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Global Investors Podcast
GI130: From a Duplex to Over 400 Units with David Kamara
December 16, 2021
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GI130:From a Duplex to Over 400 Units with David Kamara

David Kamara has been a real estate investor since buying his first duplex in 2006. Since then, he has transformed the portfolio from residential, single-family and duplex units to focus on larger multifamily investing including apartment buildings and townhouse communities; with his latest acquisition being a 124-unit property.

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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 David Kamara. David has been a real estate investor since buying his first duplex in 2006. Since then, he has transformed the portfolio from residential, single-family and duplex units to focus on larger multifamily investing including apartment buildings and townhouse communities; with his latest acquisition being a 124-unit property. So thank you so much for being on the show, David,

David:
Thank you very much, Charles. Thanks for having me.

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

David:
Yeah, so I was a management consultant before that I was a programmer, so my background’s computer science got my degree up here at Michigan university of Michigan, moved to Chicago with my wife did the young, first young, urban professional life, which was it fun. And after we bought our first house is when I really kind of both my wife and I got interested in the real estate space and decided that we should probably do something further than just buying our personal house. So a few years later we bought a duplex and threeplex and the planet time was to continue buying single family and just keep on buying single family as we could afford to. But then of course life happened. We had kids work changed. There was the downturn moved back to Michigan. So we kinda got off that I say path for a little bit. And then once the magic consulting career took off and I opened my own management consulting firm, we now had this money that we wanted to invest and we started investing in multifamily.

Charles:
Okay, cool. Awesome. Awesome. So when why did you choose real estate as your investment fuel? Was it something that you learned from from going from starting with smaller stuff and it was the way of scale or

David:
So I actually did some soul searching on this. As a consultant, you’re very analytical. You’re always comparing whether it’s businesses, you’re mentioning businesses against businesses and how they’re performing or different, different parts of the P and L. In this case, I actually looked at a lot of asset classes to see where do I wanna put my money. And when I started all of our, or most of the substantial part of our portfolio was in stocks and we did very well in that asset class, but the, the difficulty for me was you get, I mean, you get hit with all the taxes, right? It’s not, it’s not structured in a tax efficient manner and it’s also not passive, right. So I had to be very active and I enjoyed doing that with, but at some point it just came up that it’s a lot of work and it’s a lot of things that you really have zero control over, right. What companies are going to do. And whether there’s accounting, irregularities is just totally out of your control and a real estate provided that great return with relatively little risk and also allowed you things like leverage and the tax efficiencies that just made it the investment of choice for us and actually summarized these thoughts and, and something I, I wrote called the personal cashflow formula. So I kind of have shared that and made that available to other folks to take a look at

Charles:
Interesting. So I was reading before off our interview here, and it said about one of your first deals was an 18 unit in Chicago. So can you tell us a little bit about that how you founded and how you funded it?

David:
Sure. So that was actually my second deal. And it was so originally when I, when I did the, the first boo and multifamily deal I was thinking, all right, I’ll just sit on it for a year to see how it performs before I do anything else. But literally it was, I think, two months after closing that first bigger deal that we did, that this deal came around. And at the time I was working as a Metro consultant in Chicago and I also had lived in Chicago. So this was, we had moved back to Michigan, but I found myself in Chicago a lot. And I mean, it’s exciting. It’s a large metropolitan in area. Mm-Hmm, <affirmative> pricing is definitely different from, in Michigan and the deal. However, did make a lot of sense. So I I’ve been looking at at multifamily asset CLA properties in Chicago and, and a lot of them just didn’t venture out, right.

David:
People asking too much, or the cash flow wasn’t there. And on this one, it made sense. So I really had to ask myself, why would I wait a few years? Right. There’s not really a good reason not to do it. And it wasn’t a big, it wasn’t, it wasn’t that big of a deal that it was too scary. Right. I mean, at this point, the model was pretty clear. So we decided to move forward. Didn’t do it, the, the funding for, and the funding for it was mostly ours. Like we didn’t have to, we didn’t have to syndicate or anything. I guess the backstory to how the whole thing started was that my wife and I were trying to find a way for me to travel less mm-hmm <affirmative> because with the men or consult of Korea, I was traveling a lot that was on the road many weeks a year. And we had accumulated significant amount of funds that we felt we wanted to invest in multifamily real estate to generate the cash flow so that I, I came home. So this did kind of fall into that scheme and it, it made, it, made it simpler. And we said, sure, we’ll fund it and we’ll do it. There were a couple things that we learned along the way with this deal that I, I, I can speak to if that makes sense here.

