Mar 17, 2022
Should you invest in multifamily this year?
There’s no better time to invest in multifamily than today, and Bronson Hill will tell us why. Bronson is a real estate expert and a general partner in 1,400 multifamily units worth more than $120 million.
In this episode, he will share his experience jumping into the multifamily scene after working as a highly paid medical consultant. Initially, he did not want to invest in multifamily because he thought he needed a lot of money to start. This is probably the myth that many other aspiring investors believe in too.
Well, Bronson will debunk this myth and share a couple of lessons that you can apply in your real estate investing right now.
[00:01 - 03:41] Opening Segment
- Bronson Hill shares his secret in learning multifamily investing
- Aspiring investors can enter the multifamily scene by doing this event
[03:42 - 13:27] Staying in Front of Investors
- What you should be looking for in a multifamily partner
- Bronson gives some details about their monthly meetup
- Listen to what Bronson will say the current inflation rates
[13:28 - 17:36] Building Your Multifamily Network
- Why Bronson and his team are staying away from Class A assets
- Bronson defines the Margin of Safety and why you should think about it
- The importance of networking in real estate according to Bronson
[17:37 - 21:09] Closing Segment
- A tool or resource you can’t live without
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- Vidyard
- A real estate mistake you want the listeners to avoid
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- Don't try to bring a great property manager to a new market
- Your way to make the world a better place
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- Stopping human trafficking
- Reach out to Bronson
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- See links below
- Final words
Tweetable Quotes
“ I think in general, when you're looking for partners…you want to know you're working with somebody that you can trust, somebody that you know, has your interest in mind, [and] will really have similar values to you.” - Bronson Hill
“If you're willing to do the work, you're willing to network, you're willing to try and make offers and just keep going for it, you'll find [a deal].” - Bronson Hill
“Go to events where there's going to be a lot of people there and just start asking questions…and figure out what people do and what's their biggest challenge.” - Bronson Hill
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Want to read the full show notes of the episode? Check it out below:
Bronson Hill 00:00
Don't try to bring a great property manager to a new market and other people will do and they'll do fine with it. I've seen that a couple times, not just in my own deals, but other people's deals. And so I like to see who's got established relationships. It's the relationships with vendors in the market with staff with other things. If they're from another market, even if it's two hours away, it's gonna be really hard sometimes to find new people, staff members for the property, or even vendors that come in and work and I've just seen it, and these property managers will be very cool. We'll come in and we'll do this and everyone's to expand, but I just prefer not to be the first one that they're expanding on, you know. So that's, I think the biggest thing.
Intro 00:34
Welcome to the How to Scale Commercial Real Estate Show. Whether you are an active or passive investor, we will teach you how to scale your real estate investing business into something big.
Sam Wilson 00:45
Bronson Hill is the Managing Member of Bronson Equity. He is a general partner in 1,400 multifamily units worth over $120 million. Bronson, welcome to the show.
Bronson Hill 00:57
Hey, Sam, really excited to be here with you. I love talking about real estate, love talking about scaling business, and really excited for the conversation.
Sam Wilson 01:04
Hey, man, it's loads of fun. I'm looking forward to jumping in here. There's three questions I asked every guest who comes on the show. In 90 seconds or less? Can you tell me? Where did you start? Where are you now? And how did you get there?
Bronson Hill 01:13
Yeah, so I started, I was a high-paid consultant in the medical field worked with a lot of physicians realize the time for money trade, even for physicians that were getting paid a lot of money. Some physicians I knew works 80 hours a week and made millions of dollars, literally, but it was too much. And they didn't have freedom of time. And so that was most important to me, started with single family did a small single family portfolio that I had a kind of a chance meeting with a cousin I hadn't seen since I was a kid. And he said, “Why don't you do multifamily?” I said, Well, I'd love to, but I don't have the money. He said you can raise the money. And I just you know, he said read this book, go to this podcast, you know, do all this stuff and learn. And I did it. And basically a couple of years later, I raised a total of about $15 million and was able to leave my great corporate job that I thought there were golden handcuffs. And now I'm doing real estate full time, we've got about 150 million in multifamily assets, mostly in the southeast. And I just love it, man. It's just such a great business to be in.
