Mandy McAllister 0:22
What a syndication is basically is someone an active team, a general partnership buys an asset, then they sell off 70% of that asset as shares in a private placement memorandum. So, anyway, I did not like the idea of selling off 70% of the work that I was doing, because I have syndicated and in that syndication, I, you know, $12 million acquisition, I raised a million dollars, I did a ton of due diligence, I’m doing the exact same amount of work that I do on my joint ventures, but I own 5% of the general partnership. So 5% of 30% is 1.8%. I own of that deal. So if I feel like my syndicating friends who have a message of their, you know, 10,000 doors under management, you know, it wasn’t impressive to me because what was impressive to me was the dollars in my pocket, and I got more dollars in my pocket when I owned a larger chunk of the deal. So after that experience of only getting 1.8% of that larger deal, I decided to solely double down on buying from my own accounts or in joint venture where I own the larger percent
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J Darrin Gross 1:55
Welcome to Commercial Real Estate Pro Networks, CRE PN Radio. Thanks for joining us. My name is J. Darrin Gross. This is the podcast focused on commercial real estate investment and risk management strategies. Weekly, we have conversations with commercial real estate investors and professionals provide their experience and insight to help you grow your real estate portfolio.
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Today, my guest is Mandy McAllister, and she is a multifamily real estate investor, mindset ninja and connector. She spent the bulk of her career in medical device sales, chasing sales and commission checks. In 2021. Mandy left her W2 to lean on the financial independence she built through real estate investing, and he now serves as CEO of Go Bundance Women, a tribe of healthy wealthy, generous women who choose to lead epic lives. Her real estate expertise includes repositioning underperforming assets to increase cash flow and value. A portfolio is currently comprised of 373 doors of B class workforce housing, furnish student housing, and a motel reposition. She’s most proud to be a mama to her hilarious seven year old son Duncan, who coincidentally wants to be a real estate investor when he grows up. And in just a minute, we’re going to speak with Mandy McAlister about small multifamily investments, joint venture instead of syndication and the power of your tribe.
But first, a quick reminder, if you like our show, CRE PN Radio, there are a couple things you can do to help us out. You can like, share and subscribe. And as always, we encourage you to leave a comment. We’d love to hear from our listeners. Also, if you want to see how attractive Our guests are, be sure to check out our YouTube channel. You can find us on YouTube at commercial real estate pro network. And while you’re there, please subscribe with that oh and welcome my guest, Mandy McAllister. Welcome to CRE PN Radio.
Mandy McAllister 4:31
Oh, hi Darrin. I am so excited to be here with you. Thank you for having me.
J Darrin Gross 4:36
Well, I am delighted to have you and looking forward to our talk. Before we get started, if you could take just a minute and share with the listeners a little bit about your background.
Mandy McAllister 4:46
Sure. I originally was interested in real estate investing at the age of 19 when a friend explained her dad bought the house and she was renting the rooms to our friends in college and I thought and you get to keep that money Knee. That’s the best idea I’ve heard in my whole life. So the seed was planted as a must be real estate investor at 19. And then I did all the right things, I got all the right degrees, the master’s degree, I ended up working on the floor, the Board of Trade after a master’s in economics for some time, and then transitioned into medical device sales, where I just was chasing my tail, the new bar would be set every year on that sales quota. And I would make the same money even though I was selling, you know, 10x the product. So it became very clear that if I just double down on my investment strategy of buying these small multiples, that I could buy my way out of my w two, so I put my head down, starting at about maybe 2015 or so, and really work to buy my way out. And here we are now in a whole new world.
J Darrin Gross 5:52
Awesome. Well, I appreciate you identify and when you started, because I was kind of curious, I see you’ve been solo or not solo, but strictly real estate since 2021 2015. You started? Can you tell us a little bit about the what you did to get financially free or the financial freedom and felt like you could leave your W2 between 2015 and 2021?
