Category: Multifamily
Air Date: 07.07.2020

In today’s episode, we’re going to be addressing value investing, working with a team that you trust and you’re comfortable with, and the importance of coaching. It’s the first time we’ve had two guests on the show, so we’re excited to welcome Collin Shwartz and Chris Pomerleau. Together, they run Park Ave Capital, which focuses on acquiring properties in the Omaha area. They collectively own 600 units, and in addition to that, they both serve as coaches for newer investors. Collin additionally runs his own property management firm called Brick Town Management and is head of the largest Meetup in Nebraska with about 1000 members. In this episode, we discuss why they chose Omaha, investing within the path of progress, and making sure that you’re comfortable with the operator when evaluating a deal. We also talk about the importance of understanding risk, doing due diligence, and the revenue and cash flow increases you can create by utility bill backs and charging common area maintenance fees. Chris and Collin talk about coaching, giving back, and what they’re most proud of, as well as their number one goals for 2020, and the books we should all be reading. Don’t miss this episode!

Key Points From This Episode:

  • Why Collin decided to invest in Omaha, after seeing no dip during the last recession.
  • Chris explains how he grew up just outside of Omaha, which made it easy to invest there.
  • High appreciation and high volatility at the coast versus forced appreciation in the Midwest.
  • Collin talks about looking in the path of progress – investing in areas that may be considered fringe now, but where there will be development opportunities in a few years.
  • Chris shares why he thinks the most important part is feeling comfortable with the operator when evaluating a deal or vetting a syndicator.
  • Collin highlights the importance of aligning with your partners and understanding the risks.
  • Why Chris and Collin do their due diligence and look for partners with experience in every aspect of a project – from contracts and insurance to managing and roofing.
  • What to look at when assessing a deal, including rental and expenses.
  • Utility bill backs and common area maintenance –  how they can help you increase revenue.
  • Collin and Chris talk about their experience of coaching and becoming coaches themselves.
  • Some of the barriers Collin has encountered in coaching others, such as networking.
  • What’s next for Chris and Collin and how they like to give back to the community.
  • Collin and Chris share what they’re most proud of, especially their relationships with tenants and team members and their ability to spend more time with family.
  • Number one goals this year include quadrupling their investor base and being present.
  • The books that everyone should be reading: The Miracle Morning and The Compound Effect.
  • The one question Chris would ask a deal sponsor – how did you handle a negative effect, and how did you make it right by your investors?
  • The one question Chris would ask – what would you do if COVID-19 happens again on a different scale? What have you learned and how would you prepare?

Tweetables:

“The numbers on a slideshow are always going to intrigue you… What really matters is how comfortable you feel with the operator, the actual sponsor… the person running the business plan… It’s easy to look at a slideshow or projection… but if you don’t… don’t feel comfortable with who is running the project, the projections really don’t mean anything.” — Chris Pomerleau [0:07:40]

“We’re all motivated but we all have our weak spots. We all have things that we don’t want to do, that we know we should, and a coach will expose it.” — Collin Schwartz [0:21:23]

Links Mentioned in Today’s Episode:

Chris Pomerleau on LinkedIn

Collin Schwartz on LinkedIn

Park Ave Capital

Park Ave Capital on LinkedIn

The Miracle Morning

The Compound Effect

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Kent Ritter

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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—

“All of a sudden we are getting six figures to replacing new roof and decking. Those are the important questions that, as an investor but also the operator, that we need to be asking.”

[INTRODUCTION]

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]

[0:00:34.3] KR: Welcome fellow investors to Ritter on Real Estate. The show that teaches you how to passively invest like a pro. Today, we’ve got a couple of special guests, it’s the first time we’ve had two guests on the show, so excited to mix it up a little bit. We got special guests today, Collin Shwartz and Chris Pomerleau, they run Park Ave Capital, which focuses on acquiring properties in the Omaha area.

They collectively own 600 units and in addition to that, they both serve as coaches for newer investors, and Collin additionally runs his own property management firm called Brick Town Management, and is head of the largest meetup in Nebraska with about 1000 members. That’s pretty impressive! Got my own here in Indianapolis, I started recently, but we’re about a 10th of where you are, pick us some tips after the show.

These guys, really excited to dig in with some syndicators who know about the business, have some different perspectives, asset management, property management, and with that, I think let’s get right into it.

