May 30, 2022
In this episode, get inspired as our guest Dave Allred, managing partner at Axia Partners, talks about his journey from starting out in a small town in Utah to becoming a successful real estate investor. He shares how he overcame obstacles such as failing at sales during his first summer of work and turning things around by focusing on leadership and adding value for his employees. With 1000 rental properties under his belt, Dave discusses achieving financial freedom and helping other people through experiential investing.
[00:01 - 05:45] Beating Yesterday and Striving for the Next Level
- Dave shares his tough work experience
- Creating goals as a real estate investors and taking action
- From failing as an employee to finding success as a leader
- Learning how to become comfortable with being uncomfortable
[05:46 - 11:26] Surrounding Yourself With the Best People
- Why they partner with more experienced operators
- Building a team organically
- Utilizing social media to find talent
[11:27 - 18:48] Creating Maximum Value
- Overdelivering and underpromising when underwriting
- Value-add really helps insulate against a downturn
- How to mitigate downside risks
- Investing in a fund vs going directly to sponsors
- Proving ROE (return on experience)
- Experiences are the new economy
[18:49 - 19:42] Closing Segment
- Reach out to Dave!
- Links Below
- Final Words
Tweetable Quotes
“As long as you're always beating yesterday and strive for that next level, you're always going to have that personal development, progression, increasing your network, your net worth, and people you're sharing yourself with.” - Dave Allred
“Progression happens through hardship and I've tried it. I made a goal to live my life always trying to be on the fringe of my comfort zone” - Dave Allred
“When you know exactly what you want to build and there's a lot of intentionality behind it, I've just found that things just come together.” - Dave Allred
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Connect with Dave! Follow him on Instagram or email him directly at dave@axiapartners.com. Visit the Axia Partners website if you want to know more about their funds.
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Want to read the full show notes of the episode? Check it out below:
[00:00:00] Dave Allred: One of my goals and lifestyle has just been to do bigger deals than yesterday, right? It's like beat yesterday. I feel like as long as you're always beating yesterday and strive for that next level, you're always gonna have that personal development, progression, increasing your network, your net worth and people you're sharing yourself with. And so it's kind of a personal model throughout my life,
[00:00:15] Sam Wilson: Dave Allred is the managing partner at Axia Partners real estate fund. Dave, welcome to the show.
[00:00:33] Dave Allred: Thanks, Sam. Good to be here, brother.
[00:00:35] Sam Wilson: Pleasure's mine, man. Three questions I ask every guest who comes to the show: in 90 seconds or less, where did you start? Where are you now? How did you get there?
[00:00:41] Dave Allred: I started in a small town here in Utah called Manti. I was going to college, got to go out and knock doors for a company called the Vivint Smart Home. Now in Chicago, went out for four months, went really, really poorly, failed miserably at it. Luckily, halfway through the summer, I kind of turned it around and was able to stick through it and finish out the summer made $31,000, you know, more than my parents ever made.
[00:01:05] Dave Allred: It was game changer for me and came back next year to sales manager and started at 17 year leadership career over at Vivint Smart, doing solar. Really grateful for that, it was awesome. We're for the 121 sales teams across 41 different states, both those companies ended up going public for multi-billion-dollar valuation.
[00:01:23] Dave Allred: And all along the way, I was just really focused on financial freedom, achieving true financial freedom, right? Enough passive income to pay for my family's costs of living. I realized that real estate was the best way to create that as well as generational wealth. And so at age 30, I just started focusing on how to take that active income from doing it ourselves.
[00:01:42] Dave Allred: Plug it into, you know, reoccurring passive income through real estate. So age 30, I committed to getting 40 rental properties by age 40, because that gave me enough financial, you know, enough passive income to have that financial freedom. Committed to it, reverse engineered it, put together the blueprint, went to work on that, hit that when I was 36. Increased that goal to ownership in a thousand rental properties by age 40, hit that goal when I was 40. From there, I just started getting a lot of syndications multifamily, loved that space. And then from there, the next step was to start a real estate fund. So we launched the Axia Partners real estate fund about one year ago, $20 million equity raise. We're oversubscribed about two months and that's been received very, very well.
