Ep #541 – Multifamily Secrets from a Commercial Real Estate Broker

Brent Sprenkle is a commercial real estate broker and multifamily investor. He’s also the author of the book, Billion Dollar Portfolio. Here’s some of what we talked about.

  • Sourcing deals
  • Know what you want and where to start
  • How to “Date” your broker
  • Getting around the “proof of funds” question
  • Current market trends
  • How to make an impression on a broker
  • Establishing your pipeline

To find out more about our guest:

Full Transcript Below:

Rod: Welcome to another edition of “How to Build Lifetime Cash Flow through Real Estate Investing.” I’m Rod Khleif and I’m thrilled that you’re here. And listen up, I know you’re going to get tremendous value from the gentleman we’re interviewing today. His name is Brent Sprenkle and Brent has been a commercial real estate broker in the multifamily space for a very long time. He’s worked with Berkadia, Sperry Van Ness, two of the largest outfits in the country and was one of the Berkadia’s top 10 brokers for over six years. He’s been involved in over a billion dollars with the transaction so we’re really going to get into the nitty gritty today. Welcome to the show brother.

Brent: Hey Rod, great to be here. Very exciting for me.

Rod: Oh, thank you, thank you. So, you know, one of the things that new people– well actually, you know what? Forget that. Let’s not go right into it. Talk a little bit about your background with a little more detail. I apologize I was going to get right into questions. But yeah, if you could just give us a little background, a little more background.

Brent: Well, the background on me essentially is I’m originally from Pennsylvania. Went to school to be an engineer. After I graduated, I got moved to Los Angeles to work for Howard Hughes, Hughes aircraft, and I was working on building DirecTV satellites. So I did that for two and a half years and it sounds super interesting, but in reality, it was really boring and it turns out I wasn’t a very good engineer. Wound up getting laid off and just sat there scratching my head saying, what can I do now? I don’t want to be in engineering more. I don’t want to be an employee. Is there a better career path for me? A friend of mine had bought a few apartment buildings. Of course, he had money. I had none. So, I couldn’t go out and be a principal at that point or at least I didn’t know how to, and he just said, You should be a broker. You know, brokers to sell apartments make a ton of money and it’s, there’s no barrier entry and as long as you’re willing to work hard, you could do well. So, looked in the LA times, saw you know, some help wanted ads showed up and they basically said, Can you get a real estate license? Do you have a car? Are you willing to work for free? And I said “yes” to all three of them and they said, “You’re hired.” So, 20 years later, here I am, still doing brokerage. I primarily to sell apartment buildings in Los Angeles county, we do small deals, we do very, very large deals, and it’s been very lucrative. And on the way, I’ve managed to buy a building a year and try to build up a small portfolio as sort of my exit strategy and my way to segue into the next part of my career.

Rod: Love it. Now, I know you wrote a book too which we’ll talk about here in a minute but let’s dig into some questions that I came up with, that I think will help a lot of the newer investors, you know, the ones that already have a few hundred doors. It may not be as applicable to them but maybe as well because we’re going to ask what irritates you with buyers as well. So, I’m anxious to hear some of those stories but, you know, I want to talk about building relationships as a newbie with a broker because, of course, we’re in one of the hottest markets we’ve ever been in with the cost of capital right now and it’s likely to remain that way. Definitely, in the short term. So, you know, what suggestions would you have to someone who’s maybe gone to one of my boot camps, they’ve learned the business at a higher level, they’re drilling down even someone in my coaching program, for example, that’s getting more and more, you know, into the business, what recommendations would you have to them around building a relationship with someone like yourself?

Brent: So, that’s one of the big keys to this business. It seems like everybody can figure out a way to scrape together some money to go out to buy a few deals investors, somebody in their bank account, but the biggest problem and everyone has this from seasoned investors, to REITs, institutional buyers, everyone has this problem, it’s sourcing deals. Finding good properties to buy at reasonable prices.

Rod: Right.

