TEDM – Gary Lipsky – Real Insights for the Business of Real Estate Investing (Episode 208)

Summary

Episode 208: Gary Lipsky – Real Insights for the Business of Real Estate Investing

Release Date: December 10, 2024

Host: Patrick Franci

In the 208th episode of "The Everyday Millionaire", host Patrick Franci engages in a comprehensive conversation with Gary Lipsky, a distinguished real estate investor and multifamily syndication expert. Gary's impressive portfolio, which includes over 3,200 units valued at over $300 million, and his accolades, such as being recognized as the Best Real Estate Syndication Company by the American Apartment Owners Association in 2022 and the 25th fastest growing real estate company by Inc. Magazine, set the stage for an insightful discussion on wealth creation through real estate.

Gary's Journey into Real Estate Syndication

Gary’s entrepreneurial spirit ignited early in his life. Starting with ventures like a car detailing business in high school and a restaurant delivery service in college, Gary consistently sought active, hands-on opportunities rather than traditional employment. This drive led him to real estate during a challenging period in 2002, when he purchased his first home in Los Angeles despite financial constraints.

"I knew I was going to get $725 of rent from my business to help pay for that mortgage. I didn't realize at the time, but that was the groundwork for me to get to the next level."
— Gary Lipsky [05:49]

In 2019, leveraging multifamily syndication, Gary and his team acquired a 42-unit property for $1.65 million by pooling investor capital, marking a significant milestone in his real estate journey. This move not only provided economies of scale but also introduced a buffer against potential challenges inherent in larger projects.

Understanding Multifamily Syndication

Gary delves into the intricacies of multifamily syndication, clarifying its distinction from other investment vehicles like private REITs.

"Multifamily syndication is like crowdsourcing. You pool investor capital to buy large properties, typically 150 units or more, allowing for significant economies of scale."
— Gary Lipsky [03:04]

Unlike private REITs, which often involve higher fees and greater liquidity but offer lower returns, syndications provide investors with more direct investment opportunities, fewer fees, and the potential for higher returns through strategic property management and value addition.

Lessons in Raising Capital

Raising capital effectively is pivotal to Gary's success. Early in his career, Gary grappled with imposter syndrome, questioning his legitimacy to attract investor funds. Over time, he adopted a long-term, relationship-focused approach, emphasizing transparency and education over creating urgency or FOMO.

"You're only as good as your last deal. Play the long game."
— Gary Lipsky [16:08]

Gary underscores the importance of consistent, honest communication with investors, fostering trust that encourages long-term partnerships rather than short-term gains.

The Importance of Mentorship and Networking

Initially, Gary's single-minded focus hindered his ability to build a robust team or seek mentorship. Recognizing this flaw, he began participating in mentorship groups, which significantly enhanced his knowledge and network.

"My network is so strong now, I can go, at any point, reach out to a couple people, 'I need help,' and they can get me there."
— Gary Lipsky [12:20]

This shift not only refined his investment strategies but also reinforced the value of continuous learning and leveraging diverse skill sets within his team.

Gary's Book: "Invest Smart: Spotting Red Flags in Real Estate Syndications"

Gary authored "Invest Smart: Spotting Red Flags in Real Estate Syndications" to educate investors on identifying potential pitfalls in real estate deals. Drawing from experiences across over a hundred deals, the book offers practical guidance on due diligence and the importance of evaluating syndicators critically.

"We want to help other people make better, more informed decisions. Not chase IRR, and focus on the operator."
— Gary Lipsky [19:15]

The book serves as a valuable resource for both novice and seasoned investors, emphasizing the importance of investor education in fostering successful real estate ventures.

Investment Strategies and Market Focus

Gary strategically focuses on Class C and B properties in Tucson, Arizona, where he identifies consistent growth and manageable competition. By avoiding overheated markets like Phoenix, he capitalizes on undervalued opportunities with significant upside potential.

"We keep doing more and more deals in Tucson. We'd love to have a little bit more diversification, but why change something that's not broken?"
— Gary Lipsky [24:21]

Tucson's diverse economy, including sectors like healthcare, education, and technology, provides a stable foundation for real estate investments, aligning with Gary’s objective of minimizing risk while maximizing returns.

Tenant Relations and Community Building

A cornerstone of Gary's philosophy is treating tenants as clients rather than mere renters. By fostering long-term relationships and building a sense of community, Gary ensures high retention rates and enhances property value.

"Our residents stay longer at our properties than the national average by 23%. We provide a quality place and foster a sense of community."
— Gary Lipsky [45:22]

Initiatives like property newsletters offering financial advice and healthy recipes not only add value for tenants but also contribute to a positive living environment, translating into better returns for investors through reduced turnover and increased rent stability.

Navigating Economic Uncertainty

Despite global economic uncertainties, Gary remains optimistic about the U.S. real estate market, particularly in the multifamily sector. He highlights the enduring demand for housing and favorable interest rates as key drivers of sustained growth.

"Real estate is a great place to put your money. It's a long game. Don't chase the grand slams, do your due diligence and seek out advice."
— Gary Lipsky [50:56]

Gary advises investors to focus on fundamental market factors like supply and demand rather than being swayed by geopolitical events, maintaining a disciplined approach to investment even in volatile times.

