Ruben: But also, I saw you at the raising money Summit, you’re all over the place. You got all kinds of projects. I’m constantly getting emails from you about your current capital raise and it seems like it’s a new one every once in a while. You have many thousands of units. I was just discussing before I brought you on
That you had focused primarily on multifamily syndication but a third of the syndication that you do is for new construction and opportunity zones or possibly in other places.
Neal: those little bits.
Ruben: Yeah, go ahead.
Neal: Well, thank you firstly thank you for having me on this on the show. I’m very excited to be here. Yeah. It’s an interesting portfolio. Right? So, I tend to dislike. Being boxed in and so I am sort of 1/3 developer 2/3 indicator. So, I fit in the standard syndication box fairly. Well, I buy you know 70s 80s value-add properties. In fact, today’s a raised a for us we have about 510 people, but I looked at it last this morning signed up for a webinar.
For my property in Atlanta. So that’s a very standard property. It’s in the box and we do that about two-thirds of the time. We’re a high-volume syndicator. So, we do at least five of those projects every year, but then in the same time, I love the development world. With many of us challenges it is definitely a riskier world.
You’ve got your personal money at risk. You got recourse loans. It’s big numbers. The dollars are very large. There are challenges for sure, but despite all of that. I love the new building feel. And I love the fact that in build in places where you couldn’t buy value-adds simply because value-adds would not work because of the cash flow
You can build in those sorts of places. So, I keep my tentacles into that Community, which is a very different Community. You’d never find a developer showing up at raising money. Seven Summit. You’d never find it developer showing up at Zach’s meet up in Phoenix. That’s not going to happen. They live in a completely different world
They have their own set of conferences and their own set of rules. And I have managed to I’ve spent about four years penetrating that world just like I do with the with the, you know syndicator world. So, imagine how much travel that involves because I’m going to two completely different sets of conferences, right
And but the benefit of that is that we are also able to do large syndication large syndication projects where we’re raising money for new Construction Products. It doesn’t work. If you don’t have a huge database because as you can imagine Ruben for every, you know, one guy that invests in new construction, there’s going to be three that one invests in value-add because they need the cash flow
Right? So, so you need it only really works if you have a massive database and as it happens, we have a massive, you know accredited investor database. In fact, we celebrated recently our team celebrated our 2000 accredited investor in our database.
Neal: So that allows us to do some of those noncash flowing deals that.
Ruben: Now, you came up with a fantastic strategy that you shared recently about starting a new LinkedIn and then getting an accredited investor list and adding those people.
Can you share with the audience what that was?
Neal: Sure, so LinkedIn has an amazing feature. That people don’t understand the value of it’s so stunning that I’ve found that I’ve never at a money-raising conference. Have I ever had anybody come across this feature but it’s so stunning and the moment I say people are like, oh my God, why isn’t this all over the place.
But it’s I think it’s just because people don’t experiment. I’ve been playing around with LinkedIn for a long time. I’ve been experimenting and trying different things and most of them have failed but this one was it was a success. So, here’s how it works. There’s a feature in LinkedIn called Contact sync, but this feature specifically only works with Gmail accounts
So, here’s the idea you go to people that sell accredited investor list on the web. There are several of them. They’re all very shitty. So, I understand that if you buy a list of 10,000 accredited investors, maybe 4,000 of those email addresses will be good, maybe 5,000 but certainly not 10,000. So just understand that you’re going to lose half of your ear which is fine because if you buy a list of 10,000 people for you know, a grand or two grand you still end up with 5,000 accredited investors in that list.
Now that list is worthless unless you know how to nurture those people and connect with them. So if LinkedIn happens to be a platform that you post a lot of content to then this can really work for you and the way that works is so you go you buy that list maybe you know, you have a couple of your syndicator friends chip in so you lower the cost down but it’s not tens of thousands of dollars might be $8,000 to get now have this nice list
And so, what I want you to do is follow these steps exactly doesn’t work. If you don’t do it exactly firstly, I want you to open a brand-new Gmail account. It can’t be yours. It has to be a brand new one next inside of Gmail. There’s an option to import a contact list. I want you to only import this list this 5,000 people
Ten thousand whatever it is into that Gmail account. Then I want you to log into your LinkedIn account while you are logged into that Gmail account. Make sure you are not logged in using your regular Gmail account log out of it. Only stay logged into this new Gmail account then open LinkedIn. Go into the network section into my network section.
