Working Capital The Real Estate Podcast

Multifamily Investing and Asset Management with Gary Lipsky|EP32

Dec 16, 2020

In This Episode

As a successful real estate investor in over 1700 units, Gary Lipsky helps friends invest in C-Class Value-Add Multifamily opportunities. Gary typically finds deals in Phoenix and Tucson. He runs several meetups and is a regular on real estate podcasts and at conferences. You can count on Gary for integrity, strong operations and excellent communication, which have been keys to everything in which he’s been a part of.

Gary has always been a self-starter, taking on entrepreneurial endeavors and succeeding in his efforts. At the end of 2016, he sold arc, an after-school program, leadership development and outdoor education company he founded in 2001, which served over 9,000 students daily throughout Southern California. He is a founding board member of the non-profit CORE Educational Service, has been a member of Vistage since 2013 and is an alumnus of the Leadership Southern California program.

In this episode, we talked about:

  • Asset management
  • How he raises capital
  • How Gary went from simple single-family rentals to $17M in multifamily properties
  • Multifamily syndication
  • Value Add strategies
  • Handling tenants
  • And much MORE!

Resources and Links:

https://www.aptcapitalgroup.com/podcast/

Connect with Gary

Crucial Conversations (book)

 

Transcript

Jesse Fragale (1s):

Hey everybody. This is Jesse Fragale. Before we started this episode, I just want to say thank you so much for everybody that keeps on listening, it really is amazing to me and I can’t. Thank you enough. What would really help us out is if you enjoy the show to go over to iTunes and leave us a five star review. Also, if you have a favorite episode, what would be great is if you could share it on social media, whether that’s Facebook, Instagram, or LinkedIn, anyways, enjoy the show. Welcome to the working capital real estate podcast. My name is Jesper galley. And on this show, we discuss all things real estate with investors and experts in a variety of industries that impact real estate. Whether you’re looking at your first investment or raising your first fund, join me and let’s build that portfolio one square foot at a time.

Jesse Fragale (46s):

Okay. Ladies and gentlemen, my special guest today is Gary Lipsky. Gary is a multifamily real estate syndicator. He’s also a partner for the apt capital group as a successful real estate investor in over 1700 units. And more to add. And we’re going to talk about that in a bit. Gary helps friends invest in C class value, add multifamily opportunities. He runs several meetups and is a regular on real estate podcasts. And at conferences, Gary, how’s it going?

Gary Lipsky (1m 12s):

Good. Thanks for having me on. Thanks

Jesse Fragale (1m 13s):

So much for coming on Gary, quite the bio. There’s a lot I want to cover today. You know, we’ll talk today about asset management, the summits that the deals that you’re working on, but why don’t we take a step back and talk a little bit about your first foray into real estate and why you chose real estate investing in general?

Gary Lipsky (1m 33s):

Yeah. You know, growing up, I’ve always been an entrepreneur and I wish my, you know, my, my parents talked about real estate. They never, they never did. So it’s something I had a fine on my own. And you know, when you’re, when you’re younger, it just, there wasn’t that many podcasts then, or books or whatnot. So you kind of had to figure it out on your own. And so it really, it was, you know, my first house, I, you know, I was having a baby and, you know, we had no money down, but we’re here. We are buying a house in LA for almost a half a million dollars, which was, you know, a huge thing. But we looked at that as a, a value on opportunity.

Gary Lipsky (2m 15s):

We, you know, we took a house that we can open up the kitchen. We, we converted the garage into a play space. And so we created a ton of value out of that house. And little did I know that that was going to play a role in, do you know my multifamily career later on learning how to, to add that value and then extrapolate that over, you know, a hundred units?

Jesse Fragale (2m 39s):

Yeah, for sure. So before we get to, you know, the, the amount of units you have now, I know we talked a little bit before the show 1700 and currently doing a deal right now. Why don’t you take us back to maybe not necessarily the first one you can use that, but maybe the first deal of significance where you, it was kind of a lot of investors have that light bulb moment of like, you know, what now am a real estate investor or you at least feel that way.

Gary Lipsky (3m 3s):

Yeah. I mean, it has to be the first deal. Obviously it was a 42 unit in Tucson and we raised a million dollars on a, for a 1.6, $5 million purchase. And, you know, he, you know, we’re, we were super nervous obviously doing this first deal. We, we underwrote it like ridiculously conservative, but you know, I’ve invested in other people’s deals before, but this was on our owns. And we wanted to really, really make sure we, we under promise and over delivered. And we’ve actually been in escrow twice to sell that property after a year, year and a half.

