Ep #409 – Nathan Trunfio – Multifamily Financing

Here is some of what you will learn:

      • 2020 Market Outlook
      • Acquisition team 
      • Self managing 
      • Looking for deals
      • Becoming an expert in one market
      • Decision making with no emotion
      • Starting small and growing quickly
      • Partnerships are like a marriage

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Full Transcript Below:

Ep #409 – Nathan Trunfio

Hi my name is Rod Khleif and I’m the host of “How to Build Lifetime Cashflow through Real Estate Investing podcast” and every week I interview multifamily rockstars. We talk about how they built incredible wealth for themselves and their families through multifamily properties. So hit the like and subscribe button to get notified every Monday when a new episode comes out let’s get to it.

Rod: Welcome to another edition of “How to Build Lifetime Cashflow through Real Estate Investing. I’m Rod Khleif. And I’m absolutely thrilled that you’re here. And I know you’re going to get tremendous value from the super intelligent guy were interviewing today. His name’s his name’s Nathan Trunfio. Oh and he’s the president of DLP Lending Partners. Now this group that he’s affiliated with, they own 10,000 doors. They do direct lending on single-family fix and flips. They also do multi-family. They loaned in 30 states they you know Nathan’s been involved in financing over a billion dollars in loans. So we’re really gonna have a lot of fun drilling down on a bunch of different things today. Welcome to show brother

Nathan: Thank You Rod. Man I’m excited and it’s a pleasure to be here and honored to be here as well

Rod: Oh thank you. So you know we start the way we normally do and just yeah you know talk about a little bit about your trajectory you know when you got in the business you know a little bit about your history and then we’ll get into questions and Q&A

Nathan: Sure yeah and I’ll try to keep the story as short as possible but ever since getting out of college, I’ve been in real estate. A lot of my time has been spent on sort of financial services and lending side but again all that relates to something in the forms of residential housing. I’m actually, I’ve only been in the multifamily realm about the last four years now and so I have an active hand in personally investing mainly as an LP partner and then also assisting our acquisitions arm and the rest of our multifamily operated operational arm as you said. We’re pretty large in the space and then I still run the debt platform for what we do. So I have a lot of first-hand experience myself as an investor and also you know from the lending perspective and looking forward to you know continue to talk about all the ins and outs of what we see in the space. We do and it’s very important to keep a keen ear to the ground on what’s going on in the industry you know knowledge is the most powerful and insightful thing we can all have

Rod: Well let’s talk about, let’s go there first you know talking about your view about where we are in the market cycle of what you’re seeing let’s start there

Nathan: Yeah so it’s been an interesting ride and you know you look back about a year ago and you said what was gonna happen in 2019 and I think there was a lot of sort of indecision on the direction of where things were going. I think we have a lot more clarity and you know it’s very cheesy but we have some good 20/20 vision moving into this new year and things are very optimistic you know investing in multifamily is probably all the listeners know it’s a great asset class, it’s a great investment you know renter ship is at all-time high it’s only continuing to grow and there’s such a demand specifically in the affordable space and you know that’s what I’m most familiarized in. That’s what I have a huge passion in and with such high demands you know I really am very confident this year I think no matter where you look whether you’re looking at like housing wire, CBREs or any of the information that’s being put out there everybody’s pretty optimistic this year you know there’s definitely some good trends from a macro perspective whether you look at job growth or income growth or again you know the high trends in demand for renter ship right now. And so all that’s going to speak volumes to allowing for great opportunities and multi-family investing. We’ve seen tons and tons of money come into the space on both the operational side you know operators and sponsors, you have whether it’s REITs hedge funds, private money, foreign money, people getting new into the multifamily space that’s transitioning from single-family. There’s just a lot of money that’s in the space so it is making it harder for all of us good operators that are staying diligent you know we all know that it’s harder to find good product and good value at deals but that’s not to say that with hard work and discipline there’s a ton of opportunity. And then the debt space as well I mean there’s just a lot of money. Some of it you know people will say could relate back to sort of the crash. I just finished the Steve Schwarzman autobiography or biography I should say he emphasizes a lot about you know how you know we all know lenders had a big contribution to what happened back in the 2000s and you know since there’s a lot of debt capital out there and all sponsors really want to push for maximum leverage. They’re pushing there some assumptions and then we’ve seen

