Episode Transcript
[00:00:00] Speaker A: Welcome to AllView360 all things real Estate Podcast. With your hosts Daniel Gutierrez and Shannon Dempsey, we explore real estate from every angle, giving you insights, tools and confidence to make smart decisions that support your future. It's time for a new perspective on property. Welcome to AllView360.
Good morning, Daniel.
[00:00:20] Speaker B: Good morning, Shannon.
[00:00:22] Speaker A: Another day, another podcast.
And good morning, Nick. We have our first guest ever, Nick. Do you want to tell us about him?
[00:00:29] Speaker B: Yeah. So Nick is actually a good friend of mine, a workout partner and also the founder, CEO and broker of record of Gold Group Investment real estate group. So based out of Orange county, super active and high producing broker here in Orange county across the multif family space and just overall awesome guy. So super excited to have him on the podcast. Bringing a lot of really great experience, lot of applicable insight, just a wealth of knowledge, something or someone that we're all going to be able to learn a lot from and really gain a lot from his experience and what he's doing in the market right now.
[00:01:08] Speaker A: Amazing. Nick, we're so excited to have you.
[00:01:11] Speaker C: Yeah, this is really exciting. I'm stoked to be your guys first guest too.
[00:01:15] Speaker B: Yeah.
[00:01:17] Speaker A: Oh my gosh.
[00:01:18] Speaker B: I know Shannon was excited about this when I first mentioned this.
[00:01:22] Speaker A: I was, yeah.
[00:01:24] Speaker B: So Nick, I don't think I did justice by my introduction. Can you tell us a little bit more about yourself and how you got into the industry? I know even before that your, your experience within tech sales and just everything you've done is always super impressive and really fascinating.
[00:01:39] Speaker C: Yeah. Appreciate you guys having me on.
So as Daniel said, I'm CEO and founder of Gould Group Investment Real Estate. We're a boutique multifamily investment firm here in Orange county focusing primarily on helping private capital owners with maintaining, managing and, and then selling obviously their, their apartment buildings if that's what it's sort of time for.
I have a pretty unique experience in terms of how I got to this point. As Daniel mentioned, I, I spent some time in the tech world before I jumped full time into commercial real estate. I worked at a few startups and then a very well known Fortune 500 tech company, only to realize that it just wasn't what I was passionate about.
My passion has always been sort of around real estate. I got my real estate license when I was 18, broker's license at 24, while I was even working in other industries and you know, I dabbled in buying some real estate of my own, helping family and friends out. I sold some houses when I was younger, but it's A tough business to break into and it takes a lot of time and energy. And as a young person, you know, sometimes you have to go different routes to find out the route that you're really meant for.
And so right before COVID I jumped full time into commercial real estate brokerage, selling multifamily buildings. And I really found a love for it and a passion and, you know, fortunately found fairly early success in the business. And since then we've done a fantastic job of growing a really strong brand and reputation in the market.
We focus really heavily on leveraging technology to be more successful, but also taking sort of an old school approach to building relationships and really fostering and maintaining those. Because at the end of the day, people buy and sell with who they like. And you know, we, we like to pride ourselves on being there and able to help our clients when the time is right. Cool.
[00:03:50] Speaker B: I love all of that. And let's go back a little B. Cuz you, you jumped into the market at, I think, a very interesting time. Obviously no one knew Covid was going to happen, but it was a few months of just complete standstill and then just rocket ship and you were successful. Be at another brokerage before you started your own. Can you tell us a little bit about that? I think a lot of the people that listen to our podcast, all, all, all millions of them, you know, are either starting out in at a brokerage, you know, making moves, but would love to hear about that experience and, you know, more detail about how you got to where you are now, especially being your own broker and your own company.
[00:04:31] Speaker C: Yeah, obviously Covid was a pretty interesting time for everyone. I think everybody expected the market to just hit pause and it did, I guess, for, you know, a month or two. Yeah. But then it just really accelerated and then with the inflation that we saw, it really started to move pricing up.
And then I think what's even more important and a lot of reason why I like multifamily is housing is at such a premium, especially in coastal Orange County.
There's just not any more land being built. And so I really took it as an opportunity to dig into the market and hit the ground really hard, make a lot of calls. I think my first year in the business, I made 16 or 17,000 cold calls.
So I mean, I was literally just all day, every day, weekends I was just working the phones, building relationships, trying to set meetings with, you know, investors and just put my name out into the market. And fortunately I, I found a really strong niche in the coastal markets. The majority of the buildings that I've sold have been either in Costa Mesa, Newport, Huntington beach, which is sort of unique niche of selling these types of buildings, you know, sort of, I guess, jumping ahead.
Obviously these are investment properties and people are looking for returns.
In a lot of the coastal markets, folks aren't as concerned with the returns as much as they are the location and maybe more of asset appreciation.
And so I worked really hard and I, you know, I cut my teeth working at a couple of different brokerages.
Learned a lot along the way and you know, I just sort of felt like I had a calling to start my own company a couple of years ago. And we, we took the bull by the horns and we, we put together a branding package. We put together a really strong marketing design emphasis in social media, but also in a lot of the old school approaches. I mean, we're still making cold calls to this day. I think there's no substitute to being on the phone, you know. So I guess that's my advice to young people that are breaking into the business.
[00:06:44] Speaker B: It's funny because Shannon and I have actually spoken about that and of course we highly leverage technology and all the new platforms, but at the end of the day, you know, the tried and true methods are still some of the best and most effective. And at the end of the day especially you need to provide the quality service. No AI is going to provide the service that you're able to, the relationships that you're able to build with your clients. It's there to help, I think, leverage its capabilities to improving your effectiveness, your efficiency. But you know, it's who you are and the client wants to work with. It's not your AI or your tech stack.
[00:07:21] Speaker C: Yeah. And look, a lot of the owners that we work with and deal with on a day to day basis, they're not the most technologically advanced. These folks tend to be much older and you know, they're looking more at their mail than they are at their email or Instagram for that matter. But by the same token, you know, there is a new wave of investors that are coming into the market and they are using social media, they are finding deals through social media. In fact, I've got a property in escrow right now over in the west side of Costa Mesa and we generated four property tours from people that came from Instagram.
