The ABCs of Apartment Investing

 

SPEAKERS:

Trey Stone, Bobby Duncan

Bobby Duncan:  00:02

Hello and welcome to another episode of Real Estate Riches radio. This is the radio show that teaches you how to build wealth by investing in apartments. My name is Bobby Duncan and as always, our resident expert is Trey Stone. Trey, how are you doing? 

 

Trey Stone:  00:16

Doing great.

 

Bobby Duncan:  00:17

Cool. Glad to have you today. Trey grew up Pasadena, Texas with the Sam Rayburn High School, Graduated at UT. And he has owned about $300 million worth of apartments in the Houston area over the years now, Trey, we're going to be talking today about the ABCs of apartment investing, we thought it might be a good opportunity to just step back and give folks sort of the basic nuts and bolts about it what it is that you do, and we're going to be talking about your formula for the future. That's more operational stuff, what you do day to day, we're going to be talking about your acquisition criteria. What it is you look for in a property when you're thinking about purchasing one, but we're going to start off with your key strategies, now you have several here. So, tell folks about the basic key strategies that you use. 

 

Trey Stone:  01:08

Well, it really starts with a property where there's an opportunity to make something better. A lot of people have this idea that they want to go buy a property that's already going to do a great amount of cash flow, a great yield or return on investment from that cash flow. And at the same time is going to give them some huge capital gain where they can sell it for a lot more money than what they paid. But in reality, those two are usually a little bit mutually exclusive, at least in the beginning. In other words, they have properties already running great, and already has a great yield.

 

01:40

Why wouldn't somebody sell it to you for the absolute top possible amount of [crosstalk], it's already doing great. It's a property where something could be improved, whether it's the management, whether it's the tenant profile, and demographics, whether it's how you want to reposition the asset from a renovation point of you or rebrand the property? There's got to be something that's creating a discount when you're buying that property. So, you have that capital gain. And so, what we look for is deals where we can find very quickly how we're going to fix whatever's wrong. And if you can't find something where you can add value to the property, then at least for me, and for most of my partners, that's not going to be a deal that we're going to do.

 

02:25

So, the first part of our strategy is, we want to find a little bit of a sick puppy and figure out a way to nurse it back to health. The next thing that we're looking for is a great core tenant profile, that we can really build into a pattern of long-term tenancy and low turnover. Because I had one of my mentors earlier in my career explained to me, it's not so much trade, whether you're 99% occupied, or 95%, occupied or even 90% occupied. It's got a lot more to this, my friend Emery Jacob, he said it's got a lot more to do with your turnover. Because if you're four, and it's a revolving door with the tenants that are moving in and moving out, you'll never make any money. Because you're always having to spend a lot of money to buy that next tenant through marketing and advertising and leasing commissions and then expense on making ready that unit doing all those [crosstalk]

 

03:18

The vacancy time in between the tenants, so all those things cost you money and reduce your revenue. So higher expenses, lower revenue is not a good combination. Whereas if you had a property, let's say they only had 90% occupancy, but where that the turnover was very, very low. And where people love living there, they felt like they got a great deal for what they were paying for the quality of it, etc. For the overall lifestyle, the property, then that's going to lead to a property that's massively profitable. And we find that focusing on properties in Hispanic neighborhoods, where there's a huge amount of growth in the Greater Houston area within the Hispanic clientele and catering our amenities and our events and our marketing platform. To attract Hispanic renters and show them that we value them because of the explosion of their population in the Houston area that just continues to grow at an astronomical pace. That for us has been a recipe for success.

 

Bobby Duncan:  04:14

Let's talk about some of those amenities and some of your staffing and some of your marketing and branding techniques as well.

 

Trey Stone:  04:22

Sure. So one of the things that we've done is we've worked in focus groups with a lot of our residents to try to understand what's important to them, and the overwhelming response that we get and don't get me wrong from a fair housing perspective, we certainly are happy to accept anyone of any demographic so that means our screening criteria, and screening criteria doesn't include your ethnicity, or your country of origin, we could care less. But it just so happens that because the majority of the renter population in Houston is already Hispanic. And it happens to be the most quickly growing area of the community and happens to be one of those underserved areas. In other words, people that are middle to lower income Hispanic families, there's a real shortage of quality housing that provides a safe place for them to live.

 

05:11

And that has been overwhelmingly reflected in the feedback that we've gotten from those focus groups. And what they always lead with, sort of an unfinished with is their kids. It's about family. It's about children. And they feel that they need things that are constructive activities for the kids at the properties. They're very concerned about things like lighting, things about trespassers issues with crime, people involved in drugs, or gangs or prostitution at the properties. Those are things that are sort of the ugly underbelly of a lot of low-income properties and for these families that are so family oriented. And typically, with our Hispanic renters, there's different religions, but I would say probably 90% of our Hispanic residents are, at least originally of the Catholic denomination.

 

06:00

Depending upon their country of origin, almost all the Central and South American countries, that's the majority of those folks are raised Catholic. So, they have this belief that what they do for their kids is really more important than anything else in their life. And so, making sure that the property is catering towards a family friendly environment means we've put in soccer fields. And we've gone ahead and created jerseys of two different colors, with two different team names that the residents have been able to vote on before. So, their kids get to join a soccer league if you will. 

