WS446: Finding the Right Syndication Deals for You with Feras Moussa

[INTRODUCTION]

[00:00:00] ANNOUNCER: Welcome to The Real Estate Syndication Show. Whether you are a seasoned investor or building a new real estate business, this is the show for you. Whitney Sewell talks to top experts in the business. Our goal is to help you master real estate syndication.

And now your host, Whitney Sewell.

[INTERVIEW]

[0:00:24.1] WS: This is your daily Real Estate Syndication show. I’m your host Whitney Sewell. Today, our guest is Feras Moussa.

Thanks for being on the show, Feras.

[0:00:31.7] FM: Hey Whitney, thanks for having me, appreciate it.

[0:00:33.9] WS: Yeah, honored to have you on the show. I know we’ve talked numerous times in our mastermind that we’re both in and then it’s been great to see just your growth and progress over the last little bit, I know we’ve had Ben, your partner, on the show as well but a little about Feras.

He’s an entrepreneur at heart with the tech background, graduated from the University of Texas with a computer science degree and worked at Microsoft straight from college. Years later quit Microsoft to bring tech to the industries that like it, where later found his passion for real estate. Started with rentals and had nine closings in his first 12 months, that’s impressive no matter what kind of asset class you’re in. Then decided to scale up into apartment complexes where he met his business partner Ben and started Disrupt Equity. A company focused on multi-family acquisitions and investments for investors.

Feras, thank you again for your time and being willing to come on and share your expertise with the listeners. Tell them a little more about who you are, what you all are working on right now and let’s dive in.

[0:01:31.1] FM: Yeah, no, appreciate it. I know it took us a little bit longer to kind of get the schedule. I know we both kind of seem to have some things going on family wise.

Yeah, a little bit about myself, disrupt equity, you know, we focus primarily on just large apartment syndications, right? Anything from a hundred to 400 units is kind of our sweet spot, it’s more about the price range, I think people really fixate all the units but to me it’s more about what price points we’re comfortable with, right? That includes how do you structure the debt, how do you raise the equity?

For us, I mean, our sweet spot is in that 10 to 50 million dollar range and like I tell anyone, I mean, a good deal’s a good deal, it doesn’t matter if it’s an 80 million dollar deal. I mean, we’re happy to get involved and you know, we know enough people, right? Like yourself Whitney, we can all – it’s a team sport and so we can all kind of get together and get the deal going.

For us, we’re primarily – we’re based in Houston, everyone in our community is in Texas so far. Looking to continue scaling 2020.

[0:02:22.4] WS: Nice, you said 10 to 50 million dollar range. I think there will be a listener that would say, well, if you can do 50 million dollar deal, why would you waste your time looking and analyzing, going through the process with the 10 million dollar deal.

[0:02:34.1] FM: Yeah, I mean, honestly it’s about deal flow, right? I mean, for us, we left Texas, obviously we’re based in Texas. The funny thing I tell everyone is, we don’t own a single deal in Houston. There is no yield for us to find in Houston, it’s not to say people aren’t doing deal but for us and kind of what our equity’s looking for as well as what we’re looking for, in terms of what we’re looking for, in terms of comfort of being able to perform, we just haven’t been able to find enough meat on the bone in this Houston deals and Houston’s a little bit of a weird market.

For those of you who don’t know, all had a big recession in the 80s and 90s, right? During the 80s and 90s, nothing got built in Houston, there was pretty much a moratorium on new construction. Houston has an overbuild of A class, right? All of the stuff they built the past 10 to 15 years, has a lot of C’s which I like to call lipstick on a pig two or three times over.

There’s not that B product and so you have C’s that trade like these and so you know, we don’t own anything in Houston and we left Texas really, two years ago to get it to Atlanta because it was a market that we like the fundamentals, it’s a good core market, we knew in a population growth, job growth and the price points were there. That’s what got us into Atlanta and since then, we’re having to start to look for other markets.

