WIN189. How Data-Driven Investing Builds Wealth in Multifamily Real Estate with George Roberts

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AJ: All right, today we have George Roberts with us from Roberts Capital Enterprises. George, thanks so much for coming on the show. Do you want to just get started and kind of tell us a little bit about yourself and how you got into real estate?

George: Absolutely, let's dive right in. Well, first of all, thank you. It's a great honor and a pleasure to be here. I got started in real estate in 2010. I was an accidental landlord.

We all remember that was the bottom of the market and well, God that I called it, moved up into a bigger house and decided to keep the old house as a rent and turned out to be one of the best ideas ever. We were able to recover the capital, which I mean, it really shouldn't call the capital because it was the family home. So everybody else selling their home for half price, we got our money back and more and had great cash flowing asset. So after that, I thought, wow. I mean, this is beautiful.

I mean, I've got a great career. I was working, in data science through most of that time, making just tons of money. But, you know, getting that check every month, that was such a beautiful thing. And when I finally did make the mistake of selling it many years later, I missed it. I realized, real estate really is the place to be.

So I used all of that analytical firepower. I surveyed the entire world of assets and investing and decided, you know what? Next time we spin the wheel, I wanna be in multifamily. And so I decided to turn those economies of scale to work in my favor.

AJ: Awesome, that's a great way to get started. Our parents were in real estate and had rentals, but so we are not quite accidental, but very similar to our start.

George: But I So, say accidental because I didn't, it's a family home, So yeah, parents were very helpful there. Yeah, my father, real estate investors, stock investor, equities, etcetera. Yeah, big investor.

AJ: So you said you were working another job then. Did you start to kind of dabble into the multifamily world or did you just kind of like jump head first into like, what did that start look like into multifamily?

George: So yeah, starting in 2010, I became, so that's when I was merging from bioscience into data science, then worked in that field until I think it was 2021, 2022, something like that. And so over that timeframe, I was just, I just had that one unit. Well, then around 2019, said, you know, gosh, I've got to get into multifamily. I love this business, bought my first in 2020 and really didn't have very long. I didn't really have a very long ramp, but when the interest rates increased, I got booted from FinTech, they were just cutting people left and right.

And I thought, well, hey, I don't really have enough runway to be comfortable taking off, but what the hell, I'm just gonna pull the stick and we're gonna do this.

Chris: So you said you eventually sold your home, Well, your rental that was your home. What year did you sell it?

George: That was 2018. I think we did okay. I wish I had a crystal ball. Would have kept it a few years longer, or maybe even still happens, you know, it's yeah, mean, I'm like everybody in real estate. So what's your biggest regret?

I wish I could have held on to everything.

Chris: So then you said you went through and analyzed essentially every asset and that you decided on multifamily. I guess what prompted you to do that? I mean, yeah, you wish that you hadn't sold your you missed the rent check. But and then I guess what did you eventually conclude? What made you decide on multifamily?

George: Right, so there's the economies of scale, there's the semi passivity of it in the sense that I got this 6 figure plus job. I can't do 100 deals, okay? I can't be at somebody's kitchen table every night, every week, even every month, it's just, it's way too much of a grind. So buy a few bit of deals and then focus on those. So it was really all about remaining a data scientist as long as possible.

Yeah,

AJ: certainly using that those skills has gotta be pretty useful in doing the analytics of like what to invest in. Like, do you find that it's fairly adjacent to data science?

George: No, I think everything in life is all about data and analysis. Look, we gotta execute, but what are you executing on? The more things that you're analyzing, the better the likelihood you're gonna find the right deal that you're gonna pivot when the markets turn. So stay curious. And that was really the first lesson I learned in my career way back to being a bioscientist.

I gotta ask the question, you know, hey. I don't know. I asked the question, what makes a great scientist? And I thought it was like an IQ of 212 or that I have to brush up differential equations, but no, it's to me curious. And it's funny thing is that I think that that really goes for everything in the world.

If you're curious, you'll keep learning and that'll keep you fresh.

Chris: I agree. Never stop learning. That's a, you know.

George: Oh, yeah.

Chris: So I guess, why don't we go down that thread? Books or what sources did you find the most information from or most meaningful during the time when you were in learning?

