Why Smart Investors Are Buying Right Now (Even With High Interest Rates)

Multifamily Real Estate Investing During Market Cycles

Multifamily real estate investing during market cycles requires adaptability, patience, and a long term vision. In this episode, Gabe Johansen shares his journey from the car business into controlling thousands of multifamily units through brokerage ownership, property management, development, and syndication. He explains how understanding real estate as a people business rather than just a numbers game helped him scale across multiple verticals. His experience shows that success comes from building strong systems while putting the right people in place to execute the vision.

From Car Sales to Multifamily Ownership

Gabe Johansen began his career in the car business at fourteen and spent twenty years mastering sales, negotiation, and creative deal structuring. Those same skills later became the foundation of his success in multifamily real estate investing during market cycles. After transitioning into apartment brokerage, he learned underwriting, deal analysis, and acquisition strategy before moving into ownership. Over time, he acquired a brokerage, a major property management company, and built a vertically integrated real estate platform that manages thousands of units.

Vertical Integration as a Competitive Advantage

One of the major themes of the discussion is the power of vertical integration in multifamily real estate investing during market cycles. Gabe’s company controls brokerage, property management, in house maintenance, development, and fund management. This allows him to control expenses, protect occupancy, and stabilize performance even in challenging markets. He explains how in house maintenance teams reduce downtime, protect cash flow, and give owners a major advantage when competing for tenants in softer markets.

Navigating Market Cycles and Interest Rate Shifts

Gabe provides realistic insight into how multifamily operators must adjust during shifting market cycles. Rising interest rates, slower transaction volume, higher expenses, and post Covid rent resets have forced operators to be more disciplined. He emphasizes that sustainable rent growth matters more than short term spikes and that today’s market offers some of the best buying opportunities he has seen in his career. Multifamily real estate investing during market cycles rewards those who stay patient while positioning themselves for the next expansion.

On Site Management and Asset Performance

A key operational insight from Gabe is the critical importance of strong on site managers. He explains how one exceptional on site manager can dramatically improve occupancy, control costs, and stabilize performance, while losing that person can quickly damage an otherwise strong asset. Systems matter, but people ultimately determine success or failure in multifamily real estate investing during market cycles.

Seller Partnerships and Creative Structuring

Gabe also discusses how keeping sellers in the deal through seller financing, joint venture equity, or structured exchanges allows investors to reduce capital requirements and improve returns. These creative structures are especially powerful in uncertain market cycles when traditional financing becomes harder to secure. Partnering with sellers aligns incentives and creates win win transactions in slower markets.

Guest Bio

Gabe Johansen is the President of SMI Real Estate and a multifamily investor, developer, broker, and property management operator based in the Pacific Northwest. He controls over a thousand units, manages approximately five thousand doors, and leads multiple real estate platforms including a fund management company and a development firm. With over a decade of investing experience, Gabe specializes in vertically integrated multifamily operations and ground up development.

If you want to hear the full conversation and detailed insights, watch the podcast video or read the complete transcript below.

What is multifamily real estate investing during market cycles?
Multifamily real estate investing during market cycles refers to buying, operating, and selling apartment properties while adjusting strategy based on economic shifts such as expansions, slowdowns, and recessions. Investors focus on long term fundamentals rather than short term market swings.

Why is multifamily real estate investing during market cycles considered resilient?
Multifamily housing remains in demand across all phases of the economy because people always need a place to live. Even during downturns, rental demand often increases as fewer buyers qualify for homeownership.

How do rising interest rates affect multifamily real estate investing during market cycles?
Rising interest rates can reduce buyer demand and increase debt costs, which often leads to price corrections. This creates opportunities for disciplined investors to acquire assets at better pricing with stronger long term upside.

What strategies work best for multifamily real estate investing during market cycles?
Successful strategies include conservative underwriting, fixed rate or protected financing, strong property management, and buying assets with operational upside. Long term investors also focus on sustainable rent growth instead of short term spikes.

Is multifamily real estate investing during market cycles good for beginners?
Beginners can succeed by partnering with experienced operators, investing as limited partners, or focusing on smaller stabilized assets. Education, mentorship, and disciplined deal analysis are essential for managing cycle related risks.

How does vertical integration help during market cycles?
Vertical integration allows investors to control brokerage, property management, maintenance, and leasing in house. This improves expense control, protects occupancy, and increases performance stability during shifting economic conditions.

What role does property management play during market cycles?
Strong property management is one of the most important success factors in multifamily real estate investing during market cycles. High performing on site teams directly impact occupancy, resident satisfaction, and expense control.

Do seller financing and creative deal structures matter during market cycles?
Seller financing, joint ventures, and structured equity partnerships become more powerful during tight credit environments. These tools help investors close deals while preserving capital and reducing financing friction.

What makes now an opportunity for multifamily real estate investing during market cycles?
Shifting debt markets, slowing transaction volume, and motivated sellers are creating opportunities for buyers with strong underwriting standards. Investors who position themselves today often benefit most in the next expansion phase.

Disclaimer: This summary was written with the help of AI and reviewed by Rod’s Team.

01:18:30:01 – 01:18:46:05
Rod Khleif
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01:18:46:08 – 01:19:05:01
Rod Khleif
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01:19:05:05 – 01:19:21:01
Rod Khleif
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01:19:21:04 – 01:19:42:01
Rod Khleif
Now don’t wait. Text the word bootcamp to seven, two, three, 4 or 5 or go to Rod’s bootcamp.com right now and you’ll see what hundreds of people have said about the event at the bottom of that page. Get your ticket immediately. Again, that’s boot camp to 72345 or go to Rod’s Boot camp.com right now and I’ll see you soon, my friend.