Gary Lipsky (3m 44s):

And for, for, we bought it for 1.6, five, but we were in escrow for, for almost 3 million. It’s it both times it fell out Astro for w one was a 10 31 buyer. One was another reason that it fell out. But I mean, we’re not anxious to sell it. It was just a great opportunity to take advantage of the market. But yeah, I mean, from that million dollar raise from that first deal, we, we jumped to a, a $5.7 million raise on a, on our second deal.

Jesse Fragale (4m 15s):

Nice. So for those that don’t know, maybe you could just briefly explain how something would be an escrow at $3 million, even though the ticket price was 1.6.

Gary Lipsky (4m 25s):

Yeah. We, I mean, we got in there, it was, it was just the not run well by the previous owner. And I mean, for us, that, that, that screams opportunity, you know, we’re looking for deferred maintenance management that wasn’t, wasn’t good. What can we do to the exterior to really add a lot of pazazz? And we raise rent almost 50% and almost every single person stayed. We did not expect that because they were paying rent. So below market value and they loved the work that we did to the property. So it just drastically improve the, the NOI.

Gary Lipsky (5m 7s):

And so now this property was worth that much more after just a short period of time.

Jesse Fragale (5m 13s):

So you, we talked a little bit before the show you’re based out of LA. Now I am assuming that is something you probably couldn’t have done in LA in terms of raising rents and just being able to, to do that, just given the regulatory environment. Am I correct in that assumption?

Gary Lipsky (5m 30s):

I know some people that play in, you know, in that, in that field, but then what they’ll do, I mean, in my cost to get someone out 25, 50, even a hundred thousand dollars to get someone out and here we’re buying units, 39,000 a door. So just a different game. And, and you’re in LA, I’m pretty much all in California, you’re buying for appreciation and here we’re, we’re dealing with force appreciation and Tucson. We’re creating the value.

Jesse Fragale (6m 2s):

Yeah, it’s, it’s pretty incredible. And it kind of makes me just as a side note, it makes me a little nervous because our market, you know, Toronto, Vancouver, New York, Boston, LA, our markets are in such a situation where oftentimes with pretty conservative loan to value, there’s still not cash flowing. And it really you’re banking on that appreciation, which they tell you, you know, real estate investing one Oh one don’t bank on the appreciation. And I find that unless you’re a deep pocketed, maybe a pension fund or high net worth individual, I just don’t know who’s able to purchase those type of deals, especially on the entrepreneurial end.

Gary Lipsky (6m 37s):

Yeah. Yeah. Definitely more riskier. And yeah, you, you want to, you want to have around 50%, at least cash flowing if possible. So yeah, it gives me, it just, it’s just, it’s great to get that return to our investors. They want to invest again. And you know, here, you’re just in LA, if you’re doing a deal you’re just waiting and waiting and there are, I think you could be successful in any market and at any different, you know, wherever, wherever the, the economy is, but, you know, it’s just, it’s just different, you know, the way you play it, you know?

Jesse Fragale (7m 18s):

Yeah. Different strategy for sure. Well, first of all, that’s incredible that your first deal was that many units, number one. And it sounds like that first deal that you were either a sponsor or just, just the active investor, it had a capital raising component. So how did you go about that? And were the partners that you had where they had, they had experience doing this before and everybody kind of added to the team.

Gary Lipsky (7m 42s):

So my business partner, Kyle Mitchell, he found the deal. He never raised money before. I, I, neither, neither had I for, for multifamily. I had done some other stuff before, but you know, he had a podcast and he also had a meet up. We had one of the guy that he never raised before either. He, but, you know, it’s, it’s, it’s a lot of the legwork beforehand. It’s the, the newsletters that you send out the talking about what you’re doing and, you know, quite honestly, I wasn’t that comfortable talking about it until I, until I did it.

Gary Lipsky (8m 26s):

But you kind of throw that out the window and you just, you just gotta, you gotta go for it. You’ve got to develop a, a group of people that want to invest ahead of time, because if you wait, it’ll be, it’ll be too late and it’s for a million dollars, it kind of fit for us. It was a good first raise. And then we kind of learned what we, what we had to do better. And that’s why we knew the next time we went out, we were able to raise a little, almost like two and a half million just between my business partner. And I, so we went from 1 million to two, almost two and a half. So it was just, you know, you get better and better.

