Transcript for “Investing in Multifamily and Asset Management with Gary Lipsky | The Real Estate Investing Club #22”
Gabriel Petersen 0:02
All right, we are live. Gary, thank you for joining us today. How you doing? Great. Thanks for having me, Gabe. Absolutely. Why don’t you get started tell us you know who you are, where you’re from and how you got started in real estate in the first place.
Gary Lipsky 0:17
Yeah, I grew up in New Jersey been out here in LA 20 plus years, I’ve always been an entrepreneur, even as a young child, so I knew how to run businesses, obviously. And when I started out, I didn’t know how to do it well, but over time you learn from from mistakes and gaining mentors and that really served me well when I got into real estate full time. You know, I started investing 2002 just with my value, add single family homes that I own and then kind of upgraded and turn into a rentals and then started investing in multifamily. And then I found out that was kind of my true calling because I knew how to run businesses and that’s that’s almost I found the is about it’s like almost like a mini franchise each. Each property you own, you know is run by a third party property management company, you ask them manage it, but you know, you can you can have many of these, if you if you could build up to it. Nice. That’s great. So
Gabriel Petersen 1:18
you got started in single family way back when 2002 you know, on the upswing from the previous, the previous growth period and then sounds like you probably went through 2008. And you went from the single family into multifamily. And since then you’ve been you’ve been, you know, going straight to the to the multifamily and haven’t looked back since. Is that about right?
Gary Lipsky 1:44
Yeah, yeah. So I started investing in other people’s deals first. So I can learn what they’re doing right what they’re doing wrong. And as I was, you know, gaining more education myself. So once I did that, I felt comfortable then I started doing it doing it on my own. And then I started partnering up and now that was a big piece of rocket fuel for me because as an entrepreneur, you find partners but you you want to keep it your yourself. And so once I I realized, real estate is a team and you know, we partnered up we took down a $1.7 million deal and then we expanded our team and took down a $15 million deal, we wouldn’t have done it if it was just if it was just by myself or if it was just one of the partners. So team is so important in real estate.
Gabriel Petersen 2:34
Nice, I love it. I want to kind of unpack that as we go forward. But before we do that, I like starting out just to really understand what it is you do today in the in the modern day. So kind of take us through I mean, you’ve already mentioned asset management, multifamily kind of take us through what your business is like today. I’m what the bread and butter is.
Gary Lipsky 2:55
You have value add C Class B minus one Focus on Phoenix and Tucson. And you know, I have some investments in in California and Texas as well. But the markets that we’re doing multifamily is that area so that we’re not doing the shotgun approach where, you know, we know a little bit about all the different markets, we’d rather be an expert in a couple different markets. And that’s not to say we won’t do a deal somewhere else.
Unknown Speaker 3:25
Gary Lipsky 3:27
partner up with someone that really knows that that market.
Gabriel Petersen 3:31
Gotcha. So how did you how did you kind of come to decide on Phoenix and Tucson?
Gary Lipsky 3:37
A lot of reasons. One, it’s the population growth and job growth has been phenomenal. And Phoenix, particularly and in Tucson as well. Really became they change that whole market after 2008 when when when the downturn hit they they took a dump and and they they’re very business friendly. A lot of tech companies have been moving there, a lot of people from the west coast are moving there because you know, it’s cheaper to live there. Again, the business friendly environment. So there’s a huge migration huge migration to the to those areas. So and for us, it’s it’s close to get to as well so we drive it’s five hours if we take a flight, it’s like an hour so we love that market. Very similar to the DFW area which has been which has been booming as well but for us we can we can get to Phoenix and Tucson a lot easier. And a lot less players in Tucson as well.
Gabriel Petersen 4:43
Makes sense. So you mentioned that you guys focus on see class value add so so you’re in the the lower socio economic areas and you’re looking for properties that are that need some love. Right? Is that
Gary Lipsky 4:59
Yeah, absolutely. If we’re if, you know, I see a prospective for a property that looks pretty nice, I’m like not not for us. We want to do that value as we could boost the returns for our investors. Yeah, yeah, we’ll look at we’ll look at some big B class as well. But we want to make sure all you know all the trends are going up. So that C class neighborhood, you know, hopefully will be a B class in a few years. We’re looking for declining crime, population growth, job growth, and then that sub market because it’s so important, you know, Phoenix is, you know, huge. So you really got to look at the the sub market, one of the tools we like to use is neighborhood Scout, so we can, we can zero in on, you know, a pretty small radius and see what’s going on there.