01:19:42:03 – 01:20:04:09
Rod Khleif
Welcome. This is the lifetime Cash Flow Through Real Estate Investing podcast. This is where you’ll learn strategies to help you achieve lifetime financial freedom through real estate investment. Your host, Rod Cleve, has owned over 2000 homes and apartments, and he brings experts in all aspects of real estate investment and management onto the show.

01:20:04:12 – 01:20:24:16
Rod Khleif
Now, here’s your host, Rod Khleif. Welcome back to lifetime cash flow through real estate investing. I’m Rod Khleif, and I’m thrilled you’re here. We’ve got a very interesting gentleman on today. His name is Gabriel Hanson and he’s the president of SMI Real Estate. And he’s in, you know, a whole bunch of doors. I think, well, over a thousand door, 1400 plus doors.

01:20:24:16 – 01:20:32:15
Rod Khleif
And, he’s got a very unique story. And, he’s from the Pacific Northwest. And we’re gonna have some fun today watching the show game.

01:20:32:17 – 01:20:34:24
Gabe Johansen
Thanks for having me on, rod. It’s a pleasure.

01:20:34:26 – 01:20:45:22
Rod Khleif
Thank you. So. So, Yeah. Why don’t you tell your story? It’s it’s, it’s very interesting as I was reading your bio, I was I was very intrigued, so I’d love to hear it from. From your mouth. Sure.

01:20:45:22 – 01:21:03:27
Gabe Johansen
Yeah. My professional career started at age 14 on my dad’s car lot. My dad was a car dealer, so I spent 20 years in the car business. I saw that you, interviewed Grant Cardone recently. Grant was one of my heroes. And actually, I was Cardone certified in the car business. He has a sales training system that I went through.

01:21:03:29 – 01:21:20:23
Gabe Johansen
Actually, I had a phone call with him once. It was one of the most interesting calls I ever had, where he called me and asked me to get on the loudspeaker and ask every single person in the car dealership to log onto their computer and vote for him as the number one sales trainer in the US. So I always appreciated Grant’s hustle.

01:21:20:25 – 01:21:21:18
Gabe Johansen
I he’s.

01:21:21:18 – 01:21:27:26
Rod Khleif
A funny guy. I laugh my ass off. He’s been on the show twice. I laughed my ass off every time I talked to him. Yeah.

01:21:27:29 – 01:21:47:09
Gabe Johansen
Amazing story, but no, I spent 20 years in the car business. Is is, That’s a difficult way. I guess all business can be hard, but we were, selling Nissans in Salem, Oregon. So we’re a tertiary brand and a tertiary market. Sounds probably more glamorous than it was. Oh, my friends thought I was rich. But I really wasn’t.

01:21:47:09 – 01:22:04:03
Gabe Johansen
I was just hustling and learning how to work the long car hours. I, so, yeah, I spent 20 years in car because I was a teenage parent. So I got my girlfriend pregnant, and we had our first baby my senior year of high school. I got married in between my junior and senior year of high school. Wow.

01:22:04:04 – 01:22:25:05
Gabe Johansen
And, yeah. So I had a family to raise. I only did a couple of years of college, and then I had to I had to learn how to produce. So, that’s how I did it. I learned sales and marketing through cars. And, after 20 years doing that, my dad was ready to retire. It was supposed to be my business one day, but ultimately, that wasn’t in the cards.

01:22:25:05 – 01:22:42:06
Gabe Johansen
And so I didn’t really know what I was going to do with my life after that. I had a friend in real estate who owned a property management company, and real estate brokerage, which I owned today. And he pulled me aside and said, what are you going to do when you’re done with cars? And I had many offers to stay in the car business, but I wanted to do something different.

01:22:42:06 – 01:23:01:22
Gabe Johansen
The car dealership was really my dad’s dream. He always, you know, it’s very difficult to become a new car dealer and so he achieved a lot for, you know, for where he worked his way up from a car salesman to owning a car dealership. But I had a different dream. And, so my friend invited me in, and he hooked his desk to mine, and I became an apartment broker.

01:23:01:25 – 01:23:24:15
Gabe Johansen
And so, come to find out, if you can sell cars, you can sell just about anything. And so he taught me how to underwrite deals, how to look for deals, how to do deals. And so that background, you know, every single day you’re trying to put car deals together. And in the world I lived in, most of the people buying cars really didn’t have the credit too, or the money to afford to be buying the cars they were buying, which is one of the things I really didn’t like about the business.

01:23:24:15 – 01:23:40:17
Gabe Johansen
But I had to be constantly thinking of creative ways in order to put people into the cars they wanted to drive. And, so that translated over to real estate and, you know, early on, I found out that you can leverage into deals and you could do creative structures. And so that’s kind of the way my brain works.

01:23:40:17 – 01:24:03:09
Gabe Johansen
I take a more artistic approach to real estate than some. I’m not very scientific, but I understand people. And that’s kind of how I look at real estate as a, as a people business. Not really a building business. So, so I took that in. I started doing, apartment brokerage, found some success in that and ultimately ended up buying the brokerage that I was working for was just a few of us brokers.