Gary Lipsky (9m 7s):

Now we just raised on a deal. We raised, well, we were over committed for, for about two and a half million dollar raise, like the night we did the webinar, which was fantastic.

Jesse Fragale (9m 19s):

Yeah. That’s great. If you don’t mind, if you could just for listeners, cause we talk about capital raising quite a bit on the show. How can you not, when you’re talking about real estate, but maybe you could talk a little bit about those things that you learned in that first deal that you made sure that you didn’t make those mistakes with raising capital on those subsequent deals.

Gary Lipsky (9m 38s):

Yeah. You know, it’s, it’s those, those consistent touch points. And, and I, wasn’t doing a good job before that my business partner is, is super regimented and, and, you know, I kind of learned from him of, of, you know, we, we send out that newsletter every single, you know, the first of the month, you know, we call our, our investors every month as well. It’s that constant touch points, constant touch points. Th that, that, that is vital. You’ve got to cultivate the investors. And then from there, we are also, our communication has been, you know, we’ve been praised on from that, from our investors.

Gary Lipsky (10m 23s):

And so each time they bring in new people as well. So that’s really helped us to grow our, our, our investor database really quickly because they’re, they’re telling their friends like these guys good or bad news, whatever, they’re, they’re transparent. They, they, over-communicate much different than a lot of the other sponsors that they’ve invested with before. So, you know, it’s not, you know, this is nothing new, everyone knows what they need to do. It’s whether they do it or not, you know, it’s not, we don’t have this secret recipe. Yeah.

Jesse Fragale (10m 54s):

Yeah. Was there anything about the process from like a mechanistic point of view, you know, having the, the bank funding, the capital, getting the wire tramp, you know, was there anything from that point of view that you realize, Holy, we really did it the, the difficult way, the first, the first way around?

Gary Lipsky (11m 12s):

Well, we, I mean, every time we face a stumbling blocks and it is stressful and no one really talks about those things, but I mean, even now we just thought like some contract stuff, you know, that you, that you’re, you know, fine tuning some, some different things between the lender and this and that. And, you know, like, but you know, on that deal, D you know, you know, I think Freddie Mae Freddie Mac was, we were about 30 days away and they, they didn’t want to change something. We were able to move, switch to a Fannie, or I forget it was one of the other, but we got a much better rate by switching.

Gary Lipsky (11m 57s):

And it was the 30 days just before the, the closing is really tight, but we went for it and there was a, it was a big pay off. And, you know, you just gotta, you gotta stay on top of it. There’s so many small details and you can’t do it by yourself. You’ve got to track everything, have a calendar out with all the different important dates and make sure you read everything super careful, because, you know, you’re when you’re taking investors’ money, you’ve got to be so, so careful.

Jesse Fragale (12m 29s):

Yeah. Well, fast forward to today, I know that, you know, apt capital group, in terms of what you do now, you know, you’ve invested over these years, were you working at a job while you were an investor, or did you make that decision to, to go in full time prior to apt?

Gary Lipsky (12m 48s):

Yeah. I sold the business at the end of 2016, and that gave me the opportunity to, to get into real estate full-time I had some capital play with, and obviously I had the time. So I really spend that time really amping up my education and learn learning as much as I can investing in other people’s deals, seeing what they do, right. Doing what they do wrong, did a ton of networking. So that, that really gave me some banks leeway. Whereas my business partner, he, he just stopped a job about a year and a half ago. So know there’s many different ways to do it, but I, you know, I was kind of lucky to have some resources.

Jesse Fragale (13m 29s):

Yeah. And then you kind of ramped up and looks like, you know, it looks like it turned out well in the end, in terms of apt capital, what do you guys do?

Gary Lipsky (13m 39s):

So we focus mostly on a Tucson and Phoenix, the gray markets weren’t based in LA. So we can get out there, whether it’s a five-hour drive or, you know, a flight we’re out there, you know, two, two times a month looking at our properties, looking at new properties, we are open to other markets, but we, we don’t want to be the syndicators that kind of do the shotgun approach. We want to be experts in, in a few different markets. We know every single broker, we have a team in place. So if we see something, we can move fast and, and, and implement our business plan. You know, if we had properties one in Texas and one in Georgia, and, you know, we, we’re not going to get to them as much.

