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Global Investors Podcast
GI53: Scaling Your Real Estate Business to Over $60 Million with Mike Vann
June 24, 2020
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Mike has been investing in real estate for almost 20 years throughout Arkansas and Missouri while balancing a family and a full-time career in the Medical Device Industry. He has built a $6M+ personal portfolio across multiple asset classes, consisting of Single Family, Small Multifamily, Apartments & Commercial properties. Having worked in the family construction business, he gained experience in both doing the work and in project management. These skills served him well as he has completed many flips, rehabs and a $7k per door heavy lift on the apartment complex renovation he purchased in 2017.

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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 Mike van. Mike has been investing in real estate for almost 20 years. He built a $6M+ personal portfolio across; Single Family, Small Multifamily & Commercial properties. More recently Mike and his partners have syndicated over 1,000 multifamily apartments, mainly located in the Midwest. So thank you so much for being on the show.

Mike:
Absolutely. My pleasure, Charles. Thank you.

Charles:
So you’ve been involved with a number of different professions and what was your background prior to starting to invest in real estate?

Mike:
Well, the grew up with a construction background. Like my parents have a construction company and so I grew up kind of doing that work mostly the grunt work, but and worked my way through college actually as a maintenance man and apartment complex among other jobs. But so I had a good, good background in construction and then got into medical sales after college. And you know, I’m still still work full time in the medical device industry. I’ve been doing that for almost 20 years now. And that has also served me well, the, a syndication, because I work with a lot of high net worth individuals and they know what I’ve been doing over this this whole time, as far as investing in real estate. So.

Charles:
Oh, awesome. So why did you choose real estate as your investment vehicle from your, you know, as a start off, obviously it’s a part time thing. And then I went into now it’s full time.

Mike:
So really the, you know, we all see the late night infomercials with the fancy cars and the mansions in the background and all that kind of stuff.

Charles:
Carlton sheets,

Mike:
Exactly. That Carlton sheets, exactly where I got my start saw that late night infomercials. And at the time I was working for a pharmaceutical company and went through two layoffs successfully. I made it through the layoffs successfully and kept my job. But you know, at that point it showed me that you cannot rely on a corporate America that were just a number basically, and needed to do something else to have you know, a backup plan. And that’s kind of what led me to real estate.

Charles:
Awesome. So tell us about your first couple of real estate investments and you know, what they were, what type of properties and what happened?

Mike:
Well, like most people I got started with single family, a small multifamily. The first property I actually bought was a duplex for sale by owner, was driving for dollars using my Carlton sheets methods and a negotiated a, a money back at closing type deal with the seller. And, you know, I was off to the races from there, but I learned very quickly that I’m not cut out to be a landlord. You know, the first few properties I had, I managed myself. And I’m just not cut out to, to, to be a landlord. I mean, I can do all the maintenance and stuff myself, but as far as you know, I’ve just got too big of a heart for people and the sob stories as far as why I’m late on rent and this and that just led me to know that third party management was the route for me.

Charles:
Yeah, no, I know how that works. A self managed property for six years and it was my brother and myself, and that was my, my brother. I would have to take care of doing the collections on that and you got to put it, you have to really put your foot down and but it’s, it’s, it’s definitely, it’s very difficult if you’re, if you’re how full time profession, that’s not the real estate because it, I mean, you have to be available if you’re self managing without anybody else. I mean, you have to be available all the time, so it’s very time consuming. But you know, that’s, that’s the beauty of passively investing or having investors passively invest with you from your other businesses and they don’t have to worry about that.

Mike:
Right.

Charles:
So your current company focuses on multifamily acquisitions in the Midwest and the South. So what is your role at Trident Multifamily?

Mike:
So, because of my construction background, I do handle a lot of the capex projects as far as heading that up, getting, you know, the contractors lined out and going over bids and, and so forth. So that’s kind of my, my role. We all have overlapping roles as far as what we all do. We all are involved in all parts of the business. And you know, I think that’s very important cause I have two partners, you know, Rodney Miller, which you’ve interviewed before and then Carl super crop and we all have overlapping, like I said, parts of the business and I think it’s very important to know all parts of the business, but we each have our specialty kind of where we take on you know, different aspects specifically, but capex is my primary objective.

Charles:
That’s great. Yeah. So you guys have a pretty rounded partner between underwriting capital, raising someone else done work with renovation, asset management, which is, which is which is quite the, I mean, I imagine now which I want to get into his COVID and what you’re changing with it, but how is your investing strategy and goals changed over the past couple months with COVID?

Mike:
Well, you know, first and foremost, our concern was the health and safety of our residents and the staff on site. So, you know, we worked with our property management company. They’re very good and they put several measures in place. You know, we went to doing emergency maintenance calls only to minimize exposure to the residents and the staff. And you know, as far as investing side, you know, capital preservation was our first and foremost goal. So, you know, we, we did decide to withhold distributions, like probably 99% of everyone else out there just because the, the depth and duration of this crisis, no one knew. And so, like I said before, with capital preservation being our primary focus we wanted to be as cash heavy as possible. So we changed our capex plan. Basically put a halt on that for now and went to just doing, you know, just to make readies and things like that. We’re still leasing. We were doing that via appointment only. And sometimes if, if possible, we do it virtually. But as far as acquisitions, we’re kind of in a whole pattern for now. We see that there would be some potential opportunities coming on the backside of this from people who may not have been positioned quite as well. You know, unfortunate for them. Hopefully we can intervene before they get to the bankruptcy side and help them out of a bad situation. But we also feel that there will be some, even some bankruptcy opportunities on the other side of this to pick up some properties opportunistically.

