WS554: Red Flags for Passive Multifamily Investing with Dan Handford

[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 and good friend of mine, somebody I highly respect, amazing entrepreneur, Dan Hanford. Thanks for being on the show Dan.

[0:00:36.3] DH: Thanks for having me back Whitney, really appreciate it and looking forward to sharing some more with your audience here.

[0:00:40.7] WS: Yeah, Dan’s been on the show numerous times in the past and has been gracious in sharing his expertise. He was on a show number 14. It’s incredible, we were just reminiscing about way back then and everything that’s happened since then in both of our businesses and friendship and we’ve done a series of shows between 225 to 246, I would also encourage you to go back and listen to.

But a little more about him before we dive in. He is an extensive successful background in starting multiple seven figure businesses from scratch, including a large group of nonsurgical orthopedic medical clinics located in South Carolina. He’s the founder of the Multifamily Investor Nation reeducates a nationwide group of more than 9,000 members of multi-family investors on how to properly invest in multi-family assets. He also is the cohost, alongside his wife, Dene of the Tough Decisions for Entrepreneurs Podcast. Dan, thank you again.

Also, you had Multifamily Investor Nation podcast as well, right?

[0:01:38.8] DH: That’s correct. I should have updated those numbers with you because we’re now up to 26,000 members in Multi-family Investor Nation.

[0:01:45.8] WS: 26,000. Wow, congratulations Dan on that and just amazing success and what all you’ve accomplished and I want you to give us a little update on where the passive investing team is right now, I know a lot’s happened since you were on the show last, I know we’ve been keeping up with you and we’ve talked and been in different conferences together at the same time but update our listeners a little bit and let’s jump in to a few red flags we’re going to try to get to for passive investors and investing in multi-family syndications but update us a little bit first.

[0:02:13.7] DH: Yeah, I’m one of the managing partners with a group called passiveinvesting.com and we acquire multi-family assets primarily in the Carolinas and we have over the last 12 months, acquired just over 100 million, 120 million in acquisitions and raised just over 35 million in equity to be able to acquire those assets and we’re continuing to do that. Obviously, we’re going to talk about a few things today, probably as it relates to passive investors and red flags because not only am I an active investor but I’m also a passive investor as well. I’m currently in 21 different active passive deals as a multi-family passive investor.

That’s with eight different operators. It’s not just with one operator or myself which with multiple operators and so I have some criteria that I look for when I’m looking to invest in somebody else’s opportunities and so I thought it would be helpful to share with your audience those red flags that I look for, that will cause me to maybe pause a little bit before I actually invest.

[0:03:10.5] WS: Yeah, I love that you’re on the active side as well and very involved in doing deals and so I just think it gives you another level of experience from understanding what passive investors are looking for as well. I know there’s a list of things that we could go through that are potential red flags and we cover a lot of them at different times with different people in the show.

Things have changed recently in the market, right? I mean, as everybody that’s listening, Dan’s been affected by it no doubt. I’d love for us to jump in to just the current market and the red flags for investors, right now, what they’re looking at and maybe some things you’re considering from the active side that also affect, you know, the passive side. People who are looking to say, “I know I still want to own real estate. Maybe this is the time to get in, maybe it’s not. I’m not really sure with everything that’s happening right now.” I’d love your input Dan.

[0:03:54.6] DH: Yeah, right now, this is the beginning of April. Today is April 6^th. In our apartments that we own, rents are due April 1^st and my April 5^th are late. Today is going to be the first true sign as to how these properties are performing and so we’ll actually hopefully be able to know that a little bit more in the next couple of days here but right now, as far as the acquisition side and whether you should actually be acquiring right now, there’s a couple of things from the passive side that you’d want to make sure of.

A big red flag for me would be if an operator underwrote a deal before all these happened and say January, February, even the beginning of March and they didn’t change their underwriting since they’ve been into the deal, right? Because that would be a big red flag. Now a yellow flag would be, they’re still trying to acquire the asset, right?

