Creating Communities, Not Just Properties

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Today s guest is Todd Watkins Todd is a COO of a multifamily real estate operator with 4000 units He has 30 years of experience in real estate from private law practice to Fannie Mae to current operator Join Sam and Todd in today s episode ————————————————————– Introduction 00 00 00 Todd Watkins background and experience 00 00 36 Challenges in the real estate industry 00 04 24 Pay more for staff 00 08 54 Changing philosophy for tenants and staff 00 09 26 Challenges in the multifamily industry 00 13 28 Agency Debt 00 17 44 Changing Underwriting Assumptions 00 18 27 Name of Real Field Realty Partners 00 22 41 ————————————————————– Connect with Todd Web www railfieldrealty com Connect with Sam I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns Facebook https www facebook com HowtoscaleCRE LinkedIn https www linkedin com in samwilsonhowtoscalecre Email me sam brickeninvestmentgroup com SUBSCRIBE and LEAVE A RATING Listen to How To Scale Commercial Real Estate Investing with Sam Wilson Apple Podcasts https podcasts apple com us podcast how-to-scale-commercial-real-estate id1539979234 Spotify https open spotify com show 4m0NWYzSvznEIjRBFtCgEL si e10d8e039b99475f ————————————————————– Want to read the full show notes of the episode Check it out below Todd Watkins 00 00 00 – That uh that allows us to say you know yes the property right next door has their pool is you know two meters longer Or their you know whatever their their store is open for 15 minutes longer than ours is But you still wanna be here cuz we are building a community of people of you know interesting people interesting places It s a it s it s a you know you re getting more for your rent and again a a a commodity box where you can put yourself Intro 00 00 23 – 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 00 36 – Todd Watkins is the c a multi-family real estate operator with 4 000 plus units He s got over 30 years of experience in real estate from private law practice to Fannie Mae to currently being an operator Todd welcome to the show Todd Watkins 00 00 50 – Thank you Sam Wilson 00 00 52 – Absolutely Todd the pleasure is mine There are three questions I ask every guest who comes in the show in 90 seconds or less Can you tell me where did you start Where are you now and how did you get there Todd Watkins 00 01 03 – So okay it s interesting and where did I start There are a couple answers to that but I think the one I d like to say is I my earliest memory is um being told that for the summer of seventh grade I was going to go paint apartment units because my father owns 10 small apartment complexes in Philadelphia And uh that s if he would tell you if he were god rest facility he not around But he would tell you that that is how he paid for me to go to college Cuz he had worked for the public Philadelphia public school system for you know decades And it you know having a kid who he put into private school it didn t it didn t pay So he went out and bought um apartment buildings And so that s how I got my start in the apartment business Um what how s how I got my start How d I get to where I am Was that the second part Yeah Sam Wilson 00 01 48 – Where where d you start Where are you now Todd Watkins 00 01 51 – Yeah so now I am the Chief Operating Officer and a partner at Real Field Realty Partners We have about as you said about just over 4 000 units We re in nine markets from uh greater dc um a couple of markets in Virginia north and South Carolina And then we flip over to the bigger markets in Texas sorry Houston Um we re in San Antonio Austin um and Dallas Mm-hmm And so um you know we we I got there you know as when you when you said a 30 years experience all I could think of was man I m old Um and I got there uh the the long way um I got there by virtue of being a private lawyer Um I got there by um half by being in uh a department that worked with um real estate uh developers et cetera but primarily did a lot of work with Fannie Mae Todd Watkins 00 02 42 – Um and I was living in Los Angeles and uh you know I m from Philadelphia Kids need their grandparents All of a sudden I found myself back on the East coast with working for Fannie Mae Um and I had I was up late doing a deal Um this is actually I was still in private practice but I was up late doing a deal with a guy from Goldman Sachs and he you know asked me a couple of questions He went off I asked me to add some numbers together I did it kicked back to him uh a couple days later had to do the engagement letter for his firm Found out that he was going to personally make more than my entire firm was and I realized I was in the wrong part of the value chain at that point Uh started off working my way over to the business side at Fannie Mae and then uh with a partner had left about you know 18 years ago Um and started a couple of things bef you know we had a uh a real estate consulting practice before we finally joined up with somebody else and created rail field Sam Wilson 00 03 36 – Wow that s really really cool I mean there s so many I wish this podcast were longer because I m sure just the things that you your kind of insider s knowledge and I know things have probably changed since you ve been there Uh but your insider s knowledge of how Fannie Mae works how to get loans done just kind of all of that Sure Component is