Chris Jackson is a Principal and Managing Partner at Sharpline Equity, Chris is responsible for all operational strategy, systems design and process implementation. Chris specializes in finding underperforming multifamily assets with high upside opportunities. Chris is based on the North Fork of Long Island, applies the management and efficiency principles that Jackson has acquired over the last 15 years as an Information Technology consultant. Chris’s career, specializing in operational efficiency to maximize profitability, has spanned a wide range of disciplines but has mainly been focused on servicing the legal industry. He has provided strategic and tactical implementation of a suite of efforts including cybersecurity, project management, vendor selection, personnel selection and mentoring, and software architecture.
Connect with Chris:
- 10 years investing, left the W2 couple years ago
- Growing Out of that Introvert Personality
- Fulfilling my 21 year old’s self’s dream
- Sharpline Equity = based in NY but your current portfolio mixup is in the Southeast, let’s talk about that for a minute.
- I noticed you have one property in Foley, AL…right around the corner from me, let me know if you ever make it down for an inspection.
- The best business card.
- What is market blur?
- You have to buy right.
- Looking for the Value Add
- CapEx Spend – Outside / In approach
- Adding Value to predictable cash flow
- Efficient Underwriting – get a quick no
- What’s up with the Pre-1975 properties
- Where’s the market headed?
Links mentioned in this episode:
[00:00:01] Chris, welcome to the show. And good early morning to you, sir. Good morning, T.J.. So you were just talking a little bit before hit the record button. We Boettcher’s are our coffees together, right? Morning, everyone. Morning. Morning. It is a little early for this. And I appreciate you. Doing earlier than most people. Right. So it’s 6:30 Central, I mean, 6:30 Eastern, 5:30 Central. We’re doing this on a Friday morning, which is incredible for you to give me that time slot. But you and Facebook, you give me a hard time or or you tend to boast about when you get up early before me. And that is really.
[00:00:44] Yes. You and you and. Right. Well, you guys are always up early. And I’m not up early all the time. Like. I had my W-2 job for a very long time. And now I actually pride myself now that I’ve transitioned out that I don’t use an alarm clock when I would. I don’t have to. So I make six thirty six, six, thirty seven o’clock wake up just somewhere within that hour, which is again so nice tonight. Eighty percent of the time I can wake up without an alarm clock in my life. And that’s a beautiful thing.
[00:01:13] If I ever leave the W2 world, I think that’s probably gonna be the one of the biggest things that adjustments don’t have to get used to. Which is weird for me to say this because up until we had kids. My brain really didn’t start going until like 10:00 in the morning. Yeah, right. And it was because I slept right up until the last moment possible to get out the door for work.
[00:01:37] So that was a it was a huge shift when we treat three kids for me to at my normal WTS schedule was. It was it was a tech company as well. We would go from 10 to 6. So I could stay up until 2:00 in the morning and then sleep until 9:50. I did the same. But I have kids. It doesn’t, does it all like that? I’m in bed by 9:00 and I’m up at 6, 7 o’clock.
[00:01:59] I mean, by 9:00 to. And I’m and I’m struggling. Last night I fell asleep in the recliner and it was like 8:30. I was like, this is not good. I also didn’t start drinking coffee until we had kids, which is anything.
[00:02:12] Yeah, yeah. It was it was water or a coke or something, which I would still have a Coca-Cola. Early in the morning.
[00:02:20] People look at our coffee. Black bold extra old. Really does. I drink it black.
[00:02:27] I can’t do it. I can’t do. If, if, if, if. Black coffee. Tasted the way it smelled. I would bathe in this stuff. I mean, I would just. It’s just so I could drink it with that. I just can’t do it. And someone heard this line the other day that there is no good coffee, only good drinker is very strong. And some black coffee drinkers.
[00:02:51] But yeah, you got me drink. I’m not going to be getting easier. Really, Stratego?
[00:02:57] I can’t do it. I can’t do that. It’s too bad anyway. All right. So we’re here to talk about it’s talk about real estate or here about talk about a lot of stuff. Right. So you had a deputy job for how long have you been out of the W2 world?
[00:03:13] About a year now. But I was also in transition for about two years, I was doing both for about two years pretty. I mean, I was doing real estate for about 10 years, but I would say the most heavy gobble up for the last two years, I was director of operations of a tech company, a partner as well. So I was able to have some flexibility.
[00:03:34] Yeah, but I started out my tech career as a pretty hardcore computer programmer for 10 years hiding behind a computer. I loved it. I absolutely loved it. I have nothing against computer programming. I’m saying that jokingly. But I was I’m an introvert, so I naturally led myself to be behind the computer screen. And I loved the challenge of computer programming. I was the guy that would not sleep for three or four days and come up with the solution while everybody around me was saying we had to abandon this and abandon that and go try to come up with the solution and never give up. And that that led to me advancing in my career and ultimately that fire for the drive you need in real estate.
[00:04:14] Yeah. So happy to have a fellow propeller head on on the show. Don’t take offense to it because that is what I am, right. I mean that my dad using computer science, I spent I’ve moved on into the sales world, which I know is if you’re a programmer, you probably look at those guys like like our our programmers look at us all.
[00:04:34] When I when I was a programmer. Yes. But then I realized that I had something inside of me that I wasn’t tapping into. I knew that more. And then when I started to get that extra rare inmate come out, I realized that I had some sales ability. And you need that in real estate, too, and you can find that even if you’re an introvert.