01:24:03:09 – 01:24:27:25
Gabe Johansen
When I got started. We’ve grown that today to 50 brokers. And so that’s the only real estate company. We do commercial and residential now with a with an emphasis on multifamily. So multifamily has always been kind of, at the center of everything for me, about five years into owning the brokerage, the people who had sold me the brokerage also owned a property management company, a large one here in the Willamette Valley, and they wanted to retire from that.

01:24:27:25 – 01:24:45:14
Gabe Johansen
And it worked out for me to be able to buy the management company as well. So I picked that up and bought another large management company out of Portland. And today we manage around 5000 residential doors. So, I’ve been in the property management business for about five years, but my investment career started a little over ten years ago.

01:24:45:14 – 01:25:10:07
Gabe Johansen
My mentor, Brian Miles, who brought me in, he told me he wasn’t going to teach me real estate unless I was going to be an investor. And my first question to him was, can we skip the brokerage part and go straight to investing? Because that sounded more exciting to me. And, he said, no, I think you really gotta you really gotta, learn how to find the deals, win the deal, so on and so forth, and learn how to value deals and, and, you know, turnover stones.

01:25:10:07 – 01:25:20:24
Gabe Johansen
I think that was really good advice. I think to anybody out there listening that wants to learn how to be successful, I would highly recommend, if you’re very young, to go sell cars for a couple of years because you’ll sell anything.

01:25:20:24 – 01:25:22:25
Rod Khleif
Honestly, right? Yeah, yeah.

01:25:22:25 – 01:25:36:05
Gabe Johansen
So go get your teeth kicked in, learn how the world works. I think that’s a good way to do it. But as soon as you’ve had that experience, get out as soon as possible and get into real estate. And the sooner you can buy buildings, the better. So, owner, I’m sure you teach the same thing.

01:25:36:08 – 01:25:41:10
Rod Khleif
Hallelujah! My hands are to the sky right now. Hallelujah. No, I think personally I agree.

01:25:41:10 – 01:26:06:14
Gabe Johansen
It’s in that everybody a conversation without telling people they need to own more real estate. So. Oh, that’s that’s the background. I, it took me a few years to find my first deal, and I started buying, just before I turned 40, and I just turned 50, on the 11th of this month. So I’ve been a little over ten years in investing, but, really just fell in love with the idea of owning buildings and understood the value of holding hard assets.

01:26:06:14 – 01:26:21:02
Gabe Johansen
And I love the idea that you can leverage in and learn some new structures and ways to buy real estate with not a lot of money, because I really started with nothing. I was on unemployment when I got my broker’s license, and I had a nest egg of about ten grand. So that’s where it all started from.

01:26:21:02 – 01:26:41:09
Gabe Johansen
But, yeah, I worked my way up and, ended up owning the brokerage and owning the management company. And then from there, we’ve expanded now into syndication. We do, like a kind of a 721 up REIT. We have SMI fund management, where we allow people to contribute their real estate into our fund for, exchange of shares of our portfolio.

01:26:41:11 – 01:26:58:27
Gabe Johansen
And then we also have, a vertically integrated company called Stack Asset Group where, separate from the SMI companies. But SMI is closely related because that’s kind of the management arm of everything. So, we, we do ground up development, we do heavy value add. And so much like, I’m sure a lot of your guests, I’m playing in the multifamily space.

01:26:58:27 – 01:27:14:06
Gabe Johansen
We’re looking right now. We’re in the West Coast, so we’re an equity market. We buy, for the equity parts. We try to get some cash flow, but it’s a lot harder to get that cash flow here is, you know, than it is in the middle states. So we play the equity game out here on the on the West Coast, or at least in Oregon.

01:27:14:08 – 01:27:35:18
Rod Khleif
York. Yeah, that’s scary to me. I’ll be honest. That’s that scares the shit out of me. I’m all about cash flow. I know I’m all about cash flow. Yeah. My, my, the subtitle of my book is called The New Rules of Real Estate Investing, i.e. the new rules focus on freaking cash flow. Because I tell I talk about losing $50 million, and it was the lack of cash flow that caused that to happen.

01:27:35:21 – 01:27:56:21
Rod Khleif
So property management, that is a thankless job. Let me tell you, nobody, nobody calls you when they’re happy. The owners don’t call you. I’ve owned a management company for decades. They don’t call you when they’re happy. Their owners don’t call you when they’re happy, and the tenants sure as hell don’t call you when they’re happy. But, but, but, you know, and you get burnout, I think, with your, with your managers from time to time, they just can’t they can’t do it forever.

01:27:56:21 – 01:27:57:06
Rod Khleif
But,

01:27:57:09 – 01:28:00:01
Gabe Johansen
It takes a special personality to want to be in property management.

01:28:00:01 – 01:28:02:12
Rod Khleif
Yeah, yeah. Thank you, thank you.

01:28:02:14 – 01:28:09:01
Gabe Johansen
So, so for me, I started at the top of property management. If I had to start and work my way up from the ground. Yeah, I’m not sure I could have done.

01:28:09:03 – 01:28:16:02
Rod Khleif
You know what? You want to make it. Yeah. But so. So, all your assets then are in your backyard then. So you manage your own assets?

01:28:16:04 – 01:28:29:08
Gabe Johansen
Yeah. For the most part, we are a little bit, I own in the north Coast and down into Roseburg and some other spots. And some of those we do use other management companies for, but I see a lot of assets that we own are managed by SMI.

01:28:29:11 – 01:28:35:04
Rod Khleif
Oh, that’s nice, that’s that’s awesome. So, so you’re doing some ground up development. What are you building?

