Multifamily Investing Q&A and Open Discussion

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All right, well welcome to the meetup. This is October 24th. We're going to go through some multi family investing Q and A and open discussions here. A little bit about our meetup that we were just talking about earlier. But we meet on the fourth Monday of each month other than the fourth Monday in December. But we meet at 7pm Central Time. We just came back from to our this room out of the networking breakout sessions. So relationships are so important and I don't like to wait towards the end to do those networking. I feel like if someone has to go at the end of the day you can watch the recording but hopefully you know the relationships that are built just those connections can, can really be beneficial. We typically do a guest presentation from about 7:15 to 7:50 today it's going to be very informal. We're going to go through some questions that have been asked and then those on the call will either you know, put in the text box or chat box or ask a question and then we'll get some other feedback as well. Answering these questions from those are on the call and then afterwards, you know we have more time to touch base and build the relationship. So a little bit about me on this slide here. My wife Jennifer, we have been married since 2009 so I'm not a good math person so but many years. 10-10-2009 so it's been been great. We've got three kids. Hunter who's 10, Lily who's 9 and Emma who's 7. We actually live out in Bryan. College Station. We lived in Austin for, for a long time and bought some property there last year. So we've got the cows and chickens and just really enjoy that, that lifestyle and and then I do a lot of you know, commuting between you know College Station in Houston and Austin primarily focusing on on commercial real estate. So we primarily focus on value add multifamily properties. Austin, San Antonio and Houston. We've got a Build to Rent development in Lafayette, Louisiana as well and looking to expand the builder Rent portfolio. But last 15 years I've worked with 150 Fortune 150 commercial real estate firm primarily in asset management, property management. So a lot of my experience and passion is on the operation side. I'm not a transactional, not salesy. I think the, the hardest part of real estate ownership is actually the operations day one of of owning the property and saying that stay in the life cycle. So over the last, I don't know, 12 months we've purchased about 200 units in Houston and, and looking to expand. They're very bullish on, on the Houston and certain submarkets. But you know, I've worked on a lot of strategic plans, commercial repositioning, over $60 million in repositioning assets. And really a few years ago, 2019, I started Cruz. I really not only have the passion for commercial real estate, but really wanted to, to grow our investors, which really primarily were a lot of friends and family. And that network has obviously grown to, to others that I've met along the way. But it's really a true belief that real estate can, you know, provide financial freedom. Whether that's people that want to leave their W2 or stay with their W2. You know, it's, it's an alternative investment that you know, has a lot of, lot of benefits and we talk about that a lot in this, in this meetup. So a few things here. You know, if you haven't checked out our podcast and told stories of real estate investing, please do so. But I also encourage everybody who's listening in and those on this call, if you go to CRN forward slash ebook, you know, go in there, there's, there's a great ebook, but also on the website there's blogs. We write these every other week and there's a lot of great information. This most recent one was comparing real estate investing to stocks in this market. So we really try to stay up on top and, and you know, write as much content out there as possible. So with that I'm going to still keep the recording for those on the call, but wanted to see before I go through some questions that were already asked. Does anybody have any questions up front? And if not, I'll, I'll dive in on these other questions. So one of the questions that came in from someone on this call, it says with the changing financial landscape, what are new options to funding a new deal? So this is really important because right now it's hard to find financing bridge debts. Bridge markets are, are becoming tighter, you know, especially as we get into year end. A lot of people, a lot of lenders are sort of in this wait and see of what, you know, what do they lend over the last two to three years and you know, what, if any, is their exposure to rising interest rates. So if you think about bridge debt in particular, you know, bridge debt, there's a great purpose and we've talked about this on our call on this meet up before where bridge debt serves a great purpose. It's to find deep value ads where there's tremendous Amount of potential, but doesn't hit the required debt service coverage ratio that say Fannie and Freddie will require. So you go in into a bridge and the whole idea is that it bridges you to an agency debt. Right. But in doing so, a lot of times you'll have, you know, you'll be more on a floating rate. So there's a SOFR rate that's primarily used in this market. So the, the lender will have a base, say 500 basis points or 5%, and the floating SOFA rate will fluctuate. And what's happened is, I mean the SOFA rate, you know, Is, is over 3%. So what properties were, you know, what, we were financing properties earlier this year, late last year, maybe at a four, you know, four and a half percent. You know, we're underwriting eight, nine percent. Right. So it's doubled. And so what, what does that mean from a cap rate compression and, and those things? Well, there's still a lot of demand and it really is dependent on the area. What we've seen is a lot of the, the rents have skyrocketed because of inflation. When I was underwriting deal, you know, for example, in Lafayette, Louisiana, our deal there was underwritten at 15, $15,515, you know, a month in rent. Well, we are consistently getting 1700amonth in rents. Right. So that's definitely helping. So even though interest rates are going up, you know, the value of the properties are still, you know, staying strong because the income is going up. Right. So the cap rates, you know, are directionally proportional. So, so that's been, been, been really good. But going back to the question, you know, relationships matter, you know, and this is a great time. I mean, banks are still lending, they still have to, to land, they're still needing to find cash and there's a lot of international money coming in and you know, cash has to be placed somewhere. Right. So I think a good thing to do right now is, is to get to know the community banks. We just closed a deal last month, or actually, excuse me, last week in Houston and it was a fixed rate deal and this was a bank in California that was a, it's a, it's a smaller bank, but it was a relationship that this particular investor who brought in the capital through his 1031, that's where, you know, his relationship lied. Right. So, you know, community banks are a great, still, you know, a great source for small and large multifamily deals. That was a 12 million dollar deal. And again, this was a, a smaller, smaller bank Agency and agency debt still, still happening. I think the problem with the agency debt and is that sellers are still not wanting to sell, you know, at a, at a price that reflects maybe what the, the interest rates underwrite it to. And the thing is, is people are still buying. So it's hard because like when we're going in and we're, you know, we've got investor capital that wants 7, 8% on their return of money and then you got groups out there who are okay with 2, 3% are really just wanting to defer taxes because of a 1031, and they're not really worried as much on the cash flow. So, so it's, it's been, it's been pretty tough. But if you're able to find deals that are off market, that's been a big heavy strategy for us is how we found Gallery Apartments and Galleria Submarket of Houston was off market. You know, if, if you're not, I'll give you the sauce out there, right. It. Well, and it's not, none of this is rocket science. You know, we're going to, you know, we found a list of properties and, and submarkets of Houston and Austin, San Antonio that we like. We're going to the Appraisal district website. Through the Appraisal district website, there's an llc. You take that LLC and you go to the Secretary of State website, in this case, Texas Secretary of State. You put that LLC in there and you find out who the true owner is. And then you figure out how do you find, you know, how do you find that person's phone number, you know, email address? And then over time you build relationships. And so when it comes to closing a deal, one, dealing directly with the seller and building a relationship helps that dialogue of, hey, interest rates are this, you know, I'm not cash flowing. Is there a way to work together? The other thing too is a lot of, a lot of the sellers, I'll say a lot, but if you've got a strong relationship, they'll also provide preferred equity. You know, not all of them, but, you know, that's something that we've been fortunate on because of our relationships with some of these sellers is they've invested back 1 million or more into our deals, you know, and so, and it was more of a prep equity standpoint, so. But brokers out there for mortgages are eager. You know, deals are still being closed, but hopefully that answered the question a little bit of, you know, relationships matter. Take your lender out to lunch, take the mortgage broker out to lunch. They are wanting to see more capital being put into deals. So I think a good, you know, if, you know, if you're bringing, so I'm dealing with a lot, you know, larger properties. So if I'm raising $5 million, you know, they want to see 5% of that being contributed by the, at least 5% of that raise being contributed by the general partnership team. So you're seeing a lot of that. I had one bank quote me on a fixed rate, but they wanted like 50, 50% equity which wasn't, wasn't very doable. But I guess the point is, is that, you know, you just got to see what each lender is willing to do and build relationships with these larger Greystone. There's abundance capital, there's, you know, cbre jll, you know, a lot of these bigger groups have, have financing arms. So any follow up questions or any comments to that, I sort of rambled but would love for it to be a dialogue for sure.

