Speaker 1 (00:00:05):

Thank you guys for joining us. My name is Tyson Schutzi. I’m the founder of Auburn Realty and Auburn Capital Partners. I’m here today with Chris Detreville, who has been one of our longtime agents, brokers, and is now currently in the national sales manager role. Chris has a wealth of knowledge of both investing and working with investors and decided to join [00:00:30] us today on Real Estate Rewind to talk about particularly how Auburn’s history and experience working with SFR and for those that don’t know SFR’s single family rentals, how that has helped us help other owners either optimize, reposition, or exit their portfolios. So today we’re really going to approach this topic from two different perspectives. One, how [00:01:00] agents can approach owners of portfolios of single family homes and get to know both the portfolios, the owners, and look for solutions. And then also what those solutions can mean from an owner’s perspective.

(00:01:15):

So welcome Chris. Thank you for joining

Speaker 2 (00:01:18):

Us. Yeah, thank you. Absolutely.

Speaker 1 (00:01:20):

So Chris, just give a little background. You’re from Columbia, South Carolina, and you’ve spent the majority of your career operating here in a number of different roles [00:01:30] in real estate, correct?

Speaker 2 (00:01:31):

That’s right. So grew up in the real estate game. My grandfather actually amassed a portfolio here of small, multi and single family properties. Right out of school, I started working for a new home builder in real estate. Ended up moving to a property management company for five years. Spent some time, kind of cut my teeth working with investors there, [00:02:00] learning kind of the property management, how to do it professionally, not just from a family kind of perspective. And then a couple years later joined Auburn, specifically worked for one of the big bad hedge funds, gobbling up some of the single family rentals. So yeah, that’s pretty much the rundown there of how I’ve gotten to where I am.

Speaker 1 (00:02:29):

Interesting. [00:02:30] And I think one of the points that Chris makes, which is not uncommon for people that we work with or people that work at Auburn is having a number of different functions and roles within residential real estate. I think that if you talk to most people that have been in this business a while, they’ve served in different functions, but I think she’s very helpful to coming up with solutions and being able to speak to clients about helping them create solutions.

Speaker 2 (00:02:58):

Yeah. You want to be able to [00:03:00] kind of know all sides of the business ideally. If you’re selling investment properties, you want to know how they’re managed. Obviously Auburn’s full service, so we kind of got all that covered, but having some knowledge of how that works and having experience at different companies too is important.

Speaker 1 (00:03:20):

And I think you brought up a point is what is property management is a little different for owners and property managers, right? I think that individual owners [00:03:30] who are self-managing, a lot of times they have a very specific strategy or a very specific approach that may only work for them. And so at times that specific strategy may be difficult for them to exit their portfolio, hand over to their kids, hand over to a manager. I think can you speak a little bit about both how you have experienced that in your family’s involvement in real estate and then working with property management companies that were working with a number of different clients?

Speaker 2 (00:03:59):

Yeah. And honestly, [00:04:00] a lot of those say mom and pop landlords don’t necessarily have a strategy. Maybe originally, I mean, I can speak to my family stuff. Originally, my grandfather probably had a pretty good strategy, but later down the line, it all kind of. You got to pivot. So he self-managed. It was kind of our family business for a little while. And then after he passed away and family [00:04:30] stuff going on, we go to a third party manager. So family dynamics and stuff like that change. A lot of the folks that we’ve dealt with in purchasing some of these portfolios, for instance, it’s their life’s work a lot of times. And it’s their baby and they don’t. We want to look at it just on a spreadsheet and see what their returns are, but it’s way more [00:05:00] than that to them. So you’ve still got to have the personal relationship, I think, with those people and help guide them through what is basically an exit of their life’s work.

(00:05:15):

So it’s not just Xs and O’s.

Speaker 1 (00:05:19):

Yeah. And you brought up a number of things that I definitely want to talk about. And I think there’s this perception that investors are very intentional, calculated, [00:05:30] number driven individuals. And I think some of them can be, but I also think with a lot of owners who are particularly managing residential rentals and self-managing, a lot of times they can become very emotionally attached to the properties. They can become very emotionally attached to the tenants. And it can make it really challenging for them to reposition it for anybody, even their own children. And so I think that’s an interesting approach. Speak to about how, as you’ve begun to try to approach [00:06:00] some of these owners or they’ve approached you about looking for solutions or your portfolios, what’s the first piece of advice that you would give to an agent or a professional looking to help an owner who’s been self-managing?

Speaker 2 (00:06:12):

Yeah, listen to them. Listen to what they have to say because they have certain needs. And so you’ve got to try to figure out what their needs are, number one. I mean, a couple examples come to mind with us personally, but finding out what their needs are and letting that take [00:06:30] you where it goes because there’s a number of different ways you can do the deal. A lot of them are worried about capital gains. They’re worried about how it’s going to be transferred to their family or whatever. So listen to what their needs are and then kind of go from there is the number one thing.

Speaker 1 (00:06:47):

And one of the things I think you’ve done a really good job with is really that listen component and understanding that because it is their life’s work and they’ve built it up over time, the transaction may take [00:07:00] a while to come together

Speaker 2 (00:07:02):

And

Speaker 1 (00:07:02):

Come to point. And I think that’s where you become less of just a transactional agent and more of a advisor assisting them in the process.

Speaker 2 (00:07:11):

Yeah. A lot of times you end up becoming good friends with them because you’re guiding them through something that’s really important to them. And on the other hand, you do have other folks who are very intentional. They know exactly what they want to do. They know they’ve had this plan. So you got to listen to them. [00:07:30] We did another one where the individual wanted to 1031 into more passive stuff instead of these really kind of like C-class scattered single family. So he’s very intentional there. And so how do we help him do that? We pivot in order to make sure that he can get what he wants.

Speaker 1 (00:07:52):

Yeah. Well, you bring up some points which I think ultimately in the single family business with a lot of investors, [00:08:00] there’s a number of points at which some of the acquisition may be very intentional, whereas with others it may not. And some of the exit may be very intentional with others. And with some others it may not. I think all of that requires a certain level of patience and time to get to know the owners in the situation. I think you found out in some of those situations, price is only one portion of what’s really important to them. It may not be in some instances the biggest piece for [00:08:30] them.

