Don’t have a lot of capital, but want to invest in properties? Or lessen the risks in your portfolio? There are plenty of opportunities in multi-family syndications that create great returns on your investment while lowering the risk of being the sole owner of a property. Reed Goossens has had plenty of success with the multi-family syndication business models. He talks with Brad about what you can do to find success with these multi-family syndications.
Learn more about Reed!
Connect with Brad's team at www.rentwerx.com!
Brad Larsen: Everybody. On today's episode, I've got Reed Goossens and we're going to be talking through the multi family syndication business model.
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Brad Larsen: Hey everybody, welcome to the Property Management Mastermind podcast. I'm your host, Brad Larson. Now today's guest, I'm bringing on Reed Goossens, and so we're going to bring him on in a few minutes. And just want to give you a quick rundown of who this gentleman is. Now, he's in the multifamily space. He's been doing lots of syndications and he's built himself from scratch to be a multifamily syndicator. So his business model, they go out and buy multifamily properties, they raise capital, they put the management company in place, they value add potential, they flip some of these multifamily potential. They they long term hold them. But it's a really neat perspective on how this all works and how it ties into our property management world and the residential space. Of course we do. A lot of us do multifamily. It's not just a thing for outsiders. A lot of us do has even short-term rentals, but it's a neat opportunity to look at him and what they do in comparison to some of the big names that are out there doing it already. And I do think it's a good conversation because there are some insights into what's going to happen in the crystal ball world coming up and how we can tie in as managers and providing exceptional service for our clients. So without further ado, without further ado, I'm going to bring on Reed and we'll have a really good chat. Hey, Reed, thanks for coming on. Glad you could join us today at the Property Management Mastermind podcast. I wanted to introduce you a little bit. We heard about who you are, what you are, and my little monologue in the beginning. But let's go ahead and give you a few minutes to introduce yourself. Go ahead.
Reed Goossens: Thanks, Brad. Yeah. For those listeners who thanks for having me on the show, please listeners who don't know who I am. My name is Reed Goossens. I sort of my schtick is I moved to the US about a decade ago to chase a girl. That girl became my wife and I wanted to live in New York City for a period of time. I don't live in New York City anymore. I live in Los Angeles. And in that time I came here without a without a job. And my background is in structural engineering. And I bought my first property for 38,000 bucks. And fast forward a decade later, I'm now syndicate large multi million dollar properties across the US. I have a company called Iris and Property Group and we have about $650 million of assets under management. We all do it through the lens of of real estate syndication, which I'm sure we're going to talk a lot about. And there's been a lot of journeys and tales and stories and things that I can bestow upon your listeners in terms of how I've built Build It from Nothing. And I don't come on here to brag. I come on here to sort of inspire. Say if an Aussie can move halfway across the globe, then so can and achieve financial freedom, so can the average American.
Brad Larsen: So we're starting to see more of this in our space. And the reason why I want to bring you on is to kind of learn more a bit about it and then how property management companies out there can get involved. They can get involved as principals, they can get involved as managers, they can get involved as both. Right. And the end of the day, there's a really good opportunity here because I think there's more and more of this going to become more prevalent. And there's a couple of different reasons, mostly because a lot of the investors are cash heavy and time poor, so they have lots of cash to invest, but they don't have the expertise or the time to try and chase those single family homes and to go buy a $5 million, $25 million multifamily complex is very daunting. So the real estate syndication opportunity is quite real and it's tried and true. And so I think you're going to see more and more of that. So that's kind of why I brought you on, because I want to really dive into it a little bit and tell me kind of how you work this and how does it work for an investor, kind of tell me what you do and how it all works together. Go ahead.