Sam Wilson 02:08
Man. That's fantastic. I love the truncated stories because they make it sound like you know, it was just one success after another tablet. Yeah. And then oh my gosh, look at this 150 million bucks later, we're rocking and rolling. And we didn't hit a single speed bump. But I don't believe that. Yeah, I mean, some things that were some challenging pivotal moments. Maybe we're you know, you're like crud, we're at an intersection here. What did you do?
Bronson Hill 02:31
Like you said, there's a few of them. I think that one of the biggest ones is just it's so hard to get going. I mean, I'd say of those couple years, it took me about a year to really get going. And that's not uncommon. You know, there's this friend of mine, Michael Blank that says he talks about the Law of the First Deal, like getting the first deal can take a long time. But once you get the first deal done, once you're a general partner on a deal, the doors start to open, people look at you as an insider, and it changes everything. So for me, I started kind of through some of the books I was reading, I really starting a meetup, was a really great idea. So I just encourage anybody listening, if they want to get into real estate multifamily, just start a meetup. And this is literally how it went for me. I was doing single family, I had a larger meetup in town where I had, you know, been going for a number of years, I basically approached this person and said, Hey, let's start another meetup that's only multifamily. And all lead out do the work. And we'll lead it together. She said, sure. We started leading in the first meeting, we had 60 people there. And basically, I found my first investor there, he's like, I'd invest in you and one of your deals, I was like, I don't even have a deal. But I got together with him for coffee and showed him what a deal would look like. And then I introduced him to another guy I met at that same meeting. And so that kind of got me started. So I raised 100,000, for adeal, but it took a while before I found kind of the right partners, and it was really able to scale up after that.
Sam Wilson 03:42
Yeah. Talk to us about the partner search. I mean, you know, there's the life partner search, and there's the business partner search, and they both seem to take an inordinate amount of time. Tell me about the business partner search.
Bronson Hill 03:53
Yeah, so I think in general, when you're looking for partners, a few things. One is obviously character, you want to know you're working with somebody that you can trust, somebody that you know, has your interest in mind, will really have similar values to you. So I spent a lot of time a lot of people bring me a lot of deals, and they're like, I want to partner with you on this, or I want to work with you here. But I really come back to like is this somebody that I can trust and it takes time to figure that out. Reputation is huge. It's a pretty small industry. So I try to work with people that I know are that are kind of well known in our circle and I also do a background check on every partner as well just to see if there's something that I'm you know, I'm missing in that process. But I think in general, you know, being kind of looking at how you and what your strengths are. So my background was medical sales. And so there's kind of two routes people go either you find deals if you're more of an engineer type or you love numbers or CPA, you can kind of go the route of finding deals or networking brokers and kind of being more of the operations or you do you work with investors and create content and you're more of kind of a sales type of role. So those are kind of two routes for me I kind of realized you know, if I'm more on this side, I need to partner with people that are really good on the operation space. So I've got one of my partners now has over 10,000 units, has been doing it for 25 years has a great track record great experience. So my lack of experience in asset management is not a shortcoming, right, because I have a partner who's handling all of that, which is really great. So finding complementary partners, I think both in you know, as a life partner, as well as a business, I think is really important.
Sam Wilson 05:16
Yeah, absolutely. Tell me about raising money. I know, you said for the first deal, you raised 100,000 bucks. I mean, that doesn't go far in a multifamily investment.
