How To Increase The Profits In Your Multi-family Properties Without Investing Any Money with Tiffany Mittal (The Real Estate Investing Club #439)

Welcome to the Real Estate Investing Club. This is the place everyday real estate investors gather to share their best stories, biggest insights, and favorite tactics to grow a portfolio of cash-flowing properties in today's market. Here's your host, Gabe Peterson. All right, happy Friday, everybody. It is a beautiful, uh, kind of cloudy day here in California. We are still down with family. Um, so again, I say this at the beginning of every episode this month, if you guys hear a little bit of quality issues with the mic, it's because I have my trusty travel mic with me and it is not as cool and fancy as my super duper, uh, podcast mic up home. So, uh, bear with us. Uh, but today's a good day because we have Tiffany Mittal with us from UtilityRanger.com. She is a multifamily master hailing from originally California, now, uh, Florida. So both sunny states. Um, Tiffany, it is, uh, great to have you on the show.

Thanks for having me. Appreciate it.

Absolutely. Uh, I told you before we got on here, we like to start with stories. So why don't you take us to the beginning of your story? How'd you get started in real estate?

Um, I kind of fell into real estate as most people I kind of do. I was going to grad school and helping my husband with his apartments and started to realize that operations wasn't really my forte. Lots of bedbug issues and maintenance issues, and it just wasn't really what I was focused on. But I really loved helping my husband, and I'm kind of a problem solver by nature. So I kind of dove in to see, you know, what can I help with? What can I solve? And so kind of Went from there, moved into prop tech, but we still are active multifamily investors. We now have a prop tech company that was developed to solve problems in our own business.

Nice. I love it. Yeah, it's learning from people who are actively in real estate. I feel like it's the best way to get started. Something I wish that I had the opportunity to do, but You take what you can get. So your husband, he was doing multifamily prior to you getting in there?

Yeah, he pretty much grew up in the business. So his parents have a large portfolio of apartments in Los Angeles. He went down to San Diego to go to college, started building up a portfolio down in San Diego, and we grew that portfolio pretty big. Had about 100 units, we felt was pretty big at the time. Small compared to his parents' units, which were around 3,000. But we relocated recently to Florida and we just bought 30 units out in Florida and looking at continuing to buy and growing our portfolio out in Florida now.

Very cool. So Multifamily. Do you guys only do multifamily or are you in other asset classes?

So I think as most people, when you start off in real estate, you kind of start off buying single family, right? So my husband, when he was in college, he started buying a bunch of single family rentals in and around the San Diego State area because he knew he could rent them out to a bunch of students by the bedroom and treat it almost like a multifamily, but really student housing. But then you start getting into duplexes and fourplexes, and our largest property right now is 40 units, another 36 units. So it's kind of slowly creeping up. We're looking at a 72-unit right now in Florida. You definitely get some economies of scale, but we have recently sold our single-family portfolio in a bulk sale and did a 1031 to buy the 30 units out here in Florida. So You start to trade up in the process.

Yeah. And that's not to say— I mean, I say this every time we have multifamily guys on the show, because a lot of people out there listening, they feel like single-family is just for beginners. There's a lot of money in single-family. You can build a portfolio of 3,000 units in one city with single-family. So if you guys like single-family, definitely go for it. Multifamily is definitely cooler, in my opinion.

Single-family, though, You tend to have, it's pretty equity heavy. You tend to get a lot of appreciation, but it doesn't really match the cash flow. And so we were holding a lot of equity in our single-family homes, but we weren't able to really dial up the cash flow. So trading that out, we were able to triple our cash flow into 30 units than we had for the 6 homes that we had sold. Yeah.

So the 30 units, I feel like that's kind of a sweet spot because it's not, There's no institutional money in a 30-unit apartment complex, but it's not so small that you're looking at a $2,000 cash flow. So is that why you're stuck in that 30-unit range, or are you guys— what was your reasoning for going for that size of property?