Gary Lipsky (14m 23s):

We’re not going to be as good asset managers. So, so this allows us to, there’s plenty of opportunities in both of those cities. So it just, you know, that’s what we, we focus on value, add BNC class in, in those, in those areas.

Jesse Fragale (14m 43s):

So in terms of asset management, I know, you know, sometimes people differentiate between the, the, the manager or the actual property manager and the asset management. Are you kind of boots on the ground staff with property management of the actual assets themselves, or are you managing the managers with the company

Gary Lipsky (15m 0s):

Managing the managers? We, we use Shelton residential out in, in Arizona. They own, they manage about 20,000 units. So they’ve got a great team and we don’t feel like we’re a number. Obviously that’s a lot of units. We were worried about that in the very beginning, but, you know, we have a strong relationship with our regional manager, our onsite property manager. If someone’s out, they can replace them easily, but we, but they do manage lots of properties. So we’ve got to stay on top of them. We’ve got to, we throw out a lot of different ideas. We like to try new things. And we’re really focused on, you know, a lot of people, you know, if they, if they get to 93% economic occupancy, 94, they’re very happy.

Gary Lipsky (15m 49s):

We’re happy, of course, but we’re going to, how can we get to 95? How can we get to 96, 97, you know, there that’s all profit. And that goes to our investors. So we’re, we’re focused on that. How do we, how do we, you know, convert more leases? How do we, you know, add more income? How do we reduce, you know, a little bit more expenses and each little bit as up to a lot over, you know, over the course of a year and over, you know, when you, when you, you know, multiply that by the, the cap rates. So there’s, there’s lots of things that you can do, lots of funds that you can push to keep maximizing the value of your property. Yeah,

Jesse Fragale (16m 26s):

For sure. And in terms of the BC, a, B or C class asset, what was it about that asset class or those asset classes that, that, you know, kept you guys interested or made you focus on?

Gary Lipsky (16m 38s):

Yeah, well, first price point, you know, it’s going to be obviously significantly cheaper than a class, a where, you know, that’s going to be more institutional investors. They’re looking for a, a lower return. There’s less to do on the property. There’s less risk, you know, for us, we’re looking, you know, if I see a property and it’s, it’s pretty nice. That’s probably not for us because someone’s already done the, done the lift and, and, and made the money. You know, we wanna, we want to maximize our return to our investors, particularly, you know, from an exterior standpoint, if, you know, cause that’s a, that’s a really good opportunity for a, for a lift, you know?

Gary Lipsky (17m 18s):

So branding is usually one of the first things we do. I mean, we’ve, we’ve already come up with a name working on the logo now for the property we’re taking over in a few weeks. We we’d like to get there on day one and be running.

Jesse Fragale (17m 33s):

So in, in that vein, what are the, the big value adds that you look at? You know, you mentioned turnover, branding for the actual building. What other areas do you find that you have the biggest ROI on when it comes to value? Add?

Gary Lipsky (17m 47s):

Yeah, you know, you also have to be about over improving too, but obviously, you know, branding. So our last property we bought was called LACASA and it was just geared towards one demographic. So we changed it to East 34 34 just to hip her name and, and, you know, anyone could associate with the name. So signage is, is huge too. We put two giant banners on, on the buildings in the front, you know, maybe it cost us $1,500, but it’s on a busy road. And, and that can reduce our advertising budget by five, 10,000, because all these people are seeing our giant well-lit banners. You know, so signage is, is, is a definite big one as well.

Gary Lipsky (18m 30s):

And just little things along the property, keeping it clean, you know, the, the typically staff, you know, get comfortable owners get comfortable. And so you’re looking for all these different things to take advantage of, even when, you know, we’ll do spot checks for our properties. And you could even see from, from our team, like sometimes we’ll tell them we’re visiting sometimes or not. And when we’re not, we usually find something that we’re like, you know, not, not to be a pain in your butt, but you know, this light isn’t working and this trash should be dumb and just little things that keep them on their toes and they’ll get it quickly, you know, they’ll know where to be on top of their game. But the only way to hold them to a really high standard is by one, letting them know what your standard is and to, you know, doing, you know, the white glove test, you know, walking around and you know, it’s not a gotcha because they’re, they’re part of your team what it’s saying, Hey, this is what we want to see.