To get back to your question, it’s really about deal flow, right? I can find four 10 million dollar deals but I can’t find a single 50 million dollar deal, I’m going to go for that 10, right? You know, how do we, because different deals have different characteristics so –

[0:03:53.7] WS: I like that, I’d like for us to dive in to just how you all run acquisitions a little bit. I think that’s part of your specialty and that’s –

[0:03:59.7] FM: Absolutely. I mean, for us, it’s you know, a couple off of things, right? First and foremost, you hear this misnomer about off market deals, right? I think a lot of people really like to brag, it’s an off market deal. I don’t buy it, right? I mean, this day and age, any real deal is going through a broker because as a seller, right, we sold two deals this last quarter. As a seller, it’s almost reckless for me to not use a broker, right?

Because that extra one to 2% that the broker’s going to make, they will get me 10% more and you know, in price. Everything is going through a broker one facet or another, right? I mean, unless you’re talking sub-50 unit deals and so, you know, first and foremost, it’s about knowing the brokers and respecting the brokers, right?

Now, it’s not to say that every deal gets blasted widely, right? That’s what an off-market deal really is, it’s that it’s not that appropriate, it hasn’t seen it, it’s the broker’s working with you, there’s still a broker involved but they are kind of picking their horses of who they want to show it to.

I mean, we — what? Four of the last, that’s right, three of the last four deals we did last year, we got through those means, whether it wasn’t marketed widely or it was a deal that was marketed widely, a buyer can perform and then we’re the first guys that got the call.

You know, first and foremost, it’s just knowing the brokers, getting their credibility and you know, I take notes in all my brokers, how many kids they have, where their kids are, I had a broker, you know, that just had a newborn three weeks ago and sent them a gift.

Just knowing what’s going on in their lives, right? Being friends and you know, I joke with them whenever I see some bad things, I literally, the other day, I sent something to a broker and I’m like, this is just BS from a different kind of price point on a different deal at a different marker, that broker will laugh because they know the same deal.

You build rapport so first thing is really building rapport with the brokers, getting to know them and you know how many – most brokers are very nice guys, I mean, I actually – building the rapport just to build a rapport, I enjoy talking to them. That’s the first and foremost and then the other half of that equation is, okay, that’s essentially the trees that we plant, right?

Now, all the fruit that’s coming in, what do you do with it? For us, we are constantly refining our acquisition pipeline, right? We have an in-house analyst, we have kind of another person that helps with some of the initial stuff and how do we streamline all of that and maybe I’ll pause right there, let you ask the question and maybe I can kind of talk through more of that.

[0:06:13.0] WS: Yeah, that’s awesome, I appreciate that as well. You know, you mentioned it being reckless not to go through a broker and I appreciate you bringing that up because even that’s – you know, just increasing that relationship to get more deal flow, right? Just to go to the next deal and the next deal for them to building that relationship.

I like how you mentioned too, broker even sent you a gift when you had a child. Just shows the time and the energy you’ve put into that relationship as well.

[0:06:37.8] FM: I’ll just give you another example. Just how much to also respect that broker relationship, we had a deal that we sold back in October and essentially, another broker, we have a great relationship with an unsolicited offer and a very attractive price point. Now, it’s attractive price point but what I did first is I told them hey, I need two weeks, to let the broker that sold me this deal, try to get me that same – gave me a matching deal, right? I literally had to tell them hey, just give me two weeks because I wanted to go back to the guy that sold that and I’m like hey, you know, I know you sold me the deal.

I almost always want the first that sold them to do to sell my deal whenever I’m ready to sell it. We got the folks listed offer, here’s the price point, can you get close to this? Just to give them a shot, they respect that, they see that, I mean you know, you are valuing that, right? The brokers want to bring you a deal, right? II mean, it’s funny, there’s a person that we know that basically, he’s known as the place where deals go to die because he holds his deals for a long time. Which is fine but from a brokerage perspective, right? They’re looking at hey, I sell this person this deal, can I sell that deal in three or four years, right?

I have a person that I know was going to hold on for 20 years or the guys going to hold on for five years, who do you think they’re going to try to go to. Just being cognizant of that balance and what they’re looking for and how do you maybe help match that.

[0:07:50.4] WS: You know, that’s a good point that I don’t think has been made too many times just that aspect of if you’re a long term hold buyer, you may not be as likely to get as much deal flow just because brokers want to send it to people who are turning them over and say three to five years or seven, you know?

