Category: Investments
Air Date: 08.05.2020

In this episode of Ritter on Real Estate, we welcome professional asset manager Mike Taravella who joins us to share his unique perspective on deals. Mike worked for five years as a CPA and began his real estate investing career in 2016 when he bought and self-managed investment properties in Michigan. With an increasing interest in real estate development, Mike joined Rand Partners in 2019 where he is now an asset manager responsible for underwriting deals, investor relations, and asset management. Tuning in, listeners will learn more about the day-to-day functions of an asset manager, the key elements that should be included in a business plan, and how Rand Partners go about executing these plans to ensure good returns for their investors. For Mike and his team, communication and transparency are key, and these values are evident in the weekly meetings between property and asset managers and their frequent communications with investors. Mike also talks about their strategies for driving a property’s value, the importance of paying attention to other income, the use of the ratio utility billing system (RUBS) and surety bonds, and what investors should know about investing in the post-COVID market.

Key Points From This Episode:

  • Get a sense of Mike’s career path thus far and what an asset manager’s role is.
  • Hear about the elements in a business plan that should work together to increase income.
  • What Mike does to ensure that business plans are executed and investors get their returns.
  • Hear about their weekly meetings to track the numbers and keep a firm grip on properties.
  • The relevance of the communication between the asset and property manager to investors.
  • Mike describes the core metrics their team looks at to move the business plan forward.
  • The processes involved in compiling a business plan when a new acquisition is made.
  • How they drive value through rent and occupancy increases and effective marketing.
  • What “other income” comprises and the portion of the total income it should make up.
  • Mike explains the use of RUBS (ratio utility billing system) and surety bonds.
  • Views on what investors can expect from a returns standpoint in the wake of COVID-19.
  • Learn how Mike and his team prioritize and approach communication with investors.
  • The value of investing in coaching and good books to gain knowledge quickly.

Tweetables:

“As a passive investor, it’s important to ask what are your sponsorship group’s key performance indicators? Everyone’s going to say the NOI and the cap rates, but dive deeper into that. What do you look at on a weekly, monthly basis to make sure you’re moving the needle? What does your property management group look at?” — @Mike_Tarabino26 [0:10:19]

“It’s just making sure you feel comfortable with your group when you invest because this is a partnership. I jokingly but seriously say, when you hand over some of your money, you’re saying I do. You better know, like, trust, and make sure that they’re going to do the right thing and they have the same values as you.” — @Mike_Tarabino26 [0:23:24]

“As an investor, you’re a partner, and we want to make sure that you feel comfortable with the communications and what’s going on and introducing the team and what those rhythms look like. We know those first three months are usually the most chaotic and we want to be as transparent as possible on how things are going.” — @Mike_Tarabino26 [0:26:43]

Links Mentioned in Today’s Episode:

Mike Taravella on LinkedIn

Mike Taravella on Twitter

Mike Taravella on Email

Rand Partners

Michigan State University

AppFolio

Never Lose A Customer Again

Rich Dad Poor Dad

Principles of Real Estate Syndication

Best Ever Apartment Syndication Book

Wheelbarrow Profits

Ritter on Real Estate

Kent Ritter

Kent Ritter on Twitter

Kent Ritter Email

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Interested in Investing Alongside me in our next multifamily deal?

Contact me at kritter@birgeandheld.com.

My operating partner, Birge and Held Asset Management has a twelve-year track record creating sustainable wealth for over 2000 investors through high-quality multifamily investments.

https://birgeandheld.com

Thanks for listening!

—Full Transcript Below—

MT: Two years ago, I said, ‘By my 28th birthday, I’m going to own a $5 million apartment complex.’ Then I put all the work in. Our first deal with Rand Partners, we got almost a $10 million apartment complex within like a year and a half and we’re writing down that goal.”