Reed Goossens: So the best analogy I've got is think of a Boeing 747. Right? And if I was to go hire that by myself, do you take it from Los Angeles to New York City would cost me as an individual a lot of fricking money, Right. But I can go in that analogy. I can go split it up the cost. So there's a captain and copilot, which be your your your principals or the sponsors of the deal. You'd have first class, which would be your general partnership group, which may be involved. People who brought the deal together help raise money, maybe help operate the deal, and then in the back and coach, you have all the limited partners. So all these limited partners want to be involved in this plane of getting from point A to point B, but they don't they can't afford to take it down themselves. So they just want to buy the seat and they want to enjoy the in-flight entertainment. And for doing that, they can get from point A to point B. In this case, it happens to be growing their wealth and growing their nest egg with very little, little, little money in retrospect of the big Boeing 747, But they still get to participate. And that's the beauty of syndications. We're pooling everyone's money together, going down and taking down a bigger asset that maybe individually we couldn't do it as individuals, but we can do it as a group. So that's sort of the analogy around it.
Brad Larsen: So your services, I mean, you are helping put together syndications. Are you coaching people on how to do this or are you doing more of like turnkey syndication opportunities?
Reed Goossens: Yes, I used to coach. Now I only I've run a full time real estate investment firm. We're chasing deals across the country. When you're running everything from asset management to construction management to acquisitions to depositions, we don't I don't have time to coach anymore. So right now it's all we we're currently looking to buy 4 to 5 deals a year. We're looking every year to add about 100 million AUM assets under management. For those people who aren't familiar with the word AUM. And again, we probably we're a group that said does 3 to 5 deals a year. So we're backing in per deal about 25, 20 to $25 per deal. We're currently doing a deal right now in Tempe, Arizona, which is going to be about a $22 Million deal. And we're looking we're raising about $10 Million for that, and we're raising that from investors as we speak. And we'll go off and close on that deal at the end of March, and then we'll look for the next one for this calendar year.
Brad Larsen: Yeah, lots goes into that. So everyone talks about the tertiary markets, right. There's a there's a big key word that's being flown around quite a bit. Any sort of single family investment, multifamily investment, they're looking for these little markets that are feeding into the bigger markets that are very lucrative, very solid, and then up and coming. And there's a there's a real need for housing and quality housing. And so these places are where people want to live. They're, you know, almost like it's another term called the suburbs. Right? It used to be called the suburbs. And now they want to rename it to a tertiary market like there are super smart are saying something different. But it really does hold true. I mean, the further you go out from any big metro, the more desirable or new or fancy or any of those places where there's opportunity for growth. I mean, you have opportunity to build brand new and of course you can go like the mushroom effect and turn around, go back into the major market where you ever you are, whatever, I mean, versus trying to go outside of it and rebuild from scratch, you know, do a whole new value prop, you know, value add type of a multifamily complex. Now what you're looking for is, is big deals, 25 million doing four or 56a year or whatever you can get your hands on. And so as an investor, there are some steps people have to go through, meaning that you have to get them to be a qualified investor. If you would, you have to give them a PM. And so kind of talk us through some of that as you're speaking to us, like we're kindergartners and we know nothing. But that's an easy way to say it. So talk us through what your screening process is for some of these investors that want to put money in.
Reed Goossens: And I'll just answer to your your first statement you made in terms of affordable housing. Right. The big underlying thing that we believe we fundamentally believe in is affordable housing here in the US. And so we look for secondary, not necessarily tertiary market, but secondary markets. So you may you know, you've got the New York, the LA and San Francisco's of the world. But then we look at the Phoenix is the central Texas, the you know, the Greenville South Carolina is where we want to try and provide housing in these in these markets where the average person who earns 50 to 60000 a year wants to pay $500 in rent. Right. They're not going to ever be an owner of a house because, you know, just let's heaven forbid, we're you know, I think the home ownership rates at the lowest it's been in 50 odd years and people can't afford they want to live still close to cool things, but they can't afford maybe the houses in those areas. That's where quote unquote, affordable housing is. And we sort of really target that sort of blue to tan collar type of type of renter. Right. So with that being said, that's the sort of the value story of of the investment thesis in terms of how we look for investors to to invest with us. We only can allow accredited investors and there's the SEQ releases, you know, rules and regulations around what who qualifies and who does not and how you can raise that money.
