Steeve Breton is a full-time multifamily operator who left his W-2 job after joining Rod’s Warrior Group in 2017. With experience in sponsoring and investing in over 3,500 apartment units, Steeve brings a wealth of expertise in multifamily operations and ground-up development. His conservative approach and strong analytical skills enable him to assess risks clearly and invest wisely, ensuring maximum returns for investors while preserving their capital. Prior to real estate, Steeve spent 25 years in finance and operations at Fortune 500 companies. He also holds an MBA from Babson College’s Olin School of Business, where he guest lectures on Real Estate Transactions.
Here’s some of the topics we covered:
- Steeve’s Leap From Corporate To Multifamily With The Warrior Group
- Steeve’s First Game-Changing Deal In The Warrior Group
- How Steeve Ditched His W2 For Multifamily Success
- Going All-In On Multifamily
- Steeve’s Secret Weapon In Multifamily
- What’s Ahead For Investors With US Debt And Inflation
- Predictions on What Trump’s Administration Will Do For Investors
- The Office-Multifamily Hybrid Twist You Need To Know
If you’d like to apply to the warrior program and do deals with other rockstars in this business: Text crush to 72345 and we’ll be speaking soon.
Full Transcript Below
00:00:28:23 – 00:00:47:18
Rod
Come back to multifamily rockstars. So as you guys know, this is where we dive deep into our guest deals and give you practical and actionable items to help you get started and get to help you really get started in doing your first deal. Now, today’s guest is very, very seasoned. He actually joined the warrior program when we first started it.
00:00:47:20 – 00:01:06:01
Rod
I think the end of 2017. And so, you know, we’re going to go. We’re going to go deep, actually likely on a construction deal and just talk about some of the other things that he’s done over the years, when he’s been, you know, in the program. But, as always, I’ve got, you know, my co-host Mark Nagy with me here.
00:01:06:03 – 00:01:20:21
Mark
What’s going on, rod? And. Yeah, I was just looking it up. We actually had Steve back on four years ago. Episode 437. Now, I think we’re over a thousand, so it’ll be it’ll be good to get, kind of an update here. Over the past four years, what he’s been up to.
00:01:20:23 – 00:01:29:09
Rod
And that’s that’s a very good point. I’m sure people listening probably, you know, don’t even want to go back that far, but, Steve. Welcome, Steve. Welcome to the show, brother.
00:01:29:11 – 00:01:32:07
Steeve
Thank you. Well, time flies for years.
00:01:32:09 – 00:01:53:21
Rod
Can you believe it? I mean, just in general, time is flying like crazy. But, you know, why don’t you. Let’s just pretend we didn’t do that interview and people haven’t heard it because they likely it. Nobody’s going to suffer through that in my interviews. So, you know what? To to tell your story, to talk about, you know, how you got into the business.
00:01:53:22 – 00:01:57:08
Rod
I know you started doing plex’s in Boston, and so I’ll talk about all that, please.
00:01:57:12 – 00:02:23:10
Steeve
Yeah. So super high level. You know, I was in it for 25 plus years, a little over 25, you know, the one hour commute into Boston from our suburban neighborhood here. Our commute back, plus 60 hours of work. It was it was a grind. I did love my job for a long time, but I was getting old, and, we, you know, we were bought out by a larger company, started being a little bit nervous about my retirement.
00:02:23:10 – 00:02:41:19
Steeve
So I looked into real estate investing, and I ended up buying a small duplex here, in 20 2012, right in my backyard. No idea what I was doing. You know, I got myself educated as much as I could based on whatever was available online at the time. But, you just took a chance, and, it worked out really well.
00:02:41:21 – 00:03:04:05
Steeve
Before I knew it, I was buying, you know, 1 or 2, per year. Got a nice little portfolio going. And the more I grew that portfolio, the more my friends and family wanted to invest alongside me. So I ended up, you know, looking out of state at larger properties. And that’s where I realized now, getting over my skis a bit and, that’s you.