has got to be some somewhat of an advantage hopefully uh for you in what you guys are doing today Having had that experience from the private law side from being inside of Fannie Mae now to an operator with over 4 000 units uh under under your ownership like what what are things where are things going What are some challenges you guys are are looking at right now I mean it s there s trouble in the water Yeah I think but you tell Todd Watkins 00 04 24 – Me Sure sure I mean I think there are a lot of challenges um qual uh I guess uh there re on on the one hand finding people you know the I think the pandemic and times we ve come out of the pandemic have made a lot of people change their ideas of what how they want to spend their lives and what they wanna do and how hard they wanna work And hasn t um unfortunately changed my investor s views of how much they want make and how much they want those people to work And so um there there has been uh a real tough time in getting quality staff I mean just just bluntly putting um the turnover has been much greater The numbers of people who are good are asking for a lot more but they re also willing to leave much faster So there was a time when we it was sort of easier to have a a team that you felt you could count on and and they would be there for you at least for a little while Todd Watkins 00 05 18 – And now you know we fight for people every single day Um you know the the the amount of time that people are spending in their units what they re looking for in units has changed So the the product type and how quickly we have to keep things going um to to make sure that people want to be there But I guess maybe the greatest thing and I m I see you know I know it s only 15 in podcast but I d say um to to my mind I think there s some measure of the philosophy has gotta change in that or is changing and it needs to be changed And that we used to sort of think of it as a something of a commodity product right It s a it s a box where people put their stuff And now I think because it s a box where people put their stuff you have to have so much more And that s one of the things that real field is that we we try and build communities And so we re trying to create not just a place where someone can dump this stuff because let s face it as soon as I build you know the next next door is gonna be something shinier and brighter and newer So I ve gotta create an atmosphere where people want to live not just where you know the the cost of them moving is gonna be higher than staying at my place Sam Wilson 00 06 17 – Yeah those are those are all very very I think um interesting challenges that we re facing right now especially on the staffing side of things Are you are you finding that across the board it s a staffing challenge Are there certain entry level mid-level executive level differences in Todd Watkins 00 06 38 – Sam Wilson 00 06 39 – No Retentions Todd Watkins 00 06 40 – It s across the it s it s across the board I mean you know it s it s easy to say it s hard to keep maintenance people That s you know they re the the uh piece that that little bit of gold that everyone is searching for you know great maintenance people are just you know so few and far between And when you you get em all you wanna do is make sure that you know their phone only takes your calls and doesn t take them from anybody else Um but you see it as sort of every level And you know I think that um there has been a traditional path This kind of goes to what I was saying before about the the the philosophy But there s been a traditional path based on also on a leasing side where you go from you know you start up as a an associate you move up to be a leaser you know you have to be an assistant manager you have to be a manager um and then a regional and potentially beyond Todd Watkins 00 07 27 – And I think that some of these some of these properties and some of the numbers are getting to be so big that you know that path requires more than just having sat in the previous seat for you know at this point it could be six months You know that with the turnover so quickly So there is I think um there are there are changes and differences and some of the expectations that people have that they re just gonna go to the next level doesn t necessarily meet our needs When you actually get to the next level it would ve they would ve benefited by being in that previous seat a little bit longer in in particular But um but you know between that technology um and and the demand of tenants um or residents uh it s there at every level There s a there s a change and um it s it s hard to hold on to people Sam Wilson 00 08 11 – Yeah absolutely Any tips or tricks things that you guys are doing currently uh to kind of mitigate that problem Todd Watkins 00 08 20 – I mean honestly you know we re paying more I mean you know I think that s the you know I mean we want to change the paradigm Um I d really love to be able to have different entry points for different people and find a way to to make them be contented where they are so that everyone s not just looking at their boss we know to as a way to get that next job But the truth is it s such a fragmented market just so many owners and operators out there that everyone s trying to steal salad from somebody else And so I get to from what we re seeing right now is we just have to pay more Sam Wilson 00 08 53 – Right Right