Wayne, I appreciate the, the answer to that. It was actually my question I posted. I, I was just curious because the, the market and the finances are changing so rapidly. I mean we've seen interest rates increase, you know, almost at historic rates now. You know, are you finding that it's, it's better develop those relationships now, kind of cultivate that relationship, look at potential deals and hold off on pulling the trigger or if the numbers work and the relationship is, is solid, you move forward with that.

I'm not sitting on the sideline. I, I, I think deals can be made in any markets. I don't time markets. I believe they're not making any more dirt and I'm in markets that have strong demand of renters. You know, I'm looking at markets and trust me, like there are people that come to me and like, hey, we're investing in this submarket of, you know, wherever. And you know, I go to bestplaces.net I look at, you know, what, you know, the population is. I want to see over 100,000 people live in the area. So many times people are like, well this community is like 15,000. It's a great. But it's like, okay, so 100,000 people is my minimum. You know what jobs are going. You know, I was looking at an opportunity near the coast and you know, the biggest employer was Walmart and it wasn't like Walmart headquarters, it was Walmart. So there's nothing wrong with Walmart. But in the day, like it's not, there's not a lot of Jobs. However, I was like, well it's by the coast so can we be thoughtful of like how do we attract snowbirds? You know, how do we attract, you know, an older retirement community. Right. And you know, people that are looking to, you know, have nicer weather and be close to really great beaches and such. So I mean you're sort of thinking outside the box of like, of that. But I think it's on. Yeah. Bestplaces.net you know, we're looking and seeing, I mean it's all free information out there, right. It's public so but on there I think it's under the real estate or household income income, household sections. But it talks about, you know, what's the percentage of renters, you know, so in this particular area, you know, it's like 30% renters which you know, I like to see upwards to 40, 50% of them people being renters. So you want to make sure regardless. And this is why I'm saying, like I said, I'm not sitting on the sideline because I'm, I'm pretty conservative and strict on our parameters, you know, population, what's the income, what's the jobs, what's, what's the story, what's the business plan.