 

06:37

That's right there at the property and they're able to sit there and scrimmage and have games. It's a blast, and it's a great way for us to get referrals to other people that Wow, so you guys have a soccer game this weekend for little Jose. Well, what I want to come check that out, I'm going to bring my kids like, we want to live here, this is awesome. We don't have that where we live and then just the fact that we do lots of common areas. Amenities we put in brand new playgrounds, we resurface and realign the pools and put into safety equipment. And then we just also value their business across the board. We provide functioning air conditioners and we try to do rapid turnaround on work orders and service requests that may not sound like much with a lot of lower- and middle-income properties. That's something that people aren't used to getting.

 

Bobby Duncan:  07:23

Let's talk about some of the onsite stuff with your staffing. Tell me about the criteria you look for, for your staffers at these properties.

 

Trey Stone:  07:30

We look for people that are good at building relationships, we don't necessarily focus the way a lot of companies do on all of their past experience. If they're coming in, for example, in a leasing context, first of all, they got to be bilingual and fluent in Spanish and English but in particular, I like people that are coming in there either relatively new to the industry or brand new to the industry, where they have that it factor of having sort of a warmth about them because in our business Customer Service is business development. And most of corporate America, that's not the case, right? Business Development is very divorced from customer service. 

 

08:09

But the reason that they're one in the same for my firm, is that we understand, like I spoke about a few minutes ago that turnover is really the driver of either your success or failure in the apartment business, your ability to keep people there for a very long time, happy customers for many years, even with modest rent increases over time. And so, to do that, it's all about the customer service, not about the upfront sale.

 

08:33

So I'm hiring salespeople in my leasing teams in the office, including also the higher positions, the Assistant managers and the property managers that have that type of warm, kind of compassionate personality, where they seem like the type of person that if they tell you, thank you so much for letting me know, we're going to replace your garbage disposal ASAP we're going to get right on that, that you don't really feel like oh, yeah, right, do they really care? You feel like they take that personally that they do care about whatever you're experiencing, because those people are going to still be very trainable and all the things, they don't have experience doing. So if they have that warmth, and that friendly, caring personality, I can train them on fair housing, I can train them on screening criteria, I can train them on the different marketing tactics that we use, we can train them on all of the details, the ins and outs of the lease agreement, so they can accurately explain those, but what I can't train somebody on is having a kindness about them. And so that's actually a number one criterion.

 

09:34

And that's why I love the owner of that entrepreneur that started that company KIND, they make KIND bars and other nutritional supplements, and he gets sometimes on Shark Tank, that guy is my hero, because when you listen to him talk, and you listen how passionate he is, you can see that it's not just a brand, that he picked that brand because it represents how he views his business and how he views the world. And I look for people that bring that even as somebody completely new to the industry and then we train them from there. Now for some of the maintenance positions, we do have to focus a little bit more on their background, their AC certifications, and their technical knowledge because someone can't just go in and repair a boiler or air conditioner.

 

Bobby Duncan:  10:18

I tried it didn't work out.

 

Trey Stone:  10:19

Yes, I have too, and I will never do it again. Especially now that I have a bunch of maintenance guys at my properties that know 1000 times better than me they are happy to help for some extra money because I do that when they come out to my house and show me what I'm doing wrong.

 

Bobby Duncan:  10:32

Well, we're talking today with Trey Stone. Trey, we’re talking also the ABCs of apartment investing step by step. How does Trey execute his strategy? And Trey is the 2014 president of the Houston Apartment Association. He has owned about $300 million worth of apartments in the Houston area over the years. As a matter of fact, your first property ever was in Houston. The asset apartments that are above 6000, right?

 

Trey Stone:  10:56

6150 [crosstalk] I still remember

 

Bobby Duncan:  10:58

Forget that one. We're going to be looking at later on in the program of the formula for the future acquisition criteria. If you want to get a hold on Trey, it's very easy to do. All you have to do is you can catch him up on the email trey @realestateriches.com, there's a website, of course, realestateriches.com or you could just call him on the phone. That's 800 661 Trey, 800-661-8739. Now coming up here next, we're going to be talking a little bit about your acquisition criteria. You go from vacancy rates, property management, all kinds of things give us a brief peek at what we're going to be talking about next.

 

Trey Stone:  11:41

Well, we talked earlier in the last segment about how we identify opportunities, our strategies and it's about finding sick puppies and nursing them back to health. And usually it's very obvious stuff. A place that's been physically rundown, poorly managed, has really burdensome [sysco 11:56] debt or a combination of all three. That's 90% of what we're looking for. And something that we can go fix and make more valuable.

 

Bobby Duncan:  12:06

Coming up next here, it's Real Estate Riches Radio. This is the show that teaches you how to build wealth by investing in apartments. We'll be right back.

