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Global Investors Podcast
GI41: Successfully Investing in Student Housing and Apartments with Jeff Greenberg
April 1, 2020
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Since 2007, Jeff has been investing in value-add multi-family and student housing assets. Jeff focuses on all aspects of the commercial real estate projects with an emphasis in investor relationships, and operations management. Jeff is currently the CEO of Synergetic Investment Group, LLC (SIG).

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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 marke t. Host, Charles Carillo, 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 Carillo.

Charles
Welcome to another episode of the Global Investors Podcast. I’m your host Charles Carillo. Today, we have Jeff Greenberg. Since 2007, Jeff has been investing in value-add multi-family and student housing assets. He has been an investor in over $40 million worth of multifamily projects consisting of over 1000 units. His company controls 317 student housing beds, and 225 multifamily units in Georgia, Arizona, Texas, and Ohio. He focuses on all aspects of the commercial real estate projects with an emphasis on investor relationships and operations management. So thanks so much for being on the show, Jeff.

Jeff
Well, thank you for having me.

Charles
Yeah, it’s great to have you here. And are you able to give us a little background on yourself prior to starting your your current company

Jeff
Prior to actually get in the real estate I was in the IT business. And it you know, didn’t look like I was going to retire for a long time. So I decided to get into real estate and see what real estate was all about, I have no idea.

Charles
What was your How did you choose real estate as an investment vehicle on all the different other kind of vehicles out there that one can take when trying to transition from a W-2?

Jeff
Well, I don’t know it was I was I was on a hike with a with a friend of mine and he mentioned that he was getting into real estate and I said, Oh, okay, that sounds interesting. But the only thing that I knew really about real estate, or what I thought I knew was people buy single family homes, rent them out, and that was how you invest in real estate. I had no idea about fix and flips and tax liens, tax deeds multifamily, anything else that I later learned that there was many many different facets of real estate.

Charles
How did you focus in on multifamily, specifically?

Jeff
Well, I started out in probably about 2005, 2006, looking at Ohios, looking at foreclosed properties, single family homes. And that wasn’t a great time to be doing that, mainly because the banks didn’t know what the heck to do with all the foreclosures they were getting.

Charles
Right.

Jeff
And so that wasn’t working. And then I heard a guru talk at some event where I could get involved in much larger deals, and not have to worry about how much money I had. It was more about being a service to other investors and bringing their funds in. And I thought, Oh, that was a lot more interesting because my funds were limited. I was in the middle of a divorce. And so that just became very interesting to me.

Charles
And, so you were working a full time job I imagine, at the time you started in real estate, how did you scale your business to the level that it is, it’s currently at by, you know, by having a full time job as well. How did you manage that?

Jeff
Well, I did have a business partner that was doing it full time. So she helped. She helped quite a bit. But a lot of the stuff I was looking at, most of it was in Texas. So being two hours different I could get up earlier in the morning, I could get up early before work and get a bunch done talk to a lot of brokers. I was able to talk to brokers during lunch. You whenever I could change my schedule around. I mean, I was I had the flexibility of having lunch at anytime I wanted. And so it worked out that way. But it was all in between getting my job done.

Charles
Yeah, every person I speak to that’s really scaled their business, there’s at least one other partner that they’re working with. So it’s, it’s very interesting that the people that keep it small, it’s usually by themself.

Jeff
Yeah, definitely.

Charles
So our firm invest mostly in mainly multifamily properties. Now you work a lot with student housing. How do you, can you explain the difference when going from underwriting and due diligence on student housing versus on a multi family property?

Jeff
The main difference as far as the underwriting aspects of it is typically we’re looking for higher turnover than you normally are going to get and arranges in property. It depends on what options I have. I have one property that we’re probably going to get very little turnover, you know, maybe about 10-15% because there’s not a lot of other options. I have other property, another property one in Ohio, where there’s a lot of options for them. They can go from house to house or apartment to apartment, there’s plenty of options. And so we may get a 75-80% turnover every year? It depends. So there is a greater turnover. So because of the turnover, you have typically higher expenses. As we all know, turnover is one of your largest expenses in the multifamily business. But that’s the main thing on the underwriting except for, we also get a higher revenue because a lot of the properties were renting by the bed, as opposed to by the unit. And so you can charge a lot more money when you’re charging by an individual bed. But as far as the underwriting, that’s the main part. There’s a lot of other things but in underwriting the deal, that’s most of it also, I guess, your property management is going to be a little higher as well.

