WIN192. The Syndication Blueprint:(Part 2 of 4): Building Value Through Acquisition in Multifamily Investing

AJ: Welcome to the Westside Investors Network (WIN) your community of investing knowledge for growth. This is the real estate professionals investing podcast for real estate professionals by real estate professionals. This show is focused on the next step in your career, investing. Thank you for listening. And please, if you like our content, rate us on your podcast provider.

Just a quick disclaimer, the views and opinions expressed in this podcast are for educational purposes only and should not be construed as an offer to buy or sell any shares or securities make or consider any investments or take any other action.

Chris: Awesome, this is our second little podcast series. We just chatted about the Southwest sixty eight disposition and in a few of our conversations, Sean and I thought, hey we need to come up with stages for where each of our syndications are at and then be able to give a detailed description and understanding of each stage and what our goals and what we're trying to do, and how do we know when we've moved to the next stage. And so today we're going to talk about acquiring a property or the acquisition stage, And then as well, we're going to talk about the stabilization stage or just kind of the value add stage.

Sean: Yeah, one of the benefits of Uptown syndication is the fact that we're vertically integrated and have a property management team. And this kind of came up due to the fact that we have different goals. And it is a very confusing thing to explain to our team if they don't know about what stage a property is in, because we may be asking them to maybe increasing rents at a significant amount, or maybe we're not doing much, but that can be confusing.

Chris: Like what is the owner's goal in this specific property? Honestly, I first started property management, owner's goals was basically the whole purpose of property management, to achieve the owner's goals. And so part of good property management is understanding what the owner's goals are. And so at Uptown Properties, we do quarterly check ins. It's just each quarter, I feel like we can give kind of a moving target goal for the team as we're shifting through these stages.

So if we can just keep everyone like aware of exactly what we're trying to achieve and then, okay, that we've done our value add, now we're really focused on occupancy, or we're really focused on increasing our rents and implementing rubs, and we can focus on occupancy in the stabilization stage. So yeah, just a little interesting piece. Yeah, it's been helpful so far as

Sean: we kind of explained. So if you spend some time talking through that here and one of the most exciting aspects of a deal, I feel, is the acquisition. Yeah. And very versed within that, Chris. And so kind of exploring that, like finding a deal is super fun.

You're checking out one today, checking out new deals all the time and stuff comes through. But how do you create that funnel? And how do you find deals? Like how does it start as we, you know, start off the acquisition phase? And that's a broad question.

Chris: I need where do To start out it's tough to get deals in front of you. You And know, when we started out, most of the deals that we found were on the regional multiple listing service. So we scoured the RMLS and we were really lucky to come in at a time when there were a lot of bank owned properties and a lot of like a lot of supply. And so we were able to kind of pick and choose and haggle and negotiate with the bank who really wanted stuff off their balance sheet. And so that a good start.

I mean, not buying apartments, but buying single family homes. And so, but then we were kind of able to build up a little bit of a track record, and that is a huge thing when it comes to finding deals. Being able to present a broker with the, with your execution and what you've been able to close on. And it's like, hey, I've been able to buy this 40 unit or this 47 unit property. That says a lot about your ability to be able to do what you say you're going to do.

So if I put out an offer for a 60 unit property, and I have a 47 and a 40 unit in my portfolio, that's higher credibility than someone who has not closed on a multifamily property before. And so most of the time, when a broker gets an offer from an unknown, they will look at it very skeptically. And as well, a lot of times they are really only shopping deals to a few trusted buyers who can close because probably one of the worst things that a real estate broker can do is present an offer to their seller when they aren't sure that it's going to close, and as well, depending on who the seller is, they may lose that business. They may lose the listing if they aren't presenting actual viable options. And so in the first probably couple months of getting a new listing, a broker is going to be shopping their list full of pocket buyers to see if they can get a deal done with somebody who they know that can close on it, and as well they want to double end the commission.

So they want both,

Sean: they want the

Chris: listing agents, I mean you're talking 2% on you know a $10,000,000 deal. That adds up. Well, 2% on one side and then 2% on the other side, that's $200,000 It's significant amount of money and that will make one multifamily brokers that will pay their rent for their office and then some for the year if they could just get one of those done.