Todd Watkins 00 08 54 – And any and for stars we re willing to do it And and you know and and I would just say you know it might be if I could make a commercial for us in in the markets where we re if you re a potential manager out there for stars we are willing to do it We re absolutely willing to pay more And we you know we we have to But I mean I think that you know these are like I said these are getting to be good sized businesses You know you buy property for 60 million you don t just turn it over to anybody So you know the difference of six eight 10 000 in in a manager s salary on a on a business that size means nothing So right Yes Oh yeah Sam Wilson 00 09 26 – No it absolutely doesn t Uh you talked about how the philosophy kind of needs to change as it pertains to the tenants Before we get to that what outside of pay more is there a philosophy that you guys have had to change as it pertains to your staff Todd Watkins 00 09 45 – Sure Like I will say like right now we are in the market for a concierge at a property in Dallas right The the idea is it s no longer enough to have you know someone who calls when your toilet overflows or someone who s not you know we wanna become a part of the community We wanna have you know if and I can tell you the name of the property it s Skyline Trinity you know I I m talking to the city about having you know a 5K start there you know or what can we do to get our name out in in that way to have a concierge shoe sort of you know they know all the restaurants they know the places to go They re a real resource that uh that allows us to say you know yes the property right next door has their pool is you know two meters longer or their you know whatever their their store is open for 15 minutes longer than ours is But you still wanna be here Cause we re building a community of people of you know interesting people interesting places It s a it s it s a you know you re getting more for your rent and again a a a commodity box where you can put yourself Sam Wilson 00 10 44 – Right No no that that s really really cool And I and that and that again you know that that plays to both both staff and uh and to tenants where if you so we ve talked a little bit about the challenges that that you re that we re facing right now You know how people are living We ve talked about employment and staffing challenges Have we talked about insurance and kind of the things that are uh challenges on that front and then how you mitigating just the ever increasing cost of insurance Todd Watkins 00 11 11 – Yeah that s a tough one Honestly that s what I m dealing with right now Um the there have been a lot more once in a thousand year events that seem to have hit um particularly in parts of Texas um along the coast At the same time coming out pandemic there are a bunch of insurance companies that have just left the market And so the premium increases renewal re increases sorry that we re seeing are you know a hundred percent you know I I got one in April that was 80 couldn t believe it And then just recently got them was 120 So I think that you know and I I know some of your um viewers listeners are are smaller I think there are what we re trying to find is programs to help small people get together so we can get some of the hef to the and and the benefit of size that that you know some of the enormous players in this business have they can go out they can create their own towers of insurance or even their own captive insurance companies you know but my fourth thousand means I can t do that but I know but but that s sort of some of the things we re trying to look at is even combinations with other operators to see if there are ways to help us you know get some benefits of of scale Todd Watkins 00 12 22 – Because I mean I I think and you know now I m gonna demonstrate an entire industry I know nothing about but I think the insurers are really looking for ways to just bring in more profit more premiums than they re paying out in losses So you know when they look when they look at my portfolio and do their pricing you know it s you know I have to have it And I don t bring a whole lot to the party than than my 4 000 units So if I can find ways to help people you know I mean the some of the things that that have been offered of you know well take a you know an an enormously higher deductible you know there are that s like part of what the insurers are coming back to me with renewals on I m already taking more risks than I wanna so it s it s finding some way to be creative to get more people in to to truly under or or to have enough a good enough relation with my um brokers so that they can really tell our individual story about some of our properties So it s not just you know east of I 95 makes a coastal and so jack up jack up the premium it s this property is here there or the other place And it s not the same risk as you might generically think it is by just looking on a map Sam Wilson 00 13 28 – Right man Yeah And that s a challenge I mean how absorbing that absorbing that Indian right Yeah Yeah Todd Watkins 00 13 37 – Well so that s the thing right So we ve talked so what have we talked about We ve talked about competition we ve gotta pay staff more I got a hundred percent insurance increase Um you know I mean I can tell you that the the local municipalities are not looking for less on their property taxes Um you know it s it it s an ever