Mandy McAllister 6:23
It’s such a nebulous idea, right? We all say financial freedom, and what in the world does that mean? I bought my first four Plex, at the end of 2015, beginning of 2016. And it was I was so scared. Like, I feel like you know, when you’re talking to people of Oh, wow, that person is financially free. They have it all figured out that that was not the case, just seven, eight years ago for me. So understand if you’re newer to commercial real estate investing or, or anything that’s new, in general, it’s gonna feel scary whenever you’re jumping into it. So I bought a four Plex. And because I had done all my homework, figuring out what the lowest possible returns would be and feeling good about that worst case scenario, I jumped into the four Plex. And it not only did I not die, I had $1,000 cash flow coming in a month. So I had been bitten by the bug, and realized that I wanted to continue to snowball that, so a four Plex, then a six Plex and an 11. And really started to snowball as many assets as I could. And you know, as I was growing, in this world of acquisition of commercial real estate, many of my colleagues were choosing to syndicate. And in the discussion of I want to leave my day job, medical device, multi $100,000 a year job, I had an I had a friend who was doing the same, but his play was in syndication. And I asked him, you know, what do you want to see, to be willing to leave your your day job? Because if that’s why we’re doing this, shouldn’t we understand what target we’re trying to hit? And he said, Well, yes, I’m going to just do get this acquisition fee and this disposition fee. And then all I have to do is four deals a year. And I thought, oh, my gosh, you have to do four deal. Like you’re you’re going to what are you going to do crappy deals, when the good deals no longer are in the market with enough force that you can do for per year. So in that moment, I realized I wanted to build a floor of income to support my life, and then I would be able to go do whatever I wanted. So all that to say Darrin, it just became a math problem, I was able to put pen to paper, figure out what I needed to live my life, and then built a flow of income of my investments, that to help support my life, and then was able to take the leap of faith.
J Darrin Gross 8:45
I love the kind of the process and how you know, everything from the fear and the first one to the recognition of it didn’t, you said it You didn’t die, I always think of it as it this one won’t kill me kind of thing. But just that, you know, even if it’s a mistake, it’s it’s not going to be something’s going to upset the world or, you know, which upside down but it’s it’s just that that willingness to go do it after you’ve been through all of the, you know, the math possibilities and, and then actually see it come to fruition. It sounds like you, you know you caught the bug. How quickly after the four Plex Did you jump into the 611?
Mandy McAllister 9:33
So what the the big downside of being this equity hog buying things from my own accounts and or just with a few partners is you run out of capital pretty quick. So it took me about a year to prove to myself that I knew what I was doing on the four Plex and to amass a little bit of capital that I was willing to go then do the six so probably about a year and I leveraged equity and another deal that I had a con though that I had lived in and I was renting out had a ton of equity goes to leverage piece of that, in order to take down the six unit and then the 11 came pretty quickly thereafter, three to six months after.
J Darrin Gross 10:12
Got it. So the next rental it sounds like is once you figured out how to do it. And capital is, is are you running out of capital? How did you decide the joint venture option as opposed to like you mentioned, your your colleagues, were doing the syndication.
Mandy McAllister 10:35
So in looking at what my goal was, I wanted to own something for the long term. I mean, in commercial real estate, sometimes it’s easy to make things feel super complicated as compared to single family investing. But the general principle of the people in single family investing, they get super wealthy, they buy and hold, they don’t flip properties, right. And in my vantage point, the people who were fixing up and making nice, making a nice NOI and flipping it, three years later, they were the flippers, not the buy and hold guys. So I ended up finding a couple of friends who wanted to invest in the similar way the buy in watch, I call it that if you want to offer me something ridiculous, I would be a willing seller of my property. But my intent is to hold for the long term. It made more sense to me, it felt more like the investing like a billionaire, then and then investing like a flipper. So one big reason I chose to syndicate was largely the type of debt you can get. So the the non recourse agency debt, that is the you know, 30 year amortization, very long term there, we had, I think we got six or seven years of interest only when we took down our first larger deal of 5253 unit in 2020 20. The chance to to take down these deals on non recourse debt, felt very insulating felt very risk management, belt and suspenders. So I couldn’t qualify for those loans on my own. So I found a couple of friends who wanted to buy the type of asset I wanted to buy, and we chased a deal that worked on one of those loans.
J Darrin Gross 12:23
Got it? So if I understand right, then you did end up syndicating, is that correct?
Mandy McAllister 12:29
No joint venture. It’s a three we’re three partners on the 53 unit, that we’re all active. We actually had an asset management call this morning that we got we took it down now we bought it with these a Fannie Mae loan. So government backed 15 year term, 30 year amortization, I think we’re at a three and a half percent rate.
J Darrin Gross 12:49
Well, those are some pretty attractive rates. And that by itself, I think is probably worth a lot.
