From Operating On Hearts To Operating Multifamily Deals

Full Transcript Below

Intro
Hi, my name is Rod Khleif, and I’m the host of “The Lifetime Cashflow Through Real Estate Investing” podcast. And every week, I interview Multifamily Rock Stars and we talk about how they build incredible wealth for themselves and their families through multifamily properties. So hit the “Like” and “Subscribe” buttons to get notified every Monday when a new episode comes out. Let’s get to it.

Rod
Welcome to another edition of The Lifetime Cashflow Through Real Estate Investing. I’m Rod Khleif, and I am thrilled that you’re here. And I know you’re going to get tremendous value from the nice gentleman I’m interviewing today. His name is Harry Nima Zegarra. And he’s a critical care and pulmonary medical physician and he’s springboarded that into a multifamily career and single-family as well. It’s mostly a single-family portfolio, but he’s in over a 1,000 doors as a General Partner in the Dallas Fort Worth area. And, yeah, we’re going to have a lot of fun today. Welcome to the show, Harry.

Harry
Hey, Rod, yeah, thank you so much. I’m very honored to be here today with you.

Rod
It’s kind of you to say that. Thank you. So, you know, why don’t you give us a little background, you know, to come from a very high-paying you know, medical career to be doing this? And maybe you’re still– are you still a practicing physician? You’re still doing both?

Harry
Yeah, that’s correct. Yeah.

Rod
Okay.

Harry
I’m still a full-time pulmonary and critical care doctor here in the Dallas Fort Worth area.

Rod
Wow. And to do that– and you’ve got kids, I know you’ve got two boys and to build this portfolio on the side, very impressive, brother. So give us a little of your background, if you would.

Harry
Yes, absolutely. So yeah, just to get started. So my wife and I, we both are physicians actually, we’re from South America, from Peru. We came here after we finished medical school. That was about 15, 16 years ago. And, you know, because of the nature of medicine, you need to continue your training after you finish your medical school. You need to do more years of residency, sub-specialization, like fellowship, and all of that. But we also came on a visa, like most foreign physician comes. So we needed to do some extra years, kind of help in the community, right, in other areas. So it has been a long journey, right? In part because of that and also because of the nature of moving every three to five years from place to place because of the training, we couldn’t get started actually in real estate until about five or six years ago when we moved here to Dallas Fort Worth. So it has been a long journey in terms of medicine, which again, by the way, we still love medicine. And as you know, I still a full-time practice doctor, right? But yeah, I mean, like we have other interests in life and we were very passionate about real estate. And as you said, we were involved in commercial and also in residential real estate. So that’s how we started.

Rod
So where did that desire for– I mean, you know, medicine or becoming a doctor is not an easy thing and it takes a lot of effort, a lot of passion, a lot of work. Then to shift gears is a big deal. Where did that desire to move from what you both love, which is medicine, to real estate? Where did that come from? Was there someone in your past? Was there–

Harry
Yeah.

Rod
Talk about that.

Harry
Yes. So I know, and also it takes a lot of time, right, because if you can imagine, the medical school with college is about five to six years plus residency and specialization another five to six years.

Rod
Right.

Harry
You’re talking about your 12 years, right?

Rod
Right.

Harry
So Yeah, no, I mean, I could say like– I mean, all these entrepreneurial are doing things outside medicine. It comes from our families, right? Again, like I was telling you a little bit more in detail. We’re from South America. We’re very blessed and grateful that we’re the first generation in our family that was able to go to college. Actually, my mom and dad, they weren’t able to do that. So they needed to work very hard in general in doing different things and business and things like that. And one of them– so my mom, she owns real estate and she still owns real estate back in my country. I mean, of course, that’s very different than owning real estate in the United States, right, like you can imagine in a third-world country. I mean, like the rules are completely different. The lending space is way different. But yeah, so I got all that drive, all that interest in entrepreneurial things from family.

Rod
Oh, that’s fantastic. You know, it’s interesting. I got in the real estate for the same reason. My mom bought the house across the street and unfortunately, it caught me before college. So I never went to college. You know, I told her, you made 20,000 on this house and you didn’t do anything. And this was when 20,000 was a lot of money. You know, I was like, forget it, I’m going to do real estate. So I’ve done it my whole life. So you started in a single-family, I assume, just like everybody else does, right?

