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Global Investors Podcast
GI85: Mastering Asset Management with Gary Lipsky
February 4, 2021
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Gary Lipsky is a Managing Partner of APT Capital Group, which buys opportunistic value-add B & C class properties typically in Arizona. Gary has been a real estate investor since 2002 and has invested in over 1900 units with $30MM AUM.

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Announcer:
Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host, Charles 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 Gary Lipsky. Gary has been investing in real estate since 2002; during that time, he has invested in over 1900 apartments with $30 million worth of assets under management. So thanks so much for being on the show, Gary.

Gary:
Thanks for having me.

Charles:
So give us a little bit about your background, both personally and professionally and before getting involved in real estate investing.

Gary:
Yeah, I’ve always been an entrepreneur. During college I started a restaurant delivery service. I co-produced three independent films in my twenties. I started a nonprofit and I started an educational company that served 9,000 kids throughout Southern California. So, you know, running businesses was in my blood and I kind of learned about real estate investing. You know, when I was looking to buy my first house, when I, when I had a kid, I wish my parents talked about that about that to build wealth, you know, when I was younger, but we never had those discussions, but I’m glad I, I started when I did. And and obviously, you know, I, I, it took a while to, to, to really get into it, but then I started doubling down as, as I got older.

Charles:
What was the main reason that you got into it to build wealth or for another?

Gary:
To build a wealth and, and you know, the when I, I was investing in, in tech stocks and whatnot, and then that bubble blew up and then it’s like, and there was no rhyme and reason, and it was just part lack of education and, and I wanted to control my own destiny. And so that’s why with, with real estate, I know I could force appreciation. I controlled a lot of the things that went on and I could hold long-term. I had, there’s no outside manipulation of, of financials or whatnot. So I felt like this, you know, when, when 90, 90% of millionaires own real estate, I’m like, obviously they’re doing something right. So I wanted to be in control of my, my my destiny. And so I I started slowly and and learned as much as I can.

Speaker 2:
Awesome. Yeah, it’s such a, it’s such a powerful wealth creator, and I think it’s, it’s, it kind of sneaks up on you a little bit with properties that I own. I bought one property at the height of 06, which I still own now. And I was just looking back and like talking to some realtors about it, real brokers about it. And they’re like, Oh, it’s probably worth like this huge, you know, this amount here. And I bought at the top of Mark, I know, I thought I was going to be like holding this thing for years if I had to. And they’re like, Oh, it’s up this much here and stuff. And you’re like, wow, it’s amazing because it’s not like a perfect market where you log into your trading account. And you’re like, Oh, this is my brokerage account. Right. And we have a, we know it dramatically, it rides right off of inflation and everything like this. So it’s the thing is that when there’s inflation with anything else, like everything just kind of goes up and real estate kind of rides that way for the most part.

Gary:
Yeah. Yeah. It’s a, it’s a tremendous vehicle. I’ve done really well.

Charles:
So tell us about how you started investing in real estate, your first investments.

Gary:
So, you know, my, my, my first investment was my, you know, single family home for my family. I was looking for, you know, a, a value add play. I had no money to put down here. I was, you know, 30 buying, you know, a half a million dollar house. You know, what the heck am I doing? But I knew if we can open up the kitchen, we converted the, the garage in our living space and that created a lot of value. So I mean, I created $150,000 of wealth in, in a very short period of time with, with no, with no money down. And then we moved to a nicer neighborhood and I converted that house into a rental. And, and so this was over a years and I was moving slow. But you know, once I started, you know, seeing how the, the effects of this, you know, I, I read, you know, tons of books and podcasts were just coming out. I started listening to those was going into some conferences and just, you know, learning as much as I could so that I can, I can minimize my mistakes and, you know, maximize my upside. And then, you know, eventually we bought a 42 unit almost about a year and a half ago. And that was, that was my first foray as a, as a GP, I had invested in other people’s deals. But you know, then now, now we starting, we’re closing on our third deal today, actually.