[00:04:54] So so there was a challenge I did in the Facebook group a while back, too, because we were doing this work is I wanted to the team I have at work is relatively new to me in trying to learn the personality types, what nine opposed to going to. I think a 16 personalities dot com that allows you to take this test and spend 50 minute to I need to get them as a sponsor for the show anyway. It tells you basically what type of it goes to the Myers-Briggs Foundation or whatnot and tells you what kind of personality type you are. I’m an introvert, right? And you’re in a one a lot of people here that they’re like, no way. That’s right. But just like you were saying, I am really comfortable behind a camera and keyboard. Right. That is my comfort zone. Now, I always challenge people to get out of their comfort zone to do different stuff. And I take those challenges, too. So this week I went to a Toastmasters. I don’t know who those are or that group is, but and my friend first meeting, I had to give up. Get up and give like a two minute speech. You know, I know I’m out there popping my knuckles and doing all these nervous and stuff. But how did you end up doing that to get the point? How did you. Did you realize, OK, I’m an introvert.
[00:06:13] And if I want to get into real estate investing, I need to come out of this show. Or was it something that just came naturally? And how did you practice getting. Because personality types can change. Right. Personality types can change as people grow and have new experiences. But what was it for you? That was the aha moment.
[00:06:35] I realized I was losing my skills of lack of social skills and wasn’t I wasn’t I wasn’t becoming socially awkward.
[00:06:46] I mean, I am extremely lengthily awkward. But yeah, I mean, I guess I probably was I mean, I was at work, but I was so much time behind the computer that I was not I was a practicing those skills. And what happened was I.
[00:06:58] I’m forty four now. When I was twenty one, I really wanted to get into real estate. That was even before a tech career. I got called Sheet’s. I did all that stuff and I didn’t really do anything with it at all for about 10 years. I was just thinking about being a real estate investor, just like I told my wife. I’m tired of thinking about this. I got to do something about it. So at about thirty one thirty two, I realized I needed to enhance my people skills. And I went to a RIA event and I went up to one person talk to them. And it was like too much for me. Like it was like that. Yeah. Know, but what I did was I went through the journey that a lot of people go through, which is really self-defeating. You go you go to something like that. You you step outside your comfort zone and you meet somebody. You talk about real estate. You sound like an idiot. It’s it’s fine. But then you you tell yourself, I’m not good at this. You don’t practice it. And what I did was I don’t know what made that switch, but I would. I went back the next time and I just kept on doing it. And I realized that I was allowing myself to be bad at it. And I allowed myself to feel like an idiot, feeling like an idiot. It’s something people will repel against and do everything possible to not sound like an idiot. And I I tapped into you sounding being OK with feeling like an idiot. And that allowed me to grow and realized that I was I was building brick by brick. More confidence in that area.
[00:08:30] Yeah. And I feel like you were just telling my story on the first time I went to Rio meeting as well, because the first time I went, I didn’t know anybody. I was the guy who sat in the corner of the room. Actually, I think I showed up on purpose late because the Rio meeting has a networking piece in the beginning. And then there’s a note as a presenter and then there’s networking piece afterwards. So knowing that, I think I showed up purposely late so I can avoid the networking side of it saying no, anybody. Right. And then I’m probably sure I left early. Right. Snuck in the back, sat down there. OK. I did it right. But it was. I was there. I was there. Yeah, it was it was one of the things I checked off. And then that was probably the only time I went. And then fast forward a year from then. And I had a buddies say, hey, do you know about this group? Was like, oh, you know, a brat. Oh, yeah. I’ve been I’ve been to those meetings before and I wanted to go with me. Oh, crap.
[00:09:33] And to this day when I walk in that and I’m I’m a member, I’m not an active member, but I definitely want to support them because I met Rob’s and personal and he’s been very supportive of me. Right. So he’s actually let me speak in a couple. I said, like, I will co-host. I’m not getting up in front of the crowd. Right. And I will I will go speak with you. And he told me I did a good job, but I’m pretty sure I bombed it. But but I love how you took those steps. Right. And so before we go any further, let’s talk about your current portfolio.
[00:10:13] What do you have now? I know you do multi-family. Do you do anything other than multifamily?
[00:10:18] Not anymore. I have done. I’ve done a single family, Phillips single family rentals, which we still have quite a bit of. I’ve done lending, wholesaling, small multi-family, large multifamily. But yeah, our main focus right now is larger multi-family. We currently have a little over 300 units. We’ve we’ve have about a little over 500 in experience because we have in the past five or six years. We do have five full cycle multi-family projects under our belt where we found the deal, raised the money for the deal. Run the deal. Execute the business plan to either sell or refinance. But then ultimately sale and disposition of the asset with capital return and return. Very nice. So we have that. We’ve done the full cycle. It’s not like we just accumulated like a freak. And I no doubt don’t know what to do with these things. We are operators at the core of our business, which is probably why we haven’t accelerated as fast as when you look back now. Hindsight’s wonderful. You know, there’s a lot of deals I would have purchased that I said no to at the time because we’re operators. We were concentrating on becoming the best operators we can be. And I believe that that sets us apart right now.
[00:11:35] Gotcha. Gotcha. And then you’re specifically talking about sharp line equity right through your group. So I’ll make sure to put a link to that in the show notes as well. I totally forgot where where I was going after that.
[00:11:53] We were talking about, oh, I’d be more this call for an integrated.
[00:12:01] Oh, yeah, we’re we’re we go.