Sean: Yeah, so started on the RMLS with the first deals, but over time, it sounds like building relationships, connecting with brokers and having that track record has really led to success. And then I imagine finding some deals coming through your inbox and maybe some text messages with those Yeah, I mean,

Chris: there's a vertical email too, is a commercial listserv deals or people looking for deals. So that's another opportunity. I mean LoopNet, and we say that that's where deals go to die because they're so bad they have to go on LoopNet, or people are just putting their deals that they have in contract that are going to close. So some stuff on LoopNet is already sold and it's just up there because the brokers want to advertise that they're doing deals. Interesting.

Yeah, so being a property manager too, we've gotten a couple deals from clients who are just like, no, we want out, we're done, let's go do something else. And so we're like, oh, hey, we'll buy it from you. Word-of-mouth, think I bought a couple properties from acquaintances or from an acquaintance friend. So it's just talking with people and making connections and relationships. Yeah, I've heard saying that you're

Sean: a real estate investor to folks helps opportunities sometimes pop up when that's mentioned. Interesting. Yeah. Well, let's say we've found

Chris: a deal we like. Exactly.

Sean: We found one. We think we found one, I guess. Found one on the RMS. Yeah, we found one. Let's say it's 10 units on Southeast Turk.

That sounds like a very realistic opportunity for us. Very excited about that deal. That's going to be a ton of fun to work on here soon. More to come on that one. But talk us through your underwriting process, you know, metrics.

And I'm still learning this process as well. But what are some key metrics or things that, you know, really make a deal look attractive? And where do you sometimes get conservative to kind of hedge your bets a little bit on a deal? But I want to see the underwriting.

Chris: Like my napkin rule has a pretty high bar. So I mean, napkin rule, essentially, I want to be able to underwrite the deal on a napkin. And for me it's just kind of a glance of the eye. First off, I check the map, I want to know exactly where the property is and if it's in a location that I'm interested And especially these days, I'm looking for A plus locations. In the past couple years, we have kind of branched out a little farther than we wanted to for opportunities.

And now we're operating those deals and Sean's having

Sean: to drive out to Cornelius.

Chris: And there's, yes, we're gonna make some money on those deals. We're gonna learn a lot on those deals, but it's a lot of effort and energy to get those stabilized. So first things first, I am looking at the location and I want a good location, especially now that the market is kind of contracted and it really is a buyer's market. And then secondly, the napkin rule. I'm looking for the purchase price to be 1% of what I think I can get for rents.

So the purchase price plus my CapEx that I'm putting into the property. So I want, you know, if it's 10 units on Stark, I want to be buying that property for whatever the price is plus repairs. I want that to equal 1% of the rent roll. Am I saying that right? I want the rent roll to equal 1% of the purchase price.

So if I believe that I can get $15,000 a month from that property, then I want my all in cost on that property to be $1,500,000 And that's my napkin rule. I'm to put pen to paper if it's pretty close to that. And yeah,

Sean: because property taxes. I mean, yeah, insurance is kind of like a wild card sometimes. Mean, yeah. I mean,

Chris: like, insurers have left the market and then new insurers have come in. I mean, there's reasonably priced insurance here. You know, we really only plan on catastrophic insurance. If something catastrophic happens, you know, we want to be insured for that. But otherwise, you know, we're not planning on filing any claims.

Yeah, we're fixing it. Yeah. It's like we're getting there. We're way through the crowd. Yeah, yeah.

I mean,

Sean: and there's been some deals. I mean, I aware of one just recently where we were in contract with them and a great location. And then, you know, like I think through the underwriting and then actually seeing the physical property, you know, we made some adjustments.

Chris: Mean, we're like on inspection, we're making adjustments, you know, and then also in the past, like, I don't know, a year or year and a half, we're really learning more about this Portland market that, you know, where vacancy is seven or 8%. That is a very different market than ten years ago. And just like the last ten years in general. And so when a tenant has, but there's 40,000 units in the MSA. So when a tenant has the option of three or 4,000, that are no, like 3,000 different units to move into, basically they can go anywhere.