00:03:04:06 – 00:03:21:03
Steeve
I started looking around for a coach, and I came across your podcast and we had a nice discussion. I think you had, you know, pretty much just launched the program at that point. Right? I jumped in and I think it was only a few months later. I was I just doing my first deal, 106 units in San Antonio.
00:03:21:05 – 00:03:21:24
Rod
Wow.
00:03:22:01 – 00:03:32:13
Mark
That’s funny. We were just talking about this, right? Just at your boot camp last weekend where there was a thousand people. We were. We were saying that Steve was on the original list of 20 people at your first, quote, unquote.
00:03:32:13 – 00:03:57:19
Rod
Boot camp or whatever. Yeah, yeah. Well, well, I mean, yeah, 2020 warriors and, and, you know, came across Steve’s questionnaire that we asked people to fill out. So we get a feel of who they are. And, and it was just incredible to see what’s happened to you since then. You’re in 3500 apartment units. You know, you you retired from your very high paying, consuming job with the kids, with family.
00:03:57:20 – 00:04:17:16
Rod
You did it. And, you know, and which is extraordinary. And so, you know, I I’d, I’d love to maybe talk a little bit about that journey. I mean, so that first one in San Antonio, 106 units, because we’ve got a three assets now in San Antonio. I actually love the market, although it’s getting dinged a little bit in this.
00:04:17:18 – 00:04:38:19
Rod
What is it? I forgot what country the gangs are from. But but those gangs that they’ve talked Venezuelan gangs that are there now and in Houston and Denver is a little alarming. Yeah. Hopefully Trump will get that cleaned up. But but yeah. So, so talk a little bit about your trajectory. You did that 106 unit and and and just, just speak to that a little bit if you would.
00:04:38:19 – 00:05:03:11
Steeve
And that that first one was key because, again, I was very nervous. I had no idea how to invest out of state. Of course, I also had no idea how to do all the syndication work, the securities laws, and make sure I follow those properly. So that was all taken care of during our coaching sessions. But the, contact I made through the warrior group, led me to, a deal in San Antonio where he lives.
00:05:03:13 – 00:05:06:13
Rod
And so it was a Warriors A deal. Okay. Awesome.
00:05:06:15 – 00:05:38:02
Steeve
Yeah. Okay. We partnered there, did this 106 unit deal. We had it for, like, three years. It was, you know, an amazing return. Everything went well, but I rode his coattails, and I learned a ton. And then, you know, I just did a couple of deals per year after that. Some of them with warriors, a couple of them I found on my own and was managing my own, you know, fast forward seven years later, I’ve done, half billion dollars in transactions, $50 million of client money invested.
00:05:38:04 – 00:05:46:16
Steeve
I’ve done, I think, 26 deals now exiting, the 14th one here in about a week or two.
00:05:46:18 – 00:05:47:16
Rod
Fantastic.
00:05:47:21 – 00:05:51:07
Steeve
And I’ve got another one up for sale that that’ll be at the end of this year.
00:05:51:09 – 00:05:52:02
Rod
Yeah, yeah.
00:05:52:02 – 00:06:11:00
Mark
I do have a quick follow up question on that because everybody that gets into real estate, their goal is quitting their almost everybody their their their goal is quitting their W-2 job. Could you time freedom. Exactly. Could you shed a little bit of light on I guess what had to happen. Was it a certain door count, a certain cash flow?
00:06:11:00 – 00:06:16:21
Mark
Did you have to exit some deals? What did that time frame look like? Could you speak to that a little bit?
00:06:16:23 – 00:06:44:17
Steeve
Yeah. So I, I missed that very crucial point. And that’s exactly right. So joined Warriors in 2017 I think, early 2019, I had done 3 or 4 deals. And what I needed to see was that this was 100% possible. Yeah, that I could do three, four deals. Right. And I sort of knew what those exits would look like in, you know, 2 or 3 years later, four years later, if everything went as planned.