01:28:35:06 – 01:28:56:17
Gabe Johansen
Apartments. Yeah. Okay. Three story stuff. We just did a completed a 66 unit last year and Astoria right on the on the water beautiful project. We’re just getting ready to deliver another 66. And seaside, which is a neighboring town to Astoria. We built 60, last year in, actually at the beginning of this year, we finished it down in Lebanon, Oregon.

01:28:56:20 – 01:29:07:06
Gabe Johansen
So, yeah, just, you know, just smaller stuff like that. You know, we plan to go, bigger as we get bigger. But for now, that’s kind of the sweet spot for us in that kind of 60 unified.

01:29:07:08 – 01:29:10:19
Rod Khleif
How do you put those syndications you do those one off syndications or how.

01:29:10:19 – 01:29:19:27
Gabe Johansen
Do you do syndication? The one in Korea is just a partner and I that own it. There’s a couple partnerships on that one. The other ones we’ve raised capital on. Yeah.

01:29:19:29 – 01:29:26:18
Rod Khleif
Nice. Nice. And and are you sticking with multifamily. Are you have any interest in other any other asset classes?

01:29:26:18 – 01:29:45:23
Gabe Johansen
We do some I have some retail. Oh, okay. One storage complex. We’ve looked at, doing some more storage, a little bit of office, but I’m not super hot on office. I’m just sort of in some of our mixed use buildings office. You can get some pretty sweet deals out there right now in office, but that’s a scary game, especially in our market.

01:29:45:25 – 01:30:05:29
Rod Khleif
You know what the occupancy is right now? I just I did a Facebook Live on this and I mean like San Francisco. Forget it. I mean, it’s like I, I’m trying to think it’s maybe like in the 60s percent occupied. But even cities like Austin, Texas, Phoenix, what was the other city. Oh, Atlanta. They’re all like 70% occupied.

01:30:05:29 – 01:30:24:22
Rod Khleif
I mean, it’s crazy. Yeah. I mean, you office. And here’s the problem with office. It you really can’t put much else in it. Maybe you could put storage in it, but you’re not going to turn it into apartments. People are like, oh, we’ll convert to apartments. No, because there’s interior offices, there’s no windows. There’s no, you know, the plumbing is it’s cheaper to build.

01:30:24:24 – 01:30:26:16
Gabe Johansen
So cheaper to knock them down and start.

01:30:26:17 – 01:30:30:09
Rod Khleif
Yeah, yeah, yeah. So yeah. Stat office. But, I.

01:30:30:09 – 01:30:52:13
Gabe Johansen
Love, you know, when I coming out of the car business, the way I related it was when I sat with my mentor. He said, I asked him, I said if I owned 100 units, how many people would pay me rent every month? And he said, well, you’d probably get like, you know, 95 rents or something. And in my mind, I thought if I had 100 cars on my lot, I had to sell every month, and I sold 95 of them, that’d be pretty good.

01:30:52:16 – 01:31:02:00
Gabe Johansen
So I fell. I fell in love with multifamily right out of the okay, very high occupancy rates. Somebody leaves. It’s pretty easy to find another tenant for that space.

01:31:02:03 – 01:31:20:12
Rod Khleif
Yeah, yeah. No, I, I’m actually looking at senior housing as well. Close on my first day I left a couple of months ago. I mean, that’s there’s a tidal wave of people, you know, getting old. So, you know, that’s something I’m very interested in, but, Yeah, well, thank you, 10,000 people a day turning 65. I’m one of them.

01:31:20:12 – 01:31:37:03
Rod Khleif
Turned 65 in January, so. Yeah. But, yeah. No, it’s, you know, and you got to pivot. I mean, there’s some real pain right now in the multifamily space. And, you know, and even with new development, I’m sure it was harder to raise money than it has been. You know, you know, I’ve gotten I.

01:31:37:03 – 01:31:43:15
Gabe Johansen
Think it’s much harder right now. And getting the debt and just I mean, all in all, every over the last few years have been super hard.

01:31:43:17 – 01:32:00:14
Rod Khleif
Yeah. You have any, any predictions for the future? I’d love to get your opinion. You know, as far as interest rates, things like that. I mean, I hear some people say that Grant, for example, thinks it’s going to be down under where it was before next year. I don’t believe it, but I hope he’s right.

01:32:00:17 – 01:32:04:18
Rod Khleif
Yeah, I do too. I do too, but I don’t know. I mean, you know, we’ve got a real.

01:32:04:23 – 01:32:27:17
Gabe Johansen
I don’t think that will happen. My prediction is that it will come down, but I don’t think we’re going to see those kind of rates. I think if we do, we’ve got bigger problems. Yeah. But I’m, you know, I’m not the expert on that topic. I think that rates are already coming to the point where we can transact again, you know, owning a brokerage, especially commercial focused and so rate driven, transaction volume has been way down.

01:32:27:17 – 01:32:43:19
Gabe Johansen
So just to be able to see deals happening again is is good. I read this morning that, you know, somebody came out and said, we’re kind of in the top of the first inning for this recovery of of this cycle. I would tend to agree with that. I think we’re just we’ve been dragging the bottom for a little while, and I feel like we’re coming out the other side.

01:32:43:21 – 01:33:03:11
Gabe Johansen
We’re seeing some valuations come back up, inching up a little. We’re seeing you know units are filling. They’re just not filling it. Covid type rents. You know we have had to deal with a lot more, vacancy and just doing a lot more concessions and that sort of thing. So it’s definitely been hard from the transaction side and the management side to keep the units full.