[00:08:06] Speaker B: Wow.
[00:08:07] Speaker A: I believe it.
[00:08:08] Speaker C: And our buyer, who's escrow right now, he follows me on Instagram.
So, you know, they're seeing the activity and I think that's really important. I've always Sort of taken this idea of being omnipresent.
Right. Everywhere sort of at the same time. And that can be challenging, you know, to do as a small firm with, you know, sort of limited resources in some ways. Right. We're not. We're not one of the corporate brokerage houses that has endless supplies of resources to deploy. And, you know, our deals, when we list them, we really need them to sell, not sit on the market for six months.
[00:08:47] Speaker B: Yeah.
So tell us a little bit more about that. When you list or when you advertise on Instagram or any social media, do you do.
Do you promote your listings and put some money behind or is it just your followers?
[00:09:01] Speaker C: A little bit of both.
We definitely promote, you know, content, especially in the early days of our launching of listings.
You know, it seems like the Instagram, specifically, the algorithm is really tailored now towards, like, reels. Right. The short form video. Yeah.
So we've been putting a lot of emphasis in that and, and putting dollars to work and marketing to that. But I also look at it and I say, you know, we really want the organic growth because I think those are the followers that stick with you, you know, when maybe it's some content that, you know, they don't necessarily know all the way or such things like that. So again, I think it's about trying to do it all, you know, and.
And I think we found a lot of success doing it that way.
[00:09:54] Speaker B: Yeah, absolutely. And I think this is one of the reasons why Shannon and I started this is we wanted to get out our message, provide value to our clients in the market in a much more effective and efficient way. And, yeah, we follow a lot of that same theory and have that passion for providing that value and getting out there and also fall into the trap of trying to do everything, which I'm naturally inclined to do. And I think Shannon does a good job, as well as others, of grounding me into telling me to, like, chill out and let's focus on what works and where we need to actually be competing.
[00:10:28] Speaker C: Yeah, yeah, definitely.
[00:10:31] Speaker A: Every time you say, I just read a new book, we're all like, oh, no, what's the new plan?
[00:10:38] Speaker B: I mean, to put in perspective for what Shannon's referring to, I think I read two books a week, and by read I mean Audible, and I listen at 2.5 speed.
So I just finished one yesterday and I started one this morning. The one I started this morning is called the Anxious Generation, which I totally relate to in certain aspects, but much more in regards to how social are we.
[00:11:01] Speaker A: The Anxious Generation.
[00:11:02] Speaker B: We are not. It's actually the generation younger than us. It's more so the anxious, anxious generation. But we're the ones that are kind of the tail end where we started getting smartphones at a young age but didn't have full access to like Instagram or everything as more of like the developmental years, like 10 to 16.
So like your younger sisters, perhaps, but a lot of people coming into the workforce and in college right now, or even still in school that are the anxious generation. So I mix it up. But I. I do get excitement from the books I read and wanting to try to do it all well.
[00:11:40] Speaker C: And there, look, there's a lot of anxiety out there right now, especially for young people. Right. It's. It's expensive to survive and, you know, sort of the model of going to college, getting student loan debt and then getting some job, you know, corporate job.
I have friends that are still paying debt off to this day. I mean, I'm fortunate that I didn't have student loan debt, but so many people do. And then you have high housing costs, you have high cost of goods. And there's a lot of reasons to be anxious. It's like, how am I ever going to be able to retire or raise a family or do these things, you know, that previous generations, I think, had a lot easier time to do. And then I think that sort of parlays into some of my own just personal investment thesis that our generation, if we really want to propel ourselves and elevate to that next level, some level of risk is going to need to be taken that maybe our parents or their parents didn't necessarily have to take, but in order to buy a house in Orange County, I mean, I think I saw some Orange county register a few months ago, said that, you know, your average household income needs to be nearly $400,000 a year to own a house in Orange County.
And there's just. There's not a lot of those. I mean, there's not a lot of those jobs out there.
[00:13:16] Speaker A: No. And they're not happening right after college.
[00:13:18] Speaker C: Exactly. You know, you have to build experience. And so I really like the fact that real estate is one of those industries that you can.
You can kind of create your own destiny. Yeah, right. If you want to go out and earn unlimited earnings, you can do it.
[00:13:34] Speaker A: But, yeah, you have to do it. You have to take the jump.
[00:13:38] Speaker C: Yeah, exactly. Well, and you also have to work hard. And I think a lot of young people don't necessarily want to put in the time and energy that it takes to truly be successful in the business.
[00:13:49] Speaker B: And there's so much to unpack in what you said. But two things that come to mind is like the, the chart that shows the average cost of college tuition, the average household income, and the average home prices in the United States. And you see the average household income like gradually go up and then you see the average home price and the average cost of college tuition just skyrocket. So it's becoming ever more unafford for, for people to afford homes, pay for college or they get the student loans and they have that, those student loans forever, which, you know, coming out and getting that corporate job that you mentioned, sometimes it's best case scenario because a lot of people can't find jobs or with what they studied, have no chance of a corporate job.
And then the, the second component to that is also kind of the expectation we set in regards to what people could expect coming into the, into the professional world and especially the real est. Like we have people come in and apply for our positions all the time and say, I love selling Sunset, I love watching Fix or Flop, I love watching these shows. And it's like, oh man, like it is nowhere near reality and it's not going to happen like that. And it's just, it's, it's a very rude awakening.
[00:15:06] Speaker C: Yeah, absolutely. Yeah. And then I, I think that sort of then dovetails into why multifamily?
[00:15:14] Speaker B: Yeah.
[00:15:15] Speaker C: You know, if housing is a premium, people want to live in coastal Orange County. People want to live in Orange county in general. We also have a very robust labor market that most people are employed here in Orange County. And so a lot of people make good money.