Gary Lipsky (19m 29s):

And this is the product that we want our residents to have. And so they get it and they

Jesse Fragale (19m 36s):

Game, yeah, it’s more of a setting expectations, not, not trying to call anybody out in terms of the, you know, we have people that invest in a class B class C class, when you start getting a little, a little further away from a, how do you ensure that you’re, you’re making sure that you’re not going too far, you know, where you’re getting problem, tenants, headaches, you know, just oftentimes if you just go too far down the C you know, ladder and you get down to the D wrong or whatever, you know, you can have some major issues. How do you, how do you make sure that you combat those when you’re in acquisition mode?

Gary Lipsky (20m 12s):

Yeah. Yeah. That’s, that’s very true. Part of it is, is the, is at least audit, you know, when you’re, when you’re doing due diligence, you want to see, did they stuff, the tenants, you know, you know, get people that are on credit worthy that are, that are, that are in there. You know, that’s, that’s a big test, you know, driving around the property during the day and at night to, you know, what’s the noise level? What, what are the type of cars during the day? Are they, are there a lot of cars there and during COVID, that’s different, but during, you know, non COVID times, you know, most of the cars should be, you know, I have a job, you know, you know, you’re also, you know, looking at data for that market as well.

Gary Lipsky (20m 56s):

We like to use a neighborhood scout. Yup. That’s just a, that’s a good tool that we, we paid for that, that gives us median, household income, crime, you know, trends, schools, stuff like that. You know, if you’re going to be in a neighborhood with a, with a, with a better school, you’re going to typically get better, better residents as well. So there’s a lot of different factors, but yes, the, the, the lower, you know, if you start going to see your you’re going to get, have some tenants that you’re going to have to change out. If you’re, if you’re looking to raise the rants and you might have a portion that are section eight and no offense to them, but you’re going to have a cap on, on their, on the rent that you could charge.

Gary Lipsky (21m 46s):

And, you know, they’re not your typical, you know, they’re not going to have a, a good job. And, you know, those are the ones that you have to, you know, what’s your, what’s your strategy on the property? You know, that’s things you have to wait.

Jesse Fragale (22m 2s):

Yeah, for sure. And for, I know we have, you know, Americans and conducts on the show. So, you know, section eight for the Canadians, whether that’s Ontario, like, it depends where you’re at, but basically our version of a disability or, or a welfare where oftentimes I’m not sure if this is what you meant by stuffing, but if we would see properties where you have, okay, a bunch of leases just started a year ago, the rents are above market. And then you find out that their government, their government basically insured or government paid leases, which it’s not bad to have a couple of those in a portfolio. But when your building is, is majority, that’s the majority of your building, then it starts getting a little, you know, a little iffy.

Jesse Fragale (22m 42s):

So I’m not sure if that’s, I assume that’s what you meant when you said stuffing kind of tenants in there in a short matter of time than trying to flip the property.

Gary Lipsky (22m 50s):

Well, also like our last property. So they had tenants that maybe we were paying 1200 rent and their median income was for that household was like 26,000. So they’re going to struggle now if, if the rent was 600, we’re probably not going to be an issue, but at 1200, maybe that’s going to be an issue. So, you know, there, there, there are different things that you can kinda to see if you know, what types of jobs they have, stuff like that.

Jesse Fragale (23m 19s):

So, Gary, if you fast forward to today, 2020, I want to talk a little bit about the environment we’re in right now, but just prior to that, even before the pandemic, what was the ideal? So you mentioned BNC class, but in terms of asset size, was there a minimum unit size that you would be going after?

Gary Lipsky (23m 38s):

Yeah, we’re looking for 80 plus units, you know, and under, under one 50, because we want, we were, we wanted to avoid, you know, institutional and, and the bigger players that are, you know, there’s going to be quite typically a best and final bidding war. And so we try to try to get that medium range. We’re not, not necessarily mom and pop owners, but not necessarily the bigger players in that kind of medium. Now, I think we’ve, we’re probably pushing because of our investor partners. We have now we’re probably pushing up the food chain a little bit to maybe 15 to 25, 30 million.

Gary Lipsky (24m 26s):

So maybe we’ll go 200, two 50 as far as units and, and whatnot.

Jesse Fragale (24m 33s):

And do you find that that 80 to, let’s say a hundred unit that’s really where a building justifies having that superintendent or that staff at the building?

