Global Investors Podcast
GI7: Common Sense Multifamily Syndication Underwriting with Omar Khan
September 11, 2019
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GI7: Common Sense Multifamily Syndication Underwriting with Omar Khan

Omar Khan is a multifamily real estate syndicator based in Dallas, Texas and works with many foreign investors. He is a global citizen, having lived in Dubai, Toronto and Calgary. Previous to syndicating real estate deals he closed $3.7 billion in capital financing and merges and acquisitions transactions.

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Announcer: Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market host, Charles Carrillo combined decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now here’s your host, Charles Carrillo.

Charles: Welcome to another episode of the Global Investors Podcast. I’m your host Charles Carrillo. Today we have Omar Khan. Omar as a partner at Boardwalk Wealth and moved from Canada to Texas where he lives with his wife and son and Boardwalk Wealth connects passive investors to multifamily real estate opportunities with value added potential and works with a number of international investors. So how are you doing today, Omar?

Omar: Hey, thank you for having me. It’s a great honor and a pleasure to be here.

Charles: Well, thank you very much for being on the show. And a couple of things, when I was reading over your website and it says that you had lived in Dubai, Toronto, Calgary, Dallas.

Omar: Yeah.

Charles: You’re pretty much I mean, you’re kind of like a global citizen of working. And what was your business background prior to starting to invest in real estate?

Omar: Well, I worked in finance. I did southside equity research, m and a stuff all in on the finance side. My family’s been involved with business for a couple of generations now. So, you know, I had a lot of fit into insists growing up.

Charles: Okay. And, what was, what got you started investing in real estate? What was the transfer you into from the business into the real estate business?

Omar: Well, when I moved to the of my family owns a lot of commercial real estate, but it wasn’t like, I’m not one of those people who was ever supremely passionate about real estate. I had like, you know, I wasn’t like doing anything, be realistic, none of that. I moved to the US basically, I had a good set of experiences. I was structuring deals up north in Canada. We did about $4 billion of deals in oil and gas. And when I moved down here, I have just a family friend of ours that to family office to restructure their office portfolio in Houston. There was some family inheritance stuff. And basically as a result of that, my wife’s a physician, so we were being observed money and taxes and we just wanted to find a way to basically mitigate our taxes. Well, you know, north sacrificing the amount of money that was coming in. And because my family had a background in commercial real estate, and because I had a background in finance working in emanates outset, I grew research. It was somewhat of an easier transition for me to do it, atleast from the technical side of things.

Charles: So you were actually structuring deals in Canada. How do you, how do you see the difference between what you’re going for when you set up a deal in Canada or when you were setting up deals in Canada versus when you’re setting one up in the United States?

Omar: Well, I was in oil and gas, so basically it’s a different vertical completely. And that was way bigger firms. So we an army of lawyers that aren’t disposable.

Charles: okay. What are the, you see for when you see international investors that are investing with you into some of your US deals? What do you see that, what they’re looking for? What are their, what’s their main goal they’re trying to get out of it?

Omar: Most of the people that I knew of the case for people in my social circle, they have been investing in the US or they’ve been, they’re very comfortable investing globally. So they don’t have, they don’t need to be taught, it’s not like a sign one of those mentorship positive thinking sort of things, you know, you don’t need to be dotted, have either sophisticated people to begin with. Right. So they’re looking for the exact same thing that most other people are looking for. But I think they have a more sophisticated event. They’re more looking towards managing their portfolio, diversifying their holdings in some particular cases. Some are trying to take a state, have assets and are different country cause they, they live in a country and they work some assets here and some elsewhere. But at the end of the day it’s portfolio management. But also returns are very important because it’d be a more, you would say, higher net worth than the average syndicating investor in the US they have a couple of the things they’re looking at and not just returns.

Charles: Okay. It’s more of a sophisticated investor that’s investing that you’ve seen come into your deals internationally from international?

Omar: Yeah.

