Episode 134: From Active Duty to Thousands of Units! with Eric Upchurch - Apartments Operators Podcast

Episode 134: From Active Duty to Thousands of Units! with Eric Upchurch – Apartments Operators Podcast

Eric Upchurch joins host Joseph Gozlan on the Apartments Operators Podcast  to share his journey from enlisted to owning & controlling a large portfolio of apartments! Eric started his real estate investing while being on Active Duty and has since created an organization dedicated to educate Active Duty members of the armed forces about the benefits of investing in real estate and help them get started while still on active duty!

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Show Transcript


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 Operated podcast. Today we have Eric Upchurch. Eric, welcome to the show. Thank you very much. It’s great to be. . Awesome. So Eric, you have a very unique kind of story. Can you give the audience, I don’t know, 30, 60 seconds just about who you are, how you got to where you are right now and how you got to multifamily?

Yeah, sure. So I after college I chose to be enlisted in the military. Normally you’d be an officer, but I chose to be enlisted because I wanted to go influence younger guys that I was 24 when I went. I had also paid off all my college debt, so I went in debt free. I also got my master’s degree in aeronautical science while I served, I managed 27 guys in a special operations unit in the military.

When I got out my wife was from the Bay Area and so we moved back to the San Francisco Bay area. We had one rental property left behind in Savannah, Georgia, and it was barely cash flowing. Barely. But we didn’t buy it like that. We bought it as a primary residence. And so when I got back to the Bay Area, I, my head on a swivel, I had to really figure out, can I do this more intentionally?

and recognizing that a lot of people do this very intentionally and can make money at it. I started reading and going to conferences, getting educated, building partnerships over a 10 year period and I was doing single family stuff, actually started by live-in flipping, just whatever you can do.

And I was living, flipping in the Bay area, making. Family in tow with my kids living in the houses and my wife. And then and then stumbled across apartments. And and now we’re doing apartments storage. We’ve done one mobile home park and we have a student housing deal as well. And then, as a si an aside, my, my company, about six years ago, we started active duty Passive Income, which now teaches military members how to be intentional landlords.

Accidental landlords, which most of us are, most of us end up as accidental landlords. So we’re changing the face of what that looks like for military members. That’s fantastic. So first of all, thank you for your service. Yeah. And thank you for your new form of service, educating the people in service.

Yep. I think that’s a great cause and a great organization and every veteran I meet across, I try to send your way because It’s important to, to get that education. And like I said a lot of people get started in real estate by becoming an accidental landlord. And there’s so much to learn to do it the right way and being intentional about that.

So that’s great. So how is your portfolio looking like right now? How many units do you guys control and there’s a mixed bag of things over there, right? You said multi-family mobile loan parks. Yeah. And student housing. Yeah, we’ve gone full cycle on a few deals. One of those being mobile home park.

We, we bought and sold that. We owned it for about three years. Did very well on that. So just one mobile home park. One of my partners does quite a bit, but w right now as a general partner, I’m somewhere in the ballpark of 2000 units. And you know how that goes. It’s you’re 2000, then you’re 1000, then you’re 2,500, then you’re 500.

It’s depending on what you’re buying and selling. But right now we do have a couple multi-family deals in the pipeline. Smaller multi-family between 50 and 70 units. And then And then we closed an 88 unit a couple months ago that is a $400 delta on rents, or 400 and almost four 50 delta on rents.

So that was a great one we picked up. And then with partners, we have another 3000 storage units under contract that are about to close here soon. Wow. Okay. So there’s a lot going on. Yep. And how do you try to, how many markets, let’s start with that. How many markets are you guys in? I’ll just give you states right now we’re in Connecticut North Carolina, South Carolina.

We’ve been in and out of Georgia. We’re in Alabama, Texas, and we’ve been in and out of Indiana. So all over. So quite a few. Okay that leads to our usual question. Self-management or third party. Always third party. All of it. And how do you go about finding a third party property management in a new market or in a market where you know you’re not so happy with your current one and you wanna replace them?

Yeah, it’s always good to have one answer is cross-referencing. I love this one because when you’re entering a market, you can talk to your broker. Who do you know? Ask your broker who’s trying to sell you the property? Who’s the best is This is if you’re brand new and you don’t, if you don’t have boots on ground, which always recommend having somebody local in the market if you’re doing the deal, that helps cuz they’re gonna know the lay of the land.