Harry
Yes.

Rod
And then you decided to move into multifamily. I know you found a local mentor, a guy we both know and like. And– we’ll talk about that for a minute. How do you feel about the significance and value of having a coach or a mentor to help you in this journey and having an ecosystem? Because I know, like I said, he’s a buddy of mine and he has an ecosystem. Talk about why you did that.

Harry
Absolutely. Having a mentor, either a paid mentor or a non-paid mentor is huge. It’s very important.

Rod
Right.

Harry
Either you do that in single-family homes or you do it in commercial real estate. Right? The stakes are way higher. As you can imagine, in single-family homes is your own money and you can do right or wrong and you commit your mistakes and that can be painful. But in commercial real estate, we’re talking about millions and millions of dollars. The most important thing, we’re not just talking about your own money, but we’re also talking about your investors’ money.

Rod
Sure.

Harry
So that’s why it’s one of the things that drove me to the decision to get a mentor, right?

Rod
To get help, yeah.

Harry
When I was starting, actually, I was doing my own due diligence and my education, right? I was going to two different meetups and conferences. I got to talk with someone and he kind of explained it to me. If you want to go to commercial real estate and do these bigger deals and these bigger properties, you need one of three things, right? Either you have a lot of time, or you have a good network, or you have a little bit of capital and you can invest in yourself. Right? So as you can imagine, like a full-time doctor with two very active kids, I mean, it was going to be very difficult to do everything on my own. So that’s why I decided to invest in myself. And that’s something that I usually recommend to anyone who wants to get started in commercial real estate, to do this, right, to do the due diligence, and to look for a mentor they can rely on. And also as important as the education it can be, the network of that mentor or the network of those persons who have been in for a long, long time in the game is invaluable.

Rod
Yeah. Now, guys, this isn’t a massive plug for my Warrior program, but I don’t care if you come to me or you go to a mentor– you know, somebody else, but get help. Okay? This business has enough complexity that, you know, there are people that have done it on their own, but it’s just going to take a lot longer. And, you know, you’ve built up a portfolio of over a 1,000 doors in less than five years, which, you know– with everything else you’ve got going on is pretty freaking impressive, honestly. And you talked about network, and, you know, I know that our friend Mark has a great network, and so do I. You know, I will tell you, I think my students own upwards of 150,000 doors now, and I’ve only been teaching five years, and most of those are done between Warriors. That’s what we call my coaching students, Warriors. And it’s just an extraordinary environment. In fact, it’s funny that we’re having this right now, this Wednesday, and Saturday, I’ve got 300 of my Warriors coming to Sarasota here.

Harry
That’s awesome.

Rod
We’re preparing for a Warrior-only event where we go deep dives on underwriting. And the main reason we did it was to facilitate those connections you know so that people– because a lot of people are very shy and so I force them to get up and meet each other because it’s been proven to be so successful. Now, I know now in your team, because we know this is a team sport, that you focus a lot on raising capital. So I’d love to talk about raising capital because honestly, you know, in this environment, people are becoming afraid. It could be an ugly recession. A lot of people are saying it’s going to be. Some people are saying it’s not, but a lot of people are saying it are, it will be. And so, you know, whether they’re right or wrong, there’s going to definitely be some fallout, particularly in the bridge debt space, for sure. We’re already seeing that. But let’s talk about raising capital. Let’s talk about you know, what it takes to go out there and raise money for a deal. So can you maybe talk about some of the strategies around that? Because I think raising the money is going to be harder than finding the deals over the next couple of years.

Harry
Yes.

Rod
So go ahead and speak to that because that’s a really– in fact, I just finished a book on raising capital. I got the rough draft literally today, and I’m spending a couple of hours this weekend on it because the students have been asking for it. So I don’t talk about it enough on the show, so I’ll stop babbling and please, please, let’s talk about it.

Harry
Yeah. No, I mean, it’s a process, right?

Rod
Yeah.

