it like you just.

Started buying single family homes? Single family flips.

And how did you. So this was your money and you were going into financing these Geo partners?

Eventually I brought in partners. Once I like felt comfortable with what I was doing. I still felt very new at that point in time. I'd only been in the real estate industry, right. Six, seven years at that point. And as much as I felt like I understood the customer that we're describing right now, I still didn't like feel comfortable with the investment and how to run my own property management firm again. I'd seen all those pieces of it, but I never actually done it myself. And so, you know, trying to layer into that the complexities of taking other people's money, didn't you know, that felt like too much all at once. So the first couple of deals I did, I did on my own, strictly with my own money. Okay, let's make sure, you know, like I'm not able to make too many fools, foolish mistakes with someone else's money.

And there was no substitute for just figuring it out. I mean, there's no other way. I mean, I guess you go try to work for someone else, but until you've actually done it.

Listen, we take just this recent transaction. Okay. And, and I, I said this before we close too. At never have I ever bought 1300 units at one time in New York City.

Right.

I haven't. I'm not scared of that fact. It's a fact.

But I'm sure you're planning for it.

Right.

And point is just that like I have complete confidence and the utmost certainty that it's not any different than buying a thousand units or 500 units. And we're going to figure it out.

You're gonna have to scale. So will you start hiring in advance or I mean, you're going to get hit?

Sometimes, it depends on the situation.

Right.

You know, like I mentioned, we're looking at another portfolio. This portfolio is actually larger than that.

Right.

So when that happens, that will be, you know, here. Again, I've never done this before.

Right.

Like you figure it out and you, you manage everything in house.

Okay.

And that's, and we'll, we'll get to that later because I know that that's really, you know, your value add being hands on. But talk about how you started scaling this. So you start doing fix and flips and then what that turned into a 10 family, a 20 family, and then did you decide, okay, you know, if I really want to go to the big time, I've got to go back to New York?

Is that, you know, listen, I think there's different business models available for different people in different places depending on what you like. Some people like doing a single family house flip and you don't ever have to deal with a tenant or a customer or a neighbor. You don't have to deal with evictions. So some people like that and would prefer that and would rather try to, you know, nail that business model. I know plenty of people that make a ton of money doing 10 or 15 single family home flips a year.

Right.

Joe Farrell is a guy who comes to mind in the Hamptons. He's working on 50 different ground up projects at any given time. Enormously successful, I mean, for all intents purposes. And Joe, if you're out there listening, I don't, don't mean this as a slight at all. I mean he flips single family houses. That's what he does.

Yeah.

But obviously everything that goes into it, he has renovations down to a science for sure.

And his level of detail Is insane. Yeah, I mean, he's doing very, very high end. But my point is that for me, I knew pretty quickly early on I didn't like that business model as, like, I could certainly make money doing it, but I just, I didn't like it.

So how so you, after Rochester, at some point, you decide you're going to start investing in New York City. I mean, this is the most competitive market, you could say, in the world. So. Yes. What was it that, you know, drew you to the city? What. What convinced you that this is where the opportunity was as opposed to going to, you know, Texas to south? I mean, wherever else was it about New York?

So I'll try to give you the short version. So I mentioned earlier, I, you know, I grew up in Syracuse, went to Syracuse University. I moved to New York City immediately out of college, and I just absolutely fell in love with New York City. To me, there is no place in the world like this place. There is no energy in the world like this place. So to me, this has always been like the Mount Everest of places to conquer. And so, you know, I Learned the business from 04 to 2010. I ended up in Rochester accidentally, like, through no brilliance of my own. Just my wife's career took us there. And that happened to be a good time to start buying distressed real estate. And as luck would have it, I did that well enough to roll that into a few dollars and move back to New York City in 2015. And I spent 2015 to 2020 being here still investing in real estate, but mostly investing in real estate outside of New York, because the deals I was seeing just, they didn't make sense. It was very, very difficult. And in hindsight, I think I was right for it was very, very difficult to make sense of deals then. It was very, very difficult to buy good deals and make good money doing it.