01:33:03:11 – 01:33:14:04
Gabe Johansen
But, all in all, I would say fundamentals are overall fairly healthy. But you can totally sense that on Main Street people are hurting, that there’s not as much money out there.

01:33:14:07 – 01:33:21:05
Rod Khleif
How’s your, how’s your landlord tenant law? I mean, you’re you’re in effectively a blue state. Yeah. Would you call it a blue state? I mean, yes.

01:33:21:07 – 01:33:41:21
Gabe Johansen
You are 100% blue state. Yeah. In our area. So where we’re at, it’s a little more purple, but definitely Portland. Another you know, when the West Coast tends to be more liberal. We have a very, very difficult landlord tenant laws. We were the first state in the United States to have statewide rent control. Right. And so that’ll tell you something.

01:33:41:21 – 01:33:55:17
Gabe Johansen
But typically we follow what Washington and California does. I would say it’s an easier market than Washington and probably California also, all in all, but, we do have very, very, strict landlord tenant laws.

01:33:55:17 – 01:33:59:04
Rod Khleif
You know, how as long as it take to get somebody out of an apartment, they’re.

01:33:59:06 – 01:34:24:19
Gabe Johansen
Not as bad as Washington. Washington can be months, but we can actually still evict on nonpayment or, you know, you typically, you know, you’re going to have to get a court date and everything. You know, after after Covid, everybody was afraid that we were going to have months and months of backlog going into court evictions. And what actually happened was they were getting them in very quickly, and people were getting evicted within days of the time that our eviction moratorium was lifted.

01:34:24:24 – 01:34:37:27
Gabe Johansen
So they put a restriction that it you have to have at least a 30 day gap between your hearing happens and when you file. And so they built more time into it because it was actually moving faster than what everybody was going to be.

01:34:38:00 – 01:34:43:17
Rod Khleif
So, so three months, six months, how long does it takes to get somebody out?

01:34:43:20 – 01:34:46:05
Gabe Johansen
I’d say you can usually do it in a couple of months.

01:34:46:07 – 01:34:56:19
Rod Khleif
Just a couple of months. Okay. So I had heard I had heard horror stories like, I don’t I’m trying to remember where it was. Was like a year to get somebody out and and, you know, that’s like, I mean, I’ve heard of those.

01:34:56:19 – 01:35:06:20
Gabe Johansen
Stories in Washington and it certainly happened again as well. But as a general rule of we we make sure our eyes are dotted and t’s or crosses. Really not it’s not that bad.

01:35:06:23 – 01:35:23:15
Rod Khleif
Yeah. I tell I tell my students in my boot camps, you know, if you want to see real pain, go to eviction court and watch the glee on the judge’s face when he realizes somebody did their paperwork wrong. Yeah. And he throws the shit out. And, and if you want to maybe snap up from a pissed off owner, that’s the place to go.

01:35:23:15 – 01:35:39:21
Rod Khleif
But, anyway, yeah, I’ve seen that time and time again. So, you know, you manage 5000 units. Are they all larger, multi, or do you do anything from single family on up or what. What’s the breakdown on your property management companies also multifamily.

01:35:39:25 – 01:36:04:27
Gabe Johansen
Yeah we do some commercial buildings too. Okay. We’re, we’re kind of specializing in the 5 to 50 unit range. We do larger community properties as well. Most companies our size are 50 plus because they want to have on site staff. We corporate manage probably around 2000 of those 5000. So a very high percentage of what we manage does not have on site staff, which adds a whole nother layer of complex complexity.

01:36:04:27 – 01:36:19:09
Rod Khleif
Oh yeah. Yeah, I mean, that means you got to go show the units. That means you got a court, you got to coordinate the maintenance and the maintenance. A profit center, obviously, but you know, you’re going to charge more on your management fee upwards of, you know what, 10%, even 12%, I suppose.

01:36:19:12 – 01:36:24:02
Gabe Johansen
Honestly, our fees are not that high. We are usually from about 4 to 8%.

01:36:24:04 – 01:36:25:03
Rod Khleif
Depending on okay.

01:36:25:06 – 01:36:43:27
Gabe Johansen
But I’d say we average in the five 6% range. Wow. Yeah. It’s it’s a benefit to the owners. And we do run our own in-house maintenance. I’ve got about 60 maintenance guys on my team, and, we, I feel that it’s a value add because we can provide that to our clients as well, that we’re not charging as much as a contractor would charge.

01:36:43:27 – 01:36:53:27
Gabe Johansen
I’ve got guys ready to go every day. We’re able to get in a unit, you know, within 24 hours. Have the locks changed and start to turn process really, really fast. Right. Yeah.

01:36:53:27 – 01:37:17:14
Rod Khleif
So too super important, which is super important because, you know, every day that unit’s down is, is is money lost money? Yeah. So what are your biggest hurdles? In on the on the management side. That I know people might not be aware of. I’m just curious, because I haven’t had very many property management companies on the show or people that own a property management company.

01:37:17:14 – 01:37:37:04
Rod Khleif
I mean, the fact that you’re vertically integrated is a huge benefit, because I think some of the most successful operators I’ve met out there in this country are the ones that are vertically integrated. They’re geographically specific. They they handle their own maintenance. They’re their eyes on all the time. You know, for a year like year 1400 plus units, it’s a real benefit.

01:37:37:06 – 01:37:43:05
Rod Khleif
But what hurdles do you, you know, do you encounter what what sorts of crap comes up?