Charles: It’s just different because I have some people that come in and it’s asset preservation and that’s it. They’re coming with someone that just wants to keep their money and what it is now with some kind of growth and it seems like when you have a sophisticated investor, they’re worried more on the velocity of their money and not only making the return, but also preserving it all different factors that some investors don’t have. So.

Omar: Yeah.

Charles: What are the, when you have been foreign investors come to the ready to invest and now you’re working with more of a sophisticate investors. So kind of, I imagine they’re pretty much all set up with their entities or they actually you’re not, you’re not really walking through investors through that are going to be limited partners on entity formation or setting [inaudible]

Omar: I can do that if you want. I can do that cause I can do that in my sleep. Like most of the people that I talked to, they already have the shut down basically. You know, they don’t need me to tell them how basically a waterfall works. I’ve limited partner general partnership work, how real estate works, how private assets worked. They got it down. They know. We’re basically doing this because these are relationships that, you know, go back say a couple of decades or a few generations because our families know each other or you know, we worked on the same trading desk at a bank or one guy gave me another high school photo and they’re both got up in the same lines of business. What sets forward?

Charles: Yeah. Did you find the same for your domestic investors as well? There come from the sophisticated side. Private equity or.

Omar: Well, domestic has kind of fallen over the place because the issue is domestic people have more of the luxury of picking and choosing and they’re already in the market. So you know, presumably for coming from a UAE or South Korea or Hong Kong and you don’t live in the US. Well, 9 times out of 10 you might be more sophisticated investor or just because you live in the US or just more exposed to things that are happening. They just, that’s just the way it is. I could live in China even just knowing more stuff going on China. Yeah, it’s just the way it is. Right? So the domestic people are kind of all over the place depending on where they are. And obviously depending on where we are, we can obviously assist them and provide the best advice possible.

Charles: Now I know your firm is very thorough with your underwriting for multifamily, which is I believe, what your specialty asset classes. Can you walk us through like initial underwriting requirements? So for doing a pre vet, like you look at a property and say this won’t work or this possibly could work. What you guys look at?

Omar: No, we’re just, we just have basically most of the guys, we work with or we’re partnering with or some combination of the two. We’re all guys from institutional backgrounds. You know, we live, we kind of did this for living, we are doing this for a living pretty much. So ours is kind of a different model and it’s not a different model. The model is that it’s the same for everybody else. Ours is,you know, we, we’ve done what we’ve done as far as hitting basically for over 2+ decades. So, you know, we got to live and breathe numbers. We didn’t have to have a coach basically teach us how to run a financial model. Cause I mean, if you count like a pretty much anybody in finance him like actually latter to writing for it unless we’re a district. When I moved to the US I didn’t even know they were real estate and mentors. And when I moved here, I realized, Oh wow, I have a usual casing me giving a, you know, seminars at the airport, Cherokee, wow, your business must really suck. You must really start getting investments would be giving seminars at VM for character. So look, typically what we’ve done is we have our little bible talks, you know, our buy box of $25 million, you know what? I’m just like 10 $15 million. We have selected some markets that were markets and events. Some markets we’re looking in specifically. And within those areas we have specific vintages that are catering to. So for instance, in Jackson one we’re looking at mid seventies and above or in and around that area. Look, so prince indicates or Jacksonville, our typical buy boxes, $10 to $25 million, which is presumably usually a 100+ units, minimum all the way up to about 300 units for 250 units. Okay. It’s gotta be seven that mid seventies plus vintage. It’s gotta be the three. Some markets of Orange Parks Southside, the Meadows and possibly the beaches or maybe, maybe mattering, but there’s nothing really there. I’ll be honest with you, a part of that. What else? We’re clearly at value deals BC and for us we’re not basically we’re looking for a combination of BCAN and cashflow. So I’m not really the guy who is just buying say 200% cashflow deals cause I’m not buying it to get it right. So I want to have the appreciation to basically provide me juice to my returns as well.