[00:02:24] Dave Allred: And so we're now launching fund two, $40 million equity raise, launched that two weeks ago and the funds alpha it's just focused on recession- resilient passive income. So we go multifamily apartments, self-storage and RV parks. It's all focused on mitigating downside risk, hedging that while still creating strong yield for our partners.
[00:02:41] Dave Allred: And so one of my goals and lifestyle has just been to do bigger deals than yesterday, right? It's like beat yesterday. I feel like as long as you're always beating yesterday and strive for that next level, you're always gonna have that personal development, progression, increasing your network, your net worth and people you're sharing yourself with.
[00:02:55] Dave Allred: And so it's kind of a personal model throughout my life.
[00:02:58] Sam Wilson: Man, I love that. That's really impressive. Tell me about the turnaround in the middle of that summer for Vivint. What did you do from sucking as a salesman to having a great rest of the summer?
[00:03:13] Dave Allred: Cool. Yeah. So when I say sucking, I mean, I was really sucking. Like I'd always been pretty successful at wherever I put my mind to.
[00:03:19] Dave Allred: And my first week I sold one account. It's actually a sub 600 credit score, which I shouldn't have installed in the first place. Then he come rip it out a few weeks later and chargeback to our commission. So that's my first week. And my first month was six installs midway through the four months selling season.
[00:03:34] Dave Allred: I think I was sitting around like 21 accounts, which is not great, 80% of our team and quit. And what changed for me though was one of the DPS came out and gave a little presentation on how, if you can, anybody that does a hundred accounts may qualify to be a sales leader the next year. And they can go and recruit a team.
[00:03:50] Dave Allred: They can work on their leadership skills and help create something bigger than just themselves. And that really, something sparked there for me. I was like, you know what? This could become more of a career instead of just this one-time summer, you know, experiment. And so that's really what switched for me.
[00:04:04] Dave Allred: And then where it really got fun was more focusing on leadership, right? The next year, the sales manager, and then the top sales team of the company, and really just focused on how to create more value for my employees. And I really learned to embrace, you know, Zig Ziglar's my favorite quote, which is you can have everything you want in life, if you help other people get what they want. And I realized that if I can create maximum value for these guys, you know, it always reciprocates back. And I really live by that. You know, even now in the real estate game, we have, you know, 400 plus investment partners and it's all about just creating value. Like how do we create maximum value for employees? In fact, the name Axia Partners, our real estate fund is Axia is Greek for to create value.
[00:04:42] Dave Allred: And so it was just really that focus. Long story short, it was an opportunity to become a leader and do something bigger than myself and the earning opportunity. And last thing there, Sam is, you know, luckily from a young age, I think I, somehow I developed this understanding that, you know, if we do hard things, we're going to be coming out better by doing that.
[00:05:01] Dave Allred: And progression comes from hardship. So Sam, what I learned a long time ago was progression happens through hardship and I've tried it. I made a goal to live my life always trying to be on the fringe of my comfort zone. I feel like that's where I get the most progression, right? And not just progression, like feel the most fulfilled personally is why I'm making that, for progress. And so I realized early on that if I can become comfortable being uncomfortable, that's a very valuable skillset. And I think that also correlates into real estate. A lot of times the best deal, especially in a competitive market like we're in today, it's finding deals that have a little hair on it, right?
[00:05:36] Dave Allred: It's a little uncomfortable. By being willing to take on that challenge, we can usually create stronger yields and learn a lot more through that process.
[00:05:44] Sam Wilson: One of the ways that we talked about off-air that you kind of scaled initially was by partnering with much more experienced operators. Is that still kind of your business model today inside of the fund or you guys building out teams that are siloed inside each of these asset class?
[00:06:01] Dave Allred: 100%. So one of my mentors back in business, really my career said, Hey, Dave, anytime you venture into a new space or take on a new, any space, we'll say always identify the top one to 2% of people in that space and try to get proximity or partnerships with them. And what that does is not only will you have the best in class, you know, partners, but you didn't have proximity to their network, right, to their CPAs, to their attorneys, to their investors, et cetera. And so, absolutely, yes, I think that's been actually one of the best ways that's helped me to scale my portfolio so quickly over the years is by having proximity and partnerships with the very best people in the business. You know, when I first got started as a syndicator, I went to Joe Fairless, you know, went straight to the best guy that I knew in the space and partnered with Joe and same thing.