01:37:43:07 – 01:37:55:27
Gabe Johansen
You know, right now, I would say that as a general rule of thumb, owners are not very happy. And like you mentioned, management is a thankless job. So when things don’t go as planned, it’s not really the market’s fault. It’s the managers fault.

01:37:55:29 – 01:37:59:04
Rod Khleif
Right? Right, right, right. And you get a big check.

01:37:59:06 – 01:38:22:13
Gabe Johansen
You know, they were very smart to invest and they got a big check. When that check gets smaller, that’s that’s our fault. So, I would say that as a general rule, you know, and we talked about this a lot during Covid is, you know, between the supply chain issues and not being able to get units out of the ground, and having very, very low, vacancy, you know, we were running probably sub 1%.

01:38:22:16 – 01:38:39:00
Gabe Johansen
We could just name our price so an owner can pick whatever rent, or we could pick whatever rent we wanted and pretty much get at the risk of that. And we noted it at the time it was happening was this was all happening in a vacuum. And so we knew that coming out of Covid, we may not get those rents again, which were not right, and so on.

01:38:39:00 – 01:38:56:05
Gabe Johansen
Turnover. It’s a very difficult conversation to have when somebody moves out at one rent and you’re not able to rent it right away for that same rent again, and then you start offering concessions and lowering the rent back down. We’re starting to see that, you know, rents are probably hovering around where they were maybe 4 or 5 years ago.

01:38:56:07 – 01:39:17:23
Gabe Johansen
So kind of all of that froth burned off. And, and we’re kind of back as a reset. So we held on to some of it. But just in our market as an example, we were just breaching that thousand dollar a month mark on like a vintage two bedroom, one bath. Today that unit rents for maybe $1,200, but at one point we were getting almost $1,500.

01:39:17:23 – 01:39:33:10
Gabe Johansen
So yeah, it’s hard. It’s hard psychologically to remember if you were to go back and look at, well, if we came from a thousand and now we’re at 1200, you know, we might be just a little behind the curve of where, you know, I think sustainable growth curve would sit.

01:39:33:12 – 01:39:35:20
Rod Khleif
A good way to say it. Good way to put it. Good way to put it.

01:39:35:20 – 01:39:40:04
Gabe Johansen
Yeah. It wasn’t sustainable. You can’t go from 5000 to 1500. It just doesn’t make any sense.

01:39:40:05 – 01:39:58:11
Rod Khleif
We saw it all over the country. I mean, I remember when rents here in Tampa went up 30% in one year. One year, I mean, one year. I mean, it’s just staggering. But, you know, one of the other things that’s an issue for a lot of operators is, is the expense ratio has gone way up. I mean, payroll has gone through the frickin roof.

01:39:58:13 – 01:40:18:08
Rod Khleif
I mean, to, you know, the higher maintenance I’m paying, I’m paying insurance, taxes, but payroll, hell, I’m paying maintenance supervisors. I don’t know what you pay there, but it went from 28 to $40 an hour. And in some cases. And so, you know, that debt rate and that, expense ratio, you know, used to be an average of 5,050%, but it’s gone up.

01:40:18:10 – 01:40:25:05
Rod Khleif
I’ll tell you something else. How many of your assets that you manage have an onsite manager? Not a lot of work.

01:40:25:08 – 01:40:30:09
Gabe Johansen
Well, I would say that about, 3000. I would say over half of our doors.

01:40:30:14 – 01:40:48:00
Rod Khleif
Okay. Okay. All right. So one thing I noticed, because I had to I had to step in and take over asset management at 23 assets that my ex partner piece of shit ran into the ground. Don’t get me started. And so I stepped in and I had to hire I had to hire big national management companies to come in and help manage.

01:40:48:03 – 01:41:13:08
Rod Khleif
And you know what? I noticed the assets that did well had good a good onsite manager. It didn’t manage absolutely didn’t matter what the management company was like. Now they also got good regional support from a regional manager. But it literally the difference between an asset that did well and didn’t was the on site manager and and getting support from a regional, it was more important that I don’t care.

01:41:13:09 – 01:41:33:03
Rod Khleif
You know, I had the seventh largest management company that massively shipped the bed. And I mean, I could tell you stories. I’m suing another management company right now, literally signed the frickin, engagement letter, guys doing it for contingency just because it’s such a blatant thing. And so, you know, but really, that onsite person makes all the difference in the world, which I agree.

01:41:33:05 – 01:41:49:28
Gabe Johansen
Have the best systems on the planet. But if you don’t have the right people, it just doesn’t work. And I’ve experienced that in my own projects. I own a, property up in Troutdale, Oregon, near Portland on the east side. And, we had a really great onsite manager there, and we always ran that almost full all the time.

01:41:49:28 – 01:42:08:26
Gabe Johansen
Right. Because we’re under control. And you just think in your mind as an owner that, you know, this project is just, you know, it’s a winner. It’s always going to be a winner. And we lost that on site. And, it immediately just went downhill. We started having more vacancy, our costs. I mean, it is just literally one person.

01:42:08:26 – 01:42:20:08
Gabe Johansen
And you think this person, they’re not even making that much money, but like that one person who’s making, you know, 50, 60 grand a year or whatever they’re making is, is a make or break to that project.