Charles: Yeah, that’s great. So you guys have it already down to actually down to the markets and the neighborhoods of where you’re working mattress, the MSA, it’s exactly down to what neighborhood you’ll work with, which won’t because of course it’s very difficult to do a value add deal if you’re buying something that’s a C minus and you’re trying to bring that up to a certain point. So imagine all of your assets are institutional grade that you can..

Omar: Well, no, it depends. There’s a few that are institutional grade. They’re still that. I mean that’s what, where this way, I’ve seen a lot of syndicators with similar assets. Advertise that asset as institutional grade. I would not advertise it as instructors because look, get to make seventies outside workforce housing, no institution is going to buy it at $14 million, no matter what somebody tells you. It’s just not the way it works.

Charles: What is this, what is the software that the deal analytica that you guys have? I found that very interesting. I started looking at that.

Omar: That was an intern, that isn’t internal software we are building out for ourselves. A lot of the stuff that we are basically automated and [automated internally, right. Struggling, right, profit-loss, getting stuff out of our database, all of that kind of stuff. Basically that’s for internal use. A partner of mine, if it is going to be hopefully launching it, we get it by buying, hopefully soon. But there were a lot of processes internally that we have internalized, we provide to our analysts and now we can just roll them out in the software.

Charles: Okay. Well that’s great. Now do you see when, cause you’re working with more of a sophisticated, for the most part limited partners that are coming to you, what is your average timeframe that you’re looking to hold assets? Is it the years? Five to seven years?

Omar: Yeah. Everybody stays three to five. Yeah. Everybody stays five years. But let me tell you this, most indicators are playing a game where they’ll say five years or seven years because they want to sounds conservative but really didn’t want to cash out. So they’re really sending towards reuse and read by the plays, the exact same game. Anybody who tells you otherwise, it’s just lying to your face or things are stupid. Yeah, because look at the end of the day that if it’s structured the right way, and by right way, I mean look, the syndicator is getting basically compensated or performance. That basically means that roughly between rough Max is 75 to 85% of their total equity or total money of segregated is gonna make. It’s going to be back on your right. So when you sell, that’s about of your ass. That’s about of the money the syndicators gonna make. So there’s an inherent conflict of interest or the syndicator already by the general partner or holding onto these assets for the five, seven years. Now they might have it, which is fine, but they’re not going to hold onto it.

Charles: Well, it doesn’t really make sense on a percent two if they’ve hit their price in 24 months in, their returns would be much higher than what they thought. They’re going to hold it for 48 or 60 months down the road.

Omar: Yeah, your equity multiple is lower, right?

Charles: Yeah

Omar: I really, I mean, at the end of the day, you need dollars. You don’t need percentages.

Charles: It’s very interesting how different syndicators work because there’s some that want to keep, not many want to keep it for the life cycle. You know what I mean longterm legacy? what they don’t have…

Omar: I don’t think there are many have the capacity to keep it for the life cycle because people have to pay their bills and people have to see their kids. And that’s just, I mean, look, that’s reality. To shy away from reality, is to pretend that doesn’t exist. I don’t think it’s right.

Charles: Yeah. A lot of fees are built on those transactions, so, so you’re a big advocate for coaching for real estate investors.

Omar: I’m not a big advocate. No, no, no, you’re not. I’m not a big advocate. I feel low score let me put it this way. You don’t see Donald Trump giving you weekend seminars a year for Chariton right there. There’s a reason for that.

Charles: Yeah.

Omar: The reason is the guy’s too damn rich. It makes too much money, who care about these kinds of things. And most coaches, by the way, just to let you know, there’s, there’s a few very notable exceptions by the way, the few notable exceptions, like all of the professions in the world, right? Like you know, being a basketball player, being a physician, being an investor, whatever, whatever profession you choose, there are some coaches that are so damn good that there’s not enough money in the world to basically pay them for the amount of value they bring. But the other 99.999% of the coaches, they don’t have a real career to begin with. So these days, I guess if you don’t have a real career, you don’t have a real job, you suddenly become a coach these days. Right. Because they teach you what other people were to do with their money.

