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Global Investors Podcast
GI64: Increasing NOI By Focusing On Asset Management with Jason Yarusi
September 9, 2020
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Jason is an active Real Estate Syndicator and Investor. In 2016 he founded Yarusi Holdings, a multifamily investment firm currently with over 800 units under management. The firm repositions properties through operational efficiencies, moderate to extensive renovations and complete rebranding.

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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 Jason Yarusi. Jason is a real estate syndicator and currently has 800 units under management. He hosts a YouTube channel and podcast with his wife and runs a monthly meetup in New Jersey where they are based. Thank you so much for being on the show! Jason.

Jason:
Yeah. Thank you for having me. How are you doing?

Charles:
I’m doing well. How are you?

Jason:
Doing awesome, man. Appreciate your time.

Charles:
Yeah, no, thank you very much for being on. And so give our listeners a little background on yourself prior to starting your current real estate business.

New Speaker:
Sure. So honestly I live in New York city for a while. It’s where I met my wife you know, coming out of school. We, I took a nontraditional course. I started working on a lot of different facets. So open in opened a restaurants open and sold a brewery. I’m working in a bunch of different capacities that way, traveled abroad and worked abroad for a while. And then I came back to run this very large outside restaurant where my wife was currently working called, called the frying pan in New York city, worked there for a number of years and insert my family had a small construction business, heavy construction business here in New Jersey. I had worked with my dad at some point during our past, but had moved in different directions and hurricane Sandy hit and the business just exploded because there the businesses have we aligned on flood zone work. So my brother and myself and my brother was working for me at the time, moved out to New Jersey to help with the family business and that was give or take about eight plus years ago. Really helped them that, but we always knew it was always in my mind that I, my wife and I just got married. We were having our first baby. And we were just on that fact of just saying, well, we want to find something, get our time back. And that led us to, to find real estate, find a bunch of people doing real estate. And then what we thought was the next logical step. My wife got her real estate license. We started flipping and wholesaling. So instead of getting our time back when we were so busy with the construction business, we were actually just creating ourselves more steps, more activity, you know, more work. And it didn’t occur to us until we brought some small rentals out of state that was a process that we could use our management experience, use our work experience to really set up a process and use that to Excel and doing that process has been been great and those properties did great. So we sold them just with the premise that once knowing that we knew it couldn’t scale. So we said, okay, this isn’t going to meet that level of getting your time back because it’s going to produce so much effort to acquire a bunch of two, three and four units to reach that scalability level. So learning everything I could about large multifamily, you know, find the right mentor, listen to the right podcast, you know, finding and just taking it all in and just really honing in on that space. We transitioned back in 2016, a bar brought our first 94 unit back in 2017. And then now a way it’s gone from there.

Charles:
So you obviously got into real estate because of, for your family business. And then you got into rentals obviously to get some of your time back. And I made the same kind of mistake or stepping stone, I guess you would say, and started with smaller rentals up in the Tristate where I’m from as well. And cause there’s so many of them out there, but it’s not a scalable business model from the onset, like when you’re going into a larger property. Tell us about your first couple real estate deals you had and then some of the small multies you had and issues you had. And then I’d also like to hear about your first larger project when you really went to a more scalable route.

