Dan Handford - Untold Stories Of Real Estate Investing - Strength Resilience of Class A Multifamily

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Welcome to the Untold Stories of Real Estate Investing. This is your host, Wayne Courageous. Today we're going to hear from Dan Hanford, who is a Managing Principal with PassiveInvesting.com I'm really excited to have Dan due to his wealth of knowledge both on the passive and active investor side. Over the past 12 months, Dan and his team have invested in over $136 million worth of multifamily properties with a capital raise of 50 million to purchase these assets. In addition to his active investing experience, he currently and passively invests with other investment groups in 23 different properties. Based out of Columbia, South Carolina, Dan is also the founder of Multifamily Investor Nation where he educates multifamily investors with over 26,000 members. In addition, Dan and his wife Danae host Tough Decisions for Entrepreneurs podcast. Without further ado, welcome to our show, Dan.

Wayne, thanks for having me. Looking forward to sharing with the audience and providing some value.

So, very impressive background. I'm sure there were items I missed. Is there anything you want to add to introduce yourself?

And I don't know where to begin. I mean, there's. There's so much in my background that I could kind of dive into and discuss. But the biggest thing I would say is the main reason why I got into the multifamily side of things and investing is from the tax benefits because I had already started a couple of successful businesses and they were cash flowing nicely and writing large checks to the government and was trying to figure out a way to reduce my taxable liability because I saw these other high net worth individuals making lots of money and paying no money in taxes and so started going down that road and found out that there was a lot of other people that were like me that didn't have the time or didn't want to make the time to be able to invest in real estate. And that's why we launched passiveinvesting.com to allow the everyday investor to be able to invest in institutional quality assets that are normally reserved for those who are in like REITs or hedge funds or family offices. And so when we can pool our money and resources together, we can take down some of these large projects without having to worry about the, these, these, these other institutional assets, these other institutional companies.

So did you start off passively investing since you were, you had started several businesses or did you go right into the active side?

So it was kind of a dual approach. But I did start passively investing first, but shortly thereafter I went into the active side of investing. Nice.

So you've started several businesses from scratch that are non real estate related. One being a large group of non surgical orthopedic medical clinics located in South Carolina. With your success in these businesses, was what was your motivation to start investing as an active investor in multifamily apartments? You mentioned the tax perspective. Were there other, any other motivations to get on the active versus just continuing on the passive side since you were already successful in your businesses?

Well, I would go back to the taxes because as a passive investor only, you only get the benefits of depreciation on your other income. That is, that is actually passive income. Right. Because I wasn't classified as a real estate professional, but being classified as a real estate professional allowed me to offset all of my other income, which allowed me to reduce my taxable liability to zero.

So you were able to even offset the income that you were making in your non real estate investments?

Correct.

Okay. And so you set up your business by what, through an llc? And then when you, when you did your, your tax filings, you would be, you're married, so filing jointly and you would just add that as businesses and then offset all those expenses on your taxes. Is that, does that sound about right?

Well, it doesn't offset the expenses, it would offset the income. So obviously we have a CPA that handles all this stuff for us, but we have multiple businesses, all the orthopedic clinics and some online businesses and things like that. And so the income that's gener off of that because we have, I'm classified as a real estate professional. It allows me to use the depreciation to offset other gains and other income. And so the income that I'm making off the clinics as well as the other businesses is reduced by the depreciation that we're allowed to get off of the real estate side of things.

And so you're based out of Columbia. Is that where you first purchased your property? Can you talk us through sort of how you scaled and added members to your team for the passive investing dot Com.

Sure. And for those of you who are wondering, it's not Columbia the country, this is Columbia, South Carolina. So I'm right here in the middle of the state. Grew up in the upstate of South Carolina, in Greenville, South Carolina. We actually have a few acquisitions there in Greenville, South Carolina. I'm not a big fan of the market for multifamily in Columbia, South Carolina so I do not invest here passively or actively. But we do have acquisitions in Charleston, South Carolina, Charlotte, North Carolina, Raleigh, Durham, Chapel Hill area, the Triangle area in North Carolina and then of course in Greenville, South Carolina. We're looking inside of Charleston, but have not found anything yet. The way we first got started is when I decided to go forward and investing in real estate as an active investor. I hired a mentor and I wanted to hire a mentor that I could have direct access to and I didn't mind paying a little bit more money for that. I'm not a big fan of paying for somebody else's student that they coached. I wanted to get access to the main person to be able to have that lifeline whenever I need it and so hired that person to be able to allow us to acquire some assets. I did some co GP and work with some other groups in the beginning and then we started to put together our first deal. Took us about nine months to put together our first deal of our own that we actually were the main operator on. And that was an $8.9 million deal. And then fast forward to today where last, last October, October 2019, we closed a 51 and a half million dollar deal, raised 14 million equity to acquire that one out of Raleigh, North Carolina. And then just two weeks ago, in the middle of the COVID 19 pandemic, just closed a class A multifamily asset in Charlotte, North Carolina that was at right under $50 million or like 49.955 million.