Speaker 2 (00:08:30):

Yeah. I mean, I would say it’s probably not the biggest piece. And in a lot of these examples that we’re talking about, I mean, certainly there’s people that where it is and that could be a big hangup for people because we have to find value too or the buyer has to find value too. So coming to that kind of happy place, it can sometimes be difficult, but I think it really is more about kind of the structure of the deal or listen to what their needs are depending [00:09:00] on what they are.

Speaker 1 (00:09:00):

Yeah. It’s interesting. One of the things I’ve always said with, and I think this is true for me when I started my career as most real estate investors, they start out as really more of a collector than an investor. They’re out, “Oh, that’s a deal. I’ll buy that. That’s a deal. I’ll buy that.” And they’re not as disciplined as some larger institutional, but typically where you’ll have a little bit of everything in some of their portfolios. They’ll have different types of assets, [00:09:30] different locations, different conditions. Talk a little bit about how you’ve experienced

Speaker 2 (00:09:35):

That. Well, I think as they get in it, they say, “Okay, well, maybe the cashflow look better on the lower income kind of zip code, maybe the C class stuff. But maybe then later on you realize your time values a little more. So you kind of pivot your strategy there.” So yeah, you may amass a portfolio that’s pretty [00:10:00] diverse. And then your strategy changes. And then, I mean, not to go back to my grandfather, but by the time I was in college, I wouldn’t call him the S word that starts with S, ends with landlord. Because that was not how he amassed the portfolio. But probably he was sitting there thinking, and I’ve heard this from [00:10:30] investors currently, their portfolio’s worth $25 million, but they say they don’t have any money. So I would think maybe you get into it and you’re like, “Man, how do I really maximize this dollar?

(00:10:43):

How do I really stretch this dollar?” So their strategies change. Maybe they say, “I don’t need to up this cash flow. Rents aren’t there. Let’s cut some corners or do whatever.” And you see that with a lot of the older folks, I think, [00:11:00] whether that’s intentional, whether that’s just. And I

Speaker 1 (00:11:04):

Think some of that has to come about from managing scatter site residential properties is really difficult, right? Yeah. So I think a lot of these owners try to design management plans or programs that give them some of their time back, or at least are manageable for them, right?

Speaker 2 (00:11:20):

Yeah. A lot of it, I mean, honestly, you have to find really good help. I mean, if you’re managing a 50 unit personal portfolio, [00:11:30] you have to have consistent handymen that you trust and stuff like that. And everybody in real estate knows that that’s really hard to find. I mean, if you find somebody like that, you hold onto them and you don’t want to share them. Painters, cleaners, et cetera. So yeah, it’s difficult to do. Again, there’s people that are more intentional and they actually set up their business very tightly around that, hire people, bring them in maybe to the business or whatever. But [00:12:00] my experience is just like, “Hey, I have two handymen and they do all the turns and all that.” One

Speaker 1 (00:12:07):

Of the things that was interesting for me when I started in Augusta, Georgia was early in my career, I found there were some owners that were unwilling to invest in their properties because they just didn’t understand the concept of by spending more on their renovations, they may attract a better tenant. However, there was also some owners that I think approached it from a practical standpoint is [00:12:30] you always have to look at what you’re investing in the property in relation to what the property’s worth. And 10, 15, 20 years ago, some of these assets in these locations could only command so much rent. So some of these owners may have been limited in what they could really invest in the properties based on the potential rental income.

Speaker 2 (00:12:52):

Sure. Yeah. And I think that’s a good point. You don’t want [00:13:00] to outprice yourself. You don’t want to try to squeeze more out of it than it is capable of squeezing.

Speaker 1 (00:13:06):

Right. So from a standpoint of, talk about what an agent at Auburn can do to help an owner who’s really just unsure what to do with their portfolio. An owner’s got five, 10, maybe 20, 50 properties and maybe they’ve been managing them a while and they’re just unsure of what to do. What’s the first step [00:13:30] if you’re advising somebody in that position how they could help work with an

Speaker 2 (00:13:34):

Owner? Yeah. So ideally an agent has that kind of experience we talked about where we’re a full service company. So you’ve got a little management background and you can kind of speak to that a little bit. You want the professional property managers to actually speak to the property management stuff. But as a salesperson, you need to be able to speak to it a little bit or at least understand how it works, [00:14:00] which Auburn does a good job of training their agents and stuff. So yeah, what was the question? The first step?

Speaker 1 (00:14:07):

The first step in terms of if you’ve got an owner that’s trying to decide what to do with their portfolio, you mentioned before, obviously you need to listen to the process, but what helps you take an owner from, “Hey, I don’t know what to do my portfolio,” to creating a plan for them? What’s really key in terms of information you’d need to gather, process that you would go through?

Speaker 2 (00:14:29):

Yeah. [00:14:30] I mean, information gathering is important. So once you’ve kind of listened to them and they’ve told you what their needs are, obviously you’ve got to underwrite the deal. You want to see what you’re working with. So I’d say that’s probably the first step is kind of take it all in. Sometimes that can be a challenge getting it from, you mentioned that earlier to some of the older self-managing landlords. They don’t keep great records. So [00:15:00] you have to sometimes dig a little bit. I mean, honestly, you have to make some assumptions a lot of times. I mean, they’re not writing down every little maintenance item and they’re not recording everything properly or whatever. So we joke about the 97 door portfolio that we brokered a few years ago and we got a laundry basket of leases.

Speaker 1 (00:15:27):

But that’s not uncommon for a lot of these owners who

Speaker 2 (00:15:29):

Are

Speaker 1 (00:15:30):

[00:15:30] Self-managing. They’ve got a system that works for them.

Speaker 2 (00:15:32):

They’re not

Speaker 1 (00:15:33):

Thinking about how it would necessarily scale or

Speaker 2 (00:15:36):

Transfer

Speaker 1 (00:15:37):

To somebody other than themselves.

