Welcome to the REI Mastermind Network, where host Jack Haas gathers amazing stories from leaders in real estate investing.
In each episode, our guests will tell you what they're doing that works, what they've tried that failed, and best of all, you'll learn actionable steps to take your real estate investing to the next level.
Now, here's Jack with another value-packed episode.
Ivan Barrett joins me here today.You can find what his team is up to by heading over to bamcapital.com.Of course, that's a clickable link in the show notes.We're going to be talking about multifamily investing and how Ivan got his way into this.
I really appreciate your time, Ivan, and it's great to meet you.
Thanks for having me, Jack.
I'm always interested in this and we're going to kind of truncate this because I'm sure you've shared this story a million times, but could you talk a little bit how you found your way into real estate investing and possibly how you might have, I think we've all experienced a little failing forward.
Oh gosh, yeah.I've made almost every mistake in the book along the way and learned most lessons the hard way.
But started small, went and worked for a mentor in my twenties, developer here in town, got my chance to wear a lot of different hats for him.GFC hits and he didn't really lose money, but he didn't make a lot of money either.
And I also learned at that time that I would have to start my own thing if I really wanted to grow a business. And so I hung out a property management shingle, started managing for others first, buying some small multifamily assets along the way.
I learned how to use hard money to buy, renovate, rent, and refine, repeat the BRRRR method. And really grew both at the same time.
Once I had enough assets under management that were ours as we started doing apartment syndications, we let go of all the third-party property management accounts and the management company became a captive service provider to the wealth side of the business.
Today, we're pretty far along.We've transacted about a billion and a half of assets. almost 8,600 apartments, somewhere in the 8,500 range.
And we've got about 1,400 high net worth investors and families that come alongside us and invest in our funds, which is our primary product now versus the single asset syndications.Started off with a duplex.
How long did it take you to go from point A to where you are today?
Well, I got a taste for real estate early.So I went to university business school and learned about real estate finance.Worked for a mentor up and through the GFC and BAM started in 2010.
And so we're coming up on our 18th anniversary here next summer.
Cause you know, the reason I ask you that is because where you're at today is kind of an aspirational goal for a lot of people that get into real estate investing.
You've taken a different path than I've seen most people, you know, with the experience with somebody who was doing something similar and then starting a management company before anything else.That'd be interesting.
What type of lessons did you learn just owning a rental property management company?
Yeah, well, thanks for noticing Jack.
Not many people have hung out a management shingle first, but having just come through the GFC and I was studying some other wealthy multifamily companies, some other private equity, big family offices, and the most successful ones had a management company in-house.
And so I didn't know any better and thought, why wouldn't I start that first?It seemed pretty obvious to me.
The other part of it is, as you know, real estate is very capital intensive and I can go out and win management contracts much faster than looking at a hundred units, making offers on 10.
maybe getting one deal done and not let alone the capital it takes to acquire that asset.
I was able to scale the management company faster, learned a lot of mistakes along the way, but they were all relatively small at that time and was able to sort of get that
Up and going, learning the hiring and firing and the people game, which is so important in any operating company.And got some of those key people and processes in place.
Before taking on investor capital and before growing too big to where those mistakes could really hurt me or hurt my investment returns, which don't make it easy to raise capital for the next one.
Was that the first area of where leads began where you found some of your first opportunities?
Well, that's where I found some of my first investors.You're absolutely correct.
That did help find those early investors, those out of town owners of small properties who came along with me when I started doing larger apartment deals, 60, 100 units, and then on and on from there.
But no, most of those did not end up in my own portfolio. I was managing a lot of single family homes, a lot of duplexes all over town.But I think I could say confidently that none of those owners sold me a deal.
You know, I thought it was interesting that you said that your property management company eventually moved to the wealth side of the business. Was that your long-term goal that you were going to absorb that and stop managing other people's property?
And you recognize early on that that's where the wealth was going to be?
Well, at BAM, we've got our way of doing things.We're, we're very intentional about our culture and how we treat our people.
And if I'm working for somebody else, they've got their way of doing things the way they might want to treat other people is different than mine. And that can be a lot of burden on the team.
And so, yes, the plan has always been to, I used that service company to bridge to a size where we could only manage the assets that we choose to purchase.
You know, when you're the size that you're talking about, some of those numbers are kind of staggering. There has to be a lot of consideration and thought put into scaling at this point.