The yellow flags aren’t necessarily like completely don’t do the deal, they’re more of like a – let’s sit back, let’s see how they’ve actually underwrote this deal, how they actually underwrote it to mitigate the potential risks that are coming right now with the economic slowdown and because of COVID-19 and things like that.

One of the things that I would definitely say that you have to look at right now is what’s the business plan like right now, given the COVID-19? If they originally underwrote that it was going to take them say, 15, 18 months to lease up a deal after they did renovations, hopefully they have actually changed that plan to mitigate that because over the next probably three to four to possibly six months or longer, it’s going to be a little bit of a slowdown, you have a harder time with that rent growth.

That renovation plan is going to take a little bit longer. Somebody originally did 15 to 18 months. It’s going to want to see at least probably 24 months or longer and being able to execute that business plan and so, obviously, making sure that that’s in place is a crucial piece and that’s really for the B and C class, right?

When you’re looking at more like a higher end A class property. Obviously you’re not going to do renovations but you still on that A class product, you want to make sure that the rent growth assumptions, especially for that first 12 months is not overly stated. You want to make sure that – I would probably say at least 1% or less in rent growth over the next 12 months if that at all, right?

Because right now, with what’s happening, you could already see it in some of the CoStar analytic data that the rent growth is actually started to slow down already during the month of March, it’s actually started to slow down and a lot of that has to do with these daily repricing software models that reprice the software every single day based on the current market conditions that allows us to kind of have a pulse on once the inventory like, what are the turnovers like, what kind of vacancies are actually being seen across the board because that’s what causes those prices to actually differ on a daily basis you’re using one of those types of models.

And so, that’s one piece is making sure that you’re looking at the renovations as well as the actual length of time when it comes to these renovations and if somebody is in a C class product right now or a B class product right now and they’re trying to raise for it, it’s going to be very challenging to kind of figure this out because the lower end Bs and the lower C class assets are the ones that are getting hurt right now, the worst. Because those are the people who have those jobs that are being lost, there’s furlough’s, the unemployment and hopefully all the stimulus that’s happening with the economic stimulus and the increased in unemployment benefits and things like that, it will help mitigate some of that damage but at the same time, those are the people who are getting hurt the worst.

When you look at more of an A class asset, you have more of your white collar professional that’s not usually living paycheck to paycheck, they usually have extra in operating reserves, I’m thinking about properties but they usually have extra in savings or extra reserves to be able to pull from if they do have a little bit of a slowdown or a dip for say, a two or three month period of time.

Those are just a couple of things, Whitney, that I would definitely caution somebody when they’re moving into a deal right now amidst all those COVID-19 stuff.

[0:07:38.6] WS: It doesn’t mean they should just back out completely, but they should see some changes and hopefully, that operator’s communicating this changes with them, right? Absolutely, that’s the biggest thing right now with this type of situation is being overly communicative and even with our own assets, this month and April, we actually started weekly communications with our investors because we want our investors to understand what’s happening with their asset that they’ve invested in.

Normally, we do a monthly update that’s sent out by the 14^th of the month that talks about the prior month. Well right now, every Monday, we’re sending out a weekly update report so those investors can understand how the asset’s performing because today, like I said, it’s April 6^th, right? This is when all the rents are late and so by now, we should know, at least, how many of our residents have actually made their payments and how many have asked for payment arrangements and things like that because most cities right now have ordinances that are eviction moratoriums that will prevent you from being able to evict somebody.

Right now, given the situation, I really don’t want to have to evict anybody, right? We’re trying to do our best to maintain occupancy and making sure that we could increase the ability for our properties to do payment arrangements so we can keep those residents and the properties as long as possible but you have to make sure that you’re communicating with investors on a regular basis and right now, I feel like weekly is a really important thing to do.

