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Global Investors Podcast
GI45: Commercial Financing Challenges During COVID with Ryan Dumas
April 29, 2020
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Ryan Dumas is a Senior Associate with GRP Capital and has been active in the hospitality industry for 25 years, practicing in financing, lodging, and food and beverage.

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Transcript:

Announcer
Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. 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 Ryan Dumas. Over the past 2 years; Ryan has arranged over $135 million in financing for apartments, hotels, self-storage and assisted living facilities. So Thank you so much for being on the show!

Ryan
Thanks for having me, Charles. Appreciate it.

Charles
Yeah, for sure. So I briefly spoke about your professional background. Can you go into more depth about your your financing background, your hospitality background?

Ryan
I’ll just go real quick start off. I mean, when I was 15 years old, I started busting and rest in restaurants, went ladder for to serving, bartending, managing, and so forth for managing menus, managing restaurants, I created wine list, drink list, the whole the whole thing. Went into hotel financing. About eight years ago, I was doing equipment financing for about three years. And the last four years or so I’ve been doing the refinancing and the acquisition side. And that’s pretty much where the short story of what I’ve been doing the last, you know, seven to 27 years.

Charles
So the company you’re with GRP Capital Finance, what type of services and financing do they offer? I was looking at their website and it’s quite a bit. what what do you focus on and what do they mainly focus on?

Ryan
Well, let me tell you where we where we focused on and of course We, so I work for GRP capital division out of Fort Fort Myers, Florida. We also have a remote office in Beverly Hills, California as well. I would say about two to three years ago, it was a lot of hotels. The majority of hotels was about about 95%. Right now, I would say we’re more about a 75% Hotel portfolio that we’re financing right now. We became diversified more two years ago ish, on the assisted living, multifamily apartments and other you know, gas stations, medical have everything in there too. So that’s where we’re at. We done the financing side. I mean, it’s all over the place. It start off with mainly SBA. We’ve done non recourse CMBS. We’ve done Fannie Freddie agency loans. We also do some private lending which is more of a family office. And those are shorter period of time while you’re stabilizing to then go into your conventional SBA or non recourse loans.

Charles
It’s like a bridge loan.

Ryan
Correct. It’s their own family Family Fun bridge loan. You know, it doesn’t meet other bridge loan standards and everything we can, you know, supply that as well. It’s about a $200 million, you know, set aside.

Charles
Nice. Okay. The now you went through a couple different loan types. I mean, can you explain the different ones that pertain to real estate, mainly the conventional CMBS I mean, agency, stuff like that.

Ryan
So I mean, most of the multifamily you know, don’t use SBA because, you know, SBA is mainly for, you know, hotels, restaurants, you know, C stores, medical and so forth. On the multifamily side, you know, we can do CMBSnon recourse, Fannie and Freddie, you can do bridge loans, and it depends on each asset. If you have an asset that’s not stabilized and it’s 50-60% occupancy rents are low. A big value add, not a lot of people are getting into the, you know, CMBS, Fannie and Freddie, they’re wanting usually on most loans 90% occupancy. So that’s when you know, people go to that bridge loan or a local bank, but then also local banks in your area, every area is different. You know, you go to Dallas, and you know, they can do a 6,7,8 million dollar loan at a local bank, you’re in a small town, usually they’re maxing out at two or $3 million. So that’s when then you go into the non recourse or recourse national market. Most of the non recourse deals and I mean, I know people get you know, 800,000, 1.2 million or non recourse here and there, but most of the non recourse loans are two two and a half million dollars or not. Right now, they’re still lending on the CMBSnon recourse side around the three and a half to 4%, You know, they don’t, if you have a lot of late pays slow pays this last month, month and a half, they’re going to look at that. Also to touch on that if you don’t mind, those CMBS lenders are they’re not doing well because of the hoteliers that are 80 to 85% down on their occupancy. So they’re really hungry for these multifamily that are that are still doing well.

Charles
Explain CMBS, can you?

Ryan
I mean, it’s a commercial mortgage back services and I mean, I could talk about that for an hour. It’s very complicated.

Charles
Just an overview here 30 second overview, if you could.