 

Speaker 3:  12:16

We hope you're enjoying this episode of Real Estate riches radio with Trey stone. Do you have a question for Trey or one of his guests? Call Trey today at 800 661 trays. That's 800-661-8739. Let Trey stone show you how real estate can help your family meet your investment and retirement goals. You can meet Trey and his staff to a property and see the financials. Visit us online at realestateriches.com today to learn more and get started on your real estate journey. You can email Trey at trey@realestateriches.com. Trey stone grew up in Pasadena, Texas. Attended Sam Rayburn in high school and went on to graduate from the University of Texas. Trey was the first person ever to win the Apartment Owner of the Year Award for the Houston Apartment Association and the Texas Apartment Association and the National Apartment Association. Don't stand on the sidelines hoping to someday accomplish your goals take action today, meet Trey and his business partners get on the fast track to financial independence just call 800 661 Trey, that's t r e y or email trey@realestateriches.com and get started now.

 

Bobby Duncan:  13:39

Welcome back to another episode of Real Estate Riches Radio. This is the radio show that teaches you how to build wealth by investing in apartments. My name is Bobby Duncan, our resident literally expert is Trey Stone. You can always reach out to Trey anytime via email trey@realestateriches.com also, just go to the website, realestateriches.com, or you can catch him on the phone if you like 800 661 trey, that's 800-661-8739. Now today we're talking about the nuts and bolts, the basics, the ABCs of apartment investing, step by step, how does Trey execute his strategy for buying apartments? We talked about some of your key strategies here just a moment ago, I want to get into the acquisition criteria. I think this is really critical because you don't just go buy any apartment complex, you have a strict set of criteria that you have. And tell us about that.

 

Trey Stone:  14:40

We're looking, as I mentioned in the last segment for an opportunity to add value. We're going to have I think, a show coming up. I think actually the one that we're going to do for tomorrow, we're going to talk about the different types of apartment deals you can do. And one of those types that I focus on with my partners is the value play. And the whole idea behind the value play is that while once you nurse the sick puppy back to health, then that property should be producing cash flow for you that in the act of nursing back to health and fixing what's wrong and restoring the property to its potential profitability, that action, which sometimes has a cost, not just in terms of your time and effort, but in terms of rehab dollars, other things, that always winds up being a much smaller dollar amount than the increase in the value of the property when you go to sell it after you've made the property operate that much more profitably.

 

15:37

So that way, you're making money both from the cash flow of the property and from the capital gain, as opposed to buying a property that's just already perfect and doing really well, which sometimes for certain investors like we'll talk about tomorrow can be a good strategy for their circumstance, but it's not the one that I focus on. And I always tell people, if you're not doing a value play deal, I hope you're doing it on your own. And what I mean by that is, if you have a lead investor, like I see so often that's the guy helping to syndicate the partnership and raise money and sort of be the leader of that partnership going on identifying, evaluating financing, and then operating that property.

 

16:18

Those guys, I included, we don't work for free. It's not a charity job, and so what happens is that people that go into one of those value play deals where there's not a lot of upside for capital gain, if that's for themselves personally to enhance their income, it makes sense. But when they're doing that type of deal, and the lead investor that brought them into the deal that's really doing that work. They add their fee on top of that to the transaction, or they take a piece of it.

 

16:46

How are you not underwater? Let's say that guy takes 20% of the deal. I'm not uncommon. Then you go sell the property, you didn't have any value and it's worth what you paid. Does that mean you're now going to come up with a 20% loss? Because you don't give 20% up to the guy that put together you didn't make it any more valuable to make up for that. So our acquisition criteria usually surrounds that process, or we're identifying that this occupancy is way lower than what it ought to be, this property management company doesn't have a bilingual team, or they don't have a make ready standard that's consistent with competing properties and that sub market.

 

17:21

Or the rent per square foot of the property is lower than what it ought to be in that submarket based on a detailed market survey that we perform. Or they may be stuck in a loan. That's just a really bad loan. And that can create a lot of additional cost that's forcing them to sell the property at a lower price. Whereas when we come in with fresh financing, I've even bought deals all cash, one of those two options, we're going to eliminate that downside of the property. And then of course, the most obvious one, which is that it needs renovation, those are the acquisition criteria. If there's not something wrong with it, I don't want it.

 

Bobby Duncan:  17:56

That's a good rule of follow. You're listening to Real Estate Riches Radio. This is the radio show that teaches you how to build wealth by investing in apartments. Our resident expert is Trey Stone, you can always get hold of Trey 24/7. You can email him at "trey@realestateriches.com". There is a website of course, it is "realestateriches.com", or you can call him on the phone at 800 661 Trey that's 800 661, t r e y or 8739. Today, we're talking about the ABCs of apartment investing step by step, how to straight execute his strategy for buying apartments. Now we've talked about key strategies, we're going to be talking about here in a little bit your formula for the future, which I really like this because it's some real just some common sense ways to operate your properties. But right now, tell us more about your acquisition criteria.

 

Trey Stone:  18:52

So, I'd like to think about kind of the next step and the explanation I covered a moment ago, which was really focused on finding out what's right wrong with a property. Now I'd like to kind of talk about the I guess execution of that. Because really that's what it comes down to execution is what turns a problem into a positive. And just to give you a fun example of how I've illustrated this with some of my partners before. I bought a little property for about $12,000 a unit, those down the Southwest Houston, kind of the Golden submarket. It was called Jefferson house, and I rebranded it last Stancia with my partners, I should say, we rebranded it, and then sold the property for over $50,000 a unit.