They’re gonna know some people to ask. They’re gonna know the right questions to ask. You can always ask the broker, you can ask contractors, you can ask, you can cold call other apartment complexes and see who manages that, and then do your own research and call and interview them as well. But you want to have backups also.

So I always recommend, you have your one commercial. Pm that, that you’re gonna use. But behind them you want to know okay, who would I go to if it doesn’t work out? And thankfully we’ve had a pretty good run with property managers. I think we do a good enough job anyway of vetting them and making sure that they’re solid operators.

I always warn people when you’re buying commercial real estate, you do not. A part-time realtor, which you hear, I still hear all the time part-time realtor is the property manager on this 48 unit deal or whatever. They’re not paying attention and no offense to realtors, you’re trying to go sell houses and stuff and you stumble across a listing or somebody says, Hey, can you come manage this thing for me?

But if I go to. A website for a commercial property manager or for a, just say, property manager, and I see single family houses on that website. That is not my company. Yep. I want somebody who’s managing a 50 unit deal. If I’m buying a 50 unit deal, if I’m buying a 200 unit deal, I want them to have experience with a 200, 200 unit deal.

No, you’re absolutely right. And we’ve heard that multiple times from other guests on the show is you want a property management that manages the same asset class that you are buying. Yeah. Because I don’t care if they manage 3000 single family unit, they cannot handle a 50 unit apartment complex.

It’s just not the same animal. Nope. And. That sounds like a lesson you learned the hard way. Is there a story there? No, actually I, thankfully, I’ve just heard that enough times. It just, and it completely makes sense. So that’s just been my protocol from day one when I started in this business five years ago in, in multi-family five years ago.

I just heard that so many times from guys like you going, Nope, don’t do that. , all my mentors are saying, The things that I just said. Just so that’s just a standard protocol. Do not break that rule of. . Gotcha. Okay. And when you talk to those third party operators, right? What are you asking?

What is something that you want to hear from them? What are things that you really don’t want to hear from them? Other than I’m a part-time realtor. Yeah. Other than I only, or I have some multi-family and mostly single family. I don’t wanna hear that. But I want to know. what their, what day zero looks like.

What is the, what does the handoff look like? Are they prepared to hit the ground running? When that happens, that’s post acquisition, but during ac, during acquisition, what is their scope of work on due diligence? Are they capable of lease audits and walking all the units? And what does that package look like?

How much does it cost? What is their communication style? Are they willing to. Join us in a telegram group, like a private chat group where anything comes up immediately. They don’t have to email me and bog down my inbox if they need an answer. We want to give it to ’em as fast as possible. So what is their style of communication?

What is the expectations on that communication? How fast can we get ahold of them? How often do they like to have meetings? Usually we like to have a, especially when we’re getting through the stabilization period and executing the business plan, we want to have a meeting, a. At least sometimes if there’s construction going on, there’ll be two meetings a week, a PM type of meeting.

And then a construction project management type of meeting. So different focuses there. And really just you’re trying to ascertain their level of commitment, their level of of competence and then, and drive. I look at like, how organized are they and what systems do they have?

Are they capable of handling all the financial information that we’re gonna need and things like that. There’s tons and tons of questions. Capability is like the big thing. Capability and communication I think is the big thing that we have to understand right off the bat so that we know what to expect when we close this deal.

Yeah, I know. Absolutely. And I wanna reiterate something you said somewhere in that great answer. And that is when you are looking to work with them, how does handoff look like and even be before handoff? How does due diligence look like? So a lot of since we are brokers too, a lot of people tell me, yeah, I’ll pick a property management after we have something on the contract.

and I tell them, no you wanna work the other way around. Yeah. You wanna find that property management company ahead of time. They’re gonna be your quarterback, they’re gonna run the play. When you find something, they’re gonna help you with the due diligence. They’ll bring their contractors to help you with getting on the roofs and running cameras in under, in the sewers, under the building, and they’re gonna walk the unit.

because they know a lot more than a random inspector that, that has a website that says I inspect commercial real estate. Don’t use those. Use the property managers. . Another thing to consider is even before that, if you’re just looking at a deal, it’s say you’re looking at a deal in Indianapolis or something, you want to be, even before you are writing Lois, you want to have a PM in place because another thing they can do is drive by and take photos or tell you any dirt on the property.

Like, oh, oh, Oh, there was a shooting there. You don’t wanna invest there, or I would never manage there. Or, yeah, we used to manage that asset and it’s up and coming. They’ll tell you what’s going on in the streets, or they’ll say, Yeah, it looks and here’s a cool thing. They’ll look at your underwriting and they will also tell you whether or not your business plan even makes sense, especially if you’re remote investing.