Rod: Not all.. not all.. not the smart ones not the smart ones. I see really stupid stuff happening right now. We’re at 65% on an asset you know and loan-to-value you know and more than one actually and so yeah okay sorry to interject

Nathan: No you know but you’re absolutely right and absolutely I appreciate you correcting me because there’s tons of good operators out there. And I’m sure that most of them are listening in to your podcast is I’ve done significantly and it’s important you know like I said knowledge is about the most you know the most powerful thing that we can all have so you know staying diligent is very very important at the same time you know there’s been with the you know the price compression or you look at appreciation of values. It has allowed a lot of people to grow and really scale businesses such as ourselves. And so you know we, I really think that the momentum is still going to carry here very heavily into 2020. I do say, the word I like to use is an adjective to describe what’s going on out there is it is pretty frothy though

Rod: I call it irrational exuberance as well. I mean we’re scratching our head sometimes when we see what some of these properties are trading for. Let me ask you this since we’re on the topic, what do you guys do to stress test a deal? Are you involved in that process?

Nathan: Yeah so absolutely man. We stress test a lot of different ways and that’s I think the most important part you know whether you’re looking at price per pound basis on what other products selling for that’s comparable, whether you look at an affordability basis from the tenant base and will they be able to support you know the rent increases that you might be you know looking to drive through a value creation you know it’s a lot of stress testing. I mean there’s a lot of ability to make deals look good from just doing a cap rate play as well you know and that’s a tough one I mean as I know you preach you know it’s super important right now to be very disciplined and diligent about your analysis and I think it’s also very important to make sure that you don’t assume that things are going to continue on the pace that they have. And so when you’re disciplined and that and you’re not you know always compressing down what you think the cap rates gonna be and you’re going to be able to sell at a more opportune time than where we are now and you stay disciplined and all of that and all of your stress testing, I mean there’s still a lot of good deals out there but unfortunately you hear a lot of different numbers like the 80 to 1 you got to go through 80 deals to find the one.

Rod: Oh we’re going through 200 to go to one but I will say this to you, you know we’ve got 500 doors under contract right now in three states and they’re all screaming deals but we kissed a lot of frogs to find them. Now on our end you know when we stress test, I’ll just give you a couple high level things. One, if day one we can’t cash flow at 25 percent vacant, we don’t do the deal. And then after we’ve refinanced and we target out our Proforma at five years, if we can’t cash flow at 35 percent vacant in five years we don’t do the deal that’s after a refund. So you know and then obviously the other thing that we’re doing and you know when you’re as large as you guys are this may not be quite as important but we do a lot of operating reserves as well. We’ve got an asset in Louisiana we have a million dollars sitting in the bank. We’ve got another one in Dallas, a half a million you know just sitting there. It’s a just-in-case fund you know and of course that impacts returns but I can sleep at night right

Nathan: It’s important it’s very important. I mean again being conservative in every way that you not only look at deals but operate deals, it’s imperative you know from a from a return matrices perspective we’re always looking especially when you look at true like heavy value-add deals you know it cap rates almost irrelevant sometimes you buy a negative cap rate to cap rates just because in place you know financials are so low. But we’re always trying to sort of pencil out to with you know again all conservative analysis is 10% cash on cash by year 2 and an 8.5% cap rate on cost at year two as well. So you know a lot of

Rod: Those are good numbers

Nathan: Yeah we are it’s hard to find them here

Rod: Right yeah we have to analyze a 10% cash on cash. It doesn’t have to happen by year two but it has to annualize that way over a five year period

Nathan: Makes sense, it makes sense yeah it makes sense and again you know it’s all about like you would say right I’ve never seen a proforma that didn’t look good. I’ve never seen an OM that didn’t spit out a pro-forma that didn’t look good either. There’s so many ways to manipulate it and I know again that’s why I think there’s so much synergies and hopefully one of the reasons why you brought me on here is that the discipline and diligence that needs to continue to go into analyzing deals is only gonna you know make the cream of the cream rise to the top you know what I mean