If they want to move, they can go anywhere they want. And most of the time tenants are moving from properties that have shared laundry to properties that don't have shared laundry. Single family homes and kind of suburb garden style properties with washer and dryer that are clean have significantly lower occupancy or sorry, lower vacancy than properties that have shared laundry facilities and smaller unit sizes. That's definitely a space that we've

Sean: been exploring further. Think it's a great kind of segue into what we're talking about next, but it's kind of exploring and at the acquisition phase, kind of do plan what value add you're gonna do for the property, how do you think you balance that with rent increases, the purchase price? And maybe you talked about it previously, the 1% rule making sure the math maths. But I think there's a few deals we've done that have been more value add than others. But curious, maybe your thoughts on value add and how you write that into an acquisition and when risk enters the equation for those deals?

Risk, when risk enters in.

Chris: Okay, so you that a few questions. You're asking, how do I calculate value add? How do I put together what I think is a budget number? Honestly, what I'm trying to do with my inspection and going through the property with the inspector, I'm trying to acquire the property at the lowest possible basis possible without irregardless of what I think the budget is, I'm trying to get in to the property at the, you know, the lower the basis is, the lower the risk is for an investor because, you know, it doesn't matter what you bought it for when you're selling it. When we sold Southwest 68th, we bought that for 1.125 and we sold it for 2,000,000.

No one asked us what we bought it for when we sold that property. And we could have sold it probably for 2,400,000 if we sold it at the right time. The lender definitely asks you what you bought it for and how much money you have into it when you go to refinance, but not when you

Sean: go to sell. So

Chris: getting it at the lowest basis possible is key because that protects you the most. And then as far as putting the budget together, it's really hard to figure out exactly what you have to do, what's optional, what is worth,

Sean: where you're

Chris: going to earn your ROI, where you're going to be pulling out. I mean when you're looking at it, want to be every dollar you invest, you probably want to be getting $3 or $4 out because of that leverage factor. Every dollar that you raise in a syndication, our goal is to be paying out $2.5 or $3 when we do a deal. So if we're going to spend $1 we want the return on equity to be similar. Substantial.

Yeah. And just looking at cap rates and whatnot, okay, is it going to increase rent? Yes. Then if it's something that's going to increase rent, I think it's a twenty:one. If you get $1 in rent increase, you can spend $20 on that $1 and so basically if you're going to get a, what, 8¢, you can spend $20 on it you're gonna, like per month.

So yeah. And now here's a word from our sponsor.

Ad1: Get things done while you're on the move. Learn more about working with a virtual assistant through off-site professionals. It's a great way to get all the things done that you need to get done. Have freedom in your time and streamline your life by automating your business. Stop spending time on the tasks that you can delegate and start spending more time on your superpower.

Call us today at (503) 446-3177 or visit our website at off-siteprofessionals.com.

Ad2: Uptown syndication is now offering a syndication coaching program for you to take your real estate portfolio to the next level. This is your opportunity to have experienced syndicators, AJ and Chris Shepherd, coach you on your way to controlling your real estate investing future. Our coaching program will provide you with the tools and framework needed to begin syndicating real estate in your target market. Go to uptownsyndication.com today to learn more.

Ad1: Hey. Let me ask you. What if tax season was actually exciting? I know. Sounds crazy, but not when you've got the right playbook.

At mymoneyworksforme.com, we put together the pro tax strategies playbook that real estate professionals use that you may not know about. You'll learn how to crush tax with depreciation and rep status. How to stack smart write offs from the Augusta rule to vehicles. And the ultimate wealth hack, ten thirty one exchanges and vacation rentals. It's free.

It's powerful. It's And waiting for you at mymoneyworksforme.com because your money should work as hard as you do.

Sean: Yeah, so the value add in terms of what you're putting into it, we want to make sure you get the money out and that's done in acquisition. And I'm finding out too, the budgeting of all the deals, it's really front loaded and at the acquisition phase, you're kind of planning out what that's gonna look like and be ready to, some of the deals look different in terms of whether it's a front loaded value add or sometimes it may occur down later in a season, shall we say, still within the stabilization period. However, it may not be right off the bat. Yeah, I mean, asset comes to you.

Chris: The timeline and like the goal of repositioning a property can be different. So we have two deals right now where we're going to be getting a lot of vacant units and planning out. We call those F turnovers where we're going to go through and do cabinets, countertops, bathrooms, like all sorts of, you know, like floors, full paint, replacing windows, etc. Like, you know, a lot of times you'll get a property and it's 100% occupied. You have to, you know, in the value add plans like, okay, rents are insanely low at this property, so we need to increase rents.

