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How to Scale Commercial Real Estate


Feb 19, 2022

What are the secrets to achieving financial freedom through real estate? Matt Green seems to have unlocked the code and is sharing his journey with us.    

On this episode, Matt Green and I talk about how having the right people on your team is the key to scaling your multifamily business fast and seeing big return on investment. Matt is an active real estate investor who focuses on multifamily acquisition and development. His goal is to force appreciation and multiply money through his strategy.   

 

[00:01 - 05:39] Opening Segment

 

  • Matt shares how he and his father built their real estate portfolio in the ’90s 
    • America is turning into a renter-nation 
    • Why townhouses are a big opportunity for investment 
  • How to force appreciation in properties 

 

[05:40 - 14:10] Don’t Gamble by Developing Real Estate Smarter

  • How Matt had no choice but to go into development 
    • The struggles and trials of land development 
  • Why having a good team is imperative when developing in real estate 
  • Know your exit strategy before you get into a deal 

 

[14:11 - 16:41] The Final Four 

  • What’s one resource or tool that you can’t live without?
    • A property shark or county geographic information system (GIS) map 
  •  If you could help our listeners avoid just one mistake in real estate, what would it be? 
    • Not keeping up on your property 
  • What's one thing you're doing right now to make the world a better place?
    • Offering the best value 
  • How to follow Matt (click the links below!)






Tweetable Quotes

 

“It's really important that when you're investing in real estate and developing projects, that you have a really good team because having the right qualified people is going to help you execute faster, you're going to get things done more efficiently. And you'll get to the market quicker.” - Matt Green  

 

“I think one of the big mistakes people make is when they don't keep up on their property. If you let things go over time, then it just becomes harder and harder. It's almost like you're digging a hole which gets more and more expensive to get out of it.” - Matt Green  

“If you're not maintaining your properties, if you're holding them long term, but not maintaining them when it comes time for disposition, you're gonna get terrible offers.” - Sam Wilson 



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Connect with Matt on Instagram.com/mattgreenfan. Want to generate wealth and increase your income? Visit https://mattj.green  or download his free book https://re.tgoblueprint.com/free-book-21620694256285  





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Email me → sam@brickeninvestmentgroup.com



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

 

Matt Green  00:00

(teaser) We had a good team. We have an architect that was really knowledgeable about the entire process. And then we had a good legal team that basically in this town that we developed it and in the area that we develop in, there's a couple of attorneys that do every single project throughout all the different towns in this area. So they know the codes and the laws even better than the people on the board. So that's why we're able to get through and strategize and put our best strategy forward, which helps a lot. So I think it's really important that when you're investing in real estate and developing projects, you have a really good team. Because having the right qualified people is going to help you execute faster, you're going to get things done more efficiently. And you'll get to the market quicker.

 

Intro  00:37

Welcome to the How to Scale Commercial Real Estate Show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big

 

Sam Wilson  00:44

.Matt Greene, welcome to the show.

 

Matt Green  00:51

Thank you. Appreciate it. Thanks for having me.

 

Sam Wilson  00:53

Absolutely. The pleasure is mine. There are three questions I asked every guest who comes on the show. Can you tell us where did you start? Where are you now? And how did you get there?

 

Matt Green  01:01

Yeah, great. I appreciate you having me on the call. Basically, I started out about seven years ago, my father and I partnered up together to build a multifamily real estate portfolio. So he had started in real estate back in the 90s. And he had acquired a portfolio of assets, and then we teamed up together to start scaling and building out more assets. So that's where we got started. And, you know, we started out with smaller deals, and now we're working on some bigger deals now.

 

Sam Wilson  01:29

Gotcha. That's fantastic. You guys are buying primarily multifamily right now.

 

Matt Green  01:33

Yeah, that's all we focus on is apartments and townhouses. Those are the most secure and scalable assets. And they're the least risky. I know the pricing has gotten more expensive, especially over the past few years. But those are the most reliable assets that are going to withstand time.

 

Sam Wilson  01:48

Right. What about townhomes? Talk to us about that. What do you see with the opportunity on that front?

 

Matt Green  01:53

I think the whole nation as a whole is turning into more of a renter-nation, I think you got people like Zillow and Blackstone, they're all buying up single-family residential homes. So I think over time, you know, there's going to be a lot more rentals on the market. And I think the homeownership rates are going down. And I think people are less interested in doing home maintenance and keeping track of everything. So I think renting is going to be big, and I think townhouses, offer that because you get your own private entry. You know, usually, it's a two-story setup similar to a house, but you don't have to worry about all the responsibility.