Well, we were doing a 1031 exchange, and so we had about $3 million of equity in the homes collectively that we were selling in San Diego. And so you look to see, okay, if I have $3 million of equity in these homes, what can that buy me? So if you're going to put a 60% loan-to-value or 70% loan-to-value, what's available in the market? You have to also look what's available in the market. And in a 1031 exchange, you have to also say, okay, what's my backup? So initially we had found a 40-unit property in Stuart, Florida, right on the water. It was a historic building. But you don't want to fall in love with the property. We kind of fell in love with the property, but we said, okay, let's get this other backup one in Pompano Beach. That's 30 units. It's a little bit smaller. But during the due diligence on the 40-unit property, we realized there was a much larger capital requirement for some building stabilization that was kind of outside of our comfort zone. You're talking about putting pilings in the ground.

The foundation kind of stuff.

Yeah. But that was great. This is making us a little bit uncomfortable, so let's go with our backup. And then right towards the end, everything started lining up, and then the seller actually carried the financing on that for us as well. So we were able to not only put the money in, get about 60% loan-to-value, but then the seller carried the remaining debt on that. So it ended up lining up perfectly, but you kind of just Always have to have a backup. So we went with a 30-unit backup, and we were looking 30 to 40 just based on what we had to put down.

Yeah, that's a lesson I still struggle with. I get married to these properties that I look at sometimes. I'm just like, I need to close this.

I know.

And the funny thing is the best properties I bought were ones that I wasn't super excited about, and I was just like, whatever, it's this property.

I heard the best piece of advice recently. So when we were going through this deal on the 40-unit, It was just such a cool building and it was on the water. It had boat docks outside and it had all this potential, but it held a lot of risk involved. And somebody who we think of as a really close advisor to us said, look, this is a really cool deal, but you know, you don't always have to hit a home run. You just got to get on base. And, you know, that kind of resonated with us and said, yes, that would be a home run, but if it's an not a home run. It could be a total fail.

Yeah.

And that's just too big of a project for where we are at in our investing timeline to kind of take that big of a risk right now. So we said, okay, well, let's get on base, get the guaranteed cash flow. The other one had just gone through major renovation, still needed a lease-up, and so we couldn't get a good loan on it. So you kind of have to take all these things into consideration when buying new properties. And yeah, that one won out. Not as sexy as the other one, but—

But it works.

It probably worked out in our best interest.

Yeah, I'm of the opinion that risk mitigation is more important than slam dunks. So if you're looking at 2 deals, one of them has the potential to earn you $10 billion and the other, but there's a chance that you're going to lose $10 billion, might as well go with the one that's a little bit more guaranteed.

Exactly. Exactly.

So multifamily is not all you guys do. You also have the SaaS company, which is oriented towards multifamily. Let's talk about Utility Ranger. What do you guys do there? What's— who's your, you know, your primary customer? What's the— what's the purpose of the company?

So when I was helping with my husband's multifamily properties, we noticed that our utility bills were going up so much. And we couldn't really raise rents to keep up with the increasing cost. And you talked— utilities are typically the 3rd largest expense on the books. And so we'd heard of this thing called RUBS at the time, and this is, you know, in 2010. And so we'd heard of this thing called RUBS, which is Ratio Utility Billing Service or System, which is basically you hire these companies to take your master meter water, sewer, trash bills, and they sub-bill them out to your residents on your behalf. So we went to all these companies, we asked them to help us, and they all turned us away and said, I'm sorry, you're 100 units, you're not big enough. Unless you have 1,000 units in your portfolio, we won't help you. So I decided to kind of backdoor the system. My husband said, hey, you know, you don't really want to be in operations. Why don't you go and work for one of these companies? And, you know, they may be able to take us on as a client by default. So that's what I did. I went to go work for a company. that was based in San Diego. I helped grow that company from $100,000 to $20 million in 5 years, learned everything there was to learn about utility billing. And that's when we really discovered the secret of it was we'd refinanced one of our properties in San Diego. It was 36 units and we got about $36,000 of additional utility income that year when we went to go refinance that property. And you're just getting back basically what you're spending. So it's just a reimbursement. But when we went to go refinance that property, That lifts your NOI by $36,000. But $36,000 divided by a 3.5 cap is almost a million-dollar increase in valuation.