[00:12:04] We’re going to. We’re gonna introvert style. Well, I mean, being an introvert and going into those things, it was like, how did I get there? Yeah. Yeah, I mean, it was I took a year after I started going to reha meetings and just getting my skillset improved in networking. I still would not say I was a great networker. Don’t don’t think that I went to a couple of reha meetings and it was all great. And then I just tapped into something that was amazing inside of me. And it came out immediately. It was years of growth year. I beg of you audience tap in to patients. It’s not going to happen overnight because I think that I know I did it, which is. Lack of patients actually starts to allow your mind to tell you that you’re not good at it. Like, I shouldn’t be here by now. I should be Johnny hand-shake by now. Yeah. And you don’t think you’re good at it. And then you go retreat to the comfort zone of what you have, which is what you’re good at. And sometimes the part that you’re good at. Like you don’t love that much. You know, there’s nothing else. So you retreat and go back to it.
[00:13:11] Yeah. And that’s an excellent point because, you know, likes something you said earlier, might be the title of the show is Make Yourself Feel Like an Idiot. Yeah. Cool. Yeah. Totally. I mean, honestly, you and I’m synod’s been thinking about what helps. What has helped me grow the most in the last year or so. And I think it’s that right. Is just accepting. Hey, I’ve never done this. Nobody should. And I’ve got a little bit of perfectionism in me as well. Even when I start doing this podcast, I was like to where I am today. Man, it’s just a conversation I’m gonna have.
[00:13:44] Hopefully when the podcast ever. I’m not going to do it. And then. Yeah, that was that was it. Right.
[00:13:52] And there were so many angles in my life that I focused that way. And now with my. And I think this is one of those things that I’ve learned that I’m passing on. Right. Is there’s a I’ve got a couple of greenhorns on my team at work. And so we’re training them up there. There’s a couple of them that are or three of them that have been.
[00:14:16] Three months or less. Right. First month, I’m like, look here. You’re just getting acclimated to the systems and stuff like that. Second month, you’re actually going have to start calling on customers. I was like, yeah, you signed up for a sales job. You calling customers in every one of them except, well, when I was pretty good, but every one of them have been very reluctant to do. How’s it look? And here’s how I’ve helped them get over it. Look, you’re not calling the biggest customer. And we’re going to start Joe Small the first time you call somebody. It’s going to suck. Yeah. Mess it up. Yeah. See how bad you can fill it. And it’s almost like a green light goes off. I mean, a light goes off for them for the green or I guess is where I was going. But yeah, it’s allowing yourself to fail, allowing that nobody expects you to be an expert on something you’re starting out with. So I am curious about something though. When you were twenty one, you said you you have always been interested in investing in real estate since you’re 21. What was it? Twenty one that got you excited about it.
[00:15:22] I think it was it was the fact that. Something inside of me knew that it was the asset class that if I studied it. It was obtainable to take the information and then execute that information and control the value of the asset. I felt intuitively that I wasn’t interested in studying enough to apply the knowledge. If I learned to be like a stock trader now that has nothing against stock traders at all, I think they’re brilliant on the ones that are doing it right. And have I have a quick mindset too. But like, it’s not I didn’t I didn’t feel like it was control. It was more like reactive style thinking patterns, which is what brought me into computer programming. But I felt like I could touch real estate and and take the number side of it and control value.
[00:16:17] Gotcha. But it took you a while. You’ve been invest. I’m going to show off my horrible masc.. You said you were forty four. You been investing since you were 10.
[00:16:25] Ten years ago, about 30 to 30 ago started.
[00:16:29] So it took you 10 years, actually, to pull the trigger. Right. Yes. So what do you what do you think led to that? What do you think? What led to that polls? Was it just life in general or was it one of those things where you studied for that long? Because you did. You wanted to be perfect when you actually executed well, also.
[00:16:49] I didn’t. Day one I know about multi-family. I. I heard about just like the flipping and the lease options stuff. I I had maybe sent out a few mailers here and there during that 10 year process. And I did the over-thinking thing. I thought the mailers had to be perfect. I would. I mean, I actually get the mail. I remember it. It was maybe year five. I’m guessing. But like I did a mailer. I’m like, yeah, I’m a tech guy. I can pull this data. I can manipulate my excel sheet. Yeah. Mailer, I got calls. And you wanna hear something pathetic? I didn’t call anybody back.
[00:17:24] Yeah. What a freaking work. But I was like, oh, shit. And I was like them on Monday.
[00:17:31] Oh, wait. Now it’s been too long since I called them. I should just pull yourself up actually.
[00:17:38] Yeah, but that’s funny. The good thing I see there though is you took action and you figured out the hey, this is actually going to work, right. You just had to find the courage to actually do get past that introverted. I’m beginning to think that you’re much more of an introvert than I’ve ever been.
[00:17:58] Yeah. Was I what? I didn’t I didn’t take action on it. And then I had to get over that. And I was deeper into my like like full on headphone programming world. So I had retreated even further. Yeah, but I was there so I had to get out of it like my life would’ve been different for me, less fulfilling if I hadn’t broken out of that. But I knew that I had a relationship builder skill set inside of me and I needed to tap into it. And now that actually is my superpower, which is interesting. I I’m I’m really good at analytics and I can take a lot of data and see patterns. But my superpower is beyond that. It helps my superpower, but it is taking my introversion and I’m very quickly able to establish authentic relationships and develop that relationship at a faster pace than most. So I I’m not looking to to like do why relationship like with many, many, many people I have. I can go into a room and where the other person is doing 50 business cards and it’s quite good at it. And being authentic at that, that is not bad. I’m going to be the 10 business card person, but I’m going to walk out of every 10 buddies.