Rod: And there’s gonna you know there are players out there right now I was just talking about this on another podcast that I was just interviewed on and there are players out there that are doing, oh no no I just did this on my Facebook live posts, that are doing a yield place you know they’re not doing value add. And they’re putting these pie-in-the-sky pro formas together based on and you know continual increase in rents and if there’s a blip which is likely at some point here those returns are going to be non-existent. And it’s just you know really so guys you know if you’re interested in investing as a passive investor, for God’s sakes educate yourself. Come to one of my boot camps. Also we’ve got some screaming deals if you’re accredited text the word “partner” to 41411and we’d love to talk to you if you’re accredited only. But let me ask you another question you know Nathan, I ask sometimes is there a dark time in your journey that you’ve been willing to share? Everybody thinks to this journey to success is easy you know can you talk about a time you got your nose bloodied or your butt kicked

Nathan: You know yeah there’s certainly a lot you know

Rod: Thank you for that honesty because ya know people think it’s all Easy Street but you know we’re gonna have problems. We want higher quality problems right like like you know so so got any examples of

Nathan: Maybe the most relevant one you know that comes to mind was you know about two years ago, we went through rampant growth. We bought four thousand doors in a year and we hit the you know I mean I didn’t even go through all the return matrices that we look for when analyzing a deal but all of our deals penciled outs all of that. And just biting off more than we could chew so I mean I could get into the details of you know deal or two but it was sort of doing that with too many deals at the same time you know is as you know you know trying to find true value add deals that have to hit those return matrices. It’s some heavy lifting whether that’s from a management perspective or a capex perspective and then just not having enough senior management to continue to oversee it all and make sure that it’s diligently following the business plan because time is certainly money was really you know sort of where we ended up being you know you now you look back six months behind on our business plan and Proforma you know luckily we have a lot of arms and that we’re vertically integrated with to drive in you know fee revenue to help support that. But I mean it wasn’t easy. And then you know the other is you know expecting to get in there and do a million dollars in capex and that turns into 2 million just because of you know the nuances of the electrical panels that we needed to put in, the plumbing was broke I mean it was it was a lot you know the other is we bought if you’re familiar a lot of Cardinal product. So I think at our peak we own twelve to fourteen hundred Cardinal units and some really great ones and then you know some really tough ones. I mean the Cardinal product stuff it’s more like modular manufacturing the 80s with the life expectancy of forty or so years and taking on a lot of that is you know probably where we got our nose a little bit bloody because it’s hard to get financing on that product and then there’s just a lot a lot of issues whether it’s just that is old. They were all done with really old plumbing and piping everything had you know there’s a lot of mold because of how that was done as well as the walls it’s you know they weren’t all pretty and

Rod: Wow you know a lot of, that’s painful to hear you even articulate because I’ve been there you know not on a huge scale but I’ve been, yeah I built some modular stuff and I built five of five units and the floors were spongy and I’m like you know what I’m not doing this and I scrapped it. Now I regret it because they you know it’s gotten so much better but no thank you for sharing that so

Nathan: One last one real quick is you know I think this is a good lesson is I mean countless deals in the last two years just in staying disciplined that you know look when you put in bids on properties you know how important it is to structure the terms right and so you know we’ve put little put out I mean nowadays it’s a couple hundred grand hard but some of those checks were the biggest ones that you know we had to fold you know it’s those are the tough ones to swallow but you know I always say in anything the best deal a lot of times the best deal you do is that the deal

Rod: You didn’t walk away from yeah. So let’s talk about, no let’s dig into, first of all how big is your acquisition team? How many team members you’ve got and what roles you have? You want to speak to that a little bit?

Nathan: Sure yeah so we have a two director of investments and I think from, six acquisitions analysts but they work like they’re 12 analysts because the hours that they put in. So it’s actually a pretty small and mighty team and we look at anywhere from three to four hundred deals a month you know a lot of those are quick sort of swipe them out you know on the desk off the desk and then we put about 80 through to like firm underwriting that the that our analyst group sort of splits up they all take ownership in their own pipelines. And then we end up writing you call it six to eight analyzed. And at the end of the day when you know as you get through best and finals and stuff like that you know it’s ideally one a month but lately you know hasn’t been so much the last two years in a row, we’ve had our biggest acquisition months in them in the month of December. So we mop twelve hundred units that we acquire we had one slip into this year that’s a 250 units. So you know that’s a little bit about our small but mighty team considering the amount of deals that we’re buying

Rod: No, that’s a great framework though you know the way that you have the top of the funnel and you whittle it down to those 80 and then whittle it down to you know would you say about a half a dozen LOI’s and then you whittle it down to a deal and that’s just how it works and that’s the same thing in most sales environments. I love it so

Nathan: You know are the rest of our acquisition team is also you know our senior leaders in property management, our regional leaders and our heads of redevelopment you know because they’re a heavy part of going to the on sites and doing the walkthroughs and things like that you know there’s some fun times I mean we’ll go we’ll roll up about usually seven or eight people deep on on-site inspections and walkthroughs and it’s you know it’s that’s not of all the people that are involved in the acquisition it’s just who’s analyzing the deal

Rod: Yeah so that was my next question you have a lot of your management in-house correct? I assume you have probably a little bit of both some third-party some in-house?