Even right now, every day I’m getting emails and phone calls and text messages from our investors. “Hey, how is this property doing, how is that property doing?” Instead of having to respond to all those separately, we’re going to start seeing that weekly updated here in the month of April.

Dan, you know, as a passive investor, you’ve got a lot of experience on that side as well, if we’re not currently investing in a deal right now, we haven’t committed to an operator right now, should we just be sitting back on the sideline for a few months to see what happens? Should we really be looking to invest right now if there’s opportunities. What’s your fill on that?

[0:09:21.2] DH: I think it depends on your current situation because if you’re an accredited investor which means you have at least a million dollars of net worth or you have at least 200,000 if you’re single, 300,000 of income if you’re married for the last two years and you expect it to continue then you have a little more cash to play with usually, right? Usually if you have a little bit of excess there, you have the ability to invest, even in times like this, right?

I personally am still invested in this type of a market. There’s actually a deal that I was in just recently that actually fell through. I had already wired the funds and sent it in and it actually fell through and I got the funds back.

But again, that operator was constantly monitoring the situation and they realized that this deal just wasn’t going to be a deal that was going to make sense given the whole situation and so they appropriately backed out. I wasn’t upset with them, I was still wanting to invest with them but I also trust the operators that I’m investing with to make sure that they’re making the right decisions and our investors here at passiveinvesting.com trust us in the same way, right? We’ve had deals before that we’ve had to back out of and they understand that, right?

It’s not been a lot of them but there’s been situations where we’ve been like, “Okay, this deal does not make sense.” Instead of trying to get into a deal that doesn’t make sense, then we would rather just pass on and go find that next deal.

[0:10:35.2] WS: That leads right into another great point as far as just vetting operators and I have talked about on the show recently talked about this is a great time to vet operators. We talked about it a little bit on the underwriting and just as you’re vetting new operators, you know, asking, well, what has this done to your operating models or your underwriting models and how does this change your business plan and learning how an operator operates through a tough time like this, what are your properties doing? But I’d love your take on that as well, you just mentioned too.

Trusting the operator. Even in bad times, you know, you’ve already built that level of trust so you know the operator’s performing at a very high level, you know that they’re doing the best that they possibly can to safeguard those investments of all their investors but I’d love your opinion too just about vetting operators and during this type of crisis as well?

[0:11:17.9] DH: Sure, I originally told you two Whitney but there’s actually three things that I think are really important, especially right now given the COVID-19. Number one on my plate that I look for is I want to see somebody on the operations team that has some form of background and success in business, right? The reason that’s important is because when we’re buying these larger assets which is what we’re doing, we’re buying businesses that just so happen to have an asset associated with it.

I want to have somebody on that operations team that knows how to put in systems and procedures and processes in place, that knows how to manage people, knows how to make decisions in times just like this because these are the times that decisions have to be made. You can’t sit back and just wait to make decisions in this kind of situation is happening.

You have to be decisive and you know, having somebody who has some sort of successful background in business, I think is a very crucial piece. The second piece that I look for is an operator that’s full-time in the business. I want somebody who is full-time, invested everything full-time and that to me is very important because I’ve worked very hard to earn the money that I’ve got. I know our investors have as well and so all of our managing partners are full-time in the business and I want to invest in other operators that are also full-time in the business.

And then the third thing that I look for is more of a structure in the operations team. I wont invest with somebody if they only have one person as the operator because I have heard of stories before and I know you probably have too, Whitney, where somebody has invested with an operator that only had one person as the main operator and then all of a sudden, that person went ghost on them and they can’t find them.

Of course, I know of somebody right now that’s in New York City that is a friend of mine and he invested $200,000 in a deal and his friend invested $200,000 in a deal and the operator went ghost on them and they can’t find him. Of course, you go back to the operating agreement and what did it say?

In order to get out, you got to have arbitration. Well, how can you arbitrate with someone that you can’t find? They’re stuck in this kind of middle space right here where their equity’s caught up, the property’s still there, they’re still generating revenue but they’re not making distributions because there’s nobody to make distributions.