Mandy McAllister 12:56
I look smart now. Yeah, it’s crazy back then.
J Darrin Gross 13:00
I absolutely. So talk me through how you decided against syndication as opposed to joint venture and kind of the structure difference between the two.
Mandy McAllister 13:17
So I call myself in equity hog. The end result I wanted was to own as much of the property as I possibly could, for a more buy and hold type attempt, rather than a three to five year flip. So what I saw happening, and this isn’t every syndication, but this is largely what passive investors in syndication have grown to expect, what a syndication is, basically is someone an active team, a general partnership buys an asset, then they sell off 70% of that asset as shares in a private placement memorandum. So anyway, I did not like the idea of selling off 70% of the work that I was doing, because I have syndicated and in that syndication, I, you know, $12 million acquisition, I raised a million dollars, I did a ton of due diligence, I’m doing the exact same amount of work that I do on my joint ventures, but I own 5% of the general partnership. So 5% of 30% is 1.8% I own of that deal. So if I feel like my syndicating friends who have a message of their, you know, 10,000 doors under management, you know, it wasn’t impressive to me because what was impressive to me was the dollars in my pocket, and I got more dollars in my pocket when I owned a larger chunk of the deal. So after that experience of only getting 1.8% of that larger deal. I decided to solely double down on buying for my own accounts or in joint venture where I own the larger percent.
J Darrin Gross 14:56
I love the comparison there and you break it down like that because I think, of similar mindset, my wife and I are, or both, I mean, buy and hold is, that’s what got me into real estate, I just I saw it is that if, if I bought this property, and you rented it from me for 30 years, you or somebody else, at the end of that time the mortgage was paid off, I’d have essentially another 401k that I didn’t contribute to. I thought, Wow, what a great deal. And never did I even consider the fact that you could have appreciation and or cash flow I was just thinking of, you know, it might cost are x and you pay X. You know, at the end of the day, at the end of the term, I’ve got all that equity built up. So I appreciate your, your processor. So tell me how, how do you go about screening or qualifying the investors that you choose to invest with through joint venture?
Mandy McAllister 16:06
So I’ve done a really great job in some occurrences, and I’ve done a really terrible job, and other occurrences,
J Darrin Gross 16:12
Sounds like you are qualified to answer the question that’s
Mandy McAllister 16:15
Uniquely qualified, Darrin. As a matter of fact, well, a lesson I learned the very hard way is, you know, past a behavior can tell you a whole lot about a person’s potential future behavior. So one thing that I do, I had a guy steal $110,000 from me, like he Long story short, I thought I had covered all of my bases in terms of the LLC paperwork in terms of what the properties had to offer. But end of the day, the LLC that I own 50% of own nothing, so I didn’t necessarily have a chance to to chase that money back. But regardless, I now do a background search on every single person that I’m going to potentially be investing with. So first off, it’s conversations of our do our ethos, does our plan of what we want to gain out of real estate investing online, do I believe you in my core, that you are a good human, and what you bring to the table, and then I do a background search on you. And in that background search, invariably, there’s going to be something strange. Like you had a you were you, Darrin, let’s say you were going 80 miles an hour and a 50 mile an hour zone in 1997, that will come up on your background search. And I’ll be able to say, hey, Darrin, what was happening in 1997, and you went 80 and 50. Now I get to see how you deal with an awkward intense conversation. Do you blow up at me for being you know, reaching into your your past in a way something that you might be embarrassed about? Well, I now know how you deal with that type of complex. So that has been the most tremendous way to screen out potential JV partners.
J Darrin Gross 17:58
That’s, that’s pretty good. Like I said, the your, your underwriting of your partners kind of thing. That’s, it makes a lot of sense. So 373 doors, tell me a little bit about the mix of properties you have now and kind of the smallest to largest as far as with your joint venture.
Mandy McAllister 18:19
Sure, well, the smallest is a six bucks that i The second property I ever owned, I still own that, it’s it’s gonna be hard to get rid of because it’s done a 4% loan, it’s in a state that I liked their landlord friendliness, and it’s very close to a hospital. So I have repositioned a couple of those units to be for traveling nurses. And that because of that play brings in a significant amount of cash flow. So the long term rentals I get about $800 a month, the mid term rentals I get about sometimes up to $2,000 a month or so that really juices cash flow and it’s it’s a six Plex is not 104 unit, but it’s a six like that throws off a large bulk of dollars. And the 100 unit is still that the 104 unit is still that indication that I’m a part of it’s a an incredible deal and I’m proud that I got to bring people into it. But it’s uh the reason I bought my way out of a W two is because I didn’t want to be answerable to people. And if I’m answerable to my passive investors then that kind of defeats the purpose though 104 and six are the book and
J Darrin Gross 19:30
Got it so on the 104 unit being a syndication how how long ago did you acquire and what’s kind of the estimated hold time on that?