And you're running a fairly successful property management business.And to be honest, I found most property managers and investors interests aren't aligned.So you're kind of solving a problem here because now your businesses are aligned.
But what type of lessons did you learn in just simply scaling?I mean, you'd have to have all your ducks in a row just for the property management before you dived in full head first into the acquisition business.
Yeah, I'd push back on that one, Jack.You know, it's a process, especially early on.I'm a fire ready then aim kind of guy.So I did not try to have all my ducks in a row before growing.We built the plane while she was flying.
Has there been any pain points because of that?
Has there been any pain in growing a business?You should ask, you know, a gal reached out to me on LinkedIn and asked me, how do I stay motivated and how, you know, getting this far.
And I didn't respond to her cause there's just too many people to respond to these days.
But we talk about this here in the studio, even it's the ability to deal with pain and getting kicked in the teeth and knocked on the mat and getting back up is one of the keystones to building a business. There's just no other way to do it.
There are no shortcuts.You're not going to have all your ducks in a row.If I had sat back waiting for everything to be aligned, then I never would have gotten started.
Well, I think that's one of those things that, you know, as we close out the show, I have those lists of rapid fire questions.
And one of the things that continues to come up as a lie that we keep telling ourselves as real estate investors, that this is going to be easy and passive.
Is that lie still out there?Jeez.
When you host as many podcasts as I do, that lie is still thriving.Unfortunately.
Yeah.There's different kinds of passive for sure.And if you're even investing with guys like us who are sponsoring assets, there's still a lot of upfront education and work to make sure you're not putting money with the wrong team.
Well, with all of that, I would ask you then, what are some of those questions to be asking syndicators or REITs or anybody else for that matter, to make sure that you are investing your money with the right team?
Well, I'm going to go into the assumption that you don't have a personal relationship with the person you're speaking with, but if you're going out there in the marketplace looking to place capital, I think question
One of my favorites is, is your track record audited and can I see the audit report from the auditor?There's a lot of track records being thrown around out there.
I think in real estate, we often want to evaluate the deal itself when we should be evaluating the manager.
And what I often encourage people to do or just coming into this business, maybe they've made a lot of capital elsewhere and they're looking to become an investor is get a lot of education first.
If I'm going to go out and look at a hundred properties, why wouldn't I go out and look at a hundred offerings before picking a sponsor?
That is a great point.Doesn't seem like a lot of people actually do that.
I ran into a gentleman the other day, he's worth a hundred million and I'm the first sponsor he's ever looked at.Hey, let's go look at a bunch of deals.See, start getting a feel for what a good deal looks like versus a bad one.
You know, like I mentioned early on in this discussion that a lot of people ask their aspirations is to be in a position such as yours. Could you give us some idea as to, let's start off with the duplex, the smaller property.
When you're asking for people's money to, I think that's something that a lot of people just don't have, has the skillset.And it's, you know, I think we get the idea that you find the deal and the money will follow.
And I don't think that's as easy either.
No, I think that's another lie people tell themselves.That's a good one, Jack.If we're talking about really small deals, I would say learn how to do it yourself first, get educated.
How I got deal number two and three was seller financing from a creative real estate course I learned.After that, I started learning the hard money game.
So I would find ways to add a lot of value to an asset to where the hard money cost of capital, the high interest rates actually worked in my favor.
And then did a few more deals, 15 units, 30 units, 35 units with a couple of well-heeled partners that understood that success is in a straight line before getting into syndication and asking multitudes of investors to invest with me.
Again, I don't think there's any shortcuts.I think there's a process to this that if somebody wants to be in my shoes or be an operator one day, sponsor one day, they're really going to have to do some crawling before they learn to walk.
Yeah.It's like a real world game of Monopoly.We've got to trade up.
Yeah.And you're starting off in the low end properties before you go buy a park place.
Yeah. So just to remind everybody, head over to bamcapital.com to learn how Ivan and his team can help you get into multifamily investing.It's bamcapital.com.
If you found some value in what we're talking about so far, do us a quick favor, share this with one of your investor friends.And if you're watching us on YouTube, give us a quick like and subscribe.
Ivan, I'd be interested with today's economy, and now we just saw a shift with the Federal Reserve finally, where do you think the current economy is and what are your immediate plans?
Well, since really all of 23 and 24, we've been in buy, buy, buy mode because that's been the third correction of my career.The short one we had in COVID and then at the beginning of COVID and of course the GFC.