Reed Goossens: So I'm going to look at a little technical here, but there's there's two ways to raise money under regulation D for for dog. And that regulation D, I think, came out back in the 1933, which allowed people to invest into private companies directly without going public, because public going public costs a lot of bloody money. Right. But there's still a lot of businesses out there that need funding. So the Regulation D was formed under that preview of Regulation D, there's 500 6b4 Bravo, and then five or 6c4. Charlie, again, I'm not a lawyer, but I know a little bit about this. Five or six B is you cannot solicit, you can't advertise to online. I can't stand on top of rooftop and yell out and get some random walking along the street to come and invest in my deal. I've got to have a preexisting relationship with those with those folks. Now, for doing that, I'm allowed to to have up to 35 non accredited investors. Accredited investors mean you earn 200,000 or more a year individually or you're worth $1,000,000 or more excluding your primary residence anyone. If you don't meet that, you'll then considered a non accredited investor.
Reed Goossens: But you have to meet certain rules in terms of understanding a sophisticated investor, understanding what you're investing in. In our in our terms, it has to be multifamily. So that's five or 6b4, Bravo five or six C for Charlie means I can go out and bang my drama and advertise online and do Facebook ads and do funnels and all that sort of stuff. But I can only accept accredited investors and that's just the way the SECC is set itself up to say in general, someone who's earning 200,000 a year or more or they are worth a million bucks or more a year can are accredited, so not doomsday, but if a deal goes bad, they're going to be okay financially, right? They're not they're not going to wipe themselves out. And the SECC is really trying to protect, you know, loan sharks swindling grannies for their last penny. So there's two buckets accredited non accredited five or six, B five or six C depending on which which one the sponsor will choose five or six B, meaning you cannot advertise. It has to be a pre-existing relationship. Five or six C means you might be scrolling on your Internet, on Facebook or Instagram. You see ads pop up that would be a five or six C deal, which means. Only accredited investors can, can, can apply.
Brad Larsen: That's good stuff. Good explanation there. Doctor? Lawyer. Goossens. That's pretty good, you know, because some of that's pretty technical, man. So it gets confusing. And you did it well, especially with the phonetic alphabet, because you start hearing these B's and C's and D's and it's like, What did he say? A? B, what? Just very confusing because obviously a lot of our clients would probably fit into that accredited investor role. I mean, there's there's reluctant landlords, but let's say half of the clients we work with would fit into that realm because the homes that we manage for them are second and third, 10th, their 20th investment property homes and or multifamily complexes. So there they are going to fit into that role and we get off and ask the question, What more can I do? What more do you have? Do you have any good deals out there? Right. Everybody, if you're in real estate, you hear that from everybody that you bump into. Hey, if you got any good deals, let me know. Right? And so this is where we can go to them and say, look, this is this is a guy this is an organization that can steer you in the right direction in potentially investing some of your money. Now, how we would benefit from that would be one or good referral, right? It makes our investors happy. But two, I'm sure there's potentially opportunities for management. Now, that was one thing I want to talk to you about because this is a property management podcast. So are there opportunities in syndications for third party property managers to come in and be a part of this 100%?
Reed Goossens: So we use across the country. So we're in central Texas, Arizona and the Carolinas. We use an individual areas, we use third party property management teams who are focused on multi large multifamily. Right? I can talk a lot about the ins and outs of hiring a good property manager. I fired property managers in the past and no offense to anyone listening to the show, you know, the old saying is you never love your property manager, right? You always want to be able to do it slightly better yourself. And I know groups like myself, they get to a certain level and they start bringing property management in-house. But early on, when we're just growing, we need the local expertise. So we are partnering up with property property management companies like Cal Cap in Arizona or ROSCO Property Management in Central Texas, or IS Land Property Management in in Greenville, South Carolina. You can look up all these all these folks, they've got websites and all that sort of stuff. But we as an operator, we try to look for the best group boots on the ground if we don't have boots on the ground already. But really, look, how is that culture? What are they how they attracting the right talent? Because what makes or breaks a deal, Brad, is the bums in the seats on the property. So when you think about these large multifamily properties, you think there's a leasing center, right? When you walk into leasing center, someone's going to greet you.