Brent: So, the number one way that people find deals is really not looking on the internet because by the time you’ve seen it, a million other people have seen it. It’s by getting to know some brokers. You don’t need to know 30. You just need to know, in any given market, three or four guys or gals that do deals. They are in the space that you want to be in. You want to buy RV parks, you got to find brokers, have closed deals, have listings, know what they’re talking about. Unfortunately, the broker that sold you your house is probably not going to be, most likely, not going to be the person who’s going to help you build a portfolio of cash flow properties. You’re going to have to go out and you’re going to have to look on the internet, LoopNet, CoStar, multiple listing service, whatever it is, to find deals for sale and just start calling the brokers. It’s a challenging job but it’s what you got to do. It’s no different from what real estate brokers have to do to get started. They’ve got to call property owners. You’ve got to call brokers and say, Hey, I’m looking to buy. And more importantly, you need to have a business plan. Nothing makes me laugh more than when I get a call from someone who says, What’s your best deal you have for sale? I mentioned this around, I equate that to walking into a car dealership and saying, What’s the best car you have, right? You don’t know where to start. Are you looking for an SUV? Are you looking for a minivan? A sedan? A sports car? They have no idea. I mean, and then, you have to know what you want to buy. You have to have a business plan. Do you want to buy a triplex or a fourplex? Do you want to buy a 10 unit building? Do you want to buy a shopping center? And in what areas? What are you looking to do? Are you looking to buy a value-added deal that with low rents, that you’re buying at a low cap rate, that you’re going to come in and renovate the place, push rents, and sell to refi? I mean, what’s your business plan? If you can call a broker and explain what you’re looking to do, they will take you seriously. The buyers that we don’t take seriously are the people who call us and they have no idea what they want to do. They’re like, Well, you know, my next-door neighbor bought an apartment building and I want to buy an apartment too. What’s the best deal you have? I mean, that’s like, I don’t even know what to even tell them.

Rod: Right.

Brent: Someone calls me to say, I’m looking for eight to 15 units. I want to be in this part of town. I want to buy this vintage, this kind of unit mix. It needs to have at least distant amount of parking, and it’s got to be at least a four and a half cap and I don’t want to, you know, pay more than 300,000 or 150,000 a unit. I’m like, Wow! this guy or gal knows what they’re looking for. And I can then drill down and find two or three things that might fit their criteria. And the second, one of the last things I want to tell you is, when brokers send you stuff, you need to give them feedback.

Rod: Yeah.

Brent: You need to say, Hey, thank you for sending me this property. I like everything except, you know, it needs a 50% down payment and I just don’t want to put that much money down. I need something that has a little bit better existing cash flow. Like, you need to give them some feedback on what you like and what you don’t like about the property. There’s nothing that’s worse for a broker than a black hole, sending someone a bunch of deals, never hearing back from them again. You’re like, Well, what happened to this person? I thought they seemed really serious on the phone but then like, they didn’t even look at it. Like, okay and then they don’t take you seriously. There’s not that many buyers out there that follow up with brokers and those brokers will remember those buyers and they will take them seriously. If a good deal comes across my desk, there’s thousands of people I could send it to.

Rod: Right.

Brent: But there’s two or three people I’ll remember, you know, Bob, Jane, and Michael would love this type of a deal. I’m gonna send it to them. And those three people get everything that comes across my desk that fits their certain criteria. You want to make that short list.

Rod: Got you. Yeah, I want to circle back because you jumped ahead to something I want to drill down on as well. So, you know, guys and that’s one of the first things we teach in my boot camp is creating your investment criteria and coming up with that business plan like Brent just described because you can’t be all things to all people. You won’t be taken seriously. Not just with brokers, with investors, or anyone else. You’ve got to know what it is you want. You can’t shoot with a shotgun. Sorry about the analogy. You’ve got to shoot with a rifle. And so, that’s super important and one of the first things you should do before you even pick up the phone and start calling brokers. Now, you talked about follow-up. You know, once someone sends you a deal, you know, not only do they need to respond but they, you need– correct me if I’m wrong, I don’t put words in your mouth but you need to see that they’ve actually evaluated that deal. Maybe normalize the expenses, run the numbers, and give you a credible response. Not just, Hey, you know, I don’t want it. You know, that you’ve actually taken the time out of a respect thing to really look at it. Is that an accurate statement as well?

Brent: It could be something as simple as, Thank you. I looked at the property. I don’t like the neighborhood at least at this price.