Speaker 2 (00:15:41):

That’s right. So I would say you gather the information and you do your best to kind of put the pieces back together and kind of see what you’re working with. And then maybe then you go back and you have an honest conversation with them and say, “All right, here’s what your needs are. This is what you’ve told me your needs are. Here’s the information. [00:16:00] Tell me where we’re wrong, but here’s what we think. And then here’s what buyers are going to look at. So let’s come to an agreement on something.” And then you work on pricing and a sales strategy or whatever, whichever way you’re looking at it. And I’d say that’s kind of the biggest first section of things you need to do is kind of information gather, figure out their needs, [00:16:30] put it all together and come up with pricing and stuff. And

Speaker 1 (00:16:34):

You bring up something that I think is really important to this is it can be a very collaborative process with that potential owner, right? Because there’s a lot of assumptions that it’s not like a commercial property that’s listed on Crexy where you can go and pull every financial record you need. You can get condition. You can get a schedule of when the CapEx renovation. There’s a lot of assumptions that are being made. [00:17:00] And some of those just require a lot of dialogue and representations with the owners that are notated and then verified at a later point.

Speaker 2 (00:17:09):

And they have to understand. And I think as an Auburn agent, you should understand this, that there’s not a ton of buyers out there that are able to kind of take those jumps. So you’ve got to do your best to fill in the gaps and get all the [00:17:30] information, but there’s not a lot of people that will fill in those gaps or whatever. So yeah, I think that that is a really good point.

Speaker 1 (00:17:43):

And we’ve talked about that too. I think it’s a function of, there are a lot of buyers that potentially have the capital to take down these transactions, but just as a function of the complexity of the messiness of a lot of these houses we’re looking at and you’re looking at with the [00:18:00] team, evaluating them from an income based standpoint as well as a retail value standpoint. And then you’re left with the largest variable of how is the condition of the asset? What records do you have or not have on that? And how are you kind of determining what is the best specific exit strategy for that and asset, let alone a whole portfolio. So

Speaker 2 (00:18:23):

Talk

Speaker 1 (00:18:23):

A little bit about that process because I think you’ve done a really good job thinking

Speaker 2 (00:18:27):

Through

Speaker 1 (00:18:27):

And working through that over the past couple of years.

Speaker 2 (00:18:29):

Yeah. I mean, I would [00:18:30] say it’s easier probably to get to like an after repair value. So a lot of these obviously need a bunch of work. Most of them are value add. I mean, it’s very rare that I guess you get a fully sort of ready to go deal that doesn’t need either high CapEx or maintenance. So yeah, it’s tricky. It’s tricky kind of looking. You got to look at what you think the as-is value is. You got to take into [00:19:00] consideration the income, but you also got to take into consideration the market rent. So if they’re way under market rent and you recognize that even if there’s a ton of repairs needed, you can pretty much know that we’re in the ball game if they’re under rented. That’s the easiest kind of metric to see. So yeah, it’s just putting it all together.

(00:19:27):

So as is values, check out the current rents [00:19:30] versus the market rents. And then you come up with like an ARV, which is sort of like your exit if that’s the way you choose to exit. So if you do all of the work to turn the house, you have an option either re-rent it or you can sell it at that ARV and make sure the numbers work at all those little points.

Speaker 1 (00:19:52):

And you and I have talked about this a number of times. And I think one of the nice things about these portfolios is [00:20:00] you can have a good amount of options to exit on a particular asset and at the portfolio level. You’re able to look at an asset and a collection of assets and determine, okay, should we improve this and try to seek a higher rent and refinance it? Should we improve it and try to target an owner occupant? Should we improve it, stabilize it and try to sell it to a investor? All of those decisions you can make both [00:20:30] on an asset level and a portfolio level, correct?

Speaker 2 (00:20:32):

That’s right. And also, can you package them up and sell them to an institution? That isn’t as good a strategy right now, I think, because of just money tightening up. But several years ago, that was a very viable strategy. If they were. The reason you didn’t have a ton of success doing that is because a lot of these are diverse portfolios [00:21:00] and you would have to break them up. They have all these restrictions on, is the house older than 1970? Is it whatever? Three bedroom, they won’t buy a two bedroom, stuff like that. So you had to split it up and then you end up with the stuff that’s maybe less desirable. So there’s that. But what was the other part of the question? So we-

Speaker 1 (00:21:22):

Well, I think you bring up a good point that, and we can go back to specifically I was just speaking of the different exit strategies, but I

Speaker 2 (00:21:29):

Think

Speaker 1 (00:21:29):

That [00:21:30] one of the things that’s important for somebody looking to sell these or agents looking to broker them is the buyer pool for these portfolios can be somewhat limited because a lot of these institutions are limited both with their equity or their debt on what type of assets they buy. And a lot of them won’t buy the portfolios that have assets that they don’t want in them because they’re not set up to essentially perform some of the functions that we perform [00:22:00] in Auburn of divesting of the ones that don’t fit our strategy. Can you speak to that a little bit?

Speaker 2 (00:22:06):

Yeah. So I was sitting here thinking about the other, like the strategy selling as is, but repeat that real quick.

Speaker 1 (00:22:15):

The question was really is for the owners that have these portfolios, understanding why the buyer pool may be limited and what that means for them. If I’m coming to you, Chris, and [00:22:30] I say, “Okay, I know I want to sell my portfolio as an owner.” I think some owners may think, “Well, there’s tons of institutions out there buying these portfolios. Why can’t I just take my 30 homes and sell it to this big institution?”

Speaker 2 (00:22:43):

Well, it goes back to what we were talking about earlier. It’s like if you had a specific strategy when you started investing and you were buying certain properties or whatever and it fits that institution’s buy box, then yeah, that’s way more likely. But otherwise you’re going to have to break up your portfolio. [00:23:00] And a lot of people are either unwilling to do that or it doesn’t suit them.

Speaker 1 (00:23:08):

In some ways, it’s not only just unwilling though, but it’s also because there’s a tax component to what they’re looking to do with the proceeds or how they’re looking to offset or defer some of their taxes. And for some of them, they’ve owned these assets so long that if they don’t have some tax advantageous exit, it’s worse than [00:23:30] trying to take a little bit less to sell it all at once.