Gabriel Petersen 5:50
Awesome. I love it. I kind of want to unpack that just a little bit. I mean, you already mentioned one tool, neighborhood scout. I use that myself, but I I’ve struggled to kind of identify trends. So you mentioned trends, like you’re looking for, you know, kind of a lower end neighborhood, but you want it to be trending upwards. So how is it that you go about figuring out which areas you know which areas that are lower class now will in the future be? You know, more be area?
Gary Lipsky 6:21
Yeah, so, so part of that is in neighborhood Scout, they’ll have some ratings, but it’s not you know, the end all be all like anything, you know, because sometimes they’ll have stuff that they might not rate as well, but when we’re looking elsewhere, and all the other facts, we feel like it is a it is a an uprising there, but so we’ll look at our surrounding there too. So our last property, called the Casa and Phoenix is pretty close to Tempe and Scottsdale and as those prices rise, people getting pushed out and getting pushed to where you know, where not too far from They’re and they’ll be moving into our area. And so that’s part statistics that are talking to the property management. That’s part of us doing the comps as well. And seeing, you know, if you go, you know, two miles that way, it’s the rents are 1800, then you come, come, you know, maybe a mile and it’s 1600, then you come to us and it’s 1200. Well, maybe we could be at 1400. You know, we also look at what’s developing in the area. So we have a charter school getting built pretty much right across the street from our building, which is fantastic. There’s a new development, massive development, I think it’s going to be a data center right down the street. Another property It was a b b plus, just sold for 50%, more than what we paid for our property as well. So you have to look at these things and and pull them all together. So it’s not one one resource but when When you do your homework, you’ll it’s not foolproof, obviously, but it helps paint a picture for you.
Gabriel Petersen 8:07
Nice. No, I like it, I like it. So kind of summarize what you just said. So when you when you’re kind of trying to identify an area that is currently lower lower class and you want and you’re trying to identify the ones that are going to be moving into a, you know, a better status economically. So you look at current developments going on in the area, and you’re looking for areas that are next to more high value areas themselves. And then you look at the comps and the neighborhood scout as well, in addition to you know, just kind of the speaking with people in the area speaking with the property managers, things like that, that summon up pretty well.
Gary Lipsky 8:44
Yeah, absolutely. And you can’t do that unless you’re you’re, you’re visiting these properties all the time. You can’t be an expert in everything. So we’re there all the time, looking at it, different properties, seeing all the trends, and that’s the only way you can Can you put yourself in the best position for this?
Gabriel Petersen 9:03
I love it. And that’s, I mean, that’s a big reason why people, people find more success when they’re investing in the place they live because they know it more than if they were investing out of state. So I love that. So kind of take going back to your business itself. You’ve kind of gone over how you identify the location. So how do you actually find the property itself? I mean, when it comes to investing, the first stage is just finding the property and it’s oftentimes the hardest one. How do you go about finding those properties?
Unknown Speaker 9:35
relationships, relationships, relationships
Unknown Speaker 9:37
now you’ve got
Gary Lipsky 9:40
you know, emails are great to start off with a broker phone calls are better and then in person is even better. You know, having a coffee going to lunch, having a beer is even better. If you could spend some time Well, we sometimes we’ll have looked at properties that we really don’t have interest in buying quite honestly but if We can get a little time with a broker, it’s worth it. And and you tell them the things that the property is that you’re most interested in, and that you can close and you try to sell yourself a little bit, you know, not not too much, but you’re building a relationship, you’re finding out what that person likes to do. And so, you know, you use that in your next conversation. So it’s, you’ve got to build that relationship with it with the brokers. You know, there’s a lot of people that are hustling for deals, so you’ve got to find a way to separate yourself somehow.