Reed Goossens: Well, they're the leasing consultant. You're also going to have a property at the head property manager, having the right company, third party that is that attracts these good employees is very paramount to our success at our end. Right? And so we constantly are in looking for for good property management teams all over the country in certain markets we may not be in because we also use them as a litmus test. And we might say, Hey, Ellen, we're looking at a deal down the street. We already got two deals with you, and nine times out of ten, those guys are going to be like, I actually used to manage that deal, you know, 15 years ago. I know that deal. I know the ins and outs of that deal. I know where the skeletons ahead. So we actually also use them like a partner to advise us in a right way in order to when we go out and make an investment decision. And we do that across, again, the multiple markets that we're in. And that's something you can't ever just go out and buy yourself, right? You need that local expertise as you're getting used to a market. So it's very, very paramount to partner up with the right property management team in the right market so you can all be successful together.
Brad Larsen: No. Good answer. So one of the first things I want to bring up and it might be a touchy subject, it might be like, Hey, you know, don't lump me in with that, that group over there, but let's address the whole grant card down phenomena, right? And so I bring that up because when you start talking multifamily, you start talking syndications. I don't know of a bigger name out there. That's made a name for himself, right? Wrong or other. You love them, you hate them, whatever. I just want you to maybe address that kind of give me a few minutes on that whole phenomena and what you do as well.
Reed Goossens: Yeah. Look, I think the big thing has if you look at the brass tacks of what's happened since 2012, Right. Grant has done a great job. He's a salesman. He's. He's, you know, as he had love, hate him, whatever. I've unfortunately had to unfollow him. He was just too, too big for me. But. But, but I appreciate what he's done in terms of his his story. But in general, if you break it down to what has actually happened in the industry 2012, the Jobs Act changed and that allowed people to invest directly into commercial real estate deals, specifically in and around the country. So that remember that five or six sales talking about earlier, we could now advertise online, right? That's where Grant comes. And he uses his platform and he's he's awesome energy to attract different people. Well, I'm doing something similar, but it's on a smaller scale, right I want to get eyeballs on. Who we are, but it comes from the back in the day. Deals were made at the old boys club right it back in the country club. And no, no one was the average public didn't get the ability to invest directly into some great multifamily deals or great commercial real estate. Well that all change in 2012. Then if you look at history, you see that there was all these massive explosion of crowdfunding websites that came out online. Right. And you think of the realty moguls of the world, you know, there's what fund rise, there's a list of them. There was a lot back in the day. Then they all sort of went away.
Reed Goossens: And now there's only a couple that still really, really exist. And they act as a sort of a link between the sponsor like myself and the retail investor. And you can go and invest on those directly with those folks as well. And they're all focused on getting eyeballs from social media onto commercial real estate deals. The third option is that you come directly to a sponsor like myself. So I have I might not have as powerful platform as Grant or as Realty Mogul, but I do have a small platform through my podcast and writing books and being on this podcast, and that allows me to attract investors directly into my deal. But it all started with that 2012 Jobs Act. So I truly do believe it's put the power back into people's hands of where they put their money. And so you talk about the syndication and the Grant Gardens of the world. You know, you look at the positive side of it where I also invest passively in other people's deals, right? Because I can choose where I put my own money. And that's that's the that's the pure the purely the power of this law that changed because it gives us choice as investors where prior to that you might not have even heard about the 250 unit deal that I've got going because you weren't in the the country club shaking hands in the sauna room, you know what I mean? So it's just completely changed the way we invest. And I think that's only for the benefit of of the public.
Brad Larsen: Yeah. We have a very similar thing with a large company in our industry, Renter's warehouse. They started doing radio ads quite a bit on third party property management and they're doing radio ads. They spent millions upon millions for radio ads in these big markets. And what that did is it raised awareness because people would realize, well, what is this property management thing? And then go Google. And that's where, you know, 20 of 50 other property management companies would pop up on their search and they would start calling around. But a lot of times they heard about it via radio ads through that. So it raised awareness. Now, I think that's a good thing overall, especially like what you're doing, because it gives people an alternative. And what I want to do, backing up at O'Hare, let's go talk about the property management companies. Let's do a little bit of a post mortem. So let's talk about the service levels they provided. Let's talk about a potential lesson learned for my peers out there. They were listening to this. We want to do a good job. We want to provide exceptional service to our clients. Such as? Such as what you guys are doing and the multifamily space or any of the investors that we work with. What were some of the things, if you remember, that didn't quite meet your needs as a principal, an investor of this multifamily operation, and how could the management company have done better? So let's let's maybe give us a few lessons learned out of that. So everyone listening would say, well, you know what, He's right. I should have done better at communication. I should have done better at hiring, I should have done better at this. I mean, anything top of mind that you want to tell everybody and like a post mortem event. Look.
