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The Real Estate Mastermind Podcast with Steve Olson

Steve Olson Joins the Real Estate Mastermind Podcast

market research podcast episodes Aug 31, 2020

FIG's Director of Sales, Steve Olson joins the Real Estate Mastermind podcast to discuss the sweet spot of multifamily investing that is the fourplex. We're grateful for the opportunity to chat with both Jay Tenenbaum and Seti Gershberg with Scottsdale Real Estate Investments (more info on them below).

Here's the intro to the episode as given by the Real Estate Mastermind Podcast:

"Four times the rent with fourplexes is just the beginning when it comes to investing in Quads. Steve Olson, VP of Sales for FIG the Fourplex investment Group explains how passive investors can take advantage of superior returns in a turnkey solution real estate investment solution.

There's a reason why FIG's new construction fourplex is a go-to investment vehicle. The Fourplex offers the Best of Both Worlds between single-family and multifamily with Access to Conventional Loans, Long-Term Equity, Multiple Streams of Income, Recession-Resistant, and Less Vacancy. For the investor, FIG provides the product, construction, financing, and professional management. Since 2013, the FIG companies have built over 4,000 doors, providing investors with over $500M in cash-flowing properties."

About the Real Estate Mastermind "Live"

The Real Estate Mastermind is a podcast for investors who want to raise more capital and close bigger deals. Whether you are just getting started in wholesaling or fix & flipping or have over 1,000 rental units our show will entertain, educate, make you laugh, and provide value.

Hosts Seti Gershberg and Jay Tenenbaum cover all aspects of real estate investing from developing raw land to building skyscrapers and everything in between. Each week we cover specific deals, discuss the real estate economy, and interview an accomplished industry leader. Learn the tips and tricks of the pros and apply that knowledge to your own real estate investing success.

More by the Real Estate Mastermind: Watch Here

Transcription of Phenomenal Fourplexes Have It All for Investors...

(transcription software had an error and wouldn't distinguish speakers. Sorry for the inconvenience to those who aren't able to watch the podcast episode above.)

Welcome to The Real Estate mastermind, a podcast for investors who want to raise more capital and close bigger deals. Each week we interview the real estate industry's top players who share their insight into profit-making strategies that generate passive income, capital appreciation, and wealth. Go to art, our sponsor, and discover how to slice and dice and analyze your investments. raising capital, tracking performance, and managing investors have never been easier.

All right, everyone. Hey, it's a great day. It's a hot day out here in Phoenix but it's cooling off a little bit and Welcome to the Real Estate mastermind live. I'm here with my co-host Jay Tenenbaum. And Jay and I have a company called Scottsdale Real Estate Investments.

That's our primary business. So we are real estate investors and we'd like to talk to real estate investors. on this show. We are a live format and we cover a variety of topics, everything from wholesaling to hotels, fixing flips, notes, and rent single-family rentals, you know, you name it, we talk about it. What do you have to say, Jay? Good afternoon, everybody and welcomes to our mastermind, to our real estate mastermind podcast. love to have you glad you're here. I'm so just another day, you know, we're not in New Orleans where hurricane Marco may be disrupting life a little bit. We're just here in the desert where it's, you know, 100 and some degrees and that's what we expect here in August. Yeah, I woke up to a panicky email from my father who is telling me Do we have insurance on our two properties out there in New Orleans? Yes, we do.

Cover hurricanes confirming our with our insurance carrier but it is maybe another exit strategy we always talk about. Alright, can we reduce our deductible on the fly?

No lease for a couple of weeks. In fact, because Marco is looming

our realtor down there was they had the conversation this morning. So a realtor says when hurricanes are looming, the carrier's shut down the ability to get hurricane insurance. So right now, you could not buy hurricane insurance today in that area if you even like to. Alright, well, I'm glad we recovered on that. That's great to hear. So let's talk a little bit about

one deal that we've got going on now. Jay.

Which one do you want to talk about? What Shawshank Redemption Oh yeah, The Shawshank Redemption. That's right. This is a great one.

But I'm bummed what, where where is this thing located? Terre Haute, Indiana. Yeah, how do you pronounce that right by the way, terrible anyone who lives there terror Whoa, okay.

That's what I call a hot or hot but I guess Terre Haute. Alright, sounds good. So. So yeah, this property when we zoomed in actually said we zoomed out, right. So like we first say hello. And you look at the address and you're like, Oh, this is a little tiny neighborhood here and you zoom out and zoom out. And, you know, we always like to look for a stable economy, right and stable employers. So this was interesting when we zoomed out, what do we find? We found is right across a huge field from from the State President. Right, exactly. So is that good? I think so. Well, it's not saying quitting or Alcatraz. So it's good because it's not like high profile murderers. It's just this normal state prison, probably, you know, three Hots and a cot is better than some, but it's in an area of that little pocket area that I think is conducive for where the warden probably already lived.

or senior guards or you know it stable workforce. I mean, look, a prison, you can have your own idea of what a prison is, but prison think about as just another factory, right? Employees' jobs, jobs in areas drives up real estate values, it maintains real estate values. That's all it's all about. And if you want to live five minutes away from work, it's an ideal situation. So we're not actually buying the property on this, right?