There’s a section there in there. You got to click around a little bit, and you’ll find it’s called Contact sync. Go in there and click on it. It will give you an option for Gmail. Click on that button. And if you’re correctly logged in it’s going to say ah, I found a Gmail account it may or may not ask you to log into that Gmail account.
Make sure you log into the new one. Once you’re done. It’s not going to do anything and you’re going to be like, okay what happened here now? Well, it needs time because you know, there’s 70 million people using LinkedIn. So, it needs time to go into that Gmail account and fetch all of those contacts
So, let it bake for a while. Maybe leave the tab open for a few hours or just close out of LinkedIn and come back later. When you come back later. You’ll notice that it on that same page. There’s now a message that says, you know ready for contact sense or at sync or you ready for new contacts when you click on that.
You’ll notice that it’s now found those 5,000 people on LinkedIn now, it hasn’t found all of them because or those 10,000 because not all of them are on LinkedIn. They don’t or they’re using a different email address from the one that’s in this list, but it might be three thousand. It might be four thousand.
It’s going to be some percentage of those 10,000 accredited investors are now in in the LinkedIn list. Here’s the beautiful thing. You can now send a message to all of them with a single click which LinkedIn will never allow you to do because if you try to use LinkedIn to send more than 20 or 30 messages a day.
It’s going to flag you and shut your account down, correct?
Neal: But using contacts think there is no limit. At all because,
Ruben: That’s crazy
Neal: These people know you so now you can send the same message the invite as many times as you want. Not just once but as many times as you want to everybody in that Gmail list and how you can add dozens of accredited investors to your list one way to if you want to like hypercharge this even more.
Go out and pay a little bit more for investors that live in your Metro. Every Metro has tens of thousands of accredited investors, right? If it’s a San Francisco Bay area, there’s hundreds of thousands of them. So only by a list of people that live in your Metro now, you can also invite them to your meetup groups, right
All of that happens, if you follow this process, it’s insanely beneficial.
Ruben: Yeah that I can see where there would be a huge benefit. Now. I have actually a list of people in my area. It’s around 2,500 of accredited investors, but they’re completely cold and I did not use this strategy, nor did I know about it beforehand
What would I do with something like that? What I just call them or is there a different technique that you recommend for first?
Neal: I think that there’s a variety of techniques firstly I would do exactly this technique take that list create the new Gmail account follow these steps. Now you have one more way of connecting with those 2500 people not all 2500 will connect it might be 250 or 500 but now you’ve got 500 people the magic is all in multi-channel
Right. So, I know of 11 different ways to raise money from you know accredited or individual investors. We call them retail investor somebody who invest fifty to a hundred grand a deal is called a retail investor. And I know of 11 channels I use 9, I don’t use Bigger Pockets and I don’t use podcasts now technically I don’t use podcast.
But I am on 50 podcast a year. So, I guess that that one counts right, but I don’t have a podcast like Ruben does right. So, one of those the key is to touch people using as many channels as possible. The more touches you have the more trust you create and so one of the things that you should be doing is sending out invites to that list
To your meetup groups. So if you’re teaching at a speaking at a meet up, or if you have your own meet up, you should be sending out invites to them and there’s two ways of doing that one is using MailChimp, which I don’t recommend because why because you’re going to have a very high unsubscribe
Rate correct because it’s a cold list, but the problem is that’s going to affect the deliverability of your email. So, if you’ve got RubenGreth.com you’re going to have deliverability issues. Don’t do it that way. Here’s a free way to do it, which is much better. Upload that list to Eventbrite and then send the invite from Eventbrite it right doesn’t go to spam it goes to inbox. Got it.
Ruben: That’s incredibly powerful.
Neal: So now send an invite to a meetup group that your T or speaking at or a meetup group that you host and every time you do that that list of 2500, you’ll find five or ten people will attend. Right and the moment the next step is this and you can see which ones they are because you go to Eventbrite and you see the RSVP link, right
So, you now know that out of my 2500 these five people are definitely interested in real estate. They want to come to my event now because you know, these people are credited make sure that the day before the event and 90 minutes before the event you send a text message to them reminding them about the event
Why because those five people are people you want to meet. And see if you can connect with them on LinkedIn as well because then you can see their face because when they go to that meet up you’ve got to make sure you have those five conversations with those people. You don’t care about the other 50 people at the meet up you want to have those five people you want to talk with them and out of those five, maybe only two or three will come to each meter
But if you do these 12 times a year, you’ve now added 30 accredited investors. Why is that a bad yield?
Ruben: So, you’re the mad scientist, but I think it’s because you study data like a scientist does, right? You have a back to run.