[00:19:14] Yeah. Speaking of business cards, I don’t know if you’ve seen this or not because you’re active on Facebook, right? Yes. I keep getting hit by this. My wallet was right here, but I have it in this room, I put in the same spot right by the door and put it over there because I knew right when we had up and I get ready to go to work. I was going to forget about it.
[00:19:36] We weren’t really kind of get excited about it was our senior link to this. But it’s it’s like a blue things called blue card or something like that. Where is it? I think it’s gonna be the last business card that I ever buy because basically it’s looks like a credit card. If I wanted to give you a business card, I would just walk up, tap this card on the back of your phone and it brings up my profile. It’s got links to all my stuff right. On Instagram, Facebook. I think I could put it on my podcast link in there and all this other stuff. So might be something you will look into as various. There’s like twenty five bucks, which is a box set of business cards. It works with all phones. You have it has to be like and I know it works on all androids like it. It uses the same technologies like Apple Pay and those things where you just phone the paystub. So it’s pretty cool. So I’ll send you a link. Yeah, I would I wouldn’t be into that totally. But it’s one of those things rumps. And I don’t wanna spend twenty five dollars on one business card, but I’m thinking, all right, I’ve changed company names. How many does in a box of business cards as this is at least ten bucks if you’re any good at it. Right. And it gives you one address. This puts the contact right in the person’s phone and gives them all the links and everything I want to know about me. So it’s pretty cool what I do, what I do.
[00:21:05] Also, a business card is I like that. For me, giving out mine, what I do is I actually prefer getting people’s business cards. I take a picture of it. I send it into. They change the name. It’s contacts, plus an auto transcribes the whole thing into your into your CRM. And then I can and I can follow up with people because I know you can take notes on the picture.
[00:21:28] Nice. Nice. So what CRM system do you use?
[00:21:33] I’m using contacts, plus right now is my entry point of people in that order. It just gets it in quickly for me. And then where we’re migrating over to active campaign.
[00:21:49] There’s the evil side of it was coming out when I heard dozens like this is a really good idea. But is it was talking about what do you do? I remember when I heard it as opposed to comedians. What do you do? Those business cards that you collect? Will you keep them in your car? And then when you accidently bump into a car next to you, you grab one of those business cards. That’s not your you. It is landed on the windshield. And make a note.
[00:22:14] I was like, that’s evil you to make sure that that’s not your your top client.
[00:22:23] If is your top prospect, maybe there’s a way to get introduced right now inexpensively. So you have you said 300 current units all multi-family right now.
[00:22:38] Yes, I know not. We have about 30 single family homes still. We sold about around 100 units last year. And now we we do tend to look at bigger multi-family right now. We what’s bigger in numbers of us?
[00:22:56] Yeah. You know, I mean, I’ve done a lot of different sizes of multifamily, but right now our largest complex, it’s one hundred seventy four units and we also have a ninety six unit.
[00:23:06] We’ve sold like a sixty unit. I wouldn’t feel probably comfortable at this stage going up to maybe three or four hundred units.
[00:23:14] Wow. Very cool. And I noticed on your on your Web site, shameless plug, sharp line equity dot com. Right. You have you have a portfolio page. And while you’re based in New York, you know, all the properties that I saw were in the southeast area.
[00:23:33] Why is that? We started about five or six years ago going into the southeast market, into Atlanta and the Atlanta market. Georgia market has been very good to us. And I think we’re ready at this stage to go into other markets, which I can talk about. But I think it’s very important for people when they’re going into new markets to not get into like market bleu and like market distraction. I’ve done that. What you’re looking for the magic market. And we picked Atlanta for the obvious reasons now, but it wasn’t so obvious then. But it was a population growth, job growth, rank growth. And it’s been very good to us. But there were times when it was like, let’s just go to another market, because it’s easier because Atlanta got Atlanta got pretty competitive. And you can lie to yourself and be like, I’m going to go to another market and find stuff that’s easier and you waste you’re wasting time. So we doubled down back into the Atlanta metro and outer concentric rings of Atlanta because you start to have an advantage when you know the other properties that have sold what’s going on with, you know, why they’re getting ready. You begin to see things like new in the Matrix that you can’t see at other markets, and that’s only going to come with experience.
[00:24:52] And I’ll say on this side of the fence where you were, I’m a potential investor. Right. Is that I was presented an opportunity. I finally told the guy no. But what kept me hanging on to possibly working with him is it was they had their history. Right. Of the deals they had done and they had already done.
[00:25:17] I’m just gonna say multiple weeks, I don’t remember the actual number, but they had already done multiple deals and holdings within that on that same city. And I was like, okay, these guys know this market. Obviously, they had some very good sense. Yeah. So that’s that’s interesting.
[00:25:35] We went into a new market where we are established enough. We have a long enough track record in this type of union account and the type of assets that we’re going to buy and what our business plan is. If we went into a new market, we would have to do the work to tell our investors, existing and new that we’re going into a new market. Here’s why. And what are we going to overcome from the fact that this is an entry into a new market? You have to be self-aware enough that that is going to be something that your investors are going to ask of you. So you have to satisfy that objection.
[00:26:10] Absolutely. Hey, I noticed you have. Do you still have your property in Foley, Alabama?