Okay, and then let's build back utilities too. So that and we're still, you know, 25 or 30% below the market. We bought a deal in 2024 in Milwaukee and no one has moved from that property and we have increased rents twice and implemented rubs and we are still like $400 a month below the market. All of those units. So literally our value add plan is just like, okay, we're going to raise rents until people move and then we're going to do a nice turnover.

Obviously, we don't want to like jack it up so high that everybody moves all at once because I don't think that that's in the budget, But we do want to save a little bit of cash to kind of do them one at a time. Add value to the property, too. Yeah. And that property is kind of still in stabilization phase, even though we haven't really done anything.

Sean: I know, purchased two years ago. Yeah. Which is interesting. That's a ton of potential there. It is interesting and

Chris: it's just kind of in a waiting stage. As we add value to it, we're implementing solid management practices, like sending notices when notices need to be sent, resolving issues, providing services and communication to tenants, letting them pay online. I guess. And also, we're still trying to add value, even though, you know,

Sean: the original plan maybe is not in place as, you know, getting fences in the space. But yeah, let's, one more question around the acquisition and around leverage, something I'm specifically curious about. How do you determine the right amount of leverage in terms of down payment or on a specific deal like that? That thought process I'd love to learn more about. Well, you want

Chris: to know what you can refinance a property for. And so if you're planning a heavy value add, I guess, I immediately assumed the question would kind of relate it to the two deals that we've got coming up where we're using bridge financing, like short term financing so that we can stabilize or do a value add to the property and then get permanent debt. When you go into a property and you get permanent debt, just want to get as much debt as you possibly can. Because when we're syndicating deals, bank financing is significantly cheaper than funds raised. Like we're only going to pay the bank back, you know, like maybe $1.25 on a dollar, whereas we're looking to pay investors back like $2.50 instead of $3 So we're able to provide, you know, take that $1.25 from the bank and give it to our investors when we get more bank financing.

Yeah, on the permanent side. On the bridge side, we need to be very conservative so that we don't take too much money and then we're not able to refinance the property. So like, I mean, most of the time a hard money lender is going to be looking at the deal too and saying like, you know, but then again, they don't care. Like they, you know, if they are willing, able to acquire the property at 90¢ on the dollar. If they think you're getting a good deal on it and they'll loan you 90%, they don't care if you don't make the payments, they'll just take the property at a lower basis.

So they'll get into it at 90% and then hope that you've done some renovations to it and then they can get permanent financing on it and have a property manager manage it. There are hard money lenders out there who want you to fail. So it is a risky element, and so that is why I am super conservative and I don't want to take too much money, because the more money that you take, the more that the capital stack on top of that is at risk. Yeah. So.

That makes sense. Yeah. That makes

Sean: sense. And even the things you want to share about the acquisition phase, there's a lot that goes into it. I mean, finding the deal, then underwriting the deal, then checking the deal out, getting into contract, the inspection process, and coming up

Chris: with a schedule and a timeline is key. All right, we're back. Oh, a little blurry. There we go. Okay.

Exciting times. All right, so we just talked about the right amount of leverage and now we are going to get into stabilization and essentially day one, the value add plan after if you close on a property.

Sean: We've acquired it.

Chris: Yeah, exactly. We closed. We closed. We're celebrating. We got a lot of happy investors.

They're super excited about their new investment. There's less money in our

Sean: pockets for the moment, right?

Chris: Well, I mean, maybe. Well, we've got all the CapEx funds.

Sean: That's true. There'll be less money tomorrow and the day after.

Chris: Because we raised the right amount of money for the project and now we've got to get the work started.

Sean: Yeah, and as you mentioned, make every dollar work for us to have it put out two to three. So let's talk about the stabilization phase where we've had these under market value potential rents and property that may not be. Yeah, and so

Chris: let's talk value add. So value add is what we do here at Uptown Properties and Uptown Syndication, and there's two types of value add. You can level up the property management and then you can do construction of the property and improve it. And I mean there's many different levels of construction. We mainly stick in the realm of cosmetic.

We're generally not trying to pull permits on properties and doing major renovations, we do have one of those that we're working on. We do. But yeah, we're mainly looking for cosmetic improvements and then property management value add. So on day one, we're generally implementing the property management value add business plan, and we'll have decided exactly how we're going to add value. We want to get out our lease documents.

