Episode 131: Fireman turned to Operator with Seth Teagle - Apartments Operators Podcast

Welcome to the Apartment Operators Podcast, where you can learn from experienced operators what it really means to be an apartment operator. No fluff, no sugarcoating, just the raw, unfiltered truth of the ups and downs of operating multifamily communities.

Welcome everybody to the Apartments Operators podcast. My name is Joseph Gaza. I’m your host, and today we have Seth. Seth, welcome to the show. Hey, thank you for having me on. Excited to be here and talking with you. Awesome. We start every podcast with letting our guests introduce themselves, tell our audience a little bit about who you are, how you got to where you are, what portfolio you have just give us a little bit of a.

Yeah, so I was a 22 year firefighter paramedic left that a few years back and it got into multi-family investing and development. I got into real estate probably. five to seven years ago. And since then, we’ve built out a company that owns just under 2000 doors and we’ve got probably seven or 800 under construction right now.

So we’re just, we’re vertically integrated, so we do a lot of our property management and I would say not necessarily the ground up development, but the, if we do like a value add, multi-family purchase, and we do a lot of the renovations and interior CapEx items in-house. That, that’s phenomenal.

So how does one go from firefighting and paramedic into 22,000 doors, 2,700 under construction? How did Yeah, so that’s the, that’s always the question. I, it was, I was doing that job, had done it for a long time, since I was about 18. Loved it. But as I continued to get squeezed by the economy and my paycheck continued to not go far enough, I was trying to figure out a way to buy some time back and I stumbled into real estate through a college roommate of mine and then Probably, I’d say year and a half after that I had worked for a house flipper for a while doing project management, and during that time realized that single family and house flipping wasn’t really for me.

And I had the opportunity to came along between my own money and another investor that I met through a local real estate meetup. We put our money together and I went out and found the biggest thing that we could afford to buy, and it happened to be a 50 unit apartment building. And we, I basically, Ran the deal.

That was the kind of the, it was how it was supposed to, what was laid out was that he was gonna invest with me and then I would run the deal and do all the work. And we did that full executed the full value add plan. After about a year and a half, we pulled out 1.2 million which between just the two of us, we were able to get our, all of our original capital out.

And then I took my earnings and went and bought another building. And and it just it grew from there. So that’s the short. No, that’s phenomenal. Right now, is your portfolio focused in one location, one city, one metroplex, or how does that look like? So I would say pri primarily our heaviest presence is in central Ohio, which is where I live.

I’m in the Columbus, Ohio market. We have, I would say most of our stuff is here. We’ve got we’re cog P on some stuff in Oklahoma Illinois. And then one of our, there’s three of us that make up our company now as far our executives go. And we’ve got one of ’em has got a pretty big portfolio in Salt Lake City, Utah, where he lives but otherwise, I’d say the mag, I’d say 80% of our stuff is here in central. . Okay. With that, a big concentration in one spot. Do you self-manage? Do you do third party? Which way did you guys go? So we do a little bit of both. I’ve got two property, I should say three properties that we have third party management on.

Mainly because one of them is that way because of the area and the tenant class. Like we just felt more comfortable with somebody that kind of was specialized in that area. And so we didn’t wanna manage that one, but we did do a million dollars of construction on that portfolio. We we couldn’t do both when we took it over.

We couldn’t manage well and manage the construction. We knew there was a bunch of CapEx, so we focused on doing that and allowed this other company to come in and do the tenant management. And then I’ve got another, about 86 or 90 doors that’s managed by a third party person. And it only because it’s a little bit farther east from Columbus and it’s just it’s my own personal stuff.

And so it’s outside of it’s out of the way for us to go out there. We don’t really have any, but. They already had a team in place out there. I knew one of the owners. So it just made sense. But everything else that we have, we self-manage. We have a team of about 27 people that work for us.

And they do renovations in the management side of things. So how do they compare? Your third party management property and your in-house property management? Yeah, good question. A little bit of a leading question there, but yeah, no, I think it’s good. So as far as like time freedom goes, third parties obviously frees you up to do a whole lot.

When we decided to vertically integrate it sounded like a great idea at the time, but then I became an employer and I never. Thought of that side of things when I got into investing. So there’s a lot of things that we deal with that are employment based, so that, that’s a little bit different.

But as far as like the, management wise, I would, I still think that we probably perform better, only because, nobody really manages it like they do if you own it. And we’re able surgically weave our way through the business plan versus, the. One of the portfolios we have, it’s 70 units that’s managed third party.