Where you are about the best places.net too is it does a comparison between the national average versus what city you're looking in. You can look by zip code, city, state, region, and it tells you, like you said, it tells you what the median rents are. It tells you what, you know, homes owned versus homes rented. And if you're in a vacation area, just be careful the vacancy rate because it can include some like big short term rentals and stuff like that. But you want to look for sure at the vacancy rate and you're like, like Wayne said, I mean definitely 40 to 50% renters versus owners. Yeah, it's a really good site. I've used it for years.

Yeah. And it's, it's free. The other one out there is justicemap.com so I'm always looking at justice map there. You can look at demographics which I don't really so much care about. It's more so the income and so you can look at income, you know, so on that. But so going back to your question, I feel like if you're able to, you know, whether it's your capital or your investor's capital, at the end of the day, real estate is always a risk, right? The stock market's a risk. For me, the stock market, I invest in the Stock market. And I have a 401k through our, through my W2. Like, I, for me, I don't, I don't have this great desire to be like, hey, I'm going to leave my W2 and just go in real estate investing. Like, I'm pretty boring. Like, I, I measure risk that way and I sleep really well at night. But you know, I think from a standpoint of just knowing the area, using Google Earth, if you're in Tampa and you're looking in Austin or San Antonio and passing on deals that just don't make, make sense, there are not as many people looking for deals right now. Moses and I were talking before this call that I may just hang my hat up for the next three months, enjoy the holidays and get back going. But the reality is, is that we're still submitting letter of intent. Letter of intent. There's this one deal in the Galleria submarket that we put an offer on. They played some games and we backed out and now they've come back to us and my price has dropped 500,000 since, since then. And so now I'm just waiting. So at the end of day, like, rates have changed, times have changed a little bit. Austin, it's just a tough, I mean, people are just going in, especially if it's on market, you know, million or more over asking. And that's just cash money. You know, that's not, they're not even worried about debt. It's just money coming in just to buy it by the assets with cash. So. But anyway, it's a really great, great question. Hopefully it helped. I don't think it matters when you start building those relationships with lenders. It's just a good thing to do regardless. And you know, and I think if you don't have the, and I don't, you know, Mark and you know, I want to get to know y' all obviously about the relationship more, but if you're doing bigger and bigger deals, you're just going to need to do what I'm doing and it's partnering with other people who have done those deals. So at the end of the day, like it's, it's a partnership and it's, you know, do I have $20 million in net worth? Absolutely not. But I've got somebody who would love to just sign on $20 million loans, non recourse. And he trusts us. Like, we just give him an update every once in a while and he's, he just runs with it. So it's just, you build Those partnerships and forums like what we're doing right now and, and building these type of relationships. So anyway, really great question and thank you for, for asking that. Any other questions before I go to some of these other ones that came in? All right, so the next one that came in was how to, how do you vet the contractors you work with to manage and renovate properties? So I, I'd love to hear Moses and I love to hear everybody's feedback on this. For us, we hire a really strong construction management company. In each of the markets that we do business with. There are a lot of groups that do everything in house. They do property management, they do construction management. That is not my business plan. My businesses, I like the ARM links distance between CRI partners and a third party management company. That's just, that's just us. Right? I'm not looking to make, there are, there are fees and money to be made and all those things. I'm not, I haven't really wanted to do that. However, I'm still actively involved. I have weekly construction meetings with our construction management company and that construction management company should be of a decent size where they have the leverage relationships and the economies of scale to provide better pricing for your properties. Right. And so typically that's, you know, that's part of your third party management services. It's a separate division or separate group from your property manager. But typically with these larger groups, they'll have a construction management. Typically it's 5% of hard cost that they'll charge. But it could range of course on the market. But I do push on the construction manager to go out and do bids, you know, and, and vet and provide recommendations. I, I'm one of those that, you know, I want people don't bring me the bids, like look at the bids, vet the bids. You know, I want to ensure, I want to see that there's been a solid scope that are apples, Apples. If one group we, we just did a roof bid in Houston and one of the groups was like a hundred thousand less than the other two and it's like, well why, why are they a hundred thousand? And nobody could answer. So we didn't go with them. You know, we went with the higher bid because it's not, you know, I don't want to be in a contract even though it would save, save us $100,000. It's like, you know, what, what corners are they going to be cutting? And if they're not able to explain their numbers, it's just a bad way to start insurance is huge. I want to see the certificate of insurance before work starts on our property. We have and I would recommend everybody if you're buying properties to get your property as an llc that would at least protect. I'm not an attorney. We had Zeeshawn here last month and there's a recording if y' all haven't watched it. He's our, he's our real estate transaction attorney. A lot of great info in that meetup but you know, have a barrier of legal protection between you and these vendors. You know, don't sign on behalf as an individual. Sign as, as a legal entity and you know, make sure that insurance has that legal entity. A lot of times you'll get stripped of insurance and it'll have ABC property management. But that doesn't take care of you or your investors if something were to happen. So you want to be added as additional insured. And so do I personally call and ask for references? No, I mean that's what my expectation is the construction management company to do that. But I do ask those high level questions every week I'm on a call with those construction managers understanding the status of each project and you know, going from there. So that's my way of doing things. I'd love to open it up to anybody who's doing anything differently and how you're betting, you know, contractors.