I mean we're not providing tenants with new leases, but we are going to provide them with new rules. Essentially you're allowed to change the rules, like the house rules, with thirty days notice, and so as long as it's not a major change to the lease, like essentially providing more information about, you know, like pest control or the mold and mildew addendums, essentially letting tenants know, hey, need you to keep your property or your unit below a certain humidity, otherwise mold and mildew can grow. And you know, we don't want that to happen, and so we say that it's not allowed in our lease, and that's a house rule, and then parking rules, and then all types of addendums that we're able to implement to just give more information and make everything a little bit more clear. And as well introduce ourselves as the new property manager, and, you know, and we'll have inspected units already at this point. And so we'll know if we need to do reinspections or if we need to issue notices for issues that we've seen in units, like if units are extremely dirty or if there's maybe a tenant who has too much stuff and you know you can't really walk through their unit, or if we weren't allowed access to a unit, then those units will get notices so that, you know, we can use our property management skills to level up the property and make it a nicer place to live.

Sean: You bring up a good point that not only is it about a value add to the property physically, but also to the tenants. Like the leasing aspect is a huge piece of it and something that we've done in the properties is, yeah, ask tenants what works well and potentially have a value add plan, but also sometimes try to implement thoughts from

Chris: our tenants I as mean, and we're also providing a tenant portal where tenants can pay online or many different price like to make things more convenient. And then we kind of get into the construction value add, and the construction value add is where you can really do some major improvements to a property, you know, a coat of paint and some landscaping and, you know, making the parking lot look nice can really spruce up a property. And so, you know, those are the types of things that we do during the stabilization phase, you know, putting in new LVT floor, sprucing up maybe new cabinets, appliances, bath fixtures, electrical fixtures, like just kind of, you know, interior paint, sorts like blinds, all sorts of stuff like that. And so that's more of your construction value add. And you know, those those are things that happen during stabilization.

But this stabilization phase is like it is a period of turmoil or transition for a property because we are coming in and making changes and these changes are disruptive. It's a disruptive force on a community that, you know, probably doesn't want to be disrupted. Most, it's like entropy, most, you know, apartment complexes don't want to be acted upon by an outside force. And each and every reaction is going to cause an equal reaction. And so, you know, maybe it's not an equal reaction, but like everything that we do generally is going to receive some sort of response from the community.

And it takes a little while for it to stabilize, and that's why we call it the stabilization phase. There's going to be higher vacancy and we're coming in to the property with goals for rent and goals for utility bill back that generally we're not going to be able to hit in the first couple of years, depending on the size.

Sean: I think I said that wrong.

Chris: Generally, that we're not going to be able to, depending on the scope, some will be able to complete in six months, you know, and some, like that one property where no one has moved, you know, we're not able to do the cosmetic remodel to the interior units to get rents up as high as we want them because no one's moved and we don't want we like turnover and vacancy are very expensive and we're trying to operate our properties at the best with the best cash flow possible. So, you know, once we kind of decide that like, okay, the CapEx budget has been utilized but we know that we're going to have some capex in the future, then we'll hang on to a little bit of the budget but also some of the capex will need to be funded out of the cash flow of the property. And that's where a lot of operators get into these difficult situations because if the leverage is too high and the interest rate is too high, you're not able to fund any capex out of or out of net operating income or cash flow. It's out of cash flow, and if you're not able to fund any of that, then you don't have any funds for capex, And then at that point, you're going to have dilapidated units, potentially down units, and it's, you know, can turn into, kind of a bad cycle, a spiral.

So we're making sure that there's plenty of cash flow for our properties and that we don't want to have to fund capex out of cash flow, but we can if we desperately need to. Yeah, and the

Sean: stabilization phase just looks so different per property, like we mentioned, one where we haven't been able to do some of the plans that we anticipated doing. However, we're stepping into one next month where we have access to three units and it's gonna be immediate value add and no displacement in that space and provide great places for people to live, which are not looking that great right now. Just immediate value add to the community there. But you bring up like, yeah, there is a reaction sometimes when change occurs and it's natural in a lot of ways. Sometimes it happens when you don't see the end in mind or it disrupts the way of life that you're expecting to live.