Correct. We're buying the mortgage note on the property. It's vacant, so it'll be quick actually may be a CFD term, proper term, possession of a real quick, which be great. And then just different exit acquisition strategy. Right. So it's just for our listeners, it's a three-bedroom, two baths 1400 and 98 square feet. And there are you know, pictures that you can look in on zoom. Apparently the last person to live there moved in about three years ago. So there's still pictures up there and

It looks like it's right out of the early 1970s and hasn't been updated since then. So, you know, if we put a what, $30 per square foot rehab on there 1500 square feet, we're talking What? 45 50,000 for rehab.

Probably a little less than that. I mean, I don't think the area may not support 50 grand, but am I? Yeah, okay. So we do that and then you know, how do we know what it's worth after that? Well, we took a look at the comps and we found a house right down the road, probably about two miles away. It's a little bit rural, but it is the same three bedrooms two bath ranch. The one we have is wood. I think this one might be brick, but that one seemed to be you know, not like super fancy rehab but in pretty nice shape with new carpet and paint. All that and I believe it was selling for or sold for about $150,000.

So I see some profit in this one. Right? And we can pick this baby up for 15 grand. So 15 $16,000 Yeah, not so bad, right every once in a while you come around with some of those. So so the first thing we do, obviously is we want to confirm that calm so this is us doing comms remotely, which we're pretty good at. But you know, next step is to get that realtor out there and, and see what they say.

Right? Here we go.

Alright, well, that sounds like a good one. And I wanted to let all our guests know that today we are very excited to have Steve Olson on our call and Steve is with FIG, and he's been in the real estate game since 2002. He completed his first real estate deal while still in college and decided to pursue investing as a full-time career at that point and throughout the ups and downs of the world.

Since the early 2000s, Steve has completed a wide range of real estate transactions, including the sale of raw land, bulk foreclosure packages, so he knows something about what we were just talking about single-family flips and single-family and small multifamily rentals. So Steve is currently the Director of Sales for FIG, where he helps to conduct the initial due diligence for all FIG projects and personally invest in fourplexes himself.

Steve leads the charge on FIG promotions and regularly appears as a guest representing FIG and investment conferences, podcasts, and promotional events. So welcome, Steve.

Hey, guys, good to be here with you today.

Good to hear about a Terre Haute. I used to live in Indianapolis and you drive right through it on the 70 I think there's a federal prison there too. And you know, there's never gonna be a shortage of white-collar criminals. You're right. The demand is perpetual. So you'll always have tenants for your property there.

That could be the prison. It could be federal. I thought it made me but maybe the federal now I think that they might have one of each. But in any case, you know, unfortunately, crimes not going away. That's an industry that just keeps growing. really true. So So have you ever done any investing in India?

I own properties there. myself right now actually, the last thing I did before I got on the podcast, I'm doing a cash-out refinance on three properties in Indianapolis bottom three, four years ago, they've really done well and rocketed up in value and the rates are just too good right now. Give me the money. Right. That's what I'm thinking. So we'll get redeployed into some other assets. But it's been a good market for me. I used to live in Indianapolis. And so I know that that Metro, I'm not a total expert in it, but better than the average investor. So great, great area. Well, we talk about automation. Quick, Steve real quick. Um, in my experience, I found it

Maybe you kind of a hybrid, because when I've tried to buy to invest in Indianapolis, the vendors, contractors that are really don't want to work without state investors.

Now you list to live there. So you still get the hometown discount.

Well, the people I've used I did meet when I was there. So maybe I'm kind of a hybrid once in town now out of town investor, I think it's a matter of trust, you know, when when you show them, I'm going to do volume there. I'm good to be here. I care about the community, you get their attention, right. You know, the checks clear. Eventually, somebody is going to get on board, but I think it's more a function of they're just get inundated. You know, a lot of places have promoted the area and I think the contractors, the realtors, the managers, they get a lot of calls from out of state investors trying to bail out of the Western US and so they're probably just a little bit weary, you know, right. But once you prove yourself, I think they'd work with you.

Great, so is it Apple is still a good place to invest right now or have prices really taken off there? Well, they've really taken off but I think it's still if you look at it purely from a rent to value ratio how many dollars or rent can I get for what I buy the property for? It's pretty good. Considering it's a major Metro, obviously, there are places that are better but it's a lot better than most other Mark especially the coastal markets. Right. So yeah, I think you could do a good job there but it's a grind to get a deal I'd be my contacts on the ground.

Tell me that the sheriff sale you know, there, it's a sheriff sale because they do a judicial foreclosure. It's pretty dry. And if something does show up, it just gets bid like crazy because people are starving for the product. So you really got to beat the pavement, do your mailers do your kind of creative marketing campaigns to get these deals before they show up at the sale or as a listing from an agent.

Right, so your background is a little bit in these discounted mortgages. What did you actually do in that space? Oh, just a couple of those deals back in, you know, oh nine when you could buy a package of delinquent properties from Fannie Mae, I put a couple of those deals together.

Most of those, most of those deals you they call them, I can't remember what it stands for. They call them tapes, something about toxic assets and I forget the rest of the acronym, but are troubled assets are nontoxic.