They’re, I feel like they’re more of a I don’t know. They’re doing a lot of surgical work with a spoon, if you will. It’s not, they get I, that one, yeah, no we took it, we took the occupancy on that one down, to maybe 10%. We had to completely rebrand the place, go in and do all kinds of renovations floor to ceiling, we did roofs, all kinds of exterior stuff.

And they really struggled with getting at least back up. And so it wasn’t until we came in and said, Let’s do this. We gave them the plan, they executed the plan, we gave them, and then it, and it worked. So I think even then, they seem to be more costly. We’re always looking at being cost effective.

Because we’re looking at managing it, but we’re also looking at the returns. We’re looking, we’re looking at the full picture, and they’re only seeing it from, they’re like all third party management companies that. Are not owners or they’re looking at they’re a for-profit business.

. So for them, they don’t really necessarily care about your underwriting, they don’t care about your projections, they don’t care about your cash flow. They’re gonna, they do what they gotta do to run the property. But if that means running the, or leasing it out lower than market to keep it full, that’s what they’re gonna do.

Unless you’re really watching over ’em It’s one of the biggest challenges in the industry when it comes to third party property management, is the model we use to compensate them. And you look at it and you say, okay, I can get a hundred dollars more per month for that unit if I push it hard.

So they look at the amount of effort they have to do to get that extra a hundred dollars and what come and that will take the property. To occupancy down. So for them, at the three, four, 5%, you pay them out of the growth. It’s a wash. So why do the extra hard work? Yeah, they, and we’ve had that issues with staff that we’ve had, that we’ve had to let go where they don’t understand the multiplier.

If we increase the NOI by X, it, it can skyrocket the value of the property. Like we’ve tried to teach that to our, to the folks in our offices. And some of ’em get it and some of ’em don’t. But to that end, like you just said, that they’re the path of lease resistance for them is to keep the rents a little bit lower, maybe just below the fringe of market.

Keep the place full, and so again, if you’re, if I’m buying it and I own it, That might be great, right? If my base is getting into the property, I bought it 20 years ago or 10 years ago or whatever, maybe I keep it low, I keep it full, the cash flow comes in, I’m okay. I’m a happy camper. But when you buy it with a specific business plan in place to value add or exit in three to five years, or you’re, or you bought it on bridge debt in, hey, in 18 months or two years, we got a refi and you have to hit specific metrics.

You don’t have the luxury. Of running the property that way. And there’s a big disconnect between third party management companies and people that are buying value atd, multi-family. And the only time I see people really be successful is if they buy a big enough property where they can bring in institutional management or really involve the management company at the co like the contract signing timeframe.

I would say if you’re buying a 50 unit or a 30 unit or a 60 unit, the management company that’s gonna run that for you is different than the company that’s gonna run a 200 unit or 180 unit. Or if you have a portfolio of 300 doors. It’s just different levels of management and it’s different levels of I wanna call more savvy.

But, it’s the same thing as if you’re a mom and pop owner with 20 doors versus a guy that has 200 doors, like you’re, you just evaluate everything Differe. . Yeah. Somewhat. But our experience and our, the podcast guests that we talked to all pretty much got to the same conclusion of setting up their own management company.

And for the end the end reason of it doesn’t matter what’s up the food chain. In the property management company, at the end of the day, you have 40, 50, $60,000 a year person running the. True that, that’s just the end of it. So it all comes down to who’s that person and who’s the supervisor that runs that person.

And if they’re good. If they’re not good, they’re not good. The only thing that goes in favor of the bigger companies is they usually have better hiring skills and better system in place for those two individuals to do their job which kind of gives them a little bit of a better success rate.

It’s not guaranteed, unfortunately. Yeah, I would agree with that. Yeah. I think that they bring the infrastructure. That you lack if you’re trying to start your own management company, that’s something that was really tough for us was, we’re operators, we’re owners, we’re investors.

We, we weren’t employers. And bridging that gap was tough. We ended up hiring a really solid asset manager who had started in scale two property management companies. And so he, when we found him, he was the c o of a larger company and he was doing all the op, so we brought him in basically to buffer.

Me from the management company to where I didn’t have to make those decisions because yeah, my, I was getting flooded with people, the onsite person calling us all the time asking for direction. It’s that is not the highest and best piece of my time. And so when, once we brought Mark in it really.