Speaker 2 (00:23:33):

Yeah. Yeah. And that’s where things like, if you go back to what we were talking about with what can an agent do and what are some of the questions you asked, it’s like is seller financing available? Yeah. Maybe that’s the number one thing you ask them. Yeah, because a lot of them don’t know. I mean, they know that they’ll get hammered with capital gains, but they don’t know that there’s all these different strategies. And [00:24:00] obviously you have a way to do it with the 721. Yep. They can 1031 it. We had a guy, like I said, that 1031 into an oil change, triple net thing. So there’s all these different ways you can do it.

Speaker 1 (00:24:17):

And I think that’s a good point is also understanding that the options of exit for an owner, even if they get to that point, there’s several different ways that they can exit depending on what they need, how they need it. If [00:24:30] they want to stay invested in the asset class, if they want to stay invested with Auburn, there’s a number of ways that owners can get creative, but also have structures that are very beneficial for

Speaker 2 (00:24:42):

Them. Yeah. And speaking to that, I mean, I’ve run into folks that have, over the course of five years, they’ve sold their portfolio one at a time on MLS, either to owner occupant. If it’s a single family [00:25:00] and I don’t know if it’s true today, it probably still is. But the past five years or so, you’re going to get more for that house selling it, fixing it up, getting it in good shape and selling it to an owner occupant on MLS. And if you have the time and energy and okay with paying an agent and all that to do that, that was probably the way to go. But like I said, [00:25:30] you have a hundred unit portfolio, that’s going to take a long time. Years. A long time to do that. And maybe that’s okay. Maybe that person. But what are they doing every time with those proceeds?

(00:25:45):

I don’t know.

Speaker 1 (00:25:47):

I think that’s an interesting point is there are options for these portfolios to also be sold individually. But what a lot of times the owners are trading is time in that component. And to your point, I think there’s one thing that [00:26:00] we talk about a lot at Auburn that you just referenced, but it is concept of rent or sell and how that relates to assets that we manage, but also owners who are looking to reposition or prune their portfolios. Most of the assets that we manage, generally the retail value, and I think you were just referencing this, can be a little bit higher than what the income based valuation would be. And especially if the condition is good. [00:26:30] If it’s an asset where the major mechanical systems, the roof, all the items would qualify for financing for FHA or VA, you really can, in many cases, just command a little bit of a market premium versus that same home being rented with a tenant in place.

(00:26:47):

Would you agree with that?

Speaker 2 (00:26:48):

Yeah. And then on the flip side, for these houses, let’s call them D class. The undesirable areas or whatever, you can get more. [00:27:00] Particularly in South Carolina, Columbia, if they’re section eight, those rents typically outpace market rents. So you can actually probably get more on the income approach in that scenario. So that goes back to though you need to know your market as Auburn agents do and go that way. So yeah, it goes both ways basically. Yeah. And

Speaker 1 (00:27:26):

I think that’s a good point too, is that it really depends [00:27:30] on the asset. It depends on the location, but it also depends on the rent. Yeah, the rent. Some potential investors, if you’ve got that asset that’s in that low income neighborhood and the rent is a couple hundred dollars below what the potential investor buyer thinks the rent should be, your offers will reflect that. In some instances, you can. We’ve had properties that we’ve taken to market where the asset was well below what the market rent was. And even though [00:28:00] you may try to market it or present it to potential investors as this is a home with a good optimization, a lot of times you’ll get offers just reflective of the in-place rent. Is that true?

Speaker 2 (00:28:11):

Yeah. In

Speaker 1 (00:28:11):

Your experience?

Speaker 2 (00:28:12):

Yeah, sure. And honestly, I mean, if you have one that’s a little, I think I mentioned this earlier, if you have one that’s a little under rented, buyers are looking to add value any way they can. It’s not just through renovation. If they know that they can raise the rent and the tenant’s been there 10 years and they’re way under [00:28:30] rented. And trust me, the tenants know that. And you can bump it 100 or 200 bucks over the course of whatever year or two, whatever it is. That’s just a way to add value. And yeah, it reflects in the purchase price. But right now, a lot of what some of the sales we’re doing out of some of our funds, we’re seeing there’s still a lot of activity. I mean, we’re in Columbia, South Carolina, so I’m speaking [00:29:00] specific market here. And we have a lot of activity.

(00:29:04):

We have a lot of inbound traffic to our state.

Speaker 1 (00:29:08):

The most in the country.

Speaker 2 (00:29:09):

The most in the country per capita. I think it’s like the most inbound per capita.

Speaker 1 (00:29:15):

Net migration or something after

Speaker 2 (00:29:17):

Inbound,

Speaker 1 (00:29:18):

Outbound.

Speaker 2 (00:29:19):

Yeah, exactly. So there’s a lot of folks coming here that people want to invest here. And what we’re seeing right now, and I feel like it’s picked up [00:29:30] just in the last, let’s say, six months to a year. It’s just those, maybe the rents have flattened on the B class stuff. So there’s less people paying, let’s say, 200 grand for a more turnkey home that rents for 1,800. That was happening a good bit. It seems like now there’s a little more activity or uptake in activity of the value add full renovation [00:30:00] Buy it low, renovate it, rent it or flip it. It seems like that is sort of coming back a little bit. So we’ll see. We’ve got some more on the docket, so we’ll see if that holds up. But just in the past few months, I’ve noticed

Speaker 1 (00:30:17):

That. It’s interesting too how, and this is always one of the parts that I love about real estate is you meet different investors and many of them that have been in the business a while are very convinced of [00:30:30] why their strategy makes more sense. So you meet some of the investors that buy the B class and they like the potential to have maybe home price appreciation in those areas. They think that maybe they’re going to have tenants that will take better care of the properties. Then you talk to some of the owners that maybe have a C-class property and they feel like the property’s going to turn over less because that either potential renter’s not going to be looking to buy a year or two from now. So it’s interesting too that as all those can follow different [00:31:00] sort of market preference and patterns, it’s also very different for certain investors in terms of what they focus on.