Can we talk about. Because I hear this all the time, the deal doesn't make sense. I mean, maybe this is a very basic question, but when you look at a deal, define what makes sense.

Yeah. So I'll answer that question for me personally and I think, right, you've been around this business longer than I have. Everybody looks at the answer to question a little differently. And it comes back to different people having different business models. And that's what makes, like, a market. That's what makes, you know, that to me, that's the foundation of, like, the abundance mindset of, like, right. Everybody looks at deals a little differently and, and that is like, the beauty of it. So the way I look at deals is I, I have to have one of, one of two things. There's really only like two paths that a deal can like can go down that I like.

Okay.

So one is there is something so wrong with the real estate that I know and I know exactly how to fix that.

Okay.

And these are not special things that I'm the only one who knows. Right. This is like renovations and improvements and you know, filling up apartments like. But things that I know how to do and that are in my control.

Okay.

Okay.

That's path one.

Yeah.

Path two is more of what I'm seeing right now in New York City where I can buy a property that's mostly occupied, maybe I'll get it 100% occupied, but I'm going to pay the bills, I'm going to pay the mortgage and then at the end of the month there's actually some money left over.

Right.

And when that's a sufficient return on the capital required to purchase the building, it's this really strange concept where the landlord gets to make money for owning the building and just holding the building and taking good care of it for a month, one month at a time, and then Repeat that cycle 360 times and then the mortgage is paid off. That's the dream.

So.

But those are the only two paths. Either I've got to have like a real value add story that that can execute and that I know I can do, or the financials have to just make sense. And right now in New York City, you know, I'm sure we can both come up with examples of like 7 to 8% interest rates. Sorry, 7 to 8% cap rates where I'm able to go get a mortgage for 6%, let's say, and there's a spread in between the cap rate and the interest rate for my debt, which allows me to make some money.

Right.

So obviously what goes into the calculus of figuring out if the deal makes sense or not is obviously what you're going to pay for the property. So sometimes when some say, James, I can't make any sense of this, my question back to them is, well, okay, where can you make sense of it? So again, one of the things I talk about in my book is the importance of seller's motivation because the broker stellar they can ask that is whatever they want.

Now today, in today's market. Yes. Actually that is like the key.

Yeah.

If the seller doesn't have a good compelling reason to sell, you and I should both move on.

That's right.

Because nobody's Selling today's market because they love the price.

Yeah.

Nobody.

So. So when someone says, oh, okay, I can't make sense of it. I mean, if you have a real seller who has the ability to sell into the market again, every seller wants to get the highest price. Right. I've meet one who says, you know, no, that's fine. We'll leave some money on the table.

But no one ever.

Yeah. So, you know, then the question is, well, is there a path where I can make this make sense? Right. So I think. How do you. And I think the first time we ran into each other, maybe it was before, but I remember you were bidding on this portfolio that we had on the Upper east side, and we made a really aggressive run at it. And it was, I mean, after, I don't know, a year on the market, a half a dozen contracts. I mean, this was a really. We had two warring families. There was six attorneys involved in the deal. And every single. I mean, it just. We killed one. We didn't. Every single contract we sent out, the attorneys just killed. Killed the deal. Like months and months. The market was declining. And finally I said, guys, we have no credibility left in the market. No one believes we could sell. I said, we're putting this. And I love 10x. We sell a lot of properties on their plug for them. And I said, we're going to just auction this, and we're going to. We're going to agree to a contract. This is what it is. You all agree to it, and we're going to. We're going to auction it. And it worked. And I remember you made a, you know, a run at it. So how, like, what was it about, you know, the opportunity and knowing. Because there's only so many hours in the day total. Like, how do you figure out how you're going to focus on what to pursue?

That's a great example deal. Because there were two enormous things about that deal in particular that kept me interested. Number one was that just as I was just describing, two types of deals. Okay. That deal had a ton of stuff around the whole portfolio. I think it was 12 or 14 buildings, a whole portfolio. There were a ton of opportunities to just fix things that were broken and inefficiently running, inefficiently managed. I mean, there's just like so much of that stuff.