Congratulations on all those achievements. And then the most recent purchase. So you focus more so on class A multifamily properties. Why did you choose that sector of the multifamily investing?

Sure. So it's not just the Class A that we focus on. There's two types of assets that we're really looking at and it's the B plus with value add, so light to moderate value add 4 to 6000 a door stabilized assets. We're not going to buy an underperforming asset and try to think we can get it better. We're going to buy a stabilized asset that has room for rent growth. If we can come in and actually do some renovations to bring it up to the current standards. And then of course, we're looking at the core plus class a. So Class A's, we're looking for a 2010-2015, give or take, that's stabilized, already, leased up and cash flowing nicely. And then the Class Bs are going to be about the early to mid 2000s that we're looking for. And the main reason why we're going after these nicer assets is because, for one, our investors invest in assets that they can, that they can see themselves living in. Right? And when you try to take down some of these lower end properties in the C and B class and lower in B class properties, it's harder to get an investor to kind of visualize themselves living there. Right. And so that was one of the biggest reasons. And if you look at all asset classes across the board, A, B and C, the A classes are going to be lower return, but also lower risk. The C class is going to be higher return, but higher risk. So that's one of the things that doesn't get talked about a lot in multifamily is that there's actually differences in returns on all these different levels because their risks are different. So one of the biggest things you always hear is, well, if you get into A, then all the A's when there's a recession go to the B and all the B's go to C or, you know, whatever, or you say really the A's go to B's, B's don't want to go to C's, so the C's, so the B is the best place to be. Right. We've all heard of that before. But it's, if you look at the data, it's not actually support that. There are some people in A that do go down to B, but the A has still maintained a pretty high occupancy even during a recession. And so that's one of the things you have to look at, especially right now with COVID 19, we're seeing that these class A and these higher properties are collecting higher average rents than you, than you, than you would across the board. Especially inside of these lower end B and C class assets, where those are the jobs and those are the people that are getting hurt the worst. And those people live paycheck to paycheck. And so when they don't get paid, they can't pay their rents. Whereas if you're in a class B plus or an A class property, these people are not living paycheck to paycheck, they usually have some reserves set aside in their, so if something does happen, they can at least continue to make their monthly payments to be able to keep the house, keep able to keep the roof over their head.

Yeah, and that, that all makes sense. And I agree with you with the point of, with the investment pools or investor pools with what they're trying to do with their investment capital. So if I'm looking to preserve capital, then it would be more likely right to invest in a class A property or where maybe the risk is less and it's more stabilized, there's less renovations, but the cash flow is more predictable. To your point there, the renters typically are in good jobs or you know, they have savings, whereas those that are looking for more upside, more equity to grow their, their wealth or investments, you know, they would look more at a class B or maybe even a C depending on where the location is and all. So you, do you fit both styles of investors with your strategy?

Well, I would say that any investors concerned with capital preservation, so whether you're investing in a C class property or an A class property, you better be thinking about capital preservation. And I would never invest as an investor, as a passive investor in a project if I didn't think that there was capital preservation at play. I think where the biggest question mark comes in is, is are you willing to give up some potential risk of making you making lower returns because the deal isn't, it doesn't pan out the way it happens to achieve a higher return? For example, should you invest in a C class property that's projecting a 20% annualized return to hopefully get 20%, but then you might only get say 5%. Right. But hopefully they still have stop gaps and measures in place to preserve the capital. And then of course, on the other side of it, you have the A class where you know, if you're going to project a, you know, 10% or 11, 12 or 13% annualized return, you're going to get lower returns, but it's not guaranteed. But it's a safer investment, which is why you see a lot of these institutional quality investors looking for class A's because they know it's a safe investment and there's less volatility with those safer investments. Even though they have lower returns, they're willing to give up that risk to give that surety of being able to get the returns they're looking for. But on both sides of it, you definitely have to be looking for capital preservation. And I would never invest with Somebody if I didn't know that they were taking care of the capital preservation side of it too. Yeah.