Rod: Yeah.

Brent: Or I don’t like the unit mix. I need more two bedrooms and studios. Or could be as detailed as I put it in my model and, you know, here’s the issue of the property. The rents are at market. There’s no upside. I think there might actually be downside in it. Like, you need to give them some sort of feedback. But it could be as simple as–

Rod: Okay.

Brent: The building itself or the neighborhood itself, or it could be as detailed as, the deal just doesn’t work based on my investment criteria when I put in my model.

Rod: The key is the response… Okay. And this is, guys, somebody has been doing this for 20 years so listen up. So, is there anything, you know, besides that feedback when you send a deal, is there anything that changes your opinion in a positive way about a prospective buyer? Maybe that hasn’t bought from you yet even in their communication or in anything that they do. Anything come to mind with that question?

Brent: I mean, there’s a million things. I mean, one of them is just when people call and just say, I like this deal. The seller wants two million. I’d be a buyer for it at one eight.

Rod: Right.

Brent: Put an offer in a one seven and see what happens. I mean, there’s nothing bad ever comes from asking a broker to write an offer that’s less than what we think we can get it for.

Rod: Okay.

Brent: It takes the broker five minutes. They put it off together. They send it to you and they’ll remember like, Hey, this guy or gal actually like had me write an offer. They actually stepped up and did something. Now, the deal might not go anywhere and the seller might not respond or they might not, you know, they might give you a counter that’s just so ridiculous that you don’t do anything but at least you showed that broker that you’re willing to step up and make a move, not just look at a million deals. There’s nothing worse than saying somebody 30, 40 properties and then never even writing an offer on something. They will eventually forget about you or to say this guys or gals waste time. Their criteria is just so ridiculous and that’s the next thing like, you’ve got to have reasonable expectations.

Rod: Right.

Brent: You know, if you’re trying to buy an apartment building at 200,000 per unit in a market that’s everything’s 300,000 a unit, you’re probably not going to get too far.

Rod: Right.

Brent: If you’re trying to buy a deal at a, you know, 12 times gross in an area that everything’s 15, you’re probably not going to get anywhere either. You need to have expectations that are in line with the market. Once the broker realizes that you’re serious, you follow up, and your expectations are reasonable, they’re going to fall in love with you and they’re going to be calling you all the time and showing you deals.

Rod: Well, that’s my next question. How often should someone– that’s serious about this business. Not just trying to learn the business but seriously wants to find a deal is taking the time to learn how to evaluate a deal. How often should they follow up with the broker?

Brent: Well, it depends on your response from that broker. If this, for instance, I love to buy apartments for myself.

Rod: Right.

Brent: And as brokers, I call and every time I call them, they’ve got two or three new things. And it’s not all their listings but their deals that they, you know, are out there or they heard about, and I call them and they’re like, Well, I have this deal. What about this? Let me send you a few things. Those people, yeah, call them once a week.

Rod: Right.

Brent: And then, you could just follow up, Hey, I drove that property. I like it but the guy wants two million bucks, you know, that’s a crazy price. And then you might say, Well, while you’re in that neighborhood, why do you go drive this other building? There’s other brokers you call, they never have anything. So, don’t call them as often.

Rod: Right.

Brent: You’ll kind of get a sense for. I hate to say it’s kind of like dating. Like, you kind of find out like where someone’s rhythm is and they’re like, Okay, I don’t want to call this guy or gal too often. They’re getting annoyed or some people every time you call them they’ve got 20 deals, so you need to be calling them once a week.

Rod: Okay. So, you get a feel for it. Got it. Love it. Okay. You know, is there anything else that you look for besides having a business plan in a prospective buyer? You know, anything comes to mind when I ask that question?

Brent: Well, they need–

Rod: What about like, do you– is there anything you do to gauge their ability to actually close? Because obviously, you don’t get paid unless they close and you look like a horse’s ass and can lose, you know, relationships with sellers if they don’t close. So, you know, give me a feel for how you might test somebody’s ability to actually close.

Brent: Yeah. Do they have money to buy a deal?

Rod: Right.

