E185: Why Institutional Investors Invest into C-Class Real Estate w/Amy Rubinstein

Summary

Podcast Summary: How I Invest with David Weisburd – Episode E185: Why Institutional Investors Invest into C-Class Real Estate w/Amy Rubinstein

Release Date: July 11, 2025

In Episode E185 of "How I Invest with David Weisburd," host David Weisburd engages in an insightful conversation with Amy Rubinstein, a seasoned expert from Clear Investment Group. The discussion delves into the strategic approaches institutional investors adopt when investing in C-Class real estate, particularly focusing on distressed multifamily workforce housing assets.

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1. Introduction to Clear Investment Group’s Strategy

David Weisburd (00:00):
David opens the conversation by inquiring about Clear Investment Group's investment strategy.

Amy Rubinstein (00:03):
Amy explains that their primary focus is on acquiring distressed, large multifamily workforce housing assets nationwide. She defines "distressed" primarily from a management perspective, citing issues like high vacancies and delinquencies. The group aims to stabilize these properties by enhancing management practices, improving occupancy rates, and restoring asset value before reselling.

Key Points:

• Target Assets: Distressed C-Class multifamily housing.
• Objective: Stabilize properties by addressing management inefficiencies and restoring value.
• Outcome: Resell once stabilized.

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2. Stabilization Process and Operational Tactics

David Weisburd (00:29):
David probes further into what "stabilizing a property" entails.

Amy Rubinstein (00:40):
Amy outlines the stabilization process, emphasizing aligning occupancy and rental rates with current submarket standards. For instance, aiming for a 91% occupancy rate or maintaining C-Class rents around $850. The goal is not to exceed market rents but to ensure equilibrium within the submarket.

Notable Quote (00:40):
"We're trying to stabilize back to current submarket economics... we're not trying to max out rent rolls, we're just trying to fit in with everyone else."

Key Actions:

• Tenant Acquisition: Attracting reliable tenants to achieve desired occupancy.
• Rent Alignment: Setting rents based on submarket averages.
• Operational Improvements: Enhancing management practices to prevent future deterioration.

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3. Addressing Distress: Management and Maintenance

Amy Rubinstein (01:25):
Amy details the steps taken to stabilize distressed properties:

• Re-establish Management: Rebuilding the management team and restoring communication with tenants.
• Maintenance: Addressing deferred maintenance, prioritizing life safety issues, and beautifying the property.
• Tenant Relations: Responding to maintenance requests and ensuring tenant needs are met to foster a respectful landlord-tenant relationship.

Notable Quote (02:32):
"A lot of people stopped paying the rent because nobody's fixed their toilet for six months."

Key Strategies:

• Communication Restoration: Reconnecting with tenants to reclaim trust.
• Maintenance Overhaul: Systematic approach to fix and prevent property degradation.
• Tenant Engagement: Ensuring tenants feel heard and valued.

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4. Amy Rubinstein’s Journey into Real Estate

David Weisburd (02:57):
The conversation shifts to Amy’s personal journey in the real estate industry.

Amy Rubinstein (03:02):
Amy shares that she entered the industry 23 years ago somewhat accidentally. Initial investments in her own home and a condo led her to study real estate, culminating in her first syndicated deal of six studio apartments in Hollywood, California, in 2003. She attributes early success to market conditions favoring upward trends, allowing her to learn and grow.

Notable Quote (03:02):
"I bought my first property, fixed it up, occupied it six months later, I sold it and bought two deals."

Key Takeaways:

• Accidental Entry: Initial investments sparked her interest.
• Learning by Doing: Gained experience through hands-on management and syndication.
• Market Timing: Benefited from a growing real estate market from 2003 to 2008.

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5. The Resilience of C-Class Real Estate

Amy Rubinstein (04:27):
Amy discusses the historical performance of C-Class real estate, highlighting its resilience. Unlike B or A-Class assets catering to lifestyle renters, C-Class properties serve renters by necessity, ensuring consistent demand even during economic downturns.

Notable Quote (04:27):
"There are always going to be people that have to live somewhere and don't have another option other than renting."

Key Points:

• Steady Demand: Necessity-driven rental ensures continuous occupancy.
• Market Stability: Less susceptible to economic fluctuations compared to higher-class assets.
• Historical Performance: Proven track record of resilience and steady returns.

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6. Investment Approach: Conservative Underwriting and Risk Management

David Weisburd (05:48):
David inquires about whether the investment strategy involves predicting interest rates or market conditions.

Amy Rubinstein (06:00):
Amy emphasizes a non-speculative, conservative approach. They stress-test all variables, particularly interest rates, to ensure sustainability even if rates rise by 100-200 basis points. Their focus is on enhancing Net Operating Income (NOI) to create positive cash flows, thereby insulating investments from macroeconomic volatility.

Notable Quote (06:00):
"We're looking at each and every variable and we're making sure that we're conservative in each of those variables."