Gabriel Petersen 10:32
Nice, I like it. And you are, I mean, you’re not the first person that said relationships is one of their, their, you know, their main ways of attracting, attracting new deals. And so it sounds like I mean, obviously, real estate is a very relationship centric business. So you got to get out there you got to meet with brokers. And it sounds like it’s no different in the in the multifamily area as well. So I want to move on just a little bit here. And and I know You’re talking about multifamily. This is your your main bread and butter. But I also know you do meetups as part of it sounds like your relationship strategy. How did you get started with meetups? And if somebody were to well first what what have you kind of found has been the benefit of being the meetup organizer. And then if someone were to were to want to actually start up their own meetup what would you what you know, pieces of advice would you give them?
Gary Lipsky 11:28
Yeah, you know, starting a meetup gives you a platform to build your brand and it gives you an opportunity to kind of talk about what you’re doing. So it’s really important. It’s a slow build, it’s not like I mean, we were lucky we start off with probably close to like 40 people the first time but because we were we joined MFM multifamily masters which we had a few in LA so it was an LA is huge. So it was, it was a it was a good way to get us going. And obviously the little over a year ago, but man, I think there’s been double the amount of meetups since then. Yeah. So it definitely gets saturated fast but, but having a platform bringing on experts, you know, I’m not doing it all myself. So I’ve brought on lenders and legal and people that do self directed IRAs, and we talk about underwriting. So you’re educating people, they trust you and they start investing in your deals, quite honestly. But you have to provide value it’s not it’s not a take, it’s a give and then you know, maybe they introduce you to someone that
knows of a property or wants to invest or whatever, but you got to add value.
You know, and just just start, you know, just say you’re gonna do it and do it and put some time it doesn’t have to be so overwhelming and time but you have to be consistent. You You’ve got to stick to one date every month. You can’t keep moving around the location, although we’ve, we’ve had to do that sometimes, unfortunately, but but you’ve got to be consistent. And obviously now with COVID, we’ve gone virtual. So we’ve just combined our meetup. So I run a downtown LA and also a phoenix one because we’re there all the time. And then my business partner, Kyle runs along beach one in Phoenix with me. So we just combined the three and been having a super meetup every month of late. So that’s been a lot of fun and trying to make it as interactive as possible. So we’ll do big breakout rooms and whatnot. So there’s there’s networking involved as well. That’s really important to any meetup as having that networking component.
Gabriel Petersen 13:44
Yeah, absolutely. I’ve I used to go to a media pretty religiously and I got a lot from it. I’m sure the host got a lot from it as well. And and it was, you know, I started when I was relatively new and investing and so just hearing from the people standing up giving their spiel on how they got started what you know the deals they’re doing. It really helped me out as well. So I, you know, I appreciate the people that put on meetups, from the outside looking in. It looks like a lot of work. So I applaud you for that.
Gary Lipsky 14:17
And that’s how I also found my business partner, Kyle Mitchell, a little over a year and a half ago, we were attending the same meetup. I’m going to Phoenix he said he was going to Phoenix. It’s pretty boring driving out yourself. So let’s go together and and, you know, during these, you know, 1617 hour days of driving out there touring and driving back, you know, you develop a relationship and, and said, hey, let’s start doing deals together. You know, so, you you find a lot of great contacts at meetups.
Unknown Speaker 14:46
I love it. I love it.
Gabriel Petersen 14:49
All right. So I want to kind of shift gears just a little bit. We’ve talked about meetups, you’ve talked about your multifamily business. So you also you you put you’re putting on a virtual Asset Management summit tell us just a little bit about that you know what what can people expect in that in that summit itself? And And who is this for like asset management is it’s different from people who just want to invest in in single family it’s more focused on you know, the business of real estate and so kind of kind of give us an overview of what that is
Gary Lipsky 15:22
yeah there’s there’s a lot of gurus out there and educational
programs out there that that get you to your first deal but there’s not much out there if any that really okay once you’ve got that deal, what do you do next? And you know, we you know, con i had that business experience and we felt very comfortable but Heck, we’d like to learn more, you know, we want to teach others how to be successful because we see other asset managers flounder at during this time you know, they it’s all the work it doesn’t you don’t start paying attention now when things go on. Go back and certainly it was easy to make a lot of money in the last, you know, 510 years but but going forward, you know, cap rates are shrinking. What do you what do you need to do and that’s why we started this summit and we have a ton of great speakers from Neil Ba, Brad some rock, Joe fairless, Brian chavis, Michael Becker and and the list goes on. So a wide range of topics and we want to educate those that are interested in being you know, expert asset managers.