Nathan: Yeah so for the most part so we self managed 80% of our doors roundabouts and then the other 20% are really you know as we look for good value at deals and yield, we’ve had to go into some markets that were we don’t have economies of scale in. And so that’s sort of where we’ve looked to third-party but you know we have all of our companies it’s about 350 people on the property management arm. It’s about 250 people. A lot of those are workers and then you know senior leaders, regional leaders, and acquisitions team and things like that

Rod: Nice nice and what’s your primary markets?

Nathan: Yeah so we’re big believers in the southeast and the deep south you know there’s some really good trends and certainly you know a lot of people are investing in the south but we own about 3,000 doors in Georgia, one to two thousand in Florida and then a lot in the Carolinas North and South and you know you look at all the drivers whether it’s you know population growth and migration, income growth, job growth in the southeast. I mean it’s certainly a great place to be but at the same time you know that’s all public information that most other real estate investors are also investing it not. I shouldn’t say most but a lot of people on the eastern half of the US are focusing in on that southeast and so it’s hard to find good to market

Rod: Yeah no I hear you. I mean we’ve got stuff you know up in Ohio and whatnot but our target is southeast we just got an asset in Atlanta and one in and one here in my backyard another one in my backyard that’s two of the three

Nathan: Our first acquisitions on the west coast were in little town Vernal, Utah. We’re in South Arizona. Those are both about 200 unit complexes. I helped lead point on a 750 unit acquisition in South Bend, Indiana. So you know we do have those outliners and that’s where we’re you know chasing yield

Rod: Yeah you gotta chase yield that’s really and sometimes you’re going outside of your market. Now that said, those of you listening, if you’re not, if you’re fairly new you focus on one freaking market do not do not you know think that you can do what we’re talking about here until you’re skilled and really know what you’re doing. You want to become an expert in one market right now but okay to get started. Now let me ask you this in fact in that thing, what advice would you give a young wet behind year maybe not young but brand-new investor in this space hasn’t taken action yet? you know what words of wisdom would you give that person?

Nathan: Yeah so first off, you can’t make decisions with your heart or emotions you know has to be with your minds. And especially as you’re starting off there’s a ton of emotion and excitement about getting in the game you know usually it’s not always feasible but you know surround yourself with people that are experienced you know such as Rod. You do a great job with your whole community and driving that. Surround yourself with tons of knowledge and education and then you know don’t bite off more than you can chew you know whether you’re an active investor in single-family space or you know you just have a well-paying W2 job and you’re looking to get in the game. A lot of times I always advise you know best way to get in is in an LP position where you’re you know just contributing some money and then you’re able to really see behind the scenes and under the hood you know from you know a GP or an operator or sponsor who knows what they’re doing and you can learn all the tricks in the trades and you know see from their perspective that the difficulties and the challenges because even if you’re a heavy single family investor, it’s a different asset class for sure and you can look at a number of different realms whether it’s construction management, property management, acquisitions, dispositions, asset management, I mean they all are similar but very different at the same time. So don’t bite off more than you can chew. Surround yourself with good people you know crawl before you walk. Before you run, get in an LP position is usually the advice that I’ll give but for those that are really hungry, it’s again just know as much as you can be a sponge always and make disciplined and diligent decisions you know a deal might look look good on paper and on pro forma but man the importance of side business is knowing what you’re doing on your site visits and your walkthroughs of units and secret shopping this subject property, secret shopping your competitors. You can’t make your decision behind your desk and then you know be ready to say okay now I’m ready to go to clothes. There’s a huge part that’s often overlooked as you look to get in the game where you have to be boots on the ground and really understand you know the whole gravity of the market

Rod: You said a lot. I want to stop you for one second okay because I want to hone in on a couple things you said, forgive me. Number one, you know what you said about getting started as an LP is really sage advice and a lot of people start passively you know and that’s why you know in our ecosystem with our investors, I spend a lot of time on that educational component you know it’s showing the behind the scenes stuff and a lot of the good operators will do that you know regular updates, here’s what we’re doing, here’s why we’re doing, here’s what’s going on and then what was the thing you were just talking about, darn it I haven’t thought about that I wanted to interject. I lost it. I just turned 60 two days ago. It’s hell getting old

Nathan: But look at you man you know look at that’s for dark sure

Rod: Thank you thank you yeah well you know

Nathan: Starting smaller?