Ryan
Basically, if you’re refinancing, most people go in there and they’ll do. They’ll do interest only, and then they’ll cash out, pull up a lot of money out, pay their investors pay themselves some money, buy another asset, but it’s a low rate, longer amortization, long term fixed, great rate, but there’s minor details in there. So if you go below your debt service for One month, it triggers to your master servicer, long story into that two whole 20 minute topic right there. Right now a lot he’ll eat if they’re paying their bills right now, the mortgage, they have money aside, if they’re not meeting their debt service, which they have two rooms at 100, you know, unit property, they’re not meeting debt service. And there’s no revenue coming in or barely any. So that’s triggering itself lockbox, which you know, triggers somebody another, the management company to help you out. So I’m on that instance it’s, it’s not good. It’s just the same as not making your payments. So right now, you got a lot of a lot of hoteliers that have cmbs loans, commercial mortgage backed services, loans, that some are paying their bills, some are not paying their bills, they’re defaulting on those so they’re trying to get where you have to have a two to 3% fftt reserves. And there’s another reserve they have to they’re trying to get it where you can use those reserves for epidemics or anything. is like this, but they don’t have anything set up like that, that you could just take ad there and pay this month. And they’re implementing now they’re working with there’s lawyers attorneys working on this right now that they’re going to work on where the debt service doesn’t have to meet for those few months, and they can use those reserves to pay for the next 234 months to get by. But on some of these hoteliers and other businesses aren’t going to recoup if tourism everything else doesn’t shoot back up pretty quickly.

Charles
So how is COVID affecting I know we just touched on a little bit but affecting your company or borrow or specific I mean, I imagine it’s devastating to the like to the hotels.

Ryan
It is. I mean, I was getting ready to close on some large CMBS loans myself, but in a way I’m glad I didn’t so that they didn’t suffer for the consequences, like I just said about the CMBS loans. Um, a few of them have SBA and conventional loans. They’re larger, larger hotels, larger businesses, and I was getting ready to close on for four or five of them. So that would have been great for me. But also I’m glad that the that they didn’t do that for what’s happening now because right now their local banks, their SBA is actually giving them deferment, forbearance and things like that nature so they’re actually safe right now. So I don’t know if they will go into a CMBS loan act this is said and done at all. But um, it’s slow those down for sure. And the we usually are usually about one to one or two, one to three SBA deals a month as well, between about, you know, one to $4 million. So of course, that slow down, there’s different parameters. They’re wanting people that are liquid, so if you’re buying a hotel, gas station Medical Center, and you’re buying it for, you know, $3 million, and 120 percent down 600,000, you got an extra 10,000 in reserves. Right now, they’re like, that’s not enough. We need six months or a year’s worth of reserves now. I’m also there looking at whatever your businesses if it’s a multifamily apartment complex and that’s just, you know, conventional local bank, Fannie, Freddie, whoever that is, they’re looking at your client base. You know, do you have Restaurant Servers and bartenders Are you in a downtown area? Because there’s some places in St. Pete, other downtown areas like New Orleans that are real heavy on bartenders, servers, managers, and the last five weeks, they’re showing zero. A lot of them out. The numbers are I know, it’s really high. Pass 80% of them live week to week, month to month. They’re making you know, 500 bucks minimum, usually 1000 bucks a week. Sometimes they’re the ones in New Orleans, I know making 500,000 hours a day, a night working, and they work three nights 3000 bucks, but right now they’re they’re making zero. So it’s affecting, it’s affecting a lot of people. Um, the only ones that’s not affecting the, you know, the essential workers, the nurses, the doctors, okay, that’s working right now or people that have cash. That’s why cash is king and if you’re liquid, you can buy assets, but a lot of you are gonna be retired. Financing into a longer amortization. Like a lot of hoteliers I have right now and other businesses too, that are in, say, a conventional or you know, or local bank, conventional loan at a 1015 year amortization, even a 20 year, they’re going to SBA because we can get you into a 25 year amortization at around a four and a quarter, four and a half percent rate. So it can give you better cash flow. And you know, what we’re trying to do is a lot of the a lot of the non recourse CMBS I’ll stick with hotels specifically, that are failing right now that aren’t doing well that aren’t you making the payments because of the COVID-19. Their average, I think, I think it’s their average loans around $7 million. So they’re trying to increase SBA from 5 million eligibility to 10 million. So if there’s averages or 7 million, of course, people have 234 hotels, but just one person having a hotel, we can refinance it into an SBA and at least defer them for those. Not defer The government’s paying six months principal interest, so then they can save their asset. But they do have very high prepay penalties called a defeasance and CMBS which most the most of the clients I have there defeasance are 200, 500, 600,000

Charles
That’s it’s pretty helf fee to pay to refinance.