When we’re riding an l o I on a deal, and I’ll just keep on saying Indianapolis we don’t know actually how the roofs look. But a property manager who’s going to be potentially on your team down the road will spend the time to tell you whether or not your underwriting or your business plan is going to work based on your analysis of whatever the om said on the age of the roof or something.

I’m just giving a small example, but it could be, the what is the condition of the windows or the HVAC system or. You gotta rely on them to tell you whether or not, I’m looking at all these, the market conditions and then the asset itself, and I’m going, oh, I think we can get a $300 rent increase.

You give them that information and ask them to bless it. Basically, is this accurate? And a good PM will tell you, yeah, you’re spot on. You can absolutely get that rent. If you put $5,000 a door into renovation or whatever your business plan is, they’ll tell you if you can do it or not. . Yeah. And especially the dirt, right?

Like you said. Yeah. When you start doing those larger deals, the property management companies that you work with is not some random guy off the street, or not somebody that started their business two years ago. Usually these are more experienced people that’s been in the business for a while that know the area and they’ll and it’s a very small industry.

The property management companies that survive for two, three decades are the ones that have been around and they manage that property at one time or another. Or they manage the one next door, or they manage one of the competitors. Like you said, they have the dirt, they know what’s going on. They’ll tell you, oh, that property that’s one has half first floor is half a basement.

They always have floods over there. It’s always an issue. Or the things that you can’t figure out from just an om that a broker sends you. And I’ll say, if you find a property management company that you really wanna work with and the person you’re talking to, the local rep or whoever it is, doesn’t know the information you’re seeking, ask for the regional.

or the VP and try somebody at that organization. If they’re a sizable organization or experienced enough in that market, somebody will have some kind of dirt. And another way you can get more information is reviews, whether it’s apartments.com or Google. Google reviews or whatever, or the actual website might for the asset, might have its own place for reviews.

You will see. People take it is very difficult to get people to leave positive reviews, but it’s really easy for people to leave negative reviews. So if you wanna know what’s the worst that’s going on, check out the review section. Yeah. And. to that point also, just don’t let it scare you. No. It’s a good thing to look at.

But like you said, it’s the people that are pissed and upset Yeah. Are the ones that are gonna go out there. So you can have 5,000 happy residents that are not gonna put a single review and then, Five that are super pissed and they’re gonna put the review so you can have a two story review average from five people while you service 5,000 successfully.

Yeah. And it’s an opportunity to discover value add if you see consistently reviews that are saying it takes 35 days for a work order to get processed, chances are you don’t want that property manager that’s currently managing the asset on site. And or if you see. . So there’s a value add there, right?

Or if you see someone says something like, there was a shooting across the street that’s valuable information to have, you’re gonna wanna check that stuff out and yeah, use, you’re right to your point, use your own filter. If somebody’s complaining about someone knocking on the door asking for rent this month, clearly , somebody’s doing their job and somebody’s not Yeah, they kicked me out.

They don’t say because I didn’t pay rent. Yeah, exactly. Awesome. Okay, how does life with at least seven, eight different property management look like? You said a weekly call with the property management. So how do you guys you gotta have a commanded control kind of situation when you have that many different organizations helping you guys.

So how do you orchestrate all. Yeah, at first, when you’re getting started in the business, it can be quite a bit of like different, figuring out different companies and who’s doing what and just organizing that can be a headache. But what I’ve realized is I’m starting to do deals with.

Some of the same people over and over again, and so it, it becomes more, I guess this is how people get vertically integrated at some point where they have their own, in-house PM and stuff like that. I can see how that kind of evolves over the decades in the business really, but, At first, it is pretty jumbled.

You’ve gotta have at least a couple people on your team that are solid asset managers, and that’s not something I’m always focused on. I’m attending the meetings and I’m giving input, and I’m making sure I’m tracking for my investors. And I understand all the things that are happening at the assets. But one cool thing that about.

Working with different, in different markets with different PMs is that you learn different strategies and you can actually cross reference those and say, Hey, have you considered this? One of my, you didn’t even have to say this part, but one of my other assets in Indiana, they do it like this.

Have you ever considered it and we really like it. Or if you’re comparing, communication styles with different PMs so that compare and contrasting is actually a benefit. To working in multiple markets with multiple PMs you also have the opportunity to somebody who’s company that’s maybe a national company.