Charles
Yeah. I would imagine though it’s a lot more time intensive on their on their part of it is, is it much more time intensive on your part as the asset manager.

Jeff
Not so much but you hit a key point there is the time and resource intensity of of the management company, which makes it that much more important that you get in the proper company. You have to get a management company that substantially does student housing, not just as a kind of a, okay, we’ll do that for you. Because typically they have to have resources that are going to do a lot of stuff online, get into Facebook and Twitter and whatever all these other things online that the younger people are getting into. So you need that you also need access on campus. We have people going to on campus events and we have a table with a banner and the other day we had a we rented a pizza truck. And so when they came over to talk to us, you know, they got free pizza. So there’s a lot of that it’s not just the typical advertising that you’re going to do for an apartment complex. So you do have to do that. The other thing is with management, there is a lease up window. And every campus, every market is a little different. But if you don’t get your property leased up for the following semester, within that window, there’s a good chance that you’re going to have a lot more in the way vacancies, so you don’t want to mess up and miss that window. So you need a management company that understands the dynamics of that particular market.

Charles
Now, when you’re doing your leases out, are they on 12 months, which normally it’s going to be they’re going to be in there probably 10 months during the year is that how it works or?

Jeff
Each one of my properties is a little bit different. Each one of the markets is different. I do have the 12 month leases where they have to be if they’re not renewing, they have to be out the second week of July. So we can we have two weeks for new people to come in. But otherwise it’s a 12 month, or at least the the revenue is spread out over 12 months. And I have another property that’s 10 months that we don’t worry about the two months, we make enough money over the 10 months to cover us. So we’re not worried about the vacancies on those two months. And then when we do get summer tenants for summer school or whatever, that’s kind of a bonus. That you know, that we’re, you know, we’re excited about that’s great. But, yeah, it depends on the particular property.

Charles
I imagined to it depends on if they’re furnished or unfurnished. Is that correct.

Jeff
Some of them are furnished and some of them are on furnished. My Georgia property is 100% furnished, we don’t I can’t Like that, because they’re not dragging as much stuff across the floors and up and down the stairs and ruining things because they’re not taking much care, you know, for your property. There are some that they would prefer my Ohio property. We do have a lot more in the way of unfurnished units.

Charles
Yeah, it just depends, I guess, on the market specifically on what’s going on in the area and what’s going on around that university that you have to kind of mold into when you’re doing over a property, I guess.

Jeff
Yeah. And we and we do give them the options. So in my my Arizona property, we we have a more of a low end property. I mean, the property’s not low end, but it’s the area we’re in is a little bit farther away from campus. We’re two miles from campus which is, which is a little bit stretching. And it usually appeals to those people that are on a lower budget. And so we give them the option of furnished but Most of the most of them are taking the unfurnished because they don’t want to pay the extra for the furnishing. So it? You know, it does depend on that

Charles
When you’re purchasing the property and say, are they already student housing units, let’s say are used for that, or is it something that you’re purchasing possibly a multifamily property that wasn’t the previous owner wasn’t intending to keep it as student housing and then you’re coming in. And that’s your plan,

Jeff
Although all the properties that we’ve gotten so far have been student housing properties once when we acquired them, but that doesn’t mean that it wouldn’t be that difficult to convert something. The main thing I would tell people is, just to make sure what the city rules are to make sure that they’re going to be in compliance and they’re not breaking some zoning code. The Ohio property there is a rule that only a maximum of four people, unrelated people can be living in a union. And that doesn’t matter if you have five or six beds, they limit it at four. So if you have a five bedroom you can use that bedroom as an extra room. And, and typically, all of our properties are single person in a bedroom. We don’t really have any properties that have double occupancy in a bedroom itself. Even though the dorms do that dorms put two beds and or a bunk bed or something. None of our properties have done that.

Charles
So with the value add, how does that when you’re going into buying one of these what are the normal upgrades changes you’re making? When purchasing a student housing property to add value to the property? What are some of the common ideas and points to make that property.