Brent: I mean, it’s the obvious thing and it’s sometimes a little sensitive to ask like someone says, you know, Write an offer for me this property. And you’re like, Okay. Well, you know, do you want to put a loan in the offer? What’s your down payment going to be? They’re like, Well, you know, I’m going to have to work on that. It’s like, Oh, what are we doing here? Like–

Rod: Right.

Brent: Well, you don’t have any money in the bank? I mean like, you know, that’s one of the first thing you got to figure out Rod is–

Rod: Sure.

Brent: You tell people your boot camp like, step one, figuring out whether or not–

Rod: You need to be building relationships with investors the same time you’re out there looking for deals. You know, and okay. You know, I get people to call me and say, Hey, this broker asks for a proof of funds. And what that instantly tells me is that broker recognizes that they’re a newbie. You know, because– maybe not but, you know, that’s certainly one piece because, you know, a lot of people raise the equity for their deals like, you know, we raised 16 million in five days a few weeks ago. And so, you know, you need to be able to have that conversation and I don’t know. You know, please give me feedback here.

Brent: Yes, I mean, especially if you can’t show that you bought anything. If you’re a random brand new buyer and you show up, Hey, looking to buy apartments, looking to buy retail, looking by whatever, write an offer for me. The broker is probably going to say, For your own good and for the good of the seller, you have proof of funds. How are you going to finance this deal? Do you have– you getting a loan? What’s your proof of source of funds? Can you, you know, verify that? I mean, it’s also in most purchase agreements that, you know, the buyer is going to provide documentation of their ability to come up with a down payment within a few days. It’s good just to show that immediately. Bank statements, something together. If you’re syndicating the deal and you’re putting everything together, then this is probably not your first deal and then you can show them, Hey, these two deals we just did, I have investors. We put them all together. That least is a credible story and you can show, you know, a case study of another deal that you did and just explain, In the first two weeks I’m gonna go raise all the money. And, you know, I can show you the proof of funds within two weeks of the due diligence that we’re ready to go and wave contingencies and we have the funds. That’s also a credible story and people are gonna at least should understand that. But if it’s a beauty contest, there’s 20 offers on a deal, the person who can show that they have 100% of the money of the purchase price in the bank is the one who’s most likely going to win that property.

Rod: Sure. Regardless of the price, almost, yeah.

Brent: I mean, when you have someone who shows up and says, I have no money. I’m going to raise it. And you have other guys or gals that have the money in the bank, you know, that puts you to a disadvantage.

Rod: Yeah. Tough to compete with that. Okay. Do you have any sort of a, you know, because I’ve heard about screening processes that some brokers will put, you know, prospective buyers through, anything comes to mind with that comment? Any way that you kind of test the waters? See if somebody’s completely wasting your time?

Brent: You can usually find out in the first 30 seconds just by asking them, what location they want to be in, unit mix, parking? When you’re asking people questions and they don’t really know how to answer them they’re like, Well, I guess I could handle studios and ones but I’d really like twos, but I don’t know. I never thought about it. Then you kind of know like this person hasn’t even sought this through. This is going to be a very long protracted thing and they’re probably never going to do a deal.

Rod: Yeah.

Brent: They’re just going to be calling you, find me something and they’re also this is something very important Rod.

Rod: Okay.

Brent: Those kinds of people don’t know a good deal from a bad deal.

Rod: Right.

Brent: The most amazing deal could be dropped on their desk and they’re going to be like, I don’t know. It’s like, if someone showed me an awesome apartment building in Texas in the middle of nowhere, I wouldn’t be able to look at it and determine whether it’s a good deal or not but someone who owns a building that neighborhood is going to gobble it up in a second if it’s a halfway decent deal.

Rod: Right.

Brent: So, when someone calls me and I can gauge through the conversation that they haven’t quite yet figured out a good deal from a bad deal, it’s going to be an issue getting them across the finish line whereas other people and as we just discussed Rod. This is definitely still a seller’s market as crazy as the Covid. I mean, people just are flush with capital. They want to buy. They want to place funds. They’re not comfortable keeping all their money in the bank. So, it’s going to be competitive, so also, you know, make sure that you’re buying a deal that you’re comfortable with in a size range. If it’s your first deal and you’re calling a broker and it’s a very, very pricey deal, you know, maybe pull back a little bit and look for something maybe a little bit smaller for your first property.