01:42:20:08 – 01:42:40:08
Rod Khleif
And that’s the one thing I just want to, you know, and you’re in agreement, obviously, with that story you just shared, it was it was really eye opening for me to see that that the the relevance of that it didn’t matter how impressive the management company was or how big they were or their supposed training program or whatever it was all about, you know, every business is nothing but systems and people, right?

01:42:40:11 – 01:42:59:23
Rod Khleif
And and you get the systems right, which obviously in the management business, you’ve got to have great systems. But the people’s probably the hardest piece. And it is, you know, and I’ve, I’ve hired hundreds of people and you know, you think you’re doing a good job on the interviewing. But, you know, one thing I have noticed, and I’m sure you have a culture of this as well, you know, you need to empower them.

01:42:59:23 – 01:43:14:24
Rod Khleif
You need to validate them. You need to educate them. You need to praise them. You know, when I go to, one of my assets, I’ll bring thank you cards and, you know, I’ll put $500 in thank you cards, and and I and I just and I write in there. We consider it a blessing to have you on the team.

01:43:14:24 – 01:43:28:03
Rod Khleif
Are we. You know and and and man, they’ll they’ll they’ll die for you when you do stuff like that. And it’s not just that the money helps, but I tell you, I think the message is even more important, you know, in building that kind of a culture where you show them you care about them.

01:43:28:06 – 01:43:35:05
Gabe Johansen
Yeah, they’re really doing a hard job that nobody else wants to do, and you got to take care of them. You’re right. It’s all about the people.

01:43:35:07 – 01:43:52:02
Rod Khleif
Yeah, yeah. So, what do you do to maintain reputation management? You know, because because you’ll get tenants that will complain. You know, they took them two days to fix my air conditioner or heater or whatever. What do you do for reputation management? I’m just curious. I mean, I know what I do. I want to hear it come from you, though.

01:43:52:03 – 01:43:52:16
Rod Khleif
Yeah.

01:43:52:16 – 01:44:08:24
Gabe Johansen
I would love to hear your your take on this. Okay. Okay. One of my partners and I always talk about, if we do need to hire a property manager outside of the the SMB footprint, we’ll look at their Google reviews. And if they have more than two and a half stars, we won’t hire them because we figure it’s all got to be funny.

01:44:08:24 – 01:44:11:09
Gabe Johansen
They’re not really any properties, so.

01:44:11:10 – 01:44:38:10
Rod Khleif
No, you know, I’ll tell you what we do is we get those pop cards. Are you familiar with those? So we give a yeah, it’s a pop card and it’s tied into the Google, Google account for the asset. You can buy them and they’re already pre labeled with a, what do you call the code? The QR code and, and and so somebody can put it on their phone and, and like the maintenance guy does a maintenance request and he and the client’s happy.

01:44:38:10 – 01:44:56:17
Rod Khleif
Oh, thank you so much. Hey, will you take two minutes and leave me a review? Because we got a contest to see and they can literally go and do a Google review right there, and they have them do it right then and there while they’re waiting. That’s been really effective for us. And we’ll do a contest. You know, whoever gets the most five star reviews in a certain period of time gets a thousand bucks or 500 bucks.

01:44:56:20 – 01:45:01:11
Rod Khleif
So, that’s been really helpful for us as those is those podcast idea.

01:45:01:14 – 01:45:19:23
Gabe Johansen
I have tried some reputation management software and some other companies and stuff to see if we could try to get more, people to respond. I think one of the obvious, I mean, obvious problems with Google review is, you know, you turn it tenant down because they have a criminal background or they don’t have a requirement, and then they give you a bad review.

01:45:19:23 – 01:45:27:13
Gabe Johansen
And they were never really your customer. They were just somebody who wanted to be a customer and couldn’t be. And so I think that I don’t know how you got to respond.

01:45:27:13 – 01:45:41:10
Rod Khleif
You got to respond to those, though. It’s critical. You respond to those and you’ll say, hey, you know, this guy wasn’t a customer or whatever, but but I’ll tell you, you know, the key with that, those pop cards is that you have them do it right then and there. Don’t say, you know, we’ll do it later. Say, now, can you do me a favor?

01:45:41:10 – 01:45:47:04
Rod Khleif
Do it right now. And and and then then it happens. And it’s very effective. It’s been good for us, but great advice.

01:45:47:08 – 01:45:47:14
Gabe Johansen
Yeah.

01:45:47:19 – 01:45:55:16
Rod Khleif
Oh. Thanks. So, so what’s next? Are you going to develop any other stuff or are you, are you looking to develop some more stuff?

01:45:55:18 – 01:46:17:01
Gabe Johansen
Yeah, I think that, ultimately, for me, my selfish purpose in owning real estate companies is I wanted to own more assets. And so I use I built the machine for myself, but also for our clients, our investors. And so, you know, it’s grown bigger than me at this stage. And we want to continue to build out we’ve got two big companies that we’re growing now.

01:46:17:01 – 01:46:38:16
Gabe Johansen
One is the SMI fund management side, where we do the 721 exchange. The other one is Stack Asset Group, where we’re building. And both of those companies, we, you know, we launched, you know, the SMI fund management company about two and a half years ago. Stack was born about a year and a half ago. Probably by second quarter of next year, each one of those will be at about 100 million assets.

01:46:38:16 – 01:47:03:04
Gabe Johansen
So we’re growing relatively quickly. For me, it’s just all about building out the team. And so I’ve spent the last decade not only building the businesses, building the portfolio, but also finding the right partners to come along because I’m, you know, I play one role on the team. I’m really good at, attracting, you know, smart, talented people and keeping people pumped up and understanding kind of the vision of what we’re doing.