Really helped us systematize things and stabilize the management company and grow that and be strong, so that was Yeah, you’re right. And I will say too, with regional or with larger companies, I’ve seen them where maybe they don’t even have, like they have the local people, like you said, but then they just have one regional person.

If that regional person quits, now they have to bring somebody new in. Like they’re now that person has to come in and learn the properties and learn all the different things. And that’s where you said it comes down to having that $60,000 a year person on the property. And if they’re good.

If they’re not, then the property will suffer. Yeah. So let’s talk about that point in time when you guys made the decision to start your own. , what were the con what, how was the conversation at that point? What were the reasons you even considered it? Pros and cons that, I’m sure there was a conversation and eventually somebody agreed to bite the bullet.

But cause again, from experience, personal experience, and from talking to a lot of guests, property management, in-house, property management is less of a profit center and more of a control thing. Allows you to do things like you said earlier, be surgical about executing versus trying to work through somebody that is doing surgery with a spoon.

I love that. I’m gonna totally gonna steal that, that, that phrase from you. So what were the lead leading drivers in that decision? How big was your portfolio when you made that decision? What kind of scale you felt was required or justifiable in order to make that transit? Yeah, so I think that we were, God, what were we at?

We were probably at 250 doors here locally at the time. And then we were buying 180 unit complex. And traditionally we had, we would buy something, keep the staff around for a little while, let ’em go if there was staff. Some of the stuff that we bought, like my, the first 50 unit didn’t have any staff.

The next one I bought after that was a 40 unit. It didn’t have any staff. It was a a little bit different. But when we bought this 180 unit, It had staff on site. The property was a Blos property. It was being ran well. The rents were low. That was really the value add play was just taking rents to market.

So just having better oversight and management. But we really felt that the person that was onsite there working was salvageable. That she was willing to learn. She was excited about the new takeover. We had maintenance guys on site that were great. They still work for us to this day. The gal that we originally had hire, , she just left at the beginning of the year.

And I think that, that gave us the idea where’re like, look, we have a kind of on the ground team in place. Maybe it makes sense for us to just start doing this on our own and we’ll just start with this one property and see how it goes. Rather than bring in somebody else and make these people, employees of that company, we’ll just make ’em employees of our own company and we’ll go from there.

And, That was about the thinking that went into it. And what we didn’t realize at the time was, the gal that we were going to absorb and employ, she was a, spoke in the wheel to a larger. Nucleus company down in Columbus, which I knew those the, I knew the company, but we thought that she was more like all inclusive, handling everything on the site.

And it wasn’t until after we had closed and took over that we realized that she was just a satellite person sending out, the meat and potatoes of the company was down in Columbus and they were handling all, like all the accounting, all the bookkeeping, all the bill paying, like they were handling all of that, and all of a sudden, that was on her shoulders.

And, it, it just it became clear after a few months that like we were really, there was a lot more to this than we had anticipated. And so we had to halt what we were doing and really get aggressive on trying to figure out the right solution. Who’s the, the accounting company that we had, for instance, the accounting company we were using.

They were no longer able to handle just the volume of transactions we were doing. So we had to figure out a new, find a new company, and then just all the tax stuff and the just the things you don’t think about, right? You get an owner statement and you’re like, oh, this is all spelled out for me from third party.

But how do you prioritize things, do you, is this maintenance and repairs or is this CapEx? Is this, all the different things that. Normally a third party management company has an accounting person on staff, and then they do that for you. Now all of a sudden we were having to do it and the person that we thought could do it couldn’t do it.

Yeah. And so it was, like I said we instantly were on our heels trying to figure this out. Yeah, no, it makes total sense. Now also, the. A lot of people don’t realize that you have your field team and you have your back office team, in property management, right? Your field team is the onsite manager, the leasing, the maintenance guys and they operate the day-to-day.

They don’t have the bandwidth or capacity to handle bank reconciliations. Picking and choosing which invoice gets paid when and what general ledger account go, every expense goes. Oh yeah. Into and that’s really where when we talk to clients sometimes and tell them this is the property management fee and this is.

payroll, and they go, what do you mean? Is it payroll included? It’s no, the payroll is for the field team. And the property management fee usually is to supervise the field team. And to run the black office team. That’s just a normal misconception and yeah I can totally understand why you’re onsite manager couldn’t handle all of that.