For me, I have to make sure that there’s at least two but I do like to see at least three to five people on that operations team. Probably not closer to five, my preference is two to three really when it comes to an operations team because when you start to get four and five, there’s a little bit too many cooks in the kitchen, just depends on what kind of role they play so there’s more of a minority role with those different operators, then it might be a little palatable for me but I want to make sure that there is at least more than one person that’s in that main operator position because I don’t want someone to go ghost.

And, I will also tell you this that we all talk about masterminds, right? Masterminds are when you get two or more minds together and you start to strategize, think about how to improve, right? How can you do that when you only have one person as the main operator and I’ve seen it right now today that there’s an operator right now that I know is the only operator and that operator has no one to bounce ideas off of and so they’re basically bouncing ideas off of other random people that aren’t even part of the property.

Right now, you have to make sure that you’re investing with somebody who has multiple people because for us, we have three managing partners and so every single day, we’re on phone calls and we’re masterminding, we’re strategizing and we’re making sure that we’re getting things done properly for our investors and for me, I want to make sure that I have multiple operators.

[0:14:28.7] WS: I love that, I haven’t heard many people say that if anybody before on the show as far as vetting operators, thinking about the structure of that team and having more than person on the operations side because I know personally, you and I have both have experienced just like a leap in growth, once we’ve joined a good partnership, whether that’s with one person or your whole team. It’s a game changer, personally, and I think for passive investors as well. I think it’s a neat way to think about that.

A few more things I know we want to cover before we run out of time Dan, let’s talk about the preferred return structure a little bit and some other returns structures that maybe an investor needs to think about even specifically right now, you know, in the type of crisis that’s happening. I know there’s different ways that we’ve heard different operators think about this and talk about this but I’d love your opinion from the passive investing side as well.

[0:15:13.2] DH: Sure, we could talk about the preferred returns in two different areas. Let’s first talk about the traditional preferred return model, right? We have the preferred return which you know, for those listeners who are unfamiliar with that, just a little bit, the preferred return is basically the operator out of the cash flow is giving you a 100% of the proceeds until you could meet that preferred return and then there’s usually an equity split after that, right? Or cash flow split. Usually, around 70/30, okay? 70% of the investors, 30% of the operations team.

Well, the preferred return in my opinion is something that I always look for and I feel like it’s a red flag when the operator does not provide preferred returns and the way I look at it is if the deal is so tight that you can’t provide preferred returns or that the operator needs the equity splits earlier and that’s why they’re not giving the preferred returns, that operator is not well capitalized enough for me. I want to make sure that those operators are well capitalized and don’t need those splits if you will earlier on to have no preferred returns to be able to live off of.

[0:16:14.9] WS: When you say, well capitalized, I was going to ask you if you meant personally or like within that property or business specifically?

[0:16:21.7] DH: I would specifically say within that property itself. Obviously, you know, from the lender’s perspective, they’re going to make sure that there’s someone on that team, that lone guarantor if you will is well capitalized as a backup or a failsafe but the actual deal itself too, right?

The operator at the same time, in this situation, if they don’t provide a preferred returns, what I see a lot is that, the reason why they don’t is because they need the money to live off of, right? They need that 70/30 split earlier on. What I mean by earlier on is if there’s no preferred returns, every dollar that comes in off the cash flow is as profit can be split 70/30.

Instead of actually waiting until the investor gets their preferred return first. For me, I want to make sure I’m protecting my investors first because I’m not planning on just putting one deal together and I know you’re the same way, Whitney. We’re not planning on just putting one deal together, we want to have this thing as a lifetime legacy to build alongside of our investors and so this is not just a one and done type of situation with us, we want to make sure that we’re growing with our investors.

Those preferred returns are very crucial because I feel it’s the best way to align interest with the investors because we couldn’t put these deals together for our investors. We have the 70/30 spit but at the end of the day, when we go and sell an asset, if we have to give up a portion of our 30% to make sure our investors achieve the returns, then we’re going to do it, right? We want to make sure that we can do that.