(00:31:05):

Have you found

Speaker 2 (00:31:06):

That to be the case? Yeah. So again, what’s your strategy? I think most people, if they just watched one real estate show or whatever, they were like, “Well, I want cash flow.” But then you sort of see this evolution where they’re like, “Well, we talked about how much is my time worth?” Because the high [00:31:30] cash flow stuff is going to be a time suck, right? Yeah. No matter what, even if you have them managed, you’re constantly dealing with stuff.

Speaker 1 (00:31:41):

I think one interesting thing about it, sorry, just one interesting there, it’s not just the tenants a lot of times. It also can be the assets are older. Right.

Speaker 2 (00:31:50):

It

Speaker 1 (00:31:50):

May require just more upkeep and maintenance

Speaker 2 (00:31:51):

Of it. Absolutely. Yeah. Maybe the tenant’s fine, but yeah, you still have older [00:32:00] assets.

Speaker 1 (00:32:00):

That

Speaker 2 (00:32:01):

Can just

Speaker 1 (00:32:01):

Require more decision

Speaker 2 (00:32:02):

Making,

Speaker 1 (00:32:03):

Right? More time and it’s not as clear cut as some of the new assets that you’re managing.

Speaker 2 (00:32:11):

Right. But yeah, what I was getting at is, I mean, as far as their strategy, so is it cashflow? And then I feel like people have this evolution where they get into maybe nicer, nicer, nicer, less time, maybe not the cashflow in there, but maybe they’re using the cashflow from [00:32:30] the other ones to get to that point and then they start selling those off. And then maybe the A and B class stuff appreciates more and they’re using that to their advantage. So yeah, it just depends on what their strategy is. I think a lot of the strategies end up coming once they’ve gotten into it and have learned a little bit about.

Speaker 1 (00:32:53):

I think it’s interesting too though, how those strategies can also evolve with investors, like you

Speaker 2 (00:32:59):

Said,

Speaker 1 (00:32:59):

With time. [00:33:00] And they may start in one asset class or very focused in a certain area or market rate, section eight, whatever it may be. But they just figure that over time you can see some evolution in that where they just decided there’s a better fit for their time.

Speaker 2 (00:33:15):

Yeah. Maybe they get into single family because that’s maybe the easiest entry right off the bat. Then they buy some smaller multifamily and then maybe their goal eventually is to use that to jump into larger multifamily. [00:33:30] Haven’t seen a ton of that lately. Of course, we are, I think, more experts in single family rentals. So maybe that’s why I haven’t seen as much. But yeah, where are you headed? You could absolutely excel with high cash flow and rentals in areas that maybe don’t appreciate as well or whatever. There’s no wrong strategy, I guess is what I’m saying. It’s just [00:34:00] at some point you need to be a little bit intentional. You can’t just fire. I guess you can. People do. I guess you can. Don’t take my advice.

Speaker 1 (00:34:11):

For me, what I always appreciated was if you really anchor into the acquisition of the asset based on the cashflow, whatever sort of happens in the market, you can be a little bit just agnostic to. It is one of those things where if you know [00:34:30] you’ve got a good cash flow in the asset, if the market dips a little bit in terms of price appreciation, if it dips a little bit in terms of rental rates, it’s nice to have that. I will also say, and this is one of the things that I think a lot of investors, there’s a lot of things that you get into this business thinking, oh, my property’s got $200 a month cash flow that’s $200 in my pocket. Well, that may be $200 clearance of mortgage payment, but particularly with some of these older assets that [00:35:00] can go up and smoke real quick if one major item or major system.

(00:35:04):

And so because of that, we’ve seen a lot of folks go to newer assets that may even have smaller cash flows, but are much more predictable. Have you talked about that at all that

Speaker 2 (00:35:15):

You’ve seen? Yeah, absolutely. I mean, if it’s a property like we’ve been talking about and it’s 200 cashflow after PIT, maybe not even taxes, let’s say PIT, it’s not $200 cashflow. I mean, you’re negative probably. [00:35:30] So yeah, there’s this move towards bill to rent. We’ve talked about that in the past. And obviously we’re working on a deal in Houston that’s just like that, where it is a very passive. We’re not allowed to say turnkey because it’s not actually turnkey. There is some, but very close to turnkey. New builds, really nice. And [00:36:00] that investor, and usually it’s a particular type of investor, but maybe it needs to be more types of investors. The more they learn about it, I think the more people would be open to it because the build to rent thing, it’s been around a long time, but it’s still relatively new, I would say.

(00:36:22):

I mean, it’s not brand new, but it’s changed so much and people are trying to figure out how to do [00:36:30] it properly. And so this Houston deal, for instance, usually it’s out-of-state folks that need to be passive and they want to put their money in a nice asset. And these actually cash flow. And yeah, that two or $300 a month cashflow there, you’d know, at least you know, not that anything crazy couldn’t happen, but at least you know that AC’s two years old or a year old. The roof, it [00:37:00] was just built, so everything’s new in the house. All the hot water heaters are the same brand.That stuff’s important because you know what you’re dealing with.

Speaker 1 (00:37:13):

And I think we both owned and managed a number of those older assets that can be phenomenal,

Speaker 2 (00:37:19):

Right?

Speaker 1 (00:37:20):

But there also just is always a undercurrent of unpredictability with those assets. At any point, you could have a sewer line that’s 60 [00:37:30] years old that’s been great and suddenly it collapses and you can be

Speaker 2 (00:37:33):

Looking

Speaker 1 (00:37:34):

At a year or two of cash flow up in smoke.

Speaker 2 (00:37:37):

And I’m going to jump back to the Auburn. You were asking how Auburn agent can. I don’t remember what the exact question was, but in regards to Auburn agents, I was talking to an investor, out-of-state investor. Auburn’s in several different markets across Southeast and Midwest. This guy, I’m not going to say who it was, [00:38:00] but he’s West Coast. And we were actually talking about that Houston deal. And he’s like, “I’ve got a bunch of 1031 money coming up.” And he’s like, “That sounds great, and I would like to look into those, but I want to diversify across markets and asset class.” It’s like, okay, here’s this. We know [00:38:30] we have this deal here that’s in Houston. But he’s like, “I want to look at a duplex in Kansas City.” And we have the ability to do that and manage his stuff across the board. So that’s a really big, big thing.