They just can't afford the down payment or the monthly payments on a house. But look, they can afford a three to five thousand dollar a month rent on an apartment or on, you know, a detached cottage or some sort of house feeling unit. And they may stay for five or 10 years.
You know, household formation is, is slowing. Yeah.
[00:16:02] Speaker B: So before we get too off topic, and I'll probably be the one leading the off topic, I want to ask you why multifamily? How is the, the reason why you picked multifamily and why is it a good investment and then go into that, into underwriting and helping people actually really understand how to evaluate, underwrite and purchase deals.
[00:16:25] Speaker C: Yeah.
You know, the why on multifamily, I think it was, it was just sort of fate for me.
You know, I was interviewing after I left the tech world and I had a couple of opportunities to Work with, you know, brokerages and senior brokers and cut my teeth basically. And one was out in the Inland Empire selling a product out of state, working the east coast market.
And this opportunity that I, that I ended up taking was a local group here in Irvine selling locally. It's like that's felt just more me.
And so that's the direction I went. And I'm glad I did because it has been a really strong asset class for some of the reasons we talked about just in terms of a shortage of available housing.
But investors really seem to like multifamily.
They're looking at it primarily from an appreciation play. There is a lot of investors out there that are cash flow investors and they tend to be looking in sort of more of the central and north Orange county markets, the Anaheims, the Santa Anas, the Garden Groves. You just get a better cap rate in, in those markets.
[00:17:47] Speaker B: Can you elaborate why?
[00:17:50] Speaker C: I think it's the, the profile of the, the renting base. The, you know, the level of income in the area is a big factor as well.
You know, different sub markets have different feels. Right.
[00:18:09] Speaker B: One of the things I always tell clients is like you're buying, if you buy a apartment building on, in Newport beach, let's say the simplest, when you buy a duplex on the Peninsula, right.
[00:18:18] Speaker C: Yeah.
[00:18:19] Speaker B: You're almost guaranteed that that value is never going to drop. It's only going to go up. Rents are only going to go up. So therefore everything's relative to risk. Your risk is significantly lower.
So you're not going to get a high cash return on it because sellers are valuing the their property based on that and they know that it's a super low risk. So it's going to have a much smaller yield versus Santa Ana, where you're going to have some of the most difficult rent control laws in the country. You're going to have a much different tenant pool. You're not going to have the, the certainty of Newport beach or even like in Shannon's Market in San Diego, like la, places like that.
So a lot of it's what you said and a lot of it's also relative to risk and what, what buyers are willing to pay for, for that risk.
[00:19:14] Speaker C: Yeah. And look, I mean you hit the nail on the head with rent control. I mean the legislative landscape has gotten more challenging. Yeah. To stabilize the quote unquote value add type apartment buildings. Right. There's a lot of owners on these buildings for 40 and 50 years they've sort of been subsidizing the tenants and now with a lot of the rent control measures that are in place, it's now harder to displace those tenants, which, look, I, I feel for tenants. I was a renter for a long time and I wouldn't want to have gotten kicked out of my apartment. So that way a landlord could go in, do a full fix and flip and then put it back out on the market for $2,000 a month more than I was paying. But yeah, you know, look, these people are paying very high prices for these properties.
They need to be able to see a return or they're going to be looking at alternative investments. And that's a lot of the conversations we're having right now. It's like, why would I buy a 3 or even a 4% return when I could put my money in the stock market, even in the S and P index and some index fund and make 8 to 10% a year? Or government bonds, even government bonds. You know, you, you have much less risk. The tenant profile, you don't have to deal with, you know, tenant related issues and costs are rising. Right. I mean one of the things we talked about sort of in the pre call was insurance.
We are dramatically changing our underwriting in insurance. You know, the current owners policy is not matching what the buyer's policy is going to be if the buyer can even obtain insurance. You know, on a lot of these buildings that were built in the 50s and 60s, their electrical panels are uninsurable.
And so I guess sort of as a plug for my case study which we talked about, you know, we, we put together a case study, the Orange County Multifamily 1031 exchange and insurance case study, sort of talking about these things, trying to inform owners, inform folks that are doing the advisory work to investors, especially the selling population, on what it's going to take to either modernize your building to be more sellable or understand the risks that are associated with continuing to operate and manage the building. And so we found a lot of value in this. And you know, if you guys have any clients, I'm happy to share a copy, either a hard copy or digitally.
[00:21:54] Speaker B: And we'll put a link to Nick's website, his company, his social media, across our platforms or across all platforms. So you'll be able to contact him directly and get either copy mailed or get his digital copy. A plug for all of you though. If you don't want to deal with tenants and you don't want to deal with these issues, hire a good property manager.
We take care of these things. For clients all the time. Right now we're going through and having to do insane inspections, roof inspections, electrical panel inspections, plumbing inspections for insurance renewals, having to upgrade panels, having to redo roofs, having to re pipe buildings that are generally in fine shape. But that's a prerequisite for the insurance company to renew the policy.
And it's no longer a situation where we're going out and shopping policies for the best price. We're now going out shopping policies to find anyone who's willing to actually insure buildings.
[00:22:47] Speaker C: So many carriers have just moved out of California in general.
[00:22:51] Speaker B: It's wild.
[00:22:52] Speaker A: It's crazy.
[00:22:53] Speaker C: A fair plan is three or four times the cost with a quarter of the coverage.
[00:22:59] Speaker B: Absolutely.
[00:23:00] Speaker C: Sorry, Shannon, what were you going to say?
[00:23:02] Speaker A: I was going to say, so I'm all on the residential resale side of things. What are you seeing? Like, what is 2025 looked like for multifamily?
Because it's been a challenging year.
[00:23:13] Speaker C: The year started out really, really strong.
I think a lot of people have expected some interest rate cuts, but then the data has sort of just kept the Fed at bay.
And so there's this sort of push and pull right now between sellers and buyers.