Rod: Yeah. You know, one of the things we suggest people do is they align with someone that’s done it for their first couple of deals. You know, they find somebody’s got a few hundred or a thousand doors and help them find the deal and, you know, participate in the GP and just get it done. Maybe raise a little equity and then, you know, they can utilize that resume as it were to have credibility with someone like you. And, you know, and know that somebody with some experience is involved in the deal. And, you know, and maybe has the liquidity to show, you know, a piece of that one, you know, does that make sense as well?

Brent: I got started that way when I was in Sperry Van Ness back when I was in my 20s. They had a division that was buying office buildings and shopping centers and I was just rolling commissions straight into those deals. And that was how I kind of got my foot into investing and at a certain point I realized like, I could do this on my own. Like, I know the banks, I know the property management companies, I know how to find deals, I should just start doing my own. But it was, you know, eight years of me being in the business so I worked up that level of confidence.

Rod: Right.

Brent: And yeah, I look back and that was one of the biggest mistakes I made was waiting so long.

Rod: Yeah, yeah. That’s always a question I ask, if you could tell your younger self what would you do differently? I always ask the question because I want everyone to hear it time and time again, bigger faster, right?

Brent: Well, you know, the other thing too is like, I was too picky. I was looking for that colossal home run and that’s one of the biggest things people like, What’s your best piece of advice? I tell people like, you become, you know, the book I wrote, “Billion Dollar Portfolio” is about people that went out, pretty much I’m going to guess most is very typical of your average listener. Someone who didn’t start out in real estate but wants to get started. And the book I wrote is about all these clients of mine that started with nothing and now they have these billion dollar portfolios. And most of them tell me that they got to where they are by buying singles and doubles. They’re not trying to find a colossal home run. The deal that’s worth 300 a unit and the broker and the seller screw up and sell it to you 200,000 units.

Rod: Right.

Brent: You’re buying a deal 200,000 units. It’s worth 200,000 a unit but they can add value to it. So, one of the biggest mistakes that I made, most people make, it’s just having a criteria that’s, it’s unrealistic. They’re trying to buy, you know, like I said 200,000 per unit in a 300,000 per unit area. You’re never going to get your goals accomplished. But if you’re buying an area where prices are appreciating, rents are growing, you’re going to do find over the long term just buying, okay, deal. You don’t have to look for the colossal home runs. I keep mentioning.

Rod: Yeah. No, that makes sense… The only caveat I would say is you still want to be conservative, you still don’t want it, too much debt, you want to make sure you’ve got sufficient operating reserves, you want to make sure you stress test the deal that you can sustain, you know, a pullback and so on and so forth.

Brent: For sure, a hundred percent. It’s got to be, you know, a sustainable deal–

Rod: Right.

Brent: With you feeling comfortable of your ability to long term, grow the rents, grow the value, etc.

Rod: And sustain some hits if they pop up, you know.

Brent: Correct. Yes. And you’ve got to have reserves for the bad times which–

Rod: Right.

Brent: Come up with a…

Rod: Okay, you went there so I’m gonna ask the next obvious question, you know, what are your thoughts? Because you’ve been doing it for 20 years so you’ve gone through some cycles as I have and that’s the operative word in this business is it goes through cycles. So, you know, but I will tell you the downturns are probably the best opportunities known to man. Of course, I was licking my wounds in ’08 because I got crushed but, you know, that’s when the most money is made. Any thoughts about the future as, you know, I know the rates are ridiculous right now, any thoughts about what could be coming?

Brent: So, this is such a strange market we’re in because all indications should be that the market should be crushed, but look at the stock market, look at the real estate market. There is one driving factor that separates 2020 from 2009. It’s liquidity. In 2009, almost everyone that you talked to had no money in the bank.

Rod: Yeah.

Brent: And the people that did, they didn’t want to spend it. 2020, almost every investor I deal with is flushed with cash. Burning a hole in their pocket and they want to spend it. That is the big difference. Prices can never drop when there’s so much demand for product.

Rod: Yeah.