I mean, I think in the stabilization phase two, we've taken on some challenges that previous owners don't want to deal with, which is being diligent within the leasing space is really key within that, whether it is tenants who may not be paying their rents or, you know, and in Oregon, the legal process going about that, you know, that's a piece as well in in terms of stabilization as you work through the challenges at the various properties in Maryland. It's so different. So talking about unit renovation, we kind of talked a little bit about what it looks like, but it can range too. So based on like all the properties, renovation, what do think are some key points or things that Uptown Syndication is looking at for future units?

Chris: Improving the landscaping and getting the exterior grounds looking the best that they possibly can. We want that first impression of the property to be the best it possibly can and better than when we receive the property. And so whether it's exterior paint, landscaping cleanup, parking lots, like we just, we want when somebody drives up to the property to have it have the best curb appeal that it possibly can. Yeah, yeah, yeah, immediate and easy. Yeah, those exterior spruce ups are the easiest that you can possibly do because you don't, you know, you don't have to displace anyone to do it.

And as far as a reaction from that, there is generally good positive reactions from doing that and generally negative reactions to rent increases and revs implementation. But we do really want, like if we're going to be increasing rents, want to be improving the property and making it a better place to live, improving the neighborhood and all in all adding value.

Sean: Yeah, awesome. So operational challenges in the stabilization phase, what are some of the key ones you would note in the stabilization phase that maybe you don't or didn't anticipate going in?

Chris: Operational challenges, you know. Leasing is tough during stabilization because it's tough to balance keeping the property occupied and getting maximum rents. Just portfolio wide as a baseline, we're really looking to keep our prop units occupied, you know, except when we're, you know, fully 100% occupied. Like once we get above 95%, then that's the point where it's like, okay, we probably want to start, inching up our rents and pushing them a little bit because that's the point where I feel like, okay, we might be leaving a little bit on the table. But in general, we want all of our units to be under market rent.

Like we want there to be a strong perceived value that, you know, our property is under market, we're delivering more than what the rest of the marketplace is delivering. So, you know, that's a tricky balance for sure.

Sean: Yeah, I'll throw something in operational challenges. I never knew how many appliances would have challenges just in terms of units. I was impressed with.

Chris: I guess there's a lot

Sean: of appliances per unit that things can go wrong with that. That is one where it's an expense that is tough, but obviously it needs to needs to be working right and working well for the tenants. But that was one I didn't foresee stepping into the Yeah, well, have one final question for you and you answered it a little bit, but talking about a property being truly stabilized, what does that measure? How do you know we've gotten there?

Chris: I mean, I would say that the project timeline or the projects are complete is a key indicator and that, you know, and maybe it's not like every unit has been renovated, but as far as exterior projects go, and then we're reaching that level of 90% vacancy, or sorry, 90% occupancy. 90% of the place now. Yeah, we're getting one at 100%, right? But yeah, once we kind of reach that level of 90% occupancy and then also the refinance. If we're on bridge debt and then we refinance the property, I would say that you know we're much further along in the stabilization phase than you know, and the thing is we have to be too if we're refinanced, like at that point, you know, it's our job to start returning funds to investors.

And because we have done the work that has received that asset valuation and any more work that we do, yeah, maybe that's going to increase the asset valuation, but that money is going to be locked up until we sell the property. And I mean, every dollar that we keep, we want to be able to pay an investor $2.5 or $3 And a lot of times it's a lot harder to do that after you've given it the property its initial push, you've forced the appreciation up, you've gotten your new valuation, and you've got your new leverage. I feel like the highest and best use of any extra dollars is to return it to investors, pay off, pay down the capital accounts as much as we possibly can. And then they can go seek new investment returns where there's a new opportunity, there can be some forced appreciation or even just wherever those investment dollars are going to go. Just having it sit in our operating account is not the best situation.

If we do have more projects that have to get done, then we've to do them.

Sean: That's great. Well, thank you for taking us through acquisition and stabilization phase. Some key aspects and the fun aspects of the process, and hopefully y'all took away something. And let me me you on shot. Oh,

Chris: When comes to acquisition, can you simplify the process and just try from your perspective, what are the three E's that you feel like you need to know and then the people on your team, like your broker, your property manager, your contractor. What are the three things that everyone on the team needs to know you're trying to do that need to be really well communicated or three or five things, whatever. Yeah,

Sean: I mean after the property has been acquired? No, prior to acquisition. Prior to acquisition, okay. I I think mean, the key things that I've observed and I see within my deals is you gotta get a deal at the right price. That's number one.