That you’re working with. If you don’t like your current PM in South Carolina, you can ask your PM in Indiana if they have somebody in South Carolina, and oftentimes they will. So depending on the size of company you’re working with. So there’s a lot of benefits, but real at the beginning it’s just managing managing the day-to-day time, blocking those things and making sure you’re paying attention to who you’re talking to and learning.

A lot of it’s just learning, just hacking through. Just hacking through it. Just hacking, yeah. You can’t learn swimming by corresponding, sometimes at some point you’re gonna ha have to eat the water. Yep. . All your properties I’m pretty sure are in one way or another, a value add deal, right?

So we ask our guests, give us a few ideas to increase income and a few ideas to reduce expenses that are not the obvious one, right? That, that the deal you just signed with a $400 delta is phenomenal and that one is a given. , doing rubs is something that we’ve heard a lot over and over.

and that’s a given, if the area supports it give us some of the more creative stuff that you guys have been doing to increase income. Yeah. And then we’ll turn the conversation into reducing expenses. Yeah. So for increasing income, I actually have a list of 19 different things that you can do.

I heard recently somebody say if you’ve got a one and a half to one parking ratio, that’s a, that’s an indication that you could potentially do reserved parking. Not even covered parking, but if you talk to tenants that somewhere where they only have one parking spot per. Unit and you’ve got a mix of even three bedrooms.

They’re gonna need more than one parking spot if you’ve got three bedroom units on, on site, or even two bedroom units on site. So look at your unit mix, look at your parking ratio, and if it’s strained or constrained, one and a half to one ish. , you might be able to pull your, and this is always a good idea, to survey your tenants, send them all an email or a flyer, knock on the doors and send and give them a flyer cuz some people don’t respond to emails.

Collect information on whether or not they would pay for reserved parking. And here’s something that I thought was really cool that I just learned last week also. Is oftentimes you don’t even have to pay. So it’s an expense to put up signage and paint the reserved, paint the reserved sign on the thing.

Tow companies will actually pay to do that because tow companies are the ones that collect revenue off of towing those that are in the wrong spot. You don’t even necessarily have to pay for striping, res, striping the reserve lines and the word reserved or G one or whatever you’re putting on there.

And then the sign that says reserve parking, only towing companies can do that. So not only did you increase revenue, cuz they’ll pay. Whatever, 15 to $50 a month to have that reserved parking spot. But you might not have the expense of actually implementing it. So that’s a cool, fantastic. That’s a cool one.

You’ve got tech service package stuff like putting us b stuff. If somebody, depending on the asset class, not probably gonna work for C class, but if you have B class or. You can offer, we’ll put in some, a couple of U S B plugs. Those are, that might cost you 40 bucks, but you can charge probably 20 bucks a month for some tech upgrades.

A class probably nest those types of things, which is energy efficiency. That’s a reduction. Not only a reduction of. of your energy bill, but also they might pay for that ability because they can control it. , more effic effective, effectively trash valet. If you’ve got an older community or a lazy community, I’m just gonna say that I don’t know what else to say.

Or just somebody who values convenience, let’s say that. They can once a week put trash outside their door. Obviously you have to figure out how to do it without making it look ugly. But after, say, after 7:00 PM on Tuesdays, and then your maintenance tech goes by and picks up all the trash in a hallway or at, on the edge or whatever then takes it away.

And maybe that’s 15 bucks a month just for a convenience fee. So there’s also looking at the land, is there. A piece of land that is not being used. You don’t need a group of trees in an area that’s a half acre or a quarter acre on your property. Maybe you can’t remove the trees. I get that. May you have to check with arborists and all the other stuff depending on whatever state you’re in.

See if you can get it permitted to remove those or just find a chunk next to the road where you can do billboards, you can talk to cell tower companies and see if they’ll lease land and actually build a cell tower. Do your own research on whether or not that fry brains with five 5G cell tower stuff.

But what’s cool about that is you can start a contract, say it’s $50,000 additional revenue from at and t. You can then put another, sell another cell company on the same tower as well, depending on what the contract looks like. So potentially quite a bit of revenue. Yeah.

But they usually will pay like a big upfront fee to, to put the tower in and then a monthly on top of it. Yeah, exactly. . Yeah. So say $50,000 contract and then for five years and then you get say, I’m just making up like 1200 bucks a month, additional revenue. Yep. Yeah. Awesome.