Can you imagine? But um, anyway, you know, they would put mostly junk in those lists, and there were always a few good ones in there. And so that's at least what the deals I worked on where they didn't last very long. You know, banks got bailed out had a lot of cash didn't have to fire sell inventory for much longer and so now, you know, this image of the bank-owned property is a steal. I mean, that's kind of gone. nobody really talks about that anymore. They get just as aggressive as almost everybody else. You

did a couple of those and

yeah, we'll see if that ever I hope that never comes again, has to be a really bad market for all of us for that situation to create itself. Well, how do you see things playing out in our market right now with us getting sort of to the tail end of the bailout? Or maybe it's not the tail end? Maybe there's a, you know, a mid-game, you know, play again by the federal government with another stimulus, but you know, with so many people out of work, and so many, you know, foreclosures that are, you know, kind of looming. What are your thoughts on, you know, those turning into another 2008?

Well, yeah, I'm sure you're uniquely concerned about that. You guys are in Arizona, right. Um, that wasn't pretty. In 2008. I, I have a lot of opinions on that. I mean, when you look at Oh, wait, the driver of that was just supply and demand getting flipped.

almost overnight, massive amounts of supply, zero demand all of a sudden, right now in most metros, we don't really seem to have that problem supply is the problem. There's just not enough supply and even through COVID, the demand has been very, very strong. So when you look at this, you go How do supply and demand get turned on its head and well, we have to have a bunch of supply. So everybody looks COVID economic troubles, I can't make my mortgage, yada yada does that turn into this foreclosure tsunami? You know what, I don't think it's going to

because I remember back in 2008 when these loan modification started coming out,

you know, you you have somebody having trouble making a mortgage payment. There's this loan modification, especially with tarp back then that the government says okay, modify these loans. Nobody at the bank really knows how to do it. Right. a person is making a payment or not making a payment right hand

The bank isn't talking to the left, they thought it was fine. But no, all the banks really knew how to do was robotically move through foreclosure. That's all they could really do. And then when you talk about short sales, right, these banks hadn't seen one in so long, they got to go dig some employee out of the basement that did a short sale back in the 70s. Because nobody really knew what it was.

Well, now banks are much more capable of creative workouts. And I think it's really politically taboo to foreclose on somebody in the age of COVID, especially if that's the case. So I think there will probably be more creative workouts and things like that the banks are probably better equipped to handle a bunch of delinquent loans, and they were in 2008. And I don't think any politician wants to be the guy that turns off the spigot. Right. We've seen all this bailout money. I don't think either side is going to be the one to say no, we got to get on a budget. We got to do all this. I think they're gonna print their way out of this thing. They're gonna pay

money out. And you might see foreclosures. But I don't think that given where supply is at, it's going to be in a volume that is going to drive prices down in a meaningful way. We'll see. That's my two cents on it, though. So my two cents back in going back to 2008 2009, I was doing a lot of post-foreclosure eviction trials. And what I saw was, you know, they, they figured when the tsunami hit, the only way out was the foreclosed, foreclosed, foreclosed, and they that become became bad press and everything else, then they turned on their head to the loan mind.

And you're right, they had no idea what they were doing. And courts were starting to get backlog saying, Hey, we're not moving this case forward. Go, guys, you know, start working this out. And banks would take six months to make a decision and they say no, anyway, right. They still know what they were doing. Then they started selling off the mortgages, which loosened everything up. I read an article just the other day that you're right supply-demand is still demand, you know, supply is still short. However, in the last month or so.

listings in certain areas are starting to do to increase, not we're not in it. I'm not suggesting that any we've got, you know, turning on its head or moving the needle, but we're starting to see more supply. Right. Um, so I think the other part of it is that while that may be a good thing to put a little more supply, you know, in the mix, you really not gonna see any real fluctuation in the market until whatever is going to happen with whoever's gotten on a forbearance approval right now when that expires, and you're at, you know, someplace, you've got 120 days on those you got a year.

So we'll see what happens there. Right, I think that's going to give it the time to where it's not a complete supply shock, right, the banks have more options, they're better at working out those options. Whereas in a way, you just saw this stuff hit at once. It just because they didn't know what else to do with it. So there will undoubtedly be some foreclosures and distress sales that come from this, but I think that a lot of money is going to get passed out.

supply is already really low. I think that interest rates are going to stay really low, you do everything they can to keep that supply-demand dynamic, you know, lined up, we will see if they're successful or not. That was my prediction is that it'll be kind of half a when, when you're talking about the government in a bunch of banks, they'll screw it up somehow, but I don't think it'll be as bad as the right. Yeah, totally true. So okay, so so given that analysis, let's just go with that down the road a little bit. So, so so we don't, we won't see a potential massive flood of properties into the marketplace to somehow drive down prices. And even you know, when COVID ends and the vaccines out and people are going back to work, and people, you know, again, start getting into, you know, maybe more mobility and more homes come in the market, it's still going to keep us then, in the same situation, where we're in now, there's still going to be a supply

Demand imbalance, there are not enough homes even in that scenario to really bring down prices. And we're in a housing affordability crisis. So where unemployment is probably likely going to be high for a while. the affordability of those homes is also going to, you know, keep rising. So that being the case you guys at FIG are in a kind of unique situation now because really the only way to get out of the supply and demand imbalance is to build more property. So perhaps you could give us a little bit of an overview of what you guys are doing and how you fit into the marketplace.