I thought one thing to be really interesting to talk if you guys are about because we haven’t had anybody on the show local to that market is just understand how’d you guys pick Omaha? What are you looking for in your type of investments, and why that market? How do you think that that prepares you for the future here as we continue to look out kind of the post COVID environment we’re in?

[0:01:55.3] CS: Yeah, I’ll start off and Chris, definitely chime in, so this is Collin. The reason, I mean, I was living in Omaha, I’ve been living here for seven years, seven, eight years and then started to see a lot of growth in the area. I noticed that during the last recession, there was really no dip, things just kind of slowed down but there’s actually no dip in the environment. Then, becoming a new investor, I was originally working IT as a project manager for an insurance company and, to effectively do that with a new family, it made most sense to invest in my backyard.

The fundamentals made sense, I know when I would get on Bigger Pockets or listen to other podcasts that were talking about the 1% rule, and there are numerous properties out here that would exceed that quite often. I just figured that to be a really good area, stable market and once again, I have my roots here and was able to build a team to kind of focus around the Omaha market. It might have been luck that I moved to Omaha but all the fundamentals made sense.

[0:02:55.0] KR: Got you.

[0:02:56.4] CP: Yeah, I was born in [inaudible 0:02:56], which is a suburb of Omaha, Nebraska. I’ll claim that all day, keep your mouth shut Collin. It’s a small little suburb, but it’s in a different state of course, but for all intents and purposes, it might as well just be Omaha. I’ve lived here – outside of a few years I was in the military and college, I’ve lived here for over 30 years. I obviously know the market really well, Collin’s right, this is – being in the Midwest, we’re just affected a lot less than the coast. You kind of stay stagnant or you kind of run parallel in the dips opposed to the volatility of the coast.

That made it really easy for us being here, living here, living here my whole life, and like Collin says, having the ability to then also be the boots on the ground while we’re here. It just made it really easy to invest here. That’s certainly why we started here. I mean look, we have now built such a process that we start from the single and the doubles or whatever and you start moving in to the larger units, all here in Omaha, but now we have a process together where we feel comfortable and scaling out around whether it’s Kansas City or Sioux Falls or Des Moines.

We’re not just in Omaha now as well.

[0:04:08.9] CS: One thing that I think is important to point out is most people look at the coast, San Francisco, maybe New York, or any of those areas with that high appreciation, and they’re buying on appreciation. Nebraska and Omaha is not going to appreciate but there are so many opportunities that force appreciate everywhere, that you can actually just hedge that kind of delta in itself just from your underwriting. You have a lot of mom and pop owners that you run into, that rents are way under market, that you can get those up and you’re not going to have that volatility.

If you’re on the coast, it’s just based on okay, there’s a new tech hub, this million dollar home’s now worth a million and a half dollars, and then you have COVID 19 and nobody really needs to work in the coast and then they can move. As in Nebraska, you’re really able to control that. Which you kind of  have a lot of benefits from.

[0:04:57.2] KR: What type of properties do you guys target, what are you acquiring?

[0:05:02.1] CP: I mean, we look for the value add, and I understand that’s a term that’s relatively over – perhaps overused, but certainly often sought after, but there has to be some room for it. We’re not really into the purchasing something at the top of its value. You approach it, I don’t like the comparison but it’s easy to understand, you approach it like the stock market, right? You wouldn’t buy Apple stock when it’s worth it’s largest amount.You purchase it while it has room to grow.

That’s what Collin was kind of eluding to there is that we’re not going to buy something and four years later, hope that it’s worth more. We’re going to buy something and then force appreciate it by raising the income, and lowering the expenses, and fixing the place up, and that’s the way we’re able to really raise the value of these projects we’re putting on money into.

[0:05:45.0] CS: Yeah, another key point on that is I think we’re always looking in the path of progress. We’re looking at areas that may be considered slightly fringe, however, we can see two, three years down the road that other developers have plans around the area. That there’s going to be development opportunities and that way, we can get in and kind of the forefront now.

We’re going to be the crazy ones doing the heavy lifting in an area that’s a couple of blocks south of where people would consider ideal, however, those two years pass, and then they become optimal properties. As Chris said, we’re increasing the rents, we’re also looking for those utility bill backs as well. I mean, that’s one of the first things I go through, but there’s a lot of numbers you can look through when you do a PNL or something like that.

But what you’re looking for, or at least what I look for, is what’s the rents, divide that out by the number of units, that seem accurate? And then I’m looking at the utilities and decide it’s accurate, what’s the owner paying here, and where can that be allocated back?