Jason:
Sure. So I think the learning lesson was you were with the floods on projects in heavy construction projects. We’re, we’re used to doing very involved projects and I took that into our flipping business, right? So we would make prod projects that were taking eight to 10 months since because we were, you know, lifting a home or moving a home and adding levels and doing all these other parts of the project. So we took on the most complicated nature of the process besides the work of actually the flipping too. So we combined both avenues there which the payoff is, is, is larger, but now you you’re, you have that holding pattern where there’s so much time in between that, that so much can happen in terms of anything, right. And you, when you do only have one exit, right? So it’s a, it’s a fix and flip, not a fix and do something else. We realized throughout that we had a transition. So we started transitioning into different rental or different flip models where it was less of the quote unquote heavy lifting. But that’s, that’s a very saturated market cause there’s a lot of people looking at those they’re they’re moving into the small rentals. It became that my wife met a friend who was doing this. So we, we pay you back in the process and we did the same thing with large multifamily too, is that you don’t have to reinvent the wheel. You just have to say, who’s doing this successfully. And how can I use that model if it attracts and tracks me to my advantage, to build off of, and to grow from. So we did really well with the small, small motives, because we had an idea where we were finding properties that needed a ton of renovation there, put the vacant and basically buying very cheap, putting money into them, getting them rented very quickly. But we had the luxury instead of finding single families, we were finding two, three and four. So it was that experience of saying, okay, now we have some leverage of having at least two, three or four tenants in there where if one moves out, we’re not at zero, we have something else coming in. But seeing that model, I still had one roof for two units, or I still had the mechanical is one system there. And I couldn’t basically build out a process and treat it like a business. I had to treat it again like a home, right? Cause a, the investor who’s going to buy it is still gonna have to have a lender. Who’s going to look at it like a home. So that, that type of finishing is going to matter the things that don’t allow you to scale the business, we’re going to keep me in a place I was so knowing that even though we were doing great with them, we just said, well, there’s no reason to, to play both sides. We know where we want to go. So we liquidated those properties and then we quickly transitioned into learning as much as we could about large multifamily taking in everything putting the blinders on with a lot of podcasts and a lot of things that, that talk about all these different amazing real estate avenues and just said, okay, I just need to find everything that’s situated with large multifamily. And that led us to Louisville, Kentucky, which was not our first market, but the second market we really started diving into. We built a team, we grew out our process. We understood the areas we wanted to be into in the market, some markets we wanted to dive into, we set up really our internal and external partners. We got a bunch of investors that we had spoke to, to, to identify the type of opportunities we were looking for. So we basically had not taking capital, but, but it’s set up the opportunity to help a lot of people with these properties, if we could find that opportunity. So it took us a couple and we found a deal. We made an offer and you offer, we, we, we gave the right story of why we offer, but we offered about a million less than, than the asking price. And they countered basically back at asking. So, so we were pretty far apart. So he said, we appreciate your time. You know, thank you. And we walked away and what we did do, which is something we still do today. And if anybody’s listening, you should definitely do is we tracked the offers we made and we look back five, six months had gone by, and that property not transacted. It was off market to start with and went back to understand that probably most people were offering where we were and the sellers just had their mind set on a number we’ll time changes things, right. So we went back in again. We, we said, you know, would you like another offer? And they were agreeable. So we put together, put in front of them and offer that was only $50,000 higher. So we’re still, you know, almost a million off. And they came down like 600,000. So at that point we knew that they were motivated to sell and the story had gone that the father had died. They had kids who were not kids, but they were really like in their fifties and sixties who lived out of state, they didn’t want to deal with this arbitross because they actually had a thousand single family houses that they thought was going to be easier to manage than this. And they were doing, I mean, the, the property did so many things where the bones were good because it was built by the dad in the seventies. But just operations were horrendous. The leasing person couldn’t accept basically rent payments. So they were having a ton of problems with collections. Yet I mail it or take it down on the least, wasn’t motivated to show units. We never marketed there. And there were six vacant units just when we walked in, they were ready to go. They weren’t capturing data, had no application process. They weren’t capturing basically on simple things like like pet fees, they had two laundry rooms and there were 600 units that surrounded us, those laundry rooms right there. One was down in the other one was in service, but not really on a high point. So we put them on, open them up out there. They had basically three maintenance people where you really needed one to one and a helper. And it so happened. We found out later, but they were actually running their single family maintenance out of there too. So it was for that. So it was boosting up really what their expenses were there. So we looked at everything we could just to build out the process there to make it more efficient property. And I didn’t even touch that day. The rents were easily a hundred to $125 under market compared to anything around her. So you walk across the street, same product and never asked, but potentially could have been built by the same by this owner at some point. And you had no better process. You were just offering higher rent and you were getting that higher rent a hundred or $125 more. So for us to walk in and just really find the natural progression to really push units up to market at classic renovations really allowed us to Excel quickly.

