Winning Solutions For Everyone With Joint Venture Deals

Play This Episode

1 Vote

Welcome Back to How To Scale Commercial Real Estate Podcasts Today we are joined By Hendra Tambunan In this episode we re discussing the challenges of selling a business or property shifting from a transactional mindset to one that focuses on cash flow We also discussed how to overcome common challenges such as zoning issues or prohibitive pricing Hendra has been involved in Multifamily in multiple projects he is an expert in data architecture and design leading the migration and deployment planning He Has a solid background in analyzing and developing systems database implementation and data integration across various database platforms Let s Join Hendra and Listen to his Journey 00 00 – 06 16 Opening Segment Hendra Tambunan has been involved in multiple multifamily projects with over 1500 doors as both a general and limited partner He is involved in commercial grade short-term rentals and he also leads the San Francisco chapter of multifamily 06 17 – 12 01 Joint Venture Looking for a stable high-return industry like farming or manufacturing Some people looking for an MSA may want to look into 400 000 or above or 250 000 above It s not going to be one size fits all when it comes to criteria for an MSA Some areas may be focused on farming while others may be focused on manufacturing There is a market cycle and everything is cyclical EV electric vehicle manufacturing is pretty hot but who knows 10 years 15 years from now might be different 12 01 – 17 59 How to Sell a Bed and Breakfast that s Already a Short-Term Rental How to sell a property focusing on the idea of converting it into a short-term rental One unique challenge faced was getting the property zoned for short-term rentals as it is already a commercial zone By telling the potential buyer of the intentions of the property they were able to get buy-in before the hearing 18 03 – 22 20 Closing Segment Reach out to Hendra Tambunan Links Below Final Words —————————————————————————– Tweetable Quotes One thing that people forgot is what you wanna sell is the experience – Hendra Tambunan Connect with Hendra Tambunan by following Him on Facebook by visiting their website at www ideaboxcapital com You may also call him at 510 270-2920 Connect with me I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns Facebook LinkedIn Like subscribe and leave us a review on Apple Podcasts Spotify Google Podcasts or whatever platform you listen on Thank you for tuning in Email me sam brickeninvestmentgroup com Want to read the full show notes of the episode Check it out below 00 00 00 Hendra Tambunan when I invest in multifamily is always gonna be creating a clean and safe environment and affordable Those aiming for a worker that can never afford it but doesn t mean that we re gonna take advantage of them but we are trying to create a clean safe and affordable environment for them while we re still able to providing a good return for our investor as a partner 00 00 33 Sam WIlson Hendra Tambunan has been involved in multiple multifamily projects with over 1500 doors as both a general and a limited partner Additionally he s involved in commercial grade shortterm rentals and he also leads the San Francisco chapter of multifamily and more Hendra Welcome to the show Thank you for having you Sam Hey the pleasure s mine Hendra There are three questions I ask every guest who comes in the show in 90 seconds or last can you tell me where did you start Where are you now And how did you get 00 00 58 Hendra Tambunan Well for me I started with like everybody else started with single family home start seeing and realizing it s not scalable fast enough Start looking into things to ways to scale up and always going back to commercial motel family because that s a part of the force appreciation that I can go deeper later on But that s what my main focus right now is basically focusing on Commercial great multifamily And in terms of the scaling up well it s a team sport Well the you basically team up with people and that s how you scale up and that s make you scale up a lot faster in this kind of asset class 00 01 35 Sam WIlson How long ago did you make cuz I know I think at one point you were investing in single family Wh when did you make that switch from single to multifamily That 00 01 43 Hendra Tambunan was like a three years ago Okay 00 01 46 Sam WIlson Yep All right And it s been a wild ride in multifamily these last these last three years we ve seen incredible price appreciation We ve seen incredible rent growth I mean how are you guys finding opportunity in the midst of a very competitive environment 00 02 02 Hendra Tambunan So in that kind of market cycle that says a lot of thing that people don t realize that market SI we are in a different micro cycle Given time of the year You gotta employ a different strategy for me I live in California There s no way for me to find a deals However I have a lot of capital through my network That s how I partner up with operator and that s how we find and partner up and then take down larger property that And that s how we able to scale up going back again a team up and working together 00 02 37 Sam WIlson That s really interesting So are you working with multiple operators in multiple markets 00 02 45 Hendra Tambunan Not just any part any market The way I started I pick one market that I know that is gonna be growing because of the fundamental of the population growth job growth multiple industries and there s enough demand in that market That s how I pick a market to begin with and work with operator over there That s pretty stable and really ready to take it That s how I able to get into Dallas corporate market three years ago 00 03 14 Sam WIlson How so So let s think about some really tactical steps someone could take if they wanted to follow in your footsteps You tell me this Hey find a market that has the right demand features that has the right demographics that you want in It has the right job growth population growth all those things What s someone s next step If they wanna break into a new market how would you recommend someone going about finding and locating that operator partner 00 03 40 Hendra Tambunan Yeah Well I do believe with the intentional relationship Obviously a lot of people like networking and a lot