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Reed Goossens: Look, property management is a thankless game, both on the single family raising side and also on the multifamily side. It is in particular, if you're in affordable housing, you're going to get some rough tenants that come through and you deal with a lot of crap. Let's let's, let's, let's, let's call a spade a spade. And I appreciate that. But what I found is the hardest part of any business in property management, why I haven't got into the space myself is that at the end of the day, you're a HR company, right? You know, on my books, I pay for the payroll, I pay the property management fees, and I pay all to do with with running my assets. So really, the property management is a business. They don't have really a lot of overhead because I'm paying their staff. Right. Which is fine because that's that's the nature of the business. But then I want them focused purely on making sure they're getting the right, attracting the right type of talent. Right. I mentioned earlier you can make or break a deal by the type of property management and the type of bum you get in the seat. I know that in recent years we've had tech service guys move jobs because labor is really hard to come by and they will go and move for two, three bucks an hour or more. Right? So we're looking at our payroll and saying, Well, I don't want to lose that good guy or that good gal because they want to go work somewhere else.
Reed Goossens: How do we make it better for them? Well, there's only so much I can do as as an owner, right? Because they're not my directly, my employees. They work for me. They work for my my property, but they're employed by someone else. So it's really important to me. And I take it very seriously the culture within within a property management management company. I remember when I first got started in the industry, I used a company in Central Texas. I'm not not to be named and I used to always think of them like they're like a 1995 Nissan Altima, right? It got me from point A to point B, It was fine. But as I as my portfolio grew to over 1000, over 2000, I needed that BMW with seat warmers. I needed the extras because I needed to also service my investors. And my investors needed a type of reporting that was on time, a type of management terms of investor distributions that was happening on time and that mattered to me as my brand. So who I chose as the property management, even though not they weren't ESN, but they were still partnering up with us to produce a really great investment opportunity. And it takes both sides of the coin. It takes us as asset management and the sponsor, but also take the property management well. And so making sure that the property management company have the right back a house.
Reed Goossens: They had a they had a CFO, they had the right reporting, they had an accounting team, they had the right regional managers and the regional managers being not to spread too thinly across 15 deals. I remember talking with a company in central Texas. Now they have a limit of 5 to 7 assets per regional manager because then they can focus on the nuances that it takes to run these larger assets. I don't want to see someone who's a regional manager who has 4500 units under her, his or her preview. No, that's too much. I need you to be capped at 1000 or less than 1000. So I know as an owner I'm getting the right attention. So I don't know if that answers to some of your questions, but there's a lot of lessons learned along the way. And as I grow as a syndication real estate company, I needed that that that BMW with seat warmers and the Nissan Altima just ultimately just didn't cut it for us. And it was stuff like culture. It was stuff like back of house stuff. It was stuff like how much region, how much workload the regionals were getting, and they felt overwhelmed. So all of that's really, really important as as I go out and tell my investors, Hey, come invest with Ryan because we're partnering up with the best property management companies, we believe in the region.
Brad Larsen: And that's a big part of the innovation side, just like you mentioned. And also seeing that there there is a limit of what people can oversee to good points, to kind of kind of re circle back on is making sure that you're staffing appropriately to provide exceptional service and innovating every which way you can to make sure that you keep those people. And I hate that term in culture, but I you know, all my fans are not fans. I don't have any fans that my fan is my dad and that's it. But the listeners out there, they know that I say culture as like a dirty word because it just sounds like something you grow in a petri dish. However, environment is something that I firmly believe in. So if the working environment is hostile or just really negative or the people involved are negative, that's going to create a it's just it's just a create a spinning vacuum of suck. And so we want to avoid that and make sure we get the right people. Easier said than done, right. We can go on and on about how to create that all this other junk, but take it for what it's worth on the face value. As you mentioned that, hey, the company has to understand that the asset is very important and they have to have the right means to oversee it and allow it to grow. So obviously, you're in Los Angeles. I can hear sirens. So hopefully next thing you know, we're going to get kicked. The door is going to get kicked in with a raid and who knows what's going to happen.