[0:08:06.8] FM: Something just to kind of be aware of.

[0:08:08.5] WS: All right, moving on from, appreciate bringing it up too, like of market deals are not usually really off market or most of the time, they’re not of market deals but in then like planting trees and bearing the fruit and you know, take some time, right?

[0:08:19.1] FM: No, absolutely. We work hard on just the broker relationships. I mean, we have our own team goal of just how do we continue to build that rapport between gifts and visiting them and you know, going on site and dividing them out to things and you know, we have a big focus on that piece of it.

[0:08:38.2] WS: You hired an in-house analyst, right? Tell me about when did you know you’re ready to hire somebody just for that position?

[0:08:45.5] FM: Between Ben and I, we just didn’t have the time to you know, in addition to everything else we have going on, just the company’s grown and we just have less and less time to do the initial underwriting and I guess we noticed it once whenever we’re getting deals and we’re not able to get them answers really quickly, right?

That’s maybe whenever we notice that problem like hey, we’re not able to get them feedback within four days on what a price point would be, that’s a problem. So how do we you know, again, pause, let’s break everything apart and rebuild this thing in a way that we know is scaled.

[0:09:13.8] WS: All right, now, going on through that acquisition process.

[0:09:17.3] FM: Yeah, I guess you know, deal comes in, we kind of tied it up to where we get the email, I can forward that into to see customizing on what we have and then essentially, that will get turned into a task that my analyst would see and then really, we kind of have a couple of different, you might call it the [inaudible] so we have the first kind of pan of all the deals that have come in, then you know, he’ll pick those up, go grab all the files if they’re not already in the email attachment.

Kind of get them setup through our basically our follower repository. Kind of taught him the initial back of the napkin rules of thumb to go through. And then you know, he does that really that sniff test and then deals really fall into a few categories, maybe they work around 75 or better of the ask, maybe they don’t.

For kind of that subset that do work right, then, he’ll kind of bring it up and you know, I’ll kind of do a sanity check and usually I can snip a deal and kind of get an idea of like hey, is this anywhere near the realm of what’s going on or a lot of times, I’ll call the brokers too and just say hey man, let’s kind of just straight to the point, where do we need to be, what’s this guy looking for, what are the terms that we need to get this done, right?

Get that kind of initial sense and then once we have kind of those – we passed those gates, then we actually go in and get the deeper underwriting, right? He’s going to go in, start to price out, okay, what’s the tax currently, what’s the price for buying that, should that meal rate be and kind of really modeling out all the different pieces from an expense perspective and then we kind of have rules of thumb on what to do for income, right?

Once we get through all that, right? I really look at it as essentially phases. Once the deals that have made it through all this – not phases but gates, right? Made it to the last gates, it’s just a funnel, right? You know, for that last subset, then we start to really hone in, dig in. Then I’m picking up the phone probably for each on of those deals on those brokers and just kind of say, “Hey man, hey I know you wanted 32, I did this actually just last week. Broker wants 32 and we’re at 30 and a half, I cannot come up. Tell me why this still works 32.”

You know, sometimes, there are some things that we don’t know, right? The guy just did a bunch of water savings, we didn’t notice that in the last month and now we have to project that out, right? There are some of these things a broker tells you and sometimes I’ll say okay, I’ll take your word for it but I put in my LOI that this is contingent on this thing you told me. Being kind of cognizant of that, because it really – every deal has a story. I mean, all of these dealer so different, we’ve done so many deals, every one of our deals is – no deal is alike, I mean, I really can’t think of any deal that’s alike.

Even the painful ones are different than the other painful ones. Really easy ones are different and they’re really easy ones. Just kind of being aware of that and making sure you account for any of your model, right?

[0:11:49.0] WS: Some good stuff. So many good points though, you made. Even just the fact that you’re calling the broker and saying okay, let’s get right to it really, I’m not going to waste your time, I don’t want you to waste mine, ultimately. Let’s cut right to the chase, what it’s going to take, what are the terms, what’s expected. I like that.

You mentioned too, what was it? You mentioned like you’re sending an email, you’re doing it in a certain way, so then your analyst knows it, it creates a task, what’s that system?