00:06:44:19 – 00:07:14:19
Steeve
And I was seeing the cash flow come in and I was seeing the exits new on the horizon, and I was like, okay, this is an actual business here. Like, I can do this and it will absolutely replace my salary. And so, you know, I just kept operating into 2019, but what I found was that I was, you know, sneaking away at work into conference rooms to manage my properties or to talk to investors or whatever was I was literally running a second business at work, which didn’t feel right.
00:07:14:19 – 00:07:17:11
Steeve
You know, that’s not, I intelex.
00:07:17:13 – 00:07:24:19
Rod
Exactly. And you’ve got incredible integrity, I might add. By the way, let me interject that. So I really respect that. Yeah.
00:07:24:21 – 00:07:51:24
Steeve
So the you know, when I only had a couple of deals, it wasn’t a big deal. You know, it was like an occasional phone call, the third or fourth deal that I jumped on into in 2019. It was really a heavy value add deal. And there was a lot going on. And that’s what I realized. Okay, I can’t keep doing both of these things and what’s most important to me is my future and the commitments I already made to my investors and making sure we don’t lose anyone’s money and all that sort of thing.
00:07:51:24 – 00:08:08:15
Steeve
So it was very clear to me that it was time to go and I had some stock option investing, you know, a month later after that. So I just kind of wrote it out for a month, got my peers ready to kind of take over my role. I had a few people that I was talking to, so they they knew what was coming.
00:08:08:17 – 00:08:12:13
Steeve
And it was no surprise when I left. So it worked out really well.
00:08:12:15 – 00:08:25:24
Rod
You did it elegantly. Yeah. That’s fantastic. And your income at that point eclipsed your, your W-2 job. And I know you had LP interests as well. You invested, as a limited partner as well. So that certainly didn’t hurt things. Yeah.
00:08:26:01 – 00:08:39:10
Steeve
You know, I was also starting to, you know, I had I had plenty of cash flow from my original first few duplexes and boxes that I bought here. Right. And I was also looking at selling a couple of those because the values had already gone up a lot.
00:08:39:12 – 00:09:00:12
Rod
Nice, nice. So, you know, one of the questions we like to ask is, you know, what are your superpowers as it relates to this business? Because everybody, has super powers. You know, I talk about it in my bootcamps. You know, you want to focus on what you’re good at and then hire a line or partner for your weaknesses.
00:09:00:12 – 00:09:05:08
Rod
And so, how would you answer that question?
00:09:05:10 – 00:09:23:17
Steeve
Oh, I used to think it was raising capital because I was fairly well connected with, you know, the Boston i.t. People that I used to work with. And that is important, like, you know, that’s how that’s how I got into my first deal was the ability to raise some equity, plus my experience with, with my smaller portfolio.
00:09:23:19 – 00:09:51:05
Steeve
Those two things were what was appealing to my partner. So that’s what that’s what I was bringing to the party. So that was the superpower at the moment or at that time today, I think, it’s saying no to a lot of deals that, you know, the market’s changed quite a bit in the past couple of years and the ability to say no and to really dig deep on underwriting and to know, you know, what’s conservative, you know, actually conservative.
00:09:51:05 – 00:10:00:04
Steeve
You’re not conservative on the underwriting side, I think is is definitely, you know, my superpower at the moment. We’ve only done one deal the past two years.
00:10:00:06 – 00:10:04:24
Rod
Yeah, same same here, same here. Well, yeah.
00:10:05:01 – 00:10:20:17
Mark
I think that’s the first time we’ve probably heard that’s that’s super power. Yeah. I’d say say no to deals. Is it people bringing deals to you? Is it just saying no to to brokers? Is it just because of your expertise? All the above. What do you mean by that?