Ryan
So yeah, a lot going on in the industry right now. And things are changing. Its approvals aren’t coming out in the in the two or three days that we usually have there. And the banks or the banks that we have are working on some ppps loans right now. And they’re backed up.

Ryan
Yeah, it just looks like every for our lenders I speak to it’s, it’s just the underwriting across the board is just getting stricter. So when we would review properties, obviously, as multifamily. You’re going to be looking at the diverse employers right across all of your different tenants making sure that you know, 15 20% of your tenants aren’t with one employer and This kind of stuff and now you have to get even stricter because it’s not just per employer now you have to check per industry. So it’s now that you know, you’re just like how much is in restaurant you’ve got to go back and really do like a whole lease audit on these properties before they’re refinancing them just to make sure that they have like you said, the capable renters to capable income streams that aren’t going to dry up or haven’t dried up yet because a coven.

Ryan
Exactly. And like, Can you touch touch up on what you said? It’s about demand, demand generators, markets, everything else if you buy a place, say it’s a hotel or a multi family, it’s a little bit different each one, but on the multifamily if you have one big factory that has, you know, 90% of the employment around there and it’s oil like like Houston, like and not saying all of Houston but you know, closer to a town some of those areas right now. Talk to a gentleman last night that was on our zoom call. There’s about 26 of us on there and his occupancy is very, very low. It’s almost gone. But he had, um, it’s I’m not gonna say the exact numbers, but say roughly 2000 people out of a plant there, they went down it within three days, they went down to 200 people. So that’s gonna affect, you know, hotels, because the people that are traveling once a month, once a week, the higher ups in the company, and then also the ones that live around there. If cost of living you know, if they’re living in a class A Class B around there, and they were doing 100,000 a year, and they have no job, they’re probably going to be going down to a class B or C, moving in with family and so forth. So a lot of that area is going to be, you know, moved somewhere else. It might take a month, two months after some stimulus checks or something else, but, you know, the stimulus checks aren’t going to get them what they were making, so there’s gonna be a big shift. That’s why you gotta check. I mean, we always ask what’s the demands with the market? You know, where your clients where your tenants at where your clients come from? It makes sense because now you’re like, Oh, now I know why you said you said to diversify and Have more demands there. I’m like, yeah, if you have a fear in Odessa and you have one big factory there, whatever, just say it’s a solar field and they got 200 employees there. And you know, 100 are staying at your apartment complex. We’re saying, that’s, that’s not, that’s not real safe. It might be for two or three years, but it’s not safe. So

Charles
Yeah, it’s that risk when you’re getting little far out of into tertiary markets. And you’re when you get out that far, it’s not usually as diverse with the job market. So you have to make sure that you’re really you know, when you start dealing in those type of markets, that there is some sort of diversity of what you’re dealing with because now they’re just not going to loan on it. So it’s kind of your lenders gonna say, no, we’re not doing that. And obviously, you might find some that will but it doesn’t make it a good investment. But so what happens if for for clients that you have to have hotel hotels, and they’re normal? You know, they’re very low occupancy right now? Are there ways that they can work with it, not just restructuring They’re financing. But like you were, we were speaking earlier, and you were saying that they can restructure kind of how their hotel serves guests and just kind of get that occupancy up.

Ryan
Well, I mean, I’m, I don’t know which part it was. We did.

Charles
Oh, they extended the extending it. extended stay.