[INTRO]

[00:00:16] KR: Welcome to Ritter on Real Estate, the show about how to passively invest like a pro. On each episode, I interview real estate experts who give their top investing advice, strategies, and tools that break down the insights and the practical steps to avoid the pitfalls and make better investments. I want to help you passively invest like a pro. This is Ritter on Real Estate, and I’m your host, Kent Ritter.

[INTERVIEW]

[00:00:39] KR: Hello, fellow investors. Welcome to Ritter on Real Estate, the show where we teach you how to passively invest like a pro. Today, we’ve got another special guest. We’ve got Mike Taravella here. He is a professional asset manager, so I think he has a really unique perspective inside of the deals that he’s going to share with us today.

To give you a little background on Mike, Mike graduated from Michigan State University in 2014 with the Masters of Science in Accounting. He worked for five years professionally as an accountant, and he started at Ernst & Young in public accounting and then transitioned into Detroit’s startup community at Rock Ventures. He began his real estate investing career in 2016 by owning and self-managing investments in Michigan. He also took an interest in real estate development before joining Rand Partners in 2019. Mike’s currently the asset manager that’s responsible for underwriting deals, investor relations, and asset management.

Well, very cool. Excited to have you here, Mike.

[00:01:36] MT: Yeah. Excited to be on. Thanks for having me, Kent. I’m super excited to dive in and help the listeners with their next passive deal.

[00:01:43] KR: Yeah. Very cool. What is an asset manager? I think it’s something we hear about a lot as part of deals but it’s something most people probably don’t know what you’re doing day-to-day.

[00:01:53] MT: What an asset manager does is they manage the manager by making sure the business plan is getting executed. Before you get a deal done or before you’re working with your acquisitions, you need to make sure here are the things that need to get done to execute the business plan, which really means making sure getting your passive investor is paid.

Whether it be increasing occupancy, increasing rents, and decreasing expenses, really making sure that that business plan is getting throughout the life of the project to make sure that everything is going smooth. Sometimes, you have to deviate from it or change some assumptions or find revenue from different sources. But all in all, it’s manage the managers once you got the deal in place and just help collaborate with our property management team to make sure we can get to the finish line.

[00:02:46] KR: Gotcha. When you talk about that business plan, can you unpack that a little for me? What are the elements of that business plan?

[00:02:54] MT: Multifamily real estate is where we focus on and how a property is valued by net operating income provided by the cap rate. Really, in layman’s terms, we have to increase income or decrease expenses.

When we’re looking at a deal, we’re with our team, our property management team, us, and just really diving in on how we can increase the income. Everyone is looking at how can I increase rents. One thing we look at is how can we increase other income. Instead of charging security deposits, which is a balance sheet item, how about we charge application fees? How about we implement RUBS? How about we implement other fees along the way to help increase the profitability?

Expenses, reducing those are important as well. Such as our most recent acquisition, there is a $20,000 line item for a billboard, so we’re eliminating inefficient expenses. With my background being a CPA, I can see the story with the numbers of what’s going on. Is it inefficient management? Are they throwing a lot of concessions at the property that is reducing the profitability? There’s just a lot of different ways the numbers can tell what’s really happening at the property.

[00:04:12] KR: This business plan that you’re putting together really is encompassing. As you’re looking at the deal or the potential investment, you’re saying, “We’re increasing income. We’re decreasing expenses.” Right? Then the business plan really goes into how you’re going to go about doing that. Is that accurate?

[00:04:32] MT: Yup. To dive in to take the – It’s whether it’s increasing occupancy. Is it using them? I mean, we look at occupancy. We’re looking at leads. We’re trying to generate the most, whether increasing occupancy or increasing rents just to make sure that the profitability is continuing to go up as well. It’s just making sure we’re doing the best, given all things to consider with the market. You can’t be the only property that’s charging a pet fee, for example, when no one else is doing it. We’re trying to see within the market what are other groups doing that we can leverage as well.