Other than that, just the, yeah, and then the reduction, the expense part. Contracts we’ve increased the N O I on one asset. The first asset we ever bought, we increased the n o I by a hundred thousand dollars. Sorry. We increased the value by a hundred thousand dollars.

By reducing the garbage contract. We cut the garbage contract on half of the same service, different provider, and we cut it in half and it bumped the value of the asset by a hundred thousand dollars instantly. Little things like that, just looking at your cable. All your contract services, your vendors no, that’s great. The garbage thing is huge because if there’s anything I saw on almost every property I’ve been on is over usage or over capacity of trash. I just saw a 12 unit property with two. One double, one triple size dumpsters and you just need one double for a property this size. And the, you ask the owner, why is it there? And he goes I didn’t even know it’s there. And you ask the property management and they go that was there when we took over. And nobody looks at it and goes I can cut. X amount of dollars a month, which with the multiplier that we’re looking at in multifamily, could mean tens of thousands of dollars to the property value, if not more.

Yep. So trash is usually one of the first thing we’re looking at. When we’re looking to cut expenses. It’s a funny And yeah, like what how many days a week does the trash carrier come to dump it? If they come twice a week, do they need to come twice a week? If it’s never full, you don’t need them.

And maybe that’s a, an easy thing without. Having to change the contract around too much. Yeah, absolutely. Cuz you pay on trash. You pay per dumpster, per pickup. And I’ve also done the math of if I double the size of the dumpster, I can get less pickups. And then because the difference between a regular dumpster and a double dumpster.

Per pickup is not double the price. Yeah. So getting bigger dumpsters is cheaper if you can reduce the number of pickups. What else do you guys do? How do you go about investigating where can I reduce expenses? Survey. Honestly, if you can get, some of it’s not gonna be immediate because you’ve got to start managing the asset.

You’re gonna work on some stabilization at the beginning and whatever the business plan is. But then you start looking very intentionally and pretty quick within the first month, you might send out a survey to the tenants and ask them what they need. . And some of it’s gonna be value add, but some of it’s gonna be like, I need my sync to be fixed, or I need I need work orders to be faster. Whatever those complaints are, you can address ’em, and that might lead to a reduction of your highest expense, which is turnover. Just satisfaction of your clients, of your tenants is oftentimes the most drastic reduction. We actually spent $20,000 on a playground, which is not a very big playground.

And that when I went out to the property, when we had it installed, The tenant one of the tenants had his four year old daughter there, and he goes, this made all the difference. I’m not going anywhere. He goes, this is all we needed. I’ve been here a couple years and I’ve been asking for a playground for our kids.

This made all the difference. I’m staying. And I’m just like, unless you ask those questions, you’re not gonna know what the tenants need. Another thing is looking this is probably very common, but you look at water reduction and electricity reduction, even if you’re not doing rubs or not, or utility billback or not at all electrical or water or whatever you’re doing, you can look at ways to save just by doing little things like l e d lighting and some other stuff.

Yeah. No, I love it that you naturally transitioned into my next question, and that is retention. Because it is a huge cost when you have to turn over a resident and people don’t realize it, that, look, when I. In smoother operations versus when I’m gearing up for a sale or a refi, there’s two different strategies.

If I am gearing up for a sale or a refi, I want to get as much as I can from the rent. So if there’s a $50 gap or even a hundred dollars gap and the resident, the current resident refuses to increase the price they choose to leave over taking the higher. It’s worth it to, to put the CapEx to turn around the unit because the next tenant coming in is gonna pay a hundred dollars more with the multiplier.

It’s gonna help us get the highest valuation. But when we’re in stabilized mode, when we’re, we want smooth operation, I’d rather take a hit of $50 per month and not lose the tenant because it’s gonna cost me a lot more and it’s gonna take me two to three years to recover the cost. It’s gonna cost me to rehab and turn the unit around.

So retention is what makes a lot of your losses, operational losses if you don’t work towards retention. The survey is one great example of how to encourage retention. Yeah. As long as you act on what getting the survey what else do you guys do on your properties to encourage your attention?

Another thing is activities having tenant appreciation days or having a coffee bar in your leasing office, even if it’s a Class C asset, actually that’s a value add to you in a bunch of ways. It makes your Some of your tenants go, okay, I know I can on the way out, I can go grab a granola bar and give a granola bar to my kids as they’re going off to school that day, really convenient for me and grab a coffee or whatever.