Ryan
Okay. Yeah, well, I mean, some So, and it’s a little bit hard in the district there too. So a lot of people that have extended stays in certain areas right now, are doing better. For the the locals, the people that you know, may have a job and they don’t have good credit don’t have a house or a rental or anything. And they’re paying the 300 hours a week to stay at a hotel. If there’s 510 15 other hotels in the area that only have two or three rooms, those extended stays that had 50 60% occupancy. Right now there’s a few I mean, there’s not it’s not every single extended stay, but a lot of those, you know are doing 60 70% occupancy right now because of that. You know it, you just got to be careful with that. Get me if you’re getting a, you know, a Hilton Marriott a higher tier product right now, I just don’t know what the appetite is for them because tourism is going to go down first. Because most people right now it’s April, you know, if you’re looking at your June and you’re going to vacation, I mean we just cancelled our our 12 1213 day trip we had in Denver, we just don’t know about the virus, you know, things that are opening, you know, and other things that are out there too. So, we closed ours down, but we We kept our I think it’s our July or August our three four day trip to st about so a lot of people and that’s just a sample I mean, it’s just myself and but a few others I talked to they’re canceled their trip out of country because the things that are going on, and they’re doing stuff within an hour to three hours. So you’re gonna see a lot less traveled by cruises planes and all those things. But um, you know, a lot of hotels right now to get back on the topic. Some what we’re doing actually is we’re transforming hotels that were pretty big in the tourism area or were better in tourism at one time. And this is even before COVID-19 and we’re transforming them into apartments. So we’re looking for some interior corridor exterior corridors number builders, a Holiday Inn Marriott Hilton said a good bones to him in a good area that has low vacancy, and has more than one more than one demand. Um, you know, and they’re growing at a certain rate. So I mean, that’s one of the things we’re looking for. Most of you are talking about student housing and other things, but also see what your asset can do. Can you convert it to assisted living and can you convert it to something else? If it’s not doing well? There’s some areas that won’t rebound it off. It’s like between Austin and Dallas between two bigger cities, and you were doing well because of overflow from another city. But a lot of that’s going to change right now. It’s not the scare, but it’s going to be similar to the 2008 I said this about a month ago. You’re like, Oh, no, it’s not me that bad. Which, you know, we didn’t know. But now there’s cases of COVID that were here since January. They’re saying so I mean, you know, we weren’t completely prepared for it. And not to get in that topic. But we, we, we weren’t ready for it. But it’s good that we did close up some of our businesses, but you know, it’s time to get back on the on the on opening up some businesses carefully. So we can say the economy here.

Charles
What do you think from a lender’s point of view are the long term effects of COVID let’s say, you know, later this later, 2020 and, you know, years to come.

Ryan
I mean, the biggest thing is, if we rebound in the next few weeks, and things open up, and it doesn’t, the virus doesn’t spread as bad. We won’t be as bad but if this happens for like, an hour, two more months, I mean, they’re saying that, you know, 80% of restaurants won’t back up again. I mean, so that’s going to cause a lot. I mean, I have some, some restaurant owners that I know personally, that go on for six, eight week, vacations a year. So I mean, there’s it’s gonna affect a lot. I mean, just from the restaurants from the hoteliers, you know, not much travel there that the servers that work there aren’t gonna be, you know, making the money that they were making before with those restaurants and hotels. And then, of course, if they were getting their stuff dry cleaned, the dry cleaners are going to slow it’s a big circle. So, it depends on how long it goes on for the longer it goes on for the more it’s going to affect the economy, you know, and, and everything else, um, you know, the more people that go on unemployment, and if they’re getting $850 a week, they’re not going to want to work. So I mean, there’s a lot of things that that come in play with this now. I mean, a lot of hoteliers, I have restaurant owners dry cleaners, if they’re paying three, four or 500 bucks a week for their employees. And they’re getting unemployment 650 pluster to 250 Why would they come back to work so there’s a big effect in that now as well.

Charles
So it’s going to be I mean, the strict underwriting will probably last for for a while to come up. After this comes back around,

Ryan
I would say about a good year to a year to 18 months I mean look at oae I think it was around two years where it had that you know, stabilization process and then went back up from there but it’s gonna be a slow process but it just depends on how long it’s gonna last and how we rebuild and go from there. But we gotta you know, we got to buy local we got to stay local we got to spend money but if nobody has if not maybe you have jobs it’s kind of hard for people that don’t have jobs to spend money but the ones who do have the money we need to keep that circulation going. Kind of like 2008 didn’t at the beginning. Yeah, no for sure. Yeah, people pulled their money out of stocks everything else stopped held back and just just froze but you have to watch your money when you know you’re losing a job or you’re getting your hours cut in half. You know, I have friends that are in it that you know making six figures and now their hours got cut in half. So you know, they’re they’re making half the money. So You have to cut something and when everybody you know when 50 60% America starts cutting 20% it’s across the board

Charles
so it definitely drove down all the women you know i mean

Ryan
like the numbers that mean right now as I saw yesterday I believe it was 22 million are unemployed now I mean once things open up it might go that go back to, to you know 10 million or 6 million we don’t know yet. But um the less the unemployment of course the better so we’ll see how it goes. If we have 18 to 22 still unemployed. It’s not going to be good.

