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How to Scale Commercial Real Estate


Jun 25, 2022

 

Andrew Cushman is a former chemical engineer who found his entrepreneurial calling in real estate. He started out flipping single family properties in Southern California. In 2011 Andrew transitioned to multifamily acquisitions and has successfully syndicated and repositioned over 2,500 multifamily units.

 

Highlights:

 

[00:00 - 06:58] Find the deal, the money will come there is truth to that, but there's caveats

  • Andrew Cushman,  decides to quit being a chemical engineer in 2007 and has since flipped houses full time in Southern California.
  • Andrew and his wife decided to go into the apartment market and found the guy who had already done 18,800 units.
  • They syndicated their first deal in 2011 and have since done around 26,700 units.
  • One of the things they learned in their first process was that you need to have both capabilities - finding deals and raising money - simultaneously.

 

[06:58 - 13:55] How to Scale Your Business When the Deals Are Harder to Find

  • Andrew notes that the current market is much more competitive than in the past, with prices for properties increasing significantly.
  • It is now necessary to have a good relationship with a broker in order to find and buy properties.
  • There are many things that can be done to make brokers think of you first when looking for a property, such as being reliable and truthful, being consistent and predictable, and having a clear understanding of what you are looking for.

 

[13:55 - 20:59] How to Put Yourself in a position where your broker thinks of you first

  • Being top of mind. Not only because building an actual real relationship, but by knowing exactly what you want the brokers would exactly know what you want
  • They think of you first when that thing shows up and that applies whether you're looking for any Real Estate Assets. 



[21:00- 22:27] Closing Segment

Reach out to Andrew 

  • Links Below
  • Final Words



Tweetable Quotes

 

“It's about being top of mind. Not only because you've built an actual real relationship, but by knowing exactly what you want so that they know exactly what you want.” - Andrew Cushman

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Connect with Andrew Cushman by visiting their website at: https://www.vpacq.com/





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Want to read the full show notes of the episode? Check it out below:


[00:00:00] Andrew Cushman: Find the deal, the money will come there is truth to that, but there's caveats, right. The assumption there is that you've built an investor pool, or if you haven't. The assumption is, well, you're gonna take it to somebody who has, and now you're going to be giving away either control or equity or something like that. Andrew Kushman has syndicated over 2,600 value out apartment units in the last 10 years. Andrew, welcome to the show. Hi, good to be here, Sam. Hey, the pleasure's mine. Thanks for coming on today. 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?

[00:00:47] Sam Wilson: Where are you now? And how did you get there? Is that 90 seconds 

[00:00:50] Andrew Cushman: for each or 90 seconds? Total, total. Ooh, geez. All right. well, I started back in 1977. My dad had a twinkle in his eye and, fast forward a little bit. I was a chemical engineer. Quit doing that in 2007 to flip houses, full time in Southern California.

[00:01:05] Andrew Cushman: That was great, but it was the equivalent of another full-time job. Right. And so we want my wife and I, my wife's a business partner. We wanted to move into something that was more scalable and also provided more recurring income and had the higher probability of building lasting wealth. And so in 2010 we said, Hey, everyone just got foreclosed on.

[00:01:26] Andrew Cushman: And they, so that means that no one can either can buy a house or wants to buy a house. Cuz they're all scared of it. We had a huge recession, which means we're going to be having probably a long expansion so that rentals should probably do well. So we went and found the guy who'd already done.

[00:01:39] Andrew Cushman: 18, 800 units hired him as a mentor. Did our first syndication in 2011, it was 92 units on the other side of the country in Macon, Georgia. And. since then, I've been doing it full time and we're somewhere around 26, 2700 units. So 

[00:01:53] Sam Wilson: that is that's really, really cool. I love just you found something you liked and you stuck with it.

[00:01:58] Sam Wilson: Was there ever any temptation along the way to look at other asset classes? 

[00:02:02] Andrew Cushman: No, not really. I'm a big believer and there's different theories on this when you're building businesses about having like, multiple businesses and diversification. And for us, we found the best thing is try to be really good at one thing.