Harry
It’s a process in change of how you approach people, in change even on your mindset, right? Because what happens with many people who are starting in this business and in the capital raising and in the private equity is that they initially start this with the wrong mindset, right? So I’m pitching out something. I’m going to try to get the money from my investors, something like that. It takes some time–

Rod
So you’re saying they’ll jump right in and say, hey, come invest in this deal. They’re getting the cart before the horse is what I’m hearing, correct?

Harry
Yes.

Rod
Okay. When you say mindset, you don’t go at it like too aggressively. You build a relationship. Is that what you’re saying?

Harry
Yes.

Rod
Okay, got it.

Harry
Exactly. Yeah. And that starts from the beginning, right? And sometimes what you need to get started initially is in providing value and also education to your friends and to your possible investors, right? There’s one very important thing that people tend to invest or tend to do things in things that they are familiar with or things that they understand. And guess what? What’s the most easy way to invest in the United States? In stocks or funds or mutual funds or REITs, right? But they don’t have the education that they can do so much more outside that. And just not necessarily in real estate. There are other ways that you can invest, like in ATMs, in energy, carbon capture, and different things.

Rod
Sure.

Harry
So that’s the first step, right, to give your friends or your possible investors value and education.

Rod
Let’s elaborate on that for a minute. Sorry, I interrupted, but you hit on– probably the most important piece. Now, we also happen to live in the greatest time on earth from a connection standpoint with social media. I mean, you know, my podcast is at 16 million downloads. I’ve got a Facebook group with 50,000 people in it. And so, there are all these vehicles to start creating some reach and adding value. But what you just said, you know, I just did a course on social media, and one of the biggest things I hammered home on that is there are two pieces to this. One is you add value. That’s the number one piece. The second piece is you’re consistent. So if you’re communicating with people and you’re educating them and you’re consistent, you don’t need a millions like I have or anything like that. You get a couple of hundred people that you’ve connected with and you’ve added value to when you have a deal, then it’s so much easier to have that conversation. Would you agree?

Harry
Absolutely.

Rod
Yeah.

Harry
100%.

Rod
Now, do you do any social stuff as far as creating reach, or is it just one-on-one with people in the medical community? Or how do you go about starting to build those relationships? Is it through networking events? Talk a little bit about how you create those initial contacts. I know what you do after the fact. I’m sure you’re sending emails and all of that, but what do you do initially? How do you get those initial connections?

Harry
Yeah. So it has evolved, right? So initially, as you know, I was in single-family homes and long-term rentals. My friends and family, they knew about what I was doing. They knew that I was, to some degree, successful in that space. So the first step is just to get out there and just to communicate and to let other people know what you’re doing, right?

Rod
Right.

Harry
So they knew about that and also they were very aware when I switched to commercial real estate. So that’s one of the things. I mean, as simple as it sounds, just to let other people know, not being salesy or anything like that, but just to let other people know what you’re doing and how you can provide value. The second thing is, again, the value and education. In my case, I also have– I mean, as physicians, as you can understand, we love education and we love to teach. I’m actually a physician in a tertiary center here in Dallas Fort Worth, where we work with residents, with fellows, with medical students. So we also, in real estate, we like to educate people. We also have our YouTube channel like in my company.

Rod
Fantastic.

Harry
So we do some education in general about mindset, about real estate in general, and also in syndications.

Rod
Fantastic. So there you go. You’ve harnessed social media and, you know, you can do it on YouTube, you can do it on Facebook, you can do a podcast, you can do a meetup group. In fact, that’s all there was, you know, years ago. And the people that first started this business, they would do a– they call it a real estate investor club meeting, REIA meetings. It was before the meetup. And then they raised tens of millions of dollars by meeting with 30, 40, 50, 100 people on a monthly basis. And so, you know, social media has just made it so much easier. And Youtube is an incredible channel. Linkedin is another one. I just got interviewed today on somebody’s LinkedIn channel. So, you know, and something you said about letting people know. I tell my students this if they hold still long enough, they better darn well know what it is you’re doing. You know, you need to do everything you can to get asked the question, what do you do? And then, you know, I’m so glad you asked and you respond, right? So you add value, you teach, and I’m sure that you’ve got some sort of an email nurture campaign where they’re getting regular emails. Do you utilize the CRM for that?