Yeah. How long ago was that? The setup of yeah, so we took it, we took that property over maybe three years ago, two and a half years ago, three years ago, somewhere in there. Okay. So Smash Cat today, right? You’ve been doing property management for three years. You mentioned you have a team of 27. How’s your organization look like? You mentioned? So we’ve got, I would say, yeah, outta the 27 people. I’d say probably at least half of those people are construction and maintenance guys. And then we have specifically about the 450 units that we manage they. We have one office person, like the, she came from an institutional management company, so she’s really a solid A player.

She’s been instrumental. We have one leasing agent. We’ve got another one that we’re in the process of hiring. Cuz again, that, that’s all part of it too, right? Is if we’re replacing people and training people and all the things that we didn’t think about. And then the rest of it’s made up of maintenance and construction workers, and then we have.

Two guys that work for us remotely that are, they audit all of our books. So they work with, we have a, we, we brought in an accounting slash bookkeeping company that does all the bookkeeping for the properties as, as well as the management company. And then the two guys that we use for auditing.

They assist with that, but they, their main role is auditing all the transactions, all the bookkeeping, making sure that everything’s on the up and up. Cause a lot of the stuff that we do are 5 0 6 B or C syndications. And so we’re held, our bookkeeping and record keeping is held to a pretty high standard.

So we have to make sure that, that. We can’t afford to have a, somebody stealing from us and us not catch it or, a property get misbilled or, something like that happens. And I’ve seen that with people that try to manage themselves. It starts to get convoluted.

And I had a guy tell me once when I was getting started, I went to him, into his group and brought of a deal and I wanted to him to. Cog p with me. And he was like we wouldn’t, we won’t do it unless we take 70% of the deal. And he’s the reason being is because most of the people that do this, where they’ve always seen people fall apart or these deals go south, is the financials and the bookkeeping and the record keeping.

And it’s one thing to be on social media talking about buying apartments and syndicating, it’s a whole nother thing to actually be successful at it and execute what you told people you were gonna do. And that was of what. why he felt that way, and I can see why now. Just as extensive as it has to be.

Even cuz even if you’re buying, even if you’re using third party, what they’re giving you may not be capitalized correctly, or may not be, they don’t, most property management companies don’t understand all that. They’re just booking invoices and yep. Maybe supposed to be capitalized, but it was put in repairs and maintenance or whatever.

And all of that affects your depreciation and it all affects your taxes. It all affects, a lot of that stuff. And so you have to make sure that’s. Yeah. And the person that does the data entry at the property management team is also not a highly paid cpa. It’s a bookkeeper at best.

Or just a glorified secretary normally. And then, yeah, we found things misca categorized. We found income items in the expense. We found expense items in the income. We found other properties. Stuff in our property. . Auditing is absolutely a very critical piece of running the bookkeeping, especially if somebody else makes the lower level decision of what goes where.

Yeah. So you mentioned you do guys, you guys do a lot of value add, right? So one of the things we love to ask about is what value add items do you guys love to do? And we try to focus on the interesting stuff, right? Everybody can raise rent. Everybody knows how to apply rubs. Give us a few more income generating activities that you guys do, and then we’ll flip the question into the expense in a second.

So let’s start with the income side of things, right? Ways to increase income that are not raise rent and apply rubs. I think for us, the I took over a property and the, they, everybody, there seemed to be a lot of pets on the property and that was never something that, again, it’s not rocket science, when we looked at the, when we looked at the expenses or the income, they were not, they, like all the leases that we were looking at said no pets, but nobody was actually charging.

Pet rent or pet fees or whatnot. So that’s something that we really cracked down on and we were able to create a bunch of value just by that. We have another one that we went into it when we were going through due diligence, looking and figuring out like, how can we put in-unit laundry in an existing building already and it meat code and whatnot.

And the, it was expensive to do. But that was how we were able to get, three, $400 more a month in rent than what was on the proforma or what was, we could have kept it like a traditional C class with a common laundry room, or maybe you had laundry on the, on that floor or whatever.

Something that you find common in a lot of the, like the seventies and. eighties builds, , but we were able to retrofit it and go back and put laundry in the units. So that was something that was in expense. But again the amount that we saw rent increase was substantial that we were able to capture because of that.

Cuz we were marketing to a different type of tenant. I think that’s been good. We’ve done like covered parking, we’ve done common areas that we converted into. So storage units and then rented those out. We’ve done, I’m trying to think of what else that you would maybe haven’t seen before.