Bronson Hill 05:25
Yeah. So yeah, the first that was something I left out there actually, one of the challenges, I went to all my friends and family, and I said, “Hey, we got this great multifamily deal.” And I had something like 62 conversations with friends and family, either in person or over the phone, and the questionnaire is everything, and I had literally zero, zero invest. And so you know, it's challenging to go from there to, you know, to get the 100, you know, it wasn't a lot of money. But what really got me going is I went to somebody that I saw really a lot of value from, and I basically said, “Hey, how's it going, you know, raising money,” because they were kind of more on the active side of teaching people how to syndicate, but they had a huge reach. And I was like, man, there's gonna be people on here that are doctors or lawyers, or retirees, they don't want to go buy a building. So they're gonna want to be more passive, but he just really wasn't focused on that. So I said, “Well, what if, you know, we created something here together, where we had kind of a funnel, and I would kind of do calls or kind of work with folks. And we kind of set up a way for people to get involved.” And so it really just, you know, dramatically increased the amount of money they were able to raise that we able to raise together, so instead of 600k, and having to do a second webinar, by the time, you know, year and a half later, we raised $8 million in 24 hours for a deal. And so I had about 1000 on-on-one phone calls with different investors to just, you know, try to qualify and kind of tee them up for the next deal. So that was a great learning experience for me to cut my teeth. It wasn't all you know, super easy. I was working full time while I was doing that. So I was taking calls at 6 am, sometimes at 6 pm. And just whenever I could find time to take these calls, it was crazy, but it was definitely worth it.
Sam Wilson 06:50
Yeah, that's really, really intriguing. And maybe we don't have to dig into the story too much. But I think that's one of the things that I think people commonly struggle with is finding the investors. So one of the things you did if I hear correctly, is you found someone with a potential investor database but wasn't really leveraging it for that. And that right.
Bronson Hill 07:09
Yeah, that's right. Yeah. So we worked together for a couple of years on some stuff. And then I branched off on my own about a year and a half ago. And since then, we've just continued to, and we raised about $6 million, around 6 million in 2021. And so we keep going after it, but it just gave me a lot of experience. And so a lot of times people and I'm not I don't think mentorships are bad, I think they're good. And I think if somebody has a high net worth, and they're busy, and they need somebody to kind of push them into you can do that. But I also think if you just look around and go to somebody who's a high-value person, and you say how can I serve you, you can open up a lot of doors, it's amazing how it can open up doors.
Sam Wilson 07:38
Yeah, absolutely. The raise that you know, you guys have done in the past, or they've been 506(b)s, 506(c)s. And then why do you guys focus on one or the other?
Bronson Hill 07:47
Yeah, so we've done both, I've done a couple of 506(c)s about a year ago. And 506(b)s, and they were good. I mean, it was kind of again, when I was more kind of launching my own thing. So I was working with this part. And I had kind of really launched Bronson Equity, which is my group. And so I did some advertising and different things. And it you know, it works. Okay, I think I think 506(b), you know, for kind of your network that you kind of privately share, people love the idea of like off-market deals or his special deal. But don't tell anybody kind of those kind of deals and so, but if I will succeed, the ones you can advertise or for credit only minute, they can be great, too, they have, the SEC has actually made it a little bit easier to where you don't have to verify accredited status as often as they once every five years. And then you can actually do some of it a little more. You don't have to always use third party, you can use documents. And you'd have to make sure that your data matters. I'm not an attorney to sort of that. But it's gotten a little bit easier in that area.
Sam Wilson 08:37
Yeah, that is interesting. And I've heard that stat before that it's every five years now. And yet, if you go to some of the third-party verification sites, they'll still tell you it's only good for 90 days. So I've never I haven't quite got the clarification on that. And maybe you and I can work on that when we get get off air. But one of the other things that you're doing right now, I think you're still running the weekly meetup. What are some other things you're doing right now to stay in front of investors?