Charles:
Yeah. Yeah. Well, what kind of we kind of op skills or hurdles, did you did worry in your way when you bought this deal, was it a heavy value add or is there a minimal value add to do?

David:
It was a minimal value add deal. The deal was cash flowing. So part of our philosophy is minimized risk and pretty much everything we buy is 90% plus occupied when we buy it. Mm-Hmm <affirmative> the, the value plan on this was owner wasn’t paying attention too much to it. Some of the units were a bit older and more tired, so kind of light cosmetic renovations, things like kitchens, bathrooms, that kind of stuff was brick building. So the exterior was pretty solid. Roof was good, no real mechanical, any of those types issues that were a major concern, but just in, in the process of buying this deal, right? So this was our first, I think, agency loan. So our first Freddy Mac loan, small billing loan, and what happened was, it’s an 18 unit. So it’s a small property. And of course, as, as any, anyone who’s done, any of those loans finds out, they’re very particular about occupancy and just physical occupancy, economic occupancy as well.

David:
So with an 18 unit, if you drop down to too vacant, you essentially have less than 90% occupancy. You had 89%, just 16 out of 18 occupied. So we had to make sure that the, the sellers were able to put a tenant in there that was credible and had the right potential, a credit history and checked out, not just put anybody into the building before we closed. Also in this particular town, the municipality does its own inspection, which is more rigorous than the typical ready inspection that happens. And so what ended up happening is we were ready to close, but disability wouldn’t allow to sell it to close until they had actually checked off these boxes of all these repairs they needed to get done. So we had to juggle a little bit with closing timing. And when we CLO, when we locked our rate on the loan it was a very interesting experience. Things worked out, we ended up buying it, but it was one of those where you a lot, when you do anything for the first time.

Charles:
Yeah. Very interesting. Very interesting. So on your next deal, you went, I think it was a 37 unit. And you actually, JVD this one, so you brought in, I guess it was your broker from the 18 unit deal, is that correct?

David:
I was the broker from my first deal actually. So okay. The 30, 78 was in Michigan. The, the same broker that I bought the first deal from brought it to me. And actually it was happening at the same time as this Chicago deal was mm-hmm <affirmative> on this one, the broker found the deal on the MLS. So he wasn’t the listing agent, but he, he found it on the MLS and he was like, David, you should take a look at this. And so, first of all, this kinda talks about the relationship with the broker and how important that is. Mm-Hmm <affirmative>. So this broker is really cool guy very aggressive young guy. And I really liked that he thought of me for this deal, right. It wasn’t a super large deal, but it was 37 units. And frankly ended up being one of the better deals that we bought in terms of pricing and just the deal was mispriced.

David:
It was like I said, it was listed on the MLS. It sounds like the sellers didn’t quite know whether what to listed or how to sell it, or they just were kind of fumbling it. But I partnered with the broker to kind of incentivize him to bring me similar deals in the future. So really his, his contribution was he found this great deal that was priced very well. And he said, Hey, I I’d be willing to invest with you. So he understood my trajectory of where I was going. I wanted to buy a bunch of assets for myself. And he said, yeah, I mean, I’m interested in the same thing I’d like to, I’d like to have a long hold period. I’m not really looking to flip anything. I like you, I trust you. I I’d like to be involved in it.

David:
So the way we structured that was basically, Hey, Mr. Broker, I actually don’t need your money on this deal, but since you, he did bring it to me. Sure. Let’s do it. And yeah, I’d like you to be part of it. And I’d like you to also kind of consider me, cuz at this point I’m not a big investor, right. I’d like him to consider me as somebody who would, who he’d be bringing deals to. And, and happily that relationship has continued. And I brought, I bought a number of other deals from the same broker in terms of, in terms of responsibilities on it, essentially his contribution was finding that deal and helping negotiate it. But the rest of that was, was mostly myself and my wife.