So when you started your real estate investment career, what did you wish you had known when you, when you got started?

Well, I think one of the biggest things that you have to think about when it comes to what you should have known is kind of looking back and saying, hey, you know, back then, if I would have known this, you know, what could have done, what could I have done to change my path? And I would probably say starting the ability to find investors earlier. So you're always, there's always two things that are. You're always doing in an apartment syndication business where you're trying to find these deals and raise money. Those are the two main things you have to do. You got to raise money, or not really raise money, but really find investors first. And then you have to be able to secure the deal and actually find the deal. And so obviously in the very beginning, when I first got started, I was really focused on trying to find that first deal and where I kind of lagged in trying to get that find investors. And that very first deal that we did on our own, that $8.9 million deal, we raised just over $2 million to acquire that one. And it took us the entire 60 days to do it right. And fast forward now, it doesn't take us 60 days to raise or to raise even $14 million. So the deal we closed in October of last year, we raised $14 million in just under two weeks to be able to acquire that asset. Now obviously, the one we just closed was in the middle of the pandemic. So it took a little bit longer to be able to raise the funds in the middle of the pandemic. But what I'm trying to say is that it'll get easier and easier for you to raise funds if you start to build out your investor management for investor relations piece to be able to acquire new investors, but then build a fence around them to allow them to be able to continue to hear from you on a regular and consistent basis.

Yeah, that's a challenge that, you know, I personally see is starting especially working full time with all my commercial real estate career is juggling the fact of doing due diligence and going after opportunities, building the relationships with brokers and such and then at the same time building the investor list. And so it's very time consuming to doing both. And a lot of the passive investors or potential investors, they're looking, do you have a deal today? And when you Don't. It's like it's more of an education to this point of, hey, we're, we're actively looking for deals and we want you ready on the sideline for when that, when that opportunity comes. So interesting thoughts on building that investor list since you went more of an opposite direction than what I'm doing right now is, is not so much looking for the properties full time, you know, maybe 20% of the time, but more 80% of the time right now, at least over the next few months is building that investor, investor list.

Well, and the biggest thing you have to do though, Wayne, is that once you find investors, you have to, like I said earlier, build that fence around them. And so that, that has to do with building an education and providing value to your investors. And one of the things that we do with our investors is, yes, we have an email list. Yes, we send out a monthly email to our investors, yes, we keep in contact with them. But I get the mailing address, the physical mailing address of every single one of our investors so that I can add them and start sending them a physical printed mailed newsletter to them. And this newsletter is not something that we just whip together. It's a 12 to 18 page newsletter that allows us to be able to educate our investors on various things that are going to be coming down the pike with us. But also it also allows me to educate them on things like for example, I'm pulling out, I'm looking at my newsletter that we just sent out for the month of May. And in this one I wrote an article on understanding the capital stack. You know, and most investors that we work with sometimes don't even understand what a capital stack is and how it works. You know, you talk about, when you talk about the best position for them to be in is at the bottom, they're thinking, I don't want to be at the bottom, I want to be at the top. But if you understand the capital stack, you realize that the lower you are in the capital stack is the better position to be in. And so, right, we wrote an article on that and gave some nice graphs and charts that we did on our own to show our investors, you know, and educate our investors. And that goes out every month and every investor gets it. We also interview one of our investors and write an article on that that them in the newsletter and so that other investors get to know who they're investing alongside. And then one of the other things we do now we have their mailing address is once we have our next deal, we print up an actual investment package and we actually perfect bind it and actually have it printed and we mail each one of those investors a copy of it. Because we have a pretty high open rate with our emails. We're about a 56% open rate, which is pretty strong. But it also, I look at that, I look at it and say we have a pretty low. There's actually 40, 44% of the people that aren't even opening up the email, whether that's Gmail catching it or Outlook or whatever. And putting it in the junk box allows us to be able to now have another avenue of getting in front of them, even if their email doesn't even get through to them.