Bronson Hill 09:03
Yeah, so we have a, we have a monthly meetup. It's in-person that's called FIBI. So if anybody's in Southern California, we are in the city of Pasadena. So we usually, we're getting back to it after COVID It's been much more shut down here that I'm sure where you're at. But at least I do that we do a monthly virtual event, which is either on inflation or it's about multifamily investing. We bring several operators in and those have been very well attended and a lot of great feedback. Those are also available on YouTube, which I do a lot on YouTube. And then I try to go to a lot of live events. So I as I mentioned, I was in an event last weekend, I'm had to do another one this weekend. And it's a great way I think to get eyeball with investors and just meet people with a lot of people don't really want to invest unless they've met you. I have people that literally found me on YouTube and watched my YouTube videos and invested which is amazing, right? But it's more uncommon than it is common and I think I do also do a podcast called the Mailbox Money Show, talking about different forms of passive investing. So I know your audience is a little more active, mine's more passive. So just a lot of professionals that are looking to, you know, reduce taxes, get out of Wall Street and find consistent returns.
Sam Wilson 10:05
Right. Man, I love that you're always working on deals. What are you doing right now? Especially in the multifamily space to find opportunity? Because it seems to be super competitive.
Bronson Hill 10:16
Yeah, so we closed about 1,000 doors last year. So we're growing a lot, we've got new stuff we're working on right now. And it's amazing when you're in a particular market deals can come to you. I mean, we got a deal recently that it was a completely off-market deal, so that we were the only ones at the table. And, you know, it's a very different experience than being one of 30 at the table or being one at, you know, one of 20 and having to try to make your case. But I think, you know, there's a couple of ways, you know, one is through relationships. One of my partners, as I mentioned, one who has, you know, 25 years experience knows a lot of people. And so we've bought some properties from one of these owners, and he's like, I've also got this other property, and it's, you know, property that's three $400 a month under rent. And we're just seeing that, you know, he just really didn't do a lot of work on it, were able to get it from this particular sellers, as long as it's your personal relationships with the seller. Other times, it's just you own the property next door, and the brokers are basically bringing the deals to you say, hey, you know, how can we make this work. And we found that everything's for sale at the right price, we actually had a property that we weren't planning to sell for five years, we bought it in Jacksonville, Florida, which is one of our main markets we work on, bought it for 27 million, bet last March, and it was 288 units, they're going to work in class apartments, we sold it nine months later, in December, for 37 and a half million, we made 10 and a half million, almost, you know, close to double the investor equity in a short amount of time. And we're able to 1031 the majority of those investors into another deal. So you know, it is hard to find deals, you know, markets are going crazy, but they are out there. And if you're willing to do the work, you're willing to network, you're willing to try and make offers and just keep going for you'll find something
Sam Wilson 11:47
Right, man. That's really, really intriguing. Talk to us. You know, I guess we've talked a little bit about markets. We've talked about raising capital, talking about some of the hiccups you had early on. Let's talk a little bit about inflation and where you see the multifamily market going. Let's talk about that for a second. Is that okay?
Bronson Hill 12:04
Yeah, so we talk a lot about inflation. Some are different events, something I'm a student of as well, you know, I think it's really important not just to look at real estate, or multifamily real estate, a lot of people that really lost their shorts in 2008, 2009, they weren't paying attention to kind of the overarching economics of what's happening, right. And there's some just incredible things happening, we've never seen, I mean, they've created about 40% of the currency in existence just in the last two years, right. And that's just staggering. So everything is going to cost more. So the long-term, you know, effect is very inflationary. The dollar itself has lost 98% of its value since the Fed came into existence in 1913. So we know it's going to continue to happen. There's no way to stop it. So long term, it's there. But you know, if interest rates rise, which is what everybody's talking about, will that cause asset prices in general to go down? I think in single family, it definitely could, multifamily maybe a little bit. But I think, in general inflation and rents typically go hand in hand, it's a little bit lagging for rents. But I think, you know, in general, if you have long term debt, or like a lot of the stuff we're doing now is three-year fixed rate stuff that you can extend, you know, kind of bridge debt that you can extend, I still think there will be options that you can handle, as long as they don't raise rates really sharply, which I don't think they're going to do I mean, inflation is going to keep going up, they're gonna kind of stagnate, they just don't want to raise rates too high and all of a sudden have things crashed. But it's a very interesting time right now. So you have these long-term inflationary factors, and then some short-term deflationary risks, but I think multifamily is gonna weather it really well.