 

Sam Wilson  02:29

Yeah, I mean, that's absolutely true. It's not even just a changing, I think demographic shift, or preference of demographics in the sense that, “Hey, we can't afford it,” or, you know, that we’re getting priced out of the market. It's also that people just don't want to, right, that's just the reality of it is that there's the next generation don’t necessarily love cutting the grass on Saturdays.

 

Matt Green  02:48

And then you got seniors too, that are getting older, and they don't want to keep up with it anymore. They're just moving into, you know, maybe a senior housing setup or something that's easier to manage.

 

Sam Wilson  02:57

Absolutely. Yeah. My own parents are proof of the pudding. They just left a house for 40 years. And it's like, Wait, you're living where? Like, yeah, the yard guy comes he cuts the grass, he cuts everybody's grass, the neighborhood? That's like that's completely right off on the exterior. So it's really, really intriguing. Are you guys doing anything ground up in that space? Are you finding opportunities in value-add in the townhome space?

 

Matt Green  03:16

Yeah, so basically, with the apartments and townhouses that we invest into. So if we get acquisition of a deal, like for example, we just did 156 unit acquisition last year that we're working on forcing appreciation on so we'll go into the building that was built in the 70s. And basically, what we'll do is we'll identify the value-add potential on the property. So we'll go and we'll put new countertops, paint, flooring, baseboard, windows, and that'll allow us to increase the rents, at least on this property, we raised them almost $400 A month once they're completed. 

So when you can force appreciation that quickly, it's about a three-year turnaround to get through all 156 units, you can recapture your equity, and throw it into the next deal. So I think if you can find the right deal, pay the right price, and there's enough upside to it, then you can hit a home run investing in real estate, but we also invest into ground-up projects too or working on a couple of $40 million projects where we're going to purchase the land and develop it into apartments. 

So one of our sites, we’re going through approvals on entitlements with a town, that's going to be about eight buildings with 162 apartments on it. So we're working on getting that together and getting the approvals in line. So buy the land for maybe about $2 million. Once it's all approved. And everything's completed with you know, the entitlements, the value of the land will probably go up to $3 million within the year, and then we'll start building out the project. And then once it's all said and done, it'll probably be approximately a $40 million deal. So it'll be really nice.

 

Sam Wilson  04:46

Yeah, absolutely. That's tremendous. You know, on the townhome front doing a value add townhome, play, I mean, in the south and I may be wrong here, but you know, I'm thinking I just think of here in Memphis, Tennessee I just don't know a lot of townhomes. developments, is that something you're on and more regional to where you guys are?

 

Matt Green  05:04

Well, I mean, we have some townhouses. I would say the primary, you know, development and acquisition that we do are all apartments, but I think people are looking for more townhouses like they're open to them. I think it's kind of like that middle ground where it's like, maybe somebody is in a house, but you know, they'd like to townhouse over the apartment type thing. So I see a lot of that. And I think both classes of apartments and townhouses are really popular. I think, if you're building townhouses, naturally, rents are going to be a little bit higher. So maybe a little bit more expensive than the market of just an apartment, but I think they all rent everything rents, one-bedrooms, two bedrooms, and townhouses as well.

 

Sam Wilson  05:40

Yeah, absolutely. On the new build stuff. I think that's intriguing. Walk us through that process. Because the development process is kind of a mystery, I think, you know, especially to a lot of people who are just doing value add or things like that. It's like, oh, man, that's next level. That's somewhere in the nether sphere, I might someday get there. How did you finally settle on development? And then, you know, just kind of pull back the curtains on your business, if you don't mind, on how you guys got there?

 

Matt Green  06:04

Sure. Yeah, I think the reason we got into development wasn't necessarily by choice, but just lack of deal flow in our market. Like everything is very, very competitive. Every deal that is done is like everything's off-market, everybody, all the players know each other in the market. So everybody communicates pretty well. And things trade very, very quickly. And if anything ever hits the market, there are about 20 people that want it instantly. So it's very competitive. And if you want to scale, at least in our area, and something that we're doing is we're scaling in the South as well in the future. But you know, we had to get into land deals, because there's just we couldn't grow, there was not enough deal flow. So we had to start developing property, and you know, developing land, which is a lot more challenging.