Gary Lipsky (24m 42s):

Yeah. 80 80 is a good number to, to have that full-time person, but, you know, for some people, I mean, we, quite honestly, we were looking at a 60 like six months ago only because it was just so undervalued and it was, you know, no one was kind of looking at, you know, at that number. So, you know, are, you know, there are opportunities everywhere and what we, we try to stay focused on our, on our criteria.

Jesse Fragale (25m 11s):

You’re just like, well, we got to buy it. It’s, it’s just, it’s too good of a deal in terms of a Tucson or like in the area, the sandbox that you’re playing, what kind of, what type of, I know it’s a hard question to answer depending on, you know, the occupancy, but what type of cap rates are there in those areas, or maybe what type of cap rates are you usually looking for?

Gary Lipsky (25m 34s):

Yeah. And, and I mean, it’s probably compressed, you know, probably about a point in just the last year. I mean, even there was a deal in Tucson that we, we locked down just before COVID, it kind of fell out because of COVID we, we wanted, you know, like a $400,000 COVID discount. We came back a few months later. Okay. We’ll pay the regular price. They ended up selling it for a million dollars of what we were originally going to pay during COVID. I mean, it’s just, it’s just crazy, but, and Phoenix, I mean, I would say you’re gonna, if we’re C class four and a quarter now, wow.

Gary Lipsky (26m 17s):

Tucson, you know, maybe a five cap it’s just gets, you know, more and more compressed. And, you know, a lot of that’s driven by the interest rates and, and, and I, I see this continuing, you know, long-term interest rates, aren’t going to go up. People have got to put their capital somewhere, and there’s still tons of foreign, you know, money looking for places to invest. There’s we were talking to one equity partner last week, they have $700 million a place in the next two years. They’re like, find us deals, you know?

Gary Lipsky (26m 57s):

It’s yeah. It just keeps driving up a price.

Jesse Fragale (27m 1s):

Yeah. I mean, it’s, I think people are getting creative. They’re doing different things. I think the cap rate we’ve, you know, we say it all the time in our industry, but it’s, it’s becoming less and less of a accurate depiction for yield because a lot of times you’re going in cap is very different than your stabilized cap. And really, like you said, sometimes there’s just committed capital that needs to find a home. So let’s, let’s talk a little bit about the last year, you know, everybody has been going through this, we we’ve talked about it ad nauseum and every different social circle that we’re in, but for apt and your partners, how have you been dealing with the last few months? And what do you, you know, what’s your, your kind of prediction or what do you think 2021 is going to look like in your space?

Gary Lipsky (27m 46s):

Yeah, I mean, the last few months, it’s, it’s, it’s back to business as usual. There are a lot of deals I’ve been, you know, trading right now. There was definitely that, you know, when COVID hit, there was that freeze basically, and nothing was happening. Everyone was just, you know, anxious and wanting to see how things played out. And, but now it’s business as usual though, you know, in here, you know, w when we’re doing this interview, things are going to be quiet because of the holiday season and then really ramp up again, mid January, but we’re bullish. And, you know, we, we follow a lot of the economic data and, you know, people need a place to live.

Gary Lipsky (28m 29s):

And the space that we’re operating is, is, is not, you know, is, is, is not going to go away. There’s still a, a, they need more and more apartments. And we’re, we’re investing in places where there’s continued population growth, there’s rent growth, there’s job growth. So we’re, you know, we want to buy, if it makes sense, you know, and we, and we underwrite conservatively. We want to buy four or five deals in the next year, if possible.

Jesse Fragale (29m 0s):

Yeah. That’s incredible. And it’s, it’s funny, you, you, you know, you’re saying exactly the thing we look for in commercial real estate, job growth, population growth, you have all those items and then just mix in low interest rates. And all of a sudden you have a, you have a lot of capital out there chasing less deals in terms of your process. When you’re looking to find deals, talk a little bit about what that process is, whether you know, whether that’s with brokerage direct mailers, like what, what kind of process do you, do you guys run?

Gary Lipsky (29m 30s):

Yeah. We have really strong relationships with all the brokers in, in markets that we operate. We talk to them on a regular basis. So a lot of it is, you know, you just had a conversation, Hey, I just got this deal that came across my desk. Okay. I’ll send it to you. And then if you didn’t have those conversations, you’re problem. You’re not going to be on their first list. And most likely we’re not on their first list for most of these brokers, but, but having that continual dialogue gets you, you know, they’ll, they’ll send you the deal that they just got. And so timing is everything we’ve done. Some, we just started some direct to seller.