Jeff
Well, there’s not much difference in that multifamily and the student housing on that. I mean, you’re, you know, if you’re doing it by the unit you can make more money by renting it by the bed that’s an option. But otherwise, I mean, it’s raising rents but typically you don’t deal with the rubs. Typically students won’t one price they don’t want to worry about paying the utilities even though my Arizona property they do pay for their electric they, you know, have to put their own name on it. And in my Ohio property, I do have some, some of the units do pay electric and cable and gas and all that. But typically, they would prefer just, you know, to keep their budget straight by having having one cost. Yeah, but it’s not much different than your normal student or your normal multifamily. You can raise rents and reduce your expenses. If you’ve got covered parking, you can charge you know, for covered parking or reserved spaces, you know, the typical multifamily thing. But one other thing I wanted to point out as far as another different aspects of the the student housing from multifamily is typically when you’re looking at multifamily, you’re looking at job growth, jobs coming in population growth, median income, you know, all of those things where the student housing, you’re looking more at the university, how stable is the university, how it’s growing? What are they doing? What’s their plans? You know, are they putting money into fixing it up. Also, what percentage of the student population can they house in their dorms? And how long do they require the student to stay within the dorms. In some schools, it’s the first year some schools, it’s two years. Some schools don’t let the students off campus until they’re 21. So those are things that you’re going to look at as far as more related to the school and less related to the city. I have I have student housing properties. I would never buy something in that city, if it was just going to be rented to, you know, regular, regular multifamily tenants. The city itself really doesn’t have all the qualifications. But because the school is doing well, and the school has a good plan and good population, you know, we would buy in that setting.

Charles
Yeah. Now that makes sense. I’ve heard before have some of the possible exits for someone that’s owning student housing, obviously, if it’s a larger complex is there is always the possibility I’ve heard and it happened to a building that I lived in in college was that the university actually purchased the building from the private investment group as an easier way of and they’re brought it on as another dorm for further University. So have you ever heard anything like that or?

Jeff
That’s certainly a possibility, actually my property in Georgia, which has two buildings, the school wanted to master lease one of one of the buildings. They wanted to take it over and master lease it, but the terms and conditions that they were looking for was wasn’t desirable. And we already had it 100% occupied. So yeah, it wasn’t gonna do us any good. They wanted to lease it for one semester and what happens if you don’t want to for the second semester, you know, we’re kind of left hanging. So that wasn’t. The other thing is the Alumni Association for the school at one point was talking about buying the property when we told them we were looking at selling so the Alumni Association was but they didn’t want to pay the price that we wanted.

Charles
Yeah. Okay. Now I hear when I speak to people with Airbnb ease which obviously is different business model but they can’t use that income traditionally toward refinancing property toward the net operating income with your student housing. It’s normal since are 12 months leases it, you can use that income and you can use it with the bank and show them hey, this is this is exactly what we’re getting for this the noi that’s the bottom line, and this is what we’re going to refinance it for. Is that how it typically works very similar to regular multifamily.

Jeff
Yeah, there’s a lot of lenders that have no problem with student housing. We’ve had some lenders ask us, you know, what percentage of undergrads do we have, or what percentage of students do we have. So, you know, some of them may not be as comfortable as others, you just have to find which ones are. There was one lender, I don’t remember what it was, but we were looking at a lender that they only wanted grad students. You know, I mean, it’s the same thing with like military, you know, when you’re, you get military housing near a military base, they want to know, you know, what percentage are military because they can be deployed. So there, there’s some that are a little gun shy. And also they look at, you know, what’s the population? what’s the student population, they want to know that it’s a large enough school to be able to support

Charles
Yeah, every lender has their own having their own risk tolerance. So it’s, you know, if especially if they’ve lost on a property previously, they stay away from that, whereas like you said, the military which is one thing that a lot of people shy away from, especially if it’s 15 or 20% of the the area or of the the tenant, tenant base, so

Jeff
Yeah, I mean, there’s, there’s many different things that lenders will pull back on. And you just have to find the lender that, you know, is willing to do the type of property that that you have there and with the population. Now, the interesting thing you mentioned Airbnb, because on one of the properties, we had some, a couple of vacancies. We have done Airbnb. So we’ve got Airbnb and our Tucson property. And that seems to be doing pretty well. But, you know, the lender, you know, doesn’t seem to have a problem with it.