[00:26:16] That’s all I’ve got. Was to say, I don’t think I was updated. That was actually that should be updated. That’s sold. What was that like? Business partners, cash.
[00:26:26] I think it sold three years ago. I think it says there’s probably my notes or just wrong because I own your website. I didn’t notice when I went back and looked at a lot of it. Had the ones that you had exited as well? Yeah, right. So which is important to establish that record. But I was like, oh, I got one in full more. My mind was, oh my God, I wanted Foley. That’s like 30, 40 minutes from here. I need to tell Chris next time he’s down.
[00:26:52] Yeah, that was that that was a great deal. I think it was only held for two years. Now. Just purchased, right? Yeah. I mean that’s what we that’s what we do. I mean you have to buy right. And you’ve got to execute your business plan and exiting is important. You know, from a buy and hold perspective, it kind of stinks because you are you are getting into a little bit of a flipping transactional mentality of multifamily when Moldea really is is meant to be hold when you buy these. You need to understand what is this going to be like even if the intent is to flip. What is it like when we hold so that has to satisfy that, so yeah, by exiting a supporter from us, a sponsor, an investor, a track record to show that you could do the full cycle.
[00:27:41] Yet, as you said, you’ve done five so far. Yes. Full cycle. That’s incredible. What are some of the things that you look at? How article move to questions? When you say flipping. It makes me think you’re doing some sort of value add. So are you always looking for value add properties? And then the second second question is what? What kind of exit strategy do you look at for each property?
[00:28:08] So assuming the of we are always doing value add, that has been where we have focus, we’re looking for a value add component. There are two types of value add that I’m seeing right now and they both can be combined. A lot of syndicators today are just concentrating on the let’s raise enough money to update the units to a certain place, get rates up to a certain placed proof of concept, let next investor come in. That to me is a little bit of a dove. Like that’s like you’d have to do that. What we’re seeing is in the older buildings like pre nineteen seventy five, we’re going in and only doing deals where you cap ex enough to do the stuff nobody wants to do and you actually serve up a better product to the next investor that doesn’t want to do that stuff like we’re doing on right now, like roofs, windows, seal and strike a CS perimeter fence and we’re going to then do only about 10 to 20 units and serve it up. And nobody’s really doing that because I also don’t think it’s like you start to learn the construction aspect of multifamily when you’re in it for a while and you understand that these are the things that are actually being neglected by a lot of sponsors. Yeah, it’s going to come back to haunt them. We were calling this the cap ex Sunanda.
[00:29:31] I think I think you’re on. I ever heard of anything like that, but I’m sitting here running through several deals because one of the things that I challenge, I’ve got some money in a self-directed Rýza that’s been in there for way too long.
[00:29:44] So I’ve been forcing myself to look at other opportunities. And so I’ve looked at a lot and probably less special last two weeks, but a lot the last few months. You’re right. A lot of people were doing the very cosmetic stuff that’s going to improve rents and not necessarily focus on the cap ex up. How do you get your money back on a cap ex?
[00:30:11] Because I have to imagine that when you buy these and you do the Catholics improvements, it’s not really something that a tenant is going to want to pay more rent for, which is where you get the spike in value. Typically, right from from an intellij perspective, cap ex kept numbers with that is.
[00:30:32] Yes. From a from a direct kind of correlation, the CapEx spend on a lot of the roof windows, things like that, don’t directly result in higher rents. However, they can directly result in, say, less maintenance being required by the maintenance team to then be able to concentrate on being better services to your residents and you. That does result in better word of mouth that the community is developing. Feels good about. So there is a correlation there with doing the right types of CapEx. You do the roof, you’re getting less roof leaks less less. Presidents are upset. You also can improve the show trail when when residents walk in to decide if they’re going to live in this community. They’re deciding immediately if they’re going to live there. And if you haven’t done the CapEx on the exterior, you’ve if you had 100 people ready for your ad, you lost 50 before you even know it. Yeah.
[00:31:36] So there’s there’s that always start with the outside is what you’re saying.
[00:31:40] We usually do an outside in approach that that has that has worked for us. But at the same time, you asked a good question. How do you get your money back from without direct correlation to increase reds? What we’re also doing is the play would be you’re going to get your money back from a better Capri, from a refi or exit gets a. Kind of like you are serving up a better product to the next investor and that next investor is either your buyer or let’s consider them the bank that’s going to refi you, right? I don’t think a lot of people paying attention to that. We’re definitely thinking a lot about who buys this next, whether it be bank to refi value or bank to lend to the next buyer.
[00:32:27] Yeah, I haven’t heard of anybody do that. I haven’t heard of anybody. I’m sitting here. I feel like my mind just exploded that concept because you definitely that is definitely something that is allowing you guys to set yourself apart from my body else.
[00:32:46] Well, there’s there’s intricacies in multifamily where everybody is concentrating on an ally. And that is true. You have to concentrate on an ally. But these things that we’re doing, our CapEx injections, and what happens is they’re not going to show up on an annual eyeline, but they are going to affect the predictability of your cash flow, because if your CapEx is having needs beyond what you thought and you can’t predict what that will be in the future as as much as possible. What happens is you got to take from cash flow to pay for it. If your CapEx reserves were not enough otherwise thrown around like 250 to 500 dollars per unit per year on CapEx reserves, on older buildings, unless you injected a lot of capital that beginning, that’s usually not enough. Yeah, so so have injecting enough capital on the bones of the building, including underground pipes at all that we got galvanized pipes going that are 50 years on end of life people. We’ve already done so. Properties like we’re done that the PDC pipe. So the next buyer shows up and goes up nineteen seventy one product. What did you do to it. We did that. They’ll they’ll reward you for that. And you don’t have to worry about fluctuations in your cash flow for that Thatcher.