So we figured out the process, we had one deal that we worked on when we first started doing the land development, where it was just a pain to get the whole thing approved, the town gave us a lot of trouble. It was actually a property was zoned for suburban agriculture. So it was basically zoned for farmland. But next door, it was zoned for business. And then across the street, there were 200 apartments, when we presented the project to the town, they didn't like the idea because they're anti-development at the time. So we had to go through a lot of article 78 lawsuits and go to the ZBA to get a use variance. And it was very challenging. We spent over a year getting it all done. And it costs a lot of money. But we ended up getting it through as I guess it was a good learning experience for the first deal. Because we went through everything, everything got thrown at us. So we figured you know, all these different obstacles out. Then once we finally got it all approved. You know, we were able to build it out. But it was definitely a stressful first development project back when we got started with that first one.

 

Sam Wilson  07:46

Did you have it a lot easier because you have a system? Yeah, that's it. Man. I guess once you've been fed to the wolves, you kind of know what to expect. What were some of the things that helped you get through that? When it was I mean, cuz it's risky, right? Oh, yeah. It's risky to go out and tie up land, and maybe whether you bought or not before entitlement, you know, it's risky to tie it up and then say, well, gosh, I sure hope we get this entitled, right. Without, you know, how many hundreds of 1000s of dollars may be trying to get it done? And if you don't, man, that's a strong gamble.  

Matt Green  08:11

Exactly. Yes.

Well, I think first and foremost, we had like, we had a lot of confidence in it. So we knew that this was the perfect site for apartments, there were already apartments across the street, there's commercial next door to it, we knew that would be eventually developed as apartments, we didn't end up buying it until we got all the final approvals, because that would be even an even bigger risk, you put all the money on the line, you buy it, and then you can develop it, that would be challenging. So we kept everything on contingency before we bought it. And then once everything got cleared, we ended up buying it and developing it, but you don't know where it's gonna turn. 

Because if you go to, you know, Supreme Court, you don't know which way the judge is going to rule on it. But luckily, since you know, in that lawsuit, the town board actually sued the ZBA, because we got to use variance to actually develop it. So we were able to bypass the rezoning and then get site plan approval, and then eventually develop it. But I think what helped us was, you know, it's really hard to overturn a governmental approval. So when the ZBAapproved it, and the town board, you know, within the same town sued their own, you know, ZBA, sort of, I don't think they really, they didn't want to overturn it, so, and then eventually, we had a new town board within this town that came in and just dropped the lawsuit. So that helped, you know, just getting different board members into place, but it was definitely stressful cost a lot of money cost over $100,000 Just to get it to that point, and you're not sure if it's gonna come through or not.

 

Sam Wilson  09:31

I can think of a lot more fun things to do with 100 grand than just lose it on, you know, town board meetings. So did you have any guidance along the way? Was there anybody reaching out with kind of a mentor perspective, or was it just follow your nose and keep hammering at it?

 

Matt Green  09:48

We had a good team. We have an architect that was really knowledgeable about the entire process. And then we had a good legal team that basically in this town that we developed it and in the area that we develop in, there's a couple of attorneys that do every single project throughout all the different towns in this area. So they know the codes and the laws even better than the people on the board. So that's why we're able to get through and strategize and put our best strategy forward, which helps a lot. So I think it's really important that when you're investing in real estate and developing projects, you have a really good team because having the right qualified people is going to help you execute faster, you're going to get things done more efficiently. And you'll get to the market quicker,

 

Sam Wilson  10:27

Right, man, that's really, really intriguing. What outside of what you just said, what are some things you would recommend to somebody who is interested in development,

 

Matt Green  10:36

I think if you're interested in development, I think you've got to have a plan in place. You can't just go out there without a system and a plan. You have to know what you want to achieve, you have to have your end goal in mind, you can't just buy an asset without an exit plan, you have to have something where you know how you're going to recapture money out of because a lot of people go into deals and they overpay for them, and then they never get their money back. So then they're stuck, they have to wait, they're playing the waiting game until they get their capital back to go on to the next deal. So I think that's probably one of the biggest things is knowing your exit strategy. If even if you're going to stay in the deal, and maybe refinance recapture equity, at least you had that can be your exit plan. That's usually our exit plan. So the goal is to get all your capital back so you can get to the next deal.

 

Sam Wilson  11:15

Yeah, absolutely. That's really intriguing because there are two very distinct strategies there. One is, like you said, the refinance. Actually, there's three that we see I think, commonly in the land development or the development space in finance, or do a refinance via cashing out your current, you know, investors with a new round of investors that want to hold long term, three, just selling it partially leased up and then moving on and your guys' strategy, you want to do just a straight refinance, keep it and hold it in perpetuity, it sounds like.

 

Matt Green  11:45

exactly, yeah.