Sure, yeah. We I mean, we fit we're a very specific niche. Right, I don't think it gets much more specific than what we do here. And FIG, the Fourplex Investment Group is actually five companies under one brand and we are engineered to take advantage of the fact that on your conventional loans, right, your one to four-family

loans. We think, you know, the average investor is limited 10 of those, as you know, right? It doesn't matter if you're Warren Buffett, Fannie Mae will only give you 10 residential loans. beyond that. It's commercial. So we feel like, for many investors, the best use of those loans is a four Plex you get multiple doors with a true 30 year fixed rate of interest, unlike on a commercial deal, it adjusts. Right.

So it's commercial, of course, has its tremendous advantages. But the 30-year fix is great because of something like what's happening right now. You know, uncertainty, you don't have any lease audits, you don't have any balloon payments that are coming due. So if you can make your payment, you can write out on certainty on these kinds of things. So you get a little bit of the bonus of being in the single-family world and that great financing, but you also get a little bit of the bonus of being in the commercial world where you have four tenants and one property. It's these two things, though, that have made it for plexes

Historically really expensive, it's kind of crazy what people will pay for them. If you get a broker there in Arizona to go find fourplexes on the MLS, they'll find some but you're going to be really underwhelmed by what you can get. They're going to be low cap rates, old, probably not in great neighborhoods, a ton of maintenance coming your way. And there's of course opportunity and things like that in many cases, but for a very passive investor, that's not an awesome deal. So at FIG, what we do is we put these in master-planned communities with an HOA in place to make sure that hey, investor across the street, you can't have tenants park on the lawn, you can't hang up sheets in the window, we got to preserve the value of the community maintain the roofs, keep the landscaping up, right. And then we sell these on a pre-construction basis. So we say okay, Bob, the investor or Susie, the doctor, come in with a construction loan that we set you up with you close on this four Plex lot in our

development. We build your four Plex put tenants in it. And because you went through that process, you had to wait. You closed on dirt you went through the build, we're going to give you a better price than we would if we sold it stabilized and rented on the open market. So that way investors were coming in getting a cap rate on a brand new property in the high six is usually when the market is only giving up. Low fives even high fours in some cases.

Does that make sense? Sure What markets you're in right now. We got our start in the Salt Lake City area. After that, we expanded down into Houston. So I'm watching the hurricane thing too. A little curious about that right now.

We've survived a couple of them so far. And then we also expanded into Boise, Idaho. And then how I met you guys in a roundabout way. We're just edging into the Phoenix metro now. So we've got a couple of projects over in surprise that we're working on, and then another one down in

Off 83rd and Thomas and another one down off of 35th and southern on the south side of Phoenix. So lots of offers out there moving dirt on our first project called the village on Greenway it's right there where Greenway and dice are connected on the west side. And we're excited to be in the market.

So when you guys go looking for a project, you're looking for raw land, but what sighs.

Well, the FIG conveyor belts not going to turn on for less than 100 units. Right? So we're going to be five acres minimum because we want to come in there and put up you know, 50, triplexes, something like that. So it's going to be a good amount of acreage.

So talk about the different areas you have within fix. So you say so one component of it is the homebuilding part for you're doing the fourplexes second part is loans. the third part is a property management and

I think he said there might have been another one. So the five big companies are the developer, the builder, the brokerage, the property manager, and the HOA. So an investor that interacts with fig mostly deals with the brokerage and the property manager. There's some contact with the builder team and the HOA as well. By the time an individual investor hits the picture, the developers usually kind of done their thing, right?

So we're all here located under the same roof or main offices in Utah. But it's a process that somebody who wants to be more of a passive investor, but still get kind of a little bump. Right, I call the armchair value to add. It's, you know, instead of going hiring contractors and getting a property here, you're building new but because you took on the risk of construction financing, you're getting that that bump in equity. So those are the areas that function we also do have a preferred lender that we work with. So what happens is somebody

reserves a four Plex, he'll give him he'll do a 30-year pre-qualification on them. And that's what we go to one of the local community banks or credit unions that we use in the market to get that investor approved for construction financing. And they'll bank those banks do it because they've done business with us before. And they know that the investors good for the payoff because that pre-qual is in place. And that happens on the commercial side, too. You'll get people that have maxed out their 10 loans, or maybe they want to buy like eight properties in one development, they're going to have to go commercial. So we have come out of the box options on that too.