Final Wisdom and Closing Thoughts

As the conversation winds down, Gary imparts essential advice to aspiring real estate investors:

1. Long-Term Perspective:
   "Real estate is a long game. Don't chase the grand slams."
   — Gary Lipsky [50:56]

2. Due Diligence:
   "Do your due diligence and seek out advice, which I didn't do when I was younger."
   — Gary Lipsky [50:56]

3. Building Reputation:
   "It takes a lifetime to build a reputation and it takes 15 minutes to destroy it."
   — Gary Lipsky [50:33]

4. Embrace Mentorship:
   "Don't be afraid to ask what you may think is a silly question. The only dumb question is the one that didn't get asked."
   — Gary Lipsky [51:30]

Gary's insights underscore the importance of patience, continuous learning, and integrity in building a successful real estate investment career. His emphasis on ethical practices and value creation serves as a guiding principle for investors aiming to achieve lasting success.

---

Notable Quotes:

• "Multifamily syndication is like crowdsourcing. You pool investor capital to buy large properties, typically 150 units or more, allowing for significant economies of scale."
  — Gary Lipsky [03:04]

• "You're only as good as your last deal. Play the long game."
  — Gary Lipsky [16:08]

• "Our residents stay longer at our properties than the national average by 23%. We provide a quality place and foster a sense of community."
  — Gary Lipsky [45:22]

• "Real estate is a great place to put your money. It's a long game. Don't chase the grand slams, do your due diligence and seek out advice."
  — Gary Lipsky [50:56]

• "It takes a lifetime to build a reputation and it takes 15 minutes to destroy it."
  — Gary Lipsky [50:33]

Gary Lipsky's episode on "The Everyday Millionaire" provides a deep dive into the strategic, ethical, and relational aspects of real estate syndication. His experiences and teachings offer invaluable lessons for anyone looking to navigate the complexities of real estate investing successfully.

Transcript

[Patrick Franci]

Hi there and welcome to the Everyday Millionaire podcast. My name is Patrick Franci and I am your host. And I want to begin by saying thank you for listening. On this show, I am having conversations with seemingly ordinary individuals who have achieved some amazing and extraordinary results in both their life and business. My intention is to inspire and help you learn and grow by having my guests share their journey of how they face and overcome their challenges, but also how they celebrate their their many wins. And now let's get on with this show and have a conversation with today's guest.

[Gary Lipski]

My guest today, Gary Lipski, is a.

[Patrick Franci]

Real estate investor and entrepreneur extraordinaire who's focused on multifamily syndications and has acquired more than 3,200 units with a value exceeding $300 million. In 2022, he and his team won.

[Gary Lipski]

The best real estate syndication company which.

[Patrick Franci]

Is awarded and presented by his governing.

[Gary Lipski]

Body or the governing body, the American Apartment Owners Association.

[Patrick Franci]

And they were also recognized as the 25th fastest growing real estate company by Inc. Magazine. He is the host of his podcast, the Real Estate Investor Podcast, where I.

[Gary Lipski]

Also had the opportunity to be a.

[Patrick Franci]

Guest on his show and he interviews.

[Gary Lipski]

Experts to educate other investors.

[Patrick Franci]

He's also the best sell author of his book Best in Class and has spoken at countless conferences and meetings. He has built several companies, co produced three independent films and started a non.

[Gary Lipski]

Profit organization for underprivileged children.

[Patrick Franci]

His extensive experience serves as a real powerful foundation for his multifamily business.

[Gary Lipski]

Today in our conversation, you're in for.

[Patrick Franci]

A treat as Gary provides some valuable insights into his journey and the wisdom that he's gained along with his expertise working in the real estate trenches.

[Gary Lipski]

Let's get this show started. Gary Lipski, welcome to the Everyday Millionaire podcast. Thanks for joining me.

Thanks for having me. Appreciate it.

So, Gary, you know, at the end of the day, I always lead into the fact that your bio is great, tells a lot, but it never is as great as when my guests share with me a little bit about the question of if somebody asks you, so Gary, what do you do? What's your answer given your track record and all of the things you got going on?

Yeah, I'm a real estate professional and try to help other people create wealth for themselves.

Now you do that through, you know, the multifamily syndications is kind of where you've ended up on your journey. So let's describe for listeners what a multifamily syndication is by how you would define it. Let's say if you were talking to Some investor, yeah, absolutely.

So one, it's, it's pulling investor capital to get large economies of scale. So we typically buy 150 units or more. We, we find the deal, and after underwriting maybe a hundred, you know, we, you know, to finally find one really good one. Then we put the debt together, we get it under contract, we raise the capital from investors. So kind of like crowdsourcing. Then we take down the deal, we operate it all the way through, and, you know, there's highs and lows and things break and challenges, and we navigate that deal through to the end and we pick a right time to sell it. And along the way, we're communicating to our investors how we're doing, what's working, what's not working, because it's not a perfect operation all the time. I mean, there's things that you have to overcome and then ultimately sell it and return investor capital and hopefully we've doubled investor money within a certain timeframe.

So what's the difference? Just for explanation, again, just to give listeners some insights into what this is all about, what's the difference between a syndication and a private reit as an example?

Yeah, so areit is going to have many, many deals inside of it. So it could be 20, 50 or more deals. There's going to be higher fees. Typically, you typically traded where money and the syndication is really not liquid. There are some ways that you can potentially get some liquidity, but typically you're locked in from three to 10, to longer to longer years. There's typically less fees in it. And we're not a typical institution where areita is going to be more institutional. You're going to get typically lower returns, but it's going to be more of a core asset. Where syndication could be a core asset, meaning it stabilizes not much value add to maybe something that's very heavy value add.

So we have lots of real estate investors that listen to the podcast and, you know, what was your journey into syndication? Because, you know, you've been doing this for a while, so give me a little bit of background about your time frames. And then how did you get into this world of multifamily syndication? Did you start out as, okay, I'm going to do it myself? And you bought a single family and worked your way through it, or did you, like some guests I've had, they just jumped right in? They went, no, I'm doing multifamily. I'm not interested. They turned it into and looked at it as a business. So how did you view it and what was your journey to get there?