Right.

So that was the first and foremost is like, fundamentally, I know how to fix this stuff.

Right?

Give me the keys. I know how to fix it. Yep, that's number one. The other important thing about that Deal. That again, talking about seller's motivation and thinking about like, especially in today's environment, like where does one spend their time? Whether they're in your seat or mine, is, is, is like the profile of the seller. Okay. And when I see a seller who has a real problem.

Yeah.

That they have to solve.

Yeah.

And it's going to be solved some way somehow. That's a hoop I like to hang around.

Yeah.

And as you pointed out, unfortunately for you, it took a long time to figure out how to solve that problem. Obviously through no fault of your own, just the situation, you know, but you stuck with it for long enough to see it all the way through. And you know, when I see profiles of sellers like that, I hang around.

Yeah.

I make it a point to hang around.

Yeah.

My follow up game is strong.

It is, Yeah. I mean, well, you were, you were locked in on this and look, once it goes to auction it's, you know, again, if you're the highest bidder on that day and I, I would imagine at some point you just tapped out. But how do you cultivate these relationships? I mean, I think you said, I mean you're on the phone constantly, every day. So, so what do you, are you, are you spending much time talking to brokers, asking about what they have. You're calling them, following up obviously on your properties, making sure work's getting done. Like, what is that? What does that day look like as you're. Because I don't, I mean, I'm sure you have an office, but it seems like, I don't know why. You strike me as someone who's just, you're just on. I'll move. Always moving.

I have 32,000 miles on my car. I've put on it in the last 18 months.

Yeah.

So yeah, I mean I'm on the phone all day long every day. And you know, as the business has scaled from zero units to over 4,000, you know, my role has changed in that business. Of course, earlier on I wore a lot of different hats and I got to spend a lot less time on acquisitions and stuff like building the business. But I would say today I spend about maybe half my time on property management and asset management related things. Now that's everything from, you know, dealing with current lenders to, you know, communicating with current partners to solving, helping to solve the more complex, you know, issues that come up. Whether it's, you know, construction funds or tenant issues or what have you. That's about half my time. The other half of my time I spend talking to Brokers trying to solve, you know, contract problems on deals and situations that I have in the pipeline, you know, and, and I don't know.

So we, we have a lot of brokers who listen to the show as well. I mean, what, what advice would you give to them when they call you up? I mean, I, I don't. Do you get 10 calls a day? You get maybe. I'm sure it's a lot. What is it? When. And I'm sure you get a lot of. These are cold calls. We've never heard of these brokers before. I don't know if they're mostly calling you, asking you, hey, Peter, you want to sell, you want to buy? But, like, what is that call that you get from a broker where you actually, you know, want to engage with that broker and have a conversation?

Sure. So, you know, I mean, listen, the guys that, and girls that know me and, you know, I know aren't going to waste my time and keep me on the phone for, you know, 10 minutes to tell me about one crappy deal, you know, that I wouldn't be interested in. I mean, they get me on the phone very easily, so they're quick. They're to the point you're in that bucket, you call me, I answer, yeah, like, this is how it works. But I would say for, for anyone whom, you know, I don't know, or we haven't spoken with before, I mean, yeah, I don't have enough time to return all my phone calls, text messages, emails, LinkedIn, you know, direct messages, what have you. I just, I don't.

Do you have an acquisitions person? Is it like, at some point, very.

Lean shop, and we have somebody that we're grooming right now into an acquisitions role, but, like, no, not enough to just, like, throw everything, you know, in that direction and, like, not think about it. And, and, and that's been deliberate. I mean, to me, the, the filtering process, the understanding what's on the market right now and what's transacting, when, what not. Like, to me, that is, like, that's the key to knowing what to buy and when.

Yeah.

And so if I don't, if I'm not at the front lines of that, then, like, I can't make the most intelligent investing decisions.