00:10:20:19 – 00:10:46:12
Steeve
So again, through the Warrior Network, I’ve got quite a few people that I stay in touch with, and a lot of them know that, you know, I can cosign loans or I can, you know, help with the operations based on my past experience, I can raise equity, whatever it is. So if they have a gap in trying to take down an asset, you know, they’re calling me, or they’re just call me because you, you know, I’ve been a mentor to a lot of them as well.
00:10:46:14 – 00:10:56:07
Steeve
And so we’re just looking over the deal together, and sometimes it looks so good. I’m like, I want to jump in on this. But I haven’t had that reaction in a long time, unfortunately. Right.
00:10:56:09 – 00:11:19:11
Rod
Yeah. Let me let me ask you this on. As an aside, you’re very intelligent guy. And and very in tune with the marketplace. You know, and we’re all aware that there are a lot of operators in distress right now. And, you know, and the catch phrase for lenders is extend and pretend. And the catch phrase for operators is survive till 25.
00:11:19:11 – 00:11:36:16
Rod
And so, you know, do you feel like there’s going to be opportunity? I mean, I believe there is, but I I’d love to get your perspective. I mean, I know there’s a lot of money on the sidelines, but, do you feel like there’s opportunity to, to acquire distressed assets, down the road here?
00:11:36:18 – 00:12:00:11
Steeve
I’m sure they will be. I guess if I just stepping back on that a bit like what’s going on in the market, right? We’ve had massive amount of inflation. So the cost of everything, especially labor and being able to just clean your apartment and get them painted when the next tenants, all the basics have gone through the roof, taxes in places like, you know, in the Sunbelt or Texas.
00:12:00:13 – 00:12:01:22
Rod
Texas killing us. Yeah.
00:12:02:01 – 00:12:21:24
Steeve
Gone completely out of control. Like, they literally will double your taxes year over year and expect you to go to court and fight to get it reduced back to like a 30% increase, which is like regular. We do that all the time in Texas now. Insurance costs, right? Hurricanes, all the recent hurricanes are just blasting your insurance costs up.
00:12:22:01 – 00:12:40:23
Steeve
So that stuff is really putting a lot of pressure on profitability then. So that’s one thing. Then there’s overbuilding, or oversupply. So there’s too many apartment units coming into a lot of these markets. Because rents are going up so fast in the Sunbelt, all the builders came in and just started building like crazy. So. Right.
00:12:41:04 – 00:12:53:03
Steeve
That supply hit in the past year or so, there’s probably still another 4 to 6 months, depending which market you’re in, maybe eight months where that supply is still kind of hitting, but it’s dwindling quite a bit. And then it’s and it’s.
00:12:53:03 – 00:12:56:03
Rod
And it’ll be cut off next year. It cuts off next year. Right.
00:12:56:03 – 00:13:14:22
Steeve
Yeah. I think by the end of next year it’s it’s just pretty much gone. Right. And those things take, you know, 18 months to come out of the ground and right now there’s no permits happening. So we’ve got a good two year window here where there’s not a lot coming out of the ground or not a lot of, sorry, units coming online, new units.
00:13:14:24 – 00:13:25:15
Steeve
So rents should start going back up, because what’s happened in the past couple of years is rents have been flat. Right? So expenses have gone up. The rents have been flat because of all this new supply in many markets. Right.
00:13:25:17 – 00:13:28:12
Rod
It’s not or even even pulled back some honestly.
00:13:28:12 – 00:13:45:01
Steeve
And and we’ve had a bit of pull back. Yeah in Houston San Antonio. Right. Right. Stayed about flat for us. But yeah. So that’s that’s two of the things. And then the high interest rates, which you know, the fed started to reduce rates now. But the ten year Treasury hasn’t really changed right up.
00:13:45:03 – 00:14:00:01
Rod
So right. And by the way I’d love your opinion on that. You know, I had I talked to one of my partners in Cary Capital and he thinks that’s relating to Bitcoin, that there’s so much money flowing into bitcoin. I don’t know if that’s just crazy, but I just wonder if you’ve got an opinion on why the ten years going up.