[0:06:38.0] KR: So you guys just value investors, making Warren Buffett proud there, right in his backyard. I think that’s fantastic. I mean, that’s really the – it’s the same strategy that I follow and believe in, right? Buy it at a reasonable price, and you buy something that you know you can add value to, and there’s a lot more surety there than there is than trying to ride an appreciation roller coaster. I appreciate that strategy.

I know you guys have your roles within the company. I wanted to hear a little bit from your unique perspectives, asset management and property management. Help our listeners understand: as they’re looking at evaluating deals, as they’re vetting syndicators, and they’re vetting deals, what are the things from your perspectives that are most important to look at? What question should they be asking to make sure that they truly understand the deal, and understand it if it’s a good deal or not? And just expand upon that a little bit, and I’d love to hear your perspectives.

[0:07:32.4] CS: Chris, I’ll let you start it off.

[0:07:34.3] CP: Yeah, I mean, I think that’s probably one of the most important things that a passive investor needs to look at is who they’re putting their money in with, right? The numbers on a slideshow are always going to intrigue you. If they didn’t, the person didn’t put this slideshow together correctly, so it doesn’t really guaranteed type of outcome.

What really matters is how comfortable you feel with the operator, the actual sponsor, the actual general partner, the person running the business plan. I think that that is by far the most, in my opinion, overlooked concept is that it’s easy to look at a slideshow or projection and say, “I like a double digit return,” but if you don’t understand who is – or you don’t feel comfortable with who is running the project, the projections really don’t mean anything.

I’d say, by far the most important thing is to get on the phone with the sponsor or the GP. Make sure you know who you’re partnering with, if you’re going to buy a duplex with one other person, you want to make sure your interest are aligned. Through both Collin and my history of investing, we’ve had a number of different partners, and it wasn’t like we just jumped right away into an investment with out actually getting to know who they were. Go ahead Collin.

[0:08:38.0] CS: Yeah, I think that’s one of the most important things, the last thing that you said as well as calling and getting on the phone with a sponsor, but as far as the investor and the group that’s working together, that you guys are aligned. That you really understand what the risk is and also the personality types. I mean, there’s a lot from an operator perspective where we’re hoping that we are being entrusted to do our jobs and do our professions as we are professionals, and for the investor to trust that.

We also do want them on the front end to ask us a lot of questions because we want to make sure that our goals are aligned. I think that that is absolutely imperative because some projects, they may not cashflow for 18 months or 2 years because they’re such a heavy value add. Other projects, they’re going to cashflow it right away because that is the type of project it is and that’s how we’re approaching it.

I think those are really important things and to echo what Chris said, yeah. Talk to the operators, understand who the property manager is, and understand who the asset manager is and what their track record is.

[0:09:36.9] CP: I think what benefits Collin and I, or kind of sets us apart from a lot of syndicators, is that we’ve actually been a part of or done every step of the entire process. You look at the electrician’s union, or a group of electricians, a certain hall. You might have one who just starts out, but the person who is kind of over stating said individual has been in that position, has done exactly what they’ve done and worked their way up.

I mean, we are managing the majority or a large portion of the properties that we own. Collin’s group, Brick Town Management, so he obviously understands exactly what is to be expected out of another property manager. We’ve laid the flooring ourselves. We painted ourselves, we’ve done all of that. As you continue to grow, that’s 600 units in the last three years, and as we continue to grow, we’re not going to be able to paint 600 units ourselves, but we know what to expect out of the people who are part of our scaled business.

I think that’s what was really important is that we’re not just somebody who came from some type of investing background, where we’ll be reading a spreadsheet and hoping that spreadsheet’s different next quarter. We’ve been there, we’ve done that, we know what to expect, and I think that’s important that you look at that concept when you’re trying to find someone to partner with.

[0:10:52.0] CS: Yeah, it’s not necessary that you as an individual have to do everything. It is – what is necessary is that you and your group, or the group of people that you have together, has collectively touched every point. You’re always going to come across something new or you’re going to have to find a new team member, syndication attorney, et cetera.

But I know when I started, I was writing my own contracts, I was writing my own direct mail, doing all the negotiations. Now it’s getting a little bit more in depth, with negotiating certain seller financing, working insurance claims, but really being active in those pieces. Even if you only do it once or partly involved, you’re going to be able to add a ton of value to future projects because there’s so many things that often get overlooked that can make a break a deal and we, I think excel in being able to find deals because we’re the ones willing to ask, “Hey, is there an insurance claim on this?”