And then we try to get all of our equity back. The goal is always to force appreciation, if you're gonna buy an existing building, your goal should be how can I make this property appreciate as quickly as possible so that you can refinance and recapture equity. And if you can master that system, then that's how you're going to be able to move really quickly and scale fast. That's the best way to scale. And then you can't collect your property either. Over time, you have to keep up on all the improvements there was a project that we acquired in the previous owner never kept up on all his capital improvements like the sidewalks were bad all the exterior was bad. The interiors were all rough, they're old metal cabinets from like the 50s. And there were holes in the walls, they just things weren't maintained properly. So that can also really affect your value. If you want to refinance or sell the property, the next person if you're selling the property is going to knock down the price because they're gonna have to go in and repair these things. So it's just better to keep up on them, you know, as they arise.

 

Sam Wilson  12:38

Yeah, man, that's so true. The metal cabinet thing, I don't know if it's kind of in vogue a little bit of

 

Matt Green  12:43

Yeah, I know they're coming back in maybe, you know, we had a metal cabinet, and they must have had a bad tenant or something because they like kick them in, they're all dented. And so it was just a mess is terrible. There's color by their color. And all over the walls, it was you know, you run into stuff like that. And then you got to come in for this specific property, we spent actually $25,000 per unit putting new cabinets countertops and doing the whole thing inside. So it was a big proces.

 

Sam Wilson  13:10

And to your point, if you're not maintaining the properties, if you're holding them long term, but not maintaining them, when it comes time for disposition, you're gonna get terrible offers on. 

 

Matt Green  13:21

yeah, that was a deal where we bought it, it was like a $1.7 million deal. And our bank, we give them a pro forma, and then they kind of give us you know, an upon completion value, then we finance our construction and renovations to draws. And they actually valued it upon completion with the force depreciation model that we use at almost $4 million. So it was a bump of $2 million, within a couple of years.

 

Sam Wilson  13:44

Right. And that's the beautiful thing. It's just fine. It feels that's the main thing it is, which again, going back to your point of why you're moving into or doing also ground up. I mean, I've talked to enough people on this show, they're like, look, I can buy or I can build for 150 or 175,000 units, I can buy, you know, 1980s Vintage for 225 on market, it's still a value add product, like why build. So that's absolutely intriguing, man, I've enjoyed this. Thanks for coming to the show today. 

Let's jump here to the final four questions. The first one is this what is one tool or resource that you find you can't live without?

 

Matt Green  14:16

I think some of the property research tools, some like a property shark or some or even like the county GIS maps, I think those are really powerful tools where you can get in and look for land deals and look for existing properties that you can jump in and acquire.

 

Sam Wilson  14:29

That is something no one has mentioned actually on this show yet. And I'm glad you did out of 40 episodes. Nobody's mentioned the GIS maps. Yeah, probably one of my favorite tools as well because man, you're right, you can dial in most of the time. It's free. Like oh, yeah, yeah, you can type in the county name slash or face GIS. And you can find the map and most of those are just loaded with tremendous amounts of data. Oh, yeah.

 

Matt Green  14:53

That sometimes can Export Excel sheets and lists, right mailers? There's a lot you can do.

 

Sam Wilson  14:58

Yes, absolutely. Yeah, if you're looking for something that has a zero-cost handle in front of it, that's a great place to start right there with your county GIS maps. Thanks for sharing that map. That's great.

Question number two, if you could help our listeners avoid just one mistake in real estate, what would it be? And how would you avoid it?

 

Matt Green  15:13

I think one of the big mistakes is, back to what we talked about already, would be where you don't keep up on your property. If you let things go over time, then it just becomes harder and harder. It's almost like you're digging a hole and then it's going to be more and more expensive to get out of it. If you don't keep up on the roofs and all the capital expenditures, entry doors, sidewalks, exterior, whether you have to repoint brick, all these different things are really important to keep up on so you don't make a hole.

 

Sam Wilson  15:38

I love it. That's great when it comes to investing in the world, what's one thing you're doing right now to make the world a better place?

 

Matt Green  15:43

I think with our apartments, we're just trying to offer the best value because, at the end of the day, your residents are your greatest value. So you have to make sure that you provide a really good service really good quality, give them the best that you can, and then it'll help pay off in the long term.

 

Sam Wilson  15:59

Great, I love it. Matt, if our listeners want to get in touch with you, or learn more about you and your company, what is the best way to do that?

 

Matt Green  16:05

You can follow either on LinkedIn or on Instagram at Green fan. And those are the best places.

 

Sam Wilson  16:11

Awesome. Thank you for your time today, man. I do appreciate you.

 

Matt Green  16:14

Appreciate it. See you later.

 

Sam Wilson  16:15

Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google podcasts, whatever platform it is you use to listen if you can do that for us. That would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.