Charles:
Yeah. It’s amazing. The inefficiencies you’ll find. And obviously that’s a little bit, it’s not as usual the seat on larger properties. Cause usually there’s more partners involved with it, but if they bought it themselves, I would see it all the time on smaller properties where you’d have a paid off property and they’d live in like the first floor of a three family. And they wouldn’t even rent out the other two because the mortgage was already paid and there’s like, they’re like, Oh, I don’t want to deal with it. It’s already paid off. And they’re just retired people, but it’s amazing when the everything’s commingled together with what they’re doing, they’re taking care of all their other businesses. They’ve got three times as many people as you really need for that type of property managing as handyman side. So that’s great that you guys found that. Did you find that on market or was it off market?

Jason:
No, it was literally through relationships. We we’ve done transactions through brokers found them through property managers, through insurance people, cost segregation, people straight the seller. So there there’s, there’s no right way. There’s just in every way. And creating a narrative that you can make sure you’re specific with what you want. A lot falls on deaf ears, because if I I’ve came to Charles and said, I want to buy multifamily and you were a broker like, okay, well, I don’t know how you, you know, like, I don’t know how to help you at all. But if I get specific and say, I want to buy 75 to 150 units, BC assets built between 1970 and 2003 to $6 million in the South South central submarket. You’re like, okay, I’m either, maybe you have something right now or now, you know what you want. So next time you come upon that product, you say, Oh, Jason likes, let me let me see what he’s doing.

Charles:
Yeah. And even if you haven’t taken down properties already, just having that dialogue with the broker, they’re going to know you’re serious.

Jason:
Yeah.

Charles:
Because it’s just, like you said, you multifamily could be two units. They could be 250. So I mean it, it all depends. So what is your current investing strategy right now in markets that you’re interested in? Are you still in Louisville?

Jason:
So in Louisville, so we have Louisville. We have Georgia while we’re buying a property in Eastern PA. Longterm debt reserves cashflow. I can never jump on that or you can always win with that in any market. It gives you the ability to operate efficiently. So, and to stand up and, and find the right investments now and it’s just doing the digging, right? So, so it may limit the opportunities that are out there, but I’m not going into heavy, heavy turn right now, especially right now, when there’s continued potential uncertainty or unrest, there will be opportunities, but we don’t know where, where the ball’s going to drop yet.

Charles:
Yeah. So that’s why one thing I want to kind of transition into. So your firm focuses a lot on asset management, which is, I think one of the most important parts of the whole real estate investing scheme. What is your, like, what are the principles does your company employ when you’re doing asset management in times, not inside, COBIT like, and what you’re doing now to kind of keep everything stable in environments where you can a big tenants and you’re, you’re kind of working a deal with anybody that’s not paying on time.

New Speaker:
So If you always start with the approach that I’m trying to make this a better community for people to live in, that’s always going to win for everyone, right? It’s going to, it’s going to help you. It’s going to help your building. It’s going to help your tenant’s going to help your investors. And if you start with that approach in there and you, so the first thing we do is not go in there and say, okay, I can increase this a hundred dollars. Everybody rents, everybody’s rents up. I start improving the building, bring the building up to perform and operate a, so maybe resetting the branding, doing the landscaping, cleaning it up, taking care of the hallways you know, making sure the amenities are up doing the work that the people know that they’re going to have a better place to live. And then as we gradually start doing, you know, releases and other points, we’ll start increasing the rents, but we’re not gonna take them all the way up to market. We’re gonna start now potentially being slightly below market. But on that stance, let people know that they’re going to have a great product to live it. So we’re here to make this place better for them to live. And that same conversation was really understanding that the help the tenant needs at this time. We, it was surprising to me, but one thing that was hurting tenants from paying rent when COVID started, where there were a few, not a ton, but they just had didn’t have internet access. So they couldn’t get on to fitness. So we opened up the leasing office, set time, social distancing, where they could go in there and basically fill things out. Well, if you’re not asking how we can help you, and you’re saying, you owe me rent well, then that person’s not going to explain why what’s the barrier to them to be there. Cause I always go on the premise that people are good people. There’s going to be a few that are going to stand out, but the majority people are good people. And they don’t want to be on the street either. So our goal is to have heads and beds. We’ve seen leasing, be very strong collections of have remained constant. And so we’ve continued that narrative.