[00:02:15] Andrew Cushman: And that's what we're striving to do. I know guys that do multi-family and industrial and self storage and bunch of other things, and those are great investments and they've done really well. There's nothing wrong with 'em at all. Right. I. Feel like we know and understand multi-family and I feel like we're getting pretty good at it.

[00:02:31] Andrew Cushman: And we wanna just get that much better. So stay focused, 

[00:02:34] Sam Wilson: right? No, I think that's really great. I guess, uh, talk to us about this process. You said, Hey, we're gonna go buy our first 92 units in 2011 syndication. Really? We're probably wasn't even a buzz word like it is today.

[00:02:48] Sam Wilson: How did you guys take those down? 

[00:02:50] Andrew Cushman: That was a struggle. That first deal is a. Big part of why my hair is as gray as it is. and you're right. Syndication. Wasn't a buzzword. There was no one, Dave Al was like the one guy out there teaching people about apartments and that was it.

[00:03:03] Andrew Cushman: There was no one else. There was no billboards in Dallas about how to become an apartment syndicator and So, we had, like, I, like I mentioned, we had started flipping houses in Southern California. And so we had some private investors that, if we bought a $400,000 condo I'd go to invest and be like, Hey, give us the money for this.

[00:03:21] Andrew Cushman: We'll give you an interest rate and then we'd flip it and do all that. Right. And so we went into the, apart into the apartment world so that first one we bought 92 units for 1.2 million out in Macon, Georgia. And for anyone who's looked at a deal today, you're saying, well, wait, hold on, Andrew. No. You said something wrong. You said 1.2 million for 92 units. No, that was the price.

[00:03:41] Andrew Cushman: I think as, again, works out to roughly 7,500 a unit that's. That's what the market was like in 2011, right? It's either really easy to get money and really hard to get deals, which is kind of today, or it's really easy to get deals and hard to get the funding. that's what it was in 2011, the market was at a bottom lots of distress and everyone was scared to death of real estate and no one wanted to touch it.

[00:04:07] Andrew Cushman: And there was no liquidity and you couldn't get loans on a lot of this stuff. So the pricing reflected that so 1.2 million, and that included the rehab, the actual purchase price was 6 99. And the total that we needed is 1.2. And we had our mentor uh, we were a bit naive in terms of how easy it would be to raise $1.2 million.

[00:04:25] Andrew Cushman: Back then it took us six months just, one investor at a time, 10,000 here, 50,000 there. And actually at the end part of how. Got there is we got the seller to carry a $200,000 note. So that we could at least get to closing and get it finished. And then we actually raised the last few pieces over the next few months after closing.

[00:04:46] Andrew Cushman: So it was, a brutal process that first one. But wouldn't be here if we hadn't done it so glad we did. What 

[00:04:52] Sam Wilson: were some things you feel like you learned in that first process that you could help other people either, emulate or avoid. 

[00:05:00] Andrew Cushman: one of the big questions that you hear is, oh, well, do I get the deal first?

[00:05:03] Andrew Cushman: Or do I get the money first? It's both work on your deal, finding capabilities and your money raising capabilities simultaneously. Don't wait until you have a deal. To then start talking to your investors, to potential investors. Then also don't go and get a big pool of investors, all excited about investing with you.

[00:05:24] Andrew Cushman: If you don't have anything to ever show them. Right. So it's a simultaneous thing. And if you're like, well, but I haven't done a deal, so what do I talk to investors? Then? What you do is you look at deals, you analyze 'em, you put 'em together, you put together like a little package.

[00:05:37] Andrew Cushman: And then when you're talking to people, say, yeah, these are the kind of deals I'm looking. Right. And you're not gonna, you're not gonna mislead people and say, oh, I'm buying this deal or anything like that. You're gonna say, you know what? I offered on this one. We didn't get it. But if we had, oh, it would've been a great deal.

[00:05:52] Andrew Cushman: And I'm looking at lots more like it. Right. So be transparent and honest about it, but that's what you do while you're looking at deals. Then when you have one. Hey Sam, good news. Remember that deal that we looked at a month ago. I showed you that I didn't get, that was really good.