And guess what the leasing agent gets to do. Hey, John, I know you’re late on your rent this month. Are we gonna be able to make that up? Or, Hey, whatever it is, right? And, and then you can do just asking your property manager like what promo type things like are we doing a back to school day? Are we gonna do an SP C A Adopt a dog?

Adopt a pet day? Which is, all these things are ultimately a value add to you. Thing like giving away a backpack or a granola bar or offering. A tenant to, to have a small dog or cat or something in their thing that is leading to them being more satisfied with staying at your property.

And so they do add to your bottom line, but they also reduce the expenses as well. . Absolutely. And you look at it and you go that’s gonna cost me money. But it doesn’t have to be expensive stuff. It can be as simple as we used to do Halloween c coming in with your kid and we’ll do face paint.

Well, a couple of face paint kits from Amazon is like 8, 9, 10 bucks a piece. So you buy two, three of them. Depends on your property size. You spend 20, $30 and the kids are happy and. The cool factor and you get pictures for your social media and you can use that for your marketing. So there’s always a lot of value.

We used to do like pool parties, so we would actually get vendors to come in and pay for the food or the drinks, or, sponsor the event. and they’re happy to do that. You are not out of pocket a lot of money and your residents are happy. So it doesn’t have to necessarily come out of your bo bottom line as an expense.

There’s gonna be some expenses, but it’s not gonna be nearly as much as it is if you were able to increase your retention. But let’s just say two residents, three residents, covers all those activities easily. So it’s definitely worth it. Yep, absolutely. So thank you for that. I appreciate it.

It was as great value to all of our residents. I’m sorry, all of our listeners . Yeah. And it’s March 20, 23. Inflation is going crazy. Interest rates are high. What is your guys’ perspective? Cause everybody’s interested in hearing about that these days. What is your perspective of where the market is going?

What are you guys doing? Are you sitting on the the fans willing to see what happens? Are you in purchasing mode? Wh where are you guys going? We’re buying I’m just making sure that I’m not buying anything. Lean it. It’s gotta be. It’s gotta be similar to this 88 unit that we bought in December where the value is clearly there.

Like the value, even if purchased and no renovation was done, there’s gotta be good meat on the bone. And those deals are out there. It’s just a lot of people are. Not willing to look for those deals. You might have to go outside of your typical deal criteria. Like I normally wouldn’t look at a 48 unit deal.

But when you see incredible value in it and you know that there’s a say and you know that there’s a rockstar property manager on there, on site then, and maybe also a team member who’s boots on ground. So there’s a lot, maybe just a lot more scrutiny in. The area who is local, who is the team?

To me it comes down to who I’m working with more than what I’m working with. It’s more about who is on the team, who is running the deal who’s doing what, and then you start looking at the deal. And when those two things match up. I’m not gonna be scared to buy right now but I am gonna.

I’m going to be more scrutinizing of the deals and stuff too. So I’m definitely still buying. I actually don’t mind not doing a deal for the next six months, but they keep coming I know that there’s gonna be a huge opportunity for deals in the next two years because I’m seeing a lot of deals even now, and, we’re doing storage stuff too, and we see a lot of kind of mom and pop operators, and we know in the next 10 years that’s gonna shift quite a bit from mom and pop to institutional as well.

So getting in early, building the portfolio and then, sell it to some hedge fund or something. . Yeah. And there’s gonna be a lot of opportunities in the next couple of years. There’s no doubt there is. I think I read somewhere between around 30 billion worth of loans to multi-family specific that are coming due this year, whether it’s bridge loans or older debt that, that was placed years ago and.

A lot of these operators are gonna find themselves in a spot where the refi doesn’t make sense and the property cannot handle the refi. So there will be some opportunities where these people are forced to sell and maybe even forced to sell at a discount. So yeah, a lot of our clients telling us, yes, we’re still in buying mode, we’re still looking for properties.

and just like you said, just gotta do more due diligence. Gotta make sure that we’re more conservative on the underwriting, but we’ll still buy. So that’s that. We’ve also heard other operators that say, no, we’re gonna sit on the sideline and see how that plays out. And that’s a legitimate decision either way.

But it’s good to know you guys are still pushing forward and you just guys hit the ground with a new construction, . Yep. So tell us a little bit about that. It’s not the same thing as buying something and stabilizing. So what got you into the new construction situation? The team then the deal is the short answer.