Charles:
Interesting. So he found that deal on the MLS. It was just, it must have been just mom and pop people that are that were listening it with friends of theirs or a family member, the normal yeah. Kind of real estate agent. Yeah. It’s, it’s amazing because I’ve, I’ve found and purchased commercial multifamily, commercial mixed use off MLS before from brokers. So it’s just amazing that you know, even if you’re looking for larger apartment buildings, make sure you always have that relationship with someone that has access to MLS and they could be the same person that you’re using for larger stuff for someone different because they can just set up a they’ll set up an alert there for you for a number of units and it comes on there and and you’ll get an email and I, I doubt they’re gonna have other people or many other people are doing that. And that’s a great hack too, especially when we’re in the marketing cycle that we are in right now. But that was great that you guys were able to JV with. In my imagine he rolled some of his commission into the deal as well to help you guys close.

David:
He actually brought cash to the table as well. He, he, I think he did go portion, but he also brought cash in because he really wanted to not just be like yeah, I’m just here for the, for the services, but he’s like, I’ll put cash on the line. So yeah, it was, it was good, good

Charles:
Partnership. So you, I mean, you did a, you did a deal with them, him prior, so you knew who he was. People are always like trying, I hear people talking to me and they’re, oh, I can have partner with my broker and you know, they can roll their commission in and we can use that for down payment. Well, if, but you partner with them now for five or seven years. So you have to make sure that, you know, who are not, that you’re just going for the quick percentage of money that they’re gonna put in there. So you actually did a deal with you, which is awesome. So you knew who he was and you’ve must have had multi-year experience with him and a track record of both of you before you move to kind of the next the next phase in your relationship as actually JV partner.

Charles:
So that’s, that’s great. That’s an awesome way of doing the deal and keeping a lot of it for both of you without any other investors. Yep. So let’s talk about your first syndication deal. So you went from this 37 unit, you go to a 94 unit, which is your first indication. I mean, how did you find the deal? How’d you raise money for that because you were, you, were you kind of working and farming some of your professional people in your network to invest with you while you were doing these smaller deals? Or was this something that when you found it now you had to start reaching out to other people to start asking for money?

David:
Yeah. it was very interesting evolution. There was a deal in between I think the 37 unit and the 94 unit also happened to be actually from the same broker, but, and, and the 94 unit from, from the same broker as well. But interestingly people just started reaching out to me. So I, I was still were working my magic consulting career. And I was excited, right. So I was talking to my friends, my colleagues, my ex colleagues, my clients, I was telling them what I was doing. And they actually prompted me to think about syndicating. Again, our original goal was just to buy properties for ourselves and not really partner with anyone <laugh>. But literally, I mean, my clients would say, listen, tell me more about this, this, these buildings that you’re buying, because this sounds very interesting. We want to be exposed to real estate more.

David:
Right. But we don’t want to have to answer phones about tenant issues and toilet walking and all that kind of stuff. Like we, we just wanna invest in real estate kind of like, like the stock market. And so, I mean, at first I was like, yeah, haha, great, go do your own deal. But then multiple people said the same thing. So I started thinking about it, like, I mean, literally people were saying, can we invest with you? And so, I mean, after enough people had said this, my wife and I talked about it and said, well, sure. I mean, we will run out of our cash at some point soon. So maybe doesn’t maybe such, such a bad idea to partner with other individuals and take our money further and also sprinkle a little bit more cash and more deals. Right. So diversify some mm-hmm <affirmative>.

David:
So that’s really how syndication came about for us. And no, the first deal was pretty simple and, and for everyone we do, we put our own cash into and a significant amount of cash. I think on that first year we put in about 250. So people came and said, we we’d like to invest. And again, not really wanting to have too many investors, one deal, we, we said fine. As long as you can bring in a hundred thousand dollars, that’s a minimum raise. <Affirmative>, let’s do it. And so that’s how that first deal came about. I mean, it was really just saying, okay guys, we are, we’re now doing this since you guys requested. Let’s see, who’s really gonna write a check. Mm-Hmm <affirmative> and again, it kind of came together fairly seamlessly same broker <laugh> mm-hmm <affirmative>.