Sam Wilson 13:28
Yeah, there's that. And then just like you said, the money printing, it's hard to say where this all winds up, what are some things you guys are doing just to make sure that your portfolio is buttoned uptight?
Bronson Hill 13:40
Yeah. So I think the biggest thing you know, we've stayed away from Class A stuff, you know, no offense to anybody who's doing Class A, but I think I personally think there's a lot of risk in Class A-type of apartments, people look at them. They're like, Oh, this is so beautiful. Look at all the amenities. I'd love to live there. They're brand new apartments, but the returns are way lower. And this is what a lot of REITs own. And so for example, where I live in Pasadena, California, two-bedroom right now will go for 4500 a month at some really high-end apartments, right. But if there's a recession, they're not going to get 4500, they might get 3,000, maybe. So that's going to dramatically affect the returns will be some losses there. So REITs will kind of go up during times like this, and then they will crest down. Now what we do, Warren Buffett has this principle, he talks about the Margin of Safety, right, you have some sort of kind of margin of safety, if things don't go the way you want, you want to create a margin of safety. And so one way is by being very conservative on the numbers that you're projecting, being more conservative, I'd much rather under promise and over-deliver. The second thing is the Value-add Approach in multifamily. So what that means is, you know, we don't just take brand new stuff, we're taking older stuff, we're seeing, you know, rent increases of $200. If we spend $10,000 per unit, we can see those rent increases. So what happens is, even if rents, in general, go down, we still have that, you know, we made these properties better, and so the rents should hopefully be higher than they would have been otherwise. So it puts a little more margin of safety. That's also why the returns for value-add multifamily are typically about twice what a lot of the class A or the non, you know, stuff that you don't add value to as it's much higher.
Sam Wilson 15:07
Right. And the other thing with your value add is that if you get halfway through, you renovate half the units, and it's like, hey, look, you know, we got to pump the brakes, you don't have to pump that money into the property necessarily.
Bronson Hill 15:18
Yeah. And we're seeing that we're seeing sometimes, you know, the, this property I mentioned in Jacksonville, like we did a little bit of exterior work, we didn't really even get too much of the interior. And yet, we saw we already got to our number. So we're like, Okay, well, everything's for sale at the right price. So, you know, that will happen. And that's the thing, and you can test it out. So the other thing, we have another Jacksonville property we closed on about six months, five months ago, and we expected, you know, $200 a month rent bumps, what we're seeing after renovating 10 of these we're seeing about 350. So you know, again, it depends on where you're buying, but I like we'd like to buy in places where we see that population growth is business-friendly, landlord friendly, and warmer places. A lot of those kind of southeast markets.
Sam Wilson 15:56
Yeah, man, that's absolutely intriguing. What is one piece of advice you would give to somebody that is looking to scale like, what would you say to somebody said, “Hey, man, I want to get into multifamily. I want to follow in your footsteps?” What would you tell them?
Bronson Hill 16:08
Well, I think the biggest thing you can do is to go to events, go to meetups, go to especially I would say meetups are good if you're in a metro area, if not go to national events, go to events where there's going to be a lot of people there and just start asking questions and starting to hear and figure out what people do and what's their biggest challenge. And then also, instead of just asking, “Hey, you know, what's the biggest success? Or what's going well,” ask them, you know, especially if you start talking for a little bit, say, “Well, tell me about your biggest challenge or your biggest, you know, mistake or your biggest failure or something” and people will share, they'll say, oh, yeah, you know, this is gone. Well, but let me tell you a story. And I think you learn more from those stories. There's actually a saying that says, A wise man learns from their own mistakes, but a genius, learn from the mistakes of others. So if we get curious about that, it's amazing things that can open. But I do think the value of networking is just you cannot underestimate how powerful that can be.