Charles
Yeah, no, that’s a that’s definitely true. The just like now moving along with with a couple different things I want to touch on is your real estate investor and you have a different when we’ve spoken before you have a different business model compared to a traditional say multifamily investor. Obviously because of your your lengthy experience in hospitality Can you explain what your criteria and strategy is when you’re buying properties and what a typical business plan looks like.

Ryan
I mean, it’s different for every single area because some people have a same business plans, like, Here you go, if it fits, it fits. But it has to be different for each for each area. If you’re looking for for multifamily in an area, you have to look at that location and see what jobs are there and the growth is there and everything else. I have people that that just look oh, I want to go here. They don’t know the insurance, the taxes they don’t know anything about. It’s why it’s good to go. Pick one or two cities close to you, or a partner, one or two cities that you that you like and know everything about those cities. I have people that are just looking in all over the US and don’t know anything about it. And then they go ahead and they put an offer into place look at a place and I’m like hey, just so you know, I’ve done some hotels the area their taxes are 5% higher in that town than the next. That’s why it was for sale for a year now. Oh, I didn’t. I didn’t know that and the numbers look good. But I didn’t see that really a kind of numbers are high I just get a little lower and I’m like you know know that the tax taxes and then when you buy it for that million dollar higher price then the seller soda for your taxes are gonna be even higher you got to fight those every single year so it’s different i mean you know working in the banker side I see risk. So it’s something that you want to make sure that you have a lot of a lot of demands a lot of a lot of jobs in there a lot of growth. You know, right now we saw that I saw yesterday or two days ago now that because of all this COVID-19 stuff that they took us a sample I think it was I think was about 100,000 people go look at the study again, that the majority of them did not want to stay downtown now they want to say 1015 minutes away from their jobs in the downtown market now. So there’s gonna be a new shift now. Um, you know, just because of congestion and a lot of people in you know, getting diseases or sick or whatever it may be. It might change a little bit or Maybe just a fear right now, but a lot of that’s gonna change a lot of I mean like like us like where you’re buying it it’s a different strategy but a lot of jobs are are going to change people right now with with zoom, I think it was the first week it multiplied four times the amount of viewers I mean the way it is now but of course there are services servicer couldn’t handle it and everything else but there’s gonna be a lot of people I mean working at their homes or offices. So these large offices are probably gonna be vacant, people are going to turn those into assisted living so stored so you got to think outside the box right now on what you’re investing. You know, we’re going to be investing in multifamily. multifamily is, you know, assisted living, senior residential assisted living, apartments, Senior Living and some other things involved in there. So, I have a couple people that are, you know, work in assisted living and we’re going to go assisted living in certain strategic areas. And then we’re gonna do multifamily, we have a couple different areas picked out that we’re looking at. But you can’t just buy in a city state that you have no clue about. And also, I mean, there’s a reason why something is for sale for for so long. If you look at a place to sell for a long time, why are the local entrepreneurs, investors, why they’re not buying it, there’s usually a reason now if you get a price, a lot better price. And they’re asking $3 million, and I’ll send you down to one and a half. probably worth it. But there’s a lot of things to look out for. I look for risk and I look at all the things when we analyze our deals and how our lenders analyzer deals I look at those aspects. Some others might not do that, but it’s all about that market that area because just because one person didn’t do well, you know, means that you can do well, but if it’s in an area that’s decreasing and decreasing and job growth is decreasing, just get a good price doesn’t mean it’s a good deal. So, you know, I people that see good deals and good deals different for each person. But, but I mean, it just depends on where it is. But..