But that's kind of an overview on the different fig components. Does that answer your question? Yeah, it does. And so give us a structure. So an investor comes to you, they're interested in investing what's the typical size of a building, typical rent, overall cost, you know, what are they making on it more or less? Yeah, it depends. You know, your cap rates north of six. Right? That's what we

We do because in the market so we operate in the neighborhoods we operate in the markets only going to give the investor a five or the high fours. So what happens though, come to us and we do a couple of floor plans. Sometimes we do townhouse-style for plexes. So if you drive through the development to you, it's going to look like go here's a bunch of townhouses, right, but those are actually planted his quad. So pick out the first four doors. That's one tax ID number, one four Plex, and an investor can close on that. And the townhouses. The smallest ones are about 1200 square feet, they got one car attached garage in the driveway, three bedrooms, two and a half baths. We have some that are almost 1800 square feet or three-story map, two-car garages, there's a mix of plans. Other times we can't get the density and we might build apartment-style. Right so look kind of a stack flat feel, but we can still plat those as for plexus. So if you drive through one of those

You're going to look at I go to an apartment community, but in reality those three units right there on top of each other, that's a triplex. The one attached to it like in the middle is another triplex. So those tend to be two bedrooms, two baths, and we always put, we'll put up a CMU, eight-foot CMU wall around the project, create a community, do a little clubhouse with the gym and a pool. We're not like class apartments, we're more of that affordable, but higher B class where you get something new, you've got some amenities, but it's three, four or 500 bucks cheaper than the really nice a class down the road. So it's a good fit for that. Those working people that need some more new and safe and clean. They don't want to live in a rundown apartment or house that they can't afford in a class building. So that comes in all those shapes and sizes I just told you about it really does depend on the market and the neighborhood.

What's the timeframe to build it to finish from when you start construction or close on your construction on so you're taking possession of the land at that point right? to one, you have a CFO and a finished ready to rent the product. The contract is for one year, we've been known to finish in nine or 10 months, that happens. Sometimes it's taken longer in the builders had to actually pay a penalty to the client, which is written into the contract. So they plan on about 12 months front to back because it's not as simple as just building a four Plex. There are other fourplexes under construction, there's the landscaping and amenities that all have to go in so that you have a rental product.

Right. And then to the developer, it you know is in play for the builder. So where were the developers doing that getting the entitlements and all that kind of stuff? That's correct negotiating for the land get taken it through the city getting entitlements done. They also install the common areas, for the most part, right they'll come in with sidewalks and landscaping and oversee all that side of it.

Good. I was gonna say, Are you doing anything interesting in terms of the build side? Any modular? Or you know, what are you doing to keep your costs and labor down on Monday? Well, we value engineer these things as much as we possibly can. You can get better bids when you go to your subs and you're going to bid out 200 doors, you're going to get them to put their best foot forward, of course, right. So there are some savings to be had there. And yeah, we get creative on our buildings, like how we value engineer those, we've looked modular, haven't gone there yet.

We've been successful with smart home technology, you know because we're you can't save on the cost of the buildings can we bring in additional income. So when we're coming in with doorbell cameras and smart locks and smart thermostats and equipping every unit with these property management charges extra for that and that makes up some of the income that you lose by what is increasingly expensive?

You know, lumber is up a lot. Just in the last couple of months costs are continuing, to rise. So, you know, I would say that talk to me in six months, we'll probably be a lot farther down the modular road at that point because this is tough, right? tenants can only absorb so much cost. Everybody just keeps passing it to the tenants.

Yeah, the ultimate consumer. That's correct. Yeah, they're, they're paying one way or the other. So on the property management side, you're you actually are hiring people. They're employees of fig. They're on site. They're doing theirs. They're showing the units to the potential renters and then they're managing the facilities. Yeah, that's right. The management company is called max property management. Right. And so they'll hire when we expand into a new market, they hire on the ground staff, for the market to be on-site at the projects. Different states have different laws as to who needs to be licensed and who doesn't when we're talking about leasing.

activities, but there'll be somebody there, they usually maintain a model unit or have a little office there to, you know, show the units and do all the marketing and it's a mixed bag. Some marketing works really good in some states, some don't work so well, like here in Utah. Technology drives all the leases in Texas, hardly at all. It's all signage. Right, that seems to get it done for us there. So it's really important to have the right people hired on the ground that can work through the local intricacies of it all. So in the umbrella of big companies, is your developer and builder in the house as well? That's correct. Okay.

And the property management is the lending side.

No, the lending is not although they do keep an office here.

You know, we shovel probably 104 Plex loans a year to those guys that are doing the take out loans on for these construction banks. So we have their attention. They keep an office here because it's a full-time job.

For a couple of people with that mortgage company, right. And with regards to you, Vegas is a four Plex is Was there any kind of thought processes, you know, tries or duplexes versus fours? I mean, you talked about, you know, for building tenants, but two and four, two and three is the same as for you sort of some lesson. Yeah, you lose a few your economies on a scale, right? Because in theory, it's a one to four-unit loan. Why not go for, but sometimes that's just not practical. Yeah. Practical. I'm making up stuff practical. All right.

But, you know, sometimes we're talking about, what if, what if the site plan allows us to put in, say, six townhouses in a row, right, we're probably going to plant that as one four Plex and one duplex. And so the duplex is great because it allows people to enter the market that couldn't have otherwise. Right. It's about half the money. So that's a good move. There. Sometimes

For example, our project and right there on dice art and Greenway near you guys, the city would only let us go three stories high. So we're triplexes because they will let us go, four flexes. So you see a little bit of mix. We've even had some bigger buildings like we've done some 20 unit apartment buildings and some of our projects. So a bigger commercial investor comes in and does that deal. So, yeah, you know, we're 80% for plexes. But there's a little bit of variety sprinkled in there too.