00:14:00:01 – 00:14:02:16
Rod
Still.
00:14:02:18 – 00:14:05:08
Steeve
I don’t really you know, my son’s way better at that, so.
00:14:05:08 – 00:14:14:22
Rod
Okay. Fair enough. Yeah. Fair enough, fair enough I, I don’t either honestly, I, I’m not that good at it all that business myself either, candidly. But, I’ll just.
00:14:14:22 – 00:14:32:19
Mark
Say real quick, I can add in. The one thing that I saw that is affecting that is that inflation ticked back up also slightly. And that’s, I think, the reason why the ten year ticked back up, because people are saying, oh, inflation may not continue down like the fed projected. It may start to re accelerate now that the fed is cutting rates.
00:14:32:19 – 00:14:34:16
Mark
And so that’s why the ten year shot back up.
00:14:34:22 – 00:14:56:10
Steeve
Right. So so is involved here. Right. And the bond market looks at all of those factors. And you know they’re the ones that are deciding that ten year rate. So you know they’re placing their bets. I’ve listened to so many sides of the story that where inflation is going to come back or not come back or interest rates going to go down or not come down like I believe everybody.
00:14:56:16 – 00:15:02:17
Steeve
Really. Yeah, that’s that’s a great point. But I’m not betting on any of it because I have no idea where it’s going to land.
00:15:02:19 – 00:15:14:13
Rod
Yeah. Well let me get your opinion on, on on Trump coming in. Do you have any thoughts there. Do you, as it relates to our market, you know, as it relates to what we do, do you have any, any hypothesis? Well, as a.
00:15:14:13 – 00:15:28:11
Steeve
First time he came in, he really helped us out quite a bit on the real estate side. Right. He is obviously a real estate guy. So I would expect we’re going to see a lot of good things happening again. Maybe on the depreciation side. Yeah. We’ll go about.
00:15:28:11 – 00:15:30:05
Rod
That 100% bonus. Yeah.
00:15:30:05 – 00:15:57:05
Steeve
Yeah, yeah. You know, maybe a bit more on the Opportunity Zones or who knows. Right. Tax rates in general. So, I imagine it’ll it’ll be good. Yeah. Yeah. We are coming out of a, a bit of a slumping economy and we don’t know what jobs are going to do either. So that’s another big one. But assuming jobs hold, I think, he’ll be generally fairly good for the economy and good for real estate.
00:15:57:07 – 00:16:00:07
Rod
Yeah, yeah. So want.
00:16:00:09 – 00:16:00:21
Mark
Go. Go ahead.
00:16:00:21 – 00:16:03:14
Steeve
What what I said, what do I know, though.
00:16:03:16 – 00:16:06:16
Rod
Hey, same same same same same. Go ahead. Mark.
00:16:06:18 – 00:16:22:18
Mark
Well, I want to ask you about your new build because, maybe you have the same philosophy of what we’re kind of thinking is that. Yeah, all the, the building permits are tapering off end of next year. And that’s why we actually just started a new build, because we figured by the time it’s done, that that will all be gone.
00:16:22:21 – 00:16:33:09
Mark
I know you’re working on a new build. Tell us about this new build. What was your philosophy and why did you move into new construction versus, you know, just doing what you had been doing?
00:16:33:11 – 00:16:59:02
Steeve
Yeah. So, I’ve done a couple of new construction deals, you know, smaller deals. And then two or just over two years ago, we did, there was a student housing deal that we bought that was, you know, unk and we had, what was that? 48 units. And we bought the parcel next door, and we we put in another 48 units.
00:16:59:04 – 00:17:25:03
Steeve
So we just doubled the size of the property, but it was on the same property we already had. You rent comps from our own property was just a very nice, clean, easier deal to do. And that was also with another warrior who lived in Wilmington, North Carolina. So I’ve gotten comfortable with construction. My family was also in construction, but all that serve to do was to show me what I didn’t know because I saw enough to be petrified of it.