[00:05:08] KR: Tell us a little bit more about your role. I think I understand it broadly but more from a – You said you’re managing the manager and you’re also really making sure the business plan is being followed through and you’re getting the investors the returns. Well, I know our listeners are very concerned about how do they make sure that they’re getting their returns. What are the things that you’re doing and looking at it to make sure that that business plan is followed through on and investors ultimately get paid?

[00:05:32] MT: Yes. One thing as the passive investor is we – Our group really focuses on over communication and transparency. With my role, I have [inaudible 00:05:41] with our property management team to make sure everything is going smooth or if there’s ways we can collaborate and go through and overcome hurdles.

But every week, we have this document called the pulse that I’m happy to share with the listeners. I mean, it keeps us on the pulse of what’s going on with the property. It goes through the occupancy, the delinquency, our marketing leads, how many units are being turned, income and expenses on a monthly basis. What it does is if the occupancy is below 95% and that’s just with our markets where we feel is a very comfortable occupancy level. If it’s not a 95%, our marketing conversions need to be around 30%. For every 10 people that inquire through appfolioapartments.com or even calling or visiting in person, three people should be applying to live at the residence.

If that’s not the case, then we dive in to our marketing efforts. Are our ads running properly? Is our property manager fuelling the cause? Is there any ways we can tweak the customer experience so that it’s an easier process to go through? That’s why we’ve even too during this time, we’ve implemented virtual leasing so that it’s an even easier experience. People don’t have to go out and go on properties during this pandemic. They can just quickly see it through a video of each type of unit, so they can really see without even having to go to the property and just make it that much easier for our residents.

[00:07:18] KR: Interesting. Okay. You’re having this meeting. You guys go through this pulse, which I think is interesting. Walk us through, I know you said it briefly, but what else is on the pulse? Are these things you’re looking at on a weekly basis? Is this monthly? How is that happening?

[00:07:31] MT: Yes. We look at it weekly. There is the occupancy in the marketing conversions. We also look at delinquencies. Just because you have people coming in and staying, you need to make sure the residents are paying. We have kind of a trend every week of where delinquency numbers should be, so we just go in and see is it in line with our expectations. If not, we’re having a communication with our property management team to say, “Hey, we need to tailor this communication. We need to reach out to our residents and see what’s going on, so we can provide services to them.”

With everything going on to our team, we actually gave all our residents a roll of toilet paper and a card that said, “During these crappy times, we’re here as a resource for you to help you in these times of need, so feel free to reach out to us.” We provide a lot of resource to our residents. We just want to have those extra communication touches that I don’t think as many groups are doing. Delinquency is on there.

Then also too just lease evictions. How many break the leases are we having so that we understand, one, our revenue, so we can budget it. But also too the learning lessons. What did we do wrong in the customer service side, so that made the resident break the lease? We’re targeting 60% conversions of them really with us. We want to make sure we’re providing above and beyond customer service. We want to be the Chick-fil-A of apartments for B and C class units. We’re just trying to go above and beyond, and I think that those are other key metrics that are on the pulse that we really take pride on.

[00:09:05] KR: It sounds like in your role, you’re really overseeing the checkpoint for those key metrics and holding the property managers accountable.

[00:09:13] MT: Yup. On the weekly piece, we go into the monthly financials. We do it weekly because say, for example, Kent, something is wrong and you have to wait till the end of the month through financial statements. The damage is already done. But on a week-to-week basis, you have those waves of communications kind of like a wave. You don’t get a wave for a while. It’s going to be a huge blow to your team, your evaluation, and lastly your investors because it’s their returns that are on the line. We rather coarse cracked midmonth than wait till the month end and then have to figure out six weeks later to course correct.

[00:09:49] KR: Yeah. No, I really like this process you’re describing of following these key metrics and acting early and staying connected. To think about it from an investor standpoint, I think the question for investors to ask their sponsor before they’re going into a deal is what is the rhythm between the asset manager and the property manager, and what are the things that you’re looking at on a daily and weekly basis, right? It sounds like you guys have a great process in place to ensure that things get addressed before they get too out of hand.