And it's like, who's going to last longer in the fight sort of thing. Right. And there's some sellers that they're okay with their property sitting out there. They're really focused on getting the highest price. But there's also a lot of groups out there that for whatever reason, right. Whether it's an inheritance and they realize that their property taxes are going to be reassessed, that they're going to have to upgrade a lot of the major systems in the building in order for it to be insurable. And that's just eating into their, into their net operating income.
They're looking to make their exit and they're going to sell a lot of them at what the market bears for the asset at the end.
[00:24:16] Speaker B: Nick, I don't know if you've seen this, but we have clients who've kept their rents really low because the tenants have been there for a long time or they haven't really kept up with rent. And now with AB 1482 and rent control with multifamily is what, this year's 8% increase.
So they're not even close to market. They can't get close to market and they've generally been okay with it because sometimes they have little to no debt and they're all profit. But now they're going and having to spend, you know, $60,000 on a roof, $50,000 on new panels, $50,000 on a re pipe, and they're not ready for it and they're having to sell, but they're also selling at a discount because rents are so low and the buyer knows they're going to have to do all of that work.
It's been pretty brutal for some of our clients. We try to smooth it out as much as possible. We get great deals, take care of all of the headaches. But, you know, when we, we have those conversations with our clients, especially those who talk about selling, it's like, hey, okay, well, we need to position this differently to help you sell at the best price. And we, you know, we want them to succeed, but it's, it's getting more difficult.
[00:25:22] Speaker C: Yeah, definitely. I mean, it, it truly is. And then do the buyers want to take those projects on as well? You know, and if they do, they tend to want a discount in order to, to purchase that.
[00:25:35] Speaker B: Yeah.
[00:25:36] Speaker C: And I think Shannon, just, you know, sort of touch further on your question.
I think it's very market dependent as well.
You know, areas like east side Costa Mesa are super hot right now.
[00:25:52] Speaker A: I mean, you have a building there right now for sale, right?
[00:25:54] Speaker C: We have several on the west side, but inventory on the east side is very, very light. So when something goes on, the market there tends to get gobbled up pretty.
[00:26:02] Speaker B: Quickly, unless it's priced crazy high, unless.
[00:26:06] Speaker C: It'S priced crazy high, or there's a bunch of the work that needs to be done and they're trying to sell at a sort of stabilized price for something that, you know, some investor is going to need to come and dump a lot of cash.
[00:26:19] Speaker B: Sorry for interrupting. That's a bad trade of mine. Could you give us some perspective of just breaking down, let's say like Newport Beach, Laguna beach, west side, Coastal Mesa, east side, Costa Mesa, like Santa Ana. What kind of cap rates you're seeing in those markets? Or our listeners and viewers could get an understanding of just how different it is from neighborhood to neighborhood.
[00:26:37] Speaker C: Yeah, I mean, I think, you know, if you start in sort of like Newport beach, right. That's probably in Laguna Beach. Those are like your lowest cap rate markets. I mean, there's deals that are transacting in the 2, if not even sub 2 cap rate range in those markets.
When you get into like the Costa Mesas, the Huntington beaches, you know, you're starting to get into like the threes right now. Those deals several years ago when rates were lower, those were transacting. In the low threes, even in the high twos in a lot of cases.
And then as you move sort of out into the Anaheims, the Santa Anas, you know, you're starting to see fives and sixes in Santa Ana given the, the rent control that's impacted place there. I mean there's deals on the market at 7 caps even, which look, if you're an investor that's looking for cash flow and you're willing to take on some level of risk in terms of, you know, managing the tenant profile that's in those markets, if you have management that can help handle some of the day to day operations, you could be very well rewarded. And you know, I've heard even that Santa Ana has considered repealing their rent control because it's deteriorated the values so much. Right. I helped a portfolio family sell some buildings in Santa Ana a couple of years ago and we sold a group of buildings right after the rent control got passed and we sold around 250,000 a unit and then fast forward maybe a year and a half later we sold another group of buildings and those were transacting in like the, you know, 150 to 175 a unit range. So there's a big change in values. Right. Because the investor needs to see some sort of return that's worth their risk. Yeah.
[00:28:33] Speaker B: And not going into a political conversation, but even on the maintenance of buildings, when investors can't increase the rent and yet insurances is doubling, property taxes are going up, maintenance is going up and the landlord costs, you know, can't afford to repair the buildings, the buildings go into disarray, it's bad for everybody.
[00:28:52] Speaker C: Yeah, no, I couldn't agree with you more.
[00:28:54] Speaker A: I was just going to say I want to touch on 1031 exchanges because we just recently did a deep dive on that on another episode. But I want to see Nick's perspective and how that's all implemented. But what's your tangent, Dan?
[00:29:07] Speaker B: Yep, let's do that.
[00:29:08] Speaker A: Okay, Nick, tell us about 1031 exchanges and how you work that into things.
[00:29:14] Speaker C: Yeah, I think they're a fantastic tool to leverage to scale a portfolio.
In fact, one of the, in the case study that I just mentioned, one of the things we talk about is a 1031 exchange where an owner of a 4 unit apartment building in Costa Mesa was able to purchase a seven unit apartment building in Huntington beach and defer off all of their capital gains and sort of put themselves into a position to grow their noi and find a property that they could add more value to.
Obviously there's some nuances to it. Right. The identification window of 45 days can get a little bit tricky in the close of escrow.
But I think we've done a really good job of negotiating time, whether that's time for a seller to find their up leg or whether that's for a buyer to sell their down leg. And so it's really just, I think, about negotiating sort of a win, win deal. But, you know, as long as they're around, I think people will continue to leverage the exchanges to move up either.
And look, some people are exchanging out of apartments and they're looking for something that's easier to manage. They're looking for, they're not looking for the appreciation anymore. They're looking for just that consistent cash flow.
[00:30:44] Speaker B: And so triple net income or triple net commercial.
[00:30:47] Speaker C: Yeah, I, I had a coffee with a gentleman yesterday and we talked about him exchanging from, you know, some of his smaller apartment buildings into single tenant, triple net. He really likes urgent cares and Jiffy Lubes. You know, some people like the fast food restaurants or the Starbucks.