 

Bobby Duncan:  19:36

Wow. 12,000 to over 50,000 [crosstalk]

 

Trey Stone:  19:40

So huge capital gain even out of the rehab. And my point in bringing that deal up, is that was an example of a deal where I needed everyone to come into it with their eyes wide open, and not sort of think this was going to be this really nice property and then freak out after they came out today. Where the property after we'd already bought it. [Crosstalk] I've had that happen before.

 

Bobby Duncan:  19:41

Well, you wouldn't buy a car without looking at it first, why would you?

 

Trey Stone:  20:05

Make sense, but they think well, I'm looking at it for them, I suppose. But this one was really, really bad. I mean, serious issues with homicides and gangs and drug traffickers. And it was very low in occupancy, like less than 10% economic occupancy, basically vacant. But not all the units actually were vacant, because there were people in them that weren't paying the owner that is to just kind of gone to free for all out there. And I remember I had all the investors come in to one of the vacant units that were there that day, and I used to own a bus that people would get on with me on these property tours.

 

20:39

And so we piled in there quite a few people, we squeezed and I said, Now what I want everybody to do right now, it's going to sound a hokey, but just bear with me, is I want you all to just take for a moment. I don't want you to close your eyes, and I'm going to look around and I don't want to see any open eyes around the room. So, you look around, there's a couple of [inaudible 20:57] I'm looking at a single mentor that close their eyes. Now I want you to right now, I want you to breathe out first through your mouth and at the same time on the count of three. Then I'm going to ask you to take a nice deep breath in through your nose. So, it's going to seem a little weird, but everybody just right now, all together, just breathe out, instead, right now I want you to breathe in through your nose and now [breath].

 

21:21

So I just want to sit there from now on everybody open your eyes and look around and I want to find out like, if any of you know what you're supposed to get out of this like, what are you sensing? What are you picking up on here today in the room? I guess I feel like it's the energy or the excitement that we're all here we can make this place better. I was like, that sounds really good. And I got a couple other guesses, right? And I said was that smell was the smell of cat piss? Wow, did you notice that incredibly pungent odor of you're allowed to like it's fine in here, but it's disgusting in here, is it not? And then all of a sudden baby die laughter they're like, oh my god. I wouldn't say anything, why are we in here? Oh my god, it smells horrible or is there like a dead body? What's going on? Because they had these feral cats that just overrun the property. Here's my point to you.

 

22:09

The manager was acting like, Oh, you know, this property got so much potential. and we just need to, have somebody come in and take more of a hands-on approach. But we've got a great team, and we're leasing. And then she took us around to some of the units. And even the model unit, which we were in was obviously just been left unsecured for all these cats to come in, and defecate if she shouldn't and I said, you think maybe we could do a little better than soaking all of the carpets and cat urine? Because if we can even do that, I'm thinking that this property could be worth a lot more money, and they got it. So that may be a weird way of answering your question, but this is the nitty gritty, this is really where the rubber meets the road is.

 

22:52

A lot of owners that own these properties, they live out of state, they're very hands off. And the staff, sometimes they do a great job and sometimes they don't. And what we do is we come in we're hands on, and I would never fly it one of my properties because I would know about it right away. And in very grand style terminate the manager responsible for that travesty. I wonder if your model unit has cat urine in the carpet and dead roaches in the corner, thinking you're probably not going to have a great leasing operation.

 

Bobby Duncan:  23:23

I won't forget that story. This is Real Estate Riches Radio. It's the radio show that teaches you how to build wealth by investing in apartments. You've been listening to Trey Stone, our resident expert, Trey, you are the first person ever to win the apartment owner of the Year Award for all three, The Houston Apartment Association, The Texas Apartment Association and The National Apartment Association as well. You're the 2014 president of the Houston Apartment Association. We are talking about the ABCs of apartment investing step by step, how does Trey execute his strategy any other acquisition criteria or stories you want to tell us that was going to stick with me for a while.

 

Trey Stone:  24:05

There's so many, I think one of the things I do that's a lot different is when my team comes in and takes over a property, we get really, really aggressive about trying to improve the crime situation, a lot of these lower income and middle income properties. Unfortunately, a lot of these owners that use third party management companies live in a different city or different state or in some cases, a different country. So people that we buy these deals from, we're looking for deals I've been talking about today and given a lot of examples of reasons that we could add value to execute a value play, which is where you buy a property, and you put time and money into correcting whatever's wrong with the business, and then you result a huge increase in the profit. And that increase in profit allows you to sell the property or refinance your equity out of the property at a big multiple of what you originally invested as a down payment to buy the property. So, it's a hand on, it's let's go work, let's fix problems.

 

25:05

And a lot of people that buy these properties, they understand some of those ideas, they get that you're going to have to renovate the property that maybe you're going to make some upgrades to the interiors, maybe better countertops or a better quality of flooring, but what a lot of them overlook because they've never lived like I did growing up in neighborhoods like this. I mean, I grew up very much next to the trailer park and passing in Texas and playing in the apartments and trailers and also in lower income homes in that area. And I know what kind of crime issues these families face and they don't really have any other options. They can't afford to move into a different area of town sometimes or a property they wouldn't qualify for based on their income that sometimes might have less crime. So, they need help. And the owner is like, well, what can I do, I'm not the police.