Charles:
Nice. So what is your current company’s investment criteria and strategy when looking at properties? Inquiring?

Gary:
Yeah, we’re we typically focus on Phoenix and Tucson. We’re not the GPS that focus all over the, the U S we want to be experts in, in, in in the market. We love those markets because of population growth, job growth, rent, growth it’s for us, it’s easy to get to as well. I mean, that’s not a huge factor, but it is a fact because we’re there a lot. I don’t, I don’t live in that market, but I can drive there and be there in five hours or we could fly in and be there in an hour. But yeah, we were focusing that BNC class value where I typically 1980s or newer, so that when we, when we go to exit there, there’s more, more buyers in that, in that realm, really going a hundred plus units or more

Charles:
Okay. Those are great markets. We’re part of an asset in Phoenix. And I mean, from years back, we just refinanced it and it’s it’s crazy. That market has been blowing up Maricopa. I mean, it’s probably one of the fastest growing counties in the United States if I’m not mistaken. Correct.

Gary:
Yeah, absolutely. We, we bought a deal a little over a year ago with a reversion cap of 5.75, and now, you know, cap rates there are posted a four. So, I mean, it just keeps getting, you know, more and more compressed. I mean, it is super competitive. There’s a lot of buyers out there. So it’s great when you want to sell, it’s not great when you want to buy.

Charles:
Right. But you guys have that if you have that many units and in your part with strategic partners there, that’s your competitive advantage of able to source those units? Because, I mean, it must be when I speak to people from the West coast and it it’s like a, it must be 75% of the time Arizona comes up, right. Where do you want to invest? You know what I mean? And it’s like, it’s, Arizona’s in that list right. Of wherever it is, Arizona, whether it’s Tucson, whether it’s Phoenix all these different places. And it’s great. I mean, it’s great that you’re in there and that you have, you know, the teams in place to be able to scale. So,

Gary:
Yeah. Yeah. We have, we, you know, we, we have great relationships with all the brokers and we have a third property property management company that that we really like, and we have a system down. And so, yeah, we can see a property start, you know, plan our business you know, our business plan before we take over. And then as soon as we take over we’re we’re off and rocking.

Charles:
So you co-host a podcast. And he wrote a book about asset management, which is fantastic. Cause like, I feel, as you were saying, the pro project management, so our property management, product management, asset management, I feel are like the most important pieces to the real estate investing puzzle. And what, like, why do you consider asset management to be so important when for investments that you have?

Gary:
Yeah. It’s, it’s, you’re, you’re managing, you know, the, the asset, just because you, you have a property and a third property, property management company running it, they, they manage, you know, it could be as little as 10 properties to hundreds of properties. So you’ve got to make sure, you know, you’re managing your store and, you know, you gotta be able to push them and analyze all the data because they’re not going to analyze it the way you do, you know, so we break down every task. So we could see where the bottlenecks are and if, you know, if we can improve every little piece over time, that’s going to turn up a huge, you know, value to our property. So, you know, it’s, it’s funny when we start off that they’ve never looked at the data the way we have before, but they, they get into it and they, you know, they really rise to the occasion and and understand the things that we’re trying to achieve pretty quickly.

Charles:
So what KPIs do you track and do you suggest other, other investors to tracking their businesses?