Yeah.

And we were like, oh my God, the light bulb went off. We said, what are we doing? Like, this is like a way that we could basically help grow our portfolio. We were able to do a cash-out refinance of $500,000, use that money to buy another property. And so we said, why won't any of these service companies help people with under 1,000 units? What if you have 500 units in your portfolio? That comes out to almost $17 or $18 million in value increase, and no one will help you. So I said, you know what? And my sister at the time, who owned about a dozen units in LA, she said, oh, will you take me on as a client? I said, I'm sorry, I can't, but let me develop this little calculator for you, and I'll teach you how to mail merge it. So she'd been using that for years. And I said, you know what? If she can use it, and then I was using it. I'm sure there's a lot of other kind of small mom-and-pop owners that need this help too, and no one will service them. So I, I said, we need to take this service model and turn it into a software model and basically provide the same opportunities to the little guys that the big guys have had for years to help grow their portfolios through forced appreciation. And that's when I realized the secret is forced appreciation for utility billing.

Yeah.

You know, how can you tick up every little ounce of NOI that you can? So we started Utility Ranger in 2020, and about a year in, we pitched our company to Grant Cardone because I knew that his whole audience is my target market, these smaller investors trying to grow. They started 10X Incubator. And so when I pitched my company to 10X Incubator, they acquired half our company on the spot.

Nice.

And it was insane. Amazing. They helped me finish my product. Did you get to meet Grant? I did get to meet him, of course. We finished my product about a year later. We raised some money and we launched earlier this year. So it's been— actually, now we're in 2024. So we launched earlier in 2023, in April of 2023. So it's been a whirlwind and just really helping small operators like myself kind of figure out how to leverage their property's equity, grow their equity, leverage that equity to buy more properties and use that forced appreciation that they typically don't have access to because no one will help them. You don't need these service companies. You can do it yourself. You just need the right tool to do it.

Yeah, that's really cool. I like the idea. And I mean, we have mobile home parks and even there it would work because we have a couple master metered mobile home parks and we've gotten quotes to individually submeter where you go out there and they do a contraption on the actual water utility spout and it's super expensive.

It's not only super expensive, but the failure rate is incredibly high. You need the meter. If you're up in the north, you not only need the meter, but you need the sleeve to keep the pipe and the meter warm because the cold air can freeze and break the meter on top of it. You need the meter reading equipment. So you have all these failures, but if you look at what you get in return, whether you're doing a sub-meter project or whether you're using rubs, it's pretty negligible from the owner's standpoint. So why stick out a bunch of money and a bunch of capital into my properties that maybe I don't have when I can get the same result just by dividing it up by how many people you have in your unit and the size of your unit? I mean, you can't divide it equally because that's not fair. You have like the little old lady in one unit and a family of 5 in the next. So you have to do it by occupancy and square feet. So it's like, why dump a bunch of money into my properties when I can get the same results? Yeah, but mobile homes is a market for us as well.

Yeah, I definitely see the potential. Maybe it's something we're going to have to get into because you're right. I mean, when it comes to refinancing, selling, it's amazing. how just a little bit of NOI that you add on to the end drastically increases the valuation of your property. And so if you can prove, as you said, $30,000 in NOI, you said $1 million, but that's like a really low cap rate, at least.

Well, this is California too, right? This is California, and this is 2014, 2013, I think it was.

Okay.

But I can give you really quick numbers that you can use for your mobile homes even. So you take the number of units you have. This is like back of the envelope calculation, so it's not exact, but the real quick calculation is number of units you have times it by 1,000 because that's about $1,000 a year per unit you're going to get back, which comes out to be about $80 a month per unit. So $1,000 times the number of units you have, that total divided by your cap rate, and that's the money that you're leaving on the table. So take your number of mobile homes, Times it by 1,000 and divide it by your average cap rate. Tell me what the number is.