Key Strategies:

• Stress Testing: Preparing for adverse scenarios, especially interest rate hikes.
• NOI Enhancement: Focusing on improving income streams to buffer against economic shifts.
• Conservative Underwriting: Prioritizing deals that remain viable under worst-case conditions.

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7. Building and Expanding the Limited Partner (LP) Base

David Weisburd (07:59):
David shifts the topic to Clear Investment Group's LP base, asking about the sales cycle for institutional investors.

Amy Rubinstein (08:02):
Amy outlines the evolution of their LP base from high net worth individuals and family connections to institutional investors like pension funds and hedge funds. She notes that securing institutional investors typically takes 9 to 18 months due to thorough due diligence processes, including property audits and track record validations.

Notable Quote (09:57):
"People have to get to know us and feel comfortable with us... it's like very, very tedious stuff."

Key Points:

• Diverse Investor Base: From individual investors to large institutions.
• Extended Sales Cycle: Building trust and undergoing rigorous evaluations.
• Transparency: Maintaining openness to facilitate investor confidence.

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8. Overcoming Challenges in Fundraising and Management

Amy Rubinstein (10:02):
Amy discusses initial hesitations in engaging with institutional investors due to perceived loss of control. However, realizing the necessity for larger capital inflows, she adapted by expanding her team to manage the increased scrutiny and communication demands.

Notable Quote (10:58):
"Nobody wants to be the first. It's very, very hard to get your first."

Key Strategies:

• Team Expansion: Hiring to handle increased operational and investor relations tasks.
• Trust Building: Establishing credibility through consistent performance.
• Adaptability: Adjusting management practices to accommodate institutional expectations.

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9. Institutional Investors’ Attraction to C-Class Real Estate

David Weisburd (11:19):
David asks Amy to articulate why institutional investors are drawn to C-Class real estate.

Amy Rubinstein (11:19):
Amy highlights the significant alpha potential in C-Class assets due to the substantial improvements in NOI. Unlike A-Class assets with lower returns, C-Class investments at Clear achieve over a 37% IRR by transforming deeply distressed properties into profitable ventures.

Notable Quote (11:19):
"Our average return to investors is over 37% IRR over the years."

Key Points:

• High Returns: Exceptional IRRs due to aggressive value-add strategies.
• Asset Security: Investment in tangible, undervalued assets provides inherent value.
• Risk Assessment: Despite apparent high returns, the strategy is deemed low-risk due to asset quality and market positioning.

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10. Tax Advantages and Financial Structuring

David Weisburd (13:02):
David inquires about the tax-advantaged aspects of C-Class real estate investments, especially relating to 1031 exchanges.

Amy Rubinstein (13:11):
Amy confirms the benefits, including initial losses for tax write-offs, cost segregation to accelerate depreciation, and bonus depreciation. While 1031 exchanges are beneficial for deferring taxes, they are less frequently utilized in fund structures. Long-term capital gains are achieved upon selling assets, contrasting with ordinary income taxation.

Notable Quote (13:11):
"We produce lots of losses in the very beginning of our holds... and we're underwriting things to get a little bit worse, but to kind of stay the course."

Key Points:

• Tax Write-offs: Initial losses and accelerated depreciation reduce taxable income.
• Bonus Depreciation: Maximizes depreciation benefits, though subject to future legislative changes.
• Long-Term Gains: Favorable tax treatment upon asset disposition.

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11. Learning and Personal Development in Real Estate

David Weisburd (14:27):
David shifts to Amy’s personal growth within the industry.

Amy Rubinstein (14:06):
Amy attributes her success to continuous learning, networking, and humility. She emphasizes the importance of knowing when to seek help and fostering a team environment where questions are encouraged. This approach has been fundamental in navigating complex and evolving real estate challenges.

Notable Quote (15:03):
"I have no issues in the middle of a call with someone saying I have no idea what you're saying or to explain that."

Key Strategies:

• Continuous Learning: Staying updated with industry trends and practices.
• Networking: Building a robust network of mentors and industry contacts.
• Humility: Embracing a learning mindset and valuing team input.

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12. Team Management and Leadership Philosophy

Amy Rubinstein (19:15):
Amy discusses her leadership style, inspired by Patrick Lencioni’s "The Ideal Team Player." She prioritizes team members who are hungry, humble, and people-smart, fostering an environment where ideas are openly shared and egos are set aside.

Notable Quote (19:15):
"I can't work with a team that is not hungry and humble and people smart."

Key Points:

• Ideal Team Traits: Hunger, humility, and interpersonal intelligence.
• Conflict Resolution: Encouraging open dialogue and collaborative decision-making.
• Delegation: Empowering team members by delegating ownership and responsibility.