(00:38:48):

And he actually, that’s why he reached out to us because he’s like, “I see y’all are in markets I want to be in. That’s by design. We’re in markets that investors want [00:39:00] to be in.” And so they’re able to do that. And they’re able to. It’s a safety thing, I think, for him to be able to kind of

(00:39:07):

Maybe. Is Houston a primary market?

Speaker 1 (00:39:10):

I would say Houston’s a primary.

Speaker 2 (00:39:11):

Yeah, he’s

Speaker 1 (00:39:12):

A top, definitely

Speaker 2 (00:39:13):

One. Kansas City’s.

Speaker 1 (00:39:15):

Kansas City, I would say, is a primary market or on

Speaker 2 (00:39:17):

The

Speaker 1 (00:39:17):

Edge as well.

Speaker 2 (00:39:19):

So he wants to be in bigger markets. Columbia probably wasn’t a good fit for him. Chattanooga probably wasn’t –

Speaker 1 (00:39:27):

Secondary or tertiary market.

Speaker 2 (00:39:27):

Secondary, tertiary. [00:39:30] Although I think I could convince him if he truly wants to diversify across markets to be in markets like this. And maybe he goes newer, more passive there, but maybe something with a little higher cash flow in Augusta or Chattanooga. His plan would be diverse across asset classes and markets, which I think is a good strategy and something that [00:40:00] we as Auburn agents need to be able to counsel.

Speaker 1 (00:40:03):

Well, I

Speaker 2 (00:40:03):

Think you

Speaker 1 (00:40:04):

Bring up a really good point that it’s really only been, I would say, in the past five to 10 years that this is even possible in real estate. Data, technology, companies like us that are getting out there. And there’s not many of us, but that are in multiple markets where an owner has the ability to buy with one company, have one company manage in multiple markets. That even now [00:40:30] is very rare. Where if you think of just basic investment strategy in any asset type, the first thing you want is diversity. You want diversity of types of assets, locations, strategies. It’s really hard to do in real estate. And even for me that’s been in the business a long time, I always felt very safe in Augusta to say, okay, Augusta is never going to be the biggest, the most dynamic, [00:41:00] the fastest growing market, but it’s always going to be stable.

(00:41:04):

I always know that sort of downside is protected. Then you had Hurricane Aline that hit in the fall of 2024. And essentially everything we sort of thought we knew about what was possible in Augusta, we had to reconsider the havoc that sort of came there. And so I knew of owners or heard stories of owners who had 50, 100 houses that were self-insured in Augusta. [00:41:30] And so they’re probably in a very different position than they were because of that because they didn’t have some geographic diversity.

(00:41:40):

I’m not recommending self-insuring, but if you are going to self-insure, at least you would have some geographic diversity that these owners did not have, right?

Speaker 2 (00:41:48):

Yeah, it’s a good point. Obviously in South Carolina right now, so we deal with hurricanes. Columbia randomly [00:42:00] had a flood in 2015. We’re not in a flood area, but we had this crazy rain event and some dams busted. It was mostly people’s homes and actually more affluent areas. It was crazy. So anything can happen. It’s real estate. Yeah. I

Speaker 1 (00:42:19):

Think it’s prepare for the unexpected. I think also what’s interesting about is there can be benefits of also investing in the market. [00:42:30] I don’t believe in trying to get into real estate in time markets in terms of usually the people that are trying to get in and out at exactly the right time, that’s usually not going to end well. However, I think by design, Auburn is in landlord friendly markets and in markets that we believe are just emerging.

Speaker 2 (00:42:51):

And

Speaker 1 (00:42:51):

Whether it’s Chattanooga, Columbia, Kansas City, even Houston, we feel that there’s good growth opportunities in [00:43:00] all those markets. So you have the potential not only to get what’s there, but we’re not banking on it, but we would expect those properties over the next five to 10 years to increase both in the equity as well as the rental rates. So

Speaker 2 (00:43:14):

We’re asking investors to dollar cost average and safe growth mutual funds basically.

Speaker 1 (00:43:22):

Yeah. I had one of our clients tell us that we need to start index funds for our cities. We [00:43:30] have the Columbia mutual fund that

Speaker 2 (00:43:33):

Is

Speaker 1 (00:43:33):

Just assets in Columbia and they have the Chattanooga

Speaker 2 (00:43:35):

Mutual

Speaker 1 (00:43:36):

Fund. I think there’s a lot of opportunities that also are just frankly, just weren’t available. When I started 20 years ago, the concept of there were absolutely some investors investing in markets where they didn’t live. That was occurring. But usually that was in larger asset classes. That was a multifamily or that was. You didn’t have [00:44:00] a lot of, when I started, investors that were coastal buying a single property in Chattanooga. We see that all the time now.

Speaker 2 (00:44:06):

Yeah. And it’s funny. I mean, we’re just talking about stocks and it’s like you hear different people say invest in what you know. So even early in my real estate career, if somebody was investing out of state, I was like, “What are you doing?” That’s risky, it seemed. But just like, “I’m a real estate guy. I’m not going to [00:44:30] go learn about some blue chip stock and put all my chips.” So invest in what you know, but now the information is so readily available. And I’ll ask you this. Did the institutions kind of pave the way for that?

Speaker 1 (00:44:49):

Yeah. I think ultimately what was interesting is it was a couple of things coming together. The institutions played a big role in it. But I think also what began to sort of allow it to occur is [00:45:00] there was open source information. And you had a perfect sort of segue into this of invest what you know. I think we forget that 20 years ago, real estate data that you could only get from your agent was only with your agent. There was no concept of being able to go online and see a level of information like Zillow where now I think our ability to know about assets at a high level in markets that we’re not familiar with is great. And then [00:45:30] I think the other part of it is being able to see or monitor our manager’s performance or the asset’s performance remotely was really challenging.