of people especially when they started in commercial multifamily space they tend to attend every single meet up every single networking zoom everything like that That s great But be intentional though Do your homework what are you looking for What kind of customer base for your multifamily investment gonna look Because as that not every multifamily is created equally Are you aiming for a blue collar worker Are you looking for a lap star renter be intentional What you are aiming for now if I m saying that I m looking for a lap star renter but somewhere in the suburb of Montana it will never gonna be working out because they don t really have anyone like But if you do your homework you understand what you re looking for during the networking meeting you state your intention like Hey I m looking for an operator in such and such market That s focusing in this kind of customer base Then you are most likely someone you met not doing it but they might know someone who might be doing it That s how you create that relationship established over Right 00 04 55 Sam WIlson right Yeah I mean cuz that s that s it is outta the gate is it is networking but then defining the criteria of what it is you re looking for which brings yet the next question which is how do we define that criteria What did you do 00 05 08 Hendra Tambunan Well for me I m looking for my mission and when I invest in multifamily is always gonna be creating a clean and safe environment and affordable Those aiming for a worker that can never afford it but doesn t mean that we re gonna take advantage of them but we are trying to create a clean safe and affordable environment for them while we re still able to providing a good return for our investor as a partner So if you see it this will be create like a win-win win solution for everyone That s the intention of when I jump into commercial multifamily space So with that kinda understanding I know that I m not gonna looking for like Property in San Francisco or LA because that s a little bit different market but I m looking for a bread and butter where there s a manufacturing heavy industry that people can never really really afford a house but they still can be provided with those quality of living So that s kind of the market that I m looking for It could be the Sunbelt belt could be in the suburb the Sunbelt belts and then also looking for the population growth and job growth Some people looking for MSA like maybe like 400 000 and above or 250 000 above that s something that you have to do your homework on because everybody criteria is gonna be different And then looking in the sector of the industry that you re of your target market too It s not gonna be one size fits all Some area may be focusing on farming Some area may be focused on manufacturing and again that s part of the homework that you have to do How stable is that industry Cause like just like market cycle that we are in everything is cyclical Right now EV electronic electric vehicles manufacturing is pretty hot but who knows like 10 years 15 years from now Right But farming for me is pretty stable Right But again farming s also come with some cycles too that who knows So maybe lab food being created like beyond meats or something like that down the road I don t know Right But again you gotta be forward looking in some of industry that you re really focusing on 00 07 15 Sam WIlson Yeah absolutely Absolutely Tell me this I know you and I talked about this a little bit off air You guys are doing something outside of the syndication model What are you guys currently doing I know you re moving into markets You re selecting your operators You re involved in multifamily but you re structuring the deals a little bit differently What are you guys doing 00 07 34 Hendra Tambunan well my my main focus has been shifting a little bit I m still doing some syndication but also start shifting into joint venture joint ventures little rather than like syndication it s still taking on commercial multifamily but in the case like joint venture you everybody is participant is an active participant in the deals rather than just like passive and active like typical syndication does So in this case there s some opportunities in this current market cycle given that higher interest rates still that for smaller property that we can take it down And the idea is just like everybody just chip in And then that way that we can keep the property for a longer term That s the only intention rather than like looking for 5 6 7 years Now we are planning to keep it for a longer time and then eventually passing it to our next generat Which is our kit So that s the only reason that we we do it that way rather than a syndication model 00 08 31 Sam WIlson So I guess that requires I would think one high net worth investors that can bring the capital to the table Is there a deal size that you re working with that fits your buy box for a joint venture right now 00 08 45 Hendra Tambunan That s correct Yeah There s gonna be some high network that could be acting Like I said KP there s also obviously All the your partners who dealt with the in the syndication previously they get some extra equity that they can put in together So thing about it look is shifting it from syndication which is considered like a transactional Now you moving it for interim like the form of equity that you keep doing it and then you can do cash refi at the property value grows Right And but you keep the property for the in meanwhile up to that do you guys 00 09 17 Sam WIlson structure the Can find you can find the right word but do you guys do this with a waterfall Do you guys set it up like a typical preferred return with a 70 30 split Like or is there are the terms of the deal very different with a joint venture 00 09 31 Hendra Tambunan Typically there s gonna be some split for those who are gonna be in the beginning Who s helping with the bringing the deals but the rest is just gonna be Perada based on the equity that you put in Got it 00 09 46 Sam WIlson Got it That s really interesting Why did you guys decide to go to that model as opposed to syndications 00 09 53 Hendra Tambunan Well there s some opportunity there in the market right now given the higher interest rate they re still gonna be mid-size units that still able to give the return that you re looking for over a