Do you track or even know, for example, you put an investor in, you know, they're getting into the ground floor, too little out of the ground for the dirt level. Right. But if you tractor you know, if any of you those investors have been turned around and resold the properties, oh, yeah, it happens frequently. In fact, I'm helping one do that this morning. You know, probably 10% of them come back by the time construction is done. You know, they think hey, what can I get for this thing? Now that it's built least because I've got a few other opportunities

I want to look at as well, I mean, it's long runway right plans can change. Sure. So yeah, we track it and you make money. Right? I'm not going to promise that that's always going to be the case but typically there's been a very good spread to where when we tell somebody, hey, here's what we're seeing. Here's what the demand is they go oh, yeah, I'd stopped for that. Right. Is there any secret sauce we've had some challenges in our portfolio with our duplexes or traction with their triplexes do we I don't I'm not sure we have a duplex anywhere we've been getting beat up a little bit on a pray on appraisals you know appraisal and fine on single-family duplexes. Okay, Tries Tries you try as you might it just yeah.

Yeah, tries are the hardest one out of the three right? Because it's you're much more likely to see some duplex or some four Plex comps. And yeah, this is a tricky area for us. It gets better over time. But the funny thing about duplexes tries and quads. Isn't it better wants to buy them based on the cap rate? Right, a goal. That's good. But the name for me last time a Fannie Mae appraiser cared about the cat, right? It's all comps.

That's the only language those people speak. So unless you have comps, you really got to get creative. So but what happens is, when we come in this one happened in, in Arizona, we come in with 60 triplexes. And those first few appraisals get ordered by the construction lender. Do we always get a call from an appraiser going What is going on? I just got this order, what is going on? And so we'll send them budgets and site plans and concepts and say yeah, we're from another this is what we do. Now, ultimately, we've always been able to approve to get appraisers to agree on that construction price. They look at the cost per square foot. They're usually able to back into it they might have cast a wide net right duplex triplex many months.

miles away, but they've not been able to argue with the price per square foot. So we've got there. What happens is when you come back around, and the investor does their take out loan, so maybe they paid a half a million bucks for the triplex, right.

What happens on that first resale, that first investor that says, Well, hey, based on the cap rate, this thing's worth 600. But a comp doesn't exist at 600. That's your, your Hill you got to get over. Usually, it ends up being somebody all cash like on a 1031 exchange, and that happens. And then bam, the next one's easy. And then you'll see it began to climb a little, we end up kind of creating our own market because nobody really builds this kind of product in any kind of quantity. So you got to get through it on the front end, and you got to know how to talk to these appraisers. I've had plenty of those conversations. You know, you win some you lose some but I've not had people have trouble with the construction loan. That's what most investors care about. Because once they get into that refi

And the rents are there over a couple of years the comps begin to appear. And while you've got a pretty smooth exit when that happens because you really open up beyond just the cash buyers at that point your model is really very unique.

You're not really investing with any of your investors, you're literally selling them a property, right you're selling them construction property, which they will then own. However, you're putting it in a turnkey situation where there are an HOA and a property manager and they're just collecting passive income but in effect, you you've sold them pre-construction to end product. So there's no real investment per se Have you guys as a company ever looked at the idea of let's say raising capital in a fund and just going out and being owners and operators yourself like like, why have you gone to this model with finding individual buyers as opposed to just finding investors and then owning and operating the entire community.

Well, you do what you know you do what you're good at. And this is something that has become predictable for us, we can just stamp it out and it works. We know what the end result is going to be. However, what you're saying is compelling. And we're really seriously looking at it. For example, we come across the land all the time where the city won't let us do for plexes. But we could build a 200 unit complex there. And we've got all the tools in the toolbox to do it.

So there is one in Boise, Idaho that I think we're going to do the city greenlight of the project a couple of weeks ago. So I think we are going to syndicate that raises the capital and builds it. We all buy these fourplexes in the projects, there's gonna be a couple of us in the company that saves a few for ourselves and actually close on them. But why not do it in mass? Why not do it on a bigger scale? So yeah, I agree with you. It's something that we were about ready to do but to date, you know, you're successful at what you do. You just kind of keep Put your head down and keep doing it.

So what's been the, you know, the history of the company? How did it get started? You know, what are you guys doing when you originally started? And how did it morph into what you are today? So I wasn't one of the founding members, I came around back in 2014 or so. The concept hatched in 2010. As you guys know, if you're buying land in 2010, people wanted to have you committed, right?