bigger challenge I mean it s fun but it s never bigger challenge Sam Wilson 00 14 00 – Ever bigger challenge But there s a reason you re still in it So what are the Todd Watkins 00 14 05 – Opportunities You re saying I don t have any other skills Sam Wilson 00 14 08 – I m not saying that at all I m saying you can do anything you want and yet you choose to stay you re in it So no clearly not You have way more skills than uh than I do I promise you that But but what are what s the opportunity that you see right now Todd Watkins 00 14 27 – Oh I mean you know look commercial real estate is and and so we are in multifamily right That s that s all we do We you know we one of my partners like to say you know we don t know a lot about a lot but we know a lot about this right Um it s right It s still it s an incredibly fragmented industry So you know the the you know there re millions s and i I should have known these numbers but you know million management of of apartment properties out there and and you know hundreds of millions of units And the largest operator owner operator has about a hundred thousand hundred something like that So it s it s an incredibly fragmented um uh market It the the challenge every day there s a challenge in each one of these businesses and coming up with strategy and figuring out how we can keep it best positioned to make the highest return Todd Watkins 00 15 12 – Um you know it s it s tangible in a way that you know you get to go in and see you know say we should pay for something and then six months later actually seeing it come to fruition You know you you you go to apartments and you actually see you know kids playing on on swings that you decided to be there You know it s it s a lot of fun actually I mean you know I suppose um you know everybody finds the thing that they liked or everyone should find the thing that they like to do the most And I guess for me you know at this stage of my life certainly this is what I like to do the most Sam Wilson 00 15 46 – Right Is there is there any strategy or um anything I guess when you think about the multi-family space holistically is there something where you re like Hey this is where our niche is and this is why we re staying here Todd Watkins 00 16 02 – Yeah so um you know we don t develop that s a whole different set of skills So you know looking at a piece of dirt and you know turning it into a a building I mean I I could only pray to be that creative and and to deal with all the headaches that that go along with that You know we um we don t do like really high end stuff And we have some stuff that that we have um uh bought that s relatively newly built but you know not skyscrapers um you know Manhattan and all that sort of stuff We are you know and maybe it s um it goes back to our time at Fannie Mae but we re sort of BC market buyers Um you know we like um the solid part of the market It s not you know I m a brain surgeon but I just feel like renting it s people who you know if they don t necessarily need to rent they re on the cusp of it Todd Watkins 00 16 53 – You know they they they wanna rent Um and we wanna provide great um homes for em But it s it s people who um you know are not just you know having a having a a you know a pieta tear because their place at the Hamptons is being worked on Um so that s sort of the the part of the market where we stay we know it we think it s the deepest part of the market Um having been lenders it has proven to actually um provi perform the best in downturns Hmm And so you know once you re a lender you know you always sort of watch the downside um a lot more than the up So yeah that s that s kind of where we ve come from where we re we ll probably stay Sam Wilson 00 17 29 – What what are you guys doing uh speaking of lending Like what s an attractive what are attractive terms What are attractive loans that you guys are are looking for and liking right now Todd Watkins 00 17 44 – So that s actually not my part of the business Um I have a partner John Siegel who who runs that But typically you know we ve been getting and and I I jumped over something quickly which I should have forgotten It s it s not only did we come from Fannie Mae but one of my partners Ken Bacon actually used to run Fannie Mae He ran Fannie Mae multi-family for about 12 years So um we have done pretty well with agency debt Um it s typically you know uh seven to 10 years Um we get as much interest only as we can Um and you know it s a it s a cashflow business in the collection business So but in terms of actual terms right now that would be something John would ve to you you d be better off talking to him Gotcha Say they ve better off talking to him Sam Wilson 00 18 27 – I doubt that Here we go Let s talk uh about underwriting assumptions Maybe uh maybe you can talk to us about cuz I think one of the things you mentioned earlier was that you know we have all these we have all these rising costs from everywhere from staff Sure Insurance to you know all those challenges coming at you and yet you also have investors who are still wanting that amazing return that they were getting in 2019 and 2020 How are you changing those underwriting assumptions for 2023 and then how are you communicating that back to your investors Todd Watkins 00 18 58 – So it s um honestly it s hard and you know they re not many deals are getting done Um we actually are just have just circled our