I don’t know. I think a lot of it’s pretty common sense on ways to add value, to existing stuff. But we’ve also had some stuff where we thought, oh, we could do this. And then when we start really digging into it and we’re like, no, it’s, there’s just no way feasibly to do it and it works.

Give us examples of those that’s interest. So I again we’ve tried to do doing the in unit laundry. It’s worked in some unit, in some buildings and it has it in some other ones. And then we had one parking, we had one building that we were, we looked at doing covered parking cuz that was gonna be up here in like central Ohio.

We get snow, we get winter, we get, and we thought that would be able to, we’d be able to do that. But then zoning came back and they were like, they went on, we started the project and they stopped by and we were like, Hey, the inspector was like, what are you guys working on? And.

we were trying to tell him and he is nah, you can’t do that. Or they wouldn’t allow it. They didn’t like the way it looked. And so that, that was something that we learned a lesson we learned there. Yeah. Expensive one. Yeah. Just, luckily we didn’t get too far into it, but that’s also why now, like we always, trying to sneak around permitting and getting, playing, like we try to swim in the same direction as the municipalities because it.

You might get away with it once or twice, but there’s gonna come a time where you get dinged and, if you would’ve just reached out to ’em and gotten approval or you would’ve just reached out to ’em and done, done it you would’ve probably been able to do it, but because you went out on your own and tried to circumvent them it, it co it, it can be costly.

So yeah, you don’t want to piss the code guys off cuz they can be very vindictive and. Yes, they can be. Yeah, they can manipulate that code to, to serve you or to hinder you for sure. Yep. Okay, so let’s flip the coin. Let’s talk about the other side of the equation. Ways to decrease expenses. For us it’s like we, when we go in we are, we’re usually doing head to toe renovations, so we go in and we always, like, when we do due diligence, we’re always like, what’s gonna, what is going to become a maintenance issue?

So even if it’s not broke right now, We fix it. So like we’re, know, we’re replacing toilets, we’re adding shutoffs or we’re replacing the water lines, like from, like that goes into the toilet. We always take a look at that. We always replace the the shutoff. Some of ’em, some of these older apartments don’t have any shutoffs, so we, you have to add those in there.

But we either add it or we replace it and replace the line. We always, like in the vanities, if we’re gonna replace the vanity, we always re replace the drain lines bathtubs, we’re always looking. Surrounds or are they tile or what is the situation? But we always try to get in there and swap up the diverters because those are, when you, when a tub is leaking or dripping all the time, that’s where your money’s going down the drain.

If you’re paying for water and sewer, traditionally water in that sense, cuz you’re not gonna be using sewer, but. We’re always, we always in due diligence figure out, okay, do we have to go through the wall like through the front of it to where we’re gonna have to tear up the surround or can we get through a closet or get through another unit?

Like how do we get to that? We always, same thing in the kitchens, drain lines, shutoffs. If we are buying something that has through the wall acs we always plan on replacing those. It’s part of the renovation cuz you can’t go through and make an apartment look really nice and keep this old smoke stain, stinky air conditioner.

And then sometimes what we’ll do is we always want to, we always check to see, are they running on one 20 or one 20 or one 10 or two 20? And if they’re two 20, We will sometimes on these older ones, they’ll have like floor based heating, but then they’ll have through the wall air conditioners.

, we’ll swap it out with an air, a newer kind of eco-friendly air conditioner that does both heating and cooling. And so those require there to be a two 20 outlet there. So sometimes maybe they’ve ran off a one 10 in the past and we’ll have an electrician come in and say, , can we convert this to two 20?

And if we can, then we do that because running those floor based heaters are very expensive. Yeah. And so for us is if we can make the elec, tenants, no matter what market you’re in, I always feel like tenants are paying electric. , not all markets that were we in, can we bill back water and sewer?

Because if we did, we’re like the only one doing it. Yeah. And so we sometimes will just build it into the rent but in those situations, if we can make the electric bill cheaper for the tenant, then we can, we know that we can raise our. So we it’s an offset that way. But yeah, we try to make everything new, light fixtures low flow stuff and all of that.

But when we go through, we, that’s why if you were to buy something from us and you look at what’s your repairs and maintenance budget? Our budget after we’ve gone through and renovated everything is almost nothing because we, know, we eliminate all the things that are gonna cause us maintenance issues.

And then for the next, whatever our hold period is, we have very little maintenance calls because everything’s. . Yeah. So you invest the CapEx upfront instead of dealing with the opex and the labor costs that come with that later on, because your maintenance guys will be working nonstop on work orders.

