Next Level Chat: Our Acquisitions Process
“The investment goal is to buy, stable, assets that produce income every month, every year, year over year. And then hold onto those for as long as we can, until it’s feasible to sell or move them. That’s really the goal.”
During this holiday season, Next Level American Dream will be doing something a little different. Today Abigail and Sean are going to talk about their why and purpose in this business and then Sean will discuss his success formula. These chats with the hosts will allow you to get to know them a little bit better and have a better understanding of their business. If you have any questions for use please comment on our Youtube, social media, or reach out to us through our website. To make sure you don't miss the next chat, make sure you subscribe to the show and leave a review so they can continue to make episodes for you to enjoy.
Key Topics
What types of properties do you look for?
Specific areas? How do you find that deal?
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Abigail: [00:00:00] Welcome to the next level. American dream podcast brought to you by Thomson Multifamily Group. Your hosts, Abigail, and Sean will discuss how you can take your American dream to the next level. The real estate investing business practices and personal development. Join us as we share our experiences as a father, daughter duo, who are trying to accomplish their goal.
Of financial freedom. We hope you learn more about how to define and achieve your American dream. Here's another episode of next level American dream.
Sean: [00:00:35] Hi, everybody. Welcome back to the next Level American dream podcast. Abbey and I are trying this new format, we're just going to talk a little bit about, our business and how we kind of go about things so that you guys can get a little bit better understanding of what our business looks like and how, how we like to do things.
So, today we're going to talk about acquisitions. how we do that in the process of going through that, that, finding properties, looking at properties and things like that. So,
Abigail: [00:00:58] yeah. So let's, let's start out [00:01:00] with what types of properties do we look for?
Sean: [00:01:04] Well, we, we buy apartment building says let's first.
Abigail: [00:01:06] That's the first step.
Sean: [00:01:07] It has to be an apartment building.
Abigail: [00:01:09] Yep.
Sean: [00:01:09] So
Abigail: [00:01:10] Has to be multi-family.
Sean: [00:01:12] Yeah. Multi-family so I work with a number of people. So Corey is one of our, primary KP's and, I'm partners in the deal. And,
Abigail: [00:01:18] KP means key principal.
Sean: [00:01:20] Key principal, yeah. We, we look at properties that he has found success with and that he's, been successful with as well.
So we looked for a hundred plus units, deals that are under $20 million, just because funding is sort of sat there, a, B and C class properties and, hopefully be in a areas if we can, prefer stabilized with some upside too. We can do, some value add property, which means, where you have a little bit of a maintenance issues and bad management.
So we come in and we fix those things, which adds value to the property increases rents. And we look for a bad management, so we can sort of turn those issues and had streamline things, we have great management team. we're looking for properties [00:02:00] that are, you know, 1978 or newer, you know, and, and that's really kind of it, so, nice, nice, apartment buildings that are a hundred plus, units or more, that are, you know, good, good locations.
Abigail: [00:02:12] And for someone who doesn't understand real estate, all that, well, really like kind of bottom line, what an in, Layman's terms, what do we look for? Just like,
Sean: [00:02:23] well, we're looking for opportunities really. So it's not really the property itself. So the property itself, for me anyway, every property has a value, right?
Every property has value somehow. It's finding those properties that we can add value to and streamline their management and make that business operate properly. So when you're buying apartment buildings, it's really more about buying a business than it is about buying a piece of property, you know, it's not like you can go buy land and it's property.
Right. But right. Apartments are operating businesses. Money comes in the form of rent. you know, you have expenses and then there's profits that come up. [00:03:00] Right. So, you're looking at a business as well as an asset, you know, a land asset. Right. So, we're looking for an opportunity to improve that asset.
So. If you're looking at a property, you're looking for the opportunity within that property. That's hidden kind of the hidden jewel of that to make that successful. So you want deferred maintenance, which are, you know, issues that the property may have, that the current owner doesn't want to spend money on, or can't spend money on, to make those improvements that would then drive rents up because people willing to pay more because it's a nicer property has better amenities has nicer, you know, Units or whatever it is.
