- June 23, 2020
- Posted by: august19
- Category: Podcast
In this hustle economy, it is not new to find investors getting into the note business who also maintain their full-time jobs. As such, scaling their note investing business is considerably trickier for these busy professionals. In this episode, Chris Seveney brings over Mike Vann to the show to discuss the ways you can scale a business while also working full-time. Mike is the co-founder of Trident Multifamily, a company that helps busy professionals create and preserve wealth through passive investments in cash-flowing multifamily real estate. Here, he takes us deeper into how they are able to do that, spilling some helpful information and tips to help you get started on your path to growth. Mike also shares his own real estate investment journey while giving advice about partnerships, raising money, and property management.
Listen to the podcast here:
Scaling Your Note Investing Business While Working A Full-Time Job With Mike Vann
I have a special guest Mike Vann from Trident Multifamily. Mike, how are you?
I’m doing great, Chris. How about yourself?
We’re going to talk about being able to scale a business while also working a full-time job. I look at myself, I haven’t been able to scale my note investing business and then I found Mike through a common acquaintance. Mike has been able to take his real estate business to the next level. Why don’t you give everyone an intro before we start rolling into some of the things I want to talk about now?
I appreciate you having me on the show, first of all. We all start off with our 9:00 to 5:00 and the way I got into real estate investing, I started out with single-families, duplexes, small multifamilies and then got into some fix and flips during the big beginning of that craze. When the credit crunch hit, my thought process was no one can get credit to buy my flips and I’m going to stop. Had I been more educated at the time, I would have been going all-in doing buy and holds, buying it bottom dollar prices, renting them, and then waiting for the price to come back. Throughout the process of between eight and ten, I had been further educating myself and realize, “No, I’m missing out.” I jump back in and started putting feelers out. I found a bank-owned sixteen-plex. I bought that, cashing some stock options and bought a piece of property and I then probably missed out on a few deals after that because it was such a good deal that I got on it.
I expected everything to be like that. I got a little bit more realistic and bought a few more properties over the last several years. In 2017, I sold that first sixteen-plex and 1031 that into a 55-unit complex. That’s about the time that I started thinking about syndication as a scale strategy to scale and then joined the mentoring program. I met several operators who were doing what I wanted to do and were at the level I wanted to be at and part of that with a few of them and between 2017 and now, I’ve accumulated on as a general partner myself, along with other people in the partnership with about 1,000 units.
Are you still working full-time?
I’m still working full-time in the medical device industry.
You’ve met a general partner, have 1,000 units and working full-time.
That may sound like a lot and it is a lot of doors so to speak but there are various roles in each of those partnerships. A lot of people will use the, “We own this,” or “We do that,” when they may not own a significant portion of any of those deals. If any, they may have just been a KP on a thousand doors or whatever. My first two deals, I did KP on those to get my Fannie and Freddie gold card and then the next three deals I did after that, I was co-sponsor on.
We’ll talk a little bit about that because I know one of the most important factors is putting a great team around you in place. I’ll touch base about that and also mentoring. The first question I was going to ask you is, why real estate? What got you involved in real estate? It sounds like you had some stock options. You were in the markets and so forth. What was your desire to get into real estate?The hardest thing for a lot of people to do is to take that first step, but once you have done that, the sky's the limit. Click To Tweet
Through my corporate job, I did have 401(k) and did some day trading here and there. It was one night or whenever I was watching one of those late-night infomercials. I saw a Carleton Sheets ad with the big Jaguar behind him and the giant house, the Palm trees. I was like, “That’s the kind of money I want to make. Making my 6% to 8% on the 401(k) is not going to get me there.” I started looking into real estate at that point. I bought the course and it sat on the shelf for a year until I was told to wait by the phone as we were going through some restructuring. I waited by the phone one day and see if I would have a job. After I made it through that phone call successfully, I realized that, “I’m just a number to Corporate America. I needed to do something on my own to establish another source of income and I thought real estate would be that best choice for that.