00:17:25:05 – 00:17:45:04
Steeve
So, you know, it’s taken quite a few years of of smaller construction deals just to really get my head around it and, and feel more comfortable with it. Yeah. So what happened on this one? It’s in Indianapolis or just north of Indy. And another warrior brought this to me. More from a can you look at my underwriting perspective?
00:17:45:06 – 00:18:05:09
Steeve
And we looked at it together and it was a absolutely amazing deal. And, one of the this is the, you know, the the only deal I’ve done in the past two years. And one of the things I liked about it was it was a public private partnership where the city was actually putting in $9.5 million as a grant.
00:18:05:09 – 00:18:17:21
Steeve
They’re just literally giving us the money because the housing and office space that badly in this, you know, small city. And they wanted to compete with other, you know, cities that were growing in the area.
00:18:17:23 – 00:18:35:10
Rod
Wow. That’s fantastic. Holy cow. I can see why you jumped on that. By the way, guys, if you’re listening and you want to apply to our warrior program, text the word crush to seven, two, three, 4 or 5. You know, and you check us out, we check you out. And if it’s a fit, you’re off to the frickin races.
00:18:35:10 – 00:19:01:19
Rod
But again, text the word crush to seven, two, three, four, five to check out our warrior program. And I think at last count were at somewhere around 220,000 units now owned by Warriors, which is just mind blowing to me. So, so anyway, talk a little bit more about the deal. I the, the total project size where, where you’re at in the process right now, were you involved in the entitlement and everything or was it already entitled.
00:19:01:19 – 00:19:06:22
Rod
Talk about that a little bit, just so my listeners can get a feel for what the development process looks like?
00:19:06:24 – 00:19:21:14
Steeve
Sure. So the developer, the local developer who our warrior partner knew, had already he had locked up the land, hadn’t purchased it all. They had got it all locked up. And it was a it was a bunch of houses and a couple of small offices. Oh, so.
00:19:21:14 – 00:19:27:13
Rod
He did an assemblage that’s called an assemblage, guys, you buy different pieces, put them all together to do something. Right. Okay.
00:19:27:15 – 00:19:55:09
Steeve
And he’s also, you know, good friends with the with the, city mayor. So the mayors knew what they wanted. They also saw this, this assemblage, and they were like, okay, buy right. You can build a lot of multifamily, a couple hundred units, but we don’t want all of that. We need some office space. And so what we want you to build is, you know, it was it approximately this is where we landed, actually 20,500ft² of office.
00:19:55:11 – 00:20:20:23
Steeve
And it’s like it’s flex space. Or it could be retail or office in their smaller offices. And then above that is 85 units of class A really nice, multifamily. And of course, you know, we would have made a lot more money in this deal if we were to just build straight multifamily right in the city, acknowledge that, and said, okay, and yeah, we’ll we’ll give you whatever you would have made in a box.
00:20:20:23 – 00:20:39:07
Steeve
Wow. Right. Or essentially a grant. So it’s a bond that we don’t have to repay. So the city took the bond. We didn’t take the bond out. So, they made up that additional profit for us so that we would build exactly what they want. And then they also cleared the way for all the entitlements, permits, everything.
00:20:39:09 – 00:20:49:12
Rod
Because they sure, if they’re friends with the mayor, if you’re friends with a mayor, good lord, it makes such a huge difference. And wow, fantastic. What a screaming deal. So where are you at in the process now?
00:20:49:14 – 00:21:12:07
Steeve
We broke ground in, I want to say March was our February. March was our groundbreaking. And, at this point, I want to say we’re watertight on the largest building. There’s the main building, and then there’s four smaller buildings. And the other ones are getting pretty close. So, you know, we’ve we’ve built the structures. Brick is going up on a few of the buildings already.