Neal: I study patterns. I think it’s different from data. I look for patterns in everything
I’m trying to do two things one is I want to see patterns and I want to apply those patterns to other things and see if they still work and the second thing that I like to do is. I want to find loopholes in everything that is very interesting to me and it’s a personally very fun for the mad scientist to go in and find the loopholes in something and then publish that information as you know, I give it all away, right
Neal: To me. It doesn’t matter. I mean if you if you can have at it have at it. I don’t need to charge you money for it. So., I think to me it’s not about data. It’s about the patterns that are created with data that are important data by itself is just an Excel spreadsheet one person can create a million bucks out of it
The next person might not be able to create a damn Penny.
Ruben: Yeah, that makes sense. So, for somebody who’s getting into multifamily syndication or even has a small track record, but it’s not quite on the same level. How can they.
You some of the branding techniques that you’re using at a smaller level because your branding is amazing. You have the multifamilyU it’s an educational platform, right you’re getting information in front of a lot of people that’s giving you a lot of credibility, but for somebody that may have done a few syndications, but doesn’t know too much about marketing. Is there anything that you recommend?
Neal: One of the things I like to recommend is. I see people all the time that have say, you know, they come to a conference that I’m speaking at and they you know, they approached me after the event. They asked me these sorts of questions the question I ask them is this. How long have you been working on multifamily?
Oh, you know I’ve been doing it part-time for a year. Okay. How many hours would you say you have spent during that time during that one year on? On you know raising money or becoming a syndicator and very often at people tell me 20 hours a week, you know for a whole year. So, I say, okay. So, you’ve spent a thousand hours so far and they say yeah, I might even be more, you know, sometimes when we go to conferences where there the whole day and you know, it’s a very heavy schedule.
I’m there Saturday. I’m there Sunday I go to meetups so might even be more than a thousand. It’s okay. Well, we’ll use thousand as the example so. Is it fair for me to say that your time if you are working a full-time job and not paying attention to real estate? You could generate 50 bucks an hour.
A lot of people are like, oh I could generate a lot more. I think I can do a hundred bucks an hour and I say but how about 50 bucks an hour? They’re like, yeah. I think I can do 50 bucks an hour. That’s the equivalent of a hundred grand in in salary in a year. So, I said, okay, so you’ve spent a thousand hours.
And your time is worth 50 bucks an hour and some people give me a lower number. They say 30 bucks an hour said that’s fine. Okay, 30 bucks an hour. So, is it fair to say that in terms of Time Value? You spend $30,000 and they say yeah, that’s fine. So I say okay and you’ve also spend a lot of money apart from that time value on travel right you paid for conferences, like raising money Summit you go to lots of meetups you fight to traffic, you know your pay for your airfare and hotel and they’re like
Yeah, and I say how much do you think you’ve spent their? Well, probably spent like ten thousand dollars already. Even if they haven’t joined one of the guru courses, they’re usually say 5,000 10,000 20,000 said, okay now tell me exactly how many dollars you have spent on branding how many dollars have you spent on branding.
Because the truth is that that time value piece. Let’s say 30,000 dollars. And that no travel piece. Let’s say $5,000. It adds up to 35 Grand. Correct?
Neal: You have to spend 35 thousand dollars to match that you have to match your time value and your travel. With hard branding cost and that is your investment into your new career. That is like you spending for eight semesters of education at a local College. That’s your entrance fee if you are not matching. Those dollars with hard costs and branding then you’re not going to accelerate as quickly as you want. You’ll still be successful. I’m not saying this is needed to be successful.
But that wasn’t your question your question was. How do I grow? How do I grow really fast with Branding? The answer is you have to spend some money. Right, I gave you some tips about, you know meet up groups and I’m going to give you some more tips about those but in my mind simply thinking that the total amount of marketing budget that you have is zero is a horrible idea because it isn’t everything in life costs money investors are worth money.
So, in our company we have this math and I’m going to give you this math. It sounds very crude, but it’s truthful. We were in a heartbeat pay 500 dollars for one investor in a heartbeat. Right and we in some cases we’re even pay a thousand bucks because at $500 an investor its typical investor over their life cycle gives us $150,000.
She’s going to give you a hundred and fifty Grand. If you’re a decent syndicator, you’re at least going to make 10% of that which is $15,000. Right? That’s your return on investment some syndicators make more than 15 but 10% but they make 20 some even make 30, but let’s use 10% as the example over a five-year timeframe one investor who gives you a hundred fifty Grand is going to make you personally you $15,000.