As the short end of the curve comes down and rates sort of normalize, I think you'll see the transaction market start to pick back up again and you'll see a lot more buyers and sellers entering the marketplace.
We've got an asset right now that's being marketed and it looks like we will sell it above our minimum strike.
What are your current buy box and what is the sell triggers?
So the buy box is really for us now, you know, we're buying Park Place now, right?We're looking for class A assets, resort style pools, amenity heavy.And we're typically the second buyer from the developer, or maybe it's the third buyer.
And we look for operational inefficiencies that we can come in with our in-house management team and enhance.So we're looking at P&Ls where we know there's some meat on the bone, some mediocrity.
Maybe a developer who builds a really great product, but doesn't run it.Geographically, we're in the heartland from Pittsburgh to Kansas city and a little bit South.And so we like really nice suburbs.Great schools is a huge one for us.
Diverse employment picture is another big thing for us.And these class A suburbs that have class A assets with steady Eddie population and job growth.
On the sell side, we typically target somewhere between two to two and a half X net to our investor.That's net of fees and sponsor promotes and all that.
So we're aiming for that two to two and a half X. If we can do it in three and a half years, that happens every now and then.That's a home run.That's a 35 IRR. We'll sell one here pretty soon.It's a seven year hold that ends up being a 17 IRR.
Simplest definition I can give is that's pretty much like an annualized return where you grew your capital 17% a year for seven years in a row.I can sleep very well at night, even though that's the lower side of my track record of 17 compounded.
So you find some inefficiencies in the operations.Can you talk a little bit about what type of efficiencies you continue to see?
None of your damn business, Jack.No, you know, every dollar that I add to the bottom line on an annual basis is anywhere from 18 to 20 dollars on sale.
And my team's really good at finding a nickel here, a dime there, certainly some dollars on the income side and the expense side.
And when you add all those up and you get enough movement between your going in cap rate and what you've stabilized at, then you can underwriter or back into the, those net return numbers that we talked about.So it's, it's not one big thing.
It's a lot of little things.One of our not-so-secret, maybe bigger levers is the fact that we've got an all-star maintenance class of folks that I would put up against anybody.
You know, it sounds like you really leverage your team.I mean, it's this mentality.
Yeah.I'm most proud of the management company and the culture we built there.I think industry now turnover on maintenance is 40, 45%.So almost half your maintenance staff is turning over a year at BAM it's 20.
So how do you find these people?
Well, now a lot of people are knocking our door because they see what we're doing here and how we treat our people.Culture isn't just this aspirational thing on a poster on the wall.It's what we live and breathe and are intentional about every day.
And in more cases now, which I'm really excited about, thanks to our in-house training programs, we're getting folks off the street that just have the right kind of DNA and we're training them to be maintenance techs.
The, the team has to be really strong in the fact too, that you early on, you said you were building this plane in the air and how you have such an established team that they're kind of taking care of some of the, they've got all the plans, they got everything in place.
You've surrounded yourself with some great people.
For sure.The people here get much more of the credit than I do these days for execution.Management's got a great thing going.There's always room for improvement.We're trying to get a little bit better than yesterday, every day.
And then on the investment management side, the BAM capital side, we've got 1400 families now that we steward capital for. There's a lot of room for growth there.And with growth comes growing pains.
If you want to be a CEO and you want to have a big company, then you have to embrace problems.They keep happening every day.
Sure.So you pointed out the environment you've established with your employees and the people are knocking at your door, but it's kind of like a mindset thing.What have you been doing to maintain that type of environment for your employees?
Well, answering that in the time that we have here is going to be tough.It still comes back to the people that are charged with keeping our culture intact.Core values for us, again, are not inspirational.They are who we are.
When people grows, BAM grows.We got a fun, quirky spirit around here.If you're too uptight, I guess is the right word.You're not going to last here.We work hard.We play hard.We win together. And we're a loyal, loving family.
Now, of course, the family has different standards because it's also a business, but we are very loyal to our people who are loyal to us.And we try to make decisions based on those core values every single day.
So in the process, you gave me some great examples about a couple properties, one year exiting after seven years and you hopefully do exits at three and a half.Two and a half.Can you give me an example?Like what's your biggest win so far?
I've got a deal I've owned now for eight years and it's already returned four and a quarter X to the investors and we still own it.