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13. Future Vision and Growth Plans

Amy Rubinstein (25:26):
Looking ahead, Amy envisions expanding Clear Investment Group's offerings by launching a parallel debt fund focused on the same C-Class distressed real estate. Additionally, she aims to accommodate more deals by diversifying investment structures, aspiring to become a comprehensive multifamily investment firm within the next five to ten years.

Notable Quote (25:26):
"In the next five years, what we would like to do is have a parallel fund that is a debt fund that operates off of the same asset class."

Key Goals:

• Debt Fund Launch: Expanding investment products to include debt financing.
• Comprehensive Services: Becoming a one-stop shop for multifamily investing.
• Scalability: Leveraging existing strategies to handle increased deal volume.

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14. Multifamily Real Estate as an Inflation Hedge

Amy Rubinstein (27:25):
Amy underscores multifamily real estate, especially C-Class, as an effective hedge against inflation. Adjustable rental periods allow for swift rent adjustments in tandem with inflationary trends, ensuring asset performance remains robust.

Notable Quote (27:25):
"Multifamily real estate's a really great hedge against inflation."

Key Points:

• Inflation Adaptability: Ability to adjust rents quickly in response to inflation.
• Tangible Assets: Physical properties provide inherent value stability.
• Consistent Demand: Economic volatility does not significantly impact the necessity-driven rental demand.

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15. Reflections and Advice for Aspiring Investors

Amy Rubinstein (30:13):
Amy reflects on her early days, expressing that ignorance sometimes facilitated risk-taking and growth. However, she acknowledges the benefits of formal education in finance and Excel, which could have accelerated her proficiency and reduced early challenges.

Notable Quote (30:13):
"If I were to go back, I would have learned Excel better and I would have learned finance better."

Key Takeaways:

• Embrace Learning: Gain formal knowledge in relevant areas to enhance skills.
• Perseverance: Overcoming challenges through determination and faith in success.
• Continuous Improvement: Always seek to enhance personal and professional capabilities.

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16. Closing Thoughts and Impact Investing

Amy Rubinstein (34:10):
Amy highlights Clear Investment Group’s dual focus on generating substantial returns and making a positive community impact. She emphasizes that their investments not only benefit investors but also improve the lives of tenants and the broader community, aligning profitability with social responsibility.

Notable Quote (34:10):
"We never talked about it or advertised it before until this thing called ESG became very popular... it just is what we do and we're proud of it."

Key Points:

• Impact Investing: Balancing profit with social and community benefits.
• Sustainable Practices: Enhancing communities without compromising returns.
• Intrinsic Motivation: Deriving satisfaction from positive societal contributions.

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Conclusion

In this episode, Amy Rubinstein provides a comprehensive overview of Clear Investment Group's approach to investing in C-Class real estate. Through meticulous management, conservative financial strategies, and a strong emphasis on team dynamics and continuous learning, Clear Investment Group not only delivers impressive returns but also fosters community development. The discussion underscores the viability and resilience of C-Class multifamily real estate as a preferred asset class for institutional investors seeking both profitability and positive social impact.

Final Notable Quote (35:21):
"We're actually signaling that you're capitalist and you're actually helping somebody."

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For more insights and detailed discussions with leading institutional investors, subscribe to "How I Invest with David Weisburd" and stay updated with future episodes.

Transcript

[David]

So tell me about the strategy for Clear Investment Group.

[Amy]

All right, so we buy very distressed, large, multifamily workforce housing assets across the country. So when I say distressed, I mean from a management standpoint. So things like high vacancies, high delinquencies, we stabilize those assets, return the value or restore that value back to those assets after we're stabilized and we go out and resell the properties back again.

[David]

Presumably nobody wants high vacancy rates and everybody wants a stabilized property. What does it mean that you guys go in and stabilize the property?

[Amy]

So for us, stabilization is literally fill up that occupancy with viable tenants who are able to pay their rent and get the property back to the way that it was before it started to deteriorate. So we're trying to stabilize back to current submarket economics. So if the average occupancy rate in that particular submarket is 91%, then we're aiming for 91%. If average rents for C class workforce housing in that particular neighborhood is $850 and we're trying to get to that approximate $850. So we're not trying to max out rent rolls, we're not trying to exceed the market. We're just trying to fit in with everyone else.

[David]

And how do you go about doing that?

[Amy]

So there are lots of ways. Usually the property has become distressed because the management has fallen apart for whatever reason. So it starts with the staffing and the management and communication back to the tenants. Most of the time, tenants have stopped paying rent because management has stopped communicating with them or they're not getting their basic needs met. So we're going to get those lines of communication functioning again. We're going to start taking maintenance requests, start to send out notices to tenants, really just let people know that we're there again, that we have a staff. We start to staff and hire people and then we start to clean up deferred maintenance. And we're going to start with anything that is life safety issues. Then we're going to start with a little bit of cleaning up and beautifying so things don't look like they're falling apart again. And. And then we're going to get into some unit turns and then we're basically looking at how can we start to occupy these units and getting those up to speed.