Rod: Start smaller you know a lot of people start smaller that’s for sure and you know some people will go big right away but most people it’s a progression and there’s nothing wrong with that. Start with the duplex, go to a ten unit, go to a fifty unit, go to a hundred unit, but you know it is a great way to start and

Nathan: Look there’s no measuring stick right. I mean you know who cares how many units you own and that’s what unfortunately you see a lot of people that are bragging about unit size and you know there’s a lot to say about the larger bigger properties. They’re significantly more competitive so it’s significantly harder to find good deals you know that are 200 plus. And personally I love the 20 to 80 units basis personally you know because most of the bigger buyers where a lot of the money is looking to invest into. Their buy boxes are usually 200 units plus or the you know people who have built up portfolios are minimum a hundred units plus and there’s a ton of opportunity for really really good deals that are 20 to 80 units and they still bring the great value of economies of scale. They can still allow you the sort of the mailbox money mentality and again it’s a little easier to find that price, it’s really not easy anywhere out there right now right but there’s significant values

Rod: Less competition in that size. Now one other thing that I’ll mention and that is you know when you’re first getting started, the best thing you can do is partner or align with someone that’s got some doors already. That’s how you get taken serious by the brokers when you can say you know we own 300 doors because you guys know this is a team sport. Since we’re on the topic of partnerships let me just say something really important. First of all they’re easy to get into like a marriage but they’re very very hard to get out of. So it’s critical that you ask the hard questions upfront that you. You ask the difficult questions and I’ve got an incredible list of questions that you would want to ask if you’re even considering getting into a partnership. And it’s free. It’s a free download. Just text the word “partnership” to 41411 and get that list of partnership questions just because it’s so important you know this business is a team sport. So there’s lots of partnerships happening if you’re just getting started, you’re likely going to start in a partnership so you can use someone else’s balance sheet to get rolling. So get that list of questions from me so that you don’t make any mistakes. The other thing I want to say to this is trust your gut. Anytime I’ve ignored my gut, you know trust your intuition when you’re getting into a partnership. Anytime I’ve ignored that, I’ve regretted it your stomach doesn’t feel good about this person you’re communicating with just go on to the next one, trust it okay. So anyway to get that list of questions text “partnership” to 41411 and then really help you in this piece. Okay so let me ask you this Nathan, what would you say is the most challenging part of your role right now? What do you find the most challenging?

Nathan: Yeah so my role is multifaceted but again I think the hardest challenge is finding good deals, being patient enough for good deals, you know making sure that you follow all the disciplines and making sure they pencil out you know the acquisitions right now is hardest but you know as we’ve gotten to the skill that we are to, Asset Management’s gotten continuously harder to do especially when you’re looking at a lot of value add deals and a lot of heavy lift value-add deals. So making sure that everything’s following the business plan. That you know your acquisition arm is handing off the business plan smoothly to the asset management arm is gonna really run with that strategy. I mean it’s a little bit of all of it but to me the hardest part right now is acquisitions is finding good deals

Rod: Yeah so you know do you have any tips for developing relationships with brokers? I mean of course you guys have extensive, long, tenured broker relationships right can you think back to when you were just you know involved in setting those up and how you know what tips might you have there?

