Host: Trey Stone
Co-Host: Mike Jiang
Mike Jiang’s Contact Information:
Trey Stone’s Invitation to Invest
Trey explains the challenges for new investors. It’s hard to hear someone on a radio show and then make the first step towards investing in real estate. So often the people teaching these investment strategies want to sell you on their coaching programs or a membership rather than helping you break into the industry and partner in a deal. Trey is seeking partners for investments and he uses this platform to interview business partners and associates that he’s worked with over the years. He is also very transparent with listeners about his current and previous deals. He gives specifics about the names and locations so potential investors can look into it.
Mike Jiang’s Background
Mike Jiang is a banker with the Bank of Texas. He is Trey’s primary relationship manager at the bank. Mike and Trey have been doing business together for years and now consider themselves to be friends.
Mike is a first generation immigrant. He was born in China and came to the United States when he was 9 years old. He went to Michigan at first and then moved to Houston soon after the oil crisis in the late 1980s. Some of his family members moved back to China but Mike wanted to stay in Texas so they settled into the Alief area of Houston. Mike grew up in an apartment complex across the street from Memorial City Mall because it was the only thing they could afford. He remembers Alief fondly and appreciates the diversity there.
After graduating from the University of Houston, Mike started his banking career at Chase Bank as a personal banker. From there he got to know the community and grew his business. After 7 years at Chase, he moved to Bank of Texas to grow his book of business and to grow as a banker. He hopes to have another 80 years at Bank of Texas.
Mike recalls being interested in real estate as a young adult. When he was about 19 years old he heard about investing in rental properties on the radio. He was eager to do it but quickly learned he didn’t have the qualifications for financing. Since then he’s established himself in a steady career. He knows when it comes to real estate he has certain criteria. He doesn’t want to take much risk and he wants a good work-life balance. He regrets passing up an opportunity to earn passive income when he sold his condo and moved into a home. He realizes now that it would have been a valuable rental property because the value has since doubled. He says he’s learned from his mistakes and ready to gain more wealth through real estate investments.
Real Estate Investment Strategies
Mike is looking for a new home and he plans to retain his current home as a rental property. He plans to continue using this strategy as he upgrades to larger homes to keep expanding on his passive income. Trey points out that a good take away from the story is that this strategy works for him because he’s a young man in his 40s, he’s very energetic, and he has some fun hobbies. A strategy involving investing in single-family homes and serving as the property manager works for him. This strategy may not work for everyone. Younger investors may not have the capital to get into a property to turn it into a rental property. Investors who are further along in their careers may be in a different position in their life who don’t have the time and energy to keep up with the property management aspects of a single-family rental portfolio. Often those are the types of investors who choose multi-family investments with Trey.
Trey advises new investors to review their resources before choosing an investment strategy. He also suggests that new investors consider their experience, background, time, and energy. Active investors like Mike have the time to manage single-family rental properties. Passive investors don’t have as much involvement with tenants. Mike expresses his interest to move from single-family investments to multi-family investments down the line because a partnership sounds better to him than the heavy management that single-family investments require.
A recent guest on Real Estate Riches discussed his transition from single-family rental houses to multi-family investments with Trey. The reason he changed his strategy was because he not only realized that he wanted to be a passive investor but he also made a better return as a passive investor. It doesn’t always go that way but when you can make more income and not have to do as much work as an active investor, it’s a win-win. Trey loves working with investors who have managed properties themselves because they appreciate the professionalism of Trey’s team. There’s so much that goes on behind the scenes to produce those returns. Investors who have never managed properties before don’t always have that appreciation and may think it’s an easy role. They also may not understand the maintenance issues that pop up which require funding to fix, even if it’s something insurance will cover- it still needs funding up front.