[David]

From a psychological perspective, it's like reciprocity. You're not taking care of your part of the deal. So I'm not going to pay my rent, essentially.

[Amy]

Absolutely. Yeah. We get that from a lot of tenants and there's various reasons as to why people aren't paying rent. Part of when we're doing our due diligence, we're talking to the tenants and finding out why they're not paying their rent. And a lot of people stop paying rent because people stop asking for rent. A lot of people stopped paying rent because their neighbor stopped paying rent and nothing happened to them. They didn't get evicted or anything. So they just stopped paying their rent. And a lot of people stopped paying the rent because nobody's fixed their toilet for six months. So things like that.

[David]

Taking a step back, how did you get into this industry?

[Amy]

I started in this industry about 23 years ago. I fell into it by accident, which I feel like a lot of real estate people do. I bought a house and it appreciated in value and I didn't understand what I was doing, but I understood that there was value added to the house. And so I did it again and I bought a condo. Value was added again. And then I thought, well, maybe I should figure out why value is being added. So I started to study real estate a little bit to try to understand what it was. And I ended up syndicating my first deal, which was a six studio apartments in Hollywood, California. Bought my first deal, fixed it up, occupied it six months later, I sold it and bought two deals. And this was 2003, so the market was going up. I wasn't the most brilliant person. It was literally I was riding an upward market.

[David]

Sometimes these up markets for a manager maybe weren't as experienced as you are today, but they provide that buffer of protection so you can make some mistakes, still make money, and as the market continues to go up, your skills go up. So by the time you know, it might go down and is flat, you now have alpha in a trade via your skill set.

[Amy]

Yes. Learn in the market. Between the years of 2003 to 2008 was a very forgiving time period and so that was really nice to be able to have that.

[David]

So you're in the C class real estate asset. Tell me about the historic performance of the SaaS class.

[Amy]

The historic performance has been very, very strong, which is why we ended up in this particular class. So when I started in 2003, it happened to be a somewhat distressed property. It was fully vacant when I, when I bought my first property. But I started dabbling in all sorts of real estate, mostly multifamily, but I would say I was in Cs and Bs and then some office, some retail, some industrial. And after having gone through some uptime, some downtimes, what I really found stayed strongest. It was affordable housing was that C class asset. We're our tenant base are renters by necessity. We're not fighting against a housing market. You get B class or A class and those are lifestyle renters. They're choosing to rent or to go buy homes. There's always going to be a need for affordable housing. There are always going to be people that have to live somewhere and don't have another option other than renting. And so therefore it really does stay strong in the ups and downs. And historically it's performed very steady over the years. And so it is really what I like the most. That's not to say that there aren't downturns that have hurt us or caused pain or caused the market to deteriorate a bit. There certainly are, but I still think that it stays the strongest.

[David]

As part of your strategy, are you somehow trying to predict interest rates and market conditions or, or are you always leaving yourself enough of a margin to make sure that no matter what happens, you have an embedded return in your investment?

[Amy]

We don't like to speculate on any macro changes that are going to occur. Interest rates are the most common thing that people talk about trying to kind of time interest rates or time the market. As far as where are you at in the market? Up and down. We're looking at each and every variable and we're making sure that we're conservative in each of those variables. And so when we're underwriting, we are stress testing for interest rates to go up. We will never speculate that interest rates are going to go down. Even when everybody's saying you're going to get cuts, we're going to ignore that. We're going to look at how does a deal look with interest rates today and what were to happen if interest rates go up 100 basis points or 200 basis points. Can we sustain ourselves through that time? Time we find ourselves to be somewhat insulated from macroeconomics because what we're doing is increasing NOI so much that we have the wherewithal to be able to sustain ourselves through some, you know, some turbulent times. We're taking what is usually negative cash flowing assets and we're turning them into positive cash flowing assets. And we had a huge delta in that NOI that we're restoring. I say restore because it did exist at some point. This is a hard asset. You have units that are already built. There are places for people to live, but it's getting them back to market terms, where is that today? And it's bringing back that asset to whatever the market is right now. So we do try to stay away from speculations as to what's going on as far as appreciation, as far as interest rates, as far as, you know, we're going to underwrite some natural inflation, but we're underwriting things to get a little bit worse, but to kind of stay the course. And if we're buying into downtime, we're underwriting to sell in that downtime. And if we're buying in a good time, we're underwriting to sell into downtime. So we're trying to ignore as much as we can the benefits of what's going on in the marketplace and then underwrite for things that could tear us down.

[David]

Tell me about your LP base.

[Amy]

We have a range of investors from high net worth individuals up to institutional investors, pension funds. We started with just high net worth individuals. So you know, the first deals were started with friends, family, then friends of family, family of friends and so on and so forth until we no longer knew all of our investors. And then we had a lot of high net worth individuals that we didn't necessarily know, but that would join along with us. And then as we started to build and grow as a fund as opposed to deal by deal structure, then we have the ability to bring in larger investors, hedge funds, pension funds and so on.