Those are great points, especially for those that are starting the syndication process. So I started the Untold Stories of Real Estate Investing podcast to really hear from people like yourself and learn for myself and for the listeners on what are the things to look out for from an infrastructure or deal structure. And so I just want to shift gears on us real quick and really just talk about what have been some major stress points and lessons learned, things that have kept you up at night on deals. And Obviously your team, PassiveInvesting.com has been very successful and your investors keep coming back to you. So you've obviously have been able to get through those challenges and times where there was some uncertainty. But would you mind sharing with us any stress points or lessons learned that y' all have experienced over the years that you feel like other people should, should learn from?

Sure. I think one of the biggest mistakes that we made in the beginning is on that very first deal, one of the things that we forgot to do, and I don't want to say we forgot to do, we just didn't do because we didn't know we needed to do, is make sure we have more than we think we're going to need for operating reserves. And it's not necessarily for the fact that we're going to need them for operating, but you never know when the lender might require you to put more money up for something or you're going to need those extra funds for something down the road. Right. And for us in that deal, and I think it was because it was our very first deal, we were our own loan guarantors and everything on those projects that they required us to put additional money in for interest reserves and insurance reserves and tax escrows and additional funds that we didn't expect that they were going to require us to do. And so ever since that deal, we have put in those extra operating reserves because we wanted to make sure we were well capitalized. And it also allows us to make sure that we have ample funds throughout the deal as well. Now, some people would look at that and go, yeah, but now you're holding on to some money, right? Like our most recent deal that we closed in Charlotte, we raised 19 point, almost $19.4 million for that deal. And we have 1.2 million in operating reserves in that deal the day, the day we closed. And that money will just sit there as operating reserves. And we're paying for it, right, because we have investors money. And we're paying those investors on a monthly basis because we do monthly distributions. And so it costs money for us to have that money sitting there, but for us, it allows us to know that we're not going to have to worry about in the future about doing some form of a capital call for our investors. And we ran the scenarios of doing that versus not doing it, and it only changes the returns by about 30 or 40 basis points. So for me and for our investors, we would prefer to have that extra operating reserve, even if we have to give up a little bit of our return to make sure it's a safer investment. So that's one of the things that we did and very glad we did it on this deal because obviously with COVID 19, the lenders are requiring interest reserves. And so they required a principal and it's just reserves. They required nine months of that with this project. And so if we didn't have that in place, the deal might not have, might not have even happened.

So with your operating reserve, is that separate then? It sounds like it's separate than your capital reserve that you would, you would typically have as well. And then how many months of operating reserves are you putting aside? And this operating reserves is based on what, your total operating expenses with payroll, R and M utilities, Am I understanding it correctly?

And the debt service? Yes. So it's different than the, not the capital account, but the CAPEX account. So it's totally different than the CAPEX funds. And so this particular project had very little on CapEx because it was a class A deal, just bills in 2014. But the capital, the actual operating reserves are set aside for between four to six months of operating reserves if for some reason we need it. Um, what I mean by four to six months is if the occupancy drops down to zero, we should be able to make, we should be able to continue to pay the expenses and the debt service for four to Six months.

That's fantastic. I mean, especially with right now, with everything going on, if you're able to do that especially. And then are you also understanding with this most recent asset, with it being 2014, not a lot of capital, but would you recommend doing a, doing the OPEX or an operating reserve plus a capital reserve and, and for those class B older properties?

Well, I mean, I think you have to, you kind of have to balance that because if, if you, for the CAPEX reserves, that's really going to be for, not necessarily reserves, but like Capex for doing the renovations that you're doing. Right. And as far as, you know, reserves for Capex, the lender is going to require you to do that anyway. They're going to usually have you put in between about 250 and $300 per month per, per unit and not per month per year per unit back in operating reserves and they're going to hold on to it. So there's going to be already some additional reserves in place for those CAPEX funds that come up as well.

So these newer properties that you are purchasing, obviously you can't assume that the construction was done correctly. I mean, you go through probably the same due diligence going unit by unit as you would for an older property. Has there been any lessons learned or any, any things that y' all would have done differently from a due diligence standpoint on any of your properties?

From a due diligence standpoint? No. I can't think of anything other than there was one deal where it really wasn't our fault, but the seller failed to disclose an environmental issue that they experienced when they acquired the property. And it came up during our due diligence. And so now one of the things that we always do is we always ask verbally, we ask the seller on the buyer call, is there anything from an environmental perspective that we should be aware of on the property? And that way it'll jog their members, their memory to actually tell us because I think it probably didn't even cross their mind because they didn't even think about it because it was, it was a non issue. But it caused us to have to probably spend like 25,000 extra dollars to do two phase, phase two studies, subsequent phase two studies on this asset to be able to clear, to allow the lender to be able to clear it.