[00:10:19] MT: Absolutely. As a passive investor, it’s important to ask what are your sponsorship group’s key performance indicators? Everyone’s going to say like the NOI and the cap rates, but like dive deeper into that. What do you look at on a weekly, monthly basis to make sure you’re moving the needle? What does your property management group look at? Because if that sponsor doesn’t have a quick answer that they know off the top of their head or on that property management group if you’re active, then it kind of speaks volumes to that group, and that’s why – They might get defensive but it’s just keeping everyone accountable. We do budgets too and no one likes budgets and no one likes making them, but it’s the ultimate way to keep everyone accountable at all levels.

[00:11:04] KR: What is that next level down if you talk about beyond NOI, beyond expenses? I think you went over a few of them, but what are those core metrics for your group?

[00:11:13] MT: If occupancy is 95%, if that isn’t there, then we’re looking at the 30% marketing conversions. We’re looking at the end of the month. We’re making sure our delinquency number is less than 3% of total income and we’re just making sure I think between those two at a property level the financials will be good. If not, the last piece is the expenses.

Are we aligned with our budget to hit our NOI targets? If you’re doing all of those things, the business plan is moving forward. If not, you could quickly tailor it to whether it’s customer service, whether it’s an assumption at the property level. Those are kind of the three or four metrics that we look at very consistently throughout.

[00:12:00] KR: As you’re building the business plan, if you’re going into a new investment, let’s say you’re making a new acquisition, you’re building the business plan, I mean, what are the things that you’re doing? What are the inputs that go into that business plan? What are the things that you’re doing to put that together?

[00:12:15] MT: We’re really diving deep into the market. We see a lot of business plans where people are escalating rents very high, but there’s no basis comparative to the market. We never want to be the rent leaders. We want to take a property that’s here and compare it to a property that’s further up and mimic what they’re doing.

In the sense, we’re not the market leader but we’re following the same steps, whether it be the physical property, the interiors or the exteriors. What is the exteriors? Do they have a pool? Do they have cabanas? Do they have freshly done sport courts? Or is it the interiors? Is it the back splashes, the tiling? Is it new floors, stainless steel appliances? At the property level, that’s what we’re looking at.

A lot of things too is we look at the management. Our most recent acquisition, I think there is three to four people on the team, and each person have less than six months and property management in their career. There’s just a lot of inexperienced people, and it showed the leasing agent in our due diligence was letting the phone ring and we’re doing our lease audit. We’re like, “Hey, why aren’t you answering the phone?” They’re like, “Oh, this person is mean, so I don’t’ answer to mean people.”

The maintenance team, there was a leak in one of the sinks, so we told them. Instead of fixing it, they kept mopping it. Every hour, they’d mop the floor. It’s a lot of what you’re doing at the property level but also the management. What team and experience are you bringing to your residents to increase the value of it as well?

[00:13:50] KR: I gotcha. When you do a business plan, is the majority of the value driven through rent increases? Is it expenses through tighter management? What are the key levers that you guys are really pulling and what’s the magnitude of each you typically see?

[00:14:04] MT: It’s a little bit of everything, depending on the property. Generally, there’s going to be a good component of rent increases or economic occupancy increasing. It could be the properties that 90 and you’re going to increase the occupancy to 92% occupied. But you’re also going to increase the rents as well, so that’s going to be a big jump. Other income is another piece that adds a little more to the rent increases. You went from a property that could be like 90% occupied and 90% economic, and you’re up to 95% with higher rents. Your profitability gets greatly increased.

The expenses, a lot of it is we’re focusing on the efficient and effective marketing, so apartments.com and roof. We even have implemented artificial intelligence leasing so that we can have people talk to this artificial intelligence robot and go through all the leasing except up to the visit. Then that’s where we come in and show them either the virtual leasing or the in-person. It’s implementing very efficient and effective ways that we can measure, instead of having the billboards, the brochures, the newspaper ads and just going through.