But I, I think it's a great way to diversify your portfolio if you're heavily weighted in one asset or another.
[00:31:16] Speaker B: Yeah, 100. And for those of you who aren't familiar with the term like up leg and down leg or how it all works law, or check out our 1031 exchange podcast. We go into detail about all of the, the, the laws, how to do it, best practices. But to Nick's point, amazing opportunity there to, to really generate a lot of wealth and find assets that work for your portfolio and what you're looking for.
[00:31:45] Speaker A: In your phase of life.
[00:31:47] Speaker B: Yeah.
[00:31:47] Speaker C: Yes. Yeah.
[00:31:49] Speaker B: So Nick, with your experience, I'd love for you to tell us a little bit more and provide that insight to viewers about smart buying like acquisition strategies, due diligence.
Someone who's getting into the industry wants to become an investor. Like do they start. How do they really analyze these deals?
[00:32:09] Speaker C: Yeah. So I think one of the biggest things is, is know the market that you want to be in.
You know, going into some market that you have no idea. I think you really need to do your homework and understand what deals are on the market, what kind of price ranges things are transacting at, and then sort of plan accordingly.
From an underwriting standpoint, a lot of the first time investors are likely not going to have ample cash reserves. So they're going to be looking for, you know, lowest down payment possible and best financing scenario.
That tends to be Anything that's two to four units because those are residentially financed deals.
So where once you go over to five units then you become a commercial loan and they're looking at the strength and performance of the building.
And in a lot of cases those require 50 and 60% down payments in order to purchase them.
One thing that you could consider as an early investor is a house hack where you, you know, you're renting right now, you have, have good income, you have money saved up, but you can't afford a 2 million dollar starter house.
Buy a 2 million dollar triplex and move into one of the units and collect rent from the other two. That offsets your mortgage. The lenders really like it. They'll give you credit for that income coming in on the property and qualify you for potentially a larger loan.
I think too obviously is understanding some of the pitfalls. Right. The insurance landscape is one of those things that we've already sort of touched on.
Property taxes are quite heavy here, especially on these expensive buildings. And so you really need to be looking at not just what your monthly payment is going to be, but what's your monthly payment with taxes, with insurance and then maintenance cost. And then obviously if you're going to be bringing all of you in to do the property management, you know, you need to factor all those things in so that way you understand your sort of total cost of ownership and then work backwards. It's like, okay, well if the rents are here, can I do that with just annual increases or do I need to get creative and start getting in some of these units, doing some renovations and pushing them to market? Now look, there is a carve out in the rent control bill AB 1482 for owner occupancy that you can just cause evict a tenant for that. So you could in theory go through the building and, and do that if you wanted to.
[00:34:59] Speaker A: So I think it's stricter with actually proving that that's what you did or did I mishear that you need to.
[00:35:07] Speaker B: Live in the unit otherwise you're opening yourself up to some serial.
[00:35:10] Speaker C: Yeah, liability especially. And your financing likely would be owner occupied financing.
You know, where you could get 20 down. I mean if you're buying an apartment building, you're definitely putting 20 down. There's. Yeah, there's no, no less 5% down payment. Now look, one thing that you could look for and if an owner is willing to do it, which is could create a win win is seller financing.
And we talk to a lot of owners about that, especially folks that have a lot of equity in their buildings as a way to defer off capital gains and still continue to generate cash flow without buying that single tenant triple net. That's in another state that you feel like you have to fly to once a year to go make sure that your real estate looks good. Right. You can still be right next door to your property and you tend to get better terms. Right. You might be able to get a lower down payment, which makes the barrier to entry easier.
You might be able to get a below market rate for 5 or for 10 years, interest only. That might bridge the gap between now and when we see an improved rate market. And you can refinance into something sort of more stabilized.
[00:36:25] Speaker B: Yeah, absolutely. And then one of the things that I always tell people when analyzing deals is like, be honest with yourself and be honest with the deal. Like, like I, I think I did this begin at the beginning where I would, you know, paint a rosy picture and try to really minimize costs, potential risks, even just the difficulty of managing. If you're going to try to manage it yourself, you really need to know what you're doing and have the ability to end time and willingness to do so. Otherwise you gotta, you know, you gotta really underwrite it correctly or find a broker who is good at their job and is going to be an act adviser to you to help underwrite the deal so you don't close and are screwed. And something I was taught early on is you don't make money when you sell, you make money when you buy because once you buy, you're locked in and at that point you're along for the ride.
[00:37:22] Speaker C: Written down on my notes.
[00:37:23] Speaker B: Yeah, you had that written down.
[00:37:28] Speaker C: Yeah, because it's true. I mean, I had a mentor tell you make your money when you buy. Yeah. I, you, you, you can, you can always refinance to a lower rate, but you can't re, you can't refinance your basis on a property.
[00:37:41] Speaker B: Yeah.
[00:37:43] Speaker C: And so, and look, that's where the push and pull comes in. And having a good broker that is negotiating for you, you know, if you're representing the buyer in the transaction. But look on the flip side, if I'm representing sellers, which, that's the majority of our business, we are a listing brokerage. We are, we're marketers at the end of the day. Right. Like we're putting properties out on the market and trying to get exposure to them. And our goal for the sellers is to get them the highest price with the best terms.
And so there is this balance right on trying to. To navigate the waters and having somebody with the professional experience, I think makes a big, big difference. At the end of the day, what are your. I've seen your list.
[00:38:27] Speaker A: Oh, go ahead, Daniel.
[00:38:28] Speaker B: I've seen your listings. You do a great job. Your listings are very professional. Your marketing is great.
And I'm. I don't know if I focus more on buying or selling. I think we. I help clients do a lot of both.
But you're right. On the sales side, you want to get your clients the most amount of money. On the buy side, I look at the om or the offering memorandum, and most of the time, like, I don't even know if I look at it anymore because it's just. It's so useless. I. I do my own underwriting and then give my clients the actual information. From what I see, if it's aligned with the selling broker, like, great.
Also, I'd be probably surprised, but it's all part of the game. It's the market and how it all works.