[David]

And you've gone the full life cycle. You even had your first year, your own money, then you had a syndicated deal, then you had high net worth friends of high net worth institutions. When it comes to institutional investors, tell me about the sales cycle. How long does it take for you to get a check from an institutional investor from the first time that you meet?

[Amy]

I would say nine to 18 months. It's a long process. People have to get to know us and feel comfortable with us. And then there's underwriting that just takes time. It passes through a lot of people, a lot of departments. We get people to come out to our offices, visiting us, interviewing our staff, looking through our audits, looking through, you know, we had, we had an investor that pulled the deed of every purchase and sale of assets we bought from the beginning of time. And then laying it out against our track record, up against what we had submitted as our track record. So it's like very, very tedious stuff. We've gotten used to it now, so nothing really shocks us anymore. And we've got a huge database of information and due diligence on us. But people ask us New questions all the time. And we just, we're just used to producing back the answers. And it's easy. If you can be an open book, then it's easy to respond to those answers.

[David]

I remember the first time I got an institutional investor. It could be a brutal, brutal process, especially in the beginning.

[Amy]

Absolutely. I stayed away from it for a really long time because I felt like in my earlier years I didn't want to give up any control on everything I was doing. And it felt very constricting. It felt like all of a sudden you had a boss again. And then I kind of gave into it because at some point there's only so much you could grow. And you can certainly have a model that is all high net worth individuals. But it is very helpful to have some of those larger checks. And so at some point I sort of gave into it. But it's easier when you have a larger staff, when you have people to handle those kinds of questions and that kind of due diligence and the kind of communication that it takes. And if you're, you know, you're only a couple people in an office, you just can't take it on.

[David]

Was it easier after the first institutional investor? You could kind of point to them and other people got much more peace of mind. And you kind of started with this benefit of the doubt.

[Amy]

Absolutely. Because people then get that confidence. Someone else did their due diligence, they had the confidence to come into this. Nobody wants to be the first. It's very, very hard to get your first.

[David]

So now, putting on the hat of an institutional investor, why would they be interested in C class real estate?

[Amy]

Because it's where the pure alpha is. You know, when we're taking NOI and growing it so greatly, it's such a different model than a traditional value add model where you're trying to tack on a little bit of rent, you're maximizing that rent roll. You know, we're producing returns that are large enough that it's hard to ignore it. If you have a lot of very stable A class assets, you're producing single digit returns. And probably on the lower end, the nicer those assets are and the more stable they are, the lower your returns are going to be. And when you take deals that have so much room in NOI, our average return to investors is over 37% IRR over the years. That's because we're taking things that are so broken and bringing them back. On the other hand, one might look at this and say, well then it's super High risk. And we don't see this particular strategy as high risk. And the reason is we were sitting on hard assets. We were sitting on hard assets that had real value that could be proved out just a couple years prior. As soon as those assets are filled into market conditions, those assets are producing very significant cash flow. And so for us, we don't look at them as particularly risky investments. Now there is a lot of work that has to be done to get from point A to point Z where we're going to end tons has to happen, but the asset's going to stand. It's already there. And we are buying these assets so far below the cost of replacement that we're very comfortable about the value of them.

[David]

Real estate's known for 1031s for tax advantaged structures. Are there any tax advantaged aspects to this type of strategy?

[Amy]

Absolutely. We produce lots of losses in the very beginning of our holds. So first couple of years investors get to, to benefit from those losses and those write offs. And then we use cost segregations to also accelerate those losses. We've been benefiting off of bonus depreciation which may or may not disappear in the next couple of years. 1031 exchanges are absolutely a great way to be able to defer taxes. It's hard to take advantage of all the time in a fund structure, but we have the ability to in the very beginning of the fund and then, you know, our gains at the end are long term capital gains. So different than getting ordinary income.

[David]

So you're a solo GP in a difficult to understand asset class.

[Curtis]

How did you go about learning what.

[David]

It took to be successful?

[Amy]

It was, it's trial and error, a lot of it. You know, I, I taught myself a lot of what I did in the beginning, but there were lots of helpful people along the way. And I think I'm not a person that's afraid to ever ask for help or to tell someone I don't understand something. It's something I tell my team all the time. I learn every day. Very good at this office at doing one thing. We're very, very specific in what we do, but even within that we come across new things all the time. And I have no issues in the middle of a call with someone saying I have no idea what you're saying or I don't understand that term or I've never heard of that before. Can you explain that? And I think that that is very helpful. There are things we try to do every day that are new because it comes up and it happens we're going to buy something where something has happened that we've never experienced before and we'll learn from that. And a lot of it is continuing to build a network so that I have people to call on.