So I partnered with somebody who I knew. This is in Wilmington, North Carolina. He built the original, he was working for a a family office building, building multi-family apartments. He built about 3000 units and and he was trying to get out of the W two and go do it for himself. So we met and He said, Hey, I, have this one opportunity.

I know the owner, I know this. They’re open to selling off market. There’s a two acre parcel of land next door. It’s, so the current asset is two buildings. It’s 72 bed student housing deal, a stones throw from large university. Literally, you can see it across the street, behind.

There’s only a. Short woods between us and the the entrance to this university. He built the original 72 units is stabilized 97% occupied. And he’s, so we bought it for, with the land at 5.2 million. They had already, they built it in 2018 and they had already done phase one or phase two.

Stubbed in the the, all the civil engineering stuff, the water and everything for phase two. So that was already ready. So we already had the original plans for phase two, just needed to be refreshed with architectural engineering and civil and going through the re permitting.

So from when we bought this in October, we’re you. Four and a half-ish, five months in, and we have now, we have already cleared the land. We had to get land disturbance permits first to clear the land. We had to demolish two dwellings, two single family homes on the property. We had to evict a homeless person also on the backside, one of those properties unfortunately he was in a tent behind the back building.

And then built up the pad and now we have building permits and we’re ready to rock. So when we get done building this summer we will have 144 beds and they will be mirror image buildings. So it’ll be literally just building the same two buildings that are already there.

We’re building two more across the drive Yeah so that sounds like a great opportunity cuz you basically skipped the most painful part of development, which is the entitlement, right? Getting the building from the land from just a piece of land to a shovel already kind of land. So soon as like you guys zip through that because somebody else did the hard work for you.

So that’s been a great opportunity. , how is it? And I know you just at the beginning of the construction phase, right? But how is it working with development versus working with a property manager on an existing property? I would, in terms of operations wise, I would never do this unless I had a partner who.

I have the fact that he did this for a living for 20 years. Just looking at the Gantt chart on the scheduling for everything from engineering to, certificate of occupancy at the end. It’s just amazing to wa to see when everything is gonna happen in real time looking at it. And I just, I, unless you have it, it’s like when you get started in multi-family.

you wanna work with somebody who’s done it before, you just jump in and do it. So you, maybe you’re a co-sponsor the first couple times and you’re learning the language and you’re trying to figure out where you fit in and what’s what. It’s the same thing with development. You work with somebody to add value to that team that knows what they’re doing, and then you can go, oh, like I’ve learned so much about development.

I still don’t know what I’m doing. I wouldn’t be able to go and operate and build those things. But my partner. and any question I have and and that we do have, we have a property manager asset management call every week, but we also have a construction call every week. And so we’re walking through everything from, do we have all 72 tubs, do we have the electrical panels that everyone’s freaking out?

Do we have, we just got the invoices for all the trusses and all the all the roof pitches and all that stuff. So seeing the lumber quotes is really interesting to see come across. So I’m just learning a ton from, paying $120,000 in furniture. Cause these are furnished and so it’s an interesting thing that you wouldn’t necessarily experience unless it was student housing. So learning a ton. And like I said, I wouldn’t do it unless I had a partner who it’s old hat to him, yeah, that makes sense. And then I’m sure when you look at these things, we’re in a market where everything shifts a lot.

Yeah. Whatever. You quoted back, you said October, right? Yep. We’re not getting certain numbers today. Inflation is moving too fast and I’m hoping you don’t fish as much as logistics. Probably. Lumber’s the big one, right? And lumber took a dive since October. So we are looking at that and my partner here knows.

The business so well, and he’s actually, he lives in the market. He knows every contractor, he knows every subcontractor. He knows where to get the products at the right price that will deliver no matter what he can call in favors if he needs it. So that kind of like hyperlocal presence really matters when you’re doing something like this too.

So definitely recommend that. I wouldn’t say let’s go into a different market and do it even with the same team we have because you don’t know everybody. And The other part of it is when you know that you’re gonna get the right price on a thing, you’ve gotta be able to buy all of the stuff. If the price of the tub surrounds is X value and you know you can get at a steal if you buy it right now, you have to be willing and able to go buy it right now, for the reasons you talked about.

Because you need to make sure you’re not gonna pay twice as much in three months when you actually need the products. You. Yeah. And making sure you, you are capitalized correctly is also very critical. Cause while Wood took a nose dive since late last year, cement is still going up.