 

25:53

Well, we can do a lot to turns out, and so that's what we do, and I go in and I bring in police officers, and if somebody there trespassing on the property, we get a trespass affidavit, which then allows us to exert our authority as the owner to have that person removed. And that way they're not on the property selling poison. I just have no sympathy for the drug dealers that do that at these properties. And they turn these private businesses into their own personal drug distribution, storefront. And so by us eliminating that with a series of techniques that we've developed over time and working closely with law enforcement, we're able to get those families, sleep better at night that their kids are not growing up around, literally gunfire.

 

Bobby Duncan:  26:43

You are listening to Real Estate Riches Radio, the radio show that teaches you how to build wealth by investing in apartments. Our expert here is Trey Stone, you can get Trey at trey@realestateriches.com, you can go to the website at realestateriches.com or you can just call him at 800 661 Trey that's 800-661-8739. We're doing the ABCs of apartment investing. And coming up next is going to be a really interesting segment, we're going to be talking about your formula for the future. A lot of common-sense stuff in here, but it's operational stuff day to day, that really is a formula for winning. Real Estate Riches Radio. We'll be right back.

 

Speaker 3:  27:28

We hope you're enjoying this episode of Real Estate Riches Radio with Trey Stone. Do you have a question for Trey or one of his guests called Trey today at 800 661 Trey? That's 800-661-8739. Let Trey Stone show you how real estate can help your family meet your investment and retirement goals. You can meet Trey and his staff to a real property and see the financials visit us online at realestateriches.com today to learn more and get started on you. Real Estate journey you can email Trey at trey@realestateriches.com. Trey Stone grew up in Pasadena Texas attended Sam Rayburn high school and went on to graduate from the University of Texas. Trey was the first person ever to win the apartment owner of the Year Award for the Houston Apartment Association and the Texas Apartment Association and the National Apartment Association. Don't stand on the sidelines hoping to someday accomplish your goals, take action today. Meet Trey and his business partners, get on the fast track to financial independence. Just call 800 661 Trey or email at trey@realestateriches.com and get started now.

 

Bobby Duncan:  28:52

Welcome back to Real Estate Riches Radio. This is the radio show that teaches you how to build wealth by investing in apartments. My name is Bobby Duncan, our expert here is Trey Stone. And remember, you can always get hold of Trey at trey@realestateriches.com, that's the email address. Go to the website, realestateriches.com or call him on the phone 800 661 Trey that 800-661-8739. Now we're talking today about the ABCs of apartment investing. You've been on the radio for many years here in Houston and you've taken a break, and now you're back. So, there may be folks out there who just don't know your systems and don't know your strategies. We thought we'd highlight those today. And let's talk about your formula for the future. I have a couple little rent houses myself, and I'm looking at some of these tactics. And they're all just very common-sense things, but they go such a very long way with your customers. So, let's talk about your formula for the future.

 

Trey Stone:  29:53

Think in terms of the operations of the properties, we mentioned earlier, I think in the first segment, we talked about some already strategies, we talked about the staffing, you asked me a few questions there. We talked about finding people that are compassionate and kind, even if they don't have a lot of industry experience, because then we can train them on the sales and how to follow the screen policies and comply with fair housing requirements. And the ins and outs of all the clauses in the Texas Apartment Association lease that we use at these properties, we can train all that stuff, but you can't train somebody to be a kind, compassionate, decent human being. So, we try to start with that. And then we can add the other stuff later, if they have industry experience, that's just a bonus.

 

30:35

So, our family for the future, I think just kind of applying that same thought process really, to all areas of the business. So, what we do as a management company that is very different from some of the larger companies that I've interacted with, who do a great job in their own way. So different approach, having served as the president of the US Department Association, I've had the privilege of working with a lot of folks that actually head up the largest management companies in America, one of them is one of the largest management companies in the world.

 

31:08

And I think that with these really large management companies, there's sort of a pragmatic approach to what they bring to the onsite level. In other words, they have so many 10s of thousands of units that they manage, that it is really not feasible for the owner to be at the property on a regular basis. And in my career, when I built my way up to, I think it was 6 or 7000 units. And then I bought a fee management-based property management company where I took over properties, and I think it was like nine different cities. After I acquired that business, which later I sold and divested, but in that process, we were really spread out, up and down the Southern Central and East Coast of the United States.

 

31:52

And so I myself kind of started to fall into that, that approach of being a little bit in not by design, but because of the pragmatic reality of having so many units spread across such a large area, being into that proverbial ivory tower. And maybe losing touch a little bit with what was happening on site with my onsite employees. And so what I've done is kind of come full circle back on that now, I don't do any management as I did before, of other people's assets, I only manage the properties that I own, or that I own with my partners, I have to be an owner in the deal, or I won't manage the property.