Why wouldn’t you pay 500 bucks to get that investor bottom line though is to close one full syndication. You don’t need more than 50 investors 50 investors multiply by 500 is $25,000 spend the $25,000 on branding and by branding I don’t just mean a website. By branding I mean hire part-time guy that you know spend some money on meetups instead of charging for them give them away for free by some food, you know use some Facebook ads, you know hire somebody to basically get you on podcasts
Remember I talked about this at the conference. I said one of the best strategies that you can have for Branding, which also means content creation is. Going up here on another people’s podcast. I’m doing that right now, correct?
Neal: I’m very scaled. I have 2,000 investors. Why am I on your podcast
Because I’m doing two things at the same time. Number one. I’m creating content and number two. I’m creating presence. So, it’s a very efficient use of time and I’m not spending any money to be on your podcast. I might.
Ruben: No, that’s a great strategy.
Neal: I simply turned on this camera at four o’clock and I’m going to turn it off at you know, 4:45. So, in 45 minutes, I’ve met both my branding requirements and my content requirements because this content that Ruben gives me is going to be on my website instead of a Blog that might take me four hours to write that I probably will never get around to writing anyway.
Neal: Which is probably going to be 1/5 of the detail that this podcast is so imagine.
This is the laziest way to get content and eyeballs is to appear on other people’s podcast and at the conference I was so angry. Am I allowed to say pissed off?
Ruben: Why the hell not.
Neal: I was so angry Reuben because I told people that I’m going to give away a service. This service that is in my opinion a really high-quality service.
I’m not connected with them in any way. I’m just a customer that basically gets you gigs, and they specialize in real estate. So, they get you gigs on real estate podcast. And all I wanted was people to come up to me and talk with me. And what was amazing was that were 450 people in the room listening to me and about 25 came and talked with me about it.
Right? So that tells me that people are not willing to make an investment into marketing and branding we’re clearly, they have already made an investment of their time they were at the summit and they most of them flew in. So, they bought expensive hotels in Denver and expensive airfare. That’s where people go wrong.
Ruben: Easily. Yeah! We have that we have that same issue. I mean, we’ve been successful at raising money from friends and family, but now we’re going into the public solicitation and I’m telling my guys they brought me on to help with marketing and I’m like we need a budget do we what’s our budget? No, but we’ve never had a budget before and I’m like, well we need to spend money on this, but I’ve done some of the same things about my.
But Partners on podcasts are the guys that have the track record that’s been extracted incredibly successful and then I started my own podcast. It’s been great. But yeah marketing is a big thing. I probably spent around six thousand dollars a month and I want to learn as much as I can from people like yourself that teach us The Branding techniques that make us the most return on our money.
So, it’s fantastic to have you I really appreciate this. What are some of your best strategies do you think for raising Capital?
You said that you have nine different ways that you contact people but what do you think is most effective of everything?
Neal: I’m not sure that there’s a good answer to your question because some things are going to be more effective because they’re multi-channel.
But if you do them by themselves, they may not be very effective. You see what I mean?
Neal: So, some strategies are less. Dependent than other strategies, I think the Meetup strategy which I taught at the at the raising money Summit is considered one that is less dependent on other forms of branding.
So, if you could just a meet-up organizer and people keep coming to your Meetup, they eventually will invest with you. So, it’s you don’t need multi-channel in that case but meet up is also a very slow burn. So, in most metros, it takes a long time to get to the right number of investors, which is why I recommend multi-channel.
So, Facebook groups have incredible speed especially if you have a lower priced offering, so Facebook groups are not as useful for me because my off most of my offerings are a 100K minimum accredited only. Some of my offerings are 75k accredited only and Facebook works really well when you allow 25 and 50k Investments for non-accredited investors, right.
So that group will give you a higher yield if you’re allowing those numbers, right? So, if you are allowing those numbers in your syndication then in my mind Facebook groups is a terrific way. To invest into your business the time the scale that you get from Facebook groups is very powerful. Facebook ads are also powerful, but you really have to have a compelling product. You have to hire a third-party Facebook ads company never try to do Facebook ads by yourself. I think it’s a waste of your time. You’re not going to really make those ads work. They’ll keep getting flagged. So as long as you have a competent Facebook ads company that creates.
Those ads for them, you’ll find that Facebook will come in under 500 an investor in almost every case.
Ruben: Do you recommend any one particular investor? What do you recommend for Facebook ads?
Neal: I don’t have anybody at this point of time. I just find them as I go on Upwork. So, if you type. Facebook ads into Upwork.