Also, too, I think it’s just being really efficient and knowing your numbers in those markets. Some people might have really high repair and maintenance numbers, but it can be capital expenditures or it’s a bigger cause that we need to dive deeper in and see. It’s knowing your numbers in the market. If you underwrite enough deals, which I encourage all passive investors to underwrite just so you get the baselines because you’ll see trends in what your repair and maintenance is, what your payroll expenses should be, and really just measure up and give you baselines for your deals going forward.

When it comes to expenses and knowing those baselines and then just lastly too, which is the management. That customer service piece, that’s what gets people to stay. I recommend every investor to read Joey Coleman’s Never Lose a Customer Again, because the biggest expense that people have is turnover. If you’re constantly having to acquire new clients, it’s really expensive and a lot on your marketing and your team and even internally for your employees and team members. You losing that person, you’ve developed them a lot and want to keep them for a long period of time and help them grow in their career, same with your residents. It’s a great book to do little things that make them feel special and make them want to stay forever.

[00:16:37] KR: Gotcha. Very interesting. One thing that you brought up a couple times is other income and I don’t think it’s something that we talk about typically very often but it seems like your group is really focused on. What’s your expectation of other income as far as, I mean, how much of your income in total should be coming from other. Then what are the things that make up that other income bucket?

[00:17:00] MT: Yeah. If you’re in a market that you can implement RUBS, we’re generally seeing anywhere from 7 to 14% of your total income should come from other income. It just varies on the different fees that are in place. But generally if you can implement RUBS, it’s 7 to 14. If you can’t and you’re not a market that doesn’t, then I would say at least 5 to 6% of other incomes for you there, so application fees, admin fees, pet fees, utility. Like I said, RUBS and just really making sure that, I mean, surety bonds is a good way.

The reason we do movement fees instead of security deposits is because instead of charging one and a half month’s rent and then becoming the bank to your residents, you’re having a lesser hurdle of having about half of first month’s rent go towards them applying for the property. It’s a lesser hurdle. You see a ton of reviews on apartments.com of, “Oh, I cleaned my apartment for 10 hours and then the landlord took all my security deposit.”

It provides an easier experience and a lesser financial hurdle for our residents, and we’re treating it like a community, so we’re making sure that the highest customer service experience with our residents, whether it be maintenance leasing all the way through. Less burden for our residents when they’re applying for our properties.

[00:18:25] KR: Interesting. You mentioned RUBS. Could you explain what those are to our listeners? I’m not sure everybody knows that term.

[00:18:31] MT: Yes. It’s the utility bill backs. Instead of – What generally happens, for example, for our water bill, water gets billed to the property management group, and then what RUBS does is you’re charging a little bit to each resident. When you’re looking at your underwriting and you see RUBS, it’s illegal to charge more than your utilities were built.

Sometimes, you got to quickly make sure of that number but it’s a great way to reduce your utility bills and a way to charge it to your residents. It’s just making sure that you’re getting reimbursed for your utilities going forward and increasing the profitability and making sure you as an investor could potentially get paid back sooner.

[00:19:15] KR: Gotcha. Then you also mentioned – Is it sure bonds? Is that right?

[00:19:19] MT: Yeah, the surety bonds. It’s –

[00:19:20] KR: Surety bonds.

[00:19:21] MT: Yes. Instead of having that security deposit, I believe there’s groups like Rhino that are doing it, so it’s a little bit of an upfront cost and it just allows you to protect your assets when a specific resident moves in. Instead of having that security deposit and be the bank, it allows you to protect your asset as the resident moves in. Then also our residents have renter’s insurance as well, so it’s a double protection for the property.

[00:19:51] KR: You’re finding that residents are seeing this as more favorable than doing a typical security deposit?