Absolutely. So I've always been an entrepreneur and so I, you know, I was having a kid and this is 2002 and I've been trying to buy a home for a while. I was living in la. I didn't have money, I had debt. And at the time I finally got a house under contract, it was probably 10% overbid and houses were flying off the market at that point. I'm paying almost 500,000 for my first house at 31, which I thought was insane at the time. But we bought the house and I was studying markets. Where was the upcoming community? Because obviously I couldn't afford the nicest home, but where is the place where I can really extract value? And I found a community that I thought was safe and good and then it was going to continue to grow. And a house that I can, I can open up the walls and create like an open floor plan. I converted the garage to an office. I knew I was going to get $725 of rent from my business to pay, to help pay for that mortgage. So I didn't realize at the time, but I was, I was like, that was, that was the groundwork for me to like get to the next level. And so ultimately constantly looking at different neighborhoods as we look to, as the value went up and where I wanted to move next for my kids to have really good schools. And ultimately we moved down to Manhattan beach in 2011 where it was, it was a great move because I was buying low, prices were low. Now I wasn't getting the max off, off the fail of my other house, but I knew the gap between moving into this much nicer neighborhood was significantly better for me. Ultimately I turned that house that I bought into a rental and I was looking for more investment opportunities. I was looking in Inglewood, which isn't too far, but a little bit rough at the time. And I just, I didn't have the guts to pull the trigger. I was looking at other, other, other deals and not until I sold the business at the end of 2016 did I get into real estate full time. And I had some money to play with and, and some, some time to learn. And I still thought I had to do it all myself as an entrepreneur. I had to buy the 4 unit, the 8 unit, the 12, move up to a 12 unit and eventually get really good to start taking investor money. And, and I, I went to a kind of mentorship group and they talked about pooling your resources to buy bigger properties. Economies of scale and that really resonated with me because I, I got a 12 unit under contract and there was some things I was just worried about that could break. It's an older property. There was just no margin for error. But with a 42 unit there was a lot more margin for error. I can raise a few extra hundred thousand for things that may or may break. And if it didn't break then I could give it back to the investors. So we bought a 42 unit in 2019. 1.65 million. We raised a million dollars. We should have bought the whole block at the time.

Yeah, of course.

And then quickly grew from there. We brought on some other more partners and we took down a little over a $15 million deal in Phoen. 128 units. And, and, and you know, we thought we were rocking and rolling at this time. Probably waited another year to do another deal. Could Covid hit and obviously there was a lot of uncertainty so. But there, there's been many ups and downs through that, but really threw myself into learning as much as I can and still do. Like you're you. You've got to keep learning. The game is constantly changing and you've got to stay on top of it. You've got to look at historical trends. You've got to surround yourself with a good team. And I've made mistakes investing in other people's deals too. When I started out because I wanted to learn from them what they were doing right, what were they doing wrong. But it created a really strong foundation for me.

You had mentioned that you were, you know, when you've always been an entrepreneur and so when you look back, where did your journey start? Were you a product of entrepreneurial parents? Were you going, no, my parents weren't entrepreneurial. And I looked at my lifestyle and I went, no, I can't go do what they do. What was your inspiration for going on your. On your entrepreneurial journey?

Yeah, my dad was a cpa. My, my grandfather was a CPA and lawyer. But they never really talked to me about money or entrepreneurship. Quite honestly, never talked about investing in real estate. I just had this kind of bug of like I've got to do it on my own kind of thing, which is good and bad. Like I should have thought out mentorship when I was younger. Eventually I learned the, the how much rocket fuel mentorship can, can provide. But I had this, I wouldn't say chip on my shoulder, but like I love the action so I just wanted to throw myself into it. So in high school, I Started like a car detailing business in college. I started a restaurant delivery service like a Doordash and a Postmates. So I just wanted to be in the action because I did work a little bit for someone else as an intern and that was very boring to me because it was just the same thing over and over and that just didn't resonate with me. So I didn't mind if I was working tons of hours and my money was on the line whether I was going to make money or not. I just like being where the action was.

And so you, so that whole thing, you started right back in the days of high school and kind of just kept on going from there. Now when you look at your journey of being an entrepreneur and were you cognizant or were you intentionally and even in this business that you've got today, were you thinking about building team, developing team, kind of what is your, you know, philosophy and how when you reflect now, given the lessons you've learned, what is the business philosophy that you've kind of built around, you know, when it comes to team, when it comes to even client services, if you will, or attracting capital, you know, give me some, some background in how you operate.

I was horrible about building teams and I was not cognizant when I started out. I've gotten much better. I still got a ways to go to be honest, but it was very single mindedness of like me doing a lot of the stuff and people working with me or whatnot. But I wasn't thinking network, I wasn't thinking leveraging other people's skill sets as much as I should have in the beginning. That was a huge, huge flaw in what I was doing and that, that kept me from success in the beginning and it slowly built over time. I wish there were more podcasts out there when I was younger, more books, more open discussion because now there's just so much good content out there of people providing of like that really make you think about the process and that wasn't and, and how important your network is now. My network is so strong now, I can go, you know, at any point, reach out to a couple people, hey, I don't know, I don't know this thing. I need help and if they don't know the answer, they can get me there. And so it's such a powerful thing that I mean it, once you start focusing on it, it just provides so much rocket fuel for your business.