Charles
Yeah, we have a perfect property of Phoenix and they have out of, I think, 100 units, 98 units. About 10% of them are Airbnb. And it’s definitely in a complete different, I mean, it’s like three or four times the gross that comes in on that unit on those units versus traditional 12 months. So it’s very, very profitable. So during a syndication, what’s your firm’s role in the process? Are you guys finding the property normally? are you performing a lot of due diligence along with the asset management?

Jeff
Well, you’ve kind of caught me in the middle of a transition to what I’m doing right now. In the past all of the syndications that I’ve been involved with, I was pretty much the lead partner. And we essentially did everything from acquiring the property asset management, you know, disposition of the property, you know, essentially the whole bit including, you know, raising funds. Right now, I’ve taking a little bit more of a pullback, where I am looking for a very few highly qualified successful syndication groups that I will come in and help out with some of the equity raise. And so I’m not doing as much personally, as far as looking for deals. I’m looking to provide a service for my existing investors, and to do the vetting and all the hard work of finding good quality deals through through syndicators that I’ve become acquainted with.

Charles
Yeah, I agree totally with that. That’s how our group has been, has been working over the last 12 months as well. There’s so many deals to be underwritten out there, and there’s so many overpriced deals that it’s extremely time intensive to start reviewing all the deals. So there’s certain deals that we will review in our backyard, us being in like South Florida, Central Florida. But if it’s outside of that area, it’s something that we will kind of one of our partners brings it to us we review and it’s something that we will partner with them on if it if we feel it’s a good asset, so I definitely understand what you’re saying, especially in this market?

Jeff
Yeah, I mean, I’ve, I’ve done. I’ve done the bit with underwriting 100 deals and making an offer on 10 of them and maybe getting one of them, you know, that I’ve been there. And I’ve done that for the past 10 years. And, I mean, I’ve had team members that have done that. I mean, we went through 500 deals in two years, one time, and, you know, so and we got three deals out of it. That’s, you know, that’s, that’s, that’s a lot of work. And, you know, I don’t need that right now, with this market. Maybe when the market changes, we may change some things, but at this point, there’s a lot of great people that I know, you know, I’ve got a great network of some highly qualified deal sponsors. I would much rather have them do the deals, find the deals and I will review their deals and underwrite their deals. And if they can use some help with They equity and you know, I’ll jump in and partner with them. I’d much rather do that.

Charles
Yeah, exactly. No, I mean, you’re not even 500 deals and you in three properties you purchase that’s even less than what the Guru’s say out there. And that’s, that’s a full time job to underwrite all those properties, and even find the properties, get them from the brokers keep the broker relationships and all that. It’s definitely a very intensive process. So you said about, you know, what’s going on in the future, and maybe it’ll change what you’re working on. Where do you see, I mean, where we are right now, as we’re filming this second week of March. Where do you see interest rates cap rates multifamily, in general going in the next six to 12 months?

Jeff
Well, I don’t, I don’t see interest rates and going, you know, anywhere, especially, you know, right now we’re dealing with the scare of the corona virus. So I don’t see that moving very far. You know, everybody’s sitting there thinking, Okay, hey, are we on the verge of a recession? You know, I’m looking at deals, you know, through through partners that are very conservatively written, that have a lot of room in case there is some correction, we know that, at some point there will be one we just don’t know when. So, you know, cap rates may go up a little bit, you know, which may, you know, make it a little more advantageous to buy and, you know, cut back on your profits a little bit when you’re selling. But, you know, I talked to a lot of people and I say just, you know, you underwrite conservatively, you make sure you have enough reserves, you get a long term loan, and you know that way you can ride out most storms.

Charles
Yeah, exactly. That’s the exact model that I use as well. It’s the long term debt. And it’s having reserves which a lot of a lot of new investors Miss on. But speaking of new investors, you coach and mentor a lot of new investors, are you able to give us a couple points that you feel are imperative for new and experienced investors to follow?