Wayne, I think you covered pretty much most of what I would do. And I just want to highlight. I do have everything arm's length. I don't like it to be tied in to the property manager or anything. And I know there's big, you know, vertical integration on all that, but it's just not my forte. I've audited a lot of books before and I just didn't like some of the room for error if you. That could be in there. So depending on the scale of the project, I would definitely have a construction manager in between there to overlook. Especially if it's a big scale project to make sure. And I'm always with them. I mean every week or every month they have to be updates and progress and if something's delayed, why, you know, it has to be something that really out of their control that has to go wrong. Because all of that will cost you on the back end on your deal. That's right.

All right, any other comments on that? Again, I encourage, you know, encourage the exchange and conversation here. All right, so I do have quite a few questions, so I'll go to the next one. And again, if anyone thinks about questions for sure, you Know, ask it. All right, the next one here is do you prefer value add, turnkey or major reposition deals and why we. Well, I prefer value add and yeah, I think for sure value add, it comes back to risk spectrum. Where are we on our risk spectrum on. And more risky but still strong drivers in real estate investment with location and renters, etc. Is our build a rent platform. And so you know, but part of that risk is, you know, we've got rising costs in construction and then that we're able to, you know, secure our loan, etc. In this crazy financing market. So but part of that is it's like hey, it's ground up and so it's not like day one I can, I can rent those units until you know, it's, it's completed. So if you don't know what build to rent is, think of it like horizontal multifamily. So if you think of it like a vertical apartment complex and you separate those into three bed, two bath homes as an example and you rent the homes but manage the complex like an apartment community, it's a big, big growth as. So that's more on the higher spectrum. But you know, the value add for me it's, it's where you know, it's a perfect amount of risk and it's a perfect amount of reward and it's typically at a higher occupancy. So I'm not looking at doing a complete distressed property where there's 50% occupied, another 50%, 20 of those are, you know, not paying rent and so there's possibility eviction. Like there's just, there's a lot of risk in that. So we, we focus on typically value add. With that said, anybody have any preference on turnkey value add or, or major rehabs?

I guess I'm going to add. I, I like and when you notice, I like cash flowing property just because when you go through times like these, when you have cash flow and you have the right cap on your rates, you don't have to worry about jumping out the deal or you know, you can just sit tight and let it flow. But it also goes with the economic cycle that we're in. Depending on what cycle you're in, I may move to a more conservative approach as a B or maybe, maybe an A depending on where it's located just to you know, just to have those tenant base might be more lucrative and they might be able to withstand, you know, rent bumps and all that. So it's, it's a play depending on where but typically, I would go with the value adds, cash flowing property.

And I'll tell you, it's hard to find cash flow and deals year one. Right. I mean, it's just the part of the value add is you're adding value through repositioning renovations. You know, the, the, I'm going to call it the Ivy. We rebranded it, but, you know, we've had to evict five. We've owned it a little over a month, and we're going through five evictions right now, which is not all whole lot, but still, that's five vacancies that aren't paying rent for a month or so until, you know, the judge, you know, approves the full eviction process. Then we'll renovate and then we'll go. You'll go out, you know, back out to the market rents. But, you know, it's, you know, Moses hit it really well, too. It's that, you know, part of that construction management is is there delays? Because if there's delays, then it's harder to get the, the renovated rents. I mean, we've already pushed our rents, you know, pretty significantly at the Ivy, but, you know, residents and prospective residents, when they show up, I mean, it still looks like a dump. Like, we are doing a major, you know, renovation. And so over the next month, it's going to transform, but in the meantime, you know, we've got to, you know, keep our units rented and, and, you know, keep pushing for market. So anyway, don't. It's just hard for the value add. I guess my point is, is to get day one cash flow. So just, again, it goes back to your risk and, you know, understanding the business plan and who's doing it. So. All right, Another question that came in is why did you choose the markets you're focused on? Houston, Austin, San Antonio? I chose these three primarily because I live and, and I know people that are in those markets. And I'm close by. I am very, very hands on. I like to be hands on. If there is an issue in San Antonio, I'm two hours away. If there's an issue in Austin, Texas, I'm two hours away. If there's an issue in Austin or, excuse me, Houston, like, no matter, like where we live and we, we, we chose the area, we live very strategically because we want to be, you know, able to and be at our properties in a short amount of time. Now, does it mean I won't invest or partner with people outside of, of Houston? No, I'm partnering with somebody in Huntsville, Alabama. On a, on a different asset class deal, but they live 30 minutes away. Right. And so, and they have experience in that submarket, in that market. So I just want to have somebody on our general partnership team close by in case if things go wrong. I visit our properties weekly. I, I trust but verify type mentality. So it's, that's been important to me. So that's why I chose those markets. I also like the, the growth. I like the income that these cities are driving. There are certain. Just because I say that there's three markets that I'll choose. I mean, there are parts of San Antonio that I won't really look at. Right. But there's pockets like, for example, like south east, like isn't really an area that I've been that excited about. However, the Brooks development, where the Amazon fulfillment center is and such, like, that's a really great pocket in San Antonio. Northwest, north, Northeast, you know, that's all growing towards Austin. Like, those are really, really good areas. But you know, it's knowing brokers, it's calling friends and partners that live and know those areas who can help, you know, guide you to knowing if it's a, if it's a good market and then obviously visiting. So are there any other markets that you all invest in and, and, and why did you choose those markets? I'll, I'll pin the question back on, on those. On this call. Is everybody in my three markets. That's, that's good.