Let's do that. I'm going to use a 7 cap. I want to be generous just because it's mobile home.

Okay.

So even there, I just did the calculation. It's $1 million that we're— $1 million—

You're leaving on the table.

Yeah, $1,028,000. So that's crazy. That's a huge, huge number. So great product. I'm glad you guys had success. It's cool you got to meet Grant Cardone.

Yeah.

So I'm going to take that opportunity to move us on to the quick question round. Are you ready?

Yeah.

All right. Let's do it. It starts with education. It could be any form. It could be Netflix series, books, YouTube channels, whatever. I just need 2 recommendations, one for general life wisdom and then one for real estate. Hey, guys, quick break from the show. If you've listened to this podcast before, you know we are always talking about how important it is to have the right mentors and partners in real estate, which is exactly why I've opened up the Real Estate Investing Club online community. It's a place for active investors to learn, collaborate, and get real deals done together. And right now it is 100% free to join. We host weekly calls where we review deals, talk strategy, and share tactics. Just click the link in the description below and come join us.

Well, the real estate one is easy. I think Grant Cardone's education that he gives is so amazing for not only real estate, but really life on how to really kind of negotiate deals. It translates farther than just real estate. So I think that's a large one. As far as education, I'm a proponent of continuing education. I go back and take Courses at my alma mater every year or so. I take about a week-long course just to do— like, I just did a women on boards one a couple of years ago. I did a real estate one a couple of years ago. I like to go and continuing to go back to, you know, learning something that I haven't learned yet and kind of stretching my mind. I think continuing to grow. can be uncomfortable, but you're not going to grow unless you put the effort forth into learning it.

That's cool. You're the first person to say a university as their, their source of continuing education. So very cool. Where'd you graduate from?

That was Harvard Business School.

Well, there you go. That's a good place to go. I've heard they have good education. All right, next question is for your younger self. So let's go back to Tiffany, who was just buying those first few single-family, go back to her, look her in the eye, give her one piece of advice moving forward.

To just do it. I mean, you just have to make the commitment and do it and not be scared. I think if I could have done it again, I would have bought more and bought many more.

Yeah. And then that echoes— I used to keep a tally of all the people that come on the podcast who say they wish they got started earlier or they wish they went harder, some form of that.

Yeah.

And it's like 90% of the people say that. And I say it every single time. If anybody out there listening, if you have not bought your first property, you're listening because you want to learn about real estate, this is a message directly to you. Just go out there, get it done. Just buy a property, get a single family, just get your foot in the game. Because like Tiffany, like myself, when you're 10 years down the road, you're going to wish you got started sooner. So now is the time. Just go out there and get her done. All right, next question is, um, about the US. It is a big spot, a lot of opportunity. Give me the single metro you're most excited about investing in today.

I'm most excited about investing in South Florida. I think there's a ton of opportunity. There's a ton of companies moving here. They say it's about 1,000 people a day still moving to Florida. There's a lot of demand. Workforce demand right now, just to— I mean, think about Florida. It used to be the land of, you know, second homes, which is why it kind of really collapsed in '08. But now everyone's second home has turned into their primary home, right? And so the infrastructure can't really support all these primary homeowners.

Oh, right.

So the workforce demand is high, but then what comes after workforce demand is workforce housing, right? How are you going to house all these people who are coming here to support the people who are here full-time? So I'm really bullish on South Florida, and we're actively looking to acquire things here as quickly as we can.

Nice. You put it in a way that makes a lot of sense to me because I never really clicked that dynamic. People living in New York, living in Austin, whatever, they have a second home in Florida that they vacation to, and then they retire and they're like, I'd rather retire in Florida. And so now they're living in Florida. That makes a lot of sense.

