From Building A Small Multifamily Projects To Syndication And Partnerships

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Brian Wagers is a multi-family investor He grew his family s portfolio to 500 units before moving on to syndication where he is now involved Been involved in over 150 million worth of apartment transactions With over 2 000 units through his experience as an owner and general partner He now seeks to invest and help other high-growth professionals and business owners put their money in a tax-advantaged risk-adjusted growth space that is multi-family Highlights 00 00 – 05 48 Opening Segment Brian Wagers started out in Northwest Arkansas and bought a single-family home before moving on to multi-family and building a portfolio of 500 units Brian partnered up with Elevate Commercial Investment group 05 48 – 11 38 How to Capital Raise Like a Pro Tips from a Veteran Brian discusses how he has succeeded in the capital raising space by being organized adding value and being competitive He talks about the challenges of the capital raising space including interest rates and cap rates He emphasizes the importance of underwriting for higher cap rates and staying ahead of the competition Transparency is Important in Communication 11 39 – 15 00 Investors Shift Focus to Classier Properties Their Company is keeping its cap rate at 2 or 3 annually depending on the location and asset class They are starting to look more seriously at A-class assets due to the compressed cap rates The market for A-class assets is appealing to institutional investors and provides less risk than buying a house Developers Look to Multifamily Properties as an Exit Strategy The interest rates for multifamily properties have decreased which has made them more affordable for buyers Multi-family properties are becoming more liquid which makes it easier for buyers to find and exit these properties Class A developers are looking for premiums in multifamily properties so buyers must find a value that they can add to the spa 15 06 – 17 36 Closing Segment Reach out to Brian Links Below Final Words Tweetable Quotes I think transparency is really important in communication and making sure we are updating our investors whether things go wrong or whatnot – Brian Wagers —————————————————————————– Connect with Brian on LinkedIn Facebook Instagram or email him at Brian elevatecig com or visit their website Elevatecig com Connect with me Facebook LinkedIn Like subscribe and leave us a review on Apple Podcasts Spotify Google Podcasts or whatever platform you listen on Thank you for tuning in Email me sam brickeninvestmentgroup com Want to read the full show notes of the episode Check it out below 00 00 00 Brian Wagers I think transparency is really important in communication Making sure we re updating our investors whether things go wrong or what not just when things are going right 00 00 09 Brian Wagers If things are slower than expected to let them know what s happening in the market there s a lot of people are worried about where the market is headed is it too hot interest rate changes So just keeping them updated with educational material on that I think is important 00 00 23 Brian Wagers Making sure you explain your underwriting I think Investors are getting more and more sophisticated 00 00 41 Sam Wilson Brian Wagers is a multi-family investor He grew his family s portfolio to 500 units before moving on to syndication where he is now involved Been involved in over 150 million worth of apartment transactions Brian welcome to the show 00 00 54 Brian Wagers Hey thanks Thanks Sam 00 00 56 Sam Wilson Good to be on here Hey man pleasure s mine 00 00 58 Sam Wilson There s three questions I ask every guest who comes in the show in 90 seconds or less Can you tell me where did you start Where are you now And how did you get 00 01 04 Brian Wagers Yeah So I got started in Northwest Arkansas About six years ago bought a single family home quickly diverted over to multi-family had a 12 unit scaled that into another 12 unit and a 20 unit combination of family money seller financing 00 01 20 Brian Wagers Got my hands dirty with a medium sized small multi-family projects built up a portfolio of about 450 to 500 units with just me as a lead sponsor me as the only general partner with friends and family And just as of recently partnered up with elevate commercial investment group where now I m a general partner on thousands of units 00 01 43 Sam Wilson That is really really cool I love that story of building building a portfolio of 500 units I m really curious once you had figured it out and once you had made it to that 500 unit mark which is a lot of units by the way if you re just a single general partner in 500 units that s a lot of units what was the impetus for joining another team and being a general partner with other people when you can really own a hundred percent of your own deals right now 00 02 09 Brian Wagers right 00 02 09 Brian Wagers Yeah So it was always in the back of my mind It was I don t know that it was a aha moment I think when I first got started in multi-family the people that I was learning from they were doing the syndications and they were doing the larger projects But for me to get started I really wanted to have a track record proof 00 02 25 Brian Wagers I have somewhat of a proof of concept My hands dirty and do you know all aspects of real estate So I ve always had multi-family syndications in the background of my head That s always