With the 9:00 to 5:00 and managing that first, getting started, what was your biggest choke point of making that? As you said, you saw the infomercial. You took the training and sat for a year. Was there a moment where you were on the phone call about, “I need to do something,” but being able to say that and doing it is also another level of confidence that’s required and so forth? At that point in time, were you confident going into the deal or is it one of these things where you are like, “I’m going to try this and see what happens?” Many different people try it from different avenues.
You see a lot of people get super educated on real estate investing. They go to all the meetings and all the conferences and then never buy a deal.
Analysis paralysis is what we call it.
I have confidence in my own abilities. I did have some construction knowledge. I knew I could do a lot of the work myself initially. I went out and dusted the course of. I read through it. We’re not driving for dollars and I put the stuff to work. I ended up closing the first property I found. I did the work myself. I managed it myself and realized that I’m not cut out to be a landlord.
You mentioned driving for dollar stuff and one of your keys from doing a little bit of a diligence on you, is you like to stick to a specific market.
Initially, I did stuck to the market I knew where I lived in. I think that’s a great way to start. The more pieces you can put in place to make you feel comfortable about taking that jump is going to make you take action. It’s sticking with the market that you’re comfortable with or you’re confident in and then knowing your numbers and building a good team around you is going to give you the confidence to take action. It is the hardest part for a lot of people to do is just take that as that first step and then once you get that first one under your belt, the sky’s the limit from that point on.
It’s similar to my experience. You bought a few initially under the belt and once you start realizing that you mistake here and there, but nothing I’d say that’s catastrophic. You learn from it and you keep going. The money typically you put in early on is the money that you have to potentially expect, maybe you might lose some of it, but at least you better learn from it is the most important thing.
It is hard to lose money in real estate if you do proper due diligence. If you have a good, fundamental education about it, you do proper due diligence and you’re not so hungry to get a deal that you put on blinders and miss a lot of things that can get you in the hole. It is hard to lose money in real estate, although it can be done.
It happens on occasion and it depends on stuff that may happen to people but as you said, I see people like on the website BiggerPockets. Somebody posted something that they’re trying to buy a property, rehab it and then refinance it to get their investment out of the deal. The person ran the numbers but forgoing to take into account the cost for the renovation. I’m reading this and I’m like, “There is some real generic basic thing,” but the other thing that I like to tell people and this rolls into the mentorship component to it is, if you don’t know something, go to these groups and ask people. Find someone who fits your niche a little bit. They don’t have to be a full-blown mentor for you, but at least use them as a resource. I find a real estate that a lot of people do like to help people to some extent.
There is a significant abundance mentality in this industry and with the resources available through the internet and all the blogs, shows and websites, there’s almost no excuse to not be well-armed going into your first deal. There’s a lot of free advice out there.
Tell me a little bit about the mentorship program because a lot of people talk about either of these mentorships or masterminds. To me, these types of programs are when you’re dealing with people who are experts or people who have value-add. Sometimes I see these types of programs get so big, especially when they call them masterminds and it’s not a mastermind. It’s 1 or 2 experts and then 50 people who are looking to learn, which doesn’t benefit a lot of people. I’m interested to hear about the mentorship because I know a lot of people go through these types of programs and somewhat succeed and some without. It depends on who the mentor is and the person willing to take what they’re learning and implement it.
I was skeptical of gurus and things like that when I first started looking into it. The person you look to get into mentorship program with needs to be doing what it is that you seek to do. They need to be doing what it is that they’re teaching and not have done it once or twice or a handful of times or had done it ten years ago and now they’re just teaching. They need to be actively doing it right now in this current market climate. You need to be able to have verifiable information from their students, either that you meet them at networking events or whatever. Know that they’re successful in teaching what it is that you desire to learn. I looked at a few different programs and I didn’t join a mentorship program to learn about the fundamentals of real estate.