Mandy McAllister 19:42
Are we are just about at our two year anniversary here on that one. We’re getting unsolicited offers, and we’re trying to figure out what the play is. So again, this is a buy and watch we underwrote for a five year hold. However, it’s on a really great loan. That’s assumable so if we get a chance to capture a lot of upside, not, we’re taking some chips off the table, then that’s something that we’re going to look to consider here and probably the next six months.
J Darrin Gross 20:12
Yeah, no, I think that assumable loan all by itself, kind of what I’m gathering is really, you know, an attractive option. And if you’ve got enough runway, you know, the, the buyer still has time to do or reposition or, you know, make something happen, that might be a good opportunity to exit there. What I’m just kind of curious, we’re recording this in October of 2023. And anybody’s looking on the calendar will recognize that the feds been driving interest rates up. And, you know, the the buzz is that activity is, is, you know, kind of pencils down, if you will, for a lot of investors just based on interest rates and stuff. I’m kind of curious, what are you as far as the the people that are reaching out to you is more about people with capital after Park at somewhere, or what can you describe any, any insight that you’re gleaning from people that are reaching out to you?
Mandy McAllister 21:20
Sure, well and in Go Bundance. there’s a large contingent that are commercial real estate investors. And one of our meetings, we call those micro tribes groups that talk just about one subject on multifamily there is this sentiment of interest in being pencils down, because the uncertainty of interest rates just, it’s all over the place, you don’t know what to assume is going to happen if there’s uncertainty on its face, right? So the bulk of people who are asking for help, right now it’s needing to park capital and needing tax benefits. And with the bonus depreciation, getting phased out here over the next few years, if you do, if you buy something in a cut cost second, then you can take 80% of that depreciation this year, gonna go down to 60 in the following year, so trying to take advantage of that still, sometimes makes a less than beautiful return really hit your bottom line well, so that’s one big thing. But one thing that I’m personally trying to do is I looked at my portfolio and decide, like, try to see how can I do more with what I’ve got, that’s where this midterm rental play was born. So Fannie and Freddie don’t love any anything shorter than a 12 month lease. So I knew all of my stuff that was on Fannie Freddie loans. I couldn’t touch with a midterm lease. But the I am achieving that in that six Plex. And that’s really juicing return. So those plays as well as I’m under contract to buy a carwash right now kind of a little bit of a pivot, a more business heavy real estate play. Because basically, if I’m going to buy at a four cap, let’s say right now, fours or five caps is probably what you’d find in a market that I want to buy in, I’m gonna buy at a four cap the math on that is thing I’ll it’ll cost me $25 for $1 of cash flow, right? If I buy a five cap, it’s $20 for $1 cash flow, if I’m going to buy that business that carwash, I’m under contract for gonna cost me $2.50 for $1 of cash flow, so I’m very interested in figuring out a way to create a larger engine for cash flow with fewer dollars in
J Darrin Gross 23:34
Yeah, it’s interesting, the and I don’t even think it’s, I mean, I guess it just kind of the market focus on you know, when real estate when when interest rates were so low, to where you could borrow money for less than the cap rate, you know, significantly less that the delta between there made a lot of sense and people are like, Oh, my God, you know, get in get out kind of thing and, and that, but what I’m finding is, there’s a a pretty strong interest for properties that have a business in them like a carwash or self storage or, or, you know, something, as opposed to just the the tenant aspect and managing the property kind of thing. So, I mean, I applaud you for for looking and finding something and, you know, kind of recognizing the other side of it is not just the real estate, but also the, the, the occupant and and the cashflow of the business, in addition to the real estate play there. So that’s, that’s awesome. So, the strategy if I understand right, did you primarily employees the value add, is that correct?