Charles: Yeah. No, it’s, it’s funny cause I was at a conference a couple of weekends ago and you know, you just go there and you get, you know, you get a nugget of information and you just, it’s mostly just networking and when you’re in there, and I walked in one part and they were talking about their, what their portfolio was and I was like, wow, that’s not that it was small, but it’s, it’s, it was much smaller than I thought that they had. You know what I mean? And it’s, people get started in the coaching and the seminars and all this stuff much earlier than you would think they do. Like you were saying, I mean, they don’t need to really have a resume to put on a, like you said, a Hilton conference, you know what I mean? Or

Omar: Oh yeah. I mean, look, think about it. If you’ve got 5,000 units as an example, even if you’ve syndicated it the right way, you’re too busy making real money. Yeah. You’re too busy making serious money to worry about like a $5,000, $10,000, $20,000.

Charles: Right. Especially with the hold hitting the handholding that has to go on with that. After you sold some sort of coaching program, which I imagine is a handful of your paying. If you’re charging someone 20-25 thousand so what, what do you, what do you suggest, if someone came to you and they didn’t want to be an LP or, and they wanted to become active in an investing well, what would you suggest for them? Uh, the first few steps I guess.

Omar: Oh, depends on what they want to do, right? I mean different, we all have different say talents. For instance, some people look like I have partners who are fantastic in marketing, right? Now go dia potential market? Yes I guess that would be probably get their level. And even if I was to get to their level, that would take me forever to get there. Right? So they’re really good at what they do. I’m really good at a certain aspect of things. The asset management and managing the investments, all that kind of stuff. Right. So, first of all, I think the question depends, well what are you really good at and what do you really want to do? Because just because somebody, you think somebody else has a cool job doesn’t necessarily mean you like doing that job, right? So you’ve got to figure out what you’re really good at. And that could be like, that could be like I look to give you an example, look, if you live in say a city, let’s set the usual. If you live in Tampa, right? So you know somebody who is rich and who wants to invest in Tampa for whatever reason, and you live in Tampa all your life. So you have a city insight on born and raised, all that kind of stuff, right? So you can presume and you’re, you’ve got smart, showed your head on your shoulders. So you know, you can maybe advise them on a lot of software and things like, hey, how’s that location? Yeah, on demographics that might look good, but you know, just because you go past that area five times a month that oh man, things are really going down. You know, because a lot of these are lagging indicators. So you could add value there. Even though not having any real estate or for instance, somebody who lives in New York, they’re messing in Tampa, you could be their boots on the ground I mean, you don’t need to have, I don’t know, a phd in real estate to go talk to like five people. You already, you already know how to have a conversation and you know, so there’s lots of ways you can add value, right? And then along the way, as you’re adding value, as you’re doing all this work, what you can basically start seeing is learning from people, try and figuring out what helps you set apart, I feel is better than trying to just do somebody else’s job. Because you might age, you might not be good at it. It might not be a good fit for you also.

Charles: Yeah. So you guys syndicate multimillion dollar deals across US. What markets are you, are you really bull shot at this part of the real estate cycle other than Jacksonville? We just spoke about that.

Omar: Yeah. Look where Jackson, where’d I live in Dallas. I think Dallas is a fantastic market. We don’t own anything there. Like I do think it’s a fantastic market. Also at nine times Phoenix. Phoenix is a bit too far. But I think longterm wise it’s a good market if you can stomach water activity in the short term.

Charles: Yeah. Phoenix is definitely a great market. It’s getting expensive there. What do you, uh, you guys, what kind of asset classes do you guys focus on from bringing during your value add play? Like are you guys starting at buying stuff that might be currently a B- or C+ and bringing it to a B+. Is that what normally you see?

Omar: Oh yeah, it’s anywhere between, look everybody says B to C, but really most indicators are the Cielo. Okay. Let’s be honest. We’re practically have a C plus B minus level cause we graduated up over a period of time. Right. And basically the whole idea there is even if you don’t improve basically the class of the booming. What I’m, to be honest with you, what I’m really looking at improving is how quickly I get the NOI number. I really don’t. Honestly, if the glass of the building improves, that’s a bonus and that’s fantastic. Wow. That is freaking awesome. But what I’m really concerned about is even if it stays at the same class, how much you can compare. Cause if I can take up income, to be honest with you, I don’t even care about anything else. Even if you stay at the same level, but my income goes up. I’m okay with that.