00:21:12:09 – 00:21:22:11
Steeve
Windows are in on some of the buildings. So we expect the main building to be, ready with a certificate of occupancy by middle of March.
00:21:22:13 – 00:21:35:12
Rod
Wow. I think I remember seeing a picture of the warrior group. You guys, with the shovels all standing there. A nice picture in front of breaking ground. So? So, how much money did you have to raise for the for that particular deal?
00:21:35:14 – 00:21:45:12
Steeve
So that was, I want to say it’s a $6 million raise in that ballpark. Okay? You know, about a $30 million total project cost.
00:21:45:14 – 00:21:55:23
Mark
Wow. Do you want to continue to do these moving forward exclusively? There you do. You see yourself moving back to traditional multifamily? You know, once things shake out a little more, what what are you thinking?
00:21:56:00 – 00:22:28:15
Steeve
Well, so with the current market conditions, we’ve moved into, so we just want to be more secure, you know, we’ve seen a lot of assets struggling out there. I’ve got one that’s that’s struggling a bit, due to a partner’s mishandling. So we’ve seen a lot in this cycle so far. And I want to be in a position where I have control, or more control, and in a position where our money is not at risk.
00:22:28:17 – 00:22:34:07
Steeve
Or certainly not as as much of a risk as some of the money in the deal. So, you know, if for.
00:22:34:08 – 00:22:37:07
Rod
Better debt, better debt, things of that nature.
00:22:37:09 – 00:22:58:21
Steeve
Yeah. And, you know, just the capital stack in general, you generally have your debt at the bottom. You know, you have common equity at the top, right? That’s all of our investors in between. There is preferred equity. And what that is is basically that it’s still equity. It’s not not alone, but that equity is getting their money back first before the common equity gets their money back.
00:22:58:23 – 00:23:19:17
Steeve
So we’ve gone into a couple of deals where we just made a common equity. I started a preferred equity investment. And again that puts our money a bit more secure. The common equity comes, it comes out after we get our money back and then we get our returns. And so now we’re looking at launching a, a hybrid equity fund.
00:23:19:19 – 00:23:24:18
Steeve
So it’s very much like preferred equity, but a bit friendlier because we know what it’s like.
00:23:24:22 – 00:23:25:22
Rod
How so?
00:23:25:24 – 00:23:53:05
Steeve
How so? So you with straight preferred equity. They’re generally saying, you know, their terms are basically like, we’re going to get all of our money out and we get our full 15 or 16% or 17%, depending on how risky they think your deal is, before any of your common equity comes out. So the deal has to perform well enough for them to get all their money, plus all of their profits before you get a penny of common equity out at the sale.
00:23:53:07 – 00:23:59:06
Steeve
That’s pretty harsh. And then they also can pretty much take your deal from you if you don’t perform very well.
00:23:59:06 – 00:24:05:07
Rod
Sure, sure. We bought an asset in Lexington that that seller didn’t want to sell. A private equity made him sell I remember. Yeah.
00:24:05:07 – 00:24:26:01
Steeve
Yeah, yeah. So it have happened here, right? I’ve been on the buy side on that, which is nice, but I don’t want to be the owner with a preferred equity partner that’s forcing me to sell. And I don’t want to be that preferred equity partner who’s doing that to somebody else. It just doesn’t seem right. So on the hybrid equity side, what we’re looking at in our fund is, is the terms would be more, equal.
00:24:26:01 – 00:24:38:19
Steeve
So we get our money back first, then common equity gets their money back first. We get our first 6%. They get their first 6%. Right. And then we go up to our 15 and then we’re out. Right.
00:24:38:24 – 00:24:53:08
Rod
So it’s just a it’s a little there’s a few more steps in the waterfall there that that make it friendlier. Now I understand. I was just wondering where you were going with that. By the way, guys, if you want to reach out to Steve, it’s velocity cap.com. You got a question mark?