thinking about different things but I knew I was gonna focus on multi-family Just I was open to doing it different ways so About two years ago I was scaling my portfolio and I was starting to make offers on some of the same deals that I had seen before they had come back full cycle So I knew I was playing in a somewhat smaller space so I knew that thought of going bigger was going to have to come soon 00 03 00 Brian Wagers So I I was really starting to plant some seeds with some other bigger time operators and looking at how I could provide value to them as I continued to grow So yeah I could keep a hundred percent and keep trying to do the smaller deals But I think for me it was one was the inventory there where I was coming across 00 03 19 Brian Wagers Some of these deals a couple times So that was kind of a good moment for me know knowing that I had to expand and it was okay giving up a portion of that in in order to really grow it s who not how you get there So I m firm believer in that partnering up with strategic people to get you to continue to grow 00 03 38 Brian Wagers And I didn t want I m always trying to be the best version of myself in all aspects So It s okay To relinquish some control in some areas And for me that was partnering up and giving up some of that 00 03 50 Sam Wilson partnership 00 03 50 Sam Wilson I like that idea there Brian that Hey I gotta get outta my own backyard 00 03 53 Sam Wilson I ve gotta go somewhere where somebody else has local market knowledge that you don t have to then rebuild You don t have to go get into a new market and say all right how do I figure out this market You got somebody else that you that s experienced in it I guess the question I would have if someone s already in a market and they ve already got people on the ground they re already running a very large operation 00 04 12 Sam Wilson What did you bring to the table Or how did you position it such that they would say to you Brian I d love to have you be part of the team What did that conversation look like Not that you re not a great guy and you don t have great skills Cause obviously you do cuz you ve taken down 500 units on your 00 04 25 Sam Wilson But even so it seems like they would already had all the seats on the bus taken care of 00 04 30 Brian Wagers Yeah So for me that was positioning myself to continue that track record So it wasn t just Hey I m gonna be a partner with your firm Like let s go it was a deal work with them on a kind of a JV Case by case basis 00 04 46 Brian Wagers So it wasn t just I was like Hey let me give me an opportunity to prove myself that s all I wanted was an opportunity to say I m going to do what I say I m going to do So that was raising on a couple deals So we raised on three or four deals before we actually agreed on a partnership 00 05 05 Brian Wagers And that was Asking for me I focus on the capital raising piece So that was going to be my focus So when I was reaching out I was reaching out to other operators and seeing if Hey is that something that you could bring on And for the operators that I m looking at I m looking at high I was looking at high growth operators 00 05 23 Brian Wagers So the two main Flows of multi-family real estate is deals and equity So that was My main pivot point was Hey where can I bring value And that was in the equity piece 00 05 36 Sam Wilson Right Right No that s that s really cool What and again I m sorry for digging in maybe on this so much but I think it s an important stepping stones for people who are in this business looking to scale looking to grow 00 05 48 Sam Wilson They want to go okay How have other people done So focused on capital raise Why not just cog What would what was the impetus again I m just trying to figure out again not that you re not a bad not a good guy but you know for the other at elevate was it elevate equity 00 06 03 Sam Wilson Was that was it two elevate commercial 00 06 04 Brian Wagers investment group Okay Yeah So right right Like so and additionally to just COGP in there was Okay What areas of their business did I find Like bringing I m just when I m just cog and I was just the capital but right Adding value outside of that during these other deals 00 06 22 Brian Wagers So jumping on calls trying to add value as as far as marketing goes or trying to help coordinate with other cogs that we may have on the deal take it saying okay I m just gonna raise my I m gonna commit to a million And I raise 1 2 million That s great That s a good track record but going beyond staying super organized throughout the whole deal maybe GI giving recaps of what everybody s doing 00 06 47 Brian Wagers Try to find little value add pieces and each part of the deal So going above and beyond I think was a main part there And starting to kind of ma I was starting to manage some of the other co razors before I was doing that kind of staying ahead of our next steps Hey what do we need to get something on the calendar 00 07 06 Brian Wagers Where are we at So I think just over delivering on those on that piece 00 07 11 Sam Wilson that s cool No I love that That s absolutely awesome Tell me you know what as you look at the portfolio I guess do you still own that 500 unit portfolio Is that still yours 00 07 21 Brian Wagers So it dwindled down to around like 250 – 300 units 00 07 25 Brian Wagers we re selling So I just we just sold 102 units today I sold 54 units earlier this year we did sell 82 units but we bought 72 more at the end of last year