Well, if you don't mind, you know, and if we, I would like to go down this path Just a little bit, Gary, in terms of. Because I'm really, you know, with, with my wife Stephanie and I, we also have the podcast Mindset Matters, and we look at the kind of the mental side of things. You know, how do you become the best version of yourself? And are you working on it? Are you aware of it? Intentionality and all those kinds of things. So when you reflect on your resistance, if you will, to maybe asking for help or not considering mentorship or coaching or whatever that might be, are you able to reflect on and kind of go, you know, my ego was in the way, or I thought it was a weakness to ask for help? Or have you examined some of your own psychology of why you didn't engage in mentorship at the time?

I don't think it was as much ego. It was just, I didn't, I didn't know it was out there, quite honestly. So maybe, Maybe in my mid-30s, we had a. Was it score mentorship, an older gentleman that had sold the business I wanted to get back. And, and, and we found that. And that was really helpful for a business. But before that, I really wasn't seeking out less ego and more like, I just didn't realize that it was a possibility. It just wasn't within my, you know, like, I didn't know.

What a novel idea. Ask for help.

Right.

So interesting. When you kind of look at the, you know, you're at a point in your career now, you've raised millions of dollars, you've done thousands of deals. When you look at what you've learned in the raising capital space. Because I know many listening will be interested in raising capital, and they're always looking for insights into it. What are, you know, what's one or two or three lessons that you've learned both in how to raise capital and the caution that you need to exercise in raising capital. And I don't mean in terms of even what you do with the capital. That's, that's of course important. But, you know, is there times where, you know, I often share that there are times where the most difficult thing you'll do is say no to a big check and not be. And it's because of the individual and their motives and, or their knowledge or lack of knowledge, whatever the case may be. So what's some of your insights into raising capital, number one, effectively and what your kind of process has been and then the downside or the cautionary tale that you would tell?

Yeah, you know, I think a lot of people, certainly for me, it was imposter syndrome in the beginning, like, who am I to raise this money? I and I kind of, I only raised for me on that first million dollar raise, I only raised a hundred thousand. I had some other partners that raised more. I was awful at it. And I got better over time as I became more comfortable doing it. And so you've got to share what you're doing and play the long game. You know, I had, one person's been with me from the very, very first deal I had and invested in pretty much every deal along the way. Other people were waiting my fifth deal, my seventh deal, my tenth deal. They just cautiously waiting to see, you know, letting me build up that track record. But all I can do is share an opportunity and whether they want to jump in or not, I give them the respect and not, you know, create this kind of FOMO or sense of urgency. All I, all I want to do is educate them on the opportunity. When they're ready, great. If they're never ready, that's fine. But because of the way I treat them, even if they don't invest, they're more likely to tell a friend and say, hey, I really like his philosophy, how he's doing things. I don't have the money now or it's not a good fit for me, but maybe you'll be interested. So I think a lot of people make the mistake of playing the short game and you've got to play the long game. You're only as good as your last deal. Take your time and keep, you know, sharing what you do, but not in a non obnoxious way. Let people come to you, don't chase other people.

Now when you're raising capital, I'm assuming that you might be part of your strategy is, is that you're putting people in a room where you're gaining your leads through a group conversation and, or are you just one on one stuff? How's, what's your model in terms of raising capital in that regard? Gary?

So we do a lot of different things. Obviously we're sending out content via email and social media on a very consistent basis. You've got to be consistent. It's focused on education versus recruitment because I want my investors to know exactly what they're getting into. What's a good deal, what's a bad deal, all that stuff that's really, really important. Thought leadership platform is very important. So I've written two books that's gotten me on stages on other people's podcasts. So it's gotten me more comfortable talking in Front of other people, too, about what we do. We. I used to host meetups way back when. I don't do that now. I'll speak at other people's meetups, but it's just a better use of my time. And then, yeah, we've also hosted some events. Like, we just had a launch party a few weeks ago for a new deal and a book. So we get. We invite all of our investors that want to come, and then potential new investors, too, that want to talk to our previous investors. So it's just cultivating those relationships.

Sure. So you've written a couple books. You've recently released one, I think is what you said. So tell me a little bit about the book and what was the inspiration for it and what's it about?

Yeah, it's called Invest Smart Spotting Red Flags and Real Estate Syndications. And it's from our knowledge of more than a hundred deals invested as an lp. So myself and my team, certainly, we've made mistakes investing in other people's deals. And so many people have made mistakes out there. A lot of mistakes are I jumped into deals before because my friend was investing, and I didn't do due diligence on that person. I just trusted my friend, which that is not a good way to go. Someone that had a meetup, and it seemed like he had a really good following. So I invested with him. In the very beginning, I just, I didn't do enough due diligence. Again, I just trusted. And so I want to help other people make better, more informed decisions. Not chase irr and really focus on the operator. Singles and doubles don't chase grand slams, and that will help you in the long run.

So you're based in U.S. and you invest in the U.S. of course, you're talking about Arizona with that syndication. You're producing an offering memorandum, an OM in the US the same as here in Canada. Do you find that investors, historically, this is my own experience with investors, is that they don't take the time to read the om. Now, I know that's like, what, you know, it's kind of like watching paint dry, and it's a great way to fall asleep at night. But ultimately, you know, within that om, are, are you, you know, is. Are you seeing the same thing with. Even with your own investors, or are you making them like, how are you managing and saying, you guys read this OM so you understand what's your message?