Charles
So when you work with a different all different types of entrepreneurs and investors, and I imagine as you’re speaking before you definitely deal with some that are a little bit more inexperienced. What about what are some of the your successful clients that you work with? across all different types of asset classes and businesses? What are the common factors, common themes you see with them on how they review deals on how they bring deals to you, that differs from the inexperienced investor that doesn’t even know the taxes in the area, like you’re saying, and is focusing on the whole country versus two or three markets.

Ryan
I mean, I would say the ones that try to do it themselves, they don’t have a team, you know, something that’s good underwriting or say somebody is good at construction in GC. They’re like, Oh, I’m gonna come through and do all this and they’re not doing very well. Also, they’re not good at money raising. It’s good to have some that can help you raise money. Someone who’s good at that, that knows the plumbing, electrical, and all those things, you know, have a, have an asset manager, have somebody that knows the property management system. Why? Because if you just go in there buying an apartment and you get a property manager in there, how do you know they’re gonna do their job? Somebody’s got to manage your property manager. So I believe in team. And there’s a few things that I know. And there’s a lot of things I don’t know, instead of me setting me spending months or a year, two years trying to find something I don’t know, either just get a partner or two partners that can fill in those gaps, and work efficiently. And that’s what I see a lot of investors that that do, they’re trying to do all those roles or their training just buys to buy and they just, oh, here’s a good deal. And then they find out they’re all over the country. They can’t get these places. And you know, they’re not taking care of them. And that’s why people like investors like absentee owner, or somebody that’s not there. I live in California, another place in Pennsylvania. Okay, and then you go to Pennsylvania. They’re like, Oh, yeah, we never see the the owner, he’s never here. It’s, we could do everyone. So it’s more about being hands on customer service. You know, making sure your property managers doing their job, if it’s a hotel, making sure that you’re on staff because a hotel or a restaurant is a different animal, you have to be there, especially a restaurant, you have to be there almost every day. And that’s why most of the restaurant owners will go away for a week or two weeks out of this in the offseason. But during the season, they’re there 567 days a week, and sometimes 10 1518 hours a day. But it’s, you just have to be you have to love what you do. You have to be good at and you have to have a good team. That’s the way that’s the way I see it. And a lot of people also they don’t have the extra money in reserves and we’re finding that out now. The ones that don’t have enough for renovations or the renovation budget changes. And I’m asking them, hey, what’s your renovation gonna cost? I think it’s gonna cost about a million dollars. Okay, cool. I’m like, Where’s your, I want to see on Excel. I want to see what it is how much it is per room. Yeah, cuz once you start getting past the studs pass other things in it, you know, all we need are 200,000. And I understand that that happens, but have that budget in there where you think it’s going to be a million and you’ve got everything broken down an Excel spreadsheet of what you think you’re going to spend or your GC or whoever did that. You know, what happens if there is mold or whatever else, the next step is, you know, put in that contingency put in that 10%,15% contingency and go from there because that’s what makes people successful because out of the 23 loans I did I think last year, um, I think 18 or 19 of them all had renovations. at it, I think it believe it was at least had renovations. And the other ones might have had a small 20 $30,000 renovation but you know, because once you renovate your apartment, your hotel, whatever that business is, you increase the value of it. If you got a hotel, there’s 400 There’s one on each quarters, four quarters there. And I finance that asset. And it’s all brand new paint, new furniture, new sign, everything’s a lot of stuffs new in there where they going to do you start from the outside the lobby the new rooms you were going to say, Oh, this hotel looks nice pictures online and so forth. They’re going to get the most of the business there now and then the others. If they have money financing, they’re going to do the same thing, you know, following return, but if you don’t do those renovations right away, you don’t know if they’re ever gonna get done because you’re not supposed to and it depends how many assets you have much liquid you have. You’re not supposed to use your cash flow for your renovations.