I think, Wayne, to your point, that's part of our strategy is I'm looking to, you know, expand into other markets. Just that very thought. Obviously there's a, with, with the distance you're not there readily to, to check on the properties, making sure that things are done and really getting that the boots on the ground, you know, you know, kind of the micro, you know, markets that you can look at and see the trends, see the employment, see the changes. So, you know, that, I guess that is one distance about, one concern about long distance, you know, ownership.

Yeah, yeah. And you know, we try to do videos, we try to do, you know, the month, you know, we do the monthly updates. You know, that's, that should be expected. But you know, if you're not able to join or go to the market, you know, have the property manager do videos of, of the work, you know, and have them send it by text and such. So the great thing about technology is it's, you know, it's easy to, you know, for the most part to, to use and, and have that FaceTime there. But, yeah, I mean, I, I like Dallas as well. I mean, Dallas is a fantastic market. I just don't know Dallas very well. So, you know, if I'm investing in Dallas, you know, I'm. I'm going to be reaching out to some of my partners that I've met through conferences and, you know, Sonia Sasadri, I'm gonna do a shout out to her. I don't know if she'll watch this or not, but, like, she's a fantastic Dallas operator. She's one that goes to her properties every week and post about it. And she's done really good for her investors. So, you know, there's. Phoenix has been a strong market. You know, there's. There's definitely others. Charlotte, North Carolina has been fantastic. I had a call earlier, this is Tuesday, so it was last week with somebody out of New York who is a partner with us on our laugh, our Lafayette deal. He's newer into real estate, and he was wondering, how do you analyze markets? And, you know, I shared with them those websites that I mentioned earlier on this part of this meetup, but I was like, are there any other cities that you're familiar with? Like, he was like, no, I'm in New York. But he's like, well, I went to college in Atlanta. And so I was like, great. So Atlanta's a great, great market. Tell me about Atlanta. And so he was opening up about his experience in Atlanta, and I'm like, that's market analysis. Like, you know, what areas in Atlanta is a good place to live and work and where the growth is and, you know, things of that nature. So I think sometimes it's not trying to learn a completely new market. It's like, hey, where's. Where do I have family? Where do I have friends? Or where have I visited or know really well of that will help, you know, on my market analysis. So hopefully that helps a little bit.

Yeah, when I thought you were asking the caller who asked the question. So I didn't, I didn't say anything, but I said, in the Georgia market, I have the Orlando market as well. But it's like you said that for me, it's a money machine that I'm investing in. I look for those fundamental of looking at making sure there's population growth, job growth, decent school, you know, just like you would do with anything else. Just make sure you de. Risk it as much as you can from the data that you can accumulate before you invest in one of these assets. So I think when you do those fundamentals and you did as much as you can as an lp maybe looking into the deal. I think that would, you know, all the sites you've used are really great free sites that's out there that you can do have to, you know, knock yourself off.