David:
And he, that was a deal that I was gonna pass on, but he said, listen, you should really take a look at this one. It’s a very good property. It, it shows, well, it’s a bit more expensive on a per door basis, but it’s a much, it’s better quality than some of the things you bought before. There’s more doors on one roof, so to speak. So you have economies scale. So it Ru he really made us reconsider it. We went back, we attended the deal, looked at the numbers and, and said, sure, let’s do it. So that was, that was that one that came together again in very quick succession. I think that that was probably six to eight months after the first couple of deals we did.

Charles:
So how does the general partnership team look like on that? Is it just mainly you, is there a broker, did you have, bring anybody else on with you to help you close the deal, raise the funds or handle any of the asset management going forward?

David:
No, it was just me, me and my wife. So my wife and I kinda partners the, the broker did not put money in that deal and we didn’t bring him in on that one as a general partner. We did all the fundraising. We put the deal together, we closed it. We didn’t really need any partners to make it happen. So yeah, it was just us.

Charles:
So you’ve kind of progressed. I mean, you, you bought in 2006 with smaller residential multifamily and then you’ve kind of grown into buying 94 unit properties. So how have your goals and real estate investment goals and strategies adjusted since you’ve started investing? Is it just because you want it more time and you want the scale faster or is it because you were looking for something different and this was an easier way of getting to that goal by bringing on a syndication, working with other people?

David:
Yeah, I would say, I mean, that’s, that’s an interesting question. For the most part, our strategy is still the same, right? Mm-Hmm <affirmative> so really we started out with trying to generate passive cashflow for ourselves as a family and, and for investors, I mean, as, as we got to syndicating I think the, I mean we do bigger deals. So maybe from that perspective, it’s a little bit different. Mm-Hmm <affirmative> but I mean, at the, at the heart of it, we’re still doing the same thing. I would say maybe now we’re a bit more, more call of marketing a little bit more having a blog, that kind of thing. Because as, as you buy more deals and buy bigger deals, you do exhaust your network of people that can write checks. Right? So from that perspective, I think that’s the one thing that’s different, but I think our strategy has really never been to do a ton of D deals, which has been nice.

David:
And, and frankly I think has kept us out of trouble because we don’t have to go do another deal anytime really. We only do deals that we think fall into that sweet spot for us, where we can, we have an advantage where we know the area better. We can provide value where we feel like it’s a low risk, fairly high reward situation. But yeah, fundamentally our strategy has always been invest with the cashflow, do some value add, but that’s not a heavy part of our yeah. Of our return. So no, it’s, it’s fairly, still the same, I would say.

Charles:
Interesting. Yeah. It’s great that you’re doing the light value ads. I mean, with life value ads, you get the agency debt, you’re buying 90% plus economic ACC occupied properties so that the risk is very minimal for you and your investors. So it’s very easy to sell those let’s say and without better words to your investors. And it’s also knowing that there’s not much that you have to change. You’re just kind of finalizing and fine tuning the property that you’re taking over. So it’s a great business plan that you’re at, that you guys work with. Yeah.

David:
I, I would say that there’s fewer properties that fall into that category in the market. So again, maybe that’s why we do not as many deals. I think some choose to do, I mean, a little bit more kind of repositioning of properties where they do a bit heavier lifts and more difficult remodels we’ve we’ve so far stayed away from that. And it’s worked for us for the reasons you mentioned it’s it’s lower risk.

Charles:
Yeah. Yeah. Awesome. Yeah, that’s great. So you, I imagined other investors that want to be active reach out to you and ask for your advice on their particular situation. And I want to see what kind of common mistakes do you see other real estate investors make?