Charles
Yeah, for sure. The reserves has been an issue I’ve seen with new investors I’ve spoken to not just COVID it’s just an ongoing people just don’t understand, especially with real estate, multifamily, commercial, whatever it is the correct reserves that are required for operating a property even if everything if we’re even if we’re you know The economy zooming around, zooming through, and it’s it’s December 29 2019, and you know, everything’s going great. And then you just two or three months later, and people don’t have the proper reserves. And that’s where it really comes out. Because you’re not going to be able to cover all different types, there’s, there’s gonna be more money that people are spending right now on property management, because they have additional people that are coming in cleaning, there’s additional supplies, it’s harder to get supplies, you know, all these other expenses that come out that even if you have 88% of your people paying rent, you still have a lot more expenses. And people aren’t factoring those types of things in with the whole with with how they’re doing it and six months reserves is usually kind of what people say, I like going higher than that. But now with like the new agency guidelines that are going even 18 months on mortgage and the principal and interest. I mean, that’s going to really change the whole dynamic of new, especially syndications that are happening now into the future and touch on one other point having With the management, that’s another issue or factor I see happen with new investors where once they get a property manager, they feel, hey, it’s all passive now, which is completely incorrect, because you have to be especially larger properties where you have weekly now it’s almost daily contact with that manager, and doing the asset manager, asset management of the asset, you know, through the property manager. So you’re making sure stuffs getting done. I mean, you’re working just like they are. I mean, it’s not you’re not taking any vacations or doing anything. And it’s just an ongoing thing that and that’s just what happens with real estate. It’s, it’s a business, it’s not just a passive investment.

Ryan
And that’s what makes it easier having that team. So if one person is delegating to operations, asset management, you know, and it’s like me, there’s a few different things on that. So, you know, your property management’s Michelle, hey, Michelle, how’s it going? Oh, it’s, you know, we just had four people move out and because if you don’t have relationship with them, they have nobody to talk to about that. problems or issues, you’re not saying hey, how’s the noi what’s in a lie? You know, explain to them what the noi means, explain explain these things to them. So then they feel that’s more of their, of their asset as well. And they want to take care of it as it’s their own, Oh, we got a, you know, a 15% in a while, let’s see if we can get 20% and everything, then they’re working harder than I agree with the pay very minimal for some of their property management or some of their managers in some of their offices. Depends how small or large they are, and they’ll pay more on bonuses. And they can make a lot of money on the bonuses because if it’s a place that was a low occupancy plays, and they can build that occupancy, especially if they just renovated it. They’re working hard for their money, but um, it’s a relationship. So I mean, cuz some people, how long have you talked to your property manager? Oh, I don’t know. I mean, how they visit the property. You know, I mean, most property managers don’t ever visit the property. The ones that are larger building and, you know, I can see if it’s a newer place, you know, it makes sense. It’s ran well route, ran, ran well, and everything else is great, you know? old machine, but the thing about it is, is it’s good to go check when your place if you have four partners involved, you know, take take one month here, one month there, so you’re going every four months to that property. That’s the best thing. And then also, I hear it all the time. I’m just going to go visit the property tomorrow at 8am. And they’re telling you every manager on the person that I property that they’re going to meet when they’re going to be there. And I talk about a lot I just don’t get it, you know, if it’s a if it’s a hotel, and you’re, you know, your apps to your go, Hey, I’m gonna go visit you know what, you know, they’re doing what you say you’re gonna visit there Monday to Friday, Saturday or Saturday. So they’re sweeping, they’re they’re mopping they’re cleaning, they’re, they’re doing this to the date they haven’t done in the last four or five months or three or four weeks. So that’s why you go unexpectedly and you’re like, oh, The place looks beautiful here. Oh, and they’re always going to keep up with it. You know, not every single place or person is but the ones that know you’re there and you have a good relationship with them. And that there’s the ones that are going to be keeping it up like you’re always going to commit restaurant owners the same thing. You know, you’re there and you have three or four restaurants in the area to restaurants, you’re going back and forth in those places. If you’re never there, they’re gonna go he never comes in here. She never comes in here. But it’s about keeping that relationship with your employees, your tenants, your clients, and and coming in seeing how your businesses

Links and Contact Information Mentioned In The Episode:

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About Ryan Dumas

Ryan Dumas is a Senior Associate with GRP Capital and has been active in the hospitality industry for 25 years, practicing in financing, lodging, and food and beverage.
Mr. Dumas’s extensive network of hospitality professionals and active participation in the industry has been a driving force to support GRP Capital in becoming a nationally recognized financial advisor and direct lender. Having spent four years in equipment financing, Mr. Dumas served as Senior Business Development Manager at Marlin Business Services Corp. and a representative in Commercial Sales at Blue Bridge Capital. Mr. Dumas studied Business Management at St. Petersburg College.

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