long So for us that s what we are liking And then plus we also like to keep it for a longer term that pass it to the next generation Right It s not the intention Like it s not just like Hey a hundred unit 200 units It sounds good But for me you gotta balance that in portfolio rather than like transactional You also wanna keep the equity to grow That s kind of again it s like rebalancing the portfolio That s the intention Got it 00 10 32 Sam WIlson So so more or less this is for you guys an opportunity to say Hey look we re not gonna do the typical five to seven year disposition I wanna buy this I wanna hold it And so you have found some other like-minded investors that said Hey you know what We wanna just hold this in perpetuity or as long as it makes sense there s no point in the proverbial selling the milk cow No point in doing that So let s all just go in with a higher check amount per investor You probably have fewer investors I would imagine right Yeah 00 11 02 Hendra Tambunan That s definitely what s happening That s the that s actually the disadvantage of joint venture right Because obviously rather than like you re getting like X amount of investor that playing passively now you have only had limited pool number of partners that everybody have to work together For a smaller project too Right 00 11 20 Sam WIlson How long from conception to actually getting a deal across the finish line Did this idea kind of come into your head where you said Hey look I wanna have a joint venture I need four or five partners higher net worth individuals How did you get that done 00 11 32 Hendra Tambunan So actually this is happening like about a couple of years ago we got a our 44 units that we partner up together and we stopped looking at and obviously everybody s still doing Sy syndication but the more we look into it like Hey it kind of makes sense right now because we kind of enjoy it We do a full cycle on that one because we do a Casa app refi and we see the model already And then say like this is kind of nice Because now you ll get refi cash out You ve got your cap capital back Now it s still producing a cash value You re looking for imagine if you keep doing it again and again hash and repeat right That s that s pretty much the model That s something that you keep like what you said The golden goose is still there and keep producing golden egg for you on an annual basis while you ticking in out without killing the golden goose per se And just do rinse and repeat Right 00 12 25 Sam WIlson That makes a lot of sense And that s something I ve often struggled with in the syndication model which is we re doing that in the RV resort space right now where it s like my gosh these are enormous cash on cash returns Why are we discussing selling this I don t understand when it produces an income It s hard It s really hard And that s been probably a growth for me as an investor is shifting out of that transactional mindset which even in a five to seven year old is still kind of a transactional mindset into getting into the cash flow And that s Robert Kiyosaki s whole thing is get the cashflow quadrants like get into the place where consistent income comes in every month And that makes a that makes a huge difference One thing that we had talked about maybe was even there in your bio I don t remember Yeah it was com commercial grade short term rentals That s something else that you re involved in What is a commercial grade short term rental 00 13 19 Hendra Tambunan So one thing that we did my partners not our partners in Midwest they found an Airbnb sorry bed and breakfast That for some reason used to be operating as a bed and breakfast and somebody actually bought it and used it for personal residence So it s a commercial great zone It s a Victorian house 1893 built But obviously when they have an urgency they become motivated to sell because of Health situation They cannot really sell it because number one is commercial zone So when you wanna sell it there s not really comp And then if you wanna sell as a commercial there s not really income because they use it for personal housing But they we end up doing though We power up with people again as a JV structure we take it down as cash able to close according to the time that they re looking for And One thing that did down to us like Hey why don t we make it a short term rental but now becoming because we bought it cash We can do whatever we want We put a prototype with the 18 months Pro profit model then we can be cash out refi again Cause that way now you have a substantial cash flow that you can use as a baseline to go to approaching a DSCR lender and cash out that way So a lot of people are focusing so much on short term rental because of primary residents but sometimes people forget Maybe a motel that you can use it to become like a short term rental too It doesn t have to be like a big massive short term rental 20 units of hotel thing like that Something you can be as like small like 5 6 8 smaller motel that you can convert into commercial grade short term rental because One thing that people forgot what you wanna sell is the experience this Victorian home by the way is by the lake site So the moment you go out you can see the lake you can walk and then it s like sitting on a two acre lot So you got a lot of green space over there that you can enjoy and then have an quite experience a family for family gathering or even small wedding 00 15 22 Sam WIlson That s really cool And that s something I have heard where people are running into challenges and I don t know if you ran into this with your project but they ve run into challenges in getting short term rentals zoned or they may have short term rental restrictions in the area A lot of municipalities are putting in short-term rental Restrictions but if you buy something like an existing bed and breakfast it s already zoned I mean it s already a short term rental or to your point of motel it s already a short term rental You re just changing the way in which it operates Exactly Yeah there s not the red tape Oh Hey there s a short term rental movement in town It s like well no this is a bed and breakfast It s been a short term rental for a long time So I think that s really cool What have been some unique challenges maybe that you guys faced and how did you overcome them in getting cuz it