Reed Goossens: That's someone properties, right? Wrong state.
Brad Larsen: Oh, right, right. Yeah. So you also have a podcast and you do some books. So I want you I want to hear a little bit more about that because people are going to be craving some more information about the syndication ideas because, one, they may want to be getting involved or to positioning themselves to get involved as a third party property management system.
Reed Goossens: Yep. Yep. So behind me, if you're watching the video, investing in the US is the book The Ultimate Guide to US Real Estate. The podcast is called the Exact Same Thing Investing in the US. Just search my name Reid Goossens. I've been doing that since 2014. I think we've got over 400 episodes, weekly podcast that comes out and we just interview historically was about my journey coming to the United States and learning all the things, whether you're international or not, you still you still got to go through a learning curve as becoming a master of the craft when it comes to real estate investing. But today we talk a lot about people's journeys in how they built companies from scratch, all in around real estate and obviously other some we sometimes get some start ups of tech, tech companies and all that sort of stuff. But in general, the podcast is a quite valuable place to to provide content. And it's just going back to one thing you mentioned earlier about the Grant Cardone and the the access to investors. The reason why Grant does what he does and what I do, what I do is to try and educate the investor and that's what a sponsor is there to do about what we do, right? So if I don't go do a good job of educating and getting to know me and how I think and my investment thesis, well, the way I do that is through podcasting is through writing books, and it helps bridge the gap and shrink the time you get to know me, to build that trust, to then ultimately hopefully invest with me quicker. So podcasting, all this other good stuff is really where you can access all my stuff. You can also head over to Reid Goossens dot com, that's our eg0oss dot com and that's where all the educational stuff is. And then you'll link you to investment stuff as well at R's and Property Group. So yeah.
Brad Larsen: Cool. Let's talk numbers. All right. You ready for this. Let's talk talk us through one of your biggest wins. Like give us a return on investment. Give us a sales price. Give us an investor. Put in $0.10 and he made $10 Billion. I mean, something like that. I want to hear. Give me give me your one of your studs and not the studs and duds. Just give me one of the studs that you remember just because to get people understanding that, hey, this is a pretty good opportunity, I'd like to hear one of the wins. Sure. Granted, you're going to have potential losses. This is not all roses and rainbows, but talk me through one of the big wins.
Reed Goossens: Probably the biggest win we've had to date. Was it asset we bought back in 2018 in Austin, Texas. It was built in 2004. Initially, that asset, if you know anything about Austin, has expanding clay soils so it had a lot of foundation issues but it's still by the bones. It was built in early 2000s, which means it wasn't built in the seventies. As a structural engineer. I got really comfortable with that and I said, Look, this is just a maintenance problem. You know, it's the old geeky thing they say is you can't avoid you avoid death, taxes or expanding soils. As an engineer, no one really laughed at that joke. But anyway, it was always something you got to deal with. And we bought that property for $36 Million. We raised at the time, I think 15 and one half million, and then we sold it two and a half years later, two and a half years later for over $65. So we made it. We doubled people's money in a very short period of time. I would have kept the asset because it was just such a good boned. Besides the soils issue, it was just well located in a good area and still had a lot more to give. So that was one example that we did phenomenally well on in in recent times.
Brad Larsen: That's good stuff. Everyone likes to hear that because the the value add is a thing. People always say, Go in and you make it better and then you flip it. Well, that's what you did. And so that's really neat to hear because you weren't bragging. You weren't like, Oh, you know, I made 437% on their return. You know, it was it was you're very conservative in your numbers. And I'm sure when you get down to like the the actual written, this is what we did. This is where we started. You know, the numbers, they turn out pretty, pretty good I'm imagining, because just in here in the double the sales price, I mean, jeez, that was fantastic.