You’ll see a number of people and just read the reviews and pick somebody that has five-star reviews and has at least made $10,000 and all they do is Facebook ads. Don’t hire somebody that does 55 different things in marketing including Facebook ads hire somebody that only does it. Because if they would be true experts so I think that you can hire plenty of people from Upwork.
So, you could very easily start off with paying $100 a lead, which is, you know, a very expensive process, but then four weeks six weeks into your campaign you could be paying $30 a day. $30 Elite is great because one you know, that’s 16 people that you get for 500 bucks. At least one of them is going to convert probably more.
Ruben: What about for a webinar? If you want to create a really compelling webinar that gets people to either stay on your list or invest with you and your specific deal if it’s a good deal and it makes sense. Assuming that right.
Would you have somebody that you recommend or what do you recommend doing for a compelling webinar to get people to investment?
Neal: Webinar as in like the webinar for the raised itself?
Neal: We do we do them ourselves. We’ve never really found a third-party vendor that we could recommend to other people having said that there are lots of PowerPoint designers on Upwork. I would highly recommend that you use one. So, it’s it I didn’t give you a direct answer to your question, but indirectly I can tell you that having a PowerPoint designer design your raised PowerPoint is worth it. It’s not cheap. So, we’ve never we’ve never paid less than $1000 and some of them which have been more complicated. We pay $2,000, but we believe that that’s money really well spent.
Ruben: So, tell us a little bit about the deal that you’re working on right now that you’re doing, you’re in the middle of the capital race.
Neal: So, as you know, the challenge that we now have is that everything is expensive.
Honestly my belief which lot of people beat me up over at I’m very unpopular in my own industry is that everyone is over paying a hundred percent of the time today people ask me so you have access to cheap deals and the answer is no I’m overpaying for every project. And I believe that everyone is and if you’re if you’re not willing to admit that that’s fine and maybe you have some magical source of cheap properties that I don’t know about.
Maybe you should do a podcast on it, but I certainly don’t my focus today is how can I do something completely different from what other people are doing either? I should just sit on the sidelines and not buy anything and I’m not taking that approach. Or I should accept the fact that I’m going to overpay for a property.
Even if I overpay for a property. I should be able to through management efficiencies through optimization through systems processes Outsourcing technology be able to deliver a 17 or 18 percent return because rents are rising. Properties can still be updated. So, there’s still a lot that can be done.
Even if I accept the fact that properties, you know were overpaying for properties are still a lot that can be done there. So, my focus has been on finding properties where they’re in great markets. They’re in great submarkets. But the owners or the property managers or both have really failed to optimize the marketing and The Branding of the property as you can tell with 2,000 accredited investors.
I am very good with branding a particular product and then marketing the heck out of it. Why can’t I do that for a property? It is a physical asset if I could mark it if I could brand it if I could improve its reviews if I could have my Army in the Philippines for you know, raise five or ten thousand leads for it per year.
Then in a market that supports 94 percent occupancy. I can get to 96 in a market that supports 5% delinquency. I can get the 3 in a market that supports 900 in rent I can get to 950. Right, all of those things are possible, but you need extensive systems. So, for the last two years, I have been engaged in this very long, very expensive process that no investor has paid for of building an Army in the Philippines.
That does six different things. They do lead generation. We generate roughly four to five hundred tenant leads a week. They process those leads in real time 13 hours a day and schedule appointments at the for the property manager. We have a separate third-party property manager, but they schedule leads they do reputation management, which is a process of getting reviews by asking for reviews.
They do renewal management, which is a process of making tenants feel warm and fuzzy right before it’s time to renew. They do delinquency management, which is a process of accelerating evictions and preventing other evictions. Then they do community building which is everything from newsletters to highlighting tenants that are doing a great job to Bringing speakers into the property taco Tuesdays Pizza Fridays, all of those sorts of things to give tenants a warm emotional connection with the property.
So, we have we’ve now gotten to the point where this incredible machine with six different departments is up and running. So now I’m buying properties like Weatherly walk in South Atlanta. This is a hundred ninety-two-unit property. It’s in an affluent area that has typically if you look at 10 syndication properties, maybe one out of them would have incomes as high as this property. If you look at 10 syndication properties, maybe one of them would have demographics as good as this area in terms of job growth income growth population growth home price growth. Maybe one and none out of those tens would have schools as good as this property. So, the schools are 10 out of 10, which you can’t even get in areas where homes are, you know, five hundred six hundred thousand dollars, right.