Gary:
Yeah, there’s, there’s so many KPIs, obviously, you know, you start with an a Y but occupancy pre-lease. What we do also is breakdown tasks. So for, for leasing, we look leads, appointments, showings applications, and and leasing. So you, you break down any chassis and you want to see, you know, if you’ve got, you know, 50 leads and only 10 appointments, so what’s happening there are we, are we responding to their, to their emails or phone calls right away? You know, we’ll do secret shopper reports to see if they’re, if they’re communicating really well and selling the the the units. And then all the way down the part, you know, if there’s tons of applications, but not enough leases, you know, where where’s the problem there are we, are we overselling? Are we not making sure that they are capable of renting it beforehand. You know, every, every aspect do you want to, you want to break down? We look at renewal retention. That’s a, that’s a big one because if people aren’t, aren’t renewing, then you know, your community, isn’t very strong. And so you need to have better community events. Is there, is, are there a few attendants on the property that are pushing people out? So there there’s a lot behind that renewal retention. That’s really important because if you, if you have a high if you have a low renewal retention that, that costs a lot of money because you have to do Unitrends and whatnot. So that, that’s a really important one that I don’t hear a lot of people talking about. You also want to look at a projected occupancy rate, 60 days down the road. So you know, do you have a lot of renewals coming up and are those renewals even doubt throughout the year? Do you, are you aggressive enough on reaching out to people that are up for renewal two, three months down the road? So you can, you can plan in advance. You want to look at least units available because you can adjust the rents. It’s not just, well, I want to raise rents 25 on all the different units or reduce rents twenty-five dollars for all the units. If you’re not, you know, if you’re not leasing, you want to see which units are performing better than others. And what do you need a tweak to, to maximize that at least ability for all the different units.

Charles:
Yeah, for sure. The, a couple of things to highlight there, the staggering leases when you’re doing the value add is extremely important. So it’s very important that you have that. So when you start doing, going through and renovating these units, that you don’t have 20% of your units that are now having to be renovated and are offline. The other thing to said about the turnover is extremely important. The turnover is one of the most expensive costs when operating in multi-family I feel, and I mean, it’s something that, like you said, just if you can minimize that just by a week here, or, you know, a few days here, something like this, I mean, especially in these larger complexes, the, the what happens to your NLI is, is really a dramatic effect. It’s crazy.

Gary:
Yeah. If you’re really on your KPIs and, and reducing all the downtime and maximizing your occupancy, we were, you know, just a little bit, it has a huge, a huge value to your property when you go to sell it. So that, that’s what real asset management is, is, is, is, you know, pulling all the different levers and tweaking it so you can maximize, and it could, it could mean a million, 2 million, $3 million of value, which is huge.

Charles:
Right, right. And that’s, we want to find when you’re acquiring a property, something that’s been mismanaged and that you can come in there and kind of clean up and tools and systems. So I want to talk about that tools and systems that you normally use for your business, and you advise other advisors investors to use, what do you suggest?

Gary:
Yeah. Well, we had this Excel spreadsheet that is for the weekly report for our manager. That’s really involved and it’s, it’s a Google sheet. So you know, they’ll give us the link every week and we’ll go check it. And it’s, it’s really detailed and, and customized to our needs, something that they haven’t done previously, but that’s really effective. It gives us all the data where all the leads are coming from, and this way we could see, you know do we want to stop advertising on this place or, or, or double down on another thing. And it just gives a breakdown of all the information. We use real page and it’s, it’s linked to Yardi. So we get that’s through all, you know, we created all of our KPIs and it’s, it’s pretty reasonable. I forget the, I think it’s maybe $12 a unit and maybe 5,000 setup. I dunno, maybe that was a special that we got, but it’s, you know, for all things considered for all that data, it’s, it’s well worth it. If you’re going to be in this business for the long haul those are, those are the two key things that I definitely recommend, you know, and, and just tracking every conversation, we just track everything so that there is accountability. It’s not, it’s not a gotcha, but everyone can see what their tasks are, when is it due. And they can view that Google sheet whenever they want. And and it just, it’s, it’s a good reminders for us to follow up and make sure that we’re, we’re on track because you’ve got to, it’s so easy to get off track. And so you want all that information available for everyone to see.

Charles:
It’s also easy to pinpoint where the issue is, if it’s your onsite manager, if it’s something with your property management company itself, and then you can kind of go in there and be like, listen, the person that you put in this office is not, you know what I mean? We’ve got, you know, and you do it now because the problem is with real estate, this is not such a fast moving business that have that problem manager might not come out two months down the road. And you, you, you know, you figure it out. You’re like, now it’s blatant. And if you can pick up on that faster, obviously all those people that you’re now avoiding missing out on renewals or renting in the first place can now be rectified somehow. So,

Charles:
Yeah, absolutely. So how has asset management for you changed during COVID 19 in your company?