I joined a mentorship program, specifically an apartment syndication mentoring program to learn about all the moving pieces in a syndication, the SEC compliance pieces, the different lending aspects of commercial real estate. Also, to be able to network and form relationships with people who are doing what it is that I sought to do. High-level operators who were buying apartment complexes and operating them successfully. Not only was the mentor himself doing this actively at the time and still continues to do it. He had a number of successful students who had in the past and currently are still doing apartment syndications. There was an opportunity to meet other operators and partner up with them potentially and then also too, within the group, you can raise money from members of the group as well. You’ve got built-in capital stack somewhat or at least partial.
The first two deals I did is I met him through the group. I was at KP on their deals. One was 102-unit and one was a 243-unit. I did the two different deals so I could have a midsize and larger deal on my “resume” from a Fannie Mae perspective. Whenever I was ready to go out and do my own sponsorship, then I have that gold card. I met the partners that I have now early on. We had all done deals with other partners that we had met in the group and we decided to start pursuing deals together. The three of us did our first deal together in early 2019 and we all did that under our own separate LLC entities. I would suggest doing that because partnership’s like a marriage. You want to know who your partners are going to be and know them before you get too tied together. We did that deal. It worked very well together. It had some great synergies and then after that, the deal was done and we closed it. We decided to formalize a partnership and created Trident Multifamily. We then did another deal into the Trident banner late in 2019.
You mentioned your partnerships is like a marriage. It also relates to the due diligence side of things where a lot of people focus all their time on due diligence on the asset, but you’ve also got to make sure you do the due diligence on anyone you’re bringing into that deal as well. That’s one thing I see some people lack some of the credentials or requirements and sometimes it can come back to bite you on that.There's plenty of money out there. You just have to know how to go out and find it. Click To Tweet
If you’re a passive investor, you want to do due diligence on your sponsor as well.
One question I want to ask is because you’ve been able to grow and scale and a lot of people always have the challenge of raising money and I’m curious, have you ever been able not to raise money for a deal?
My whole real estate career, I’d done things on my own. I’m working in the medical device industry and I know a lot of high net worth individuals. From a conflict of interest standpoint, I couldn’t access those due to those constraints. I was a little concerned on how will I be able to raise $1 million or $2 million on my own. That’s one of the reasons that I’ve joined the program is to have access to the information and the networking, but also to have access additional sources of capital. We never had any issues raising capital for the deals. There’s plenty of money out there. You have to know how to go out and find it.
Another $3 trillion last month, I think they printed. There’s definitely the money from there. I would make that point because sometimes people will try and make excuses on why they can’t do things and it’s not easy. Nothing is easy in life. If something’s easy, then you should be asking yourself, “What’s going on or something doesn’t seem right.” Certain tasks may come easy to you, but nothing is easy. In the same sense, a lot of people have that fear of they use their money initially and then, “I’m going to go out and raise money.” They’re like, “Where do I go? Where do I do?” Like you said, I have a similar instance where now I have conflicts of interest with my work where I keep it completely separate and you go that path. If you put yourself around the people you either want to be like or I forget which book it is, but they say, “You’re the average of the five people you spend the most time with.” One of the keys that I’m picking up from this conversation is you thought through and planned everything out and also organized at a sense of, “I want to be around these people because if they’re successful, then that success will spawn off possibly on myself,” if you do the work. It sounds like that’s what happened.
The key is you’re going to do the work.
What would you attribute to being able for you to grow the most? Is there something that you thought you did, whether it be, take your time or partner with other people? What was the number one thing that you think or several things that did allow you to go from owning a few single-families into the multifamily to where you are now?