The most recent deal that Trey worked with Mike on is a property called La Monterra. When he bought this property it was actually two different properties: Chancellor and North Park. Trey acquired them separately and then merged them into one larger property which avoided the need for a duplicate office staff and provided other cost savings benefits. He also did a multimillion dollar renovation on the property. Mike’s team helped Trey refinance so he could take the loans from the two separate properties and convert it into one. Trey needed a lender with some creativity who could reconcile the fact that they were doing one loan for two separate properties and recognize the efficiencies that would lead to more profits and more value. Part of the reason it was such a good fit for Mike was because he knew Trey and the local market. Trey’s original cost basis for this property was around 28 million dollars. Recently, since Covid-19, he got an appraisal on the property at 45 million dollars.
Last week, Trey received an email from a skeptical listener that it all sounds too good to be true. Trey hopes his transparency with the location and the name of the property along with having the lender who financed the deal on the radio show will help anyone who is skeptical. Mike says the deal took a team effort from Bank of Texas who can understand the lingo, the market, and what the client is trying to do in order to be creative when finding solutions to their clients’ problems. In this particular case, they leveraged the skills of Eric Thomas and Jason Walker from the commercial real estate group in Bank of Texas. Mike admits the language got complicated and he was grateful for Eric Thomas who also worked on this deal. It can be overwhelming for anyone who isn’t knee deep in these types of deals day in and day out. Mike recalls visiting the property with Eric and being impressed with the types of improvements that Trey had made. They were also impressed with Trey’s business plan. Mike also says that they worked on a previous deal together in Pasadena and the success on that deal showed that Trey is a good operator.
“Typically we look at the loan to value, how strong the guarantors are, how good are the operators...You can give someone the fastest car in the world but if they don’t know how to drive it, it’s still going to be slow.” Mike Jiang
Mike’s history with Trey and understanding of how he operates and the types of deals he’s done in the past made the Bank of Texas team really eager to help him to get the deal done. Mike thanked Trey for the opportunity to work on that deal with him because his team takes very prudent steps to make sure they’re lending to the right people and they place emphasis on growing the right relationships. The specialty and know-how of the commercial real estate group was also crucial to the results.
Trey also gives credit to Eric Thomas who was fantastic to work with. He now calls Eric for advice on the market. Eric has also gone above and beyond to help with a supplemental loan which allowed Trey to do more improvements and increase the value further. A supplemental loan is not typical from a lender and Trey values this relationship because the team at Bank of Texas goes above and beyond. Mike agrees that their culture is to help their clients to do the best thing for them while maintaining integrity for their shareholders. They take the long-term approach to bring the most value to their clients and to help them grow their business. Trey reflects on the project and the use of the supplemental loan. It actually funded a lighting upgrade that improved the quality of life for the residents because it made the property safer. Every crevice and corridor is now lit up which makes a huge difference for the residents.
Mike Jiang’s Opinion on the Current Market
Mike recalls a seminar he listened to the other day and his key take away that he felt holds true:
“Oftentimes when you should sell, you don’t want to. Oftentimes when you should buy, you don’t want to.” For many retail investors, they often buy when they hear that something is going up so they’re buying at the top and getting greedy thinking it will continue to go up. When they start losing they often get emotional and sell when they should have kept it.
Mike says that in the retail segment like office spaces, vacancies have gone up since last month and have been since the later part of 2019. The vacancies in the industrial warehouse segment is also up. In the residential segment, the inventory levels are low. This is surprising and it’s good because it shows there are a lot of buyers out there trying to take advantage of this market and the low interest rates. It’s a little bit concerning that the builders aren’t building more which causes more demand than supply and increases in residential home prices.
Houston is a resilient city. It is no longer energy-dependent like it was in the late 1980s and 90s. In regards to the owner-occupied commercial real estate side like warehouses and individual businesses, those have been stronger in sales and transactions than before. Mike recalls a migration from Chicago, LA, etc to Houston during the last financial crisis, particularly within the Asian community. If we think about what happened then and what’s happening now, we’re seeing a lot of population migration down into Texas still. New businesses are moving in along the beltway which brings new jobs and more people in the Houston area. If there isn’t a huge drop, it’s still a good time to start looking to purchase properties before the potential price increase from the simple fact of more population migration into the Houston area.