George: Yeah, I would say that Michael Blanc's book, I think was very influential to me. I love the way that he just spoke with a great deal of candor and he started these pizza restaurants, made a lot of money for a while and things kind of turned against him. And I really think that, again, the idea is, you know, analyze, you wanna be ready to pivot. He pivoted. He went into fix and flip and then multifamily.

So look, it's a long and winding road, but guess what? There's a there's a lot lot of, out there for people who are willing to go out there and parents. So that was hugely influential to me. And anyway, wherever you wanna go from there.

AJ: Well, I kind of read a little bit more about your bio and that sort of stuff. And did you when you started out in multifamily, did you start out as a limited partner investor or did you just straight to a sponsor?

George: Yeah, some people, I don't know what it is, but I just had to get my hands dirty. So it was around the same time I tried both. And I think that I actually started actively predated by at least a half a year to a year.

AJ: And like

George: Definitely, definitely don't discount the idea of starting as passive.

AJ: Exactly. I mean, I think when we we started out kind of similar timeframe, I think, we kind of identified our first one in 2019 and sponsored our first one in 2020. And, you know, over the course of twenty to twenty two made a couple, couple LP investments. But, I was just kinda curious, like, when you were looking at those other LP investments, what, I mean, what what drew you to invest in passively, along with doing it actively?

George: I think I just really wanted to learn more because I have my finger in more pods, see more deals, and then not have to operate everything. I mean, I think we all wanna have our toes in the stand. I I just love the Westside Investors Network vibe. I feel a little bit like him out of the West Coast when I talk to you guys. So that's really what it's all about.

I mean, me, I wanna be on my sailboat. You can see my book here in in the background, Passionate Living Through So Passive that's really what it's all about for me. And in in the in the end game, we all should want to be passive investors. So however you get there by doing more and more passive deals, or maybe by being an operator for X number of years, again, don't think of it as necessarily just the starting point, it may also be your end point.

Chris: I mean, to move into the investor box, from the W2 box, that's the

George: dream. Exactly. The Kiyosaki terms, lovely guy.

Chris: Oh man, we're going to do a rich dad, poor dad book review for our property management team next month. So good old Rich Dad Poor Dad and then some cash flow quadrant.

George: Yeah, one of the best games ever.

Chris: Only game that can drive is Yeah. So when you got started in multifamily, what was it like? And you know, you were working full time and then what was going full time into real estate like?

George: Yeah, so so it was crazy for a long time. I was kind of full time in both. When I think back to those times, and really, those were the great days. I mean, those were the days 2020 if we realized it, but we didn't realize it. I got my first deal because a couple of people pulled out of a deal because of the pandemic, because of this, and I think for other reasons, and then the pandemic came and we signed closely shortly after the pandemic was just frightening people from, know, do we get into this or not?

But we were able to find a good enough deal from a seller who had some deal fatigue. So we really took advantage of that. We got into that in a great cost basis, making money, cash flow, appreciation. I mean, really, was the total picture. And then went on and did a few more deals kinda like that.

And at that point, like I said, it was good and lucky timing that the multifamily thing took off quickly for me because I had no idea that the FinTech gig was gonna end so soon.

Chris: Yeah, and then so was it, I mean, were doing multifamily full time and then you instantly had another forty hours a week to work. What was the I guess, but then the market started turning a little bit. So how did how did that go?

George: Well, I mean, it was only possible with telecommuting. I was, you know, I had two computers open, it seems all the time, Keeping a track of my investments and my perspective investments on one and then just keeping the job on the other. So, you know, in some ways it was very, very lucky timeframe. And then it was it was just very welcome when I went into real estate full time because again, then it's not as if I have two jobs anymore, only one and a half as full time.

AJ: And I I don't know if we asked this yet. Where where are you out of?

George: So I'm coming at you out of Michigan, Southeast Michigan, North Of Detroit, out by Lake St. Clair. It's beautiful out here. Love our vibe too. Our Midwest vibe, we got the Great Lakes and and I get to get out there.

You know, I wanna say almost every weekend that was the past. Now I'm busy with other things, but at least once a month I get out on that sailboat and enjoy Lake Erie.

AJ: Oh, that's cool. And then are you investing locally or are you looking at other markets? What what's how's that working for

George: I I was investing locally at first, but that was another thing that actually drew me to multifamily that it doesn't have to be here. The idea that really the entire country is potentially my markets that really appealed to me, especially given that I just I love analysis.