[00:06:44] Dave Allred: And, in Axia, you know, I partnered with our very best fund manager I could find, our best underwriter you get from Goldman Sachs and build up this all-star team here. And then looking at scaling Axia, instead of just doing one fund and then another fund, we actually changed it where we now have strategic partnerships with some of the best people in the country is specialized in, for example, in industrial.
[00:07:05] Dave Allred: So we'll launch an industrial fund with one of the top guys in that space. Here in Utah, the number one commercial broker teamed up with us to deal with a Utah fund, specifically focused on the Utah market. And so getting the very, very best people involved, not only does that make it more fun. But also it just creates a lot of peace of mind knowing that we have, we're not going to miss anything.
[00:07:25] Dave Allred: And what I learned a long time ago in real estate, Sam, is the biggest risk in real estate in my opinion is simply not knowing what you don't know, right? It's missing one step in the process or something else and, you know, a pothole, or you hit a speed bump and it's hard to recover from that sometimes.
[00:07:39] Sam Wilson: Yeah. And it's the details matter in this space, they matter very much, and it is, they have a leveraged effect, both ways where either the small details can make you a lot of money and they can also lose you a lot of money. So I think one of the things you mentioned there was bringing on somebody from Goldman Sachs on the underwriting side. I guess when administering a fund, so who are some of the key people on your team that you found that you needed to add in order to do such large deals? Talk to us about the team you've had to build around the fund.
[00:08:08] Dave Allred: Good question because previously, the fund's always a solopreneur, it was always Dave Allred doing the entire syndication, the entire process. Frankly, it was actually a concern to me going into a partnership where I'm going to have multiple GPS and a whole entire team and not being able control the whole process.
[00:08:24] Dave Allred: I'm a little bit OCD. I'm kind of a perfectionist if you will. But in hindsight, a year later, it was the best thing I've ever done. You know, you can only go so fast by yourself. And so having a team really does help you to scale much quicker. The key roles for a fund would be your fund manager, I have a director of investors and that's the director of investments, which is our underwriter.
[00:08:43] Dave Allred: And now we're building that out to have a full-time underwriter underneath them, and then also an investor relations role underneath him. And then we have a financial manager for the fund. There's all the, you know, the books, annual audits, K1s, all that for us. And then a director of marketing. And that's one of the things actually very, very important as you are marketing to investors, right?
[00:09:08] Dave Allred: So your pitch decks, your websites, even the value-add business plans for asset, how we're going to repurpose or rebrand the assets themselves. So those are the three primary ones. From there, you want to have an admin, maybe a controller in place. I think in investor relations is important role as well as you scale.
[00:09:26] Sam Wilson: Yeah. Those are a lot of people. Yeah. Going from solopreneur to adding, gosh, I'm counting up what, at least six to eight people that you're adding to the team. That's quite a change in direction there. How have you gone about, and I want to ask a few questions that are specific to each of these roles, but how have you gone about finding the talent that is ready and willing to join you and your team? Like how have you built that out?
[00:09:46] Dave Allred: Great question. So I've got 3, 400 plus investors right now. And I've never paid for a lead, I've never paid for marketing. It's always just been organic, right? It's people that I know in my social network. And on that note, I mean, I know people are like, well, Dave, doesn't that stress you out, you know, bringing in your brother or your family or friends and these deals, I would say absolutely. It's a heavy responsibility.
[00:10:05] Dave Allred: But at the same time, why would I not want them to come in when they're people I care about? If I truly believe in real estate, I actually believe it's the best way to create generational wealth and financial freedom, why would I not want people I care about coming into these deals with me. With that being said, same thing on my team.
[00:10:20] Dave Allred: It's always been organic, it's more, I think, reputation and, you know, past performance and track record. And when you just, you know, you know exactly what you want to build and you know, there's a lot of intentionality behind it, I've just found that things just come together there, man. But the key is having a real clear idea and vision of what you want to build and then just putting it out there. You know, social media is a very powerful tool. It's a free resource. I think it's something that if you can clearly communicate what is it you want, what you need, naturally things just come together, man. I mean, we do a little bit on LinkedIn, ZipRecruiter to find some of this talent.
