Read the entire interview here:
You sold a deal today and you return a huge amount to the investors. It would be cool to go over the entire process from why were you analyzing that deal and what made you want to buy it. If you want to talk about the negotiation process, value adds, and when to sell.
The name of the deal is Equinox at Night, which is a name that we gave it, it was called Weatherly Walk when we bought it. The property was sold today, which ended December 2023, and was purchased right about this time four years ago. We wanted to buy it in time and close in time for the depreciation benefits in 2019. The journey was one day short of four years.
I wasn’t looking for a property in this particular marketplace but back in 2019, I had started feeling that properties were getting too expensive inside city limits and I felt like it was a terrific market to be putting a lot of money into. As I was talking about Atlanta, I started seeing good things and then as the years went on 2017-2018, I found that I was seeing more negative things about Atlanta than positive things because inside of the city, I was starting to see pricing that was just unreasonable for the income levels. What was happening was that the incomes of the people living in Atlanta, were going up 4% a year, and the property prices were going up 20% a year when property prices go up that much, the new owner needs to raise rents, so they’re forcing rents higher because everyone’s buying at these new prices. And for a while that works but then what happens is that either you start seeing occupancy fall, or even worse, you start seeing delinquency increase, as you start forcing people into 40% of their income, 45% of their income going to rent and almost 50% go into rent, then you’re going to see a lot of delinquency, the first time their car breaks down, they can’t pay rent.
How do you convince the investors that may have been used to keep investing in MSA itself?
In many of our projects, you just send out an email, and all the shares are taken. We knew that we were buying a better property and were going to make a lot of money on it but first, we had to convince investors (you’re not going to make any money if you can’t close the property). We did a two-step approach: first, before we put the property in the contract, we were making offers and we had identified three cities not two, that were around. We started holding webinars about the true opportunity in Atlanta, and then another webinar about the true opportunity in Phoenix. “First, I’ll tell you about the true opportunity webinars and then I’ll tell you about how that transition into getting the property funded”, this is something that every syndicator should do instead of telling everybody, “Fayetteville is the greatest city in the Atlanta metro” which never works, what we do is we started to rank some of these outside cities. The cities we picked were Mapleton Smyrna, which is on the northwest side and then we picked Batesville on the south side. We started comparing these cities and started talking about these different cities and why we felt that they were better than Atlanta itself, both for single-family and multifamily. We even did single-family comparisons. We always tell our database, that if you want to buy single-family homes, go do it. You’ll be back talking to us in one or two years once you realize you’ve turned into a landlord, you just wanted to be an investor. We always tell people, that the single-family experience is worth it, you…