 

32:30

And what I do is I spend time my wife and I both out that those properties, we buy lunch for the staff, and we give them sort of unexpected bonuses sometimes for doing a great. And maybe some unexpected correction. Sometimes I see something that we don't like, but we try to be really handed on. And we try to I think to really cater to understanding the underserved, market of the Hispanic renter in Greater Houston and really tailoring events like having a Kingston [inaudible 33:45] extravaganza. I have held a live bond a concert that one of my properties before you probably don't know what bonded is,

 

Bobby Duncan:  33:08

I have heard about that.

 

Trey Stone:  33:09

It is the Mexican version of what we would call country music here in America, and it's a large band. We have done live remotes with Spanish speaking radio stations. And what we are trying to do is really understand not just the language, we have Spanish applications. We are done. Now that is what a lot of companies do. But we're trying to be handed on and really understand what their needs are and encourage them. I think, to communicate those to us we try to hold a resident function, every month or two at all the properties, my wife and I are involved in the planning of those functions. And we cater those things about what we people need.

 

33:49

When we walk across the property. We stop residents every opportunity that we get. We ask them questions about how it is going, what are they like, what are they not, I was at a property, I guess maybe about three months ago. A resident told me that he had not been able to get something repaired in his unit and that he had come in. And you already asked about it and called about it, and that nobody took care of it. I got his name; I got his unit number. We went and had a conversation pulled up the work order, and the system said, why isn't this done? And suffice to say, it got done that day. And so I think just having that hands on approach and treating your customer, the way that you'd like to be treated, in providing the amenities that cater to what is the majority of the demographic of rental properties that I own in this part of the country.

 

Bobby Duncan:  34:32

You are listening to real estate, riches radio, a radio show that teaches you how to build wealth by investing in apartments. Our expert here is Trey Stone, get him on the email trey@realestateriches.com. Also go to the website realestateriches.com or just call him 800 661 Trey, 800-661-8739. We are talking about the ABCs of apartment investing, step by step. How does Trey execute his strategy for buying apartments? We have talked about key strategies. We have talked about acquisition criteria. We are talking now about your formula for the future. I think in a way, this kind of reminds me something, you are in this for the long haul. You come into a distressed property, you purchase the property, you do your homework, purchase the property, you rehab it, and then you raise the rents and you get better clientele, and then your investors make passive income through that process. What are some of your other formulas that you like to deploy?

 

34:32

And by choosing to pass on things outside of my core competency, so that is why we don't manage properties that other people loan. That is why I don't manage properties outside of the Greater Houston area, because it allows me to have that small footprint and really keep lean and be hands on with an experienced management team. Lead on site by the owner, not by some third party.

 

Trey Stone:  35:58

I like to look at trying to stack yards in our favor. And by our I mean myself and the other owners if I have partners in the deal, have 1300 units right now that I own with no Equity Partners, but then I've had thousands of units and other deals, like the one that I'm raising money for right now, from other partners being in that deal with me. And the way that I stacked the deck in our favor, is by trying to look for a confluence of favorable, economic factors, and that's a fancy way of saying, you got to get it at the right time in the business cycle.

 

36:37

Because that is another thing in your favor if you're buying like we are right now, where the impact of the Coronavirus in combination with the impact of the oil and gas industry experiencing massive layoffs, many more to come. What that does by pressing downward on market prices, is it sets you up to buy a deal that the bricks and sticks if you don't know anything else about It just the bricks and mortar, wood and nails that make up that property. You're paying on just an absolute dollar price by the pound basis, a much lower price than what you would have paid in the market before those two things happened when we were in what I really feel like has been a, Gosh! seller's market for four or five years

 

Bobby Duncan:  37:19

High cotton, as they are saying.

 

Trey Stone:  37:21

Yeah, exactly. And then we were in a circumstance back in maybe 2009, where it was a similar buying opportunity, because the collapse the financial markets and their impact on debt, helped to create, I guess there's a big drop off in the ability for people to transact at a normal arm's length price. And so that is the reason why I started buying heavily at that time with my partners. And then as we got into, 2013 2014 I sort of backed off acquisitions because the prices I felt like you'd come up a lot and started doing a lot more selling. And then the same thing, going into this next downturn where now we have seen prices plummet, and I've been touring deals that never would have been available just six months ago for the prices that they're available.

 

38:09

The second thing that I tried to do to just take advantage of having as much margin of safety to copy Warren Buffett there as we can, is not just the right time in the business cycle, but what we talked about earlier on this show, having a deal where there's something clearly wrong with it. That is objectively wrong with it, not just subjectively, at the end of the day, 60% or 70%, occupancy is a lovely thing for me to see. When I am looking at buying a property. I do not want to see that it's 99% occupied, I want to see that it's not doing well. I want to see that it needs a lot of work, a lot of renovation. You know the example in our previous segment of the cat, that smell in a vacant unit. When you are touring a deal that you want to buy, that's a spell of money. That is something that is so easy to resolve and make the property so much more marketable.

 

39:03

The crime issues I do not like to see crime issues. But at the same time, I like the knowledge that I know how to address it and dramatically improve it. I love a property that when I go drive it at night, it is just so dark that it's like scary because I can put in lights. Imagine that. And then you can see a big difference when it's broad daylight, because I put so much lighting in at night and I mean, when I say broad daylight, it looks like a baseball stadium. When you go to some properties at night,

 

Bobby Duncan:  39:32

You've had tenants approach you after installing these light systems and actually point that out to you is something, they're so grateful for.