Yeah, we. Before anyone invests, we really want to make sure they understand that it's not liquid, you know, that These are projections. Like we really make sure ahead of time they understand it and then we do push them to read the, the om, the ppm. Some do, some don't. We actually had a lawyer, first time investor came in last week and he went through every single line and had a couple questions. And that's great. We want him to really to know the paperwork. It is super long like you said. It's like, you know, it'll definitely put you to sleep. But yeah, we want to know, we want the investors to know all the risks that are involved so that there's no problems down the road and so we don't have issues with our investors saying, hey, you promised me this or whatnot. We share all the information ahead of time and along the way so that they know like this is what's going great, this is what's not going great. This is where we stand right now. And so that communication is so important. No one expects you to have a perfect track record. It's impossible to have a perfect track record. But if you're transparent and working your butt off and this is how we're trying to solve the problem, that's not working. This is another tackle that we're trying or this is the third tack we're trying or the fourth track. But keep sharing that information and your investors will keep coming back time and time again.

So what's your model? So when you think about, if you're talking to, and I've talked to hundreds, thousands likely of investors, but what is your model? Are you buying C buildings, putting in B, Are you looking for A type buildings? Like I recently talking to a very accomplished investor, he goes, no, I'm only looking at brand new. That's all I'm interested in. I'm either developing them and building them myself or I'm buying new. Others are going, no, I'm looking at C buildings in a decent area, area where the owners have been owning them for a long time, it's fallen off, they're not looking after them, they're run down and I'm bringing them back to life, improving on noi, doing all of those things. So what's your operating system in terms of your model?

Yeah, we want to be highly focused. I think a lot of new investors are chasing so many different markets, so many different asset classes and you can't get good at that. So we start off doing Cs, we move to Bs. It's just a little bit easier to operate. Staff stay longer. It's not as rough. We've been very successful in the Cs, the Bs. We just want a little newer product as well. We feel like there's an opportunity there even like the B minus a B plus A minus where the as the cap rates have, have expanded there's some really good opportunity there. So yeah, just looking for, for newer stuff and, and, and value add. So we've averaged across our portfolio a 40% bump in NOI in the first 12 months. I think that's going to be harder and harder to continued down the path. But we always like to be able to force some appreciation as a way to de risk the asset.

Now you're focused in Arizona. Are you certain parts of what Phoenix or where in Arizona and do you expand outside that?

Yeah, so we have been on a bunch of deals in Vegas. We always seem to get out bid. It seems like, you know, a sexier market if you will. We bid on stuff in Albuquerque so we like the Southwest but we've done a handful of deals in Phoenix and most of them in Tucson because Phoenix, the pricing just got so overheated and people were outbidding us by millions of dollars. Tucson was a city that a lot of people forgot about. We were getting great value and we've been very successful. We know all the brokers there, we know all the submarkets. So you know, why change something that's, that's not broken, you know. So we keep doing more and more deals in Tucson though. We'd love to have a little bit more diversification.

You know, I'm not familiar with Tucson. I mean I'm certainly familiar with the name Tucson, but what's the difference, you know, why do you see opportunities in Tucson? What's driving Tucson economically relative to what's going on in Phoenix? Just out of curiosity.

Yeah, so it's over a million population in the msa which is, which is great. So I can get a good could work for us. Very diverse. Certainly you've got the University of Arizona. Raytheon is big there. Healthcare. Amazon has a big presence there. You have some raw goods there. So very diverse job market. It's just nice and steady growth. It doesn't have the highs and the lows of Phoenix, but very consistent, which is fine by me. It's one of the lowest cost of living cities in the States, which is good. So that means I've got room to push the rents. Yeah, it's easy for us to get to and, and I guess, you know, operators fall asleep on it. They either they've done well, they don't want to travel there. They'd rather go to Scottsdale and have a good time. And so we've, we've just been able to capitalize on it.

That's great. You know, it's interesting these, you know, what we'll call and I'm not saying Tucson would be considered tertiary market, but when you look at Tucson versus, you know, Phoenix, you don't, you hear about Phoenix, you don't hear about Tucson, you know, so it's, it's interesting. But when you look at affordability, people in that kind of blue collar, working class individual is going to go and flow to where there are jobs, number one. And affordability, that's really what drives that market, is what I'm hearing in what you're saying.

And supply and demand. So Phoenix, I think there's like 40,000 permits right now. I mean, they're just billing at every single corner. They just don't build that much in Tucson. So what I love about any market is looking at the supply and demand because if the demand is high and the supply is low, then I'm just riding those tailwinds.

So when you look into the future and you start to look at what's going on economically, I mean, right now at this podcast, we're only 10 or 15 days away, whatever it is, from the election. When you look at the global macro, the uncertainty, the confusion, you know, of course, FUD is a common term. Fear, uncertainty, doubt. Do you sometimes want to touch the brake? Where are you at in terms of what's going on economically? Is this for you? Like, given what's going on economically, we got to push, you know, we got to push and get units up and available, affordable. Given immigration into the U.S. canada faces a similar challenge of so much immigration coming into the country. The politicians have just opened up the doors and so housing supply is low on the surface. You go, well, listen, we got a supply issue and a demand that doesn't seem to be diminishing anytime soon. This looks like a great opportunity. But then when you look at what's going on, you know, the potential of wars, we got Ukraine, Russia still fighting it out. That seems to be maybe escalating or who knows. Then you got Israel and Iran, you've got China and Taiwan. I mean, it's a cluster screw of, you know, weird things happening. So what's your, what's your take on what's going on and how do you see the future?