Gary:
So we’re pretty much back to normal now. You know, but in the beginning you know, tons of zoom calls pictures, cause we couldn’t get out to the property as often as we wanted to. So obviously we’re relying on on tech a lot more and that, and that, that will continue. But now, now we’re w we’re back to visiting our properties as much as we’ve had in the past, which is every, every couple of weeks. Obviously you couldn’t do due diligence. I’m not sure you would consider that asset management, but you know, that, that kind of, you know, restricted was restricted a little bit in COVID, but right now everything is pretty much you know, back to normal lease activity has really picked up of late as well, which is, which is nice to see. So yeah,

Charles:
Yeah, yeah. You guys had pretty good retention. I would imagine during COVID

Gary:
Yeah. We had, we had good retention you know, and for those that who we didn’t want that weren’t paying rent and you kind of incentivize them to leave so we can get a good tenant in there, but yeah, there wasn’t, there wasn’t very many as any leases and there wasn’t many people leaving as well, but but now things have, now we’re seeing some, some turnover, some, some some really good activity.

Charles:
Yeah. I think people are getting on with their life and they’re starting to move and doing what they kind of put off for eight months or so. So what do you see for multifamily real estate? In 2021,

Gary:
You know, a lot of people when, when, when COVID star, we’re talking about this wave of foreclosures, it’s a tremendous buying opportunity, but, you know, you know, as well, it cap rates compressed, you know, you’ve got the interest rate, you know, COVID discount. You know, I just, I just don’t see a lot of foreclosures coming down the pipeline, but it’s, you know, people need a place to put their money and it’s, it’s very competitive. Not only from the U S but you know, those tons of foreign money is coming in and investing in multifamily. So I, I see, you know, you know, business as usual, tight, tight, you know markets trying to, you know, you’re trying to buy properties and it’s, it’s going to be super competitive, but there in every market in every different asset class, there are opportunities it’s, it’s, it’s, you know, how do you know and, you know, to take advantage of those opportunities.

Charles:
Yeah, for sure. I don’t, I don’t think on our commercial, multi-family what we’re looking at for you. And I there’s going to be much of a shakeup with this fall, the foreclosures, cause you always have to go back and tell people that, you know, agency debt loans less than 1% of them defaulted in Oh eight. So, you know, it’s, it’s the thing is that people have high collections coming through. It’s not going to waiver the price at all. The other thing too, is there might be a shakeup in real state, maybe on the single family with when forbearances and moratoriums, you’ll people moving in with other people and peel, moving home, stuff like that, but there’s going to be even more of a demand, I think for multifamily. And I mean, we haven’t had the number of units that are required to satisfy the population in years. So it’s something that for properties that we’re buying, there’s going to be huge demand for those in years to come. So I don’t see when people are doing that. I don’t, I don’t see, like you were saying that there’s going to be a pullback in pricing on the larger commercial multifamily.

Gary:
Yeah, I wish, but I don’t see that happening.

Charles:
So you coach a number of investors. What mistakes do you commonly see real estate investors make?

Gary:
So, you know, investors want to invest with people they know like, and trust, but you know, one of the common mistakes is how well they know that person. You know, a lot of people don’t do background checks just because they’re on a, on a, you know, have a podcast or hold a meet up or whatever it is. It doesn’t mean they’re, they’re an expert, you know? Maybe, you know, I know a lot of people say, Oh, you know, they reach out to me, you’re killing it. I’m like, well, I haven’t had a deal in a year. I’m not really killing you. See me on social media, but I mean, I’d love to have close four properties. It just, it just didn’t make sense for me, you know? So I think a lot of people need to do more research on their, on their GPA. You know, what is their experience? Have they run businesses before you know, look at some certain numbers on their, on their underwriting because every, every deal looks good on paper, you know, what’s their reversion cap rate, you know, what’s the population growth. What’s their economic occupancy and, and new investors typically don’t, you know, they don’t know how to dive into that. And so I, I recommend them getting involved in investor groups and so that you could share information and and underwriting. And so everyone brings a little bit of different knowledge and they can, you know, they can really underwrite the deal more effectively.