Gabriel Petersen 16:34
I love it. I love it. So kind of tell tell take us into Asset Management itself. if somebody were to want to buy a multifamily, you know, 10 plus units, I guess 10 is kind of on the low side, but you know, a large multifamily asset, what are what are the keys just I know this is a very deep topic, but if you were just to kind of summarize it in you know, the the top five takeaways are really important when it comes to managing a large asset. What would those be?
Gary Lipsky 17:05
Well, you’ve got to set up your key performance indicators, KPIs so because you’ve got to measure the success of the property each month, you want to have more net operating income than the month before. For the most part, you know, in the beginning you have your value add, will always underwrite the, we’re gonna take a dip in the first couple months could be the first year we go, our income backtracks from the previous 12. Because you know, where we’re renovating, we’re gonna have more vacancy, but you’ve got to you got to track that you’ve got to track all your expenses and making making sure on a month to month basis that you don’t have any drastic spikes. You know, well, you know, if you’re using a third party property management company, you know, just because there are the expert doesn’t mean they’re not going to make a mistake and you have to stay on top of it. I mean, we’ve seen charges to our property that weren’t ours and We really liked them. And, you know, mistakes do happen. They’re managing a lot of properties. So you got to measure everything. You’ve got to, you know, just because you have a business plan, you’ve got to stay on top of it all the time and potentially pivot and we’ve, we’ve pivoted off of our plan a little bit, we had a backsplash $500 that we would do. We backed off of that because we thought we didn’t really have to go to that level for the renovation. So you’re you’re constantly watching what’s working, checking out the comps and manipulating that along as you go. And then you you have to continue the conversation with a broker where where is the market has a market skyrocketed so on one of our other properties we were working on our disposition only six months into our our purchase because the property was doing phenomenal. So you know, we met with the broker and said, Hey, you know, we bought at 39 Thousand our net operating income is through the roof, we keep raising rents we did our value added plan, you know, so we started implementing a higher end renovation because you’re gonna want to create that value add opportunity for the for the next buyer so you’re constantly monitoring everything along the way maybe you’re helping with the marketing as well you’re not it just because you have a property doesn’t mean Oh, it’s all done and that’s great. I could sit back and relax. A lot of people do that. And you know if that’s good for them, that’s fine, but we’re for us. We want to maximize our revenue maximize the return for our investors. And you know that that’s that is his strong asset managing.
Gabriel Petersen 19:48
I love it. I love it. I mean, it sounds like I think you’re definitely right. A lot of people will buy multifamily and just kind of let it go. But that’s not looking at it as a business. It’s just looking at it as a structure. So Asset Management really at its core is running it as a business. You mentioned you have to track KPIs and pivot when things don’t go as planned. So I like those two KPIs are definitely a hard thing to identify and but super necessary when it comes to figuring out how your business is actually performing. So I love it. So I’m going to pivot one more time here. We’ve talked about, you know, what you’re doing out there in the field. Now, I want to hear a little bit about his stories that you’ve already been through. We all know real estate, it’s a roller coaster, you got your ups, you got your downs, both emotionally and financially. Um, so kind of tell it take us to a low point that you’ve had in real estate, and tell us you know, what was the main lesson that you learned from that one?
Gary Lipsky 20:46
Yeah, I’ll take you through the last deal. Because, you know, we went from a $1.7 million deal to a little over 15 million and I mean, that’s, that’s a huge jump. Cheese. Yeah. So but you’ve got to be You’ve got to be optimistic, you’ve got to be persistent because there are many times along the way that the deal could have fell apart. So we First off, we worked on an lmia and got it done. And
we got the contract
A week later, it was completely different than the lie and we’re like, what the heck is going on here? So we call the broker and you know, and asked him to like, work with the seller and their lawyer because they’re obviously not talking and we thought maybe the deal was done. We were We were really shocked. But finally, we got to where we basically were took probably two weeks to do that. Usually you can get a contract done within a week because the Li is basically the contract.