Nathan: Yes so I like to think I got some good tips but it’s nothing that’s gonna be earth-shattering you know be you know treat others as you want to be treated and look to provide value because you know you might for example, broker brings you a deal it just doesn’t fit your box it’s too small for you, it’s too big for you, it’s too hot, it’s too cold, but then referring to other operators that they might be able to solicit the deal too and giving them that opportunity that you know it provides value to them. They’re then gonna think of you and a good light and bring you back deals that you know are gonna better fit your box. You’re certainly

Rod: I like that idea you know that’s never been brought up on my podcast before. If there’s a deal that doesn’t work for you to pass it off to someone who will might work for it. No one’s ever said that before. That is so freakin smart so you know because not only you’re helping the person you’re passing it to, you’re helping the broker build his networking and maybe sell a deal

Nathan: It’s a big industry but it’s a small industry right y and then I’m sure many of others have spoken to, I mean execution is what defines you in this space to brokers. So you know do what you say, give quick feedback because brokers aren’t there they can’t afford to waste their time and you know if you say you’re gonna get back to them by tomorrow with an analysis on a deal make sure you can deliver on that you know obviously the same goes as you’re writing contracts and as you’re you know they accept your bids, I mean you have to be able to execute you know all it takes is one deal where you don’t execute and your reputation gets tarnished you know it’s funny like I said how big of an industry it is but how small it is and how word gets out quickly.

Rod: Everybody knows each other you know a couple other things I’ll mention and you can tell me if you agree. FaceTime is so important you know you may start the relationship over the phone but they need to meet you either at a IMN conference or you know NMAC or whatever or work you know you just fly out there and have them show you some properties. Would you agree with that?

Nathan: Yeah 100% and you mean you have to do it’s just like anything right that has some sort of sales in it. It’s the follow-up game you know you also had to stay in front of them you know continue to reach out and you know hey what are you seeing in the market and then the thing about it is is that you know whether you have multiple brokers in multiple markets or in the same market you know you can use them as resources as well you know as long as you’re all in the best interest of each other and looking to help each other out, they you know brokers can be great resources even when it’s not their transaction. But staying in front of them and letting them know you’re an active buyer, also making sure that you know you do a good job showing your case studies of acquisitions and putting that out on social media frequently you know letting them know whether it’s actively or passively that you are executing. It is hugely important. I agree that the personal FaceTime is you know just like in much of sales of anything it’s imperative

Rod: you know I remembered what I wanted to circle back to thank you that was perfect. And that was you know when you were doing your mystery shopping and you’re signing out you know you’re in there doing the due diligence on an assets and you’re going and visiting all the competitors, that is one of the most, in my opinion, the most important and eye-opening things you can do, to study that market, to study the competition, to see how you compare, to in our case to because we don’t self manage, interview third party property managers. You get so much information there as well. Would you want to expand on that?

Nathan: Two tips that I give is what two overlooked and forgotten about is, don’t forget to secret shop the asset that you want to buy. So might it might not be you right there might be somebody else in the acquisition team but you need a secret shop your own asset that you’re looking to buy first and foremost and really get insights about how they handle things during you know during the sales process of leasing and then act as if you’re a client. The other is when you are secret shopping to your competitors always always always reference the property that you’re looking to buy and ask them, hey what do you know about you know XYZ property down the road because most of the time your competitors are gonna know you know how to sort of poke holes in that asset and so they’ll tell you oh well we hear that there’s a lot of sewage problems so pipes get backed up and you know a lot of people are coming over to rent ours because you know this and that and that gives you great insights on areas to then focus in on on your own due diligence on the asset that you’re looking to acquire

Rod: Freaking brilliant and that has never come up before either. And that is so smart, oh that’s so smart and like you just said they’re gonna want to trash it. So you’re gonna hear all the dirt that you need to hear about that asset. Oh that is brilliant and you got me on that

Nathan: Yeah because think about it like you’re always trying, like if you’re doing a site visit and you’re with the staff of the asset you’re looking to buy, I mean they know what’s going on even if you’re just the bank coming in for an appraisal or a cash flow analysis or site visits, they know they’re only going to talk positive. So you’re not going to get the all of the meaty juicy hairy stuff out of the people that work at the asset you’re looking to buy. They’re gonna hype it up and you know the other thing on site visits that I always say is we make sure that we always find a way to get away from the staff to talk to some of the rest of the residents

Rod: For sure. We bought an asset in Louisiana that talked to a resident, found out all these things that we hadn’t heard about, the serious things and we’re gonna back out of the deal but we got a million dollar cut you know on the deal because of that conversation, saved a million dollars on it while we were gonna back out. But actually we would not have backed out if we had not gotten that information. So we saved a million dollars by having a conversation that’s how big a deal it is guys. So how about some conversation about property management. Let’s play around with that a little bit. So you guys do that in a big way so what are some tips you might share