Gary Lipsky (30m 13s):

It’s not the space that we’re looking in. Really isn’t, you know, the brokers are, are, are hounding them every single day. So, you know, direct to seller is probably best for like 70 units or below a more mom and pop. And, you know, I have no problem, you know, you know, if the broker, if we go through a broker and, you know, letting them get their, get their money and their sound to flush down the road, but that, that’s really how we, you know, we look at deals and, you know, every time we’re out in Phoenix and Tucson, we’ll make sure even if the broker doesn’t have something, try to sit down with a couple of brokers over lunch or coffee or something, because they’re always filled with information, whether it’s a deal that we’re looking at and say, Hey, what do you, what do you think about this deal we’re looking at?

Gary Lipsky (31m 5s):

You know, and, you know, most of them will give you their, their honest opinion and feedback. And so that’s really valuable. We do lean on them for, for feedback. And, and a lot of times like, Hey, I love that deal that you’re at, you’re looking at. And it’s good to know that, like, you know, we’re not missing anything. Or if we see it, we see something that we’re excited about. And they’re like, eh, not so much. And you know, maybe there’s some validity to that. So it just, it helps to really have those strong, strong relations.

Jesse Fragale (31m 36s):

Yeah. And it’s a process. It’s not a, it’s not built overnight, but it’s a, that’s funny though, you say that about direct mailers. I don’t even, I couldn’t even imagine the 70 plus market cause even in the mid, you know, 50 units, 60 units, oftentimes there’ll be the first call you get to the first question. Is, are you an agent? You’re an agent. Are you an agent? It’s like, no, I’m not an agent. I specifically said no agents. So yeah. I can only imagine that they’re just getting hammered all the time. But for those listeners that are looking at smaller unit apartment buildings, direct mailers, a hundred percent, if you have the capacity to send them out, I still think it’s a, it’s definitely a strong road in conjunction with all these other methods. So for 2021, Gary, what, what’s the plan in terms of the current portfolio?

Jesse Fragale (32m 21s):

So we mentioned at the outset 1700, and you said that you have one under contract right now.

Gary Lipsky (32m 26s):

Yeah. We closed in about three weeks on 176 unit in Tucson. We have, we have a couple offers out there right now. So we’ll see if they’re off market deals. We’ll see if we get one of them, but I mean, we’re aggressively going after deals. That make sense. So, yeah, like I said, we hope to do, you know, four or five deals in the next year. We have equity partners ready to go. It’s just a matter of, you know, do the finances, you know, make sense, you know, and finding those deals. Yeah. And how do you differentiate yourself? Because so many other people are going after the same thing. So maybe you take something that has some has a problem that no one else wants to solve or, or you’re, you’re first to the punch and you’re aggressive to get there to, to, for not for it not to go to best.

Gary Lipsky (33m 18s):

And finally, you’ve got to find ways to differentiate.

Jesse Fragale (33m 21s):

So at this stage, you know, raising money is old hat to you and the team now, in terms of when you put out offers, are you at the stage now where you have a committed capital or are you, you know, a 60 day due diligence period, and you just get all your ducks in a row. What’s, what’s that look like for you at this point?

Gary Lipsky (33m 39s):

Yeah. If it’s going to be more than a, you know, a $5 million deal, we’ll, we’ll, we’ll take 60 days, just the loan itself, just it just time, we’re doing an assumption on this current deal on that. That’s really, I mean, we could have closed in 45 days, but the assumption takes forever. But again, that was a problem that we saw that someone else didn’t want to solve. And so we got a million dollar discount by assuming that alone. So yeah, we just, it, it just, everything takes time on, unfortunately we can do due diligence pretty quickly, you know, we’ve, we’ve done it, you know, 17, 21 days, you know, and some people ask for a lot longer, but in the markets that we’re in, you have to be, you have to condense that timeframe to be competitive, and you’re not getting every single report, but you’re able to, to walk all the units, you know, do the electrical mechanical, you know, stuff like that.

Gary Lipsky (34m 35s):

And yeah, yeah, yeah.