[00:06:05] Andrew Cushman: I got another one just like it. And this time they accepted my offer. Right. So you build both at the same time. Right? Right. 

[00:06:12] Sam Wilson: Yeah. I think that's that's really valuable cuz that is, I mean you hear the find the deal, the money will come, which is nonsense. But I also like the idea that you said that you have to build, you have to find the deals as well, because it is, I've been in that season before where you've got loads of investors lined up and you've got nothing to give 'em and it's like, oh, well, hold tight while we go find something else, it's gonna take, if it's 90 days before I bring a deal to you, a lot of those people have already moved.

[00:06:36] Andrew Cushman: Yeah. And, what you mentioned a minute ago, you hear that a lot. Find the deal, the money will come there is truth to that, but there's caveats, right. The assumption there is that you've built an investor pool, or if you haven't. The assumption is, well, you're gonna take it to somebody who has, and now you're going to be giving away either control or equity or something like that.

[00:06:58] Andrew Cushman: Right. So yeah, you're, right. It's not just to find the deal. It's not like, field of dreams, right. Where everyone just shows up and everything's happy and fun. There's costs and caveats to that. So, these days the deal is the tougher part of it but. You want to scale both at the same time, either on your own or by partnering with the right person.

[00:07:15] Sam Wilson: Absolutely things have changed. You're no longer buying 90, what'd you say? 92 units or 96 units for 6,000 bucks a door 

[00:07:24] Andrew Cushman: yeah. long gone. Well, we will not see that again. 

[00:07:28] Sam Wilson: I don't think so. I don't think so. I think one we've rented too much money to see that. And I just think it's things are very different right now.

[00:07:34] Sam Wilson: It's a very competitive market and you guys are paying a lot more, probably adding a zero plus to a lot of what you're buying. If not, gosh, the zero times one and a half, probably how are you guys finding deals in a competitive market? So 

[00:07:46] Andrew Cushman: , it's kind of gotten a little better now, but for the last couple of years, we're averaging having to look at anywhere from one to 200 deals just to buy one And when I say, look at that means, at least put 'em through a screening process and, check things like median income and population growth and all of that.

[00:08:02] Andrew Cushman: All of our deals, I don't, everything we've bought. And at least the last six years has been off market through a broker, meaning. It's a broker that we have a relationship with, and that knows what kind of markets and what kind of properties that we like to buy in. And that knows that if they connect us with the seller or owner, that they've built a relationship with that, we're not gonna make them look bad.

[00:08:29] Andrew Cushman: But in reality, we're gonna have a high probability of being able to put a deal together. And then if we do actually get it closed. So it's just been nurturing those relationships, now over 11 years. But you know, candidly, we've done, we've bought three off market deals from one broker.

[00:08:46] Andrew Cushman: In the last 12 months that I've just met for the first time, like 18 months ago. Right. So please, I just want, then the reason I say that is I don't want everyone to hear, oh my gosh, I gotta build relationships for 10 years before I get a deal. That's that's not true. It definitely, it benefits you over time as you persist with it.

[00:09:02] Andrew Cushman: But we're finding. The best deals, cuz the broker , , I get direct calls all the time from people everyone's trying. Everyone tries to circumvent the brokers thinking they're gonna get a better deal. You might get one or two. But the brokers, they spend their lives. Like all they do is.

[00:09:19] Andrew Cushman: Hunt down these owners and build relationships with them. And they, good, the good ones know every property. They know the state of every seller, what their intentions are. And the most effective way to to do a large number of deals is to leverage the relationships that they've built.

[00:09:36] Andrew Cushman: Right. Right. One good broker knows every property in your city and can save you and them a whole lot of time. Now. That applies, I'd say, especially for 50 units on up when you start getting to smaller stuff I'd say between 10 and 50 units, that's where if you want to go direct to seller, it's a, I'd say it's a little bit more fragmented and a little bit more mom and pop, and there's probably some more opportunity for deals in that smaller space.