[0:12:10.9] FM: Yeah, for us, you know, we use a variety tools, I mean, a lot of it’s kind of built on top of Asana, that’s what we’re using but really, we have kind of our weekly call meeting lesson and we just kind of go through what’s the pipeline looks like today. Everything okay, let’s prioritize these, let’s look at these. Okay, these are not interesting or I mean, it killed me.

Last week we missed out a deal that I really liked. Gung ho for it and really, the broker just came back and like hey, they’re already kind of negotiating a PSA. That was just like – frustrated because I really liked that deal, I thought we dropped the box, we had a lot going on in the past two weeks.

I went back and looked and I’m like, from the time we got the deal, literally heard the time we had I LOI, nine days. It’s not like we move very slow at all. I mean, that’s still very fast. Clearly it’s not fast enough. My goal now is really getting six days, you know, every one of these deals, we have an LOI out in front of the broker. There’s other gates that I didn’t even talk about and just from dotting the eyes, getting insurance quotes and kind of getting these other things and so.

Really, we’re trying to get even quicker. So brokers know us as being quick. I mean, I thought brokers, if you really need another 48 hours, tell me and I’ll get you an answer what price we’re at. There’s different kind of levers we can pull but even as quickly as we think we are, we’re still going to refine that and get it down to you know, five, six day turnaround, tops.

[0:13:26.4] WS: I just like, – did you say you’re documenting the process, I feel like most people don’t even start to document the process. You can’t improve.

[0:13:33.4] FM: No, they don’t think too is, that data becomes super valuable, there are so many times a deal comes around nine months later and I’m like, I know this deal, I swear I know this deal and I poke around, I go search our database and I find it, boom, there’s a deal, here’s where it’s at, okay, they were here, now they’re here, what happened, right?

Sometimes the price came down, sometimes the price went up. I mean, sometimes thee deal never sold and you realize that the seller is just totally not real estate expectation and so you know, as we continue to build that database, the data’s going to be much more valuable so it will help to continue to your point, right?

Continue to help us grow.

[0:14:05.7] WS: Okay, now you’re documenting all this, you have it in a database where you can search up, you’re moving forward with the deal now, you know, unless I mean not currently but just on the show here, we’re just talking through kind of your acquisition process and –

[0:14:18.9] FM: Yeah, you know, once we get an LOI out, get the PSA going, lately we’ve been trying to do more early access just so we can get the thing moving quicker, right? It’s sellers. I think a lot of buyers are scared to ask sellers for it. What I’m learning is a lot of sellers at least, the ones where they have a trust of the broker and the broker essentially going to bat for us, right? Sellers just want to get the deal done quicker.

If you get the early access that enables everything to move more quickly, a lot of times, we try to do the early access, you know, while we’re kind of getting a PSA going and again, we’re fast movers, right? Every broker, after we close a deal, I ask every broker how did we do you and how do you compare everyone else and you know, what I want to hear is that you guys have been the best ones, one of the easiest guys to work with and pretty much that’s what I usually hear.

I’ll dig in on that because you really can’t improve if you don’t know what you’re doing well with what you’re not doing well. You know, that includes start to finish, right? Being available, being transparent, getting the team going quickly. Our PSA, it’s fairly, you know, it depends if the sellers starts ours but again, our returning moves really quickly and keep the pressure going to get that going. Similarly, right? We schedule all the due diligence, all the on sites, you know.

People go, I tell this to even like family members. Don’t negotiate for things that you don’t need. People really try to be super safe and negotiate for everything they can but all you’re going to do is you know; you have to look at it as you have a very limited set of cards that you can play. If you’re just playing them all, you’re not going to get to move forward.

If you don’t need a 30 day due diligence, why are you doing 30 day due diligence? Right? I mean, I’ve yet to find anyone that really needed all 30 days, right? For us, we really start at 21, sometimes 14 and really, 9 times out of 10, within the first 4 days, I know if I’m going to buy the property or not, right? Some things are waiting on other reports and other things to happen but I mean again, usually you know pretty quickly. So how do you make your offer enticing to stand out against the others? And so and if you say there is that kind of that tit for tat, right? Kind of finalizing, dotting the ‘I’s, crossing the ‘T’s and you know once we have done the due diligence all that’s going I mean it is just straight out of the gates.