Brent: People wanna buy. And that is why this market has not gone down, why it’s going to stay where it is. If interest rates go up, that’s gonna be a game changer, but I don’t think that they are. So, the people who say, I’m gonna wait till prices drop. Well, they’re never gonna buy then, because prices are not gonna drop. It’s gonna be some other thing that makes prices drop in another 10 years.

Rod: Interesting.

Brent: It would have already happened by now, so I don’t know that quite answers your question, Rod?

Rod: Well, it’s, you know, all of this is opinion and I have, you know, I don’t know. Part of me thinks we are gonna have a contraction at some point here in the next couple three years.

Brent: Yeah. Expense. Yeah.

Rod: But, you know, if you look at it and, like you just described, it sure doesn’t feel like it, and it’s kind of hard to figure out how it could happen. But, I don’t know. You know, Covid didn’t seem to derail anything to speak, of course, put a lot of small businesses out of business. I mean, there’s some real horrific stories there, but as it relates to multifamily, so maybe some of the smaller ones in the Blue States are getting killed, you know, New York and so on and so forth. But, yeah, interesting. So, circling back to broker relationships is, you know, what have you seen someone do before they’ve bought their first deal from you that made you think, you know, okay, I’m impressed. I definitely gonna send this person some deals. Anything to add to what we’ve already discussed?

Brent: Well, like I mentioned, it’s when you start getting answers to questions that you ask and you can tell that this person is really thinking about this. They’ve developed a business plan, they know how they’re gonna finance it, they know how they’re gonna manage it, they know exactly what they’re looking for in a deal.

Rod: Yeah.

Brent: I could go back to that car analogy, as well. When someone just shows up and they’re like, we’re looking for a car, and they have no idea. The salesman’s like, where do I start? SUVs or Minivans? They have no idea. But when you show up and you call a broker, you tell them what you’re looking for, they meet you at the property, and you get the sense that they’re new to the business but they know exactly what they wanna do. Then you’re like, Okay. And a lot of brokers are gonna be excited about that because they’re like, you know, this person might just be like, come my buyer.

Rod: Yeah. For real.

Brent: Like, they might become loyal to me, and only buy through me, and only sell through me. Everyone’s looking to meet, every broker is looking to meet that next guy or gal that’s gonna go out and buy a dozen deals. And not to mention, in fact, you’re looking for a buyer who’s gonna be loyal. You sell them a great deal, they’re gonna come back a year or two or three years later, and let you sell for them. They’re gonna give you the listing back.

Rod: Yeah.

Brent: Those buyers, they do amazingly well because the brokers know, Hey, this is a long-term pipeline. I’m gonna sell them a great deal, in a couple years you’re gonna give it back to me. I’m gonna sell it for them. I’m gonna find them another deal to buy as an up leg. This is just gonna keep rolling and it’s just like a broker’s dream.

Rod: Nice. So, you know, one of the things that comes up from time to time is you hear about buyers asking brokers to share their commission, to offset something that happened. Can you speak to that?

Brent: We get that request from time to time and typically that’s the last time I’m gonna work with that buyer. I mean, there’s so many people out there that we can sell a deal to. If a good deal comes up, I’m gonna call a buyer who I know is never gonna ask for money. They’re never gonna ask me to chip in on the commission, and more importantly, just as equally importantly, I know when they go to sell the property, they’re gonna call me and give it back to me.

Rod: Right.

Brent: Nothing’s worse than selling somebody a building for, say a million dollars, and two years later, the guy doesn’t give you the listing and he doesn’t even talk to you and you see it with a competitor.

Rod: Right.

Brent: And what you sold to them, and you’re just pulling your hair out being like, What did I do wrong? I just made this guy or gal a bunch of money and they won’t give me the time of day. You’re never gonna show that guy or gal a deal again. You’re gonna give it to a loyal client. So, this is a tough business, brokers are not making the money as they used to and just understand that for you to get that call, you can’t get in their pocket.