So, you still can’t get 10 out of 10 schools. But this area has 10 out of 10 schools. So, you take that combination. And you pay up for it? Yes. I’m paying a fair amount for it. And then you mark it the shit out of it. That’s our business plan. And that’s what we’re doing with Weatherly walk and people are resonating with that.
That’s why I have 500 people signed up for my webinar. That’s at 6:30 tonight. Right people resonate with that because they like the concept of yeah don’t go out and buy shitty property simply because they’re expensive go out and buy in a great area and then. Highlight those schools. What was amazing is when I was looking to buy this property Ruben.
I looked at all of their marketing firstly it was missing from 90% of the online portals. Secondly. Nowhere in any of those portals. Did they mention the fact that they have 10 out of 10 schools? Which was so glaring in my mind that if you know if I was a king of America a thousand years ago, I would have had somebody shot for that.
Right, it wasn’t even mentioned. If it was my property, there wouldn’t be a single picture of this property on the web that didn’t have a sign of the bottom saying did you know we have 10 out of 10 schools? Did you know we have the best schools every picture every property every single aspect of this property would mention that.
There wouldn’t be a way that there would be a tenant in that entire city of Fayetteville. That would not know that this property has the best schools. Why? because the tenant based that’s in place where there are singles and the Tenant brace. I want our families because families will stay for much longer for good schools and families will pay up a lot of firmer schools.
So, what this property is currently doing is worst and lowest use. All I have to do is best and highest use, so I don’t have an extensive rehab program I’ve of you know fairly it’s a million bucks. Right? So, there’s lots of people doing million-dollar rehab programs. Nothing special. But what I’m doing is taking it from a company that doesn’t understand what they have understanding it and then marketing it so that there isn’t a single person that City that could be a potential renter that doesn’t understand the value.
Ruben: Yeah, I think people are going to want to invest with you just because of how good you are on the marketing side of things not to mention the way that you are wanting to take care of the residents there.
I think people intrinsically have find that very high value about you.
Neal: I find it what very high value I find that so sometimes doing the right thing and making money is the same thing, right
So, a lot of people say we treat our tenants well, Okay, and your indicator, I’m looking at you in the eye right now and I’m asking you this have you ever had a property where you wished a tenant? Happy birthday. Have you ever had a property where you’ve had a monthly event where you highlighted a tenant?
Have you ever had a property where you send newsletters out to tenant? Have you ever wished them? Anniversaries. Have you ever sent them text messages? If you haven’t done any of those things, then you’re just mentally saying that we take care of our tenants mentally how many times have you called your tenants after a maintenance call as happened to check to see if your property manager did a good job or not.
In fact, leave alone the maintenance how many times have you as part of the ownership group actually called your tenants to see if they like living. How many times in the last year have you replied to reviews bad ones? at your property in the last year. Do you even know how to respond to your reviews on Google or Yelp?
Do you own the property on Google reviews or Yelp? Do you know what that means? If you don’t know what that means and how could you be taking care of your tenants? You know that there’s a 33% chance that if somebody calls the tenant back within an hour of them putting a one-star review that the tenant will take the review off 33% one hour.
All you have to do is make sure that the review is coming directly to you and not just going to the property manager. You know that 50% of property managers in the United States for 200-unit properties. Don’t own the Google reviews in the Yelp sites for their property, which means that no one is ever reading that one-star review.
How could you be taking care of your tenants? Yeah, that’s where are the people that do this my armies in the Philippines? I don’t believe that property managers do it and I’m not going to trust them.
Ruben: That’s incredible. Wow, that’s a complete mind shift and looking at it from that perspective.
Yeah, you can’t answer. I don’t think anybody can really answer a hey I hit every single one of those on the head. But the Personal Touch, I think I heard Cory Peterson talk about it at the RMS at the raising my Summit just doing that extra above and beyond what it what the everyday person does to go out of your way to help these people and to make them feel good.
So that’s very powerful and I think people will resonate that and once again the want to invest because they know that you’re going to take care of the people in your deal that way.
Neal: Yeah. I mean do everything you can with marketing. But once you get the tenants in make an investment of dollars this efficiency Summit that’s in the Philippines.
I am paying for their salaries. My properties are not because I fundamentally believe that if I don’t do this, I can’t make the back-end returns. I’m going to end up being in those 90 percent of properties that are not going to hit perform. I want to be in the 10% So I have to make an investment if you think about it my strategy is the exact same on the pre-acquisition side as it is on the post-acquisition site invest in your in finding investors to buy properties. Invest in finding and keeping tenants once you buy them, same strategy.