It was crazy land was basically free back then. But you could begin to see a slight emergence, you could realize, you know what, there's a lot of capital out there, investors that need some kind of an asset work. So our founding members figured you know what, a four Plex is pretty solid with the financing, you can get on it. Multiple tenants, why don't we go do some of that. And the first one was just a small project, and it worked well, so I'll try it again. And we're talking 1010 properties here. But then you realize this, this could be done on the scale of hundreds. I came into the picture when not only

had been, but had also been realized that it could be done on the scale of hundreds that it could be done outside of Utah. We could do this in other states. And, you know, we're primarily looking for states that are landlord-friendly, business-friendly, growing population, as Jay was talking about jobs, we want jobs in these markets. Because if there are people making a salary, they need a place to live, you can navigate through most problems that you have in real estate. So that's really how it unfolded. And so now we're in four states. And probably in a couple of years, we may look to see if we can expand into a fifth area but you got to do it slowly. There's you can research market all you want, but until you get in there and hit your head a bunch of times you don't really know what you don't know. So you got to go slow.

When you go into a new market, and we talked about how the big companies all have the builder-developer, the property management all in house, but is that in house, from Utah or is that in the house where you're building, you're hiring in

You're a new market. So the main nerve center is here in Utah where I'm at right now. For example, the property management team, all the accounting goes out of there, right? All the builders accounting and, and main headquarters is here, but you will physically hire employees that there's a satellite office in each of those markets that they operate out of.

What's when you go to a new market, I guess depends on time. When's the last market you open?

Well, we're opening Phoenix right now just starting to push and dirt as we speak.

And the hiring process was that a

good opportunity or challenge?

You know, wasn't too bad. We're able to get a really good solid

individual out of Dr. Horton, there in Phoenix. We've moved some stuff down there as well. So that's all happening. Right now. Much of the activity has been on the development and the construction side. The management team is getting its presence onto the

Now as well, but they're, they're not going to be moving and shaking for another 1012 months. But the construction team is already down there operating and hired and got an office there in Scottsdale for them. Great. Awesome. So how do you guys find your buyers? What's your marketing plan to go out and find potential buyers for your product? Well, you know, it's, it's not too difficult because I think the average investor, a four Plex resonates with them. It makes sense to the average investor. They go Yeah, I get that and that's something I want. So we have a big online presence on our website. People find it organically, right. We run some pay per click and to get some attention there we run some social media. We have partner brokerages all over the country that that deal with investors that bring us their clients that are looking for cash flow

That's working now better than it ever has because it's extremely difficult for investors to go find deals on their own. You guys are seasoned pros and it's what you do all day every day. But a busy professional I mean they don't have time to go dig and do go find this stuff so they have time to search around and to call a broker but not do it on their own. So those partnerships and then we do a little bit on the MLS and some of the national platforms like Craxi and loop net people are on there looking for assets as well but it's a lot of heavy education on the front end it's you know, it's not like a get alone close on a property it's this is how this is gonna go this is the timing This is the financing This is the management so really, we don't sell so much as we educate investors are here's what's going to happen and they can decide for themselves works or not. But like I said it's a message that resonates with the mainstream investor, a four Plex makes sense. So we capture a lot of traffic that way

Yeah, four is better than one, right? Yeah. Yeah, exactly. Excitement right away. But some of those ones are really good deals too. We but you know, we say, look, hey, you know, if you're looking at a passive portfolio, maximize those 10 conventional loans. Maybe you're in and out of some single deals here, hear him there too. But you know that in and we've really been beating the drum of two things right now. Number one, the government typed on their computer and made $3 trillion appear a couple of months ago. Okay. And that's going to affect all of us. it already is. And so we feel like if you're going to borrow fixed-rate money, a four Plex is a great way to do it because that fixed-rate money is going to cost you less and less over time, as they keep pumping money into the economy. And number two, we don't know what's going to happen in November. Well, we know it's going to be mayhem. Right. I think everybody can agree on that. But

in the new tax cuts,

And the JOBS Act, the bonus depreciation you can get on new construction has astronomical. So investors that qualify as real estate professionals and can take all that depreciation they get a ton of benefit after that as well. So we're talking about those two things. There's a ton of money out there, which means more inflation, probably somehow, someway for everybody. And, you know, does anybody really think taxes are going to stay low forever? Get some savings off of that depreciation while the getting's good.

Have you looked into when you're looking at new markets, new opportunities, more like an opportunity, looking opportunity zones? Yeah, yeah, actually, we are working on one in Provo, Utah right now. And what's really cool is most of these opportunity zone deals are fun. Somebody's got to put money into a big font. I were the only one I know of where you can get fee simple ownership of your opportunity zone asset so we're physically located in the opportunity's own

An investor who comes in closes on the dirt has a vertical budget to complete the four Plex. So they hit that requirement. Disclaimer, I'm not a CPA, you got to figure that out. But when you buy the land, you have to put into the land the same amount of improvements that you paid for the land. So our model qualifies for that.

So we have quite a few investors taking advantage of going into our project. And in Provo, we've got more land under contract and surprise that's in the opportunity zone right next to the surprise City Hall there. And then we're looking at another opportunity zone project. That's the one down off of 83rd Thomas. Bye, you guys. So yeah, yeah, we're definitely into the OCS is that at third and Thomas on the avenues are on the streets

of Western east. It's West West avenues. Yep. Okay. And then in surprise, are you guys east or west of the three or three

So we have one project right now not a nosy. That's West, right next to the new Toll Brothers, a community that's going in over there. We have another one, the one that's in dice Arden. greenways is technically an El Mirage. Although what's funny is behind it is surprise Elementary School, which is in a mirage.