To me, it’s not about just making my 30%. I want to be rewarded with my 30% if I can outperform that asset. And so that’s one thing that we do with our group is, “Hey, we have that 30%. We have to give up five, 10, 15, 20% of it to make our investors whole at the end of the day, we’re going to do it right? And that is something that a lot of people don’t talk about. I never heard anybody talk about that, Whitney but it is something that our group talks about all the time.

And I am going to shift here to a little bit different piece of preferred returns and it is still preferred returns, but it is also preferred equity at the same time. So lately or probably the last year, year and a half, you started to see this dual class structure where you have class A as a preferred equity piece and then you have the class B, which is your traditional seven or eight percent preferred return with a 70-30 split after that. Well the preferred equity piece is usually 25 to 35% of the equity stack and it provides you no participation on the upside but usually a higher, like a nine or 10% preferred return that you get along the entire hold process.

And so for somebody who is listening right now who’s maybe in this situation going, “I really don’t want to invest right now because I’m afraid I might not achieve the returns I am looking for, maybe we won’t receive the cash flows or maybe I might lose some of my investment,” I think that the class A would be a perfect choice for you because the way that works for the sophisticated investors and especially a lot of these institutional investors they actually prefer to be in that preferred equity position because it is not a guarantee but it is pretty close to a guarantee, right?

Because the class A investor, that preferred equity stack investor, that class A has to be paid first before the class B investor sees anything and so if you are on the fence there a little bit uncertain as to where you want to be go into a class A position if you need to because you’re pretty much guaranteed that because let’s just say you have a 9% preferred return in that class A position, well it is only 25% of the equity stack.

So whenever your distributions are happening, you are going to get paid all of your portion first before class B gets anything and if for some reason you go down let’s say to 7 or 8% during that hold period because maybe the market shifts or whatever or the business plan doesn’t go exactly as planned, when they sell that asset there should still plenty of extra there to be able to pay you otherwise there is nothing for class B and there is nothing for class C, which is the operator.

So being in that class A position right now for somebody who is a little bit uncertain and wants more, wants that guarantee but that surety to some of that cash flow and that overall return, I think is a great position for a lot of people.

[0:20:08.4] WS: Which of those are you investing in right now or are you still investing with operators that are not doing that type of structure?

[0:20:14.0] DH: I’m investing in both. So I would invest with an operator who doesn’t do that structure but what I actually prefer, Whitney, is a blended option where I can put 50% of my investment in class A, 50% of my investment in class B and you have this nice blended return, which increases your cash yields over time, during the whole period and then it also allows you to have participation on the upside but it is a nice blending of the risk profile within the same investment.

[0:20:37.6] WS: Nice, would you expect the preferred return to change right now through this type of crisis and what we are seeing right now?

[0:20:43.9] DH: Well for deals that are being put together I would hope that nothing is being changed as far as the preferred return because even if the cash flow is maybe a little bit light, I would still want to see that preferred return or seven or 8% and even if they had never achieved that during the whole period I still want to be made whole when we go in and sell that asset to that seven or 8% preferred and so to me I would say that the preferred return should stay very consistent with where they are right now.

Staying in that seven or 8% because we put together deals right now where that preferred return is a little bit up the preferred return but where the cash yields year over year is less than that preferred return and the investors are just told that out front that, “Hey, the first year is going to be a little bit light on cash because of the given situation but the next few years after that is going to be doing really well and we’ll make that up in future proceeds whenever we had that coming in.”

But the nice thing is, is that if you have these dual trunk structure then the class B investor gets anything the class A is going to get their preferred return, which is usually higher around that nine or 10% mark.

[0:21:38.2] WS: Say we’re passive investors investing anything right now, how soon should we see a distribution giving the current state of the market?