Ruben: So, for tonight’s webinar that you’re going to do are there some Target things that you want to hit that you really want to convey to the audience and what are those things?
Neal: I think some of them I conveyed already. Yeah, this I I’ve already done that in my mind. What I am seeing more and more of is people, you know, they used to buy $60,000 a door. And now that those prices are up to 90. They’re still buying $60,000 a door. And in my mind Ruben, if those people are honest to themselves, they’re taking a greater and greater risk because they’re diving down deeper and deeper into class C – and into D.
Because they want to keep that price looking attractive. Right? I’ve people you know telling me that I just had somebody texted me today. I’m not going to mention who, and this person is convinced that he’s got a property that is 30, IRR It’s 500 plus units that he’s buying it $40,000 a door and my advice to him was please go back and add it the delinquency. This property has had in the last 12 months understand fully what your delinquency is because you’re looking at Top Line and the bottom line for this property might be disastrous people are not really looking at that. They’re not really auditing the delinquency in a property to see if the tenant base will actually support the higher rents that they’re showing you’ve got to have the money people have to have the money when people were doing this six years ago.
If you had ten thousand potential tenants in a Marketplace out of those 10,000. Let’s say 25% were more affluent than the others, right? They had more money. So, first 25% of properties that got upgraded in a Metro we’re fine. Those people had the money the remaining 75% didn’t have the money you could you know gold plate everything at your property and they still wouldn’t give you a dime for it because they didn’t have a dime to give you and so I keep seeing people investing into these lower and lower income areas lower income areas believing that all they have to do is spend $6,000 a unit and they’ll get rents popped by a hundred and fifty and certain cases. They will they will get those new higher rents, but then their delinquency is going to triple.
Because now people are paying 50% or more of their gross income on apartments. And this is what we’re seeing in the marketplace everything that has all that almost everything that could already be exchanged and improved has been improved once or even twice and so now you’re seeing properties that really are trash in the marketplace. So, it’s a very difficult time and finding a good property and having a real plan around it is fairly rare today as well.
Ruben: There’s two last things that I want to hit on number one. I can tell when I communicate and when I hear you speak. Neal that you have studied some level of psychology in sales in the way that you talk to people.
Can you tell us anything about that or anything that you recommend in terms of who study for that?
Neal: I don’t know. I think I haven’t I’m a technologist. I have never done sales in my life. So, I don’t have a good answer to give you I have heard that comment from other people. So, I think I picked up.
Psychology or neuro linguistic programming along the way. So, the only thing that I would suggest is that there are lots of great NLP or neuro-linguistic programming videos on YouTube watch them a subset of them are about how to use NLP for sales. I think I sort of picked up MLP on my own and then realized it later that what I was doing was NLP, but I’m sure other people can do this.
So, my advice would be to understand neuro-linguistic programming and find people that are specifically in the vertical of using NLP for sales. And I think that you’ll see a lot of success.
Ruben: Okay, what about this and it may be a loaded question, but do you see a recession or correction coming that’s really going to affect a lot of these multifamily’s indicators that are out there?
Neal: Yes. I at this point. I give it a higher than 75% chance that they will be a recession in the US before the next presidential election, which now is about 13 months away. I believe the impact will be stunning. I believe the impact will be significant. I don’t believe that that recession is like the GFC.
It’s not the great financial crisis that’s coming. I think it is a vanilla U.S. Recession which usually lasts for two or three quarters six or nine months and the impact on multifamily in past vanilla recessions, like 2001 or 1991 hasn’t been profound. It wasn’t a big impact. So, people that the reason this time we might have a bigger impact is because we have a very large number of inexperience indicators.
We have never seen. This anything like this syndication. Boom. I tell people Ruben all the time. There’s no I don’t see a bubble in multifamily. I see a bubble in multifamily syndication. Yeah, because a lot of people that are doing syndication aren’t really not set up for it mentally their systems their thought processes.
They’re not true Advocates of their investors’ money. They are not true fiduciaries. And so, when there is a downturn a lot of these people are going to cut bait. Because they never fully gave themselves over to being real estate’s indicators that are holding down J day jobs and doing this on the in the evening, which is fine until a recession happens and you got to focus on that job now and well, I know where their attention is good
They’re going to focus on the day job and not on the property which is all of a sudden going to become a much harder, you know property to run and so I do see significant problems coming up perhaps 15 months from now.