Mandy McAllister 24:48
I love a value add that is not contingent on rehab. So during COVID, the huge spikes of these inputs of supplies really, you know, there was a 38 unit reposition that we did that could not go online because we didn’t have the primary power switch. So I now have this play that my absolute favorite play is how do I find something where I can institute a rug that I can build back for utilities? How can I charge a pet rent or a parking rent that doesn’t exist already that that type of value add play is what’s most interesting to me to add just a little bit to my noi, what I think is kind of scary right now that I don’t think is getting a lot of airtime is if again, if you’re buying at a forecast, and the forecast will go to a five cap by the time you sell it to execute this value add strategy, think of what we’ve done to go from a four to a five, you’ve increased by 25% in that denominator, right. But the actual just truth math of the deal is if you want to increase that noi value, add that NoI just to break even if your cap rate has gone from four to five, you have to increase by 25% Your noi to break even on the value. So when it comes to working to value at in this atmosphere, it’s I’m more interested in what brings in a little bit more cash flow for a longer term hold than trying to flip a property based off of an increasing noi right now.
J Darrin Gross 26:20
Yeah, I have seen the wisdom and what you say there, you know, kind of the operational kind of things as opposed to the physical, which tend to have a fairly or can have a fairly heavy capex, a requirement to achieve and, you know, being being a little bit more savvy to recognize where the the operation is either lazy, or we’re not paying attention to what you know, the opportunities or the market will allow. Definitely makes a lot of sense on that. With your strategy, you can have the value add and the hold long term. Do you have? Are all of your JV partners? Or they have the same mindset? Or do you have any that have kind of a? Okay, I’m in but I want to be able to get out at a certain point or in that case? Is there any kind of a provision for buying a partner out? Or?
Mandy McAllister 27:27
Yeah, I’m actually working to exit that motel reposition right now. And that is something that we’re trying to figure out, do we sell it? Or do we buy one of us buy the other one out. So those are always written into the operating agreements. But but end of the day, it’s open communication, it’s making sure that upfront, the goal is the same. So the larger the 53, the 38, the larger deals that I’m a part of we all are interested in owning for the long term, but we do always have the conversation around what do we need to see to entertain a sale? So that is always on the table always opens lines of communication?
J Darrin Gross 28:12
So on the the joint venture strategy, kind of the structure, can you describe a little bit about what are the kind of the keys and then we’ve talked a little bit about screening partners and that but as far as just the actual come together, you know, the the the number of people involved and what’s required in order to, quote be a joint venture, as opposed to in a more of a passive syndication model.
Mandy McAllister 28:42
So if if you take someone’s money, this is my I am not an attorney, I am not an accountant, all of those things, talk to someone smarter than me, but this is your friend, Mandy’s read on these rules and how she plays this game. So if you take someone’s money, and you offer them a return with them doing nothing, then you have sold a security, right? If you are going to take someone’s money, even if it’s just uncle Joe’s and then offer him a return where he does nothing, you have sold a security and you need to work with the SEC to do an exemption a syndication exemption in order to do right by the law, in my humble opinion. So what we do in a joint venture, it is a requirement that everyone be active in the deal. So in the 53 unit, the first larger acquisition that I did, every single one of us are on every asset management call. So all three of us and the team we’re on today, asking questions about increases in rents. We’ve had a problem with the gate asking about the washers and dryers, things like that everyone is active everyone goes to look at the property. So that is one big thing. In terms of number of people in the deal. My little analogy I love to live life by analogy, Darrin, if I’m if I’m willing to cook in the kitchen with that many people Whoa, I’m willing to do a deal joint venture with that many people, if you’re doing it alone, adding another person is gonna get a lot more done, adding a third person is gonna get a lot more done. But once he gets about five or six, like grandma’s not making the pie at that point, you know, grandma’s just hanging out. So end of the day, you need to be reasonable, you need to be willing to prove to the SEC, if push comes to shove, that everybody has an active job, if you’re calling yourself a joint venture.
J Darrin Gross 30:28
And as far as the the talents or the skill sets, you know, that you look for and in joint venture partners? Is there any kind of a strategy? Or is it kind of who has capital to invest? Or how do you? How do you discern who you need on the team? Or, or, you know, skill sets needed? Or, or you know, how you put the team together?