So what are the most overlooked aspects of real estate investing that can cause investment mistakes?

I think you had to look at the underwriting, and in the underwriting there's a lot of things that you can do, a lot of moving parts and pieces and a lot of levers that can be pulled to make returns look good. And you probably know as well as I know that you can pull some of these levers and make these returns look really, really good. But are they really realistic? And so there's a lot of these different levers, meaning one of the biggest things that I see is a lot of deals that are really high in fees, early fee heavy they have, they start to compromise their exit cap rate assumptions. And so instead of having at least a 50 to 75 basis spread on the entry and the exit, they start to lower that. Right. Especially on these lower end class B or class C properties, you're starting to see, you know, 10, 20 basis spreads on five year holds where I have even seen some that actually reduce the cap rate upon exit. And then it starts to make sense as to why they can actually have such a fee heavy deals. Because their assumptions are really, really out there and you have to run a exactly perfect deal in order for them to make sense. And so understanding underwriting even as a passive investor is something that's very crucial and important. So you can start to ask the right questions when you're investing as well.

Yeah, so I really want to hit on that because that's really a great point from a passive investor side. So the expectation is that a passive investor is not going to do the underwriting or go through all the details. But I think you can ask questions that gives you a little, gives you a sense of, you know, does it make sense? And one of those points that you made was, you know, is it 50 to 70 basis points higher than the going in, you know, cap rate? So if you're at a 6% cap, the underwriting likely, you know, on the exit would be six and a half percent. And the lower the cap rate, you know, the higher the value. So it's, it's putting in there a little bit of a cushion to whether any market condition that we're not really, you know, we can't foresee, you know, five, seven years from now.

It's exactly, it's exactly correct because I mean, even right now in the middle of the pandemic, you know, we're going to see some deals that are going to probably fall through and it's a lot of it's due to the underwriting and being a little bit too aggressive with it. And I mean, I don't think you're going to see as many as you might have saw in 2008. I think we're going to see a fairly V shaped recovery in my opinion, especially given the dynamics that we're seeing even from the CDC on infection rates and things like that being a lot less than what was originally projected. But at the same time you have to make sure that you underwrite conservatively. And that's one of the reasons why I like Danny on our team. Daniel Randazzo is one of our partners and one of our managing partners on our group. And his background is that he used to be a former top financial analyst with Deloitte. And so he comes to us and then does all of our financial underwriting and due diligence and heads our asset management division and things like that. And we're running this as a true business, not just as a side hobby. And I think a lot of times you can get caught into the aspects of just trying to find one deal and raising money for a deal and that's it. But you really need to start thinking about building out a team and running this as a true business because at the end of the day that's really what it is. And you have to be able to sleep well at night, put your head on your pillow and, and sleep well. When you take on the amount of money to people are entrusting that much money to you. I mean for our group to be able to bring in over $50 million in the last 12 to 13 months, I mean it's, that's pretty significant. And I sleep well at night because I know the assets that we have that money in are really good quality and cash flowing assets.

Yeah, you're able to sleep at night because going back to you underwrote at a conservative rate. So with Post Covid now, you know, I've been seeing some posts online and social media on how people are starting to underwrite deals and I'm seeing pretty common out there that year one, you know, likely no rent increases, maybe even a negative rent increase. And then you know, year two, you know, starting to bump up. Are you all starting to do that in your underwriting? I'm sure you are, but what other things are you all adapting to from an operational and a revenue when you're buying properties and for your existing properties?

Post Covid well, I'll tell you that the class A's right now are really solid because there's not a lot of as long as you can still make it cash flow nicely with very little rent growth in the first 12 months. But for us, I mean the Class A's have been really nice as far as the underwriting, because there has been some discounts, you know, 3 to 5% or so as far as the purchase prices on the Class A's. And so they're still selling, they're still trading, we're still making offers and still bidding on them. But we don't have to worry about renovation timelines or high rent growth assumptions or anything like that. Whereas in your deals that are your B and C class, you're going to have a lot more renovations at play. And so even the B plus assets that we look at, it's been a lot harder to pencil them because we don't really know what's going to happen as far as rent growth assumptions are concerned. And so whenever we're trying to underwrite, it's a little more challenging. So you got to add in a lot more, a lot of extra buffers and increasing the stress test that you're doing to see what does the actual deal do and how does it pencil when you start to modify the entry and exit cap rates or the economic and physical vacancy rates and various things like that, as well as, as well as the expenses themselves. So there's a lot of different aspects that you have to look at when you're trying to implement different value plays on these assets. And right now it's a little more challenging to do that because of some of the unknowns.