But on 12 exits so far, our average is a 35 IRR in three and a half years, which would be about a two and a half multiple.
Those, those are some huge numbers.Like where was that particular properly located and what did you do to turn?
That's the average across 12 exits here in the Midwest.The thing that I would point to the most, look, crap happens every day in managing a business, whether it's apartments or something else.Right.
But when it comes to like buying assets, I can't change what I paid for it. I can do a lot with the business plan, but I cannot change what I paid for that asset.So I want to stress that my partner is even better at it than I could be.
Having that deal or acquisition discipline is everything.And I'll tell you, we were just looking at a 50, a deal we loved at 52 million.Somebody else comes along, they're going to pay 53, 750, or maybe 54 million for it.We're out.
We're giving it to somebody else because just another million and a half or so can really move the needle on what you can expect to return to your investors.
There's not a lot of companies that have that level of dedication to their buy box.
Jacket common sense, man.If I want to be at this a long time, I have got to keep my track record high because that is my, especially in the fund business. That's my biggest asset is what have I done on my track record, right?
Because I'm asking that investor to trust me and my team that when we say it's a deal, it's a deal.
So you're saying that the old adage, you make money at the buy is actually true.
Still very much true.And it's been a lot of fun the last two years because very few buyers had money, let alone financing.
So knowing what you know now, would you have taken the same path starting with smaller properties or would you have tried to work your way to larger multifamily sooner?
What held me up for years was holding out thinking I'm going to do a big deal. I've got this fancy degree from IU.I know all this finance.I've worked for this awesome developer.Why would I want to screw around with more duplexes?
That ego held me back for a while.And so I would tell anybody, start where you can just put one foot in front of the other.Worry about the big deals later.It's easy to say that in hindsight.Yeah, start with the big deal.
Yeah, that's interesting.
You know, I don't run into a lot of people that are in the multifamily space who haven't admitted that they would try to jump into multifamily sooner, but you do have a very valid point there where it can hold up a lot of people and delay your investment.
So this has been a fantastic conversation, Ivan.Before we jump into the rapid fire questions, is there a question or concept you wish we would have tried to cover here today?
Oh gosh.I mean, I'm sure we could have, if we had more time, but I just want to say, you know, it's the hose that drives the podcast.So thank you so much.This is a lot of fun.
Well, if you're ready, then Ivan, we'll jump into the rapid fire questions before we do head over one more time, bamcapital.com to learn what Ivan's team is up to there.And that's going to be a clickable link in the show notes.
But if you're ready, Ivan, let's jump in.
What lie do real estate investors sometimes tell themselves?
We had a couple.I think one of my favorites, and I still see this being propagated today, is that 90% of millionaires are created in real estate, and that's total BS. Way more millionaires and multimillionaires and beyond are created in business.
Figuring out the business in real estate was what really helped us grow this thing.Buying real estate on its own, unless you've got a lot of capital sitting around, is pretty tough.
I really appreciate you pointing that out.
Does that mean I get a prize?
I am reading for the second time, how to make a few billion dollars by Brad Jacobs, all-star CEO, very authentic and vulnerable with how he got to where he got to a lot of good meat in there on how to grow companies, how to find value.
And that's really what we're in is the value creation game.
If you could go back in time and give your younger self one piece of advice, what would that be?
Oh man, I wasted too many years in my twenties chasing fun.If I had a time machine, I would not have wasted so many years in my twenties.
Now that's the good question.
What single strategy process or tool have you implemented that has had the biggest time-saving impact to you or your business?
It goes back to people, finding people that are way better at something than I am, finding complimentary skillsets, whether it's an executive assistant or my business partner, or the people that we've put here on the team.
Those are the ones that really explode your ability to do more, be in more places at once, execute at a higher level.
Did you find that it was difficult to get through that mindset shift to actually see these individuals as an investment versus an expense?
Early on, I came to the conclusion that if I wanted to own a big business one day, that I would have to figure out the people side. of it and that it's been the hardest thing makes real estate seem easy.
Um, but it's created a lot of momentum and it is just so much fun making impact now on 200 employees and how we treat them and how they treat us.And it's a virtuous cycle of fun in a lot of ways.
Well, Ivan, this was a fantastic conversation.I really appreciate your time and meeting you here today.Again, it is bamcapital.com but
I'm happy to come back anytime you'll have me.
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