[David]

It's interesting because a lot of these quote unquote dumb questions are simple questions are. Actually, most of them are not dumb. I asked you, for example, about tax advantages and of course I've heard about 1031 exchanges, but you talked about cost segregation studies, which I've heard about, haven't done a deep dive. You talked about bonus depreciation. So something that sounds like a very obvious topic that you should know. You should know 1031 exchanges and real estate. There's actually more to it oftentimes than what we saw.

[Amy]

Yes. The wonderful thing about real estate is the basics of real estate are very simple. And then you can layer on all these complications, but it's easy to start to get a grasp of it, to start to understand what it is. It's very tangible. So. So the concepts are simple. It's just laying on the many, many layers of complications that sort of start to add to the complexity of a deal.

[David]

And you mentioned you have mentors in the industry. How did you cultivate those relationships?

[Amy]

I've always been great at keeping up relationships with people that I buy from or people that I sell to or brokers in the industry or lenders in the industry. And I use the network of those people that I come across all the time and to ask questions to. There's a. A guy who bought a portfolio from us once and then I ended up buying a portfolio from him once. And he's someone I'll like. Every once in a while I'll. I'll text him and say, hey, have you been in this market before? What do you think about that market? Or, you know, I have other friends who've bought or sold in areas that I hadn't bought or sold in, or just. It's just constantly sort of keeping up a network through working and then also through business organizations or people you meet at conferences and stuff like that. I'm actually not the most extroverted person, but I think it's important to constantly be networking, to be able to have that library of information.

[David]

There's a real estate aspect to what you do, but there's also the part of being a gp, fundraising, investing, and learning the fun side. How have you become better at being a better investor?

[Curtis]

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[Amy]

The hardest part of running a company is figuring out your team. How do you maximize your team's potential? How do you get your team running at all cylinders? And I think it's the people part that's the hardest. The buildings are going to throw you curveballs all the time. You're going to have a fire, you're going to have a code enforcement come in. You're going to have problems that happen. But you have to have the team that's able to take on those problems, that's nimble enough to pivot and come up with new ideas. But there's only so much you can do on your own. And so I think for me the biggest learning curve is always about the people. How do I help foster our team?

[David]

What's been the biggest lessons about what kind of people you should work with, how to manage those people or any people issues.

[Amy]

I read a lot about business management, teamwork, unlocking potential. And there is a Patrick Lencioni book about the ideal team player and it talks about how people the ideal team player is someone who is hungry, humble and people smart. And for me that is something that I would have loved to have learned earlier because I can't agree with it more. I can't work with a team that is not hungry and humble and people smart. People smart cuts out the drama. But the humble and hungry is so crucial. We all have to just be ready to hear someone else's ideas. And when I was younger I thought that I should try to be the smartest person. And then as I got older I realized it's more way, way better. If I'm not the smartest person, I need to have people that are way smarter than me in my office. And I do. I have teammates here that are way smarter than me in each of the divisions that they work in. And that's such a gift. But when that comes with, when you get those smart people, and that comes with people who are humble so that you can have conversations and have disagreements and be able to come up with which strategy is the best and not care whose strategy it was. We're just looking for what is the best strategy, what is the best answer? And I don't care if it's never my answer. And I want all of our team to feel that same way. Where, you know, we have a policy here in the office that if two people disagree on something, they have to sit and take the time to communicate to each other what they disagree on and state their case and then listen and try to get the other person to understand them and try to understand the other person's side. And if they do it well, without ego, almost always both of them will agree on one of the ways that is better, and that is the way decisions should be made, as opposed to the person in the highest position gets to make the decision.

[David]

There does seem to be a right answer for a lot of questions. It's a little bit paradoxical to say that, but in terms of strategy or micro things, there does seem to be a right answer in that if two people without an ego put all the facts on the board, the answer most of the time, 90 plus percent of the time, is obvious. Me and my partner Curtis, we, we almost annoyingly get to the same answer and we've wondered, do we both have the same blindside? Are we basically systematically, like, fooling ourselves? We almost have a paranoia about why do we keep on coming up with the same answers. Do we have groupthink? Do we access the same information to kind of live in this paranoia? But I do think that for most topics, if you take away the ego, the answer starts to present itself.

[Amy]

Absolutely. And when you and your partner are speaking or analyzing a problem, do you both analyze it in different ways and get to the same end?

[David]

For sure, he'll say something like really brilliant, orthogonal that I never thought about. And then sometimes I could add to that, or I might say something. And as I'm saying it, I'm like, no, that's not true. And then we both kind of laugh and I correct myself. And so there's this kind of discovery and two Minds with different kind of data sets evolving on this topic together.

[Amy]

Yeah, that's the best way. It's great when you're coming across it from different mindsets and still can get to the same answer.