Then they may say, “No, but I think the roof’s fine. It was replaced five years ago.” Well, we do our due diligence and we go find that no, it needs a whole new roof and then, all of a sudden, we are getting six figures to replace new roof and decking. Those are the important questions that, as an investor but also the operator, that we need to be asking.

It comes with experience but it also comes with those qualified team members that you have around you. You can’t do it all the time.

[0:12:05.0] KR: Right. Expand on that a little bit for our investors. As you’re looking at it, let’s say from an asset management perspective. Your background, you’re looking at a deal, What is it that you’re looking at first? How are you evaluating the deal, and what are the levers that you’re looking to pull as you’re saying, does this deal make sense or not?

[0:12:21.4] CP: Collin kind of eluded to it earlier but you want to make sure that the – first off, that the rental income is where it should be. It’s easy as an owner, or what we’ve seen from these perhaps older owners or at least owners who have become comfortable in their position, it’s easy to just be really happy with the 99% occupancy that is $75 less a unit than it should be.

Maybe they haven’t taken the time to crunch those numbers and find out that, if they pressed the market a little bit, raise it $75 a unit, that maybe they’re down to 92% occupancy but they’re pulling in 10,000 more dollars a year. It’s easy not to have to do that because some people become comfortable in it. I think that you have to look at the income right away. Compared to the surrounding locations.

I think that the background that we have in property management, as well as a couple of third-party property managers that we use, they have that ability to really fine tune and review the local market and the rental income. And then, Collin had said it earlier as well, is the expenses. It’s amazing to me how many owners are still paying the utilities for their tenants, or aren’t charging common area maintenance fees. Or aren’t taken an advantage of a possible laundry room or – there’s a number of items that you can actually take away on the expenses and, by raising the income of all the expenses, change the  net operating income of course, as you know. That’s what we’ve been really successful at.

[0:13:48.4] KR: When you look at things like other income, what are those items? I know you went into a few of them, what are those items that you are seeing consistently, you’re able to implement, and how much of an up tick do you see in revenue because of those other income items?

[0:14:01.0] CS: I mean, one of the big ones is the utility bill back. We’re always doing the utility bill back with gas, water, sewer. Some of the older buildings, the buildings were just single meter so we were adding that bill back. Another one which we just started doing, this is probably six to eight months ago, is adding a common area maintenance fee. What we did is we start looking at, what does it cost for snow removal, what does it cost for cleaning, what does it cost for lawn care? Okay, well we have that, okay, we’re paying these items. In Nebraska sometimes, you get hit really badly with a lot of snow as we did two years ago and those things start to add up and they become painful.

We’re also going out there and doing a service. We work really hard at our first objective. My objective is, for my customers at Brick Town Management, is to get across that we care. We are here for you, we are going to take care of maintenance issues as fast as possible. For our investors, it’s that we’re relentless and aggressive. We’re going to work our butts off to make sure that our residents – that they know that we care for them. In doing that, it costs extra money, so we look at that number, we look at that yearly amount, and we tap that on, we add it as a common area maintenance fee.

I think that’s oftentimes overlooked, especially for these C-class type buildings, where you don’t’ usually see that, you just usually see a flat rate. I tell you, we have had no qualms with a $15, $12, $20 charge a month that’s tacked on. Well, you tack that over 500  units, you multiply that out, at a six and a half cap rate, you are adding a ton of value to the property, and also increasing it cashflow substantially.

[0:15:34.0] KR: Yeah, that’s interesting, is that something that you guys are a leader in the market or are other people doing that?

[0:15:38.6] CP: I wouldn’t say we’re the first to bring it to Nebraska by any means, but I can tell you that the majority of the property managers we’re speaking to are not doing this. I think Collin eluded to it, but I think it’s the sincere statement that – I think the tenants get what they pay for. We have not had any issues at all with asking for that small amount and I think it’s because, I’m almost certain it’s because they’re legitimately happy with where they live.

Sure, they’re paying an extra $10 a month which is what? Two trips to Starbucks or who knows, whatever. It’s a clean environment, there’s not snow in the way, things are actually getting done as opposed to them just being billed for it. As far as us being the first operators to do this, we are certainly teaching other operators of this, but we haven’t had an issue with it and it’s certainly has been a big turnaround for us as far as our overall return.