Yeah. And then we're also looking for bad management. So management companies. There's a ton of great management companies out there. There's also a few management companies that take their eye off the ball and, you know, vacancies go up, I guess, or our occupancy goes down. And people don't like living there.
They're not getting the, the maintenance requests done quickly enough. They're letting the place kind of [00:04:00] fall apart. that can be a couple of issues that maybe the owner doesn't want to spend money on the property. Maybe the manager doesn't know how to use the money that the owner is giving them.
Abigail: [00:04:08] Yeah.
Sean: [00:04:08] Whatever that is. What ends up happening is your, your tenants or your residents start to not enjoy their living there. Right. So it's hard. It's hard to get new tenants. It's hard to keep the tenants you have. So your occupancy gets, it gets hurt. So, now, when you have deferred maintenance, bad management, those are great opportunities for someone who comes in and can spend the money to get those things fixed, get the property up to where it's really a hundred percent again, and encourage those tenants that are there to stay with, you know, and pay more rent and get new tenants in that you want, that are going to pay more rent.
And when you, anything, you pay more rent on a property, the value goes, it goes up exponentially, right? So that's what you're looking for. For me, it's really the opportunity. That the property presents in, repairs or maintenance or management, you know, those kinds of things. That's what I'm looking for.
So [00:05:00] anytime I'm sort of digging through, you know, property, I'm always asking myself where's the opportunity because for me, that's, that's where the whole success formula ends up.
Abigail: [00:05:09] Right. Yeah.
Sean: [00:05:11] If there's no opportunity to increase those things, if you've got a perfect property, And, you know, there's nothing to improve, your growth or your return or your whatever your investment criteria is going to be.
It's going to be limited. Right. It's going to be much smaller.
Abigail: [00:05:25] Yeah.
Sean: [00:05:25] So we're looking for ways to, to jump that value up with a great deal.
Abigail: [00:05:30] Right.
Sean: [00:05:31] and that's what I, that's what I think of it as it is opportunity. So
Abigail: [00:05:35] fantastic.
Sean: [00:05:35] I don't know if that makes sense, but that's how I, that's how I think about it when I'm looking for properties.
Abigail: [00:05:39] We look for a hundred plus properties or a hundred plus. unit in your properties and, and lower, nicer, areas. And we're looking to add value to the community in repairing maintenance and management.
Sean: [00:05:57] Yeah. My favorite thing is to own a on a, on a [00:06:00] asset that a working family can be happy and feel safe and enjoy living in that's my goal in life.
Right? So I'm looking for assets that do that. That have an upside. Right. So I want to be able to create that for somebody. And I think that's, for me, that's the underlying goal all the time is so I have a place that people can feel safe and happy to live, and it gives me a property that gives me an opportunity to create that.
Abigail: [00:06:24] Yeah, it's their home. So you want to make sure that they're happy where they living. I think another good question is, do we have specific markets or areas that we look at and if so, how did we come to that conclusion? How did we get to that? Specific area that we want to look at,
what about it is, is there?
Sean: [00:06:44] So we, we look at a lot of markets, so we look in a ton of places, for us, the, the market itself is not restriction, right? So we can buy pretty much nationwide. I focus on a specific area, but we could buy a nationwide. there's some [00:07:00] places we don't like to go, they just don't have, you know, kind of favorable policies for, Apartment owners, but, yeah, real estate owners.
And so we, we kind of avoid those areas, but, we can really go anywhere. So what we're looking for when we do go into a market is, we're looking for upward mobility, mobility, I guess, in the, in the economy. we want an economy that's growing. you want an economy that has, jobs increasing, you know, population is increasing opportunities increasing, right?
So you want all those sorts of things. So we look at all those metrics. but we will look at properties sometimes in an emerging area, too. We like emerging areas as, as opportunities as well. So not only in the same way we look at opportunities for properties. We're also looking for opportunities in communities.
So if there's a community that's kind of, I don't know, struggled for a while, but it's kind of on the uptake or it's, you know, it's on, on a surge, industry is moving in, people. Really loved living there. There's more people moving in, to fill those jobs that the industry [00:08:00] is providing. And people are just sort of like enjoy living there.
Like right now you see an exodus from New York city, for example, and they're all moving to the suburbs and moving into those areas. So those areas that those people are moving to, those are emerging and there there's an opportunity there to, own property. And then, and then ride that kind of the upward yeah.