[00:39:08] Speaker C: Yeah. And look, I mean, we try and pride ourselves and do a good job of accurately underwriting the buildings we sell in the offering memory and.
Because I think at the end of the day, that limits the retrade on the seller. Right. Yeah, true.
And so if you can do a good job of painting the picture that as it is, I think you put yourself in a better position to not get something.
Some big ask that, you know, ends up ruffling feathers, and then you have to sort of navigate a ship to calmer waters. Yeah, right.
[00:39:48] Speaker B: And one of the things I think you do really well, and I really like, because not everyone does it, is you give the whole package. You say, hey, here's a property. Here's an insurance broker. This is a real quote. Here's a property manager. This is what they can manage your building at. This is the. You give them the whole package and you make it easy for the seller to sell and the buyer to buy. And I think you go like, a few steps beyond what the. The average broker does. And I think probably one of the reasons exemplifies why you're good at what you do.
[00:40:15] Speaker C: I appreciate you saying that.
[00:40:17] Speaker A: What are your. If someone's hiring you to sell a building, what are your expert tips or what are kind of the top things you're looking for or suggesting to get top dollar when you walk a property?
[00:40:29] Speaker C: Yeah, it's a good question. I. I think it really sort of depends on where the building currently sits. You know, if you've got a building That's a heavy value add. And it's, it needs the roof done and it needs the electrical panels and it needs plumbing. It needs the whole nine yards. I'm sort of advising the sellers to sort of just leave it alone and let the buyer, the buyers are going to want to do the work the way that they're going to want to do it anyways. Right. But, and at the end of the day, I'd rather negotiate the, that work into the price or into some sort of a credit then have it come out of the, out of the seller's pocket. It tends, I tend to be able to get them a better deal that way. Right.
But then on the flip side, if there's a building that's in pretty good shape, you know, maybe most of the units have been renovated, but maybe, you know, the landscaping looks a little off or it looks like it needs to be painted. I'll advise the clients, hey, spend a few bucks, make this look more attractive. So when somebody drives by, they see the interior photos look really nice. Right. For the renovated units, but let's make the exterior match that. Right. I mean, a broker told me once that the outside is always usually pretty indicative of what the insides look like. If the landscaping is really tired, the building looks really tired, likely the interiors are going to be tired too.
And so it's really on a case by case basis and, and just understanding what's important to the various clients I think is really what it comes down to as well.
[00:42:08] Speaker B: Yeah, 100%.
One thing I did want to ask, and probably more on a selfish perspective, what is the importance of a well run property or property management, good property management for the properties that you're bringing to market it.
[00:42:28] Speaker C: Yeah, look, I mean, I think from one of the biggest things is just from a recordkeeping standpoint, we get a lot of offers that'll come in on the, even on a 10 or a 12 unit building that's been mom and pop sort of ran.
And the buyers are more sophisticated, I think, and to. I'll answer your question, but I think one thing that we do see is a lot of these buyers are not mom and pops buying the mom and pop building any longer. Right now it's expensive. More investment companies or syndications, people with access to lots of funds to be able to go in and do the work that, that needs to be done.
But one of the biggest things is, you know, a lot of times people ask for income and expense statements or T12s or you know, an updated rent roll and a lot of Times these, these owners don't have it or you know, they're sending one page photographs of every document that they send. Right. Just being able to have sort of a full package that is easy to drop into Dropbox really helps us paint the picture of we're actually selling what we told you in our om that we're selling. Right. I mean I can underwrite it, but if the actual documents that support it, it don't support it, then I don't look the professional broker. Right. That is trying to portray something accurately.
And then I think just obviously property management companies have a much clearer view on the condition of the property. They're the ones who are fielding the general plumbing issues, the general electrical issues on a day to day basis and maybe catching those bigger ticket items.
You know, like maybe you've got tree roots starting to grow into your, into your sewer line. Right. And it's clay, it could probably be re lined.
If you don't take care of it now, you're not going to be able to relive. Right. You're going to get to a point where it can't be fixed without replacement.
And so you can maybe catch things that can be taken care of more proactively than that mom and pop owner that, that maybe goes to their building every other month. Only when there's some problem to take care of. Sure.
[00:44:46] Speaker B: Even some of the things like we see when our clients take over buildings and we took, we start management is, you know, no leases, half leases, leases that are 20 years old, you know, no, no records of anything beyond the, the normal maintenance and stuff. But you're like, hey, like, like this person doesn't have a lease.
And right now, especially in California, there's so many different documents that you have to have to have a lawful lease and to be abiding by all the current laws that you're, you know, you're guessing what their rent is, you're guessing what the terms are. None of the disclosures are there, none of the proper documentations there.
And it's a mess. And it's a hard conversation to have with people too.
[00:45:33] Speaker C: Yeah. And then that leads to the, the ask from a buyer for tenant estoppers. Yeah, right. And then, then that's putting, which is part of the job. But then as a broker we end up carrying that weight of going and having the conversation with these tenants and having them complete these documents to prove their, their tenancy in a building.
You know, there's been times where tenants aren't that friendly, especially if their rent's really low. And they, you know, they've been at a place for a long time and now somebody's upsetting the apple cart. They look at the broker like the bad guy because you made the owner sell this and it's like, no, they made their own choice to sell it. They just asked me to help them do it.
And look, I try and take a friendly approach with everyone. Right. If I'm doing that, I'm obviously not going to wear a jacket and a night. Like I'm going to probably go in a T shirt and a hat and try and meet them at their level. Right.
Because I think that you'll get further that way than, you know, coming off as the hot shot broker that, you know, is just to ruin lives.
Yeah, I'm kicking them out of their, their place. But look, I also don't feel bad for some of these people because they've been subsidized for the last 20 years. And you know, I, and this is a hard conversation that I have with sellers a lot. You know, I go, I live in some of the markets that I sell in and I see these buildings with these tenants, I know their rents are way under market and they're driving Mercedes and brand new cars. And you know, I talk to the owners and I say, you really need to be thinking about raising your rents. And it's like, oh, I feel so bad for them. They're, they can't get ahead. And it's like, well, they're not putting themselves in a position to get ahead. Right. And I think that's just a fundamental issue with, with maybe some of the younger generations that they, they think everything should be sort of given to them. And you know, a society has sort of told them this is me going off on my tangent, but has told them that everything should sort of be given to them and they don't have to work hard for it. And that's just not the case.