(00:45:41):

Now I’m always just amazed at how far we’ve come from the ability to document the condition of an asset, the performance of an asset, the trajectory of an asset that I think there’s just so many options available to owners now [00:46:00] who maybe feel like they know real estate very well, but don’t want to invest in their backyard. And I think we’re seeing this very frequently, in particular with our Houston opportunity where many of our interested parties have been coastal. They just don’t like the markets that they’re in. It’s

Speaker 2 (00:46:17):

Not

Speaker 1 (00:46:17):

That they don’t understand or appreciate real estate. It’s they just know that the market that they’re in is maybe not right for the strategy that they’re talking

Speaker 2 (00:46:25):

About. For a lot of reasons. Yeah. Regulation, landlord laws, stuff like that. Yeah, we see [00:46:30] that all the time.

Speaker 1 (00:46:31):

Landlord laws, regulation. And I think even for some of them, it’s very basic, just a cost of entry standpoint. I can remember when I first started my career in New York, I just looked at it as if I was going to invest in New York City, your entry point was a million dollars. There was no way I had any way to even get anywhere closer to that versus I could go up the road to Syracuse and get a triplex for less than $50,000. And so [00:47:00] I think there’s some just very practical realities of

Speaker 2 (00:47:04):

That too. We joke about the rental market. And of course the University of South Carolina is here and it’s like we have this pipeline to like Connecticut and New Jersey. And those parents can’t believe that it’s only $2,300 a bedroom. They can’t believe it’s that cheap. We’re like $2,300 a bedroom? Jesus. Yeah.

Speaker 1 (00:47:25):

We see that in Charleston where I live too, is that the market that seemingly seems [00:47:30] just completely inflated to native South Carolinians seems like it’s on sale to some of the Northeastern or West Coast individuals relocating. So I think there is one item that I would want to make sure that we talk about that also is a backdrop to all this, which is I think, and I definitely want to hear your perspective, is this concept of affordability, both from a home ownership standpoint and just [00:48:00] overall affordability cost of living in all of our markets, I feel like is impacting potential residents or potential home buyers decisions in what they’re looking for, for their living situations or scenarios. What are you seeing with that?

Speaker 2 (00:48:15):

Well, I mean, more people are moving to the rent side. Is that kind of where you’re headed there?

Speaker 1 (00:48:20):

Well, I think I just really wanted your perspective on it. It’s like, what are you seeing? And we talk about people that some of them are [00:48:30] doing it by choice, some of them are doing necessity. I think we’ve had a number of conversations.

Speaker 2 (00:48:34):

Yeah. I mean, a young person, I don’t know the stats, but it was like 40 years ago, a young family on a $75,000 a year total salary could afford entry into a whatever, $300,000 house or whatever. And it doesn’t exist anymore. And [00:49:00] so they’re forced into other options, which is either cheaper housing, maybe pushing them into maybe an area that they don’t want to be in or whatever, or renting. I mean, they’re renting or they’re staying with their parents longer. So yeah, the affordability thing is a problem. And landlords aren’t immune to it either. It’s like property taxes specifically in South [00:49:30] Carolina are high. So that’s passed on to the tenant. A lot of times that rent is higher than maybe it should be. Inflated, we’ll call it inflated. So yeah, you see that a lot. I think the average, I’m trying to remember what it was, but let’s say 30, 40 years ago, the average first time homeowner was [00:50:00] 20, I don’t know, six or something.

(00:50:03):

Now it’s like 40.

Speaker 1 (00:50:05):

Interesting. I didn’t realize they didn’t move that much.

Speaker 2 (00:50:07):

Don’t quote me on that. Y’all looked that up.

Speaker 1 (00:50:11):

We’ll fact

Speaker 2 (00:50:11):

Check it. It is something like that. I

Speaker 1 (00:50:15):

Think what’s always interesting to me too is there’s obviously large portions of the population that are renting because they can’t afford to purchase homes or they don’t have the down payment. But I have read a lot [00:50:30] of where it’s also decision, intentional decisions. And I think this has been interesting for us is some of these West Coast investors we’ve seen may not even own a personal residence. They may be renting where they are, but they’re using their funds to buy an investment property in Houston or Chattanooga or wherever because they just feel that’s a better use of their money or a better use of their funds. Or it’s less volatile than maybe even owning a home [00:51:00] where they live.

Speaker 2 (00:51:00):

Or maybe they knew they weren’t going to be there for an extended amount of time or something. I don’t know. We have a large military presence here. So every now and then I get a call from an officer at Fort Jackson who’s going to be here for two years. And you learn that every stop he makes, he buys a rental property in a different town. And it’s like, that’s pretty smart. And so yeah, it just depends. But [00:51:30] yeah, I don’t know. Hopefully things change with the affordability stuff. Yeah. I

Speaker 1 (00:51:39):

Think it’s an interesting market because I think you’d be hard pressed to find somebody that would tell you that we’re not undersupplied as a nation. But yet then you read all of these different pieces of information of there’s a lot of markets that from a micro perspective may be significantly [00:52:00] oversupplied

Speaker 2 (00:52:01):

From

Speaker 1 (00:52:02):

A micro market. And yet I think we can all agree that there’s also certain price points of rental properties that are massively undersupplied because you can’t develop lower to moderate income housing just based on the cost of new construction. And so – That’s

Speaker 2 (00:52:23):

A good point.

Speaker 1 (00:52:24):

We’ve had some good conversations around this, but I think that hopefully with some [00:52:30] of the 21st century road to Housing Act or some other legislation, they really address some of the main issues, which are ultimately, I think there are massive sort of portions of the market that are just being underserved. And that’s, in my opinion, lower, moderate to affordable workforce housing that is just really hard to develop at this point. And frankly, just have the numbers make sense. [00:53:00] The costs of construction have gone up. The costs of development have gone up. The operating costs have gone up. A lot of the taxes, insurance, all the while against rents that in most of our markets have normalized and some even slightly declined. So it can be challenging, I think, for certain areas of the market, but yet we still believe there’s a lot of opportunity.

Speaker 2 (00:53:25):

Yeah. Be in our markets. Those secondary, [00:53:30] tertiary, some primary, and dollar cost average, your mutual fund.