AJ: So where where do you like to invest in or is it a specific thing or is it just more kind of like deal specific?

George: Yeah. So right now I like the middle attitudes of the country. I think that's where better deals are. We all know what happened to the Southeast. I I had great deal in Orlando there.

Still have it, but I'm not buying in Orlando right now. But I like the the Lower Midwest, Upper South. This is where things make sense. Northeast may be growing, but guess what? I don't like all of the regulations, etcetera.

So, you know, the band where I'm in where there's not, you know, it's it's not too wild in terms of, you know, regulations on the landlords on the one hand, and yet still growing. Steady Eddie wins the race on the Midwesterner.

Chris: So the Midwest, I guess we only invest in Portland where we're vertically integrated. I mean, I guess we only buy property there. Well, we do passive investments anywhere. But yeah, I mean, the numbers I've analyzed a few deals in Chicago, I've analyzed Cleveland. And I mean, the numbers are just so wildly different, like the expense ratios.

I mean, the amount of rent per the cost of what a building is like, it's, you're looking at like 2% rule here, it's an absolute miracle if we get 1% of the purchase price on gross rents for a month. So I would be interested to hear, like how you shift markets. So I guess easily, we've underwritten Jacksonville, Florida, the expense ratios are just through the roof there as well. And so I guess maybe we're just anchored to low expenses here in Portland.

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George: I love it. We'll stick to what you know, staying in your lane. It's a great bit of advice. I'm not looking in Chicago and I have looked at Cleveland and, you know, I I did take a pass. When I talk about Midwest, again, I'm looking more places like Cincinnati, Kansas City, or, you know, as some people call Louisville, the gateway to the, you know, to the Midwest, etcetera.

So those are the sorts of places that I'm looking. A lot of the Midwest I wouldn't touch. I mean, we've got other problems here at your rights. It's pretty amazing what you can get, for example, per unit, etcetera. And people coming from some of these, maybe higher expense ratio places or places where per unit is just again to the roof, these deals, again, they do look very different, but we've got to deal with a lot of places in the Midwest people are leaving.

So again, that's why I like to stay kind of close to the South where people are moving, people are going where it's more affordable. And I think that's really the part of the country that I do believe should continue to expand and should be safe to invest in for some good time to come.

Chris: I'm interested to hear more about your thoughts on migration and just like, I did a little market update for our team today and we essentially were talking about cities, major hubs and how remote work has devastated the office market downtown in many, many metros. So what, are people going to move back to the cities? I mean, are our offices going to get converted to apartments? You mentioned that people are moving to affordability and I kind of agree with that. We have a lot of people moving, well, who moved from Portland to Boise, Idaho, when Boise was a little more affordable, but now Boise is more expensive than Portland.

And so that's interesting. I mean, politics are way different in Idaho.

George: Yeah, exactly. It's funny you cross a mountain range and all of a sudden everything changes on the other side of the divide, but. Yeah. So, well, let's see, getting kind of back to Midwest migration, I think that's still, yeah.

Chris: I'd be interested to hear your thoughts on migration and just like where we had a massive move of people to the Sunbelt. Like it was huge, like in 2021, 2022. And people are moving away from

George: Yeah, so I think we're still playing out the last trends. Okay, the last trend really was the affordability still is, I've got to keep our eyes on that. I don't know what's gonna happen, but I love your insights about people moving out to Boise and that getting, you know, sort of expensive in its own right. And that's happening really all over the country. We had another wave of overbuilding recently, and I think there's another one coming.

And it's gonna come as soon as the interest rates decline, as soon as lending opens up a little bit, those builders are gonna start building like crazy. Now, where are they gonna build? I don't know. That's what we're gonna have to keep our finger on the pulse of, because those are gonna markets that we're gonna wanna stay away from. I got into Orlando in 2020, massive tailwinds.

Now we've got some headwinds, but we're surviving because we bought with a good margin of safety, we bought rights, and we're gonna be fine, we can hold on as long as we want. We're in no trouble, but yeah, I think people are gonna want to shift away from the markets that get built up very quickly. And another way to put it is when the markets do rise like crazy, boys and watch out because people get way too excited. I mean, it's commonplace. I mean, we all know this, but then why does it happen again and again?

Why does human nature never change, even though we see these markets crash? So I don't know.