Rod: Right. Yeah. I know a story. I’ve got a buddy in my mastermind. I host a mastermind, about 12 billion in assets in there, and his name’s Glenn, and I remember he told the story, he had a chiller go out on one of these assets he had under contract. It was a hundred thousand dollar hit, pre-closing. And he’s sure he could have gone to the broker to ask for a little help with it, and he didn’t. He hate it. And because he valued that broker relationship so much, you know, I was talking to another, a person in my boardroom, Vincat, that built that relationship with a broker and I sold him 2,000 doors in Dallas or Houston. I forgot what city’s in, but the point is, you’ve got to value those relationships. I feel like there was something else we were gonna talk about.

Brent: You’re so right, this is a relationship business.

Rod: Right.

Brent: And if you’re gonna achieve that, you know, what I wrote in the book, that “Billion Dollar Portfolio”, you’ve got to establish that pipeline with brokers. You’ve got to treat brokers as an asset. You can’t look at a broker as just a salesman at Walmart. This is someone who’s gonna be finding you deals to buy.

Rod: It’s a partnership. It’s a freaking partnership. There’s no other way to describe it. That’s how you have to treat, you know, because a broker can make you freaking wealthy. Hello? So, okay. Let me ask you this question because a lot of buyers, I don’t know a lot of buyers come from out of State to California, but certainly the other way around is big. But let me ask you a question, Do you feel like, if someone starts a relationship or maybe they’re in San Francisco, and they start the relationship with you over the phone, Do you feel like the relationship changes when they come visit and actually go tour at property with you?

Brent: There are several groups that I’ve worked with and sold deals who were from the Bay Area.

Rod: Right.

Brent: They called me but I quickly found out who they were and that they owned a bunch of buildings up there so, you know, I’ve screened them and knew they were real.

Rod: Okay.

Brent: And then, they wrote offers on properties. They’d fly down, they’d go see the building, we do tours like, you know, you take those people seriously. Someone is gonna fly all the way from San Francisco down to LA to see a marginal apartment building, they must be pretty serious, right?

Rod: Right.

Brent: It’s not a five-minute drive from their house on a Sunday afternoon. I mean, it takes effort for somebody to make that deal.

Rod: Yeah. And I’ve heard this from, you know, from other brokers and from, even from investors that once they actually, you know, they see that the person is real, they see that, you know, that they’ve got it, you know, they sense they’ve got integrity, they see their passion and, you know, they articulate with more clarity. What they’re looking for and how they’re able to, you know, accomplish the closing if they do the deal, maybe position that really, that things really change. That they’re, you know, that the relationship is enhanced.

Brent: It’s good to put a face to a name. It’s good to actually meet somebody, connect with them, and–

Rod: Yeah.

Brent: I can’t tell you how many, there’s so many people I’ve talked to for 10-15 years and like, I haven’t met the people and also don’t meet them and they’re like, Wow! I thought, you know, we’ve talked so long and I finally met you and it’s like, these people like feel like, I get the sense that they feel like we’ve known each other like really well, for a long period of time. So yes, it’s always great to meet people in person. With Covid, obviously, it’s been challenging.

Rod: Right.

Brent: But, you know, people are adapting and it’s, you know, it is what it is, but it’s always good to establish a real relationship with somebody. Not just telephone and emails. And by the way, the worst thing you can do to try to establish a relationship with a broker is through email.

Rod: Right.

Brent: I guess, let me email some people, Hi, I like your deal, you know, please send me some info. You never hear from them again.

Rod: Right.

Brent: They don’t give you a phone number. They won’t call you. I don’t take those people seriously like people that call me or want me to call them? I take them seriously. Why? Because they are letting me know that they want to establish a relationship. The people that hide behind a computer.

Rod: Right.

Brent: You know, I don’t know how they get business done anyway.

Rod: Right. Is there a way that a prospective buyer can help you, as a broker?

Brent: Yeah. Besides, just the obvious, buying deals and closings.

Rod: Right. Besides that. Right.

Brent: Sure. Oftentimes, I have buyers tell me about other properties that they looked at or they give me some feedback. I made an offer on this deal and there was 20 offers on it, and then I’m like, just market knowledge. Because–

Rod: Right.

Brent: You know, as great as I think I might be, there’s a lot of stuff going on in the market that is not possible for me to be aware of.

Rod: Right.