so it s right around 250 300 but we re looking at selling a lot of that A lot of my personal portfolio is 00 07 46 Sam Wilson that because it s just I mean the market is just red hot and you can just get top dollar for it 00 07 51 Sam Wilson Is that kind of your thinking there Or was there other things that that are driving those decisions 00 07 57 Brian Wagers Yeah there s several different factors but that being one of the main reasons the market is super hot where more and more people are looking at our market of Northwest Arkansas two we ve implemented a lot of the value add business plan 00 08 10 Brian Wagers Some of these deals we ve only held for two years three years but you know we ve got it to about where we wanna be And if we can get those offers that we expected to have in five years and two years Might as well especially with me focusing on these larger deals it just gives me more equity to put back alongside of the on on these larger deals 00 08 32 Brian Wagers So it s a huge plus having that I built up quite a bit of equity in these smaller deals too place in in the larger deals 00 08 40 Sam Wilson yeah that s a great point is that you can recycle that back into your own opportunities And develop more the limited partner side of things As you invest in your own opportunities than you could maybe on the active investor side 00 08 53 Sam Wilson Yeah Yeah 00 08 54 Brian Wagers So I m investing as an LP in all our deals too as well as helping on the GP portion 00 08 59 Sam Wilson Right right Oh that s cool And that certainly gives your investors a vote of confidence as As they 00 09 05 Brian Wagers yeah it s definitely an extra there s a lot of reassurances in multifamily but I think being able to invest alongside of your investors is super important to them 00 09 13 Brian Wagers But I wasn t always able to do that I had to that s one of the reasons I had to do those small and medium sized deals was to Really help one get my track record and prove the concept like I mentioned before but get that equity two be able to invest with them 00 09 28 Brian Wagers Yeah 00 09 28 Sam Wilson no I think that s awesome What are some challenges that you see in the capital raising space right now 00 09 36 Brian Wagers I think transparency is really important in communication Making sure we re updating our investors whether things go wrong or what not just when things are going right 00 09 45 Brian Wagers If things are slower than expected to let them know what s happening in the market there s a lot of people are worried about where the market is headed is it too hot interest rate changes So just keeping them updated with educational material on that I think is important 00 10 00 Brian Wagers Making sure you explain your underwriting I think Investors are getting more and more sophisticated So it s important to show them your underwriting your assumptions and make it clear on what the risks are and what the potential are 00 10 14 Sam Wilson Yeah absolutely What and let s talk about that if if we re standing on shaky ground or who everybody s been calling for a recession 00 10 22 Sam Wilson Lord who knows how many years Five seven years But I mean even so there are some things changing We continue especially in the multi-family market to see cap rates compress and now we re seeing rates go up What are you guys doing in this environment to remain competitive 00 10 36 Brian Wagers Yeah So underwriting more deals is a big thing 00 10 39 Brian Wagers Getting in front of more deals bringing on more boots on the ground partners that can find us deals that are local I are finding more and more important that people local in the market are sometimes getting first looks at deals So sometimes we ll bring on partners who find deals and their local market have relationships with commercial brokers 00 10 58 Brian Wagers And as far as the cap rates you want to make sure you re underwriting for higher cap rates That s huge And the interest rate changes now refinance events in year three We definitely wanna make sure we re not Keeping the same interest rate or a lower interest rate at what we re coming in at 00 11 15 Brian Wagers So we re making sure that interest rate is going up at year three And we re also accounting for a higher cap rate at sale in year five 00 11 23 Sam Wilson Yeah no that s that s absolutely important What do you think this is This is pure just subjective questioning We ve seen rent rates and I mean I own some multifamily properties and we ve just seen rents just I mean just up into the right 00 11 39 Sam Wilson All of us have what are you guys doing on your underwriting side for rent growth If any 00 11 44 Brian Wagers Yeah we re keeping it around 2 We try to keep it around 2 annually 3 depending on the location depending on the asset class That can vary from C class to A class So so we are looking more and more at a CLA the way with cap rates compressing we have started to look more and more at the a class opportunities 00 12 03 Brian Wagers Now five years ago I would tell you I ll never buy an a class I m a value add C class to B class property buyer but the way the market is we re starting to shift that outlook As far as With the way the cap rates are going but definitely And if it s a deep value add obviously we can increase those rents quite a bit more than just a 2 3 00 12 25 Brian Wagers But once sta once upon stabilization we re looking around 2 rent growth 00 12 30 Sam Wilson Gotcha No that s really interesting