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Global Investors Podcast
GI116: Multifamily Investing and Property Management with Matt Brawner
September 9, 2021
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GI116: Multifamily Investing and Property Management with Matt Brawner

Matt Brawner has been a property manager and real estate investor since 2011 and has an ownership interest in nearly 2,200 units.

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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 Matt Brawner. Matt has been a property manager and real estate investor since 2011 and has an ownership interest in nearly 2,200 units. We might have to update decks. They had a closing yesterday, but thanks so much for being on the show. Matt.

Matt:
Thank you so much for the opportunity Charles, excited to be here.

Charles:
Awesome. Awesome. So give us a little background on yourself, both personally and professionally prior to getting involved in real estate investing,

Matt:
You know, I’m born and raised in the Midwest, grew up in Omaha, Nebraska ping ponged around to a couple of different places. I now call Minnesota home with my beautiful wife from three young kiddos that we had moved up here from Austin, Texas. And that’s part of our story as well. I had lived in Minnesota for a time back in 2011, where I started at the time buying town homes with five other partners. And that was all that I thought you could do with real estate was just to buy more town homes and life took me onto some other opportunities and it up down in Austin, Texas, as I said, we thought that’s what we were gonna do life. But this real estate investment company continued to grow and grow. And we got these crazy apartment deals that people brought to us that we didn’t even know like were legal.

Matt:
And this is, you know, how you could work together as part of a syndication to buy these properties. And over time, I got to a point where I was really focused on be implanted. I wanted to work worship and play all in the same place. And so that meant leaving what we thought again was gonna be the home for the rest of our lives in Texas to move up to Minnesota, to come back and to run my real estate company. Full-Time here. As you alluded to there, we’ve been unbelievably blessed. It’s grown significantly. We now are over 2200 units, 2,254 after yesterday’s closing to be exact and just try to honor what God’s given us every day.

Charles:
Awesome. Awesome. So what really attracted you to real estate investing?

Matt:
You know, I wish I could tell you that I was so smart that I was able to clearly articulate the risk file and say for the risk adjusted returns, there’s just nothing that beats real estate, when the fact of the matter was it was in 2011, we had about 10 guys that were getting together to throw maybe a little bit more like 12 to 15, throw 50 bucks a month at the stock market and drink beer. And it was really more the the latter than it was the former on that. And one guy said, you know, if you’re really interested in putting some money to work, come to Perkins next weekend for breakfast. And we had just for lack of a better way to say it looked around to all these town homes that had really taken a beating in 2011 and said, there’s no way that they’re worth half what they were two to three years ago.

Matt:
There’s more opportunity here. People are still looking for a place to live. People are still paying rent. There has to be a, a way to utilize this. And so we bought our first one and from there it just became the dependability and the predictability of real, we still have surprises in our business, but what I tell people a lot, and the reason I’ve continued to come back, no one can put a pencil and show me any math that supports Tesla or Amazon’s valuation. It’s just not possible. Right? The fact of the matter is you can do that with real estate and it’s our ability to drive tax heard value for us and our investors that’s kept us coming back. Yeah,

Charles:
For sure. For sure. So you started with townhomes. Can you tell us about like your first investments, what you guys did, what went right? Went, went wrong. I mean, buying in 2011 obviously was a great decision.

Matt:
You know, we were really blessed all the way up through about I’ll say 2017. We just continued to, to buy more town homes that along the way though, that success bred our first mistake, which was that the assumption that all properties operate the same, you know, we’d seen these town homes lease up so quickly have low maintenance tenants that we thought this has gotta be the way all tenants are. And so we bought like older homes that were retrofa, you know, things that would call themselves an apartment building, but, you know, they were really like this chopped up sixplex and those, we were blessed to be able to get out of those with our capital back, but that’s not the case. The property type really matters your ability to effectively manage that property really matters. That’s why right now in the twin cities, we really like class C assets because they’re stacked, right? Like, so if you have leaks it leaks down into a bathroom, it’s easier to isolate. It, it’s really easy to build systems around these. You can learn the units. They’re more predictable. Your underwriting is more predictable there. So I, I would say that it was really one of the key mistakes that we made early on was assuming that all properties operated the same. Oh

Charles:
Yeah. Yeah. I could definitely see that. It’s I’m a big proponent of class C. So it’s most of what my portfolio, what our portfolio is, is class C. So it’s awesome. Nice. let’s talk about managing properties. So do you manage all your own properties? Is that how it works now? Or, I mean, you’re in one area, so I imagine you’re managing it all. Is that correct? We’re