Charles:
Yeah, no, that’s great because I feel that even without COVID, it’s one of those things where I think with the value add model, it’s not a hundred percent in every market because when we went through like, Oh six Oh seven Oh eight Oh nine, we were raising rent, but it was like inflation raises, right? They weren’t you know, we, weren’t putting a new bathroom in and jacking rents a hundred dollars, you know, you know, all this kind of stuff. So it was something that I think that’s a value added component. That’s kind of overlooked is by just maintaining your occupancy minimizing turnover, which is a huge expense. Any landlord will tell you. And when that’s, when that’s done, you can increase your NOI without having to put huge amounts of money into cap ex and Jack people’s rents because something happened like that somebody’s going to leave, right? If you’re raising rent on it, you’re gonna leave. If you can kind of maximize that in the sense of where your, you know, raising the rent a little bit, you’re doing a little bit of work. They see what you’re doing. You’re a little flexible, which is normal for like C class. Cause when I used to self manage C class would be something where you know, somebody didn’t have the rent, you have to kind of work a deal out, right. Which is not as normal and B class kind of properties and above, but C class. There’s always something, unless you want to have turnover every month because it’s very month to month paycheck to paycheck type situations. But yeah, that’s great. That’s a, that’s an awesome way of doing it.

Jason:
Yeah. You can’t go wrong with that narrative. Right. And, and on that fact the people do want to live in a community. So your, your highest thing is is really the amount of debt, the cost of turns and that the cost of having vacancy. Right. So if you can limit that right. And not capture maybe a heavier term, because it’s a, it’s a tenant that lived there for a while instead of capturing a hundred hours, you do, you know, six months at 46 months at 40 or six months at 56 months at 50. Well that in the backend, it depends on your business approach. Right? Some people say, no, I’m gonna rip the bandaid off. I’m gonna go in there. I’m going to push that right away. But we’re always trying to say, okay, how can we maximize this building, make it perform to the best level. Really continued to meet the narrative, the narrative for investors and push forward from there.

Charles:
Yeah, no, that’s a great model. So you wrote up a YouTube channel podcast, the meetup, what is the importance of branding with Anne for anybody’s real estate business?

Jason:
So the need for our resumes is no longer part of the agenda, right? So, so people are going to go source you on social media, right? That’s going to be their, their first introduction to you. So if what you’re trying to do does not match what you’re presenting on social media, it’s going to taint your image, right? So if you’re talking about finding great investments for your investors and your first picture is you, you know, with a beer hat on or something like that, right. You’re, you’re now you’re setting that narrative. So you’re not creating your brand and we’re all brands, right? So my grandma out there doing, you know, posting about whatever she’s creating that brand narrative of, of what her backdrop is. And it’s even more important today because there’s little read between the lines, you would just take her face value. What is there? Right. So setting up that narrative, being consistent with your message, allowing people to understand what you do and why you do it. It’s highly important.

Charles:
So you consistently raise money from investors for your projects. So what have you found to be one of the best recipes, roads to raising money from passive investors?