00:24:53:08 – 00:25:14:11
Mark
Yeah. Yeah. Yeah. So. So for all the people listening that just have no idea what you were talking about there for the last two minutes, how can we translate that into newbie advice? Does that mean go after smaller deals? Have less partners? How would you translate that into people that haven’t even done a deal yet? What would you advise them to do?
00:25:14:13 – 00:25:39:14
Steeve
You know, I always think about, you know, what would I do right now if I was just starting? I’d probably go back and buy another duplex. Honestly, just to see how that works and get my head around everything. Aside from that, I would find somebody I trust and invest it as an LP in a deal. I did a bunch of them, and that really helped me get comfortable with syndication, with larger deals, how to communicate to investors.
00:25:39:14 – 00:26:01:23
Steeve
You know, all of those things I learned a ton how to work with property management companies. When you’re not, you know, next door to the property where you can just drive over and see what’s going on. So investing as an LP, I think is, is hugely important for people. It gives them a great amount of experience, and it also gives them confidence where they can now walk the walk, talk the talk.
00:26:01:24 – 00:26:12:19
Steeve
You know, they’ll be taken more seriously by brokers or other partners or their investors, you know, once they do decide to actually be a general partner in a deal.
00:26:12:21 – 00:26:31:00
Rod
Yeah, sure. I mean, it goes right on your resume, you know? And the beautiful thing is you can say, yeah, I’m an investor in 300 doors. You may be a limited partner investor, but you can say you’re an investor in 300 doors, that you’re not lying. And, and, and, you know, it affects your, your resume in a big way.
00:26:31:02 – 00:26:49:07
Steeve
More importantly, again, you know, the the idea that you’re actually learning, you’re learning how to underwrite, you’re learning property operations. So before you’re taking on that general partner role, you’ve actually seen a few things. And again it’s going to grow your confidence. But it’s also going to grow your investors confidence in you because you’re actually doing these things.
00:26:49:12 – 00:27:14:17
Steeve
And again especially today with with all that, we were just talking about the current market conditions. It’s really hard to operate profitably right now. Yeah. And it’s also difficult to tell like what’s a good deal. What’s not a good deal compared to 2022. Right. If you if you’re trying to compare your price per door today versus price per door from a comp from a year or two ago, because there hasn’t been a lot of things trading on the market in the past couple of years.
00:27:14:19 – 00:27:26:03
Steeve
Right. So you’re looking at these comps that are older, but they’re 20% higher than they should be. If you’re looking at two years ago. Right. So you should be buying a at least a 10% discount today if not more.
00:27:26:05 – 00:27:26:11
Rod
Yeah.
00:27:26:11 – 00:27:28:17
Steeve
And real quick goes into that. Yeah.
00:27:28:17 – 00:27:44:21
Mark
Real quick before we end on that point of the LP, I’m not I’m not trying to pitch the warrior program more, but you know, including us and a lot of Warriors as an LP, a lot of them will give you more of an inside scoop as a passive investor than, you know, a lot of other, syndicators out there.
00:27:44:21 – 00:28:00:18
Mark
Like, we record our team calls, we record our property management calls and all LPs. They can be as involved as they want to learn those things and even go walk the property with us. And so we give them that inside scoop, whereas some other syndicators might not be willing to do that for you.
00:28:00:18 – 00:28:20:05
Steeve
Yeah, I agree well within the warrior group and it helps to write that. So the the LP that’s maybe a newer warrior is now getting immersed in this world. They’re starting to understand a lot better. And they’re going to ask a lot better questions. And there’s nothing I like more than an intelligent question that comes back from from an investor update that I sent out.
00:28:20:07 – 00:28:24:18
Steeve
So we’re happy to dig into those details with with people that want to have that conversation.
00:28:24:20 – 00:28:37:03
Rod
Yeah, yeah. No question. It’s, it’s it’s going to be exciting to see where you are another four years from now. But, anyway, it’s great to see a brother and, if I don’t talk to you, I have have a wonderful holiday, my friend.