Matt:
Managing about 15% of our properties on the other ones. We utilize third party managers. We don’t do any fee management. Again, I would, mm-hmm, <affirmative> the story of it. I’d love to tell you I was so smart. Like, Hey, we’re gonna be vertically integrated and this is how we’re gonna monetize real. It came about because we needed a way to pay ourselves. And then over time it became a means to capture more value. Certainly what I’m most grateful for in, in my experiences, property management is my ability to understand the basics of real estate. You know, I tell people all the time, I can make a spreadsheet, show you all the pretty numbers you want by how I manipulate rent and expenses, but it’s your ability. And we come up with all these crazy scenarios and private equity to show how we can do deals. And those are fun to talk about important, but what’s more important is, is how you understand the fundamentals of the business. What can you rent the unit for? And what’s it gonna cost you money in money out? That’s the basic,

Charles:
Yeah, for sure. It’s I’ve had friends that were in private equity when I started investing real estate like 15 years ago and they make these complicated you know, graphs and programs and stuff for, and I was like, yeah, that’s, I mean, that’s, I understand what you’re doing when you’re comparing one investment to another, but it’s really a straightforward business in the sense that what, what’s our comparables, what are we buying it for? What are we gonna rent it for? And what that return’s gonna be after we take into consideration all the exp S and reserves. So, but so what type of properties for you guys right now managing, how do you make the decision if you’re gonna manage it yourself, or if you’re gonna put it out for third party management,

Matt:
It really comes down to the location of it. If it’s in the twin cities here where likely going to manage of it, there are some larger complexes where we’ve partnered with existing operators here, that they have their own management infrastructure. And then we’ve been really active. It’s kind of random, but it’s been relationships. And then doubling down on the markets as we look towards the Mid-South area of the country, anything down there we’re utilizing third party management.

Charles:
Okay. All right. That makes perfect sense. So with with property management being, as I consider probably one of the most important elements in real estate investing, what are some good traits of a good property manager and how would an investor go about finding one?

Matt:
Sure. So a property manager is gonna be as good as their systems. So you wanna evaluate what are their systems for really the three phases of property manager management, that’s HR construction and accounting. Construction is pretty broad, but everything from help me understand if a tenant has a maintenance request, how do they make that known? Do they use a ticketing process, right? So that you can actively track the progress on completing that request so that the tenant is notified. That’s customer service at a basic level. We like good customer service tenants that are happy, stay tenants that stay, keep our turnover costs really low. It’s an important thing to watch your accounting, your property manager should be able to give you a full suite of reports on demand, whether it’s your rent, roll your balance sheet, your P and L and then should have good audit functions in place so that they can show you, Hey, show me a receipt for this transaction that I see here that you made on my behalf, and then your property manager, as I said, HR, the people that they are hiring to do your leasing for you, leasing is basic sales.

Matt:
How do we make sure that we are capturing the tenants or most likely to pay market rent and stay for extended periods of time and steward your property?

Charles:
Yeah, no, that makes perfect sense. What kind of systems do you guys have put in place? Obviously I imagine a ticketing system, as you just mentioned, but any other systems that you guys have put in place that have really streamlined your management portion of the business? We

Matt:
Have a ticketing system for maintenance. We use professional property management software. That’s another thing. Quickbooks can be fine for like your internal accounting, but if you see a property manager just using QuickBooks, that’s a red flag, cuz the QuickBooks is not a property management software. So you wanna make sure they’re using property management software. We use buildum, but there’s plenty of other good ones, app folio, Resmond you name it? And then from there, as we look through our leasing in particular, it’s another good area to evaluate processes. Everything is done online. The application is handled by an offsite prop by an off site back ground screening firm. So we can make sure we’re in full compliance with all rental laws. We also build in what’s called a pre-lease deposit. So you can’t lease a unit from us unless you’ve put down a security deposit. And that requires that you take that unit if you’re accepted. And what that does is it reduces skips and ultimately reduces the amount of vacancy that our units experience. Yeah,

Charles:
That’s a great thing. A lot of property management companies don’t do that. I do that one of our property management companies does that and it’s like at least, I mean even $50 really minimizes it. Right. And you, I mean, it’s, it’s amazing. It it’s just it’s that right amount of money where they won’t have an issue to apply, but it’s also is, Hey, I don’t wanna lose $50. This is how serious I am about the apartment that you’re offering to me. So that’s, that’s great. When you’re talking to new investors or if if a new investor asks you for any kind of information on if they should self-manage or if they should seek third party management what do you usually say in that situation?