Yeah.
[00:47:47] Speaker B: So along with that, one of the things like, and this is probably going more into the weeds, but well run that good professional property management companies and well run properties generally have higher rents. Tenants that are happier, tenants that stay longer, just much better performance overall versus the owner who's like, hey, I don't raise rent, so they never call me. And you know, that's that, that's the, the relationship which works for some people.
[00:48:18] Speaker C: Yeah, but those are the ones with the toilet falling into the floor.
[00:48:20] Speaker A: Yeah, sometimes, exactly.
[00:48:22] Speaker B: No, and that does absolutely happen. And when we have clients call us and say, hey, you know, I I don. Manage our property or the property anymore. I want professional property management. It's been great. The tenants haven't called us in 10 years. It's going to be super easy. I'm like, oh man, we're going to walk into a disaster.
And generally we walk in and the whole property is falling apart. But the tenants never called because, you know, the, the rate wasn't being raised and now it's past the point of repair. Now you're just rebuilding the whole place.
[00:48:51] Speaker C: Yeah, yeah.
And then that goes in.
Construction is really hard and in terms of multifamily, there's very, very little new construction, multi family and if it is, it tends to be institutional grade by billion dollar companies that are building 500,000 unit apartment buildings.
There is an interesting project, I don't know if you've seen in Fountain Valley by Miles Square park that they're building a huge new community. I think it's on like 20 or 30 acres if I remember right.
And part of what they're going to be building are new construction triplexes for sale.
[00:49:36] Speaker B: Wow. Oh, we've seen that in a long time.
[00:49:40] Speaker C: Yeah. I mean, well, but again they have the scale to build at a cost that can make those and economically sound. Right. It's probably cheap. It's almost probably going to be cheaper to buy one of those buildings than it's going to be to buy something existing.
[00:49:57] Speaker B: That's right.
[00:49:57] Speaker C: Because your cost of ownership is going to be a lot much lower. You're going to have much more efficient property, new windows, all the metering is going to be up to date.
And I think there could be a lot of demand for that type of product. And there's just no, I mean another example, right. In say Costa Mesa, for example, a site where a triplex sits. Right now due to current zoning laws, you may not be able to get three units back, but then state law says you can't reduce the number of units on an existing site. So you know, there's sort of two different push and pulls going on and trying to add housing stock but also modernize what's, what's there and.
[00:50:44] Speaker B: Yeah. Contradictory laws.
[00:50:46] Speaker C: Yeah. And that's just Sacramento at work, I guess.
[00:50:49] Speaker B: Yeah. Well, it's wild too because right now everything costs so much money, even the simple repairs.
And the majority of the costs come from the labor. The materials are marginal. So if you're repairing a class C building, you're only going to spend a little bit less than repairing that class A building.
It's really. The Delta is just the, the cost of the materials, which as I mentioned is marginal. So when you're doing though, that construction, those repairs, you generally need to do that class A to get that higher rent in order to justify the astronomical costs of, of construction these days.
[00:51:23] Speaker C: Yeah, yeah. And I mean, you and I have talked about that at the gym. I mean, cost of construction is, is heavy right now. It's a heavy, heavy lift.
And then the soft costs that go into it as well, right? The permitting, the geotechnical, the structural, all the surveys that you need to do to build something new, you know, and it's funny because I laugh, I look at, I see a lot of old building permits from the 50s and 60s. When I sell buildings, I'll go pull the permit file. I mean it seems like back then they were just like, yep, yep, you're good. Build this. You know, it's like, oh, I want to build a, I want to build a 10 unit apartment building. They're like, look, you can't build a 10 unit apartment building, but you can build five duplexes on the site. Right. I mean, I think it was just much easier to get things done. And look, I get from a safety standpoint, as we start, you know, building upwards, right, if you, you, you want to make sure that something's safe, we are in an earthquake zone, right? I mean we're in a fire zone in a lot of senses here in California. And so, so you want to have those things in place, you want safe property. But I think the, I think the regulations are stifling the production of housing stock.
[00:52:43] Speaker B: And beyond the cost of construction, the cost of capital for those two year holding perm or holding period to get permits is insane. Just the loopholes or the, all the hurdles you have to jump over to get those permits, it's nuts. But I do have to ask you, you mentioned our workouts and you said heavy lift. Was that a intended pun?
[00:53:07] Speaker C: It was good.
[00:53:08] Speaker B: No, it really wasn't.
[00:53:09] Speaker C: It just kind of came out that way.
[00:53:10] Speaker B: But I, I like a Freudian slip where you just know how, how much weight we lift in the morning.
[00:53:16] Speaker C: Yeah, you're usually pushing me to lift heavier, I'm sure.
[00:53:21] Speaker B: Good. Okay, very cool. So in regards to wrapping this up, kind of in regards to investment, if someone was coming to the market that says, nick, I have some money I want to invest, what do you recommend I do? What are you going to recommend? What are you going to tell them? What's your advice?
[00:53:41] Speaker A: How much money do they have?
[00:53:43] Speaker B: Okay, let's say they come in saying I have 1 million liquid.
[00:53:50] Speaker C: I think that opens a lot of doors, you know, to invest. Right. You can, you could buy a 2 million dollar 5 plus unit if you're looking for cash flow, right. In like an Anaheim and probably get seven, eight units sort of in that, in that price range. Right.
If you're looking for more of like the house hack, you want to stick, you're living in Costa Mesa or in Newport, you want to stay in that neighborhood. Right.
I would probably advise somebody to start looking for a smaller building that they could own or occupy.
I, I really think it's a great way to get in the game, so to say.