[David]

Another thing that I've started to implement this kind of form of delegation where if somebody is responsible for something, like the editor of the podcast, I tell Wellrose, who runs the podcast, basically, I work for you. So you have a schedule, you need to do three episodes a week, you tell me what I need to do. And it's a powerful frame, both for Wellrose, but also for me because I don't have to be doing somebody else's job. I kind of think about it like I work for her. I'm like the on air talent. You tell me where to show up, you know who I'm interviewing. And it's a beautiful kind of symbiotic way and it's a very scalable way to build an organization. It's not something that you see that much in organizations.

[Amy]

Absolutely. It's so important to do that because if you don't give someone ownership, then you end up taking it back on yourself. Or if you don't have buy in from someone else and they don't have their heart in it. And it's something to constantly be reminding ourselves as managers or leaders, but you have to give that power to the other person to run their own show and literally in this situation, to run their own show, but to run their own division, their own ideas, their own projects. And then you step in, they get to ask you what they need and you step in to assist them. I agree with you. It was a way more productive method of getting people to really rise to their full potential.

[David]

A lot of high achievers, they think they're control freaks and all these things. But what I like to point out to them is they have somebody on their team that's really top notch and they have no issues delegating to that person. So the issue is not actually them or their controlling or their quote unquote, high standards, which are an asset. It's actually they don't have the right people in the seats in order to give up control to them so that they could carry on that standard. And ideally you have people that have even a higher standard in a specific domain.

[Amy]

That's a really, really hard balance to get to that point where you figure you can trust that person to lay everything off and delegate everything off and know that it's going to come back the right way or that they're going to take it on the right way. But if you don't give it off in full and delegate it in full, then you're never going to see what can come back at you. So it is a hard balance in the beginning when you're first starting to work with someone to figure out what can they do and what is their potential and how do you take those risks with them to delegate out and know that it's okay to let go.

[David]

Where do you see your business in five, 10 years and how do you think about the opportunity set and also organizationally how you expand?

[Amy]

There is so much wonderful distress real estate out there. And so we have a lot of room to grow within the exact asset class that we're in right now doing exactly what we do. And we love that in that sense that growth is just more of the same. It's scaling what we already do. And then when you ask about, you know, years out, what are our goals, there are other things that we would like to do at some point. So I think in the next five years what we would like to do is have a parallel fund that is a, that's a debt fund that operates off of the same asset class. So it would be the same process up to the purchase. And at that point you, someone else takes it on because you're just providing the debt so being the debt instead of the equity and in within that same, you know, C class distressed real estate. And then there are a lot of deals that are great deals that we pass on that because they're just not distressed enough for us that we're not seeing those 30% IRRs, we're seeing, you know, 22% IRRs and we would like the opportunity not to have to pass on some of those. And so in that 10 year range we would love to be a one stop shop for multifamily investing. I don't know that we're ever gonna be A class owners. Cause I struggle to wrap my head around the concept. D class is a whole nother thing too because but that middle range of multifamily, I think it's a great place to be and I, and I think we'd like to be even more well rounded in that, in that era, in that arena. Over the next 10 years we'll get.

[Curtis]

Right back to interview, but first we're looking for the next great guest. If you or someone you know is a capital allocator and would make for a great guest, please reach out to.

[David]

Me [e-mail] what A C class real estate correlated with. And what is it correlated, what is it negatively correlated with?

[Amy]

Multifamily real estate's a really great hedge against inflation. And so it fits really nicely in the portfolio in that period of time. For sure, we have assets that, you know, the individual rents are about 12 months in length, that your, your rental period, your lease period is 12 months. So you can adjust to inflation really quickly. Now, of course, the market is adjusting with you, right? You're not raising rents when everything else is going down. But it typically, when you're in inflationary periods of time, you're going to also see those rents go up as well. And so you're in an asset class that can react a little bit faster to something like inflation than other asset classes. So I think multifamily is a really strong piece of a portfolio. You also are sitting with a hard asset that has tangible value. Regardless of what's going on with rents, there is some inherent value in just the asset itself. So you've got some stability in that. But right now I can't imagine a better place to put my money than in. I mean, of course it's easy for me to say that when it's, it's the one asset class that I understand the best. But when you see the market volatility and that has been happening, you know, year to date and we've seen our ups and downs and sure it's in a good place right now, but the market's been unpredictable. And you don't get that unpredictability in multifamily real estate, and especially in multifamily real estate that's C class. And the reason being is we're not fighting against a housing market. We're renting to renters by necessity, as opposed to lifestyle renters. So there's always going to be a need for affordable housing no matter what. It doesn't matter what happens to interest rates with the housing market because our renters are not going to go buy homes. There are always going to be people that are working class people that need a place to live. And right now also when you do have inflation, when you do have tariffs, what happens is construction becomes very difficult to put out new construction because there's quite a costs that are unpredictable right now and very high right now. And so low income housing is not being built. And so it makes our asset class even more important and even stronger in a time like now. So I'm a huge advocate of C class assets.