Mandy McAllister 30:55
I think attitude and ethos matter more than anything else. So if if you are someone who’s toying with the idea of holding for the long term, I don’t think we’d be great partners, because I’m certain I want to hold for the long term. Right. And if I believe you to be a good, reasonable human reasonableness is the thing that matters most. And the only way you get to that is by working closely with someone. But end of the day, what I prize most in my business partners, I call this one guy, my favorite business partner. He’s a commercial broker, by by trade by background, he sees around corners that I wouldn’t think to see around because of his work experience. So I really lucked out having this man as my primary business partner.
J Darrin Gross 31:45
No, that sounds like a win right there. Let me ask you, for joint ventures, are you able to accommodate 1031? Funds? If somebody has a deal they’re selling is are you able to do tenancy in common kind of joint ventures? Or is it? Or is that not an option?
Mandy McAllister 32:10
That’s absolutely allowable, I was actually I had a failed 1031 into the 38 unit that we were working to do just because of timeframes. But you can absolutely 1031 into joint venture structures with a lot more ease than you can into a syndication.
J Darrin Gross 32:26
And I just got my mind thinking about a lot of opportunities based on just that little flexibility as opposed to the syndication is kind of a little more difficult there for that.
Mandy McAllister 32:39
I understand, though, you have to be active in that deal.
J Darrin Gross 32:43
Well, right, no but I mean, that’s but that’s kind of the the premise here, you know, you’ve you said, Hey, in order to be a joint venture, you’ve got to be active. So I mean, that’s kind of your your qualifying that. So I get it.
Mandy McAllister 32:54
One more point on that, if you don’t mind, my read of the accounting behind this is the percentage ownership that we do is usually commensurate to number of dollars in. So if you needed to bring in, let’s say, a million dollars to close this deal, and you bring 100,000, and I bring 900,000, I would own 90% of that deal, you would own 10% of that deal. Because my read of this is if we went 5050, then the government would think the FBI, the IRS would think that you would own you would have had a taxable event, to the tune of that. $400,000, if that makes sense. So talk with your accountant in terms of the ownership percentage before doing a JV.
J Darrin Gross 33:41
Yeah, that makes sense. And I second that, check with a professional, this is a conversation, but not advice. So that’s, that’s good. Let’s see here. So with your, your joint ventures, you you’ve mentioned kind of a variety of, of, you know, as far as size of properties and stuff, is the 53 is at the largest JV property you guys have done?
Mandy McAllister 34:13
It is yeah. And in my opinion, the 30 to 50 is really a sweet spot for that type of asset for a couple of reasons. So those reasons are number one, you’ll you’ll be able to get agency debt, that better loan that I’ve been chasing. And number two, you know many you know larger Property Buyers will convince you that buying 100 unit should be your minimum because then you can afford someone’s eyes on that deal. 24/7 365 right, you can afford afford a full payroll person. Well, what I’ve found is on that 53 on that 38 We don’t have that person on our grounds every single day but we have her on the grounds Monday, Wednesday, Friday, or Tuesday Thursday. So the real win when it comes to leveraging a third party manager is having one person’s eyes and problem solving abilities on your asset at all times. This is a gong show when it comes to the property management because I’m too small to get anyone’s attention. But if you can afford a 50%, full time person in my, in my experience that has really fixed that problem.
J Darrin Gross 35:23
That’s great. And you do utilize third party management?
Mandy McAllister 35:27
In every asset I have.
J Darrin Gross 35:29
Ok. Gotcha. So you mentioned you’re under contract, I believe you said for the carwash, is that right?
Mandy McAllister 35:37
I’m expecting the loan approval during this call.
J Darrin Gross 35:41
Oh, well, congrats. Hope that goes well for you. As far as just given, like we’ve commented on the market, and kind of the loan rates and and, you know, just kind of the general sense of where, where’s the market going kind of thing? Are you actively seeking additional opportunities? And then I guess a follow up to that is a carwash? Are you doing that as a joint venture as well?
Mandy McAllister 36:10
The carwash is just me, I had actually some 1031 funds that I was able to bring over to help I that the purchase price, we’re talking $500,000, for something that throws off $110,000. Net per year. So and that’s, it’s without efficient efficiencies in place. So end of the day, I’m looking for cash flow, I have run down the aisle with a number of these sweet spot 20 to 50 unit, apartment complexes. And what I’m finding is, when I go to get the loan, I’m getting quotes for 60% 55% loan to value. And so for this $2 million deal, I’m going to need to bring 900,000 to the table, which I just can’t make that work right now. So what the way I look at my overall investment strategy is I need an engine for cash flow, to be able to dump money into this apartment complex play that’s going to pay me forever. So my end game is always going to be these B class 50 ish unit on non recourse debt deals. But if they’re not presenting themselves, then I’m going to work on the engine for cash flow to be able to throw money into that end game.