Yeah, you know, unfortunately there's always wars going on. And so I know a lot of times we focus on the here and now. But if you look back at any point in history, there's always something going on, unfortunately. So I could just focus on what we do. We know that there's a tremendous housing demand depending upon. Every article is a little different, whether it's 2 million housing units short, 5 million, and location plays a role in that as well. That's what I'm going to focus on. The election, whoever wins, it doesn't really affect that much at the end of the day. I think today is a really great buying opportunity because interest rates have gone lower and I think we can all project that they will continue to go lower and cap rates haven't compressed yet. So I'm buying at this kind of window of opportunity where I have relatively inexpensive debt and I'm not, I'm not paying for that right now. Maybe in probably closer to 12 months, 18 months, there'll be so many more buyers. And that kind of like fear of missing out that typically happens when once the market picks up momentum, that pricing really jumps. And now I've locked in deals at really great basis where I might have paid 25, 30% more than that that I'm paying now maybe two years ago at the high inflation is always there and will creep back up again too. So that plays a part. I love having other people pay down the mortgage while, you know, even expenses are going up, but, but the income is going up as well. So sure, real estate is a great place to put your money.

What's. What are you buying? What, what cap are you currently buying at a Tucson, for example?

Yeah. So a deal we have under contract now is 5.75 going in cap rate, which two years ago probably was under 4 under a forecast, you know, now I don't think we're necessarily going to get there anytime soon or ever again, who knows. But I like where I'm buying it at now. And there's still some really good meat on the bone as well to create value.

In Canada. When we look at, and we have so many Canadians going south of the border, investors are moving that direction. And those are individuals who, like you, are in the business of investing in real estate. They've got a following, they're doing all the things that they're doing as well as individuals just going down there going, no, I'm putting my capital into the US and they're doing it through different, you know, various opportunities that present themselves, not perhaps on even unlike what you present in terms of your syndication. So when you in Canada we're able to get interest rates on multifamily because of the programs that are in, within our financing system that are under 4%. What kind of an interest rate are.

You paying in the U.S. yeah, so it's constantly changing. So I had a quote from agency that Fannie and Freddie. It was with a, with a 2% buy down. It was sub 5 maybe a month ago. It's gone backwards quite a bit now so it's, it just keeps fluctuating dramatically back and forth. So right now I'm probably at a back up to a five, five where maybe two months ago it was, it was maybe six and a quarter. So it's, there's a bit of a whiplash but I think it'll, it'll start creeping back down again. Depending upon the new jobs report that we'll get next Friday. Do we get another rate cut? November, December, you know, there's, there's still that uncertainty like we talked about before but of course it's not, it's not a bad rate. And then if you go on bridge certainly it's going to be a little bit higher, maybe high sixes, low sevens, maybe more depending upon how much leverage you have. But you don't have that large prepayment penalty. But investors want that longer term fixed debt.

And when you're looking at your model, are you buying these units to hold for forever? Are you looking at a window of time like within again back to the model. Are you getting these assets into a cash flow position and, or improving on noi and bringing more value and then exiting. What's the overall arching plan when you, when you do a push I guess on a building.

Yeah. Typically we promise investors or project invest to investors a three to five year hold. A lot of the deals we've sold earlier rather than later just because we took advantage of the market, we locked in gains and we had older product too. So I'm more of the mindset of okay, let's get out of this, you know, because it's a little bit older but some of our newer stuff that I may hold on a little bit longer to like the five years and, and it all depends where the market is too. Like if the market is bad, I don't want to be forced to sell and, and, and, and sell at a discount. I want to have the debt that gets me through to a, you know, on a more opportune time because there's, there's up cycles, there's down cycles and you've got to be able to navigate through that.

So when you look at the model that you've built and the team that you're surrounding yourself with, you know a little bit about your journey in terms of your own education. Now, is most of your education been hands on in the trenches doing it or was there a time where you along or in parallel or maybe even pulled back and said, no, okay, I'm going to do this, I'm going to get this further education in some way, shape or form. How did you kind of gain the knowledge? Again, you're in the trenches learning every day and I, and I understand that intimately. When you look at some of the additional education you may have received or the team that you put around yourself, give me a little bit of insights into how you gained the knowledge and the expertise.

Yeah, certainly all my years of being an entrepreneur, like that led me to having a strength in operations and then and I aligned myself with some other people that, to build the confidence like, hey, this is what I'm seeing. What are you seeing? And so that kind of led us along a good path. And then after my second deal, I finally, with the push of my partner at the time to start a podcast called it was based on Asset Management. And so we actually, the book behind me, we wrote a book on asset management too. So I would bring in operators that were much more experienced than me and ask them. It was just a real quick 10 minutes on asset management. We focus on one topic and that led to rocket fuel growth for me to learn from them. Each week I had an expert on that. I could ask the questions that I wanted to. And then I was a part of other mentorship groups of people doing what I was doing so we could learn and share things that were working, things that weren't going well and developed a network of people that, that I can rely on, learn from, share what, what I'm working from and that really has helped guide me and be successful.

So when you consider, you know, when you look into this and are you yourself, personally or within your corporations, whatever that might be, you're exiting. So in other words, in your syndication you're three to five year old, but are you also building your own real estate portfolio? Are you have long term assets that you're holding in the real estate world or are you taking that capital and I don't know, putting into gold and bitcoin or like how do you kind of take and build your own portfolio, your own future, financial future, if you will?

Yeah, that's a great question. I mean almost all my money is in my deals, I mean I trust myself more than anyone and lenders want to see you investing in your deal. So I'm heavily in my deals. I've got some liquidity I have on the side for my loans as well. And to add as a backstop if a deal is struggling as well, I would like to, as I continue to, to grow over time and diversify a little bit out of it in non correlated assets. So I'm part of some different investment groups so I can continue to learn the best place to put, you know, some of my money off the side as well. There was another question in there. I didn't, I don't remember.