The upward wave
Abigail: [00:08:19] See that growth.
Sean: [00:08:20] Right. So for us, it's more about, it's more about the metrics of that community and what that community is kind of doing than it is the community itself or its location or things like that. So there's some, like I said, some areas that we don't want to be in for, or for negative reasons, but most part we'll look at properties that are in areas that have that sort of, that trajectory.
We, we looked at a property recently that the community had been hard hit with COVID and, oil crisis and things like that, but it was really rebounding strong. So we really liked that, you know, we like that, that, that, where it's, it's headed back in the right direction.
Abigail: [00:08:55] Yeah.
Sean: [00:08:55] And for us, that's, that's the most important thing. So when we're selecting markets, we're [00:09:00] looking for upward, upward economic mobility,
Abigail: [00:09:02] So why would we not choose a market that is already at a very high point? Like New York city or another large metropolitan area?
Sean: [00:09:13] That's already peaked at the market?
Abigail: [00:09:15] Yeah.
Sean: [00:09:15] Well, because, the, the future is a less little less certain right in some sometimes it's, you know, maybe, maybe not really. but if it's a really strong, overpriced type market, the volatility of there is a little bit of a risk, right. I think anyway, and you know, it's just finding something that's affordable.
I don't really, like, I like to own, like I said earlier, a place that working family can, can raise their family. Right. So that's kinda my goal. That's what I really love. And, you have that in New York city too, but it's just so expensive, you know? So it'd be hard for someone like me as an investor to buy those properties.
It's just, it's too, too sort of, [00:10:00] expensive, really to, to make sense of. Right. I'd much rather buy a property and, you know, say Oklahoma city or something. Where you can have a really nice big property. That's a hundred units that we can sort of afford to, to, to do, and people can afford to live in.
Right. So for me, that's just, that's just more what I want, you know, to buy property in San Francisco or New York, those overinflated markets. I just, it's a little bit scary. I think, it just seems like the volatility is. It's so close to the edge because people are struggling so hard to afford those markets.
Abigail: [00:10:39] Right.
Sean: [00:10:39] You know, you can still have a good life in Oklahoma city and live a good life without having to spend every penny you have on your housing. Right.
Abigail: [00:10:47] Absolutely.
Sean: [00:10:48] And I think that's a better, financial risk as an investor to buy those types of properties than something that's in an upscale area, you know, like in New York or San Francisco or even [00:11:00] Dallas, you know, in some ways.
you know, that that real estate in those markets is, a lot of times priced very high, right. and it's, and it's driving prices up for the residents. It's driving the prices up for everybody. Now. I just, I don't know. I just don't, I don't like those sorts of things.
Abigail: [00:11:14] You've touched on some of the cons to why you would do it as an actual real estate investor, but are there any cons to investing in a high inflated areas as a passive investor?
Sean: [00:11:27] It's the same risk. Right? Well, it's different risks, but it's the same, it's the same logic, right? So you don't want to be in an area you want to be in an area that affords you the growth and the trajectory that you want. Right. So in an area that's on an up cycle and it's, it's kind of tipping the top of that up cycle.
Then, then, you know, which way is it going to go in the future? Right. most communities look for a strong, you know, for the future, but you know, if you'd ask someone. You know, nine months ago, 10 months ago, 11, 12 months ago, how New York city real estate was doing and it was it's going crazy.
Abigail: [00:11:56] It's definitely a different answer.
Sean: [00:11:58] Yeah. Then we have a COVID and [00:12:00] everybody's leaving town. Right? So that risk is there when you're at those top markets. Yeah. But in Oklahoma city, they're doing fine. Right? They, they got hit by COVID. They're very, their communities are struggling. Their businesses are struggling, but people still want to live there.
People are still happy there. They're still trying to make it work there. You know, so you don't have a mass exodus out of a community like that. So, you know, with, with some sort of crazy pandemic. Yeah. And the property values are pretty stable. Still. I keep using Oklahoma city, but there's a lot of communities like that.
There's, you know, Kansas city, there's
Abigail: [00:12:31] It's one specific example.