AJ: I mean, as a data analysts or, like, data sciences, like, you that that's a job of, like, aggregating, like, tons of data together. Is that do you use that to do kinda some of this market analysis at all? Or

George: Yeah. Absolutely. I mean, I am on, Fred all the time. There's all kinds of amazing things that you can find on Fred. Look at the markets.

Freddie Mac is great. They're looking at a couple of dozen cities for multifamily. If you can't find the multifamily data, you can look at the single family data and get some basic idea of how the housing market is going on fred.stflucified.org. So absolutely, you wanna stay agile. Again, just the more data you're looking at, the more likely you are to spot the trends and figure out where you need to be.

Yeah,

Chris: I mean, was the interest rate decision today. It doesn't seem like rates are going to be, at least the Fed is going to be lowering rates this year, sadly. So it's going to be more tough sledding.

AJ: Yeah. Inflation's up for sure.

George: George. At least temporarily.

AJ: I mean, Hopefully. Yeah. Out their fingers. I mean, I've I've heard some guys say that, like, this you know, the a stable market is gonna be, you know, interest rates somewhere between four and a half and five and a half. So we might be a little elevated from that, but I, you know, seeing the sub threes, ever again in our lifetime might be might be a little troublesome.

I'm not sure that that's gonna happen, but yeah, well.

Chris: Should we move on to the four questions or George, do you wanna share a little bit about your businesses and the goals that you've got for Robert's Capital and Horizon Multifamily?

George: Yeah, so the horizon is really sort of been to the past, still work those guys, but Robert's Capital is what I'm doing going forward. We do multifamily. I also do some private lending out in there. That's my main vehicle these days. I wanna continue doing these things.

Private lending is a beautiful thing. It works really well in your self directed IRA, great for tax purposes, etcetera. And multifamily is a great place to be. So definitely not making any major changes there, just barreling forward. So

Chris: that's interesting, I don't think that we've had anybody on doing hard money lending, especially out of their IRA. Are you doing that?

George: Yeah, so I mean, I got a couple of larger loans out. It's not something I do all the time. But it is a significant part of my portfolio. And again, you gotta remember that the lender always gets paid or at least they're the first to get paid. If they don't get paid, nobody gets paid.

As you get more wealthy, it's really more a matter of holding onto wealth rather than growing it. And when you look, again, as you go more up and up a scale, it really is totally about capital preservation. So you have to concentrate to grow it, but if you want to keep it, you better diversify to some degree.

Chris: Interesting, so yeah, I am just very intrigued. We interact with hard money lenders relatively often because we buy deals that need hard money lenders. We have two deals in contract right now. And we were trying to get million dollar loans and for properties that for eight plus unit properties that need a lot of work and currently aren't performing. And so it's just to have a good hard money resource is huge for us.

And then as well, I would just be interested to hear what your long term outlook is doing hard money lending. I've always thought that it'd be a pretty interesting opportunity.

George: I mean, I just don't want keep in it probably at the same level. So, you know, if something pays off, may be interested in something new. So, know, maybe not something I expand, but certainly not something that's gonna go away.

AJ: How do you how do you identify the opportunities to, you know, deploy the hard money lending?

George: I think there's a lot of pots. Hard to say really because look, I've got a weekly networking call. I've got a monthly in person networking in South East Michigan. I just talked to people. People say, you know, George Roberts is a guy who knows everybody in real estate.

So passive investing, all these ways, I just have my fingers in a lot of pots. So if something makes sense, you know, hey, I'm always hearing about dealers. And then people send me their deals. I work with a lot of newer investors, etcetera. So, you know, really, I I am a guy who has his eyes on a lot of deals.

AJ: So would you say then that most of the hard money lending is local then? Or, like, have you tried out some of, the debt funds?

George: Yeah, so right for me, it's not necessarily local, you know, in terms of debt funds. What I'm seeing with that is that, you know, if I was gonna invest with someone else passively as in debt funds, it's not very good. I know some people locally whose deals I like. And, you know, if if you're working with somebody maybe a little smaller, maybe not a fund yet, you know, you may be able to get yourself 12% plus a point and maybe they're taking points. So with numbers like that, I'm really not losing.

Chris: Yeah. Yeah.