The first 13, 14, 15 years, I was on my own. I’d say the number one thing that contributed to scaling in that regard was networking. Going out every day and having a set of people that you wanted to call whether it’s brokers, bankers or property managers, whatever the case may be. Always be taking action every day and looking at deals, analyzing deals. Especially in the single-family world, you have to analyze a lot of properties to be able to find that one. You walk them and you spend a lot of time. Every day, I was spending time in my business in some form or fashion. You had to put in the work, but whenever I got into syndication, the key is finding good partners that you have good synergies with and the same thing. You’re always taking action every day in some form or fashion, but having partners, you can go further together, that’s a big key.
One of the challenges like I have personally is I don’t have any partners. I don’t want to bring any in and I realized that there’s only so much you can do, especially working full-time. One of the things I’ll mention about what you talked about and the key points that I picked up from it was consistency. It sounds like you are very consistent in working on this business every day or making sure you’re staying, and it’s not something you do once a week or once a month, or you started it, stopped it or so forth. It seems like it’s something you are now at a point of doing on daily basis. How much time do you spend per day on your business right now compared to your regular 9:00 to 5:00?
I’d probably say anywhere from 2 to 4 hours a day.
You’re probably not watching a lot of TV.
No, I don’t know what’s on TV.
It’s funny because I’m very similar. My sisters are like, “Did you watch this?” I’m like, “I don’t even know what that is.” I spend an hour in the morning going through my to-do list for the day and manage certain aspects of it. During my lunch break at work or something, I check emails and then in the evening. I’ll spend another hour or two hours once the wife and kids go to bed cleaning stuff up. With the business I’m in, I have that luxury to be able to do it at different odd hours of time and wait for people’s response. We talked about building that team or partnership around you is very important. Why haven’t you left your full-time job?
The good and bad about having a great W-2 job is it takes a lot of income to replace. I’ve been very blessed to have a great career and I earn a high W-2. I want to be able to replace that and then some before I can feel comfortable, even though I know what it takes from a number standpoint to be where I need to be. I’m so used to paying taxes over the years that it has sparked me to think that I can get by on that much because I’m going to be keeping more of it or pretty much all of it with the way you can use appreciation. It’s simply a comfort level. I have a freedom number that I want to get to that I know is more than I’ll ever need to do what I need to do. My second child is going into college next year. I have two kids in college and we have phenomenal health insurance with my corporate job right now. That’s probably the major reason is until the kids are out of the house or I hit that freedom number where I know I’ll have no worries then I’ll probably stick with the job at least for a couple more years.
We are similar. I had a very well-paid W-2 job and I’ve got a 16-year-old and 9-year-old. For me, I haven’t even started college yet. I look at it as working backwards. If my investments equal or match my W-2 job, I look at it. It’s one less a year from 65 that I’m retiring. I’m putting that money away. It’s not like I’m out there buying fancy cars or anything like that. What I’m doing, after taxes, about 90% of it because uncle Sam definitely takes a good chunk of everything. I reinvest it. I put some away for the kids’ school and I diversify as well. I don’t put everything in one bucket. Put stuff in mixed buckets just in case real estate does have a dip. Hopefully, I have something else and the same thing with the markets that nobody can predict what the heck is going on.
The last couple of months are a good indicator of that. Even historically, you can see how the markets respond. That’s why I like multifamily real estate. It’s pretty steady throughout the whole thing.
One of the things I wanted to touch base on your multifamily from your business goals perspective on the multifamily, are you more of an investor who will look to get a value-add, get it up to performing and sell it or you long-term buy and hold? What type of a multifamily or do you mix?
In my personal portfolio, I’m a buy and hold guy by nature and the only reason I’ve sold any of the stuff that I’ve sold over the last couple of years is to put in the syndication. I sold those things and because I had so much accumulated depreciation, I could sell what I’ve sold so far and not having any taxes on it. I was able to use the full amount to put into syndications because we invest our own money into our syndications as well. Other than that, in the apartment deals, most of our time horizons are 3 to 7 years and we will either look to sell or refi and then hold for the long-term.
Are all your multifamilies rental? You don’t do any for sale product, do you? I mean new construction, condo and everything’s existing rental.