[00:19:58] MT: Yes. It’s just the financial burden aspect, how a resident moves out. It’s always a crazy process and the last thing you want to do. It’s more admin on you as the operator in the sense of I have to fill it out. Then you have to combat the resident. It’s just extra communication and it’s just very inefficient versus the moving fees. It’s a lesser hurdle. It’s an easier process.

Once they move in, a lot of our people or residents stayed for long periods of time. It’s been a smooth process, so we haven’t seen any pushback. But the biggest thing is it’s just less burn for them. We know they want to move in. They qualify. Why do we need to have them pay even more money to stay and be the bank? It’s just an efficient process and just streamlines everything through and through.

[00:20:45] KR: Yeah, that’s interesting. It’s a new process I haven’t heard of before, so thanks for sharing that with us. I mean, it sounds like something that could be of value and a differentiator.

[00:20:53] MT: Yeah. Every market is different too. In Chicago, I know this is very prevalent because if you charge security deposit and you don’t charge the resident or you give back the insurance on the bond, then what happens is you’ll get taken to court. You’ll lose 100% of the time and you have to pay back three times that security deposit plus court fees. It’s very market specific, but we found it very prevalent in our markets.

[00:21:19] KR: Interesting. Mike, from your perspective in the middle of these deals, what are you seeing right now as far as what should investors be expecting from a return standpoint? Have you seen things change in 2020 as we’ve gone through COVID? I mean, what are you telling your investors at this point?

[00:21:36] MT: Our collections have only taken a slight dip. I think at most 5% at a property. We’re in Knoxville, which had less than 200 cases as of May 6th, so less than about 200 cases. Lexington, Kentucky at 200 cases. Those properties actually were ahead of schedule on collections.

Our other properties in Louisville only had a dip of around 5% compared to the previous month. Collections-wise, we’ve been subbed thankfully. We tell our investors it’s just that we contribute to the fact that we’ve had communications approximately every other day or every three days with our residents during this time. If you’re just sitting at home, you might have lost your job, you might be sick, you might have family who are sick, and you just turn on the news and it’s just everything is just getting thrown at you. We make sure as our property management group that we’re staying home, giving our residents a rock of information of here’s what we know and we’re with you with this.

Because of that, we’ve worked with our investors when it comes to the returns of we delay distributions because we didn’t know how long the impact would be and we’ve increased our communications. Every Friday, I have an office hours with our investors 2:00 to 4:00 PM Eastern and just, hey, hope on. If you have any questions with our deal, what’s going on, we’re happy to share and go through any questions you may have. It’s been awesome. We’ve had average about like two to three investors hop on and just talk shop or what’s going on and how their families have been impacted. It’s been a cool touch point just to see where our investors are and just talk to them even further and help them through this time.

But our distribution is not as accumulating. Even though we didn’t pay at this quarter, we’re looking to pay at the next quarter because our collections have been so strong. But it’s just making sure you feel comfortable with your group when you invest, because this is a partnership. I jokingly but seriously say when you hand over some of their money, you’re saying I do. You better know, like, trust and make sure that they’re going to do the right thing and they have the same values as you. It might not always be the returns and things can happen but it’s just making sure you know like you can trust them that they’re going to do the right thing and execute more than anything.

[00:23:53] KR: Absolutely. I think we said many times on this show it starts with the sponsor, right? I’m curious. These office hours, I think that’s a really unique concept. It’s a great way to stay connected with investors. What are some of the questions that you’ve been getting?

[00:24:07] MT: I think the most unique question is how do I get my webcam to work. I had an older investor who is one my favorite investor. [inaudible 00:24:15] very Friday. He’s like, “Is my webcam working,” and he’s just messing with me.

But it’s just generally to see our collections. Also, another touch point that I do is I send a collection report. It’s a day by day breakdown of what percentage of rents have we collected from May 1st, 2nd, 3rd, 4th. It just accumulates and you can see the rental increases go slowly.