It's right there across the street of surprise. But then if you go about a half-mile east of there, you're back in surprise again. And that's where we have another one under contract. That's the only deal. Over there, south of Bell, just I know exactly where you're talking. My father lives out that way. He's in Sun City West but just no matter where you're talking about so I drive up to Grand Avenue all the time. And you know, there's a Wells Fargo Wealth Advisors right there on that corner of the street is called greasewood. And Belle, you just go south and it's we're right back in there.

So you got to fig in

2014 What, what got you what brought you there?

Well, I had been working with the broker out of California. And we sold turnkey properties to investors, mostly from California, but in the Midwest, and in the south, you guys know, there's great deals to be had for somebody that's trying to get into the game or somebody that just like singles.

But I ended up meeting some of the original principles to fig and found out well they live, you know, 10 minutes away from me. So we got together and they need a little bit of help. So I thought, okay, I'll, I'll help these guys out a little bit. And within a couple of months, it was clear to me that this was more than just we're going to do some stuff together. But you know, this is going to be a run that we want to make and, and so I originally just started kind of helping out with the marketing and the sales division here in Utah and I got to put over the expansion into Texas, right and really gotten to that so now I run the sales and marketing division for fig, and we've got

Some team internally to work one on one with our investors that are purchasing. So I still do a little bit of that. I like to do it. It's fun to help investors. But yeah, that's how I got in a little bit and then all of it. So we do before that

before the turnkey properties. Yeah. Well, I did the turnkey properties for a time I had one of those home investor franchises. You saw that we buy ugly houses sides. That's a whole different conversation. But that was educational. So I did a bunch of that. I did retail real estate for a while but mostly been involved in the investment side because when I was in college, I worked for the late-night infomercial guru, Robert Allen.

Yep, yep. And I thought you know what, I had to do some real estate so I could pay for law school and eventually realized, wait, if I could really do real estate, why would I want to go to law school. So I made that connection later. And thank you.

So, now here we are. It's 2020, just like that. Sure. 18 years it's been. I spent 20 years in LA doing me babysitting hangnail employees and then became a real estate investor. So I already went to grab your book. Yeah, you're truly a recovering attorney. That's true. That's true.

It's gonna pass myself. Didn't you know, I was actually, I had been accepted to a number of different law schools and wound up getting my MBA instead.

dodged the bullet. Well, yeah. And much to the chagrin of my parents at the time, but yeah, oh, it goes. Well, it's good to be a failure, right? At least.

Failing up to the real estate.

There you go. What do you guys working on right now? What's got your attention?

Well, we've got a few things going on right now. Probably the most. Well, we've got you to know, this podcast right, which is something that we started about

Two months ago, maybe a little bit more than that, because we have a number in the can so so we have, we're playing a little bit of catch up. We're doing the new podcast each week, but we're releasing two. And I still think it's gonna take, you know, eight weeks for us to get them all out there, which has been a lot of fun. And then we're working a lot on our educational platform.

We have a lot of students part of the real estate investment community, which I know you're familiar with out here through a grant, right. Yeah, and something really exciting. We are going to alpha testing on our new software platform, which is a SaaS model for real estate investors. And it's called the REI Blade. And it helps real estate investors in six success areas of investing from acquisitions to asset management, Investor Relations, performance and analytics, sales and distribution and may be missing one in there but we're gonna

We've got a number of customers already from people who have no investments in real estate, but they're excited about, you know, getting into it. And then a company that is maybe coming in for, they've already purchased 500 doors, we have a per door price, but they're likely going up to about 1000. So it covers the whole gamut. And, you know, could even handle the reader at some point down the road. We're just not there yet.

But super excited about that. Right. Right. Right. And also, I'm very, very preliminary because Sandy has me know about it, but I got a call today from one of our mutual cohorts, 14 singles in a duplex section eight in Kansas City. Oh, nice. That sounds great. I'm gonna get ready to analyze that. Then later this week. Very good. All right. Well, um, do you have any final thoughts that you may want to share about shake that we may not have covered before we sign off here?

Uh, no, no, I we've covered a lot here. It's a great product, I buy it myself if somebody has been looking fourplexes. And they can be a little patient, we can get them an above-average deal. But let the numbers do the talking, you know, we plug existing deals into our proformas all the time for people.

And if it makes sense, we'd love to help you. But we realize that some deals are best to just let sit and do their thing. So if your listeners are looking to expand, go ahead and reach out to [email protected]. And that's about the size of it. Well, it's great to hear that you invest in your own product, because there's no easier way to sell what you do is, you know, if you're investing in it yourself, so that's really great to hear.

Jay, do you have any last words for our audience? It's just Steve, thank you so much for coming on board. It has been a very interesting and informative conversation. I love the idea. I love the business model and good luck. Can you continue success? Thanks a lot, guys. Good luck to you as well. Thanks a lot. I agree. And thanks for

Have you and for everybody out there in podcast land. It's been a pleasure having you on this podcast. Please share it out. And you have a great day. We'll see you next week.

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