Your retention is not gonna be the greatest because your tenants are not happy. And so sometimes it, it’s worth it uh, to invest the CapEx upfront I mentioned retention. How is your retention looking like? Are you guys doing anything specific to increased retention? Like resident events or resident retention programs?

There’s all kind of ways people use that. Try to do things to increase retention. . Yeah, so none of this, I wouldn’t say any of the properties that we have we had to do any kind of retention program. Most of the stuff that we’re doing is we’re just creating such a better product than what else is out there in that class of asset that people don’t wanna leave.

We’ve got, we bought one last year. That the rents, the ma the majority, it was 113 units. The majority of the rents were three to $400 below market. And we’re, we’ve gone through and cleaned the place up and done a ton of exterior work, and then we’re going through and doing common space and renovating some, but we’re just taking people to market and they’re staying, I think it’s because we’re, again, we’re, our customer service is strong.

Our response to maintenance issues is strong. They know if it’s broke, we’re gonna fix it. They don’t have to be afraid to call. We’re, we respond to work orders quickly. Like I think. We provide pretty good customer service in a sea of. not great customer service in, like C class and I’d say like B minus assets.

. We have not really had to do it. We’ve done some things like dog parks and storage and like a sea cover park, things like that, that we are trying to draw people in. And I think that maybe that kind of helps as well. But for the most part, I don’t feel like we’ve had to do anything that’s really had to retain people.

I, I, we’ve done some different things. To bring people in upon stabilization. So if we bought a property and we took it from 90% occupied to 10 because we had to go in and rebrand and do tons of CapEx and whatever, like when you get done with all that, you have an empty building, how do you draw people in at that point then?

Yes, we’ve done concessions and lowered security deposits and done, first month’s rent free and, done concessions like that to get people to come in. But once they’re in, then the, after a certain time that goes, , yeah. That first month free the mo the 99 moving specials and stuff like that, that those from our experience have always came back to bite us in the behind.

So we don’t do those anymore. You, you operate in a hybrid mode where you self-managed some of it, your third party, some of it. How does a typical asset management look like? Who talks to the third party? versus who talks to the onsite? Is there a cross between them? Is it the same person split between asset management and property management?

How does that look like in your organization? Yeah. Great. Great question. So there’s the, there’s like the three of us I call it owners or executives. And then we have an asset manager. He’s got 25 years of a cons of development and kind of asset management experience. And. He oversees all the staff, all the properties directly.

He basically has a dashboard of all the properties and what they’re doing, and then we meet twice a week with him and say, okay, here’s, here’s where we’re at, here’s where we want to be. And then he guides the crew and the team to get there. We have, we set up specific KPIs and different metrics to make sure that we’re moving in the right direction.

But he’s definitely the, like it used to be myself and my partner here in Ohio, like we were, 12 hour days. Just grinding away, trying to, make sure that this, all this was gonna work. And then we were like, man, we gotta get there’s somebody out there that can do it better than us in a less amount of time.

And so we hired, we found this guy, we hired him, and he’s been phenomenal for us to continue to grow. But get some of those things off of our plate. Traditionally yeah he interacts with our staff does the leadership meetings like he does, he handles everybody. And then he also interacts with a lot of the third party folks, some of the third party that’s here in central Ohio, they’ll still call me.

To go over some things, but I try to push them off to talk to our asset manager. Like it’s like you have to train ’em, or maybe they can’t get ahold of our asset manager or maybe they don’t get the answer from him that they want. So they try to, they owe us to try to play Mom against Dad, and so I just.

Know that hap we start seeing that happen. We just push him back to the other guy and make sure that we, that we don’t want that. That’s kinda how it works. We’ve ju and it’s really, we’re set up no different than if we were working completely third party and we just had an asset manager and he dealt with the management company.

That’s kind how we set it up. Gotcha. So he’s working with the onsite and with the third. Yeah, so he’s not like in the office leasing apartments, like we have, he’s not the onsite person. Yeah, he’s not the onsite person. But yeah he’s. Like the head of everything on the ground.

Gotcha. That allows you guys to focus on other things that, that makes total sense. But yeah when they start with mom said, dad says go ask your mother. Yeah. . Yep. I’m back over there. Yeah, exactly. If you went back in time and met young and the premises that you can tell yourself that 2009 was the bottom.