sounded like the bed and breakfast Was it still in in business or had it closed 00 16 13 Hendra Tambunan It was closed way back then Wow And then it got convert to a single family residence Now when we obviously we do have a pushback from neighboring because we tell they are afraid the typical bad Airbnb typically like a party school party goers right It nuisance Right Noise problem We bring it up to the hearing by the way in this is located in an in corporate area So obviously already commercially zone So we do have some upside on that one We would do a hearing However we also be able to my partners going knocking door or neighboring to neighboring properties and tell em like look this is the model that we re looking for We re not gonna be buying in just A property just for our college kids come and party on a weekend Right But this is the intentions are gonna be like for corporate retreat family reunion thing like that And then we also tell them like this is the price when they re looking for we actually our prospects like about four figures At night right Summertime And then during wintertime this is a Midwest Lakeside as you imagine the wintertime is very cold but still gonna be less than a an higher triple digit So we tell them like look how many college kids can afford that kind of thing Even though it s like eight bedroom but still that s gonna be too massive for them We re not gonna be letting any college kids coming in and have a party Costing a lot of issue for you guys So we are able to get buy in before even the hearing So during the hearing we just basically just stem up approval formals 00 17 46 Sam WIlson Got it Oh that s really cool How have you guys found an effect or what have you done to effectively manage that from a long or from a distance 00 17 55 Hendra Tambunan So my business model again I live in California west coast I was able to I always invest out of state because I always pop and rock with peoples who is acting as an operator who is living over there as oppos on the ground So that s our always our model working I come in this the position of it ll coming in from capital raise for the syn prospective there but I also come from the asset management and as well also deal structured And some ideation obviously in planning in some of the execution 00 18 27 Sam WIlson Got it That s really cool I love that So you said in 18 months your plan was to buy that commercial grade short term rental Turn it in actually get the business running and then do a cash out refi on that Have you been able to implement 00 18 41 Hendra Tambunan that No we are still in we are in about September right now We are in nine months We still have nine more months to go But so far it s hitting on the dot what we are looking for this summer We re probably gonna be exceeding The plan 00 18 55 Sam WIlson Gotcha That s really cool That is really cool If you were to rewind say I don t know how long again I didn t get that maybe in the intro there but how long you ve been investing in commercial real estate but if you were to rewind the tape what is one thing maybe that you would do differently If you could 00 19 10 Hendra Tambunan I would say that connect with people as many as you can But not only just connecting be intentional and see how can you add value to people Because that way you re gonna scale a lot faster right This podcast title help to scale in more commercial multifamily But a lot of people are asking like how do I scale up How do I scale up Well you scale up when you scale yourself up first by adding value to other people that you re gonna be getting a lot of opportunity and deals coming your I love 00 19 42 Sam WIlson that I love that if you were to rewind a tape and then say here s something I did really well what would you recommend that people do to follow in your footsteps 00 19 52 Hendra Tambunan I would always say that to me and my wife We are doing this together Get comfortable in being uncomfortable I m not an extrovert to begin with I m an introvert by nature right But now I started becoming an Ambivert But he just basically got comfortable and asked people like how can I add value to you What are you looking for And how can I help you to grow Instead of me grow Cause I want you to grow first then we ll grow together That s 00 20 17 Sam WIlson awesome I love that I love that Hendra You ve given us a lot of things here to think about I like the way you re restructuring really the balancing of your portfolio and saying Hey look we re going to do more joint ventures We re gonna do things and hold em in perpetuity We re gonna do stuff that we can then pass on to our kids if they want I think that s really cool It certainly speaks to my heart I go gosh that s that s kind of the goal I think for me as well is building that portfolio of things that we hold for a long period of time as opposed to the transactional nature that we can certainly fall into on the syndication front Commercial grade short term rentals I hadn t heard that phrase before but certainly like the way that you ve put that because again taking things like a previous bread and breakfast and turning it into a short term rental that s something that we ve certainly seen a few people chip in here on the show and talk about and the in the ways they ve taken that down And I think that s a really unique opportunity as well especially on the short term rental front maybe that people aren t looking at So you ve given us plenty of things to think about Is there anything else you d like to share with our guests here before we sign Yeah Well 00 21 16 Hendra Tambunan I like I said I ll always love to add value to people If you are a season or even the beginner in commercial family space if there s anything I can help you with they can reach out to me I can be reached at Facebook through Facebook Hendra Tambunan or I ll give you my phone number too If you want to connect with me 5 1 0 2 7 0 2 9 2 0 And then just mention that hear us from this podcast and I ll be happy to schedule a time and connect and help them to 00 21 45 Sam WIlson grow That s awesome Yeah we ll make sure we put all those things there in the show notes as well Hendra thank you for taking the time to come on the show today I certainly appreciate 00 21 54 Hendra Tambunan Thank you Sam for having me Click here to visit this podcast episode