[00:34:06] Do you see it as big and you’ve done this on five properties that you’ve exited now. Right. You see what kind of returns are you seeing for yourself and for your investors?
[00:34:18] I mean, that’s hard to step in to say no here. And then it’s like I get held to it. And then when I don’t, you can give me a range. Right. I don’t. I don’t. I mean, the last last thing we just did, we had we sold a fifty six unit. We held it for two and a half years. Cash flow the entire time. We ended up selling it for a sixty three percent return in total in two and a half years. Well annualized out at like twenty three ish. We’ve had some properties that exited in two years that were north of that that even better. We’ve had some that annualized out in the double digits for many year holds. Yeah. And we’re we’re good at what we do. You know, if we haven’t we haven’t like we haven’t gone crazy bought so much that we can’t control it. Yeah. So that’s that because we are paying attention to asset management. There’s not a concentration being talked about. Asset.
[00:35:12] Yeah. Do you know do you guys manage these properties yourself. Do you have boots on the ground kind of in your warehouse or do you outsource it to a property management firm? Because we’re kind of spread out a little bit, right?
[00:35:25] Yeah, we’ve always used professional third party management. So there’s the discipline in our team of effectively managing other teams. So third party management management.
[00:35:37] Yeah. Yeah. Which is actually kind of fun.
[00:35:40] Yeah. I mean I think well will also be used to teams. I mean I moved up through the ranks to to understand how to manage teams over time. But yeah you have to if the bumper bowl a lot if to encourage them to and goals and encourage them.
[00:35:57] How many deals do you look at a week. It’s gonna be tremendous amount.
[00:36:03] It’s a lot, but I don’t subscribe to this whole course crap out there that like I underwrite 100 deals to find what I want. Yeah, yeah. I mean, it’s just like going in one year out the other these days. I would say that realistically looking at like enter the pipeline will be like like three or four real ones that I want to spend attention on. So but I also filter correctly. So after wasting time like a deal comes in, we have somebody in our team that instantly looks to see if it’s in a flood zone or not. I don’t want to know that.
[00:36:37] Yeah, that’s awesome. So what are the what other tricks do you do? You do.
[00:36:43] Because it sounds like the flood zone thing is one one quick. No. Right. And that’s something I’m always trying to encourage my self-esteem to dos. I get to a quick new right. No need to spend a ton of time on something that’s never going to happen. So you want to get to a quick no. So you guys look at flood zones. What other things? It sounds like you have a pretty good napkin test for identifying those properties that you want to dive in deeper on. What is it? What are some of those tips and tricks that you can you want to share with us?
[00:37:13] Sure, I would. So flood zone is for us that I can get a whole spiral of conversation where some people will disagree and say, oh, you can you can account for increased fight for us, but for us, I’m done. I don’t I don’t I don’t always time I’m with my personal home.
[00:37:28] And I mean, I’m just I don’t when it’s just there’s just too much that goes on.
[00:37:33] Oh, yeah. And so our yeah. Our filter is no flood zones. And if there’s one if there’s a flood zone near it and FEMA has not like very near like on the edge and FEMA has not been back to remap within the last. More than five years, FEMA’s coming back, baby, and they’re going to remap you’re going to stretch it out and then your insurance costs are going to go up.
[00:37:55] Do you know why we know this? Because it happened to experience in a how to deal.
[00:38:03] It was my partners deal that I was partners with her while it was going on. So I was I was active with it with her making decisions with her. Yep. Right. There was a creek like you never would think that there would be a flood issue. No, it wasn’t part of the flood zone. When bought, FEMA came back, remapped for buildings, went from like eleven percent cash on cash return that was being given out for a few years to drop it too. I forget I’m not saying the numbers wrong, but like seven. Now you’ve got to add a lot of problem to the fire because it’s set. And look at the sheet. She correctly exited with grace and professionalism and found the right buyer ended up after five years with an annualized 9 percent, which was a victory on something like that.
[00:38:49] Yeah, that’s that’s that’s not bad. But it was probably projected to do 50 or r16. Right.
[00:38:56] So that’s that’s that’s buying. Right. And also having a good sponsor that’s going to work their butt off to like, OK. We we have a situation now where how do we deal with it. What are our options and you deal with it.
[00:39:08] I don’t imagine that in dealing with with FEMA in flood zones, there is a way to discredit or challenge there. Other, as you can see, 50 grand per building and raise it. Oh, yeah, yeah, yeah, yeah.
[00:39:21] Oh, you talk about raise the rate actually raise the building we get not our A C building talking about getting to know some other things that we do to disqualify.
[00:39:38] Oh yeah I know. Elevator buildings zero. Was that just elevators are expensive to fix that the only way I would look at an elevator building would be if if we were buying in a class like it that got my world, I would have to be super new and I would need to learn what the due diligence items are for elevator. Yeah, but I don’t I don’t do elevators.
[00:40:00] I’m with you. And if you notice or at least around here, most of the multiform was round. Here are three stories at Max because it depends. Right. And this is where you got to know when you go into to your inner city ordinances and codes, is that most I think most city ordinances and codes around this G.O. in Pensacola, after you get above three floors, you have to have a irrigation system of some sort in it. Right. Depending on the dwelling or whatnot. And some of you have to have it on two floors.