Matt:
I tell ’em to seek third party management because somebody starting out when people ask me what I wish I would’ve done differently. I would’ve wish I would’ve gone bigger, faster. So yeah. You know, if you’ve just got one town home, go manage that yourself. Mm-Hmm <affirmative>. But if you’re starting out buying an apartment complex, your ability to drive value is how you can find deals and find money mm-hmm <affirmative> right. Don’t let yourself get bogged down in third party. We’re able to grow now because we’ve built enough systems. We have enough people working with us that it doesn’t take large amounts of our time. That’s not what I spend my day doing in day in and day out. What I really wanna focus on are stewarding the investments for my investors, managing the people who operate our properties day to day. And even if you use third party manage, your managers need to be managerD. You need an active asset manager there. That can be you, but you need to understand how the property operates at a basic level. So you understand what questions to ask and what to look for in your reports.

Charles:
So when you’re buying and you’re using third party managers, when, how do you define what your roles are versus the property managers? Let’s say in regards to you’re doing a renovation of value out on a property. I imagine you are getting involved with some of the project management on there where you’re picking GCs you’re vetting GCs. Is that what you’re, you’re telling your product manager, Hey, we’re gonna take care of project management on this. You are taking care of like, you know, support, inquiries, rent, leasing, all that kind of stuff. Is that correct?

Matt:
No. Our property manager is still involved there, you know, as they should be, ultimately whoever’s controlling the money has to be involved and a property manager is gonna be over the central source of accounting there. But it’s really okay. You know, here’s last week, what you said you were working on, even if you’ve got a property manager that can oversee construction for you, like where, where are we at? How did we do? We said, we’d have these units ready by this date. Are they ready? Are they not? Why not? What’s the problem. What’s the hold up? In being able to dig into that granular detail. Yeah.

Charles:
Okay. So forming partnerships when you’re ready to scale as as a, so what, what makes a good partnership

Matt:
Reminds me of a story I like, or I don’t know if a story’s the right word or just kind of something I do whenever I meet people that have been married for a really long time, like say 50 years, I’ll ask like, what’s your secret? And it’s funny how basic the secrets are. We communicate well, we’re on list with each other. We do what we say that we’re gonna do. We try to keep each other’s best interest in mind. And I mentioned all that, cause I think that’s what makes a good partnership. Right? you need to find people who communicate well, you need to find people who are equally yolked in a project as you are, who have similar goals and outcomes as you do. Yeah, you gotta take care of all the legal docs, but no one is gonna create an operating agreement. That’s gonna perfect. The partnership either the partnership works or it doesn’t, you, you need to be evaluate character that way. I think finding partners is important in this because this is a growth and abundance sport, right? The more people that you can find and build relationships with, you know, these deals kinda require this because of the nature of how they’re financed. Right. But it’s your ability to find others who can link you to other sources of capital and other investment opportunities. That’s gonna drive your success. Interesting.

Charles:
What’s some of the best ways of finding a partner like before you’re going through the whole process of being on the same even keel,

Matt:
You know, for me, it’s just been talking about what I do. I don’t utilize a platform. You have people like yourself and others, who’ve been incredibly successful. Putting what they do out in a podcast or out through social media. I I’ve just had to be very intentional about making sure I’m finding time, day in and day out to have coffee, have lunch with those who I think might be of venture or might have an interest in what I’m doing in vice versa there so that we can always look for new people to be working with it’s part of, you know, how I conduct my week going through a list of all my key relationships. Like, all right. I haven’t gotten in front of this person in a while. What’s important here. How can I go back?

Charles:
Yeah, yeah. That’s great information cuz I, I, every morning I’m spending about an hour and a half reaching out to people that I haven’t spoken to in like three or four months. And especially when going through the whole COVID and you were like just sitting at your house. Right? Right. I mean, it’s just one of those things where, you know, you gotta keep this going and it’s amazing when you’re out networking, whether you’re having coffee with a broker or someone that you don’t think at all that you’re gonna be connected. I was having just coffee last week with someone and they connected me to someone that’s building a townhouse community. Right. Wow. And you have no idea, like, and it was just, just got permanent. Right. And it’s like, you have no idea what people are gonna connect you with. Right. And what’s gonna happen in that kind conversation.

Charles:
And they come from, especially if someone’s like using good property manager, I’m like, oh, gimme their information. I mean, I would just love to have that information cuz who knows, maybe I’ll find someone in a certain market. Right. And I might need that or someone might ask me, Hey, do you know any property managers here? No I, but this person told me this, you may wanna reach out to them. So. Right. It’s awesome. Yeah. the relationship are such a big thing in, in, in real estate, especially when you’re getting into commercial real estate. Agreed. So what mistakes do you commonly see real estate investors make.