And so from then, a place for us you know we — our business – our asset is the investors, right? It is really not the properties. It is the investors and then operations and so how do you make it easiest for investors? Where investors invest in you and they are like, “Those are the guys I want to invest with because they perform but also because they just made my life so much easier.”

And so we’re continuously refining that. We use IMS honestly we haven’t been super happy with it. It is not easy enough for most people and so we are looking at how do we reinvent the process a little bit, how do we make it really white glove. So how do we make things a lot easier and through the closing process, right? So that is for the investor side and then on the other side of the equation too, I mean we are in frequent communication with the brokers, with all the team and just knowing where things are at.

And so the brokers will text me things and I text them back. I mean he’ll be on an airplane and everyone knows where the deal is going. There is not this weirdness like the last week where no one knows if they are going to close, right? We’d had that maybe once and that was purely seller just not doing anything until two days before closing and so it is about – I like to say that I guess syndication is about two things. It is about project management on steroids really, right?

And I remember when I was at Microsoft I was a project manager and the other part of it too is really about essentially being a glorified matchmaker, right? How do you match deals to equity and so constantly that is why you are always looking for different equity pools and different deals and whenever things match, right? You have a deal and then you move forward and how do you manage this project through the finish line to closing and then I can go on post-closing.

The other thing people need to realize is all this stuff I told you about might sound super hard, right? But it is really not. It is all a process and a method to the madness. The hard thing is what happens after the closing I think people really fixate on closing but you just bought a multimillion dollar business, you know how to run a business. So I think that is again another trait that my partner and I have been able to just do well. We both had businesses prior. We know what it takes and how you build up the right team, staff and systems around that so —

[0:18:28.5] WS: Before we run out of time though, I want to say I really want to get to that closing process and even the hard parts after closing like you are talking about but maybe we can do another episode and focus on that. But a couple things there that you mentioned, don’t negotiate for things that you don’t need. I really like that, you know it is like focus on important things, right?

[0:18:48.7] FM: It is so important, brokers see that and you know I literally because there is things that there is just two categories. There’s things that I know I want and there’s things I know I don’t want. But they are all things that I still want – or sorry, the things that I don’t know I don’t want, I don’t want that much. So some of those are in there because I know the seller will come back and yank that out but that is fine. He got to have that I got to keep what I want.

But once you show up with, “Hey, here’s my laundry list of 50 things I am not trying to piss you off but here it is.” I mean how likely do you think the seller is going to be willing to be flexible, right? So you know stick to just what you need and then add a little buffer. Don’t start at wanting everything under the sun and try to work down.

[0:19:27.3] WS: So Feras what is your buying criteria now? I know we mentioned like 100 to 400 units, 10 to 50 million. You know when you are talking to a broker and they say, “What is your buying criteria?” What is your response?

[0:19:37.3] FM: Man that is actually a good question because that has honestly changed quite a bit overtime and I am reflecting back on a conversation I had I think a week before last with a broker that I know and my answer to him was essentially, “Hey, right now we are looking at pretty much everything, A’s, B’s and C’s.” We have different equity pools that are looking for different things. We have looked at and offered on a 35 million dollar A class deal.

We have also looked at and offered and I might have anymore minimums today for a deal that we might win that’s a $9 million 70’s deal and so typically, we are looking our box is almost a tiered box now right? It is dependent on the asset class. Usually we are looking between 8 to 12% cash on cash, right? Kind of everyone is looking for that. 13%, 18% IRR and for me though it is more interesting is about what is the actual upside, how concerned were we pricing it and what is the market.

And that is the other thing I think people really gloss over. So for us, you know the lesser we had – sorry let me back track. We have three deals on a tertiary market. We know that market well and we have sold two of these deals now, right? We like our trade markets. With that said, it is different than a deal in Atlanta for example, right? The thing that people look at is cash flow in a tertiary market is nice but you have to understand the limited pool of sellers.