You say you re moving into a class Can you gimme some really Insight into why you re finding more value or even potentially less risk in an a class asset 00 12 41 Brian Wagers Yeah So the a class stuff that we re looking at one if you think about a class in general you kind of think less headaches it s a more appealing investment to more institutional equity that we are getting more and more of they see it as a more safe 00 12 58 Brian Wagers Whereas the way that the housing market is going it s becoming harder and harder to buy a house And so for young professionals to really fork up to buy a 400 500 000 house they may see it better to ride it out and live in a nice a class community with good amenities for a while before they can move into a permanent home 00 13 19 Brian Wagers So the factors the way the single family market Less maintenance on the front end so we can you can underwrite for that And more of a safe longer ride for some of our people are wanting to hold closer to the five year Five 00 13 33 Sam Wilson year terms Got it No that makes a lot of sense 00 13 36 Sam Wilson Yeah Offsetting some of that risk by buying newer nicer assets Maybe you don t have the maintenance but also like you said is that your institutional players tend to like that space So if you guys are looking for an exit and in three to five years your buyer pool probably exists at a much a much larger buyer pool on those types of assets 00 13 54 Sam Wilson Yeah 00 13 54 Brian Wagers exactly Right So you re always looking at who what your exit plan is and who you re going to ultimately sell it to So now we have a lot more capital chasing multi-family real estate a lot of these people in Covid that we re buying office space and retail space are now looking at multifamily 00 14 10 Brian Wagers A lot of these people that have Their money in the stocks and the money in other vehicles are more and more looking at the real estate market So I think that also helped offset some of its interest rates We re seeing it s becoming a more liquid space because like you said you have a lot more exit buyers for your properties 00 14 28 Sam Wilson right 00 14 29 Sam Wilson No that s really cool How do you overcome I would think though as you move into the a class space That your return profile just get gets diminished I mean is that a fair assumption Yeah it s definitely 00 14 42 Brian Wagers fair The A class developers builders they are looking for premiums 00 14 46 Brian Wagers So you really have to find it s like if it s an a class you have to find the value that you can add So hopefully we are when we re buying a class we re trying to buy from the developers So they ve got it to 90 lease up And they re just getting it leased up however they can 00 15 02 Brian Wagers So they re offering concessions they may be putting a little bit higher expenses in they just wanna get that property leased up So we re then able to get some of those expenses down a little bit And start pushing the rents up to more market rents versus to the rents that they were just to get people in the door to where they can eventually exit 00 15 20 Brian Wagers So finding that value in that space is really important cuz not every a class is an opportunity but we definitely like to buy From the developers from for that reason 00 15 30 Sam Wilson right No that s an interesting strategy Not one I hear a lot about but I think it has a lot of merit in that like you said you can improve their operations decrease expenses bring rents up to market 00 15 42 Sam Wilson And yet at the same time you re not having the risk of being the developer getting the project done So it s kind of like a it s a nice hybrid approach to development in its own Exactly 00 15 51 Brian Wagers You just have to be upfront with your investors they just and if they re buying into an opportunity like that the cash flow is going to be low especially on the front end 00 16 00 Brian Wagers Right But that s what you get when you are buying those kind of opportunities Right 00 16 04 Sam Wilson Right And as long as everybody understands the rules of the game then that is what it is So I think that s really cool Brian thank you for taking the time to jump on today and really tell us 00 16 13 Sam Wilson The the nuances of transitioning from owning 500 your own units to then just joining a team it s kind of like that idea of McDonald s it s like do you wanna own a hundred percent of your own deal or 1 of McDonald s Well I ll take 1 of McDonald s all day long So I love the the idea for you joining a bigger team and just owning the smaller piece of a bigger pie 00 16 33 Sam Wilson I think that s really cool and love just how you ve Brought value to that team and shared the way that you ve done that in order to make this all work So thanks again for sharing your insight today do appreciate it If our listeners wanna get in touch with you and learn more about you what is the best way to do that 00 16 49 Brian Wagers Yeah just you can email me Brian elevatecig com I m on Facebook Instagram LinkedIn message me on one of those If you re active in the space too just Brian Wagers Awesome 00 17 00 Track 1 Brian 00 17 01 Sam Wilson we ll be sure to include that all in the show notes And certainly thank you again for coming on 00 17 05 Brian Wagers Yeah absolutely 00 17 06 Brian Wagers Sam thanks for having me Sorry about the background noise today Hey 00 17 09 Sam Wilson man no sweat at all Appreciate it Click here to visit this podcast episode