How quick can you kind of get your arms around a deal? And part of it, I'm sure, is how the broker is able to present it, answer your questions. I mean, can you get to the bottom of a deal in five minutes? Is it like, are you going back to the drawing Board. You're running numbers. I mean, sure, I'll. I'll give you.

Well, okay. I'll answer that question in two ways. So I would say for, like, for me, it's. It's hard for me to spend any time on a deal under like, say 5 or $10 million right now. So thinking about a deal size that is interesting to me today, If I spend 30 minutes looking at a rent roll and the situation, right? Because if it's just like boring and vanilla, I'm not interested. And I've already pass at that point. But If I spend 30 minutes on it, I can decide pretty, like from there, okay, do I want to spend more time on this? Again, the more complex the situation, the more interested I'm going to be. I'll give you a quick example. I'm looking at buying a defaulted loan in foreclosure right now. The owner is an estate that's been feuding for eight years. The lender has been in foreclosure for seven years now. And I'm buying it at 30 cents on the dollar of UPB. And it turns out that all of the surrounding properties are actually also owned by the estate. So the deficiency judgment on this initial foreclosure action will just spread to the other assets that they own. So that's like a really complex issue.

I would imagine, if it's been seven years in litigation or in the foreclosure process, obviously. Maybe that's because it's an estate. Maybe it's because, I mean, that, that's a pretty long time. I've heard years, not, not seven years.

Families, complicated.

But it gives you the confidence that you can, you can see this through. And your money, good. You get it's. It's racking up default interest. You get a 30.

It falls under that first category of deal where it's like, okay, I know what's wrong here. I know how to fix it. Half the problem is just getting to title. You get the title and, like, you've solved half the problems. But, but I use it rather as an example of like, okay, I spent a half an hour on it, right. Decided I really like it. Now I'm going to invest a lot more time in that.

Yeah, okay.

I could have spent that half an hour to like, you know, think about that particular transaction, just like set it aside and not, you know, think about it again.

So let's talk a little bit about now raising capital. I think one of the number one reasons that keeps people from investing is on the money, right? So I Mean, obviously you were able to make some commissions. You start parlaying in some of these flips, you buy, you refinance, you go buy more. You know that that's how, you know, when we see these portfolios built, that, that's oftentimes how, how it's done over time. Indeed. Along the way, were you bringing in investors? If so. If so, is, are those friends and family, are they institutional investors? What kind of partners?

It starts with friends and family for sure. And that's, you know, who most people are able to, you know, convince to have trust in them. You know, to me that's like, that is, that is the root of it. I am able to convince people to trust me. I'm able to convince people to trust me now even easier than before because I've done it a thousand times.

And are we talking about like hundreds of investors? A couple really strong, you know, a couple dozen or real.

We don't take small checks from small investors anymore. It's just, it's too much work and headache and, and I, I always look at it like if I take $10 from you or $10 million from you, I have to take your phone call.

Yeah.

And, and that's a, that's valuable time in the day that I don't want to give up. So, so yeah, so we have several institutional capital partners, especially in, in today's.

World, institutions as opposed to individuals. So we're on like, I mean like pension funds. Are we talking really? Okay. And, and I would imagine you had to get to a certain scale, I mean, where you graduated from.

It's a lot about the, the management company and the platform that we have in place that, you know, that we've built confidence in and that, you know, we can take over a 1300 unit portfolio tomorrow and not skip a beat.

The investor reporting because there's that, that's a big component of it as well. I mean, and again, if you're doing a good job, I would imagine keeping them informed, then that probably also limits the amount of, you know, follow up questions and this and that and confusion. So are you pretty proactive about.

Very. I look at that more as like, you know, that transparency, that trust is like, you know, it's the sort of thing that just, you know, takes years and years and years to build and can be wiped out in a second.

Yeah.

And so we spend a lot of time and money and energy on ensuring that, you know, every single month, like clockwork, no matter what, our investor reports are done and they're, you know, Sent out without question.

So how many. So you got 4,000 units. How many buildings is this again, spread out over roughly?

I mean it would depend on how you would define like let's say portfolio, garden complex, sub state that has 28 buildings. I don't know, is that one property or 28 in New York?