Sean: [00:12:33] There's a, there's a ton of, there's a ton of middle America, areas that people can buy and live that are still affordable and still say. And you can still have a fantastic, like, there are a lot of times, you know, if you asked the right person, New York city is not the place to raise a family.
Right. So, those other communities are, are a lot of times more sought after I think. But anyway, so yeah, so the downside is still the same, even if you're a passive investor, active investor, [00:13:00] being in those, More volatile communities. It's just, you're just risking, losing out if something, if anything sort of turns in that market.
Abigail: [00:13:07] Yeah. And there's more opportunities in those middle class
opportunity, or
Sean: [00:13:12] middle America, yeah.
Abigail: [00:13:14] Middle America things, and then the high inflated or even the lower end.
Sean: [00:13:19] Well, it's stability. That's what I look for. So stability is a big deal for me. I don't want volatility in real estate is not the goal. The goal is stable.
Right. So if you can find communities that are stable, and that's why we want communities that have a trajectory that's upwardly mobile in their economy, because you can see that you can see a stable growth in that, in that project. Right? If you're going to places that are having explosive growth, 40% growth rates, you don't know what that's going to do.
Right. And you just don't know. If you have a 4% growth rate. That's fantastic. To me, that's, that's more appealing to me than these crazy growth rates. Everybody wants to be in these giant growth rate [00:14:00] communities when they're buying real estate, because they want that big boom. To me, that's scary because I want stability.
I want long-term stability in my investments because my goal is income. So I want to get paid every month for 30 years. I'm not trying to make all my money in one deal in one year kind of thing, but a lot of people want to do that. That's their, that's their investment goal. For us, that's not the investment goal.
The investment goal is to buy, stable, nice assets that produce income every month, every month, every year, over year, over year. Right? Yeah. And hold onto those things for as long as we can, until, you know, it's feasible more feasible to sell them or move them or whatever it is. Right. But that's really the goal.
So for me, crazy markets are, just that. They're unstable.
Abigail: [00:14:52] They're crazy.
Sean: [00:14:53] Right. So I want nice and stable. So places, you know, like, like I said, Oklahoma city of those middle America, places that have more [00:15:00] stable economies population kind of grows at a certain rate, that, that trajectory is really more predictable.
And if they get hit, it's generally a much smaller hit. Right. You know, if you have in those areas that you have these explosive growth rates at 40% over five years or whatever it is when they get hit, it's hard. Yeah.
Abigail: [00:15:19] Right. Very dramatic.
Sean: [00:15:20] Yeah, the, the harder, what is it? The bigger you are, the harder you fall kind of thing.
Right? So those things are scary, but if you have a community that just, just kind of clicks along and gets their 4% or 6% growth, when they get hit, they, they go down a couple points. Right. And so your investments don't just get trashed too.
Abigail: [00:15:39] And it's easier to kind of go back up. They hit, they get hit, and then they, they reached back to where they were.
Sean: [00:15:45] Right. If it's a nice stable community. They're going to eventually rebound. Right. And you've got, you've got a good workforce. You've got good, good businesses there. you know, if you do have a problem, like COVID, people are going to get hurt of course, but over a 10 year period, that that community is going to [00:16:00] rally.
They're going to, they're gonna overcome that problem. They're going to fix their issues. They're going to continue to grow. Right? So those things are going to happen. That's true for every community, but the difference is they dropped 4% where someone else might drop 30%. Right. But then no one really dropped 30%, but you know what I'm saying to the bigger, the bigger communities or the stronger markets like that can get hit harder is all.
Abigail: [00:16:21] Yeah.
Sean: [00:16:21] Anyway.
Abigail: [00:16:22] Okay. Well, Dad, thank you so much for answering those questions. I think those would be really beneficial to a lot of people. And thank you guys for tuning in. We hope to see you in the next one. And if you guys have any other questions that you want, either of us to answer, please let us know in the comments below and we'll try and answer them for you.
Thanks for joining us for another episode of Next Level American Dream. If you would like to learn more about what we talked about today, you want to contact the team directly. We're interested in passively investing and being a part of our deal room. Head over to our website at [00:17:00] www.thomsonmultifamilygroup.com.
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