[00:10:04] Andrew Cushman: But as you move up good brokers and good broker relationships really is the way to, to scale again, not saying you can't grab a great dealer to the other way, but for any kind of real volume you want those relationships. 

[00:10:17] Sam Wilson: Yeah. And it's certainly, like you said they devote their lives to this.

[00:10:21] Sam Wilson: And this is really, I mean, the brokers control the market especially when you get into the bigger assets. So that's, you might as well just go straight to the store, save yourself some time. I mean, it takes an incredible amount of time to build the database. For an entire city, let alone, all the outreach, the cold calling, the whatever your method is to get that far.

[00:10:38] Sam Wilson: So you might as well just go straight to the source and go to the brokers on those deals and nurture those relationships. Are there things other than being known as someone that can get a deal done and get it closed that you guys do to make sure that brokers think of you first? 

[00:10:52] Andrew Cushman: There's a couple things. One is, there's the I'm, I'm sure everyone's heard this before, but basically, you know how you do the little things is how you do everything, right?

[00:11:02] Andrew Cushman: So be consistent and reliable and truthful in all of the little things. Right? So if you say, if you tell a broker they send you a property. and regardless of whether it's good or you like it or whatever, and you say, oh cool. they send you a property on Monday. You say, Hey, I'll get back to you on Wednesday.

[00:11:20] Andrew Cushman: Get back to 'em on Wednesday. Right. And maybe, life happened and you haven't had a chance to look at the property on Wednesday, send him an email, say, oh, Hey, thanks for sending this. I really sorry. I wasn't able to get to it. Like I thought I would, I'm gonna look at it tonight. I'll be in touch tomorrow.

[00:11:34] Andrew Cushman: Right. It's just feedback. another example is when you look at a property and this is me, most of them, and it doesn't work. Don't just delete it and leave the, leave. The guy hanging and I've heard I've had brokers tell us this over and over again.

[00:11:46] Andrew Cushman: They appreciate being told. No, because their job is to find buyers. And if you have all these buyers that have just not answered. That means it's a task for them to follow up with you. And now you're becoming a pain in the butt. Whereas if you just reply, say, Hey, you know what, Sam, thanks for sending me this property.

[00:12:03] Andrew Cushman: Looks like a good asset, but it does not quite a fit for us because it's a little too old or we don't like the submarket. But again, thanks for the chance to look at it and looking forward to the next one or something like that. Tell 'em no. So they can take you off the list and they're not looking for you to say yes to everything.

[00:12:17] Andrew Cushman: They're just looking, are you interested or not? So they can do their service to the owner or the seller. So just little bits of follow up go a long way. And then the other, another thing. And that you can do again without having to have, huge track record or anything like that is in a sense.

[00:12:35] Andrew Cushman: Train them to know exactly what you're looking for. Right. And the assumption there is that, you know exactly what you're looking for. Right. Right. So, for us, it's we want, ideally properties built between 1990 and 2010, that are 200 units in secondary and tertiary markets in the Southeast United States.

[00:12:56] Andrew Cushman: And then we have, certain things about population growth and median income and crime and all that. Right. And so the more conversations that we have with brokers about, Hey, that's what we're looking for. And so someday when, topnotch broker, Sam Wilson is out there having lunch with the seller and the seller goes, you know what, actually, yeah, I think I'm considering actually selling this thing.

[00:13:18] Andrew Cushman: Sam goes, oh, you know what. You need to talk to Andrew and his group and cuz they could be the perfect buyer for this. That's how that off market deal happens that no one gets to see. Right. And like literally we bought, we closed 200 units, 173 units in March. That's exactly what happened. The broker was having breakfast with somebody who said actually yeah, these guys made me an offer and I think I'm gonna take it.

[00:13:43] Andrew Cushman: And he said no, hold on. Let me hit, let me call one guy he actually texted me an hour later. I was over there, met with that seller may have been offered the next morning and we B closed on that property in March. Right? Wow. So it's about being top of mind. Not only because you've built a, an actual, real relationship, but by knowing exactly what you want so that they know exactly what you want, so they can go, oh, so they think of you first when that thing shows up and that applies whether you're looking at industrial or self storage or multi-family, or even, Duplexes or, I mean, fourplexes, that principle applies across the board.