Probably closer to 20.

Yeah. In New York City we're at 60.

Okay.

And you manage in house. So how big is your team?

So we have about 75 employees right now, but.

75.

Yeah, but I expect that.

Yeah.

That includes like on site staff. Right. So in, in New York, you know, like a 50 unit building has a super. So he's one of our.

And are you managing these people too? I mean there's so much.

Me personally here again I described earlier, I spend probably about 50 of my time on like operations and this sort of the side of the business. But yeah.

What's your leadership structure then to run your, your company?

So I have two partners and then we have a cfo and we're actually bringing in a COO with this next acquisition.

Okay.

By the end of the year.

Got it.

Okay. So we talked about raising equity now in this podcast episode and you all should, should definitely listen to the episode. In the, in the broker's brunch they you talked about trying to raise financing for this latest acquisition. I think you said something unbelievable like you went to 50 or 60 lenders and you ended up. And this was a cash flowing deal if I'm not mistaken. So income producing. This isn't like you know, vacant, you know, value add type situation. You said because of the rent regulated nature. There was just, there just wasn't appetite from.

There's. There's a common influence of, of issues right now in New York City. And you know, there's obviously terrible political, what's the word sentiment around rent regulated units.

Yeah.

The laws around them are truly unsustainable in every sense of the word.

Right.

The. But, but really having nothing to do with New York City or the rent regulated nature of that particular portfolio. I lived through the great financial crisis and invested through it and I believe that today's lending environment is less liquid than the great financial crisis. I don't know what we're going to call this one later on in the future when other people start to agree with that statement. But I think there are fewer lenders today willing to lend fewer dollars than there was in the gfc. And so yeah, finding a lender for that, we ended up having to split it in two and we Found two separate lenders, but incredibly painful and difficult.

Yeah, maybe we'll call this the great void or something. I mean, it's just everybody, I mean, so many buyers and sellers and lenders have just become bystanders. You know, they just, they don't want to participate. They just say, hey, I'm gonna just sit out, I'm gonna wait.

And you probably see a combination of issues like even from your seat, where, okay, one possibility is you see deals die because purchaser can't find any financing options. Another likelihood that I'm sure you're painfully aware of and are seeing is sellers getting retraded and the price just dropping, dropping, dropping, because buyers, once they get hip to exactly what kind of financing options they may have. Whoa. Yeah, this, this deal just got a lot more expensive and a lot less attractive.

Yeah, it is, I mean, obviously rates, you know, go up, but the, I think the regulation has been really challenging for these, these lenders where, you know, you talk to these community banks, they, they're in the business to lend money and they've got a microscope on them. So I, I, that's definitely part of it.

Banks lending meaningful dollars right now.

Yes. Not so, Peter, one thing that you had said that I really thought was great because maybe the question was asked, hey, what do you, where do you think interest rates are going to go? And you know, how are you, you know, what's, your predictions on the future? And, and your response was, look, I, I can only focus on what I can control. Right? You said, I know what is within my realm of control. So maybe talk a little bit about that, of what is in, under your control, what's not in your control. And then, you know, how do you, you know, for these unforeseen circumstances, you know, how do you, how do you address those?

That's a complicated one. I mean, thinking about what's in my control is easy. You know, this, this portfolio I mentioned to you that we're focused on right now and, and I think is, is a good transaction that we're going to be doing it. You know, there just, there happens to be a lot of vacancy. And that's part of why the seller wants to sell. That's part of why their lenders is pressuring them in different ways. And that's something that I look at and I say, okay, I know how to solve that. Give me the keys to the building. And, and I know exactly how to do that. I know how to fix apartments, repair them, get them ready to rent, and I know how to go Find renters. So it's, you know, really, really, really keep it simple, stupid.

Yeah.

Kind of stuff.

Yeah. And.

And so that's, like, what I try to focus on. You know, the other part of your question, how do you prepare for, you know, unexpected stuff? You know, I think about the period of 2015 to 2020, and I remember looking at deals and, like, racking my brain trying to think about how do I change the exit cap rate or the refinance assumptions can make sense of this deal.