Yeah, that's a great point. There's a lot of great, great markets, you know, you just got to choose one that you know well or know and have comfort in the business plan of everything that's going on in that particular submarket because not all submarkets of every city are doing well. All right. Another question that came in is do you invest your own capital into your deals? It's a fantastic question and the answer is yes. We don't invest hundreds of thousands of dollars like some people do. One, it's just because resources, we don't have the resources for that. But it is important to have skin in the game. And I do feel like everybody on the general partnership team should invest something, right? They should invest, they should have skin in the game. But I phrase it a different way. Like I personally take a lot of risk for our investors and a lot of time to find deals. In our markets hard money is still a reality, you know, and we put on, we, we do hard money and when I say hard money, it's typically 1% of the deal. So if it's a 12 million dollar deal, like we're putting out 120, 000 check just to get the contract award awarded to us. And if I can negotiate a pre access, you know, while we're working on the purchase sale agreement, we'll do, we'll do so, so when you're doing real estate syndications as, as much as we're trying to, as a, as a growing company, you know, it's, it's going to be important to have cash in the bank. Lenders want to see that you have liquidity as well. So it's, it's investing and making sure you've got skin in the game, but also that you are able to follow through on your business if you're putting in your last, you know, if you have say 50,000 in savings, right, and you're putting that 50,000 into real estate. Well, that real estate holdings isn't going to liquidate in, you know, potentially five to seven years. You know, ideally some business plans that we're doing is three years. So you know, if I were to lose a job, if I were to have some circumstance where my wife couldn't work or whatever and we needed that money, like that's not good for the investment. Like, it's not good that, you know, we are now thinking about our personal finances more than our, our, you know, doing the job for our investors. So it's a really great question. We do invest and you know, as time goes on and as, as we continue to grow, we're going to invest more and more because the tax incentives and the benefits and everything that you all and everyone else is enjoying about real estate is something we enjoy as well. So any questions or any, any thoughts? This is one of those. It's a great subject and depending on which social media site, there's a lot of, a lot of back and forth that can happen. It's, it's going to be a personal thing between that sponsor. But you know, I'm, I'm investing and even if it's so, you know, there's this deal I mentioned, Huntsville, Alabama. It's a different asset class. Like, you know, we're putting in money into that deal because I believe in like setting one, I want to invest in the deals that I'm part of. But two, because over five to seven years like that money's going to double too. And so I want to see. Or not maybe not double, Maybe it was 1.8, but still have some return for us as well. So any, any questions, thoughts on that? I mean, not right or wrong. It just curious on what Yalls thoughts are on that, on when you look at sponsors or you're doing your own deals. What's. What are things that you're seeing with investing your own capital? Okay, the other thing, I'll say I do my budgets two years in advance. My operating budget is going to sound crazy. Year two, mind you, we only probably do three or four deals a year. Maybe that'll grow down the road. But it's about what we're at. We're close to $80,000 in expenses. So you know, for those that are saying like hey, those, you know, how much are you investing in deals and such like, we have a platform like I've got a director of brand and investor relations, we've got a marketing specialist, I've got a real estate services administrator who's just calling off market deals, scouring information. So we're, we've invested a lot into to, into our company, the website, the blogs, the podcast, et cetera, the masterminds, the mentorship groups. So I think these are good things to ask sponsors is what's, what are they investing? But also I think it's important for everybody to see the big picture. Of know you're investing in a company and that company should be investing in its long term growth as well. All right, so the next one. Oh, any, before I go to the next one, is there any other, any questions that may have popped up? If not, there's like three or four more. So I'm just going to keep going through it. All right, so why should I invest with your company? So this is, I said earlier this, in these meetups is not a sales pitch. I want everybody to invest with people that they're comfortable with, that they trust, trust that they like. I think the wonderful thing about real estate syndications is that you get to know who the person flying in the captain seat. It's, it's not monies that are being put into a fund where you're not sure who's really the asset manager or who's really making the ultimate, you know, those decisions. So you know, I, I think you got to find the, the person that you're or the group that you're comfortable with. I mean, track records are important, but if you don't have like the long term track records as some of these other syndicators do, then from a investor standpoint, you've got to look at the team. And I have always prided myself on finding people better, smarter, more experienced. I love to be the dumbest person in the room. And anytime I'm putting together a team, it's always with people that are so much better than me. And so what I tell all of our investors is you're not investing with CRI partners, you're investing with other partners that have just an incredible amount of experience. And you only know that team when an offering is available and we do our presentation on it. We try to be as transparent as possible. Y limited partners are owners on the deal. We'd love to the tour and have those conversations on those updates. But the reality is there are a lot of people doing this, right? And what I'm finding, because I'm not, I'm, I'm genuinely. And this is why we do this meetup, right? It's to educate and find good investments. And when people