Personally, I really like looking for these older single family houses on larger lots. I think there's some interesting ways in adding value with building adus or just brand new construction. You know, in some of these markets, given where new construction houses or just single family houses are transacting, it's worth it to invest in redeveloping some of these sites.
So I think it's really buyer specific and what they're looking for. You know, if somebody's telling me they have a million liquid, they're already in their forever house, they're just looking to buy something. I'd say you want to probably buy either cash flow or buy a really nice property that you really like, like the location of. And that's just dependent on what they, what they're looking for.
So that would be sort of my investment advice overall.
[00:55:33] Speaker B: Yeah, absolutely. I love it.
Shannon, do you have any other questions?
[00:55:39] Speaker A: No, I think this was educational.
[00:55:42] Speaker B: Okay, so on top of this for, especially for investors, we've said it before and I'll say it again, having a team to help you, I think it's is crucial for your success. Don't try to do it alone. Have a team to help you and whether that's all of it, the property manager, the broker, the construction companies, generally with a good property management company, they're going to have all of the vendors.
Good brokers should be partnered with some property management companies. Likewise property management companies with brokers. But have a good team that can help you. And if you're in the industry, make yourself part of a team to add value to your network and really be able to add value to those clients.
Okay, so quick recap from, from the episode. Nick, you're saying the market is slowed, but it's still, it's still transacting.
I think you mentioned interest rates are one of the biggest issues in regards to transactions relative to cap rates and how difficult it is to cash flow. So you're bullish on appreciation.
And the political and legislative landscape of California and the individual counties and cities, I think something to always, always be cautious of. And that's something that I don't think people understand or really give enough credit to. But the city, the county, or the state could change one law that kills your entire business plan and you have no control over that.
[00:57:19] Speaker C: The city can put in their own ordinance that supersedes the state. And if you're not going to city council meetings, you may not know about it. Yeah. You know, caught in a tough spot.
[00:57:30] Speaker B: This is like the same thing that happened with all those Airbnbs early on, and then cities started outlawing them. People were paying crazy prices because of the cash flow it could generate on Airbnb, and all of a sudden, they're illegal, and the home is worth half of what they paid for it.
[00:57:44] Speaker C: It.
Yeah, yeah, yeah, absolutely.
[00:57:47] Speaker B: And then on the acquisition side, what is it, Nick? It's really evaluating the deal, the operations, the cash flow, and then all the ancillaries, the insurance.
What else am I missing? You mentioned a few other things.
[00:58:01] Speaker C: I mean, I think looking at your capital expenditures, budget. Right. If there is renovations that need to be done, start thinking about that early on. Right. Especially as costs rise.
But, yeah, I think it's really taking a deep look at the underwriting, understanding the metrics of the deal and understanding if that is in alignment with your specific investment portfolio criteria. And if it's not, I think you should move on. Right. But by the same, on the, I guess, flip side of that coin, getting in sooner is better than getting in later.
Yeah.
[00:58:40] Speaker B: A lot of clients, a lot of friends who said, I wish I would have bought it when they said that deal was overpriced and crazy. Now it's two times the price. And they're like, man, I lost out.
[00:58:50] Speaker C: Yes.
[00:58:50] Speaker B: But also there's a few where that they definitely shouldn't have bought in regards to underwriting. If you have a. For those listening, if you have a broker, work with your broker. But, Nick, how can people get in contact with you to have you help them with underwriting and be able to go through this process?
Yeah.
[00:59:10] Speaker C: So, I mean, you can find a lot of information on our website. It's GouldGroup Inc dot com.
You can also reach out to me via email.
I think you guys will put my email address up. It's just ngualgroupinc.com follow me on social media. We post a lot of content there.
My handle is at O.C. underscore, multifamily.
And yeah, I'd be happy to connect with anyone again if somebody wants a copy or if any of your listeners want a copy of the case study, we have a few hard copies left that I'd be happy to either meet and give you a copy of. Or if you'd like a digital copy, I can send it via email or through direct message.
Cool.
[00:59:56] Speaker B: I love it. Thank you. This has been super insightful, super helpful. Obviously have a ton of experience and you're one of the, the great names in the industry, so really appreciate your time. And Shannon, is there anything that you want to touch on before we close out?
[01:00:10] Speaker A: No, I mean I, I super appreciate you Nick, and taking the time to do all this like Daniel said.
And if people enjoyed this, make sure you like it. Comment, go follow Nick, you know, keep the conversation going.
I Our next topic, our next podcast is sharpleft because we're going to be talking about different strategies of how to accomplish your goals, get traction with what you want to do. So that's kind of what we have coming up next. Nick, are you going to listen?
[01:00:40] Speaker C: Yeah, absolutely.
[01:00:41] Speaker A: Every single podcast, number one fan.
[01:00:44] Speaker B: Well, so I want to touch on that a little bit. Like buying real estate is a very, I think right now, difficult task because of how expensive it is. But we want to be able to provide actionable insight and really great structured programs for everyone to be able to achieve their goals. Whether you're an aspiring investor and how you get to your first door, to your 50th door and everything in between, or a broker, an agent and how to structure, structure your day to day to 10 year goals to reach those levels, the levels that Shannon, you've reached, Nick, you've reached and really continue pushing and I know both of you very well and you're, you're both really dedicated to your goals. You work diligently to always improve yourselves and not everyone's able to do that intrinsically. So trying to provide more insight from a very, very structured, very effective program that's helped some of the world's, I think best companies go from zero to, to huge in a much less painless way than, than otherwise than you otherwise could.
But yeah, love for you guys to listen. I think it's gonna be super valuable as well.
[01:02:01] Speaker A: Thanks for listening everyone. We'll see you next time.
[01:02:03] Speaker B: See you next time.
[01:02:04] Speaker A: That's a wrap on this episode of AllView360, all things real estate. If you found this helpful, don't forget to subscribe. Leave a review and share it with someone navigating their own real estate journey. Connect with us anytime on Instagram @AllView360 and on LinkedIn @AllView Real Estate. Until next time, stay curious and keep your perspective360.