I think 2020 really kind of changed the game though, if you think about it. People put kind of quality of life over where they worked because everybody now works remotely pretty much, so you can live wherever you want. I think that whole shift in economics really changed the game for Florida. So I think you can still buy units in Florida for under $200 a door. Where we can sell our properties in San Diego for $330 a door in C neighborhoods and buy in South Florida for under $200 a door in B neighborhoods, you know, and the rents are pretty much the same, if not better. So I think there's still a lot of great opportunities here in South Florida, and we all are also here. I think we want to have properties where we live. So we can stop by, visit them. We're not in operations anymore. We have third-party management, but you still want to go by and check on the properties.

Make sure they're still standing.

Yeah.

Yeah. The one caveat, but the one thing that kind of has scared me away from Florida, I've been sent deals that were pretty good in Florida, and I know the metrics are just crushing it. It's a great place to invest, but for some reason I have this weird fear about hurricanes and about sea level rise. And so these deals that I see, I'm just like, I just can't do it. I just can't do it. But I mean, obviously Florida is a great place to invest.

Beautiful. It's like saying you're afraid of earthquakes in California, though.

That's true. That's true.

I mean, you just have to kind of put boots on the ground and understand the market. You're not going to necessarily buy in an area that's flood-prone, and it's different. Everybody in California buys stick-built where everything in Florida has to be concrete block. So there's different nuances that you need to learn. But if you're looking at any deals in Florida, I'm happy to give you my 2 cents of what we've learned so far the year and a half that we've been here.

I did not know that about them being block-based.

Yeah, because of the hurricanes, right? We have stick-built in California to really sway with the earthquakes, right? But you don't want that kind of you know, organic material in a very humid state, right? You have a lot of mold issues and a lot of wind issues, not only hurricanes, but just lots of wind issues that come up. And stick-built is not as safe, and you can't even build really stick-built in Florida anymore. If you have anything that's stick-built, you're pretty much having to tear down and rebuild to code, which is all concrete block.

Huh, that's interesting. All right, moving us along to the next question. I do this every time I ask a question and I lose my spot. So let me— all right. Lessons learned. Not every deal we get into goes the way we expect it. Sometimes a wrench is thrown into the mix and the deal goes a little bit sideways, but those are the perfect times to learn our lesson and to take it to the next deal. So what was a deal that went a little bit sideways for you? And then what was the lesson that you pulled from it?

Actually, I think we mentioned this earlier. It was that 40 units that we were going to buy right on the water. We were kind of in love with it and trying not to be in love with it. But you have to finally look at the numbers and look at all the nuances and say, okay, is this a risk that we're willing to take? You know, you have to look at your financial scenario and say, is this a— are we at a point in our careers or a point in our investment careers that we could take this risk or not. And so our lesson learned was always have a backup. Thank God we had a backup, but we weren't really paying attention to the backup as much as maybe we should have upfront. So everything worked out the way it was meant to. The other property is still for sale. That sounds like a deal. And I still really like it. I drive by it somewhat often and I still really like it. I We're just not in a position to move on something that risky right now. But have a backup for your backup.

Yeah. Having a backup is super important. And it sounds like the owner of that property probably needs to reconsider his asking price if there's that much risk. All right. That leads us to the very last question. This is for the listeners. You've given us a lot to think about. I'm sure people want to reach out. get in contact with you, learn a little bit more about Utility Ranger. Um, so what is the best way for them to reach out?

Um, they can reach me on utilityranger.com, or they can reach me on any social media handle under Utility Ranger.

Perfect. I will put that in the show notes. utilityranger.com, super easy to spell, so I'm not going to spell it out, but it'll be down there. All you guys got to do is just click the little more in the description, it'll pull down that full description, and there you can find the link. All right, Tiffany, that wraps it up. Thank you very much for hopping on the show.

Thank you.

Take care. Absolutely. Uh, for everybody who's here with us today, thank you guys for showing up. You are the reason we do this. So if you guys have any questions whatsoever, reach out to me, Gabe, at therealestateinvestingclub.com. Uh, if you guys want to support the show, as always, just give us a like, subscribe, share, all that jazz. Other than that, I hope you guys have a great week. Keep rocking real estate, and I look forward to seeing you on the next episode.