Charles:
Yeah, for sure. There’s definitely going to be some investors, some properties that come up that have been over leveraged incorrectly leveraged, or just in incorrectly there, they just don’t have the reserves inadequate reserves. And I think from reviewing so many deals over the past few years and in the last 24 months, I imagine, I know Carl has told me they’ve deals as well from other syndicators and very light on reserves and all that. Stuff’s going to come out to play because it’s just not from here moving forward with any acquisitions. I mean, they’re talking to 18 months you know, principal and interest in reserve. And then they have now for, I mean, no one was raising that for the most part, for other properties reserves. It was all six months or something. Right. So right.

Mike:
And, and that makes deals you know, with the new reserve requirements that makes most deals not, not paying out from a syndicator standpoint, you just can’t hit your return metrics with having to hold 18 months of reserves in cash.

Charles:
Yeah. So if we get a little dip in price though, maybe that makes up for it a little bit, but at the end, currently it’s not, the reserve will definitely be compressed. I mean, you won’t have the influx of investors. I think like you had over the last 10 years really.

Mike:
Right. That’s one other thing we’re trying to do too, is, is educate our investors to potential uptime, upcoming opportunities and prepare them to take advantage of them.

Charles:
Yeah. Yeah. We’ve done the same with what you’re saying in regards to the preferred returns. We’ve, we’ve put a hold on that. And that’s also happened with our active and then also for our passive investments as well. They’ve done that, which like, you know, I’d rather have it done that way. And I think, you know, I’m speaking to the, the investors we have, they’d rather have it done that way as well, where there’s no capital hall, Hey, make sure you weather it don’t call me for more money, but just make sure that, you know, the property stays, you’re keeping it rented, you know, everything’s operating and then we can restart, like you said, the business plan, the capital expenditures and down the road, once we actually are up on the uptake of this, right. So when you’re having 20 years experience in real estate investing, what would you tell a new investor that you’re working with or that you’re consulting with?

Mike:
You know, one thing that you see is so many people are so anxious to get a deal that sometimes they will sacrifice their fundamentals of real estate investing. You know, they may buy in a little bit a sketchy of a location or even worse sacrificed or underwriting fundamentals and ended up overpaying. And so I would just say, you know, be patient and don’t be so anxious to get a deal, but get the right deal.

Charles:
Yeah, no, I agree with that. I imagine you have investors bring you deals. So are they just, when they bring you deals, do you see the underwriting is just very aggressive in the sense that they’re saying, you know,

Mike:
Yeah. Rim projections your rent increases are projecting, you know, three to 5% sometimes regardless of market, which is, is very very aggressive. The reversion cap rate, which, you know, we all know is kind of a best gas, but you know, you’ll see people underwriting, a reversion cap rate, maybe 20 basis points over what they bought it at. You know we, we try to use a full a hundred, a hundred basis points over, over our going in cap rate at a minimum at a minimum 0.5, you know, 10 points a year for our average five year old, but that we try to go a full point at least on reversion cap rate. And that’s, that’s probably the two biggest mistakes

Charles:
When you’re underwriting a deal. What do you guys usually put pencil out for reserves on the property?

Mike:
As far as 250 unit per year.

Charles:
Okay. All right. Awesome. And for other investors that you’re, if you’ve spoken to any investors or anything that you would say for book-wise or any type of education that you would suggest, is it important for them to work with a mentor? Is there any books that you would suggest them to read prior to getting involved with real estate investing

Mike:
The, you know, rich dad, poor dad is a basic fundamental of most real estate investors from a mindset standpoint. You know, it really helps you change the way you think about money. If you’re looking at that syndication either from an active or passive standpoint, Joe Fairless, his new book is fantastic as far as the nuts and bolts of understanding real estate and syndication. So those two are probably the best two that I recommend that I think Joe’s book is the one I’ve given way the most in the past year.

Charles:
Yeah. That’s a pretty in depth novel of a pottery out outta syndicate real estate. So I mean, I know he focuses on multifamily. You guys focused on multifamily, you’ve been involved with a lot of different asset classes within real estate. What are some of the factors that you bring you back to investing and having multifamily as your, you know, your predominant asset class that you invest in?

Mike:
Well, primarily it’s you know, not the numbers. I mean, you’re dealing with larger numbers. You have you know, more doors under one roof, so to speak. So the scale is really what, what brings you back to multifamily over single family and small multifamily, I’m actually selling some of the stuff. I usually buy it, whole guy hold forever. But but I’m selling some of my smaller stuff too, to do more syndications, just because the economies of scale you know, from a income and expense standpoint.