[00:10:56] Dave Allred: I'm very lucky to have our fund manager, his name's Adam, you know, he's a Stanford, only person ever with Stanford and also JD at Harvard. And so he has a very connected network of very prolific, very experienced real estate professionals. And so it's been in the top 22% of people, right. Their network, their proximity. They just know people. And so if you get the very best people as partners, naturally, it's going to be pretty easy to build out a best-in-class team.
[00:11:23] Sam Wilson: Right, no, I think that's really key. Talk to me a little bit about the underwriting side of things. I think it's always interesting when you hear of somebody in a fund like yourself, or, you know, some I've talked to some advisors and some other people that they basically take all of the sponsors decks and all the sponsors information and turn around re- underwrite it themselves. Is that kind of what you guys are doing?
[00:11:44] Dave Allred: Sorry, I didn't quite follow what you mean there. That takes someone else's deck and...
[00:11:49] Sam Wilson: You're going to take the information from your sponsor because one of the things that you guys are doing is finding the top best in class people and in partnering up with them by allocating large chunks of capital to their deals, right? But you're also doing your own underwriting, which means you're taking the data set they're giving you and independent of how they've underwritten it. You're underwriting it again yourself.
[00:12:06] Dave Allred: Absolutely. 100%. And I'll say this on underwriting. I love real estate, man. Everything about it.
[00:12:11] Dave Allred: Separately underwriting. That's the one thing that I get no energy from. And so I really do try to hire, you know, again, the best in class underwriter I can get on the team and really just trust him to do that. But we absolutely underwrite every single deal, no matter what the proforma is. To me, usually proformas are BS anyway. I mean, it's not something that, I would never do a deal or close on a deal just based on somebody else's packet they gave me. You know, we want to look at the assumptions, want to make sure it's conservative, want to make sure that all the data is up to date and checks out for our model we're looking for. And with our model again, with Axia, you know, it's such a competitive market right now.
[00:12:45] Dave Allred: And I see so many other people's decks right now that are very loose assumptions, in my opinion, that frankly speaking, in my opinion, being that we're 12, 13 years into this incredible housing run. It's irresponsible to assume that it's going to be the same next three years, five years, seven years, or even close to that, right? And so our underwriting is extremely conservative in my opinion. And that's what we want. I mean, we want to be able to always over-perform and, you know, overdeliver or underpromise. And so, we always underwrite it. And you know, he does a fantastic job on that one at the end of the day, real estate comes down to numbers.
[00:13:17] Dave Allred: It's simple math, right? Doing real estate the right way, but it's so competitive right now. I would say that, share this real quick, we're big on value add, right? A lot of people are in the space right now. But I think value add really helps insulate from a downturn or when there is, it's not a matter of if, but when there is a correction or some choppy waters ahead of us.
[00:13:33] Dave Allred: And so really being great at value add is important. And one thing that we did with Axia is it's not just traditional value add of putting, you know, lipstick on a pig and putting some new paints and granite countertops in, but it's also a more innovative approach with working on searching and optimization, social media presence.
[00:13:49] Dave Allred: A lot of these assets in today's commercial real estate market have no online presence or no social media presence, which is kind of crazy to me, you know, going in and adding dog spas, you know, putting in WeWork type of shared office spaces or renovating units to have a little break in a little cubby office space in the units.
[00:14:07] Dave Allred: So just some more of an innovative approach than what we see in the market.
[00:14:12] Sam Wilson: Yeah, no, I think that's absolutely great. What are some deal types that you guys are flat out saying no to right now?
[00:14:18] Dave Allred: A lot. Yeah. I mean, ton. We're big on net positive migrations. We started a u-haul data points every month, every quarter.
[00:14:25] Dave Allred: And so we'll only go into states was a positive net migration, you know, love Florida, Tennessee, the Carolinas, Georgia, Utah, Idaho, and Nevada, Arizona, and Texas, obviously. And also we actually won't go in, those all happen to be red states and it's not like a political thing. We can't control rent evictions or rent control or eviction moratoriums and stuff like that.
[00:14:47] Dave Allred: And so we want to go to markets where they embraced free markets, right? Because that's something that we can't control that. If the government's going to come in and say, we, they're going to interrupt the natural flow or the natural markets, that's a big concern for us. So we only go into those markets with high positive net migration, you know, red states.