Reed Goossens: Yeah. No. And we're always a group that says that we're going to try and double people's money in a 5 to 7 year time period. If we do that quicker, that's just gravy. And that was what was a deal that we did that in. I think less than 36 months we doubled people's money. That's that's that's a very outlier. But but middle of the road is, you know, 5 to 7 years. We double people's money, we buy it and double it and get move on down the road. So, yeah.
Brad Larsen: Pull your crystal ball out. Are you ready for this? So do you see multifamily syndications gaining in popularity and traction, staying the same or waning.
Reed Goossens: I think. It's a very good question if I gunned ahead. I don't think it's going to the rate of popularity won't get won't continue what we've seen over the last 5 to 6 years. I think it's just more going to plateau. I don't think it's going to lose popularity because, again, the fundamentals of multifamily real estate are there. It's affordable. People need shelter. We've seen that through COVID. Shelter and food are the two most important things. So if you compare it to other asset classes, self storage, retail, hotels, it's it is the belle of the ball in terms of how well it performed during COVID. But but moving forward, we've also seen a crazy amount of money into the space, which is compressed cap rates ridiculously. And now pricing of some multifamily is really like, oof, it takes you know, you've got to take a shot of whiskey to to sort of swallow that. So I don't know if but but at the same time, rents have also gone up, right. And continue to go up. So do I see rents coming down 40%? No. So do I see multifamily prices coming down 40%? No, they may they may soften a little bit, may plateau. But but in general, I don't I see the fundamentals of multifamily real estate being extremely strong because, you know, just the need for affordable housing is still it's an ever growing issue across every single city in the United States and around the globe. So there's not there's not been one time in history where everyone's whingeing and moaning about about affordability of housing. So, you know, you sort of point to me somewhere in history where everyone's like, oh, affordability, affordability is not issue. We're going to continue to have that moving forward. And you know, with with the rising inflation issues and cost of living and the cost of going out and buying a new house with interest rates being at five, seven, 5 to 6, 7%. Yeah, not many people are getting into new houses, so thus people are then renting for longer. So yeah.
Brad Larsen: Yeah. Follow the the follow the population as they say. So where the people are going, that's where the multi families are going to be needed. And I agree with all your points, especially the cap rates being compressed. Just because the prices are raising, rents are not going to go down. And what we're going to see more of is more of a renters type of a nation where it's it's a thing. I mean, people as you get into these apartment complexes, I think a lot of people are looking for amenities. And that's one of the big things they're looking for in renting any sort of space, no matter what it is, single family, multifamily, whatever it is, if you have a gym and a dry cleaning and a restaurant and a coffee place and a dog park and all the other stuff, a pool, you know, why go anywhere else? Why get in your car and go drive to a gym? Why get in and go to a pool somewhere? You know, you have your dog right there. Everything right there. Amenities. You get it. I mean, I could talk on about it, but that's really what's going to make people like apartment complexes, because your competition in the apartment world is actually the single family home world. We are sort of competing, but we're sort of not. It's a different animal altogether. You know, our applications are 5 to 10 per home that we advertise.
Brad Larsen: So they're clearly very popular. But I do think there's there's the amenities are dragging people your way. Now, here's one thing we've always said. We always want to thank the multifamily sector because you end up training our tenants, right? And so what I mean by that is the tenants that come in and rent from you guys in a multifamily world, they've been trained to pay for this fee, they pay for that fee, they pay for the other fee. And so when we put our lease requirements in front of them, they're like, Oh yeah, I'm already used to doing that. Marty. I've seen this before. This is not a new thing. My apartment complexes already did that. They charge me a pet fee, they charge whatever. And so a lot of times I tell people, if you want to understand where the fee bases are, where the base of our fees come from, all of it's coming from the multifamily. We are five, ten years behind what y'all are doing and we're starting to see that now. In one specific example I'll give you and that we've talked a lot about this in this podcast is the fee in lieu of a security deposit. So we're seeing more and more tenants opt out of a large security deposit in lieu of a fee. Let's do some math. Would you rather pay 3000 right now as a security deposit, or would you rather pay ten bucks a month? You know, everyone's going to say I'll pay ten bucks a month or whatever that number is.