Jesse Fragale (34m 40s):

Better to have those extra days then than not, you know, how many times I hear a seller, you know, we can get all your, all the documents to you in five days. Well, you know what, I’m not going to start the clock until we get all those documents because I got a feeling it’s going to be longer than that. And it’s just, I mean, I think it’s just the reality of the business and, and kind of human nature in general. Like we, you know, we think we can do something faster than we can, and it just sometimes takes longer. Gary, we’re coming up to a, to the end here. So I thought what we do is before we kind of get into where people can reach out to you and talk about your meetups a little bit, we got four questions. We ask every guest. So if you’re game for that, I’ll, there are a couple softballs. So I’ll, I’ll send those over to you now. All right, let’s do it. Okay. So it doesn’t have to necessarily be real estate, but what were the books that impacted you, that you have found that have helped you throughout your career?

Gary Lipsky (35m 28s):

Crucial conversations, not a real estate book, but it’s, it’s about having those, you know, being able to have those tough conversations in any relationship, because, you know, a lot of times we shy away from having those, those, those tough, tough conversations, and it gives you a good, a really good framework. Awesome.

Jesse Fragale (35m 46s):

Okay. Number two, Gary, who are your mentors?

Gary Lipsky (35m 52s):

I would say less mentors and more people like, you know, there’s so many people out there that I’m like, Ooh, that offers some value that, that you learned from and whatnot. And that’s, to me more important out, just have like one mentor. I have lots of different people that I feed off of that give me energy, that stimulate ideas. And, and yeah,

Jesse Fragale (36m 16s):

I think it’s a great answer. And it just illustrates that, you know, back in the day, if somebody was saying this person or these people were, our mentors were today, and I think you mentioned it a little bit earlier, we’ve have podcasts, we have books. We have all these resources where you can pick a little bit of knowledge from all these different areas. If you really put yourself out there and actually, you know, put a little bit of effort in doing so, but we do have all these resources. Okay. What’s something that you wish you knew at the beginning of your career that you know now?

Gary Lipsky (36m 46s):

Well, I mean, I wish my parents talked about investing in real estate and I started much earlier, quite honestly. I mean, you know, they, you know, I grew up in, you know, middle class. He was, my father was an accountant and, but never, never talked about real estate. And, you know, I wish I started earlier, but it’s never too late to start

Jesse Fragale (37m 5s):

For the listeners. How old were you when you actually started those first deals you were talking about?

Gary Lipsky (37m 11s):

So I bought my while, my first house, even though it was for me, but it still was a launching point. That was, I was like 30, 31. I didn’t close on my first multi-family deal until maybe I was four 49. But you know, all the things that I’ve done, I’ve always been entrepreneurial in that that provided a great framework to be successful in, in multi-family.

Jesse Fragale (37m 38s):

Yeah. So that’s where all the thirties and 20 year olds that tell me, it’s, you know, it’s too late to come on. You. We’ve had people on the show, 39, 45, 50, 50, you know, mid fifties and starting, and, you know, having a very successful second or third career, the last one, my favorite, nothing to do with real estate. First car make and model

Gary Lipsky (37m 58s):

Dodge challenger. Nice car. This one was, I get that reaction too a lot. I mean, it was, it was like, I, my friends would call it the Fred Flintstone car. Cause it felt like you could put your feet through the ground to, to bring, I mean, it was, it was like a, it was like a shoe box. So I think, I don’t know, maybe it was a year or this one. I mean, cause this was so long ago. It was, I mean I put my foot through the, through the, the floor just to get it to accelerate like 60, 65. So that’s great. Well,

Jesse Fragale (38m 36s):

I love that. It needs an explanation. No, no, no, no, no, no. It’s not that it’s not the challenger. You’re thinking about Gary. That’s been great. Thank you so much for, for taking the time here. I, for the individuals that would like to hear more, you’ve got a bunch of stuff online. Where would we best point them to?

Gary Lipsky (38m 53s):

Yeah. Yeah. So our company apt capital group.com. If you’re interested in our asset management summit am summit 2020 one.com and I’m on Facebook. LinkedIn connect with me, reach out, love to

Jesse Fragale (39m 11s):

Real estate. My guest today has been Gary Lipski Gary. Thanks for coming on working capital. I appreciate it. It was a great time. Awesome man, favor, listening to the working capital podcast. My goal is to help individuals break into real estate investing as well as educate experience investors. If you enjoyed the show, please share with a friend subscribe and give us a rating on iTunes. It really helps us. If you have any questions, want to learn more or likely to cover a specific topic on the show. Please reach out to me via instagram@jforgalsorheadtowwwdotjesseforgalley.com. My name is Jessica galley and I’ll see you back here for the next episode of the working capital real estate podcast.