Harry
Yes, we use ActiveCampaign for that.

Rod
Active Campaign is fantastic. We use HubSpot. There are lots of good ones out there, guys. There are Insightly, Zoho, really simple systems. Yeah.

Harry
Yeah. Mailchimp. There’s a lot.

Rod
Mailchimp. Exactly. So lots of options for that. But the reason you use a CRM is it keeps track of everybody because you’re getting in this business, you’re making lots of new connections, potential investors, potential partners, you know, even sellers. And so you’ve got to track all that and make sure you stay on top of it. So CRM stands for Client Relationship Management software. And so you do that. Once you’ve got people that are invested in your deals, do you continue that education? Talk a little bit about that because in our case, you know, we do webinars and I kind of try to show people behind the scenes. You know, open the kimono. Here’s what we’re doing back here that I can’t possibly teach from the stage. Do you do any of that with your investors or let them show up at your assets or anything like that?

Harry
Yes, absolutely.

Rod
Yeah.

Harry
So we have our newsletter and we send updates every two weeks, right? Again, it’s like industry standard. Again, every time we close a project or a deal, we buy a project, we send the information about that. We send updates every month. We send financial updates every three months.

Rod
Right.

Harry
Also in our newsletter, we have a blog where we teach the different aspects of how’s the process of investing and what happens also after you invest, right? Because that’s important because no one tells you that or no one teaches you that. Like in Wall Street, you just put your money there, and then you forget about that, right?

Rod
Right.

Harry
And you don’t know what it’s doing or who’s working with your money.

Rod
And you hope for the best.

Harry
Exactly.

Rod
And I will tell you, I just saw an economist. He was a strategist for one of the big– oh God, I’ve got to find that article. But it was just like within the last week who said that the stock market is expected to decline by 26% this year. Now, you know, that’s a fourth of the value– you know, that’s some sobering stuff. It’s funny, people will give their money to a stockbroker. And what’s sad is most of these stockbrokers are just salespeople. They’re not analysts. They’re not charting the stocks. They’re not experts in the stocks. And so, in that vein, guys, you know, if you’re an accredited investor and you are thinking about investing in an asset, for God’s sake, educate yourself. Come to one of my boot camps. They’re ridiculously reasonable. I don’t sell anything there but don’t give your hard-earned money to someone unless you’ve evaluated it. Would you agree, at least at a high level at the very least, would you agree, Harry?

Harry
Yes, absolutely. Like also, you’re saying there’s completely lack of transparency in the stock market compared to what we do, like this indication where again, are you able to talk with the CEO of Apple or like Walmart or Amazon? Absolutely not. Right?

Rod
Right.

Harry
In the case you invest in a syndication or a fund, you’re able to speak directly with your operator and ask questions, and he or she is supposed to answer that in the first 24 or 48 hours.

Rod
That’s a really good point. Very good point. Yeah. And some investors will come in, they’ll start to invest passively, and then they’ll take an interest in possibly becoming an operator themselves. I don’t know if you’ve seen that. We see that all the time.

Harry
Yes.

Rod
Yeah, sure.

Harry
Yes. So one of the things that we try to do is, again, educate but also give options to people who approach us, right? Again, as great as syndications are, they’re not the only way to invest in real estate. Again, there are many people who don’t have the time or they don’t have an interest in real estate, but there are some people who have a little bit more time and they have a passion like you or me in real estate. So why not to bring another member to the active space in real estate? Absolutely.