Typically, we do BC value-add deals a hundred plus complexes.
Where do you find those types of deals? Is it again through the networks? I know people joke a lot of time about things like LoopNet, which is like the place for deals to die, essentially. Do you have brokers you work with or is it more just word of mouth?If there is ever a thing such as perfecting a process, then it's always about constant improvement. Click To Tweet
We worked with brokers. When we were first going together as partners, Carl, Rodney and I. Carl Suverkrop is my partner out of Dallas and Rodney Miller is my partner out of Oklahoma City. I live in Missouri. We have a triangle around what we call the mid-South. If we like to buy deals in our area, we can drive to within a few hours. When we got together, we decided we were going to start doing broker contacts on each day. Each week, we had a set number of brokers we need to contact. We maintain those relationships over time and to get our deal flow. That’s how we get our deals through broker relationships.
From financing component, do you try and work with consistent lenders or because you got the track record now or how does that work?
Until 2017, I didn’t even know about Fannie Freddie. It was all community bank stuff and even though I was working with a commercial banker at my local community bank. It was still 20, 25-year AM, recourse notes and they were five-year terms before you ended up having to refi. They were recourse loans. I did all my work through them. I had a great relationship with them, but now we’d done Fannie Mae, Freddie Mac and we’ve done bridge deals and bridge lenders. We’ve done it al.
Is there a one you prefer over the other? If I recall, the paperwork side of things, a lot of times when you’re using the GSEs, they usually ask for a lot.
There is a lot of paperwork, yes, for sure but not that I have a preference because each deal dictates what type of lender you can use. With Freddie, for example, you can’t finance rehab. With Fannie, you can. They both have a small balance. Freddie is a small balance lender under $6 million. Fannie has a small balance program as well. With bridge lending, a lot of times you can get 100% of your rehab finance on the bridge lenders whereas, you can’t with the agency. Each deal dictates what strategy you want to take.
How long did it take you to find a good property manager?
With my personal portfolio, the very first property manager on that first property, it was the guy that showed me the property. He was managing it for the bank and I’m here in Missouri and I talked to him. We were like-minded and he agreed to manage it for me and he manages all my properties in Missouri. In Arkansas, which is where I bought the 55 units that 1031 into, I work with a property management company there, Trinity Multifamily. They probably have about 25,000 doors that they manage in 15, 16 states now and they’re headquartered in Fort Smith, Arkansas, which is where I grew up. I use them there. There are a couple of properties in between that I manage myself. One in Fayetteville where the University of Arkansas is and where my kids go. I bought a duplex for them to live in. I manage that myself.
The reason I ask that question is, usually the property management side of things is very challenging.
It can be for sure. We had a property management company that didn’t work out so for us on our last two deals and we struggled with them. We gave them a lot of rope on the first property and it suffered, but it was such a high cashflow property that even when it was not doing very well, it was still then okay. Now we switched it over to a different property management company and it’s knocking it out of the park and same with our other property. We gave them a very short rope on that property and within a couple of months, they were gone.
I was going to ask you, what do you see for the next few years for your business? It’s very challenging in this times to even forecast what’s going to happen next week from your business plan. Do you have plans of where you want to be in the next three years whether it’s diversifying into another market or continue to grow?
Our kind of strategy is to accumulate 700 to 1,200 units in the market and then move on and do that in another market. Right now, we’re focusing on Tulsa and our goal is to accumulate 500 plus units a year and then also, recruit more capital partners so we can maybe get that to 1,000 units a year. There’s a lot of money out there and there’s also a lot of people looking for it. We’re putting our track record together slowly, consistently and developing good relationships. Ultimately, in the next three years, I’d like to see us owning 2,500 units minimum.
On average, what would you say you pay per door now when you talk about 500 units?
It depends on the market. We’re in the Tulsa market, East of Tulsa or in Dallas. You’re looking at anywhere from $30,000 a door to $88,000 a door or a $100,000 door depending on what you’re finding in Dallas. You maybe even finding some C properties for $100,000 a door in Dallas, which is insane to me.