By everything you can, what advice do you give your younger self? That’s a good question too. I think that, back then I wouldn’t have even have I wouldn’t have known what an asked asset in the liability was. So I think that would be the first conversation I’d have to have with myself.

But is. Making sure that you’re getting in the right deals. I think that there’s a lot of people that are, they’re just, at least up until recently the rates have gone up, so people have slowed buying, but people were just buying deals. Buying. I see it on social media all the time.

Oh, I, I got this under contract, not under contract and all this different stuff. And it all sounds great, but. But actually executing on the deals is you never hear that. So that would be something that I would say is like making sure you’re getting in the right deals, not just any deal.

And making sure that if you’re putting stuff under contract, that it’s the right deal. Like I’d rather do two deals a year or one a year than do 10 of the wrong ones. So that’s what we’ve always looked at as I feel like people just have a a race. It’s a race to scale.

It’s a race to get to a thousand doors. It’s a race to grow this big thing. , in doing that, I know a lot of people who have gotten burned because they bought something that they shouldn’t have. I actually just spoke to a guy the other day that did 10 years in prison because he bought a, he exploded his growth in that like 2003 to 2008 timeframe.

And then in 2009 when things were of crashing down and coming apart, some of the properties that he had were in central Ohio, but they were in areas that were drastically affected by the auto industry. And when it was collapsing and laying people off and. His he couldn’t pay for the property, stopped paying for themselves, people weren’t paying their bills, they were moving out.

And he started co-mingling funds between those properties and other ones trying to like, keep those ones afloat. And even though he had gotten advice from his legal team and from his accounting group who said that, yeah, you can do that, you can’t do that. And so he ended up doing 10 years in federal prison because of it.

And I just met him few days, few weeks ago. So I think that’s, That is something that I would communicate to myself back then even is that, yes, you wanna scale, but there, but scaling too quickly can kill you. And I think that’s something that, that a lot of people miss.

Everybody wants to get real big, but when you get that way and you don’t have the infrastructure, it can really be costly. . Yeah. It’s, I call it the sprint to the closing table while there’s a whole set of, there’s a whole marathon waiting for you right after that signature, right? That’s right. So that, that’s a very good insight and I absolutely agree with you.

I’ve seen people overscale too fast and. , they’re paying the price. I think in 2023, where we are right now, the market is different and it’s gonna be dramatically different in the next few years. And only the top operators are gonna come out of it. Let’s just say that. , with that said like before we’re wrapping up, what is your.

Outlook for 20 23, 20 24. Where do you see the economy? What are your plans? Are you still buying? Are you holding off? Give us your 2 cents. Yeah, so I’m gonna, we’re in an a unique situation because of where we’re at in central Ohio Intel is building 20, they’re investing 20 billion in our local market, and that’s phase one of five.

So they’re saying that they could go up to a hundred billion. I don’t, if the, if you followed Congress and what’s happened to that? And I follow it because I’m in the area, right? It’s 10 minutes from my house. But they passed the CHIPS act at the end of last year.

So basically this whole deal’s backed by the federal government. It’s happening and what’s happening here in central Ohio is just crazy right now. And so, in the county that I live in alone we have to be building 6,000 apartments or homes annually just to keep up with the growth that’s projected to be coming.

And it’s not projected, pull it out of the air. They’re looking at Chandler Arizona where there are other factories at and saying, look, in the last 20 years or whenever it was, I can’t remember the year that they built it, but as that they’re, they picked that spot and they invested there and what it did to that local area.

Just gearing off of those numbers, which this investment here near us is bigger than that. It’s like we, we can’t build enough, there’s not enough product here on the market, so for us, we’re digging in and going deeper in our own market because if you can buy it now or build it now, what it’s gonna be worth in 10 years is probably.

You’re probably looking at a Phoenix, Arizona, or Salt Lake City, Utah, or somewhere out in California where you know the paying 65,000 a door. , which is crazy to some of the people that I am around in central Ohio, or like Columbus for instance. Columbus, you’re buying stuff at a hundred, 110,000 a door.

That’s 30 minutes from where we’re doing a big development. We are we’re betting on our local market, we’re betting on our local economy. I think it’s different than anywhere else in the country. And I, I wouldn’t wanna probably be developing anywhere else, but, we know that we know what’s coming to our area.

And so it’s of a land grab right now where a lot of developers are buying. Anything that they can get their hands on that makes sense, obviously. We’re we should be breaking ground on our. Big development here. I would say in the fall of this year, it’s 200 apartments, 170 condos and 250 single family homes.