Yeah. And you know, hopefully, I mean, you seem to be very optimistic of V shape. I'm more of the. The Nike swoosh. I think it. There'll be some time of recovery and really state to state dependent on the reopening and just how things progress over the next few months. Hopefully everybody, most are staying well and we're able to get back to a new normal. But in a Class A, I mean, really Class A right now has benefited from the workforce that's in Class A are still, you know, able to pay rents that are still working. Really, you're right. Class B and C has taken a harder hit because of the workforce, the residents and those assets. But what can impact class A in 2008, 2009, I mean, class A, you could argue, was hit really bad. And class B and C seemed to survive and do better. So when you look at the risk of Class A, knowing that there's a lot of positive, obviously, but what do you think are some risks in particular asset class that you focus on?

Let me ask you this. Where are you getting your data that Class A was hit really hard and really bad in 2008.

Well, with the aspect of just a lot of people losing their jobs, I was getting into the commercial real estate industry. Class A, you know, office was what I was focused on. And a lot of tenants were doing a lot of layoffs in every industry. And you know, ultimately that does impact housing. And so if you're in a class A, you know, you do look for cheaper alternatives to live. And then you also have a supply. You know, 2008, 2009, there was, you know, a big supply that was booming. Things were looking very positive. And so when you combine an oversupply and not all markets, but many markets, and then you look at job loss, there was impacts in class A. We saw that in all asset classes, single family. I mean, it hit everybody hard.

Yeah, I think that you have to look at the data very closely because one of the things that we've done is we've looked very closely into the data from CoStar. So CoStar has data analytics all the way back to the early 2000s. And that was one of the things that I was curious about. What did class A do in the last recession? Did it have a made headed to have a major impact compared to all the other asset classes? Of course, all asset classes took a. Took a bit of a nosedive. But class A still fared fairly well compared to the other asset classes, especially when it comes to multifamily. Obviously doing office and retail and things like that is totally different. It's a totally different type of asset. You can't compare apples and oranges and things like that with that type of an asset. But within multifamily, the difference in occupancy rates from class A to B to C was not more than about 30 to 50 basis point spread in any one of those asset classes. And so even inside a multifamily, that's one of the reasons why I like multifamily the most, is because it's a necessity that people need to have and next to their groceries, the next bill they pay is the roof over their head. And so inside of multifamily, like I said earlier, you get this idea that everybody needs to downsize into class B. And it's not true. There are some people that do, which is why you saw a drop in vacancies or an increase in vacancies, if you will, in 2008. But I'm of the belief, because I've seen the data from CoStar, that that's not, it's not a major hit that class A's, because class A Gets a bad rap. Right. But if you look at it from a return standpoint, class A's have lower returns because they're a safer investment. Right. But if, and that's the case with all, with all types of investments. The lower the return, the lower the risk. The higher the return, the higher the risk. So if you look at that the same way in multifamily, if you have lower returns inside of class A, it means it's lower risk investment. If you look at class C, it has a higher return, which means it's a higher risk investment. And there's different dynamics before that same reason. And even right now in the middle of this COVID 19 what's the asset class that got hit the worst? It's actually class, class C and then the lower end, class B's. Yes. Did B plus have an impact? Yes. Did A have an impact? Yes. But it was not as, as dramatic as it was in these lower end properties. And the same thing inside of office and retail. There's a reason why I don't invest right now and I haven't invested in an office or retail or shopping malls or anything, any of those types of things because those, what's happening right Now, I mean $190 billion worth of defaults and mortgage backed security securities over the next two years is what's being projected right now. And a lot of that has to do with what's happened in the market with COVID 19. And it scares me. And that's one of the reasons why I don't invest in that. I talk to people all the time about. That's one of the reasons why I don't do it is because when the market starts to turn south, businesses can't afford to pay for those leases anymore. And, and whether it's a class A lease or B or C or whatever, you know, even, even these, these national tenants that are, you know, credit, a credit rating, you know, you saw just four days ago Hertz filed for bankruptcy.

Right.