 

Trey Stone:  39:39

Many times, I had a guy was telling you about a up in Montero property owner at 45 and 1960 you know he's in his track is coming home from work. He's coming in through the gate and realized by means and some people I was with that we were part of the management team and said man, I've been mugged before you bought this property this gate all of us do when you bought it because you repented the whole thing you changed the name and you made all these other changes, he said you know what? The fact that you put lights everywhere and there's not people like kind of lying in wait for us anymore we pull up and must wait for the gate to open to come carjackers. That is my biggest value add.

 

40:14

And I thought well, thank you. And then I thought, jeez, man the impact that it has on these people's lives when people slumlord these properties and do not maintain them. I do not know how they sleep at night knowing that these people are living this way. I had a girl approached me, she was an older lady, but she approached me at a property that I own off West Park and highway 6, just under 500 units and talked about how before, we had gone in and added all this lighting to the property that she had been mugged walking from the bus stop to the property and that the last time she wasn't so much upset about the purse because she expects that now, but she was upset that didn't give her time to just hand them the purse. And it was still around her shoulders.

 

40:58

So, when they pulled it and yanked her neck really bad, and she couldn't afford to have her neck fixed but she had never ending neck pain since that had occurred because it pulled her all the way to the ground. They yanked it so hard and just snapped her neck and, in a way, where it did some kind of long term damage all because there's just no lighting to prevent people from being able to get away with this crap. So, there's some really obvious stuff Bobby that you can do in these properties and it makes them a lot more valuable and you get to be the good guy at the same time.

 

Bobby Duncan:  41:26

You're listening to real estate riches radio, the show that teaches you how to build wealth by investing in apartments with our expert Trey Stone get a hold of Trey anytime trey@realestateriches.com, that's the email address the website realestateriches.com or call him on the phone 800 661 Trey, 800 661 t r e y. We are talking about the ABCs of apartment investing step by step. Coming up next, we are going to tell you how you can get involved with Trey Stone right here real estate riches.

 

Speaker 3:  42:01

We hope you are enjoying this episode of Real Estate Riches Radio with Trey Stone. Do you have a question for Trey or one of his guests called Trey today at 800 661 Trey? That is 800-661-8739. Let Trey Stone show you how real estate can help your family meet your investment and retirement goals. You can meet Trey and his staff to a real property and see the financials visit us online at realestateriches.com today to learn more and get started on you. Real Estate journey you can email Trey at trey@realestateriches.com. Trey Stone grew up in Pasadena Texas attended Sam Rayburn high school and went on to graduate from the University of Texas. Trey was the first person ever to win the apartment owner of the Year Award for the Houston Apartment Association and the Texas Apartment Association and the National Apartment Association. Don't stand on the sidelines hoping to someday accomplish your goals, take action today. Meet Trey and his business partners, get on the fast track to financial independence. Just call 800 661 Trey or email at trey@realestateriches.com and get started now.

 

Bobby Duncan:  43:24

Welcome back to another episode of Real Estate Riches Radio. This is the radio show that teaches you how to build wealth by investing in apartments. My name is Bobby Duncan, our expert is Trey Stone, Trey, you're the 2014 president of the Houston Apartment Association. You're the first person ever to win the apartment owner of the Year Award for all three, the Houston Apartment Association, the Texas Apartment Association and the National Apartment Association. We're talking today about the building blocks of what you do the ABCs of apartment investing step by step we've talked about your key strategies. We've talked about acquisition criteria, the formula for the future. Let's talk now about how do people get involved?

 

Trey Stone:  44:08

Well, Bobby, it's a pretty simple process. We have a website, realestateriches.com, people can go there. And they can just click on the contact us button and then give us their information that way. Another way they can do it has sent me an email trey@realestateriches.com, or they can call us 800 661 Trey. But I think the email is probably the most common way people do. Shoot me an email if they hear me on the radio, or if they're referred to me by one of my other partners or something like that.

 

44:36

And when we receive that information, the first thing that either myself or my business partner Chad, are going to do is we're going to contact that person and say, how'd you hear about us and what are you looking to do? And if it's like, well, I'm looking to learn and come out and hang out and eventually figure out how to go buy my own apartment complex. We say that's a wonderful idea. Here's a couple of different places. Where you can go that are not real estate riches. But they're places where you can go other companies that are in the business of teaching you to do this on your own.

 

45:11

That's not what I do. I have done that before. But what we do now, is we've come to realize that the vast majority of people that invest in these deals, they really don't want to go spend hundreds and hundreds of hours. Whether that's through online education, whether that's through meetings and seminars and books and tapes, driving to and from traffic away from their families and their friends and their jobs and their weekends, to go out and learn all of these detailed aspects of property operations and detailed aspects of financing and underwriting and all of the different everything from fair housing to comparing roofing bids, and I've been with companies before where that's what they do, and that's what I did while I was there, is put on these seminars and stuff for people who want to learn how to go do it themselves, quit their job and make this their life and do it full time. Not passively, but actively. This is all day, every day with they're going to be doing.