are like, I had one investor who invested a pretty good amount of money and said, hey, this is for my grandkids. Like this is, I mean that. And I left and I talked to my wife. I was like, this is why I mean this. I love that pressure. I like that stress, right? And, and it's not something I can delegate. There's a lot of great capital raisers out there. They and this is something you need to ask for, you know, your syndicator or the person who's raising capital. Are you just a capital raiser? And there's nothing wrong with that. Those capital raisers are finding people that can deliver the job and such. But my joy is the operations. Like I enjoy being in the weeds. So I think that's a big separator. It's like you're those that are investing with CRI Partners are investing in the asset management arm of whatever investment that we're doing. I don't delegate that piece. And that's why we're doing maybe three, four deals a year because we want to make sure we are setting ourselves up for success long term. So there are a lot of great syndicator sponsors out there. Meetups are great. Covid has hopefully is sort of behind us. It's not never going to be over. But I definitely encourage going in person meeting people. Everybody has a pretty good sense of character and like, hey, is this person a good person? Right? And I think at the end of the day, like you're investing in a person, you're investing in a company. But are they going to make the right decisions when nobody's looking? Right. And so those are, those are things that you want to feel comfortable with when you're investing any amount of money. And so, and the last thing I'll say is, you know, find a syndicator sponsor who's, who's experienced and close to that market. You know, so I've chosen three markets and I may go on another if there's a strong relationship experience person in that market. But, you know, I don't know if that, you know, everybody's going to have their own little different why they should. Why you should invest with somebody else. But that's so reasons why I think we're. We've been good at protecting our investor capital. So. All right. What happens if the renovation costs are more than budget? How do you determine what to cut back on and still give the investors the desired returns? Okay, so we'll do a case study. I'm only a month and a half into the Ivy. H vacs are $200,000 more than budget. I mean, it's just insane In Houston they are, you know, I stuff you learn every single day. You know, it's just part of real estate is they're completely changing out the seer rating come January 1st. They're not changing the refrigerant, but the sear rating is changing. So now there's a supply and demand, which is already out there because of everything going on in the world. But now we are up against camden who's buying 800 units just to have on standby for their properties and you know, just sort of like what are we going to do? So what are we going to do? This. The business plan for us is to renovate the property. And our business plan was to replace 101 units. But now we're saying, well, hey, you know, today we, you know, I'll sideline that. So we do 101 units. But you know, we came together and like hey, we really only need to do effectively 60, 70 units and then let's keep parts, compressors, etc, in storage so as these one offs happen we can make repairs. Right? Because it's all, all this is about is, you know, they're not making certain parts and refrigerants and compressors, etc. In the future. So it takes care of the story to our, to the next owner and saying, hey, we've gone in and substantially upgraded the mechanical by replacing X H vac units we've put in storage or we will put in storage if we go this plan in being able to repair as units need repair down the road. But also with that 60 to 70 units, we'll still have 50,000 left in that capital budget for when we do have to replace like when our parts and such don't come in. So you are, you know, there are scaling of, of, of projects that do occur however, like GFCIS. You know, that was a pretty, we put 25000 in for GFCIS. Well, we just went on Amazon, ordered 270 GFCIS and are having our group do our, our maintenance team installation install them. So that's you know, going to be some, some savings there. So I think at the end day, like you've got a business plan, you want to execute the business plan, you know, but before you, and this is where like Moses and I, you know, it's like we, there's delays but part of maybe there may not be delays on the strategy of executing, for example, and this is where I stress on my property manager, I'm like, hey, if we can get $1.69 a square foot in rent with doing a light renovation or maybe no renovation at all because they've seen a massive change on the exterior, then why would we put 75, $8,000 into that unit when it comes down to renewal if they're willing, if we've made a great community, we've renovated the Exterior, we've done the amenities, etc. They're literally all the second floor apartments are leaking. So we've already started the roof replacement, which we saw about 70,000 in savings because we bid and use economies of scale. But if you. Just because you've got a renovation plan doesn't mean you have to go through the entire renovation to achieve the results. At the end of the day, the results are measured by the net operating income. So anything that you do from a renovation standpoint, exterior, interior, if it's not equating to potential higher rents or reducing operating expenses, the two levers to grow your net operating income, you know, you just got to ask yourself, is it worth it? Right. So for us, you know, everything is pretty much original. The roof's original H Vacs. We just cleared out all the gym equipment. We're ordering new gym equipment, new flooring. The pole needs to be completely replastered. I mean, the place is a mess, but it's going to be incredible over the next couple months. Just night, night and day difference. And by doing that exterior, we may not have to do as much on the interior. So hopefully that helps. There are going to be. Costs are going to continue to grow. You know, yes, you can buy in bulk, yes, you should call around, but sometimes you may have to reduce the scope and there's nothing wrong with that either. Right. So any, any comments on that and you know, how you're seeing renovation costs being managed and you know, just kept within budget.