Brad Larsen: All right. Those are just example numbers out of my thin air. But if that's what you guys have started to train them more and more on. And so not moron not they're not morons you've been you've been training them more to deal with is that they're used to seeing that come in. Yeah. They come into our leasing system and they're like, hey, we offer this fee instead of a security deposit. We hate security deposits. Right? Honestly, I'm sure you do, too, because they're just full of legal landmines. And so long story short on that whole comment is appreciate you guys training our tenants. They come to us as they start to graduate bigger and bigger, because naturally, if you're in a one bedroom or two bedroom and you start having kids and dogs and multiple cars, they're like, Well, it's time to get a house. You know, we have more employment, more in. Let's go get a single family home. They look to buy it. And the buy, it's like, Oh, my God, are you kidding me? You know, I can't buy it. Or they're moving to a new market and there's time to graduate and they look to single family homes. So anyway, that's just a long story on that side. No.
Reed Goossens: One of the things I'll add to that is, is just before we end here is one of the best things I like about buying certain multifamily is that multifamily I don't have not all across all my whole portfolios like this, but we do have a couple of select assets. The one that I mentioned in Austin that that sold for a great multiple, that asset was the majority of the people who are leaving that asset were leaving to go buy homes. And so they were breaking their lease and they were paying the lease breakage fee. And it wasn't just delinquency because they were going off to buy a new home. And as an owner, I'm like, I want to be that last step before you go off and buy a home, because I know people are going to then come back through the door because they want to take your spot, because we're either in a good location or whatever we have, we have the nice amenities or whatever that might be. So yeah, it's a good spot to be in just before they go off and come knocking on your door and say, Hey, I want to start renting a single family property from from you guys.
Brad Larsen: So we all work well together and I think the investment opportunity of multifamily is still strong. I do think that's a great way for for residential. Here we are, property management, residential property management, third party managers and we are also advisors. And so it's okay to advise them to say, you know what, you may want to take a bit of your nest egg and go look at a syndication and look at other syndication opportunities out there. Now we're seeing that come into our space a little bit. With single family. It's not as much. It's just really kind of muddy and complicated, and I've gone full circle doing the research on it, and it's just really kind of weird. I mean, the single family to try and package ten or 20 or 50 of those together and make a.
Reed Goossens: Syndication is.
Brad Larsen: Difficult.
Reed Goossens: Right? It's very hard to scale.
Brad Larsen: It's very hard to scale.
Reed Goossens: And that's why it's so popular in the multifamily, because we can go buy 200 units at once, trying to go buy 200 houses. It's it's completely different.
Brad Larsen: So yeah, Yeah, it is. And it's very muddy. It's just not as clean. And so, you know, I've been working with some syndicators here in our space, AJ and Chris Shephard, and they've been doing this at the multifamily level and they operate a single family residential property management company, and they do a lot of investment in that space, but they're also very, very good at the multifamily space, not near, as you know, into it as you are potentially because your website is fantastic. ReedGoossens.com. Definitely encourage everybody go check you out there because you have books, you have podcasts to listen to. You can learn about that and then you can also get in touch with Reed about getting involved with some of his investment. So that was your own commercial? I just did it for you. I did your whole pitch for you right there. Reeduses.com. Anything you want to say as we close this out?
Reed Goossens: No. Look, I think the only big thing is for those listeners who are in the property management space, you know, understanding your client's needs is really, really important as, as sitting on the other side of the fence. We understand how important you guys are to us. So investing in, in your back end, investing in your systems, investing in good people will only help, you know, futureproof your property management business as a third party fee based business in the future to then keep attracting more and more. Because if you do a really good job at property management, you you'll have people knocking around the door as clients to come who want to manage. They want you to manage for them because no one ever wants to manage people. It's as I said, it's a thankless game. So thank you for everyone that all you all you do out there and go in and get rough and tumble with our with our tenants and make sure they pay on time every month. So yeah.
Brad Larsen: Read really cool conversation. Thanks again for coming on today. Look forward to seeing you in the future.
Reed Goossens: Be well.
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