Brent: So when you find out from somebody that they walked the property and there was 20 other buyers there, you start thinking, Was that deal underpriced? Or, you know, what’s going on? Why are so many people interested in that building? And that helps you gather more knowledge about what’s going on in the market, and the more knowledge you have, the more effective you’re gonna be as a real estate investor.

Rod: Sure. What about actually going in and touring your listings and allowing the seller to see that things are happening, and you’re active, and things are happening. Is that a dynamic that comes into play at all?

Brent: Yeah. We were launching actually a very large listing today, and more likely, is gonna be a ton of requests for property tours and as much as it’s kind of a burden to get everyone through the buildings and do it. But it’s a great way for us to meet buyers, it’s a great way for us to know what people like, and just, it’s an important thing to do to show a seller we brought five people after that …

Rod: Right.

Brent: Give the seller feedback. You know, everyone was commenting that they like the units but, you know.

Rod: But there’s this and this. Yeah.

Brent: Yeah, it’s the sellers, it’s good for the sellers to know what buyers are thinking as well because every seller thinks that their building is great, the best building ever, and that people should pay more than what it’s worth. And it’s, you know, the sellers oftentimes need that feedback especially when we’re in a market like we are now.

Rod: Right.

Brent: Prices are just so astronomically high. And in California, we’ve got major issues with rent collection. Rents have dropped.

Rod: Right. Rent control as well, yes?

Brent: Rent control, which is not going away, we now have statewide rent control here. The entire state is rent controlled. Anything 15 years or older. But we just have economic issues. I mean, I have a 100 unit building for sale right now. We have, not joking, we have 15% vacancy and we have 20% of the tenants not paying rent. So, of 100 units, there’s 65 paying, 35 are vacant or they’re occupied, and attendants are not paying rent.

Rod: Wow.

Brent: Hard to sell that deal. Hard to get a loan on it.

Rod: Yeah.

Brent: And we’ve got a guy in escrow on it but he’s a seasoned …

Rod: Gotta find some bridge debt or something, yeah.

Brent: Yeah. He’s struggling with it and the seller’s trying to work with him and make that happen but, you know, these are some real issues. But despite all those issues, we’re looking at prices are not dissimilar from where we are pre-Covid, pre-pandemic.

Rod: Right.

Brent: So, it really shows you that we’re in a really dynamic market, despite all the flaws of what’s going on.

Rod: It’s a resilient market is really what we’re seeing, right?

Brent: It’s just unbelievable. Resilient is an understatement when you consider all, I mean, a year ago, prices were pretty much where they are now. You didn’t have to worry about vacancies or my tenants gonna pay rent, and interest rates weren’t that much higher then, and leverage was way better. So now, you’ve got all these issues, these headwinds, that people still want to buy. It’s incredible.

Rod: Yeah.

Brent: But apartment buildings seem to be like the safe place to go. People want to buy just for that reason.

Rod: Well, I mean, I will tell you, you know, I was reading an article by, oh gosh, I forgot the source now, but it was a real credible source, so you knew it was real that, you know, apartments rebounded within three years of the ’08 crash, and to the rent levels that they were in that pre-crash.

Brent: Correct.

Rod: I mean, that’s how resilient multifamily is and, you know, I mean don’t get me started about retail or office, you know, they’re both sucking wind right now. But worse than what you’re describing with that hundred unit asset, you know, and so, you know, I’ve got guys that own retail centers that say they’re 75% of their tenants are in trouble, so–

Brent: Yeah, no one’s paying them.

Rod: Yeah. Well, listen. You’ve added tremendous value today, Brent. Guys, his book is “Billion Dollar Portfolio”, and he talks about some of these people that he’s worked with that have built billion dollar, you know, billion dollar worth of assets under management and, you know, success stories. And so, I’m sure I have not read it. I can’t tell you it’s awesome. I imagine that it is, but I haven’t read it, so. But I will tell you that, you know, even if you get one fantastic tip from it, I’m sure there’s more than one, I’m sure it’s worth getting. So again, “Billion Dollar Portfolio”, Brent, thanks for being on the show, brother. It’s a pleasure to meet you and, you know, I know that you definitely added value today, my friend.

Brent: Thank you, Rod. It was a pleasure. I hope your fans enjoyed it, and it was great to be here today.

Rod: Thank you, bud. Take care.