Wayne, I think also I've run into some of that and I think if they're really fighting to get inflations down, so maybe in a year from now you might see some reduction in some of the material and some of the prices. So it's not a bad idea if you can avoid it now and later on you can tackle it. So it could be a timing too. So those are some of the things we see as, you know, practical that comes to play and then that's where you have the team that makes a decision. And I was saying to Mark before, this is why the economy of scale is better because you can move things around and it doesn't throw your entire, you know, operating budget out of whack or your, your, your asset out of whack.

Yeah, really great. Well, I, I'm sorry, I'm keeping, I mean, it's 8 11. I'm just, I could talk so much on real estate. So if you have to drop, I will send the recording out, but I want to get through just a few of These other questions that were that asked. The other thing on that piece is contingency. Right. Lenders will typically require a contingency amount, but you know, between 5 and 10% minimum, you'll have that as, as reserves. The other thing we do is we over raise, we over capital raise every single time. And so that monies is sit in an operating account. It's used to execute, you know, deals or excuse me, execute the business plan faster because we have cash on hand and then we submit to the lender. A lot of times it gets reimbursed. But that money is also set as, as reserves too. So between capital reserves and you know, over raising a little bit is, you know, a good, good strategy as well. All right, so there's two more here. What's the minimum to invest? So you know, sponsors are going to have different minimums. You're going to see sponsors that, you know, only want to work with accredited investors. $100,000 or more. You're going to have sponsors that do 50,000 or more. You're going to have some that are okay with, you know, 25,000. You know, we typically are working closely with accredited investors. We do some 5 or 6B that are non accredited but typically accredited investors. And the typical minimum investments, 50,000 investors do bring their investment via cash or retirement or you know, usually either one of those business LLC can also invest as well. I think this is again, you know, not everybody's going to have 50,000 to invest. Right. But if you've got a relationship with that sponsor, again everything goes back to relationship and you're able to say, hey, you know, sponsor. You know, I'm really into real estate syndications. This is something, you know, I don't have the 50,000 now, but I really want to invest 25,000 or 20,000. You know, I think that's, that's something that sponsor will say yes or no on. But I think if you have that relationship that goes a lot, a lot easier. But typically 50,000, I mean sponsors typically. And I think this is the right thing to do. And it's going to sound maybe a little cold, but we real estate, it's not a liquid investment, right? And so we. You don't want to invest. There's other real estate avenues. You know, you can get into REITs. You can, you know, do smaller family do, you know, smaller projects. You don't want to put your last 50,000 into an investment. And those are things I tell, you know, our investors all the time. Like it's not, it's not the best play. Right. Because if you're going to need that in the next year or so, you're not going to have access to it. So this is going to be definitely sponsor driven. Our investment typically is 50,000 and we're getting to a case where we get a lot of repeat investors. And it's just pretty amazing to, to, you know, again, going back to what I said earlier, when you've got people who trust you and believe in what you're doing, you know, that's the exciting, you know, exciting for us. So has anybody seen any investment amounts differently than, than that? I mean I think that's pretty standard. And syndications. Okay, all right, I know it's getting late. Last question. Unless anyone else has any questions. How do I confirm I'm an accredited investor? All right, so the accredited investor status is really created by, you know, secretary of SEC defines what an accredited investor is. Right. And that accredited investor, just by the rules that the SEC put out there, is that it's 200,000 as an individual or 300,000 with a spouse of income over the last two years. And the expectation is that you'll continue making either that 200,000 as an individual or 300,000 as a married couple in the next year. Right. So the thought behind it is if you're making that income, it's highly likely that you can look at a business plan and make a good financial decision for yourself on that. Right. So alternatively, if an investor has an a million, $1 million of net worth excluding their primary residence, that also is, you know, an accredited investor checkbox. And the thing about net worth, you know, people can put their cars, their boats or their furniture. I mean net worth is assets minus liabilities. Right. So if your assets are over that 1 million and your CPA or your attorney, there's a website we, we use Verify Investor that you know, helps verify accreditation. But that will, that, that's one of the big heart, you know, that 1 million. Right. Believe it was last year or the year before. I think it was 2020. The SEC expanded the definitions to allow knowledge employees. So if you're a, if you're a GP member on a deal, so you're active in the investment but you're not accredited, you can invest in that deal because you're knowledgeable about the financial aspects of it. And then it also opens up to those that are not maybe meeting the financial requirements, but who hold a Series 765 or an 82 security license that could be considered as accredited investors as well. Now remember for the accredited investors, that's only for a 506c deal. And on 506c, the big difference between a 506c and a 506b is the sponsor is able to advertise. So what you typically would see on Facebook, social media and such is you're seeing somebody out there who's sort of, in a way, crowdfunding. Right. And they're, they're advertising an investment opportunity. And those people that click and learn more or subscribe or go to the webinar, the Security Exchange Commission wants to protect the average investor in making good decisions. So, you know, so if you're out there doing a 506C or you're advertising, it's got to be with accredited investors. Only with 506B, you can take on accredited investors and sophisticated investors. Now, sophisticated investors are those on this call like you're becoming educated on multifamily investing. And through books and through meetings and meetups, et cetera, you're going to become more educated. So maybe you're not accredited investor, but you want to invest in real estate syndications, you could do so through a 506B. The difference between a 506B as well is that you can. The sponsor can only take 35 of the non accredited investors or sophisticated investors. So relationships, I think is the key to all this. You know, having a relationship with the sponsor is, is definitely a plus if you're in that boat and want to invest but may not hit that accredited investor status. So. All right, well, it's 8:20. I'm so sorry. I lost track of time, so. But we got through a lot of the questions and appreciate y' all hanging in there with me. I typically am not the speaker. I typically do bring other people who, you know, know a lot more or just more experience in certain aspects, like a tax attorney or real estate transaction attorney, et cetera. But I will post this recording to our YouTube channel and I'll send you all the link so you can refer back to it. And then there's a lot of YouTube recordings from previous meetups. We are posting on Instagram and Facebook and LinkedIn. If you go to. Crei Partners, there's a lot of. We do daily content that way, so it's a good way to, to continue learning. One of the questions was what, what ways can I learn? If you're new to it and you know, obviously these meetups help, but there's a lot of free material. Bigger pockets is another group. You don't need to be spending 5, 10, $40,000 for some of these groups. Those groups are great because it gets you access to people who are doing deals and maybe helps accelerate your timeline, for sure. But this education, as we mentioned, been bestplaces.netjustice. matt, like those. I mean, this is free resources. Like, you don't need to subscribe to a lot of these platforms when there's information already out there. So any other questions or anything I can do for anybody on the on the call?

All right.

Well, be on the lookout for our November meetup that will wrap us up into 2022, and then we'll be crazy. 2023. I think most of us are ready to get past 2022 and start 2023. Just crazy. But y' all have a great evening. Thanks for hanging in with me. Thank you.

Great. Thank you.

Thank you.