[David]

It's kind of like a staple Good. Like milk and eggs. It's almost inherently a. A hedge against a. And a downward economy. What do you wish you knew before starting as a real estate investor 22 years ago?

[Amy]

Oh, my gosh. In some ways, I was very lucky that I didn't know anything or I probably wouldn't have done it. So in some ways that allowed me to grow. I just didn't know all the things that I should have been scared of. I did take risks that were. That I would not take today, and they worked out well for me. So I wouldn't suggest that you take risks because you don't understand them.

[David]

So you might have not known all the challenges, call it like the hundreds of challenges. But you also probably underestimated your perseverance and your ability to go through those challenges. So the reason you may have not done it is because your brain would only see those hundreds of challenges and it wouldn't price in your perseverance. And as you when after these challenges, your perseverance kept on going up, so you solved these issues sequentially. So if you had really understood your human mind, you might have actually went through it. But if you were just looking at this mountain of challenges without knowing that you'd grow on that journey, it would seem insurmountable.

[Amy]

Absolutely. So we got through 2009, 2010. We didn't lose any money for any investors ever. We did fine through that period of time, but it was so painful, and it was very physically painful, too. I no longer feel the physical pain of stress. And I think that the reason for that is that I have this intense faith that we will get through it. Just like, put your head down and keep working, like you just said, you know, that perseverance gets you to the other side of it. And having. If I would have had that faith back then, or that understanding that we're going to make it through this, maybe that time would have been less painful. I grew so much from that stuff, too. I'll tell you what I should have, what I would have liked to have known. I studied economics, but it wasn't my major in college. And so I came out of school without all of the tools I needed. And so if I were to go back, I would have learned Excel better and I would have learned finance better, and I would have, you know, taken different classes in college that would have gotten me. That would have helped me learn in a more productive way as opposed to the remedial ways that I taught myself. And I could be smarter today and I could be better at math. And I could be better at Excel and I could be, you know, I could be better at these things. And so maybe that would be something that I would go back and change.

[David]

Dare I ask, what are these remedial ways that you taught yourself these skills?

[Amy]

I didn't even know what Excel was. And I was sent an Excel sheet when I was trying to understand what real estate was. And I had this Excel sheet and I was, like, copying, like, looking in the cells at what the formula was and then, like, copying it into another cell into another sheet to try to teach myself what Excel was. It wasn't even a class. I didn't even take a class on it. I literally took a model and copied.

[David]

You're recreating the model, so, yes.

[Amy]

And that was how I taught myself Excel. So that's pretty remedial. There had to have been a better way to do that. I did the same thing with teaching myself QuickBooks. There was one night when I had a. I had a very small staff. I was a couple years into it. I had a bookkeeper who worked for me, and one night she just left. And I thought, what am I going to do? I don't know what QuickBooks is. At that time, we were on QuickBooks. I took one accounting class in college, I Know nothing. And I literally spent the night teaching myself QuickBooks so I could run my own books the next day. And I did. But there's better ways to do these things. You know, we don't have to do it that way. We could take classes and learn things in a different way. And, you know, I didn't have those luxuries.

[David]

What would you like our listeners to know about you? Clear investment group or anything else you'd like to share?

[Amy]

We're super passionate about what we do. The thing that I feel the luckiest, I guess, about my career in general and about our company in general, is we are able to create great returns for our investors. But naturally, we're impact investors. And we didn't set out to be impact investors, but we are. And it is, I would say, the one thing that makes me always happy to come to work. I feel really good about what we do. We change communities for the better constantly. We support our tenants and the communities that our tenants live in, and that's without sacrificing any of our profits. And I think that that is the most sustainable way to make a difference in the world. When you get to do your job every day and you feel like you're making a positive impact on the world, it's it just feels great. And so we love what we do.

[David]

It's like the opposite of traditional virtue signaling where you're signaling that you're virtuous and you might be hurting somebody. You're actually signaling that you're capitalist and you're actually helping somebody.

[Amy]

Yeah. Yes. We never talked about it or advertised it before until this thing called ESG became very popular for a very short period of time and I think now rebranded the other side again so we don't talk about it again. But there was this like, teeny little window where some people would be interested. I, I, you know, we would get on calls sometimes with investors and, you know, we'll go through our whole pitch and our pitch never has anything to do with ESG or Impact or like, I would never until two years ago have said that we're a women owned business. It's just to me, that was only going to be a negative, not a positive. And so then like, like at the end of all of our pitches, we'd say to people, you know, do you want us to talk about impact investing? Do you guys care about that at all? And most of the time people will say no. It's like, okay, no problem. You know, it's very rare that anyone cares about it, but it's not for anyone else that we, that we do it. You know, it just is what we do and we're proud of it and happy about it, but sort of like the silver lining for us.

[David]

Well, Amy, it's been a pleasure to chat and look forward to sitting down very soon.

[Amy]

Likewise. Thanks so much.

[David]

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