Speaker 1 (00:53:38):

I think also we’re seeing too is right now that you still see a lot of local, regional, really non-institutional investors who are active in the marketplace. Transacting, buying, renovating, renting. We see that very frequently.

Speaker 2 (00:53:54):

More than anybody. Yeah, absolutely.

Speaker 1 (00:54:00):

[00:54:00] And I think ultimately in many of our markets, there’s still really good opportunities to buy, especially when you look at some of the existing inventory in relation to what some new construction in some of those markets can cost. It’s really going to depend on the market. But some of the secondary and tertiary markets, you can still get very affordable inventory for a fraction of what it costs for –

Speaker 2 (00:54:25):

Well, I mean, that’s why I think I mentioned earlier, people are maybe doing the rehab [00:54:30] thing here. That’s sort of happening. I think picking up a little bit. Maybe it never died. I don’t know. But that’s because you get into a lower entry. Like here in South Carolina, we have high taxes. So if you buy one that’s already rehabbed, you’re getting assessed at the ARV, right? You’re getting assessed at the higher. And that could be a couple hundred bucks in cash flow right there. If [00:55:00] you buy a house for 80 and you put 80 in it, and you have it, the ARV is 200, your tax base is 80. So that’s kind of the way to go if you ask me.

Speaker 1 (00:55:16):

I think one of the things that you bring up, and I know we got to wrap it up here soon, but I think one of the things that you bring up is within our markets too, there can be some very beneficial things for our investors if they really get to know [00:55:30] the nuance or specifics of the market. Because what I hear a lot is when investors will look at a state or a region, they’ll assign this sort of statement or belief to it. But then you talk to individuals that live, operate and invest in the markets that we’re in like yourself. You know that, okay, yes, South Carolina does have higher taxes for non-owner occupants. However, there’s absolutely strategies that you have employed for your clients [00:56:00] that allow them to save not hundreds of dollars a year, but hundreds of dollars a month potentially on some of these properties.

Speaker 2 (00:56:05):

Yeah. Well it’s what sets us apart from a roof stock or something is we have the local knowledge to say, and what you’re talking about is the ATI exemption for non-owner occupants. So it reduces the tax basis. So yeah, local agents who deal with investors would know that. [00:56:30] So absolutely.

Speaker 1 (00:56:32):

It’s amazing to me how every one of the markets that we’re in has their own nuances of how you can get a little bit better performance out of an investment, maybe a better rate, better term. Really if you understand the market. And not just the market from a broad data standpoint, but specifics of the market that can be really the difference between an investment just being okay and a great investment.

Speaker 2 (00:56:58):

I mean, that could be an entire podcast that’s breaking [00:57:00] down different markets and the strategies each one uses. I’m saying the value add thing is great here. Maybe it’s not as good in whatever, Fort Worth. Maybe Kansas City, you’d rather buy and not rehab as much or whatever.

Speaker 1 (00:57:18):

Well, and just to your point, one of the things that’s always been fascinating to me is you take something like Section eight that’s a federally backed program. Section eight is massively different [00:57:30] in every county that we’re in. Not even market. Many of our markets are multiple counties and what Section eight is in one county can be completely different.

Speaker 2 (00:57:39):

And it could be as far down the line as who you’re dealing with and the inspector that’s assigned to. Th could throw everything off. So yeah, that’s a good point.

Speaker 1 (00:57:51):

There’s a lot of nuance, but Chris, I just want to thank you for attending and participating in conversation about [00:58:00] how Auburn and Auburn agents work with investors. If you were to give one piece of advice to an investor starting their real estate career, other than don’t be a South Carolina Gamecock fan, what would your piece of advice be?

Speaker 2 (00:58:17):

What’s your pain tolerance? Is that a South Carolina reference? That’s a Gamecock reference. The one piece of. So investing in general, just getting in the game.

Speaker 1 (00:58:29):

If I’m brand [00:58:30] new to investing, I haven’t done a single deal. I’ve heard that investing in real estate makes a lot of sense.

Speaker 2 (00:58:36):

What

Speaker 1 (00:58:36):

Do I do to just kind of get started?

Speaker 2 (00:58:38):

You got to just look at deals. I mean, that’s the cliche thing. I think that’s probably what everybody at some of these other podcasts would say, but you got to look at a ton of deals and learn how to underwrite them. Working with investors, I’ve actually learned as an agent working with investors, not to push my [00:59:00] underwriting on an investor because I learned people, they would stop me and say, “Well, this is what I’m doing.” I was like, “Okay.” So I’ll give you all the facts of what I think it is. But a lot of times they have their own situations and their own needs and their own kind of way to evaluate stuff. So learn how to do that for yourself and figure out what works for you. And then seek [00:59:30] that deal that you’re going to pull the trigger on.

Speaker 1 (00:59:32):

And I

Speaker 2 (00:59:32):

Really – And get into the game. You got to get into

Speaker 1 (00:59:35):

It. You got to make the leap, but you said something that I think is. You said two things that I completely agree with. One is I think you have to look at a lot of deals. And that looking at a deal can be online. It can be physically going to the assets. It can be talking to people about it. But I think that also what’s important about the second part of that is at some point you have to determine what a deal looks like for you.

Speaker 2 (01:00:00):

[01:00:00] Exactly.

Speaker 1 (01:00:00):

And it’s very different for everybody. One of the pieces that I’m very fortunate, when I started, I really didn’t know what, or I thought I knew what a deal was, but the market had been so volatile that I had to suspend my disbelief long enough to figure out, do I really know what a deal is? Or can I learn from all these different investors what a deal is for them [01:00:30] to then determine what a deal really should be for me? And I think that’s been one of the parts that I’ve enjoyed the most at Auburn is our investor account manager role that we have that works hand in hand with you and other brokers and agents, they are interacting with investors all day long and get a lot of perspective as to how different a deal can be from investor to vestor. Absolutely. Thank [01:01:00] you for your time.

(01:01:02):

What’s the prediction on South Carolina’s –

Speaker 2 (01:01:05):

National Championship and Lenore Sellers Hasman. I said that last year.

Speaker 1 (01:01:12): Spoken like a true South Carolina fed. So thank you for your time, Chris.