Ruben: This conversation has been an absolute fire from your side. I could see the passion in your eyes when you’re talking about taking care of the residents.
So, this is some really good stuff. I really appreciate you coming on. Why don’t you tell a little bit about how people can get a hold of you before we sign off?
Neal: Sure. So those that are looking to invest with our Tech enabled company can go to grocapitus.com. That’s G-R-O without the W at the end so G-R-O capitus C-A-P-I-T-U-S which is Latin for Capital grocapitus.com. But I think a better way to learn more about us is not to go there unless you really need to invest money today. It’s better to go to multifamilyU.com. So multifamilyU.com is a is a knowledge portal. It has dozens and dozens of Deep dive webinar.
We don’t allow any pitchfest simply because there’s nothing to sell at the on this website. So, anybody tries to sell anything we look at their PowerPoint deck if the value is not there if the Nuggets there aren’t lots and lots of gold nuggets in their presentation. We just simply decline. But what’s nice is that we have every kind of realistic professional that you can imagine not just around syndication, but on real estate, there’s analysts there’s forecasters,
there’s lawyers, there’s syndicators. There’s people that are involved in every part of the process property managers lenders. That are providing thoughtful Deep dive education in our long, you know webinars on multifamily you.com and that’s really a terrific place to learn. Nobody is a nobody’s calling you.
There’s no phone calls you go in there. You watch a webinar. There’s both live webinars and then there’s also all our on-demand webinars. I think that’s how education should be. It content poured like Wikipedia doesn’t call you five minutes after you read an article there, right? Why do they have to call you?
You just go there and you learn I think and multifamilyU is like that. We will probably send you an e-mail six times a year to invite you to our race events, but nobody’s ever going to call you.
Ruben: Yeah, that’s fantastic. One last question though. I can’t let you get off without this.
Because you’re so good at explaining why you like multifamily. So, tell the audience if they’re thinking about a specific asset class.
What are the things that you love most about multifamily?
Neal: Well, I think apart from the usual stuff. Everybody needs a place to live. There aren’t they aren’t making any more, you know real estate. They aren’t making any more land and the United States is now failing in its ability to build more infrastructure.
So, where if you look at any major Metro in the US and you see those rings of freeways around have you seen a new ring in the last 20 years in any Metro in the US? No, because we simply can’t be failing to maintain existing roads. How can we make new ones? We can’t make new rings. And they’re not making any more land and the population keeps growing by 1% a year.
What do you think is eventually going to happen? Right? So, you that the density forces prices to go up. So, there’s a lot of things that are moving, you know, keeping multifamily where it is, even though prices are high. It’s still keeping rent growth strong millennials. Our very active they like to move around the country.
They like to move around for their jobs. They want that freedom that their parents didn’t have when they bought a single-family home. And so, you see a record low level of home price purchase a home purchases from Millennials. You see a lot of baby boomers retiring to Apartments instead of retiring the smaller homes.
If you look at the trends you see why multifamily a preferred asset class is also, please note that the United States is now the only developed country in the world that pays interest on bonds. No other country pays interest on bond. If you if you want to lend money for 10 years to the Swiss government or the German government.
You have to pay them to lend them money. Isn’t that total nonsense, isn’t it ridiculous that I should basically be paying somebody to lend the money for 10 years. Well, imagine where that money is going. Well that money is flowing into the U.S. And it’s going into our stock market and into our real estate. I don’t see that changing anytime soon. Because I think that for all the problems that the US economy has, we are by far the best-looking pig in the pigsty because of that money keeps flowing in here and it seems that every other country on Earth loves our real estate. So, it is possible. And I’m not betting on it, but it’s possible for our real estate to get significantly more expensive.
If you want to see how expensive real estate can get, I asked you to study real estate in London, Vancouver, Singapore and Hong Kong all of a sudden you might find U.S. real estate to be staggeringly cheap.
Ruben: Yeah, that’s been lights out information. I really appreciate you coming on Neal man. It’s been fantastic.
Thank you so much. Hopefully we can get you on another year. And then touch base. I’m looking forward to finding you at an event and definitely I’ll join you on the webinar to see what kind of tools I can get for presenting my own webinars on there if that’s okay.
Neal: That’s perfectly fine. I mean I learned from other people other people should learn from me.
There should never be any resentment of that. We’re all at some stage of the journey with people I had us in mind.
Ruben: Awesome. All right, well with that will sign off man. Have a great presentation tonight. Thank you so much for coming on will talk to you next time.
Neal: Alright. Thank you.
Ruben: Bye. Take care.
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