That’s been the biggest thing is the collections, what’s been going on. We just pointed that report and just walk through it what’s been going on and the updates. I mean, people just want to know that it’s like we’re people too, and so we just talk about – I mean, we’ve talked about family. We talk about collections. You name it. We’ve talked about – It’s a wide variety, but the biggest thing that’s been consistent is how are our collections. We’ve been solid and even this month throughout May. Knock on wood. It’s been very strong. Even we’re comparing it to March and even April because it’s been that far ahead.

[00:25:11] KR: Excellent. Well, congratulations, you guys. It sounds like based on the good work you’re doing. Can you paint a picture for us? You mentioned communication a lot. It sounds like your group is very strong in their communication back to investors. Can you paint a picture for us? I mean, what is that communication? What are all those different touch points? You mentioned a few of them. I wonder if you could just give us an overview of what that looks like.

[00:25:32] MT: Yes. If you’re to invest with Rand Partners, what it looks like is you start off the call with me just going through what we’re doing and we try to align our goals with your investing goals as well because, like I said, we got to have the same vision and we got to have the same values of investing.

Once we have the relationship, then hypothetically deal comes through. What it looks like is we send out email communications highlighting deals under a contract. A week later, we’ll have an investor memorandum, which is the very federal document where we go through, highlight markets, the market property and financials. Then a week after that, we’ll have a webinar with all of our principles, highlighting what we love about the deal, the risk, how we’re mitigating those, and how the business plan will be executed.

From there, the first three months, we’ll do a webinar for the deal. Once you invest with us, you’re like, ”How do I know they just didn’t take the money and run?” It’s me and Gino Barbaro going through month one, month two, month three because those are the hardest months of making sure things are going smooth. Plus too as an operator, we understand. Or as an investor, you’re a partner, and we want to make sure that you feel comfortable with the communications and what’s going on and introducing the team and what those rhythms look like. We know those first three months are usually the most chaotic and we want to be as transparent as possible on how things are going.

Also, we provide monthly statements to our investors, where it’s a very brief one-pager with any notes on major variances that are going on. Then the webinars after those first three months go into quarterly webinars but very transparent. Our brand promise is transparent, peace of mind investing, so we’re making sure – I talk to investors from 9:00 am to 9:00 pm any time, just to make sure they feel comfortable. But more importantly, they understand what we’re doing and why we’re doing it.

[00:27:32] KR: Gotcha. That sounds great. It’s a pretty comprehensive process there.

[00:27:37] MT: Yeah. That’s the thing. It’s like people invest a lot of money, and so we want to make sure they feel they know what we’re doing at every stage because we understand that a lot of our investors want to be active investors as well, and there’s a lot of repeats and investors as well. We just want to make sure people understand why they’re doing it. They might not have the time now but eventually they might and do their own deals as well. We just want to make sure we put them in the processes if they were the operators. We’re farming it that way as well.

[00:28:08] KR: Well, Mike, thanks. The last piece of the show is a piece I like to do called keys to success. I’ve got a couple questions I’d like to ask you. The first one is what is the most important question a passive investor can ask the sponsor? If you only had one question, what would that be?

[00:28:25] MT: That’s a tough one. What is the most important question? How can I trust you to execute? I think that’s important because it frames it in the way of how do I know I like you and trust you enough to execute on the deal, and it really puts the ball on their court because if they don’t have a good answer for that, I think it really proves that you shouldn’t be investing with them. It’s not a number because in every Excel – I can put in on Excel. It’s 100% IRR. But I think it really goes back to the grassroots of trusting that person.

[00:28:58] KR: What’s been the best investment you’ve made?

[00:29:00] MT: I invested in coaching for myself because I was an accountant, a CPA, doing the books. I just saw with working with Dan Gilbert’s group, and I saw all these people investing and doing really well. I invested in coaching that helped short cut the path of knowledge and it just really helped and also books.