So the single family homes we will not build, we’ll sell that off, it, it makes sense for us right now to be doing that. So that’s what we’re working on. I And as far as the rates go, if you’re doing institutional right now, we’re seeing stuff from the low to mid fives.

If you’re doing. Depending on, I just did two refis. I was under 6% on those, and it was through like regional banks. , so it just depends on what. where you’re at and what you’re looking at. I think the tenant tenant class is important. The location’s important. I think that the stuff that was more tertiary markets and rural areas are getting squeezed right now a little bit.

You’re better to probably sit tight and just hang on. And if the cash flow is great, and I think that’s something that we’ll see too, is as people as their, maybe their debt service expires if they were interest only, or they were, maybe they were in bridge debt. We got bridge debt that was in six.

It was 6%. When loans were going out at three to three and half percent and bridge debt was six, six and a half percent. Like Yep, that was crazy. Right now bridge is like nine and a half to 10, so Yeah. Full digits. Yeah. So I we, I think if you. if that loan is coming to a close and you and the deal only worked because you thought you were gonna get in at four and a half percent still at the end of that, and now you’re having to get in at six or six and a half, or even, five and a half.

Like I said, if you get institutional, that could make your deal not so amazing anymore. Yeah. And that’s gonna cause a lot of pain in the near future. Yeah. So I, like I said, we’ll, I don’t know. I mean there seems to be like some waves happening already. I know there’s some pretty, pretty big players that are have, sounds like they’ve defaulted on some loans.

And then I know there’s some other pretty big equity groups that have caused put a freeze on anybody withdrawing their money and so some of the bigger players are. Bracy. Yeah. They’re like the first indicator that something could be coming. But do I, I just, I don’t think that we’re gonna see stuff that like, you’re, like you said, you’re picking up stuff in oh nine for pennies on the dollar.

I don’t see that happening, I don’t see that it’s a completely different type of economy right now than it was back then. And why we’re, where we’re at is different than back then. So I don’t know that we’re gonna necessarily see that. But the longer this. You’re, you’re gonna have to, sellers are gonna have to adjust their price, and buyers are gonna have to.

They’re gonna have to come off the 2009 numbers. I’ve seen a lot of that too, or, yeah, no I agree. I don’t think we’re gonna see the same level of shit storm we had back in the way. There was like a perfect shit storm and a lot of things were happening at the same time. , we’re not overbuilt like we were.

There are some pockets in the market in the market out there that are overbilled, but. overall as a country as multiple states. We’re not overbuilt as we were in 2008. So I think we have some room there. I do think there’s gonna be some blood in the water. I think there’s a lot of people that were playing the musical chair game in the last few years buying, selling, buying, selling, and buying, selling with the hope that when the music stops they don’t have a.

So now the music stopped and let’s see who’s got the chair, right? Yeah. And can they hold to that chair or are they gonna fall off? Hopefully not a lot of groups out there will fall off. I don’t wish that to anybody. , I wanna be respectful of your time. This has been a great conversation.

If any of our listeners wants to reach out, maybe invest with you guys or hire you guys to help them with their project, how can they find you? Yeah, so the, you can find me on all social media platforms. You just look up my name, Seth Teigel, and it should pull it up. You, if you’re looking to invest or learn more about that you can go to our website, it’s www.thestreamgroups.com.

And then we do I would say we. I, when I was in the fire service, I was always a I taught at the state Ohio, the Ohio Fire Academy, and I taught at one of the colleges taught paramedicine at one of the colleges. So I’ve always enjoyed teaching and giving back.

The Firehouse Bros is a, is our brand for education. And I don’t wanna call it coaching, but it’s, I’ve learned a ton over the years. When I got started, I wish I would’ve had somebody that could help me view training wheels for me. And that’s what we’re, what that, what we do through that is, is we offer that to people that are getting started or are looking to get started in commercial multifamily or commercial real estate in general.

Linking up with us through that website which is the firehouse bros.com and that’s our education platform. Awesome. And we’ll definitely make sure to put all those links in the show. . Thanks a lot, Seth. This has been a great show with a really good conversation. I appreciate your journey.

Absolutely. Thank you very much for having me. Awesome. And for you, the audience, if you would like to listen to more episodes, we’re on YouTube, iTunes, stitchers, SoundCloud, anywhere you can consume a podcast, we’re there. Would appreciate if you can leave us a review, one star, five star, whatever you feel we deserved.

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