[0:21:44.1] DH: Well that is a great question because there is a lot of unknowns and uncertainty right now but where the cash flow is going to be but there is also a lot of things that you can do for an economic stimulus standpoint. So there is deals right now and so far all of our deals have not stopped distributions. Now this is the month of April so this is kind of like the true time as to what’s going to happen and we’re going to have to make decisions this month as to which property might or might not need to do that with but we also want to make sure that when we are acquiring assets right now, we set realistic expectations for those cash flows and that is going to be determined once we actually get into the deal, right?

But I would say for me, what I would like to see is monthly distributions. So I don’t invest unless we have monthly distributions and so I wanted to make sure we see that and one of the main reasons why I like to see monthly distributions is because I’ve seen operators who do quarterly, they don’t get those stats until the beginning of the next quarter and now they are doing the retrospective analysis on the prior quarter and it is too late to make any changes or pivots but I want to make monthly decisions on how that asset is performing and so it is a way for me to know that they are actually looking at those finances on a monthly basis. So if the deal right now is closing say this month in April, you are going to probably have another two or three months’ worth of no distributions until you start that back up depending on how that property performs but if you have a deal that’s closing a little bit later so maybe May, June, July things might be a little bit different.

So I think it just depends on how that property is performing right now. To set your expectations upfront, I would say waiting until probably August, September, October somewhere around there to actually start seeing those first distributions just to set your expectations realistically and hopefully the operator dealing with is one that will make up those distributions as the cash flow start to come in because right now there are a lot of things that are happening even with these properties that – we’re considered as small business each property and so we are able to get our payroll two and a half times right now paid for with the economic stimulus. We are able to get some grant money right now that is available and so there is a lot of different things that are happening from the property side but even from the resident side, they are able to also get extra unemployment benefits and they are also getting their payroll even if they are not working and things like that.

So there is a lot of things that are happening from the government side of things and on the other end of this, I know we’re going to go out strong and long term multi-family is going to continue to have a lot of demand. There is three things that always happen, Whitney, when there’s some sort of a downturn or really a pandemic, right? First off is there is a lot of divorces, there is a lot of marriages and of course, the third thing is there is a lot of births and so those three things long term create a lot of demand for multi-family, which is great for us in the long term.

[0:24:11.2] WS: So that passive investor that is in the deal right now and the operator’s reached out and had to say, “We’re going to delay distributions for the next few months and we don’t know how long.” Should they be worried, should they not? What is your opinion and thoughts about that?

[0:24:25.5] DH: Well first off, I would just automatically suspend distributions indefinitely for the foreseeable future, right? I would say, “All right, this month we are going to go ahead and withhold distributions because we want to make sure we have enough in operations if we need it.” We don’t have to dip into our operating reserves if we don’t need to. So you withhold for that one month and we’ll reassess and say and ask that question the next month.

So every month they are making that decision can they make distributions but again, this goes back to why your monthly distributions because if they are doing quarterly distributions then it’s going to be six months down the road before they make the next decision on whether they can actually make those distributions or I guess three or four months down the road, right? So now there’s been six months of a gap of distributions where for me I want to see monthly decisions being made on the assets.

And so I don’t necessarily think that you should be worried. I think you should actually be proud of your operator that has to withhold distributions because they didn’t expect this. Nobody expected this. It is not their fault that this happened but they are making the right decisions and the best decisions as the fiduciary for your investments in that particular asset.

[0:25:24.5] WS: They are being proactive.

[0:25:25.1] DH: To make sure that you are happy with that because you are the one that wired them the money and trusted them so you also have to trust them during this time and don’t be upset. Be proud of them because you would rather not take a distribution than have to be doing a capital call and diluting your shares if you have to.

[0:25:38.8] WS: We are out of time Dan but it does lead me into one more question though I just wanted to cover. It goes into that reserve budget – how do we know if the operator has a large enough reserve? I would say right before all of this happened we closed on a large project and some other operators were saying, “Whitney that is too large of a reserve budget. You know that cuts into those returns too much. That is just too big,” you know?