Charles: Yeah. Which it’s very difficult when investors tell you or when syndicators are telling you, well I’m going to go, this is going to be C and we’re bringing it to C plus or C plus to B. I mean those are very skewed too because it, how are you going to change the ear? I mean if the area’s already in..

Omar: If the areas, for instance with dump you can have the nicest looking building in the dump, but it will still be in the dump. You know, it’s one little thing.

Charles: He’ll be in the dump with a higher NOI,

Omar: Yeah, it would be or, or maybe not. Maybe you have the nicest looking building in the dump of the same and why as everybody else.

Charles: True.

Omar: But it’s sucks, even more Bible.

Charles: So, all right. Give you some information on how people can learn more about Boardwalk Wealth and your investments and your opportunities.

Omar: So pleased. First of all, I thought you’d never ask that question, Chris. So you can go to our website, BoardWalkWealth, B O A R D walk wealth, one word, .com. You can basically, we made it really simple. Okay. Enter your name, hopefully you know your name and your email hopefully also know that and type in the third field you found out about it, right? Podcasts, right. And then you register, you click that button, you’re gonna get an email, you’ve verified your email address and what’s going to happen Charles, after that is that basically you can then access other, well, you can access other parts of the website anyways as well. And what you can be seeing there is basically different blog posts and a lot of our blog posts aren’t the usual fluffy Dipo. What are the five greatest right markets in the country, honestly with gives a crap, right? Really this is insightful posts of our say how to read a PPM. How do what a find multifamily sponser or how do we get a deal? What do you do when you have cost segregation? What are things you’ve got to look out for? How do the waterfalls work? So this isn’t like a fluffy sort of a thing, I am pushing like 20 articles a month. This is like one or two really incisive articles written where we’re basically then going forward.

Charles: That’s great cause it educates all of your potential investors and your current investors on exactly how the process works because it’s extremely confusing for the first few times you see it.

Omar: Oh yeah. And then everybody else is kinda different also. Right? So even if you know this stuff, what happens is everybody structures their deals differently, all of that stuff. So yeah, just gives you a better idea.

Charles: Yeah. Everybody has a different target kind of LP, when they are partner, passive investor they’re looking at and sometimes more of those like you have more of a sophisticated I think compared to some other syndicators that might, might not have that. So your deal might be structured differently than if I went with another syndicator.

Omar: Of course. So, so many ways getting with that.

Charles: Definitely. Well I want to thank you very much for all your time today.

Omar: Thank you Charles.

Charles: I will put all your contact information in the podcast and also on the Youtube on note section so anybody can just click on that. You don’t have to worry about writing down what Omar was writing a was reading there and that’s great. Well, I really appreciate it. Thank you very much and have a great rest of your day.

Omar: No, I appreciate it. Charles, Thank you so much for the plan for the opportunity. Thank you.

Announcer: Thank you for listening to the Global Investors Podcast. If you’d like to show, be sure to subscribe on iTunes or Google play to get new weekly episodes. For more resources and to receive our newsletter, please visit global investor podcast.com and don’t forget to join us next week for another episode.

Announcer: Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of harborside partners incorporated exclusively.

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About Omar Khan

Omar Khan is a multifamily real estate syndicator based in Dallas, Texas and works with many foreign investors. He is a global citizen, having lived in Dubai, Toronto and Calgary. Previous to syndicating real estate deals he closed $3.7 billion in capital financing and merges and acquisitions transactions.

Today, Omar focuses on syndicating large multi-million dollar deals across the US along with advising high net-worth individuals and entrepreneurs on real estate portfolio allocations.

His firm, Board Walk Wealth, has developed their own underwriting software called “Deal Analytica”.

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