Charles:
Yeah. It’s a lot easier to cash flow out when you’re, when you’re speaking to new investors and they want to start with smaller properties. I mean, it’s a great place to start, but if they’re looking to get that consistent cash flow it’s very difficult with the smaller properties, especially in a single family, mean I still own some, the three families and stuff that I initially bought years back. I mean, you can get money out of them, but consistently, even in one of those types of properties, you have one unit leave or you’re making make ready. And one of them, I mean, you’re not taking any money out of that property and you might not be for another two, two months or something like this.

Mike:
You mean a simple illustration that I tell people is like, look, if you have a single family versus even a duplex, if someone moves out of your house, you’re a hundred percent vacant. At least if someone moves out of your deep lakes, you still have 50% occupancy. So that, that seems to click immediately for most people. When they think about it that way,

Charles:
What type of commercial properties did you start with initially? You said you were doing that with your small multifamily, what? That

Mike:
I just had a couple of small they were actually single family homes that were converted into offices. And so they were rented out that way through, through commercial to commercial tenants.

Charles:
Oh, interesting. Yeah, that’s a, that’s a normal thing we see with older, with older houses and stuff like that. So, well, thank you very much for being on the show today. How can our listeners learn more about you and your in your company Trident?

Mike:
Oh, well you can go to our website tridentmultifamily.com. You can follow us on our social media platforms, Facebook, LinkedIn, Instagram, Twitter, YouTube. We try to hit them all. And and then I’m coming up soon. We’ll have, have our Trident multifamily school. There’ll be launching through our website just to educate people on multifamily, investing from the, either an active or passive standpoint.

Charles:
Yeah. I was going to ask you about that. Is that a little bit more, is that going to be a one-on-one or is that going to be just a straight online course? How are you guys

Mike:
Primarily, we, we wanted to put it out there simply just to educate passive investors, because a lot of people that we have coming into our deals, our friends and family, or people that we meet at different events and so forth, they learned that what we’re doing and the returns that we can provide and don’t know anything about how to invest in real estate. So instead of going out and having him read Joe Fairless, his book, we wanted to put together a few videos to explain the nuts and bolts of it so they can gain a better understanding of it. So yeah, that was the primary focus of it. We may eventually, you know, roll it into something more in depth and, and, and all that. But primarily just to, just to, as a giveaway or free tool to educate passive investors,

Charles:
Yeah, I definitely see that when you’re raising money from passive investors, it’s education is probably the, the, the, what you spend your time the most on, and you’re explaining them how it works, how your firm works, how other firms are going to work with something what they can expect, what issues you’re avoiding and kind of like how you’re navigating this whole process, purchasing a property. And especially like you said, with the larger multi-families, yes, it’s much easier on the scales of economy, but there’s a lot more underwriting it’s than when you’re just dealing with, you know, a three family or a single family and you have one lease. And you know, it’s, it’s very simple, it’s a whole different underwriting strategy.

Mike:
And not to mention, you know, you, you want people who are going to be investing with you to be educated from his standpoint. You know, it’s, it’s a lot of money. I mean, that they’re putting, they’re putting at risk because it is a risk. I mean, even the real estate that a fundamentally sound investment vehicle there’s always a risk associated with that. So you want them to understand all the ins and outs and an upside and downside of, of that investment risk. So I guess we educate, we try to educate through all of our social media platforms, as far as you know, what it’s all about. But this is something, a tool we’re developing to really get into the nuts and bolts all in one place. So people can truly understand and be educated whenever they do make a decision to invest with us.

Charles:
Okay. Awesome. Great. Well, thank you so much. I will put all the links that you mentioned earlier into the show notes on YouTube and the podcast. So thank you very much. And looking forward to connecting with you in the future.

Mike:
Absolutely. Charles, thank you.

Charles:
Thanks.

Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. 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.

Links and Contact Information Mentioned In The Episode:

About Mike Vann

Mike has been investing in real estate for almost 20 years throughout Arkansas and Missouri while balancing a family and a full-time career in the Medical Device Industry. He has built a $6M+ personal portfolio across multiple asset classes, consisting of Single Family, Small Multifamily, Apartments & Commercial properties. Having worked in the family construction business, he gained experience in both doing the work and in project management. These skills served him well as he has completed many flips, rehabs and a $7k per door heavy lift on the apartment complex renovation he purchased in 2017.

In 2017, after years of informally helping people through advice, mentoring and sharing his knowledge of the business, he decided to formalize and scale those efforts to help other busy professionals realize the security and freedom that can be attained through real estate investing. He is achieving those goals through apartment syndication and has since been involved in the purchase of approximately 1000 units in Kansas, Oklahoma and DFW valued in excess of $60M. Mike is a Principal and Co-Founder of Trident Multifamily LLC. Trident helps busy professionals create and preserve wealth through passive investments in cash-flowing multifamily real estate investments in the Mid-South (midwest & southern states).
Besides educating and helping busy professionals work their way towards financial freedom, Mike enjoys being involved in local, national and international mission work and believes “We are blessed, to be a blessing”.

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