[00:15:03] Dave Allred: And then, you know, again, I think that the value add is such an important component right now. And I think it's really important that we're always focusing on how to mitigate downside risk. What would we say no to flat out? Quite a bit. Each one of our funds has a specific investment thesis, right? So our first was a cashflow-focused fund.
[00:15:20] Dave Allred: This fund today, it's more of a development fund. And so we have the ability to go into industrial, even to do some ground-up commercial, you know, essentially the question is what kind of back to me is all about mitigating downside risk. You know, Warren buffet says, well, number one in investing, don't lose your principle.
[00:15:35] Dave Allred: Number two, don't forget rule number one. And so it's always, in a worst-case scenario, how bad could this deal be and going into a data approach. And again, in real estate sometimes, what you don't know is your biggest risk. And so I think that if you go into it with your eyes wide open, you can actually mitigate so much of the risk in a deal by having the foresight of seeing it, looking at it very critically and what could possibly go wrong with this opportunity?
[00:16:00] Sam Wilson: I love that, last question here for you is when you talk to investors and they recognize that you are a fund that invests in other opportunities or other well-known sponsors, why would they choose to invest with you versus just going directly to that sponsor?
[00:16:16] Dave Allred: Great question. So, first off, I would say the reason why I went from the syndications into fund world was mainly because I started investing in the funds and I realized that for some different data points, it's 2.7 times less risk in a fund versus an individual asset because of the diversification that a real estate fund creates. So again, a much lower risk profile on a fund structure, and then just the compound effect of what, how a fund is structured correctly, where you can reinvest those proceeds. And over a five to seven-year period, that's a beautiful thing.
[00:16:50] Dave Allred: We can get that compounded effect going. And then just to be able to help a lot more people. My syndications I'd only have, you know, five to 20 people coming into a syndication. Now I can bring in hundreds of investors and create maximum value for them. That's probably the biggest reason, you know, I think funds make even more and more sense as we go into some choppy waters where the economy I go swimming.
[00:17:10] Dave Allred: And then lastly is because of the passive nature. You know, I think that a lot of people there's a lot of money in the markets right now, but a lot of people want to be more passive in their approach and they don't want to go and own their own real estate, right? So for us to be able to create a truly passive opportunity where we literally just, Hey, you know, if the deal fits your investment thesis, the workload is filling out subscription documents, sending a wire, and then the end of each year sending a K1 to their CPA.
[00:17:33] Dave Allred: That's literally all they have to do. Now, Sam, I just want to mention the one thing that I'm really proud about with our fund, it's very unique from what anybody else I've seen in the market, is the motto is experiential investing. And what that means is we're very committed to education and creating, not just a strong ROI return on investment, but also an ROE, return on experience and I feel like that's very valuable. And so once a month we have a webinar with all of our partners. We have the best guys in the nation coming in and speaking for an hour. But when we do a site visit, we let our partners come and walk with us. When we do underwriting, we close on a deal.
[00:18:07] Dave Allred: We give a webinar, we go through the entire process on the underwriting on how we sourced the debt, how are we going to manage it, business plans for value add. And that's been received very, very well because I think that most people want to be doing large commercial real estate. They want to be doing these type of deals.
[00:18:21] Dave Allred: It's just a lack of competence or confidence, right? And so anyway, I call it experiential investing. And last thing on that is actually, I believe that experiences are the new economy. You know, I think people are willing to pay for experiences, whether it's millennials or baby boomers, like people want experiences.
[00:18:38] Dave Allred: And so the more we can create experiences around our real estate, then the better it's received. And in my opinion, the greater NOI we can achieve as well.
[00:18:48] Sam Wilson: Love it, Dave, thank you for taking the time to come on today and break down a really cool business model and just share your experience here with us today. Has been lots of fun.
[00:18:57] Sam Wilson: If listeners wanna get in touch with you or learn more about you or your funds, what is the best way to do that?
[00:19:01] Dave Allred: I would say I'm most active on Instagram. So just search Dave Allred. Should be pretty easy to find. With Axia, it's axiapartners.com. And my email is dave@axiapartners.com.
[00:19:13] Sam Wilson: Dave, thank you again for your time. I do appreciate it.
[00:19:15] Dave Allred: Thanks. And I appreciate it, man.