Oh, it was just, it was just a case of how you're, you're building a portfolio for your own financial future. Is are you got long term buy and hold strategies with real estate or are you just doing driving income slash revenue through your deals?

Yeah, so we do have one deal in Phoenix. It was garden office space. We converted to multifamily. We added 60 new units and with any luck next Thursday we're going to refinance that out. We've stabilized it. Investors came in as debt and me and two other partners on the deal will hold that. We'll have a 10 year loan on that property and just take advantage of the cash flow, the depreciation and that will be an asset we hold long term. And eventually I'd like to have more of those that cash flow. Well, because typically when you're a real estate investor, you're cash flow poor, real estate rich and I need to get my cash flow up right now.

You talked about your book. I want to go back to your book a little bit. Are you now is it available where? On Amazon? Where are you kind of pushing that?

Yeah, it's on Amazon. We have an audio book, it's available on Kindle as well. And it's great. You know, when I go to different conferences or events, people come up to me and let me know like how helpful the books have been for them. So it's super rewarding. And you know, writing those books really helped me be better at what I do as well because I'm putting on paper and I'm like, are we doing all these things if we're not like hey, we better like figure this out, you know. And so it really gives an opportunity to kind of like dig into how what we're doing, you know, to make sure like hey, you know, is everything like to the level that we're putting on paper, you know so is it.

Built, Gary, did you take the book and write it in a way of a how to or what's the kind of the underlying message, if you will, of the book?

Yeah, this new book is all the things that you should look out for. So half the book is on, you know, what to look out for from a syndicator standpoint, and then, and then the other half is on a deal. So just really easily digestible. We don't, we don't. It's, it's not like a super dive down to every single technical thing, but just a really good overview of all the different things that you should look at before you invest in someone's deal.

Got it. So I'm gonna, I'm gonna go off a little bit on a tangent, if you will, just based on your experience, because, you know, you've got your podcast going, you've written a couple of books now, you've done the work that you've done, and I'd like your kind of perspective on a couple things. What we've noticed and certainly what's kind of just gone off to a whole new level in terms of social media since COVID and everybody started sitting in front of a camera and being good at doing podcasts or videos and you see a lot of, I'll just refer to it without. This isn't meant to be derogatory, but talking heads, it's a common term. So we see all these talking heads that are experts in the real estate world. But I'm noticing that, you know, what's your view? And I don't know that I have an opinion. I probably do if I have to think about it. So I'm asking you or your opinion. I haven't asked myself the question yet. When you see some very young and I'm talking late 20s, early 30s talk in real estate and have you ever taken the time to listen, what are you seeing out there that may be a bit of a flag or a concern to me? I'm looking at it going, man, they're so good at production. They're so good at doing all the bells and whistles and getting attention. I don't know that people are buying into it. I'm assuming they are. What's your, what's your read on it or what's your experience even with it?

It's, it's very scary. I, I just, I remember one person that, that came into our high level boardroom, if you will, on, on experienced operators who had never done a deal before and like a few months Later I see he's has a mentorship group on multifamily. And I'm like, huh, like, how, how is this possible? And he, I think, raised money on one deal. And, and, and, and those types of guys are a dime a dozen where they start a mentorship group. Now I get like, you start where you're at and there's always someone that knows less than you. But it's, you've got to be really careful of, you know, for someone that's joining this, got to understand the level of the training that you're going to get and how much you're paying. Like, don't look at this person as an end all, be all and sign up for a $40,000 mentorship program. Right. You know, they just don't have that experience. There's value in these groups, but you've got to find the right, the right mentor, someone that's been doing it for a while, good people within that group. And just because they have that, don't look at them as a God. You know, just be really, really careful.

Yeah, it's interesting. It is an interesting time and, you know, lots of caution that has to be, you know, that seems to get thrown to the wind because it's so convincing. I think sometimes, you know, in Canada, one of the big issues that's come up, and I don't know what it is in the US Is promissory notes. And a lot of money has been lent or borrowed against a promissory note, which in Canada, you know, we joke it's not worth the paper it's written on, which is the truth. What is that? And I mean, hundreds of millions of dollars have gone south over the past couple of years because of these promissory notes. Kind of some would argue Ponzi scheme like initiatives, which is true in some cases, others as promissory notes against deals where the person, again, didn't really know what they were doing and the money went away because the deal went south because it wasn't handled right from the beginning. On your side of that border, what are, what is the impact of promissory notes and how do you, you know, here we're going, don't do a promissory note. Just don't do it. But what, what is it over there?

Quite honestly, I haven't really operated in that space, so I don't really know. But yeah, it's super important for investors to really understand, you know, what kind of lien or whatnot they have on a particular deal for recourse. You Know, otherwise you're going to be screwed.

Well, you know, we, we stress it all the time. Don't do promissory notes. Just don't do it, you know. But again, and I was just curious, it was just one of those things that's been, you know, really showing up over the past several months here in Canada. And so that's why I bring it up and I'm curious about it. So when you look into the future and you know, one of the things that you're just mentioning is, you know, with mentorship and coaching and then who you're working with within your own corporation and what you operate, how important do you have a mission? Do you have values? Is that something that drives your decisions? You know, are your investors and, or are your team aligned with your values, your way of operating? Is that a conscious thing for you or does that show up for you?