[0:16:32.1] CS: Yeah, it’s typically done in larger complexes but you figure you know, if we’re servicing, say just 200 units of this common area maintenance at $20 a month, what’s that, $2,000 or $4,000. We hire somebody for 300, 400 bucks a week, at 10 to 12 hours to go around, pick up items and just add to it, add that in addition to and make sure the trash, anything like that is cleaned up. Anything that’s been left out at the complex and kind of looking unsightly, that in itself pays for, not including the value add portion of it.

It’s a service on both ends.

[0:17:04.9] KR: Yeah, I mean, I love that perspective, you guys are service first, and you’re creating immense value for the property by making sure they’re really focusing on the needs of the residents, that’s a very good approach. You guys are also real estate coaches, right? Both in your own way. I wanted to dig into that a little more, a lot of our listeners are folks that are either investing actively in deals, and my big push is that we’re always continuing to educate ourselves, and there’s also a quite a few folks that are interested in getting into real estate and into multi-family and are looking at their first deal.

From your coaching perspective, you guys put your coaching hats on, I’d love to hear you expand a little bit on what do you coach in students about? What are the things that are the biggest lessons learned, or the biggest kind of light bulbs that you’re seeing in your students? Kind of just expand on that a little bit for us.

[0:17:54.0] CS: That’s a good question. Before I became a coach, and I’ve just started doing it recently, I mean, I had started the meetup which serendipitously brought a lot of newer investors to me, asking me questions. Just being a younger real estate investor in the area, I was already doing it to begin with. I think, most importantly, is those individuals that are interested in hiring a coach, et cetera, is to know your goals because that is always my question. Also, what work have you put forth? Because coaching is not you pay me, I give you results.

Coaching is you pay and then we work together to formulate results. We are working to expand on your certain knowledge base and I am going to help guide that ship but with that you are still the captain of the ship. Some of the best things I found is, I mean, I’ve learned from a lot of the students and they’ve been able to get back as well, but just getting them over some hurdles. The straight mind deal focus is like okay, I plug in these numbers and it comes out to a 5.5 cap and cash on cash is 5%.

Okay, so that deal doesn’t work like that. How will it work and what are some areas in which we can make it work? Now, can we do some creative financing? Can we do seller financing? Have we asked that? Have we done delayed payments? Have we done interest only? Have we talked to other banks to look at, maybe you were paying 5.5% percent interest, or can we pay 3.5% interest? Just diving into those items. I think are key in just being able to provide those questions that we have from our background and our successes and failures.

[0:19:25.0] CP: Yeah, helping people understand that there is more than one way to accomplish something huge. I mean for example, in my own life, I’ve paid for coaches. I remember one time I was really struggling with taking the jump and purchasing coaching from a well-known individual. It was relatively expensive and my answer at first was, “I can’t do it. I just can’t. I don’t know where the funds are right now.”

Believe it or not that coach, it seems self-serving but it is not, he’s phenomenal, he’s very well-known – helped me learn ways I could even find the funds for the coaching. Now I know that sounds self-serving, but he taught me actually whole different avenues, whole other routes that can be taken for access to funds. So the same funds that I found to actually pay for coaching have helped me paid for other things in my own real estate investing career.

So being able to look at things in a different light is part of the biggest thing that I would stress on anybody. I think Collin is right when he says that this isn’t a, “Look, you pay me and then I’ll take care of it all for you.” I think coaching is the best for anybody who is serious about actually becoming a better investor, but if they are not serious and not willing to put in the work, it is a waste of time and money, for everybody. It makes no sense for you to pay me if you are going to expect me to serve it to you on a platter.

So I think it is important that you understand, you are going to have to show up and play ball as well, but I think that that’s one of the reasons why it is so beneficial, is if you actually find somebody who is really passionate about being better what they can be. I think that they not only have someone now holding them accountable. They have someone who has already walked that path and they’ve paid money for it. So they know they’d better show up and I think that is huge. I know it is certainly helped me.

[0:20:59.3] CS: One big thing to point out too because, I also do have a coach and I actually got off this, it is an all-day coaching program that we do once a month, and I have one-on-ones with my coach and he has said something and I was just like, “Oh this is just like too much work.” I was explaining it to my wife. She’s like, “Well isn’t that why you hired a coach?” and I think just the light bulbs went off in my head. We are all motivated individuals.

Anybody listening to this, we’re all motivated but we all have our weak spots. We all have things that we don’t want to do, that we know we should, and a coach who will expose it. A really good coach will say, “Hey you are trying to take the easy route on this. This is the work that you need to do and you need to go network. You need to do this, you need to do that,” and in that moment between having a good spouse and a good coach, I was just like a big light bulb went off.