Matt:
Well to touch on what I mentioned earlier, assuming all properties operate the same. I think right now there’s a lot of exuberance around real estate. I think it’s buffet who said, you know, the, the definition of a troubled market is too much money chasing too few deals. Yeah. There’s a lot of money chasing deals out there. And I I’ve been there when you get told no. When you hear that some deal that you’ve been chasing for a while now has others pursuing it. And there’s an inclination to fudge on that underwriting to just be a little bit more aggressive to who allow you to pay a higher price. But the fact is you never get back. What you lose on the front end. You have to stay conservative, whether it’s for your own purposes or for your investors’ purposes, you’re acting as a fiduciary there and they’re placing their trust and their hard earned money in your hands to invest on their behalf.

Charles:
Wow. That’s great information. So what do you think are some of the main factors that have contributed to your success?

Matt:
I think one it’s been my partners and the relationships that we have formed our ability to work together. As we have grown this company two it’s being really focused on what we’re looking for. It’s easy to get distracted in this business with new shiny objects. We really like apartments class C class B assets in these markets. We’re gonna focus here. And then I think there’s an element that people, especially on the front end of this can be a little bit surprised by it’s just hustle, being willing to go out there and find other people who are doing what you’re doing to continue to call back brokers after your call, doesn’t get returned to continue to go talk to investors. When people look at you, like you have two heads, as you talk about syndicating, an apartment, you, you just can’t replace hustle. Yeah. Awesome.

Charles:
Before we wrap up here, I, one thing I wanted to touch base on is why you love class C so much and you’ve been in it for 10 years. So tell us like, why do you like it so much? Why do you think it’s a such a strong portion of the multifamily asset class

Matt:
It’s really market dependent. I like class C, especially in the twin cities. Cause we’re just on the right side as a blind demand. There have been approximately the increase in 2010 is like 12% in Minneapolis St. Paul, the housing stocks only increased 6%. There’s just not enough places for people to live. And so you can’t build new class C units. And then when we’re looking at construction costs, going up my goodness, the most expensive thing on a, any item or any menu right now is a sheet of plywood. Right? so if it’s gonna cost you 175 to $200,000 to build new and you can buy class C for the 75 to a hundred K unit, that’s an amazing amount of value priced in right from the get go. And they didn’t build a lot of apartments in the sixties and seventies. So the demographic that needs those is growing, but they’re, we can’t go back to the sixties and seventies and build more of those. And so if you can operate those, then you have to have systems in place because class C units have the crazy tenant stories that go along with them. But I believe they can be wonderful fruitful investments where you can also provide housing to a group of people that really need it.

Charles:
Yeah, for sure. And the other thing too, with that at adding to it is you know, you have people that are, you’re going lower than a class C not many people are gonna live there. Most people, depending on what situation they find themselves in will live in a C or C plus area C or C plus apartment. And I feel it’s something that a lot of markets, especially where we are in Florida there’s not really that much in that middle zone. That’s why you have a lot of people in some of these very expensive markets that are spend so much money of their income on rent, because it’s missing that C plus C asset. And it just pushes people, Hey, I don’t wanna live in a C minus property or anything like this or a D property. So there’s no C plus I can find, or C I have to go all the way up to be. And that’s where it’s getting really expensive. So I feel that it’s such a it, it’s amazing like in certain markets, how, how much demand there is for it. So a hundred percent agree with you. Absolutely.

Charles:
How can our listeners learn more about you and your business? You

Matt:
Can find me online. My name is Matt. Braunner on LinkedIn. That’s the best way to connect with me. Also send me an email at Matt M a T T N Ws. It’s N as in Nancy Ws in world S as in Sarah properties, all spelled out [email protected]

Charles:
Okay. Thanks Matt for being on today and looking forward to connecting with you in the near future.

Matt:
Thanks for having me Charles, talk to you soon.

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 LLC exclusively.

Links and Contact Information Mentioned In The Episode:

About Matt Brawner

Matt has been a property manager and real estate investor since 2011, helping to build a portfolio with an interest in nearly 2,200 units throughout the Twin Cities and Mid-South region of the United States. Matt’s focus at NWS is to provide great customer service to all of our residents. Prior to his work with NWS, Matt worked in the non-for-profit sector as a fundraising professional following his career at Target Corporation.

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