[00:40:36] Yeah. The new ones. Yeah. Like not irrigations. Did I say irrigation? Fire suppression. Thank you. Wow. Murkoff. I’m glad to be here. I was talking about. You’re gonna read that book? Yeah.
[00:40:51] Another one is it’s not. It’s not a direct cancel, but this is where we get blown out of some deals, not meaning like we’re just not gonna make the numbers and be competitive. Flat roofs. I’m OK with. But to put a flat roof on the way we want is probably like we’re not going to beat our competitors on the.
[00:41:10] Why flat route one flat roof versus a pitch roof went to you.
[00:41:15] Well, sir, we just we just find that the flat roofs tend to pool water. And if you’re not done correctly, you now have just leaking issues that are just constant on your committee on energy maintenance, whack a mole cap ex then to redo them all. They just say it ends up getting expensive. I mean, I’ve seen a couple of deals where I really like where they. They they they rerouted re p.o.’d it. Yeah. And like I don’t know it’s like you your into it, you realize you’re like OK. I think it’s going to last long time to get a roofer up there and it was done wrong or not done. And it’s just when it’s not done great on a flat roof, it’s a time bomb.
[00:42:05] You know, I have one of the best roofers for my single family and stuff and he does some multifront with somebody. I have a bonding thing in that area that he serves in. He’s not the cheapest, but damn. He’s one of the best ones ever. And he’d just choose me straight. Look, man, here’s here’s what’s going on to the point where I’ve never presented him a week that he couldn’t fix, doesn’t use. Usually he fixes fixes in the very first shot at it. Right. He’ll come back. Hey, man, that was done wrong. Like I got to leave now that he told me he was going to get off on a tangent talking about myself. So we’re here about what do you want? Well, the point I want to make is I luckily found him, but he’s been my roofer for six or seven years now. And he’s incredible. So find those good trades if someone is not treating you right.
[00:43:01] Oh, one more thing. I think that people know out there, if you’re buying pre nineteen seventy five, nobody is really asking about this. It’s starting to happen which is good is we will look at pre nineteen seventy five ish pre nineteen eighty pre nineteen seventy five. That’s right. A gray area in the 70s. But we’ve done it twice now on buildings. If pre nineteen seventy five we are going to ask what kind of piping is underneath the mainlines. Not, not be in the unit IP or base as copper. Is that what I’m talking about. Right. About galvanized or PDC or ductile pipe underneath. I want PDVSA or ductile underneath. And if it’s cast iron or gap galvanized, we know that it’s the time bombs going to happen. It’s we’ve done it twice already. We do so. So we get we lose competitiveness when we see pre-dating seventy five stuff because we know we have to cap ex to do it to be safe. We’ve got we did it on our 174 unit. We knew there were some leaks. We knew that the owner was taking care of them. But we did cap ex enough. We’re like wow. I feel like this is going to happen. He did get to plug the leaks. We thought we were cool. It’s like day seven. After closing, another leak happens. Whack a mole, two to four thousand dollar digs. The second time it happened, we were like, forget this. We got quotes. We dropped 100 grand to get galvanized to BBC, put being shut off down to every single building. And we dropped the water bill from twenty one thousand to 11000 for the month. Wow. Your payback on it. And this. Now you can serve up this product to the next investor. They’re not worried about it. And also for us, for predictable cash flow, in this particular case, it’s predictable anyway.
[00:44:55] Yeah. Yeah.
[00:44:59] So keep an eye on people and start talking to your brokers about this stuff that actually helps the. Future investors out there like. Brokers are kind of like, yeah. Needs a new roof like everybody knows that, but they don’t want to hear about underground piping and discounts like. So more people are saying. Did you do that? Did you the underground piping, it will get out there and owners will have to do it.
[00:45:21] Yeah, that’s an excellent, excellent point. Yeah. And it’s funny, those CapEx things that are that have those long lifespans, you know, roofs or one of those things that you can physically see. Right. Piping is not right.
[00:45:35] So if you’re doing an asset class on your turn it up, you’re like ripping up parking lot. Let’s just talk about sewers and crap. Stewart, you’re talking about effluent and you’re talking about like drinking water. So that’s good stuff. Yes.
[00:45:57] Kruse’s It’s been amazing, man. And we’re coming up on time. I want to make sure people know how to get in touch with you of your questions and everything. What’s the best way for for folks to do that? Before you get to that. Definitely want to have you back on sometime soon. I think I had to risk. So I’ve gotten to this point where I didn’t do this at the beginning. But with us having several kids under the age of five, you’ve got a few kids yourself. You told me earlier, you get this, but I’ve had to reschedule almost every podcast of the last two months. I’m pretty sure you fall into that category, too. I don’t know. There’s something I know there’s something in my mind says there was we had this scheduled before or whatever. I think I think I rescheduled. It wasn’t while I’m apologizing. Apologize and everybody else because it has typically happened.
[00:46:43] So that’s kind of been my my intro and I forgot to do it. So for whatever reason. But back on you. How can people get in touch with you? And you have a Facebook group that will make links to the show. But tell us a little bit about that as well.