Right.

And when I have to work that hard.

Yeah.

And 25 basis points on a terminal cap rate or on my interest rate assumption, that's what pushes me over the edge in one direction.

Yeah, that's a problem. Yeah, that's a real problem.

And that leads me to sit on the sidelines and just say, okay, this deal's not for me. So I think now, in retrospect, it's easier for me to answer the question about, you know, like, unexpected things happen. Because unexpected things are always going to happen in business, and they're always going to happen in markets in general. Move up and move down. And if you don't have enough wiggle room in your deal to allow yourself to make some kind of mistakes, then something unexpected is going to happen with certainty. And that unexpected thing is going to run you over. And so if you don't have that wiggle room, you can't possibly be prepared for something unexpected. You know, nobody. I don't know anybody that predicted this recent rise in interest rates.

Yeah.

But it hasn't run me over. Yeah, hopefully it won't. It hasn't run me over because I don't buy deals that are razor thin. You know, like, oh, I've gotta walk this line perfectly or else.

Right.

Make no mistake about it, I am poorer and my returns are lower over the last two years thanks to Jerome Powell.

Right.

That stinks.

Right.

But, like, there was no cushion in the deal. It wasn't hated on if it wasn't Jerome Powell.

Well, like, I don't know, something else unexpected probably would have happened.

Yeah.

When you have issues or things come up, you would strike me as someone who's pretty to the point and gets things done quickly. Or do you. How do you, you know, manage?

Yeah. I mean, one of the biggest mistakes I made earlier in my career was just not being fast enough with, you know, making decision like, okay, something goes wrong with a deal. Like, okay, let's not cry over spilled milk. You got to make it decision. You got to move fast. You got to pivot when I see what I think is the solution to a problem, like, I don't care if it's going to hurt anybody's feelings. I don't care if it's going to upset anybody. I don't care if it requires firing this vendor or that person or talking to this partner about a change. Like, here's the solution, I'm going for it.

Yeah.

Get out of my way.

Yeah, yeah.

I, I've noticed over the years and kind of listen to other brokers who, you know, there's, you know, kind of the, the story and I mean, you can't even talked about, you know, brokers who get right to the point and those who, you know, can kind of go on and on. And I, I think just, you know, we're, we're in a business where time is money.

Right.

And the longer time, I mean, we're.

All checking our time.

Yeah, yeah.

That's what we do.

So talk a little bit more about, you know, as far as as you grow this portfolio, what is the ultimate goal? I mean, is it, I mean, is it just continue to acquire more units? I mean, how, and are you, are you just being opportunistic along the way or is there actually like a strategic plan of, you know, where you want to be? Sure. Next five, ten years?

Yeah, no, no particular like number of units goal or anything like that. I, because I think in terms of systems and processes, I really like having a, a machine that is functioning.

Yeah.

It doesn't require my, you know, minute by minute input. So, you know, I'm motivated to continue to improve that machine.

Right.

I, you know, I think markets go up and markets go down and that's like how markets work. And so I'm really focused on this moment in this market of grabbing and vacuuming up as much as I possibly can because I think this is a fantastic, like moment in time that I might not see again until I'm well into my 50s. And so I wouldn't say there's a particular goal in mind, but I like thinking of us as a responsible manager in an industry where there's not a lot of people that have a reputation for being one. I like thinking of us as a responsible steward of capital where we have a system and a platform and a process in place that, that does that efficiently and that starts with the investment decision, but then goes all the way through to completing a transaction. So that whole life cycle is fun for me.

Is that why? I mean, and you just see yourself continuing to do it. Is the goal, the Cash flow. I mean, I would have to imagine if you wanted to just sell off the entire portfolio right now, you could be hanging out on a beach right now. And yet here we are grinding things out in New York. So like, like, sure. Is it just the thrill of a hunt? Is this something you just keep doing like, or, or is it a point where you're like, okay, I'm good.

Yeah, yeah, no, no, it's a good, it's a good way of, of directly asking. So, yeah, I, I like the game.