And I was like, “Ah, I hate to say it you’re right!” I think that is important for any students I mean and for myself as a coach and I am also being coached. Just understanding that you may not hear what you want to hear, but you are probably going to hear what you need to hear.

[0:22:01.5] KR: Yeah. I think that is a great point. I mean I have coaches as well, and in my experience, yeah it has propelled my success far beyond what I initially paid and so I believe in it too. I think what you are talking about though is accountability, right? You will do way more for somebody else that you will for yourself is what I found, right? So if you know that you have to get on there and you have to tell them that you didn’t do what you said you’re going to do, you are much more likely to do it than if it was just you holding yourself accountable. You can quickly just scribble it to next week.

So I think there is huge value there not in the knowledge but in the accountability to make sure you keep moving forward. So I definitely appreciate that. As you are starting the coaching process, I mean what are the barriers that typically people are bringing up that you are helping them push through as they get started?

And I know you mentioned one Collin, just the direct line, only one way to do the deal, you help them figure that out, but what are some other things? What are the barriers that you are seeing people that you have to enlighten them too and help them expand their mindset?

[0:22:59.0] CS: Another big one is networking, being willing to put yourself out there. Just going in networking events, be on podcasts, create podcast, anything on that level. People have the tendency to most of the time be very inward in their thoughts because that maybe where they were working, coming from a very corporate background, nobody – we never had a huddle every day in which we talked about our goals and our journeys. We talked about the task that needed to be completed.

Finding out that there is a group out there of individuals like us that are open and comfortable talking about what our goals are and what we want to become. So it is just breaking through those barriers.

[0:23:36.6] KR: Yeah and I think that is a great point in some people that are passive investors may be saying, “Well, I am just a passive investor. I just want to give my money to somebody else and let them do this. What do I need to be networking and things for?” But I mean it is still important. That is how you find the deals right? That is how you find the sponsors, that is how you meet people, that is how you create a network to bring the deals to you. Even if you don’t want to actively purchase.

You still have to find the people that are out doing the deals, right? And Chris, to your point earlier, the most important point or piece of the deal is the sponsor, right? If you are not networking you are not getting out there. How are you meeting these people? How are you understanding who these people really are and that they are somebody with integrity that you are going to want to do a deal with, right? So I think that is a great point about networking.

[0:24:18.9] CP: Yeah and then like you said about passive investors I mean passive investors they may not need a coach. They may not need to learn how to run an entire investment on 14 unit or a 44 unit or they don’t even care about that, but they need to run elbows with the right people. They need to get in front of the right people. They need to actually meet them and get to know them like you said, network with them and then feel comfortable with the money to putting towards them, and so I agree.

Passive investors don’t necessarily need coaches. Certainly wouldn’t hurt in certain areas of their lives but they may not even be a real estate coach, but they certainly need to get out there and network, no question.

[0:24:50.2] CS: And typically if passive investors are reaching out to you, they’ve already achieve some success in other areas and they’re genuinely interested. You rarely have somebody reach out to you that is interested that has capital that has no clue on any type of business, business aspects, and hasn’t achieved some type of success. The stock market is the easy route, the bank account, the CD fund, like just roll money in there and don’t teach me anything.

When you are going into this, typically people are asking questions because they’ve had some type of background. So typically I find those people gravitate towards just learning more and getting educated. They don’t need to know all the ins and outs. They don’t need to know how our property management company is structured. They don’t need to know any of that but they want to know the fundamentals.

[0:25:35.0] KR: Yeah and I think understanding just from the education standpoint, I think understanding those questions that have to be asked, right? So the minute you know how the property management company works, but they need to know what a good property management company does, and what a poor property management company does, and what metrics a good property management company is looking at, and judging their performance off of.

I think those things are critical and they’ll go back to the education. So for you guys, now that you’ve had tremendous success, you have acquired 600 units, what is next for you guys? Where does the business go from here and how do you continue to expand?

[0:26:10.6] CP: One brick at a time, right Collin?

[0:26:12.2] CS: One brick at a time.

[0:26:14.0] CP: 601 units is next and then 602 and then –

[0:26:19.1] CS: I feel like we just started. I will let Chris answer this but honestly, I feel like we have honestly just started. We have started to put together all the systems. We now have a very good understanding, but we are still learning things, a 100 things a day but I feel like we’ve just started.