01:47:03:04 – 01:47:16:23
Gabe Johansen
But, you know, I’m not a spreadsheet guy. I’m not. I don’t want to sit and study, you know, owner statements all day long and figure out which property’s underperforming. So I’m not a detail guy. I’m a I’m a like I said, I’m more of a real estate artist.

01:47:16:23 – 01:47:18:04
Rod Khleif
Same same here.

01:47:18:06 – 01:47:38:18
Gabe Johansen
Yeah. I just want I want to go out and get more buildings and and so anyway, building those teams out has, has been critical now that we have them built, we have a number of different ways that we can go into deals. We feel like we’ve got a lot of different strategies and we can syndicate. We can, you know, one of our favorite, models that we like to use is keeping a seller in a deal.

01:47:38:18 – 01:47:53:02
Gabe Johansen
So, whether that’s in his debt or in his equity, you know, that’s kind of the 721 exchange is keeping them, keeping their equity at work. And, you know, there’s there are other ways that I, you know, my first part of my portfolio, when I didn’t have a lot of money, I had to figure out how to do seller carries.

01:47:53:02 – 01:48:13:02
Gabe Johansen
And, you know, you’re borrowing the down payment. You’re doing all these things. And we learned early on that one of the best people to go to when you’re looking for a partner, you’re looking for a debt partner. Is the seller. Sure. And so different structures, to where we might be able to get bank financing, have the, you know, have the seller also carry a note or something so that we can leverage into a deal.

01:48:13:08 – 01:48:44:11
Rod Khleif
Yeah. Or just or just be part of your LLC. Does it literally stay in as, as a, as a GP in the deal. And it minimizes how much money you’ve got to come up with and enhances the returns for the money you do bring into the deal. It’s a home run all the way. I mean, it’s very similar to, you know, going out and finding a piece of land that’s own free and clear and telling the seller, hey, we’re going to develop this and we’ll we’ll keep you in it and we’ll split the profit and blah, blah, blah, and, and it minimizes or sometimes even eliminates you putting money in in some cases it’s

01:48:44:13 – 01:49:01:23
Rod Khleif
no it’s a great strategy and there’s a lot more of that happening right now with the current economic environment. You know, there’s incredible deals out there right now. I mean, I’ll give you an example. We’ve got a 200 unit asset in San Antonio. The one right next door sold for about 43,000,000 in 20 1 or 22 Banco.

01:49:01:23 – 01:49:19:04
Rod Khleif
Now there are down to 28. Beautiful. It’s on a lake. Same vintage as the one we have is 97% occupied. And the numbers still don’t make sense until it comes down to about 24. But it went from 43 to freakin 28. And it’s going to be I think we’ll get it at 24 if it comes down. So, you know, some incredible opportunity out there.

01:49:19:06 – 01:49:30:04
Rod Khleif
We’re seeing it, and so, you know, very excited about our possibilities and also excited about senior housing as well. I just think that’s, kind of a no brainer. Over.

01:49:30:04 – 01:49:45:06
Gabe Johansen
The years, I always say I’m not smart enough to time the market, but if I were, this would be the best buyer’s market that I’ve ever right. Thank you. But this is the time to get in, and we are doing what you’re talking about. We’re finding a lot of entitled land. Where. Right. But he has had the dirt for a while.

01:49:45:06 – 01:50:04:07
Gabe Johansen
They’ve got their right and it’s ready to go. It’s permit ready, but they don’t. They either can’t raise the capital to do it. They can’t find a lender partner. And so you bring in a team that’s got you know, some better relationships or connections or sophistication. And we can come in and just say, hey, to stay in the deal with us, we’ll let you make a lot more than if you’re to go sell the dirt.

01:50:04:07 – 01:50:09:25
Gabe Johansen
Yeah. In a way, you’re not going to sell the dirt anyway, because nobody’s just going out and really buying dirt to build on right now.

01:50:09:25 – 01:50:19:08
Rod Khleif
So no, no. And that which is why, you know, this, this absorption issue that we’ve been dealing with is going to go away because nothing’s really being built right now. So, you know, in any.

01:50:19:08 – 01:50:21:24
Gabe Johansen
Way we got a little way to go, but it’s all right.

01:50:21:26 – 01:50:39:19
Rod Khleif
Yeah, yeah, yeah. Well listen brother, I, it is a pleasure to meet you. I love your energy and and, Yeah. And, you know, I know you’re going to continue to do great things and, and, you know, I appreciate you coming on. It’s a shame you couldn’t come into the studio here, but, hell, you’re about as far as Florida.

01:50:39:21 – 01:50:41:14
Gabe Johansen
But for 40 and.

01:50:41:16 – 01:50:53:27
Rod Khleif
I have homes in Sarasota and in Miami. Yeah. But, yeah. And and studios now in both as well. So, yeah, that’s, But, Gabe, it’s a pleasure, my friend. And, you know, let’s stay in touch.

01:50:54:00 – 01:50:55:17
Gabe Johansen
All right? Sounds good. Thanks for having me on.

01:50:55:17 – 01:50:57:17
Rod Khleif
All right. Absolutely. Thanks.

01:50:57:17 – 01:51:18:03
Rod Khleif
Thank you for listening to the lifetime cash flow through real estate investing podcast. If you’ve enjoyed the show, please take a minute to visit iTunes and leave your comments. For more resources or to connect with us further, please visit our website at radcliff.com. Tune in next week for our next show.