Charles:
Yeah. That’s a great idea to do that. The, I see that a lot where you have people that just cause someone’s closed the deal, or they said there’s done in this, you know, with the, with the amount of buzz around syndication now you know, you don’t know what person’s position was in acquiring that. I mean, for us, we’ve done one deal this year and in 2020, and it was something where it was next to other properties that we had. So we knew exactly how that was operating. So it was a safe play for us and our investors to go and invest there. And you know, for 2021, you always want to do more deals and stuff like that. But if it, if it doesn’t meet a criteria to, to effectively handle our strategy, then you know, you can’t go in with it. I mean, that’s where you’re going to have problems with not obtaining reaching any of the goals and returns that you’ve, you’ve set for your investors.

Gary:
Yeah. We had lots of goals this year. And you know, we just, we’re taking on this one deal that that’s it. And, you know, we do this full time, but it is what it is. We’re not going to chase a deal. That doesn’t make sense. So, yeah,

Charles:
That’s the other thing too, is you have people that are, aren’t just living off of acquisition, which is something I always worry about and people are doing deals and you’re like, you know, is that really a good deal? Is that really a great market? I wouldn’t want to invest there. And it’s like kind of a thing where it’s just are, you know, you have to also feel out your operators and your, the sponsorship team and see you know, what, like you said, their experience in what they’re and what they’re really trying to do with the property that they’re buying. What do you, what do you think are the main factors that contribute to your success, Gary?

Gary:
Well, definitely consistency. You know, grinding it out every, every, every single day over a long period of time never stop learning, you know every, every day I learn something new from someone else. So I appreciate our community and you know, do what I say I’m going to do. And then the last thing is Oh, never over promise, never over promise because a lot of people are overselling their deals or whatnot. And, you know, I make, you know, I educate them here. This is what we’re doing, but you know, if you want it, you know, but I’m not going to say this is the greatest deal of all time. This is, these are the facts. These are the numbers you want to, and we’d love to have you, if not, then, you know, there’ll be it.

Charles:
The other thing I don’t see people do sometimes is they don’t communicate to their investors about the first six months or nine months of a project where listen, it takes 90 days or 45 days for me to figure out who’s in this property, if it’s really badly mismanaged and then all this kind of stuff. I mean, it’s a six month initial stabilization period where you’re getting vendors in vendors out that were from the previous owners and all this stuff. And I think people say, Oh, you know, it’s going to be great from day one. Well, it’s going to be cash flowing, but it’s not going to be where we want it to be. It’s, that’s going to be the end of the first year and second year and on, and they don’t say that. And that’s another thing too. That’s kind of a red flag when I’m looking at deals cause I’ve invest passively and obviously as a general partner, but so how can listeners learn more about you and your business, Gary?

Gary:
Our website ABT capital group.com. I’m on social media, definitely reach out connect and you know, I’d love to love to talk real estate with any of you guys.

Charles:
Okay. It sounds great. Well, thank you so much for coming on today. Gary, I’ll put all the links into the show notes and we’ll talk to you soon. Have a great 20, 21 and great with your new deal. You’re closing today.

Gary:
Thanks for, thanks for having me on. I really appreciate it.

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 Syndication Superstar incorporated exclusively.

About Gary Lipsky

Gary Lipsky is a Managing Partner of APT Capital Group, which buys opportunistic value-add B & C class properties typically in Arizona. Gary has been a real estate investor since 2002 and has invested in over 1900 units with $30MM AUM. Gary is Real Estate Financial Modeling Certified and has been a successful business operator for over 30 years.

 

Gary co-hosts the Asset Management Mastery Podcast and is also the Co-Founder of the Asset Management Summit. He is passionate about helping others build wealth through aligned goals, transparency and first-class communication.

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