Sam Wilson 16:55
Man, that's so funny, because not five minutes before this phone call, I had somebody email me. And they said, “Hey, man, I hear you're going to do such a conference here in a couple weeks. You know, this is my position in business. I'm not really seeing the value in it. And I just kind of wrote back and I'm like, dude, like, here's the three reasons I always go to these large national events. And it's not for the any of the reasons you said that, you know, you don't need to go” so anyway, I second your wholeheartedly. Second your comment there that? Yeah, go to big events. It's amazing what you can learn just by being in the room. Yeah, I percent. That's fantastic. I think it's actually where you and I finally met here face to face not a month ago. So yeah, that's tons of fun. Let's jump here to the Final Four Questions Bronson. First one is this: What is one tool or resource you find you can't live without?
Bronson Hill 17:42
I think one tool or resource that I use a lot. There's a video service I use for some of the content production that I do, because I you know, my businesses creating, whether it's podcasts or different things like that, there's a kind of a screen recording service called Vidyard. And some people might say it has nothing to do with real estate, but it records your screen as you're kind of going through, you know, pointing things out, it's really helpful. Rather than having to get on a call with somebody to be able to kind of explain a process or even with an investor, I've had to do that with here's how you get on your portal. And here's how you do and if you're working with busy people, any way you can kind of explain things and create a replicatable process. So when you have that question again, you can already just say, Oh, I've got this and just send it over there, right?
Sam Wilson 18:20
Right. Yeah, that's absolutely tremendous. And yes, you hit it nail on the head, and especially something where they can hit play. It's on-demand at that point, yeah, you're not going to get on a call. So that's what is one mistake you can help our listeners avoid, and how would you avoid it?
Bronson Hill 18:34
I think the biggest challenge that we've had over the years, we had a property that just mean no easy way to say it, we just got the wrong property manager. And I think one thing I learned from this particular situation was don't try to bring a great property manager to a new market now that people will do and they'll do fine with it. I've seen that a couple times, not just in my own deals, but other people's deals. And so I like to see who's got established relationships, it's the relationships with vendors in the market with staff with other things, if they're from another market, even if it's two hours away, it's going to be really hard sometimes to find new people, staff members for the property or even vendors that come in and work and I've just seen it, and these property managers will be very, “Oh come in” and we'll do this and everyone's to expand but I just prefer not to be the first one that they're expanding on. You know, so that's, I think the biggest thing.
Sam Wilson 19:18
That's a great piece of advice. Question number three: When it comes to investing in the world, what's one thing you're doing right now to make the world a better place?
Bronson Hill 19:25
Yeah, so my big why is really trying to stop human trafficking in the world. So today 2022, there are 20 to 40 million human slaves in the world more than there's ever been in history of the world. And there's, you know, sexual human slavery, there's labor, slavery, there's different things and I've just gotten really involved as a cause I am involved with called Dressember. Actually, my sister started this and they raised about 25 million for fighting human trafficking for creating awareness advocacy, and that's at dressember.org. People can check that out.
Sam Wilson 19:56
How do you spell that?
Bronson Hill 19:57
So just the word dress so like D-R-E-S-S-E-M-B-E-R, so it's in the month of December, they do it so they can find the word dress with December but guys wear bow ties, women's wear dresses during the month of December and it's a way that you can create awareness and try to stop human trafficking.
Sam Wilson 20:14
That's very good. Thanks, Bronson. Last question for you. If our listeners want to get in touch with you or learn more about you, what is the best way to do that?
Bronson Hill 20:21
Yeah, so I created this special report. It's called the Single Best Investing Strategy During and After a Pandemic, 24 colored pages. I just talk about a lot of the kind of the unfair advantages of multifamily investing. If somebody is interested in you know, talking about you know, partnership or looking at, you know, investing or just looking to kind of learn how to get moving, you can check out at Bronsonequity.com.
Sam Wilson 20:41
Thank you so much, Bronson. Have a great day.
Bronson Hill 20:43
Hey, Sam, thanks for having it was a great time.
Sam Wilson 20:45
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 I appreciate you listening. Thanks so much and hope to catch you on the next episode.