Jeff
Well, the main thing is with new investors is, you know, as we know, this is a team sport. There’s so much that you don’t know. And you end up dealing with a lot of extra zeros on on the deals that you’re doing. So typically, this there’s a lot that can be lost, if you’re not careful. You know, either finding a formal mentor, or even an informal mentor, teaming up with a very experienced person and finding a way to be of assistance to them. You know, I tell a lot of people that one of the things that I would have done differently Then the way I started out, I teamed up with a very, very good person, very bright person, but she was at the same level that I was, she kind of started out, you know, at the same time I did. And it would have been great to be alongside of somebody that had a lot more experience. I mean, we both did have mentors, you know, so we were able to go back to our mentors and ask them questions. But I think somebody teaming up with someone with more experience and getting into deals that way. Is a great way to go. Even with people with some experience, you know, getting on a team, with somebody with more experience is a fantastic way to learn. And even if you don’t get much financially out of the deal, that that, you know, that doesn’t matter. It’s it’s how much you know, you’re going to get a lot of exposure, a lot of experience. Just from being side by side with some more experienced people.

Charles
Yeah, the experience is a huge factor you get with mentoring or partnering with people that are that are more seasoned than you are for sure, definitely. So what common mistakes you see new investors make other than you had one that you love, maybe not a mistake, but something that you said you would change one of the mistakes you see or that people can avoid,

Jeff
Under capitalizing, getting into deals with insufficient reserves. I see a lot of underwriting that are pie in the sky that are are not very conservative. In fact, I have a lot of my students bring deals to me and said, Hey, somebody wants me to come in and invest in this deal or JV with them on this deal. And I’ll look over the numbers and say, you know, they’re being way too aggressive on their They’re underwriting. And that’s that’s part of it as somebody, you work so hard to find a deal, you work so hard to get it under contract. And you want those numbers to work. You want it so much that you can squeeze the numbers a little bit here and a little bit there. And if all the stars align, everything’s going to be fantastic. But you can’t get emotionally involved in it. You have to, you know, not not get, you know, so tied up that you’ve spent so much time trying to get this deal and kind of squeeze the numbers. So it’s always good to let somebody that has nothing, nothing to gain. Look over those numbers and say, Hey, what do you think of this? Because you’re you get too emotionally tied into it?

Charles
Yeah, for sure you get television, especially after you’ve invested hours into a project. Especially using how many deals you have to review. To get one, it’s definitely something where you can squeeze it. That’s one of the first things I’ll do when reviewing. And my underwriters will look at stuff and we really we look at the rent increases, number one of what they’re thinking they’re going to get, and then you can kind of work back from there. Because sometimes, I mean, you’re not gonna be able to get these huge rent increases, when there’s pullback, you might be able to get just a fraction of it. So it’s something where you just have to review exactly what’s going on before getting involved. But so how can how can our listeners learn get in touch with you and learn more about you and your company, Jeff?

Jeff
Well, they can get ahold of me at my website, which is www.synergeticig.com. And that’s spelled s y in er gt IC. I g.com. They can get ahold of me at [email protected] . I’m also I respond to people on bigger pockets. Even though I’m not on there quite as much as I used to be, but when I get messages from BiggerPockets, I respond to those. So those are probably the best ways to get ahold of me.

Charles
Awesome. So what I’ll do is I’ll put those links in both the podcasts and YouTube notes. And I want to thank you for being on the show today.

Jeff
Well, thank you very much. It’s been fun.

Charles
Have a great rest of your day.

Jeff
All right. Thank you.

Charles
Hi guys, this is Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in investing in real estate and you don’t know where to begin, set up a free 15 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com.

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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.

Links and Contact Information Mentioned In The Episode:

About Jeff Greenberg

Since 2007, Jeff has been investing in value-add multi-family and student housing assets. Jeff focuses on all aspects of the commercial real estate projects with an emphasis in investor relationships, and operations management. Jeff is currently the CEO of Synergetic Investment Group, LLC (SIG).

He has been an investor in $40 million multi-property projects consisting of over 1000 units. SIG currently controls 317 student housing beds and 225 MF units in Georgia, Arizona, Texas, and Ohio. SIG focus’ on value-add Student Housing, Market Rate MF and Senior Living MF properties.

Jeff has an MBA and has over forty years of experience in management, staff supervision, development and training.

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