And so you can't even just bank on those people either in the middle of these types of recessions because those people can also be losing their jobs and leases being turned over and bankruptcies happening. But inside of multifamily, when you're people that need a roof over their head, it's great. And even right now, in the middle of the pandemic, the demand for multifamily is actually going up. If you actually look@apments.com data there, there's certain, there's people searching for apartments has gone through the roof. It's because, Mark the Mark, the actual housing market has tightened up with their lending requirements. They're not lending out as much. And so you have more people entering or entering or staying in the actual multifamily residential market. So that's going to continue to drive demand. Plus, inside of a pandemic. If you look at all the pandemics that have happened over the last hundred years, they always create three things. They create marriages, divorces, and babies. We're going to call them Corona babies for this last one, because back in January and February of next year, we're going to see a lot more increase in births because of this pandemic. Everybody's staying home. Right. But all three of those things create an increase in demand for multifamily, which, again, is another one of the reasons why I enjoy it so much.

Yeah, well, all really great feedback, especially with this post COVID 19 environment. And one of the reasons why, you know, I do, just like yourself, invest in multifamily investments, it's just less volatile just because people need a place to live. And now it's even where you're.

You're working.

Right. So, hey, we've got a couple more questions before we close up, but on a positive, and you've been very positive throughout this podcast with the asset class and class A properties. But what is your. What is, you know, one of your proudest moments investing in real estate?

Well, I would say that there's probably been two so far. The first one is closing the very first deal that we did on our own.

Right.

Because that was pretty exciting. Very first time. And there's this thing called the law of your first deal. Right. Once you get your first deal, the other ones usually come in a lot faster. And so that would be my first one. The second one would probably be the most recent deal that we closed in the middle of the pandemic, because not too many people can say that They've raised almost $20 million in the middle of the COVID 19 pandemic and actually closed a deal within 60 days on time as originally scheduled, and, and didn't have to file an extension. So we're really excited about that. And obviously that deal wasn't planned that way. I mean, we originally got that deal under contract, like the first week of March, and then like the next week, the bottom fell out of the market and we were kind of like sitting there freaking out as to whether or not we actually were able to get it done. But we have a really good, solid network of investors. And, you know, right now we have over 575 active investors in our projects. And we just did a demographic study on our investors, and we have investors in 41 of the 50 states in the US that have invested in our projects, which is really exciting to see.

Yeah, well, congratulations. I mean, you're doing obviously really well. And this education outreach, I mean, that's how I found you, was. Was through your webinars and your podcasts. And it's all very. You're adding value to so many people, mostly on the passive and the active side. Well, we thank you for, you know, being a guest and providing your insights. Is there anything else you'd like to share on the show or about your. I mean, you've definitely highlighted a lot about your company, but is there anything else you want to talk about before we close up?

Sure. I'd love to mention our Multifamily Investor Nation group, because we have a group of about 26,000 investors across the United States and Canada and even some international investors that are part of that program. And it's where we met Wayne is through that platform. And you can go to multifamilyinvestornation.com and sign up for our email list to be apprised of our our free weekly webinars that we do every single week. Typically, I've been doing them right now on Thursdays at noon Eastern. We do record them and send them out to those that register. So you can do that. We also have a Multifamily Investor Nation summit that's done twice a year, once in January and once in June. We usually have over 500 to 800 people that will attend that. Our most recent one, we had just over 800 that we did in January. We got another one coming up in June 2020. But even if you're listening to this after that event, you can Certainly go to mfinsummit.com and find out more information about it. And that'd be great.

Perfect. Anybody wanting to invest in your deals, how can they find you?

Sure, it's very simple. You can go to passiveinvesting.com when you go to passiveinvesting.com on the top right hand corner, you'll see a big blue button that says join the Passive Investing Club. You can click on that button, there'll be a form you'll fill out, and then I'll jump on a call with you to discuss your investment goals, one on one, to see if you're a right fit for our group. And then looking forward to having you potentially, potentially partner with us on one of our future projects.

Okay, well, thank you, Dan. Great insights. Really appreciate. Hope you and your family stay safe and well and we'll talk soon.

All right, Sounds good. I appreciate it, Wayne.

That's all for this episode. We hope you subscribe, share and leave a review of the show. For more information about passively investing in multifamily apartments, check out Wayne's free ebook by going to CREI Forward slash ebook. Also, follow us on Facebook by searching CREI Partners.

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