J Darrin Gross 37:25
No, I love it. I mean, the cashflow is definitely, as my friend says, It’s not the king, it’s the ace. I mean, it’s the why, you know, it’s you gotta have and it’s and, you know, when interest rates are low, and the markets got lots of activity, and this and there’s lots of buyers, lots of opportunities, I think people kind of lose sight of the value of cash flow, especially if you’re, you know, you’re buying and flipping because your your payday comes at the sale, as opposed to kind of the ongoing cash flow. But I think as interest rates rise, and everybody has to kind of reevaluate and understand where the market is and how it works. Cash flow is by far, much, much, much more important, and really kind of demonstrating them the wisdom of seeking and making certain you have cash flow. So I get let’s see here. I think those are kind of the questions I had. Is there anything that I I did not ask you? I mean, I love the concept of the joint venture? Is there anything any any blind spots, you’ve had that, that you’ve recognized that, that anybody looking to do a joint venture should know?
Mandy McAllister 38:45
Um, you cannot manage what you do not measure. One thing I wish I would have asked early on in some of these subpar partnerships that I’ve had is a commitment to deliverables in terms of numbers. So really going through a mock one of my assets that I have, or one of that partners assets would have been tremendously helpful. When it comes to what numbers what metrics are you looking at on a normal basis, because we had very different viewpoints on what needed to be tracked. And the best way to to try to move things forward. So have a conversation around numbers because you can’t manage what you don’t measure. Yeah,
J Darrin Gross 39:29
That’s that’s great insight there. Again, kind of that like minds coming together and and then making sure you’re on the same page. A little more harmony that way. That’s good. Lipson. Sorry about that. Hey, Mandy, if we could, I’d like to shift gears here for a second. By day, I’m an insurance broker. And as such, I work with my clients to assess risk and determine what to do with risk. And there’s three strategies we typically consider We first looked to see if there’s a way we can avoid the risk. If that’s not an option, we look to see if there’s a way we can minimize the risk. And if we cannot avoid nor minimize the risk, then we look to see if there’s a way we can transfer the risk. And that’s what an insurance policy is. It’s a risk transfer vehicle. And, as such, I like to ask my guests, if they can look at their own situation, could be your clients, investors, the Fed the market political pressures, you know, whatever it is that you identify, to be the biggest risk. And, again, for clarification, while I am an insurance broker, I am not necessarily looking for an insurance related answer. And so if you’re willing, I’d like to ask you, Mandy McAllister, what is the BIGGEST RISK?
Mandy McAllister 40:54
I really believe that the BIGGEST RISK is doing nothing, that there’s risk all around us. And no matter. I’m a very risk adverse person, I have followed the script. I am a farm kid who does stuff the right way. And it wasn’t until I realized that no matter what it takes not taking a risk is the is a risk. It’s a choice boards, leaning into my money getting eaten by inflation. So there was a book that was kind of all the rage recently through governance women called the psychology of money. And my primary takeaway there is I don’t need to be perfect in my decision making. I just need to be reasonable enough. And if I’m reasonable enough in that risk mitigation, and the idea of real estate, everybody always needs a roof over their head. Maslow’s hierarchy of needs, tells me that this will have demand till the end of time, right? You don’t need to buy a Bitcoin, you don’t need to buy a stock certificate, you need a roof over your head. So how can I lean into the thing with the strongest demand ever? And be reasonable enough in the process, so that I am winning, rather than just leaning back in letting inflation eat away at my mouth?
J Darrin Gross 42:09
Now there’s a lot of wisdom in the you know, the biggest risks do nothing that’s that’s a good good insight there. Mandy, where can listeners go if they’d like to learn more connect with you? Sure.
Mandy McAllister 42:24
J Darrin Gross 42:33
Awesome. Mandy McAllister, I cannot say thanks enough for taking the time to talk today. I’ve enjoyed it. Learned a lot. And I look forward to doing it again soon.
Mandy McAllister 42:44
Thank you, Darrin. It was a pleasure to be here.
J Darrin Gross 42:47
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