Yeah. So the, there’s a lot of that too is labor. You’ve got labor as one of your highest costs in in construction always. Yep. And the labor shortage. The labor shortage is, hate to say nobody wants to work, but there’s a labor shortage, , and so you, you can say it.

We don’t code on this podcast could say it. I’m just saying. I’m just saying. It’s like you, you gotta have the right team and and the right workers, the people who are motivated and willing to do it, and to keep those costs down too. Otherwise it’s we could do your job, but we’ve got another job over here and I’ve only got one workforce, and if you want me to bypass that one, it’s gonna be this quote.

or you can wait three months and it’s this quote, no, I totally understand what you’re saying. And it’s like that everywhere, all over the country. Every operator I talk to is facing the same challenges with labor. I just came back from a commercial real estate conference and the developers were on a panel and they go look, and we used to pay 14, 15, $16 an hour.

But the Walmart distribution center is paying 24 26 with benefits. Yeah. And we have to compete with that. So you either have to increase your prices by a lot to support that, or you’re gonna have labor shortages and labor challenges. So it’s everywhere. It’s not just your market. Yep. It’s crazy. I can’t imagine somebody who has a specialized skill in concrete going to work for Walmart cuz they pay twice as much, yeah, absolutely. And it’s not out in the cold or the heat or the weather and it’s some warehouse. So even Chick-fil-A is paying 18, $19 an hour these days. Oh, funny story about that. My kids, we were driving to Home Depot and there’s a Chick-fil-a Chick-fil-A in the same parking lot, and I was driving by and there’s a big sign and it says Chick-fil-A now hiring $19 an hour and we’re in California, and I don’t know what it is everywhere else, but it said 19 bucks an hour.

And my son goes, wait, they’ll pay me $19. Every hour to work there. , . And he was like, whoa. That’s crazy. Yeah. How old is he? He’s 13. Yeah. Oh yeah. That’s just absolutely insane. And then, again, the multi-family world. If you look at our labor, you’re looking at maintenance people, ground people make ready guys, why would I go paint an apartment or work hard or keep pick up trash for four?

It used to be 12. Right now it’s 14, 15, $16 an hour where I can go work at Chick-fil-A in an aced environment, flipping some chick nugget chicken nuggets. Yep. And I can make 19. Yeah. So the labor shortage is a, it’s across the c the country, across every industry that everybody’s facing right now.

So we’ll see how that works out with the economy the next few years. Eric, I wanna be respectful of your time. You’ve brought a lot of value. We ask everybody the same question. If you met younger Eric, let’s say 24 year old Eric that goes to the military what advice would you give your younger self?

What would be the best advice? I would say buy Bitcoin in 2010 and sell in 2020. I would say I, I honestly, I would, I love the path that I’ve I’ve taken so far, but I would tell ’em, I would tell my younger self to start investing. Or sooner. I didn’t really start buying multi-family until I was 37, and I would love to have purchased a here’s a military tip for anybody who’s listening, whose prior service, the VA loan, you put zero down on a fourplex.

Imagine that had I gone from one duty station to the next duty station and been purchasing real estate, but not just single family houses, just owner-occupied loans up to four units. You buy a fourplex, triplex, duplex, wherever you can, and building a portfolio. While I was serving, man, that’s the reason my company exists.

Now. No one is teaching that. Now. They are thanks to us, but no one was teaching that. . And so I would say to myself, go buy a fourplex, live in it with my wife and renovate some units and then turn over a profit sooner and just get my feet wet faster. Yeah, that, that’s a great advice, Eric, if anybody wants to reach out, whether it is a service person that wants to learn more about your A D P I program, or if it’s just a multifamily guy that wants to invest or partner, how can they find you?

And we’ll put everything in the show notes. Okay. Yeah, you can. We have 70,000 military members in our community. You can go to military real estate investing.com. That’ll take you to our Facebook group where the community currently lives. We’re about to transfer that over or add on to that in our private community.

But that’s free for anybody to join and tons of great information in there. Active duty passive income.com is the website, or you can also find me, if you wanna personally invest with me, it’s eric upchurch.com and find me on Instagram. Come find me on Instagram at real, Eric Upchurch . Awesome.

Eric, that has been a very great show. Thank you so much for the value, and thank you for showing up on the show. Thanks a lot, Joseph. Awesome. And for you, the audience, if you wanna listen to more great podcasts like this and experts like Eric, please subscribe. Please give us a thumbs up or a review on iTunes, teacher Amazon, wherever you consume your podcast.

We’ll, appreciate it and we’ll see you next time.

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