Nathan: Yeah so a couple of things here you know what I would emphasize is you know client or resident experience is everything. And so how can you go above and beyond providing good service right. That’s sort of an obvious one but the other thing is that you know when we see and look at a lot of you know B and C class value-add deals, you know you see a lot of times business plans that you know really just want to overall improve the asset itself and more importantly people that are living in affordable B and C class housing, they want you know a couple of things. Obviously they want something that’s an affordable product they want something that’s safe and secure and they want good service you know a lot of B and C classes they know the bells and whistles will only help you but at times it doesn’t really provide that much additional you know value to the asset and to the residents which are of most importance. Just the service does you know. So a couple of things that we are doing and also implementing is related to one, the moving experience. I heard a crazy stat the other day it’s over 60% of tenants that have a negative move-in experience, do not renew their leases. So that just exemplifies how important it is to make sure they have a good experience. So one thing that we do is that we are dedicating one hour of a service or maintenance text time on the first or second day when somebody moves in whether that’s they want to you know fix the handles on the cabinet’s they need help moving in a bed or whatever it might they need to clean the shower a little bit more or whatever it might be but going above and beyond in the moving experience is certainly something that you know shows the importance of resident experience and then hopefully it helps you retain them more and we all know the benefits of certainly

Rod: Sure, there’s no greater expense than turnover. So besides the maintenance is there anything else or is that just top of mind that’s all that comes to mind, that’s brilliant one hour. Hey, maintenance time within 24 hours, they’re there, knocking on their door, hey sir anything I can help you with you know I want to you know

Nathan: Yeah maybe I guess just you know from a maintenance perspective is just making sure that you hire the right people and build the right culture. So we put a lot into building culture among our people

Rod: Okay I want to drill down on that a little bit. What do you do to build culture? because that’s something I’m fascinated with

Nathan: Yeah so we do a lot so we have like a FitLife challenge group. So we highly encourage people to be active. We provide every single person that we hire no matter you know what sort of ranks they’re in. We will give them free Fitbit’s right when they come on board. We do something really cool we call “Driven for Greatness”. It’s every other Thursday morning. It’s actually before sort of work hours at 8am. We as a company, its voluntary so it’s not everybody that shows up, we go through a book a month. So we provide free audible accounts to everybody that’s employee of us with all free credits and we go through reading books in each every other week and driven for greatness we have a different person. So you’ll have maybe it’s a maintenance Tech, regional manager or senior leader. It can be anybody in the organization that will lead a one-hour presentation on half of a book and then we all collaborate, we encourage it to be engaging so you know we really do emphasize that as well as as much as it’s important for you know assets or companies to set goals. When we require goals, it’s three personal goals and three business goals. So making sure that you just put value to a work-life balance and people developing not only the business which you know will put more moneys into the assets pocket and yours. It’s helping them develop and so users providing initiatives providing you know training, will do training once every Thursday morning for everybody on some realm of something self-development whether it’s sort of like time hacking or being more efficient. It’s, we put a lot into our training and into just different you know overall programs for recreational purposes and self-development purposes

Rod: That’s freaking awesome. Everything you just said is absolutely awesome. I’m really impressed and you know we are in the process of appointing our CFO our Chief Fun Officer right now for our culture and but I love the positive stuff you’re doing. The goals, when you’re asking your team what their personal goals are, it’s so freakin powerful and you know because they don’t get asked that by anyone else. I mean that’s so powerful and yeah we used to do the same thing where we’d get a book and a different team leader would do a chapter of a book that we were really proud of that we wanted everyone to be trained on but I love the Fitbit’s and I love the free audible that’s just brilliant brilliant

Nathan: Yeah it really embraces a great culture and then just embody at all I mean sure we have a lot of scale but having 350 total people all the vertical arms of our company but we also have a C-level called Chief Experience Officer. So he’s focused on CX and EX, Client Experience and Employee Experience and that’s this little job is running all of these initiatives. I’m actually a week from today we’re doing what we called vision day. So we lay out what we call our compass it’s we lay out our one year goal, three year goal, five year goal, our strengths, our weaknesses, our big moves, our 10x opportunities, all of our, we go over our mission statement, our purpose statement, our core value, we really just lay out the direction for the next year for everybody and we you know as much as we talk about the great things that we’re doing, we very much acknowledge you know where we fall short you know right now technology is a big one that we need to improve on significantly. And so we don’t have a problem saying that to our people because we really embrace good culture and good people and good people understand there’s going to be issues that are gonna have to be overcome especially as you rapidly scale a business