Versus like in Atlanta, I mean there is just a million people looking to buy deals there and not all deals that we have bought there are just for so much more now than what we paid for them, right? And so there’s being cognizant of that and so we like secondary and tertiary market. We have homerunned it thankful on all the deals we sold so far but again, they are different kind of deals. It is not as many buyers and sellers. So there is something to be said about the value of being in a good market, right?

I mean I am really starting to learn that and then also to ask where we have grown even the value of being in the right intersection, the right location. Because for us I tell everyone the whole team I am like, “Anytime we need to we all roll up our sleeves and get our hands dirty on any part of the business that we need to,” right? And with some of these deals can almost carry themselves purely based on the location whereas the other deals that aren’t as good of a location, yeah.

We got a better price point but we are having to really monitor the marketing, really monitor the callbacks, really monitor the renewals, right? you know again those are all systems and processes that you put in place but there is just that – you know it is almost at the back of your mind like, “Hey, this is the one that I have to really watch,” right? It is like having two kids. The one kid that is never problematic and then you have the other one that always goes off and that you have to keep an eye.

This one is taking 70% of your time. And so just being more aware of that and so back to the question I think that have spawned all my thoughts, is it is really dependent on the deal location and the asset class and we are starting to be wary of that. Not all deals are the same and so for me, my box is a really wonky, probably a hexagon more than it is a box right now.

[0:22:32.6] WS: I like the response in a way that the response to a broker and what your criteria is based on. I mean it should be but it is based on where he’s at, what location are you actually speaking to as opposed to well this is what it is.

[0:22:45.4] FM: Yeah, exactly and then you know the other thing too is know the broker you are talking to, right? The broker that is doing the C’s is not usually the same broker that is doing the A’s and so that helps a little bit when I am trying to tailor the answer to where I am not having to go off on a five minute tirade of what I am looking for.

It is a little bit more focused for them but yeah I mean my box is this and I just tell them to send me all the deals that they think might fit. He will give you quick answers and so I try to get more out of them to put the burden on us to turn around is this something we like, an area we like and then give it back to them.

[0:23:16.2] WS: Feras, what’s been the hardest part of this syndication journey for you personally?

[0:23:20.4] FM: Hardest part of the syndication journey that is a good question. I mean it is all challenging. It’s got its ups and down. The hardest part is I guess I’d say is really the first year, right? So for everyone listening to this, the first year of any deal is critical and on the investor side too. The first year is where you give syndicators slack if you need to because again, as a buyer you don’t know what you are going into, honestly.

As much due diligence says you might even doing there is still a lot of unknowns. And so the first year is where a good syndicator can whip that deal into shape and get it humming, right? And so with that really it is just the first year just knowing how to handle a deal the first six months because again, we bought deals in multiple markets. We are in four markets throughout the country and you know, different property managers throughout those markets.

And different tenant basis. And so even within the same market, two different deals that we have that are a mile and a half apart perform so different that first year and so we’ve learned on how to what do we need to be aware of that first six months to really kind of address. Don’t let issues become a bigger problem later, right? Really the core of it boils down to kind of the – there is usually – I guess I will tell you the story.

So there is kind of an implied agreement between a buyer and seller. So we’ve been both buyer and we’ve been seller, we have seen both sides of this where for a stabilize deal for those of you that don’t know, to get good debt a deal needs to be stabilized. I mean it is 90% of more in occupancy for the past three months. Now if you are buying a deal that is 90% occupied you got to be careful because really the seller there is that implied agreement.

Where the seller is going to do whatever he needs to do to let that deal stay 90%. He might let in someone that he might not have really qualified or screened all the way because again, getting it at 90% is more important than not because if he doesn’t that is going to blow up the buyers that are there and so the seller is doing whatever he needs to do and as the buyer have to wink at them. He’s like, “Fine, do whatever you need to do. I don’t want to know about it just do it” right?

Just keep the 90% occupancy. Now that is all great now we have closed but now you just got a property where you don’t necessarily know the quality of the tenant base and so really being leery that first six months of that what’s the delinquency look like and the problem is you take over the property, you don’t know who is performing and who is not, who are the people that is going to give you the promised pay and actually delivered and who aren’t.