David:
Yeah, so I think, I think especially where we are today the one thing that I see is a lot of people just have a bit of aggressive assumptions, a bit more aggressive than maybe they have vetted out. Right. that’s one, I think another one is probably paying a bit more upfront. I think the, the current capric compression is really pushed pricing up. And I think just it’s a fact that a lot of people have raised a bunch of cash. And so there’s a lot more money chasing deals, right. Just kind of how it is. So being very selective in being patient I’d say is, is a very you, and some people may afford to pay a bit more than I would. And not that that’s a mistake, but again, you just have to know what your expectation from your investors is.

David:
And what can you go execute? Right. So those are kind of the two things that I caution people about. And I think, I think in general, all the space has become a bit crowded in that specifically, multifamily is getting more attention mm-hmm <affirmative> post pandemic or at the tail end of the pandemic, hopefully just because some of the other real estate asset classes have not performed as much, right. So hotels, I would perform as much retail. So office space. So a lot of those traditional investors that would invest in those assets seem to be looking at anything that cash flows well and has good returns, which is multifamily

Charles:
Interesting. Again, Leah, a lot of people chasing yields from other real estate asset classes. That’s for sure. So David, what are, what do you think are the main factors that have contributed to your success

David:
Would say staying disciplined is, is very key and know what your strengths are. Right. So we know that our strength is not doing major rehabs with properties. We just don’t have that skillset. At least at this point we don’t we might delve into that in the future. Mm-Hmm <affirmative> but, but I think, yeah, so can know where you can do well and what you can accomplish. So being disciplined and staying patient I would also say having the support of my wife in this as we work together has been very key, right? I think a lot of, a lot of families and spouses would, would realize or recognize that sometimes it’s hard when you’re pulling into directions, if you’re working as a, trying to work as a team, but not everybody’s on the same page. So I’ve been very fortunate that my wife is exactly on the same page with this. I mean, at the end of the day, you have to do your homework, you have to do the analysis, you have to know the neighborhoods, you have to spend time with the brokers. There’s no substitute for that. And you have to be really attentive to detail. Right. I’d say real, estate’s a business where sure. It’s less complicated than many other businesses that I’ve seen, but you still have to know your numbers. Right. And if you make a few mistakes, you can still be okay, but just don’t make the big ones. Yeah.

Charles:
<Laugh> yeah. That’s great. That’s great. The other thing too, that kinda add to what your what I feel one of your factors is, is that when we were talking about your first property is that your family, you and your family had your why in place, which was more time with your family. So that’s a huge goal for you to work for work towards. And that’s awesome that it’s great to have that kind of guiding light of where you’re going. So, you know, Hey, this, this, this property’s gonna be a lot of work. It’s gonna be a lot of, management’s gonna be a lot of asset management, project management let’s pass over and then stick with ones that are gonna be a little easier that we can use some of our skills to you know, to clean up and to get rented to better tenants, higher paying tenants and stuff like that. So that’s awesome.

David:
Yeah. I think, I think having why you’re doing it absolutely is a, is a key thing because it helps us figure out what deals make sense for us. But also to your point, what, I mean, again, for me right now, it’s really all about cashflow, right? So for any given deal, there’s an element of how much cash flow is this adding to our income statement, our personal income statement, <laugh> our personal cash flow statement on a, on a monthly basis. And so you, you kind of have to really understand that because I think some people do get wrapped up in let’s the next deal, let’s do the next deal. And at some point, I mean, if you’re doing too many things, it’s more difficult to make mistakes.

Charles:
Yeah, no, that’s great. And you, you also have a strict criteria that you’re sticking with for that cash on cash return, cuz obviously that it leads to your goal as well as having passive income. And I imagine as well with your investors. So it’s great to have that alignment of interest between both the general partners and the limited partners. So, but David, how can our listeners learn more about you and your business?

David:
You can find us at website, which is Cape Sierra capital it’s C a P E S I E R R a capital.com. And while you’re there, you can download my free ebook, which is the personal cash formula. Take a look. I think it should help you.

Charles:
Okay, David. Well, thank you so much for coming on today. I will put those links into the show notes and looking forward to connecting with you in the near future.

David:
Thank you. It’s been a pleasure. Thank you, Charles.

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.

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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

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