[00:46:59] Sure. I’m available online. You can reach out sharp line equity dot com and fill out the contact form. Chris Jackson on Facebook. Also on LinkedIn. Chris Jackson, sharp line. We also have a private Facebook group called Multifamily Unveiled. And we do a lot of videos and do high-quality shares of various articles and and links that can help your journey. And we talk about a lot of the things that people are talking about. A lot of the things that are the how did not sound like an idiot stuff like what is I know things like interest only.
[00:47:33] Yeah, well, it depends, right? If you got your propeller hat back on, you’re talking about input output, right?
[00:47:40] Correct. You might say that to a banker and they like what the heck are you talking about?
[00:47:46] You know, smile and nod at those that Chris has been fun. Definitely. I’m actually going to go. Well, I don’t know that I’m on your list of potential partners, so I definitely want to do that.
[00:48:00] And what else? What else? What am I forgetting? My notes. I’m freaking out now. I’m just kidding. Oh, so the last question that I knew there was something else. Last question I tend to ask everybody here in the last several months is that, you know, where is the market going? You know, everybody has this crystal ball. Everybody’s looking at things. And in the deal that I backed out of, I just if I told the guy who was sponsoring, I was like, man, if we were in a different spot in the market. Because they were doing huge value ads, but it wasn’t to the Catholics like you guys are doing, which has got me extremely interested. It was the same story, right? That you keep hearing over and over again. And I don’t know that the property will support it in a couple of years when they trying to exit, because I’ve got a feeling we’re I think the market is gonna be in a couple of years is not where it is today. Right. So where do you think we’re going when they come to the multi-family market?
[00:49:02] Multifamily. Yeah. First of all, being a mind pro and a shot at it because like we underwrite to mitigate where that can because nobody knows because last year we thought that interest rates were going to go up and now interest rates are starting to stay and not possibly go down. We have some proof of concept, if you will, that Europe. Did very low interest rates, if that occurs and there’s a recession, you would have interest rates go down and you would have a plateau effect on pricing. So I think that there’s still demand. I think you have demand on the millennial market, even though they’re starting to buy houses a bit. The genze behind them. I like properties that also cater to the garden style first floors for 55 and older. Know that the under-trained on those. And I do think there’s going to be a cap ex sudani that that is going to reward those that can find the deals where the pricing makes sense, where you can deploy the right capital and then you will be rewarded by the market that you did the right thing. Yeah, but I do think that it’s going to get harder for newbies to do multifamily because their banks will probably not let seventy five people come up with a net worth of two million.
[00:50:20] Hmm. Well you make a good point there too for newbies. You don’t want to make sure you know this warning for folks who are trying to get into multifamily or not thinking about those huge Catholic’s expenses that are now, you know, reaching their end of life is that if you don’t know this stuff and you look at a deal and you’re thinking, I’ve got this mazing deal on my hands, let me go raise money, let me close it and then, man, are you going to get burnt? Right. So you really got to know what you’re doing when it comes to that sort of thing.
[00:50:54] So when you say these things don’t run for the hills also, like don’t become a binary thinker of. Right. Oh, like like it’s going to get harder for new people. That that means I’m going to wait. That’s that’s you doing what everybody does. What I did for 10 years. Yeah. Yeah. Get in. You can kick the can and get pissed off that the market is hot right now. But that’s just where we are. Learn it, stay in it, get better at it, learn your craft and then execute on the one that makes sense. Just just understand where we are. But they’ll kick the can and be like I’m going to wait until everything’s perfect because then you’re gonna shop with everything. Yeah. Like, I’m going to have the advantage while the market fluctuates or goes down because I’ve been at it for a while and you’ll be like, what’s going on?
[00:51:36] Yeah, it’ll be like me releasing this podcast. Wait until everything’s perfect. It would never happen. And now, you know, I thought I’m doing great.
[00:51:42] By the way, you’re like, we’re having a great conversation and this is like you. Yeah.
[00:51:47] Yeah. The other day I was thinking, OK, April is gonna be one year anniversary.
[00:51:51] So that’s it. Yeah, well, you’re doing really good on marketing and branding because in my mind you’ve been W2 capitals for like five years.
[00:52:01] No. Yeah, no, it’s deputy capital site.
[00:52:06] So we launched about two years ago, a year ago. The podcast is like Metaphysic. I think I suck at marketing. To the point where I’ve now hired two marketing people in the first one a couple weeks ago, says, hey, I need to see your business plan. I was like you. You made the right one because I don’t have one analysis to the business plan is get in front of more people.
[00:52:30] Well, yeah, no.
[00:52:31] In my mastermind, those nine that let that cat out of the bag and they’re like, how in the hell? I was like, well, all I’m doing is publicizing what I would be doing anyway. Right. Like, I would rather, you know, for you not to have this conversation. I would like I would like for us to have this conversation right anyway. But it’s just one of those and I was having those conversations was like, okay, well, maybe more people can hear about this. So, yeah, it’s I appreciate that. And it tells me I’m doing something right. But it’s. But yeah, it’s it’s very new. It’s really new. So I’ve got some exciting stuff. I’m not ready to talk about this yet, but it’s it’s coming hopefully here pretty hopefully in two months. All right.
[00:53:15] That’s it. Happy to be a part of it. And I love talking about this stuff. As you know, it’s something I’m passionate about and got there. Live and let live in the dream. So it’s it’s wonderful. I can talk I can talk about this stuff all day.
[00:53:29] Me, too. But I’ve got to get to work. Either you’re ready to go to work.
[00:53:33] You don’t know what to do.
[00:53:35] I got my I appreciate it very much. I will check with you again soon. All right. Thank you very much.