Yeah.

It's fun.

Yeah.

And it's interesting. And I suppose it, it could stop being interesting and fun someday, but like, I'll give you an example. So, you know, I've been in several 1031s over the years and, and, and every single time I'm in a 1031, I end up in some way, shape or form looking at single tenant, triple net lease deals. Yeah, I don't own a single single tenant triple net.

It'd be so much easier too.

It would be, wouldn't it? It's a really sexy, fun dream to think about. Ah, yeah. Just cash in all my chips, put it in Walgreens, you know, and, and.

Call it a day until they vacate.

Yeah, Correct. Right now you've got every idiot who's holding on to a Walgreens that they bought for a 4 cap in the last 10 years kicking themselves in the butts and losing money hand over fist. That dream doesn't exist. The dream of having a machine that manages an asset class that I think I know intimately and understand precisely. Okay, that dream exists and that's the dream I'm living.

But it's hard work. I mean, how many hours, I mean, to, to own and manage the management piece alone? I mean, ask me how many customers.

Have called me recently to thank me, right? Not one. It's not that kind of business. It's not feel good business.

Right.

From like the, the transaction standpoint and the customer standpoint, but it, it is still it for me personally, it is still feel good business in that like we do a lot of work to take care of buildings and manage a portfolio and manage a business plan and manage capital. And yes, that takes a lot of work.

So what's the advice to someone looking to get into investing? I mean, maybe it's, maybe it's a student, maybe it's someone who's a brokerage. Is it just, hey, just start going and flipping homes and figuring it out? Is it going and working for someone like you? I mean, what's the go going to school. I mean, what's the right path?

So I'm involved in Syracuse University alumni.

Yeah, they got a great real estate program there.

They do, yeah.

They actually came to visit here and.

Arnold's and a lot of, you know, Syracuse alum here, you know, in New York City in a lot of different part all over the industry. But so I get asked that question by, you know, sophomores and juniors and seniors all the time from Syracuse. And my advice is always the same, which is, you know, you have to go somewhere where you're going to see transactions. So I actually encourage people to go to brokerages, whether that be debt brokerages or investment sales brokerages. You know, my advice is the same, you got to go somewhere where you're going to see transactions. So for the last two summers I've had the same intern on our team from Syracuse University's real estate program. And I'm helping him get onto a team right now with like a super high performer. Okay. Who does a ton of business because that is where this 21 year old kid who's never worked in real estate doesn't actually know what goes into seeing a transaction all the way through. That's where he's going to see not just like three transactions I might do for the year. Okay. He's going to see like 300 transactions.

Yeah.

And he might not be super in depth involved in every single one of those, but that's my advice to anybody trying to get into the real estate business is that the brokerage business is where you're going to see a lot of transactions, hopefully, and where you're going to get a lot of exposure to how the industry operates.

Yeah, yeah.

Well, Peter, I love that advice and I think, you know, working for someone who's busy, Right. And that's how I learned, you know, working alongside Bob Nackle. And it's not like he said, james, I'm going to sit you down and teach you the real estate business. I was just like, hey, try to keep up, you know, and I think, you know, this is also a business where you learn by, by listening. So Peter, this has been amazing. Really appreciate you coming in. Thanks for having me sharing your story. I mean this is super exciting. Congrats on the 1300 units. Congrats on this, this next deal that's even bigger and better. And, and I, I hope on the next time we meet and sit down, you'll, you'll talk about doing a deal with, with Floyd. I, I, I love the fact that you put that out there. So really appreciate you coming again.

All right, well, thanks again for having me, James.

And thank you everyone for joining. As always, you can go to james nelson.build this site for you. That's where you can find out the notes for today's show, how to connect with Peter. There's also a lot of helpful resources there, so I don't know how you couldn't get a lot out of this show. So the best thing you can do is forward this to someone that you think could benefit from this. That's a great way to get the word out there. We're helping people to gain the insider's edge to real estate investing so you can outperform the market. Thanks again for listening. Until next week.

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