Oh, absolutely. That's got to drive every decision that we make. So we go back to that. And so, you know, we try to create win, win scenarios for our investors and for our residents. And that's why our residents stay longer at our properties than the national average by I think, 23%. Like we're, we're trying to provide a real quality place, you know, kind of absolutely change a community to revitalize it because they don't build new workforce housing, they don't build new class C or class B properties. So we want to add more amenities. We want to make residents feel proud for where they live. So that's really important too. And, and, and, and transparency. Kaizen is one of our values. Constantly improving that, that's really, we talk about that all the time. We share that in all of our decks as well, like our mission, our values, so that people understand like where what's of value to us and, and that that guides well.

I think there's a, you know, there's a fundamental that, you know, many new entrepreneurs and, and I look at investors, you doing you're entrepreneurial. The business model happens to be syndication, multifamily. That's kind of a tactic or strategy, if you will. But ultimately, even what you talked about is that what we've coached, and I've coached for 25 years is that your tenants are like clients. And it's interesting that as much as we think the building is the asset, our real asset is our clients, our tenants. And there's a. I learned this, and I don't remember where I learned it from. I'd love to take credit for it, but I can't it's not mine, but it was a really interesting thought process which is that there's a difference between a tenant and a client and a customer. So customer is very transactional. So you know, you're at a store, you have a customer walk in, they buy something, they walk out. When you use the term client, you're actually, it's associated with a long term relationship. You know, you're a, a client of an accountant, you're the client of a lawyer, like so it's a client because these are longer term relationships. And when you just shift, even if it's just mentally and thinking about your tenants as clients, these are long term relationships. And to your point that you made earlier, I mean they're paying down your mortgage, they're huge value to you know what your business model is all about. So when you consider the culture of a building as an example, you know, 100 unit building, well that's a little ecosystem on its own. Somebody has to drive that culture so that you're putting the right tenant base in there, you're bringing and making sure the environment that people are living in is something they can be proud of, et cetera, et cetera. Is that something that you talk about, think about with your own team when it comes to culture, environment, how you treat your tenants?

Oh, absolutely. I mean it starts, you know, we use third party property management company but this, they're start, they're part of our team. We want their input. They're on the grounds every single day. So having a right regional, having a good property manager, having the right maintenance, that too, that extra mile that they, they go for you means could be millions of dollars more for your investors because they're going that, that extra occupancy, that's just straight to the bottom line. You know, they're, they're nicer to the tenants. So there's the renewing. You're not paying to turn over all that to recruit more people, create a sense of community. So that's really important for us. We do a property newsletter where we share like a healthy recipe and some financial advice to, to our, our residents because they don't necessarily have access to these things. And so we want, we want to create good well being for them so that they can, they can be healthy and prosperous and pay the rent. And if they want to buy a house eventually or move to a nice place, then that's great too then. But they're going to recommend our place and the sense of community that we provided. And because of that it means Better returns for our investors?

Well, Yeah, I mean, 100%. When you do the math and you realize that they're willing to pay more rent. Well, if they're willing to pay more rent because of the value that you bring within the environment, the quality of the building and care, et cetera, I mean, that translates to millions of dollars ROI. When you can get an extra 25 bucks, 50 bucks a unit or whatever the number happens to be, that translates. It also, what I'm hearing and what you're talking about in your newsletter is it's very relational with your investor clients. So that's really part of what drives you as well or supports the business model that you're creating is it's relational, not transactional. And I think that's a pretty important message to get anybody who's thinking about getting into some kind of syndication, lp, whatever model you might be, where you're raising capital. It's gotta be really strong communication and you gotta be very respectful of your clients in the fact that they've put their hard earned money in your care and trusting you to deliver. What would you say to that? Like, how do you view that and even within your own team, what's kind of your philosophy around that, Gary?

Oh, I mean, it's an insane amount of trust that they're relying on you. And I know people like, well, they read the ppm, it says all these risks, but man, you're the one that, as an operator or you're taking that money, you better make sure this is, this is a good deal for your investors and not take money just to, just to get fees. Because, you know, a lot of times they're friends, family, friends of family, friends of friends. Like, you know, this is, this is serious, serious stuff. And people are trusting you oftentimes blindly because they just don't understand all the intricacies. So you better do right by them and protect your investors.

There's a phrase that is along the lines of it takes a lifetime to build a reputation and it takes 15 minutes to destroy that reputation. So we have to be, if you're going to be in business, you got to be savvy and thoughtful around that. Gary, as we start to wind down, any parting kind of thoughts or I guess, wisdom that you would want to pass on to listeners?

Yeah, real estate is a great place to put your money. It's a long game. Don't chase the grand slams, do your due diligence and seek out advice, which I didn't do when I was, you know, when I was younger. But there's a lot of people that want to help. So don't be afraid to ask what you may think is a is a silly question. There's a lot of people, particularly in the real estate industry, I think more than ever that are like just willing to help, you know, if you, if you just seek advice. Don't be afraid to get a second opinion.

Yeah, isn't it interesting what can get in the way. And like you, I didn't seek, you know, guidance soon enough in my own career. And you know, it takes courage to ask what is to you may seem like a dumb question. You know, I always try and pre position things with people that there are no dumb questions. The only dumb question is the one that didn't get asked. So you know all of those kind of memes, as they say, those quotes that go along. Gary, I want to say thanks for sharing your insights, your wisdom with the audience today and look forward to catching up again in the future.

Yeah, thanks for having me. It was a great time.

[Patrick Franci]

Ladies and gentlemen, thank you for listening. If you found value in the podcast.

[Gary Lipski]

Please take the time to rate and.

[Patrick Franci]

Review and share with others. Share with your friends as it is my goal to always improve and to provide the highest value for you, the listener. If you have any comments, suggestions or questions you'd like answered, please email me@ceoon canada.com that's ceoreda.com I look forward to hearing from you. And until next time, Patrick out.