I’m like, “Wait a minute, I just feel better about having a large reserve budget probably much larger than what most operators tend to have.”

[0:26:04.1] DH: How much do you have in reserves?

[0:26:05.6] WS: One and a half million.

[0:26:06.4] DH: So we have 1.7 in one of ours right now. We have 1.4 in another one, 1.2 in another and I don’t think that that is a crazy number right? I think it is a smart number honestly because it allows you to have those extra funds in case you need it. Now I hope we never have to dip into that and yes it is expensive but for you and I it allows us to be able to sleep well at night because now we’re not going to have to – I won’t say ever but it would be very rare situation where we actually have to dip into those operating reserves to a point here we have to do a capital call in the future and so I think it is a smart decision for you to actually do that. I wouldn’t falter for that all. That is why I asked you about what it was because I figured you and I were probably very similar as far as making sure we had plenty in operating reserves and at the same time that operating reserve is going to go back to the investors for some reason when we actually sell the asset and we put those proceeds back in right?

But one of the things that I will also mention about the reserves because you asked me what is a right number to keep in operating reserves. To me, I want to see if the property goes to zero percent occupancy, which is extremely rare, but if the property goes to zero percent occupancy I want to be able to meet the expenses and the debt service for about three to six months, right?

But with us obviously we have ample operating reserves and very rare is it going to go down that low but let’s say it drops down to 50% so now I have six to 12 months’ worth of operating reserves in place versus just three to six months and so I think it is a smart way. It is the smart thing right now, especially right now, to make sure you have ample in operating reserves and there is never a situation where I would say it is too much, right?

I mean obviously trying to put way too much but then the returns is going to go down and this is going to kill the deal anyway, right? But I think that you are right. You have to have enough in operating reserves right now. That way if you for some reason you have to dip into that, you don’t have to do a capital call if your investors because that looks a whole lot worse.

[0:27:54.5] WS: All right Dan just a little shift, just a few final questions before we have to go. What is a way you have recently improved your business that we could apply to ours?

[0:28:01.1] DH: We recently, with our business, we actually just hired two key people. One of them was back in the fall of 2019, one was in the first quarter of 2020, was a director of marketing in PR and she’s been absolutely phenomenal for us and has taken us to the next level when it comes to our presentation, our communications with investors.

And then we also hired a full time asset manager, who actually worked for one of the largest REITS in the country and has managed multiple billions of dollars’ worth of assets over a 100,000 units and has been helping us put in additional systems and procedures and processes in place and it has been very crucial for us right now with our acquisitions because of this whole COVID-19 but also managing the assets that we have right now because he’s been doing this thing for over 20 years and so he has been through the dot com bubble issues and 9/11 and 2008.

So he has been through all of these different situations that are different than what we are seeing right now but they have similar responses to what we are seeing right now as well.

[0:28:58.2] WS: I love that answer because it also goes back to that business structure question that we were talking about earlier and you are adding team members that are extremely experienced and just improving just every aspect of the team. That’s incredible. Tell me the one thing that’s contributed to your success Dan, what do you say that is?

[0:29:13.9] DH: I would say that one of the things that has contributed to my success is that I am the type of person that likes to measure things all the time. I like KPI’s, I like statistics and a good mentor of mine years ago told me, he said, “If you can’t measure it you can’t manage it,” and for me, everything that I do, we try to measure so that if you need to manage it we can and even to the point, even in my medical clinics that I own, we sit down for a corporate meeting once a month for an hour.

And my team goes over all these different metrics and you’d be surprised that some months we look at metrics we’re like, “We didn’t even know if that is a metric that we really like to see,” but then we start to see that metric move or change and we can pivot and make some changes. So for us, and for me personally, being able to measure things has really helped us be able to manage things to a point where we can create a lot of success with it.

[0:29:59.8] WS: How do you like to give back?