I mean, people too think you have to have so much money to get one-on-one coaching, but you can invest in books and just really help you learn from the best without having it be a one-on-one setting. Investing in your education, whether it be coaching or reading as well.

[00:29:38] KR: I love that. We haven’t had anybody say that at this point. But investing in yourself and your education, I think that’s really unique.

[00:29:45] MT: There’s a lot of people who have done it and you got to learn from the best. I mean, I have doubled down on my reading this year on loan and I’m like I think like 10 to 15 books in. I might as well learn from people who’ve done it a lot well before I have and just learn from the best.

[00:29:59] KR: That’s a great point of view. What are you most proud of?

[00:30:02] MT: Most proud of? I think just two things. Moving from a CPA to being in the position I am with Rand Partners investing in, I dedicated myself. Two year ago, I said, “By my 28th birthday, I’m going to own a $5 million apartment complex.” Then I put all the work in. In our first deal with Rand Partners, we got almost a $10 million apartment complex within like a year and a half and we were writing down that goal. That was one. Number two, I think that was the second mind shift. But the first one was two years before that, it was I lost 60 pounds. I called him fat Mike. I’m just working and not eating, investing in myself. I went from running the Chicago marathon last year, so the transition from fat Mike who was an accountant, not happy, to now real estate investor working with investors and being healthy. I’m just continuing to invest in myself in more ways than one.

[00:30:55] KR: Congratulations. That’s a huge accomplishment.

[00:30:57] MT: Thank you.

[00:30:58] KR: You mentioned books. You’re obviously an avid reader. What’s the one book that everybody should read?

[00:31:03] MT: If you’re starting off and you just have no idea in just the mindset of money, I’d say Rich Dad Poor Dad by Robert Kiyosaki. If you’re looking to more understand real estate investing, it’s a think book and it goes through everything, the Sam Freshman’s book. The Principle of Real Estate Investing is a good one. Joe Fairless and The Best Ever Book on Real Estate Syndication, and Jake and Gino’s book, Wheelbarrow Profits.

Those are all like the four crash course books of really getting yourself out there and diving into multifamily real estate. But I think those four books, depending on where you are in the journey every book at the right time can help, so I think those couple books will get you very far.

[00:31:42] KR: Awesome list. What is your number one key to success?

[00:31:47] MT: I think the biggest thing is just networking with people because if you surround yourself with the wrong group of people, you’re not going to go anywhere. I mean, you always have to reach up to get to where you want to go, so have people who will help you elevate your performance, whether it be physical investing knowledge. It’s hard enough to do it by yourself and that’s why you need the right support system in your corner to help you during those rough times. Just invest – Have people that have the same vision as you and help you grow because there’s going to be a lot of critics telling you you can’t do something, so just make sure you get those and the right people in your corner.

[00:32:25] KR: That’s great advice. Last, Mike, but not least, how can folks get a hold of you if they want to learn more about you and what your team is doing?

[00:32:32] MT: Yeah. Reach out if you’re interested in investing. Go to randpartners.com and sign up for our portal. Once you create the investor portal, we’ll schedule a call on and hop and talk about your investing goals. If you have any direct questions, you can reach out to me at miket@randcre.com. I’m happy to answer any questions, thoughts, market updates. I’m here for you.

[00:32:56] KR: Awesome. Well, thanks, Mike. It’s been valuable insights from a full-time asset manager, so a really unique perspective. Thanks for being on the show today.

[00:33:04] MT: Absolutely. Thank you, Kent, and have a great day.

[00:33:07] KR: You too.

[END OF INTERVIEW]

[00:33:08] KR: Thanks for listening to another great episode of Ritter on Real Estate. Hit the subscribe button to make sure you don’t miss out on the content that will make you a better investor. Also, visit kentritter.com for articles, videos, and tools curated just for passive investors. Until next time, this is Kent Ritter with Ritter on Real Estate. Now, go out and invest like a pro.

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