Rod
Yeah, love it. So that was capital raising, guys. It’s just building relationships and not being salesy and being yourself and being honest and having integrity and communicating. And, you know, if you’re introverted and, you know, you don’t love that, you just got to push yourself. You have five seconds of courage and say, hey, I’m Rod. I don’t think we’ve met. And what I used to do is I used to have a list of questions in my back pocket so I didn’t fumble. And this is a true story. And I would just push myself to say hi, and then I would just ask questions. And of course, if you’re asking questions, you’re driving the conversation number one, anywhere you want. And people think it’s the greatest conversation ever because they’re doing the most of the talking. You know, it’s from Dale Carnegie’s book, “How to Win Friends and Influence People”. You take a genuine interest in them. And that’s all it is, guys. Don’t overthink it. All right, so that’s capital raising. Now, I know you also do some asset management. Let’s speak to that for a few minutes because you know, I will tell you, there were a lot of operators that have not been through a downturn. You know, you could fog a mirror these last couple of years and make money in multifamily with the rents going crazy like they’ve gone. But it’s all changing right now and forgetting the debt. Rents are flat-lining, they’re starting to decline, vacancies are increasing. And right now, it’s going to be– asset management is a big deal. So talk about some of the things you do to– so I’m assuming you asset manage a property management company, yes?

Harry
Yes, absolutely.

Rod
Yes. So talk about the communication and the sorts of things that happen inside of that bubble.

Harry
Yes. No, so I 100% agree with you. I mean, as you’re saying, in the last three or four years, the returns were not sustainable, right? So again– or because of the increase of the rents or the compression of the cap rates, it was something that was not going to stay for that long, right? And we have seen that in many properties that we acquired, how the prior ownership team, they were not able to lay out the business plan, but it’s still because of all of that, they were able to give the credit, like returns to the investor. That’s not the case anymore, right?

Rod
Right.

Harry
That’s not the case anymore. Now, again, the most important part, as even more important than the underwriting and acquiring the property is the asset management. Right? And that can make or break a deal. That can make a great deal to go south or a bad deal to stay afloat or to go to a good end. So last year, I joined two partners and we were able to be the lead sponsors in this asset that we acquired last year around August in Dallas Fort Worth. So it’s 105 units here in Dallas Fort Worth, like a Class-C property. We have seen actually firsthand how important, how valuable, how key is to do the asset management in this property. It’s not an easy task. It’s very difficult because you now need to implement all these business plans. You need now to stay on top of your property management company. And we all know that the property management space is a very tough space. Right? They don’t necessarily get the best [inaudible]

Rod
There are a lot of people in that space that really aren’t that great as well. And I will tell you, you know, I’m sure you’ve probably already realized this, it’s less about the property management company and more about the people that they get onsite to work the property. If you get a good manager, even with a bad company, you’re likely okay. But if the reverse is the case, you’ve got a great company and they bring in the wrong manager, you can have problems. So talk about some of the things– how often are you meeting with that onsite team on that particular asset?

Harry
Yes. We have weekly meetings with the team.

Rod
Weekly.

Harry
But also as I’m local in this market and I’m like the boots on the ground on my team, I go every single week to the property.

Rod
You do.

Harry
I know that’s not a must or a need, but I feel that this is very important in this environment. Right? You don’t want to delay things a week or two weeks or three weeks because then it impacts tremendously like the NOI or Net Operating Income. So when you have a vacancy or two vacancies, you’ll say, oh, that’s maybe not going to affect that much. But if in the next week, you have another two, then that’s affecting your income.

Rod
Right.

Harry
That’s super important.

Rod
And then you have to find out why, you know.

Harry
Yes.

Rod
And you might walk the property and see trash and things that aren’t being taken care of and so on and so forth, and that’s an issue. Now, what KPIs do you monitor on a weekly basis with your property management team? Can you speak to that? Now, guys, these are key performance indicators or metrics. These are things that you measure and keep track of on a regular basis. What do you watch?

Harry
Yes. So we watch for the occupancy, for the lease and sign, for the traffic, for the work orders, right, for the people to–

Rod
So on the work orders, guys, you want to see how many are open and how long they take to fix because if they’re not taking care of these people, they’re going to move, right?

Harry
Yes.

Rod
They need to be taken care of.

Harry
That’s one of the most important things actually. Again, they are not going to stay in your property. And again, it just takes a couple of months until you start seeing that turnaround very quickly if you have a good service where they live.