first deal for the year um just this past week Um and it s it s difficult Um we actually you know it s we have different investors who have different um requirements and so we can kind of um try to find a fit for them but it s been very very difficult And in fact I mean I don t know who else you re talking to but I haven t heard of many deals going off this year I think volume is just way way down Um so I think that there is a how should say a sort of a bid ask that is or or readjustment um that s gonna have to happen Um as truth be told some of the sellers are gonna have to come and start to realize that you know some of the amounts that they thought they were going to get you know 15 18 months ago just aren t going to be there Todd Watkins 00 19 57 – Um I mean it s you know it s it s just a math Um you know investors you know investors still do want some of those returns now They re you know they also will have to at some point come to grips with the fact that you know uh if if they re going to put money out it s gonna have to they re gonna end up having to do something at lower than the returns that they were um looking for as well But that s you know how a market will be made right is people both sides will have to give some Sam Wilson 00 20 22 – Right right Yeah And I I would think just you know from a uh outsider s perspective we only have a couple multi-family properties in our portfolio but from an outsider s perspective those deals with agency debt you know that was acquired two three years ago at two and 3 fixed for 30 years I mean those are the ones that I think will still trade at you know uh you know at a premium Am I in in incorrect in that assumption Todd Watkins 00 20 50 – Well all especially if it s a sum Um the yeah well that s that s largely what we ve we ve been trying to do is assume is a assume loan Um but but again remember agents so just so we re clear multi-family um tends not to have the 30 year death A standard product that comes out of Fannie is like a 10 year product Okay Um single family will go out will go out to 30 years But typically on multi-family it s it s 10 Um sometimes you might see something out of FHA that goes longer but I think it s typically it is 10 as the horizon But yeah that s where that s what if you have um if you have loans that can be assumed that where the math works there that s probably where the action s gonna be Right Or quite honestly if you re I mean you know I think you know back to my father um you know and one of these things it s like you know there s always gonna be a deal because someone always gets divorced dies you know has to sell for some you know has some cash requirement Todd Watkins 00 21 46 – Um I think there were deals done a few years ago that had variable rate debt um where either the rates has gone up so much that they can t afford it or the escrowing for the next cap has gotten to be so much that they can t afford to hold them anymore And I would imagine that some of those you know there could be that could be where some of the movement starts Cause some of those people I mean you know God bless em I hope they re all doing but but I I would imagine if they re not feeling it feeling great right now Sam Wilson 00 22 17 – Right No no they re not I can I I can I can only imagine as well And having talked to some of the people on this show uh who have been in that exact and are are in that exact predicament right now where it is um yeah they re feeling they re feeling that pinch Todd I got one last question here for you Rail Field why that name for your company What what does that come from Todd Watkins 00 22 41 – So um uh you know it s uh the short answer along short answer was we were starting with a uh a program and investor who you know needed a name And it was already written in the documents because my partner Ken had come from when he had come over he had a he had a company called Refield Um so we just took it longer answer Um the originally there were two partners ones African American and one was Asian And the Asian person said when my family came over here in the mid you know 19th century you know they were probably working on the rails And the the African American guy said well at the same time I m probably working in the fields and you got rail and field So Sam Wilson 00 23 21 – There you go There you go Fantastic I love I love I love both answers as short and the long That explains it very very clearly Todd if our listeners wanna get in touch with you learn more about your firm uh what is the best way to do that Todd Watkins 00 23 35 – Rayfield realty com Um it s the long name but I think it s worth it Uh but yeah look us upfield realty com Sam Wilson 00 23 42 – Rayfield realty com Yeah we ll make sure we put that there in the show notes Todd this has been certainly insightful Your uh your experience is unique and you ve shared a lot of really great stuff with us here today So thank you for taking the time to come on the show today We certainly appreciate it Sam Wilson 00 23 57 – Thank you so much for Todd Watkins 00 23 58 – Having me I really enjoyed it Sam Wilson 00 24 00 – 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 Podcast Spotify Google Podcast 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 hire on those directories So appreciate you listening Thanks so much and hope to catch you on the next episode Click here to visit this podcast episode