Jason:
Don’t ask for, it would be the first one there. I think don’t find the deal, then need the money. Find the investor, see how you can help them, see what they’re looking for, because I could have to me the greatest deal in the world, but if it doesn’t fit to help them, it’s it doesn’t matter. Right. So find what they want to do. Are they looking for, you know, diversify for cashflow for, you know, tax benefits, what is it that, that fits find your threshold for tolerance, understanding what they’re looking for, explain to them, yourself, what you do, what you’ve done in the past and what you’re looking for. And then present. I used to present, now we can present real deals, but in the beginning we presented a mock deal. Ideally what we’re looking for, how it would work. So we would garner interest from there. So the leg work was done. And when I would go back and find a deal while I can just go to those investors again and speak to them and say, okay, we’ve had that deal. Are you still feeling like you’re going to commit for that 25,000? At least I have in my mind how much I can raise number one and number two knowing how much debt I can qualify. Right? So instead of just offering them properties, blindly, not knowing what it is. Cause if I came to Charleston said, Hey, I you want to invest in this deal? I gotta close in two weeks. Just let me know right now. Cause I got, I got to know, you know, like you don’t feel good. You, you, you feel like you’re, you’re being pulled into something. Instead of being it being basically I’m allowed to make a rational choice and you’ll, you’ll hear a lot more nos that way.

Charles:
Yeah. Now the other thing too, is what you’re saying about the mock deals I used to present previously, and I would show those to investors and be like, this is kind of what we’re looking at. Something I’ve invested in the passively. This is what I’d like to bring to you kind of a, and then you have an idea. Cause every investor is different where they are, like you were saying, there’s some investors that don’t need the money that rather have a longer return, a larger return and wait for it. Some of them want to have cashflow three months in. Right. So it’s kind of figuring out, and then what you have when you have something you bring to the right investors, show it to them. I would probably send it to all of them. Just show them an idea of what you’re working on, but it’s great to say, Hey, this is like exactly what you’re you’re you were talking about three months ago or whatever.

Jason:
Yup, absolutely.

Charles:
So what factors for you and your team have you implemented that has led to success in your business and personally life?

Jason:
Consistency, honesty. That that’s the big thing, right. So everything happens with consistency and, and pivoting as needed. Right. So consistency with the routine, right. With our process. So asset management, right? So having consistent talk track where every week we get on the phone with property management companies, we go through the process. There we talk construction we talk open balances, we talk leasing, we talk open objectives for my life, just having a consistent morning routine to get me in the flow. For our family, just finding that consistency. It’s not every day going to be perfect, but at least gives you that backbone to, to rely on when something, instead of just dealing with chaos all day and try and fit in the mold, you now can have those moments to work on the things that are outliers because you know, you have your consistent plan with their other daily focuses.

Charles:
Nice. Yeah. That’s great. The consistency especially goes back to the branding where you’re putting stuff out consistently with what you’re doing with your work. And you show people that, Hey, I’m in this business, I’m doing something it’s amazing when you’re putting stuff out like that. And people want to contact you because they want to work with someone that’s actually doing something. So it’s even if you’re doing something you’re not posting or you’re not showing it. And like you said, the resume’s kind of dead. It’s everybody’s going on social media. If you’re putting up an even if they’re smaller deals and someone’s doing deals that are 10 times the size, but they’re not putting in social people out to you. Cause you’re like, wow, this Jason’s really doing something. He’s got deals going on. I’ve always wanted to invest in that city and that asset class, et cetera. So that’s, that’s a great way. It’s a great model to work by. So Jason, how can listeners learn more about you and your business?

Jason:
So you talked a little bit about our podcast that you can go over and find us the Jason and PD project. Same thing on YouTube. I appreciate your time today. I want to know more about multifamily education process. Some people we help out there, a multifamily formula is the business or MF formula.com.

Charles:
Okay, great. So I’ll put all those links in the podcast and YouTube notes. Thanks so much for being on today. Jason, look forward to speaking to you in the future.

Jason:
Sounds great. Thank you.

Charles:
Bye bye.

Jason:
Bye.

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.

About Jason Yarusi

Jason is an active Real Estate Syndicator and Investor. In 2016 he founded Yarusi Holdings, a multifamily investment firm currently with over 800 units under management. The firm repositions properties through operational efficiencies, moderate to extensive renovations and complete rebranding. Jason also hosts “The Jason and Pili Project” a Youtube Channel and Podcast that sets the foundation for building Mental Fortitude, Growing Wealth and Improving Health by providing actionable steps (and avoiding missteps). Their monthly meetup, The New Jersey Multifamily Foundation Club has over 2,000 members and focuses on Real Estate Syndication.

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