Rod
Yeah. And they need to be following up and asking them if they’re happy with what they did. And that’s one of the biggest issues because I’m going to tell you, your biggest expense in multifamily is turnover. And you want to do everything you possibly can to lower your turnover because you lose rent, you lose, you know, the fix-up, the make-ready. All of that costs a tremendous amount of money and directly impacts your bottom line. So you’re watching lease-ups, you’re watching traffic. Now, on the traffic guys, you know, you’ve got to look for any breakdowns in the system. Like for example, how many leads are coming in from the computer? What’s the response time on those leads? How many of those leads are converting to a visit to the property or an application? Then how many of those applications become leases? And you look for breakdowns in any piece of that system.

Harry
Absolutely. Yeah. On that point, on that, you will decide which one of those is working or not, and on which one of those you may not need to put your money anymore or you may want to double down on another source, right? That’s very important.

Rod
Yes. And so you’re checking work orders, renewals as well, yes?

Harry
Yes.

Rod
You’ve got them all working on renewals. If you’ve got a lease expiring, you know, you want to be two or three months out working those lease expirations to renew them into another year lease and, of course, do a bump if you can.

Harry
Absolutely.

Rod
Let’s see, what else do we monitor?

Harry
So we also follow the delinquency, also the CapEx, which many units are being under renovation and they’re ready to.

Rod
Right.

Harry
And also our draws and our reimbursements with the lender, right, which also is very important, especially at this moment where capital is so scarce.

Rod
Yes, yes, yes. Okay. Yeah, so these are all things, guys. You know, people think they buy a property and they give it to a property management company and they can raise their hands and then they’re, my work here is done. No, you’re just getting started. In fact, when we put together a syndication deal and we carve up the pieces, the biggest piece is the asset management because it goes on for five years, you know.

Harry
Absolutely.

Rod
You know, that’s the biggest chunk out of the deal. But, well, listen, I know the name of your company’s Nima Equity and I really appreciate you coming on and adding some value today, Harry. It’s a pleasure to meet you. And, you know, I’m in Dallas– we’ve got several assets in Dallas, actually, and we love that market and definitely want to buy more. So maybe our paths will cross again one day, my friend.

Harry
I hope so. I hope so. Yeah, and actually, I know a couple of your Warriors here from Dallas Fort Worth.

Rod
Do you really?

Harry
His name is David Turner and Liz Thomas. Yeah.

Rod
Oh. yeah. Yeah.

Harry
And they’re here.

Rod
Sure, sure, sure.

Harry
And they’re great guys. And in the last two years, I’ve also seen how they have grown in your programs. So, that’s awesome.

Rod
Yeah, thank you. I appreciate that. Well, listen, it’s great to meet you and we’ll definitely stay connected. Thanks, Harry.

Harry
Awesome. Thank you so much. Thank you, guys.

Outro
So one other quick thing. We encounter so many people that are frankly frustrated. They’re looking in the mirror and they’re frustrated that they haven’t been able to escape the rat race. They haven’t been able to build cash flow to the point where they’re able to have financial and time freedom with their families. And maybe they see other people buying real estate and creating incredible cash flow and they think, Well, it’s just scary. Buying apartments is intimidating. I get it. See, that’s why we created our Warrior Mentorship Program. They’re our coaching students and they’ve had extraordinary results. My students, I’ve been teaching about five years and they own upwards of 140,000 units now that we know of, right? And we feel like it’s just getting going. Now, we’re looking to grow this group and really take it to the next level and honestly believe that the greatest transfer of wealth could be upon us right now with this current economic environment. Everything’s going on sale. So we’re looking for people who want to follow a proven framework, really like a blueprint or a map, literally step by step. And then they’re able to leverage our systems and our incredible network to raise money and equity to find deals and close those deals and build partnerships, really nationwide. So if you’re interested in finding out more about how you can become more in our incredible network and take advantage of the unbelievable opportunities that are upon us, you can apply to my Warrior Mentorship Program by texting the word “CRUSH” to “72345”, or you can go to “MentorWithRod.com” and what we’ll do is we’ll set up a call so you can check us out and we can check you out and see if it’s a fit. Now, again, you can go to “MentorWithRod.com” or text the word “CRUSH” to “72345” to apply, and we will speak soon.