From a scale perspective, you’re doing between “$15 million and $50 million” a year.
Our sweet spot deal size is $5 million to $15 million. We wanted to accumulate at least one a quarter of those.
I hear a lot of rumblings about Tulsa. Is it an area that’s projected for some pretty good growth over the next decade or so?
It’s a good steady stable market. It’s more known as oil town, but it’s diversified a lot and its employer-based. Oil is still a part of it but they’re becoming a big tech town. They have a lot of technology companies moving in there. They’re one of the two finals for Tesla in Austin and Tulsa. We’re keeping our fingers crossed but we’re realistic too.
Have you ever considered looking at office or other types of uses besides multifamily or even student housing or anything like that or is it typically more a straight W-2 employee rental-type of property?
Workforce housing is what we are focused on at least for the next few years. We want to accumulate a large number of doors and refine our processes and perfect the process if there is ever a thing as perfecting a process. It’s always a constant improvement. That’s where our main focus is. With office, I’m not too sure about how that’s going to go in light of what’s going on but there’s a lot more inconsistency there. As far as the future of that sector, self-storage is a great place. Mobile home parks are a great place to park some money, not to say we wouldn’t do it in the future, but right now its apartment complexes.
You’ve got your plan together and you’re sticking to your guns, which is good because sometimes you see some people try to do too much and diversify into too many different markets and never become an expert in the one that they started at. My last question is if you could give advice to anybody out there reading in regard to trying to start with your side hustle and turn into a business, what would it be? As you can see, you’ve been able to build a very large portfolio while still again doing the 9:00 to 5:00 thing. I have the scars from that and I know it takes a lot of work and so forth and I have a ton of respect for people, especially yourself who do this because it’s not easy and it shows people out there that you just don’t have to be a number as an employer. You can try and do better for you, your family or whatever your interests are. Do you have any last messages?
It’s up to you to take charge of your own life but the first thing I would say is get educated. There are a lot of resources out there to do so. Find a mentor who’s doing what you want to do and take them to lunch. Find a way to add value to what they’re doing so that you can learn from them and take action. That’s the biggest thing is to take action. Take what you learned and do something with it because if you don’t, you’re wasting everybody’s time. If you have someone who’s helping you along the process, from a mentorship standpoint and you take action, they’re going to be more likely to be your biggest cheerleader and help you be successful. Also, once you get to that point and you do take action, be persistent and don’t give up. You’re going to have setbacks. You’re going to have bad things that happen along the way. Keep your head down and work through it and find a way to keep going, because it’s not all rosy out there but a lot of hard work and persistence will get you a long way.
It is great advice. Mike, thank you for joining us. If people want to reach out and connect with you, what’s the best way for them to do so?
You can go to our website, TridentMultifamily.com. Connect with us on Facebook or LinkedIn at Trident Multifamily. You can send me an email at Mike@TridentMultifamily.com or even give me a call (417) 576-8850. I’m happy to talk about real estate and helping anybody I can.
Mike, thanks for joining us and everyone out there reading, thank you. Take care and have a good day.
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About Mike Vann
Mike’s early real estate experience comes from the family construction business where he worked his way through college and was able to gain the skills necessary to manage all aspects of construction and project management. After college, Mike entered the corporate world and has had a successful 20+ year career in Medical Sales with the last 15 years spent in the Medical Device Industry. This unique combination of skill sets served him well as he built a personal real estate portfolio of over $6M across multiple asset classes while working full time.
He enjoys educating people on real estate investment and has been featured on multiple podcasts and speaks at local REI meetups. Mike currently lives in Springfield, MO with his wife Aline and their two children. He enjoys spending time with family, hunting, fishing and snow skiing. Mike has a heart for mission work and believes that “We are blessed to be a blessing to others”. He lives this out through serving others locally, nationally and internationally.
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