 

46:11

I think that's great, I'm all for it. It's just not what I do. Because what I have found is that the vast majority of people that do those programs, get to the end of all of that, whether it's six months or two years later, and then they realize, holy crap, this is a lot. And what I really want to do is I want to hire a lead investor; I want to go in and be passive with that person and learn actually in a deal. And then the more they see that they go, what if this person is doing well, I'd rather continue investing with them. I want to know what's going on. I want to read the financials; I want to have partner meetings. But what I don't want to do is have to go do all that nitty gritty because then let's face it, they probably already have a skill set, whatever they did to amass the savings, they're going to now invest in one of these deals that they're already good at.

 

46:57

So, they want to go trade time for money. Go do what you're already good at doing, practice law or dentistry or work as an engineer or an information technology, whatever that might be. So, what we do is we take a little bit different approach. And we just say, you know what, you just want to make sure that you're picking the right person to do a deal with and that you're picking the right deal. So we want to make sure on our side, that we're getting the right partner, the right investor, because I told you the story the other day, on one of our episodes that we recorded together that came out on CD, where we talked about a mismatch between some of the investors in that particular deal. So, the way we avoid that now and just get people straight into something that makes sense, is we meet with you at one of the properties that I already own.

 

47:43

And we've already renovated that already operating that we've already turned around. And we introduce that prospective investor, not just meeting them ourselves chatter I but also to the rest of the team at that property, meet the office staff and sometimes some of the maintenance team. These are typically large apartment complexes with anywhere from 5 to 15 people who work at that particular location. And we walk around and tour the property and see the model see a couple of make readies. what are those look like, we go over the numbers of what we spent, buying it, or renovating it. We look at the financial statements so that you can see how they've changed from how the property was operating and what the profit and loss statement looked like, before we bought the property, right after the property because sometimes it gets worse before it gets better, because you're moving some of the people out for the new rent level that you're moving to.

 

48:35

At the same time, you're renovating the property and improving it. So, you're spending a lot of money. So, less money coming in, more commonly coming out. And then they get to see the financials after we've completed that process, and how the property is now producing a lot more net income than what it was before we bought it or even right after we bought it. And so, they get to see kind of that lifecycle of a deal, but actually at that subject property. Here's the before pictures, look around you and now this is the after. And I think it makes it a lot more compelling. And we also spend a fair amount of time reviewing that investors financials also.

 

49:08

So, we show you our financials, but then we want to see yours, figure out, if that person is really qualified and suitable for this type of deal. We also want to understand what their goals are, if they say, invest $10,000. And I want to $100,000 back on that in about six months, I'm going to say, that's awesome. I know this Great Casino in Vegas. That's not going to be [crosstalk] nobody does that. Oh, yes, people do that. And so we want to make sure there's realistic expectations, that we're going to be able to perform and exceed those expectations as opposed to the way around, want to make sure this person seems to be of sound mind and is in a position to make this investment. And that we get to know each other a little bit and then a lot of times if that goes well, then we'll have a follow up meeting. Maybe see another one of the properties and Chad to the first one, I may come to the second one or vice versa. 

 

50:04

And then at some point, if it still looks like a fit on both sides, and we sit down, we go through our private placement memorandum, which is a fancy way of saying, the document that you have to review and sign if you're investing in the deal before you write a check. What that does is lets you know what your role and responsibilities are, what our role and responsibility is, and it lets you know, every conceivable risk that we've been able to think of. So that's all fully disclosed to the investors upfront, as well as what we expect to make off this particular deal that we're going to be going into. So that meeting goes well. Then at that point, the person signs that subscription agreement and they fund it whether it's through their [inaudible 50:42] or whether it's through their cash holdings, and we go on down the road and we get back together once we have that rehab underway, so they can see the progress in person, and it's a lot of fun.

 

Bobby Duncan:  50:54

Okay, you've been listening to Real Estate Riches Radio. The radio show that teaches you how to build wealth by investing in apartments. Our expert today as always Trey, it's a pleasure Trey Stone. Get a hold of Trey via email trey@realestateriches.com. Also, you can go to the website realestateriches.com or call him on the phone 800 661 TREY 800 661 8739.

 

51:23

We hope you're enjoying this episode of Real Estate Riches Radio with Trey Stone. Do you have a question for Trey or one of his guests called Trey today at 800 661 Trey? That's 800-661-8739. Let Trey Stone show you how real estate can help your family meet your investment and retirement goals. You can meet Trey and his staff to a real property and see the financials visit us online at realestateriches.com today to learn more and get started on you. Real Estate journey you can email Trey at trey@realestateriches.com. Trey Stone grew up in Pasadena Texas attended Sam Rayburn high school and went on to graduate from the University of Texas. Trey was the first person ever to win the apartment owner of the Year Award for the Houston Apartment Association and the Texas Apartment Association and the National Apartment Association. Don't stand on the sidelines hoping to someday accomplish your goals, take action today. Meet Trey and his business partners, get on the fast track to financial independence. Just call 800 661 Trey or email at trey@realestateriches.com and get started now.

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