I mean, ideally you're getting below market value and you see potential value to add. And I think you did a great job talking about it, but that plan is already in mind prior to the acquisition. And that plan can change maybe slightly after acquisition, but you have an idea how you're gonna improve that space.

Chris: So value add plan. Yeah, number one is you're buying a property with a problem and you're coming into it with a value add plan. So communicating that value add plan is important to your broker, your property manager and your contractor that everyone is kind of aware that this is the plan.

Sean: Yeah. And having the end in mind, right? So broker, I mean, they want to close the deal. So, you know, they're going to want to make the deal happen.

Chris: Say anything to get their commission.

Sean: Yeah. But hey, they may be at the back end as well, right? To sell the deal. So with them having that end in mind is good. But once it's acquired, sharing with the team what is going to happen.

Chris: Prior to it being acquired.

Sean: Prior to it being acquired and when it's acquired. Well, saying

Chris: it again after it's acquired, yes. Sometimes they have to

Sean: say things twice or seven times. Me too. Mentioning what is going to be done to the property, because having leasing agents, maintenance technicians, everyone know kind of what is going to happen later is helpful to get to that.

Chris: I guess there's another stakeholder here that we didn't mention and the residents of the property too. A lot of times I've been able to have conversations about what's going to happen at the property with the current tenants and they genuinely appreciate it knowing that there is going to be change as opposed to just doing it without saying anything.

Sean: Yeah, and I've had a conversation with a tenant and he apologized to me. He apologized to me because he mentioned that there was water issues at the property. And I said we were having someone out tomorrow to fix that. And we put in over 300 feet of water mitigation and just drain piping at the property. I came back a few days later and he said, I wanted to apologize to you.

I didn't think you all were going to actually do something with this. And I just am really impressed that you all took action and you said what you're gonna said you were gonna do. Had integrity. Yeah. And so I think, you know, when we do communicate those things that are being done to our tenants, there is positive impact.

I think we've also taken that to ask our tenants what they potentially see at the property because they've sometimes been there for quite a while and have an idea what would

Chris: So potentially number one, prior to acquisition and post acquisition is communicate the value add plan. Yes. What's number two? I mean, that's where

Sean: I feel like I spend all the time. Then I think it's staying on top of the schedule and moving things forward.

Chris: Okay, so two is having a schedule. Yes, having a schedule, executing the schedule.

Sean: And then three, I think, breathing a sigh of relief when you get to the stabilized phase. That's what I'm looking forward to in some of these properties. Is getting to that point.

Chris: So I feel like three, you you talk about the stabilized phase like it's the end of the rainbow. And, you know, would say three, so prior to acquisition, is setting some targets. And so putting a stake in the ground and like, hey, at acquisition, we underwrote this deal for this amount of rents and this amount of expenses. Then through your leasing, try to hit those numbers or exceed those numbers, and then when you do, acknowledge and understand that and also communicate that to your property manager, to your construction team, and to your broker because brokers are to want to know because they'll always be very interested about when they get to

Sean: list your property. When it comes back around. Thank you for summarizing my thoughts there, Chris. Appreciate it.

Chris: Okay. And then, I mean, two might smush together for acquisition and stabilization because you want to come up with a plan prior and then you want to execute the plan. So we talked about creating a schedule like that schedule gets created during the acquisition stage, but then it gets executed during the stabilization phase and in property management and the team is going to want to know that schedule and they're going to want to know what your targets are because then they're able to keep score and that helps people want to know if they're doing a good job. Yeah, they want to

Sean: know what's going on too. I think one of the things coming full circle back to the beginning is talking about these phases has been super helpful for our property management team to understand where we're at, our goals and continue to communicate because yeah, think you, I don't know who said this quote. So forgive me about it. Entire your message far before people start hearing it.

Chris: Yep. Yep. All right. Well, with that quote from someone, we nailed it. Thanks, John.

Sean: Thank you. All right.

AJ: Thank you for listening to this episode of the Real Estate Professionals Investing Podcast on WIN, your community of investing knowledge for growth. We hope that this episode has increased your knowledge and added value to your path to freedom. If you would, please take a second to rate us so that we can get more great investors to interview. If you or someone that you know wants to be on, please visit westsideinvestors.com and fill out our form to be on the show. Thank you again, and enjoy your day.