[0:26:37.0] CP: Yeah, I mean I think we’re certainly good at what we do but as far as getting just started I mean, what our goals are, we are not even close. I mean, we want to continue to grow. We want to continue to help – and not only the company that we are building but with the people that are investing with us. We are talking about it the other day, I wouldn’t mind 10,000 units in 10 years. I think that is a good goal.

Collin, his Brick Town group started giving back, and this has been on our radar as well as perhaps starting a non-profit, but I mean helping out the community, taking in money from not only the real estate meet up like Collin has done, but helping out the tenants during this time, giving them gift certificates or whatever that can help them. It helps both of us right? Because they are happy with where they live, then they pay their rent, but they’re also help during this time.

I think one of the things that Collin and I do outside is that while we continue to grow so quickly it is also important to help out the investors, the tenants, those less fortunate. So I think as we continue to grow financially, that is also something that is in the back of our mind, just to give as well.

[0:27:38.5] KR: That’s great. So as we wrap up the show, there is a little segment I like to do at the end called The Keys to Success. I’ve got a couple of questions I want to fire at you guys. We haven’t done it with two on before, but we’ll just go back to back and – what do you guys most proud of?

[0:27:52.9] CP: I will let Collin answer first, always.

[0:27:55.4] CS: Yeah, thanks buddy. This is rare but you know, honestly, I’m really proud of the team and the individuals that I brought together. I know this is also self-serving. I am very proud of the enjoyment and fulfillment of finding and doing what I am doing, because I have met some of the best people in my life in the past couple of years. It was just incredible. Working with our residents and we’ve gotten notes that we have done the best job.

We gave a lady a free month’s rent, you know, she was struggling – this was a year ago for a Christmas present. She said, “That is the nicest thing that anybody has ever done for me, ever.” I mean just seeing those things and having the ability to do that it is awesome.

[0:28:37.0] CP: You know I will piggyback it off that, I have my own organic answer as well, but the relationships, no question. I am extremely happy with the relationship. I’m glad that I met someone like Collin. Our interest aligned and whatnot, and he’d built a good team there. We continue to gather more and more partners. So that is certainly something I am proud of. On a selfish or personal level I’d say that, because of how driven we have been and the success that we have been, I’ve been able to spend more time with my family.

So I guess I would honestly say that I am proud of myself and my team for allowing that. I think that is the benefit of passive investing. So that is something I am truly proud of.

[0:29:11.3] KR: And what is each of your number one goal this year?

[0:29:14.6] CS: All right Chris, you go first this time.

[0:29:16.9] CP: I’d say just – this is a non-quantitative, more of a qualitative look into it, but I’d say having the same group of investors times three or four by December 31st, that has seen how we’ve been able to handle this COVID issue, and how everything has gone for us and our relationship with our tenants. I think our goal by the end of the year would be that – this sounds weird to say but with COVID everything is different, but it’s quadrupling our investor base by the end of the year.

Because I feel that a number of syndicators/people taking your money/partners, real estate investors, are going to perhaps not make it to the end of the year. I am wishful, there is plenty to go around. So I am not wishing that happens to anybody but I think my main goal is to make sure everyone stays happy tenants and investors alike to the end of the year.

[0:30:03.7] CS: So I’ve got five different goals. COVID has made a big difference, one of them was travel for two months with my family. So we’ll see if that happens but one of them is a thousand units, and that also builds off of getting investors, etcetera but one of the biggest things is just being more present. I know that that is more personal item but with all of the work that we put through, and having a family of three, all children under five, being able to have that ability to be present, and that is a good goal.

[0:30:34.3] CP: For me as well.

[0:30:36.4] CS: It is very have because we are so business-driven, and we just want to do more. So that is my business coach telling me to work on that so.

[0:30:45.2] CP: And that is my wife who wanted me to do that.

[0:30:47.9] CS: Me too.

[0:30:48.4] KR: She is as important as the business coach.

[0:30:50.5] CP: You’re dang right.

[0:30:52.8] KR: What book should everybody be reading?

[0:30:55.2] CS: Just one huh?

[0:30:57.1] CP: Well, I have given this answer a number of times when somebody asked me a book. I like The Miracle Morning by Hal Elrod. You don’t necessarily have to follow his exact morning routine. I somewhat do basically, but I think it is just important to have a morning routine, and that really helped set up that mindset. So I think you can utilize that book whether you are a real estate syndicator or investor, a dentist, an electrician, or whatever. I think The Miracle Morning is huge.