[00:14:22] Sam Wilson: I love that, that is some very tangible steps and advice that you've given there on just managing broker relationships and telling us how really we should be interacting with the brokers Devo, put yourself in a position where they think of you first. Are there things that you guys are doing outside of competing on price?

[00:14:43] Sam Wilson: That makes your offers get accepted over somebody else

[00:14:45] Andrew Cushman: yeah, we've never won on price. If I do I get nervous or I would, if we did, I would get nervous. So, how we win without winning on price. Number one is kind of what we're just talking about is we. Just don't get into bidding situations where we're up against 20 other, people and all this kind of things.

[00:15:03] Andrew Cushman: So, but whether you're doing it off market and that's, I should mention too, just cause it's off market doesn't mean there's zero competition. Right, There's other guys just like you who are doing the same thing. And so there may be two or three or four other offers, even though it's not listed or marketed.

[00:15:16] Andrew Cushman: So other ways to stand out, number one, larger deposits. If most people are giving a $50,000 deposit, maybe you put a hundred or 75 the other, another thing you can do and getting kind of relating to the deposit is hard money, which basically means, once, once you make that deposit, it's not refundable.

[00:15:36] Andrew Cushman: Like you have to be certain. That you're you wanna close on that property? Right? So you can't come back 30 days later and be like, ah, you know what? The roofs don't look that good. And ah, this don't, we don't wanna buy this well. Okay, great. But they're keeping your deposit, right? So that hard money gives the seller comfort that you really are gonna close in.

[00:15:57] Andrew Cushman: You're committed to closing. Another thing we'll do is we provide just a really short, like three sentence. Bio at the bottom of our letter of intent, which is our offer that this kinda says who we are. And, we adjust that to the property that we're buying. So for example, if we're buying a property in the Florida panhandle, we might say, oh yeah, we've done 2,600 units, blah, blah, blah, including recently acquiring and you know, units in.

[00:16:25] Andrew Cushman: Like, oh, these guys just bought units here. Oh, well, okay. Well they, they're in the market. They understand they close, they can perform et cetera. We'll also provide, references, meaning other brokers that we've closed deals with loan brokers that we've closed loans with.

[00:16:39] Andrew Cushman: So that we can, say so seller can be like, oh, okay, well, these guys just closed the loan. Flow loan with this company, or, and actually, maybe for example, we just, so we just were in the process of selling two properties and the guy that we accepted his offer, he did that. And when I looked at his references, I personally knew the two brokers he put as references.

[00:17:03] Andrew Cushman: I'm like, oh, alright. I can call these guys and talk to him. And if he's working with these two brokers, then I know he's a legitimate guy. Right. Because I know those brokers. Right, right. So, just that, that extra level of, did that one thing win him the deal? No, but it was an extra comfort point, like, oh, alright, well, he's working with these guys.

[00:17:20] Andrew Cushman: I've worked with these guys. He's, clearly knows some people and has been doing things. So tho those are some of the ways that that you can do it also have your financing arranged in advance as much as possible. 

[00:17:32] Sam Wilson: That is some excellent points. I appreciate that. That like you said, there are, larger deposits.

[00:17:38] Sam Wilson: You can go hard on your money early on. You have a short bio and a letter of intent. You can have references to other deals you've done in other brokers, as well as, talking, even in that short bio talking about. Putting maybe the deals that you've closed nearby, the ones that you're looking at there.

[00:17:52] Sam Wilson: I think those are those some excellent excellent things to really keep in mind as we put offers out there. Tell me about this. You are going on a pretty big adventure here. I think sometime this year. Tell us a little bit about what you're doing. It sounds a little bit risk. To uh, guys like me, but tell us about that, why you're doing it and then how you view that from a risk adjusted perspective and then how you relate that back to multifamily 

[00:18:19] Andrew Cushman: Let's see. Well, yeah I love to go. I love to do back country skiing. Which means a couple, I've got a part, one particular friend. I do it with a lot, but I go, I never do it alone, but what that means is instead of going to a ski area and buying a Lyft ticket, we just drive around the Western us.