Then when we did our due diligence there was
they had been stuffing tenants and there’s a lot of some of the things didn’t match up, right. And again, you know, we went back to the cell said hey you know you know based on some of these things that we uncovered it’s really it’s not the deal that we expected you know in order to move forward we need to be at this this price and again we thought the deal was done because they didn’t want to budge and then finally we found a middle ground so you you you’ve got to throw emotion out of it you know you’ve gotta stay even keel and and for us we obviously we wanted to deal with it be a big jump for us but not at the risk to our investors not at you know how to make sense. So you just you got to you got to keep it cool. You got to be optimistic and keep keep grinding away every every day and if it was going to be another deal so so be it but
Unknown Speaker 22:52
you know, you
Gary Lipsky 22:54
highs and lows and you got to try to stay as much as
Gabriel Petersen 22:57
you can in that middle. I like it all I can see you got into a deal you you’ve already created your letter of intent. And, you know, you thought you had you thought you had you thought that both of you guys were on the same page. Turns out that was not the case. And so you you just had to keep pushing through multiple things happened, it turns out that you know, it wasn’t, you know, lining up. So the lesson was, keep pushing through keep keep being persistent. It’s never gonna and I know this for myself, it is never, I don’t think I’ve ever just had a deal happen where it was exactly what it appeared on, on the surface level. So I mean, that is that’s great advice in and of itself is just do your due diligence and pivot when when you know, things come up, because they will. It’s never, it’s never going to be exactly what you think it is. So I like it. Great. So that that’s the trough. You You know, you just had a deal. That was kind of it wasn’t what you expected. So now take us to the peak. Why are you still in real Why do you love it? What gets you out of bed?
Gary Lipsky 24:04
action, I love helping others. Make Money build wealth.
It’s creative, it’s business. It’s it’s working together with other people to solve problems. It’s, it’s improving communities. There’s so many things involved in real estate is it’s it’s never a dull moment. It’s a lot of fun. And I love looking at something and kind of figuring out okay, what, what are we going to create out of this and it’s never smooth.
But, you know, that makes that makes it interesting.
Gabriel Petersen 24:45
All right, I love it. Alright, so shifting gears one last time, we do try to keep these in about 30 minutes. So we’re running up to the end here. So going back to yourself back in 2002. You know, the Gary, that was just starting out. And kind of take us back to if you were to go back to that, that version of you and give that person one piece of advice going forward in real estate, what would that one piece of advice be?
Unknown Speaker 25:11
Find a mentor. You know, I waited
Gary Lipsky 25:17
a really long time to find a mentor.
And being around like minded individuals, because that that gave me rocket fuel. You know, talking, learning, seeing what other people were doing. If I started then,
man, my net worth would be
probably four times as high as it is now. So don’t be afraid to start getting mentor start, you know, getting involved in meetups or conferences or whatnot. Be around like minded people.
Gabriel Petersen 25:46
I like it. And I mean, this is a plug for you, I guess. But meetups, I can attest that meetups are a great way to find mentors. So if that is something that that you know, in your current real estate journey that you’re looking for, definitely go to meetup. in your area you’ll be able to you know connect with somebody that will kind of show you the ropes there. So Gary thank you very much for coming on I can I know that I can speak for everybody listening and watching that we appreciate you sharing your knowledge here if someone you know we all need things so if someone were to bring you something What would you want them to bring you?
Gary Lipsky 26:21
Yeah, they have a great deal I mean Oh, but you’ve got to underwrite it people send me deals before and they have no idea what you know, like they haven’t underwritten it or anything. Or if they want to invest shoot shoot me an email I can be reached at G litski. Li p sky at abt Capital Group comm and our website for the virtual Asset Management summit is Ms. summit.com.
Gabriel Petersen 26:49
Is it a ms summit 2020 dot com correct?
Unknown Speaker 26:52
Gabriel Petersen 26:54
Perfect. And that was the next question is how people can get in contact with you. So everybody listening watching, you just heard his Email, you can reach him there, or I will put his LinkedIn in the show notes here. If anybody listening wants to get involved with the asset management summit that him and his partner Kyle are putting on who we had on the show just a couple weeks ago. Check out a ms summit 2020 dot com. And and you can check it out there. So yeah, Gary, thank you very much and for everybody listening watching, thank you for sticking around, and we look forward to seeing you on the next episode.
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