[0:31:22.5] CS: The Compound Effect by Darren Hardy. That is a book I have listened to a dozen times, given away multiple times. The Compound Effect by Darren Hardy. Everybody should read that. It focuses on incremental gains and how every day, every minute can make an impact on your life either positively or negatively.

[0:31:40.7] KR: Sounds great. I haven’t read The Compound Effect but a I’m a big Miracle Morning fan.

[0:31:45.8] CS: Please listen to it tonight. Please listen to it tonight, seriously.

[0:31:48.0] CP: The entire thing tonight please.

[0:31:49.4] KR: I will start it when I get up early on my Miracle Morning routine.

[0:31:52.1] CP: Nice, well played.

[0:31:53.3] KR: That is something that I do. I have fallen of the wagon, gotten back on and things but –

[0:31:58.2] CS: We had our second child two months ago so I have certainly fallen off the early morning routine wagon. I am slowly getting back into it a bit.

[0:32:05.8] KR: Yeah, I experience the same thing with my third kid. Once you start getting some steady sleep, five to six hours at one time again, then you can start edging back in, yeah exactly. Those are great answers guys I think those are both fantastic books ,and the one I’ll have to check out. So the last question is, if you can only ask one question to a deal sponsor, thinking about it as a passive investor, what is that one question that somebody should ask you?

[0:32:33.3] CP: I think I would ask them – to give an example, of a time or an investment did not go the way they projected, or the way they wanted to, and I’d put an emphasis on the negative effect. Not like we projected 11%, we only get 10%. It was terrible. But I mean like it was a negative effect, how did you handle it and how did you make it right by your investors? I think that is a great question to ask because you can see, one, if you have just somebody who doesn’t tell the truth.

That they say, “Well those would never happen, us we’re perfect, we do everything absolutely amazing. Everything that we’ve projected has been above and beyond.” If they say that, I would run and then, two, you could see what kind of person you’re dealing with. If it is somebody who had to give some of their own, some of the benefits they would have received so that the investors succeeded. You start to look at somebody who knows that you are after the overall game.

And from myself perspective, the happier your investors are the longer they stay around, right? And the more they want to help out with you and then the more they trust you. So that is the number one question I would ask.

[0:33:36.0] CS: What would you do if COVID-19 happens again on a different scale? Say, we’ve already been set up for this perfect scenario, or what was your preparation for that? What did you do during that? I don’t know if that is the best question but it is also a very relevant question like, “Did you just stand still or did you actually put an action plan together? And if so, what was that action plan and how did you implement it?” Because, I mean, there could be floods. There could be tornadoes.

I mean we are not just talking about just evictions or anything like that – but somebody that’s prepared and somebody that went through this as an operator, we all quickly put together an action plan. We got an actual team and we dispersed into our team and to our residents as needed. So it is a question for now that I would ask.

[0:34:15.9] KR: It is likely relevant going forward, right? We don’t know that this never happens again. In all likelihood there is going to be some form of this again in some way. So I think it is very relevant, right? And what’s your preparedness and what were the lessons learned I think are big things, right? So how are you going to do it better next time because that is what’s important, right? Do it better every time.

[0:34:37.1] CS: Yes.

[0:34:37.6] KR: Cool. Thank you guys so much. Thanks Collin, thanks Chris. This has been an awesome conversation. I loved to hear about talking about the importance of the sponsor and how the deal due diligence really starts there. I loved hearing about your perspectives around asset management and property management and learning a little bit about the Omaha market. I wish you guys a ton of success in the future and thanks for being on the show.

[0:35:00.5] CS: Yeah, thank you.

[0:35:01.3] CP: Yeah, thanks for having us. I appreciate it.

[END OF INTERVIEW]

[0:35:03.6] KR: That was a fantastic interview with Chris and Collin. The guys wanted to let me know that they are offering a free report to our listeners. Just go to partneringchecklist.com and get your report on what questions to ask a sponsor or partner before investing with them. Again, just go to partneringchecklist.com and check that out. If you’d like to contact Chris and Collin, you could reach them at parkaveinvesting.com, and you can also find them on LinkedIn at Chris Pomerleau and at Collin Shwartz. I will include all of that in the shownotes so you could reference it later.

[OUTRO]

[0:35:34.5] KR: Thanks for listening to another great episode or 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 on Ritter on Real Estate. Now go out and invest like a pro.

[END]