[00:18:35] Andrew Cushman: And find really cool looking mountains and the Tetons or the seas or wherever and say, Hey, it'd be fun to ski that. So let's climb it. And then we'll ski down. And we've been doing that for 20 something years around the Western us. We've done it in Alaska. And we are, going to go do that in Antarctica.

[00:18:53] Andrew Cushman: Yeah. I spend some time on the Antarctic peninsula climbing mountains and skiing. 'em down there. No, and we're not doing it alone. It's not just me and my buddy. Like, Hey, let's figure out how to get to Antarctica and, die in a CVOs or something. Right. We are going with people who actually know what they're doing but yeah, really looking forward to doing that.

[00:19:08] Andrew Cushman: And, it is exciting and, stepping a little bit outside the comfort zone. I don't know how I'm gonna. Get across the Drake passage without throwing up. Cuz I get Sea Sick of not looking forward to that. but yeah, I guess relating back to multi-family one it can be pretty scary to make a jump from doing, fourplexes or 10 units to a hundred or 200.

[00:19:27] Andrew Cushman: So it's a bit of a jump to go from climbing a mountain, two hours from my house to. Go into the literal ends of the earth to climb climb stuff that you're days away from any kind of assistance. And then actually now I think about it might be a business trip because the other people there might make for good investors.

[00:19:45] Andrew Cushman: So 

[00:19:45] Sam Wilson: that's absolutely awesome. What are some other than going along with people that know what they're doing? What are some other things you're doing on this trip to kind of mitigate risk? 

[00:19:53] Andrew Cushman: Preparation. I mean, we, I try to be fairly physically fit as just in general, always have, but we're, making it in an extra effort to be in as.

[00:20:04] Andrew Cushman: Fine tuned condition as possible before we go down there. So, being a healthy condition as possible also I'm having all my gear tuned up and going through it, making sure it's in, in good shape. So we don't have any gear failures out in the middle of nowhere. And also relating to business.

[00:20:22] Andrew Cushman: I've been really fortunate. This is something I did too late, but three years ago I finally started building a bigger team around me in our business. And we've had, our success has multiplied because we've been fortunate. We've got some amazing people that have joined us. So this is also a good forcing factor for, making sure.

[00:20:41] Andrew Cushman: If Andrew's off the grid for 10 days or whatever that everything runs smoothly without me. So this has been a good catalyst to, to push forward on that because one of my flaws is a lot of times it's just like, it's just quicker for me to just get something done, right. Instead of take the time to build the system.

[00:20:59] Andrew Cushman: So somebody else can do it. And many times there's other people who would love to do it and want to do it right then mom's like, well, it's just faster. If I just handle this well, Maybe at the moment is faster, but not in the long term. 

[00:21:09] Sam Wilson: That. Yeah. I heard building systems is never fun. Like, I think it's fun to get something checked off the list, but it's also not scalable so without building systems, there's no scale.

[00:21:20] Sam Wilson: So that's that's absolutely awesome, Andrew, thanks for the time to come on the show today. Best of luck on your trip and Antarctica. I can't wait to follow along and see how that trip shakes out. That sounds absolutely amazing. You've given us some awesome things to think about in immediate ways that we can,

[00:21:33] Sam Wilson: some of these very hands on approaches in our business. So appreciate taking the time to come on today. If our listeners wanna get in touch with you or learn more about you, what is the best way to do that? 

[00:21:42] Andrew Cushman: Yeah, just Google vantage point acquisitions. The website is VP acq.com.

[00:21:48] Andrew Cushman: There's a bunch of tabs on there for how to get connected with us. I mean, I'm on bigger pockets in LinkedIn and all that stuff, but just going to the website's probably the best way. Awesome. 

[00:21:58] Sam Wilson: Andrew, thank you for your time today. Certainly 

[00:22:00] Andrew Cushman: appreciate it. All right. Take care, Sam. Good to talk with you.