[0:30:01.0] DH: Well I’ll tell you right now Whitney that in the fall of last year I started a new non-profit organization. It is called The Fortify Foundation and it is a foundation that helps private Christian schools to be able to create their own foundation because a lot of these Christian schools don’t have that in their thought process or they don’t have the staff to be able to put together a foundation that will allow them to be able to fortify if you will and build up their nest egg if you will to allow that non-profit themselves to be able to go forward.

So what we are doing is we’re coming alongside these small to mid-size Christian private schools and helping them create their own foundation, so that instead of going off and one of the biggest flaws that I see in Christian education is that they go off and they say, “Oh we need new computers for the computer lab,” and they raise 10 grand for that but then when the 10 grand is spent it’s gone, right?

So I use the same concepts in multi-family and said what if I can create a foundation that can invest assets like multi-family and have a diversified portfolio across multiple assets and many different markets and allow them to be able to still spend money off the returns that they are making off of it but then the main principle never goes away and so we have actually started to develop this. It is still in the infancy stages. So we are still are in the developing this.

We just hired our first interim executive director to help us get off the ground but that is one thing I am doing right now and I am pouring a lot of money into that to get it started because our kids right now go to Christian private school and I see a lot of Christian private schools that are going under right now because they’re just undercapitalized and if they can find a way to create a foundation that will allow them to be well capitalized into the future then it will be a legacy for everybody that we can actually create for them.

[0:31:36.1] WS: Love that. I appreciate you sharing that Dan. Amazing show, very timely just with the information that we have covered today, no doubt about it. I am sure the listeners have enjoyed this and probably learned a lot but tell them how they can get in touch with you and learn more about you.

[0:31:48.9] DH: Sure, I will give you two different ways you can find me. So first off if you are interested in investing with us or thinking about wanting to learn a bit more about us you can go to passiveinvesting.com, pretty simple there, and on the top right hand corner of the screen there is a button that says, “Join the passive investor club,” and if you fill that form out I’ll jump on a phone call with you, do a one on one call with you, discuss your investment goals and see if you’re the right fit for our group.

And then the second way if you are just interested in learning more about multi-family and educating yourself you can find more information by going to the multifamilyinvestornation.com site and you can also go to the mfinpodcast.com to find us on our podcast and of course we are all over the place as you know Whitney on YouTube and Facebook and LinkedIn and things like that. So thank you so much Whitney for having me on and looking forward to be on in the future.

[0:32:32.5] WS: My pleasure Dan and why don’t you tell them, do you know when the next summit is coming up?

[0:32:36.2] DH: Yes, it is going to be June 11^th, 12^th and 13^th so thank you for that Whitney I forgot about that. It is called the Multi-family Investor Nation Summit. It is an all online virtual summit and yes because of COVID-19 a lot of people are doing a lot of virtual events but this is something I have been doing as you know Whitney, this is my 4^th time doing it, right? This is our second year doing this and really excited to have it and doing it again and I appreciate you helping us be able to promote it.

But if you are interested in joining us there, you can go to mfinsummit.com and I’ll tell you what Whitney, I know I did this last time when I was on the show with you, I will do the same thing where I’ll have a promo code set up which is just going to be “Whitney” and that will give your listeners the ability to register for a $100 off but then all the proceeds I’ll give to your non-profit.

[0:33:21.5] WS: Awesome, thank you so much Dan. I appreciate your partnership and friendship as well.

[END OF INTERVIEW]

[0:33:26.1] 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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[OUTRO]

[0:34:05.9] ANNOUNCER: Thank you for listening to The Real Estate Syndication Show, brought to you by Life Bridge Capital. Life Bridge Capital works with investors nationwide to invest in real estate while also donating 50% of its profits to assist parents who are committing to adoption. Life Bridge Capital, making a difference one investor and one child at a time. Connect online at www.LifeBridgeCapital.com for free material and videos to further your success.

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