Then on top of that you are probably doing some upgrades and pushing some rents and then on top of that you probably have a million dollars of rehab going on around the property. So it is not like the property is amazing when you are looking at it first. There is a lot of chaos right? And so you need a team onsite that can handle all the chaos. You need to be able to handle it as well and understand what’s going on and all the dynamics and what thresholds you need to do, right?

Even if you have a take a price, a rent drop upfront because you are trying to offset the bad. People you know, you try to put them in a six month lease and so maybe the hardest part is that because as you see, I have seen so many other syndicators and then the deal blows up at six months and now they are paying for it for the next two years if you are not really careful because again, a lot of times these leases are one year. So the best case scenario is going to take you a year to fix the problem that you just let go by.

And so maybe I would say that is the hardest part is how do you put the right systems checks and balances in place with the team, the property manager, even the house asset manager as well to make sure that we all know where we are headed and what are the changes we need to do and be pretty moldable in the first six months to get there. I think before we used to do a lot more astringent but you start to learn that actually there is a payoff that it backfires.

And so just being adaptable and really looking at the first six months on a week by week basis of what is going on and where we are headed, okay we have to do this now because of this situation and getting past that.

[0:26:52.3] WS: It is hard too when you are brand new. You don’t know what you don’t know.

[0:26:55.1] FM: You don’t know what you don’t know, no. Absolutely it is hard and so like I said, we have two deals in the same market one mile apart, it is night and day between these two and I don’t understand it honestly. Just that first year was so different and it is funny the newer one is the easier one. That was the one I thought is going to be harder in the two and it is like that one is much better tenant base. I never had delinquency that low.

And so back to my point earlier about starting to value the quality of the property and the location, a property that is 94% occupied versus a property that is 90% occupied well it seems like it is 4% it is only a handful of leases, right? That actually makes a huge difference because you probably have a much better quality tenant base at 94% because the seller never needed to let that bar slip because they are already humming. So it is something to be aware of.

Even me as a buyer now I am really looking for that, for deals that are right on the cusp. You want to keep that in the back of your mind that there is probably a cleanup that you need to do and I will give you an example. One of the deals that we had in Atlanta that we sold back in November, you know this deal we bought it. I remember touring it with my property manager before we bought them. He said, “You’re probably going to have 50% turnover on this deal.”

I am like, “No way is it going to be that high.” We knew it was a complete turnaround property but sure and behold, a year later we had 50% turnover. We had cycled out all completely cleaned house on them from just getting rid of all of the non-performers, all the drug dealers, all of the problematic issues because it was rough property in a decent area. Just cycling through that and now seeing it hum along and so just being leery of what that first year is going to intel and then you know it continuous.

And then the other thing maybe I will add to that is you will see a lot of guys will buy one or two deals and then they just get burning off, right? They get completely overwhelmed. It takes a while to get through and so how do you get ahead of that and continue to scale and grow as well.

[0:28:41.4] WS: Wow, so much great content there, Feras. Unfortunately we are out of time but I hope that you will agree to do another show and we can focus on all of that closing process and some of the hard parts after closing that we are talking about and then there’s many other questions that I wanted to ask you but tell us how you like to give back before we have to go.

[0:28:59.8] FM: Oh man, I am happy I can tell my investors, feel free to reach out to me with questions or anything we can help with. I mean my partner and I both try to make ourselves super available, right? Maybe I am going to regret this in the future but today, we are happy to help answer questions, happy to help partner with people as needed. So that is a big thing we like to do especially if you have questions on that first six months, right?

One of the ups and downs I mean, feel free to reach out. It is better to ask a question or at least try to ask questions than pay for it for the next year.

[0:29:26.2] WS: For sure and how can people get in touch with you?

[0:29:28.8] FM: Yeah, disruptequity.com or [email protected].

[END OF INTERVIEW]

[0:29:34.6] WS: Don’t go yet! Thank you for listening to today’s episode. I would love it if you would go to iTunes right now and leave a rating and written review. I want to hear your feedback. It makes a big difference in getting the podcast out there. You can also go to the Real Estate Syndication Show on Facebook so you can connect with me and we can also receive feedback and your questions there that you want me to answer on the show.

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