Rod: Transparency is so huge in a culture you know and having fun and doing things together. So really appreciate that all really good stuff and yeah we just embrace that whole EOS system. I don’t know

Nathan: Same yes yeah we’ve implemented EOS and we’ve actually tweaked it to EES so Elite Execution System because you know it’s just sort of like anything that’s to help build a company our culture. There’s a lot of out-of-the-box stuff that certainly helps and the principles are great but you got to make it your own. If you’re putting initiatives in place that you don’t have passion or belief behind, then if your people see that then they’re not going to believe if they see that you don’t believe. So we’ve really tweaked a couple things but at the core of it it’s definitely based off of the EOS principles

Rod: Yeah that’s been real powerful for us. What would you say is the best advice you’ve ever received and I’ll leave you to answer that in any genre

Nathan: The best advice, man I that’s a tough one because

Rod: I know I didn’t prepare you for some of these

Nathan: That’s okay I mean you know I think really you stumped me man, it’s rare that I get stumped

Rod: We’ll pass on that one but let me ask you this one, if you could go back in time knowing what you know now, what would you tell your 20 year old self about this or anything?

Nathan: Yeah man that’s a great question. So if I were to go back, I take a lot of pride in my work ethic and just running through walls to get stuff done and persevering through difficulty and so I think if I were to go back to my 20 year old self, it would say actually think bigger, set bigger aspirations, and bigger goals because I do I spent a lot of time really running through walls to things that were mediocre accomplishments and sure another people’s eyes they might have been great accomplishments but if I would only set the bar that much higher I know I would have achieved that much more and certainly that sort of higher level and grandiose is core but at the same time you know we take a lot of pride and I take a lot of pride in what I’ve accomplished but I just know that if I would have set that bar even higher than I already did, then I would have been looking back at even more and bigger accomplishments

Rod: Yeah I love it. So guys, Nathan and I actually met at another mastermind that we both belong to and that’s how we met and you know you know I’m always pushing masterminds. I’ve got our mastermind you know with about six million in assets at the Multifamily Boardroom. So you know if you’re not ready for that yet which many of you want, make sure you create your own. Get around and pull some people together and go to give not just to get and it’s just incredible what comes out of that sort of environment. So make sure that you’re surrounding yourself with people that you know they’re gonna hold you to a higher standard, that are gonna hold you accountable, that many of which might think what you think as hard as easy. And that’s how you really propel yourself would you agree with that Nathan?

Nathan: Yeah absolutely. I mean couldn’t agree more. I mean there’s not anybody and that’s what’s so exciting about real estate in general, not to mention multifamily, is that you never know everything and things are evolving it’s such a fast pace that you’re never gonna be able to stay ahead of the curve but the more good people that you surround yourself with, the more that you will set yourself apart and be able to learn from others challenges and not have to experience it yourself firsthand and then you know it’s, I heard it recently from Brian Tracy but it’s been through a number of different self developmental you know sort of preachings is, CANI, Continuous And Never-ending Improvement

Rod: With Tony Robbins he calls it CANI

Nathan: I read it in a Brian Tracy book whose a little bit older than Tony right?

Rod: I will tell you where it comes from. It comes from Charles Demings and that whole Japanese Kaizen philosophy. I totally believe it. Its those little improvements you make, you take him out a year, two years, three years, they’re giant shifts. And so when you’re continually looking to improve like we are an organization it sounds very much that you do the same incredible what you can accomplish with those little tweaks

Nathan: Really is

Rod: Well listen guys, they’re DLP Direct Lending Partners. They lend. They’re obviously big time operators. Their website is DLPREC.com and I know that Nathan and I are going to definitely stay in touch because I think we’re kindred spirits but brother I really appreciate you being on the show man

Nathan: My man, thank you so much again it’s been an honor and a blessing and you know it’s cool to be you know on a podcast with someone so successful that’s also so giving man. So commend you for that you know I’ve been a big fan for a while and we’ll certainly remain that way

Rod: Well it’s very kind of you to say that buddy. We’ll talk again very soon. Take care

Nathan: Thanks Rod

Rod: Nice job brother

Nathan: Thanks man. I got off the recording really nice job