George: I mean, especially since I just have to bet the deal, I don't have to find it. That's my idea with

Chris: Yeah, that, you know, having to find it. And that's where all the work is. So yeah, it makes sense that the broker would get the finder's fee.

George: Absolutely. I'm happy to give it to you. I mean, if I can get a point out of it too. I mean, that just seems like grading. Well,

Chris: why don't we get on to our final four questions? AJ, do you wanna kick us off?

AJ: Sure. What's one piece of advice you would give to your 25 year old self?

George: Don't worry, be happy. It's going to be all right. I've always been a total workaholic, but you know, when you let those worries go, you just relax, take a deep breath, and actually work a lot harder.

Chris: Okay, I love that. What was your first entrepreneurial endeavor?

George: So we talked about becoming a landlord in 2010. Was really it was in a small way, then in a bigger way with my sister and the family construction company and then buying that first multifamily. Now that was my big introduction to entrepreneurship in 2020.

Chris: Exciting.

AJ: And then how has your formal and informal training shaped your journey?

George: So, working as a bioscientist really taught me the importance of curiosity and being a forever learner. And that really continued through being a award winning data scientist. I learned to grow my love of data and analysis. The more I analyze, better I can pivot and find the right place. It's not all about finding markets, finding niches, right?

I like smaller deals. I like secondary markets, these are some things that make sense to me. And again, just stay curious my friends.

Chris: Stay curious, that might be the title of our podcast. All right, and our last question, what was your biggest mistake and what did you learn?

George: So like most investors, I continue to buy towards the peak now I slowed way down, thank heavens. I showed a lot more prudence than many people, but we all wish we had that crystal ball. And you gotta remember just make deals because they make sense. Don't make deals for ego's sake. Relax.

I mean, something we talk about in private equity is deal. Recognize that deal heat. And that's when you need to slow way down when everybody else is rushing. Sorry, but you know.

Chris: So wait, say that again, recognize that deal.

George: Deal heat, so yeah, in sort of traditional hardcore private equity, yeah, deal heats angel investing, talk a lot about deal heats. When everybody's doing deals, they're hot to do a deal, valuations are going through the roof. Yeah, we call that deal keeps. And when you recognize that, that you're caught up in the frenzy, take a step back. And it's hard because by definition, this is when everybody else is doing the opposite.

Chris: Yeah, I mean, I think that we wish we were selling at the end of twenty twenty one instead of buying.

AJ: Well, I think we wish we were doing both.

George: I love it. I didn't mind buying in 2021. I think that was still okay, at least, you know, halfway through the year, roughly. Yeah. Or, hey, if you were getting seller financing, you might have been good even labor leader.

Couple of deals in 2021 I did. One was a seller finance and the other one was an assumption. So, you know, if you're doing that, the interest rate environment still really, you know, hadn't changed 2021, even 2022. So it's really, it's all about where you're looking. I just try not to run with the pack.

Is, if you wanna quote, you can't beat the pack if you run with the pack. So, you know, make sure that you are always differentiating yourself.

Chris: Alright. I love that.

AJ: George, thanks for coming on. I know that you have a book, right that you wrote?

George: I do. It's called passionate living through passive investing. And what a perfect segue because pillar one of my method is, you know, that you have to look for opportunities where others aren't looking. So exactly. Don't run with the pack.

And I talk all about private equity here, not just multifamily. That's one of the things that sort of differentiates me. I'm not just telling people, hey, come and invest with me, although I wouldn't mind, call me. But my second book is gonna focus more on what I do as an investor myself as an active operator. That's gonna be all about multi fam.

And actually, by the way, if you talk a great deal about real estate, I mean, to me, real estate private equity is the best place in private equity, I wouldn't be there if I didn't believe.

AJ: Yeah, the thing with real estate that you get is the leverage. Know, if you're getting if you're in the regular market, the stock market, there's no leverage to your money and real estate really provides an opportunity through that. Well, thank you again for coming on. If our listeners want to, find more find out more about you or get ahold of you, what's, what's some good way for them to search you out?

George: Find me at www.robertscapitalenterprises.com.

AJ: Okay. Awesome. Well, thank you again. Appreciate it.

Chris: Great to meet you, Yeah,

George: Thank you. It's it's been an honor and a pleasure.

Chris: Awesome. Well, enjoy the Great Lakes. Well, hopefully we'll see you out there sailing.

George: Yeah, we'll do.

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